Pagegroup Plc

Good morning everyone and welcome to the Page Group 2024 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 to this presentation and which will also be available on our website following the call. The group delivered gross profit of £196.7 million in the quarter, a decline of 13% in constant currencies against Q4 2023. Gross profit for the full year was £842.5 million, a decline of 12.9% against 2023. We continue to see challenging market conditions in the majority of the group's markets. Whilst most markets were sequentially stable, we experienced a further worsening in trading activity and sentiment in Europe, particularly in our two largest markets, France and Germany. Our Fiona headcount reduced by 130 or 2.4% in the quarter, mainly in Europe and the UK. Overall, the group ended the quarter with 5,370 Fionas and a total headcount of 7,361. Due to the tough macroeconomic conditions combined with our decision To broadly hold on to the level of our FIANA headcount, gross profit per FIANA, our measure of productivity, was down 5% compared to Q4 2023. Our balance sheet remains strong, with net cash at the end of December of around £95 million. This was up from £93 million at the end of Q3, having paid out the interim dividend of £16.8 million on 11 October. I will now give a brief financial review. During periods of market uncertainty, clients often seek more flexible options in non-permanent recruitment. However, we saw similar declines across temporary and permanent recruitment in Q4. This was due to softer activity in trading in our European businesses, where we have a higher proportion of non-permanent business, as well as a tougher comparator in temporary recruitment. Temporary recruitment decreased by 14.2% against Q4 2023, with permanent down 12.5%. our ratio of permanent to temporary gross profit was 70-30, consistent with Q4 2023. In Michael Page, permanent recruitment represented 78% of gross profit, while in Page personnel it was less, at 45. Michael Page was the stronger performing brand, down 8%, compared to a decline of 25.1% in Page personnel. The portion of the decline in Page personnel was due to the transition of teams in certain markets to Michael Page, as part of our strategy to improve profitability in our core business. We reduced our Fiona headcount by 130 or 2.4% during the quarter, with reductions mainly in Europe and the UK. During the year, we drove further efficiencies in the organisation through the closure of our shared service centres in the UK and Singapore, with the transition of activities into Barcelona, Buenos Aires and Kuala Lumpur. and non-Fiona headcount increased by 49 in the quarter, or 2.5%. This increase was due to the double running of around 65 heads due to the transition of our shared service center from Singapore to Kuala Lumpur. We continue to review our Fiona headcount, reallocating resources in line with our strategy into the areas of the business where we see the most significant long-term structural opportunities, as well as ensuring it remains aligned to the levels of activity we are seeing in each of our markets. Due to the tough macroeconomic conditions, combined with our decision to broadly hold on to the level of our Fiona headcount, gross profit per Fiona decreased by 5% in constant currencies compared to Q4 2023. Although salary levels remain strong, offers made to candidates are not as elevated as they were in 2022 and early 2023. As a consequence, conversion of interviews to accepted offers remains the most significant challenge as the ongoing macroeconomic uncertainty continues to impact candidate and client confidence. While our fee rates remain at high levels, as clients' recruitment budgets have tightened, they have become more risk-averse, which has continued to slow the recruitment process, impacting time to hire. I will now present a brief regional review. Group gross profit declined 13% in constant currencies against Q4 2023. and we saw tough market conditions in the majority of the group's markets. While most markets were sequentially stable, we experienced a further worsening in trading in Europe, particularly in our two largest markets, France and Germany. Foreign exchange had a negative impact on the quarter's growth rate compared to the prior year, decreasing the reported gross profit growth by 4.2 percentage points, or £9.8 million. In our largest region, Europe, Middle East, and Africa, which represented 55% of the group, we declined by 15.9% on Q4 2023. The tough conditions and reduction in activity levels that we experienced in Q4 worsened, sorry, experienced in Q3 worsened in Q4 with lower levels of candidate and client confidence. Michael Page was the stronger performing brand, down 13% compared to a decline of 21 in Page personnel. Permanent recruitment, down 14%, was more resilient than temporary, down 19%. We saw particularly tough conditions in temporary in Germany, the Netherlands, and Spain, with softer activity and trading. In permanent recruitment, France and Germany were impacted the most heavily. France, the group's largest market, which represented 15% of the group, declined 17%. Temporary recruitment, down 12%, outperformed permanent, down 