Pagegroup PLC

LSE:PAGE

Earnings Call Transcript 2018-Q2

[Operator]

Ladies and gentlemen, welcome to the PageGroup Second Quarter Trading Update. My name is Sophie, and I'll be your coordinator today. [Operator Instructions]I'll now hand you over to Kelvin Stagg. Kelvin, go ahead.

[Kelvin Stagg]

Good morning, everyone, and welcome to the PageGroup Second Quarter and First Half 2018 Trading Update. I'm Kelvin Stagg, Chief Financial Officer, and I have with me Steve Ingham, Chief Executive Officer. I'll shortly take you through the headline numbers and a financial review before handing over to Steve for the regional results and a summary.Although I will not read it through, I'd 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 presentation.The group delivered another record quarter with group gross profit of GBP 208.2 million, the first time we have achieved gross profit of over GBP 200 million in a quarter. This represented constant currency growth of 16%, our best quarterly growth rate for 7 years. This was an increase from the 12.3% growth achieved in quarter 1 and is partially explained by the timing of Easter. Our first half growth rate of 14.2%, therefore, shows a more representative picture.It is our third consecutive quarter of double-digit growth with all regions other than the U.K. delivering strong growth and their best-ever quarters. Foreign exchange had a negative impact during the quarter, which led to a lower reported gross profit growth rate of 14.5%.In monetary terms, foreign exchange movements decreased gross profit by around GBP 3 million in the quarter and GBP 6 million in the first half.Michael Page grew 15.8% with marginally stronger growth in Page Personnel, up 16.4%. Following an outflow of just over GBP 27 million at the end of June to payout 2017 final dividend as well as purchases into the Employee Benefit Trust of around GBP 10 million, we closed the quarter in a strong financial position with net cash of around GBP 85 million. This was broadly in line with our net cash position at the end of June last year.I will now provide a more detailed financial review. In the second quarter, permanent recruitment grew 17.6% in constant currencies with temporary up 10.7%. This gave a ratio of permanent-to-temporary gross profit of 78:22, slightly up on the 77:23 the previous year. Our higher ratio of permanent recruitment reflects the mix of geographies and salary bands in which the group operates.In Latin America and in large parts of Asia, for cultural reasons, the white collar temporary recruitment market has only recently emerged. In each of these geographies, where 90% of our gross profit is derived from permanent recruitment, we saw strong growth of 19% in temporary recruitment.In other markets, the permanent-to-temporary mix reflects the salary bands in which we operate. Our Page Executive brand is largely permanent and Page Outsourcing operates at all levels.In Michael Page in Q2, permanent recruitment represented 85% of gross profit, but in Page Personnel it was less, at 60%.Looking now at our gross profit by the disciplines in which we operate. The disciplines we do outside of Accounting and Financial Services represented 66% of the group collectively, a new record up from 63% at the end of 2017, reflecting the continuing success of our diversification strategy. Accounting and Financial Services, which represented 34% of the group, grew 9%. Within this, Financial Services, which represented 7% of the group, grew 29%, with strong performances across all regions.Our technical discipline category, which represented 24% of the group, grew 26% and is now our second largest. Within this, there were strong performances from Property & Construction and Engineering.Our Professional Services category also represented 24% of the group and grew 22% with our technology and secretarial disciplines delivering strong growth.Finally, our Marketing, Sales and Retail disciplines, representing 18% of the group, grew by 10% despite particularly challenging conditions in retail.Having added 786 fee earners in 2017 and 183 in Q1, we added a further 136 in the second quarter. The additions were mainly into our Large, High Potential markets as well as those where we saw the greatest growth, such as France and India. By region, we added 44 in EMEA, 46 in Asia Pacific and 62 in the Americas. In the U.K., fee earner headcount fell by 16.Operation support staff headcount increased by just 10 in the quarter to get a joining ratio of fee earner to operational support staff of 93:7. Our overall fee earner to operational support staff headcount ratio was maintained at 78:22. At the end of June, the group had a record 5,816 fee earners and 1,641 operational support staff, a total headcount of 7,457.This fee earner headcount and gross profit chart illustrates both our record second quarter gross profit at reported rates and also our record fee earner headcount. The last column on the right shows the quarter in constant currencies to enable comparison with Q2 2017.I will now hand you over to Steve, who will take you through the rest of the presentation.

