International specialist recruitment firm PageGroup (MPI: LSE) reported gross profit for the second quarter ending 30 June 2015 of £145.3 million, an increase of 10.6% in constant currency (CC) compared with £137.1 million during Q2 2014.

Gross profit broken down by recruitment type was as follows:

Ongoing FX headwinds lowered reported Q2 total gross profit by circa £6.2 million.

In the first half, PageGroup reported a number of one-off items which impacted underlying operating profit. The company closed its business in Russia; the costs associated with exiting this market are expected to be circa £1 million. PageGroup are also establishing a European shared service centre; as such there are associated transition costs which stand at circa £1 million for the year to date.

Steven Ingham, CEO of PageGroup, commented: “The 10.6% increase in the Group’s gross profit reflects continued year-on-year growth in all four regions; with the UK and Americas showing improved growth rates from Q1. Our five high potential markets of Germany, Greater China, Southeast Asia, the US, and Latin America are now performing at a record level.”

“EMEA, when adjusted for the effect of closing our business in Russia, grew in line with Q1. The Asia Pacific growth rate slowed in Q2, but this was due to a particularly strong Q2 2014 comparator for Greater China of 37%.”

“In reported rates, Q2 gross profit was up 6.0% to £145.3 million. As previously highlighted, foreign exchange movements continued in Q2 lowering our reported figure by 4.6 percentage points, equivalent to £6.2 million of gross profit. This has also impacted our first half reported operating profit by £2 million,” Mr Ingham added.

By geography, the company reported gross profit growth is as follows:

EMEA grew Q2 gross profit by 11.4% (CC) compared with Q2 2014 and by 13% (CC) if adjusted for the effects of closing PageGroup’s business in Russia during Q1. Page Personnel performed well across the region, with growth of 16% (CC). Growth in France improved slightly over the first quarter, up 7% (CC), as productivity from the new heads added in Page Personnel in late 2014 continued to rise, up by 11% (CC) on Q1 2015.

In Germany, strong growth continued at 15% (CC), with Page Personnel up by 28% (CC). Benelux, Switzerland, Poland, and Southern Europe all continued to perform well. The Middle East, which was impacted by the fall in the oil price and ongoing political instability, reported flat growth compared with 2014; however the UAE still recorded a record gross profit result in the quarter. The EMEA region exited the quarter well, with June being its highest gross profit month since October 2008.

UK gross profit grew by 12.8% (CC), despite the General Election, which caused a brief drop in activity, Page Personnel, which represents 21% of the UK, again performed strongly, up 21% (CC). In Michael Page, the Group’s Finance & Accounting, Legal, Procurement & Supply Chain, and Property & Construction businesses all performed well.

The market has been consistently strong all year, with good levels of demand and candidate shortages, which are providing some degree of pricing leverage, particularly in the company’s temporary staffing business. The mix of gross profit and growth rates of Private Sector (88% of business) and Public Sector (12% of business) remained in line with the last few quarters of 13% (CC) and 11% (CC) respectively.     

Asia Pacific gross profit grew by 5.6% (CC), producing a record quarter gross profit, reflecting strong growth in Asia against a particularly strong quarter last year and ongoing tough economic conditions in Australia. Asia grew by 9% (CC) driven by a record quarter in Greater China, which grew by 11% (CC) despite the exceptional 37% (CC) growth seen in Q2 2014.

Southeast Asia grew gross profit by 6% (CC), with Malaysia up by 48% (CC) and Indonesia, the company’s newest market in the region, performing well. In Australia, which reported a 2% (CC) decrease in gross profit, a strong performance was reported in the company’s newer page Personnel business, which increased gross profit by 21%. However, this growth was offset by the company’s Michael Page business, which decreased by 6% (CC), with particularly difficult trading conditions in Queensland and Victoria.

Gross profit across the Americas increased by 11.5% (CC) in Q2 2015, up from 7.1% (CC) in Q1. North America delivered a record quarter from both the US and Canada, reporting combined growth of 21% (CC), against strong comparators. In the US, this was driven by a stand-out performance in New York, but improvement s were also noted in Chicago and Los Angeles, where the company expects to build a significant market presence.

Latin America reported gross profit growth of 4% (CC), despite variable market conditions across the region. Brazil, which accounted for 43% of Latin American gross profit in Q2, experienced another challenging quarter, reporting a decrease of 15% (CC), in line with the region’s Q1 2015 results. The political and economic uncertainty continued to impact trading conditions in Brazil and, with this expected to continue for some time, PageGroup reduced its fee earner headcount by 11%. Elsewhere, other countries had another strong quarter, growing at a combined 30% (CC) compared with last year. Performances in Mexico and Argentina were particularly strong.

PageGroup reports gross profit across four primary business segments: Finance & Accounting (Fin & Acc); Legal, Technology, HR, Secretarial, and Healthcare (Legal & Tech), Engineering, Property & Construction, Procurement, and Supply Chain (EPPS), and Marketing, Sales, and Retail (MSR). 

Gross profit during Q2 2015 was broken down as follows:

Mr Ingham concluded: “We are pleased with our performance in Q2 and the outlook is positive for all our regions in the second half. We remain focused on productivity and ensuring that our conversion continues to improve at a steady rate. Excluding the effects of foreign exchange movements during the second quarter, forecast to reduce full year operating profit by an additional £4 million (£2 million in Q1, £6 million in total), the Board’s expectations for the full year results remain unchanged.”

In trading today, the company’s share price decreased by 2.3% to £5.43, an increase of 29.5% compared with a year ago. Based on its current share price, the company has a market value of £1.8 billion.