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Strong UK & EMEA performance drives Q4 PageGroup profit

PageGroup has released its fourth quarter and full year 2015 trading update.


UK gross profit was £36.2m in Q4, up 2.1% from £35.5 in Q4 2014, while in EMEA gross profit totalled £55.8m, increasing 1.6% from £55.0m in Q4 2014. In the Americas gross profit totalled £18.8m, a drop of £4.1% from £19.6m in Q4 2014. There were tough trading conditions in Asia Pacific where Q4 2015 gross profit was £24.8, down -5.5% from £26.2m in Q4 2014.


A new operating system rolled out to 85% of fee earners, was established in Q4 and will be completed in 2016. The company finished the quarter with net cash of c. £93m.


Group gross profit for the year was £555.9m, constant currency growth +9.2%, a record year for the Group. FX lowered reported gross profit by c. £26m and operating profit by c. £4m. There was an Increase of 206 fee earners (+4.8%), ratio to operational support staff at record 77:23. The Group also announced operating profit is expected to be broadly in line with current market consensus, representing growth of c. 20% in constant currency.


Commenting, Steve Ingham, chief executive officer, said, "The Group's Q4 gross profit growth rate of 5.3% in constant currencies was delivered despite trading conditions deteriorating during the fourth quarter, notably in our UK and Asia Pacific regions, as well as in Brazil and the Middle East. However, our businesses in Continental Europe, the US and Latin America, excluding Brazil, continued to grow strongly.


"In reported rates, Q4 gross profit was down 0.5% to £135.6m. During the quarter, foreign exchange lowered our reported gross profit growth rate by 5.8 percentage points, the equivalent of c. £8m of gross profit.


"Within EMEA, our largest country France, grew 4%. Germany grew 12%, with a particularly impressive result from our temporary recruitment business, up 48%. In Southern Europe, all countries performed well, delivering growth of 28% for the quarter. We also saw good growth in Benelux of 21%. Political uncertainty and the weakness in the Oil and Gas sector saw a decline of 32% in the Middle East.


"In the UK, we saw growth in our HR, Legal and Technology disciplines, however all our other disciplines slowed in the quarter. Whilst activity levels remained consistent, as we approached the end of the year clients became increasingly reluctant to make decisions, which led our growth rate to slow to 2% in the quarter. This was felt across both our Michael Page and Page Personnel businesses, with the technical disciplines most affected.


"Asia grew 2% in Q4, with Greater China up 6% as prevailing market conditions lowered our previous stronger growth rates. With market conditions remaining challenging, our businesses in Australasia had a difficult quarter, down 9%. In addition, in Australia, we made management changes during the second half to strengthen our management team. These changes, we believe, will enable us to better react to the current environment and growth opportunities that exist. While the Asia Pacific region decreased 1.3% in Q4, for the year as a whole it grew 4.9%.


"North America delivered an encouraging result, up 23%, driven by another strong performance from the US, which was up 27%, and in particular from our New York office. Trading conditions in Canada remained challenging with growth of 1%. In Latin America, gross profit decreased 9% due to the ongoing tough economic conditions in Brazil where gross profit fell by 34%. Elsewhere in Latin America, the other five markets now representing 65% of the region, continued to perform well, collectively growing 23%.


"Having added 136 fee earners in the third quarter, net fee earner additions slowed in the final quarter to 45. In 2015, fee earner headcount grew 206 (+4.8%) and is now at a record level for the Group. With an increase of 51 in operational support headcount during the year, we maintained our record fee earner to operational support staff ratio of 77:23. This continued focus on improving our conversion rate has delivered a further increase, broadly in line with that seen in recent years.


"Given the toughening market conditions experienced in Q4 across a number of our markets, we are pleased with the 9.2% growth in gross profit in constant currencies in what was a record year for the Group. We expect 2015 operating profit to be broadly in line with current market consensus**, which represents growth of c. 20% in constant currencies. With macro-economic challenges in a number of our larger markets, the unpredictable nature of the current cycle and our limited visibility, we will continue to focus on driving profitable growth, as we have throughout 2015".



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