Hays Plc · LSE:HAS
Hays — H1 FY2006 Earnings Presentation
53 slides from Hays's earnings presentation, February 2006
Slide 1: Interim Results Six months ended 31 December 2005
Interim Results Six months ended 31 December 2005 Specialist Recruitment hays.com
Slide 2: Bob Lawson, Chairman
Bob Lawson Chairman Specialist Recruitment hays.com 2
Slide 3: Continued strong net fee and profit growth
Continued strong net fee and profit growth 6 months ended 31 December 2005 Growth * £m Net fees 259.1 + 14% Operating profit 94.1 + 16% Net cash from continuing operations 83.9 * Growth rates at constant currency Specialist Recruitment hays.com 3
Slide 4: Corporate
Corporate Earnings per share of 4.16p, + 28% Interim dividend of 1.45p, + 28% Share buy-back – Return of £312m of surplus cash from the disposal process is now complete – Buy-backs will be used going forward to return surplus cash Appointed Paul Venables new Group Finance Director, effective
Slide 5: Agenda
Agenda Operating review – Denis Waxman, Chief Executive Financial review – John Martin, Finance Director 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: Specialist Recruitment
Specialist Recruitment 6 months ended 31 December 2005 Growth * £m Net fees 259.1 + 14% Operating profit 94.1 + 16% Consultants 3,742 + 9% * Growth rates at constant currency Specialist Recruitment hays.com 7
Slide 8: Fee growth in every region
Fee growth in every region 6 months ended 31 December 2005 Net fees Growth * £m United Kingdom & Ireland 184.8 + 7% Continental Europe & Canada 32.9 + 36% Australia & New Zealand 41.4 + 34% 259.1 + 14% * Growth rates at constant currency Specialist Recruitment hays.com 8
Slide 9: Profit growth in every region
Profit growth in every region 6 months ended 31 December 2005 Op profit Growth * £m United Kingdom & Ireland 67.4 + 6% Continental Europe & Canada 6.6 + 74% Australia & New Zealand 20.1 + 46% 94.1 + 16% * Growth rates at constant currency Specialist Recruitment hays.com 9
Slide 10: United Kingdom & Ireland: Accountancy & Finance
United Kingdom & Ireland Accountancy & Finance 6 months ended 31 December 2005 Growth £m Net fees 78.0 + 8% Operating profit 32.6 + 6% Consultants 948 + 2% Good performance in Scotland and the Home Counties Temporary worker numbers continue to grow Specialist Recruitment hays.com 10
Slide 11: United Kingdom & Ireland: Construction & Property
United Kingdom & Ireland Construction & Property 6 months ended 31 December 2005 Growth £m Net fees 51.3 + 4% Operating profit 21.5 + 7% Consultants 749 (2%) Strong performance from the North East, Scotland & Ireland Mixed performance in South East Specialist Recruitment hays.com 11
Slide 12: United Kingdom & Ireland: Information Technology
United Kingdom & Ireland Information Technology 6 months ended 31 December 2005 Growth £m Net fees 15.1 + 7% Operating profit 5.4 + 8% Consultants 148 - Permanent and temporary fees both grew Good growth in permanent volumes Specialist Recruitment hays.com 12
Slide 13: United Kingdom & Ireland: Other Specialist Activities
United Kingdom & Ireland Other Specialist Activities 6 months ended 31 December 2005 Growth £m Net fees 40.4 + 8% Operating profit 7.9 - Consultants 745 + 1% Good net fee growth in HR, Education, Purchasing & Supply and Executive Organic start up in Hays Retail Refocused Contact Centre busines
Slide 14: Other Specialist Activities: Origin of net fees
Other Specialist Activities: Origin of net fees Banking & Financial Services 20% Education 14% Contact Centres 14% Human Resources 13% Legal 11% Other 28% Specialist Recruitment hays.com 14
Slide 15: Other Specialist Activities: Expansion & rollout
Other Specialist Activities: Expansion & rollout Retail Sales & Marketing Healthcare Social Care Purchasing & Supply Executive Specialist Recruitment hays.com 15
