Last checked at 28 Feb 2011 07:00
HAYS PLC HALF YEAR REPORTSIX MONTHS ENDED 31 DECEMBER 2010
28 February 2011
STRONG NET FEE AND OPERATING PROFIT GROWTH DRIVEN BY INTERNATIONAL BUSINESS
6 months ended 31 December Actual LFL*Unaudited (In £'s million) 2010 2009 growth growthNet fees 326.1 264.8 23% 20%
Operating profit (before exceptional items) ** 52.1 35.1 48% 38%Profit before tax (before exceptional items)** 48.6 30.4 60% Profit before tax 48.6 3.4 1,329% Basic earnings per share (before exceptional items)** 2.34p 1.38p
70% Cash generated by operations 24.7 36.1 (32)% Dividend per share 1.85p 1.85p - Highlights
· Strong International performance driving Group net fee growth of 20%* and
operating profit growth of 38%* versus prior year
· 62% of Group net fees generated from outside the UK (2009: 54%)
· Excellent performance in Asia Pacific delivering 38%* net fee growth
- Australia & New Zealand net fees up 35%*; record performances in Singapore,
China and Japan
· Strong growth in Continental Europe & RoW with net fees up 33%*
- Led by Germany which grew net fees by 38%* and now operating at record
levels
· Consultant headcount increased by 13% across the International business with
investment ongoing
· Overall net fee stability in the UK with strong growth of 27% in private
sector markets, offset by tougher conditions in the public sector which was
down 36%
- Resources redirected to growth sectors such as Accountancy & Finance, IT,
City-related and Corporate Accounts
· Solid cash performance, with working capital increase driven by German temp
fee growth and cash phasing
· 70% growth in basic earnings per share** to 2.34p with interim dividend
unchanged at 1.85p
* LFL (like-for-like) growth represents organic growth of continuing activitiesat constant currency. There were the same number of trading days in 2010 and2009.
** In 2009 numbers are presented before the exceptional item of £27.0 million relating to the OFT fine that is currently under appeal. There were no exceptional items in 2010.
Commenting on these results, Alistair Cox, Chief Executive of Hays, said:
"Our performance this half has been very encouraging with profit up almost 50%. 18 countries around the world grew net fees by more than 25%*, showing
the depth and breadth of momentum across the business. Our outlook remains positive across nearly all of the markets in which we operate.
We continue to invest for growth and have increased our International consultant headcount by 13% this half, with further increases planned for the next six months. Our IT investment projects are now substantially complete and our focus has moved on to fully utilising these systems to drive productivity, efficiency and customer service. We opened businesses in Mexico and the United States in the second quarter, bringing the total number of country operations to 30. With almost two thirds of our net fees now generated outside the UK the business is well placed to capitalise on the excellent long term
structural growth prospects ahead."
EnquiriesHays plc Paul Venables Finance Director + 44 (0) 20 7383 2266James Hilton Investor Relations + 44 (0) 20 7383 2266 Maitland Neil Bennett / Liz Morley + 44 (0) 20 7379 5151 Results presentation webcast
The Half Year Results presentation at 10.00am on 28 February 2011 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 31 March 2011 7 April 2011 Trading Update for quarter ending 30 June 2011
7 July 2011Preliminary Results for year ending 30 June 2011 1 September 2011Interim Management Statement for quarter ending 30 September 2011 6 October 2011 Note to editors
Hays plc is the leading global specialist recruitment group. It is market leader in the UK and Australia, and one of the market leaders in Continental Europe. As at 31 December 2010, the Group employed 7,086 staff operating from 257 offices in 30 countries across 17 specialisms. For the year ended 30 June 2010:
- the Group reported net fees of £557.7 million and operating profit before exceptional items 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; and
- Hays operates in the following countries: Australia, Austria,Belgium, Brazil, Canada, China, Czech Republic, Denmark, France, Germany, Hong Kong,
Hungary, India, Ireland, Italy, Japan, Luxembourg, Mexico, Netherlands,New Zealand, Poland, Portugal, Russia, Singapore, Spain, Sweden, Switzerland,UAE, USA and the United Kingdom.Summary Income Statement growth 6 months ended 31 December (In £'s million) 2010 2009 Actual LFL* Turnover 1,576.0 1,288.3 22% 20% Net fees Permanent 147.4 107.5 37% 34% Temporary 178.7 157.3 14% 11% Total 326.1 264.8 23% 20% Operating profit** 52.1 35.1 48% 38% Conversion rate 16.0% 13.3%
Underlying temporary margin*** 15.1% 15.5% Temporary fees as % of total 55% 59% Period end consultant headcount**** 4,591 4,308
7%
* LFL (like-for-like) growth represents organic growth of continuing activities at constant currency. There were the same number of trading days in 2010 and 2009.
** In 2009 numbers are presented before the exceptional item of £27.0 million relating to the OFT fine that is currently under appeal. There were no exceptional items in 2010.
