Half-yearly Report
26 February 2008
Half Year Report
Interim results for the 6 months ended 31 December 2007
Press Release
OUTSTANDING INTERNATIONAL PERFORMANCE AND EPS UP 28%
6 months ended 31 December Actual LFL*
(In £'s million) 2007 2006 growth growth
Net fees 374.8 297.2 26% 23%
Profit from continuing activities 125.0 102.2 22% 20%
Cash from operations 105.0 98.6 6%
Profit before tax** 122.7 100.3 22%
Basic earnings per share** 6.05p 4.73p 28%
Dividend per share 1.85p 1.60p 16%
- Excellent like-for-like net fee and operating profit growth of 23%* and 20%*
respectively
- Outstanding International performance with net fees up 45%* and operating
profit up 50%*
- International business now represents 40% of Group net fees
- 32%* increase in net fees from permanent business with excellent performance
across the Group
- 28%** increase in earnings per share and 16% increase in the interim dividend
- Strong operating cash from operations of £105.0 million
- Strong balance sheet position with net debt of £114.9 million
* LFL is like-for-like growth, which represents organic growth of
continuing activities at constant currency. No adjustment is made for the one
additional trading day in 2007.
** continuing activities only.
Commenting on these results, Alistair Cox, Chief Executive of Hays, said:
"This is an excellent result and it shows how we are capitalising on the many
opportunities available to us across the world. Our growth has come from all
areas of our business: significant structural growth in Continental Europe, a
stunning performance in Australia and the aggressive roll out of our activities
across Asia. In the United Kingdom, we have improved our net fee performance
and we are now increasing our focus on operational effectiveness.
Many of our markets are characterised by shortages of skilled candidates. One
of the strengths of Hays is our ability to satisfy the varied needs of both our
clients and candidates by delivering services in both the permanent and
temporary placement markets. I am delighted that both these sectors have
delivered strong growth, including permanent placement fees up by a third.
We have made a good start to the second half of the year. Whilst mindful of the
economic uncertainty, the Board remains confident in its outlook for the year."
Enquiries
Hays plc
Paul Venables Finance Director + 44 (0) 20 73832266
Martin Abell Investor Relations + 44 (0) 20 73832266
Brunswick
Gill Ackers + 44 (0) 20 7404 5959
Alexa von Wietzlow
Results presentation webcast
The interim results presentation at 9:00am GMT on 26 February 2008 will be
available as a live webcast on our website, www.haysplc.com, and a recording
will also be available on our website.
Reporting calendar
Interim management statement for quarter ending 31 March 2008 10 April 2008
Investor day 17 April 2008
Trading statement for quarter ending 30 June 2008 10 July 2008
Full year results for year ending 30 June 2008 2 September 2008
Note to editors
Hays plc is the leading global specialist recruitment group. It is market
leader in the UK and Australia, and one of the market leaders in Continental
Europe. The Group employs 8,673 staff operating from 391 offices in 26
countries across 17 specialisms. For the year ended 30 June 2007:
the Group had revenues of £2.1 billion, net fees of £633.6 million and
operating profit of £216.1 million;
the Group placed circa 68,000 candidates into permanent jobs during the year
and paid circa 46,000 temporary workers weekly; and
the temporary placement business represented 51% of net fees and the permanent
placement business represented 49% of net fees.
Summary profit and loss statement
6 months ended 31 December growth
(In £'s million) 2007 2006 actual LFL*
Turnover 1,214.3 1,002.3 21%
Net fees
Temporary 183.7 157.1 17% 14%
Permanent 191.1 140.1 36% 32%
Total 374.8 297.2 26% 23%
Operating profit** 125.0 102.2 22% 20%
Conversion rate 33.4% 34.4%
Temporary margin*** 18.0% 18.2%
Temporary fees as % of total 49% 53%
Period end consultant headcount**** 5,718 4,527 26% 23%
* LFL (like-for-like) growth represents organic growth for continuing
activities at constant currency. No adjustment is made for the one additional
trading day in 2007.
** continuing activities only.
*** the temporary placement gross margin is calculated as temporary placement
net fees divided by temporary placement gross revenue.
**** the increase in consultants is shown on a closing basis, comparing 31
December 2007 versus 31 December 2006.
Group turnover increased by 21%, net fees increased by 26% (23% on a
like-for-like basis*), and operating profit increased by 22% (20% 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
benefited modestly from the James Harvard acquisition, which increased net fees
by £8.0 million and operating profit by £1.5 million. Exchange rate movements
had a favourable impact increasing net fees by £3.6 million and operating
profit by £1.3 million.
Our excellent fee growth in the period has been driven by our investment in the
business and strong demand in our markets. Whilst the economic cycle is the
most important short term influence on the performance of our business, there
are significant long term structural changes driving demand in specialist
recruitment markets. These long term drivers include deregulation in the labour
markets, particularly in Europe, 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.
We achieved excellent performances in our permanent placement businesses across
all regions, benefiting from continued investment in new consultants and
favourable market conditions owing to a shortage of highly skilled candidates.
