PageGroup : pdf (153.88 KB)

PageGroup Q4 and Full Year

2020 Trading Update

Wednesday, 13th January 2021

Transcript produced by Global Lingo

London - 020 7870 7100

www.global-lingo.com

PageGroup Q4 and Full Year 2020 Trading Update

Wednesday, 13th January 2020

Headline Numbers

Kelvin Stagg

Chief Financial Officer, PageGroup

Welcome

Good morning everyone and welcome to the PageGroup fourth quarter and full year 2020 trading update. I am Kelvin Stagg, Chief Financial Officer and I will now present the headline numbers and a financial review before moving on to a regional review and a summary. Although I will not read it through, I would just like to make reference to the legal formalities that are covered in the cautionary statement in the appendix to this presentation and which will also be available on our website following the call.

Q4 Overview

Group gross profit decline of 20.2%, December-18.2%

Although the Group continued to be impacted by Covid-19, the increase in activity levels we saw in Q3 continued into Q4 and trading improved as the quarter progressed. Consequently the Group delivered gross profit of £165.5 million in the quarter, a decline of 20.2% in constant currencies and an improvement from the decline of 31.9% in Q3. We exited the quarter at -18.2% in December. During the quarter foreign exchange had a favourable impact on gross profit with a decline in reported rates of 19.3%. In monetary terms foreign exchange increased gross profit by around £2 million.

For the year the Group delivered gross profit of £609.7 million, a decline of 28.2% in constant currencies and 28.7% in reported rates. For the quarter Michael Page declined 18% and Page Personnel declined 25.1%. We ended the year in a strong financial position with net cash of around £165 million. Our headcount fell by 89 in the quarter, a reduction of 1.3% on Q3. At the end of December the Group had a total headcount of 6,694.

Financial Review

Kelvin Stagg

Chief Financial Officer, PageGroup

Perm and Temp Ratio

Similar impact in Perm and Temp

In the fourth quarter reflecting the exceptionally challenging conditions in many of our markets permanent recruitment declined 20% in constant currencies while temporary declined 20.7%. Our ratio of permanent to temporary gross profit was 73:27, in line with Q3. In Michael Page permanent recruitment represented 82% of gross profit, while in Page Personnel it was less at 52%. Michael Page continued to be more resilient across both permanent and temporary recruitment with permanent marginally ahead of temp. However, in Page Personnel both temporary and permanent were behind Michael Page with permanent materially weaker.

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PageGroup Q4 and Full Year 2020 Trading Update

Wednesday, 13th January 2020

Protecting and investing in our platform

Slower reduction of headcount in Q4

In line with our strategy of investing in and protecting our platform, while gross profit was down 28% for the year we chose to reduce our fee earner headcount at a slower rate, down 15% over the same period. We reduced our fee earner headcount initially by 531 in Q2. Most of these had recently joined the Group and therefore had very limited experience or were on performance reviews. The hiring of now approaching 400 experienced fee earners meant that our fee earner headcount reduced at a slower rate in Q3 and Q4, down 169 and 78 respectively. Operational support staff reduced by 11 in Q4 which maintained our fee earner to operational support staff ratio at 77:23. At the end of December the Group had 5,145 fee earners and 1,549 operational support staff, a total headcount of 6,694.

We have also continued to invest in our new operating system, Customer Connect, with around a third of our fee earners now live on the system. Investment in innovation also continued into Page Insights, our data intelligence tool which provides rich information for our clients and consultants into hiring trends by specialism and geography using internal and external data.

