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UK – Michael Page benefits from geographical diversification

07 March 2011

Revenues were up by +16.1% from 716.7 million Pounds in 2009 to 832.3 million Pounds in 2010 at Michael Page International Plc (MPI:LSE), the specialist professional recruitment company. In constant currency, revenues were up by +14.8%.

The Preliminary Full-year results for the year ended 31 December 2010 published today provide a more comprehensive overview of the Company's performance following the Q4 announcement in January. They reveal that annual gross profit was up by +25.7% from 351.7 million Pounds in 2009 to 442.2 million Pounds in 2010. In constant currency gross profit was up by +23.8%.

Operating profit before non-recurring items (17.1 million Pounds of refunded VAT) was up by +254% from 20 million Pounds in 2009 to 71.5 million Pounds in 2010. Operating profit after non-recurring items was up by +338.8% to 88.6 million Pounds.

Profit before tax and non-recurring items (17.1 million Pounds of refunded VAT and 11.3 million Pounds of interest) was up by +242.7% from 21.1 million Pounds in 2009 to 72.2 million Pounds in 2010. Profit before tax, after non-recurring items, was up by +377.8% to 100.7 million Pounds.

The United Kingdom contributed 28% (2009: 32%) of the group's gross profits in 2010. Revenue grew by +10.2% to 302.6 million Pounds (2009: 274.6 million Pounds) and gross profit grew by +12.7% to 124.9 million Pounds (2009: 110.8 million Pounds). The gross margin in the UK has remained flat at 41%, with the positive mix effect of a greater proportion of faster-growing permanent gross profit, being negated by slower-growing temporary gross profit, at lower margins due to pricing pressure.

The UK business, which stabilised in the fourth quarter of 2009, achieved year-on-year growth in every quarter of 2010. While confidence levels have improved, market conditions remain tough, with clients and candidates remaining cautious over the impact of the government's austerity measures. The UK business is well diversified in terms of geography, disciplines and the mix of permanent and temporary revenues and has limited exposure to the public sector and construction industry.

Headcount was 1,179 at the start of the year and increased to 1,324 by the end of December, with the majority of the investment in new headcount being added in the second half of 2010, with the objective of continuing the growth and gaining market share in 2011. Benefiting from the reductions in the cost base achieved during 2009 and the increase in productivity, operating profits for the year increased to 19.6 million Pounds (2009: 11.3 million Pounds), representing a conversion rate of 15.7% (2009: 10.2%).

Continental Europe, Middle East and Africa (EMEA), the group's largest region, contributing 43% of the group's gross profit for the year, grew revenue by +6.8% (+10.1% in constant currency) to 332.2 million Pounds (2009: 311.1 million Pounds) and gross profit by +15.3% to 188.7 million Pounds (2009: 163.7 million Pounds).

In the newer and smaller countries, the group has continued to invest for growth. Headcount in the region was 1,572 at the start of the year and increased to 1,831 by the end of December, with the majority of the hiring taking place in the second half of the year. Headcount levels are still well below the 2,155 at the start of 2009 and, with the benefit of a lower cost base and the increased level of gross profit, the region recorded a strong recovery in operating profits to 22.3 million Pounds (2009: 1.0 million Pounds), a conversion rate of 11.8% (2009: 0.6%).

The Netherlands was the most challenging market, with year-on-year gross profit comparisons only beginning to stabilise in the fourth quarter.

In all other countries in the region, the group achieved strong gross profit growth: in France (38% of EMEA up +21%, in constant currency), Germany (13% of EMEA up +17%, in constant currency), Spain (8% of EMEA up +20%, in constant currency) and Italy (9% of EMEA up +29%, in constant currency). The other 13 countries, representing 32% the EMEA region, achieved gross profit growth of +13%, in constant currency, with particularly strong performances in Switzerland and the UAE.

The Asia Pacific region contributed 16% of the group's gross profit in 2010. Revenue was 51.5% (33.9%, in constant currency) higher at 120.3 million Pounds (2009: 79.4 million Pounds) and gross profit was 71.1% (53.9%, in constant currency) higher at 72.2 million Pounds (2009: 42.2 million Pounds).

Operating profit increased to 22.3 million Pounds (2009: 8.1 million Pounds), representing a conversion rate of 30.9% (2009: 19.2%). The gross margin in the region increased from 53% to 60%, reflecting both the faster growth in permanent gross profits and strong growth in Asia, where the group has predominantly permanent placement businesses. Headcount across the Asia Pacific region increased from 403 at the start of the year, to 691 at the end of the year, an increase of +71%, reflecting both the increased activity levels and the intention for building a substantial business in Asia.

In Australia and New Zealand, gross profits grew by +34%, in constant currency, with strong growth throughout the year. In Asia, confidence levels recovered quickly from the global financial crisis and we grew our gross profit by +79%, in constant currency. The Company more than doubled its headcount in Asia during the year, opened its seventh office in China and a second office in Singapore. At the start of 2011, new offices were opened in Malaysia and India.

Revenue for the Americas region grew by +49.5% (38.9%, in constant currency) to 77.2 million Pounds (2009: 51.6 million Pounds) and gross profit grew by +61.4% (48.1%, in constant currency) to 6.4 million Pounds (2009: 35.0 million Pounds). With strong growth in revenue and gross profit, the region produced operating profit of 7.3 million Pounds (2009: loss -200,000 Pounds), representing a conversion rate of 13%. Headcount in the region increased from 395 at the start, to 652 at the end of the year, with a greater proportion being added in the second half.

Approximately two thirds of the Americas region is in Latin America, of which the largest business is in Brazil. In North America, market conditions have been slower to recover from the downturn, but the group is now benefiting from maintaining its platform, recording +42% year-on-year growth in gross profit in the fourth quarter of 2010.

Steve Ingham, Chief Executive of Michael Page, said "the group was well positioned to benefit from the economic recovery during 2010 and our profitability has improved significantly. We have maintained a strong balance sheet and, while increasing the returns to shareholders, we have also continued to take a long-term approach by making significant investments in the future of the business, opening in Chile, India, Malaysia and Qatar." 

"Since the start of 2011 we have seen strong growth in our EMEA region, Australia and North America and steady growth in our UK business where market conditions remain tough but stable. We continue to achieve our highest rates of growth in our Asian and Latin American regions where we have market leading positions."

"We are well positioned to continue our growth in 2011 and to pursue opportunities to invest in the development of our business over the long-term".

In early trading Michael Page's shares were down by -0.84% to 531 Pence.

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