Final Results

HAYS PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2012 30 August 2012 GOOD FEE AND PROFIT PERFORMANCE DUE TO STRONG COST CONTROL AND SELECTIVE INVESTMENT FOR GROWTH Year ended 30 June Actual LFL(1) (In Â£'s million) 2012 2011 growth growth Net fees 734.0 672.1 9% 8% Operating profit (before exceptional items)(2) 128.1 114.1 12% 9% Cash generated by operations(3) 162.2 97.3 67% Profit before tax (before exceptional items)(2) 122.4 106.6 15% Profit before tax 122.4 110.7 11% Basic earnings per share (before exceptional item)(2) 5.47p 5.19p 5% Basic earnings per share 5.47p 5.69p (4)% Dividend per share 2.50p 5.80p (57)% All numbers are from continuing operations only. Highlights Â· Strong International net fee growth of 16%(1) driving Group net fee growth of 8%(1) Â· Good operating profit growth of 9%(1) due to our selective investment approach and focussed cost control Â· Record performance in Continental Europe & Rest of World, delivering 23%(1) net fee growth - Broad-based growth, with Germany up 30%(1), Brazil up 30%(1), Canada up 25%(1) and France up 17%(1) Â· Good performance in Asia Pacific, delivering 10%(1) net fee growth with markets increasingly multi-speed - Australia & New Zealand net fees up 10%(1), Asia net fees up 11%(1) with Japan up 16%(1) Â· The UK market became increasingly challenging as the year progressed, with net fees down 7% - Private sector net fees down 6%. Public sector down 8% but sequentially stable over the year - Cost reductions delivered in the second half to protect the financial performance of the business Â· Consultant headcount up 1% year-on-year, but down 4% in the second half, reflecting our strategy to capitalise on growth markets whilst maximising Group profit Â· Excellent cash performance, with 127% conversion of operating profit into operating cash flow(3) Â· 5% growth in basic earnings per share(2) to 5.47p; full year dividend down 57% to 2.50p, in line with the rebased level announced at the Interim results Commenting on these results Alistair Cox, Chief Executive, said: "Delivering profit growth above our net fee growth in the increasingly difficult markets we faced is a good result. We have focussed on getting the balance right between continued investment to grow our business and rapid action to control costs as many of our markets tightened throughout the year. The strong performance of our International business is further clear evidence of the structural growth characteristics of markets such as Germany, Brazil, Canada and Japan. In addition, our performance illustrates the expertise of our teams around the world and their ability to respond to challenges whilst fully capitalising on opportunities in their specific markets. Looking ahead to 2013 we expect the overall economic backdrop to remain difficult and our markets to continue to be multi-speed. Several markets are likely to remain very challenging, but these will sit side-by-side with clear opportunities for growth. Therefore we need to be both adaptable to the world as it changes and selective about areas for investment. Achieving the right balance of building scale for the long term, exploiting stronger market segments and reducing costs and driving productivity to maximise the bottom line in more difficult areas will be key to our success." (1) LFL (like-for-like) growth represents organic growth of continuing activities at constant currency. (2) Continuing operations only, before exceptional items. 2011 profit numbers are presented before an exceptional credit of Â£4.1 million. (3) Cash generated by operations excludes cash impact of exceptional items of Â£7.0 million (2011: Â£15.4 million) paid in the year. (4) Based on earnings per share from continuing operations only, before exceptional items. (5) The underlying temporary placement gross margin is calculated as temporary placement net fees divided by temporary placement gross revenue and relates solely to temporary placements in which Hays generates net fees and specifically excludes transactions in which Hays acts as agent on behalf of workers supplied by third party agencies. (6) Consultants shown on a closing basis at 30 June 2012, and the change in consultants compares 30 June 2012 with 30 June 2011. Enquiries Hays plc Paul Venables David Walker / Lauren Burns Group Finance Director + 44 (0) 20 7383 2266 Investor Relations + 44 (0) 20 7383 2266 Maitland Liz Morley / Brian Hudspith + 44 (0) 20 7379 5151 Results presentation & webcast The preliminary results presentation will take place at UBS offices at 100 Liverpool Street, London at 8.30am on 30 August 2012 and will also be available as a live webcast on our website, www.hays.com/investors. A recording of the webcast will be available on our website from 1:00pm on 30 August 2012. Reporting calendar Interim Management Statement for quarter ending 30 September 2012 9 October 2012 Trading Update for quarter ending 31 December 2012 10 January 2013 Interim Results for six months ending 31 December 2012 28 February 2013 Interim Management Statement for the quarter ending 31 March 2013 11 April 2013 Trading Update for the quarter ending 30 June 2013 11 July 2013 Hays Group Overview Hays has 7,800 employees in 245 offices in 33 countries. In many of our global markets, the vast majority of professional and skilled recruitment is still done in-house, with minimal outsourcing to recruitment agencies which presents substantial long-term structural growth opportunities. This has been a key driver of the rapid diversification and internationalisation of the Group, with the International business representing 69% of the Group's net fees in 2012, compared with around 15% just 10 years ago. Our 5,013 consultants work in a broad range of sectors with no one sector specialism representing more than 26% of Group net fees. While Accountancy & Finance, Construction & Property and IT represent 64% of Group net fees in 2012, our expertise across 20 professional and skilled recruitment specialisms gives us opportunities to rapidly develop newer markets by replicating these long-established, existing areas of expertise. In addition to this international and sectoral diversification, the Group's net fees are generated 56% from temporary and 44% permanent placement markets, and we believe that this balance provides relative resilience to our business model in the current environment. This well diversified business model was a key driver of our performance in 2012. Introduction Good fee growth, selective investment and strong cost control to defend Group profitability We have delivered good net fee growth of 8%(1) driven by a strong performance by our International businesses, in the context of increasingly challenging conditions in many of our