Final Results

RNS Number : 6892M

Hays PLC

29 August 2013

 



PRELIMINARY RESULTS

FOR THE YEAR ENDED

30 JUNE 2013

29 August 2013

RESILIENT FINANCIAL PERFORMANCE AGAINST FRAGILE MARKET BACKDROP WITH FIRM CONTROL ON COSTS AND SELECTIVE INVESTMENT APPROACH

Year ended 30 June (In £'s million)	2013	2012	Actual growth	LFL(1) growth
Net fees	719.0	734.0	(2)%	(1)%
Operating profit	125.5	128.1	(2)%	(1)%
Cash generated by operations(2)	136.3	162.2	(16)%
Profit before tax	118.5	122.4	(3)%
Basic earnings per share(3)	5.14p	5.47p	(6)%
Dividend per share	2.50p	2.50p	0%

All numbers are from continuing operations only.

Highlights

·      Resilient operating profit performance due to firm cost control and selective investment approach

-  Second half operating profit 8% higher than the first half

·      UK & Ireland returned to profit; market stable

-   £12.1 million improvement in operating profit due to successful delivery of cost reduction programme

-   UK returned to year-on-year net fee growth in the second half

·      Strong 10%⁽¹⁾ net fee growth in Continental Europe & Rest of World where markets remained mixed

-   Germany up 13%⁽¹⁾, France up 1%⁽¹⁾, Canada up 31%⁽¹⁾ and Russia up 40%⁽¹⁾

-   13 countries delivered net fee growth of over 10%, 7 countries saw a decline in net fees

·      Asia Pacific net fees decreased 13%⁽¹⁾; Australia tough, market conditions in Asia subdued

-   Australia down 16%⁽¹⁾, with material step down in Resources & Mining activity during the year

-   Australia broadly sequentially stable in the second half

-   Asia up 4%⁽¹⁾ with improved rates of fee growth through the second half

·      Consultant headcount flat year-on-year reflecting our selective investment approach

·      Good cash performance, with 109% conversion of operating profit into operating cash flow⁽²⁾

·      Basic EPS down 6%⁽³⁾, reflecting lower operating profit, higher net finance charge and higher effective tax rate

Commenting on these results Alistair Cox, Chief Executive, said:

"We have delivered a resilient financial performance against a backdrop of fragile market conditions. This highlights the strength of our diverse business model and our ability to react quickly to fast-changing markets. Our unrivalled sector coverage, mix of contract type and market-leading positions in both mature and structural growth markets set us apart in today's market.

Our focus on controlling costs and driving productivity improvements has returned the UK business to profit. We have invested to drive growth in stronger markets such as Germany and Canada, and we have reacted quickly to reduce costs in more challenging areas, such as Australia, to best defend our financial performance.

Looking ahead to 2014 we expect overall market conditions to remain mixed. While some markets are likely to remain challenging, there are also clear opportunities for growth. We will continue to react quickly to changing market conditions, investing in stronger markets while reducing costs where market conditions or outlook are more challenging. Our focus remains on ensuring the Group is positioned for long-term growth whilst driving our profits along the way."

(1)  LFL (like-for-like) growth represents organic growth of continuing operations at constant currency.

(2)  Excludes exceptional cash cost of £0.6 million in 2013 and £7.0 million in 2012.

(3)  Based on earnings per share from continuing operations only, excluding exceptional items.

(4)  The underlying temp gross margin is calculated as temp net fees divided by temp gross revenue and relates solely to temp 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.

Enquiries

Hays plc Paul Venables David Walker Bell Pottinger Gavin Davis / Elly Williamson

Group Finance Director Head of Investor Relations

+ 44 (0) 20 7383 2266 + 44 (0) 20 7383 2266 + 44 (0) 20 7861 3232

Results presentation & webcast

The results presentation will take place at the offices of UBS at 1 Finsbury Avenue, London, EC2M 2PP at 8:00am on 29 August 2013 and will also be available as a live webcast on our website, www.hays.com/investors/results-centre. A recording of the webcast will be available on our website from 1:00pm on 29 August 2013.

A live conference call facility can be accessed by dialling [phone] (confirmation code 30990099).

Reporting calendar

Interim Management Statement for quarter ending 30 September 2013	10 October 2013
Hays Investor Day 2013	7 November 2013
Trading Update for quarter ending 31 December 2013	9 January 2014
Interim Results for six months ending 31 December 2013	26 February 2014
Interim Management Statement for quarter ending 31 March 2014	10 April 2014
Trading Update for quarter ending 30 June 2014	10 July 2014

Hays Group Overview

Hays has 7,840 employees in 239 offices in 33 countries. In many of our global markets, the vast majority of professional and skilled recruitment is still done in-house, with minimal outsourcing to recruitment agencies which presents substantial long-term structural growth opportunities. This has been a key driver of the rapid diversification and internationalisation of the Group, with the International business representing 69% of the Group's net fees as at 30 June 2013, compared with around 15% just 10 years ago.

Our 5,037 consultants work in a broad range of sectors with no sector specialism representing more than 25% of Group net fees. While Accountancy & Finance, Construction & Property and IT & Engineering represent 65% of Group net fees, our expertise across 20 professional and skilled recruitment specialisms gives us opportunities to rapidly develop newer markets by replicating these long-established, existing areas of expertise.

In addition to this international and sectoral diversification, the Group's net fees are generated 59% from temporary and 41% permanent placement markets, and we believe that this balance gives our business model relative resilience in the current environment.

This well diversified business model continues to be a key driver of the Group's resilient financial performance.

Introduction

We have delivered a resilient financial performance for the year, despite market conditions that remained mixed and fragile overall. Net fees decreased by 1% on a like-for-like basis⁽¹⁾ and 2% on a headline basis. Operating profit decreased by 1% on a like-for-like basis⁽¹⁾ and 2% on a headline basis.

