REG - PageGroup plc - Q1 Trading Statement

PagegroupAnnouncement

17/04/2023 07:00

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RNS Number : 3357W  PageGroup plc  17 April 2023

 

 

17 April 2023

 

RECORD RESULT IN EMEA; ONGOING CHALLENGING MARKET CONDITIONS

 

Q1 Highlights*

 

·    Group gross profit of £262.7m, -2.4% vs. 2022 (+1.8% in reported
rates)

·    EMEA +6.8%: France +3%; Germany +11%

·    Americas -7.6%: US -15%; Latin America +4%

·    Asia Pacific -17.0%: Greater China -42%; SE Asia -12%; Japan +5%;
India flat

·    UK -9.4%: Michael Page -14%; Page Personnel +4%

·    Large, High Potential markets (36% of Group) -9%; excluding Greater
China -1%

·    Decrease in fee earner headcount of 304 to 6,639 (Q4 2022: 6,943)

·    Productivity down 8% on Q1 2022

·    Strong cash position, net cash of c. £105m (Q4 2022: c. £131m, Q1
2022: c. £122m)

·    Full Year operating profit expected to be in line with company
compiled consensus of £140m

 

* In constant currencies vs 2022 except where stated otherwise

 

Q1 Gross Profit Analysis

 

                           Reported (£m)             Constant
 Year-on-year  % of Group  Q1 2023  Q1 2022  %       %
 EMEA          55%         145.4    129.7    +12.2%  +6.8%
 Americas      16%         42.7     42.9     -0.7%   -7.6%
 Asia Pacific  16%         41.2     48.5     -15.1%  -17.0%
 UK            13%         33.4     36.9     -9.4%   -9.4%
 Total         100%        262.7    258.0    +1.8%   -2.4%

 Permanent     74%         195.7    202.0    -3.1%   -7.2%
 Temporary     26%         67.0     56.0     +19.5%  +14.9%

 

 

Nicholas Kirk, Chief Executive Officer, PageGroup, said:

 

"The Group delivered strong results in the quarter, with a record performance
from EMEA, where the standout result was Germany. However, tough market
conditions continued in Asia, the US and the UK. Overall, Group gross profit
declined 2.4% in constant currencies against Q1 2022. The Group benefited from
positive foreign exchange movements, increasing our reported gross profit by
£10.8m. As a result, we grew 1.8% in reported rates.

 

"The challenging conditions we saw towards the end of 2022 continued into
2023, with lower levels of both candidate and client confidence resulting in
delays in decision making and candidates being more reluctant to accept
offers. Reflecting the uncertainty, temporary recruitment outperformed
permanent, as clients sought more flexible options. Our fee earner headcount
reduced by 304 (-4.4%) in Q1, with reductions in all regions. However, due to
the level of investment made in 2022, our total headcount remains 510 (+6.2%)
higher than at the end of Q1 2022. Consequently, gross profit per fee earner,
our measure of productivity, declined 8% compared to Q1 2022.

"Looking forward, there remains a high level of global macro-economic and
political uncertainty in the majority of our markets. However, against this
backdrop, we continue to see candidate shortages and good levels of vacancies.
Given our highly diversified and adaptable business model, with a cost base
that can be adjusted rapidly and a strong balance sheet, we believe we will
continue to perform well despite the uncertainty and, at this early stage of
the year, expect 2023 operating profit to be in line with company compiled
consensus of £140m."

