Michael Page Plc (PAGE) Earnings Call Transcript & Summary

Hello, and welcome to the Michael Page half year results. My name is Alex, and I'll be coordinating today's call. [Operator Instructions] I'll now hand over to Nick Kirk, CEO, to begin. Please go ahead.

Thank you. Good morning, everyone, and welcome to the Michael Page interim results presentation. I'm Nick Kirk, Chief Executive Officer. On the call with me today is Kelvin Stagg, Chief Financial Officer. The group delivered a resilient performance in H1 despite ongoing challenging market conditions. We saw continued growth in Asia Pacific and the Americas as well as a return to growth in Q2 in Southern Europe. In total, around 50% of the group was in growth in H1. However, trading remained more challenging across France, Northern Europe and the U.K. The progress we're making in productivity, technological innovation, operational efficiency and execution demonstrates that our strategy is working and positions us well for future growth. We continue to harness the power of Page as well as our position as the global leader for specialist management and leadership perm recruitment, placing more senior talent at higher salary levels and at higher fees. This has helped drive our highest level of productivity since our record year in 2022 as well as a record performance for Page Executive. We continue to control the cost base tightly and have undertaken various programs since the launch of our new strategy to manage it in light of the tougher market conditions, which we will cover in more detail later. I will now hand you over to Kelvin to talk you through our financial review.

Thank you, Nick. 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. Group gross profit for H1 was GBP 385.2 million, down 2.4% in constant currencies. Operating profit in the first half was GBP 9.7 million, up from GBP 2.1 million in H1 2025, conversion rate of 2.5%. Gross profit per fee earner, our measure of productivity, was up 3.7% compared to H1 2025 and is at the highest level we've seen since our record year in 2022. We continue to balance managing our headcount in markets where conditions are tough, such as France, Northern Europe and the U.K., with reallocating headcount into markets showing the most significant long-term structural opportunities, such as the U.S. and Japan. Earnings per share was 1.2p. We closed the first half with net debt of GBP 7.2 million, in line with expectations, and we are today announcing an interim dividend of 1.46p per share or GBP 4.6 million, which I will cover in more detail later. I will now take you through the financial review. Overall, we delivered group operating profit of GBP 9.7 million at a conversion rate of 2.5%. Looking at each of our regions and starting with the largest, EMEA, our conversion rate was 7.5%, the highest conversion rate of the group. This was despite the tougher trading conditions in France and Northern Europe. The Americas remained profitable with a conversion rate of 4.2%. However, in Asia Pacific and the U.K., while trading conversion was positive, after central cost allocations and one-off costs, both regions had a negative conversion rate. We have a flexible cost base through our fee earner headcount, which we align to market conditions. Alongside this, we have undertaken various programs since the launch of our new strategy to reduce our costs in light of the tougher market conditions. These programs included reducing our nonoperational headcount alongside moving these functions to more cost-effective locations, consolidating offices and reducing management layers. Collectively, since the launch of our strategy and excluding savings due to reduction in fee earner headcount, these initiatives have delivered annualized savings of around GBP 40 million. This cost base control has continued in H1 2026, incurring around GBP 2.5 million of net one-off costs in relation to senior exits, which will result in an annualized equivalent savings from 2027. The effective tax rate continued to be elevated due to the lower profit environment. For the first half, the rate was 41.2%, which is consistent with our expectations for the full year. The elevated tax rate results primarily from nondeductible items such as client entertaining and employee benefits. Going forward, as profitability improves, the impact of these will be reduced, and we expect our tax rate to normalize at around 35%. The most significant item in our balance sheet was trade and other receivables of GBP 346.6 million. Net debt at the end of June was GBP 7.2 million, in line with expectations. We had borrowings of GBP 30 million under the revolving credit facility and GBP 7.6 million under our U.K. trade debtor discounting facility, partially offset by cash of GBP 30.4 million. Overall, net assets decreased from GBP 217 million in H1 2025 to GBP 211.6 million in H1 2026. This chart shows the movements in our cash in the first half of 2026. Our H1 EBITDA inflow was GBP 40 million, partially offset by an increase in net working capital of GBP 33.9 million, which I will talk in more detail on the next slide. Tax and net interest payments were GBP 7.3 million. Net capital expenditure was GBP 3.2 million, down from GBP 7.1 million in H1 2025. The lower capital expenditure was driven by sustainably lower spend on software as the majority of our system investments are now Software-as-a-Service and therefore, directly expensed. In addition, the majority of the larger post-pandemic office fit-outs have been completed by the end of 2025. Payments made in relation to lease liabilities reduced cash by GBP 20.6 million. The group paid out GBP 10 million for the 2025 final dividend in June. Overall, the impact of these cash flows decreased the group's net cash position since year-end by GBP 38.6 million to net debt of GBP 7.2 million at the end of June. We expect to close the year with around GBP 30 million of net cash after the payment of the interim dividend of GBP 4.6 million. Net working capital reduced cash by GBP 34 million in H1. We paid 2025 annual bonuses to senior staff and Q4 profit share in the first half, albeit at a reduced level of last year, reflecting the performance of the business. Our debtor book remains strong, and we've seen no deterioration in debtor days across either permanent or temporary recruitment. We have also not experienced an increase in debt write-offs. We saw an increase in trade and other debtors as compared to December 2025, and this was due partially to temporary recruitment, which has a greater working capital requirement, being more resilient in the current market uncertainty. We also had an increase of around GBP 11 million in prepayments compared to December due to most of our significant software license renewals being in H1. This will unwind over the second half of the year. The group aims to run the balance sheet in a position of net cash. We have a clear, well-established capital allocation policy with 3 defined uses of cash. The first is to satisfy the operational investment requirements of the group as well as the hedge liability under the group's share plans. The second is for the payment of ordinary dividends, where our policy is to increase them at the long-term growth rate of the group. And finally, any remaining cash surplus is to be distributed to shareholders by way of a supplementary return. While reviewing the group's current and future cash position in light of the sustained challenging trading environment and the ongoing unpredictable nature of our markets, the Board believes it's prudent to declare an interim dividend for 2026 of 1.46p per share, a total of GBP 4.6 million. This action balances the group's current level of profitability and affordability with the desire to continue to invest in growth areas. The Board recognizes the importance of dividends to shareholders, and we'll continue to assess the level of dividend payments while considering the group's future outlook. The interim dividend will be paid on the 9th of October to shareholders on the register as at the 28th of August. I will now hand you over to Nick to take you through our strategic review.

