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UK – PageGroup reports improving business environment in half year results

13 August 2014

International specialist recruiter PageGroup (MPI: LSE) reported revenue growth for the six months ended 30 June 2014 of +8.3% to £512.2m (2013: £503.2m) at constant exchange rates.  Gross profit increased by +7.9%% to £263.7m (2013: £261.9m).

Gross profit derived from temporary recruitment accounted for 23% of total gross profit, rising by +6.4% in constant currency to £60.2 million, up from £59.3 million, year-on-year. Permanent gross profit rose by +8.3% in constant currency to £203.5 million, up from £202.6 million last year.

Operating profit was up +21.4% in constant currency to £35.7 million.

Steve Ingham, Chief Executive Officer of PageGroup, commented: "We saw solid performances across our regions, including strong growth in the major economies of Greater China, the UK and the US. While adverse FX continues to impact our results at reported rates, the underlying business environment is gradually improving in a number of our key markets."

In common with a number of its international rivals, PageGroup’s financial results have been impacted by recent movements in foreign exchange rates. Due to sterling strengthening against almost all of the currencies relevant to the Group’s operations, revenue, gross profit and operating profit (when expressed in sterling) have been reduced by £33 million, £19 million and £3 million, respectively.

The Group's conversion rate (ratio of operating profit to gross profit) rose strongly from 12.3% to 13.5% year-on-year. This reflected the full run-rate of cost savings from the work done in 2013 to achieve consistency and efficiency, as well as a steady improvement, in this early stage of the recovery cycle, resulting in growth predominantly in temporary and lower-level permanent recruitment. However, both Asia Pacific and the Americas saw their conversion rates decline, due to macro-economic challenges in the major markets of Australia and Brazil, together with increased headcount investment in Asia and North America and the development of new markets such as India and Peru.

Constant currency growth in gross profit was reported across all four regions.

UK gross profit rose by +10.0% to £67.6 million, up from £61.4 million last year. Gross profit from the UK accounted for 26% of total group gross profit. The business continued to experience positive momentum and greater confidence both in London and the regions and there were increasing instances of candidate shortages in certain disciplines.

EMEA accounted for 41% of total group gross profit during H1 2014. Gross profit grew to £107.5 million for H12014, an increase of +5.2% in constant currency. Operations in France and Germany, together representing 49% of the region by gross profit, grew by +5% and +7% respectively in the first half. Each saw strong growth in their Page Personnel businesses being offset by continued difficult trading conditions in Michael Page, which focuses on higher salary and predominantly permanent placements. Overall, 16 countries in the region grew in constant currency compared to the first half of 2013. Of these, significant growth was seen in Southern Europe, Turkey, Middle East and Poland.

Asia Pacific gross profit increased by +7.8% in constant currency to £51.3 million. Asia (comprising 67% of the Asia Pacific region), enjoyed strengthened trading conditions which helped Greater China achieve growth of +22%, with improving momentum through the half year, including record months from all offices in June. However, In Australia, gross profit was down -6.9% in constant currency as the company continued to be impacted by the downturn in the mining and commodities sector. The Australian market did stabilise progressively as the rate of decline slowed through the first half, in part due to softer comparators from the prior year.

In the Americas, gross profit increased by +11.8% in constant currency to £37.3m. Gross profit in the USA was up +23% while Latin American gross profit was up +6% year-on-year in constant currency with record performances from Mexico, Argentina and Colombia. A new business was launched in Lima, making Peru the company’s sixth country in the Latin American region.

The Group is currently undertaking a significant technology upgrade including the development and roll-out of a new Recruiting System "PRS". This is focused on delivering productivity gains for recruitment consultants such as automatic CV parsing and enhanced job-board management, together with a significantly improved capability to attract candidates through an upgraded multidevice website platform. This roll-out accelerated in the first half and is being expanded across the Group, with an expectation of approaching one third of the consultant network on PRS by the end of 2014.

Mr Ingham concluded: "Looking ahead, we expect market conditions to remain challenging in Brazil and France, and for Australia to stabilise. The more positive environment in many of our other countries is expected to continue, with our leading KPIs positive as we start the second half. For the full year, if the current trend of improving growth rates is maintained and foreign exchange rates remain constant, we expect to perform in line with market expectations" Mr Ingham added.  

In early trading today, the company’s share price decreased -3.6% to £432.80, +3.74 above its 52 week low of £417.20 set on 10 July 2014. Based on its current share price, the company has a market value of £1.4 billion.


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