REG - Hays PLC - Final Results
25/08/2022 07:00
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RNS Number : 1426X Hays PLC 25 August 2022
PRELIMINARY
RESULTS
FOR THE YEAR ENDED
30 June 2022
25 August 2022
RECORD FEES & MATERIAL PROFIT GROWTH, DRIVEN BY STRONG MARKETS AND
MANAGEMENT ACTIONS. £262M IN TOTAL CASH DISTRIBUTIONS FOR FY22
Year ended 30 June 2022 2021 Reported LFL
(In £s million)
growth
growth
Net fees ((1)) 1,189.4 918.1 30% 32%
Operating profit 210.1 95.1 121% 128%
Conversion rate ((2)) 17.7% 10.4% +730 bps
Cash generated by operations ((3)) 182.9 130.8 40%
Basic earnings per share 9.22 p 3.67 p 151%
Core dividend per share 2.85 p 1.22 p 134%
Special dividend per share 7.34 p 8.93 p n/a
Note: unless otherwise stated all growth rates discussed in this statement are
LFL (like-for-like), YoY (year-on-year) net fees and profits, representing
organic growth of continuing operations at constant currency.
· Fees up 32%; operating profit up 128% to £210.1 million.
Excellent fee performance in all regions, including 24 country records, driven
by strong client & candidate confidence, our management actions and
continued improved fee margins. Q4 FY22 represented a quarterly fee record,
with fees and activity levels sequentially stable at strong levels
· Australia & New Zealand: fees up 24%; operating profit up 32%
to £51.6 million. Excellent fee growth in Perm, up 60%; slower growth in
Temp, up 9%. Record fees in New Zealand, up 49%
· Germany: record fees, up 34%; operating profit up 152% to £75.6
million. Strong activity levels drove excellent growth in our largest business
of Temp & Contracting, up 31%, with record contractor volumes. Perm up 51%
· UK & Ireland (UK&I): fees up 31%; operating profit up
277% to £43.4 million. Perm fees up an excellent 58%, Temp up 15%. The
Private sector, up 42%, significantly outperformed the Public sector, up 10%
· Rest of World (RoW): fees up 36%, including 22 country records;
operating profit up 234% to £39.5 million((4)). Fees in EMEA ex-Germany up
31%, the Americas up 51% and Asia up 35%
· Investment and profitable growth: consultant headcount increased
by 26% YoY, with additions across all key specialisms and via our Strategic
Growth Initiatives, which continue to perform strongly. Even with our
investments, consultant productivity was at record levels and the Group's
conversion rate((2)) increased by 730 basis points
· Strong cash generation supports £168M in FY22 dividends &
£75M share buyback programme: net cash of £296.2 million. Given confidence
in our strategy, the Board has proposed a final core dividend of 1.90 pence
per share, making a full year core dividend of 2.85 pence and a special
dividend of 7.34 pence per share
Commenting on the results Alistair Cox, Chief Executive, said:
"Performance in all regions was excellent. Our actions to capitalise on
long-term structural opportunities, acute skill shortages and strong markets,
supported by our ability to increase fee margins and the benefits of wage
inflation, delivered record Group fees, 24 country records and 128% operating
profit growth. Germany, our largest business, was the biggest absolute
contributor to our profit growth, while the UK&I and RoW divisions
delivered strong profit recoveries. We also made significant investments to
underpin our long-term growth ambitions as set out at our Investor Day in
April 2022. These Strategic Growth Initiatives helped deliver record fees in
long-term structural growth markets such as Technology, where we exceeded
£300 million in fees for the first time, and in our broader services offering
into large Enterprise clients.
"In addition to our FY22 core dividend of £47.3 million, given the Board's
confidence in our strategy and commitment to returning significant cash to
shareholders, we propose a special dividend of £121.2 million. The Board has
also increased our share buyback programme by a further £18.2 million,
meaning we began FY23 with £75.0 million available for buybacks.
"With macroeconomic uncertainties increasing, we are closely monitoring our
activity levels and KPIs, which remain broadly stable overall at strong
levels. Our focus is now on leveraging the investments we have made and
increasing our already strong consultant productivity. We have a clear
strategy to continually build market-leading positions in the most attractive
structural growth markets, which are characterised by ongoing skill shortages.
Our global network, financial strength and highly experienced management teams
give me confidence that we can navigate current uncertainties and remain
highly focused on delivering our long-term objectives."
(1) Net fees comprise turnover less remuneration of temporary workers and
other recruitment agencies.
(2) Conversion rate is the conversion of net fees into operating profit.
(3) Cash generated by operations is stated after IFRS 16 lease payments.
FY21 cash generated by operations of £130.8 million is also adjusted for
£118.3 million of FY20 payroll tax and VAT deferred which was paid in FY21.
(4) FY22 operating profit includes £4.2 million one-off costs of closing
our Russia business, within our RoW division. Excluding this, RoW operating
profit was £43.7 million and conversion rate was 10.5%.
(5) 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. This is consistent with
prior years.
(6) The underlying Temp margin is calculated as Temp net fees divided by
Temp gross revenue and relates solely to Temp placements in which Hays
generates net fees. This specifically excludes transactions in which Hays acts
as agent on behalf of workers supplied by third party agencies and
arrangements where Hays provides major payrolling services. FY21 Temp margin
included £6.2 million of one-off Germany Temp severance costs. Excluding
this, underlying FY21 Temp margin would have been 14.6%.
(7) Represents percentage of Group net fees and operating profit.
Enquiries
Hays plc
Paul Venables Group Finance Director + 44 (0) 203 978 2520
David Phillips Head of Investor Relations + 44 (0) 333 010 7122
FGS Global
Guy Lamming / Anjali Unnikrishnan hays@fgsglobal.com
Results presentation & webcast
Our results webcast will take place at 8.00am on 25 August 2022, available
live on our website, www.haysplc.com/investors/results-centre
(http://www.haysplc.com/investors/results-centre) . A recording of the webcast
will be available on our website later the same day along with a copy of this
press release and all presentation materials.
Reporting calendar
Trading update for the quarter ending 30 September 2022 (Q1 FY23) 13 October 2022
Trading update for the quarter ending 31 December 2022 (Q2 FY23) 17 January 2023
Half-year results for the six months ending 31 December 2022 23 February 2023
Hays Group Overview
As at 30 June 2022, Hays had c.13,000 employees in 253 offices in 32
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 FY22, compared with 25% in FY05.
Our consultants work across a broad range of industries covering recruitment
in 21 professional and skilled specialisms. In FY22 our three largest
specialisms of Technology (26% of Group net fees), Accountancy & Finance
(14%) and Construction & Property (11%) together represented 51% of Group
fees.
In addition to our international and sectoral diversification, in FY22 the
Group's net fees were generated 55% from temporary and 45% 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.
In our 2022 employee 'YourVoice' survey, 86% of employees said they would
recommend Hays as a great place to work, up from 80% in 2021.
Introduction & market backdrop
FY22 trading review: record Group fees
Trading in the year to 30 June 2022 represented a fee record for the Group,
with 24 individual country records and strong overall activity levels in all
our major markets. Net fees increased by 32% on a like-for-like basis, and by
30% on a reported basis, to £1,189.4 million, helped by global economic
recovery from the pandemic. This represented like-for-like fee growth of
£291.7 million versus the prior year. Fees in the Private sector, up 37%,
significantly outperformed the Public sector, up 14%. Group fees in the year
were c.8% above pre-pandemic levels of FY19.
We began the year with strong momentum, with our FY21 exit rate (June 2021)
representing our strongest fee period since the start of the pandemic. Net
fees in the first half were £565.3 million, including monthly records in
September and November. Second half fees accelerated to £624.1 million,
including a record month in March, and our fourth quarter remained
sequentially stable at strong levels, delivering record fees of £320.2
million. As previously disclosed, the Group's net fee growth exit rate in June
2022 was 19%.
Performance was led by excellent results in Perm (45% of Group net fees), with
fees up 49%, driven by 42% volume growth and including a 5% increase in
average Perm fee, which improved through the year. Temp fee growth was also
very strong, up 21%, led by Temp volumes up 10% and also benefitting from a 7%
increase in underlying Temp margin plus 4% positive mix / hours effects. Temp
volumes increased through H1 and remained sequentially stable at record levels
through Q3 and Q4. Our growth in both average Perm fee and Temp margins
clearly demonstrate how we are benefitting from wage inflation and skill-short
markets.
Our largest global specialism of Technology (26% of Group net fees) exceeded
£300 million for the first time, increasing by 32%. Accountancy & Finance
and Construction & Property increased by 37% and 21% respectively. Direct
outsourcing fees with Enterprise clients also reached £200 million for the
first time, growing by 21%, and we continue to win Enterprise market share and
broaden our service offering, with a strong pipeline of opportunities.
