Final Results
Hays PLC
06 September 2005
PRESS RELEASE
6 September 2005
Hays plc
'A RECORD YEAR FOR HAYS SPECIALIST RECRUITMENT'
PRELIMINARY RESULTS FOR THE YEAR TO 30 JUNE 2005
Highlights £'s million
Year ended 30 June 2005 2004 Growth
Record turnover(1) 1,640.4 1,388.8 +18%
Record net fees(2) 470.6 404.7 +16%
Record operating profit(3) 167.1 133.4 +25%
Group profit before tax(4) 191.5 147.7 +30%
Excellent operating cash flow(1) 158.0 104.5 +51%
Dividend per share 3.40p 3.00p +13%
• Net fees(2) and operating profit(3) growth across all three regions and
all major activities
• Investment in recruitment consultants - up 19% to 3,683 (2004 - 3,107)
• Expansion of the office network - 27 new offices opened during the year
including 10 overseas
• Rollout of specialist activities - 80 new business units, 12% increase
on last year
• Conversion rate(5) improved to 35.5% (2004 - 33.0%)
• Successful demerger of DX Services
• Acquired 143.0 million own shares for £183.7 million up to 5 September
2005
• Share buy-back to be extended to at least £300 million
Hays Group is now focused entirely on Specialist Recruitment. We employ 5,269
staff in 326 offices and provide specialist recruitment services in 723 business
units across 16 countries
(1) From Specialist Recruitment
(2) Net fees are equal to turnover less payroll costs of temporary
contractors and workers
(3) Operating profit from continuing operations before goodwill amortisation
of £13.2 million (2004 - £13.3 million)
(4) Group profit before tax includes discontinued activities and is
stated after an exceptional credit of £24.4 million (2004 - exceptional
charge of £20.0 million)
(5) Conversion rate is operating profit from continuing operations before
goodwill amortisation, divided by net fees
Bob Lawson, Chairman, commented:
'Hays, now focused entirely on Specialist Recruitment, generated strong net fee
growth, 16% ahead of last year at £470.6 million (2004 - £404.7 million), and
growth in operating profit before goodwill amortisation 25% ahead of last year
at £167.1 million (2004 - £133.4 million) - both at record levels. Specialist
Recruitment operating cash flow of £158.0 million was also very strong. Each of
the three regions of the United Kingdom & Ireland, Continental Europe & Canada
and Australia & New Zealand grew substantially.
The conversion rate of net fees into operating profits of 35.5% (2004 - 33.0%)
was an excellent result and we believe that this is the best conversion rate
amongst our peers in the recruitment industry.
The growth and productivity achieved has enabled the business to invest
substantially - a 19% increase in recruitment consultants, 80 new business units
and 27 new offices provide a platform for future growth. We now have 5,269
staff, 326 offices and 723 business units across 16 countries.
These record results reinforce the fundamental stability of the Hays business
model. Whilst the recruitment industry at large is only now achieving profits
similar to those of the last cyclical peak in 2000, Hays, by virtue of its
strategy and execution, is delivering profits significantly above that peak. The
business today is bigger, stronger, more profitable and cash generative than it
has ever been before.'
Denis Waxman, Chief Executive, commenting on the outlook said:
'We are delighted with the performance of the Group. We have continued to invest
substantially across all regions in order to deliver our strategy for growth. At
the same time the business delivered record net fees and operating profit. This
is an outstanding achievement.
In July and August the business continued to grow across all three regions, with
the growth rate in the United Kingdom lower than in the second half of the last
financial year. Overall the Group has generated net fee growth of 13% against
tougher comparatives.
Our continuing investment, both in the United Kingdom and overseas, is a strong
indicator of our confidence in the future.'
Enquiries
Denis Waxman Chief Executive, Hays plc + 44 (0)20 7628 9999
John Martin Finance Director, Hays plc + 44 (0)20 7628 9999
Mike Smith Brunswick + 44 (0)20 7404 5959
Delayed web-cast
A presentation to analysts and investors will be available from 14:30 UK time on
6 September 2005 at www.haysplc.com. The presentation will also be filmed and
distributed by RAW Communications.
