Half-yearly Report
HAYS
HALF YEAR REPORT
SIX MONTHS ENDED 31 DECEMBER 2009
25 February 2010
Press Release
DIVIDEND MAINTAINED IN DIFFICULT MARKETS
6 months ended 31 December Actual LFL*
Unaudited (In £'s million) 2009 2008 growth growth
Net fees 264.8 383.7 (31)% (35)%
Operating profit (before exceptional items)** 35.1 105.1 (67)% (70)%
Cash generated by operations 36.1 137.6 (74)%
Profit before tax (before exceptional items)** 30.4 100.8 (70)%
Profit before tax 3.4 100.8 (97)%
Basic earnings per share** 1.38p 5.15p (73)%
Dividend per share 1.85p 1.85p -
Highlights
· 54% of Group net fees and 82% of operating profits** generated from outside the UK
· Continued strong cash flow from operations of £36.1 million (103% of operating profit**)
· Net debt levels reduced to £38.4 million (2008: £54.6 million)
· Interim dividend maintained at 1.85p
· Modest sequential improvement in demand in Asia Pacific and parts of Continental Europe
· Selectively increasing headcount, predominantly in Asia Pacific
* LFL (like-for-like) growth represents organic growth of continuing activities
at constant currency. There were the same number of trading days in 2009 and 2008.
** numbers are presented before the exceptional charge of £27 million in 2009
relating to the OFT fine that is currently under appeal. There were no
exceptional items in 2008.
Commenting on these results, Alistair Cox, Chief Executive of Hays, said:
"These results illustrate the importance of our international business, which
represents over three quarters of our worldwide profits. With operations in 27
countries outside the UK, Hays has the largest international specialist
recruitment business in the industry. Throughout the recession we have
protected the core of our international business and strengthened it by
entering new geographies and sectors. At the same time as investing in this
infrastructure around the world, we have defended our market leading position
in the UK, rapidly adjusted our cost base and generated significant cash to
allow us both to reduce net debt and maintain the dividend.
Currently we are seeing improved candidate and client confidence across the
business in most of our private sector markets. Asia Pacific and parts of
Continental Europe have continued to deliver modest rates of sequential
improvement. Our remaining businesses continue to see overall stability in
their markets and in the UK we expect our performance to be broadly similar in
the second half. Our exposure to high potential overseas markets, our
investment in technology, and the retention of our key people, position us
extremely well to capitalise on the next phase of economic growth."
Enquiries
Hays plc
Paul Venables Finance Director + 44 (0) 20 7383 2266
Martin Abell / James Hilton Investor Relations + 44 (0) 20 7383 2266
Maitland
Neil Bennett / Liz Morley + 44 (0) 20 7379 5151
Results presentation webcast
The Half Year Results presentation at 9.30am on 25 February 2010 will be
available as a live webcast on our website, www.haysplc.com, and a recording
will also be available on our website from 1:00pm.
Reporting calendar
Interim Management Statement for quarter ending 31 March 2010 8 April 2010
Investor Day (London) 29 April 2010
Trading Update for quarter ending 30 June 2010 8 July 2010
Preliminary results for the year ending 30 June 2010 2 September 2010
Interim Management Statement for quarter ending 30 September 2010 7 October 2010
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. As at 31 December 2009, the Group employed 6,644 staff operating from
325 offices in 28 countries across 17 specialisms. For the year ended 30 June
2009:
- the Group had revenues of £2.4 billion, net fees of £670.8 million and
operating profit of £158.0 million;
- the Group placed around 50,000 candidates into permanent jobs and around
270,000 people into temporary assignments;
- the temporary placement business represented 56% of net fees and the
permanent placement business represented 44% of net fees;
- Hays operates in the following countries: Australia, Austria, Belgium,
Brazil, Canada, China, the Czech Republic, Denmark, France, Germany, Hong Kong,
Hungary, India, Ireland, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Poland, Portugal, Russia, Singapore, Spain, Sweden, Switzerland, UAE
and the United Kingdom.
Summary profit and loss statement
growth
6 months ended 31 December
(In £'s million) 2009 2008 Actual LFL*
Turnover 1,288.3 1,278.7 1% (5)%
Net fees
Temporary 157.3 199.9 (21)% (26)%
Permanent 107.5 183.8 (42)% (45)%
Total 264.8 383.7 (31)% (35)%
Operating profit** 35.1 105.1 (67)% (70)%
Conversion rate 13.3% 27.4%
Underlying temporary margin*** 15.5% 17.0%
Temporary fees as % of total 59% 52%
Period end consultant headcount**** 4,047 5,213 (22)% (22)%
* LFL (like-for-like) growth represents organic growth of continuing activities
at constant currency. There were the same number of trading days in 2009 and 2008.
** numbers are presented before the exceptional item of £27 million in 2009
relating to the OFT fine that is currently under appeal. There were no
exceptional items in 2008.
*** the underlying temporary placement gross margin is calculated as temporary
placement net fees divided by temporary placement gross revenue and relates
solely to temporary placements in which Hays generates net fees and
specifically excludes transactions in which Hays acts as agent on behalf of
workers supplied by third party agencies.
**** the change in consultants is shown on a closing basis, comparing 31
December 2009 versus 31 December 2008.
