Earnings Call: H2 2020

Aug 27, 2020

Ladies and gentlemen, thank you for standing by, and welcome to the Preliminary Results for the year ended 30th June 2020. At this time, all participants are in listen only mode. After the speaker presentation, there will be the question and answer Alternatively, you can submit questions via the webcast. I must advise you that this conference is being recorded today on 27th August, 2020. I would now like to hand the conference over to your first speaker today, Alastair Cox. Please go ahead, sir. Thank you very much, Nadia. Good morning, everybody, and welcome to our full year results. Clearly, we'd all like to be sitting presenting these results in person, but we also have been on usual times these days. So here goes with our first ever Hayes remote annual results presentation, where I think it's fair to say that virtually every single one of us on this call is in a separate location. We will however, stick to our traditional format. I'll take you through the operating review for Paul and addresses our detailed financials as well as current trading. And then I'll finish off with an update on our strategy. So I think it's obvious to everybody that the pandemic has been all consuming on our world. However, we should also recognize that the economic backdrop was deteriorating even before the pandemic hit in our final quarter. We faced a number of specific events in our first including, for example, the UK general election, general strikes in France, the bush fires in Australia, and that all combined to dampen our growth. The pandemic and the resultant lockdowns then began in our 3rd quarter under effects clearly dwarfed these previous events. And as an indication, our quarterly net fee sequence through FY2020 was 0% -4 percent -7 percent and then minus 34%. And putting this into context, those fee declines as a result of COVID-nineteen matched to that of the global financial crisis, but they happened in only 6 weeks versus the 8 months of the GFC. Now our business has been around for around 52 years, but in all that time, we've never seen such a sharp deceleration in activity. That said, as difficult as the markets have been, it's also fair to say that trading has stabilized faster and at higher fee levels than we expected at the time of our equity raise. And coupled with a stellar performance in terms of cash collection, we now have the strongest balance sheet in our history, and that has allowed us to protect our core infrastructure. So facing such a challenging backdrop as you'd expect we've been incredibly busy. Number 1 priority was, and it remains the safety of our colleagues, our clients and our candidates and we immediately implemented travel bans and quarantines often before local government guidance. I'm very relieved to say that to date, only a very few of our colleagues have knowingly contracted the virus and all have since recovered. Our offices in China, obviously, were the first to close, and we learned a lot from that initial phase that has stood us in good stead in the months to come. As lockdown spread globally, we then switched our entire business to working from home overnight with complete operational continuity. And I think great credit is due to our technology teams worldwide They ensured that all of our colleagues retained full working functionality built by our rapid roller of Microsoft teams, to support remote working. Consultant activity with clients and candidates has remained very strong throughout the lockdown as we adjusted to this new way of working. As restrictions have eased in recent weeks around the world, we now have around 80% of our offices globally opening And we're operating under a hybrid model of remote and office working, and we're already starting to see some of the benefits that this can bring. Also in support of our clients and candidates, we launched Hayes Thrive. That's our unique free to use employee training and well-being platform, And in the 3 months since launch, we've already had 17,000 client sign ups, which includes 5000 new clients to Hays, and over 51,000 individuals registering their own personal learning account. This is all part of our strategy to become lifelong partners to our customers, and it shows that we can bring innovative new services to market very quickly, even when conditions are so volatile. With these under such sharp decline, we obviously reduced our cost base, but we did that while protecting our core business operations, and our productive capacity. Overall, we reduced the monthly cost base by around 20% between February June. And as part of this, As of the 30th June, 18 percent of group employees were either in job support schemes, short term work short time work arrangements, or had voluntarily reduced their pay, including senior management. We also took swift and decisive action to strengthen our balance sheet by our equity raise, we're hugely grateful to our shareholders for their support, and our financial strength now allows us to navigate the pandemic However, long its effects may last. We'll use it to take market share as organizations fly to quality suppliers and it has allowed us to protect our productive capacity that we've invested in over so many years. However, however, rest assured that we will use our capital in a highly disciplined way. And when conditions improve, the board will consider how best to reinstate our capital turns policy as that remains an important aspect of our strategy. We also undertook a strategic return to growth review of each of our divisions globally, and we've agreed over 1,000,000 of accelerated investment plans in attractive opportunities such as our IT business, and our large corporate accounts businesses, which I'll return to later in the strategy section. Yes, of course, that does mean a short term impact on profitability, But we also think it's absolutely the right thing to do as we set Hays up to be a winner in the post COVID world. Now focus is to make sure that Hays is in the best possible position for the recovery when it comes. Finally, I think it's at times like this that a company's purpose and its culture becomes most evident. Over decades, we very deliberately built our culture and it's been deeply moving to me to hear so many success stories and team initiatives, which have brought colleagues together around the world and helped our clients and candidates. With so many thousands working from home, connectivity and communication across all of our people globally has been absolutely vital both to ensure their own productivity as well as their own well-being, and that has gone flawlessly. I'm also very proud that in these tough times, We've helped literally thousands of people find new work every single week. And after all, alongside our family and our health, careers in our livelihoods are fundamental in our society, and we feel privileged to be playing our partners' CEO. I simply could have not asked for more from our team. I think they've been absolutely exceptional. Turning then to our results. Considering the macro storms that we face, I think the business has stood up well to the challenge. Over the year, the fees declined by 11% to 1000000. 