Robert Walters plc ($RWA)

Good morning, everyone, and thanks for joining our first quarter trading update call. I'm Toby Fowlston, Chief Executive of Robert Walters. Since our full year results in March, we announced the departure of David Bower as CFO. David made a great contribution in his 3 years with the business, and I know many others at Robert Walters will join me in wishing him well in his retirement. I'm joined today in London by Jonathan Solesbury on our new Interim CFO. This is just day 11 for Jonathan, but he's already begun to make a very valuable contribution drawing on his considerable experience leading finance functions in international businesses. So on that note, I'll hand over to Jonathan now, who will make a few remarks regarding performance at the group level before I return to touch on trading in our service lines and the wider market backdrop as we exited the first quarter.

Thank you very much, Toby, and good morning, everybody. I've received a really warm welcome in my first couple of weeks with the business, and the strength of the culture has really been evident from day 1. Let's turn to group trading during the first quarter, where, as you're accustomed to, and unless otherwise stated, all percentage movements in net fees are in constant currency terms. Group net fees in quarter 1 were 2% down year-on-year, in line with the Board's expectations, and a clear sequential improvement versus the trend seen throughout 2025. Whilst elements of our specialist recruitment portfolio do remain tough, we saw a notable step-up in the proportion of the specialist recruitment portfolio in growth during the first quarter, with the countries in growth representing half of specialist recruitment net fees, which was up from fifth in the second half of 2025. Furthermore, it was great to see our recruitment outsourcing business return to growth for the first time since late 2022. Turning to productivity, headcount and costs. We saw a third consecutive quarter of growth in the critical metric of perm placements per perm fee earner per month, which grew 6% on the prior year. Within this, it was particularly pleasing to see certain markets drive higher perm placements year-on-year despite a lower fee earner headcount. Consistent with our aim, as mentioned, at the full year results last month of improving the quality of growth. And the headcount continued to be closely managed and was up 3% on the prior quarter. Meanwhile, total headcount was flat quarter-on-quarter. With respect to operating costs, we saw further progress during the quarter with the underlying cost rate per month below GBP 23.5 million. Turning to the balance sheet. Period-end net cash was over GBP 20 million, in line with the Board's expectations. The first quarter outflow reflected the typical seasonal profile, driven by the payment of fee earner annual bonuses. And for reference, I note the quantum of outflow at GBP 6 million compared to the GBP 11 million outflow in the first quarter of the prior year. You will note from the full year results in March that measures to optimize cash levels in the group continue to be a key focus, and I'm looking forward to further progressing these very clear plans at pace. Let me hand you back to Toby, who will take you through trading in our service lines as well as the wider market backdrop.

Thanks, Jonathan. Let's look at our specialist recruitment business across each of our 4 geographic regions before turning to recruitment outsourcing. Asia Pacific specialist recruitment net fees were up 4% year-on-year in quarter 1. Japan, our single largest market, returned to growth in the quarter, up 13% with a better performance seen in perm driven by higher productivity. You'll recall, we implemented actions in Japan towards the back end of last year to improve our perm performance. And it's pleasing to see these beginning to bear fruit and disciplined focus will, of course, continue. In Australia and New Zealand, there was further momentum in temp volumes, and indeed quarter 1 finished with volumes at the highest level since quarter 1 '24 and quarter 2 '24, respectively. This drove growth in net fees of 12% in New Zealand, whilst the softer perm performance in Australia, where it is a larger proportion of the mix, meant fees were down 7% on prior year. Fees were up 2% in Greater China, whilst a 7% decline in Southeast Asia, which was a blend of mixed performance at the country level. Turning to Europe. Net fees were down 16% in the first quarter. And it's fair to say Northern Europe, in particular, remains the region of our global business where hiring market conditions are still comparatively tough. As a reminder, the backdrop in Northern Europe of late has been one where a mix of regulatory and macro factors have contributed to uncertainty for hiring organizations. In France, quarter 1 net fees were down 21%, sequentially stable against the second half of 2025. Meanwhile, there was sequential improvement in the Netherlands with fees down 10%, driven by a notably better performance in perm. However, in Belgium, our first quarter performance was weaker than expected, with fees down 36%, and we have work to do there. In Spain, where we saw growth emerge through the second half of 2025, there was further momentum with fees up 13%. And for reference, our Spanish business is over 90% perm. Turning briefly to the U.K., net fees were up 1% in the first quarter. And at our full year results last month, we noted how external indicators of labor demand in the U.K., notably job vacancies have been stabilizing month-to-month for a little while, and we've seen this continue. In the rest of the world segment, net fees were down 16%. However, excluding Brazil, Canada and the U.S. West Coast, all offices which we closed last year, net fees were down just 3% on a like-for-like basis. In the Middle East, where fees declined 15%, our performance clearly came against the backdrop of geopolitical tension, albeit it was a more moderate rate of decline as seen in the fourth quarter of 2025. Meanwhile, in the Americas, which comprises our U.S., Mexico and Chile operations, fees were up 11%. Turning then to our recruitment outsourcing business. Fees were up 13% in the first quarter with that business returning to growth for the first time since late 2022. Performance with retained clients, which comprise well over 90% of the book was again resilient. And we also saw a very good contribution from a perm volume hiring contract expansion, which we announced late last year. Our consultancy offering also saw continued momentum in the quarter, driven by public sector clients. So a good start to the year for our outsourcing business and testament to all the hard work our people there have put in over the last few years. Turning then to consider the market backdrop and how we're looking out over the rest of the year. As Jonathan mentioned a few moments ago, our first quarter trading was in line with our expectations. We remain encouraged that the momentum that we saw in the second half of last year in the U.K., Spain and New Zealand continued into the first quarter. And of course, it was great to see Japan, our largest market, return to growth, meaning that 4 out of our top 8 markets were in growth during the first quarter. More widely, with 50% now of our specialist recruitment portfolio in growth during the first quarter, growth clearly broadened out compared to the second half of last year, where just 20% of the portfolio was in growth. Now it's important to say we haven't really witnessed a material uptick in new job flow year-on-year, but we do see some 4 years now since the peak of the post-COVID job surge, a bit of incrementally greater resolve among both clients and candidates to get recruitment processes over the line. We continue to remain laser-focused on working our sales funnel smartly and giving great service to our clients and candidates, and we believe this is seeing us take share in certain markets. The growth we've seen in some markets is clearly not yet universal, with Northern Europe, in particular, remaining tough. And whilst the hiring market in the Middle East conflict appears to remain at this point, limited to the region itself, we do remain mindful of potential macro impacts down the line should the tensions become retracted. So taking all that into account, our guidance for 2026 group net fees remains unchanged. We will continue to remain focused on those factors in our control, and we feel the group is increasingly well positioned to take advantage of the opportunities we have ahead, given the total talent solutions offering we are building out. So with that said, Jonathan and I would be happy to take any of your questions.

