30th Aug 2012 07:00
HAYS PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2012
30 August 2012
GOOD FEE AND PROFIT PERFORMANCE DUE TO STRONG COST CONTROL AND SELECTIVEINVESTMENT FOR GROWTHYear ended 30 June Actual LFL(1)(In £'s million) 2012 2011 growth growth Net fees 734.0 672.1 9% 8%
Operating profit (before exceptional items)(2) 128.1 114.1 12% 9%Cash generated by operations(3) 162.2 97.3 67% Profit before tax (before exceptional items)(2) 122.4 106.6 15% Profit before tax 122.4 110.7 11% Basic earnings per share (before exceptional item)(2) 5.47p 5.19p
5% Basic earnings per share 5.47p 5.69p (4)% Dividend per share 2.50p 5.80p (57)%
All numbers are from continuing operations only.
Highlights
· Strong International net fee growth of 16%(1) driving Group net fee growth of 8%(1)
· Good operating profit growth of 9%(1) due to our selective investment approach and
focussed cost control
· Record performance in Continental Europe & Rest of World, delivering 23%(1) net
fee growth
- Broad-based growth, with Germany up 30%(1), Brazil up 30%(1), Canada up 25%(1)
and France up 17%(1)
· Good performance in Asia Pacific, delivering 10%(1) net fee growth with markets
increasingly multi-speed
- Australia & New Zealand net fees up 10%(1), Asia net fees up 11%(1) with
Japan up 16%(1)
· The UK market became increasingly challenging as the year progressed, with net fees
down 7%
- Private sector net fees down 6%. Public sector down 8% but sequentially stable
over the year
- Cost reductions delivered in the second half to protect the financial performance
of the business
· Consultant headcount up 1% year-on-year, but down 4% in the second half, reflecting our
strategy to capitalise on growth markets whilst maximising Group profit
· Excellent cash performance, with 127% conversion of operating profit into operating cash
flow(3)
· 5% growth in basic earnings per share(2) to 5.47p; full year dividend down 57% to 2.50p,
in line with the rebased level announced at the Interim results
Commenting on these results Alistair Cox, Chief Executive, said:
"Delivering profit growth above our net fee growth in the increasingly difficult markets we faced is a good result. We have focussed on getting the balance right between continued investment to grow our business and rapid action to control costs as many of our markets tightened throughout the year.
The strong performance of our International business is further clear evidenceof the structural growth characteristics of markets such as Germany, Brazil,Canada and Japan. In addition, our performance illustrates the expertise of ourteams around the world and their ability to respond to challenges whilst fullycapitalising on opportunities in their specific markets.Looking ahead to 2013 we expect the overall economic backdrop to remaindifficult and our markets to continue to be multi-speed. Several markets arelikely to remain very challenging, but these will sit side-by-side with clearopportunities for growth. Therefore we need to be both adaptable to the worldas it changes and selective about areas for investment. Achieving the rightbalance of building scale for the long term, exploiting stronger marketsegments and reducing costs and driving productivity to maximise the bottomline in more difficult areas will be key to our success."
(1) LFL (like-for-like) growth represents organic growth of continuing
activities at constant currency.
(2) Continuing operations only, before exceptional items. 2011 profit numbers
are presented before an exceptional credit of £4.1 million.
(3) Cash generated by operations excludes cash impact of exceptional items of
£7.0 million (2011: £15.4 million) paid in the year.
(4) Based on earnings per share from continuing operations only, before
exceptional items.
(5) The underlying temporary placement gross margin is calculated as
temporary placement net fees divided by temporary placement gross revenue and
relates solely to temporary placements in which Hays generates net fees and
specifically excludes transactions in which Hays acts as agent on behalf of
workers supplied by third party agencies.
(6) Consultants shown on a closing basis at 30 June 2012, and the change in
consultants compares 30 June 2012 with 30 June 2011.
EnquiriesHays plc Paul Venables David Walker / Lauren Burns Group Finance Director + 44 (0) 20 7383 2266 Investor Relations + 44 (0) 20 7383 2266Maitland Liz Morley / Brian Hudspith + 44 (0) 20 7379 5151
Results presentation & webcast
The preliminary results presentation will take place at UBS offices at 100Liverpool Street, London at 8.30am on 30 August 2012 and will also be availableas a live webcast on our website, www.hays.com/investors. A recording of thewebcast will be available on our website from 1:00pm on 30 August 2012.
Reporting calendar
Interim Management Statement for quarter ending 30 September 2012 9 October 2012 Trading Update for quarter ending 31 December 2012
10 January 2013 Interim Results for six months ending 31 December 2012 28 February 2013 Interim Management Statement for the quarter ending 31 March 2013 11 April 2013 Trading Update for the quarter ending 30 June 2013 11 July 2013 Hays Group OverviewHays has 7,800 employees in 245 offices in 33 countries. In many of our globalmarkets, the vast majority of professional and skilled recruitment is stilldone in-house, with minimal outsourcing to recruitment agencies which presentssubstantial long-term structural growth opportunities. This has been a keydriver of the rapid diversification and internationalisation of the Group, withthe International business representing 69% of the Group's net fees in 2012,compared with around 15% just 10 years ago.Our 5,013 consultants work in a broad range of sectors with no one sectorspecialism representing more than 26% of Group net fees. While Accountancy &Finance, Construction & Property and IT represent 64% of Group net fees in2012, our expertise across 20 professional and skilled recruitment specialismsgives us opportunities to rapidly develop newer markets by replicating theselong-established, existing areas of expertise.In addition to this international and sectoral diversification, the Group's netfees are generated 56% from temporary and 44% permanent placement markets, andwe believe that this balance provides relative resilience to our business modelin the current environment.
