Last checked at 2 Sep 2010 07:00
HAYS PLC
PRELIMINARY RESULTSFOR THE YEAR ENDED 30 JUNE 2010
2 September 2010
RETURN TO GROWTH IN SECOND HALF DRIVEN BY INTERNATIONAL BUSINESS
Year ended 30 June Actual LFL*(In £'s million) 2010 2009 growth growth Net fees 557.7 670.8 (17)% (21)%
Operating profit (before exceptional items)** 80.5 158.0 (49)% (53)%Cash generated by operations*** 78.1 260.9 (70)% Profit before tax (before exceptional items)** 71.1 151.0 (53)% Profit before tax 29.7 151.0 (80)% Basic earnings per share (before exceptional items ** 3.25p 7.72p
(58)% Basic earnings per share 0.48p 7.72p (94)% Dividend per share 5.80p 5.80p -
All numbers are from continuing operations only.
Financial highlights
· Good profit protection against a difficult market environment,
particularly in the first half
· Broad based recovery in the second half with sequential net fee
growth of 8%* and operating profit** growth of 23%*, versus the first half
· Strong cash flow from operations*** of £78.1 million (representing
97% of operating profit**)
· Strong balance sheet and dividend maintained at 5.80p
Operational highlights
· Continued diversification of the business with 58% of Group net fees
in the second half generated outside the UK
· Permanent placement markets recovering more rapidly than temporary
placement in most geographies
· Major IT projects substantially complete and now focused on driving
productivity and efficiency benefits
· Over 200 consultants added across the International business in the
second half
Commenting on these results, Alistair Cox, Chief Executive of Hays, said:
"After a tough first half to the year, we returned to growth in the second halfdriven by excellent performances in Asia Pacific and Germany. In the fourthquarter, 20 countries across the Group delivered net fee growth of over 10%* aswe added headcount to capitalise on the upturn.The outlook across 90% of our markets, including the UK private sector,continues to improve. During the downturn we invested in building a stronger,more efficient and broader based business, and with our major investmentprogrammes now substantially complete, this ideally positions us to capitaliseon the significant growth opportunities that are increasingly present acrossour markets."* LFL (like-for-like) growth represents organic growth of continuing activitiesat constant currency. There were the same number of trading days in 2010 and2009.
** 2010 numbers are presented before exceptional charges of £41.4 million, comprising £29.0 million relating to the OFT fine that is currently under appeal and £12.4 million non-recurring restructuring costs relating principally to the United Kingdom back office automation project.
*** excludes cash impact of exceptional items of £4.1 million paid in the year.
**** the number of office locations has been restated to exclude a number oflocations in which Hays' consultants are based at a clients premises. Theselocations had previously been included within the total number of offices foreach division. This has resulted in the opening office number being reducedfrom 345 offices to 311 offices, with the closing number of offices reduced
to270 offices. EnquiriesHays plc Paul Venables Finance Director + 44 (0) 20 7383 2266Martin Abell / James Hilton Investor Relations + 44 (0) 20 7383 2266 Maitland Neil Bennett / Liz Morley + 44 (0) 20 7379 5151 Results presentation webcast
The preliminary results presentation at 9.00am on 2 September 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 30 September 2010 7 October 2010 Trading Update for quarter ending 31 December 2010
6 January 2011 Half Year Report for 6 months ending 31 December 2010 28 February 2011Interim Management Statement for quarter ending 31 March 2011 7 April 2011 Trading Update for quarter ending 30 June 2011 7 July 2011 Note to editors
Hays plc (the "Group") is the leading global professional recruiting group. TheGroup is the expert at recruiting qualified, professional and skilled peopleworldwide, being the market leader in the UK and Australia and one of themarket leaders in Continental Europe. The Group operates across the private andpublic sectors, dealing in permanent positions, contract roles and temporaryassignments. As at 30 June 2010, the Group employed 6,845 staff operating from270 offices**** in 28 countries across 17 specialisms. For the year ended 30June 2010:
- the Group reported net fees of £557.7 million and operating profit** of £80.5 million;
- the Group placed around 50,000 candidates into permanent jobs and
around 180,000 people into temporary assignments;
- 26% of Group net fees were generated in Asia Pacific, 30% in
Continental Europe & RoW and 44% in the United Kingdom & Ireland
- the temporary placement business represented 58% of net fees and the
permanent placement business represented 42% 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 Income Statement growth Year ended 30 June (In £'s million) 2010 2009 Actual LFL* Turnover 2,691.1 2,447.7 10% 5%Net fees Temporary 323.5 373.4 (13)% (18)% Permanent 234.2 297.4 (21)% (26)% Total 557.7 670.8 (17)% (21)% Operating profit** 80.5 158.0 (49)% (53)% Conversion rate 14.4% 23.6%
Underlying temporary margin**** 15.2% 16.8%
Temporary fees as % of total 58% 56%
Period end consultant headcount***** 4,508 4,558 (1)% * LFL (like-for-like) growth represents organic growth of continuing activitiesat constant currency. There were the same number of trading days in 2010 and2009.
** 2010 numbers are presented before exceptional charges of £41.4 million, comprising £29.0 million relating to the OFT fine that is currently under appeal and £12.4 million non-recurring restructuring costs relating principally to the United Kingdom back office automation project.
