Pagegroup PLC

LSE:PAGE

Earnings Call Transcript 2018-Q1

[Operator]

Ladies and gentlemen, welcome to the PageGroup Quarter 1 2018 Trading Update. My name is Sasha, and I'll be coordinating your call today. [Operator Instructions] I will now hand over to your host, Kelvin Stagg, CFO, to begin. Kelvin, please go ahead.

[Kelvin Stagg]

Good morning, everyone, and welcome to the PageGroup 2018 First Quarter Trading Update. I'm Kelvin Stagg, Chief Financial Officer; and I have with me Steve Ingham, Chief Executive Officer. I will shortly present to you the headline numbers and a financial review before handing over to Steve for the regional results and a summary. Although I will not read it through, I'd just like to make reference the legal formality that are covered in the cautionary statement in the appendix of this presentation, and which will be also available on the website following the presentation. The group delivered another record quarter with gross profit of GBP 187.7 million giving constant currency growth of 12.3%. This was a small reduction from the 13.8% growth achieved in the last quarter of 2017, but our results in some geographies were impacted by the timing of Easter and a strong comparator. Last year, Easter fell fully in April, whereas this year, it has fallen partially in March, affecting both temp days and permanent placement. It remains, however, our best Q1 growth rate since 2011, and the first time the group has delivered sequential double-digit growth since 2015. All regions, other than the U.K., delivered strong double-digit growth, with EMEA and the Americas having their best-ever quarters. Foreign exchange had a negative impact during the quarter, which led to a lower reported gross profit growth rate of 10.3%. Michael Page grew 10.8% with stronger growth in Page Personnel, up 15.9%. We ended the first quarter with a net cash balance of around GBP 91 million, GBP 5 million higher than a year ago. I will now provide a more detailed financial review. In the first quarter, permanent recruitment grew 13.9% in constant currencies, with [ temporary ] up 7.3%. This gave a ratio of permanent to temporary gross profit of 76:24, broadly in line with the previous year. To remind you, our higher ratio of permanent recruitment reflects the mix of geographies and salary bands in which the group operates. In Latin America, Greater China and elsewhere in Asia, for cultural reasons, the white collar temporary recruitment market is just starting to emerge. In these geographies, around 90% of our gross profit is derived from permanent recruitment. In other markets, the permanent-to-temporary mix reflects the salary bands in which we operate. The Page Executive brand is largely permanent. In Michael Page, permanent recruitment represented 84% of gross profit in Q1 but in Page Personnel, it was less at 59%. Looking now at our gross profit by the disciplines in which we operate. The disciplines we do outside of Accounting and Financial Services represented collectively 65% of the group, a new record high and reflecting the continuing success of our diversification strategy. Accounting and Financial Services, 35% of the group, grew 5.3%. Within this, Financial Services, 6% of the group, had another strong quarter, growing 21%. Our technical disciplines category, 24% of the group, grew 25.6%. Within this, Property & Construction and Engineering, grew 55% and 23%, respectively, driven by strong performances in Continental Europe and North America. Our professional services category, also 24% of the group, grew 19.9%; with our Technology and Legal discipline delivering the strongest growth. Finally, our Marketing, Sales and Retail discipline, 17% of the group, grew by 2.1%, with particularly tough trading conditions in the U.K. Having added 786 fee earners in 2017, we added a further 183 in Q1. These were mainly into our Large, High Potential markets as well as those where we saw the greatest growth, such as France, Italy and Japan. By region, we added 82 in EMEA, 78 in Asia Pacific and 51 in the Americas. In the U.K., fee earner headcount fell by 28. Operational support staff headcount increased by 99 in the first quarter. This increase partly reflected the needs of our growing operational business but was also to support our strategic operational support transformation program, such as the implementation of our new Global Finance System and a double running during the transition of our business technology help desk into our Singapore and Argentina shared service centers. Our fee earner to operational support staff headcount ratio was maintained at 78:22. At the end of March, the group had a record total of 5,680 fee earners and 1,631 operational support staff. In total, we now have a record headcount of 7,311. This fee earner headcount and gross profit chart illustrates both our record first quarter gross profit at reported rate and also our record fee earner headcount, which was up 3.3% on Q4 2017 and reflects our confidence in the majority of our markets around the world. The last column on the right shows the quarter in constant currency to enable comparison with Q1 2017. I will now hand you back to Steve, who will take you through the rest of the presentation.

