REG - Hays PLC - Third Quarter Trading Update
13/04/2021 07:00
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RNS Number : 2174V Hays PLC 13 April 2021
QUARTERLY UPDATE
FOR THE THREE MONTHS ENDED
31 MARCH 2021
13 April 2021
Financial summary
Growth in net fees for the quarter ended 31 March 2021 (Q3 FY21)
(versus the same period last year) Growth
Actual LFL
By region:
Australia & New Zealand (ANZ) (5)% (13)%
Germany (4)% (5)%
United Kingdom & Ireland (UK&I) (14)% (14)%
Rest of World (RoW) (10)% (8)%
Total (9)% (10)%
By segment:
Temporary (6)% (7)%
Permanent (13)% (13)%
Total (9)% (10)%
Note: unless otherwise stated, all growth rates discussed in this statement
are LFL (like-for-like) fees, representing year-on-year organic growth of
continuing operations at constant currency.
Overview
· Fees down 10% (Q2 21: (19)%). Although markets remain impacted by
the pandemic, Temp and especially Perm activity improved in all regions.
Encouragingly, we saw strong sequential fee growth, particularly in March
· Given improving fees and good underlying cost management, and assuming
a continuation of current market conditions, FY21 operating profit is expected
to be at least £85 million
· Australia & New Zealand: fees down 13%, with momentum
improving gradually through the quarter, particularly in Perm. Temp and Perm
fees declined by 14% and 10% respectively
· Germany: fees down 5%, with good sequential improvement through
the quarter as business confidence improved. Fees in our largest market of
Contracting declined by 4%, with improving volumes. Temp fees were down 1%,
driven by record hours per Temp worker and high Temp utilisation. Perm fees
down 16%
· UK & Ireland: fees down 14%, with momentum improving through
the quarter, particularly in Perm. Temp & Perm down 12% and 18%
respectively, while the Public sector again showed resilience, down 8%,
despite school closures impacting Education fees
· Rest of World: fees down 8%. EMEA ex-Germany down 10%, with France
and Belgium down 16% and 15%, while Switzerland and Italy grew by 2% and 7%
respectively. Americas fees down 8%, helped by flat fees in the USA. Asia down
2%, led by China up 20%, partly helped by easier growth comparatives
· Group consultant headcount was up 3% in the quarter and down 12%
year-on-year
· Cash collection remains strong, with underlying net cash of c.£385
million (31 December 2020: £379.5 million; 30 June 2020: £366.2 million).
All short-term tax deferrals have now been paid in full
Commenting on the Group's performance, Alistair Cox, Chief Executive, said:
"Despite our markets remaining impacted by the pandemic, we continued to see
improving momentum across the quarter and I am pleased to say Group fees were
ahead of our expectations. This was most evident in our largest market of
Germany, driven by increased business confidence and client investments.
Australia and the UK saw improvement, particularly in Perm, while fees in the
Americas and Asia both grew sequentially, led by the USA and China. Overall,
there are clear signs of skill shortages in certain industries, notably
Technology and Life Sciences.
"Looking ahead, we expect operating profit for FY21 to be at least £85
million, ahead of market expectations((1)). This is despite making significant
investments in our 'Return to Growth' programme, which is on-track and
performing well. Our market-leading positions, strong management teams
globally and financial strength mean we are well-placed to capitalise on the
opportunities we see. We are confident we will continue to take further market
share as clients and candidates look for our expert recruitment guidance, both
during and after COVID."
Group
Q3 trading overview and sequential fee progress
The Board remains extremely grateful for the commitment and innovation shown
by our colleagues as they continue to operate through challenging
circumstances, including third-wave lockdowns in most of Europe.
In our third quarter, Group net fees continued to be impacted by the pandemic,
decreasing by 10% on a like-for-like basis versus the prior year. On an actual
basis, net fees decreased by 9%, with the weakening of Sterling versus the
Australian Dollar and the Euro modestly increasing our reported net fees.
Overall consultant engagements with clients and candidates increased during
the quarter and since the onset of the pandemic, the Group's quarterly net fee
trend has improved from minus 34% (Q4 FY20) to minus 29% (Q1 FY21), minus 19%
(Q2 FY21) and now minus 10%. For reference, fees in Q3 FY20 declined by 7%.
Like-for-like net fees in Temp (61% of Group fees) and Perm (39% of Group
fees) declined by 7% and 13% respectively. Encouragingly, in Temp we have seen
a lengthening of the average duration of assignments, together with an
increase in average Temp hours worked, helped by very low levels of Temp
worker vacations and sickness. Perm activity also significantly increased in
February and March.
