Hello, and welcome to the Hays Q4 Full Year 2022 Trading Update. My name is Courtney, and I'll be your coordinator for today's event. Please note that this call is being recorded, and for the duration, your lines will be on listen-only. However, you will have the opportunity to ask questions, and this can be done by pressing star one on your telephone keypad. If you require assistance at any time, please press star zero and you will be connected to an operator. I will now hand you over to your host, David Phillips, to begin today's conference. Thank you.
Thank you, Courtney, and good morning, everyone. Welcome to Hays quarterly update call for the three months ended 30th June 2022, the fourth quarter of our 2022 financial year. I'm here with Paul Venables, Group Finance Director. Before we begin, please be aware that this call is being recorded, with the recording accessible using the number and code provided in the release. Please be aware that our discussions may contain forward-looking statements that are based on current expectations or beliefs, as well as assumptions on future events. There are risk factors which could cause actual results to differ materially from those expressed in or implied by such statements. Hays disclaims any intention or obligation to revise or update any forward-looking statements that have been made during this call, regardless of whether these statements are affected as a result of new information, future events, or otherwise.
I'll now hand you over to Paul.
Thank you, David. Good morning, everybody, and thanks for joining us. I'll present the highlights and key themes of today's update and discuss regional performances before taking questions. As usual, all net figure percentages are on a like-for-like basis versus prior unless stated otherwise. Let's start with the performance overview. We finished our financial year strongly, delivering record quarterly net fees in Q4, up 23%. Overall, group fees and activity levels were sequentially stable through the quarter, and client and candidate confidence remained at high levels. Currency translation had a positive impact, increasing headline net fees by 1%, and there were no material working days adjustments in the period. I'd highlight the following key features. One, we delivered quarterly fee records in 15 countries, including an excellent performance in our largest business of Germany.
Two, growth in all of our major markets was again led by Perm at 31%, with Temp a strong 16%, and we saw further margin improvements in both Temp and Perm. The private sector, up 26%, again significantly outperformed the public sector, up 7%. Three, our largest global specialism of Technology, which is 26% of group fees, delivered another record quarter with fees up 24% and exceeded GBP 300 million of net fees in FY 2022. Our Enterprise Solutions business also produced another record quarter with direct outsourcing fees up 30%. Four, overall, group fees and activity levels were sequentially stable through the quarter, and group net fee exit rate at June was 19%. Five, consultant productivity remained at high levels despite increasing consultant headcount by 5% in the quarter.
Six, as a result of all of the previous points, group operating profit for the year ended 30th of June is expected to be at circa GBP 210 million at the top end of our previous guidance range given at Q3 FY 2022. Of course, this includes the one-off cost of exiting our Russia business, which is now complete. Seven, cash performance was strong. We ended the quarter in a robust financial position with net cash of GBP 295 million, which is also after GBP 80 million in share buybacks in Q4. This strong cash performance supports the board's commitment to returning significant cash to our shareholders. I'll now comment on the performance by each region in more detail. ANZ. Our ANZ division, 17% of group fees, increased by 12%, with fee and activity levels sequentially stable through the quarter.
Perm, 141% of ANZ fees, was up an excellent 33%, while Temp increased by 2%, with volumes stable across the quarter. In the private sector, which is 65% of fees, increased by 13%, while public sector grew by 11%. Australia fees increased by 11%, again led by Queensland, up 22%. Our two largest industries, Construction & Property, and Technology, grew 11% and 21% respectively. New Zealand, 8% of ANZ fees, continued its strong run and increased by an excellent 33%. Consultant headcount in ANZ increased by 3% in the quarter and 20% year-on-year. Germany, our largest business, representing 27% of group net fees, delivered another record fee performance up 29%, with record contractor volumes and continued strong activity levels. Contracting, 55% of German fees, delivered a record quarter.