[Stephen J. Ingham]

Thank you, Kelvin. I will start with a brief overview of our regional performance before presenting each region in more detail.Gross profit in the first quarter grew 16.0% in constant currencies. As Kelvin mentioned earlier, growth in this quarter was impacted positively by the timing of Easter. The group maintained the double-digit growth it achieved in the last 2 quarters, following 8 quarters of single-digit growth. Our Large, High Potential markets, representing 33% of the group, grew 24%, collectively, with all 5 markets delivering record quarters.Our largest region, Europe, Middle East and Africa, which represented 48% of the group, grew 18.6% and delivered another record quarter. This was driven by France and Germany, which both also achieved record performances.Asia Pacific, representing 20% of the group, delivered growth of 18.4%, with strong performances in Asia and double-digit growth in Australia.In the U.K., where market conditions remain challenging, gross profit declined by 1.9%.The Americas, representing 15% of the group, grew 29.2%, with record quarters for both North and Latin America.Across the group, 19 countries delivered record quarters and 20 achieved growth of over 20%. Adverse foreign exchange movements impacted our reported performance by 1.5 percentage points.Moving to each of our 4 regions and starting with the largest, Europe, Middle East and Africa, which represented nearly half of group gross profit. With a headcount of over 3,000, EMEA delivered its 16th consecutive quarter of double-digit gross profit growth, up 18.6%. Within the region, 13 countries saw growth of over 10% and 7 delivered record quarters. For the first half, growth was 18.5%.Michael Page, which represented 56% of EMEA, grew 21%, while Page Personnel, which delivered record quarters in Belgium, France, Germany, Italy, Spain and The Netherlands, grew 16%.France, our largest country in EMEA, representing 1/3 of the region and 16% of the group with over 700 fee earners, grew 15% and delivered another record quarter. Both Page Personnel and Michael Page grew at similar rates despite the challenging -- challenges of mid-week bank holidays and the disruption of strikes. Germany, which represented 7% of the group, delivered a sixth consecutive record quarter and grew 25%.In our Michael Page Interim business, now around 20% of Germany, our sustained investment in fee earner headcount, up nearly 70% year-on-year, drove another record quarter and growth of 38%.Benelux grew 24% with strong performances from Belgium and The Netherlands, up 41% and 18%, respectively. Southern Europe delivered a second consecutive record quarter and grew 15%. Spain, 5% of the group, grew 8% despite challenging conditions in Catalonia, which represented around 40% of our Spanish business. Italy and Portugal also delivered record performances in the quarter, up 23% and 35%, respectively.The Middle East and Africa, which represented 2% of the group, grew 30%, driven by a record performance in the U.A.E, up 42%.Reflecting these positive trading conditions, fee earner headcount grew by 44 in the quarter. Fee earners were added to most European businesses, but our larger investments were in France and Germany.Our Asia Pacific region, which represented 20% of group gross profit, grew by 18.4%. In Asia, which represented 75% of the region and 15% of the group, we grew 21%, a fifth consecutive quarter of double-digit growth.Greater China, the group's third largest market after the U.K. and France and representing 9% of the group, grew 18%. There were record performances from our Shenzhen, Guangzhou and Beijing businesses, and our Chengdu office started well in its first full quarter.South East Asia grew 18%, driven by strong growth in Singapore, up 25%. During the quarter, we opened in Vietnam, our fifth country in South East Asia, and we now have over 200 fee earners across these 5 markets.India delivered another record quarter, growing 27%, and now has over 100 fee earners operating out of 2 offices, Mumbai and New Delhi. Japan delivered a record quarter and grew 35% driven by our investment in fee earners in both the Gaishikei and the domestic Nikkei market.Australasia, which represented 25% of Asia Pacific and 5% of the group, grew by 11% in the quarter. Australia's growth improved to 10%, its first quarter of double-digit growth for 6 years. This was driven by our Michael Page businesses and strong growth in Victoria and Western Australia. Our new office in Canberra had a successful first half. The region added 46 fee earners in the quarter into countries where we saw the strongest growth.In the U.K., which represented 17% of the group, gross profit declined by 1.9%, an improvement on the decline of 7.1% in the first quarter, in part due to the timing of Easter. Although market sentiment remained weak, there were pockets of growth. In Page Personnel, which represented 24% of the U.K. and operates primarily in finance and business support, we delivered growth of 5%. In Michael Page, there was strong growth in our Financial Services discipline, offset by weaker performances in Sales and Retail. Overall, Michael Page declined by 4%.Most regions performed in line with the U.K. average with our offices in the Midlands the best performing relative to the prior year. Reflecting these challenging trading conditions, fee earner headcount fell by 16, a decrease of 2%.Finally, to the Americas, which represented 15% of group gross profit, with a headcount of over 1,200. This was our fastest-growing region, up 29.2% in the quarter, its best quarterly growth rate since 2011. Both North and Latin America delivered record quarters.In North America, which represented 9% of the group and 57% of the