Q2 2022 Cushman & Wakefield PLC Earnings Call
Welcome to Cushman, and Wakefield second quarter 2022 earnings conference call.
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After the Speakers' remarks, there'll be a question and answer session.
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It is now my pleasure to introduce <unk>.
Texter head of Investor Relations.
Global controller, and Chief Accounting Officer, Cushman <unk> Wakefield.
Mr. Texter, you may begin the conference. Thank.
Thank you and welcome again to Cushman and Wakefield second quarter 2022 earnings Conference call.
Earlier today, we issued a press release announcing our financial results for the period.
This release, along with today's presentation, which can be found on our Investor relations website at IR deck Cushman Wakefield Dot com.
Please turn to the page labeled a cautionary note on forward looking statements. Today's presentation contains forward looking statements based on our current forecast and estimates of future events.
Payments should be considered estimates only and actual results may differ materially.
During today's call, we refer to non-GAAP financial measures as outlined by SEC guidelines reconciliations of GAAP to non-GAAP financial measures definitions of non-GAAP financial measures and other related information are found within the financial tables of our earnings release and appendix of today's presentation.
Also please note that throughout the presentation Harrison and growth rates are two comparable periods of 2021 and are in local currency unless otherwise stated.
For those of you following along with our presentation. We will begin on page four with that I'd like to turn the call over to our CEO John Forrester.
Thank you Lynn and thank you to everybody joining our call today.
I am pleased to announce another exceptionally strong quarter of earnings we posted record results for the second quarter reporting fee revenue of $1 9 billion and adjusted EBITDA of $263 million, reflecting year over year growth of 21% and 23% respectively.
Although last 12 months, we have now delivered 27% revenue growth adjusted EBITDA growth of 64% and margin expansion of approximately 315 basis points the strength of our comprehensive diverse and resilient global service offering is evident in our performance.
Highlights the progress we have made in our multi year strategy of prioritizing investments in the long term growth sectors of our industry.
I'll focus to grow our company create value and generate strong performance is unwavering.
Performance this quarter reflected it.
In terms of service line performance.
Revenues in our property facility and project management service line continue to generate very pleasing growth for both occupied and investor clients, increasing 16% in the second quarter year over year.
These services comprised nearly half of our total fee revenue.
<unk> have proven to be increasingly resilient through times of volatility.
In fact, we've seen clients often accelerates strategic decision, making sure economic environments.
Our project management business is also growing significantly up 45% in the second quarter versus prior year as occupiers and investors alike, reevaluate that post COVID-19 occupancy requirements and sustainability objectives.
On our last earnings call I noted that project management like many of our operations benefit from client activity not just incremental changes in the amount of space occupied and this pickup in activity can be seen in our growth.
In addition, our global Occupier outsourcing platform continues to win mandates are increasing scale as clients turned to cushman <unk> Wakefield to help reduce costs and drive further real estate operating efficiencies within their organizations.
Our leasing business has been strong through the first half in.
In the office sector, the leasing environment continues to improve steadily.
U S office using employment increased one 9%, adding 635000 jobs in the first half.
There are now $1 million more office using workers in the U S. As of June 2022, and prior to the commencement of the pandemic.
As we know more jobs overtime means more demand for all types of useful space, particularly office.
And more broadly global office leasing activity continues its recovery.
Preliminary data shows an increase of 21% in the first half of 2022 over prior year.
While about 50% of office markets globally registered positive demand for office space in the first half.
Part of this growth and recoveries attributable to the emergence of areas like life Sciences, which now represents around 10% of all U S leasing.
Lastly, within the office sector, we continue to observe other trends consistent with pre pandemic norms.
Specifically the split of new leases versus short term renewals as average lease lengths are.
Both reverting back to pre pandemic levels.
The industrial logistics sector continues to perform strongly given the persistent supply demand imbalance driven by the secular brand in e-commerce activity.
