Hays Aktie

Good morning, and welcome, everyone. I'm Mark Dearnley, and I'm excited to present my first set of results as the new CEO of Hays. Our agenda today is slightly different from usual format because we are announcing our new Momentum strategy. We'll focus on this initially, and then I will hand over to James to run through our financials. This is my first opportunity to meet you after my appointment as CEO. So please allow me a moment to share a few initial thoughts as we introduce our new Momentum strategy to you today.

Hays has a tremendous heritage, an excellent client portfolio and deeply expert consultants. I have traveled extensively over the last few months to meet colleagues across the globe and many of our clients. I would like to thank our colleagues, candidates and clients for openly sharing their views from which I draw 2 main conclusions. Firstly, a consultant-led approach enabled by advanced technology is an important element that clients wish to retain. And secondly, my colleagues at Hays are genuinely excited by our new Momentum strategy.

I have 4 key messages for you to take away from our presentation today. To deliver improved market share and profitability, we will become a more focused specialist recruitment business, and we have already been taking decisive action to achieve this. We and our clients believe the consultant is key. A human in the loop, supported by great technology is critical to the best hiring outcomes. Thirdly, Momentum is, first and foremost, a growth strategy. We have already made a good start returning to year-on-year profit growth in the second half of FY '26. And finally, over time, we will increase consultant net fee productivity by more than 50%, return Hays to a 25% plus conversion rate and deliver superior returns for shareholders.

Before we examine Momentum in more detail, let's initially examine why clients use recruitment agencies. Our clients need to secure the best talent to build successful businesses. Candidates need the best roles to build successful careers. And in both instances, the cost of making a wrong decision is significant. The impact of exiting unsuccessful hires increases exponentially with seniority due to exit packages, organizational disruption and the direct cost of finding a replacement. As a percentage of the salary, our data indicates that these costs for a director-level role can be more than twice as high as for an associate. Hays helps candidates and clients to improve the probability of success. Our fee is a modest insurance premium virtually versus the potentially high cost of failure.

I mentioned earlier that our strategy has been shaped by what clients have told us. The feedback from a recent survey is clear. They universally want access to the highest quality candidates. They also want Hays consultants at the center of the process. A strong technology platform is necessary, but our clients are clear that our consultant-led approach is the critical element they wish to retain. So keeping the human in the loop remains key. Why is this? As you can see from the charts on this slide, price ranks well below the top 2 purchasing considerations for Perm and Temp and Contracting recruitment processes. Instead, once baseline technical skill requirements have been achieved, then interpersonal skills are the key candidate attributes.

Hays consultants have deep domain knowledge of their clients, of their candidates and of their specialisms, which they use to provide essential human insight when assessing these interpersonal skills such as leadership, communication and motivation. This presents Hays with an opportunity to differentiate and grow in our markets. By leveraging our database of more than 10 million candidates and over 40,000 weekly interactions between our consultants and their clients and candidates and by applying proprietary search and match algorithms that assess both hard and interpersonal skills. Through this, we can swiftly identify the highest quality candidates. And if we move to the next slide, clients tell us that these interpersonal skills will be increasingly important over the next 5 years for managers and directors, which represent the sweet spot of our business.

So how do we at Hays, help clients and candidates improve the probability of success? We do it through our sources of competitive advantage with Hays expert consultants at the center. Our advantages include proprietary data and technology, our people, our brand and our reputation, how we go to market and our operational excellence. For example, Hays has proprietary data and tools, which our consultants use to swiftly and precisely match candidate and client demand and supply. The Hays consultant sits at the center of this flywheel and is key. They have deep domain expertise. They provide essential human insight when assessing values and behavioral alignment. Momentum places Hays consultants at the center of a self-reinforcing flywheel and enables them with the best tools through investments in technology. It forges sustainable long-term relationships with our clients and candidates.

Clients benefit by our speed of assessing the best candidates, reducing their recruitment costs and the risk of an unsuccessful hire. Candidates are offered the best roles, successful placement outcomes and regular feedback. Our internal data confirms a strong link between financial returns and the rotational speed of this flywheel. Roles for which CVs have been sent on the same day achieved materially higher fill rates than responses over the next 1 or 2 days. Single CV submissions perform even better, clearly demonstrating that candidate quality and the judgment applied by Hays consultants are vital aspects of the matching process. By building an unbeatable matching engine, we will deliver faster and better matching, allowing consultants to fill even more vacancies and generating a self-reinforcing flywheel. This results in higher market share, productivity and profitability for Hays and improved outcomes for both clients and candidates.

Five forces amplify this flywheel: growth to specialism leadership, being experts in all we do, building an unbeatable matching engine, powering productivity and delivering this through the Hays Way. Let's explore some of these over the next few slides. Firstly, specialism leadership. We will grow to specialism leadership through 5 dimensions of focus. Firstly, by concentrating on 16 countries with a GBP 100 billion and growing addressable market, where we can build or extend leadership positions. Secondly, focusing on 6 global specialisms where Hays has the strongest opportunity to extend or become a market leader, plus local specialisms where we already have profitable market leadership and expect continued growth. Thirdly, a focus on higher-value roles where the cost of failure is higher and the potential impact from AI on these roles is lower. Fourthly, by targeting end market industries where demand for our products is greatest. And finally, we will operate across 3 products: recruitment, solutions and services.

We have already taken important action to sharpen our focus in FY '26, including decisive steps to reshape our country portfolio and define core specialisms. Focus and market leadership allow our consultants to provide deep domain expertise to clients. Focus and market leadership also drive superior returns with data in the chart indicating that regional specialists with a top 2 share of clearly defined markets consistently deliver stronger growth, higher margins and more resilient performance. As our market share increases, we will secure these economic benefits through higher productivity. To achieve this, we will invest to grow and build leadership in 6 global specialisms: technology, finance, construction and property, engineering, life sciences and human resources. Countries may offer an additional 1 or 2 existing specialisms beyond this. For example, office support or resources and mining to reflect the composition of their local market, but only where there is an attractive opportunity and a clear path to leadership.

We are experts in specialist recruitment across a wide range of products. Recruitment is our existing Temp and Perm activity, including spot placements and preferred supplier lists. Solutions combines our existing MSP and RPO activities. And finally, services addresses the growing statement of work market. Although this may be a new terminology for many of you, services primarily includes our existing German Contracting business, which has successfully provided project-based services to clients for many years. We are also experts in compliance and need to be because our clients care deeply about it. Around the world, regulations largely designed to avoid mock employment, are becoming more complicated, particularly for non-Perm recruitment services and solutions.

As I mentioned earlier, after decades in specialist recruitment, Hays benefits from more than 10 million candidates in our database and over 40,000 weekly interactions between our consultants and their clients and candidates. These are proprietary inputs and are very difficult to recreate. To leverage this competitive position, we are developing a next-generation Hays digital platform, including AI agents, which provide our consultants with best-in-class tools and powerful personalized data and insights for our customers. One example is our Smarter Meetings AI agent. With permission, this analyzes client and candidate conversations and captures structured actions, key CRM data and actionable insights in real time. It is already materially improving the quality and depth of our candidate records, supporting better matching analytics and lead generation. We have a further pipeline of enterprise-level AI agent initiatives and are focused on generating returns from them at scale.

In my previous position as Chief Technology Officer at Hays, I was delighted to discover that we own our own core proprietary systems, including our CRM, client and candidate databases and vendor management system. These provide a powerful cost and flexibility advantage versus the off-the-shelf solutions and support the rapid training and development of the proprietary AI and analytics, which are essential to optimize staffing processes. To augment this technology, we are also establishing a people advantage. Our Hays Academy will become our global center for learning, performance, reward and career development, bringing together onboarding, leadership development and career progression into one connected experience. We have also introduced a potential one-off share award for all our colleagues satisfied by existing shares, which recognizes their contribution and reinforces alignment with shareholders. The scale of this award will be determined by pre-exceptional operating profit in FY '27.

Through broader share employee ownership and top quartile reward, we will strengthen engagement, foster a long-term ownership mindset and incentivize successful delivery of our Momentum strategy. I would like to thank our colleagues across the group for their professionalism, resilience and commitment during the year. Their continued focus on supporting clients and candidates while simultaneously helping to reshape the business has been instrumental to our progress. As mentioned earlier, Momentum will deliver a positive structural shift in our profitability, net fee growth, cash flow and return on capital employed. Through sharper focus, market leadership, radically improved search and match capability and lower cost to serve, we can increase consultant net fee productivity by more than 50%, return Hays to a 25% plus conversion rate and deliver superior returns for shareholders.

I will now hand over to James to run through our financials in more detail.

Thank you, Mark, and good morning, everyone. Today, I'll cover the financial and divisional operational reviews, along with current trading before handing back to Mark for closing comments. Summarizing our financial performance, on a like-for-like basis, net fees decreased by 8% to GBP 906 million with pre-exceptional operating profit up 3% to GBP 48.6 million. Our strong cash conversion drove cash from operations of GBP 92 million, and we finished the year in a GBP 20.1 million net cash position.

Turnover decreased by 4%, with fees down 8%. The higher decline in fees relative to turnover was due to the more resilient performances in Temp and Contracting versus Perm and in our solutions businesses. Pre-exceptional earnings per share was 1.21p, an 8% decrease versus prior year, driven by a higher effective tax rate, partially offset by higher operating profit.

Over the next few slides, we have summarized our FY '26 actions and performances for each region. In Germany, significant actions were taken to restructure our operations, reduce non-consultant headcount and secure further structural cost savings, which drove a sequentially stable pre-exceptional operating profit in the second half. Temp and Contracting fees were resilient, while Perm remained challenging due to lower demand and slower client decision-making. However, there were bright spots. Construction and property performed strongly again with fees up 44%, driven by our focus on infrastructure and the energy sector.

The UK&I recovered from losses in the prior year to deliver a GBP 4 million operating profit. We delivered further improvements in consultant productivity, up 14%, including actively managing our consultants to focus on higher-value placements and stronger margins. We secured structural savings, which included 30 office closures, and we also invested in growth with the launch of a statement of work services business in the second half.

In ANZ, we saw stable Temporary and Contracting volumes through the year, but Perm became slightly more challenging through our fourth quarter. ANZ more than doubled its operating profit to GBP 8.5 million, driven by consultant productivity growth as we focused on higher skilled roles and delivered structural cost savings, including the closure of 11 offices.

And finally, in Rest of World, although the division reported a slightly larger GBP 5.1 million operating loss for the year, it returned to profitability in the second half following significant cost and country portfolio actions. In June, we disposed of our operations in 6 European countries and announced that we are exploring options relating to a further 7 countries. EMEA ex-Germany remained mixed overall. France remains tough, but our actions here to address productivity and cost drove improved profit performance in our fourth quarter. And we reported all-time fee and record profit performances in Spain and Portugal. As previously disclosed, the U.S. was impacted by the loss of a material contract, although trading improved through our second half. And net fees in Asia grew by 3%, with Japan up 10%, driven by strong growth in Contracting where we see huge long-term potential.

Temp and Contracting fees were resilient and decreased by 5%. Volumes declined by 4% with a further 1% or GBP 6 million fee impact from lower average hours worked in Germany. Temp and Contracting remained sequentially stable through the second half in our major markets of Germany, UK&I and ANZ and included strong performances in Spain, Japan and in our services businesses. Perm fees decreased by 12% as weaker client and candidate confidence drove slower conversion of activity to placement. Volumes declined 14%, and our average fee was up 2% as we continue to target higher value roles.

Over the next few slides, we have set out the decisive actions we have taken to manage costs and increase profitability and structurally improve our cost base for the long term. As explained, we saw a significant reduction in net fees and our pay rises in July '25 increased payroll costs by circa GBP 8 million. Our response has been decisive with our operating costs reduced by 8% or GBP 70 million. Payroll costs were reduced by GBP 68 million by actions taken to reduce consultant and non-fee-earning headcount down 12% and 13%, respectively. Commission payments decreased in line with fees and profit, partially offset by higher bonus payments versus prior year. We delivered property savings of GBP 4.5 million, although the majority of exits were in June '26, and therefore, we expect a more significant cost saving in FY '27. And finally, we secured GBP 3.5 million overhead savings from close control of third-party spend.

The next slide looks at our annualized cost savings delivered in the year. We delivered GBP 25 million from our finance and technology transformation programs and our restructuring of our back-office functions in several regions. We delivered GBP 15 million through restructuring our sales operations in Germany, U.K. and Ireland, France and Asia, and we delivered GBP 10 million through the closure or consolidation of 74 offices globally. Given the weighting of cost save activities to Q4, the in-year FY '26 P&L benefit was around GBP 20 million, with the remaining GBP 30 million of P&L benefit to be realized in FY '27. And as Mark has set out, our investment in technology and people will further improve our efficiency in our back office and middle office functions, and we target a further GBP 50 million per annum saving in FY '27.

In addition, our actions to better align consulting capacity to market opportunities and improve productivity, together with the commission savings on lower fees delivered a further GBP 33 million per annum of cost benefit.

Our improved allocation of consultants resulted in 7% productivity growth, including the UK&I up a notable 14%. And adjusting for our seasonally quieter second quarter, productivity has now increased for 11 consecutive quarters. We have worked hard to balance cost reduction with maintaining consultant capacity, and we continue to carefully allocate consultants to business lines, targeting higher skilled candidate roles and investing in the best tools for our consultants. We secured GBP 50 million annualized savings in FY '26, 3 years ahead of schedule and have now delivered GBP 115 million of savings since the start of FY '24. And with our clear ambition for further savings in FY '27, this will take us to over GBP 160 million per annum cumulative structural savings.

The combined impact of our actions to improve productivity and structurally reduced costs drove a return to year-on-year profit growth in H2. Our exceptional costs of GBP 89.6 million comprised 3 parts. We incurred GBP 45.1 million costs related to sales and back-office restructuring, which drove GBP 40 million in annualized savings. In addition, we incurred GBP 26.6 million charge from our global consolidation or exit of 74 offices and which drove a GBP 10 million annualized saving. The sale of our operations in Czech Republic, Denmark, Hungary, Luxembourg, Romania and Sweden resulted in an GBP 8 million loss on disposal, including associated transaction costs. We also incurred a charge of GBP 6.9 million from the partial impairment of goodwill in Belgium and Netherlands and GBP 3 million from the net impairment of intangible assets from the acceleration of our digital program.

Due to the ongoing and multiyear nature of our restructuring and transformation programs, which are strategically reshaping our business in line with our Momentum strategy, we expect to incur significant further exceptional restructuring costs in FY '27 as we drive towards our GBP 50 million annualized cost saving target. The Board is committed to materially reducing exceptional costs thereafter.

Our net finance charge for the year was GBP 13.5 million, broadly unchanged, and we expect the net finance charge for FY '27 to be around GBP 12 million due to a lower noncash lease interest charge. Consistent with our half year results, our pre-exceptional tax rate increased by 10 percentage points to 45%, driven by the concentration of profits in higher tax rate countries, coupled with the impact of losses arising in countries where no tax benefit has been recognized and the impact of disallowable items. We expect the group's tax rate to be slightly lower in FY '27, and the tax rate remains highly sensitive to both the geographical mix of profits and losses, and we would expect to reduce materially to more normal levels as profits rebuild over time.

We delivered a strong cash performance in the year with cash from operations of GBP 92 million, and this represented a 189% cash conversion. Our working capital inflow was GBP 24.9 million, driven by the reduction in Temp fees and a 1-day improvement in our DSO. We paid tax of GBP 19.8 million and net interest of GBP 8.2 million. The cash impact of exceptional restructuring charges was GBP 42 million.

Overall, this led to free cash flow of GBP 22 million. And our uses of free cash flow were the payment of GBP 7 million of dividends, the purchase of our own shares for employee incentive awards of GBP 11.7 million and CapEx of GBP 24.1 million. The cash flow benefited significantly following the full pension buy-in in FY '25 that previously required annual deficit funding contributions of GBP 18 million per annum. We expect CapEx in the GBP 30 million to GBP 35 million range in FY '27 to support our ongoing investments in technology and at a similar run rate to our H2 CapEx of GBP 14 million. We ended the year with net cash of GBP 20.1 million.

DSOs improved by 1 day, driven by good collection performance and our aged debt profile remains strong. Bad debt write-offs were minimal and remained at historically low levels. The group continues to maintain a strong balance sheet. Provisions increased due to restructuring activity, including staff and property closures costs through the year. And net cash decreased after paying GBP 7 million of dividends in the year, GBP 11.7 million in respect of share purchases for employee share awards and the GBP 42 million cash exceptional charges. Our business model remains highly cash generative with a strong balance sheet and the group maintains a clear capital allocation framework. Our priorities for the use of free cash flow are to fund the group's investment and development requirements to maintain a strong balance sheet, to fund a dividend that is affordable and appropriate and return surplus cash to shareholders through a combination of special dividends and share buybacks.

The final dividend of 0.29p per share is consistent with the revised capital allocation framework and dividend policy we announced at the FY '25 results and brings the full year dividend to 0.44p, representing a dividend cover of 2.8x. We remain committed to maintaining balance sheet strength and a 2 to 3x dividend cover while investing in the business.

In summary, fees declined by 8%, but excellent progress with structural cost savings, together with 7% productivity growth drove 3% increase in our operating profit. Volumes declined in both Temp and Perm, although Temp remains significantly more resilient, we saw improving trading conditions in several markets with around 30% of our business in year-on-year growth in Q4.

We remain resolutely focused on repositioning the business in line with our Momentum strategy and delivering further significant structural cost savings of GBP 50 million in FY '27. This will drive another material exceptional charge next year. We maintained a strong balance sheet underpinned by strong levels of cash conversion, and this will fund our transformation and long-term growth initiatives generating attractive returns to our shareholders as our profitability rebuilds over time.

Turning to current trading. July and August to date have been in line with our expectations with no significant change to activity levels from Q4 in either Contracting, Temp or Perm. September is our largest trading month of the quarter, and it is currently too early to assess trends. At a group level, there are no material working day effects in Q1. And given our ongoing focus on driving consultant productivity, we expect overall group consultant headcount will remain broadly stable in Q1. We'll also continue to deliver on our structural efficiency programs, which will further reduce our cost base for the period through FY '27.

I'd now like to hand back to Mark.

Thank you, James. So to recap, Momentum is our strategy to accelerate profit growth and improve market share in our chosen markets by helping Hays solve specialist talent selection processes better than anyone else in the market. In addition, when market conditions allow, we will return to net fee growth. Our strategy anticipates changes in the world of work, shaped by our 60 years of experience and client feedback about what they need, responding to increasingly complex workforce challenges and the greater pressures they face to make the right hiring decisions. Getting it wrong can be costly. It also leverages our 40,000 weekly interactions between expert Hays consultants and their clients and candidates to provide deep insights into specialist recruitment markets.

This is a powerful combination, a key point of differentiation and one where we have only just started to capture its potential. Momentum is a compelling strategy because it is shaped by colleagues, candidates and clients, compelling because it is a growth strategy delivered through superior and sharper focus and market leadership and compelling because it will deliver significant increase in profitability, cash flow and shareholder returns.

Over time, we will increase consultant net fee productivity by more than 50%, return Hays to a 25% plus conversion rate and deliver superior returns for shareholders. As you have heard, we are already delivering Momentum at pace after taking decisive action and executing strongly over the last few months. FY '27 will be an exciting year. We will accelerate our execution and start to unlock Hays full potential.

I will now hand you back to the administrator, and we're very happy to take your questions.

[Operator Instructions] We are now going to proceed with our first question. And the questions come from the line of Andy Grobler from BNP.

Three from me, if I may. Firstly, just on the savings target for this fiscal year, so fiscal 2027. Could you just talk about maybe the potential over a slightly longer period of time? This project has been going on for a while now. I kind of assume it doesn't come to an end in this fiscal year. So just what your expectations are over 2, 3 years?