Net fees in the permanent business, representing 51% of Group net fees, grew by
32%*, with permanent placement volumes increasing by 23% and average fees per
placement increasing by 7% compared to last year. The temporary placement
business, representing 49% of Group net fees, had a strong performance with net
fee growth of 14%*. This growth represented volume and mix growth of 15%,
partially offset by a 20 basis point reduction in the temporary margin to 18.0%
(2006: 18.2%)***.
The Group's conversion rate, which is the proportion of net fees converted into
operating profit, decreased from 34.4% last year to 33.4% this period due to
the reduction in the conversion rate in the United Kingdom & Ireland, which is
explained in the United Kingdom & Ireland section.
Investment
We have invested significantly in the business during the period. We increased
the number of consultants by 26% (23% on a like-for-like basis*) compared to
last year, with the majority of this increase being in the International
business. We added 15 offices to the network over the 6 months, of which 13
were in the International business, and we continued to roll out specialisms
across our network.
In the United Kingdom & Ireland, we achieved strong growth in net fees through
our investment in consultants and our focus on growing our newer specialisms.
In Australia & New Zealand, we continued to develop our newer specialisms and
strengthened our market leading position with a market beating performance. In
Asia, we continue to build critical mass in the major cities. 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.
United Kingdom & Ireland
6 months ended 31 December growth
(In £'s million) 2007 2006 actual LFL*
Net fees
Accountancy & Finance 86.9 77.6 12% 12%
Construction & Property 60.6 54.4 11% 11%
Information Technology 16.3 15.8 3% 3%
Other Specialist Recruitment Activities 61.5 50.9 21% 13%
Total 225.3 198.7 13% 11%
Operating profit
Accountancy & Finance 32.1 31.5 2% 2%
Construction & Property 22.8 22.4 2% 2%
Information Technology 5.6 5.5 2% 2%
Other Specialist Recruitment Activities 10.1 8.1 25% 16%
Total 70.6 67.5 5% 4%
Conversion rate 31.3% 34.0%
Period end consultant headcount**** 3,355 2,909 15% 13%
In the United Kingdom & Ireland, we had net fee growth of 13% (11% on a
like-for-like basis*) to £225.3 million and operating profit growth of 5% (4%
on a like-for-like basis*) to £70.6 million. The difference between headline
growth and like-for-like growth was due to the acquisition of James Harvard. We
opened a net 2 new offices in the 6 month period, and increased the number of
consultants by 13%* compared to last year.
The improvement in the net fee growth rate versus last year is due to strong
growth in both permanent and temporary placements. The Accountancy & Finance
business had net fee growth of 12%, building on its improvement in the second
half of last year. Construction & Property, which serves both the construction
and "built" environment sectors, benefited from strong demand, particularly in
the commercial sector, increasing net fees by 11%. Information Technology
suffered from a slight weakening in demand later in the period and consequently
had net fee growth of 3%. The Other Specialist Recruitment Activities continue
to grow rapidly, increasing net fees by 13%*, with Resource Management, Education
and Human Resources achieving particularly good growth. The Other Specialist
Recruitment Activities cover 11 specialisms and represent 27% of United Kingdom
& Ireland net fees. We see exciting long term growth opportunities for Hays in
these markets and we expect a number of these specialisms to develop into large
businesses in the future.
As previously referred to, profit in the United Kingdom & Ireland has been
affected by the reduction in the temporary business margin that occurred last
year, primarily in the public sector, and the impact of legislative changes
affecting the status of temporary workers in sectors in which managed service
companies operate. These factors reduced operating profit by circa £4 million
in the period. Consequently, the conversion rate declined from 34.0% in the
first half of last year to 31.3%.
Alistair Cox, the Group Chief Executive, has recently taken over the
leadership of the United Kingdom & Ireland business, with the objective of
increasing the operational effectiveness of the business.
Asia Pacific
6 months ended 31 December growth
(In £'s million) 2007 2006 Actual LFL*
Net fees 80.6 51.4 57% 45%
Operating profit 38.6 24.4 58% 49%
Conversion rate 47.9% 47.5%
Period end consultant headcount**** 1,129 802 41% 32%
In Asia Pacific, our businesses continued their excellent track record in both
the permanent and temporary placement businesses. Net fees increased 57% (45%
on a like-for-like basis*) to £80.6 million and operating profit increased 58%
(49% on a like-for-like basis*) to £38.6 million. The difference between
headline growth and like-for-like growth was due to the appreciation in the
Australian dollar and the acquisition of James Harvard in Japan. We increased
the number of consultants by 32%* compared to last year. The business achieved
good operating profit leverage increasing the conversion rate from 47.5% to
47.9%.
In Australia & New Zealand, our market leading businesses recorded exceptional
performances across all of their specialist activities and regions. We rapidly
expanded in the newer specialist activities with Human Resources, Sales &
Marketing, and Legal performing especially well, and we opened further offices
in Queensland and Victoria. Overall, net fees in Australia & New Zealand
increased by 43%* compared to last year.
In Asia, net fees were £5.8 million in the period (2006: £1.2 million). Our
businesses in China, Hong Kong, and Singapore continued their strong momentum.
