PageGroup plc FOURTH QUARTER AND FULL YEAR 2020 TRADING UPDATE (4653L)

TIDMPAGE

RNS Number : 4653L

PageGroup plc

13 January 2021

13 January 2021

PageGroup plc

FOURTH QUARTER AND FULL YEAR 2020 TRADING UPDATE

Q4 Results Summary*

   --    Group gross profit of GBP165.5m, -20.2% (Q3: -31.9%) 
   --    Monthly sequential improvement through the quarter, exiting in December at -18.2% 
   --    Large, High Potential markets (34% of Group) -17% 
   --    EMEA -18.6%: France -20%; Germany -13% 
   --    Asia Pacific -10.2%: Greater China -10%; SE Asia -13%; Japan +18% 
   --    Americas -23.2%: US -31%; Latin America -13% 
   --    UK -34.2%: Michael Page -31%; Page Personnel -43% 
   --    Strong cash position, net cash of c. GBP165m (Q3 2020: GBP152m, Q4 2019: GBP98m) 
   --    Reduction in fee earner headcount of 78 in Q4 

-- Fee earner headcount reduced by a net 882 (15%) for the year, with recent joiners or those on performance review leaving, partially offset by the hiring of c. 400 experienced fee earners

* In constant currencies except where stated otherwise

Q4 GROSS PROFIT ANALYSIS

 
                                   Reported (GBPm)         Constant 
 Year-on-year    % of Group   Q4 2020   Q4 2019     %         % 
                -----------  --------  --------  -------  --------- 
 EMEA               53%        87.7      103.5    -15.2%    -18.6% 
                -----------  --------  --------  -------  --------- 
 Asia Pacific       20%        34.0      37.4     -9.0%     -10.2% 
                -----------  --------  --------  -------  --------- 
 Americas           14%        22.8      32.3     -29.6%    -23.2% 
                -----------  --------  --------  -------  --------- 
 UK                 13%        21.0      31.9     -34.2%    -34.2% 
                -----------  --------  --------  -------  --------- 
 Total              100%       165.5     205.1    -19.3%    -20.2% 
                -----------  --------  --------  -------  --------- 
 
 Permanent          73%        121.3     150.6    -19.5%    -20.0% 
                -----------  --------  --------  -------  --------- 
 Temporary          27%        44.2      54.5     -18.9%    -20.7% 
                -----------  --------  --------  -------  --------- 
 

FULL YEAR GROSS PROFIT ANALYSIS

 
                                   Reported (GBPm)         Constant 
 Year-on-year    % of Group   FY 2020   FY 2019     %         % 
                -----------  --------  --------  -------  --------- 
 EMEA               52%        318.8     418.3    -23.8%    -24.5% 
                -----------  --------  --------  -------  --------- 
 Asia Pacific       20%        121.1     163.3    -25.8%    -25.1% 
                -----------  --------  --------  -------  --------- 
 Americas           15%        88.8      138.8    -36.0%    -31.4% 
                -----------  --------  --------  -------  --------- 
 UK                 13%        81.0      135.1    -40.1%    -40.1% 
                -----------  --------  --------  -------  --------- 
 Total              100%       609.7     855.5    -28.7%    -28.2% 
                -----------  --------  --------  -------  --------- 
 
 Permanent          72%        436.6     643.8    -32.2%    -31.5% 
                -----------  --------  --------  -------  --------- 
 Temporary          28%        173.1     211.7    -18.2%    -18.0% 
                -----------  --------  --------  -------  --------- 
 

Commenting, Steve Ingham, Chief Executive Officer, PageGroup, said:

"The Group's results improved in each of the three months of Q4, which continued the monthly sequential improvement since May. This performance was achieved despite the background of continued and increasing restrictions or lockdowns in many of our markets. Having exited Q3 in September at -26%, Group gross profit in December improved to -18.2%, with a number of markets such as Mainland China and Japan growing in the last month of the year. Overall, Q4 was -20.2% compared to -31.9% in Q3.

"Our focus continues to be on the protection and wellbeing of employees, candidates and clients during the pandemic, whilst we progress our strategy of investment in our platform to take advantage of the recovery.

"We have a resilient business model, with some areas such as Technology, Digital, Healthcare and Life Sciences, delivering robust results during the pandemic. Two of our recent investments, our Interim business in Germany and the Nikkei market in Japan, both performed particularly well with Interim up 3% and Nikkei up 47% for the year. In total we recruited around 400 experienced hires, largely into these growing disciplines and markets in 2020, and we will continue to focus on these businesses going forward. 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 continues in 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.

