Operator
Hello, and welcome to the Robert Walters Half Year 2026 Financial Results presentation. If you would like to ask a question during today's call, please press star one on your telephone keypad. I would now like to hand the call over to Toby Foulston. Please go ahead.
Morning, everyone, and welcome to our 2026 Half Year Results presentation webcast. I'm Toby Foulston, Chief Executive of Robert Walters, and I'm joined here in London by Jonathan Salisbury, Interim Chief Financial Officer. up. We're pleased to have delivered a first half financial performance in line with our expectations, a good outcome, particularly given the increased global uncertainty we have seen so far in 2026. The steps that we've been taking over the last three years to unlock more of the potential of Robert Walters has frequently required many of our people to go above and beyond. So it's right to recognise that and say a very big thank you the execution of our strategy has been sharpened around cost cash and growth actions over the last nine months the actions we have taken continue to give us confidence in the opportunity we have ahead and in the value this business can deliver for our clients for our shareholders and for our people in terms of our agenda today i'll hand over to jonathan shortly for a view of our first half financials and an update on our cost and cash actions I'll then return to update you on the growth actions that we've been taking in the business and the positive impact that they are driving. We'll then leave time at the end to open up for questions. So let me firstly highlight our key messages for today. Whilst markets have of course been tougher than almost everyone in the industry anticipated in the two years since we presented our refresh strategy at CMD, we remain confident in our plan. That said, tough markets have of course prompted us to further sharpen how we're executing the plan. We have further focused on cost, cash and growth actions, three of which are fundamentally linked. Secondly, on costs and cash, we've made substantial progress. Our annual cost base is reduced on an annualised basis by £83 million since 2023 and we're very clear on the actions ahead to deliver the cost base that is right for the current market. Meanwhile, we've made solid progress in optimising cash levels across the group to support execution of our strategy. And thirdly, we continue to take focused growth actions to position the business strongly for the structural opportunities we see ahead. We are confident in returning our specialist recruitment business to growth quicker than the broader market. We have a larger addressable market today than three years ago, and we are increasingly well positioned in attractive areas where our total talent solutions offering will continue to resonate with clients over the long term. So with that said, I'll hand over to Jonathan now for a view of our first half financial performance and an update on our cost and cash actions.
Thank you, Toby. Good morning, everybody. Turning first to the summary of our first half financial performance. As Toby said, we're pleased to have delivered trading in line with our expectations and what remains a volatile global backdrop. Net fees of £135 million in H1 were down 3% year-on-year in constant currency, a clear sequential improvement in the 2025 trend. In terms of the shape of our first half, given the Asia-Pacific weighting of the business, net fees in the second quarter were larger than the first quarter. Comparing the 4% year-on-year decline in the second quarter net fees to the 2% year-on-year decline in the first quarter, what we are seeing is a consequence of the tougher second quarter comparative with fees bigger by £5 million. Operating costs of £139 were reduced by 6% on the prior year. Within this, there was a net charge of around £1 million of one-off items taken above the line during the first half, thereby giving an underlying cost base of £138 million. After interest costs and the impact of foreign exchange, the first half result was a $6.8 million loss before tax, reduced on the prior year. As we continue to take actions to ensure a strong balance sheet to enable the business to execute its operational and strategic objectives, the Board is not declaring an interim dividend. As Toby has already made clear, we have focused on the costs across the business. Let me first turn to a review of the H1 operating costs before updating you on our cost actions more wildly. the average group headcount was down 11 on the prior year in h1 driving a 4.5 million pound reduction in staff costs we continue to manage non-staff costs very tightly during the first half with a four million pound reduction year on year we are being selective in investing spend in those current relationships that best support good quality business development and all our teams are focused on ensuring spend is directly fee generating ultimately cost-reducing or ensures regulatory compliance. Our tight cost management during the first half was part of the longer-running cost initiatives that underpin our strategy and medium-term targets. Let's now turn to that. Over the last three years, the business has taken considerable action to reduce the cost base. As you can see from the chart on the left-hand side, since 2023 and on the underlying annualized basis, around £83 million of cost has been removed. Investors are likely keen to know what that can be sure that the cost actions being taken isn't damaging the muscle of the business, which we're clear it hasn't. We gauge this by tracking the average tenure of our fee earners, which you can see on the chart in the middle of the slide. All else equal, we know that higher fee earner experience levels are associated with greater levels of productivity. As such, we've made the necessary reductions in the cost base while attaining many of our most experienced fee earners fee earner average tenure at the end of h1 was up near a quarter versus the end of 2021 when the hiring market was showing signs of overheating the other significant part of our cost reduction program relates to reducing the structural costs within the business you will recall that we're targeting delivery at least 12 million pounds of annual structural cost savings against the 2023 base with the full benefit of that being seen in the P&L in 2027. For reference, we've included detail on the slide on how that program has unfolded over time, with a little over half of the reduction being delivered this year, which