Chairman's statement
I am proud to be able to report to you record profits for your Specialist
Recruitment business on conclusion of the Group transformation. These results
have been achieved entirely from organic growth and, once again, this underlines
the fundamental quality of the Hays business model. As detailed in Denis's
report, these record earnings have been achieved whilst continuing to invest
substantially in our geographic and sector coverage both in the United Kingdom
and overseas. A direct benefit of the transformation and subsequent focus is
that the executive team is able to identify the emerging opportunities for your
Group with pace and enthusiasm. I expect the development and exploitation of
these opportunities to provide significant opportunities for future growth.
Results summary
Specialist Recruitment turnover in the year was £1,640.4 million (2004 -
£1,388.8 million) an increase of 18% over the prior year. Net fees of £470.6
million (2004 - £404.7 million), were 16% ahead of last year. Operating profit
before goodwill amortisation was £167.1 million (2004 - £133.4 million), an
increase of 25%. The profit growth exceeded fee growth as the conversion rate
increased to 35.5% (2004 - 33.0%).
At the interim we reported strong growth and that has continued through the
second half. In the United Kingdom & Ireland, which continues to be our largest
market, growth was generated across all our major specialist activities.
Australia & New Zealand grew substantially and outperformed the market. Hays'
penetration of Continental Europe & Canada continued and we generated record net
fees and profits in the region. Our strategy is to roll out our specialist
business model internationally and the results achieved demonstrate the
potential available.
The Group profit and loss account includes the results of discontinued
operations, including DX Services until its demerger on 1 November 2004.
Discontinued activities generated £8.4 million of operating profit in the year
(2004 - £48.1 million). Group profit before tax, goodwill amortisation and
exceptional items was £180.3 million (2004 - £181.0 million) and Group profit
before tax was £191.5 million (2004 - £147.7 million).
Cash flow
The Group's relentless focus on the management of cash produced excellent
operating cash flow within Specialist Recruitment of £158.0 million (2004 -
£104.5 million), 51% ahead of last year.
Transformation and exceptional credit
DX Services was successfully demerged from the Group on 1 November 2004. I would
like to thank Chairman John Maxwell, his executive team and the staff of DX
Services for their effort and professionalism and we wish them well for the
future. The Group also disposed of its equity investment in Albion Group Limited
on 10 December 2004, and the transaction gave rise to no profit or loss on
disposal.
Provisions established at the time of earlier disposals have been reviewed and
this has given rise to an exceptional write-back of £22.0 million, with a
further £2.4 million credit arising on the disposal of a property and the
repayment of loan notes previously provided.
Return of capital
The Group has made excellent progress with the share buy-back which began in
November 2004. By 5 September 2005, 143.0 million shares had been purchased at
a total cost of £183.7 million, an average price of 128.5 pence per share.
Having carefully reviewed the Group's prospects, the Board has decided to extend
the buy-back to at least £300 million.
Dividend growth
As a consequence of our strong profit growth and excellent cash generation, the
Board is recommending a final dividend of 2.27p per share, which, if approved at
the Annual General Meeting will make a total of 3.40p for the full year. This
represents an increase of 13% on last year. The recommended dividend will be
paid on 8 November 2005 to shareholders on the register at 7 October 2005. The
Board is aware of the importance of sustainable dividend growth to shareholders
and intends to maintain its current policy of progressive growth in dividends.
Directors and employees
We are delighted to welcome our two new non-executive Directors, William
Eccleshare and Paul Stoneham. William and Paul bring relevant international
business experience to your Board. In the short time that they have been
Directors they have brought new perspectives and great value to Board debates.
Both will be offering themselves for election at the Annual General Meeting.
During the year we appointed a new Divisional Managing Director with
responsibility for the development of our international operations. This
appointment demonstrates our confidence in, and commitment to, the excellent
growth potential available in our chosen international markets.
The record financial performance in the year has been achieved by our people,
who continue to meet and exceed the increasing demands of our clients. During
my visits to our offices and back office support functions, I continue to be
impressed by our teams' application, enthusiasm and knowledge. Our objective is
to make our business uniquely attractive to our clients, candidates and
employees and this is achieved by a combination of professional and enthusiastic
recruitment consultants, supported by a first class back office infrastructure.
