Interim Results
27 February 2007
Interim results for the 6 months ended 31 December 2006
OPERATING PROFIT UP 11%* AND OUTSTANDING PERFORMANCE INTERNATIONALLY
6 months ended 31 December 2006 2005 Actual LFL*
growth growth
£'s million
Net fees 297.2 259.1 + 15% + 14%
Profit from continuing activities 102.2 94.1 + 9% + 11%
Cash from operations 98.6 83.9 + 18%
Profit before tax** 100.3 94.6 + 6%
Basic earnings per share** 4.73p 4.16p + 14%
Interim dividend per share 1.60p 1.45p + 10%
- Good like-for-like net fee and operating profit growth of 14% and 11%
respectively*
- Outstanding International performance with net fees and operating profit up
36%*
- Profits flat in the United Kingdom & Ireland due to reduction in temporary
business margin
- 26% increase in net fees from permanent business with excellent performance
across the Group
- 14% increase in earnings per share** and 10% increase in interim dividend per
share
- Entry into Japan and Pharmaceutical sector through James Harvard acquisition
for initial £24 million
* LFL is like-for-like growth which represents organic growth of continuing
activities at constant currency. No adjustment is made for the one less trading
day in 2006
** continuing activities only
Commenting on these results, Denis Waxman, Chief Executive of Hays, said:
"These results show good growth in net fees, operating profit and earnings per
share. The highlight is our outstanding performance internationally where we
grew net fees by 33% (36% on a like-for-like basis*) to £98.5 million and
operating profits by 30% (36% on a like-for-like basis*) to £34.7 million. The
International business has increased its share of Group net fees from 22% three
years ago to 33% this period. Our success underlines the excellent market
opportunities available worldwide to Hays and the strength of our business
model. We are continuing to invest internationally, primarily organically, to
maximise our opportunities in these markets.
There was a mixed performance in the United Kingdom & Ireland. The permanent
placement business performed strongly generating good net fee growth of 18%.
However, challenging conditions in the temporary market, primarily in the
public sector, led to margin reduction and low volume growth in this segment.
The investment in consultants during the period in the United Kingdom & Ireland
positions us for an improved performance in the second half of the financial
year.
Since the start of January, net fees have been ahead of the comparable period
last year by 16% on a like-for-like basis*. By region, net fee growth on a
like-for-like basis* was 9% in the United Kingdom & Ireland, 29% in Asia Pacific
and 36% in Continental Europe & Rest of World. Overall, the Group's performance
for the year ending 30 June 2007 continues to be in line with the Board's
expectations."
Enquiries:
Denis Waxman Chief Executive Hays plc + 44 (0)20 7628 9999
Paul Venables Finance Director
Martin Abell Investor Relations
Giles Croot / Gill Ackers Brunswick + 44 (0)20 7404 5959
Chairman's statement
Net fees of the Group were £297.2 million, 15% ahead of last year (14% on a
like-for-like basis*), operating profit from continuing activities was £102.2
million, 9% ahead of last year (11% on a like-for-like basis*), and basic
earnings per share from continuing activities was 4.73 pence, 14% ahead of last
year. The average number of consultants increased by 17% to 4,349 compared to
the average in the first half of last year (2005: 3,726).
We achieved a strong performance in our permanent placement business across all
regions benefiting from continued investment in new consultants. Net fees in
the permanent business grew by 26%, increasing its share of Group net fees to
47% (2005: 43%). Permanent placement volumes increased 15% and average fees per
placement increased by 10% compared to the first half of last year. The
temporary placement business, representing 53% of Group net fees, had a strong
performance internationally but was impacted by challenging conditions in the
United Kingdom & Ireland market, primarily in the public sector. Overall, the
temporary placement business had modest net fee growth of 6%, with volume
growth of 10% compared to the first half of last year and an 80 basis point
reduction in the temporary business margin from 19.0% in the first half of last
year to 18.2% in this period. This decline in margin reduced operating profit
by circa £6 million.
The same factors led to a reduction in the Group's conversion rate, which is
the proportion of net fees converted into operating profit, from 36.3% in the
first half of last year to 34.4%.