*** 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 31 December 2010 versus 31 December 2009. The number of consultants has been re-stated in 2009 to include resource analysts in addition to front line consultants.
This has been a strong six months of growth for the Group driven by excellent performances across the International business. Group turnover increased by 20%*, net fees increased by 23% (increasing by 20% on a like-for-like basis*), and operating profit increased by 48% (38% on a like-for-like basis*). Favourable exchange rate movements, principally the Australian Dollar, had a positive impact on the results increasing net fees
by £6.3 million and operating profit by £2.7 million.
Net fees in the permanent business, representing 45% of Group net fees, increased by 34%*, with permanent placement volumes increasing by 34%. We capitalised on the significant improvement in trading conditions across nearly all of our markets this period, with strong performances recorded across Asia Pacific, Continental Europe, South America and UK private sector. Average fees per placement remained flat compared to last year.
The temporary placement business, representing 55% of Group net fees, increased by 11%*. This comprised an increase in volumes of 6%, a favourable increase in mix/hours worked of 8%, partially offset by underlying margins*** slightly lower at 15.1% (2009: 15.5%). Margins have remained broadly stable
since October 2009. The lower level of growth relative to permanent placement reflects the temporary placement business' greater level of resilience in the prior year and its higher weighting to the UK public sector.
The Group's operating cost base, excluding exceptional items, increased by 17%* versus prior year. This was principally due to the 7% increase in consultant headcount versus prior year, together with an increase in commission payments which rose in line with net fees. The Group's conversion rate, which is the
proportion of net fees converted into operating profit**, increased from 13.3% in the prior year to 16.0% this year. This was driven by higher average consultant productivity levels and strong control of the Group's overhead cost base.
Total consultant headcount increased by 3% over the six months to December 2010. This comprised a 13% increase in consultants in the International business where we continue to invest for growth across most countries in which we operate, partially offset by a 7% consultant headcount reduction in the UK where we continue to balance managing the strong recovery and growth in the private sector business with difficult markets in the public sector.
Investment
In Asia Pacific, we opened offices in Suzhou, China and Launceston, Tasmania. In Continental Europe & RoW we opened offices in Mexico City and New Jersey, representing our first entries to the Mexican and US markets respectively, and also offices in Gdynia, Poland and Campinas, Brazil. We expect to continue the roll-out of our office network during the second half of the financial year,with a selective number of openings planned. In the United Kingdom & Ireland we reduced our office network by a total of 19 offices over the period as we continued to drive efficiency savings by consolidating operations in selected towns and cities. 31 December opened/ 30 June Office network 2010 (closed) (net) 2010 Asia Pacific 45 2 43Continental Europe & RoW 83 4 79United Kingdom & Ireland 129 (19) 148Group 257 (13) 270
We continue to build a stronger, broader-based and more efficient business. We have completed the global roll-out of the new front office system and this now provides us with a state of the art operating platform. We are now focused on fully utilising the capacity of this system to improve service to our clients and customers, together with improving our own efficiency levels.This period has also seen significant consultant headcount investment in most countries across the Group. The increasing level of investment in training across the business has been instrumental in improving the processes of effective selection and training of new and experienced consultants. This will be greatly beneficial to the Group as we continue to build scale by bringing in new recruits in the future. We have also continued to invest in our leadership and management, and currently a total of 150 leaders across the business are undertaking our most senior management development programmes. AsiaPacific growth 6 months ended 31 December (In £'s million) 2010 2009 Actual LFL* Net fees 100.5 64.2 57% 38%Operating profit 36.7 22.1 66% 45%Conversion rate 36.5% 34.4%
Period end consultant headcount**** 1,012 753 34%
In Asia Pacific, net fees increased by 57% (38% on a like-for-like basis*) to £100.5 million and operating profit increased by 66% (45% on a like-for-like basis*) to £36.7 million. The difference between actual growth and like-for-like growth was predominantly due to the appreciation in the Australian Dollar. The business achieved a strong conversion rate of 36.5%,
up from 34.4% in the prior year, as we continued to balance rebuilding shorter term profitability with investment to capitalise on the considerable growth
potential of the region.
In our market leading Australia & New Zealand business, net fees increased by 35%* versus prior year. In the permanent placement business, net fees increased by 51%* with solid momentum throughout the half. In the temporary
placement business, net fees increased by 24%* with demand increasing through the half and reaching all-time record numbers of temporary workers on assignment in December. Growth continues to be broadly based across all specialisms and regions, led by the Financial Services and Resources & Mining specialisms, which each achieved net fee growth in excess of 50%* in the period. Our public sector business, which accounts for 23% of net fees in Australia & New Zealand, achieved good net fee growth of 12%* versus prior year.In Asia, which accounted for 14% of the division's net fees in the period, net fees increased by 69%* versus prior year. All countries across the region recorded strong net fee growth with Singapore, China and Japan each achieving all-time record net fee performances during the half, driven by growth across a broad range of specialisms. We continue to aggressively invest in thesebusinesses in order to achieve our strategy of doubling the size of the region over the next two years.Consultant headcount in Asia Pacific increased by 15% during the half, with consultant headcount increasing by 10% in Australia & New Zealand and by 33% in Asia. The outlook in Australia & New Zealand remains good and we expect to increase consultant headcount modestly in the second half. Whilst the floods in Queensland will impact trading in the second half, this is not anticipated to be material to the Group. In Asia, the outlook remains strong and we are continuing to increase our consultant headcount in order to capitalise on opportunities for long term structural growth across the region.