7 of our countries grew fees year on year, including 6 individual records. Operating profit declined by 45 percent to 1000000. Prior to the pandemic, We were already reducing our cost base to defend profitability as markets had started to soften. We restructured several European countries particularly in Germany, and we incurred exceptional charges of GBP 19,600,000. This is expected to deliver around GBP 15,000,000 of annualized cost savings. At the same time, we continued our strategic investments in key markets such as our IT specialists and globally. IT is now our largest specialism by some margin representing about a quarter of group net fees, and we now find ourselves as one of the world's largest recruiters of IT talent. Global IT fees performed better than the group average. They were down 4%, but outside Germany, IT grew by 2%. Cash generation was excellent. 183 percent of operating profit was converted into cash. And our debtors book unwound substantially in the 4th quarter But I do hope that that is a short term effect as I want to see our 10 book expanding as we return to growth in the future, and we'll clearly in a very strong position to fund that. Clearly, we've been dealing with the world full of huge change and uncertainty However, the steadfastness and innovation shown by my colleagues around the world and just their sheer grit to get so many things done so quickly. Has shown as a result what the remarkable organization is. So let me give you a little bit of additional color on each division. Starting at the other side of the world and considering the backdrop, I think our Australian New Zealand division deserves great credit. Fees fell by 11% and profit was down 25%, within that 10th was relatively resilient down 6% but perm was more difficult down 20%. Our first half fees fell by 4% and that was in part impacted by the bush fires in December, Activity levels were then starting to improve before the onset of the pandemic, but the lockdowns had a relatively less impact on our business in ANZ than in other regions and fees declined by 28% in our final quarter, with 10% down 18% and perm down 52%. Sector wise in Australia, the professional sectors such as account seeing finance with the hardest hit that was down 23% in the year. However, again, a recurring theme, IT demonstrated its resilience with flat fees And our corporate account business had an excellent year. It was up by 1 third. Consultant headcount across the division declined 20% year on year. Turning now to our largest country, Germany. Net fees fell by 13% and profit was down 41%. Growth slowed materially through the first half amid broad signs of reduced business confidence as well as increased client cost control. And this was particularly evident in the larger clients, obviously, in the automotive sector, although there were also some signs of weakness spread into the large Financial Services sector clients. And in response, as I mentioned earlier, in January, We restructured the German business to provide greater local focus on the midsize Mittelstandnet surprises alongside a dedicated large corporate accounts division and that came at an exceptional cost of GBP 12,600,000. We completed that restructuring in our 3rd quarter and we expect it to deliver annualized cost savings of around 1,000,000. Contracting is our largest area, at 58% of German fees, and it operates under a freelancer model. That was relatively resilient and it declined 9% in the year. The 10th business, however, was much weaker and it declined 24% with Q4 down more significantly. A large proportion of this decline was due to the underutilization of the temp workers, and Paul will cover the actions that we took towards year end to reduce this bench exposure. I think we're making good progress in reducing underutilization. However, I also remain convinced that there is a large and growing market for highly skilled temps in Germany and were determined to continue to lead it The third part of the business is the perm business. It's 17% of the German fees, and there remains a lot of structural outsourcing potential there and the performance was relatively solid given the conditions falling just 8%. So in summary, our restructuring in Germany, I think, has set our business up to capitalize on the structural growth that remains there once the market stabilize as well as to reinforce our market leading position. Germany remains in my view the most exciting recruitment market in the world, and we believe that there remains substantial value to unlock there. Moving now to the UK and Ireland. Net fees fell 14% and profit was down 60% to 6% Fees in the first half had already declined 4% as client and candidate competence weakened in the run up to general election. The second half, however, was much tougher as the lockdown impacted and Q4 was down 42%. 10th is about 61% of the UK and Ireland fees. That was relatively resilient. It was down 9% The perm market was much tougher, and it declined 22%. Again, our public sector business outperformed the private sector with fees down 3% and 19% respectively. Regional performance around the UK was broadly similar to the overall UK but London, which is our largest region, around a third of the UK business, fared slightly better, it was down 10% And finally, at the specialism level, IT yet again delivered an excellent performance, up 4%. However, accounts receivable finance and construction and property much more difficult down 19% and 20%, respectively. Overall, consultant headcount, which includes those that were on the furlough schemes, decreased by 6%. And our final division, rest of the world, obviously, with 28 Countries in that division, performance was understandably mixed. In Europe and the Middle East outside Germany, fees fell by 9% in the year following a flat first half Our largest markets there of France, Belgium and Spain declined by 13%, 14% 15%, respectively, although Russia and Switzerland delivered strong performances, up 7% 5%, respectively. Asia overall declined by 9% in the year after growing 4% in the first half. In that region, China is our largest Asian business, and following a flat first half, fees fell by 17% over the year as that was the 1st country to be hit by the pandemic. In contrast, Japan was more resilient. Fees there were down just 2%. And I also think a special mention is reserved for our team in Malaysia. They grew fees by a remarkable 28%. Across the water in the Americas, the in the first half and 3% year on year despite the effects of the pandemic. And IT represents 2 thirds of our U. S. Business, and it grew by an impressive 9%. Overall, average rest of the world headcount decreased by 11% year on year but we did protect our infrastructure because once the pandemic has passed, our rest of the world countries continue to offer some massive structural growth opportunity particularly for first time outsourcing and recruitment, and that gives me great confidence for our future. And then pulling all of this together, as you know, Since 2013, we've maintained an ambitious set of 5 year profit ambitions. Looking at our 2022 plan, we set