Geographical Analysis (unless stated otherwise all growth rates are vs. 2022
and in constant currency)

 

 EMEA            Gross Profit (£m)       Growth Rates
 (55% of Group)   2023       2022        Reported  Constant
 Q1              145.4       129.7       +12.2%    +6.8%

 ·    France (14% of Group) +3%

 o  Page Personnel +3%

 o  Michael Page +4%

 ·    Germany (13% of Group) +11%

 ·    Benelux +9%

 o  Belgium +21%

 o  Netherlands +3%

 ·    Southern Europe +6%

 o  Italy -2%

 o  Spain +5%

 ·    Middle East and Africa +20%

 Total Headcount at 31 March 2023: 4,081 (31 December 2022: 4,085)

 

In Europe, Middle East and Africa, gross profit grew 6.8% to £145.4m. EMEA
was our strongest performing region, and notably this performance was achieved
despite Q1 2022 being a particularly tough comparator across the region.
France delivered growth of 3% for the quarter, with similar performances in
both Michael Page and Page Personnel. We also saw consistent performances
across both permanent and temporary recruitment. Germany delivered another
record quarter, up 11%, with the standout performances from Page Personnel and
our Technology focused Interim business. Elsewhere in the region, we delivered
strong results against a tough Q1 2022, with Belgium, Spain and Turkey
delivering record quarters. Having added 534 fee earners in 2022, we reduced
our fee earner headcount in Q1 2023, down 37 for the region overall.

 

 

 Americas        Gross Profit (£m)       Growth Rates
 (16% of Group)  2023        2022        Reported  Constant
 Q1              42.7        42.9        -0.7%     -7.6%

 ·    North America (10% of Group) -14%

 o  US -15%

 ·    Latin America (6% of Group) +4%

 o  Mexico -4%

 o  Brazil -13%

 Total Headcount at 31 March 2023: 1,568 (31 December 2022: 1,690)

 

In the Americas, we delivered gross profit of £42.7m, down 7.6% against Q1
2022. In the US, we declined 15%, compared to growth of 2% in Q4 2022. The
conditions we saw at the end of 2022 continued into Q1, with uncertainty
around market conditions affecting both candidate and client confidence,
particularly within our Technology and Banking disciplines. In Latin America,
gross profit grew 4%, despite macro-economic uncertainty across the region.
Mexico, our largest country in the region, was down 4%, compared to growth of
1% in Q4, driven by increased delays in decision making. Brazil was down 13%,
however elsewhere in Latin America, our remaining countries grew 23%,
collectively. In line with the more challenging conditions, overall fee earner
headcount decreased by 134, mainly in the US, Brazil and Mexico.

 

 Asia Pacific    Gross Profit (£m)       Growth Rates
 (16% of Group)  2023        2022        Reported  Constant
 Q1              41.2        48.5        -15.1%    -17.0%

 ·    Asia (12% of Group) -21%

 ·    Greater China (4% of Group and 34% of Asia) -42%

 o  Mainland China -46%

 o  Hong Kong -36%

 ·    South East Asia -12%

 ·    India flat

 ·    Japan +5%

 ·    Australia +1%

 Total Headcount at 31 March 2023: 1,796 (31 December 2022: 1,842)

 

In Asia Pacific, gross profit for Q1 was down 17.0% against 2022 to £41.2m.
Permanent recruitment across the region declined 21%, whilst temporary
recruitment grew 12%, reflecting the continued uncertain market conditions.
Greater China declined 42%, with Mainland China down 46% on Q1 2022, as this
region only started to be impacted by the COVID lockdowns in March 2022.
Whilst COVID restrictions have been lifted, trading remains challenging with
fluctuating levels of COVID infections during the quarter. Hong Kong declined
36% for the quarter. Our other Large, High Potential geographic market in the
region, South East Asia, declined 12%. India was flat on Q1 2022, which was a
particularly tough comparator of +79%. Japan delivered growth of 5%, a new
record quarter. Australia grew 1%, broadly in line with Q4. Our fee earner
headcount in the region decreased by 67.

 

 UK              Gross Profit (£m)       Growth Rate
 (13% of Group)  2023        2022
 Q1              33.4        36.9        -9.4%

 ·    Michael Page -14%

 ·    Page Personnel +4%

 Total Headcount at 31 March 2023: 1,353 (31 December 2022: 1,404)

 

In the UK, gross profit for Q1 declined 9.4% against 2022 to £33.4m,
following the decline of 1.9% in Q4 2022. We continued to see clients
deferring hiring decisions and candidates cautious about accepting offers.
Reflecting the uncertain market conditions, clients sought more flexible
options, and as such, temporary recruitment was more resilient than permanent
recruitment. In line with the more challenging trading conditions, our fee
earner headcount reduced by 66 in Q1.

