REG - PageGroup plc - Trading Update

PagegroupAnnouncement

15/01/2024 07:00

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RNS Number : 6079Z  PageGroup plc  15 January 2024

 

 

15 January 2024

 

RESILIENT PERFORMANCE IN CHALLENGING MARKET CONDITIONS

 

Q4 Highlights*

 

·    Group gross profit of £237.3m, -8.9% vs. 2022

·    Slower exit to the quarter with continued weakness in client and
candidate confidence

·    EMEA -6.1%: France -5%; Germany -6%

·    Americas -8.0%: US -24%; Latin America +11%**

·    Asia Pacific -10.3%: Greater China -8%; SE Asia -14%; Japan -7%;
India +16%

·    UK -19.9%: Michael Page -23%; Page Personnel -15%

·    Decrease in fee earner headcount of 224 to 5,851 (Q4 2022: 6,943)

·    Strong cash position, net cash of c. £90m (Q3 2023: c. £136m, Q4
2022: c. £131m)

·    2023 full year operating profit expected to be slightly below
previous guidance of £120m - £125m***

 

* In constant currencies vs 2022 except where stated otherwise

** Excluding Argentina due to hyperinflation following the election

*** After previously announced restructuring charge of c. £5m

 

Q4 Gross Profit Analysis

 

                           Reported (£m)             Constant
 Year-on-year  % of Group  Q4 2023  Q4 2022  %       %
 EMEA          56%         132.4    141.7    -6.5%   -6.1%
 Americas      17%         40.4     46.5     -13.2%  -8.0%
 Asia Pacific  15%         35.9     43.0     -16.4%  -10.3%
 UK            12%         28.6     35.7     -19.9%  -19.9%
 Total         100%        237.3    266.9    -11.1%  -8.9%

 Permanent     70%         165.4    197.7    -16.3%  -13.9%
 Temporary     30%         71.9     69.2     +3.9%   +5.2%

 

Full Year Gross Profit Analysis

 

                           Reported (£m)             Constant
 Year-on-year  % of Group   2023    2022     %       %
 EMEA          55%         548.8    538.5    +1.9%   +0.2%
 Americas      17%         172.7    193.4    -10.7%  -9.5%
 Asia Pacific  16%         159.6    195.3    -18.3%  -14.3%
 UK            12%         124.9    149.1    -16.2%  -16.2%
 Total         100%        1,006.0  1,076.3  -6.5%   -6.4%

 Permanent     73%         732.9    826.3    -11.3%  -11.0%
 Temporary     27%         273.1    250.0    +9.2%   +8.7%

 

 

 

Nicholas Kirk, Chief Executive Officer, PageGroup, said:

 

"We produced a resilient performance in challenging market conditions. Despite
the year-on-year decline in gross profit, we are still seeing good activity
levels, albeit we did see a deterioration in job flow through Q4. However,
these activity levels are not all converting into gross profit due to ongoing
lower levels of candidate and client confidence.

 

"Looking ahead, macro-economic uncertainty persists. 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."

 

Trading Summary

 

Group gross profit declined 8.9% in constant currencies against Q4 2022, which
was a 10% softer comparator than Q3. Trading conditions in Asia, the UK or the
US saw no improvement, while trading conditions deteriorated in Europe. We
experienced a slower end to the quarter as customer uncertainty was compounded
by the proximity to year end salary reviews and bonuses, which combined to
make trading particularly challenging.

 

The tougher market conditions at the end of Q3 continued into Q4, as low
levels of client and candidate confidence continued to delay time to hire,
particularly in permanent recruitment. As clients' recruitment budgets have
tightened, they have become more risk averse which has slowed the recruitment
process. Although salary levels remain strong, offers made to candidates are
not as elevated as they were in 2022.

 

However, against this backdrop activity levels remained good, albeit we did
see a deterioration in job flow through Q4. We also experienced acute
shortages of highly skilled candidates in nearly all our markets, which
continued to support high fee rates.

 

Reflecting the uncertain macro-economic conditions, temporary recruitment
(+5%) continued to outperform permanent (-14%), as clients sought more
flexible options. In line with these conditions, we reduced our fee earner
headcount by 224 (-3.7%) with action taken in all regions. This followed
similar headcount reductions in the previous four quarters. From the peak of
7,071 at the end of Q3 2022, we have reduced our fee earner headcount by 1,220
(17.3%) to the end of Q4 2023. Productivity, measured as gross profit per fee
earner, was up 8% versus Q4 2022, as a result of our action on fee earner
headcount over the past 12 months.

 

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

 

 EMEA            Gross Profit (£m)       Growth Rates
 (56% of Group)   2023       2022        Reported  Constant
 Q4              132.4       141.7       -6.5%     -6.1%
 FY              548.8       538.5       +1.9%     +0.2%
 Q4

 ·    France (15% of Group) -5%

 ·    Germany (13% of Group) -6%

 ·    Benelux -6%

 o  Belgium -2%

 o  Netherlands -6%

 ·    Southern Europe -7%

 o  Italy -11%

 o  Spain -4%

 ·    Middle East and Africa -5%

 Headcount at 31 December 2023: 3,814 (30 September 2023: 3,900)

 

In Europe, Middle East and Africa, gross profit declined 6.1% to £132.4m.
This was a weaker performance than the decline of -1.3% in Q3, despite a
softer comparator in Q4. We also saw a slower end to the quarter. France
declined 5%, with continued weakness in candidate and client confidence,
particularly within Michael Page. Reflecting the uncertainty in the market,
temporary recruitment (+10%) was more resilient than permanent (-15%). Germany
declined 6%, with tougher conditions within permanent recruitment in Michael
Page. Our Technology focused Interim business continued to show resilience, up
7%. Elsewhere in the region, the tougher conditions we experienced at the end
of Q3 continued into Q4, with the majority of countries declining
year-on-year. We reduced our fee earner headcount by 84 in Q4, which was
broadly in line with the reductions in the previous two quarters.