*** excludes cash impact of exceptional items of £4.1 million paid in the year.
**** 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 30 June2010 versus 30 June 2009. The number of consultants has been re-stated in 2009and 2010 to include resource analysts in addition to front line consultants. The performance of the Group during the year has been impacted by tough tradingconditions although market conditions improved markedly in the second half ofthe year. Overall, Group turnover increased by 5%*, net fees decreased by 17%(declining by 21% on a like-for-like basis*), and operating profit decreased by49% (53% on a like-for-like basis*). The results benefited from exchange ratemovements, principally the Australian Dollar and the Euro, which had afavourable impact increasing net fees by £37.2 million and operating profit by£13.9 million. The increase in turnover was primarily due to significantcorporate account wins, which include a high proportion of pass through thirdparty supplier revenues, and the withdrawal of Staff Hire Concession.The temporary placement business, representing 58% of Group net fees, was moreresilient through the downturn than the permanent placement business, with netfees decreasing by 18%*. This reflected a volume decrease of 9% and a 160 basispoint reduction in the underlying temporary margin to 15.2% (2009: 16.8%)****.Around half of the margin reduction was a result of the mix effect of a greaterproportion of placements being made through large volume contracts, with thebalance of the reduction resulting from modest pricing pressure impacting ourmajor temporary placement markets, namely Australia, Germany and the UK.However, the margin remained broadly stable on a sequential basis across allmarkets in the second half of the year. On a sequential basis, Group temporaryplacement net fees increased by 4%* in the second half of the year driven byincreased demand in our Australian, German and UK private sector businesses,and we continue to see improving trends in these markets.Net fees in the permanent placement business, representing 42% of Group netfees, declined by 26%*, with permanent placement volumes decreasing by 19%.Average fees per placement decreased by 8%* compared to last year primarily dueto a less favourable mix. Market conditions were very difficult across allcountries at the start of the year, however in the second half of the year wesaw improved levels of demand across nearly all our businesses, withparticularly strong recovery in Asia Pacific. This drove sequential net feegrowth of 15%* in our permanent placement business in the second half of theyear with the momentum continuing into the current year.The Group's cost base excluding exceptional items was 11%* lower than lastyear, principally due to the early actions taken at the start of the previousyear to realign the cost base, including the reduction in consultant headcountby 29% from peak levels. However, lower placement volumes versus last year andthe lower level of average consultant productivity achievable in a demandconstrained market led to a reduction in the Group's conversion rate, which isthe proportion of net fees converted into operating profit**, from 23.6% in thelast year to 14.4% this year. As the improvement in market conditions in thesecond half of the year led to an increase in consultant productivity levels,we achieved an improved conversion rate of 15.5% versus 13.3% in the firsthalf.Group consultant headcount***** at the year end was 1% below the position atthe start of the year. This comprised an increase of 14% in Asia Pacific, as werapidly invested to capitalise on the strong recovery in market conditions,offset by a 5% reduction in the United Kingdom & Ireland and a 3% reduction inContinental Europe & Rest of World, with most of these reductions being madenear the start of the year. Investment
Throughout the downturn we have remained committed to building a stronger,broader based and more efficient business. We have substantially completed theglobal roll-out of the new front office IT system, which provides us with astate-of-the-art operating platform. We are now focused on harnessing thecapacity of this system to progressively improve our efficiency and service toour clients and candidates.We have made good progress in signing multi-specialism contracts with a numberof large corporates, such as Goodyear, JDSU, Reckitt Benckiser and SonyPictures, where we have differentiated ourselves as an organisation that canserve our client's requirements across a broad range of expert skills, across awide number of countries.Our continued focus on enhancing client service levels has been reinforced bythe global roll-out of our updated Hays brand which aims to differentiate Haysfrom the competition through communicating better our unique expertise to ourclients. We are in an industry where the limiting factor on growth wheneconomies are supportive is not capital but people capability. Accordingly, wehave continued to invest in our people through our leadership trainingprogrammes and consultant academies. This has strengthened our business throughthe development of our managers at all levels, deepening the expertise of ourconsultants, and through the effective selection and training of newconsultants.We have maintained the geographical coverage of the business through thedownturn and are now building scale in locations where market conditions areimproving. In addition, we have also completed the groundwork for a number ofnew organic country openings in the next 12 months including Mexico and the US,where we will be opening offices in Mexico City and New Jersey, respectively. Asia Pacific growth Year ended 30 June (In £'s million) 2010 2009 Actual LFL* Net fees 146.3 149.1 (2)% (18)% Operating profit 52.0 61.4 (15)% (30)% Conversion rate 35.5% 41.2%
Period end consultant headcount***** 881 771 14% In Asia Pacific, net fees decreased by 2% (18% on a like-for-like basis*) to £146.3 million and operating profit decreased by 15% (30% on a like-for-likebasis*) to £52.0 million. The division represents 65% of Group operating profit** making Asia Pacific the largest contributing division. The differencebetween actual growth and like-for-like growth was mainly due to the appreciation in the Australian Dollar. The business achieved a strong conversion rate of
35.5% for the year, with the second half conversion rate at 36.5%.
