25th Feb 2010 07:00
HAYSHALF YEAR REPORT
SIX MONTHS ENDED 31 DECEMBER 2009
25 February 2010 Press Release
DIVIDEND MAINTAINED IN DIFFICULT MARKETS
6 months ended 31 December Actual LFL*Unaudited (In £'s million) 2009 2008 growth growth Net fees 264.8 383.7 (31)% (35)%
Operating profit (before exceptional items)** 35.1 105.1 (67)%
(70)%
Cash generated by operations 36.1 137.6 (74)% Profit before tax (before exceptional items)** 30.4 100.8 (70)%
Profit before tax 3.4 100.8 (97)% Basic earnings per share** 1.38p 5.15p (73)% Dividend per share 1.85p 1.85p - Highlights
· 54% of Group net fees and 82% of operating profits** generated from outside the UK
· Continued strong cash flow from operations of £36.1 million (103% of operating profit**)
· Net debt levels reduced to £38.4 million (2008: £54.6 million)
· Interim dividend maintained at 1.85p
· Modest sequential improvement in demand in Asia Pacific and parts of Continental Europe
· Selectively increasing headcount, predominantly in Asia Pacific
* LFL (like-for-like) growth represents organic growth of continuing activities at constant currency. There were the same number of trading days in 2009 and 2008.
** numbers are presented before the exceptional charge of £27 million in 2009 relating to the OFT fine that is currently under appeal. There were no exceptional items in 2008.
Commenting on these results, Alistair Cox, Chief Executive of Hays, said:
"These results illustrate the importance of our international business, whichrepresents over three quarters of our worldwide profits. With operations in 27countries outside the UK, Hays has the largest international specialistrecruitment business in the industry. Throughout the recession we haveprotected the core of our international business and strengthened it byentering new geographies and sectors. At the same time as investing in thisinfrastructure around the world, we have defended our market leading positionin the UK, rapidly adjusted our cost base and generated significant cash toallow us both to reduce net debt and maintain the dividend.
Currently we are seeing improved candidate and client confidence across the business in most of our private sector markets. Asia Pacific and parts of Continental Europe have continued to deliver modest rates of sequential improvement. Our remaining businesses continue to see overall stability in their markets and in the UK we expect our performance to be broadly similar in the second half. Our exposure to high potential overseas markets, our investment in technology, and the retention of our key people, position us extremely well to capitalise on the next phase of economic growth."
EnquiriesHays plc Paul Venables Finance Director + 44 (0) 20 7383 2266 Martin Abell / James Hilton Investor Relations + 44 (0) 20 7383 2266 Maitland Neil Bennett / Liz Morley + 44 (0) 20 7379 5151 Results presentation webcast
The Half Year Results presentation at 9.30am on 25 February 2010 will be available as a live webcast on our website, www.haysplc.com, and a recording will also be available on our website from 1:00pm.
Reporting calendar
Interim Management Statement for quarter ending 31 March 2010 8 April 2010 Investor Day (London)
29 April 2010 Trading Update for quarter ending 30 June 2010 8 July 2010 Preliminary results for the year ending 30 June 2010 2 September 2010 Interim Management Statement for quarter ending 30 September 2010 7 October 2010 Note to editorsHays plc is the leading global specialist recruitment group. It is marketleader in the UK and Australia, and one of the market leaders in ContinentalEurope. As at 31 December 2009, the Group employed 6,644 staff operating from325 offices in 28 countries across 17 specialisms. For the year ended 30 June2009:
- the Group had revenues of £2.4 billion, net fees of £670.8 million and
operating profit of £158.0 million;
- the Group placed around 50,000 candidates into permanent jobs and around
270,000 people into temporary assignments;
- the temporary placement business represented 56% of net fees and the
permanent placement business represented 44% of net fees;
- Hays operates in the following countries: Australia, Austria, Belgium,
Brazil, Canada, China, the Czech Republic, Denmark, France, Germany, Hong Kong,
Hungary, India, Ireland, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Poland, Portugal, Russia, Singapore, Spain, Sweden, Switzerland, UAE
and the United Kingdom.
Summary profit and loss statement
growth 6 months ended 31 December (In £'s million) 2009 2008 Actual LFL* Turnover 1,288.3 1,278.7 1% (5)% Net fees Temporary 157.3 199.9 (21)% (26)% Permanent 107.5 183.8 (42)% (45)% Total 264.8 383.7 (31)% (35)% Operating profit** 35.1 105.1 (67)% (70)% Conversion rate 13.3% 27.4%
Underlying temporary margin*** 15.5% 17.0%
Temporary fees as % of total 59% 52%
Period end consultant headcount**** 4,047 5,213 (22)%
(22)%
* LFL (like-for-like) growth represents organic growth of continuing activities at constant currency. There were the same number of trading days in 2009 and 2008.
** numbers are presented before the exceptional item of £27 million in 2009 relating to the OFT fine that is currently under appeal. There were no exceptional items in 2008.
