Ladies and gentlemen, welcome to the PageGroup Half Year Results. My name is Kenneth, and I will be coordinating your call today. If you would like to ask a question during the presentation, you may do so by pressing star one on your telephone keypad. I will now hand you over to your host, Kelvin Stagg, to begin. Kelvin, please go ahead.
Good morning, everyone, and welcome to PageGroup's 2024 interim results presentation. 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 delivered gross profit of GBP 444.1 million in the first half, down 12.4% in constant currencies. Due to the more challenging trading conditions in 2024, we delivered operating profit of GBP 28.4 million, down from 63.9 in H1 2023, with a conversion rate of 6.4% compared to 12.1.
Earnings per share decreased to 5.3 pence from 13.6 pence in H1 2023, and we closed the first half in a strong financial position with net cash of GBP 57.2 million. We are today announcing an increase in the interim dividend of 4.5% to 5.36 pence per share, or GBP 16.8 million. I will now take you through the financial review. Looking at each of our regions and starting with the largest, EMEIA, our conversion rate was 14.6%, down from 16.6% in the prior year. This was due to the tougher trading conditions and a very tough comparative period, as a number of countries, including France, Germany, Belgium, and Spain, all had records in H1 2023.
Despite the challenging trading conditions, the region continued to have the group's highest conversion rate. In the Americas, our conversion rate decreased by 1% to 5.7, which reflected tough conditions in the U.S., with Latin America being more resilient. In Asia Pacific and the U.K., our trading conversion was positive. After central cost allocations, both regions had a negative conversion rate. The tax charge for the first half was GBP 10.9 million. This represents an effective tax rate of 39.5%, an increase from the 31.9% ... Sorry, this represents an effective tax rate of 39.5%, an increase from the 31.9% for H1 2023.
This increase is due primarily to the impact of prior year adjustments in the first half, together with a higher forecast full-year effective tax rate due to reduced profits in lower tax jurisdictions, such as Asia and the UK. For the full year, we expect our effective tax rate to be around 35%. The most significant item in our balance sheet was trade and other receivables at GBP 371.2 million, which decreased due to weaker trading conditions by 53.4 million versus June 2023. Net cash at the end of June was GBP 57.2 million. Overall, net assets have decreased from 333.9 in H1 2023 to 274 in H1 2024. This chart lays out the movement in our cash in the first half of 2024.
Our H1 EBITDA inflow was GBP 61.6 million, partially offset by a decrease in working capital of GBP 12.4 million, due largely to timing differences on payment of our temporary payrolls, with month-end falling on a weekend. Tax and net interest payments were GBP 7.1 million, and net capital expenditure was GBP 7.4 million, down from GBP 11.3 million in H1 2023. Payments made in relation to lease liabilities reduced cash by GBP 20.7 million. GBP 0.5 million was generated from employees exercising options in line with H1 2023. The group also purchased GBP 13.2 million worth of shares into the Employee Benefit Trust to satisfy future committed obligations under our group share plans. We also paid out GBP 35.2 million for the 2023 final dividends.
Overall, the impact of these cash flows decreased the group's net cash position since year-end by GBP 32.9 million to GBP 57.2 million at the end of June. The group operates a highly generative, cash-generative business model with high levels of cash conversion. We have a clear capital allocation strategy with three defined uses of cash. The first and primary use is to satisfy the operational investment requirements of the group, such as investments in technology, data, and innovation, as well as hedging liabilities under the group's employee share plans. The second use of cash is for the payment of ordinary dividends, where it is the group's policy to maintain these through a downturn, which we have in all years apart from the pandemic, and to increase them when conditions are more favorable.
Thirdly, and finally, any remaining surplus cash is distributed to shareholders by way of a supplementary return, either by share buyback or special dividend. Today, we are announcing an interim dividend of GBP 0.0536 per share, a total of GBP 16.8 million. This is an increase of 4.5% on the 2023 interim dividend of GBP 0.0513 per share. The interim dividend will be paid on the eleventh of October to shareholders on the register as at the thirtieth of September.... I'm going to hand you over to Nick to take you through our strategic review.