Selective, targeted investment to capitalise on stronger markets and deliver profitable fee growth

Throughout the year our approach to managing the business remained focused on defending our financial performance and reacting quickly to changing conditions. We saw clear opportunities for growth alongside more challenging areas, and some markets were very tough. Conditions in Australia saw rapid change, most notably in the resources and mining-focused regions.

Against this backdrop, we remained focused on managing our cost base globally and continued to prioritise areas of investment to maximise fees where we have seen opportunities to grow, such as in Oil & Gas, IT and Engineering and Life Sciences. We have continued to invest to position the Group in structural growth markets such as Germany, Canada and Russia and have taken rapid action on costs in more challenging regions such as Australia and Southern Europe, to best defend the financial performance of the Group.

Movement in consultant headcount

Consultant headcount ended June at 5,037, broadly flat year-on-year and versus December 2012, reflecting our selective investment approach. In our Continental Europe & Rest of World (RoW) division, we increased consultant headcount by 6% year-on-year to 2,084, primarily in Germany and Canada. Asia Pacific consultant headcount was 8% lower, largely reflecting the tougher market conditions in Australia, where headcount was down 15%, but partially offset by continued investment in Asia, where headcount was up 12%, mainly in China, Japan and Malaysia. In the UK & Ireland consultant headcount remained broadly flat.

Consultant headcount	30 June  2013	Net change	30 June  2012
Asia Pacific	1,024	(88)	1,112
Continental Europe & RoW	2,084	117	1,967
United Kingdom & Ireland	1,929	(5)	1,934
Group	5,037	24	5,013

Office network changes & global specialism roll-out

We continue to build a stronger, broader-based and more efficient business and during the year we selectively invested to grow our International businesses and focussed on developing new specialisms in existing locations. We opened new offices in Ulm and Essen in Germany and St Petersburg in Russia. We also continued to develop our global Oil & Gas-focussed business and the roll-out of our successful IT contractor model across six countries, including Canada and France.

In the UK, we finalised the consolidation of our office network in London as well as focussing on offices that have failed to make a positive contribution. We ended the year with 102 offices, a reduction of eight since 30 June 2012 and down from a peak level of 235 in full year 2009.

Office network	30 June 2013	Net opened/ (closed)	30 June  2012
Asia Pacific	48	-	48
Continental Europe & RoW	89	2	87
United Kingdom & Ireland	102	(8)	110
Group	239	(6)	245

Investing in technology, building relationships and responding to change

Over the last five years we have significantly upgraded our core technology platforms and now benefit from the most advanced integrated systems in our industry, enabling our consultants to quickly identify the best people for our clients' vacancies and thereby increase their productivity.

The power of our global database is further enhanced by unique relationships with key platforms such as LinkedIn. For example, our systems now enable cross-system awareness with LinkedIn and enable us to exploit that platform alongside our own to build relationships with more professionals worldwide. As a result of this investment, we are now the 31^st most followed company worldwide on LinkedIn and the most followed recruiter, facilitating access to the profiles of around 119 million professionals. This combination of our expertise and the most effective technology available is now creating real differentiation of our services for our clients and candidates around the world.

Temp market shows relative resilience in more challenging areas and areas of skills shortage; perm markets volatile and tough overall

Net fees in the temp business, which represent 59% of Group net fees, increased by 3%⁽¹⁾. This comprised a volume increase of 1% and an increase in mix/hours worked of 1%. Underlying temp margins⁽⁴⁾ were broadly flat at 14.7% (2012: 14.6%).

Net fees in the perm business decreased by 7%⁽¹⁾, with a volume decrease of 4%, as client and candidate confidence in most markets remained subdued, and there was a reduction in the average fee per placement of 3%.

The higher level of growth in temp relative to perm reflects the greater resilience of the temp and contractor business in more challenging, uncertain markets, and the changes we are seeing in the behaviours of both candidates and clients in certain markets to embrace more flexible working arrangements. This is especially notable in areas of high technical skills and skills shortages such as IT, Engineering and Energy, Oil & Gas.

Asia Pacific

Australian market tough with significant step-down in activity in mining; Asian markets subdued but with positive momentum towards the end of the year

				Growth
Year ended 30 June (In £'s million)	2013	2012		Actual	LFL(1)
Net fees	211.8	242.2		(13)%	(13)%
Operating profit	67.2	90.9		(26)%	(26)%
Conversion rate	31.7%	37.5%
Period end consultant headcount	1,024	1,112		(8)%

In Asia Pacific, net fees decreased by 13% (13% on a like-for-like basis⁽¹⁾) to £211.8 million and operating profit decreased by 26% (26% on a like-for-like basis⁽¹⁾) to £67.2 million, representing a conversion rate of 31.7% (2012: 37.5%). Throughout the year we took the necessary steps to react to fast-changing market conditions across the various geographies and sectors in the division to reduce our cost base.

In Australia, net fees decreased by 16%⁽¹⁾. Temp net fees decreased by 10%⁽¹⁾ and perm net fees decreased by 25%⁽¹⁾. In New South Wales and Victoria (which together represent 47% of our Australia business) net fees decreased by 15%⁽¹⁾ and market conditions were tough but broadly stable through the year. We saw a significant step-down in activity in the resources-based regions of Western Australia and Queensland, notably in the second quarter, with fees down 21%⁽¹⁾. We responded rapidly by reducing headcount where necessary to best protect our financial performance. New Zealand delivered solid net fee growth of 4%⁽¹⁾.  

In Asia, which comprises 5 countries and accounted for 15% of the division's net fees in the year, net fees increased by 4%⁽¹⁾. In Japan, net fees increased by 3%⁽¹⁾ and we saw an improvement in sentiment towards the end of the year. Whilst banking and financial services remained subdued across the region, other specialisms showed clear signs of improvement and we continued to grow our Accountancy & Finance, Life Sciences and IT businesses.

