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PageGroup announces 12.9% Q4 gross profit growth & full year update

Full Year Results

&middot    Group gross profit of &pound532.7m, delivering constant currency growth of 10%

&middot    FX lowered reported gross profit by &pound33m and operating profit by &pound6m

&middot    Net increase of 468 fee earners (12%)

&middot    Operating profit before a small positive exceptional expected to be a minimum of 
      current market consensus    

  *  In constant currencies

** Company compiled consensus: &pound77.6m.

Q4 GROSS PROFIT ANALYSIS

 

Reported (&poundm)

Constant

Year-on-year

% of Group

Q4 2014

Q4 2013

%

%

EMEA

40%

55.0

52.0

5.7%

12.5%

UK

26%

35.4

31.9

11.0%

11.0%

Asia Pacific

19%

26.2

24.2

8.4%

10.8%

Americas

15%

19.6

17.0

15.2%

20.2%

Total

100%

136.2

125.1

8.9%

12.9%

 

 

 

Permanent

75%

102.3

93.5

9.5%

13.4%

Temporary

25%

33.9

31.6

7.1%

11.1%

FULL YEAR GROSS PROFIT ANALYSIS

 

Reported (&poundm)

Constant

Year-on-year

% of Group

FY 2014

FY 2013

%

%

EMEA

40%

212.0

207.8

2.1%

8.4%

UK

26%

138.3

124.1

11.5%

11.5%

Asia Pacific

20%

105.5

105.8

-0.3%

9.3%

Americas

14%

76.9

76.2

0.8%

12.9%

Total

100%

532.7

513.9

3.7%

10.0%

 

 

 

Permanent

76%

406.6

392.2

3.7%

10.4%

Temporary

24%

126.1

121.7

3.7%

8.5%

Commenting, Steve Ingham, chief executive officer, said, "The 12.9% increase in the Group's gross profit for the fourth quarter reflects double digit year-on-year growth in constant currency across all our four regions, with market conditions remaining broadly similar to those seen in Q3. Both the Americas and EMEA growth rates improved sequentially, while the UK growth rate moderated slightly to 11%, although Page Personnel was up 26%. Asia Pacific remained stable at around 11% growth.

"In reported rates, fourth quarter gross profit was up 8.9% to &pound136.2m. The impact of foreign exchange lowered our reported figure by 4 percentage points, equivalent to &pound5m of gross profit.

"Within EMEA, our largest country, France, was up 8%. Germany grew 14%, with double-digit contributions from both Michael Page and Page Personnel. In Southern Europe, all countries performed very well, delivering growth of 27% for the quarter.

"The UK delivered a strong performance, despite its growth rate slowing slightly from the previous quarter. Page Personnel, driven by the Finance & Accounting disciplines, performed particularly well, while Michael Page saw greatest growth in the technical disciplines, such as Engineering and Property & Construction.

"In the Asia Pacific region, growth in Asia in the fourth quarter was 15%, with Greater China up 18%, despite some impact from the protests in Hong Kong. Northern & Eastern China performed strongly with growth of 29%. Australasia, as we go into their summer, showed a marginal improvement in Q4 growth rates and grew in both permanent and temporary placements.

"Both North and Latin America grew 20%, with Canada and Mexico performing particularly well. Brazil was up 16%, having benefitted from a weak Q4 2013 comparator and improved activity since the October presidential elections.

"Having added over 200 fee earners in the third quarter, net fee earner additions slowed in the final quarter to 81, as predicted. In 2014, total headcount grew 448 (9%) and is now at record levels for the Group. Within these additions, fee earner headcount grew 468 and operational support headcount reduced by 20. As a result, our operational support staff ratio is now 77:23, also a record for the Group, reflecting the operational support efficiencies achievable as we scale the revenue-generating side of the business.

"We are pleased with the 10% growth in gross profit in constant currencies for the year, given the macro-economic challenges in a number of our larger markets and the unpredictable nature of the current cycle. We expect operating profit before a small positive exceptional to be a minimum of current market consensus*, implying growth of over 20% in constant currencies."

*Company compiled consensus: &pound77.6m.

Group Trading Update

Michael Page International plc ("PageGroup") delivered fourth quarter gross profit of &pound136.2m, up 9% in reported rates and 13% in constant currencies, with double digit growth in all our four regions. For 2014, Group gross profit was &pound532.7m, with the impact of foreign exchange on these full year results being material at &pound33m for gross profit and &pound6m for operating profit.

