Hays Plc · LSE:HAS
Hays — H1 2014 Earnings Presentation
60 slides from Hays's earnings presentation, February 2014
Slide 1: Interim Results: Six months ended 31 December 2013
INTERIM RESULTS Six months ended 31 December 2013
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT This presentation contains certain statements that are neither reported financial results nor other historical information. The information contained in this presentation is not audited, is for personal use and informational purposes only and is not intended for distribution to,
Slide 3: Agenda
AGENDA 1 FINANCIAL REVIEW PAUL VENABLES, FINANCE DIRECTOR 2 OPERATING REVIEW ALISTAIR COX, CHIEF EXECUTIVE 3 STRATEGY UPDATE ALISTAIR COX, CHIEF EXECUTIVE 4 CURRENT TRADING ALISTAIR COX, CHIEF EXECUTIVE 5 APPENDICES 3
Slide 4: 1. Financial Review
1. FINANCIAL REVIEW PAUL VENABLES GROUP FINANCE DIRECTOR 4
Slide 5: Strong Group Profit Performance
STRONG GROUP PROFIT PERFORMANCE Net fees Operating Profit Basic earnings per share H1 12 £373.8m H1 12 £63.1m H1 12 2.76p H2 12 £360.2m H2 12 £65.0m H2 12 2.71p H1 13 £360.3m H1 13 £60.3m H1 13 2.43p H2 13 £358.7m H2 13 £65.2m H2 13 2.71p H1 14 £363.4m H1 14 £66.7m H1 14 2.90p Net fees Operating pro
Slide 6: Strong Group Profit Performance: Income Statement
Net fees H1 12 H1 13 £558m£360m H2 H2 12 13 £672m £359m STRONG GROUP PROFIT PERFORMANCE H1 13 H1 14 £734m £363m Income statement** Restated** Six months ended 31 December 2013 2012 Actual LFL* £m £m growth growth Turnover** 1,849.2 1,849.4 0% 1% Net fees 363.4 360.3 1% 2% Operating profit 66.7 60.3
Slide 7: Solid Net Fee Performance; Strong Profit Leverage
SOLID NET FEE PERFORMANCE; STRONG PROFIT LEVERAGE Performance by region* 25% 42% 33% of net of net of net fees fees fees Asia Pacific Continental Europe & RoW United Kingdom & Ireland Net Fees £89.8m (10)%* Net Fees £154.1m 6%* Net Fees £119.5m 9%* Op Profit £25.3m (22)%* Op Profit £31.5m 24%* Op Pr
Slide 8: Growth in Temp and Perm for First Time in 2 Years
Split of net fees H1 13 59% Temp H2 13 49% Temp 59% Temp GROWTH IN TEMP AND PERM FOR FIRST TIME IN 2 YEARS H1 14 52% Temp 59% Temp Review of Group Permanent and Temporary Businesses* Permanent placement business Temporary placement business 2% net fee growth 3% net fee growth 6% volume increase 7% v
Slide 9: Australian Dollar Has Depreciated by 10% Since June 2013
AUSTRALIAN DOLLAR HAS DEPRECIATED BY 10% SINCE 30 JUNE 2013 GBP / AUD FX Cross Rate FY 13 average: $1.53 H1 14 average: $1.72 Latest 24-Feb-14: $1.84 FY 13 yr. end Investor Day 30-Jun-13: $1.67 07-Nov-13: $1.70 Half yr. end 31-Dec-13: $1.86 9
Slide 10: Australian Dollar and Euro Are Significant FX Sensitivities
THE AUSTRALIAN DOLLAR AND EURO ARE SIGNIFICANT FX TRANSLATION SENSITIVITIES FOR THE GROUP Key FX rates and sensitivities Six months ended 31 December 2013 Average Closing Australian $ 1.7214 1.8580 Euro € 1.1801 1.2048 Impact of a one cent change per annum Net fees Op profit Australian $ +/- £0.7m +
Slide 11: ETR Decreases to 35% After Material Increase in UK Profit
