Trading Update

Apr 13, 2021

Earnings release

Hello, and welcome to the Hays Quarter 3 Trading Update Conference Call. My name is Judy, and I'll be your coordinator for today's event. Please note that this call is being recorded. And for the duration of the call, your lines will be in listen only. However, you will have the opportunity to ask questions at the end of the call. I will now hand you over to your host, David Phillips, Head of Investor Relations to begin today's conference. Thank you. Thank you, Judy, and good morning, everyone. Welcome to Heath's quarterly update call for the 3 months ended 31st March 2021, the Q3 of our 20 21 Financial Year. I'm David Phillips, Head of IR, and I'm here with Paul Venables, Group Finance Director. Before we begin, please be aware that this call is being recorded with the recording accessible using the number and code provided in the release. Please be aware that our discussions may contain forward looking statements that are based on current expectations or beliefs as well as assumptions on future events. There are risk factors, which could cause actual results to differ materially from those expressed in or implied by such statements. Hays disclaims any intention or obligation to revise or update any forward looking statements that have been made during this call regardless of whether these statements are affected as a result of new information, future events or otherwise. I'll now hand you over to Paul. Thank you, David. Good morning, everybody, and thanks for joining us. I'll present highlights of today's update, Cover key themes and discuss regional performances before taking any questions. As usual, all net fee growth percentages are on a like Firstly, performance overview. Net fees were down 10%, a continued significant improvement on the 29% down in Q1 and 19% down in Q2 FY 2021. While the pandemic continued to impact our business, activity levels in hemp and especially perm improved in all regions, We saw strong sequential group fee growth through the quarter. There were no working days adjustments in the period. Currency translations have a slightly positive impact, increasing headline net fees by circa 1%. I'd highlight the following key features. 1, encouragingly, trading in most markets improved across the quarter. A good performance in February Was followed by a strong pickup in March, which delivered by far our highest period of fees since the start of the global pandemic And was up 4% versus March 2020. However, for context, our fees were still 13% down versus March 2019. 2nd, temp and perm fees declined by 7% 13%, respectively, with activity improving in all regions. In perm, activity significantly increased in February March. And in temp, many assignments have been extended. We have seen a sequential increase in volumes and a significant increase in the average hours worked per tent, in part due to historically low tent Vacation and illness as much of our markets were in lockdown. 3, our largest market of Germany saw the strongest rebound with an Improvements of 15% versus Q2. The UK and Ireland also saw significantly improving trends, especially in perm. And whilst the rest of the world was helped in part by easier comparatives, given the pandemic began earlier in parts of Asia, We also saw record trading in March in the USA. 4, our cost base increased slightly over the quarter To an average of GBP 68,000,000 per period, primarily as consultant commissions increased in line with net fees, especially in March. Group consult headcount was up 3% in the quarter, but down by 12% year on year. 5, within that cost base, While we continue to tightly manage all discretionary costs, the fact that much of the world has been in lockdown means our non payroll costs remain artificially low And so I could GBP 3,500,000 for period below pre pandemic levels. 6th, as a result of the improved net fee performance And continued good cost control. Group operating profit for FY 'twenty one is expected to be at least GBP 85,000,000 And finally, cash performance was again strong. We ended the quarter with underlying net cash of GBP 385,000,000 And we've now paid all short term deferrals of tax. I'll now comment on the performance by each division in more detail. Australia and New Zealand. Our ANZ division, 17% of group fees declined by 13%, With momentum gradually improving through the quarter, temp, which represented 69% of ANZ fees, was relatively resilient, down 14%, While perm was down 10%, a sequential improvement of 17% versus Q2. The private sector, which represented 64% of fees declined by 15%, while Public Sector fell 10%. Australia decreased by 14% And in New South Wales and Victoria, which together represent 51% of our Australian business, net fees decreased by 16% and 21%, respectively. Queensland and Western Australia were relatively resilient, both down 11%, while ACT and South Australia fared better still down 6% 3%, respectively. At the Australian Specialism level, construction property, our largest specialism in Australia, declined by 17%, While Accounting and Finance was down 25%, IT 16%, office support 15% and Resource and Mining declined by 7%. HR grew by a good 7%, and smaller specialisms, which represent 20% of our business and are primarily in the professional space, We're collectively down 4%. New Zealand, which is 7% of ANZTs, decreased by 1% as activity rebounded following And consultant headcount in AIMZ had increased by 7% in the quarter, but was down 6% year on year. Germany. Germany, our largest business, at 27% of group net fees, reported the largest sequential fee improvement throughout Through the quarter in our divisions, with net fees down 5% and 15% sequentially improvement versus Q2. Business confidence continued to improve with increased client investments, especially in contracting. Our contracting business, which represented 50 7% of German fees improved through the quarter with good acquisitions of new contractors, and fees declined by 4%. Tank net fees declined by 1%. Average temp volumes were down versus