Thank you, Kelvin. Since the launch of our strategy in 2023, we have used 3 key phrases to act as our North Star: less is more, what we are famous for and building on our existing strengths. We look to those same principles when it came to developing our brand structure. Over the past 50 years, we've built a sea of brands and sub-brands to explain what we do. Each of them was created to label different services, specialisms and parts of our business. In an increasingly noisy world, we need to make it easier for our customers to quickly engage with us. That's why we've simplified and brought everything together under one single identity, Michael Page. People know Michael Page. They recognize us as a global professional recruitment business with scale, reach, expertise and a strong market presence. Where customers previously saw many brands, they will now see one, and the one they know the best, Michael Page. At the heart of our strategy is our focus on permanent recruitment, where we are the leading player with the most global reach with presence in 34 markets. Despite the tougher trading conditions, which up until recently have favored temporary recruitment, we still generate nearly 3/4 of group gross profit through permanent recruitment. We continue to harness the power of Page and our position as a global leader for specialist management and leadership recruitment. We continue to trade up in line with our strategy, placing more senior talent at higher salary levels and at higher fee rates, which in turn has driven increased levels of fee earner productivity as well as a standout result from our global Executive Search business. As we brought everything together under Michael Page, we want to give clarity for customers to understand the different things we do. We start with Specialist Recruitment Services, our core business, delivering permanent and nonpermanent recruitment to specialist and management roles. Next is Executive Search, our Page Executive business, offering assessment and advisory alongside search and selection. Over the last 30 years, we've built up strong equity around our capability in Executive Search. So we'll retain the Page Executive brand sitting under the master brand of Michael Page. And then we have Enterprise Solutions. This business will continue to support our largest global customers with delivery through scaled recruitment and outsourcing capabilities. So when customers ask what Michael Page does, the answer is clear. Instead of navigating multiple brands and sub-brands, they'll experience 3 distinct service areas: Specialist Recruitment Services, Executive Search and Enterprise Solutions. We continue to make significant strides in our use of AI. Based on feedback from our technology partners, we know we are in a strong position compared to our global competitors. Our implementation and adoption of AI continues to grow, and our smart agents are in use every day across the business, increasing productivity and saving time. We believe for the roles that we recruit, people will remain at the heart of the process. At Michael Page, we specialize in senior-level appointments. And in an AI-enabled world, we strongly believe that the need for human judgment increases rather than decreases. This is due to the criticality of relationships to build trust and credibility, which is a vital part of the process of delivering successful recruitment outcomes. We have a clear vision of the relationship between AI and our people, the balance between technology and the human. The role of our people remains critical in delivering for our customers, building out principles to create the People AI framework. We deploy this across 3 layers. On the left, what only our people can do: understanding context, judging human potential and leaning into differentiation. On the right, the tasks technology should do: how we drive efficiencies and take away the time spent completing administrative tasks, enabling our people to do what they do best, consulting with our customers. And in the middle sits what our people do better with AI: screening, talent mapping, providing insights and enhancing candidate outreach, driving more consistency and an uplift in performance. Overall, the goal is to use AI to support the human, supercharging the trust we've built in relationships as well as our proprietary data and platforms to deliver our customer promise, connecting talent that makes a difference. We launched our strategy in 2023 with 3 key strategic goals: delivering operating profit of GBP 400 million, changing 1 million lives and increasing our Net