27th Feb 2007 07:00
27 February 2007
Interim results for the 6 months ended 31 December 2006
OPERATING PROFIT UP 11%* AND OUTSTANDING PERFORMANCE INTERNATIONALLY
6 months ended 31 December 2006 2005 Actual LFL* growth growth ‚£'s million Net fees 297.2 259.1 + 15% + 14%
Profit from continuing activities 102.2 94.1 + 9% + 11%
Cash from operations 98.6 83.9 + 18% Profit before tax** 100.3 94.6 + 6% Basic earnings per share** 4.73p 4.16p + 14% Interim dividend per share 1.60p 1.45p + 10%
- Good like-for-like net fee and operating profit growth of 14% and 11% respectively*
- Outstanding International performance with net fees and operating profit up 36%*
- Profits flat in the United Kingdom & Ireland due to reduction in temporary business margin
- 26% increase in net fees from permanent business with excellent performance across the Group
- 14% increase in earnings per share** and 10% increase in interim dividend per share
- Entry into Japan and Pharmaceutical sector through James Harvard acquisition for initial ‚£24 million
* LFL is like-for-like growth which represents organic growth of continuing activities at constant currency. No adjustment is made for the one less trading day in 2006
** continuing activities only
Commenting on these results, Denis Waxman, Chief Executive of Hays, said:
"These results show good growth in net fees, operating profit and earnings pershare. The highlight is our outstanding performance internationally where wegrew net fees by 33% (36% on a like-for-like basis*) to ‚£98.5 million andoperating profits by 30% (36% on a like-for-like basis*) to ‚£34.7 million. TheInternational business has increased its share of Group net fees from 22% threeyears ago to 33% this period. Our success underlines the excellent marketopportunities available worldwide to Hays and the strength of our businessmodel. We are continuing to invest internationally, primarily organically, tomaximise our opportunities in these markets.There was a mixed performance in the United Kingdom & Ireland. The permanentplacement business performed strongly generating good net fee growth of 18%.However, challenging conditions in the temporary market, primarily in thepublic sector, led to margin reduction and low volume growth in this segment.The investment in consultants during the period in the United Kingdom & Irelandpositions us for an improved performance in the second half of the financialyear.Since the start of January, net fees have been ahead of the comparable periodlast year by 16% on a like-for-like basis*. By region, net fee growth on alike-for-like basis* was 9% in the United Kingdom & Ireland, 29% in Asia Pacificand 36% in Continental Europe & Rest of World. Overall, the Group's performancefor the year ending 30 June 2007 continues to be in line with the Board'sexpectations."Enquiries:Denis Waxman Chief Executive Hays plc + 44 (0)20 7628 9999 Paul Venables Finance Director Martin Abell Investor Relations Giles Croot / Gill Ackers Brunswick + 44 (0)20 7404 5959 Chairman's statement
Net fees of the Group were ‚£297.2 million, 15% ahead of last year (14% on alike-for-like basis*), operating profit from continuing activities was ‚£102.2million, 9% ahead of last year (11% on a like-for-like basis*), and basicearnings per share from continuing activities was 4.73 pence, 14% ahead of lastyear. The average number of consultants increased by 17% to 4,349 compared tothe average in the first half of last year (2005: 3,726).We achieved a strong performance in our permanent placement business across allregions benefiting from continued investment in new consultants. Net fees inthe permanent business grew by 26%, increasing its share of Group net fees to47% (2005: 43%). Permanent placement volumes increased 15% and average fees perplacement increased by 10% compared to the first half of last year. Thetemporary placement business, representing 53% of Group net fees, had a strongperformance internationally but was impacted by challenging conditions in theUnited Kingdom & Ireland market, primarily in the public sector. Overall, thetemporary placement business had modest net fee growth of 6%, with volumegrowth of 10% compared to the first half of last year and an 80 basis pointreduction in the temporary business margin from 19.0% in the first half of lastyear to 18.2% in this period. This decline in margin reduced operating profitby circa ‚£6 million.The same factors led to a reduction in the Group's conversion rate, which isthe proportion of net fees converted into operating profit, from 36.3% in thefirst half of last year to 34.4%.
