Hello everyone. Welcome to today's PageGroup Q3 trading update call. My name is Seb and I'll be the operator for your call today. If you would like to ask a question during the Q&A session, please press star, one on your telephone keypad. If you would like to withdraw your question, please press star two. I will now hand you over to Kelvin Stagg to begin the call. Please go ahead.
Good morning everyone and welcome to the PageGroup 2025 third quarter trading update. I'm Kelvin Stagg, Chief Financial Officer, and on the call with me is Nicholas 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 £187.8 million in the quarter and a decline of 6.7% in constant currencies. In line with Q2, we saw variable market conditions across the group. We continue to experience subdued levels of sentiment and confidence in Europe, particularly in our two largest markets, France and Germany, as well as in the U.K..
However, we delivered a fourth consecutive quarter of growth in the U.S., our fourth largest market, and a second consecutive quarter of growth in Asia. Collectively, these two markets represent a quarter of the group. We reduced our fee earner headcount by 120 or 2.3% during the quarter, mainly in Europe. Productivity measured as gross profit per fee earner grew 1% versus Q3 2024. Despite the tough macroeconomic conditions, net cash at the end of September was around £38 million. This compares to £11 million at the end of Q2 and is before the recent interim dividend payment paid on the 10th of October totaling £16.7 million. I will now give a brief financial review. We reduced fee earner headcount by 120 or 2.3% during Q3 with reductions mainly in Europe and non-operations. Headcount decreased by 11 in the quarter.
Overall, the group had 5,043 fee earners and a total headcount of 6,903. 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. Concurrently, we continue to ensure headcount in all 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 when market conditions improve. Despite the tough macroeconomic conditions, gross profit per fee earner increased 1% compared to Q3 2024 as we continue to carefully balance customer demand with fee earner resource, where we experienced improved trading in Asia and the U.S. This was driven by higher 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, however, our fee rates remain at record levels. I will now present a regional review. Group gross profits declined 6.7% in constant currencies against Q3 2024. In line with Q2, we saw variable market conditions across the group, with ongoing challenging conditions in continental Europe and the U.K.. However, we saw growth continue in Asia and the U.S. In our largest region, Europe, Middle East and Africa, which represented 52% of the group, we declined 10.2%. We continue to see tough trading conditions with low levels of candidate and client confidence. Germany, the group's largest market in Q3, represented 13% of the group, declined by 11%, an improvement on the decline of 21% in Q2. The market remains challenging but stable, with companies continuing to limit and delay hiring decisions due to macroeconomic uncertainty.
Our contracting business was the most resilient, down 5%. However, tough conditions continued in our temp and perm businesses, which were down 13% and 9% respectively. France, the group's second largest market, declined 16%. Temporary recruitment, down 4%, outperformed permanent, down 26%, indicative of the ongoing uncertainty in the market. Spain grew 3% with particularly strong results in Page Executive. Elsewhere in Europe, we saw challenging market conditions in all countries. In response, we reduced our fee earner headcount by 79, mainly in Germany and France, excluding the impact of hyperinflation in Argentina. The Americas, which represented 19% of the group, grew 3.5% against Q3 2024. North America grew 10% with the U.S. up 10%, its fourth consecutive quarter of growth. We saw good levels of activity in trading, which continued strong results, particularly in manufacturing and construction. In Latin America, excluding Argentina, gross profit was down 4%.
Mexico, our largest country in the region, was down 12% due to ongoing tariff uncertainty. Brazil was flat with challenging conditions in permanent recruitment but a strong performance in temporary. Our remaining countries in Latin America grew 1% collectively. Overall, fee earner headcount decreased by 16 in the quarter, mainly in Brazil, partially offset by additions in the U.S. In Asia Pacific, which represented 17% of the group, Q3 gross profit declined 1.2%. We continue to see improved trading conditions and a second quarter of growth in Asia, up 1%. Southeast Asia grew 5% against Q3 2024, with improved conditions across most of our markets in this region. Conditions remained tough in Greater China, down 7% on Q3. Mainland China declined 20%, but Hong Kong grew 8%, driven by another particularly strong performance in Page Executive. Japan declined 2%.
India, where we now have almost 250 fee earners, grew 11% with continued strong trading conditions. Australia declined 12%, with the market particularly challenging in New South Wales. Our fee earner headcount in the region decreased by 9% in the quarter. In the U.K., which represented 12% of the group, gross profit declined 14.3% in line with Q2. We continue to see clients deferring hiring decisions and candidates cautious about accepting offers. Permanent recruitment declined 12% against 2024, with temporary down 19% due to the closure and reallocation of resources from our U.K. Page Personnel business to Michael Page this year. Fee earner headcount reduced by 16% in Q3. I will now provide a summary of our results in line with the previous quarter. In Q3, we saw variable market conditions across the group.