up our first half results, back in February that the targets remain valid, but that economic weakness meant that it would take a couple of years beyond 2022 to achieve those targets. However, as GDP in our main markets has since collapsed, rates unseen in peacetime, I have to say that the plan is outlined in 2017 is now no longer valid Remember though that we've always said that our long term plans, they are a means to convey the scale of the opportunities, almost an art of the possible hays over the medium to long term when supported by a stable global economy. They also act as a strategic guide to us internally, so that we focus our ambition as well as our resources where most appropriate. And as such, once we see sustained green shoots of recovery, Our plan is to conduct an Investor Day where we'll present a new 5 year plan. Back in 2013, our first plan showed us doubling our profit to 1,000,000, which we then subsequently delivered. So despite limited visibility, I do think this framework is very effective at articulating where we can take Hays in the future. Remember, our industry continues faced significant structural opportunities, and we have built leadership positions in many of the key global markets from that combination gives me every reason to be confident in our long term potential. So needless to say, it's been an incredibly tough year. However, the team have worked tirelessly to make sure the business is in the strongest possible shape, both to weather the storm, but also to grow once again our market once again once our market stabilize. We have a clear strategy in place. We are the leaders in some of the best markets in the world, We also have a of uncertainty, including the global financial crisis. So we know what to do. We'll continue to do the right thing for the long term. That's investing in the strongest sectors. Taking market share and protecting our productive core whilst also appropriately managing our near term cost base. I'll now hand over to Paul who'll take us through a deeper look into our financial performance as well as an overview of current trading, Paul. Thank you, Allison, and good morning, everyone. Before I start the highlights of the financial review, unless otherwise stated, when I refer to operating profit and EPS, I'll be presenting numbers before exceptional costs of $39,900,000, which I'll cover in more detail shortly. On this slide, we have shown the quarterly fee trends over the last 2 financial years. Prior to the pandemic, Global macroeconomic conditions have been slowing for over 18 months. This reflected falling business confidence as clients move from firstly reducing investments, then to cost control and on to cost reduction as the first half of FY 2020 progressed. In our first half, whilst we continue to invest in structural growth opportunities, including our IT specialism, we had already moved to reducing costs. In those markets that have become more difficult and I completed a program to reduce our global overhead by GBP 5,000,000 and have already reduced our headcount by more than 200 people. The second half of the year and particularly Q4, saw severe pandemic related lockdowns, which caused the fastest fee decline in our 52 year history. The relative level of fee reduction per region in Q4 was very much linked to the severity and length of each country's lockdown. The magnitude of the pandemic became evident we moved to swift and appropriate cost reduction. On to summarize what has been a very tough year, Net freeze decreased by 11% on a like for like basis. We delivered $135,000,000 operating profit, which was all generated in the first 9 months of the year, Q4 was broadly breakeven. Our equity raise in April strengthened our financial position and our strong cash performance driven by excellent credit control globally and a partial unwind of the debt to book added further strength. As a result, we finished the year with our strongest ever balance sheet with net cash of $366,000,000, excluding short term deferrals of tax payments. Moving on to the income statement. Turnover decreased by 1% in the year with a difference between turnover and fees, primarily explained by 3 large client wins, which included a high proportion of payroll revenues. The difference between the headline and like for like growth rates is primarily the result of the depreciation and the average rate of exchange between the Australian dollar and euro versus sterling. Overall, FX movements decreased net fees and operating profits by 1000000 and 1000000 respectively. And basic earnings per share was 5.28p, a 56% decrease versus prior year, reflecting the group's lower profit higher interest charge from tax rate, which I will cover later. Alastair covered regional trading earlier, but I'll add one detail on our technical issue. In Germany, our 10th business, which is required under German law, we employ temporary workers, These declined by 24%, but including Q4 down 72%, while we had a large proportion of the decline due to the under utilization attempt which arose primarily due to the widespread client closure of manufacturing sites during lockdown. Consequently, the net reduction in billable hours in Q4 impacted net fees by GBP 6,800,000, which is net of GBP 2,200,000 received from the German short time working program. And Q4 fees were further reduced by $4,100,000 as we took the decision to release 420 tanks given significantly reduced levels of demand and the tough market outlook. Moving on to look at the performance fees of our perm and business. Our perm business, which comprised 41 percent of net fees, declined 15% as an 18% decrease in volume more than offset a 3% increase in average term fee, mainly driven by underlying wage inflation, which we estimate was 2%. Our temp business, which comprised 59 percent of group net fees, decreased by 9%. This comprised a volume decline of 6 percent, a 70 basis point decrease in underlying temp margins, primarily in Australia and Germany, And this includes the impact of an underutilization of 10s in Q4 that I just covered, partially offset by a 2% increase in mix and hours driven by the relative resilience in a higher paid IT professionalism. Here, we've set out the operating profit bridge comparing FY 2019 and FY 2020, starting with GBP 248,800,000 deduct the negative impact of FX on profits of $2,700,000 and the 11% decline in like for like fees of $126,900,000 explained earlier. Then there are 6 main cost buckets, which impact profitability. As explained in the interims, we invested GBP 10,000,000 to accelerate the growth and capacity of IT specials from around the world, we incurred GBP 8,000,000 higher property costs, increasing capacity in existing offices, primarily in Asia, As we've said before, these decisions were taken some 2 years earlier, an additional GBP 4,000,000 in our IT capability and cybersecurity and finally GBP 9,000,000 of pay inflation and other cost increases. Preco, we'd already identified cost savings, including a GBP 5,000,000 overhead reduction program in the second half and GBP 5,000,000 of other savings. As the extent of the pandemic became clear in March, we took swift and