Thanks, Kelvin. We launched our strategy in September 2023, with three key strategic goals: delivering operating profit of GBP 400 million, changing 1 million lives, and increasing our Net Promoter Score to over 60. Since we launched the strategy, market conditions have been challenging, but despite this, we continue to make progress on our strategic goals to position the group for when the macro improves. Against our social impact objective of changing 1 million lives, we performed well in the first half of 2024. In H1, we changed over 60,000 lives, meaning that in total, we've changed over 560,000 since we set this target in 2020, putting us well on track to deliver against our strategic goal.
Progress in this area is measured by the number of people whose lives we change by placing them into work, as well as the number of people who access programs we run that support traditionally underrepresented groups accessing employment. We also made progress on our customer experience goal of achieving a client Net Promoter Score of over 60 from our baseline of 52 in 2022. Our NPS increased to 56 in 2023, and in H1 2024, we have seen further improvement. For the 12 months to the end of June, our score increased to 59. This highlights our commitment to providing excellent service to our customers, further cementing our position as a benchmark of quality in our industry. Our strategy prioritizes delivering what we are famous for, building on our existing strengths and leveraging our established global platform.
We have a clear focus on what we do best at the city and country level, growing our business in areas where we see the greatest future potential. To achieve our strategy, we have four pillars of growth: our core business, our technology business, Page Executive, and Enterprise Solutions, which supports our strategic customers with their complex global requirements. We continue to maximize our core business under our Michael Page and Page Personnel brands, building on our previous investment strategy to strengthen our market-leading position with a focus on profitable growth. Our technology business is a scale play, enabling us to build a high-value, high-volume business in what, for us, is already a significant market. Page Executive is a market gap play. We operate at salary levels above Michael Page, specializing in senior leadership search and recruitment, as well as offering executive advisory services.
Enterprise Solutions is a partnership play as we build out our capabilities and breadth of offering to create long-term mutual value with our strategic customers. I will now give you a brief update on the progress we have made within our 4 pillars of growth. Within the core business, we are making progress with our strategy despite challenging market conditions. We continue to review our business operations and are actively reallocating resource into areas with more growth potential in order to maximize future performance. Our broad-based global platform provides multiple opportunities for accelerated growth as conditions improve. As has been widely reported, technology sector has been heavily impacted by tough macro factors over the past 18 months. Despite this, we saw some individual markets delivering growth, such as India, Latin America, and Middle East and Africa.
We also saw further diversification into non-permanent recruitment, which represented 38% of technology gross profit in H1, up from 27% in 2022. In Page Executive, we delivered a strong first half with gross profit growth of 6% on H1 2023. This was a record H1 performance for Page Executive globally, as well as in individual markets such as France, Germany, Italy, Mexico, and Japan. We have a highly experienced and proven team of just over 300 fee earners in Page Executive, with an average tenure of 14 years. Within Enterprise Solutions, which is our business focused on strategic customers, we have successfully transitioned from a regional to a global structure, aligning our leadership, sales, and account management teams as we seek to best serve our largest clients.
We have seen early successes with a number of our top 400 clients as we seek to work more closely with them by increasing our geographic footprint to include more brands, disciplines, and locations. Despite the underperformance of the overall recruitment outsourcing sector, we have seen encouraging growth in this area in H1. We remain focused on winning business that delivers conversion rates in line with our strategy. Outsourcing continues to play a significant role in responding to evolving client demands. I will now finish with a brief summary. We continue to see challenging market conditions across all regions in H1, and we experienced a softening in activity levels towards the end of the period, particularly in terms of new jobs and interviews. Permanent recruitment continued to be more impacted than temporary, as clients sought more flexible options and permanent candidates. Candidates remained reluctant to move jobs.
While we saw a slower end to H1, having taken action to reduce headcount throughout last year, our intention remains to hold fee earner headcount broadly at existing levels to ensure we are well-placed to take advantage of opportunities when sentiment and confidence improve. We have a highly diversified and adaptable business model, a strong balance sheet, and our cost base is under continuous review. We continue to see the benefits from our investments in innovation and technology. Customer Connect is supporting productivity and enhancing customer experience. Page Insights is providing real-time data to inform business decisions, and we continue to work with our partners to deploy AI and automation tools into our working environment.
