Trading Update

PageGroup plc

12 July 2023

 

12 July 2023

FULL YEAR OUTLOOK IN LINE WITH CONSENSUS

Q2 Highlights*

·   Group gross profit of £263.5m, -6.5% vs. 2022 (-6.2% in reported rates), against a record comparative period

·    Stronger performance in temporary recruitment +11.1%; permanent -11.4%

·    Decrease in fee earner headcount of 255 to 6,385 (Q1 2023: 6,639)

·    Productivity down 4% on Q2 2022; up 6% sequentially on Q1 2023

·    EMEA +1.4%: France flat; Germany +6%

·    Americas -8.8%: US -16%; Latin America +3%

·    Asia Pacific -17.2%: Greater China -32%; SE Asia -22%; Japan -10%; India +5%

·    UK -17.0%: Michael Page -19%; Page Personnel -12%

·    Large, High Potential markets (38% of Group) -10%; excluding Greater China -5%

·    Strong cash position, net cash of c. £96m (Q1 2023: c. £105m, Q2 2022: c. £136m)

·    Full Year operating profit expected to be in line with company compiled consensus of £137.6m

* In constant currencies vs 2022 except where stated otherwise

Q2 Gross Profit Analysis

		Reported (£m)			Constant
Year-on-year	% of Group	Q2 2023	Q2 2022	%	%
EMEA	54%	142.3	137.1	+3.9%	+1.4%
Americas	18%	46.3	51.2	-9.6%	-8.8%
Asia Pacific	16%	42.4	53.5	-20.7%	-17.2%
UK	12%	32.5	39.1	-17.0%	-17.0%
Total	100%	263.5	280.9	-6.2%	-6.5%
Permanent	74%	195.5	220.1	-11.2%	-11.4%
Temporary	26%	68.0	60.8	+12.1%	+11.1%

H1 Gross Profit Analysis

		Reported (£m)			Constant
Year-on-year	% of Group	H1 2023	H1 2022	%	%
EMEA	55%	288.0	266.7	+8.0%	+4.1%
Americas	17%	89.1	94.2	-5.5%	-8.2%
Asia Pacific	16%	83.5	102.0	-18.2%	-17.2%
UK	12%	65.9	76.0	-13.2%	-13.2%
Total	100%	526.5	538.9	-2.3%	-4.5%
Permanent	74%	391.8	422.1	-7.2%	-9.2%
Temporary	26%	134.7	116.8	+15.3%	+12.6%

Nicholas Kirk, Chief Executive Officer, PageGroup, said:

"The Group delivered a good result in the quarter, especially given the particularly tough Q2 2022 comparator, which is the Group's record quarter. EMEA performed strongly, however, tough market conditions affected the performances in Asia, the UK and the US. Overall, Group gross profit declined 6.5% in constant currencies against Q2 2022.

"The challenging conditions we saw towards the end of 2022 and in Q1 2023 continued into Q2, with lower levels of both candidate and client confidence resulting in delays in decision making and candidates being more reluctant to accept offers. Reflecting the uncertain macro-economic conditions, temporary recruitment outperformed permanent, as clients sought more flexible options. In line with these conditions, we reduced our fee earner headcount by 255 (-3.8%) in Q2, following declines in Q1 and Q4 2022, with reductions in all regions. Our total headcount of 8,572 is now marginally lower than at the end of Q2 2022. Productivity, measured as gross profit per fee earner, declined 4%, reflecting the reduction in gross profit, although this was partially offset by the decrease in headcount. Compared to Q1 2023, productivity was up 6% sequentially.  

"Looking forward, there remains a high level of global macro-economic and political uncertainty in the majority of our markets. However, against this backdrop, we continue to see candidate shortages and good levels of vacancies, as well as continued high fee rates. We are also seeing the benefits from our investments in innovation and technology, where Customer Connect is supporting productivity and enhancing customer experience and Page Insights is providing real time data to inform business decisions. We have a highly diversified and adaptable business model, a strong balance sheet, and our cost base is under continuous review and can be adjusted rapidly to match market conditions. Given these fundamental strengths, we believe we will continue to perform well despite the uncertainty. At this stage of the year, the Board expects 2023 operating profit to be in line with company compiled consensus of £137.6m."

