ICON PLC (ICLR) 2007 Q1 法說會逐字稿

Good morning ladies and gentlemen and welcome to the Q1 2007 ICON plc earnings conference call. My name is [Frances] and I will be your coordinator for today. At this time all participants are in listen-only mode. We will conduct a question and answer session toward the end of this conference. (OPERATOR INSTRUCTIONS) I would now like to turn the call over to Mr. Mr. Ciaran Murray, chief financial officer. Please proceed, sir.

Good day ladies and gentlemen. I'd like to thank everyone for joining us today on this call. We're going to cover the results of the quarter ended 31st of March 2007.

On the call today I have Dr. John Climax, our chairman, beside me and our chief executive officer, Mr. Peter Gray.

Before I hand the call over to John, I would just like to note that this call is webcast. There are slides available and the comments will follow the slide show. I will now make the customary statement in relation to forward-looking statements.

Certain statements in today's call may constitute forward-looking statements concerning the company's operations, performance, financial conditions and prospects. Because such statements involve known and unknown risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Given these uncertainties, investors and prospective investors are cautioned not to place undue reliance on such forward-looking statements. The company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Today's commentary refers to our quarter one, which ended on the 31st of March, 2007, and I'd like to note that in the following commentary the financials for both the current and prior quarters and any reference to March is after taking into account the impact of the stock compensation expense and the effect on diluted shares of the adoption of SFAS 123(R).

And with all of that said, I'd like to hand the call over to John.

Thank you, Ciaran. Good day, ladies and gentlemen. Quarter one has been an excellent start to 2007. Net revenue grew 38% over the comparable quarter last year to $136.1 million. The organic growth rate was 35%.

Operating income for the quarter after taking the SFAS stock compensation charge of $1.2 million was $14.7 million representing a 46% increase over operating income of $10.1 million in the first quarter 2006.

Group operating margins for the quarter was 10.8% up from 10.2% for the same quarter last year. Core margin in our clinical business again improved sequentially to 11.3%.

Our central laboratory continued its improvement recording an operating margin of 6% in quarter one compared to a negative margin of 6.3% for the same quarter in 2006.

Net income rose to $12.3 million from $7.5 million last year, representing 64% growth. EPS grew from $0.27 per share in quarter one 06 to $0.42 per share, a 56% increase.

The effective tax rate for the quarter was 21.8% compared to 29.2% for the same period last year, reflecting the impact of the adoption of our new global business model. For the year we expect the affected rate to remain approximately 22%.

Cash flow used in operating activities was $2.8 million in the quarter. We spent $12.5 million on capital expenditure, of which $5.9 million related to the extension of our Dublin facility. To date, we have invested $23 million into this expansion and anticipate that we will spend another $43 million to complete the project by the end of 2008.

At March 31st 2007, net cash and short-term investments amounted to $84.4 million compared to $97.9 million at December 2006.

DSOs at the end of March were 59 days compared to 56 days at the end of March 2006 and 53 days at the end of December 2006.

Gross business awards for the quarter to March 31st 2007 were a record $245 million. Cancellations were $22 million or 9% of gross awards. Accordingly, net business wins for the quarter were a record $223 million compared with $171 million in the comparable quarter last year. This represents an increase in net awards by 30% resulting in a very strong book-to-bill of 1.6.

As a result, our total backlog at the end of March was $963 million, a 36% increase over last year. Of this backlog, we expect $470 million to be earned in the next four quarters, a coverage of approximately 77%.

Quarter one represents an excellent start to 2007. RFB flows continue to be strong and with a record level of business awarded in the first quarter, we are pleased to increase guidance for 2007. We now estimate that our revenue will be in the range of $560 million to $580 million and consequently our EPS estimate increases to a range of $1.70 to $1.80 after non-cash stock compensation expense.

Before I hand the call over to questions, I would like to thank all our four and half thousand staff around the globe for their continuing contribution to our success.

Can we have the first question, please, Frances?

(OPERATOR INSTRUCTIONS) Your first question comes from the line of [Alex Alvarez] with Goldman Sachs. Please proceed.

Hi and congratulations on a good quarter. I was hoping you could walk us through some of the factors that drove the stronger than expected revenue this quarter and also driving you to increase the revenue guidance here. Is it sort of an improvement in your ability to convert the backlog or is it just the fact that you're winning more work? Any color you could share there would be helpful.

