REG - PageGroup plc - Q3 Trading Statement

PagegroupAnnouncement

11/10/2023 07:00

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RNS Number : 7005P  PageGroup plc  11 October 2023

 

11 October 2023

 

Implementing new strategy; resilient performance in challenging markets

 

Q3 Highlights*

 

·    Group gross profit of £242.2m, -7.9% vs. 2022 (-10.5% in reported
rates)

·    Stronger performance in temporary recruitment +5.8%; permanent -12.1%

·    Decrease in fee earner headcount of 310 to 6,075 (Q3 2022: 7,071)

·    Productivity up 4% on Q3 2022

·    EMEA -1.3%: France +1%; Germany +5%

·    Americas -13.3%: US -25%; Latin America +7%

·    Asia Pacific -11.0%: Greater China -22%; SE Asia -12%; Japan +4%;
India +3%

·    UK -18.9%: Michael Page -20%; Page Personnel -17%

·    Strong cash position, net cash of c. £136m (Q2 2023: c. £96m, Q3
2022: c. £186m)

·    Interim and special dividends of £66.2m to be paid on 13 October
2023

 

Outlook

·    The Board expects 2023 operating profit, excluding the previously
announced one off cost of c. £5m, to be between £125m - £130m

 

* In constant currencies vs 2022 except where stated otherwise

 

Q3 Gross Profit Analysis

 

                           Reported (£m)             Constant
 Year-on-year  % of Group  Q3 2023  Q3 2022  %       %
 EMEA          53%         128.0    130.0    -1.6%   -1.3%
 Americas      18%         43.3     52.7     -17.9%  -13.3%
 Asia Pacific  17%         40.6     50.4     -19.3%  -11.0%
 UK            12%         30.3     37.4     -18.9%  -18.9%
 Total         100%        242.2    270.5    -10.5%  -7.9%

 Permanent     72%         175.5    206.5    -15.0%  -12.1%
 Temporary     28%         66.7     64.0     +4.3%   +5.8%

 

 

Nicholas Kirk, Chief Executive Officer, PageGroup, said:

 

"The Group delivered a resilient result in challenging markets. EMEA was our
best performing region, however, tough market conditions affected our
performances in Asia, the UK and the US. Overall, Group gross profit declined
7.9% in constant currencies against Q3 2022.

 

"Candidate shortages remain acute and are supportive of continued high fee
rates. Salary levels remain elevated, albeit the salary increases offered to
candidates reduced compared to Q3 2022. These lower offers, combined with
lower candidate confidence, led to a further increase in the number of offers
rejected by candidates, either through employer buybacks or unwillingness to
risk the move for the size of incentive on offer. The increased time to hire
that we saw in Q2 continued.

 

"Reflecting the uncertain macro-economic conditions, temporary recruitment
continued to outperform permanent, as clients sought more flexible options. In
line with these conditions, we reduced our fee earner headcount by 310 (-4.8%)
in Q3, following declines in H1 2023 and Q4 2022, with reductions in all
regions. Our total headcount of 8,140 is now 10.7% lower than at the end of Q3
2022. Productivity, measured as gross profit per fee earner, was up 4% versus
Q3 2022, as a result of our action on fee earner headcount over the past 12
months.

 

"As previously disclosed, as part of our refined strategy and our increased
focus on our conversion rate target, we have already implemented a number of
initiatives to reduce our cost base. These initiatives will incur a one off
cost in 2023 of c. £15m, offset by the majority of the cost savings being
realised in FY23. The net negative impact this year will be c. £5m. Going
forward, we expect these initiatives to deliver annualised savings of
c. £20m per annum compared to our FY23 cost base from FY24 onwards.

 

"Looking ahead, due to a slower end to the quarter, there is a heightened
degree of uncertainty in the short term. However, we have a highly diversified
and adaptable business model, a strong balance sheet, and our cost base is
under continuous review and can be adjusted rapidly to match market
conditions. Given these fundamental strengths, we believe we will continue to
perform well in these challenging markets, and we are confident in our ability
to implement our new strategy driving the long-term profitability of the
Group. We are also seeing the benefits from our investments in innovation and
technology, where Customer Connect is supporting productivity and enhancing
customer experience, and Page Insights is providing real time data to inform
business decisions.

 

"At this stage of the year, the Board expects 2023 operating profit, excluding
the previously announced one off cost of c. £5m, to be between £125m -
£130m."

 

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

 

 EMEA            Gross Profit (£m)       Growth Rates
 (53% of Group)   2023       2022        Reported  Constant
 Q3              128.0       130.0       -1.6%     -1.3%

 ·    Germany (14% of Group) +5%

 ·    France (13% of Group) +1%

 o  Page Personnel +1%

 o  Michael Page +2%

 ·    Benelux -8%

 o  Belgium +2%

 o  Netherlands -13%

 ·    Southern Europe -5%

 o  Italy -5%

 o  Spain -8%

 ·    Middle East and Africa +17%

 Total Headcount at 30 September 2023: 3,900 (30 June 2023: 4,035)

 

In Europe, Middle East and Africa, gross profit declined 1.3% against a tough
comparator to £128.0m. Germany, our largest market during Q3, delivered a
record quarter, growing 5%. The standout results continued to be delivered by
our Page Personnel (+15%) and Michael Page Interim businesses (+11%), the
latter delivering a record quarter. Tougher trading conditions remained in
permanent recruitment, which had a greater impact on Michael Page (-4%).
France was up 1% for the quarter, with similar performances in both Michael
Page and Page Personnel. We saw a stronger performance from within temporary
recruitment, which is indicative of the current uncertainty in the market.
Elsewhere in Europe, trading conditions were tougher due to weaker candidate
and client confidence. Our businesses in the Middle East and Africa grew 17%,
with good growth in all markets. Having reduced fee earners by 79 in Q2 2023,
we reduced our fee earner headcount further in Q3, down 93 for the region
overall.

