REG - Michael Page Intl - First Quarter 2016 Trading Update <Origin Href="QuoteRef">MPI.L</Origin>

PagegroupAnnouncement

12/04/2016 07:05

RNS Number : 8543U
Michael Page International PLC
12 April 2016
12 April 2016
FIRST QUARTER 2016 TRADING UPDATE
Highlights (in constant currencies)

 3.6% Group gross profit growth; despite timing of Easter and challenging trading conditions in a number of markets
 Strongest growth in EMEA +10.3%; Benelux +32%; Southern Europe +20%
 UK flat overall; Page Personnel +9%
 Asia Pacific -2.0%; Asia -1%; Australasia -3% 
 North America +9% against strong comparatives 
 LatAm (ex Brazil) +11%; Brazil -31%
 Strong balance sheet with net cash of 89m
Q1 GROSS PROFIT ANALYSIS


Reported (m)
Constant
Year-on-year 
% of Group 
Q1 2016
Q1 2015
%
%
EMEA 
43%
61.7
54.1
+14.1%
+10.3%
UK 
26%
36.5
36.5
+0.0%
+0.0%
Asia Pacific
18%
25.9
25.8
+0.5%
-2.0%
Americas
13%
18.3
19.3
-5.3%
-0.6%
Total
100%
142.4
135.7
+4.9%
+3.6%






Permanent 
76%
107.9
105.1
+2.7%
+1.6%
Temporary
24%
34.5
30.6
+12.8%
+10.6%

Commenting, Steve Ingham, Chief Executive Officer said:
"The Group delivered gross profit growth of 3.6% in constant currencies, despite the timing of Easter and the challenging market conditions in several of our larger markets, including Greater China, the UK and Brazil. However, we saw particularly good performances in the US, and Continental Europe, which now accounts for over 40% of the Group.
"Current market conditions remain stronger at lower salary levels and in temporary roles. This was reflected by the strong growth of 9% in our Page Personnel business, where temporary recruitment represents 41% of gross profit. Our Michael Page business, where temporary recruitment represents only 17%, grew 2%. Overall, temporary recruitment grew by 10.6%, compared to 1.6% in permanent. 
"Despite the challenges in a number of our larger markets, the unpredictable nature of the current cycle and our limited visibility, we will continue to focus on driving profitable growth, whilst remaining able to respond quickly to any changes in market conditions."
Group Trading Update
Michael Page International plc ("PageGroup") delivered first quarter gross profit of 142.4m, up 3.6% in constant currencies and 4.9% in reported rates as it benefited by c. 1.8m due to the weakening of Sterling.
Ongoing Investment
Having added 206 fee earners in 2015, net fee earner additions slowed in Q1 2016 to 12. Our operational support headcount increased by 30 in the quarter, however, the majority of these were in Continental Europe where we are temporarily parallel-running some support functions as they transition into our new Shared Service Centre in Barcelona. Our fee earner to operational support staff ratio remained at the record of 77:23.
Perm/Temp mix
Gross profit from permanent recruitment grew 2.7% in reported rates, and 1.6% in constant currencies, to 107.9m (Q1 2015: 105.1m) and gross profit from temporary recruitment grew 12.8% in reported rates, and 10.6% in constant currencies, to 34.5m (Q1 2015: 30.6m). This resulted in a ratio of permanent to temporary recruitment of 76:24. The variation in growth rates between permanent and temporary recruitment was driven primarily by uncertainty in some of our markets leading to a lower number of permanent positions being filled and an increase in the hiring of lower risk temporary positions.
Discipline analysis


Reported (m)
Constant
Year-on-year gross profit
% of Group 
Q1 2016
Q1 2015
%
%
Finance & Accounting 
40%
56.7
53.9
+5.2%
+4.0%
Legal, Technology, HR, Secretarial, Healthcare
22%
31.3
27.8
+12.6%
+10.9%
Engineering, Property & Construction, Procurement & Supply Chain
19%
26.9
26.5
+1.2%
-0.2%
Marketing, Sales & Retail
19%
27.5
27.5
+0.2%
-0.8%
Total
100%
142.4
135.7
+4.9%
+3.6%
Geographical analysis (unless otherwise stated all growth rates are in constant currency)
EMEA 
Gross Profit (m)
Growth Rates
(43% of Group)


Reported
Constant
Q1 2016 vs. Q1 2015
61.7
54.1
+14.1%
+10.3%
Headcount at 31 March 2016: 2,380 (31 December 2015: 2,295)
Gross profit growth in constant currencies:
 France (13% of Group) +2% on Q1 2015 
 Germany (6% of Group) +6% on Q1 2015 
Compared to the prior year, EMEA was up 10.3%, in line with the Q4 growth rate. France was up 2%, with Page Personnel France up 5%, ahead of Michael Page France (-2%), which being entirely permanent was impacted more by the timing of Easter. In Germany, gross profit grew 6%, with Page Personnel up 17% and temporary recruitment up 40%. Benelux grew strongly, up 32%, with Southern Europe up 20%. Elsewhere, we had many strong performances, with record gross profits in four of our businesses. Challenging conditions in the Middle East, as a result of ongoing political instability and the depressed oil price, resulted in a drop in gross profit of 28%. Fee earner headcount grew by 60 across the region. 
UK 
Gross Profit (m)
Growth Rates
(26% of Group)



