Good day and thank you for standing by. Welcome to the trading update for the quarter ending 31st of March 2023 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll 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. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Phillips. Please go ahead.
Thank you, Sharon. Good morning, everybody. Welcome to Hays quarterly update call for the three months that ended 31st March 2023, the third quarter of our FY23 year. I'm David Phillips, Head of Investor Relations, and I'm here with James Hilton, 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 will now hand you over to James.
Thank you, David. Good morning, everyone, and thanks for joining us. I'll present the highlights and key themes of today's update and discuss the regional performances before taking questions. As usual, all net fee growth percentages are on a like-for-like basis versus prior year, unless otherwise stated. Overall, we delivered another record quarter with good growth across our key strategic areas, including Temp & Contracting and Technology, and an excellent performance in Germany. Group fees grew by 5%, including a monthly fee record in March, and our growth exit rate was 4%. Growth was led by our largest business, Temp & Contracting, which represented 59% of group fees and was up 11%. Perm fees decreased by 2% as activity levels reduced through the quarter, driven by reduced clients and candidate confidence, which led to a lengthening in time to hire in most perm markets.
Currency translation had a positive impact, increasing headline net fees by 5%. I would like to highlight the following. With Temp volumes down 2% overall, our growth in Temp was again driven by our actions to increase fee margins and our focus on higher value markets together with the positive effects of wage inflation. Overall Perm volumes, sorry, decreased by 11%, partially offset by continued increase in average Perm fee, which is up 9%. We delivered quarterly fee records in eight countries, including a standout performance in our largest business of Germany, up 23%, and also in EMEA. Our largest global specialism of Technology, 26% of group fees, also delivered another record quarter with fees up 8%.
We also saw an excellent performance in our Engineering business, up 23%, and now our third largest specialism at 11% of group fees. consultant headcount decreased by 2% in the quarter as we continue to align our consultant capacity to the underlying levels of activity and demand in each of our markets. consultant headcount increased by 4% year-on-year, exiting the quarter in line with fee growth, with average consultant productivity at good levels. Our cash performance was solid with debtor days unchanged at low levels. Our 31st of March net cash position of circa GBP 80 million in line with our expectations and after GBP 12 million of share buybacks in the quarter. I will now comment on the performance by each division in more detail.
Our largest market of Germany, which represented 32% of group fees, delivered another record fee performance, up 23%. Fees increased sequentially through the quarter, driven by ongoing skill shortages in our high salary markets, higher than normal level of contract extensions, and solid client demand for new projects. We ended the quarter with near record contractor and Temp volumes. Contracting 60% of Germany fees delivered another record quarter, up an excellent 27%. This was driven by 10% growth in contractor volumes, together with 16% via the mix of improved fee margins and higher contractor rates. Average weekly hours per contractor increased by 1% versus the prior year. Temp, 24% of Germany fees increased by 20%, driven by 13% volume growth, and Perm increased by 13%.
At the specialism level, Technology, our largest specialism, was up 17%, Engineering up 27%, Accountancy & Finance up 30%, and HR up an outstanding 64%. consultant headcount was up 1% in the quarter and up 10% year-on-year. The U.K. and Ireland, 20% of group fees decreased by 2%. Performance was led by Temp, 58% of U.K. and I fees up 3%, entirely driven by increased margin and mix, with Temp volumes down 5%. Perm fees decreased by 8%, driven by volumes down 20% as Perm markets became more difficult through the quarter.
Private sector fees, 69% of U.K. and I fees decreased by 5%, with the public sector up 6%. Most regions traded broadly in line with the overall U.K. and I business, apart from Northern Ireland and North East, which increased by 19% and 4% respectively, and the North West, which was down 12%. Our largest region of London decreased by 6%, including London City down 7%. At the specialism level, Accountancy & Finance and Technology decreased by 4% and 1% respectively. Engineering increased by an excellent 32%, with Education up 6%, while Construction & Property decreased by 7%. Ireland delivered another good performance with fees up 9%. consultant headcount decreased by 3% in the quarter and was flat year-on-year. Our ANZ division, 14% of group, decreased by 8%.
Perm, 40% of ANZ fees declined by 7% with volumes down 18%. Temp fees decreased by 9% with volumes down 14%, again, partially offset by improved mix and margin of 5%. The private sector, 67% of fees decreased by 7%, with the public sector down 10% as we continue to see more challenging Temp markets at the federal government level. Australia fees decreased by 9%, with New South Wales down 11% and Victoria down 13%. Our largest specialism in ANZ, Construction & Property decreased by 4%, with our second-largest Technology down 6%. Our other smaller specialisms fell 10% in aggregate. New Zealand, which represents 10% of ANZ fees, continued its record run and increased by 3%. consultant headcount decreased by 2% in the quarter and by 1% year-on-year.
