Q2 2020 Jones Lang LaSalle Inc Earnings Call

When we spoke on the first quarter earnings called the covid-19 pandemic had proliferated across the world leaving many wondering how to successfully operate on a lockdown environment with the experience of the second quarter behind us. I'm very encouraged by jail else ability to rapidly respond and adapt to the challenges presented. We concentrated our focus on three priorities and the second quarter first the safety and well-being of our employees second our clients and Bert cash management with respect to our clients. Our teams have been available during All Phases of the lockdown brilliantly advising and supporting them on best practices and procedures to ensure that their workspaces meet the safety standards and social distancing guidelines necessary for their employees to feel comfortable with yep.

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In addition, we are providing clients with thoughtful advice about how we will all need to rethink the function and design of commercial real estate in a post-pandemic future off on a personal note. I can tell you that I have never received so many thank you letters from clients before for all the great work. Our colleagues have been doing wrong.

As I remarked during the first quarter's earnings call. These are the times where we are positioned to gain market share because the outstanding culture of jll the team spirit of the Essex a highly valued by our clients home.

Moving on to cash management the entire organization showed tremendous discipline where you responded early by lowering costs and reducing non crucial Investments off applying for government support programs to prevent extensive job cuts and collecting our receivables in a very efficient manner all of these actions executed by our management teams led to record cash generation in the second quarter. It is important to note that we balanced our spend reduction without compromising our long-term growth potential.

Turning to the overall second quarter operating environment. The backdrop was obviously not favorable macroeconomic and real estate fundamentals illustrate the effects of the pandemic as signs of global declining economic activity intensified throughout the majority of the second quarter indicating the world is facing a deep recession in the office leasing Market volumes were down 60% for the quarter with decreases across all regions.

I will turn out to the discussion of our second-quarter financial performance Consolidated Revenue felt 13% to 3.7 billion and fee Revenue declined 22% to 1.2 billion in local currency adjusted net income totaled $37 for the quarter and adjusted diluted earnings per share totaled $0.71.

Leasing and capital markets were the most severely impacted service lines as the pace of transactional activity slowed as investors were sidelined due to travel restrictions mounting uncertainty and Rising economic headwinds activity in April and May was ahead of our expectations driven by a strong pre covered pipeline though the pace slowed down.

Corporate Solutions continue to show its resiliency as a scaled Global platform posting a modest 2% decline for the quarter the facility management business perform, especially well in addition to delivering on our long-term contracts. We were able to offer newly-designed products to help our clients mitigate the impacts from the pandemic on the use of the real estate footprint our mobile engineering business in the United Kingdom and parts of our interior fit-out business in Europe were the most impacted by the site closes and lockdowns resulting in the overall modest Revenue decline in corporate Solutions.

Turning to HFF. I'm happy to report that we have successfully integrated HFF into the jail our platform since the acquisition closed. We realized twenty eight million of synergies off line with our 12 months Target. The lockdown environment has helped to significantly accelerate. The integration of HFF. Our teams have been focused on identifying cross-selling opportunities learning from each other and enhancing our Superior technology platform. We continue to be bullish on the Strategic rationale of the transaction the potential for even more mean across selling opportunities and our Glide path to establishing the premier Capital markets platform within the industry now, we will hear from Karen Brennan for more details of the second quarter results.

Thank you Christian after working in our LaSalle business for over twenty years. I'm excited to join the finance team as CFO. Although these unprecedented times are creating wage this challenges. I am proud to continue the jail Legacy of our approach to financial reporting and communication which has to be consistently transparent and dependable.

Second-quarter results clearly reflected the adverse impact of the covid-19 pandemic on the commercial real estate industry. However, our top-line performance reflects the competitiveness and resiliency of our full service globally Diversified business platform. We actively managed our costs made prudent reductions in capital expenditures and Investments off and utilize government programs in Waimea and asia-pacific to retain staff all of these actions help protect our margins while positioning gel to capture market share wage and benefit from the long-term secular growth Tailwind of our industry.