 

 Americas        Gross Profit (£m)       Growth Rates
 (18% of Group)  2023        2022        Reported  Constant
 Q3              43.3        52.7        -17.9%    -13.3%

 ·    North America (10% of Group) -25%

 o  US -25%

 ·    Latin America (8% of Group) +7%

 o  Mexico -4%

 o  Brazil +4%

 Total Headcount at 30 September 2023: 1,373 (30 June 2023: 1,500)

 

In the Americas, gross profit was £43.3m, down 13.3% against Q3 2022. In the
US, gross profit declined 25%, a deterioration on the decline of 16% in Q2.
Uncertainty in market conditions continued to impact time to hire as well as
client and candidate confidence. In Latin America, gross profit grew 7%, a
record quarter, despite macro-economic uncertainty across the region. Mexico,
our largest country in the region, was down 4%, compared to a decline of 7% in
Q2 and Brazil was up 4%, an improvement on the decline of 9% in Q2. Elsewhere
in Latin America, our remaining countries grew 19%, collectively. In line with
the more challenging conditions, overall fee earner headcount decreased by 96,
mainly in the US and Mexico.

 

 Asia Pacific    Gross Profit (£m)       Growth Rates
 (17% of Group)  2023        2022        Reported  Constant
 Q3              40.6        50.4        -19.3%    -11.0%

 ·    Asia (13% of Group) -11%

 ·    Greater China (5% of Group and 35% of Asia) -22%

 o  Mainland China -23%

 o  Hong Kong -21%

 ·    South East Asia -12%

 ·    India +3%

 ·    Japan +4%

 ·    Australia -11%

 Total Headcount at 30 September 2023: 1,624 (30 June 2023: 1,730)

 

In Asia Pacific, gross profit for Q3 was down 11.0% against 2022 to £40.6m.
Permanent recruitment across the region declined 12%, whilst temporary
recruitment declined 3%, reflecting the continued uncertain market conditions.
Greater China declined 22%, with Mainland China down 23%. Trading remained
challenging with the recovery continuing to be slower than anticipated. Hong
Kong declined 21% for the quarter. South East Asia declined 12%, with
Singapore, which continued to be impacted by the slowdown in Greater China,
down 13%. India continued to deliver strong results, up 3% on Q3 2022, a
record quarter. Japan returned to growth of 4%, compared to the decline of 10%
in Q2, whilst Australia declined 11%, compared to -4% in Q2, due to tougher
market conditions. Our fee earner headcount in the region decreased by 85,
mainly in South East Asia and Japan.

 

 UK              Gross Profit (£m)       Growth Rate
 (12% of Group)  2023        2022
 Q3              30.3        37.4        -18.9%

 ·    Michael Page -20%

 ·    Page Personnel -17%

 Total Headcount at 30 September 2023: 1,243 (30 June 2023: 1,307)

 

In the UK, gross profit for Q3 decreased 18.9% against 2022 to £30.3m,
following the decline of 17.0% in Q2. We continued to see clients deferring
hiring decisions and candidates cautious about accepting offers. We also
experienced an increase in turndowns and buybacks in our permanent business
during September. Reflecting the uncertain market conditions, clients sought
more flexible options, and, as such, temporary recruitment (-5%) was more
resilient than permanent recruitment (-24%). In line with the more challenging
trading conditions, our fee earner headcount reduced by 36 in Q3 and is now
17% lower than Q3 2022.

 

Perm/Temp mix

 

Gross profit from permanent recruitment decreased 15.0% in reported rates and
12.1% in constant currencies to £175.5m (Q3 2022: £206.5m). Gross profit
from temporary recruitment increased 4.3% in reported rates and 5.8% in
constant currencies to £66.7m (Q3 2022: £64.0m). This resulted in a ratio of
permanent to temporary recruitment of 72:28 (Q3 2022: 76:24).

 

Headcount

 

We reduced our fee earner headcount by 310 (-4.8%) during Q3, with reductions
made across all regions, albeit more significantly in markets where we saw the
most challenging trading conditions. Our non-operations headcount fell by 122
(-5.6%) in Q3, as we reduced headcount in areas such as operational support
and candidate acquisition. Overall, the Group had 6,075 fee earners and a
total headcount of 8,140.

 

Productivity

 

As a result of the reduction in fee earners made in the quarter, gross profit
per fee earner, our measure of productivity, increased 4% compared to Q3 2022.
We continued to see the benefits of video interviewing, 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.

 

Foreign Exchange

 

Foreign exchange had a negative impact on the Group's reported results during
Q3, decreasing our Q3 reported gross profit by 2.6 percentage points, or
£7.0m.

 

Financial Position

 

Save for the effects of Q3 trading detailed above and the forthcoming payment
of the 2023 interim and special dividends of £66.2m to be paid on 13 October
2023, there have been no other significant changes in the financial position
of the Group since the publication of the results for the quarter ended 30
June 2023. Net cash at 30 September 2023 was c. £136m (Q2 2023: c. £96m, Q3
2022: c. £186m).

 

Shares

 

At 30 September 2023 there were 328,618,774 Ordinary shares in issue, of which
15,149,770 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 13,502,599 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 Third 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 Fourth Quarter Trading Update on 15 January 2024.

 

 

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/650bfe60673c270c00b7af50/dssa
(https://protect-eu.mimecast.com/s/7z_nCl5qOU2Z2RXmIGSAtk?domain=investis-live.com)

 

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

 

 United Kingdom (Local)  020 4587 0498
 All other locations     +44 20 4587 0498

 

Please quote participant access code 27 10 62 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 11 October 2023 at:

 

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

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