Continental Europe & Rest of World ('RoW')
growth 6 months ended 31 December (In £'s million) 2010 2009 Actual LFL* Net fees 102.5 79.1 30% 33%Operating profit 13.3 6.8 96% 114%Conversion rate 13.0% 8.6%
Period end consultant headcount**** 1,468 1,227 20%
In Continental Europe & RoW, net fees increased by 30% (33% on a like-for-like basis*) to £102.5 million and operating profit increased by 96% (114% on a
like-for-like basis*) to £13.3 million. The difference between actual growth and like-for-like growth was mainly due to the modest depreciation in the Euro. The conversion rate increased from 8.6% to 13.0% this period due to the strong net fee growth and the return to profitability in the majority of countries across the region this half.Our German business, representing 50% of the division's net fees and most of the division's profit, recorded a 38%* increase in net fees versus prior year. Demand in Germany accelerated through the half as net fees in each of our contracting, temporary placement and permanent placement businesses returned to pre-downturn levels during the second quarter. Our strategy of diversifying our German business into Accountancy & Finance, Construction & Property, Sales &Marketing, Legal and Pharma, continues apace with these businesses collectively accounting for 25% of total net fees in the period. Our market leading position and increasing diversification of the business places us in a strong position to benefit from improving market conditions and the long term structural growth opportunities in the German market.In our other businesses in this division, covering 21 countries, we have seen broad-based and accelerating net fee growth in the half. In France, our second largest country in the division, we recorded 18%* net fee growth versus prior year with momentum building through the half. Brazil, now our third largest country in the division, recorded an exceptional 60%* net fee growth and werecorded net fee growth in excess of 40%* in a further seven countries, with Austria, Brazil, Denmark and Poland recording new highs during the half compared to their pre-recession peaks. Consultant headcount increased by 12% during the half with additions across most countries in the region, led by an 11% increase in Germany and 30% increase in Brazil. The outlook for the second half of the year remains strong and we are continuing to increase our consultant headcount in order to capitalise on the excellent long term structural growth opportunities that exist across this
region.United Kingdom & Ireland growth 6 months ended 31 December (In £'s million) 2010 2009 Actual LFL*Net fees 123.1 121.5 1% 1%Operating profit 2.1 6.2 (66)% (66)%Conversion rate 1.7% 5.1%
Period end consultant headcount**** 2,111 2,328 (9)% In the United Kingdom & Ireland, net fees increased by 1% on an actual and like-for-like basis* to £123.1 million, with operating profit decreasing to £2.1 million. Net fees increased by 16% in the permanent placement business. In the temporary placement business net fees declined by 7% due to its greater weighting to the public sector markets, despite temporary placement net fee growth in the private sector of 18%. The conversion rate declined from 5.1% to 1.7% reflecting a modest increase in the operating cost base as a result of dual-running costs of the back office automation project and modest cost
inflation.
Overall net fee trends have continued to be stable against both the previous six month period and the prior year. In the private sector, we have seen a return to strong growth with net fees increasing by 27% versus prior year. The recovery has been broad-based with notable growth in our Accountancy & Finance, IT, Corporate Accounts and City-related business. We have continued to respond to evolving client requirements in the Corporate Accounts market
and have won a number of important new contracts including American Express, Goldman Sachs and RBS in the period.
In the public sector business, we have continued to face difficult market conditions throughout the period with net fees decreasing by 36% versus prior year, and now down 45% from peak levels. Our front-line businesses have been relatively more resilient, with net fees down 7% versus prior year. Our public sector Back Office and Construction & Property businesses continue to face difficult market conditions, with net fees now down around 60% from peak levels. The UK public sector business currently represents 26% of UK net fees and 9% of Group net fees.Consultant headcount in the United Kingdom & Ireland decreased by 7% during the half as we continued to balance managing the recovery in the private sector with more difficult public sector market conditions. We expect to maintain consultant headcount at broadly similar levels in the second half of the year. The back office automation project is substantially complete and we are now moving a
number of administrative processes to India.
Net finance charge
The net finance charge for the period was £3.5 million (2009: £4.7 million).The average interest rate on gross debt during the period was 2.5% (2009:1.0%), generating net bank interest payable, including amortisation ofarrangement fees, of £2.5 million (2009: £0.8 million). The net interest chargeon the defined pension scheme obligations was £0.8 million (2009: £3.3 million)with the decrease primarily due to the higher level of scheme assets increasingexpected returns. The charge for the Pension Protection Fund levy was £0.2million (2009: £0.6 million). It is expected that the net finance charge forthe year to 30 June 2011 will be around £8 million (2009: £9.4 million).
