Hays PLC

LSE:HAS

Earnings Call Transcript 2018-Q4

[Operator]

Hello, and welcome to Hays Q4 Trading Update Call. My name is Amelia, and I'll be your coordinator for today's conference. [Operator Instructions] I am now handing over to your host, David Phillips, to begin today's conference. Thank you.

[David Phillips]

Good morning, everyone, and welcome to the Hays quarterly update conference call for the 3 months ended 30th June, 2018, the fourth quarter of our 2018 financial year. I am David Phillips, Head of Relations -- Investor Relations, and I am here with Paul Venables, the Group Finance Director.Before we start, please be aware that this call is being recorded, and the recording may be accessed using the number and code provided in the press release. You should be aware that the discussions may contain forward-looking statements that are based on current expectations or beliefs as well as assumptions of our future events. There are risk factors, which could cause actual results to differ materially from those expressed in or implied by such statements. Hays disclaims any intention or obligation to revise or update any forward-looking statements that have been made during this call, regardless of whether these statements are affected as a result of new information, future events or otherwise.I'll now hand you over to Paul.

[Paul Venables, Group Finance Director & Executive Director]

Thank you, David. Good morning, everybody, and thanks for joining us. I'll summarize the highlights of today's update, cover some of the key themes and discuss the regional performances before taking your questions.As usual, all net fee growth percentages I give for the quarter will be on a like-for-like basis versus prior year.Firstly, highlights of the results. We delivered a record quarterly net fee performance with group fees up 15%, which is 14% adjusted for working days. During the quarter, there was one extra trading day versus the prior year due to the timing of Easter. We estimate this had a 1% positive impact on group net fees, comprising 2% positive in Germany and 1% in both the U.K. and ANZ.I'd highlight the following key features in the results: first, our performance was broad-based with 24 of our 33 countries delivering double-digit growth, and no fewer than 16 all-time record performances.Second, growth was driven by excellent growth in our Perm business, up 20% versus Temp which grew by 11%. In fact, the U.K. was the only market where Temp outperformed Perm. Third, we delivered another market-leading performance in Australia with growth in net fees of 16%, extending its run of consecutive growth quarters to 16, the best result since 2008.Four, Germany. Germany delivered a record quarterly performance with strong growth of 16%, driven by superb growth in our Perm business, up 42%.Five, in the U.K. and Ireland, we returned to growth with net fees up 5%, driven by good 10% growth in our Temp business in part due to easier comparatives.Six, performance in the Rest of the World is excellent, up23%. Within this, Asia and the Americas were the standouts, delivering excellent growth of 25% and 35%, respectively. Europe ex Germany was up 18%.Seven, we expect our full year operating profit to be marginally ahead of current market consensus, which we understand to be GBP 240.9 million.And finally, we ended our financial year with net cash of GBP 123 million, an excellent outcome reflecting good credit control. This and underlying trading will enable the board to consider increasing shareholder return significantly in line with our dividend policy.I'll now comment on the performance by each division in a little more detail.ANZ. Our ANZ division represents 19% of group net fees, delivered another strong performance, its best since September 2008, with growth of 14% or 13% adjusted for working days. Our Temp business is up 13% and Perm up 16%. Private sector growth remained strong at 15% and public sector growth was 11%. This was driven by another market-leading performance in Australia with net fees up 16%. Growth was broad-based across all major specialisms in States. In New South Wales and Victoria, which together represent 58% of Australian business, net fees grew by 13% and 26%, respectively.Queensland, our third-largest state, saw growth of 21%. And Australia -- South Australia delivered 20%.At the specialism level, Construction & Property, our largest business in Australia, grew by 9%; IT accelerated to 23%; HR was up an excellent 29%; Office Support, 15%; and Accounting & Finance, 5%.And in New Zealand, which represents about 6% of ANZ, net fees fell by 13%.Consultant headcount in ANZ decreased by 3% in the quarter, in part due to timing, and was up 10% year-on-year.Germany. Our largest market in Germany, which represents 25% of group net fees, grew strongly at 16% or 14% on an underlying basis. This represents an all-time record quarter, with June delivering a record net fee month.Contracting was up 11%, with volume growth over the quarter slightly below our expectations, but growth accelerated in June.Temp growth was strong at 17%, and Perm delivered a super performance, up 42%.Growth in each of our largest specialisms, IT and Engineering was 11%. Performance in our other specialisms