On 3 March 2022, we announced that due to the ongoing conflict in Ukraine,
Hays had taken the decision to close its offices in Moscow and St Petersburg,
cease trading with immediate effect and exit Russia, which was completed in
June 2022. The total one-off costs of closing our Russia business were £4.2
million, which were incurred as an expense in H2 FY22. In FY22, Russia
produced £7.8 million of Group net fees and, excluding closure costs, £1.2
million of operating profit.
Our highest-ever profit growth, after significant investments
Driven by the increase in net fees, Group operating profit in the year of
£210.1 million represented a like-for-like increase of 128%. Our conversion
rate in the year was 17.7%, up 730 basis points, or 18.0% excluding the costs
of exiting Russia. This represented an FY22 like-for-like drop through rate of
net fees to operating profit of 40%, or 42% excluding Russia.
Like-for-like costs increased by 22% year-on-year or £173.9 million (£156.3
million on a reported basis). This was driven by our investment in productive
capacity, with year-end consultant headcount increasing by 26%, and increased
consultant commissions, which rose in line with net fees. During the year we
added 1,847 consultants, investing to capitalise on the cyclical recovery
globally and in our Strategic Growth Initiatives (SGI), which continued to
perform strongly and where we added c.550 consultants. SGI is positioning us
for future growth, and we invested c.£20 million in FY22. We continue to
expect c.£20 million of incremental SGI investment in FY23.
Encouragingly, even with our increased headcount, average productivity per
consultant was at record levels, and we are focused on increasing productivity
further. We continued to actively manage our variable cost base, including
travel costs which remained well below pre-pandemic levels.
The Group's cost base per period((5)) as we entered FY23 was c.£87 million,
representing a like-for-like increase of c.£14 million per period((5)) or
c.19% versus our cost base at the start of FY22. This reflects our significant
investment in headcount through FY22, increased consultant commissions which
rose in line with net fees, together with the impact of inflation on our own
cost base, mainly due to salary increases in July 2022.
Having made significant headcount investments in FY22, we have appropriate
capacity for today's good market conditions and the opportunities we see. We
expect consultant headcount growth will be minimal in H1, outside of our SGI
programme, as we focus on driving consultant productivity and returns from our
investments.
Earnings per share boosted by one-off tax benefits
The Group's Profit after Tax of £154.2 million and Earnings per share of 9.22
pence benefited from one-off tax items. These were driven by positive one-off
settlements with certain tax authorities, plus the recognition of deferred tax
assets, driven by the positive movement in the Group's Defined Benefit pension
surplus, which meant our Effective Tax Rate in the year was 24.5%. We expect
the ETR will return to c.30% in FY23. On a normalised basis applying a 30%
ETR, the Group's adjusted EPS was 8.55 pence.
Cash generation, working capital and dividends
We converted 87% of operating profit into operating cash flow((3)), helped by
another strong performance from our credit control teams, with debtor days of
33 days (2021: 33 days), well below pre-pandemic levels (39 days). Our
year-end net cash was strong at £296.2 million, after paying £170.5 million
in core and special dividends in November 2021, £15.9 million in respect of
our FY22 interim dividend, and purchasing £19.8 million in Treasury stock
during our second and third quarters. These shares will be held in treasury
and utilised to satisfy employee share-based award obligations over the next
two to three years. The Group also purchased £18.2 million in shares for
cancellation in our fourth quarter under our share buyback programme, which we
announced in April 2022.
Given the excellent growth in our Temp business, with fees up 21%, we saw a
working capital outflow of £65.0 million in the year. The working capital
outflow resulted from growth in our Temp debtor book.
Our business model remains highly cash-generative. The Board's priorities for
free cash flow are to fund the Group's investment and development, maintain a
strong balance sheet, deliver a sustainable and appropriate core dividend and
to return cash to shareholders in the most appropriate form. Our FY22 core
dividend is 2.85 pence per share, representing dividend cover of 3.0x our
underlying EPS when adjusted for a normalised tax rate of 30%, i.e. excluding
our one-off FY22 tax benefits. The Board is also pleased to propose a special
dividend of 7.34 pence per share, equating to £121.2 million.
As announced on 28 April 2022, the Group commenced a £75 million share
buyback programme, to be completed over a 12-month period. By 30 June 2022 we
had purchased and cancelled 15.4 million shares under this programme at a cost
of £18.2 million. The Board announces that it has increased this programme by
a further £18.2 million, which means we began FY23 with £75 million
available for buybacks during this financial year.
As a reminder, our policy for special dividends will be based on returning
capital above our cash buffer at each financial year-end (30 June) of £100
million, plus any amounts outstanding on our share buyback programme and is
subject to the Board having a positive economic outlook.
Investor day summary
Hays held its first Investor Day since 2017 on 28 April 2022, which can be
viewed here
(https://onlinexperiences.com/scripts/Server.nxp?LASCmd=AI:4;F:QS!10100&ShowUUID=5E5F1AFD-C19A-43C2-B1B7-734D1EC606B0&LangLocaleID=1033&GroupID=Onyx)
. Presentations by 13 members of our global management team set out the
reasons why we believe Hays will win in the new world of work, including:
· Our market-leading positions and global infrastructure in many of
the fastest growing, most skill-short talent markets including Technology,
Life Sciences and Engineering, and across large Enterprise Clients
· The breadth and depth of our candidate relationships and Talent
Networks in the skilled talent market
· Our formidable client base, with strong relationships with SME's
at one end of the market and partnerships with large Enterprise clients at the
other end
· Our clients' demands for Hays to provide a broader suite of HR
services (see page 7)
Achieving our aspirations will make us a more resilient and higher-quality
business, with stickier and more visible earnings streams. Assuming a broadly
supportive economic backdrop, we believe we can drive material fee growth over
the next five years, including our ambition to deliver over £500 million in
Technology fees by FY27, and double fees in our outsourced Enterprise
Solutions business to over £400 million. We are confident that we can also
improve our conversion rate back to and above pre-pandemic levels, and
overall, we aspire to double Hays profitability to over £400 million over the
plan period.
We will also maintain our relentless focus on converting this increased
profitability into high levels of cash generation. At its mid-point, our plan
aspirations can generate c.£1 billion in free cash flow and help facilitate
c.£650 million of shareholder returns over the plan period. These will be
distributed via core and special dividends and disciplined share buybacks, as
appropriate. As stated at the Investor Day, while we recognise that there are
macroeconomic and geopolitical uncertainties which could delay the delivery of
these aspirations by one to two years, the strong recovery of our business
from the pandemic clearly demonstrates our clients' demand for our services.
Director change
As announced at our half-year results in February, after 16 highly successful
years with Hays Paul Venables will retire as Group Finance Director on 30
September 2022. As previously announced, James Hilton, Hays' Group Financial
Controller, will succeed Paul as Group Finance Director and join the Hays
Board on 1 October 2022.
Foreign exchange
Overall, net currency movements versus sterling negatively impacted results in
the year, decreasing net fees by £20.4 million, and operating profit by £2.8
million.
Fluctuations in the rates of the Group's key operating currencies versus
sterling represent a significant sensitivity for the reported performance of
our business. By way of illustration, each 1 cent movement in annual exchange
rates of the Australian dollar and euro impacts net fees by c.£1.1 million
and c.£4.1 million respectively per annum, and operating profits by c.£0.3
million and c.£1.1 million respectively per annum.
The rate of exchange between the Australian dollar and sterling over the year
averaged AUD 1.8346 and closed at AUD 1.7613. As at 23 August 2022 the rate
stood at AUD 1.7064. The rate of exchange between the euro and sterling over
the year averaged €1.1808 and closed at €1.1619. As at 23 August 2022 the
rate stood at €1.1877.
The weakening of sterling versus our main trading currencies of the euro and
Australian dollar is currently a tailwind to Group operating profit in FY23.
If we re-translate FY22 profits of £210.1m at 23 August 2022 exchange rates
(AUD1.7064 and €1.1877), operating profit would increase by c.£6 million.
Increase in Group volumes, average Perm fee and Temp margin
Perm fees, which represented 45% of Group fees, increased by 49%, driven by a
42% increase in placement volumes and including a 5% increase in our average
Perm fee. The increase in average Perm fee was driven by both rising Perm fee
margins and higher average salaries, and our average Perm fee increased
through the year, particularly in the second half. Overall, there remains
clear evidence of wage inflation globally, particularly in the most
skill-short markets.