now, at just over the halfway mark, we remain on track to do. Putting the cyclical element of the cost base required for current market conditions, together with the structural savings being secured, we have developed line of sight to an underlying cost base, monthly cost base, with the exit in 2026 at around 22 million pounds turning now to the cash profile during the first half and our recent cash actions in the first half we saw reduced outflow on a free cash basis compared to the prior year underpinned by control of costs regarding working capital we saw 6.3 million pound outflow during the period receivable days decreased year on year however the working capital inflow associated with that was more than offset by the rebuild in 10 volumes particularly reflective of the growth in Australia and New Zealand and timing effects of period-end cut-off where revenue has been earned but not yet invoiced. Now moving on to our wider actions, at the full-year results in March we outlined the focus throughout the business on further optimising cash. You may recall that whilst the cash resources of the Costa Group remain solid, we've historically operated with a consistent net debt position in the UK compared to our overseas markets which retain positive cash reserves that financing structure did not give the flexibility for our international business mix and we had to retain sufficient cash overseas reserves to fully fund the local working capital requirements across our international markets rather than repatriating that cash to the uk during the first half we made good progress in improving this specifically we've up-weighted our day-to-day cash management actions including more robust forecasting processes led by an upscaled treasury function this has enabled us to forecast cash with more precision resulting in lower cash reserves to fund local working capital requirements we continue to see the merit for the business in having access to financing facilities locally in certain of our non-uk markets and steps to realize this by an advanced stage in summary we have made substantial progress with our cost and cashback actions and they will continue to support the delivery of our growth strategy. Before heading back to Toby, let me touch on our full year guidance. The key takeaway is that we expect to deliver our financial results for the year towards the upper end of current market expectations. With regard to net fees, we remain mindful that hiring markets across the globe continue to move at different speeds with a volatile backdrop being managed with agility. As such, we continue to expect 2026 group net fees to be slightly below 2025. In specialist recruitment we see a blend of continued growth in certain of our larger hiring markets whilst we anticipate conditions in Northern Europe to remain relatively tougher but stable. In recruitment outsourcing we anticipate the growth in net fees seen in the first half to be broadly sustained in H2. With regard to costs we expect further reduction in underlying cost space over the second half of the year and we continue to envisage net cash at the end of 2026 to be broadly stable on the closing level in 2025. And with that said, I will now hand you back to Toby.
Thanks Jonathan. We've sharpened execution regarding cost and cash to help fund the investment into the growth actions that we are taking in the business. So before we turn to look at those growth actions in more detail, let me take a moment just to remind you and put them in the context of our group strategy. As you can see from the slide, our strategy focuses on two levers organic growth. Geographic penetration is about scaling in key markets. Our strong market position in Japan is a good example of what we're focused on extending and replicating. Service line diversification, such as we are focused on through interim management, consultancy and outsourcing, grows our addressable market. We first set out this strategy at a capital markets day in September 2024. Clearly, the cycle downturn has been tougher and the AI-driven debate about the future of professional work more contested than perhaps anyone could have anticipated back then. All that said, though, we remain confident in our plan, but clearly have been adaptive over the last couple of years. Let me talk more on what continues to guide our thinking given the structural debate on the sector. on the hotly debated impact ai will have on the world of professional work we first set out our view back in march whilst much of course remains uncertain we have confidence in two core beliefs the first is that the change in the world of professional work will present opportunities for our relationship-based business model the chart that you can see on the left hand side of the slide is one we first shared at our preliminary results in march it shows the proportion of job adverts on the Indeed platform mentioning AI in the description. We think this is a useful way to track the speed at which this new technology is reshaping existing jobs and creating completely new types of jobs. The clear trend continues to be upwards, though at different rates across some major hiring markets. Many people who know their stuff on these matters are coming to a similar conclusion to ours. On the slide, we've included a quote from the chair of the UK government's AI Economics Institute. As seen previously in history with computers, the internet, we agree it's much more likely that there will be new job creation from AI. And we think the emerging evidence is starting to bear this out. Our second core belief is that human skills become more, not less important, in an AI-enabled future of professional work. We hear this from our own clients, who consistently tell us that finding the right people who have been validated by a trusted human source remains a top priority for them. We also see it more widely across a whole range of professional job types. And this theme was brought out well by PwC in their recent Global AI Jobs Barometer, which analysed over one billion job adverts across six continents. Their finding is that for the white collar work that is our specialism, AI is changing those roles by automating away routine tasks and raising the importance of human expertise, judgment and creativity. right now that is most clearly seen in the entry-level jobs and as you can see on the chart on the right hand side pwc's finding is that for the entry-level roles which are highly exposed to ai that's the bar on the left just over half of the new