REG - Michael Page Intl - Fourth Quarter and Full Year 2015 Trading Update <Origin Href="QuoteRef">MPI.L</Origin>

PagegroupAnnouncement

12/01/2016 07:11

RNS Number : 5171L
Michael Page International PLC
12 January 2016
12 January 2016
FOURTH QUARTER AND FULL YEAR 2015 TRADING UPDATE
Q4 Gross profit growth of 5.3% at constant currency, 9.2% for the full year
Q4 Highlights*
 5.3% Group gross profit growth
 Strong performance from EMEA +10.3%; with Germany +12% 
 Tougher trading conditions in Asia Pacific -1.3% and the UK +2.1%
 North America +23%, with US +27%
 New operating system rolled out to 85% of fee earners; will complete in 2016
 Net cash of c. 93m
Full Year Results
 Group gross profit of 555.9m, constant currency growth +9.2%, a record year for the Group 
 FX lowered reported gross profit by c. 26m and operating profit by c. 4m
 Increase of 206 fee earners (+4.8%), ratio to operational support staff at record 77:23
 Operating profit expected to be broadly in line with current market consensus**, representing growth of c. 20% in constant currency
 * in constant currencies
** Company compiled consensus of 91.0m
Q4 GROSS PROFIT ANALYSIS
Reported (m)
Constant
Year-on-year 
% of Group 
Q4 2015
Q4 2014
%
%
EMEA 
41%
55.8
55.0
+1.6%
+10.3%
UK 
27%
36.2
35.5
+2.1%
+2.1%
Asia Pacific
18%
24.8
26.2
-5.5%
-1.3%
Americas
14%
18.8
19.6
-4.1%
+5.4%
Total
100%
135.6
136.3
-0.5%
+5.3%
Permanent 
74%
100.9
101.9
-1.0%
+4.9%
Temporary
26%
34.7
34.4
+1.0%
+6.2%
FULL YEAR GROSS PROFIT ANALYSIS
Reported (m)
Constant
Year-on-year 
% of Group 
FY 2015
FY 2014
%
%
EMEA 
39%
216.8
212.0
+2.3%
+11.8%
UK 
27%
151.6
138.4
+9.6%
+9.6%
Asia Pacific
20%
109.1
105.5
+3.4%
+4.9%
Americas
14%
78.4
76.9
+1.9%
+7.3%
Total
100%
555.9
532.8
+4.3%
+9.2%
Permanent 
76%
424.4
406.4
+4.4%
+9.0%
Temporary
24%
131.5
126.4
+4.1%
+9.9%
Commenting, Steve Ingham, Chief Executive Officer said:
"The Group's Q4 gross profit growth rate of 5.3% in constant currencies was delivered despite trading conditions deteriorating during the fourth quarter, notably in our UK and Asia Pacific regions, as well as in Brazil and the Middle East. However, our businesses in Continental Europe, the US and Latin America, excluding Brazil, continued to grow strongly.
"In reported rates, Q4 gross profit was down 0.5% to 135.6m. During the quarter, foreign exchange lowered our reported gross profit growth rate by 5.8 percentage points, the equivalent of c. 8m of gross profit.
"Within EMEA, our largest country France, grew 4%. Germany grew 12%, with a particularly impressive result from our temporary recruitment business, up 48%. In Southern Europe, all countries performed well, delivering growth of 28% for the quarter. We also saw good growth in Benelux of 21%. Political uncertainty and the weakness in the Oil and Gas sector saw a decline of 32% in the Middle East.
"In the UK, we saw growth in our HR, Legal and Technology disciplines, however all our other disciplines slowed in the quarter. Whilst activity levels remained consistent, as we approached the end of the year clients became increasingly reluctant to make decisions, which led our growth rate to slow to 2% in the quarter. This was felt across both our Michael Page and Page Personnel businesses, with the technical disciplines most affected.
"Asia grew 2% in Q4, with Greater China up 6% as prevailing market conditions lowered our previous stronger growth rates. With market conditions remaining challenging, our businesses in Australasia had a difficult quarter, down 9%. In addition, in Australia, we made management changes during the second half to strengthen our management team. These changes, we believe, will enable us to better react to the current environment and growth opportunities that exist. While the Asia Pacific region decreased 1.3% in Q4, for the year as a whole it grew 4.9%. 
