2024 Half-Year Results

1 August 2024

ROBERT WALTERS PLC

Interim results for the six months ended 30 June 2024

Continued actions to strengthen performance amidst challenging market conditions

* Constant currency is calculated by applying prior year exchange rates to local currency results for the current and prior years and denoted by '*' throughout this announcement

**Conversion rate is calculated by expressing operating profit as a proportion of net fee income.

***Net cash is cash and cash equivalents net of bank overdrafts and borrowings.

'nm' denotes where change is 'not measured'

Group strategic and operational summary

§ Group net fee income down 14%* to £166.1m, reflecting the rebasing in hiring market conditions relative to the post-pandemic peak.

§ Specialist professional recruitment net fee income down 12%*, with permanent (66% of fees) down 14%* and temporary (33% of fees, being contract and interim) more resilient and down 9%*.

§ Recruitment outsourcing net fee income down 23%*.

§ Fees remain geographically well-diversified, with no single country accounting for more than a sixth of Group net fee income in the first half.

§ Operating profit of £0.2m (H1 2023: £11.2m), reflective of the reduced trading volumes, the operating leverage of the Group's model and the foreign exchange impact particularly from the Japanese Yen. Included in operating costs is c.£2m of redundancy costs.

§ Period end headcount down 15% year-on-year to 3,625 (30 June 2023: 4,280). The Group continues to match headcount with demand in local markets, whilst being well-positioned for an improvement in conditions.

§ Actions to strengthen medium-term performance in progress, including: differentiating on the quality of service; better penetration of existing markets; and improved fee earner productivity and people efficiency, underpinned by technology.

§ Balance sheet remains strong, with period-end net cash of £48.8m (30 June 2023: £69.8m).

§ Reflecting the strong balance sheet and actions taken to date to ensure the business is well-positioned for an improvement in end markets, interim dividend maintained at 6.5p per share.

Toby Fowlston, Chief Executive, commented:

"During the first half, the business continued to experience challenging hiring market conditions. This reflects the sustained period of lower client and candidate confidence impacting the sector since hiring markets reached their most recent peak in the second quarter of 2022. This had a marked impact on our financial performance during the first half.

Our near-term planning assumes that any material improvement in confidence levels will be gradual, and likely not occur before 2025, however 2024 is not a lost year. We are implementing the key elements of our medium-term plan to further strengthen the business. We are pursuing the right actions to continue to differentiate Robert Walters on the quality of its service, drive higher penetration in our existing markets, and improve productivity and people efficiency. We look forward to sharing fuller details on our activities at our capital markets event in September."

Group trading summary

¹Percentage movements throughout this announcement are based on full unrounded results, not the rounded figures in the tables.

NB c.1% of specialist professional recruitment net fee income is classified as 'Other', and not categorised in either perm or temp. As such the aggregate of perm and temp % mix may not sum to 100%.

§ Asia-Pacific (42% of Group net fee income): net fee income down 13%*, with specialist professional recruitment down 10%* and recruitment outsourcing down 30%*. Japan grew by 2%* and Greater China (-8%*) demonstrated relative resilience. Conditions in Australia and New Zealand (-21%*) remain tough.

§ Europe (34% of Group net fee income): net fee income down 13%*, almost wholly reflecting specialist professional recruitment (-13%*). Softness in France (-18%*) was compounded by recent political uncertainty, with both the Netherlands (-9%*) and Belgium (-3%*) more resilient.

§ UK (16% of Group net fee income): net fee income down 18%, with specialist professional recruitment down 20% and recruitment outsourcing down 17%. London (-16%) developed sequential momentum, whilst the regions (-25%) remain softer.

§ Rest of World (8% of Group net fee income): net fee income down 15%*, with specialist professional recruitment down 9%* and recruitment outsourcing down 24%*. The Middle East (-4%*) was sequentially stable across the first half, with a solid performance also seen in Mexico (+1%*). The USA (-18%*) remains challenging.

Outlook

Current trading remains unchanged from that reported at the Company's second quarter update on 15 July 2024. Notwithstanding challenging markets, good progress was made on cost reduction during the first half. Further momentum is expected as we move through the year, helping to mitigate the second half year-on-year fee income impact to an even greater degree than achieved during the first half.