continued to be excellent with Accountancy & Finance at 40%; Construction & Property, 13%; Life Sciences, 17%; and Sales & Marketing, 26%.And as anticipated, after significant half 1 investment, the consultant headcount was flat in the quarter and was up 13% year-on-year.U.K. and Ireland. In the U.K. and Ireland, which represents 24% of the group, net fees returned to growth of 5% or 4% on an underlying basis. This is in part due to easier comparatives, especially following the negative impact of IR35 changes in the public sector implemented in April 2017.Public sector net fees were up 12%, and our larger private sector growth, which represents 76% of our U.K. business, grew by 3%.Our Temp business delivered good growth with net fees up 8% -- sorry, 10% or 8% on an underlying basis, and our Perm market overall was flat. We're also seeing modest sequential growth in Q4, a better reflection of true underlying growth rate in the U.K. is to look at second half growth, which is up 2%.All trade -- regions traded broadly in line with the overall U.K. business, with exception of London and the South West and Wales, which is up 9% and 8%, respectively, and Scotland and the Midlands, which was down 7% and 5%, respectively. Ireland delivered another strong performance with net fees up 23%. And across our 5 largest specialisms, the net fees in IT accelerated and grew by 15%; Office Support, 11%; Construction 6%; and Accountancy & Finance, 2%. Education continues to face tough market conditions and declined by 4%.Consultant headcount in the division was down 2%, both in the quarter and year-on-year as we continue to focus on consultant productivity.Rest of the World. Our largest division in the Rest of the World made up of 28 markets and representing 32% of group net fees delivered excellent growth of 23%. 15 countries delivered all-time record net fees. Europe ex Germany was up 18%. Our largest market of France grew 15%, completing its fourth year of double-digit growth.Growth in our third largest Rest of the World business, Belgium, was excellent at 23% as was Russia, up 48%.After flat Q3 FY '18 growth, Spain rebounded to deliver strong 19%. However, Netherlands was down by 1%.Asia delivered excellent growth of 25%. Our 2 largest markets, Japan and China, grew by 12% and 37%, respectively, with Hong Kong up 57%. Singapore remained tough, down 16%.And in the Americas, we also saw excellent growth, with net fees up 35%. Our largest market, the U.S.A., accelerated to 40%, whilst Canada was up 41% and Brazil 22%.And overall, consultant headcount in division was up 2% in the quarter and 13% year-on-year.Cash flow and balance sheet. We delivered an outstanding cash performance in the quarter and ended our financial year with net cash of GBP 123 million. As a reminder, our policy is to build a net cash position of about GBP 50 million, after which we anticipate that any free cash flow generated every year above -- over and above this level will be distributed to shareholders assuming a positive outlook in the form of a special dividend. The board is, therefore, in a position to consider increasing shareholder returns significantly.And moving on to current trading guidance, I'd highlight 6 points: conditions in the vast majority of our international markets remained strong. In the U.K., marketing conditions remain broadly stable overall.Secondly, on an underlying basis, the group net fee exit rate was broadly in line with the quarter as a whole. Regionally, the U.K. exit rate was below the underlying U.K. growth rate, whilst Germany exited the quarter above its underlying growth rate. Looking forward, we will start to overlap tough growth comparators, especially in Australia and Europe, including Germany.Three, we expect full-year operating profit to be marginally ahead of current consensus market expectations, which we understand to be GBP 240.9 million.Fourth, during the year, we've opened 7 new offices and expanded the capacity of a further 15 to facilitate further growth in our International business.Five, as previously guided, our consultant headcount investment was more selective in the quarter, as we focused on driving productivity. Group consultant headcount was flat in the quarter and up 8% year-on-year. Looking forward, we expect sequential headcount growth in Q1 FY '19 to be up between 3% to 5%, including our normal graduate intake.And six, exchange rate movements remain a material sensitivity to the group's reported results. And if we re-translate FY '18 profit to current sterling spot rates, we estimate a negative GBP 3 million operating profit currency headwind for FY '19.In conclusion, this has been another strong and record quarter of broad-based growth led by International business, which represents 76% of group net fees. Trading conditions in most international markets are strong, and we continue to invest significantly in key growth markets, where we see structural and market share opportunities, notably Germany, France and the U.S.A. Our focus remains on driving profitable net -- profitable cash-generative growth and leveraging the largest and most balanced global platform in our industry.I'll now hand you back to the administrator, and we're very happy to take your questions.