This well diversified business model was a key driver of our performance in 2012.
Introduction
Good fee growth, selective investment and strong cost control to defend Group profitability
We have delivered good net fee growth of 8%(1) driven by a strong performance by our International businesses, in the context of increasingly challenging conditions in many of our markets.
The year saw fast-changing, volatile market conditions around the world, withsentiment amongst our clients and candidates varying from quarter to quarter.As such, our approach to managing the business has been nimble and responsiveto reflect this volatility, most notably in terms of prioritising appropriateareas of investment.We have continued to grow our business to maximise fees in more buoyantmarkets, such as the resource-based regions of Australia and our global IT,Engineering, Life Sciences and Oil & Gas specialisms. Equally, we havecontinued to invest in order to capitalise on structural growth markets such asGermany, Japan and Brazil. At the same time, we have taken appropriate actionto defend the profit of the Group by focussing on strong cost control in morechallenging markets and leveraging our best-in-class IT systems to driveconsultant productivity.As a result of this approach, we delivered operating profit growth of 9%(1) forthe full year, and the Group's operating profit in the second half of the yearwas 3% higher than in the first half, despite net fees in the second half beingsequentially 4% lower.Investing in our business
Selective, targeted investment to capitalise on stronger markets and deliver profitable fee growth
Office network changes and new country expansions
We have continued to selectively invest to grow our International platform,opening new offices and developing new specialisms in existing countries. InAsia Pacific ('APAC'), we opened an office in Guangzhou (our fourth in China),and in May 2012 we launched Hays Malaysia, our seventh Asia Pacific country ofoperation and the 33rd country for the Group. In Continental Europe & Rest ofWorld ('RoW') we opened offices in Cologne and Leipzig (Germany), Houston (USA)and Gosselies (Belgium) and we are continuing to develop our business in LatinAmerica, where we launched new businesses in Colombia and Chile.In the UK, we continued the consolidation of our office network, ending thefinancial year with 110 offices, a reduction of 15 in the year and down from apeak level of 235 in 2009. 30 June Net opened/ 30 JuneOffice network 2012 (closed) 2011 Asia Pacific 48 2 46Continental Europe & RoW 87 3 84United Kingdom & Ireland 110 (15) 125Group 245 (10) 255
Movement in consultant headcount
Our consultant headcount ended June at 5,013, up 1% year on year but down 4% inthe second half, reflecting our more selective, targeted investment approach.In our International business, we increased consultant headcount by 11% in theyear, to 3,079. Consultant headcount in the UK & Ireland reduced 10%, primarilythrough natural attrition. 30 June Net 30 JuneConsultant headcount 2012 change 2011 Asia Pacific 1,112 41 1,071Continental Europe & RoW 1,967 253 1,714United Kingdom & Ireland 1,934 (224) 2,158Group 5,013 70 4,943
We continue to build a stronger, broader-based and more efficient business. Ourbest-in-class IT systems enable us to interact with new media and socialnetworks effectively, provide data capture on candidates and opportunitiesglobally and allow us to manage administration more efficiently. Each of theseelements are critical to ensure we continue to provide a market-leading serviceto our clients and candidates, and anticipate and respond to their evolvingneeds.
Temporary and permanent placement market trends
Temp market resilience in more challenging markets and areas of skills shortage, perm markets more cyclical and overall increasingly tough
Net fees from temporary placements, which represent 56% of Group fees,increased by 12%(1). This comprised a volume increase of 4% and a favourableincrease in mix/hours worked of 9%, partially offset by underlying margins,which were slightly lower at 14.6% (2011: 14.7%). Margins have remained broadlystable through the year.
Net fees in the permanent placement business, representing 44% of Group net fees, increased by 3%(1). The average fee per placement increased by 6%(1) driven primarily by the mix of business, as more of our permanent fees were generated by the International businesses where the average salary of candidates placed is higher. This was partially offset by a 3% decline in placement volumes.
The higher level of growth in temporary relative to permanent placements reflects the greater resilience of the temporary placement business in more challenging, uncertain markets. We saw lower levels of activity in permanent placements, particularly in the second half of the year, as client and candidate confidence in many markets was negatively impacted by heightened global economic uncertainty.
Asia Pacific
Strong growth overall, driven by Western Australia, New Zealand & Japan; other Asian markets and the rest of Australia increasingly difficult
Growth Year ended 30 June (In £'s million) 2012 2011 Actual LFL(1) Net fees 242.2 210.0 15% 10%Operating profit 90.9 78.1 16% 11%Conversion rate 37.5% 37.2%
Period end consultant headcount(6) 1,112 1,071 4% In Asia Pacific, net fees increased by 15% (10% on a like-for-like basis(1)) to£242.2 million and operating profit increased by 16% (11% on a like-for-likebasis(1)) to £90.9 million. The difference between actual growth andlike-for-like growth was predominantly due to the appreciation in theAustralian Dollar. The business continued to achieve an excellent conversionrate of 37.5%, up from 37.2% in the prior year, as we carefully balanced theneed to drive profitability with selective investment to capitalise on thelong-term growth potential across the region.In our market-leading Australia & New Zealand business, net fees were up 10%(1)versus prior year. Temporary placement net fees increased by 18%(1) and weachieved record temp levels in several months. Permanent placement net feesdeclined by 1%(1) with an excellent performance in the resource-based regionsof Western Australia and Queensland offset by increasingly tough marketconditions in New South Wales and Victoria. New Zealand also deliveredexcellent net fee growth of 34%(1). Our public sector business, which accountsfor 24% of net fees in Australia & New Zealand, delivered good growth of 13% (1).Our Asian business, which accounted for 13% of the division's net fees in theyear, delivered net fee growth of 11%(1). Japan delivered strong net fee growthof 16%(1), although comparators include the impact of the March 2011 earthquakeand subsequent disruption. Elsewhere in Asia, market conditions were mixed andbecame more challenging as the year progressed, notably in those businesseswith a significant weighting towards banking and financial services such asHong Kong and Singapore.Consultant headcount in the division increased by 4% over the year, with 3%more consultants in Australia & New Zealand and 5% in Asia, but we took actionto reduce headcount by 2% in the second half as we became more selective aboutareas of investment. We will continue with this approach going forward, asalthough we continue to selectively increase consultant headcount in theresources-based regions of Australia and to capitalise on structural growth inJapan, we remain cautious elsewhere in order to protect the profitability ofthe division while market conditions remain challenging.
