Hays Plc · LSE:HAS
Hays — FY2005 Earnings Presentation
47 slides from Hays's earnings presentation, September 2005
Slide 1: Preliminary Results Year ended 30 June 2005
Preliminary Results Year ended 30 June 2005 Specialist Recruitment hays.com
Slide 2: Bob Lawson, Chairman
Bob Lawson Chairman Specialist Recruitment hays.com 2
Slide 3: A record year for Hays Specialist Recruitment
A record year for Hays Specialist Recruitment Growth Record turnover £1,640.4m + 18% Record net fees £470.6m + 16% Record operating profit* £167.1m + 25% Record operating cash flow £158.0m + 51% Record investment in consultants 3,683 + 19% Record investment in business units 723 + 12% * Before goodw
Slide 4: Corporate
Corporate ! Full year dividend of 3.40p - up 13% ! Share buy-back − £184 million to date − Extended to at least £300 million ! Successful demerger of DX Services Specialist Recruitment hays.com 4
Slide 5: Agenda
Agenda ! Operating review – Denis Waxman, Chief Executive ! Financial review – John Martin, Finance Director ! Strategy and outlook – Denis Waxman, Chief Executive Specialist Recruitment hays.com 5
Slide 6: Operating review
Operating review Denis Waxman Chief Executive Specialist Recruitment hays.com
Slide 7: Net fee growth in every region
Net fee growth in every region 40 30 Growth 20 % 10 +30% +30% +16% +12% United Australia & Continental Total Kingdom New Zealand Europe & Ireland & Canada ! Temporary net fees +13% ! Permanent net fees +21% Specialist Recruitment hays.com 7
Slide 8: Operating profit growth in every region
Operating profit growth in every region Operating profit 50 +227% Net fees 40 30 Growth +41% % 20 10 +18% +30% +30% +16% +25% +12% United Kingdom Australia & Continental Total & Ireland New Zealand Europe & Canada Specialist Recruitment hays.com 8
Slide 9: United Kingdom & Ireland
United Kingdom & Ireland +12% +18% 140 400 70 £m £m £315.5 £354.7 £111.0 £130.6 200 2004 2005 2004 2005 Net fees Operating profit ! Net fee and profit growth in all major segments Specialist Recruitment hays.com 9
Slide 10: United Kingdom – Accountancy & Finance
United Kingdom – Accountancy & Finance 100 +11% +17% 200 50 £m £m £149.2 £165.9 £60.7 £71.1 100 2004 2005 2004 2005 Net fees Operating profit ! Permanent placements Strongest growth: ! South East Specialist Recruitment hays.com 10
Slide 11: United Kingdom – Construction & Property
United Kingdom – Construction & Property +10% +15% 40 100 20 £m £m £94.1 £103.6 £33.9 £38.9 50 2004 2005 2004 2005 Net fees Operating profit ! Strongest growth in the regions, good growth in social housing ! Future opportunity from the London Olympics 2012 Specialist Recruitment hays.com 11
Slide 12: United Kingdom – Information Technology
United Kingdom – Information Technology +25% +47% 10 30 £m 5 £m £23.4 £29.3 £6.9 £10.1 15 2004 2005 2004 2005 Net fees Operating profit ! Strong permanent placement growth ! Growth in contractor numbers Specialist Recruitment hays.com 12
Slide 13: United Kingdom – Other specialist activities
United Kingdom – Other specialist activities +15% +11% 10 60 £m 5 £m £48.8 £55.9 £9.5 £10.5 30 2004 2005 2004 2005 Net fees Operating profit ! Good growth in Education, Legal & Banking Specialist Recruitment hays.com 13
Slide 14: Australia & New Zealand
Australia & New Zealand +30% +41% 30 60 £m 15 £m £48.3 £62.6 £19.8 £28.0 30 2004 2005 2004 2005 Net fees Operating profit ! Government infrastructure investment ! Forecast skill shortages Specialist Recruitment hays.com 14
Slide 15: Continental Europe & Canada
Continental Europe & Canada +30% +227% 10 60 £m 5 £m £40.9 £53.3 £8.5 30 £2.6 2004 2005 2004 2005 Net fees Operating profit ! Growth in all 12 countries ! 8 new businesses grew net fees by more than 50% Specialist Recruitment hays.com 15
Slide 16: Pricing
Pricing ! Temporary margins − Lower for the year as a whole − 29 bps improvement H1 to H2 ! Permanent pricing remains firm ! Wage inflation − Average 4-5% − Slightly higher at senior levels Specialist Recruitment hays.com 16
Slide 17: Financial review
Financial review John Martin Finance Director Specialist Recruitment hays.com
Slide 18: Group profit and loss
Group profit and loss Year ended 30 June £m Specialist Other Group Recruitment Turnover 1,640.4 42.6 1,683.0 Operating profit 167.1 8.4 175.5 Associate - 1.4 1.4 Exceptional items - 24.4 24.4 Interest 3.4 - 3.4 Goodwill amortisation (13.2) - (13.2) Profit before tax 157.3 34.2 191.5 Tax (53.0) (3.1)
Slide 19: Specialist Recruitment profit and loss
Specialist Recruitment profit and loss Year ended 30 June £m 2005 2004 Growth Turnover 1,640.4 1,388.8 + 18% Net fees 470.6 404.7 + 16% Operating profit 167.1 133.4 + 25% Interest 3.4 (3.4) Goodwill amortisation (13.2) (13.3) Profit before tax 157.3 116.7 Tax (53.0) (41.0) Profit after tax 104.3 75.