prior year but improved through the quarter, And we saw record levels of temp utilization and record hours per temp worker, driven by very low vacation and sickness levels, The format of which will reverse in the coming months. And finally, there were no severance temp severance costs in the quarter. Perm 15% of fees declined by 16%. Our German Public Sector business, which is now 14% of German Business, Delivered another strong relative performance with fees at 4%. And our specialism level, our largest speciality, fell by 9%. Engineering, our 2nd largest, improved significantly to be down 10%. Accounting Finance fared better still down 6%, Was Construction Property and Life Sciences both at 15% were the standout performers. Headcount increased by 3% in the quarter And declined by 5% year on year. UK and Ireland. UK and Ireland's 22% of group net fees by 14%, with improved momentum, particularly in perm. Temp, 63% of U. K. And Ireland fees decreased by 12% And perm by 18%. Fees in the private sector, 66% of U. K. And Ireland, fell by 17%, with the public sector down 8% Despite €2,000,000 lower education fees, the schools were closed for most of the quarter. All regions traded broadly in line with the overall business, except for Northern Ireland and Southwestern Wales, both down 10% And Scotland and the North down 20% 19%, respectively. Our largest UK region of London fell by 17%. And in Ireland, net fees declined by 11%. At the specialism level, IT and Life Sciences again performed resiliently with fees down 4% 3%, And our large corporate accounts business outperformed the UK average with flat fees, while construction property and office support Both saw improved momentum down 13% 12%. However, Accounting Finance down 25% and Education down 34% were tougher. Although encouragingly, activities rebounded in education since the schools reopened in March. Consult headcount increased by 3% in the quarter and declined by 17% year on year. Rest of the World. Our Rest of the World division, comprising 28 countries and 34% of group net fees, declined by 8%, Comprising perm down 11% and a more resilient performance in 10th, which fell by 2%. In EMEA ex Germany, fees reduced by 10%. Our largest rest of the world country, France, declined by 16%, Whilst Belgium and Spain declined by 15% 14%, respectively. Italy and Switzerland were standout performers with fees up 7% 2%, And Poland saw flat fees in the quarter. The Americas declined by 8%, including the USA, Our 2nd largest rest of the world country, which was flat in the quarter and delivered a record performance in March. Canada continued to be tough With fees down 17%, LATAM fell 20%, including Brazil down 6%. In Asia, our fees fell by 2%, helped in part by easier growth comparatives given the pandemic started earlier in parts of Asia. China, our 3rd largest rest of the world country, grew by a strong 20%, with Mainland China again significantly outperforming Hong Kong. Japan had another tough quarter, down 23%, while Hong Kong performed relatively well sorry, while Singapore performed relatively well, up 1%. Consult headcount was up 2% in the quarter but down 14% year on year. Cash flow and balance sheet. Cash collection remained very strong, and we delivered good underlying cash performance in the quarter with net cash at 31st March of €385,000,000 and all short term tax deferrals have now been paid in full. Current trading and guidance, I'd make the following points. Firstly, to date, 2nd and third wave lockdowns I've had minimal negative impacts on our fees. 2nd, March trading was significantly ahead of our expectations. In addition to a strong perm performance, it was helped by much higher than normal hours per temp worked in our major markets As lockdowns have led to minimum vacation and sickness levels. Whilst it's too early to state whether the overall perm performance this March is repeatable, It is clear that temp hours will start to reduce to more normal levels as lockdown and especially travel restrictions are reduced and vacations are taken. 3, despite Q3 trading, clearly significant uncertainties remain, and our forward visibility is very limited. 4, our return to growth investment program remains on track. We continue to expect to incur GBP 15,000,000 of additional operating expenditure in FY 2021, Of which EUR 11,000,000 is expected in half 2. We are confident these investments will accelerate our growth in the medium term And strengthen our positions in key strategic markets. 5, looking into FY 'twenty two, we expect investing at least the same net amount In return to growth projects. 6, our strong recent fee momentum has driven consultant productivity, Especially in March, up to historically high levels, material food growth from here will therefore increasingly be driven By additional consultant headcount. And overall, we expect headcount will increase sequentially by up further 2% to 4% in Q4 Across return to growth projects and key specialisms. 7, we expect our cost base to continue to gradually increase, Driven by headcount increases and also non payroll costs will increase to the extent to an extent as lockdown restrictions ease, Offices reopen and eventually travel restrictions are lifted, especially in FY 2022. And 8, as with FY 'twenty Easter falls entirely in our 4th quarter. We, therefore, expect no material year on year working day effects in Q4 FY 'twenty one. In conclusion, the improvements in trading and our financial strength put us in a strong position to deliver substantial profit growth, invest for the future And increase our dividend to shareholders. Our highly experienced management teams are focused on best positioning us for recovery. We're confident we'll continue to take further market share as clients and candidates look for expert guidance to navigate the pandemic and beyond. And I'll now hand you back to the administrator, and we're happy to take your questions. You will then be advised when you can ask your question. The first question in the queue is coming from the line Rory McKenzie from