PageGroup Q3 Trading

Update

Wednesday, 12th October 2022

PageGroup Q3 Trading Update

Wednesday, 12th October 2022

Introduction

Kevin Stagg

CFO, PageGroup

Welcome

Good morning, everyone, and welcome to the PageGroup Third Quarter Trading Update. I am Kelvin Stagg, Chief Financial Officer, and on the call with me is Steve Ingham, Chief Executive Officer.

Headline Numbers

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.

Continued strong performance

Key financial highlights

We continued to deliver strong growth in Q3, with gross profit of £270.5 million. We grew 14% in constant currencies against Q3 2021, which adjusted for the tougher comparator, was broadly in line with our Q2 growth rate. The strengthening of the dollar in the quarter had a favourable impact on the growth rate compared to the prior year, increasing the reported gross profit growth rate by 4.6 percentage points, or £10.5 million to 18.6%.

In Q3, we increased fee earner headcount by 337. To support this growth, our operational support headcount rose by 106, and as such, our ratio of fee earners to non-operational staff remained at 78:22.

Overall, the Group had 7,071 fee earners and a total headcount of 9,111. We have a strong balance sheet, with net cash at the end of September of around £186 million. This compares to £136 million at the end of Q2 but is before the forthcoming special and interim dividend payments on 14th October, totalling £100.5 million.

Financial Review

I will now give a brief financial review.

Q3 Perm and Temp Ratio

Stronger growth in Temporary recruitment

Overall, growth was stronger in temporary recruitment, which is indicative of the current uncertainty in the market, as clients seek more flexible options. Overall, growth was stronger in temporary recruitment, up 20.9% against Q3 2021, with permanent up 12. This was the first time since 2019 that growth has been stronger in temporary recruitment. Reflecting this, our ratio of Permanent to Temporary gross profit was 76:24, compared to 78:22 last quarter.

In Michael Page, permanent recruitment represented 83% of gross profit, while in Page Personnel it was less, at 57%. Page Personnel was the stronger performing brand, up 17.4% compared to growth of 12.8% in Michael Page. Growth was stronger in temporary recruitment in Michael Page and broadly consistent across permanent and temporary in Page Personnel.

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PageGroup Q3 Trading Update

Wednesday, 12th October 2022

Strategic Priorities

Geographies, Disciplines and Brands

We continued to focus on our five large, high potential geographic markets of Germany, Greater China, Latin America, South East Asia and the US. Collectively, they represented 41% of the Group in Q3, a new record, albeit aided by the weakness of Sterling against the Dollar. In Q3 our large, high potential markets grew 11%, and excluding Greater China, which was impacted by COVID-19 lockdowns and restrictions, growth was 21%. We now have 2,840 fee earners in these 5 markets, which compares to around 800 in 2010 as we recovered from the Global Financial Crisis.

Our high potential disciplines of Technology and Healthcare & Life Sciences continue to deliver strong results, and Technology remains our second largest discipline. We are pleased with the performance of our newest brand, Page Outsourcing, which continues to outperform its plan.

Strategic Priority

Investing in our platform

In Q3 we increased our fee earner headcount by 337. We added fee earners into markets with particularly strong trading conditions such as Germany, as well as those where we saw the highest potential for future growth. The majority of these fee earners were non- experienced as the availability of experienced fee earners has become limited. Non- experienced hires take longer to reach average productivity.

As a result of this investment in fee earner headcount, challenging trading conditions in Greater China, as well as a slight softening in client confidence, which resulted in a slowdown in time to hire, productivity decreased 8% compared to Q3 2021. To support this growth, our operational support headcount rose by 106, and as such, our ratio of fee earners to non- operational staff remained at 78:22.

Our attrition rate currently remains relatively low at around 30%. We remain confident in our ability to adjust down our headcount, if needed, with our flexible business model and staff attrition.

Strong gross profit growth

Further investment made in headcount

This fee earner headcount and gross profit chart shows the unprecedented scale of the decline in Group gross profit in 2020 due to COVID-19 and the comparison to the Global Financial Crisis in 2008. It also shows how we chose strategically to maintain and invest in our platform, which has driven the sharp recovery seen throughout 2021 and 2022.

While Q3 was down on Q2 in absolute terms, this was partially due to the usual seasonal impact.

I will now hand you over to Steve for a regional review and a summary.

