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UK – PageGroup reports marginal gross profit decline in Q3

14 October 2013

Recruitment firm Michael Page International PLC (MPI: LN) reported a -0.2% fall in organic gross profit for the third quarter ending 30 September 2013. In terms of reported gross profit, the company reported a slight increase of +0.4% to £127 million from £126.5 million, year-on-year. Permanent recruitment for the period was -1% below last year, while temporary recruitment rose by +2.4%. Temporary recruitment now accounts for 24% of total gross profit. 

Steve Ingham, Michael Page CEO, commented: "Overall PageGroup delivered another robust performance in the third quarter, against a backdrop of challenging, but gradually improving market conditions across the majority of our regions. Gross profit was £127 million in our traditionally weaker third quarter, up 0.4% year-on-year in reported currency.”

Referring to the improved performance in each segment compared with a year ago, Mr Ingham added: “In all our regions and key disciplines, in the third quarter we saw increasing year-on-year quarterly growth rates in constant currency.”

The company’s largest business segment in terms of gross profit was EMEA, which accounted for 38% of total gross profit, excluding the UK. Gross profit for the region sank by -7% in constant currency to £48.5 million from £49 million, year-on-year. Market conditions remained challenging, but with further signs of improvement. The Group’s larger businesses of France and Germany, which predominantly operate in permanent recruitment, still experienced a challenging quarter, reported improving growth rates. Good quarterly performances were achieved in Spain, Turkey, Italy, Sweden, Russia, Poland and the UAE.

Gross profit also fell in the Asia-Pacific region, falling to £27.3 million from £31.2 million, equating to a drop of -4.3% in constant currency. Asia-Pacific accounts for 22% of total Group gross profit. Market conditions in Australia stabilised, but remain challenging as a result of the slowdown in the Mining and Resources sector. The Group’s business in Greater China delivered consistent growth, with the new office in Taipei performing well. Japan, India and Malaysia all had record quarters.

Mr Ingham added: "We saw good performances throughout the third quarter in a number of markets. Our businesses in the US, Japan, Mexico, Spain, Turkey and the Middle East all performed particularly well, as did some smaller and newer businesses in Europe, Latin America and Asia. The third quarter saw a return to growth in Brazil, while Australia, France and Germany experienced another challenging quarter. The UK recorded year-on-year growth of +5%, the best quarterly year-on-year rise since Q2 2011.”

Gross profit in the UK, which accounts for 24% of group gross profit, increased to £31 million from £29.5 million, year-on-year. The Group’s reported record quarters in Property & Construction, Buying & Merchandising, Design & Production, and Digital Marketing disciplines. The quarter also saw good performances from the Group’s Finance, Legal, Engineering, and Logistics disciplines. A good performance was also seen from the Public Sector business, which now makes up 12% of the UK, which grew by +20%.

The region reporting the biggest year-on-year increase in terms of constant currency was the Americas, growing by +16.9%. The smallest business segment, accounting for 16% of total gross profit, reported gross profit for the period of £20.2 million, up from £17.8 million last year. In Latin America, Brazil showed signs of improvement, with year-on-year growth in the third quarter of +7% in constant currency. Elsewhere in Latin America, the Group’s other businesses in Mexico, Chile, and Colombia all grew strongly, posting record quarters. In North America, business in the US performed particularly well, growing at +35% in constant currency.

The company also announced today the appointment of Kelvin Stagg to the position of Acting Chief Financial Officer, following Andrew Bracey tendering his resignation of 11 October 0213. Mr Stagg has been with PageGroup since July 2006, and most recently held the positions of Group Finance Controller and Company Secretary.

Commenting on Mr Stagg’s appointment, Steve Ingham said: “Kelvin has demonstrated considerable financial acumen during his seven years at PageGroup and the Board is delighted to appoint him as Acting Chief Financial Officer.”  

Looking forward, Mr Ingham said: “Although we have limited visibility, we expect Q4 to be another challenging quarter, with difficult conditions likely to continue in some markets, but with gradual improvements in others. After the impact of adverse movements in exchange rates (c. £1m) and increases in social charges on share plans as a result of the rise in our share price (c. £0.5m), at this point we expect full year operating profit to be around £68 million," he concluded.

In trading today, the company’s share price fell by -6% to £4.65, an increase of +33.7% compared with a year ago. Based on its share price, the company’s current market value is £1.4 billion. 


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