Hays Plc · LSE:HAS
Hays — FY2006 Earnings Presentation
29 slides from Hays's earnings presentation, September 2006
Slide 1: Preliminary Results Year ended 30 June 2006
Preliminary Results Year ended 30 June 2006 Specialist Recruitment hays.com Bob Lawson Chairman Specialist Recruitment hays.com 2
Slide 2: Record net fees and profits
Record net fees and profits Year ended 30 June 2006 Growth £m Net fees 538.2 + 13%* Operating profit 193.0 + 15%* Profit before taxation 192.5 + 15% Earnings per share 8.69p + 27% Dividend per share 4.35p + 28% Net cash from operating activities 136.4 + 29% * Organic growth at constant currency Spec
Slide 3: Agenda
Agenda Financial review – Paul Venables, Finance Director Operating review and outlook – Denis Waxman, Chief Executive Specialist Recruitment hays.com 5 Financial review Paul Venables Finance Director Specialist Recruitment hays.com
Slide 4: Income statement
Income statement Year ended 30 June 2006 2005 Actual Like-for- £m growth like* Turnover 1,826.6 1,640.4 + 11% + 10% Net fees 538.2 470.6 + 14% + 13% Profit from operations 193.0 166.2 + 16% + 15% Net finance (cost) / income (0.5) 1.5 Profit before tax 192.5 167.7 + 15% Tax (60.1) (52.5) Profit after
Slide 5: Impact of exchange movements and trading days
Impact of exchange movements and trading days FX impact Net fees Operating profit £m Continental Europe & Canada 0.4 0.1 Asia Pacific 2.8 1.3 3.2 1.4 Number of trading days H1 H2 Year 2006/07 127 125 252 2005/06 128 125 253 2004/05 129 124 253 Specialist Recruitment hays.com 9 Exchange rate guidance
Slide 6: Net fee growth
Net fee growth Year ended 30 June 2006 2005 Actual Constant £m growth exchange Temporary net fees 301.6 272.4 + 11% + 10% Permanent net fees 236.6 198.2 + 19% + 18% 538.2 470.6 + 14% + 13% Permanent % of total 44.0% 42.1% + 1.9% Specialist Recruitment hays.com 11 Pricing Temporary margins – Group
Slide 7: Conversion rate
Conversion rate 48.7% 50% 44.4% 40% 36.6% 36.3% 30% 18.6% 20% 15.9% 10% 0% Continental Europe United Kingdom Asia & Canada & Ireland Pacific Year ended 30 June 2005 Year ended 30 June 2006 Overall conversion rate improved from 35.3% to 35.9% (H1: 36.3%, H2: 35.4%) Specialist Recruitment hays.com 13
Slide 8: Taxation and discontinued activities
Taxation and discontinued activities 2006 2005 Taxation Effective tax rate 31.2% 31.3% Discontinued activities Profit net of tax £52.5m £30.7m Investment in Albion realised with profit net of tax of £30.0 million Release of surplus tax related accruals of £18.2 million Disposal of legacy prope
Slide 9: Cash flow analysis
Cash flow analysis Year ended 30 June £m Operating Non cash Working Tax Net cash profit capital from operations £14.3m 200 £193.0m £(24.2)m Uses of net cash from ops 150 £136.4m Net capex of £(10.7)m £(46.7)m Acquisitions £(28.4)m 100 Residual proceeds £20.4m Dividends c.£(56.7)m 50 Share
Slide 10: Retirement benefit obligations
Retirement benefit obligations Pension deficit under IAS 19 of £55.9m (£39.1m net of deferred tax), a reduction of £13.8m vs PY Assumptions for accounting: – Latest mortality assumptions added 3 years – Liabilities discounted at AA bond yield of 5.22% – Inflation increased to 2.90%, salary infla
Slide 11: Share buy-back
Share buy-back Period ended Number of Total cost % of issued shares £m capital * 30 June 2005 100.8 128.1 5.8% 31 December 2005 134.4 168.1 7.7% 30 June 2006 32.7 47.1 1.9% 4 September 2006 6.7 8.8 0.4% 274.6 352.1 15.8% Acquired 15.8% of the shares at an average price of 128p Share buy-back estim
Slide 12: Operating review
Operating review Denis Waxman Chief Executive Specialist Recruitment hays.com Specialist Recruitment Year ended 30 June 2006 Growth £m Net fees 538.2 + 13%* Operating profit 193.0 + 15%* Consultants 4,062 + 10% * Organic growth at constant currency Specialist Recruitment hays.com 24
Slide 13: Growth of our international business
Growth of our international business – net fees 2006 £378.4m £159.8m 70% 30% 2003 £292.0m £55.6m 84% 16% United Kingdom & Ireland International Specialist Recruitment hays.com 25 Net fee and profit growth in every region Year ended 30 June 2006 Net fee Op profit growth * growth * United Kingdom & Ir
Slide 14: United Kingdom & Ireland
United Kingdom & Ireland Year ended 30 June 2006 Growth* £m Net fees 378.4 + 6% Operating profit 137.5 + 6% Consultants 2,698 Flat * Organic growth Specialist Recruitment hays.com 27 United Kingdom & Ireland - Summary Major specialist activities – Moderate growth across A&F, C&P and IT – Modest ma
Slide 15: Accountancy & Finance; Construction & Property
United Kingdom & Ireland Accountancy & Finance Year ended 30 June 2006 Growth £m Net fees 158.0 + 6% Operating profit 67.6 + 6% Consultants 925 (5%) Specialist Recruitment hays.com 29 United Kingdom & Ireland Construction & Property Year ended 30 June 2006 Growth £m Net fees 101.6 + 5% Operating pro