As of the second quarter U S vacancy rates are at a new record low of three 1% and rental growth increased 19% year over year.
So the first half of the year the market has absorbed over 236 million square feet, which is broadly in line with the record setting levels of 2021.
At the start of this year and many commentators reflected concerns, but the logistics market would face supply shortages. The fact that some high profile occupies a push based back into the market is providing other actual active tenants the opportunity to participate.
In terms of capital market's fundamentals.
Capital inflows to the commercial real estate sector remain elevated given the general attractiveness of real estate assets across multiple sectors. Despite rising interest rates.
As evidenced by real capital analytics U S transaction volumes of $190 billion up 17% for the second quarter and above pre COVID-19 levels.
Cushman and Wakefield continues to take share with our transaction volumes rising 116 basis points in the quarter compared to prior year.
Our strategic investments made over recent years and those property sectors, which we believe would benefit from outsized growth are reflected in our strong performance and we will continue to drive further value for our clients and shareholders.
We are capitalizing on the growth in the U S multifamily sector by building an industry, leading multifamily full service platform with further opportunity for continued growth globally.
The asset class landscape is evolving according to RCA multifamily comprised about 45% of the overall U S capital transaction volume in the quarter.
While our business continues to perform with deep rooted momentum we have at least not yet material evidence of changing client behavior.
However, we are monitoring the changing macroeconomic environment and growing uncertainty closely.
While there are areas within our industry may be impacted by economic volatility, we continue to see strengths across the fundamentals of our portfolio.
In addition, I would reiterate that we continue to build our capabilities and scale in key sectors. When expansion is anticipated despite the potential.
A more difficult economic environments ahead.
And as such is life Sciences, biotechnology and data centers.
This all positions cushman and Wakefield better than at anytime in our history, regardless of economic environment.
In addition, our exceptional leaders and dedicated teams in the field continued to deliver exceptional service every day to our clients around the world.
I would like to highlight a couple of examples that illustrate both our leadership in the industry, but also the exceptional performance of our teams.
Cushman <unk> Wakefield is among the first group of companies to have its net zero target approved by the SBA team buys recently launched net zero corporate standard.
<unk> first framework for corporate net zero target setting in line with climate Science.
This is an important progression of our long standing commitment to sustainability and our journey to take bold action for the future of our firm our industry and society.
Our European Middle East and Africa operations have long been a center of excellence and leadership and the many diverse and unique market is found in the region.
But I'm, particularly pleased to congratulate our talented leaders and that discipline and focus which has resulted in our business achieving industry, leading earnings and profit margins.
Finally, I'd like to touch on our capital allocation framework.
We are continuously weighing the most attractive returns to drive shareholder value.
Our continuous improvement initiatives highly accretive M&A record and our talent recruiting capabilities alongside our strong balance sheet position does extremely well.
We will continue to deploy capital into the most accretive areas as opportunities present themselves whether that be through service the market expansion or back to our shareholders.
We remain confident about the performance of the business and our progress against our strategy in the ever expanding market for our services.
And with that I'd like to turn the call to Neil to discuss our financial performance.
Neil.
Thank you John and good afternoon, everyone.
Overall, the momentum in our markets continued through the second quarter and I'm pleased to report that we delivered record results for both the second quarter and the first half of the year for.
For the second quarter fee revenue of $1 $9 billion grew 21% over prior year and adjusted EBITDA of $263 million grew 23% over prior year, resulting in an adjusted EBITDA margin of 13, 7%.
Our margin for the quarter reflects strong revenue growth, particularly in brokerage and also includes our equity investment in our greystone joint venture.
Partially offsetting these trends was the impact of Covid related lockdowns in China as well as our continued focus on balanced investments in our business to support future growth.
On a trailing 12 month basis, our margin of 13, 9% represents just under a 100 basis points of expansion from the end of 2021.
Adjusted earnings per share for the quarter was <unk> 63, an increase of 26% versus prior year.