Fees grew by 32%, driven by 29% growth in contractor volumes, which ended the quarter at record levels. Margin and fee mix increased fees by a further 9%, partially offset by 6% lower average weekly hours per contractor. Temp, 27% of Germany fees, was up 17%, and Perm delivered another excellent performance up 39%. At specialism level Technology, our largest specialism was up 15%, Engineering 32%, and Accountancy and Finance up 44%. Consultant headcount increased by 6% in the quarter and 24% year-on-year. U.K. And Ireland. The U.K. and Ireland, which is 21% of group fees, increased by 22%, with fees stable through the quarter. Performance was led by Perm, 47% of U.K. and Ireland fees, up an excellent 43%.
Temp was up 8%, with higher margins offset by slightly lower volumes. Private sector fees increased by 34%, with the public sector down 2%. Most regions traded broadly in line with the overall business, apart from the South West and Wales and the East of England, which grew by 33% and 28% respectively, and Northern Ireland and the Northwest, which grew by 5% and 14% respectively. Our largest region of London increased by 18%, including London City up 40%. At the specialism level, we again saw excellent growth in Technology at 35% and Accountancy & Finance, our largest specialism, at 31%, while Construction & Property grew by 7%. Ireland delivered another excellent performance, with fees up 59% and consultant headcount overall increased by 7% in the quarter and 24% year-on-year. Rest of the world.
The rest of the world, which represents 35% of group fees and comprises 27 countries, grew by 24%, with 14 countries delivering quarterly records. Perm, which is 67% of fees, increased by 25%, with Temp up 22%. In EMEA ex Germany, fees increased by 21% and activity levels remain strong. Our largest rest of the world country of France increased by 31%, with Spain up 26%. Italy and Poland both increased at 37% and each delivered a fee record. Growth was slower in Belgium, up 6%. The Americas grew by 33% with fee records in Canada up an excellent 64% and Latin America as a sub-region at 45%. Fees in the U.S. increased by 20%.
In Asia, fees increased by 19%, with record fees in Japan up 65% and another excellent performance in Malaysia of 27%. China decreased by 5%, with strict pandemic-related restrictions weighing heavily on mainland China through the quarter. Consultant headcount was up 5% in the quarter and 29% year-on-year. Cash flow and balance sheet. Cash generation was again strong and we ended the year with net cash of GBP 295 million. The board is committed to returning significant cash to shareholders over 100 million cash buffer via core and special dividends and buybacks. During the quarter, we purchased and canceled 15.4 million shares at an average price of 118p, and this left a residual balance on the buyback program of GBP 57 million.
As a reminder, the board will add any residual amount of our share buyback program to the GBP 100 million cash buffer in calculating any FY 2022 special. Coming on to current trading and guidance, and I'd make four points before an overall conclusion. Firstly, while we're mindful of increased macroeconomic and geopolitical uncertainties, client and candidate confidence remains at good overall levels, with continued skill shortages, supportive margin dynamics and rising wage inflation globally. Overall, two, the group fees and activities are sequentially stable at high levels with signs of some market normalization, particularly in the hottest part of the Perm market. Overall, this remains a very good market. Three, after significant investment in consultant headcount over the last six months, we expect growth to moderate to 1%-2% over the next quarter, mainly in our strategic growth initiatives.
In FY 2023, as I've said previously, our focus will be on driving productivity while continuing selective investment in structural growth markets. Fourth, we anticipate the group's effective tax rate will benefit from one-off items in FY 2022 and will be materially below our previous guidance of 30%. We expect tax rate to return to circa 30% in FY 2023. In conclusion, we've had a strong end to our financial year and are firmly focused on driving profitable cash generative growth and increasing consultant productivity. Although the increasing macroeconomic uncertainties are clear, our market leading position, strong brand, highly experienced management teams and our financial strength mean we are confident we can deliver our long-term objectives. With that, we'll hand you back to the administrator and we're happy to take your questions.
Thank you. As a reminder that if you would like to ask a question on today's call, please press star one on your telephone keypad. Please ensure your line is muted locally and you will be advised when to ask your question. Star one on your telephone keypad. Our first question comes in from the line of James Rose, calling from Barclays. Please go ahead.