In our market leading Australia & New Zealand business, net fees were down 21%*versus prior year. Net fees decreased by 18%* in the temporary placementbusiness and by 25%* in the permanent placement business. Following a period ofsequential net fee stability in the first quarter of the year we recorded threeconsecutive quarters of sequential net fee growth as we capitalised on thestrong private sector recovery across all specialisms and states. The recoverywas driven by the permanent placement business, which achieved 35%* sequentialnet fee growth in the second half, with a more modest recovery in temporaryplacement which achieved 4%* sequential net fee growth in the second half. Therecovery has been broadly based across all specialisms, led by FinancialServices and Resources & Mining with each of these specialisms achievingsequential net fee growth in excess of 30%* in the second half. In our publicsector business, which accounts for 25% of net fees in Australia & New Zealand,net fees were sequentially stable through the year.Our Asian business, which accounted for 12% of the division's net fees in theperiod, achieved net fee growth of 14%* versus prior year. Market conditionsimproved markedly through the year, driven by improved levels of demand acrossa broad range of specialisms, culminating in all-time record monthly net feeperformances being achieved by Japan, China and Singapore during the year. Weare aggressively pursuing our strategy of doubling the size of this businesswithin the next two years and Asia is now operating at above its pre-downturnlevel.Consultant headcount***** in Asia Pacific increased by 14% during the year withsignificant headcount investment in the second half. In Australia & NewZealand, consultant headcount increased by 12% in the second half with broadinvestment across all specialisms and regions. In Asia, consultant headcountwas added aggressively and broadly in the second half, resulting in a 43%increase to 175 consultants which is 6% above the pre-downturn peak.
Continental Europe & Rest of World ('RoW')
growth Year ended 30 June (In £'s million) 2010 2009 Actual LFL* Net fees 167.5 191.0 (12)% (16)% Operating profit** 17.1 33.1 (48)% (50)% Conversion rate 10.2% 17.3%
Period end consultant headcount***** 1,355 1,400 (3)% In Continental Europe & RoW, net fees decreased by 12% (16% on a like-for-likebasis*) to £167.5 million and operating profit** decreased by 48% (50% on alike-for-like basis*) to £17.1 million. This division now represents 21% ofGroup operating profit**. The difference between actual growth andlike-for-like growth was mainly due to the appreciation in the Euro. Theconversion rate declined from 17.3% to 10.2% in 2010.Our German business, representing 48% of the division's net fees and themajority of the division's profits, recorded a 12%* decrease in net fees versusprior year. Germany has been the Group's most resilient country through thedownturn and, on a sequential basis, net fees in Germany showed a stable trendin the first half of the year before recording 8%* sequential net fee growth inthe second half, driven by a broad based recovery of the temporary andpermanent placement markets. Our German business continues to diversify into abroader range of specialisms including Accountancy & Finance, Construction &Property, Sales & Marketing, Legal and Pharma, which now account for 21% oftotal net fees in Germany (2005: 3%). Our market leading position andincreasing diversification of the business place us in a strong position tobenefit from the improving market conditions.Our other businesses in this division, covering 19 countries, are focusedprincipally on the permanent placement markets. After experiencing sequentialnet fee stability in the first half of the year, most countries returned tosequential growth in the second half as client and candidate confidence levelsimproved across our markets. Our businesses in Brazil, Portugal, Denmark andHungary each achieved all-time record fee months during the fourth quarter ofthe year, with 14 countries across the region achieving net fee growth of over10%* in this quarter. Our businesses in Southern and Eastern Europe, whichcurrently contribute 11% of the division's net fees, have seen no impact fromthe sovereign debt issues.Consultant headcount***** decreased by 3% during the year. This comprised a 9%reduction in the first half which was partially offset by a 6% increase in thesecond half, with increases in Germany and Brazil. We currently plan to addheadcount more broadly across the region after the summer vacation period.During the downturn we protected the infrastructure in these businesses and asa result we are well positioned to capitalise on the significant structural andcyclical growth that we expect to see in the coming years.United Kingdom & Ireland growth Year ended 30 June (In £'s million) 2010 2009 Actual LFL* Net fees 243.9 330.7 (26)% (26)% Operating profit** 11.4 63.5 (82)% (82)% Conversion rate 4.7% 19.2%
Period end consultant headcount***** 2,272 2,387 (5)% In the United Kingdom & Ireland, net fees declined by 26% to £243.9 million,and operating profit** declined by 82% to £11.4 million. Net fees decreased by23%* in the temporary placement business and by 32%* in the permanent placementbusiness. The conversion rate declined from 19.2% to 4.7% this year.Overall, demand remained sequentially stable throughout the period with netfees in the second half of the year in line with the first half. In the privatesector, net fees improved sequentially in the second half versus the first halfwith Pharma, Corporate Accounts and City-related recruitment all achievingparticularly strong growth. As expected, performances in the public sector weremixed. In frontline service areas we continued to achieve growth, with net feesin our Healthcare and Education businesses up 29% and 4%, respectively, versusprior year. In contrast, the pressures on public finances impacted theremainder of our public sector business, particularly in Construction &Property and back office functions. Overall public sector net fees, whichcurrently represent 30% of our United Kingdom & Ireland net fees, decreased by19% versus prior year, and are now more than a third below peak levels.Consultant headcount in the United Kingdom & Ireland was reduced by 5% duringthe year with most of the reduction being undertaken near the start of theyear. Throughout the year, we have supported growth in the private sector byredirecting resources from the public sector and we will continue to do this ifcurrent trends continue. As a result, we expect to broadly maintain headcountat current levels in the coming months.In the year, 38 offices were closed as we have continued to drive efficiencysavings by consolidating operations in selected cities. We have also madeexcellent progress on our key efficiency investment programmes this year. Ournew front office system has been fully rolled out across the United Kingdom &Ireland business and we are now focused on leveraging this to increaseconsultant productivity and deliver enhanced client and candidate service. Theback office automation project will complete in October 2010. As a result ofthis implementation, and the reduction in volumes during the downturn, our backoffice headcount will be reduced by around 50% from peak levels to around 300,of which a significant proportion will be based in India. We have alsocontinued to strengthen our national corporate account management andrecruitment outsource services. These investments have yielded severalimportant client wins, including Bank of America, JP Morgan Chase, The AuditCommission and Northampton County Council, during the year. These wins haveconsolidated our market leading position, particularly in the City.