Taxation
Taxation for the period was £16.5 million, representing an effective tax rateof 34.0% (2009: 37.5%**). The decrease in the effective tax rate was due to thereturn to profitability in most countries in Europe this period. It is expectedthat the effective tax rate for the full year will remain at a similar level tothe first half.Earnings per shareBasic earnings per share before exceptional items** increased 70% to 2.34 pence(2009: 1.38 pence). The increase in earnings per share reflects the higheroperating profit, the reduction in the net finance charge and the decrease
inthe effective tax rate. Cash flow and balance sheetCash flow was solid this period with a 47% conversion of operating profit intooperating cash flow. This was largely a result of net fee growth in ourtemporary placement business, particularly in Continental Europe, increasingthe working capital requirements of the business, and the timing of cash flowsin December. Trade debtor days remained unchanged at 31 days (2009: 31 days).Overall, cash outflow from working capital was £42.9 million and net cashgenerated by operations was £24.7 million (2009: £36.1 million). Tax paid inthe period was £4.4 million (2009: £3.5 million).
Net capital expenditure was lower at £7.9 million (2009: £16.6m), reflecting the substantial completion of the Group's major IT investment programmes. Capital expenditure is expected to remain at a broadly similar level in the second half of the year.
Dividends paid in the period totalled £54.3 million and £5.7 million was paidout in net interest and banking facility arrangement fees. Net debt increasedfrom £77.2 million at the start of the period to £125.7 million at the end ofthe period, primarily due to the payment of the dividend and the increase innet working capital. The Group expects the level of net debt to increasemodestly in the second half of the year. The Group has a £300 million unsecuredrevolving credit facility available, which expires in January 2014.
Capital structure and dividend
The Board's current priorities for our free cash flow are to fund Groupdevelopment, to maintain the strength of the balance sheet and to support asustainable dividend policy. After taking account of the Board's confidence inthe outlook and the strength of the Group's balance sheet, the Board proposesto pay an interim dividend of 1.85 pence per share, which is in line with lastyear. The interim dividend payment date will be 15 April 2011 and will be paidto shareholders on the register at the close of business on 11 March 2011.
Retirement benefits
The Group's pension liability under IAS 19 at 31 December 2010 of £35.2 million(£25.7 million net of deferred tax) decreased by £31.9 million compared to 30June 2010 primarily due to higher than expected asset returns partially offsetby changes to assumptions in respect of inflation and the discount rate. During the period, the Company contributed £8.3 million of cash into thedefined benefit scheme, including £6.0 million additional funding towards thepension deficit in line with previous guidance.
Current trading
The outlook remains positive across nearly all of the markets in which weoperate. In Continental Europe & RoW we continue to see strong growth and inAsia Pacific we are seeing good levels of growth despite facing toughercomparatives. In the UK, we continue to see overall stability with strong feegrowth in the private sector offset by difficult public sector markets. TheBoard is confident in its outlook for the year and, with almost two thirds ofour net fees now generated outside the UK, the business is well placed tocapitalise on the excellent long term structural growth prospects ahead.* LFL (like-for-like) growth represents organic growth of continuing activitiesat constant currency. There were the same number of trading days in 2010 and2009.
** In 2009 numbers are presented before the exceptional item of £27.0 million relating to the OFT fine that is currently under appeal. There were no exceptional items in 2010.
*** 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 31 December 2010 versus 31 December 2009. The number of consultants has been re-stated in 2009 to include resource analysts in addition to front line consultants.
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 renewed its unsecured revolving credit facility and in theprocess reduced the facility from £460 million to £300 million. The facilityexpires in January 2014. The Group uses the facility to manage its day-to-dayworking capital requirements as appropriate. All borrowings are raised by theGroup's UK-based treasury department, which manages the Group's treasury riskin accordance with policies set by the Board. The Group's treasury departmentdoes not engage in speculative transactions and does not operate as a profitcentre.
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 is provided in the 2010 Annual Report. Hays plc250 Euston RoadLondonNW1 2AFResponsibility Statement
We confirm that, to the best of our knowledge:
- the condensed set of financial statements has been presented in
accordance with IAS 34 "Interim Financial Reporting" and gives a true and fair
view of the assets, liabilities, financial position and profit for the Group;
- the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events during the
first six months and description of principal risks and uncertainties for the
remaining six months of the year); and
- the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties' transactions
and changes therein).