Taking a look at our fee revenue by service line in the second quarter leasing and capital markets increased 24% and 33% respectively leasing fee revenue exceeded pre pandemic levels, increasing 14% over the second quarter of 2019.
We continue to see improvement in the Americas office sector as well as ongoing strength in the industrial logistics sector with demand outpaced supply for the seventh quarter in a row.
And capital markets. Despite high interest rates investment appetite remains strong with near record levels of available capital, particularly in the Americas.
All property sectors reported growth.
As can be seen in our strong growth this quarter. The investments we've made in fast growing sectors like industrial and multifamily continued to be important growth drivers for the business given the long term secular trends.
The performance across our entire PM FM service offering was again strong this quarter, particularly in our project in facilities management businesses with PM, FM and valuation and other service lines up 16% and 8% respectively.
Turning to our segment results for the quarter Americas fee revenue was up 22% year over year, driven by strong performance across all service lines.
Leasing and capital markets improved, 31% and 29% respectively year over year.
Total leasing was above 2019 pre pandemic levels, while the office sector was generally in line with 2019 pre pandemic levels for the second quarter.
Adjusted EBITDA of 211 million improved $53 million versus prior year, principally due to the performance of our brokerage business and our greystone joint venture, which performed in line with our expectations for the second quarter.
In EMEA revenue growth of 22% was driven by growth across all set asides leasing and capital markets grew 21% and 56% respectively with broad based growth across nearly all markets and sectors.
We generated adjusted EBITDA of $35 million up 29% versus prior year, which reflects strong brokerage activity and continued focus on cost discipline.
It is worth pointing out that our EMEA business has performed exceptionally well throughout our strategic realignment and multiyear transformation growing margins more than 300 basis points over the last 12 months a testament to the exceptional teams we have in the region.
In APAC revenue growth of 11% was driven by the performance of our <unk> service line, which grew 22% for the quarter.
Partially offsetting this growth with declines in our leasing business at 15% versus prior year, which was principally driven by the impact of Covid related Lockdowns in China.
As a result, adjusted EBITDA was down 40% versus prior year.
Moving to our balance sheet, our financial position remains strong we ended the second quarter with $1 $6 billion of liquidity consisting of cash on hand of $477 million and availability on our revolving credit facility of $1 $1 billion.
We had no outstanding borrowings on our revolver.
Net leverage was two six times at the end of the second quarter unchanged from the first quarter.
We are well positioned to continue to fund both operations and investments.
Have an active pipeline of investment opportunities, which we are constantly evaluating.
As John mentioned, we will continue to deploy capital in areas that provide the most accretive returns to our shareholders.
In conclusion, we are encouraged with the performance of our entire portfolio for the first half of the year.
We have a diverse global business that is capitalizing on secular growth trends.
While the first half performance is similar to the momentum we saw last year. We do recognize that we are now balancing the second half of the year with a differing macroeconomic backdrop.
Pacifically in capital markets, where we expect second half comparisons to be challenging given the performance delivered a year ago.
Consistent with our typical practice, we are not providing an update to our full year 2022 guidance, we will revisit it after the third quarter.
Our business model has proven to be very resilient over an entire cycle and our diversified revenue streams disciplined cost management and recent investments in growth sectors provide us with greater confidence as we head into this period of economic uncertainty. We believe we are well positioned to manage through any number of scenarios and continue to deliver.
The value to our clients and our shareholders.
With that I'll turn the call back to operator for the Q&A portion of today's call.
We will now begin the question and answer session.
Ask a question you may post southern one kind of funky.
Using a speakerphone please pick up your handset before pressing the key.
Your questions. Please I'll start in Q2.
We will pause momentarily to somebody.
Okay.
Our first question will come from Anthony Powell with Jpmorgan you May now go ahead.
Thanks, and good afternoon, everyone.
Maybe I'll start with you.
I understand not wanting to address.
Address guidance until there is a little more clarity on the fourth quarter, but just looking at the <unk> business. If we go back to your original guidance there being up.