UBS. Rory, you're unmuted and may go ahead. Good morning, all. 3 from me, please. Firstly, On the perm fees in March, I appreciate the uncertainty ahead, but you said that a lot landed right at the end of the quarter. Was that a push from your recruiters? Was it from the clients, the candidates? And what does that behavior tell us about the sustainability of some of that work? Secondly, on the temp and contractor trends, can you just talk about, again, mention the decline behaviors As you got to the end of the quarter, are you still seeing lots of extensions of assignments? And is it changing any of the kind of Clients or segments that's happening in? And then just lastly, on the profit outlook. Obviously, your guidance this year implies a strong drop through In H2, to get to over €60,000,000 in EBIT for the period. But given your comments on headcounts and costs regrowth from here, What kind of normalized stop through should we expect as we look out to FY 'twenty two? Thank you. Thank you, Rory. Quite a few questions there. So clearly, I will if I miss any of these, please come back to me. First of all, on the perm fees in March, I think all of you are aware that we booked Client fees on start date. So the candidates have to start with our clients. So I moved us to that policy when I joined almost 15 years ago. I think what was encouraging across this period, and I guess trying to put myself in the position of all I think all of us have seen a pickup in economic activity as we came to the end of the last calendar year. That's continued into start of this year. And I think a lot of our clients have probably found themselves short of headcount. We absolutely had a number of assignments where We were looking to get perhaps 2 people into a client. We gave them a shortlist of 6 or 7 people. And instead of taking 2, they took 3 or they took 4. So first of all, there was an acceleration in Decision making speed of our clients, I think that's hugely encouraging. And I think the second part of it is there is no doubt. The further we get away from the pandemic, more of our candidates are very happy to Explore the market, go through a job process remotely and start remotely. So I'm not trying to say that this market feels like it did at the peak And other cycles of plan. Certainly, there are some sectors of it where candidates still remain cautious. We're still living in a global pandemic. But I do think the uniformity of clients and candidate confidence across the patch, first of all, is much greater than I would have expected, Certainly, if you'd have asked me a year ago. And secondly, I think we've seen an improvement. And there's no doubt, I think, that all of this is in part tied to The announcement and the success of various vaccination programs around the world. In temp and therefore, what does that mean for the next Few months. I think it's a little bit too early to tell. What is, of course, true is that when we do get a strong month, if anything, There's probably certainly a psychological incentive consultant to try to land these earlier and get candidates started earlier. Activity levels are very strong in the business. I think the perm part of it feels that we'll have a good few months to come. But I think it's too early to tell whether that is sustainable across the next quarter and to what level. It's Hard to disaggregate what may be a catch up in roles and companies getting more confident and a continuation of those trends. And I think underpinning it Actually, we'll be the candidate confidence because we are now very clearly, not just in areas such as IT and Life Sciences, but also In pretty much all of the areas of construction property, White Collar and some of the senior finance areas, we're now in a still short market. So I think as long as candidate confidence remains strong, there is a good outlook. On temp and contracting, I think the extensions will continue for some time. I think if we think it through, Pretty much in large parts of the world over the last quarter, most of our temps have been working remotely. Certainly, outside of the manufacturing and engineering sectors And construction, a lot of our candidates have been temps have been working remotely. And of course, if a temp is working remotely from home, working well, They've gone through all of the protocols in companies and cybersecurity and all this sort of stuff. I think it makes sense if clients Whereas in the past, clients that might have released a temp at the end of an assignment and then if they needed something in 4 or 5, 6 weeks' time and then look to come back to us To get another temp, here, they're holding on to the temps for longer. And then associated with that, which is definitely an impact So in February and even more in March versus previous years, I think we also saw this kind of unprecedented increase in Temp Hours. Specifically, Germany was the standout part of that, but it was also a trend in the U. K. And Australia, which is our biggest market. And I would put that down too if you think it through. In a world where you can't go anywhere, you can't travel anywhere, I think most understandably, most temps and contractors have been very happy to work and very happy to work right away up And therefore, whilst I don't know whether the perm is sustainable, I do think that we benefited to the tune. Just for example, in March, we will have benefited to the tune of $3,000,000 to $4,000,000 of increase in hours. Of course, some of that doesn't reverse because the pickup in things like sickness versus where we would We have. That's not certainly going to start to accelerate, but at some point in time, vacations will have to be taken. And from a segment standpoint, I think the really exciting part of this, it really is across the board. And the difference between these results from the previous quarters from my standpoint In the previous quarters, it was more about larger corporates in a strong financial position, returning to hiring earlier And of course, continued strength in the public sector. This