Given these fundamental strengths, we believe we will continue to perform well despite the challenging environment. We are confident in our ability to implement our strategy, driving the long-term profitability of the group. At this stage of the year, the board expects 2024 operating profit in the region of GBP 60 million, in line with our previous guidance. Kelvin and I will now be happy to take any questions you may have.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two to withdraw your question. When preparing to ask your question, please ensure your phone is unmuted locally. We have our first question from Andy Grobler from BNP Paribas.
Hi, good morning. Three, if I may. Firstly, just on trading, have you seen any signs of inflection or at least change in client candidate behavior in some of your bigger markets, like the UK and France? Secondly, you know, profitability fell into loss in UK and Asia Pacific, in H1. Are there areas across those regions or countries where you are making profits? And do you still think those areas are capable of getting to those 20% margins you want in the longer term?
And then thirdly, on tech, I know the markets are tough, but I wondered if there were any kind of underlying structural changes to the areas of demand that you're seeing, so particularly some of those maybe lower end or legacy programming support roles. Are those beginning to disappear as AI and technology continues to evolve? Thank you very much.
Thanks, Andy. Okay, well, I'll take the first and the third question, and Kelvin can pick up the second one. So in terms of trading, I mean, we gave an update to the market probably 3 or 4 weeks ago, so if there'd been anything extraordinary that had happened in the month of July, we'd be calling it out. But July was broadly in line with our expectations, so there's really nothing to add on UK or France at this stage other than what we said in the Q2 statement. As regards to technology, yeah, I think you raise an interesting point to me. I think that that part of the market around software development definitely is being challenged by AI and perhaps, you know, the role of the human in some of the elements of those jobs.
That isn't really the area that we play in, though. I mean, we play more in kind of senior level contracting, leadership roles, and at the moment, sadly, we're not seeing really any inflection in the market there in terms of improvements really across the board. It remains tough. The earnings round from a lot of the tech companies recently wasn't great, and I would imagine that will continue to cast a bit of a shadow over the sector as a whole.
Yeah, picking up the second one. The UK and Asia Pacific, both regions were actually profitable at a trading profit level. We essentially sort of task our businesses with making profits based on their own local profitability, but then we do have a fairly sizable amount of central costs that then get charged out afterwards between trading profit and operating profits, and it's that that's pushed the UK and APAC down into a loss-making position. The only business that was broadly break even would have been China in the first half. All of the other businesses across Asia, including the UK, were profitable.
The size of that central allocation has gone down a bit, but not anywhere near the 20%+ that the fee and the headcount has gone. And so that's why you're seeing it being quite a sizable cost on those. As the costs, as the profits, sorry, restore back to sort of historical levels, then the absolute amount becomes less, and you'll see them move back into profits in the future. There's nothing in any of those businesses that says structurally, we can't get back to 20%+ conversion rate.
Okay. Thank you.
Thank you. We'll have our next question from Rory McKenzie, from UBS.
Oh, good morning. Two questions, please. Firstly, just on that point on profits. Your fee and the headcount, you know, broadly flat from here, having reduced it, I think, about 11% from the peak. Can you remind us what you've done on those indirect central costs in total over the past couple of years? Just about how much savings you've pulled out and how lean that central cost base is now versus what it could be. And then secondly, interesting stats on the customer NPS. Just thinking about how that actually works in a downturn. You know, so even if the customers aren't using you very much, do you still get the sense you're keeping and growing a good relationship?
Is that something that gives you comfort, thinking about recovery?
... Thanks, Rory. Well, I'll take the net promoter score, and then perhaps let Kelvin talk to the question on profits and costs. Yeah, I mean, from our perspective, the reason, you know, when we launched the strategy, we talked a lot about with the fact that we built the strategy through three different lenses, the lenses of our shareholders, the lens of our people, and the lens of our customers, and we wanted all three of those objectives, reflecting those kind of core groups, if you like. And from a customer perspective, I think, you know, the sense of kind of servicing customers is even more greatly enhanced when the markets are tough, because you really want to do a good job for them and take them through what are often challenging market conditions.
