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UK - Michael Page sees profits rise but UK flat, announces new Chairman

10 October 2011

Group gross profit was up by +26.5% from 112.8 million Pounds in Q3 2010 to 142.7 million Pounds in Q3 2011 at Michael Page International Plc (MPI:LSE), the specialist recruitment consultancy. In constant currency, group gross profit was up by +21.8%.

An interim management statement for the three months ended 30 September 2011 reveals that gross profit generated from permanent placements (79% of total) was up by +28.4% from 87.7 million Pounds in Q3 2010 to 112.6 million Pounds in Q3 2011. In constant currency, permanent gross profit was up by +23.7%.

Gross profit generated from temporary placements (21% of total) was up by +20% from 25.1 million Pounds in Q3 2010 to 30.1 million Pounds in Q3 2011. In constant currency, permanent gross profit was up by +15%.

Headcount was up by +4.5% or up by +229 individuals to 5,350 in Q3 2011 compared with Q3 2010.

Gross profit generated from placements in finance and accounting (46% of total) was up by +22.2% from 54.2 million Pounds in Q3 2010 to 66.2 million Pounds in Q3 2011. In constant currency, it was up by +17.5%.

Gross profit generated from placements in marketing, sales and retail (17% of total) was up by +13.8% from 21.1 million Pounds in Q3 2010 to 24 million Pounds in Q3 2011. In constant currency, it was up by +9.4%.

Gross profit generated from placements in legal, technology, HR, secretarial and healthcare positions (19% of total) was up by +32.1% from 20.5 million Pounds in Q3 2010 to 27 million Pounds in Q3 2011. In constant currency, it was up by +26.9%.

Gross profit generated from placements in engineering, property, construction, procurement and supply chain positions (18% of total) was up by +49.4% from 17 million Pounds in Q3 2010 to 25.5 million Pounds in Q3 2011. In constant currency, it was up by +43.1%.

In the UK, representing 23% of group gross profit, third quarter gross profit was 33.1 million Pounds, flat on the third quarter of 2010. Market conditions remained tough, with modest growth in the private sector and a restrained public sector. The group continues to invest, with 82 graduates joining during the third quarter and this accounts for the increase in the headcount, which grew by +71 (+5.3%) to 1,414.

In the group's largest region, Europe, Middle East and Africa (EMEA), representing 41% of group gross profit, third quarter gross profit was 58.3 million Pounds, an increase of +30.8% (+23.2%, in constant currency) over the 44.6 million Pounds recorded in the third quarter of 2010.

In local currency, compared with Q3 2010, gross profit in:

• France (14% of the group) was higher by +19%.

• Germany (6% of the group) was higher by +43%.

• Netherlands (4% of the group) was higher by +21%.

• Italy (4% of the group) was higher by +22%.

• Spain (3% of the group) was higher by +10%.

• Rest of EMEA: Austria, Belgium, Ireland, Luxembourg, Poland, Portugal, Qatar, Russia, South Africa, Sweden, Switzerland, Turkey, U.A.E. (10% of the Group) was higher by +24%.

The group opened a second office in Geneva, Switzerland, during the quarter, continuing the roll-out of Page Personnel. Headcount in the region increased by +64 (+3.0%) to 2,190, with the majority of the investment in France and Germany.

In Asia Pacific, representing 21% of group gross profit, third quarter gross profit was 29.2 million Pounds, an increase of +44% (+35.2%, in constant currency) over the 20.3 million Pounds recorded in the third quarter of 2010. In Australia and New Zealand, the third quarter gross profit was +28%, in constant currency higher year-on-year, with strong performance in Western Australia driven by the mining and commodities sector.

In Asia, where the group continues to achieve strong levels of growth in China, third quarter gross profit was +42%, in constant currency, higher year-on-year. The new start-ups in Malaysia and India, where the group opened its third office in Bandra, Mumbai, are progressing well. Headcount across the region grew by +82 (+9.4%) to 956, with the majority of the additions in Asia.

In the Americas, representing 15% of group gross profit, third quarter gross profit was 22.1 million Pounds, an increase of +48.3% (+46.9%, in constant currency) over the 14.9 million Pounds recorded in the third quarter of 2010.  In Latin America, gross profit was up +60%, in constant currency, year-on-year. The group continued to invest in the region, opening Page Personnel offices in Mexico City, Mexico, and Campinas, Brazil. The new business in Chile, which started in the first quarter of 2011, is trading profitably.

In North America, gross profit grew by +24%, in constant currency, over the third quarter of 2010 and the group opened an office on the West Coast of the USA, in San Francisco, California.

Headcount across the region grew by +12 (+1.5%) to 790.

Steve Ingham, Chief Executive, commented "we are pleased with our third quarter performance, with gross profit increasing by +26.5% against a backdrop of increasing levels of macro-economic uncertainty. As expected, our gross profit growth rates, whilst strong, have slowed as markets have become more challenging."

"In Continental Europe, whilst gross profit growth rates were strong, they weakened in the third quarter. In the UK, with challenging market conditions and a restrained public sector, gross profits were flat. Gross profit from Latin America grew +60%, in a constant currency and in North America gross profit grew +24%, in a constant currency. Gross profit grew +42%, in a constant currency in Asia, with a particularly strong performance from our business in China. In Australasia gross profit grew +28%, in a constant currency with strength in the commodities sector."

"Finance and Accounting grew +17.5%, in a constant currency in the third quarter, within which are our Banking businesses that account for approximately 10% of the group's gross profit, and operate primarily in London, New York, Tokyo, Hong Kong and Singapore, and which grew +10%, in a constant currency, against a growth rate of +28%, in a constant currency achieved in Q2."

"We continued to invest selectively in developing our business, opening an office in San Francisco, a third office in India in Bandra, Mumbai and three Page Personnel offices in Geneva, Mexico City and Campinas, Brazil. Group headcount increased by +229 (+4.5%) to 5,350, with the additions mainly into Asia and our graduate intake in the UK. This takes our investment in new countries and offices this year to 3 and 15, respectively."

"The group is in a strong position, both financially and as a result of our successful strategy of diversification, both by geography and business discipline. Markets have weakened and become more uncertain reducing our short-term visibility. However, while mindful of the uncertainty in so many of the world's economies, we continue to invest where there are opportunities for longer-term growth."

During the quarter, the group had further correspondence and discussions with Her Majesty's Revenue and Customs (HMRC) concerning the amended claims for an additional refund of VAT and related interest, but the eventual outcome still remains uncertain.

In a separate statement the group announces that Sir Adrian Montague will retire as Chairman of the board on 31 December 2011 following the completion of a planned succession process, and Robin Buchanan, who joined the board as an independent Non-Executive Director in August, will succeed him as Chairman.

Robin Buchanan is a Senior Adviser to Bain & Company Inc , having been the Managing Partner and then the Senior Partner of Bain in the UK between 1990 and 2007. He is also a Non-Executive Director of Schroders Plc, the global asset management company and LyondellBasell NV, the NYSE global petro-chemicals company. He is a member of the Trilateral Commission and of the International Advisory Council of Recipco. He is also an advisor to Coller Capital Ltd.

He served previously as Dean and then President of the London Business School, as non-executive director of Liberty International Plc and also of Shire Plc.

Robin Buchanan said "Michael Page has many great strengths, including a highly respected global brand, impressive competitive positioning in the world's growth markets, a strong balance sheet and a 'make it happen' culture. It is a privilege to be asked to serve as Chairman of Michael Page and to work with the board and management team who have helped make the company so successful."

Despite the good overall results, Michael Page's shares were down in early trading by -4.59% to 347 Pence.

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