Q2 AND FIRST HALF 2011 TRADING UPDATE

RNS Number : 0979K

Michael Page International PLC

11 July 2011

 



11 July 2011

Q2 AND FIRST HALF 2011 TRADING UPDATE

Financial Summary

·        Group Q2 gross profit of £147.8m up 32.4% (29.6%*) on the £111.7m in Q2 2010

·        Group H1 gross profit of £275.1m up 31.3% (29.5%*) on the £209.6m in H1 2010

·        EMEA (43% of Group) Q2 gross profit of £64.1m up 37.2% (31.8%*) against the £46.7m in Q2 2010

·        UK (23% of Group) Q2 gross profit of £34.3m up 6.4% against £32.2m in Q2 2010

·        Asia Pacific (19% of Group) Q2 gross profit of £27.2m up 50.8% (45.8%*) against the £18.0m in Q2 2010

·        Americas (15% of Group) Q2 gross profit of £22.2m up 51.3% (53.7%*) against the £14.7m in Q2 2010

·        Q2 Permanent gross profit (80% of Group) of £118.6m up 34.8% (32.1%*) against the £88.0m in Q2 2010

·        Q2 Temporary gross profit (20% of Group) of £29.2m up 23.5% (20.3%*) against the £23.7m in Q2 2010

·        Group headcount at 30 June 2011 of 5,121 up 269 (5.5%) on 31 March 2011

·        5.7m shares (1.8% of share capital) purchased and cancelled during the second quarter at a cost of £30.3m

·        £18.8m final dividend for 2010 (6.12p per share) paid in June 2011

·        Net cash at 30 June 2011 in the region of £25m (£73.9m at 31 March 2011)

* Denotes where overseas results denominated in foreign currencies have been translated at constant rates of exchange for constant currency illustrative purposes.

Commenting on the second quarter trading, Steve Ingham, Chief Executive said:

"We continued to perform well in the second quarter of 2011, with the year-on-year increase in gross profit rising to 32%. The growth continues to be driven largely by permanent placements, where gross profit was up 35%, and we also recorded an improvement in gross profit from temporary placements, which are now growing at 24%.

"We continue to achieve very strong growth from Latin America (68%*) and Asia (72%*) and combined they now represent over 20% of the Group's gross profit with 28 offices, across 11 countries and over 1,000 staff. I would like to make a special mention of our business in Tokyo, which having been impacted by the recent earthquake and tsunami, has proved to be remarkably resilient, achieving an all-time gross profit record in June.

"We have further invested in our business platform during the second quarter, with Group headcount increasing by 269 (5.5%) to 5,121 and new office openings in Houston, USA and Pudong in Shanghai, China.

"We anticipate that in the short-term, our UK business will maintain modest growth. However, our outlook for Asia and Latin America remains strong and in Europe continues to improve. While our second quarter gross profit was ahead of our expectations, we continue to invest significantly in developing our business both by geography and discipline and, as a consequence, anticipate that our full year profits will be broadly in line with current market estimates*."

*Reuters: £111.7m operating profit

Enquiries:

Michael Page International plc	01932 264144
Steve Ingham, Chief Executive
Stephen Puckett, Group Finance Director
Financial Dynamics	020 7269 7291
Richard Mountain / Sophie Moate

The company will host a conference call for analysts and investors at 8.30am today. The live presentation can be viewed by following the link:

http://event.on24.com/r.htm?e=326622&s=1&k=538709C955550CF1322D08E90F38ABD1

The dial-in details for the conference call are as follows:

Dial-In:             [phone]
Conference ID: 719181

The presentation and recording of the call will be available on the company's website later today at:

http://investors.michaelpage.co.uk/presentations

The Group will issue its interim results on 15 August 2011.

TRADING UPDATE

Michael Page International plc (MPI), the specialist recruitment consultancy, reports second quarter Group gross profit of £147.8m (Q2 2010: £111.7m), a year-on-year increase of 32.4% (29.6%*). Group headcount increased by 269 (5.5%) during the quarter to 5,121 at the end of June 2011. Gross profit in the first half of 2011 was £275.1m (H1 2010: £209.6m), a year-on-year increase of 31.3% (29.5%*).

Perm/Temp mix

Group gross profit from permanent recruitment in the second quarter was £118.6m, an increase of 34.8% (32.1%*) over the £88.0m in the second quarter of 2010. Group gross profit from temporary recruitment in the second quarter was £29.2m, an increase of 23.5% (20.3%*) over the £23.7m in the second quarter of 2010.

The perm/temp gross profit ratio in the second quarter was 80:20 (Q2 2010: 79:21).

