International recruitment firm Robert Walters (RWA: LSE) reported group net fee income (gross profit) fell by 12% in constant currency (CC) in its trading update for the second quarter ended 30 June 2024.

The group said the fall in net fee income reflected the continued rebasing in market conditions relative to the post-pandemic peak. Fees were down 18% (CC) in June, while new job flow in the month was also weaker than expected.

Specialist professional recruitment net fee income of £71.8 million was down 10% (CC), with permanent (68% of fees) down 11% (CC) and temporary (32% of fees, being contract and interim) down 9% (CC).

Recruitment outsourcing net fee income of £13.0 million was down 23% (CC), with ongoing fragile confidence amongst financial services clients impacting volumes.

Group net fee income by region was as follows.

Toby Fowlston, Chief Executive, said, “Fee income for the first half of 2024 continued to reflect the rebasing in market conditions relative to the post-pandemic peak. This period of market adjustment is now longer in duration than previously expected, with macroeconomic turbulence and political uncertainty restraining client and candidate confidence in certain geographies.”

Headcount was down 5% quarter-on-quarter and down 15% year-on-year to 3,625 (31 March 2024: 3,812, 30 June 2023: 4,280). The group said it continues to appropriately tailor headcount to current demand conditions and is being highly selective on replacing fee earner natural attrition.

Regional summary

Unless stated otherwise, all net fee income growth rates below are versus 2023 and in constant currency.

In Asia-Pacific, net fee income was down 9% (down 6% excluding recruitment outsourcing). Japan net fee income was up 7% while conditions continued to improve in Greater China (5%). Australia & New Zealand (-19%) remained tough. In South-East Asia (-17%), fee earner productivity was broadly stable, however time-to-hire increased.

Across Europe, net fee income was down 13% (down 12% excluding recruitment outsourcing). Netherlands (-5%) year-on-year performance improved slightly versus the first quarter, while Belgium performance (-8%) reflects a tough 2023 comparative. Conditions remained soft in France (-20%), where recent political uncertainty has added to already muted client and candidate confidence.

In the UK, net fee income was down 18% on a reported basis (down 14% on a reported basis excluding recruitment outsourcing). London (-6% on a reported basis) delivered further sequential improvement, while conditions were more challenging in other regions (-21% on a reported basis). Over half of UK fee income year to date came through recruitment outsourcing (-19% on a reported basis).

Net fee income in Rest of World was down 12% (down 10% excluding recruitment outsourcing). The Middle East (6%) returned to growth, with a resilient performance also seen in Mexico (flat). USA (-21%) remains challenging while recruitment outsourcing, contributing around a third of Rest of World fee income year to date, was down 16%.

Fowlston said, “Our near-term planning now assumes that any material improvement in confidence levels will be gradual, and likely not occur before 2025. In this environment, we remain focused on being positioned to deliver the best outcomes for our clients and candidates, whilst maintaining tight cost discipline. These actions do not fully offset the first-half fee income reduction, but they position us well going into the second half of the year.”

 “Though current market conditions suggest a wider range of potential outcomes for the full-year than seen historically, I have high confidence in our experienced leadership team, which has successfully navigated many challenging market cycles,” Fowlston added. “We are committed to our medium-term plan to further strengthen the business, details of which will be shared at our capital markets event in September.”

Robert Walters also published H1 gross profit of £166.1 million, down 14% in constant currency when compared to the prior year period.

As of last trade Robert Walters traded at £373.39, down 2.25% on the day and 8.54% above its 52-week low of £344.00, set on 23 October 2023. The company has a market cap of £276.41 million.