Robert Walters plc (RWA) Earnings Call Transcript & Summary

Good morning, and welcome to the Robert Walters Q3 Trading Update Call. We are joined this morning by Toby Fowlston, Chief Executive Officer; and Jonathan Solesbury, Interim Chief Financial Officer. [Operator Instructions] I would now like to hand the call over to Toby. Please go ahead.

Good morning, everyone, and thanks for joining us. I'm Toby Fowlston, the Chief Executive at Rob Waters, and I'm joined today by Jonathan Solesbury, our Interim CFO. As you will see from this morning's update, we are encouraged that the group is now back to growth. Before I hand over to Jonathan, I will spend a couple of minutes on what we have been doing across the business and what we are now seeing as a result. At our Capital Markets Day in 2024, I talked about bringing greater rigor and focus to our business whilst retaining our entrepreneurial culture. I called this disciplined entrepreneurialism. So in practice, that means things like one, managing the details. We embedded the visibility of what is happening market by market, office by office and desk by desk. And this gives us a clearer view of productivity and pipeline conversion, so we can see where the opportunities are and where and how to improve performance. The second is turning relationships into results. The relationships that we've added so highly mostly backed by trust and capability. That means knowing our markets, spending more time face-to-face with our clients in our, understanding what they need and having the credibility to challenge them when we think there is a better answer. But of course, it will start with leadership. We have strengthened leadership in a number of key markets and businesses and set clear expectations around performance. Our leaders today are more commercial. They know their markets are closer to their clients, develop their people and contribute to revenue. And the same standards apply at the top of the organization, including me. Now there is more to do that market conditions are still uncertain, but we are seeing those actions translate into improved performance. So I'll now hand over to Jonathan to take you through performance at the group level before I talk through what we're seeing across our markets and service lines.

Thank you very much, Toby, and good morning, everyone. Let's turn to group trading during the third 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 Q3 were up 1% year-on-year, a sequential improvement versus the first half of 2026. We have our specialist recruitment portfolio was a growth in the third quarter, a broader base than seen in H1. Additionally, recruitment outsourcing saw its third consecutive quarter of year-on-year growth. Now turning to productivity, head count and costs. It was pleasant to see net fee income, overall measure of productivity, up 8% year-on-year. Copayments per property earned per month were 0.89 and our actions remain focused on driving further improvements in volume productivity. Fee and headcounts continue to be carefully managed and was broadly stable in the prior quarter. We consider the existing fee earner head count levels to be about overall for prevailing market conditions. At the business line level though, as Toby alluded to earlier, we remain agile in positioning the business as required market by market. We saw further progress in respect of operating costs during the quarter with the underlying cost rate per month in Q3 at around GBP 22 million. Moving to the balance sheet. Period-end net cash was around GBP 30 million. During the quarter, consistent with our previously stated objective to further optimize cash levels across the group, an additional GBP 20 million of financing facilities were secured around half of this in international markets. Now let me pass it back to Toby, who will take you through trading and our service lines as well as the wider market backdrop.

Thanks, Jonathan. I'm now going to take you through our specialist recruit results across each of our 4 geographic regions before turning to crude and outsourcing. So starting with Asia Pacific, where especially to recruitment net fees were flat year-on-year in the third quarter. Japan, our large specialty market saw a third consecutive quarter of growth, with net fees up 5%. This was led by a strong performance in 10, while also grew year-on-year. New Zealand continue to see growth with net fees up 13%, driven by strong volumes. And meanwhile, the in turn offset the stronger performance in Australia, which overall was down 8%. In Greater China, net fees were down 5%, where growth in the Hong Kong and Taiwan was offset by Mainland China. In Europe, net fees were down 5%, albeit both France and the Netherlands saw modest sequential improvement. In France, net fees were down 8% with sequential improvement primarily driven by our interim business. Whilst in the Netherlands, net fees were down 9% with a more resilient performance in. Spain continues to be the brightest spot in the region, with net fees up 10%. The markets continue to be more supportive but we are also spending more time in front of clients, and we can see the impact that it's having on forwards. In Belgium, was down 21%, actions continue to improve the performance there. Looking now at the U.K., where net fees were up 14%. I've talked previously about the changes we made to leadership of that business, the decisions we took around our office footprint and our focus on the sectors and disciplines where we believe we can win, but we are continuing to see those decisions translate into performance. What's encouraging is that this has been achieved against a market backdrop that remains challenging. We are not seeing a sudden influx of new jobs. The difference is in how we are converting the opportunities that are there. In the Rest of the World segment, net fees were down 13%, although that included the impact of offices, which were closed last year. Americas, which comprised our U.S., Mexico and Chile operations performed strongly, with net fees up 29%. In the Middle East, fees were down 39% as the region continues to be impacted by the ongoing conflict. Looking at outsourcing. Net fees were up 19%, and we saw continued very strong growth from our consultancy offering alongside year-on-year progression from the combined RPO MSP offerings. So stepping back, I'm encouraged by the progress that we made in the third quarter. Returning the group net fee growth is an important milestone. But more importantly, we continue to see evidence of the actions that we have taken are working. Now we are not only ahead of ourselves. Conditions remain mixed across our markets, meaning we expect volatility and caution to continue as we enter the final quarter. That said, we feel we have developing momentum in the business, particularly with our cost actions, and that rounds our expectation for the 2026 financial result to be at least in line with current market expectations. Jo and I will now be very happy to take the questions.

[Operator Instructions] Our first question is from Sanjay Vidyarthi from Panmure Liberum.

Jonathan, just a question on Japan, please. You've talked in the past about how I think you need to kind of broaden the funnel and get more jobs coming through the pipeline there to help with the productivity. Can you talk a bit about how that's progressing, and where we are now in terms of Japan's productivity versus the rest of the group?

Yes, sure. So we have been very deliberate, Sanjay, and Japan's a key market for us. And this year, we have really focused on improving our productivity with the existing headcount. So we haven't actively grown the head count in Japan. I'm delighted to see that our productivity in terms of our net fee income, the fee and also our trading contribution but that is significantly up. So we're seeing big improvements there. On a perspective, I still think there is room for improvement there, but it isn't a single metric that we look at because on the one hand, we could be placing a very senior executive on the other hand, a more junior individual as well. So we tend to look at things like placement per head per month, net fee income for fee earner and TC but fee earner collectively rather than isolation. But I'm really encouraged by the improvement in productivity. We're seeing that and also the fact that we've seen both our perm and our 10 business in growth, albeit that, that has been accelerated more by the performance. So overall, I'm really encouraged by what I'm seeing in Japan. We're going to continue to focus on that operating leverage improvement that we see this year.

Okay. That's great. Are there any other markets where there's -- I know it's a factor across lots of markets, but are there any particular markets where there's a focus on that. And you're seeing the results coming through particularly strongly?