region, we grew 27%. The U.S., representing 90% of North America, grew 27% and delivered a record quarter.We continue to diversify our geographic and discipline mix in the U.S. with our offices outside of New York now representing 55%, up from around 25% from a few years ago and grew 38%. Our Boston, Houston and Los Angeles offices delivered particularly strong growth. We added 17 fee earners in the quarter and 61 in the last 12 months, an increase of 18%.Canada delivered a record quarter with growth of 30%, its best quarterly growth rate for 3 years. Latin America, which represented 6% of the group and 43% of the region with a headcount of over 700, grew 32%, achieving another record quarter. Mexico grew 25%, delivering a record quarter. Brazil recorded a third consecutive quarter of double-digit growth and grew 23%, up from 12% in the first quarter. Growth was driven by Page Personnel, which accounted for over 45% of gross profit and grew 41%.The other 4 countries, Argentina, Chile, Colombia and Peru, with collective headcount of over 300, all delivered record quarters and grew 46% collectively. Fee earner headcount in Latin America increased by 37 in the quarter, with additions spread throughout the region.Next, I would like to provide you with an update on our Page Vision and Digital Strategy. At our Investor Afternoon, we presented our updated Page Vision for the group, which was to deliver GBP 1 billion of gross profit from a total headcount of 10,000. This second quarter has continued our progress towards that goal.In headcount terms, we now have a record total headcount of 7,457, up from the 7,029 at the end of last year. In gross profit terms, in the last 12 months, we have generated GBP 756 million, up from GBP 674 million in the previous 12. If the group's current growth rate is maintained, and obviously, there are many external factors that could influence this both up and down, we would reach our gross profit goal in 2 years' time.During the afternoon, we also set out our vision for how we use platforms and tools that allow us to identify our customers. We want to know as much as we can about them to facilitate ongoing relevant communication. We want to engage proactively, to build ongoing relationships, creating a connected customer experience. We are using technologies to build a robust framework to drive customer acquisition from sources, including recruitment-specific media partners, but also using noncore recruitment media, such as Google and Facebook. Engaging our candidates and clients from these initial contacts through to life cycle campaigns enabled through sales force allows us to leave our consultants to do what they do best: nurturing relationships at a human level.Over the last 3 years, we built a program on the sales force platform of ongoing customer contact, supporting them throughout their career journey, whether a candidate or a client. This program is live across all our markets with continuous improvements.Our customers want to hear from us. We continue to outperform with our engagement rate 3x the current recruitment industry benchmarks, leading to strong growth in job applications.In the digital presentation, we announced the launch of our job matching tool on our U.K. website. Since then, we've expanded the program into India and Spain, enabling us to further refine the algorithm that sits behind this enhancement to deliver jobs best suited to our visitors.Having now received thousands of applications through the tool, we're very encouraged by the results. In particular, visitors who has shown matched jobs at 80% more likely to apply than those shown results by our standard keyword search.We also talked about how we're pursuing technologies outside of recruitment that meet our customer expectations, giving them a personalized experience more commonly associated with large-scale e-commerce businesses. Powered by Thunderhead, we carry out real-time audience analysis on thousands of parameters, all to present each customer with content and jobs that are relevant to them individually. Now running on our U.K., German and Japanese websites, we've seen a double-digit growth in the likelihood of visitors to sign up to e-mail job alert in each market and a large increase in clicks on our recommended jobs.Deploying Thunderhead and personalization into our CRM program, again using real-time insights on candidates' interests, allows us to deliver behavior-driven campaigns. These highly personalized e-mails are delivering open rates that are 3x and click rate through -- click-through rates 10x the industry average. Each of these technologies allows us to build a better understanding of our customers and deliver a connected customer experience, keeping us front of mind at all times.I will now finish with a brief summary of our second quarter results. The group delivered another record quarter of gross profit, the first time, we've achieved gross profit of over GBP 200 million in a quarter. This represented constant currency growth of 16.0%, our best quarterly growth rate for 7 years.Our Large, High Potential markets grew 24%, collectively, with all 5 delivering record quarters. During the quarter, we also opened in Vietnam, our fifth country in South East Asia.We added 146 heads in the quarter, of which 136 were fee earners, and now have a record fee earner and total headcount of 7,457.Our financial position remain strong, with net cash of around GBP 85 million, broadly in line with our cash position of a year ago. As a result of this pickup in the group's growth rate, we now expect operating profit for the year to be slightly ahead of the current consensus of market forecasts.Kelvin and I will now be happy to take any questions that you may have.