‘ETR’ DECREASES TO 35% AFTER MATERIAL INCREASE IN UK PROFIT Finance charge and taxation Six months ended 31 December 2013 2012 £m £m Finance charge Net interest charge on debt (2.5) (3.9) IAS 19 pension charge (1.4) (0.3) PPF levy (0.3) 0.6 Net finance charge (4.2) (3.6) Increase in net finance ch
Slide 12: 19% Increase in Earnings Per Share
Basic EPS H13.25p** H1 10 12 13 7.72p 2.43p H2 11 13 H2 12 5.19p2.71p 5.19p** 19% INCREASE IN EARNINGS PER SHARE 12 14 H1 H1 13 5.47p2.90p Basic earnings per share (EPS) Six months ended 31 December 2013 2012 Change Basic earnings £40.6m £33.8m 20% Weighted average number of shares* 1,402m 1,390m Ba
Slide 13: Good First Half Cash Performance
Cash from operations H1 £78.1m 12* £60.1m H1 13 £97.3m£49.2m GOOD FIRST HALF CASH PERFORMANCE H113 14 £60.0m H1 £162.2m Operating profit to free cash flow conversion Uses of cash flow Operating cash flow £60.0m (H1 13: £49.2m) Capex £6.2m £16.0m Pensions £6.6m £66.7m £(22.7)m £40.3m £(16.6)m £(3.1)m
Slide 14: Balance Sheet Remains Strong
BALANCE SHEET REMAINS STRONG Balance sheet analysis 31 Dec 30 June GOODWILL & INTANGIBLES £m 2013 2013 Decrease primarily due to the amortisation Goodwill & intangibles 213.1 221.7 of intangibles on Hays IT systems Property, plant & equipment 19.6 22.3 NET WORKING CAPITAL Net deferred tax 37.7 34.
Slide 15: Net Debt Remained Flat in H1, Ahead of Expectations
Free cash flow* H1 £52.7m 12 £38.0m H1 13£62.2m £21.2m NET DEBT REMAINED FLAT IN H1, AHEAD OF OUR H1 H113 14 £111.8m £40.3m EXPECTATIONS Closing net debt £m 177.7 NET DEBT REDUCED average net debt down c.£40m vs. H1 13 145.4 132.9 £300M BANK FACILITY IN PLACE 105.2 105.2 expires October 2017 NET
Slide 16: Interim Dividend Unchanged on Prior Year
INTERIM DIVIDEND UNCHANGED ON PRIOR YEAR FREE CASH Fund Group investment and development Maintain strong balance sheet FLOW Deliver a sustainable dividend which is affordable and PRIORITIES appropriate Dividend should be sustainable, progressive and appropriate DIVIDEND Target dividend cov
Slide 17: Financial Summary
FINANCIAL SUMMARY SOLID GROUP NET FEE PERFORMANCE, UP 2%* Growth in net fees accelerated over the half, driven by the return to meaningful net fee growth in the UK STRONG GROWTH IN OPERATING PROFIT, UP 15%* Strong operating profit performance underpinned by improved productivity and cost discipl
Slide 18: 2. Operating Review
2. OPERATING REVIEW ALISTAIR COX CHIEF EXECUTIVE
Slide 19: Improved Conditions in Many Parts of the Group
WE HAVE SEEN IMPROVED CONDITIONS IN MANY PARTS OF THE GROUP Group net fees Country and specialism examples Japan: Life Sciences +33% 77% Germany: Accountancy & Finance +25% Of Group Growth* UK&I: Construction & Property +19% net fees UK&I: Accountancy & Finance +6% Germany: IT & Engineerin
Slide 20: Australian Market Tough Plus Currency Headwind; Strong Asia
APAC net fees H1 13 £146m £111m 10 AUSTRALIAN MARKET REMAINS TOUGH PLUS CURRENCY H2 13 11 £101m £210m H1 14 £90m£242m HEADWIND; STRONG ASIA PERFORMANCE Australia & NZ (net fees: £71.3m; operating profit: £22.7m) APAC Net fees down 16%*, operating profit down 26%* 57% Temp net fees down 11%*, Per