United Kingdom & Ireland
The United Kingdom & Ireland business had a mixed performance with net feegrowth of 8% (6% on a like-for-like basis*) to ‚£198.7 million (2005: ‚£184.8million) and operating profits remaining broadly flat at ‚£67.5 million (2005: ‚£67.4 million). A strong performance by the permanent placement business wasoffset by a weak performance in the temporary business. In particular, thepublic sector activities, which represent circa 35% of our temporary businessnet fees, experienced challenging market conditions, which affected margins. Asa result, the conversion rate declined from 36.5% in the first half of lastyear to 34.0%. We are encouraged that our temporary business margin hasstabilised over the last three months. Whilst the public sector market has beendifficult, it remains an attractive part of our business which providesresilience across the economic cycle.
As indicated in September, we have invested in consultants increasing the average number by 7% to 2,826 (2005: 2,636). This investment positions us for an improved performance in the second half of the financial year.
The Accountancy & Finance business, which has a large weighting to the publicsector, was impacted by the conditions in the temporary market described above.As a result, this business had flat net fees of ‚£77.6 million (2005: ‚£77.3million) and a 3% fall in operating profit to ‚£31.5 million (2005: ‚£32.6million). The increased focus and consultant investment in the permanentplacement business positions us for an improved performance in the second halfof the financial year.Construction & Property, which serves both the construction and "built"environment sectors, had an improved performance versus the second half of lastyear, benefiting from earlier investment in consultants and the temporarybusiness margin stabilising in the second quarter. Net fee growth of 7% to ‚£54.4 million (2005: ‚£50.8 million) translated into operating profit growth of4% to ‚£22.4 million (2005: ‚£21.5 million). We believe this business is wellpositioned for an improved performance in the second half of the financialyear.Information Technology had net fee growth of 5% to ‚£15.8 million (2005: ‚£15.1million) and operating profit growth of 2% to ‚£5.5 million (2005: ‚£5.4million). This business, which is predominantly in the temporary placementmarket, was affected by subdued demand from our larger contracts. In responseto this, we are increasing our focus on the permanent market and SMEs.The Other Specialist Activities in the United Kingdom & Ireland continued theirstrong track record of growth. Net fees increased by 22% to ‚£50.9 million(2005: ‚£41.6 million) and operating profits increased by 3% to ‚£8.1 million(2005: ‚£7.9 million). This result included strong contributions from HumanResources, Recruitment Management Services, Banking and Legal which hadcombined net fee growth of 28%. As expected, the Contact Centres business wasimpacted by the completion of a large contract and the Healthcare business wasaffected by the challenging NHS market for healthcare professionals and, asadvised in September, the investment in the new social care activities.Excluding the Contact Centres and Healthcare businesses, operating profit inOther Specialist Activities was up by 30%.
Asia Pacific
The Asia Pacific business had an excellent performance in both the temporaryand permanent placement businesses. Net fees increased 24% to ‚£51.4 million(2005: ‚£41.4 million) and operating profit increased 21% to ‚£24.4 million(2005: ‚£20.1 million). On a like-for-like basis*, the growth in net fees andoperating profit was 28% with the difference being principally due to thedepreciation of the Australian dollar. The average number of consultantsincreased by 39% to 775 (2005: 557). As a result of the investment in China &Hong Kong and Singapore, the conversion rate declined slightly from 48.6% to47.5%.In Australia & New Zealand, the business continues to deliver strong growthacross all its specialist activities further enhancing its market leadingposition. New specialist activities, including Oil & Gas and Healthcare, wererolled out, and activities were expanded in Perth, Melbourne, Maroochydore andAuckland. This expansion contributed to an increase in net fees in Australia &New Zealand of 21% compared to the first half of last year.In Asia, net fees were ‚£1.2 million in the period (2005: nil). In line with ourexpectations, the newly established China & Hong Kong business achievedbreak-even in the period. We also entered the Singapore market. We believe Haysis well placed to take advantage of the opportunities in these rapidly growingmarkets.
