PageGroup : Pdf (139.32 KB)

PageGroup Q3 2021 Trading

Update

Wednesday, 6th October 2021

PageGroup Q3 2021 Trading Update

Wednesday, 6th October 2021

Q3 2021 Trading Update

Steve Ingham

Chief Executive Officer, PageGroup

Welcome

Good morning everyone and welcome to the PageGroup third quarter trading update. As a result of the quarterly trading being much stronger than expected we brought this call forward. Thank you for joining us at short notice and apologies for any inconvenience this has caused. I am Steven Ingham, Chief Executive Officer and on the call with me is Kelvin Stagg, Chief Financial Officer. 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.

Q3 Overview

Strong performance, continued investment, profit guidance increased to c. £155m

The improvement in trading conditions we experienced at the end of Q2 continued into the third quarter. Consequently, the Group delivered gross profit of £228.1 million in the quarter. Against 2020 we grew 65.4%. Given the magnitude of the impact of COVID-19 in 2020 we are also comparing our results in constant currencies throughout this presentation to our record gross profit year of 2019. Compared to Q3 2019 we grew 12.9% in constant currencies. This compares to +2% in Q and -10% in Q1.

The quieter summer months of July and August were slightly behind the growth we saw in June of 11%, up 4% and 9% respectively. However as we saw in Q1 and Q2, conditions improved materially in the last month of the quarter and in September we grew 26% versus 2019, our record year. As a result of this improvement in trading conditions, we are today announcing an upgrade in our guidance for the year. We now expect full-year operating profit to be in the region of £155 million.

Reflecting the continued improvement in trading conditions in Q3, we increased our fee earner headcount by 329. This makes a net 627 to the end of September and as such our fee earner headcount is currently down just 4% on the pre-pandemic level at the end of 2019. Our operational support headcount rose by 74 and as such our ratio of fee earners to operational support staff was maintained at 77:23. Overall the Group had 5,772 fee earners and a total headcount of 7,478.

We have a strong balance sheet with net cash at the end of September of around £195 million. This is before the previously-announced dividend payment of £100 million payable to shareholders a week today on 13th October.

Quarterly growth rate improved to +12.9%

Significant improvement in September, +26% vs 2019

As mentioned, we saw a significant improvement in September, which was up 26% on 2019. The growth rate in all of our regions improved in Q3 over Q2 and all regions exited the quarter in September ahead of the Q3 growth rate.

2

PageGroup Q3 2021 Trading Update

Wednesday, 6th October 2021

Large, High Potential Markets

Now represent 40% of the Group

Our five Large, High Potential Markets of Germany, Grater China, Latin America, South East Asia and the US, delivered the standout results in the quarter, reaching a new milestone of 40% of the Group collectively. They grew 27% in the quarter and exited in September up 45% on 2019. This was ahead of the rest of the Group which was up 15% in the same month. Four out of these five markets delivered record quarters with Greater China held back by tougher trading conditions in Hong Kong. We now have 2,300 fee earners across these five markets compared to around 800 in 2010 coming out of the Global Financial Crisis.

EMEA

Improvement in trading conditions continued

Looking now at each of our regions, in our largest region, Europe, Middle East and Africa, which represented 46% of the Group, we grew 9.9% on 2019, up from 0.4% in Q2. Against 2020 this represented growth of 45.8%. France declined 8% against 2019, an improvement on the decline of 11% in Q2. September showed further improvement, exiting the quarter up 5%. Page Personnel, representing around 60% of France and with a higher proportion of temporary workers, was impacted more significantly by the lockdowns, down 16% for the quarter. Michael Page was more resilient, up 8%. Germany, the Group's third-largest market, delivered a record quarter, up 33% with September up 39%. This continued to be driven by our Michael Page Interim business which was up 57% for the quarter and exited in September up 73%. Belgium, Italy and Spain grew 8%, 14% and 22% respectively for the quarter versus 2019, with Germany, Austria and Turkey delivering record quarters despite the quieter summer months.

Asia Pacific

A second consecutive record quarter

In Asia Pacific, representing 22% of the Group, gross profit was up 20.4% on 2019, up from 10.5% in Q2, a second consecutive record quarter. Against 2020 this represented growth of 68.2%. In Asia, 17% of the Group, we grew 29%. In Greater China, 8% of the Group, we grew 21%. Mainland China was up 34% and we exited in September strongly, up 45% on 2019. Hong Kong, where conditions remain more challenging, was up 1% for the quarter, a significant improvement on the decline of 16% in Q2 and returned to growth in September, up 10%. South East Asia delivered a record quarter and was up 29% with Singapore up 15% and the remaining countries in the region up 41% collectively. Japan was up 36%, delivering a record quarter and a significant improvement on the already strong growth of 17% in Q2, exiting in September up 56%. India, where we have around 200 people, despite being significantly impacted by the pandemic, also delivered a record quarter, growing 72% and exited the quarter in September up over 100% on 2019. Australia continued to be impacted by State lockdowns and declined 3% for the quarter. Although we saw an improvement in September, exiting up 7%.

