Robert Walters plc

Hello and welcome to the Robert Walters Q1 of 2025 Trading Update call. Please note this conference is being recorded and for the duration of the call, your lines will be on listen only. However, you'll have the opportunity to ask questions. This can be done by pressing star 1 on your telephone keypad to register your question. If you require assistance at any point, please press star 0 and you'll be connected to an operator. I will now hand you over to your host, David Bauer, CFO, to begin today's conference. Thank you.

Good morning, everyone, and thanks for joining our Q1 2025 trading update. I'm David Bauer, Chief Financial Officer, and joining me this morning is Toby Falston, Chief Executive. At the beginning, I'll make a few remarks around performance at the group level before Toby touches on trading across our regions, as well as the market backdrop. As ever, we'll then be happy to take any questions you may have. As usual, all net fee income percentage movements are in constant currency. So you'll have seen from this morning's statement, group net fee income was down by 16% year on year in the third quarter, as trading conditions overall remain challenging across our markets. We saw some pockets of growth in the UK and broadly stable activity levels in Asia Pacific. However, the weaker sentiment observed in Europe in late 2024 continued in the first quarter. Forward activity levels for the specialist recruitment business, namely job flow and interviews, followed the typical shape we see in Q1, with activity levels ticking up in March following a quieter January and February. For our specialist recruitment service line overall, job flow was in line with the first quarter last year. Returning now to consider headcount and productivity, we closed the quarter with group headcount just over 3,200, which was down 3% on the 2024 closing position. Within this, fee earner headcount fell by 4% quarter on quarter, whilst non-fee earner headcount was down by 1%. In managing fee earner headcount, we remain highly selective in replacing natural attrition, with fee earner headcount levels now down by 28% against the peak reached in the first quarter of 2023, and down by 16% year-on-year, in line with reduction in fees. Overall productivity for the group, measured by net fee income per fee earner, remained strong and was up by 2% year-on-year in constant currency terms. This was underpinned by stable fee rates and positive effects from mixed and wage inflation. As you'll be aware, one of the key drivers for our overall model is volume productivity in our specialist recruitment service line, measured in terms of PERM placements per PERM fee earner per month. Guided by job flow levels, our strategic approach has been to not let PERM fee earner headcount fall wholly proportionally with volumes. And this, along with the market conditions, explains a 7% reduction in volume productivity. Sitting just below 0.8 PERM placements per PERM fee earner per month, we continue to have a good deal of headroom compared to a long-run average volume productivity of around one per placement per month, underpinning the opportunity we have to drive operational leverage over the medium term. Looking at the balance sheet, in line with the typical first quarter profile, where we tend to see an outflow driven by fee and available pay in respect to the prior year, we close the quarter with net cash of around £42 million. So I'll now hand you over to Toby to take you through trading in our regional segments and the marketing backdrop.

Thanks, David. Morning, everyone. Let's turn first to our Asia-Pacific segment. Here, fee income is down 15% overall. In specialist recruitment, fees were down 11%, a few points lower than the fourth quarter. In Japan, the 7% reduction in fees reflected more cautious client behavior in PERM, which extended time to higher. But we continue to see positive trends in temp. In Australia, fees were down by 11%, albeit with some pockets of growth in certain markets, and conditions remain more favourable than in New Zealand, where public sector demand for temps is still yet to improve. We continue to see a more resilient performance in Greater China, with fees down 1%, led by growth in the mainland, while Southeast Asia declined by 16%. Asia-Pacific recruitment outsourcing fee income declined by 42%, reflective of a client account not being renewed. Turning now to Europe, where fee income overall and in specialist recruitment was down by 22%. In the Netherlands, where we're over 70% weighted towards temp, there was increased uncertainty from new legislative enforcement powers regarding self-employment, driving the 30% reduction in fee income. We do, however, feel confident in our ability to help clients navigate the regulatory change, particularly given our status as a larger provider, and therefore potentially take share, particularly as the landscape settles. In France and Belgium, where fees were down 17% and 15% respectively, conditions remained tough. And in Spain, which is in the early stages of a turnaround with new leadership, fees were down 32%. but have been largely stable sequentially over the prior two quarters. In Germany, where the cornerstone of our offering is in accounting and finance and technology, we saw tougher conditions in PERM. However, interim volumes were up year on year. Turning to the UK, fee income was down 4% overall, a notable improvement from the recent trend. Specialist recruitment fee income was down by 1%, We saw another quarter of growth in London, the fees up 22%, whilst in the regions, the 22% decline in fees is partly a function of the comparative predating the recent office network consolidation. Recruitment outsourcing fee income was down by 8%, driven by lower hiring volumes. In our rest of world segment, fee income was down by 18% overall. Specialist recruitment fee income was down by 26%. We saw a slightly more muted performance in the Middle East, with fees down 12%, whilst the USA performance, with fees half the prior year level, partly reflects, again, the office network consolidation during the quarter. There was a more resilient performance in recruitment outsourcing, with fees down 1%. So in summary, then, global hiring markets remained challenging during the first quarter. Thinking about our activity levels in specialist recruitment in terms of job flow and interviews, these were stable to slightly up year on year in the UK and Asia Pacific. In Europe, meanwhile, the weaker sentiment seen in late 2024 continued in the first quarter. Now, more recently, we have, of course, seen increased uncertainty regarding the flow of global trade due to tariffs. and our early interactions with clients and candidates informs our view this is likely to be a further headwind to confidence levels in the near term, limiting visibility on the outlook for the balance of the year at present. Notwithstanding that, we remain highly focused on our strategic initiative to strengthen the business, and this combined with the full suite of talent solutions we have to support our clients and the experienced and motivated teams that deliver them means we will continue to take the right actions to navigate the challenging trading environment. And with that, David and I would be happy to take any of your questions.