Continental Europe & Rest of World
Delivering strong growth and improved conversion rate, driven by an excellentperformance in Germany Growth Year ended 30 June (In £'s million) 2012 2011 Actual LFL(1) Net fees 266.5 220.4 21% 23%Operating profit 43.7 32.4 35% 37%Conversion rate 16.4% 14.7%
Period end consultant headcount(6) 1,967 1,714 15% In Continental Europe & RoW, we delivered net fee growth of 21% (23% on alike-for-like basis(1)) to £266.5 million, driving excellent operating profitgrowth of 35% (37% on a like-for-like basis(1)) to £43.7 million. Both net feesand operating profits in the year represented records for the division. Thedifference between actual growth and like-for-like growth was primarily due tothe depreciation in the Euro. The conversion rate increased to 16.4% in 2012from 14.7% in 2011 driven by broad-based net fee growth in the more buoyantmarkets, strong cost control across the division and more selective headcountinvestment in the more challenging areas, particularly in the second half ofthe year.Our German business, which represented 51% of the division's net fees and themajority of the division's profits, delivered excellent net fee growth of 30%(1) and posted several record monthly performances as momentum remained strongthrough the year. Growth was broad-based across our contracting, temporary andpermanent placement businesses, particularly our core specialisms of IT andEngineering. We also achieved strong growth in Accountancy & Finance,Construction & Property, Sales & Marketing, Legal and Life Sciences and thesespecialisms now account for 23% of total net fees. Our market-leading positionand the increasing diversification of the business means we are ideallypositioned to benefit from the continuing rapid development of the specialistrecruitment market in Germany and the clear structural growth opportunitiesthis presents.
Elsewhere in Europe, activity was significantly impacted by the Eurozone crisis and more general macroeconomic uncertainty. In France, our second largest country in the division, we recorded 17%(1) net fee growth, although perm momentum slowed markedly in the second half. Our other businesses in Continental Europe, covering 14 countries and focussed principally on the permanent placement markets, delivered net fee growth of 9%.
We continue to invest in our business in Latin America, recognising thestructural growth opportunities in this market. Having opened Hays Colombia andChile in the year, we now operate in four countries across seven offices inLatin America. In Brazil, which is now the sixth largest country in the Group,we delivered excellent net fee growth of 30%(1). In North America, Canadadelivered strong net fee growth of 25% and we started to diversify our offeringin the US by opening our second office, in Houston, which will focus on Oil &Gas.Consultant headcount in the division increased by 15% during the year, led byincreases of 16% in Germany, 29% in Brazil and 56% in Canada. We are continuingto invest in consultant headcount in those regions which demonstrate cleargrowth, while being more cautious across the rest of the division to maximiseour financial performance. As a result, consultant headcount was broadly flatin the second half.United Kingdom & Ireland
More difficult private sector; tough but stable public sector
Growth Year ended 30 June (In £'s million) 2012 2011 Actual LFL (1)Net fees 225.3 241.7 (7)% (7)%Operating profit(2) (6.5) 3.6 (282)% (282)%Conversion rate (2.9)% 1.5%
Period end consultant headcount(6) 1,934 2,158 (10)% In the United Kingdom & Ireland, net fees decreased by 7% to £225.3 million,with an operating loss of £6.5 million. Net fees fell by 8% in the permanentplacement business and by 6% in the temporary placement business, and are nowdown 50% versus peak levels.Trading conditions in the UK have been tough, and became increasingly difficultas the year progressed. In our UK private-sector business, net fees declined by6%. Markets were particularly difficult in our Banking and City-relatedspecialisms, but as the year progressed conditions became tougher across muchof the market as confidence amongst candidates and clients was negativelyimpacted by the worsening economic conditions.Our public-sector business, which represented 24% of UK net fees, faced toughbut stable market conditions throughout the year, with net fees decreasing by8%. We continue to expect this business to remain broadly stable at thesesubdued levels in the short term.
In Ireland, our business performed well delivering excellent net fee growth of 30%(1).
