REG - Hays PLC - Second Quarter Trading Statement

HaysAnnouncement

17/01/2023 07:00

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RNS Number : 9049M  Hays PLC  17 January 2023

 

QUARTERLY

UPDATE

FOR THE THREE MONTHS ENDED

31 DECEMBER 2022

17 January 2023

 

Financial summary

Growth in net fees for the quarter ended 31 December 2022 (Q2 FY23)

 (versus the same period last year)                           Growth

                     Actual                                   LFL
 By division:
                     Germany                                  25%   22%
                     United Kingdom & Ireland (UK&I)          4%    4%
                     Australia & New Zealand (ANZ)            (1)%  (4)%
                     Rest of World (RoW)                      12%   6%
                     Total                                    11%   8%

 By segment:
                     Temporary                                12%   9%
                     Permanent                                11%   7%
            Total                                             11%   8%

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.

Highlights

·    Good quarter, with fees up 8%. Temp up 9% and Perm up 7%, both
driven by management actions to increase fee margins and target higher value
markets, plus wage inflation. Overall, fees were stable through the quarter
and November matched our previous fee record (Sept 2022). The Group's WDA fee
growth exit rate was 6%

·      Operating profit in H1 FY23 between £95-97 million, in line with
our expectations

·      Germany: record fees up 22%. Sequential growth through the
quarter driven by record contractor volumes, with Temp & Contracting up
20%. Perm up an excellent 32%

·      UK & Ireland (UK&I): fees up 4%, with Temp up 5% and Perm
up 2%. Fees were sequentially stable through the quarter, with the Public
sector up 6%, slightly outperforming the Private sector, up 3%

·    Australia & New Zealand (ANZ): fees down 4%. Temp down 6%, driven
by 12% lower volumes, and Perm down 1%. Public sector fees, down 2%,
outperformed the Private sector, with fees down 6%

·      Rest of World (RoW): fees up 6%, with eight country records. Temp
up 7% and Perm up 6%. Growth was led by EMEA ex-Germany, up 13% with fees
sequentially stable through the quarter. Asia decreased by 5%, with tough
conditions in China, and the Americas was down 1%

·      Group consultant headcount down 2% in the quarter and up 10% YoY.
We expect overall headcount will be broadly flat in Q3 as we focus on driving
productivity while selectively investing in structural growth areas

·      Net cash position of c.£100 million, in line with our
expectations and after paying c.£150 million in core and special dividends in
November 2022 (30 September 2022: £185 million; 31 December 2021: £237
million)

Commenting on the Group's performance, Alistair Cox, Chief Executive, said:

 

"We performed well in the quarter, with fees stable at high levels and
delivering a record in November. Growth was the result of our actions to
increase fee margins and our focus on the most in-demand markets, supported by
overall wage inflation. For the first time in seven quarters, our largest
business of Temp & Contracting grew faster than Perm, and Temp volumes
increased through the quarter, while overall Perm volumes decreased modestly.
Around the world we delivered a number of quarterly fee records, including our
largest market of Germany, in EMEA and our global Technology business.

 

"Our forward-looking client and candidate activity remains at good levels in
our Temp and Contracting business, but we have seen modest reductions in Perm
in several markets as client and candidate uncertainties increase. That said,
our key markets continue to be characterised by acute skill shortages and wage
inflation, and we are focused on further increasing fee margins while closely
managing our overheads. I am confident our highly experienced management teams
globally will continue to navigate the shorter-term macroeconomic challenges
while capitalising on the long-term opportunities which are so apparent."

 

Group

Q2 trading overview

The Group delivered good growth in the quarter, up 8% on a like-for-like basis
versus the prior year, despite tough prior year quarterly growth comparatives,
and up by 10% on a working-day adjusted basis. On an actual basis, net fees
increased by 11%, with the weakening of sterling versus the Euro, US dollar
and Australian dollar increasing our actual net fees. Overall, net fees were
sequentially stable at high levels through the quarter, and November matched
our previous record monthly fee performance (September 2022). Nine countries
delivered record fees, and the Group's December net fee growth exit rate was
5%, or 6% on a working-day adjusted (WDA) basis.

For the first time in seven quarters, Temp and Contracting grew faster than
Perm. Net fees in Temp (56% of Group) increased by 9%, driven by our actions
to increase fee margins and our focus on higher value markets, together with
the positive effects of wage inflation. Overall Temp volumes increased through
the quarter, in line with normal seasonal trends. Fees in Perm (44% of Group)
increased by 7%, driven by strong improvement in our average Perm fee. Perm
volumes reduced modestly through the quarter, as client hiring processes
extended and with reduced candidate confidence in several markets. Fees in the
Private sector (83% of Group fees) increased by 8%, with the Public sector up
10%.

