Michael Page Plc (PAGE) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us on today's Michael Page Third Quarter Trading Update. My name is Drew, and I'll be the operator on the call today. [Operator Instructions] With that, it's my pleasure to hand over to Kelvin Stagg, Chief Financial Officer, to begin. Please go ahead when you're ready.

Thank you, Drew. Good morning, everyone, and welcome to the Michael Page 2026 Third Quarter Trading Update. I'm Kelvin Stagg, Chief Financial Officer. And on the call with me is Nick Kirk, Chief Executive Officer. While 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 GBP 190.5 million in the quarter, representing growth of 1.5% in constant currencies and 1.4% in reported rates against 2025, the first quarter of growth since Q4 2022. Productivity measured as gross profit per fee earner grew 6% versus Q3 2025. This is higher Q3 productivity than in our record year of 2022. Overall, around 50% of the group was in growth in Q3. Our fee earner headcount reduced by 63 or 1.3% during the quarter with a reduced level of new starters over the summer period. Overall, the group ended the quarter with 4,851 fee earners and a total headcount of 6,604. Net cash at the end of September was around GBP 6 million, in line with expectations. This compares to net debt of GBP 7 million at the end of Q2 and is before the recent interim dividend payment of GBP 4.6 million paid on the 9th of October. I will now give a brief financial review. Our fee earner headcount reduced by 63 or 1.3% during Q3 with a reduced level of starters over the summer period. Reductions in EMEA and APAC were partially offset by additions in the Americas and the U.K. and our non-operations headcount decreased by 12 in the quarter. 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 growth opportunities. Concurrently, we continue to ensure headcount in all our markets is aligned to activity levels. Over the past 2 years, we have reduced by 24% in France, Germany and the U.K. collectively, partially offset by increases in the U.S., Japan and India of 18%. Gross profit per fee earner, our measure of productivity, remained high and increased 6% compared to Q3 2025. This is higher Q3 productivity than in our record year of 2022. In line with our strategy, we continue to move resources out of Page personnel level recruitment up into our established Michael Page and Page Executive businesses, which in turn is increasing the salary levels at which we operate. In markets where we've seen recovery, this has been driven by normalization of offer to placement conversion levels. The supply of talent remains a key challenge for our clients. And as a result, our permanent fee rates remain at record levels. I will now present a regional review. Group gross profit grew 1.5% in constant currencies against Q3 2025. The group delivered its first quarter of growth since Q4 2022. We saw growth continue in Asia Pacific, the Americas and Southern Europe, with trading more challenging, albeit stable across France, Northern Europe and the U.K. In total, around 50% of the group was in growth in Q3. In line with our strategy, Page Executive, which now represents around 10% of the group, delivered its second consecutive quarter of growth of 15%. In our largest region, Europe, Middle East and Africa, which represented 49% of the group, we declined 3.8% with continued mixed results across the region. Germany, the group's largest market in Q3, representing 12% of the group, declined by 7%. We saw strong results from our contracting business, up 15%, with continued strong demand for finance transformation and project-based IT implementation specialists. Page Executive grew 9%. However, trading was more challenging in our predominantly permanent-focused Michael Page business. France, 11% of the group, declined 11%. Temporary recruitment, down 8%, outperformed permanent, down 15%, indicative of the ongoing tough market conditions. The trading environment remains challenging with high levels of uncertainty amongst both candidates and clients. As in recent quarters, clients are highly selective, slower in decision-making and cautious on salary offers. As a result, the recruitment process has become more complex and time to hire has increased. Southern Europe delivered another quarter of growth, up 5%, with Spain continuing to deliver the standout results, up 9%. Elsewhere in Europe, we saw challenging market conditions in all countries, albeit Switzerland returned to growth with improved conversion of office to placements. In response to these conditions, we reduced our fee earner headcount by 47, mainly in Northern Europe. In the Americas, which represented 22% of the group, we grew 8.9% against Q3 2025. North America grew 8% with the U.S., our second largest market in Q3, up 7%, delivering 2 years of consecutive quarterly growth. Our largest discipline, Construction, continued to deliver the standout results, up 12% due to continued strong client demand and talent shortages. In addition, manufacturing delivered another quarter of growth. However, we are yet to see a broad-based recovery with tough conditions in most other disciplines. In Latin America, gross profit grew 10%, in line with Q2. Mexico, our largest country in the region, grew 8%, slightly ahead of Q2. Brazil grew 5%, a notable improvement on the decline of 6% in Q2. Temporary recruitment continued to outperform permanent due to the uncertainty in the lead up to the election. Colombia, which represents around 20% of Latin America, grew 14% due primarily to our technology-focused consulting business. Our remaining countries in Latin America grew 18% collectively. Overall fee earner headcount increased by 16% in the quarter, mainly in the U.S. In Asia Pacific, which represented 18% of the group, Q3 gross profit grew 14.7%. Asia was up 19%, a further improvement from the growth of 11% in Q2. This is our sixth consecutive quarter of growth with 10 of our 11 markets delivering growth. Greater China was up 28% in Q3, an improvement on the growth of 17% in Q2. Mainland China grew 36% due partly to a soft comparator, but also driven by improved trading across both Michael Page and Page Executive. We continue to see improvement in sentiment from both clients and candidates, which is helping to secure placements, particularly for senior hires across both domestic and multinational clients. Hong Kong was up 9% compared to the growth of 2% in Q2, with a particularly strong result in Page Executive. Southeast Asia grew 8% in Q3 '25 with stable market conditions across most of the region. In Japan, where we have invested over the past 2 years in fee earners due to the size of the market and its strategic importance, we delivered a standout performance, up 23%, a record quarter and a further improvement on the growth of 18% in Q2. India grew 18%, delivering another record quarter. The market sentiment remained positive with continued good levels of business confidence. Australia declined 7% with a slight deterioration in market conditions due to economic uncertainty. Our fee earner headcount in the region decreased by 41 in the quarter due to the timing of levers. In the U.K., which represented 11% of the group, gross profit declined 5.5%, in line with Q2. Market remains tough but stable with some positive sentiment, albeit this has not yet translated into job acquisition. Temporary recruitment up 2%, continued to outperform permanent, down 9%. Fee earner headcount increased by 9 in Q3. I will now provide a summary of our results. The group delivered our first quarter of growth since Q4 2022. We saw continued growth in Asia Pacific, the Americas and Southern Europe, with trading continuing to be more challenging, albeit stable across France, Northern Europe and the U.K. We continue to execute our strategy, harnessing the power of Page and our position as the global leader for specialist management and leadership permanent recruitment, placing more senior talent at higher salary levels and at higher fee rates. As a result, Q3 productivity was up 6% on 2025 and was also higher than Q3 2022, our record year. Page Executive, representing around 10% of the group, delivered its second consecutive quarter of 15% growth. The progress we are making in productivity, technological innovation, operational efficiency and strategic execution demonstrates that our strategy continues to work and positions us well for future growth. Collectively, since the launch of our strategy, our cost-saving programs have delivered annualized savings of around GBP 40 million. This cost base control has continued in 2026, incurring GBP 2.5 million of one-off costs in relation to senior exits in H1 with a similar figure expected for H2. Whilst we continue to see improvement and normalization in trading in a number of our markets, there remains a significant degree of uncertainty. We have a highly diversified and adaptable business model, a strong balance sheet and a cost base that is under continuous review. We currently expect 2026 operating profit to be in line with company compiled consensus of around GBP 29 million. Nick and I will now be happy to take any questions you may have.