Net fees in Temp, which incorporates our Contracting business and represented
55% of Group net fees, increased by 21%. This comprised a 10% increase in
volume and a 7% fee growth arising from a 100 bps increase in underlying Temp
margin((6)) to 15.5% (2021: 14.5%). Additionally, we saw a 4% benefit from mix
and hours, with strong growth in higher paid specialisms such as Technology
and Life Sciences, and wage inflation more generally, partially offset by a
greater number of part-time Contracting assignments.
Movements in consultant headcount and office network changes
Consultant headcount at 30 June 2022 was 9,037, up 26% year-on-year. Total
Group headcount increased by 23% year-on-year. In ANZ, consultant headcount
increased by 20% year-on-year. In Germany, consultant headcount increased by
24% year-on-year. In the UK&I, consultant headcount increased by 24%
year-on-year. In our RoW division, consultant headcount increased by 29%
year-on-year. We expect consultant headcount growth will be minimal in H1,
outside of our SGI programme, as we focus on driving consultant productivity
and returns from our investments.
Consultant headcount 30 June Net change 31 Dec 30 Jun
2022
(vs. 30 June
2021
2021
2021)
Australia & New Zealand 1,136 20% 1,054 945
Germany 2,016 24% 1,745 1,620
United Kingdom & Ireland 2,175 24% 1,958 1,759
Rest of World 3,710 29% 3,509 2,866
Group 9,037 26% 8,266 7,190
Over the last year, in RoW we closed our two Russian offices and opened one
new office in Italy. In UK&I and ANZ we consolidated some of our smaller
offices, and we opened one new office in Germany.
Office network 30 June Net opened/ (closed) 30 Jun 2021
2022
Australia & New Zealand 40 (1) 41
Germany 26 1 25
United Kingdom & Ireland 87 (2) 89
Rest of World 100 (1) 101
Group 253 (3) 256
Deep engagement with our customers and growing in HR Services
The global recruitment staffing market is estimated to be worth over $600
billion in 2022, with only approximately one third currently outsourced to
consultancies like Hays. Importantly, this outsourced part of the market is
growing at twice the overall market rate. Our global network, strong brand and
market leadership in the most attractive structural areas positions Hays as a
global leader in white collar recruitment. We have built a strong platform
from which to grow structurally and take significant further market share with
both SME and large enterprise clients.
In addition, we believe the global HR advisory market is currently worth
around $90 billion and growing. Our customers - both clients and candidates -
are increasingly looking to Hays to broaden our service offering to support
them across the entire range of their human capital and talent challenges,
helping to shape, upskill and deliver the skilled workforces they need to
thrive. Our scale, data, insights and capability combined with the strong
relationships we've built with large and small companies all around the world,
positions Hays as the global recruitment and HR services company at the heart
of thousands of organisations. Given the complex challenges our customers
face, their expectations and demands have significantly increased, moving away
from transactional relationships towards much deeper partnerships - what we
term 'Leadership Partners'. Outsourced contracts or preferred supplier
agreements are being increasingly awarded on a regional or global level, and
Hays is ideally placed to capitalise.
We believe delivering 'Leadership Partner' status can set us apart from the
competition and drive material market share gains. We can achieve this by
delivering:
· Highly personalised services for both clients and candidates,
supported by using technology at scale to inform and enhance the human
elements of the process
· Deep expertise on the best practice of today and the future
· Scale, breadth and depth of insights to drive better decision
making
· Building very large, but highly focused and engaged Talent
Network communities
Our customers are increasingly demanding more of their workforce services,
plus elements of HR Services advice and execution are provided by one trusted
partner. Examples of HR services we currently or are targeting to provide
include: ED&I analysis and consultancy; Assessment and Development
processes; EVP & Employer brand insights; Change management; Skilling
& re-skilling, Services procurement; Early careers and Talent Networks.
Purpose, Net Zero, Equity and our Communities
Our purpose is to benefit society by investing in lifelong partnerships that
empower people and organisations to succeed, creating opportunities and
improving lives. Becoming lifelong partners to millions of people and
thousands of organisations also helps to make our business sustainable. Our
core company value is that we should always focus on 'doing the right thing'.
Linked to this and our commitment to Environmental, Social & Governance
(ESG) matters, Hays has endorsed four United Nations Sustainable Development
Goals (UNSDG's) - Decent Work & Economic Growth; Gender Equality; Climate
Action and Supporting Industry Innovation and Infrastructure. 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 Equity, Diversity &
Inclusion at their heart. Our global ED&I Council helps co-ordinate and
drive our actions. We made progress in FY22 by further embedding UNSDG Goal 5:
Gender Equality in our strategy. We have set stretching targets on female
representation in senior management. By 2025, we have committed to reach a
level of 45% female leaders (FY22: 42% female) among our senior leadership of
c.630 individuals, and to reach 50% by 2030.
As a business which exists to help people further their careers and fulfil
their potential, Goal 8: Decent Work & Economic Growth aligns very closely
with Hays' purpose. Over the last four years we are proud to have placed well
over one million people globally in their next job; helping the individual,
their employer and society. Our commitment to this goal is further reinforced
through Hays Thrive, our free-to-use online Training & Wellbeing platform.
Overall, across all our online platforms, over 850,000 individual training
courses were undertaken on our web platforms in the last year, equating to
c.27 million minutes of online learning.
We believe we have a significant role to play in combating climate change. In
2021, we became a Carbon Neutral company - our first step under Goal 13:
Climate Action to achieve emissions reductions consistent with limiting global
warming to 1.5°C, the most ambitious goal of the Paris Agreement. In March
2022, the Science-Based Targets initiative (SBTi) approved Hays' Science-Based
targets to reduce i) absolute scope 1 and 2 GHG emissions by 50% by FY26; ii)
absolute scope 3 GHG emissions from purchased goods and services and capital
goods by 50% by FY30; and, iii) absolute scope 3 GHG emissions from business
travel by 40% by FY26. This landmark step demonstrates Hays' firm commitment
to be the first global specialist recruitment firm to reach Net Zero.
During FY22, Hays added a further UNSDG - Goal 9: Supporting Industry,
Innovation and Infrastructure. Actions to support Goal 9 include our global
Green Labs initiative, which identifies and support growth in 'Green Collar'
and Sustainability jobs. We are already a large recruiter of skilled workers
in low carbon, social infrastructure and ESG roles, and we are investing to
grow these areas, helping to solve global skill shortages. As Technology is
our largest recruitment specialism, Hays clearly supports the growth of
higher-technology industries, and our position as global leaders in
Construction & Property supports resilient infrastructure development.
Also, our MyLearning training portal also gives access to learning and
development for candidates. Given many courses are free, MyLearning also
supports marginalised groups to access labour markets.
Australia & New Zealand (16%((7)) net fees, 25%((7)) operating profit)
Strong growth, led by Perm and the Technology sector
Growth
Year ended 30 June 2022 2021 Reported LFL
(In £s million)
Net fees((1)) 195.7 159.9 22% 24%
Operating profit 51.6 39.7 30% 32%
Conversion rate((2)) 26.4% 24.8%
Period-end consultant headcount 1,136 945 20%
In Australia & New Zealand ("ANZ"), net fees increased by 24% to £195.7
million, with operating profit up 32% to £51.6 million. This represented a
conversion rate of 26.4% (2021: 24.8%). Currency impacts were negative in the
year, decreasing net fees by £2.6 million and operating profit by £0.7
million.
Business confidence improved following the lifting of lockdown restrictions in
October, although trading was negatively impacted in Q3 by high levels of
Covid infections. Conditions were strong in Perm, with fees up an excellent
60%, although momentum moderated in the second half, with fourth quarter
volumes and activity sequentially stable. Temp, which represented 62% of ANZ
net fees and which was relatively resilient in the prior year, increased by
9%. We saw some signs of candidates shifting from the Temp to Perm markets,
particularly in mid-salary roles, and Temp volumes were flat in the fourth
quarter.
The Private sector, which represented 66% of ANZ net fees, grew by 29%, with
public sector fees up 17%.
Australia, 92% of ANZ, saw net fees increase by 23%. New South Wales and
Victoria increased by 27% and 24% respectively. Queensland grew by 30%, with
South Australia, Western Australia and ACT up 23%, 16% and 6% respectively. At
the Australian specialism level, Construction & Property, 17% of Australia
fees, increased by 13%, although Technology and Accountancy & Finance were
much stronger, up 37% and 30% respectively. HR grew by 28% and Office Support
grew by 28%.
New Zealand delivered a record performance, with fees up 49%.
ANZ consultant headcount increased by 20% year-on-year.