*** 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.
**** the change in consultants is shown on a closing basis, comparing 31 December 2009 versus 31 December 2008.
The performance of the Group has been impacted by a significant reduction indemand levels compared to a year ago. As a result, Group turnover decreased by5%*, net fees decreased by 31% (declining by 35% on a like-for-like basis*),and operating profit decreased by 67% (70% on a like-for-like basis*). Thereduction in turnover* was considerably less than the reduction in net feesprimarily due to the impact of the withdrawal of the staff hire concession inApril 2009. Last year, only our net fees on temporary workers qualifying forthe staff hire concession were accounted for in turnover. However, followingthe withdrawal of the staff hire concession, the full cost of the relevanttemporary workers is recognised in turnover. The results benefited fromexchange rate movements, principally the Australian Dollar and the Euro, whichhad a favourable impact increasing net fees by £25 million and operating profitby £10 million.The temporary placement business, representing 59% of Group net fees, wasrelatively more resilient than the permanent placement business with net feesdecreasing by 26%*. This represented a volume decrease of 15% and a 150 basispoint reduction in the underlying temporary margin to 15.5% (2008: 17.0%)***.Broadly half of the margin reduction was a result of the mix effect of agreater proportion of placements being made through large volume contracts,with the balance of the reduction resulting from modest pricing pressureimpacting our major temporary placement markets, namely the United Kingdom,Australia and Germany. In recent months we have seen stability in demand in thetemporary placement markets in the United Kingdom and modest sequentialimprovement in demand in Australia and Germany.Net fees in the permanent business, representing 41% of Group net fees,declined by 45%*, with permanent placement volumes decreasing by 43%. The fallin permanent placement volumes compared to last year reflects the difficultmarket conditions. However, in recent months we have seen sequential stabilityin demand in the United Kingdom and Continental Europe divisions and modestsequential growth in Asia Pacific. Average fees per placement decreased by 4%*compared to last year primarily due to a less favourable mix.As a result of the actions we took last year to reduce the cost base andprotect profitability, the Group's operating cost base in the period was 21%*lower than prior year. However, the marked reduction in activity levels versusa year ago and the lower level of average consultant productivity achievable ina demand constrained market led to a reduction in the Group's conversion rate,which is the proportion of net fees converted into operating profit**, from27.4% in the prior year to 13.3% this period.After the large reduction in consultant headcount in the preceding year,consultant headcount was reduced by 5% over the six months ended 31 December2009, with all this reduction taking place in the first quarter. Headcount isnow being increased selectively where market trends are favourable,predominately in Asia Pacific.Number of offices 31 December 30 June 2009 closed (net) 2009 Asia Pacific 49 - 49Continental Europe & RoW 82 (2) 84United Kingdom & Ireland 194 (18) 212Group 325 (20) 345
In the United Kingdom & Ireland we reduced our office network by a total of 18offices over the period as we continued to drive efficiency savings byconsolidating operations in selected cities. In Asia Pacific and ContinentalEurope & RoW we have maintained the office infrastructure in order to positionthe business for the substantial long term structural growth that we expect inthe future. As economic conditions improve, we will continue the rollout of ouroffice network, with a number of openings already planned for the next 12months.Asia Pacific growth 6 months ended 31 December (In £'s million) 2009 2008 Actual LFL* Net fees 64.2 88.3 (27)% (39)%Operating profit 22.1 38.9 (43)% (52)%Conversion rate 34.4% 44.1%
Period end consultant headcount**** 753 1,056 (29)% (29)% In Asia Pacific, net fees decreased by 27% (39% on a like-for-like basis*) to £64.2 million and operating profit decreased by 43% (52% on a like-for-likebasis*) to £22.1 million. This equates to 63% of Group operating profit** andfor the first time makes Asia Pacific the largest contributing division. Thedifference between actual growth and like-for-like growth was mainly due to theappreciation in the Australian dollar. The business achieved a strongconversion rate of 34.4% in the period although this was below the 44.1%achieved last year.In our market leading Australia & New Zealand business, net fees were down 40%*versus prior year. Net fees decreased by 20%* in the temporary placementbusiness and by 58%* in the permanent placement business. Both our permanentand temporary businesses saw sequential stability in net fees in the firstquarter of the period and sequential growth in the second quarter. The smallerspecialisms have been the best performing businesses, with Pharma and Educationboth recording year on year growth in recent months. Our public sectorbusiness, which accounts for 27% of net fees in Australia & New Zealand, faceddifficult market conditions throughout the period with net fees decreasing by17%* versus last year, mainly driven by decline in back office functions.In Asia, which accounted for 12% of the division's net fees in the period, netfees decreased by 18%* versus prior year. However, market conditions improvedmarkedly through the period, driven by improved levels of demand in Banking andFinancial Services. Record monthly net fee performances were achieved by bothour Japanese and Chinese businesses during the second quarter and since theperiod end Asia has returned to year on year growth.Consultant headcount in Asia Pacific was broadly flat through the period with amodest reduction at the start of the period offset by selective investment inthe second quarter as market conditions strengthened. As at 31 December 2009,consultant headcount was 29% below the prior year level. Assuming positivemarket trends continue, we expect to add headcount across the region in thesecond half.
Continental Europe & Rest of World ('RoW')
growth 6 months ended 31 December (In £'s million) 2009 2008 Actual LFL* Net fees 79.1 102.8 (23)% (29)%Operating profit 6.8 20.6 (67)% (70)%Conversion rate 8.6% 20.0% Period end consultant headcount**** 1,068 1,472 (27)%
(27)%
In Continental Europe & RoW, net fees decreased by 23% (29% on a like-for-like basis*) to £79.1 million and operating profit decreased by 67% (70% on a like-for-like basis*) to £6.8 million. This division now represents 19% of Group operating profit**. The difference between actual growth and like-for-like growth was mainly due to the appreciation in the Euro. The conversion rate declined from 20.0% to 8.6% this period.
Our German business, representing 49% of the division's net fees and themajority of the division's profits, recorded a 21%* decrease in net fees versusprior year. Demand in Germany stabilised sequentially in the period with netfees posting a modest sequential increase in the second quarter. Althoughprincipally focused on the IT contracting market, our German business continuesto diversify into a broader range of specialisms including Accountancy &Finance, Construction & Property, Sales & Marketing, Legal and Pharma, whichnow account for 19% of total net fees in Germany. Our market leading positionand increasing diversification of the business each place us in a strongposition to benefit from improving market conditions.