In our acquired Japanese business, we significantly increased headcount and
began our geographical expansion by opening in Osaka.
Continental Europe & Rest of World ('RoW')
6 months ended 31 December growth
(In £'s million) 2007 2006 actual LFL*
Net fees 68.9 47.1 46% 45%
Operating profit 15.8 10.3 53% 54%
Conversion rate 22.9% 21.9%
Period end consultant headcount**** 1,234 816 51% 50%
The Continental Europe & RoW division continued its outstanding progress
increasing net fees by 46% (45% on a like-for-like basis*) to £68.9 million and
operating profit by 53% (54% on a like-for-like basis*) to £15.8 million
compared to last year. The difference between headline growth and like-for-like
growth was due to the appreciation of the Euro and the acquisition of James
Harvard. We invested significantly in consultants, increasing the number of
consultants by 50%* compared to last year. The conversion rate continued to
improve, increasing from 21.9% to 22.9%, due to the increased scale of the
business.
All countries contributed to the outstanding performance across both temporary
and permanent sectors with 10 countries delivering net fee growth of more than
40% in the year.
Germany, 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 42%*.
This business predominantly focuses on the IT and Engineering contracting
markets and, with the opening in Stuttgart, is now in 7 offices employing 478
staff. We see excellent growth prospects for our expanding Accountancy &
Finance, Legal and newly launched Pharmaceutical specialisms.
France, representing 18% of the region's net fees, grew net fees by 35%*,
increasing its presence in Paris and continuing its expansion into the
provinces, opening in Nancy. In line with the French specialist recruitment
market, this business is predominantly focused on the permanent placement
market, and is now in 16 offices employing 390 staff.
Among the other countries in Continental Europe, we opened in new cities in
Spain, Switzerland, the Czech Republic and Poland, and we started operations in
Hungary. Following the acquisition last year of James Harvard, we continue to
roll out our Pharmaceutical specialism across Europe, introducing it into
Switzerland and Portugal during the period, bringing our Pharmaceutical
presence up to 7 countries in the region. Elsewhere, we have opened new offices
in Canada and Brazil and our new businesses in the UAE and Brazil are making
excellent progress.
Taxation
Tax on continuing operations for the period was £36.8 million, representing an
effective tax rate of 30.0% (2006: 31.2%). The reduction in the effective tax
rate is primarily due to the recognition and utilisation of brought forward tax
losses in our French business.
Earnings per share
Basic earnings per share from continuing activities increased 28% to 6.05 pence
(2006: 4.73 pence). The improvement in earnings per share results from the
excellent growth in profit after tax, 24% ahead of last year, and the
favourable impact of the accretion from the share buy-back programme.
Cash flow and balance sheet
Cash flow in the period was strong, with 84% conversion of operating profit
into operating cash flow. Overall, net cash from continuing operations was
£105.0 million (2006: £98.6 million). Cash outflow from working capital was
£29.8 million, which is in line with seasonal trends and the increase in
turnover. Tax paid was £33.6 million and net capital expenditure was modest at
£7.0 million, reflecting the low capital intensity of the business. £48.2
million was paid out in dividends, £3.6 million was paid out in net interest,
and £52.7 million was used to buy back our own shares. Over the period, net
debt increased from £76.2 million at the start of the period to £114.9 million
at the end of the period principally due to the payment of the full year
dividend and the buy back of shares.
Capital structure and dividend
The priorities for our free cash flow are to fund Group development, support a
sustainable dividend policy and to buy back shares when appropriate. During the
period, we purchased 36.0 million shares at a total cost of £51.7 million,
representing 2.5% of the shares in issue at the start of the period. The Board
places great importance on the strength of our balance sheet and we will
continue to balance this priority with the share buy-back programme. Since the
period end, we have purchased a further 10.6 million shares at a cost of £11.2
million. The current expectation is that we will buy back circa £100 million of
shares in the 12 months ending 30 June 2008.
In view of the excellent results, the Board has decided to pay an interim
dividend of 1.85 pence per share, which represents a 16% increase on last year.
The Board has decided to bring forward the interim dividend payment date to 15
April 2008 and it will be paid to shareholders on the register as at 25 March
2008.
Retirement benefits
The Group's pension liability under IAS 19 at 31 December 2007 of £58.8 million
(£42.3 million net of deferred tax) increased by £15.3 million compared to 30
June 2007 mainly due to the increase in expectations for inflation. During the
period, the Company contributed £4.4 million of cash into the defined benefit
scheme.
Board changes
As previously announced, the following Board changes were made on 15 November
2007:
Denis Waxman retired as CEO and Alistair Cox succeeded him;
Richard Smelt, the Group Human Resources Director of Carphone Warehouse Group
plc, joined Hays plc as a non-executive Director;
Brian Wallace retired as a non-executive Director;
Lesley Knox assumed the role of Senior Independent Director; and
Paul Harrison was appointed as Chairman of the Audit Committee.
Outlook
The Board has identified substantial opportunities for Hays in existing,
emerging and new specialist recruitment markets across the world. Our growing
International network, our proven ability to replicate our business across both
borders and sectors and the ambition of our people, position Hays extremely
well to capitalise on these opportunities over the long term.
