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PageGroup announces third quarter interim management statement

Q3 GROSS PROFIT ANALYSIS

                              Reported             Constant

Year-on-year gross profit             % of Group Q3  Q3 2013               Q3 2012               %           %

EMEA   38%       &pound48.5m &pound49.0m -0.9%     -7.0%

UK         24%       &pound31.0m &pound29.5m 5.0%   5.0%

Asia Pacific         22%       &pound27.3m &pound30.2m -9.5%     -4.3%

Americas             16%       &pound20.2m &pound17.8m 13.0% 16.9%

Total     100%     &pound127.0m               &pound126.5m               0.4%   -0.2%

                                                                             

Permanent       76%       &pound96.8m &pound97.6m -0.8%     -1.0%

Temporary         24%       &pound30.2m &pound28.9m 4.4%   2.4%

 

Commenting, Steve Ingham, Chief Executive Officer said:

"Overall PageGroup delivered another robust performance in the third quarter, against a backdrop of challenging, but gradually improving market conditions across the majority of our regions. Gross profit was &pound127.0m in our traditionally weaker third quarter, up 0.4% year-on-year in reported currency. In all our regions and key disciplines, in the third quarter we saw increasing year-on-year quarterly growth rates in constant currency.

"We have continued to make good progress on our key strategic objectives:

-     continued investment in headcount in all 5 high potential markets: Greater China, South East Asia, Germany, Latin America and the United States

-     increased focus on consistency and efficiency in our operational support teams and

-     turning around our US business, where, as a result, gross profit was up 35% in constant currency year-on-year in the third quarter.

"We saw good performances throughout the third quarter in a number of markets. Our businesses in the US, Japan, Mexico, Spain, Turkey and the Middle East all performed particularly well, as did some smaller and newer businesses in Europe, Latin America and Asia. The third quarter saw a return to growth in Brazil, while Australia, France and Germany experienced another challenging quarter. The UK recorded year-on-year growth of 5%, the best quarterly year-on-year rise since Q2 2011.

"We continue to actively manage our cost base, both to take account of market conditions as well as to improve the Group's operating performance. As a result, operational support headcount has been reduced by a further 41 this quarter, with an investment in operational headcount increasing fee earners by 157.

"Although we have limited visibility, we expect Q4 to be another challenging quarter, with difficult conditions likely to continue in some markets, but with gradual improvements in others. After the impact of adverse movements in exchange rates (c. &pound1m) and increases in social charges on share plans as a result of the rise in our share price (c. &pound0.5m), at this point we expect full year operating profit to be around &pound68m."

 

Group Trading Update

Michael Page International plc ("PageGroup"), delivered third quarter gross profit of &pound127.0m, up 0.4% (-0.2%*) on the &pound126.5m in Q3 2012. Headcount increased by 116 (2.3%) in the quarter to 5,071 at the end of September 2013. Since the start of the year, headcount has reduced by 28 (-0.5%), with operational support headcount being reduced by 152 (-10.3%) and fee earner headcount increasing by 124.

*Denotes where overseas results denominated in foreign currencies have been translated at constant rates of exchange for constant currency illustrative purposes.

Perm/Temp mix

Group gross profit from permanent recruitment in the third quarter was &pound96.8m, down -0.8% (-1.0%*) on the &pound97.6m in Q3 2012. Group gross profit from temporary recruitment in the third quarter was &pound30.2m, up 4.4% (2.4%*) on the &pound28.9m in Q3 2012.

The perm/temp gross profit ratio in the third quarter was 76:24 (Q2 2013: 78:22, Q3 2012: 77:23).

Discipline analysis

                              Reported             Constant

Year-on-year gross profit             % of Group Q3  Q3 2013               Q3 2012               %           %

Finance & Accounting   42%       &pound53.6m &pound53.2m 0.7%   0.0%

Legal, Technology, HR, Secretarial, Healthcare  21%       &pound26.1m &pound25.3m 3.0%   3.1%

Engineering, Property & Construction, Procurement & Supply Chain     19%       &pound24.2m &pound24.5m -1.0%     -2.1%

Marketing, Sales & Retail           18%       &pound23.1m &pound23.5m -1.7%     -2.3%

Total     100%     &pound127.0m               &pound126.5m               0.4%   -0.2%

Growth rates in all disciplines show a small improvement compared to those in Q2 2013.