Hi there. Good morning, everyone. Two questions from me. The first one is just to come back on the signs of normalization in the hottest areas of, and just give you the opportunity to expand on that and what you're seeing. Then secondly, could you talk a bit more about how the U.S. business is doing, and particularly your exposure to tech roles? Is there any sign of slowdown there or what's your leading indicators tell you in the U.S.? Thank you.
I think. You remember, James, on the last couple of quarters, I've said, you know, my more than 16 years now at Hays, this has been the strongest perm market I've ever seen by some way. Of course, that can never continue to expand at that level of growth. All we've seen, I think, is just some froth come off the top of the market. This remains a very strong perm market today. There's good candidate and client confidence. I think one of the benefits of operating in the specialist recruitment market is that we know the significant shortages. Today, there's high levels of job churn and wage inflation. This remains overall a very good market. Then specifically on your point on the U.S.
Look, I think overall, the U.S. remains a good market. You know, the nature of our business in the U.S. is our tech business is well diversified. It's not as strong as it was three or six months ago, but we're still delivering good growth today. I think if I took all of the data we've got around the world, you know, I think the strength in these results is we had a monster March, which was an all-time record by about GBP 8 million. Sequentially, we've been stable across this quarter. June, for example, isn't a record, but actually, if we adjust for less working days in June versus March, then our fee level in June was very similar to the March level. You know, good overall market.
Perm, not as strong as it was three or six months ago, but this is a really good market for us to drive profitable growth.
Great. Thanks very much.
The next question comes in from the line of Thomas Schiager, calling from Jefferies. Please go ahead.
Yes, thank you, both. Thomas Schiager here standing on behalf of Kean Marden. I have three, if I may. The first of which is cash generation clearly appears to be strong. Is there any further commentary around cash collection or debtor days versus perhaps previous quarters? My second question comes to the contractor volumes. Clearly record contractor volumes in Germany. Is there any stickiness there? In other words, are we able to anticipate those volumes will remain in subsequent quarters, or can it vary very much so quarter-over-quarter? My third question is just around the narrative of potential gas restrictions in Germany. Clearly, exposure to tech and perhaps accounting may be limited, but for those more industrial sectors such as engineering or construction, is there any risk to those areas? Thank you.
No, I think they're good questions, Thomas, and if I miss part of it, please do come back. First of all, on cash generation, you know, I guess as the group FD, and this is my 17th year end, I'm delighted to be finishing on a strong cash position. It's too early to say where our debtor days are, but I think considering we've had, you know, strong growth in our temp markets over the year, the fact that our working capital has only increased by GBP 50 million in the year is something that we're incredibly proud of. I think James Hilton has to take a hell of a lot of credit for that. He's done a great job in managing it around the world.
You know, this will be great for the future as well as James takes over. I think the generation itself was strong. We could well have gone with excellent. It was more than we expected, Thomas. We've certainly done GBP 20 million or so more than we expected. Therefore, as the board thinks over the next couple of months, and certainly we come to decisions we have to take in August, I think, you know, first of all, we'll look at the buyback program and whether we want to top that back up to GBP 75 million. Clearly, no decision taken yet, but we'll reflect on that.
Even if we did that, you know, if we top that buyback program up from 57 to back to GBP 75 million, you'd still be looking at a special dividend of about GBP 120 million. We feel no need to continue with this working capital buffer. We said that we were looking to stop that this year. Then finally, of course, you know, the core dividend itself will be strong. I think you can see scenarios of, you know, total dividends for the full year in the region of about GBP 0.10 , with about GBP 0.09 coming as part of the special and the final call. I think all that's important. We've always been, by far, the best cash-generating machine of the specialist recruiters globally.