We have made a good start to the second half of the year. In Asia Pacific and
Continental Europe, growth in demand for our services continues to be strong.
In the United Kingdom & Ireland, growth has slowed but continues to be good.
Whilst mindful of the economic uncertainty, the Board remains confident in its
outlook for the year.
Principal risks and uncertainties
There are a number of potential risks and uncertainties which could have a
material impact on the Group's performance over the remaining six months of the
financial year and could cause actual results to differ materially from
expected and historical results. These risks include the following:
Macro economic environment
The performance of the Group has a very close relationship and dependence on
the underlying growth of the economies of the countries in which it operates.
The Group strategy is to continue to grow the size of its International
businesses in the countries in which the Group currently operates and within
new countries that the Group currently has no operations. Over time, this will
reduce the Group's exposure or dependence on any one specific economy.
Competitive environment
In the United Kingdom & Ireland and Australia & New Zealand, the markets for
the provision of permanent and temporary recruitment are very competitive and
fragmented. In these more developed markets, competitor risk manifests itself
in increased competition for clients and candidates and in pricing pressures
which may impact margins. In Continental Europe & Rest of the World and Asia,
the markets for the provision of recruitment services remain less developed and
the market place is more fragmented; however, the markets in Continental Europe
and Asia are developing quickly.
The Group's competitors in its markets range from large multi-national
organisations to small, boutique, privately owned businesses. The Group is
continually subject to existing and new competitors entering into the markets
in which it operates. The competitive threat is from small start-up operations
to large multi-nationals as the costs of entry into the specialist recruitment
markets can be relatively low, although these costs have risen (especially in
the United Kingdom & Ireland temporary market) with the increased levels of
compliance required from local regulators and clients.
Commercial relationships
The Group benefits from close commercial relationships with key clients in both
the public and private sectors. Within the private sector, the Group is not
dependent on any single key client, however the Group, like most companies is
always subject to the risk that a large customer might be unable to fulfil its
obligations to the Group which might materially impact the Group's results.
Foreign exchange
The Group has significant operations outside the United Kingdom and as such is
exposed to movements in exchange rates. Currently, the Group does not actively
manage its exposure to foreign exchange risk by the use of financial
instruments. The Group uses a small amount of foreign currency denominated
loans as a natural hedge against its overseas net assets. In the current
period, 40% of total net fees were generated by the International businesses
and this is expected to increase in the future. The Group will continue to
monitor its policies in this area.
Technology systems
The Group is increasingly reliant on a number of technology systems in
providing its services to clients and candidates. These systems are housed in
various datacentres and the Group has improved its capacity to cope with a
datacentre loss as a result of a significant event through the establishment of
new disaster recovery sites which are physically based in separate locations to
the ongoing operations.
The Group is also reliant upon a number of important suppliers that provide the
businesses' information technology infrastructure. The Group continues to
monitor the performance and robustness of these suppliers to ensure business
critical processes are safeguarded as far as practicably possible.
Regulatory environment and legislative changes
The specialist recruitment industry is governed by an increasing level of
compliance which varies from country to country and market to market. In
addition, clients now require more complex levels of compliance in their
contractual arrangements. The Group takes its responsibilities seriously, is
committed to meeting all of its regulatory responsibilities and continues to
strengthen its internal controls and processes with respect to legal and
contractual obligations.
As the employment laws are changed and harmonised in certain geographies, they
bring with them new risks and opportunities. The Group will continue to monitor
its policies, processes and systems to reflect best practice where possible and
to meet the legal requirements of the markets in which it operates.
Hays plc
250 Euston Road
London
NW1 2AF
By order of the Board
Group Finance
Director
Paul
Venables
25 February 2008
Disclaimer
Certain statements included or incorporated by reference within this half
year report may constitute "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. The Board
considers the risks and uncertainties listed above to be the principal ones
that might affect the Group's performance and results for the second half of
this financial year and beyond but cautions that the risks listed above may not
address all the factors that could cause results to differ materially.
This report does not constitute or form part of any offer or invitation to
sell, or any solicitation of any offer to purchase 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. Past performance cannot be relied upon as
a guide to future performance.