Overall, our largest specialism of IT (c.26% of Group fees) fell by 7%,
Construction & Property fell by 11% and Accountancy & Finance by 17%.
Life Sciences grew by a strong 12%, and our large Corporate Accounts business,
Hays Talent Solutions, was again resilient, with fees down 1%.
FY21 operating profit outlook and Group headcount
Activity levels improved in all regions and we saw strong sequential Group fee
growth, particularly in March which encouragingly delivered our highest
period((2)) of net fees since the start of the global pandemic. March 2021
fees were c.4% above March 2020 fees, although remain c.13% below March 2019.
To date, second and third-wave lockdowns have had minimal negative impact on
our fees. However, the unpredictable nature of the pandemic means our forward
visibility remains limited.
Our cost base increased slightly over the quarter to an average of c.£68
million per period((2)), primarily as consultant commissions increased
proportionately with the rise in net fees, together with the additional cost
of increased consultant headcount. We continue to tightly manage all
discretionary costs, but also recognise that lockdowns and travel restrictions
mean our non-payroll costs remain artificially low, c.£3.5 million per
period((2)) below pre-pandemic levels. As restrictions ease and offices
reopen, we expect some of these costs will increase, especially in FY22.
As a result of improving net fee performance and good cost control, Group
operating profit for FY21 is expected to be at least £85 million.
This includes c.£15 million of operating expenditure relating to our 'Return
to Growth' (RTG) investment programme. As previously guided, c.£11 million of
RTG investment is expected in H2, and is included in the above cost base per
period((2)). We remain confident that our RTG projects, targeting attractive
structural growth sectors including IT, Life Sciences and large Corporate
Accounts, will accelerate medium-term growth and position Hays to take further
market share. We anticipate investing at least the same net amount in RTG
projects in FY22.
Group consultant headcount increased by 3% in the quarter and decreased by 12%
year-on-year. Overall, we expect Group headcount will increase by a further
2-4% in Q4 FY21, as we invest in both our 'Return to Growth' investment
programme and in other recruitment specialisms. The positive fee momentum
noted above has significantly improved our average productivity per consultant
to historically high levels and, going forward, material fee growth will
increasingly be driven by additional consultant headcount.
As with FY20, Easter falls entirely in our fourth quarter. We therefore expect
no material year-on-year working day effects in Q4 FY21.
((1)) As at 12 April 2021, Bloomberg reports market consensus operating
profit for the year to 30 June 2021 to be c.£61 million.
((2)) Due to the cycle of our internal Group reporting, the Group's annual
cost base equates to c.12.5x our cost base per period. We report our annual
fees over 13 periods, based on a mixture of four-weekly and monthly reporting
businesses This is consistent with prior years.
Australia & New Zealand (17% net fees)
Net fees in Australia & New Zealand (ANZ) declined by 13%, against a
relatively resilient Q3 FY20, particularly in Temp. Overall net fees improved
modestly through the quarter, with Perm rebounding faster than Temp.
Our Temp business, which represented 69% of our ANZ net fees, reduced by 14%
while Perm net fees fell by 10%. Public sector net fees, which represented 36%
of ANZ, decreased by 10%, while Private sector net fees fell by 15%.
Australia net fees decreased by 14%. Our largest regions of New South Wales
and Victoria, which represented 51% of Australia net fees, declined by 16% and
21% respectively. South Australia, ACT and Queensland demonstrated relative
resilience, down 3%, 6% and 11% respectively.
At the Australia specialism level, Construction & Property, our largest
business, declined by 17%. Accountancy & Finance, IT and Office Support
were also difficult, down 25%, 16% and 15% respectively, although HR grew by a
good 7%. Our other smaller specialisms collectively fell by 4%.
New Zealand decreased by 1%, as momentum improved following the relaxing of
lockdown rules.
ANZ consultant headcount increased by 7% in the quarter and declined by 6%
year-on-year.
Germany (27% net fees)
Net fees in Germany fell by 5%, with good sequential fee improvement through
the quarter. Overall business confidence continued to improve, including
increased client investments, particularly in Contracting.
Our largest Germany specialism of IT decreased by 9%, while our second
largest, Engineering, declined by 10%. Accountancy & Finance fell by 6%,
although Life Sciences and Construction & Property were both much stronger
and each grew by 15%. We also saw solid growth in fees in the Public sector
(14% of Germany fees), which increased by 4%.
Our largest area of Contracting (c.56% of Germany net fees), which is
primarily in the IT sector and where we operate a freelance model, declined by
4%, with improving volumes.
