Pagegroup Plc

Good morning, everyone, and welcome to the Page Group 2023 fourth quarter and full year 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 of this presentation, and which will be also available on our website following the call. The group delivered gross profit £237.3 million in the quarter, a decline of 8.9% in constant currencies against Q4 2022. Gross profit for the full year was just over £1 billion. In line with the continued challenging trading conditions in Q4, our Fiona headcount reduced by 224, or 3.7% in the quarter, with reductions in all regions. Our Fiona headcount ended the quarter at 5,000 851, which is 1,092, or 15.7% lower than at the end of Q4 2022. Due primarily to this reduction in fee earners, gross profit per fee earner and measure of productivity increased 8% compared to Q4 2022. We have a strong balance sheet with net cash at the end of December of around 90 million pounds. This was down from 136 million at the end of Q3 having paid out £66.2 million in interim and special dividends on 13 October. Given the slowdown in trading towards the end of Q4, we now expect 2023 full-year operating profit to be slightly below previous guidance of £120 to £125 million. I will now give a brief financial review. Overall growth was stronger in temporary than permanent recruitment, which is indicative of the current uncertainty in the market with clients seeking more flexible options. Temporary recruitment grew 5.2% against Q4 2022, with permanent down 13.9%. Reflecting this, our ratio of permanent to temporary gross profit was 70-30, down from 72-28 last quarter, and down from 74-26 in Q4 2022. In Michael Page, permanent recruitment represented 80% of gross profit, while in Page personnel it was less, Growth was stronger in temporary recruitment in both Michael Page and Page personnel. In Q4, we decreased our Fiona headcount through natural attrition by 224, or 3.7%, with reductions in all regions. This followed the Fiona reduction of 310, or 4.8%, in Q3. This was the fifth successive quarter of Fiona headcount reductions from the peak of over 7,000 Fiona's at the end of Q3 2022 to 5,851 at the end of Q4, a reduction of 1,220, or 17%. Our non-Fiona headcount also decreased by 57 in the quarter, or 2.7%. Our total headcount is now 1,161, or 12.9% lower than Q4 2021. Driven by the action on Fiona headcount over the past 12 months, productivity increased by 8% in constant currencies compared to Q4 2022. Despite the year-on-year decline in gross profit, we are still seeing good activity levels, albeit we did see a deterioration in job flow through Q4. However, these activity levels are not all converting into gross profit due to ongoing lower levels of candidate and client confidence. Candidate shortages remain across the majority of our market and are supportive of continued high fee rates. Salary levels also remain elevated, albeit salary offers to candidates have reduced compared to Q4 2022. These lower offers, combined with lower candidate confidence, led to continued high levels 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 Q3 also continued. I'll now present a brief regional review. The tougher conditions we saw at the end of Q3 continued into Q4. Trading conditions in Asia, the UK, and the US saw no improvement, whilst trading conditions in Europe deteriorated. Overall group gross profit declined 8.9% in constant currencies against Q4 2022. Foreign exchange had a negative impact on the quarter's growth rates compared to the prior year, decreasing the reported gross profit growth rate by 2.2 percentage points, or £5.7 million. In our largest region, Europe, Middle East and Africa, which represented 56% of the group, we declined by 6.1% on Q4 2022. Michael Page, which is focused on higher income permanent recruitment, was down 4% for the quarter, while Page Personnel, which is focused on lower level recruitment, was down 9. France, the group's largest market, which represented 15% of the group, declined five, with continued weakness in candidate and client competence, particularly within Michael Page. Reflecting the uncertainty in the market, temporary recruitment was more resilient than permanent. Germany, the group's second largest market, representing 13% of the group, declined six, with tougher conditions, particularly within permanent recruitment, in Michael Page. A technology-focused interim business was more resilient, continued to deliver the standout results, up 7%. Elsewhere in the region, the tougher conditions we experienced in Q3 continued into Q4, with the majority of countries declining year on year. In line with the tougher trading conditions, we reduced our Fiona headcount by 84 in Q4, which was broadly in line with the reductions in the previous two quarters. The Americas, which represented 17% of the group, declined by 8%. North America was down 24%, with the U.S. also declining 24%, broadly in line with the decline of 25% in Q3. Conditions remained challenging, with uncertainty affecting both Canada and client