Pagegroup Plc

Good morning, everyone, and welcome to the Page Group 2023 third quarter trading update. I'm Kelvin Stagg, Chief Financial Officer, and on the call with me is Nick Kirk, Chief Executive Officer. 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 for this presentation, and which will also be available on our website following the call. The group delivered gross profit of £242.2 million in the quarter, a decline of 7.9% in constant currencies against Q3 2022. This was a resilient result despite a slower end to the quarter. Our largest region, EMEA, was our best performing. However, tough market conditions affected performances in Asia, the US, and the UK. In line with the continued challenging trading conditions, AFIANA headcount reduced by 310 or 4.8% in the quarter, with reductions in all regions. AFIANA headcount ended the quarter at 6,075, 996 or 14.1% lower than in Q3 2022. The group had a total headcount of 8,140. Due primarily to this reduction in fee earners, gross profit per fee earner and measure of productivity increased 4% compared to Q3 2022. We have a strong balance sheet with net cash at the end of September of around 136 million pounds. This compares to 96 million at the end of Q2 and is before the special and interim dividend payments to be paid on the 13th of October, totaling 66.2 million pounds. I will now give a brief financial review. Growth in temporary recruitment remains stronger than permanent during Q3, which is indicative of the current uncertainty in the market, with many clients seeking more flexible options. Temporary recruitment grew 5.8% against Q3 2022, with permanent down 12.1. Reflecting this, our ratio of permanent to temporary gross profit was 72.28, down from 74.26 last quarter, and down from 76.24 in Q3 2022. In Michael Page, permanent recruitment represented 82% of gross profit, while in Page personnel it was less, at 48%. At lower salary levels, there is often more choice between permanent and temporary solutions, and accordingly, the current market uncertainty led to a bigger differentiation between permanent and temporary performances in Page personnel. In Q3, we decreased our Fiona headcount through natural attrition by 310%, or 4.8% with reductions in all regions. This followed the Fiona reduction of 255 or 3.8% in Q2. Our operational support headcount also decreased by 122 or 5.6% in areas such as operational support and candidate acquisition. Our total headcount is now 971 or 10.7% lower than in Q3 2022. Driven by the action on Fiona headcount over the past 12 months, productivity increased by 4% in constant currencies compared to Q3 2022. Candidate shortages remain acute and are supportive of continued high fee rates. Salary levels also remain elevated, albeit salary increases offered to candidates reduced compared to Q3 2022. These lower offers combined with lower candidate confidence led to a further increase in the number of offers rejected by candidates, either through employer buybacks or unwillingness to risk the move for the size of incentive on offer. The increased time to hire that we saw in Q2 continued. I will now present a regional review. The group delivered resilient results in the quarter despite a slow exit. The strongest performance was in EMEA, with Germany delivering a new record quarter in Q3. Latin America also achieved robust results and a record quarter. However, tough market conditions continued in Asia, the US and the UK. Overall, group gross profit declined 7.9% in constant currencies against Q3 2022. Foreign exchange had a negative impact on the quarter's growth rate compared to the prior year, decreasing the reported gross profit growth rate by 2.6 percentage points, or £7 million. In our largest region, Europe, Middle East and Africa, which represented 53% of the group, we declined by 1.3% on Q3 2022. Michael Page, which is focused on higher income, permanent recruitment, was down 3% for the quarter, while Page Personnel, which is focused on lower level recruitment with a higher proportion of temporary, was flat. Germany, the group's largest market during Q3, which represented 14% of the group, delivered a record quarter, up 5%. The standout performances were delivered by Page Personnel and our Michael Page interim business, which is focused primarily on technology. France, the group's second largest market in Q3, representing 13% of the group, was up 1%, with Michael Page up 2% and Page Personnel up 1%. Growth was stronger in temporary recruitment, up 12%, whereas permanent was down 5%. Elsewhere in Europe, trading conditions were tougher due to weaker candidate and client confidence. The Middle East and Africa grew 17% with good growth in all markets. Having reduced Fianas in the region by 79 in Q2, we reduced