time, as we saw a much greater improvement both in the medium and smaller Clients and really across the board. So I think that's quite encouraging. On profit outlook, You're right to say that we've had a strong got through, in part because we like our fence, I guess. Nobody goes anywhere. You can't spend anything on anything, and therefore, the cost base is artificially low. And therefore, our March level Being only being 4% versus where we were a year ago. And a year ago, our March was strong, but the fact again that The term is booked when people start, I mean, we didn't have a strong falloff in fees. I mean, I'm going to say off the top of my head, Our March 2020 number was only 4% below February. Our reduction came in April May. So We did get a strong drop through. I don't think that drop through is particularly relevant for next year. What is clear 1st of all, our decision to protect all of the experienced consultants in our business has been fully vindicated by the level of growth Sequential growth we've achieved since the trough in May of 2020, and that's put us in a position to be able to bounce back Strongly and to drive further growth, but now it's all about and I think the positive is as markets reopen, as offices reopen, Very important to the development of junior consultants is on the job training. That is much harder done remotely than obviously is in offices. And therefore, I think the fact that we're now looking to significantly increase our headcount, we added 200 consultants in this quarter, we'll do similar or more in the next quarter, I think it's a positive because that's about making sure we've got sufficient productive capacity in a year's time to drive fee growth. And then on drop through rates, Rory, I think you guys can appreciate. We've gone a couple of days earlier than expected. And I think we need to understand what is the trajectory I'll have sequential fees from here to have a good idea on the drop through. And as I said at the interims, we'll certainly give some guidance to that when we get to year end. But Overall, I think quite encouraging across the patch. That's great. Lots of answers to my questions. Thank you very much. Thank you, Rory, for your questions. And the next question in the queue is coming from the line of Anvesh Agrawal from Morgan Stanley. Andres, you're unmuted, and now go ahead. Hey, good morning. And you probably answered my questions in your previous answer, but I got like A couple of clarifications really here. So you sort of touched on the way you guys book revenues for perm on the start date and when the sort of And the contract is signed, so to say. Does that mean you have further acceleration to come given the activity level you're seeing at the end of March and there is some sort of leverage over the Fall through in Q4. And then you commented to the March sort of down minus 13 versus 2019. Is that what you are baking in for Q4 as well versus Q4 2019? Or are you seeing sort of any underlying improvement in trend versus that Minus 13% so far. And if you have given that already, apologies, but can you tell us what Jan, Feb March was For temp and pound from a fee perspective, write the numbers, if you can give that, please. Well, on the final one, no, I can't do that one, Anders. I can do a lot of things. I'm pretty good at That one will be a bit more difficult. What I can do is to tell you that 4% exit rate, I mean perm was up 11%, for example, and hemp was down 1% Yes, if that helps. Again, some complicated questions there. So if I missed the point here, then please let me run through. If I can answer your first one on how we book perms, I can do it slightly differently. It may well be that the March Fees will be the it could well be that that's the largest we'll have in this financial year. March was a significant pickup on any of the month we've had previous In this year, as I said earlier, I think there are some nice points aligned specifically in the tech side of it. I do think that sequentially, we will have lower fees in April and May, and that's In many respects due to the bank holidays and impacting the perm side of it, sorry, impacting the temp side of it. I think our perm will hold. So the most interesting one is what happens in my mind. Temp, we continue to pick up our temp numbers From the rebound now, we're now some way above what we had going into Christmas, so that's a real positive. I think on the perm side of it, we did have a strong pickup in perms placed in March. I think there's every opportunity we could have similar levels in the next 2 to 3 months. Whether it is greater, in the end, I think, comes back to that point, which I don't have the answer to at this As to how much of what we saw at the end of February going into March was almost like the release of some pent up demand with clients You know what, we've got a number of jobs that we cut a year ago or we put on hold when we went into lockdowns We now want to try to fill those. So it's too early to say that. I think the positive though is that the improvement was uniform and across the board. And therefore, it's not like it's really dependent on any one sector or any one client. On the kind of questions on Q4 'nineteen, first of all, I haven't gone and looked at that in any sort of detail. And I don't know, for example, sequentially how things went across 2019. And in many respects, I'm not particularly too bothered. I think it comes my point. The key for us, I think, is where will June be versus where has March been because our 3 big months in any year are September. Now that's overall a strong month and in part, of course, impacted by things like U. K. Education perm, but it's still a big month. It's a similar one. March is an important month. Generally, if we've had an uptick in temps, we tend to hold on to those temps. And I think, therefore, March is quite Seating from a volume standpoint, certainly at the volume level, the most exciting part of these results was in the German contracting market. That, in my mind, is Actually, more important