Good morning, everyone, and welcome to the Robert Walters Q2 2024 trading update. I'm David Bower, Chief Financial Officer, and joining me this morning is Toby Fowlston, our Chief Executive. Hopefully, you've all seen the short statement we published earlier this morning. Before we move to Q&A, I'll make a few remarks around performance at the group level before Toby touches on trading across our regions and our near-term outlook. Unless otherwise stated, all net fee income percentage movements are in constant currency terms. So looking first at group trading, net fee income was down 12% year on year in the Q2. That performance was reflective of two big drivers. Firstly, and one that is now well, well-documented industry-wide, we continue to see hiring markets globally rebase relative to the post-pandemic peak of late 2021, 2022, and early 2023.
Secondly, and more specific to certain geographies, we saw macroeconomic turbulence and political uncertainty further dampen client and candidate confidence as we progressed through the quarter. The second of these dynamics is well illustrated in the profile of fee income we saw across the quarter. We continue to observe our typical quarterly profile with May sequentially better than April and June better than May. However, the degree of ramp-up through the quarter was reduced versus quarter two last year. As such, this drove a relatively weak end to the quarter, with fees in June 18% lower than a year ago. Across the quarter as a whole, we saw specialist professional recruitment net fee income of around GBP 72 million, which was down 10% year-over-year.
Within this, perm was down by 11%, and temp, being our contract and interim business, was slightly more resilient and down by 9%. Meanwhile, in recruitment outsourcing, net fee income of GBP 13 million was down by 23%. Turning now to group headcount and productivity. Notwithstanding the current challenging conditions, we remain focused on delivering the best outcomes for our clients and candidates while maintaining tight cost discipline. People-related costs are around 70% of our total cost base, and group headcount of 3,625 was down by 5% quarter-on-quarter and down by 15% year-on-year. While we seek to maintain our core muscle, that being experienced fee earners, we're also committed to ensuring headcount is appropriately matched to current demand conditions across our markets, hence driving productivity improvements.
We are maintaining a data-driven and therefore highly selective approach to replacing fee earner natural attrition, and we will continue to do so as we trade through these challenging market conditions. We've continued to enable proportionately more headcount to flow out of those markets where conditions are the toughest and/or where productivity since the peak has been lower than expected. Looked at on both a placements per fee earner and a fee income per fee earner basis, we're seeing an improving trend in productivity across many of our markets, and we believe there's still more to be achieved here. Then finally, looking at the balance sheet and cash. The balance sheet remains strong, with quarter-end closing net cash of around GBP 49 million, excluding IFRS 16 leases, broadly in line with our targeted level of minimum net cash.
Toby will now take you through trading our regional segments and the near-term outlook.
Thanks, David. Morning, everyone, and I'm going to turn first to Asia Pacific. Net fee income was down in APAC by 9% year-on-year. And in the context of obviously an overall tough trading globally, it was pleasing to see a strong performance, particularly in Japan, which, as you know, is our largest single market. Fees were up 7% there, but also continued improvement in Greater China, which was up 5%. It was here, actually, more the mainland that offset the year-on-year declines in Taiwan and Hong Kong. Conditions in Australia, New Zealand were down 19%, and that remains tough.
And if we're going to benchmark that to the very height of the post-pandemic peak, indicators like job flow per fee earner, they remain the furthest away from these highs in ANZ more than anywhere else in Asia Pacific. And lastly, in Southeast Asia, we did see improved consultant productivity versus the end of 2023. However, time to hire has increased, particularly at the more senior level. In Europe, where net fee income was down 13%, France was where fees were down 20%. Already sort of muted client and confidence was obviously impacted by the recent political uncertainty. Fees in Belgium were down 8%. This was partly comparative to a strong performance in 2022 and a tougher comparative in 2023.
Meanwhile, the Netherlands, down 5%, was among the most resilient of our larger European markets. Turning to the UK, net fee income was down 18%, within which specialist professional recruitment fees were down by 14%. Though conditions remain tough, London, where fees were down 6% year-on-year, did register further sequential improvement, notably driven by specialisms in accounting, finance, and technology. Trading was weaker in the regions, albeit stable on the prior quarter. In our Rest of World segment, net fee income was down 12%. Conditions in the US remain very muted, while we delivered a resilient performance in Mexico, and we also saw fees uplift by 6% in the Middle East. In our recruitment outsourcing business, which enables organizations to transfer all or part of their recruitment needs to Robert Walters, fees were down by 23% year-on-year.