Germany (26%((7)) net fees, 35%((7)) operating profit)
Record fees and excellent profit growth, driven by record contractor numbers
Growth
Year ended 30 June 2022 2021 Reported LFL
(In £s million)
Net fees((1)) 313.9 244.8 28% 34%
Operating profit 75.6 31.4 141% 152%
Conversion rate((2)) 24.1% 12.8%
Period-end consultant headcount 2,016 1,620 24%
Our largest market of Germany saw net fees increase by 34% to £313.9 million,
with activity improving through the year and strong sequential fee and profit
growth. Operating profit increased by 152% to £75.6 million, which
represented a conversion rate of 24.1% (2021: 12.8%). Currency impacts were
negative in the year, decreasing net fees by £10.7 million and operating
profit by £1.4 million, and there were no material trading day impacts.
At the specialism level, our largest specialism of Technology, comprising 38%
of Germany net fees, increased by 21%, with Engineering, our second largest,
up an excellent 45%. Accountancy & Finance and Sales & Marketing
increased by 36% and 56% respectively, while Life Sciences and Construction
& Property increased by 14% and 16% respectively.
Net fees in our Temp and Contracting business, which represented 83% of
Germany fees, increased by 31%. Within this, Contracting (57% of Germany net
fees) grew by 28%, driven by record contractor volumes and increasing fee
margins. This was partially offset by c.5% lower average weekly hours per
contractor, as we saw a greater number of part-time assignments.
Our Temp business, 26% of Germany fees which is mainly in Engineering &
Manufacturing and where we employ temporary workers as required under German
law, increased fees by 39%. Encouragingly, Temp volumes improved through the
year, although given the slower recovery in the Automotive & Manufacturing
sectors, average volumes remain below prior peak levels. Our comparative fees
in the first half of FY21 included £6.2 million in Temp severance and
under-utilisation costs and, excluding this, underlying FY22 Temp fees
increased by 27%. As expected, we saw a return to more normal levels of
sickness leave in both our Contracting and Temp businesses.
Perm, 17% of Germany fees and which continues to have excellent long-term
structural outsourcing potential, increased by 51%.
Consultant headcount increased by 24% year-on-year.
United Kingdom & Ireland (22%((7)) net fees, 21%((7)) operating profit)
Excellent fee and profit growth, driven by Perm and Technology
Growth
Year ended 30 June 2022 2021 Reported LFL
(In £s million)
Net fees ((1)) 263.3 201.1 31% 31%
Operating profit 43.4 11.5 277% 277%
Conversion rate ((2)) 16.5%
5.7%
Period-end consultant headcount 2,175 1,759 24%
In the United Kingdom & Ireland ("UK&I"), net fees increased by 31% to
£263.3 million, with good sequential growth in the first three quarters, and
fees sequentially stable at strong levels in the fourth quarter. Operating
profit of £43.4 million represented excellent growth of 277% versus the prior
year, delivering a strong increase in conversion rate to 16.5% (2021: 5.7%).
Our Perm business, which represented 45% of UK&I, saw fees increase by an
excellent 58%. Temp was strong overall and increased by 15%, although momentum
moderated in the second half, and the 8% Temp fee growth in the fourth quarter
was driven by higher fee margins, with Temp volumes slightly down.
The Private sector, which represented 72% of UK&I net fees, delivered
excellent growth, up 42%. The Public sector, which was relatively resilient in
the prior year, increased by 10%.
All UK regions traded broadly in line with the overall UK business, except for
the East of England and the North West, up 41% and 39% respectively, and
Northern Ireland, up 20%. Our largest region of London increased by 30%, while
Ireland grew by an excellent 57%.
Technology fees increased by 56%. Accountancy & Finance, Office Support
and HR were also excellent, up 38%, 50% and 81% respectively. Construction
& Property increased by 15%, and Education and Life Sciences increased by
28% and 9% respectively.
Consultant headcount in the division increased by 24% year-on-year.
Rest of World (36%((7)) net fees, 19%((7)) operating profit)
Record fees in 22 countries and excellent profit growth
Growth
Year ended 30 June 2022 2021 Reported LFL
(In £s million)
Net fees ((1)) 416.5 312.3 33% 36%
Operating profit 39.5 12.5 216% 234%
Conversion rate((2)) (inc. Russia closure costs) 9.5% 4.0%
Period-end consultant headcount 3,710 2,866 29%
Our Rest of World ("RoW") division, which comprises 27 countries, delivered
record fees, up 36% including 22 individual country records. Operating profit
increased to £39.5 million, representing excellent growth of 234% versus the
prior year, and a conversion rate of 9.5% (2021: 4.0%). Excluding the £4.2
million of one-off costs of closing our Russian business (as noted on page 4),
operating profit was £43.7 million and our RoW conversion rate was 10.5%, up
650 basis points year-on-year. Currency impacts were negative in the year,
decreasing net fees by £6.7 million and operating profit by £0.7 million.
Perm, which represented 68% of fees, increased by an excellent 43%. Temp fee
growth was also strong, up 24%.
EMEA ex-Germany (56% of RoW) fees increased by 31%, including 12 country
records. France, our largest RoW country, increased by 35%, and Poland and
Spain were also very strong, up 42% and 34% respectively. The Netherlands and
Belgium increased by 29% and 12% respectively, with Switzerland up 27%. Among
our smaller markets, Hungary, up 64%, and Denmark, up 78%, both produced fee
records.
The Americas (26% of RoW) fees increased by 51%. All of our six countries
produced fee records, including the USA, our second-largest RoW country which
increased by 43%, and Canada, up 63%. In Latin America, up 65%, Brazil net
fees increased by 75%, and Mexico by 48%.
Asia (18% of RoW) fees increased by 35%, including four country records.
Malaysia performed very strongly, up 47%, and Japan grew by an excellent 45%.
China increased by 25%, with Hong Kong outperforming Mainland China. This
said, given strict lockdown restrictions, conditions were weaker in the second
half and fourth quarter fees in China declined by 5%.
Consultant headcount in the RoW division was up 29% year-on-year. In the year,
EMEA ex-Germany increased by 18%, the Americas by 60% and Asia by 29%.
Current trading
Despite increasing macroeconomic uncertainties, client & candidate
confidence remains good, with fees & activity sequentially stable at
strong levels
We have made a good start to our new financial year. While we are mindful of
increasing macroeconomic uncertainty, client and candidate confidence remains
good, supported by skill shortages and wage inflation.
Perm activity remains strong overall, with some normalisation in some of the
previously most active markets. Temp volumes remain stable overall.
Globally, both Temp and Perm continue to benefit from improving fee margins
and the broader impact of wage inflation, which we expect to continue across
FY23.
Having made significant headcount investments in FY22, we have appropriate
capacity for today's market opportunities. We expect consultant headcount
growth will be minimal in H1, outside of our SGI programme, as we focus on
driving consultant productivity and returns from our investments.
Australia & New Zealand
Conditions in Perm remain good, with markets supported by skill shortages and
wage inflation, and Temp volumes are broadly stable.
Germany
Overall conditions are strong and Contractor numbers are at record levels. Due
to the timing of public holidays, there are three fewer trading days in H1
FY23 versus the prior year (H2 FY23 trading days are unchanged YoY). We
estimate this will have an H1 FY23 profit impact of c.£5 million.
United Kingdom & Ireland
Conditions in Perm are good, with markets supported by skill shortages and
wage inflation. Temp volumes are sequentially stable.
Rest of World
Conditions across EMEA and Asia are good. In North America, Perm activity
levels have decreased modestly, reflecting some reduced client confidence.
FINANCIAL REVIEW
Summary Income Statement
Growth
Year ended 30 June 2022 2021 Reported LFL
(In £s million)
Turnover 6,588.9 5,648.4 17% 19%
Temp 659.2 556.2 19% 21%
Perm 530.2 361.9 47% 49%
Net fees((1)) 1,189.4 918.1 30% 32%
Administrative expenses (979.3) (823.0) 19% 22%
Operating profit 210.1 95.1 121% 128%
Conversion rate((2)) 17.7% 10.4%
Underlying Temp margin ((3)) 15.5% 14.5%
Temp fees as % of total net fees 55% 61%
Period-end consultant headcount 9,037 7,190 26%
(1) Net fees comprise turnover less remuneration of temporary workers and
other recruitment agencies.
(2) Conversion rate is the conversion of net fees into operating profit.
(3) The underlying Temp margin is calculated as Temp net fees divided by
Temp gross revenue and relates solely to Temp placements in which Hays
generates net fees. This specifically excludes transactions in which Hays acts
as agent on behalf of workers supplied by third party agencies and
arrangements where Hays provides major payrolling services. FY21 Temp margin
included £6.2 million of one-off Germany Temp severance costs. Excluding
this, underlying FY21 Temp margin would have been 14.6%.