The performance of the Group has been impacted by a significant reduction in
demand levels compared to a year ago. As a result, Group turnover decreased by
5%*, net fees decreased by 31% (declining by 35% on a like-for-like basis*),
and operating profit decreased by 67% (70% on a like-for-like basis*). The
reduction in turnover* was considerably less than the reduction in net fees
primarily due to the impact of the withdrawal of the staff hire concession in
April 2009. Last year, only our net fees on temporary workers qualifying for
the staff hire concession were accounted for in turnover. However, following
the withdrawal of the staff hire concession, the full cost of the relevant
temporary workers is recognised in turnover. The results benefited from
exchange rate movements, principally the Australian Dollar and the Euro, which
had a favourable impact increasing net fees by £25 million and operating profit
by £10 million.
The temporary placement business, representing 59% of Group net fees, was
relatively more resilient than the permanent placement business with net fees
decreasing by 26%*. This represented a volume decrease of 15% and a 150 basis
point reduction in the underlying temporary margin to 15.5% (2008: 17.0%)***.
Broadly half of the margin reduction was a result of the mix effect of a
greater proportion of placements being made through large volume contracts,
with the balance of the reduction resulting from modest pricing pressure
impacting our major temporary placement markets, namely the United Kingdom,
Australia and Germany. In recent months we have seen stability in demand in the
temporary placement markets in the United Kingdom and modest sequential
improvement in demand in Australia and Germany.
Net fees in the permanent business, representing 41% of Group net fees,
declined by 45%*, with permanent placement volumes decreasing by 43%. The fall
in permanent placement volumes compared to last year reflects the difficult
market conditions. However, in recent months we have seen sequential stability
in demand in the United Kingdom and Continental Europe divisions and modest
sequential growth in Asia Pacific. Average fees per placement decreased by 4%*
compared to last year primarily due to a less favourable mix.
As a result of the actions we took last year to reduce the cost base and
protect profitability, the Group's operating cost base in the period was 21%*
lower than prior year. However, the marked reduction in activity levels versus
a year ago and the lower level of average consultant productivity achievable in
a demand constrained market led to a reduction in the Group's conversion rate,
which is the proportion of net fees converted into operating profit**, from
27.4% in the prior year to 13.3% this period.
After the large reduction in consultant headcount in the preceding year,
consultant headcount was reduced by 5% over the six months ended 31 December
2009, with all this reduction taking place in the first quarter. Headcount is
now being increased selectively where market trends are favourable,
predominately in Asia Pacific.
Number of offices
31 December 30 June
2009 closed (net) 2009
Asia Pacific 49 - 49
Continental Europe & RoW 82 (2) 84
United Kingdom & Ireland 194 (18) 212
Group 325 (20) 345
In the United Kingdom & Ireland we reduced our office network by a total of 18
offices over the period as we continued to drive efficiency savings by
consolidating operations in selected cities. In Asia Pacific and Continental
Europe & RoW we have maintained the office infrastructure in order to position
the business for the substantial long term structural growth that we expect in
the future. As economic conditions improve, we will continue the rollout of our
office network, with a number of openings already planned for the next 12
months.
Asia Pacific
growth
6 months ended 31 December
(In £'s million) 2009 2008 Actual LFL*
Net fees 64.2 88.3 (27)% (39)%
Operating profit 22.1 38.9 (43)% (52)%
Conversion rate 34.4% 44.1%
Period end consultant headcount**** 753 1,056 (29)% (29)%
In Asia Pacific, net fees decreased by 27% (39% on a like-for-like basis*) to £
64.2 million and operating profit decreased by 43% (52% on a like-for-like
basis*) to £22.1 million. This equates to 63% of Group operating profit** and
for the first time makes Asia Pacific the largest contributing division. The
difference between actual growth and like-for-like growth was mainly due to the
appreciation in the Australian dollar. The business achieved a strong
conversion rate of 34.4% in the period although this was below the 44.1%
achieved last year.
In our market leading Australia & New Zealand business, net fees were down 40%*
versus prior year. Net fees decreased by 20%* in the temporary placement
business and by 58%* in the permanent placement business. Both our permanent
and temporary businesses saw sequential stability in net fees in the first
quarter of the period and sequential growth in the second quarter. The smaller
specialisms have been the best performing businesses, with Pharma and Education
both recording year on year growth in recent months. Our public sector
business, which accounts for 27% of net fees in Australia & New Zealand, faced
difficult market conditions throughout the period with net fees decreasing by
17%* versus last year, mainly driven by decline in back office functions.
In Asia, which accounted for 12% of the division's net fees in the period, net
fees decreased by 18%* versus prior year. However, market conditions improved
markedly through the period, driven by improved levels of demand in Banking and
Financial Services. Record monthly net fee performances were achieved by both
our Japanese and Chinese businesses during the second quarter and since the
period end Asia has returned to year on year growth.
Consultant headcount in Asia Pacific was broadly flat through the period with a
modest reduction at the start of the period offset by selective investment in
the second quarter as market conditions strengthened. As at 31 December 2009,
consultant headcount was 29% below the prior year level. Assuming positive
market trends continue, we expect to add headcount across the region in the
second half.
Continental Europe & Rest of World ('RoW')
growth
6 months ended 31 December
(In £'s million) 2009 2008 Actual LFL*
Net fees 79.1 102.8 (23)% (29)%
Operating profit 6.8 20.6 (67)% (70)%
Conversion rate 8.6% 20.0%
Period end consultant headcount**** 1,068 1,472 (27)% (27)%
In Continental Europe & RoW, net fees decreased by 23% (29% on a like-for-like
basis*) to £79.1 million and operating profit decreased by 67% (70% on a
like-for-like basis*) to £6.8 million. This division now represents 19% of
Group operating profit**. The difference between actual growth and
like-for-like growth was mainly due to the appreciation in the Euro. The
conversion rate declined from 20.0% to 8.6% this period.