I think mid single digits for the year, it's just been running stronger just wondering it's one of the more stable businesses, a little bit less seasonality and it's.
What's keeping that from potentially being stronger than mid single digits. This year.
I'll tell you. It's a great question, Amit certainly we've been exceptionally pleased with the performance of that business through the first half of the year. Some of it is the timing of contracts as they come into the business. So I'd encourage you to look at a slightly longer runs if you look at the last <unk>.
Nine to 12 months.
Still a very strong performance.
And we would expect that high that momentum to continue as we look through the back half of the year as you said, it's resilient to economic conditions to Sydney.
Something we're very pleased with.
Okay and then.
John .
You've been in the seat now for a couple of quarters. Just curious if you could update us on how you're thinking about your growth priorities and any parts of the business that have struck you as needing you know more or less attention.
Now.
Hi, Tony.
Well I think I said this on the last call, which is yes, and you and Chad.
Sat around the table, but in the room with Neil and breath on these calls for an awful long time and be involved with the build of our portfolio.
I'm really pleased and most of all with the how the multi year strategy of this circular that lean in investments and resource builds is showing up.
We've always been a very strong globally diverse business more so on the transactional side going back five to seven years.
As you touched on the first question with Neil.
Really strong build year over year that we've seen in our recurring revenue businesses.
Really exceptional margin growth.
This business is very pleasing one.
One thing we are keeping an eye on though is how we go into the second half and we've already begun to do what we do really well here at Cushman, and Wakefield, which would be very very careful about how we use every dollar in the company and so for me Thats, where a real heavy focus lies today.
Okay.
Does that create a priority in terms of your cash cash usage between hiring.
Debt reduction stock buyback M&A anything you can to address there.
I think the best as you laid out.
Three or four areas is exactly how we think about it we look at we look at each area with a myopic view, we continue to want to hire into those secular growth areas at weight at global connectivity.
And then the flip side, we're being very careful on those sectors, where there is less growth overall, it's what drug drives the portfolio richness and diversity. It means that if we are going to go into any form of downturn globally I think as a company we're going to go in with a very different business than to any prior downturn, which drove more strongly much more resilient.
<unk> done before.
Okay. Thank you.
Our next question will come from.
Sandy.
Goldman Sachs.
Oh go ahead.
Hi, good afternoon, and thank you for taking my question. So I would like to continue with the last question that was just off.
If we do go into recession health misunderstand.
What levers do you have.
And.
How do you think you are a different company now.
<unk> 2020, I completely understand it was a black Swan event it wasn't really.
Traditional <unk> session.
Help us understand what levers do you have to pull in order to meet.
To manage your cost structure.
Thank you Shawn and thank you for the question.
If you go back only for short periods.
Late 2019, we first tell you talking about the opportunity that we had as an organization to to lean into significant cost withdrawal.
We said to the markets, we'd take upwards of $250 million.
Our fixed long term cost out of the company and we have done that.
Coming to the very backend of that tail of cost out it's a big part of it.
Our margin story, it's also a very big part of how we look at.
As a management team running the business.
So given the fixed costs, you've got variables is hitting the market such as travel marketing research support.
All of which we gained boil down by on a sector by sector location by location basis.
Ensure that we are not allowing any part of the business John there'll be starved of resources for growth, which is critical as much of our portfolio will continue to grow through a downturn, but also we will be we will be very sharp on cost as we always have been.
And then the other area, which sees less than the positive growth.
As a global business upwards of 54000 colleagues now I believe.
That's a large portfolio upon which.
Many many levers to pull on cost.
Management team globally.
Overemphasize this enough management team globally is highly match fit in this area of management.
Okay.
Okay.
That color.
And.
Switching gears to the outlook for Pms business, a little bit and just thinking about that in the event of a recession.