than the temp results. But I think And then June, and it will be interesting this year to see whether June is higher than the March number and whether we've had a sequential growth, therefore, across the next quarter. I think for us across the next quarter, we know that our fees will dip in April and in May simply due to the bank holidays. We book a large amount of temp fees Every day, temp fees are I don't have the it's well in excess of you're talking about £2,500,000 per working day, so it's quite big. Well, I think there's every opportunity that we'll have a strong June. So I think I may not have picked all of your points up. In my mind, the uniformity of this, the fact it's across nearly all of our clients means But as long as the candidate confidence remains strong, and ideally, we're going to increase in candidates coming to the market. And then finally, one of the nuances in this, and I know a couple of you guys have written about it, is, of course, this point that You've now got greater flexibility as to where a candidate lives and what job you place them into. And there's no doubt that, that greater flexibility is there today. And of course, the final one is we've also seen that our clients and candidates have got very comfortable Doing jobs remotely. Since the start of this pandemic now, we have filled, I think it's about 65,000 perm jobs, A large number of which will all have been remote, including starting remotely. And we've done more than 200,000 temp assignments. So I think the one big positive out of this for all of us is that working practices of clients have changed and confidence of candidates is enough They're continuing to move. But I think how that goes over the next 3, 6, 9 months will be, in many respects, tied to the general sentiment in the market, Certainly positive today. Okay. Thank you very much for your answers. Thank you, Enbridge, for your questions. The next question in the queue is coming from the line of Matthew Lloyd from HSBC. Matthew, you're unmuted. I may now go ahead. Good morning. I just wondered if you could talk to us a little bit about what fill rates are doing And it's time to hire because in some ways, they're the same thing. But are you finding it easier to fill the vacancies that you've got? And is that part of the productivity gain? Absolutely, Matthew. That is what I'm correct. And I think if we stand back and think of it from a client standpoint, How do we think our clients would feel in most companies? If you're outside of hospitality and you're outside the travel industry and aerospace, and Quite frankly. For recruiters, we've got little and no exposure to that now today because that would have gone now pretty much our clients in most other industries. If you think How they feel today versus how they would have felt in October, November versus how they would have felt a year ago, they are feeling more confident. They're almost Certainly concerned that they've got a little bit too less headcount, and that means their confidence leads to them making decisions quicker. And I think we've seen that, and that also ties to your It's a higher point. In the end, if clients pick up, if clients accelerate their decision making and they move faster and they do the interviews quicker, and I think the And I think the nice thing is that, that's, as I said again, fully remote, and that position has now Really embedded in. So I think all of that means that we have found that we've had a higher quite a significantly higher conversion of jobs into And then on the temp side of it, because that's almost a permant on the temp side of it, it is not so much that there's a lot more temp jobs out there. I haven't seen the level of extensions we're getting. So we're getting increase in temp volumes, but it's the extensions. And I think that's back to It's a confidence standpoint across the board. So I think All of that is very positive. It's very positive at the high end of town with very high fill rates in our MSP and RPO contracts. And it's also, if I look across the more of the SME segments, again, where we're getting high fill rates, and that's None of us would have expected to have seen pretty much all time record consultant productivity in March 2021, a year after the pandemic, whereas we've all been used to much slower recovery, certainly thinking back to what happened. And of course, the last point I'd make on it is we're also in a kind of a unique fact pattern at the moment, aren't we? Because generally, in previous recessions, We've had governments quickly get onto the concerns about austerity and affordability and all those things. Now some of those may come in the future because we've all got to pay for this at some point. But at the moment, you've also got significant government expenditure as well. And without a doubt, that helps us because We are by far the largest recruiter in the UK and Australian public sector. And we've also got a really nice growth, faster growing business The German public sector. So this is a different recovery because I think you've got increasing confidence in the private sector Same time that the public sector wants to spend money, and I think all of those lead to the faster decision making. And I think that the vaccination program managed Success in certain countries and its non existence in others is interesting in the difference we've seen in candidate confidence between countries. And what is true is the more comfort there is in that vaccination program. I think the more confidence we've seen generally In kind of those economies and activity levels, but a real positive. And then just finally, it's very early to know. I understand that. How are you thinking about if your business can run at the productivity levels that you must have had in February and into March, How is that making you think about the balance and there has to be a balance between injecting headcount in for growth And what is the right operating margin for the group? I find these relatively simple to Because I am a top 100 shareholder in Hays, and