Our German business, representing 49% of the division's net fees and the
majority of the division's profits, recorded a 21%* decrease in net fees versus
prior year. Demand in Germany stabilised sequentially in the period with net
fees posting a modest sequential increase in the second quarter. Although
principally focused on the IT contracting market, our German business continues
to diversify into a broader range of specialisms including Accountancy &
Finance, Construction & Property, Sales & Marketing, Legal and Pharma, which
now account for 19% of total net fees in Germany. Our market leading position
and increasing diversification of the business each place us in a strong
position to benefit from improving market conditions.
Our other businesses in this division, covering 19 countries, are focused
principally on the permanent placement markets and hence have been more exposed
to the impact of the recession. As a result, many of the smaller countries
recorded losses during the period. However, we have seen a sequential
stabilisation in demand in most of these countries.
Consultant headcount decreased by 9% during the period with all the reduction
being made in July and August, primarily through natural attrition. As at 31
December 2009, the headcount was 27% below the prior year level. We have
protected the infrastructure in these businesses since we believe they are
positioned in markets with significant structural growth ahead of them. Most of
these countries were achieving organic growth of more than 40% per annum before
the recession and we believe we can achieve these levels again in the next
cycle of growth. We plan to cautiously invest in headcount in the second half
in countries where trends are improving.
United Kingdom & Ireland
growth
6 months ended 31 December
(In £'s million) 2009 2008 Actual LFL*
Net fees 121.5 192.6 (37)% (37)%
Operating profit 6.2 45.6 (86)% (86)%
Conversion rate 5.1% 23.7%
Period end consultant headcount**** 2,226 2,685 (17)% (17)%
In the United Kingdom & Ireland, net fees declined by 37% on an actual and
like-for-like basis* to £121.5 million, with operating profit down 86% on an
actual and like-for-like basis* to £6.2million. Net fees decreased by 29%* in
the temporary placement business and by 47%* in the permanent placement
business. The conversion rate declined from 23.7% to 5.1% this period.
Overall demand stabilised sequentially during the period. However, market
conditions remain challenging. In the private sector trends improved towards
the end of the period but there still remain only limited signs of recovery. In
the public sector, trends are continuing to weaken.
By sector, Accountancy & Finance and IT achieved sequential stability through
the half although demand continued to be fragile. Our Construction & Property
business recorded modest sequential decline. Our Pharma and Financial Services
specialisms were the best performing businesses in the private sector, with
each showing good levels of growth. Performances in the public sector were
mixed: Education and Healthcare achieved strong growth with record results. In
contrast, the pressures on public finances impacted the remainder of our public
sector business particularly in Construction & Property and back office
functions. Overall public sector net fees, which represent 39% of our United
Kingdom & Ireland net fees, decreased by 13% versus prior year and as a result
we continue to reallocate resources from the public sector back to the private
sector.
Consultant headcount in the United Kingdom & Ireland decreased by 4% during the
period. This reduction was made in July and August with headcount being held
broadly flat thereafter as trading stabilised. As at 31 December 2009 the
headcount was 17% below the prior year level and 34% down from peak in March
2008, and we anticipate maintaining headcount at current levels in the second
half. 18 offices were also closed in the period as we have continued to drive
efficiency savings by consolidating operations in selected cities. We have made
excellent progress on our key efficiency investment programmes, with our new
front office system rolled out across the United Kingdom & Ireland and the back
office automation project on track to complete in September 2010. We have also
continued to strengthen our national corporate account management and
recruitment outsource services and these investments have continued to yield
important client wins, including IBM, BT and The Audit Commission, during the
period.
In view of the pressures in the public sector and the unprecedented adverse
weather conditions which reduced the number of temporary placement days worked
in January, we expect our performance in the United Kingdom & Ireland in the
second half to be broadly similar to the first half.
Net finance charge
The net finance charge for the period was £4.7 million (2008: £4.3 million).
The average interest rate on gross debt during the period was 1.0% (2008:
5.2%), generating a net bank interest payable of £0.8 million (2008: £2.7
million). There was a net interest charge on the defined pension scheme
obligations of £3.3 million (2008: £1.2 million) with the increase mainly due
to the lower level of scheme assets reducing expected returns and lower
liabilities more than offset by a higher discount rate, with the charge for the
Pension Protection Fund levy of £0.6 million (2008: £0.4 million).
Overall the net finance charge for the period was £4.7 million. It is expected
that the net finance charge for the year to 30 June 2010 will be around £11
million.
Taxation
Taxation for the period was £11.4 million, representing an effective tax rate
of 37.5% (2008: 30.0%). The increase in the effective tax rate was due to the
presence of unrelieved tax losses in some countries during the period and the
change in geographical mix of profits. It is expected that the effective tax
rate for the year to 30 June 2010 will remain at a similar level.
Earnings per share
Basic earnings per share before exceptional items** decreased 73% to 1.38 pence
(2008: 5.15 pence). The fall in earnings per share reflects the reduction in
operating profit, the higher net finance charge and the increase in the
effective tax rate.
Cash flow and balance sheet
Cash flow in the period was strong with a 103% conversion of operating profit**
into operating cash flow, driven by continued close control of working capital.