The Americas

Our strongest performing region

The Americas, representing 17% of the Group, has been one of the worst affected regions by COVID but despite this was our strongest performing region. Gross profit in Q3 was up 24.6%

3

PageGroup Q3 2021 Trading Update

Wednesday, 6th October 2021

on 2019, a record quarter and a significant improvement on the growth of 7.7% in Q2. This represented growth of 113.4% on 2020. The US delivered a record quarter and grew 28% with a material improvement in September, which was up 61% on 2019. In Latin America gross profit grew 22%, a record quarter up from the growth of 11% in Q2. Mexico was up 18%, a record quarter and exited September strongly up 38%. Brazil was up 27% for the quarter and exited in September up 36%. Elsewhere in Latin America the remaining countries were up 23% collectively for the quarter.

UK

Trading improved as the quarter progressed, September +15% vs 2019

In the UK, representing 15% of the Group, gross profit grew 1.3%, a significant improvement from the decline of 9% in Q2. Against 2020 this represented growth of 94.3%. Conditions improved as the quarter progressed and we exited the quarter up 15% in September. Our Michael Page business was more resilient, up 6% in the quarter compared to a decline of 13% in Page Personnel. Performance was stronger in our regional offices outside of London.

Summary

Strong performance, continued investment, profit guidance increased

I am pleased to report that the improvement in results we saw in Q2 continued into Q3 with the Group reporting growth of 65.4% versus 2020 and 12.9% versus 2019. We exited the quarter strongly with September up 26% on 2019 compared with July and August, up 4% and 9% respectively. This noticeable improvement and record performance in Q3 was seen throughout the Group with 12 countries delivering record quarters and was achieved despite the backdrop of continuing restrictions and lockdowns in many of our markets.

We believe our strategy of maintaining and investing in our platform throughout the pandemic is helping us to achieve these results. Our investments include hiring around 1,000 experienced fee earners since July 2020, rolling out new technologies globally, such as Customer Connect, our new Salesforce-based CRM system. New innovation such as our Page Insights data intelligence tool, as well as diversity and inclusion and strategic engagement tools to ensure our culture resonates and is attractive to our people and potential new employees.

Reflecting the continued improvement in trading conditions in Q3, we added a net 329 fee earners in the quarter, making a net 627 this year. We have added around 600 experienced hires so far in 2021 which complements the around 400 experienced hires we added in the second half of 2020. Our fee earner headcount is currently down just 4% on the pre- pandemic level at the end of 2019. We are the clear leader in many of our markets with a highly experienced senior management team which we retained in 2020 and we believe positions us well to take advantage of opportunities to grow and improve our business. We have maintained our focus on driving progress towards our long-term strategic goals.

Looking ahead there continues to be a high degree of global macroeconomic uncertainty as COVID-19 remains a significant issue and restrictions remain in a number of the Group's markets. Additionally, there is further uncertainty regarding the pace of clients' offices reopening, challenges in global supply chains and the inflation outlook. However, the strength of our performance in Q3 and notably in September has further increased our confidence in

4

PageGroup Q3 2021 Trading Update

Wednesday, 6th October 2021

the outlook for the year. Therefore, we now expect full-year operating profit to be in the region of £155 million. Kelvin and I will now be happy to take any questions you may have.

Q&A

James Rose (Barclays): Good morning, I have got three please. The first is on the really strong growth rate you have seen in September. What do you think explains that? Is it any particular work or specialism? What is your view on what explains it and do you think it is sustainable going into the fourth quarter? Second is on supply chain shortages and manufacturing disruptions. How has that impacted the Group? Then thirdly, are there any differences between the temp side and the perm side which particularly stand out to you? Thanks.

Steve Ingham: The sustainable one is a difficult question to answer because clearly I would have to predict various economic factors and that is quite challenging. However, at the moment it feels like it is certainly sustainable in the short-to-medium term as our forward- looking KPIs still remain positive as we go into the fourth quarter. How do I explain September? Obviously we think we have invested well, and I have just said that, in hiring a lot of experienced people which we took advantage of literally f rom July of 2020. I think that probably was looking back a smart move. What is happening is that a lot of candidates have definitely reflected on their organisations, the culture of their organisations they are working for, how their organisations reacted to COVID and did they keep in touch. Did they not? Did they make them feel secure or insecure? Are they doing the right strategic things? Do they have the right approach to diversity and inclusion, CSR, ESG, etc? If they did not, then they are doing something about it. There are a large number of candidates on the move and there is high demand from clients as they recover from the pandemic. There is a huge supply and demand which benefits us.

Why, in particular? Of course we would love to think we are taking market share from the obvious competitors, some of which I am sure are doing well as well. The main competitor we are definitely taking market share from are the clients themselves. Clients and their resourcing departments, talent acquisition or whatever they call it, are definitely our biggest competitor and they are struggling to hire people. As yet, I have struggled to come across a company either in or outside of work that has not told me they have got staffing issues at the moment and that they are struggling to fill jobs. That is playing to our strengths. While they are focused on doing whatever they do, we are focused on making sure that we can find necessary candidates to fill roles and we are largely better than our clients at doing it. We are successfully filling jobs they cannot fill. That helps as well because we are seeing some wage inflation where there are particular hot points of candidate shortages. We are definitely seeing a bigger gap between the salary that a candidate comes to us with and the salary that they are offered by a client. We bill on the salary offered obviously or the one that is accepted and so that is benefitting us. We are starting in some places to see as well a bit of fee inflation. You can imagine during 2020 when clients no doubt were negotiating with us they were probably tougher than they can afford to be today with candidate shortages. All of those things I suppose explain September.

Why does September look so remarkable against the other two months in the quarter? I largely put that down to the summer and September is notoriously one of our biggest months

5