PageGroup Regulatory News (PAGE)

11 October 2017

PageGroup plc

THIRD QUARTER 2017 TRADING UPDATE

Q3 Highlights - in constant currencies

· Group gross profit growth of +8.8% (+11.8% in reported rates)

· EMEA +12.6%; France +21%

· Asia Pacific +13.9%; Asia +22% (including Greater China +21%); Australia -2%

· UK -7.6%; Michael Page -8%, Page Personnel -5%

· Americas +18.4%; US +29%; LatAm +9%

· Technical disciplines (22% of Group) fastest growing at +17.8%

· Record headcount of 6,750; +290 fee earners in Q3; +566 (+12%) year to date

· New record ratio of fee earner to operational support staff: 78:22

· Strong balance sheet, net cash of c. £109m (Q2 2017: £89m, Q3 2016: £100m)

· Interim and special dividends paid today, 11 October, of £52.3m

Q3 GROSS PROFIT ANALYSIS

Steve Ingham, Chief Executive Officer, said:

"The Group delivered gross profit growth of 8.8% in constant currencies and 11.8% at reported rates. Continental Europe, the Americas and Asia delivered strong performances. However the UK, Singapore and Brazil continued to experience challenging market conditions. The benefit from positive foreign exchange movements continued, adding c. £5 million to our gross profit and c. £1 million to operating profit in the quarter. However, if the exchange rates at the end of Q3 continued, this benefit would reverse in Q4.

"Our strategy of continued investment in our five Large, High Potential Markets of Greater China, Germany, Latin America, South East Asia and the US resulted in combined growth of 17%, and they now represent more than a third of the Group.

"There were particularly strong performances from the US, +29%, and Greater China, +21%, with Mainland China +26%. Germany was +9% as we continued to invest in the temporary and contract markets. In South East Asia, +20% and Latin America +9%, we had exceptional performances from individual countries such as Argentina, Indonesia, Malaysia and Peru. Both regions were held back by challenging markets, in Singapore and Brazil, respectively. However, each of these countries improved in the quarter and are now flat year-on-year.

"Elsewhere, France, our second largest market after the UK, and 15% of the Group, continued to grow strongly, +21%. Other countries in Continental Europe performed well, particularly Belgium, the Netherlands, Poland and Spain, all growing in excess of 15%. In Asia, India and Japan also had excellent quarters, growing at 18% and 31% respectively. The UK, however, was down -7.6%, with client and candidate confidence levels continuing to be impacted by the Brexit negotiations and political uncertainty. Australia, 6% of the Group, was down -2%. However, we have increased fee earner headcount by 17% year to date to support the management changes made previously and opened a new office in Canberra.

"Our focus on investing in our Large, High Potential Markets as well as businesses experiencing strong growth resulted in 290 additional fee earners in the quarter and 566, +12%, since the start of the year. Total fee earner headcount is now 5,277, with total headcount at 6,750, which gives a ratio of fee earners to operational support of 78:22; all new records for the Group.

"Cash generation in the period was strong, with net cash of c. £109m at the end of the quarter. This will reduce today by £52.3m as we pay shareholders both the interim and special dividends.

"We are pleased with the strong performances across the majority of our regions. However, there remain a number of challenges as we continue through 2017 and into 2018: the UK, where we will continue to focus on protecting margins and investing in structural opportunities; Australia, where we have invested in headcount and a new office; and Brazil, which remains challenging, despite results improving from negative to flat year-on-year growth.

"Elsewhere, we continue to invest to take advantage of markets with favourable trading conditions, as well as in our Large High Potential Markets and new markets, such as India and the Nikkei market in Japan. We will, as always, continue to focus on driving profitable growth while being able to respond quickly to changes in market conditions. Our outlook for full year operating profit remains in line with current consensus*."

* Company compiled consensus operating profit of £113.0m

Group Trading Update

PageGroup delivered third quarter gross profit of £177.3m, up 8.8% in constant currencies and 11.8% in reported rates.

Foreign Exchange

The Group continued to benefit from positive foreign exchange movements during the quarter, increasing our Q3 reported gross profit by 3.0 percentage points, or c. £5m and operating profit by c. £1m. Cumulatively to the end of Q3, foreign exchange has increased our reported gross profit by c. £33m and operating profit by c. £7m. For the fourth quarter, should exchange rates at the end of Q3 continue, we expect foreign exchange to reduce our reported gross profit by c. £3m and operating profit by c. £1m.

Ongoing Investment

Having added 227 fee earners in 2016 and 276 in H1 2017, net fee earner additions increased in Q3 by a further 290 mainly in our Large, High Potential Markets as well as those where we saw the greatest growth, such as France and Germany. Our operational support headcount increased by just 12 in the quarter and our fee earner to operational support staff ratio improved to a new record of 78:22.

