Good morning. Welcome to the Hays 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 an opportunity to ask questions at the end. If you need assistance at any time, please press star zero on your telephone keypad, 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.
Thank you, Courtney, and thanks, everyone, for joining us. Good morning. Welcome to our quarterly update call for the three 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.
Hays disclaims any intention or obligation to revise or update any forward-looking statements that have been made during this call, regardless of whether these statements are affected as a result of new information, future events, or otherwise. I'll now hand you over to Paul.
Thank you, David. Good morning, everybody, and thanks for joining us. I'll summarize the highlights of today's update, cover some key themes, and discuss regional performances before taking any questions. As usual, all net fee growth percentages I will give are 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 was against tough year-on-year comparatives, more mixed macro conditions, and signs of reduced business confidence. Net currency effects were minimal. I'd highlight the following key features in the results. Growth was flat in both our temp and perm businesses. On an underlying basis, Q4's 1% increase represented our 25th consecutive quarter of year-on-year growth. Eight of our 33 countries delivered double-digit growth, including six all-time quarterly records.
Australian net fees declined an 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 U.K. 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, where net fees fell by 6%. Performance in the Rest of the World was solid, up 2%. Asia performed strongly, up 10%, EMEA ex Germany was flat, with Southern Europe performing better than Northern, whilst the Americas fell 1%. Group consultant headcount was down 2% in the quarter and up 4% year-on-year. In line with our long-term plans, we opened one new office in Erfurt, Germany. We have reiterated the expectation for full-year operating profit to be in line with current market expectations of GBP 248 million.
Finally, cash performance was strong, and we ended the quarter with record net cash of GBP 130 million. I will now comment on the performance by each division in a little more detail. Our ANZ division, which is 18% of group net fees, declined 3% or 2% underlying. This was against a tough comparative, some negative impacts from the general election on market activity levels, and more mixed market conditions generally. These particularly impacted perm, which declined 15%, although temp was solid and grew by 3%. Public sector fees were flat, with private sector down 4%. Australia fell underlying 2%. In New South Wales and Victoria, together 57% of Australian business, net fees fell 4% and 7% respectively. Queensland grew by 1%, and ACT was up 2%. Although 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%. Construction & Property, our largest business in Australia, saw continued tough conditions and declined by 16%, the fourth consecutive quarterly decline. Accounting & Finance fell by 11%. New Zealand, which represented about 5% of ANZ, remained tough. As in Q3, net fees fell 6%. Consultant 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 comparator in Q4 last year. We also in the quarter saw broader signs of client cost control and slower decision-making.
Our temp and contractor business, which represents 83% of German net fees, grew by 4% underlying, with contracting flat and tech delivering another quarter of strong growth at 13%. Perm grew a solid 4%. Our largest specialism, IT, 41% of German net fees, delivered good growth of 6%. Engineering, our second-largest specialism, was flat, in part due to tougher conditions in the automotive sector. Finance was up 3%, while sales and marketing grew 10%, and legal was up by an excellent 31%. However, Construction & Property declined 11%. Consultant headcount in the quarter was down 1%, but up 6% year-on-year. In U.K. and Ireland, 23% of group net 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%. Conditions in the private sector were tougher and fell by 6%. All regions traded broadly in line with overall business except for South West and Wales and the East of England, up 8% and 3% respectively, and North and Scotland down 12% and 7%. Our largest U.K. region of London fell 2%, and our Ireland business declined by 11%. At specialism level, net fees in IT grew by 2%. Accounting & Finance and office support both fell 1%, whilst Construction & Property was down by 3%. Education continues to face tough market conditions and declined 15%. consultant headcount was flat in the quarter and up 2% year-on-year. Finally, our largest division, Rest of the World, comprising 28 countries and 34% of group net fees, grew 2% with six countries delivering all-time records.
This was against a very tough 23% growth comparative. EMEA ex was flat, with service-led Southern Europe outperforming the more manufacturing-led Northern Europe. Spain saw a good 6% growth, while growth in Italy and Portugal was excellent at 23% and 21%, respectively. Our largest Rest of the World market, France, fell 2%, Belgium was down 4%. The Netherlands remained tough with net fees down 15%. Asia delivered strong growth of 10%. Greater China, our third-largest Rest of the World market, delivered a record quarter and grew by 9%. Within this, Hong Kong delivered a strong 18%. Elsewhere in Asia, Japan rebounded up 8%, Singapore continued its recovery up an excellent 48%. In the Americas, net fees fell 1%. Within that, the USA declined by 4%, although did have a better end to the quarter and delivered a monthly fee record in June. Canada grew by 2%.