I think, you know, a final dividend including special in the region of GBP 0.09 and GBP 0.10 for the full year, including the interims, is, you know, I think a strong performance. I'm sure our shareholders will be happy with that. Coming on to Germany, both your questions are spot on. Let me take the contractor volumes first. I think without a doubt, our standout performance is in the German market because, you know, we are by far the market leader in Germany, and we will have grown our contractor base this year by an amount that's bigger than all of our competitors put together. You know, we're a...
We have a very strong business in that marketplace, and I think our team has done a great job in driving growth. You know, contracting originally was very much a tech business. Now it's much more diversified. We've got by far the largest contracting, heavily high-end senior interim market and Accountancy & Finance. We've got a superb HR practice now that we built out over the last few years. I think the nice thing about contracting volumes is, on average, the contracts last on average about nine months. If you remember, whether it was the financial crash in 2008 or the pandemic in 2020, no contractor assignments were canceled earlier.
I think the contracting base in Germany and the German base, the German business in total, was the best performer and is the one that we would be the most confident of going into the next year, hence why we did investments. I think we're in a strong position, and I'm very confident that that business will continue to grow into the next year. You come back to an interesting part, don't you? Because understandably, there's a lot of focus in the press and the markets at the moment about inflation, and concerns about where economic growth goes to. They're very understandable, and we all read it, and that is clear. I think without a doubt, the energy situation in Europe is the most precarious one.
You know, will suppliers continue to flow through to Europe in gas and oil? Well, I think we all hope so, but that's not something that's within our control at Hays. If you look at the German press at the moment, there's a lot of discussions going on between German government and large manufacturers. Where we are is we've got a fabulous business in Germany. It grew at 29%. I think it'll be by far the largest growth market for us next year, so we're in an incredibly strong position. We can't control what happens in energy, neither should we try to. Our job is to stay very close to all the activity in our business that we do and make sure that we convert every growth opportunity we've got.
Great questions, and hopefully, I answered them, Thomas.
That's great. Thank you very much.
Thank you. Before we move to the next question, just as a reminder, if you would like to ask a question on today's call, please press star one on your telephone keypad. The next question comes in from the line of Rory McKenzie, calling from UBS. Please go ahead.
Morning, all. It's Rory here. Just two from me, please. Firstly, that 19% growth rate in June suggests that fee growth slowed through the quarter, but you also say that activity levels remain sequentially stable. Can you help us interpret that exit rate? Anything to be aware of there? Secondly, what's your estimate of where wage inflation is tracking now? Is it perhaps stabilizing after about 18 months now of acceleration? Maybe beyond that, you know, it'd be great to get your thoughts on what happens to client confidence in the current market. We've finished that kind of catch-up hiring from 2020 now. Obviously, everyone's seeing costs of labor go up and up.
At what point do you think this kind of impact its own cycle? If that makes sense.
Three great questions. The third one, we should all get our collective kind of futuristic views on the table. I think if we start with the first one, no, we're really happy with June. It's just the comparatives get harder a year ago. If you remember, a year ago, we had a phenomenally strong end to the year. As I said, while if you look to absolute level of fees, June is below where March is. If I adjust for working days in Germany, I think we had two less working days in Germany in June than we did in March. If I adjust for that, and Jubilee and all that sort of rubbish, you end up at the same fee level. Very happy with the fee level.
All we were trying to get across this is that we've been sequentially stable across the quarter. If you go from March into April, into May, into June, and you adjust the months for working days, they're all at a similar level and March was a monster record. I think we're very happy with that. On wage inflation, has it stabilized after 18 months? I don't think so. I think what is clear is over the last six months, most companies have realized that after a decade or so of it being no or 2%, because as we've discussed before, 1% was seen as being insulting, and you should build it up and do 2%. I think pretty much across the board now, what we're seeing is around 5%.