Secondly, at the trading, kind of shorter term on the trading statement back in July, you talked a little bit about slower Perm, particularly in ANZ and Northern Europe. Is that still the case into July, August? I know it's summer and difficult to call, but have you seen any change in trends from that perspective?

And then thirdly, you've talked about 50% productivity gains in the medium term. When you think about where those are going to come from, what are the key drivers between technology, increased focus, a market recovery and moving up the wage scales?

Thanks, Andy. I think I'm going to give James the first 2, and then I'll come back on the third one.

Yes. Thanks, Mark. And thanks, Andy. Clearly, the savings target we set out for FY '27 is for another GBP 50 million of structural savings, which is similar to what we've just done this financial year. We're looking hard across our back office and mid-office functions primarily there and a combination of operating model and technology actually underpinning quite a lot of that.

Regarding the longer duration, I guess, was the first of the question beyond next financial year, is there more? Well, we want to do a lot next year. And we've been clear that we want to materially lower exceptional costs in the longer term. So we do expect a significant exceptional charge next year as we work towards that cost objective, but to materially reduce thereafter. So that, the lion's share of the big repositioning and structural savings will come through next financial year, Andy.

Should I pick up the second question, Mark?

Yes.

Around current trading. And clearly, in the Q4 IMS, I talked about a resilient Temp and Contracting business through the second half of the year, but we did see some modest slowing in activity in some markets in our fourth quarter. And really, Andy, just to reiterate what we put in the statement and really, we've only had 6 weeks trading since then, and it's all summer months as well. We've seen no change in the momentum or the shift in direction there at all. So activity levels through July and into August so far have been consistent with what we saw through Q4, not seen any change in that, both in Temp and Contracting and from a Perm perspective and on a region-by-regional level.

As we put in the statement and as always, some is a difficult time of the year to really understand where we are. September is a key month for us. It's about 40% of our quarterly fees. And that will be an important indication about where we've come out of the summer and has there been any significant shift in activity levels in that period of time. So we'll talk about that more in October.

And Mark, I'll hand back to you.

Yes. It's a great question, Andy, on productivity. It isn't a single answer because actually, as I've been going around the world meeting all the different markets, everyone is in a slightly different place of what's driving their current productivity. And so actually, it's a very forensic exercise we're going through to, technology underpins everything and will help everywhere. And that's where getting the feedback from the early AI agents that we're putting out there and what difference they're making to the consultants things like Copilot that we've given them, they're making a difference.

But then it gets down to what is the specialism, what are the roles, which of our products are we selling into and making sure we're forensic on all of those different lenses in, I mean, almost down to the desk level in each market. So I would say, yes, technology will help us all across. But everywhere else, it is just going through every single dimension and making sure we're doing it in the best way possible. And that's why it will be a journey over time, but it's a journey that never ends.

And the questions come from the line of Rory McKenzie from UBS.

Yes, it is Rory here. First question again was about the 50% productivity uplift target. Is it right to take the FY '26 net fees and average headcount as the starting point? I think that's around GBP 160,000 a head. And then as you're in the middle of exiting a set of countries and you'll be exiting some specialisms, can you help us think through the exit rate, I guess, or the run rate of net fees and headcount once you've completed that repositioning?

And then my second question is about the new model you're building to drive that. So the digital platform, the next level search and match functions, for example. When do you think we'll see signs of that landing in the market, hopefully driving market share and so positive volume growth? I guess we've heard some peers talk about contract wins or fill rate improvements when these things land in some markets. So what stage you're at with your rollouts across the different markets you have today?

Yes, lovely. Thanks, Rory. I'm going to let James do the first one, and I'll come back on the second.

Yes. Thanks, Rory. If I pick up the third question on effectively, what was that -- what's the baseline of that productivity improvement? And clearly, we're just going through the disposal process of the countries we've just exited and obviously the options on the other regions as well. But they don't materially shift the dynamic in terms of where the cost, the fees per consultant currently sit within the business. So I think, Rory, taking that as the baseline is the right approach to move forward from there. So the number you quoted is the correct one. There's not a much of a distortion effect from the countries we're disposing. Just so that you're aware, that's about GBP 70 million of net fees per annum around 530 consultants in those 7 countries. So if you do the math on that, there's not much of a distortion effect for the underlying productivity of the business. I'll hand back to Mark for the...

Yes. On the technology one, so actually, we're making good progress already. So if you take our core CRM platform, which many of you will know over the years as OneTouch, the modernization of that, and this is a key point. We're on a modernization agenda here because of the assets we already have rather than the sort of a replacement agenda. So the OneTouch modernization has already rolled out now across our APAC region. And we are just in the final testing stages of going into Southern Europe, and then we will continue that around the rest of the world from there. So really good strong progress there, but it makes it much easier to use for the consultants. And then again, many of you will be aware of our VMS system, which is known as 3SS. That, again, is already in wide-scale adoption in some of our largest MSP clients. And again, in all markets, we've already got a use of that. What we need to do there is accelerate the level of adoption.

And then I'll talk about Search and Match and come back to the Hays digital platform. So Search and Match, this is the rebuild. This is the one where we are step changing in the generations of technology we're using. We're partnering with Databricks on this to bring a really leading AI-enabled Search and Match engine together. We have the first alpha of it, and I deliberately say alpha because those are real trial versions rather than in production or in full production. That is out in our Australia business at the moment, and we'll be going into a couple of other businesses this side of Christmas. We want to make sure we get that right before we do a large-scale rollout, but we're talking months here, not years, in terms of scaling that. And the lovely thing with this technology is that the beauty of AI is it does all the parsing for you so that when we know we've got it right, we can start to scale quite quickly.

So then I bring it back to sort of the overall picture of what we want to create is the Hays digital platform, which joins all of that up as a core underlying platform for our candidates, our clients and our consultants. That is a big integration exercise because that is joining up what we've got in the CRM with what we've got in the VMS with all the data across those. That program is underway as well. We have picked a couple of markets where we're going to trial it. I won't use today to tell you those markets because I want to make sure they're working. But again, we're talking months to actually get these trials underway, not super long-term sort of typical IT implementation plans. We're well underway on doing these things and some of the testing has already started. So we're kind of really pleased because we've inherited such great assets into here that we can take those forward and really leverage them.

Great. That's really interesting. I mean it sounds like the Hays Momentum strategy has really been definitely at least soft launched internally given the things you're rolling out. Can you just talk about some of the reception from your internal colleagues and how that's gone down and what you plan to do next now it's kind of live and public?

Yes. No, great question. And we've had a fabulous reaction from the colleagues actually. So I and a few of my colleagues, James and other of the ELT members, we've been on the road meeting colleagues. So we've been to North America. We've been all around the U.K. We've been all around APAC. We've just got Europe to go after they come back from holiday. And I guess it's 3 things that have really worked. One is the sort of the clarity it's giving people. It's very, when you explain which markets, which specialisms, which roles, which industries, everybody goes, "Oh, I get it, let's go for it."

The second, and this one might all make you smile is they love the fact we've given them Copilot. So as part of all the work we've been doing to upgrade the technology, we've done a, I think we're the first in our industry to do the, what's known as the E7 deal with Microsoft. And so they love the fact that every single one of our consultants all around the world has full Copilot to use, and it's making their jobs easier on a day-to-day basis, and they feel they've got modern technology.

And then the third one is they love the share scheme. The engagement we've had from having an all-colleague share scheme has been phenomenal. I mean it's slightly nice that at the same time, the share price went up a little bit, but it's gone down really well, and they're all really engaged in the targets they've got to hit and the way we want that to work. So those would be the big 3. I'm sure we'll get some more when we go around Europe, but it's been really encouraging to get their feedback.

We are now going to proceed with our next question. And the questions come from the line of Karl Green from RBC Capital Markets.

Three questions from me. Firstly, just in terms of the net fee medium-term ambition, clearly, north of GBP 1 billion net fees is a very open-ended number. But it's clearly not a huge amount more at the bottom end versus what you delivered last year. So is the interpretation of that, given that you could have picked any number, you could have picked GBP 1.2 billion, GBP 1.3 billion, whatever, that actually you don't need to see a material step-up in fees to drive that level of conversion ratio improvement? Am I interpreting that correctly is the first question.

The second question, just on Slide 13, where you've helpfully kind of recast the group fees by 5 new categories from Spot through to SoW. Clearly, there's going to be market forces that drive the relative proportions over the next few years. But could you just talk about which of those 5 areas you're going to be really trying to intentionally drive as a greater proportion of the group? MSP, more price sensitive/commoditized. Is that something you prefer to see diminish as a proportion of the group? So a little bit of color there would be helpful.

And then the final question, just on Slide 12 above that. The regional specialist profitability jumps off the page. Just kind of any thoughts from your end as to why there's such an exceptional gap between them and yourselves and lots of your more global peers. I mean one would guess that there's different cost structures, different gross margin profiles, maybe less investment in technology. But anything you can add there would be helpful.

Okay. So maybe, James, you pick the first one. I'll do the number 2 and 3.

Yes, Karl, I'll pick that first one up. So in terms of what does the net fee ambition mean versus where we are currently today? We've just done a fraction of over GBP 900 million of fees. And then if you put against that, the countries that we have exited was around GBP 15 million of net fees and then a further GBP 70 million of net fees will exit from the other remaining 7 countries. I think then the next thing, so clearly, that takes the overall number closer down to GBP 800 million on a like-for-like basis. The other area which we, obviously, we are mindful of is that there are a number of our smaller specialisms, which are within the global specialism. So which, whilst we're not exiting those markets on day 1, they are not investment markets either, and we may see some net fee decline over a period of time there because we will be investing heavily in the global specialisms that we've outlined today rather than some of the old legacy specialisms.

And that as it stands today is about GBP 60 million of fees, Karl. And whilst we'll retain a good proportion of that for a period of time, I will expect that to drift down as well. So if I rebase the business at sort of GBP 800 million or slightly lower, clearly, then we have to grow back up to GBP 1 billion plus over a period of time, which is our inward organic investment into our focus markets within the countries and within the specialisms that we've outlined. So clearly, as Mark set out, Momentum is a growth strategy, but we have to go a little bit down from the GBP 900 million today with the rationalizations we set out in order to grow back up north of GBP 1 billion over a period of time.

Yes, super. So Karl, to the slide on products. And of course, there's another layer below all of this, the more detailed breakdown of the products that underpin these. But the way I think I would look at it is, I think if you looked at one that we shrink we think will shrink over time is the RPO one. But RPO is 2 products under there. One is the full outsourcing of companies' entire recruitment processes. We think that's probably a shrinking market. But we think there's a very interesting segment in RPO about where we're helping project RPO.

So someone who wants to build a global capability center in India, we are a great partner to work with them to hire the first 200 or 300 people they need to get them going whilst they're building their scale. But overall, I wouldn't expect growth in RPO. I think I would expect some growth in MSP. But the thing that's exciting for us is in MSP is where we are also supplying into the MSP. Just the pure managed service, you're right, is not the highest margin business. But what we want to be able to offer is, yes, across a range of recruitment partners provide an overall service, but we want to be in the middle of that as a key provider, almost using our recruitment services on the left-hand side. So these kind of interrelate some of these things.

Spot is always nice. If the market picks up a bit there, we'll see business in Spot. And PSL, what we just need to make sure as we do the PSL bid is that we're maintaining the right margin structure in the roles we're doing in the PSL and not being driven too far down on those. So that's where I see there. But the really interesting one is the services one. And our German business has done some amazing work in this space, almost defining that industry in Europe. And that, I think, is what we want to look at how we leverage much more globally and how we're able to grow in a controlled way where we're not taking risk in the statements of work, but we want to see how we can grow that business now in the U.K. and in Australia and then see where we can take that more globally over time as well. So I think that's probably how the proportions move there.

To the regional specialists, yes, I mean this was a great piece of analysis, and this really, really made us think about what the Momentum strategy should be. This is one of the key bits we looked at. And I think there's a couple of dimensions to it. Your comment on cost base is spot on. And that's clearly the work we're doing. We need to be able to match their cost base. But cost base alone and being generalist, we worked out wasn't going to work. It's the specialism and the focus and therefore, the reputation they get that means to the flywheel diagram, by being known to be the specialist in those areas, they attract the best candidates and the best clients and therefore, the best roles, and that's how you can create higher margins. And that's the analysis we've done, and that's what showed us the direction we need to move in. Now we then need to be able to do that in each defined market at scale globally. And hopefully, our global scale will give us an even better cost advantage to that.

[Operator Instructions] And the questions come from the line of James Rowland Clark from Barclays.

My first one is just a follow up on that answer you have just provided. Is there a pricing difference with regional specialists, i.e., the sort of fee rate or take rate? Secondly, just on your exceptional items that you're saying will be significant in 2027. Should we expect that figure to be kind of similar to what we saw in 2026 as sort of GBP 90 million? I know there's a bunch of things in there, but is that the right ballpark? And is it all cash?

And then also finally, on your financial ambitions in the medium term, you sort of upgraded the conversion ratio to sort of 25% plus. I think previously, it was 22% to 25%. Should we also be thinking that the old GBP 250 million operating profit that you haven't sort of provided a specific number today, but you just said significant growth. Should that be up from that old target given the cost savings for an extra GBP 50 million today and a bunch of productivity gains in the medium term as well?

Thanks, James. So let me do the first one, and then James will pick up the second two. So undoubtedly, they're pricing different, and that's what we've really got to go after. So our pricing optimization in the whole of the Momentum strategy is a key area we're looking at. But yes, the different roles, slightly different ways of doing it. We'll be looking at all those dimensions as well.

Mark, if I pick up on the exceptional, James. So I haven't specifically given guidance for FY '27 exceptional, largely because there's a likely wide range on that. Clearly, we've given the structural cost saving target to GBP 50 million for next year, which will drive an exceptional cost. Now if I look at FY '26, James, we had a GBP 45 million restructuring charge in this year, which drove a GBP 40 million annualized cost. So we've talked previously at sort of 0.80p to 0.90p in the pound on the operational restructures from the annual cost savings into exceptional charges. I'd expect that to be broadly similar going forward. Clearly, there's a range around that depending on exactly where it takes place. Clearly, some parts of the world are a lot more expensive than others in order to do restructuring. But that is, that should follow a similar principle. Now, and that would be the cash side of things.

I guess on the other hand, clearly, we're going through the processes on the remaining 7 countries, and there will be the financial effects of those transactions to consider similar to what we had this financial year. And that is quite hard for me to gauge at this stage, looking at potential impact of goodwill and impairment on net assets and so on and so forth. So likely that there will be an exceptional cost coming through from those, but they sit outside of those core restructuring activities. So it's quite hard for me to give guidance at this stage.

I think what I would say, James, as always, we will be giving you very clear updates through the year on exactly where we are on the savings plan and where we are on that exceptional costs as we go through the year. And obviously, that will become fuller over time as I have more clarity on that. But you're going to have to bear with me slightly because it's a slightly tricky one for me to try and pull together at this stage.

If I just pick up the final question, which is around the financial ambitions, and you talked about the 22% to 25% conversion rate guidance we've done in the past. Clearly, now we set our store out slightly differently. We've given a medium-term net fee ambition of GBP 1 billion plus and a 25% plus conversion rate. So if I put the math together on that, that's a GBP 250 million plus target for us to get to from a profitability perspective over the medium term.

Now if I put that against where we have been historically, that would put us into new space actually. I don't think we ever quite hit GBP 250 million in the past. So that should put us into blue water beyond that. So no, look, it's a fair ambition for us. It's, but we think it's absolutely a credible one. If I think about that 25% conversion rate from a technical perspective, we're in sort of mid-single digits presently. I look at the annualization of the cost saves we've already delivered next year plus the new target objectives, there's about a 10% conversion rate improvement to come through from the structural cost saves that we set out, either we delivered or we set out to deliver.

And then clearly, we've talked extensively today around the opportunity to drive our productivity forward over time, and Mark has been very clear on our ambitions for that. That, too, will be an accelerator of our conversion rate over time.

We have no further questions at this time. So I'll now hand back to Mark Dearnley, Chief Executive Officer, for closing remarks.

Thank you. James and I would like to thank you again for joining us this morning. We look forward to speaking to you at our next Q1 results on the 12th of October. Should anyone have any follow-up questions, James, Kean and Prash will be available for the rest of today, and we look forward to seeing investors over the next couple of weeks. Thank you.

Good day, and thank you for standing by. Welcome to the trading update for the quarter ending 30 June 2026. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Kean Marden, Head of Investor Relations and M&A. Please go ahead.

Thank you, Madalina. Good morning, everyone, and thank you for joining us on another warm day in London. I am Kean Marden, Head of Investor Relations and M&A, and I'm joined here today by James Hilton, Chief Financial Officer, to present Hays' Q4 '26 results.

Before we begin, please be aware that this call is being recorded, and the replay is 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 by new information, future events or updates.

I'll now hand you over to James.

Thank you, Kean. Good morning, everyone, and thanks for joining us today. I'll present the key points and regional details of today's trading update before taking questions. As usual, all net fee growth percentages are on a like-for-like basis versus prior year unless stated otherwise and consequently exclude our previously communicated exits from operations in 4 countries and our divestment of the Czech Republic, Denmark, Hungary, Luxembourg, Romania and Sweden.

Group net fees decreased by 5% with Temp & Contracting down 3% and Perm down 7%. I'm pleased to confirm that our decisive action has improved our financial performance, and we currently expect FY '26 pre-exceptional operating profit will be at the top of the consensus range following a strong return to year-on-year profit growth in the second half.

I'd like to highlight the following key items from the results. Temp & Contracting net fees decreased by 3% as volumes remained stable and the year-on-year decline in average hours worked in Germany was in line with our expectations and stable through the quarter. Group Temp & Contracting volumes decreased by 5% year-on-year, including Germany, down 6%; U.K. and Ireland, down 8%; Australia and New Zealand, down 8%; and Rest of the World, up 4%.

Perm net fees decreased by 7%, driven by a 10% decline in volumes, and we saw modestly lower Perm activity and placement conversion through the quarter in markets outside of North America, Southern Europe and Asia. This was partially offset by a 3% increase in group average Perm fee supported by our actions to target higher salary roles.

We continue to carefully allocate consultants to business lines with the most attractive productivity and long-term structural growth opportunity, target higher payrolls for candidates and invest in the best tools for our consultants. Despite challenging markets, our actions delivered an acceleration in year-on-year average consultant net fee productivity growth to 8% in Q4, including notable increases in Germany and Rest of World.

On a seasonally adjusted basis, productivity has now increased for a sector-leading 11 consecutive quarters. Excluding the impact of country disposals and exits, group head -- consultant headcount decreased by 4% sequentially in the quarter and by 12% year-on-year.

We've continued to make strong progress towards our structural cost saving program with a further GBP 20 million per annum savings delivered in Q4. Altogether, we have achieved GBP 50 million per annum savings in FY '26, exceeding our target of GBP 45 million per annum by FY '29, 3 years ahead of schedule, and in total, have now delivered GBP 115 million per annum of structural savings since the start of FY '24.

Our non-consultant headcount exited the quarter down 13% year-on-year. As a result of the acceleration of our cost program in FY '26, we expect to incur a circa GBP 40 million exceptional restructuring charge, which will drive a GBP 40 million per annum reduction in costs.

In addition, we have undertaken a significant review of our global property estate outside of the countries we have exited or plan to exit. This will lead to the consolidation or downsize of circa 80 properties globally, which will drive a circa 10% -- GBP 10 million per annum saving and will result in the impairment of our right-of-use property assets of circa GBP 30 million.

During the quarter, we took action to reshape our country portfolio, as we focus on building scale in high-performing and high-potential markets, where we have an ability to establish and grow leading positions. As a result, we incurred a modest noncash loss on the disposal of our operations in 6 European countries. The group's net cash position was circa GBP 20 million, which is in line with our expectations and reflects normal seasonal cash flows.

I'll now comment on the performance by each division in more detail. Our largest market of Germany saw fees down 7% year-on-year. Temp & Contracting net fees decreased by 7% with volumes down 6% and a further 1% impact from negative hours and mix. Temp & Contracting volumes remained stable overall, and average hours worked in Germany remained stable through the quarter and in line with our expectations.