One thing we've got if you guys have talked about in the Boston. These last two years has been that cross selling opportunities have been something that bodes very well you'll get these good transactions and then you have opportunities to cross sell within.
Within that how should we think about the outlook for BSM.
In the event of a tougher economic setup.
Well I think a very short we will continue.
Expectations of growth through whatever economic scenario, we see.
Other than something that's entirely unforeseen.
In the prepared remarks I touched on.
The reality of it.
In downturns the.
The outsourcing business actually tends to expand increased strongly as our client base themselves seek.
Cos shelter.
Through working with an organization that is called the style of Cushman <unk> Wakefield to take on both that services and drive value.
No.
The portfolio the diversity of our business is absolutely our strength.
Got it thank you very much.
Our next question will come from Michael Griffin with Citi. You May now go ahead.
Hey, Thanks, maybe just to touch on inflation for a second I'd be curious to see sort of where you are feeling the effects of inflation sort of most across your business lines and what's the best way you found sort of mitigate the effects.
Yeah, Michael Great question look inflation, while it does impact the business is not one of the material factors.
Perfect.
Right the business and the reason is inflation really impacts the pls business most but.
The majority of our contracts.
Pat.
<unk>.
Just as a or contracts that are cost plus.
So while inflation is certainly something we're watching closely we don't see it as a material risk to the business as we go forward.
We'd be very cash around.
Our employment cost inflation and I think as everybody has been particularly in the private sector, but I will just focus on one additional point, we are not exposed to say the real estate development market. The direct development market, where we will be taking on any risk of.
Construction costs.
Inflation for instance, so that's another business that we're in and have any risky.
Got you. That's that's helpful. I appreciate the color on that maybe.
Maybe switching gears to the office leasing side of things Youre. Your commentary seemed relatively more positive definitely compared to sort of what the sentiments sort of been in this space with recent I'm curious if you're getting a sense of kind of what kind of tenants you are seeing drive a lot of this demand if its any specific sectors geographies any additional color.
There would be helpful.
We liked it too Michael.
By reiterating something that Brett and I are actually both said on earnings calls, which is we did expect it to be through 2024 before the office market on a like for like basis came back to pre pandemic levels.
We still feel we're right on track for that to occur so whilst our office revenues on now sorry, our office defined revenues all substantially higher than pre pandemic levels. We've seen an expansion within that of what you might call the alternatives like.
Biotechnology life Sciences, which largely come out of office or the <unk>.
<unk> office is going into that type of use.
Yes.
Defined as such within within our calculation. So expansion most certainly in the secular growth areas and there's a flow around the world or tech drove the last seven to eight is now takes a little bit on the back foot, particularly large tech is a little bit on the back foot professional services growing strongly.
In the office sector globally.
I think what we're seeing in I'd point back to again, the fundamental that I continue to reiterate it's not the amount of space that is utilized primarily the trucks out revenues, it's the activity within the sector.
We are beginning to see this accelerating pick up in.
In activity driven by environmental sustainable issues. So much of the office stock globally is obsolete and.
Organizations are now highly focused on upgrading quality their accommodation irrespective of the fact that may or may not have a lease event.
Lease expiry in the near term so.
The activity levels are driving the general office sector and <unk>.
High growth coming from the secular growth trend areas.
Got you thanks, guys I appreciate the time.
Okay. Thanks, Bob.
Okay.
Our next question will come from Ronald Camden with Morgan Stanley You May now go ahead.
Great just sticking on the office leasing classes, if I could ask a different way is there a way to break it out whether big or small user bye bye sectors.
Or is it sort of all across the board the activity that youre seeing.
So.
Rollout I would say there is activity across the board between each tier of quality office, its a different type of activity.
Core high class offices, performing outstandingly well not just in the absorption rates globally, but also in true rental growth again, I think I love that is about the return to the office high performing environment organizations wanting to give the desktops only to come back to as well as the environmental sustainability.