Temp (c.29% of Germany net fees), where we employ temporary workers as
required under German law, primarily in Automotive and Manufacturing sectors,
saw net fees decline by 1%. Average Temp volumes, while down versus prior
year, improved through the quarter. We also saw record hours per Temp worker,
driven by very high levels of Temp utilisation, mainly due to low vacation and
sickness levels, some of which will reverse in the coming months. As expected,
there were no temp severance costs in the quarter.
Perm, which represented c.15% of Germany net fees, declined by 16%.
Consultant headcount increased by 3% in the quarter and declined by 5%
year-on-year.
United Kingdom & Ireland (22% net fees)
Net fees in the United Kingdom & Ireland (UK&I) declined by 14%, but
with improved momentum, particularly in Perm. Our largest business of Temp,
63% of UK&I fees, fell by 12% while Perm fees decreased by 18%.
The Private sector, 66% of UK&I net fees, declined by 17%. The Public
sector again showed relative resilience and decreased by 8%, despite c.£2
million lower Education fees as schools were closed due to the pandemic for
much of the quarter. Encouragingly, activity in Education has significantly
rebounded since schools reopened.
All regions traded broadly in line with the overall UK business, apart from
the South West & Wales and Northern Ireland, which both declined by 10%,
and Scotland and the North, down 20% and 19% respectively. Our largest UK
region of London fell by 17%, and in Ireland our business decreased by 11%.
At the specialism level, Life Sciences and IT again performed resiliently,
with fees down 3% and 4% respectively. Our large Corporate Accounts business,
Hays Talent Solutions, again substantially outperformed the UK average, with
flat fees. Construction & Property and Office Support both saw improved
momentum, down 13% and 12% respectively, although Accountancy & Finance
and Education remained tough, down 25% and 34% respectively, with the latter
driven by school closures.
Consultant headcount increased by 3% in the quarter and declined by 17%
year-on-year.
Rest of World (34% net fees)
Our Rest of World (RoW) division, comprising 28 countries, saw net fees
decline by 8%, with improvement across all sub-regions. Perm, which
represented 65% of RoW net fees, decreased by 11%. Temp was more resilient and
declined by 2%.
EMEA ex-Germany (61% of RoW net fees) net fees decreased by 10%. Fees in
France, our largest RoW country, declined by 16%, while Belgium and Spain
declined by 15% and 14% respectively. Poland again demonstrated relative
resilience, with flat fees, while encouragingly Italy and Switzerland both
grew, by 7% and 2% respectively.
The Americas (22% of RoW) net fees decreased by 8%. The USA, our
second-largest RoW country, showed strong momentum through the quarter and
delivered flat fees, including a record performance in March, although Canada
was weaker and declined by 17%. Latin America fell by 20%, including Brazil
down 6%.
Asia (17% of RoW) net fees decreased by 2%, helped in part by easier
year-on-year growth comparatives given the pandemic started earlier in parts
of Asia. China, our third largest RoW country, grew by an excellent 20%, with
Mainland China again significantly outperforming Hong Kong. Singapore grew by
1% and Malaysia declined by 4%, although Japan remained tough with fees down
23%.
RoW consultant headcount increased by 2% in the quarter and declined by 14%
year-on-year.
Cash flow and balance sheet
Underlying net cash of c.£385 million as at 31 March 2021 (31 December 2020:
£379.5 million; 30 June 2020: £366.2 million). Cash collection from our
clients remained strong, and during the quarter we paid the last remaining
pandemic-related short-term tax payment deferrals.
Enquiries
Hays plc Group Finance Director
Paul Venables
Head of Investor Relations
David Phillips
+44 (0) 203 978 2520
+44 (0) 333 010 7122
Finsbury
Guy Lamming
hays@finsbury.com
Anjali Unnikrishnan
( )
( )
Conference call
Paul Venables and David Phillips of Hays plc will conduct a conference call for analysts and investors at 9:00am United Kingdom time on 13 April 2021. The dial-in details are as follows:
Dial-in number +44 (0) 330 551 0200
Dial-in number (UK toll free) +44 (0) 808 109 0700
Password Hays
The call will be recorded and available for playback for seven days as
follows:
Replay dial-in number +44 (0) 20 8196 1480
Access code 7065337#
Reporting calendar
Trading update for the quarter ending 30 June 2021 15 July 2021
Trading update for the quarter ending 30 September 2021 14 October 2021
Preliminary results for the year ending 30 June 2021 26 August 2021
Trading update for the quarter ending 31 December 2021 18 January 2022
Hays Group overview
As at 31 December 2020, Hays had c.10,000 employees in 257 offices in 33
countries. In many of our global markets, the vast majority of professional
and skilled recruitment is still done in-house, with minimal outsourcing to
recruitment agencies, which presents substantial long-term structural growth
opportunities. This has been a key driver of the diversification and
internationalisation of the Group, with the International business
representing c.78% of the Group's net fees in H1 FY21, compared with 25% in
FY05.
