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PageGroup (MPI: LSE) reported revenue of £1 billion for the year ending 31 December 2013, an increase of +1.2% in constant currency compared with £990 million in 2012. The company achieved a gross profit for the year of £513.9 million, an organic drop of -2.7% from £526.9 million a year ago. Net income for the year was £37.9 million, a year-on-year increase of +22.3% from £31 million in 2012.
Steve Ingham, Chief Executive Officer of PageGroup, commented: “Although 2013 was a challenging year for the recruitment industry and the global economy in general, PageGroup was able to deliver a robust performance.”
“We achieved good performances in our significant UK and US markets, and also in Spain, the UAE, Mexico and Japan. There were also some signs of recovery in Continental Europe towards the end of the year. In contrast, Australia remained a difficult market, with the continued downturn in the resources sector, and our largest business in Latin America, Brazil, felt the impact of more challenging conditions. The refocusing of the business in the USA has been highly successful. We now have a fast growing and profitable business in this region which has considerable potential for PageGroup. Overall, year-on-year gross profit growth was experienced in 20 of the 34 countries in which we operate.”
“Our revenue from permanent placements decreased by -4.5% to £403.1 million (2012: £422 million), while revenue from temporary recruitment was up by +6.1% at £602.5 million (2012: £567.9 million). The differences in these performances are in line with what we would normally expect at this point in the cycle, as temporary recruitment tends to pick up earlier in the recovery, but will be overtaken by the subsequent much faster recovery in permanent recruitment,” Mr Ingham added.
Revenue from EMEA, excluding the UK, accounted for 40% of the group’s gross profit for the year, compared with 41% last year. Revenue for the region fell by -2.9%, on an organic basis to £407 million from £403 million last year, while gross profit fell to £208 million from £218.4 million in 2012, a year-on-year drop of -8.2% in constant currency.
Mr Ingham commented: “Market conditions remained challenging across the region, particularly in our largest markets of France and Germany, which is a predominantly permanent recruitment business. France and Germany make up 50% of our EMEA region and both countries saw gross profit decrease in the year. However, while these two markets remain challenging, they improved as the year progressed and our optimism has increased with regard to their outlook.”
“At the end of the year, France and Germany looked close to returning to positive growth. In addition, strong performances were seen in many countries, most notably in the UAE (+15%), Turkey (+46%), and Spain (+9%), as well as in Portugal, Sweden, Poland, Ireland, Russia and Qatar,” he added.
Due to increased geographic diversification, Michael Page’s home market now accounts for less than a quarter (24%) of the group’s gross profits. Revenue from the UK in 2013 was £299 million, an increase of +0.9% compared with £296 million last year. Gross profit for the region increased by +2.2% to £124 million, up from £121.4 million in 2012.
Mr Ingham commented: “Our Page Personnel brand, representing 19% of the UK business, grew by +21% in the fourth quarter of the year, with permanent recruitment up +27% and temporary recruitment up +13%. Page Personnel focuses on roles with a salary below £40,000 and, therefore, in line with the job market at this level, recruits a higher proportion of temporary roles. Typically, as markets recover, lower-level job recruitment tends to improve first, which was reflected in the growth rate for permanent recruitment being higher than in temporary.”
Trading in Asia Pacific continued to be negatively impacted by difficult market conditions in Australia. The region contributed 21% of group gross profit in 2013, compared with 22% in 2012, decreasing organically by -4.7% in 2013 to £105.8 million down from £114.9 million in 2012. Revenue for the region fell by -1.5% to £189.4 million, down from £192.2 million last year.
In constant currency the combined gross profit for Australia and New Zealand declined by -19% on the previous year as a result of the continued slow-down in the mining and natural resources sector in Australia and its effect on the wider economy. Consequently, having represented 44% of the region’s gross profit in 2012, this fell to 36% in 2013.
Mr Ingham commented: “In contrast, our Asia businesses continued to grow, year-on-year, delivering a record gross profit performance in 2013 with growth of +7% on the prior year. Asia now represents 62% of the region’s gross profit, compared to 55% in 2012 and only 39% in 2008. Greater China grew by +1% in terms of gross profit year-on-year, India by +23%, Malaysia by +80% and Japan grew by +25% and finished the year with a record quarterly performance in quarter four.”
The Americas represented 15% of the group’s gross profit during 2013, up from 14% last year. Revenue increased by +12.1% to £111 million, compared with £99 million in 2012. In constant currency, gross profit for the region increased by +8.7% to £76 million, up from £72 million a year ago.
Mr Ingham explained: “In North America, the USA performed particularly well with gross profit growing +31% to £25.8 million. Market sentiment continued to improve in the USA and this, along with the management changes in 2012 and subsequent investments made in 2013 to strengthen the teams across the region, has driven improvements in gross profit and the conversion rate. The USA business now operates from nine offices, having opened an office in Los Angeles during the year.”
“In Latin America, our largest business, Brazil, felt the impact of tougher economic conditions and consequently gross profit fell by -8%. However, overall gross profit in Latin America increased by +1% due to our other Latin American countries, representing 37% of our Latin American region, performing extremely well, with Mexico increasing gross profit by +22% to £8.2 million, Chile increasing its gross profit by +20% to £5 million, and our newer business in Colombia growing gross profit in excess of +100%; all three recorded record gross profit years,” Mr Ingham added.
Michael Page is moving into 2014 with caution, as explained by Mr Ingham: “The strength and timing of any recovery in world economic markets is uncertain, our visibility relatively short and we remain exposed to some volatile economies. This is demonstrated by the recent adverse movements in foreign currencies that are impacting our overseas results when translated into Sterling. However, we have continued to invest in additional fee earner headcount in selected markets since the start of the year. We believe our clear and consistent growth strategy, our geographic and discipline diversity and our strong balance sheet, with £85 million of net cash at year end, ensures that we remain in a strong position to respond to any improvements in market conditions in 2014.”
In trading today, the company’s share price fell by -1.4% to £4.97, an increase of +13.4% compared with a year ago. Based on its current share price, the company has a market value of £1.5 billion.