Our other businesses in this division, covering 19 countries, are focused principally on the permanent placement markets and hence have been more exposed to the impact of the recession. As a result, many of the smaller countries recorded losses during the period. However, we have seen a sequential stabilisation in demand in most of these countries.
Consultant headcount decreased by 9% during the period with all the reductionbeing made in July and August, primarily through natural attrition. As at 31December 2009, the headcount was 27% below the prior year level. We haveprotected the infrastructure in these businesses since we believe they arepositioned in markets with significant structural growth ahead of them. Most ofthese countries were achieving organic growth of more than 40% per annum beforethe recession and we believe we can achieve these levels again in the nextcycle of growth. We plan to cautiously invest in headcount in the second halfin countries where trends are improving.United Kingdom & Ireland growth 6 months ended 31 December (In £'s million) 2009 2008 Actual LFL* Net fees 121.5 192.6 (37)% (37)%Operating profit 6.2 45.6 (86)% (86)%Conversion rate 5.1% 23.7% Period end consultant headcount**** 2,226 2,685 (17)%
(17)%
In the United Kingdom & Ireland, net fees declined by 37% on an actual andlike-for-like basis* to £121.5 million, with operating profit down 86% on anactual and like-for-like basis* to £6.2million. Net fees decreased by 29%* inthe temporary placement business and by 47%* in the permanent placementbusiness. The conversion rate declined from 23.7% to 5.1% this period.Overall demand stabilised sequentially during the period. However, marketconditions remain challenging. In the private sector trends improved towardsthe end of the period but there still remain only limited signs of recovery. Inthe public sector, trends are continuing to weaken.By sector, Accountancy & Finance and IT achieved sequential stability throughthe half although demand continued to be fragile. Our Construction & Propertybusiness recorded modest sequential decline. Our Pharma and Financial Servicesspecialisms were the best performing businesses in the private sector, witheach showing good levels of growth. Performances in the public sector weremixed: Education and Healthcare achieved strong growth with record results. Incontrast, the pressures on public finances impacted the remainder of our publicsector business particularly in Construction & Property and back officefunctions. Overall public sector net fees, which represent 39% of our UnitedKingdom & Ireland net fees, decreased by 13% versus prior year and as a resultwe continue to reallocate resources from the public sector back to the privatesector.Consultant headcount in the United Kingdom & Ireland decreased by 4% during theperiod. This reduction was made in July and August with headcount being heldbroadly flat thereafter as trading stabilised. As at 31 December 2009 theheadcount was 17% below the prior year level and 34% down from peak in March2008, and we anticipate maintaining headcount at current levels in the secondhalf. 18 offices were also closed in the period as we have continued to driveefficiency savings by consolidating operations in selected cities. We have madeexcellent progress on our key efficiency investment programmes, with our newfront office system rolled out across the United Kingdom & Ireland and the backoffice automation project on track to complete in September 2010. We have alsocontinued to strengthen our national corporate account management andrecruitment outsource services and these investments have continued to yieldimportant client wins, including IBM, BT and The Audit Commission, during theperiod.In view of the pressures in the public sector and the unprecedented adverseweather conditions which reduced the number of temporary placement days workedin January, we expect our performance in the United Kingdom & Ireland in thesecond half to be broadly similar to the first half.
Net finance charge
The net finance charge for the period was £4.7 million (2008: £4.3 million).The average interest rate on gross debt during the period was 1.0% (2008:5.2%), generating a net bank interest payable of £0.8 million (2008: £2.7million). There was a net interest charge on the defined pension schemeobligations of £3.3 million (2008: £1.2 million) with the increase mainly dueto the lower level of scheme assets reducing expected returns and lowerliabilities more than offset by a higher discount rate, with the charge for thePension Protection Fund levy of £0.6 million (2008: £0.4 million).Overall the net finance charge for the period was £4.7 million. It is expectedthat the net finance charge for the year to 30 June 2010 will be around £11million. TaxationTaxation for the period was £11.4 million, representing an effective tax rateof 37.5% (2008: 30.0%). The increase in the effective tax rate was due to thepresence of unrelieved tax losses in some countries during the period and thechange in geographical mix of profits. It is expected that the effective taxrate for the year to 30 June 2010 will remain at a similar level.
Earnings per share
Basic earnings per share before exceptional items** decreased 73% to 1.38 pence(2008: 5.15 pence). The fall in earnings per share reflects the reduction inoperating profit, the higher net finance charge and the increase in theeffective tax rate.Cash flow and balance sheetCash flow in the period was strong with a 103% conversion of operating profit**into operating cash flow, driven by continued close control of working capital.This emphasises the importance placed by our management on disciplined cashmanagement. Overall, net cash generated by operations was £36.1 million (2008:£137.6 million). Cash outflow from working capital was £6.4 million, resultingprincipally from the £20 million payment to other agencies at the start of theperiod which reversed the one-off cash inflow received in June 2009 relating tothe withdrawal of the staff hire concession. This cash outflow was partiallyoffset by an improvement in trade debtor days to 31 days (2008: 37 days). Taxpaid was £3.5 million.
Net capital expenditure was £16.6 million, reflecting the additional expenditure on the Group's key IT projects. These IT projects are scheduled to be substantially completed during the second half of the year, after which capital expenditure is expected to fall back to historical levels.