Perm was challenging, but broadly stable sequentially through the quarter, and the year-on-year decline in net fees was steady at 12%. In our 2 largest specialisms, technology was again flat year-on-year, while the net fee decline in engineering, our second largest, eased to 20%, driven by greater stability in the automotive sector. Accountancy & Finance was down 15%. Property performed strongly once again with 38% net fee growth, driven by our focus on the infrastructure and the energy sector. And this specialism now contributes 10% of our net fees in Germany versus only 4% in FY '24.

Consultant headcount decreased by 6% in the quarter and by 16% year-on-year. Consultant net fee productivity increased by 9% year-on-year in Q4, driven by our ongoing focus on resource allocation, and we made strong progress with our structural cost-saving initiatives.

In U.K. and Ireland, fees decreased by 8%. Temp & Contracting declined by 5%, but Perm remains subdued, down 12%, and activity softened slightly through the quarter. Fees in the private sector declined by 9% with the public sector down 6%. At the specialism level, technology was stable versus prior year, while Accountancy & Finance and Construction & Property decreased by 9% and 2%, respectively.

Office Support was up 1% as our actions to target higher salary roles continue to offset lower volumes in junior roles. Consultant headcount decreased by 4% in the quarter and 16% year-on-year. Consultant net fee productivity increased by 8%, and we made further good progress in improving operational efficiency and the cost structures during the quarter, as we continue to optimize our office portfolio and delayer management.

Once again, a key driver of productivity has been greater focus from our consultants on high-skilled roles. And as a result, year-on-year growth in average candidate salary remained at 7% for Perm in Q4. In Australia and New Zealand, fees decreased by 2% year-on-year with Temp & Contracting stable, down 2%, but Perm became slightly more challenging through the quarter and was down 1%. The private sector grew by 5%, but the public sector was again tougher and down 14%.

At the specialism level, Construction & Property, our largest at 20% of ANZ net fees increased by 2% with Accountancy & Finance and Office Support up by 6% and 3%, respectively. Technology was tougher and declined by 9%. Australia net fees were down 2% with New Zealand at minus 13%.

ANZ consultant headcount was down 6% through the quarter and by 8% year-on-year, driven by our focus on resource allocation. Consultant net fee productivity increased by 6%.

As with the U.K. and Ireland, a key driver of our profit recovery has been greater focus from our consultant on higher skill roles. As a result, year-on-year growth in our average salary of our Perm placements was maintained at 4% in Q4.

In our Rest of World division, now comprising 18 countries, like-for-like fees decreased by 1%. Temp remained in positive year-on-year growth for the second consecutive quarter with fees up 5%, but Perm declined by 5%. As a reminder, our total actual growth rate includes the impact from our previously communicated exits from operations in Chile, Colombia, Thailand and Mexico and the recent disposal of our operations in 6 European countries.

In EMEA ex Germany, net fees decreased by 2%. France, our largest Rest of the World country, remained challenging with net fees down 17%, but our actions to address productivity and costs are being delivered on plan, and our profit performance improved in Q4. Portugal performed strongly, and Spain again achieved record quarterly net fees, and these were up 31% and 23% year-on-year, respectively. Poland grew by 6%.

In the Americas, net fees decreased by 2%. The momentum increased -- improved through the quarter in the U.S., which was down 1%, and Canada was down 8%. We have previously highlighted a substantial bid pipeline with large enterprise clients in North America, and we expect recent wins to mobilize over the coming quarters.

Asia net fees increased again by 8%. Japan grew by 9%, driven by strong growth in our Temp & Contracting business while Greater China grew by 22% with improved activity in Perm.

For Rest of the World as a whole, consultant headcount decreased by 2% in the quarter and by 8% year-on-year.

I'd like to take a few moments to update you on our strong strategic progress during the quarter. As we've previously shared with you, our initiatives to improve consultant net fee productivity in real terms and structurally improve our cost base will be key drivers of profit recovery. So we are encouraged by our return to strong year-on-year profit growth in our second half.

Amidst challenging markets, we are executing well and continue to make significant operational progress. We continue to invest in high potential and high-performing business lines and scale back or exit those with low performance and potential. As previously communicated, we have exited 4 countries and sold our operations in 6 European countries over the last year. And consistent with our strategy, we recently announced we are exploring options relating to our businesses in Belgium, Brazil, Greater China, Malaysia, The Netherlands, Singapore and the UAE.

Consultant fee productivity accelerated 8% in the quarter and has increased now for a sector-leading 11 consecutive quarters, driven by careful allocation of consultants to business lines with the most attractive productivity and long-term structural growth opportunity, together with greater focus from our consultants on higher-skilled roles and our investments to provide them with the best tools.

We are mobilizing new contract wins with several large enterprise clients, which we expect to contribute to net fees over the coming quarters. And our programs to structurally reduce our cost base are performing well with the GBP 45 million per annum structural cost saving target we set last year exceeded 3 years ahead of schedule.

Before moving to current trading, I'd like to share some background behind our recent country portfolio decisions. In the past, we have operated in many countries and specialisms, and that has spread us too thinly. Over the last year, we've made deliberate choices around where we compete, the specialisms we prioritize, the products we offer and where we have the greatest opportunity to grow and establish leading positions.

Businesses that are #1 or 2 in clearly defined markets by country and by specialism consistently deliver stronger growth, higher margins and more resilient performances. Following careful assessment of our choices, we intend to build scale in high-performing and high-potential markets, where we have the greatest ability to maintain or establish leading positions.

We will reinforce our competitive advantage to differentiate and to drive leadership positions through investment in our proprietary data and technology, our people, our brand and reputation. Client feedback is consistent across permanent recruitment and temp and contracting. They value recruitment agencies whose consultants provide deep specialism expertise and access to high-quality candidates.

So in every market we compete in, our ambition is clear: to grow, to achieve leadership and deliver the benefits that come with it through faster matching, greater exposure to higher-value roles, stronger margins and better outcomes for clients and candidates. Where we can't, we'll step back and reallocate investments to generate superior returns elsewhere.

Progress on the design of our strategy and the shaping of a more competitive operating model is well underway. We are on track to share an update alongside our full-year results on the 20th of August. And I would like to thank all of our Hays' colleagues for their hard work and commitment through the year.

Moving on to current trading and guidance. Our actions to deliver strong consultant net fee productivity growth and cost discipline continued to offset our lower net fees in H2, and we currently expect FY '26 pre-exceptional operating profit will be at the top of the GBP 37 million to GBP 46 million profit consensus range.

To date, we have observed minimal direct impact from the developments in the Middle East, but we remain vigilant to the modest softening in perm activity through the quarter in some markets. Given heightened levels of global macroeconomic uncertainty, we continue to expect near-term market conditions to remain challenging with greater resilience in Temp & Contract than in Perm.

We were pleased once again with our net fee productivity through Q4 and believe our group consultant headcount capacity is appropriate for the current market conditions, and therefore, expect it to remain broadly stable in Q1 '27, as we balance focused investment in high-performing and high-potential business lines with improving productivity in more challenging areas.

We'll continue to structurally reduce our cost base to support our investments in data and technology and position Hays strongly for when end markets recover. We'll share more information regarding these initiatives and any associated restructuring charges at our full year results in August. And finally, there are no material working day impacts expected in Q1 '27.

I'll now hand you back to the administrator, and we are happy to take your questions.

[Operator Instructions] And this question comes from the line of Andy Grobler from BNP Paribas.

Just a couple from me, if I may. Just thinking about Perm markets and the ongoing challenging nature, can you just talk about kind of client behavior and views and how that developed through the quarter, particularly in places like France and Australia?

And then secondly, in Germany, just whether you are seeing any impact from the fiscal stimulus as yet? And what your expectations are for that coming through over the next 6 months or so?

Thanks, Andy. I'll pick the first question up on the Perm that we've seen through Q4. And I think back to the previous trading update we did in April, and clearly, events have just sort of kicked off in the Middle East, and there was questions then, have you seen anything in your business? And clearly, at that stage, the answer was no. I think 3 months later on, what have we seen? We've seen, if I compare the level of job inflow in markets outside of the North America, Asia and Southern Europe, and I'll come back to those regions separately, that leaves the U.K. and Ireland, Australia and Northern Europe.

Our job inflow is down about 5% versus where we were in February and March at pre-Easter levels. So there has been a modest softening, I would say, in the top of funnel activity coming through, but not a dramatic one. And at this stage, we've continued to see decent levels of conversion on jobs, but probably a slight softening as well on the time to hire as business decision-making has lengthened slightly.

So, Andy, I'd say it's been a modest softening in those markets rather than anything significant, but we remain vigilant, and we'll see how things play out. And clearly, there's broader macroeconomic uncertainty that leads to business confidence and fragility there, but -- that's what we're seeing right now.

In North America, actually, we're seeing improving momentum in Perm. The U.S. business, which has got a big business there in Construction & Property is seeing good momentum and good levels of activity actually improving through the quarter. Asia has been pretty strong. Japan has had a good Perm quarter, so was Greater China, so it's been quite upbeat there. And as I say, in Southern Europe, we've continued to hit record after record in the business in Spain, and the businesses in Portugal and Italy have performed well as well. So it's not a one size fits all by any means.

On the other hand, Temp & Contracting has been really, really resilient, and we've continued to see stable trends in volumes working through the quarter and consistent with where we were back in February and March. And then specifically on the Germany position, we've talked about for some time the impact on working hours in Germany. That was stable in the quarter. We were down 5%, which is consistent with where we were in the previous quarter, and we're continuing to see that largely offset by better margin and better day rate on temps placed and contracts placed. So overall, pretty stable trends in Germany.

Whether we're seeing any specific impact there of any -- the fiscal stimulus, again, it's quite hard to say. I probably need another quarter or 2. And nothing obvious, Andy, at this stage. But certainly, we've seen a pretty stable picture in Germany right now in this quarter, which is quite pleasing in many respects.

And this question comes from the line of James Rowland Clark from Barclays.

So with adjusted operating profit guided to the top end of the range for FY '26, I just wondered if you could confirm that the sale of those loss-making markets has no bearing on that and this was all just sort of structural cost savings that sort of got you there and a slightly better top line? And then my sort of follow-up to that is what sort of cost savings could we see from those sold countries you've announced? And what about the sort of remaining 13 that are available for sale at the moment? On top of the GBP 50 million, I appreciate you don't consider them structural, but I'm interested to know what sort of savings you could get there?

And then, my second part is just on trading again. It looked like in terms of year-on-year trends, there's been a material improvement, but the outlook is very, very similar. Are we overall at a group level, just looking at those Perm markets you've just flagged as being the real -- as really holding you back because of year-on-year trends are certainly improving. Maybe that's just improving to a sort of a stable position. But is it just those sort of softer Perm markets you've just flagged? Or is there anything else to mention?

Thanks, James. I'll pick up the profit and the cost question first. So yes, we've guided towards the top end of the range for the full year, which is the GBP 37 million to GBP 46 million, which is about -- I think consensus was about 43%, so ahead of where the market is. And actually, interestingly, if you think about where that is from a year-on-year perspective, it means that our second half -- this second half profit performance is up about 30% versus H2 last year. So I think that's a good reinforcement of the actions we've taken to both improve our productivity and to look at the cost base more structurally as well.

With regards to the countries that we've disposed of during the quarter, the 6 countries that we disposed of made around GBP 15 million per annum in fees and pretty much 0 from a P&L perspective. So cost base there, clearly about GBP 15 million per annum. We -- by the way, we don't include disposed countries in our structural cost savings because we wouldn't see that as our actions to really reduce the underlying cost base. That is more mathematical.

And interesting, similarly, with the further 7 countries that we're reviewing right now, those together this year will do about GBP 70 million of net fees. And again, modest level of operating profit, not far, but somewhere between 0 and 1. So not a lot. So you can see there that the cost base clearly is around the GBP 70 million mark as well. So as we move forward, and we explain further in August about the cost-saving plans we have going forward, we won't be, again, including the cost reductions from those countries in those numbers. We'd like to keep ourselves focused on delivering real cost savings from the underlying cost structures of the business. Just -- hopefully, that was clear.

Just moving on to the question around outlook and Temp and Perm. And yes, I mean, it's a fair question. Our exit rate overall was at 5%. So June performance was consistent with where we were. Overall, as a business, we were 5% down in the quarter and 5% down in June, if I adjust for working days. And then, when I look at the mix within there, Perm was down 6% in June, and our Temp & Contracting business was down 3%. So not dramatically different.

Remember, last year, we actually had quite a tough Perm in Q4. And particularly in May and June, we had a really sort of slow end to the last financial year in FY '25 following the tariff and all that sort of stuff that happened in April time. So actually, that Perm is against quite a soft comparator. And I think -- looking at it, I think it reinforces the trends that we tried to highlight in this trading update. The Temp & Contracting feels very stable. We look at the number of temps and contractors we have out on placement. It's stable overall.

We are continuing to see clients holding on to temps and contractors because they're valuable resources. So we see lower levels of finishes than we have done historically, slightly lower levels of new starters. But overall, it's a stable trend. The margin and hours trends are pretty stable as well. And Perm is, as I said before, and I've tried to be helpful of which markets we're seeing that little softening in Perm activity versus the markets where we're seeing actually quite robust Perm markets, and we continue to grow. So we don't have huge visibility going forward in Perm, as you're well aware. And hence, we have to be relatively sort of considerate, as we think through the summer.

And then, what the outlook is for September? September is always a really important Perm month for us. So much of the activity we're doing now will be Perm fees in September. So we're watching it very carefully. But I think we've been trying to be as clear as we can, James, on our forward visibility on Perm versus Temp & Contracting.

And this question comes from the line of Simon Van Oppen from Kepler Cheuvreux.

Two questions, if I may. First one is on the portfolio reshaping. Could you walk us through the specific criteria used to classify a country as core versus noncore? And beyond the 7 countries already under review, are there any additional markets currently on the table? And should we expect further portfolio announcements before the full-year results on the 20th of August?

And then secondly, on dividend and capital allocation and with disposal proceeds now coming in from the portfolio reshaping, how should we think about the dividend ahead of the full-year results? And going forward, what will be your capital allocation priority with your new reshaped portfolio?

Thanks, Simon. And hopefully, I'm relatively clear in my script of how we've approached the country portfolio. And just to be clear, the 16 remaining countries will be the core countries that we continue with as a business going forward, and there'll be nothing else for review. Now, we've tried to be very clear on how we prioritize the business going forward. And what we want to achieve is a more focused business. And I think in the past, we have been quite thinly spread on a geographic basis with -- and that's led to several subscale businesses in a number of those markets.

When we stand back from this, what do we want to achieve? We want to achieve market leadership in the markets that we operate in, and that's when we look at it both by geography, and importantly, the specialisms within those geographies. And the reason for that is the returns to being market leader are significant in terms of higher growth rates, historically stronger margins, and importantly, greater resilience. And I think no business has underpinned that. And it sort of lived up to that more than our German business, where we have a really, really strong market leadership. And that business has not just grown structurally over many years.

Remember, that was a business we bought that did GBP 3 million operating profit back in 2003. And we've grown that exponentially over many years and reinforced that market leadership position. And also, it's performed incredibly well through this tougher down market over the last 3 years. And I think that really reinforces the benefits of having that market leadership position.

We'll reinforce those positions with investment, importantly, in data and technology, our people and our brand. But it's important to prioritize our investment, and you can't spread yourself again too thinly, and we have to prioritize that where we have scale and where we have focus as a business.

So when you put that all together and our view is clear that the benefits of leadership are significant in terms of faster matching of candidates, of delivering against high-value roles, stronger margins. And ultimately, that is about delivering better outcomes for our clients and for our candidates. So this has been a pretty measured piece of work.

Clearly, it's a big change, and we have many good quality businesses around the world, which will leave us over a period of time, and they will succeed, I'm sure, under different leadership. But our job and our priority is to focus on where our returns are greatest. And this is the route that we're going down. Hopefully, that was relatively clear.

In terms of dividend and capital allocation going forward, clearly, we had a big reset this time last year with the dividend, and we set out our capital allocation strategy then. Clearly, I'm not going to talk too much about that because it's a decision for August and the Board then. But safe to say that we had a reset, then we changed our core dividend to 3x our cover and that obviously was a recalibration at that point. But we'll talk about that more in August going forward.

And this question comes from the line of Rory McKenzie from UBS.

Firstly, I wanted to ask on Temp & Contractor, how many months now would you say that Temp & Contractor net fees have felt sequentially stable in aggregate? And then within that, how many markets are showing kind of positive momentum versus how many markets are showing kind of still ongoing deterioration?

And then secondly, on the cost savings, you're already ahead of your original 3-year target. Can you talk about how you accelerated those plans over the course of this year? And does that just reflect some markets overall were just worse than hoped? Or have you kind of been more proactive and sped up decisions about which areas to close and move on from?

Thanks, Rory. I'll pick up the question. The first question was around Temp & Contracting and how long have we seen broadly stable markets across the world. I think we can see it in our year-on-year volumes in most of our markets are slightly down versus where we were this time last year. And actually, I'd say that we've been pretty stable since our second quarter. We had a pretty decent return to work in the majority of our businesses around the world, and that was the first time we've had that in 3 years. So our business in the U.K. and Ireland, Australia is slightly ahead. Germany was in line.

And within Germany, we had 2 parts. We had the Contracting business, which felt pretty stable, but we had a Temp business, which was clearly still facing a few headwinds at that point, particularly in the automotive sector. And I'd say that's probably been the area of weakness in our major markets over the last 12 months. I think we've been pretty stable from around September, October time in the U.K. and Ireland and in Australia and then in the Germany contracting business.

The Germany Temp business took a step backwards from Q2 to Q3. It's actually been quite stable since then. And we have actually seen a little bit more activity in the auto sector in the last quarter, interestingly. And don't get me wrong, we're not back to the levels where we were 3 or 4 years ago. But a lot of the autos have heavily downsized, but they've got work to do, and we've actually seen more inbound business in the last 3 or 4 months there than we had in the last 2, 3 years, which is quite encouraging.

So look, I think it's been a pretty stable outlook. And then, we've got the countries already where we're really starting to put the hammer down and grow. We've seen some fantastic growth in Spain, in Poland, in Japan. A number of our focused businesses, where we see a really big opportunity to grow and to really scale Temp & Contracting. And we see those absolutely as growth markets. So they're relatively small today. But actually, some of them are starting to get quite big now. We have close to 1,000 contractors out in Poland.

We have a Spanish business now, which is in several hundred contractors working. And Japan, similarly, we're really moving those business forward. Over 70% growth in Japan in Temp & Contracting this quarter is fantastic. I think we're up about 40% in Spain. So there's lots and lots of opportunity there. And whilst the market is -- has a level of uncertainty, we also have a level of stability in those markets, which is really encouraging.

Cost savings, yes, we've done a lot this year, to be fair. We particularly accelerated that in the second half of the year. We did about GBP 15 million of annualized savings in H1. That means we will have done about GBP 35 million of savings in H2. And where and how have we done that, there's been a significant level of work across Europe and Germany. Clearly, some of that has been driven by the broader macro there and some of the fragility we've seen in regions such as France, but we've also done an awful lot of work to position the business better going forward in Germany, and Europe has been a large part of that.

We've continued to work hard on our -- on some of our support functional areas. So in finance, we've done a lot of work around our shared service center structures and also some of our ways of working and looked at how we do things around our cash management cycle. We're doing a lot of work in the HR area and a lot of restructure there. And then finally, in technology, we've done an awful lot of work in how we structure our technology function globally as well. So many, many parts.

The other area of acceleration in this half has been our property portfolio. And we've done a significant review of the excess space and capacity that we have there also and how do we better bring our big people together in locations, and that's led to consolidations, and ultimately, the exits of a number of properties around the world in the last 3 or 4 months. And about 80 properties have been touched overall, either we've exited and consolidated or we've significantly downsized. So that's been a huge part of work as well. And Rory, obviously, that's ongoing. We'll give you an update in August of the things that we've got on our radar going forward.