Focus and as you get away from that high quality down to the poorer quality, you're getting this obsolescence back to come into the B and C, where ultimately there may be no ready market. So the buildings go into the redevelopment portfolios becomes something else.
A very agile market out there globally.
Purchasing buildings for different uses.
Moving away from the traditional office, let's say to Repurposing them for whether its laboratory space for the life sciences or even moving into multifamily.
The repurposing the space is driving the activity in the in the.
<unk> certainly to see sector.
Does that answer the question.
Yes, that's exactly right that's really helpful.
That's all I had thank you.
Again, if you have a question. Please press Star then one our next question will come from Stephen Sheldon with William Blair You May now go ahead.
Hey, good afternoon. This is actually.
Pat Mckelvey on for Stephen.
First of all the.
The $3 million step up in interest expense this quarter I thought was pretty modest given.
Give or take $3 billion in floating rate debt.
Is there any detail you can provide on your hedging activities. There are any context, you can give us as we think about how that might trend.
Yes, sure Pat we are actually in pretty good shape, so and it is.
To the senior notes, which are fixed.
About 75%.
Our net debt is actually fixed with interest rate swaps.
No.
Only about 25%.
And so that's why you're seeing less of an impact on our interest cost we feel like we're in good shape.
Great, Okay and then.
Can you just elaborate a little bit on what you saw in APAC during the quarter.
Obviously, not a huge piece of the business, but fee revenue grew around 11% constant currency.
But the regional EBITDA, obviously, it took quite a big step back so I'm sure. There's a variety of factors that play there, but just any additional color would be helpful.
Yes happy to it's primarily a mix issue actually because we saw strong growth in our PFM.
Service line, which drove the top line.
Pac really nicely.
But where we saw the the constraint, which as Neil said in his prepared remarks was in the area.
On the whole centered in China centered in leasing and brokerage relating to largely the whole quarter being in one form of lockdown or another.
Margin within that.
Healthy and therefore wouldn't that type of business fall away a little bit the margin is not replaced by simply.
The type of growth we've seen in PMI.
China is going to come back it will be active again, a recurring revenue business will continue to grow as we said so actually we feel very good about the prospects.
For APAC, although we're very sensitive to when the timing.
China's return will actually show up now.
Understood and then if I could sneak one quick one in here can you just provide an update on what your pipelines are looking like in capital markets and leasing.
Okay I'll start with the leasing first of all and again.
The sophistication now of the Marcus means you have to look at each use plus separately because of the dynamics that are driving easily.
Each used class a difference I'll start with retail actually which is something that's not being spoken about.
By us or our peers for quite some time.
Our fourth quarter.
Material revenue revenue growth in retail globally.
Singles signals.
You turn in that longer term reduction.
Michael retail was really back to the market primarily.
Retail developers owners and occupiers.
Found I think the way to the future that isn't really a keen understanding that retail is going to remain a big part of the shopper experience.
Retail physical retail itself needs upgrading and Thats a lot of activity for us and our teams around the world in doing that so the pipeline for retail is growing it looks strong.
<unk>.
For US we went into the co.
Covid with as much as 65% of our leasing revenues coming from office.
We can certainly see a longer term mix is closer to 50 or even slightly below is the strength.
In industrial and into alternative uses comes through very strongly and as I said in the prepared remarks.
Industrial leasing continues.
On the secular trend.
Feel good about the pipeline and the worries.
You simply there being no.
Real estate to acquire for our tenants isn't the case of some of the major global platforms plus space back to the market.
Office, I think I've talked about already.
Many many layers to office interestingly this year, we have a very.
At relatively high levels of lease Expiries globally.
Around about 8% of leases come mature every year, so 92% is captive.
But we had a lot of leases where the comp was kicked down the road over the last two to three years because of the pandemic and the uncertainty in the office market. So tenants are taking new one year or two year leases. So therefore, we got quite a lot of opportunity this year and I tend to look at that.
As a positive because as I continue to reiterate is the activity in the market.
