Trading Update

Oct 11, 2018

Earnings release

Hello, and welcome to Hays Q1 analyst call. My name is Amelia, and I'll be your coordinator for today's conference. For duration of the call, you'll be in listen only. However, you'll have the opportunity to ask questions. Dial 0 on the telephone keypad and you'll be connected to an operator. I am now handing over to your host, David Phillips, Head of Investor Relations to begin today's conference. Thank you. Thank you, and good morning, everyone, and welcome to Hays quarterly update conference call for the 3 months ended 30th September 2018, the first quarter of our 2019 financial year. I'm David Phillips, Head of Investor Relations, and I'm here with Paul Venables Group Finance Director. Before we start, please be aware that this call is being recorded and the recording may be accessed using the number and code provided in the release. You should be aware that the discussions may contain forward looking statements that are based on current expectations or beliefs as well as assumptions on our future events. But there are risk factors which could cause actual results to differ materially from those expressed in or implied by such statements. Hayes 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 of the key themes and discuss the regional performances before taking any questions. As usual, all net figure percentages I give for the quarter be on a like for like basis versus prior year. Highlights for the results. We delivered another record quarterly net fee performance, with group net fees up a good 9% against a tough year on year comparative. Currency translation continued to move adversely and reduced headline net fees by 2% in the quarter. As a reminder, our main sensitivities are sterling versus Australian dollar and euro, Movements in these currencies since our prelims in 2018 would mean that if we re translate our FY 'eighteen profits to 1,000,000, and 9th October 2018 exchange rates, our operating profit will reduce by 1,000,000. This represents a reduction of 1,000,000 on 28th August 2018. I'd highlight the following key features in the results: 1, Our performance was broad based with 17 of our 33 countries, delivering double digit growth, including 10 all time country record performances. 2, our perm business grew slightly faster than 10th at 11% versus 8%. 3, Australia delivered good growth in net fees of 9% versus a tough year on year comparative and extended its run of consecutive growth quarters to 'seventeen. 4, Germany delivered another record quarterly performance with strong growth of 13%. Our 10 business grew by 10%. We saw continued excellent growth in perm, 29%. 5, the UK and Ireland business delivered a solid performance with growth of 3%. This was driven by good 7% growth in our 10th business helped in part by easier comparatives. 6 performance in the rest of the world was strong at 14% within this Americas and Asia with a stand out, delivering excellent growth of 22% and 20% respectively. And against a tough year on year growth comparative, Europe ex Germany was a good 9%. 7 group consultant headcount rose 5% in the quarter, in line with our expectation and up 7% year on year. This is boosted by our normal seasonal gradual intake, together with ongoing selective investments in markets, where we see strong growth opportunities like Germany, France, the USA and Asia. And finally, at the end of that quarter, our net cash position was 1,000,000, representing a good performance and is in line with our expectations. I'll now comment on performance by each division in a little more detail. ANZ. Our ANSED division, which represents 18% of group net fees, delivered another good quarter with net fees, up 7% despite tough comparatives. This was our 17th consecutive quarter of growth, and Q1 FY2019 was also our strongest net fee quarter since 2008. Our temp business was up 10% and perm at 1%. Our private sector net fees grew by 7% with public sector up 5%. We saw another good performance in Australia with net fees at 9%, growth of broad based across most major specialisms of the states, In New South Wales And Victoria, which together represent 58% of Australian business, net fees grew 9% 11%, respectively, Queensland our 3rd largest states saw growth of 11% and South Australia delivered 18%. AT and T grew by 5%. At the specialism level, net fee growth in IT was again excellent at 26%. Office support grew by 12% and sales and marketing delivered an excellent percent growth. Net fees in Construction Property, our largest business Australia, declined by 1% and Accounting Finance was also 3% lower. In New Zealand, which represents about 4% of ANZ, our growth remains below expectations and net fees fell by 29%. However, we have taken steps to improve our performance. NetSol headcount in ANZ increased by 4% in the quarter, and was up by 7% year on year. Germany, our largest market of Germany, which represents 27% of group net fees, grew strongly at 13% and delivered another all time record quarter. Our Tempur contracting business, which together represents 83% of German net fees grew by 10% And within this, contracting was up 8% and temp up 14%. Perm, which represents 70 17% of German net fee delivered another excellent performance of 29%. And at the specialism level, our largest specialisms of IT And