14 October 2014
THIRD QUARTER 2014 TRADING UPDATE
11.6% constant currency growth, cautious on macro-economic outlook
Highlights*
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11.6% Group gross profit growth, positive contributions from all four regions
Ongoing FX headwinds lowered reported figures by 7%
Continued improvement in the UK +14%; Page Personnel up 25%
Growth in EMEA, largest countries: Germany +15%; France +7%
Good growth in Asia of 17%; but slowing from 25% in Q2
North America +22%; launched 3rd Canadian office, Calgary
Brazil down 10%, restricting Latin America growth to 2%
Record quarter for our combined Large High Potential Markets
(Germany, Greater China, LatAm, SE Asia, US)
210 fee earners added in Q3, primarily in Large High Potential Markets
*in constant currencies
Q3 GROSS PROFIT ANALYSIS
Reported (£m)
Year-on-year
Constant
% of Group
Q3 2014
Q3 2013
%
%
EMEA
37%
49.6
48.5
+2.3%
+11.2%
UK
27%
35.3
31.1
+13.7%
+13.7%
Asia Pacific
21%
28.0
27.2
+2.9%
+11.1%
Americas
15%
20.0
20.1
-0.8%
+9.6%
Total
100%
132.9
126.9
+4.7%
+11.6%
Permanent
76%
101.4
96.1
+5.5%
+12.7%
Temporary
24%
31.5
30.8
+2.4%
+8.0%
Commenting, Steve Ingham, Chief Executive Officer said:
“The 11.6% increase in the Group’s gross profit in constant currency for the third quarter reflects
steady year-on-year growth in all four regions. EMEA, UK and the Americas all saw improved
growth rates compared to Q2 2014, but the growth rate in Asia slowed from 25% in Q2 to 17%. In
reported rates, our gross profit was up only 5% to £132.9m. The impact of FX lowered our reported
figure by nearly 7 percentage points, equivalent to £9m of gross profit and £1.6m of operating profit
compared to last year.
“The EMEA region faced increased political and economic uncertainty, both in Europe and the
Middle East. In France and Germany, Page Personnel (‘PP’) continued to outperform our
predominantly permanent Michael Page businesses. UK growth continued to improve, with the
strongest performances from our Finance & Accounting, Marketing, Procurement & Supply Chain,
Property & Construction, and PP businesses.
“In Asia, growth in the third quarter slowed from 25% to 17%, with growth in our largest business,
Greater China, slowing from 37% to 25%. Australasia was positive for the first time in over two
years. North and Latin America both delivered record performances in constant currencies, despite
Brazil declining 10% in the run up to the October presidential elections.
“The roll-out of our new Page Recruiting System was completed in the US and in Page Personnel
UK during the quarter, both of which went well. We expect to complete the roll-out to all UK
businesses by the end of the year.
“Having added 177 in the first half, we accelerated our investment in fee earners during the
quarter, in higher growth businesses and our Large High Potential Markets, in anticipation of
continued growth in 2015. This, combined with an increased focus on staff retention, led by our
new Group HR function, resulted in a net increase of 210 fee earners in Q3.
“Although the macro environment is challenging in many regions, we do believe that our strategic
goals for 2015 are best achieved through this targeted headcount investment. However, this does
have a short-term impact on productivity, particularly where we seek to grow our temporary
businesses in Germany, France and the UK. At the same time, we continue to seek operational
efficiencies across the Group, with our operational support ratio moving from 74:26 at the start of
the year to 76:24.
"So far this year we have made good progress in a number of markets, notably in the UK, however
as we look ahead to the final quarter we are becoming more cautious on the short-term outlook in
a number of international markets. In EMEA, confidence levels are increasingly fragile and our
Asian business, although still performing well, saw its growth rate slow. Foreign exchange
movements also continue to affect our reported results.
“These factors, allied to our strong headcount investment, lead us to now expect operating profit
modestly lower than consensus market expectations*, but still showing year-on-year growth of over
20% in constant currencies.”