The conversion of offers to placements remained the most significant area of challenge as ongoing macroeconomic uncertainty continued to impact confidence, which extended 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. Concurrently, we continue to ensure headcount in all 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 when market conditions improve. We have made good progress on our cost optimization program during the year, which is on track to deliver annualized savings of around £15 million from 2026.
Despite the uncertain outlook due to the unpredictable economic environment, we remain confident in the execution of our strategy, given our highly diversified and adaptable business model, strong balance sheet, and our cost base that is under continuous review. The Board expects full year operating profit to be broadly in line with current consensus and of £21.5 million. Nick and I are now happy to take any questions you may have.
Thank you. As a reminder, please press star, one if you would like to ask a question or press star two if you would like to withdraw. The first question is from Andrew Grobler at BNP Pariba . Please go ahead.
Hi, good morning. Just a couple from me if I may. Firstly, on net cash in the period, sort of relatively low at this point. Can you just talk through some of the drivers, working capital and so forth, and also what that means for the dividend? Then, just in terms of run rates through September and into October, what are your thoughts on headcount? For the remainder of the year.
Thanks, Andy. Okay, I'll take the second question first. In terms of run rate on headcount, we'd expect to see probably in Q4 something similar to what we've seen over Q1, Q2, and Q3, which is probably a drift in Europe, particularly where markets remain a bit more challenging, offset by some additions into the markets where we're seeing some growth. If you take the run rate through this year, our fee earner headcount has come down by somewhere around 100, 120 per quarter. I would expect that would happen again probably in Q4.
Kelvin?
Yeah, the cash at £38 million at the end of September before the dividend of just under £17 million, therefore currently stands just above £20 million. That's where we were expecting it to be. Our current forecast for the year end is that we would be at about £40 million. We're not expecting to have any borrowings under our RTF facility at the year end. Whilst that's a little lower than we'd normally want it to be, I expect the bonus payment for the senior staff and for the Q4 profit share will be lower than usual as well. Whilst it would normally be £30 million, I'm expecting it to be nearer £25 million.
Our current ability to run the business on cash is somewhat improved and that's largely about the improvements we've made to our cash management structures over the recent years, and therefore where it used to be nearer £50 million, it's now currently just under £30 million. I don't have any concerns about running the business with this sort of level of cash. The decision on the dividend is one for the prelims and we've got another five months' worth to go before we get there. We tend to be highly cash generative in the last part of the year. There aren't any big payments after the interim dividend, so we'll leave it for the board to make that consideration in early March.
As I say, we'll have had five more months' worth of cash generation and also a much better idea on what the outlook looks like as we come into next year.
Okay, thank you.
Cheers.
The next question is from Rémi Grenu at Morgan Stanley. Please go ahead.
Morning, gentlemen. A few questions if I may. The first one is on the U.S. First, I'd like to have your view on whether you are seeing a broad permanent recruitment market recovery in the country or if you would attribute the stronger performance over the last four quarters to a company-specific contract, with market share gains or business mix exposure to specific sectors. In your discussion with clients in the U.S., what do you think has been the most significant driver to gradually unlock the situation over these last four quarters? I'm trying to understand what we should look out for in Europe in your view. That's the first question on the U.S. The second one is on pricing and salary. Can you update us on the average level of salary at which you're placing candidates and how it has evolved recently?
Obviously, kind of combining the impact of inflation receding, but maybe any of the initiatives on your side where you continue to actively position the business. Also, adding the question on fee rates in there. The last one, and maybe it's me being picky, but net fees came in $2 million- $3 million ahead of consensus, but the operating profit guidance is down $0.5 million. I mean broadly stable or slightly down. I just wanted to ask if you can provide more details on the bridge here, whether there's been a mix impact, a change in the term gross margin, or some phasing on the operating cost savings that has changed versus three or four months ago. That would explain a slightly higher net fee, but guidance on operating profit broadly stable or slightly down.
Okay, no problem. Thanks, Rémi. Okay, I'll take the first two questions and then let Kelvin answer the third one. In terms of the U.S., have we seen a broad per market recovery? No, I don't think we have. When you look across our business, we obviously operate in multiple disciplines and sectors. Where we're seeing growth is where we've positioned the business. Around about 50% of our operation is in construction and that is performing very, very well. A lot of the contracts we have now have shifted away from traditionally what would have been, say, residential work towards data centers. That, as you know, is a very, very hot market to be in right now. We're benefiting from that positioning, so that's great. The second area where we're seeing a lot of growth, I mean considerable growth, is manufacturing.