UK financial performance was negatively affected as a result of these morechallenging market conditions. However, despite the fact that net fees in thesecond half were 6% lower than those in the first half, the successfulimplementation of a series of cost-saving initiatives meant that the sequentialfinancial performance of the business in the second half broadly reflected thatof the first half. The various cost reduction programs incurred one-off costsof £5.8 million, which were offset by a £6.0 million curtailment gain on theclosure of the UK defined benefit pension scheme to future accrual in the year.Consultant headcount in the division declined 10% during the year primarilythrough natural attrition, as we reacted to changes in market conditions todefend the financial performance of the business. We continue to review allaspects of our UK cost base, which we have already reduced by c.30% from peaklevels, with particular emphasis on overhead and back-office support costs. Atthe same time, our focus is on growing market share and taking full advantageof those segments of the UK recruitment market which continue to presentrevenue growth opportunities.Current trading
Continued mixed conditions, with pockets of strong growth but overall more challenging, notably in permanent markets
Overall trading conditions became more challenging through the second half,particularly in the fourth quarter. The difficult global economic environmentcontinues to have a negative impact on candidate and client confidence in manymarkets, particularly in permanent recruitment markets.Conditions in Australia are sequentially stable overall, with comparativesbecoming tougher. We continue to see growth in Western Australia, although thisis offset by tougher conditions elsewhere. In Asia, markets with significantweighting towards banking remain particularly tough. In Continental Europe &RoW, we see continued strong growth in Germany and Canada, and good growth inmarkets such as Brazil and Russia, but growth is slowing across much of therest of the division, and net fees are declining in certain countries. In theUK, the market continues to be very difficult.Looking ahead, whilst we continue to see pockets of growth and opportunity incertain markets, overall the environment remains challenging and in somecountries very difficult. We will continue to react quickly to changingconditions in each market, investing selectively to capitalise on growth anddefending the financial performance where markets are more difficult.FINANCIAL REVIEWSummary Income Statement Growth Year ended 30 June (In £'s million) 2012 2011 Actual LFL (1)Turnover 3,654.6 3,256.0 12% 11% Net fees Temporary 414.0 365.4 13% 12% Permanent 320.0 306.7 4% 3% Total 734.0 672.1 9% 8% Operating profit(2) 128.1 114.1 12% 9% Conversion rate 17.5% 17.0%
Underlying temporary margin(5) 14.6% 14.7% Temporary fees as % of total 56% 54% Period end consultant headcount(6) 5,013 4,943 1%
(1) LFL (like-for-like) growth represents organic growth of continuing activities
at constant currency.
(2) Continuing operations only, before exceptional items. 2011 profit numbers are
presented before an exceptional credit of £4.1 million.
(3) Cash generated by operations excludes cash impact of exceptional items of
£7.0 million (2011: £15.4 million) paid in the year.
(4) Based on earnings per share from continuing operations only, before exceptional
items.
(5) The underlying temporary placement gross margin is calculated as temporary
placement net fees divided by temporary placement gross revenue and relates solely
to temporary placements in which Hays generates net fees and specifically excludes
transactions in which Hays acts as agent on behalf of workers supplied by third
party agencies.
(6) Consultants shown on a closing basis at 30 June 2012, and the change in consultants
compares 30 June 2012 with 30 June 2011
Group turnover increased by 12% (or 11% on a like for like basis(1)) and netfees increased by 9% (8% on a like for like basis(1)), driving operating profitgrowth of 12%(2) (9% on a like for like basis(1)). The difference in growthrates between Group turnover and net fees was primarily driven by a change inmix between the temp and perm businesses. Exchange rate movements had apositive impact on the results overall increasing net fees and operating profitby £7.1 million and £3.4 million respectively, as depreciation in the rate ofexchange of the Euro was more than offset by favourable movements in otherGroup currencies, particularly the Australian Dollar. Fluctuations in exchangerates remain a significant sensitivity for the Group.The Group's operating cost base increased by 8%(1) versus prior year. This wasprincipally due to the fact that whilst the Group's consultant headcountincreased 1% year-on-year at the end of June, it was 9% higher, on average,throughout the year. The other primary driver of the increase was a rise incommission payments in line with net fees. The Group's conversion rate, whichis the proportion of net fees converted into operating profit(2), increased to17.5% from 17.0% in the prior year. This was driven by net fee growth andstrong control of the Group's operating cost base.Group consultant headcount increased by 1% during the year, but was down 4% inthe second half. The full year increase was driven by an 11% rise in the numberof consultants in the International business, where we continue to invest inorder to ensure the Group capitalises on the more buoyant markets and on theclear structural growth opportunities which exist across many of ourInternational markets. This was principally offset by a 10% reduction inconsultant headcount in the UK, which was largely as a result of naturalattrition, as we reacted to changes in market conditions to defend thefinancial performance of the business.
Net finance charge
The net finance charge for the year was £5.7 million (2011: £7.5 million). Theaverage interest rate on gross debt during the year was 2.8% (2011: 2.5%),generating net bank interest payable, including amortisation of arrangementfees, of £7.1 million (2011: £6.0 million). The net interest credit on thedefined benefit pension scheme obligations was £2.3 million (2011: charge of £1.2 million), with the change being primarily due to higher scheme asset valuesincreasing expected asset returns. The charge for the Pension Protection Fundlevy was £0.9 million (2011: £0.3 million). It is expected that the net financecharge for the year ending 30 June 2013 will be around £10m due to the IAS19pension charge and an expected increase due to early refinancing of therevolving credit facility.TaxationTaxation for the year was £46.9 million, representing an effective tax rate of38.3% (2011: 33.0% pre-exceptional items). The effective tax rate reflects theGroup's geographical mix of profits, and the impact of unrelieved overseas taxlosses and costs incurred in the UK for which no tax deduction is currentlyavailable. We expect the Group's effective tax rate to be around 40% in 2013.Discontinued operations
A profit from discontinued operations of £11.0 million arose in the year, primarily from the write-back of provisions that were established when the Group completed the disposal of its non-core activities between March 2003 and November 2004 which in the light of subsequent events are no longer required.
Earnings per shareBasic earnings per share increased 5% to 5.47 pence (2011: 5.19 pence(2)). Theincrease in earnings per share reflects the Group's higher operating profit andthe lower net finance charge, partially offset by an increase in the effectivetax rate.Cash flow and balance sheetCash flow in the year was excellent with 127% conversion of operating profitinto operating cash flow(3). This was higher than the cash flow conversion inthe prior year (2011: 85%) primarily as a result of stronger working capitalmanagement, with trade debtor days decreased to 35 days (2011: 38 days).Overall, cash inflow from working capital was £3.2 million and net cashgenerated by operations(3) was £162.2 million (2011: £97.3 million).