United Kingdom & Ireland
The United Kingdom & Ireland business had a mixed performance with net fee
growth of 8% (6% on a like-for-like basis*) to £198.7 million (2005: £184.8
million) and operating profits remaining broadly flat at £67.5 million (2005: £
67.4 million). A strong performance by the permanent placement business was
offset by a weak performance in the temporary business. In particular, the
public sector activities, which represent circa 35% of our temporary business
net fees, experienced challenging market conditions, which affected margins. As
a result, the conversion rate declined from 36.5% in the first half of last
year to 34.0%. We are encouraged that our temporary business margin has
stabilised over the last three months. Whilst the public sector market has been
difficult, it remains an attractive part of our business which provides
resilience across the economic cycle.
As indicated in September, we have invested in consultants increasing the
average number by 7% to 2,826 (2005: 2,636). This investment positions us for
an improved performance in the second half of the financial year.
The Accountancy & Finance business, which has a large weighting to the public
sector, was impacted by the conditions in the temporary market described above.
As a result, this business had flat net fees of £77.6 million (2005: £77.3
million) and a 3% fall in operating profit to £31.5 million (2005: £32.6
million). The increased focus and consultant investment in the permanent
placement business positions us for an improved performance in the second half
of the financial year.
Construction & Property, which serves both the construction and "built"
environment sectors, had an improved performance versus the second half of last
year, benefiting from earlier investment in consultants and the temporary
business margin stabilising in the second quarter. Net fee growth of 7% to £
54.4 million (2005: £50.8 million) translated into operating profit growth of
4% to £22.4 million (2005: £21.5 million). We believe this business is well
positioned for an improved performance in the second half of the financial
year.
Information Technology had net fee growth of 5% to £15.8 million (2005: £15.1
million) and operating profit growth of 2% to £5.5 million (2005: £5.4
million). This business, which is predominantly in the temporary placement
market, was affected by subdued demand from our larger contracts. In response
to this, we are increasing our focus on the permanent market and SMEs.
The Other Specialist Activities in the United Kingdom & Ireland continued their
strong track record of growth. Net fees increased by 22% to £50.9 million
(2005: £41.6 million) and operating profits increased by 3% to £8.1 million
(2005: £7.9 million). This result included strong contributions from Human
Resources, Recruitment Management Services, Banking and Legal which had
combined net fee growth of 28%. As expected, the Contact Centres business was
impacted by the completion of a large contract and the Healthcare business was
affected by the challenging NHS market for healthcare professionals and, as
advised in September, the investment in the new social care activities.
Excluding the Contact Centres and Healthcare businesses, operating profit in
Other Specialist Activities was up by 30%.
Asia Pacific
The Asia Pacific business had an excellent performance in both the temporary
and permanent placement businesses. Net fees increased 24% to £51.4 million
(2005: £41.4 million) and operating profit increased 21% to £24.4 million
(2005: £20.1 million). On a like-for-like basis*, the growth in net fees and
operating profit was 28% with the difference being principally due to the
depreciation of the Australian dollar. The average number of consultants
increased by 39% to 775 (2005: 557). As a result of the investment in China &
Hong Kong and Singapore, the conversion rate declined slightly from 48.6% to
47.5%.
In Australia & New Zealand, the business continues to deliver strong growth
across all its specialist activities further enhancing its market leading
position. New specialist activities, including Oil & Gas and Healthcare, were
rolled out, and activities were expanded in Perth, Melbourne, Maroochydore and
Auckland. This expansion contributed to an increase in net fees in Australia &
New Zealand of 21% compared to the first half of last year.
In Asia, net fees were £1.2 million in the period (2005: nil). In line with our
expectations, the newly established China & Hong Kong business achieved
break-even in the period. We also entered the Singapore market. We believe Hays
is well placed to take advantage of the opportunities in these rapidly growing
markets.