Okay. Great. And then just, I guess, related to that, the other thing you've obviously done a lot on is the country portfolio and the exits. You've already made some comments on explaining that, that shift in strategy. Just to get a sense of the relative size of the core remaining 16 countries, could you say how much of net fees and operating profits they were at the previous peak or how much of profits those core markets are represented on average over the cycle?

Yes. I mean, we can have a good debate on what the previous peak was, Rory. I think, we probably go back to -- it feels like there's a sort of a payback in time. But if we look at those businesses in 2018, 2019, which I would probably focus on rather than the sort of the world of 2022, which was a bit weird, they did about just over GBP 100 million, about GBP 110 million to GBP 112 million of fees and about GBP 20 million of profit, but those were different times and businesses then where Perm markets were substantially better. So this is a world we have to react to the world that we're in today. And as I said that very clearly, we did about GBP 85 million of fees in those 13 businesses now, and no profit, and that's about the business we have today, and that's the business that we've had to address.

[Operator Instructions] And this question comes from the line of Karl Green from RBC Capital Markets.

Just 2 outstanding questions from me. Just finally, on the portfolio reshaping. In terms of those businesses in totality, what level of like-for-like growth will they have delivered in fiscal '26? Clearly, some of that's been excluded from the continuing like-for-like data. But just in terms of thinking about how it's going to remove potentially a drag for fiscal '27?

And then secondly, just on the U.S. and the Rest of world, you mentioned those enterprise contracts and frameworks coming down the pipeline. Does that give you sort of strong confidence or moderate confidence that you're going to see further momentum in the U.S. going into fiscal Q1 and Q2?

Thanks, Karl. I mean, if you -- I was quite clear that there were only GBP 15 million of fees from those businesses we exited. So the impact on like-for-like growth is negligible actually for this financial year with or without those countries because they just don't have that big an effect. I have just been -- my learned colleagues in the room have just reminded me that the number that I just gave in response to Rory's number of GBP 20 million or so operating profit in those countries in FY '18 and '19 was actually pre-central costs. So actually, if I allocate the group cost to those businesses, it's about GBP 13 million of profit as opposed to GBP 20 million. So I should correct myself just to make that absolutely clear.

So just to summarize, Karl, on those 6 countries because they only do GBP 15 million of fees versus a business that does close to GBP 900 million, the like-for-like impact is negligible in this financial year. In terms of enterprise...

Sorry, just to clarify. I was interested in just what the 13 countries, what that like-for-like growth of 13 rather than the exited ones would look like...

I don't have the answer to that, Karl. I'll have to get back to you. I can't do the math, if I had, that quick. The enterprise businesses, as I've said previously on the last couple of calls, has had a really good pipeline over the last 12 months, really encouraging number of wins we've had, particularly in North America. Several of those are now moving towards implementation and will start to come on stream through the next half or half year. So looking forward to seeing that come through in H1 '27, some quite exciting opportunities, particularly in the States, which is really encouraging. So -- and the pipeline itself is still strong. So we're set quite well there and expect to see that coming through over the next 6 to 12 months, it will be quite encouraging.

There are no further questions for today. I will now hand the call back to James Hilton, Chief Financial Officer, for closing remarks.

Thank you all. If that's all we have for questions, I'd like to thank you again for joining today's call. I look forward to speaking to you next at our full year results on the 20th of August. And should anyone have any follow-up questions, Kean, Prash and myself will be available to take calls for the rest of the day. Thank you.

Thank you. This concludes this conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Hays plc Trading Update for the quarter ending 31st of March 2026 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Kean Marden, Head of Investor Relations and M&A. Please go ahead.

Good morning, everyone, and thank you for joining us on a busy reporting day for the sector. I'm Kean Marden, Head of Investor Relations, and I'm joined here today by James Hilton, Chief Financial Officer, to present Hays' Q3 '26 results.

Before we begin, please be aware that this call is being recorded, and the replay is 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 by new information, future events or otherwise.

I'll now hand you over to James.

Thank you, Kean. Good morning, everyone, and thanks for joining us today. I'll present the key points and regional details of today's trading update before taking questions. As usual, all net fee growth percentages are on a like-for-like basis versus prior year unless stated otherwise, and consequently exclude our previously communicated exits from operations in Chile, Colombia, Thailand and Mexico.

Group net fees decreased by 8% with Temp & Contracting down 6% and Perm down 12%. I'm pleased to confirm that strong consultant net fee productivity growth and cost discipline continues to offset lower net fees. Although near-term market conditions are likely to remain challenging, and we remain mindful of heightened global economic -- macroeconomic uncertainty, we currently expect FY '26 pre-exceptional operating profit will be in line with consensus.

I would like to highlight the following key items from the results. Temp & Contracting net fees decreased by 6% as we saw a modestly stronger return to work in the U.K. and Ireland and ANZ and the year-on-year decline in volumes and average hours worked in Germany was in line with our expectations during the quarter. Group Temp & Contracting volumes decreased by 5% year-on-year, including Germany, down 9%, UK&I down 8%, ANZ down 6%, and Rest of the World up 2%. Perm net fees decreased by 12%, driven by a 15% decline in volumes as conversion of activity in UK&I and ANZ reduced modestly versus Q2. This was partially offset by a 3% increase in the group average Perm fee supported by our actions to target higher salary roles.

We continue to manage our consultant capacity on a business line basis. And despite challenging markets, our actions delivered 7% year-on-year growth in average consultant net fee productivity in Q3, including notable increases in the UK&I and our Rest of the World businesses. On a seasonally adjusted basis, productivity has now increased for a sector-leading 10 consecutive quarters. Consultant headcount reduced by 3% in the quarter and by 14% versus prior year. We've continued to make strong progress towards our structural cost saving program with a further GBP 15 million per annum savings delivered in Q3.

We've now achieved GBP 30 million annualized savings in FY '26, making excellent progress towards our target of GBP 45 million by FY '29. In total, we've now delivered GBP 95 million annualized cumulative structural savings since the start of FY '24. Our non-consultant headcount exited the quarter down 7% year-on-year. And the group's net debt position was circa GBP 15 million, which is in line with our expectations and reflects normal seasonal cash flows.

I will now comment on the performance by each division in more detail. Our largest market of Germany saw fees down 11% year-on-year. Temp & Contracting fees decreased by 11% with volumes down 9% and a further 2% impact from negative hours and mix. Temp & Contracting volumes remained solid overall with return to work in line with prior year and the year-on-year decline in average hours were during the quarter predominantly in our public sector and enterprise clients was in line with our expectations. These sectors hired in anticipation of fiscal stimulus, hence, our placement volumes have remained resilient, but hours work remained softer in the quarter after federal budget approval was delayed.

Perm was sequentially stable through the quarter and the year-on-year decline in net fees eased to 10%. At the specialism level, Technology and Engineering, our 2 largest specialisms, were flat year-on-year and down 27%, respectively, the latter impacted by ongoing subdued performance of the automotive sector. Accounting & Finance was down 22%, but Construction & Property performed strongly once again with 37% net fee growth, driven by our focus on infrastructure and the energy sector, and it now contributes 9% of our net fees in Germany.

Consultant headcount decreased by 6% in the quarter and by 15% year-on-year. Net fee productivity increased by 5%, driven by our ongoing focus on resource allocation, and we made strong progress with our structural cost-saving initiatives. In U.K. and Ireland, fees decreased by 10% with a modestly stronger return to work in Temp & Contracting down 6%, but Perm remained subdued and was down 15%. Fees in the private sector declined by 8%, while the public sector was tougher, down 13%. At the specialism level, Technology was flat versus prior year, while Construction & Property and Accountancy & Finance decreased by 8% and 6%, respectively. Enterprise fees declined by 4%, while office support was flat as our actions just to target higher salary roles offset lower volumes in our junior roles.

Consultant headcount decreased by 4% in the quarter and 16% year-on-year. Consultant net fee productivity increased by 11%, and we made further good progress in improving operational efficiency. Once again, a key driver has been our greater focus from our consultants on high skilled roles, consistent with our Five Levers strategy. As a result, year-on-year growth in average candidate salary remained at 8% for Perm in Q3 and accelerated to 9% in Temp & Contracting. As expected, our sustained focus on cost discipline, including ongoing initiatives to optimize our office portfolio and delayer management has driven a further structural improvement in costs.

We've made good progress towards building a higher quality focused business and consequently anticipate improved profitability in the second half. In ANZ, fees decreased by 2% year-on-year with modestly improved momentum in Temp & Contracting, but Perm was more subdued. Temp & Contracting decreased by 1% year-on-year with a Return to Work modestly ahead of previous years. Perm net fees down 6% slipped back into modest year-on-year decline as conversion of activity to placement became more challenging. The private sector decreased slightly by 1% with the public sector down 6%. At the specialism level, Construction & Property, our largest specialism at 21% of ANZ net fees increased by 6% with office support and Accountancy & Finance up by 7% and 5%, respectively.

Technology declined by 11%. Australia net fees were down 2% with New Zealand at minus 11%. ANZ consultant headcount was up 2% through the quarter but decreased by 4% year-on-year. Driven by our focus on resource allocation, consultant net fee productivity grew by 7%. As with U.K. and Ireland, the key driver of our profit recovery has been greater focus from our consultants on higher-skilled roles. As a result, year-on-year growth in our average salary of our Perm placements was maintained at 5% in Q3. In our Rest of World division, comprising 24 countries, like-for-like fees decreased by 6%. Temp moved back into positive year-on-year growth and fees were up 3%, but Perm declined by 12%. As a reminder, our total actual growth rate includes the impact of our previously communicated exits from operations in Chile, Colombia, Thailand and Mexico.

In EMEA ex Germany, fees decreased by 8%. France, our largest Rest of the World country, remained tough and loss-making with fees down 17%, but our actions to address productivity and costs are being delivered on plan, and we continue to expect an improved performance in H2. Southern Europe performed strongly with Spain and Portugal again achieving record quarterly net fees, up 17% and 6%, respectively, and Poland grew by 2%.

In the Americas, fees decreased by 7%. The U.S. and Canada were down 8% and 2%, respectively. We have previously highlighted a substantial bid pipeline with large enterprise clients in North America, and I'm pleased to share that several contracts have now reached final close with mobilization anticipated over the coming quarters. Brazil, down 12%, was again challenging.

Asia fees increased by 8% with activity -- improved activity overall through the quarter. Japan grew by 33%, driven by strong growth in our Temp & Contracting business and an easier comparable. Mainland China grew by 16% and Hong Kong by 9%. For the Rest of the World as a whole, consultant headcount increased by 3% in the quarter and by 14% year-on-year.

Before moving to the current trading, I wanted to take a few moments to update you on our strong strategic progress during the quarter. As we've previously shared with you, our initiatives to improve consultant net fee productivity in real terms through our Five Levers and structurally improve our cost base will be key drivers of profit recovery. Amidst challenging markets we are executing well and continue to make significant operational progress. We continue to invest in high potential and high-performing business lines and scale back or exit those with low performance and potential.

As previously communicated, we have exited 4 countries over the last year, and we'll continue to review our country portfolio in the medium term. Consultant fee productivity up 7% in the quarter has increased for a sector-leading 10 consecutive quarters, driven by careful allocation of consultants to business lines with the most attractive productivity and long-term structural growth opportunities. Greater focus from our consultants on high skilled roles and our investments to provide them with the best tools. Within Temp & Contracting net fee growth was positive in 3 of our 8 focus countries in Q3. And at the group level, Temp & Contracting now contributes 65% of net fees.

In Enterprise Solutions, we've recently signed several new contracts which we expect to contribute to fees over the coming quarter. And our programs to structurally reduce our cost base performing well with GBP 95 million per annum aggregate structural savings now secured since the start of FY '24. We continue to make strong progress with our initiatives and expect the full financial benefits to build over time.

Moving on to current trading and guidance. To date, we have observed minimal impact from developments in the Middle East, but we remain vigilant. Although we have limited forward visibility given the heightened levels of global macroeconomic uncertainty, we expect near-term Perm market conditions to remain challenging but expect greater resilience in Temp & Contracting to continue. We were pleased once again with our net fee productivity through Q3 and believe our consultant headcount capacity is appropriate for current market conditions and therefore, expect it to remain broadly stable in Q4 as we balance focused investment in high-performing and high-potential business lines with improving productivity in more challenging areas.

We will continue to structurally reduce our cost base to position Hays strongly for when end markets recover and expect to make further substantial progress in Q4. As a result of the acceleration of our cost program, we have incurred around GBP 20 million of exceptional restructuring costs to date in fiscal 2026. But finally, there are no material working day impacts anticipated in Q4 '26.

I'll now hand you back to the administrator, and we're happy to take your questions.

[Operator Instructions] We will now take the first question from the line of Rory McKenzie from UBS.

It's Rory here. Two questions, please. Firstly, I'm sure you've scrutinized all the forward indicators all the ways that you can. So have you seen any signs of client activity changing at all since the start of the Middle East conflict?

Then secondly, within enterprise clients, can you say what the net fee trend here was excluding those 2 large RPO contracts you lost? And you referenced a growing pipeline and improving win rates. Can you just talk more about any sectors or countries that are driving that and what your hopes are for that fee pile going forward?

Thanks, Rory. I'll start off with the first one around the impact in the Middle East. And look, standing back from this the first an immediate priority for us has been the safety and the well-being of our 70 or so colleagues over in the region, specifically in the UAE I mean as I put in the statement and in the script, we have seen to date little to no impact at all in our -- either our fees or in our forward indicators. But clearly, we remain highly vigilant given the level of uncertainty that's building around the world.

And as you would expect, we'll watch every piece of data like a hawk. And if and when we see any change, we'll react accordingly. But as we stand here today it's business as usual. We're continuing to focus on our priorities, which is optimizing our resource allocation for the best long-term opportunities versus -- and managing it versus the current level of demand and activity. We're fully focused on our cost programs, and we expect to make good progress through the next quarter, and we're continuing to invest in our technology and our people and position ourselves for the long term.

So as a team, Rory, you know us well, we've been through choppy times in the past, whether that's GFCs, whether it's pandemics. This is the next thing to come along to the world of geopolitics, but we'll manage it accordingly, and we'll stay very, very close to it. And as and when we see anything, we'll let you know.

Second question was around Enterprise and really the trends in that business. I think if we just look through the impact of 2 large losses that we had in Q4 last year, actually, excluding those, we were about flat year-on-year in the Enterprise business. I mean, bearing in mind this time last year, it was an all-time record performance for our Enterprise business. So we're up against a relatively tough comp. We were down 5% in the quarter. But if I adjust for those 2 contracts, it's about flat.

In terms of the pipeline, it's been encouraging, actually. We've been talking a little while now around the efforts we've had to sharpen our focus on the bid pipeline and what we've had is some really successful conversions of that and now getting those deals over the line in the last quarter have been -- should be beneficial for us in the coming quarters ahead. In terms of where those are concentrated, we've had several wins in the North America and in the U.S., in particular in the tech sector as well. So that's where a lot of our focus has been, as you know, in terms of investment and really pleasing to see some of those efforts coming through. And I think that will help that business going forward over the next 6 to 12 months.

Great. Maybe just one more to follow up on the kind of the business repositioning in these tricky markets. You're having to manage some areas that are up strong double digits right now and other areas that are still down strong double digits.

So I know you've closed 4 country operations, and there's lots of kind of repositioning in the group. But can you talk about how you -- are you still in a process of a very active portfolio management? Could there be other countries or practices you might be closing to redeploy? Or how far through the evaluation of all the mix do you think you are right now?

I mean the way we run the business, Rory, is not just at a country level. We -- as you know, we run it at a business line level. So whether that's a specialism or the contract form within that specialism. So we may be investing in tech contracting in a country while we're disinvesting in Perm because we see deeper levels of demand and activity, and we have to make appropriate decisions.

And you're absolutely right. If you look at our consultant headcount at a macro level in the last quarter, we were down 3%. But actually, several of our countries, we were strongly investing in, and I'd highlight Japan, Spain has been 2 good examples there where we're seeing relatively benign macroeconomic conditions, we see really good long-term opportunities to structurally grow our businesses there, particularly in the Temp & Contracting area, and we really made some investments in both of those markets, which are really coming through quite nicely.

So the way we run our business, as you know, is really to map our resource allocation to both the long-term opportunities for us to grow, but also we have to manage it within the markets we're in and have to respond to current levels of demand and activity. So that's how we do that at an overall group level, Rory.

In terms of the portfolio, clearly, we've had 4 countries we've withdrawn from over the last 12 months or so. There's a couple more that we're looking at. I expect us to think about that more strategically going forward and think about the long-term opportunities and the major markets that we need to focus on. But we'll update on that in due course. I mean -- but as today, business as usual, we're very much focused on making sure we've got the right consultants on the right desks in the right markets.

We will now take the next question from the line of James Rowland Clark from Barclays.

My first question is just in France. You commented it's loss-making at the moment. Are you able to update us on a potential time line for turning profitable at this level of activity in the market?

And then my second question is on Australia and New Zealand. It slipped a little bit in this quarter to mind, the private sector was down 1%, it was up 2% last quarter. Just interested to know what's happened there? And a similar comment on Germany and Technology, which has done the opposite. It's materially improved to flat from down 10%. I just wondered if that was complicated or anything else to draw out.

Great. Thanks, James. I'll kick off with France. And clearly, it's been a challenging market for us and for the sector overall to be fair, over the last couple of years. Clearly, we've not been happy with the performance there. And as you know, we were loss-making in the first half of the year.

We're very much focused on turning that business around, both in terms of the markets that we're focused on increasing our exposure to Temp & Contracting away from junior clerical roles and moving further up the food chain and at the same time, bringing some of the structural costs down in that business.

We're well on with our plan. Our current plan at the levels of demand that we've got today would see us back into a breakeven position or even slightly profitable in our Q4. So we're very much focused on that. But clearly, as all our markets is subject to current levels of demand. But other things being equal, I'd expect to be back into a positive position there. As we exit the financial year, which is important for us because France is an important market for us. Not so long ago, we were making GBP 15 million plus of profit there. Let's not forget. So it is an important market for us. It's been through an incredibly challenging time, talk about instability and the broader impacts on business confidence, that's right in the heart of that. The team have had a real battle on their hands, but I think we're coming through that now, and I expect to be in a better position as we exit the year.

Question on Australia is a fair one. And actually, we talked last quarter about some positive momentum. As you mentioned, the private sector was up slightly. We were back in growth in the Perm business. And we've seen that slightly inflect actually whereas our Temp & Contracting business has continued to move forward. And I think overall, I look at Australia and we're pretty consistent with where we were 6 months ago. But I would say that the Temp & Contracting business has probably been slightly ahead of where we expected to be and have good momentum and good trends through the quarter as we've highlighted in the returns to work.

But on the other hand, Perm has been a little bit softer. And it's interesting because we -- the top of funnel activity is actually pretty good. And I look at the number of job registrations, interview numbers, it's consistent with where we were in September and October. We just haven't seen that conversion come through at quite the same level. As we had 6 months ago. And hence, the Perm fees have come in just slightly short, but it's relatively small deltas both ways, but just a subtle shift there. But overall, it's a pretty stable trend in Australia and actually a pretty similar picture in the U.K. actually, not dissimilar in the trends that we've seen there.

Germany tech is predominantly underpinned by our contracted business. So if you think about the weightings of our businesses, the Temp business is heavily weighted to the Engineering sector and the Automotive sector more broadly, whereas the contracting business is the largest business there is in technology. And that's been pretty stable. We've had reasonably pretty solid performance in terms of the number of starters there over the last 3 months post-Christmas. The hours has been stable, which is helpful. The team are doing a really good job of pivoting that business and finding growth within our clients, not everywhere is difficult in Germany. There are pockets of opportunity, and I think the team are doing a good job of finding that. So Technology being flat was a pretty decent result overall for the German business.