Consultant headcount in the division decreased by 8% during the year. In Australia & New Zealand, consultant headcount decreased by 14% as we responded quickly to more challenging market conditions, notably in the first half. In Asia, consultant headcount increased by 12% and investment was broad-based across the region. Going forward, we expect headcount in the division to remain broadly at current levels.

Continental Europe & Rest of World

Record net fee and profit performance driven by Germany; market conditions elsewhere mixed and fragile overall

				Growth
Year ended 30 June (In £'s million)	2013	2012		Actual	LFL(1)
Net fees	285.2	266.5		7%	10%
Operating profit	52.7	43.7		21%	25%
Conversion rate	18.5%	16.4%
Period end consultant headcount	2,084	1,967		6%

In Continental Europe & RoW, we delivered net fee growth of 7% (10% on a like-for-like basis⁽¹⁾) to £285.2 million, driving excellent operating profit growth of 21% (25% on a like-for-like basis⁽¹⁾) to £52.7 million. Both net fees and operating profit represented records for the division. The difference between actual growth and like-for-like growth rates was due primarily to the depreciation of the Euro versus Sterling. The conversion rate of the division increased to 18.5% (2012: 16.4%) driven by strong net fee growth in more buoyant markets, strong cost control in more challenging areas and our selective investment approach across the division.

Germany, which represented 53% of the division's net fees, delivered strong net fee growth of 13%⁽¹⁾. Although the rate of growth slowed in the second half, this represented a record net fee performance. We saw growth in all of our specialisms across contracting, temp and perm. We saw strong growth in Legal, Life Sciences, Accountancy & Finance, Construction & Property and Sales & Marketing as well as solid growth in our core specialisms of IT and Engineering. Specialisms outside of IT and Engineering account for 25% of our total net fees in the country. Our market-leading position and our well diversified business mean we are ideally positioned to benefit from the structural growth opportunities presented by an increasing demand for specialist recruitment services in Germany and the increasing adoption of flexible working.

In France, our second largest country in the division, net fees increased by 1%⁽¹⁾, a good performance against the backdrop of a very difficult market. Seven countries saw net fees decline in the year, including Italy, Spain, Portugal and the Netherlands, but 13 countries delivered net fee growth of 10%⁽¹⁾ or more including Russia, Poland and Hungary, which each achieved record monthly net fee performances during the year.

In Latin America, our recently opened businesses in Colombia and Mexico performed well. Brazil remains a volatile market and net fees were down 8%⁽¹⁾ in the year. In North America, Canada delivered excellent net fee growth of 31%⁽¹⁾ and our business in the USA continues to perform well, increasing net fees by over 60%⁽¹⁾ versus last year.

Consultant headcount in the division increased by 6%, led by increases of 15% in Germany and 28% in Canada. We are continuing to invest in consultant headcount in markets which demonstrate clear growth, while being more cautious across the rest of the division to maximise our financial performance. Overall, we expect headcount in the division to remain broadly at current levels.

United Kingdom & Ireland

Returned to profit due to successful delivery of cost reduction plans. Markets stable; private sector subdued for majority of year but exited with growth; public sector grew

				Growth
Year ended 30 June (In £'s million)	2013	2012		Actual	LFL(1)
Net fees	222.0	225.3		(1)%	(1)%
Operating profit / (loss)	5.6	(6.5)		186%	186%
Conversion rate	2.5%	(2.9)%
Period end consultant headcount	1,929	1,934		(0)%

In the United Kingdom & Ireland, net fees decreased by 1%⁽¹⁾ to £222.0 million but we generated an operating profit of £5.6 million (2012: operating loss of £6.5 million). We saw relative resilience in the temp business with net fees up 3%⁽¹⁾ while perm remained more challenging, with net fees down 7%⁽¹⁾ in the year.

Although trading conditions in the UK were subdued throughout the year they were broadly stable and we returned to net fee growth in the second half. Activity was broad-based and net fees in our Home Counties, London (excluding City-related), Midlands, Scotland & Northern Ireland and Yorkshire regions grew in the year.

In our private sector business, which represented 72% of the division's net fees, net fees declined by 6%⁽¹⁾. Markets remained difficult in our Banking and City-related specialisms, but we saw good growth in several areas including Human Resources, Life Sciences and Sales & Marketing.

In our public sector business, which represented 28% the division's net fees, we delivered net fee growth of 14%⁽¹⁾, although activity in this market remained subdued and growth was driven by perm job-churn. We delivered particularly good performances in our Education and Healthcare businesses.

The £12.1 million improvement in profitability in the UK & Ireland business has been primarily the result of the successful delivery of a range of cost reduction measures we announced in February 2012. We have reduced the cost base in the division by over 30% from peak levels and we continue to review all aspects to seek further efficiency savings, focussing primarily on Back Office and overhead costs. Additionally, our office network now consists of 102 offices versus a peak of 235.

Closing consultant headcount in the division was broadly flat year-on-year. We delivered an improvement in consultant productivity, which increased by 7% year-on-year following an 8% reduction in average consultant headcount. We focused on growing market share and taking full advantage of those segments of the UK recruitment market which continue to present growth opportunities. Whilst we remain focused on driving consultant productivity, we expect to selectively increase headcount to target opportunities where they arise.

Current trading

Markets are stable overall but conditions remain mixed

Although markets remain mixed, our business is stable overall. Globally, candidate confidence remains fragile, particularly in the perm market. Temp and contractor markets remain relatively robust.

Asia Pacific

Australia remains tough but broadly stable. Conditions in New South Wales and Victoria are stable, but continue to be subdued, notably in perm. In the mining-focused states of Western Australia and Queensland, conditions are broadly stable but fragile. In our Asia businesses, conditions continue to improve.

