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UK gross profit down 4.8% in Q4 2019 for PageGroup

PageGroup has released its results for the fourth quarter and full year 2019.


PageGroup delivered fourth quarter gross profit of £205.6m, a decline of -0.4% in constant currencies and -2.6% in reported rates. In constant currencies, Michael Page was down -0.1%, with Page Personnel declining -1.0% in the quarter.


For the full year, group gross profit was up 5.0% to £856.0m with 19 countries delivering record gross profit.


Steve Ingham (pictured), chief executive officer, said, “The majority of the Group’s regions were impacted by macro-economic and political uncertainty in Q4. Consequently, Group gross profit declined -0.4% in constant currencies from growth of 2.1% in Q3. The Group delivered strong performances in Germany, India, and the US, despite a slowing financial services market in New York. However, trading conditions were more challenging in many of our larger markets, including Greater China, the UK and France.


“As a result of the heightened geopolitical and macro-economic uncertainty seen in a number of the Group’s markets, fee earner headcount reduced by 54 in Q4, mainly in Greater China and the UK.


“The Group was impacted by adverse foreign exchange movements during Q4, decreasing our Q4 reported gross profit by 2.2 percentage points, or £4.6m. We expect that these foreign exchange headwinds will persist, or possibly increase.


“Looking ahead, the tough trading conditions experienced during Q4 across the majority of our regions are anticipated to continue. There are challenges in EMEA, including social unrest in France and heightened political tensions, notably in the Middle East. Asia Pacific continues to be impacted by trade tariff uncertainty in Mainland China, the protests in Hong Kong, as well as the fires in Australia. In the Americas, the weak financial services market in New York, as well as social unrest in Chile are expected to continue to impact the region’s results. In the UK, Brexit related uncertainty is expected to be ongoing during 2020.


“However, we have a flexible and highly diversified business model that enables us to react quickly to changes in market conditions. We are clear market leaders in many of our markets, with a highly experienced senior management team, which, we believe, positions us well to take advantage of all opportunities during 2020.


“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.


“Despite the increased tough trading conditions in Q4, we expect FY 2019 operating profit to be in line with our previous guidance of £140m to £150m.”


The UK’s gross profit declined -4.8% to £31.9m in Q4, with disruption from Brexit increasing uncertainty and impacting confidence. Page Personnel, which represents around a quarter of the UK, suffered from low client confidence, and declined -4%, while Michael Page continued to be impacted by low senior candidate confidence and declined -5%.


EMEA Q4 gross profit grew 2.3% to £103.6m, down from growth of 5.6% in Q3 as macro-economic uncertainty continued to impact market confidence. Michael Page was up 4%, growing faster than Page Personnel, which was flat. France, representing 17% of the Group, grew 1%, impacted by increased macro-economic uncertainty as well as the recent large scale strikes. Despite weak macro-economic data, Germany delivered a strong quarter, up 16%, with the company’s interim business, mainly focused on technology, growing 50%. Italy grew 3% and Spain was up 2%, broadly in line with its Q3 growth rate. Benelux grew 6%, with Belgium delivering a record quarter. The Middle East and Africa declined -3% with tougher trading conditions, particularly in Africa.


In Asia Pacific, PageGroup’s second largest region, gross profit declined -7.9% to £37.5m in Q4. Greater China, one of its large, high potential markets, declined -14%. Mainland China declined -7%, which was an improvement on the -27% in Q3, as the comparators became easier and the business adapted to the more challenging conditions. The protests continued to impact PageGroup’s Hong Kong business, down -27%, in line with Q3. South East Asia, another of its large, high potential markets declined -4%, with good growth in some of its newer countries offset by Singapore, which was down -19%, albeit against a tough comparator of 37%. Japan declined -1%, down from its Q3 growth rate of 5%, with continued weaker growth from the company’s multinational clients. India, where PageeGroup now has around 160 fee earners, grew 13%, against a particularly tough comparator of 79%. Australia declined -7%, also against a tough comparator of 25%, with challenging trading in New South Wales.


The Americas continued to be PageGroup’s fastest growing region in Q4, up 5.0% to £32.6m. The US grew 10%, despite a weaker financial services sector in New York, with particularly strong growth in Boston, Chicago and Los Angeles. Latin America grew 5% with Brazil up 4% and Mexico, its largest country in the region, up 9%. Elsewhere, the company’s other four countries in the region grew 4%, collectively, with record performances from Argentina, Colombia and Peru, partially offset by tougher trading conditions in Chile, as a result of the political and social unrest.


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