Net capital expenditure was higher at £18.8 million (2011: £18.6 million). Capital expenditure is expected to reduce to around £10 million in 2013.
Dividends paid in the year totalled £65.8 million, pension deficitcontributions were £12.4 million and £6.2 million was paid out in net interest.Net debt therefore reduced slightly from £134.8 million at the start of theyear to £132.9 million at the end of the year. The Group expects a modestreduction in net debt in 2013. The Group has a £300 million unsecured revolvingcredit facility available, which expires in January 2014.The most significant item in the Group balance sheet is trade receivables,which were £351.4 million at year end (2011: £345.6 million). The increase intrade receivables reflects the increase in turnover offset by the improvementin debtor days.Retirement benefitsThe Group's pension liability under IAS 19 at 30 June 2012 of £15.4 million (£10.4 million net of deferred tax) increased by £3.5 million compared to 30 June 2011, primarily due to the net effect of a decrease in the net yield (discount rate versus RPI inflation rate) being partially offset by higher than expected asset returns, employer contributions.During the year, the Company contributed £15.5 million of cash to the definedbenefit scheme (2011: £16.5 million), which included £12.4 million fundingtowards the pension deficit in line with previous guidance.
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.
As we set out in our Interim results statement, the increased global economicuncertainty which impacted our business in the year slowed the pace of theGroup's profit growth. At the end of the first half, considering this slowingof profit growth and our view on the likely growth in Group profitability inthe second half, the Board decided that whilst the previous level of dividendremained affordable, it was no longer appropriate to maintain the dividend atthat level, which had been uncovered for the last two years. The Boardtherefore decided to rebase the dividend and paid an interim dividend of 0.83pper share (2011: 1.85p).
In line with this policy, the Board proposes to pay a final dividend of 1.67p per share (2011: 3.95p), resulting in a total dividend for the full year of 2.50p per share (2011: 5.80p).
We believe that dividends should be covered by earnings in the range 2.0x to3.0x(4) and consider this payout policy to be appropriately covered by earningsand cash flow.
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(4).
The recommended dividend payment date will be 16 November 2012 and, if approved, will be paid to shareholders who are on the register at the close of business on 12 October 2012.
Board changesPippa Wicks joined the Board as a non-executive director on 1 January 2012 andis a member of the Audit, Nomination and Remuneration Committees. Pippa iscurrently Managing Director of AlixPartners LLP, the global business advisoryfirm. At this year's Annual General Meeting Paul Stoneham will be retiring as anon-executive director having served on the Board for eight years. We thankPaul for his commitment and contribution in that time. Alan Thomson, asChairman of the Nomination Committee will lead the process for the appointmentof a new non-executive director.
Treasury management
The Group's operations are financed by retained earnings and bank borrowings.The Group has an unsecured £300 million revolving credit facility, in placeuntil January 2014, and uses this facility to manage its day-to-day workingcapital requirements as appropriate. We have begun refinancing discussions withour banking group, which are progressing well.All borrowings are raised by the Group's UK-based treasury department, whichmanages the Group's treasury risk in accordance with policies set by the Board.The Group's treasury department does not engage in speculative transactions anddoes not operate as a profit centre.The Board considers it appropriate to use certain derivative financialinstruments to reduce its exposure to interest rate movements under itsfloating rate revolving credit facility. The Group holds six interest rateswaps which exchange a fixed payment for floating rate receipt on a total debtvalue 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 derivativefinancial 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 andreviewed by the Audit Committee. There are a number of potential risks anduncertainties that could have a material impact on the Group's financialperformance and position. These include risks relating to the cyclical natureof our business, business model risk, talent, compliance risk, reliance ontechnology, contract risk, foreign exchange and Eurozone risk. A fulldescription of these risks and our mitigating actions will be provided in the2012 Annual Report.Hays plc250 Euston Road, LondonNW1 2AFwww.hays.com/investorsCautionary statementThe Preliminary results report (the "Report") has been prepared in accordancewith the Disclosure Rules and Transparency Rules of the UK Financial ServicesAuthority and is not audited. No representation or warranty, express orimplied, is or will be made in relation to the accuracy, fairness orcompleteness of the information or opinions made in this Report. Statements inthis Report reflect the knowledge and information available at the time of itspreparation. Certain statements included or incorporated by reference withinthis Report may constitute "forward-looking statements" in respect of theGroup's operations, performance, prospects and/or financial condition. By theirnature, forward-looking statements involve a number of risks, uncertainties andassumptions and actual results or events may differ materially from thoseexpressed or implied by those statements. Accordingly, no assurance can begiven that any particular expectation will be met and reliance should not beplaced on any forward-looking statement. Additionally, forward-lookingstatements regarding past trends or activities should not be taken as arepresentation that such trends or activities will continue in the future. Theinformation contained in this Report is subject to change without notice and noresponsibility or obligation is accepted to update or revise anyforward-looking statement resulting from new information, future events orotherwise. Nothing in this Report should be construed as a profit forecast.This Report does not constitute or form part of any offer or invitation