Good day, and thank you for standing by. Welcome to the interim results update for the six-month ending, 31st of December 2024, conference call and webcast. At this time, all participants will be in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Alternatively, you may also submit your questions via the webcast at any time by typing them in the question box and clicking submit. Please note that today's conference is being recorded. I would now like to turn the conference over to your speaker, Mr. Dirk Hahn, CEO. Please go ahead.
Good morning and welcome, everyone. I'm Dirk Hahn, Chief Executive, and I'm here with our CFO, James Hilton, to present our H1 25 interim results. Many of you will recall that our strategy includes five levers designed to build a structurally more profitable, resilient, and growing business. Despite ongoing macroeconomic uncertainty, we have remained relentlessly focused on delivering them. Our presentation today will increase your confidence that we are structurally improving Hays despite challenging markets and remain relentlessly focused on driving operational rigor through business line prioritization, resource allocation, and efficiency initiatives. Before we examine this in more detail later, let me briefly run through a high-level overview of our first half. H1 25 was a half of significant operational and strategic transition against the backdrop of economic and political uncertainty, which weighed on client and candidate confidence, driving lower placement volumes and a material lengthening of time to hire.
Group like-for-like net fees decreased by 13%. Temp and contracting down 9% was more resilient than perm, down 19%. As guided at our Q2 results, pre-exceptional operating profit decreased 56% year-on-year on a like-for-like basis to GBP 25.5 million, impacted by tough conditions in key markets, particularly towards the end of the half in perm. And as James will examine more closely later, our cost base has declined significantly, with GBP 55 million per annum structural savings now secured since the start of the last fiscal year. We are not content with current profitability, but we are pleased with how we have delivered strategic progress during the half. Firstly, business line prioritization and optimized resource allocation have resulted in a sector-leading productivity increase over the last two quarters. Secondly, net fees with our Enterprise clients are growing well.
And thirdly, temp and contracting net fees are more resilient than perm and are growing strongly in several of our focus countries. Later in the presentation, I will provide case studies outlining how we have achieved this. But first, let me examine our divisional performance. I won't provide a detailed narrative of our financial data because many of these figures have been previously disclosed. In Germany, like-for-like net fees declined by 13%. We took decisive action to protect profitability, and the division has been relatively resilient in a challenging market, contributing all of group pre-exceptional operating profits in the first half. Contracting net fees were resilient. Temp was more challenging because we have greater exposure to the automotive sector, and activity levels remained subdued in perm as client decision-making slowed during the half. However, year-on-year growth was strong in energy, defense, and Life Sciences.
Despite this, profit headwinds from economic conditions and fewer working hours more than offset cost efficiencies, initiatives, and disciplined pricing. In the UK and Ireland, like-for-like net fees declined by 17%, and the division reported a GBP 6.5 million operating loss. We have taken significant restructuring actions to better position the business going forward. We have more actively managed our less productive consultant population to transition to a more focused core, secured structural savings in both front and back office functions, which James will cover in more detail later, and have today announced an external appointment to lead the division who joins Hays in June. In ANZ, like-for-like net fees declined by 17%, and the division reported a reduced operating profit of GBP 1.4 million. Our new management team has increased accountability and alignment to a performance-based culture, so consultancy productivity improved by 12% year-on-year to its highest level since FY22.
We have moved up the value chain in temp and contracting and will intensify our initiatives to target highly skilled roles in the most in-demand job categories with fast-growing end markets. And finally, in Rest of World, like-for-like net fees declined by 9%, and the division reported a reduced operating profit of GBP 3.1 million. U.S. consultant fee productivity increased by 40% year-on-year, and the country has moved from monthly losses a year ago to consistent profitability. Our cost actions drove a return to profitability in China, but activity in EMEA slowed through the half, particularly with the impact of elections being felt across Northern Europe. However, temp and contracting net fee growth was positive in five of our eight focus countries, including notably strong performances in Italy and Poland. I will update later how we have delivered operational discipline and strategic progress in challenging markets. But before then, I will hand over to James to run through our financials in more detail.
Thank you, Dirk, and good morning, everyone. First, summarizing our financial performance. On a like-for-like basis, net fees decreased by 13% to GBP 496 million, with pre-exceptional operating profit down 56% to GBP 25.5 million. H1 25 cash conversion was strong at 257%, and we finished the half with GBP 29 million cash after paying out GBP 32.6 million in dividends, GBP 21 million relating to the full pension buy-in, and GBP 15.9 million of cash exceptionals. Moving on to the income statement, turnover decreased by 3%, with net fees down 13%. The difference between reported and like-for-like growth rates was primarily the strengthening of sterling versus the euro. Overall, FX movements decreased net fees and operating profits by GBP 13.3 million and GBP 1.6 million, respectively.