[Operator]

[Operator Instructions] And we have the first question come through the line of Paul Checketts.

[Paul Daniel Alasdair Checketts, Director]

I've got three questions please, Paul. The first is around Germany. Would you be able to go in a bit more detail about why you think the contractor growth was slower in the quarter? And were that to continue at lower rates than the Perm side, which of course, it will, but at such a pronounced level, would you see a negative mix effect on conversion rates there? And perhaps, lastly on Germany, what are you expecting to do in the coming quarter on headcount? Is that flat too? And then, the second is on Australia. I see a very strong quarter, but the comps are quite tough in the coming quarter. Maybe you'd give us a feel for what your data is telling you about upcoming trading? And then, the last was on wage inflation. I know it's been stubbornly low for a long time, and it does take long time to come through. Have you seen any change in that in the recent weeks or months?

[Paul Venables, Group Finance Director & Executive Director]

Thanks, Paul. Again, if I miss any of those points, please come back to me. I think we'll start on Germany. The interesting thing is there is no obvious trend underlying now. Clearly, I've had a look at each of the specialisms in each of the component parts. And the largest, I guess, miss within the contracting space is in IT. There's no doubt within that, we had a [ week ] plus week in April and across May. And if you look at that cross-slot period of time, there were 3 bank holidays, 2 of which were in mid-week. And we just struggled to get some momentum. And then some facts underpinning that is if I look at the whole of the Contracting and Temp base over that period of time, April and May, we lost about 0.1 of an hour, and while that might not seem much, when that's across more than 12,500 contractors and Temps, it clearly has an impact. So no obvious market part, no obvious change in jobs being registered or candidates. And I think the pleasing part, which we tried to be explicit, I mean, as you know, my style is to always take head on and witness the results. I think the pleasing part of it was we had a very strong June. And of course, that's quite important because certainly in the contractor and Temp space and the length of assignments that we have in Germany, the more important thing is what's the additions. We had a strong June, and that I think bodes well going into the next quarter. In hindsight, had we have got those at the end of April and May, then we'd have had better results. But as the underlying growth for the quarter was 14%, the exit rate for Germany is 16%. And I think that's not a bad position to be going into the next quarter. Moving on to -- if growth continued at this sort of level, what will the impact be? I think the good thing is that we have the headcounts in the right space. So we're up 13% exiting. We will increase headcount in the next quarter. We have our normal graduate intake. We also have hiring plans that we have signed off. And when we talked about the 3% to 5% increase in group headcount, the 3 largest elements of that will be in Germany, in Australia and in France. So we will be increasing headcount, and my guess is that will be, whether it's 3% or 4% or 5% in this quarter, but that will be in place, included in the normal graduate part of it. And I think therefore we exit in a decent position, we would like -- clearly like to have a bit more volume. The guys did a great job on the cost base. And therefore, we've kind of exited profit-wise in a position that I kind of half expected 2 or 3 months ago. Moving on to Australia, you're right to say that comparatives are tough, but the best way I can describe that is that in May and in June, we have the 2 best performances since September 2008. Let's not -- remind of our September 2008, we have -- we had the 2 best performances. And if we repeated that in July and August and September, our growth in Australia would be in the 7% to 8% range. So if you come back to the strategy that we set out in November, we set out 4% to 9% growth on average over the 5 years. We've clearly had a superb start to the 5-year plan ahead of our expectations when we have to share the profits, when we get to the prelims, we have delivered good profit growth this year. And there is no doubt that we'll have a green against Australia. And -- but we'll go into tougher