[Operator]

[Operator Instructions] Our first question comes from Bilal Aziz from UBS.

[Bilal Aziz, Associate Director and Equity Research Analyst]

Just 2 questions from me, please. Firstly, just in France, still clearly growing very strongly here despite the noise in the market through the first half of the year. I think you perhaps suggested that Page Personnel and your Michael Page brand both grew at the similar sort of rates. Do you feel there's any difference in the level of disruption you faced in either of them? Although, I appreciate it would be difficult to quantify given the impact. And secondly, in the U.K., the improvement of minus 2%, clearly a reversal, of the disruptions you suggested, do you feel that's a sort of decline you can probably sustain conversion margins being flattish year-over-year given the headcount reductions you've made through the quarter?

[Stephen J. Ingham]

Right on both of those, Bilal. If I may, France, first of all, you're quite right, very, very difficult to calculate or estimate the disruption. Bank holidays happen every year, of course, but when they fall, differs in France, sometimes they're midweek, sometimes they're on a Monday, sometimes they're at the weekend. This year, they did fall, quite a few of them midweek. On top of that, we clearly had some strikes particularly related to transportation, particularly in Paris, which meant it was either difficult for a temp to get to work or difficult for a perm to get to an interview. I think, in the case of Michael Page, which is more perm than temp, the majority of candidates will still eventually get to an interview, so they'll arrange those interviews on days that aren't going to be strike-bound. And in Page Personnel, we possibly will have lost some revenue as a result of strikes and people not being able to get to work. It may have taken a small amount of our growth rate, which we were pleased with at 15%. And it was broadly consistent over the quarter as well. In terms of the U.K., again, difficult to estimate the exact impact of Easter. And I think Easter is probably largely responsible for the difference between the quarter 1 growth rate and the quarter 2 growth rate. If you were to add the 2 together and roughly get 9% and divide by 2, you're at minus 4.5% as a sort of run rate in the first half. The last 2 years, we've been negative 3 point something. So I think we're probably feeling like the U.K. will continue at low negative single-digit growth for the rest of the year. Clearly something that emerge in terms of a Brexit decision, and we may have some clarity on that by the end of the year, I hope, and that may impact things, but it would be difficult to estimate, I think, for very obvious reasons for those of us that read what's going on as Brexit tries to finalize its decision in place. But at the moment, I think low single digit is probably where we're going to remain for the rest of the year in the U.K. You're quite right, the last part of that question was conversion rate. Our headcount, fairly in line with the revenue, we feel at the moment we can sustain a similar level of conversion this year to last.

[Operator]

We currently have 3 more questions on the line. Our second question comes from Steve Woolf from Numis Securities.

[Steven John Woolf, Analyst]

Just in terms of China, which has certainly surprised me on the upside, just if you could sort of outline some of the end markets, given the macro data that might have been stronger than expected, I mean, just in terms of the strength there versus some of the macro data. And secondly, in Singapore, where I think you're sort of doing stronger than some of your peers, just again some of those end markets which might have -- you're doing pretty well and given some of the market backdrop.