Continental Europe & Rest of World ('RoW')
The Continental Europe & RoW region continued its outstanding progressincreasing net fees by 43% to ‚£47.1 million (2005: ‚£32.9 million) and operatingprofit by 56% to ‚£10.3 million (2005: ‚£6.6 million) compared to the first halfof last year. On a like-for-like basis*, the growth in net fees and operatingprofit was 44% and 58% respectively. We accelerated our investment inconsultants increasing the average number of consultants in the period by 40%to 747 (2005: 533) and we started operations in Brazil, representing our firstentry into Latin America. The conversion rate strengthened to 21.9% from 20.1%due to the increased scale of the business despite significant investment inthe period.All countries contributed to the outstanding performance across both temporaryand permanent sectors with ten countries delivering net fee growth of more than25% in the period. Germany, our largest business in the region, furtherimproved its market share and took advantage of structural growth in themarket, growing net fees by 26%. France, our second largest business in theregion, continued its expansion into the provinces growing net fees by 37%.Canada, our third largest business in the region, benefited from the ongoinginvestment in consultants, growing net fees by an impressive 65%.
Among the other countries in this region, Spain delivered the strongest performance, more than doubling its net fees, followed by the Netherlands, which increased net fees by 63%. The launch into Italy last year is progressing to plan and our entry into the United Arab Emirates (UAE) has exceeded our expectations, trading profitably within six months of opening.
We see great opportunities for Hays in these markets and we will continue to invest in consultants and offices to take advantage of them.
Tax and earnings per share
Tax on continuing operations for the period was ‚£31.3 million, representing an effective tax rate of 31.2% (2005: 31.3%).
Basic earnings per share from continuing activities of 4.73 pence was 14% aheadof last year (2005: 4.16 pence per share). The improvement in earnings pershare arises from the good growth in operating profit, 9% ahead of last year,and the favourable impact of the accretion from the share buy-back programme,partially offset by the higher net interest charge this period.
Cash flow
Cash flow was strong with net cash from continuing operations of ‚£98.6 million(2005: ‚£83.9 million) after investing ‚£9.0 million in additional workingcapital. Tax paid was ‚£31.8 million and net capital expenditure was modest at ‚£4.8 million reflecting the low capital intensity of the business. ‚£42.3 millionwas paid out in dividends, ‚£2.7 million was paid out in net interest, and ‚£21.8million was used to buy-back our own shares. Over the period net debt increasedfrom ‚£77.0 million at the start of the period to ‚£82.6 million at the end
ofthe period.Retirement benefitsThe Group's pension liability under IAS 19 at 31 December 2006 of ‚£88.9 million(‚£62.2 million net of deferred tax) increased by ‚£33.0 million compared to 30June 2006 due to the decrease in the AA bond discount rate. During the periodthe Group contributed ‚£2.4 million of cash into the main scheme. A formalactuarial valuation of the scheme as at 30 June 2006 is currently beingfinalised and the results will be known by the end of the financial year.
Capital structure and dividend
The priorities for our free cash flow are to fund Group development,particularly overseas, support a progressive dividend policy and to buy backshares when appropriate. During the period, we purchased 11.2 million shares ata total cost of ‚£15.4 million. This brings the total number of shares boughtback since the start of the share buy-back programme to 279.0 million shares ata cost of ‚£358.7 million.The Board has decided to pay an interim dividend of 1.60 pence per share, whichrepresents a 10% increase on last year. The dividend is payable on 25 May 2007to shareholders on the register at 20 April 2007.
Acquisition and disposal
Whilst the strategy of the Group is to grow and create value primarily fromorganic development, geographical and sector in-fill acquisitions form part ofour development strategy. On 23 February 2007 we acquired James Harvard, arecruitment business specialising in the Pharmaceutical and Biotechnologysectors and the IT Financial Services sector. Two thirds of the James Harvardbusiness is based in the United Kingdom with the remainder overseas, primarilyin Japan. The consideration was an initial ‚£24 million, on a cash free, debtfree basis, with further payments estimated at ‚£19 million depending onachievement of growth and profitability targets over the next three years. Inthe year ended 31 December 2006, James Harvard generated estimated net fees of‚£10.7 million and estimated operating profits of ‚£3.0 million.
This acquisition moves Hays into the specialist Pharmaceutical and Biotechnology sectors, which we believe are attractive markets with strong growth characteristics, and significantly strengthens Hays' recruitment offering in the high end IT Financial Services sector. The acquisition will enable the roll out of James Harvard's Pharmaceutical and Biotechnology specialist activities across Hays' Continental European network.