This Half Year Report was approved by the Board of Directors and authorised forissue on 27 February 2011. Alistair Cox Paul VenablesChief Executive Group Finance DirectorCautionary statementThis Half Year Report has been prepared solely in compliance withthe Disclosure Rules and Transparency Rules of the UK Financial ServicesAuthority and is 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 actualresults 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.Independent Review Report to Hays plc
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31 December 2010 which comprises the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated cash flow statement, the consolidated statement of changes in equity and related notes 1 to 12. We have read the other information contained in the half-yearly financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed. Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our review. Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditors
London, United Kingdom 27 February 2011
Condensed Consolidated Income Statement
Six months to Six months to 31 December 31 December Year to 2010 2009 30 June(In £'s million) Notes (unaudited) (unaudited) 2010 Turnover Continuing operations 1,576.0 1,288.3 2,691.1Net fees * Continuing operations 2 326.1 264.8 557.7 Operating profit from continuing operations before exceptional items 2 52.1 35.1 80.5 Exceptional items - (27.0) (41.4)Operating profit from continuing operations 2 52.1
8.1 39.1Finance income 0.5 0.3 0.7Finance cost (4.0) (5.0) (10.1) 3 (3.5) (4.7) (9.4)Profit before tax 48.6 3.4 29.7Tax 4 (16.5) (11.4) (23.1)
Profit/(loss) from continuing operations after tax 32.1 (8.0) 6.6Profit from discontinued operations 0.2 - 2.7Profit/(loss) attributable to equity holders of the parent company 32.3 (8.0) 9.3 Earnings per share from continuing operations before
exceptional items - Basic 6 2.34p 1.38p 3.25p - Diluted 6 2.29p 1.37p 3.21p
Earnings per share from continuing operations
- Basic 6 2.34p (0.58)p 0.48p - Diluted 6 2.29p (0.58)p 0.48p
Earnings per share from continuing and discontinued
operations - Basic 6 2.35p (0.58)p 0.68p - Diluted 6 2.31p (0.58)p 0.67p *Net fees are equal to turnover less remuneration of temporary workers and other recruitment agencies.
Condensed Consolidated Statement of Comprehensive Income
Six months to Six months to 31 December 31 December Year to 2010 2009 30 June(In £'s million) (unaudited) (unaudited) 2010 Profit/(loss) for the period 32.3 (8.0) 9.3
Currency translation adjustments 13.1 11.2 6.8Actuarial gain on defined benefit pension scheme 27.3 10.2 47.4Tax on items taken directly to reserves (7.6) (2.8) (13.3)Net income recognised directly in equity 32.8 18.6 40.9Total recognised income and expense for the period 65.1 10.6 50.2Attributable to equity shareholders of the parent company 65.1
10.6 50.2
Condensed Consolidated Balance Sheet
31 December 31 December Year to 2010 2009 30 June(In £'s million) Notes (unaudited) (unaudited) 2010Non-current assets Goodwill 191.4 186.1 185.6Other intangible assets 60.7 55.2 62.1Property, plant & equipment 21.3 26.9 23.8Deferred tax assets 22.0 41.7 29.0 295.4 309.9 300.5Current assets Trade and other receivables 437.7 365.9 407.2Cash and cash equivalents 42.6 119.2 74.7 480.3 485.1 481.9Total assets 775.7 795.0 782.4Current liabilities Trade and other payables (355.7) (356.5) (371.9)Current tax liabilities (27.2) (24.1) (14.6)Bank loans and overdrafts (3.3) - (151.9)Provisions 8 (5.5) (3.2) (7.9) (391.7) (383.8) (546.3)Non-current liabilities Bank loans and overdrafts (165.0) (157.6) -
Retirement benefit obligations 7 (35.2)
(101.3) (67.1)Provisions 8 (34.7) (38.1) (36.7) (234.9) (297.0) (103.8)Total liabilities (626.6) (680.8) (650.1)Net assets 149.1 114.2 132.3Equity Called up share capital 14.7 14.7 14.7Share premium account 369.6 369.6 369.6Capital redemption reserve 2.7 2.7 2.7Retained earnings (312.4) (330.4) (313.0)Other reserves 74.5 57.6 58.3Total shareholders' equity 149.1 114.2 132.3
Condensed Consolidated Cash Flow Statement
Six months to Six months to 31 December 31 December Year to 2010 2009 30 June(In £'s million) Notes (unaudited) (unaudited) 2010
Operating profit from continuing operations 52.1 8.1 39.1Adjustments for: Exceptional items - 27.0 37.3 Depreciation of property, plant and equipment 5.3 4.5 11.8 Amortisation of intangible fixed assets 5.6 0.7 2.8 Loss on disposal of property, plant and equipment - - 0.1 Movements in provisions, employee benefits and other items 4.6 2.2 4.3 15.5 34.4 56.3
Operating cash flow before movement in working capital 67.6
42.5 95.4Changes in working capital (42.9) (6.4) (21.4)Cash generated by operations 24.7 36.1 74.0Income taxes paid (4.4) (3.5) (22.1)