Mexico continued its rebound up 17%, Brazil grew by 6%. consultant headcount in the division as a whole was down 1% in the quarter, but up 6% year-on-year. Cash flow and balance sheet. We delivered a strong underlying cash performance in the quarter, finishing with a record year-end net cash position of GBP 130 million. 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'd highlight six points. Firstly, we expect full-year operating profit to be in line with current consensus market expectations, which we understand from Bloomberg to be GBP 248 million. Secondly, we estimate the group's net fee exit rate was in line with the underlying rate of growth in the quarter. Three, looking forward, we will overlap high single-digit growth comparatives in half one 2020, particularly in our international businesses.
Fourth, we expect headcount growth in Q1 FY 2020 to be up 1%-3% sequentially, including the impact of our normal seasonal graduate 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. Five, for comparative purposes, if we translate FY 2018 profit to average FY 2019 exchange rates, operating profit will be 3 million lower at GBP 240 million. Within this, exchange rate movements would 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. 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. I'm delighted we've ended the year in a record net cash position. Our financial strength and our global network, which is the largest and most balanced in our industry, means we have an excellent platform to balance short-term performance with long-term strategic goals. I'll now hand you back to the administrator. We'll be happy to take your questions.
If you would like to ask a question, please press star one on your telephone keypad. Please ensure your line is unmuted locally. You will be advised when to ask your question. The 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 three. 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. What was the volume of placements doing in the period? Was that worse than the value, the sales and net fees number? Secondly, is it sort of primarily manufacturing clients that are seeing some degree of slowing? Do you think that's a slightly broader economic across the group? Just a third question, is there any pressure on fee rates emerging, or are people sort of reasonably holding firm? Thank you, Matthew. I do think that was three questions. It's good that we can both count as well.
I guess if the results weren't where they were, we could bask in Villa being promoted back to the Premier League.
Worth mentioning, though.
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 pressure and fee rates. I think we all understand, in pretty much any industry in the world, that we're all under constant margin pressure. Of course, our job, which I think we've done a phenomenally good job at Hays over the years and also in this year's results, is to also look for efficiencies in our own business. 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.
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. That's been a theme that we've gone through this year. Of course, we entered this year with growth at 14% underlying, and we've exited at 1%. That's been fairly universal across the base. I think what is clearer, though, if you think it through, is that service industries tend to be more candidate-led. So for example, Accounting & Finance. No chief exec wakes up in the morning and says, "I want to hire more finance people," unless you run Deloitte. Therefore, I think what we're seeing is in the service part of it, candidate confidence remains strong, and therefore for us in that part of our business, fee growth is a little bit higher.
If I then move to the more manufacturing, exports, technical specialism part, technical specialisms are driven by companies investing. The way I would try to describe this, after three to four years of very strong investment by our clients, and we've perfectly placed for that and have driven a lot of growth, a lot of increase in profitability, et cetera. Understandably, we've seen our clients be increasingly more cautious as we've gone across this year as their own end markets have weakened. I think manufacturing's had more impact than services, but I do think increasingly all of the areas are being impacted. We try to draw distinction where we can. I think if you look at our results and also you look at 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 Hans Pluijgers, calling from Kepler Cheuvreux. Please go ahead.
Yes. Good morning, gentlemen. Question on Q1 headcount increase. You're going from 1% to 3%. What's the basis for that? Of course, historically, Q1 is always, let's say, high season for hiring. 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 that? Do you expect, let's say, continued growth? Because obviously, you're indicating or I understand that you see Q1 fee income in line with headcount increase. Is that correct?
I think it's trying to give a directional path. A year ago, if you think back to we, as I said in Matthew's reply, we were at 14% in the exit quarter underlying. We went into this year 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. Whilst we have given some examples over the last year of areas 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.
For us, we have not felt the need to do much preemptive headcount reductions, just been through 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. If we do 1%-3%, I think that would lead our headcount growth at the end of September to be somewhere from 0%-2%, and I think that's in the right position for the market today. A completely separate point is, of course, that's just an overarching position. We will continue to significantly invest in IT headcount, for example. 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 prospects of the group whilst trying to drive decent profitability as we work our way through. We will continue to invest quite significantly in increasing our exposure to the IT specialism. When I joined all those years ago, distant memory now, we were about 8% in IT. Today it's about 23%, 24% of our group. I think it will be well over 25% within the next 2-3 years. We're investing in the areas of the market that are strong. 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. Obviously, there are areas such as Construction & Property around the world where we're being phenomenally cautious on our headcount growth.