On behalf of the Board, I would like to thank everyone in Hays for their
contribution to these outstanding results.
Outlook
'We are delighted with the performance of the Group. We have continued to invest
substantially across all regions in order to deliver our strategy for growth. At
the same time the business delivered record net fees and operating profit. This
is an outstanding achievement.
In July and August the business continued to grow across all three regions, with
the growth rate in the United Kingdom lower than in the second half of the last
financial year. Overall the Group has generated net fee growth of 13% against
tougher comparatives. Our continuing investment, both in the United Kingdom and
overseas, is a strong indicator of our confidence in the future.'
Bob Lawson, Chairman
Specialist Recruitment operating review
It is great to report that this was a record year for Hays Specialist
Recruitment. Turnover grew by 18% to £1,640.4 million (2004 - £1,388.8 million).
Net fees were 16% ahead of last year at £470.6 million (2004 - £404.7 million).
Operating profit before goodwill amortisation increased by 25% to £167.1 million
(2004 - £133.4 million).
We continued to invest substantially in the business. At the end of the year the
total number of recruitment consultants, the best measure of our productive
capacity, was 19% ahead of last year. During the year we also added another 27
new offices to our network, 17 in the United Kingdom & Ireland, 1 in Australia &
New Zealand and 9 in Continental Europe & Canada. We also continued with the
roll out of specialist activities across our network. At the end of the year the
total number of business units had increased by 12% and we had 3,683 recruitment
consultants, 326 offices and 723 business units in 16 countries.
Both permanent fees (21% ahead) and temporary fees (13% ahead) grew strongly.
The proportion of net fees arising from permanent recruitment increased to 42.1%
(2004 - 40.5%).
Fee rates for permanent placements were maintained at levels similar to last
year, with salary inflation of 4% to 5% adding to growth. The overall gross
margin on temporary placements in the year was 18.9% and this compares to 19.7%
last year. Encouragingly we have seen some improvement in gross margins in the
second half of the year and we will maintain our focus on protecting our
margins. Net fees from the public sector grew at the same rate as the rest of
our business and remain at 21% of the total.
The overall efficiency of our business is best measured by the proportion of net
fees converted to operating profit, which was 35.5% in the year (2004 - 33.0%),
an increase of 2.5%. This was a particularly good result given the increased
investments in headcount and new offices. In the year ahead the conversion rate
is expected to be slightly lower due to the impact of pension and employee
benefit costs which are projected to increase by approximately £3.5 million. We
believe that our conversion rate is the best amongst our peers in the
recruitment industry.
In the United Kingdom & Ireland, our largest market, net fees were up 12%
compared with last year to £354.7 million (2004 - £315.5 million) and operating
profit before goodwill amortisation was up 18% at £130.6 million (2004 - £111.0
million).
Net fees in Accountancy & Finance were 11% ahead of last year at £165.9 million
(2004 - £149.2 million). Both temporary and permanent recruitment fees grew well
and the business generated good productivity gains. There was stronger growth in
the South East accompanied by a robust performance from the other regions. We
continue to generate excellent growth from our new specialist HR, Purchasing,
and Sales and Marketing activities, and these are likely to become large
businesses in their own right.
Construction & Property, which serves both the construction and 'built
environment' sectors, generated net fees of £103.6 million (2004 - £94.1
million), 10% ahead of last year, and the business generated strong growth in
permanent placements.
Our Information Technology business performed extremely well and generated net
fee growth of 25% to £29.3 million (2004 - £23.4 million). There was very strong
growth from the permanent recruitment business and double-digit growth in
contractor numbers.
Within our other specialist activities in the United Kingdom & Ireland, net fees
grew by 15% to £55.9 million (2004 - £48.8 million). Our Education business
continued to grow strongly despite challenging market conditions. Both our
Banking and Legal businesses grew during the year though demand in our Contact
Centre and Financial Services businesses was weaker.
