REG - PageGroup plc - Third Quarter 2024 Trading Update

PagegroupAnnouncement

14/10/2024 07:00

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RNS Number : 9475H  PageGroup plc  14 October 2024

 

 

14 October 2024

THIRD QUARTER 2024 TRADING UPDATE

 

ONGOING CHALLENGING MARKET CONDITIONS, FURTHER SOFTENING IN EUROPE

 

Q3 Highlights*

 

 

·    Group gross profit of £201.4m, -13.5% vs. 2023 (-16.7% in reported
rates)

·    Exited September -16% vs. 2023

·    Continued subdued levels of client and candidate confidence impacting
decision making

·    EMEA -15.1%: France -16%; Germany -19%

·    Americas -10.3%**: US -11%; Latin America -7%**

·    Asia Pacific -16.8%: SE Asia -9%; Greater China -25%; Japan -5%;
India -3%

·    UK -13.5%: Michael Page -10%; Page Personnel -19%

·    Decrease in fee earner headcount of 98 (-1.8%) to 5,500 (Q2 2024:
5,598)

·    Productivity down 4% on Q3 2023

·    Net cash of c. £93m (Q2 2024: c. £57m, Q3 2023: c. £136m)

·    Interim dividend of £16.8m paid on 11 October 2024

 

Full Year Outlook

 

·    The Board expects 2024 operating profit to be broadly in line with
current market consensus of £58m

 

* In constant currencies vs 2023 except where stated otherwise

** Excluding Argentina due to hyperinflation

 

Q3 Gross Profit Analysis

 

                           Reported (£m)             Constant
 Year-on-year  % of Group  Q3 2024  Q3 2023  %       %
 EMEA          53%         106.3    127.9    -16.9%  -15.1%
 Americas      18%         36.2     43.3     -16.4%  -10.3%**
 Asia Pacific  16%         32.7     40.3     -19.0%  -16.8%
 UK            13%         26.2     30.4     -13.5%  -13.5%
 Total         100%        201.4    241.9    -16.7%  -13.5%

 Permanent     71%         142.8    175.3    -18.5%  -15.3%
 Temporary     29%         58.6     66.6     -12.0%  -8.6%

 

Nicholas Kirk, Chief Executive Officer, PageGroup, said:

 

"We continued to see challenging market conditions throughout the Group in Q3,
with no improvement in September after the seasonally quieter summer months.
Whilst most markets were sequentially stable, we experienced softer activity
and trading in a number of European countries including France and Germany.
The conversion of interviews to accepted offers remains the most significant
area of challenge as the ongoing macro-economic uncertainty in the majority of
our markets continues to impact candidate and client confidence negatively. In
this context, permanent recruitment continues to be impacted more than
temporary.

"We continue to review fee earner headcount, reallocating resource in line
with our strategy into the areas of the business where we see the most
significant long-term structural opportunities. Overall, our intention remains
to hold fee earners broadly at existing levels to ensure we are well placed to
take advantage of opportunities when market conditions improve. We have a
highly diversified and adaptable business model, a highly experienced
management team, a strong balance sheet and our cost base is under continuous
review.

"We continue to see the benefits of our investments in innovation and
technology. Customer Connect is supporting productivity and enhancing customer
experience, Page Insights is providing real time data to inform business
decisions for both Page and our customers, and we continue to work with our
partners to deploy AI and automation tools into our working environment. Given
the Group's fundamental strengths, we believe we will continue to perform well
despite the challenging environment, and we are confident in our ability to
implement our strategy, driving the long-term profitability of the Group."

Trading Summary

 

Group gross profit declined 13.5% in constant currencies against Q3 2023. We
continued to see tough market conditions in the majority of the Group's
markets with no signs of improvement. As clients' recruitment budgets have
tightened they have become more risk averse, which has continued to slow the
recruitment process, impacting time-to-hire. Although salary levels remain
strong, offers made to candidates were not as elevated as they were in 2022
and early 2023.

 

We saw no improvement in market conditions in September, which is a key month
after the seasonally quieter summer holiday period. Conversion of interviews
to accepted offers remains the most significant challenge due to reduced
levels of client and candidate confidence.

 

Reflecting the uncertain macro-economic conditions, temporary recruitment
(-8.6%) continued to outperform permanent (-15.3%), as clients sought more
flexible options. Our fee earner headcount remained broadly consistent with
Q2, down 98 (1.8%) in the quarter, with reductions mainly in Europe.
Productivity, measured as gross profit per fee earner, was down 4% versus Q3
2023, due to the tough macro-economic conditions combined with our decision to
hold onto our fee earner headcount.