tosell, or any solicitation of any offer to purchase or subscribe for any sharesin the Company, nor shall it or any part of it or the fact of its distributionform the basis of, or be relied on in connection with, any contract orcommitment or investment decisions relating thereto, nor does it constitute arecommendation regarding the shares of the Company or any invitation orinducement to engage in investment activity under section 21 of the FinancialServices and Markets Act 2000. Past performance cannot be relied upon as aguide to future performance. Liability arising from anything in this Reportshall be governed by English Law, and neither the Company nor any of itsaffiliates, advisors or representatives shall have any liability whatsoever (innegligence or otherwise) for any loss howsoever arising from any use of thisReport or its contents or otherwise arising in connection with this Report.Nothing in this Report shall exclude any liability under applicable laws thatcannot be excluded in accordance with such laws.CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE (In £s million) Note 2012 2011Turnover Continuing operations 3,654.6 3,256.0Net fees * Continuing operations 3 734.0 672.1
Operating profit from continuing operations before exceptional items 3 128.1 114.1Exceptional items - 4.1Operating profit from continuing operations 3
128.1 118.2Finance income 0.9 1.0Finance cost (6.6) (8.5) 6 (5.7) (7.5)Profit before tax 122.4 110.7Tax 7 (46.9) (32.4)
Profit from continuing operations after tax 75.5 78.3Profit from discontinued operations 11.0 1.8Profit attributable to equity holders of the parent Company 86.5 80.1Earnings per share from continuing operations before exceptional items
- Basic 9 5.47p 5.19p - Diluted 9 5.37p 5.10p
Earnings per share from continuing operations
- Basic 9 5.47p 5.69p - Diluted 9 5.37p 5.59p
Earnings per share from continuing and discontinued operations
- Basic 9 6.26p 5.82p - Diluted 9 6.16p 5.72p *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) 2012 2011Profit for the year 86.5 80.1
Currency translation adjustments (16.1) 19.4Mark to market valuation of derivative financial instruments (0.4) (0.7)Actuarial (loss)/gain on defined benefit pension schemes (24.6) 43.7Tax relating to components of other comprehensive income 2.4 (11.6)Other net (expense)/income for the year (38.7) 50.8Total comprehensive income for the year 47.8 130.9Attributable to equity shareholders of the parent Company
47.8 130.9 CONSOLIDATED BALANCE SHEET AT 30 JUNE (In £s million) Note 2012 2011Non-current assets Goodwill 177.2 183.5Other intangible assets 55.5 62.9Property, plant and equipment 24.2 23.4Deferred tax assets 28.3 29.2 285.2 299.0Current assets Trade and other receivables 538.6 524.2Cash and cash equivalents 38.7 55.1 577.3 579.3Total assets 862.5 878.3Current liabilities Trade and other payables (429.0) (405.0)Current tax liabilities (29.2) (31.0)Bank loans and overdrafts (1.6) (4.9)Provisions 11 (2.7) (8.5)
Derivative financial instruments
(1.1) (0.7) (463.6) (450.1)Non-current liabilities Bank loans (170.0) (185.0)Trade and other payables - (1.0)
Retirement benefit obligations 10
(15.4) (11.9)Provisions 11 (22.9) (33.9) (208.3) (231.8)Total liabilities (671.9) (681.9)Net assets 190.6 196.4Equity Called up share capital 14.7 14.7Share premium 369.6 369.6Capital redemption reserve 2.7 2.7Retained earnings (270.5) (275.6)Other reserves 74.1 85.0Total shareholders' equity 190.6 196.4
The Consolidated Financial Statements of Hays plc, registered number 2150950, were approved by the Board of Directors and authorised for issue on 29 August 2012.
Signed on behalf of the Board of Directors
A R Cox P Venables
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE (In £s million) Note 2012 2011
Operating profit from continuing operations
128.1 118.2Adjustments for: Exceptional items(i) (7.0) (19.5) Depreciation of property, plant and equipment
9.7 9.4
Amortisation of intangible fixed assets
13.5 10.9
Loss on disposal of property, plant and equipment
0.9 -
Net movements in provisions and other items (5.4) (2.4) Share-based payments 12.2 12.5 23.9 10.9
Operating cash flow before movement in working capital
152.0 129.1Changes in working capital Increase in receivables (26.7) (93.5)Increase in payables 29.9 46.3 3.2 (47.2)Cash generated by operations 155.2 81.9Income taxes paid (44.2) (26.6)
Net cash inflow from operating activities 111.0 55.3Investing activities Purchase of property, plant and equipment (12.7) (8.9)Proceeds from sales of business and related assets 0.1 0.5Purchase of intangible assets (6.1) (9.7)Cash paid in respect of acquisitions made in previous year (1.0) (3.2)Interest received 0.9 1.0Net cash used in investing activities
(18.8) (20.3)Financing activities Interest paid (7.1) (9.5)Equity dividends paid (65.8) (79.7)Purchase of own shares (0.7) -
Proceeds from exercise of share options 2.1 1.2(Decrease)/increase in bank loans and overdrafts (18.3) 38.0Pension scheme funding (12.4) (12.0)Net cash used in financing activities (102.2) (62.0)Net decrease in cash and cash equivalents (10.0) (27.0)Cash and cash equivalents at beginning of year 12 55.1 74.7Effect of foreign exchange rate movements (6.4) 7.4Cash and cash equivalents at end of year 12
38.7 55.1
(i) The adjustment to the Cash Flow Statement in the year to 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.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2012
Share Capital Share premium redemption Retained Other (In £s million) capital account reserve earnings reserves TotalAt 1 July 2011 14.7 369.6 2.7 (275.6) 85.0 196.4
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 - 2.4Net expense recognised in other comprehensive income - - - (22.2) (16.5) (38.7)Profit for the year - - - 86.5 - 86.5Total comprehensive income for the year - - -
64.3 (16.5) 47.8Dividends paid - - - (65.8) - (65.8)Share-based payments - - - 6.6 4.4 11.0Other share movements - - - - 1.2 1.2At 30 June 2012 14.7 369.6 2.7 (270.5) 74.1 190.6
FOR THE YEAR ENDED 30 JUNE 2011
Share Capital Share premium redemption Retained Other (In £s million) capital account reserve earnings reserves TotalAt 1 July 2010 14.7 369.6 2.7 (313.0) 58.3 132.3
Currency translation adjustments - - - - 19.4 19.4Mark to market valuation of derivative financial instruments - - - - (0.7) (0.7) Actuarial gain on defined benefit pension schemes - - - 43.7 - 43.7 Tax relating to components of other comprehensive income - - - (11.6) - (11.6)Net income recognised in other comprehensive income - - - 32.1 18.7 50.8Profit for the year - - - 80.1 - 80.1Total comprehensive income for the year - - -
