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UK – Michael Page sees no further slowdown in 2012

06 March 2012

Michael Page International Plc (MPI:LSE), the specialist professional recruitment company, announced on Tuesday that revenues in 2011 went up +22.4% to £1.019 million from £832.3 million in 2010. Despite the “challenging” economic backdrop, the firm was “delighted” with its performance in the year which benefited from geographic diversification with growth in all regions.

The preliminary full-year results for the year ended 31 December 2011 provide a more comprehensive overview of the company's performance, following the Q4 announcement in January. The results reveal that annual gross profit increased +25.2% to £553.8 million from £442.2 million in the previous year. However, profit for the year dropped to £56.9 million in 2011 from £67.5 million in 2010.

In 2011, profit before tax and non-recurring items amounted to £86.1 million, up +19.3% from £72.2 million in 2010.

Global Performance in 2011

The firm stated that in July 2011 its financial services business started to weaken as concerns over the Eurozone began to emerge and economic growth expectations in Asia and the Americas were revised downwards.  The Eurozone crisis also lowered business confidence amongst clients, and the slowing activity levels initially impacted the more developed recruitment markets in the UK and Europe, but also the emerging markets, the firm pointed out.

In the UK, which contributed 24% (2010: 28%) of the Group's gross profit in 2011, revenue grew by +7.4% to £324.9 million (2010: £302.6 million) and gross profit increased +4.1% to £130 million (2010: £124.9 million). The gross margin in the UK has remained flat at broadly 40%, with both the mix of permanent and temporary gross profit and their respective gross profit margins remaining largely the same as in 2010.

The UK business achieved modest year-on-year growth in every quarter of 2011, although the quarterly growth rates declined throughout the year. Trading was characterised by growth in the private sector, held back by a more restrained public sector, and this trend persisted throughout 2011. Market conditions remained tough throughout 2011, with clients and candidates remaining cautious over the impact of the government's austerity measures and sovereign debt issues in the Eurozone. The UK business is well diversified in terms of geography, disciplines and the mix of permanent and temporary revenues, and now has only limited exposure to the public sector.

Headcount in the country decreased -2.4% to 1,292 by the end of December, following “toughened market conditions” which led to a slowdown in hiring and the business reducing its headcount by natural attrition during the final quarter. Due to the slowing growth in the second half of the year, operating profit for the full year was -6.7% lower at £18.3 million (2010: £19.6m).

Continental Europe, Middle East and Africa (EMEA), the Group's largest region, contributed 43% of the total gross profit for the year as revenues grew by +26.8% to £421.2 million (2010: £332.2 million) and gross profit increased by +27% to £239.6 million (2010: £188.7 million).

The firm said that Continental Europe experienced a strong recovery during the first half of the year as market conditions gradually improved and, with the exception of Southern Europe, this growth continued through the third quarter. But the deterioration in confidence that started towards the middle of the third quarter in Southern Europe, driven by the sovereign debt issues in Greece and Italy, quickly spread across Continental Europe and in the fourth quarter the growth rates of most businesses in EMEA slowed with the exception of Germany.

Headcount increased by +20.7% to 2,210 by the end of December, with the majority of hiring taking place in the first half of the year. The firm said that all countries across the region performed well during 2011. The Netherlands, the firm’s most challenging market, recorded year-on-year gross profit growth of 21%. Other notable performances were in France (37% of EMEA up 21% in constant currency); Germany (15% of EMEA up 39% in constant currency); Italy (9% of EMEA up 23% constant currency); and Spain (7% of EMEA up 15% in constant currency).

The other 14 countries, representing 32% of the EMEA region, achieved gross profit growth of 25% in constant currency. During the year, the firm opened a third office in the Middle East in Doha, Qatar, a second Portuguese office, in Porto, a Page Personnel office in Geneva, Switzerland, and further offices in Cologne, Barcelona and Paris.

