Michael Page reveals 11.6% group gross profit growth
Q3 GROSS PROFIT ANALYSIS
% of Group
Commenting, Steve Ingham, Chief Executive Officer said, "The 11.6% increase in the Group's gross profit in constant currency for the third quarter reflects steady year-on-year growth in all four regions. EMEA, UK and the Americas all saw improved growth rates compared to Q2 2014, but the growth rate in Asia slowed from 25% in Q2 to 17%. In reported rates, our gross profit was up only 5% to £132.9m. The impact of FX lowered our reported figure by nearly 7 percentage points, equivalent to £9m of gross profit and £1.6m of operating profit compared to last year.
"The EMEA region faced increased political and economic uncertainty, both in Europe and the Middle East. In France and Germany, Page Personnel ('PP') continued to outperform our predominantly permanent Michael Page businesses. UK growth continued to improve, with the strongest performances from our Finance & Accounting, Marketing, Procurement & Supply Chain, Property & Construction, and PP businesses.
"In Asia, growth in the third quarter slowed from 25% to 17%, with growth in our largest business, Greater China, slowing from 37% to 25%. Australasia was positive for the first time in over two years. North and Latin America both delivered record performances in constant currencies, despite Brazil declining 10% in the run up to the October presidential elections.
"The roll-out of our new Page Recruiting System was completed in the US and in Page Personnel UK during the quarter, both of which went well. We expect to complete the roll-out to all UK businesses by the end of the year.
"Having added 177 in the first half, we accelerated our investment in fee earners during the quarter, in higher growth businesses and our Large High Potential Markets, in anticipation of continued growth in 2015. This, combined with an increased focus on staff retention, led by our new Group HR function, resulted in a net increase of 210 fee earners in Q3.
"Although the macro environment is challenging in many regions, we do believe that our strategic goals for 2015 are best achieved through this targeted headcount investment. However, this does have a short-term impact on productivity, particularly where we seek to grow our temporary businesses in Germany, France and the UK. At the same time, we continue to seek operational efficiencies across the Group, with our operational support ratio moving from 74:26 at the start of the year to 76:24.
"So far this year we have made good progress in a number of markets, notably in the UK, however as we look ahead to the final quarter we are becoming more cautious on the short-term outlook in a number of international markets. In EMEA, confidence levels are increasingly fragile and our Asian business, although still performing well, saw its growth rate slow. Foreign exchange movements also continue to affect our reported results.
"These factors, allied to our strong headcount investment, lead us to now expect operating profit modestly lower than consensus market expectations*, but still showing year-on-year growth of over 20% in constant currencies."
* Operating profit: £82.0m (2013: £68.2m)