Overall, very tight cost control going into next year, continuing to attack those markets which give us long-term prospects.
Looking at those markets, I would imagine Germany and mainly the Rest of the World, that's where the investment mainly will be looking at headcount in the coming months.
Number one is Asia, whilst it's less than 10% of our group, it's the one area of our business that we've still got significant sequential growth. It feels a good market. There's good opportunities, and we know there's a high degree of first-time outsourcing. Asia will have the largest part of our headcount increase. The Americas, we'll invest significantly into. In Germany, we'll continue to invest, but it'll be much more modest than it was a year ago because we could 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.
Okay. Thank you.
The next question comes in from the line of Paul Chekatts, calling from Barclays Capital. Please go ahead.
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 in 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. Following on from that, would you be able to remind us the cost base, excluding headcount in 2020? I know there's various factors coming in and moving out. Could you just give us an update on that? The last one is on 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. I'm not clear, Paul, I understood question number 3. If I answer the other 3, perhaps you can just think of a tighter way of asking that one.
Okay.
Why don't I start with Germany? I think on the basis that Australia and the special dividend is very clear and I think positive. Let me give you a try 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. I think we have to be a little bit more mindful that we've got a fabulous business in Germany. We dominate the market. We're as big as two, three, four, and almost five put together. We will continue to invest for the long term, new offices, et cetera.
I think we will be fairly modest on headcount in the short term because of the uncertainty. I think there's more uncertainty in Germany, interestingly, the strategic push to go into additional offices, to move into the Mittelstand, to widen our customer base away from the top 100 employers in Germany and move into smaller and medium-sized companies is really paying off. What we are seeing is much higher growth in that market. 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. I actually think our engineering specialism did pretty well this quarter to be flat.
I'd actually expected it to be negative. Automotive, we were certainly down by between 5% and 6%, and that's against a number that we've been growing in a year ago. 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. It's the first time I've seen something I think is worthwhile saying. Why do I say that when we're negative in Australia? I think number 1, the election result was excellent.
I think the fact that the government was reelected with a stronger position, a greater mandate. The most important part of there is that hiatus that we had in public sector hiring going into the election, kind of gets removed immediately. We don't lose three, six, nine 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 & Property, 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 three months where there's been no further fall in house prices in Sydney and Melbourne. They seem to have stabilized at about 10% down. Remember the backdrop, they went up 40%, now they're falling off 10%. That's quite important from candidates feeling more confident to change jobs.
If you look at our business, the perm part of it is weaker. On top of that, you've clearly got a weak Australian economy, you saw the central banks done two interest rate cuts, unemployment, two interest rate cuts down to very low levels. That's an interesting one. I do think all of those taken together means that we may well see in six or nine or 12 months time an inflection point in Australian business. If I was Nick Deligiannis here, I'd also say that within this quarter in May, we had a really strong result and it was something like the second or third all-time best performance in Australia. I think 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. On the special dividend, we have a phenomenally clear policy. I think when the board gets together in August, clearly, I'm only one member of the board, I think it'll be very easy. I certainly know where I will be voting. I think if your broader point is what happens if your trading is negative and everything else about a year or two's time, I think that's better described then. The one thing we know, as these results show, is we're phenomenally cash generative. Our profitability could see material reduction before we wouldn't have cash balances well in excess of GBP 50 million, for example.
I think sitting here today, what we're seeing is a slight tightening by our clients around the investment in their cost base, we're seeing no distress in the market at all. If I don't foresee a circumstance today where we see a significant reduction in fee. Therefore, I think we have the get out of jail free card, I think that's more extreme circumstances. I actually think that our policy is very clear, we'll continue to follow it. 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-over-year move would be?
Yeah, thank you. Of course, I will do a slide on that when I get there. Next year, sitting here today, we have a GBP 5 million uplift in property costs. These are for expansions in property that we signed off during the year. As we've been very open, when we went across the 2014, 2015, 2016, 2017 period of time, we have effectively used most of the spare space we've had in offices around the world. Across last financial year and the financial year we've just started, we are seeing an increase. I think that'll be capped at about GBP 5, Paul. We'll be a little bit more cautious now, but we've still got a couple in Germany to go. GBP 5 million is a good number in there, and on depreciation, GBP 5 million is the same number for that. Those are the main-
Yeah
the main two areas.
Very clear.