Net cash from operating activities 20.3 32.6 51.9Investing activities Purchase of tangible and intangible assets (7.9) (16.6) (29.8)Proceeds from sales of business and related assets 0.3 - 1.1Cash paid in respect of acquisitions made in previous year - - (17.9) Interest received 0.5 0.3 0.7Net cash used in investing activities (7.1)
(16.3) (45.9)Financing activities Interest paid (6.2) (3.3) (4.0)Equity dividends paid (54.3) (54.2) (79.5)Purchase of own shares - (0.4) (0.4)
Proceeds from share option exercises - - 0.2Repayment of loan notes - (0.8) (0.8)Increase in bank overdrafts & repayment of borrowings 16.4 103.3 98.4 Additional pension scheme funding (6.0) (0.6) (1.2)Net cash (used)/from financing activities (50.1) 44.0 12.7Net (decrease)/increase in cash & cash equivalents (36.9) 60.3 18.7Cash and cash equivalents at beginning of period 74.7 55.0 55.0Effect of foreign exchange rate movements 4.8 3.9 1.0Cash and cash equivalents at end of period 9 42.6
119.2 74.7
(In £'s million) Notes Bank loans and overdrafts at beginning of period (151.9) (54.3) (54.3)Increase in period (16.4) (103.3) (97.6)Bank loans and overdrafts at end of period (168.3)
(157.6) (151.9)Net debt at end of period 9 (125.7) (38.4) (77.2)
Condensed Consolidated Statement of Changes in Equity For the six months ended 31 December 2010
Share Capital Share premium redemption Retained Other (In £'s million) capital account reserve earnings reserves Total Balance at 1 July 2010 14.7 369.6 2.7 (313.0) 58.3 132.3
Currency translation adjustments - - - - 13.1 13.1Actuarial gains on defined benefit pension scheme - - - 27.3 - 27.3Tax on items taken directly to reserves - - - (7.6) - (7.6)Net income recognised directly in equity - - - 19.7 13.1 32.8Profit for the period - - - 32.3 - 32.3Total recognised income for the period - - -
52.0 13.1 65.1Dividends paid - - - (54.3) - (54.3)Share-based payment schemes - - - 2.9 3.1 6.0Balance at 31 December 2010 14.7 369.6 2.7 (312.4) 74.5 149.1
For the six months ended 31 December 2009
Share Capital Share premium redemption Retained Other (In £'s million) capital account reserve earnings reserves Total Balance at 1 July 2009 14.7 369.6 2.7 (282.6) 50.0 154.4
Currency translation adjustments - - - - 11.2 11.2Actuarial gains on defined benefit pension scheme - - - 10.2 - 10.2Tax on items taken directly to reserves - - - (2.8) - (2.8)Net income recognised directly in equity - - - 7.4 11.2 18.6Loss for the period - - - (8.0) - (8.0)Total recognised income/(expense) for the period - - -
(0.6) 11.2 10.6Dividends paid - - - (54.2) - (54.2)Share-based payment schemes - - - 7.0 (3.6) 3.4Balance at 31 December 2009 14.7 369.6 2.7 (330.4) 57.6 114.2
For the year ended 30 June 2010
Share Capital Share premium redemption Retained Other (In £'s million) capital account reserve earnings reserves Total Balance at 1 July 2009 14.7 369.6 2.7 (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 14.7 369.6 2.7 (313.0) 58.3 132.3
Condensed Consolidated Statement of Changes in Equity - Other Reserves For the six months ended 31 December 2010
Own Equity Cumulative (In £'s million) shares reserve translation TotalBalance at 1 July 2010 (4.7) 12.8 50.2 58.3
Currency translation adjustments - - 13.1 13.1Total recognised income for the period -
- 13.1 13.1Share-based payment schemes - 3.1 - 3.1Balance at 31 December 2010 (4.7) 15.9 63.3 74.5
For the six months ended 31 December 2009
Own Equity Cumulative (In £'s million) shares reserve translation TotalBalance at 1 July 2009 (5.5) 12.0 43.5 50.0
Currency translation adjustments - - 11.2 11.2Total recognised income for the period -
- 11.2 11.2Share-based payment schemes (0.1) (3.5) - (3.6)Balance at 31 December 2009 (5.6) 8.5 54.7 57.6
For the year ended 30 June 2010
Own Equity Cumulative (In £'s million) shares reserve translation TotalBalance at 1 July 2009 (5.5) 12.0 43.5 50.0
Currency translation adjustments - - 6.8 6.8Total recognised income for the year -
- 6.8 6.8Share-based payment schemes 0.8 0.7 - 1.5Balance at 30 June 2010 (4.7) 12.7 50.3 58.3 1 Basis of preparation
The condensed consolidated interim financial statements are the results for the six months ended 31 December 2010. The condensed consolidated interim financial statements ("interim financial statements") have been prepared under
International Financial Reporting Standards ("IFRS") as adopted by the European Union, in accordance with International Accounting Standard 34 'Interim
Financial Reporting' and the Disclosure and Transparency Rules of the Financial Services Authority. It is unaudited but has been reviewed by the auditors and their report is attached.