The acquisition provides Hays with an entry into Japan, which is the largestspecialist recruitment market in Asia and the third largest in the world. Hayssees strong growth potential in the Japanese market and the sectors in whichJames Harvard operate. In addition, the acquisition provides Hays with anexcellent platform to introduce our core sector businesses into Japan.On 13 February 2007 Hays sold the IT services business in France for netproceeds of ‚£2.0 million. This business was not a core activity and represented asmall part of the Hays business in France with net fees and operating profit of‚£3.0 million and ‚£0.3 million respectively for the year ended 30 June 2006.
Current trading and outlook
Since the start of January, net fees have been ahead of the comparable periodlast year by 16% on a like-for-like basis*. By region, net fee growth on alike-for-like basis* was 9% in the United Kingdom & Ireland, 29% in Asia Pacificand 36% in Continental Europe & RoW. Overall, the Group's performance for theyear ending 30 June 2007 continues to be in line with the Board's expectations.Bob LawsonChairman26 February 2007CONSOLIDATED INCOME STATEMENT(In ‚£'s million) Notes Six months Six months Year to to to 30 June 31 December 31 December 2006 2006 2005 (Unaudited) (Unaudited) TURNOVER Continuing operations 3 1,002.3 888.7 1,826.6 NET FEES * Continuing operations 3 297.2 259.1 538.2 PROFIT FROM OPERATIONS Continuing operations 3 102.2 94.1 193.0 Finance income 1.7 2.5 5.8 Finance cost (3.6) (2.0) (6.3) 4 (1.9) 0.5 (0.5) PROFIT BEFORE TAX 100.3 94.6 192.5 Tax 5 (31.3) (29.6) (60.1)
PROFIT FROM CONTINUING OPERATIONS AFTER TAX 69.0
65.0 132.4
PROFIT FROM DISCONTINUED OPERATIONS AFTER TAX 6 0.3
17.2 52.5
PROFIT ATTRIBUTABLE TO EQUITY HOLDERS 69.3
82.2 184.9
Earnings per share from continuing operations
- Basic 8 4.73p 4.16p 8.69p - Diluted 8 4.72p 4.14p 8.65p
Earnings per share from discontinued
operations - Basic 8 0.02p 1.10p 3.45p - Diluted 8 0.02p 1.09p 3.43p Total earnings per share - Basic 8 4.75p 5.26p 12.14p - Diluted 8 4.74p 5.23p 12.08p * Net fees are equal to turnover less payroll costs of temporary contractorsand workers.CONSOLIDATED BALANCE SHEET(In ‚£'s million) Notes 31 December 31 December 30 June 2006 2005 2006 (Unaudited) (Unaudited) Goodwill 122.2 100.3 126.2 Other intangible assets 1.9 1.6 1.6 Property, plant & equipment 21.1 18.4 20.1 Deferred tax assets 32.8 32.5 22.2 NON-CURRENT ASSETS 178.0 152.8 170.1 Trade & other receivables 370.7 311.7 330.2 Cash & cash equivalents 30.0 33.7 52.8 CURRENT ASSETS 400.7 345.4 383.0 TOTAL ASSETS 578.7 498.2 553.1 Trade & other payables (233.3) (201.0) (208.9) Tax liabilities (49.8) (56.5) (49.4) Obligations under finance leases - (0.1) - CURRENT LIABILITIES (283.1) (257.6) (258.3) Bank loans & overdrafts (112.6) (107.0) (129.8) Trade & other payables (5.2) - (7.9) Retirement benefit obligations 9 (88.9) (87.3) (55.9) Deferred tax liabilities (0.9) (2.3) (0.9) Provisions & other liabilities 10 (53.7) (64.8) (57.0) NON-CURRENT LIABILITIES (261.3) (261.4) (251.5) TOTAL LIABILITIES (544.4) (519.0) (509.8) NET ASSETS / (LIABILITIES) 34.3 (20.8) 43.3 Called up share capital 15.7 16.5 15.7
Capital redemption reserve 1.7
0.9 1.7 Share premium account 369.6 369.6 369.6 Retained earnings (359.4) (411.6) (354.8) Other reserves 6.7 3.8 11.1 TOTAL SHAREHOLDERS' EQUITY / (DEFICIT) 34.3 (20.8) 43.3
CONSOLIDATED CASH FLOW STATEMENT
(In ‚£'s million) Notes Six months Six months Year to to to 30 June 31 December 31 December 2006 2006 2005 (Unaudited) (Unaudited)
Operating profit from continuing operations 102.2
94.1 193.0 Adjustments for:
Depreciation of property, plant and equipment 3.2
3.1 6.5
Amortisation of intangible fixed assets 0.1
- 0.2
Net movements in provisions, employee benefits & 2.1
0.7 7.6other items 5.4 3.8 14.3
OPERATING CASH FLOWS BEFORE MOVEMENT IN WORKING 107.6
97.9 207.3CAPITAL Movements in working capital (9.0) (14.0) (24.2) CASH GENERATED BY OPERATIONS 98.6 83.9 183.1 Income taxes paid (31.8) (7.1) (46.7)
NET CASH FROM OPERATING ACTIVITIES 66.8
76.8 136.4 INVESTING ACTIVITIES
Purchases of tangible & intangible assets (4.8)
(3.5) (10.9)
Proceeds from sale of property, plant & machinery -
0.2 0.2
Cash paid in respect of acquisitions made in -
(1.6) (8.2)previous years Acquisition of subsidiaries - - (20.2)
Sale of businesses and related assets (2.2)
(10.6) 20.4 Interest received 0.6 3.2 4.7
Net cash used from investing activities (6.4)
(12.3) (14.0) FINANCING ACTIVITIES Interest paid (3.3) (1.6) (6.3) Equity dividends paid (42.3) (35.6) (56.7)
Cash outflow in respect of share buy-back (21.8)
(168.1) (209.2)
Disposal of own shares & exercise of share 1.8
2.7 8.7options
(Repayment)/issue of loan notes (0.5)
- 0.4
(Decrease)/increase in bank overdrafts & (16.7)
100.6 122.5repayment of borrowings
Net cash used in financing activities (82.8)
(102.0) (140.6)
NET DECREASE IN CASH & CASH EQUIVALENTS 11 (22.4)
(37.5) (18.2)
CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 52.8
71.2 71.2
Effect of foreign exchange rate changes (0.4)
- (0.2)
CASH & CASH EQUIVALENTS AT END OF PERIOD 30.0
33.7 52.8 (In ‚£'s million) Notes
BANK LOANS, OVERDRAFTS AND FINANCE LEASE (129.8) (6.9) (6.9)OBLIGATIONS AT BEGINNING OF PERIOD
Decrease/(increase) in period 17.2 (100.6) (122.9)
Effect of exchange rate movements -
0.4 -
BANK LOANS, OVERDRAFTS AND FINANCE LEASE (112.6)
(107.1) (129.8)OBLIGATIONS AT END OF PERIOD NET DEBT AT END OF PERIOD 11 (82.6) (73.4) (77.0) NOTES TO THE ACCOUNTS
CONSOLIDATED RECONCILIATION OF MOVEMENTS IN EQUITY
For the six months ended 31 December 2006
(In ‚£'s million) Share Capital Share Retained Other Total capital redemption premium earnings reserves reserve account Balance at 1 July 2006 15.7 1.7 369.6 (354.8) 11.1 43.3 Currency translation - - - - (2.2) (2.2)adjustments Actuarial losses on defined - - - (32.9) - (32.9)benefit pension scheme Tax on items taken directly - - - 9.9 - 9.9to reserves Net expense recognised - - - (23.0) (2.2) (25.2)directly in equity Profit for the period - - - 69.3 - 69.3 Total recognised income/ - - - 46.3 (2.2) 44.1(expense) for the period Dividends paid - - - (42.3) - (42.3) Share based payment schemes - - - 3.1 (0.7) 2.4 Purchase of own shares and - - - 3.7 (1.5) 2.2other Share buy-back - - - (15.4) - (15.4) Balance at 31 December 2006 15.7 1.7 369.6 (359.4) 6.7 34.3
CONSOLIDATED RECONCILIATION OF MOVEMENTS IN EQUITY
For the six months ended 31 December 2005
(In ‚£'s million) Share Capital Share Retained Other Total capital redemption premium earnings reserves reserve account Balance at 1 July 2005 17.4 - 369.6 (278.8) (2.2) 106.0 Currency translation - - - - 1.3 1.3adjustments
Actuarial losses on defined - - - (16.2)
- (16.2)benefit pension scheme
Tax on items taken directly - - - 4.9
- 4.9to reserves Net (expense)/income - - - (11.3) 1.3 (10.0)recognised directly in equity Profit for the period - - - 82.2 - 82.2
Total recognised income for - - - 70.9
1.3 72.2the period Dividends paid - - - (35.6) - (35.6)
Share based payment schemes - - - -
2.0 2.0 Cancellation of shares (0.9) 0.9 - - - -
Disposal of own shares and - - - -
2.7 2.7other Share buy-back - - - (168.1) - (168.1) Balance at 31 December 2005 16.5 0.9 369.6 (411.6) 3.8 (20.8)
CONSOLIDATED RECONCILIATION OF MOVEMENTS IN EQUITY - OTHER RESERVES