comps, and therefore, the real question is from where we are today can we drive sequential growth? I think the market's in a pretty good space. Clearly, Construction & Property is our biggest business. It's not far off -- It's just shy of 30% for that business in ANZ. And that now gets into very hard comps. And I don't expect that's going to drive the largest part of our growth. I think the IT performance was superb, and we've made significant investments in the IT space. We've gone from being a #3 player in IT 3 or 4 years ago to now being by far the largest player in the IT space in Australia. And I think there's a lot of long-term opportunities for us there. And then when you go into the second half of the year, of course the current expectations for those of you that suffer from insomnia and read lots of articles coming out of Australia is that we expect to see the election be in around the March time. What that does is we had a hiatus in the 2 to 3 months in Australia going into that election where there are no new assignments of any significance. There are certainly no new Perm in that space. And then, really if the coalition is reelected, then you come back and get back on with things, go through the change of government and the hiatus will go for a period of time. So very happy with the performance of Australia. We'll move into tough comps, but we've got a great business. We'll to continue to do a good job. And then, the final one on the missing part of the economic recovery, wage inflation, I don't think we've seen too much changes yet, but I think overall, 2 or 3 things are starting to bubble up. If I'd take the U.S. and we are not big enough, there is no -- none of the U.K. recruiters are big enough in the U.S. to be able to talk to the U.S. market. But I think we are seeing an absolute massive talent war in the U.S. And for everything I am seeing, clients are not massively focused on what they're actually paying to get all the candidates. Of course, that's a good market to drive wage inflation. And I think all of the signs there is some parts to that. I think when we come across to Germany, I think as we've said before, there is -- certainly, in IT and Engineering, there's a significant shortage of candidates. Clients are looking to invest in that space. You've seen some unionized deals, which have no direct impact on us, that are quite extensive And I do think that we will see wage inflation in Germany. And what's been quite pleasing is, in part, some of that hours I talked about earlier on, which is quite a big impact on our business of our size. Similar hours part was offset by some kind of increase in the rates that we have to charge, which is a positive. And then finally, Australia, there's a quite fascinating piece, I read about a week ago, which went through some of the -- Australia has a strange economy. And there are some aspects to it regulated where there are commonwealth law, which have tariffs. And there seem to be increases in tariffs in that space. So far, Paul, I would still stick with my -- it's about 2%, but if we're ever going to get it, it's going to come over the next couple of years because I think if you stand back, the global economy is in good shape at the moment. Our clients -- our candidates are increasingly confident. That's why you can see Perm at 20% and Temp at 11%. Clients are focused on growth, but of course, there is a political uncertainty around, which let's all hope on a global scale is kind of nicely managed because the economy is in good shape and it's only the politics, I think, can start to impact that. Hopefully, that was -- hopefully, that answered the questions.

[Operator]

We have the next question come through the line of Bilal Aziz.

[Bilal Aziz, Associate Director and Equity Research Analyst]

And just two from me, please. Paul, and just regards to Germany, and have you done any different -- and you talked about volumes slight slower than you would have hoped. Is there any difference in the fee rates, particularly on the contractor side so far this year versus last year? And secondly, perhaps a bit early to ask this question, but clearly you had significant investment this year, both in headcount and in offices. As you look into the budget next year, I know the German plan is very set in stone, but how should we think about new offices opening next year? And what potentially could fall out on the comparative base in that regard for pricing profit?