Once again we achieved outstanding growth in Australia & New Zealand. Every
specialist activity in the region generated double-digit fee growth. Fees from
both temporary and permanent recruitment grew strongly. The business achieved a
record conversion rate of 44.6% (2004 - 41.0%). We are confident that we have
continued to increase our market share with net fees increasing by 30% to a
record £62.6 million (2004 - £48.3 million). Operating profit increased by 41%
to £28.0 million (2004 - £19.8 million).
We continued to expand our business in Continental Europe & Canada despite weak
economic conditions. Net fees grew by 30% to £53.3 million (2004 - £40.9
million) and operating profit before goodwill amortisation of £8.5 million (2004
- £2.6 million) increased by 227%. We generated net fee growth in every one of
our operations in the region. Germany, our largest business in the region,
developed its core Information Technology activities strongly as well as
introducing new specialist activities and continuing the rollout of our services
in Austria and Switzerland. France, our second largest business in the region,
grew especially strongly in Accountancy & Finance and Construction & Property.
Our operations in Canada, which are profitable and growing, opened 3 new
offices. Our newer businesses throughout Continental Europe & Canada all
generated impressive growth.
We are delighted with the performance of the Group. We have continued to invest
substantially across the business in all regions in order to deliver our
strategy for growth and at the same time the business delivered record net fees
and operating profit. This is an excellent achievement.
We have the best team in the recruitment sector. With their passion, commitment,
and professionalism they have delivered a great service to our customers and
achieved an outstanding financial performance.
The specialist recruitment sector offers us tremendous opportunities for growth
and I know that we have the right people, strategy and resources to capitalise
on them.
Denis Waxman, Chief Executive
Hays plc
Consolidated Profit and Loss Account
for the year ended 30 June 2005
(In £'s million) Note 2005 2004
TURNOVER
Continuing operations 1,640.4 1,388.8
Discontinued operations 42.6 776.5
________ ________
1,683.0 2,165.3
1
__________________________________________________________________________________________________________
OPERATING PROFIT
Continuing operations before goodwill amortisation 167.1 133.4
Goodwill amortisation (13.2) (13.3)
________ ________
153.9 120.1
Discontinued operations 8.4 48.1
________ ________
1 162.3 168.2
__________________________________________________________________________________________________________
OPERATING PROFIT
Continuing operations 153.9 120.1
Discontinued operations 8.4 48.1
________ ________
1 162.3 168.2
Share of operating profit of associate -
discontinued 1.4 2.9
EXCEPTIONAL ITEMS 4 24.4 (20.0)
Net interest receivable/(payable) 3.4 (3.4)
________ ________
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 191.5 147.7
Tax on profit on ordinary activities (56.1) (81.4)
________ ________
PROFIT FOR THE FINANCIAL YEAR 135.4 66.3
DX Services demerger (dividend in specie) (39.3) -
Dividends (55.1) (51.5)
________ ________
Transferred to reserves 41.0 14.8
======== ========
EARNINGS PER SHARE
Basic 8.01p 3.87p
Before goodwill amortisation and exceptional items 7.35p 7.23p
Diluted earnings per share 7.94p 3.86p
DIVIDEND PER SHARE 3.40p 3.00p
Hays plc
Consolidated Balance Sheet
at 30 June 2005
(In £'s million) 2005 2004
FIXED ASSETS
Intangible assets 86.2 99.2
Tangible assets 19.5 38.7
________ ________
105.7 137.9
CURRENT ASSETS
Stocks - 0.1
Debtors due within one year 291.0 268.6
Debtors due after more than one year 46.0 44.2
Cash at bank and in hand 71.2 79.4
________ ________
408.2 392.3
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Borrowings (6.9) (1.9)
Other creditors (298.5) (321.6)
________ ________
(305.4) (323.5)
NET CURRENT ASSETS 102.8 68.8
TOTAL ASSETS LESS CURRENT LIABILITIES 208.5 206.7
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Borrowings - (0.1)
Other creditors - (6.7)
PROVISIONS FOR LIABILITIES AND CHARGES (89.5) (125.4)
________ ________
NET ASSETS 119.0 74.5
======== ========
CAPITAL AND RESERVES
Called up share capital 17.4 17.4
Share premium account 369.6 369.4
