Hays Plc · LSE:HAS
Hays — H1 FY2024 Earnings Presentation
56 slides from Hays's earnings presentation, Feb 21, 2024
Slide 1: Half-Year Results for the Six Months Ended 31 December 2023
HALF-YEAR RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2023 #CreateTomorrowTogether
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT This presentation contains certain statements that number of risks, uncertainties and assumptions constitute a recommendation regarding the shares are neither reported financial results nor other and actual results or events may differ materially of the Company or any invitation
Slide 3: Agenda
AGENDA 1 OPERATING REVIEW Dirk Hahn, Chief Executive 2 FINANCIAL REVIEW James Hilton, Group Finance Director 3 CURRENT TRADING James Hilton, Group Finance Director 4 STRATEGY UPDATE Dirk Hahn, Chief Executive 5 Q&A 3
Slide 4: Operating Review
1. OPERATING REVIEW Dirk Hahn Chief Executive
Slide 5: Lower fees and profit in challenging markets, strong cash performance
LOWER FEES AND PROFIT IN CHALLENGING MARKETS, AS ACTIVITY SLOWED THROUGH H1. STRONG CASH PERFORMANCE Fees Operations Cash • Group fees down 9% to £583.3m • Group operating profit‡ down 37% • Strong cash conversion** of 112% to £60.1m (down 33% WDA*) • Activity slowed through H1, including • Period-e
Slide 6: Decisive management actions taken, c.£30m annualised cost saves delivered in H1
DECISIVE MANAGEMENT ACTIONS TAKEN, WITH c.£30M* IN ANNUALISED COST SAVES DELIVERED IN H1 WITH ONGOING ACTIONS TO DELIVER A FURTHER c.£20M IN H2 Back-office efficiency and Consultant capacity Operations overhead cost management • Consultant headcount down 12% • We restructured the operations of • Acc
Slide 7: Germany – Financial overview
RESILIENT PERFORMANCE, WITH OPERATING PROFIT UP 3% WDA* DESPITE A TOUGHER ECONOMIC BACKDROP Germany – Financial overview Six months to 31 December 2023 2022 Actual growth LFL growth H1 24 share of Group Net feesupup Net fees 3%;3%; operating operating profit‡profit up 3% up 3% WDA WDA* (down 6% (dow
Slide 8: UK & Ireland – Financial overview
MARKETS SLOWED SHARPLY THROUGH H1, PARTICULARLY IN PERM, SIGNIFICANTLY IMPACTING PROFITS UK & Ireland – Financial overview Six months to 31 Actual LFL H1 24 share December 2023 2022 of Group Net fees feesdown down14%; 14%;operating operatingprofit profitdown ‡ down 63%63% growth growth £ Net fees £1
Slide 9: Australia & New Zealand – Financial overview
MARKETS SLOWED SHARPLY THROUGH H1, PARTICULARLY IN PERM, SIGNIFICANTLY IMPACTING PROFITS Australia & New Zealand – Financial overview Six months to 31 Actual LFL H1 24 share Net fees down 19%; operating profit‡ down 60% December 2023 2022 growth growth of Group £ Net fees £74.3m £99.9m (26)% (19)% 1
Slide 10: Rest of World – Financial overview
SLOWING MARKETS IN EMEA AND CHALLENGING CONDITIONS IN CHINA AND THE AMERICAS NEGATIVELY IMPACTED OPERATING PROFIT Rest of World (RoW) – Financial overview Six months to 31 Actual LFL H1 24 share December 2023 2022 growth growth of Group Net fees down 11%; operating profit‡ down 65% Temp fees flat, w
Slide 11: Financial Review
2. FINANCIAL REVIEW James Hilton Group Finance Director
Slide 12: Decisive actions to reduce headcount and align capacity
DECISIVE ACTIONS TO REDUCE HEADCOUNT AND ALIGN CAPACITY WITH CHALLENGING MARKET CONDITIONS Net fee growth* ‒ Temp versus Perm Group net fee growth* vs. Group consultant headcount change 67% 65% 61% Temp Fees Net fees Perm Fees Consultant headcount 48% 39% 41% 37% 31% 32% 24% 26% 26% 22% 21% 16% 16%