Geographical Analysis (unless stated otherwise all growth rates are vs. 2022 and in constant currency)

EMEA	Gross Profit (£m)		Growth Rates
(54% of Group)	2023	2022	Reported	Constant
Q2	142.3	137.1	+3.9%	+1.4%
H1	288.0	266.7	+8.0%	+4.1%
·    France (14% of Group) flat o  Page Personnel + 3% o  Michael Page -3% ·    Germany (13% of Group) +6% ·    Benelux flat o  Belgium +10% o  Netherlands -6% ·    Southern Europe flat o  Italy -1% o  Spain -3% ·    Middle East and Africa +19% Total Headcount at 30 June 2023: 4,035 (31 March 2023: 4,081)

In Europe, Middle East and Africa, gross profit grew 1.4% to £142.3m. EMEA was our strongest performing region, delivering growth against Q2 2022, which was a particularly tough comparator across the region. France, our largest market in the Group, was flat for the quarter. We saw stronger performances from Page Personnel and within temporary recruitment, both of which are indicative of the current uncertainty in the market. Germany, now the Group's second largest market, saw growth of 6% for the quarter, with Page Personnel (+17%) and our Technology focused Interim business (+19%) continuing to deliver the standout results. Elsewhere in Europe, we achieved strong results against a particularly tough comparator. The Middle East and Africa delivered a record quarter, up 19%, driven by strong performances in the UAE and South Africa. Having reduced fee earners by 37 in Q1 2023, we reduced our fee earner headcount further in Q2, down 79 for the region overall.

Americas	Gross Profit (£m)		Growth Rates
(18% of Group)	2023	2022	Reported	Constant
Q2	46.3	51.2	-9.6%	-8.8%
H1	89.1	94.2	-5.5%	-8.2%
·    North America (10% of Group) -16% o  US -16% ·    Latin America (8% of Group) +3% o  Mexico -7% o  Brazil -9% Total Headcount at 30 June 2023: 1,500 (31 March 2023: 1,568)

In the Americas, gross profit was £46.3m, down 8.8% against Q2 2022. In the US, gross profit declined 16%, in line with the reduction we experienced in Q1 2023. The conditions we saw in Q1 continued into Q2, with uncertainty around market conditions affecting both candidate and client confidence. In Latin America, gross profit grew 3%, a new record quarter, despite macro-economic uncertainty across the region. Mexico, our largest country in the region, was down 7%, compared to a decline of 4% in Q1 and Brazil was down 9%, an improvement on the decline of 13% in Q1. However, elsewhere in Latin America, our remaining countries grew 23%, collectively. In line with the more challenging conditions, overall fee earner headcount decreased by 84, mainly in the US, Brazil and Mexico.

Asia Pacific	Gross Profit (£m)		Growth Rates
(16% of Group)	2023	2022	Reported	Constant
Q2	42.4	53.5	-20.7%	-17.2%
H1	83.5	102.0	-18.2%	-17.2%
·    Asia (12% of Group) -21% ·    Greater China (5% of Group and 37% of Asia) -32% o  Mainland China -37% o  Hong Kong -19% ·    South East Asia -22% ·    India +5% ·    Japan -10% ·    Australia -4% Total Headcount at 30 June 2023: 1,730 (31 March 2023: 1,796)

In Asia Pacific, gross profit for Q2 was down 17.2% against 2022 to £42.4m. Permanent recruitment across the region declined 19%, whilst temporary recruitment declined 5%, reflecting the continued uncertain market conditions. Greater China declined 32%, with Mainland China down 37%. Whilst COVID restrictions have been lifted, trading remained challenging with the recovery continuing to be slower than anticipated. Hong Kong declined 19% for the quarter. Our other Large, High Potential geographic market in the region, South East Asia, declined 22%, due mainly to Singapore which was impacted by the slowdown in Greater China, as well as a tough comparator. India continued to deliver strong results, up 5% on Q2 2022, whereas Japan declined 10%. Australia declined 4%, despite a strong performance in our Technology discipline. Our fee earner headcount in the region decreased by 57, mainly in Greater China.