Ongoing Investment

Total headcount increased by 76 in the quarter to 5,578, a record for the Group, and comprised an increase of 81 fee earners, partially offset by a reduction of 5 operational support staff. Overall, in 2014 there was a net increase of 468 fee earners and a reduction of 20 operational support staff. As a result, our operational support ratio was 77:23, also a record for the Group.

Our continued investment in the 5 high potential markets of Greater China, South East Asia, Germany, Latin America and the United States was rewarded with an increase in gross profit at constant currency in the fourth quarter of 17% and for the full year of 14%. In both cases, these growth rates exceeded the Group average.

The roll-out of our new software to all UK businesses and the US was completed by the end of the year, bringing around 30% of the Group's fee earners onto the new system. The roll-out will continue in 2015, starting with the EMEA region.

Perm/Temp mix

Group gross profit from permanent recruitment in the fourth quarter grew 9.5% to &pound102.3m (&pound93.5m: Q4 2013) and temporary recruitment grew 7.1% to &pound33.9m (&pound31.6m: Q4 2013). This resulted in a ratio of permanent to temporary recruitment of 75:25. In constant currencies, permanent recruitment was up 13.4%, ahead of temporary recruitment which was up 11.1%.

Discipline analysis

 

Reported (&poundm)

Constant

Year-on-year gross profit

% of Group

Q4 2014

Q4 2013

%

%

Finance & Accounting

40%

54.7

51.7

5.8%

9.5%

Legal, Technology, HR, Secretarial, Healthcare

20%

27.1

25.5

6.3%

10.3%

Engineering, Property & Construction, Procurement & Supply Chain

20%

27.2

24.3

12.0%

16.5%

Marketing, Sales and Retail

20%

27.2

23.6

15.2%

19.2%

Total

100%

136.2

125.1

8.9%

12.9%

Geographical analysis

Country/regional highlights*:

&middot    Germany up 14% France up 8%

&middot    Southern Europe up 27%

&middot    UK up 11%, with Page Personnel up 26%

&middot    Greater China up 18%, with Northern & Eastern China up 29%

&middot    Australia & New Zealand up 3%

&middot    North America up 20%

&middot    Latin America up 20%, with Brazil up 16% against soft comparator

* in constant currencies vs Q4 2013

EMEA

Gross Profit (&poundm)

Growth rates

(40% of Group)

 

Reported

Constant

Q4 2014 vs. Q4 2013

55.0

 52.0

5.7%

12.5%

2014 vs. 2013

212.0

207.8

2.1%

8.4%

Headcount at 31 December 2014: 2,113 (30 September 2014: 2,084)

Gross profit in constant currencies:

&middot    France (14% of Group) 8% on Q4 2013 (7% in Q3 2014 against Q3 2013)

&middot    Germany (6% of Group) 14% on Q4 2013 (15% in Q3 2014 against Q3 2013)

Compared to the prior year, EMEA was up 13% in constant currencies and up from 11% in Q3. France was up 8%, with positive contributions from both Michael Page and Page Personnel. Michael Page saw growth (5%) for the first time in nearly 3 years. In Germany, gross profit grew 14%, with Page Personnel up 19%. Southern Europe (8% of Group gross profit) also ended the year strongly, up 27% in Q4. Fee earner headcount grew by 38 across the region and was up 254 (18%) in 2014 as a whole.

UK

Gross Profit (&poundm)

Growth rates

(26% of Group)

 

Q4 2014 vs. Q4 2013

35.4

 31.9

11.0%

2014 vs. 2013

138.3

124.1

11.5%

Headcount at 31 December 2014: 1,441 (30 September 2014: 1,419)

As predicted, with the UK coming out of its early recovery stage, its gross profit growth rate decreased slightly to 11% in Q4, reflecting a more normal seasonal trend. Within this, Page Personnel continued to perform strongly, up 26% driven in particular by the Finance & Accounting disciplines. In Michael Page, the technical disciplines, such as Engineering and Property & Construction, performed strongly. London and the North were our best performing regions. Fee earner headcount grew by 20 in the quarter and 108 (12%) in 2014 as a whole.