appropriate cost action to reduce our variable and discretionary costs, including headcounts. This led to cost reduction of 1,000,000, which we'll explain in more detail in the next slide. Overall, while we materially reduced our cost base, importantly, we ensured that we protected our core business operations and productive capacity. The speed and severity of the downturn led to a material reduction in group conversion rate. On this slide, we set out how we reduce the cost base per period as the pandemic hits. Our pre get COVID cost base was GBP 73,000,000 per period. We achieved payroll savings of GBP 9,000,000 comprising GBP 4,000,000 reduced commission, GBP 3,000,000 in headcounts and GBP 2,000,000 lower management incentive costs. Additionally, Overall ofheads reduced by GBP 3,000,000, including travel and office costs, and we received GBP 3,000,000 of various government support schemes globally. This reduced our cost base to circa 58,000,000 by June. In Q1, for period costs will increase as government schemes end adding 3,000,000 We moved back to more normal levels of incentive payments $1,000,000 and office re openings and other costs at $1,000,000. We anticipate GBP 1,000,000 per period of return to growth investment starting in August, part of the total GBP 15,000,000, which we'll discuss later. And finally, costs will reduce by circa $1,000,000 of further headcount savings, giving a period cost base of 1,000,000 at current levels of trading. Our P and L is sensitive to changes in key exchange rates, namely the Australian dollar and even more so the euro. As we said before, the group does not undertake any P and L translation hedge arrangements. IFRS 16 leases become effective for the group on the 1st July 2019 and the group is reporting under this new standard for the first time. We've applied the modified retrospective approach with no restatements to prior years. The left hand side sets out the impact on the income statement, which leads to an operating profit increase of SEK 1,900,000, and a profit before tax reduction of GBP 3,400,000. And on the right hand side, we set out the impact on the balance sheet both at the start and end of FY 2020. And the reduction in asset and liability levels during the year reflects that there were minimal new leases signed during FY 2020. Moving on to interest and tax. The net finance charge for the year increased to GBP 8,800,000 due to the adoption of IFRS 16, which increased the interest charge by GBP 5,300,000 and a GBP 1,400,000 increase in IS19 pension charge, both of which are noncash. Looking forward, we expect net finance charge to remain at circa GBP 8,500,000 in FY 2021. Turning to tax, our effective tax rate increased to CHF 36,600,000, driven by the geographic mix of profits the impact of trading losses in certain countries and a write down of the UK deferred tax asset. With such a wide range of potential trading results in FY21, but at this stage, it's not possible to forecast the group's effective tax rate for this year only. During the year, we incurred an exceptional cost of 39,900,000 comprising, firstly, $19,600,000 of restructuring, including $12,600,000 in Germany, we've restructured its operations to focus more on Midside Enterprises while creating a specific large corporate cats division and the remaining GBP 7,000,000 resulted from the restructuring of several country operations after the fall in demand for recruitment services due to the pandemic. This will deliver annualized savings of GBP 15,000,000, of which GBP 2,000,000 was realized in FY 2020. Overall, the cash outflow was GBP 8,100,000 in FY20 and will be GBP 11,500,000 in FY21. And secondly, we've written down the carrying value of goodwill by GBP 20,000,000 relating to our U. S. Business. The U S. Business performed in line with expectation until the pandemic. But as disclosed in previous years, the business has had limited headroom on the carrying value of goodwill. And as we've frequently stated, the group's priorities to continue to make investments in the U. S. Business in line with our strategy to build a strong presence in that market. Because of the ongoing investments against a difficult market backdrop, we have recognized GBP 20,000,000 exceptional impairment loss against goodwill. Cash flow. On this slide, we've summarized the key components of our cash flow. The chart on the left details are sources of cash flow starting low operating profit of GBP 135,000,000, we are back non cash items of GBP 77,700,000, predominantly IFRS 16 property depreciation and other fixed asset depreciation and amortization. We then had a working capital inflow of GBP 199,000,000 reflecting very strong cash collection with debt a day is reduced by 3 to 36 days and a GBP 100,000,000 partial in wind of the tent book. We then subtract the element of that $118,000,000, which refers to deferral of payroll taxes and VAT resulting from various government responses to the pandemic and we deduct lease payments for 1,000,000. This leaves an operating cash flow of 1,000,000 an excellent underlying conversion of profit into cash of 183 percent. From this, we paid tax of GBP 29,800,000 and net interest of GBP 1,400,000, leading to free cash flow of GBP 216,000,000. And on the right hand slide, we detail how we've used the cash generated as well as the cash increase from the equity raise. The main items were dividend payments of GBP 122,000,000, which represents last year's final core special dividends paid in November 2019, CapEx of GBP 25,800,000, pension deficit payments of GBP 16,800,000 And then finally, the net proceeds of equity raise of 1,000,000. And for FY 2021, we expect CapEx to be circa 1,000,000. With our strong cash performance and net April's equity raise, We ended the year with net cash of GBP 366,000,000. And in October 2019, we extended our GBP 210,000,000 facility, by year to November 2024 exercising our option in the agreement. And finally, while we're admitted into the Bank of England CCFS scheme in April 2020 up to a level of funding of GBP 600,000,000, we do not expect to draw on this facility. Balance sheet. On this slide, we compare the balance sheet as of June 2020 with prior year. The 4 noteworthy movements are impact the implementation of IFRS 16 as explained earlier, an increase in the IS19 pension accounting surplus to 55,000,000 primarily due to an increase in asset values, normal company contributions, net of the increase in liabilities due to a lower discount rate, The decrease in working capital explained earlier and increase in provisions due to restructuring provisions. Moving on to shareholder returns. Our priorities for free cash flow remain unchanged, namely to fund group's investments and development, maintain a strong balance sheet and deliver the core dividend at a level which is sustainable, progressive and appropriate, given the current level of macroeconomic uncertainty, And the fact that we traded at a breakeven level of profitability in Q4, the board is not proposing final dividend for FY 2020. We remain acutely aware of the importance of dividends to shareholders and will look to return to paying dividends as soon as is appropriate. So in summary, given the unprecedented impact of the global pandemic on society and the global economy, we've delivered a credible performance in the We acted quickly to manage costs whilst protecting our core operations and the productive capacity of our business. We delivered an excellent cash performance, driven by strong working capital management and partial in line with the 10th book, and we acted decisively to reinforce our balance sheet and finished the year with net cash of GBP 366,000,000. As a result, we look forward to the future with confidence. Coming on to current trading. In Australia, our business has been stable since mid April, and we began to see initial signs of modest improvements in activity in July, particularly in perm. It is too early to quantify the negative impact of the recent lockdown in Victoria. In Germany, overall fees are stable. Activity and contracting is stable. With some marginally better renewal rates on June ending assignments than normal. 