UK	Gross Profit (£m)		Growth Rate
(12% of Group)	2023	2022
Q2	32.5	39.1	-17.0%
H1	65.9	76.0	-13.2%
·    Michael Page -19% ·    Page Personnel -12% Total Headcount at 30 June 2023: 1,307 (31 March 2023: 1,353)

In the UK, gross profit for Q2 declined 17.0% against 2022 to £32.5m, following the decline of 9.4% in Q1. We continued to see clients deferring hiring decisions and candidates cautious about accepting offers. Reflecting the uncertain market conditions, clients sought more flexible options, and, as such, temporary recruitment (+6%) was more resilient than permanent recruitment (-24%). In line with the more challenging trading conditions, our fee earner headcount reduced by 35 in Q2 and is now 11% lower than Q2 2022.

Large, High Potential Markets

Our 5 Large, High Potential geographic markets of Germany, Greater China, Latin America, South East Asia and the US, which represented 38% of the Group, collectively, declined 10% in Q2. Excluding Greater China, which was impacted by the ongoing disruption following the COVID lockdowns and restrictions, these markets declined 5%.

Perm/Temp mix

Gross profit from permanent recruitment decreased 11.2% in reported rates and 11.4% in constant currencies to £195.5m (Q2 2022: £220.1m). Gross profit from temporary recruitment increased 12.1% in reported rates and 11.1% in constant currencies to £68.0m (Q2 2022: £60.8m). This resulted in a ratio of permanent to temporary recruitment of 74:26 (Q2 2022: 78:22).

Headcount

We reduced our fee earner headcount by 255 (-3.8%) during Q2, with reductions made across all regions, albeit more significantly in markets where we saw the most challenging trading conditions. Our non-operations headcount rose by 29 (+1.3%) in Q2. As reflected in our continued high fee rates, candidate shortages remained across most of our markets and as such we continued the move of our candidate acquisition teams into Delivery Centres. Overall, the Group had 6,385 fee earners and a total headcount of 8,572.

Productivity

Overall, gross profit per fee earner, our measure of productivity, decreased 4% compared to Q2 2022. We continued to see the benefits of video interviewing, the investments made in experienced hires, continued high fee rates as well as wage inflation. However, reduced candidate and client confidence caused an increase in time to hire as well as some reluctance to accept offers, limiting the number of placements per fee earner. Compared to Q1 2023, productivity was up 6% sequentially.  

Foreign Exchange

The Group benefited from positive foreign exchange movements during Q2, increasing our Q2 reported gross profit by 0.3 percentage points, or £1.0m.

Financial Position

Save for the effects of Q2 trading detailed above, the payment of the 2022 final dividend of £33.9m and the purchase of shares into the Employee Benefit Trust (EBT) of c. £11m, there have been no other significant changes in the financial position of the Group since the publication of the results for the quarter ended 31 March 2023. Net cash at 30 June 2023 was c. £96m (Q1 2023: c. £105m, Q2 2022: c. £136m).

Shares

At 30 June 2023 there were 328,618,774 Ordinary shares in issue, of which 15,235,770 were held by the Employee Benefit Trust (EBT). The rights to receive dividends and to exercise voting rights have been waived by the EBT over 13,588,599 shares and consequently these shares should be excluded when calculating earnings per share. The total number of voting rights in the Company is 328,618,774.

Cautionary Statement

This Second Quarter 2023 Trading Update 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 Update should not be relied on by any other party or for any other purpose. This Trading Update 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 Trading Update 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 Update has been prepared for the Group as a whole and therefore gives greater emphasis to those matters that are significant to PageGroup and its subsidiary undertakings when viewed as a whole.

The Group will issue its H1 results on 7 August 2023.

Enquiries:

PageGroup	[phone]
Nicholas Kirk, Chief Executive Officer
Kelvin Stagg, Chief Financial Officer
FTI Consulting	[phone]
Richard Mountain / Susanne Yule

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

https://www.investis-live.com/pagegroup/646635a0796b4213005414e0/oioi

Please use the following dial-in numbers to join the conference:

United Kingdom (Local)	020 3936 2999
All other locations	[phone]

Please quote participant access code 55 75 58 to gain access to the call.

A presentation and recording to accompany the call will be posted on the Company's website during the course of the morning of 12 July 2023 at:

https://www.page.com/presentations/year/2023

 

END