Geographical Analysis (unless stated otherwise all growth rates are vs. 2023
and in constant currency)

 EMEA            Gross Profit (£m)       Growth Rates
 (53% of Group)   2024        2023       Reported  Constant
 Q3              106.3       127.9       -16.9%    -15.1%

 ·    Germany (13% of Group) -19%

 ·    France (13% of Group) -16%

 o  Page Personnel -18%

 o  Michael Page -14%

 ·    Benelux -17%

 o  Belgium -6%

 o  Netherlands -23%

 ·    Southern Europe -7%

 o  Italy -20%

 o  Spain -3%

 ·    Middle East and Africa -3%

 Total Headcount at 30 September 2024: 3,654 (30 June 2024: 3,714)

In Europe, Middle East and Africa, Q3 gross profit declined 15.1% against 2023
to £106.3m. The tough market conditions we saw in Q2 worsened in Q3, with
lower levels of candidate and client confidence. Germany, the Group's largest
market in Q3 declined 19%, with our Technology focused Interim business the
most resilient. France, our second largest market in the Group, was down 16%.
Temporary recruitment, down 8%, outperformed permanent, down 23%, indicative
of the ongoing uncertainty in the market. Elsewhere in Europe, we saw tough
market conditions in all countries. In the Middle East and Africa, gross
profit was down 3%. We reduced our fee earner headcount in response to ongoing
challenging market conditions in Q3, down 49, mainly in Germany and France.

 

 Americas        Gross Profit (£m)       Growth Rates
 (18% of Group)  2024        2023        Reported  Constant
 Q3              36.2        43.3        -16.4%    -10.3%**

 ·    North America (10% of Group) -13%

 o  US -11%

 ·    Latin America (8% of Group) -7%**

 o  Mexico -15%

 o  Brazil +7%

 Total Headcount at 30 September 2024: 1,341 (30 June 2024: 1,338)

 ** Excluding Argentina due to hyperinflation

 

In the Americas, gross profit was £36.2m, down 10.3% excluding Argentina due
to hyperinflation. In the US, gross profit declined 11%. The conditions we saw
in Q2 continued into Q3, with low levels of candidate and client confidence
impacting conversion of interviews to accepted offers. In Latin America,
excluding Argentina, the region declined 7%. Mexico, our largest country in
the region was down 15%, due to its high level of dependency on the US,
whereas Brazil was up 7%, with strong growth particularly in temporary
recruitment. Elsewhere in Latin America, our remaining countries declined 8%,
collectively. Overall fee earner headcount increased by 14, as we held onto
our platform in the US.

 

 Asia Pacific    Gross Profit (£m)       Growth Rates
 (16% of Group)  2024        2023        Reported  Constant
 Q3              32.7        40.3        -19.0%    -16.8%

 ·    Asia (13% of Group) -13%

 ·    South East Asia (4% of Group and 31% of Asia) -9%

 ·    Greater China (4% of Group and 30% of Asia) -25%

 o  Mainland China -24%

 o  Hong Kong -23%

 ·    Japan -5%

 ·    India -3%

 ·    Australia -31%

 Total Headcount at 30 September 2024: 1,441 (30 June 2024: 1,468)

 

In Asia Pacific, gross profit for Q3 was down 16.8% against 2023 to £32.7m.
South East Asia declined 9%, with Singapore, down 10%. Conditions remained
tough in Greater China, down 25% in Q3, with Mainland China down 24% and Hong
Kong down 23%. Japan and India declined 5% and 3%, respectively, albeit both
had tough comparators. Australia declined 31%, with ongoing challenging
conditions across all states. Our fee earner headcount in the region decreased
by 29.

 

 

 UK              Gross Profit (£m)       Growth Rate
 (13% of Group)  2024        2023
 Q3              26.2        30.4        -13.5%

 ·    Michael Page -10%

 ·    Page Personnel -19%

 Total Headcount at 30 September 2024: 1,006 (30 June 2024: 1,056)

 

In the UK, gross profit for Q3 declined 13.5% against 2023 to £26.2m,
following the decline of 17.4% in Q2. We continued to see clients deferring
hiring decisions and candidates cautious about accepting offers. Temporary
recruitment (-8%) was more resilient than permanent recruitment (-16%),
reflective of market conditions. Our fee earner headcount in the region
decreased by 34.

 

Perm/Temp mix

 

Gross profit from permanent recruitment decreased 18.5% in reported rates and
15.3% in constant currencies to £142.8m (Q3 2024: £175.3m). Gross profit
from temporary recruitment decreased 12.0% in reported rates and 8.6% in
constant currencies to £58.6m (Q3 2023: £66.6m). This resulted in a ratio of
permanent to temporary recruitment of 71:29 (Q3 2023: 72:28).

 

Headcount

 

We reduced our fee earner headcount by 98 (-1.8%) during Q3, mainly in Europe.
We continue to believe that our current level of fee earner headcount remains
broadly appropriate. Our non-operations headcount decreased by 36 (-1.8%) in
Q3. Overall, the Group had 5,500 fee earners and a total headcount of 7,442.

 

Foreign Exchange

 

Foreign exchange movements had a negative impact on the Group's results in Q3,
decreasing our reported gross profit by 3.2 percentage points, or £8.0m.

 

Financial Position

 

Save for the effects of Q3 trading detailed above and the payment of the 2024
interim dividend of £16.8m on 11 October 2024, 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 2024. Net cash at 30
September 2024 was c. £93m (Q2 2024: c. £57m, Q3 2023: c. £136m).

 

Shares

 

At 30 September 2024 there were 328,618,774 Ordinary shares in issue, of which
16,720,972 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 15,312,185 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 2024 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 13 January 2025.

 

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/66ea9ba326e9bc12001f5204/kyurw
(https://www.investis-live.com/pagegroup/66ea9ba326e9bc12001f5204/kyurw)

 

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 51 78 70 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 2024 at:

 

https://www.page.com/presentations/year/2024
(https://www.page.com/presentations/year/2024)

 

 

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