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UK – Michael Page's gross profit boosted by international business

11 April 2011

Gross profit was up by +30% from 97.9 million Pounds in Q1 2010 to 127.3 million Pounds in Q1 2011 at Michael Page International Plc (MPI:LSE), the specialist professional recruitment company. At constant currency gross profit was up by +29.3%.

Interim results for the three months ended 31 March reveal that group gross profit from permanent recruitment in the first quarter was 101.1 million Pounds, an increase of +33.9% at constant currency over the 75 million Pounds in the first quarter of 2010.

Group gross profit from temporary recruitment in the first quarter was 26.2 million Pounds, an increase of +14.2%, at constant currency over the 22.9 million Pounds in the first quarter of 2010.

The permanent/temporary gross profit ratio in the first quarter was 79:21 (Q1 2010: 77:23).

In terms of disciplines, gross profit from placements in finance and accounting (45% of gross profit) was up by +22.8% at constant currency from 46.2 million Pounds in Q1 2010 to 57.1 million Pounds in Q1 2011.

Gross profit from placements in marketing, sales and retail (19% of gross profit) was up by +24.7% at constant currency from 18.9 million Pounds in Q1 2010 to 23.7 million Pounds in Q1 2011.

Gross profit from placements in legal, technology, HR, secretarial and healthcare (19% of gross profit) was up by +36.7% at constant currency from 17.9 million Pounds in Q1 2010 to 24.6 million Pounds in Q1 2011.

Gross profit from placements in engineering, property, construction, procurement and supply chain (17% of gross profit) was up by +46.4% at constant currency from 14.9 million Pounds in Q1 2010 to 21.9 million Pounds in Q1 2011.

During the quarter Michael Page had correspondence and discussions with HMRC concerning the amended claims for a further refund of VAT and related interest, but the eventual outcome still remains uncertain.

In the UK, representing 25% of group gross profit, first quarter gross profit was 31.7 million Pounds, up +9.4% on the first quarter of 2010. Market conditions remained tough, with a slow but steady improvement in the private sector, held back by a difficult public sector. The sales, engineering, procurement, supply chain and technology disciplines grew strongest and this is reflected in the headcount, which grew by +34 (+2.6%) to 1,358.

In the group's largest region, Europe, Middle East and Africa (EMEA), representing 44% of group gross profit, first quarter gross profit was 56.2 million Pounds, an increase of +28.2% at constant currency over the 44.6 million Pounds recorded in the first quarter of 2010.

Market conditions continued to show further improvement, resulting in strong year-on-year growth. The group performed well in France, Germany, Italy, Spain, and, for the first time, since the start of the recovery, business in the Netherlands achieved good growth, up +18% in the quarter.

The thirteen countries that comprise the rest of EMEA represent 11% of the Group's gross profit and grew by +41% at constant currency. The new opening in Qatar has progressed well and the group opened a second Portuguese office in Porto. Headcount across the region increased by +151 (+8.2%) to 1,982, with the majority of the investment being in Germany (+33), France (+41) and rest of EMEA (+55).

In local currency, against Q1 2010:

• France (16% of the Group) was higher by +23%.
• Germany (6% of the Group) was higher by +31%.
• Netherlands (4% of the Group) was higher by +18%.
• Italy (4% of the Group) was higher by +34%.
• Spain (3% of the Group) was higher by +26%.
• Rest of EMEA: Austria, Belgium, Ireland, Luxembourg, Poland, Portugal, Qatar, Russia, South Africa, Sweden, Switzerland, Turkey, U.A.E. (11% of the group) was higher by +41%.

In Asia Pacific, first quarter gross profit was 21.4 million Pounds, an increase of +54.0% at constant currency over the 13.2 million Pounds recorded in the first quarter of 2010. In Australia and New Zealand, the first quarter gross profit was +26% at constant currency, higher year-on-year, with a particularly strong performance in Western Australia. In Asia, where the group is achieving rapid levels of growth in China, first quarter gross profit was +92% at constant currency, higher year-on-year. The earthquake and tsunami in Japan have understandably had an impact on the business in Tokyo (2% of Group) and the group anticipates it will take a number of quarters to assess the longer-term impact.  New start ups in Malaysia and India are progressing well. Headcount across the region grew by +98 (+14.2%) to 789, with the majority of the additions in Asia.

In the Americas, first quarter gross profit was 18.0 million Pounds, an increase of +56.0% at constant currency over the 11.2 million Pounds recorded in the first quarter of 2010. In Latin America, gross profit was up +73% at constant currency, year-on-year.

Brazil has now become the third largest country in gross profit terms and the group has continued its investment there by opening a new office in Porto Alegre and increasing headcount by +41 (+13.8%).

In Chile new business started well, recording a trading profit in the first quarter, and in Argentina the groups has started Page Personnel.

In North America, market conditions remained tough, but were showing signs of improvement. Gross profits grew +7% over the fourth quarter of 2010 and by +28% at constant currency, year-on-year. Headcount across the region grew by +71 (+10.9%) to 723, with the majority of the additions in Latin America.

Steve Ingham, Chief Executive, said "we are pleased with our performance in the first quarter of 2011, with gross profit increasing by +30%. The growth continued to be largely driven by permanent placements, where gross profits were up by +35%, and we also noted a pick-up in gross profits from temporary placements, growing by +14%."

"Gross profit from Latin America grew by +83% and Brazil is now our third largest country business. In Asia, gross profit growth in the first quarter was up +97%, with a particularly strong performance from our business in China."

"As a result of our success and as we continue to invest in developing our business, our cost base is increasing. We have added to our business platform with new discipline rollouts and start ups, as well as opening new businesses in Qatar, Malaysia and India. Group headcount increased by +354 (+7.9%) to 4,852 and we would expect this number to increase further during the second quarter."

"We have now had four quarters of broadly similar gross profit growth, at constant currency and we expect tougher comparative periods to affect growth rates going forward. However, the outlook in Asia and Latin America remains positive, and Europe continues to improve, all of which gives us confidence that we are well positioned to exceed our 2010 profit performance."

In early trading Michael Page's shares were up by +1.55% to 525 Pence.

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