 

Large, High Potential Markets

 

Our 5 Large, High Potential geographic markets of Germany, Greater China,
Latin America, South East Asia and the US, which represented 36% of the Group
collectively, declined 9% in Q1. Excluding Greater China, which was impacted
by the ongoing disruption following the COVID lockdowns and restrictions, as
well as a tough comparator in Q1 2022, these markets declined 1%.

 

Perm/Temp mix

 

Gross profit from permanent recruitment decreased 3.1% in reported rates and
declined 7.2% in constant currencies to £195.7m (Q1 2022: £202.0m). Gross
profit from temporary recruitment increased 19.5% in reported rates and 14.9%
in constant currencies to £67.0m (Q1 2022: £56.0m). This resulted in a ratio
of permanent to temporary recruitment of 74:26 (Q1 2022: 78:22).

 

Headcount

 

Our fee earner headcount reduced by 304 (-4.4%) during Q1, with reductions
made across all regions albeit more significantly in markets where we saw the
most challenging market conditions. Our non-operations headcount rose by 82 in
Q1, as we continued to invest in Page Outsourcing and moved our candidate
acquisition teams into our delivery centres. Overall, the Group had 6,639 fee
earners and a total headcount of 8,798. Our total headcount at the end of Q1
remains 510 (+6.2%) higher than at the end of Q1 2022.

 

Productivity

 

Overall, gross profit per fee earner, our measure of productivity, decreased
8% compared to Q1 2022. We continued to see the benefits of video
interviewing, the investments made in experienced hires, continued high fee
rates as well as wage inflation. However, reduced candidate and client
confidence caused an increase in time to hire as well as some reluctance to
accept offers, limiting the number of placements per fee earner.

 

Sustainability

 

We have just released our 2022 Sustainability report to highlight the progress
we've made towards our four Sustainability goals over the past 12 months.

This includes:

- changing 135,871 lives

- increasing our proportion of women in leadership roles to 43%

- decreasing our scope 1 & 2 emissions by 30%

- growing our sustainability business by 120%

We are now well on our way to reaching our sustainability goals, as we strive
to support the transition to a more equitable and greener society.

Read our full report here: https://www.page.com/sustainability
(https://www.page.com/sustainability)

 

Foreign Exchange

 

The Group benefited from positive foreign exchange movements during Q1,
increasing our Q1 reported gross profit by 4.2 percentage points, or £10.8m.

 

Financial Position

 

Save for the effects of Q1 trading detailed above and the purchase of shares
into the Employee Benefit Trust (EBT) of c. £6m, there have been no other
significant changes in the financial position of the Group since the
publication of the results for the year ended 31 December 2022. Net cash at 31
March 2023 was c. £105m (Q4 2022: c. £131m, Q1 2022: c. £122m).

 

Shares

 

At 31 March 2023 there were 328,618,774 Ordinary shares in issue, of which
14,457,299 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 12,810,128 shares and consequently these shares should be excluded when
calculating earnings per share. The total number of voting rights in the
Company is 328,618,774.

 

 

Cautionary Statement

 

This First Quarter 2023 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.

 

The Group will issue its Q2 Results on 12 July 2023.

 

Enquiries:

 PageGroup                               +44 (0)19 3226 4032
 Nicholas Kirk, 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:

https://www.investis-live.com/pagegroup/641b179e33aa1a1200649ef4/dsfarr
(https://protect-eu.mimecast.com/s/s-iNC32MlhpzBpxKTgK_hi?domain=investis-live.com)

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

 

 United Kingdom (Local)  020 3936 2999
 All other locations     +44 20 3936 2999

 

Please quote participant access code 24 46 48 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 17 April 2023 at:

 

https://www.page.com/presentations/year/2023
(https://www.page.com/presentations/year/2023)

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