(4) 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. This is consistent with
prior years.
(5) Exchange rate as at 23 August 2022: £1 / AUD 1.7064 and £1 /
€1.1877.
(6) Cash generated by operations is stated after IFRS 16 lease payments and
in FY21 before the payment of tax deferrals of £118.3 million.
Turnover for the year to 30 June 2022 increased by 19% (17% on a reported
basis), with net fees increasing by 32% (30% on a reported basis). The
significantly higher net fee growth compared to turnover was primarily driven
by excellent growth in our Perm fees, and the 100 basis-point increase in the
underlying Temp margin((3)). This represented the first annual increase in
average Temp margins since FY15 and is the result of the positive impact that
skill shortages are having in white-collar recruitment markets, and our
actions to drive fee margins.
Like-for-like costs increased by 22% or £173.9 million (£156.3 million on a
reported basis), as we actively invested in our productive capacity with
period-end consultant headcount up 26% year-on-year to 9,037, and increased
commission costs which were driven by the increase in net fees. This
investment included c.£20 million in our SGI programme. Group overhead costs
continued to be closely managed and even with the significant investment in
headcount, consultant productivity in the year was at record levels. We
continued to actively manage our variable cost base, including travel costs
which remained well below pre-pandemic levels.
Operating profit increased by £117.8 million, or 128% on a like-for-like
basis. This was driven by the significant £291.7 million like-for-like
increase in net fees, representing a drop-through rate of net fees to
operating profit of 40%, or 42% excluding the one-off costs of closing our
Russia business. This drove a 730 bps increase in the Group's conversion rate
to 17.7% (2021: 10.4%), or 18.0% excluding Russia closure costs. Exchange rate
movements decreased net fees and operating profit by £20.4 million and £2.8
million, respectively. This resulted from the strengthening in the average
rate of exchange of sterling versus our main trading currencies, notably the
euro and Australian dollars. Currency fluctuations remain a significant Group
sensitivity.
Net finance charge
The net finance charge for the year was £5.8 million (2021: £7.0 million).
Net bank interest payable (including amortisation of arrangement fees) was
£0.4 million (2021: £0.6 million). The interest charge on lease liabilities
under IFRS 16 was £3.9 million (2021: £5.0 million), and the charge on
defined benefit pension scheme obligations was £1.4 million (2021: £1.1
million). The Pension Protection Fund levy was £0.1 million (2021: £0.2
million). We expect the net finance charge for the year ending 30 June 2023 to
be around £6.0 million, of which c.£5.0 million is non-cash.
Taxation
Taxation for the year was £50.1 million (2021: £26.6 million), representing
an effective tax rate (ETR) of 24.5% (2021: 30.2%). The decrease in the ETR in
the year reflects positive one-off settlements with certain tax authorities,
plus the recognition of deferred tax assets driven by the positive movement in
the Group's Defined Benefit pension surplus. We expect the ETR will return to
c.30% in FY23.
Earnings per share
Basic earnings per share increased by 151% to 9.22 pence (2021: 3.67 pence),
driven by the significant increase in Group operating profit and the effect of
the lower Group ETR. On a normalised basis, applying a 30% ETR, the Group's
adjusted EPS would have been 8.55 pence, representing growth of 133%.
Cash flow and balance sheet
Conversion of operating profit into operating cash flow((6)) was 87% (2021:
138%((6))). This resulted from strong underlying profitability, partially
offset by a £65.0 million cash outflow from working capital as our Temp
debtors increased with Temp fee growth. We continued to see a strong
performance by our credit control teams globally, with debtor days of 33 days
(2021: 33 days), versus 39 days pre-pandemic.
Net capital expenditure was £24.4 million (2021: £18.8 million), with
continued investments in technology infrastructure, cyber security and to
support our SGI programme. We expect capital expenditure will be between
£25-30 million for the year to June 2023.
We paid £186.4 million in core and special dividends in the year (2021: £
nil) and pension deficit contributions were £17.2 million (2021: £16.7
million). Net interest paid was £0.5 million (2021: £0.9 million) and
corporation tax payments were £39.0 million (2021: £31.8 million). We ended
the year with a net cash position of £296.2 million (2021: £410.6 million).
During the year we purchased 14.2 million shares, at a cost of £19.8 million,
as part of our treasury share purchase programme, at an average price of 138.4
pence per share. The shares will be held in treasury and utilised to satisfy
employee share-based award obligations over the next two years. As previously
noted, we also commenced a £75 million share buyback programme for
cancellation on 28 April 2022, and between then and 30 June 2022 we purchased
and cancelled 15.4 million shares, at a cost of £18.2 million (average price
118.2 pence per share).
Retirement benefits
The Group's defined benefit pension scheme position under IAS19 at 30 June
2022 has resulted in a surplus of £102.0 million, compared to a surplus of
£46.6 million at 30 June 2021. The increase in surplus of £55.4 million was
driven by changes in financial assumptions, most notably an increase in the
discount rate, and changes to the scheme's demographic assumptions, plus
company contributions. These were partially offset by lower expected returns
on scheme assets. In respect of IFRIC 14, the Schemes' Definitive Deeds and
Rules are considered to provide Hays with an unconditional right to a refund
of surplus assets and therefore the recognition of a net defined benefit
scheme asset is not restricted. Agreements to make funding contributions do
not give rise to any additional liabilities in respect of the scheme.
During the year, the Group contributed £16.7 million of cash to the defined
benefit scheme (2021: £16.3 million), in line with the agreed deficit
recovery plan. The 2021 triennial valuation quantified the actuarial deficit
at £23.9 million on a Technical Provisions basis. Our long-term objective
continues to be reaching full buy-out of the scheme and therefore our recovery
plan remained unchanged and comprised an annual payment of £16.7 million from
July 2021, with a fixed 3% uplift per year. The scheme was closed to new
entrants in 2001 and to future accrual in June 2012.
Capital structure and dividend
Our business model remains highly cash generative. The Board's free cash flow
priorities are to fund the Group's investment and development, maintain a
strong balance sheet, deliver a sustainable and appropriate core dividend and
to return cash to shareholders in the most appropriate form.
Given the strong recovery in the Group's profitability, strong balance sheet
and our confidence in our outlook, the Board has proposed a final dividend of
1.90p per share (2021: 1.22p). When added to the interim dividend of 0.95p
paid in April 2022, the Group's total FY22 core dividend is 2.85 pence per
share (2021:1.22p), representing dividend cover of 3.0x our underlying EPS of
8.55 pence per share, when adjusted for a normalised tax rate of 30% excluding
our one-off FY22 tax benefits. The final dividend payment date will be 11
November 2022, and the ex-dividend date is 29 September 2022 (record date 30
September). Our target core full year dividend cover range remains 2.0 to 3.0x
earnings.
The Board is also pleased to propose a special dividend of 7.34 pence per
share, equating to £121.2 million, to be paid alongside our core dividend. As
previously noted, in April 2022 we announced the launch of a £75 million
share buyback programme, and by 30 June 2022 we had bought back 15.4 million
shares at a cost of £18.2 million, which were subsequently cancelled. The
Board has increased our share buyback programme by a further £18.2 million,
which means we began FY23 with £75 million available for buybacks.
Our policy for special dividends will be based on returning capital above our
cash buffer at each financial year-end (30 June) of £100 million, plus any
residual amounts outstanding on our share buyback programme and is subject to
the Board having a positive economic outlook.
Treasury management
The Group's operations are financed by retained earnings and cash reserves. In
addition, the Group has in place a £210 million revolving credit facility,
which reduces in November 2024 to £170 million and expires in November 2025.
This provides considerable headroom versus current and future Group funding
requirements.
The covenants within the facility require the Group's interest cover ratio to
be at least 4:1 (ratio as at 30 June 2022: not applicable, given that on a
covenant basis, we received £0.1 million of net interest) and its leverage
ratio (net debt to EBITDA) to be no greater than 2.5:1 (as at 30 June 2022 the
Group held a net cash position). The interest rate of the facility is on a
ratchet mechanism with a margin payable over Compounded Reference Rate in the
range of 0.70% to 1.50%.
The Group's UK-based Treasury function manages the Group's currency and
interest rate risks in accordance with policies and procedures set by the
Board and is responsible for day-to-day cash management; the arrangement of
external borrowing facilities; and the investment of surplus funds. The
Treasury function does not operate as a profit centre or use derivative
financial instruments for speculative purposes.
The Group's cash management policy is to minimise interest payments by closely
managing Group cash balances and external borrowings. Any Group surplus
balance is used to repay any maturing loans under the Group's revolving credit
facility or is invested in overnight money market deposits. As the Group holds
a sterling-denominated debt facility and generates significant foreign
currency cash flows, the Board considers it appropriate in certain cases to
use derivative financial instruments as part of its day-to-day cash
management. The Group does not use derivatives to hedge balance sheet and
income statement translation exposure.