This emphasises the importance placed by our management on disciplined cash
management. Overall, net cash generated by operations was £36.1 million (2008:
£137.6 million). Cash outflow from working capital was £6.4 million, resulting
principally from the £20 million payment to other agencies at the start of the
period which reversed the one-off cash inflow received in June 2009 relating to
the withdrawal of the staff hire concession. This cash outflow was partially
offset by an improvement in trade debtor days to 31 days (2008: 37 days). Tax
paid was £3.5 million.
Net capital expenditure was £16.6 million, reflecting the additional
expenditure on the Group's key IT projects. These IT projects are scheduled to
be substantially completed during the second half of the year, after which
capital expenditure is expected to fall back to historical levels.
Dividends paid in the period totalled £54.2 million and £3.0 million was paid
out in net interest. Principally due to the payment of the dividend, net debt
increased from a cash position of £0.7 million at the start of the period to
net debt of £38.4 million at the end of the period. The overall reduction in
net debt levels during the recession of circa £75 million demonstrates the
consistency of the Group's operating cash flow and the robustness of Hays'
business model.
The Group has a £460 million unsecured revolving credit facility available,
which expires in February 2011. The covenants in the facility require the
Group's interest cover to be at least 4:1 and its leverage ratio (net debt to
EBITDA) to be no greater than 3:1. The Group has significant headroom within
these covenants.
Capital structure and dividend
The Board's current priorities for our free cash flow are to fund Group
development, maintain the strength of the balance sheet and to support a
sustainable dividend policy. The Board has no plans to buy back shares at the
present time.
Reflecting the Board's confident outlook and the Group's balance sheet
strength, the Board has decided to pay an interim dividend of 1.85 pence per
share, which is in line with last year. The interim dividend payment date will
be 1 April 2010 and will be paid to shareholders on the register on 5 March
2010.
Retirement benefits
The Group's pension liability under IAS 19 at 31 December 2009 of £101.3
million (£72.9 million net of deferred tax) decreased by £7.9 million compared
to 30 June 2009 primarily due to the higher than expected asset returns and
lower than expected level of scheme liabilities based on the updated membership
data from the triennial valuation process, partially offset by a decrease in
the discount rate. During the period, the Company contributed £2.7 million of
cash into the defined benefit scheme, which included £0.6 million additional
funding towards the pension deficit.
The defined benefit pension scheme is currently undergoing its triennial
actuarial valuation as at 30 June 2009. It is expected that this valuation will
lead to an increase in the actuarial deficit largely due to lower asset values
and changes in the expected long term inflation rate assumptions. As a result
and as referred to in the 2009 Annual Report, we expect Hays' deficit funding
into the pension scheme to increase to between £10 million and £20 million per
annum following the completion of the triennial actuarial valuation.
OFT investigation
On 30 September 2009, The Office of Fair Trading ('OFT') issued its decision
finding that Hays' Construction & Property business in the UK had breached
competition law in the period October 2004 to November 2005. Hays has
co-operated fully with the OFT in its investigation under the leniency regime
and has been fined £30.4 million. Whilst Hays takes the findings of the OFT's
investigation seriously, we believe that the level of the fine is arbitrary and
wholly disproportionate to the activities to which it relates, Hays'
involvement in those activities and the way in which the OFT has dealt with
other cases in the past. The Group is appealing the decision and whilst the
appeal is in progress, the £30.4 million fine is being held on deposit by Hays.
The Half Year Financial Statements include an exceptional charge of £27 million
in the period in respect of the fine and the anticipated costs of the appeal.
Current trading
Currently we are seeing improved candidate and client confidence across the
business in most of our private sector markets. Asia Pacific and parts of
Continental Europe have continued to deliver modest rates of sequential
improvement. Our remaining businesses continue to see overall stability in
their markets and in the UK we expect our performance to be broadly similar in
the second half. Our exposure to high potential overseas markets, our
investment in technology, and the retention of our key people, position us
extremely well to capitalise on the next phase of economic growth.
* LFL (like-for-like) growth represents organic growth of continuing activities
at constant currency. There were the same number of trading days in 2009 and 2008.
** numbers are presented before the exceptional item of £27 million in 2009
relating to the OFT fine that is currently under appeal. There were no
exceptional items in 2008.
*** the underlying temporary placement gross margin is calculated as temporary
placement net fees divided by temporary placement gross revenue and relates
solely to temporary placements in which Hays generates net fees and
specifically excludes transactions in which Hays acts as agent on behalf of
workers supplied by third party agencies.
**** the change in consultants is shown on a closing basis, comparing 31
December 2009 versus 31 December 2008.
Treasury management
The Group's treasury operations remain straight forward and uncomplicated with
Group operations financed by retained earnings and bank borrowings. The Group
has a £460 million revolving credit facility in place until February 2011 and
it uses this facility to manage its day-to-day working capital requirements as
appropriate. Based on positive feedback from initial discussions with the
major syndicate lenders, management are confident that an appropriate
replacement facility will be renewed in advance of February 2011. All
borrowings are raised by the Group's UK-based treasury department, which
manages the Group's treasury risk in accordance with policies set by the Board.
The Group's treasury department does not engage in speculative transactions and
does not operate as a profit centre.
Counterparty risk primarily arises from investment of any surplus funds. The
Group restricts transactions to banks and money market funds that have an
acceptable credit rating and limits its exposure to each institution.