Results presentation

The Company will host a results presentation webcast at 8:30am today, accessible live via the following link:

https://brrmedia.news/RWA_HY24

A recording of the presentation and subsequent conference call will be available on the Company's website shortly after the event.

Capital markets event

As previously announced, the Company will host a capital markets event on Thursday 26 September 2024 at its central London offices, starting at 2pm. To register, please contact [email protected].

- Ends -

Enquiries

About Robert Walters

Established in 1985, Robert Walters is a global talent solutions business operating in 31 countries across the globe. We support organisations to build high-performing teams, and help professionals to grow meaningful careers. Our client base ranges from the world's leading blue-chip corporates through to SMEs and start-ups.

We deliver three core services:

·      Specialist professional recruitment - encompassing permanent and temporary recruitment, executive search and interim management.

·      Recruitment outsourcing - enabling organisations to transfer all, or part of, their recruitment needs to us either through recruitment process outsourcing (RPO) or contingent workforce solutions (CWS).

·      Talent Advisory - supporting the growth of organisations through market intelligence, talent development, and future of work consultancy.

Our approximately 3,600 employees are passionate about powering people and organisations to fulfil their unique potential. We take the time to listen to, and fully connect with, the people and organisations we partner with. Our ability to truly understand them and create and share their compelling stories is what sets us apart.

www.robertwalters.com

Forward looking statements

This announcement contains certain forward-looking statements.  These statements are made by the directors in good faith based on the information available to them at the time of their approval of this announcement and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

Robert Walters plc

Interim results for the six months ended 30 June 2024

CHIEF EXECUTIVE'S REVIEW

During the first half, the business faced the challenging conditions of current hiring markets. Since hiring markets reached their most recent peak in the second quarter of 2022, there has been a material, and now sustained, period of lower client and candidate confidence. In this context, our business was not immune, as seen by first-half Group net fee income which was down 14%* on the prior year and a reported loss before tax. As disappointing as those financial results are, the challenging market conditions we face also bring with them opportunities. For my leadership team and I, it has served to deepen our conviction in our medium-term plan to further strengthen the business.

During the first half, in addition to tightly managing the cost base and pursuing operational excellence, we took steps to clarify the key elements of our medium-term plan and to pursue the right actions.

People

At Robert Walters, our purpose is to power people and organisations to fulfil their unique potential. Our clients rely on us to understand their unique business strategy, culture and hiring needs, and match that with the highest quality talent. People leadership is, therefore, essential to how we run our own business - including creating an environment which allows all of our people, whatever their background, to perform to the best of their ability.

A hugely important element of people leadership has been having the right people in the right roles within my immediate team. The team I am privileged to lead combines several decades of Robert Walters experience with recent key hires who bring fresh perspectives, complementary business experience, critical core competences, and have made an immediate positive impact on the business in the first half.

More widely across our business, we have defined our key leadership behaviours, placing an emphasis on authenticity, care and an entrepreneurial mindset. As a relationship-based recruiter, in our specialist professional recruitment offering for example, these behaviours will continue to help us differentiate our services from purely transactional competitors, and ensure that our pipeline is consistently bringing through future leaders. This approach also positions us strongly for when the pace of hiring in our markets begins to accelerate, underpinned by the trusted relationships we have nurtured with our clients and candidates through challenging markets.

Geographical penetration

We have well-scaled businesses in some of the largest hiring markets globally. However, we also have businesses in mid-sized markets where Robert Walters is not yet a top three competitor. We see an opportunity to develop our portfolio, appropriately and selectively scaling in our existing markets that most excite us.

Our Japan business best exhibits this blueprint. Since launching in Tokyo in 1999, our Japan business has grown to contain over 70 teams, serving increasingly specialised industry verticals. With the structural tailwind of acute labour shortages in Japan forecast for the next few decades, Robert Walters has a differentiated offering particularly catering to bilingual candidates and the multinational enterprises that seek them. This combines to support sustainably strong fee rates and a well-above Group average conversion rate.

