15 July 2014 - PageGroup

Second Quarter 2014 Trading Update

15 July 2014

PageGroup Second Quarter 2014 Trading Update | 2

Overview

Group

Q2 Gross Profit •  +9% in constant currency •  +2% in reported rates •  Y-o-Y growth in all regions

H1 Headcount

Impact of FX •  Q2 Gross Profit lower by c. £10m •  c.£19m in H1

H1 Financial Position

•  FE in Q2 +72 (+2%)

•  Other investment •  Cash of £41m at 30 June

•  +177 Fee Earners in H1

•  £22m Final dividend paid

•  + 30 Support staff in H1

•  £25m EBT share hedging


Trading Performance

Group

Growth Rates Group Gross Profit

£m

£m

Reported

Constant

Q2 2014 vs Q2 2013

137.2

135.1

+1.5%

+8.9%

Q2 2014 vs Q1 2014

137.2

126.6

+8.4%

+8.9%

H1 2014 vs H1 2013

263.7

261.9

+0.7%

+7.9%

H1 2014 vs H2 2013

263.7

251.9

+4.7%

+12.2%

FX Impact YoY • Q2 2014 reported rates: • H1 2014 reported rates:

GP £10m lower GP £19m lower


Permanent:Temporary

Group Q2 2014

Q2 2013

£m

£m

Reported

Constant

Permanent

106.1

104.7

+1.3%

+9.4%

Temporary

31.1

30.4

+2.4%

+7.4%

77:23

77:23

H1 2014

H1 2013

£m

£m

Reported

Constant

Permanent

203.7

202.6

+0.5%

+8.4%

Temporary

60.0

59.3

+1.2%

+6.1%

77:23

77:23

Perm:Temp Gross Profit

Ratio (Perm:Temp)

Perm:Temp Gross Profit

Ratio (Perm:Temp)

Growth Rates

Growth Rates

•  Perm:Temp ratio remains at 77:23 •  Permanent growth ahead of temporary in constant currency •  Reflection of geographic mix of business: –  due to strong GP growth in regions with little / no temp: LatAm, Asia, etc.


Group headcount and reported gross profit

Group

• 

Total headcount increased by 4% during H1 to 5,337 (Q4 ’13: 5,130)

• 

Support staff 15% of H1 headcount additions


H1 Discipline overview

Group H1 2014

Gross Profit

H1 2013

Growth Rates

Proportion

£m

£m

Reported

Constant

Finance & Accounting

40%

104.4

107.4

-2.8%

+3.5%

Engineering, Property & Construction, Procurement & Supply Chain

21%

54.5

52.0

+4.8%

+12.8%

Legal, Technology, HR, Secretarial, Healthcare

20%

53.9

54.0

-0.2%

+7.8%

Marketing, Sales & Retail

19%

50.9

48.5

+4.9%

+12.4%

100%

263.7

261.9

+0.7%

+7.9%

GROUP TOTAL

Selected disciplines* •  Oil, Gas & Mining: >25% •  • 

Procurement & Supply Chain: >20% Human Resources: >15%

• 

Retail: > 23%

• 

Marketing: >14%

*In constant currency


Q2 Regional overview

Group

Q2 2014 Gross Profit

Q2 2013

Growth Rates

Proportion

£m

£m

Reported

Constant

EMEA

40%

54.8

55.0

-0.5%

+5.0%

UK

25%

34.8

31.3

+11.1%

+11.1%

Asia Pacific

21%

28.3

28.2

+0.6%

+14.2%

Americas

14%

19.3

20.6

-6.6%

+8.7%

100%

137.2

135.1

+1.5%

+8.9%

Group Total

• 

20 countries (56% of Group) grew >10%*

• 

Large, High Potential markets: +15%*

• 

Record quarters for 15 countries

*In constant currency


Year-on-Year Gross Profit growth rates

Group

2013

2014

Q1

Q2

Q3

Q4

Q1

Q2

EMEA

-15.0%

-8.2%

-7.1%

-1.4%

+5.7%

+5.0%

UK

-1.2%

+0.3%

+5.0%

+5.1%

+8.1%

+11.1%

Asia Pacific

-0.3%

-8.0%

-4.3%

-5.7%

+1.3%

+14.2%

- Asia

+13.5%

+1.6%

+7.4%

+2.7%

+8.0%

+25.0%

- Australasia

-16.1%

-21.3%

-19.7%

-18.3%

-9.5%

-2.9%

Americas

+2.1%

+9.8%

+16.8%

+6.7%

+16.2%

+8.7%

- North America

+15.8%

+29.8%

+26.0%

+30.0%

+30.5%

+15.7%

- Latin America

-2.1%

+1.4%

+12.6%

-4.8%

+7.4%

+4.4%

Group Total

Growth rates in constant currency

-6.7%

-3.8%

-0.3%

+0.3%

+6.8%

+8.9%


EMEA

Region

Growth Rates Gross Profit

£m

£m

Reported

Constant

Q2 2014 vs Q2 2013

54.8

55.0

-0.5%

+5.0%

Q2 2014 vs Q1 2014

54.8

52.6

+3.9%

+5.0%

H1 2014 vs H1 2013

107.4

107.1

+0.3%

+5.2%

Headcount up 34 (+2%) to 2,036 (Q1 ’14: 2,002)