Promoter Score to over 60. Despite the challenging market conditions since we launched the strategy, we continue to position the group to ensure we can maximize opportunities as trading improves. I will expand on the progress made on the implementation of this part of the strategy in the following slides. Against our social impact objective of changing 1 million lives, we again performed well in the first half of 2026. Overall, we changed over 75,000 lives in H1, which means that since we set our target in 2020, we've changed over 865,000 lives. This puts us well on track to deliver our target of changing 1 million lives by 2030. We've also continued to make strong progress on our customer experience goal of achieving a client Net Promoter Score of over 60. From our pre-strategy baseline of 52, our Net Promoter Score increased to 61 in 2024 and then again to 66 in 2025. In H1, this increased further to 67. This score rates as excellent and is a clear recognition of the work we continue to do at Michael Page to deliver best-in-class service for our customers. Our strategy is based around 4 key pillars: the Core Business, Technology Recruitment, Page Executive and Enterprise Solutions. Over the last 6 months, we've experienced improved trading conditions in a number of our core markets. We've seen continued growth in Asia Pacific and the Americas as well as a return to growth in Southern Europe in Q2. At a country level, we delivered a record performance in India, and we saw good growth across a number of individual markets, including the U.S., Colombia, Greater China and Japan. That said, in Northern Europe, France and the U.K., we continue to experience challenging, but stable market conditions. As a result of the mixed performance by region, we continue to review our business operations and reallocate resources into the areas of the business where we see the most significant long-term structural opportunities, such as the U.S. and Japan, the 2 largest recruitment markets in the world. As has been widely reported, the technology sector has been impacted heavily by macro factors. Despite this, technology remains our second largest discipline. We continue to see a highly dynamic sector with demand for skills changing rapidly, and we continue to see a more resilient performance from non-perm. Despite the tough conditions globally, there were some individual markets which delivered good growth in H1, in particular, Spain, Colombia, Japan, Greater China and India. Page Executive delivered a record performance in H1 with growth of 8% and particularly strong performances from Germany, Southern Europe, Greater China, Southeast Asia and India. A key element of our Page Executive strategy has been to focus on more senior leadership roles and as a result, increase the salary levels at which we operate. It has become increasingly clear that the market gap for Page Executive is a significant opportunity for the group, and we remain confident that we are the best placed global recruiter to exploit it. Enterprise Solutions supports our largest strategic customers with their often complex international requirements. Our well-established global platform allows us to consult with clients as they look to launch into new markets or expand in existing geographies. Our customer-centric approach, highlighted by our excellent Net Promoter Score, increasingly makes us the partner of choice. Within Enterprise Solutions, our outsourcing business delivered a record H1 with growth of 22%, and we remain focused on winning business that delivers conversion rates in line with our strategy. I will now finish with a brief summary and outlook. The group delivered a resilient performance in H1 despite ongoing challenging conditions. We saw continued growth in Asia Pacific and the Americas as well as a return to growth in Q2 in Southern Europe. In total, around 50% of the group was in growth in H1. However, trading remained more challenging across France, Northern Europe and the U.K. Against these trading conditions, we've continued to take actions to optimize our cost base, incurring a net one-off charge of GBP 2.5 million in H1. This will deliver an equivalent annualized saving from 2027 onwards. We have a highly diversified and adaptable business model, strong balance sheet and our cost base is under continuous review. We are announcing today an interim dividend of 1.46p per share or GBP 4.6 million. The Board expects full year operating profit to be in line with company-compiled consensus of GBP 28 million. Kelvin and I will now be happy to take any questions you may have.

