Michael Page International plc : FULL YEAR AND Q4 2012 TRADING UPDATE

15 January 2013

FULL YEAR AND Q4 2012 TRADING UPDATE

FULL YEAR HIGHLIGHTS

·        Full year 2012gross profitof £526.8m, a decrease of £26.9m or -1.5% in constant currencies (-4.9% in reported) on 2011

·        Full year 2012operating profitfrom trading activitiesis expected to be in the region of £65m1 (2011: £86.0m)

·        Continuedinvestment4 new offices and 2 new country openings during 2012. Now 164 offices in 34 countries

·        Strong balance sheet net cashc. £58m at 31 December 2012 (31 December 2011: £58.2m)

·        Headcount:5,099 at 31 December 2012, reduced by 187 (-3.5%) since the start of the year and by 156 (-3.0%) in Q4 2012

Q4 GROSS PROFIT ANALYSIS

1Operating profit from trading activities before the exceptional item announced at the half year.

Commenting, Steve Ingham, Chief Executive said:

"As anticipated in our October update, economic conditions and market confidence remained poor and trading continued to be challenging across all our regions. Despite this, the Group reported gross profit of £127m, which was flat against the third quarter. Before the impact of exchange rates, gross profit reduced by 4% year-on-year. The geographic balance of our businesses helped insulate the Group from these challenges, particularly within Europe.

"Regionally, Asia delivered the strongest performance, with Q4 gross profit at constant currency up 19%. Our offices in Japan and Greater China performed particularly well. Legal, Technology, HR, Secretarial and Healthcare were the strongest disciplines with good performances in the Americas and Asia Pacific.

"We continued to adjust our cost base, principally headcount, to take account of market conditions. The majority of this has been achieved through natural attrition and as usual we have retained our more experienced and stronger people. We expect our full year 2012 operating profit to be in line with current analysts' expectations2.

"Activity levels remained robust through the quarter, however, we do anticipate Q1 to be another challenging quarter."

2Reuters consensus £64.8m. Bloomberg consensus £64.2m.

Enquiries:

The company will host a conference call and presentation for analysts and investors at 8.30am today. The live presentation can be viewed by following the link:

http://www1.axisto.co.uk/webcasting/investis/pagegroup/2012-full-year-trading-update/

Please use the following dial-in numbers to join the conference:

0208 817 9301                       London Local

0845 634 0041                       UK Local

0800 634 5205                       UK Freephone

Confirmation Number:            9550965

The presentation and recording of the call will be available on the company's website later today at:

http://www.pagegroup.co.uk/investors/reports-and-presentations/presentations-and-webcasts/2012.aspx

The Group will issue its Full Year results for 2012 on 5 March 2013.

Group Trading Update

Michael Page International plc ("PageGroup"), reports fourth quarter gross profit of £126.5m (£131.1m3), flat on Q3 2012 and -7.0% (-3.6%3) on Q4 2011 (£136.1m). Headcount reduced by 156 (-3.0%) in the quarter to 5,099 at the end of December 2012.

3 Denotes where overseas results denominated in foreign currencies have been translated at constant rates of exchange for constant currency illustrative purposes.

Perm/Temp mix

Group gross profit from permanent recruitment in the fourth quarter was £96.6m (£100.3m3), -0.9% (-0.6%3) on Q3 2012 and -9.1% (-5.6%3) on the £106.3m in Q4 2011. Group gross profit from temporary recruitment in the fourth quarter was £29.9m (£30.8m3), +3.2% (+3.0%3) on Q3 2012 and +0.3% (+3.5%3) on the £29.8m in Q4 2011.

The perm/temp gross profit ratio in the fourth quarter was 76:24 (Q3 2012: 77:23, Q4 2011: 78:22).

Discipline analysis

Finance and Accounting, which includes Financial Services, was impacted across all our markets. The strongest growth rates were in Legal, Technology, HR, Secretarial and Healthcare, with particularly strong performances in the Americas and Asia Pacific. Marketing and Sales performed strongly in Asia Pacific, while all disciplines were impacted to a similar degree by the general slowdown in Continental Europe.