Clearly there are certain companies that are doing kind of one-off payments. I think 5% across the board, certainly in the professional space, is what we're seeing. On top of that, of course, as we know, there's a massive war for talent. If you look in the technology space, you know, if you're in tech, this is a great opportunity to be changing jobs or going for new assignments because there's a massive skill shortage around the world. You know, the war for talent is really way real. That, on one hand, has been exacerbated by the fact that there's been little or no immigration, skilled immigration into major markets around the world, whether that is the U.S., whether that's the U.K., whether that's Australia, whether that's Germany, et cetera.
At the same time, as we know, there is greater opportunities to work from home and work remotely, et cetera. I actually think wage inflation will stay at this kind of elevated level for some time. Do I think companies across the board are suddenly gonna say, "Well, 5%'s not enough, it's gonna go to 10%"? No, I don't. What I think they'll do is they go with 5%, they try and secure the real talent in their business, and they understand that for certain roles they're bringing in, they're gonna have to pay more. And then finally, on client confidence, I don't have a crystal ball, Rory. God, I wish I did. What I know in our business is, it's superbly managed.
All of our operators are on top of all of the trends all of the time. At the center, you know, we have a really good dashboard of all of our data with new jobs registered, interview numbers, conversions, time to hire all this data by sector, by country. You know, James has done a great job in pulling all that data together. We have a global dashboard that we can discuss with all of our country managers when we do the reviews. I think this is an intriguing conundrum. Absolutely, the economic data is worse. Absolutely, from a macro level confidence. You know, there are enough concerns out there that could cause real issues. At the same time, we've got full employment.
You know, I read a report that came out on Australia this morning where record low unemployment at 3.5%, which means that there is no unemployment at all in the skilled space. The war for talent continues to be dramatic. Therefore, I personally don't think this is as much about client confidence. That will be what it will be, and it'll be logical. It's much more about candidate confidence, and does that remain strong? All we can say today is it's at very high levels. But I think that will be the determinant of where the specialist recruitment markets go to over the next three months, six months, and year. But certainly to date, remains a very good market.
Thanks. Very helpful as always.
The next question comes in from the line of Paul Kirjanovs calling from Credit Suisse. Please go ahead.
Yes, thank you. I just had a question on headcount additions. Are you seeing trouble with accessing experienced hires? Is that mix between experienced and non-experienced changing for you and does that affect productivity plans? Maybe as a follow-up, are you seeing trends changing in your own attrition internally? Thank you.
Thank you. Again, Paul, if I miss any part of that, please do come back to me. Look, I think on headcount, generally, as I said before, over the last 18 months or so, I think we've had a really good mix between about 80% of the people coming into our business being new grads. They may well have had 1 or 2 years experience in the relevant area. As I said to you several times over the years, you know, kind of failed accountants are fabulous for our accounts and finance business because at least they know the market inside out. Equally, we have a superb academy that gives people very relevant skills and training.
We also mix that with about 20% of experienced hires, and that's what we use to help accelerate the growth and open up new sub-specialisms, whether that be in Technology, Life Sciences, HR around the world. We set out a stall at the Investor Day. You know, we continue to rapidly roll out sub-specialisms in the technology space, and I think that was demonstrated in another great set of results today. You know, GBP 300 million, well on the way to GBP 500 million, and beyond. Do we see any difference in that mix between inexperienced and experienced hires? No. Do we struggle to bring people in? No. You know, we are the preeminent specialist recruitment company in the world, and that puts us in an incredibly strong position to attract the talent.
We've got some great leaders and managers around the world, and in the end, you know, you join a business to work for inspiring individuals. For example, we had the PLC Board having a complete review of our U.K. business over the last two days, some great people running that business, market in a really strong position, and I remain very excited about where the opportunities for the U.K. business is over the next four or five years. Then looking at internal trends, no real change in kind of attrition, you know. By the very nature of recruitment, you have a reasonable level of attrition in the first year because this is a hard sales-driven operation. Then when people get beyond that one to two years, they tend to stay with us up to five years.
