REG - PageGroup plc - Trading Update

PagegroupAnnouncement

15/04/2024 07:00

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RNS Number : 5253K  PageGroup plc  15 April 2024

 

 

15 April 2024

 

RESILIENT PERFORMANCE DESPITE ONGOING CHALLENGING MARKET CONDITIONS

 

Q1 Highlights*

 

·    Group gross profit of £219.7m, -12.8% vs. 2023

·    Exited March -18% vs. 2023, impacted partially by reduced working
days and timing of Easter

·    EMEA -12.7%: France -16%; Germany -16%

·    Americas -5.5%: US -15%; Latin America -4%**

·    Asia Pacific -15.7%: Greater China -15%; SE Asia -3%; Japan -26%;
India +13%

·    UK -19.2%: Michael Page -20%; Page Personnel -17%

·    Decrease in fee earner headcount of 100 to 5,751 (Q1 2023: 6,639)

·    Productivity up 1% on Q1 2023

·    Cash position remains strong, net cash of c. £67m (Q4 2023: c.
£90m, Q1 2023: c. £105m)

 

* In constant currencies vs. 2023 except where stated otherwise

** Excluding Argentina due to hyperinflation

 

Q1 Gross Profit Analysis

 

                           Reported (£m)             Constant
 Year-on-year  % of Group  Q1 2024  Q1 2023  %       %
 EMEA          56%         123.3    145.7    -15.4%  -12.7%
 Americas      17%         37.3     42.7     -12.6%  -5.5%
 Asia Pacific  15%         32.0     41.1     -22.0%  -15.7%
 UK            12%         27.1     33.5     -19.2%  -19.2%
 Total         100%        219.7    263.0    -16.4%  -12.8%

 Permanent     73%         159.7    196.3    -18.6%  -14.9%
 Temporary     27%         60.0     66.7     -9.9%   -6.7%

 

 

Nicholas Kirk, Chief Executive Officer, PageGroup, said:

 

"The slower end to Q4 2023 continued into Q1 2024, particularly within
Continental Europe. Overall, activity levels remain strong, however we
experienced a slight deterioration in job flow towards the end of the quarter.
Conversion of final interviews to accepted offers is still the most
significant challenge, as candidate and client sentiment remains subdued
reflecting the general macro-economic uncertainty in most of our markets.
Permanent recruitment was more impacted than temporary across all of our
markets, as clients continue to seek more flexible options.

 

"While we anticipate a period of low confidence levels, based on our current
outlook, we intend to hold fee earner headcount broadly at existing levels to
ensure we are well placed to take advantage of opportunities as sentiment and
confidence improve. 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.

 

"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 new strategy driving the long-term profitability of the Group."

 

Trading Summary

 

Group gross profit declined 12.8% in constant currencies against Q1 2023. The
slowdown we saw at the end of Q4 2023 continued into Q1, with some
deterioration experienced, particularly within Continental Europe. Trading
conditions in Asia, the UK and the US saw no improvement with low levels of
client and candidate confidence continuing 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 were not as
elevated as they were in 2022 and early 2023.

 

We exited the quarter with March down 18% on 2023, albeit this was against a
tough comparator and was impacted by the reduced number of working days in
March due to the timing of Easter. However, against this backdrop activity
levels remained good and we continued to experience acute shortages of highly
skilled candidates in nearly all our markets, which was supportive of
continued high fee rates.

 

Reflecting the uncertain macro-economic conditions, temporary recruitment
(-7%) continued to outperform permanent (-15%), as clients sought more
flexible options. In line with these conditions, we reduced our fee earner
headcount by 100 (-1.7%). This follows quarterly headcount reductions since
the peak of 7,071 reached at the end of Q3 2022. As a result of this reduction
in headcount, productivity, measured as gross profit per fee earner, was up 1%
versus Q1 2023, despite the tough macro-economic conditions.

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

 

 EMEA            Gross Profit (£m)       Growth Rates
 (56% of Group)   2024       2023        Reported  Constant
 Q1              123.3       145.7       -15.4%    -12.7%

 ·    France (14% of Group) -16%

 o  Page Personnel -15%

 o  Michael Page -17%

 ·    Germany (13% of Group) -16%

 ·    Benelux -17%

 o  Belgium -10%

 o  Netherlands -19%

 ·    Southern Europe -8%

 o  Italy -11%

 o  Spain -9%

 ·    Middle East and Africa +12%

 Total Headcount at 31 March 2024: 3,838 (31 December 2023: 3,814)

 

In Europe, Middle East and Africa, gross profit declined 12.7% to £123.3m.
The tougher conditions we saw at the end of 2023 continued into Q1 2024.
Reflecting this uncertainty, temporary recruitment was more resilient than
permanent. France declined 16% for the quarter, with similar performances in
both Michael Page and Page Personnel. This was a slowdown from the -5% in Q4.
Germany declined 16%, compared to -6% in Q4. Tougher conditions were
experienced in permanent recruitment, down 23%, while our Technology focused
interim business was more resilient, down 8%. Q1 2023 was also a tough
comparator, with the region still growing in the first half of 2023. We
reduced our fee earner headcount in Q1 2024 by 46.