The higher decline in net fees relative to turnover was due to the relative resilience of our temp and contracting businesses versus perm, and also the impact of our Enterprise MSP contracts, which delivered good levels of growth in the half. Pre-exceptional earnings per share was 0.81 pence, a 66% decrease versus the prior year, driven by 58% lower reported operating profit and a higher net finance charge. Moving on to the performances of perm and temp. Perm net fees decreased by 19% and slowed through the second quarter in EMEA, UK and Ireland, and Germany, with markets stable but subdued elsewhere. Volumes declined by 22% as job inflow decreased and hiring processes extended. As with prior years, this was partially offset by growth in our average perm fee of 3%, albeit with wage inflation slowing in most markets.
Temp and contracting net fees decreased by nine% year-on-year, with momentum sequentially stable through the half year. Importantly, we delivered year-on-year net fee growth in five of our eight focus countries. Temp volumes decreased by six% year-on-year, with a further two% fee reduction from lower average hours worked per contractor in Germany. We also saw a fee decrease of one% from margin and mix, resulting from a 40 basis points year-on-year decline in our underlying temp margin to 14.8% due to stronger growth in our Enterprise clients. This slide sets out the ongoing actions we have undertaken through H1 to manage costs, protect profitability, and better structure the business for the long term. Starting with H1 24 profit of GBP 60.1 million, we deduct the negative exchange impact of GBP 1.6 million and a 13% decrease in our like-for-like fees of GBP 74 million explained on the previous slide.
Like-for-like administrative expenses decreased by 8%, or GBP 41 million, driven by the following: a GBP 40.7 million reduction in payroll costs resulting from the actions taken to reduce consultant and back office headcounts in the year, which were reduced by 15% and 80%, respectively. An GBP 8.9 million decrease in commission and bonus payments driven by the decline in fees and overall financial performance. Partially offsetting this are average 3% group pay rise in July 2024, increased payroll costs by GBP 8.1 million. Our overhead costs decreased by GBP 0.5 million, driven by savings in advertising, motor travel, entertainment, and other overheads, broadly offset by property indexation increases and higher insurance costs. On this slide, we set out the actions we have taken to structurally improve our cost base. Our cost initiatives fell into three categories.
We announced last August our program to deliver circa GBP 30 million per annum in structural back office cost savings by the end of FY27. This is progressing well, and we exited the half with circa GBP 13 million per annum saving run rate, having completed our finance transformation in the Americas region, our global technology outsource project, and restructured our global marketing function. Secondly, we generated new and further circa GBP 12 million per annum structural cost savings in the half for restructuring operations. In the UK and Ireland, we closed our Statement of Work business, restructured management and back office operations, and closed five offices. In Germany, we restructured our Statement of Work business, exiting three locations and refocusing the business portfolio. Together with the back office initiatives I just mentioned, these projects drove our non-consultant headcount reduction of 18% year-on-year.
These combined circa GBP 25 million per annum structural cost savings when added to the circa GBP 30 million per annum structural cost savings we reported in FY24 have now secured circa GBP 55 million per annum structural savings since the start of last fiscal year. And finally, we have continued to surgically align consultant capacity to demand in each of our business lines. As a result, group consultant headcount declined by 15% year-on-year, but this also included headcount investment in some markets, including Spain, India, Portugal, and Austria. Our year-on-year productivity growth of 4% in H1 is indicative of our careful allocation of our consultant resource. As a result, on a periodic and constant currency basis, our cost-based decline from around GBP 81 million per period in Q4 FY24 to circa GBP 77 million per period in Q2 FY25. During the half, we incurred an exceptional cost of GBP 9.9 million, which comprised two parts.
Firstly, a GBP 4 million charge relating to the restructuring of our operations in the UK and Ireland and Germany divisions, as covered on the previous slide. These restructurings led to the redundancy of a number of employees, including senior management and back office positions. The group also incurred 5.9 million exceptional charge in relation to the technology transformation and finance transformation programs, comprising both staff costs and third-party costs. We expect to incur further exceptional costs in H2 25. Moving on to interest and tax. Our net finance charge for the half increased to GBP 6.5 million, driven by a GBP 2.1 million increase in net bank interest payable due to higher average drawings on the group's revolving credit facility. As a result, we now expect a finance charge of circa GBP 13 million in FY25. Our pre-exceptional effective tax rate increased by 10 basis points to 32.1%.
On a post-exceptional basis, the effective tax rate was 67%, in which a GBP 2.1 million tax credit in respect of the exceptional items was offset by a GBP 2.1 million tax charge arising from the derecognition of a deferred tax asset following the defined pension buy-in. In December, we completed a circa GBP 370 million full and final buy-in of our defined benefit pension scheme, which ensures the remaining 68% of benefits payable from the scheme and ensures that financial and demographic risks relating to the scheme's liability are now 100% insured. The decision to finalize the buy-in follows a material reduction in the scheme's buyout deficit valuation from GBP 192 million in June 2021 to GBP 39 million in June 2024, in line with the agreed long-term strategy with the scheme trustees to achieve a full buyout of the scheme.