Geographical analysis

FULL YEAR GROSS PROFIT ANALYSIS

Q4 GROSS PROFIT ANALYSIS

In our largest region, Europe, Middle East and Africa (EMEA), representing 41% of Group gross profit, market conditions remained challenging throughout the fourth quarter. Our German business had a particularly challenging quarter. Our business there is predominantly permanent, where the indecision caused by economic uncertainty is driving clients' preference towards contractors or temps. However, strong performances were seen from our investments in Austria, Luxembourg, Poland, Russia, Sweden and Turkey. The weakening of the Euro relative to sterling continued to impact the results of the Eurozone countries, with year-on-year reported growth rates some 5% lower than constant. Reflecting the slower market conditions, headcount across the region reduced during the quarter by 3.2%.

In the UK the strongest performances were seen in our Technology, Digital, Energy and Compliance disciplines. Reflecting the tough economic conditions, headcount in the UK reduced during the quarter by 2.2%.

In Asia Pacific, markets remained more challenging, particularly in Australia, with a continued slowdown in the Western Australian mining sector. Our businesses in Japan and Greater China remain resilient, performing strongly, with our newer businesses in Malaysia and India progressing well. Headcount across the region reduced during the quarter by 1.7%.

Within the Americas, Brazil continued to be impacted by the slowdown in the economy and exchange rates, with year-on-year growth rates at constant rates of exchange some 13% higher than on a reported basis. While our business in Argentina also slowed, our other businesses in Latin America grew strongly. In North America, market conditions remained difficult.  Our recent management changes though have gone smoothly and we are optimistic these will help to improve performance during 2013. Headcount across the Americas decreased during the quarter by 5.2%.

Share repurchases

No share repurchases were made during the fourth quarter. During the year, the Employee Benefit Trust purchased 5.0m shares (1.6% of share capital) at a cost of £18.0m (an average price of 356.6p per share). At 31 December 2012, there were 318m shares in issue, of which 14m are held by the Employee Benefit Trust.  Dividends and voting rights on these shares are waived. Accordingly, 304m shares receive dividends and hold voting rights. At 31 December 2012, 23m options were outstanding.

VAT reclaim

In Q1 2012, HMRC rejected our amended claim (£82.7m) in full and we subsequently wrote to them requesting reconsideration. In Q4 2012, the decision to reject the claims was upheld by HMRC and consequently we submitted a Notice of Appeal against HMRC's decision to the First Tier Tax Tribunal. The appeal is currently held over pending the decision of the Upper Tribunal in the case of Reed Employment Ltd, which considers similar issues. As such, the eventual outcome and timing of any final decision in respect of the additional amounts of overpaid VAT remains uncertain.

Intangible assets

We expect to commence operating our new software in 2013, which will generate operational efficiencies, and therefore savings, as it is rolled-out across the business. We intend to begin the amortisation of this intangible asset in 2013. The software and associated development costs will be amortised over 5 years or their useful life, whichever is the shorter.

Financial Position

Save for the effects of trading in the third and fourth quarters, £18.0m share repurchases into the Trust and the payment of the 2012 interim dividend of £9.9m on 5 October 2012, there have been no other significant changes in the financial position of the Group since the publication of the results for the half year ended 30 June 2012.

Net cash at 31 December 2012 is in the region of £58m (31 December 2011: £58.2m).

The Group will issue its Full Year results for 2012 on 5 March 2013.  

Cautionary statement

This Full Year and Q4 2012 Trading Update has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The Trading Update should not be relied on by any other party or for any other purpose. This Trading Update contains certain forward-looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

This Trading Update has been prepared for the Group as a whole and therefore gives greater emphasis to those matters that are significant to PageGroup and its subsidiary undertakings when viewed as a whole.