markets. The year saw fast-changing, volatile market conditions around the world, with sentiment amongst our clients and candidates varying from quarter to quarter. As such, our approach to managing the business has been nimble and responsive to reflect this volatility, most notably in terms of prioritising appropriate areas of investment. We have continued to grow our business to maximise fees in more buoyant markets, such as the resource-based regions of Australia and our global IT, Engineering, Life Sciences and Oil & Gas specialisms. Equally, we have continued to invest in order to capitalise on structural growth markets such as Germany, Japan and Brazil. At the same time, we have taken appropriate action to defend the profit of the Group by focussing on strong cost control in more challenging markets and leveraging our best-in-class IT systems to drive consultant productivity. As a result of this approach, we delivered operating profit growth of 9%(1) for the full year, and the Group's operating profit in the second half of the year was 3% higher than in the first half, despite net fees in the second half being sequentially 4% lower. Investing in our business Selective, targeted investment to capitalise on stronger markets and deliver profitable fee growth Office network changes and new country expansions We have continued to selectively invest to grow our International platform, opening new offices and developing new specialisms in existing countries. In Asia Pacific ('APAC'), we opened an office in Guangzhou (our fourth in China), and in May 2012 we launched Hays Malaysia, our seventh Asia Pacific country of operation and the 33rd country for the Group. In Continental Europe & Rest of World ('RoW') we opened offices in Cologne and Leipzig (Germany), Houston (USA) and Gosselies (Belgium) and we are continuing to develop our business in Latin America, where we launched new businesses in Colombia and Chile. In the UK, we continued the consolidation of our office network, ending the financial year with 110 offices, a reduction of 15 in the year and down from a peak level of 235 in 2009. 30 June Net opened/ 30 June Office network 2012 (closed) 2011 Asia Pacific 48 2 46 Continental Europe & RoW 87 3 84 United Kingdom & Ireland 110 (15) 125 Group 245 (10) 255 Movement in consultant headcount Our consultant headcount ended June at 5,013, up 1% year on year but down 4% in the second half, reflecting our more selective, targeted investment approach. In our International business, we increased consultant headcount by 11% in the year, to 3,079. Consultant headcount in the UK & Ireland reduced 10%, primarily through natural attrition. 30 June Net 30 June Consultant headcount 2012 change 2011 Asia Pacific 1,112 41 1,071 Continental Europe & RoW 1,967 253 1,714 United Kingdom & Ireland 1,934 (224) 2,158 Group 5,013 70 4,943 We continue to build a stronger, broader-based and more efficient business. Our best-in-class IT systems enable us to interact with new media and social networks effectively, provide data capture on candidates and opportunities globally and allow us to manage administration more efficiently. Each of these elements are critical to ensure we continue to provide a market-leading service to our clients and candidates, and anticipate and respond to their evolving needs. Temporary and permanent placement market trends Temp market resilience in more challenging markets and areas of skills shortage, perm markets more cyclical and overall increasingly tough Net fees from temporary placements, which represent 56% of Group fees, increased by 12%(1). This comprised a volume increase of 4% and a favourable increase in mix/hours worked of 9%, partially offset by underlying margins, which were slightly lower at 14.6% (2011: 14.7%). Margins have remained broadly stable through the year. Net fees in the permanent placement business, representing 44% of Group net fees, increased by 3%(1). The average fee per placement increased by 6%(1) driven primarily by the mix of business, as more of our permanent fees were generated by the International businesses where the average salary of candidates placed is higher. This was partially offset by a 3% decline in placement volumes. The higher level of growth in temporary relative to permanent placements reflects the greater resilience of the temporary placement business in more challenging, uncertain markets. We saw lower levels of activity in permanent placements, particularly in the second half of the year, as client and candidate confidence in many markets was negatively impacted by heightened global economic uncertainty. Asia Pacific Strong growth overall, driven by Western Australia, New Zealand & Japan; other Asian markets and the rest of Australia increasingly difficult Growth Year ended 30 June (In Â£'s million) 2012 2011 Actual LFL(1) Net fees 242.2 210.0 15% 10% Operating profit 90.9 78.1 16% 11% Conversion rate 37.5% 37.2% Period end consultant headcount(6) 1,112 1,071 4% In Asia Pacific, net fees increased by 15% (10% on a like-for-like basis(1)) to Â£242.2 million and operating profit increased by 16% (11% on a like-for-like basis(1)) to Â£90.9 million. The difference between actual growth and like-for-like growth was predominantly due to the appreciation in the Australian Dollar. The business continued to achieve an excellent conversion rate of 37.5%, up from 37.2% in the prior year, as we carefully balanced the need to drive profitability with selective investment to capitalise on the long-term growth potential across the region. In our market-leading Australia & New Zealand business, net fees were up 10%(1) versus prior year. Temporary placement net fees increased by 18%(1) and we achieved record temp levels in several months. Permanent placement net fees declined by 1%(1) with an excellent performance in the resource-based regions of Western Australia and Queensland offset by increasingly tough market conditions in New South Wales and Victoria. New Zealand also delivered excellent net fee growth of 34%(1). Our public sector business, which accounts for 24% of net fees in Australia & New Zealand, delivered good growth of 13% (1). Our Asian business, which accounted for 13% of the division's net fees in the year, delivered net fee growth of 11%(1). Japan delivered strong net fee growth of 16%(1), although comparators include the impact of the March 2011 earthquake and subsequent disruption. Elsewhere in Asia, market conditions were mixed and became more challenging as the year progressed, notably in those businesses with a significant weighting towards banking and financial services such as Hong Kong and Singapore. Consultant headcount in the division increased by 4% over the year, with 3% more consultants in Australia & New Zealand and 5% in Asia, but we took action to reduce headcount by 2% in the second half as we became more selective about areas of investment. We will continue with this approach going forward, as although we continue to selectively increase consultant headcount in the resources-based regions of Australia and to capitalise on structural growth in Japan, we remain cautious elsewhere in order to protect the profitability of the division while market conditions remain challenging. Continental Europe & Rest of World Delivering strong growth and improved conversion rate, driven by an excellent performance in Germany Growth Year ended 30 June (In Â£'s million) 2012 2011 Actual LFL(1) Net fees 266.5 220.4 21% 23% Operating profit 43.7 32.4 35% 37% Conversion rate 16.4% 14.7% Period end consultant headcount(6) 1,967 1,714 15% In Continental Europe & RoW, we delivered net fee growth of 21% (23% on a like-for-like basis(1)) to Â£266.5 million, driving excellent operating profit growth of 35% (37% on a like-for-like basis(1)) to Â£43.7 million. Both net fees and operating profits in the year represented records for the division. The difference between actual growth and like-for-like growth was primarily due to the depreciation in the Euro. The conversion rate increased to 16.4% in 2012 from 14.7% in 2011 driven by broad-based net fee growth in the more buoyant markets, strong cost control across the division and more selective headcount investment in the more challenging areas, particularly in the second half of the year. Our German business, which represented 51% of the division's net fees and the majority of the division's profits, delivered excellent net fee growth of 30%(1) and posted several record monthly performances as momentum remained strong through the year. Growth was broad-based across our contracting, temporary and permanent placement businesses, particularly our core specialisms of IT and Engineering. We also achieved strong growth in Accountancy & Finance, Construction & Property, Sales & Marketing, Legal and Life Sciences and these specialisms now account for 23% of total net fees. Our market-leading position and the increasing diversification of the business means we are ideally positioned to benefit from the continuing rapid development of the specialist recruitment market in Germany and the clear structural growth opportunities this presents. Elsewhere in Europe, activity was significantly impacted by the Eurozone crisis and more general macroeconomic uncertainty. In France, our second largest country in the division, we recorded 17%(1) net fee growth, although perm momentum slowed markedly in the second half. Our other businesses in Continental Europe, covering 14 countries and focussed principally on the permanent placement markets, delivered net fee growth of 9%. We continue to invest in our business in Latin America, recognising the structural growth opportunities in this market. Having opened Hays Colombia and Chile in the year, we now operate in four countries across seven offices in Latin America. In Brazil, which is now the sixth largest country in the Group, we delivered excellent net fee growth of 30%(1). In North America, Canada delivered strong net fee growth of 25% and we started to diversify our offering in the US by opening our second office, in Houston, which will focus on Oil & Gas. Consultant headcount in the division increased by 15% during the year, led by increases of 16% in Germany, 29% in Brazil and 56% in Canada. We are continuing to invest in consultant headcount in those regions which demonstrate clear growth, while being more cautious across the rest of the division to maximise our financial performance. As a result, consultant headcount was broadly flat in the second half. United Kingdom & Ireland More difficult private sector; tough but stable public sector Growth Year ended 30 June (In Â£'s million) 2012 2011 Actual LFL (1) Net fees 225.3 241.7 (7)% (7)% Operating profit(2) (6.5) 3.6 (282)% (282)% Conversion rate (2.9)% 1.5% Period end consultant headcount(6) 1,934 2,158 (10)% In the United Kingdom & Ireland, net fees decreased by 7% to Â£225.3 million, with an operating loss of Â£6.5 million. Net fees fell by 8% in the permanent placement business and by 6% in the temporary placement business, and are now down 50% versus peak levels. Trading conditions in the UK have been tough, and became increasingly difficult as the year progressed. In our UK private-sector business, net fees declined by 6%. Markets were particularly difficult in our Banking and City-related specialisms, but as the year progressed conditions became tougher across much of the market as confidence amongst candidates and clients was negatively impacted by the worsening economic conditions. Our public-sector business, which represented 24% of UK net fees, faced tough but stable market conditions throughout the year, with net fees decreasing by 8%. We continue to expect this business to remain broadly stable at these subdued levels in the short term. In Ireland, our business performed well delivering excellent net fee growth of 30%(1). UK financial performance was negatively affected as a result of these more challenging market conditions. However, despite the fact that net fees in the second half were 6% lower than those in the first half, the successful implementation of a series of cost-saving initiatives meant that the sequential financial performance of the business in the second half broadly reflected that of the first half. The various cost reduction programs incurred one-off costs of Â£5.8 million, which were offset by a Â£6.0 million curtailment gain on the closure of the UK defined benefit pension scheme to future accrual in the year. Consultant headcount in the division declined 10% during the year primarily through natural attrition, as we reacted to changes in market conditions to defend the financial performance of the business. We continue to review all aspects of our UK cost base, which we have already reduced by c.30% from peak levels, with particular emphasis on overhead and back-office support costs. At the same time, our focus is on growing market share and taking full advantage of those segments of the UK recruitment market which continue to present revenue growth opportunities. Current trading Continued mixed conditions, with pockets of strong growth but overall more challenging, notably in permanent markets Overall trading conditions became more challenging through the second half, particularly in the fourth quarter. The difficult global economic environment continues to have a negative impact on candidate and client confidence in many markets, particularly in permanent recruitment markets. Conditions in Australia are sequentially