Continental Europe & RoW

In Continental Europe & RoW, conditions are stable overall. In Germany, our business is performing well and continues to grow, although growth is slowing against tougher comparators. In the rest of the division, conditions are mixed but stable overall.

United Kingdom & Ireland

In the UK & Ireland we continue to see early indications of recovery, particularly in terms of improved client confidence. Although levels of growth remain modest, this improvement feels widespread across all sectors and regions, other than banking.

FINANCIAL REVIEW

Summary Income Statement

			Growth
Year ended 30 June  (In £'s million)	2013	2012		Actual	LFL(1)
Turnover	3,696.9	3,654.6		1%	2%
Net fees
Temporary	423.1	414.0		2%	3%
Permanent	295.9	320.0		(8)%	(7)%
Total	719.0	734.0		(2)%	(1)%
Operating profit from continuing operations	125.5	128.1		(2)%	(1)%
Conversion rate	17.5%	17.5%
Underlying temporary margin (4)	14.7%	14.6%
Temporary fees as % of total	59%	56%
Period end consultant headcount	5,037	5,013		0%

(1)  LFL (like-for-like) growth represents organic growth of continuing activities at constant currency.

(2)  Excludes exceptional cash cost of £0.6 million in 2013 and £7.0 million in 2012.

(3)  Based on earnings per share from continuing operations only, excluding exceptional items.

(4)  The underlying temp gross margin is calculated as temp net fees divided by temp 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.

Turnover increased by 1% (2% on a like-for-like basis⁽¹⁾) and net fees decreased by 2% (1% on a like-for-like basis⁽¹⁾). Operating profit decreased by 2% (1% on a like-for-like basis⁽¹⁾). The difference in growth rates between turnover and net fees is consistent with the outperformance of temp versus perm. Exchange rate movements decreased net fees and operating profit by £6.8 million and £1.3 million respectively, primarily as a result of depreciation in the rate of exchange of the Euro. Fluctuations in exchange rates remain a significant sensitivity for the Group, particularly in the Australian Dollar and the Euro. For example, a one cent change in the exchange rates of these currencies to Sterling has a respective operating profit impact of £0.45 million and £0.60 million per annum.

Operating costs decreased by 1%⁽¹⁾ versus the prior year. This was primarily due to the successful delivery of reductions to our operating cost base in the UK, which decreased by 7%⁽¹⁾, and reflected our focus on cost control in our more challenging markets, and our selective, targeted investment approach.

Group conversion rate, which is the proportion of net fees converted into operating profit, remained stable at 17.5% (2012: 17.5%) as our strong control of operating costs, largely focussed on Back Office and overheads, was offset by a reduction in activity levels in Australia.

Consultant headcount at the end of June was 5,037, broadly flat year-on-year and also versus December 2012. In our International business, we increased consultant headcount by 1% year-on-year, with increases within our Continental Europe & Rest of World division largely offset by decreases in Australia. This reflects our targeted investment approach to ensure we capitalise on stronger markets and clear structural growth opportunities, but react to defend our financial performance in more volatile or challenging markets.

Net finance charge

The net finance charge for the year was £7.0 million (2012: £5.7 million). The average interest rate on gross debt during the year was 2.8% (2012: 2.8%), generating net bank interest payable including amortisation of arrangement fees of £7.0 million (2012: £7.1 million). The net interest charge on the defined benefit pension scheme obligations was £0.4 million (2012: credit of £2.3 million) with the movement being primarily due to lower expected asset returns than in the prior year. The Pension Protection Fund levy was a £0.4 million credit (2012: £0.9 million charge) which included a £0.8 million credit arising on the release of an accrual related to the settlement of historic issues. Following the adoption of IAS 19(R), we expect the net finance charge for the year ending 30 June 2014 to increase to around £8.5 million. The increase is a non-cash item.

Taxation

Taxation for the year was £46.8 million (2012: £46.9m), representing an effective tax rate of 39.5% (2012: 38.3%). The effective tax rate reflects the Group's geographical mix of profits, and the impact of unrelieved UK and overseas tax losses and costs incurred in the UK for which no tax deduction has been available. We expect the Group's effective tax rate to decrease to around 37% for the year to June 2014.

Earnings per share

Basic earnings per share decreased 6% to 5.14 pence (2012: 5.47 pence)⁽³⁾. The decrease in earnings per share reflects the Group's lower operating profit, higher net finance charge and higher effective tax rate.

Cash flow and balance sheet

Cash flow in the year was good with 109% conversion of operating profit into operating cash flow⁽²⁾. This was lower than the prior year (2012: 127%) as a result of an increase in trade debtor days to 37 days (2012: 35 days), due primarily to a change in business mix following strong growth in our German temp and contractor business and a reduction in our Australian temp business.

Net capital expenditure was lower at £10.7 million (2012: £18.8 million). Capital expenditure is expected to be around £12 million for the year to June 2014.

Dividends paid in the year totalled £34.8 million and pension deficit contributions were £12.8 million. Net interest paid was £8.3 million, which included the upfront arrangement fee in relation to the renewal of the Group's £300 million unsecured revolving credit facility in the first half of the year, which expires in October 2017 (more details of which are included in the Treasury management section below).

Net debt reduced from £132.9 million at the start of the year to £105.2 million at the end of the year. We expect a further reduction in net debt in the year to June 2014.

Retirement benefits

The Group's pension liability under IAS19 at 30 June 2013 of £33.0 million increased by £17.6 million compared to 30 June 2012. The movement was due primarily to a decrease in the discount rate and changes to assumptions following the triennial actuarial valuation, partially offset by company contributions and higher than expected asset returns.