Our client base today predominantly comprises financial services business, and though client confidence has moved off the recent lows of March last year, which you'll remember, saw stress in the sector related to various events such as Credit Suisse, this is still yet to pull through into higher volumes. In terms of our near-term outlook, consistent with when we last spoke to you shortly after the end of the Q1, client and candidate confidence still remains muted, with the period of adjustment from the post-pandemic peak now longer in duration than previously expected. Mindful of our experience over the year to date, and in particular, indicators such as new job flow in the month of June, our near-term planning now assumes that any real material improvement in confidence levels will be gradual and likely not occur before 2025.
Given the quantum of the fee income reduction, the actions that we are taking on costs and productivity, although meaningful, do not currently fully offset the top-line impact. We continue to believe that the actions that we are taking leave us well-positioned going into the H2 of the year. As you can appreciate, given all the market uncertainties we face, how trading develops over the H2 is more difficult to predict than in the past, and as such, the range of potential outcomes for the full year is wider than we've seen historically. In that context, we continue to focus on the factors within our control. We have a highly experienced leadership team, and we are focused on furthering our medium-term plan to strengthen the business, and we're looking forward to setting out more fully at our Capital Markets Event in September.
With that said, we'll be happy to take any questions.
Thank you, sir. Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star one on your telephone keypad. If you wish to cancel your request, please press star two, and please make sure the mute function on your phone is switched off to allow your signal to reach our equipment. Again, it is star one to ask a question. Our first question comes from Tom Callan from Investec. Please go ahead.
Thank you. Morning, chaps. Hopefully, you can hear me. I've got four questions, if that's okay, so I'll just go sort of sequentially. So on France, please, could you just give us a bit more color as to what you expect to see there in Q3, mindful of the fact that we've got the Olympics coming up, as well as the political uncertainty with the elections and stuff. So a bit more info on that would be helpful and specifically maybe on sort of the interim business. I remember sort of historically, that's always been a pretty strong performer in France, so it would be helpful to sort of get sort of a split between sort of interim and perm in terms of what you expect to see there moving forward.
On Germany, you know, clearly some of your peers have reported a pretty difficult market in Germany in recent quarters, especially on the contract side. So it'd be good to sort of understand what you guys are seeing there. Appreciate it's not a particularly material component of Europe for you, but again, just would be helpful for sort of context. On Japan, you know, clearly a very strong sort of Q2. Noted the comments you just made around sort of natural headcount attrition, but you know, clearly, it's a really strong region, and therefore, would you potentially be looking to selectively sort of hire into that market if conditions continue to remain favorable?
And then, lastly, just on branding, I think I saw on LinkedIn last week what looked like a pretty sort of fundamental brand refresh, bringing different parts of the business, sort of together under one banner. I just wondered if you could provide a bit more color on that as well. Thanks.
Sure. Thanks, Tom. So I think we've got France, Germany, Japan and then rebrand. So maybe, maybe David can cover France, and then I'll cover Germany, Japan, and the rebrand.
Thanks, Toby. Yeah. Hi, Tom. So yeah, with regards to France, we were already planning for a certainly a quieter Q3, given the Olympics. Real sense that with the Olympics in town, as it were, in Paris and across the country, that a lot of businesses would be otherwise engaged, otherwise focused, so we were already planning on a slower Q3. I think the election and the challenges that's bringing probably exacerbates that and makes the challenge in France probably a little bit harder in Q3 as a consequence. So we'll see how that plays out. With regards to interim, particularly versus the rest of business, we don't obviously split out the individual disciplines by country, but it's fair to say that our interim business in France is very strong.
It's got a really good leading position and, and more importantly, has real critical mass. So that's, you know, holding up well, and, you know, it's, it's a good profit business. And it's one of those areas back to your... Perhaps back to your piece around the headcount, is one where we have actually increased heads over the last 12 months, in response to its, its strength and resilience. And then touching on, on Germany. So, I mean, Germany was fairly resilient for us, down about 4% in the quarter, so it did outperform our overall European performance. You might recall we opened an office in Berlin during 2022.
... So that combined with our, our offering in Düsseldorf, Hamburg, and Frankfurt, we believe we're well, well-placed to serve the Berlin tech, fintech, and startup scene. Obviously, we're very aware of the peer commentary. Our exposures in Germany are quite different to some of our, our competitors, in that we're not particularly heavy in automotive or general, manufacturing sectors. So I'd say overall resilient performance in Germany, but obviously it's borne out by the fact the likes of France, Netherlands, and Belgium are referenced in the statement, yet we do have larger businesses there, in our European segment, in what, what we believe is a well-diversified portfolio. Japan, so as you know, it's globally our, our biggest business. It's highly differentiated.