As a reminder, we report variances to Prior year and local-currency unless otherwise noted.

Compared with 2019 second-quarter revenue and fee Revenue declined 13% and 22% respectively our higher-margin transactional Leasing and capital service lines where the primary drivers of the decline globally as many occupiers and investors paused activity at the onset of the pandemic to reassess their path forward month. We saw a sequential weakening in the year-over-year fee Revenue results as we move through the quarter with the most profound impact to Capital markets in June.

We have seen recent stabilization in some business indicators and in certain cases a slight uptick albeit off a low base and the evolution of the pandemic will be a key determinant of results going.

With the focus on maintaining a strong financial position in a very uncertain economic environment. We expanded our cost mitigation actions that began in the first quarter some expenses such as Monday and marketing were down well over 60% year-over-year we continue to adjust our cost structure as the environment evolves and expect to see the broader impact of our mitigation actions and not coming quarters.

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Mitigation actions and government relief programs in asia-pacific. Anemia were not enough to offset the adjusted ebitda margin pressure from lower Revenue particularly within our transactional wage has lines in addition profitability was adversely impacted by nearly three hundred basis points due to timing of incentive compensation accruals in the Americas and a few discrete items. Anemia that I will discuss in a moment consequently our second quarter adjusted ebitda declined 55% year-over-year and reflected in 8.3% adjusted ebitda margin down from 13.9% a year earlier.

Pivoting to our balance sheet. We ended the second quarter and a very strong financial position with materially lower debt levels and excellent liquidity as Christian mentioned cash investment was an elevated area of focus. We continue to refine our receivables collection practices including leveraging analytics from our recently upgraded Erp system in order to drive a meaningful improvement in our cash conversion.

The cash conversion combined with aggressive cash management deferral of us and UK tax obligations tied to government stimulus programs and a reduction in spending $150 million dollars sequential reduction to net debt, which ended the quarter at one point 1 billion.

We are focused on managing our investment-grade balance sheet to maintain significant operational flexibility.

In addition to the significant like in quarter debt-reduction, we pause dividends and share repurchases to maintain that flexibility at the end of June leverage was 1.1 time down from 1.4 times at the end of March at quarter-end. We had nearly 2.5 billion of liquidity including approximately four hundred million dollars of cash and 75% of capacity available on our 2.75 billion dollar revolver.

Our earliest debt maturities are not until November 2022.

Turning to our service lines real estate service fee Revenue declined 22% in the quarter and it was down 27% on an organic basis. All reporting systems were down year-over-year as we're most service lines the exception being property and facility management, which grew 1% in the quarter reflecting its resiliency.

Within property and facility management good underlying growth driven largely by new business wins and strengthen. Our America's corporate Solutions business with masked by headwinds from the late 2019 or Property Management business in Continental Europe as well as from our UK mobile engineering business, which declined due to client office closures the strength in America's corporate mission was attributable to new client when client expansions and a near all-time high second quarter renewal rate of 98% which speaks to our strong execution Service delivery and quality of client relationships.

We are pleased with.

Relative resiliency of the corporate Solutions business and continue to be encouraged about the long-term secular Outsourcing trend.

Consolidated leasing fee Revenue declined 43% in the quarter most notably in the Americas office sector. We compare favorably to the 60% Decline and Market office leasing velocity wage which reflects the strength of our platform as well as Investments and the higher growth asset classes of industrial supply chain and Logistics.

Capital markets fee Revenue including HFF 73 million dollar contribution declined 16% for the quarter of globally.

Excluding HFF our Legacy Capital markets T Revenue declined 47% compared with the prior-year.

Or with resilience in some markets with deep domestic Capital such as Germany and Japan our Capital markets business pipeline stabilized late in the quarter and there continues to be a longer-term trend of increased allocations to real estate with significant capital on the sidelines ready to be deployed with highly liquid debt markets.