• 

France (14% of Group) +3% on Q2 ’13 Page Personnel (Temp/Perm < €40,000; 63% of France): +11% on Q2 ’13 Michael Page (Perm > €40,000; 37% of France): -8% on Q2 ’13 • 

Germany (6% of Group) +7% on Q2 ’13

• 

Middle East (2% of Group) +24% on Q2 ’13

• 

10 countries grew >10%

• 

FX impact as Euro:£ moved from 1.17 to 1.25*

All in constant currency * Euro:£ rates as at 30 June ’13 / 30 June ’14


UK

Region

Gross Profit

£m

£m

Growth Rates

Q2 2014 vs Q2 2013

34.8

31.3

+11.1%

Q2 2014 vs Q1 2014

34.8

32.8

+6.2%

H1 2014 vs H1 2013

67.6

61.4

+10.1%

Headcount up 11 (+1%) to 1,361 (Q1 ’14: 1,350)

• 

Private sector +11% on Q2 ’13

• 

Public sector +14% on Q2 ’13 (12% of UK)

• 

5 out of 13 disciplines >10%

• 

Financial Services remains flat (3% of UK)

• 

Strong performances in HR, Finance & Accounting, Marketing


Asia Pacific

Region


£m

£m

Reported

Constant

Q2 2014 vs Q2 2013

28.3

28.2

+0.6%

+14.2%

Q2 2014 vs Q1 2014

28.3

23.0

+23.4%

+23.5%

H1 2014 vs H1 2013

51.3

54.3

-5.5%

+7.8%

Headcount flat at 1,114 (Q1 ’14: 1,112)

• 

Asia (14% of Group and 68% of Asia Pacific) +25% on Q2 ’13

• 

Greater China +37% on Q2 ’13

• 

Australia and New Zealand (7% of Group and 32% of Asia Pacific) -3% on Q2 ’13 (from -10% last quarter)

• 

Regional FX impact of nearly £4m in Q2

• 

Records in Japan, China, Malaysia

All in constant currency


Americas

Region


£m

£m

Reported

Constant

Q2 2014 vs Q2 2013

19.3

20.6

-6.6%

+8.7%

Q2 2014 vs Q1 2014

19.3

18.1

+6.3%

+5.8%

H1 2014 vs H1 2013

37.4

39.1

-4.4%

+11.8%

Headcount up 5 (+1%) to 826 (Q1 ’14: 821)

• 

Latin America (8% of Group) +4% on Q2 ’13

• 

Brazil (58% of LatAm) -7% on Q2 ’13 and -4% on Q1

• 

LatAm excluding Brazil +24%

• 

Argentina and Colombia grew >40%

• 

North America (6% of Group) +16% on Q2 ’13

• 

US +17% on Q2 ’13 against increasingly tough comparators

All in constant currency


Large High Potential Markets

Strategic Focus: Large, High Potential Markets

•  Strategy implemented in 2013 •  Response to experience of 2009-2011 - FE headcount cuts impacted ability to respond as markets quickly recovered •  Commitment to invest through cycles •  Set criteria to qualify as Large, High Potential Market •  5 markets identified: comprises 30% FY13 Group Gross Profit

US

Germany

China

LatAmSE Asia


Market Criteria: Large, High Potential Markets


Macro criteria •  • 

Leading global economies, positive long-term macro prospects Ideally, under-developed recruitment outsourcing penetration

•  • 

Scalable business opportunity / receptive marketplace Attractive conversion rate potential

PageGroup criteria •  • 

PageGroup recruitment model proven locally Ability to hire / retain / promote local consultants