[Paul Venables, Group Finance Director & Executive Director]

Let me take the second one first, if I may, Bilal, whilst mostly the answer is kind of firmly in my head. We only mentioned the property part of it because -- and if you actually looked over the last 4 to 5 years where the world's moved back into a reasonably good economy, and clearly, we've had -- we've driven material growth over that period of time. We've clearly gone through a phase where we've been able to grow into the existing office network, and there haven't been a lot of expansions. What is crystal clear is over the last 18 months, I've signed more new leases and more expansions than I did in the previous 5 to 8 years kind of put together. And we will set out when we do the prelims what the financial impacts of that has been in the current year, but we've -- we've effectively had an increase in rental cost this year of something like GBP 4 million. Looking into next year, we've everything -- we've already signed off, which impacts next year because clearly on some profit issue you're taking some space for a period into the future. We already see an increase in cost next year of about GBP 6 million. So I think all of these are positives. The best way of looking at it is for us at the moment, as I said, the economy is in good shape. Our business is doing really well. We're driving decent leverage. And we've got lots of opportunities. And therefore, you have to have offices so you can pull employees in. You can't leave them outside of the offices or have them double-stack like you might do on a pit-stop of Formula One cars. So we need that space to be able to expand in, and we've been taking that during the year. And it is quite nice to see us opening a number of new offices because whether it is in Germany or France or the U.S. or parts of Asia, there are some really good opportunities for us to expand into. Coming back to Germany, I think I probably answered that so far, but let me just add a couple of specific things, I think on volume growth. And when I last talked, I've said that our combined contractor and Temp volume growth was about 18% or 9% -- 18% to 19%. In this quarter that has slowed, and we're certainly -- across the quarter and exiting the quarter, we're in the kind of the 15-ish percent level. And I think that will -- I think if we hold at that sort of level, then we'll have a very good year next year. The nice thing about everything for us in Germany next year because we don't lose working days. Last year, we had -- in this financial year, we had 3 less working days. Next year, we've got one additional working day, which is a positive. Secondly, we've got relatively good growth. Remember, the strategy had an average of 13% fee growth, [ primary mode ] over 5 years. So we're already ahead of that in year 1 from the fee perspective. We are exiting in a very good position. We've got a great team, a unique market position where we are as big as #2, 3 and 4 and almost 5 put together. We are #1 in most of those specialisms and #2 in accounts and finance. So there's lots of opportunities for growth. And on the fee rates, I think I did pick that one up in Paul's answer. I said earlier on that we've had less hours work that was in part offset by -- we were able to push forward some of the fee rates that our contractors were able to get and our Temps were able to get. And clearly, therefore, we get some reward on the back of that. But I think that will be more interesting as we move -- as we see what happens to wage inflation going forward.

[Operator]

We have the next question come through the line of George Gregory.

[George Nicholas Gregory, Research Analyst]

Paul, this is George speaking. Just on the latter points on the fewer hours work this year, you already touched on it in Paul's question, but then if there's anything you can add on it. Was it a derivative in the bank holidays? Is there anything structural in that, that you could see, which could be driving fewer hours worked in German contracting?

[Paul Venables, Group Finance Director & Executive Director]

I mean if you think about, there are only 3 possible answers, and then I'll give you my view. Answer number one is companies are being more cautious and tight on cost control, I see no evidence of that at all. Answer number two, contractors that are running large amounts of money are confident that they will get -- at the end of this assignment, they will get the new assignments. And therefore, you know what, I could say, it's good. Germany is doing well in the World Cup and of course it didn't -- it's good. The weather is good. And they're taking a Friday off. What is clear is these bridging days. When you have bank holidays, which are in the middle of the week, it is very easy for contractors just to say, you know what, I've got a bank holiday on a Wednesday, we have one of those in this period, or we've got a bank holiday on a Tuesday, we've had one of those in May. And then, they will take the Monday off as well. And I think intuitively, it is that which has impacted the hours more in this period of timing. It's good to see that when we got into June, which has no holidays in it, the hours improved again. So that's clearly one of the things that we always keep a track on. We keep that track in every market around the world because it's being one of the best forward indicators whether positive or negative. My view here, it's a combination of number two and three. We are finding it very easy to find new assignment for good contactors and good Temps. They are earning a large amount of money and the average contractor with us earns EUR 140,000 a year and the average Temp earns about EUR 80,000 a year. And therefore, they are taking a little bit more time off, but that will be one of the ones that we are tracking. Clearly, if there's been any change, George, I would absolutely pick that up again when we get to the prelims.