"North America delivered an encouraging result, up 23%, driven by another strong performance from the US, which was up 27%, and in particular from our New York office. Trading conditions in Canada remained challenging with growth of 1%. In Latin America, gross profit decreased 9% due to the ongoing tough economic conditions in Brazil where gross profit fell by 34%. Elsewhere in Latin America, the other five markets now representing 65% of the region, continued to perform well, collectively growing 23%. 
"Having added 136 fee earners in the third quarter, net fee earner additions slowed in the final quarter to 45. In 2015, fee earner headcount grew 206 (+4.8%) and is now at a record level for the Group. With an increase of 51 in operational support headcount during the year, we maintained our record fee earner to operational support staff ratio of 77:23. This continued focus on improving our conversion rate has delivered a further increase, broadly in line with that seen in recent years. 
"Given the toughening market conditions experienced in Q4 across a number of our markets, we are pleased with the 9.2% growth in gross profit in constant currencies in what was a record year for the Group. We expect 2015 operating profit to be broadly in line with current market consensus**, which represents growth of c. 20% in constant currencies. With macro-economic 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, as we have throughout 2015".
Enquiries:
PageGroup
+44 (0)1932 264 446
Steve Ingham, Chief Executive Officer
Kelvin Stagg, Chief Financial Officer
FTI Consulting
+44 (0)20 3727 1340
Richard Mountain / Susanne Yule
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/56717c16e491730c00d46be3/q4-15
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 January 2016 at:
http://www.pagegroup.co.uk/investors/reports-and-presentations/presentations-and-webcasts/2015.aspx
The Group will issue its Full Year Results on 10 March 2016 and First Quarter Trading Update 2016 on 12 April 2016.
Group Trading Update
Michael Page International plc ("PageGroup") delivered Q4 gross profit of 135.6m, up 5.3% in constant currencies and down 0.5% in reported rates. For FY 2015, Group gross profit was a record 555.9m, up 9.2% in constant currencies and 4.3% in reported rates. Foreign exchange impacted the full year results materially by c. 26m on gross profit and c. 4m on operating profit. 
Headcount
Having increased our fee earners by 25 in H1, and by 136 in Q3, we added a further 45 during Q4, primarily into markets where growth was strongest. We maintained our fee earner to operational support staff ratio at 77:23, with the majority of the 8 operational support staff additions joining our newly established European Shared Service Centre. This resulted in fee earner headcount at the end of the quarter of 4,484 and total headcount of 5,835. 
Market leading technology systems 
Having started the year with one third of fee earners on our new Page Recruiting System, the roll-out progressed well throughout 2015. At the year end, over 85% of the Group's fee earners were live on the system, ahead of our 80% target. The roll-out will complete in 2016.
Perm/Temp mix
In constant currencies, Group gross profit from permanent recruitment was up 4.9%, with temporary recruitment growing faster at 6.2%. Permanent recruitment in Q4 decreased 1.0% at reported rates to 100.9m (Q4 2014: 101.9m) whereas temporary recruitment grew 1.0% to 34.7m (Q4 2014: 34.4m). This resulted in a ratio of permanent to temporary recruitment of 74:26. 
Discipline analysis
Reported (m)
Constant
Year-on-year gross profit
% of Group 
Q4 2015
Q4 2014
%
%
Finance & Accounting 
40%
53.8
54.2
-0.6%
+5.0%
Legal, Technology, HR, Secretarial, Healthcare
22%
30.4
27.0
+12.7%
+18.7%
Engineering, Property & Construction, Procurement & Supply Chain
19%
25.2
27.3
-7.5%
-1.7%
Marketing, Sales and Retail
19%
 26.2
27.8
-6.1%
-0.5%
Total
100%
135.6
136.3
-0.5%
+5.3%
Geographical analysis
EMEA 
Gross Profit (m)
Growth rates
(41% of Group)
Reported
Constant
Q4 2015 vs. Q4 2014
55.8
55.0
+1.6%
+10.3%
2015 vs. 2014
216.8
212.0
+2.3%
+11.8%
Headcount at 31 December 2015: 2,295 (31 December 2014: 2,113)
Gross profit in constant currencies:
 France (13% of Group) +4% on Q4 2014 
 Germany (6% of Group) +12% on Q4 2014 
Compared to the prior year, EMEA was up 10.3% in constant currencies in Q4. France was up 4%, with growth in both Michael Page and Page Personnel. Germany continued to perform well, up 12%, with Page Personnel up 37%. Southern Europe (9% of Group gross profit) also ended the year strongly, up 28% in Q4, with Spain delivering particularly impressive growth of 37%. Our businesses in Benelux performed strongly, collectively up 21%, and our business in Poland delivered a record quarter. Political uncertainty and the weakness in the Oil and Gas sector saw a decline of 32% in the Middle East. Fee earner headcount grew 36 in the quarter and 125 (+8%) in 2015 as a whole. 
