kelvin stagg chief financial officer half year results 2019 · financial review capital allocation...

Kelvin Stagg Chief Financial Officer

LSE: PAGE.L

Website: https://www.page.com/investors

7 August 2019

Half Year Results 2019

“Record first half for the Group”

http://www.page.com/investors

Financial Review

Kelvin Stagg, Chief Financial Officer

Financial Review Capital Allocation Summary

H1 19

3

Key financial highlights

Record first half for the Group

£433.5m£396.0m H1 2018

+9.5%+14.2% H1 2018

Gross Profit

Constant

Currency

Growth

£75.6m£67.2m H1 2018

17.4%17.0% H1 2018

Operating

Profit

Conversion

Rate

16.8p15.5p H1 2018

£81.7m£87.0m H1 2018

EPS

Net cash

4.30p4.10p H1 2018

12.73p12.73p H1 2018

Interim

Dividend

Per share

Special

Dividend

Per share


H1 19

Focus on productivity and conversion

Conversion rate up to 17.4%

£m H1 2019 H1 2018 Reported % Constant %

Gross Profit 433.5 396.0 +9.5% +9.5%

Operating Profit 75.6 67.2 +12.5% +11.4%

Conversion Rate* 17.4% 17.0%

Fee Earner

Productivity** (£k)70.7 69.2 +2.2% +2.2%

• Record Gross and Operating Profit

• Conversion rate increased by 0.4 ppts

• Fee Earner Productivity increased +2.2%

4*Operating Profit as a percentage of Gross Profit

** Gross Profit per Fee Earner


H1 19

Record Gross Profit in three of our four regions

Improvement in productivity in all regions

H1 2019 H1 2018

£m Gross ProfitOperating

Profit

Conversion

Rate

Productivity

increase*

Gross

Profit

Operating

Profit

Conversion

Rate

EMEA 213.1 45.6 21.4% +3.0% 194.9 40.9 21.0%

Asia

Pacific81.8 8.8 10.8% +0.5% 74.1 9.0 12.1%

UK 69.4 12.5 18.0% +2.1% 69.7 10.5 15.0%

Americas 69.2 8.7 12.5% +3.1% 57.3 6.8 11.9%

• Strong conversion rate performance in EMEA

• Asia Pacific conversion rate impacted by trade tariff uncertainty and client confidence

• UK increase due to focus on productivity and conversion

• Increased growth throughout the Americas

5*In constant currencies


H1 19

• Employee costs driven by a +6.6% increase in average

headcount and inflationary salary rises

• Completed implementation of Global Finance System (GFS) in

H1 2019

• Resultant temporary increase in support headcount

Fee earner to support staff ratio currently at 78:22

Costs driven by employee headcount

15

18

21

24

27

30

2009 2013 2017S

up

po

rt s

taff

as

% o

f G

rou

p h

ea

dc

ou

nt

6

£m H1 2019 H1 2018 Constant %

Employee 281.0 257.6 +9.3%

Other costs 76.9 71.2 +8.8%

Total 357.9 328.8 +9.1% H1 19


H1 19

7

Grossing up of Assets and Liabilities by c. £130m

IFRS 16 - balance sheet impact

• IFRS 16 adopted using the modified retrospective method on 1 January 2019

• Right-of-use assets and lease liabilities recognised, were previously classified as operating leases

• Reduction in equity of £2.1m recognised on transition

• Right-of-use assets of £129.5m and Lease Liabilities of £138.5m as at 30 June 2019

£m 2019 H1 2019 Opening Balance

Assets

Right-of-use assets 129.5 129.3

Liabilities

Lease Liability (138.5) (131.4)


H1 19

8

Slight benefit to EBIT; marginal negative impact on PBT

IFRS 16 – income statement impact

• Straight line rental expense has been replaced by depreciation of right-of-use assets and interest on lease liabilities

H1 2019

£m

Lease charge 20.4

Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) 20.4

Depreciation expense (19.6)

Earnings Before Interest & Tax (EBIT) 0.8

Finance Costs (1.1)

Profit Before Tax (PBT) (0.3)


H1 19

Net cash of £81.7m

Strong and robust balance sheet

£m H1 2019 H1 2018

Intangible assets 36.5 33.4

Tangible assets 35.5 31.9

Right-of-use assets 129.5 -

Trade and other receivables 393.2 346.7

Trade, other payables, current and deferred taxes (186.8) (194.6)

Lease Liabilities (138.5) -

Net cash 81.7 87.0

Net assets 351.1 304.4

9


H1 19

10

Depreciation of right-of-use assets of £19.6m

Depreciation increase due to IFRS 16

H1 2019 H1 2018

£m £m

Depreciation 24.9 4.4

Amortisation 5.0 5.1

Total 29.9 9.5

Net Capital Expenditure

Tangible assets 5.0 6.8

Intangible assets 8.4 4.0

Total 13.4 10.8

• Amortisation charge is primarily for GFS and PRS

• Intangible Capital Expenditure due to system investments


H1 19

Special dividend to be paid for a fifth successive year

Strong cash flow generation

Cash Increase Decrease

11

97.7

81.7

109.1

(45.8)

(20.7)

(13.4)

50

90

130

170

210

Dec 18 EBITDA WorkingCapital

Tax and netinterest

Net capex Leasepayment

Share optionsexercised

DividendsPaid

Exchange Jun 19

£m

1.1

(20.7) 3.5

(29.0)

