Earnings Call: H1 2020

Feb 20, 2020

Welcome to our half year results. As usual, you know, the former, I'll take you through the operating review, and Paul will walk us through the detail, financials, conduct current trading, and then I'll come back and finish off with an update on the strategy. So, clearly, it's been a difficult 6 months with old case with the markets, and we've also had unexpected events that we've, what we've done with the round work. But I think the key point I want to make here is that we've continued to execute against our strategy It's a strategy that we firmly believe in, and we spent our time in the last 6 months seeking to get the balance right between continuing to invest in those areas where that where we continue to see long term opportunity whilst also protecting our profitability in other areas through tight cost control and management. So let me turn to the results themselves. Net fees were down 2% to $553,100,000 and operating profit was down 18% to 100,100,000. And looking first at the fees, sequentially, the underlying first quarter fees fell 1%, but the momentum deteriorated through the half and the second quarter was down 4%. The main driver of this was a sharp slowdown in Germany, which if you remember went from mid teens growth a year ago to decreasing by 9% in our last quarter as the German economy and its industrial base weakened, particularly in the automotive sector. At the same time, however, just to put things in context, we did hit card fees in 7 countries around the world. I think that's a good indication of how mixed the markets have been globally. Looking at cash, cash generation again was good. Our underlying cash conversion was up 2 percentage points year on year, and we ended the half with £13,000,000 cash, very much in line with our expectations. And as per our policy, we maintained the interim core dividend at 1.11p, which brings our total dividends shareholders distributed since 2017 to over 1,000,000. What have we been doing? Well, clearly as the markets got progressively tougher, we implemented a number of cost reduction initiatives, largely in November, predominantly in the overhead areas, and we believe that should benefit our second half by around about 1,000,000. Consultant headcount was down marginally in the 2nd quarter. So while the average consultant headcount in the half was up 1% versus a year ago, the period end headcount was reduced by 2%. In terms of investment, we added 1 new office to our network. We expanded several others, but we also continue to invest in those businesses, which we believe offer significant long term potential. The technology sector is one obvious area and we added an additional 200 heads into the IT business globally in the last 12 in the last six months. The IT business is now nearly a quarter of our total group fees, and that makes it our largest specialist and it also interestingly makes Hays 1 of the world's largest recruiters in the technology space. So IT fees themselves were up 3% globally and outside Germany were actually up 8%. We're now starting to explore other interesting areas little interesting sectors such as marketing and HR, which we believe over time can offer similar potential to the tech sector. To support our consultant we continue to invest in building com consultant pro positivity enhancing systems. And as many as you've, many of you saw our recent technology are. We've launched several new tools in the last year, all of which are designed to make our consultants more effective in their jobs. So just stepping back We've been dealing with the world of political and uneek and economic uncertainty in many areas, together with some genuinely unforeseen external events in some of our biggest markets of the UK, Australia, and France. And against that, we've sought to defend our fees and our profitability in the more difficult markets, but we've also taken steps forward to invest in those areas where long term opportunities are apparent. I think that that's absolutely the right thing to do, even though it impacts short term profitability because the long term potential in those investment areas, I believe, is absolutely undiminished despite the current economic backdrop. So let me now give you a little bit of color on each of our divisions. We'll start in our Australian New Zealand. As you can see here, fees in ANZ fell 4% and profit was down 14% year on year. The temp market was relatively resilient. It was down just 2%. We had an average of around 22,000 workers on assignment throughout the half. But perm was obviously more difficult and it fell by 9%. Stepping back from July through to November, fees were broadly stable on a month on month basis, are pretty close to record levels. Remember, however, in December, the bush fires effectively stopped all activity across the country, particularly in the perm market, and we had a very weak end to the year. New South Wales and Victoria combine on behalf of the business, they fell 8% and 9% respectively. Queensland and Western Australia were also down marginally, but South Australia was up 2%. Looking at the production property is