I've been here almost 15 years, and this is a company that's in my heart and one that I love. You've got to focus on growth. It's all about growth in the end. And I think at the moment, so far, and of course, it can change, that's You're almost behind the initial sentence of your question. Is it can change? And therefore, of course, we could be having a discussion in 3 or 6 months' time. None of us knows The trajectory of the recovery from here, what we do know is the shape of the recovery from where we were to where we are where we were in May, for example, to where we were in March It's dramatically better than I could ever have foreseen. I think I'm pretty good at this. So I think on the back of that, Where your fees are generally beating your expectations, you need to significantly increase the headcount. And having fully protected the Experienced consultants in the pandemic and unlike a lot of other recruiters letting the newcomers And poor performers, we've gone on the front foot with adding 200 in this period. Thank you, Matthew. If we'd have added 250, 300, 350, 350, I'd have been very happy with that. We will look to Do similar levels of increases every quarter for as long as we're seeing sequential opportunities because I think in the end, We're not the size of our business and the level of profitability and where we might get to next year is interesting. It's kind of irrelevant because we won a business 2 times What we got today, and we want profitability getting back to $250,000,000 and then well north of it. We need More headcount for that, and we need to be bringing those people in and training them in now so that when they are fully trained, and a large part of that is, of course, on the job training With people in offices, then that enables us to make sure that 1, 2, 3 years Down the line, we still got sufficient productive capacity to drive growth. And but what is clear, and hopefully that comes across, Yvesant, we will watch this business like a hawk, as we always do, and we're all minded that a pandemic has an opportunity to hit back. But I think everything is really encouraging so far. And is there any room sorry, I promised 2, and I'm going to cheat and do a 3rd. Is there any room for acquisitions in that? Is there an ability to perhaps build out a network, make it stronger in geographies or in skill sets By and accelerate the growth with acquisitions, it's almost a sort of heretical view in staffing that acquisitions are good, but well executed they could be. Well, I think we've got a good track record, haven't we, Matthew? So I think if we came out at any point and announced an acquisition, Then I think with the track record we've got, not just in Germany, which is the obvious one, Well, I also think in Belgium, in the Netherlands, in the U. S, I think our U. S. Business is going to do Incredibly well in the next 5 years and will be the 4th big pillar of our business. I think we've got a good track record, But that is never going to be our primary focus. And in part, I think, in any professional service business Where the country managers and the senior management teams in those countries put all of their energy and skill in building a business, You've got to be really careful when you do acquisitions. Same as you've got to be really careful with the amount of very experienced consultants you bring into your business Any point? This is all about having one culture in a business. And that culture is better built for the longer term By bringing people in at relatively junior level and training them up, we do Not too modest acquisitions. We do bring modest levels of experienced consultants, specifically in specialisms where we're relatively small. I think all of those need to be in moderation. The core of the business has to be organic growth and showing that there is a clear Opportunity for any consultant that joins today that they will be really well trained, they will become consultants, they'll And I think so our trajectory will have our primary focus will be On organic growth, we may well do perhaps we've done, what, 2 deals in my 15 years here. If I was here another 15 years, I doubt we'd do more than probably one more, Matthew. I think we've got such a great network So the opportunities are there. Clearly, you could argue that something in the U. S. Might help from a geographic standpoint with little or no overlap. There's nothing obvious in that market. There's nothing we're looking at today. But our primary focus is aggressive organic revenue growth because I think there's real Things like IT, we had $250,000,000 fees before The pandemic, why can't that be €500,000,000 Us and our leaders are by far the market leaders in that space. So we've gone from €80,000,000 fees 10 years ago to €250,000,000 pre pandemic. Why can't it get to €500,000,000 And therefore, our focus is really and has been is a large part of the return to growth is really accelerating growth, Strengthening management, marketing, adding subspecialisms. I think there's lots we can do in the subspecialism space in things like IT and engineering, There's some really attractive opportunities for us over the next 3 to 5 years. And I have no doubt within the next year You know that we'll set out our stall at an Investor Day because it feels that the time will be right, assuming the trajectory of recovery continues. Thank you. It's super to hear you so optimistic again. So congratulations and thank you. Thank you. Thank you, Matthew, for your questions. And the next question in the queue is coming from the line of Edward Donahue from 1Invest. Edward, you're on mute. I may now go ahead. Good morning, gentlemen. A few from my side, if you don't mind. You've referenced candidate Confidence several times during the call. If you look to your commercial teams and the relevant KPIs to that particular space, What is what are they showing you looking forward or what additional actions do you think either you have to take place or is this generally A bigger picture confidence required. Well, first of all, as