In Rest of World , representing 34% of group fees and comprising 28 countries, fees grew by 2%, including six countries delivering quarterly records. Perm, 65% of Rest of World fees decreased by 2%, with temp up a good 9%. EMEA, ex Germany, produced record fees up 11% or 13% excluding the impact of our Russia closure 12 months ago, with broad-based growth across the region. France, our largest rest of the world country, grew by 15%, with Switzerland up 16%, both delivering record performances. Belgium increased 15%, with Poland up 14%. The UAE was an outstanding performer up 58%. The Americas contracted by 15%, with activity slowing through the quarter, particularly in Perm.
Growth of 3% in LATAM was offset by challenging conditions in Canada and the U.S., which were down 6% and 23% respectively. Asia declined by 4%. Japan grew by 4%. Malaysia was up an excellent 30%. The China decreased by 26%, although Hong Kong was up slightly, significantly outperforming mainland China, where the pandemic continued to impact performance. Excluding China, our Asia business grew by 11%. Overall, Rest of World consultant headcount was down 2% in the quarter and up 6% year-on-year. Cash flow and balance sheet. Net cash at the end of the quarter was circa GBP 80 million in line with our expectations and after purchasing 12 million of shares under our share buyback program.
Our buyback program has a residual balance of GBP 6 million outstanding at the 31st of March, which we expect to complete in our fourth quarter. Current trading and guidance. I'd like to make the following points. 1. Client and candidate activity remains solid overall in our Temp & Contracting business, with modestly lower numbers of new assignments broadly offset by higher numbers of contract extensions. In Perm, we've continued to see further lengthening of time to hire, driven by increased clients and candidate uncertainty. 2. Demand in our core markets continues to be underpinned by skill shortages globally. Our actions are driving supportive margin dynamics, as is wage inflation, and we expect to remain a net beneficiary of wage inflation through FY23 .
3, driven by our actions over recent quarters, group consultant headcount growth is now in line with our fee growth, with improving average productivity, and we have appropriate capacity for current market conditions. We expect consultant headcount will be broadly flat in Q4 overall as we focus on further driving productivity. 4, the group's cost base per period was stable over the quarter and we remain highly focused on managing cost. 5, assuming overall activity levels remain stable in our fourth quarter, we expect H2 FY23 operating profits and conversion rates will be modestly above H1. In conclusion, we delivered a record quarter and exited with group fee growth of 4%, led by strong growth in Temp & Contracting and our largest market of Germany.
Our focus is on driving productivity, further increasing fee margins and closely managing our overheads while capitalizing on the significant opportunities we see in the long term. Clearly, we remain vigilant of macroeconomic uncertainties. We have a flexible business model and our highly experienced management teams will react swiftly to any changes and are watching lead indicators closely. I will now hand you back to the administrator and we're happy to take your questions.
Thank you. To ask a question, you will need to 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, if you'd like to ask a question, please press star one and one. We will now go to your first question. One moment, please. Your first question comes to the line of Rory McKenzie from UBS. Please go ahead. Your line is open.
Morning all, Rory here. Three, please. Firstly, within the exit rate at 4% growth, can you split that, Temp and Perm? Secondly, can you give us more detail on the really strong growth in Engineering, which has now crept up to be the third largest specialism? I guess that's majority Temp and contractor, like your Technology business. Can you explain a bit more about, you know, where you've been investing over the past few years and within your MSP programs, and which the areas that are driving that impressive growth? Finally, you added the word modest to the statement on your outlook to increase profits in H2.
Should we take that as adding any caution there, or is that just kind of realistic, now it's more clear where you're going to probably land for H2? Thank you?
Thanks, Rory. I'll pick each of those up. If I fail to get back to any, let me know. In terms of our exit rate between temp and perm, our perm exit rate was 4% down year-on-year, and our temp exit rate was 11% up. Not overly inconsistent with what we saw for the quarter and very much a kind of continuation, really, of the trend that we saw overall. Obviously, that comes back to 4% overall for March, which was a record quarter for us, versus if you remember this time last year, we hit a record in March. The second question was around Engineering and what are we doing and where in Engineering. It...
This has been an area of focus. Clearly, it's been a bedrock of our business in Germany for some time, and we have a very large business in Engineering there. It's our second largest specialism in Germany, and we were up 27% there, which is a fantastic performance. A lot of that was underpinned by really strong dynamics in the automotive sector, in manufacturing generally, and also our switch there into sectors such as utilities and renewables, which really come through positively in Germany. We also have been investing more broadly, actually, and take the U.K. and Ireland, for example. That's been an area of key strategic investment for us in Engineering over the last three years since we came out of the pandemic.