Company pension contributions in the half were GBP 21 million, which comprised GBP 8.4 million in respect of normal pension deficit contributions and an additional GBP 12.6 million relating to the full pension buy-in. We anticipate a further circa GBP 6 million in expenses and true-up costs over the next 12 to 18 months through to final scheme buyout. Importantly, there will be no further deficit contributions following the scheme's full buy-in, which will provide a material cash flow benefit, circa GBP 19 million per annum from FY26. We delivered a strong cash performance in the half, with cash from operations of GBP 65.5 million. This represented a conversion of pre-exceptional operating profit into cash from operations of 257%. We had a working capital inflow of GBP 31 million, driven by the reduction in temp fees and placements. We paid tax of GBP 6.6 million and net interest of GBP 3.4 million.
The cash impact of exceptional restructuring costs was GBP 15.9 million. Overall, this led to free cash flow of GBP 39.6 million. On the right-hand side, we detail how we used the cash generated. The main items were the payment of GBP 32.6 million of core dividends, CapEx of GBP 9.9 million, and pension deficit payments of GBP 21 million, leading to a GBP 27.8 million decrease in net cash. We expect full-year capital expenditure will be circa GBP 25 million in FY25. Our DSO has increased by one day year-on-year in H1, driven by the growth in Enterprise fees. Our aged debt profile and bad debt write-offs are both at historically low levels. During the half, we refinanced a new five-year revolving credit facility at an increased level of GBP 240 million, with an option to extend by a further two years at the same pricing as our previous deal.
On this slide, we compare the balance sheet of December 2024 with June 2024. The main movements were our IAS 19 defined benefit surplus on an accounting basis decreased by GBP 19.4 million to nil as we completed the full buy-in of the scheme. Our cash position reduced by GBP 27.8 million, as explained on the previous slide. Our priorities for free cash flow remain unchanged, namely to fund the group's investment and development, maintain a strong balance sheet, deliver a sustainable, progressive, and appropriate core dividend, and to return surplus cash to shareholders. At this stage, the board has proposed an unchanged interim dividend of 0.95 pence per share. The interim dividend is covered 0.9 times by pre-exceptional EPS, which is below our two to three times target range. In summary, fees declined by 13%, with challenging markets continuing to persist.
Volumes declined in both temp and perm, although we saw an increase in average perm pricing as we targeted the most skill shortages and higher value areas of the market. Operating profit declined by 56% due to tough market conditions. However, we have delivered circa GBP 40 million per annum of cost savings, of which GBP 25 million are structural, meaning that we have now delivered GBP 55 million of structural cost savings since the start of FY24 and continue to make good progress on our back office efficiency and operational restructuring programs. We continue to maintain a strong balance sheet underpinned by good levels of cash conversion and a new five-year RCF facility supported by the full pension buy-in, which would drive a material long-term free cash flow benefit. Finally, we maintained our interim dividend at GBP 0.0095.
Despite the difficult trading environment, I'm confident that our actions are better positioned to benefit from the market recovery when it comes. Turning to current trading, our temp and contracting new year return to work has been in line with the prior year in the UK and Ireland and in Australia and New Zealand. In Germany, temp and contracting volumes are rebuilding modestly behind the prior year, driven primarily by automotive-related headwinds in temp. Germany's temp and contracting average hours worked remain sequentially stable, and as expected due to the easier comparable, the year-on-year headwind is likely to be modest in Q3. Perm job flow and activity are in line with pre-Christmas levels and remain tough in EMEA, particularly in France, the UK and Ireland, and Germany. We continue to see slower client and candidate decision-making, leading to longer time to hire.
As previously reported, we expect group consultant headcount will remain broadly stable in Q3, with reductions to capacity in more difficult markets, but also selected investments where we see opportunities. We will also continue to deliver further structural cost efficiencies, which will further reduce our cost base per period in H2. I'd now like to hand back to Dirk to cover strategy.
Thank you, James. I wanted to take a few moments to update you on our initiatives to build a structurally more profitable, resilient, and growing business underpinned by our culture and talented colleagues worldwide and our Golden Rule to maintain a disciplined approach to consultant headcount investment. Through our Five Levers, we will achieve this by increasing our exposure to: one, the most in-demand future job categories, two, growing industries and end markets, three, higher skilled and higher paid roles, four, non-perm recruitment, and five, large Enterprise clients.
Our strategy is not one size fits all, and we will tailor each region and country to its market and customer needs. Despite challenging markets, we have been highly disciplined and made good progress during the half. Consultants' fee productivity increased by 4% year-on-year. Net fee growth in enterprise accelerated to 12% in Q2, and as James just outlined, our structural cost-saving initiatives are progressing well. Over the next few slides, I will provide greater insight into how we are structurally improving Hays despite challenging markets and how we will benefit materially when our end markets recover. Since launching the new strategy, we have instigated a cultural shift in our mindset to focus as much on delivering profit growth as well as net fee growth. We intend to maintain operational rigor, retain structural cost savings, and deliver a healthy drop-through to operating profit during an upturn.