Manufacturing as a discipline for us is twice the size of the next largest discipline, which would be financial services. That's been growing for the last 12 months double digit. We're just seeing lots of success in that area, driven slightly by the political policy of bringing manufacturing back onshore. Clearly, organizations aren't in a position to bring full manufacturing facilities back from offshore locations in the space of nine months. What they are able to do is make decisions around leadership hiring and doing that into the U.S. in anticipation of the return of manufacturing to the U.S. rather than doing it in another country outside of that jurisdiction. We're benefiting from that. I wouldn't say it's a broad based per market recovery because we're not seeing it in areas like finance or financial services.
Our success, as I say, is driven by those two areas where we position the business. It's about 65%- 70% of our business in construction and manufacturing and they're going great. We're happy with that. I think you have something else around the U.S., which is what are clients saying. I think what our clients are saying is that because they have order books that are filling up, particularly if we take that construction example, which is if they want to go out and bid for and then win a contract, they need to have the supply of talent to then execute on that contract.
Therefore, it drives a lot more sensible conversations around landing candidates because they know they have the work, they know what the price of that work is, they know what their margin on that work is, and then they can make a decision around what salaries they want to offer to get the talent on board. Very sensible, I would almost say normal recruitment conversations. What is happening in that market? It's nothing extreme like we saw post Covid where those two years where the market was moving just at a slightly strange pace. It's something that's very recognizable in pre-pandemic recruitment markets. Sensible conversations between clients and candidates to get the deal done and to make the appointment happen. That's really what's happening from a client and candidate perspective in the U.S. as regards pricing.
Our fee rates remain at record levels and salary levels are up on last year, not significantly. I think in Q3 they were running about 3% up on where they were. For me that's more kind of an annual review increase. What we have seen though more significantly is in Q3, a 7% increase in our average perm fee. That's been driven by a few things. That's driven by the fact we've got record fee rates. It's driven a little bit by what we said there about the perm salaries going up a little bit as well. It's also being driven by the positioning of the business as part of our strategy, which is to move upwards, therefore a higher ratio of Page Executive revenue, more Michael Page revenue, less Page Personnel revenue.
That is a very confirming piece of data for us that the business is moving up into those leadership and specialist roles that we intended as part of this strategy. That will continue. It is very much. I think your question was, are we actively positioning the business? Yes, we are. That's the result of that.
I can talk to your last question. It's really about an improvement against the consensus of $2 million on the GP line, but down $0.5 million on the operating profit line. I mean, I don't think that's necessarily outside of what we were expecting, in all honesty, but probably stems from a few things, one of which is we are holding on to our more senior fee earners. We want to hold on to that management headcount in order to support the business for when it recovers and we can pin more junior fee earners underneath them. The average cost of a fee earner is now increasing, not dramatically, but certainly in certain markets it will be up a bit.
I think the impact in Europe, which has always been one of our most profitable regions, has been hard and is now one of our most hard hit regions and therefore that's impacted product profitability as well. I don't think looking forward, we would expect the drop through to have materially changed for the incremental GP that we get coming out.
Understood, thank you very much.
Very clear.
Our next question is from Rowland Clark at Barclays . Please go ahead.
Hi, James Rowland Clark from Barclays. I've got two, please. Your net cash guidance for the end of this year is now £14 million, I think. Kelvin, you said at the Q2 results call that it was a big guess, but you were thinking of £60 million- £70 million. I just wondered if you could give some color on maybe what's changed versus your admittedly so obviously a big prediction at that point, what's changed since then? Secondly, just on productivity, I noticed you're now growing in terms of net fees per headcount from a decline. You sort of elaborated on why that's happened in your last comment. If you look versus your sort of key peer, you're underperforming on that metric. Could you provide any color as to why that's happened?
The second part to that would be given your shift of the business to the sort of higher end, and you mentioned the US in particular, does that mean that we should see further growth in the productivity sort of metric that you're reporting? Thank you.
Okay, let me talk about the productivity because I think it's a really important point to get across to you. If you look across some of our peers and you look at the headcount reductions that they've made year on year in Q3, you've got numbers like 15%, 17%, 16%. We have very intentionally not done that. We started to bring our headcount down before our peer group did when we started to see the slide in the market in late 2022, early 2023. That has enabled us to do it more steadily and in a more controlled manner, which means that when we look at our headcount reduction year on year in Q3, it's only 8%. So half of what some of the peers have done. That's very intentional because we are aiming to balance near term productivity with our recovery.