Because from a client perspective, they're coming to us to have a role filled. They're coming to us because often they may have tried to do it for themselves, haven't been able to, and they're coming to get some specialist advice. They're looking to access talent that they can't do on their own. But over and above that, they want some expert knowledge, and they want that guidance, and they want some advice around what salary to offer to get the candidate over the line. And we've talked a lot about what the increases were that were in place, say, through 2021 and 2022, where a lot of clients were buying talent, so there wasn't much subtlety, there wasn't much art in the skill of landing a candidate.
I think when budgets are tighter, you then have to be more creative, you have to build a better narrative, and that's where a really good recruitment consultant can sit alongside you and support you, to help you build out that story as to why that candidate should accept an offer that may not be in line with what a colleague may have moved for 18 months, 2 years ago, and has a broader sense of the employer value proposition, and can help bring that to life with the candidate and secure the talent for them.
So in a way, I'm probably not surprised by the Net Promoter Score going up, because I have a sense that, in a market where talent shortages are such an extreme as they are now, clients that do come to us really are relying on our expertise, and they value that, and that comes through in the survey results.
Yeah, talking to the cost savings. So, we announced a restructuring last year, with a net cost last year of about GBP 3 million. That delivered GBP 20 million of run rate savings in the current year. We also went through the closure of our UK shared service center, at the end of last year and through into early April this year. That has a run rate saving of just under GBP 5 million, albeit there were GBP 2 million of costs related to that in the first half of this year. So GBP 23 million in total in the current year. We're also currently just going through the process of closing our Singapore shared service center and moving that into Kuala Lumpur, which we expect to have a further saving of around GBP 3 million from next year.
So there are some quite a number of savings going through, albeit our wage inflation costs for our own people cost us just over GBP 12 million this year, and we would have had inflation in a number of other items, particularly software licenses and the like.
That's helpful. Thank you both very much.
Thank you. We have our next question from Kean Marden from Jefferies.
Thanks, morning, all. I've got a few questions on Page Executive and then a little bit on AI, if I can. Forgive me if I didn't catch all of the numbers. So did you mention that Page Executive had about 300 headcount in the first half, which I think is pretty similar to the numbers that you mentioned at the Capital Markets Day for fiscal 2023. And did you mention a record first half net fee number as well? So I'm just wondering if you can... If that's up, can you give us an idea of what sort of base that you're starting at, just, you know, with an eye obviously on your medium-term targets to get that business to about 200 million GBP worth of revenue?
And then a few questions on AI and sort of Alex Bates and what his team's doing at the moment. Well, appreciate, Nick, just a quick update on what you found that works and what you've cut. And then secondly, whether your dataset is reliable enough to support your AI initiatives or whether you need some further work here. And then thirdly, is current PageGroup profitability impeding the change of momentum that you're looking to put through in that area? Thanks. Okay. I'll give that a go, Kean. Right, so Page exec first. Yes, you heard right, so 300- and you're also right that that was the headcount number that we were talking about in our Capital Markets Day.
We consciously have held headcount in that area because we believe it's a really strong opportunity for us. Therefore, as a result, you know, where, where we've seen fee earner headcount declining in our core business or perhaps in technology, we haven't made that call in, in Page Executive, largely because, as I said in the presentation, you've got an average tenure of 14 years. These are people who really know what they're doing, and frankly, are the people that have networks that can enable them to make money even in the toughest of markets, and you've seen that, which leads into the second question, which is: Yes, we did have a record in H1, and, we had a record based on holding headcount, so as you can probably tell from that, productivity's improved slightly in that area, while we've held headcount.
So we're really excited about the Page exec business. We talked about, in September last year, the market gap, and I think, approximately 12 months on from there, the one thing that we probably know for sure is that not only does it exist, but it's probably a little bit bigger than we thought it was. So, I guess in terms of that business, we're very optimistic that if we can see these kind of results in this kind of a macro, the opportunity that we have when the macro starts to improve... So yeah, a good start. Early days, but a good start, but I think, you know, we will clearly need some macro improvement to get on track to deliver against the, the objective that we set out on the, capital markets day.
We can't do that based on seven years of these kind of conditions. But with the right conditions, I feel very comfortable that we can deliver on that Page Executive plan. As regards to the AI side, I mean, clearly, you know, when you're looking at the cost base of the business and investment, you have to be sensitive in all areas of your organization around spend. So it's not as if we can career off and double budget in areas just because, you know, there's a lot of chat about it, and it's very exciting. That said, we've been very careful not to cut budgets across that area because we do feel that there's a strong opportunity for us, and as we've talked about before, a chance to really remove some of the heavy lifting for our consultants.