confidence. Conditions were particularly tough within accounting and financial services, while property and construction was more resilient. In Latin America, excluding Argentina, as the hyperinflation following the recent election has distorted the growth rate, Gross profit grew 11%, despite political and macroeconomic uncertainty across the region. Mexico, our largest country in the region, was down 6%, broadly in line with Q3, whereas Brazil was up 20%. The remaining countries grew 22% collectively. Across the region, Fiona headcount decreased by 35%, the majority of which was in Latin America, as we held on to our more experienced Fiona's in the U.S. In Asia Pacific, which represented 15% of the group, Q4 gross profit declined 10.3% on 2022. Permanent recruitment across the region declined 11, whilst temporary declined 7. In Asia, 12% of the group, we declined 6%. In Greater China, 4% of the group, we declined 8, with mainland China flat. Hong Kong declined 12%. While trading in Greater China has now stabilised, there is little sign of improvement. The increase in the growth rate compared to Q3 due to the softer comparators. Southeast Asia declined 14%, broadly in line with Q3, with Singapore, which continues to be impacted by uncertainty related to China, down 14%. India delivered the standout performance up 16%. However, Japan declined 7% compared to growth of 4% in Q3. Australia declined 24% with high levels of candidate and client uncertainty. Our Fiona headcount decreased by 54 in the quarter, mostly in Australia and Japan, as we hold on to our experienced Fiona headcount in China. In the UK, which represented 12% of the group, gross profit declined 19.9%, following the decline of 18.9% in Q3. Michael Page was down 23%, whilst Page personnel declined 15%. we continue to see clients deferring hiring decisions and candidates becoming increasingly cautious about accepting offers. Reflecting the challenging trading conditions, our Fiona headcount reduced by 50, or 6.2% in Q4, and is now 20% lower than at the end of Q4 last year. I will now give a brief summary of the results. Group gross profit declined 8.9% in constant currencies against Q4 2022, which was a 10% softer comparator than Q3. Trading conditions in Asia, the UK, and the US saw no improvement, while trading conditions in Europe deteriorated. We experienced a slower end of the quarter, as Canada uncertainty was compounded by the proximity to year-end salary reviews and bonuses, which combined to make trading particularly challenging. The tougher market conditions at the end of Q3 continued into Q4, as low levels of client and candidate confidence continue to delay time to hire, particularly in permanent recruitment. However, against this backdrop, activity levels remain robust, albeit we saw a deterioration in job flow in many of our markets during the quarter. We experienced shortages of highly skilled candidates in most of our markets, which continue to support high fee rates. In line with these conditions, we reduced our fee on a headcount by 224, with action taken in all regions. followed similar headcount reductions in the previous four quarters. Productivity measured as gross profit per Fianna was up 8% versus Q4 2022 and as a result of our action on Fianna headcount over the past 12 months. We now expect 2023 full-year operating profit to be slightly below previous guidance of £120 to £125 million. Nick and I will now be happy to take any questions

Ladies and gentlemen, if you'd like to ask a question, please press star one on your telephone keypad. Let's star one on your telephone keypad. To withdraw your question, star followed by two. And please also remember to unmute your microphone when it's your turn to speak. Our first question comes from Kim Martin from Jefferies. Kim, your line's now open.

Thank you. Morning all. I've got a few questions regarding different territories, first of all, if you'll bear with me. So first of all, on US accounting and finance, which you've called out as being a little softer in the fourth quarter, I'm just wondering if you could put some figures around that. I presume it's sort of weakness in professional services that's possibly driving that, but any narrative would be helpful. And just your thoughts about how things might develop in 2024. On China, I think you flagged that there's no signs of improvement coming through. Is that what you've assumed for the budget for 24? Have you taken a more optimistic view as the year progresses? And then finally, on the countries, just your Japanese business. Any reasons why that wouldn't have been a little stronger in the fourth quarter, that labour market and some of your peers, traders? pretty well there in the last few quarters, so a slightly negative number just to add a little bit. And then equipment on balance sheets. Am I right in thinking, Kelvin, that working capital is about neutral in the second half? And should that improve over the next few months, given the deterioration in your net fee momentum? Thank you.