For the six months ended 31 December 2006
(In ‚£'s million) Own Equity Cumulative Total shares reserve translation Balance at 1 July 2006 (0.7) 8.7 3.1 11.1
Currency translation adjustments - -
(2.2) (2.2)
Total recognised expense for the period - -
(2.2) (2.2)
Share based payment schemes - (0.7)
- (0.7) Purchase of own shares (1.5) - - (1.5)
Balance at 31 December 2006 (2.2) 8.0
0.9 6.7
CONSOLIDATED RECONCILIATION OF MOVEMENTS IN EQUITY - OTHER RESERVES
For the six months ended 31 December 2005
(In ‚£'s million) Own Equity Cumulative Total shares reserve translation Balance at 1 July 2005 (9.4) 4.4 2.8 (2.2)
Currency translation adjustments - -
1.3 1.3
Total recognised income for the period - -
1.3 1.3 Share based payment schemes - 2.0 - 2.0 Disposal of own shares 2.7 - - 2.7 Balance at 31 December 2005 (6.7) 6.4 4.1 3.8
CONSOLIDATED STATEMENT OF RECOGNISED INCOME & EXPENSE
(In ‚£'s million) Six months Six months Year to to to 31 31 30 December December June 2006 2005 2006 (Unaudited) (Unaudited) Profit for the period 69.3 82.2 184.9
Currency translation adjustments (2.2)
1.3 0.3
Actuarial (losses)/profits on defined benefit (32.9) (16.2) 15.8pension scheme
Tax on items taken directly to reserves 9.9
4.9 (4.8) 44.1 72.2 196.2 1 STATEMENT UNDER S240 - PUBLICATION OF NON STATUTORY ACCOUNTS
The interim financial statement has been prepared in accordance with the recognition and measurement criteria of IFRS and the disclosure requirements of the Listing Rules.
The information for the year ended 30 June 2006 does not constitute statutoryaccounts as defined in Section 240 of the Companies Act 1985. A copy of thestatutory accounts for that year prepared under IFRS has been delivered to theRegistrar of Companies. The auditors' report on those accounts was unqualifiedand did not contain a statement under Section 237 (2) or (3) of the CompaniesAct 1985.
2 BASIS OF PREPARATION OF INTERIM FINANCIAL INFORMATION
Hays plc presented its 30 June 2006 financial statements in accordance with applicable International Financial Reporting Standards. The same accounting policies and methods of computation have been followed in these interim financial statements.
3 SEGMENTAL INFORMATION
Continuing operations comprise one class of business, the 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
(In ‚£'s million) Six months to Six months to Year to 31 December 31 December 30 June 2006 2005 2006 (Unaudited) (Unaudited) TURNOVER United Kingdom & Ireland 677.3 623.2 1,266.9 Continental Europe & Rest of World 167.6 129.8 286.5 Asia Pacific 157.4 135.7 273.2 1,002.3 888.7 1,826.6 NET FEES United Kingdom & Ireland 198.7 184.8 378.4 Continental Europe & Rest of World 47.1 32.9 74.1 Asia Pacific 51.4 41.4 85.7 297.2 259.1 538.2 PROFIT FROM OPERATIONS United Kingdom & Ireland 67.5 67.4 137.5 Continental Europe & Rest of World 10.3 6.6 13.8 Asia Pacific 24.4 20.1 41.7 102.2 94.1 193.0 4 FINANCE INCOME AND FINANCE COSTS(In ‚£'s million) Six months Six months Year to to to 30 June 31 December 31 December 2006 2006 2005 (Unaudited) (Unaudited) FINANCE INCOME Interest on bank deposits 0.6 2.0 4.7
Net interest on pension obligations 1.1 0.5
1.1 1.7 2.5 5.8 FINANCE COSTS Interest payable on bank overdrafts and (3.3) (2.0) (6.0)loans Pension Protection Fund levy (0.3) - (0.3) (3.6) (2.0) (6.3) Net finance (charge)/income (1.9) 0.5 (0.5) 5 TAXATION ON ORDINARY ACTIVITIESThe Group's consolidated effective tax rate in respect of continuing operationsfor the six months to 31 December 2006 is based on the estimated effective taxrate for the full year of 31.2% (31 December 2005: 31.3%, 30 June 2006: 31.2%).