Slide 21: Newer Specialisms & Perm Drive German Growth
CE&RoW net fees £133m 10 13 £168m £140m H1 NEWER SPECIALISMS & PERM DRIVE GERMAN GROWTH; H2 13 11 £220m£134m £145m H1 14 H1 13 £140m £154m £267m MATERIAL PROFIT GROWTH IN REST OF DIVISION Germany (net fees: £83.7m) CE&RoW Good net fee growth of 6%*; Profit growth of 5%* 61% Continued growth in c
Slide 22: Broad-Based Acceleration of Growth in UK & Ireland
UK&I net fees H1 13 10 £109m £244m BROAD-BASED ACCELERATION OF GROWTH IN ALL H2 13 11 £113m £242m H1 14 12 £120m £225m SPECIALISMS AND REGIONS Private sector net fees up 6%*: 71% of UK&I net fees UK & IRELAND Improved momentum in the half 59% Temp Strong growth in our largest specialisms with C&
Slide 23: 3. Strategy Update
3. STRATEGY UPDATE ALISTAIR COX CHIEF EXECUTIVE 23
Slide 24: Objective: Broadly Double and Diversify Group Profit
THERE ARE 5 PILLARS WHICH UNDERPIN THE STRENGTH OF OUR OBJECTIVE IS TO BROADLY DOUBLE & DIVERSIFY GROUP PROFIT OUR BUSINESS MODEL Underpinned by three areas of focus to best leverage our global platform 1. INCREASE CONSULTANT PRODUCTIVITY 2. INVEST TO CAPITALISE ON GROWTH OPPORTUNITIES 3. BUILD CRIT
Slide 25: Selectively Investing to Drive Profitable Fee Growth
SELECTIVELY INVESTING TO DRIVE PROFITABLE AND SUSTAINABLE FEE GROWTH Average no. of Net Fees* consultants** Illustrative examples In countries that have RUSSIA: Net fees +32%; Consultants +16% grown by >10%* +9% SINGAPORE: Net fees +36%; Consultants +8% In countries that have UK: Net fees +9%;
Slide 26: Building Critical Mass; Rolling Out New Services
THERE ARE 5 PILLARS WHICH UNDERPIN THE STRENGTH OF BUILDING CRITICAL MASS; ROLLING OUT NEW SERVICES OUR BUSINESS MODEL Building Critical Mass Contracting roll-out update Further diversifying and building Canada Netherlands Japan scale in existing countries is a key +26% +10% +16% strategic focus P
Slide 27: Positioned to Capitalise on the Upturn
WE HAVE POSITIONED THE GROUP TO CAPITALISE ON THE UPTURN SIGNIFICANT UK Expect c.75% drop through of first £30m of net fees to EBIT OPERATING LEVERAGE Focus today is on driving fee growth and productivity MARKET LEADERSHIP Market leader in 8 countries incl. Australia, Germany, UK IN KEY COUNTR
Slide 28: 4. Current Trading
4. CURRENT TRADING ALISTAIR COX CHIEF EXECUTIVE 28
Slide 29: Current Trading Conditions by Region
BROAD-BASED IMPROVEMENT IN THE UK, GOOD MOMENTUM IN PARTS OF THE GROUP, AUSTRALIA REMAINS TOUGH Current trading conditions by region Australia remains tough. Conditions subdued but stable in NSW and APAC Victoria, fragile but broadly stable in WA and Queensland Return to work in the Temp market
Slide 30: 5. Appendices
5. APPENDICES 30
Slide 31: H1 2014 Results Supporting Information
1.0 H1 2014 RESULTS SUPPORTING INFORMATION 31
Slide 32: Market Conditions in CE&RoW Outside Germany Improving