our largest sector in ANZ. That continued to be a very tough market. It was down 13% and we adjusted our costs accordingly. ANF and office support were also more difficult, down similar amounts. But again, on the positive side, IT grew 5%. And HR was up 7%. Headcount across ANZ was down 6% year on year, and it was flat in the half as we've focused on productivity and profit protection despite the investment that went into the IT business. And then finally, I shout out to our colleagues in New Zealand think the management team there that we put in 18 months ago have done a fantastic job and that recovery has continued. He's in New Zealand, up 12%. Turning now to Germany, our biggest country net fees were down 5% against a very tough comp last year, and profit was down 20%. Fee growth slowed progressively through the half as business confidence fell and client started to shift more in cost control mode. And I think this was particularly evident amongst our larger clients, which are some of the biggest names in Germany, the Automotive Manufacturing And Financial Services sectors. On a more positive note, we did see growth amongst the smaller and the mid sized clients, and we're clearly directing more of our resources into that middle stand area as we speak. The Flex business, which is around 83 percent of German fees was down 5% in total, and and that comprised of contracting down 7% and temps down 4% and perm itself was down 3%. Looking by industry, our largest specialisms were the toughest, so engineering was down 10% and IT was down 3%. But the newer specialisms performed much better, including sales and marketing, which was up 17% and our legal business which was up 4% and those new businesses now constitute around a third of the overall German fees. We did reduce headcount by 4% year on year. That was broadly in line with volume, and it was mainly in the 2nd quarter. But again, in terms of investment, we opened 1 new office in Breman, very much in line with our network expansion strategy. So while things have been more difficult in Germany, I believe the long term opportunity in a skill short market remains as intact as it ever was. And our job now is to make sure we've set the business up to capitalize on that long term potential to continue to reinforce our market leading position there because we believe that there's a massive amount of value unlock. And then moving to the UK and Ireland, net fees, were down 4%, profit down 21%, And unsurprisingly, in the run up to the election, conditions became more difficult as confidence between both clients and comp and candidates weakened. Always happens around every election, and this was no different. Temps is around 58% of the UK Ireland net fees. That was relatively resilient. It was down just 1%, but term was perm was much tougher, and perm fees fell 8%. The public sector had another good run. It was up 8%. But the private sector, which is almost three quarters of the UK business, was much tougher and that was down 8%. Looking by region, Northern Ireland continued to do well. These up 2% but the north was much tougher. It was down 9% and London is our biggest region, as you know, was down marginally down 2%. Looking by industry sector, our largest specialisms of A And F And Construction And Property both decreased at 6% and 8%, respectively. Education is a big business for us. It was down 6%. But the good news there is after several tough years, the education business did stabilized towards the end of the half for the first time in a in a number of years. IT repeated the success story it grew 8% and Healthcare, another interest in investment area of ours, delivered some very strong growth. Up 15%. Looking at consultant headcount, we increased headcount by 2% over the half, mainly as we added around 60 consultants additional into our IT business to support demand there. And then finally, the rest of the World Division, it comprised 28 countries around the world grouped into 3 subregions. Overall, across the entire division, fee growth was 2% but profits decreased by 20%, primarily due to 3 specific factors: number 1, a mark slowdown in fee growth throughout the half, particularly in China and Canada. Number 2, the strikes in France and number 3, the investments that we've chosen to make in countries in Europe outside Germany, 6 of which had record harms. The largest market in that region is France. It was growing at about 3% from July through to November, but the general strikes in December took away all of the momentum in France and France ended up with flat fees over the half. Of the smaller countries in, in Europe outside Germany, we had a range of different outcomes. So the, the Netherlands was very tough. It declined 12% and it weakened through the half. More positively, Belgium showed signs of stabilization, it was down very marginally down 1%. But a shout out to Italy, which was the standout performer this time around, it grew a very strong 10%. And operating profit in EMEA outside Germany fell 18% year on year largely due to the the French slowdown and our continued investment in the IT business right across the patch. Across the