In continental Europe, Belgium, the Netherlands and France stand out in terms of their critical mass. These businesses are more evenly-weighted between perm and temp than the two-thirds (perm) one-third (temp) specialist professional recruitment global average seen during the first half. Specifically on the temp side, we are building competency in the 'interim' space - being senior executive and mid-managerial candidates able to bring their experience to bear for clients over shorter fixed terms.

We will continue to pursue geographical penetration as a key driver of our medium-term organic growth strategy.

Fee earner productivity and people efficiency

As a business, we are increasingly focused on fee earner productivity and, more broadly, people efficiency.

Looked at in terms of perm placements per fee earner per month, our regions are at different levels of productivity today relative to their most recent peaks in the second quarter of 2022. In Asia-Pacific, whilst North-East Asia, South-East Asia and Greater China are approaching their recent peak fee earner productivity, Australia & New Zealand remain further behind. In some of our European markets, fee earner productivity has surpassed the post-pandemic peak, whilst the UK, though much improved over the first half, still lags. We will continue to closely monitor fee earner productivity trends in the second half, using the data to ensure we are adequately matched to demand in our local markets, whilst well-positioned for a sustained improvement in confidence levels as and when they arrive.

There is also work to be done to ensure our non-fee earner headcount is appropriately based and structured to support the needs of our global business. We are reviewing the best operating model for our central support functions (finance, HR, legal, marketing and technology) to determine whether roles should be based in each of our trading markets - as is sometimes optimal - or 'offshore' in service centres that cater for a whole region.

Fee earner productivity and wider people efficiency is also underpinned by our technology. During the first half we extended the rollout of 'Zenith', our custom-built CRM, to our teams in the UK, Ireland and South Africa. Currently, 60% of the Group's markets are now benefiting from this significant upgrade. As a great example of how we are leveraging the benefits of generative AI in our human relationship-based business, our AI job ad writer was integrated into Zenith during the first half - giving our fee earners more time to invest in client and candidate relationships.

Finally, we are also giving thought to our office footprint. Our offices are where our people come together to collaborate and be close to the clients and candidates they serve. However, the needs we have in this area have evolved, particularly given the changes brought by the pandemic. Since I became Group Chief Executive, and in recognition of this, we have consolidated our office footprint in Australia, France, Malaysia, the Netherlands, Thailand, the UK and the USA, being very clear that the consolidated in-country network enables our people to more effectively serve their clients and candidates. We can see further opportunities in this area.

Winning as one Robert Walters

Just after the end of the first half, we externally launched our new brand identity - bringing the multiple brands through which we have traded historically under the single banner of 'Robert Walters'. At its core, the brand unification will enable us to better serve our clients and will help us fulfil our vision to be the world's most trusted talent solutions business.

We know that the talent requirements and hiring processes of businesses have arguably evolved more rapidly in the last four years than the 20 that preceded them. We also know that the needs and expectations of today's professionals are changing just as quickly. In response, we have combined all of our expertise, across specialist professional recruitment, recruitment outsourcing and talent advisory, to go to market as one, enabling us to offer a full suite of talent solutions to help organisations address their hiring challenges.

As our clients benefit from the solutions we offer as one Robert Walters, we see a clear opportunity to introduce them to the full suite of our offering where we currently only partner with them in one area. For example, client awareness of our recruitment process outsourcing offering is just 11%, compared to considerably higher levels for professional recruitment. Our move to one Robert Walters will help us convert this opportunity.

Conclusion

As I conclude this review, I want to recognise our people - who make Robert Walters such a great place to work. The current market conditions mean we must demonstrate tenacity and resilience to an even greater extent than during the hiring surge of the recent past, and I see this dedication in action from so many of our people each day.

I believe we have clear opportunities within our grasp to further strengthen Robert Walters over the medium-term and, together with all our people, I'm excited to do so on behalf of all our stakeholders.

