Pagegroup Plc

Good morning, everyone, and welcome to the Page Group 2024 First Quarter Trading Update. I'm Kelvin Stagg, Chief Financial Officer. 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 to this presentation, which will be available on our website following the call. The group delivered gross profit of £219.7 million in the quarter, decline of 12.8% in constant currencies. This was against the group's second largest ever Q1 and was also impacted by the reduced number of working days in March due to bank holidays and the timing of Easter. Reflecting the uncertain macroeconomic conditions, our Fiona headcount reduced by 100, or 1.7% during Q1, which was slower than the quarterly reductions in 2023. Overall, the group ended the quarter with 5,751 Fiona's and a total headcount of 7,778. Due primarily to this reduction in headcount, gross profit per fee earner and measure of productivity increased 1% on Q1 2023, despite the tough macroeconomic conditions. Our balance sheet remains strong, with net cash at the end of March of around 67 million pounds. This compares to 90 million at the end of 2023, having paid our annual and quarterly bonuses in January, as well as having purchased £4 million worth of shares for the Employee Benefit Trust in March. I will now give a brief financial review. Reflecting the uncertain macroeconomic conditions, temporary recruitment continued to outperform permanent as clients sought more flexible options. Temporary recruitment decreased by 6.7% against Q1 2023, with permanent down 14.9. Reflecting this at ratio of permanent to temporary gross profit, was 73.27. In Michael Page, permanent recruitment represented 82% of gross profit, while in Page personnel it was less of 48. Michael Page was the stronger performing brand, down 11% compared to a decline of 18 in Page personnel. A proportion of the drop in permanent recruitment in Page personnel was due to transitioning consultants to more profitable roles within Michael Page as a result of Andrew's strategy. We used attrition to manage down our Fiona headcount by 100 during the quarter, or 1.7%, which was slower than the quarterly reductions of around 250 in 2023. This was the sixth successive quarter of reductions in Fiona headcount, down 1,320, or 19%, since the peak of 7,071 at the end of Q3 2022. Our non-operations headcount increased by 19 in Q1, due to the double running of around 50 heads as we transition activities out of our UK Shared Service Centre into our centres in Barcelona and Buenos Aires. In total, our headcount is now 1,020, or 11.6% lower than in Q1 2023. Based on our current outlook, we intend to hold Fiona Headcount broadly at existing levels to ensure we are well-placed to take advantage of opportunities as sentiment and confidence improve. Despite the decline in gross profit in the quarter, the reduction in AFIANA hit count over the past 12 months supported productivity, which was up 1% in constant currencies compared to Q1 2023. We exited the quarter more slowly, down 18%. However, this was impacted by the reduced number of working days in March due to bank holidays and the timing of Easter. Reflecting continued shortages of candidates, fee rates remained at high levels and slightly above the prior year. salary levels also remain strong. However, salary offers have reduced compared to 2022 and early 2023. These lower offers, combined with lower candidate confidence, led to continued high levels of offers being rejected by candidates, either through employer buybacks or unwillingness to risk the move for the size of incentive on offer. I will now present a regional review. Group gross profit declined 12.8% in constant and currencies against Q1 2023. The slowdown we saw at the end of Q4 2023 continued into Q1, with a deterioration particularly within continental Europe. Trading conditions in Asia, the UK, and the US saw no improvement, with low levels of client and candidate confidence continuing to delay time to hire, particularly in permanent recruitment. Foreign exchange had a negative impact on our results, decreasing our reported gross profit growth rate by 3.6 percentage points, or 9.4 million pounds. In our largest region, Europe, Middle East, and Africa, which represented 56% of the group, we declined 12.7% on Q1 2023. Q1 2023 was a tough comparator. It was a record quarter for Germany, Spain, Belgium, and Turkey. The tougher conditions we saw at the end of 2023 continued into Q1 2024. Reflecting this uncertainty, temporary recruitment was more resilient, down 9%, compared to permanent recruitment, which was down 15%. France, the group's largest market, which