MARKET CONDITIONS IN CE&RoW OUTSIDE OF GERMANY ARE IMPROVING Operating profit split in Continental Europe & RoW Six months to 31 December 2013 2012 LFL £m £m growth* Germany 32.0 28.8 5% Rest of CE&RoW (23 countries) 5.8 2.2 156% Central Costs (6.3) (7.5) 16% CE&RoW Operating Profit 31.5 23.5 24%
Slide 33: Like-for-Like Summary
LIKE-FOR-LIKE SUMMARY Six months to 31 December 2012 FX impact Organic 2013 LFL* £m £m £m £m growth Net fees Asia Pacific 111.2 (11.1) (10.3) 89.8 (10)% Continental Europe & RoW 139.7 5.8 8.6 154.1 6% United Kingdom & Ireland 109.4 0.2 9.9 119.5 9% 360.3 (5.1) 8.2 363.4 2% Operating profit Asia Paci
Slide 34: H1 FY14 v H2 FY13: Analysis by Division
H1 FY14 v H2 FY13: ANALYSIS BY DIVISION Net fee growth (LFL*) Q3 13 Q4 13 H2 13 Q1 14 Q2 14 H1 14 versus same period last year Asia Pacific (14)% (13)% (14)% (12)% (9)% (10)% Continental Europe & RoW 4% 9% 6% 6% 5% 6% United Kingdom & Ireland 0% 7% 3% 8% 10% 9% Operating profit growth (LFL*) versus
Slide 35: Continental Europe & RoW Performance by Country
CONTINENTAL EUROPE & RoW PERFORMANCE BY COUNTRY Relative size Country / sub region Net fee growth # of offices # of consultants (ranked by net fees) (LFL*) Germany 6% 13 823 France 2% 15 283 Benelux 12% 16 175 Canada 5% 6 130 Switzerland 19% 3 73 Poland 14% 6 130 Other** (16 countries) 4% 31 507 90
Slide 36: Consultant Headcount
CONSULTANT HEADCOUNT Change in headcount As at As at Change As at Change Dec June since Dec since 2013 2013 June 2013 2012 Dec 2012 Asia Pacific 1,009 1,024 (1)% 1,035 (3)% Continental Europe & RoW 2,121 2,084 2% 2,154 (2)% United Kingdom & Ireland 2,020 1,929 5% 1,849 9% 5,150 5,037 2% 5,038 2% 36
Slide 37: Office Network
OFFICE NETWORK Number of offices 30 June Opened/ 31 Dec 2013 (Closed)* 2013 Asia Pacific 48 0 48 Continental Europe & RoW 89 1 90 United Kingdom & Ireland 102 0 102 Total 239 1 240 * Offices opened is shown net of closed and merged offices. 37
Slide 38: Trading Days
TRADING DAYS Number of trading days* H1 H2 Year Year ended 30 June 2013 128 124 252 Year ending 30 June 2014 129 124 253 Year ending 30 June 2015 129 124 253 * UK only. 38
Slide 39: The Hays Business Model & Strategy for Growth
2.0 THE HAYS BUSINESS MODEL & STRATEGY FOR GROWTH 39
Slide 40: Leading Global Expert in Qualified, Professional and Skilled Recruitment
HAYS IS A LEADING GLOBAL EXPERT IN QUALIFIED, PROFESSIONAL AND SKILLED RECRUITMENT EXECUTIVE SEARCH (head hunting) PROFESSIONAL RECRUITMENT (mostly white collar) Contingent fee model Focus on high-skilled roles Clear structural growth markets GENERALIST RECRUITMENT (mostly blue collar) Note: W
Slide 41: A Proven Track Record of Organic Growth
A PROVEN TRACK RECORD OF ORGANIC GROWTH New country & specialism entries Key: Organic Acquisition 33 COUNTRIES 20 SPECIALISMS Pre 1990 UK Australia Ireland A&F C&P IT Early 1990s Banking Fin Services Office Pros Late 1990s Czech Re. France N.Zealand Contact Ce. Education 2000 Belgium Portugal Legal
Slide 42: Worldwide Platform Provides Pipeline of Growth Opportunities