world in Asia, fees grew 4% including 7% in Japan and a fantastic 29% in Malaysia. However, we did see slowdown through the half in China, including, Hong Kong, obviously, when coupled with additional in, property investment across Asia, that meant that our percent that was led by the United States, which itself was up 12%. We continue to reinvest most of our profits in that region to build scale faster in the states. However, Canada was tougher and Canadian fees were down 5%. Right across the entire division, average rest of the world headcount in increased 1% in the half and 2% year on year as we expanded capacity. And then finally, our usual traffic light assessment of our performance versus our long term, profit aspirations as as you know, our 2022 plan aims to significantly grow our profits to between £345,550,000,000 based on macro conditions remaining as they were in November 2017. I think we all know that the world has become significantly tougher since since that date. And last year, we said it may take us longer to achieve the midpoint of that range. I think the factors that we're dealing with now will probably mean that it will take around 2 to 3 years longer, but rest assured that we're still managing our business against that original plan, and we're taking actions ensure that we eventually get to those profit numbers. So looking first at ANZ in the top left, the combination of lower fees and slower economy means that that business has turned amber. We still have the chance to to deliver on the 2022 aspirational profit range, but there are more risks today than last time we met. Turning to Germany, in the in the top right, the pace of the fee decline in Germany's accelerated with Automotive And Financial Services, very tough sectors. And with the German industrial base going through its own transformation, I think it's prudent to downgrade Germany to RED. It will be beyond 2022 when we reach that aspiration of doubling profits from our 2017 levels, But again, I am very confident that we will get there and that will come when we see a period of stability and a return of GDP growth in Germany, which should get us then back to our historical levels of German fee growth. Bottom left UK and Ireland is still tracking very close to our 5 year plan range and it's outperforming the market. I do hope that the decisive general election result will provided much needed market input over time. However, I'm also very mindful that we still need to get through the details of the future trading arrangements with euro and to rebuild some positive fee momentum. So with all of that going on, we'll keep the UKA number for now as well. I've also kept the rest of the world on Amber. I'm very happy with our United States performance and encouragingly France has rebounded very, very well after the, the December strikes. However, China and potentially other countries across Asia are likely to be significantly impacted by the coronavirus outbreak. Understandably, this has caused deep concern both in China as well as globally and we're very closely monitoring the situation. Our number one priority is the health and safety of all our all of our colleagues and our clients, and we'll do whatever we can to provide any support that they need at what is a very difficult time. I think today, it's still too early to assess whether the markets will stabilize relatively quickly as they did with the SARS outbreak back in 2003. Or whether it takes longer, but it is a material uncertainty that we need to manage through in the second half. So overall, It's been a tough half, but our long term opportunities are undiminished. I'm very confident in our strategy. We're blessed with excellent management teams throughout the world who've navigated through many periods of uncertainty and will continue to do the right thing for our shareholders which is both investing for the long term, while striking a balance in managing our cost base in the near term. Now hand over to Paul a deeper look at our financial performance. Thank you, Alastair, and good morning, everyone. Starting with the highlights of the financial review, Firstly, to summarize what's been a tough first half. As you can see on the slide, net fees decreased by 2% on a like for like basis, whilst operating profit declined 18 percent to 100,100,000, impacted by sharp slowdown in our largest country, Germany 3 external events in December and million of net reported cost increases driven by strategic investment in our IT specialism, prop and IT capability. As a result, EPS decreased 22%, but in line with our dividend policy, the board has maintained the interim core dividend at 1 0.11p per share. These results reflect the tough conditions we've experienced combined with our continuing investment in key areas to support future growth. Coming on to the more detailed income statement, on a reported basis, net fees decreased by 3% and operating profit by 19%. On a like for like basis of organic growth at constant currency, net fees decreased 2% on operating profit by 18%. And the difference between the reported and like for like rate exchange between both the Australian