Final Results
4 September 2007
Preliminary results for the year ended 30 June 2007
OUTSTANDING PERFORMANCE INTERNATIONALLY AND EPS UP 17%***
Year ended 30 June 2007 2006 Actual LFL*
£'s million growth growth
Net fees 633.6 538.2 + 18% + 17%
Profit from continuing activities 216.1 193.0 + 12% + 13%
Cash from operations 232.1 183.1 + 27%
Profit before tax*** 211.7 192.5 + 10%
Basic earnings per share*** 10.19p 8.69p + 17%
Dividend per share 5.00p 4.35p +15%
- Strong like-for-like net fee and operating profit growth of 17% and 13%
respectively*
- Outstanding International performance with net fees up 37%* and operating
profit up 38%*
- Improved United Kingdom & Ireland performance in the second half
- 30% increase in net fees from permanent business with excellent performance
across the Group*
- 17% increase in earnings per share*** and 15% increase in full year dividend
- 25% increase in recruitment consultants in the year**
- Excellent operating cash from operations of £232.1 million (107% of operating
profit)
* LFL is like-for-like growth which represents organic growth of continuing
activities at constant currency. No adjustment is made for the one less trading
day in 2007
** increase in consultants is shown on a closing basis, comparing 30 June 2007
versus 30 June 2006 on a like-for-like basis, which excludes the impact of
acquisitions and disposals
*** continuing activities only
Commenting on these results, Denis Waxman, Chief Executive of Hays, said:
"These results show strong growth in net fees, operating profit and earnings
per share. The highlight is our outstanding performance internationally where
we grew net fees by 37% to £216.5 million and operating profits by 38% to £75.3
million*. The International business has increased its share of Group net fees
from 16% four years ago to 34% this year. Worldwide we now have a network of
7,753 staff operating from 376 offices in 25 countries across 17 specialisms.
Following the actions taken in the first half of the year, performance improved
in the United Kingdom & Ireland in the second half, despite continuing
challenging conditions in the temporary market, primarily in the public sector.
Across all the regions in which we operate, we continue to see strong demand
for our specialist recruitment services. Since the start of July, net fees have
been ahead of the comparable period last year by 19% on a like-for-like basis*.
By region, net fee growth on a like-for-like basis* was 11% in the United
Kingdom & Ireland, 35% in Asia Pacific and 38% in Continental Europe & RoW.
Although there remains some pressure on our United Kingdom temporary margin,
overall, the Board is confident in its outlook for the year.
On a personal note, this is my final results announcement after leading Hays'
specialist recruitment business for 38 years. I am very proud of what Hays and
our people have achieved and I leave with absolute confidence that Hays is well
positioned to take advantage of the tremendous opportunities available
worldwide in the specialist recruitment markets. I will miss the people and the
business enormously and wish them every success in the future."
Date of Interim Management Statement:
For the first time, as required by the UK Listing Authority's new Disclosure
and Transparency rules, we expect to issue an Interim Management Statement for
the quarter ending 30 September 2007 on 11 October 2007.
Enquiries:
Denis Waxman Chief Executive Hays plc + 44 (0)20 7628 9999
Paul Venables Finance Director
Martin Abell Investor Relations
Giles Croot / Gill Ackers Brunswick + 44 (0)20 7404 5959
Chairman's statement
Highlights
I am pleased to report another year of strong progress for Hays. At the
beginning of the year, there were two principal objectives. Firstly, to
continue the excellent momentum in the International business which now
represents 34% of the Group's net fees, and secondly to accelerate the
investment in our United Kingdom & Ireland business. On the first objective, we
achieved excellent growth in the International business extending our network,
particularly in Continental Europe and Asia. On the second objective, we
increased the number of consultants in the United Kingdom & Ireland by 555,
which represents an 18% increase compared to last year**. In addition, we
acquired James Harvard, which gives the Group a significant position in the
growing Pharmaceutical recruitment market, together with an excellent entry
vehicle into the exciting Japanese market.
Over the last decade, Hays has quadrupled the size of its specialist
recruitment business, both in terms of net fees and profits, principally
through organic growth. Looking ahead, your Board sees substantial
opportunities in the specialist recruitment markets across the world and views
the long-term prospects for Hays with great optimism. Our strategic priorities
are to:
strengthen our market leading positions in our core specialisms in the United
Kingdom and Australia whilst aggressively growing our newer specialisms; and
develop our businesses in the major markets of Continental Europe and the
emerging markets of Asia. We have proven that our business model works in these
large and developing markets. Our emphasis now is to invest to build scale and
market leadership.
Basic earnings per share from continuing operations for the year increased by
17% compared to last year***. In line with our policy of supporting a
progressive and sustainable dividend, the Board is recommending a final
dividend of 3.40 pence per share which would bring the full year dividend to
5.00 pence per share, representing an increase of 15% over 2006.
People
As we announced in June, Denis Waxman has decided to retire at our AGM in
November. Being the last occasion that I shall report to you with Denis as CEO,
I would like to take this opportunity to formally recognise Denis' achievement.
Denis was one of the founders of the recruitment business that began in 1969.