The Group is exposed to interest rate risk on floating rate bank loans and
overdrafts. It is the Group's policy to limit its exposure to interest rates
by selectively hedging interest rate risk using derivative financial
instruments. However, there were no interest rate swaps held by the Group
during the current or prior year. Counterparty credit risk arises primarily
from the investment of surplus funds. Risks are closely monitored using credit
ratings assigned to financial institutions by international credit rating
agencies. The Group restricts transactions to banks that have an acceptable
credit profile and limits its exposure to each institution accordingly.
Principal risks facing the business
Hays plc operates an embedded risk management framework, which is monitored
and reviewed by the Board. There are a number of potential risks and
uncertainties that could have a material impact on the Group's financial
performance and position. These include risks relating to the Covid-19
pandemic, the cyclical nature of our business, business model, talent
recruitment and retention, compliance, reliance on technology, cyber security,
data protection and contracts. These risks and our mitigating actions are set
out in the 2021 Annual Report
(https://www.haysplc.com/~/media/Files/H/Hays/annual-reports/ar-2021/Hays%20Annual%20Report%202021.pdf)
, and remain relevant. There are no additional risks since this date which
impact Hays' financial position or performance, although as noted earlier in
this statement, with macroeconomic uncertainties increasing, we are closely
monitoring our activity levels and KPIs, which remain broadly stable overall
at strong levels.
This Preliminary Report was approved and authorised for issue by the Board of
Directors on 24 August 2022.
Alistair Cox
Paul Venables
Chief Executive
Group Finance Director
Hays plc
20 Triton Street
London
NW1 3BF
haysplc.com/investors
Cautionary statement
This Preliminary Report (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
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE
(In £s million) Note 2022 2021
Turnover 3, 4 6,588.9 5,648.4
Net fees ((1)) 3, 4 1,189.4 918.1
Administrative expenses ((2)) 4 (979.3) (823.0)
Operating profit from continuing operations 3 210.1 95.1
Net finance charge 5 (5.8) (7.0)
Profit before tax 204.3 88.1
Tax 6 (50.1) (26.6)
Profit from continuing operations after tax 154.2 61.5
Profit attributable to equity holders of the parent company 154.2 61.5
Earnings per share from continuing operations (pence)
- Basic 8 9.22p 3.67p
- Diluted 8 9.11p 3.64p
((1)) Net fees comprise turnover less remuneration of temporary workers and
other recruitment agencies.
((2)) Administrative expenses include impairment loss on trade receivables of
£2.4 million (2021: £1.9 million).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE
(In £s million) 2022 2021
Profit for the year 154.2 61.5
Items that will not be reclassified subsequently to profit or loss:
Actuarial remeasurement of defined benefit pension schemes 39.6 (24.2)
Tax relating to components of other comprehensive income (8.6) 8.5
31.0 (15.7)
Items that may be reclassified subsequently to profit or loss:
Currency translation adjustments 10.5 (28.9)
Other comprehensive income for the year net of tax 41.5 (44.6)
Total comprehensive income for the year 195.7 16.9
Attributable to equity shareholders of the parent company 195.7 16.9
CONSOLIDATED BALANCE SHEET
AT 30 JUNE
(In £s million) Note 2022 2021
Non-current assets
Goodwill 202.3 199.9
Other intangible assets 47.1 44.8
Property, plant and equipment 29.3 27.4
Right-of-use assets 9 171.7 190.3
Deferred tax assets 18.5 20.6
Retirement benefit surplus 10 102.0 46.6
570.9 529.6
Current assets
Trade and other receivables 1,205.1 927.7
Corporation tax debtor 5.2 5.6
Cash and cash equivalents 296.2 410.6
1,506.5 1,343.9
Total assets 2,077.4 1,873.5
Current liabilities
Trade and other payables (1,029.8) (753.2)
Lease liabilities 9 (39.8) (36.9)
Corporation tax liabilities (34.5) (22.9)
Derivative financial instruments (0.1) -
Provisions 11 (12.7) (10.0)
(1,116.9) (823.0)
Non-current liabilities
Deferred tax liabilities (10.0) (4.9)
Lease liabilities 9 (145.3) (164.2)
Provisions 11 (9.0) (9.6)
(164.3) (178.7)
Total liabilities (1,281.2) (1,001.7)
Net assets 796.2 871.8
Equity
Called up share capital 16.7 16.8
Share premium 369.6 369.6
Merger reserve 43.8 193.8
Capital redemption reserve 2.7 2.7
Retained earnings 268.2 207.8
Cumulative translation reserve 73.6 63.1
Equity reserve 21.6 18.0
Total equity 796.2 871.8
The Consolidated Financial Statements of Hays plc, registered number 2150950,
were approved by the Board of Directors and authorised for issue on 24 August
2022.
Signed on behalf of the Board of Directors
A R COX P VENABLES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2022
(In £s million) Called up share capital Share premium Merger reserve ((1)) Capital redemption reserve Retained earnings Cumulative translation reserve Equity reserve ((2)) Total equity
At 1 July 2021 16.8 369.6 193.8 2.7 207.8 63.1 18.0 871.8
Currency translation adjustments - - - - - 10.5 - 10.5
Remeasurement of defined benefit pension schemes - - - - 39.6 - - 39.6
Tax relating to components of other comprehensive income - - - - (8.6) - - (8.6)
Net income recognised in other comprehensive income - - - - 31.0 10.5 - 41.5
Profit for the year - - - - 154.2 - - 154.2
Total comprehensive income for the year - - - - 185.2 10.5 - 195.7
Dividends paid - - (150.0) - (36.4) - - (186.4)
Purchase of own shares (0.1) - - - (94.7) - - (94.8)
Share-based payments - - - - 6.3 - 3.6 9.9
At 30 June 2022 16.7 369.6 43.8 2.7 268.2 73.6 21.6 796.2
FOR THE YEAR ENDED 30 JUNE 2021
(In £s million) Called up share capital Share premium Merger reserve ((1)) Capital redemption reserve Retained earnings Cumulative translation reserve Equity reserve ((2)) Total equity
At 1 July 2020 16.8 369.6 193.8 2.7 161.0 92.0 17.5 853.4
Currency translation adjustments - - - - - (28.9) - (28.9)
Remeasurement of defined benefit pension schemes - - - - (24.2) - - (24.2)
Tax relating to components of other comprehensive income - - - - 8.5 - - 8.5
Net expense recognised in other comprehensive income - - - - (15.7) (28.9) - (44.6)
Profit for the year - - - - 61.5 - - 61.5
Total comprehensive income for the year - - - - 45.8 (28.9) - 16.9
Purchase of own shares - - - - (6.4) - - (6.4)
Share-based payments - - - - 7.4 - 0.5 7.9
At 30 June 2021 16.8 369.6 193.8 2.7 207.8 63.1 18.0 871.8
((1)) The Merger reserve was generated under section 612 of the Companies Act
2006, as a result of the cash box structure used in the equity placing of new
shares issued during the year ended 30 June 2020.
((2)) The Equity reserve is generated as a result of IFRS 2 'Share-based
payments'.
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE
(In £s million) 2022 2021
Operating profit 210.1 95.1
Adjustments for:
Depreciation of property, plant and equipment 10.0 11.6
Depreciation of right-of-use lease assets 44.0 45.1
Amortisation of intangible assets 10.1 11.3
Loss on disposal of business assets 1.5 0.4
Loss on closure of Russian business 4.2 -
Net movements in provisions 2.1 1.2
Share-based payments 10.9 8.7
82.8 78.3
Operating cash flow before movement in working capital 292.9 173.4
Movement in working capital:
Increase in receivables (259.4) (80.7)
Increase/(decrease) in payables ((1)) 194.4 (30.2)
Movement in working capital (65.0) (110.9)
Cash generated by operations 227.9 62.5
Cash paid in respect of exceptional items from the year ended 30 June 2020 - (8.0)
Pension scheme deficit funding (17.2) (16.7)
Income taxes paid (39.0) (31.8)
Net cash inflow from operating activities 171.7 6.0
Investing activities
Purchase of property, plant and equipment (12.1) (9.2)
Purchase of own shares (38.0) (6.4)
Purchase of intangible assets (12.3) (9.6)
Interest received 0.8 0.4
Net cash used in investing activities (61.6) (24.8)
Financing activities
Interest paid (1.3) (1.3)
Lease liability principal repayment (45.0) (50.0)
Equity dividends paid (186.4) -
Net cash used in financing activities (232.7) (51.3)
Net decrease in cash and cash equivalents (122.6) (70.1)
Cash and cash equivalents at beginning of year 410.6 484.5
Effect of foreign exchange rate movements 8.2 (3.8)
Cash and cash equivalents at end of year 296.2 410.6
((1)) The decrease in payables in the year ended 30 June 2021 includes the
payment of £118.3 million of short-term taxes deferred at 30 June 2020.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 STATEMENT UNDER S435 - PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information set out in this preliminary announcement does not
constitute statutory accounts for the years ended 30 June 2022 or 30 June
2021, as defined in section 435 (1) and (2) of the Companies Act 2006, but is
derived from those accounts. The statutory accounts for 2021 have been
delivered to the Registrar of Companies and those for 2022 will be delivered
following the Company's Annual General Meeting. The Group's Auditor has
reported on those accounts; their reports were unqualified, did not draw
attention to any matters by way of emphasis without qualifying their report
and did not contain statements under Section 498(2) or (3) of the Companies
Act 2006.