There was a modest increase in revenues and our debt servicing business and no change to our reserve on our multifamily portfolio forbearance activity has been minimal to date.

As Christian noted, we are extremely pleased with the pace and success of our ongoing integration efforts of HFF in the first 12 months following our acquisition HFF cannot get approximately $615 fee revenue and 135 million dollars to adjusted ebitda.

I will now turn the segment performance review the quarter's results from a geographic perspective and for Lasalle.

America's fee Revenue declined 20% with Organic operations down 28% America's leasing was down 44% and America's capital markets fell 53% off early. We are cautiously optimistic on our leasing business as we saw a recent update in showings virtual and otherwise, however business activity in the near-term will be highly dependent on the progress and easing of quarantine requirements and clients reaching decisions on their go forward real estate strategies.

We saw it delays and America's capital markets activity as significant covid-19 certainty led to wider bid-ask spread and physical inspection complexities.

As referenced earlier property and facility management grew 29% in the quarter and is up 23% year-to-date driven largely by new client when corporate suggestions client expansion and pandemic response projects.

America's adjusted ebitda was down 48% year-over-year and adjusted ebitda margin was 10.8% versus 16.5% a year earlier off. The decline was mostly due to lower transactional revenue and an approximate 250 basis point adverse impact from the timing of incentive compensation of cool. I'm moving now to emia fee Revenue was lower by 27% largely attributable to the pandemic impact on our transactional businesses and our UK mobile engineering as well as the previously mentioned sale of the property management business and Continental Europe.

adjusted ebitda

Declined thirty-three million year-over-year to a loss of twenty four million which reflects a negative 8.8% adjusted ebitda. Margin. The decline in profitability was driven primarily by lower revenues charges related to losses uncertain contracts, which are nearing completion or termination other discrete items and a generally less flexible compensation structure in Europe wage offset in part by government stimulus programs targeted at maintaining employment.

Within our asia-pacific business fee Revenue decreased by 22% for the quarter the growth and property and facility management again led by new client wins and expansion of our existing Club dates for corporate Solutions was more than offset by an approximate 50% decline in our transactional businesses.

Asia-pacific adjusted ebitda declined 23% year-over-year. It's 13.1% Margin in the quarter was consistent with a year earlier as I'm gon no cost mitigation efforts and employment-related government program benefits offset the decline in Revenue.

Well challenging conditions persist in Real Estate Services. Globally. We've seen slight improvement in our transaction pipeline which coincides with a general loosening of quarantine measures. However, results will be heavily influenced by how the pandemic evolves.

Finally, I will speak to LaSalle second quarter performance LaSalle fee Revenue declined 22% in the quarter flat year-over-year advisory fees which comprised over eighty percent of the revenues speak to the stability of this business in Santa fe's were considerably lower than the prior-year consistent with our expectations. We expect minimal incentive fees in the second half of 2020 for a full year total of approximately twenty-five million Equity earnings were eleven million driven mostly by the share price increase of our co-investment and a publicly traded Reit engine.

For sales, are you I'm in total $65 billion at quarter-end down 6% from March primarily due to modest valuation Decline and currency fluctuations. Um is down just 5% year-over-year due to strong capital-raising over the past twelve months. We know that roughly 80% of our advisory fees are derived from Fear Arrangements that include evaluation or income component off.

Before turning the call back to Christian for further remarks. I would like to thank our team around the world for their contributions in this profoundly distinct. I look forward to helping Drive positive results 4th all stakeholders and the quarters and years to come.

Thank you, Karen. Economic Outlook remains uncertain reducing the ability to accurately forecast the second half of the year. We have been encouraged by the recent economic statistics and client dialogue that have shown signs of recovery those still threats, but in light of the high number of new infections looking ahead to the third quarter, we expect to operate in an environment very similar to that of the second course in the short-term. We anticipate a modest increase of activity as the world adapts to operating and a productive and safe manner even in the absence club scene.