The interim financial statements do not constitute statutory accounts as
defined in Section 434 of the Companies Act 2006 as they do not include all of
the information required for full statutory accounts. The interim financial
statements should be read in conjunction with the statutory accounts for the
year ended 30 June 2010, which were prepared in accordance with IFRS as adopted by the European Union and have been filed with the Registrar of Companies. The
auditors' report on those accounts was unqualified, did not draw attention to
any matters by way of emphasis and did not contain a statement under Section
498 (2) or (3) of the Companies Act 2006.
Accounting policies
The interim financial statements have been prepared on the basis of the
accounting policies and methods of computation applicable for the year ending
30 June 2010. These accounting policies are consistent with those applied in
the preparation of the accounts for the year ended 30 June 2010 with the exception of the following new accounting standards, amendments and interpretations which were mandatory for accounting periods beginning 1 January 2010. Improvements to IFRSs 2009 IFRS 5 Non-current Assets Held for Sale and Discontinued Operations IFRS 8 Operating Segments IAS 1 Presentation of Financial Statements IAS 7 Statement of Cash Flows IAS 17 Leases IAS 36 Impairment of Assets
IFRS 2 Group Cash-Settled Share-Based Payments Transactions - Amendment.
IAS 32 Financial Instrument Presentation - Amendment IAS 39 Financial Instruments - Amendment IFRIC 9 Embedded Derivatives IFRIC 17 Distribution of Non-cash Assets to Owners IFRIC 18 Transfer of Assets from Customers IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
There have been no alterations made to the accounting policies as a result of
considering all of the above amendments that became effective in the period, as these were not material to the Group's operations.
Going Concern
The Group's business activities, together with the factors likely to effect its future development, performance and financial position, including its cash
flows and liquidity position are described in the Interim Management Report.
On 1 July 2010 the Group renewed its unsecured revolving credit facility and in the process reduced the facility from £460 million to £300 million. The
facility expires in January 2014. The Group uses the facility to manage its day-to-day working capital requirements as appropriate. The Group's facility, together with internally generated cash flows, will continue to provide sufficient sources of liquidity to fund its current operations, including contractual and commercial commitments, future growth and any proposed dividends.
The directors have formed the judgment, at the time of approving the condensed
set of financial statements, that there is reasonable expectation that the Group has adequate resources to continue in operational existence for the
foreseeable future. For this reason, the directors continue to adopt the going
concern basis in preparing the condensed consolidated financial statements.
2 Segmental information
Adoption of IFRS 8, Operating Segments The Group has adopted IFRS 8, Operating Segments, with effect from 1 July 2009. IFRS 8 requires operating segments to be identified on the basis of
internal reports about components of the Group that are regularly reviewed by
the chief operating decision maker to allocate resources to the segment and to
assess their performance.
As a result, the Group continues to split the business into three regions, Asia
Pacific, Continental Europe & Rest of World, and United Kingdom & Ireland. The Group's continuing operations comprise one class of business, that of
specialist recruitment.
Net fees and profit from continuing operations The Group does not split turnover by segment in internal reports, as
remuneration of temporary workers and payments to other recruitment agencies,
where the Group acts as principal, are not considered relevant in allocating
resources to segments. The Group's chief operating decision maker instead
focuses on net fees.
Net fees and profit from continuing operations
Six months to Six months to 31 December 31 December Year to 2010 2009 30 June(In £'s million) (unaudited) (unaudited) 2010 Net fees Asia Pacific 100.5 64.2 146.3
Continental Europe & Rest of World 102.5
79.1 167.5United Kingdom & Ireland 123.1 121.5 243.9 326.1 264.8 557.7
Operating profit from continuing operations before exceptional items Asia Pacific 36.7 22.1 52.0Continental Europe & Rest of World 13.3
6.8 17.1United Kingdom & Ireland 2.1 6.2 11.4 52.1 35.1 80.5
Operating profit from continuing operations Asia Pacific 36.7 22.1 52.0Continental Europe & Rest of World 13.3
6.8 15.7United Kingdom & Ireland 2.1 (20.8) (28.6) 52.1 8.1 39.1
3 Finance income and finance costs
Finance income Six months to Six months to 31 December 31 December Year to 2010 2009 30 June(In £'s million) (unaudited) (unaudited) 2010Interest on bank deposits 0.5 0.3 0.7 Finance costs Six months to Six months to 31 December 31 December Year to 2010 2009 30 June(In £'s million) (unaudited) (unaudited) 2010
Interest payable on bank overdrafts and loans (3.0) (1.1) (2.3)Pension Protection Fund Levy (0.2) (0.6) (1.1)Net interest on pension obligations (0.8)
(3.3) (6.7) (4.0) (5.0) (10.1)Net finance charge (3.5) (4.7) (9.4)4 Tax on ordinary activitiesThe Group's consolidated effective tax rate in respect of continuing operations for the six monthsto 31 December 2010 is based on the estimated effective tax rate for the full year of 34.0% (31 December 2009: 335.3%, 30 June 2010: 77.8%).