21%. Germany, representing 12% of the group, declined 23%. We saw tough conditions in all brands, with a deterioration in client and candidate confidence impacting both permanent and temporary recruitment. Market conditions remained tough throughout the rest of Europe. In the Middle East and Africa, gross profit was down 8%. In line with the tougher trading conditions, we reduced our Fiorina headcount by 116 in Q4, mainly in France and Germany. The Americas, which represented 18% of the group, and excluding Argentina due to hyperinflation, declined by 5.5% against Q4 2023. North America was up 2%, with the US up 3%. This was an improvement on the decline of 11% in Q3. We saw an increase in activity levels and trading during the quarter, particularly in engineering, accounting, and financial services. In Latin America, excluding Argentina, Gross profit declined 14%. Mexico, our largest country in the region, was down four, an improvement on the 15% decline in Q3. Brazil was down 12, albeit against a tough comparator due to a one-off provision release in the prior year. Excluding this item, Brazil grew one. The remaining countries declined 24% collectively. Across the region, the earner headcount decreased by eight. In Asia Pacific, which represented 15% of the group, Q4 gross profit declined 14.6% on 2023, with ongoing challenging market conditions across the region. In Greater China, which represented 4% of the group, we declined 23%, broadly in line with Q3, with mainland China down 26% and Hong Kong down 19%. While conditions in Greater China appear to have stabilized, we saw no sign of improvements. Southeast Asia declined 4%, with Singapore down 3%. Japan declined 6%, and India declined 7%, albeit against a tough comparator. Australia declined 25%, with ongoing challenging conditions in all states. Our Fiona headcount increased by 17 in the quarter, mainly in Japan. And on operations, headcount increased by 74 in Q4, due to the double running of around 65 heads. as we transitioned our shared service center from Singapore to Kuala Lumpur. In the UK, which represented 12% of the group, gross profit declined 13.6% in line with Q3. The conversion of interviews to accepted offers remains a significant area of challenge, with ongoing subdued levels of client and candidate confidence also impacting decision-making and increasing time to hire. Reflecting the continued challenging trading conditions, our Fiona headcount reduced by 23 in Q4 to 676. I will now give a brief summary of the results. We continue to see challenging market conditions in the majority of the group's markets in Q4. While most markets were sequentially stable, we experienced the further worsening in trading in Europe, particularly in our two largest markets of France and Germany. Conversion of interviews to accepted offers remains the most significant area of challenge as ongoing market uncertainty continues to impact candidate and client confidence, restricting the levels of offers made to candidates and extending the time to hire. We continue to review our FIONA headcount, reallocating resources in line with our strategy into areas of the business where we see the most significant long-term structural opportunities. Overall, our focus remains to balance near-term productivity with ensuring we remain well-placed to take advantage of opportunities when market conditions improve. We have a diversified and adaptable business model, a highly experienced management team, a strong balance sheet, and our cost base is under continuous review. We now expect 2024 full-year operating profit after one-off costs of around £5 million relating to the closure of our shared service centres in the UK and Singapore to be towards the lower end of the current market consensus range of 49 to 58.5 million pounds. Nick and I will now be happy to take any questions you may have.

Thank you. We will now start today's Q&A session. If you would like to ask a question, please press star followed by 1 on your telephone keypad. And if you wish to withdraw your question, then it is star followed by 2. Our first question today comes from Rory McKenzie from UBS. Your line is now open. Please go ahead.

Morning all, it's Rory here. First question is, appreciate you don't give an exit rate for December, given it's seasonally hard to read the trends. But just given how the weeks fell, it feels like the 6th of January could have been an important start date for lots of new joiners. Is there anything you can talk to about the placement trends through December or what you've learned in the return to work so far that you can share? Secondly, you referenced the unusually similar trends that we're seeing in temp and term at the moment, which of course have been a puzzle to all of us. I take your point that mix and comparators are different, but it doesn't feel like clients are at all trying to build a more flexible labor force to deal with the uncertainty as we'd expect. Do you think that's an affordability issue? Is it because their own internal productivity is at lows? Is there anything you can talk to about, again, those kind of client budgets and plans that you've learned from your conversations since we last spoke? Thank you.