[Stephen J. Ingham]

Thank you, Kelvin. We'll start with a brief overview of our regional performance before presenting each region in turn. Gross profit in the first quarter grew 12.3% in constant currencies. As Kelvin mentioned earlier, growth was impacted by the timing of Easter and the tough prior year comparator. However, despite this, the group maintained the double-digit growth it achieved last quarter, which had followed 8 quarters of single-digit growth. Our Large, High Potential markets, 31% of the group, grew 21% collectively. Our largest region, Europe, Middle East and Africa, 50% of the group, grew 18.2% and delivered another record quarter. This was driven by France and Germany, which both achieved record performances. In the U.K., where market conditions remained challenging as well as the timing of Easter, and a tough comparator, gross profit declined 7.1%. Asia Pacific, representing 18% of the group, delivered growth of 13.8% with strong performances in Asia and an improvement in Australasia. The Americas, representing 14% of the group, grew 20.4%, with record quarters for both North and Latin America. Across the group, 16 countries delivered record quarters, 15 achieved growth of over 20% and 23 achieved growth of over 10%. Moving to each of our 4 regions, starting with the largest, Europe, Middle East and Africa, which represented half of group gross profit with a headcount of over 3,000, delivered its 15th consecutive quarter of double-digit growth, up 18.2%. Within the region, 10 countries saw growth of over 10% and 8 delivered record quarters, despite the impact of Easter in a number of these markets. Michael Page, which represented 55% of EMEA, grew 19%; while Page Personnel, which delivered record quarters in Belgium, France, Germany, Italy and the Netherlands, grew 18%. France, our largest country in EMEA, 1/3 of the region and 17% of the group, with a headcount of over 800, grew 18% and delivered another record quarter. Page Personnel, which represents around 2/3 of our French business, grew by 18%, while Michael Page grew 19%. Looking forward, we're mindful of any potential disruption from the ongoing industrial action. Germany, 8% of the group, delivered a record quarter and grew 28%, its strongest quarterly growth rate for 6 years. In our Michael Page Interim business, our investments in fee earner headcount, up over 60% year-on-year, is paying off, with another record quarter and growth of 31%. Southern Europe grew 15%, with all 4 countries delivering record performances. Spain, 5% of the group, grew despite the challenges in Catalonia, which represented around 40% of the business. Italy had a very strong quarter, up 26%, its best quarterly growth for 2 years. Elsewhere in Europe, Austria, Benelux, Poland and Switzerland all saw growth of 20% or more. The Middle East and Africa, 2% of the group, was flat for the quarter, with single-digit growth in Africa, offset by a small decline in the Middle East. Reflecting these positive trading conditions, fee earner headcount grew by 82 in the quarter, a rise of 3.5%. Fee earners were added to most businesses in Europe, but our largest investments were in France, Germany and Italy. In the U.K., 18% of the group, gross profit was down by 7.1%. Brexit and political instability continued to impact confidence and uncertainty remained, particularly with our more senior candidates and some multinational clients. The timing of Easter and the tough year-on-year comparator also impacted our results. In Page Personnel, which represented 24% of the U.K. and operates primarily in finance and business support, we delivered growth of 2%. In Michael Page, there was strong growth in our Legal and Technology disciplines, up 25% and 28%, respectively, offset by weaker performances in Marketing, Sales and Retail. Most regions performed in line with the U.K. average, with our offices in the Midlands the best performing, relative to the prior year. Reflecting these challenging trading conditions, fee earner headcount fell by 28, a decrease of 2.8% to below 1,000 consultants. Our Asia Pacific region, 18% of group gross profit, grew by 13.8%. In Asia, 73% of the region and 13% of the group, we grew 18%, our fourth consecutive quarter of double-digit growth. Greater China, the group's third largest market after the U.K. and France and representing 7% of the group, grew 17% with record performances from of our Page Personnel business in Hong Kong and our office in Taipei. During the quarter, we opened our first office in Western China in Chengdu, our sixth office in Mainland China. Japan had a record month in March and grew 19% with a continued focus on the domestic Nikkei