PageGroup plc ($PAGE)

Good morning, everyone, and thank you for joining us on today's PageGroup Q1 trading update. My name is Drew, and I'll be the operator on the call today. After today's prepared remarks, we will have a Q&A session. [Operator Instructions] With that, it's my pleasure to hand over to Kelvin Stagg, Chief Financial Officer, to begin. Please go ahead.

Thank you, Drew. Good morning, everyone, and welcome to the PageGroup 2026 First 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 and which will also be available on our website following the call. The group produced another resilient performance despite the heightened geopolitical and macroeconomic uncertainty. Q1 gross profit was GBP 187 million, a decline of 4.9% in constant currencies against 2025. Our fee earner headcount increased by 26 or 0.5%, driven by growth in the Americas and Asia Pacific, partially offset by reductions in EMEA in the U.K. Overall, the group ended the quarter with 4,994 fee earners and a total headcount of 6,801. Despite the challenging macroeconomic conditions, gross profit per fee earner and measure of productivity remained high and grew 2% versus Q1 2025. We had net debt at the end of March of around GBP 7 million, in line with expectations. This compares to net cash of GBP 31 million at the end of 2025, having paid our annual bonuses and the quarterly profit share in January. I will now give a brief financial review. We increased our earner headcount by 26 or 0.5% during the quarter. We continue to review our fee on headcount, reallocating resources in line with our strategy in the areas of the business offering 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. And this was particularly evident in Q1, where in response to the tough conditions in EMEA in the U.K., we reduced our fee earner headcount by 80 However, in Asia Pacific and the Americas, due to the continued growth and to maximize market share, we added 106 fee earners. We reduced our nonoperations headcount by 45 in Q1. Despite the challenging macroeconomic conditions, productivity remained high and grew 2% versus Q1 2025, where we have experienced improved trading in parts of Asia Pacific and the U.S. This was driven by a normalization of levels of conversion of offers to placements. In our other countries, where trading remains challenging, we are yet to see any improvement in this metric. Although our clients' recruitment budgets have tightened in many markets, which extends time to hire, our fee rates remained at record or high levels across all regions. Salary levels remain strong, although the level of increases offered to candidates were not as elevated as they were in 2022 and early 2023. And as a consequence, the conversion offers to placements remain the most significant challenge. I will now present a regional review. Group gross profit declined 4.9% in constant currencies against Q1 2025. In line with the 3 previous quarters, we saw variable market conditions across the group with ongoing challenging conditions in Europe and the U.K. However, we delivered a sixth consecutive quarter of growth in the U.S. and a fourth in Asia. In our largest region, Europe, Middle East and Africa, which represented 54% of the group; we declined by 9.2% on Q1 2025. We continue to see tough conditions throughout most of the region with low levels of candidate and client confidence. Germany, the group's largest market, which represented 13% of the group; declined 7% in the quarter, broadly in line with Q4, with activity levels and business sentiment remaining stable. In line with Q4, our interim business was the most resilient, down 1%, and we continue to see high demand for project-based work, particularly in finance. France, the group's second largest market, which represented 12% of the group; declined 14% due to the ongoing political and macroeconomic uncertainty, leading to continued high levels of candidate and client caution. Temporary recruitment down 10%, continued to outperform permanent, down 18, where we saw a 9% reduction in job acquisition per fee earner in Q1. Clients become increasingly selective, slower to make decisions and more conservative on salary offers. As a result, the recruitment process has become more complex and time to hire has increased. Spain continued to be the strongest performing market in the region, growing 1% with ongoing good levels of candidate and client confidence. Elsewhere in Europe, market conditions remain challenging in all countries. In the Middle East, where our first and foremost priority is the safety and well-being of our 70 