[Operator Instructions] We will now take our first question from Tom Callan of Investec.

Just one from me. So clearly, an encouraging uptick there in placement volumes year-on-year. I just wondered if you could remind us as to the sort of economic impact behind that in a steady market, i.e., what that increase potentially means in the context of incremental NFI and maybe also EBIT, if you assume a typical drop-through?

Yes, I'll take that question. Thanks, Tom. Yes, obviously, really pleasing to see the volume productivity has gone up. That's now our third consecutive quarter. And obviously, it's good to see certain markets driving that placement growth as well, particularly in most cases with fewer fee earners. So perm placement, if we just go back last year, perm placements per fee earner per month in 2025, we're tracking around 0.84. And again, just as a reference point, that sits against an average pre-COVID of about 1.0. And then as you may recall, we did see it sort of tick up to about 1.2 during the post-COVID surge. So I think as we step back from all of that, we recognize that we still have headroom capacity to grow from where we are today. I think if we looked at a 10% uplift in that volume productivity metric alone, and again, just to be clear, that is just perm in specialist recruitment, that would drive probably north of GBP 10 million worth of net fees. Now clearly, there is a larger benefit if that uplift is also reflected in temp, and you might recall when we did the CMD, we talked about both the impact of perm and temp benefits. So hence, it was a larger number we discussed then. So I think in terms of EBIT, look, on the basis that headcount remains flat, then there's no reason why we shouldn't see a drop-through of around 70% to 80%.

And we'll now take our next question from Steven Woolf of Deutsche Bank.

A couple from me. I'm interested in the comments that you said there about this greater result for client and candidates to get deals done, which obviously is slightly contrary to what we've been hearing from -- certainly from some of your peers, which said that the time to hire has become more protracted, more interviews, less confidence in decision-making, a wait-and-see approach. So just any sort of info you can give around there is number one. Secondly, the U.K., again, you're clearly going against the trend in the strong performance there. So any improvements? And then to your comment about external indicators being sort of either holding their own as it were, the job vacancies number has continued to drop a little bit over the last 3 months. So just thoughts on that one. And then finally, on the headcount, you put a little bit extra there on fee earners at this point. So just wondering managing that natural attrition and selective investment, where that might have gone into.

That's right. Okay. So I'll start with the fee earners firstly. I mean we are very focused clearly on productivity gains. If I go back to the point I made on the placements per head per fee earner, we know we've got capacity. Now clearly, that performance differs in different markets. So in some markets, we're tracking well over one placement ahead. And selectively, we are going to be looking and have looked at where we can build in headcount when we feel we're at capacity. Other markets, clearly, we're tracking well behind that. So we are very, very focused on where we can maximize that capacity and productivity gains. U.K. itself, as you know, we made a change in leadership a couple of years ago. I think the team have done a very good job. The reality is that, obviously, there are still challenges in that market in the U.K. But if we step back, we took some decisions to rationalize our office footprint. We operate really in 3 core cities down in the U.K. And I think we are consciously really focused on those disciplines and sectors that we believe there is -- there are gains to be had. So specifically legal, accountancy and technology are obviously 3 of those. And it just goes back to real discipline on sales funnel, proximity to clients and candidates. I appreciate, obviously, AI, automation, et cetera. But again, relationships and the ability to influence is so critical. And despite the job volumes, and I appreciate some of the numbers that have come out, we believe that there is still opportunity in the U.K. So we're going to continue to really focus on that. In terms of greater resolve, look, I think it's probably anecdotally, what we're seeing at the moment is -- and again, it is very different in different markets. And there's no question perhaps in Northern Europe, for example, there is a little bit more pain there, perhaps in other markets. But equally, I get a sense in some of our markets now that candidates do -- they're starting to want to make the move now. And I think a lot of this is driven, as we all know, by candidate churn and candidate movements. And if we just step back, there are a lot of people who entered into the job market in that sort of post-COVID surge, which is now 3, coming up 4 years ago. So they've been through that 3-, 4-year cycle in their roles. And equally, the markets in which we tend to operate, and again, it is at that more sort of mid- to senior level, and it is in those core white-collar professional service areas. So I believe there is increasingly a bit more of an appetite now for candidates to start to move. And I don't have the data yet to support this, but also in some markets, the U.K. being a good one with the cost of living increasing, that in itself may well, in turn, mean that people need to look at a higher base salary to accommodate that, which, of course, means moving jobs potentially.

[Operator Instructions] There are currently no further questions in the queue.

Okay. Thank you very much, everybody. Thanks for all your time, and look forward to seeing you all soon. All the best.