Principal risks facing the business
Hays plc operates an embedded risk management framework, which is monitored and
reviewed by the Audit Committee. The principal risks and uncertainties faced
by the Group for the remaining six months of the year are unchanged from those
set out in the 2009 Annual Report. These are: macroeconomic environment,
competitive environment, customer credit risk, contractual risk, people-related
risks, technological risks, risks associated with regulatory and legislative
changes, foreign exchange risks and the impact of pension scheme liabilities.
See the 2009 Annual Report for a detailed explanation of the principal risks
and uncertainties faced by the Group, a copy of which can be downloaded from
www.haysplc.com/hays/investor/reports/.
Hays plc
250 Euston Road
London
NW1 2AF
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" and gives a true and fair
view of the assets, liabilities, financial position and profit for the Group;
- 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).
This Half Year Report was approved by the Board of Directors and authorised for
issue on 24 February 2010.
Alistair Cox Paul Venables
Chief Executive Group Finance Director
Cautionary statement
This Half Year Report has been prepared solely in compliance with
the Disclosure Rules and Transparency Rules of the UK Financial Services
Authority and is not audited. Statements in this Report reflect the knowledge
and information available at the time of its preparation. Certain statements
included or incorporated by reference within this Report may constitute
"forward-looking statements" in respect of the Group's operations, performance,
prospects and/or financial condition. By their nature, forward-looking
statements involve a number of risks, uncertainties and assumptions and actual
results or events may differ materially from those expressed or implied by
those statements. Accordingly, no assurance can be given that any particular
expectation will be met and reliance should not be placed on any
forward-looking statement. Additionally, forward-looking statements regarding
past trends or activities should not be taken as a representation that such
trends or activities will continue in the future. No responsibility or
obligation is accepted to update or revise any forward-looking statement
resulting from new information, future events or otherwise. Nothing in this
Report should be construed as a profit forecast. This Report does not
constitute or form part of any offer or invitation to sell, or any solicitation
of any offer to purchase 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. Liability arising from anything in this Report shall be governed
by English Law. Nothing in this Report shall exclude any liability under
applicable laws that cannot be excluded in accordance with such laws.
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 2009 which comprises the consolidated income statement, the
consolidated statement of comprehensive income, the consolidated balance sheet,
the consolidated cash flow statement, the consolidated statement of changes in
equity and related notes 1 to 12. 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 (UK and Ireland) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity"
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 Kingdom's 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 2009 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 LLP
Chartered Accountants and Registered Auditors
London, United Kingdom
24 February 2010
Condensed Consolidated Income Statement
Six months to Six months to
31 December 31 December Year to
2009 2008 30 June
(In £'s million) Notes (Unaudited) (Unaudited) 2009
Turnover
Continuing operations 2 1,288.3 1,278.7 2,447.7
Net fees *
Continuing operations 2 264.8 383.7 670.8
Operating profit from continuing operations
before exceptional items 2 35.1 105.1 158.0
Exceptional items 3 (27.0) - -
Operating profit from continuing operations 2 8.1 105.1 158.0
Finance income 0.3 1.3 1.9
Finance cost (5.0) (5.6) (8.9)
4 (4.7) (4.3) (7.0)
Profit before tax 3.4 100.8 151.0
Tax 5 (11.4) (30.2) (45.2)
(Loss)/profit from continuing operations after tax (8.0) 70.6 105.8
(Loss)/profit attributable to equity holders of
the parent company (8.0) 70.6 105.8
Earnings per share from continuing operations
before exceptional items
- Basic 7 1.38p 5.15p 7.72p
- Diluted 7 1.37p 5.15p 7.71p
Earnings per share from continuing operations
- Basic 7 (0.58)p 5.15p 7.72p
- Diluted 7 (0.58)p 5.15p 7.71p
* Net fees are equal to turnover less remuneration of temporary workers.
Condensed Consolidated Statement of Comprehensive Income
Six months to Six months to
31 December 31 December Year to
2009 2008 30 June
(In £'s million) (Unaudited) (Unaudited) 2009
(Loss)/profit for the period (8.0) 70.6 105.8
Currency translation adjustments 11.2 38.6 15.9
Gain on sale of own shares taken to equity - - 5.4
Actuarial gains/(losses) on defined benefit pension scheme 10.2 (9.4) (21.2)
Tax on items taken directly to reserves (2.8) 2.6 5.2
Net income recognised directly in equity 18.6 31.8 5.3
Total recognised income and expense for the period 10.6 102.4 111.1
Attributable to equity shareholders of the parent company 10.6 102.4 111.1
Condensed Consolidated Balance Sheet
31 December 31 December
2009 2008 30 June
(In £'s million) Notes (Unaudited) (Unaudited) 2009
Non-current assets
Goodwill 186.1 193.0 174.9
Other intangible assets 55.2 18.7 38.6
Property, plant & equipment 26.9 32.9 29.1