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Is Will continuously adjust their policies in response to health threats while reactivating their operations and recovering from the pandemic at the gas station trajectory is emerging as an interim and more permanent State calling for workplace redesign workspace adjustments as well as Workforce and workflow adaptations. I'm often asked what the net impact on office demand post-pandemic will be and I find that it is too early to determine the net impact on demand of the media more longer-term. The pandemic has massively accelerated Trends which had been slowly developing or the last ten to fifteen years.

Well, it's offices used to be a series of work tests and meeting rooms. We began to see the development of offices as collaborative spaces areas where employees can come together informally and drive Innovation and creativity as well as places where they experience the culture the values and the brand of the employers this change May mean an increase in space and investment required which is obviously advantageous for jll as they are very few companies who can credibly deliver the design identify the space and the fit out of the office of the future anywhere in the world in best quality with the highest governance and ethics.

Office space will play an even greater role in driving corporate well-being and productivity and will continue to win market share over the long-term similarly wage type the short-term uncertainty real estate will remain an attractive asset class for investors and their capital.

As we look to the Future our commitment to maintaining an investment-grade balance sheet and ample liquidity to support us through seasonality and economic Cycles fuels our confidence in our ability to successfully navigate through this pandemic. I believe that the lessons learned so far a great encouragement to advance on our long-term goals of shaping the future of real estate for a better world leveraging our deep client relationships. Jll is particularly well equipped and positioned to make it very significant difference in helping to build better living and working environments laying the foundation for truly sustainable cities and communities. I'd like to close by extension my gratitude to our employees who managed to deliver solid result and it's this challenging environment. Let me move over to our Q&A portion of today's call Richard.

Neil available to answer any specific questions to the investor and occupy a markets operator, please explain the Q&A process.

Time, I'd like to remind everyone in order to ask a question, press star. Then the number one on your telephone keypad will pause for just a moment and pull the Q&A roster.

Your first question comes from Anthony alone with JPMorgan your line is open. Okay. Thank you. My first question is, you know Christian you made the comment that three Q will be a fairly, I think backdrop or something along those lines is to Q is that mean, you know, we should think about your over your growth in the same way as to Q or just it was just a general comment about just the the virus continuing to create a tough backdrop.

It was a general comment Anthony towards the overall environment. We have to operate in we don't see much difference in the third quarter to the second quarter and wage and therefore it it gives you a bit of a indication on how we will be operating.

Okay, and then as it relates to the office business if if we think about companies just you know, I don't know if they're staying put or making shorter-term decision just figure out their own businesses or what but what is the effect on just the the general commission pot for leasing in the office business of companies, you know do shorter-term boxes or just stay put like our the commission's smaller. Do they do these deals without representation or how should we think about that would be the office leasing business is is impacted by several factors. I mean obviously volumes of all significantly down and the truck home. So the lease lengths are also down and and to be specific to your questions depending on the market, but in our biggest Market that we usually get a percentage of wage.

All the overall value of the lease agreement. So if the term of the lease agreement is shorter than obviously the overall value is smaller. And therefore our fee is smaller. We saw in the first couple of months the first six months of this year terms to go down by roughly 16% compared to pre Cove it off and and that smallest obviously the income profile the good thing about the leasing business is occupiers have to do something at some point. You can only wait so long then you have to take a decision either you extend your existing contract for a short period of time before you take a big bigger decision or you take that big decision that you cannot kind of push it out indefinitely. And so that's what we have been seeing already in in the first couple of weeks of the third quarter that we saw more activity coming back because yep,

Nice are realizing this is a longer-term.

Challenge now and they have to take it to season now on their space.

Okay, that's that's helpful. Thank you. And then a question specific to HFF and also more broadly. Can you comment on retention off both in the HFF deal in an environment? Like this? Is it is it is it easier to keep people more difficult and then just also more more broadly how you approach life when the business was down like this?