10 point assignment volumes are broadly stable. However, we continue to see some underutilization of temp workers, albeit at an improving level versus Q4 FY 2020. And we expect some temp underutilization and one off costs to continue across half 1 FY 'twenty one. In the UK, the world, we're starting to see some modest signs of recovery. Fees in EMEAirex Germany are broadly stable on a seasonally adjusted basis with signs of some modest positive momentum and our Asian Americas business are stable. Overall, it's also worth highlighting any second wave lockdowns may have short term negative impacts on activity levels and potentially delay country recoveries. With that, I'll hand you back to Alastair who will update you on our strategic priorities and progress before taking any questions. Thanks very much, Paul. Let me just spend a few minutes covering strategy. In particular, what we're doing for the longer term, as well as talk a little bit about our return to growth initiatives. Now we've talked a lot in the past about some of the big changes that are underway in the world of work, what we've called megatrend and also how we're aligning our business so that we can leverage those changes to our own benefit. And if anything, some of these megatrends I think they've only been accelerated by COVID, which makes our existing strategy even more valid. So for example, of non permanent, flexible working. I think that's obvious in today's world of uncertainty. And overnight, remote work has become an absolute necessity for most businesses worldwide. However, there's also still potentially some huge benefits from flexible working yet to be realized. And at the same time, we're also seeing major changes in worker demographic workers, financial needs, people are working longer, more portfolio careers, that's becoming the new norm. And I think we are well positioned to serve those needs. And one of the side benefits of remote work, remember, is that we can also attract talent from both a wider geographic area and we can create broader and deeper talent pools for our clients. And our infrastructure around the world gives us a major advantage for this versus in house HR department, small local agencies, or the less tech enabled, larger competitors. Clearly, the pandemic has had a huge impact on the global economy. However, currently used to run hay, make sure that we build a profitable and cash generative business, those are also applicable today as ever So firstly, when our business moves into recovery phase, we'll continue to aspire to materially increase as well as diversifying our profits and already over 80% of our profits originate from outside the UK. Secondly, remember, we remain a highly cash generative business, and we're acutely aware of the significance of dividends to our shareholders. And clearly, with conditions today remaining highly uncertain, the board concluded but it's still too early right now to recommence dividends yet. We're very clear though that distributing excess funds above an appropriate buffer is absolutely the right thing to do. That philosophy has not changed one Iota. And as I said earlier, when conditions improve, the board will consider how best reinstate our capital returns policy. And as a reminder, in the 3 years prior to the pandemic, we paid over GBP 374,000,000 in core special dividends, and we believe that such an approach remains absolutely right. Another key pillar of our strategy is embrace technology to make us better at our jobs and the comfort value of our services. And to do this, we create and grow partnerships with some of the biggest technology companies in the world. Technology and the smart use of data all demands our human expertise. It does not replace it. And a great example of that is our Education hub app, which was made great strides prior to the pandemic. Hayes hub is a fully automated tent recruitment tool for highly regulated environments such as schools, and many of you will have seen it demoed at our Technology seminar just over a year ago, and it remains unique in today's market. This service, it could literally help every single school and every single teacher in the land So clearly, our ambition to make a real difference is very high. Prior to the lockdown, we had around 4000 300 teachers using the app every single day, and it was signed up to buy over 2000 schools. Since then, we've expanded the app services to include safeguarding and training. And by the autumn term, which starts next month, Over four and a half thousand schools will be accessed in the system, and we're now starting to generate meaningful fees in areas such as training, compliance, safe guarding and well-being modules. This context also extends to many other similar regulated fields, We've recently launched a version into the Social Care Sector, for example, and we've also taken it into Australia. And I'm really quite excited by the prospects there. So together with Hayes 5, which I mentioned earlier in the ops review, I think we're leading the way in providing training and well-being services to our clients. That enriches our approach to profitability signals, fulfilling new roles. It builds greater engagement with the outside world, it improves employability prospects and it deepens our talent pool. So it's a win win all around. I also mentioned in my first section, that we've identified over 20 return to growth investment projects as a direct consequence of the pandemic. We'll invest over 1,000,000 in these in FY 2021 across both the revenue and the CapEx areas globally. The project was selected after a detailed bottom up approach, which was designed to identify meaningful profit opportunities that will move our dial over the medium term. The projects themselves span many areas in specific countries, including, for example, accelerated investments in areas such as life sciences, the sales and marketing, specialism, engineering in some countries But two common themes, which continue to reoccur in all regions around the world, is growing our IT specialism more aggressively, as well as expanding our share in large corporate accounts, but I am convinced that there are opportunities to