Slide 13: Operating profit down 37%, strong balance sheet and cash performance
OPERATING PROFIT‡ DOWN 37%, STRONG BALANCE SHEET AND CASH PERFORMANCE Net fees Operating profit‡ Cash Conversion‡** H1 20 £553.1m H1 20 £100.1m H1 20 65% H1 21 £422.8m H1 21 £25.1m H1 21 257% H1 22 £565.3m H1 22 £101.6m H1 22 39% H1 23 £651.9m H1 23 £97.0m H1 23 68% H1 24 £583.3m H1 24 £60.1m H1 24
Slide 14: EPS down 42% driven by lower profits and higher tax rate
Basic EPS‡ (p) H1 22 4.08 EPS‡ DOWN 42% DRIVEN BY LOWER PROFITS AND HIGHER TAX RATE H1 23 4.11 H1 24 2.37 Income Statement Six months ended 31 December 2023 2022 Reported LFL* £m £m growth growth Turnover 3,538.4 3,839.8 (8)% (5)% Net fees 583.3 651.9 (11)% (9)% Operating profit‡ 60.1 97.0 (38)% (37
Slide 15: Fee decline driven by lower volumes, partially offset by pricing and mix
Drivers of H1 24 fee performance (£m) FEE DECLINE DRIVEN BY LOWER VOLUMES, PARTIALLY OFFSET BY PRICING AND MIX Review of Group Permanent and Temporary Businesses* Permanent placement business Temporary placement business (15)% net fee decrease (3)% net fee decrease (25)% Volume decrease (7)% volume
Slide 16: Decisive action to manage cost base through H1
DECISIVE ACTION TO MANAGE COST BASE THROUGH H1 H1 24 operating profit‡ bridge (£m) Actions taken to reduce our cost base Payroll: i) Consultant headcount reduced by 12% versus prior year and by 7% in H1. Non-consultant headcount 1.8 decreased by 3% in Q2. Total headcount reductions of c.770 heads in
Slide 17: Conversion rate of 10.3%, or 10.8% on WDA basis
CONVERSION RATE* OF 10.3%, OR 10.8% ON WDA** BASIS Conversion rate* H1 23 H2 23 FY23 H1 24 Comments Germany 24.0% 28.2% 26.2% 21.9% Conversion rate* of 23.4% on a working-day adjusted** basis We reduced our UK&I cost base per period by c.£0.7 million in H1 with further UK & Ireland 11.1% 10.4% 10.8%
Slide 18: Exceptional cost of £27.9 million
EXCEPTIONAL COST OF £27.9 MILLION; OF WHICH £15.3 MILLION IS NON-CASH Six months ended 31 December 2023 Operating Profit Profit after (£m) Net fees Tax EPS profit before tax tax H1 24 Pre-exceptional 583.3 60.1 55.5 (17.8) 37.7 2.37 Restructuring costs - (12.6) (12.6) 2.5 (10.1) (0.65) US acquisitio
Slide 19: Effective tax rate of 32.0%
EFFECTIVE TAX RATE‡ (ETR) of 32.0% Finance charge and taxation Six months ended 31 December 2023 2022 Finance charge £m £m Net interest charge on debt* (1.3) (1.3) IFRS 16 interest on lease liabilities (non-cash) (2.4) (2.0) IAS 19 pension charge (non-cash) (0.8) 0.4 PPF levy (0.1) (0.1) Net finance
Slide 20: Strong cash performance, with 112% cash conversion
Cash from operations* (£m) H1 22 39.3 STRONG CASH PERFORMANCE, WITH 112% H1 23 66.4 CASH CONVERSION H1 24 67.3 Operating profit‡ to free cash flow bridge (H1 24, £m) Uses of cash flow (H1 24) Cash from operations* £67.3m (H1 23: £66.4m) Pensions £9.1m 112% cash conversion (H1 23: 68%) Capex
Slide 21: Continued strong credit control, modest increase in debtor days
CONTINUED STRONG CREDIT CONTROL, WITH MODEST INCREASE IN DEBTOR DAYS BUT STILL BELOW PRE-PANDEMIC LEVELS Debtor Days (Days Sales Outstanding) Cash position overview Closing net cash (£m) NET CASH POSITION 379.5 H1 24 ended with net cash of £66.9m 38 36 35 35 34 £210 MILLION BANK FACILITY 236.9 £210m
Slide 22: A strong balance sheet, despite significant shareholder distributions
A STRONG BALANCE SHEET, DESPITE SIGNIFICANT SHAREHOLDER DISTRIBUTIONS Balance sheet analysis 31 Dec 30 Jun RETIREMENT BENEFITS £m 2023 2023 • Defined Benefit surplus broadly unchanged, with employer contributions of £9.1 million, Goodwill & intangibles 245.7 254.0 and an increase in asset values lar