skills required for these roles are distinctly human ones that simply aren't going to be taken by an ai agent anytime soon so things like motivational leadership, strategic decision making, team building. Now perhaps those strike you as a bit intangible but if you look at the organisations where those skills are in abundance they're likely to be the ones leading in their sectors. So the key point seems to be this, the more that AI is deployed into professional work the more we'll need distinctly human skills to truly leverage all of its benefits. Now whilst you know that entry-level roles is not where we play, we think this is an instructive finding about what is happening now. And we suspect that roles at more mid to senior levels will also need to further seniorize to demonstrate these skills. Let's now turn to the growth actions that we've been focused on in the business, consistent with our two key levers of geographic penetration and service line diversification. Specialist recruitment remains the engine of the group. We're focused on returning it to profitable growth as soon as possible and we're clear on how we want to do that across our footprint there is increasingly better execution of our commercial playbook and this is well illustrated when you consider that broadly half of our portfolio was in growth during the first half as you can see from the chart on the left hand side this is well up from just a tenth in the first half of last year importantly we believe that in many cases this growth is due to our market share gains. To help you see that more clearly, we've included a couple of other charts on the slide. The middle chart shows how hiring demand has trended in the UK, Spain and New Zealand using our preferred measure of job outlets from external sources. As you can see, it's been a relatively stable picture so far in 2026 compared to the prior year. We think this is important when you consider the charts of the right hand side, which shows how our top line trading has trended in those same three markets. The clear takeaway is that our performance seems to have inflected. We believe this comes back to clients and candidates continuing to respond to our differentiated relationship-based offering and high-quality service. But don't take it just from me, because it's much more powerful coming directly from the clients that we serve, and on the bottom of the slide we've included some direct feedback collected as part of our NPS program from clients in our UK specialist recruiting business. What stands out for me is the value in our ability to provide really quality candidates and quickly demonstrate a good understanding of the client's needs. When you consistently create the conditions for that sort of quality service to be repeated day in, day out in both supportive and challenging markets, you have real barriers to entry and the sort of relationship property that market share gains are built on. So half of our specialist recruiting portfolio was in growth in the first half, and clearly we're not satisfied with just that. Whilst we can't detach ourselves from the reality that hiring markets globally are moving at different speeds, we're focused on outperforming the market. To deliver this, our playbook remains our four-box model, and I'll bring to life what that really means in practice. In the top right of our portfolio we have country businesses in markets where there are strong structural tailwinds and where we are on the whole executing well the key action here is to invest to strengthen our platform platform strengthening can either be focused on the top line ie net fees or the bottom line operating profit with the real sweet spot clearly being both malaysia and japan are great examples where we're focusing actions to strengthen both top line and bottom line respectively In Malaysia, our largest market in Southeast Asia, we've invested to develop our executive search offering, expanding the suite of solutions we can help our clients with. This helped drive a 6% increase in our average perm fee during the first half. Particularly pleasing to see in a business where the conversion rate is already in line with the medium-term target for the group as a whole. In Japan, our single largest specialist recruitment market, our recent actions have been particularly focused on further strengthening profitability with volume productivity and perm which is to say perm placements per perm fiona a key focus here we're more actively managing the sales funnel to get even more from our existing fiona headcount now there's more we have to do and a more competitive market environment for the best consultants is something we're watching closely but the early evidence gives encouragement with volume productivity rising 12 year on year during the first half. Let me also say a quick word on our European interim management business, where we place senior professionals, often at C-suite level, into organisations going through a critical event, such as an acquisition or large-scale transformation. Our platforming strengthening actions here have been focused on going into different segments of the interim market. For instance, in France, we saw an opportunity to access the mid-management level as a complement to the C-suite positioning that our business there is well known for. Now, whilst market conditions in northern Europe remain tougher than other key markets, we continue to be excited about Interim as a key engine of future growth. And it was really encouraging to see our Interim volumes in France exceed prior year levels during the second quarter for the first time since early 2025. Moving to the top left quadrant, the structural market tailwinds remain strong but our execution needs to be better. And so here our focus is on improving execution before looking to grow the platform. Our specialist recruitment offering in the U.S. is a prime example. You may recall that we consolidated our footprint last year to focus on two key hubs, one on the East Coast and the other in Texas. In addition, we've also narrowed our segment presence as well, whereby we envisage the majority of our activity being the placement of senior talent. In the bottom right, we have markets where, perhaps due to maturity, the structural tear winds are less pronounced. However, we are executing well. Our focus then is to keep doing that to a high level, to outperform competitors and take market share. The UK is a good example here. And as you can see from the chart, whilst our average perm-fian