look after the lion's share of any client's recruitment needs. I'll set back at the half year results. The IT represented around 14% of group net fees in 2008. And back then, it was our 3rd largest specialism. As the left hand chart here shows today, with annual fees of GBP 250,000,000,000, IT is now our largest specialism and it represents a quarter of group fees. Those stats makers, 1 of the world's largest technology recruiters, with over 1700 consultants worldwide. And I think that's a privileged place that we find ourselves in today's market, but I also believe that there's a lot more to come Remember, these are still short markets. Pretty much every company in every country needs more technology people and support. There's obviously a wide range of skills and subsectors under that IT banner. And our return to growth plans are targeting the most attractive areas anticipating in advance which subsegments are likely to be in greatest demand in different economies. And when I think about some of the hottest parts of the market today, areas such as cyber, artificial intelligence and machine learning, the use of big data, dead ops, Many of these were tiny, tiny subsegments by comparison just 5 years ago. And actually, many of the roles that were accrued for today simply did not exist 3, 4, 5 years ago. So I'm proud of the progress that our IT specialism has made in the last few years, but I also believe there's no reason why it can't become greater than 30% of our group fees in the foreseeable future. Changing topic, Ace Talent Solutions is our large corporate accounts business, and it too has made some good progress in recent years, and it was one of our most resilient areas in FY 2020. It's grown from just under 14 percent of group fees 2 years ago to over 16% today. We've also seen an expansion in the number of our clients generating over 500,000 of annual fees with Hays, grow by nearly 1 third in 2 years to now 80 clients today. And that's a clear sign of taking share. And I'm personally convinced that at the larger end of the market, there'll be some excellent growth opportunities over the few years, and each of our regions around the world is very focused on leveraging this. Projects such as these simply would not be possible without our financial strength. It is fair to say that we are investing ahead of the economy's recovering, but in order to reap the benefit in 2 or 3 years' time, we think it's exactly the right thing to be doing now. So wrapping it all up, We faced the toughest market of my lifetime, but the business has also stood up well to that challenge. My Hayes colleagues around the world deserve huge credit, I'd like to thank them again on behalf of the board for their outstanding efforts. We have a clear strategy, one that we believe in very deeply. We also have experienced management teams across all our countries who've been through economic cycles many times. So while it's impossible to predict where our markets might be over the next year or so, rest assured that we believe we can navigate through all conditions, protect our business and make sure that we exploit the many opportunities that remain available. And with that, Paul and I would be delighted to start to take your questions. Thank you. The first questions on the line comes from the team, Martin from Jefferies. Please ask your question. Just first one on Germany and current trading. Is the lack of momentum in Germany at the moment a function of the natural lags in contracts and it's small contribution from perm or is that something else that you sort of call out? Because I think the economists are picking up maybe a little more rapidly than some of the other territories at the moment. Secondly, we've seen another company where sort of tech innovation and collaboration has suffered and obviously sort of natural distractions during COVID over the last 3 to 6 months. I'm just wondering whether that's impacted the pace of innovation and roll out new ideas, for your technology, sort of internally. And then secondly, it's a small point, and I have a feeling that you got after some of the question 12 months ago. Is there any reason why remuneration of other recruitment agencies is up about 10% year on year? Versus a revenue number that's slightly down? Thanks. Thanks, Kane. Hope you're well. Thanks for your questions. Let me do with the tech 1 first and then maybe Paul, I can hand over to you for the current trading and Keane's comments around momentum and the German economic recovery. In terms of tech innovation, it's absolutely not supper keen. If anything, it's accelerated. Because one of the outputs, if you like, of the pandemic, I believe, is that the need for greater technological support and development in a more remote working world is going to be stronger than ever. So we've actually accelerated our tech innovation and we've been very successful at doing that, even though we've been working remotely. I mentioned a couple of examples, Hayes Thrive, which has really taken off. That's designed to help people understand what skills they might need and then access them. That all helps employability Hayeshub in the education world, we've quite dramatically expanded the services that we can supply to teachers in almost a one stop shop. So, it's not just about recruitment, it's also about training, self guarding, compliance, checking, and we'd expect to expand further services into the school sector, as time goes by. So we have a very full program and if anything, we're putting even more effort and resources into that space because it underpins so much of what we do. Okay. Paul, can I hand over to you for the, for the German part? Yes. I'll start off with the other agency question, Kean. So 3 large wins during the year, all in Australia, which brought with them, quite a high other agency spend. One of them is but not me, all of that is in the blue collar space. Where we have contracts, which have got a mix between white collar and blue collar, we're in the MSP position. And we often use a blue collar provider to do that work. And part of that as well had a payroll element that we didn't want to take on ourselves. So Certainly, on the if we stand back and look at our MSP business, we deliver we feel more than 90% of all roles on all of our contracts globally, so in a very strong position for that. So we'd expect to see a good slug of that in Australia convert over time. But in the blue collar space, we'll leave that work with the blue collar agency, and we receive a fee for managing on top Coming to Germany, I think it's really about the Kent part of it because you're correct. Our perm business is relatively small in scale. It's slightly more than 10% of the business. That's reasonably stable. Contracting as we covered in Q4 was very resilient, only down 11%. So those two businesses haven't fall very far It's all really about the 10th part of it. We naturally take about a 5% step down in contractual intent numbers when we get to the end of June. We said in here that contracting, losses were slightly less than the normal about 1% better. So that's a positive. But the 10th part will dominate as we come through