We want to maintain the platform and therefore the art, if you like, it's not a science, it's an art, is to try and hold productivity around the level it's at, which I will also remind you is above where we were pre-pandemic. These are good levels of productivity, but that's the balance that we're trying to strike. Sometimes it will be minus one as it was in Q1, and sometimes it'll be plus one as it is in Q3. We're trying to balance it around that number. As I say, that's because we've got one eye on the near term, but also one eye on the long term and that involves maintaining the platform. In a perm driven business, that sometimes means that you'll have movement slightly down, but other times if the perm revenue comes through in the quarter, it'll move slightly up.
You'll see us continuing to do that. We're not measuring ourselves on near term productivity. Part two of your question on productivity was around the U.S. and I think that's a fair comment really is that if we continue to see the U.S. grow as a proportion of the total, it is a market where we have higher salaries than anywhere else in the world and it's our third highest average fee rate. You would assume that if that's a broader proportion of the total, that that will impact our productivity. Now at the end of the day, it is still only around about 10% of the group. We'll have significant impacts in the overall productivity and will be offset if we're seeing increases in markets like France and Germany that are bigger than the U.S. but yeah, I mean that's the aim. That's what we're trying to do.
Hold productivity at these levels that are well above where they were pre-pandemic and keep one eye on recovery and add headcount where we see some of that recovery. Yeah.
I can talk to net cash. I think partly that's one of the challenges if you make a rather large guess too early in the year. I don't think anything has materially changed from that estimate of £60 million- £70 million a while back, apart from really working capital. I think we're seeing temp books continue to be robust and hold up, particularly in places like Latin America, which have slightly longer working capital DSO. I think the additional cash has really gone into supporting the temp payrolls around the world. I don't see anything really materially in terms of bad debt or anything that's untoward. Overall, our DSO remains in a pretty sensible place, but it is being funneled into supporting temp payrolls and contracting statement of work businesses around the world. Great.
Thank you very much for this.
Our next question is from Karl Green at RBC. Please go ahead.
Yeah, thanks very much. Good morning Nick and Kelvin. A couple of interrelated questions remain from me. You did mention already that you've seen improved conversion of office to placements in Asia and the U.S., and I think at the Q2 stage you'd referenced the U.S. gradually moving up from around three in five hit rate towards three in five. Really just to get a sense as to whether that has continued in the U.S. and how it's tracking in parts of Asia, and I guess also linked to that in terms of the drivers of that improved conversion rate. Are you seeing the kind of salary offer increase as you referenced in Asia continuing, and are there any other sort of glimmers of positivity elsewhere in the world on the perm side, please.
Yeah, sure, I can answer that one. I would say that in the U.S. now we are back to what I would consider more normal trading, which is as you've alluded to there, on average consultants who land five offers turning four of them into revenue. That's always how I felt market dynamics worked in a perm business all around the world pre-pandemic. We then had that strange period after the pandemic, a strange period since. I find it very reassuring to see the U.S. now return to something that is very, very recognizable. Are we there yet in Asia? No, we're not back at 4 out of 5 landing. Are we moving in that direction? Yes, we are, but we're not back there yet.
If that continues to improve in Asia, the results then that will be driven, I would imagine, by that return back to four out of five offers turning into revenue. The second part of the question, what are the drivers? It's not that suddenly everybody's got their checkbooks out in the U.S. and are offering big salaries to every single candidate. As I said to one of the earlier questions, we're not seeing a broadband recovery in perm in the U.S. There are just areas of the market that we are positioned in that happen to be very hot right now. If you are in a hot market with a limited supply of talent and you want to land the candidates, then there's always a cocktail of elements that will be put on the table. Part of that will be salary.
You might be getting an extra couple of percentage points. We're certainly not going back to the world of 2021-2022 where it's 15%, 20%, but might it creep up to 10% increases in some cases? Yes. If I've landed a contract and I need to deliver and the data center, the kind of initial spades are going into the ground in two weeks' time and I need to land the candidate ready for that, then I'm going to do what I need to do. I think probably what I feel is that what's happened in the U.S. isn't a return to some or a move towards something that is unrecognizable. It's a return to something that's very, very normal. If anything, I think what we should be looking at with the U.S. is that we're seeing a recruitment market where when market conditions return to as they were probably pre-pandemic and you have a level of positive sentiment, you have markets where there are shortages of supply of talent. How do they behave? They behaved like they, and they're behaving like they've always done. To me, I find that very reassuring.