Guided by our Golden Rule, we will maintain a disciplined approach to consultant headcount investment. We have applied a more forensic analysis of our business lines to focus on those with most attractive productivity and conversion rates and have removed split perm temp desks and 180-degree consultants where appropriate to optimize our delivery models. To provide you with further confidence that cultural change has been embedded, I would like to highlight several people changes over the last 18 months. Our executive leadership team now includes dedicated Chief Technology Officer and Chief People Officer leadership positions. Plus, I'm pleased to announce today an external appointment to lead the UK and Ireland business who joins Hays in June. This appointment adds external experience and fresh thinking, which complements the deep operational knowledge provided by me, James, and the divisional CEOs.
Despite challenging markets, we are delivering on our strategy, and we are pleased with progress during the quarter. Firstly, business line prioritization and optimized resource allocation have resulted in a sector-leading productivity increase over the last two quarters. Secondly, our enterprise net fees are growing rapidly. And finally, our temp and contracting net fees are more resilient than perm. Let's explore these three themes in more detail. Consultant net fee productivity increased by 5% and 4% respectively in Q1 and Q2 and has been sector-leading over this period. And if we adjust for our seasonal quieter second quarter, productivity has increased now for five consecutive quarters. Let me provide you with a few examples why. In the U.S., productivity rose 40% year-on-year, and the business has moved from monthly losses a year ago back to profitability.
After an extensive review, our new management team closed business units and offices where we lacked critical mass and now has a highly focused core. With the correct operational rigor now in place, we intend to size growth opportunities and scale up while maintaining our disciplined approach to headcount investment and our Golden Rule. In ANZ, productivity increased by 12% year-on-year to its highest level since FY22. Our new management team has removed split perm temp desks, more clearly differentiated between 180-degree and 360-degree consultants, and moved up the value chain in temp and contracting. Going forward, we will intensify our initiatives to target high-skilled roles in the most in-demand job categories with fast-growing end markets. In the UK and Ireland, we have more actively managed our consultants to transition to a more focused core and secured structural savings in both front and back office functions.
We transferred more than 50 Healthcare and Social Care consultants to Construction and Property and Senior Finance, reallocating them from roles with low productivity and conversion rates to specialisms where they can generate higher productivity and a mid-teens % conversion rate within 12 months. Technology and enterprise were highlights during the half, with productivity up double digits driven mainly by temp and contracting. I reminded you earlier that our five levers include the commitment to increase our exposure to large enterprise clients. When we talk about enterprise clients, we mean the provision of recruitment and other HR services to blue chip government and large organizations. These tend to be delivered under more complex and structured agreements such as MSP. At the 2022 Capital Markets Day, we told you the global enterprise client markets were huge.
We explained how our platform would enable us to take significant market share and structurally grow. Enterprise delivered a strong performance in the half with 9% net fee growth, including an acceleration to 12% in the second quarter, driven by in-contract growth with existing clients and several new wins. In our view, net fees are likely to be approximately GBP 225 million-GBP 250 million this year, which, in contrast to broader labor markets, is stable versus FY23 peak and validates our strategy to target these clients. Our positive momentum was supported by three factors. Firstly, we grew within existing clients driven by higher fill rates and geographic expansion. 24 enterprise clients appointed Hays to provide services in additional countries in the first half. Secondly, we secured new clients, including first-generation MSP outsourcing opportunities and rewarding wins from competitors.
Thirdly, underpinned by our service quality, we retained key contracts, including a three-year renewal with AstraZeneca, which will extend our relationship to 25 continuous years. Enterprise currently has a substantial bid pipeline, and we look forward to updating you further during 2025. Our five levers include the intention to increase the proportion of non-perm fees in our business. Temp and contracting was resilient and sequentially stable through the half, and its contribution to group net fees increased to 62% from 59% in H1 24. On a year-on-year basis, the decline in net fees moderated to 9% in H1. Growth was positive in five of our eight focus countries in the first half, including notably strong performances in the USA, Spain, Poland, and Italy, and profitability increased. For example, Italy grew by 42% in the half as our business line prioritization and resource allocation initiatives generated attractive returns.
Poland grew by 27% due to strong handling of large contracting accounts and an HR MSP offering. The USA grew by 7% as it focused on a narrow range of business lines and won new enterprise clients. In our view, delivering our strategy will eventually result in a structurally more profitable, resilient, and growing business. Here are a few examples of how. Firstly, consultant fee productivity. Two of our five levers increasing exposure to higher skilled, higher paid roles and the most in-demand future job categories have positive implications for consultant fee productivity. In addition, we provided you with examples earlier how we have reallocated consultants from low to high potential productivity areas, and that under our Golden Rule. We will maintain a disciplined approach to headcount investment. These factors would increase the net fees with a potentially high drop-through to operating profit. Secondly, operational efficiency.
Last year, operational and back office restructuring undertaken across the business better aligned us to market opportunities, improved efficiencies, and captured a GBP 30 million structural cost saving. As James mentioned earlier, since then, we have added a further GBP 25 million bringing total structural savings secured since the start of the last fiscal year to GBP 55 million. This will also build a more scalable back office function, which will drive stronger profit leverage in the recovery. Finally, cyclical recovery. It is taking longer on average to secure a placement, although in terms of input activity, our teams are as busy as ever. This creates a material drag on the average number of placements per consultant and our profitability. We don't control the cycle, but eventually, client and candidate confidence will improve, and the economy will recover. When it does, we will deliver a healthy drop-through to operating profit.