Gross profit sharp downturn

Decline in fee earner headcount mush less than 2009

This fee earner headcount and gross profit chart shows the unprecedented scale in the decline in Group profit in Q2 and the comparison to the Global Financial Crisis in 2008. It also shows the recovery seen in Q3 and Q4 as well as headcount stabilising. Quarterly gross profit due to the pandemic fell 42% from £205.6 million in Q4 2019 to £118.3 million in Q2 2020. As activity levels started to improve this increased to £143.5 million in Q3 2020 and to £165.5 million in Q4 2020. The decline during the GFC was similar in magnitude but over a longer period, down 45% over the four quarters. In 2009 our fee earner headcount reduced by 1,139 or 31% from a lower base of 3,654 at the end of 2008. During 2020 our fee earner headcount reduced significantly less, down 882 from a higher base of 6,027 or 15%.

Regional Review

Kelvin Stagg

Chief Financial Officer, PageGroup

Group growth rate improved to -20.2%

Improving activity levels through Q4

I will now give a brief overview of our regional performances before presenting each region in more detail. Although the Group continued to be impacted by the pandemic we saw an increase in activity levels as the quarter progressed. Overall in Q4 the Group was down 20.2%, an improvement from being down 31.9% in Q3. Our Large, High Potential markets representing 34% of the Group, declined by 17% in the quarter compared to 29% in Q3. our businesses of Technology, Contracting, Digital and Healthcare & Life Sciences were the most resilient, while Construction and Retail were amongst the most challenging. A number of our markets exited the quarter with positive growth including Mainland China and Japan. Overall the Group exited the quarter down 18.2% in December despite local lockdowns retuning in a number of the Group's markets.

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PageGroup Q4 and Full Year 2020 Trading Update

Wednesday, 13th January 2020

EMEA -18.6%

Improvement in trading conditions continued, lockdowns impacted exit rates

Moving to each of our four regions and starting with the largest, Europe, Middle East and Africa, representing 53% of the Group. The improvement in trading conditions we experienced at the end of Q3 continued into Q4 and we were down 18.6% compared to a decline of 24.5% in Q3. However, several of our countries were impacted by local lockdowns in December and we exited marginally slower at -20%. Our Michael Page business, representing 57% of the region, was more resilient with a decline of 16% compared to a decline of 22% in Page Personnel. Permanent recruitment declined 18% for the quarter with temporary down 19%.

In France, our largest country representing a third of EMEA and 17% of the Group, we declined 20% with Michael Page the more resilient business, down 17% compared to Page Personnel which was down 22%. Our business in Germany, representing 19% of EMEA and 10% of the Group, delivered another resilient performance and declined just 13%. Our performance in Germany was driven by our Technology focused contracting business, Michael Page Interim, which was down 7% despite December being impacted significantly by local lockdowns. overall, Germany exited the quarter in December slower, down 22%. Southern Europe declined 19% with Italy down 21% and Spain down 20%. Benelux declined 24% and the Middle East & Africa, which represented 2% of the Group, was down 27%.

Fee earner headcount was down 39 in the quarter, the majority in France.

Regional Review

Steve Ingham

Chief Executive Officer, PageGroup

Asia Pacific -10.2%

Mainland China and Japan standout results

Asia Pacific, representing 20% of the Group, was our strongest performing region. Trading conditions continued to improve as we progressed through Q4 and we declined 10.2% for the quarter compared to -28.2% in Q3. In Asia, representing 17% of the Group and 80% of the region, we were down 4% and exited in December flat. In Greater China, 8% of the Group, we declined 10%. mainland China was flat for the quarter but we saw a continued improvement in trading conditions and we exited with growth of 15%. The improvement was driven by our domestic clients who now represent over half of our Mainland China business.

Hong Kong with a greater proportion of international clients continued to be impacted significantly by Covid-19 and declined 28%. Japan grew 18%, delivering a record quarter, and exited December up 26% with record performances in Contracting and our Nikkei market businesses. India was one of the worst affected countries by Covid-19 and declined 3% for the quarter. This was up from a decline of 32% in Q3 although they exited the quarter more slowly, down 18%. South East Asia declined 13% with Singapore down 14%. Australia declined 26% with local lockdowns in some areas. Fee earner headcount was down 31 in the quarter, the majority in Australia.

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