Trading Update

Jul 16, 2019

Earnings release

Morning and welcome to the Hayes Q4 Analyst Conference Call. My name is Courtney, and I'll be your coordinator for today's event. Please note that this conference is being recorded and for the duration of the call, your lines will be on listen only. However, there will be and you will be connected to an operator. I will now hand you over to your host, David Phillips, Head of Investor Relations to begin today's conference. Thank you. Hey, Courtney, and thanks everyone for joining us. Good morning. Welcome to our quarterly update call for the 3 months ended 30th June 2019. The fourth quarter of our financial year. I'm David Phillips, Head of Investor Relations, and I'm here with Paul Venables, Group Finance Director. Before we begin, please be aware that the call is being recorded and the recording is accessible using the number and code provided in the release. Please also be aware that any discussions today may contain forward looking statements that are based on current expectations or beliefs as well as assumptions on future events. There are risk factors, which could cause actual results to differ materially from those expressed in or implied by such statements. Abe disclaims any intention or obligation to revise or update any forward looking statements that have been made during this call Regardless of whether these statements are affected as a result of new information, future events or otherwise. I'll now hand you over to Paul. Thank you, David. Good morning, everybody, and thanks for joining us. I'll summarize the highlights of today's update, cover some key themes, and discuss regional performances before taking any questions. As usual, all net figure percentages I will give will be on a like for like basis versus prior year. Highlights of the results, we delivered a solid quarterly performance with group net fees flat on a headline basis and up 1% underlying when adjusted for working days. This is against tough year on year comparatives, more mixed macro conditions and signs of reduced business confidence. That currency effects were minimal. I highlight the following key features in the results, gross was flat in both our 10th and perm businesses, On an underlying basis, Q1's 1% Q4's 1% increase represented our 25th consecutive quarter of year on year growth. 8 of our 33 countries delivered double digit growth, including 6 all time quarterly records. Earlier net fees declined underlying 2% versus a tough comparative and some negative impact from the run up to the general election. Germany delivered solid underlying growth of 4% against an increasingly challenging macroeconomic backdrop. In the UK and Ireland fees declined 1% on an underlying basis, comprising good 7% headline growth in the public sector business, and understandably tougher conditions in the private sector when that fees fell by 6%. Performance in the rest of the world was solid, up 2% Asia performed strongly at 10% and Merex Germany was flat with Southern Europe performing better than Northern, whilst the Americas fell 1%. Total consultant headcount was down 2% in the quarter and up 4% year on year. In line with our long term plans, we opened 1 new office in Effort, Germany. We've reiterated the expectation for full year operating profit to be in line with current market expectations of 1,000,000 And finally, cash performance was strong, and we ended the quarter, we ended the quarter with record net cash of 1,000,000. On our comment on the performance by each division in a little more detail. Our ANZ division 18% of group net fees declined 3% or 2% underlying. This was against a tough comparative some negative impacts from the general election and market activity levels and more mixed market conditions generally. These particularly impacted perm, which declined 15% although 10% was solid and grew by 3%. Public sector fees were flat with private sector down 4%. Trailier fell underlying 2% in New South Wales and Victoria together 57% of Australian business, net fees fell 4% and 7%, respectively, Queenland grew by 1% and ACT was up 2%. Both fees in Western And South Australia fell by 6% and 1% respectively. At the specialism level, net fee growth in IT was good up 7% and HR grew by 4%. Instruction property, our largest business in Australia, saw continued tough conditions and declined by 16%. 4th consecutive quarterly declined. Mackenzie and finance fell by 11%. New Zealand, which represented about 5% of A and Z remain tough. And as in Q3, net fees fell 6%. And so headcount in ANZ decreased 6% in the quarter but was up 1% year on year. Moving on to Germany, our largest business, which represents 25% of group net fees, which grew by 2% or 4% on an underlying basis. Against a tough 16% growth competitor in Q4 last year. We also in the quarter saw broader signs of client cost control and slower decision making. Our Tempur Contractor business, which represents 83% of German net fees, grew by 4% underlying, with contracting flat and tank delivering another quarter of strong growth of 13%. Perm grew a solid 4%. Our largest pressures in IT 41 percent of German net fees delivered good growth of 6%. Engineering, our 2nd largest specialism was flat, in part due to tougher conditions in the automotive sector. Tax And Finance was up 3%, while sales and marketing grew 10%. And legal was up by an excellent 31%. However, construction profit declined 11%. The total headcount in the quarter was down 1% but up 6 percent year on year. In UK and Ireland, 23% of pretenet fees, conditions were understandably more subdued, and net fees fell by 2% or 1% underlying, both perm