* Operating profit: £82.0m (2013: £68.2m)
Enquiries:
PageGroup
Steve Ingham, Chief Executive Officer
Kelvin Stagg, Chief Financial Officer
Ross Hawley, Director of Investor Relations
+44 (0)20 3077 8425
FTI Consulting
Richard Mountain / Susanne Yule
+44 (0)20 3727 1545
The Company will host a conference call and presentation for analysts and investors at 8.30am
today. The live presentation can be viewed by following the link:
http://www.axistolive.com/investis/clients/pagegroup/presentations/541ae3cc1f7822b57705bed0/q3
Please use the following dial-in numbers to join the conference:
United Kingdom (Local)
All other locations
020 3059 8125
+44 20 3059 8125
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 14 October 2014 at:
http://www.pagegroup.co.uk/investors/reports-and-presentations/presentations-andwebcasts/2014.aspx
The Group will issue its Fourth Quarter Trading Update on 13 January 2015 and its Preliminary
Results on 13 March 2015.
Group Trading Update
Michael Page International plc (“PageGroup”) delivered third quarter gross profit of £132.9m, up
5% in reported rates, but up nearly 12% in constant currencies, with growth in all four regions. The
FX impact on the FY14 results remains material, at £34m for gross profit and £6m for operating
profit.
Ongoing Investment
Having added 177 in the first half, we accelerated our investment in fee earners during the quarter,
in higher growth businesses and our Large High Potential Markets, in anticipation of continued
growth in 2015. This, combined with an increased focus on staff retention, led by our new Group
HR function, resulted in a net increase of 210 fee earners and a reduction of 45 operational
support staff. Total headcount increased by 165 in the quarter to 5,502.
The roll-out of the new Page Recruiting System was completed in the US and in Page Personnel
UK during the quarter, both of which went well. We expect to complete the roll-out to all UK
businesses by the end of the year, which together with the US would imply a third of the Group by
gross profit will be on the new system.
Perm/Temp mix
The ratio of permanent to temporary recruitment of 76:24 was similar to the first half of 2014
(77:23). Group gross profit from permanent recruitment grew 6% to £101.4m (£96.1m: Q3 2013);
temporary recruitment grew 2% to £31.5m (£30.8m: Q3 2013). In constant currencies, permanent
recruitment was up 13%, ahead of temporary recruitment which was up 8%.
Discipline analysis
Reported (£m)
% of
Year-on-year gross profit
Constant
Q3 2014
Q3 2013
%
%
Group
Finance & Accounting
40%
53.3
52.7
+1.2%
+7.6%
Legal, Technology, HR, Secretarial,
21%
27.3
25.9
+5.4%
+12.6%
20%
27.0
24.5
+9.9%
+17.5%
Marketing, Sales & Retail
19%
25.3
23.8
+6.4%
+13.0%
Total
100%
132.9
126.9
+4.7%
+11.6%
Healthcare
Engineering, Property & Construction,
Procurement & Supply Chain
Geographical analysis
Country highlights*:
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Germany up 15%; France up 7%
Southern Europe up 27%, but Russia & Middle East impacted by regional conflict
UK up 14%, including Page Personnel up 25%
China growth slowed from 37% in Q2 to 25%
Australia & New Zealand up 2%
North America up 22% producing a record quarter
Brazil down 10%, restricting Latin America growth to 2%
* in constant currencies vs Q3 2013
EMEA
Gross Profit (£m)
(37% of Group)
Growth rates
Reported
Constant
Q3 2014 vs. Q3 2013
49.6
48.5
+2.3%
+11.2%
Q3 2014 vs. Q2 2014
49.6
54.8
-9.4%
-7.0%
Headcount at 30 Sept 2014: 2,084 (30 June 2014: 2,036)
Gross profit in constant currencies:
• France (12% of Group) +7% on Q3 2013 (+3% in Q2 2014 against Q2 2013)
• Germany (6% of Group) +15% on Q3 2013 (+7% in Q2 2014 against Q2 2013)
Compared to the prior year, EMEA was up 11% in constant currencies, however the region
experienced a reduction in market sentiment during the third quarter. This amplified the seasonal
effect with the region down 7% sequentially. Page Personnel France was up 15%, more than
offsetting a negative performance from our Michael Page business. In Germany, gross profit rose
15%, with Page Personnel up over 25%. Holland and Southern Europe grew strongly, but Russia
and the Middle East suffered from concerns over regional conflicts. Fee earner headcount grew by
around 50 people across the region, principally in our temporary business in Germany.