Deferred tax assets 41.7 39.8 42.9
309.9 284.4 285.5
Current assets
Trade and other receivables 365.9 436.6 352.4
Cash and cash equivalents 119.2 53.6 55.0
485.1 490.2 407.4
Total assets 795.0 774.6 692.9
Current liabilities
Trade and other payables (356.5) (319.3) (312.5)
Current tax liabilities (24.1) (20.5) (16.3)
(380.6) (339.8) (328.8)
Non-current liabilities
Bank loans and overdrafts (157.6) (108.2) (54.3)
Trade and other payables - (13.6) -
Retirement benefit obligations 8 (101.3) (96.6) (109.2)
Provisions 9 (41.3) (45.0) (46.2)
(300.2) (263.4) (209.7)
Total liabilities (680.8) (603.2) (538.5)
Net assets 114.2 171.4 154.4
Equity
Called up share capital 14.7 14.7 14.7
Share premium account 369.6 369.6 369.6
Capital redemption reserve 2.7 2.7 2.7
Retained earnings (330.4) (293.7) (282.6)
Other reserves 57.6 78.1 50.0
Total shareholders' equity 114.2 171.4 154.4
Condensed Consolidated Cash Flow Statement
Six months to Six months to
31 December 31 December Year to
2009 2008 30 June
(In £'s million) Notes (Unaudited) (Unaudited) 2009
Operating profit from continuing operations 8.1 105.1 158.0
Adjustments for:
Exceptional items 27.0 - -
Depreciation of property, plant and equipment 4.5 4.6 10.4
Amortisation of intangible fixed assets 0.7 0.3 1.2
Loss on disposal of property, plant and equipment - - 0.8
Movements in provisions, employee benefits and
other items 2.2 3.3 0.5
34.4 8.2 12.9
Operating cash flow before movement in
working capital 42.5 113.3 170.9
Changes in working capital (6.4) 24.3 90.0
Cash generated by operations 36.1 137.6 260.9
Income taxes paid (3.5) (36.0) (56.5)
Net cash from operating activities 32.6 101.6 204.4
Investing activities
Purchase of tangible and intangible assets (16.6) (17.0) (37.0)
Cash paid in respect of acquisitions made in
previous years - - (5.4)
Interest received 0.3 1.3 1.9
Net cash used in investing activities (16.3) (15.7) (40.5)
Financing activities
Interest paid (3.3) (3.9) (4.6)
Equity dividends paid (54.2) (54.0) (79.3)
Cash outflow in respect of share buy-back - (2.0) (2.1)
Additional pension scheme funding (0.6) (2.1) (2.7)
Proceeds from sale of own shares - - 5.4
Purchase of own shares (0.4) - -
(Repayment)/issue of loan notes (0.8) (0.2) 0.6
Increase/(decrease) in bank overdrafts &
repayment of borrowings 103.3 (30.5) (82.7)
Net cash from/(used) in financing activities 44.0 (92.7) (165.4)
Net increase/(decrease) in cash & cash
equivalents 10 60.3 (6.8) (1.5)
Cash and cash equivalents at beginning of
period 55.0 54.0 54.0
Effect of foreign exchange rate movements 3.9 6.4 2.5
Cash and cash equivalents at end of period 119.2 53.6 55.0
(In £'s million) Notes
Bank loans and overdrafts at beginning of period (54.3) (135.1) (135.1)
(Increase)/decrease in period (103.3) 26.9 80.8
Bank loans and overdrafts at end of period (157.6) (108.2) (54.3)
Net (debt)/cash at end of period 10 (38.4) (54.6) 0.7
Condensed Consolidated Statement of Changes in Equity
For the six months ended 31 December 2009
Capital Share
Share redemption premium Retained Other
(In £'s million) capital reserve account earnings reserves Total
Balance at 1 July 2009 14.7 2.7 369.6 (282.6) 50.0 154.4
Currency translation adjustments - - - - 11.2 11.2
Actuarial gains on defined benefit
pension scheme - - - 10.2 - 10.2
Tax on items taken directly to
reserves - - - (2.8) - (2.8)
Net income recognised directly in
equity - - - 7.4 11.2 18.6
Loss for the period - - - (8.0) - (8.0)
Total recognised (expense)/income for
the period - - - (0.6) 11.2 10.6
Dividends paid - - - (54.2) - (54.2)
Share-based payment schemes - - - 7.0 (3.6) 3.4
Balance at 31 December 2009 14.7 2.7 369.6 (330.4) 57.6 114.2
For the six months ended 31 December 2008
Capital Share
Share redemption premium Retained Other
(In £'s million) capital reserve account earnings reserves Total
Balance at 1 July 2008 14.7 2.7 369.6 (307.0) 43.0 123.0
Currency translation adjustments - - - - 38.6 38.6
Actuarial losses on defined benefit
pension scheme - - - (9.4) - (9.4)
Tax on items taken directly to reserves - - - 2.6 - 2.6
Net (expense)/income recognised
directly in equity - - - (6.8) 38.6 31.8
Profit for the period - - - 70.6 - 70.6
Total recognised income for the period - - - 63.8 38.6 102.4
Dividends paid - - - (54.0) - (54.0)
Share-based payment schemes - - - 4.9 (3.5) 1.4
Share buy-back - - - (1.4) - (1.4)
Balance at 31 December 2008 14.7 2.7 369.6 (293.7) 78.1 171.4
For the year ended 30 June 2009
Capital Share
Share redemption premium Retained Other
(In £'s million) capital reserve account earnings reserves Total
Balance at 1 July 2008 14.7 2.7 369.6 (307.0) 43.0 123.0
Currency translation adjustment - - - - 15.9 15.9
Actuarial profits on defined benefit pension - - - (21.2) - (21.2)
Tax on items taken directly to reserves - - - 5.2 - 5.2
Net (expense)/income recognised - - - (16.0) 15.9 (0.1)
Profit for the period - - - 105.8 - 105.8
Total recognised income for the period - - - 89.8 15.9 105.7
Dividends paid - - - (79.3) - (79.3)
Share-based payment schemes - - - 4.5 (4.9) (0.4)
Gain on sale of own shares taken to reserves - - - 5.4 - 5.4
Purchase of own shares - - - (4.0) (4.0)
Other share movements - - - 5.4 - 5.4
Share buy-back - - - (1.4) - (1.4)
Balance at 30 June 2009 14.7 2.7 369.6 (282.6) 50.0 154.4
Condensed Consolidated Statement of Changes in Equity - Other Reserves
For the six months ended 31 December 2009
Own Equity Cumulative
(In £'s million) shares reserve translation Total
Balance at 1 July 2009 (5.5) 12.0 43.5 50.0