and temp declined by 2%. Growth in the public sector, which represents 26% of U. K. And Ireland was a good 7% within this temp grew by 6% and perm by 10%. Additions in the private sector were tougher and fell by 6%. All regions traded broadly in line with the overall business, except for Southwestern Wales And East of England up 8% and 3% respectively, and North And Scotland down 12% 7%. Our largest UK region of London fell 2% and our Ireland business declined by 11%. The specialism level net fees in IT grew by 2% Counting finance and office support, both our 1% whilst construction property was down by 3%. And education continues to face tough market conditions and declined 15%. And so headcount was flat in the quarter and up 2% year on year. And finally, our largest division rest of the world, comprising 28 countries 34% of group net fees, grew 2% with 6 countries delivering all time records. This was against a very tough 23% growth comparative. Europe ex Germany was flat with service led Southern Europe at performing the more manufacturing led Northern Europe. Spain saw a good 6% growth, while growth in Italy and Portugal was excellent at 2321 per cent, respectively. Our largest rest of the world market, France, fell 2% and Belgium was down 4 and the Netherlands remained tough with net fees down 15%. Asia delivered strong growth of 10% Greater China, our 3rd largest rest of the world market, delivered a record quarter and grew by 9%. And within this, Hong Kong delivered a strong 18%. I swear in Asia, Japan rebounded at 8% and Singapore continued its recovery at an excellent 48%. In America's net fees fell 1% Within that, the USA declined by 4% although did have a better end of the quarter and delivered a monthly fee record in June. Canada grew by 2%, Mexico continued its rebound up 17% and Brazil grew by 6%. The total headcount in the division as a whole was down 1% in the quarter but up 6% year on year. Cash loan balance sheet, we delivered a strong underlying cash performance in the quarter finishing with a record year end net cash position of 1,000,000. This will allow the board to consider increasing shareholder returns in line with our clear dividend policy. Moving on to current trading and guidance. I've highlighted 6 points. Firstly, we expect full year operating profit to be in line with current consensus market expectations, which we understand from Bloomberg to be 1,000,000. 2nd, we estimate the group's net fee exit rate is in line with the underlying rates of growth in the quarter. 3, looking forward, we will overlap high single digit growth comparatives in Half 1 2020, particularly in our international businesses. 4th, we expect headcount growth in Q1 FY 2020 to be up 1 to 3% sequentially, including the impact of our normal seasonal gradual intake. This is lower than last year, and as a result, by the end of Q1, we'd expect our headcounts and net fee growth to be in alignment. 5, for comparative purposes, if we translate FY18 profit to average FY19 exchange rates, operating profit will be $3,000,000 lower at 2 1,000,000. Within this exchange rate movements remain a material sensitivity for the group's reported results. Looking ahead, we're mindful of economic and political uncertainties. Our focus remains on driving consultant productivity while selectively investing in key markets to reinforce our market leadership. And in conclusion, this has been a solid performance in a more mixed macroeconomic conditions, and a backdrop of increased client cost control and slower decision making. Our cash performance was strong and I'm delighted we ended the year in a record net cash position. Our financial strength on our global network, which is the largest and most balanced in our industry, means you have an excellent platform to balance short term performance with long term strategic goals. I'll now hand you back to the administrator, and we'll be happy to take your questions. Please. First question comes in from the line of Matthew Lloyd calling from HSBC. Please go ahead. Good morning, gentlemen. I'll try and do that thing where I ask too many questions and pretend it's only 3. One, I just wondered whether you had any feeling about or any data about how much of the slowdown was volume and how much of it was value. So what was the volume of placements doing in the period? Was that worse than the value, the sales of net fees number? Secondly, is it sort of primarily manufacturing clients that are seeing some degree of slowing, or is that, do you think that's a slightly broader economic across the group? And then just a third question, is there any pressure on fee rates emerging or are people sort of reasonably holding firm? Yes, thank you, Matthew. I do think that was three questions. So It's good that we can both we could that we can both count as well. I guess we could, if if the results weren't where they were, we could, bask in in Villa being promoted the Premier League. But anyway, I guess the answer is I think it is. The answer is in order. First of all, if I take the last two quarters, it's been mainly volume, Matthew. If I take that into the third one, I don't think there's any difference today on pressuring fee rates. I think we're, you know, we all understand in pretty much any industry in the world that we're all under constant margin pressure. And of course, our job, which I think we've done a phenomenal good job at phase over the years and also in this year's results is to also look for efficiencies in our own business and we are ruthlessly focused on trying to ensure that the efficiencies we can drive in our business offlay any kind of margin pressure we