market. Year-on-year, gross profit from our Nikkei clients has grown by over 40% to now represent around 1/4 of our Japanese business. South East Asia grew 19%, driven by strong growth in Singapore, also up 19%; and Indonesia, up 23%. India delivered a record quarter, growing 26%. Australasia, 27% of Asia Pacific and 5% of the group, grew by 4% in the quarter. Australia grew 6%, its best quarterly growth rate for 6 years, driven by Michael Page and the strong growth in Engineering and Technology, Queensland exhibiting the strongest growth at over 15%. Our new office in Canberra had a successful first quarter of trading, performing above expectation. The region added 78 fee earners in the quarter, all into Asia, with Australasia flat. Finally, to the Americas, which represented 14% of group gross profit with a headcount of over 1,100, we grew 20.4% in the quarter, its best quarterly growth rate since 2011. The Americas was our fastest-growing region, with both North and Latin America delivering record quarters. In North America, which represented 8% of the group and 55% of the region, we grew 16%. The U.S., 90% of North America, grew 17% and delivered a record quarter. We continue to diversify both our geographic and discipline mix in the U.S. with growth outside of New York up 24%. There was particularly strong growth in our Houston and Los Angeles offices. Property & Construction again grew strongly and our Legal discipline also performed well. We added 15 fee earners in the quarter and 75 in the last 12 months, an increase of 24%. Latin America, 6% of the group and 45% of the region, grew 26% with a headcount of over 600, achieving another record quarter. Brazil delivered a second consecutive quarter of double-digit growth, driven by Page Personnel, which accounted for over 40% of group -- of gross profit and grew 25%. Market conditions in Brazil are showing some signs of improvement with clients and candidate confidence growing slowly. However, we are mindful of the general election taking place in October. Excluding Brazil, the rest of Latin America grew 33%, with all countries delivering record quarters. Mexico grew 26% and is now broadly the same size as Brazil in gross profit. Argentina, Chile and Peru all grew in excess of 30%. Fee earner headcount in Latin America increased by 38 in the quarter, particularly in Mexico and Argentina. I'll now finish with a brief summary and some more detail on our forthcoming Investor Afternoon. The group delivered another record quarter of gross profit, growing 12.3% in constant currencies. The majority of our markets performed well, with both EMEA and the Americas delivering record performances. 4 of our 5 largest markets, namely France, Germany, Greater China and the U.S., grew 19% collectively. The U.K., our largest single market, remained in negative growth, with market sentiment remaining cautious. Other previously challenging markets, such as Australia, Brazil and Singapore, still continued improvement. We added 282 heads in the quarter, of which 183 were fee earners. And we now have a record total headcount of 7,311. Our financial position remains strong, with net cash of around GBP 91 million, an increase of GBP 5 million on our cash position a year ago. At this early stage of the year, we're comfortable with current consensus, which estimates a full year operating profit of around GBP 132 million. Finally, I would like to remind you about our Investor Afternoon on the 15th of May. As we mentioned at the prelims presentation, it has been a couple of years since we last hosted an Investor event, and we've made significant progress since that time on a range of strategic and digital objectives. I would like to briefly outline the agenda now. We will look back at the progress we made against the vision we laid out in 2013 and present our updated vision for the group. You will meet some of our regional management team as they review our strategy in terms of our markets, our brands, our investment approach to permanent and temporary recruitment, and our investment criteria for adding heads. We will demonstrate how we're leveraging technology in such areas as candidate acquisition, candidate search, innovation and digital. You will hear how workplace trends are changing the recruitment needs of our customers and how our business model continues to evolve to meet their requirements. Finally, there will be a focus on the impact our nonoperational transformation projects have had on supporting our business flexibility, and is impacting our conversion rate for the group now and going forward. Kelvin and I will now be happy to answer any questions you might have. Thank you.