Hi, Alex. Peter here. I'll take that one. As for driving the higher revenues than forecast is really a function of the strength of the backlog that we had going into the quarter helped by the continuing strong wins that we had in the quarter. I wouldn't attribute it to faster conversion of backlog. I haven't done that analysis, Ciaran, and I don't think we've looked at that analysis as to what the backlog conversion--okay, Ciaran is saying it's the same. The backlog conversion is essentially the same this quarter as compared to last quarter, so effectively it's just a function of the fact that we came in with a good backlog, a strong backlog, and it converted as we would have expected it to convert, maybe a little bit better than we expected it to convert.

Clearly the business wins in the quarter were as John had said at record levels so clearly the business wins have continued to enhance our position, which is why we felt it was important to raise guidance. We've beaten the revenues in the quarter better than expected. We've had wins higher than we expected. I think when we were giving guidance in December, we said that we were basing it on the assumption of a book-to-bill of 1.2 to 1 or on average for 2007 and clearly we've had a much stronger book-to-bill already in the first quarter and that's why we felt the right thing to do was raise guidance.

Understand. And how does this higher revenue impact your hiring plans for the rest of the year along some of the targets you had given in some prior conference calls and could you tell us what the ending head count was at the end of the quarter?

The ending head count at the end of the quarter was just under 4,500 people. It was I think about 20 people short of 4,500. So hiring in the quarter was around 200, a little under 200 people I think for the quarter and that's a function that we'd had such strong hiring in the quarters all through 2006 so we had a strong bench at that stage and we were able work our backlog without having to further aggressively increase the head count in the quarter that we're reporting here.

In relation to the rest of the year, I think the likelihood is that as we've now upped our revenue guidance and we're now projecting I think revenue growth of over 20% year-on-year, the head count growth through the year will likely be a little higher than we had previously suggested. I think we suggested we would add between 600 and 800 people, so we don't guide on what our head count is going to be but I would expect that the overall head count additions in the course of the year will probably be towards the upper end of that or maybe a little above that.

And one last question, I'm sorry if I missed this. Did you give out the breakdown between bookings or backlog between the central lab and the clinical development business?

No, we didn't but we'd be happy to say that the lab had bookings, net bookings of just over $15 million for the quarter.

Thank you.

Your next question comes from the line of Dave Windley of Jeffries and Company. Please proceed.

Hi, good morning gentlemen. I apologize in advance for the background noise if it's distracting but I had a couple of question. One, I want to start on margin, Peter, could you talk about perhaps the mix of business, in the clinical segment in particular, that may have had some impact on margin and I'm thinking obviously margin was up a little bit sequentially. You had nice revenue growth. Your hiring was a little slower in the quarter and I guess I would have expected that to translate to a little bit more margin improvement sequentially than it did and I just was looking for some factors that might have come into play there.

David, you always ask the embarrassing questions, don't you?

Oh, I'm sorry. I don't mean to.

The mix was, you're asking, was our for example say is one business a little better or a little worse or what were the factors influencing it. Phase one improved but didn't improve as much as we hoped it would in the quarter. Japan, we had hoped would break even in the quarter. It made a very small loss so you know a little bit of the margin that we would have hoped to achieve from the lower level of hiring, as you correctly identified, didn't come through because those parts of the clinical business didn't quite perform as well as we had hoped they would in this quarter. But they made progress. They're continuing to make progress and therefore the outlook doesn't change. We're comfortable that margins should continue to improve as the year progresses.

Great. So they're growing, maybe not at the pace you had hoped but certainly headed in the right direction.

Correct.

And on that front in the longer term, the margin targets that you have set for both clinical and central lab in the kind of approaching the mid-teens range are still achievable targets in your mind?

Yes, they are. The time frame, obviously David, is a longer term time frame and we've always said, I think our past comments on this has been exiting 2008 at those kinds of levels. We haven't changed our view. That's been the goal and that's been achievable so no change in that regard.

Okay. And then while we're on the topic of adding head count--

I'm sorry, David. One thing I should say to you--

Okay.

--is that those mid-teens were guidance given prior to SFAS charges.

Oh, okay.

So that means that now that we're reporting on a post-SFAS cost basis, you need to take a percentage point off of that.

Okay. All right. Fair point. And so on, getting back to the head count, the labor market, labor environment is reasonably tame, all things considered at this point? How would you characterize that?