Since then, he has developed the business into a leading International
specialist recruitment group which now employs 7,753 staff in 25 countries. It
is a unique accomplishment to not only have co-founded the business, but then
to have developed it to the size and international reach that is Hays today.
During his leadership, Denis has provided inspiration to each and every one of
our staff. From the Board and all our staff, we wish him and his wife, Carole,
many, many years of happy and well-deserved retirement.
We are delighted that Alistair Cox, formerly CEO of Xansa plc, joined the Group
as CEO Designate on 1 September. Alistair brings proven leadership skills, a
broad international background and significant experience of leading a dynamic
high service business. I am confident that he will build on the success of
Denis' legacy and deliver the next phase of Hays' development.
Brian Wallace, who has served the Board as both Chairman of the Audit Committee
and Senior Independent Director, will be retiring at the AGM. Brian has been a
vital member of our Board throughout his six years, and has enlivened and
enriched Board discussion with wise counsel and observation, particularly
through Hays' transformational process. On behalf of the Board, I thank him for
his outstanding contribution and he has our very good wishes for the future.
We have been very pleased to welcome Paul Harrison to our Board as a
Non-Executive Director. Paul is Group Finance Director of The Sage Group plc
and brings depth of financial and international expertise to the Board's
debates. He will also chair the Audit Committee on Brian's retirement.
I have spent considerable time this year visiting our offices. On each visit I
have been struck by the enthusiasm, professionalism and commitment of everyone
I have met. These qualities permeate our culture and are the foundations of
our success. Our people work hard supporting our clients and candidates to an
exceptional standard and I thank them for a job very well done.
Bob Lawson
Chairman
4 September 2007
Executive review
Markets
During the financial year, the specialist recruitment markets were strong.
Favourable economic conditions in our major markets, high levels of business
confidence and a shortage of highly skilled staff led to significant demand for
specialist recruitment services.
Whilst the economic cycle is the most important short term influence on the
performance of our business, there are also significant long term structural
changes driving the specialist recruitment markets. These long term drivers
include deregulation in the labour markets, increasing awareness and
willingness to use specialist recruitment services, people moving jobs more
frequently and demographic changes. In addition, the temporary placement market
benefits from increasing demand from both candidates and clients for flexible
employment.
Investment
We have invested heavily in the business during the year. We increased the
number of consultants by 27% (25% on a like-for-like basis), we added 24
offices to the network, of which 13 were in the International businesses, we
expanded into 4 new countries, we acquired James Harvard giving us entry into
Japan and the Pharmaceutical market, and we continued to roll out specialisms
across our network.
Recruitment consultant headcount
Closing headcount Average headcount
As at 30 June 2007 2006 growth 2007 2006 growth
Headline LFL** Headline LFL**
United Kingdom & Ireland 3,134 2,579 22% 18% 2,966 2,599 14% 11%
Asia Pacific 915 707 29% 23% 815 601 36% 29%
Continental Europe & RoW* 973 657 48% 51% 826 570 45% 56%
Total 5,022 3,943 27% 25% 4,607 3,770 22% 21%
* RoW is Rest of World
** LFL (like-for-like) growth excludes acquisitions and disposals
In the United Kingdom & Ireland, our second half performance benefited from the
increased investment in consultants and our focus on growing our newer
specialisms. In Australia & New Zealand, we have continued to develop our newer
specialisms and strengthened our market leading position with a market beating
performance. In Asia, we strengthened the business in China and Hong Kong,
opened in Singapore and entered Japan. The challenge now is to build upon our
entry into Asia by developing critical mass in the major cities within this
rapidly growing region. In Continental Europe, we have significantly increased
the number of consultants, substantially increased our presence in major cities
and rolled out our network into new cities, with the objective of securing
market leading positions in the countries in which we operate. In the Americas,
we increased the size of our Canadian business by almost 50% and we opened an
office in Brazil representing our first entry into South America.
In February, we launched our new specialist recruitment internet site which
includes innovations designed to provide better service to candidates and
clients. The site attracts circa 1.3 million visitors a month, 11 million page
views a month, 140,000 applications a month, and has more than 57,000 jobs
advertised. It is a tool of great importance for attracting candidates and
clients, and we will continue to innovate and invest to strengthen our online
capability.
The Hays network
Number of offices
30 June 2006 Opened* Acquired 30 June 2007
United Kingdom & Ireland 246 10 1 257
Asia Pacific 43 3 1 47
Continental Europe & RoW 63 9 0 72
Total 352 22 2 376
*Offices opened is shown net of closed and merged offices
The Group now employs 7,753 staff (2006: 6,101), operating from 376 offices
(2006: 352) in 25 countries (2006: 21) across 17 specialisms (2006: 15). We
believe this global network, supported by the talent in the business,
represents an excellent platform for continuing the Group's development.