Hopefully, that covered everything, I think, and please forgive me if I missed anything.

We will now take the next question from the line of Karl Green from RBC Capital Markets.

Just a quick question to see if you've got anything incrementally, you say, around a permanent CEO appointment in terms of how the process is unfolding there?

And secondly, just technically, an update on what you'd expect exceptional restructuring charges to look like in the second half. You said that you expect to incur increased charges in H2. I just want to check how that compares to previous comments, please.

I think I got it, Karl. You were a little bit faint. So if I miss anything in your questions, just please just shout.

I think the first question was around the permanent CEO appointment -- clearly, Mark stepped into the role in February on an interim basis. And it's very much BAU. As you can imagine, we're focused on driving performance on making sure we've got the right business line allocation. As you're aware, we've cracked on hard with the structural cost program and better positioning ourselves from that perspective, and we expect to make good progress through Q4 as well.

So very much making sure that we deliver and best position the business as strongly as possible. While the Board are clearly running their process, evaluating both external and internal candidates. So that's their process to run and they'll update in due course. But working with Mark, it's very much business as usual, and we're very clear on what we're doing, and we're cracking on with that.

The second question was around the restructuring work that we're doing and any update on restructuring costs in the second half. We had about GBP 10 million or so of restructuring charges in H1. And I expect a similar level in Q3, bearing in mind, we've accelerated the delivery of the cost program, but I expect similar levels in this quarter. Clearly, we've got another quarter to go, and as I mentioned, we expect to make good progress. So there's highly likely to be some further costs coming through. in Q4. But clearly, we'll update, Karl, in due course when we're closer to the time, and we know what the actual numbers are.

We will now take the next question from the line of Steve Woolf from Deutsche Bank.

Just one for me. On the Enterprise Solutions business, down overall, mentioning the contracts you previously flagged on North America and Switzerland. And also down in the U.K. So I was just wondering whether there was any sort of knock on those contracts were global contracts that were lost or whether this was anything specific to the U.K.

Yes. Thanks, Steve. Yes. No, it's a fair question. And what we've seen in the last quarter is a little bit of a drop in some of the Perm contracts that we have in the Enterprise Solutions business in the U.K., notably in the construction sector. We've seen a little bit less demand coming through, which has been the driver of that being slightly down year-on-year.

But as I said before, I'd highlight that this time last year was an all-time record quarter for that business. So pretty tough comp to go up against. But the Temp & Contracting side with the MSP has been pretty solid overall, but we have seen a little bit of a drop in demand in some of the Perm RPO parts of the business.

[Operator Instructions] We will now take the next question from the line of Tom Burlton from BNP Paribas.

Sorry, my line did cut out, so apologies if any of these have been covered, but 2 for me. First one is on Asia, which was particularly strong, and I guess, especially Japan. Just wondering if you could dig a bit more into exactly what the drivers of that were?

And then on -- second one is on headcount plans for Q4. I know you touched on the Middle East and limited impact there, but you did mention sort of heightened vigilance. I'm just curious if any of that heightened sort of awareness of what's going on there is feeding into headcount decisions as we think about Q4?

Thanks, Tom. I'll kick off with Asia. So 8% growth in the region was pleasing. And as you highlighted, Japan, was the standout performance in that region. Underpinning that, has been really quite rewarding is the return on investment that we've made over the last couple of years in our contracting business, that's now a good -- about 25% of our business, actually probably close to 30% of our business is in the contracting space in Japan.

And the investments we've made both in Engineering and in Technology contracting have really started to come through and that business was growing at north of 40% year-on-year, which is really pleasing. So the team are cracking on there and doing a really good job. I'm really pleased with that. We see it as a priority business for us. We think we can grow a big business there, and we're making good headway. So congratulations to the team over in Japan. It's been a really, really good quarter, and I expect to see another one in Q4.

Moving on to the headcount question. And again, looking out to next quarter, we put the guidance in the statement as we expect it to be pretty flat overall. I think there was an earlier question that talked around resource allocation and how we manage that. So it doesn't mean that we won't be investing in some parts of the business and maybe scaling back in other parts. But I think net-net, we expect it to be broadly flat over the next quarter based on where we are today.

And look, that's as I said at the outset, we haven't seen any significant impact on our forward KPIs and then trading in the business. But we remain vigilant and we'll react to that if we see it. So as we stand here today, we look forward to the next quarter, we think it will be pretty stable overall. But as I said before, there'll be lots and lots of moving parts under the covers where we're scaling back or we're doubling down.

There are no further questions at this time. I would now like to turn the conference back to James Hilton for closing remarks.

Thank you. That's all for questions. Thanks again for joining the call today. I look forward to speaking to you at our next Q4 results on the 10th of July. And should anyone have any follow-up questions Kean, Prash and myself will be available to take calls for the rest of the day. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Hays Trading Update for the 6 months ending 31st December 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, James Hilton, Chief Financial Officer. Please go ahead.

Good morning, and welcome, everyone. You will have seen from our separate announcement this morning that Dirk Hahn has stepped down as our CEO for personal reasons. I'd like to acknowledge Dirk's significant contribution to Hays over the last 28 years as one of our very first sales consultants in Germany right through to successfully growing our German business to the powerhouse it is today and then for the last 2.5 years as our CEO.

Dirk has made an enormous contribution to our business, and we wish him well in the future. And on a personal level and having worked with Dirk closely for many years, I wish him the very best of luck.

Mark Dearnley, our Chief Digital and Technology Officer, who joined Hays back in the summer, will step in as Interim CEO, while the Board conduct their process to appoint Hays' next CEO. Mark has already made a significant contribution to the business in the time he's been with us, including our technology program, which I'll cover later in the presentation, and I very much look forward to working closer with Mark going forward.

But for today, I'll take you through our operational, financial and strategic review of our first half results before as normal, opening up to questions. Let me start with the market context. Global recruitment markets remain challenging, notably in Perm through the first half against the backdrop of continued macroeconomic and political uncertainty. However, we have executed our strategy well and remain resolutely focused on delivering against our five levers, which are designed to increase our exposure to attractive, high-potential markets and scale back where market forces are less supportive.

Our decisive actions delivered strong sector-leading growth in net fee productivity, a structurally improved cost base and improved profit in the UK&I and ANZ, two of our major markets. The proportion of our business delivering year-on-year net fee growth increased from 15% in Q1 to 20% in Q2 as we saw improving performances across ANZ, Asia and parts of Europe.

Let me briefly run through a high-level overview of the half. Group net fees decreased by 9%. Temp & Contracting down 7% was more resilient than Perm, down 14%. And as guided at our January trading update, pre-exceptional operating profit decreased 25% on a like-for-like basis to GBP 20.1 million.

We're not satisfied with our current level of profitability, but we are pleased with how we have remained highly disciplined. We limited the profit impact of the group's GBP 47 million net fee reduction to GBP 5 million. And as we'll explore later, drove improved profit performances in several regions, including the U.K. and Ireland and ANZ.

We also made strong strategic progress during the half, driven by improved resource allocation, consultant net fee productivity increased by a sector-leading 7%. Secondly, we delivered net resilient net fees in Enterprise Solutions. And thirdly, we have improved our business mix through resilience in Temp & Contracting and by reshaping our country portfolio.

Later in the presentation, I'll provide examples outlining how we've achieved this. But first, let me examine our divisional performance. And I won't provide a detailed narrative because many of these figures have been previously disclosed and discussed.

In Germany, fees declined by 11%. We took decisive action to protect profitability, and the division has remained resilient in a challenging market, contributing GBP 20.6 million operating profit. Contracting net fees were resilient, with Temp more challenging, primarily due to greater exposure in the automotive sector and lower demand and slower client decision-making impacting Perm. However, there were bright spots. Construction & Property performed strongly again and increased by 40%, driven by our focus on infrastructure and the energy sector and has increased from 4% of net fees in FY '24 to 8% in the half.

Despite this, headwinds from economic conditions and fewer working hours, predominantly in our enterprise clients in the construction, infrastructure and public sectors more than offset cost efficiency initiatives and disciplined pricing. We've taken significant cost actions in Q2, which will benefit our second half, including restructurings of operations and back-office functions.

In the U.K. and Ireland, fees declined by 9%, and the division recovered from losses in the prior year to deliver a GBP 2 million operating profit. Markets remain challenging in the public sector, but the private sector was more resilient and technology, our largest specialism, moved back into positive year-on-year growth for the first time in 3 years. Our Enterprise Solutions business also recorded good levels of growth.

We delivered strong productivity growth and maintained good cost control, and we will examine the actions we have taken to return the U.K. and Ireland to profitability in a case study later on.

In ANZ, fees declined by 3% and the division tripled its operating profit to GBP 4.2 million. Temp & Contracting reduced slightly, but trading improved modestly through the half, and we returned to growth in Perm in Q2 for the first time in 3 years. We saw 5% growth in Enterprise Solutions. Resources & Mining was up 4% and Construction & Property was flat. We'll also examine the actions we've taken to deliver this profit improvement in a case study later.

And finally, in Rest of the World, fees declined by 10%, and the division moved to a -- sorry, 6.7 million operating loss from a small profit last year. EMEA ex Germany was particularly challenging with fees down 12%, driven by France down 20% and loss-making in the half. But we reported all-time record fee and profit performances in Spain and Portugal, where we executed our strategy well.

The U.S. was impacted by the loss of a material RPO contract, which was taken back in-house. And Asia was mixed, but with China and Hong Kong back in growth and Japan solid and up 1%, but Malaysia more challenging and down 18%.

We took decisive action in the half to return the Rest of the World division to profitability, notably in France, where we are delivering on plan, and so we expect an improved performance in the second half. We exited Thailand in December and in January, closed our recruitment operations in Mexico. Overall, I expect an improved financial performance in H2.

Moving on to our Financial Performance in the half. Summarizing our financial performance on a like-for-like basis, net fees decreased by 9% to GBP 453 million, with pre-exceptional operating profit down 25% to GBP 20.1 million. Our strong cash conversion drove cash from operations of GBP 43.7 million, and we finished the half in a GBP 40 million net cash position.

Turnover decreased by 3% and with fees down 9%. The higher decline in fees relative to turnover was due to the more resilient performance in Temp & Contracting versus Perm, in part due to the resilient performance in our MSP business. Pre-exceptional earnings per share was 0.46p, 43% decrease versus prior year, driven by the lower operating profit and higher effective tax rate.

Perm fees decreased by 14% as low client and candidate confidence drove reduced levels of activity and longer time to hire. Volumes declined by 14% and our average perm fee was flat.

Temp & Contracting fees were more resilient and decreased by 7%. Volumes declined by 7% with a further 1% or circa GBP 3 million fee impact from lower average hours worked in Germany. This was offset by a 1% increase in our average placement fee driven by improved mix with a 20 basis point reduction in underlying margin.

Temp & Contracting fee growth was positive in five of our focus countries, driven by good volume growth as we continue to build scale in structurally attractive long-term markets.

Over the next few slides, we set out the decisive actions we have taken to manage costs and protect profitability and structurally improve our cost base for the longer term.

As explained, we saw a significant reduction in net fees and our pay rises in July '25 increased payroll costs by GBP 4 million. Our response has been decisive with our operating costs reduced by 8% or GBP 40 million year-on-year. Payroll costs were reduced by GBP 33 million by actions taken to reduce consultant and non-fee-earning headcount, down 15% and 16%, respectively, year-on-year.

Commission and bonus payments decreased in line with fees and profits, and we delivered property savings of GBP 2.2 million from the closure of 27 offices over the last 12 months, and we secured GBP 2.6 million of overhead savings, primarily from travel and entertainment and marketing spend.

The next slide looks at our annualized cost savings delivered in the half. We secured GBP 9 million from our finance and technology transformation programs and restructuring our back-office functions in Germany, U.K. and Ireland, ANZ and in Asia. We also delivered GBP 6 million through restructuring sales operations in the U.K. and Ireland and Germany and our global enterprise business.

Our improved allocation of consultants once again resulted in a sector-leading productivity growth up 7% year-on-year. And adjusting for our seasonally quiet second quarter, productivity has now increased for 9 consecutive quarters. We've worked hard to balance cost reductions with maintaining consulting capacity, and we continue to allocate consultants to markets with the most attractive growth opportunities. U.K. and Ireland productivity growth accelerated to 15% and ANZ grew by 7%. And despite the market backdrop, we delivered 3% productivity growth in Germany.

As we examined on the previous slide, we've also continued to take decisive action to structurally improve the group's cost base. We delivered a further -- sorry, GBP 15 million per annum savings in H1 and therefore, made strong progress against the FY '29 target of GBP 45 million we set ourselves in August. We've now delivered GBP 80 million per annum over the last 2.5 years and expect to make substantial further progress in H2. As we'll explore later, our new Hays digitized program will further improve our efficiency in our back office and middle office functional areas.

Our exceptional costs of GBP 8.8 million comprised two parts. We incurred GBP 7.3 million costs related to senior management and back-office employee redundancies, and we incurred a GBP 1.5 million exceptional charge in relation to the multiyear technology transformation and finance transformation programs. Due to the ongoing nature of our restructuring and transformation programs, we expect to incur further exceptional restructuring costs in the second half.

Our net finance charge for the half increased slightly to GBP 6.7 million due to the modestly higher average drawings on the group's revolving credit facility. We expect the net finance charge for FY '26 to be GBP 13 million, slightly below FY '25 due to the positive impact of the defined benefit pension buy-in and improving working capital.

Our pre-exceptional tax rate increased by 13 percentage points to 44.8%, driven primarily by the impact of tax losses in some countries in H1, together with the impact of disallowable items. We expect the group's ETR for FY '26 to be circa 45%, consistent with the first half. The ETR remains highly sensitive to the geographic mix of profits and losses and to disallowable items. We would expect the ETR to reduce materially to more normal levels as profits rebuild over time.

We delivered a strong cash performance in the half with cash from operations of GBP 43.7 million, and this represented a 217% cash conversion. Our working capital inflow was GBP 14.5 million, driven by the reduction in Temp fees and a 1-day improvement in DSO. We paid tax of GBP 10.6 million and net interest of GBP 4.1 million. The cash impact of exceptional restructuring charges was GBP 12.1 million. And overall, this led to a free cash flow of GBP 16.9 million.

Our uses of free cash flow were the payment of GBP 4.6 million of dividends, CapEx of GBP 10.1 million and purchase of own shares for PSP issuance of GBP 1.2 million. The cash flow benefited significantly year-on-year following the full pension buy-in that previously required deficit funding contributions of circa GBP 18 million per annum.

And in addition, the cost of our technology investment has been lower than initially expected, and we now anticipate GBP 30 million CapEx in FY '26 versus our previous guidance of GBP 35 million.

We ended the half with net cash of GBP 40 million. DSOs improved by 1 day and remain below pre-pandemic levels. And our aged debt profile remains strong. Bad debt write-offs are in line with FY '25 and remain at historically low levels. Our balance sheet strength was maintained with minimal movements over the last 6 months.

Our business model remains highly cash generative with a strong balance sheet and the group maintains a clear capital allocation framework. Our priorities for the use of free cash flow are to fund the group's investment and development requirements to maintain a strong balance sheet, to fund a dividend that is affordable and appropriate and return surplus cash to shareholders through a combination of special dividends and share buybacks.

The interim dividend of 0.15p per share is consistent with the revised capital allocation framework and dividend policy we announced at the FY '25 results. We remain committed to maintaining balance sheet strength and a 2 to 3x dividend cover while investing in the business.

In summary, fees declined by 9%, but we saw clear progress in strategic delivery during the half, which together with our cost actions drove improved profit performances in the U.K. and Ireland and in Australia and New Zealand. Volumes declined in both Temp and Perm, although Temp remained significantly more resilient. We maintained a strong balance sheet underpinned by strong levels of cash conversion, further supported by lower-than-anticipated CapEx and our full pension buy-in has eliminated deficit funding commitments. This will fund our long-term growth initiatives and generate attractive returns to shareholders.

Moving to Current Trading. Our Temp & Contracting New Year return to work has been solid overall and in line with the prior year and our expectations. In U.K. and Ireland and ANZ, Temp volumes have returned modestly ahead of the prior year and are now back at pre-Christmas levels. In Germany, Contract is in line with prior year and Temp slightly behind, with working hours in Germany consistent with trends from our Q2. Perm activity levels are in line with pre-Christmas.

Our group consultant headcount capacity is appropriate for current market conditions, and we expect it to remain broadly stable in Q3 as we balance focused investments with improving productivity in more challenging areas. We'll also continue to deliver on our structural efficiency programs, which will further reduce our cost base in the second half.

Our strategy will build a structurally more resilient, profitable and growing business underpinned by our culture and talented colleagues worldwide. We are increasing our exposure to the most in-demand job categories, growing industries and end markets, higher skilled and higher paid roles, Temp and contracting in our 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.

The next three slides present case studies to demonstrate our strategic progress and improve financial performance.

In the U.K. and Ireland, we've made good progress towards building a higher-quality focused business. Under our new management team, we have focused our consultants on higher-value placements and stronger margins. Growth in our average candidate salary accelerated from 5% in Q1 to 8% in Q2. We have invested in a new STEM leadership team and launched a project services business to provide statement of workspace solutions.

We've also formed stronger relationship with clients with enterprise solution fees up 4% in the half. These have driven an acceleration in consultant productivity growth to 15%. We also delivered structural savings by delayering management and optimizing our office portfolio. Together, these actions returned the division to profitability in the half.

There are similar themes in ANZ, where we delivered a threefold improvement in profit. We delivered 7% productivity growth, including 10% increase in Q2 and maintained strong cost control.

Our Q2 average Perm and Temp & Contracting fee increased by 5% as we focused on higher skilled roles. We've grown our proportion of fees from technology with good Temp & Contracting momentum through H1, and we are building scale in statement of work.

We returned our Perm business to growth in Q2 and delivered forward momentum in Temp & Contracting through the half, underpinned by good performances in Enterprise Solutions, where net fees were up 5%.

And in Spain, we delivered 12% fee growth and a record fee and profit performance in H1. Temp & Contracting was up 32%, driven by client wins and continued expansion in new specialisms and now contributes almost 1/4 of Spain's net fees.

Construction & Property doubled year-on-year and Technology was up 14%, driven by excellent growth in our contracting business. We've also launched an engineering contracting business where we see significant long-term growth potential. We delivered 8% productivity growth and maintained good cost discipline, which drove record profits.

Our performance in Spain demonstrates the long-term growth potential in our markets when the economic backdrop is stable, aligned with strong management execution.

We believe we have the right strategy in place and executed well against our five levers, which will reposition and reshape our business.

Firstly, we'll continue to invest in high potential and high-performing business lines, and we'll scale back or exit business lines with low performance and potential. We have exited four countries in the recent months, and we'll continue to review our country portfolio.

Secondly, we will remain focused on delivering a lower cost and scalable business, driving stronger profit leverage in the recovery.

Which brings me to our final area of focus. We are developing a next-generation Hays digital platform to reinforce our strong competitive position, improve our productivity and drive further structural cost savings.

Building on many years of investment, Hays owns its core proprietary technology systems, which include our CRM system, global client and candidate databases and vendor management system. These provide a powerful cost and flexibility advantage versus off-the-shelf solutions and allows the rapid training and development of proprietary AI and analytics, essential to optimize staffing processes. We've rolled out AI agents to provide our consultants with best-in-class tools, reduce administrative burden, improve back and middle office efficiency, improve our structured data and provide powerful and personal insights to our clients.

Two live examples include, firstly, our Smarter Meetings AI agent, which analyzes clients and candidate conversations, capturing structured actions, key CRM data and actionable insights in real time. This reduces manual administration and consistently records high-quality and structured information and data.

We are already seeing a material improvement in the volume of structured data captured per conversation, improving the quality and depth of our candidate records, which in turn drives better matching, stronger pipeline visibility and more sophisticated and analytics.