Slide 16: Other Specialist Activities: Impact of investment
Other Specialist Activities: Impact of investment 6 months ended 31 December 2004 New * Existing 2005 £m Net fees 37.4 2.4 0.6 40.4 Net fee growth + 6% + 2% + 8% Costs (29.5) (2.8) (0.2) (32.5) Operating profit 7.9 (0.4) 0.4 7.9 Headcount 741 51 (47) 745 Conversion rate 21.1% (2.3%) 0.8% 19.6% Typic
Slide 17: Other Specialist Activities: Health and Social Care
Other Specialist Activities: Health and Social Care Acquisition of RSG for £18.5m cash in February 2006 Specialist recruitment business supplying health and social care markets Annual net fees of £8.4m and operating profits of £2.4m Places qualified professionals in temporary, contract and per
Slide 18: Continental Europe & Canada
Continental Europe & Canada 6 months ended 31 December 2005 Growth * £m Net fees 32.9 + 36% Operating profit 6.6 + 74% Consultants 572 + 36% Strong growth continued in Germany, France & Benelux Organic start-up in Italy * Growth rates at constant currency Specialist Recruitment hays.com 18
Slide 19: Continental Europe & Canada: Origin of net fees
Continental Europe & Canada: Origin of net fees Germany 50% France 21% Benelux 10% Canada 7% Iberia 4% Other 8% Specialist Recruitment hays.com 19
Slide 20: Continental Europe & Canada: New offices in H1
Continental Europe & Canada: New offices in H1 Berlin Milan Ottowa Strasbourg Barcelona II Specialist Recruitment hays.com 20
Slide 21: Continental Europe & Canada: Impact of investment
Continental Europe & Canada: Impact of investment 6 months ended 31 December 2004 New 1 Existing 2005 £m Net fees 24.3 1.6 7.0 32.9 Net fee growth 2 7% 29% 36% Costs (20.5) (2.5) (3.3) (26.3) Operating profit 3.8 (0.9) 3.7 6.6 Headcount 421 77 74 572 Conversion rate 15.6% (3.9%) + 8.4% 20.1% Typical
Slide 22: Australia & New Zealand
Australia & New Zealand 6 months ended 31 December 2005 Growth * £m Net fees 41.4 + 34% Operating profit 20.1 + 46% Consultants 580 + 33% Strong growth in both temporary and permanent fees Growth across all specialist activities Continued investment in new recruitment consultants * Growth rate
Slide 23: Further international expansion
Further international expansion Hong Kong Dubai Specialist Recruitment hays.com 23
Slide 24: Pricing
Pricing Temporary margins remain firm, 5 bps improvement principally due to mix Permanent placements: – Pricing remained consistent – Wage inflation of approximately 3.5% Specialist Recruitment hays.com 24
Slide 25: Financial review
Financial review John Martin Finance Director Specialist Recruitment hays.com
Slide 26: Income statement
Income statement 6 months ended 31 Dec 2005 2004 Actual Constant £m Growth exchange Turnover 888.7 800.7 + 11% + 10% Net fees 259.1 226.1 + 15% + 14% Profit from operations 94.1 80.4 + 17% + 16% Net finance income 0.5 0.7 Profit before tax 94.6 81.1 + 17% Tax (29.6) (25.6) Profit after tax 65.0 55.5
Slide 27: Net fee growth
Net fee growth 6 months ended 31 Dec 2005 2004 Actual Constant £m Growth exchange Temporary net fees 148.5 132.5 + 12% + 11% Permanent net fees 110.6 93.6 + 18% + 17% 259.1 226.1 + 15% + 14% Permanent % of total 42.7% 41.4% + 1.3% Note: Figures throughout relate to continuing operations, under IFRS
Slide 28: Impact of exchange movements and trading days
Impact of exchange movements and trading days FX impact Net fees Operating £m profit Australia & New Zealand 2.0 1.0 Continental Europe & Canada (0.1) - 1.9 1.0 Number of trading days H1 H2 Year 2005/06 128 125 253 2004/05 129 124 253 Specialist Recruitment hays.com 28
Slide 29: Cost development and investment