Consolidated Income Statement
Six months to 31 Six months to 31 Year to
December 2007 December 2006 30 June
(In £'s million) Notes (Unaudited) (Unaudited) 2007
TURNOVER
Continuing operations 2 1,214.3 1,002.3 2,110.2
NET FEES*
Continuing operations 2 374.8 297.2 633.6
PROFIT FROM OPERATIONS
Continuing operations 2 125.0 102.2 216.1
Finance income 1.2 0.6 1.5
Finance cost (3.5) (2.5) (5.9)
3 (2.3) (1.9) (4.4)
PROFIT BEFORE TAX 122.7 100.3 211.7
Tax 4 (36.8) (31.3) (63.6)
PROFIT FROM CONTINUING
OPERATIONS AFTER TAX 85.9 69.0 148.1
PROFIT FROM DISCONTINUED
OPERATIONS AFTER TAX 5 - 0.3 18.4
PROFIT ATTRIBUTABLE TO
EQUITY HOLDERS 85.9 69.3 166.5
Earnings per share from
continuing operations
- Basic 7 6.05p 4.73p 10.19p
- Diluted 7 6.00p 4.72p 10.13p
Earnings per share from
discontinued operations
- Basic 7 - 0.02p 1.27p
- Diluted 7 - 0.02p 1.26p
Total earnings per share
- Basic 7 6.05p 4.75p 11.46p
- Diluted 7 6.00p 4.74p 11.39p
* Net fees are equal to turnover less payroll costs of temporary contractors
and workers
Consolidated Statement of Recognised Income & Expense
Year
Six months to 31 Six months to 31 to
December December 30
2007 2006 June
(In £'s million) (Unaudited) (Unaudited) 2007
Profit for the period 85.9 69.3 166.5
Currency translation adjustments 11.7 (2.2) (0.9)
Actuarial (losses)/profits on defined
benefit pension scheme (17.9) (32.9) 12.9
Tax on items taken directly to reserves 4.4 9.9 (4.7)
Net (expense)/income recognised
directly in equity (1.8) (25.2) 7.3
Total recognised income and expense for
the period 84.1 44.1 173.8
Attributable to equity shareholders of
the parent 84.1 44.1 173.8
Consolidated Balance Sheet
31 December 31 December
2007 2006 30 June
(In £'s million) Notes (Unaudited) (Unaudited) 2007
Goodwill 164.0 122.2 157.7
Other intangible assets 4.4 1.9 4.3
Property, plant &
equipment 28.2 21.1 25.2
Deferred tax assets 28.3 32.8 22.7
NON-CURRENT ASSETS 224.9 178.0 209.9
Trade & other receivables 429.7 370.7 375.7
Cash & cash equivalents 86.3 30.0 68.4
CURRENT ASSETS 516.0 400.7 444.1
TOTAL ASSETS 740.9 578.7 654.0
Trade & other payables (275.7) (233.3) (252.4)
Tax liabilities (35.9) (49.8) (31.7)
CURRENT LIABILITIES (311.6) (283.1) (284.1)
Bank loans & overdrafts (201.2) (112.6) (144.6)
Trade & other payables (19.6) (5.2) (19.6)
Retirement benefit
obligations 8 (58.8) (88.9) (43.5)
Deferred tax liabilities - (0.9) -
Provisions 9 (48.4) (53.7) (50.2)
NON-CURRENT LIABILITIES (328.0) (261.3) (257.9)
TOTAL LIABILITIES (639.6) (544.4) (542.0)
NET ASSETS 101.3 34.3 112.0
Called up share capital 14.7 15.7 15.7
Capital redemption
reserve 2.7 1.7 1.7
Share premium account 369.6 369.6 369.6
Retained earnings (311.6) (359.4) (288.7)
Other reserves 25.9 6.7 13.7
TOTAL SHAREHOLDERS'
EQUITY 101.3 34.3 112.0
Consolidated Cash Flow Statement
Six months Six months
to to
31 December 31 December Year to
2007 2006 30 June
(In £'s million) Notes (Unaudited) (Unaudited) 2007
Operating profit from continuing
operations 125.0 102.2 216.1
Adjustments for:
Depreciation of property, plant &
equipment 4.1 3.2 7.3
Amortisation of intangible fixed assets 0.4 0.1 0.4
Movements in provisions, employee benefits
and other items 5.3 2.1 2.4
9.8 5.4 10.1
OPERATING CASH FLOW BEFORE MOVEMENT IN
WORKING CAPITAL 134.8 107.6 226.2
Changes in working capital (29.8) (9.0) 5.9
CASH GENERATED BY OPERATIONS 105.0 98.6 232.1
Income taxes paid (33.6) (31.8) (70.7)
NET CASH FROM OPERATING ACTIVITIES 71.4 66.8 161.4
INVESTING ACTIVITIES
Purchase of tangible & intangible assets (7.0) (4.8) (15.1)
Proceeds from sale of property, plant &
equipment - - 0.2
Cash paid in respect of acquisitions made
in previous years - - (0.3)
Acquisition of subsidiaries - - (22.8)
Sale of businesses and related assets - (2.2) 1.6
Interest received 1.2 0.6 1.5
NET CASH USED IN INVESTING ACTIVITIES (5.8) (6.4) (34.9)
FINANCING ACTIVITIES
Interest paid (4.8) (3.3) (5.9)
Equity dividends paid (48.2) (42.3) (65.5)
Cash outflow in respect of share buy-back (52.7) (21.8) (58.2)
Additional pension scheme funding (1.8) - -
(Purchase)/disposal of own shares (0.8) 1.8 (0.4)
Proceeds from share option exercises 0.7 - 3.8
(Repayment)/issue of loan notes (0.7) (0.5) 0.2
Increase/(decrease) in bank overdrafts &
repayment of borrowings 57.3 (16.7) 14.6
NET CASH USED IN FINANCING ACTIVITIES (51.0) (82.8) (111.4)
NET INCREASE/(DECREASE) IN CASH & CASH
EQUIVALENTS 10 14.6 (22.4) 15.1
CASH & CASH EQUIVALENTS AT BEGINNING OF
PERIOD 68.4 52.8 52.8
Effect of foreign exchange rate movements 3.3 (0.4) 0.5
CASH & CASH EQUIVALENTS AT END OF PERIOD 86.3 30.0 68.4
(In £'s million) Notes
BANK LOANS, OVERDRAFTS AND FINANCE LEASE OBLIGATIONS AT
