APAC GP up over 13% in Q3 2017 for PageGroup
PageGroup has released a trading update for its third quarter of 2017.
PageGroup delivered third quarter gross profit of £177.3m, up 8.8% in constant currencies and 11.8% in reported rates.
In Asia Pacific, now the company’s second largest region, gross profit increased 13.9%, up from 6.8% in Q2. Asia, three quarters of the region, grew 22%, with Greater China showing a notable improvement, up 21% (Q2 2017: +11%), a record quarter. Mainland China, where PageGroup has a higher proportion of domestic clients, had a particularly strong performance with growth of 26%. South East Asia grew 20%, with its newest country, Thailand, performing to plan. Its investment in Japan, with fee earner headcount up 27% over the last year, delivered growth of 31%, up from 20% in Q2. In Australia, which declined by 2%, the company has increased fee earner headcount by 17% year to date to support the management changes made previously and opened a new office in Canberra. PageGroup says it is confident this will improve its growth rate in the future. There were record performances from Greater China, Indonesia, Malaysia and Thailand.
The UK declined 7.6% in the quarter, with Brexit and political uncertainty continuing to impact confidence, particularly amongst its multi-national clients and the more senior permanent candidates. PageGroup’s temporary business was impacted less, down 2%, with permanent down 10%. Page Personnel, which represented 22% of the UK, declined -5% compared to -8% in Michael Page. Within the disciplines, property & construction was its best performing, with growth of 7%, while financial services, now only 5% of the UK, was flat. Both the private sector (88% of the UK) and the public sector (12% of the UK) declined by 8%.
EMEA Q3 gross profit grew 12.6% (Q2 2017: +13.2%). Both Page Personnel and Michael Page delivered strong performances, with growth of 14% and 11%, respectively. Following an investment in fee earner headcount of 78 (14%) YTD, its largest country in the region, France (+21%) delivered a third successive quarter of growth in excess of 20%, with strong performances in both brands. Germany delivered growth of 9%, with a record quarter for the group’s interim business. The Netherlands continued to perform well and a strong performance in Spain drove growth of 10% overall for Southern Europe. There were record performances in Belgium, Germany and Poland.
The Americas was PageGroup’s fastest growing region and grew 18.4% in constant currencies. North America grew 27% in the quarter, with the US up 29% and Canada up 3%. In the US, its strategy of diversification continued, with strong performances from its regional offices (+31%). The group also saw a return to growth in the financial services market in New York, now a quarter of its US business, which grew 26%. Latin America grew 9%, with Brazil, now a third of Latin America, flat. Elsewhere, its other countries in Latin America had another strong quarter, growing 14%. In the region, there were record performances in Argentina, Colombia, Peru and the US.
Steve Ingham (pictured), chief executive officer, said, “The Group delivered gross profit growth of 8.8% in constant currencies and 11.8% at reported rates. Continental Europe, the Americas and Asia delivered strong performances. However the UK, Singapore and Brazil continued to experience challenging market conditions. The benefit from positive foreign exchange movements continued, adding c. £5 million to our gross profit and c. £1 million to operating profit in the quarter. However, if the exchange rates at the end of Q3 continued, this benefit would reverse in Q4.
“Our strategy of continued investment in our five Large, High Potential Markets of Greater China, Germany, Latin America, South East Asia and the US resulted in combined growth of 17%, and they now represent more than a third of the Group.
“There were particularly strong performances from the US, +29%, and Greater China, +21%, with Mainland China +26%. Germany was +9% as we continued to invest in the temporary and contract markets. In South East Asia, +20% and Latin America +9%, we had exceptional performances from individual countries such as Argentina, Indonesia, Malaysia and Peru. Both regions were held back by challenging markets, in Singapore and Brazil, respectively. However, each of these countries improved in the quarter and are now flat year-on-year.
“Elsewhere, France, our second largest market after the UK, and 15% of the Group, continued to grow strongly, +21%. Other countries in Continental Europe performed well, particularly Belgium, the Netherlands, Poland and Spain, all growing in excess of 15%. In Asia, India and Japan also had excellent quarters, growing at 18% and 31% respectively. The UK, however, was down -7.6%, with client and candidate confidence levels continuing to be impacted by the Brexit negotiations and political uncertainty. Australia, 6% of the Group, was down -2%. However, we have increased fee earner headcount by 17% year to date to support the management changes made previously and opened a new office in Canberra.
“Our focus on investing in our Large, High Potential Markets as well as businesses experiencing strong growth resulted in 290 additional fee earners in the quarter and 566, +12%, since the start of the year. Total fee earner headcount is now 5,277, with total headcount at 6,750, which gives a ratio of fee earners to operational support of 78:22; all new records for the Group.
“Cash generation in the period was strong, with net cash of c. £109m at the end of the quarter. This will reduce today by £52.3m as we pay shareholders both the interim and special dividends.
“We are pleased with the strong performances across the majority of our regions. However, there remain a number of challenges as we continue through 2017 and into 2018: the UK, where we will continue to focus on protecting margins and investing in structural opportunities; Australia, where we have invested in headcount and a new office; and Brazil, which remains challenging, despite results improving from negative to flat year-on-year growth.
“Elsewhere, we continue to invest to take advantage of markets with favourable trading conditions, as well as in our Large High Potential Markets and new markets, such as India and the Nikkei market in Japan. We will, as always, continue to focus on driving profitable growth while being able to respond quickly to changes in market conditions. Our outlook for full year operating profit remains in line with current consensus*.”