Moving a client from a to b agreeing a new lease even if it's on a slightly smaller footprint.
There are revenue opportunities so the pipeline than the office market driven by.
Just the transparent level of expires.
It is relatively good I'm sure your question with a little bit to capital markets ultimately.
And I think.
For us.
Looking at our continuing a strong.
Performance in capital markets.
To me it seems that.
Ryan's behaviour, whether thats buyers or sellers.
It's based on the fact that the headwinds whether that's interest rate increases.
Supply chain issues inflation LNG costs all of these headwinds spinning around they have been well known and understood now for upwards of six months. So the transactions that we're seeing going ahead and tend to be based on strong deals with sophisticated buyers and sellers.
Whether that's a redeployment of capital either by sector.
Price point.
<unk>.
Continue to see the market moving forward, so I wouldnt to an extent colbert quarters in a pause.
<unk> is a very strong word, but what I would say is there's a lot of people being very careful about where they where they put that kind of debt capital.
Finally pipelines, we will it depends what youre asking the question of is it about capital available to be deployed or is it about the amount of real estate for sale because when you have a bid ask spread which has been mentioned by a number of our payers on their calls this week.
It really depends which which which question you're asking so yes. There is a lot of real estate for sale at the moment, but the buyer market globally is not necessarily aligned with the sale prices. So the pipeline really depends on whether youre talking about record levels of real estate for sale.
We'll still record levels of capital to be deployed the price to be found.
Right, Okay, well I apologize for calling that a quick one but that was really really helpful. So thank you John .
Thanks Neil.
All for me thank you.
The next question will come from Patrick O'shaughnessy with Raymond James You May now go ahead.
Hey, guys, it's actually David Farnum on for Patrick.
I wanted to start with more of a strategic question for John .
Crishman's named keeps coming.
Getting thrown around as a potential buyer, so maybe regardless of whether or not these stores have any merit. As currently composed you feel that cushman has the scale you need to achieve the margin targets and the strategic objectives that you aspire.
Yes, it's a good question, it's something we think about a lot as we consider our deployment of capital.
We have as an organization we have.
Really really pleasing results quarter over quarter over quarter, So I would say that.
Turning to the types of margins that we've been sharing with since the sharing the market with since the IPO as well on target and we have obviously the scale to achieve that.
So strategically.
<unk>.
The growing nature of our organization.
The growing diversity of our portfolio, but growing resilience.
Our earnings.
But I also ultimately see.
This industry is one which.
<unk> has further consolidation opportunities.
Large small and mid sized globally.
So we want to remain particularly active on the M&A.
Funds as we see opportunities to deploy our capital.
With highly accretive returns than the other uses we might put it to from time to time.
Got it I ask the question.
Yes that helps.
And then maybe switching gears to that we work partnership a bit I was wondering if you could update us on the <unk>.
Ration of the facilities management contracts, where we were.
I believe that started in the second quarter.
Can you speak to how the roll on of that contract impacted sequential acceleration in the PM FM mine.
Then maybe as a clarification is that contract fully ramp within the facilities management business or is that role on happening over the next couple of quarters.
So we don't talk to specific contracts in the <unk>.
We mentioned that that was something we were fortunate enough to win through the investment in <unk>.
We work last year, but we don't talk to the specific.
Machinations of each contract what I would say is that.
That contract was well understood when we looked at.
The expected performance of.
Global outsourcing business the <unk> business this year.
But everything is going swimmingly well.
Great and then just the clarification on is that fully ramped now or is that rollout.
Sure.
I wouldn't speak to whether it's entirely and fully ramp because it is a progressive ramp but.
I will check that out and I'll get back to you.
Alright, great. Thank you very much.
Yeah.
This concludes our question and answer session I would like to turn the conference back over to John <unk> for any closing remarks.
Thank you and thanks to everyone, who joined Neil and I on the call today.
Also for the questions. We look forward to speaking with you all again in three months time.
Hi.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.