our Fiana headcount by a further 93 or 3% in Q3. The Americas, which represented 18% of the group, declined by 13.3%. North America was down 25%, with the U.S. also declining 25%, compared to the decline of 16% in Q2. The conditions we saw in Q2 continued into Q3, with uncertainty around market conditions continuing to impact both candidate and client orders. In Latin America, gross profit grew 7%, and we delivered a record quarter, despite the macroeconomic uncertainty. Mexico, our largest country in the region, was down 4%, compared to a decline of seven in Q2, and Brazil was up 4%, an improvement on the decline of nine in Q2. The remaining countries grew 19% collectively, and Argentina, Chile, and Colombia all achieved record quarters. Across the region, Fiona headcount decreased by 96, or 8.9%, mainly in the US and Mexico. In Asia Pacific, which represented 17% of the group, Q3 gross profit declined 11% on 2022. Permanent recruitment across the region declined 12, whilst temporary declined 3, reflecting the continued market uncertainty. In Asia, 13% of the group, we declined 11, due mainly to tough conditions in Greater China. In Greater China, 5% of the group, we declined 22, compared to a decline of 32 in Q2. Mainland China was down 23, A Fiona headcount in mainland China is now around 210, down from around 340 at the end of Q2 2022, albeit now a third on manager grade or above, with an average tenure of over six years. Market conditions are stable, but showing little sign of improvement. Hong Kong declined 21% in the quarter. Southeast Asia declined by 12% against Q3 2022, with Singapore down 13% due mainly to the broader influence of Greater China across the region. India, which represented 16% of Asia, delivered a new record quarter, up 3% on the prior year. Elsewhere, Japan grew 4%, while Australia declined 11%. Afriana headcount decreased by 85%, or 6.4% in the quarter, mainly in Southeast Asia and Japan. In the UK, which represented 12% of the group, gross profit declined 18.9%, following the decline of 17% in Q2. Michael Page was down 20%, whilst Page personnel declined 17. We continue to see clients deferring hiring decisions and increased caution from candidates. We also experienced an increase in offer turn downs and candidate buybacks in our permanent business during September. Reflecting the uncertain market conditions, clients sought more flexible options, and as such, temporary recruitment was more resilient, down 5%, whereas permanent recruitment declined 24%. In line with the more challenging trading conditions, our Fiona headcount reduced by 36, or 4.3% in Q2, and is now 17% lower than Q3 last year. I will now provide a brief summary of our results. Group gross profit declined 7.9% in constant currencies against Q3 2022, with a slower end to the quarter in September. EMEA was our best performing region. However, tough market conditions affected the performances in Asia, the UK and the US. In line with the challenging market conditions, we reduced our Fiona headcount by 310 or 4.8% in Q3, with reductions in all regions. Productivity measured as gross profit per fee earner increased by 4%. Despite the slower end to the quarter, which presents a higher degree of uncertainty in the short term, we're confident in our ability to implement our new strategy, driving the long-term profitability of the group. We're also seeing the benefits from our investments in innovation and technology. We also have a highly diversified and adaptive business model, a strong balance sheet, and a cost base which is under continuous review. and can be adjusted rapidly to match market conditions. At this stage of the year, the Board expects 2023 operating profit, excluding the previously disclosed one-off costs of around £5 million, to be between £125 and £130 million. Nick and I will now be happy to take any questions you may have.

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, please press star followed by one. As a reminder, if you are using a speakerphone, please remember to pick up your handset or asking your question and please do ensure that you are unmuted locally. Our first question today comes from the line of Steve Wall from Numa Securities. Please go ahead. Your line is now open.

Morning, guys. Just really a couple from me. Firstly, on Germany, I'm just thinking you've got a decent performance there. Again, I know you flagged it was at the page personnel level, but anything you can give me on volume versus wage growth or perhaps which key markets are giving the strength? And the second question? Second question was on the US and the performance there and the feeling that things might have got a little bit less worse during that period. And again, just sector thoughts on the US market. Thanks.