6th Sep 2005 07:03
Hays PLC06 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 5,269staff in 326 offices and provide specialist recruitment services in 723 businessunits 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 feegrowth, 16% ahead of last year at £470.6 million (2004 - £404.7 million), andgrowth in operating profit before goodwill amortisation 25% ahead of last yearat £167.1 million (2004 - £133.4 million) - both at record levels. SpecialistRecruitment operating cash flow of £158.0 million was also very strong. Each ofthe three regions of the United Kingdom & Ireland, Continental Europe & Canadaand 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 rateamongst our peers in the recruitment industry. The growth and productivity achieved has enabled the business to investsubstantially - a 19% increase in recruitment consultants, 80 new business unitsand 27 new offices provide a platform for future growth. We now have 5,269staff, 326 offices and 723 business units across 16 countries. These record results reinforce the fundamental stability of the Hays businessmodel. Whilst the recruitment industry at large is only now achieving profitssimilar to those of the last cyclical peak in 2000, Hays, by virtue of itsstrategy and execution, is delivering profits significantly above that peak. Thebusiness today is bigger, stronger, more profitable and cash generative than ithas 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 investsubstantially across all regions in order to deliver our strategy for growth. Atthe same time the business delivered record net fees and operating profit. Thisis an outstanding achievement. In July and August the business continued to grow across all three regions, withthe growth rate in the United Kingdom lower than in the second half of the lastfinancial year. Overall the Group has generated net fee growth of 13% againsttougher comparatives. Our continuing investment, both in the United Kingdom and overseas, is a strongindicator 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 on6 September 2005 at www.haysplc.com. The presentation will also be filmed anddistributed by RAW Communications. Chairman's statement I am proud to be able to report to you record profits for your SpecialistRecruitment business on conclusion of the Group transformation. These resultshave been achieved entirely from organic growth and, once again, this underlinesthe fundamental quality of the Hays business model. As detailed in Denis'sreport, these record earnings have been achieved whilst continuing to investsubstantially in our geographic and sector coverage both in the United Kingdomand overseas. A direct benefit of the transformation and subsequent focus isthat the executive team is able to identify the emerging opportunities for yourGroup with pace and enthusiasm. I expect the development and exploitation ofthese 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 £470.6million (2004 - £404.7 million), were 16% ahead of last year. Operating profitbefore goodwill amortisation was £167.1 million (2004 - £133.4 million), anincrease of 25%. The profit growth exceeded fee growth as the conversion rateincreased to 35.5% (2004 - 33.0%). At the interim we reported strong growth and that has continued through thesecond half. In the United Kingdom & Ireland, which continues to be our largestmarket, 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 netfees and profits in the region. Our strategy is to roll out our specialistbusiness model internationally and the results achieved demonstrate thepotential available. The Group profit and loss account includes the results of discontinuedoperations, 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 andexceptional items was £180.3 million (2004 - £181.0 million) and Group profitbefore tax was £191.5 million (2004 - £147.7 million). Cash flow The Group's relentless focus on the management of cash produced excellentoperating 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 wouldlike to thank Chairman John Maxwell, his executive team and the staff of DXServices for their effort and professionalism and we wish them well for thefuture. The Group also disposed of its equity investment in Albion Group Limitedon 10 December 2004, and the transaction gave rise to no profit or loss ondisposal. Provisions established at the time of earlier disposals have been reviewed andthis has given rise to an exceptional write-back of £22.0 million, with afurther £2.4 million credit arising on the disposal of a property and therepayment of loan notes previously provided. Return of capital The Group has made excellent progress with the share buy-back which began inNovember 2004. By 5 September 2005, 143.0 million shares had been purchased ata 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 extendthe buy-back to at least £300 million. Dividend growth As a consequence of our strong profit growth and excellent cash generation, theBoard is recommending a final dividend of 2.27p per share, which, if approved atthe Annual General Meeting will make a total of 3.40p for the full year. Thisrepresents an increase of 13% on last year. The recommended dividend will bepaid on 8 November 2005 to shareholders on the register at 7 October 2005. TheBoard is aware of the importance of sustainable dividend growth to shareholdersand 