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UK - Michael Page's profits driven strongly by overseas business and permanent placements

11 July 2011

Group gross profit was up by +32.4% from 111.7 million Pounds in Q2 2010 to 147.8 million Pounds in Q2 2011 at Michael Page International Plc (MPI:LSE), the specialist recruitment consultancy. In constant currency, group gross profit was up by +29.6%.

A trading update for the Q2 period ending on 30 June 2011 reveals that group gross profit from permanent recruitment in the second quarter was 118.6 million Pounds, an increase of +34.8% as reported and of +32.1%, in constant currency, over the 88.0 million Pounds in the second quarter of 2010. Group gross profit from temporary recruitment in the second quarter was 29.2 million Pounds, an increase of +23.5% as reported and of +20.3%, in constant currency, over the 23.7 million Pounds in the second quarter of 2010.

The permanent/temporary gross profit ratio in the second quarter was heavily weighted towards permanent placemnt at 80:20 (Q2 2010: 79:21).

Looking at the results on a per sector basis, the strongest performing discipline in terms of gross profit growth (at constant currency) was Engineering, Property & Construction, Procurement & Supply Chain (+50%), followed by Legal, Technology, HR, Secretarial, Healthcare (+31%) and Marketing, Sales & Retail (+27%). Finance & Accounting, the Company’s largest and most established sector (representing 45% of total gross profit) was actually the slowest in terms of growth (+23%). The more recently launched disciplines are growing at faster rates as they continue to be introduced across country and office networks.

Group headcount increased by +269 (+5.5%) during the quarter to 5,121 at the end of June 2011.

In the UK, representing 23% of group gross profit, second quarter gross profit proved less strong at34.3 million Pounds, up by +6.4% on the second quarter of 2010. Not surprisingly, growth in the private sector was held back by a more restrained public sector. General activity levels slowed considerably at the end of April due to the late Easter holidays and the short working weeks which followed, but have since recovered and remain stable. The Company expects the business to continue to grow at a similar rate to that achieved in the first half and this is reflected in the headcount, which remained broadly flat during the quarter at 1,343.

In the group's largest region, Europe, Middle East and Africa (EMEA), representing 43% of group gross profit, second quarter gross profit was 64.1 million Pounds, an increase of +37.2% as reported and of 31.8%, in constant currency, over the 46.7 million Pounds recorded in the second quarter of 2010.

Market conditions continued to show further improvement, with the year-on-year growth rates improving in the second quarter in France, Germany and the Netherlands. In Italy and Spain, the group continues to achieve strong year-on-year growth, despite weak economies. The thirteen countries that comprise the rest of EMEA represent 10% of the group's gross profit and grew by +33%, in constant currency. Headcount across the region increased during the quarter by +144 (+7.3%) to 2,126.

Gross profit in local currency, against Q2 2010:

• France (16% of the Group) +31%.
• Germany (6% of the Group) +42%.
• Netherlands (4% of the Group) +30%.
• Italy (4% of the Group) +31%.
• Spain (3% of the Group) +20%.
• Rest of EMEA: Austria, Belgium, Ireland, Luxembourg, Poland, Portugal, Qatar, Russia, South Africa, Sweden, Switzerland, Turkey, U.A.E. (10% of the Group) +33%.

In Asia Pacific, second quarter gross profit was 27.2 million Pounds, an increase of +50.8% as reported and of +45.8%, in constant currency, over the 18 million Pounds recorded in the second quarter of 2010. In Australia and New Zealand, second quarter gross profit was +23%, higher in constant currency year-on-year, with a particularly strong performance in Western Australia.

In Asia, second quarter gross profit was +72%, higher in constant currency year-on-year.

The group is achieving rapid growth in China where it now has over 250 staff and is continuing to invest by opening an office in Pudong, Shanghai and doubling office space in Beijing.

The earthquake and tsunami in Japan had an impact on the business in Tokyo (2% of the group) at the beginning of the quarter, but the business recovered strongly recording an all-time record level of gross profit in June. In Singapore, the group produced a record second quarter and reported that the start-ups in Malaysia and India are progressing well. The group has recently committed to a second office in Mumbai, which will be the third office in India. Headcount across the region grew by +85 (+10.8%) in the quarter to 874, with the majority of the additions in Asia.

In the Americas, second quarter gross profit was 22.2 million Pounds, an increase of +51.3% as reported and of +53.7% in constant currency over the 14.7 million Pounds recorded in the second quarter of 2010.

In Latin America, gross profit was up +68% in constant currency year-on-year. Brazil is now the group's third largest country in gross profit terms. The investment last year in opening four offices has contributed to strong growth and the group continued its investment in the second quarter, increasing the headcount by a further +39 (+12%) to nearly 400 staff.

The group has also invested in additional headcount in Mexico, Argentina and Chile to further enhance market positions.

In North America, gross profit grew +29% in constant currency in the second quarter and, while market conditions remain tough, there are signs of improvement, particularly in Canada. The group opened an office in Houston during the quarter to capitalise on the growing strength of the worldwide oil and gas business. Headcount across the region grew by +55 (+7.6%) to 778, with all the additions being in Latin America.

During the quarter, the group 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.

Steve Ingham, Chief Executive, commented "we continued to perform well in the second quarter of 2011, with the year-on-year increase in gross profit rising to 32%. The growth continues to be driven largely by permanent placements, where gross profit was up by +35%, and we also recorded an improvement in gross profit from temporary placements, which are now growing at +24%."

"We continue to achieve very strong growth from Latin America (+68%) and Asia (+72%) and combined they now represent over 20% of the group's gross profit with 28 offices, across 11 countries and over 1,000 staff."

"We have further invested in our business platform during the second quarter, with group headcount increasing by +269 (5.5%) to 5,121 and new office openings in Houston, USA and Pudong in Shanghai, China."

"We anticipate that in the short-term, our UK business will maintain modest growth. However, our outlook for Asia and Latin America remains strong and in Europe continues to improve. While our second quarter gross profit was ahead of our expectations, we continue to invest significantly in developing our business both by geography and discipline and, as a consequence, anticipate that our full year profits will be broadly in line with current market estimates."

It was also announced that Stephen Puckett, Group Finance Director, will be leaving the group for personal reasons. The process to find a successor is underway and until such time as a new appointment is made, Puckett will continue full time in office.

In early trading Michael Page's shares were up by +2.16% to 545 Pence.

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