 

Geographical analysis

Q3 GROSS PROFIT ANALYSIS

EMEA Gross Profit

(38% of Group in Q3 2013)                                          

Growth rates

                                              Reported             Constant

Q3 2013 vs. Q3 2012       &pound48.5m &pound49.0m -0.9%     -7.0%

Headcount at 30 September 2013: 1,850, (30 June 2013: 1,881)

Gross profit at constant currency:

•   France (13% of the Group) -7% on Q3 2012

•   Germany (6% of the Group) -16% on Q3 2012

 

In our largest region, Europe, Middle East and Africa (EMEA), representing 38% of Group gross profit, market conditions remained challenging, but with further signs of improvement. Our larger businesses of France and Germany, where we operate predominantly in permanent recruitment, still experienced a challenging quarter, but growth rates are improving. Good quarterly performances were achieved in Spain, Turkey, Italy, Sweden, Russia, Poland and the UAE. There was a small increase in fee earners in the quarter, but overall headcount across the region reduced by 31, or 1.6%, as a result of reductions in operational support staff.

 

UK Gross Profit

(24% of Group in Q3 2013)                                          

Growth rates

                                             

Q3 2013 vs. Q3 2012       &pound31.0m &pound29.5m 5.0%

Headcount at 30 September 2013: 1,303 (30 June 2013: 1,256)

In the UK, representing 24% of Group gross profit, our diversification and the depth of management experience continued to underpin our improved performance. We had record quarters in our Property and Construction, Buying and Merchandising, Design and Production and Digital Marketing disciplines. The quarter also saw good performances from our Finance, Legal, Engineering and Logistics disciplines. A good performance was also seen from our Public Sector business, which now makes up 12% of the UK, which grew at 20%. With the graduate intake and reflecting the more confident outlook, headcount was up 47 in the quarter, an increase of 3.7%.

 

Asia Pacific Gross Profit

(22% of Group in Q3 2013)                                          

Growth rates

                                              Reported             Constant

Q3 2013 vs. Q3 2012       &pound27.3m &pound30.2m -9.5%     -4.3%

Headcount at 30 September 2013: 1,126 (30 June 2013: 1,076)

Gross profit at constant currency:

•   Asia (14% of the Group) 8% on Q3 2012

•   Australia and New Zealand (8% of the Group) -20% on Q3 2012

In our Asia Pacific region, representing 22% of Group gross profit, market conditions in Australia have stabilised, but remain challenging as a result of the slowdown in the Mining and Resources sector. Our business in Greater China delivered consistent growth, with our new office in Taipei performing well. Japan, India and Malaysia all had record quarters. Headcount across the region increased during the quarter by 50, or 4.6%, as we continued to invest in Asia.

Americas Gross Profit

(16% of Group in Q3 2013)                                          

Growth rates

                                              Reported             Constant

Q3 2013 vs. Q3 2012       &pound20.2m &pound17.8m 13.0% 16.9%

Headcount at 30 September 2013: 792 (30 June 2013: 742)

Gross profit at constant currency:

•   Latin America (10% of the Group) 12% on Q3 2012

•   North America (6% of the Group) 25% on Q3 2012

In the Americas, representing 16% of Group gross profit, we grew gross profit year-on-year by 16.9%*. In Latin America, Brazil showed signs of improvement, with year-on-year growth in the third quarter of 7% in constant currency. Elsewhere in Latin America, our other businesses in Mexico, Chile and Colombia all grew strongly, posting record quarters. In North America, our business in the US performed particularly well, growing at 35%*, reflecting the improvements in the economy and a strengthened management team. Headcount across the region increased during the quarter by 50, or 6.7%.

Intangible assets

We continue to operate our new software in Boston in the US. We are currently reviewing further modifications to the system before commencing the roll-out to the rest of North America. We have begun the amortisation of this intangible asset in 2013. The charge for 2013 is expected to be c. &pound5.4m.

Share repurchases

No share repurchases were made during the third quarter. During the quarter, 1.3m options were exercised and satisfied through newly issued shares. At 30 September 2013 there were approximately 320.6m shares in issue, of which 10.9m were held by the Employee Benefit Trust upon which dividends and voting rights are waived. Accordingly, 309.7m shares receive dividends and hold voting rights.

Financial Position

Save for the effects of trading in the third quarter described above and the payment of the 2013 interim dividend of &pound10.1m on 4 October 2013, there have been no other significant changes in the financial position of the Group since the publication of the results for the half year ended 30 June 2013.

Net cash at 30 September 2013, before the payment of the interim dividend, was in the region of &pound72m (30 June 2013: &pound47.6m).

The Group will issue its fourth quarter and full year trading update on 14 January 2014.

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