stable overall, with comparatives becoming tougher. We continue to see growth in Western Australia, although this is offset by tougher conditions elsewhere. In Asia, markets with significant weighting towards banking remain particularly tough. In Continental Europe & RoW, we see continued strong growth in Germany and Canada, and good growth in markets such as Brazil and Russia, but growth is slowing across much of the rest of the division, and net fees are declining in certain countries. In the UK, the market continues to be very difficult. Looking ahead, whilst we continue to see pockets of growth and opportunity in certain markets, overall the environment remains challenging and in some countries very difficult. We will continue to react quickly to changing conditions in each market, investing selectively to capitalise on growth and defending the financial performance where markets are more difficult. FINANCIAL REVIEW Summary Income Statement Growth Year ended 30 June (In Â£'s million) 2012 2011 Actual LFL (1) Turnover 3,654.6 3,256.0 12% 11% Net fees Temporary 414.0 365.4 13% 12% Permanent 320.0 306.7 4% 3% Total 734.0 672.1 9% 8% Operating profit(2) 128.1 114.1 12% 9% Conversion rate 17.5% 17.0% Underlying temporary margin(5) 14.6% 14.7% Temporary fees as % of total 56% 54% Period end consultant headcount(6) 5,013 4,943 1% (1) LFL (like-for-like) growth represents organic growth of continuing activities at constant currency. (2) Continuing operations only, before exceptional items. 2011 profit numbers are presented before an exceptional credit of Â£4.1 million. (3) Cash generated by operations excludes cash impact of exceptional items of Â£7.0 million (2011: Â£15.4 million) paid in the year. (4) Based on earnings per share from continuing operations only, before exceptional items. (5) The underlying temporary placement gross margin is calculated as temporary placement net fees divided by temporary placement gross revenue and relates solely to temporary placements in which Hays generates net fees and specifically excludes transactions in which Hays acts as agent on behalf of workers supplied by third party agencies. (6) Consultants shown on a closing basis at 30 June 2012, and the change in consultants compares 30 June 2012 with 30 June 2011 Group turnover increased by 12% (or 11% on a like for like basis(1)) and net fees increased by 9% (8% on a like for like basis(1)), driving operating profit growth of 12%(2) (9% on a like for like basis(1)). The difference in growth rates between Group turnover and net fees was primarily driven by a change in mix between the temp and perm businesses. Exchange rate movements had a positive impact on the results overall increasing net fees and operating profit by Â£7.1 million and Â£3.4 million respectively, as depreciation in the rate of exchange of the Euro was more than offset by favourable movements in other Group currencies, particularly the Australian Dollar. Fluctuations in exchange rates remain a significant sensitivity for the Group. The Group's operating cost base increased by 8%(1) versus prior year. This was principally due to the fact that whilst the Group's consultant headcount increased 1% year-on-year at the end of June, it was 9% higher, on average, throughout the year. The other primary driver of the increase was a rise in commission payments in line with net fees. The Group's conversion rate, which is the proportion of net fees converted into operating profit(2), increased to 17.5% from 17.0% in the prior year. This was driven by net fee growth and strong control of the Group's operating cost base. Group consultant headcount increased by 1% during the year, but was down 4% in the second half. The full year increase was driven by an 11% rise in the number of consultants in the International business, where we continue to invest in order to ensure the Group capitalises on the more buoyant markets and on the clear structural growth opportunities which exist across many of our International markets. This was principally offset by a 10% reduction in consultant headcount in the UK, which was largely as a result of natural attrition, as we reacted to changes in market conditions to defend the financial performance of the business. Net finance charge The net finance charge for the year was Â£5.7 million (2011: Â£7.5 million). The average interest rate on gross debt during the year was 2.8% (2011: 2.5%), generating net bank interest payable, including amortisation of arrangement fees, of Â£7.1 million (2011: Â£6.0 million). The net interest credit on the defined benefit pension scheme obligations was Â£2.3 million (2011: charge of Â£1.2 million), with the change being primarily due to higher scheme asset values increasing expected asset returns. The charge for the Pension Protection Fund levy was Â£0.9 million (2011: Â£0.3 million). It is expected that the net finance charge for the year ending 30 June 2013 will be around Â£10m due to the IAS19 pension charge and an expected increase due to early refinancing of the revolving credit facility. Taxation Taxation for the year was Â£46.9 million, representing an effective tax rate of 38.3% (2011: 33.0% pre-exceptional items). The effective tax rate reflects the Group's geographical mix of profits, and the impact of unrelieved overseas tax losses and costs incurred in the UK for which no tax deduction is currently available. We expect the Group's effective tax rate to be around 40% in 2013. Discontinued operations A profit from discontinued operations of Â£11.0 million arose in the year, primarily from the write-back of provisions that were established when the Group completed the disposal of its non-core activities between March 2003 and November 2004 which in the light of subsequent events are no longer required. Earnings per share Basic earnings per share increased 5% to 5.47 pence (2011: 5.19 pence(2)). The increase in earnings per share reflects the Group's higher operating profit and the lower net finance charge, partially offset by an increase in the effective tax rate. Cash flow and balance sheet Cash flow in the year was excellent with 127% conversion of operating profit into operating cash flow(3). This was higher than the cash flow conversion in the prior year (2011: 85%) primarily as a result of stronger working capital management, with trade debtor days decreased to 35 days (2011: 38 days). Overall, cash inflow from working capital was Â£3.2 million and net cash generated by operations(3) was Â£162.2 million (2011: Â£97.3 million). Net capital expenditure was higher at Â£18.8 million (2011: Â£18.6 million). Capital expenditure is expected to reduce to around Â£10 million in 2013. Dividends paid in the year totalled Â£65.8 million, pension deficit contributions