BEGINNING OF PERIOD (144.6) (129.8) (129.8)
(Increase)/decrease in period (56.6) 17.2 (14.8)
BANK LOANS, OVERDRAFTS AND FINANCE LEASE OBLIGATIONS AT
END OF PERIOD (201.2) (112.6) (144.6)
NET DEBT AT END OF PERIOD 10 (114.9) (82.6) (76.2)
Consolidated Reconciliation of Movements in Equity
For the six months ended 31 December 2007
Capital Share
Share redemption premium Retained Other
(In £'s million) capital reserve account earnings reserves Total
Balance at 1 July 2007 15.7 1.7 369.6 (288.7) 13.7 112.0
Currency translation
adjustments - - - - 11.7 11.7
Actuarial losses on
defined benefit pension
scheme - - - (17.9) - (17.9)
Tax on items taken
directly to reserves - - - 4.4 - 4.4
Net (expense)/income
recognised directly in
equity - - - (13.5) 11.7 (1.8)
Profit for the period - - - 85.9 - 85.9
Total recognised income
for the period - - - 72.4 11.7 84.1
Dividends paid - - - (48.2) - (48.2)
Share-based payment
schemes - - - 3.9 1.3 5.2
Purchase of own shares
and other - - - 0.7 (0.8) (0.1)
Share buy-back - - - (51.7) - (51.7)
Cancellation of treasury
shares (1.0) 1.0 - - - -
Balance at 31 December
2007 14.7 2.7 369.6 (311.6) 25.9 101.3
For the six months ended 31 December 2006
Capital Share
Share redemption premium Retained Other
(In £'s million) capital reserve account earnings reserves Total
Balance at 1 July 2006 15.7 1.7 369.6 (354.8) 11.1 43.3
Currency translation
adjustments - - - - (2.2) (2.2)
Actuarial losses on defined
benefit pension scheme - - - (32.9) - (32.9)
Tax on items taken directly to
reserves - - - 9.9 - 9.9
Net expense recognised directly
in equity - - - (23.0) (2.2) (25.2)
Profit for the period - - - 69.3 - 69.3
Total recognised income/
(expense) for the period - - - 46.3 (2.2) 44.1
Dividends paid - - - (42.3) - (42.3)
Share-based payment schemes - - - 3.1 (0.7) 2.4
Purchase of own shares and
other - - - 3.7 (1.5) 2.2
Share buy-back - - - (15.4) - (15.4)
Balance at 31 December 2006 15.7 1.7 369.6 (359.4) 6.7 34.3
For the year ended 30 June 2007
Capital Share
Share redemption premium Retained Other
(In £'s million) capital reserve account earnings reserves Total
Balance at 1 July 2006 15.7 1.7 369.6 (354.8) 11.1 43.3
Currency translation
adjustments - - - - (0.9) (0.9)
Actuarial profits on
defined benefit pension
scheme - - - 12.9 - 12.9
Tax on items taken
directly to reserves - - - (4.7) - (4.7)
Net income/(expense)
recognised directly in
equity - - - 8.2 (0.9) 7.3
Profit for the period - - - 166.5 - 166.5
Total recognised income/
(expense) for the period - - - 174.7 (0.9) 173.8
Dividends paid - - - (65.5) - (65.5)
Share-based payment
schemes - - - 4.2 3.9 8.1
Purchase of own shares and
other - - - 5.3 (0.4) 4.9
Share buy-back - - - (52.6) - (52.6)
Balance at 30 June 2007 15.7 1.7 369.6 (288.7) 13.7 112.0
Consolidated Reconciliation of Movements in Equity - Other Reserves
For the six months ended 31 December 2007
Own Equity Cumulative
(In £'s million) shares reserve translation Total
Balance at 1 July 2007 (1.1) 12.6 2.2 13.7
Currency translation adjustments - - 11.7 11.7
Total recognised expense for the
period - - 11.7 11.7
Share-based payment schemes - 1.3 - 1.3
Purchase of own shares (0.8) - - (0.8)
Balance at 31 December 2007 (1.9) 13.9 13.9 25.9
For the six months ended 31 December 2006
Own Equity Cumulative
(In £'s million) shares reserve translation Total
Balance at 1 July 2006 (0.7) 8.7 3.1 11.1
Currency translation adjustments - - (2.2) (2.2)
Total recognised income for the
period - - (2.2) (2.2)
Share-based payment schemes - (0.7) - (0.7)
Purchase of own shares (1.5) - - (1.5)
Balance at 31 December 2006 (2.2) 8.0 0.9 6.7
For the year ended 30 June 2007
Own Equity Cumulative
(In £'s million) shares reserve translation Total
Balance at 1 July 2006 (0.7) 8.7 3.1 11.1
Currency translation adjustments - - (0.9) (0.9)
Total recognised income for the
period - - (0.9) (0.9)
Share-based payment schemes - 3.9 - 3.9
Purchase of own shares (0.4) - - (0.4)
Balance at 30 June 2007 (1.1) 12.6 2.2 13.7
Notes to the interim financial statements
1. Basis of preparation
The condensed consolidated interim financial statements are the results for the
six months ended 31 December 2007. The condensed consolidated interim financial
statements ("interim financial statements") have been prepared under
International Financial Reporting Standards ("IFRS") as adopted by the European
Union, in accordance with International Accounting Standard 34 'Interim
Financial Reporting' and the Disclosure and Transparency Rules of the Financial
Services Authority. It is unaudited but has been reviewed by the auditors and
their report is attached.