We've built up there quite a sizable team that have made some real progress in that market, which has been really pleasing. They were up 32% in the quarter and have really started to get some traction in that market. The vast majority of our business in Engineering is in Temp & Contracting space and not rather than the Perm market. There is a Perm market, but our focus has been to build Temp & Contracting and really leveraging that knowledge that we have in the German business more broadly around the world and pushing that into Europe, for example, as well.
As a good example, outside of the UK and in Germany, our Rest of World business had nearly GBP seven and a half million fees in Engineering in the quarter, was up 11%. It's not just a Germany play. It really hasn't come out of the German business, but we've really pushed it hard around the group. It's fantastic that that's now our third largest business and 11% of our overall group fees. I think we're really encouraged by that. Third question was around the guidance and I guess the word modest and what does that mean? We still expect our second half profits to be higher than the first half profit of GBP 97 million that we delivered.
What we have seen though, Rory, is the Perm market get tougher through this quarter. We're really pleased with the Temp & Contracting performance. That was resilient. 11% growth this quarter was consistent with the growth that we achieved in Q2, if we adjust for the working days in Germany in Q2. We have seen the Perm markets all around the world get tougher and we just have to be mindful of that as we head into the fourth quarter. We don't have a crystal ball, as you know. We'll say what the Q4 results are in July. At this stage, I do feel that we should just be a little bit more mindful of that Perm market as we head into that fourth quarter, and hence the wording and the guidance.
We are happy with overall consensus overall with where it is. I think it's about GBP 197 million. Bear in mind that we're keeping our headcount pretty flat. Our cost base is pretty stable at the moment. We expect that to continue into the fourth quarter, and we'd hope to push the productivity in the fourth quarter and hopefully push that ahead of headcount growth.
Great. That's all very helpful. Thank you very much.
Sure.
Thank you. We will now go to your next question. One moment, please. Your next question comes from the line of James Rhodes from Barclays. Please go ahead. Your line is open.
Hello, morning. I've got three, please. Firstly, coming back on Perm volume. Where has the volume slowdown been most evident across your businesses? Secondly, in your view, does the Perm decline foreshadow what could happen to Temp volumes in a few quarters time? Thirdly, could you touch a bit more on the U.S. business that's particularly weak and just generally what's going on there? Thank you.
Great. Thanks, James. In terms of the Perm market and the slowdowns we've seen, it's been pretty consistent by geography. All of our markets have slowed. If you look at the growth rates in Q2 versus what we're where we are in this quarter, all of our regions have slowed. It's been consistent across specialisms as well. I would add to that, though, that we have seen more slowdown in the more junior ends of the Perm markets and I think more resilience at the more senior end. If you take Accountancy & Finance as a good example, we're seeing more of a slowdown in the junior end of Accountancy & Finance than and areas of sort of Office Support and Business Support than we are in the senior end of finance.
I think that's fairly logical at this stage in the cycle, where if you've got a large team, in a more junior area and someone leaves, you might be more hesitant to replace that person. Whereas if a senior member of the team leaves, you will go straight back and replace. I think so there's a sort of logic to that, I think. In terms of whether that perm trend is a lead indicator for temp, I mean, that's a difficult question for me to answer because I think what this cycle has shown, and this was recovery from the pandemic, it's been completely unlike anything we've seen before. It was a dramatically strong perm recovery out of the pandemic, and temp was lagged perm, and that's quite unusual in a recovery.
Normally, the recovery would be led by Temp & Contracting, and Perm would come later in the cycle. This has been quite unusual in many aspects. Our Temp & Contracting performance has been really consistent, and it's been really consistent globally as well. You can see in this call that we haven't deviated from where we were in the previous quarter. Whether we see a change in that or not, it is difficult to say. We, we're a strong believer in Temp & Contracting as a mega trend in our industry and an area of long-term value for us as an organization. I think we see higher quality of earnings and stability from Temp & Contracting.
It's now just a fraction under 60% of our business, and that's important as we come into this stage of the cycle when that market is performing well. You know, how long that continues to do so, you know, it's difficult to say. I'm very glad that we've deliberately built a large business in Temp & Contracting over many years in the end markets that we want to be in. Final question was on the US and the business there, which was down 23% and clearly a weaker performance. The large part of the weaker performance has been in the Perm end of the market, and particularly in the Tech Perm area, which has been quite tough in the States.
Areas of Construction & Property, Accountancy & Finance, Life Sciences have actually been reasonably resilient over in the States, as has our Technology contracting business. It's the Technology Perm area which has been weaker there, and it is more challenging there than in other parts of the world. I think that's fair to say. Bearing in mind around the world, our Technology market and our Technology business is about 75% Temp & Contracting and about 25% Perm. We are heavily weighted to the Temp & Contracting business, but we do have more Perm exposure in the States, and that's where the difficulty's been in that market.