Slide 20: Net fee growth
Net fee growth Year ended 30 June £m 2005 2004 Growth Temporary net fees 272.4 240.9 + 13% Permanent net fees 198.2 163.8 + 21% 470.6 404.7 + 16% First half 226.1 192.4 +18% Second half 244.5 212.3 +15% 470.6 404.7 +16% Specialist Recruitment hays.com 20
Slide 21: Impact of exchange movements and trading days
Impact of exchange movements and trading days FX impact £m Gross fees Net fees Op. profit Australia & New Zealand (3.6) (1.1) (0.5) Continental Europe & Canada (2.3) (0.6) - (5.9) (1.7) (0.5) Number of trading days H1 H2 Year 2005/06 128 125 253 2004/05 129 124 253 2003/04 129 125 254 Specialist Rec
Slide 22: Cost development and investment
Cost development and investment £m United Australia & Continental Total Kingdom New Zealand Europe & & Ireland Canada Operating expenses 2004 204.5 28.5 38.3 271.3 Movement 19.6 6.1 6.5 32.2 Operating expenses 2005 224.1 34.6 44.8 303.5 Operating expenses +10% +21% +17% +12% Consultant headcount +16
Slide 23: Conversion rate
Conversion rate 50% 44.6% 41.0% 36.8% 40% 35.2% 30% 2004 20% 16.0% 2005 6.4% 10% 0% Continental Europe United Kingdom Australia & Canada & Ireland & New Zealand Overall conversion rate improved from 33.0% to 35.5% Specialist Recruitment hays.com 23
Slide 24: Specialist Recruitment interest and tax
Specialist Recruitment interest and tax Year ended 30 June £m 2005 2004 Average net cash / (debt) 85.1 (87.6) Effective rate of interest 4.0% 3.9% Interest 3.4 (3.4) Profit before tax and goodwill 170.5 130.0 Effective rate 31.1% 31.5% Tax 53.0 41.0 Specialist Recruitment hays.com 24
Slide 25: Specialist Recruitment cash flow
Specialist Recruitment cash flow Year ended 30 June £m 2005 2004 Operating profit before goodwill 167.1 133.4 Depreciation 6.5 6.5 Working capital (15.6) (35.4) Cashflow from operations 158.0 104.5 Interest * 3.4 (4.1) Tax * (55.3) (40.7) Capital expenditure (8.8) (5.3) 97.3 54.4 Dividends (53.4) (7
Slide 26: Balance sheet
Balance sheet As at 30 June £m 2005 2004 Intangible fixed assets (goodwill) 86.2 99.2 Tangible fixed assets 19.5 38.7 Debtors 337.0 312.9 Taxation (89.8) (110.3) Other creditors (208.7) (218.0) Provisions for liabilities & charges (89.5) (125.4) 54.7 (2.9) Net cash 64.3 77.4 Net assets 119.0 74.5 Sp
Slide 27: Pension commitments
Pension commitments As at 30 June £m 2005 2004 FRS17 deficit * 48.2 47.7 SSAP 24 prepayment * 16.9 18.5 Net impact on reserves of adoption of FRS17 65.1 66.2 * Net of deferred tax Specialist Recruitment hays.com 27
Slide 28: Earnings per share
Earnings per share 2005 2004 Growth Specialist Recruitment * 6.95 5.20 +34% Goodwill (0.78) (0.77) Discontinued 0.40 2.03 Exceptional items 1.44 (2.59) Basic EPS 8.01 3.87 * Using earnings before goodwill of £117.5m (2004 – £89.0m) and weighted average shares in issue of 1,690.0m (2004 – 1,712.8m) S
Slide 29: Dividends
Dividends Year ended 30 June 2005 2004 Growth Interim dividend 1.13p 1.00p Final 2.27p 2.00p 3.40p 3.00p + 13% Total charge £55.1m £51.5m + 7% Dividend cover * 2.04 x 1.73 x * Adjusted Specialist Recruitment Earnings Per Share before goodwill & exceptional items / dividend per share Specialist Recru
Slide 30: Share buy-back
Share buy-back November to July to Total to date June September Number of shares 100.8m 42.2m 143.0m Average price paid 127.1p 131.7p 128.5p Total cost * £128.1m £55.6m £183.7m % of issued capital * 5.8% 2.4% 8.2% Share buy-back programme to be extended to at least £300m * Calculated using 1,735.9m
Slide 31: Reconciliation to group profit after tax
Reconciliation to group profit after tax Year ended 30 June £m 2005 2004 Specialist Recruitment profit after tax 104.3 75.7 Discontinued activities 8.4 48.1 Associate 1.4 2.9 Exceptional items 24.4 (20.0) Tax (3.1) (40.4) Profit after tax 135.4 66.3 Specialist Recruitment hays.com 31
Slide 32: Reconciliation to group cash flow
Reconciliation to group cash flow Year ended 30 June £m 2005 2004 Specialist Recruitment 43.9 (24.9) Discontinued activities & other 3.3 52.0 Pension cash contribution - (51.7) Exceptional finance charge - (18.0) Capital expenditure (1.3) (18.7) Acquisitions and disposals 61.3 334.0 Financing 6.3 (3
