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UK – Michael Page finds UK tough going

11 April 2012

Michael Page (MPI:LSE) struggled in the UK during the first quarter of 2012 as business activity there was modest due to the ongoing macroeconomic uncertainty, the firm said today. But in its Q1 report, the staffing company reported stronger growth rates in the EMEA region with France and Germany taking the lead. Overall, the banking sector was poor in various regions across the world with things looking particularly bleak in the UK and Southern Europe where gross profit was down.

However, group gross profit increased by almost +7%, amounting to £136.0 million in Q1 2012 from £127.3 million a year ago. Group gross profit from permanent recruitment in the first quarter was £106.9 million, up +6% when compared to the £100.9 million in the first quarter of 2011. Group gross profit from temporary recruitment in the quarter also increased by over +10% to £29.1million, up from £26.4m last year. The perm/temp gross profit ratio in the first quarter was unchanged at 79%:21%.

The staffing firm also reported that all disciplines achieved year-on-year growth in the quarter, despite weakness in the banking sector. Finance and Accounting grew by +2.7% to £58.2 million from £56.7 million, this contributing 43% of group gross profit. Gross profit from placements in legal, technology, HR, secretarial and healthcare (20% of group gross profit) was up by +12.4% from £24.5 million in Q1 2011 to £27.6 million in Q1 2012. Engineering, Property & Construction, Procurement & Supply Chain performed particularly strongly (19% of group gross profit), with gross profit increasing by over +18% year-on-year from £22.1 million to £26.1 million. However, in marketing, sales and retail (18% of gross profit) gross profit was up only marginally +0.5% from a year ago and amounted to £24.1 million from 24.0 million.

Performance by region in Q1 2012

In the UK, representing 23% of group gross profit, gross profit was down -3.7% in the quarter and amounted to £30.6 million from £31.7 million a year ago. The firm said that market conditions there remained tough. The banking sector was particularly depressed and hence year-on-year gross profit in the first quarter was 50% lower, now representing 5% of UK gross profit. Excluding banking, UK gross profit was marginally ahead of the first quarter of 2011 while headcount reduced by -7.3% from a year ago to 1,259.

In EMEA, the firm’s largest region representing 44% of group gross profit, first quarter gross profit was up +7.4% at £60.3 million from £56.2 million a year ago. In Southern Europe, gross profit in local currency declined in both Spain (-11%) and Italy (-5%) but the firm said that these countries performed “well in difficult market conditions and generated profit”. Elsewhere in the region, good growth was achieved in Germany (7% of the group), which recorded growth of +36% in local currency, and France (16% of the group), which grew by +10%. The fourteen countries that comprise the Rest of EMEA now represent 11% of the group's gross profit, and collectively they grew by +10% in local currency. Overall, during the first quarter, headcount reduced in the region by -0.8% to 2,193, with the reductions being primarily in Southern Europe and the Netherlands.

In Asia Pacific, first quarter gross profit rose +23% and was £26.3 million, up from the £21.4 million a year ago. In Australia and New Zealand, the first quarter gross profit was 14% higher year-on-year in local currency, while in Asia, with the notable exception of banking, the firm grew strongly in the first quarter by +22% year-on-year. The weakness in banking has particularly impacted the growth rates in Tokyo, Hong Kong and Singapore but all other disciplines continued to grow, especially in mainland China. Malaysia and India, which opened at the start of 2011, are “progressing well” and the firm has continued its expansion in Asia by opening new offices in Taipei and Suzhou. Headcount across the region is 28% higher than at the end of the first quarter of 2011.

In the Americas, first quarter gross profit increased by +4.6% to £18.8 million from £18.0 million a year ago. In Latin America, gross profit was up +11% in local currency year-on-year while in Brazil, lower GDP growth lowered confidence and resulted in flat gross profit for the quarter. Mexico, Argentina and Chile performed well and the firm opened a new business at the start of the year in Bogota, Colombia. In North America, again with the exception of banking, the firm made “good progress” as gross profit was up +2% in local currency when compared to last year.  Headcount across the Americas region grew in the first quarter by +4.6% to 850, which is +18% higher than at the end of the first quarter of 2011.

Steve Ingham, Chief Executive, said, “Markets continue to be weak and visibility remains limited, however, the Group remains financially strong, with net cash in the region of £63 million. Operationally, our successful strategy of diversification, both by geography and business discipline, positions us well to benefit from our ongoing investment in those markets which we expect to deliver growth over the long-term and our strong competitive position in more mature markets.”

Michael Page International plc is a specialist recruitment consultancy, operating in Continental Europe, Middle East and Africa (EMEA), and the United Kingdom. It is the tenth largest staffing firm in the UK, according to Staffing Industry Analysts’ research, and clients include global multi-nationals as well as small and medium enterprises. The firm employs more than 5,350 people in over 161 offices and 33 countries worldwide.

Following the announcement of today’s Q1 results, in early trading this morning the company’s share price dropped -5.44% to £429.20, down -18.33% from a year ago but +37.08% above the 52-week low of £313.10 set on 5 December 2011. The firm is valued at £1.45 billion.

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