Cost development and investment Operating expenses United Australia & Continental Total £m Kingdom New Zealand Europe & & Ireland Canada 6 months ended 31 Dec 2004 109.1 16.1 20.5 145.7 Movement 8.3 5.2 5.8 19.3 6 months ended 31 Dec 2005 117.4 21.3 26.3 165.0 Operating expenses + 8% + 32% + 28% + 1
Slide 30: Conversion rate
Conversion rate 48.6% 50% 44.3% 40% 36.9% 36.5% 30% 20.1% 20% 15.6% 10% 0% Continental Europe United Kingdom Australia & Canada & Ireland & New Zealand 6 months ended 31 December 2004 6 months ended 31 December 2005 Overall conversion rate improved from 35.6% to 36.3% Specialist Recruitment hays.com
Slide 31: Finance income, tax and discontinued operations
Finance income, tax and discontinued operations 6 months ended 31 December 2005 2004 £m Average (debt) / cash (2.0) 96.9 Net finance income 0.5 0.7 Effective tax rate 31.3% 31.6% Discontinued operations, net of tax 17.2 7.2 Specialist Recruitment hays.com 31
Slide 32: Earnings per share
Earnings per share 6 months ended 31 December 2005 2004 Growth Basic earnings from continuing operations £65.0m £55.5m + 17% Weighted average number of shares 1,564.2m 1,712.1m (9%) Basic Earnings Per Share 4.16p 3.24p + 28% 1,482.3m shares for basic EPS at 28 February Specialist Recruitment hays.co
Slide 33: Cash flow from operations and tax
Cash flow from operations and tax 6 months ended 31 December 2005 2004 £m Profit from continuing operations 94.1 80.4 Depreciation 3.1 3.9 Movements in working capital (13.3) (9.2) 83.9 75.1 Tax paid on continuing operations (26.4) (17.6) Discontinued operations (net of tax) 19.3 (27.1) Net cash fro
Slide 34: Cash flow from investing and financing
Cash flow from investing and financing 6 months ended 31 December 2005 2004 £m Net cash from operations 76.8 30.4 Investing Net capital expenditure / receipt (3.3) 0.2 Prior year acquisitions (1.6) - Residual (10.6) 68.1 Financing Dividends (35.6) (34.4) Own shares and buy-backs (165.4) (30.4) Inter
Slide 35: Balance sheet
Balance sheet As at 31 December 2005 2004 £m Goodwill and intangibles 101.9 103.0 Property, plant & equipment 18.4 16.4 Net deferred tax 30.2 32.3 Net working capital 146.0 139.7 Tax liabilities (91.8) (92.7) Retirement benefit obligations (87.3) (85.7) Provisions and other liabilities (64.8) (108.3
Slide 36: Retirement benefit obligations
Retirement benefit obligations Pension obligations under IAS brought onto the balance sheet Pension deficit under IAS 19 of £87.3m (£61.1m net of deferred tax) Assumptions: – Latest mortality assumptions added 3 years – Liabilities discounted at AA bond yield of 4.73% – Inflation increased to
Slide 37: Interim dividend
Interim dividend Pence per Growth share Interim dividend last year 1.13 Increase to reflect growth in the business 0.15 + 13% Increase to reflect the impact of the share buy-back 0.17 + 15% 1.45 + 28% No longer accrued in profit & loss account under IFRS Specialist Recruitment hays.com 37
Slide 38: Capital structure
Capital structure New 5 year Revolving Credit Facility Supported by a syndicate of 11 banks Syndication oversubscribed and closed at £460m Targeted net debt range revised to £150m to £250m Net debt at 28 February is approximately £95m Specialist Recruitment hays.com 38
Slide 39: Share buy-back
Share buy-back Period ended Number of Total cost % of issued shares £m capital * 31 December 2004 27.1 33.2 1.6% 30 June 2005 73.7 94.9 4.3% 31 December 2005 134.4 168.1 7.7% 28 February 2006 12.6 16.1 0.7% 247.8 312.3 14.3% Acquired 14.3% of the shares at an average price of 126p * Using 1,735.9 m
Slide 40: Financial summary
Financial summary Record H1 net fees + 14% * to £259.1m Conversion rate + 0.7% to 36.3% Record H1 operating profit + 16% * to £94.1m Earnings per share + 28% to 4.16p Strong net cash from operations of £83.9m Interim dividend + 28% to 1.45p Completed transformation buy-back of £312.3m,