Currency translation adjustments - - 11.2 11.2
Total recognised expense for the period - - 11.2 11.2
Share-based payment schemes (0.1) (3.5) - (3.6)
Balance at 31 December 2009 (5.6) 8.5 54.7 57.6
For the six months ended 31 December 2008
Own Equity Cumulative
(In £'s million) shares reserve translation Total
Balance at 1 July 2008 (1.5) 16.9 27.6 43.0
Currency translation adjustments - - 38.6 38.6
Total recognised expense for the period - - 38.6 38.6
Share-based payment schemes 1.1 (4.6) - (3.5)
Balance at 31 December 2008 (0.4) 12.3 66.2 78.1
For the year ended 30 June 2009
Own Equity Cumulative
(In £'s million) shares reserve translation Total
Balance at 1 July 2008 (1.5) 16.9 27.6 43.0
Currency translation adjustments - - 15.9 15.9
Total recognised income for the period - - 15.9 15.9
Share-based payment schemes - (4.9) - (4.9)
Purchase of own shares (4.0) - - (4.0)
Balance at 30 June 2009 (5.5) 12.0 43.5 50.0
1. Basis of preparation
The condensed consolidated interim financial statements are the results for the
six months ended 31 December 2009. 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 434 of the Companies Act 2006 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 2009, 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, did not draw attention to
any matters by way of emphasis and did not contain a statement under Section
498 (2) or (3) of the Companies Act 2006.
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 2009. These accounting policies are consistent with those applied in
the preparation of the accounts for the year ended 30 June 2009 with the
exception of the following new accounting standards, amendments and
interpretations which were mandatory for accounting periods beginning 1 January
2009.
IAS 1 (revised) Presentation of Financial Statements
On adoption there were no changes to the disclosure previously provided except
for the following:
· The statement of recognised income and expenditure has been renamed
the statement of comprehensive income.
· The reconciliation of movements in equity has been renamed the
statement of changes in equity.
IFRS 8 Operating Segments.
The standard defines operating segments as components of the Group about which
separate financial information is regularly reviewed by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. On adoption, there were no significant changes to the Group's
reportable segments or financial measures.
All other new standards, amendments to standards and interpretations mandatory
for the first time for the accounting periods beginning 1 January 2009 do not
currently have an impact on the Group.
Going concern
The Group's business activities, together with the factors likely to effect its
future development, performance and financial position, including its cash
flows and liquidity position are described in the Interim Management Report.
The Group has a £460 million revolving credit facility in place until February
2011 and uses this facility to manage its day-to-day working capital
requirements as appropriate. Based on positive feedback from initial
discussions with the major syndicate lenders management are confident that an
appropriate replacement facility will be renewed in advance of February 2011.
The Group's facility, together with internally generated cash flows, will
continue to provide sufficient sources of liquidity to fund its current
operations, including contractual and commercial commitments, future growth and
any proposed dividends.
The directors have formed the judgment, at the time of approving the condensed
set of financial statements, that there is reasonable expectation that the
Group has adequate resources to continue in operational existence for the
foreseeable future. For this reason, the directors continue to adopt the going
concern basis in preparing the condensed consolidated 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
2009 2008 30 June
(In £'s million) (Unaudited) (Unaudited) 2009
Turnover
United Kingdom & Ireland 776.5 720.3 1,395.7
Continental Europe & Rest of World 277.9 301.2 587.9
Asia Pacific 233.9 257.2 464.1
1,288.3 1,278.7 2,447.7
Net fees
United Kingdom & Ireland 121.5 192.6 330.7
Continental Europe & Rest of World 79.1 102.8 191.0
Asia Pacific 64.2 88.3 149.1
264.8 383.7 670.8
Operating profit from continuing operations before
exceptional items
United Kingdom & Ireland 6.2 45.6 63.5
Continental Europe & Rest of World 6.8 20.6 33.1
Asia Pacific 22.1 38.9 61.4
35.1 105.1 158.0
Operating profit from continuing operations
United Kingdom & Ireland
Operating profit from continuing operations
before exceptional items 6.2 45.6 63.5
Exceptional items (27.0) - -
United Kingdom & Ireland (20.8) 45.6 63.5
Continental Europe & Rest of World 6.8 20.6 33.1
Asia Pacific 22.1 38.9 61.4
8.1 105.1 158.0
3. Exceptional Items
On the 30 September 2009, The Office of Fair Trading ('OFT') issued its
decision finding that Hays' Construction & Property business in the UK had
breached competition law in the period October 2004 to November 2005. Hays has
co-operated fully with the OFT in its investigation under the leniency regime
and has been fined £30.4million which is currently under appeal.
The effect of this fine and the legal costs associated with the appeal has been
recognised in the Income Statement as an exceptional charge of £27.0 million.
In agreement with the OFT, the fine is currently held on deposit pending the
appeal and a current liability of £30.4 million is held on the balance sheet
within trade and other payables.