[Stephen J. Ingham]

Sure. Well in China, we've had a strategy of our ongoing -- trying to develop the local Chinese market. When we first established ourselves in different cities, we tend to call up the clients we know the best, and they are often the multinationals. But we are now seeing an increasing percentage of our business coming from both local and international Chinese companies. If you look at where we've done well, we had a record quarter in Shenzhen, for example. Shenzhen is far more focused on local Chinese companies than somewhere like Shanghai or, obviously, Hong Kong. So we're having a good level of success developing those Chinese clients. Many of these cities that we're in, including Shenzhen and Chengdu, we are almost the only operator of an international recruitment standing, and so, therefore, it's a very, very underdeveloped market. And I think, structurally, this gives us a huge potential opportunity for growth. In terms of the end market, it's everywhere. From manufacturing -- high-tech manufacturing through to food and consumer goods, business services, property, engineering, literally the full remix, as we would do here in the U.K. And so the opportunity in these huge cities, Shenzhen has a population roughly 25 million, with almost no competition, the scope for growth is enormous. That all said, the oldest office that we have in China is Hong Kong, and we had a record quarter in Hong Kong. And our growth, albeit slightly less than the overall position in China of 18%, was still strong. And what we're seeing in Hong Kong is the emergence of more and more Chinese companies. I was there recently and, more and more, you hear in the office Mandarin being spoken rather than just English and Cantonese. So again, that appears to be a good opportunity as we continue to grow at record levels in Hong Kong, so not a huge surprise for us. We've invested heavily in headcount. Clearly, we've opened another office. It takes our office headcount to about 8, I think, for China, and there's opportunity. In terms of Singapore, yes, look, we're pleased. When -- it's a fairly developed country with lots of competitors of an international standing. And a year ago, all of us were negative, particularly, I think, hit by the slowdown in financial services. What we've seen is a steady pick up. We've had good growth over the last 3 quarters. This is the strongest growth yet in the last 3 quarters, and we're delighted with it. And it's everywhere, again, we're dealing with a number of large Internet companies. We do a lot in business services, financial services. But to be honest, there is a broad spectrum of clients that we've got. We've got a very strong team there. We've hired locally as well as transferred some people in that have wanted to work in the Singapore market. And for us, it's a very big and very profitable business. But if you get the team right and the management right, that helps as well. And I think that's why we've had good growth over the last 3 quarters.

[Steven John Woolf, Analyst]

Just one follow-up just in terms of the U.S. offices. Just sort of speaking to Kelvin this morning, and he mentioned a sort of a good niche borne out in the U.S. in areas like construction. And also, you're obviously aware that you guys have got some decent scale now building in some of those sort of more regional offices with more than 50 people there. Is there any other areas that you draw out beyond construction where you sort of feel you've got more of a presence now beyond construction?

[Stephen J. Ingham]

Yes, I would say, marketing. I would say engineering, supply chain, obviously, accounting and then, with New York, financial services. So the breadth in terms of discipline is very pleasing. And then the breadth in terms of different offices, likewise. So yes, the fastest portion of our business at the moment is construction. But I think we've now got a number of different revenue streams, both geographic and discipline, that gives us a more stable platform than we had when we were just big in New York and strong in financial services. So we think it's a large and diverse business now that we have in the States, we can only improve that as well. And from the platform of offices that we've got, we think, again, the potential to become a very, very big player over time, and it will take time, naturally, as we grow our management team, is enormous.

[Operator]

Our next question comes from Anvesh Agrawal from Morgan Stanley.

[Anvesh Agrawal, Research Associate]

I just have one question, a follow-up on Slide 16. Now the targeted gross profit of GBP 1 billion would represent a growth of around 32% on last 12-month GP. And then if you look at your target headcount of 10,000, that's again up 34% versus the current headcount. This would imply no productivity improvement in consultant productivity, which looks a bit odd, given the growth rate and everything. So can you please explain that dynamic a bit more, please?