Continental Europe & Rest of World ('RoW')
The Continental Europe & RoW region continued its outstanding progress
increasing net fees by 43% to £47.1 million (2005: £32.9 million) and operating
profit by 56% to £10.3 million (2005: £6.6 million) compared to the first half
of last year. On a like-for-like basis*, the growth in net fees and operating
profit was 44% and 58% respectively. We accelerated our investment in
consultants increasing the average number of consultants in the period by 40%
to 747 (2005: 533) and we started operations in Brazil, representing our first
entry into Latin America. The conversion rate strengthened to 21.9% from 20.1%
due to the increased scale of the business despite significant investment in
the period.
All countries contributed to the outstanding performance across both temporary
and permanent sectors with ten countries delivering net fee growth of more than
25% in the period. Germany, our largest business in the region, further
improved its market share and took advantage of structural growth in the
market, growing net fees by 26%. France, our second largest business in the
region, continued its expansion into the provinces growing net fees by 37%.
Canada, our third largest business in the region, benefited from the ongoing
investment in consultants, growing net fees by an impressive 65%.
Among the other countries in this region, Spain delivered the strongest
performance, more than doubling its net fees, followed by the Netherlands,
which increased net fees by 63%. The launch into Italy last year is progressing
to plan and our entry into the United Arab Emirates (UAE) has exceeded our
expectations, trading profitably within six months of opening.
We see great opportunities for Hays in these markets and we will continue to
invest in consultants and offices to take advantage of them.
Tax and earnings per share
Tax on continuing operations for the period was £31.3 million, representing an
effective tax rate of 31.2% (2005: 31.3%).
Basic earnings per share from continuing activities of 4.73 pence was 14% ahead
of last year (2005: 4.16 pence per share). The improvement in earnings per
share arises from the good growth in operating profit, 9% ahead of last year,
and the favourable impact of the accretion from the share buy-back programme,
partially offset by the higher net interest charge this period.
Cash flow
Cash flow was strong with net cash from continuing operations of £98.6 million
(2005: £83.9 million) after investing £9.0 million in additional working
capital. Tax paid was £31.8 million and net capital expenditure was modest at £
4.8 million reflecting the low capital intensity of the business. £42.3 million
was paid out in dividends, £2.7 million was paid out in net interest, and £21.8
million was used to buy-back our own shares. Over the period net debt increased
from £77.0 million at the start of the period to £82.6 million at the end of
the period.
Retirement benefits
The Group's pension liability under IAS 19 at 31 December 2006 of £88.9 million
(£62.2 million net of deferred tax) increased by £33.0 million compared to 30
June 2006 due to the decrease in the AA bond discount rate. During the period
the Group contributed £2.4 million of cash into the main scheme. A formal
actuarial valuation of the scheme as at 30 June 2006 is currently being
finalised and the results will be known by the end of the financial year.
Capital structure and dividend
The priorities for our free cash flow are to fund Group development,
particularly overseas, support a progressive dividend policy and to buy back
shares when appropriate. During the period, we purchased 11.2 million shares at
a total cost of £15.4 million. This brings the total number of shares bought
back since the start of the share buy-back programme to 279.0 million shares at
a cost of £358.7 million.
The Board has decided to pay an interim dividend of 1.60 pence per share, which
represents a 10% increase on last year. The dividend is payable on 25 May 2007
to shareholders on the register at 20 April 2007.
Acquisition and disposal
Whilst the strategy of the Group is to grow and create value primarily from
organic development, geographical and sector in-fill acquisitions form part of
our development strategy. On 23 February 2007 we acquired James Harvard, a
recruitment business specialising in the Pharmaceutical and Biotechnology
sectors and the IT Financial Services sector. Two thirds of the James Harvard
business is based in the United Kingdom with the remainder overseas, primarily
in Japan. The consideration was an initial £24 million, on a cash free, debt
free basis, with further payments estimated at £19 million depending on
achievement of growth and profitability targets over the next three years. In
the year ended 31 December 2006, James Harvard generated estimated net fees of
£10.7 million and estimated operating profits of £3.0 million.
This acquisition moves Hays into the specialist Pharmaceutical and
Biotechnology sectors, which we believe are attractive markets with strong
growth characteristics, and significantly strengthens Hays' recruitment
offering in the high end IT Financial Services sector. The acquisition will
enable the roll out of James Harvard's Pharmaceutical and Biotechnology
specialist activities across Hays' Continental European network.