Q1 2016 vs. Q1 2015
36.5
36.5
+0.0%
Headcount at 31 March 2016: 1,472 (31 December 2015: 1,516)
In the UK, while activity levels remained strong and in line with last year, conversion to gross profit was impacted by the timing of Easter and the uncertainty surrounding the EU Referendum. This led to our growth rate slowing from 2% in Q4 2015 to flat in Q1 2016. Our more technical disciplines and permanent placements at higher salary levels were most affected. Temporary recruitment (+6%) performed better than permanent (-3%), with Page Personnel (+9%) more robust than Michael Page (-3%). We also saw an excellent result from our Legal discipline (+23%). The mix (87:13) of Private and Public Sector remained in line with the last few quarters, with the Private sector flat in the quarter, but the Public sector down 2%. Reflecting the challenging trading conditions, fee earner headcount fell by 49 in the quarter.
Asia Pacific 
Gross Profit (m)
Growth Rates
(18% of Group)


Reported
Constant
Q1 2016 vs. Q1 2015
25.9
25.8
+0.5%
-2.0%
Headcount at 31 March 2016: 1,200 (31 December 2015: 1,180)
Gross profit growth in constant currencies:
 Asia (13% of Group) -1% on Q1 2015 
 Greater China (57% of Asia) -5% on Q1 2015 
 Australasia (5% of Group) -3% on Q1 2015 
Asia Pacific gross profit decreased 2% in constant currencies, but grew 0.5% in reported rates, helped by the relative strength of the Chinese Renminbi. Overall, Asia decreased 1%, with Greater China down 5% as prevailing market conditions and uncertainty impacted growth rates. However, following Chinese New Year in February, we saw some improvement across the region as the quarter progressed. In South East Asia we had a strong performance, with Malaysia and Indonesia, combined, growing 17%. Australasia decreased 3%, though this was an improved performance on Q4 2015, with sequential growth of 5%. Trading conditions continued to be tough across Australia (-4%), most notably in Western Australia. However, there was a strong performance from Queensland. The management changes we made during the second half of 2015 are having a positive impact and should enable us to better react to the current environment and growth opportunities that exist. Fee earner headcount in the region increased by 14.
Americas 
Gross Profit (m)
Growth Rates
(13% of Group)


Reported
Constant
Q1 2016 vs. Q1 2015
18.3
19.3
-5.3%
-0.6%
Headcount at 31 March 2016: 825 (31 December 2015: 844)
Gross profit growth in constant currencies:
 North America (8% of Group) +9% on Q1 2015
 Latin America (5% of Group) -10% on Q1 2015 
 Brazil (35% of LatAm) -31% on Q1 2015 
The Americas gross profit decreased 5.3% in reported rates and 0.6% in constant currencies, with the strong US Dollar partially offsetting weaker currencies elsewhere. North America delivered another good performance growing 9%, with the US, against tough comparatives, growing 12% in constant currency and 20% in reported rates. We saw another strong result from our New York office, though global stock market volatility caused a slower start to the year in our Financial Services business. In Latin America, gross profit decreased 10%, similar to Q4 2015. The political and economic uncertainty in Brazil continued to impact trading and, as a result, Brazil fell 31%. Elsewhere in Latin America, the other five markets which now represent 65% of the region, continued to perform well, growing 11% collectively, with a particularly strong result from Argentina.
Financial Position
Save for the effects of trading in the first quarter described above, there have been no other significant changes to the financial position of the Group since the publication of the results for the year ended 31 December 2015.
Net cash at 31 March 2016 was in the region of 89m (31 December 2015: 95m). The decrease of 6m compared to December is mainly the result of quarterly bonus payments to consultants and annual bonus payments to more senior staff paid in January, offset by good cash generation from trading in the quarter.
Subject to shareholder approval at the AGM on 9 June 2016, the proposed final dividend for 2015 of 7.9p per share will be paid on 20 June 2016 to shareholders on the Register as at 20 May 2016. This would give a full year ordinary dividend of 11.5p per share for 2015, in addition to the special dividend of 16p per share that was paid in October.
The Group will issue its Second Quarter Trading Update on 12 July 2016.
Shares
At 31 March2016 there were 325,947,955 Ordinary shares in issue, of which 14,035,439 were held by the EBT. The rights to receive dividends and to exercise voting rights have been waived by the EBT over 12,618,628 shares and consequently these shares should be excluded when calculating earnings per share. The total number of voting rights in the Company is 325,947,955.
Cautionary Statement
This First Quarter 2016 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.
Enquiries:
PageGroup
+44 (0)20 3077 8425
Steve Ingham, Chief Executive Officer

Kelvin Stagg, Chief Financial Officer



FTI Consulting
+44 (0)20 3727 1340
Richard Mountain / Susanne Yule

Conference call / presentation:
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.investis-live.com/pagegroup/56fbca184731d0080014bdbe/j34hka3
Please use the following dial-in numbers to join the conference:
United Kingdom (Local) 
020 3059 8125 
All other locations 
+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 12 April 2016 at:
http://www.page.com/investors/investor-library/2016.aspx
Q2 Trading Update:
The Group will issue its Q2 Trading Update on 12 July 2016.

This information is provided by RNS
The company news service from the London Stock Exchange
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