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PageGroup Q4 Trading

Update

Wednesday, 12th January 2022

PageGroup Q4 Trading Update

Wednesday, 12th January 2022

Overview

Kelvin Stagg

CFO, PageGroup

Welcome

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

Cautionary Statement

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.

Overview

A record quarter and year for the Group

The improvement in trading conditions we experienced at the end of Q3 continued into the fourth quarter. Consequently, the Group delivered gross profit of £246.8 million in the quarter, and £879.1 million for the full year, a record quarter and year for the Group.

Against Q4 2020, we grew 55.1%. Given the magnitude of the impact of COVID-19 in 2020, we are comparing our results in constant currencies throughout this presentation to our previous record gross profit year of 2019. Compared to Q4 2019, we grew 24.2% in constant currencies, an improvement on the 12.9% in Q3.

Reflecting the continued improvement in trading conditions, in Q4 we increased our fee earner headcount by 310. This made a net 937 for the year. As such, our fee earner headcount has now returned to our pre-pandemic level at the end of 2019.

Our operational support headcount rose by 50, which improved our ratio of fee earners to operational support staff to 78:22. Overall, the Group had 6,082 fee earners and a total headcount of 7,838. We have a strong balance sheet, with net cash at the end of December of around £152 million, having paid out £100.2 million in dividends to shareholders on 13th October.

Financial Review

I will now provide a brief financial review.

Q4 Perm and Temp Ratio

Stronger trading continues in permanent recruitment

In line with previous quarters, trading was stronger in permanent recruitment compared to temporary. Overall, permanent recruitment grew 30.5% against 2019, with temporary up 6.9%. Reflecting this, our ratio of permanent to temporary gross profit was 77:23.

In Michael Page, permanent recruitment represented 84% of gross profit, while in Page Personnel it was less, at 58%. Michael Page continued to be more resilient across both permanent and temporary recruitment, reflecting the more favourable conditions and stronger trading in higher income roles.

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PageGroup Q4 Trading Update

Wednesday, 12th January 2022

Protecting and investing in our platform

Ratio of fee earners to support staff improved to 78.22

Reflecting the continued improvement in trading conditions, in Q4, we added 310 fee earners giving a total of 937 in 2021. Within these 2021 additions were around 700 experienced hires, to complement the 400 experienced hires we added in the second half of 2020, giving a total of over 1,100.

Our fee earner headcount has now reached the pre-pandemic level at the end of 2019. Our operational support headcount rose by 50 in Q4, improving the ratio of fee earners to operational support staff to 78:22. Overall, the Group had 6,082 fee earners and a total headcount of 7,838.

Continued strong gross profit growth

Maintaining and investing in the platform through 2020 and 2021

This fee earner headcount and gross profit chart shows the unprecedented scale of the decline in Group gross profit in 2020 and the comparison to the Global Financial Crisis in 2008.

It shows how we chose strategically to maintain and invest in our platform, which has driven the sharp recovery seen throughout 2021. Productivity is now at record levels, up 25% on Q4 2019. This was driven by improved trading conditions, a shorter time to hire facilitated by video interviewing, investments in new systems, wage inflation and improvements in fee rates as a result of the high demand and short supply of candidates .

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

Regional Review

Steve Ingham

CEO, PageGroup

Q4 Gross Profit +55.1% vs 2020

Significant improvement in quarter, +24.2% vs 2019

Thank you, Kevin. The Group saw a significant improvement in Q4, which was up 55.1% on 2020, and 24.2% on 2019, our previous record year.

We exited December with our strongest growth rate of the year when compared to 2019, with improvements in all regions in most countries. Our five large, high potential markets of Germany, Greater China, Latin America, South East Asia and the US delivered standout results in the quarter, growing 41%, collectively.

This was a record performance for the category, with three of these markets delivering record quarters. We now have over 2,400 fee earners across these five markets, which compares to around 800 back in 2010, coming out of the global financial crisis.

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PageGroup Q4 Trading Update

Wednesday, 12th January 2022

EMEA

Improvement in trading conditions continued, Germany standout result

In our largest region, Europe, Middle East and Africa, which represented 50% of the Group, we grew 21.2% on Q4 2019, up from 9.9% in Q3. Against 2020, this represented growth of 48%.