 

 

 Americas        Gross Profit (£m)       Growth Rates
 (17% of Group)  2024        2023        Reported  Constant
 Q1              37.3        42.7        -12.6%    -5.5%

 ·    North America (9% of Group) -15%

 o  US -15%

 ·    Latin America (8% of Group) +9%

 o  Mexico -12%

 o  Brazil +10%

 Total Headcount at 31 March 2024: 1,363 (31 December 2023: 1,329)

 

In the Americas, we delivered gross profit of £37.3m, down 5.5% against Q1
2023. In the US, we declined 15%, an improvement on Q4 2023, albeit this was
due partially to a softer comparator. The conditions we saw at the end of 2023
continued into Q1, with uncertainty around market conditions affecting both
candidate and client confidence, particularly within Accounting and Financial
Services. In Latin America, gross profit grew 9%, despite macro-economic
uncertainty across the region. This was also partially due to hyperinflation
in Argentina following the election. Excluding Argentina, the region declined
4%. Mexico, our largest country in the region, was down 12%, compared to -6%
in Q4. Brazil was up 10%, however, elsewhere in Latin America, our remaining
countries declined 6%, collectively. Fee earner headcount in the region
increased by 37.

 

 Asia Pacific    Gross Profit (£m)       Growth Rates
 (15% of Group)  2024        2023        Reported  Constant
 Q1              32.0        41.1        -22.0%    -15.7%

 ·    Asia (12% of Group) -11%

 ·    Greater China (4% of Group and 33% of Asia) -15%

 o  Mainland China -19%

 o  Hong Kong -12%

 ·    South East Asia -3%

 ·    India +13%

 ·    Japan -26%

 ·    Australia -32%

 Total Headcount at 31 March 2024: 1,472 (31 December 2023:1,552)

 

In Asia Pacific, gross profit for Q1 was down 15.7% against 2023 to £32.0m.
Greater China declined 15%, with Mainland China down 19% and Hong Kong down
12% for the quarter. This was a worsening from the performance in Q4, due to a
further reduction in headcount of c. 30 in Q1.  South East Asia declined 3%
with Singapore returning to growth in Q1. India continued to deliver the
standout performance in the region, delivering a record Q1, up 13%. Japan
experienced tougher conditions during the quarter, declining 26%. Australia
declined 32%, below the Q4 growth rate of -24%, with tough conditions in all
states. Our fee earner headcount in the region decreased by 65, mainly in
Australia and Greater China.

 

 UK              Gross Profit (£m)       Growth Rate
 (12% of Group)  2024        2023
 Q1              27.1        33.5        -19.2%

 ·    Michael Page -20%

 ·    Page Personnel -17%

 Total Headcount at 31 March 2024: 1,105 (31 December 2023: 1,164)

 

In the UK, Q1 gross profit declined 19.2% against 2023 to £27.1m, following
the decline of 19.9% in Q4 2023. 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 (-12%) was more resilient than permanent
recruitment (-22%). In line with the more challenging trading conditions, our
fee earner headcount reduced by 26 in Q1 and at the end of the quarter was 17%
lower than Q1 2023.

 

Perm/Temp mix

 

Gross profit from permanent recruitment decreased 18.6% in reported rates and
14.9% in constant currencies to £159.7m (Q1 2023: £196.3m). Gross profit
from temporary recruitment decreased 9.9% in reported rates and 6.7% in
constant currencies to £60.0m (Q1 2023: £66.7m). This resulted in a ratio of
permanent to temporary recruitment gross profit of 73:27 (Q1 2023: 74:26).

 

Headcount

 

Our fee earner headcount reduced by 100 (-1.7%) during Q1, which was slower
than the quarterly reductions in 2023. Our non-operations headcount rose by 19
in Q1, which is due to double running of c. 50 heads as we transition
activities out of our UK SSC. Overall, the Group had 5,751 fee earners and a
total headcount of 7,778.

 

Foreign Exchange

 

Foreign exchange movements had a negative impact on the Group's results in Q1,
decreasing our Q1 reported gross profit by 3.6 percentage points, or £9.4m.

 

Financial Position

 

Save for the effects of Q1 trading detailed above and the purchase of shares
into the Employee Benefit Trust (EBT) of c. £4m, 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 2023. Net cash at 31
March 2024 was c. £67m (Q4 2023: c. £90m, Q1 2023: c. £105m).

 

Shares

 

At 31 March 2023 there were 328,618,774 Ordinary shares in issue, of which
15,150,808 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 14,284,829 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 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 Q2 Results on 10 July 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/6602b82f6fb95d1300a3a25f/vdag

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 65 88 59 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 April 2024 at:

 

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

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