Slide 33: IFRS net assets reconciliation
IFRS net assets reconciliation Net assets at 30 June £m 2005 UK GAAP 119.0 IAS 19 (FRS 17) pensions (65.1) Dividends 36.1 Goodwill 13.2 IFRS 2 share based payments 3.5 IFRS * 106.7 * Unaudited Specialist Recruitment hays.com 33
Slide 34: IFRS profit and loss reconciliation
IFRS profit and loss reconciliation Year ended 30 June 2005 £m Operating profit Group profit from continuing after tax operations before goodwill UK GAAP 167.1 135.4 IFRS 2 share based payments (0.5) (0.6) IAS 19 (FRS 17) pensions (0.4) (2.1) Goodwill - 13.2 IFRS * 166.2 145.9 * Unaudited Specialist
Slide 35: Financial summary
Financial summary ! Record net fees +16%, to £470.6m ! Conversion rate + 2.5% to 35.5% ! Record operating profit +25% to £167.1m ! Tax rate 0.4% better at 31.1% ! Record cash from operations of £158.0m ! Dividend +13% to 3.40p, with improved cover ! Bought back £128.1m of shares during the period &
Slide 36: Strategy and outlook
Strategy and outlook Denis Waxman Chief Executive Specialist Recruitment hays.com
Slide 37: Strategy
Strategy ! Investment ! Growth ! Profit ! Cash ! Delivered consistently Specialist Recruitment hays.com 37
Slide 38: Strategy - investment in recruitment consultants
Strategy - investment in recruitment consultants United Kingdom & Ireland +7% 3,683 Australia & New Zealand +112 Continental Europe & Canada +76 +12% 3,440 +55 +254 +53 3,107 +26 June 04 Dec 04 June 05 Investment in recruitment consultants +19% Specialist Recruitment hays.com 38
Slide 39: Strategy – development of new recruitment consultants
Strategy – development of new recruitment consultants 10 8 Net fees / 6 4 week period (£’000) 4 Q1 Q2 Q3 Q4 Consultants reach average productivity in the 4th quarter Specialist Recruitment hays.com 39
Slide 40: Strategy - investment in new office locations
Strategy - investment in new office locations United Kingdom Australia & Continental & Ireland New Zealand Europe & Canada Birmingham Rugby South Auckland Geneva Canterbury Scunthorpe Katowice Derry Tunbridge Wells Luxembourg Dublin Victoria Nantes Kettering Walsall Nice Newry Wigan Ontario Portadow
Slide 41: Strategy - investment in new business units
Strategy - investment in new business units As at 30 June 2005 2004 United Kingdom & Ireland 423 392 Australia & New Zealand 145 124 Continental Europe & Canada 155 127 723 643 Number of office locations 289 278 Average business units / location 2.50 2.31 Investment in new business units +80 Special
Slide 42: Strategy – development of new specialist activities
Strategy – development of new specialist activities Hays Human Resources 10 Net fees 5 £m 0 2002 2003 2004 2005 Specialist Recruitment hays.com 42
Slide 43: Strategy - market growth
Strategy - market growth ! Increased employer demand for more flexible workforce ! Increased attraction of temporary work for professional candidates ! More frequent job changes ! Demographic trends – skills shortages and greater worker mobility ! Low specialist penetration rates in many markets ! D
Slide 44: Strategy – geographical expansion
Strategy – geographical expansion Specialist activities ! Launch new specialist activities ! Increase specialisation within existing activities Geographies ! Increase our geographical coverage Specialist Recruitment hays.com 44
Slide 45: Hays Specialist Recruitment – historic performance
Hays Specialist Recruitment – historic performance 500 Net fees 200 Operating profit 400 150 300 100 200 50 100 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Specialist Recruitment hays.com 45
Slide 46: Outlook
Outlook ! July and August net fee growth of 13% ! Continuing to invest in new offices across the business ! Developing new specialist activities ! Geographic expansion Specialist Recruitment hays.com 46
Slide 47: Specialist Recruitment hays.com
Specialist Recruitment hays.com