Dividends paid in the period totalled £54.2 million and £3.0 million was paidout in net interest. Principally due to the payment of the dividend, net debtincreased from a cash position of £0.7 million at the start of the period tonet debt of £38.4 million at the end of the period. The overall reduction innet debt levels during the recession of circa £75 million demonstrates theconsistency of the Group's operating cash flow and the robustness of Hays'business model.The Group has a £460 million unsecured revolving credit facility available,which expires in February 2011. The covenants in the facility require theGroup's interest cover to be at least 4:1 and its leverage ratio (net debt toEBITDA) to be no greater than 3:1. The Group has significant headroom withinthese covenants.
Capital structure and dividend
The Board's current priorities for our free cash flow are to fund Group development, maintain the strength of the balance sheet and to support a sustainable dividend policy. The Board has no plans to buy back shares at the present time.
Reflecting the Board's confident outlook and the Group's balance sheetstrength, the Board has decided to pay an interim dividend of 1.85 pence pershare, which is in line with last year. The interim dividend payment date willbe 1 April 2010 and will be paid to shareholders on the register on 5 March
2010. Retirement benefitsThe Group's pension liability under IAS 19 at 31 December 2009 of £101.3million (£72.9 million net of deferred tax) decreased by £7.9 million comparedto 30 June 2009 primarily due to the higher than expected asset returns andlower than expected level of scheme liabilities based on the updated membershipdata from the triennial valuation process, partially offset by a decrease inthe discount rate. During the period, the Company contributed £2.7 million ofcash into the defined benefit scheme, which included £0.6 million additionalfunding towards the pension deficit.The defined benefit pension scheme is currently undergoing its triennialactuarial valuation as at 30 June 2009. It is expected that this valuation willlead to an increase in the actuarial deficit largely due to lower asset valuesand changes in the expected long term inflation rate assumptions. As a resultand as referred to in the 2009 Annual Report, we expect Hays' deficit fundinginto the pension scheme to increase to between £10 million and £20 million perannum following the completion of the triennial actuarial valuation.
OFT investigation
On 30 September 2009, The Office of Fair Trading ('OFT') issued its decisionfinding that Hays' Construction & Property business in the UK had breachedcompetition law in the period October 2004 to November 2005. Hays hasco-operated fully with the OFT in its investigation under the leniency regimeand has been fined £30.4 million. Whilst Hays takes the findings of the OFT'sinvestigation seriously, we believe that the level of the fine is arbitrary andwholly disproportionate to the activities to which it relates, Hays'involvement in those activities and the way in which the OFT has dealt withother cases in the past. The Group is appealing the decision and whilst theappeal is in progress, the £30.4 million fine is being held on deposit by Hays.The Half Year Financial Statements include an exceptional charge of £27 millionin the period in respect of the fine and the anticipated costs of the appeal.Current trading
Currently we are seeing improved candidate and client confidence across the business in most of our private sector markets. Asia Pacific and parts of Continental Europe have continued to deliver modest rates of sequential improvement. Our remaining businesses continue to see overall stability in their markets and in the UK we expect our performance to be broadly similar in the second half. Our exposure to high potential overseas markets, our investment in technology, and the retention of our key people, position us extremely well to capitalise on the next phase of economic growth.
* LFL (like-for-like) growth represents organic growth of continuing activities at constant currency. There were the same number of trading days in 2009 and 2008.
** numbers are presented before the exceptional item of £27 million in 2009 relating to the OFT fine that is currently under appeal. There were no exceptional items in 2008.
*** 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.
**** the change in consultants is shown on a closing basis, comparing 31 December 2009 versus 31 December 2008.
Treasury management
The Group's treasury operations remain straight forward and uncomplicated withGroup operations financed by retained earnings and bank borrowings. The Grouphas a £460 million revolving credit facility in place until February 2011 andit uses this facility to manage its day-to-day working capital requirements asappropriate. Based on positive feedback from initial discussions with themajor syndicate lenders, management are confident that an appropriatereplacement facility will be renewed in advance of February 2011. Allborrowings 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.
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 its 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. The principal risks and uncertainties facedby the Group for the remaining six months of the year are unchanged from thoseset out in the 2009 Annual Report. These are: macroeconomic environment,competitive environment, customer credit risk, contractual risk, people-relatedrisks, technological risks, risks associated with regulatory and legislativechanges, foreign exchange risks and the impact of pension scheme liabilities. See the 2009 Annual Report for a detailed explanation of the principal risksand uncertainties faced by the Group, a copy of which can be downloaded from www.haysplc.com/hays/investor/reports/.Hays plc250 Euston RoadLondonNW1 2AFResponsibility Statement
We confirm that, to the best of our knowledge:
- the condensed set of financial statements has been presented in
accordance with IAS 34 "Interim Financial Reporting" and gives a true and fair
view of the assets, liabilities, financial position and profit for the Group;
- the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events during the
first six months and description of principal risks and uncertainties for the
remaining six months of the year); and
- the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties' transactions
and changes therein).