the next couple of months. And the positive is that every single week, goes by, there's greater utilization of the temps that we're retaining. And we're still working our way through some other temps that we are kind of be releasing over this period. So I think overall, considering the impact intent, we're pretty happy to be stable. What you are correct on is of all of the economies in the world, it has the most positive forward economic data at the moment, the most uniform, certainly across Europe, some more data came up this morning. That's quite encouraging. So I think we're in a really good position. And as I kind of alluded to when I've covered the current trading, we're going to have 3 to 6 months of issues to work through in the tent book. We're making good progress on it. I do think we'll finish that by the end of December, and then I'd expect us to see to return to sequential growth. Thank you. The next question comes from the line of Rory McKenzie from UBS. Good morning, all. It's Rory here. 3 for me, please. Firstly, obviously, it's really good to hear the signs of improvement are now coming through or the tentative. Any sense of if these are perm roles that were delayed by the lockdowns or any sign of kind of a real activity recovery? And secondly, on the million OpEx investment, I guess, that could be around, I don't million or so heads. Can you say how you assess the potential payback or what you expect that to deliver given the difficult markets to judge at the moment? And then just just lastly, you've talked about more remote working world. Have you had any thoughts on what that means for Hayes itself and your cost base? I'm aware that 20% of your offices are still closed. So any thoughts about the kind of midterm outlook there? Thanks very much, Rory. Let me kick off on all 3 and then Paul, I'll hand over to you for any further points on the million OpEx and, and issues around our cost base. In terms of the the perm roles picking up, yes, there are some ten give signs of modest improvement in activity, particularly in the perm markets in a number of countries around the world. Undoubtedly, some of that is organizations that put things on hold a while ago, while they worked out their own strategy about what they're focused on. But also there are new roles coming through as well in different sectors, that resulted maybe post pandemic I think it's a combination of 2. In terms of the million OpEx, it goes into a whole number of areas, but it's largely bringing in more capacity is you quite rightly point out into into specific subsegments around the world, which are country specific. I would expect that we'd start to see the returns for that in the 2nd year. So we're not going to be seeing anything in the 1st 12 months because we're building up teams training them, they're building up their databases, etcetera. It will take us into the year 2, that investment before we're seeing a return, but I still think it's a rapid and fast payback. It's exactly in line with the sorts of previous investments that we've already been making. So this is This is more of the same done more quickly in more areas is how I would describe it, Rory, as opposed to something fundamentally new. So we know what the track record of when you make this investment when you start to see it washing its face and when you start to see it delivering. The kind of longer term returns that you'd expect. So years 2 is year 2, it starts to be washing its face years 3 onwards yet you're earning very, very attractive returns. But clearly, we don't have a bottomless pit of investment, so we've had to beat the careful and considerate and challenging on the plans that have come to us from around the world. And we've not backed everything, for example, we've been very focused on where do we allocate our resources? Because the results is always a scarce, whether it's time, people, or money. And I think we've got the right balance there. Once we've gone through year 1, then we'll assess where we've got to and provided we're being successful. Then we may well look at continuing into year 23 with some level of additional investment, but I think these are all the right things to do to build big businesses in those segments in the market that kind of your point going forward. And then finally, on the remote working, about 80% of our offices globally are now open. We have a number in places such as parts of the state, South America, etcetera, where the offices are closed. At the moment for obvious reasons. At any point in time, about 30% of our people are back in an office, but each day it might be a different 30% in sea ottermine because we have to make sure that we're planning properly around, safe working protocols, social distancing, etcetera. We've started at the early stage thinking through what's the implication for our office footprint. And clearly over time, we you can easily envisage that we may not need the space, that we currently have. But that doesn't mean we'll be pulling out of anywhere. Still expect to retain a local presence. It's just that the local physical presence may not need to be as big as it's been in the past. But we're working through all of that now. I think one of the things that all companies ourselves included have learned through this pandemic is number 1, you can do a lot of of the time, homework in situations around the world may not be particularly conducive either to continued strong productivity or even just an individual's sort of well-being. So we do think there's a time and a place for the office, but we also think that we can build greater flexibility into all of our employees work schedule, and we think that will give them a better balance going forward actually and create a stronger proposition for people who want to come and work for, hey, signing that balance doing working in the office with your team and all the benefits that brings, whether it's cultural training, just the social interaction. With also the ability to work from home, in a planned way. Too early to say what that might save us, but with that, let me hand over to Paul. Yes, just a couple of comments. I would add, Alastair, I guess, on the perm side of it, clearly, some of the indicators that we're seeing are more likely to hit in Q2, but the UK, we are definitely seeing a fairly obvious pickup in activity levels. And I think in part, that's, of course, because the UK was the one of the toughest lockdowns and the longest. So encouraging, but more likely to impact 2nd quarter, And I think on the investment, an important part of it is back to the key account management. And we've got a great client base But what we want, what we're trying to do, and we've done good track record as Alastair showed in his slides, have good in greater share of wallets of each of those accounts, So for example, there's a large investment going into the U S to put a number of key account managers to focus not just for the benefits of the U. S. Market, but for the benefits of the global market, because of course, you've got so many global companies based in the U. S. And that will be that's going to give us a return for years to