UK
Gross Profit (£m)
Growth rates
(27% of Group)
Q3 2014 vs. Q3 2013
35.3
31.1
+13.7%
Q3 2014 vs. Q2 2014
35.3
34.8
+1.4%
Headcount at 30 Sept 2014: 1,419 (30 June 2014: 1,361)
The UK gross profit growth rate continued to increase, to 14% in Q3. Page Personnel performed
strongly, up 25%, with notable performances in the regions, as well as the Public Sector. Within
Michael Page, our Marketing, Finance & Accounting, Procurement & Supply Chain and Property &
Construction, businesses all performed well. Candidate shortages were experienced in niche
markets, such as digital, but overall wage inflation was subdued. Fee earner headcount grew
strongly, up 63 in the quarter, as the business continued to invest selectively to take advantage of
the steadily improving market.
Asia Pacific
Gross Profit (£m)
Growth rates
(21% of Group)
Reported
Constant
Q3 2014 vs. Q3 2013
28.0
27.2
+2.9%
+11.1%
Q3 2014 vs. Q2 2014
28.0
28.3
-1.1%
-1.9%
Headcount at 30 Sept 2014: 1,119 (30 June 2014: 1,114)
Gross profit in constant currencies:
• Asia (14% of Group) +17% on Q3 2013 (+25% in Q2 2014 vs. Q2 2013)
• Greater China (57% of Asia) +25% on Q3 2013 (+37% in Q2 2014 vs. Q2 2013)
• Australia / New Zealand (7% of Group) +2% on Q3 2013 (-3% in Q2 2014 vs. Q2 2013)
Asia Pacific grew 11% in constant currencies, but only 3% in reported, reflecting the ongoing FX
headwinds. Asia grew by 17%, down from 25% in Q2. With the macro-economic outlook more
subdued, our Greater China growth slowed from 37% to 25%. Our businesses in Southern &
Eastern China and in Hong Kong performed well. In Australasia, easier comparators helped the
business achieve 2% growth, with Australia positive for the first time in over two years. Headcount
in the region remained broadly constant.
Americas
Gross Profit (£m)
(15% of Group)
Growth rates
Reported
Constant
Q3 2014 vs. Q3 2013
20.0
20.1
-0.8%
+9.6%
Q3 2014 vs. Q2 2014
20.0
19.2
+3.9%
+4.0%
Headcount at 30 Sept 2014: 880 (30 June 2014: 826)
Gross profit in constant currencies:
• Latin America (8% of Group) +2% on Q3 2013 (+4% in Q2 2014 vs. Q2 2013)
• Brazil (59% of LatAm) -10% on Q3 2013 (-7% in Q2 2014 vs. Q2 2013)
• North America (7% of Group) +22% on Q3 2013 (+16% in Q2 2014 vs. Q2 2013)
The Americas grew by 10% in constant currencies, but was slightly negative in reported rates.
North America enjoyed strong growth, up 22%, helped by an excellent result in Canada where we
opened a new office in Calgary. Latin America was up 2%, despite Brazil declining 10% due to
uncertainty in the run up to the Presidential elections. Latin America, excluding Brazil, grew 22%,
with both Mexico and Colombia performing well. Headcount grew 54, as Mexico and the US, in
particular, added fee earners.
Financial Position
Save for the effects of trading in the third quarter described above and the payment of the 2014
interim dividend of £10.5m on 3 October 2014, 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
2014.
Net cash at 30 September 2014, before the payment of the interim dividend, was in the region of
£70m (30 June 2014: £42.9m).
The Group will issue its Fourth Quarter Trading Update on 13 January 2015 and its Full Year
Results on 13 March 2015.
Shares
At 30 September 2014 there were 321,726,190 Ordinary shares in issue, of which 17,477,474
were held by the EBT. The rights to receive dividends and to exercise voting rights have been
waived by the EBT over 15,368,920 shares and consequently these shares should be excluded
when calculating earnings per share. The total number of voting rights in the Company is
321,726,190.
Cautionary statement
This Third Quarter 2014 Interim Management Statement (“IMS”) 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 IMS should not be relied on by any other party or for any other
purpose. This IMS 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 report 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 IMS 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.