Secondly, our AI curated market intelligence agents create bespoke daily market reports for our consultants. This enables them to engage clients with more informed and timely insights, demand trends and opportunities, improving our business development and engagement. Our business development focus and returns are improving.

Our focus with AI is to -- our approach with AI is to focus on rapid deployment and high ROI use cases. We are already seeing improved consultant capacity and productivity, improved speed and quality of execution and the ability to scale revenue at low cost. Our investments will provide our consultants with the best tools and drive a superior client and candidate experience.

As we've mentioned before, we believe our actions will support a substantial recovery in profits over the longer term. Delivering productivity growth above inflation remains a key focus for our management, driven by our actions to reallocate consultants, reshape our business to focus on higher skilled, higher paid roles and provide our consultants with the best tools through the next-generation Hays digital platform. These factors will increase net fees with a high drop-through to operating profit.

In addition, we continue to make strong progress against our structural cost saving ambitions, which will be accelerated by our Hays digital platform investment. The performance of ANZ and Spain in the first half is evidence that when macroeconomic headwinds are stable, Hays can deliver material growth and profitability.

So to close, markets remain challenging in the first half, and the Board and I would like to thank our colleagues for their deep commitment, hard work and resilience. We're not satisfied with current levels of profitability, and we'll relentlessly focus on execution of our strategy. Our first half results provide evidence that we are making significant strategic and operational progress. I'll now hand you back to the administrator, and we're happy to take your questions.

[Operator Instructions] and now we're going to take our first question for today, and it comes from the line of Rory McKenzie from UBS.

Firstly, of course, I wanted to add all of our best wishes to Dirk and recognize his big impact on Hays over the years and obviously wish him well for the future.

The first question I want to ask was about the current level of profitability. GBP 20 million in H1 was steady on the GBP 20 million in H2 for the first time in a while.

And although it doesn't sound like there's much aggregate help for markets, there's a lot of work that you've done on cost and productivity to get to that kind of point of stability. If nothing changes in markets, what should that mean for profits over the next 6 months? Can you maybe just remind us where you are on the kind of the ramp-up or annualization of the cost savings and productivity improvements and how that should flow through in markets if we assume that they're sideways for now?

And then secondly, thanks for laying out the ambition on the digital platform. And I'm sure we'll hear more about this from Mark in particular in the months ahead. But can you summarize kind of where you are today in different regions perhaps with the development or the future rollout, particularly talking about some of the Agentic AI programs that you're pushing out?

Thanks, Rory. I'll kick off with the first question on the profit performance and the profit outlook for the second half. For [indiscernible], you're absolutely right. We're in some respects, pleased that we defended a GBP 47 million decline in net fees to a GBP 5 million reduction in operating profit. But it's not where we want to be, and our ambition is to move that profit forward.

So whilst it's been stable against the H2 from last year, which you point out, we have an expectation to improve that in the second half of the year. So we have a full year consensus of GBP 46 million, which means we need to deliver GBP 26 million in the second half to do that.

If you think about the phasing of our year, we typically in a relatively flat world where things, as you mentioned, are necessarily improving from a market perspective, just through the phasing of the working day pattern, we generally have a slightly better second half than first half. So logically, we would expect to be slightly better in the second half than the first half just on the working pattern.

But as you quite rightly point out, we've made good progress through the first half of the year building on the work we've done previously on managing our cost base. And we've given guidance on consultant headcount in the second half certainly for the next quarter, we expect that to be pretty flat. So we expect to see the cost base come down in that world. But we continue to make progress in our structural prog, we do expect the cost base to come down over the next 6 months as we crack on those.

I mean to be honest, as you know, it's always hard to give guidance out there beyond a few weeks. I mean we've been through a relatively critical period on our return to [indiscernible]. We're quite pleased with that. As you've seen, we're in line with where we were last year overall and where we expected to be, but activity has come back at levels that we were expecting as well. So we had a decent 6 weeks or so, but there's still quite a bit of work to do. And as you know, March is an important month for us, and this is the big month in our Q3.

So putting all that together, we're fine with where the market is today. We made a decent start to the second half. Cost base is in good shape. I expect it to come down a little bit through the half as we crack on with our programs. And overall, we're comfortable with where the market position is, which is the GBP 26 million for the second half.

Second question was around the Hays digital platform where we've made some substantial progress actually over the last 6 months. And Mark -- I'm sure Mark will take the opportunity to talk you through our ambitions, and they are considerable in that area. But we have made really good progress, which has been quite pleasing. But we are building our own technology, and that's core and fundamental to our strategy in the world of technology.

We have invested over many years in our CRM system, which is our own, our candidate database, which is our own and our VMS system, which is our own. We acquired a business called 3SS many, many years ago, which is one of our -- we feel a differentiator as well. So we're building our own technology, and that's helpful because we can manage the rollout of that. It's less expensive and also upgrading it is a low risk. We have updated our CRM system and are rolling out globally. So it's live across the whole of Asia Pacific, and we'll be rolling a new instance of CRM system in the second half of the year. That gives more flexibility to embed AI agents into our workflows, and we are live across many parts of the business now with a number of those agents, which is really quite encouraging.

We're seeing quite a lot of reduction in admin burden, as you would expect. So for example, the meetings application that I mentioned in the script, save about 20, 30 minutes of admin time for each individual candidate or client interview. That in itself is clearly helpful. But actually, the bigger win is the quality of structured data that we're starting to see and how we improve that data in our own arch and match algorithms.

I think it's a really exciting part of the journey we're on. And I think that over time will be a key competitive advantage of how we can manage that. So really exciting stuff going on. I think there's a real opportunity to how we invest and use AI in the business, and we're really starting to bring that life and I'm really quite encouraged about it. But I know Mark will have a really good opportunity to talk about that hopefully later in the year, and we can really bring it to life with some really good examples.

Yes that makes sense I think we'll kind of to about candidates using AI to write CVs and then companies using AI to read and project CVs. You're trying to take a slightly more kind of thoughtful and data approach, which makes sense.

I think that's right, Rory. I mean we see in the world of AI is evolving quickly. But we see many opportunities to see how we can help our consultants be even more productive in how they go about their daily tasks and how we can improve data in the organization, but not just for ourselves but also for our clients as well.

But at the heart of it, we still believe the human being is a really, really important part of the equation. That's ultimately why people will come to recruitment agencies to have that human contact. But it means also that we have to be ambitious in how we use AI to help our people become even better at how they do their jobs and provide even better service to our clients.

Now we're going to take our next question. And the question comes from the line of Andy Grobler from BNP Paribas.

Just a couple for me, if I may. Firstly, on Temp fees, which were down year-on-year in the first half and quite a way below, I guess, where they were in fiscal '23. Can you just talk through the changes there and the extent to which that is like-for-like or whether it is driven by mix?

And then secondly, in Germany, where not much seems to have changed at the beginning of the year, are you seeing any signs of activity improving as a result of the fiscal stimulus starting to work its way through into labor markets?

Thanks, Andy. I'll pick up the question first on Temp, and are we seeing any -- what are we seeing there? And are we seeing any sort of structural changes, I guess, was the key question. You can see that Temp & Contracting has continued to be more resilient across the business than Perm, as you would expect. And I think that's both the cyclical pressure is less and clients continue to want to engage and to hire on a temporary and contracting basis. But we also think it's supported by long-term megatrends in the world of work. And I think that's for us, a key part of our strategy to become greater exposed to Temp & Contracting over time as that demand continues.

So you can see that in a number of our countries around the world where we're continuing today to grow strongly in Temp & Contracting. And I highlighted Spain as a really good example where we're up 32% in the first half. That is because there's a huge opportunity in that market to build a structurally bigger business in Temp & Contracting.

In terms of the market forces, we're seeing relative stability from a Temp margin perspective. I think we were down about 20 basis points year-on-year. And if I look at that over maybe a 5- or 6-year period, it's been pretty stable market by market. So any real reduction we've seen in the Temp margin over time has largely been a mix effect around the group. But we've been in the sort of 14%, 15% range now for -- if I go back to 2018, 2019, we've not seen a material shift in that at all.

Clearly, one of our focuses in Temp & Contracting as it is in Perm is to move up the value chain. And we continue to look at that and to drive that and to focus on higher skilled, more specialist roles, and that's a key part of our strategy. And we're getting on and executing that. And you can see the benefits of that coming through in the business as well.

So whilst volumes were down in Temp & Contracting year-on-year, they were pretty stable through the half. We have some encouraging trends in Australia. Parts of the U.K. business has started to move forward on a Temp basis. And clearly, then we've added Germany with some headwinds there.

But I think overall, I'll come back to Germany in your second question. Our return to work, as I mentioned on the call, was pretty solid overall with Australia and New Zealand, U.K. and Ireland slightly ahead of where we were expecting to be, Germany a little bit behind.

So I'll pick up the question on Germany and are we seeing any improving trends and any evidence, I guess, of the fiscal stimulus and whether that's starting to flow through into our client behaviors.

I think we've -- as I mentioned, we've had an in-line return to work in contracting. Temp is a little bit behind. Why is that? We're still seeing a soft market in Automotive, and that's the reason why our Temp business return to work is a little bit behind where we would normally expect it to be. Contracting volumes are in line. And we're still seeing the hours issue that we saw in Q2 in our January numbers and so far in February. It's a consistent theme for Q2. So we've not seen any reverse of that trend yet.

When we've looked into the detail of where we see that hours weakness, it's very much concentrated in our clients in the public sector and in the construction infrastructure and energy sectors. And I look at the concentration of that, it is very much in those pockets of business, which are quite significant ones for us. We have some material clients there. It's been part of our successful pivot over time to focus on those areas because there's a lot of job creation.

But it's clear that clients in that sector are holding on to capacity. And logically, that should hopefully benefit us over the longer term. I think I've said it before, I'm much more comfortable having made the placements themselves, and I'd be more concerned if the volumes were significantly lower than they are. But for now, the hours trend hasn't started to change.

[Operator Instructions] We're going to take our next question. And it comes from the line of Karl Green from RBC Capital Markets.

Two questions from me. Firstly, just on France profitability, which I think you said was still loss-making in the first half. Can you indicate roughly what level of incremental fees would get you back to breakeven in that market with the current kind of run rate cost base? That would be helpful. And then secondly, just in terms of the four country exits in recent months, I appreciate they're going to be pretty small, but can you indicate roughly what the combined fees of those countries were? And is it fair to assume that collectively, they were loss-making?

Thanks, Karl. I'll pick up the question on France first. So in the first half, we lost about GBP 3.5 million in France, and that was before any allocation of central overhead. So it gives you a sort of a feel for where we are.

Now the cost base has come down through the first half, as you would expect, as we've cracked on and done plenty of work in bringing the cost base down both in the front office areas and in the back office areas. And we still got stuff going on there, and we've still got actions on the ground now, which will benefit us further through the second half of the year. So it gives you a feel for what the gap is from a P&L perspective.

I'd like to say that gap is slightly lower than GBP 3.5 million now because of the cost save measures that we've done. But it's relatively -- it's been a disappointing first half. I do think we're going to have a better second half of the year, and our ambition is to be back into a breakeven position in our Q4.

Hopefully, that gives you a feel for what's going on in France. I think your second question was around our businesses that we closed. And the businesses that we closed in the last few months were in Chile and in Colombia, they closed back in July. And then we closed our businesses in Mexico in January and in Thailand was in December.

I think if you look at those overall, they're relatively small businesses, as you mentioned, Karl, in aggregate, they are around about GBP 7 million or so of net fees per annum, so pretty small. So not huge businesses, but they're still part of the broader perimeter. And I think we've done an awful lot of work trying to understand the market dynamics and 95% of the world's specialist recruitment market is addressable in around 20 to 21 countries. So -- and we are in those. And so the smaller perimeter, where certainly we don't see a huge long-term opportunity, each of those businesses was loss-making and not contributing overall. So we felt it was the right thing to do to refocus the business on the core, and we'll continue to review that portfolio going forward.

Dear speakers, there are no further questions for today. I would now like to hand the conference over to James Hilton for any closing remarks.

I'd like to thank you all again for joining us this morning. We look forward to speaking to you next at our Q3 results on the 16th of April.

Should anyone have any follow-up questions, myself, Kean and Prash will be available for the rest of today, and we look forward to seeing our investors over the next couple of weeks. Thank you.

This concludes today's conference call. Thank you for participating. You may now all disconnect.

Good day, and thank you for standing by. Welcome to the Has Trading Update for the 3 months ending 31st December 2025 Conference Call.

[Operator Instructions]

Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Kean Marden, Head of Investor Relations and M&A. Please go ahead, sir.

Thank you, Nadia. Good morning, everyone. Thank you for joining us today, and Happy New Year to anyone we haven't spoken with yet in 2026. I'm Kean Marden, Head of Investor Relations, and I'm joined here today by James Hilton, Chief Financial Officer, to present Hays Q2 '26 results.

Before we begin, please be aware that this call is being recorded, and the replay is 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 by new information, future events or otherwise. I'll now hand you over to James.

Thank you, Kean. Good morning, everyone, and thanks for joining us today. I'll present the key points and regional details of today's trading update before taking questions. As usual, all net fee growth percentages are on a like-for-like basis versus prior year unless stated otherwise, and consequently exclude our operations in Chile and Colombia, which as we previously communicated, closed in June 2025. Group net fees decreased by 10%, with Temp and Contracting down 8% and Perm down 14%. Strong consultant net fee productivity growth and cost discipline has broadly offset our lower net fees. And as a result, we expect pre-exceptional operating profit in our first half to be around GBP 20 million, including year-on-year increases in the U.K. and Ireland and Australia and New Zealand, and in line with consensus expectations.

I'd like to highlight the following key items from the results. Temp and Contracting net fees decreased by 8% as volumes remained solid but were impacted by lower average hours worked in Germany during the quarter. Group Temp and Contracting volumes decreased by 7% year-on-year, including Germany, down 9%; U.K. and Ireland down 12%, ANZ down 8%; and the rest of the world, up 1%. Perm net fees decreased by 14%, driven by a 14% decline in volumes with the group average Perm fee flat. We continue to manage our consultant capacity on a business line basis. And despite challenging markets, our actions delivered 6% year-on-year growth in average consultant net fee productivity in Q2, including notable increases in the U.K. and Ireland and in ANZ. This continues the encouraging trend we have demonstrated through FY '25. And on a seasonally adjusted basis, productivity has now increased for 9 consecutive quarters.

Consultant headcount reduced by 1% in the quarter and by 15% versus prior year. We will deliver circa GBP 80 million per annum structural cost savings by the end of FY '29, comprising the GBP 35 million delivered in FY '25 and the additional GBP 45 million target we communicated at our full year results. We've made strong progress towards the latter with circa GBP 15 million annualized savings secured in H1 '26, and our non-consultant headcount exited the quarter down 5% year-on-year. The group's net cash position was around GBP 40 million, which reflected normal seasonal inflows and the timing of month-end payments and was in line with our expectations. Payments in the period included GBP 4.6 million in dividends and GBP 1.2 million purchase of shares for employee incentive schemes. DSOs were maintained at 37 days.

I'll now comment on the performance by each division in more detail. Our largest market of Germany saw fees down 14%. Temp and Contracting net fees decreased by 13% with volumes down 9% and a further 4% impact from negative hours in mix. Temp and Contracting volumes remained solid overall. However, the modest decline in average hours worked through the summer accelerated further during Q2, driven by cost control measures within our public sector and enterprise clients, largely in the energy and infrastructure sectors. These sectors had hired in anticipation of fiscal stimulus, hence, our placement volumes have remained resilient, but hours worked softened in the quarter after federal budget approval was delayed. In Perm, conditions remain challenging and fees decreased by 20%. At the specialism level, technology and engineering, our 2 largest specialisms were down 10% and 23%, respectively. Accountancy and Finance was down 22%, and Construction and Property performed strong once again with 36% net fee growth, driven by our focus on infrastructure and the energy sector.

Consultant headcount decreased by 3% in the quarter, and by 14% year-on-year. Despite our ongoing focus on resource allocation, consultant net fee productivity decreased by 1% year-on-year in Q2, impacted by the reduction in average hours worked. In U.K. and Ireland, fees decreased by 9%. Temp &and Contracting and Perm broke down by 9%. Temp &and Contracting net fees were steady through the quarter, while Perm remained challenging. Fees in the private sector declined 5%, while the public sector was down 16%. At the specialism level, Technology, up 4% moved back into positive year-on-year growth for the first time since Q2 '23, and while Construction and Property and Accountancy and Finance decreased by 12% and 10%, respectively. Enterprise continued to perform well with fees up 3%. Consultant headcount decreased by 2% in the quarter and by 22% year-on-year. We have taken decisive action over the last 12 months to improve consultant net fee productivity with growth accelerating to 15% year-on-year in Q2, and have made good progress in improving operational efficiency.

As a result of these actions, the U.K. and Ireland returned to profitability on a pre-exceptional basis in H1 '26. We'll provide further information at the interims, detailing how we've returned to profitability but a key driver has been our greater focus from our consultant on high skilled roles consistent with our 5-lever strategy. As a result, year-on-year growth in average candidate salary accelerated from Q1 at 5% in Q1 to 8% in Q2 in both Perm and Temp and Contracting. In ANZ fees decreased by 1% year-on-year, with activity improving slightly through the quarter. Although Temp and Contracting decreased by 3% year-on-year, momentum improved during the quarter, and Perm net fees up 2% moved back into positive year-on-year growth for the first time since Q1 '23, driven by enterprise, executive, resources and mining and the banking sectors. The private sector increased by 2% with the public sector down 6%.

At the specialism level, Construction and Property and Technology were flat, Accountancy and Finance decreased by 1%, while office support was up 1%. The Australia net fees were flat year-on-year with New Zealand tougher at minus 15%. ANZ Consultant headcount was down 1% in the quarter and by 10% year-on-year. Driven by our focus on resource allocation, consultant net fee productivity growth accelerated to 9% year-on-year in Q2. As a result of these actions, we delivered good year-on-year profit growth in H1 on a pre-exceptional basis. As with the U.K. and Ireland, a key driver of our profit recovery has been our greater focus from our consultants on high-skilled roles. As a result, year-on-year growth in the average salary of our Perm placements accelerated to 5% in Q2. In our Rest of World division comprising 26 countries, like-for-like fees decreased by 11%. Temp fees decreased by 2%, but Perm was tougher and declined by 17%. As a reminder, our total actual growth rate includes the impact from our previously communicated actions to close our operations in Chile and Colombia in June '25. In EMEA ex Germany, net fees decreased by 12%. In France, our largest Rest of the World country, market conditions remained tough with fees down 21%. Our actions to address productivity and costs are being delivered on plan, so we expect an improved performance in H2.

Southern Europe was stronger with Portugal and Spain, up 16% and 7%, respectively. And Poland returned to year-on-year growth and was up 3%. In the Americas, net fees decreased by 10%. The U.S. and Canada were down 9% and 13%, respectively. LatAm, down 8% was again challenging. Asia net fees decreased by 3% with mixed for improved activity overall through the quarter. Japan declined by 3%, but we continue to drive good growth in our Temp and Contracting business. Mainland China grew by 3% and Hong Kong by 26%. And in December, we announced the closure of our operations in Thailand. For rest of the world as a whole, consultant headcount was flat over the quarter and down 14% year-on-year.

As you may recall from previous calls, we have several initiatives underway to build a structurally more profitable and resilient business, underpinned by our culture and talented colleagues worldwide. Before moving to current trading, I wanted a few moments to update you. Amidst challenging markets, we are executing well against our strategy and continue to make significant operational progress. Consultant fee productivity has increased for 9 consecutive quarters and was up 6% year-on-year. Within Temp and Contracting, net fee growth was positive in 5 of our 8 focus countries in Q2 with standout performances in Spain, up 31% and Japan up 21%. We delivered a resilient net fee performance with enterprise clients in Q2. Net fees decreased by 3% year-on-year with good growth in the U.K. and Ireland and ANZ, offset by contract losses in North America and Switzerland.