were Â£12.4 million and Â£6.2 million was paid out in net interest. Net debt therefore reduced slightly from Â£134.8 million at the start of the year to Â£132.9 million at the end of the year. The Group expects a modest reduction in net debt in 2013. The Group has a Â£300 million unsecured revolving credit facility available, which expires in January 2014. The most significant item in the Group balance sheet is trade receivables, which were Â£351.4 million at year end (2011: Â£345.6 million). The increase in trade receivables reflects the increase in turnover offset by the improvement in debtor days. Retirement benefits The Group's pension liability under IAS 19 at 30 June 2012 of Â£15.4 million (Â£10.4 million net of deferred tax) increased by Â£3.5 million compared to 30 June 2011, primarily due to the net effect of a decrease in the net yield (discount rate versus RPI inflation rate) being partially offset by higher than expected asset returns, employer contributions. During the year, the Company contributed Â£15.5 million of cash to the defined benefit scheme (2011: Â£16.5 million), which included Â£12.4 million funding towards the pension deficit in line with previous guidance. Capital structure and dividend The Board's priorities for our free cash flow are to fund the Group's investment and development, maintain a strong balance sheet and deliver a sustainable dividend at a level which is both affordable and appropriate. As we set out in our Interim results statement, the increased global economic uncertainty which impacted our business in the year slowed the pace of the Group's profit growth. At the end of the first half, considering this slowing of profit growth and our view on the likely growth in Group profitability in the second half, the Board decided that whilst the previous level of dividend remained affordable, it was no longer appropriate to maintain the dividend at that level, which had been uncovered for the last two years. The Board therefore decided to rebase the dividend and paid an interim dividend of 0.83p per share (2011: 1.85p). In line with this policy, the Board proposes to pay a final dividend of 1.67p per share (2011: 3.95p), resulting in a total dividend for the full year of 2.50p per share (2011: 5.80p). We believe that dividends should be covered by earnings in the range 2.0x to 3.0x(4) and consider this payout policy to be appropriately covered by earnings and cash flow. The Board remains committed to paying a sustainable and progressive dividend. It is our intention to grow the dividend when dividend cover sustainably reaches c.2.5x(4). The recommended dividend payment date will be 16 November 2012 and, if approved, will be paid to shareholders who are on the register at the close of business on 12 October 2012. Board changes Pippa Wicks joined the Board as a non-executive director on 1 January 2012 and is a member of the Audit, Nomination and Remuneration Committees. Pippa is currently Managing Director of AlixPartners LLP, the global business advisory firm. At this year's Annual General Meeting Paul Stoneham will be retiring as a non-executive director having served on the Board for eight years. We thank Paul for his commitment and contribution in that time. Alan Thomson, as Chairman of the Nomination Committee will lead the process for the appointment of a new non-executive director. Treasury management The Group's operations are financed by retained earnings and bank borrowings. The Group has an unsecured Â£300 million revolving credit facility, in place until January 2014, and uses this facility to manage its day-to-day working capital requirements as appropriate. We have begun refinancing discussions with our banking group, which are progressing well. All borrowings are raised by the Group's UK-based treasury department, which manages the Group's treasury risk in accordance with policies set by the Board. The Group's treasury department does not engage in speculative transactions and does not operate as a profit centre. The Board considers it appropriate to use certain derivative financial instruments to reduce its exposure to interest rate movements under its floating rate revolving credit facility. The Group holds six interest rate swaps which exchange a fixed payment for floating rate receipt on a total debt value of Â£40 million with an equal mix of two-year and three-year maturities, which commenced in October 2011. The Group does not hold or use derivative financial instruments for speculative purposes. Counterparty risk primarily arises from investment of any surplus funds. The Group restricts transactions to banks and money market funds that have an acceptable credit rating and limits exposure to each institution. Principal risks facing the business Hays plc operates an embedded risk management framework, which is monitored and reviewed by the Audit Committee. There are a number of potential risks and uncertainties that could have a material impact on the Group's financial performance and position. These include risks relating to the cyclical nature of our business, business model risk, talent, compliance risk, reliance on technology, contract risk, foreign exchange and Eurozone risk. A full description of these risks and our mitigating actions will be provided in the 2012 Annual Report. Hays plc 250 Euston Road, London NW1 2AF www.hays.com/investors Cautionary statement The Preliminary results report (the "Report") has been prepared in accordance with the Disclosure Rules and Transparency Rules of the UK Financial Services Authority and is not audited. No representation or warranty, express or implied, is or will be made in relation to the accuracy, fairness or completeness of the information or opinions made in this Report. Statements in this Report reflect the knowledge and information available at the time of its preparation. Certain statements included or incorporated by reference within this Report may constitute "forward-looking statements" in respect of the Group's operations, performance, prospects and/or financial condition. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions and actual results or events may differ materially from those expressed or implied by those statements. Accordingly, no assurance can be given that any particular expectation will be met and reliance should not be placed on any forward-looking statement. Additionally, forward-looking statements regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The information contained in this Report is subject to change without notice and no responsibility or obligation is accepted to update or revise any forward-looking statement resulting from new information, future events or otherwise. Nothing in this Report should be construed as a profit forecast. This Report does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase or subscribe for any shares in the Company, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment or investment decisions relating thereto, nor does it constitute a recommendation regarding the shares of the Company or any invitation or inducement to engage in investment activity under section 21 of the Financial Services and Markets Act 2000. Past performance cannot be relied upon as a guide to future performance. Liability arising from anything in this Report shall be governed by English Law, and neither the Company nor any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this Report or its contents or otherwise arising in connection with this Report. Nothing in this Report shall exclude any liability under applicable laws that cannot be excluded in accordance with such laws. CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE (In Â£s million) Note 2012 2011 Turnover Continuing operations 3,654.6 3,256.0 Net fees * Continuing operations 3 734.0 672.1 Operating profit from continuing operations before exceptional items 3 128.1 114.1 Exceptional items - 4.1 Operating profit from continuing operations 3 128.1 118.2 Finance income 0.9 1.0 Finance cost (6.6) (8.5) 6 (5.7) (7.5) Profit before tax 122.4 110.7 Tax 7 (46.9) (32.4) Profit from continuing operations after tax 75.5 78.3 Profit from discontinued operations 11.0 1.8 Profit attributable to equity holders of the parent Company 86.5 80.1 Earnings per share from continuing operations before exceptional items - Basic 9 5.47p 5.19p - Diluted 9 5.37p 5.10p Earnings per share from continuing operations - Basic 9 5.47p 5.69p - Diluted 9 5.37p 5.59p Earnings per share from continuing and discontinued operations - Basic 9 6.26p 5.82p - Diluted 9 6.16p 5.72p *Net fees comprise turnover less remuneration of temporary workers and other recruitment agencies. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE (In Â£s million) 2012 2011 Profit for the year 86.5 80.1 Currency translation adjustments (16.1) 19.4 Mark to market valuation of derivative financial instruments (0.4) (0.7) Actuarial (loss)/gain on defined benefit pension schemes (24.6) 43.7 Tax relating to components of other comprehensive income 2.4 (11.6) Other net (expense)/income for the year (38.7) 50.8 Total comprehensive income for the year 47.8 130.9 Attributable to equity shareholders of the parent Company 47.8 130.9 CONSOLIDATED BALANCE SHEET AT 30 JUNE (In Â£s million) Note 2012 2011 Non-current assets Goodwill 177.2 183.5 Other intangible assets 55.5 62.9 Property, plant and equipment 24.2 23.4 Deferred tax assets 28.3 29.2 285.2 299.0 Current assets Trade and other receivables 538.6 524.2 Cash and cash equivalents 38.7 55.1 577.3 579.3 Total assets 862.5 878.3 Current liabilities Trade and other payables (429.0) (405.0) Current tax liabilities (29.2) (31.0) Bank loans and overdrafts (1.6) (4.9) Provisions 11 (2.7) (8.5) Derivative financial instruments (1.1) (0.7) (463.6) (450.1) Non-current liabilities Bank loans (170.0) (185.0) Trade and other payables - (1.0) Retirement benefit obligations 10 (15.4) (11.9) Provisions 11 (22.9) (33.9) (208.3) (231.8) Total liabilities (671.9) (681.9) Net assets 190.6 196.4 Equity Called up share capital 14.7 14.7 Share premium 369.6 369.6 Capital redemption reserve 2.7 2.7 Retained earnings (270.5) (275.6) Other reserves 74.1 85.0 Total shareholders' equity 190.6 196.4 The Consolidated Financial Statements of Hays plc, registered number 2150950, were approved by the Board of Directors and authorised for issue on 29 August 2012. Signed on behalf of the Board of Directors A R Cox P Venables CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE (In Â£s million) Note 2012 2011 Operating profit from continuing operations 128.1 118.2 Adjustments for: Exceptional items(i) (7.0) (19.5) Depreciation of property, plant and equipment 9.7 9.4 Amortisation of intangible fixed assets 13.5 10.9 Loss on disposal of property, plant and equipment 0.9 - Net movements in provisions and other items (5.4) (2.4) Share-based payments 12.2 12.5 23.9 10.9 Operating cash flow before movement in working capital 152.0 129.1 Changes in working capital Increase in receivables (26.7) (93.5) Increase in payables 29.9 46.3 3.2 (47.2) Cash generated by operations 155.2 81.9 Income taxes paid (44.2) (26.6) Net cash inflow from operating activities 111.0 55.3 Investing activities Purchase of property, plant and equipment (12.7) (8.9) Proceeds from sales of business and related assets 0.1 0.5 Purchase of intangible assets (6.1) (9.7) Cash paid in respect of acquisitions made in previous year (1.0) (3.2) Interest received 0.9 1.0 Net cash used in investing activities (18.8) (20.3) Financing activities Interest paid (7.1) (9.5) Equity dividends paid (65.8) (79.7) Purchase of own shares (0.7) - Proceeds from exercise of share options 2.1 1.2 (Decrease)/increase in bank loans and overdrafts (18.3) 38.0 Pension scheme funding (12.4) (12.0) Net cash used in financing activities (102.2) (62.0) Net decrease in cash and cash equivalents (10.0) (27.0) Cash and cash equivalents at beginning of year 12 55.1 74.7 Effect of foreign exchange rate movements (6.4) 7.4 Cash and cash equivalents at end of year 12 38.7 55.1 (i) The adjustment to the Cash Flow Statement in the year to June 2012 of Â£7.0 million relates to cash paid in respect of exceptional items which were recognised in the financial years ended 30 June 2010 and 30 June 2011. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2012 Share Capital Share premium redemption Retained Other (In Â£s million) capital account reserve earnings reserves Total At 1 July 2011 14.7 369.6 2.7 (275.6) 85.0 196.4 Currency translation adjustments - - - - (16.1) (16.1) Mark to market valuation of derivative financial instruments - - - - (0.4) (0.4) Actuarial loss on defined benefit pension schemes - - - (24.6) - (24.6) Tax relating to components of other comprehensive income - - - 2.4 - 2.4 Net expense recognised in other comprehensive income - - - (22.2) (16.5) (38.7) Profit for the year - - - 86.5 - 86.5 Total comprehensive income for the year - - - 64.3 (16.5) 47.8 Dividends paid - - - (65.8) - (65.8) Share-based payments - - - 6.6 4.4 11.0 Other share movements - - - - 1.2 1.2 At 30 June 2012 14.7 369.6 2.7 (270.5) 74.1 190.6 FOR THE YEAR ENDED 30 JUNE 2011 Share Capital Share premium redemption Retained Other (In Â£s million) capital account reserve earnings reserves Total At 1 July 2010 14.7 369.6 2.7 (313.0) 58.3 132.3 Currency translation adjustments - - - - 19.4 19.4 Mark to market valuation of derivative financial instruments - - - - (0.7) (0.7) Actuarial gain on defined benefit pension schemes - - - 43.7 - 43.7 Tax