Slide 41: Outlook
Outlook Denis Waxman Chief Executive Specialist Recruitment hays.com
Slide 42: Outlook - Trading
Outlook - Trading Net fees in January & February to date have grown at approximately + 13% Continuing growth trends – UK single digit growth – International strong double digit growth Specialist Recruitment hays.com 42
Slide 43: Expanding the business in the second half
Expanding the business in the second half New offices planned + 12 New business units planned + 25 New consultant headcount + 8-9% Actively researching entry into new countries Specialist Recruitment hays.com 43
Slide 44: Appendices
APPENDICES Specialist Recruitment hays.com
Slide 45: Appendix I - Recruitment consultant headcount
Appendix I - Recruitment consultant headcount As at period ended December June Growth December Growth 2005 2005 since 2004 since June 05 Dec 04 United Kingdom & Ireland Accountancy & Finance 948 971 (2%) 930 + 2% Construction & Property 749 778 (4%) 763 (2%) Information Technology 148 165 (10%) 148
Slide 46: Appendix II - Office network
Appendix II - Office network Office On-site Back office Total locations locations locations At 30 June 2005 289 33 4 326 Expansion 15 - - 15 Office mergers (3) - - (3) At 31 Dec 2005 301 33 4 338 New office locations: United Kingdom & Ireland: Exeter, Galway, Hastings, Keighley, Macclesfield, Southe
Slide 47: Appendix III - Business units
Appendix III - Business units As at period ended December June December 2005 2005 2004 United Kingdom & Ireland 443 423 412 Continental Europe & Canada 181 155 147 Australia & New Zealand 145 145 135 769 723 694 46 new business units (+ 6%) since June 2005 Specialist Recruitment hays.com 47
Slide 48: Appendix IV - Restatement of prior year net fees
Appendix IV - Restatement of prior year net fees 6 months ended 31 December 2004 As previously IFRS Reclassified Restated presented adjustments United Kingdom & Ireland Accountancy & Finance 79.3 - (7.4) 71.9 Construction & Property 53.2 - (3.7) 49.5 Information Technology 14.1 - - 14.1 Other Specia
Slide 49: Appendix V - Restatement of prior year operating profit
Appendix V - Restatement of prior year operating profit 6 months ended 31 December 2004 As previously IFRS Reclassified Restated presented adjustments United Kingdom & Ireland Accountancy & Finance 33.6 (0.1) (2.7) 30.8 Construction & Property 20.5 (0.1) (0.3) 20.1 Information Technology 5.0 - - 5.0
Slide 50: Appendix VI - impact of foreign exchange movements
Appendix VI - impact of foreign exchange movements 6 mths ended 31 December 2004 Impact of Growth at 2005 Growth * fx constant movements currency Net fees United Kingdom & Ireland 172.9 - 11.9 184.8 7% Continental Europe & Canada 24.3 (0.1) 8.7 32.9 36% Australia & New Zealand 28.9 2.0 10.5 41.4 34%
Slide 51: Appendix VII - Segmental summary
Appendix VII - Segmental summary 6 months ended 31 December 2005 2005 2004 2004 Net fees Operating Net fees Operating profit profit United Kingdom & Ireland Accountancy & Finance 78.0 32.6 71.9 30.8 Construction & Property 51.3 21.5 49.5 20.1 Information Technology 15.1 5.4 14.1 5.0 Other specialist
Slide 52: Appendix VIII - Restatement of prior year net fees
Appendix VIII - Restatement of prior year net fees Year ended 30 June 2005 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 Speciali
Slide 53: Appendix IX - Restatement of prior year operating profit
Appendix IX - Restatement of prior year operating profit Year ended 30 June 2005 As previously IFRS Reclassified Restated presented adjustments United Kingdom & Ireland Accountancy & Finance 71.1 (0.3) (6.9) 63.9 Construction & Property 38.9 (0.2) - 38.7 Information Technology 10.1 (0.1) - 10.0 Othe