Slide 23: Highly cash generative business model, clear cash flow priorities
HIGHLY CASH GENERATIVE BUSINESS MODEL, WITH CLEAR CASH FLOW PRIORITIES AND DELIVERING SUBSTANTIAL SHAREHOLDER RETURNS • Invest in headcount, training, systems Fund Group investment and brand to support organic growth Full-year capex in line with expectations at c.£30 and development • Assess potenti
Slide 24: Financial Summary
FINANCIAL SUMMARY Fees Operations Cash Net fees down 9% to £583.3m Operating profit‡ down 37% to £60.1m Strong cash generation and interim • Group fees down 9%, as trading slowed • Down 33% WDA* as the sharp deceleration dividend through the half-year and included a in December fees had a direct imp
Slide 25: Current Trading
3. CURRENT TRADING James Hilton Group Finance Director
Slide 26: Return to work: Temp & contracting volumes rebuilding
RETURN TO WORK: TEMP & CONTRACTING VOLUMES REBUILDING IN LINE WITH THE PRIOR YEAR IN UK&I & ANZ; GERMANY 2% BEHIND PRIOR YR. PERM REMAINS TOUGH Current trading conditions and outlook by region Germany UK & Ireland Australia & New Zealand Rest of World T&C volumes are rebuilding 2% T&C volumes are re
Slide 27: Strategy
4. STRATEGY Dirk Hahn Chief Executive
Slide 28: Future Hays: building the global leader in talent and workforce solutions
FUTURE HAYS BUILDING THE GLOBAL LEADER IN TALENT AND WORKFORCE SOLUTIONS Delivering greater resilience & highly profitable growth through increased focus and enhanced operational rigour Why What How To reduce our overall reliance We will return to, and then Stronger market positions on the economic
Slide 29: Our five key strategic levers
OUR FIVE KEY STRATEGIC LEVERS 1. Enhancing our 2. Greater focus 3. Increased 4. Building 5. Increasing leading positions on higher skilled, focus on resilient stronger proportion of in the most in- higher paid and growing end relationships non-Perm demand job roles markets with our fees in our categ
Slide 30: Hays country portfolio: clear focus, tailored growth plans
HAYS COUNTRY PORTFOLIO: CLEAR FOCUS, WITH TAILORED GROWTH PLANS FOR EACH MARKET Key countries: Focus countries: Emerging countries Germany, UK, Australia Austria, France, Italy, Japan, Poland, Spain, Switzerland, USA • Each key country has all five • Each country already has some • Establish highly
Slide 31: Driving operational rigour globally
DRIVING OPERATIONAL RIGOUR GLOBALLY Focus Performance Profit growth • On the most attractive end • Enhanced suite of KPIs to drive • Golden rule of OP growth > fee markets productivity and performance growth > headcount growth • On the best clients and • Drive productivity via: • We will not tolerat
Slide 32: Conclusion: building a more resilient and profitable Hays
CONCLUSION: BUILDING A MORE RESILIENT – AND SIGNIFICANTLY MORE PROFITABLE – HAYS 1) Focus on the most attractive & 2) Growth, diversity and 3) Enhanced operational skill-short markets worldwide resilience of Group profits execution and delivery Our key objectives • Deliver Group Conversion Rate of 2
Slide 33: Appendix 1
APPENDIX 1 H1 24 Results supporting materials
Slide 34: Like-for-like summary
LIKE-FOR-LIKE SUMMARY 2022 FX impact Organic 2023 LFL* Six months ended 31 December £m £m £m £m growth Net fees Germany 180.2 0.1 5.9 186.2 3% United Kingdom & Ireland 136.9 0.0 (18.8) 118.1 (14)% Australia & New Zealand 99.9 (8.5) (17.1) 74.3 (19)% Rest of World 234.9 (5.1) (25.1) 204.7 (11)% Group
Slide 35: Full-year and half-year growth analysis and conversion rate by division