The very nature of that is some people will leave similar to your industry between years five and seven to set up own practices or do other things or whatever. No. For us, very easy to get real talent into our business, and really quite excited about the opportunities we've got to drive that talent forward. Certainly all of the people we've brought into our business over the last year, if we look where they are on the productivity curve, which is again, a lot of the data that we look at making good progress. That puts us in a really strong position, which is why our, you know, headcount investment, we expect to be much lower in the next year because we've got sufficient headcount in our business today to drive volume growth of 5%-10%.
Our primary focus in FY 2023 is on driving consultant productivity.
Thank you. The next question comes in from the line of Anvesh Agrawal calling from Morgan Stanley. Please go ahead.
It is just most of my question's been asked. Just a bit of a follow-up on the headcount question, really. Like 5% addition in the quarter when the run rate on the fees was sort of stable, seems quite punchy. I'm just wondering what drove that. I know you sort of expect it to be sort of a bit moderate going forward and productivity focused, but like what led to this strong addition in the headcount when there was no real acceleration in the underlying fee rate?
Yeah, I mean, I think Anvesh, you know, managing headcount is a combination of lots of factors, isn't it? It's what is the availability of really talented individuals in the market. As you know, we set out a stall at the Investor Day around investment, specifically into SGI and tech. We were also looking to continue with investment in Germany because I think that's warranted with where we are. Absolutely, we ended up with 1%-2% more than we expected going into the quarter. Equally, you've seen that that's why we've given the guidance we've given going into the next quarter. I actually think over the next six to twelve months, outside of SGI. You know, we've now got...
I think we're in a really good position now to just put our foot on the ball, drive the SGI investment continuing going forward. We don't need to make further investments in BAU investment. We're happy with the headcount we've got. We'll focus on driving productivity. That will help drive our profitability and sets us up really well, assuming the economy holds for a good year next year. It's more of an art than a science. Yep, perhaps 1%-2% higher than we would have expected, but that will be adjusted in the next quarter.
Yeah. Just on the SGI, I mean, like, obviously there is a big structural growth out there and that's sort of driving that investment. But, sort of, what we look to in KPIs or something to have a rethink or put a brake on it in case the macro environment sort of started to deteriorate? Or that's an investment that you sort of continue to make even if there's a modest slowdown.
Yeah, I think, Anvesh, you know, on almost using the words you've used, assuming a modest slowdown, then we continue with all of the SGI investment. I think we set our stall out very well at the Investor Day. We've got very supportive shareholder base, very experienced management team, and we will continue to drive forward. I think SGI gives us such fabulous opportunity, not just in tech, but also in enterprise. You know, without a doubt, companies continue to bundle together in the specialist space. They're purchasing from recruitment. That is a growing market, and we have by far the largest practice in the enterprise space. We're incredibly well-positioned as that market grows. It's been fascinating to see a number of our competitors decide after years of saying they were never gonna get involved, it's about time to get involved in this space.
We have a really strong market position. We're determined to drive it forward. Clearly in the business as usual headcount, as I said, we've got it in place. That absolutely will look at, you know, all of the underlying trends. If they continue to be strong, then we'll look to return to some modest investment in that space in the second half. Clearly, if the trends got weaker, then we would adjust the headcount. You know, we are very experienced management team. We know exactly what to do if market trends change. At the moment, as I kind of started the call with, this remains a very good market with really good growth opportunities.
Yeah. That's clear. Thank you.
We currently have no further questions in the queue. Just as a final reminder, if you would like to ask a question on today's call, please press star one on your telephone keypad now. Okay. We have no further questions coming through, so I shall hand the call across to yourselves, David and Paul, for any concluding remarks.
Thank you very much, Courtney. If that's all the questions for today, we'd like to thank you again for joining the call. I look forward to speaking to you next at our full year results on the 25th of August, and then clearly James Hilton will take over for the Q1 in October. Should anybody have any follow-up questions, David, Charles and I will be available to take your calls for the rest of the day. Have a great day and a really good summer. Thank you very much, guys. Much appreciated.
Thank you for joining today's call. You may now disconnect your handsets.