Perm/Temp mix

Gross profit from permanent recruitment grew 11.8% in reported rates and 9.1% in constant currencies, to £133.4m (Q3 2016: £119.3m) and gross profit from temporary recruitment grew 11.9% in reported rates and 7.8% in constant currencies, to £43.9m (Q3 2016: £39.3m). This resulted in a ratio of permanent to temporary recruitment of 75:25.

Q3 Gross Profit - Discipline analysis

Geographical analysis (unless otherwise stated all growth rates are in constant currency)

EMEA Q3 gross profit grew 12.6% (Q2 2017: +13.2%). Both Page Personnel and Michael Page delivered strong performances, with growth of 14% and 11%, respectively. Following an investment in fee earner headcount of 78 (14%) YTD, our largest country in the region, France (+21%) delivered a third successive quarter of growth in excess of 20%, with strong performances in both brands. Germany delivered growth of 9%, with a record quarter for our Interim business. The Netherlands continued to perform well and a strong performance in Spain drove growth of 10% overall for Southern Europe. There were record performances in Belgium, Germany and Poland.

In Asia Pacific, now our second largest region, gross profit increased 13.9%, up from 6.8% in Q2. Asia, three quarters of the region, grew 22%, with Greater China showing a notable improvement, up 21% (Q2 2017: +11%), a record quarter. Mainland China, where we have a higher proportion of domestic clients, had a particularly strong performance with growth of 26%. South East Asia grew 20%, with our newest country, Thailand, performing to plan. Our investment in Japan, with fee earner headcount up 27% over the last year, delivered growth of 31%, up from 20% in Q2. In Australia, which declined by 2%, we have increased fee earner headcount by 17% year to date to support the management changes made previously and opened a new office in Canberra. We are confident this will improve our growth rate in the future. There were record performances from Greater China, Indonesia, Malaysia and Thailand.

The UK declined 7.6% in the quarter, with Brexit and political uncertainty continuing to impact confidence, particularly amongst our multi-national clients and the more senior permanent candidates. Our temporary business was impacted less, down 2%, with permanent down 10%. Page Personnel, which represented 22% of the UK, declined -5% compared to -8% in Michael Page. Within the disciplines, Property & Construction was our best performing, with growth of 7%, while Financial Services, now only 5% of the UK, was flat. Both the Private Sector (88% of the UK) and the Public Sector (12% of the UK) declined by 8%.

The Americas was our fastest growing region and grew 18.4% in constant currencies. North America grew 27% in the quarter, with the US up 29% and Canada up 3%. In the US, our strategy of diversification continued, with strong performances from our regional offices (+31%). We also saw a return to growth in the Financial Services market in New York, now a quarter of our US business, which grew 26%. Latin America grew 9%, with Brazil, now a third of Latin America, flat. Elsewhere, our other countries in Latin America had another strong quarter, growing 14%. In the region there were record performances in Argentina, Colombia, Peru and the US.

Financial Position

Save for the effects of trading in the third quarter described above and the forthcoming payments of the 2017 interim and special dividends amounting to £52.3m which are being paid today, there have been no other significant changes in the financial position of the Group since the publication of the results for the half year ended 30 June 2017.

Net cash at 30 September 2017, before the payment of the dividends, was in the region of £109m (30 June 2017: £89m).

Shares

At 30 September 2017 there were 326,771,276 Ordinary shares in issue, of which 14,752,475 were held by the Employee Benefit Trust (EBT). The rights to receive dividends and to exercise voting rights have been waived by the EBT over 11,621,896 shares and consequently these shares should be excluded when calculating earnings per share. The total number of voting rights in the Company is 326,771,276.

Cautionary Statement

This Third Quarter Trading Update has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The Trading Update should not be relied on by any other party or for any other purpose. This Trading Update contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this Trading Update and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

This Trading Update has been prepared for the Group as a whole and therefore gives greater emphasis to those matters that are significant to PageGroup and its subsidiary undertakings when viewed as a whole.

Enquiries:

The Company will host a conference call and presentation for analysts and investors at 9.00 am today. The live presentation can be viewed by following the link:

http://www.investis-live.com/pagegroup/599317e11eb5570b000b7457/bewa 

Please use the following dial-in numbers to join the conference:

Please quote "PageGroup" to gain access to the call.

A presentation and recording to accompany the call will be posted on the Company's website during the course of the morning of 11 October 2017 at:

http://www.page.com/investors/investor-library/2017.aspx

The Group will issue its Fourth Quarter Trading Update on 10 January 2018 and its Full Year Results on 7 March 2018.