Well, obviously retention challenges are correlating to the overall prosperity of a market environment. And so in this club environment people are more concerned about keeping their job than than trying to go elsewhere. So that has become significantly easier or is obviously almost completely off the table. Usually what happens is that in in really prosperous times people are prepared to take more risk with regards to the employment in in times like this. They they not only look for the best platforms, but they look for the best platforms who are also very safe and sustainable platforms. And so we tend to take advantages in those times in getting a lot of key Talent knocking at our doors and asking whether there's room phone number.

Okay, then last question if I might I think late last year you'd made a couple of very senior hires on the technology side and you had some large plans there which check if anything in terms of the thinking as it relates to technology and potential Acquisitions in that space and just deploying Capital there.

Well, actually we continue to hire quite aggressively in that area and the first quarter of this year and and we also made some great hires in the second quarter. All this pandemic has learned am not having Superior technology puts you ahead and is very valuable to our clients and and we made great progress in the last six months on our technology platform, but also very much on our own data platform and and we are continuing to focus on that very much. So what we have is being slightly more cautious is doing any kind of m&a around technology companies pricing is still very very high long as you note from the publicly traded technology companies and and and we have been as we stated as one of our priorities to preserve cash. So we were cautious on that front but our

Team total development is continue.

doing without any interruption

Okay. Thank you for that.

Your next question comes from Jade rahmani with KBW your line is open.

Thanks very much. I was wondering if you could point two factors in your mind that could drive an uptick and transaction pipelines. And also whether you experience any stores in the way pipelines were being rebuilt in July specifically in the US as some of these states that were earlier to go off lockdown have shown an uptick in cases and there seemed to be a flowing in some indicators in the last few weeks.

Yeah, I mean, let me start off with the leasing market and then I will hand over to Richard bloxham on on the capital markets side because we see slightly different behavior and these two areas on on the leasing Market side as I alluded to earlier in the first couple of months of the lockdown people were kind of a bit stunned about the situation and not much was happening which you saw with the overall Market to be down by 60% And then the what we have seen then that you know discussions restarted again, and especially in July August first couple of days, but also in July, we saw a couple of things which were discussed already before to really re-emerge seriously where we believe that now clients are determined to to come to a decision I think dead.

What we see is that business is coming to terms that this will be the environment. We are in for the foreseeable future and and so we have to adjust to that environment as in the first couple of weeks. Everybody was more kind of thinking. Oh, wow, what's going on here and was in a wait-and-see situation to see how quickly we are coming out now, we know this is this is no longer term Challenge and we have to operate in this environment. And so as I said earlier on the leasing side, you cannot wait indefinitely you have to take it off either or and and that's what we are seeing. So there's a there's a glimpse of optimism there that we will see the market picking up a little bit in the next couple of weeks and for Capital markets. I like to hand over to to Richard. Thanks Christian. Hi Jada, I think that typically in in capital markets when we get any kind of wage.

You know, make sure we've got a a six month. We're real estate investing in lending Community really review their strategies and what we have in this environment at least which is very different from the Gulf crisis is a much more resilient kind of equity and credit market. So there's there's definitely liquidity there. So when Christian was referring to a slightly different approach in the capital markets as opposed to the home markets, we're seeing the emergence of buyers and sellers who have different views on the the likely links duration impact of the environment and that creates a market wage. There's no doubt. There's a the evolution of price Discovery still bid-ask spread still exists, but is definitely beginning to close. So I think in terms of dead green shoots, there is a a constructive pipeline developing and I think we see groups that are still ultimately focused on defense strategies.

but also many that are now focused on the

Offense and maybe one additional comment to make is is kind of geographically oriented and Karen referred to this earlier in those markets where you've got strong domestic capital and uh the and or strongly developed Global Capital based on the ground as well as a government with the crisis is either, uh, a media rating or there's Confidence from the community that it's being a heading in that direction. You're seeing much more resilient, market. So I pointed to Japan and to Germany is examples of markets. We're actually you've seen very resilient performance volumes of the first half in Germany of broadly flat Japan, actually year-on-year.