[George Nicholas Gregory, Research Analyst]

But just on June, Paul, you would say the hours worked, would you say that was back to a completely normal pattern or...

[Paul Venables, Group Finance Director & Executive Director]

No, exactly. So when we have -- one of the beauties of the systems that we put in place over the years. And FD up in Germany was superb, as he got a really good analysis, and it's kind of a classic volume price, and an hours worked analysis. So he's very clear the impact -- and I do think that's bridging days and most of that is in the contractor space because, of course, contractors are off-rate and so they may have a little bit more choice about what -- when they work, whereas Temps is in a lightly different slight position.

[Operator]

We have the next question come through the line of Chris Hartley.

[Chris Hartley, Analyst]

This is Chris Hartley from Redburn. I just had a question on your Rest of World division, please. As you're seeing great growth there, but could you perhaps give us a sense of the degree to which you are having to reinvest profits there back into those businesses to keep that growth going or perhaps if the profits can come up for the group? And then there's also -- very quickly on the Rest of the World, what do you have to do with the geographies in terms of the countries that you're in or if any plans to perhaps think about some other countries?

[Paul Venables, Group Finance Director & Executive Director]

Thanks for that Chris, and thanks for the question on the Rest of World as well. I mean one, it's been the star performer for the last 6 years now. The good news is that actually when you see the results, it is a stand-out profit performance this year. And in fact, in places -- if you take the U.S., we're not looking to drive profitability in that market. There's a certain level of profit, of course, that we need and are targeting, but most of the incentives we have in place for that management team are focused on growth, both at the fee line and at the specialism level and in cities and all those sorts of things. But I think what has been the case is that the level of growth has accelerated. It's been greater than we expected. And therefore, naturally, it's driven profitability. So if I was actually to give a star performer for the whole of this year on profit growth, it will be Asia. We've moved very, very quickly from a business making just over GBP 0.5 million every month to a business making more than GBP 1 million every month. So that's been a really good performer this year. America, U.S.A. and Canada were focused more on growth rather than profit growth. There's a lot of investment going into those businesses, both in the specialisms and in our corporate accounts business. And I think in Europe, the nice thing there is our French business, our Belgium business. These are big businesses. And they have equally delivered very strong profit growth. And I think you will see that when we show, breakout of the profitability of those businesses. Looking forward, there's clearly some of the biggest opportunities that we've got. If anything, I would prefer this year to have had a bit more headcount in Asia, though we have put some significant headcount into those businesses. Our markets of Hong Kong, which is a business I stay quite close to. We've got a great guy running that business, a great team. And we have put some significant headcount in over the last 3 months or so, but if anything, we would have liked even more over the last year. So we've got a nice mix. There's not doubt going into next year, we of course expect to get some profit growth in Germany. We will get less profit growth in Australia and New Zealand. The U.K. for fairly obvious reasons is phenomenally hard to call. And therefore, we don't expect to get that much growth, that much profit growth. And therefore, anything we get will be a bargain. And the Rest of World is trying to get this right mix of investing aggressively for the long term and driving some profits along the routes. So other than the U.S. and Canada where the investment will be material, I think in all of the other markets we can invest significantly and drive significant profitability. I have no doubt that when we come to the end of next year that again, the greatest profit performance will come out to the Rest of World region. And then on new countries, there is nothing on the stocks at the moment. I mean, one of the clear opportunities for us when we go outside of the more mature markets like the U.K. or Australia is that one, a lot of the cities where we're in, there's nowhere near saturated. So if you take France, for example, we've got excellent regional network, very happy with that. We will be adding another 2 offices this year. But outside of Paris, we are the clear market leader and that's driven a lot of our growth. And in Paris, we traditionally have one large office in the center in Haussmann, which has been really good, probably the best office that we've got -- the flagship office we've got anywhere in the group, but we are opening regional offices in Paris as well. So we would rather focus on using our revenue money and putting it into expanding in the major cities we're already in, where we'll have the significant structural growth opportunities. And then in those big cities, no different to somewhere like London, looking to open some regional offices, which can have -- can focus on slightly more niche specialisms. So well, we've really nice things I think for the whole of the specialist recruitment industry, unlike the generalist. So I think that the beautiful thing is there's massive organic growth opportunities. And I think we set that very clearly out at our Investor Day. Results show that again. And we are absolutely determined to drive significant growth of those businesses over the next few years. I think it's really quite exciting.