I said earlier, the confidence is not at the level it was 2 or 3 years ago because you've got certain sectors where Often in Accounting and Finance, you have some of the most cautious candidates, whereas often in the technical areas, in the sales areas, in the marketing areas, you tend to have more generally more Confident candidate. So I think what we are seeing is conversions being quicker. And of course, as I've already alluded to in a previous answer, that has two parts to it, Because the client is making faster decision making, but in the end, the candidate has got the ultimate decision about whether they take that job or not. And so far, we're seeing Pretty high conversions that when we expect to see candidates accept jobs and then move they are. I think longer term, it's all about Making sure that you've got sufficient, vetted, suitably qualified candidate pools. And everything that we've been trying to do, certainly since Alastair joined 13 years ago, and all of the work we've done in the IT space and all the We've done in marketing is building engaged relationships with pools of candidates So that when we get job assignments from clients, we haven't just got immediately go to market. We've already got candidates ready to go that we've got engaged And we spend a lot of our time, a lot of our marketing focus in doing that. And in the end, that's all about the success part because back to A year ago, we were all talking about what might the level of unemployment be. Absolutely, in the professional white collar space, Outside of those industries I mentioned earlier, clearly have been hit hard, and people will have lost their jobs, etcetera. We've got pretty much full employment, so Significant skill shortage. So it's all about building engaged relationships so that you know candidates specifically And that you know that they will go to a new job for AU. So that's all of our focus, has been for the last 5 years. But it comes even I think even more important as we move into likely skilled short markets. Okay. Thanks. And then if you go to your comment with regard to vaccinations and the confidence factor attached to that, How do you square that a bit with Germany with a very strong performance out of your contracting teams there? Can you just give us an idea also Why you've had such strong performance, which you highlight as well against the backdrop of not exactly the greatest vaccination rollout program? Yes. I think what is absolutely crystal clear, Edward, is there's a lot of frustration in Germany at the moment. And I don't think I've ever seen a situation where a government in this country might have a higher rating than a government in Germany, Certainly around competence. But that's the situation at the moment. And of course, you've also got an election in Germany coming up. I think in Germany, we have a dominant business. We are Bigger than our top 4 leading competitors together, and we're by far the largest player in the IT space. And I think in the end, a lot of our clients realize that they made some mistakes in reducing contractor numbers a year ago. Without a doubt, this quarter, whilst we have a kind of a complex story to tell on TEMP, The contracting story is not complex at all. By the time we got to the end of March, we're not too far away. I think it's 5%, 10%, 5% away from all time record contractor numbers. So the volumes in contracting has come back quite strongly. That's She's clearly very encouraging. And then I think in the engineering space, a lot of the automotive companies, of course, Cut back their own headcount sharply, cut back comps sharply. You saw that in all of our previous results. And therefore, at the moment, I think what we've seen is a combination of, as I said earlier on, some unique features whereby These are highly paid tanks in Germany earning on average of about €100 €80,000 and contractors earning €140,000 And in that market, therefore, things like skiing vacations do happen normally. Well, none of them have happened in the last or 3 months. And whilst that might seem a bit suspicious, I actually think it's a unique set of circumstances where nobody can go anywhere. Therefore, everybody is working. And my guess is some of the increase in hours as well. It's not just vacation and no sickness because a lot of people are working remotely. But there's also there's been a request for people to work more overtime, whereas normally a year after a massive economic shock, there is a complete overtime ban. So I think we've seen this quarter A real pickup in those markets, in part because in IT and engineering, we dominate that market with a go to player. Okay. Thanks for that. And then just with regard to your consultant wage inflation for this year, Do you see any particular tightness developing across any of the business lines? And how would you expect that relative to 2019? I'm sorry, excuse me, on just a calendar year. I have an idea, bear in mind that last year was more on the money level. Do you mean are we talking about general wage inflation in the economy or what? No, your consultants. What you're going to have to pay your consultants? That's driven by fees primarily. So remember, if I do think there will be some wage inflation over the next few years back to the skill shortage earlier, And that leads to higher fee per placement, and that leads to greater commission per placement per consultants. So in consultants, what drives their pay is Promotions and it's a very clear path. Get to X level of productivity on a consistent basis. Build teams, you get promoted, you earn more money. And of course, the more fees they book, the more that they get. So it's more through wage increases tend to come through promotions. We do increase base pay every few years, but that's not a great driver of our cost base. Our cost base is driven more by the commissions. And what is true is when you get strong period, when you get strong pickup in perm, then of course, a lot more consultants will be earning 30%, 35% of every fee At the top end because it