Profit and loss account (258.6) (296.0)
Own shares (9.4) (16.3)
________ ________
EQUITY SHAREHOLDERS' INTERESTS 119.0 74.5
======== ========
Hays plc
Summarised Consolidated Cash Flow Statement
for the year ended 30 June 2005
(In £'s million) 2005 2004
CASH INFLOW FROM OPERATING ACTIVITIES 161.3 104.8
________ ________
Returns on investments and servicing of finance 3.4 (22.1)
Taxation (55.3) (40.7)
Capital expenditure (10.5) (24.0)
Capital receipts 0.4 -
________ ________
NET CASH INFLOW BEFORE ACQUISITIONS AND DISPOSALS 99.3 18.0
Net cash inflow from acquisitions and disposals 61.3 334.0
Equity dividends paid (53.4) (79.3)
________ ________
NET CASH INFLOW BEFORE FINANCING 107.2 272.7
Financing (121.8) (347.2)
________ ________
DECREASE IN CASH IN THE YEAR (14.6) (74.5)
======== ========
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
DECREASE IN CASH IN THE YEAR (14.6) (74.5)
Cash outflow from movement in debt and lease financing 0.8 349.2
________ ________
Change in net debt resulting from cash flows (13.8) 274.7
Borrowings disposed - 44.9
Exchange adjustments 0.7 3.6
________ ________
MOVEMENT IN NET DEBT IN THE YEAR (13.1) 323.2
OPENING NET CASH/(DEBT) 77.4 (245.8)
________ ________
CLOSING NET CASH 64.3 77.4
======== ========
Hays plc
Reconciliation of Movements in Consolidated Equity Shareholders' Interests
for the year ended 30 June 2005
(In £'s million) 2005 2004
Profit for the financial year 135.4 66.3
DX Services demerger (dividend in specie) (39.3) -
Dividends (55.1) (51.5)
________ ________
41.0 14.8
Other recognised gains and losses relating to the year 2.9 (2.3)
New share capital subscribed 0.2 0.6
Disposal of own shares 6.9 1.4
Share buy-back (128.1) -
Goodwill written back relating to demerger and disposals 121.6 63.2
________ ________
Net increase in equity shareholders' interests 44.5 77.7
Opening equity shareholders' interests 74.5 (3.2)
________ ________
Closing equity shareholders' interests 119.0 74.5
======== ========
Hays plc
Note 1
Consolidated Profit and Loss Account Extracts
for the year ended 30 June 2005
(In £'s million) 2005 2004
TURNOVER
United Kingdom & Ireland 1,223.4 1,059.3
Continental Europe & Canada 216.7 171.7
Australia & New Zealand 200.3 157.8
________ ________
1,640.4 1,388.8
Discontinued operations 42.6 776.5
________ ________
1,683.0 2,165.3
======== ========
OPERATING PROFIT BEFORE GOODWILL AMORTISATION
United Kingdom & Ireland 130.6 111.0
Continental Europe & Canada 8.5 2.6
Australia & New Zealand 28.0 19.8
======== ========
167.1 133.4
Discontinued operations 8.4 48.1
________ ________
175.5 181.5
======== ========
OPERATING PROFIT AFTER GOODWILL AMORTISATION
United Kingdom & Ireland 123.4 103.7
Continental Europe & Canada 2.5 (3.4)
Australia & New Zealand 28.0 19.8
________ ________
153.9 120.1
Discontinued operations 8.4 48.1
________ ________
162.3 168.2
======== ========
Note 2 - Consolidated Balance Sheet Extracts
at 30 June 2005
(In £'s million) United Continental Australia & Discontinued Group
Kingdom Europe New Zealand & Corporate
& Ireland & Canada
Intangible fixed assets 42.3 43.9 - - 86.2
Tangible fixed assets 14.1 2.1 0.8 2.5 19.5
Net working capital 97.2 6.4 9.4 (74.5) 38.5
Provisions for liabilities and
charges - (0.8) - (88.7) (89.5)
______ _________ ______ __________ ________
153.6 51.6 10.2 (160.7) 54.7
Net cash - - - 64.3 64.3
______ _________ ______ __________ ________
Net assets/(liabilities) 153.6 51.6 10.2 (96.4) 119.0
====== ========= ====== ========== ========
at 30 June 2004
(In £'s million) United Continental Australia & Discontinued Group
Kingdom Europe New Zealand & Corporate
& Ireland & Canada
Intangible fixed assets 49.4 49.8 - - 99.2
Tangible fixed assets 12.3 1.9 0.6 23.9 38.7
Net working capital 80.2 8.1 9.0 (112.7) (15.4)
Provisions for liabilities and
charges - (0.6) (0.1) (124.7) (125.4)
______ _________ ______ __________ ________
141.9 59.2 9.5 (213.5) (2.9)
Net cash - - - 77.4 77.4
______ _________ ______ __________ ________
Net assets/(liabilities) 141.9 59.2 9.5 (136.1) 74.5
====== ========= ====== ========== ========
Discontinued & Corporate items includes assets and liabilities relating to
discontinued activities and certain assets and liabilities that are managed at
the Group level including cash and borrowings, Group pension and employee
benefits, intercompany balances and corporate tax balances.