Engineering which represent over twothree of net fees grew by 8% and 9% respectively. Growth in accounts in finance was excellent at 27% with sales and marketing up 18% and construction property grew by 9%. Consult headcount increased by 4% in the quarter, including our normal seasonal graduate intake and was up 7% year on year. As flagged at our full year results, we expect a smoother profile of headcount additions in FY 'nineteen compared to the prior year. UK Ireland. In UK and Ireland, which represents 24% of the group, net fees continue to grow modestly increasing by 3%. This was led by our public sector business, which saw net fees up 8% in part due to easy comparatives following the negative impacts of IR35 changes in the prior year, growth in the private sector 74% of our UK business was up 1%. Our temp business, which is 55% of UK net fees, continued to deliver good growth of 7% was perm fell by 2%. Our overall growth of 3% represents a continuation of the underlying UK and Ireland growth trends in half 2 FIA 18 where we grew by 2%. All regions traded broadly in line with the overall UK business with the exception of Northern Ireland And Southwestern Wales of 15% and 12% respectively, and the Southeast of Midlands down 7% and 5% respectively. Our largest UK region of London delivered solid 5 percent growth. In Ireland, our business delivered another strong performance with net fees up 12%. Across our 5 largest specialisms, net feeds in IT grew strong at 14% Construction property was up 7% office support 5% and Accounting Finance at 1%. Education continues to face tough market conditions and declined by percent. Consultant and division increased by 3% driven by gradual intake and fell 1% year on year We will continue to focus on driving consultant productivity in the region. Rest of the world, our large division, the rest of the world, makeup of 28 countries and representing 31% of group net fees, delivered excellent growth of 14%. 9 countries delivered all time record net fees. Europe ex Germany was up 9% despite increasingly tough growth comparatives Our largest market to France grew by 8%, while Spain delivered another strong quarter up 16%. Belgium, our 4th largest rest of the world country by fees grew by 3%. In Asia, we delivered excellent growth of 20%, China, which includes our Hong Kong business and is now our 3rd largest rest of the world country, grew by an excellent 29% and within this Hong Kong delivered a superb 41%. And elsewhere in Asia, Japan's growth of 19% was also strong. In the Americas, we also saw excellent growth with net fees up 22%. In the U. S, our 2nd largest stress to our country by net fees delivered another excellent result up 27% as did Canada also up by 27%. Brazil fell by 3% and Mexico was down 7%. During the quarter, we opened 2 new offices in our Rest of the World division, in line with our long term plans. And overall consultant headcount and division was up 7% in the quarter and 14% year on year. Cash flow and balance sheet, net cash was 1,000,000 at SEK 30,000,000 for September 2018, circa SEK 20,000,000 above our Q1 FY18 level, The decrease in the quarter was entirely in line with our expectations and is due to the normal timing and phasing of cash flows. Conntrading and guidance, I would highlight 6 points. First, to reiterate exchange rate movements remain a material sensitivity for group's retorted results. If we re translate FY18 profits at current sterling spot rates, we estimate a negative GBP 5,000,000 operating profit currency headwind for FY 2019. This represents a negative swing of GBP 8,000,000 since we reported our prelims. 2nd, our consult head count of 5 growth of 5% in the quarter was boosted by a normal seasonal graduate intake, looking forward, which that sequential increase in Q2 will be slightly below that of Q1. 3rd, the group net fee growth exit rate was below the quarter as a whole, 7% driven by Europe, including our largest market of Germany. Growth comparisons are increasingly tough, but we also saw a slower than expected European result in the second September, resulting in European growth of 7% for the month. 4th exit growth rates outside of Europe were broadly in line with the growth rate reported in each region in the quarter. 5, in the second quarter, there are 2 additional working days in Germany versus the prior year, which included additional public holidays. We expect this to have a 3% positive impact on Q2 net fees in Germany and a 1% positive impact on Q2 group net fees. And 6, as we sit here today, with a normal caveat, so we have 3 to 5 weeks visibility and limited fortified revenue stream, we expect our group like for like growth rate in Q2 adjusted for these additional working days to be broadly similar to Q1. In conclusion, this has been another record quarter abroad based growth led by international business, which represents 76 percent of group net fees. Whilst we're mindful of global macroeconomic conditions, Trading conditions remain positive across our international markets. We continue to invest significantly in crude growth markets where we see structural and market share opportunities, notably Germany, France, the U. S. And Asia. Now focus remains on driving profitable cash generative growth and leveraging the largest and most balanced global platform in our industry. I