During the year, the Company contributed £12.8 million of cash to the defined benefit scheme (2012: £15.5 million) all of which represented funding towards reducing pension deficit in line with previous guidance. The June 2012 triennial valuation quantified the actuarial deficit at c.£150 million, which was agreed between the scheme trustees and the Group in June 2013. Hays has agreed a recovery plan with the Trustees of the pension scheme which maintains the annual payment at the previous level of £12.8 million with a fixed 3% uplift per year, over a recovery period reduced to just under 10 years.

Capital structure and dividend

The Board's priorities for our free cash flow are to fund the Group's investment and development, maintain a strong balance sheet and deliver a sustainable dividend at a level which is both affordable and appropriate. We target a dividend cover range of 2.0x to 3.0x⁽³⁾ earnings and in line with this policy, the Board proposes to pay an unchanged final dividend of 1.67p per share (2012: 1.67p), resulting in a total dividend for the full year of 2.50p per share (2012: 2.50p). Our dividend cover is 2.1x for the year to June 2013.

The Board remains committed to paying a sustainable and progressive dividend. It is our intention to grow the dividend when dividend cover sustainably reaches c.2.5x⁽³⁾.

The proposed final dividend payment date will be 15 November 2013 and the final dividend will be paid to shareholders on the register at close of business on 11 October 2013.

Board changes

As previously announced, Paul Stoneham retired as a non-executive director at the Group's Annual General Meeting in November 2012. Torsten Kreindl joined the Board as a non-executive Director on 1 June 2013 and is a member of the Audit, Remuneration and Nomination Committees. Torsten is a partner in Grazia Equity, a Munich-based venture capital firm, and is a member of the Board of Directors of Swisscom AG.

Treasury management

The Group's operations are financed by retained earnings and bank borrowings. The Group completed the re-financing of its £300 million revolving credit banking facility on 2 October 2012 at interest rates similar to the previous deal. The new 5-year-facility provides considerable headroom versus current and future expected levels of Group debt. The covenants, which are unchanged on the Group's previous facility, require the Group's interest cover ratio to be at least 4:1 and its leverage ratio (net debt to EBITDA) to be no greater than 2.5:1. The Group has significant headroom within these covenants.

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.

The Board considers it appropriate to use certain derivative financial instruments to reduce its exposure to interest rate movements under its floating rate revolving credit facility. The Group holds six interest rate swaps which exchange a fixed payment for floating rate receipt on a total debt value of £40 million with an equal mix of two-year and three-year maturities, which commenced in October 2011. The Group does not hold or use derivative financial instruments for speculative purposes.

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 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. There are a number of potential risks and uncertainties that could have a material impact on the Group's financial performance and position. These include risks relating to the cyclical nature of our business, business model risk, talent recruitment and retention, compliance risk, reliance on technology, contract risk and foreign exchange risks. These risks and our mitigating actions remain as set out in the 2012 Annual Report.

Hays plc

250 Euston Road

London

NW1 2AF

hays.com/investors

Cautionary statement

This Preliminary results report (the "Report") has been prepared in accordance with the Disclosure Rules and Transparency Rules of the UK Financial Services Authority and is not audited. No representation or warranty, express or implied, is or will be made in relation to the accuracy, fairness or completeness of the information or opinions contained in this Report. 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 shall not be placed on any forward-looking statement. Additionally, forward-looking statements regarding past trends or activities shall not be taken as a representation that such trends or activities will continue in the future. The information contained in this Report is subject to change without notice and 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 shall 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 or subscribe for 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 or any invitation or inducement to engage in investment activity under section 21 of the Financial Services and Markets Act 2000. 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, and neither the Company nor any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this Report or its contents or otherwise arising in connection with this Report. Nothing in this Report shall exclude any liability under applicable laws that cannot be excluded in accordance with such laws.

CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE
(In £s million)		Note	2013	2012
Turnover
Continuing operations			3,696.9	3,654.6
Net fees (1)
Continuing operations		3	719.0	734.0
Operating profit from continuing operations		3	125.5	128.1
Finance income		5	0.7	0.9
Finance cost		5	(7.7)	(6.6)
Profit before tax			118.5	122.4
Tax		6	(46.8)	(46.9)
Profit from continuing operations after tax			71.7	75.5
Profit from discontinued operations			-	11.0
Profit attributable to equity holders of the parent Company			71.7	86.5
Earnings per share from continuing operations
	- Basic	8	5.14p	5.47p
	- Diluted	8	5.06p	5.37p
Earnings per share from continuing and discontinued operations
	- Basic	8	5.14p	6.26p
	- Diluted	8	5.06p	6.16p
(1) Net fees comprise turnover less remuneration of temporary workers and other recruitment agencies.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE
(In £s million)			2013	2012
Profit for the year			71.7	86.5
Items that will not be reclassified subsequently to profit or loss:
Actuarial loss on defined benefit pension schemes			(28.8)	(24.6)
Currency translation adjustments			1.2	(16.1)
Tax relating to components of other comprehensive income			4.1	2.4
			(23.5)	(38.3)
Items that may be reclassified subsequently to profit or loss:
Mark to market valuation of derivative financial instruments			0.6	(0.4)
Other comprehensive income for the year net of tax			(22.9)	(38.7)
Total comprehensive income for the year			48.8	47.8
Attributable to equity shareholders of the parent Company			48.8	47.8