Hays plc
Note 3 - Segmental Information
Consolidated Cash Flow Statement Extract
for the year ended 30 June 2005
(In £'s million) United Continental Australia & Discontinued Group
Kingdom Europe New Zealand & Corporate
& Ireland & Canada
Operating profit 123.4 2.5 28.0 8.4 162.3
Goodwill amortisation 7.2 6.0 - - 13.2
_______ ______ ______ ______ ________
130.6 8.5 28.0 8.4 175.5
Depreciation of tangible and
intangible assets 5.3 0.8 0.4 2.2 8.7
Movement in working capital
and provisions (17.0) 1.9 (0.5) (7.3) (22.9)
_______ ______ ______ ______ ________
NET CASH INFLOW FROM OPERATING
ACTIVITIES 118.9 11.2 27.9 3.3 161.3
======= ====== ====== ====== ========
for the year ended 30 June 2004
(In £'s million) United Continental Australia & Discontinued Group
Kingdom Europe New Zealand & Corporate
& Ireland & Canada
Operating profit 103.7 (3.4) 19.8 48.1 168.2
Goodwill amortisation 7.3 6.0 - - 13.3
_______ ______ ______ ______ ________
111.0 2.6 19.8 48.1 181.5
Depreciation of tangible and
intangible assets 5.1 0.9 0.5 26.8 33.3
Pension cash contribution
(5 Sept 2003) - - - (51.7) (51.7)
Movement in working capital
and provisions (29.7) (3.0) (2.7) (22.9) (58.3)
_______ ______ ______ ______ ________
NET CASH INFLOW FROM OPERATING
ACTIVITIES 86.4 0.5 17.6 0.3 104.8
======= ====== ====== ====== ========
Note 4 - Exceptional Items
Following the results of a strategic review in March 2003 the Group has
completed the disposal of all non-core activities and is now focused entirely on
Specialist Recruitment. The disposals and associated restructuring gave rise to
an exceptional charge in the year ended 30 June 2003. The adequacy of
provisions established at that time has been reviewed and this has resulted in
an exceptional write-back of £22.0 million in the year. In addition, an
exceptional profit of £2.4 million arose from the disposal of a property in
Belgium and the repayment of loan notes previously provided for.
Exceptional items in the year resulted in a cash inflow of £4.8 million and a
tax charge of nil.
Note 5 - Statement under S240 - Publication of non-statutory accounts
The financial information contained in this preliminary announcement does not
constitute statutory accounts for the financial years ended 30 June 2005 and 30
June 2004 as defined in section 240 of the Companies Act 1985. The financial
information is based on the statutory accounts for the financial years ended 30
June 2005 and 30 June 2004. The financial statements for 30 June 2005, upon
which the auditors issued an unqualified opinion, and which do not contain a
statement under Section 237 (2) or (3) of the Companies Act 1985, will be
delivered to the Registrar of Companies following the Company's Annual General
Meeting. The financial statements for 30 June 2004 upon which the auditors
issued an unqualified opinion, have been delivered to the Registrar of
Companies.
Note 6 - Basis of preparation
The accounting policies used in this document are consistent with those used in
the full financial statements for 30 June 2005 which have yet to be published.
This information is provided by RNS
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