[Stephen J. Ingham]

Yes. I mean, first of all, to be very clear, you've given a growth rate of 30%, we haven't given a timeline as to how long that will take. As I said in the statement quite clearly, things can change in terms of the economic outlook, both up and down. This group has grown at 37% in 2007, so we know we can grow that fast, but at the moment, we're growing at 16%. So -- and clearly, things will shake out over the next few years. I'm sure that we'll change that growth rate up and down. What we've done is we've used loose figures to be able to provide a vision internally for the business, which we've now communicated in the capital markets externally as well, of GBP 1 billion in GP and 10,000. As you know, at the beginning of the year, we appointed the COO to the business to focus on productivity. If they're successful, and we're already seeing signs that they are, then productivity could move that GBP 1 billion, coming off 10,000 people, upwards. We would certainly hope to do that. And we've, like I say, appointed a COO. One of our most experienced -- or 2 or our most experienced people sharing that role at the moment, with a combined level of experience of nearly 60 years in Page and a deep understanding of our front office operations. So I'm pretty confident that we will be able to drive productivity of those people upwards as well. So -- but they were broad figures that we've used as a target. I would hope that if we have 10,000 people, we could increase productivity over that time as well, and therefore do more than GBP 1 billion. And I would just add as well that, clearly, you could apply today's conversion rate to then work out what the operating profit might be at that time as well. That said, depending on how quickly we get to that figure, will depend on the conversion rate that we manage to achieve when we're doing GBP 1 billion in GP. We've been undertaking a number of projects over the years to try and make the business more efficient than it is today, and a lot of those projects have either completed or are coming to the completion over the next year to 2 years. And Kelvin took us through a waterfall slide at the Capital Markets Day to show the impact that those projects will have on our conversion rate, which improves it. And like I say, if our growth rate is faster and we get there quicker, then that will also improve our conversion rate. So we gave a range in our vision of what the profit figure could be if we're doing GBP 1 billion in GP of anywhere between GBP 200 million and GBP 250 million. Again, it's a broad number, and there are a number of levers, such as productivity, that can improve that as well. So it does depend on a lot of things. But when you are creating a vision several years in advance for a business, you're not going to be completely accurate because a number of things can change over that period.

[Operator]

We have one more question on the phones, from Paul Checketts from Barclays Capital.

[Paul Daniel Alasdair Checketts, Director]

I think I've got 3 areas of questions, if I can. The first is on North America. Can you -- what's not quite clear to me is what drove the sharp acceleration. You've obviously given us a feel for where it's going well, but could you maybe flesh that out in terms of how much is market, is some of it wage inflation? Is it things that are going on internally that have driven that improvement? And when I look to the rest of the year, you've got a really tough comp in the next quarter in North America. What's your expectation of sense for what the sustainable rate of growth is there? That's about 11 questions for the first one. The second is just on Brazil, and that was a lot better, I thought, in the quarter. Are you getting good operating profit leverage on that growth coming through? If you wouldn't mind giving us a feel for that. And then the last is on operating profit at the group level. Kelvin, maybe you'd give us a feel for where you think the half year will come in. And given the high gross profit growth rates we're seeing, what are your expectations for drop through in the second half?

[Stephen J. Ingham]