2 BASIS OF PREPARATION
On 31 December 2020, IFRS as adopted by the European Union at that date was
brought into UK law and became UK-adopted International Accounting Standards,
with future changes being subject to endorsement by the UK Endorsement Board.
The Group transitioned to UK-adopted International Accounting Standards in its
Consolidated Financial Statements on 1 July 2021. This change constitutes a
change in accounting framework. However, there is no impact on recognition,
measurement or disclosure in the period reported as a result of the change in
framework.
Whilst the financial information included in this preliminary announcement has
been prepared in accordance with the International Financial Reporting
Standards (IFRSs) in conformity with the Companies Act 2006, this announcement
does not itself contain sufficient information to comply with IFRS. The
accounting policies applied in preparing this financial information are
consistent with the Group's financial statements for the year ended June 2021;
there have been no new standards or improvements to existing standards that
are mandatory for the first time in the Group's accounting period beginning on
1 July 2021 and no new standards have been early adopted.
Going Concern
The Group's business activities, together with the factors likely to affect
its future development, performance and financial position, including its cash
flows and liquidity position are described in this preliminary results
announcement for the year ended 30 June 2022. The Directors have formed the
judgment that there is reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future. As
a result the Directors continue to adopt the Going Concern basis in the
preparation of the Consolidated Financial Statements.
As in prior years, the Board undertook a strategic business review in the
current year which took into account the Group's current financial position
and the potential impact of the principal risks set out in the Annual Report.
In addition, and in making this statement, the Board carried out a robust
assessment of the principal risks facing the Group, including those that would
threaten the Group's business model, future performance and liquidity. While
the review has considered all the principal risks identified by the Group, the
resilience of the Group to the occurrence of these risks in severe yet
plausible scenarios has been evaluated.
Financial position
At 30 June 2022, the Group had cash of £296.2 million compared to cash of
£410.6 million at 30 June 2021, with share repurchases of £38.0 million and
dividends of £186.4 million being paid during the year. In addition, the
Group currently has an unsecured revolving credit facility of £210 million
that reduces in November 2024 to £170 million, and expires in November 2025.
The facility has remained undrawn throughout the current year. Despite the
excellent growth achieved during the year, the Group had a strong working
capital performance, with significant Management focus on cash collection,
average trade debtor days remained consistent in the year at 33 days (2021: 33
days).
Stress testing
The Board approves an annual budget and reviews monthly management reports and
quarterly forecasts. The output of the planning and budgeting processes has
been used to perform a sensitivity analysis of the Group's cash flow to model
the potential effects should principal risks actually occur, either
individually or in unison.
The sensitivity analysis modelled scenarios in which the Group incurred a
sustained loss of business arising from a prolonged global downturn, with a
range of recovery scenarios considered. The Group's 'Stress Case' scenario
assumes that the Group experiences another severe downturn similar in scale to
the one caused by the Covid-19 pandemic in the year ended 30 June 2020,
followed by a period of gradual recovery, as opposed to the significant
recovery the Group experienced through the year ended 30 June 2021 and
excellent growth achieved in the year ended 30 June 2022. The Stress Case
scenario forecasts a strong cash position in excess of £140 million
throughout the Going Concern period, being at least 12 months from the date of
approval of the Consolidated Financial Statements, with the revolving credit
facility remaining undrawn with significant headroom against its banking
covenants.
2 BASIS OF PREPARATION continued
Set against these downside trading scenarios, the Board considered key
mitigating factors including the geographic and sectoral diversity of the
Group, its balanced business model across Temporary, Permanent and Contract
recruitment services, and the significant working capital inflows which arise
in periods of severe downturn, particularly in the Temporary recruitment
business, thus protecting liquidity as was the case during the global
financial crisis of 2008/09 and which we again experienced during the Covid-19
pandemic in the year ended 30 June 2020.
In addition, the Group's strong balance sheet position and history of strong
cash generation, tight cost control and flexible workforce management provides
further protection. The Group also has in place its £210 million revolving
credit facility which is currently undrawn. This facility is in place until
November 2025, although at the lower value of £170 million in its final year
due to reduced lender commitments received.
The Group has sufficient financial resources which, together with internally
generated cash flows, will continue to provide sufficient sources of liquidity
to fund its current operations, including its contractual and commercial
commitments and any proposed dividends. The Group is therefore well-placed to
manage its business risks. After making enquiries, the Directors have formed
the judgment at the time of approving the Consolidated Financial Statements,
that there is a reasonable expectation that the Group has adequate resources
to continue in operational existence throughout the Going Concern period,
being at least 12 months from the date of approval of the Consolidated
Financial Statements. For this reason, they continue to adopt the Going
Concern basis of accounting in preparing the Consolidated Financial
Statements.
3 SEGMENTAL INFORMATION
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 segments the business into four regions, Australia
& New Zealand, Germany, United Kingdom & Ireland and Rest of World.
There is no material difference between the segmentation of the Group's
turnover by geographic origin and destination.
The Group's operations comprise one class of business, that of qualified,
professional and skilled recruitment.
(In £s million) Note 2022 2021
Turnover
Australia & New Zealand 1,638.8 1,502.4
Germany 1,621.9 1,409.1
United Kingdom & Ireland 1,657.2 1,561.1
Rest of World 1,671.0 1,175.8
Group 4 6,588.9 5,648.4
(In £s million) Note 2022 2021
Net fees
Australia & New Zealand 195.7 159.9
Germany 313.9 244.8
United Kingdom & Ireland 263.3 201.1
Rest of World 416.5 312.3
Group 4 1,189.4 918.1
(In £s million) 2022 2021
Operating profit
Australia & New Zealand 51.6 39.7
Germany 75.6 31.4
United Kingdom & Ireland 43.4 11.5
Rest of World 39.5 12.5
Group 210.1 95.1
4 OPERATING PROFIT
The following costs are deducted from turnover to determine net fees:
(In £s million) 2022 2021
Turnover 6,588.9 5,648.4
Remuneration of temporary workers (4,784.1) (4,422.7)
Remuneration of other recruitment agencies (615.4) (307.6)
Net fees 1,189.4 918.1
The increase in remuneration of other agencies during the year is primarily
caused by a large contract win in the US, which included a significant amount
of pre-existing other agency supply. Management expects that this will, over
time, transition to the direct remuneration of temporary workers. Excluding
this contract, other agency supply increased by c.£54 million.
Operating profit is stated after charging the following items to net fees of
£1,189.4 million (2021: £918.1 million):
(In £s million) 2022 2021
Staff costs 766.5 624.5
Amortisation of intangible assets 10.1 11.3
Depreciation of property, plant and equipment 10.0 11.6
Depreciation of right-of-use assets (note 9) 44.0 45.1
Loss on closure of Russian business 4.2 -
Short-term leases and leases of low-value assets 3.1 2.1
Impairment loss on trade receivables 2.4 1.9
Auditor's remuneration:
- for statutory audit services 1.8 1.6
- for other services 0.2 0.1
Other external charges 137.0 124.8
Administrative expenses 979.3 823.0
Due to the conflict in Ukraine, the Group announced on 3 March 2022 that it
had taken the decision to close its offices in Moscow and St Petersburg, cease
trading with immediate effect and exit Russia. The Directors consider that
control was lost at this date, although the exit was completed in June 2022.
In the year ended 30 June 2022, Russia generated £7.8 million of net fees
(2021: £9.1 million) and £1.2 million of operating profit (2021: £1.0
million). The total one-off cost of closing the Russian business was £4.2
million and, due to the amount being immaterial to the Group, was incurred as
an expense within operating profit and not reported as a discontinued
operation.