Group performance
Specialist Recruitment summary profit and loss statement
Year ended 30 June
£m 2007 2006 growth
actual LFL*
Turnover 2,110.2 1,826.6 16% 15%
Net fees
Temporary 324.1 301.6 7% 7%
Permanent 309.5 236.6 31% 30%
Total 633.6 538.2 18% 17%
Operating profit 216.1 193.0 12% 13%
Conversion rate 34.1% 35.9%
Temporary margin 18.0% 19.0%
Permanent fees as % of total 49% 44%
* LFL (like-for-like) growth represents organic growth for continuing
activities at constant currency
Group turnover grew by 16% (15% on a like-for-like basis), net fees by 18% (17%
on a like-for-like basis), and operating profit by 12% (13% on a like-for-like
basis). The increase in net fees was greater than the increase in turnover
because of the higher growth in fees generated by the permanent placement
business, compared to the temporary placement business. The results were
modestly impacted by acquisitions which increased net fees by £9.5 million and
operating profit by £0.7 million. Exchange rate movements had an adverse impact
reducing net fees by £3.6 million and operating profit by £1.5 million.
We achieved strong performances in our permanent placement businesses across
all regions, benefiting from continued investment in new consultants and
favourable market conditions. Net fees in the permanent business grew by 30%,
increasing its share of Group net fees during the year from 44% to 49%*.
Permanent placement volumes increased 19% and average fees per placement
increased by 9% compared to last year.
The temporary placement business, representing 51% of Group net fees, had a
strong performance internationally but was impacted by challenging conditions
in the United Kingdom & Ireland, primarily in the public sector, as previously
disclosed. Overall the temporary placement business had modest net fee growth
of 7%, with volume and mix growth of 12% compared to last year, and a 100 basis
point reduction in margin from 19.0% last year to 18.0%*. This decline in
margin reduced operating profit by £14 million.
The same factors led to a reduction in the Group's conversion rate, which is
the proportion of net fees converted into operating profit, from 35.9% last
year to 34.1%.
United Kingdom & Ireland
Year ended 30 June 2007 2006
£m growth
actual LFL*
Net fees
Accountancy & Finance 164.4 157.1 5% 5%
Construction & Property 111.8 100.8 11% 11%
Information Technology 31.5 30.7 3% 3%
Other Specialist Activities 109.4 89.8 22% 16%
Total 417.1 378.4 10% 9%
Operating profit
Accountancy & Finance 67.6 67.6 - -
Construction & Property 44.2 41.5 7% 7%
Information Technology 11.2 11.0 2% 2%
Other Specialist Activities 17.8 17.4 2% 3%
Total 140.8 137.5 2% 3%
Conversion rate 33.8% 36.3%
Year end consultant headcount 3,134 2,579 22% 18%
Average consultant headcount 2,966 2,599 14% 11%
As stated in the interim results, the United Kingdom & Ireland business had a
mixed start to the year with net fee growth of 6% and flat profits in the first
half on a like-for-like basis versus last year*. However, following the actions
we have taken, including our investment in consultants, the performance
improved in the second half with net fee growth increasing to 11%, and
operating profit growth increasing to 4% on a like-for-like basis versus last
year. The improvement in the second half was stronger for net fees than
operating profit due to the full six month impact of the reduction in the
temporary business margin which occurred part way through the first half.
Overall for the year, net fees grew by 10% (9% on a like-for-like basis) to £
417.1 million, and operating profits grew by 2% (3% on a like-for-like basis)
to £140.8 million. We opened a net 10 new offices and increased the number of
consultants by 18%**.
A strong performance by the permanent placement business was largely offset by
a weak performance in the temporary business. The public sector activities,
representing circa 35% of our temporary business net fees, experienced
challenging market conditions, which affected margins. As a result, the
conversion rate declined from 36.3% last year to 33.8%.
Whilst our temporary business margin was broadly stable in the second half of
the year, there are two legislative changes in the United Kingdom & Ireland
that may put modest pressure on the temporary business margin this year.
Firstly, legislation was introduced in April 2007 impacting the tax status of
temporary workers in sectors in which managed service companies operate. This
particularly affects the Construction & Property and IT sectors. Secondly,
legislation has been introduced requiring that temporary workers are paid
additional holiday entitlement.This legislation is being phased in, with four
additional days being payable per annum from October 2007, and a further four
from April 2009.
The Accountancy & Finance business achieved a good performance in the permanent
market benefiting from high levels of demand for accountants. However, due to a
large weighting to the public sector, this performance was offset by the
conditions in the public sector described above. Overall, net fees increased by
5% to £164.4 million and operating profit was flat at £67.6 million. The
increased focus and consultant investment in the permanent placement business
positions us for improvement in the current financial year.
Construction & Property, which serves both the construction and "built"
environment sectors, had a good performance, benefiting from earlier investment
in consultants. Net fee growth of 11% to £111.8 million translated into
operating profit growth of 7% to £44.2 million. We believe this business is
well positioned to benefit from the continuing strong demand in the
construction market.
Information Technology under-performed during the year due to subdued demand
from our larger contracts in the temporary placement market and our
under-exposure to the buoyant permanent placement market. Net fee growth was 3%
to £31.5 million and operating profit growth was 2% to £11.2 million. In order
to increase our focus on the permanent market and SMEs, we have rolled out the
business into a further 8 offices during the year, bringing our Information
Technology presence into a total of 25 offices.