FULL-YEAR AND HALF-YEAR GROWTH ANALYSIS AND CONVERSION RATE** BY DIVISION Net fee growth* Q3 22 Q4 22 H2 22 FY22 Q1 23 Q2 23 H1 23 Q3 23 Q4 23 H2 23 FY23 Q1 24 Q2 24 H1 24 versus same period last year Germany 32% 29% 31% 34% 26% 22% 24% 23% 11% 14% 19% 7% 0% 3% United Kingdom & Ireland 29% 22% 25% 3
Slide 36: Rest of World performance by country/market
REST OF WORLD PERFORMANCE BY COUNTRY/MARKET Consultant Rest of World net fees Country/Region Net fees (£m) Net fee growth* No. of offices Headcount France 40.0 0% 21 574 USA 24.6 (26)% 10 303 Switzerland 19.1 (4)% 4 181 Other** France Benelux 17.3 (5)% 11 235 Spain 12.8 1% 6 255 China 11.8 (22)% 5 1
Slide 37: Australian dollar and Euro remain significant FX sensitivities
THE AUSTRALIAN DOLLAR AND EURO REMAIN SIGNIFICANT FX TRANSLATION SENSITIVITIES FOR THE GROUP Key FX rates and sensitivities Six Months ended 31 December 2023 Average Closing Euro (€) 1.1587 1.1517 Australian dollar ($) 1.9205 1.8661 Impact of a one cent change per annum Net fees Op profit Euro (€) +
Slide 38: Consultant headcount and office network
CONSULTANT HEADCOUNT AND OFFICE NETWORK Consultants Offices Half-on-half Year-on-year As at 31 As at 30 Change since As at 31 Change since As at 31 As at 30 Change since Dec 2023 Jun 2023 Jun 2023 Dec 2022 Dec 2022 Dec 2023 Jun 2023 Jun 2023 Germany 2,055 2,044 1% 2,072 (1)% 26 26 - United Kingdom &
Slide 39: Trading days in major markets
TRADING DAYS IN MAJOR MARKETS Germany UK Australia Number of trading days H1 H2 Year H1 H2 Year H1 H2 Year Year ending 30 June 2023 128 123 251 129 124 253 129 123 252 Year ending 30 June 2024 126 123 249 127 125 252 128 125 253 Year ending 30 June 2025 128 121 249 129 124 253 130 123 253 39
Slide 40: Balanced business model: exposure to Temp/contractor markets
BALANCED BUSINESS MODEL: SECTOR-LEADING EXPOSURE TO KEY TEMP/CONTRACTOR MARKETS, PERM-GEARED IN HIGH GROWTH AREAS H1 24 net fees by geography and contract type 18% 44% 37% 63% 82% 56% 63% 37% Germany - 32% UK&I - 20% ANZ - 13% RoW - 35% Temp Perm PROPORTION OF GROUP NET FEES 40
Slide 41: Appendix 2
APPENDIX 2 Our strategy, business model and investment case
Slide 42: A balanced portfolio
A BALANCED PORTFOLIO H1 24 net fees by type* Public sector Full Technology 25% 17% outsourced 20% Germany 32% Professional 36% Perm 41% A&F 15% PSL 30% UK&I 20% Engineering 11% C&P 10% Private sector ANZ 13% 83% Multiple Office Support 5% Life Sciences 5% Technical 64% placements 30% Temp 59% RoW 35
Slide 43: Market-leading breadth and depth of platform
MARKET-LEADING BREADTH AND DEPTH OF PLATFORM, WITH A STRONG RECORD OF ORGANIC GROWTH 21 Specialisms 33 Countries New Zealand Luxembourg Netherlands Switzerland Czech Rep. Singapore Colombia Denmark Germany Malaysia Australia Romania Thailand Portugal Hungary Belgium Sweden Canada Mexico Austria Pola
Slide 44: Technical specialisms add to our balance and relative resilience
TECHNICAL SPECIALISMS ADD TO OUR BALANCE AND RELATIVE RESILIENCE Attributes of Technical* vs Professional** net fees In H1 24, Technical specialisms represented c.64% Group net fees Investment-led hires rather than 1. purely candidate-driven 49% 52% 54% 55% 58% 60% 60% 60% 61% 62% 62% 62% 63% 64% 63
Slide 45: Purpose, behaviours, and the four UN SDGs we endorse
PURPOSE, BEHAVIOURS, AND THE FOUR UNITED NATIONS SUSTAINABILITY GOALS (UNSDGs) WE ENDORSE PURPOSE We benefit society by investing in lifelong partnerships that empower people and organisations to succeed BEHAVIOURS Build partnerships Think beyond Do the right thing UNSDG Alignment and action • We be