"As we enter 2021, there remains a high degree of global macro-economic uncertainty in many of our markets, as COVID-19 remains a significant global issue and lockdowns have returned in a number of the Group's markets. However, in the UK we are encouraged that the Brexit deal has provided a degree of clarity. We remain confident in our strategy of maintaining our platform and continuing to carefully invest in headcount, as well as continuing to roll-out new technology and innovation. We are the clear leader in many of our markets, with a highly experienced senior management team, which, we believe, positions us well to take advantage of opportunities to grow and improve our business. We have maintained our focus on our long-term vision for the Group to drive progress towards our strategic goals."

Perm/Temp mix

Gross profit from permanent recruitment declined 19.5% in reported rates and 20.0% in constant currencies, to GBP121.3m (Q4 2019: GBP150.6m). Gross profit from temporary recruitment declined 18.9% in reported rates and 20.7% in constant currencies, to GBP44.2m (Q4 2019: GBP54.5m). This resulted in a ratio of permanent to temporary recruitment of 73:27 (Q4 2019: 73:27).

Headcount

In line with our strategy of protecting our platform and hiring experienced fee earners, while gross profit for the year was down 28%, fee earner headcount fell only 15%. Having reduced our fee earner headcount by 169 in Q3, we reduced it at a slower rate in Q4, down 78. Our operational support headcount fell by 11, and, as such, our ratio of fee earners to operational support staff was maintained at 77:23. Overall, the Group had 5,145 fee earners and a total headcount of 6,694.

Financial Guidance

With COVID-19 continuing to impact the majority of our markets around the world, particularly with rolling lockdowns now affecting many countries, it remains too uncertain to estimate the impact on the Group's operations and, as such, we are unable to provide financial guidance for 2021 and future years. We will monitor the situation closely and will provide updates when appropriate, as well as Trading Updates quarterly.

Geographical Analysis (unless otherwise stated all growth rates are in constant currency)

All of the Group's regions continued to be impacted by COVID-19 during Q4, resulting in Group gross profit declining 20.2% in constant currencies, an improvement from -31.9% in Q3. In constant currencies, Michael Page was down 18.0%, with Page Personnel declining 25.1% in the quarter.

 
 EMEA                            Gross Profit (GBPm)          Growth Rates 
 (53% of Group)                                          Reported      Constant 
                               ----------  ----------  ------------  ------------ 
 Q4 2020 vs. Q4 2019              87.7        103.5       -15.2%        -18.6% 
                               ----------  ----------  ------------  ------------ 
 2020 vs 2019                     318.8       418.3       -23.8%        -24.5% 
                               ----------  ----------  ------------  ------------ 
 
      *    France (17% of Group) -20% 
 
 
      *    Germany (10% of Group) -13% 
 
 
      *    Southern Europe -19% 
 
 
      *    Italy -21% 
 
 
      *    Spain -20% 
 
 
      *    Benelux -24% 
 
 
      *    Middle East and Africa -27% 
 
 
     Headcount at 31 December 2020: 2,979 (30 September 2020: 3,021) 
 

In Europe, Middle East and Africa, down 24.5% in Q3, the improvement in trading conditions we experienced at the end of Q3, with September down 21%, continued into Q4, which was down 18.6% overall. However, local lockdowns at the end of the year impacted the December exit rates in some markets, with EMEA overall down 20% in December. Recruitment in our Michael Page business declined 16% for the quarter, with Page Personnel down 22%. France declined 20%, with Michael Page down 17% and Page Personnel down 22%. Germany delivered another resilient performance, declining 13% in the quarter, broadly in line with Q3, albeit the December exit rate was slower at -22% as a result of local lockdowns. Our German Technology focused Interim business proved the most resilient to the deterioration in macro-economic conditions, up 3% in 2020. Southern Europe declined 19%, with Italy down 21% and Spain down 20%, both impacted at the end of the quarter by increased restrictions. Benelux declined 24%, with the Netherlands and Belgium impacted to a similar extent. The Middle East and Africa declined 27%.