Much appreciated. Thanks very much. Thank you. As a reminder, if you would like to ask a question, please press star one and one on your telephone. We will now go to our next question. One moment, please. Your next question comes from the line of Hans Pluijgers from Kepler. Please go ahead. Your line is open.
Morning, gentlemen. A few questions from my side. First on Germany, a very strong performance. First of all, yeah, do you believe, let's say, due to the quiet shortage of candidates, you see an accelerated shift to using intermediates for their recruitment? If you look, let's say, at unemployment rates, which are broadly now stable, and even looking at some areas, also manufacturing, there's still some, let's say, some slowdown visible. It's a little bit contradictory to what you see in other countries with respect to the normal trend. You believe, let's say, that the high candidate shortage and a relatively low penetration of intermediates in the perm and temporary staffing markets is really resulting now in an accelerated shift towards your services?
Secondly, China, of course, has been the slowdown. Actually, the lockdown has impact, of course, Q1. Do you see some signs that it is really now opening up, and again, you should expect some improvement there? Can you give maybe some feeling on that? Lastly on the buyback, you already said you would, let's say, finalize it this quarter. Looking at, let's say, your, yeah, your policy on returning of cash, looking at current share prices, is more logical to expect that going forward, buybacks will be more the way to go, or if you could maybe some feeling on that?
Great. Thanks, Hans. I'll start off with the Germany question and the, I guess, the penetration question around agencies into the market and whether that could change with any slowdown in the market. As you highlight, this is a Germany is probably one of the most skill short markets in the world. There is a significant shortage of skilled engineers and skilled technicians, skilled Technology professionals and those are the hearts of the markets that we which we operate in. I don't think that's gonna change anytime soon. You're right to highlight that we have relatively low penetration of agencies in Germany if you compare to other major markets around the world.
You put together the strength and the size of the German economy with the relatively low agency penetration rates with the skill short market that we're operating in. I think that all comes together with the fact that we are the leading player in Germany by some distance. I think that really contributes and so there's several factors behind Our performance. I do think we've had an outstanding performance in Germany and it's been very, very broad-based. It's not just in Technology, it's not just in Engineering. Our HR business was up significantly. Our Accountancy & Finance business was up over 30%.
We positioned that business over time from, you know, when I originally worked with the business, it was solely a contracting business in technology, and we've diversified that into engineering. We've diversified into other contract forms and launched Temp business. We've launched Perm businesses, and we've branched out into new specialisms. I think the team there have done an absolutely outstanding job actually, and I think they should be, you know, should be very, you know, highly regarded for that. It really has been an excellent performance and we're really pleased with it. Second question was on China and whether we're seeing any early signs there of things coming back after the pandemic. It's been a difficult quarter, Hans.
As you can imagine, the pandemic hit through the Christmas period. We had Chinese New Year came a little bit earlier this year, and we kinda ran straight into that at the end of January into February. It was a really, really challenging January and February. Our March result was a little bit better actually than January and February. How much of that was getting the new year out the way, which is always a slower time anyway? How much of it was a bit of a pickup in the market? I think it's a little bit too early to say.
Whilst it was a better month for us, I've not seen enough underlying fundamentals coming through in the activity and the job flow, in the interviews, in the CV sends and so on and so forth, which we look at carefully to really get a sign that the Q4 could be clearly better. I think it's early days at this stage, but we're watching it closely. The last question was on buyback and policy of returning cash. We've, as you know, we've done buyback this year, GBP 75 million program from the first of July, and we're towards the tail end of that. We've just done GBP 12 million this quarter, and we've got about GBP 6 million to go, which we'll finish off in the fourth quarter.
That will get us to a position at the 30th of June. Our policy hasn't changed in terms of distribution of cash. We will. As you know, we pay a core dividend, which is progressive and appropriate and is well covered by earnings. Then we look at what to do with our surplus cash, and again, we'll revisit that at the year end, and that'll be a decision for then. We have a clear policy, which is we just turn surplus cash above GBP 100 million at the year end, but we'll take a view at the year end, Hans, around what the most appropriate form of distribution is.
Okay, thanks.
Thank you.
Thank you. Once again, if you would like to ask a question, please press star one and one on your telephone. That is star one and one if you would like to ask a question. Thank you. As we have no further questions at this time, I will hand you back to James and David for closing remarks.
Thank you. If that's all for questions for today, we'd like to thank you all for joining the call. I look forward to speaking to you at our next Q4 results on the 13th of July. Should anyone have any follow-up questions, David, Rob and myself will be available to take calls for the rest of the day. Thank you very much. Bye-bye.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.