face. I see no change in the margin part of it. And I think that naturally leads into the middle question that you asked which is I think I would describe it as actually everything's just getting a little bit harder every quarter. And that's been a theme that we've gone through this year. And of course, you know, we entered this year with growth at 14% underlying and we've exited at 1%. And that's been fairly universal across the boat. I think what is clearer, though, if you think it through, is that service industries tend to be more candidate led. So for example, accounts in finance, you know, no chief exec lights up in the morning, it says I want to have more finance paid unless you unless you run the light. And therefore, I think what we're seeing is in the service part of it, candidate conference remains strong and therefore, for us in that part of our business. If you go to a little bit higher, if I then move to the more manufacturing, exports, technical specialism part, technical specialisms are driven by companies investing. And after high, the way I would try to describe this after 3 to 4 years of very strong investment by our clients, And we've, you know, are perfectly placed for that and have driven a lot of growth, a lot of increase in profitability, etcetera. Understandably, we've seen our clients be increasingly more cautious as we've gone across this year as their own end markets have weakened. So I think, manufacturing's had a more impact than services, but I do think increasingly all of the areas are being impacted. So We try to draw a distinction where we can. I think if you look at our results and also you look at the kind of the general industry's results, it's now being a bit more uniform. Okay. Thank you very much for that. Welcome. Okay. The next question comes in from the line of Jens Plubert calling from Kepler Cheuvreux. Please go ahead. Yes. Good morning, gentlemen. Question on Q1 headcount increase. You're going for 1% to 3%. What's the basis for that? Do you, let's say, of course, historically, Q1 is always, say, high season for hiring. But if you look, let's say, at the trend and you say the exit rate is, as I understand, around 1%. The trend is slowing down. Where do you expect to add the heads mainly? And what's the basis for fully? Do you expect, let's say, continued growth? Because obviously, you indicating what I understand that you see, Q1 fee income in line with headcount increases. Is that correct? No, I think it's trying to give a directional part. A year ago, if you think that too, we, as I said to, in Matthews, we were at 14% in the exit quarter underlying. We went into this year at expecting strong growth. And of course, the years got increasingly more difficult. We are still at 4% increase in headcount. Our underlying fee growth is 1%. The market is still very measured. So whilst we have given some examples over the last year, there is we're having to do more work to get real prospects. Actually, when you get the real prospects, the conversion rates are still staying high. So for us, We have not felt the need to do much preemptive headcount reductions, just been to natural attrition, And it's clear coming into next year that we don't need the same level of increase in headcount earlier in the year, and it wouldn't be appropriate. So If we do 1% to 3%, I think that would lead our headcount growth at the end of September to be somewhere from naught to 2%. And I think that's in the right position for the market today, but a completely separate point. Is, of course, these are that's just an overarching position. We will continue to significantly invest in IT headcount, for example. So Now we have a very clear strategy, we're in a very strong financial position that enables us to take choices. We are focused, as always, on the long term cross of the group whilst trying to drive decent profitability as we work our way through. So we will continue to invest quite significantly in increasing our exposure to the IT Specialism. You know, when I joined all those years ago, just remember now we were about 8% in IT, note to date, it's about 23%, 24% of our group. I think it will be well over 25% within the next 2 to 3 years. So we're investing in the areas of the market that are strong. So in Australia, we're investing significantly in IT. We've increased our headcount already We've added 100 consultants into that space. We'll continue to invest in the next year. But obviously, there are always such as construction property around the world where we're being phenomenally cautious on our headcount growth. So overall, very tight cost control going into next year, but continuing to attack those markets, which give us long term prospects. And looking at those markets, imagine, Germany and main rest of the world, that's where the investment mainly will be looking headcount in the coming months. Number 1 is Asia, and whilst it's it's less than 10% of our group. It's by far it's the one area of our business that we've still got significant sequential growth feels a good market, there's good opportunities, and we know there's a high degree of first time outsourcing. So Asia will have the largest part of our headcount increase in the Americas. Will invest significantly into. And in Germany, we'll continue to invest, but it'll be much more modest than it was a year ago because we can have a long debate from a client perspective, of course, there are a number of headwinds hitting that market. So we'll be more cautious there. Thank you. The next question comes in from the line of Paul Checketts calling from Barclays Capital. Please go ahead. Good