Exceptional costs
There is an exceptional cost of £41.4 million included in the ConsolidatedIncome Statement in 2010. Of this, £29.0 million relates to The Office of FairTrading's ('OFT's) decision, as disclosed in the Half Year Report, which foundthat Hays' Construction & Property business in the UK had breached competitionlaw in the period October 2004 to November 2005. Hays co-operated fully withthe OFT in its investigation under the leniency regime and was fined £30.4million. The Group is appealing the decision and whilst in progress, the £30.4million fine is being held on deposit by Hays. The remaining £12.4 million ofthe exceptional cost relates to a non-recurring restructuring cost which wedisclosed in the fourth quarter trading update. This relates principally to theback office staff redundancy costs and non-cash asset write-downs following thenear completion of the United Kingdom back-office automation project.
Net finance charge
The net finance charge for the year was £9.4 million (2009: £7.0 million). Theaverage interest rate on gross debt during the year was 1.0% (2009: 3.2%),generating a net bank interest payable of £1.6 million (2009: £3.5 million).There was a non-cash net interest charge on the defined pension schemeobligations of £6.7 million (2009: £2.4 million) with the increase mainly dueto the lower expected return on scheme assets, and a charge for the PensionProtection Fund levy of £1.1 million (2009: £1.1 million). It is expected thatthe net finance charge for the year ending 30 June 2011 will be at a similarlevel to 2010. TaxationTaxation before exceptional items** for the year was £26.6 million,representing an effective tax rate of 37.4% (2009: 29.9%). The increase in theeffective tax rate was a result of the changing geographical mix of profits,the presence of unrelieved tax losses in a number of countries during theperiod and an increase in disallowable expenses. The Group also recognised a £3.5 million tax credit in respect of the exceptional restructuring costincurred in the year, bringing the total tax charge in the year to £23.1million. It is expected that the effective tax rate will reduce in 2011 toaround 34% as a number of countries return to profitability and available taxlosses are utilised. Earnings per shareBasic earnings per share before exceptional items** decreased 58% to 3.25 pence(2009: 7.72 pence). The fall in earnings per share reflects the reduction inoperating profit, the higher net finance charge and the increase in theeffective tax rate. Basic earnings per share post exceptional items decreased94% to 0.48 pence. Cash flow and balance sheet
Cash flow in the year was strong with 97% conversion of operating profit** intooperating cash flow***, driven by continued close control of working capital.Overall, net cash generated by operations*** was £78.1 million (2009: £260.9million). Cash outflow from working capital was £21.4million, resultingprincipally from the £20 million payment to other agencies relating to thewithdrawal of the staff hire concession at the start of the year which reversedthe one-off cash inflow received in June 2009. Trade debtor days at 35 daysremained in line with prior year (2009: 35 days). Tax paid was £22.1 million.Net capital expenditure was £29.8 million, reflecting the additionalexpenditure on the Group's key IT projects. These IT projects are nowsubstantially complete and therefore capital expenditure in the year to June2011 will reduce to historic levels of around £15 million per annum. As aresult of the expenditure on the IT projects, this year's depreciation andamortisation charge increased to £14.6 million from £11.6 million last year,and we expect this to increase to around £22 million next year. In respect ofthe James Harvard acquisition, £18.7 million was paid in the year representingthe final deferred consideration payment following the very strongpost-acquisition performance of this business. In the year, the James Harvardacquisition generated £11.4 million operating profit which compares to a totalconsideration paid of £48.3 million.Dividends paid in the year totalled £79.5 million and £3.3 million was paid outin net interest. Principally due to the payment of the dividend, net debtincreased from a net cash position of £0.7 million at the start of the year tonet debt of £77.2 million at the end of the year. During the recession we havereduced net debt by around £40 million, whilst maintaining the payment of theGroup's dividend, which demonstrates the consistency of the Group's operatingcash flow and the robustness of Hays' business model.The Group completed the re-financing of its revolving credit banking facilityon 1 July 2010. The new facility of £300 million provides considerable headroomversus current and future expected levels of Group debt. The covenants in thenew facility require the Group's interest cover to be at least 4:1 and itsleverage ratio (net debt to EBITDA) to be no greater than 2.5:1. The Group hassignificant headroom within these covenants.