dollar and the euro versus sterling. Overall FX movements decreased net fees and operating profit by 1,000,001,400,000, respectively, and I'll cover FX in detail later on. Market conditions Alister covered trading early, and I will not repeat that here, but I thought it useful to set out the market backdrop that we faced, how our clients have changed the way they manage their business, and our hays has responded to a weakening conditions. Over the last 18 months, we've seen a material weakening in global economic conditions, and our group net fee growth has slowed materially from 14% growth in Q4 FY18 for 4% decline in Q2 FY20. This trend has been seen across all of our large international businesses other than the U. S. And in the UK after stable fee trends until Q3 FY19, we've seen a decline due to Brexit and election uncertainties. As a result, since Q1 FY19, we've seen our clients move initially to reduce investment spend, then to cost control, and then over the last 6 to 9 months increasingly to cost reduction mode. As our client confidence has reduced and decision making slowed, We've also changed our approach to managing the business. The start of FY19, we were focused on investment to capitalize on the many growth opportunities around the world. But over the last 12 months, we've moved to a more surgical approach, still investing in those parts of the market that are growing and which are strategically important such as IT, while simultaneously reducing costs in those parts of the market that have become more difficult. And overall, we have reduced total consultant headcount by a net 200 since the peak. As you know, our H2 FY19 European restructuring reduced our overheads by 1,000,000 And additionally, in Q2 FY2020, we completed a program to further reduce our global overhead by $5,000,000, helping to attack our second half FY2020 profitability. The key as key Hays strength, our experienced management teams around the world. We will continue to seek out growth where possible but also drive tight cost control where appropriate. We've been here before and we'll deal with it appropriately. Planning for the in our IT specialism, £1,000,000 of which was funded by cost reductions in other areas. In Germany, costs increased by a net £2,000,000 like for like representing increases in an incremental £2,000,000 in our IT specialism, all funded by cost reductions in other areas. And in the rest of the world, costs increased by 1,000,000 like for like, including 1,000,000 in our IT specialism, 1,000,000 in expanded offices especially in Asia and £4,000,000 in base pay and commissions net of overhead reductions. On this slide I've set out an operating profit bridge comparing the profitability in the first half of the last financial year with first half FY 'twenty. Starting with 1,000,000 with deductible negative impact of exchange on profits of 1,400,000 and the 2% decline in like for like fees of $11,900,000 explained earlier. Then there are 5 main cost buckets which impact profitability. Starting with our 1,000,000 investment in 200 consultant, IT consultants, and other costs to accelerate the growth and capability of our IT specialism in the UK, Australia, France, and Spain. £4,100,000 in property costs, which is net of IFRS 16, increasing capacity in existing offices, primarily in Asia. These decisions are often taken 2 years before the offices come on stream. Thirdly, £2,000,000 investment in our IT capability and cybersecurity. And finally, £4,600,000 of pay, mainly inflation, and other net cost increases offset by £5,000,000 of cost savings, including 2,000,000 of last year's reduction European overheads, 1,000,000 in reduced current year management's incentive costs. Excluding our IT headcount investment, Our average consultant headcount decreased by 1% unless average consultant productivity also fell by 1%. And as Alastair explained earlier, we're trying to get the balance right between investing for the long term and cost protection in the shorter term. Moving on to look at the performances of our permanent term businesses, our perm business representing 42% of group net fees decreased by 3% driven by a 10% increase in volume, partially offset by a 7% increase in our average perm fee. The increase in average perm fee was in part due to client mix where we saw a greater decline in volumes from larger clients where the average perm fee tends to be lower. We estimate that global wage inflation will Circa 2% overall with pockets of higher inflation in certain skilled shortcuts markets. Our 10 business 58% of group net fees declined by 2%. This comprised of volume increase of 1%, a 2% increase in mix and hours, primarily due to the relative strength of our IT Specialism, net of reduction in German Tempowers, together with a decrease in underlying temp margins down 50 basis points in Australia and Germany. As usual, we provide details of P and L sensitivity to changes in kick exchange rates the Australian dollar and even more so the euro represent meaningful FX translation sensitivities for the group each 1¢ movement in the annual average rate impacts operating profits by $400,000 $1,200,000 