HF historically had a very strong loan portfolio Sales Group. I was wondering if that business line is gaining traction and if you expect an uptick in a portfolio sales post-labor day as one of your peers recently set

Yeah, I think absolutely I would I would I would preface that by saying that the The Lending environment in the last ten years has been much more moderate than it was in previous Cycles. So there isn't the inbuilt very high octane ltvs that existed prior to the global financial crisis, but that said, you know, there are specific areas. And in fact, we're undoubtedly, you've got you've got cash flow challenges from The Operators and that is in turn beginning to on Earth distressed situations particular. Yeah, I would I would highlight areas of the retail industry and the hotel industry and we have a team we we don't only trade loan during difficult choices. So we got a very well-established team and uh, the the pipeline is certainly building but I wouldn't say that. Uh, this is this is by any means a a fully developed Trend yet.

With respect to the comment that was made durations. I was wondering if that was specific to the office sector where you talked about the terms being down sixteen per month and historically Office Buildings because of their long durations in the financial markets have been somewhat of a proxy for fixed-income, you know, a lower east duration would definitely have a negative impact from a you know, Credit Credit worthiness standpoint and probably would have an impact on cap rates. You have any thoughts around them back to the office secular from that? I would Echo Christians earlier comments that you know, the future direction of office is something that's very much in flux. What I can absolutely say is that long-duration leases in offices continue to be highly sought-after and we've got, you know, a great examples around the world of long leases where there's very competitive bidding wage.

still very freely available and not freely available, but available credit and I think that

Feels comfortable inevitably in an environment where you end up with short of these terms you're going to have a slightly changing investor profile. I don't think it'll become less interesting. But it may change a little bit the type of owners who are interested in investing in short-term flexible least style assets as opposed to long-term ones, but there's going to be a room in the world for both.

Thank you for taking the questions.

Your next question comes from Steven Sheldon with William Blair your line is open.

Good morning, and welcome Karen first really encouraging trans and property and Facilities Management in the America this quarter. So can you talk to some about public education fair over the rest of the year since you have a stable base, especially with I think you said 98% retention and visibility into contracts that have and will potentially go live. And can you also check the ability to onboard new contracts in this moment?

Sure, Steven. I have Neil answer that question.

Yeah. Hi Steven. Yeah, we're very pleased with the resilience of the property and FM business in in the US particularly, but around the world. The pipeline was a little slow in the quarter as you might imagine given the that we were locked down. It was it was difficult to to actually go and and and view real estate portfolios and so on but it's it's now that pipeline we've got we've got line of sight to Thursday. I'm which stronger pipeline now as Christian said the, you know, we expect the propensity to add source to increase during times like this. We're already seeing it. So yeah, very excited about the wage, uh potential in the business as it goes forward.

Got it. That's so cool on a Mia in the profit pull back there. I'm guessing a good portion of that is less variable expense given the producers there have higher base compensation. So I guess how much of a call back with that component relative to the contract losses and additionally, you know, once in his ability to do you have in in a media into continued government relief like you saw in the second quarter

Well, I think Amelia is as always something where you have to almost look country-by-country as you rightly say we said we had some government office support in the mirror roughly fourteen million, which was helpful because the labor markets especially on the continent and not very flexible and that helped us to maintain our highly talented people on top of that. We had an emir a couple of contracts in specifically in our faith business which would difficult contracts before covert and and cover it didn't make them better. And so we we had to take some provisions on those Thursday. We are finalizing them now and and so that should be behind us but overall parts of a mayor were really heavily hit by

bye-bye that covered crisis

As we all know the very much in the end of our biggest proportion of our business, but then the whole south of of Europe was waging pretty much completely locked down and and that was something which which obviously we had to kind of pay toll to going forward as what we see at the moment countries are currently at least much better and dealing with the pandemic and we have our offices all open again Thursday and and business is is coming back slowly, but surely and so I would say specifically for me are the worst should be behind us.