will now hand you back to the administrator and we're very happy to take your questions. You. We have some questions on the line. The first one is from the line of Guillaan Mordin from Jefferies. Please go ahead. You're now Morning all. I just wonder if you might be able to expand your narrative on Germany, obviously, trajectory during the quarter. So obviously a lot of debate going on at the moment around momentum within the German labor market. So would you characterize your momentum is being driven by, sort of impact on the automotive supply chain from sort of recent developments do you think actually there's a broader impact that's taking place in the German labor market at the moment? Or do you think that you've maybe hit a speed limit for the business and as the law of big numbers kicks in, that it's more difficult to maintain same percentage on your growth rates? Thanks, Kean. It's both an excellent question. There are various component parts to it. And in many respects, my simple answer is I think all of those. I mean, 1st of all, we are by far the largest specialist recruitment business in Germany, we are as big as number 2, 3, 4 and almost 5 put together. Therefore, from where I sit, any growth in excess of 10% in a quarter is pretty good. So we wouldn't be disappointed with anything greater than 10%. I think when you look under the cover, there are 2 or 3 things which are playing. Firstly, there's no doubt but if we focus on the contracting and temp side, there were a couple of percentage points below where we would have expected certainly when I did the Q4 update at the end of June. And I think as we've gone across that period of time, the volume growth that we've had has been slightly below our own expectations. And then secondly, clearly impacting the sorry. And on that part of it, that's almost entirely in the IT And Engineering area. And as we've discussed before, engineering which is one of our largest specialists for the 30 percent of our business, that's pretty much dominated by Automotive. Automotive is 20% of our group. So I think there is underneath, there is some modest, cautiousness of some of our clients but equally, I think when you've got overall growth of 13%. That's a good place. And then secondly, clearly, as we've explained in the exit paragraph, Our growth in Germany in September was below where we expected it to. I certainly expected it to be 10% or slightly above that. And we were at 7. And that is more perm driven, and that's the last couple of weeks of the month. And while I try to give that guidance at the end, is as much to say, having been there earlier this week, my own view is that's just gone across into October and has landed into October. So I think overall 13% is good growth. We would clearly have preferred it to have been 14% or 15%. You can see in the headcount position that we're in about the right space from a headcount perspective. So I think we've done a pretty good job of managing the cost base. And an underlying, despite the fact that the last couple of weeks in September might have been a bit weaker, perm growth of 29% is excellent. And all we're talking about is, without those last 2 weeks, we would have been closer to, and it would have been above 35%. So it's far too early to draw, I think, any conclusions on more broader issues. But, 13% is pretty good, but absolutely either preferred 14% or 15%. Okay. Thanks very much. The next question comes from the line of Johan Spickers from Kepler Cheuvreux. Please go ahead. Yes. Good morning, gentlemen. First question on your guidance for Q2. Did I understand well that, adjusted for the trading day should expect growth to be in line with that of, Q1 despite, let's say, the lower exit rate, is that correct? So and if it's a case, where do you see them? Let's say, the improvement versus the exit rates? And secondly, looking to your ex Germany, Could you give maybe some indications what you do see happening, let's say, by end user, where, let's say, you see the slowdown in growth coming from, is it for specific sectors? I think if you could give some flavor on that. Okay. Again, Hans, if I don't cover all the points you've raised, please do come back. There's quite a few points there. Look, why have I given both the exit rate in September and then try to give comfort on Q2. I've had the pleasure of being the group finance director 12 years here. And through that period of time, I've always believed in transparency. I think if there's a fact, if something comes in the business, which is a bit of a surprise to me, I should state that. So what we try to do is 2 things: 1, the exit rate is 7% that's factual. Secondly, the only weakness in that exit rate is in euro all of the other regions of our business performed exactly in line with the quarterly rate as a whole. Secondly, sitting here, and reflecting on, that weakness in September and having done some sensitized analysis across our Q2 sitting here today with all the caveats I gave because, you know, we don't have that much forward secured revenue stream. We've only got 3 to 5 weeks visibility. All of those things My point was to say, look, guys, where we're sitting here today, I expect to grow by 9% on a working days adjusted line for line basis, therefore close to 10% including the additional working days. For Q2, so why