UK 
Gross Profit (m)
Growth rates
(27% of Group)
Q4 2015 vs. Q4 2014
36.2
35.5
+2.1%
2015 vs. 2014
151.6
138.4
+9.6%
Headcount at 31 December 2015: 1,516 (31 December 2014: 1,441)
The UK experienced a more challenging quarter, with overall growth of 2.1%. Within this, Page Personnel continued to grow at a quicker rate, up 10%. Michael Page saw growth of 1%, with our technical disciplines the most challenging. Michael Page Finance and Accounting, which had been strong in the first three quarters of 2015, also slowed in Q4. Our public sector business saw growth of 1%, whereas our private sector, which represented 87% of the UK, grew at 2%. Fee earner headcount was flat in the quarter and up 70 (+7%) in 2015 as a whole.
Asia Pacific 
Gross Profit (m)
Growth rates
(18% of Group)
Reported
Constant
Q4 2015 vs. Q4 2014
24.8
26.2
-5.5%
-1.3%
2015 vs. 2014
109.1
105.5
+3.4%
+4.9%
Headcount at 31 December 2015: 1,180 (31 December 2014: 1,141)
Gross profit in constant currencies:
 Asia (13% of Group) +2% on Q4 2014
 Greater China (60% of Asia) +6% on Q4 2014 
 Australia / New Zealand (5% of Group) -9% on Q4 2014 
Asia Pacific decreased 1.3% in constant currencies in Q4. Asia grew 2%, down from 9% in Q3, as growth in Greater China slowed from 12% to 6%. Hong Kong and Southern China performed well, up 9% and 23% respectively; though this was moderated by Northern & Eastern China which was down 2%, as we saw a number of multi-national clients avoid hiring decisions. In Australia, continuing tough economic conditions, led to a decrease in growth of 9%. We made management changes during the second half to strengthen our management team. These changes, we believe, will enable us to better react to the current environment and growth opportunities that exist. Gross Profit in South East Asia increased 1%, but continued to be impacted by political uncertainty in Malaysia, balanced with a record quarter in Indonesia. Fee earner headcount grew 27 in the quarter and 48 (+6%) in 2015 as a whole. For the year, fee earners increased 6% in Asia and 4% in Australasia.
Americas 
Gross Profit (m)
Growth rates
(14% of Group)
Reported
Constant
Q4 2015 vs. Q4 2014
18.8
19.6
-4.1%
+5.4%
2015 vs. 2014
78.4
76.9
+1.9%
+7.3%
Headcount at 31 December 2015: 844 (31 December 2014: 883)
Gross profit in constant currencies:
 North America (8% of Group) +23% on Q4 2014 
 Latin America (6% of Group) -9% on Q4 2014 
 Brazil (35% of LatAm) -34% on Q4 2014 
The Americas grew 5.4% in constant currencies in Q4, with North America continuing to deliver a very strong set of results, up 23%. The US, driven by a good performance in New York, grew 27%. Latin America continued to be affected by divergent market and trading conditions. In Brazil, which in Q4 represented 35% of Latin America, gross profit decreased by 34% in the quarter, due to the ongoing economic and political uncertainty. Excluding Brazil, the rest of the region grew 23%, with strong performances in Mexico, which grew at 28%, Argentina and Peru, which had record quarters. Fee earner headcount was stable in the quarter. For the year as a whole, headcount movements reflected trading, as we reduced fee earner headcount in Brazil by 73, but increased in the rest of the region by 36.
Financial Position
Save for the effects of trading in Q4 and the payments of the 2015 interim and special dividends which amounted to 61.3m on 2 October 2015, there have been no other significant changes in the financial position of the Group since the publication of the Q3 Interim Management Statement ended 30 September 2015.
Net cash at 31 December 2015 was c. 93m (31 December 2014: 90m).
The Group will issue its Full Year Results on 10 March 2016 and its Q1 Trading Update 2016 on 12 April.
Shares
At 31 December 2015 there were 325,919,705 Ordinary shares in issue, of which 14,776,231 were held by the EBT. The rights to receive dividends and to exercise voting rights have been waived by the EBT over 12,634,253 shares and consequently these shares should be excluded when calculating earnings per share. The total number of voting rights in the Company is 325,919,705.
Cautionary statement
This Q4 and Full Year 2015 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. This 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 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 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.

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