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, WilliamEccleshare and Paul Stoneham. William and Paul bring relevant internationalbusiness experience to your Board. In the short time that they have beenDirectors 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 withresponsibility for the development of our international operations. Thisappointment demonstrates our confidence in, and commitment to, the excellentgrowth 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. Duringmy visits to our offices and back office support functions, I continue to beimpressed by our teams' application, enthusiasm and knowledge. Our objective isto make our business uniquely attractive to our clients, candidates andemployees and this is achieved by a combination of professional and enthusiasticrecruitment consultants, supported by a first class back office infrastructure.On behalf of the Board, I would like to thank everyone in Hays for theircontribution to these outstanding results. Outlook "We are delighted with the performance of the Group. We have continued to investsubstantially across all regions in order to deliver our strategy for growth. Atthe same time the business delivered record net fees and operating profit. Thisis an outstanding achievement. In July and August the business continued to grow across all three regions, withthe growth rate in the United Kingdom lower than in the second half of the lastfinancial year. Overall the Group has generated net fee growth of 13% againsttougher comparatives. Our continuing investment, both in the United Kingdom andoverseas, 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 SpecialistRecruitment. 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 thetotal number of recruitment consultants, the best measure of our productivecapacity, was 19% ahead of last year. During the year we also added another 27new 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 theroll out of specialist activities across our network. At the end of the year thetotal number of business units had increased by 12% and we had 3,683 recruitmentconsultants, 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 lastyear, with salary inflation of 4% to 5% adding to growth. The overall grossmargin 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 thesecond half of the year and we will maintain our focus on protecting ourmargins. Net fees from the public sector grew at the same rate as the rest ofour business and remain at 21% of the total. The overall efficiency of our business is best measured by the proportion of netfees 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 increasedinvestments in headcount and new offices. In the year ahead the conversion rateis expected to be slightly lower due to the impact of pension and employeebenefit costs which are projected to increase by approximately £3.5 million. Webelieve that our conversion rate is the best amongst our peers in therecruitment 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 operatingprofit before goodwill amortisation was up 18% at £130.6 million (2004 - £111.0million). 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 welland the business generated good productivity gains. There was stronger growth inthe South East accompanied by a robust performance from the other regions. Wecontinue to generate excellent growth from our new specialist HR, Purchasing,and Sales and Marketing activities, and these are likely to become largebusinesses in their own right. Construction & Property, which serves both the construction and "builtenvironment" sectors, generated net fees of £103.6 million (2004 - £94.1million), 10% ahead of last year, and the business generated strong growth inpermanent placements. Our Information Technology business performed extremely well and generated netfee growth of 25% to £29.3 million (2004 - £23.4 million). There was very stronggrowth from the permanent recruitment business and double-digit growth incontractor numbers. Within our other specialist activities in the United Kingdom & Ireland, net feesgrew by 15% to £55.9 million (2004 - £48.8 million). Our Education businesscontinued to grow strongly despite challenging market conditions. Both ourBanking and Legal businesses grew during the year though demand in our ContactCentre and Financial Services businesses was weaker. Once again we achieved outstanding growth in Australia & New Zealand. Everyspecialist activity in the region generated double-digit fee growth. Fees fromboth temporary and permanent recruitment grew strongly. The business achieved arecord conversion rate of 44.6% (2004 - 41.0%). We are confident that we havecontinued to increase our market share with net fees increasing by 30% to arecord £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 weakeconomic conditions. Net fees grew by 30% to £53.3 million (2004 - £40.9million) 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 ofour operations in the region. Germany, our largest business in the region,developed its core Information Technology activities strongly as well asintroducing new specialist activities and continuing the rollout of our servicesin 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 newoffices. Our newer businesses throughout Continental Europe & Canada allgenerated impressive growth. We are delighted with the performance of the Group. We have continued to investsubstantially across