Pagegroup Plc

Good morning, everyone, and thank you for joining us at short notice. Welcome to the Page Group 2024 second 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 to this presentation, which will also be available on our website following the call. The group delivered gross profit of 224.3 million pounds in the quarter, a decline of 12% in constant currencies. For the first half, we delivered gross profit of 444.2 million pounds, a decline of 12.4% in constant currencies. We saw a softening in activity levels towards the middle of the quarter and exited in June slower, down 18% on the prior year. We reduced Zafiona headcount by 153 or 2.7 percent during Q2, mainly in Europe. However, going forward, we still intend to hold Fianna headcount at around existing levels. Overall, the group ended the quarter with 5,598 Fiannas and a total headcount of 7,576. Despite the reduction in gross profit, productivity measured as gross profit per Fianna increased 1 percent on Q2 2023. Our balance sheet remains strong, with net cash at the end of June of around £56 million. This compares to £67 million at the end of Q1, having purchased £9 million worth of shares for the Employee Benefit Trust in April, as well as having paid out the 2023 final dividend of £35 million in June. I'll 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 9.8% against Q2 2023, with permanent down 12.8%. Reflecting this, our ratio of permanent to temporary gross profit was 74-26, broadly in line with Q1. In Michael Page, permanent recruitment represented 82% of gross profit, while in Page personnel it was less, at 49%. Michael Page was the stronger performing brand, down 10% compared to a decline of 17 in Page personnel. A part of the drop in permanent recruitment in Page personnel was due to transitioning teams to more profitable roles within Michael Page as a result of our new strategy. We reduced our Fiona headcount by 153, or 2.7% during Q2, mainly in Europe. However, we still intend to hold Fiona headcount at around existing levels. And non-operations headcount decreased by 49 in Q2 due to the finalization of the closure of our UK shared service center during the quarter. In total, our headcount is now 996, or 11.6% lower than in Q2 2023. We saw a reduction in the number of new jobs acquired in May. This reduced the number of interviews in June and consequently placements and gross profit, resulting in a lower exit rate for the quarter. We anticipate the further reduction in new jobs acquired in June will impact activity and trading in Q3. Gross profit per fee earner increased 1% compared to Q2 2023, despite the softening in activity levels through the quarter. Reflecting continued shortages of candidates, fee rates remained at high levels and slightly above the prior year. Salary levels also remained strong. However, salary offers have reduced compared to 2022 and early 2023. These lower offers combined with lower candidate confidence has led to continued high levels of offers being rejected by candidates, either through employer buybacks or unwillingness to move for the size of incentive on offer. I will now present a regional review. Group gross profit declined 12% in constant currencies against Q2 2023, and we saw tough market conditions in the majority of the group's markets, with little signs of improvement. We saw a slower end to the quarter with a softening in activity levels, which led to our exit rate in June being down 18% in constant currencies on the prior year. Foreign exchange had a negative impact on our results, decreasing our reported gross profit growth rate by three percentage points, or 7.9 million pounds. In our largest region, Europe, Middle East, and Africa, which represented 56% of the group, we declined 10.2% on Q2 2023, with tough market conditions across Europe. France, the group's largest market, which represented 14% of the group, declined 14% against the strong comparator, with similar performances in both Michael Page and Page Personnel. Political uncertainty in June led to a number of jobs and interviews being put on hold. We saw a more resilient performance in temporary recruitment, which is indicative of the current uncertainty in the market. Germany, which represented 13% of the group, declined by 9% in Q2, with declines across all brands, albeit with our technology-focused interim business the most resilient. We saw tough market conditions throughout the rest of Europe, with declines in all major markets. In the Middle East and Africa, gross profit grew 7%, a new record quarter, with stronger levels of candidate confidence. In line with the tougher trading conditions in Q2, we reduced our Fianna headcount by 120, mainly in Germany, France, and the Netherlands. The Americas, which represented 18% of the group, declined by 6.6%. North America was down 19%, with the U.S. declining 19%. The trends we saw in Q1 continued into Q2, with uncertainty around market conditions affecting both candidate and client confidence, particularly in accounting and financial services. In Latin America, excluding Argentina due to the hyperinflation, gross profit was down 4%. Mexico, our largest country in the region, was down 10%, broadly in line with Q1, due to its high degree of reliance on the U.S. Brazil was up 9%. particularly strong performance in temporary recruitment. The remaining countries declined 8% collectively. Across the region, Fiona headcount decreased by 31. In Asia Pacific, which represented 14% of the group, Q2 gross profit declined 19.8% on 2023. In Asia, which represented 12% of the group, we declined by 14%, due mainly to tough conditions in Greater China. In Greater China, which represented 4% of the group, we saw no signs of improvement and declined 29%. Mainland China was down 25%, and Hong Kong was down 38% in the quarter, with particularly tough conditions within financial services. Southeast Asia declined by 12% against Q2 2023, due mainly to Singapore, which was down 16%. India continued to deliver standout results, delivering a record Q2, and up 7% on Q2 2023, whereas Japan declined 6%. Australia declined 38% with ongoing challenging conditions in all states. A Fiorina headcount decreased by 9 in the quarter. In the UK, which represented 12% of the group, gross profit declined 17.4%, with tough conditions in both Michael Page and Page personnel. We continue to see clients deferring hiring candidates cautious about accepting offers. Permanent recruitment was more resilient than temporary recruitment, partly due to a softer comparator than permanent. Following headcount decreases over the past 18 months, in Q2 we held our Fiona headcount broadly flat. I will now provide a summary of our results. We continue to see challenging market conditions in most of our markets in Q2, We experienced a softening in activity levels through the quarter, particularly in terms of new jobs and interviews. Permanent recruitment continues to be more impacted than temporary as clients sought more flexible options and permanent candidates remained reluctant to move jobs. While we saw a slower end to the quarter, having taken action to reduce headcount throughout last year, our intention remains to hold Fiona headcount broadly at existing levels. to ensure we are well-placed to take advantage of opportunities when sentiment and confidence improve. We have a highly diversified and adaptable business model, an experienced management team, a strong balance sheet, and our cost base is under continuous review. Given the weaker than expected trading in June, recent increased geopolitical and macroeconomic uncertainty, and consequently a more cautious view for H2, the Board now expects full-year 2024 operating profit to be in the region of 60 million pounds. Nick and I will now be happy to take any questions you may have.

Thank you. If you would like to register a question, please press Start followed by 1 on your telephone keypad, ensuring you are unmuted locally. If you'd like to withdraw your question at any time, you can do so by pressing Start followed by 2. Our first question comes from the line of Remy Grenu of Morgan Stanley. Your line is now open. Please go ahead.

Yes, morning, gentlemen, and thanks for the call. Three questions on my side. So first, on the exit rate, so the minus 18%, just interested in hearing if this has been driven by any geographies in particular or if the weakness has continued to be relatively broad. So that's the first question. The second one, it It's about France, and given the political uncertainty, I'm interested also to understand how this has impacted the trading in June, if you can quantify that a little bit. And related to the previous question, was this country a large contributor to the slowdown experience and the weaker exit rates? So that would be the second question. And then the third one has to do with your strategic decision to hold on to your headcount from now on. Can you maybe elaborate a little bit whether it relates to any tangible signs or discussions with your clients or if you just believe that doing more in terms of cost savings from now on would start hurting the business more permanently? Thanks.