Well, tame is a word I'd be very careful about using. Obviously demand is strong. I know one of our competitors, PPD have already reported and they've obviously had good bookings as well. So demand in the sector continues to be strong, which means that demand for experienced staff will continue to be strong. But you know we've increased the head count by the number that we needed to increase it by in the quarter and there's nothing happening out there in the HR marketplace that is causing us any concern.

Okay. All right. I'll drop out. Congrats on the quarter. Thanks again.

Your next question comes from the line of John Kreger with William Blair. Please proceed.

Hi, thank. Peter, question about your rapid top-line growth that you had recently. I know this is a nice problem to have but what, are you putting anything in place to try to manage that number and make sure it doesn't get out of control to the point where you perhaps start to see quality suffer? And what I'm really getting at is are you turning business down at this point?

The short answer is no, we don't turn business down, but we obviously, it does give us an opportunity, John, to be careful in how we price business and be selective in the business that we really go after. But to go back to the core of your question, which is are we growing too fast for safety, the trajectory has slowed down. It was 46% last quarter, 38% this quarter compared to a year ago. That's a significant slow down in this quarter and obviously the head count growth in this quarter at just under 200 people is significantly lower than we had in previous quarters as well.

I'm very comfortable that from a quality perspective that we can manage this level of growth. We said at the beginning, we said when we were giving guidance for 2007 that we expected the growth rate for the year to be around 20%, maybe a little above that given we've raised guidance now, but what you see in each of the quarters following on from here is the percentage growth coming down significantly because the comps from against last year will be moving upward and therefore I think the growth rate will naturally show itself to slow down.

So I've given you a convoluted answer, which is really saying we're very comfortable that we can manage this level of growth. We've guided to grow in the low 20s. We think we can manage that level of growth and we're tracking well toward that.

Great, thank. A second question relating to margins, at least compared to our model, your gross margin was a bit under our expectation but SG&A ratio was also under. Were there any changes in a way that perhaps you'd classify expenses in the quarter or was there anything else that drove the gross margin down a bit?

Hi, John. It's Ciaran here. No, there was no change in how we classified any of our expenses in the quarter. Gross margin was just a little bit softer as a function of so many moving parts around heavy hiring at the end of Q4 and projects, how the pattern of the work folds, so you know across a lot of regions. So there was nothing unusual there and nothing that gives us undue cause for concern nor anything that would be in our view the start of a trend.

Okay, excellent, and then just one final question. If you look at the bookings that you had in the quarter, can we or should we expect your mix of business to change or are you continuing to see your bookings coming in at a fairly typical rate, biotech versus pharma or major clients versus smaller clients?

In this quarter, in fact the balance, John, was very strongly in favor of larger pharma but it's dangerous to draw any conclusions from any one quarter, as you well understand.

When we look at last year, 2006 as a whole, bookings were 50/50 between large pharma, and what we define as large pharma are the top 20 companies. 50% of our bookings were from top 20 companies and 50% of our bookings were from the rest last year. As I say, in the first quarter of this year, the balance was closer to two-thirds large pharma and one-third non-large pharma but I'll bet you anything that next quarter the balance will be, could be completely different.

So we're very pleased with the way in which, and I'm sure someone will ask this question about client concentration in a few minutes, we're very pleased about how client concentration is progressing, continuing to diversify our customer base. And a 50/50 split between large pharma and non-large pharma is probably where we're going to end up in the next couple of years, although currently it is closer to 60/40 in favor of the large pharma companies.

Great, thanks very much.

The next question comes from the line of Douglas Tsao with Lehman Brothers. Please proceed.

Hi, thanks a lot. Congratulations on the quarter. Just a couple quick housekeeping questions to lead off. Did you give the breakdown of revenues for the central lab and the clinical business?

I don't think we did. The lab had just $13.1 million of revenues in he quarter so it had a small increase, a small increment in its revenues relative to last quarter.

And sort of sticking to the central lab, you know the book-to-bill, sort of a rough calculation sort of came in based on the $15 million number, a little over 1.11, 1.15. I mean, do you feel that perhaps you know the growth is slowing in that business as it sort of reaches a sort of more mature state? Are you potentially sort of maxxing out the opportunity given its size right now?

I don't think so, Doug, no. It's obviously had a couple of quarters now with revenues of around 13 and bookings at around 15 but we don't anticipate that that's a plateau we've reached. We anticipate that as the year progresses we'll see significantly higher levels of bookings. Remember, we had a number of quarters last year where the bookings were around $20 million in that business.

Okay.