did I say that? Because I think otherwise, we leave the 7% act naked I don't think I'm giving the other part of the guidance. And I think therefore, it's important just to give that. But of course, that is my view looking at all the results. In the end, we get to January, we will know where we are. Where do the improvements in the exit rates come to? I think firstly, Australia will we should give part of that. See, Australia results in this quarter actually think whilst we use good because it's between 5% 10%. Actually think that's a pretty impressive result. That's the best quarter since, 2008, and we had sequential growth across that quarter. So we get into slightly easier comps when we go into the next quarter. So I think some of that is comps. The UK businesses continues to do well course, there's all of the uncertainty there at the moment. And we would expect to do, Asia and the Americas still continue to be strong. And I expect to do a little bit better in Europe. So then you moved on to, I think, was your last comment. If we look at Europe ex Germany, why was September 7% Again, that is that's perm. So we had a strong July. We had a strong August. But of course, that's what I should have said earlier on, but most of you know, Tamber in this quarter dominates, it is more than 40% of the overall fees as a disproportionate impact. And what is clear in the last couple of weeks of the year, the perm growth was lower. I think there are several factors in that. First of all, I think we have to acknowledge that we're now into our 5th year of growth in Europe. So when you've got markets such as France, we've had 4 years of double digit growth. So I think we are into tough comps. I've talked tough comps in Q3, I talked to it again, and those comps are even harder in the September period. And you see that within Belgium, I think France and Belgium are 2 of our strongest well run businesses and yet clearly their growth was a little bit less than we expected and we've showed those percentages today. When you look under the hood, It's not like it is only one specific sector, but if I went to the client base, there's more been more weakness certainly in the manufacture sector in the export sectors than we've seen anywhere else at the moment. But it's 2 weeks. So I think if you look at the exit 2 weeks trading, it's far too early to make any assumptions. But having kind of factored that sensitivity in, we have a lot of markets across Europe where we're going very strongly. As we said today, we've got 17 markets in excess of 10%. So the underlying business is doing very well. We've had a slightly weaker last couple of months in September. It's important to disclose that today. It's, and I think, important to use my 12 years worth of judgment to say that based on what I can see today with the caveat, I still think will drive good growth similar to Q1 in Q2. Okay, thanks. One follow-up question. With respect to headcount additions, consult headcount additions, what do you expect, let's say, for Q2 to add? Yes, I would expect, I mean, if you think what we're trying to achieve at the global business, we have always focused on consultant productivity. And that's why we've had, by far, the best profit performance out of any specialist recruiters over the last kind of 5, 6, 7 years. And therefore, sitting here, having our normal stronger Q1, I think if we're at 2% to 3% in Q2, that is where we should look to be. In that way, if we can continue to have consultant headcount growth in the 6%, 7%, 8%, 9% range, that means that we can drive some leverage because other than this kind of little wobble in the last couple of weeks, the markets are still pretty predictable. And there's some very good growth opportunities out there. And therefore, there's no reason why we can't focus on productivity and drive profit leverage. The next question comes from the line of Tarek Badia from HSBC. Please go ahead. Good morning. 3 questions for me. Have you seen any reduction in the fill rates in your MSP or RPO contracts? Secondly, how many MSPs are coming up for renewal in the next 12 months? And what are the fees on that? And finally, are you seeing given the Bank of England comments yesterday an increasing number of pockets of wage inflation? I think first of all, we should put the RPO bit into context. Those contracts across all of our global business are less than 15%. So I understand that, you have a fixation on those, but they're a relatively small part of our business. Secondly, they grew pretty much in line with the overall business estimate, which is a significant proportion of our overall fees. So I don't really get the renewal part. The answer is we always have renewals in those businesses, But remember, that business is largest in the UK, it's largest in Australia. We of course have Global And European contracts like all the recruitment companies do, but I reiterate it is kind of below 15% of our net fees. Now moving on to the Bank of England bit and going broader, I think there are pockets of wage inflation. There's no doubt about that. From where we sit at the moment, it is strongest in the U. S, if we take a global position, broadly across the path, including the UK, it's in the very school shortage areas of the market. So the IT sector, If you're in digital marketing, if you're in