As we've previously shared with you, our initiatives to improve the consultant net fee productivity in real terms through our 5-lever strategy and structurally lower our cost base will be key drivers of profit recovery. H1 reinforces our confidence in this view. Pre-exceptional operating profit is expected to be circa GBP 20 million, down GBP 5 million year-on-year, despite a 9% or GBP 45 million net fee decline with the U.K. and Ireland back in profit and Australia and New Zealand up year-on-year. Our programs to structurally reduce our cost base are performing well, and we secured circa GBP 50 million of additional annualized savings in H1 and expect to make further material progress in H2. Moving on to current trading and guidance, and I'd highlight the following. Given ongoing macroeconomic uncertainty and reduced average hours worked in Germany, our new year return to work will be particularly important in FY '26, and we are closely monitoring activity levels.

We were pleased once again with our net fee productivity through Q2 and believe our group consultant headcount capacity is appropriate for current market conditions, and therefore, expect it to remain broadly stable in Q3 as we balance focused investment in high-performing and potential business lines with improving productivity in more challenging areas. We will continue to structurally reduce our cost base to position Hays strongly for when end markets recover. There are no material working day impacts anticipated in Q3 and Q4. And overall, while it is difficult to predict timing, we know our markets will recover. When they do, we remain confident that we are well positioned to benefit materially.

I'll now hand you back to the administrator, and we're happy to take your questions.

[Operator Instructions]

And now we take our first question. The question comes from the line of James Rowland Clark from Barclays.

Just on the top line, it looks like trends are running a little lower than expectations as you exit the first half and head into the second half. I think consensus is down low single digit for the second half. Is that fair? And do you think that's achievable? And then my second sort of related question to that is, are the current levels of activity, when in this year or which quarter in this year, this calendar year, would you expect to return to breakeven or positive net fee growth?

And my final question is on the adjusting operating profit. I think as you guide to GBP 20 million in the first half, but consensus is at GBP 50 million for the second half, that implies a GBP 30 million of EBIT in the second half. Can you just talk about the sort of bridging items to get into that, given that the top line looks like it's a little under pressure?

Thanks, James. I'll try and pick each one of those in turn. So I mean, yes, we delivered decline in net fees in Q1, and that was slightly behind that minus 10% in Q2. I think the material swing factor between Q1 and Q2 was the working hours in Germany. I think in our other larger businesses around the world, we actually saw some positive movements between Q1 and Q2, notably Australia, which improved versus the first quarter and actually getting back into the year-on-year growth in Perm was pretty encouraging, and we saw forward momentum in Temp. And it's pretty mixed around the world. But I mean, it was probably a percentage point or 2 behind our expectations.

I think on the other hand, though, we've actually outperformed and delivered better on the structural cost savings than we expected. We expected our consultant headcount to be broadly stable this quarter, which it has done. So that was in line with where we expected it to be. But we've made better progress on the costs. When you put that all together, our profits at circa GBP 20 million, we've offset most of that top line weakness year-on-year through the cost initiatives. So GBP 20 million is broadly where we expected to be in the first half.

In terms of the second half and what we expect for that, I mean, it's really quite difficult at this time of year to be accurately predicting the top line. As I mentioned in the current trading, the return to work over the next 6 weeks is critical. We always see a drop in Temp and Contracting volumes over Christmas and we track how that rebuilds over the next 6 to 8 weeks to see how much of that we will rebuild and how quickly. And that's a material sensitivity to the second half. And I put on top of that this year, the working hours in Germany is a sensitivity for the second half as is Perm activity itself and whether we drive enough new job registrations and interviews in Perm over the next 2 months to deliver what we need in Perm. So there's a lot of moving parts, James, for the second half of the year.

So it's pretty difficult for me to accurately predict when the business returns back into year-on-year growth. But what we've seen in some of our businesses this year is positivity around the world. And I would say that where we've seen supportive conditions and macro economic conditions, take Spain as a good example. We've had a really strong quarter in Spain, and year-on-year growth off the back of a really good year last year. That's an economy running at 2.5% GDP and you can see the performance coming through in a business like that. So I think a lot of it depends on the wider world as well. Regarding second half from a consensus perspective, we've got a consensus at the moment, which is about GBP 48.5 million, something like that for the full year, which means clearly, we've got to do a slightly better second half from a profit perspective than the first half. It's really quite difficult for me to predict the moving parts at the top line. I expect to continue to make progress on the cost savings in the second half and that's within our [ gift, ] and we're making good progress on that. So I expect it to deliver a good result in the second half.

Really, though, logically, we do normally have a better second half than first half due to working days. So whilst we provided, we see some stability and return to work in line with our expectations and we see Perm activity come back at levels we saw pre-Christmas than we've got -- that's a realistic number for us. And clearly, we'd be talking differently if we didn't think that was our expectation.

And the question comes line of Simon Van Oppen from Kepler Cheuvreux.

So I have 2 questions. The first one is taking your growth rate at quarter end into account, which was in line with the overall quarter of minus 10%. How do you look at, yes, the consultant headcount for the remainder of the year? So how should we look at consultant capacity for the remainder of your fiscal year? And secondly, can you give a bit more granularity on Germany and France by segment or by Temp and Perm, and also by sector, so which end markets are performing better versus those that are underperforming?

Thanks, Simon. I'll take the first one on consultant capacity in H2. Relatively simplistically we're pretty happy with where we are as per guidance. And so next quarter, we expect it to be broadly stable. And therefore, for the second half, I expect it to be broadly stable unless things change materially from where we are now. And as I've just highlighted, clear, we're in a relatively key part of our second half now. So provided we performed in line with our expectations. I'd expect that to be pretty stable over the half. Doesn't mean that we won't see some mix changes between that because what we're doing continually is investing in some parts of the business and we may be scaling back in others. But I think net-net, I expect things to stay pretty flat because we're happy with the overall level of capacity for the markets we've got today.

In terms of performance, within Germany and France by sector. The standout performance in Germany was in our Construction and Property business. We had strong growth there of north of 30% year-over-year. That was the clear standout. I think we've continued -- you see clearly seeing some impact of working hours in our results this quarter. We actually saw the start of that in the previous quarter, but it's clearly accelerated in this quarter. When we've looked all of the covers of where exactly that is, it's very clear that the client base in our public sector and some of our enterprise clients, both of which when they have leanings towards the infrastructure and energy sectors, that's where we're seeing the weakness in working hours. Several of those clients have hired hard in our bands of government-led projects and government-funded projects. They're holding on to those contractors, so the volumes are there, but the hours haven't come through and they're managing the costs as those -- the funding of those has perhaps been slightly slower than they had expected. So we'd rather have the volume in the not that's a positive. Clearly, the hours is a headwind, and we've seen that this quarter. But that's where we've seen some challenges.

I think we've spoken in the past around engineering and clearly, our engineering business, which was down 23%, continues to be impacted by a subdued automotive sector. So we have a high leaning towards that. Although I would highlight that the automotive sector now is only around 8% of our business in Germany. And actually, if you look at the mix overall in Germany now, if we're starting to build some significant businesses in defense, for example, 2% of our business is in defense, 7% in Construction & Property in the Energy & Infrastructure sector itself, and about 5% of our business. So hopefully, that gives you a good feel. Perm, clearly, in Germany is pretty challenging, down 20%. We had a tough quarter in Q1. We're continuing to see slow decision-making as we are across most of Northern Europe which is very different, as perhaps Southern Europe and Eastern Europe, which are clearly more supportive. If I move on to France. Our business in France has been challenging. It's been a particularly tough market.

Our business in France is about 75% Perm, 25% Temp and Contracting. Temp and Contracting continues to be resilient. It was modestly down year-over-year. So we have seen a little bit of slowdown in our contracting business there. Really clients being hesitant to make decisions and commit to projects. Clearly, Perm has been impacted quite broadly. Paris has been really challenging, and the regions has been slightly more supportive. We have a big business in office support and junior finance in our French business. That's been really difficult. Those businesses are just not getting on and making decisions in the Perm markets. It's really hard getting decisions over the line. We've seen a long time higher. Business confidence is very low.

We've clearly had challenges from a macro perspective in terms of the government policies and getting budgets approved, et cetera. So the whole business environment in France is very challenging. And I think we're seeing that across broadly across the industry. I don't think it's a Hays issue. I think it's a market problem. We're not sat on our hands though, and we're busy reshaping that business, we're working hard to take some of the cost out of that business, both in the front office and the back office and those plans are performing well. So I expect a better performance in the second half.

And then the next question comes from the line of [ Doug Alcamuti ] from Morgan Stanley.

Just 2 quick questions for me, please. So firstly, the enterprise business still looks more resilient, but net fee growth was a little bit weaker sequentially. And so it sounds like that was almost entirely driven by the contract losses in the U.S. and Switzerland. Are you seeing a tougher competitive environment to win and retain this business? Or is there nothing more really to read into there? And then secondly, could you just remind us what level of one-off costs you're expecting for the second half?

Thanks. I'll start with the enterprise question. And we were down slightly this quarter, having had several quarters of strong growth in enterprise. We -- I think we were up 4% in Q1 and we were down 3% in Q2, almost, if I just put on RPO contract, which we lost sadly in September, that had a swing of about 5% on its own. It's our biggest RPO contract in North America, which has clearly impacted the business in the States and overall, our enterprise business. Actually, we've got a really good pipeline. We're pleased with how that business is performing. We've got a good pipeline of work coming through. With all these things, clearly, sometimes you win a contract, sometimes you lose a contract. So we're working hard. We're bidding on work selectively. We've got a good win rate. We've got a good pipeline coming through. So I do expect the business to move forward in the second half. So I'm not overly concerned about that.

Second question on one-off costs. It's really difficult for me to estimate that in H2. Clearly, in the first half, we've got about GBP 10 million exceptional costs, we drove about GBP 15 million unrealized savings. So it's difficult for me to predict exactly what it will be in the second half. maybe a similar level again. I would say, at this stage. But clearly, there's some moving parts to that. And a lot of it depends on timing and also depends on where it is. Some parts of the world are significantly more expensive than others to actually make changes. So it really depends on timing and how quickly we get there and where it is. But broadly, I expect to have a similar level of exception in the second half.

And the question comes from the line of Steve Woolf from Deutsche Bank.

Just one to follow up on that comment on the U.S. contract that was lost, given it was your biggest. What was the customer feedback? So why you might have lost that, whether it was again price service or just a change of heart by the company taking it in-house? And then secondly, just on Germany, with those reduced hours, I appreciate saying volumes are essentially the same, slightly down. But are you seeing any evidence of a flight from candidates who are moving in search of higher hours elsewhere? Just any thoughts there.

Thanks, Steve. In terms of why that was lost, it was put out to tender as these things are. We've been a long-standing client, and they put that out to tender and met with someone but their decision is their decision. I'm not going to speculate on what drove that. We performed well on that contract in many years, a long-standing client, disappointing to lose it, but that's life in some respect. In terms of Germany hours, and what's really driving that, Steve, I think, is the key. We are still, by far, the largest provider of contractors in Temp in Germany. And we still have the virtuous circle of having the best opportunities for our candidates because we have the best access into the best companies and the best jobs. So I don't think we've seen flight of talent.

We have seen -- and this is much more of a longer-term trend. We have seen more candidates choosing to split their time and do 2 part-time contracts. And that's been a trend that we've seen in the German market now for several years and post-market employment introduction in sort of late teens. That is part of the market that we're operating now. I don't think that's been a driver at all with what we've seen in the last few months. So I think what we've seen in the last few months has been much more directly correlated specific sectors within energy and infrastructure.

So if I look down at all of our clients, client by client, where we're seeing the negative hours trend, it is a very, very clear pattern in those sectors and clients, particularly in the public sector who are able to manage their own budgets and their own funding. So that clearly hits us this quarter.

But as I said that earlier, I'd rather have the volume in there and the placements secured. And with a fair following wind, we'll benefit that over the longer term.

The question comes the line of Simon LeChipre from Jefferies.

Just one for me on the cost savings. So you commented on the GBP 15 million annualized savings by the end of H1, but can you clarify the actual savings contributing to the GBP 20 million EBIT in H1? And how much do you expect for H2, please?

Yes, so the GBP 15 million annualized savings is what we've delivered through this half. In terms of the actual half and the full year, in-year cost benefit we expect to be about GBP 30 million or so in year benefit from a P&L perspective. And it will be pretty broadly split between the 2, slightly more than the first half, slightly less in the second half, about 17.5% in the first and 12.5% in the second just on timing of that as we clearly get the annualization of the GBP 35 million that we saved in the previous financial year.

Now clearly, what we save in the second half to a certain extent, depends on how much cost saves we deliver in the second half, but clearly, the annualization of that is relatively low or sort of the P&L impact of that is lower in the second half, but we do expect to get some benefit in the second half from those actions as well.

And we'll take our next question. And the question comes from line of Karl Green from RBC Capital Markets.

Just going back to the average hours worked in Germany. James, I think you talked about the infrastructure and energy sectors where they've hired hard. I suppose the question is they wouldn't have done that if they weren't fairly confident that the funds -- the infrastructure funds wouldn't come through or fiscal stimulus funds rather wouldn't come through eventually. So is that the sense you've got that the -- although the timing of those fund flows might be uncertain, there is an inevitability to the average hours in those spaces going up once the action starts to materialize? That's the first question.

And then the second question, a much broader one. We kind of -- here we are again, we've got this European malaise that just keeps pushing a wishful recovery to the right. To what extent do you think there's a change in the mood in the industry about potential consolidation? It must be the case that it's going to be harder for consultants to jump ship or set up on their own for all the reasons that we think biggest guys are going to keep getting bigger and taking market share. What's the latest mood music around M&A basically?

I'll pick the first question, Karl, on the -- is the hours impact to timing issue rather than step down that's going to be there for the longer term. It's difficult for me to comment on that. And I'd probably like to wait and see for the second half of the next couple of quarters. I mean, logically, there is an element of logic there that they wouldn't have held on to the volume and wouldn't have recruited so heavily, and there may be an element of timing in that. But I'd like to wait and see over the next couple of quarters, how that trends. And I'd like to think that we see some longer-term benefit.

But I won't call it until I see it. I think you know me well enough to be prudent enough on that, to wait and see how that pans out over the next couple of quarters. In terms of M&A and consolidation, I mean, clearly, the whole recruitment market has had some challenges over the last 2 or 3 years. This has been a very unusual period of economic performance across the world. And we've seen it sequence starting in the States over 3 years ago. Europe held up for longer, but clearly, it is going to be the last out of this downturn. And -- but it's not everywhere. You can see in our performance that Southern Europe has maintained a strong performance and a strong economy. Spain and Portugal, we've continued to perform really well there and we're growing well, but it shows what an economy that does 2.5% GDP growth does for recruitment business.

And I get asked a lot of the time, is this a structural thing? Is it a cyclical problem? And whilst the world changes in the world of jobs always changes, new job categories get created, old job categories come and go. It shows that when we have a supportive macro backdrop, we can perform really well and drive business forward and grow, which is what we intend to do. We see huge structural growth opportunity in Temp and Contracting around the world as businesses continually look for flexible solutions. Candidates want flexible careers. They want to move jobs more. So the macro drivers that we talk about, the mega trends in the industry and the world of work, I don't think it's gone away. But we've been battling in this world for the last 2 or 3 years now where it's been political shocks, geopolitical uncertainties. We had government in fiscal pressures and having to cut funding across the world. And that's created a lot of uncertainty in businesses and a lot of uncertainty in candidates. My own view is that won't last forever. Two things will happen.

Economies will normalize over a period of time and people get on with their lives and start making their choices of how they want to be for the next 5, 10 years. And people will move jobs. And I think we're starting to see some parts of the world coming through that. And I think this -- so I can't really speculate on consolidation or M&A, but we're very clear on what our strategy is as an organization and what we're going to go and do and execute on that.

Thank you. Dear speakers there are no further questions for today. I would now like to hand the conference over to your speaker, James Hilton, for any closing remarks.

Thanks, Nadia. If that's all for questions today. Can I thank everyone for joining the call? I'd like -- look forward to speaking to you next at our interim results on the 27th of February. And should anyone have any follow-up questions, Kean and myself will be available to take calls for the rest of the day. Thank you.

This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.

Good day, and thank you for standing by. Welcome to the trading update for the 3 months ending 30th of September 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Kean Marden, Head of Investor Relations and M&A.

Thank you, Sharon. So good morning, everyone, and thank you for joining us at the end of the busy week. I'm Kean Marden, Head of Investor Relations. And I'm joined here today by James Hilton, Chief Financial Officer, to present Hay's Q1 '26 results.

Before we begin, please be aware that this call is being recorded, and the replay is 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 on this call regardless of whether these statements are affected by new information, future events or otherwise.

I'll now hand you over to James.

Thank you, Kean. Good morning, everyone, and thanks for joining us today. I'll present the key points and regional details of today's trading update before taking questions. As usual, all net fee growth percentages are on a like-for-like basis versus prior year unless stated otherwise, and also exclude our operations in Chile and Colombia, which as we previously communicated, closed in the prior year.

Group net fees decreased by 8%, with Temp and Contracting down 5% and Perm down 13%. We experienced a normal recovery in post-summer activity levels and trading was stable on a seasonally adjusted basis through the quarter. Our September growth rate of minus 8% on a working day adjusted basis was in line with the quarter overall. Perm exited down 14%, while Temp and Contracting remained more resilient and exited down 4% on a working day adjusted basis.

Driven by strong consultant fee, productivity growth and good cost discipline, group pre-exceptional operating profit was broadly stable year-on-year in Q1, including year-on-year increases in UK&I and ANZ and overall was in line with our expectations. I would highlight the following from our results. In our Temp and Contracting business, net fees decreased by 5% with activity levels and volumes rebuilding through the quarter in line with normal seasonal trends.

Group Temp and Contracting volumes decreased by 8% year-on-year, including Germany down 9%; ANZ down 9%, UK&I down 12% and Rest of World, down 1%, which includes strong fee growth in several of our focus countries. Perm net fees decreased by 13%, driven by a 13% decline in volumes with the average group Perm fee flat. Perm job flow and activity levels have returned to pre-similar levels in the majority of our markets, but placement volumes remained subdued due to longer than normal time to hire.

Our Enterprise Solutions business was again strong, and we delivered 4% year-on-year net fee growth in Q1, successfully providing a consistent global approach to how we engage with our clients, how we contract with them, and how we deliver services, provides opportunities to capture more share of client spend by growing geographically and by cross-selling our suite of services. We continue to manage our consultant capacity on a business line basis. And despite challenging markets, our actions drove year-on-year consultant net fee productivity growth of 7% in Q1, including notable increases in the UK&I, ANZ and in Germany.

This continues the encouraging trend we have demonstrated through FY '25. And on a seasonally adjusted basis, productivity has increased now for 8 consecutive quarters. Consultant headcount was reduced by 4% in the quarter and is now down 15% versus prior year. Our program to deliver GBP 80 million per annum in structural cost savings by the end of FY '29, which comprises the GBP 35 million delivered in FY '25, and the additional GBP 45 million target we communicated at our full year results continues to progress well, and our non-consultant headcount exited the quarter down 17% year-on-year.

Consequently, our cost base on a periodic and constant currency basis has improved to around GBP 74 million from GBP 75 million in Q2 -- sorry, Q4 '25. The group's net debt position was around GBP 40 million, which reflected normal seasonal outflows and timing of month-end payments. DSOs were maintained at 37 days, in line with prior year.

I'll now provide comments on each division in more detail. Our largest market of Germany saw fees down 7%. Temp and Contracting fees decreased by 5% with contracting volumes remaining solid overall with fewer finishes offsetting lower starter volumes. We saw a modest year-on-year reduction in average hours worked through the quarter, which was offset by improved margin and mix. In Temp, volumes and starter numbers remain weak, although automotive headwinds steadied over the summer and the sector contributed only around 8% of the division's total net fees in the quarter, which is down from around 14% 2 years ago.