The Other Specialist Recruitment Activities in the United Kingdom & Ireland
continued their strong track record of growth. Net fees increased by 22% (16%
on a like-for-like basis) to £109.4 million and operating profit increased by
2% (3% on a like-for-like basis) to £17.8 million. This result included
excellent contributions from Resource Management Services, Financial Services &
Insurance, Banking, Purchasing and Sales & Marketing which had combined net fee
growth of 30%. As expected, the Contact Centres business was impacted by the
completion of a large contract and the Healthcare business was affected by the
challenging NHS market for healthcare professionals. Excluding the Contact
Centres and Healthcare businesses, net fees and operating profit in Other
Specialist Recruitment Activities was up by 22% and 17% respectively on a
like-for-like basis. We see exciting long term growth opportunities for Hays in
these markets and expect these specialisms to develop into large businesses in
the future.
Asia Pacific
Year ended 30 June 2007 2006 growth
£m actual LFL*
Net fees 114.0 85.7 33% 33%
Operating profit 54.2 41.7 30% 32%
Conversion rate 47.5% 48.7%
Year end consultant headcount 915 707 29% 23%
Average consultant headcount 815 601 36% 29%
The Asia Pacific business delivered an excellent performance in both the
temporary and permanent placement businesses. Net fees increased 33% (33% on a
like-for-like basis) to £114.0 million and operating profit increased 30% (32%
on a like-for-like basis) to £54.2 million. The difference between headline
growth and like-for-like growth was principally due to the depreciation in the
Australian dollar partially offset by the acquisition of James Harvard in
Japan. We increased the number of consultants in the year by 23%**. As a result
of the investment in Asia, the conversion rate declined slightly from 48.7% to
47.5%.
In Australia & New Zealand, the business achieved exceptional performance
across all its specialist activities further enhancing its market leading
position. Accountancy & Finance, our largest specialism (representing 41% of
net fees), grew net fees by 29%; Construction & Property, our second largest
specialism (representing 23% of net fees), grew net fees by 28%; Resources &
Mining, created four years ago and now our third largest specialism
(representing 9% of net fees), continued its excellent progress growing net
fees by 13%; and Information Technology, our fourth largest specialism
(representing 7% of net fees), grew net fees by 30%*.
We rapidly expanded in the newer specialist activities with HR, Sales &
Marketing, and Purchasing performing particularly well. We also rolled out two
new specialist activities, Oil & Gas and Healthcare, and we expanded our
activities in Sydney, Canberra, Melbourne, Perth, Wollongong and Auckland. This
investment contributed to an increase in net fees in Australia & New Zealand of
32% compared to last year*. Our continued success in Australia & New Zealand
stems from our excellent customer service, strong consultant training
programmes, a very efficient automated technology platform, a high quality
management team, and a strong market presence across all states.
In Asia, net fees were £4.7 million in the period (2006: £0.4 million). The
newly established businesses in China and Hong Kong expanded into Beijing, and
reported a profit in their first full year. The start up in Singapore is
progressing well and the newly acquired Japanese business traded strongly.
Overall, we are very encouraged by the growing demand for our services in the
Asian markets.
Continental Europe & Rest of World ('RoW')
Year ended 30 June
£m 2007 2006 growth
actual LFL*
Net fees 102.5 74.1 38% 42%
Operating profit 21.1 13.8 53% 55%
Conversion rate 20.6% 18.6%
Year end consultant headcount 973 657 48% 51%
Average consultant headcount 826 570 45% 56%
The Continental Europe & RoW division continued its outstanding progress
increasing net fees by 38% (42% on a like-for-like basis) to £102.5 million and
operating profit by 53% (55% on a like-for-like basis) to £21.1 million
compared to last year. The difference between headline growth and like-for-like
growth was due to the depreciation in the Euro and the disposal of the French
IT Services business, partially offset by the James Harvard acquisition. We
invested significantly in consultants, increasing the number of consultants
during the year by 51%**. The conversion rate improved to 20.6% from 18.6% due
to the increased scale of the business despite substantial investment in the
year.
All countries contributed to the outstanding performance across both temporary
and permanent sectors with eleven countries delivering net fee growth of more
than 40% in the year*.
Germany, our largest business in the region (representing 40% of the region's
net fees), took advantage of growth in the market and further improved its
market share, growing net fees by 22%*. This business predominantly focuses on
the IT and Engineering contracting markets and is now in 6 offices employing
441 staff including 160 consultants. We are also expanding our Accountancy &
Finance and Legal specialisms in Germany and we see excellent growth prospects
in these areas in the coming years.
France, our second largest business in the region (representing 20% of the
region's net fees), grew net fees by an impressive 50%, significantly
increasing its presence in Paris and continuing its expansion into the
provinces, opening in Tours, Rennes and Bordeaux*. This business, predominantly
focused on the permanent placement market, is now in 13 offices employing 240
consultants.
Canada, our third largest business in the region (representing 7% of the
region's net fees), benefited from the ongoing investment in consultants and a
new office in Calgary, growing net fees by 46%*. This business is now in 7
offices employing 103 consultants.
Among the other countries in this region, Spain doubled its net fees supported
by a new office in Bilbao, whilst the Netherlands increased net fees by 43%*.
The start up in Italy continues to develop well with a new office opening in
Bologna. In addition, we started operations in Brazil (Sao Paulo), representing
our first entry into South America, we opened an office in Slovakia
(Bratislava), and we expanded our operations in Sweden, opening a new office in
Malmo.