[Operator]

[Operator Instructions] The first question we have comes from Paul Checketts of Barclays.

[Paul Checketts, Director]

I think I've got 3 questions. The first is, in the U.K., I -- there's some noise around Easter, clearly. Steve, what's your sense of, if you were to -- if you're able to exclude the impact of that one, what are you seeing on the ground there and what are your expectations for the coming months? And then the second area is about drop-through margins, conversion rates for the full year. I think if you put through the latest currency moves, your guidance would improve -- would imply improvement in the conversion rate. Is it still the case, Kelvin, that the cost savings coming through and the investments in the year broadly net out? And this is, clearly, highly contingent on what the growth rates on the top line end up being for the year, but what are you are broad expectations for conversion rates and drop-throughs and -- drop-through rates in the regions, please?

[Stephen J. Ingham]

And your third question?

[Paul Checketts, Director]

I'm including -- I was saying the latter 2 was my third question. We normally have a few multiple parts.

[Stephen J. Ingham]

Okay, let me answer the first one, then, in the U.K. I mean, it is difficult to quantify, as you can imagine, because if you look last year, and Easter fell in April. You look the year before, and Easter fell in March. This time, it straddles the 2 months. But just to try to give you a flavor of our world for a moment. First of all, we have a proportion of our business as temp. Clearly, temps don't work on a bank holiday. To add to that, a lot of our temps, unlike some of our competitors, our temps are quite senior, often called interims, and as a result of being senior, quite a few of them have family, and like many of us, they will choose to take a week off when their kids are on holiday, particularly the week leading up to Easter, which is exactly when I went away. And if a temp doesn't work, then a temp doesn't get paid. And nor do we. So that has an impact, therefore, on our temp business. And it's difficult to quantify completely without going literally through all the time sheets and so on, but that will give you a flavor for some of the loss. The other losses that, naturally, when you're offering a candidate, particularly a senior candidate, the final interview is with the most senior person in the process. A lot of those senior people are away at the end of the -- away at Easter on holiday, as I've said and, therefore, your decision is held up by the fact there isn't somebody in the office to make that decision or to do the final interview. Not in all cases, but undoubtedly, I was told when I got back from my holiday, it was quiet in London and it was quiet in the U.K., as a lot of people chose to be away. So again, that doesn't help. And to emphasize that point, the busiest week of any quarter is the last week of the quarter. No surprise. And so to have the last week of the quarter not helped by the fact a lot of people were away, it doesn't help the numbers. So what are expectations -- I mean, what does that all mean? Our number would undoubtedly have been better -- I don't want to put a figure to it because it's too difficult to actually quantify without literally going through every single job that we were working on during that period. Naturally, therefore, there should be a positive impact in Q2. So all things being equal, no other surprises around the world or in the U.K. through the quarter, we would expect Q2 to reflect that. So whatever we lost in Q1 would be gained in Q2. Obviously, last year Q2 had the full impact of Easter. This year, it doesn't, and so the -- ultimately, the result should be better than we've just done.

[Kelvin Stagg]