Gross profit from permanent placements in the first half of 2011 was £219.5m, an increase of 34.7% (32.8%*) over the £163.0m recorded in the first half of 2010. Gross profit from temporary placements in the first half of 2011 was £55.6m, an increase of 19.4% (17.8%*) over the £46.6m recorded in the first half of 2010.

Discipline analysis

	Gross Profit		Growth rates
	Q2 2011	Q2 2010	Reported	Constant
Finance & Accounting	£66.7m	£53.0m	+25.7%	+23.4%
Marketing, Sales & Retail	£27.0m	£20.8m	+30.0%	+27.1%
Legal, Technology, HR, Secretarial, Healthcare	£27.6m	£20.7m	+34.0%	+31.0%
Engineering, Property & Construction, Procurement & Supply Chain	£26.5m	£17.2m	+53.7%	+49.7%

	Gross Profit			Growth rates
	% of Group H1	H1 2011	H1 2010	Reported	Constant
Finance & Accounting	45%	£123.6m	£99.2m	+24.6%	+22.9%
Marketing, Sales & Retail	18%	£50.8m	£39.7m	+28.0%	+26.2%
Legal, Technology, HR, Secretarial, Healthcare	19%	£52.1m	£38.5m	+35.4%	+33.4%
Engineering, Property & Construction, Procurement & Supply Chain	18%	£48.6m	£32.2m	+51.0%	+48.7%

All disciplines achieved strong year-on-year growth in the quarter, with the more recently launched disciplines growing at faster rates as they continue to be introduced across the country and office networks.

Geographical analysis

EMEA Gross Profit (43% of Group in Q2 2011)			Growth rates
			Reported	Constant
Q2 2011 vs. Q2 2010	£64.1m	£46.7m	+37.2%	+31.8%
H1 2011 vs. H1 2010	£120.3m	£91.3m	+31.7%	+30.0%
Headcount at 30 June 2011: 2,126 (31 March 2011: 1,982) Gross profit in local currency, against Q2 2010: ·    France (16% of the Group) +31% ·    Germany (6% of the Group) +42% ·    Netherlands (4% of the Group) +30% ·    Italy (4% of the Group) +31% ·    Spain (3% of the Group) +20% ·    Rest of EMEA: Austria, Belgium, Ireland, Luxembourg, Poland, Portugal, Qatar, Russia, South Africa, Sweden, Switzerland, Turkey, U.A.E. (10% of the Group) +33%

In our largest region, Europe, Middle East and Africa (EMEA), representing 43% of Group gross profit, second quarter gross profit was £64.1m, an increase of 37.2% (31.8%*) over the £46.7m recorded in the second quarter of 2010.

Market conditions continued to show further improvement, with the year-on-year growth rates improving in the second quarter in France, Germany and the Netherlands. In Italy and Spain, we continue to achieve strong year-on-year growth, despite weak economies and believe we are achieving this growth through gaining market share. The thirteen countries that comprise the Rest of EMEA represent 10% of the Group's gross profit and grew by 33%*. Headcount across the region increased during the quarter by 144 (7.3%) to 2,126.

UK Gross Profit (23% of Group in Q2 2011)			Growth rates
Q2 2011 vs. Q2 2010	£34.3m	£32.2m	+6.4%
H1 2011 vs. H1 2010	£66.0m	£61.2m	+7.9%
Headcount at 30 June 2011: 1,343 (31 March 2011: 1,358)

In the UK, representing 23% of Group gross profit, second quarter gross profit was £34.3m, up 6.4% on the second quarter of 2010, with growth in the private sector held back by a more restrained public sector. General activity levels slowed considerably at the end of April due to the late Easter holidays and the short working weeks which followed, but have since recovered and remain stable. While we anticipate that the UK market will remain challenging, our current expectations are for our business to continue to grow at a similar rate to that achieved in the first half and this is reflected in our headcount, which remained broadly flat during the quarter at 1,343.