increases depending on what fees you land in a month. So I think If people were allowed to be in offices in March, Edward, I think there'd have been a lot of happy consultants when they realized what commissions they're going to earn for the March month. Okay. And then my just sorry, my final question is just on your headcount additions, you're planning for the rest of this year. Again, on a calendar basis, if you looked by the end of 2021, how would you be stacking up versus headcount at the end of 2019? I apologize. I'm probably being lazy. I could dig out my numbers. But if you had those, I'd be grateful. I think that's really driven By where fees goes from here. But as a simplistic standpoint, I think we were 13% down In these results, that's clearly going to be bridged. And if we just anchor it versus perhaps February a year ago, My guess is that we'll be back to 7% or 8%. Actually, no, we'll be back at we'll be about 10% down By the end of June, beyond that, that's all what happens to the parties. But I put it into context. If the trends continue as it is at the moment, I can see us wanting to have a similar level of headcount every quarter, and that will increase our cost base by something like GBP 20,000,000 in the full year next year. But again, that's really driven by continued trajectory of the sort of recovery we've had so far. And that's the beauty of these calls. We'll give an update every quarter. Brilliant. And on that high note, thank you very much. Thank you. Thank you, Edward, for your questions. The next question in the queue is coming from the line of Andy Grobler from Credit Suisse. Andy, you're unmuted and may now go ahead. Hi, good morning. Most of mine have been answered already. Just two quick ones. 1, just given the pace of recovery and how much above expectations it was, Do you have a scope to reevaluate how quickly you return that excess cash? Is that number now bigger than you may have thought a few months ago? And then secondly, just Around efficiency, which you've talked already this morning. But is there an element of natural selection So you'd be more efficient in this kind of market as in the more experienced guys of staff are still there, whereas the newer newcomers And that will there'll be kind of a natural process of kind of that normalizing as you go back to growth. Can I take the second one first? That's spot on correct. And in part because, of course, really good consultants I've been not everywhere in the world, but certainly in most parts of Europe, have been working remotely. There have been few newcomers in the business. That's only just started really in the last quarter, and therefore, there's little on the job training they're giving. And even in offices that are I mean, in Asia, all of our offices are open. And there's a high level of people back in the offices. But obviously, on the job training is an incredibly important part of a senior consultant. We run desks of 4. 1 person is in charge of that desk, And part of their remuneration and their development and their promotion criteria is the development of people underneath them. Well, If you don't have many new people in there, there's less time has to be spent on that. And of course, when you're working from home, it is very difficult to do real on the job training. So I think really good consultants Have got more time on their own to focus on their fees. And then the added parties, a lot more of our clients and candidates All working from home, it's easier to get ahold of people. So it's either virtuous circle. You are correct. Michael, sorry, you are correct. That will, at some point, normalize, but I think it will normalize more because we'll be increasing the amount of newcomers we bring into our business. And sorry, can you just reiterate the first one again about pace of recovery and the Yes, yes. It was just You set out your level of excess cash. Sorry, got that. I think, yes. This year end, I don't think so. But of course, there'll be a bigger core dividend than I would have expected. I think the year afterwards, the real positive Is that you're going to get the second return of capital of 50,000,000 Again, there'll be a significantly increased core based on any level of trajectory we might come up with. And I think there'll be a meaningful trading special because remember, we've kept back an amount which effectively funds the working Capital increase that will happen as our tent book continues to grow. So I think you could easily see a situation That we'll be yielding about 5% for the next few years relatively easily. So I think that's a real positive from a cash perspective. And what is Strange, certainly, somebody who's been there a long time that we talk about cash distributions in the context of a growth stock. I think in a world where interest rates are 0, Actually, as a collective, the industry has shown that it's managed incredibly well with the pandemic. And therefore, to have a high quality Stocks such as Hays, where we're likely to be returning in excess of €100,000,000 per year for the next few years, I think that Puts us in a really good position and will be well appreciated by shareholders. And it is interesting that More than 30% of our shareholder base now is income stocks. And all of those companies have held have stayed with us across this pandemic And therefore, can expect to get well rewarded over the next few years. So yes, I think another positive. Brilliant. Thank you very much. And thank you, Andy, for your question. Okay. Thanks, Judy. Okay. There are no further questions in the queue. So I'll hand you over to your host. Well, thank you. That's all the questions for today. We'd like to thank you all again for joining the call. I look forward to speaking to you next at our Q4 FY 'twenty one trading update on the 15th July. And should anybody have any follow-up questions, David, Charles and I will be available to take your calls for the rest of the day. Thank you very much. Thank you, everyone, for joining us on today's call. You may now disconnect your