We see great opportunities for Hays in these markets, and we will continue to
invest in staff and offices to secure market-leading positions.
Acquisitions and disposals
Whilst the strategy of the Group is to grow and create value primarily from
organic development, geographical and sector in-fill acquisitions form part of
our development strategy. On 23 February 2007 we acquired James Harvard, a
recruitment business specialising in the Pharmaceutical sector and the IT
Financial Services sector. On acquisition, two thirds of the James Harvard
business was based in the United Kingdom with the remainder primarily in Japan.
The consideration was an initial £24 million, on a cash free, debt free basis,
with further payments estimated at £20 million depending on achievement of
growth and profitability targets over the next three years. In the year ended
31 December 2006, James Harvard generated net fees of £10.7 million and
operating profits of £3.0 million.
The acquisition provided Hays with entry into Japan, and expertise in the
Pharmaceutical sector. In Japan, we have re-branded the business under the Hays
brand, moved to a larger office in Tokyo, opened an office in Osaka in July
2007 and we are rolling out Hays' core specialisms. In Europe, we have rolled
out James Harvard's Pharmaceutical business into Belgium, Germany, France,
Spain and the Czech Republic under the new brand 'Hays Pharma'. Early
indications suggest there is very strong demand for Hays Pharma and we will
continue the roll out in the current year. Overall, the financial performance
of the James Harvard business has been in line with plan contributing £4.7
million net fees and £1.3 million operating profit in the four months ended 30
June 2007.
In February, Hays sold the non-core IT Services business in France for net
proceeds of £2.0 million. In the seven month period prior to disposal, this
business generated net fees of £1.9 million and operating profit of £0.4
million.
Taxation and discontinued activities
Tax on continuing operations for the year was £63.6 million, representing an
effective tax rate of 30.0% (2006: 31.2%). The reduction in the effective tax
rate is due to the recognition and utilisation of brought forward tax losses in
our French business. Profit from discontinued activities in the year was £18.4
million of which £17.6 million relates to the write-back of tax related
accruals that are no longer required, following the resolution of tax issues in
respect of previously disposed businesses.
Earnings per share
Basic earnings per share from continuing activities of 10.19 pence was 17%
ahead of last year (2006: 8.69 pence). The improvement in earnings per share
arises from the strong growth in operating profit, 12% ahead of last year, the
reduction in the effective tax rate, and the favourable impact of the accretion
from the share buy-back programme, partially offset by the higher net interest
charge this year.
Cash flow
Cash flow in the year was excellent, with 107% conversion of operating profit
into operating cash flow. Overall, net cash from continuing operations was
£232.1 million (2006: £183.1 million) including £5.9 million inflow from working
capital following initiatives to improve working capital management. Tax paid
was £70.7 million and net capital expenditure was modest at £13.3 million,
reflecting the low capital intensity of the business. £23.1 million was spent
on acquisitions and £65.5 million was paid out in dividends, £4.4 million was
paid out in net interest, and £58.2 million was used to buy-back our own
shares. At the year end, net debt was broadly at the same level as last year
end at £76.2 million (2006: £77.0 million).
Capital structure and dividend
The priorities for our free cash flow are to fund Group development,
particularly overseas, support a sustainable dividend policy and to buy back
shares when appropriate. During the year, we purchased 34.3 million shares at a
total cost of £52.6 million. As at the year end, this brings the total number
of shares bought back since the start of the share buy-back programme to 302.2
million shares at a cost of £395.9 million.
The Board is proposing to pay a final dividend of 3.40 pence per share, which
if approved at the Annual General Meeting, will make a total of 5.00 pence per
share for the full year. This represents a 15% increase on last year. The
recommended dividend will be paid on 20 November 2007 to shareholders on the
register at 19 October 2007.
Retirement benefits
The Group's pension liability under IAS 19 at 30 June 2007 of £43.5 million
(£31.3 million net of deferred tax) decreased by £12.4 million compared to
30 June 2006 mainly due to the improvement in the return on investment. During the
year, the company contributed £4.7 million of cash into the defined benefit
scheme and that is expected to increase to circa £6 million in 2008.
Current trading and outlook
Across all the regions in which we operate, we continue to see strong demand
for our specialist recruitment services. Since the start of July, net fees have
been ahead of the comparable period last year by 19% on a like-for-like basis*.
By region, net fee growth on a like-for-like basis* was 11% in the United
Kingdom & Ireland, 35% in Asia Pacific and 38% in Continental Europe & RoW.
Although there remains some pressure on our United Kingdom temporary margin,
overall, the Board is confident in its outlook for the year.
The Board has identified substantial opportunities for Hays in existing,
emerging and new specialist recruitment markets across the world. Our growing
International network, the ambition of our people, and our proven ability to
replicate our business across both borders and sectors positions Hays extremely
well to capitalise on these opportunities.
Notes
* growth is shown on a LFL (like-for-like) basis which represents organic
growth for continuing activities at constant currency
** increase in consultants is shown on a closing basis, comparing 30 June 2007
versus 30 June 2006 on a like-for-like basis, which excludes the impact of
acquisitions and disposals
Important notice
Certain statements in this preliminary announcement are forward looking
statements. By their nature, forward looking statements involve a number of
risks, uncertainties or assumptions that could cause actual results or events
to differ materially from those expressed or implied by those statements.