morning, everyone. I've got three questions, please. The first Paul, would you be able to go into a bit more detail in terms of what you're seeing Germany and Australia. Obviously, you often give us a run through of the various data points you're looking at to give us a sense of what you're expecting in the coming months. And then, following on from that, would you be able to remind us the cost base excluding headcount in 2020 I know there's some various factors coming in and moving out. Could you just give us an update on that? And then the last one is on the, the special dividend. In the past, you've had a very clear framework about what would be returned. If we were going into a weaker period of economic growth, Is it possible you would take a more cautious view? Thanks. Right. And not clear, Paul, I understood question number 3. If I answered the other 3, perhaps if you can just think of a, the kind of, a tighter way of asking that one, Okay. Why don't I start with Germany? I think on the basis of Australia and the special dividend is very clear and I think positive. Let me give it to you on Germany. I think with Germany, that's probably where the greater uncertainty is at the moment. All of you will have seen the announcement from a lot of German companies over the last couple of quarters, some significant profit warnings It is clear that a number of German companies are looking to, adjust their cost base downwards and, we won't be immune to any impact from that. So I think we have to be a little bit more mindful that, you know, We've got a fabulous business in Germany. We dominate the market, we're as big as 2, 3, 4 and almost 5 put together. We will continue to invest for the long term, new offices, etcetera. I think we will be fairly modest on headcount in the short term because of the uncertainties. I think there's more uncertainty in Germany, but interest the strategic push to go into additional offices to move into the Mittelstand to widen our customer base away from the top German top 100 employers in Germany and moving into smaller and medium sized companies is really paying off. And what we are seeing is much higher growth in that market. And not just we're going into new markets and therefore, we're growing, but we're seeing continued strong hiring trends in that part of the market Whereas what we are seeing, if I come to our top 20 clients, we're seeing a much more cautious position within that automotive for lots of reasons is the hardest hit. And I actually think our engineering specialists did pretty well this quarter to be flat, I'd actually expect a bit to be negative. Automotive, we were certainly down by between 5% 6%. And that's against a number that we've been growing in a year ago. So I think that market continues to get more difficult we're seeing all of the signs of cost control from less new, assignments to a bit more non renewals at the end of each period to a bit tighter cost control. And I think that's going to continue in Germany for the next couple of quarters. Flip across to Australia. I think there are some reasons to be cheerful, but they're probably a year out, if I'm honest, Paul, but it's the first time I've seen from it, I think, is worthwhile saying. So why do I say that when we're negative in Australia? I think number 1, the election result was excellent. Think the fact that the government was reelected, with a stronger position, a greater mandate. The most important part of that is that hiatus that we had in public sector, hiring going into the election. Therefore, you know, kind of gets removed immediately. We don't lose 36 9 months, we don't see a whole raft of new initiatives, which might have impacted our industries. I think that is a real positive. Secondly, If I look at construction, which is one of the lead part indicators for us, I think you look at the residential house building part of it. We've now seen 2 months, 3 months where, there's been no further fall in house prices in Sydney and Melbourne. They seem to have stabilized 10% down. Remember the backdrop, they went up 40% now they've fallen off 10%. Well, that's quite important from candidates being more confident to change jobs. And if you look at our business, it's the perm part of it is weaker. On top of that, you've clearly got a weak Australian economy, and you saw the Central Bank them 2 interest rate cuts, unemployment, 2 interest rate cuts down to very low levels. So that's an interesting one, but I do think all of those taken together means that we may well see in 6 or 9 or 12 months' time an inflection point in Australian business. And, you know, if I was Nick Dela Johnny, I'd also say that within this quarter in May, we had a really strong result. And it was something like the 2nd or third all time best performance in, in, in Australia. So I think there are There are some signs in that market. We may have another couple of negative quarters, but I think there are some initial signs in that market that we might have stabilization. And then on the special dividend, we have a phenomenally clear policy. I think when the board gets together in August, clearly our many one member of the board, but I think it'll be very easy. I certainly know where I will be voting. I think if your broader point is, you know, what happens if your trading is negative and everything else about a year at this time. I think that's better described then. The one thing we know as these results show is we're phenomenally cash generative. And, our profitability see material reduction before, you know, the that we wouldn't be generating, you know, we wouldn't cash balance is well in excess of 