come. Thank you. The next question comes from the line of Ambrish Agrawal from Morgan Stanley. Please ask your question. Hi, good morning. I mean, sorry, my line has been on an off, so I appreciate it. This has been covered before, but I just got a couple of long term questions here. First, I mean, one of the issues for the recruitment industry in general has been the level of competition increasing post pandemic, have you seen sort of any signs of consolidation or sort of the smaller players in the industry starting to suffer therefore? There is a landscape for the bigger recruitment companies to sort of gain market share and probably some of the investments you're making in the fields sort of helps you to cover that. And second, just talking about the flexible working and then there are sort of 2 aspects to that. 1, I mean, more of your consultants sort of work from home, then obviously there is scope for cost saving there. Any sort of thoughts on that And then second, how does it sort of change the revenue model or does it change the revenue model for you guys at all? If your sort of consultants are working more work from home and do you sort of need to open anything in there? Thank you. Let me keep up and then Paul, and hand over to yourself. I think it is fair to say that we will see a degree of consolidation in the marketplace, as organizations struggle to survive or grow. Some organizations undoubtedly will exit this market, and that will play to our benefit. So I fully expect that part of our strategy very clearly is to grow our own market share, as a result of those changes. However, we'll do that organically. So we have no intention to engage in any kind of sort of inorganic growth. I think the opportunities are there for us to take by just doing a better service for more people. As Paul has already mentioned, there's a number of areas where we've already taken market share And we're making investments ahead of the curve now. Paul's example in the United States is a great one. They're putting quite a significantly enhanced bigger team into our account management part of the business, without very intention. To either hoover upgrade to market share within existing clients and do more of their recruitment spend where we may be one of several suppliers or to win new clients when we've got examples of both of those going on, and that's a key part of our strategy going forward. In terms of flexible work, and I'll hand over Paul in secondly on the cost savings. I personally don't see why it would change the revenue model, but Paul, any thoughts? Look, I think 2 or 3 things. We cannot estimate the importance of offices and for culture and for on the job training, the best on the job training is where you hear your colleagues doing calls with candidates or clients and you get used to their success parts. And that's very important for, the new people we bring in the business in the 1st 12, 18 months, etcetera. But I think what is true is, I've had the pleasure of being here for 14 odd years. If I'm here for another 5 to 10 years, then I don't think I'd sign an dension or expansion of a large property lease again. So I think for most businesses now, we know that in the individuals in your business have proven themselves, got proven skills, and they will get greater flexibility, and they are likely to work from home 2 days a week, 3 days a week, whatever the right model is. And so I think over time there will be savings as we work our way through. I would not be surprised to see the actual sheer space that we have, per consultant in the business fall by something like 20% over the next 5 odd years. So that's some benefits but there's no change to the revenue model. That will be the same as same as normal. The next question comes from the line of Andy Grobler from Credit Suisse. Please ask your question. Thing. Just one from me, if I may. The temp gross margin was down again. And you mentioned some of that was the German utilization. Can you just talk through, the other drivers of that decline through the year. And I guess as a bit of an add on to that, as the IT business continues to grow, would you expect that to put further, incremental pressure on the, on the TEM gross margin? Paul, over to you. Quite a weak line, Andy, so if I hopefully, I'll pick up both ones. But you're right. First of all, on the tech margin, it was predominantly in Australia and in Germany. And in Germany, I think there were 2 parts to that. One without a doubt, the last really the last 2 years, not just post pandemic, last 2 years in the German economy has been much harder. We've been talking about weakness in automotive for some time. We've got a lot of clients, whether it's in the automotive space, but also of course in the banking space, looking to reduce cost etcetera. So understandably, there has been pressure on suppliers. And our aim is to stick with our customers through tough times, we have to accept that we may and slightly less margin. And there's also less wage inflation and everything else. So that's been part of it. In Australia specifically. Of course, there has been a very long tough slowdown in construction property and also in resource and mining. And that those have been relatively higher margin areas and therefore have reduced. And then finally on IT, that is correct. The beauty of IT though, you get it both ways. It's the highest salary level, specialism that we operate in on an average across the world. So we get a higher pounds margin per hour on activity. But of course, our clients recognize that and therefore, it tends to be a slightly lower margin and level versus things like accounts in finance, which are pretty much in the 18% to 20% level in the state at that level. But The important part for us is that's one of the reasons I've always focused on our own internal efficiencies. So one of our track records over time, which Alastair has driven beautifully has been to drive efficiencies into our business, not just in the front office and consultant productivity, but of course, all specs of back office, automation, etcetera. We've got a lot of bots being tested at the moment. Those are the things to reduce our own costs and pretty much we've been able to offer more than offset the consultant productivity and our own cost reductions, any reduction in temp margin. Great. Thank At this moment, there are no questions over the phone to your speakers who are welcome to our to announce the questions over the from the webcast. It doesn't appear to be any questions on the webcast. We're just refreshing to see if that comes from the body. Okay, so quite a chance if anyone online would like to ask a question. No. Doesn't appear to be anything. Last chance from the floor on the voice questions. Alistra, I think we can wrap it now. Excellent. Okay, guys. Well, thank you everybody for dialing in this morning. I hope it was helpful. I hope we've given you some some clear indications of where we find ourselves and how we're feeling today. So we look forward to talking at the first quarter IMS in the not too distant future. Thanks again for dialing in. Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.