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UK gross profit down over 4% in Q3 2019 for PageGroup

PageGroup has released its results for the third quarter of 2019.


PageGroup delivered third quarter gross profit of £216.7m, up 2.1% in constant currencies and 4.2% in reported rates. In constant currencies, there was similar growth in both Michael Page and Page Personnel.


EMEA Q3 gross profit grew 5.6% to £101.5m, down from growth of 9.0% in Q2 as increased economic uncertainty impacted market confidence across the region. Growth was faster in Michael Page, up 9% compared to 2% in Page Personnel. France, representing 15% of the Group, slowed to 2%, from 6% in Q2 2019. Germany, despite weaker macro-economic data, maintained strong growth, up 16%, with its interim business, mainly focused on technology, growing 28%. Italy improved slightly on its Q2 growth rate of 7%, delivering growth of 11% and Spain grew 3%, in line with Q2. Benelux slowed from 13% in Q2 to 7%. The Middle East and Africa declined 10%, with particularly tough conditions in South Africa.


In Asia Pacific, gross profit declined 8.1% to £44.1m. Greater China, one of PageGroup’s large, high potential markets, declined 24%, against a tough comparator of 31%. Trade tariff uncertainty continued to impact Mainland China, particularly among its larger international clients, while the increased social unrest affected our Hong Kong business. South East Asia, another of its large, high potential markets, grew 11%, with growth in some of its newer countries, partially offset by a 4% decline in Singapore, which was affected by the wider trade tariff concerns. Japan, where PageGroup continue to focus on both the Gaishikei and Nikkei markets, grew 5%, down from 13% in Q2, with weaker growth from multinational clients. India delivered another record quarter, up 23%. Australia grew 2%, with strong growth in Victoria offset by more challenging trading in New South Wales.


The Americas, PageGroup’s fastest growing region, grew 13.0% to £37.3m. The US delivered growth of 14%. Growth was strongest in its offices outside of New York, which was impacted by a slowing in financial services. Latin America grew 17%, delivering another record quarter for the region. Mexico, the largest country in Latin America, grew 13%, while its Brazilian business continued to perform well, growing 25%. Elsewhere, the other four countries in the region grew 15% collectively, with record performances from Argentina, Colombia and Peru, partially offset by more challenging conditions in Chile.


The UK declined 4.1% to £33.8m, with heightened Brexit related uncertainty now impacting candidate and client confidence at all levels. This was reflected by Page Personnel, which represents a quarter of the UK, and Michael Page, which is focused on more senior opportunities, both declining by 4%. Having started the year with around 1,000 fee earners, this had declined to 929 at the end of June.


Steve Ingham (pictured), chief executive officer, said, "The majority of the Group's regions were impacted by increased macro-economic and political uncertainty in Q3. Consequently, Group gross profit growth slowed to 2.1% in constant currencies from 7.4% in Q2.


"We saw standout performances in Germany, India, and Latin America, as well as a strong performance in the US, despite a slowing Financial Services market in New York. However, we saw increasingly challenging trading conditions in many of our larger markets, including Greater China, the UK and France


"Looking ahead, the deterioration in trading conditions seen during Q3 across the majority of our regions is anticipated to continue. In the UK, heightened Brexit related uncertainty is expected to remain as we approach and go beyond 31 October. With worsening macro-economic indicators in Continental Europe, particularly in Germany, and in the US, there are signs that growth in these markets may slow. In Greater China, confidence in Mainland China continues to be affected by trade tariff uncertainty and the social unrest in Hong Kong is increasing. Given these heightened political and macro-economic challenges, together with our limited forward visibility, we currently expect 2019 operating profit to be in the range of £140m to £150m.


"However, we will continue to focus on driving profitable growth, while progressing our strategic investments towards our Vision of 10,000 headcount, £1bn of gross profit and £200m - £250m of operating profit."


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