• 

Strength & depth in PageGroup management experience able to move into market

• 

Attractive salary levels & potential fee rates



Gross Profit & Fee Earners: CAGRs to H1 2014

CAGR %*

Since 2005

Large, High Poten=al Gross Profit Markets

PageGroup

* In constant currencies

Since 2009

Since 2013

18.6%

21.3%

13.1%

Fee Earner Headcount

21.5%

21.3%

15.1%

Gross Profit

7.2%

9.2%

7.9%

Fee Earner Headcount

8.7%

8.6%

11.0%



Performance: 2005 to 2013

£m / no. FEs Germany US LatAm China SE Asia Total

2005

2009

2013

Gross Profit

10.7

19.6

29.0

Fee Earners

66

144

198

Gross Profit

7.8

11.6

23.6

Fee Earners

80

95

211

Gross Profit

6.3

17.1

40.5

Fee Earners

58

159

384

Gross Profit

7.4

8.8

31.0

Fee Earners

38

68

347

Gross Profit

4.7

4.1

14.4

Fee Earners

21

21

118

Gross Profit

37

61

139

Fee Earners

263

487

1,258

* Figures stated are in single rate sterling, using closing rates H1 2014



2014 Business Environment

Macro environment

Germany GDP: +2.5% US GDP: +3.2%

LatAm GDP: +2.9%

China GDP: +7.3%

SE Asia GDP: +6.3%

Professional recruitment

Fee rates/ salaries

Job Count

Candidates

Posi>ve, improving, but not yet robust

Confidence slowly improving; Perm candidates s>ll cau>ous

Slight increase vs 2013; limited momentum

Candidate-‐short in technical disciplines & temp market

Fee rates above Group average; salaries above European average

Remains posi>ve, some long-‐term macro concerns

Confidence high amongst clients/ candidates

Remaining steady vs 2013

Candidate-‐short market in most areas

Fee rates above Group average, high salaries

Brazil/Argen>na challenging; elsewhere posi>ve

Buoyant market where macro strength

Ex-‐Brazil, improving trends

Candidate-‐short, par>cularly in technical areas

Posi>ve fee rates, wage infla>on

Limited compe>>on Long-‐term GDP in largest of ci>es, slowing, but s>ll strong elsewhere in infancy

Steady, healthy job flow

Limited, but growing talent pool; strong bilingual demand

Good fee rates, wage infla>on

Stable in key markets; overall posi>ve commercial environment

Stable in Singapore, posi>ve trends elsewhere

Candidate-‐short in many areas

Fee rates v. strong; salaries high in Singapore, acceptable elsewhere

GDP estimates: av. 2015-16F. Source: Citi

Singapore is mature; Malaysia etc. have significant poten>al


Strategy in 2014


Germany

Expanding FE headcount Building temp business scale & capability; leveraging leading perm posi>on

US

Transfers-‐in of experienced Page management (2 MDs YTD) Broadening of disciplines; opening of L.A. Office; growth of FE headcount

LatAm

Cost base flexed by management transfers both within / outside region Brazil -‐ niche markets; FE growth in Mexico, Colombia & Chile; launch in Peru

China

Ongoing hiring of FEs; discipline roll-‐out through office network Development of experienced local Chinese management base (80% of mgmt)

SE Asia

Growing FE headcount in Singapore & Malaysia Expanding disciplines & territories; teams dedicated to Indonesia & Thailand


Conclusion

•  Solid performance, improving trends •  High Potential Markets in positive growth •  Infrastructure roll-out: Website & PRS (Page Recruiting System) rolled out in more US offices (rest of US & UK starts in Q3) •  Remains in strong cash position following dividend & EBT cash outflows •  Leading KPI indicators positive for start of H2


Cautionary Statement

The information contained in this presentation is not audited, is for personal use and informational purposes only and is not intended for distribution to, or use by, any person or entity in any jurisdiction in any country where such distribution or use would be contrary to law or regulation, or which would subject any member of PageGroup to any registration requirement. Certain statements included or incorporated by reference within this presentation may constitute “forward-looking statements” that are based on current expectations or beliefs, as well as assumptions about future events. There are risk factors that can cause actual results to differ materially from those expressed in or implied by such statements. Accordingly, no assurance can be given that any particular expectation will be met and reliance should not be placed on any forward-looking statement. PageGroup disclaims any intention or obligation to revise or update any forward-looking statements that may be made in this presentation, regardless of whether those statements are affected as a result of new information, future events or otherwise. Nothing in this presentation should be construed as a profit forecast. This presentation does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase any shares in the Company, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment or investment decision relating thereto, nor does it constitute a recommendation regarding the shares of the Company. Past performance cannot be relied upon as a guide to future performance. Liability arising from anything in this presentation shall be governed by English Law. Nothing in this presentation shall exclude any liability under applicable laws that cannot be excluded in accordance with such laws.

PageGroup 2013 half year results | 21


Regional overview

Appendix

H1 2014 Gross Profit

H1 2013

Growth Rates

Proportion

£m

£m

Reported

Constant

EMEA

41%

107.4

107.1

+0.3%

+5.2%

UK

26%

67.6

61.4

+10.1%

+10.1%

Asia Pacific

19%

51.3

54.3

-5.5%

+7.8%

Americas

14%

37.4

39.1

-4.4%

+11.8%

100%

263.7

261.9

+0.7%

+7.9%

Group Total