So to close, markets remain challenging in the first half of 2025, and the board and I are very grateful for the deep commitment shown by all our colleagues through this period. We have the right strategy in place and have already started to make progress. We have the right team, which blends Hays experience with new external perspectives, and we have structurally improved Hays during the half. While it is difficult to predict timing, we know that markets will eventually recover. When they do, we will benefit materially and will be firmly focused on delivering a high drop-through of net fee growth to profits. I will now hand you back to the administrator, and we are happy to take your questions.
Thank you. As a reminder to ask your questions on the phone line, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Once again, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. If you wish to ask a question via the webcast, please type them in the question box and click submit. Please stand by while we combine the Q&A roster. This will take a few moments. Thank you. We are now going to proceed with our first question. The questions come from the line of Andy Grobler from BNP Paribas Exane. Please ask your question.
Hi, good morning, everybody. Three questions from me, if I may. The first one just around the savings. There's been quite a few in recent quarters. Could you just talk through the phasing of when those are going to land, if you have any more plans to increase that number from GBP 55 million, and also any exceptionals that may land either in the second half of fiscal 2025 or into next year? So it's a three-part question. Secondly, just on the dividend, it might be a bit premature to ask this, but it wasn't covered for the interim. What are your thoughts for the full year looking at where consensus currently sits? And then thirdly, just on AI, sorry to bring that up, but Manpower put in their 10K and additional risk to the business that AI would start to impact the job market and then maybe less demand for their activities. Is that a trend that you are beginning to see impact some of your end markets? Thanks very much.
So I would say the first two questions are for James, and I take then the third one, right?
Yeah.
So I'll cover the first two then, Dirk. And on the savings, last year we talked about GBP 30 million of structural cost savings, which are obviously in the cost run rate through this half. In terms of the new savings that we've delivered through the half in two buckets, first of all, we've made about GBP 13 million of annualized savings through the half against our back office objective for FY27.
In terms of the timing of that, there's probably about GBP 4 million or so of cost savings in the half that we already booked in the half, and then clearly we get the run rate of that through into the second half. Then we had about GBP 12 million of savings through the half in other operational areas as we set out there. And that was more back-end loaded, and we probably had about GBP 2 million of savings in the P&L in this half. And then obviously, going into the next half, we'd get the full sort of run rate saving on those. That hopefully gives you a bit of a feel that there's about GBP 6 million of those new structural savings in the half year in terms of the P&L. I guess the second part of the question was plans for H2.
Yes, we do have some plans for H2, both within some of the back office areas which are ongoing and also some more operational stuff as well. I don't want to get too drawn into that, and that'll be something for us to talk about as we progress through the half and also the final year results in August, but we do have some plans for H2, and alongside that, I would expect further exceptional costs in the second half as well. You can see that in the first half, we had GBP 9.9 million of exceptionals, which related specifically to those four areas of work that we've done in the half. I haven't got a clear view yet on exactly what that will be, but there will be some exceptionals in the second half.
Second question was on the dividend. As you point out, Andy, that the interim dividend we've held in line with prior year, but that isn't covered by EPS. I think we're at 0.9 times cover, which is outside of our two to three times target cover. Now, we decided that to hold the interim dividend, it's important to us and to our shareholders. We also have a balance sheet with GBP 29 million of cash, so we felt it was the right thing to do to maintain that. I think your question regarding the thoughts for the full year dividend is clearly a decision for the board in August. There's a long time between now and then, and we'll have to see, first of all, how does current trading map out in the second half of the year, what's our financial position, and importantly, what's our outlook.
I can't really speculate on that, so I think it will be a decision for August. I guess as a pointer, our full year dividend is about GBP 47 million in cash. Now that we've secured the pension buy-in, and that's important because that saves us about GBP 19 million a year in perpetuity in the long term, that means that we need about GBP 80-85 million of operating profit to cover that from free cash flow. I think that's a helpful bit of mathematics just to sort of put that in perspective. I'll hand over to Dirk for the AI question.
Yeah, Andy for AI. I think AI is a topic for all industries and for all clients. That's true. For sure, we are talking a lot to our clients and some are in early stage and others are more advanced. And we are screening the market for sure. And you have platforms like LinkedIn, for instance, where they introduce new AI tools and so on. So that's ongoing. So I would say for me, it's still a positive trend because on one hand, we create new jobs, or there will be created new jobs, and other are more at risk, put it this way. And most companies are using this really for productivity efficiency programs and to increase productivity. So I strongly believe in this, and we have several use cases also internally how we can optimize our productivity with generative AI. We launched, for instance, last summer, an end-to-end digital platform called TribeWorks, and we learned a lot just already during the development phase.
It's not just since it's up and running, we learn a lot how clients are reacting with a totally digital process or not. I think that's really important to stay ahead of the development and have an overview, so I keep going and saying that this is a positive trend, and yeah, I think we are on top of it.
