Pagegroup Plc

Good morning, everyone, and welcome to the Page Group 2024 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 to this presentation, which will also be available on our website following the call. The group delivered gross profit of 201.4 million pounds in the quarter, a decline of 13.5% in constant currencies. We continue to see challenging market conditions in the majority of the group's markets, with a further softening in Europe, and we exited in September, down 16% on 2023. Our Fiona headcount reduced by 98, or 1.8% during the quarter. We continue to review Fiona headcount, reallocating resource in line with our strategy, into the areas of the business where we see the most significant long-term structural opportunities. Overall, our intention remains to hold fee earners broadly at existing levels to ensure we are well-placed to take advantage of opportunities when market conditions improve. Overall, the group ended the quarter with 5,500 fee earners and a total headcount of 7,442. Due to the tough macroeconomic conditions, and our decision to hold on to Fiona headcount, gross profit per Fiona, our measure of productivity, was down 4% compared to Q3 2023. Our balance sheet remains strong, with net cash at the end of September of around 93 million pounds. This compares to 57 million at the end of Q2, and is before the recent interim dividend payment paid on the 11th of October, totaling 16.8 million pounds. 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 8.6% against Q3 2023, with permanent down 15.3%. Reflecting this, our ratio of permanent to temporary gross profit was 71%. In Michael Page, permanent recruitment represented 80% of gross profit, while in Page personnel it was less, at 44. Michael Page was the stronger performing brand, down 10.5% compared to a decline of 21.3 in Page personnel. A portion of the decline in permanent recruitment in Page personnel was due to the transition of teams in certain markets to more profitable roles within Michael Page. We reduced our Fiona headcount by 98, or 1.8% during Q3, with reductions mainly in Europe. We continue to review Fiona headcount at a country level to ensure it remains appropriate to market conditions. Our intention is to hold Fiona headcount broadly at existing levels. And on operations headcount, decreased by 36 in Q3. In total, our headcount is now 698, or 8.6% lower than in Q3 2023. Due to the tough macroeconomic conditions and our decision to hold on to FIONA headcount, gross profit per FIONA decreased 4% compared to Q3 2023. The number of interviews and jobs per FIONA was relatively stable in Q3 after adjusting for the seasonally quieter summer months. Reflecting continued shortages of candidates, Fee rates remained at high levels and slightly above the prior year. Salary levels also remained strong. Salary offers, however, 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. Sorry, unwillingness to risk the move for the size of incentive or offer. Conversion of interviews to accepted offers remains the most significant area of challenge as ongoing market uncertainty continues to impact candidate and client confidence negatively. I will now present a regional review. Group gross profit declined 13.5% in constant currencies against Q3 2023. and we saw tough market conditions in the majority of the group's markets, with no sign of improvement. Foreign exchange had a negative impact on our results, decreasing our reported gross profit growth rate by 3.2 percentage points, or £8 million. In our largest region, Europe, Middle East and Africa, which represented 53% of the group, we declined 15.1%, with market conditions worsening. Michael Page was the stronger performing brand, down 12%, compared to a decline of 21% in Page personnel. Within EMEA, temporary recruitment represented 36% of total gross profit, a higher proportion than the rest of the group. Temporary recruitment, down 12%, was more resilient than permanent, down 16%. While temp was more resilient than perm, temp placements were not as high as anticipated in September, after the quieter summer months. Germany, the group's largest market in Q3, which represented 13% of the group, declined by 19. We saw declines across all brands, albeit our technology-focused interim business was the most resilient. France, which represented 13% of the group, declined 16. We saw a more resilient performance in temporary recruitment, which is indicative of the current uncertainty in the market. Tough market conditions continued throughout the rest of Europe. with declines in all major markets. In the Middle East and Africa, gross profit was down 3%. In line with the tougher trading conditions, we reduced our Fiona headcount by 49 in Q3, mainly in Germany and France. Excluding Argentina due to the hyperinflation, the Americas, which represented 18% of the group, declined by 10.3% against Q3 2023. North America was down 13%, with the U.S. declining 11%. The conditions we saw in Q2 continued into Q3, with low levels of candidate and client confidence impacting conversion of interviews to accepted offers. In Latin America, excluding Argentina, gross profit was down 7%. Mexico, our largest country in the region, was down 15% due to its high degree of reliance on the U.S., However, Brazil was up seven with strong growth, particularly in temporary recruitment. The remaining countries declined 8% collectively. Across the region, Fiona headcount increased by 14 as we held on to our platform in the US. In Asia Pacific, which represented 16% of the group, Q3 gross profit declined 16.8% with ongoing tough market conditions across most of the region. Southeast Asia declined by 9% against Q3 2023, with Singapore down 10%. In Greater China, which represented 4% of the group, we saw no signs of improvement and declined 25%. Mainland China was down 24%, and Hong Kong was down 23%. Japan and India declined 5% and 3% respectively, albeit both had tough comparisons. Australia declined 31%, with ongoing challenging conditions in all states. Our Fiona headcount decreased by 29 in the quarter. In the UK, which represented 13% of the group, gross profit declined 13.5%, with tough conditions in both Michael Page and Page personnel. We continue to see clients deferring hiring decisions and candidates cautious about accepting offers. Reflective of market conditions, temporary recruitment more resilient than first. The earner headcount reduced by 34 in Q3 to 698. I will now provide a summary of our results. We continue to see challenging market conditions across all regions in Q3, with no signs of improvement and softer activity in trading in a number of European countries, including France and Germany. Conversion of interviews to accepted offers remains the most significant challenge due to subdued levels of client and candidate confidence. Permanent recruitment continue to be impacted more than temporary, but clients sought more flexible options. 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 a strong balance sheet, and our cost base is under continuous review. We expect 2024 full-year operating profit to be broadly in line with current market consensus of £58 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 1 on your telephone keypad. If you would like to withdraw your question, please press star 2. Our first question comes from Rory McKenzie at UBS. Please go ahead.

Good morning. It's Rory here. Just two questions on fee rates and wage inflation. Firstly, can you say what the year-over-year gross profit benefit was of rising fee rates and wages, please? And I guess that's been fading year-over-year across the past 12 months. And then secondly, you talk, of course, about the relatively weak salary offer rates, which are clearly impacting the conversion that you're seeing. There are some kind of split views in the press about whether candidates need to be accepting of lower rates or clients need to up what they're offering. Can you say what you're hearing from the clients and the candidates once that conversion doesn't happen? Is the client then looking for a higher paid job offer, or are they just not going ahead with the move they're looking for? Just trying to work out what could change next to break down this kind of deadlock. Thank you.