Hello, welcome to today's PageGroup Interim Results 2023. Today's call will begin in just a few moments' time and will be hosted by Kelvin Stagg, Chief Financial Officer. If you would like to ask a question during today's call, please press Star followed by one on your telephone keypad. Once again, today's PageGroup Interim Results 2023 conference call will begin in just a few moments' time. Thank you. Hello, welcome to today's PageGroup Interim Results 2023. My name is Bailey, and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press Star followed by one on your telephone keypad. I would now like to pass the conference over to Kelvin Stagg, Chief Financial Officer.
Kelvin, please go ahead.
Good morning, everyone, welcome to PageGroup's 2023 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 526.8 million, down 4.4% in constant currencies on our record H1 last year. We delivered operating profit for H1 of GBP 63.9 million, down 47% from GBP 115.3 million in H1 2022.
Our conversion rate was 12.1%, compared with 21.4 in H1 2022, due to the more challenging trading conditions in 2023 impacting productivity. This was combined with higher costs, due primarily to the average headcount in H1 2023 being 5% higher than in H1 2022, as well as inflationary salary increases. Earnings per share decreased to 13.6 pence from 25.6 pence in H1 2022. We closed the first half in a strong financial position with net cash of GBP 97.9 million. We are today announcing an increase in the interim dividend of 4.5% to 5.13 pence per share or GBP 16.2 million.
In line with our policy to return surplus cash to shareholders, the board has also announced a special dividend of 15.87 pence per share. This represents an additional return of GBP 50 million. Both the interim and special dividends will be paid on the 13th of October to shareholders on the register on the 1st of September. I will now take you through the financial review. Due to the reduction in gross profit as a result of the continued weakness in both candidate and client confidence in the first half, productivity, measured as gross profit per fee earner, decreased 6% in constant currencies compared to H1 2022. This is a particularly tough comparator, with H1 2022 productivity at a record level for the group.
We continue to focus on productivity, and when compared to H2 2022, productivity was up 5% as we reduced our fee earner headcount in line with trading conditions. During the first half of the year, activity levels remained strong and reflecting sustained shortages of candidates, fee rates remained at high levels and above the prior year. Salary levels also remained strong, with wage inflation in most markets. However, we continued to see the slowdown in time to hire that we started to see in H2 2022, driven by increased client caution. Accordingly, conversion into placements was slower than the previous year due to both clients being less willing to raise offers and candidates being subject to buyback from their current employer or less confident in switching roles.
We are also seeing the benefits from our investments in innovation and technology, where Customer Connect is supporting productivity and enhancing the customer experience, and Page Insights is providing real-time data to inform business decisions. Overall, the group's operating profit was GBP 63.9 million, down from GBP 115.3 million in 2022. Our conversion rate was 12.1%, compared with 21.4% in H1 2022, due to the tougher trading conditions impacting productivity as well as higher costs. Looking at each of our regions, starting with the largest, EMEA, our conversion rate was 16.6%, down from 24.5% in the prior year. Despite the record gross profit, productivity was down 4% as we saw a slowdown in time to hire.
This was combined with a higher cost base due to a higher average headcount in H1 2023, compared with H1 2022, as well as wage inflation. In our other three regions, the Americas, Asia Pacific, and the UK, conversion rates were behind H1 2022, due to reductions in productivity combined with a higher cost base. Conversion in Asia Pacific and the Americas were impacted adversely by tough trading conditions in Greater China and US, two markets where we have strategically held on to our headcounts to position us for future growth. Conversion in the UK decreased due to tough trading conditions, as well as the UK having a higher degree of senior management. The tax charge for the first half was GBP 20.2 million.
This represented an effective tax rate of 31.9%, an increase from the 28.8% for H1, 2022. This is due primarily to the rise in the UK corporation tax rate from 19% to 25% from April 2023. Going forward, we expect the full year effective tax rate for 2023 to be around 30%. The most significant item on our balance sheet was trade and other receivables of GBP 424.6 million, which decreased by GBP 29.7 million versus June 2022 due to the weaker trading conditions. Net cash at the end of June was GBP 97.9 million. Overall, net assets have decreased from GBP 387.3 million in H1, 2022, to GBP 333.9 million in H1, 2023.
This chart lays out the movements of our cash in the first half of 2023. Our H1 EBITDA inflow was GBP 98.4 million, offset by an increase in working capital of GBP 14.7 million, driven by the stronger performance in temporary recruitment. Tax and net interest payments were GBP 26.8 million, and net capital expenditure was GBP 11.3 million, down from GBP 18.9 million in H1 2022. Spending in 2023 related mainly to office fit-out expenditure, as we continue to adapt our offices to better suit hybrid working, with collaborative spaces for our people to work and socialize. Payments made in relation to lease liabilities reduced cash by GBP 18.8 million. In H1, GBP 0.8 million was generated from employees exercising options, up slightly from GBP 0.3 million in H1 2022.
The group also purchased GBP 17.5 million worth of shares into the Employee Benefit Trust to satisfy future committed obligations under our group share plans. Furthermore, in H1, we paid out the 2022 final dividend of GBP 33.9 million. Overall, the impact of these cash flows decreased the group's net cash position since year-end by GBP 33.6 million to GBP 97.9 million at the end of June. The group operates a highly cash-generative business model with high levels of cash conversion. We have a clear capital allocation strategy with three defined uses of cash. 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 done in all years apart from during 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 dividends. Today, we're announcing an interim dividend of 5.13 pence per share, a total of GBP 16.2 million. This is an increase of 4.5% on the 2022 interim dividend of 4.91 pence per share. After payment of this interim dividend, the group's board has concluded that we are still holding surplus capital.
As such, today we are also announcing a special dividend of 15.87 pence per share, totaling GBP 50 million. Together with the interim dividend, this amounts to a cash return to shareholders of just over GBP 66 million. The special dividend will be paid at the same time as the interim dividend on the 13th of October to shareholders on the register as at the 1st of September. I will now finish with a brief outlook. Looking forward, there remains a high level of global macroeconomic and political uncertainty in the majority of our markets. However, against this backdrop, we continue to see candidate shortages and good levels of vacancies, as well as continued high fee rates.
We are also seeing the benefits from our investments in innovation and technology, where Customer Connect is supporting productivity and enhancing the customer experience, and Page Insights is providing real-time data to inform business decisions. We have a highly diversified and adaptable business model, a strong balance sheet, and our cost base is under continuous review and can be adjusted rapidly to match market conditions. Given these fundamental strengths, we believe we will continue to perform well despite the uncertainty. At this stage of the year, the board expects 2023 operating profit to be in line with our previous guidance. Nick and I will now be happy to take any questions you may have.
Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, please press star followed by one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question, and please do ensure that you have unmuted locally. Our first question today comes from the line of Andy Brooke from RBC. Please go ahead, Andy. Your line is now open. Andy, your line is now open. You may proceed with your question.
Possibly on mute, Andy.
It appears we can't reach Andy at the moment. We will move to our next question. The next question comes from the line of Steve Wall from Numis Securities. Please go ahead, Steve. Your line is now open.
Morning, gents. Just thinking of the last downturn as, you know, part of the pandemic, you, you sort of took time to hire more experienced client candidates, consultants, rather, perhaps from, from other people that might have been on the move then. I just wondered, I know natural attrition is taking care of the sort of the 5% reduction in headcount year to date. I was wondering, get your thoughts on, you know, any strategic moves you might make from your more experienced consultants elsewhere?
Morning, Steve. I think the, the move that we made coming out of COVID was very much a moment in time. We spotted, obviously, as you know, at the time, that there were a number of organizations that we felt perhaps weren't paying bonuses or put people on furlough in various markets, and we took that opportunity. I, I, I don't really think that that, that is available to the same degree. I mean, most organizations like us are seeing high volumes of vacancies, shortages of candidates, so everyone's kind of hanging on to their best people. So we, we always look for good talent out there, but I don't think there's any specific move that we'd make.
Then just sort of following up on that. You mentioned internal wage inflation. What on sort of base salaries, what sort of levels are we seeing?
In terms of people we're hiring?
No, not really. Internal for the consultants. You mentioned wage inflation as part of the cost base going up and conversion ratio, and, you know, nipping down. Just internal wage inflation, anything you're seeing there, and you could comment on?
In January, we gave most of the people about 5% across the U.K., across Europe, and across North America. It was slightly lower in parts of Asia, because actually inflation started to come down there. We're seeing wage inflation come down a bit in terms of what people are moving from in terms of the people that we're placing. This time last year, they were probably commanding 15%-20%. Now they're probably closer to 5%-10%, if that. I think it's not a decision that we need to make today in terms of what we're going to do to the cost base for next year, although we have started discussing it, but it will, it'll certainly be lower than 5%.
Perfect. That's great. Thanks very much, guys.
Thank you.
Thank you. The next question today comes from the line of Hans Pluijgers from Kepler Cheuvreux. Please go ahead, Hans. Your line is now open.
Yes, thank you. Good morning, gentlemen. Looking at your cost base for H2, you made a reduction already in personnel, about 5%. First of all, yeah, do you see any, let's say, further reductions, or are you happy with your current, let's say, headcount? Looking at the cost base for H2, quick calculation, back of the envelope, then, I assume you're about 1 million-2 million down in cost compared to H1. Could you maybe, let's say, give some feeling on, on that? So that's correct. Secondly, on your H2 forecast, which implies a slight increase or some increase compared to H1 in operating earnings, why are you so, let's say, certain, looking at that, looking at current trends in the markets and still the high uncertainty?
Okay, let me take the first question. I'll leave Kelvin to do the second two. The first question is regards fee earner headcount. I think as we commented in the statement, we have two strategic markets where we believe we've already reduced headcount pretty significantly, and we now want to try hold at the levels we're at, and those two would be the U.S. and China. As regards to all of our other markets, we'll very much move with the conditions that we see, and that in certain markets will potentially involve adding headcount where we see opportunity. As a general trend, away from the U.S. and China, we'll just move with the markets, and at the moment, in many of our markets where we see performance being pretty tough, then clearly we'll bring headcount down.
You know, as you probably know, I mean, our, our headcount moves pretty quickly and reacts to market conditions. As I say, the only, the only two markets where we want to hold the line, 'cause we want to be in a good position for recovery, are US and China from where we're at the moment. Yeah, coming back to you on, on really the second half cost base. One of the levers that we have to pull in the second half is the non-operational headcount. In the first half, our fee earners were down 558. We, we intend to hold, I think we mentioned before in terms of where we are in China, we've got 240 people in China now.
Actually about a third of those have six years or more of experience. We want to hold on to that experience. We're profitable there, but we're, we're not looking at conversion rate in China in the short term. We're, we're trying to hold on to the experienced people. The same will be said for the U.S., so we're holding on to a level of headcount in the U.s. that's slightly above what we would need in today's market, but such that we can come back strongly there. What we did in the first half, as things were somewhat uncertain, was hold on to a level of non-operational headcount that's probably ahead of what we actually need, so you'll probably see that come down in the second half, that will support profitability in the second half.
The one to, one to two, you mentioned, I'm assuming you mean per month. I think when I look at the second half as a whole, it's difficult to think about where productivity is, is going to sit. We, we'll try not to make a guess on that and just assume we can hold productivity where it is, possibly move it up if the earners continue to come down. You will see fee earners come down in, in markets other than China and the U.S. I mean, we were in the market four weeks ago, nothing's really changed in those four weeks. We see with a slightly lower cost base and, and productivity, the same or slightly higher due to less fee earners.
We, we will have a slightly larger amount of profit in the second half than the first half. We'll continue to update people if that changes as we go through the second half of the year.
Okay, thanks.
Thank you. As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. Our next question today comes from the line of Andy Grobler from BNP Paribas Exane. Please go ahead, Andy. Your line is now open.
Hi, good morning. Just two quick ones from me. Just going back to the, the cost base. Can you, on a monthly basis, can you tell us where it ended in, for H1, just as a kind of guide into the second half? Secondly, just on markets, specifically in China, where you're holding on to the headcount, and there's, you know, there's lots of moving parts going on in that Chinese market. What are you seeing in, in the early parts of H2 in terms of, return to, to activity in that key market? Thanks very much.
Thanks, Andy. Well, again, I'll, I'll deal with the 2nd question on China. We've, we've obviously, came into the year expecting a, a recovery that we felt would kick off maybe toward the end of Q1. We then thought it would be in Q2. It hasn't come back to the degree that we would have hoped by now. I think that that's what most people are reporting about that market. We're still optimistic that we'll see some recovery in the 2nd half of the year. Clearly, the comps get easier. We've seen some, confidence returning very much at the top end of the sales pipeline, so around maybe some more meetings, maybe some more conversations with clients than we'd expected, et cetera, but that hasn't really translated into anything tangible at this early stage.
Yeah, I mean, we continue to remain positive in the long term about, about the market. As we've said, we want to hold our position because we've spent a long time building it up. As Kelvin said, we've got a very experienced workforce. We don't want to lose them because they're the people that we will rebuild the business under when the market returns. Overall, yeah, I mean, there's probably not a huge amount to say above and beyond what we said at the end of Q2. I mean, it's, it's a market where we, we, we believe in the long term, but at the moment we've just got to hold on in there. Yeah, coming back on the, on the monthly cost base.
It, it obviously came down in H1 as, as 558 fee earners came out, and, and it's currently running somewhere in the low GBP 70 million.
Okay. Thank you.
Thank you.
Thank you. As a final reminder, if you would like to ask a question, please press star, followed by one on your telephone keypad. There are no additional questions waiting at this time, so I'd like to pass the call back over to Kelvin Stagg for any closing remarks.
Thank you, Bailey. As there are no more questions, thank you for joining us this morning. As a reminder, we'll be holding a capital markets event on the 20th of September to update on our strategic direction. Further details will follow in due course. Our next update to the market will be our Q3 trading update on the 11th of October. Thank you all for joining this morning.
Thank you all for your participation. This concludes today's conference call. You may now disconnect your lines.