Robert Walters plc

Good morning and welcome to Robert Walters Q3 Trading Update call. If you would like to ask a question during today's call, please press star 1 on your telephone keypad. I would now like to hand the call over to David Bower, CFO of Robert Walters. Please go ahead.

Thank you. Good morning everyone and thanks for joining our Q3 2025 Trading Update. I'm David Bower, Chief Financial Officer. And here with me is Toby Falston, Chief Executive. To begin, I'll make a few remarks regarding performance at the group level before Toby touches on trading in our service line and the wider market backdrop. As ever, we'll then be happy to take any questions you may have. As I've stated, all net fee income percentage movements are in constant currency terms. Looking first at group trading during the third quarter. Net fee income was down 12% year-on-year, a slight sequential improvement compared to the second quarter, and with fees in September down 9% year-on-year. As Toby will touch on in more detail in a few moments, the overall group results continue to represent a blend of quite marked differences in performance across our geographic portfolio. In particular, we saw a noticeably better year-on-year performance in Asia Pacific, our largest regional segment by net fee income, and an improvement in the UK, whilst Northern Europe remained challenging. Furthermore, it's worth highlighting a slight contrast between our two largest service lines. In specialist recruitment, fees were down 10% year-on-year, a sequential improvement on the second quarter and indeed the first half. Meanwhile, fees declined 22% in recruitment outsourcing. While this was a sequential slowdown from the first half, it reflects the non-renewal of certain client contracts which feeds from continuing clients being more stable year on year. In terms of activity levels in specialist recruitment, interview volumes grew quarter on quarter, particularly in Asia Pacific and the UK. Turning to consider group costs, headcounts and productivity. Here we are taking the right actions to drive a return to profitability in 2026. Over the quarter, our cost base reduced compared to the first half run rate to now sit around £24 million per month. And we made further progress towards delivering at least £10 million of annualised structural cost savings by 2027, particularly through positive steps on our finance functions transformation. Group headcount as of 30 September reduced by 3% versus the half-year position, with this rate of reduction mirrored in both our fee earner and non-fee earner populations. Looking ahead, whilst we will continue to be highly selective in replacing natural attrition, we believe fear inner levels are broadly appropriate for the current market conditions. Meanwhile, work remains ongoing to relocate appropriate non-fear inner activities into our global business services hubs. We remain resolutely focused on the importance of fear inner productivity to our business model And you'll recall this is the most material of our five building blocks to our medium term conversion rate target of 16 to 19%. As such, we were encouraged to see continued growth in overall productivity in terms of group net fee income per fee earner, which was up 7% year on year in the third quarter. Within this, in our specialist recruitment service line, it was also pleasing to see volume productivity in terms of term placements per term fee earner up 8% year-on-year. Sustaining these productivity improvements is a key focus for our teams as we close out the year and look ahead to 2026. Turning briefly to the balance sheet, we closed the third quarter with net cash of around £27 million. As communicated at the half-year results in July, the Board will review the potential to reinstate capital returns to shareholders at the time of our full year results in March 2026. With that said, I'll now hand you over to Toby to take you through training in our segments in the wider market backdrop.

Thanks, David. Morning, everyone. I'll make a few comments on our specialist recruitment service line in our four regions before more briefly turning to recruitment outsourcing and talent advisory. Looking first at Asia-Pacific specialist recruitment, net income is flat year-on-year, a clear improvement versus quarter two in the first half. This better performance was broad-based. Japan was down 2% with continued good trading intent, whilst we saw further stabilization intent volumes in both Australia and New Zealand, with total net fees down 4% and 8% respectively in those markets. Meanwhile, Southeast Asia grew 1% underpinned by Malaysia. Now turning to look at Europe, and as David mentioned a few moments ago, conditions here remain challenging. In France, where a new political uncertainty is, of course, well publicized, we saw a sequential slowdown compared to the first half, with quarter three fees down 24%. We have recently put a new leader in our French business and are pleased with the early action that they've taken to drive an improvement in performance. The Netherlands continue to navigate short-term turbulence from the enforcement of self-employment legislation. and Belgium remain challenging. Looking at external market indicators, Spain is a relative bright spot in Europe, and you will recall we installed a new leader a year ago, and our actions to drive better performance in that business continue, and the fees were up 1% year on year. Turning to the UK, here our specialist recruitment service line was up 6% on the prior year, the first quarter of year on year growth since the end of 2022. The good performance was led by London, with fees up 23% year-on-year, and both perm and temp fees grew, and there were notably strong performances in our core specialisms of accounting and financial services. Conditions remain more muted in the regions, however fees were broadly flat year-on-year, excluding the impact of office closures, and the absolute level of quarterly fees has been stable through 2025 to date. In rest of the world, specialist recruitment fees were down 26% year-on-year, or 18%, excluding the impact of office closures. Our largest market, the Middle East, was down 10% year-on-year. However, in absolute terms, fees were flat to slightly up for the fourth consecutive quarter. In the Americas, where fees were down 43% year-on-year, we continue with corrective actions to improve our performance. And just as a reminder, Rest of the World accounts for just 5% of our specialist recruitment net fee income. Going to recruitment outsourcing, fees were down 22% year on year, behind where we tracked in quarter two. And as David mentioned earlier, this was driven by the non-renewal of certain clients, which in quarter three annualised, where we had fee contributions from those clients last year. Excluding the impact of this, fee income was more stable year on year, which is where the service line has been trending so far this year. We've made real progress in improving our customer proposition in outsourcing, and this was underlined by the launch and expansion of a permanent volume hiring partnership with an existing customer shortly after the quarter end. And I want to congratulate all of our colleagues involved for that significant win for our business. In Talent Advisory, where we support organisations through the provision of market intelligence and talent development advisory services, we continue to be encouraged by the market opportunity, as seen through our lead flow. This provides us with great momentum as we progress through the fourth quarter. So as we conclude then, just a few words on how we see the market backdrop. As seen from our trading, there was clear improvement in a number of our Asia-Pacific markets, and a return to growth in UK recruitment. However, with the exception of Spain, the larger European markets remain challenging. There are signs from external hiring market indicators which point to sustained improvement in a select number of hiring markets, though overall conditions globally remain fragile. And as such, our planning assumption continues to be that any recovery in hiring markets will develop very gradually. That being said, we continue to execute against our disciplined entrepreneurialism strategy and are highly focused on continuing to take the right actions to position the business strongly. On that note, we'd now be very happy to take your questions.