Last checked at 15 Jul 2014 07:00
15 July 2014
SECOND QUARTER AND FIRST HALF 2014 TRADING UPDATE
Growth in all regions in constant currencies
Highlights*
· Q2 Group gross profit growth of 8.9% to £137.2m
· All four regions delivered year-on-year growth
· Strong country performances from major economies: UK, US and China
· Continued focused investment, including increase in fee earner headcount of 72 in Q2
· FX headwinds impact on Gross profit of £10m in Q2 (£19m total in H1)
*in constant currencies
Q2 GROSS PROFIT ANALYSIS
Reported (£m) | Constant | ||||
Year-on-year | % of Group | Q2 2014 | Q2 2013 | % | % |
EMEA | 40% | 54.8 | 55.0 | -0.5% | +5.0% |
UK | 25% | 34.8 | 31.3 | +11.1% | +11.1% |
Asia Pacific | 21% | 28.3 | 28.2 | +0.6% | +14.2% |
Americas | 14% | 19.3 | 20.6 | -6.6% | +8.7% |
Total | 100% | 137.2 | 135.1 | +1.5% | +8.9% |
Permanent | 77% | 106.1 | 104.7 | +1.3% | +9.4% |
Temporary | 23% | 31.1 | 30.4 | +2.4% | +7.4% |
H1 GROSS PROFIT ANALYSIS
Reported (£m) | Constant | ||||
Year-on-year | % of Group | H1 2014 | H1 2013 | % | % |
EMEA | 41% | 107.4 | 107.1 | +0.3% | +5.2% |
UK | 26% | 67.6 | 61.4 | +10.1% | +10.1% |
Asia Pacific | 19% | 51.3 | 54.3 | -5.5% | +7.8% |
Americas | 14% | 37.4 | 39.1 | -4.4% | +11.8% |
Total | 100% | 263.7 | 261.9 | +0.7% | +7.9% |
Permanent | 77% | 203.7 | 202.6 | +0.5% | +8.4% |
Temporary | 23% | 60.0 | 59.3 | +1.2% | +6.1% |
Commenting, Steve Ingham, Chief Executive Officer, said:
"PageGroup delivered an increase of 8.9% in year-on-year growth in constant currencies for Q2, with improvement in all four regions. We saw solid performances across our regions, including strong growth in the major economies of China, the UK and the US. While adverse FX continues to be a drag on the reported results, overall the underlying business environment is gradually improving in a number of our key markets. In reported rates, the Group gross profit was up 2% on the prior year to £137.2m and up over 8% sequentially from £126.6m in Q1 2014.
"In our largest region, EMEA, both France and Germany saw modest constant currency growth over the prior year, and our Southern European markets performed strongly. The UK grew at over 11% for the quarter reflecting increasing momentum in the business, especially in technical disciplines and in Finance & Accounting, although Financial Services remained flat. Asia had an exceptional quarter, delivering 25% growth on the prior year, including China up 37% to record levels. Australia continued to stabilise, with Q2 4% down on the prior year versus down 10% in Q1. The Americas region grew 9% in the quarter, helped by the US being up 17% against tougher comparators. Latin America (LatAm) grew 4%, despite Brazil declining 7% as the World Cup impacted activity levels, with the other 5 countries up 24% collectively.
"We are seeing more instances of candidate shortages in a number of markets and disciplines. This gives us confidence to continue our investment programme, both in infrastructure and, selectively, additional fee earners. As a result, we increased headcount by 72 consultants (2%) during the second quarter and over 175 for the first half. Support staff headcount accounted for only 15% of total headcount growth over the same period. We will continue this investment in people and infrastructure as long as we continue to see the right market conditions.
"Our infrastructure programme, such as the upgraded website roll-out, which will make a significant contribution to candidate acquisition in an increasing number of countries, is progressing well. The roll-out of our new Page Recruiting System continued to four more of our US offices and in Q3 we expect this to continue with further roll-outs in the US and UK. We are confident that such investment puts us in the best position to take advantage of improving market conditions, as they occur. Likewise, our focus on developing scale and breadth in under-penetrated markets, and in regions such as LatAm and Asia where we lead the market, is delivering significant competitive advantage.
"We have seen an improvement in the performance of all our regions over the last six months in constant currency, despite challenging economic conditions in some of our larger countries. Looking ahead, we expect to see market conditions remaining variable in Brazil and France and for Australia to become increasingly stable. The more positive environment in many of our other countries, both large and small, is expected to continue, with our leading KPIs positive as we start the second half. For the full year, if the current trend of improving growth rates is maintained, we continue to expect to perform in line with our expectations as outlined at the time of the first quarter results."