The Group has not received any income in the current year in respect of job
support schemes following the Covid-19 pandemic. Operating profit in the prior
year is stated net of £3.9 million income received from governments globally
in respect of job support schemes, which was received entirely from
governments outside of the United Kingdom.
5 NET FINANCE CHARGE
(In £s million) 2022 2021
Interest received on bank deposits 0.8 0.4
Interest payable on bank loans and overdrafts (1.2) (1.0)
Other interest payable - (0.1)
Interest on lease liabilities (note 9) (3.9) (5.0)
Pension Protection Fund levy (0.1) (0.2)
Net interest expense on defined benefit pension schemes (1.4) (1.1)
Net finance charge (5.8) (7.0)
6 TAX
The income tax expense for the year can be reconciled to the accounting profit
as follows:
(In £s million) 2022 2021
Profit before tax 204.3 88.1
Income tax expense calculated at 19.0% (2021: 19.0%) (38.8) (16.7)
Net effect of items that are non-deductible in determining taxable profit (5.6) (3.2)
Effect of unused tax losses not recognised for deferred tax assets (1.1) (2.3)
Effect of tax losses not recognised for deferred tax utilised in the year 0.8 -
Effect of tax losses now recognised for deferred tax 3.1 2.4
Effect of other timing differences not recognised for deferred tax assets 2.4 (0.7)
Effect of other timing differences previously unrecognised for deferred tax 0.9 4.0
assets
Effect of different tax rates of subsidiaries operating in other jurisdictions (15.7) (9.1)
Effect of changes in tax rates - (0.2)
Effect of share-based payment charges and share options (0.6) (0.3)
Income tax recognised in the current year (54.6) (26.1)
Adjustments recognised in the current year in relation to the current tax of 4.0 (2.4)
prior years
Adjustments to deferred tax in relation to prior years 0.5 1.9
Income tax expense recognised in the Consolidated Income Statement (50.1) (26.6)
Effective tax rate for the year 24.5% 30.2%
The tax rate used for the reconciliation above for the year ended 30 June 2022
is the corporation tax rate of 19.0% (2021: 19.0%) payable by corporate
entities in the United Kingdom on taxable profits under tax law in that
jurisdiction. In the Spring Budget 2021, the UK government announced an
increase in the UK corporation tax rate from 19% to 25% with effect from 1
April 2023. This was substantially enacted in May 2021.
7 DIVIDENDS
The following dividends were paid by the Group and have been recognised as
distributions to equity shareholders in the year:
2022 2021
(pence per 2022 (pence per 2021
share) (£s million) share) (£s million)
Prior year final dividend 1.22 20.5 - -
Prior year special dividend 8.93 150.0 - -
Current year interim dividend 0.95 15.9 - -
Total 11.10 186.4 - -
The special dividend for the year ended 30 June 2021 of 8.93 pence per share,
paid on 12 November 2021, was paid out of the merger reserve, which was
generated under Section 612 of the Companies Act 2006, as a result of the cash
box structure used in the equity placing of new shares issued during the year
ended 30 June 2020.
The following dividends have been proposed by the Group in respect of the
accounting year presented:
2022 2021
(pence per 2022 (pence per 2021
share) (£s million) share) (£s million)
Interim dividend (paid) 0.95 15.9 - -
Final dividend (proposed) 1.90 31.4 1.22 20.5
Special dividend (proposed) 7.34 121.2 8.93 150.0
Total 10.19 168.5 10.15 170.5
The final dividend for 2022 of 1.90 pence per share (£31.4 million) along
with a special dividend of 7.34 pence per share (£121.2 million) will be
proposed at the Annual General Meeting on 9 November 2022. Neither the final
dividend nor the special dividend have been included as a liability. If
approved, the final and special dividends will be paid on 11 November 2022 to
shareholders on the register at the close of business on 30 September 2022.
8 EARNINGS PER SHARE
Weighted
average
number of Per share
Earnings shares amount
For the year ended 30 June 2022 (£s million) (million) (pence)
Basic earnings per share 154.2 1,671.7 9.22
Dilution effect of share options - 20.7 (0.11)
Diluted earnings per share 154.2 1,692.4 9.11
Weighted
average
number of Per share
Earnings shares amount
For the year ended 30 June 2021 (£s million) (million) (pence)
Basic earnings per share 61.5 1,677.3 3.67
Dilution effect of share options - 15.2 (0.03)
Diluted earnings per share 61.5 1,692.5 3.64
9 LEASE ACCOUNTING UNDER IFRS 16
Right-of-use assets
Total
Motor Other lease Lease
(In £s million) Property vehicles assets assets liabilities
At 1 July 2021 181.8 8.3 0.2 190.3 (201.1)
Exchange adjustments 2.5 0.2 - 2.7 (2.4)
Lease additions 32.0 6.6 - 38.6 (38.6)
Lease disposals (15.7) (0.2) - (15.9) 15.9
Depreciation of right-of-use assets (38.2) (5.7) (0.1) (44.0) -
Lease liability principal repayments - - - - 45.0
Interest on lease liabilities - - - - (3.9)
At 30 June 2022 162.4 9.2 0.1 171.7 (185.1)
(In £s million) 2022 2021
Current (39.8) (36.9)
Non-current (145.3) (164.2)
Lease liabilities (185.1) (201.1)
10 RETIREMENT BENEFIT SURPLUS
(In £s million) 2022 2021
Surplus in the scheme brought forward 46.6 55.2
Administration costs (2.5) (2.1)
Employer contributions (towards funded and unfunded schemes) 17.2 16.7
Net interest income 1.1 1.0
Remeasurement of the net defined benefit surplus 39.6 (24.2)
Surplus in the scheme carried forward 102.0 46.6
11 PROVISIONS
(In £s million) Restructuring Other Total
At 1 July 2021 3.3 16.3 19.6
Amounts provided during the year - 7.0 7.0
Utilised (1.5) (3.4) (4.9)
At 30 June 2022 1.8 19.9 21.7
(In £s million) 2022 2021
Current 12.7 10.0
Non-current 9.0 9.6
Total provisions 21.7 19.6
Other provisions relate to exposures arising from business operations overseas
and £9.5 million for certain tax-related exposures.
12 LIKE-FOR-LIKE RESULTS
Like-for-like results represent organic growth of operations at constant
currency. For the year ended 30 June 2022 these are calculated as follows:
Foreign 2021
exchange at constant Organic
(In £s million) 2021 impact currency growth 2022
Net fees
Australia & New Zealand 159.9 (2.6) 157.3 38.4 195.7
Germany 244.8 (10.7) 234.1 79.8 313.9
United Kingdom & Ireland 201.1 (0.4) 200.7 62.6 263.3
Rest of World 312.3 (6.7) 305.6 110.9 416.5
Group 918.1 (20.4) 897.7 291.7 1,189.4
Foreign 2021
exchange at constant Organic
(In £s million) 2021 impact currency growth 2022
Operating profit
Australia & New Zealand 39.7 (0.7) 39.0 12.6 51.6
Germany 31.4 (1.4) 30.0 45.6 75.6
United Kingdom & Ireland 11.5 - 11.5 31.9 43.4
Rest of World 12.5 (0.7) 11.8 27.7 39.5
Group 95.1 (2.8) 92.3 117.8 210.1
13 LIKE-FOR-LIKE QUARTERLY RESULTS ANALYSIS BY DIVISION
Net fee growth versus same period last year:
Q1 Q2 Q3 Q4 FY
2022 2022 2022 2022 2022
Australia & New Zealand 34% 31% 24% 12% 24%
Germany 39% 37% 32% 29% 34%
United Kingdom & Ireland 45% 33% 29% 22% 31%
Rest of World 45% 41% 36% 24% 36%
Group 41% 37% 32% 23% 32%
14 DISAGGREGATION OF NET FEES
IFRS 15 requires entities to disaggregate revenue recognised from contracts
with customers into relevant categories that depict how the nature, amount and
cash flows are affected by economic factors. As a result, we consider the
following information relating to net fees to be relevant:
Australia & New Zealand Germany United Kingdom & Ireland Rest of World Group
Temporary placements 62% 83% 55% 32% 55%
Permanent placements 38% 17% 45% 68% 45%
Total 100% 100% 100% 100% 100%
Private sector 66% 87% 72% 99% 85%
Public sector 34% 13% 28% 1% 15%
Total 100% 100% 100% 100% 100%
Technology 15% 38% 17% 26% 26%
Accountancy & Finance 10% 16% 19% 12% 14%
Construction & Property 19% 4% 16% 9% 11%
Engineering 0% 25% 1% 6% 9%
Office Support 11% 0% 11% 5% 6%
Other 45% 17% 36% 42% 34%
Total 100% 100% 100% 100% 100%
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