digital IT, if you're inside the security, those are strong markets and there's a massive war for talent, and a significant increase in salary levels, but that tends to be our movement. And I think what is interesting in the results is not just if you stand back and say that perm is continues to grow, in excess of 10, something like that side of the UK and Australia, our perm growth is 2 times 10. But I think we are in a market where there is significant candidate confidence. That candidate confidence is slightly greater than corporate confidence. But does this mean that wage growth is going to go from the current 2%, 2.5%, 3% to 4% or 5%. I don't think that's the case because fundamentally, as we've discussed before. And so companies are confident that they can increase their own prices to end customers, they're always going to be cautious on overall wage increases. So what you have is pockets What you have within individual businesses, of course, talented people getting decent pay raises, but what you haven't got is an across the board. Increase in salary levels. And I think with all of the uncertainty at the moment, the primary one being about trade issues between the U. S. And China for fairly obvious reasons, I don't think we're going to see a sudden pickup in wage inflation, but what I do think we are seeing is more candidates looking to move perm, and they're looking to do that in part to secure wage increases. So by the very nature of that, if we get an acceleration of candidate move, then that would be a positive for us. And of course, on those deals, we would earn more money. Thank you. Your next question comes from the line of Andy Grabler from Credit Suisse. Please go ahead. Hi, good morning. Just a question on Germany, if I may or a couple. You've talked about driving consultant productivity. German headcount's grown over 40% over the last couple of years and and, net fees haven't really kept pace. Is there still a case for that consultant productivity to improve going forward? And then on a similar kind of theme, you mentioned that growing over 10% was a very good performance given how big that German business is. Looking at your longer term, targets you need to grow 10% to 16% was in those targets. How sustainable is that if the markets are a little bit volatile? Well, I think you know the answer by yourself and the volatility doesn't help any recruitment business in the longer term. But I'm back to the 5 year plan needs us to drive 13% fee growth and a little bit leverage on the top of that. We're in excess of that the fee line last year. We're in line with that in the fee line in the first quarter. We clearly had it been not for the perm issue in the last couple of weeks, so they've been at 14%. So I think at the moment, we've had a good start in the 5 year plan. Clearly, when you start a plan to expand and broaden your business to go into the SME sector to open new offices, all those sorts of things. That's an investment on which you don't get an immediate return, but we're pretty happy with the performance of the German business. Fundamentally, I would have preferred 2% more fee growth. Where you are right is that of course we need to take the growth we've got and to start to drive some leverage on that. And that will be our primary focus over the remaining part of this year. And in terms of doing that, is that just a course of time as those consultants get up to up to speed, or is there anything that you can do? There's a fundamental difference between a perm business and the run rate business. In a perm business, of course, if you put the new candidates into the right desks, you get a much earlier return on fees. That has always been the case. But as we all know, why you need a large Flex business, Tempan contracting, is that that's more sustainable for the longer term. But when you're building that growth, it takes a good 2, 2.5 years before you get to a new consultant being fully productive. So When you're correct, as you make an investment today, not for the next 6 months or the next 12 months is beyond that, having put lot of headcount in last year, a bit more in at the moment. We will be a little bit more cautious as we go across the next few months, but we're going to try to keep the fee growth at 10%, sorry, the headcount growth, that's about 10% and drive a little bit of productivity on the top. Exacting, of course, that the headcount we brought in 12 months ago is now becoming more productive and it will go through that productivity curve. One of the beauties of our German business in the market position we're in and the strength of that franchise is that actually the productivity assumptions are fairly predictable as you go through that. Other than, of course, as I said earlier on, we're probably 1 or 2 percentage points of growth where we're behind where we would have been. And therefore, we're a little bit behind on productivity where we would have been, but that's for the German team. Supported by ours from myself to improve that over the next few quarters. The next question comes from the line of Anvesh Agwao from Morgan Stanley. Please go ahead. Hi, good morning. I just have one follow-up on the, on the UK and you kind of partially touched on it. But do you think the combination of wage, wage growth and skill shortage into the