The acquisition provides Hays with an entry into Japan, which is the largest
specialist recruitment market in Asia and the third largest in the world. Hays
sees strong growth potential in the Japanese market and the sectors in which
James Harvard operate. In addition, the acquisition provides Hays with an
excellent platform to introduce our core sector businesses into Japan.
On 13 February 2007 Hays sold the IT services business in France for net
proceeds of £2.0 million. This business was not a core activity and represented a
small part of the Hays business in France with net fees and operating profit of
£3.0 million and £0.3 million respectively for the year ended 30 June 2006.
Current trading and outlook
Since the start of January, net fees have been ahead of the comparable period
last year by 16% on a like-for-like basis*. By region, net fee growth on a
like-for-like basis* was 9% in the United Kingdom & Ireland, 29% in Asia Pacific
and 36% in Continental Europe & RoW. Overall, the Group's performance for the
year ending 30 June 2007 continues to be in line with the Board's expectations.
Bob Lawson
Chairman
26 February 2007
CONSOLIDATED INCOME STATEMENT
(In £'s million) Notes Six months Six months Year to
to to 30 June
31 December 31 December 2006
2006 2005
(Unaudited) (Unaudited)
TURNOVER
Continuing operations 3 1,002.3 888.7 1,826.6
NET FEES *
Continuing operations 3 297.2 259.1 538.2
PROFIT FROM OPERATIONS
Continuing operations 3 102.2 94.1 193.0
Finance income 1.7 2.5 5.8
Finance cost (3.6) (2.0) (6.3)
4 (1.9) 0.5 (0.5)
PROFIT BEFORE TAX 100.3 94.6 192.5
Tax 5 (31.3) (29.6) (60.1)
PROFIT FROM CONTINUING OPERATIONS AFTER TAX 69.0 65.0 132.4
PROFIT FROM DISCONTINUED OPERATIONS AFTER TAX 6 0.3 17.2 52.5
PROFIT ATTRIBUTABLE TO EQUITY HOLDERS 69.3 82.2 184.9
Earnings per share from continuing operations
- Basic 8 4.73p 4.16p 8.69p
- Diluted 8 4.72p 4.14p 8.65p
Earnings per share from discontinued
operations
- Basic 8 0.02p 1.10p 3.45p
- Diluted 8 0.02p 1.09p 3.43p
Total earnings per share
- Basic 8 4.75p 5.26p 12.14p
- Diluted 8 4.74p 5.23p 12.08p
* Net fees are equal to turnover less payroll costs of temporary contractors
and workers.
CONSOLIDATED BALANCE SHEET
(In £'s million) Notes 31 December 31 December 30 June
2006 2005 2006
(Unaudited) (Unaudited)
Goodwill 122.2 100.3 126.2
Other intangible assets 1.9 1.6 1.6
Property, plant & equipment 21.1 18.4 20.1
Deferred tax assets 32.8 32.5 22.2
NON-CURRENT ASSETS 178.0 152.8 170.1
Trade & other receivables 370.7 311.7 330.2
Cash & cash equivalents 30.0 33.7 52.8
CURRENT ASSETS 400.7 345.4 383.0
TOTAL ASSETS 578.7 498.2 553.1
Trade & other payables (233.3) (201.0) (208.9)
Tax liabilities (49.8) (56.5) (49.4)
Obligations under finance leases - (0.1) -
CURRENT LIABILITIES (283.1) (257.6) (258.3)
Bank loans & overdrafts (112.6) (107.0) (129.8)
Trade & other payables (5.2) - (7.9)
Retirement benefit obligations 9 (88.9) (87.3) (55.9)
Deferred tax liabilities (0.9) (2.3) (0.9)
Provisions & other liabilities 10 (53.7) (64.8) (57.0)
NON-CURRENT LIABILITIES (261.3) (261.4) (251.5)
TOTAL LIABILITIES (544.4) (519.0) (509.8)