people, we declined 12%, with clients in Canada confidence having deteriorated further due to the regional conflict, which also increases the risks of backouts and hiring freezes. Overall, for the region, our fee earner headcount reduced by 51 in Q1. The Americas, which represented 19% of the group, grew 1.1% against Q1 2025. The U.S. was up 1%, its sixth consecutive quarter of growth. Our largest discipline of construction continued to deliver the standout results, up 14%. This has been driven by high hiring demand in all markets, notably in commercial, multifamily and health care, where the demand for experienced project managers and superintendents remained high. However, we are yet to see a broad-based recovery with tougher conditions in most other disciplines. In Latin America, gross profit grew 1%. Mexico, our largest country in the region, declined 8% and an improvement on the 17% decline in Q4, although we continue to see ongoing tariff-related uncertainty. Brazil was down 7%, albeit against a tough comparator. Temporary recruitment up 12%, continued to outperform permanent, down 17. Colombia, which now represents around 20% of Latin America, delivered the standout performance, up 15% with particularly strong trading in our technology-focused consulting business. Our other 4 countries in the region grew [ 16% ] collectively. Overall fee earner headcount increased by 48 in the quarter, mainly in the U.S. In Asia Pacific, which represented 16% of the group, Q1 gross profit grew 9.3% on 2025. Asia was up 10%, its fourth consecutive quarter of growth, an improvement on the growth of 7% in Q4. In Greater China, which represented 4% of the group, we grew 12%, albeit against a soft comparator. We continue to see improvements in both candidate and client confidence, which helped to secure placements, particularly for more senior roles. Mainland China and Hong Kong were up 21% and 4%, respectively. Southeast Asia grew 5%, with Singapore up 16 and strong trading conditions across most of our markets in this region. India, where we now have over 260 fee earners, was up 10%, its fifth consecutive quarter of double-digit growth. Elsewhere in Japan where we have invested in fee earners due to the size of the market and its strategic importance, we grew 17% and notable improvement on the growth of 3% in Q4. Australia was up 4%, its second consecutive quarter of growth, supported by good results across most states and particularly strong trading in Victoria. Despite a decline in external job volumes, our consultants delivered strong job acquisition and interview outcomes from a lower headcount, driving improvements in productivity. We increased our fee earner headcount in the region by 58, mainly in Southeast Asia and India. In the U.K., which represented 11% of the group, gross profit declined 11.4%. The market remains tough, with clients continuing to delay hiring decisions and candidates remaining cautious about accepting offers. Temporary recruitment down 7% outperformed permanent, down 14%, where we saw a 9% reduction in job acquisition per fee earner. Our as earner headcount reduced by 29 in the quarter. I will now provide a summary of our results. The group produced another resilient performance despite the heightened geopolitical and macroeconomic uncertainty. In line with the previous quarters, we saw variable market conditions across the group. The conversion of offers to placements remain the most significant area of challenge as ongoing macroeconomic uncertainty continued to impact confidence extending time to hire. We remain committed to our strategy and continue to reallocate resources into the areas of the business where we see the most significant long-term structural opportunities as well as ensuring headcount in all of our markets is aligned to activity levels. Overall, our focus remains to balance near-term productivity with ensuring we are well placed to take advantage of opportunities as market conditions improve. Whilst we have seen signs of normalization in trading in some of our markets, increased geopolitical and macroeconomic risks due to the conflict in the Middle East create a heightened degree of uncertainty in the outlook for the rest of the year. Despite this market outlook, we continue to focus on controlling the controllables and invest in innovation and technology and remain confident in the execution of our strategy. We have a highly diversified and adaptable business model, a strong balance sheet and a cost base that is under continuous review. Nick and I will now be happy to take any questions you may have.