Asia Pacific

Gross Profit (&poundm)

Growth rates

(19% of Group)

 

Reported

Constant

Q4 2014 vs. Q4 2013

26.2

 24.2

8.4%

10.8%

2014 vs. 2013

105.5

105.8

-0.3%

9.3%

Headcount at 31 December 2014: 1,141 (30 September 2014: 1,119)

Gross profit in constant currencies:

&middot    Asia (13% of Group) 15% on Q4 2013 (17% in Q3 2014 vs. Q3 2013)

&middot    Greater China (56% of Asia) 18% on Q4 2013 (25% in Q3 2014 vs. Q3 2013)

&middot    Australia / New Zealand (6% of Group) 3% on Q4 2013 (2% in Q3 2014 vs. Q3 2013)

Asia Pacific grew 11% in constant currencies. Asia grew 15%, down from 17% in Q3, as growth in Greater China slowed from 25% to 18%. Northern and Eastern China performed well, up 29%, while Hong Kong was more subdued, with our temporary business impacted by the protests. In Australasia, softer comparators helped the business achieve marginal growth of 3%. Fee earner headcount grew by 24 in the quarter and was up 22 (3%) in 2014 as a whole. Within this, fee earners in Australasia declined by 10%, while Asia increased by 8%.

Americas

Gross Profit (&poundm)

Growth rates

(15% of Group)

 

Reported

Constant

Q4 2014 vs. Q4 2013

19.6

17.0

15.2%

20.2%

2014 vs. 2013

76.9

76.2

0.8%

12.9%

Headcount at 31 December 2014: 883 (30 September 2014: 880)

Gross profit in constant currencies:

&middot    Latin America (8% of Group) 20% on Q4 2013 (1% in Q3 2014 vs. Q3 2013)

&middot    Brazil (56% of LatAm) 16% on Q4 2013 (-10% in Q3 2014 vs. Q3 2013)

&middot    North America (7% of Group) 20% on Q4 2013 (22% in Q3 2014 vs. Q3 2013)

The Americas grew 20% in constant currencies, with both North and Latin America performing strongly, each up 20%. Canada had another record quarter, helped by our new office in Calgary, while the US continued to perform well, especially in the Financial Services and Marketing disciplines. Brazil was up 16% on the prior year, in part due to the weak comparator from the slowdown at the end of 2013, but also reflecting the recovery in activity since the October presidential elections. Latin America, excluding Brazil, grew 26%, with notable contributions from Colombia and Mexico. Fee earner headcount was stable in the quarter and increased by 84 (13%) in 2014 as a whole.

Financial Position

Save for the effects of trading in the fourth quarter and the payment of the 2014 interim dividend of &pound10.5m on 3 October 2014, there have been no other significant changes in the financial position of the Group since the publication of the results for the third quarter ended 30 September 2014.

Net cash at 31 December 2014 was in the region of &pound89m (30 September 2014: &pound71.8m).

The Group will issue its Full Year Results on 11 March 2015 and its First Quarter Trading Update 2015 on 14 April 2015.

French profit share

In October 2013, Page Personnel France (PPF) received notice from the Competent Authorities of the UK and France of their decision regarding a transfer pricing case that had arisen as a result of a tax audit in March 2008. The decision, which was unexpected, increased the profit generated by PPF, which, as per the mandatory profit share or "participation aux r&eacutesultats de l'entreprise" that is particular to France, drove a requirement to pay increased employee profit share, both to employees of PPF and also to the temporary workers placed by that company. As a result, the Group took in 2013 an exceptional charge of &pound2.5m relating to prior periods, and &pound0.6m that was included within operating profits from trading activities.

In December 2014, PPF received notice from the French tax authorities that they would not be seeking to make any further adjustments to the transfer pricing arrangements in place between PPF and the UK, as a result of their audit of the tax years 2011 and 2012. In addition, as no assessment was raised within the statutory timeframe, there will be no adjustment for the 2010 tax year. Accordingly, in 2014, the Group has recorded exceptional income of &pound1.65m relating to the reversal of amounts that were previously provided as an exceptional charge and a further &pound0.6m that is included within operating profit.

Shares

At 31 December 2014 there were 321,900,790 Ordinary shares in issue, of which 17,458,124 were held by the EBT. The rights to receive dividends and to exercise voting rights have been waived by the EBT over 15,349,570 shares and consequently these shares should be excluded when calculating earnings per share. The total number of voting rights in the Company is 321,900,790.

Fiona Cincotta, a senior market analyst at Finspreads, said, "These are some really reassuring figures from Michael Page, which seemed to be well positioned to take advantage of the improving global economic situation that was evident towards the end of 2014. Obviously as a firm they are cautious that there will be challenges along the road in 2015 but the outlook remains positive especially as we are seeing an increase in job opportunities and wage rises most notably in the America&acutes and Europe. The market was particularly impressed with shares in Michael Page climbing over 5.5% in the morning session."

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