NET ASSETS / (LIABILITIES) 34.3 (20.8) 43.3
Called up share capital 15.7 16.5 15.7
Capital redemption reserve 1.7 0.9 1.7
Share premium account 369.6 369.6 369.6
Retained earnings (359.4) (411.6) (354.8)
Other reserves 6.7 3.8 11.1
TOTAL SHAREHOLDERS' EQUITY / (DEFICIT) 34.3 (20.8) 43.3
CONSOLIDATED CASH FLOW STATEMENT
(In £'s million) Notes Six months Six months Year to
to to 30 June
31 December 31 December 2006
2006 2005
(Unaudited) (Unaudited)
Operating profit from continuing operations 102.2 94.1 193.0
Adjustments for:
Depreciation of property, plant and equipment 3.2 3.1 6.5
Amortisation of intangible fixed assets 0.1 - 0.2
Net movements in provisions, employee benefits & 2.1 0.7 7.6
other items
5.4 3.8 14.3
OPERATING CASH FLOWS BEFORE MOVEMENT IN WORKING 107.6 97.9 207.3
CAPITAL
Movements in working capital (9.0) (14.0) (24.2)
CASH GENERATED BY OPERATIONS 98.6 83.9 183.1
Income taxes paid (31.8) (7.1) (46.7)
NET CASH FROM OPERATING ACTIVITIES 66.8 76.8 136.4
INVESTING ACTIVITIES
Purchases of tangible & intangible assets (4.8) (3.5) (10.9)
Proceeds from sale of property, plant & machinery - 0.2 0.2
Cash paid in respect of acquisitions made in - (1.6) (8.2)
previous years
Acquisition of subsidiaries - - (20.2)
Sale of businesses and related assets (2.2) (10.6) 20.4
Interest received 0.6 3.2 4.7
Net cash used from investing activities (6.4) (12.3) (14.0)
FINANCING ACTIVITIES
Interest paid (3.3) (1.6) (6.3)
Equity dividends paid (42.3) (35.6) (56.7)
Cash outflow in respect of share buy-back (21.8) (168.1) (209.2)
Disposal of own shares & exercise of share 1.8 2.7 8.7
options
(Repayment)/issue of loan notes (0.5) - 0.4
(Decrease)/increase in bank overdrafts & (16.7) 100.6 122.5
repayment of borrowings
Net cash used in financing activities (82.8) (102.0) (140.6)
NET DECREASE IN CASH & CASH EQUIVALENTS 11 (22.4) (37.5) (18.2)
CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 52.8 71.2 71.2
Effect of foreign exchange rate changes (0.4) - (0.2)
CASH & CASH EQUIVALENTS AT END OF PERIOD 30.0 33.7 52.8
(In £'s million) Notes
BANK LOANS, OVERDRAFTS AND FINANCE LEASE (129.8) (6.9) (6.9)
OBLIGATIONS AT BEGINNING OF PERIOD
Decrease/(increase) in period 17.2 (100.6) (122.9)
Effect of exchange rate movements - 0.4 -
BANK LOANS, OVERDRAFTS AND FINANCE LEASE (112.6) (107.1) (129.8)
OBLIGATIONS AT END OF PERIOD
NET DEBT AT END OF PERIOD 11 (82.6) (73.4) (77.0)
NOTES TO THE ACCOUNTS
CONSOLIDATED RECONCILIATION OF MOVEMENTS IN EQUITY
For the six months ended 31 December 2006
(In £'s million) Share Capital Share Retained Other Total
capital redemption premium earnings reserves
reserve account
Balance at 1 July 2006 15.7 1.7 369.6 (354.8) 11.1 43.3
Currency translation - - - - (2.2) (2.2)
adjustments
Actuarial losses on defined - - - (32.9) - (32.9)
benefit pension scheme
Tax on items taken directly - - - 9.9 - 9.9
to reserves
Net expense recognised - - - (23.0) (2.2) (25.2)
directly in equity
Profit for the period - - - 69.3 - 69.3
Total recognised income/ - - - 46.3 (2.2) 44.1
(expense) for the period
Dividends paid - - - (42.3) - (42.3)