[Operator Instructions] Our first question today comes from Abi Bell from UBS.

Just two questions from me. Firstly, March is typically a seasonally significant hiring month. So did you observe any notable change in trends as the quarter progressed? Or was activity fairly consistent across the 3 months? And then secondly, we continue to see a very mixed regional trends with sustained in the Americas and APAC compared with much tougher conditions in Europe. Could you help us unpack what is driving that divergence and whether you view the strength in the Americas and APAC as primarily cyclical or is it more structural? Or is it more so positioning relative to the weakness in Europe?

No problem. I can take those two. So the first question, I mean, we don't comment on month-by-month trading. I mean we already update you every quarter. So we don't really want to be dragged into month-by-month update as well. As regards to your second question, yes, it is mixed. I think there's quite a lot to talk about in relation to that question. I mean first things first, if you remember back to probably the start of or end of '22, start to '23, we have markets like Asia and the Americas starting to soften in terms of performance earlier than Europe, which probably continued to perform pretty well right through until the end of 2023. So there's a bit of a timing thing that the Americas and Asia went into the downturn first. And therefore, one could assume that they would come out of it first. I think then even between the two markets, there's variance because if we look at the Americas and more specifically within that, the U.S., what we haven't called over the last 6 quarters is a broad-based recovery, and we're still not seeing on areas like financial services, finance, sales and marketing, legal, still all really tough. We're just grateful of our strategic positioning into construction, which is 55% of our business. That market is really hot at the moment. We would expect it to continue to be hot throughout this year. And there's a severe lack of talent for the roles that we recruit, which are only 3 job types. We look after estimators, we look after project managers, and we look after site supers. Those are the only 3 that we do. They are the leadership roles within construction. And as I said, there's talent shortages all over the U.S. for those positions, and we're benefiting from that. In Asia, we've seen now, what, 4 quarters of growth. It's very pleasing to start to see some of the investments that we've made in markets like Japan, for instance, beginning to pay off. very pleased with the quarter that we have there. As we are with the recovery that we've seen now in Mainland China, having had a really tough 2 or 3 years, so yes, there's there's a lot of kind of regional variance in the answer to that question. But I think at the moment, what we're seeing in those markets is a recovery, which is very much around a cyclical recovery, i.e. in those markets before they started to recover, the issue that they were experiencing was the conversion of offers to accepted offers. And we talked about a ratio that in a normal market would be around about 4 and a drop to around about 3. In places like Europe and the U.K., it's still hovering around that 3 figure. In markets like construction in the U.S., it will be back to 4. In other markets in the U.S., it will still be hovering around 3. And in Asia, very much you could just do a list of company -- countries that are growing. And the ones that's really starting to kind of deliver good growth are the ones where you're starting to see that conversion rate of offers to accepted offers going back towards 4.

Our next question today comes from Remi Grenu from Morgan Stanley.

I've got two. So the first one would be on France specifically, which I think was quite weaker. And looking at some of the data, so indeed job posting, for example, started to get significantly worse from beginning mid-March onwards. So I was wondering if there is anything happening in this country. I know you're calling the political background, but it's been difficult over the last 12 months. And if anything, it has probably stabilized a little bit over the last 2 quarters. So trying to understand what's happening in this market specifically. The second one would be on the outlook. So you're calling for a higher level of uncertainty. Just wondering if you start to think about any potential initiative on the cost side? And what are your room of maneuver on that front? I'm just trying to understand a little bit if we think worst-case scenario and lower volume of placement over the next few months, what could be the drop for the negative impact on operating profit?

Yes. Okay. Thanks for your question. I'll take the first one and then pass over to Kelvin for the second one. Yes. I mean, France is our second largest market. And it's tough. I mean, I take onboard your point there around the fact that it's been tough for a period of time. And one could argue for the past couple of quarters, there's a bit more stability. But stability, having come off the back of -- lost count of how many Prime Ministers France has had over the past 2 or 3 years it's been a very, very uncertain and to some degree, unprecedented period for business in France. We've seen candidates becoming increasingly cautious, especially for permanent roles. That said, the best candidates are often involved in multiple processes, which just increases the competition to get the very best candidates and increases, therefore, backout rates when a candidate gets 2 or 3 offers. There is a bit of variety across the sectors. I mean probably not a huge surprise that the best-performing sectors are defense and aerospace. But as we move through the quarter, we've certainly seen some softening in new job acquisition, and we felt that was important to call that out because France is such a big market for us. And we've seen there what round about circa 10% reduction in new jobs per fee earner. So that would be a bit of a concern for us going into Q2. And the comment that I get consistently when I speak to leadership over in France is that they don't believe that there will be any significant change for the positive anyway until we get through until summer next year when they have the presidential election. So I think we're in for a bit of a tougher item, I'm afraid.

Yes, let me take the one on the outlook and costs. So clearly, as we've highlighted in the statement, the outlook has got more uncertain. I think the war in the Middle East, the possible impact from that on oil prices, and therefore, possibly inflation and interest rates is one that we're fully aware of and monitoring closely. I think we obviously look at our costs in two different buckets. So we have our operational costs really in terms of the fee earners. And as we always say, we try and align those with the level of job activity we have in the market. Generally, up until now, certainly, in most cases, we're not seeing a reduction in the number of jobs. We've been seeing a challenge at the bottom of the funnel in terms of the conversion of offers into placements and therefore, the monetization of those offers. However, in a couple of markets, as I mentioned during the update, we have seen job acquisition come off by 9% in France, 9% in the U.K. I think you may well, therefore, see us realigning the number of fee earners that we have in those markets using natural attrition with the level of jobs that we've got to work, albeit in the U.K., we have had a bit of a restructure in the U.K. and therefore, we are moving people within the U.K. into other disciplines where we're seeing better activity. When I then look at the nonoperational costs or the global business solution costs, we've got a number of activities either that have just concluded. So the transition of our shared service center out of Singapore in Kuala Lumpur is now complete, and we're working on efficiencies within that new shared service center. We have the HR transformation program that started about a year ago and will carry on through the rest of this year. which is really about rolling out a new HR system about moving the HR function out of local countries and into our shared service centers, primarily in KL, with both the efficiencies and [ waiver ] arbitrages that, that will deliver. We've been running location strategy for some time, moving support roles out of more expensive locations, London would be an example, into places like Barcelona, Buenos Aires and Kuala Lumpur. And we will also continue to see where we can streamline activities outside of that. While we don't have anything to announce at this point, we do have a lot of activities ongoing, looking at those costs, and we may well be able to update you with something a bit more material when we get to Q2.