Very Clear. Thank you.
Thanks, Karl.
Our next question is rom Rory McKenzie at UBS. Please go ahead.
Morning all. Two questions, please. Firstly, I know September is the main month for Q3 anyway, so trends are kind of hard to call out, but it does kind of set the tone f or the rest of the year. What can you say about how t he KPIs rebuilt after the summer holidays? Now, are there any more clients than usual talking about hiring freezes for the rest of the year, or do you think there's still plans to try and spend budgets that are in place? Secondly, in the U.K., where you've closed Page Personnel, can you just outline the thinking there? Is that a market you just don't think will rebound well, or is it more structural how you're seeing that end of the market evolve, and can you help us understand how big it is in terms of a drag on the region? Thank you.
Yeah, sure. I can take both of those. Okay, so in terms of KPIs, are we seeing any hiring freezes? No. Activity built as we would have expected. Coming out of Q3 was, as it always is, a bit slow in July and August. You never quite know what you're going to get. September activity built very nicely. We go into Q4 with the expected level of momentum that we've planned for. Really, what other signals can I give you? Our Enterprise Solutions business has got a pipeline that's the biggest it's ever been. We won't clearly win all of the business that's in the pipeline, but it's great to see so much in there. RFI, RFP stage, and we will win a proportion of it. That's got to be a positive.
No, if anything, I think that the overall summary of KPIs falls really around the headline of our statement, which is that if you're in Europe right now, it's pretty challenging, and if you're in Asia and the U.S., it's starting to look a bit more positive and you've got some growth, and that's really reflective of the trends and the KPIs that we're seeing. As regards Page Personnel in the U.K., for us in the U.K., it was a decision really around the strategy of the organization. We felt that it's a market that is threatened by disintermediation, particularly by the rise of generative and Agentic AI.
We had an opportunity to look at the U.K. business model and we made a decision that we wanted to move more of our resource up into the Michael Page business and make a clean break in the U.K.'s case away from that Page Personnel market, which as a reminder was more junior clerical graduate entry roles, which I think we've seen in the press have been affected by AI and I guess will continue to be. We wanted to focus more on the Michael Page and Page Executive markets. Our Page Executive business in the U.K. is our biggest in the world. We'd rather see more resource going into those areas where we get higher fees, better fee rates, etc., etc. It was a very deliberate decision as part of the strategy and we also closed Page Personnel in Latin America and also in Asia as regards the drag.
Yes, I mean there is a drag in the U.K. at the moment, and to explain as to why in simple terms, if you're a successful Page Personnel consultant and we're asking you now to move up to the Michael Page level, your clients as they were in Page Personnel are now your candidates, and you now need to go out and find a whole new set of clients to work with. That doesn't happen overnight. There is a lag, six, nine, 12 months for a consultant to transition to become as productive as they were before. We need to support them through that. We can't ask them to make that move and then not reward them through that period. We are doing that.
Ultimately, what it will mean is that as we go into next year, we'll have a business that is more focused around the Michael Page level, the area that we want to trade in. I think it will put us in better shape to be more productive in the U.K. market when the conditions improve.
Thank you. Obviously that all fits with your strategy of repositioning, which I think with this call. Can I just come back on those comments around the risks you see around generative AI for those roles? Is this about anticipating job displacement in the economy overall or do you think that firms will be looking to fill those jobs through different providers, platforms or channels?
How long have you got, Rory? It's a big topic. I mean, I probably read the same articles that you do and I look at the, and I speak to CEOs of other organizations, but I also look at our own business and I look at the opportunities that we have to utilize AI within some of our shared service centers, for instance. I think the balance at the moment is that there's organizations that are very openly going out to use AI to save on headcount and there are other organizations, many that I've spoken to, that are talking about it as an augmentation tool where they can take away repetitive tasks, admin heavy tasks, and then get the headcount to do the high touch white glove service that they want them to do.
I don't know the answer as to what the overall trend will be over the next few years, but there's certainly going to be some disruption around that level. Whether the jobs will disappear, whether there'll be less jobs, whether the jobs will change. I'd just be guessing. I think what we've learned on this call is that guessing can probably make things a bit tricky when you have a follow up question in three months' time. I'm not going to do that.
Fair enough. Thank you very much.
Thank you. At this time, we have no further questions on the call, so I will hand back to Kelvin to wrap up.
Yes, thank you, Seb. As there are no further questions, thank you all for joining us this morning. Our next update to the market will be our fourth quarter trading update on January 13, 2026. Thank you all.
This concludes today's conference call.
Thank you all very much for joining. You may now disconnect.