represented 14% of the group, declined 16% against a strong comparator, with similar performances in both Michael Page and Page personnel. Germany, which represented 13% of the group, declined by 16% in Q1, with tougher conditions in permanent recruitment, down 23%. while our technology-focused interim business was more resilient down eight. Elsewhere in the region, the tougher conditions we experienced in Q4 2023 continued into Q1 2024, with the majority of countries declining year on year. In line with the tougher trading conditions, we reduced the Afliana headcount by 46 in Q1. The Americas, which represented 17% of the group, declined by 5.5%. North America was down 15%, the US declining 15. The conditions we saw at the end of 2023 continued into Q1, with uncertainty around market conditions affecting both candidate and client confidence, particularly within accounting and financial services. In Latin America, excluding Argentina, as hyperinflation following the recent election has distorted the growth rate, gross profit was down 4%. Mexico, our largest country in the region, was down 12%, compared to a decline of 6 in Q4. Brazil was up 10%. The remaining countries declined 6% collectively. Across the region, Fiona headcount increased by 37. In Asia Pacific, which represented 15% of the group, Q1 gross profit declined 15.7% on Q1 2023. In Asia, which represented 12% of the group, we declined by 11%, due mainly to tough conditions in Greater China. In Greater China, which represented 4% of the group, we declined by 15%. Mainland China was down 19%, and Hong Kong was down 12% in the quarter. The reduction in gross profit was due largely to a further reduction in Fiona headcount of around 30% in Q1. Southeast Asia declined by 3% against Q1 2023, with Singapore returning to growth. India... which represented 15% of Asia Pacific, delivered a record Q1, up 13%. We now have over 220 fee earners in India, which by headcount is now our largest market in Asia Pacific. Elsewhere, Japan declined 26 against Q1 2023, its record quarter, with reduced levels of candidate and client confidence impacting the business. Australia was down 32%, with tough conditions in all states. Our Fiona headcount decreased by 65 in the quarter, mainly in Australia and Greater China. In the UK, which represented 12% of the group, gross profit declined 19.2%. Reflecting the uncertain market conditions, clients sought more flexible options, and as such, temporary recruitment, which was down 12%, was more resilient than permanent recruitment, down 22%. We continue to see clients deferring hiring decisions and candidates cautious about accepting offers. In line with the more challenging trading conditions, AFI earned a headcount reduced by 26 in Q1 and is now 726, 17% lower than Q1 2023. I will now provide a summary of our results. Group gross profit declined 12.8% in constant currencies against Q1 2023. The slowdown we saw at the end of Q4 2023 continued into Q1, with a deterioration particularly within continental Europe. Trading conditions in Asia, the UK, and the US saw no improvement, with low levels of candidate and client confidence. We exited the quarter in March, down 18% on 2023, albeit this was against the tough comparator, and was impacted by the reduced number of working days in March and the timing of Easter. Reflecting the market uncertainty, temporary recruitment was more resilient than permanent. In line with these conditions, we reduced our Fiona headcount by 100, or 1.7%. As a result of this reduction in headcount, productivity was up 1% compared to Q1 2023, despite the tough macroeconomic conditions. Based on our current outlook, we intend to hold Fiona headcount broadly at existing levels to ensure we are well-placed to take advantage of opportunities as sentiment and confidence improve. Activity levels remained good. And we continue to experience acute shortages of highly skilled candidates in nearly all our markets, which was supportive of continued high fee rates. Nick and I will now be happy to take any questions you may have.

Our first question is from Andy Grobler at BNP Paribas Exxon. Please go ahead.

Hi, good morning. Just a couple from me, if I may. As you describe markets, they all sound pretty challenging at this point. Are there any areas where you're seeing a sign of inflection, either in terms of confidence or activity levels? And then secondly, and a bit more specifically on Australia, where the declines were pretty steep, you said that was across the board. What kind of more specific are you seeing within the Australian market to make it so tough at this point? Thanks very much.