UK market can further strengthen the growth rate because we have seen some sort of stabilization, stabilization in the growth and the growth is in positive last couple of quarters now. So just your thoughts there? I think the answer is all about politics actually. And this might seem rather strange. And I don't in any way mean to denigrate the performance of our Americas or Asia region, which is upon more than 20%. But I think the performance of the UK at 3% growth in the uncertain market we've got is very good. Clearly, we use the words solid, but think with all of the political turmoil we've got at the moment, not just Brexit, but can they get any deal to the House of Commons? On the various party companies and everything else. There's clearly a lot of uncertainty in the UK market. Why your point is very apt is if that uncertainty is increased, clearly that will that will weaken because that will lead to companies being more cautious. If there is uncertainty given to that, I. E, a deal, Even more if that deal got through that as a comment, I do believe that growth in our UK business will accelerate. And one of the nice features of our UK business as we demonstrated over, you know, certainly the last 7 or 8 years, is it give us any growth we're very good at driving profitability out of that. So I think 3% is good. There's a bit of wage growth there, but very targeted There's absolutely still shortage. You're correct in certain sectors. It'd be by far the largest in marketing by being by far the largest. Companies are very, selective and surgical on where they will allow wage growth going into their businesses in which areas. So do I is going to be material wage growth in accounts in finance, not really. But I think there's some good opportunities there. But at the moment, I think until we get through this next 3 months are pretty critical aren't they on lots of levels because you can draw lots of scenarios equally if you're on the positive side of it. And we get an agreement. It gets to the House of Commons that uncertainty disappears. I actually think that, there is a positive outlook for our UK business because I'm exceptionally clear and confident that had it not been for all of the Brexit crap we would have a much bigger UK business than we've got today. So 3% is good. Could that go by more? Yes. I think the timing on that is all about the political issues of the deal and getting through the House of Commons. Most companies are cautious are looking at that But they have both plans. They have the downside plan, but they also have the upside plan. So I think for all of us on this call, even more for many of you in the organizations that you're in, we're on the upside plan. The next question in the queue comes from the line of Paul Tekaert from Barclays. Please go ahead. Good morning. I've got three questions, please. Paul, do you know if you look back at the quarter last year, How much better was September in Europe? I know there was sort of some distorting factors, but could you give us a feel for how much stronger September was in the quarter. And the second question is on Australia. You often give us this rundown of your appraisal of the lead indicators that you look at. Would you be able to do that again, please? I know some of the house price data was a bit it would be replaced? And then lastly, if going back to Germany and maybe another way of asking and East, question. If theoretically the growth rates step down further in Germany related to the macro, how would the investment program evolve? Perfect. So Paul, because I actually do think I haven't answered all parts of people's questions today. So please do come back if I'm missing the I can't really remember back to last September, but if I can explain, we had a real flyer in the year last year. We had very strong growth, both in July August. We had an excellent September. It exceeded our expectations. And you know, we're a good we're probably about a 5% tougher comp within Europe. So that's why. But going back to Q4, and then emphasizing the prelims. And clearly, at the prelims, I expected that we would deliver 10% or 11% growth in this quarter. We mentioned tough comparatives. It's not like we've just got it today and started talking to tough comps. We've been talking about for some time, and we've solely talked about them in Australia, which I'll come on to in a second, and in Europe, including Germany. So there is no doubt that the comps were tough and in September, but it is more in September this year that we've had 2 weeks worth of firm weakness in a few of the markets, and we didn't expect that. So, that's clearly led to us probably being about 1% fees off, versus where we would have been. On ANZ, I think it's a fascinating market, isn't it? I try to give you what we see at the moment. I haven't physically been in Australia since the start of August, but as you guys know, One I know that market really well, so can they have a very close relationship with both ANZ and NAB's Chief Economist. If I were taking our board down for scheduled visit there in a week and a half's time. Overall, The economy is doing very well. The government's financial position is in a strong position. Every country in the world would like to be in the position of Australian economy. But of course, the political environment