Toby Fowlston

Chief Executive Officer

31 July 2024

OPERATING REVIEW

Asia Pacific (42% of Group net fee income)

The Group's Asia-Pacific business comprises the specialist professional recruitment offering in North-East Asia (Japan and South Korea), Australia & New Zealand, South-East Asia (Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam) and Greater China (Mainland China, Hong Kong and Taiwan), as well as the region-wide recruitment outsourcing offering. Recruitment outsourcing accounted for 10% of Asia-Pacific net fee income in the first half.

¹Percentage movements throughout this announcement are based on full unrounded results, not the rounded figures in the tables.

NB c.1% of specialist professional recruitment net fee income is classified as 'Other', and not categorised in either perm or temp. As such the aggregate of perm and temp % mix may not sum to 100%.

Specialist professional recruitment

H1 net fee income was down 10%*, with both perm and temp fees lower year-on-year by this proportion and the perm/temp mix therefore unchanged. The reduction in perm fee income was driven by lower placement volumes, reflective of market conditions, with average fees broadly stable. The reduction in temp fee income was driven by lower temp volumes year-on-year, with the most marked reduction in Australia and New Zealand where, in the case of the latter, the government reduced the use of temp labour following the late 2023 national elections.

Elsewhere in the region, fee income was resilient in North-East Asia (-1%*), driven by a 2%* increase in Japan where both the number of temps working and fee earner productivity in perm were up marginally on the prior year. As a result of the foreign exchange headwind from the weaker Japanese Yen, in reported terms Japan net fee income was down 12% on the prior year. Greater China net fee income was down 8%*, with a strong performance in mainland China (+13%*) - where new leadership has re-focused the go-to-market strategy - more than offset by Hong Kong (-23%*), where financial services sectoral confidence levels remain low. In South-East Asia, net fee income was down 15%* on the prior year, with a lengthened time-to-hire observed particularly for more senior roles.

Recruitment outsourcing

H1 net fee income was down 30%*, reflecting lower hiring volumes from the largely financial services-weighted client base.

Operating costs

Operating costs were down 7%*. Period end headcount reduced by 14% year-on-year, with a reduction in both fee earners and support staff.

Europe (34% of Group net fee income)

The Group's Europe business predominantly comprises the specialist professional recruitment offering in Northern Europe (Belgium, France, Germany, Ireland, the Netherlands and Switzerland) and Southern Europe (Italy, Portugal and Spain). Recruitment outsourcing accounted for 1% of Europe net fee income in the first half.

¹Percentage movements throughout this announcement are based on full unrounded results, not the rounded figures in the tables.

NB c.1% of specialist professional recruitment net fee income is classified as 'Other', and not categorised in either perm or temp. As such the aggregate of perm and temp % mix may not sum to 100%.

Specialist professional recruitment

H1 net fee income was down 13%*, with perm down 17%*, whilst temp (-7%*) was more resilient - thereby growing its share of the mix year-on-year. The reduction in perm fee income was broadly proportionate with lower placement volumes year-on-year, whilst average fees were stable. Lower temp fee income is reflective of lower temp volumes, with weaker conditions in the Group's largest European temp markets of France and the Netherlands partly offset by growth in Belgium.

In the Group's largest European market of France, H1 fee income was down 18%*. Muted confidence amongst French clients and candidates as the year began (reflected in Q1 fee income -15%* year-on-year) was further impacted towards the end of the half by political uncertainty. Combined with the Paris Olympics, this pulled forward the commencement of the seasonal lull in hiring activity typically seen during the third quarter. Netherlands (-9%*) was more resilient and has been broadly stable sequentially since the third quarter of 2023, whilst Belgium (-3%*) annualised a record H1 prior year comparative. The continued rebasing in market conditions relative to the post-pandemic peak was also seen in Spain (-19%*), which also annualised a record level of H1 fee income in 2023. In Germany (-13%*), the group's fifth largest European market, performance improved as the half progressed (Q1: -21%* year-on-year, Q2: -4%* year-on-year).

Operating costs

Operating costs were down by 11%*. Period end headcount fell 21% year-on-year, with a reduction in both fee earners and support staff.