Okay, and just on that last one, as you use technology to become more productive so your people can do more with less or the same capabilities, do you think your clients will do the same thing? And therefore, the demand for human capital may decline through that period with implications for the agencies?
I don't think so. It depends. If you see that there are always tools who may be helping the client to be more efficient and so on, but it always depends. For instance, when you see the LinkedIn tool, for instance, and how to handle more efficient candidates. So I think for our target group in Perm, this is the SME world. So the challenge for them is maybe not how to handle so many incoming CVs because you always need an agency or somebody who brings your candidate in when you have no employer branding. This is maybe true for the big companies. They have a volume problem or challenge, and we've been working with many, many of our clients in the RPO world to help them. And we also have some tools in place to help them to make their processes more efficient. So I think I don't see this really at all, but you never know. So for sure, we are analyzing the market, and it's always you never know what happens.
But so far, I'm really positive that this is the market. It's been changing always, and we always have to adapt, and we control the controllables, I think. And so far, I don't see this, Andy.
Okay. Brilliant. Thank you very much.
We are now going to proceed with our next question. The next questions come from the line of Rory McKenzie from UBS. Please ask your question.
Morning, Rory here. Three questions, please. Firstly, on the German current trading, can you just say how much auto temp has fallen now? And then outside of that, can you give a bit more detail on the contractor volume so far this year compared to last year? Secondly, within the rest of the world, temp and contractor plus 3% year over year is good and must represent market share gains and expansion.
Can you give a bit more detail on where you're driving that? And also just talk about where your actual rest of the world temp contractor headcount is compared to last year. I know there's been a lot of kind of reshaping of that division. And then finally, just on some of the local specialism closures, you've announced the closure of some Statement of Work businesses in the UK. Can you explain the thinking there and maybe any comments on just how far through that kind of portfolio review you are now, Dirk, since you joined? Thank you.
Rory, perhaps if I just pick up the first question, which was relating to current trading and some of the trends we're seeing in Germany temp and contracting, then I'll hand over to Dirk for some of the more strategic stuff around the temp and contracting growth around the rest of the world and the impact on contractors, etc., so we've clearly put some guidance in current trading on our return to work in Germany, where we're about two to three percentage points behind in terms of volume recovery post-Christmas than what we'd normally expect to see. If I look at how that breaks down, our contracting business is more resilient, and it's down about 1% versus prior year. Our temp business, though, is weaker, and we're down sort of 5%-6% behind where we would normally expect to be.
Within that, the specific weakness is in autos, and that is a trend that clearly we've been highlighting now for some time, and there's been a drag on that business. Actually, if you look at the volume of workers that we have in the autos, it's about 1,500, 1,400, 1,500 temps out of a population of about 3,600 temps and out of a total external headcount population of about just over 14,000. So that gives you a feel for our overall exposure into the automotive sector. I would highlight and say that we have been relatively resilient within that marketplace, and I think we've taken quite a bit of market share as other players have kind of come out of that market. So whilst it's weaker than the rest of the business, I do feel that we've managed to hold more than hold our own within that weaker market.
Hopefully, that gives you a bit of a feel for kind of what we've seen on the ground, Rory, in Germany. I'll hand over to Dirk, though, to talk about the more strategic aims and objectives around temp and contracting in the rest of the world and our opportunities there.
Okay. Thank you, James. Hi, Rory. The contracting is an important part of our five levers because we are convinced that this leads to a more resilient business, and you see this also in the figures. Even if we are going down year on year, then you see that contracting is much more stable than Perm. And I think that's really important. But we have several countries around the world who used to be mainly Perm-focused, several also in Europe. And we established in some of these countries our contracting business, especially in the focus countries.
And we see huge progress there, for instance, in Spain, in Italy, and in Poland. And I think we are growing really in the right way, even in a tricky market. So this is a huge success and a proof of concept of our strategy. And then coming to the U.S., I think the U.S., it's been a contracting country for us. Our U.S. business is a contracting country for us. And so they were loss-making last year, and we turned it with higher focus and improving also their contracting business in combination with enterprise clients. And we see huge growth rates there. And so we are on the right track. So for me, this is just a proof of concept that we have the right strategy overall.
Coming on to the Statement of Work thing, as I said, we have some countries where we are a bit further away from contracting or had more Perm history. For instance, in Germany, we keep going with the Statement of Work business because that's the extension. We have some service contracts with deliverables, but Statement of Work, in our definition, is a huge market. For instance, in Germany, it's 50% of the engineering market. But this is really deliverables, onshore development, having whole teams and technical capacities. I think our German business, with a big dominated contracting business, it's the closest within Hays, and therefore we keep going. But this is just, well, just maybe it's not the right word, but this is a pilot for us to see how it is going. But this is just an add-on.
Honestly, we are focusing on our core business that's contracting temp and Perm, MSP and RPO. And the Statement of Work, we keep going with this in Germany because we think, especially in the auto industry, in these tough times, it helps us. But outside of Germany, we realize it is just too far away from our core business and our understanding and our culture. And this is the reason why we closed, for instance, the UK business. So I think, as I said, we are focusing on our core businesses.
Thanks, both. That's helpful.