OUR WORLDWIDE PLATFORM PROVIDES A PIPELINE OF FUTURE GROWTH OPPORTUNITIES & LEADERSHIP IN ALL CORE MARKETS Hays market positioning* Market Leader Top 3 position Top 5 position Other TOP 3 TOP 5 Australia (#1) Austria Belgium China Brazil Denmark Colombia Hong Kong Czech Rep Hungary France Luxembourg
Slide 43: Strategic Focus on Building Scale in Key Markets
OUR STRATEGIC FOCUS IS ON BUILDING SCALE IN KEY MARKETS HAYS COUNTRIES HAYS SPECIALISMS 2013 2013 33 20 11 10 2002 2002 Market leaders in 8 countries including: Leading market positions across UK, Australia, Germany professional and technical areas Long established market presence Top 3 mark
Slide 44: Strength of Our Model Delivers for Clients and Performance
THE STRENGTH OF OUR MODEL IS KEY TO DELIVERING FOR CLIENTS AND DRIVING FINANCIAL PERFORMANCE THROUGH THE CYCLE Unrivalled … the best …delivers … a resilient … and scale, people, sector the best financial leverages balance and leading solutions for performance the Group to diversity… technology clien
Slide 45: Clear Plan to Broadly Double Group Profit
AND WE HAVE A CLEAR PLAN TO BROADLY DOUBLE GROUP PROFIT CORE PROFIT FUTURE MATERIAL NETWORK NEXT WAVE DRIVERS PROFIT DRIVERS CRITICAL AUSTRALIA JAPAN RUSSIA 20 OTHER HAYS GERMANY CANADA USA COUNTRIES UK FRANCE CHINA BRAZIL OTHER LATAM 5 YEARS 5-10 YEARS ONGOING 45
Slide 46: Five Pillars Underpinning Our Business Model
THERE ARE 5 PILLARS WHICH UNDERPIN THE STRENGTH OF BALANCE, SCALE AND DIVERSIFICATION ARE WHAT SETS THE HAYS OUR BUSINESS MODEL BUSINESS MODEL APART AND DRIVES OUTPERFORMANCE Exposure to structural growth and more mature areas 1. BALANCE Long-established across technical, white-collar specialism
Slide 47: Leveraging Best-in-Class Technology Platform and Brand
LEVERAGING OUR BEST-IN-CLASS TECHNOLOGY PLATFORM AND BRAND Global Internally integrated Delivering outcomes Database & externally connected to drive growth GLOBAL DIGITAL OPERATIONAL PLATFORM INTELLIGENCE OPERATIONAL 1 EFFECTIVENESS CROSS SYSTEM EFFECTIVENESS BEST CUSTOMER AWARENESS OPERATIONAL MANA
Slide 48: A Balanced Portfolio
A BALANCED PORTFOLIO Net Fees by type* Recruitment Public Top 40 sector contracts ~15% UK 17% Perm ~25% 33% Other** 33% 41% Office Sup. 8% Construction 30,000 CE&RoW & Property Private sector customers 16% Spot 83% ~85% 42% Accountancy ~75% & Finance Temp 17% 59% IT & APAC Engineering 25% 26% * Indi
Slide 49: Well Diversified in Structural and Cyclical Markets
BALANCED BUSINESS MODEL: WELL DIVERSIFIED IN STRUCTURAL AND CYCLICAL MARKETS Net fees by market maturity* (percentages in table show % of Group net fees in HY 14) ESTABLISHED**: DEVELOPING: >70% penetration >30-70% penetration 33% of Group net fees 28% of Group net fees UK & Ireland -12% LFL net fee
Slide 50: Sector Diversity Protects Our Business
BALANCED BUSINESS MODEL: SECTOR DIVERSITY PROTECTS OUR BUSINESS AND EXPOSES US TO GROWTH OPPORTUNITIES TOUGH: DECLINE <0%* STRONG: GROWTH >5%* Energy 23% Banking & Capital Markets Financial Services Const’n & Property Resources & Mining Education Net fees IT 46% Short term challenges HY14 Oil & Gas
Slide 51: Sector-Leading Exposure to Key Temp Markets