Slide 46: Worldwide platform provides pipeline of future growth opportunities
OUR WORLDWIDE PLATFORM PROVIDES A PIPELINE OF FUTURE GROWTH OPPORTUNITIES AND LEADERSHIP IN ALL CORE MARKETS Hays’ market positioning* Market Leader Top 3 position Top 5 position Other TOP 3 Australia Malaysia Belgium New Zealand Brazil Poland France Portugal Germany Singapore Greater China Spain Hu
Slide 47: Appendix 3
HAYS sor choro APPENDIX 3 x
Slide 48: Financial archive – net fees, operating profit and consultant headcount
FINANCIAL ARCHIVE – NET FEES, OPERATING PROFIT AND CONSULTANT HEADCOUNT £ Net fees by division (£m) £ Operating profit‡ by division (£m) 1,295 1,189 243 249 1,130 1,073 212 210 955 996 458 41 42 197 918 417 164 181 27 810 339 368 135 40 764 15 22 66 36 291 340 69 312 63 17 52 32 230 188 44 44 95 196
Slide 49: Germany profile
Snapshot - #1 market position* GERMANY PROFILE – 32% OF GROUP NET FEES AND - Structurally developing market 68% OF GROUP PROFIT - Sectoral diversification Net fees by specialism (H1 24) £ Historical headline net fees (£m) £ Historical headline operating profit‡ (£m) 382 10% 4% 314 100 300 91 4% 276
Slide 50: UK & Ireland profile
Snapshot - #1 market position* UK & IRELAND PROFILE – 20% OF GROUP NET FEES AND - Diverse sector exposure 9% OF GROUP PROFIT - Nationwide coverage Net fees by specialism (H1 24) £ Historical headline net fees (£m) £ Historical headline operating profit‡ (£m) 331 64 272 272 264 263 266 52 20% 246 253
Slide 51: Australia & New Zealand profile
Snapshot - #1 market position* AUSTRALIA & NEW ZEALAND PROFILE – 13% OF GROUP NET FEES, - Diverse sector experience WITH AUSTRALIA REPRESENTING 92% OF DIVISIONAL NET FEES - Geographical diversification Net fees by specialism (H1 24) £ Historical headline net fees (£m) £ Historical headline operating
Slide 52: Rest of World profile
Snapshot - Structural growth opportunities REST OF WORLD PROFILE – REPRESENTS 35% OF GROUP - Diverse sector exposure NET FEES, WITH FRANCE OUR LARGEST RoW MARKET - Geographical diversification Net fees by specialism (H1 24) £ Historical headline net fees (£m) £ Historical headline operating profit‡
Slide 53: Financial archive net fees and operating profit (local currency)
FINANCIAL ARCHIVE NET FEES AND OPERATING PROFIT (LOCAL CURRENCY) $ Australia & New Zealand - Historical net fees (AUDm) $ Australia & New Zealand - Historical operating profit‡ (AUDm) 347 359 359 323 337 130 134 321 293 293 305 120 120 288 116 274 263 273 106 232 245 98 95 88 90 91 80 83 72 58 FY09
Slide 54: Financial archive quarterly net fee growth
FINANCIAL ARCHIVE QUARTERLY NET FEE GROWTH % Germany % UK & Ireland 38% 39% 37% 32% 29% 48% 26% 45% 22% 23% 16% 13% 15% 33% 11% 29% 6% 7% 22% 16% 2% 0% 0% 11% 5% 3% 3% 3% 4% (9%) (2%) (2%) (4%) (4%) (7%) (2%) (5%) (10%) (7%) (14%) (11%) (20%) (20%) (17%) (33%) (31%) (34%) (42%) Q3 Q4 Q1 Q2 Q3 Q4 Q1
Slide 55: Financial archive quarterly net fee and consultant growth
FINANCIAL ARCHIVE QUARTERLY NET FEE AND CONSULTANT GROWTH % Temp Fees % Perm Fees 67% 65% 61% 48% 24% 26% 22% 21% 20% 16% 14% 31% 16% 9% 11% 8% 9% 9% 11% 11% 11% 9% 5% 4% 7% 7% 0% 0% 0% 0% 0% (2%) (5%) (6%) (10%) (9%) (3%) (15%)(17%) (5%) (7%) (13%) (26%) (13%) (35%) (26%) (25%) (44%) Q3 Q4 Q1 Q2 Q3
Slide 56: Further Information
FURTHER INFORMATION David Phillips Head of Investor Relations & ESG Rob Maguire Investor Relations & ESG Manager ir@hays.com +44 (0)333 010 7122 For more information about the Group: haysplc.com/investors