This Half Year Report was approved by the Board of Directors and authorised forissue on 24 February 2010. Alistair Cox Paul VenablesChief Executive Group Finance Director Cautionary statementThis Half Year Report has been prepared solely in compliance withthe Disclosure Rules and Transparency Rules of the UK Financial ServicesAuthority and is not audited. Statements in this Report reflect the knowledgeand information available at the time of its preparation. Certain statementsincluded 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-lookingstatements involve a number of risks, uncertainties and assumptions and actualresults or events may differ materially from those expressed or implied bythose statements. Accordingly, no assurance can be given that any particularexpectation will be met and reliance should not be placed on anyforward-looking statement. Additionally, forward-looking statements regardingpast trends or activities should not be taken as a representation that suchtrends or activities will continue in the future. No responsibility orobligation is accepted to update or revise any forward-looking statementresulting from new information, future events or otherwise. Nothing in thisReport should be construed as a profit forecast. This Report does notconstitute or form part of any offer or invitation to sell, or any solicitationof any offer to purchase any shares in the Company, nor shall it or any part ofit or the fact of its distribution form the basis of, or be relied on inconnection with, any contract or commitment or investment decisions relatingthereto, nor does it constitute a recommendation regarding the shares of theCompany. Past performance cannot be relied upon as a guide to futureperformance. Liability arising from anything in this Report shall be governedby English Law. Nothing in this Report shall exclude any liability underapplicable laws that cannot be excluded in accordance with such laws.
Independent Review Report to Hays plc
Introduction
We have been engaged by the Company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 31December 2009 which comprises the consolidated income statement, theconsolidated statement of comprehensive income, the consolidated balance sheet,the consolidated cash flow statement, the consolidated statement of changes inequity and related notes 1 to 12. We have read the other information containedin the half-yearly financial report and considered whether it contains anyapparent misstatements or material inconsistencies with the information in thecondensed set of financial statements.This report is made solely to the Company in accordance with InternationalStandard on Review Engagements (UK and Ireland) 2410 "Review of InterimFinancial Information Performed by the Independent Auditor of the Entity"issued by the Auditing Practices Board. Our work has been undertaken so thatwe might state to the Company those matters we are required to state to them inan independent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone otherthan the Company, for our review work, for this report, or for the conclusionswe have formed.Directors' responsibilitiesThe half-yearly financial report is the responsibility of, and has beenapproved by, the directors. The directors are responsible for preparing thehalf-yearly financial report in accordance with the Disclosure and TransparencyRules of the United Kingdom's Financial Services Authority.As disclosed in note 1, the annual financial statements of the Group areprepared in accordance with IFRSs as adopted by the European Union. Thecondensed set of financial statements included in this half-yearly financialreport has been prepared in accordance with International Accounting Standard34, "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview.Scope of Review
We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410 "Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity" issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making inquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly,we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us tobelieve that the condensed set of financial statements in the half-yearlyfinancial report for the six months ended 31 December 2009 is not prepared, inall material respects, in accordance with International Accounting Standard 34as adopted by the European Union and the Disclosure and Transparency Rules ofthe United Kingdom's Financial Services Authority. Deloitte LLPChartered Accountants and Registered AuditorsLondon, United Kingdom24 February 2010
Condensed Consolidated Income Statement
Six months to Six months to 31 December 31 December Year to 2009 2008 30 June(In £'s million) Notes (Unaudited) (Unaudited) 2009 Turnover Continuing operations 2 1,288.3 1,278.7 2,447.7Net fees * Continuing operations 2 264.8 383.7 670.8
Operating profit from continuing operations
before exceptional items 2 35.1 105.1 158.0Exceptional items 3 (27.0) - -
Operating profit from continuing operations 2 8.1
105.1 158.0Finance income 0.3 1.3 1.9Finance cost (5.0) (5.6) (8.9) 4 (4.7) (4.3) (7.0)Profit before tax 3.4 100.8 151.0Tax 5 (11.4) (30.2) (45.2)
(Loss)/profit from continuing operations after tax (8.0) 70.6 105.8(Loss)/profit attributable to equity holders of the parent company (8.0) 70.6 105.8Earnings per share from continuing operations before exceptional items - Basic 7 1.38p 5.15p 7.72p- Diluted 7 1.37p 5.15p 7.71pEarnings per share from continuing operations - Basic 7 (0.58)p 5.15p 7.72p- Diluted 7 (0.58)p 5.15p 7.71p
* Net fees are equal to turnover less remuneration of temporary workers.
Condensed Consolidated Statement of Comprehensive Income
Six months to Six months to 31 December 31 December Year to 2009 2008 30 June(In £'s million) (Unaudited) (Unaudited) 2009 (Loss)/profit for the period (8.0) 70.6 105.8
Currency translation adjustments 11.2 38.6 15.9Gain on sale of own shares taken to equity - - 5.4Actuarial gains/(losses) on defined benefit pension scheme 10.2 (9.4) (21.2)Tax on items taken directly to reserves (2.8) 2.6 5.2Net income recognised directly in equity 18.6 31.8 5.3Total recognised income and expense for the period 10.6 102.4 111.1Attributable to equity shareholders of the parent company 10.6