UK (16% of Group net fee income)

The Group's UK business comprises the specialist professional recruitment offering in London and the regions, as well as recruitment outsourcing and talent advisory services. Recruitment outsourcing is the most material in the UK of any of the Group's reportable segments, accounting for 56% of net fee income in the first half. As well as Robert Walters co-locating its people on client sites to perform volume hiring (in common with the other reportable segments), UK recruitment outsourcing also includes the provision of contingent workforce solutions such as the fledgling, but high growth, 'Workforce Consultancy' offering.

¹Percentage movements throughout this announcement are based on full unrounded results, not the rounded figures in the tables.

NB c.1% of specialist professional recruitment net fee income is classified as 'Other', and not categorised in either perm or temp. As such the aggregate of perm and temp % mix may not sum to 100%.

Specialist professional recruitment

H1 net fee income was down 20%, with perm fee income down 21% and temp slightly more resilient - with its mix share marginally up as a result. Lower perm fee income was driven by lower placement volumes, with average fees up year-on-year. Lower temp fee income reflects the lower temp volumes year-on-year. In London (-16%), improved momentum (Q1: -26% year-on-year, Q2: -6% year-on-year) was driven by two consecutive quarters of sequential growth, led by the accounting and finance vertical. Conditions were softer in the regions (-25%), however sequential momentum was stable as the half closed (Q2 fee income up 4% v. Q1).

Recruitment outsourcing

H1 net fee income was down 17%, primarily driven by lower perm hiring volumes through the predominantly financial services sector client base. Client confidence levels re-set sharply lower in the first quarter of 2023 and, though recovery commenced through the first half of this year, perm hiring requirements still lagged those of a year ago. The lower confidence levels were also seen in volume temp hiring requirements being more resilient year-on-year.

Although still a modest proportion of UK recruitment outsourcing net fee income today, Workforce Consultancy continued to perform well during the first half - and indeed ahead of management's expectations. Having been launched in 2022, and initially offered to existing Robert Walters' clients only, first half fee income was up 40% on the prior year, with a product conversion ratio in excess of 30%.

Operating costs

Operating costs were down by 11%. Period end headcount fell 8% year-on-year, with a reduction in both fee earners and support staff.

Rest of World (8% of Group net fee income)

The Group's Rest of World business comprises the specialist professional recruitment offering in North America (Canada and USA), South America (Brazil, Chile and Mexico), the Middle East and South Africa, as well as the region-wide recruitment outsourcing and talent advisory offering. Recruitment outsourcing accounted for 33% of Rest of World net fee income in the first half.

¹Percentage movements throughout this announcement are based on full unrounded results, not the rounded figures in the tables.

NB c.1% of specialist professional recruitment net fee income is classified as 'Other', and not categorised in either perm or temp. As such the aggregate of perm and temp % mix may not sum to 100%.

Specialist professional recruitment

H1 net fee income was down 9%*, almost wholly reflecting perm performance. Lower perm placement volumes were partially offset by growth in average fees year-on-year in both North and South American markets.

H1 fee income in the Middle East, the Group's largest Rest of World market, was down 4%* and stable sequentially across the first two quarters. Meanwhile, in the USA (-18%*), hiring conditions in the technology sector remained tough. Mexico (+1%*) saw the strongest performance of the South American markets. While Chile (-13%*) was softer, it remains an attractive market given its prospects for continued export-led GDP growth.

Recruitment outsourcing

H1 net fee income was down 24%*, largely driven by lower levels of volume hiring in perm on behalf of financial services clients.

Operating costs

Operating costs fell by 6%*. Period end headcount was 24% lower year-on-year, with reductions in both fee earners and support staff.

FINANCIAL REVIEW

These financial results have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the United Kingdom.

Group statutory results

The headline statutory financial results for the Company are presented below.

Revenue

Revenue for the Group is the total income from the placement of permanent and temporary (comprising contract and interim) staff, and therefore includes the remuneration costs of temporary candidates and the total cost of advertising recharged to clients. It also includes outsourcing fees, consultancy fees and the margin derived from payrolling contracts charged by Robert Walters to its clients. Revenue in the period decreased by 16% to £459.3m.

Gross profit (net fee income)

Net fee income is the total placement fees of permanent candidates, the margin earned on the placement of temporary candidates and the margin from advertising. It also includes the outsourcing, consultancy and payrolling margin earned by the Company. Net fee income is the primary financial top-line metric used to evaluate business performance.