headcount was broadly flat year on year during h1 we saw an 18 increase in perm placement volumes our platform in terms of the market experience our fee owners have is as strong as ever and that is supporting authority and trust in the marketplace which is a real differentiator lastly then the bottom left quadrant has weaker structural market tailwinds whilst our execution is historically required improvement here we challenge ourselves and whether a path to a more competitive position exists During the first half, we continue to review markets in this quadrant, albeit now against stricter criteria, whereby we're asking ourselves whether we remain the best owner of these businesses. We anticipate concluding that review later this year. However, we are clear that our objective is to optimise value for the group. So I hope that's helpful in demonstrating the growth actions that we're taking in specialist recruitment. As we move now to consider our growth actions elsewhere in the business, it's helpful to place these in the context of our addressable market. We showed a version of this slide for the first time in our 2025 full year results in March. Outside of specialist recruitment, our growth actions can be summarised under the banner of investing to expand our future addressable market. We've included some detail on the slide in terms of how we've gone about that since 23. And this has mainly been about addressing the talent challenges that larger enterprise businesses have, often distinct from those faced by the small and medium-sized businesses that are often our clients in the specialist recruitment market. So let me now turn to update you on our growth actions in enterprise talent solutions. We've historically provided the enterprise talent solutions that our clients need through our recruitment outsourcing business. That business has been turned around over the last three years. Under new leadership, we've focused our range of solutions, become more competitive at Tender, and develop new offerings which have real commercial traction. The business now consists of three main elements, as you can see on the bottom left of the slide. Firstly, you have the RPO offering, which is basically doing perm hiring at scale for larger enterprises, and this delivered about two-thirds of the net fees for the outsourcing as a whole, during the first half of the year. Then you have the MSP offering, which is doing non-perm hiring at scale for larger enterprises. These two offerings have historically been the bedrock of our enterprise talent solutions offering. And when I say that the outsourcing business has been turned around over the last three years, it's really here that those turnaround actions needed to be focused. Thirdly, you have the consultancy offering. This is a much newer business. We launched it from a standing start in late 2022, but it's already grown to comprise around a sixth of outsourcing net fees in the first half, or about £4 million. And I'll say more on that later. Before that, let's take more closely a look at the RPO and MSP offerings. We're really starting to see the impact of the turnaround actions I mentioned on our financial performance. RPO and MSP combined return to net fee income growth during the first half of the year, as you can see on the chart at the top right of the slide. Furthermore, the book now largely comprises only retained clients, as you can see on the chart at the bottom right of the slide. This has removed the headwind from clients with whom we parted ways and were in runoff. The turnaround actions have also enabled us to show up more confidently in the marketplace, and you will recall we secured a significant expansion of a perm volume hiring partnership with a major financial institution, namely MUFG, in the fourth quarter of last year. Looking ahead, our pipeline of opportunities, particularly in RPO, is something we're encouraged by. Turning to consultancy, we're excited by the structural growth opportunity. Here, we're specifically focused on the IT space. When we first launched the business, we supplied those larger enterprises needing IT talent on a non-perm basis at scale, but we wanted a different model to the MSP. In the consultancy model, Robert Walters directly employs the IT talent and we then deploy the talent into our clients typically for six-month assignments but with high rates of renewal and very low bench costs more recently and this is what has unlocked the incremental 5 billion addressable market opportunity you saw a couple of slides ago we have gone into the statement of workspace where the key value add is not just supplying the worker but an end-to-end solution for clients with often large complex technology projects a great case study of that is our work with the uk government department responsible for setting and delivering digital services they needed to scale specialist capability quickly to hit their project milestones in the tender process our conversations with them focused first on solution outcomes rather than resource requests and help them with governance risks and operational requirements. We now have teams responsible for delivering outcomes for our client across both the IT infrastructure platform as well as the end user data platform and this relationship has made a strong contribution to the 41% year-on-year growth in net fees in our consultancy business during the first half. And on the slide we've included a visual of how we're now showing up in the marketplace across our four key practice areas. So I hope that provides helpful detail on the focus growth actions we've been taking right across our business. So in conclusion then, we delivered a first half trading performance in line with our expectations. My thanks go to all of our people for the contribution they have made in making that happen. Three years on from the beginning of our work to unlock more of the potential of Robert Walters, we're seeing good strategic progress focused on cost, cash and growth actions. We've begun the second half of the year with good trading momentum in a number of our markets, accelerating progress on the cost base and better execution capability of our growth actions. And as such, we expect to deliver a financial result for the year towards the upper end of current market expectations. We remain focused and confident in how we can deliver for our clients, for our talent, for our shareholders and for our people. So thank you for listening and Jonathan and I are now happy to take any questions.