Forward looking statements regarding past trends or activities should not be
taken as representation that such trends or activities will continue in the
future. Accordingly, undue reliance should not be placed on forward looking
statements.
CONSOLIDATED INCOME STATEMENT
for the year ended 30 June
(In £'s million) Note 2007 2006
TURNOVER
Continuing operations 3 2,110.2 1,826.6
NET FEES
Continuing operations 3 633.6 538.2
PROFIT FROM OPERATIONS
Continuing operations 3 216.1 193.0
Finance income 4 1.5 4.7
Finance cost 4 (5.9) (5.2)
(4.4) (0.5)
PROFIT BEFORE TAX 211.7 192.5
Tax 5 (63.6) (60.1)
PROFIT FROM CONTINUING OPERATIONS AFTER TAX 148.1 132.4
PROFIT FROM DISCONTINUED OPERATIONS 6 18.4 52.5
PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT 166.5 184.9
Earnings per share from continuing operations
- Basic 8 10.19p 8.69p
- Diluted 8 10.13p 8.65p
Earnings per share from continuing and discontinued operations
- Basic 8 11.46p 12.14p
- Diluted 8 11.39p 12.08p
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the year ended 30 June
(In £'s million) 2007 2006
Profit for the financial year 166.5 184.9
Currency translation adjustments taken to equity (0.9) 0.3
Actuarial profits on defined benefit pension scheme 12.9 15.8
Tax on items taken directly to equity (4.7) (4.8)
Net income recognised directly in equity 7.3 11.3
Total recognised income and expense for the year 173.8 196.2
Attributable to equity shareholders of the parent 173.8 196.2
CONSOLIDATED BALANCE SHEET
at 30 June
(In £'s million) Note 2007 2006
NON-CURRENT ASSETS
Goodwill 157.7 126.2
Other intangible assets 4.3 1.6
Property, plant and equipment 25.2 20.1
Deferred tax assets 22.7 22.2
209.9 170.1
CURRENT ASSETS
Trade and other receivables 375.7 330.2
Cash and cash equivalents 68.4 52.8
444.1 383.0
TOTAL ASSETS 654.0 553.1
CURRENT LIABILITIES
Trade and other payables (252.4) (208.9)
Current tax liabilities (31.7) (49.4)
(284.1) (258.3)
NON-CURRENT LIABILITIES
Bank loans and overdrafts (144.6) (129.8)
Trade and other payables (19.6) (7.9)
Retirement benefit obligations 9 (43.5) (55.9)
Deferred tax liabilities - (0.9)
Provisions 10 (50.2) (57.0)
(257.9) (251.5)
TOTAL LIABILITIES (542.0) (509.8)
NET ASSETS 112.0 43.3
EQUITY
Called up share capital 15.7 15.7
Share premium account 369.6 369.6
Capital redemption reserve 1.7 1.7
Retained earnings (288.7) (354.8)
Other reserves 13.7 11.1
TOTAL SHAREHOLDERS' EQUITY 112.0 43.3
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 June
(In £'s million) Note 2007 2006
OPERATING PROFIT FROM CONTINUING OPERATIONS 216.1 193.0
Adjustments for:
Depreciation of property, plant and equipment 7.3 6.5
Amortisation of intangible fixed assets 0.4 0.2
Net movement in provisions (6.1) (0.2)
Movement in employee benefits and other items 8.5 7.8
10.1 14.3
OPERATING CASH FLOWS BEFORE MOVEMENT IN WORKING CAPITAL 226.2 207.3
Changes in working capital
Increase in receivables (38.9) (37.6)
Increase in payables 44.8 13.4
5.9 (24.2)
CASH GENERATED BY OPERATIONS 232.1 183.1
Income taxes paid (70.7) (46.7)
NET CASH FROM OPERATING ACTIVITIES 161.4 136.4
INVESTING ACTIVITIES
Purchases of property, plant and equipment (12.3) (10.5)
Proceeds from sale of property, plant and equipment 0.2 0.2
Purchase of intangible assets (2.8) (0.4)
Cash paid in respect of acquisitions made in previous (0.3) (8.2)
years
Acquisition of subsidiaries (22.8) (20.2)
Sale of businesses and related assets 1.6 20.4
Interest received 1.5 4.7
NET CASH USED IN INVESTING ACTIVITIES (34.9) (14.0)
FINANCING ACTIVITIES
Interest paid (5.9) (6.3)
Equity dividends paid (65.5) (56.7)
Cash outflow in respect of share buy-back (58.2) (209.2)
(Purchase) / disposal of own shares (0.4) 8.7
Proceeds from share option exercises 3.8 -
Repayment of borrowings - (0.1)
Issue of loan notes 0.2 0.4
Increase in bank overdrafts 14.6 122.6
NET CASH USED IN FINANCING ACTIVITIES (111.4) (140.6)
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 15.1 (18.2)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 11 52.8 71.2
Effect of foreign exchange rate changes 0.5 (0.2)
CASH AND CASH EQUIVALENTS AT END OF YEAR 11 68.4 52.8
NOTES TO THE ACCOUNTS
1 STATEMENT UNDER S240 - PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information contained in this preliminary announcement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985. The financial information is based on the statutory accounts for the
financial years ended 30 June 2007 and 30 June 2006. The financial statements
for 30 June 2007, upon which the auditors issued an unqualified opinion, that
did not contain a statement under Section 237 (2) or (3) of the Companies Act
1985, have yet to be delivered to the Registrar of Companies. The financial
statements for 30 June 2006 upon which the auditors issued an unqualified
opinion, have been delivered to the Registrar of Companies.