BALANCED BUSINESS MODEL: SECTOR-LEADING EXPOSURE TO KEY TEMP MARKETS, PERM-GEARED IN HIGH GROWTH AREAS Hays HY14 net fees by geography Temp Perm 11% 41% 31% 72% 87% 89% 69% 59% 28% 13% Asia Rest of CE&RoW UK & Ireland Australia & New Zealand Germany 0% Group net fees 100% 51
Slide 52: Divisional Profiles
3.0 DIVISIONAL PROFILES 52
Slide 53: Asia Pacific Represents 25% of Group Net Fees
ASIA PACIFIC REPRESENTS 25% OF GROUP NET FEES WITH AUSTRALIA REPRESENTING OVER 70% OF DIVISIONAL NET FEES Net fees: £89.8m Net fees by specialism Net fees by country Operating profit: £25.3m Conversion rate: 28.2% 21% Countries: 7 30% 7% Consultants: 1,009 8% Offices: 48 16% 5% Temp : Perm 72% 7% 10
Slide 54: Profile of Hays Australia & New Zealand
PROFILE OF HAYS AUSTRALIA & NEW ZEALAND % 20% GROUP NET FEES TEMP PERM 69% 31% 684 CONSULTANTS £ £71m £23m Net fees EBIT Conv. Rate 32% 38 OFFICES % Net fees by specialism % Net fees by region Q’land Mining Res & Construction Acc. & Office IT Other NSW Victoria WA NZ Other & Property Finance Support
Slide 55: Historic Profile of Hays Australia & New Zealand
HISTORIC PROFILE OF HAYS AUSTRALIA & NEW ZEALAND £ Historic net fees (£M) £ Historic operating profit (£M) 210 81 87 163 182 179 72 60 64 135 129 54 49 110 42 85 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY consultant headcount % Historic Conversion Rates 1,090
Slide 56: Continental Europe & Rest of World Represents 42% of Net Fees
CONTINENTAL EUROPE & REST OF WORLD REPRESENTS 42% OF GROUP NET FEES AND GERMANY REPRESENTS 54% OF THE DIVISION’S NET FEES Net fees: £154.1m Net fees by specialism Net fees by country Operating profit: £31.5m Conversion rate: 20.4% 14% 15% Countries: 24 4% 3% Consultants: 2,121 4% 8% 49% 5% Offices:
Slide 57: Profile of Hays Germany
PROFILE OF HAYS GERMANY % 23% GROUP NET FEES TEMP & CONTRACTING PERM 89% 11% 823 CONSULTANTS £ £84m £32m Net fees EBIT Conv. Rate 38% 13 OFFICES % Net fees by specialism % Net fees by contract type IT Engineering Other Contracting Temp Perm 41% 33% 26% 68% 21% 11% Note: All data is presented as of 3
Slide 58: Historic Profile of Hays Germany
HISTORIC PROFILE OF HAYS GERMANY £ Historic net fees (£M) £ Historic operating profit (£M) 136 150 58 52 106 38 88 80 36 63 24 26 34 41 13 15 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY consultant headcount % Historic Conversion Rates 804 38 38 41 38 38 702 37
Slide 59: UK & Ireland Represents 33% of Group Net Fees
UK & IRELAND REPRESENTS 33% OF GROUP NET FEES Net fees: £119.5m Net fees by specialism Net fees by region Operating profit: £9.9m 3% Conversion rate: 8.3% 7% 21% 20% 21% 20% Consultants: 2,020 13% 36% Offices: 102 9% 9% 17% 9% 19% 17% Temp : Perm 9% 10% 14% 42% 10% 12% 24% 59% 41% Private : Public s
Slide 60: Historic Profile of Hays UK & Ireland
HISTORIC PROFILE OF HAYS UK & IRELAND £ Historic net fees (£M) £ Historic operating profit (£M) 417 453 138 141 137 378 331 244 242 225 222 64 11 4 (7) 6 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY consultant headcount % Historic Conversion Rates 3,134 3,128 36