102.4 111.1
Condensed Consolidated Balance Sheet
31 December 31 December 2009 2008 30 June(In £'s million) Notes (Unaudited) (Unaudited) 2009 Non-current assets Goodwill 186.1 193.0 174.9Other intangible assets 55.2 18.7 38.6Property, plant & equipment 26.9 32.9 29.1Deferred tax assets 41.7 39.8 42.9 309.9 284.4 285.5Current assets Trade and other receivables 365.9 436.6 352.4Cash and cash equivalents 119.2 53.6 55.0 485.1 490.2 407.4Total assets 795.0 774.6 692.9Current liabilities Trade and other payables (356.5) (319.3) (312.5)Current tax liabilities (24.1) (20.5) (16.3) (380.6) (339.8) (328.8)Non-current liabilities Bank loans and overdrafts (157.6) (108.2) (54.3)Trade and other payables - (13.6) -
Retirement benefit obligations 8 (101.3)
(96.6) (109.2)Provisions 9 (41.3) (45.0) (46.2) (300.2) (263.4) (209.7)Total liabilities (680.8) (603.2) (538.5)Net assets 114.2 171.4 154.4Equity Called up share capital 14.7 14.7 14.7Share premium account 369.6 369.6 369.6Capital redemption reserve 2.7 2.7 2.7Retained earnings (330.4) (293.7) (282.6)Other reserves 57.6 78.1 50.0Total shareholders' equity 114.2 171.4 154.4
Condensed Consolidated Cash Flow Statement
Six months to Six months to 31 December 31 December Year to 2009 2008 30 June(In £'s million) Notes (Unaudited) (Unaudited) 2009
Operating profit from continuing operations 8.1 105.1 158.0Adjustments for: Exceptional items 27.0 - - Depreciation of property, plant and equipment 4.5 4.6 10.4 Amortisation of intangible fixed assets 0.7 0.3 1.2 Loss on disposal of property, plant and equipment - - 0.8 Movements in provisions, employee benefits and other items 2.2 3.3 0.5 34.4 8.2 12.9
Operating cash flow before movement in
working capital 42.5 113.3 170.9 Changes in working capital (6.4) 24.3 90.0Cash generated by operations 36.1 137.6 260.9Income taxes paid (3.5) (36.0) (56.5)
Net cash from operating activities 32.6 101.6 204.4Investing activities Purchase of tangible and intangible assets (16.6) (17.0) (37.0)Cash paid in respect of acquisitions made in
previous years - - (5.4)Interest received 0.3 1.3 1.9
Net cash used in investing activities (16.3)
(15.7) (40.5)Financing activities Interest paid (3.3) (3.9) (4.6)Equity dividends paid (54.2) (54.0) (79.3)
Cash outflow in respect of share buy-back - (2.0) (2.1)Additional pension scheme funding (0.6) (2.1) (2.7)Proceeds from sale of own shares - - 5.4Purchase of own shares (0.4) - -(Repayment)/issue of loan notes (0.8) (0.2) 0.6Increase/(decrease) in bank overdrafts & repayment of borrowings 103.3 (30.5) (82.7)Net cash from/(used) in financing activities 44.0 (92.7) (165.4)Net increase/(decrease) in cash & cash equivalents 10 60.3 (6.8) (1.5)Cash and cash equivalents at beginning of period 55.0 54.0 54.0Effect of foreign exchange rate movements 3.9 6.4 2.5Cash and cash equivalents at end of period 119.2
53.6 55.0 (In £'s million) Notes
Bank loans and overdrafts at beginning of period (54.3) (135.1) (135.1)(Increase)/decrease in period (103.3) 26.9 80.8Bank loans and overdrafts at end of period (157.6) (108.2) (54.3)Net (debt)/cash at end of period 10 (38.4)
(54.6) 0.7
Condensed Consolidated Statement of Changes in Equity
For the six months ended 31 December 2009
Capital Share Share redemption premium Retained Other (In £'s million) capital reserve account earnings reserves Total Balance at 1 July 2009 14.7 2.7 369.6 (282.6) 50.0 154.4
Currency translation adjustments - - - - 11.2 11.2Actuarial gains on defined benefit pension scheme - - - 10.2 - 10.2Tax on items taken directly to reserves - - - (2.8) - (2.8)Net income recognised directly in
equity - - - 7.4 11.2 18.6Loss for the period - - - (8.0) - (8.0)
Total recognised (expense)/income for
the period - - - (0.6) 11.2 10.6Dividends paid - - - (54.2) - (54.2)Share-based payment schemes - - - 7.0 (3.6) 3.4Balance at 31 December 2009 14.7 2.7 369.6 (330.4) 57.6 114.2
For the six months ended 31 December 2008
Capital Share Share redemption premium Retained Other (In £'s million) capital reserve account earnings reserves Total Balance at 1 July 2008 14.7 2.7 369.6 (307.0) 43.0 123.0
Currency translation adjustments - - - - 38.6 38.6Actuarial losses on defined benefit pension scheme - - - (9.4) - (9.4)Tax on items taken directly to reserves - - - 2.6 - 2.6Net (expense)/income recognised
directly in equity - - - (6.8) 38.6 31.8Profit for the period - - - 70.6 - 70.6
Total recognised income for the period - - -
63.8 38.6 102.4Dividends paid - - - (54.0) - (54.0)Share-based payment schemes - - - 4.9 (3.5) 1.4Share buy-back - - - (1.4) - (1.4)Balance at 31 December 2008 14.7 2.7 369.6 (293.7) 78.1 171.4
For the year ended 30 June 2009
Capital Share Share redemption premium Retained Other (In £'s million) capital reserve account earnings reserves Total Balance at 1 July 2008 14.7 2.7 369.6 (307.0) 43.0 123.0
Currency translation adjustment - - - - 15.9 15.9Actuarial profits on defined benefit pension - - - (21.2) - (21.2)Tax on items taken directly to reserves - - - 5.2 - 5.2Net (expense)/income recognised - - - (16.0) 15.9 (0.1)Profit for the period - - - 105.8 - 105.8Total recognised income for the period - - -
89.8 15.9 105.7Dividends paid - - - (79.3) - (79.3)Share-based payment schemes - - - 4.5 (4.9) (0.4)
Gain on sale of own shares taken to reserves - - -
5.4 - 5.4Purchase of own shares - - - (4.0) (4.0)Other share movements - - - 5.4 - 5.4Share buy-back - - - (1.4) - (1.4)Balance at 30 June 2009 14.7 2.7 369.6 (282.6) 50.0 154.4
Condensed Consolidated Statement of Changes in Equity - Other Reserves
For the six months ended 31 December 2009
Own Equity Cumulative (In £'s million) shares reserve translation Total Balance at 1 July 2009 (5.5) 12.0 43.5 50.0
Currency translation adjustments - - 11.2 11.2Total recognised expense for the period - -
11.2 11.2Share-based payment schemes (0.1) (3.5) - (3.6)Balance at 31 December 2009 (5.6) 8.5 54.7 57.6
For the six months ended 31 December 2008
Own Equity Cumulative (In £'s million) shares reserve translation Total Balance at 1 July 2008 (1.5) 16.9 27.6 43.0