Our next question today comes from Steven Woolf from Deutsche Bank.

Just one question sort of following up on the headcount side of things. I'm wondering where your thoughts were on the investment of which I presume will continue, were required in the U.S. and in parts of Asia going forward. With the other parts where you've taken the headcount of the fee earners out, if it's not a question more about the number of jobs, more the number of conversion, is there a point we're reaching where it starts to cut into the muscle a bit if you continue to take parts down. I just wondered how close we are to that point.

Yes. It's a fair question. I mean what we're trying to do in all of our markets, as we previously mentioned, is balanced near-term productivity with retaining the platform. So if you take, for instance, Germany in Q1, productivity was up 5%, headcount was down 8%. So that's kind of what we're trying to do everywhere. And I think that it's obviously harder in markets where you're seeing significant levels of contraction, so whether that's France or the U.K., and hence, the reason we call that out. And Kelvin just spoke about it a moment ago is that we'll continue to keep an eye on productivity to ensure it's in the right place. I mean, in Q1, it was, I mean, in the U.K., our productivity was up 9%. And in France, it was up 1%. So it was about right. But yes, that will be the balance as we go. I don't think we're close to a point where we're cutting into muscle. But at the same time, we just have to see how things progress, particularly in relation to the Middle East because that's the big unknown at the moment. I think if we take that off the table, then I think there's a lot of positives in our results today. But clearly, the outlook is just incredibly uncertain because of what's going on over there and nothing off the table as a result.

[Operator Instructions] Our next question comes from Karl Green from RBC.

A couple of questions from me. Just in terms of a question around offers, are there any areas outside of Asia and the U.S., where you're seeing any inklings of softening of client intransigent around the level of offers being put to candidates? That's clearly been an issue in some verticals in some geographies. Just any kind of areas where you're seeing clients getting a little bit more realistic about the kind of package that is required to get people to move? And then the second question, just a bit more straightforwardly, just in terms of any latest thoughts on the shape of the balance sheet as the year progresses, please.

Thanks, Karl. Okay, I'll take the first one. I mean, not really. No, I mean the offers conversions improving in the markets that we've already highlighted. But it's a bit more nuanced than that, which I'll try to explain. So for instance, I spoke a moment ago about France and the fact that over there at the moment, you've got the best candidates involved in multiple positions. I mean clients want the very best candidates, the very best candidates are wanted by most of our clients before they come to the table and they get more than 1 offer. They can only take 1 of those offers. And if it isn't the 1 that we worked with them on, then we receive no money for the work that we do. It doesn't mean that we didn't have a good candidate at the end. It doesn't mean there wasn't a sensible conversation, and it doesn't mean that the candidate and client weren't interested in trying to make the deal happen. It just happened that they had another offer on the table that was better in some shape or form. So in all countries that we operate in, even in these conditions, the best candidates when they come to market will find that there'll be a home for them, there will be an offer on the table. That is a case of is it enough? Is it going to get them over the line? And is there a current employee going to make an effort to keep them? And if so, how much of an effort are they going to make? So I guess, at a top level, just to answer your question, no, the markets where we've seen more sensible conversations happening are in the U.S., but not every market, as I said earlier, specifically in construction, less so in areas like finance, legal, sales and marketing, banking, et cetera, where it still remains difficult. The markets that are starting to come back online in Asia, that's because, again, we're starting to see more sensible conversations, improving the chance of offers turning to accepted offers. And in the other markets like Europe and the U.K., there's just a lot of caution. People don't enjoy recruiting. So it's not as if people spend time deciding they'll fill their day by doing interviews, either going to them or actually running interviews. It's a drag for most clients, and candidates don't particularly like doing interviews either. So if the client is committed to interview, it means that they're committed to hiring. But when it gets to the end of the process, there's just a lot of barriers there, which could be the candidate is not quite good enough. They are a good candidate, but not a great candidate. The candidate looks at the client and goes, yes, it's a good opportunity, but is it that much better than the one that I am in at the moment? Is the offer that much better than the one I have at the moment? Et cetera, et cetera. So there's just a lot of nuance within the process, which results in this kind of conversion rate figure that we're using. But it often feels quite blunt when we talk about it because there's a lot more subtlety to it than that. And there's so many factors that go into it. But at a broad level, you're seeing that normalization out in places like Asia, which is what we expected. You're seeing that normalization in places like the U.S. construction sector. But in most of the markets, that is the key challenge that we face, which is that conversion of offers to accepted offers.