CONSOLIDATED BALANCE SHEET
AT 30 JUNE
(In £s million)		Note	2013	2012
Non-current assets
Goodwill			177.3	177.2
Other intangible assets			44.4	55.5
Property, plant and equipment			22.3	24.2
Deferred tax assets			34.2	28.3
			278.2	285.2
Current assets
Trade and other receivables			565.9	538.6
Cash and cash equivalents			40.0	38.7
			605.9	577.3
Total assets			884.1	862.5
Current liabilities
Trade and other payables			(433.4)	(429.0)
Current tax liabilities			(33.0)	(29.2)
Bank loans and overdrafts			(0.2)	(1.6)
Provisions		10	(4.2)	(2.7)
Derivative financial instruments			(0.5)	(1.1)
			(471.3)	(463.6)
Non-current liabilities
Bank loans			(145.0)	(170.0)
Retirement benefit obligations		9	(33.0)	(15.4)
Provisions		10	(18.4)	(22.9)
			(196.4)	(208.3)
Total liabilities			(667.7)	(671.9)
Net assets			216.4	190.6
Equity
Called up share capital			14.7	14.7
Share premium			369.6	369.6
Capital redemption reserve			2.7	2.7
Retained earnings			(244.3)	(270.5)
Cumulative translation reserve			54.8	53.6
Other reserves			18.9	20.5
Total shareholders' equity			216.4	190.6
The Consolidated Financial Statements of Hays plc, registered number 2150950, were approved by the Board of Directors and authorised for issue on 29 August 2013.
Signed on behalf of the Board of Directors
A R Cox		P Venables

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2013
(In £s million)	Share capital	Share premium account	Capital redemption reserve	Retained earnings	Cumulative translation reserve	Other  reserves	Total
At 1 July 2012	14.7	369.6	2.7	(270.5)	53.6	20.5	190.6
Currency translation adjustments	-	-	-	-	1.2	-	1.2
Mark to market valuation of derivative financial instruments	-	-	-	-	-	0.6	0.6
Actuarial loss on defined benefit pension schemes	-	-	-	(28.8)	-	-	(28.8)
Tax relating to components of other comprehensive income	-	-	-	4.1	-	-	4.1
Net (expense)/income recognised in other comprehensive income	-	-	-	(24.7)	1.2	0.6	(22.9)
Profit for the year	-	-	-	71.7	-	-	71.7
Total comprehensive income for the year	-	-	-	47.0	1.2	0.6	48.8
Dividends paid	-	-	-	(34.8)	-	-	(34.8)
Share-based payments	-	-	-	13.9	-	(3.8)	10.1
Deferred tax on share-based payment transactions	-	-	-	0.1	-	-	0.1
Other share movements	-	-	-	-	-	1.6	1.6
At 30 June 2013	14.7	369.6	2.7	(244.3)	54.8	18.9	216.4
FOR THE YEAR ENDED 30 JUNE 2012
(In £s million)	Share capital	Share premium account	Capital redemption reserve	Retained earnings	Cumulative translation reserve	Other  reserves	Total
At 1 July 2011	14.7	369.6	2.7	(275.6)	69.7	15.3	196.4
Currency translation adjustments	-	-	-	-	(16.1)	-	(16.1)
Mark to market valuation of derivative financial instruments	-	-	-	-	-	(0.4)	(0.4)
Actuarial loss on defined benefit pension schemes	-	-	-	(24.6)	-	-	(24.6)
Tax relating to components of other comprehensive income	-	-	-	2.4	-	-	2.4
Net expense recognised in other comprehensive income	-	-	-	(22.2)	(16.1)	(0.4)	(38.7)
Profit for the year	-	-	-	86.5	-	-	86.5
Total comprehensive income for the year	-	-	-	64.3	(16.1)	(0.4)	47.8
Dividends paid	-	-	-	(65.8)	-	-	(65.8)
Share-based payments	-	-	-	6.6	-	4.4	11.0
Other share movements	-	-	-	-	-	1.2	1.2
At 30 June 2012	14.7	369.6	2.7	(270.5)	53.6	20.5	190.6

CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE
				Restated (2)
(In £s million)		Note	2013	2012
Operating profit from continuing operations			125.5	128.1
Adjustments for:
	Exceptional items (1)		(0.6)	(7.0)
	Depreciation of property, plant and equipment		11.0	9.7
	Amortisation of intangible fixed assets		12.6	13.5
	(Profit)/loss on disposal of property, plant and equipment		(0.1)	0.9
	Net movements in provisions and other items		(2.4)	(5.4)
	Share-based payments		10.2	12.2
			30.7	23.9
Operating cash flow before movement in working capital			156.2	152.0
Changes in working capital
Increase in receivables			(25.1)	(26.7)
Increase in payables			4.6	29.9
			(20.5)	3.2
Cash generated by operations			135.7	155.2
Pension scheme deficit funding (2)			(12.8)	(12.4)
Income taxes paid			(45.2)	(44.2)
Net cash inflow from operating activities			77.7	98.6
Investing activities
Purchase of property, plant and equipment			(9.3)	(12.7)
Proceeds from sales of business and related assets			0.2	0.1
Purchase of intangible assets			(1.4)	(6.1)
Cash paid in respect of acquisitions made in previous years			(0.8)	(1.0)
Interest received			0.7	0.9
Net cash used in investing activities			(10.6)	(18.8)
Financing activities
Interest paid			(9.0)	(7.1)
Equity dividends paid			(34.8)	(65.8)
Purchase of own shares			-	(0.7)
Proceeds from exercise of share options			1.6	2.1
Decrease in bank loans and overdrafts			(26.4)	(18.3)
Net cash used in financing activities			(68.6)	(89.8)
Net decrease in cash and cash equivalents			(1.5)	(10.0)
Cash and cash equivalents at beginning of year		11	38.7	55.1
Effect of foreign exchange rate movements			2.8	(6.4)
Cash and cash equivalents at end of year		11	40.0	38.7
(1) The adjustment to the Cash Flow Statement in the year to 30 June 2013 of £0.6 million and in the year to 30 June 2012 of £7.0 million relates to cash paid in respect of exceptional items which were recognised in the financial years ended 30 June 2010 and 30 June 2011.
(2) The Pension scheme deficit funding payments of £12.8 million have been reclassified from Financing activities to Operating activities in the current year. Accordingly, the 2012 Cash Flow Statement has been restated to conform with the current year presentation resulting in £12.4 million moving from Financing activities to Operating activities.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1	STATEMENT UNDER S435 - PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information set out in this preliminary announcement does not constitute statutory accounts for the years ended 30 June 2013 or 2012, for the purpose of the Companies Act 2006, but is derived from those accounts. The statutory accounts for 2012 have been delivered to the Registrar of Companies and those for 2013 will be delivered following the Company's Annual General Meeting. The Group's Auditor has reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.
2	BASIS OF PREPARATION
Whilst the financial information included in this preliminary announcement has been prepared in accordance with the International Financial Reporting Standards (IFRSs) as adopted for use in the European Union and as issued by the International Accounting Standards Board, this announcement does not itself contain sufficient information to comply with IFRS. The accounting policies applied in preparing this financial information are consistent with the Group's financial statements for the year ended June 2012 with the exception of the following new accounting standards and amendments which were mandatory for accounting periods beginning on or after 1 January 2012, none of which had any material impact on the Group's results or financial position.
·	IAS 1 (amendment) Presentation of Items of Other Comprehensive Income (effective 1 July 2012)
·	IAS 12 (amendment) Deferred Tax: Recovery of Underlying Assets (effective 1 January 2012)
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 this preliminary results announcement for the year ended 30 June 2013. The directors have formed the judgement that there is reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. As a result the directors continue to adopt the going concern basis in the preparation of the financial statements.
3	SEGMENTAL INFORMATION
The Group's continuing operations comprise one class of business, that of qualified, professional and skilled recruitment.
The Group's Management Board, which is regarded as the chief operating decision maker, uses net fees by segment as its measure of revenue in internal reports, rather than use turnover.  This is because net fees exclude the remuneration of temporary workers, and payments to other recruitment agencies where the Group acts as principal, which are not considered relevant in allocating resources to segments. The Group's Management Board considers net fees for the purpose of making decisions about allocating resources. The Group does not report items below operating profit by segment in its internal management reporting.  The reconciliation of turnover to net fees can be found in note 4.
(In £s million)							2013	2012
Net fees from continuing operations
Asia Pacific							211.8	242.2
Continental Europe & Rest of World							285.2	266.5
United Kingdom & Ireland							222.0	225.3
							719.0	734.0
(In £s million)							2013	2012
Operating profit from continuing operations
Asia Pacific							67.2	90.9
Continental Europe & Rest of World							52.7	43.7
United Kingdom & Ireland							5.6	(6.5)
							125.5	128.1
4	OPERATING PROFIT FROM CONTINUING OPERATIONS
The following costs are deducted from turnover to determine net fees from continuing operations:
(In £s million)							2013	2012
Turnover							3,696.9	3,654.6
Remuneration of temporary workers							(2,685.9)	(2,421.3)
Remuneration of other recruitment agencies							(292.0)	(499.3)
Net fees							719.0	734.0
Profit from operations is stated after charging the following items to net fees of £719.0 million (2012: £734.0 million):
(In £s million)							2013	2012
Staff costs							428.1	436.6
Depreciation of property, plant and equipment							11.0	9.7
Amortisation of intangible assets							12.6	13.5
Operating lease rentals payable							31.2	30.6
Impairment loss on trade receivables							2.5	3.8
Auditor remuneration
- for statutory audit services							0.8	0.8
- for other services							0.6	0.2
Other external charges							106.7	110.7
							593.5	605.9
5	FINANCE INCOME AND FINANCE COST
Finance income
(In £s million)							2013	2012
Interest on bank deposits							0.7	0.9
Finance cost
(In £s million)							2013	2012
Interest payable on bank loans and overdrafts							(7.7)	(8.0)
Pension Protection Fund levy							0.4	(0.9)
Net interest on pension obligations							(0.4)	2.3
							(7.7)	(6.6)
Net finance charge							(7.0)	(5.7)
6	INCOME TAXES RELATING TO CONTINUING OPERATIONS
The income tax expense for the year can be reconciled to the accounting profit as follows:
(In £s million)							2013	2012
Profit before tax from continuing operations							118.5	122.4
Income tax expense calculated at 23.75% (2012: 25.50%)							(28.1)	(31.2)