Enquiries:
PageGroup | +44 (0)20 3077 8425 |
Steve Ingham, Chief Executive Officer | |
Kelvin Stagg, Chief Financial Officer Ross Hawley, Director of Investor Relations | |
FTI Consulting | +44 (0)20 3727 1340 |
Richard Mountain / Susanne Yule |
PageGroup will be presenting these results at 9.00am today. The presentation and a recording of the meeting will be available on PageGroup's website later on today at:
http://www.pagegroup.co.uk/investors/reports-and-presentations/presentations-and-webcasts/2014.aspx
A conference call facility is available for analysts and investors unable to attend, details of which are below:
Link:
http://www.axisto-live.com/investis/clients/pagegroup/presentations/53b2d99d1991941318708087/q2-2014-trading-update
Dial in number:
+44 (0)20 3059 8125
Password: PageGroup or Michael Page
PageGroup will issue its interim results on 13 August 2014 and Third Quarter Interim Management Statement on 14 October 2014.
Group Trading Update
Michael Page International plc ("PageGroup") grew by 9% in constant currencies and all regions were positive. Adverse FX movements meant that our quarterly gross profit was approximately £10m lower in reported rates, with the Group delivering second quarter gross profit of £137.2m, up 2%.
Perm/Temp mix
The ratio of permanent to temporary recruitment remained at 77:23. In constant currencies, permanent recruitment grew 9% and temporary recruitment grew at 7% on the prior year. This profile was similar for the first half of 2014, with permanent and temporary recruitment up 8% and 6% respectively. In most countries where PageGroup has both temporary and permanent businesses, the temporary business continues to grow more strongly, but the overall ratio reflects the fact that in key growth markets such as in LatAm and China, there are fewer or no temporary placements made.
Discipline analysis
Q2 | Reported (£m) | Constant | |||
Year-on-year gross profit | % of Group |
Q2 2014 |
Q2 2013 |
% |
% |
Finance & Accounting | 40% | 55.0 | 55.4 | -0.8% | +6.1% |
Engineering, Property & Construction, Procurement & Supply Chain | 21% | 28.2 | 26.8
| +5.1% | +13.0% |
Legal, Technology, HR, Secretarial, Healthcare | 20% | 28.2 | 27.8 | +1.2% | +9.3% |
Marketing, Sales & Retail | 19% | 25.8 | 25.1 | +3.1% | +10.6% |
Total | 100% | 137.2 | 135.1 | +1.5% | +8.9% |
Half Year | Reported (£m) | Constant | |||
Year-on-year gross profit | % of Group |
H1 2014 |
H1 2013 |
% |
% |
Finance & Accounting | 40% | 104.4 | 107.4 | -2.8% | +3.5% |
Engineering, Property & Construction, Procurement & Supply Chain | 21% | 54.5 | 52.0 | +4.8% | +12.8% |
Legal, Technology, HR, Secretarial, Healthcare | 20% | 53.9 | 54.0 | -0.2% | +7.8% |
Marketing, Sales & Retail | 19% | 50.9 | 48.5 | +4.9% | +12.4% |
Total | 100% | 263.7 | 261.9 | +0.7% | +7.9% |
Geographical analysis
Country highlights*:
· All major EMEA countries saw positive growth; 10 countries in region grew over 10%
· UK up 11% driven by Finance & Accounting, and technical disciplines
· Greater China up 37%: strong performances across all offices
· Australia decline slowed to -4% in Q2 from -10% in Q1
· US up 17%, continuing strong momentum but now with tougher comparables
· LatAm: Brazil down 7%, the other 5 markets delivered strong growth (+24%)
* in constant currencies
EMEA | Gross Profit (£m) | Growth rates | ||
(40% of Group in Q2 2014) | Reported | Constant | ||
Q2 2014 vs. Q2 2013 | 54.8 | 55.0 | -0.5% | +5.0% |
Q2 2014 vs. Q1 2014 | 54.8 | 52.6 | +3.9% | +5.0% |
H1 2014 vs. H1 2013 | 107.4 | 107.1 | +0.3% | +5.2% |
Headcount at 30 June 2014: 2,036 (31 March 2014: 2,002) Gross profit in constant currencies: · France (14% of Group) +3% on Q2 '13 · Germany (6% of Group) +7% on Q2 '13
| ||||
The EMEA region experienced mixed market conditions in the quarter similar to Q1, with the quarterly growth rate holding constant at 5%. France, our largest market in the region, was up 3% in constant currency, with Page Personnel France (63% of France) growing 11%. Germany saw gross profit up 7% in constant currency, with its Page Personnel business performing particularly well. Spain, Italy and Turkey were each up around 15%, reflecting improving conditions in Southern Europe. The Middle East produced a record result in Q2 and now accounts for approximately 4% of the EMEA region. Fee earner headcount growth in EMEA was 79 during the quarter, including in Southern Europe and the Middle East.