 

 

 Americas        Gross Profit (£m)       Growth Rates
 (17% of Group)  2023        2022        Reported  Constant
 Q4              40.4        46.5        -13.2%    -8.0%
 FY              172.7       193.4       -10.7%    -9.5%
 Q4

 ·    North America (9% of Group) -24%

 o  US -24%

 ·    Latin America (8% of Group) +18%

 o  Mexico -6%

 o  Brazil +20%

 Headcount at 31 December 2023: 1,329 (30 September 2023: 1,373)

 

In the Americas, we delivered gross profit of £40.4m, down 8.0% against Q4
2022. The US declined 24%, broadly in line with Q3. Conditions remained
challenging, with uncertainty affecting both candidate and client confidence.
Conditions were particularly tough within Accounting & Financial Services,
while Property & Construction was more resilient. In Latin America, gross
profit grew 18%, despite political and macro-economic uncertainty across the
region. This was also partially due to hyperinflation in Argentina following
the recent election; excluding this the growth rate was 11%. Mexico, our
largest country in the region, was down 6%, broadly in line with Q3, whereas
Brazil was up 20%. Elsewhere in Latin America, the remaining countries grew
22%, collectively. Overall fee earner headcount decreased by 35, mainly in
Latin America, as we held on to our more experienced fee earner headcount in
the US.

 

 Asia Pacific    Gross Profit (£m)       Growth Rates
 (15% of Group)  2023        2022        Reported  Constant
 Q4              35.9        43.0        -16.4%    -10.3%
 FY              159.6       195.3       -18.3%    -14.3%
 Q4

 ·    Asia (12% of Group) -6%

 ·    Greater China (4% of Group and 35% of Asia) -8%

 o  Mainland China flat

 o  Hong Kong -12%

 ·    South East Asia -14%

 ·    India +16%

 ·    Japan -7%

 ·    Australia -24%

 Headcount at 31 December 2023: 1,552 (30 September 2023: 1,624)

In Asia Pacific, gross profit for Q4 was down 10.3% against 2022 to £35.9m.
Greater China declined 8%, with Mainland China flat. The improvement in the
growth rate from Q3 was due to the softer comparators in Q4. Hong Kong
declined 12% for the quarter. South East Asia declined 14%, broadly in line
with Q3, with Singapore, which continues to be impacted by uncertainty related
to China, down 14%. India delivered the standout performance, up 16%. Japan
declined 7%, a deterioration on the growth of 4% in Q3. Australia was -24% for
the quarter, with uncertainty from both clients and candidates. Our fee earner
headcount in the region decreased by 54, mostly in Australia and Japan, as we
held on to our more experienced fee earner headcount in China.

 

 UK              Gross Profit (£m)       Growth Rate
 (12% of Group)  2023        2022
 Q4              28.6        35.7        -19.9%
 FY              124.9       149.1       -16.2%
 Q4

 ·    Michael Page -23%

 ·    Page Personnel -15%

 Headcount at 31 December 2023: 1,164 (30 September 2023: 1,243)

 

In the UK, gross profit for Q4 declined 19.9% against 2022 to £28.6m. This
was broadly in line with Q3, and we continued to see clients deferring hiring
decisions and candidates becoming increasingly cautious about accepting
offers. Reflecting the continued challenging trading conditions, our fee
earner headcount reduced by 50 in Q4 and is now 20% lower than Q4 2022.

 

Perm/Temp mix

 

Gross profit from permanent recruitment decreased 16.3% in reported rates and
13.9% in constant currencies to £165.4m (Q4 2022: £197.7m). Gross profit
from temporary recruitment increased 3.9% in reported rates and 5.2% in
constant currencies to £71.9m (Q4 2022: £69.2m). This resulted in a ratio of
permanent to temporary recruitment of 70:30 (Q4 2022: 74:26).

 

Headcount

 

We reduced our fee earner headcount by 224 (3.7%) during Q4, with reductions
made across all regions. Our non-operations headcount fell by 57 in Q4, in
line with the reduction in fee earner headcount. Overall, the Group had 5,851
fee earners and a total headcount of 7,859.

 

Foreign Exchange

 

Foreign exchange movements had a negative impact on the Group's results in Q4,
decreasing our Q4 reported gross profit by 2.2 percentage points, or £5.7m.

 

Financial Position

 

Save for the effects of Q4 trading detailed above and the payments of the 2023
interim and special dividends of £66.2m 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 September 2023. Net cash
at 31 December 2023 was c. £90m (Q3 2023: c. £136m, Q4 2022: c. £131m).

 

Shares

 

At 31 December 2023 there were 328,618,774 Ordinary shares in issue, of which
14,883,172 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 13,236,001 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 Fourth Quarter and Full Year 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 Full Year Results on 7 March 2024.

 

Enquiries:

 PageGroup                               +44 (0)19 3226 4022
 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/6581737db2f6c90d00051324/erqaw
(https://protect-eu.mimecast.com/s/gQhNCN9zxU0OQMEKHmFD3f?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 91 08 77 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 15 January 2024 at:

 

https://www.page.com/presentations/year/2024
(https://www.page.com/presentations/year/2023)

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