Asia Pacific Gross Profit (19% of Group in Q2 2011)			Growth rates
			Reported	Constant
Q2 2011 vs. Q2 2010	£27.2m	£18.0m	+50.8%	+45.8%
H1 2011 vs. H1 2010	£48.6m	£31.2m	+55.7%	+49.2%
Headcount at 30 June 2011: 874 (31 March 2011: 789) Gross profit in local currency, against Q2 2010: ·    Asia (10% of the Group) +72% ·    Australia and New Zealand (9% of the Group) +23%

In Asia Pacific, second quarter gross profit was £27.2m, an increase of 50.8% (45.8%*) over the £18.0m recorded in the second quarter of 2010. In Australia and New Zealand, second quarter gross profit was 23%* higher year-on-year, with a particularly strong performance in Western Australia. In Asia, second quarter gross profit was 72%* higher year-on-year. We are achieving rapid growth in China where we now have over 250 staff and we are continuing to invest by opening an office in Pudong, Shanghai and doubling our office space in Beijing. The earthquake and tsunami in Japan, understandably, had an impact on our business in Tokyo (2% of the Group) at the beginning of the quarter, but the resilience and recovery has been remarkable, with our business recording an all-time record level of gross profit in June. In Singapore, we produced a record second quarter and the start-ups in Malaysia and India are progressing well. We have recently committed to a second office in Mumbai, which will be our third office in India. Headcount across the region grew by 85 (10.8%) in the quarter to 874, with the majority of the additions in Asia.

Americas Gross Profit (15% of Group in Q2 2011)			Growth rates
			Reported	Constant
Q2 2011 vs. Q2 2010	£22.2m	£14.7m	+51.3%	+53.7%
H1 2011 vs. H1 2010	£40.2m	£25.9m	+55.3%	+54.6%
Headcount at 30 June 2011: 778 (31 March 2011: 723) Gross profit in local currency, against Q2 2010: ·    Latin America (11% of the Group) +68% ·    North America (4% of the Group) +29%

In the Americas, second quarter gross profit was £22.2m, an increase of 51.3% (53.7%*) over the £14.7m recorded in the second quarter of 2010.  In Latin America, gross profit was up 68%* year-on-year. Brazil is now our third largest country in gross profit terms. Our investment last year in opening four offices has contributed to our strong growth and we continued our investment in the second quarter, increasing the headcount by a further 39 (12%) to nearly 400 staff. We have also invested in additional headcount in Mexico, Argentina and Chile to further enhance our market leading positions. In North America, gross profit grew 29%* in the second quarter and, while market conditions remain tough, there are signs of improvement, particularly in Canada. We opened an office in Houston during the quarter to capitalise on the growing strength of our worldwide Oil and Gas business. Headcount across the region grew by 55 (7.6%) to 778, with all the additions being in Latin America.

Share repurchases

During the second quarter, the Group purchased and cancelled 5.7m shares (1.8% of share capital) at a cost of £30.3m (an average price of 528.4p per share). At 30 June 2011, there were 316m shares in issue and 24m options were outstanding.

Financial Position

Save for the effects of trading in the second quarter described above, £30.3m share repurchases for cancellation and the payment of a final dividend of £18.8m for 2010, there have been no other significant changes in the financial position of the Group since the publication of the results for the year ended 31 December 2010.

Net cash at the end of June 2011 was in the region of £25m (£73.9m at 31 March 2011).

The Group will issue its interim results for the six months ending 30 June 2011 on 15 August 2011 and its third quarter interim management statement on 10 October 2011.

Group Finance Director

It has been agreed that Stephen Puckett, Group Finance Director, will be leaving the Group for personal reasons. He has been in the role for over 10 years, during which time Stephen's commitment and contribution has been instrumental in driving the Group's significant growth and international presence, with Michael Page now operating in 32 countries.  The increasing time required to travel around the Group no longer fits with Stephen's personal situation. The process to find a successor is underway and until such time as a new appointment is made, Stephen will continue full time in office.

Executive Board

Patrick Hollard, Regional Managing Director for Latin America, has been appointed to the Executive Board. He joined Michael Page in France in 1996 and in 2000 started the Group's business in Brazil, which is now the Group's third largest country by gross profit. Patrick then led the further organic expansion into Mexico, Argentina and Chile. Today, the Group has some 15 offices across 4 countries and in excess of 500 staff in the region, with numerous opportunities for further growth.

Oliver Watson, who has been with Michael Page for 15 years, having joined in 1995, was appointed to the Executive Board in 2010 and has now been promoted to UK Managing Director. While the Group has undergone a significant period of successful international diversification, the UK still represents just under a quarter of the Group's gross profit, spread across Michael Page, Page Personnel and Michael Page Executive Search, with some 1,350 staff and 31 offices.

Update on VAT reclaims

During the quarter, we had correspondence and discussions with HMRC concerning the amended claims for a further refund of VAT and related interest, but the eventual outcome still remains uncertain.

Cautionary statement

This Second Quarter 2011 Trading Statement has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The Trading Statement should not be relied on by any other party or for any other purpose. This Trading Statement contains certain forward-looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

This Trading Statement has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to Michael Page International plc and its subsidiary undertakings when viewed as a whole.

 

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