2 BASIS OF PREPARATION
Whilst the financial information included in this preliminary announcement has
been computed in accordance with International Financial Reporting Standards
(IFRSs), this announcement does not itself contain sufficient information to
comply with IFRSs. The Company expect to publish full financial statements
that comply with IFRSs in November 2007.
The financial information included in this preliminary announcement has been
prepared using accounting policies consistent with those in the Group's last
published annual financial statements for the year ended 30 June 2006.
3 SEGMENTAL INFORMATION
Continuing operations comprise one class of business, the Specialist
Recruitment activities. The Group operates in three identified geographical
segments. These results by geography are shown below.
TURNOVER AND PROFIT FROM OPERATIONS
(In £'s million) 2007 2006
TURNOVER
Continuing operations
United Kingdom & Ireland 1,413.7 1,266.9
Continental Europe & Rest of World 353.2 286.5
Asia Pacific 343.3 273.2
2,110.2 1,826.6
NET FEES
Continuing operations
United Kingdom & Ireland 417.1 378.4
Continental Europe & Rest of World 102.5 74.1
Asia Pacific 114.0 85.7
633.6 538.2
PROFIT FROM OPERATIONS
Continuing operations
United Kingdom & Ireland 140.8 137.5
Continental Europe & Rest of World 21.1 13.8
Asia Pacific 54.2 41.7
216.1 193.0
4 FINANCE INCOME AND FINANCE COSTS
Finance income
(in £'s million) 2007 2006
Interest on bank deposits 1.5 4.7
Finance costs
(in £'s million) 2007 2006
Interest payable on bank overdrafts and loans (7.4) (6.0)
Pension Protection Fund levy (0.4) (0.3)
Net interest on pension obligations 1.9 1.1
(5.9) (5.2)
Net finance charge (4.4) (0.5)
5 TAX
The tax charge for the year was based on the following:
(In £'s 2007 2007 2007 2006 2006 2006
million) Continuing Discontinued Total Continuing Discontinued Total
Current tax 69.7 (17.3) 52.4 61.5 (15.5) 46.0
Deferred tax (6.1) - (6.1) (1.4) - (1.4)
63.6 (17.3) 46.3 60.1 (15.5) 44.6
6 DISCONTINUED OPERATIONS
The results of the discontinued businesses which have been included in the
consolidated income statement, were as follows:
(in £'s million) 2007 2006
Profit from disposal of business assets 1.1 6.0
Write back of amounts previously provided against fixed asset - 27.0
investments
Interest - 4.0
Profit before tax 1.1 37.0
Tax 17.3 15.5
Post tax profit from discontinued operations 18.4 52.5
The tax credit of £17.3 million in the current year is the result of a £17.6
million write-back of tax-related accruals that were established when the Group
completed the disposal of non-core activities between March 2003 and November
2004 and in the light of subsequent events are no longer required, less a £0.3
million charge on other items.
The profit from disposal of business assets in the current year relates mainly
to the cash receipts from loan notes arising from the disposal of the Hays US
Home Delivery business, previously fully provided against.
In the prior year, profits from discontinued operations in the year were
generated from surplus property disposals of £6.0 million and the receipt of
£31.0 million as final settlement of amounts receivable from the acquirers of
Hays Chemicals.
The tax credit of £15.5 million in the prior year is the result of an £18.2
million write-back of tax-related accruals less a £2.7 million tax charge
arising from the profit on disposal of Hays Chemicals and surplus
properties.
7 DIVIDENDS
The following dividends were paid by the Group and have been recognised as
distributions to equity shareholders in the year.
2007 2006
pence per £ pence per £
share million share million
Previous year final 2.90 42.3 2.27 35.6
dividend
Current year interim 1.60 23.2 1.45 21.1
dividend
65.5 56.7
The following dividends were proposed by the Group in respect of the accounting
year presented:
2007 2006
pence per £ pence per £
share million share million
Interim dividend 1.60 23.2 1.45 21.1
Final dividend (proposed) 3.40 49.2 2.90 42.4
5.00 72.4 4.35 63.5
The proposed final dividend of 3.40 pence per share (£49.2 million) is subject
to approval by shareholders at the Annual General Meeting and has not been
included as a liability in these financial statements.