the business in all regions in order to deliver ourstrategy for growth and at the same time the business delivered record net feesand 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 andachieved an outstanding financial performance. The specialist recruitment sector offers us tremendous opportunities for growthand I know that we have the right people, strategy and resources to capitaliseon them. Denis Waxman, Chief Executive Hays plc Consolidated Profit and Loss Accountfor 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 Sheetat 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 Statementfor 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 18.0Net cash inflow from acquisitions and disposals 61.3 334.0Equity dividends paid (53.4) (79.3) ________ ________NET CASH INFLOW BEFORE FINANCING 107.2 272.7Financing (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 - 44.9Exchange 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' Interestsfor the year ended 30 June 2005 (In £'s million) 2005 2004 Profit for the financial year 135.4 66.3DX 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 0.6Disposal of own shares 6.9 1.4Share 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 Extractsfor 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 1,388.8Discontinued operations 42.6 776.5 ________ ________ 1,683.0 2,165.3 ======== ========OPERATING PROFIT BEFORE GOODWILL AMORTISATIONUnited Kingdom & Ireland 130.6 111.0Continental Europe & Canada 8.5 2.6Australia & New Zealand 28.0 19.8 ======== ======== 167.1 133.4Discontinued operations 8.4 48.1 ________ ________ 175.5 181.5 ======== ========OPERATING PROFIT AFTER GOODWILL AMORTISATIONUnited Kingdom & Ireland 123.4 103.7Continental Europe & Canada 2.5 (3.4)Australia & New Zealand 28.0 19.8 ________ ________ 153.9 120.1Discontinued operations 8.4 48.1 ________ ________ 162.3 168.2 ======== ======== Note 2 - Consolidated Balance Sheet Extractsat 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 - - 86.2Tangible fixed assets 14.1 2.1 0.8 2.5 19.5Net working capital 97.2 6.4 9.4 (74.5) 38.5Provisions for liabilities andcharges - (0.8) - (88.7) (89.5) ______ _________ ______ __________ ________ 153.6 51.6 10.2 (160.7) 54.7Net 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 - - 99.2Tangible fixed assets 12.3 1.9 0.6 23.9 38.7Net working capital 80.2 8.1 9.0 (112.7) (15.4)Provisions for liabilities andcharges - (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 todiscontinued activities and certain assets and liabilities that are managed atthe Group level including cash and borrowings, Group pension and employeebenefits, intercompany balances and corporate tax balances. Hays plc Note 3 - Segmental Information Consolidated Cash Flow Statement Extractfor 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 8.4 162.3Goodwill amortisation 7.2 6.0 - - 13.2 _______ ______ ______ ______ ________ 130.6 8.5 28.0 8.4 175.5Depreciation of tangible andintangible assets 5.3 0.8 0.4 2.2 8.7Movement in working capitaland provisions (17.0) 1.9 (0.5) (7.3) (22.9) _______ ______ ______ ______ ________NET CASH INFLOW FROM OPERATINGACTIVITIES 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 48.1 168.2Goodwill amortisation 7.3 6.0 - - 13.3 _______ ______ ______ ______ ________ 111.0 2.6 19.8 48.1 181.5Depreciation of tangible andintangible assets 5.1 0.9 0.5 26.8 33.3Pension cash contribution(5 Sept 2003) - - - (51.7) (51.7)Movement in working capitaland provisions (29.7) (3.0) (2.7) (22.9) (58.3) _______ ______ ______ ______ ________ NET CASH INFLOW FROM OPERATINGACTIVITIES 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 hascompleted the disposal of all non-core activities and is now focused entirely onSpecialist Recruitment. The disposals and associated restructuring gave rise toan exceptional charge in the year ended 30 June 2003. The adequacy ofprovisions established at that time has been reviewed and this has resulted inan exceptional write-back of £22.0 million in the year. In addition, anexceptional profit of £2.4 million arose from the disposal of a property inBelgium and the repayment of loan notes previously provided for. Exceptional items in the year resulted in a cash inflow of £4.8 million and atax charge of nil. Note 5 - Statement under S240 - Publication of non-statutory accounts The financial information contained in this preliminary announcement does notconstitute statutory accounts for the financial years ended 30 June 2005 and 30June 2004 as defined in section 240 of the Companies Act 1985. The financialinformation is based on the statutory accounts for the financial years ended 30June 2005 and 30 June 2004. The financial statements for 30 June 2005, uponwhich the auditors issued an unqualified opinion, and which do not contain astatement under Section 237 (2) or (3) of the Companies Act 1985, will bedelivered to the Registrar of Companies following the Company's Annual GeneralMeeting. The financial statements for 30 June 2004 upon which the auditorsissued an unqualified opinion, have been delivered to the Registrar ofCompanies. Note 6 - Basis of preparation The accounting policies used in this document are consistent with those used inthe full financial statements for 30 June 2005 which have yet to be published. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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