Capital structure and dividend
The Board's current priorities for our free cash flow are to fund Groupdevelopment, maintain the strength of the balance sheet and to support asustainable dividend policy. After taking account of the improving tradingtrends in the second half of the year, the Board's confidence in the outlookand the strength of the Group's balance sheet, the Board proposes to maintainthe final dividend at last year's level of 3.95 pence per share, equating to £54.2 million. This would make a total dividend for the full year of 5.80 penceper share (2009: 5.80 pence). The recommended dividend payment date will be 19November 2010 and will be paid to shareholders on the register at close ofbusiness on 22 October 2010.
Retirement benefits
The Group's pension liability under IAS 19 at 30 June 2010 of £67.1million (£48.3 million net of deferred tax) decreased by £42.1 million compared to 30June 2009, primarily due to the greater than expected return from the scheme'sassets and the lower than expected level of underlying scheme liabilities,partially offset by a decrease in the discount rate. During the year, theCompany contributed £5.5 million of cash into the defined benefit scheme, whichincluded £1.2 million additional funding towards the pension deficit.To address the pension deficit, Hays has agreed in principal with the Trusteesof the pension scheme to increase its deficit funding into the scheme to £12million per annum (£9 million net of tax), increasing thereafter by 3% perannum, with effect from the 2011 financial year. This revised level of annualpayments towards the deficit funding is at the lower end of the guidancepreviously given of between £10 million and £20 million per annum.
Board change
As announced on 15 July 2010, Bob Lawson, the present Chairman, is due toretire from the Board on 10 November 2010 and will be replaced by Alan Thomson.Alan brings a wealth and depth of international experience both from hiscurrent roles as Chairman of Bodycote plc, Senior Independent Director andAudit Committee Chairman of Johnson Matthey plc, non-executive director ofAlstom SA, and from his previous role as Group Finance Director of Smiths Groupplc. The Board would like to thank Bob for his considerable contribution overhis 12 years with the Group. Bob oversaw the transformation of Hays from aconglomerate into a pure-play professional recruitment business and has alsobeen instrumental in developing our recruitment business from being aprincipally UK business into an international group which now operates in 28countries and generates the majority of its fees from outside the UK. The Boardwishes him every success in the future.
Current trading
The outlook across 90% of our markets continues to improve, including the UKprivate sector. The agility and flexibility of our business, combined with theinvestments we have made during the downturn, ideally position us to capitaliseon the significant growth opportunities that are increasingly present acrossour markets. Treasury managementThe Group's treasury operations remain straight forward and uncomplicated withGroup operations financed by retained earnings and bank borrowings. On 1 July2010 the Group completed the renewal of its reduced £300 million revolvingcredit facility, in place until January 2014, and it uses this facility tomanage its day-to-day working capital requirements as appropriate. 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 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. There are a number of potential risks anduncertainties that could have a material impact on the Group's financialperformance and position. These include risks relating to the cyclical natureof our business, competitive environment, candidate due-diligence, reliance ontechnology, talent, contract risk, changing legal and regulatory environmentand foreign exchange. A full description of these risks and our mitigatingactions will be provided in the 2010 Annual Report.Hays plc250 Euston RoadLondonNW1 2AFCautionary statementThe preliminary results (the "Report") have been prepared in accordance withthe Disclosure Rules and Transparency Rules of the UK Financial ServicesAuthority and are 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 actual results 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.Consolidated Income Statementfor the year ended 30 June 2010 2010 Exceptional Before items (note 4) exceptional & discontinued (In £'s million) Note items operations 2010 2009Turnover Continuing operations 2,691.1 - 2,691.1 2,447.7Net Fees Continuing operations 3 557.7 - 557.7 670.8
Operating profit from continuing operations 3 80.5 (41.4)
39.1 158.0Finance income 6 0.7 - 0.7 1.9Finance cost 6 (10.1) - (10.1) (8.9)Profit before tax 71.1 (41.4) 29.7 151.0Tax 7 (26.6) 3.5 (23.1) (45.2)
Profit from continuing operations after tax 44.5 (37.9) 6.6 105.8Profit from discontinued operations - 2.7
2.7 -Profit attributable to equity 44.5 (35.2) 9.3 105.8holders of the parent
Earnings per share from continuing
operations - Basic 9 3.25p (2.77)p 0.48p 7.72p- Diluted 9 3.21p (2.73)p 0.48p 7.71p
Earnings per share from continuing
and discontinued operations - Basic 9 3.25p (2.57)p 0.68p 7.72p- Diluted 9 3.21p (2.54)p 0.67p 7.71p Consolidated Statement of Comprehensive Incomefor the year ended 30 June(In £'s million) 2010 2009Profit for the financial year 9.3 105.8
Currency translation adjustments taken to equity 6.8 15.9Gain on sale of own shares taken to equity - 5.4Actuarial gain/(loss) on defined benefit pension scheme 47.4 (21.2)Tax on items taken directly to equity (13.3) 5.2Net income recognised directly in equity 40.9 5.3Total recognised income and expense for the year 50.2 111.1Attributable to equity shareholders of the parent
50.2 111.1Consolidated Balance Sheetat 30 June(In £'s million) Note 2010 2009Non-current assets Goodwill 185.6 174.9Other intangible assets 62.1 38.6
Property, plant and equipment
23.8 29.1Deferred tax assets 29.0 42.9 300.5 285.5Current assets Trade and other receivables 407.2 352.4Cash and cash equivalents 74.7 55.0 481.9 407.4Total assets 782.4 692.9Current liabilities Trade and other payables (371.9) (312.5)Current tax liabilities (14.6) (16.3)Bank loans and overdrafts (151.9) -Provisions (7.9) - (546.3) (328.8)Non-current liabilities Bank loans and overdrafts - (54.3)
Retirement benefit obligations 10
(67.1) (109.2)Provisions (36.7) (46.2) (103.8) (209.7)Total liabilities (650.1) (538.5)Net assets 132.3 154.4Equity Called up share capital 14.7 14.7Share premium account 369.6 369.6Capital redemption reserve 2.7 2.7Retained earnings (313.0) (282.6)Other reserves 58.3 50.0Total shareholders' equity 132.3 154.4
The financial statements were approved by the Board of Directors and authorised for issue on 1 September 2010.