112.2 18.7 130.9Dividends paid - - - (79.7) - (79.7)Share-based payments - - - 4.9 6.7 11.6Other share movements - - - - 1.3 1.3At 30 June 2011 14.7 369.6 2.7 (275.6) 85.0 196.4
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 2012 or 2011, for the
purpose of the Companies Act 2006, but is derived from those accounts. The
statutory accounts for 2011 have been delivered to the Registrar of Companies
and those for 2012 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 2011 with the exception of the following new accounting standards and amendments which were mandatory for
accounting periods beginning on or after 1 January 2011, none of which had any
material impact on the Group's results or financial position. · Improvements to IFRSs 2010 (effective 1 July 2011)
· IAS 24 (revised 2009) Related Party Disclosure (effective 1 January 2011)
· IFRIC 14 (amendment) IAS 19 - The Limit on Defined Benefit Asset, Minimum
Funding Requirements and their interaction (effective 1 January 2011)
· IFRS 1 (amendment) Severe Hyperinflation and Removal of Fixed Dates for First
Time Adopters (effective 1 July 2011) · IFRS 7 (amendment) Disclosures - Transfers of Financial Assets (effective 1 July 2011) 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 2012. 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.
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 reconciliation of turnover to net fees can be found in note 5. (In £s million) 2012 2011
Net fees from continuing operations Asia Pacific 242.2 210.0Continental Europe & Rest of World
266.5 220.4United Kingdom & Ireland 225.3 241.7 734.0 672.1 2011 Before 2011 exceptional Exceptional (In £s million) 2012 items items 2011
Operating profit from continuing operations Asia Pacific 90.9 78.1 - 78.1Continental Europe & Rest of World 43.7 32.4 - 32.4United Kingdom & Ireland (6.5) 3.6 4.1 7.7 128.1 114.1 4.1 118.2 4 Exceptional items
In the prior year, the Group recognised an exceptional credit of £4.1 million
in the Consolidated Income Statement. Full details of these items were disclosed in the 2011 Annual Report & Financial Statements. 5 Operating profit from continuing operations The following costs are deducted from turnover to determine net fees from continuing operations: (In £s million) 2012 2011Turnover 3,654.6 3,256.0Remuneration of temporary workers (2,421.3) (2,125.8)Remuneration of other recruitment agencies
(499.3) (458.1)Net fees 734.0 672.1
Profit from operations is stated after charging/(crediting) the following items to net fees of £734.0 million (2011: £672.1 million):
2011 Before 2011 exceptional Exceptional (In £s million) 2012 items items 2011Staff costs 436.6 406.9 7.0 413.9Depreciation of property, plant and equipment 9.7 9.4 0.8 10.2Amortisation of intangible assets 13.5 10.9 10.0 20.9Auditor remuneration - for statutory audit services 0.8 1.0 - 1.0 - for other services 0.2 0.3 - 0.3Other external charges 145.1 129.5 (21.9) 107.6 605.9 558.0 (4.1) 553.9
Included within staff costs is a £6.0 million credit in respect of the curtailment gain arising from the closure of the UK defined benefit pension scheme to the accrual of future benefits (note 10).
Set against this is a series of non-recurring UK costs amounting to £5.8 million,
of which £2.5 million is included within staff costs, and £3.3 million within other external charges. The net UK impact of these items is a £0.2 million credit to the Income Statement. 6 Finance income and finance costs
Finance income (In £s million) 2012 2011Interest on bank deposits 0.9 1.0Finance costs (In £s million) 2012 2011
Interest payable on bank loans and overdrafts (8.0) (7.0)Pension Protection Fund levy (0.9) (0.3)Net interest on pension obligations
2.3 (1.2) (6.6) (8.5)Net finance charge (5.7) (7.5) 7 Income taxes relating to continuing operations The income tax expense for the year can be reconciled to the accounting profit as follows: 2011 Before 2011 exceptional Exceptional (In £s million) 2012 items items 2011Profit before tax from continuing operations 122.4 106.6 4.1 110.7
Income tax expense calculated at 25.5% (2011: 27.5%) (31.2) (29.3) (1.1) (30.4) Effect of expenses that are not deductible in
determining taxable profit (0.1) (2.9) 3.9 1.0Deductible pension contribution in respect of prior periods 2.5 - - -Effect of unused tax losses not recognised as deferred tax assets (7.9) (4.9) - (4.9)Effect of different tax rates of subsidiaries operating in other jurisdictions (9.4) (4.6) - (4.6)Effect on deferred tax balances due to the change in income tax rate from 26.0% to 24.0% (effective March 2012) (0.7) (0.2) - (0.2)Effect of share-based payment charges and share
options (0.9) (0.4) - (0.4) (47.7) (42.3) 2.8 (39.5)
Adjustments recognised in the current year in relation to the current tax of prior years (0.8) 0.2 - 0.2Adjustments to deferred tax in relation to prior years 1.6 6.9 - 6.9Income tax expense recognised in profit or loss (relating to continuing operations) (46.9) (35.2) 2.8 (32.4)Effective tax rate for the year on continuing
operations 38.3% 33.0% (68.3%) 29.3% The tax rate used for the 2012 and 2011 reconciliations above is the corporate tax rate of 25.5% (2011: 27.5%) payable by corporate entities in the United Kingdom on taxable profits under tax law in that jurisdiction. 8 Dividends The following dividends were paid by the Group and have been recognised as distributions to equity shareholders in the year: 2012 2011 pence per 2012 pence per 2011 share £s million share £s millionPrevious year final dividend 3.95 54.3 3.95 54.3Current year interim dividend 0.83 11.5 1.85 25.4 65.8 79.7 The following dividends are proposed by the Group in respect of the accounting year presented: 2012 2011 pence per 2012 pence per 2011 share £s million share £s million Interim dividend 0.83 11.5 1.85 25.4Final dividend (proposed) 1.67 23.1 3.95 54.3 2.50 34.6 5.80 79.7 The final dividend for 2012 of 1.67 pence per share (£23.1 million) will be proposed at the Annual General Meeting on 7 November 2012 and has not been included as a liability as at 30 June 2012. If approved, the final dividend will be paid on 16 November 2012 to shareholders on the register at the close of business on 12 October 2012.