50,000,000, for example. So I think sitting here today, what we're seeing is a slight tightening by our clients around the investment in their cost base, and we're seeing no distress in the market at all. And if I don't see us foresee a circumstance today, where we see a significant reduction in fee, And therefore, I think we have, you know, we have the get out of jail free card, but I think that's more extreme circumstances. So I actually think that our policy is very clear and we'll continue to follow it. And then, Paul, I know you had something on the cost base, which seemed like I was really asking about, some of the amortization and depreciation around various assets. Right. Can you remind us what the year on year move would be? Yeah. Thank you. And and, of course, I will do a a slide on that one I get there. But next year, sitting here today, we have a 5,000,000 uplift In property costs, these are for, expansions in property that we signed after in the years. We've been very open. When we went across the 14, 15, 16, 17 period of time, we have effectively used most of the spare spaces had in offices around the world. And across last financial year and the financial year we just started, we are seeing an increase. I think that'll be captured about 5, Paul. We'll be a little bit more cautious now, but we still got Germany to government, 5,000,000 is a good number in there. And on depreciation, 5,000,000 is is the same number for that. So those are those are the main the main areas. And the only other one I'd give just because you've asked the question, I'd feel a bit guilty if I didn't give an answer. And I don't expect anybody to start weeping on the call, but for failure of this reason, the level of profitability this year isn't the level we expected coming into the year. And therefore, Like a lot of businesses in those circumstances, it does mean that things like incentive payouts are quite a bit lower. That, of course, has helped give some resilience to our 2nd half profitability But I mean, some of that one would hope would reverse next year. So you've got the main 2, but if I hadn't have given you the fact that we had benefited from lower incentive pay this year and it will obviously increase a bit next year. Assuming we, you know, we do a good job and hit our numbers. The next question comes in from the line of Tom Callen calling from Investec. Please go ahead. Morning, guys. Can you just give me, a bit of an update on the Hong Kong business, notice in the IRS know, you guys have a strong performance there in the quarter of 18%. Can we just sort of shed a bit of light on on what's driving this and then how you guys are different to say, cage in this region there, sorry, in this region because, they clearly had a a a pretty tough time there, for the same 3 month period. So I'm just trying sort of understand, how your business is structured differently, to sort of drive the outperformance versus the rest of the market. I think sometimes, Tom, and, you know, where we have underperformance, sometimes it's just management. And I think this time, it's a bit over performance because of management. I think we've got a superb management team, both the cost greater China and within Hong Kong. And, that team has performed very strongly now over the last 3 years. We, it is one of the markets, and I'm I'm much more measured in my use of these words, but it's one of the and we have taken market share. We've had some real momentum as we've done across the year. That doesn't mean, of course, that our business won't be impacted by all of the demonstrations we've seen recently. Of course, we have the most conservative anti policy in the industry. We only bought term fees when somebody starts. And so there's no doubt that fivity levels in June and the demonstrations, everything else. So for example, there was a demonstration about a week ago. It was literally phenomenally close to where our offices are. Fortunately, I'm going to say it was early March, I think, well, something like the 61st floor. So we were well above it, but you know, it's clearly means it's been it's been a little bit more mixed market, but I do think we've got a really good team there doing very well. And very occasionally in life, you should just say, I think our team's outperformed the business. I call businesses in Hong Kong. It has high exposure to financial services, and we've done very well, but we've also driven it back to this common theme. We've taken a very clear strategic view positioned 3 years, 3, 4 years ago, but we were putting investment into the IT specialist, and we would look to globally, and we put a lot of investment into Hong Kong and it's really come out very well. So the whole area of IT, digital, digital marketing, cyber security, all those areas, we've got very strong specialism And of course, those are some of the areas that the financial institutions as well have been investing into. So I think good performance in IT, good performance in banking, good performance in Accounting Finance. But clearly, like everybody else, we're mindful, and we're watching all the trends at the moment. Okay. The next question comes in from the line of Anvesh Agarwal calling from Morgan Stanley. Please go ahead. Hi, good morning. I got two questions. First on the UK, now it looks like the IR35 is also to come into place for private sector from April 20. Just wondering if you have had any discussion with the clients or how you thinking about the impact there given the uncertainty around the implementation of it's still kind of there. And the second is on the cash flow and like you pay your employee the share based payments and which obviously are it's done through the dilution to your shares. Now given where the share prices are any thought on, instead of diluting the shares you buy back from the market and pay up the employees? 