Hello, and welcome to the Robert Walters Q1 of 2025 trading update call. Please note this conference is being recorded, and for the duration of the call, your lines will be on listen only. However, you'll have the opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero, and you'll be connected to an operator. I will now hand you over to your host, David Bower, CFO, to begin today's conference. Thank you.
Thanks for the call. Good morning, everyone, and thanks for joining our Q1 2025 trading update. I'm David Bower, Chief Financial Officer, and joining me this morning is Toby Fowlston, Chief Executive. As we begin, I'll make a few remarks around performance at the group level before Toby touches on trading across our regions, as well as the market backdrop. As ever, we'll then be happy to take any questions you may have. As usual, all net fee income percentage movements are in constant currency. As you'll have seen from this morning's statement, group net fee income was down by 16% year-on-year in the first quarter, as trading conditions overall remained challenging across our markets. We saw some pockets of growth in the U.K. and broadly stable activity levels in Asia Pacific. However, the weaker sentiment observed in Europe in late 2024 continued in the first quarter.
Broad activity levels for the specialist recruitment business, namely job flow and interviews, followed the typical shape we see in Q1, with activity levels ticking up in March following a quieter January and February. For our specialist recruitment service line overall, job flow was in line with the first quarter last year. Returning now to consider headcount and productivity, we closed the quarter with group headcount just over 3,200, which was down 3% on the 2024 closing position. Within this, fee owner headcount fell by 4% quarter on quarter, whilst non-fee owner headcount was down by 1%. In managing fee owner headcount, we remain highly selective in replacing natural attrition, with fee owner headcount levels now down by 28% against the peak reached in the first quarter of 2023 and down by 16% year-on-year, in line with reduction in fees.
Overall productivity for the group, measured by net fee income per fee owner, remained strong and was up by 2% year-on-year in constant currency terms. This was underpinned by stable fee rates and positive effects from mix and wage inflation. As you'll be aware, one of the key drivers for our overall model is volume productivity in our specialist recruitment service line, measured in terms of per-employee placements per fee owner per month. Guided by job flow levels, our strategic approach has been to not let fee owner headcount fall wholly proportionally with volumes, and this, along with the market conditions, explains the 7% reduction in volume productivity.
Sitting just below 0.8 per-employee placements per fee owner per month, we continue to have a good deal of headroom compared to a long-run average volume productivity of around one per-employee placement per month, underpinning the opportunity we have to drive operational leverage over the medium term. Looking at the balance sheet, in line with the typical first quarter profile, where we tend to see an outflow driven by fee owner variable pay in respect to the prior year, we closed the quarter with net cash of around GBP 42 million. I will now hand you over to Toby to take you through trading in our regional segments and the market backdrop.
Thanks, David. Morning, everyone. Let's turn first to our Asia Pacific segment. Here, fee income was down 15% overall. In specialist recruitment, fees were down 11%, a few points lower than the fourth quarter.
In Japan, the 7% reduction in fees reflected more cautious client behavior in perm, which extended time to hire, but we continue to see positive trends in temp. In Australia, fees were down by 11%, albeit with some pockets of growth in certain markets, and conditions remain more favorable than in New Zealand, where public sector demand for temps is still yet to improve. We continue to see a more resilient performance in Greater China, with fees down 1%, led by growth in the mainland, while Southeast Asia declined by 16%. Asia Pacific recruitment outsourcing fee income declined by 42%, reflective of a client account not being renewed. Turning now to Europe, where fee income overall and in specialist recruitment was down by 22%.
In the Netherlands, where we're over 70% weighted towards temp, there was increased uncertainty from new legislative enforcement powers regarding self-employment, driving the 30% reduction in fee income. We do, however, feel confident in our ability to help clients navigate the regulatory change, particularly given our status as a larger provider, and therefore potentially take share, particularly as the landscape settles. In France and Belgium, where fees were down 17% and 15% respectively, conditions remain tough, and in Spain, which is in the early stages of a turnaround with new leadership, fees were down 32%, but have been largely stable sequentially over the prior two quarters. In Germany, where the cornerstone of our offering is in accounting and finance and technology, we saw tougher conditions in perm; however, interim volumes were up year-on-year.
Turning to the U.K., fee income was down 4% overall, a notable improvement from the recent trend. Specialist recruitment fee income was down by 1%. We saw another quarter of growth in London, with fees up 22%, whilst in the regions, the 22% decline in fees is partly a function of the comparative predating the recent office network consolidation. Recruitment outsourcing fee income was down by 8%, driven by lower hiring volumes. In our rest of world segment, fee income was down by 18% overall. Specialist recruitment fee income was down by 26%. We saw a slightly more muted performance in the Middle East, with fees down 12%, whilst the U.S.A. performance, with fees half the prior year level, partly reflects again the office network consolidation during the quarter. There was a more resilient performance in recruitment outsourcing, with fees down 1%.
In summary then, global hiring markets remained challenging during the first quarter. Thinking about our activity levels in specialist recruitment in terms of job flow and interviews, these were stable to slightly up year-on-year in the U.K. and Asia Pacific. In Europe, meanwhile, the weaker sentiment seen in late 2023 continued in the first quarter. More recently, we have, of course, seen increased uncertainty regarding the flow of global trade due to tariffs, and our early interactions with clients and candidates informs our view this is likely to be a further headwind to confidence levels in the near term, limiting visibility on the outlook for the balance of the year at present.