The interim financial statements do not constitute statutory accounts as
defined in Section 240 of the Companies Act 1985 as they do not include all of
the information required for full statutory accounts. The interim financial
statements should be read in conjunction with the statutory accounts for the
year ended 30 June 2007, which were prepared in accordance with IFRS as adopted
by the European Union and have been filed with the Registrar of Companies. The
auditors' report on those accounts was unqualified and did not contain a
statement under Section 237 (2) or (3) of the Companies Act 1985.
Accounting policies
The interim financial statements have been prepared on the basis of the
accounting policies and methods of computation applicable for the year ending
30 June 2008. These accounting policies are consistent with those applied in
the preparation of the accounts for the year ended 30 June 2007.
In the current financial year, the Group will adopt IFRS 7 "Financial
instruments: Disclosures" for the first time. As IFRS 7 is a disclosure
standard, there is no impact of this change in accounting policy on the interim
financial statements.
2. Segmental information
Continuing operations comprise one class of business, being specialist
recruitment activities. The Group operates in three identified geographic
segments. These results by geography are shown below.
Turnover, net fees and profit from continuing operations
Six months to Six months to
31 December 31 December Year to
2007 2006 30 June
(In £'s million) (Unaudited) (Unaudited) 2007
Turnover
United Kingdom & Ireland 768.2 677.3 1,413.7
Continental Europe & Rest of World 220.3 167.6 353.2
Asia Pacific 225.8 157.4 343.3
1,214.3 1,002.3 2,110.2
NET FEES
United Kingdom & Ireland 225.3 198.7 417.1
Continental Europe & Rest of World 68.9 47.1 102.5
Asia Pacific 80.6 51.4 114.0
374.8 297.2 633.6
PROFIT FROM OPERATIONS
United Kingdom & Ireland 70.6 67.5 140.8
Continental Europe & Rest of World 15.8 10.3 21.1
Asia Pacific 38.6 24.4 54.2
125.0 102.2 216.1
3. Finance income and finance costs
Six months to Six months to
31 December 31 December Year to
2007 2006 30 June
(In £'s million) (Unaudited) (Unaudited) 2007
FINANCE INCOME
Interest on bank deposits 1.2 0.6 1.5
1.2 0.6 1.5
FINANCE COSTS
Interest payable on bank overdrafts and
loans (4.9) (3.3) (7.4)
Pension Protection Fund levy (0.1) (0.3) (0.4)
Net interest on pension obligations 1.5 1.1 1.9
(3.5) (2.5) (5.9)
Net finance charge (2.3) (1.9) (4.4)
4. Taxation on ordinary activities
The Group's consolidated effective tax rate in respect of continuing operations
for the six months to 31 December 2007 is based on the estimated effective tax
rate for the full year of 30.0% (31 December 2006: 31.2%, 30 June 2007: 30.0%).
Six months to Six months to
31 December 31 December Year to
2007 2006 30 June
(In £'s million) (Unaudited) (Unaudited) 2007
TAX CHARGE
United Kingdom 19.0 18.2 39.2
Overseas 17.8 13.1 24.4
36.8 31.3 63.6
5. Profit from discontinued operations
There was no profit or loss from discontinued operations in the period to 31
December 2007.
Profit from discontinued operations in the six months ended 31 December 2006 of
£0.3 million arose from the repayment of loan notes previously provided for.
Profit from discontinued operations in the year ended 30 June 2007 of £18.4
million arose from 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, less a £0.3 million charge on other
items. A further £1.1 million profit arose from disposal of business assets and
relates mainly to the cash receipts from loan notes arising from the disposal
of the Hays US Home Delivery business, previously fully provided against.
6. Dividends
Six months Six months Year
to to to
31 December 31 December 30
2007 2006 June
(In £'s million) (Unaudited) (Unaudited) 2007
Amounts recognised per ordinary share as
distributions to equity holders in the period:
Final dividend for the year ended 30 June 2006 of
2.90 pence per share - 42.3 42.3
Interim dividend for the period to 31 December
2006 of 1.60 pence per share - - 23.2
Final dividend for the year ended 30 June 2007 of
3.40 pence per share 48.2 - -
48.2 42.3 65.5
The interim dividend for the period ended 31 December 2007 of 1.85 pence per
share is not included as a liability in the balance sheet as at 31 December
2007.