Signed on behalf of the Board of Directors
R A Lawson P VenablesConsolidated Statement of Changes in Equityfor the year ended 30 June 2010 Capital Share Share redemption premium Retained Other (In £'s million) capital reserve account earnings reserves TotalBalance at 1 July 2009 14.7 2.7 369.6 (282.6) 50.0 154.4
Currency translation adjustments - - - - 6.8 6.8Actuarial gains on defined benefit pension scheme - - - 47.4 - 47.4Tax on items taken directly to reserves - - - (13.3) - (13.3)Net income recognised directly in equity - - - 34.1 6.8 40.9Profit for the year - - - 9.3 - 9.3Total recognised income for the year - - - 43.4
6.8 50.2Dividends paid - - - (79.5) - (79.5)Share-based payment schemes - - - 6.5 0.7 7.2Other share movements - - - (0.8) 0.8 -Balance at 30 June 2010 14.7 2.7 369.6 (313.0) 58.3 132.3
for the year ended 30 June 2009
Capital Share Share redemption premium Retained Other (In £'s million) capital reserve account earnings reserves TotalBalance at 1 July 2008 14.7 2.7 369.6 (307.0) 43.0 123.0
Currency translation adjustments - - - - 15.9 15.9Actuarial profits on defined benefit pension scheme - - - (21.2) - (21.2)Tax on items taken directly to reserves - - - 5.2 - 5.2Net (expense)/income recognised directly
in equity - - - (16.0) 15.9 (0.1)Profit for the year - - - 105.8 - 105.8
Total recognised income for the year - - - 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 Consolidated Cash Flow Statementfor the year ended 30 June (In £'s million) Note 2010 2009Operating profit from continuing operations 39.1 158.0Adjustments for: Exceptional items 4 37.3 - Depreciation of property, plant and equipment 11.8 10.4 Amortisation of intangible fixed assets 2.8 1.2 Loss on disposal of property, plant and equipment 0.1 0.8 Net movement in provisions (4.2) 0.1 Movement in employee benefits and other items 8.5 0.4 56.3 12.9
Operating cash flows before movement in working capital 95.4 170.9Changes in working capital (Increase)/decrease in receivables (50.6) 99.0Increase(decrease) in payables
29.2 (9.0) (21.4) 90.0Cash generated by operations 74.0 260.9Income taxes paid (22.1) (56.5)
Net cash from operating activities 51.9 204.4Investing activities Purchases of property, plant and equipment (6.7) (8.2)Proceeds from sales of business and related assets 1.1 -Purchase of intangible assets (23.1) (28.8)Cash paid in respect of acquisitions made in previous years (17.9) (5.4)Interest received 0.7 1.9Net cash used in investing activities
(45.9) (40.5)Financing activities Interest paid (4.0) (4.6)Equity dividends paid (79.5) (79.3)
Cash outflow in respect of share buy-back - (2.1)Purchase of own shares (0.4) -Proceeds from share option exercises 0.2 -Proceeds from sale of own shares - 5.4(Repayment)/issue of loan notes (0.8) 0.6Increase/(decrease) in bank loans and overdrafts 98.4 (82.7)Additional pension scheme funding (1.2) (2.7)Net cash from/(used) in financing activities 12.7 (165.4)Net increase/(decrease) in cash and cash equivalents 18.7 (1.5)Cash and cash equivalents at beginning of year 11 55.0 54.0Effect of foreign exchange rate changes 1.0 2.5Cash and cash equivalents at end of year 11
74.7 55.0
Notes to the Consolidated Financial Statements
1 Statement under s498 - publication of non-statutory accounts
The financial information set out in this preliminary announcement does notconstitute statutory financial statements for the years ended 30 June 2010 or2009, for the purpose of the Companies Act 2006, but is derived from thosestatements. Statutory financial statements for 2010, on which the Group'sauditors have given an unqualified report which does not contain statementsunder Section 498(2) or (3) of the Companies Act 2006, will be filed with theRegistrar of Companies prior to the Group's next annual general meeting.Statutory financial statements for 2009 have been filed with the Registrar ofCompanies. The Group's auditors have reported on those accounts; their reportswere unqualified and did not contain statements under Section 498(2) or (3)
ofthe Companies Act 2006.2 Basis of preparation
Whilst the financial information included in this preliminary announcement hasbeen prepared in accordance with the International Financial ReportingStandards (IFRSs) as adopted for use in the European Union and as issued by theInternational Accounting Standards Board, this announcement does not itselfcontain sufficient information to comply with IFRS. The accounting policiesapplied in preparing this financial information are consistent with the Group'sfinancial statements for the year ended June 2009 with the exception ofintangible assets, where software incorporated into major ERP implementationsthat support the recruitment process and financial reporting is amortised overa life of up to seven years, and the following new accounting standards andamendments which were mandatory for accounting periods beginning 1 January2009, none of which had any material impact on the Group's results or financialposition.IAS 1 (revised 2007) Presentation of Financial StatementsIFRS 8 Operating SegmentsIFRS 2 (amendment) Share-Based Payment - Vesting Conditions and Cancellations
3 Segmental information
The Group's continuing operations comprise one class of business, that of specialist recruitment.