[Operator Instructions] Our first question for today comes from Karl Green of RBC.

I've got one question on Slide 18, which was super interesting in terms of framing how you're thinking about that technology deployment. At one end of the spectrum, you've got human uniqueness and the other, you've got the more sort of tech-enabled dynamics. The sort of question without asking for specific numbers is how far do you think you are along the journey in terms of giving the consultants what they need with the best available technology? Or is this an area where, as we go forward, there is going to be further productivity and efficiency gains to be brought through? Just thinking again in terms of the consulting capacity, there's clearly a frustration among some of them, the conversion ratios aren't quite where they are. So clearly working very hard. Just thinking about in the future, how many placements per month or per annum do you think that this tech strategy could deliver an uplift of? So just in terms of further consultant productivity. So it's kind of 2 sub questions there [indiscernible].

Yes. Thanks, Karl. It's a really interesting question. It feels like we're right at the start of the journey is the answer to the question at the moment. And I guess, as the technology continues to adapt and change, we'll continue to move along with it. I think that we've often said that we don't really want to be right at the leading edge of technology as it's just coming into the market. It's not being tested. People don't know the implications or risks involved. We want to see that it's being tested, it's robust. It fits within the guidelines of any compliance or governance or legal frameworks in any of the countries that we operate in before we put it into our ecosystem. As regards to your question around anything that we invest in, whether it's technology or other areas, is always aimed at driving productivity. And we've tried to make it pretty clear in terms of the framework that we're adopting that we see certain areas that really aren't going to change in terms of the way the consultant operates with customers. Areas where we can save consultants' time and therefore, giving them more time in theory means that they spend more time doing the bits that only they can do, which is speaking to customers, which you would logically believe over time will drive up productivity, more conversations, means more jobs, means more interviews, which ultimately should mean more placements. And then I guess, what everybody is looking for, I think, at the moment, having defined what AI can do well and what the human can do well is where is the sweet spot, where's the augmentation. And I think that's the bit that we will continue to adapt over time. But it just feels like we're right at the beginning. And I guess what we wanted to do by putting the framework out there was just make it very clear that as we put technology in place, we've got really clear categorization in our mind as to where we want to invest, where it's saving time, where it's driving productivity and where we really want to keep the human in front of the customer and not have them driven by technology. Yes, superpowered by it, but not driven by it.

Makes sense. Just a quick follow-up question just on the rebrand. I mean that sea of brands as you put on Slide 14 as well. Have you had any instances whatsoever of clients slightly unsettled by the changes or in any sort of sense there might have been 1 or 2 volume opportunities that have been lost because of the rebranding?