Good to hear and then just last one here actually think about absolute is removed from the second quarter third, you know operating in this sort of expense is downstairs. Sequentially. I think that's against the normal sequential uptick that you see in the second quarter and it sounds like you can continued cost mitigation efforts throughout the course of just any detail on how we should think about the fixed expense for directory. Do you think about the the rest of the year?

Well, we have two major fixed expenses. We have kind of fixed compensation which is obviously different market-by-market country-by-country. And and in those markets where it's more difficult to work on it than in others this this ongoing work on our side, we'll continue and and and it will be visible still in the third and the fourth quarter. They're the progress we are making and then we have obviously fixed expenses on the operating table where we were very quick in in reacting and and had very significant drop of those expenses in the second quarter. And and we maintained that would cost discipline very much. So that was what I was indicating earlier that we believe that the third quarter environment is very similar to the second quarter environment. So we have we don't have any choice.

To be less tight on those fixers expenses as we already were on the second quarter.

Right. Thank you again to ask a question, please. Press star. The number one on your telephone keypad. Your next question comes from home. Yeah. Hey, good morning. Everyone. Just wanted to Circle back to the to the comments around the third quarter and it may be even further just to clarify what you meant. So you said the operation just now should be similar to the third quarter, but it's in the second quarter. Sorry, but you also said that you obviously had some benefits from some some the pipeline in terms of leasing Etc that that home second. So so is it fair to say that given that the second quarter was fairly close to new new pipeline building that you could be you should be down a little bit further in the percentage terms of actual business and three q and then the other comments more longer-term on the four Q etcetera also fair to assume that given that you're you're hoping that that companies will have to come to terms.

And move into fourth quarter is generally the quarter that hopefully fourth-quarter in percentage terms of the the decline will be less.

Sorry for the long question.

That's fine Alex. Well, what we said is that the operating environment and the third quarter will be very similar to the second quarter. Usually our third quarter of tends to be better than our second quarter, but we have a couple of priests specific Elements which were held back in the second quarter to us like government support which is phasing out in most countries and others which were slightly unhelpful like the club of some contracts in Europe. And so there's a mix of things coming to us you have heard from our comments that we are slightly more optimistic how the pipeline is filling the challenge for us is, you know, our clients do not really care whether they close a leasing deal in September or October. So, yep.

Not quite sure whether that will that pipeline which is filling whether that will already kind of fall into the third quarter or whether it falls into the fourth quarter so dead we cannot be more specific on that than we have already been on this call with regards to the fourth quarter. You're absolutely right. Usually the first quarter is a very big quarter for us depending on how the pandemic is developing and if we are able if the world is able to really prepare and full second wave. We are fairly optimistic that we will see an uptick in the fourth quarter Richard alluded to that. We see I'm pretty healthy Pipeline on the capital Markets Front, which is the part of the business which drives the fourth quarter results, usually the most and so we hope that parts of birth.

That will also come through during this year. But frankly what the pandemic exactly we'll do or the next couple of weeks off certainly don't know fair enough. Thank you and then shifting gears completely here, you know you obviously in in cash preservation modes, uh, you cut the dividend wage, but but can you talk about m&a a little bit? I mean this is this obviously the time where some of your competitors may be struggling more. Um, I know you you made some cautious comment on on the text side, but but m&a General do you think that will be opportunities you have a strong balance sheet and and and and what are the areas you most interested in?

Well, I mean in those times there's you have to be a little bit opportunistic because things may change overnight and opportunities come to surface which weren't available the day before what will not change is our total discipline was regards to how we allocate our Capital. You can do some stupid mistakes also in those times. So yes, we we we are very focused on our cash and we have a very very healthy liquidity position wage which enables us to do when we believe it is smart for our shareholders and for the long-term growth of jll and so let's see what's coming over the next couple of months. I hope everybody including all our competitors are doing well. But if there is an opportunity, we at least have the financial means to think about it.

okay, and then

I guess one more on the margin side. I mean again, you know, you you you it sounds like you're very much reacting to the environment. But to what degree maybe this is for Karen long as you hopefully at one point come out of this like we all hope, you know, are there permanent decisions that you're making right now as you think about the future should could we be in an in an environment with the margins a hopefully, you know in a better position if we get back to 2019 type of levels.