Share based payment schemes - - - 3.1 (0.7) 2.4
Purchase of own shares and - - - 3.7 (1.5) 2.2
other
Share buy-back - - - (15.4) - (15.4)
Balance at 31 December 2006 15.7 1.7 369.6 (359.4) 6.7 34.3
CONSOLIDATED RECONCILIATION OF MOVEMENTS IN EQUITY
For the six months ended 31 December 2005
(In £'s million) Share Capital Share Retained Other Total
capital redemption premium earnings reserves
reserve account
Balance at 1 July 2005 17.4 - 369.6 (278.8) (2.2) 106.0
Currency translation - - - - 1.3 1.3
adjustments
Actuarial losses on defined - - - (16.2) - (16.2)
benefit pension scheme
Tax on items taken directly - - - 4.9 - 4.9
to reserves
Net (expense)/income - - - (11.3) 1.3 (10.0)
recognised directly in
equity
Profit for the period - - - 82.2 - 82.2
Total recognised income for - - - 70.9 1.3 72.2
the period
Dividends paid - - - (35.6) - (35.6)
Share based payment schemes - - - - 2.0 2.0
Cancellation of shares (0.9) 0.9 - - - -
Disposal of own shares and - - - - 2.7 2.7
other
Share buy-back - - - (168.1) - (168.1)
Balance at 31 December 2005 16.5 0.9 369.6 (411.6) 3.8 (20.8)
CONSOLIDATED RECONCILIATION OF MOVEMENTS IN EQUITY - OTHER RESERVES
For the six months ended 31 December 2006
(In £'s million) Own Equity Cumulative Total
shares reserve translation
Balance at 1 July 2006 (0.7) 8.7 3.1 11.1
Currency translation adjustments - - (2.2) (2.2)
Total recognised expense 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
CONSOLIDATED RECONCILIATION OF MOVEMENTS IN EQUITY - OTHER RESERVES
For the six months ended 31 December 2005
(In £'s million) Own Equity Cumulative Total
shares reserve translation
Balance at 1 July 2005 (9.4) 4.4 2.8 (2.2)
Currency translation adjustments - - 1.3 1.3
Total recognised income for the period - - 1.3 1.3
Share based payment schemes - 2.0 - 2.0
Disposal of own shares 2.7 - - 2.7
Balance at 31 December 2005 (6.7) 6.4 4.1 3.8
CONSOLIDATED STATEMENT OF RECOGNISED INCOME & EXPENSE
(In £'s million) Six months Six months Year
to to to
31 31 30
December December June
2006 2005 2006
(Unaudited) (Unaudited)
Profit for the period 69.3 82.2 184.9
Currency translation adjustments (2.2) 1.3 0.3
Actuarial (losses)/profits on defined benefit (32.9) (16.2) 15.8
pension scheme
Tax on items taken directly to reserves 9.9 4.9 (4.8)
44.1 72.2 196.2
1 STATEMENT UNDER S240 - PUBLICATION OF NON STATUTORY ACCOUNTS
The interim financial statement has been prepared in accordance with the
recognition and measurement criteria of IFRS and the disclosure requirements of
the Listing Rules.
The information for the year ended 30 June 2006 does not constitute statutory
accounts as defined in Section 240 of the Companies Act 1985. A copy of the
statutory accounts for that year prepared under IFRS has been delivered to 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.
2 BASIS OF PREPARATION OF INTERIM FINANCIAL INFORMATION
Hays plc presented its 30 June 2006 financial statements in accordance with
applicable International Financial Reporting Standards. The same accounting
policies and methods of computation have been followed in these interim
financial statements.