In Perm, conditions remain challenging and fees decreased by 18%. At the specialism level, Technology and Engineering, our largest 2 specialisms were down 1% and 16%, respectively. Accountancy and Finance was down 15%, but Construction and Property performed strongly once again and net fees increased by 44%, driven by our focus on infrastructure and the energy sector. C&P now represents 7% of Germany net fees, and we are well positioned to benefit from the government's longer-term infrastructure commitments.

Consultant headcount decreased by 2% in the quarter and by 13% year-on-year, driven by our ongoing resource allocation and back-office efficiency initiatives. Consultant net fee productivity increased by 6% year-on-year in Q1 and non-consultant headcount reduced further. In U.K. and Ireland, fees decreased by 9%. Temp and Contracting fees were down 10% year-on-year and was subdued through the quarter, notably in public sector.

Perm was down 9% and remain challenging, but stable. Fees in the private sector declined by 5%, while public sector was tougher, with fees down 20%. At the specialism level, Accountancy and Finance and Technology decreased by 7% and 2%, respectively. Construction and Property decreased by 12% and Enterprise performed well with net fees up 16%.

Consultant headcount decreased by 7% in the quarter and by 25% year-on-year. We have taken decisive action over the last 9 months to improve consultant net fee productivity, which increased by 14% year-on-year in Q1. And have made good progress with driving operational efficiency. As a result of these actions, pre-exceptional operating profit in the U.K. and Ireland increased year-on-year in Q1.

In ANZ, fees decreased by 5% year-on-year. While market conditions remain challenging, activity levels were stable through the quarter. Temp and Contracting decreased by 2%, although the conversion of Perm activity remained challenging and Perm net fees were down 9%. The private sector was down 3%, with the public sector down 7%. At the ANZ specialism level, Construction and Property declined by 4%, Technology was down 2%, Accountancy and Finance decreased by 5% and Office support was flat.

ANZ consultant headcount was down 4% in the quarter and down 11% year-on-year, driven by our focus on resource allocation, consultant net fee productivity increased by 5% year-on-year in Q1. And as a result of our actions, pre-exceptional profit in ANZ increased year-on-year. In our Rest of World division comprising 26 countries, like-for-like fees decreased by 10%. Temp fees decreased by 4%, but the majority of our Perm markets remain challenging and fees were down 14%.

As a reminder, our actual growth rates include the impact from our previously communicated action to close our operations in Chile and Colombia. In EMEA, ex Germany, net fees were down 13%. France, our largest Rest of World country, remained tough and loss-making with net fees down 20%, but our actions to address productivity and costs are being delivered on plan. Southern Europe was stronger with Spain and Portugal up 18% and 5%, respectively.

In the Americas, net fees were down 10%. And following a subdued summer, but stronger September and improving outlook, the U.S. and Canada were down 6% and 18%, respectively. LatAm was down 14%, again, challenging, but stable. Asia net fees increased by 2%, with mixed, but improved activity overall through the quarter. Japan grew by 5% as our strategy to develop local language recruitment services alongside our existing multinational clients drove record net fees in Q1. Mainland China and Hong Kong increased by 2% and 1%, respectively, and we delivered good growth in our Temp and Contracting business. For Rest of World as a whole, consultant headcount decreased by 4% in the quarter and was down 13% year-on-year.

Moving on to current trading and guidance, and I'd like to highlight the following: Given ongoing macroeconomic uncertainty, we expect near-term market conditions to remain challenging. And although we have limited forward visibility, we continue to believe this is likely to persist through FY '26. We were pleased with our net fee productivity through Q1 and believe our consultant headcount capacity is appropriate for current market conditions and therefore, expected to remain broadly stable in Q2 as we balance focused investment in high-performing business lines with improving productivity in more challenging areas.

We'll continue to structurally reduce our cost base to position Hays strongly for when end markets recover. And there are no material working day impacts anticipated in either H1 '26 or in FY '26 overall. So overall, while it is difficult to predict timing, we know our markets will recover. And when they do, we remain confident that we will benefit materially.

I will now hand you back to the administrator, and we are happy to take your questions.

[Operator Instructions]

And your first question today comes from the line of Andy Grobler from BNP Pariba.

Just a couple from me, if I may. You mentioned that profitability has improved in the U.K. and Australia. And I just wondered whether you could talk through your expectations for phasing of profits through the first half and the full year?

And then secondly, in the U.S. a bit weaker through the quarter, but September was stronger. Can you just talk about kind of what's moving -- what are the moving parts within that business, 1 and 2. What the underlying market feels like at this point?

Great. And I'll kick off with the first question on the U.K. and Ireland and Australia profitability. So yes, we were pleased with the profit performance in both of those regions in Q1. In fact, this time last year, our U.K. business was slightly loss-making. So it's good to return that back into profitability. Why is that? We've worked really hard at driving consultant productivity across both of those regions. You can see from the statement that they were both heavily up year-on-year, notably in the U.K., actually, it was up 14%, which is significant.

And also, we've done an awful lot of work to rightsize the infrastructure of those businesses in the U.K. We closed a number of offices that we felt that we didn't need to be in. In Australia, we closed 2 or 3 offices as well. Both businesses, we've worked hard in back office areas and then our overall management structure. So the overhead cost base is in much better shape.

In terms of the profit phasing, I think we'll probably have a similar result in Q2 in both of those regions to where we were in Q1. I don't think there's any real change in the top line momentum in those businesses at the moment. And I think the cost base in both is in pretty decent shape. It may come down slightly in the U.K. and Ireland. But I think overall, it will stay fairly consistent through the half year.

Into the second half, it's probably a little bit too hard to call only from a profit perspective. Just I mean, really, it will be dominated by top line and whether we see any material change there. But overall, for the group, as we highlighted in the statement, we're pretty pleased with where we've landed from a profit perspective. So whilst top line is down 8% overall at the group level, we're there or thereabouts on profit in Q1, which got us off to a decent start to the year.

Just picking up the second question on the U.S. So we had a bit of a subdued July and early August, actually came back stronger in later August and then a better September. So we actually were up 3%, 4% in the U.S. in September, which is where I expected the business to be, i.e., in modest growth that we're not seeing hugely improving market conditions there, but the outlook certainly, it's not deteriorated at all. And we grew through the second half of last financial year. We had a bit of a dip in the summer with holidays and so on and so forth, but we actually had a pretty decent September. Outlook for October and November is a pretty similar level.

So I expect to see modest growth in the next quarter, but not material growth in the U.S. It's not pretty difficult to call much further out than that, but I think things have picked up how we were expecting to. We do have a decent pipeline of some large contracts there, but the timing of those is always quite uncertain. So we'll get those when we get them. But so far, we're trading pretty well over there.

Your next question comes from the line of Simon LeChipre from Jefferies.

Two questions for me. First of all, just looking at consensus for this year, it points to a bit more than GBP 50 million EBIT. I mean, mindful it's still early in the year, but I mean, how do you feel about this, given the start of this year?

And secondly, on France, could you comment on the magnitude of the losses and also, if you could detail a little bit the action plan you are putting in place? And basically, do you need to see market trends improving to be profitable again? Or you're confident that your cost action would bring you back to profitability in this market?

Thanks, Simon. First question on full year consensus, I think it's around GBP 51 million, as you highlighted. We're very early, obviously, in the year, we're 3 months in. And I think there's a lot of road ahead of us to get over the next 9 months to see where we get to. At this stage, Simon, I'm comfortable with where the market is. I don't really see it either way, to be honest. I think, as I said before, we've had a decent start to the year from a profit perspective, but it's very, very early days. I wouldn't want to get drawn on that number too much.

Second question, on France. As I said, it's been a tough quarter over there. We've had a tough 12 months, to be honest. It's a really challenging market as you probably are well aware as a Frenchman, it's a difficult macro there. There's a lot of instability. There's a general lack of business confidence. And we, like many of our competitors, are finding that as a very challenging market to operate in.

Our business in France is around 70% -- 70%, 75% Perm. So clearly, it has an impact. We were down 20% year-on-year in the quarter, which is representative of that. And we're not seeing any pickup at all. So top line is still very challenging. We've done a lot of work on the cost base. But as you'll also be aware that takes some time in France. We've been through a social plan, which is time-consuming and is necessary to make this kind of corrections that we need to our cost base. But the plans are going well. I expect that to land in the next quarter. And when it does, the cost base should come down to get us back to a position where we were around the breakeven. But in the first quarter, we lost about GBP 1.5 million.

Your next question comes from the line of Rory McKenzie from UBS.

Rory here. Two questions, please. You've already given the exit rate in September. But could you talk about how some of the KPIs within that look at the moment Temp and Contractor starters versus finishes, maybe anything on Perm job flow? I guess, September can kind of set the tone for the rest of the year. Just interested to know if there's anything worth reading into in terms of client behavior after the summer.

And then secondly, while markets overall sound broadly stable, I guess, consultant headcount was down 4% in the quarter, which maybe was a bit faster than expected. Can you just talk about the kind of balance within that of where you're removing heads and maybe the number of areas where actually you're seeing net adds and how that adds up to a flattish picture from here?

Great. Thanks, Rory. I'll take the first question upon KPIs and what we've been seeing through September. I'll kick off with Perm, and our Perm job flow is back to where we were in May and June. So it has picked up. We always see a drop off through July and into August, as you can imagine. But our September job flow in the vast majority of markets and actually, overall, at the group level, is consistent with where we were through the second part of Q2 -- sorry, of our Q4. Remember that we did see a slowing down through our Q4, but we're consistent with levels through May and June.

And then same on interview numbers, actually, interview numbers are pretty consistent as well, but it's still challenging to convert all the activity into placements. And I think that's reflective of still challenging business confidence. So we are seeing activity come through. Everyone's busy. There's plenty of work going on getting that work over the line is still challenging in Perm in the majority of market. It's not everywhere.

I mean we still have pockets where we're seeing pretty decent conversion. Southern Europe is a really good example. We had a really good performance in Spain and in Portugal. In Japan, we had a good quarter as well, a record quarter, in fact. So it's not everywhere, but the majority of markets are still pretty challenging.

Temp, we're seeing starter numbers again, consistent with where we were at the back end of the last financial year. And overall Temp volumes are slightly behind where we were in June, but that's normal at this stage because it takes a little bit of time to rebuild. But I expect that rebuild to continue now over the next few weeks and get -- normally by late October into November, we should be back at where we were in June. And I expect to be there or thereabouts. There's a couple of pockets of weakness, which we've highlighted in the statement.

Temp in Germany is still subdued. I think a lot of that weakness has played through, though, as you've seen in the statement, our exposure now to the Temp automotive sector is materially lower than where we were a couple of years ago, but it's still a headwind for us. And I would also highlight public sector, both in the U.K. and in Australia is still challenging. And obviously, we have quite a lot of Temp business in each of those markets. But outside of that, the private sector, on the whole, feels pretty resilient, and we are back at the levels of volumes of where we were pre-summer in the private sector.

Just your question on consultant headcount, we were down 4% in the quarter, up -- to be honest, it's probably a percentage point or 2 higher than where I expected it to be, but these things are never an exact science. But what we are doing is very much balancing investment in areas where we've got high performance and high potential with still throttling back on areas where we're seeing underperformance or we're not seeing the level of productivity or profitability that we need. So it's a bit of a balancing that right now.

We are looking to expand headcount in some markets, as I highlighted before, Southern Europe, Japan, Asia, 1 or 2 other markets outside of Japan. We are adding headcount selectively. And also in some of our bigger businesses as well, such as the U.K. and Australia, there's very much parts of the senior professional areas, some of the technical areas in life sciences and some elements of the technology businesses and contracting, we are investing in. So it's not a one-size-fits-all at all at this stage. It's very much nimble market-by-market selection of where we really want to add heads. But I don't want really to see headcount fall much further than it is now for the markets we've got.

Great. And just a follow-up on the KPIs. Can you just talk about any changes in the salary offers that you're seeing? I think within Perm, the wage, the kind of tailwind is now 0% for you. So is wage inflation really kind of stalling at the moment?

Yes, I think that's fair, Rory, actually. We had a flat year-on-year average Perm fee. I think that's the first time in 3 or 4 years that we've seen that come off to about a flat result. Interestingly, if you see the RET data that just came out this morning in the U.K., they stay a very similar kind of trend in the U.K. specifically, but there's little to no wage inflation coming through now, and I think that's reflective of the work we're in.

Your next question come from the line of Zach Al-Qaryooti from Morgan Stanley.

Two questions, please. Firstly, regarding the remaining GBP 45 million cost savings that's targeted, could you help us quantify the amount of exceptional costs you expect to come with that? And then secondly, the GBP 40 million of net debt is a little more elevated than we expected. Could you maybe elaborate on the moving parts there and help us understand how much was just driven by timing of cash flows at the end of the month that should reverse?

On the exceptional costs, it's really hard to call how much that will be over because clearly, it's over a time line of 3 to 4 years. And it also depends on where it is. I wouldn't want to get drawn too much on it. What I would highlight is, last year, we saved about GBP 35 million in structural costs, and we incurred a GBP 30 million exceptional. So it wasn't quite one for one, but it wasn't a million miles away. So as I stand here today as a broad rule of thumb, I think that's probably not a bad yardstick to guide by. But clearly, there's a lot of sensitivity around that depending on where it is and exactly what decisions get made. But I think that's probably a sensible guideline on that.

In terms of the GBP 40 million net debt, is a little bit behind where I was expecting it to be. We normally do see a cash outflow in Q1. It's normally more around GBP 50 million or so. Clearly, this time is a bit higher. It's about GBP 75 million. Part of that actually was that we slightly overshot in June. If I look back to where we landed at GBP 37 million, it was probably GBP 15 million better than I was expecting. And we've seen that reverse through this quarter.

I don't see any underlying issues in the debt ledger. The DSOs are still fine. Aging is fine. I'm not seeing any that stretching out. It really is a seasonal impact. And I expect to recover that position back through the next quarter, which is what we did last year, and I expect to do the same again.

Your next question today comes from the line of Karl Green from RBC Capital Markets.

Just a couple of remaining questions from me. You talked obviously about the cadence of profitability in the U.K. and Australia between H1, H2. Just at the group level, very broadly, what kind of percentage split would you expect to see based on current consensus between the third and second halves?

And then the second question. Just going back to this issue of consultant productivity and redeployment, it might not be a stat that you've got to hand, but what would you hazard a guess as to the proportion of consultants currently seeing productivity increases versus those seeing decreases in productivity. I guess the underlying question is, what's the residual tolerance of paying here in terms of preserving capacity to benefit when the upturn comes.

While that second one is going to be a difficult one to answer. But I'll have to go with the first one. It's probably slightly easier, so we can. I mean, historically, we generally have slightly better profitability in the second half of the year than in the first half. But clearly, we've been through some pretty choppy waters over the last 2 or 3 years. We haven't always seen that seasonality. But we do have more working days in the second half.

Put simply, in the first half we have combination of summer and Christmas and in the second half, we have Easter. So you generally have a little bit of tailwind into the second half, but that's clearly dependent on a relatively stable top line. But if the world was stable when we saw stability through the year, expect generally to make about GBP 10 million more profit in the second half than in the first half.

On the second question, well, that's a challenge. I'd have to sit there and look at all sort of 6,500 consultants and figure out who's up and who's down. But I mean, joking aside, what we are doing is managing our business on a very detailed basis business line by business line. The absolute, resolute focus is making sure that all of our performance is understood, that our business is performing. We are hitting the kind of metrics and measures that we would expect to in all of our businesses.

And many of our businesses are performing well with very good productivity in fact, record productivity in some areas, and those are absolutely the businesses that we want to double down on and grow because if we're performing well, we're performing profitably. And the market outlook is good, and it's an area of long-term potential. Absolutely the right thing to do is to double down on that. Do we still have some pockets of weakness in the business? Yes, we do. There are still some areas of performance that aren't quite where we are, and each one of those is a careful, considered decision on whether we kind of stick or twist really on it, Karl.

Is it something that we feel is doing well in the market is in and therefore, we should keep and therefore, hold them and preserve or not? And each one of those is a market-by-market call with its own individual set of circumstances. So I can't really answer that at a macro level other than to say we've been incredibly surgical and very, very thorough and detailed in how we look at the business and how we're managing it.

That's clear. I mean maybe phrasing it slightly differently and easier. We shouldn't interpret sequential headcount stability as a willingness at the group level to see productivity dip necessarily because of the churn or because of the redeployments, et cetera?

We still expect to see productivity growth, Karl, not just in the next quarter, over the longer term. I think that's how we measure the improving quality of business mix over a period of time, and that will be a really important part of how we rebuild profitability over the long term. Put simply, we see consultant productivity growth, be in inflation, has been really critical to the long-term profitability of the business and rebuilding that, and we'll continue to manage it that way.

Your next question comes from the line of James Rowland Clark from Barclays.

I just had a follow-up on the productivity question from Karl just a moment ago. You mentioned in the release that the U.K. has seen the strongest year-on-year gains. And I just wondered if that is a pure reflection of the mix of sort of taking out your least profitable consultants? Or is there anything that you've learned from the U.K. that are specific to the market that you can perhaps roll out across your other consultant base? Was the U.K. perhaps just lagging on productivity versus the other markets and have some catch-up. So I guess any color there specifically as to why it's been so strong and kind of be replicated across the group.

I think it's probably slightly more of the latter than the former, if I'm honest, James. I think we did have a bit of work to do and a bit of catch-up to be done in the U.K. And part of that was that we've had really tough markets in the U.K., particularly in a number of our Perm areas, and we had to address some of the levels of performance and productivity and make corrections. You can see that our consultant headcount is down 25% year-on-year. And we've had to make some really tough decisions and hard decisions in order to improve that.

And I think it's come through really well. I think the team has done an absolutely fantastic job actually of managing that really well. That business is now back into profitability, which is really, really important for us. The productivity is in a pretty good place. Now I'd put it against most of the other businesses across the group in terms of fees per consultant which is where it should be and where we expect it to be and where we expect it to remain. So I think we've done a really good job there.

Interestingly now, we are looking at pockets of investment in the U.K. So there are some good markets out there where we think performance is good. We've got the opportunity to get back on the front foot, which is great. There are still some areas where we're not quite happy with the performance, and we might have to take a few corrective measures as well. But overall, I think we'll be in a pretty stable position on U.K. headcount, maybe even slightly up in the next quarter, but we'll see.

Thank you. [Operator Instructions] We will now go the next question. The question was withdrawn, he has just come back apologies, one moment please. Your next question comes from the line of Simon Oppen from Kepler Cheuvreux.

I would like to zoom in on Germany a bit more. Quite interesting to see that your Construction & Property business performed strongly, whereas the broader market in Germany remains subdued. And could you give a little bit more color on the dynamics that you are currently seeing in Germany and the sentiment among your clients there?

Thanks, Simon. I think thanks for highlighting that. I think we've been really pleased with the action taken by the team in Germany to pivot the business quickly and effectively away from challenging markets, which we've been discussing for some time in autos, for example, into where a lot of the opportunities are and our successes in Construction & Property are testament to that. I think done a really good job.

And actually, if you look at the size of that C&P business today, it's virtually as big as our auto business. I never would have thought that 3 years ago. So it just shows how much actions have been taken. And actually, we're positioned quite well for our biggest clients there, a combination of public sector and in private sector across infrastructure. We do a lot of work in the utilities and energy sector and increasingly now into the defense sector.

And I think we're positioned well for what should hopefully be some stimulus and some tailwind from the infrastructure projects that the government has outlined and is now starting to fund. So I think the team have done a great job of pivoting away from some of our sort of historic businesses towards new areas of opportunity. So well done to them.

As there are no further questions, I will now hand back to James Hilton for closing remarks.

Thank you. If that's all for questions today, thank you again for joining the call. I look forward to speaking to you next at our Q2 results on the 14th of January. And should anyone have any follow-up questions, Kean, [ Prash ], and myself will be available for the rest of the day to take any calls. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.