Okay, as you've asked, I'll do the first 3, and Kelvin can focus on the fourth. In North America, first of all, look, we put a lot of heads in last year. Particularly, those heads landed in our offices outside of New York. For example, LA, being our newest office. That office now is up to around 80 fee earners, and 2 years ago, would have been mid-20s. So -- and we have seen a lot of growth coming from those offices. And clearly, there's a huge market to go at in somewhere like California, likewise in Texas, likewise up in Chicago. And there is also, and I've always said this, a critical size beyond which an office gets where life becomes a lot easier from the point of view you're less exposed to 1 or 2 high-billing consultants. And that is once you get above about 40 or 50 people, the office is much -- it's much easier to achieve sustainable growth. And so I think, really, the fact that we've managed to expand all of these offices to over that number, the fact that we've also cemented in good, strong management now that are well-established in America, even locally, we've now got 2 American managing directors. And equally, we've managed to successfully transfer a number of people into the market. Now just because they're good in one market doesn't make them good in another, and sometimes it takes a while for these new Managing Directors to transfer from one market, such as the U.K., to land well and then become fully productive. But we now have a very strong management team in the U.S. In fact, the depth that we have at Managing Director level, for example, would be probably broader than, actually -- so there's more Managing Directors in our U.S. business, than, say, France. And that's because the belief we have in the U.S. market has a structural opportunity for the group going forward. So it's the strength of management, it's the investment in headcount in some of those offices outside of New York. And I think it's also, as we've tried to diversify into a number of new disciplines, such as we mentioned earlier Property & Construction, Engineering and supply chain, again, they're starting to get to a critical mass where sustainable growth is a lot easier. And clearly, our competence in those new disciplines continues to grow. So it's a combination of internal strength, depth of management, investment in headcount in those regional offices and sustainable growth that can be achieved once we get above a critical mass in offices and disciplines. The tough comp in the U.S. Well, yes, you're right. In the third quarter, we did do particularly well last year. We've now been growing at a sustainable rate for some time. We believe we got a really good platform of both offices and management, and we think it's still sustainable going forward. That's our forecast as we sit here today, assuming nothing else changes. Clearly, in the America, a lot can, as we've seen this morning. In terms of Brazil, yes, we're delighted with the improvement in growth. It was 12% in Q1 and 23% in Q2, that's a good step up. We did what we always do, and we maintained our depth of management in Brazil. We transferred a few out when things got really tough a few years ago to other markets such as Mexico. But we kept our core experience there in preparation for when the market did improve. We've also started to do temporary recruitment in the biggest cities across Latin America, the most successful of which has been Brazil. It's fair to say that, in the past, in many developing economies, Latin America being one of them, that culturally, for cultural reasons, there really wasn't an opportunity for us to grow a temp business in white collar. That said, clearly, it's culturally even more unacceptable to not work. And so, particularly in Brazil, it would be better to be a temp than not work at all. So we've seen the emergence and a rapid emergence of a temp business in Brazil, and that's really helped us grow faster. And again, we didn't have a lot of expertise in Latin America on growing a temp business. It's very different than growing a perm one. That expertise only gets better as we continue to grow, and that's helped us. We've also just literally, I mean yesterday, cut the ribbon on a new office in São Paulo, which, for the first time, brings together our Page Personnel business and our Michael Page business, such as -- sat next to each other now, hopefully, therefore, working harder to nurture clients to our benefit. And so we're quite excited about all of that. The only thing I would add and the caveat I would always add in Latin America is that we've got a number of elections in the second half of the year, Brazil included. And so I think we have to have that caveat in terms of what may or may not happen as a result of that. But yes, delighted with the momentum we've got, and we're pretty confident that we're in good shape at the moment going forward.

[Kelvin Stagg]

On your last question, and actually we haven't closed books yet, so -- or not fully closed the books, so exactly what the number is, I couldn't tell you even if we were ready to. I guess, if you wanted to take an indication, I think consensus for this was around GBP 134 million as we put in the statement. We said we're slightly ahead of that. If you used last year's percentage split between first and second half, which was about 48%, 49%, that would give you somewhere around GBP 64 million to GBP 66 million in the first half on the GBP 134 million. So if that goes up slightly, it'll be a little bit more than that, I suspect, but somewhere in that range. In terms of the drop through, the drop through is affected by quite a lot and it actually depends on which markets grow fastest, if you like. I think in places like, for example, Brazil, we've got relatively low conversion rates at the moment, we've got low occupancy rates in some of our offices. Whereas actually something or somewhere like Michael Page Interim in Germany, we are intentionally trying to run that at almost 0 conversion rates to try and get critical mass in that market. So it's a mixture of the market, it's a mixture of the headcount speed that goes through. Last year, it was somewhere around 20%, 25% in terms of drop through. It may be a little bit ahead of the bottom of that range this year, but I don't think it would be far in excess.

[Operator]

[Operator Instructions] Sir, we currently have no more questions on the lines.

[Stephen J. Ingham]

Well, as there are no further questions, thank you all for joining us this morning. The next 2 dates for your calendar are the interim results on the 8th of August and the third quarter trading update on the 10th of October. Thank you all.

[Operator]

Ladies and gentlemen, this concludes today's call. You may now disconnect your lines, and have a lovely day.

[Stephen J. Ingham]

[indiscernible]

[Kelvin Stagg]

Thank you.