3 SEGMENTAL INFORMATION
Continuing operations comprise one class of business, the 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
(In £'s million) Six months to Six months to Year to
31 December 31 December 30 June
2006 2005 2006
(Unaudited) (Unaudited)
TURNOVER
United Kingdom & Ireland 677.3 623.2 1,266.9
Continental Europe & Rest of World 167.6 129.8 286.5
Asia Pacific 157.4 135.7 273.2
1,002.3 888.7 1,826.6
NET FEES
United Kingdom & Ireland 198.7 184.8 378.4
Continental Europe & Rest of World 47.1 32.9 74.1
Asia Pacific 51.4 41.4 85.7
297.2 259.1 538.2
PROFIT FROM OPERATIONS
United Kingdom & Ireland 67.5 67.4 137.5
Continental Europe & Rest of World 10.3 6.6 13.8
Asia Pacific 24.4 20.1 41.7
102.2 94.1 193.0
4 FINANCE INCOME AND FINANCE COSTS
(In £'s million) Six months Six months Year to
to to 30 June
31 December 31 December 2006
2006 2005
(Unaudited) (Unaudited)
FINANCE INCOME
Interest on bank deposits 0.6 2.0 4.7
Net interest on pension obligations 1.1 0.5 1.1
1.7 2.5 5.8
FINANCE COSTS
Interest payable on bank overdrafts and (3.3) (2.0) (6.0)
loans
Pension Protection Fund levy (0.3) - (0.3)
(3.6) (2.0) (6.3)
Net finance (charge)/income (1.9) 0.5 (0.5)
5 TAXATION ON ORDINARY ACTIVITIES
The Group's consolidated effective tax rate in respect of continuing operations
for the six months to 31 December 2006 is based on the estimated effective tax
rate for the full year of 31.2% (31 December 2005: 31.3%, 30 June 2006: 31.2%).
(In £'s million) Six months to Six months to Year to
31 December 31 December 30 June
2006 2005 2006
(Unaudited) (Unaudited)
TAX CHARGE
United Kingdom 18.2 19.8 39.4
Overseas 13.1 9.8 20.7
31.3 29.6 60.1
6 PROFIT FROM DISCONTINUED OPERATIONS
Profits from discontinued operations in the period of £0.3 million arose from
the repayment of loan notes previously provided for.
Profits from discontinued operations in the prior year period of £17.2 million
arose from the write-back of £17.2 million of tax related accruals which had
been established for a number of historic disposals.
Profits from discontinued operations in the year ended 30 June 2006 of £52.5
million were generated from surplus property disposals of £6.0 million, a final
settlement of £31.0 million from the acquirers of Hays Chemicals and a net tax
credit £15.5 million due mainly to the write-back of tax related accruals that
were established for a number of historic disposals.
7 DIVIDENDS
(In £'s million) Six months Six months Year
to to to
31 December 31 December 30
2006 2005 June
(Unaudited) (Unaudited) 2006
Amounts recognised per ordinary share as
distributions to equity holders in the period:
Final dividend for the year ended 30 June 2005 - 35.6 35.6
of 2.27 pence per share
Interim dividend for the period to 31 December - - 21.1
2005 of 1.45 pence per share
Final dividend for the year ended 30 June 2006 42.3 - -
of 2.90 pence per share
42.3 35.6 56.7
The interim dividend for the period ended 31 December 2006 of 1.60
pence per share is not included as a liability in the balance sheet as at 31
December 2006.
8 EARNINGS PER SHARE
(In £'s million) Six months Six months Year to
to to 30
31 December 31 December June
2006 2005 2006
(Unaudited) (Unaudited)
Earnings from continuing operations 100.3 94.6 192.5
Tax on earnings from continuing (31.3) (29.6) (60.1)
operations
Basic earnings from continuing 69.0 65.0 132.4
operations
Earnings from discontinued operations 0.4 - 37.0
Tax on earnings from discontinued (0.1) 17.2 15.5
operations
Basic earnings from discontinued 0.3 17.2 52.5
operations
Number of shares (million):
Weighted average number of shares 1,457.4 1,564.2 1,523.2
Dilution effect of share options 5.2 6.9 8.2
Weighted average number of shares
used for diluted EPS 1,462.6 1,571.1 1,531.4
Basic earnings per share from 4.73p 4.16p 8.69p
continuing operations
Basic earnings per share from 0.02p 1.10p 3.45p
discontinued operations
Total basic earnings per share 4.75p 5.26p 12.14p
Diluted earnings per share from 4.72p 4.14p 8.65p
continuing operations
Diluted earnings per share from 0.02p 1.09p 3.43p
discontinued operations
Total diluted earnings per share 4.74p 5.23p 12.08p
9 RETIREMENT BENEFIT OBLIGATIONS
(In £'s million) Six months to Six months to Year to
31 December 31 December 30 June
2006 2005 2006
(Unaudited) (Unaudited)
Deficit in scheme brought forward (55.9) (69.7) (69.7)
Current service cost (3.6) (4.3) (8.1)
Past service cost - - (0.1)
Contributions and other 2.4 2.4 5.1
Finance income 1.1 0.5 1.1
Actuarial (loss)/profit (32.9) (16.2) 15.8
Deficit in scheme carried forward (88.9) (87.3) (55.9)
10 PROVISIONS AND OTHER LIABILITIES
(In £'s million) Property Deferred Other Total
employee
benefits
Balance at 1 July 2006 14.8 2.2 40.0 57.0
Utilised (0.7) (0.4) (2.0) (3.1)
Reclassification 1.5 - (1.5) -
Exchange adjustments - - (0.2) (0.2)
15.6 1.8 36.3 53.7
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. Deferred employee benefits
include provision for the Performance Share Scheme and other employee related
provisions. It is not possible to estimate the timing of payments against the
deferred employee benefit provision. 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.