9 Earnings per share Weighted average number of Per share Earnings shares amountFor the year ended 30 June 2012 (£s million) (million) (pence)Continuing operations: Basic earnings per share from continuing operations 75.5 1,381.4 5.47Dilution effect of share options - 23.4 (0.10)Diluted earnings per share from continuing operations 75.5 1,404.8 5.37Discontinued operations: Basic earnings per share from discontinued operations 11.0 1,381.4 0.80Dilution effect of share options - 23.4 (0.02)Diluted earnings per share from discontinued operations 11.0 1,404.8 0.78Continuing and discontinued operations: Basic earnings per share from continuing and discontinued operations 86.5 1,381.4 6.26Dilution effect of share options - 23.4 (0.10)Diluted earnings per share from continuing and discontinued
operations 86.5 1,404.8 6.16 Weighted average number of Per share Earnings shares amountFor the year ended 30 June 2011 (£s million) (million) (pence)Continuing operations before exceptional items: Basic earnings per share from continuing operations 71.4 1,376.0 5.19Dilution effect of share options - 24.3 (0.09)Diluted earnings per share from continuing operations 71.4 1,400.3 5.10Continuing operations after exceptional items: Basic earnings per share from continuing operations 78.3 1,376.0 5.69Dilution effect of share options - 24.3 (0.10)Diluted earnings per share from continuing operations 78.3 1,400.3 5.59Discontinued operations: Basic earnings per share from discontinued operations 1.8 1,376.0 0.13Dilution effect of share options - 24.3 -Diluted earnings per share from discontinued operations 1.8 1,400.3 0.13Continuing and discontinued operations: Basic earnings per share from continuing and discontinued operations 80.1 1,376.0 5.82Dilution effect of share options - 24.3 (0.10)Diluted earnings per share from continuing and discontinued
operations 80.1 1,400.3 5.72 Reconciliation of earnings (In £s million) Earnings
Continuing operations before exceptional items 71.4Exceptional items (note 4) 4.1Tax credit on exceptional items (note 7)
2.8Continuing operations 78.3
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.
10 Retirement benefit obligations
(In £s million) 2012 2011
Deficit in the scheme brought forward (11.9) (67.1)Past service cost/curtailment
6.0 -Current service cost (2.7) (3.8)Contributions 15.5 16.5Net financial return 2.3 (1.2)Actuarial (loss)/gain (24.6) 43.7
Deficit in the scheme carried forward (15.4) (11.9) 11 Provisions (In £s million) Property Other TotalAt 1 July 2011 16.5 25.9 42.4Exchange adjustments (0.3) (0.4) (0.7)Charged to income statement 2.4 - 2.4Credited to income statement (2.0) (8.0) (10.0)Utilised (3.6) (4.9) (8.5)At 30 June 2012 13.0 12.6 25.6 (In £s million) 2012 2011Current 2.7 8.5Non-current 22.9 33.9 25.6 42.4 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 and environmental 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, £2.7 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. 12 Movement in net debt 1 July Cash Exchange 30 June(In £s million) 2011 flow movement 2012Cash and cash equivalents 55.1 (10.0) (6.4) 38.7Bank loans and overdrafts (189.9) 18.3 - (171.6)Net debt (134.8) 8.3 (6.4) (132.9)
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.
13 Like-for-like results
Like-for-like results represent organic growth of continuing activities at constant currency.
For the year ended 30 June 2012 these are calculated as follows:
(In £s million) Net fees for the year ended 30 June 2011 672.1Foreign exchange impact 7.1Net fees for the year ended 30 June 2011 at constant currency 679.2Net fee increase resulting from organic growth 54.8Net fees for the year ended 30 June 2012 734.0Profit from operations for the year ended 30 June 2011 114.1Foreign exchange impact 3.4Profit from operations for the year ended 30 June 2011 at constant currency 117.5Profit from operations increase resulting from organic growth 10.6Profit from operations for the year ended 30 June 2012 128.1
14 Like-for-like results H1 v H2 analysis by division
Net fee growth Q1 Q2 H1 Q3 Q4 H2 FYversus same period last year 2012 2012 2012 2012 2012 2012 2012Asia Pacific 21% 11% 16% 9% 1% 4% 10%Continental Europe & Rest of World 34% 20% 27% 26%
14% 19% 23%United Kingdom & Ireland (4%) (7%) (6%) (5%) (9%) (8%) (7%)Group 15% 8% 11% 10% 2% 5% 8%
H1 2012 is the period from 1 July 2011 to 31 December 2011. H2 2012 is the period from 1 January 2012 to 30 June 2012.
PINXRelated Shares:
Hays