UK | Gross Profit (m) | Growth rates | |
(25% of Group in Q2 2014) | |||
Q2 2014 vs. Q2 2013 | 34.8 | 31.3 | +11.1% |
Q2 2014 vs. Q1 2014 | 34.8 | 32.8 | +6.2% |
H1 2014 vs. H1 2013 | 67.6 | 61.4 | +10.1% |
Headcount at 30 June 2014: 1,361 (31 March 2014: 1,350) | |||
The UK increased its gross profit growth rate to 11% for the quarter and over 10% for the first half (Q1: 8%). The business continued to experience positive momentum and greater confidence both in London and the regions and there were increasing instances of candidate shortages in certain disciplines. Excluding Financial Services, Finance & Accounting (+17%) and technical disciplines such as Property & Construction (+28%) maintained their momentum from the first quarter. Page Personnel grew by 20% year-on-year, and was up 17% for the first half. Fee earner headcount was up 5 in the quarter with most of the gross profit growth being generated through consultant productivity gains.
Asia Pacific | Gross Profit (£m) | Growth rates | ||
(21% of Group in Q2 2014) | Reported | Constant | ||
Q2 2014 vs. Q2 2013 | 28.3 | 28.2 | +0.6% | +14.2% |
Q2 2014 vs. Q1 2014 | 28.3 | 23.0 | +23.4% | +23.5% |
H1 2014 vs. H1 2013 | 51.3 | 54.3 | -5.5% | +7.8% |
Headcount at 30 June 2014: 1,114 (31 March 2014: 1,112) Gross profit in constant currencies: · Asia (14% of Group and 68% of Asia Pacific) +25% on Q2 '13 · Greater China (57% of Asia) +37% on Q2 '13 · Australia and New Zealand (7% of Group and 32% of Asia Pacific) -3% on Q2 '13 | ||||
The Asia Pacific region grew over 14% in Q2 on the prior year and 8% in the first half in constant currency. Within this, Asia grew by 25% in constant currency, reflecting positive economic conditions and the increasing experience and ability of our local consultants to capture market opportunities. Greater China saw record growth of 37%, with our businesses in Northern & Eastern China such as Shanghai and Beijing up over 40%, and strong elsewhere including Hong Kong. Japan and SE Asia performed strongly, including Malaysia up over 20%. Both Malaysia and Japan achieved record quarters. The Australian market stabilised further, and was down 4% in constant currency, compared to down 10% in Q1. Fee earner headcount in the region was flat on Q1.
Americas | Gross Profit (£m) | Growth rates | ||
(14% of Group in Q2 2014) | Reported | Constant | ||
Q2 2014 vs. Q2 2013 | 19.3 | 20.6 | -6.6% | +8.7% |
Q2 2014 vs. Q1 2014 | 19.3 | 18.1 | +6.3% | +5.8% |
H1 2014 vs. H1 2013 | 37.4 | 39.1 | -4.4% | +11.8% |
Headcount at 30 June 2014: 826 (31 March 2014: 821) Gross profit in constant currencies: · Latin America (8% of Group) +4% on Q2 '13 · Brazil (58% of LatAm) -7% on Q2 '13 and -4% on Q1 · North America (6% of Group) +16% on Q2 '13 | ||||
The Americas region saw gross profit up 9% in constant currencies for the quarter and 12% for the first half, helped by growth in North America and in countries such as Mexico, Chile and Colombia. The US again grew strongly (+17%), even with tougher 2013 comparables. Canada was also up over 10%. Brazil was 7% lower than the prior year due to the expected impact of the World Cup. Excluding Brazil, the other countries in the region (42% of LatAm) were up over 24%. Fee earner headcount in the region reduced slightly in the quarter, but was broadly stable in the first half, although mixed across the region reflecting our revenue growth rates.
Financial Position
Other than the effects of trading in the first half, together with £25m share purchases into the Employee Benefit Trust ("EBT") and the payment of a final dividend of £22.2m for 2013, there have been no significant changes in the financial position of the Group since the publication of the results for the year ended 31 December 2013. Net cash at 30 June 2014 was approximately £41m (31 March 2014: £76m).
PageGroup will issue its interim results for the six months ending 30 June 2014 on 13 August 2014, followed by its Third Quarter 2014 Interim Management Statement on 14 October 2014.
Shares
At 30 June 2014 there were 321,506,690 Ordinary shares in issue, of which 17,517,985 were held by the EBT. The rights to receive dividends and to exercise voting rights have been waived by the EBT over 15,409,431 shares and consequently these shares should be excluded when calculating earnings per share. The total number of voting rights in the Company is 321,506,690.
Cautionary statement
This Second Quarter and First Half 2014 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.