respectively, and the total half 1 operating profit impact to moving exchange rates was 1,000,000 negative versus prior year. If current exchange rates hold the remainder of the actual year, the impact on the FY 2019 full year reported operating profit will be 1,000,000 negative this is £3,000,000 worse than that at the q 2 IMS in January and £12,000,000 worse than the prelims. As we said before, the group does not undertake any P and L hedging translation. Moving on to conversion rate, our group conversion rate for the half decreased by 3 70 basis points year on year to 18.1 percent, The decrease is almost equally split between the decline in fees and increase in costs, and I explained the regional costs changes in costs space earlier in the presentation. IFS16 for leases became a effective for the group from the 1st July 2019 and the group is reporting this under the new standard for the first time. We've applied the modified retrospective approach with no restatement to prior years. On this slide, we set out on hand side, the impact on the income statement, which leads to an increase in operating profit of 1,000,000 and a reduction in profit before tax of 1,000,000. And on the right hand side, we set out the impact on the balance sheet with a capitalized leases and outstanding lease liability both at the start of the year at the end of December 9, 2019. The reduction in asset liability levels during the 6 months reflects that after a number of new leases started in the 12 months to June 2019, which led to the increase in property costs explained earlier. There were minimal new leases signed during the first half. And thus the balances have reduced. Moving on to interest in the next net finance charge for the 1st year decrease increased to 1,000,000, primarily due adoption of IFRS 16, which increased the interest charge by 1,000,000. We expect the net finance charge for the full year to be around 9.5 1,000,000. And turning to tax, our effective tax rate decreased to 29.5 percent, driven by the geographic mix of profits. We expect the tax rate remain at 29.5 percent for the full year. Basic earnings per share was 4 point pence, a 22% decrease versus prior year, reflecting the group's lower operating profit, higher interest charge due to IFRS 16 and lower effective tax rate. The impact of IFRS 16 reduced basic EPS by 0.1pads. On this slide, we've summarized the key components of our cash flow. The chart on the left details our sources of cash flows starting with operating profit of 100,100,100,000 We had backed non noncash items of 35,100,000, predominantly, IFRS 16 property depreciation, other fixed asset depreciation, and amortization, and also share based payments. We then deduct to 1,000,000 outflow in respect of working capital driven primarily by normal seasonality net of a decline in our Tempur contracting business. We then deduct lease payment to 24,100,000. This leaves an operating cash flow of percent, which is up 2% on last year. And from operating cash flow, we paid tax of 31,900,000 and net interest of 700,000. Leading to free cash flow of $32,600,000. And as normal on the right hand side, we set out how we use the cash generated. The main items are dividend payments 1,600,000, representing last year's final and special dividends paid in November, CapEx of 15,000,000 and pension deficit payments of 8,100,000. For the full year, we expect net we expect CapEx to be circa 1,000,000. On cash, our underlying cash performance was good. We ended the half with net cash of 13,200,000, some 1000000 below prior year, due to lower profitability, million higher dividend payments, net of lower working capital outflow. In October 2019, we extended £210,000,000 facility by year to November 2024, exercising our option in the banking agreement. On this slide, we compare the balance sheet at December 2019 versus June 2019. And the 3 noteworthy movements are impacted the presentation of IFRS 16 as explained earlier, an increase in the IS19 pension accounting surplus, 29,200,000 primarily due to company contributions and increase in asset values net of an increase in liability due to a lower discount rate and the increase in working capital explained earlier. Moving on to dividends. Our priority for the free cash flow remain unchanged namely to fund the group's investments and development, maintain a strong balance sheet and deliver a core dividend at a level which is sustainable progressive and appropriate. The board has maintained our interim dividend at 1.11p per share in line with our policy. And finally, the group is highly cash generative and has paid or proposed more than 1,000,000 in core and special dividends since the start of FY 2017. And in the on the 3rd box on the slide, we have reiterated our special dividend policy. So in summary, with market conditions that have been in Germany and where we've been impacted by 3 specific events in December, we tried to get the balance right between investing for the long term and managing our cost base in the short term. We have continued to invest in our largest and fastest growing specialism IT whilst at the same time continuing to reduce