Our consultants work in a broad range of sectors covering 20 professional and
skilled recruitment specialisms, and during H1 FY21 our three largest
specialisms of IT (26% of Group net fees), Accountancy & Finance (14%) and
Construction & Property (12%) together represented 52% of Group fees.
In addition to our international and sectoral diversification, in H1 FY21 the
Group's net fees were generated 62% from temporary and 38% from permanent
placement markets, and this balance gives our business model relative
resilience. This well-diversified business model continues to be a key driver
of the Group's financial performance.
Purpose, Net Zero, Equality and our Communities
Our purpose is to benefit society by helping people succeed and enabling
organisations to thrive, creating opportunities and improving lives.
Becoming lifelong partners to millions of people and thousands of
organisations also helps to make our business sustainable.
Our key company value is that we should always try to focus on doing the right
thing. As part of this, Hays has endorsed three United Nations Sustainable
Development Goals (UNSDG's) - Decent Work & Economic Growth, Gender
Equality and Climate Action. These call upon businesses to advance sustainable
development through the investments they make, the solutions they develop and
the practices they adopt.
We believe that responsible companies should have Equality, Diversity &
Inclusion at their heart. Our global ED&I council helps co-ordinate and
drive our actions, sharing best practice.
As a business which exists to help people further their careers and fulfil
their potential, the goal of Decent Work already sits very close to Hays'
purpose. Over the last four years we have placed over one million people
worldwide in their next job. We are proud of this as it helps the individual,
their employer and society in general. We have reinforced our Decent Work and
Economic Growth commitment through the launch of Hays Thrive, our free-to-use
online Training & Wellbeing platform, which is designed to help candidates
upskill and to help employees deal with very difficult times.
We also believe we have a significant role to play in combating climate
change. Accordingly, as part of our ongoing commitment to Environmental,
Social & Governance matters (ESG), we will set material, ongoing carbon
reduction targets across our businesses, and we will become 'Net Zero' in
terms of carbon emissions by the end of 2021. We also recognise the
significant opportunities which 'Green' and 'Sustainable' economies present.
We are already a large recruiter of skilled workers into low carbon, social
infrastructure and ESG roles, and we are actively looking to grow our ESG
talent pools, helping to solve global skill and talent shortages.
Cautionary statement
This Quarterly Update (the "Report") has been prepared in accordance with the
Disclosure Guidance and Transparency Rules of the UK Financial Conduct
Authority and is not audited. No representation or warranty, express or
implied, is or will be made in relation to the accuracy, fairness or
completeness of the information or opinions contained in this Report.
Statements in this Report reflect the knowledge and information available at
the time of its preparation. Certain statements included 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-looking statements involve a number of
risks, uncertainties and assumptions and actual results or events may differ
materially from those expressed or implied by those statements. Accordingly,
no assurance can be given that any particular expectation will be met and
reliance shall not be placed on any forward-looking statement. Additionally,
forward-looking statements regarding past trends or activities shall not be
taken as a representation that such trends or activities will continue in the
future. The information contained in this Report is subject to change without
notice and no responsibility or obligation is accepted to update or revise any
forward-looking statement resulting from new information, future events or
otherwise. Nothing in this Report shall be construed as a profit forecast.
This Report does not constitute or form part of any offer or invitation to
sell, or any solicitation of any offer to purchase or subscribe for any shares
in the Company, nor shall it or any part of it or the fact of its distribution
form the basis of, or be relied on in connection with, any contract or
commitment or investment decisions relating thereto, nor does it constitute a
recommendation regarding the shares of the Company or any invitation or
inducement to engage in investment activity under section 21 of the Financial
Services and Markets Act 2000. Past performance cannot be relied upon as a
guide to future performance. Liability arising from anything in this Report
shall be governed by English Law, and neither the Company nor any of its
affiliates, advisors or representatives shall have any liability whatsoever
(in negligence or otherwise) for any loss howsoever arising from any use of
this Report or its contents or otherwise arising in connection with this
Report. Nothing in this Report shall exclude any liability under applicable
laws that cannot be excluded in accordance with such laws.
This announcement contains inside information.
LEI code: 213800QC8AWD4BO8TH08
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