5 Dividends
The following dividends were paid by the Group and have been recognised as distributions to equity shareholders in the year:
Six months to Six months to 31 December 31 December Year to 2010 2009 30 June(In £'s million) (unaudited) (unaudited) 2010
Final dividend for the year ended 30 June 2009 of 3.95
pence per share - 54.2 54.2Interim dividend for the period to 31 December 2009 of 1.85 pence per share - - 25.3
Final dividend for the year ended 30 June 2010 of 3.95
pence per share 54.3 - - 54.3 54.2 79.5
The interim dividend for the period ended 31 December 2010 of 1.85 pence per share is not included as a liability in the balance sheet as at 31 December 2010.
6 Earnings per share Six months to Six months to 31 December 31 December Year to 2010 2009 30 June(In £'s million) (unaudited) (unaudited) 2010
Earnings from continuing operations before exceptional items 48.6
30.4 71.1Tax on earnings from continuing operations before exceptional items (16.5) (11.4) (26.6)Basic earnings before exceptional items 32.1 19.0 44.5Earnings from continuing operations after exceptional items 48.6 3.4 29.7Tax on earnings from continuing operations after exceptional items (16.5) (11.4) (23.1)Basic earnings after exceptional items 32.1 (8.0) 6.6 Number of shares (million):Weighted average number of shares 1,374.1 1,376.7 1,371.1Dilution effect of share options 26.6 9.5 15.0Weighted average number of shares used for diluted EPS 1,400.7
1,386.2 1,386.1 From continuing operations before exceptional items: Basic earnings per share before exceptional items
2.34p 1.38p 3.25pDiluted earnings per share before exceptional items 2.29p
1.37p 3.21pFrom continuing operations:Basic earnings per share 2.34p (0.58)p 0.48pDiluted earnings per share 2.29p (0.58)p 0.48pFrom continued and discontinued operations:Basic earnings per share from continuing and discountinued operations 2.35p (0.58)p 0.68pDiluted earnings per share from continuing and discontinued operations 2.31p
(0.58)p 0.67p
7 Retirement benefit obligations
Six months to Six months to 31 December 31 December Year to 2010 2009 30 June(In £'s million) (unaudited) (unaudited) 2010
Deficit in scheme brought forward (67.1)
(109.2) (109.2)Current service cost (2.9) (1.7) (4.1)Contributions 8.3 2.7 5.5Net financial return (0.8) (3.3) (6.7)Actuarial gain 27.3 10.2 47.4
Deficit in scheme carried forward (35.2)
(101.3) (67.1) 8 Provisions (In £'s million) Property Other TotalBalance at 1 July 2010 18.6 26.0 44.6Utilised (1.9) (2.8) (4.7)Exchange adjustments 0.2 0.1 0.3
Balance as at 31 December 2010 16.9
23.3 40.2 Current 5.5Non-current 34.7 40.2
Provisions relate to continuing and discontinued operations and are for rents
on certain leased properties for periods in which they are not anticipated to
be in use by the Group. The leases expire in periods up to 2015 and the amounts
will be paid over this period. Other provisions include warranty and
environmental claim liabilities arising as a result of the business disposals
and the Group transformation that concluded in 2004, deferred employee benefit
provisions and restructuring provisions mainly as a result of the back office restructuring. 9 Movement in net debt 1 July Cash Exchange 31 December(In £'s million) 2010 flow movement 2010Cash & cash equivalents 74.7 (36.9) 4.8 42.6Bank loans & overdrafts (151.9) (16.4) - (168.3)Net debt (77.2) (53.3) 4.8 (125.7)
The table above is presented as additional information to show movement in net
debt, defined as cash & cash equivalents less overdrafts & bank loans.
On 1 July 2010 the Group renewed its unsecured revolving credit facility and 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%. As at 31 December 2010, £135 million of the committed facility was un-drawn.
10 Events after the balance sheet date There are no significant events after the balance sheet date to report.
11 Like-for-like results
Like-for-like results represent organic growth of continuing activities at
constant currency.
For the six months ended 31 December 2010 these are calculated as follows: (In £'s million) Net fees for the six months ended 31 December 2009 264.8Foreign exchange impact 6.3Net fees for the six months ended 31 December 2009 at constant currency 271.1Fee increase resulting from organic growth 55.0Net fees for the six months ended 31 December 2010 326.1Profit from operations for the six months ended 31 December 2009 35.1Foreign exchange impact 2.7
Profit from operations for the six months ended 31 December 2009 at constant currency 37.8 Profit from operations increase resulting from organic growth
14.3Profit from operations for the six months ended 31 December 2010 52.1 12 Like-for-like results H1 analysis by division
Net fee growth Q1 Q2 H1versus same period last year 2011 2011 2011Asia Pacific 39% 36% 38%
Continental Europe & Rest of World 27%
37% 33%United Kingdom & Ireland 1% 1% 1%Group 18% 21% 20%
H1 2011 is the period from 1 July 2010 to 31 December 2010.
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