(In ‚£'s million) Six months to Six months to Year to
31 December 31 December 30 June 2006 2005 2006 (Unaudited) (Unaudited) TAX CHARGE United Kingdom 18.2 19.8 39.4 Overseas 13.1 9.8 20.7 31.3 29.6 60.1 6 PROFIT FROM DISCONTINUED OPERATIONS
Profits from discontinued operations in the period of ‚£0.3 million arose from the repayment of loan notes previously provided for.
Profits from discontinued operations in the prior year period of ‚£17.2 millionarose from the write-back of ‚£17.2 million of tax related accruals which hadbeen established for a number of historic disposals.Profits from discontinued operations in the year ended 30 June 2006 of ‚£52.5million were generated from surplus property disposals of ‚£6.0 million, a finalsettlement of ‚£31.0 million from the acquirers of Hays Chemicals and a net taxcredit ‚£15.5 million due mainly to the write-back of tax related accruals thatwere established for a number of historic disposals.7 DIVIDENDS(In ‚£'s million) Six months Six months Year to to to 31 December 31 December 30 2006 2005 June (Unaudited) (Unaudited) 2006
Amounts recognised per ordinary share as distributions to equity holders in the period: Final dividend for the year ended 30 June 2005 - 35.6
35.6of 2.27 pence per share
Interim dividend for the period to 31 December - -
21.12005 of 1.45 pence per share
Final dividend for the year ended 30 June 2006 42.3 -
-of 2.90 pence per share 42.3 35.6 56.7 The interim dividend for the period ended 31 December 2006 of 1.60pence per share is not included as a liability in the balance sheet as at 31December 2006.8 EARNINGS PER SHARE(In ‚£'s million) Six months Six months Year to to to 30 31 December 31 December June 2006 2005 2006 (Unaudited) (Unaudited) Earnings from continuing operations 100.3 94.6
192.5
Tax on earnings from continuing (31.3) (29.6) (60.1)operations Basic earnings from continuing 69.0 65.0 132.4operations Earnings from discontinued operations 0.4 -
37.0
Tax on earnings from discontinued (0.1) 17.2 15.5operations Basic earnings from discontinued 0.3 17.2 52.5operations Number of shares (million): Weighted average number of shares 1,457.4 1,564.2
1,523.2
Dilution effect of share options 5.2 6.9
8.2
Weighted average number of shares
used for diluted EPS 1,462.6 1,571.1 1,531.4 Basic earnings per share from 4.73p 4.16p 8.69pcontinuing operations Basic earnings per share from 0.02p 1.10p 3.45pdiscontinued operations Total basic earnings per share 4.75p 5.26p
12.14p
Diluted earnings per share from 4.72p 4.14p 8.65pcontinuing operations Diluted earnings per share from 0.02p 1.09p 3.43pdiscontinued operations Total diluted earnings per share 4.74p 5.23p
12.08p
9 RETIREMENT BENEFIT OBLIGATIONS(In ‚£'s million) Six months to Six months to Year to 31 December 31 December 30 June 2006 2005 2006 (Unaudited) (Unaudited) Deficit in scheme brought forward (55.9) (69.7) (69.7) Current service cost (3.6) (4.3) (8.1) Past service cost - - (0.1) Contributions and other 2.4 2.4 5.1 Finance income 1.1 0.5 1.1 Actuarial (loss)/profit (32.9) (16.2) 15.8 Deficit in scheme carried forward (88.9) (87.3)
(55.9)
10 PROVISIONS AND OTHER LIABILITIES(In ‚£'s million) Property Deferred Other Total employee benefits Balance at 1 July 2006 14.8 2.2 40.0 57.0 Utilised (0.7) (0.4) (2.0) (3.1) Reclassification 1.5 - (1.5) - Exchange adjustments - - (0.2) (0.2) 15.6 1.8 36.3 53.7 Property provisions are for rents and other related amounts payable on certainleased properties for periods in which they are not anticipated to be in use bythe Group. The leases expire in periods up to 2016. Deferred employee benefitsinclude provision for the Performance Share Scheme and other employee relatedprovisions. It is not possible to estimate the timing of payments against thedeferred employee benefit provision. Other provisions comprise liabilitiesarising as a result of business disposals and the Group transformation, mainlyrelating to possible warranty and environmental claims for businesses disposedas part of the Group transformation during the period from March 2003 toNovember 2004.11 MOVEMENT IN NET DEBT(In ‚£'s million) 1 July Cash Exchange 31 December 2006 flow movement 2006 Cash & cash equivalents 52.8 (22.4) (0.4) 30.0 Bank loans & overdrafts (129.8) 17.2 - (112.6) Net debt (77.0) (5.2) (0.4) (82.6)