Notwithstanding that, we remain highly focused on our strategic initiatives to strengthen the business, and this, combined with the full suite of talent solutions we have to support our clients and the experienced and motivated teams that deliver them, means we will continue to take the right actions to navigate the challenging trading environment. David and I would be happy to take any of your questions.
Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. If you change your mind and want to withdraw your question, please press star two, and please ensure your lines are unmuted locally as you'll be prompted when to ask your question. The first question comes from a line of Thomas Cullen from Investec. Please go ahead.
Morning, guys. Hope you're both well. I've got two, please. Just firstly, thinking about the group's vertical exposure in the context of U.S. trade tariff dynamics. For example, it's skewed to say sort of financial services or legal services. To what extent do you think verticals such as these provide the company with a degree of downside risk protection? Secondly, just on the cost base and noting that 16% year-on-year fee owner headcount reduction, how should we be thinking about where that headcount base might end up at the end of fiscal 2025? Has there been any changes to your expectations here versus the prelims, or is it still that you're looking to ensure optimal positioning to sort of take advantage of the recovery as and when that materializes? Thanks.
Hi, Tom. I'll take the vertical question. David can touch on the fee owner headcount. I think in terms of verticals, it's still clearly very challenging overall. In specialist recruitment, we've clearly seen greater year-to-date resilience anyway in terms of low to mid-single-digit percentage of clients across legal, financial services, particularly more so encouraging in the U.K. Overall, I think supply chain and procurement, we've seen a lot of activity in that space and across cyber and AI. I think tariffs, it's just too early to really have any visibility on that as of yet. Regards to headcount, I'll pass to David.
Yeah, hi, Tom. In terms of the headcount, as we've said, we've used very, very selective rehiring of natural attrition to sort of manage the headcount levels down. I think that's worked and served us as well. If I look at the productivity piece, as I said earlier, we've got net fee income per fee owner up slightly. We've got job flow broadly stable. Those two things combined, plus the natural attrition sort of management, all come together to say, look, I think we've got heads in broadly the right place and the right numbers. We will look at pockets of success and recruit accordingly, but overall, I think the headcount level we've got today is broadly where we would expect it to be.
Yeah, to your question, really unchanged from the prelims view, but we'll clearly keep it very much under review as we progress through the year.
Thanks, guys.
Again, to join the queue to ask a question, please press star one on your telephone keypad. The next question comes from a line of Steve Woolf from Deutsche Bank. Please go ahead.
Morning, guys. A couple for me, just backing to that tariff question inevitably. Have you noticed out there in any sort of particular regions, I'm thinking maybe specific to Asia where the tariffs are highest, any sort of mandates being pulled at this point, put on hold, any sort of very early sort of rabbit in the headlights kind of activity that you've seen? Secondly, just on the Netherlands and the legislative changes, just what roles there are you exposed to and are being impacted? Thirdly.
Yeah, hi. Sorry.
Sorry, Toby. Go ahead. I'll follow up.
Okay. Hi, Steve. Sorry, Toby here. Just on the Netherlands, the legislation there, it is really in that interim space. As I mentioned, about 70%, just over 70% of our business is non-perm in the Netherlands. I mean, I won't go into all the specifics of what the legislation is around, but essentially, it is around sort of protecting what might be perceived as people moving from temp to perm. We are exposed in that interim space. That said, of course, it is across the whole country, so we are looking at ways in which we can support our clients. We feel we have some solutions which we can come up with, but currently, obviously, it is a challenge. I think in Asia, it is probably too early to say. China is the obvious one, given that is still the position it sits right now.
We haven't seen any immediate impact as of yet, so I think we'll probably be in a better position once we've got some visibility, particularly after the sort of 90-day moratorium, if indeed that's where it goes.
Sure. The other ones I had were on the headcount reductions. If we're sort of where largely have they been? I know when speaking to David earlier, there's obviously the closure of Liverpool and areas like that and some consolidation in the US. From a fee owner perspective, where have those other reductions outside of that been? Finally, just on the cash position, any thoughts on where the shares are now with the likes of buyback, etc.?
Yeah, on the headcount question, the headcount, as we've said all along, we're trying to look at it very surgically and scientifically around job flow, productivity, and where we're seeing activity. Fee owners have come off in many and most of the markets. That being said, where you see us talk about having sort of a more resilient performance or even some growth, that's where potentially heads have come off less. Where we have resilience in performance, we've had a lower headcount reduction than where we've seen more weakness. That's how we've managed it from the start, and that's how we'll continue to look at it. With regards to the cash, given where the shares are, but equally given where cash currently is, we have our sort of internal view of really wanting to try and maintain a minimum around about GBP 50 million.
That gives us the protection for interim month swings, but also for tough times, which we're clearly in at the moment. I think for me, the priority is preserving the strength of the balance sheet and preserving the dividend. Yeah, as soon as we can see through that, then yeah, we can look at alternative allocations of capital. First and foremost, it's about the balance sheet maintenance and dividend.
Perfect. That's great. Thanks, both.
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Thank you very much. Good to speak to everybody, and no doubt we'll speak soon. Thanks.
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