Paul, on the conversion rate question, I think the short answer is we are anticipating something in the region of around 17%. And I think that there's a lot of moving parts to it, and particularly this early in the year. We -- you are right in that we still anticipate that the costs in the year of about GBP 6 million are going to be offset by the benefits that we've got coming through. You'll probably have noticed, within the statement we talked about 99 support staff coming in, in the first quarter. Of that 99 support staff, about 50 of them are directly related to the IT transition that's going on. So we actually have a support office in Sydney coming to the end of its lease; we've hired the IT help desk people into our shared service center in Singapore and actually, they're being trained up at the moment. So we're double running there. We're doing the same between São Paulo and our shared service center in Argentina. So actually, at the end of the quarter, we had sort of double counting of the help desk there. We also hired a number of people into the infrastructure hub in Barcelona who are working on the transition out of our data centers and various elements of bringing that up into the cloud. So those costs do sit within our numbers. We've also got the Global Finance rollout that's going on at the moment, the new system. We intend to go live with Asia Pacific in Q3, and then Latin America towards the end of Q3, Europe in Q4 and in Q1 next year. So most of those programs do have costs in the current year, which is what's holding back that conversion rate. As we move through into next year, part of the end of Q1, we'd expect the vast majority of those to be finished and, therefore, the costs would come down further and we'll start to see the benefit coming through with a full round of benefits coming through in 2020, which is also when some of our amortization from the PRS system finishes. So we'll go into this in much more detail on the 15th of May, if you can join us, and -- but top line, that's what we're anticipating. If I broke it down by region, it would be quite difficult because there are so many moving parts. At a relatively high level, I don't expect the U.K. to improve its underlying conversion rate much this year, if at all; trading remains difficult. I think in Europe, there is a drag on Catalonia, which was a particularly profitable area of business for us, and is unlikely to allow them to move on conversion much further this year. However, I think America, with Brazil, hopefully, continuing to grow -- I was going to say improve, I think, certainly growth as we go through the year. And that should improve the Americas' overall profitability. And Australia, again, will assist the profitability in Asia Pacific. So at a fairly high level, that's where I think the regional parts move.

[Operator]

The second question we have comes from Hans Pluijgers of Kepler Cheuvreux.

[Hans Pluijgers, Head of Research of Benelux]

Most of my questions have already been answered, but one question on U.K. If you look, let's say, at the conversion rate, you've given already an indication a little bit what you expect for the full year for the group and a little bit of color on the different region. But could you just provide us some feeling what you see possible in the U.K. going forward with cost savings, if the current trend continues? Is there still a lot of room to improve, let's say, reduce costs? Or what do you see going forward, what kind of level of, let's say, trend or fee income you should need to, let's say, at least keep the conversion rate a little bit stable?

[Stephen J. Ingham]

Yes, I think I got that. Look, the conversion rate will be impacted, obviously, if we're in negative growth. But we anticipate -- or our expectations for this year, aside from anything that we aren't expecting, would be a similar level of growth to the previous 2 years, which was minus 3%, 3.5%. And you've seen our headcount come down, as we've allowed natural attrition to bring it down; in other words, people that have chosen to leave, typically, young consultants that have found it either too challenging or not to their taste, they've left and we haven't replaced them. And they are, typically, in the weaker-performing disciplines. Naturally, we are still adding headcount to disciplines like Technology and Legal, where we're growing. So we can reduce our employment costs in line, roughly speaking, with our performance. That said, of course, when there's a negative market, it's more difficult to find the right candidates for clients, and not every client that comes to us ends up hiring somebody. So that indecision means that the productivity of a consultant will naturally go down a bit as well. But we're fairly comfortable that with the size of operation we have, with the number of offices being typically large hubs, we have the flexibility to react accordingly to the market conditions that we see. Like I say, we expect this year to be similar to the year before and the year before that. In 2017, our conversion rate did fall, but a large proportion of that was not down to the fact the business was in negative growth, it was down to some share plan charges that fell in the U.K. because of the way we booked them, particularly because a number of our senior people, including myself and Kelvin, but also because of our operational support heads, HR, IT, marketing, and so on, happen to be based in the U.K, those charges hit the U.K. rather than our other regions. And that was really the impact that was felt on the conversion rate last year. So I wouldn't use that as a guidance into this year. But we can react, it's a large enough business to be able to do that, if things change beyond our expectation.

[Hans Pluijgers, Head of Research of Benelux]

But also looking then at 2016, there was a comparable decline in the conversion ratio. So should we then take that number or...

[Stephen J. Ingham]

But that was an unusual year because, obviously, we started the year in double-digit growth and finished in negative growth. So that's a slightly different scenario. So a little bit more challenging, but -- as we reacted and so on. But like I say, we can react. We, obviously, know where we are, we've already got plans in process. We've continued to react to the market conditions we've got here, and you saw that in Q1, where, like I say, we expect this year to be similar to the previous years where we were down 3.5%. You've just seen our headcount come off minus 2.8%, so it's similarly in line.