Currency translation adjustments - - 38.6 38.6Total recognised expense for the period - -
38.6 38.6Share-based payment schemes 1.1 (4.6) - (3.5)Balance at 31 December 2008 (0.4) 12.3 66.2 78.1
For the year ended 30 June 2009
Own Equity Cumulative (In £'s million) shares reserve translation Total Balance at 1 July 2008 (1.5) 16.9 27.6 43.0
Currency translation adjustments - - 15.9 15.9Total recognised income for the period - -
15.9 15.9Share-based payment schemes - (4.9) - (4.9)Purchase of own shares (4.0) - - (4.0)Balance at 30 June 2009 (5.5) 12.0 43.5 50.0 1. Basis of preparation
The condensed consolidated interim financial statements are the results for thesix months ended 31 December 2009. The condensed consolidated interim financialstatements ("interim financial statements") have been prepared underInternational Financial Reporting Standards ("IFRS") as adopted by the EuropeanUnion, in accordance with International Accounting Standard 34 'InterimFinancial Reporting' and the Disclosure and Transparency Rules of the FinancialServices Authority. It is unaudited but has been reviewed by the auditors andtheir report is attached.The interim financial statements do not constitute statutory accounts asdefined in Section 434 of the Companies Act 2006 as they do not include all ofthe information required for full statutory accounts. The interim financialstatements should be read in conjunction with the statutory accounts for theyear ended 30 June 2009, which were prepared in accordance with IFRS as adoptedby the European Union and have been filed with the Registrar of Companies. Theauditors' report on those accounts was unqualified, did not draw attention toany matters by way of emphasis and did not contain a statement under Section498 (2) or (3) of the Companies Act 2006.
Accounting policies
The interim financial statements have been prepared on the basis of theaccounting policies and methods of computation applicable for the year ending30 June 2009. These accounting policies are consistent with those applied inthe preparation of the accounts for the year ended 30 June 2009 with theexception of the following new accounting standards, amendments andinterpretations which were mandatory for accounting periods beginning 1 January2009.
IAS 1 (revised) Presentation of Financial Statements
On adoption there were no changes to the disclosure previously provided except for the following:
· The statement of recognised income and expenditure has been renamed
the statement of comprehensive income.· The reconciliation of movements in equity has been renamed the
statement of changes in equity.
IFRS 8 Operating Segments.
The standard defines operating segments as components of the Group about which separate financial information is regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance. On adoption, there were no significant changes to the Group's reportable segments or financial measures.
All other new standards, amendments to standards and interpretations mandatoryfor the first time for the accounting periods beginning 1 January 2009 do notcurrently have an impact on the Group.
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 the Interim Management Report.
The Group has a £460 million revolving credit facility in place until February2011 and uses this facility to manage its day-to-day working capitalrequirements as appropriate. Based on positive feedback from initialdiscussions with the major syndicate lenders management are confident that anappropriate replacement facility will be renewed in advance of February 2011.
The Group's facility, together with internally generated cash flows, will continue to provide sufficient sources of liquidity to fund its current operations, including contractual and commercial commitments, future growth and any proposed dividends.
The directors have formed the judgment, at the time of approving the condensedset of financial statements, that there is reasonable expectation that theGroup has adequate resources to continue in operational existence for theforeseeable future. For this reason, the directors continue to adopt the goingconcern basis in preparing the condensed consolidated financial statements.
2. Segmental information
Continuing operations comprise one class of business, being specialist recruitment activities. The Group operates in three identified geographic segments. These results by geography are shown below.
Turnover, net fees and profit from continuing operations
Six months to Six months to 31 December 31 December Year to 2009 2008 30 June(In £'s million) (Unaudited) (Unaudited) 2009 Turnover United Kingdom & Ireland 776.5 720.3 1,395.7
Continental Europe & Rest of World 277.9
301.2 587.9Asia Pacific 233.9 257.2 464.1 1,288.3 1,278.7 2,447.7Net fees United Kingdom & Ireland 121.5 192.6 330.7
Continental Europe & Rest of World 79.1
102.8 191.0Asia Pacific 64.2 88.3 149.1 264.8 383.7 670.8
Operating profit from continuing operations before exceptional items United Kingdom & Ireland
6.2 45.6 63.5Continental Europe & Rest of World 6.8
20.6 33.1Asia Pacific 22.1 38.9 61.4 35.1 105.1 158.0
Operating profit from continuing operations
United Kingdom & Ireland Operating profit from continuing operations
before exceptional items 6.2 45.6 63.5Exceptional items (27.0) - -United Kingdom & Ireland (20.8) 45.6 63.5
Continental Europe & Rest of World 6.8
20.6 33.1Asia Pacific 22.1 38.9 61.4 8.1 105.1 158.0 3. Exceptional ItemsOn the 30 September 2009, The Office of Fair Trading ('OFT') issued itsdecision finding that Hays' Construction & Property business in the UK hadbreached competition law in the period October 2004 to November 2005. Hays hasco-operated fully with the OFT in its investigation under the leniency regimeand has been fined £30.4million which is currently under appeal.The effect of this fine and the legal costs associated with the appeal has beenrecognised in the Income Statement as an exceptional charge of £27.0 million.In agreement with the OFT, the fine is currently held on deposit pending theappeal and a current liability of £30.4 million is held on the balance sheetwithin trade and other payables.