4. Finance income and finance costs
Finance income
Six months to Six months to
31 December 31 December Year to
2009 2008 30 June
(In £'s million) (Unaudited) (Unaudited) 2009
Interest on bank deposits 0.3 1.3 1.9
Finance costs
Six months to Six months to
31 December 31 December Year to
2009 2008 30 June
(In £'s million) (Unaudited) (Unaudited) 2009
Interest payable on bank overdrafts and loans (1.1) (4.0) (5.4)
Pension Protection Fund levy (0.6) (0.4) (1.1)
Net interest on pension obligations (3.3) (1.2) (2.4)
(5.0) (5.6) (8.9)
Net finance charge (4.7) (4.3) (7.0)
5. Taxation on ordinary activities
The Group's consolidated effective tax rate in respect of continuing operations
for the six months to 31 December 2009 is based on the estimated effective tax
rate for the full year of 37.5% (31 December 2008: 30.0%, 30 June 2009: 29.9%).
6. Dividends
The following dividends were paid by the Group and have been recognised as
distributions to equity shareholders in the year:
Six months to Six months to
31 December 31 December Year to
2009 2008 June
(In £'s million) (Unaudited) (Unaudited) 2009
Final dividend for the year ended 30 June 2008 of
3.95 pence per share - 54.0 54.0
Interim dividend for the period to 31 December
2008 of 1.85 pence per share - - 25.3
Final dividend for the year ended 30 June 2009 of
3.95 pence per share 54.2 - -
54.2 54.0 79.3
The interim dividend for the period ended 31 December 2009 of 1.85 pence per share is not
included as a liability in the balance sheet as at 31 December 2009.
7. Earnings per share
Six months to Six months to
31 December 31 December Year to
2009 2008 June
(In £'s million) (Unaudited) (Unaudited) 2009
Earnings from continuing operations before
exceptional items 30.4 100.8 151.0
Tax on earnings from continuing operations before
exceptional items (11.4) (30.2) (45.2)
Basic earnings before exceptional items 19.0 70.6 105.8
Earnings from continuing operations after exceptional items 3.4 100.8 151.0
Tax on earnings from continuing operations after
exceptional items (11.4) (30.2) (45.2)
Basic earnings after exceptional items (8.0) 70.6 105.8
Number of shares (million):
Weighted average number of shares 1,376.7 1,370.3 1,370.5
Dilution effect of share options 9.5 1.6 1.1
Weighted average number of shares used for diluted EPS 1,386.2 1,371.9 1,371.6
From continuing operations:
Basic earnings per share before exceptional items 1.38p 5.15p 7.72p
Basic earnings per share (0.58)p 5.15p 7.72p
Diluted earnings per share before exceptional items 1.37p 5.15p 7.71p
Diluted earnings per share (0.58)p 5.15p 7.71p
8. Retirement benefit obligations
Six months to Six months to
31 December 31 December Year to
2009 2008 30 June
(In £'s million) (Unaudited) (Unaudited) 2009
Deficit in scheme brought forward (109.2) (88.1) (88.1)
Current service cost (1.7) (2.3) (4.5)
Contributions 2.7 4.4 7.0
Net financial return (3.3) (1.2) (2.4)
Actuarial gain/(loss) 10.2 (9.4) (21.2)
Deficit in scheme carried forward (101.3) (96.6) (109.2)
9. Provisions
(In £'s million) Property Other Total
Balance at 1 July 2009 20.0 26.2 46.2
Utilised (1.9) (3.3) (5.2)
Exchange adjustments 0.1 0.2 0.3
Balance as at 31 December 2009 18.2 23.1 41.3
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. Other provisions include liabilities arising as a result of business disposals
and the Group transformation that concluded in 2004, including provisions relating to possible
warranty and environmental claims.
10. Movement in net debt
1 July Cash Exchange 31 December
(In £'s million) 2009 flow movement 2009
Cash & cash equivalents 55.0 60.3 3.9 119.2
Bank loans & overdrafts (54.3) (102.5) (0.8) (157.6)
Net debt 0.7 (42.2) 3.1 (38.4)
The table above is presented as additional information to show movement in net debt, defined
as cash & cash equivalents less overdrafts & bank loans.
The Group has a £460 million unsecured revolving credit facility available,which expires in February
2011. The covenants in the facility require the Group's interest cover to be at least 4:1 and its
leverage ratio (net debt to EBITDA) to be no greater than 3:1. The interest rate on the facility is
based upon a ratchet mechanism with a margin payable over LIBOR in the range 0.375% to 0.525%.
As at 31 December 2009, £307.2 million of the committed facility was un-drawn.
11. Events after the balance sheet date
There are no significant events after the balance sheet date to report.
12. Like-for-like results
Like-for-like results represent organic growth/decline of continuing activities at constant currency.
For the six months ended 31 December 2009 this is calculated as follows:
(In £'s million)
Net fees for the six months ended 31 December 2008 383.7
Foreign exchange impact 25.4
Net fees for the six months ended 31 December 2008 at constant currency 409.1
Fee reduction resulting from organic decline (144.3)
Net fees for the six months ended 31 December 2009 264.8
Profit from operations for the six months ended 31 December 2008 105.1
Foreign exchange impact 9.6
Profit from operations for the six months ended 31 December 2008 at constant currency 114.7
Profit from operations reduction resulting from organic decline (79.6)
Profit from operations for the six months ended 31 December 2009 35.1
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