Yes. I'll take the one on cash. I guess, just to start out, whilst announcing a net cash number for us at a quarter end or any period end is unusual. It was exactly in line with what we expected when we made the decision on the final dividend, which totaled GBP 10 million at the prelims. It's not unusual for us to drop by about GBP 40 million between the year-end position and the end of Q1. If you look back to the 2024 year-end where we had GBP 95 million of net cash, that had come down by about GBP 40 million when we got to the end of Q1. At the end of 2025, we had GBP 31 million. And therefore, being at minus 7 is not unusual, and it is very much in line with expectations. The reason you probably see it as being net cash and historically wouldn't have been is more because we now believe that we can run the business structurally on about GBP 25 million worth of net cash rather than the GBP 50 million that we historically would have needed, and that's to do with good cash flow management. I still fully expect that by the year-end, we'll be back in a net cash position, subject to trading and subject to decisions on further dividends during the year. But I'd expect us to be GBP 30 million and GBP 40 million. Given that we're paying GBP 10 million, sorry, out in June for the final dividend, we could well be in roughly the same net debt position of about minus 5, somewhere around there when we get to the half year.

Our next question comes from James Rowland Clark from Barclays.

Just one question, please. I think you mentioned there that potentially in what you said in France that you're down 9% in terms of job acquisition per fee earner and that perhaps they had lots of job offers per candidate on the table, and they were deciding between them. Is that -- is there a greater level of competitive pressure in France? And then, as you talk about the conversion to accepted offers being the biggest challenge, particularly outside of U.S. construction and Asia Pac, is that -- is it a competitive pressure that is playing a role in the conversion? Do you think there's a little bit more competition perhaps on price, perhaps just activity, more staffers be a bit more aggressive? Is there anything there to speak of in terms of that conversion being a little bit tougher? Thank you.

There are kind of two separate points and apologies if I brought the two together because that wasn't the intention. So just to explain, we've seen new job acquisition on perm roles. So again, specifically permanent roles, not temporary roles. New job acquisition for permanent roles was down 9% in Q1. So what we're calling out there is a bit of softening at the top of the funnel in terms of activity. So our consultants are just getting -- going down from, say, 10 jobs a quarter to 9 jobs a quarter, in simple numbers. So that's one point and one issue that we have going into Q2 and the remainder of the year if that remains the same. The separate part to that is then from the candidate side, which is that candidates are remaining cautious, especially for permanent roles. We've talked before about the protection that you have as an employee. If you're going to give up that level of employee protection, then it needs to be for a role that really does excite you or reward you financially for the risk that you're going to take to step away from some of those protections during your probationary period. What I was calling out, therefore, was that the very best candidates are coming to market, they're finding that there are roles out there because there are. And they're the candidates that are in demand. And therefore, they end up in multiple processes. What does that mean for us? it means that we just have increasing competition to get those candidates converted because they might have 2 offers or 3 offers. Therefore, turndown rates go up. which is another issue at the bottom end of the funnel going back to that point around converting offers into accepted offers. Do I think there's a change in the competitive landscape? No. In the market that we play, which is white collar recruitment on both the temporary cinema site, we are, by far, the market leader in France. And I don't think -- if anything, competitors are falling away rather than there being more competition. It's more of an issue just around the market confidence, which isn't in a great place.

With that, we have no further questions in the queue at this time. So that concludes the Q&A portion of today's call. I'll now hand back over to Kelvin Stagg for some closing comments.

Thank you, Drew. As there are no further questions, thank you all for joining us this morning. Our next update to the market will be our Q2 2026 trading update on the 30th of July. Thank you for joining.