[Operator]

[Operator Instructions] The next question comes from Tom Sykes of Deutsche Bank.

[Thomas Richard Sykes]

Just following up on the headcount comments. Your headcount growth is running faster than your gross profit growth at the moment. But what is the sort of seniority of people that you've been adding over the last couple of years? And so how should we then think now about the movement in gross profit versus the movement in your personnel costs, please? And as you're getting into tighter markets, are you seeing that people you're adding at a more junior level are becoming more profitable more quickly now than they would have been 3, 4 years ago at all?

[Stephen J. Ingham]

Yes, I mean, the headcount that we're adding in the operational staff are all -- or almost without exception, are all consultants or trainees coming into the business. So they are typically people with anywhere between 0, because they're coming straight out of university, or 5 years' experience. So they are, if you like, the lowest-cost individuals coming. We're not hiring directors and managing directors into the business. So there is a dilution effect in terms of the overall employment costs of our operational staff. That's, obviously, happening as well where, typically, a managing director, a director, a manager, will be managing larger teams than they did before. So again, diluting their cost over all the business. So we would expect that to continue. As I've said to you before, Tom, it depends where we put the heads. We had a large investment last year, as you know, into Germany, of headcount, 60% into our Interim business. It takes about 12 months for those people to become fully productive. So we do have to, sometimes, grow our headcount in advance of seeing the growth in gross profit. Now strategically, we think we can have a bigger business in Germany. That's a decision we've made back in 2013, and we've been investing consistently since then. It does require, sometimes, a brave decision because you're not literally going to put a headcount in who's never done recruitment before and generate the revenue the following week. So you have to, therefore, make those strategic decisions in certain markets. We've made them in -- predominantly in 5, the High Potential markets we're focused on, where we're investing not only in perm but temp with a view that they will deliver in 6, 9, 12 months' time. And I'd like to think, particularly in Germany, this quarter maybe is the perfect quarter to answer this question. We've put in a lot of headcount 12 months ago. We're now growing at 28% in Germany and it's paying off, as it has done in the States, as it has done in China, South East Asia, and so on. And that's something that strategically the business will continue to do.

[Thomas Richard Sykes]

Okay. And then just a little bit more granularity on the discipline breakdown, if possible. Thank you for the details of which disciplines were growing the fastest in the different sort of overall categories that you have. But if you look at your sort of top 4, 5 disciplines now, how much of the group do they actually account for and how much are they growing? Just trying to work out whether the growth is being skewed by some of the larger disciplines or not at all, please.

[Kelvin Stagg]

Sure. I can answer that one for you, Tom. We still have accounting as being our biggest discipline by some way. So accounting represents about 29% of the group. In itself, it grew 5%, so that would have been held back particularly by the U.K., [ being sizeable ] to the U.K. After that, you then have a number of disciplines, sort of 4 or 5 disciplines, Engineering, Sales, Procurement & Supply Chain, Technology, that are all around 9% or 10% of the group. And then you have a tail that goes on after that for quite a few other disciplines. And within those, actually Sales apart, which again is quite a large U.K. contingent to that, the others, Engineering was up 23%, Technology was up 25%, Procurement & Supply Chain was up 13%. I mean, our fastest-growing disciplines: Engineering, Technology, Legal and Property & Construction. Property & Construction was the fastest growing that we've got anywhere in the world, and that represents 6%, and it was up 55%. So I think there is a bit of difference between the disciplines, but the technical disciplines were all up in the 20s.

[Thomas Richard Sykes]

Okay. So if you take the -- sort of that Engineering, Tech, Property & Construction, and I think you mentioned Legal, how much would they account roughly for gross profit at the moment?

[Kelvin Stagg]

If you take Finance, that's 30%; and if you take Engineering, Sales, Tech and Procurement, that's another 40%. So that's 70% within those disciplines.

[Operator]

[Operator Instructions] The next question comes from Chris Hartley of Redburn.