Our largest global specialism of Technology (26% of Group fees) delivered
another record performance, with fees up 10%, despite a tough prior year
growth comparator. Accountancy & Finance also increased by 10%, with
Construction & Property up 4%. Our fourth largest specialism, Engineering,
also produced a fee record, up 23%. Direct outsourcing fees in Enterprise
clients increased by 7%, and we continue to win Enterprise market share, with
a strong pipeline of opportunities.

Group headcount and FX

Group consultant headcount decreased by 2% in the quarter, in line with our
expectations, and increased by 10% year-on-year. We remain focused on cost
control, and the Group's cost base per period(( 1 )) decreased through the
quarter. Overall, average productivity per consultant remained stable at good
levels. We expect consultant headcount will be broadly flat in Q3 FY23
overall, as we focus on driving productivity while selectively investing in
attractive structural areas such as Technology via our Strategic Growth
Initiative (SGI) programme. SGI investment in H1 FY23 was c.£8 million, in
line with our expectations.

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 13 January 2023 exchange rates
(AUD1.7547 and €1.1272), operating profit would increase by c.£10 million,
an increase of £1 million versus the position at Q1 FY23.

H1 FY23 operating profit and outlook

Group operating profit in H1 FY23 of between £95-97 million, in line with our
expectations. As previously stated, due to the timing of public holidays, our
Germany business had three fewer trading days in the quarter versus the prior
year, which negatively impacted H1 FY23 fees and operating profit by c.£5
million. Additionally, the closure of our Russia business in March 2022
negatively impacted H1 FY23 operating profit by c.£1 million versus the prior
year.

Our forward-looking client and candidate activity remains at good levels in
our Temp and Contracting business, but we have seen some modest reductions in
Perm in several markets as client and candidate uncertainties increase.

Easter falls entirely in Q4 FY23, as it did in FY22, and therefore we do not
anticipate any material working day impacts in Q3.

 

Germany (28% of net fees)

Germany delivered a record fee performance, up 22%, or up 28% when adjusted
for three fewer working days versus the same period last year. We ended the
quarter with record Contractor volumes, driven by skills shortages and good
levels of client demand.

Our largest specialism of Technology, 36% of Germany fees, increased by 12%,
with our second largest, Engineering, up 20%. Accountancy & Finance and
Construction & Property grew by 29% and 12% respectively, with HR up an
excellent 160%. Private sector fees (86% of Germany) increased by 21%, with
the Public sector up 30%.

Contracting (59% of Germany fees) delivered a record quarter with fees up an
excellent 26%, driven by 19% growth in contractor volumes, to record levels.
Margin and Contractor rates mix added a further 11%, partially offset by a 5%
headwind from fewer working days year-on-year. Helpfully, average weekly hours
per contractor was flat versus the prior year, in contrast to a trend of
decline in recent quarters.

Fees in Temp (23% of Germany fees), where we employ temporary workers as
required under German law, increased by 5%, or by 20% on a working-day
adjusted basis. Underlying Temp volumes increased by 17%.

Perm, which represented 18% of Germany fees, also delivered a record
performance and increased by 32%.

Consultant headcount increased by 3% in the quarter and by 19% year-on-year.

 

United Kingdom & Ireland (21% of net fees)

Net fees in the United Kingdom & Ireland (UK&I) increased by 4%, with
fees sequentially stable through the quarter. Performance was led by Temp (55%
of UK&I fees), up 5%, all driven by margin and mix. Perm fees increased by
2%. The Private sector (68% of UK&I fees) grew by 3% and the Public sector
increased by 6%.

Most regions traded broadly in line with the overall UK&I business, apart
from Northern Ireland and the South West and Wales, which grew by 9% and 8%
respectively, and the North West, which declined by 3%. Our largest region of
London was flat, including London City up 4%. In Ireland, our business
increased by an excellent 22%.

At the specialism level, Technology delivered another record performance, up
13%. Accountancy & Finance grew by 4%, while Construction & Property
and Office Support decreased by 2% and 7% respectively.

Consultant headcount decreased by 6% in the quarter and increased by 6%
year-on-year.

 

Australia & New Zealand (14% of net fees)

Net fees in Australia & New Zealand (ANZ) fell by 4%, with fees broadly
stable through the quarter.