With that, we can start today's Q&A session. [Operator Instructions] Our first question today comes from Karl Green from RBC.

I've got 3 questions unrelated. Firstly, just on that 6% increase in productivity. Could you just decompose that in terms of what the bigger building blocks were in terms of salary increases, mix headcount management, et cetera? That's the first question. The second question, just thinking about Page Executive and the very strong momentum there going into fiscal '27, how much of a conversion ratio tailwind do you think that Page Executive could be as we look forward into the next year? And then the last question, just specifically on Australia. Just maybe a little bit more color if you can in terms of some of the specialisms which have hit in the last few months just to get a sense of whether that's going to be temporary or maybe something a little bit more structural coming through in.

Thanks, Carl. I think you got most of that, but I think you might need a new headset. I know one blew up last night, but you might need another one of it. But anyway, I'll have a go answering the questions. If I miss any detail, please come back to me and just ask me a follow-up question. So in terms of the increase in productivity, as you know, we closed our Page Personnel business. and we're moving resource up into the Michael Page business, which is a well-established management and specialist recruitment firm with a brand known for that. So we're really just building out the presence of Michael Page. Now naturally, that's, therefore, driving productivity. That's also helped by the fact that fee rates are at record levels, and we're seeing some salary inflation as well. So you pull all of those things together, and we're starting to see that feed through into improved productivity and no reason to believe that, that won't continue. And that will be a key measure for us moving forward because what we don't want to do is start adding in lots of headcount into markets where we are now starting to see this top line growth and dilute that productivity. We have to hold the productivity and grow out at this new high productivity level to drive margins going forward. A key part of that story is Page Executive, and we're delighted to have 3 quarters of growth, 2 at 15%. And the business itself is really delivering in the way that we thought it would when we made it a central pillar of our strategy. It's a business that naturally as well feeds the Michael Page organization because, obviously, by placing a CFO into a company, you then have the opportunity for that CFO to come back to us if they're looking to do a reorg and Michael Page then get work off the back of that. So that works very well for us. It also is a career opportunity for some of our Michael Page consultants that want to move up into more senior search work. And the Page Exec commitment that we have, 350 fee earners globally now allows us to actually give them that career opportunity within the Page family. So that's all good. And I think your final question was on Australia. I mean what we're seeing there is that it just feels as if the sentiment has come off a bit. It felt a bit better in Q2, feels a bit weaker in Q3. By region, certainly, the Sydney office, Melbourne office has been tougher. -- the Perth office and the Brisbane office were better. But yes, it just seems to be kind of struggling almost to kind of get off the ground in terms of recovery. But I know that the team are doing a lot of the right things. So fingers crossed, we'll start to see some improvement over the next 3, 6 months. Was that okay, Karl?

Yes.

Our next question comes from Abi Bell from UBS