is a bit of a mess. You've already had Prime Minister change. So they now have a majority of 1. It's hard to get anything through. There will be an election. That's election the expectation is it will be next May, assuming that the government can continue through to that point. And at the moment, the opposition party is well ahead in the poll. So There is a greater degree of political uncertainty and that is on the horizon for a lot of companies. If we look at construction property, which is our largest specialism by far sure it was 28% of our business. The trends are the same as we talked about the last couple of times. There is a significant acceleration in large state and government funded infrastructure projects, but of course, the largest demand for labor in that space comes from larger construction companies themselves all have individually large construction recruitment businesses. So the business we get out of those is in the high end professional areas. We get a lot of business into subcontractors, etcetera. So that is a positive. There is no doubt on the residential part of it. In the multistory apartment blocks, which have more of an impact on our business in construction and property in that space, but that has probably passed its peak. Certainly, it's passed its peak in approvals, but there's still a lot of activity and that activity will give us, I think, pretty good market position for the next year. Smaller residential is accelerating commercial construction is in a pretty good space. So for us, construction being, I think, we're 1% down in the quarter is more, as we actually saw in the UK a few years ago, when you've had a strong run up in construction property now, we're into the 5th year of our growth in ANZ. Of course, you get to a mathematical position. You can't have any more cranes. So I think the market could be strong But I don't see much sequential growth in construction property from where we sit today. We have continued to put some investments in certain sectors, certainly the energy sectors, and we may well get an extraction from there. The nice part is we made a material investment in our IT specialism a couple of years ago continue to do that today. And that growth is quite dramatic. We've gone from being a number 3 player in IT about 4 years ago. To being by far the largest player in that marketplace. I think the team have done a really good job. And the business confidence part of it He is still in a stable and supportive position, but of course, there is a greater discussion about China and tariff between the U. S. And China and all those sorts of things. So that tends to dominate. So it's a longer round router saying, I think overall the indicators today are of a positive, orderly market. And we had sequential growth in this quarter. It's the best quarter since 2008, It's slightly in excess of our expectations Australia was up 9%. And I think we'll have another good quarter and we've put the reasonable amount of headcount into deliver that. Whilst clearly with our 7% up year on year, we're trying to drive some productivity improvements. And I think on Germany, We're into a bit of hypotheticals now, but the very obvious nature of any recruitment business is that, if growth becomes a little bit less, all you do is you're a little bit more cautious on headcount growth. We will still continue with the Office rollout. We will still continue with moving into the SME Sector Our German business, as we've always described it, as well as being a market dominant player in IT And Engineering and the number 2 player in accountancy and finance. So we've got a really good market position. And there is a long term opportunity for structural growth. That business was initially concentrated around larger corporates because you have a big business in engineering, surrogates for Automotive. That's going to be the case. And if you have a big business in IT that often starts in the larger corporates, what is clear in Germany is a few of those larger corporates are being more cautious on their hiring at the moment, certainly in the financial service sector for fairly obvious reasons, if you've had any other press, So for us, if growth slowed a bit, we would be more cautious on headcount, we would continue with the structural investments because this is not about FY 2019. It's not about FY 2020. We're in a market dominant position. We want to ensure that the market position that we built in Australia over a long period of time which drove superior financial performance and superior profitability is replicated in Germany. And therefore, we will continue with the structural investments whilst being slightly more cautious on headcounts, but sitting here today with everything we know, fee growth is in a good place, and we're in a good place, I think, to get within the 2022 range. So We just had a couple of quarters where in the end, we're 1% to 2% below where we would like it to have been. We have no further questions We have one more question from the line of Ken Martin from Jefferies. Please go ahead. Hi, there. Just wanted to sneak in. So how would you characterize the delay in German perm decisions at the moment? So is this HR departments being slower to sign off? Is it because the number of interviews required to get the candidate on board is increasing? Are you seeing sort of candidates being slower to take the decision to commit or are you seeing the start date delayed? Yes. There are excellent questions as normal. Everything I've seen so far, is it just felt like what we expected to land, in the last 2 weeks in September specifically on the 1st October start date. As you guys know, we book when people start in their job we include the 1st working day of the next month included in our cutoff. 