7. Earnings per share
Six months Six months
to to Year to
31 December 31 December 30
2007 2006 June
(In £'s million) (Unaudited) (Unaudited) 2007
Earnings from continuing operations 122.7 100.3 211.7
Tax on earnings from continuing
operations (36.8) (31.3) (63.6)
Basic earnings from continuing
operations 85.9 69.0 148.1
Earnings from discontinued operations - 0.4 1.1
Tax on earnings from discontinued
operations - (0.1) 17.3
Basic earnings from discontinued
operations - 0.3 18.4
Number of shares (million):
Weighted average number of shares 1,419.0 1,457.4 1,453.2
Dilution effect of share options 12.5 5.2 8.2
Weighted average number of shares used
for diluted EPS 1,431.5 1,462.6 1,461.4
Basic earnings per share from continuing
operations 6.05p 4.73p 10.19p
Basic earnings per share from
discontinued operations - 0.02p 1.27p
Total basic earnings per share 6.05p 4.75p 11.46p
Diluted earnings per share from
continuing operations 6.00p 4.72p 10.13p
Diluted earnings per share from
discontinued operations - 0.02p 1.26p
Total diluted earnings per share 6.00p 4.74p 11.39p
8. Retirement benefit obligations
Six months Six months
to to
December 31 December Year to
2007 2006 30 June
(In £'s million) (Unaudited) (Unaudited) 2007
Deficit in scheme brought
forward (43.5) (55.9) (55.9)
Current service cost (3.2) (3.6) (7.1)
Contributions and other 4.3 2.4 4.7
Finance income 1.5 1.1 1.9
Actuarial (loss)/profit (17.9) (32.9) 12.9
Deficit in scheme carried
forward (58.8) (88.9) (43.5)
9. Provisions
(In £'s million) Property Deferred Other Total
employee
benefits
Balance at 1 July 2007 14.7 1.7 33.8 50.2
Utilised (1.3) - (1.2) (2.5)
Reallocation 5.0 - (5.0) -
Exchange adjustments 0.3 - 0.4 0.7
Balance as at 31 December 2007 18.7 1.7 28.0 48.4
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 2016. Other provisions comprise
liabilities arising as a result of business disposals and the Group
transformation, mainly relating to possible warranty and environmental claims
for businesses disposed as part of the Group transformation during the period
from March 2003 to November 2004. After a detailed review of Other provisions
the Directors have concluded that £5.0 million of Other provisions is more
fairly presented in the Property provisions.
10. Movement in net debt
1 July Cash Exchange 31 December
(In £'s million) 2007 flow movement 2007
Cash & cash equivalents 68.4 14.6 3.3 86.3
Bank loans & overdrafts (144.6) (56.6) - (201.2)
Net debt (76.2) (42.0) 3.3 (114.9)
The table above is presented as additional information to show movement in net
debt, defined as cash & cash equivalents less overdrafts & bank loans.
11. 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.
12. Events after the balance sheet date
As part of the share buy-back programme, the Company has purchased an
additional 10.6 million shares for a total cost of £11.2 million since the
balance sheet date.
13. Like-for-like results
Like-for-like results represent organic growth of continuing activities at
constant currency.
For the six months ended 31 December 2007 this is calculated as follows:
(In £'s
million)
Net fees for the six months ended 31 December 2006 297.2
Foreign exchange impact 3.6
Adjustment for fees from disposed of businesses (1.6)
Net fees for the six months ended 31 December 2006 at constant
currency 299.2
Fees generated from acquisitions 8.0
Fees generated from organic growth 67.6
Net fees for the six months ended 31 December 2007 374.8
Profit from operations for the six months ended 31 December 2006 102.2
Foreign exchange impact 1.3
Adjustment for profit from disposed of businesses (0.3)
Profit from operations for the six months ended 31 December 2006
at constant currency 103.2
Profit from operations generated from acquisitions 1.5
Profit from operations generated from organic growth 20.3
Profit from operations for the six months ended 31 December 2007 125.0
Responsibility Statement
We confirm that to the best of our knowledge:
- the condensed set of financial statements has been presented in accordance with
IAS 34 "Interim Financial Reporting";
- the interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the first six
months and description of principal risks and uncertainties for the remaining
six months of the year); and
- the interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties' transactions and changes
therein).
By order of the Board
Group Finance
Director
Paul
Venables
25 February 2008
Independent Review Report to Hays plc
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
December 2007 which comprises the consolidated income statement, the
consolidated statement of recognised income and expense, the consolidated
balance sheet, the consolidated cash flow statement, the consolidated
reconciliation of movements in equity, and related notes 1 to 13. We have read
the other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the company in accordance with International
Standard on Review Engagements 2410 issued by the Auditing Practices Board. Our
work has been undertaken so that we might state to the company those matters we
are required to state to them in an independent review report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure and Transparency
Rules of the United Kingdoms' Financial Services Authority.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 31 December 2007 is not prepared, in
all material respects, in accordance with International Accounting Standard 34
as adopted by the European Union and the Disclosure and Transparency Rules of
the United Kingdom's Financial Services Authority.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditor
London
United Kingdom
25 February 2008
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