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. I don't expect anybody to start weeping on the call. For fairly obvious reasons, the level of profitability this year isn't the level we expected coming into the year. 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 second half profitability. Some of that, one would hope, would reverse next year. You've got the main two, but if I hadn't have given you the fact that we have benefited from lower incentive payouts this year, and it will obviously increase a bit next year, assuming we do a good job and hit our numbers.
Okay, thanks.
The next question comes in from the line of Tom Callan, calling from Investec. Please go ahead.
Morning, guys. Can you just give me a bit of an update on the Hong Kong business? Noticed in the RNS that you guys had a strong performance there in the quarter, up 18%. Can you just sort of shed a bit of light on what's driving this and how you guys are different to, say, Page in this region? Sorry, in this region because they clearly had a pretty tough time there for the same three-month period. I'm just trying to 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, where we have underperformance, sometimes it's just management. I think this time it's overperformance because of management. I think we've got a superb management team, both across Greater China and within Hong Kong. That team has performed very strongly now over the last three years. It is one of the markets, I'm much more measured in my use of these words, but it's one of the markets where we have taken market share. We've had some real momentum as we've gone 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 accounting policy in the industry. We only book perm fees when somebody starts. There's no doubt that activity levels in June, the demonstrations and everything else.
For example, there was a demonstration about one week ago. It was literally phenomenally close to where our offices are. Fortunately, I'm going to say it was nearly March, I think it was something like the 61st floor, so we were well above it. It clearly means it's been a little bit more mixed market. I do think we've got a really good team there doing very well. Very occasionally in life, you should just say, I think our team's outperformed. The business, like all businesses in Hong Kong, it has a high exposure to financial services, and we've done very well there. We've also driven it back to this common theme. We've taken a very clear strategic view position three, four years ago, that we would put investment into the IT specialism.
We would look to go globally, and we put a lot of investment into Hong Kong, and it's really come out very well. The whole area of IT, digital marketing, cybersecurity, all those areas, we've got very strong specialism. Of course, those are some of the areas that the financial institutions as well have been investing into. I think good performance in IT, good performance in banking, good performance in accounts, in finance. 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 Agrawal, calling from Morgan Stanley. Please go ahead.
Hi, good morning. I got two questions. First, on the U.K., now it looks like the IR35 is all set to come into place for private sector from April 20. Just wondering if you have had any discussion with the clients or how you're thinking about the impact there?
Given the uncertainty around the implementation of it still there. The second is on the cash flow and you pay your employee, the share-based payments, and which obviously 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? Just these two.
Yeah. Two good questions. Look, IR35, this is nothing new. We've done more than 100 seminars with our clients over the U.K. over the last 18 months. We have a rolling program of this. We've got both the group tax guy, members of our own business. They are working very hard with our clients, and I think it's very different in the private sector versus public. If you remember, in the public sector, 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 hung, drawn, quartered, 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 Kudos that we offer to our clients.
We offer as part of a service to validate whether individuals are within or outside of IR35. We got the guidance from HMRC last Thursday. I spent an enjoyable afternoon reading it yesterday. There wasn't that much new news in that. There's 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, of course, there's bound to be some uncertainty, and I will come and talk about this when we get to the prelims with a little bit more color. Secondly, on dividends, buybacks, share-based payments, of course, 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, and we will announce that policy in August at the prelims. You know what? On whether you should suddenly do a buyback or not, personally, I don't believe in buybacks. I think you have to have a right in a moment of clear distress, and as I said before, in the dark days post-Lehman, had I have had the firepower then I might have done it.
Remember when things like Brexit happened and our share price went from GBP 1.40 to GBP 0.95 in a nanosecond, three of our largest shareholders, who are longstanding supporters of our business, bought 160 million shares in 10 days. I think we have a strong following among institutions, and if the share price is seen as being at a below-market price for short or medium-term, I'd have every confidence that those shareholders who've got much greater firepower will step in, rather than us coming in and playing around in the market with GBP 10 million or GBP 20 million in the short term. We haven't done that since we completed the original buyback program. As I said, we will have a discussion as a board in August. Our shareholders, it gives them an opportunity to buy at a cheaper price and to benefit for the long term.
Okay, that's very clear. Thank you so much.
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. 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, in a scenario where like-for-like is negative, where you perhaps still feel you've got a good amount of cost flexibility within your regions? Thank you.
Yeah, I think those are a series of difficult questions to answer short and kind of concisely. On the cost side of it, there's a market rate for our consultants. We offer a very attractive package. It is unlimited commission on an individual basis with suitable team incentives as well. I think that is in the right space. There will, of course, be some cost inflation that you will face in property, that you'll face in kind of administrative purposes. That tends to be at 2% or lower. I don't see us doing any more than that this year. Of course, we will get most of that back in continued wage inflation, which, A, certainly pushes up the average perm fee. I think generally, we're incredibly good at adjusting our cost base pretty quickly.