The Asia Pacific region contributed 19% of the Group's gross profit in 2011 as revenue was +38% higher at £166.1 million (2010: £120.3 million) and gross profit was up +43.1% at £103.4 million (2010: £72.2 million). Operating profit increased to £26.2 million (2010: £22.3 million), representing a conversion rate of 25.3%, down on 2010 due to the high levels of headcount growth and new business investment in the region, including two new countries. The gross margin increased from 60% to 62%, reflecting the strong growth in Asia, where the firm has predominantly permanent placement businesses. Headcount across the Asia Pacific region increased +41% to 971.

In Australia and New Zealand, gross profit grew +22% in constant currency due to growth in Western Australia, driven by the mining and commodities sector. In Asia, the earthquake and tsunami in Japan impacted business in the first quarter, but recovered in the second quarter. Business across China grew strongly, with gross profit in Mainland China, where the firm opened a new office in Pudong, Shanghai went up over 100% in the year. The new business start-ups in Malaysia and India progressed very well through the year. In India the firm opened a third office in Bandra, Mumbai, and closed the year with a headcount of around 50.

In the Americas revenue grew by +38.5% £106.9 million (2010: £77.2 million) and gross profit went up by +43.3% to £80.9 million (2010: £56.4 million). The region produced operating profit of £9.9 million (2010: £7.3 million), representing a conversion rate of 12.2%. Headcount in the region increased by +24.7% to 813 at the end of the year although the firm said that market conditions in North America remained challenging. 

Approximately two thirds of the Americas region is in Latin America, of which the largest business is in Brazil, which, by the second quarter, had become the third largest country in gross profit terms. The firm opened new offices in Porto Alegre and Page Personnel offices in Campinas as well as a new offices in Mexico City, Mexico and Bogota, Colombia. The new business in Santiago, Chile, launched in 2010, is reported to be performing well.

Commenting on the annual results, Chief Executive of Michael Page, Steve Ingham, said that the firm was “delighted” with its performance in 2011 as profits improved “from a broad and diverse set of geographies and business streams.” However, Mr Ingham was mindful of the current macroeconomic outlook, and said that in the second half of the year “trading became more challenging as general business confidence fell. All regions in which we operate were impacted, with growth rates slowing, but remaining positive. In the first two months of 2012, with the exception of financial services, we have seen no significant further slowing, and in a number of geographies activity levels have remained strong, increasing Group gross profits by approximately 10%.”

Commenting on current trading, the firm said that it “will react according to the prevailing economic climate in each market in which we operate and manage each business appropriately, adjusting headcount to reflect market conditions, while continuing to invest where we have opportunities for long-term growth. We have maintained a strong balance sheet and, while increasing cash returns to shareholders, we have also continued to take a long-term approach to delivering shareholder value by making significant investments in the future of the business, both during 2011 and at the start of 2012. While mindful and cautious of the current macro economic outlook, we are in a position to continue our geographic expansion, as there remain many long-term growth opportunities in our newer territories, particularly Latin America and Asia.”

“In EMEA, while Southern Europe remains the weakest area, we continue to achieve good year-on-year growth elsewhere, including in France and particularly strong growth in Germany. In the UK, with the exception of banking, activity levels have stabilised and year-on-year gross profits are broadly flat. In Asia Pacific, Australia has performed well in the first two months, while in Asia we continue to see good levels of activity, again with the exception of banking. In the Americas, North America remains challenging and Latin America is progressing well, where we are pleased with the progress of our newer countries Argentina, Chile and now Colombia.”

Michael Page International plc is a specialist recruitment consultancy, operating in Continental Europe, Middle East and Africa (EMEA), and the United Kingdom. Clients include global multi-nationals to small and medium enterprises. The firm employs more than 5,350 people in over 161 offices and 33 countries worldwide.

In early trading, the company share prices went down -3.17% at £463.80, down -13.39% from a year ago, and -17.11% below its 52-week high of £570.50 set on 28 April 2011. This values the company at £1.47 billion.


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