2 good questions. Look, on IR35, this is nothing new. We've done more than 100 seminars with our clients. Over the UK over the last 18 months. We have a rolling program of this. So we've got, both the group tax guy, members of our own business. So they are working very hard with our clients. I think it's very different from the private sector versus public. If you remember, in the public sector, this was there was no negotiation. This was implemented with a massive baseball bat where If you didn't, deduct tax and there was any problem at any point in the future, you would be honed, gone, courted, and fired. Whereas in the private sector, it'll be much more measured. We have a superb tool that we developed with a company called CUDA that we offer to our clients. We offer as part of the service to, validate whether, individuals are within or outside of IRSA 5. So we will, you know, we we we got the, the guidance from HMRC last Thursday. I spent an enjoyable afternoon reading it yesterday. It wasn't that much news in that. It was meant to be much more detail coming out, plus an updated model in September. We are working very hard with our clients. I think it'll be a more measured reaction, but of course, there's bound to be some uncertainty. And I will come and talk about this when we get to the prelims and look a bit more color. Secondly, on dividends, buybacks, share based payments. Of course, we've had a, prior to my time, we had a large amount of shares in treasury, which we've used up over a period of time, so we've been using those up. We will, as a board, have to make a formal decision, which we'll do at our August board. About whether we continue to issue shares for management share based payments or whether we buy shares on the market. We have had discussions with all of our shareholders. We will announce that policy in, in August at the prelims. But you know what, on, on whether you should certainly do buyback or not, I kind of don't personally, I don't believe in buybacks. It's, I think you have to have a right, in a moment of clear distress And as I said before, you know, in the dark days, post lemons, had I had the firepower then I might have done it. But remember, when things like Brexit happened, then our share price went from GBP 1.40 to 95p in a nanosecond, 3 of our largest shareholders who are long standing supporters of our business bought 160,000,000 shares in, in kind of 10 days. So I think we have a strong following among institutions And if the share price is seen as being at a below market price for a short or medium term, I'd have every confidence that those shareholders have got much greater firepower will step in rather than us coming in and playing around in the market with 10 or 20,000,000 in the short term. So We haven't done that, so since we completed the original buyback program, but as I said, we will have a discussion as a board in August, but, our shareholders, it gives them an opportunity to buy at a cheaper price and to benefits for the long term. The next question comes in from the line of Bilal Aziz calling from UBS. Please go ahead. Good morning, everyone. Just one quick one from my side. And you alluded to incentive payments. Can you talk about the level of cost inflation you expect to see over the business in the next 12 months and in a scenario where like for like is negative where where you perhaps still feel you've got a good amount of cost flexibility within your regions? Thank you. Yes. I think there's a series of difficult questions to answer short, kind of concisely. On the cost side of it, There's a market right for our consultants. We have a offer a very attractive package. It is unlimited commission on an individual basis. With suitable team incentives as well. So I think that is in the right space. There will of course be some cost inflation that you will face in property you'll face in kind of administrative purposes. That tends to be 2% or lower. I don't I didn't see us doing any more than that this year. And of course, we will get most of that back in continued wage inflation, which I will push up certainly pushes up the average perm phase. So I think generally, we have we're incredibly good at adjusting our cost base pretty quickly. And we don't need to be told more than once the market is weakening, and we've seen that across this year, and therefore, we've moved into, as I said earlier on, trying to invest in the areas that are strong for the longer term, but being very tight on cost control across the path and we will continue to do that. The hardest part when you're in a position like this is, of course, we still in a market that has still a reasonable degree of confidence in, but not the confidence we had a year ago. There are still pockets where we know that we can grow. And also, of course, on the basis that we've got a 60, 65% exposure to technical stations, we know that we suffer weakness 1st, but also we see stabilization first and we get to growth first. So it's trying to get that balance right of managing the profitability appropriately for short term, but investing for the long term. I think we've got the nice thing is we have a phenomenally experienced management team across the world. It is not just, Alastair Nige and myself and the other senior operators, it really is Across the Patch, and we'll make all the right decisions. But what is true going into FY 2020, it's a year to be