Operator
Thank you. If you'd like to ask a question today, please press star one on your telephone keypad. Please ensure your line is unmuted locally as you'll be advised then to ask your question. Once again, that is star one if you'd like to ask a question today. Our first question today comes from Thomas Callan from Zofestek. Please go ahead.
Morning, guys. Hope you're well. Two questions from me, please. So firstly, on productivity. So, you know, Japan delivered 12% growth in current productivity. UK placement volumes ticked up as well on broadly flat consultant numbers. That's great. But how are repeatable do you think those gains are moving forward? And then secondly, on the outsourcing piece, you know, great that RPO and MSP return to growth. Where do you see the medium term margin profile with respect to enterprise talent? And how does that potentially change the group's overall conversion margin once that mix has potentially shifted? Thanks.
Hi, Tom. It's Toby. I'll take both those questions. So on your first question, I mean, look we've exited quarter two with our volume productivity at 0.88 historically we've seen a very steady state sort of mid cycle healthy position about one so we know we've got at least another sort of 10 to 15 percent capacity there now some markets are already north of one obviously clearly with others there's still a way to go so we're we're confident that there is still capacity to absorb more activity in that specialist recruitment space. On your second question, RPO and MSP, so you're pleased to see RPO and MSP obviously back to growth, very much underpinned by those turnaround actions that we referenced during the presentation. When we did the CMD, and investors will understand, RPO and MSP margins are structurally lower, obviously, than the specialist recruitment business. So in RPO, it's typically low double digit, probably more single digit for MSP, consultancy a lot better. However, clearly we're seeing now less cyclicality there against cost base. So some fairly solid financial rationale and also a key part of the total talent solutions mix in terms of helping us solve our clients' problems. So I'd say consistent view margins wise, as we set out in the CMD, we haven't determined, we don't have a predetermined view of what the group net fee income mix looks like two to three years out we're still very much focused on that 16 to 19 percent drop down as a medium-term target so um yeah we're obviously focused on that on getting to there thanks really helpful thank you our next question is from sanjay vidyarthi from panmio lebron please go ahead Good morning, Toby.
Two from me as well. First, on Japan, you referenced a more competitive environment. We can see that from what some of the peers have been saying as well, that all trying to make inroads into that market. Obviously, you have a very strong position in that market and long-established, but can you talk a little bit about how that competitive dynamic is changing?
The second question is on France, where I think there's a new management team in place can you talk about some of the initiatives some of the changes that you're making and obviously what what is a very tough macro environment there um but what you're trying to do there to take market share thanks yeah certainly i'll take both so on japan um yeah i touched on the presentation clearly uh yeah we have really laser focused into productivity and specifically profitability so uh we've been very disciplined around headcount um we recognize an opportunity to improve productivity and obviously as you can see we've made really good progress on there so I'm very happy to see that. That said we know that we have opportunities to continue to build an additional headcount so particularly in our technology business which is performing very well. Competition you know it's always been there in Japan it continues to be there as well and you know we are very focused on doing more on specifically that candidate engine given, obviously, the scarcity of talent there. But I'm happy with the progress we make in Japan. There's always more to do, and we know where we need to do it. France, you're right, we had some new leadership there. Well, probably two, actually. We had a new MD that came in over 12 months ago. I think that individual has landed very well, has brought some good discipline to that business. And specifically, where we saw, we touched on the presentation, Obviously, we've started to see in quarter to some growth in the interim business, which we haven't seen since the beginning of 25. That is a big engine room for us in France. So happy to see that. Where we perhaps didn't feel that we were performing as well as we could have been was in that what I call the temp business, which is the more junior end of that market. And we made a recent hire from one of our competitors and very happy with how that individual is driving our performance in France. it still remains challenging. I was happy with the performance in the first half and France for us is on plan, but clearly always more to do.
Great, thank you very much.
Operator
Thank you. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. At this time, there are no further questions. I'd like to hand back over to the management team for any closing remarks.
Just say thanks everybody for your time this morning and look forward to seeing some of you during the coming days on the Roadshow. All the best.