We are very well-known in that market for serving multinational enterprise businesses, looking for bilingual and, in particular, English-speaking professionals. And we've built a very competitive advantage, in Japan over time. So our performance reflects that. We saw pretty broad-based growth across both perm and temp during the quarter. Osaka, we are gonna continue to build in headcount, and that headcount number has actually increased, which is our growing business, obviously, outside of Tokyo. Tokyo, we will also continue to build in headcount, but we're just keeping a very close eye to ensure that we have the productivity gains. And then lastly, Tom, you touched on the brand unification. More of that at the half year, but you're right, obviously, that's happened. That's over LinkedIn. It was the right thing to do.
We had three brands, Robert Walters, Resource Solutions, Walters People. It's all about ultimately making it as simple as possible for our customers. We've been through the last nine months of preparing for that. There are obviously gonna be efficiency gains from that, but most importantly, it's about bringing together our recruitment, our agency business, our outsourcing business, and what is our fledgling but growing advisory business, and they will now all come together, winning as one as Robert Walters.
Really helpful. Thanks, guys.
Now our next question comes from Sanjay Vidyarthi from Panmure Liberum. Please go ahead.
Morning, all. Just one for me, please. Can you give any indication of what proportion of the reduction in headcount was from non-fee earners in H1, and how that might evolve in the H2, please? Thanks.
Hi, Sanjay. So, yes, overall, headcount down 5%. There has been a particular focus proportionately on the non-fee earner piece, as we talk about the efficiency of our sort of support functions, as well as the productivity efficiency within the fee earners. We don't, as you're aware, historically split out sort of non-fee earner, fee earner mix, but it's fair to say that a substantially higher proportion of the fee, of the headcount reduction was in the non-fee earner space, with you know, the average of all of it being 5%.
And Sanjay-
And we'd expect that to-
Sanjay, sorry, just to add to that, and of course, we're looking at it, market by market as well. So that's an overall number. Clearly, that number is higher or lower, depending on the performance within each of our markets.
Okay. And we expect a similar kind of trend in the H2?
Yeah, we will continue to focus on sort of balancing the headcount appropriately to the demand we see, and that's obviously for fee earner with the job flow, but then also, yeah, making sure that the support functions and the fee earner support functions are appropriately based, and efficient. Yeah, more to come in H2.
Okay. That's great. Thank you very much.
Thank you. As a reminder, to ask a question, please signal by pressing star one. Our next question comes from Steve Woolf from Deutsche Bank. Please go ahead.
Morning, all. Just a couple from me. If you can give any comment about the time to hire, and whether that's, you know, more on the interview side, sort of nervousness by candidate, I guess, versus the requirements by companies. Also the job flow into late May, and then into June itself, just any thoughts or comments whether that is, you know, purely new jobs coming to market or also there's evidence of sort of mandates actively being pulled from the market itself? And then any comment you've got around about, you know, fee rates at all from maybe where they were, you know, six months ago, 12 months ago, so any more color you can give on that. Thanks.
Sure. Hi, Steve. I'll cover time to hire and job flow, and I'll let David maybe touch on fee rates. Time to hire, so, I mean, job flow in a lot of our markets has actually held up reasonably okay. Not all markets. Australia is a good example where we've seen a material drop in job flow. And actually, when we think about all the components that we have, which is, obviously, inflation is still there, we have low unemployment, these are all ingredients that we would normally welcome, but confidence is-
Yeah
... continues to be the challenge. So it's very frustrating. We're getting more counteroffers than we've historically seen in a long, long time. So the importance of actually close relationships with both clients and candidates to get that conversion from interview to placement is critical. And that's the real challenge area at the moment. So obviously, that continues. Job flow, I mean, really, when we look at the exit rate in June, which was 18%, it's partly a product of job flow, perhaps in some markets that we perhaps didn't see coming through May, but I still think it continues to be this simple lack of confidence of clients and candidates.
Everybody's obviously seeing what's going on in the world, and until we start to see that confidence pick up and we start to see candidates actually accepting offers, you know, we're gonna continue to be in a, you know, relatively challenging market.
Sure.
Steve, just picking up with regards to fee rates. Overall, they're holding up really well. Obviously, it varies by market, even by discipline, but overall, fee rates holding up well. We're not seeing any markets come under any particular pressure on fee rates to the downside. And in actual fact, we are seeing some increases in some markets. So I would say, you know, fee rates are on average, sort of flat to slightly up. Certainly no significant downward pressure on them.
Okay. That's great. Thank you.
Thank you. And, it appears there are currently no further questions at this time. With this, I'd like to hand the call back over to Toby and David for any additional or closing remarks.
Nothing more from me. Thank you.
Nope.
Thanks very much.