Perm fees, which represented 38% of ANZ, were down 1%. Temp, 62% of ANZ,
decreased by 6%, with volumes down 12% year-on-year, partially offset by
improved margin and mix of 6%. Private sector net fees, which represented 61%
of ANZ, decreased by 6%, with the Public sector fees down 2%.

Australia net fees decreased by 6%. Our largest regions of New South Wales and
Victoria, which together represented 52% of Australia fees, decreased by 3%
and 12% respectively. Queensland fell by 3%, ACT by 16% while Western
Australia was flat.

At the ANZ specialism level, Construction & Property, our largest business
representing 20% of ANZ fees, increased by 4%. Technology, our second largest
specialism, was flat, and Accountancy & Finance increased by a strong 15%.
Sales & Marketing declined by 10%, with HR down 11% and our 'Other'
smaller specialisms also down 11% in aggregate.

New Zealand, 9% of ANZ net fees, delivered another good performance, with fees
up 10%.

ANZ consultant headcount decreased by 5% in the quarter and increased by 5%
year-on-year.

 

Rest of World (37% of net fees)

Our Rest of World (RoW) division, comprising 28 countries, grew net fees by
6%, including eight quarterly fee records. Excluding the fee impact of the
closure of our Russia business in March 2022, RoW growth was 9%. Perm, which
represented 66% of RoW net fees, increased by 6% with Temp up 7%.

EMEA ex-Germany (59% of RoW) produced record fees, up 13%, or 19% excluding
Russia, with broad-based growth. France, our largest RoW country, and
Switzerland both grew by 23% and delivered record performances. Italy and
Spain grew by 24% and 14% respectively, and the Netherlands grew by 4%. The
UAE was a standout performer, up 69%.

The Americas (25% of RoW) fees decreased by 1%. Latam delivered excellent
growth, up 21%. Canada increased by 10%, while the USA decreased by 9%, with
fees and activity slowing through the quarter, particularly in Perm.

Asia (16% of RoW) fees decreased by 5%. Performance in Japan was excellent, up
38%, with Malaysia up 9%. China decreased by 28%, with Mainland China
particularly impacted by strict pandemic restrictions, and continuing to
significantly underperform Hong Kong, which grew year-on-year.

RoW consultant headcount decreased by 1% in the quarter and increased by 9%
year-on-year.

 

Cash flow, balance sheet and dividends

Net cash position at 31 December 2022 of c.£100 million (30 September 2022:
£185 million; 31 December 2021: £237 million), in line with our expectations
and after paying c.£150 million in core and special dividends in November
2022. Working capital increased in H1 FY23, driven by the excellent growth in
Temp and Contracting in Germany and EMEA, which are our highest salary markets
and are therefore most working-capital-intensive.

During the quarter, we also purchased £18.6 million under our share buyback
programme. As at 31 December 2022, c.£18 million remained in our share
buyback programme.

 

Enquiries

 Hays plc                  Group Finance Director

James Hilton
Head of Investor Relations

David Phillips                                        +44 (0) 203 978 2520

+44 (0) 333 010 7122
 FGS Global

Guy Lamming

                                                       hays@fgsglobal.com
 Anjali Unnikrishnan

( )

Conference call

James Hilton and David Phillips will conduct a conference call for analysts and investors at 8:00am United Kingdom time on 17 January 2023. The dial-in details are as follows:
 Dial-in number                  0330 551 0200
 Password                        Hays

 The call will be recorded and available for playback for seven days as
 follows:
 Replay dial-in number           +44 (0) 208 196 1480
 Access code                     7185062#

 

Reporting calendar

 Half-year results for the six months ended 31 December 2022    23 February 2023
 Trading update for the quarter (Q3 FY23) ending 31 March 2023  14 April 2023
 Trading update for the quarter (Q4 FY23) ending 30 June 2023   13 July 2023

Hays Group overview

As at 31 December 2022, Hays had c.13,000 employees in 254 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 80% of the Group's net fees in Q2 FY23, compared with 25% in
FY05.

Our consultants work in a broad range of industries covering recruitment in 20
professional and skilled specialisms. In Q2 FY23 our four largest specialisms
of Technology (26% of Group net fees), Accountancy & Finance (14%),
Construction & Property (10%) and Engineering (10%) collectively
represented 60% of Group fees.

In addition to our international and sectoral diversification, in Q2 FY23 the
Group's net fees were generated 56% from temporary and 44% 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, 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.

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 supports 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.

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

 1  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.

 

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