So we're anticipating we'll see more quarters like that as the year progresses and we're also anticipating that we'll see the revenues ratchet up somewhat further in the course of the year. We would be expecting revenues in the lab to be above $15 million by the end of the year.

And then have you seen, I don't know if you, Ciaran, if you have commented but I know some of your competitors have commented that there's been an increase in the time between a study award and the study start. Are you seeing that? And then another question is sort of a follow up. What percentage of your current studies ongoing are in the study start-up stage, which is meaning sort of site set up versus sort of enrollment in full swing?

Are you asking that in the context of the lab or overall?

Overall business, primarily clinical actually.

Primarily clinical, okay. I think the answer is not particularly, not particularly seeing a longer lag time between the award of a study and the start of work on the study. However, we are seeing in isolated cases situations where the planned study start date doesn't, isn't met because there are unresolved discussions with the FDA that takes some considerable time to resolve. But overall, we're not seeing a huge change in pattern in terms of award and the beginning of applying resources to execute those projects.

I think everyone has commented on the fact that the duration of projects has lengthened simply because there's more complex indications being investigated and more complex drugs being developed. So the duration of projects is longer, which is one of the factors that causes backlog to grow and for the conversion of backlog to be slower, which is expected when the projects are longer duration projects.

(inaudible) commentary around the fact that patient recruitment is a challenge but patient recruitment has always been a challenge in clinical research. It is always a gating factor in terms of getting a project executed on time and the challenges have not got any less over the years as more complex drugs are developed and more complex indications, challenges of finding patients and recruiting patients into those studies only multiply. So that in itself contributes to the longer duration of studies.

And sort of my follow up question was the percentage of your studies now that are in the start up stage versus actively enrolling patients.

We don't have that data, Doug. It's not something that's important for us to track so we don't really track that.

Okay. And then my final question, you know obviously you had a fantastic quarter in terms of new bookings. Was there a--was this a function of winning just a couple of very large projects or was this a measure that the project size across the board has increased? I mean, I guess sort of a simple way to look at it is was there a pretty big variance between the median size of projects and the mean project one?

There always is. There always is. We win projects of multi millions down to projects of tens of thousands every quarter. In this quarter obviously with the strength of the bookings, there were one or two above average size projects in excess of $20 million in value. But that's what you'd expect when you're getting up into $200 million plus of gross bookings.

Okay, great. Thanks a lot.

Your next question comes from the line of Jack Gorman with Davy. Please proceed.

Thank you very much. I joined the call a little bit late so apologies if you're going over the same ground again, but I have three small questions. Firstly, just on DSO trends, a small tick up in the quarter, I was just wondering if there's anything in particular behind that and maybe you can update us, Peter, on your wish list of deals that you talked about in March? And finally just on staff costs, I know you've talked about this a bit already, just I'm trying to get a sense of what absolute stock costs would be let's say per CRA between the US and EU, just to get a sense of the quantum of difference between those and how they're moving relative to each other over the last couple of quarters.

I'll let Ciaran answer the DSO one. He gets the nasty one.

I do. Firstly, Jack, one quarter at 59 isn't a trend.

Okay.

The trend of the four quarters last year when we took it then from when it was in the 70s, 18 months ago, so (inaudible) you know, hold that close to my heart and I'm touchy and factious about it. No, nothing there. As you know our DSO is a function really of sort of three things that drive it and that's the AR, the unbilled and the prepayments, which all net off. It's a function of four things. It's the number of days in a year and we assume that that's somewhere approximated 360 but the other three factors, there are a lot of moving parts in it, the timing of cash receipts and things like that.

We had a large number of cash receipts this quarter that had they arrived on time would have brought the number down to sort of 54, 55 but it's a function of the big contracts we have and that one $5 million payment can make the difference between a good number and a poorer number. And it's a function too, you'll see when you look at the balance sheet attachment to the press release that our prepayment balance as well then and that's just the timing of contract signing and the amount of prepayment related to that contract. So it's very hard to actually control that. You're really a hostage to fortune on that one.

So it came in at 59 I think I may have said before and certainly in some of the conversations and calls. The range that we like to manage our DSO is when it's good and we're lucky and everything works, we'll see 51. When things don't work as well as we like, when it's bad, we like to keep it to 59 but I can clearly like to think we've seen the last of sort of our traditional numbers in the 70s.

That's great. Thanks.

Your second question was have I any update on the wish list of deals and the answer is I'm still wishing, Jack. In preparing for this call I was having recollections of the number of times we've predicted the lab was going to turn around and how long it took for us to be right in that. I feel the same way about some of the comments I've made around acquiring a Phase I business. We've still nothing to report on that. We continue to be very active in looking at potential acquisition opportunities but we have nothing that is at an advance state at this point.

Okay.

In relation to staff costs between the US and the EU, well for our American friends who think the EU is one homogeneous marketplace, unfortunately it's not. As you well know, there's a huge variation in costs between people from country to country within the EU so it's very hard to draw the kind of comparison that you'd like me to draw. And the reason I'm giving this fudgy answer is I don't have the figures at hand anyway.

Okay. But you don't get a sense, Peter, even from a macro view that costs have been rising faster in one territory than the other?

No. I certainly haven't got that, Jack. If what you're getting at is there are a much higher level of salary inflation in one place or another, the answer is no. We don't--we certainly have not seen that. Obviously from a translation point of view, where people are being paid in euros and the dollar has been weakening against the euro, when you convert all that into dollars currently, costs in Europe are growing in dollar terms faster than they're growing in the United States because of the currency movement, but that's an artifact of currency moving. It has nothing to do with underlying costs.

Thanks. That's great. Thanks guys for that.

Your next question comes from the line of Steve Unger with Bear Stearns. Please proceed.

Hi, good morning.

Good morning, Steve.

Good morning. First question, just in terms of the utilization of staff right now, are you balanced between the US and outside the US or is there excess capacity in one of those regions?

I would say we're broadly balanced in the quarter just ended. We were slightly--we had slightly more capacity in Europe than in the US.

Okay, and do you think you'll catch up starting in the second quarter?

Oh yes.

Okay, and then were you surprised by the strength of the demand in the first quarter of this year and would you have liked to have hired more staff if you could have?

No, no. We're very happy. I mean as I just said, in terms of utilization, utilization numbers came out pretty well across the organization, a little bit lower utilization in Europe than ideally we would have liked. Demand, no, we weren't surprised by it. I think we've been, God help me, I think bullish for the last year about the state of the marketplace and what we're seeing and hearing in the marketplace and the first quarter has just continued on these trends.

Some of the awards that we have in the current quarter are ones that are not scheduled to start until later this year so it's not a case that we're going gangbusters and we're under pressure. It's a case that we continue to build our backlog and our forward four quarters projection based on that backlog continues to strengthen.

Great. It's a high-class problem.

It is a high-class problem, yes.

All right. And then in terms of the new wins that you've been generating over the last couple of quarters, are these new, relatively new customer relationships within big pharma? Could you talk a little bit about, I know you've been developing customer relationships for quite some time.

Seventeen years to be exact.

Right. In terms of some of the larger big pharma relationships, are we seeing new wins out of these?

I'm just looking down through the list of significant wins here at the moment. There is one top 20 pharma company that appears on the list and they're appearing on the list for the first time, so yes, there's one significant pharma relationship that we've added in the course, major pharma relationship that we've added in the course of the last quarter. But although I will not say the same old-same old because we certainly don't regard them as that. But otherwise on the large pharma side, it's people we've been working with for a considerable period of time. And you'd expect most of the big names are represented there.

Okay. And then are you feeling like you're getting a very good look then at a broad base of the market in terms of various customers and various therapeutic classes?

I wouldn't want to say we see everything and every opportunity that's out there ICON gets to look at because I don't think that's the case. And the nice thing about that is there's plenty more work for us to do and there's plenty more opportunities for us to plow. So I think we get a look at the significant opportunities from those clients with whom we've had established relationships for a considerable number of years but then there's others where perhaps our relationship is only two or three years old and I wouldn't be certain that we would see all of the opportunities emanating from those companies at this point.

Wonderful. So you're continuing to penetrate those relationships then?

Absolutely.

Wonderful. Okay. Thank you very much. Congratulations on a very strong quarter.

Thanks, Steve.

(OPERATOR INSTRUCTIONS) Your next question is from the line of Terri Powers with Robert W. Baird. Please proceed.

Yes, good morning. This is Terri in for Eric Coldwell. I have a couple of questions regarding the central lab business. First of all, at least versus our model, the revenue came in a little weaker than we would have expected and I was wondering if, and I believe you guys might have cited this last quarter, I wonder if you guys were seeing the same things that PPD and obviously the much larger Covance had seen in terms of slower kit returns related to patient enrollment in clinical trials?

We're not calling that at this point, Terri. We've had all through last year we had very strong ramp up in the revenues in the lab business. We expected that there would be some slowing of that and perhaps a plateau for a period of time. That's what we're seeing. Kit volumes continued to grow strongly through the end of January and eased a little in February and picking up again in March. And we're expecting that as those kit volumes, that those increasing kit volumes return to us, the revenue growth in the lab will accelerate again.

We're not anticipating there's going to be an unusual or unnatural delay between the shipping out of those kits and the return of those kits, but if that happens, well that will just slow the pace of revenue growth in the lab more than we had anticipated. But we're not seeing any signals that that's going to be the case.

Okay. That's great. And then in terms of the profitability for that unit, you guys have been making investments particularly in the Singapore area. Is that still expected to negatively impact profitability more in the second quarter? I would imagine it should have impacted this quarter as well but if you could give an update on that.

Yes. The way we were looking at the lab's performance in our own internal planning was that the second quarter would show a small dip in margins reflecting some of those investments and then margin expansion would resume in the third and fourth quarters. And that's still the way we see it.

Okay. That's great. And then I wanted you to remind us, you say you have 77% of next full month's revenue included in backlog currently. Is that a record for the company and can you remind us about what you've said in the past in terms of at what level you remain very confident that you'll hit your guidance and above that level you're more likely to beat.

That's a very leading question, Terri. We have just raised guidance so I think at this point we'd be confident of meeting that revised revenue guidance target or those numbers. 77% is not a record. We had in the past, although I probably had dark hair at the time as opposed to gray hair I now have, we had 82% back several years ago. The mix of our business has changed since then and we've acquired some consulting businesses and I think our Phase I business and so that moderates the percentage coverage that we can have. So 77%, I'm giving you a long rambling answer here and I apologize. But 77% represents a strong backlog position. The last five quarters it's been 76% so we're in a very comfortable position but not so comfortable that we could say we're going to exceed that number that we just revised. It will require steady business wins from here on in for us to just meet that revised guidance that we've given.

Very good. And then for Ciaran, could you tell us if there was a meaningful foreign currency impact on the sales and EBIT for the quarter?

I wouldn't describe it as a meaningful foreign currency impact but if we took in the impact of the dollar read on the business and our growth we would have booked would have been about 34% instead of 38%. It was about $4 million at the revenue line and it's about half a million dollars at the EBIT line.

And at the EBIT, is the half a million a negative impact?

It is. It would have reduced the growth I think from 46% to 41%.

Okay. Thank you very much.

(OPERATOR INSTRUCTIONS) And your next question is from the line of Ian Hunter with Ian Hunter with Goodbody Stockbrokers. Please proceed.

Mr. Hunter, your line is open.

Good afternoon, gentlemen. I'm anxious, just a quick question on the Dublin development. I'm just wondering what the timeline is for the completion of the headquarters, rebuilding, et cetera. What we can see as a cost CapEx spend going through the end of this year and what stage we're at on the sale and lease-back?

In relation to the actual project itself, Ian, the construction project will not be completed until probably the third quarter and the way these things work, maybe the fourth quarter of 2008. The project will extend for another seven quarters, certainly six quarters or possibly seven quarters.

In terms of the sale and lease-back, Ciaran, do you want to comment on that?

I've nothing really to say that I didn't say the last time. It's a pretty significant negotiation. You can be sure that as soon as there's something meaningful to report to you, you'll all be the first to know, you know. These things are complex deals and we got our tenders in towards the back end of last year. We had discussions and are having discussions with a number of parties and we're looking at the options. It's a good time in the property market at the minute. We don't feel compelled to rush into a deal or to compromise ourselves so we just keep trying to extract the maximum value from this and see how it goes.

Okay. Thanks very much. Apologies to everyone listening. I was late coming into the call. It's probably the first question was asked today. I'd be grateful if you would just run it past me again. On the net new business wins, I'm assuming it's just a standard size of contract that came through and there were no large ones that caused the increase?

There were a couple over $20 million but the spread was pretty broad.

Okay, that's fine. Thanks very much.

And there are no further questions at this time.

Since there are no more questions, I would like to thank you all for joining us today. We are very pleased with our performance thus far in 2007. Our growth continues to be strong. Our backlog has reached over $960 million and it's likely to reach a billion by the end of this quarter. Our focus remains on delivering excellence to our clients and capitalizing on the strong market environment that continues in our industry.

With that ladies and gentlemen, thank you very much.

Thank you for your participation in today's conference. This concludes the presentation and you may now disconnect and have a good day.