8 EARNINGS PER SHARE
For the year ended 30 June Weighted average Per share
2007 Earnings number of shares amount
£'s million) (million) (pence)
Continuing operations:
Basic earnings per share from
continuing operations 148.1 1,453.2 10.19
Dilution effect of share options - 8.2 (0.06)
Diluted earnings per share from
continuing operations 148.1 1,461.4 10.13
Discontinued operations:
Basic earnings per share from
discontinued operations 18.4 1,453.2 1.27
Dilution effect of share options - 8.2 (0.01)
Diluted earnings per share from
discontinued operations 18.4 1,461.4 1.26
Continuing and discontinued
operations:
Basic earnings per share from
continuing and discontinued
operations 166.5 1,453.2 11.46
Dilution effect of share options - 8.2 (0.07)
Diluted earnings per share from
continuing and discontinued
operations 166.5 1,461.4 11.39
The weighted average number of shares in issue excludes shares held in treasury
and shares held by the Hays Employee Share Trust Ltd and the Hays plc
Qualifying Employee Share Ownership Trust.
For the year ended 30 June 2006
Weighted average Per share
Earnings number of shares amount
(£'s million) (million) (pence)
Continuing operations:
Basic earnings per share from
continuing operations 132.4 1,523.2 8.69
Dilution effect of share options - 8.2 (0.04)
Diluted earnings per share from
continuing operations 132.4 1,531.4 8.65
Discontinued operations:
Basic earnings per share from
discontinued operations 52.5 1,523.2 3.45
Dilution effect of share options - 8.2 (0.02)
Diluted earnings per share from
discontinued operations 52.5 1,531.4 3.43
Continuing and discontinued
operations:
Basic earnings per share from
continuing and discontinued
operations 184.9 1,523.2 12.14
Dilution effect of share options - 8.2 (0.06)
Diluted earnings per share from
continuing and discontinued
operations 184.9 1,531.4 12.08
RETIREMENT BENEFIT OBLIGATIONS
(In £'s million) 2007 2006
Deficit in the scheme brought forward (55.9) (69.7)
Current service cost (7.1) (8.1)
Past service costs - (0.1)
Contributions 4.7 5.1
Net financial return 1.9 1.1
Actuarial gain 12.9 15.8
Deficit in the scheme carried forward (43.5) (55.9)
10 PROVISIONS
(In £'s million) Property Deferred Other Total
employee
benefits
Balance at 1 July 2006 14.8 2.2 40.0 57.0
Exchange adjustments - - (0.2) (0.2)
Reclassification 2.0 - (2.0) -
Utilised (2.1) (0.5) (4.0) (6.6)
Balance at 30 June 2007 14.7 1.7 33.8 50.2
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 2013.
It is not possible to estimate the timing of payments against the other
deferred employee benefit provisions.
Other provisions comprise liabilities arising as a result of the business
disposals and the Group transformation that concluded in 2004, including the
following items: -
Provisions of £3.7 million (2006 - £7.1 million) relating to restructuring
costs arising from the Group transformation. These provisions are expected to
be utilised over the next 24 months.
Provisions of £6.0 million (2006 - £6.2 million) for potential liabilities
relating to the disposal of the chemicals business including certain site
restitution costs.
Provisions of £18.9 million (2006 - £19.1 million) relating to possible
warranty and environmental claims in relation to businesses disposed of. It is
not possible to estimate the timing of payments against these provisions.
11 MOVEMENT IN NET CASH / (DEBT)
(In £'s million) 1 July Cash Exchange 30 June
2006 flow movement 2007
Cash and cash equivalents 52.8 15.1 0.5 68.4
Bank loans and overdrafts (129.8) (14.8) - (144.6)
(77.0) 0.3 0.5 (76.2)
The table above is presented as additional information to show movement in net
cash / (debt), defined as cash and cash equivalents less overdraft and bank
loans.
12 CONTINGENT LIABILITIES
In June 2006, Hays was visited by the UK Office of Fair Trading ('OFT') as part
of an investigation into possible breaches of competition law by Hays and other
recruitment companies in the construction recruitment sector. The OFT
investigation related to a small part of Hays' Construction & Property
business. Hays is co-operating fully with the OFT under the OFT's leniency
programme and the Board believes that any financial impact of the matters under
investigation will not be material to the Group.
13 POST BALANCE SHEET EVENTS
As part of the share buy-back programme, the Company has purchased an
additional 7.0 million shares (held as treasury shares) for a total cost of £
11.7 million, after the year end.
There are no other post balance sheet events within the Group that require
disclosure.
14 LIKE-FOR-LIKE RESULTS
Like-for-like results represent organic growth of continuing activities at
constant currency.
For the year ended 30 June 2007 this is calculated as follows:
(In £'s
million)
Net fees for the year ended 30 June 2006 538.2
Foreign exchange impact (3.6)
Adjustment for fees from disposed of businesses (1.4)
Like-for-like fees for the year ended 30 June 2006 at constant 533.2
currency
Fees generated from acquisitions 9.5
Fees generated from organic growth 90.9
Net fees for the year ended 30 June 2007 633.6
Profit from operations for the year ended 30 June 2006 193.0
Foreign exchange impact (1.5)
Adjustment for profit from disposed of businesses (0.1)
Like-for-like profit from operations for the year ended 30 June 191.4
2006 at constant currency
Profit from operations generated from acquisitions 0.7
Profit from operations generated from organic growth 24.0
Profit from operations for the year ended 30 June 2007 216.1
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