relating to components of other comprehensive income - - - (11.6) - (11.6) Net income recognised in other comprehensive income - - - 32.1 18.7 50.8 Profit for the year - - - 80.1 - 80.1 Total comprehensive income for the year - - - 112.2 18.7 130.9 Dividends paid - - - (79.7) - (79.7) Share-based payments - - - 4.9 6.7 11.6 Other share movements - - - - 1.3 1.3 At 30 June 2011 14.7 369.6 2.7 (275.6) 85.0 196.4 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1 Statement under s435 - publication of non-statutory accounts The financial information set out in this preliminary announcement does not constitute statutory accounts for the years ended 30 June 2012 or 2011, for the purpose of the Companies Act 2006, but is derived from those accounts. The statutory accounts for 2011 have been delivered to the Registrar of Companies and those for 2012 will be delivered following the Company's Annual General Meeting. The Group's Auditor has reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under Section 498(2) or (3) of the Companies Act 2006. 2 Basis of preparation Whilst the financial information included in this preliminary announcement has been prepared in accordance with the International Financial Reporting Standards (IFRSs) as adopted for use in the European Union and as issued by the International Accounting Standards Board, this announcement does not itself contain sufficient information to comply with IFRS. The accounting policies applied in preparing this financial information are consistent with the Group's financial statements for the year ended June 2011 with the exception of the following new accounting standards and amendments which were mandatory for accounting periods beginning on or after 1 January 2011, none of which had any material impact on the Group's results or financial position. Â· Improvements to IFRSs 2010 (effective 1 July 2011) Â· IAS 24 (revised 2009) Related Party Disclosure (effective 1 January 2011) Â· IFRIC 14 (amendment) IAS 19 - The Limit on Defined Benefit Asset, Minimum Funding Requirements and their interaction (effective 1 January 2011) Â· IFRS 1 (amendment) Severe Hyperinflation and Removal of Fixed Dates for First Time Adopters (effective 1 July 2011) Â· IFRS 7 (amendment) Disclosures - Transfers of Financial Assets (effective 1 July 2011) Going Concern The Group's business activities, together with the factors likely to effect its future development, performance and financial position, including its cash flows and liquidity position are described in this preliminary results announcement for the year ended 30 June 2012. The directors have formed the judgement that there is reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. As a result the directors continue to adopt the going concern basis in the preparation of the financial statements. 3 Segmental information The Group's continuing operations comprise one class of business, that of qualified, professional and skilled recruitment. The Group's Management Board, which is regarded as the chief operating decision maker, uses net fees by segment as its measure of revenue in internal reports. This is because net fees exclude the remuneration of temporary workers, and payments to other recruitment agencies where the Group acts as principal, which are not considered relevant in allocating resources to segments. The Group's Management Board considers net fees for the purpose of making decisions about allocating resources. The reconciliation of turnover to net fees can be found in note 5. (In Â£s million) 2012 2011 Net fees from continuing operations Asia Pacific 242.2 210.0 Continental Europe & Rest of World 266.5 220.4 United Kingdom & Ireland 225.3 241.7 734.0 672.1 2011 Before 2011 exceptional Exceptional (In Â£s million) 2012 items items 2011 Operating profit from continuing operations Asia Pacific 90.9 78.1 - 78.1 Continental Europe & Rest of World 43.7 32.4 - 32.4 United Kingdom & Ireland (6.5) 3.6 4.1 7.7 128.1 114.1 4.1 118.2 4 Exceptional items In the prior year, the Group recognised an exceptional credit of Â£4.1 million in the Consolidated Income Statement. Full details of these items were disclosed in the 2011 Annual Report & Financial Statements. 5 Operating profit from continuing operations The following costs are deducted from turnover to determine net fees from continuing operations: (In Â£s million) 2012 2011 Turnover 3,654.6 3,256.0 Remuneration of temporary workers (2,421.3) (2,125.8) Remuneration of other recruitment agencies (499.3) (458.1) Net fees 734.0 672.1 Profit from operations is stated after charging/(crediting) the following items to net fees of Â£734.0 million (2011: Â£672.1 million): 2011 Before 2011 exceptional Exceptional (In Â£s million) 2012 items items 2011 Staff costs 436.6 406.9 7.0 413.9 Depreciation of property, plant and equipment 9.7 9.4 0.8 10.2 Amortisation of intangible assets 13.5 10.9 10.0 20.9 Auditor remuneration - for statutory audit services 0.8 1.0 - 1.0 - for other services 0.2 0.3 - 0.3 Other external charges 145.1 129.5 (21.9) 107.6 605.9 558.0 (4.1) 553.9 Included within staff costs is a Â£6.0 million credit in respect of the curtailment gain arising from the closure of the UK defined benefit pension scheme to the accrual of future benefits (note 10). Set against this is a series of non-recurring UK costs amounting to Â£5.8 million, of which Â£2.5 million is included within staff costs, and Â£3.3 million within other external charges. The net UK impact of these items is a Â£0.2 million credit to the Income Statement. 6 Finance income and finance costs Finance income (In Â£s million) 2012 2011 Interest on bank deposits 0.9 1.0 Finance costs (In Â£s million) 2012 2011 Interest payable on bank loans and overdrafts (8.0) (7.0) Pension Protection Fund levy (0.9) (0.3) Net interest on pension obligations 2.3 (1.2) (6.6) (8.5) Net finance charge (5.7) (7.5) 7 Income taxes relating to continuing operations The income tax expense for the year can be reconciled to the accounting profit as follows: 2011 Before 2011 exceptional Exceptional (In Â£s million) 2012 items items 2011 Profit before tax from continuing operations 122.4 106.6 4.1 110.7 Income tax expense calculated at 25.5% (2011: 27.5%) (31.2) (29.3) (1.1) (30.4) Effect of expenses that are not deductible in determining taxable profit (0.1) (2.9) 3.9 1.0 Deductible pension contribution in respect of prior periods 2.5 - - - Effect of unused tax losses not recognised as deferred tax assets (7.9) (4.9) - (4.9) Effect of different tax rates of subsidiaries operating in other jurisdictions (9.4) (4.6) - (4.6) Effect on deferred tax balances due to the change in income tax rate from 26.0% to 24.0% (effective March 2012) (0.7) (0.2) - (0.2) Effect of share-based payment charges and share options (0.9) (0.4) - (0.4) (47.7) (42.3) 2.8 (39.5) Adjustments recognised in the current year in relation to the current tax of prior years (0.8) 0.2 - 0.2 Adjustments to deferred tax in relation to prior years 1.6 6.9 - 6.9 Income tax expense recognised in profit or loss (relating to continuing operations) (46.9) (35.2) 2.8 (32.4) Effective tax rate for the year on continuing operations 38.3% 33.0% (68.3%) 29.3% The tax rate used for the 2012 and 2011 reconciliations above is the corporate tax rate of 25.5% (2011: 27.5%) payable by corporate entities in the United Kingdom on taxable profits under tax law in that jurisdiction. 