Net fee income in the period decreased by 18% to £166.1m, principally driven by the lower volume of permanent placements and on-payroll temporary workers in specialist professional recruitment, and the lower level of volume hiring in recruitment outsourcing.

Operating profit

Operating profit in the period decreased to £0.2m, reflecting the underlying trading performance and the inherent operating leverage in the Group's model whereby the lower net fee income (down 18%) was not proportionately matched, in the short-term, by lower operating costs (down 13%).

The majority of the Group's operating costs (c.70%) relate to staff, being front office fee earners (recruitment consultants) and non-fee earners (front office support staff as well as back-office support staff across various corporate functions such as finance, HR, IT, legal and marketing). Included in operating costs is c.£2m of redundancy costs incurred in the period.

Interest and financing costs

The Group incurred a net interest charge for the period of £2.0m (H1 2023: £2.2m).

A foreign exchange loss of £0.5m (H1 2023: £0.9m) arose during the period on translation of the Group's intercompany balances and external borrowings.

Taxation

The tax charge in the period was £0.1m (H1 2023: £2.8m), which is substantially lower than the expected effective tax rate for the full year due to the incidence of interim profits and losses in various overseas markets, versus the expected outturn in each market for the full financial year.

The effective tax rate ("ETR") for the full year is expected to be higher than the prior full-year ETR (2023 ETR: 36.0%), reflecting both the higher rate of taxation on profits in many of the overseas markets in which the Group operates, as well as the incidence of losses in a number of overseas markets in the current year.

Cash flow and financing

Cash generated from operations in the period was £0.4m (H1 2023: £14.9m).

During the period, net cash decreased by £31.1m to £48.8m (31 December 2023 net cash: £79.9m).

Working capital increased during the period by £9.0m (H1 2023: £7.3m), reflecting the usual first half working capital cycle of the Group.

The Company was free cash flow negative in the period in the sum of £16.9m (H1 2023: £7.7m). Repayment of lease liabilities of £8.9m (H1 2023: £7.6m) relates to the Group's office estate. There were also additions in the right of use assets of £9.3m (H1 2023: £9.5m) relating to the Group's office estate which are non-cash items. Intangibles capital expenditure of £3.4m (H1 2023: £2.7m) principally comprises spend to further develop the Group's in-house CRM system. Property, plant and equipment capital expenditure of £1.4m (H1 2023: £5.8m) principally relates to the Group's office estate.

During the period, the average amount drawn on the Group's financing facility reduced and amounted to £14.6m at the period end (30 June 2023: £19.1m) as stronger cash management saw more cash repatriated to the UK, which resulted in a reduction in the related interest paid.

Dividend

Reflecting the strong balance sheet, and the actions taken to date to ensure the business is well-positioned for an improvement in end markets, the Board has declared an interim dividend of 6.5p per share (H1 2023: 6.5p), which will be paid on 27 September 2024 to shareholders on the register on 30 August 2024.

Foreign exchange impact

The Group's primary overseas functional currencies are the Japanese Yen, the Euro and the Australian Dollar.

The impact of foreign exchange movements between H1 2024 and H1 2023 resulted in a £8.0m decrease in reported net fee income and a £0.2m decrease in operating profit for the Group.

Principal risks and uncertainties

The Group's principal risks and uncertainties, together with mitigating actions, are detailed on pages 52-58 of the Company's Annual Report & Accounts 2023. Since the publication of the Annual Report & Accounts, the Board has assessed the Group's risk profile and does not believe the principal risks and uncertainties are different in nature overall to those detailed.

ROBERT WALTERS PLC

Half-yearly Financial Results 2024

CONDENSED CONSOLIDATED INCOME STATEMENT

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND EXPENSE

ROBERT WALTERS PLC

Half-yearly Financial Results 2024

CONDENSED CONSOLIDATED BALANCE SHEET

ROBERT WALTERS PLC

Half-yearly Financial Results 2024

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

ROBERT WALTERS PLC

Half-yearly Financial Results 2024

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY