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UK gross profit flat in Q1 for PageGroup

PageGroup has issued its first quarter trading update. The group delivered first quarter gross profit of £142.4m, up 3.6% in constant currencies and 4.9% in reported rates as it benefited by c. £1.8m due to the weakening of Sterling.


In the UK, gross profit for the quarter was flat, but EMEA saw a 14.1% increase year-on-year (YoY). In the Americas, gross profit was down 5.3% while in Asia Pacific, gross profit was up 0.5%.


Gross profit from permanent recruitment grew 2.7% in reported rates, and 1.6% in constant currencies, to £107.9m (Q1 2015: £105.1m) and gross profit from temporary recruitment grew 12.8% in reported rates, and 10.6% in constant currencies, to £34.5m (Q1 2015: £30.6m). This resulted in a ratio of permanent to temporary recruitment of 76:24.


In a sector breakdown, the finance and accounting sector saw a 5.2% increase YoY; legal, technology, HR, secretarial, healthcare saw a 12.6% increase; engineering, property & construction, procurement & supply chain saw a 0.2% increase and marketing, sales & retail saw a 4.9% increase.


In the UK, while activity levels remained strong and in line with last year, the group says that conversion to gross profit was impacted by the timing of Easter and the uncertainty surrounding the EU Referendum. This led to the growth rate slowing from 2% in Q4 2015 to flat in Q1 2016. More technical disciplines and permanent placements at higher salary levels were most affected. Temporary recruitment (+6%) performed better than permanent (-3%), with Page Personnel (+9%) more robust than Michael Page (-3%). The groups states that it saw an excellent result from its legal discipline (+23%). The mix (87:13) of private and public sector remained in line with the last few quarters, with the private sector flat in the quarter, but the public sector down 2%.


Compared to the prior year, EMEA was up 10.3%, in line with the Q4 growth rate. France was up 2%, with Page Personnel France up 5%, ahead of Michael Page France (-2%), which being entirely permanent was impacted more by the timing of Easter, PageGroup says. In Germany, gross profit grew 6%, with Page Personnel up 17% and temporary recruitment up 40%. Benelux grew strongly, up 32%, with Southern Europe up 20%. Challenging conditions in the Middle East, as a result of ongoing political instability and the depressed oil price, resulted in a drop in gross profit of 28%, according to the group.


Asia Pacific gross profit decreased 2% in constant currencies, but grew 0.5% in reported rates, helped by the relative strength of the Chinese Renminbi. Overall, Asia decreased 1%, with Greater China down 5% as prevailing market conditions and uncertainty impacted growth rates. However, following Chinese New Year in February, the group says it saw some improvement across the region as the quarter progressed. In South East Asia, PageGroup had a strong performance, with Malaysia and Indonesia, combined, growing 17%. Australasia decreased 3%, though this was an improved performance on Q4 2015, with sequential growth of 5%. The Group reported trading conditions continued to be tough across Australia (-4%), most notably in Western Australia. However, there was a strong performance from Queensland.


The Americas gross profit decreased 5.3% in reported rates and 0.6% in constant currencies, with the strong US Dollar partially offsetting weaker currencies elsewhere. North America delivered another good performance growing 9%, with the US, against tough comparatives, growing 12% in constant currency and 20% in reported rates. The group saw another strong result from its New York office, though global stock market volatility caused a slower start to the year in our financial services business. In Latin America, gross profit decreased 10%, similar to Q4 2015. The political and economic uncertainty in Brazil continued to impact trading and, as a result, Brazil fell 31%. Elsewhere in Latin America, the other five markets which now represent 65% of the region, continued to perform well, growing 11% collectively, with a particularly strong result from Argentina.

Steve Ingham, chief executive officer, commented, "The Group delivered gross profit growth of 3.6% in constant currencies, despite the timing of Easter and the challenging market conditions in several of our larger markets, including Greater China, the UK and Brazil. However, we saw particularly good performances in the US, and Continental Europe, which now accounts for over 40% of the Group.


"Current market conditions remain stronger at lower salary levels and in temporary roles. This was reflected by the strong growth of 9% in our Page Personnel business, where temporary recruitment represents 41% of gross profit. Our Michael Page business, where temporary recruitment represents only 17%, grew 2%. Overall, temporary recruitment grew by 10.6%, compared to 1.6% in permanent.


"Despite the 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, whilst remaining able to respond quickly to any changes in market conditions."









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