We are now going to proceed with our next question, and the questions come from the line of Ryan Flight from Jefferies. Please ask your question.
Yeah. Good morning, Rory. It's Ryan Flight from Jefferies here, and just one from me if I may build on previous questions. Number one, and I know you've mentioned autos, but any other particular industry trends and particularly incremental strength or weakness that you could call out would be really useful? Number two, and again, I know it's difficult, but if you could provide any further color on market share dynamics and kind of competitive landscape in your key markets? And then final question, number three, given the structural cost savings, I wonder if you could provide any further color on how we think about the capacity of the group when we're thinking about the eventual recovery would be really useful? Thank you.
Okay. I take the first one. I think it's hard to say overall industries across which are more in demand or not. But when we come to our core countries in Germany, for instance, we see energy, for instance, life science, and defense are important industries. Life science is maybe one of the only industries I would highlight globally also which are normally always in demand. So I would say this is definitely a trend. In the UK, I think it is the traditional ones when you see it's in C&P and finance. It depends more or less in Perm. It's always tricky in all of the industries, but we see some positive signs in the UK also in contracting, for instance, or in the senior Perm finance. I think there are always pockets where we are more interesting. But it is hard to say globally this is an industry which is dominant. In terms of market share, from my perspective in Germany, even in this tough market, or especially in this tough market, we are taking market share.
When you think about just the temp population in Germany at its peak before COVID, I would say it was one million temp workers out, and at the moment, there are just 600,000 temp workers out. And we reduced our headcount from whatever, 4,200 temp workers to 3,600 if you compare just the size, so we are taking definitely market share, and in contracting, it's the same. So I think mainly also in this downturn, we are taking market share, and the same in ANZ with our focusing more on productivity and going to the more in-demand role types and so on. And I think we are also taking market share there, and in the UK, it's tricky to say, but if you compare this with our core competitors, I would say there are also some statistics where we say we are taking market share also in the UK. That's my view. But James, maybe you.
Yeah. I think that's right, Dirk. And I think it's importantly in a number of our focus countries where specifically in the temp and contracting as Dirk set out in the presentation, I think some of the growth rates there are clearly we think that's a long-term structural growth market, but I also think we're increasing our share in those markets as well. I think, Ryan, just going back to your question on the cost savings and capacity, clearly we've set out what we've done in terms of the structural areas. In terms of the capacity question, I think what Dirk and I have been heavily focused on over the last 12, 18 months is really getting the right people in the right desks focused on the right parts of the market.
And I think we've started to see the impact of that coming through in the consultant productivity growth over the last 12 months. And I think that's really, really important. Good progress there. In terms of excess capacity, we've been two years into a hard market, and we've clearly brought our consultant headcount down by over 20% over the last 18 months. So we've continued to work at this hard, as you can imagine. So in terms of surplus capacity, there is some, and there is always new joiners coming into the business. But I would say that we've worked hard on that to make sure that we're not carrying too much capacity because clearly we've got to work for the markets that we've got today.
What we do have, though, as Dirk mentioned in his presentation, is all of our consultants are working in harder markets where the funnel takes longer to complete from outbound activity, BD calls with clients and client visits through to job registrations and interviews, and then converting those into placements is all taking longer. So there is a latent capacity within the business, which is largely driven by the cycle and the fact that it is a harder market than normal, and there's a huge amount of work going on to make the placements we do. So there's always a fine balance between taking capacity out and keeping capacity in because we need the consultants in to make us the fee. So I think we've done a pretty decent job at that so far, and we'll continue to manage it market by market and business line by business line.
That's great. Thank you.
We are now going to take our next question. The questions come from the line of Afonso Osório from Barclays. Please ask your question.
Hello. Yes. Yeah. Thank you for the presentation, guys. There's a lot of details, so yeah, appreciate that. A few last ones from me, if I can. One on the cost run rate. I think, James, I think we spoke about this before, but you're still mentioning the GBP 77 million run rate. But given the incremental savings you continue to deliver in FYs, I was just wondering if you can see any possibility to improve this run rate further in the second half or maybe into next year. This is the first one. Then secondly, on the free cash flow, I see GBP 31 million working capital inflow here.
So can you expand a little bit on what drove that through the first half and if we expect a similar pattern in the second half, perhaps? And on the same topic, cash, on the pension scheme buy-in, can you remind us what is the impact this is going to have on your full year 25 from a cash perspective, but also if there's any impact on the net interest line of the P&L? And now that I have a chance, one last one for you, Dirk. Thank you for the update on the enterprise lines. I think that's very interesting. 20% of the group now. Given how resilient this business still is, do you think you can contribute a bit more down the line, long-term, for your business, especially as the legacy business continues to face some pressure in the short term? And also, I appreciate this is a global business, but what would be the main country exposures within this particular business here? Thank you.
Okay. I'll start off, Afonso, on those. The first one was around cost run rate. And as you mentioned, we look at this relatively simplistically and look at it on a periodic basis and how much has the cost base come down over time as we work through programs and manage the costs. And in Q2, we were around about GBP 77 million per period on a constant currency basis. I do expect that to come down a little bit further in the second half year. We've given clear guidance on consultant headcount, which we expect to be broadly stable. It may be up a bit in one or two places and down a bit in one or two places as well, but broadly stable.