cautious on the cost base and to be surgical on revenue investment and we will do that. The next question comes in from the line of George Gregory calling from Exane. Please go ahead. Morning, Paul. Just 3, please. Again, largely on movements in the cost base. So I just wondered if you could maybe roughly quantify, the benefit you saw in the fourth quarter from, lower incentive payouts. And secondly, I think in response to Paul's earlier question, you gave some guidance on the impact of D And A in fiscal 'twenty. Could I just clarify, you expect that to be an uplift of, about GBP 5,000,000 aligned with the uplift in property cost or today? Did I mishear that? And then just pulling the various movements in the cost base together? I know you don't give guidance at this stage. Guidance will stop, but you don't really talk about fiscal 2020 in detail at this point, but, I suppose, is it fair to say that H1 given the exit rate, with an uplift in D And A And Property Cost and with headcounts still running slightly above fee growth, we'd we'd we might expect that being a slightly tougher period, but maybe then hopefully turning a bit better in the second half of next year. Just some thoughts around sort of drop through phasing would be helpful. That's a pretty lengthy question, George. I'll I'll do my best, but I am feeling our fail on those counts. To reiterate, we said 5,000,000 more on property. We said 5,000,000 more on depreciation. So yes, the Also, kind of the cash add back would go up by that amount. We will separately, on the results day, issue the IFRS 16, lease in pets, for next year. So I'd rather cover that there because Deloitte's are, clearly, p w c ROAD. So we've got Deloitte's reviewing, our modeling on that standpoint. But I think other than that, you just described my job in a nutshell. We've got a lot of moving parts. The most important one, more important than anything else, is what happens to the sea lion. And clearly, we've gone from you know, 8% in underlying in q2to5percentinq3toonepercentinq4. The positives I reiterate are no real distress in any markets. Why I mentioned the Australia stuff earlier on? I do think Australia will be the first of our bigger countries that returns to growth and starts to accelerate, but that's some time off. The importance of that is come up first and second half point you made. So I think I think the first half, of course, we'll have some tough comps So from the profit standpoint is a bit more difficult. And in fact, you saw that in, in actually the second half this year, you know, we've said 248. We did 124 in the first half. Did 127 a year ago in the second half, so it's been a bit more difficult despite the protection from, from incentives. But, gotta get the balance right and we'll do that. We're gonna continue to invest, in all of the IT tools that we're developing actually very happy with consultant positivity this year. I think to, with, to have protected the position in the market this week and the decision making slow, it's been really good. A lot of moving parts into next year, and there are 2 things that will never change in our business. 1, we'll do the right thing for the long term. And secondly, you're right. I won't give, I won't talk to guidance for a year in advance or 3 quarters an ounce or 2 quarters in advance. We have 3 to 5 weeks visibility. We have no forward to good revenue stream outside of Germany. And it is speculative at most. But, we edit the year in a better position from a cost standpoint because the headcount as I said earlier on by September, we'll be there. The real question mark is, do our fees say at 1, do we increase to 2 or 3 or 4? Or do they decline? And, and, you know, I that's not possible to predict at the moment even more when you go into a summer period, where visibility gets a bit harder. So I probably haven't answered your question very well, but it's quite a hard one to do. And I do think the summer and exit rate in September will be very important for next year's, trading. No, that's helpful. I just wondered if you could maybe quantify the incentive movement year over year in the second half. Well, what I can say is that it's been a bit more than 5,000,000. So, you know, we will We will have, appropriately. We have incentives which are driven on, growth. We had a growth budget for this year, It's been harder to get there. I think we've done a really good job. I think the operator has done a really good job considering growth has gone from 14% up, which expecting strong growth this year, right way down to 1 to manage the cost base. And I'm deeply grateful for everything the guys have done around the world. But this has been a harder year positive for me reiterate is, I don't see any distress at all, and we know having exposure technicians, we suffer the weakness first, but we come out first. So, I look forward to an inflection point, but I, you know, I have no real view when that will be at the moment. Perfect. Thank you very much Paul. We currently have no further questions Hi, suggestion. I I do a short wrap up. First of all, thank you all very much for listening. Secondly, Thank you for humoring me in alignment to mention Estin Butler. Thirdly, I should mention I was at Lourdes on Sunday, so that was also a thoroughly enjoyable day. But if that's for all the questions for today, we'd like to thank you again for joining the call. We look forward to speaking to you all at our premium results on the 29th August. Should anybody have any follow-up questions, David Charles and I will be available to take calls for the rest of the day. Thank you. Bye. Thank you for joining today's call.