[Operator]

Next question in the queue comes from the line of Matthew Lloyd.

[Matthew Lloyd, Head of United Kingdom Small and Mid]

I just wondered if you had any thoughts on the Brexit white paper and the comments about freedom of movement and whether that makes you more optimistic about candidate flow in the U.K. or a little bit more worried?

[Paul Venables, Group Finance Director & Executive Director]

I'm not sure there's anything of any part of the Brexit process so far that make me feel any more confident about anything. I think the positive, Matthew, is I put this, this way around, you know the U.K. dynamics are very well. There is a massive amount of uncertainty already in the U.K. market. And I think if you take this collectively as a whole of the industry, that's been reflected in the results over the last few years. So the good news is, there's little or no material investments going into our clients, long-term investments in financial services. There's reasonable churn, which is a positive, but there's not a lot of investment going in. And therefore, it's one of these things. I think in the end whatever clarity we eventually get and that's only when the deal is done and that would be at the last second of the last hour, that starting up that will be positive unless we will collectively say why the hell did we sign up to that. So I think I don't, I mean, I haven't had the opportunity yet to read the white paper. When I'm suffering from insomnia around this Saturday or Sunday night, no doubt I will, but I'm not clear I expect any positives to come out of anything in the Brexit process until we get to the final outcome.

[Matthew Lloyd, Head of United Kingdom Small and Mid]

I can sympathize with that, but at least a little bit of free movement if people are looking for jobs. If -- let's be optimistic and let's just say that, if they have to be proving that they are coming for a job or coming to look for a job, surely an agent can find a way of capitalizing up on that.

[Paul Venables, Group Finance Director & Executive Director]

Yes. And I think that's what we've got at the moment. So the nice thing is other than -- for a lot of agencies, other than -- and actually, IT's most interesting part, clearly we grew significantly in this space. But it is getting harder to bring Europeans in the -- even in the high-end IT markets into the U.K. at the moment for obvious reasons. I think actually, Matthew, when we get through the process and we get to find out as long as the U.K. government follows a sensible approach which says, if you're a skilled person and you have a job to come to, you'll be able to come into the country, then I think that will continue to be a positive. And I do kind of think that intuitively the minute we get a deal of whatever size, that's going to be a positive for all of the recruitment agencies, including ourselves. Well, we've had a pretty decent year this year in the U.K. We've had some fee growth. We've had some good profit growth. We've grown 2% in the second half of the year. That might not be -- that's not exciting enough to shout it from the rooftops, but I think it's a pretty good performance. And all that we could do with is, is some final certainty and that will only come, I do think, right at the end. And then I do think then U.K. businesses will get on and drive some investment. And as long as we are able to bring good people into the country, I mean, at the moment -- the system at the moment, Matthew, is not helpful, because when you end up in a system where outside of Europe you hit the caps on immigration quite quickly in the period of time, that makes it quite difficult for companies to focus on. But at least now that's beginning to get the political focus. And therefore, look, I think in the end, we've got the worst in our markets at the moment, therefore, clarity has to improve. And I'm very confident when we get through that, our U.K. business will return to some significant growth.

[Operator]

We have no further questions in the queue. [Operator Instructions]

[Paul Venables, Group Finance Director & Executive Director]

I think that's all. This is a clear sign that it is good weather outside and Nadal is playing Djokovic at Wimbledon this afternoon. So some of the analysts are not on the call. I can imagine where they are today. So if that's all the questions for today, we'd like to thank you all again for joining the call. I look forward to speaking to you next at the prelim results on the 30th of August. And as normal, whether it is today or whether it's after people have listened to the call, if you have any follow-up questions, David, Charles and and myself will be happy to take those calls for the rest of the day or for next week. Thank you very much.

[Operator]

Thank you for joining today's call. You may now disconnect your handsets.