We don't need to be told more than once that 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 patch, and we will continue to do that. The hardest part when you're in a position like this is, of course, in a market that there's 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. Also, of course, on the basis that we've got a 60%-65% exposure to technical specialists, we know that we suffer weaknesses first, but also we see stabilization first, and we get to growth first.
It's trying to get that balance right of managing the profitability appropriately for the short term, but investing for the long term. I think the nice thing is we have a phenomenally experienced management team across the world. It is not just Alistair, Nigel, myself, and the other senior operators. It really is across the patch, and we'll make all the right decisions. What is true going into FY20, it's a year to be cautious on the cost base and to be surgical on revenue investment, and we will do that.
Okay. Thank you very much.
The next question comes in from the line of George Gregory, calling from Exane. Please go ahead.
Morning, Paul. Just three, please. Again, largely on movements in the cost base. I just wondered if you could maybe roughly quantify the benefit you saw in the fourth quarter from lower incentive payouts. Secondly, in response to Paul's earlier question, give some guidance on the impact of D&A in fiscal '20. Could I just clarify, you expect that to be an uplift of about GBP 5 million aligned with the uplift in property cost or did I mishear that? Then just pulling the various movements in the cost base together. I know you don't give guidance at this stage. You give guidance for stock, but you don't really talk about fiscal '20 in detail at this point.
I suppose, is it fair to say that H1, given the exit rate with an uplift in D&A and property cost and with headcounts still running slightly above fee growth, we might expect that being a slightly tougher period, maybe then hopefully turning a bit better in the second half of next year. Just some thoughts around drop through phasing would be helpful. Thanks.
That's a pretty lengthy question, George. I'll do my best, but I have a feeling I'll fail on most counts. To reiterate, we said GBP 5 million more on property. We said GBP 5 million more on depreciation. Yes, also the cash add back would go up by that amount. We will separately, on the results day, issue the IFRS 16 lease impacts for next year. I'd rather cover that there because Deloitte are, and clearly PwC are auditors. We've got Deloitte reviewing our modeling on that standpoint. I think other than that, you've 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 fee line. Clearly, we've gone from 8% in underlying in Q2 to 5% in Q3 to 1% in Q4.
The positives, I'll 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, going back to that first and second half point you made. I think the first half, of course, will have some tough comps, so from the profit standpoint is a bit more difficult. And in fact, you saw that in actually the second half this year. We've said GBP 248 million. We did GBP 124 million in the first half. We did GBP 127 million a year ago in the second half. It's been a bit more difficult despite the protection from incentives. We got to get the balance right, and we'll do that.
We're going to continue to invest in all of the IT tools that we're developing. We're actually very happy with consultant productivity this year. I think to have protected a position in the market that's weakened and decision-making slow, it's been really good. A lot of moving parts into next year, and there are two things that will never change in our business. One, we'll do the right thing for the long term. Secondly, you're right, I won't talk to guidance for a year in advance or three quarters in advance or two quarters in advance. We have three to five weeks visibility. We have no forward-to-good revenue stream outside of Germany, and it is speculative at most. We exit the year in a better position from a cost standpoint because the headcount, as I said earlier on, by September will be there.
The real question mark is, do our fees stay at one? Do they increase to two or three or four? Or do they decline? That's not possible to predict at the moment. Even more when you go into a summer period where visibility gets a bit harder. I probably haven't answered your question very well, but it's quite a hard one to do. I do think the summer and exit rate in September will be very important for next year's trading.
No, that's helpful, Paul. 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 GBP 5 million. 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 operators have done a really good job considering growth's gone from 14% up, we're expecting strong growth this year, right the way down to one to manage the cost base. I am deeply grateful for everything the guys have done around the world. This has been a harder year. Positive for me, reiterate, is don't see any distress at all. We know having exposed tech specialisms, we suffer the weakness first, but we come out first.
I look forward to an inflection point, I have no real view when that will be at the moment.
Perfect. Thank you very much, Paul.
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I suggest then-
Okay
I do a short wrap-up. First of all, thank you all very much for listening. Secondly, thank you for humoring me and allowing me to mention Aston Villa. Thirdly, I should mention I was at Lord's on Sunday, that was also a thoroughly enjoyable day. If that's 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 preliminary results on the 29th of 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.