[Chris Hartley, Analyst]

I've got a couple of questions for you, please. Firstly, on your German business. So some great growth there, but I was wondering if you could perhaps give us a sense of how much of that growth is coming from you taking share from competitors? And how much of that is sort of growth of the markets or your first-time outsourcing and perhaps how you see that dynamic developing? And then a second one, just quickly on the U.K., there was some jobs data out the other day, I guess, I think that noticed a -- well noticed a sharp increase in average starting salaries, I think the wording was. Is that something that mirrors your experience?

[Stephen J. Ingham]

Just on Germany, well, it really depends on what part of the business you're talking about. But largely speaking, because we've got, I guess, 3 businesses in Germany: Michael Page, a perm business; Page Interim, a contracting business; and Page Personnel, a lower-level perm business but largely a temp business. So there are 3 different areas. I would say largely speaking, the -- assuming that we're growing faster than everybody else, and I don't know the results of every single player in Germany, but we will be taking market share rather than just clients outsourcing for the first time. There is low employment in Germany, particularly in some of the skill -- highly skilled areas in engineering and the technical disciplines, there is a shortage of candidates. And I guess for companies or recruitment companies, those that can have the technical ability and the right skilled consultant to find those candidates will be the winners in the market. And I think that's what we've been doing, focusing on recruiting the right people, training them in the right way to be able to identify these candidates which is winning us business. So we'll continue to invest in that way and, hopefully, that'll continue to pay dividends. But it is the skill of finding candidates. And a lot of those candidates, of course, are working in contracting jobs, so it's also catching them when they're available, when a contract finishes which, of course, we're not always told by the client because they're not always our client and not necessarily does the candidate know that they're about to be finished on a contract either. So it is about real regular dialogue with the candidates to make sure that we pick up on them -- their availability straightaway so that we're ready to place them in what are demanding positions. So we're seeing there a challenge in finding candidates and wage inflation accordingly. In the U.K., not all highly paid jobs are white-collar, professionally qualified people, so I think again, with jobs data, you have to try to unpick what is our market and what is other people's market and not relevant to us. Without doubt, there are still -- you've seen our Technology business grow at 20%, there are still areas of candidate shortages where you see wage inflation. And this is always the irony, highly skilled, very competent people who are good at their jobs, particularly in technical areas or niche areas or -- then, you will see wage inflation, and we've seen that in our own business, irrespective of whether we're in slight negative growth or not.

[Operator]

[Operator Instructions] The next question we have comes from Kean Marden of Jefferies.

[Kean Marden, Equity Analyst]

Just a quick one from me. Are there any areas where you see -- have the ability to increase fee rates pickup over the last sort of 3 to 6 months that you'd like to call out?

[Stephen J. Ingham]

Kean, yes, it's the supply and demand answer, really. Where the demand is high and people are desperate for certain skills, then we are definitely seeing some improvement in fee rates and that impacts us, both in temp and perm. So if you're looking for a particular skill in technology or digital, legal, whatever, engineering, then if the demand is high enough, then the client will pay slightly more for that, both in salary terms as well as fee terms. And that's definitely reflected on what we're seeing around the world.

[Kean Marden, Equity Analyst]

Just -- so if my memory serves me correctly, do correct me if I'm wrong, so I think from -- your fee rate from peak to trough declined by about 2 percentage points. If that is the case, where do you feel that you are in terms of recovering some of that back as we enter a sort of tighter phase of the labor market?

[Stephen J. Ingham]

Yes, I mean globally, you're quite right. So roughly speaking, just below 22% to just below 20%, is sort of peak to trough as a percentage of first-year salary, and it's not that different in the contracting temp world as well, and we're probably 1/3 to 1/2 of the way back.

[Operator]

We currently have no further questions. I'll hand back to you, Steve.

[Stephen J. Ingham]

As there are no more questions, thank you all for joining us this morning. We look forward to seeing you on the 15th of May at our Investor Afternoon, and our next update to the market will be our second quarter trading update on the 11th of July. Thank you, everyone.