our cost base in other areas with our focus on reducing the overhead cost base of the group to provide some profit protection in the second half. Our ability to then turn these profits into cash means that after paying 1,000,000 in dividends we ended the half with a net cash position of 1,000,000 and have maintained their interim dividend. And in conclusion, these results continue to demonstrate the strength and depth in management we have across the world which is especially important in such and certain times of these. Before I talk about the regional trading trends for current trading, 2 overall comments. First, understandably, too early to quantify the effect of the coronavirus on our second half trading. And secondly, exchange remains a material sensitivity to reported profits and movements since the Q2 IMS further reduced profits by 1,000,000. On regional trends in Australia, Overall trading remains subdued. The return to work in our temp and contracting business has been 3% slower on average than prior year trends impacted by the bush fires although that gap has reduced in recent weeks. In Germany, trading remains tough. Our return to work in Tampa Contracting has seen a 2% lower level of contractual extensions in the prior year. However, since then, the actual level of new contracting and temp assignments are broadly in line with the trends seen in previous We continue to closely monitor average hours worked per assignment, which are running at 4% below the prior year modestly better than the trend seen in Q2. And given the step down in German fees and the difficult outlook, we are again reviewing the cost base of that business. In the U. K, overall trading remain subdued and in our temp and contracting markets, our return to work to date has been 2% lower than trend seen in prior years, primarily in the private sector IT markets. As we all know, expected changes in IR35 regulations in the private sector from April may well lead to a hiatus intent activity coming up to that date and beyond, primarily in the private sector. In the rest of the world, in Asia, China is increasingly tough with additional public holiday and travel restrictions relating to the coronavirus outbreak, materially impacting market activity This is likely to continue across the whole of Q3 FY2020 at a minimum. Elsewhere growth remains good in the Americas led by the USA, And in EMEA, ex Germany, the return to work has been solid, including in our largest rest of the world markets of France. With that, I'll hand you back to Alastair who will update you on strategic priorities and progress before taking any questions. Thanks, Paul. So let me just spend the next few minutes looking slightly longer term so you know where our priorities lie. And as I said earlier, we haven't changed our strategy nor our approach to running the business because we follow these same 4 key themes to run Hayes to make sure that we build both profitable and a cash generative business and one that's also sustainable over many years to come. So even though many of the markets were tougher in the first half and we cut costs in those markets, we still made good progress in several other areas. So we did hit record net fees in 7 countries, including the United States, Russia, and Japan, for example, and we did end the year with 13,000,000 in net cash rolling out some of our newer specialisms into key markets around the world. So just over a year ago, I talked about the launch of accountancy and finance into States and that business just grew 42%. Over in Germany, we launched sales and marketing fairly recently and that business grew 17% and I think these are great examples of what I'd call relatively low risk growth where we take a business where we're already the global leader and we the single Hays brand. It's a key part of our strategy to steadily infill all of those specialisms across all of our regions. Another key plan for the strategy is to embrace technology to make us all better at our jobs and to bring more valuable services into the market. And to do this, we continue to initiate and grow partnerships with some of the biggest technology companies in the world because we believe that technology can augment our human expertise but will not replace it. A great example is here in the UK where we recently launched some new services into the education market to help our schools and our teachers, meet the demands that are placed upon them. And I think those new services that can help literally every school and every teacher in the land, so our ambition to make a real contribution into that space is very indeed. Already, our Hayes hub app is now being used actively by several 1000 teachers and over 2000 schools. You've seen this slide many times over the years. We're obviously highly focused on the core profit drivers over on the left. They constitute around 2 thirds of our net fees. And as we've shown this morning, each of those three markets have had issues and headwinds to deal with, and that hasn't happened in tandem since the global financial crisis. However, we're also the market leader in each of these 3 countries, and we'll