8 Dividends The following dividends were paid by the Group and have been recognised as distributions to equity shareholders in the year: 2012 2011 pence per 2012 pence per 2011 share Â£s million share Â£s million Previous year final dividend 3.95 54.3 3.95 54.3 Current year interim dividend 0.83 11.5 1.85 25.4 65.8 79.7 The following dividends are proposed by the Group in respect of the accounting year presented: 2012 2011 pence per 2012 pence per 2011 share Â£s million share Â£s million Interim dividend 0.83 11.5 1.85 25.4 Final dividend (proposed) 1.67 23.1 3.95 54.3 2.50 34.6 5.80 79.7 The final dividend for 2012 of 1.67 pence per share (Â£23.1 million) will be proposed at the Annual General Meeting on 7 November 2012 and has not been included as a liability as at 30 June 2012. If approved, the final dividend will be paid on 16 November 2012 to shareholders on the register at the close of business on 12 October 2012. 9 Earnings per share Weighted average number of Per share Earnings shares amount For the year ended 30 June 2012 (Â£s million) (million) (pence) Continuing operations: Basic earnings per share from continuing operations 75.5 1,381.4 5.47 Dilution effect of share options - 23.4 (0.10) Diluted earnings per share from continuing operations 75.5 1,404.8 5.37 Discontinued operations: Basic earnings per share from discontinued operations 11.0 1,381.4 0.80 Dilution effect of share options - 23.4 (0.02) Diluted earnings per share from discontinued operations 11.0 1,404.8 0.78 Continuing and discontinued operations: Basic earnings per share from continuing and discontinued operations 86.5 1,381.4 6.26 Dilution effect of share options - 23.4 (0.10) Diluted earnings per share from continuing and discontinued operations 86.5 1,404.8 6.16 Weighted average number of Per share Earnings shares amount For the year ended 30 June 2011 (Â£s million) (million) (pence) Continuing operations before exceptional items: Basic earnings per share from continuing operations 71.4 1,376.0 5.19 Dilution effect of share options - 24.3 (0.09) Diluted earnings per share from continuing operations 71.4 1,400.3 5.10 Continuing operations after exceptional items: Basic earnings per share from continuing operations 78.3 1,376.0 5.69 Dilution effect of share options - 24.3 (0.10) Diluted earnings per share from continuing operations 78.3 1,400.3 5.59 Discontinued operations: Basic earnings per share from discontinued operations 1.8 1,376.0 0.13 Dilution effect of share options - 24.3 - Diluted earnings per share from discontinued operations 1.8 1,400.3 0.13 Continuing and discontinued operations: Basic earnings per share from continuing and discontinued operations 80.1 1,376.0 5.82 Dilution effect of share options - 24.3 (0.10) Diluted earnings per share from continuing and discontinued operations 80.1 1,400.3 5.72 Reconciliation of earnings (In Â£s million) Earnings Continuing operations before exceptional items 71.4 Exceptional items (note 4) 4.1 Tax credit on exceptional items (note 7) 2.8 Continuing operations 78.3 The weighted average number of shares in issue for both years exclude shares held in treasury and shares held by the Hays plc Employee Share Trust. 10 Retirement benefit obligations (In Â£s million) 2012 2011 Deficit in the scheme brought forward (11.9) (67.1) Past service cost/curtailment 6.0 - Current service cost (2.7) (3.8) Contributions 15.5 16.5 Net financial return 2.3 (1.2) Actuarial (loss)/gain (24.6) 43.7 Deficit in the scheme carried forward (15.4) (11.9) 11 Provisions (In Â£s million) Property Other Total At 1 July 2011 16.5 25.9 42.4 Exchange adjustments (0.3) (0.4) (0.7) Charged to income statement 2.4 - 2.4 Credited to income statement (2.0) (8.0) (10.0) Utilised (3.6) (4.9) (8.5) At 30 June 2012 13.0 12.6 25.6 (In Â£s million) 2012 2011 Current 2.7 8.5 Non-current 22.9 33.9 25.6 42.4 Property provisions are for rents and other related amounts payable on certain leased properties for periods in which they are not anticipated to be in use by the Group. The leases expire in periods up to 2015 and the amounts will be paid over this period. Other provisions include potential warranty and environmental claim liabilities arising as a result of the business disposals that were concluded in 2004,deferred employee benefit provisions, and restructuring provisions. Of these provisions, Â£2.7 million is expected to be paid in the next 12 months and it is not possible to estimate the timing of the payments for the other items. 12 Movement in net debt 1 July Cash Exchange 30 June (In Â£s million) 2011 flow movement 2012 Cash and cash equivalents 55.1 (10.0) (6.4) 38.7 Bank loans and overdrafts (189.9) 18.3 - (171.6) Net debt (134.8) 8.3 (6.4) (132.9) The table above is presented as additional information to show movement in net debt, defined as cash and cash equivalents less bank loans and overdrafts. 13 Like-for-like results Like-for-like results represent organic growth of continuing activities at constant currency. For the year ended 30 June 2012 these are calculated as follows: (In Â£s million) Net fees for the year ended 30 June 2011 672.1 Foreign exchange impact 7.1 Net fees for the year ended 30 June 2011 at constant currency 679.2 Net fee increase resulting from organic growth 54.8 Net fees for the year ended 30 June 2012 734.0 Profit from operations for the year ended 30 June 2011 114.1 Foreign exchange impact 3.4 Profit from operations for the year ended 30 June 2011 at constant currency 117.5 Profit from operations increase resulting from organic growth 10.6 Profit from operations for the year ended 30 June 2012 128.1 14 Like-for-like results H1 v H2 analysis by division Net fee growth Q1 Q2 H1 Q3 Q4 H2 FY versus same period last year 2012 2012 2012 2012 2012 2012 2012 Asia Pacific 21% 11% 16% 9% 1% 4% 10% Continental Europe & Rest of World 34% 20% 27% 26% 14% 19% 23% United Kingdom & Ireland (4%) (7%) (6%) (5%) (9%) (8%) (7%) Group 15% 8% 11% 10% 2% 5% 8% H1 2012 is the period from 1 July 2011 to 31 December 2011. H2 2012 is the period from 1 January 2012 to 30 June 2012.

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