Yeah, so the cost reduction expense is certainly a strong area of focus in this current environment and we're looking at everything with a strategic and thoughtful lens. So we are obviously needing to make purchase decisions and the current economic landscape, but are also being very mindful to position to gain market share in the future.

So we're between maybe God. No, please sorry, so we're certainly taking actions on both a permanent and temporary basis to allow them to flex.

Okay, and then just I squeezed one last word and any any breakdowns you can update on as on on leasing by market office versus indikitch Etc. And also on the property management that that you did you would like to disclose. I forget when the last time was you you you you gave a breakdown.

Well, listen, the office is Market came down globally by by roughly 60% in the home to send very different for us. If the industrial Market we don't have volumes on that globally, but we know our own revenues on that and and they have with the increased and and and this is something which which is obviously not a surprise to you that especially the whole Logistics sector is is booming because of all the online sales. And so what we did in the past, we invested heavily into that area and and that is obviously showing a lot of benefit in this current environment and we believe that this will continue to be the case and and fortunately our overall exposure to the retail sector birth.

Has shrunk and pretty significantly already over the last couple of years and and so we are predominantly generating our revenues and the leasing side from from office and Industrial as the vast majority and and and that will continue to help us going forward.

Okay. Thanks that was plenty for me again to ask a question, please. Press star one on your telephone keypad. Your next question comes from Thursday open. Thank you very much. And you look across the business lines globally. Are there any areas that you see having the greatest potential for acceleration and importantly the uncovering of new new areas of growth perhaps services that you did not historically provide to either corporate occupiers off for various other Capital markets providers. Listen, I don't think that there's any surveys which we don't provide but there are certain Services which we are already providing which will have very strong potential going forward accelerated by this club.

Is this and that is one of the reasons why I have need?

In this cold, so I hand over to Neil once again. Yeah, thanks Christian. And thanks for the questions. I think a lot of platform we built in in in corporate Solutions around around Global occupied. The last number of years. I pretty much was a the covert is accelerated a lot of the sort of secular Trends we were seeing so very pleased with a form that we have in place around things. Like, uh, you know, we we we put a product development platform in place globally sustainability platform workplace Design Studios and Thursday are investments in technology that you you know all about so I think the the businesses in in really great shape to to take advantage of the situation we find ourselves in and as we come out of this, um situation, I think the office has shifted from a place where people did work to something else.

Clearly different it's you know from the chief executive as I speak to now in a daily basis, you know, if I've had clients comments that you know, we can we can run a business remotely but it's nice to grow a business remotely. So they're thinking about the offices as a hub of collaboration of creativity and and as as Christian mentioned the real manifestation of of brand and culture, so so all the life-forms we have in place to really help our clients reimagine what their their property portfolio is for it's called purpose. As I said, I think we're very well placed to take advantage of of those opportunities.

Thank you for taking if I make it from a perspective. If you are the CEO of a company and that current environment your name is in your neck around the safety and well-being of your employees. You'll see a vote in your neck around the cost of your real estate footprint. I mean, if there's one time where you are really keen on getting great advice from a company which has Global Knowledge and can deliver best practice around the world. Then this is just a moment where you want that advice and and we have never had more calls directly with CEOs of the large companies of the world as we had in the last couple of months and then we'll continue to happen.

Thanks for that.

There are no further questions. Can I put this time? I'll turn the call back over to management for closing remarks.

Thank you with no further questions. We will close today's call. Thank you for participating Kevin and I look forward to speaking with you again following the third quarter. Stay safe home.

This concludes today's conference calling you may now disconnect.

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