Effect of expenses that are not deductible in determining taxable profit							(0.7)	(0.1)
Deductible pension contribution in respect of prior periods							-	2.5
Effect of unused tax losses not recognised as deferred tax assets							(1.8)	(7.9)
Effect of different tax rates of subsidiaries operating in other jurisdictions							(10.9)	(9.4)
Effect on deferred tax balances due to the change in income tax rate from 24.0% to 23.0% (effective March 2013)							(0.9)	(0.7)
Effect of share-based payment charges and share options							0.3	(0.9)
							(42.1)	(47.7)
Adjustments recognised in the current year in relation to the current tax of prior years							(5.0)	(0.8)
Adjustments to deferred tax in relation to prior years							0.3	1.6
Income tax expense recognised in the Consolidated Income Statement (relating to continuing operations)							(46.8)	(46.9)
Effective tax rate for the year on continuing operations							39.5%	38.3%
The tax rate used for the 2013 and 2012 reconciliations above is the corporate tax rate of 23.75% (2012: 25.50%) payable by corporate entities in the United Kingdom on taxable profits under tax law in that jurisdiction.
7	DIVIDENDS
The following dividends were paid by the Group and have been recognised as distributions to equity shareholders in the year:
					2013		2012
					pence per	2013	pence per	2012
					share	£s million	share	£s million
Previous year final dividend					1.67	23.2	3.95	54.3
Current year interim dividend					0.83	11.6	0.83	11.5
						34.8		65.8
The following dividends are proposed by the Group in respect of the accounting year presented:
					2013		2012
					pence per	2013	pence per	2012
					share	£s million	share	£s million
Interim dividend					0.83	11.6	0.83	11.5
Final dividend (proposed)					1.67	23.5	1.67	23.1
					2.50	35.1	2.50	34.6
The final dividend for 2013 of 1.67 pence per share (£23.5 million) will be proposed at the Annual General Meeting on 13 November 2013 and has not been included as a liability as at 30 June 2013. If approved, the final dividend will be paid on 15 November 2013 to shareholders on the register at the close of business on 11 October 2013.
8	EARNINGS PER SHARE
							Weighted
							average
							number of	Per share
						Earnings	shares	amount
For the year ended 30 June 2013						(£s million)	(million)	(pence)
Continuing operations:
Basic earnings per share from continuing operations						71.7	1,393.8	5.14
Dilution effect of share options						-	23.4	(0.08)
Diluted earnings per share from continuing operations						71.7	1,417.2	5.06
There are no discontinued operations in the current year.
							Weighted
							average
							number of	Per share
						Earnings	shares	amount
For the year ended 30 June 2012						(£s million)	(million)	(pence)
Continuing operations
Basic earnings per share from continuing operations						75.5	1,381.4	5.47
Dilution effect of share options						-	23.4	(0.10)
Diluted earnings per share from continuing operations						75.5	1,404.8	5.37
Discontinued operations:
Basic earnings per share from discontinued operations						11.0	1,381.4	0.80
Dilution effect of share options						-	23.4	(0.02)
Diluted earnings per share from discontinued operations						11.0	1,404.8	0.78
Continuing and discontinued operations:
Basic earnings per share from continuing and discontinued operations						86.5	1,381.4	6.26
Dilution effect of share options						-	23.4	(0.10)
Diluted earnings per share from continuing and discontinued operations						86.5	1,404.8	6.16
The weighted average number of shares in issue for both years exclude shares held in treasury and shares held by the Hays plc Employee Share Trust.
9	RETIREMENT BENEFIT OBLIGATIONS
(In £s million)							2013	2012
Deficit in the scheme brought forward							(15.4)	(11.9)
Past service cost/curtailment							-	6.0
Current service cost							(1.2)	(2.7)
Contributions							12.8	15.5
Net financial (cost)/return							(0.4)	2.3
Actuarial loss							(28.8)	(24.6)
Deficit in the scheme carried forward							(33.0)	(15.4)
10	PROVISIONS
(In £s million)						Property	Other	Total
At 1 July 2012						13.0	12.6	25.6
Exchange adjustments						-	0.1	0.1
Utilised						(2.2)	(0.9)	(3.1)
At 30 June 2013						10.8	11.8	22.6
(In £s million)							2013	2012
Current							4.2	2.7
Non-current							18.4	22.9
							22.6	25.6
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 2015 and the amounts will be paid over this period.
Other provisions include potential warranty claim liabilities arising as a result of the business disposals that were concluded in 2004, deferred employee benefit provisions, and restructuring provisions. Of these provisions, £4.2 million is expected to be paid in the next 12 months and it is not possible to estimate the timing of the payments for the other items.
11	MOVEMENT IN NET DEBT
					1 July	Cash	Exchange	30 June
(In £s million)					2012	flow	movement	2013
Cash and cash equivalents					38.7	(1.5)	2.8	40.0
Bank loans and overdrafts					(171.6)	26.4	-	(145.2)
Net debt					(132.9)	24.9	2.8	(105.2)
The table above is presented as additional information to show movement in net debt, defined as cash and cash equivalents less bank loans and overdrafts.
The Group completed the re-financing of a five year £300 million unsecured revolving credit facility on 2 October 2012 which expires in October 2017. The financial covenants, which are unchanged from the Group's previous facility, require the Group's interest cover ratio to be at least 4:1 and its leverage ratio (net debt to EBITDA) to be no greater than 2.5:1. The interest rate of the facility is based on a ratchet mechanism with a margin payable over LIBOR in the range of 1.85% to 2.40%.
At 30 June 2013, £155 million of the committed facility was un-drawn.
12	LIKE-FOR-LIKE RESULTS
Like-for-like results represent organic growth/(decline) of continuing activities at constant currency.
For the year ended 30 June 2013 these are calculated as follows:
(In £s million)
Net fees for the year ended 30 June 2012								734.0
Foreign exchange impact								(6.8)
Net fees for the year ended 30 June 2012 at constant currency								727.2
Net fee reduction resulting from organic decline								(8.2)
Net fees for the year ended 30 June 2013								719.0
Profit from operations for the year ended 30 June 2012								128.1
Foreign exchange impact								(1.3)
Profit from operations for the year ended 30 June 2012 at constant currency								126.8
Profit from operations reduction resulting from organic decline								(1.3)
Profit from operations for the year ended 30 June 2013								125.5
13	LIKE-FOR-LIKE RESULTS H1 V H2 ANALYSIS BY DIVISION
Net fee growth/(decline)		Q1	Q2	H1	Q3	Q4	H2	FY
versus same period last year		2013	2013	2013	2013	2013	2013	2013
Asia Pacific		(9%)	(14%)	(11%)	(14%)	(13%)	(14%)	(13%)
Continental Europe & Rest of World		16%	12%	14%	4%	9%	6%	10%
United Kingdom & Ireland		(9%)	(3%)	(6%)	0%	7%	3%	(1%)
Group		(1%)	(1%)	(1%)	(3%)	1%	(1%)	(1%)
H1 2013 is the period from 1 July 2012 to 31 December 2012.  H2 2013 is the period from 1 January 2013 to 30 June 2013.

 

END

 

 

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