4. Finance income and finance costs
Finance income Six months to Six months to 31 December 31 December Year to 2009 2008 30 June(In £'s million) (Unaudited) (Unaudited) 2009 Interest on bank deposits 0.3 1.3 1.9Finance costs Six months to Six months to 31 December 31 December Year to 2009 2008 30 June(In £'s million) (Unaudited) (Unaudited) 2009
Interest payable on bank overdrafts and loans (1.1) (4.0) (5.4)Pension Protection Fund levy (0.6) (0.4) (1.1)Net interest on pension obligations (3.3)
(1.2) (2.4) (5.0) (5.6) (8.9)Net finance charge (4.7) (4.3) (7.0) 5. Taxation on ordinary activitiesThe Group's consolidated effective tax rate in respect of continuing operationsfor the six months to 31 December 2009 is based on the estimated effective taxrate for the full year of 37.5% (31 December 2008: 30.0%, 30 June 2009: 29.9%).
6. Dividends
The following dividends were paid by the Group and have been recognised as distributions to equity shareholders in the year:
Six months to Six months to 31 December 31 December Year to 2009 2008 June(In £'s million) (Unaudited) (Unaudited) 2009
Final dividend for the year ended 30 June 2008 of 3.95 pence per share - 54.0 54.0Interim dividend for the period to 31 December 2008 of 1.85 pence per share - - 25.3Final dividend for the year ended 30 June 2009 of
3.95 pence per share 54.2 - - 54.2 54.0 79.3
The interim dividend for the period ended 31 December 2009 of 1.85 pence per share is not included as a liability in the balance sheet as at 31 December 2009.
7. Earnings per share Six months to Six months to 31 December 31 December Year to 2009 2008 June(In £'s million) (Unaudited) (Unaudited) 2009 Earnings from continuing operations before exceptional items 30.4 100.8 151.0Tax on earnings from continuing operations before exceptional items (11.4) (30.2) (45.2)Basic earnings before exceptional items 19.0 70.6 105.8Earnings from continuing operations after exceptional items 3.4 100.8 151.0Tax on earnings from continuing operations after exceptional items (11.4) (30.2) (45.2)Basic earnings after exceptional items (8.0) 70.6 105.8Number of shares (million): Weighted average number of shares 1,376.7 1,370.3 1,370.5Dilution effect of share options 9.5 1.6 1.1Weighted average number of shares used for diluted EPS 1,386.2 1,371.9 1,371.6From continuing operations: Basic earnings per share before exceptional items 1.38p 5.15p 7.72pBasic earnings per share (0.58)p 5.15p 7.72pDiluted earnings per share before exceptional items 1.37p
5.15p 7.71pDiluted earnings per share (0.58)p 5.15p 7.71p 8. Retirement benefit obligations Six months to Six months to 31 December 31 December Year to 2009 2008 30 June(In £'s million) (Unaudited) (Unaudited) 2009
Deficit in scheme brought forward (109.2)
(88.1) (88.1)Current service cost (1.7) (2.3) (4.5)Contributions 2.7 4.4 7.0Net financial return (3.3) (1.2) (2.4)Actuarial gain/(loss) 10.2 (9.4) (21.2)
Deficit in scheme carried forward (101.3)
(96.6) (109.2) 9. Provisions(In £'s million) Property Other Total Balance at 1 July 2009 20.0 26.2 46.2Utilised (1.9) (3.3) (5.2)Exchange adjustments 0.1 0.2 0.3
Balance as at 31 December 2009 18.2
23.1 41.3
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 2013. Other provisions include liabilities arising as a result of business disposalsand the Group transformation that concluded in 2004, including provisions relating to possible warranty and environmental claims.10. Movement in net debt 1 July Cash Exchange 31 December(In £'s million) 2009 flow movement 2009Cash & cash equivalents 55.0 60.3 3.9 119.2Bank loans & overdrafts (54.3) (102.5) (0.8) (157.6)Net debt 0.7 (42.2) 3.1 (38.4)
The table above is presented as additional information to show movement in net debt, defined as cash & cash equivalents less overdrafts & bank loans.
The Group has a £460 million unsecured revolving credit facility available,which expires in February 2011. The covenants in the facility require the Group's interest cover to be at least 4:1 and its leverage ratio (net debt to EBITDA) to be no greater than 3:1. The interest rate on the facility is based upon a ratchet mechanism with a margin payable over LIBOR in the range 0.375% to 0.525%.
As at 31 December 2009, £307.2 million of the committed facility was un-drawn.
11. Events after the balance sheet date
There are no significant events after the balance sheet date to report.
12. Like-for-like results
Like-for-like results represent organic growth/decline of continuing activities at constant currency.
For the six months ended 31 December 2009 this is calculated as follows:
(In £'s million)
Net fees for the six months ended 31 December 2008 383.7 Foreign exchange impact 25.4 Net fees for the six months ended 31 December 2008 at constant currency 409.1 Fee reduction resulting from organic decline (144.3) Net fees for the six months ended 31 December 2009 264.8 Profit from operations for the six months ended 31 December 2008 105.1 Foreign exchange impact 9.6
Profit from operations for the six months ended 31 December 2008 at constant currency 114.7 Profit from operations reduction resulting from organic decline
(79.6) Profit from operations for the six months ended 31 December 2009 35.1
vendorRelated Shares:
Hays