Capital Allocation


H1 19

To make

supplementary

returns to

shareholders either

by a share buyback

or special dividend

13

A highly cash generative business model

Clear and established capital allocation strategy

To satisfy

operational and

investment

requirements, and to

hedge liabilities

under the Group’s

share plans

To maintain the

ordinary dividend

through downturns

and to increase it

during more

prosperous times

2nd use of cash 3rd use of cash1st use of cash


H1 19

£m

Track record of shareholder returns

14

13 12 13 1418

2227 26 25

29 31 31 3135 36 38 4114

24

34

83

60

1615

30

50

20

4040

0

20

40

60

80

100

120

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Ordinary Dividend Share Buyback Special Dividend

1

c. £875m returned via share buybacks and dividends


H1 19

13.1 13.9

40.8 41.0

0

10

20

30

40

50

60

2018 2019£

mInterim Special

Committed to returning cash to shareholders

A growing dividend through the cycle

• 2019 interim dividend proposed of 4.30p per share or £13.9m,

increase of 4.9% on 2018

• 2019 special dividend proposed of 12.73 pence per share

(£41.0m)

• Both payable 9 October 2019

• Together with the £29.0m 2018 final dividend paid in June,

represents a total of £83.9m returned to shareholders in 2019

2019 Pence per Share

Interim 4.30

Special 12.73

Total excl. Final 17.03

+1.8%

15

Summary


H1 19

Mindful of challenging macro-economic conditions in a number of our regions

Another record half year for the Group

Special dividend of 12.73 pence per share, fifth successive year of

special dividends

Interim dividend up 4.9% to 4.30 pence per share

Conversion rate increased to 17.4%

Operating profit +11.4% in constant currencies

Productivity +2.2% following COO appointment and focus

Gross Profit +9.5% in constant currencies

17

Appendix


H1 19

19

Our business model


H1 19

20

Delivering on our global diversification strategy

A growing international business

61%

39%

76%

24%

84%

16%

FY 2007 FY 2013 H1 2019

Gross Profit

InternationalUK


H1 19

21

70%

87%

70%

90%

30%

13%

30%

10%

EMEA Asia Pacific UK Americas

Temp Perm

85%

58%

15%

42%

Michael Page Page Personnel

Geography Brands

Significant variations in recruitment mix


H1 19

1,174

1,657 1,657 1,466 1,444

1,708 2,075

2,763

3,837 3,654

2,515

3,273

3,797 3,624 3,810

4,278 4,484

4,711

5,497

6,116 6,035

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1990-99 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Fe

e E

arn

er

He

ad

co

un

t

AMERICAS

ASIA

PACIFIC

EMEA

22

1985-1990 1990-1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2017 2018

Portugal

(2000)

Switzerland

(2001)

Belgium

(2002)

Sweden

(2002)

Poland S Africa

Ireland

UAE

Austria

Turkey

Luxembourg

Morocco

Thailand

Indonesia

Taiwan

India

MalaysiaNew

Zealand

Japan

(2001)

China

(2003)

Australia

(1985)

USA (1998) Brazil (2000) Canada Mexico Chile Colombia Peru

INT

ER

NA

TIO

NA

L G

RO

WT

H

France

(1986)

Netherlands

(1987)

Germany

(1993)

Spain

(1997)

Italy

(1997)

Hong Kong

(1995)

Singapore

(1996)

EMEA

APAC

UK

Americas

Argentina

UKASIA

PACIFICEMEA AMERICAS

Long-term international growth

H1 2019

Vietnam

2016


H1 19

23

Fee earner investment and support staff

0

1000

2000

3000

4000

5000

6000

7000

H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1

He

ad

cou

nt

Fee Earner Support Staff

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019


H1 19

24

2017 2018 2019

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

EMEA +14.8% +13.2% +12.6% +19.3% +18.2% +18.6% +20.9% +13.9% +11.4% +9.0%

Asia Pacific +3.9% +6.8% +13.9% +14.9% +13.8% +18.4% +27.7% +22.0% +14.9% +4.7%

– Asia +3.6% +10.2% +21.9% +20.8% +17.8% +21.2% +32.2% +21.2% +15.6% +5.8%

– Australasia +4.7% -1.5% -4.4% +0.7% +4.3% +10.6% +15.7% +25.0% +13.0% +0.9%

UK -0.1% -4.5% -7.6% -2.8% -7.1% -1.9% +0.8% +2.1% +1.7% -2.4%

Americas +15.2% +13.8% +18.4% +18.8% +20.4% +29.2% +30.1% +29.2% +21.4% +17.4%

– North America +12.5% +14.6% +26.5% +18.7% +16.4% +27.0% +27.2% +30.3% +20.9% +18.9%

– Latin America +19.2% +12.8% +9.1% +19.0% +25.7% +32.2% +33.9% +27.7% +21.6% +15.3%

Group Total +9.1% +7.7% +8.8% +13.8% +12.3% +16.0% +19.7% +15.4% +11.7% +7.4%

Year-on-Year Gross Profit Rates


H1 19

25

Contacts

Jeremy Tatham – Group Financial Controller

Tel: +44 (0) 1932 264 143

Email: [email protected]

Web: http://www.page.com/investors

Date Event

9 October 2019 Q3 2019 Trading Update

Contacts and Calendar


H1 19

26

This presentation contains certain statements that are neither reported financial results nor other historical information.

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kelvin stagg chief financial officer half year results 2019 · financial review capital allocation...

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