(In £'s million) 2010 2009Net fees from continuing operations Asia Pacific 146.3 149.1Continental Europe & Rest of World
167.5 191.0United Kingdom & Ireland 243.9 330.7 557.7 670.8 2010 Before 2010 exceptional Exceptional (In £'s million) items items 2010 2009
Operating profit from continuing operations Asia Pacific 52.0 - 52.0 61.4Continental Europe & Rest of World 17.1 (1.4)
15.7 33.1United Kingdom & Ireland 11.4 (40.0) (28.6) 63.5 80.5 (41.4) 39.1 158.0 4 Exceptional items
During the year the Group incurred an exceptional charge of £41.4 million in relation to the following items:
On 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 £30.4 million which is currently under appeal. The effect ofthis fine and legal costs associated with the appeal has been recognised in theIncome Statement as an exceptional charge of £29.0 million. The fine has notyet been paid and a current liability of £30.4 million is held on the balancesheet within trade and other payables, pending the outcome of the appeal.The Group incurred a non-recurring restructuring cost of £12.4 million whichprincipally relates to back office staff redundancy costs of £7.9 million,onerous property leases of £2.5 million and non-cash fixed asset write down of£2.0 million following the near completion of the United Kingdom back-officeautomation project. The exceptional charge generated a tax credit of £3.5million.The cash impact from the exceptional items as at the balance sheet date was £4.1 million with a further £35.3 million cash outflow expected in the future,primarily during the financial year to 30 June 2011.
In the prior year, non-recurring net costs of £0.3 million included within operating costs have not been restated (note 5).
5 Operating profit from continuing operations
The following costs are deducted from turnover to determine net fees fromcontinuing operations:(In £'s million) 2010 2009Turnover 2,691.1 2,447.7
Remuneration of temporary workers (1,811.8) (1,672.4)Remuneration of other recruitment agencies
(321.6) (104.5)Net fees 557.7 670.8
Profit from operations is stated after charging/(crediting) the following items to net fees of £557.7 million (2009 - £670.8 million):
2010 Before 2010 exceptional Exceptional (In £'s million) items items 2010 2009Staff costs 345.0 7.9 352.9 371.3
Depreciation of property, plant & equipment 11.8 2.0 13.8 10.4Amortisation of intangible assets 2.8 -
2.8 1.2Auditors' remuneration 1.2 - 1.2 1.2Other external charges 116.4 31.5 147.9 128.7 477.2 41.4 518.6 512.8
The operating costs in the prior year include restructuring costs of £8.0 million and a release of £7.7 million in respect of prior years share based payment charges as a result of the change in performance (net £0.3 million).