 
 Asia Pacific                    Gross Profit (GBPm)          Growth Rates 
 (20% of Group)                                          Reported      Constant 
                               ----------  ----------  ------------  ------------ 
 Q4 2020 vs. Q4 2019              34.0        37.4         -9.0%        -10.2% 
                               ----------  ----------  ------------  ------------ 
 2020 vs 2019                     121.1       163.3       -25.8%        -25.1% 

                               ----------  ----------  ------------  ------------ 
 
      *    Asia (17% of Group) -4% 
 
 
      *    Greater China (8% of Group and 47% of Asia) -10% 
 
 
      *    Mainland China flat 
 
 
      *    Hong Kong -28% 
 
 
      *    South East Asia -13% 
 
 
      *    Singapore -14% 
 
 
      *    India -3% 
 
 
      *    Japan +18% 
 
 
      *    Australia -26% 
 
 
     Headcount at 31 December 2020: 1,385 (30 September 2020: 1,418) 
 

In Asia Pacific, gross profit for Q4 was down 10.2%. Mainland China was flat for the quarter and exited December +15%, with market conditions continuing to improve. The improvement was driven by our domestic clients, who now represent over half of our Mainland China business. However, Hong Kong declined 28%, impacted significantly by COVID-19. Overall, Greater China declined 10% for the quarter. South East Asia declined 13%, with Singapore down 14%. Japan was up 18%, a record quarter, exiting December up 26%, with record performances in Contracting and our Nikkei market business. India, one of the worst affected countries by COVID-19, declined 3% for the quarter, up from -32% in Q3, though exited December slower at -18%. Australia declined 26%, an improvement from -42% in Q3.

 
 Americas                        Gross Profit (GBPm)          Growth Rates 
 (14% of Group)                                          Reported      Constant 
                               ---------  -----------  ------------  ------------ 
 Q4 2020 vs. Q4 2019              22.8        32.3        -29.6%        -23.2% 
                               ---------  -----------  ------------  ------------ 
 2020 vs 2019                     88.8       138.8        -36.0%        -31.4% 
                               ---------  -----------  ------------  ------------ 
 
      *    North America (8% of Group) -30% 
 
 
      *    US -31% 
 
 
      *    Latin America (6% of Group) -13% 
 
 
      *    Brazil -6% 
 
 
      *    Mexico -30% 
 
 
     Headcount at 31 December 2020: 1,155 (30 September 2020: 1,162) 
 

In the Americas, gross profit for Q4 was down 23.2%. The US declined 31%, as a result of significant disruption from COVID-19 as well as political uncertainty. Trading conditions remained particularly tough in Construction. In Latin America, gross profit declined 13%. Brazil was down 6% and Mexico, our largest country in the region, was down 30%, but improved in December to -22%. Elsewhere in Latin America, the remaining countries were flat for the quarter, collectively.

 
 UK                                Gross Profit (GBPm)      Growth Rate 
 (13% of Group) 
                                 ----------  ----------  ----------------- 
 Q4 2020 vs. Q4 2019                21.0        31.9           -34.2% 
                                 ----------  ----------  ----------------- 
 2020 vs 2019                       81.0        135.1          -40.1% 
                                 ----------  ----------  ----------------- 
 
   *    Michael Page -31% 
 
 
   *    Page Personnel -43% 
 
 
   *    Overall, December -30% 
 
 
  Headcount at 31 December 2020: 1,175 (30 September 2020: 1,182 
  including 65 furloughed employees) 
 

In the UK, gross profit declined 34.2% in Q4, improving from -47.9% in Q3. However, conditions remained challenging with regional lockdowns imposed during the quarter and Brexit related uncertainty in December. Our Michael Page business was more resilient than Page Personnel, with declines of 31% and 43%, respectively. Overall for the quarter, Permanent recruitment was down 33% with Temporary down 37%.

Financial Position

Save for the effects of Q4 trading detailed above there have been no other significant changes in the financial position of the Group since the publication of the results for the quarter ended 30 September 2020. Net cash at 31 December 2020 was in the region of GBP165m (Q3 2020: GBP152m; Q4 2019: GBP98m).

Shares

At 31 December 2020 there were 328,618,774 Ordinary shares in issue, of which 12,795,658 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 11,249,646 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 Fourth Quarter and Full Year 2020 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 Full Year results on 3 March 2021.

Enquiries:

 
 
   PageGroup                                [phone] 
 Steve Ingham, 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 9:00am today. The live presentation can be viewed by following the link:

https://www.investis-live.com/pagegroup/5fda379311f2251100bab9cd/udhs

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 46 63 32 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 13 January 2021 at:

https://www.page.com/presentations/year/2021

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January 13, 2021 02:00 ET (07:00 GMT)