11 MOVEMENT IN NET DEBT
(In £'s million) 1 July Cash Exchange 31 December
2006 flow movement 2006
Cash & cash equivalents 52.8 (22.4) (0.4) 30.0
Bank loans & overdrafts (129.8) 17.2 - (112.6)
Net debt (77.0) (5.2) (0.4) (82.6)
The table above is presented as additional information to show movement in net
debt, defined as cash & cash equivalents less overdrafts & bank loans.
12 CONTINGENT LIABILITIES
In June 2006, Hays was visited by the UK Office of Fair Trading ('OFT') as part
of an investigation into possible breaches of competition law by Hays and other
recruitment companies in the construction recruitment sector. The OFT
investigation related to a small part of Hays' Construction & Property
business. Hays is co-operating fully with the OFT under the OFT's leniency
programme and the Board believes that any financial impact of the matters under
investigation will not be material to the Group.
13 EVENTS AFTER THE BALANCE SHEET DATE
As part of the share buy-back programme, the Company has purchased an
additional 6.0 million shares for a total cost of £9.6 million since the
balance sheet date.
On 23 February 2007 the Group acquired James Harvard International Group Ltd
and James Harvard International Asia KK ('James Harvard'). James Harvard
provides specialist recruitment services in the Pharmaceutical and
Biotechnology sectors and Information Technology for the Financial Services
sector. Approximately two thirds of the business is based in the United
Kingdom and the remainder is based overseas, primarily in Japan. The initial
consideration for the acquisition was £24 million with up to a further £19
million dependent upon profitability over the next three years.
14 LIKE-FOR-LIKE RESULTS
Like-for-like results represent organic growth of continuing activities at
constant currency.
For the six months ended 31 December 2006 this is calculated as follows:
(In £'s
million)
Net fees for the six months ended 31 December 2005 259.1
Foreign exchange impact (2.6)
Net fees for the six months ended 31 December 2005 at constant 256.5
currency
Fees generated from acquisitions 3.7
Fees generated from organic growth 37.0
Net fees for the six months ended 31 December 2006 297.2
Profit from operations for the six months ended 31 December 94.1
2005
Foreign exchange impact (1.3)
Profit from operations for the six months ended 31 December 92.8
2005 at constant currency
Loss from operations generated from acquisitions (0.5)
Profit from operations generated from organic growth 9.9
Profit from operations for the six months ended 31 December 102.2
2006
INDEPENDENT REVIEW REPORT TO HAYS PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 31 December 2006 which comprise the consolidated income
statement, the consolidated balance sheet, the consolidated cash flow
statement, the consolidated reconciliation of movements in equity, the
consolidated statement of recognised income and expense and related notes 1 to
14. We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the company in accordance with Bulletin 1999/4
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 interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and
applying analytical procedures to the financial information and underlying
financial data and, based thereon, assessing whether the accounting policies
and presentation have been consistently applied unless otherwise disclosed. A
review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope than
an audit performed in accordance with International Standards on Auditing (UK
and Ireland) and therefore provides a lower level of assurance than an audit.
Accordingly, we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 December 2006.
Deloitte & Touche LLP
Chartered Accountants
London
United Kingdom
26 February 2007
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