Regional Review

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PageGroup Q3 Trading Update

Wednesday, 12th October 2022

Steve Ingham

CEO, PageGroup

Q3 Gross Profit +14.0% vs 2021

Record quarters delivered in 9 countries

Thank you, Kelvin. The strong growth we saw in quarter two 2022 continued into Q3. Overall, for the quarter we grew 14% against 2021. Nine individual countries delivered record quarters, despite the typical slower summer months. We exited the quarter strongly, delivering our third month of gross profit in excess of £100 million, albeit aided by the strengthening of the dollar. This had a favourable impact on the quarter's growth rate compared to the prior year, increasing the reported gross profit growth rate by 4.6 percentage points, or £10.5 million.

EMEA

Strong trading conditions continued into Q3

In our largest region, Europe, Middle East and Africa, which represented 48% of the Group, we grew 22.1% on Q3 2021. Overall, conditions continued to be more favourable in Michael Page, which is focussed on higher income permanent recruitment and was up 27% for the quarter. Page Personnel, which is focused on lower-level recruitment with a higher proportion of temporary, grew 15%.

Germany, which was the Group's second largest market in Q3, representing 12% of the Group, delivered another record quarter, up 29%, with strong growth in all three brands. Our Michael Page Interim business, which is primarily focused on technology, was the best performing, up 46%.

We now have over 700 fee earners in Germany, having added around 150 in the past 12 months. This positions us well for ongoing growth in this large, high potential market. France grew 12% in both Michael Page and Page Personnel, with stronger growth in permanent recruitment in both brands. Belgium, the Netherlands, Italy and Spain all delivered strong growth.

The Americas

Now the Group's second largest region

The Americas, now the Group's second largest region, representing 19% of the Group, delivered growth of 18.3%. North America grew 15%, where in the US the consistently strong trading conditions seen over the past 18 months continued into Q3 and we delivered growth of 14%.

Growth was particularly strong in our offices in Boston, Chicago and Houston. Property & Construction, our largest discipline in the US, continued to deliver standout results.

In Latin America, gross profit grew 24%. Mexico, our largest country in the region, was up 18%, however Brazil was down 1%, due to the heightened political uncertainty from the recent elections. The remaining countries in the region were up 50%, collectively.

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PageGroup Q3 Trading Update

Wednesday, 12th October 2022

Asia Pacific

Tough conditions continued in Greater China

In Asia Pacific, representing 19% of the Group, Q3 gross profit declined 3.9% on 2021. In Asia, 15% of the Group, we declined 6%, driven by the challenging conditions in Greater China.

In Greater China, 6% of the Group, we declined 26. by the ongoing COVID-19 lockdowns and restrictions. restrictions and declined 20% in the quarter.

Mainland China was down 32%, driven Hong Kong was also impacted by these

South East Asia, our other large, high potential market in the region, delivered growth of 17%, with all markets growing against Q3 2021. India, which represents 14% of Asia, delivered another record quarter, up 35%. We now have around 230 fee earners in this highly profitable market. Elsewhere, Japan declined 4% whilst Australia grew 7% against Q3 2021.

UK

Another strong performance by Page Personnel

In the UK, which represented 14% percent of the Group, gross profit grew 9.5%. Page Personnel, which operates at lower salary levels and had been slower to recover from the pandemic, was up 56%, in line with Q2.

Michael Page declined 4%. We exited the quarter slower in September, impacted by the national period of mourning following the death of Her Majesty the Queen, as well as economic uncertainty following the mini budget.

Summary

I will now provide a summary of our results.

Summary

Strong performance and continued investment

We continued to see strong growth in Q3 with Group gross profit up 14% against Q3 2021, which was a significantly tougher comparator than Q2. We delivered a good broad-based performance across the majority of our geographies, disciplines and brands, with record performances in nine countries despite the typically slower summer months.

We exited the quarter strongly, delivering our third month of gross profit in excess of £100 million, albeit aided by the strengthening of the dollar.

However, Greater China, 6% of the Group, continued to be impacted by lockdowns and restrictions, down 26% for the quarter. We also saw a slight softening in client confidence across the majority of our regions. This led to a small number of jobs being withdrawn and a slowdown in time to hire in a number of our markets towards the end of the quarter.

Temporary recruitment outperformed permanent, as clients looked for more flexibility in their resourcing and cost base, reflecting the current economic uncertainty. We continued to make targeted investments in headcount in markets where we saw the strongest growth, as well as the highest potential for the future.

Overall, we added 337 fee earners in Q3, the majority of which were non-experienced hires.

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Page Group plc published this content on 13 October 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 October 2022 10:51:03 UTC.