1st October is an important date. And in the end, Dean, it looks like some of those dates just moved as we went across the month. And, and it was slightly greater than we expected. I think that's quite hard to disaggregate between candidates and clients. We've certainly seen no signs of any distress or weakness. More of it has been skewed to some of the larger companies. But having been there all day Tuesday, having looked at the parts of the business that did move, we've got very firm start date later in October. So I think it's hard to give greater clarity at the moment. And of course, we're only sitting here on the one that we're the 11th October. And I think the key that I don't know at the moment, of course, is where we see similar trends at the end of October, at the end of November, all those sorts of things. We'll see that when we do the Q2 results. What I can say, I think is that all the discussions we've been having with our clients other than with perhaps a handful of some of the larger clients. It's still a pretty positive market. There's significant school shortage certainly in the IT sector, there's a real scramble to get hold of good candidates. So I think the market is strong. And I would reiterate as by far the largest market player, both dominant in IT Engineering and overall I think when we're around 8%, 9%, 10% in the 2 biggest specialisms and 13% overall, that's a pretty good growth position to be in. Whilst we were clearly preferred to be a little bit higher. We have another question from the line of Martin Burrows from Private Private Investor. Please go ahead. Oh, hello, Paul. Thanks. Very interesting conversations. You may or may not be able to answer this, but would you expect that the recent fairly sharp drop off in share price has anything to do with simply a fall in line with the 250 in general, or or do you think there's some underlying confidence in the growth figures that you've proposed? No, I think it's all the former. I think if you, at 7 o'clock this morning, I happen to be at the CMBC studios doing an interview with them. And the first 20 minutes of their program was all about what's happened to the risk off part of the stock market. So I think in the end, we were about 2.10 P at the start of September. We were at below 180 end of yesterday, and pretty much across the whole of the cyclical parts of the markets, we've seen a good 10% fall. And I think that's all around forward confidence, isn't it? It's not about 1 quarter or 2 quarters trading. It's much more about where will the market be in a year's time, concerns over interest rates, concerns over trade, the biggest issue in my own humble view is all about the trade war between the U. S. And China because that's the 3rd of the global economy. So you can't dismiss that. And I think the biggest confidence it can be given to the markets if he's all around that trade position. But no, I think that the falloff is pretty much in line with everybody else and So you're confident about your 5 year plan anywhere. Yes. I mean, with the normal caveats, gave early on about any set of numbers. I think we're in an excellent position. And look, what we said in that 5 year plan clearly had the caveats around any significant downturn in a major But at the moment, the economy is so let me put it this way down. The economy is completely supportive of delivering the 5 year plan. The politics around the world is in an interesting position, isn't it? And they keep getting used to trying to get some stability in that market, whether that's a UK with a discussions we had earlier on, whether that's over tariff issues, whether that's in Australia, with the elections to come forward, that's something we can't do anything about. What we do is we've delivered an excellent long track record of superior financial performance over the last 4, 5, 6, 7, 8 years, and we continue to look at all of our indicators and make decisions on the back of that. We clearly have an eye on what's going in the border economy with our own indicators and we make those decisions And that's why we've got superior conversion rate, in this sector because we're very good at converting what fee graph have into profit growth in the long term, that's the most important part because it also drives cash, drives dividends, drives specials and everything else, and we will continue to do that. That's great. Thank you very much. We have no further questions in the queue at the moment. I was waiting for another one actually after the last 5 minutes. If that's all of the questions for today, we'd like to thank you all for joining us for the call. I look forward to speaking to you again at our Q2 FY19 IMS on January 15, 2019 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 very much for joining. Have a good day. Thank you for joining this conference call. You may now disconnect your handsets.