So the cost reductions that we do expect in H2 will be largely in the non-consultant areas. But those are in flight now, and we'll talk about them as and when we work through the second half. So we'll come back to them, I'm sure, at the next set of interim, the next set of results or the prelims. Free cash flow, we had a good working capital performance in H1 where we saw largely because of the temp and contracting business is a little bit down on prior year, we saw a cash inflow in the half. Remember, we always have a lot of cash flow going through the business at any one point in time. We collect about GBP 130 million worth of cash every week.
There's always going to be a little bit of volatility just depending on when month end is and also impacts of things like VAT payments, etc. I'm pretty pleased with how we've got on from a working capital perspective. Our aged debt book is in as good a shape as it has been in my time. And also, we've had record low levels of insolvencies and debt write-offs in the half. I think we've done a pretty good job on that. We'll continue to manage it carefully in the second half. In terms of what I expect to see in the second half, and going back to an earlier question around free cash flow, clearly at the levels of profitability that we're at right now, once we pay our tax, we've clearly given some CapEx guidance, and we've got a GBP 15 million dividend to pay in April.
There won't be a huge movement, I don't think, in the cash positions for the second half year, but clearly there's always a little bit of volatility around where it exactly lands in June. Going back to the question on pension scheme buy-in and the impact of that. So we've been put in about GBP 18 million or just over next year. But clearly, the pension buy-in, we'll make no further contributions into that from now on. We have put in there clearly that there'll be some further admin costs, expenses, and potential true-up costs over the next 12 months as we work through to buy out. That may or be hopefully sort of around that sort of GBP 4-6 million number, but we'll have to pay for that as we go through to the full buy-in. But that's buy-out, but that's just admin expenses.
In terms from an interest line perspective, we have an interest charge in there which relates to the pension deficit. Clearly, that will drop away from next financial year as that saves us about GBP 1.5 million on the interest line on an annual basis. And I'll hand it back over to Dirk for the last question.
Afonso, I'm not sure if I got the question right. It was a bit probing, but let me talk about the enterprise world. Why it is so important for us, and then you can come back to me if I haven't answered your question. So enterprise clients is an important part of our five-lever strategy. And honestly, when you see in Germany the success story of the German businesses contracting in combination with enterprise clients, we are doing 70% of our net fees with 350 clients in Germany.
This is highly profitable, as you're aware. So this is the reason why we roll this out globally also. I strongly believe in this. When we talk about enterprise clients, we are talking not just about the MSP programs, for instance, or RPO programs. It is more, we call it bottom-up sales. So you address the bigger clients, say, clients with a certain number of employees or with a certain number of external contractors or temp headcount. Then you structure these clients, and therefore you need a certain management structure and knowledge how to handle these clients and really develop these clients. We have this strategic approach with MSP managed service provider. You have the strategic salespeople coming in and then really try to bundle the external workforce of these clients with our MSP offering.
And altogether, this is our strategy in the enterprise/contracting world. And so we are convinced this is the right one. And from our perspective, it is highly profitable. Have I answered your question? I'm not sure.
No, no, no. You have. You have it. Thank you very much both for that. Appreciate it.
We are now going to proceed with our next question. The questions come from the line of Zach Coyote from Morgan Stanley. Please ask your question. Your line is open.
Morning. Morning. Just one more in the context of these structural cost savings. Could you please just elaborate on the impact on the operating leverage and drop-through once the recovery starts to materialize? So should we expect this to be much stronger versus previous cyclical recoveries?
Thanks, Zach. Yeah. I mean, talking about the recovery, I'm getting almost excited now. But no, I mean, clearly, the reason we call them structural cost savings is we see these as savings that we should secure for the longer term as opposed to the more cyclical type savings, which really are, for us, the management of our consultant capacity to meet current demand and also the short-term management of overhead costs. So these are things like, as I say, restructurings of operations in order to face the markets the way we want to. Or there are things in the back office where we make transformations, and those are longer-term savings that we would hope to keep. So yes, absolutely. As and when the recovery comes, we would expect that element of cost to remain fairly fixed as opposed to scaling back up and therefore should secure a better drop-through of the increase into profit increase over the long term. So absolutely.
And I see that it's a key part of making the business structurally more profitable over the long term. And that's why it's difficult work. These are longer-term projects. They take longer to put into place. And I think we've made some really good progress over the last 12 months in delivering those. Hopefully, that was clear, Zach.
Yep. Thank you very much. Great. Thank you.
We have no further questions registered. So this concludes the question and answer session. I will now hand back to James and Dirk for closing remarks.
Okay. Dirk and I would like to thank you all for joining us today. Keegan, Rob, and myself will be available for any questions for the rest of the day. And we look forward to seeing shareholders over the next couple of weeks. Our next announcement will be out our Q3 IMS on the 16th of April. Many thanks. Bye-bye.
This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.