6 Finance income and finance costs
Finance income(In £'s million) 2010 2009Interest on bank deposits 0.7 1.9Finance costs(In £'s million) 2010 2009
Interest payable on bank overdrafts and loans (2.3) (5.4)Pension Protection Fund levy (1.1) (1.1)Net interest on pension obligations
(6.7) (2.4) (10.1) (8.9)Net finance charge (9.4) (7.0) 7 Tax
Factors affecting the tax charge for the year
The current tax charge for the year differs from the standard rate of corporation tax in the UK of 28.0% (2009 - 28.0%). The differences are explained below:
2010 Before 2010 exceptional Exceptional (In £'s million) items items 2010 2009
Profit before tax from continuing operations 71.1 (41.4) 29.7 151.0Tax at the standard rate of UK corporation tax of 28.0% (2009 - 28.0%) (19.9) 11.6 (8.3) (42.2)Factors affecting charge for year: Tax effect of expenses that are not deductible in determining taxable profit (2.9) (8.1) (11.0) (1.1)Adjustment in respect of foreign tax rates (2.9) -
(2.9) (2.4)Prior year adjustments 1.8 - 1.8 3.8Unrelieved overseas losses (1.5) - (1.5) (2.7)
Impact of share-based payment charges and (1.2) - (1.2) (0.6)share options Tax on continuing operations (26.6) 3.5 (23.1) (45.2)Effective tax rate for the year on continuing 37.4% 8.5%
77.8% 29.9%operations 8 Dividends
The following dividends were paid by the Group and have been recognised as distributions to equity shareholders in the year:
2010 2009 pence per 2010 pence per 2009 share £ million share £ millionPrevious year final dividend 3.95 54.2 3.95 54.0Current year interim dividend 1.85 25.3 1.85 25.3 79.5 79.3The following dividends are proposed by the Group in respect of the accountingyear presented: 2010 2009 pence per 2010 pence per 2009 share £ million share £ millionInterim dividend 1.85 25.3 1.85 25.3Final dividend (proposed) 3.95 54.2 3.95 54.0 5.80 79.5 5.80 79.3 The final dividend for 2010 of 3.95 pence per share (£54.2 million) will be proposed at the AGM on 10 November 2010 and has not been included as a liability as at 30 June 2010. If approved, the final dividend will be paid on 19 November 2010 to shareholders on the register at the close of business on 22 October 2010.9 Earnings per share Weighted average number of Per share Earnings shares amountfor the year ended 30 June 2010 (£'s million) (million) (pence)Continuing operations before exceptional items: Basic earnings per share from continuing operations 44.5 1,371.1 3.25Dilution effect of share options - 15.0 (0.04)Diluted earnings per share from continuing operations 44.5 1,386.1 3.21Continuing operations after exceptional items: Basic earnings per share from continuing operations 6.6 1,371.1 0.48Dilution effect of share options - 15.0 -Diluted earnings per share from continuing operations 6.6 1,386.1 0.48Discontinued operations: Basic earnings per share from discontinued operations 2.7 1,371.1 0.20Dilution effect of share options - 15.0 (0.01)Diluted earnings per share from discontinued operations 2.7 1,386.1 0.19Continuing and discontinued operations: Basic earnings per share from continuing and discontinued operations 9.3 1,371.1 0.68Dilution effect of share options - 15.0 (0.01)Diluted earnings per share from continuing and
discontinued operations 9.3 1,386.1 0.67Reconciliation of earnings(In £'s million) Earnings
Continuing operations before exceptional items 44.5Exceptional items (note 4) (41.4)Tax credit on exceptions items (note 7)
3.5Continuing operations 6.6 Weighted average number of Per share Earnings shares amountfor the year ended 30 June 2009 (£'s million)
(million) pence
Continuing operations before and after exceptional items: Basic earnings per share from continuing operations 105.8 1,370.5 7.72Dilution effect of share options -
1.1 (0.01) Diluted earnings per share from continuing operations 105.8 1,371.6 7.71
There were no discontinued operations in the prior year.
The weighted average number of shares in issue for both years exclude shares held in treasury and shares held by the Hays Employee Share Trust (Jersey) Limited.
10 Retirement benefit obligations
(In £'s million) 2010 2009Deficit in the scheme brought forward
(109.2) (88.1)Current service cost (4.1) (4.5)Contributions 5.5 7.0Net financial return (6.7) (2.4)Actuarial gain/(loss) 47.4 (21.2)
Deficit in the scheme carried forward
(67.1) (109.2)
11 Movement in net (debt)/cash
1 July Cash Exchange 30 June(In £'s million) 2009 flow movement 2010Cash and cash equivalents 55.0 18.7 1.0 74.7Bank loans and overdrafts (54.3) (97.6) - (151.9) 0.7 (78.9) 1.0 (77.2)
The table above is presented as additional information to show movement in net (debt)/cash, defined as cash and cash equivalents less bank loans and overdrafts.
12 Subsequent events
On the 1 July 2010 the Group renewed its unsecured revolving credit facility in the process reduced the facility from £460 million to £300 million. The new facility expires in January 2014. The financial covenants under the renewed 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 2.5:1. The interest rate of the facility is based on a ratchet mechanism with a margin payable over LIBOR in the range of 1.75% to 2.25%.
13 Like-for-like results
Like-for-like results represent organic growth/decline of continuing activities, pre exceptional items at constant currency.
For the year ended 30 June 2010 this is calculated as follows: (In £'s million)
Net fees for the year ended 30 June 2009 670.8Foreign exchange impact 37.2Net fees for the year 30 June 2009 at constant currency 708.0Fee reduction resulting from organic decline (150.3)Net fees for the year ended 30 June 2010 557.7Profit from operations for the year ended 30 June 2009 158.0Foreign exchange impact 13.9Profit from operations for the year ended 30 June 2009 at constant currency 171.9Profit from operations reduction resulting from organic decline (91.4)Profit from operations for the year ended 30 June 2010 80.5
14 Like-for-like H1 v H2 analysis by division
Net fee growth Q1 Q2 H1 Q3 Q4 H2 FYversus same period last year 2010 2010 2010 2010 2010 2010 2010Asia Pacific (45%) (32%) (39%) 3% 28% 11% (18%)Continental Europe & Rest of World (32%) (27%) (29%) (7%) 16% 1% (16%)United Kingdom & Ireland (41%) (30%) (37%) (18%) (6%) (11%) (26%)Group (40%) (30%) (35%) (10%) 8% (2%) (21%)
H1 10 is the period from 1 July 2009 to 31 December 2009. H2 10 is the period from 1 January 2010 to 30 June 2010.
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