The table above is presented as additional information to show movement in net debt, defined as cash & cash equivalents less overdrafts & bank loans.
12 CONTINGENT LIABILITIES
In June 2006, Hays was visited by the UK Office of Fair Trading ('OFT') as partof an investigation into possible breaches of competition law by Hays and otherrecruitment companies in the construction recruitment sector. The OFTinvestigation related to a small part of Hays' Construction & Propertybusiness. Hays is co-operating fully with the OFT under the OFT's leniencyprogramme and the Board believes that any financial impact of the matters underinvestigation will not be material to the Group.
13 EVENTS AFTER THE BALANCE SHEET DATE
As part of the share buy-back programme, the Company has purchased an additional 6.0 million shares for a total cost of ‚£9.6 million since the balance sheet date.
On 23 February 2007 the Group acquired James Harvard International Group Ltdand James Harvard International Asia KK ('James Harvard'). James Harvardprovides specialist recruitment services in the Pharmaceutical andBiotechnology sectors and Information Technology for the Financial Servicessector. Approximately two thirds of the business is based in the UnitedKingdom and the remainder is based overseas, primarily in Japan. The initialconsideration for the acquisition was ‚£24 million with up to a further ‚£19million dependent upon profitability over the next three years.
14 LIKE-FOR-LIKE RESULTS
Like-for-like results represent organic growth of continuing activities at constant currency.
For the six months ended 31 December 2006 this is calculated as follows:
(In ‚£'s million) Net fees for the six months ended 31 December 2005 259.1 Foreign exchange impact (2.6)
Net fees for the six months ended 31 December 2005 at constant 256.5 currency
Fees generated from acquisitions 3.7 Fees generated from organic growth 37.0 Net fees for the six months ended 31 December 2006 297.2
Profit from operations for the six months ended 31 December 94.1 2005
Foreign exchange impact (1.3)
Profit from operations for the six months ended 31 December 92.8 2005 at constant currency
Loss from operations generated from acquisitions (0.5) Profit from operations generated from organic growth 9.9
Profit from operations for the six months ended 31 December 102.2 2006
INDEPENDENT REVIEW REPORT TO HAYS PLC
Introduction
We have been instructed by the company to review the financial information forthe six months ended 31 December 2006 which comprise the consolidated incomestatement, the consolidated balance sheet, the consolidated cash flowstatement, the consolidated reconciliation of movements in equity, theconsolidated statement of recognised income and expense and related notes 1 to14. We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information.This report is made solely to the company in accordance with Bulletin 1999/4issued 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' responsibilities
The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management andapplying analytical procedures to the financial information and underlyingfinancial data and, based thereon, assessing whether the accounting policiesand presentation have been consistently applied unless otherwise disclosed.
A
review excludes audit procedures such as tests of controls and verification ofassets, liabilities and transactions. It is substantially less in scope thanan audit performed in accordance with International Standards on Auditing (UKand Ireland) and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 December 2006.
Deloitte & Touche LLPChartered AccountantsLondonUnited Kingdom26 February 2007
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