The piece of work that we did when we were building Customer Connect was we did a lot of work on our data set. And if our Head of AI was in the room now, he'd be talking a lot about that because he couldn't do any of the stuff that he's currently doing if we didn't have a global data set, and we hadn't done all of the work to bring everything together and really kind of make sure that we're in a position where the data that we were working from was already in really good shape, our own data, because that's the power. I mean, clearly, going out and pulling things from external sources, anybody can do that.
And that, combined with your own data set, with a company with our history, with our footprint, and with our scale, is what makes it really, really powerful. So yes, that, that work was done during the period with Customer Connect. It wasn't the sexy part of the investment, but it was a crucial part of the investment, and it really does allow us now to do some of the things that we're doing. The other advantage of Customer Connect, when you start looking at AI, is the sense that if you are innovating and you have got new products, and you want to drop them into the ecosystem that we have, i.e., Customer Connect, we can just do it over one weekend.
Whereas with our old systems, because we had 30-odd instances on it, it was 30 weekends of closing down an instance, putting in the innovation, and then next weekend, a different one, next weekend, a different one. And in a market and with a, with a world... Sorry, should I say, and with a world where the technology is moving so quickly, you can't be launching new innovation, and it takes you 6 months to roll it out. You need to do it over a weekend, get it into the markets that you want to get it into, and have everybody using it come the Monday. And that's really the advantage that we now have with Customer Connect.
So that alignment between doing the data work, launching Customer Connect, and now being in a world where we can innovate but deploy quickly, I think is what helps us to win.
Great stuff. Thank you. Just going back to Page Exec, and forgive me if I put you on the spot. Is net fees in Page Exec for fiscal 2024 likely to be sort of GBP 80-90 million? Is that the right interpretation, Nick?
Probably slightly less than that, Kean. I, I suspect 70-75.
70-75. Okay. So still plenty of runway to get to that 200 over the medium term?
Yes.
Great stuff. Wonderful. Thanks so much for your time, and good luck over the next few years, guys.
Thank you. Cheers, Kenneth. You too. You too.
Thank you. We have our next question from Alfonso Osorio, from Barclays.
Hello. Good morning, guys. I just have two or three questions for you at this point. Kelvin, well, a few weeks ago, in the Q2 presentation, you provided a very good table on the jobs created in the first half and the number of interviews as well. And also, you had a comment on the reduction in June, in the number of jobs acquired in June, which eventually would have an impact in Q3. I'm sure you're not providing run rates for July, et cetera, but can you comment on this development into July and August? And do you expect, like, further impact, negative impact into Q4?
The reason I ask for this is just because as clients, as we approach the end of the year, performance reviews December from December, essentially from December to essentially February, March next year. Just trying to understand the mechanics on growth, job creation, and interviews and, you know, general thoughts there, because in terms of growth, probably we can get weak until end of Q1, Q2 next year. So that's the rationale for that question. And then number two, I think your EMEA performance is quite resilient, given where we are in the cycle. So just can you walk us through the different growth dynamics by country in EMEA? I'm sure France, according to what your peers have said recently, France, you know, faces pretty much a tough market there.
So just, you know, the winners and losers within EMEA, that would be great to know. And then finally, in the US, it's important for you guys as well, so just wondering if you see any green shoots in the second half, or is it a function to my previous, you know, first question, if it's just a function of waiting for early 2025 for any signs of a recovery? Thank you.
No worries. I mean, I think you said I'm not gonna get into number of jobs and interview statistics for every month as we go forward. I think what we saw was slightly unusually a drop in May and June off the back of which we moved consensus down to the GBP 60 million that we're holding at today. As it said in the statement, we're still comfortable with that GBP 60 million. So you can sort of assume that things were okay in July. They certainly didn't get any worse, otherwise we'd have to-
... move that number down, and we're not. But activity naturally, as you go through into the late July and August summer months, is lower than it would be elsewhere. So in the same way, if I gave you the stats, they might mislead. So you can assume that things are largely okay. With regards to Europe, I'd probably say if I was looking at a country that was a bit softer than the others, it's probably Italy, for us. We don't have a temporary business in Italy, so that will probably be reflected in that performance, and probably the strongest is Spain. I don't think really France has become better or worse, over the recent period.