Slide 16: Information Technology; Other Specialist Activities
United Kingdom & Ireland Information Technology Year ended 30 June 2006 Growth £m Net fees 30.7 + 5% Operating profit 11.0 + 10% Consultants 150 (9%) Specialist Recruitment hays.com 31 United Kingdom & Ireland Other Specialist Activities Year ended 30 June 2006 Growth £m Net fees 88.1 + 11% Operatin
Slide 17: Health and Social Care; Continental Europe & Canada
Other Specialist Activities: Health and Social Care Acquisition of RSG Update Strategic entry into healthcare and social care markets Net fees of £2.3 million and operating loss of £(0.3) million since ownership Performance adversely impacted by NHS funding issues Remain confident in the lon
Slide 18: Continental Europe & Canada Summary and Impact of investment
Continental Europe & Canada - Summary Recruitment consultant growth of 38% 10 new offices opened Germany – strong fee growth and strong profit generation Excellent growth in Iberia, Poland, Sweden, Benelux & Switzerland Entry into Italy and Dubai during the period – both performing well
Slide 19: Asia Pacific
Asia Pacific Year ended 30 June 2006 Growth £m Net fees* 85.7 + 31% Operating profit* 41.7 + 43% Consultants 707 + 38% * Organic growth at constant currency Specialist Recruitment hays.com 37 Asia Pacific - Summary Australia & New Zealand – Excellent performance across all specialist activities an
Slide 20: Australia & New Zealand net fees; Hong Kong and China
Australia & New Zealand: Net fees by specialism Year ended 30 June Net fee Net fee growth share Accountancy & Finance + 22% 41% Construction & Property + 27% 23% Resources & Mining + 87% 10% Information Technology + 30% 7% Banking + 42% 7% Other specialist activities + 40% 12% Specialist Recruitment
Slide 21: Investment in new office locations; Outlook
Investment in new office locations United Kingdom & Ireland Asia Pacific Continental Europe & Canada Exeter Birmingham East Melbourne Berlin Galway Leeds Brisbane Milan Hastings Maroochydore Ottowa Keighley Camberwell Barcelona Macclesfield Hong Kong x 2 Strasbourg Southend Shenzen Dubai Stafford Sh
Slide 22: UK & Ireland and Continental Europe Actions
United Kingdom & Ireland - Actions Appointment of a UK Managing Director Increase in recruitment consultants of circa 10% Increased focus on the London and South East markets Opening of 10-20 new offices Accelerate growth of new activities Increased focus on senior appointments Continu
Slide 23: Asia Pacific Actions; Current trading
Asia Pacific - Actions Increase in recruitment consultants of 15% New offices in Singapore and Beijing Expansion of major offices in Australia Aggressively target the temporary market Expansion of the newer specialist activities - Legal, Sales & Marketing and Human Resources Start up of
Slide 24: Appendix I - Segmental summary
APPENDICES Specialist Recruitment hays.com Appendix I - Segmental summary Year ended 30 June 2006 2006 2005 2005 £m Net fees Operating Net fees Operating profit profit United Kingdom & Ireland Accountancy & Finance 158.0 67.6 149.0 63.9 Construction & Property 101.6 41.5 97.0 38.7 Information Techno
Slide 25: Like-for-like summary; Recruitment consultant headcount
Appendix II - Like-for-like summary Year ended 30 June 2005 Fx Impact Acquisition Like-for- Growth* 2006 £m Impact like growth Net fees United Kingdom & Ireland 354.7 - 2.3 21.4 6% 378.4 Continental Europe & 53.3 0.4 - 20.4 38% 74.1 Canada Asia Pacific 62.6 2.8 0.2 20.1 31% 85.7 470.6 3.2 2.5 61.9 1
Slide 26: Office network; Business units
Appendix IV - Office network Office On-site Back office Total locations locations locations At 30 June 2005 289 33 4 326 Opened 29 - - 29 Acquired 8 - - 8 Office mergers (9) (2) - (11) At 30 June 2006 317 31 4 352 New office locations: United Kingdom & Ireland: Exeter, Galway, Hastings, Keighley, Ma
Slide 27: Cash flow from operations and tax
Appendix VI - Cash flow from operations and tax Year ended 30 June 2006 2005 £m Profit from continuing operations 193.0 166.2 Profit from discontinued operations - 8.4 Depreciation 6.7 8.8 Movement in employee benefits 7.6 3.9 Movements in working capital (24.2) (26.0) 183.1 161.3 Tax paid (46.7) (5
Slide 28: Restatement of prior year net fees and operating profit
Appendix VIII - Restatement of prior year net fees Year ended 30 June 2005 £m As previously IFRS Reclassified Restated presented adjustments United Kingdom & Ireland Accountancy & Finance 165.9 - (16.9) 149.0 Construction & Property 103.6 - (6.6) 97.0 Information Technology 29.3 - - 29.3 Other Speci
Slide 29: Cost development and investment
Appendix X - Cost development and investment Operating expenses United Continental Asia Total £m Kingdom Europe & Pacific & Ireland Canada Year ended 30 June 2005 224.8 44.9 34.7 304.4 Movement 16.1 15.4 9.3 40.8 Year ended 30 June 2006 240.9 60.3 44.0 345.2 Operating expenses + 7% + 34% + 27% + 13%