Overall, conditions continued to be more favourable in Michael Page, which is focussed on higher income permanent recruitment and was up 35% for the quarter against 2019. Conditions were more challenging in Page Personnel, which is focused on lowe r-level recruitment with a higher proportion of temporary, up 6% overall.

France grew 3% against 2019, a record quarter, and a significant improvement on the decline of 8% in Q3. Page Personnel, representing around 60% of France was impacted more significantly by the lockdowns.

Germany, the Group's third largest market, delivered a record quarter, up 53% against 2019, with strong growth and record performances in all three brands. Our primarily technology- focussed Michael Page Interim business continues to be the best performing, but we also saw strong growth in Michael Page and Page Personnel.

We now have approaching 600 fee earners in Germany, an increase of 16% on Q4 2019, which positions us well for continued growth in this large, high potential market. Belgium, The Netherlands, Italy and Spain all grew strongly, with Poland up 93% for the quarter versus 2019. Nine countries in the region delivered record quarters despite the seasonal impact of Christmas.

Asia Pacific

Continuing strong growth across the region

In Asia Pacific, representing 20% of the Group, Q4 gross profit grew 33.8% on 2019, up from 20.4% in Q3. Against 2020, this represented growth of 48.7%. In Asia, 16% of the Group, we grew 45%. In Greater China, 8% of the Group, we grew 32%. Mainland China was up 46%, with good growth amongst both domestic and international clients .

Hong Kong, which has been slower to recover than other markets in the region, was up 11%, a significant improvement on the growth of 1% in Q3.

South East Asia delivered a third consecutive record quarter and was up 58%, with Singapore up 36% and the remaining countries in the region up 75% collectively, including record performances for Indonesia, Thailand and the Philippines. Japan was up 44%, delivering another record quarter and a further improvement on the already strong growth of 36% in Q3.

India also delivered another record quarter, growing 95% versus 2019. We have over 180 fee earners in this market, which now represents 8% of the region. Australia grew 7%, a notable improvement on Q3, which was down 3%, with the strongest growth in Victoria and Queensland. In the region overall, five countries delivered record quarters in Q4.

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PageGroup Q4 Trading Update

Wednesday, 12th January 2022

The Americas

Performance continued to improve in the region

The Americas, representing 15% of the Group, was up 33.3% on 2019, a further improvement on the growth of 24.6% in Q3. This represented growth of 75.7% on 2020. The US grew 28% with strong growth in all offices, though most significantly in Boston and Chicago.

Growth was strong across all disciplines, with the best performances from Property & Construction, our largest discipline in the US, as well as Technology.

In Latin America, gross profit grew 44%, a record quarter, up from growth of 22% in Q3. Mexico, our largest country in the region, was up 27%, improving from the growth of 18% in Q3. Brazil grew 41%, up from 27% in Q3. Elsewhere in Latin America, the remaining countries were up 63% compared to 2019 collectively for the quarter, with record quarters for Argentina, Colombia and Panama.

UK

Trading improved as the quarter progressed

In the UK, representing 15% of the Group, gross profit grew 14.1%, a significant improvement from the growth of 1.3% in Q3. Against 2020, this represented growth of 73.2%.

Like our other regions, conditions and trading improved as the quarter progressed finishing in December with our strongest growth rate of the year versus 2019. Our higher salary level focussed Michael Page business was more resilient, up 18% and Page Personnel returned to growth, up 4% in the quarter.

Summary

A record quarter and year for the Group

I will now provide a brief summary of our results. I am pleased to report that 2021 was a new record year for the Group. The quarterly improvement we saw in 2021 continued in Q4, with growth in constant currencies of 24.2% versus 2019.

Productivity is at record levels, up 25% on Q4 2019. This is due to improved trading conditions, a shorter time to hire facilitated by video interviewing, investments in ne w systems, wage inflation and improvements in fee rates as a result of the high demand and short supply of candidates.

This noticeable improvement and record performance in Q4 was seen throughout the Group and was achieved despite the backdrop of continued restrictions or lockdowns in many of our markets. Given the strength of our performance in December, we now expect 2021 full year operating profit to be marginally in excess of our previous guidance of in the region of £165 million.

We believe that our strategy of maintaining and investing in our platform throughout the pandemic has been key to us achieving the results we are announcing today. This was demonstrated by our investment in experienced hires, as well as continuing with our roll out of technology and innovation.

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