I think the political uncertainty there is, to a certain extent, now fallen away. I wouldn't pick out the other countries, whether that's Germany, Belgium, or Holland, all of which have fairly sizable temp businesses, as being really outside of the pack.
I can take the U.S., if you like. I mean, the U.S., I think if we were to chat about that, that market historically, we've often referred to it as being a very transactional market. That said, a transactional market with high fees and high salaries, some of the highest in the group. But actually, in terms of the relationship between us and our clients, it tends to be, as I say, pretty transactional, pretty arm's length. The clients don't really want to meet us. They're very happy to take a candidate that we would, proactively send across to them, interview them, don't want to see a shortlist and hire them. That would have historically been the type of market condition we've seen in the U.S.
As things have become more challenging, and it has and sentiment has dropped in the U.S., what we've seen is that the U.S. has started to become a lot more like a market that we would recognize in Europe, where the client does want to engage up front. They do want to see a shortlist. They do want to have options. They want to have choice. They want to have a level of relationship and consultancy, which slows the process, as a result. But at the same time, the clients are still recruiting, but they're setting a very high bar to hire. So if the candidate doesn't meet that bar, then they are re-reverting back to the start of the process and asking us to send over a new shortlist. So yeah, I'm not surprised by that.
As a set of kind of dynamics, it's very much in relation to a market that seems to kind of be on the cusp of kind of where it's heading at the moment, and there's a lot of uncertainty across the piece as a result.
Okay. That, that's very clear. Thank you very much.
Thank you. We have our next question from Rémy Grenu, from Morgan Stanley.
Good morning, and thanks for taking my question. Just one last one on my side. You talked about the momentum in technology and executive, so last piece of the puzzle, if you can maybe discuss a little bit what you're seeing in terms of momentum in the short term with your enterprise client, and if there is anything to call in terms of divergence versus the performance of the rest of the group, or any discussion or any difference in trend with these specific clients? Thanks.
Yeah, sure. I mean, within the statement, I talked a little bit about our performance in Enterprise Solutions, and I'd probably break that down into two areas. The key two areas would be our global account management, so our top 400 clients that our Enterprise Solutions teams are working more closely with, and then our outsourcing business that you'll be aware of already. Now, in the presentation, that probably counter to the sector as a whole, we were very pleased with the results of our outsourcing business. It grew during H1. It's relatively small in comparison to some of the competitors, so yeah, I think that's important to recognize. Yet, you know, we've made a very clear position with our outsourcing business, that we don't want to go out and win vanity projects. It's not all about the top line.
We're very committed to only bidding for business that we believe can deliver a conversion rate in line with our strategy, which therefore limits some of the accounts that we would go after. But we're happy with that. That's important to us to make sure that we're growing an outsourcing business, as I say, that has profit levels that are in line with our strategy as a whole. As regards to our global accounts, I think it's fair to say that SMEs probably for us have been more resilient than our largest clients. Our largest clients tend to be very sensitive to movements in the markets.
They have exposure to multiple markets, multiple sectors, and you know, when they are in a position whereby they're not growing, they will often lean into resource of their own or use their own employer brand to try and recruit directly. So as a result of that, you know, when markets are tougher, the largest clients do tend to kind of try to do it for themselves and are able to do it with a level of success. Maybe not for all roles, but for certainly some of the more standard roles, that's what they'll tend to do. Whereas an SME probably can't do that in a talent short market, because they don't have the employer brand, and therefore, they still need to partner with someone like us, and therefore, that business area is more resilient.
Okay, understood. Thanks.
Thank you. We currently have no any question. As a reminder, ladies and gentlemen, to ask any question, you can press star followed by one on your telephone keypad now. Thank you. We currently have no any question, and I will hand over back to Kelvin for any closing remarks.
Thank you. As there are no more questions, thank you for joining us this morning. Our next update to the market will be our Q3 trading update on the fourteenth of October. Thank you all.
Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.