October 11, 2023
PageGroup plc, a UK-based staffing firm with global operations, reported group gross profit of £242.2 million (US$296.0 million) for the third quarter, a decrease of 7.9% in constant currency when compared to last year. PageGroup also announced initiatives to reduce its cost base.
“The group delivered a resilient result in challenging markets. EMEA was our best performing region; however, tough market conditions affected our performances in Asia, the UK and the US,” Chief Executive Nicholas Kirk said in a press release.
“Overall, group gross profit declined 7.9% in constant currencies against Q3 2022,” Kirk said. “Candidate shortages remain acute and are supportive of continued high fee rates. Salary levels remain elevated, albeit the salary increases offered to candidates reduced compared to Q3 2022. These lower offers, combined with lower candidate confidence, led to a further increase in the number of offers rejected by candidates, either through employer buybacks or unwillingness to risk the move for the size of incentive on offer. The increased time to hire that we saw in Q2 continued.”
He continued, “Reflecting the uncertain macroeconomic conditions, temporary recruitment continued to outperform permanent as clients sought more flexible options. In line with these conditions, we reduced our fee earner headcount by 310 (-4.8%) in Q3, following declines in H1 2023 and Q4 2022, with reductions in all regions.”
“Our total headcount of 8,140 is now 10.7% lower than at the end of Q3 2022. Productivity, measured as gross profit per fee earner, was up 4% versus Q3 2022, as a result of our action on fee earner headcount over the past 12 months,” Kirk said.
PageGroup’s board also announced it expects 2023 operating profit, excluding a one-off cost of circa £5 million (US$6.1 million), to be between £125 million (US$153.2 million) and £130 million (US$159.3 million). This is lower than the company-compiled consensus of £137.6 million (US$173.7 million) it had forecasted during its Q2 results. For comparison, FY 2022 operating profit stood at £196.1 million (US$236.5 million).
By geography
Unless otherwise stated, all growth rates in the below geographical analysis are in constant currency and compared with 2022.
WEMEA Germany, the largest market during Q3, delivered a record quarter, growing 5%. The standout results continued to be delivered by the Page Personnel (15%) and Michael Page Interim businesses (11%), the latter delivering a record quarter. Tougher trading conditions remained in permanent recruitment, which had a greater impact on Michael Page (-4%).
France was up 1% for the quarter, with similar performances in both Michael Page and Page Personnel. The group saw a stronger performance from within temporary recruitment, which is indicative of the current uncertainty in the market. Elsewhere in Europe, trading conditions were tougher due to weaker candidate and client confidence. The businesses in the Middle East and Africa grew 17%.
In the US, gross profit declined 25%, a deterioration on the decline of 16% in Q2. Uncertainty in market conditions continued to impact time-to-hire as well as client and candidate confidence.
In Latin America, gross profit grew 7%, a record quarter, despite macro-economic uncertainty across the region. Mexico, the largest country in the region, was down 4% compared to a decline of 7% in Q2, and Brazil was up 4%, an improvement on the decline of 9% in Q2. Elsewhere in Latin America, the remaining countries grew 19%, collectively. In line with the more challenging conditions, overall fee-earner headcount decreased by 96, mainly in the US and Mexico.
In Asia Pacific, permanent recruitment across the region declined 12%, while temporary recruitment declined 3%, reflecting the continued uncertain market conditions.
Mainland China was down 23%. Trading remained challenging with the recovery continuing to be slower than anticipated. Hong Kong declined 21% for the quarter. Overall Greater China was down 22%.
Southeast Asia declined 12%, with Singapore — which continued to be impacted by the slowdown in Greater China — down 13%.
India continued to deliver strong results, up 3% on Q3 2022, a record quarter. Japan returned to growth of 4% compared to the decline of 10% in Q2, while Australia declined 11%, compared to a decline of 4% in Q2, due to tougher market conditions.
In the UK, gross profit for Q3 decreased 18.9% against 2022 to £30.3 million, following the decline of 17.0% in Q2. PageGroup continued to see clients deferring hiring decisions and candidates cautious about accepting offers. It also experienced an increase in turndowns and buybacks in the permanent business during September.
Reflecting the uncertain market conditions, clients sought more flexible options, and, as such, temporary recruitment (-5%) was more resilient than permanent recruitment (-24%).
Initiatives to reduce cost base
Kirk continued, “As previously disclosed, as part of our refined strategy and our increased focus on our conversion rate target, we have already implemented a number of initiatives to reduce our cost base. These initiatives will incur a one-off cost in 2023 of circa £15 million (US$18.4 million), offset by the majority of the cost savings being realized in FY23. The net negative impact this year will be circa £5 million (US$6.1 million). Going forward, we expect these initiatives to deliver annualized savings of circa £20 million (US$24.5 million) per annum compared to our FY23 cost base from FY24 onwards.”
“Looking ahead, due to a slower end to the quarter, there is a heightened degree of uncertainty in the short term,” Kirk said. “However, we have a highly diversified and adaptable business model, a strong balance sheet, and our cost base is under continuous review and can be adjusted rapidly to match market conditions.”
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Share price
Shares in PageGroup closed down 2.31% today in London to £414.20 (US$507.69); they were 15.06% above their 52-week low, according to FT.com.