use that privilege position to continue to invest to ensure that we remain ahead of the competition. One such investment obviously has been the specialism globally where we grew headcount by over 200 consultants. That's as big as most people's entire IT business, by the way, we added that in the last year, and I think that's worth a closer look. Slightly busy slide, but back in 2008, IT represented around 14% of our group net fees, and it was our 3rd largest specialism. Today, it's 23 percent of group fees and it's our largest specialism. And our IT fees now globally are around about a quarter of a £1,000,000,000 and that makes us 1 of the world's largest technology recruiters with over 1700 consultants worldwide. However, I do believe that there's a lot more to come. Remember, these are still short markets. Pretty much every company in every country in the world needs more technology people. There's obviously a wide range of skills and subsectors beneath the overall IT banner. So we are targeting the most skill short areas as well as anticipating what are likely to be the greatest in demand submarkets in different economies And when I think about some of the hottest parts of the market today, areas such as cybersecurity, machine learning, artificial intelligence, big data, Python programming, Many of those were very, very small by comparison just 5 years ago. And in fact, many of the jobs that we're recruiting to fill today simply did not exist. Just back then. So between 2010, 2016, you can see our global IT fees grew organically at around 6% CAGR and each region is shown in the dark blue column on the screen. However, in the last three years, We've invested both more aggressively and on a more sustained basis, and we've seen the global fee CAGR accelerated 12%. In four regions, growth has accelerated and dramatically so in places such as ANZ, Asia, and across most of Europe. So today, despite all of the tough conditions that we've talked about, we still grew IT fees by 3% in the half. And if you exclude Germany with it's well known, economic issues. IT fees globally were up 8%. I'm personally very proud of the progress our teams have made in the IT specialism just over the last few years and there's no reason why that specialism can't become more than 30% of our group net fees in the foreseeable future. So wrapping up, we have faced some tough markets. We've faced uncertain politics, but the business is adapting to it. We have a very clear strategy that we believe in very deeply. We also have experienced management teams who've been through such cycles many times. Our priorities are to constantly, balance both long term investment with short term profit protection. As well as collecting dividends in total dividends since FY 2017. So while it might be difficult to predict exactly what the markets might have in store for us for the 6 months, nor which new events might grab the headlines, please do rest assured that we believe we can navigate through all types of conditions. We will protect our business and we'll also make sure that we exploit any opportunities that are available. So with that, Paul and I, happy to take any of your questions And because we are being recorded, there is a mic by the side of your chair, if you could use that. Paul? It's Paul Cheggers from Barclays Capital. Can I just ask about Germany and China, please? With regards to Germany, the hours works point where it's gone from minus 6 to minus 4. Is there any sort of comparative benefit or is that genuinely a move in the right direction? I know it's still -4. And more broadly on Germany, Can you give us tell us that how you think the best way to address the market is at the moment given the challenges it's facing? And is there anything you've seen that causes you to modify your medium to longer term strategy. I know there's a few points within that. And on China, perhaps you would just give us the latest and the state of play in terms of demand your operational situation and the cost base. Thanks. If I start off with the German hours, I think it's too I just take some comfort it hasn't gotten worse, Paul. So we went from nothing to 6% in that last quarter. I was quite clear on the call that there were some specific clients that had furloughs where they were asking contractors take time off. So, unpaid leave in December. So the 4% at the moment feels a more normal level. And what that seems that seems to be tracking fairly stable on a week by week basis, but clearly, we need to see another couple of months first. All I was trying to do was kind of give some comfort. It has not worst. There were a few one offs, in December, but underlying, this is really tight controlled by our clients. Just in terms of what are we doing about Germany? We've very successfully built our business over 15, 20 years by concentrating on the the bigger corporate end of town. So some of the biggest names in the German economy are our long standing clients. And in contrast to most of the rest of the world, Germany is more concentrated. Its fee base is more traditionally concentrated in the larger corporates versus the rest of the world which