Hays Plc · LSE:HAS
Hays — H1 2004/05 Earnings Presentation
48 slides from Hays's earnings presentation, March 2005
Slide 1: Interim Results, Six months ended 31 December 2004
Interim Results Six months ended 31 December 2004 Specialist Recruitment hays.com
Slide 2: Bob Lawson, Chairman
Bob Lawson Chairman Specialist Recruitment hays.com 2
Slide 3: Specialist Recruitment highlights
Specialist Recruitment highlights Continued strong net fee growth + 18% Operating profit growth + 28% Interim dividend growth + 13% Net cash generation +£36m Good progress with share buy back to date £53m Successful demerger of DX Services plc Specialist Recruitment hays.com 3
Slide 4: Group transformation
Group transformation 130 120 110 100 90 80 70 Hays FTSE 100 60 50 Jul-03 Nov-03 Jul-04 Nov-04 Mar-03 May-03 Sep-03 Jan-04 Mar-04 May-04 Sep-04 Jan-05 March 2003: “the biggest opportunities and those on which we will focus our attention are within the Specialist Recruitment business” Specialist Recru
Slide 5: Denis Waxman, Group Chief Executive
Denis Waxman Group Chief Executive Specialist Recruitment hays.com
Slide 6: Specialist Recruitment highlights
Specialist Recruitment highlights Strong growth in all 16 countries Impressive productivity improvements – Net fees per employee +8.8% – Conversion rate +2.9% Continued investment for the future – Recruitment consultants +14% – New offices +15 Record net fees and operating profit in Specialist
Slide 7: Continuing net fee growth
Continuing net fee growth 25 20 Growth 15 113 % 10 +13% +24% +18% 113 113 5 Temporary Permanent Total Net fees £132.5m £93.6m £226.1m Specialist Recruitment hays.com 7
Slide 8: Net fee growth in every region
Net fee growth in every region 40 30 Growth 20 % 10 +15% +24% +32% +18% 113 United Australia & Continental Total Kingdom New Zealand Europe Net fees £172.9m £28.9m £24.3m £226.1m Specialist Recruitment hays.com 8
Slide 9: Operating profit growth in every region
Operating profit growth in every region 40 +850% 30 +38% Growth +28% 20 +20% % 10 +15% +24% +32% +18% Operating profit 113 Net fees United Australia & Continental Total Kingdom New Zealand Europe Net fees £172.9m £28.9m £24.3m £226.1m Op profit £64.0m £12.8m £3.8m £80.6m Specialist Recruitment hays.
Slide 10: United Kingdom & Ireland
United Kingdom & Ireland 25 20 Growth 15 % +17.7 10 % +11% +15% +20% 5 Consultants Net fees Op profit 2,583 £172.9m £64.0m Continued good fee growth in all major segments Growth widespread throughout the regions Strong performance of new start-up activities Specialist Recruitment hays.com 10
Slide 11: United Kingdom – Accountancy & Finance
United Kingdom – Accountancy & Finance 25 20 Growth 15 % 10 +17.7 % +8% +13% +18% 5 Consultants Net fees Op profit 1,044 £79.3m £33.6m Growth widespread throughout the regions Continued development and growth of new specialist activities Specialist Recruitment hays.com 11
Slide 12: United Kingdom - Hays Human Resources
United Kingdom - Hays Human Resources 5 4 3 Net fees £m 2 1 0 H1 01/02 H2 01/02 H1 02/03 H2 02/03 H1 03/04 H2 03/04 H1 04/05 Specialist Recruitment hays.com 12
Slide 13: United Kingdom – Construction & Property
United Kingdom – Construction & Property 25 20 Growth 15 % 10 +17.7 +13% +13% +15% % 5 Consultants Net fees Op profit 847 £53.2m £20.5m Double digit temp and perm fee growth Continued good growth, including public sector Specialist Recruitment hays.com 13
Slide 14: United Kingdom – Information Technology
United Kingdom – Information Technology 50 40 Growth 30 % +17.7 20 +36% +31% +47% % 10 Consultants Net fees Op profit 148 £14.1m £5.0m Record number of contractors Strong growth and good pricing in perm placements Excellent productivity Specialist Recruitment hays.com 14
Slide 15: United Kingdom - other specialist activities
United Kingdom - other specialist activities 50 40 Growth 30 % 20 +17.7 % 10 +17% +36% +9% Consultants Net fees Op profit 544 £26.3m £4.9m Strong performance from Legal & Banking Continued good growth in Education Specialist Recruitment hays.com 15
Slide 16: Australia & New Zealand
Australia & New Zealand 40 30 Growth 20 +17.7 % % 10 +27% +24% +38% Consultants Net fees Op profit 437 £28.9m £12.8m Growth across all specialist activities Strong perm placements and good pricing Record conversion rate Specialist Recruitment hays.com 16
Slide 17: Hays Resources & Mining
Hays Resources & Mining 2.0 Net fees £m 1.0 0.0 H1 02/03 H2 02/03 H1 03/04 H2 03/04 H1 04/05 Specialist Recruitment hays.com 17
Slide 18: Continental Europe
Continental Europe 40 30 Growth 20 % 10 +18% +32% +850% Consultants Net fees Op profit 421 £24.3m £3.8m Record number of IT contractors in Germany Net fee growth of more than 50% in 8 countries Continued investment in consultants and offices Specialist Recruitment hays.com 18
Slide 19: Organic development in France
Organic development in France 3 2 Net fees £m 1 0 H1 01/02 H2 01/02 H1 02/03 H2 02/03 H1 03/04 H2 03/04 H1 04/05 Specialist Recruitment hays.com 19
Slide 20: Temporary margins
Temporary margins Temporary margin 70bps below H2 last year Continued impact of last year’s large contract wins Construction & Property margins weaker in South East Mix impact of strong growth in Information Technology ‘Spot’ margins remain robust Specialist Recruitment hays.com 20
Slide 21: Permanent pricing
Permanent pricing Wage inflation in several areas, circa 4% to 5% across the business Improved rates in several areas including Accountancy & Finance, IT and Legal Skills shortages in certain areas Specialist Recruitment hays.com 21
Slide 22: Continued investment in recruitment consultants
Continued investment in recruitment consultants + 11% 3,441 + 334 + 3% 3,107 3,025 + 82 Dec 03 Jun 04 Dec 04 11% increase since June 2004, 14% since December 2003 Specialist Recruitment hays.com 22
Slide 23: Expansion of the office network
Expansion of the office network United Kingdom & Ireland +9 Australia & New Zealand +1 Continental Europe * +5 +15 * Includes Canada Specialist Recruitment hays.com 23
Slide 24: Average net fees per employee
Average net fees per employee 100 90 80 70 60 £'000 50 40 30 20 10 0 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 Average net fees per employee improved by 8.8% this year Note: 2005 is based upon the annualised performance for the first half Specialist Recruitment hays.com 24
Slide 25: John Martin, Group Finance Director
John Martin Group Finance Director Specialist Recruitment hays.com
Slide 26: Specialist Recruitment profit and loss
Specialist Recruitment profit and loss £m 2004 2003 Growth (Restated) Turnover 800.7 661.8 +21% Net fees 226.1 192.4 +18% Operating profit 80.6 63.0 +28% Interest 1.9 (3.0) Goodwill amortisation (6.6) (6.6) Profit before tax 75.9 53.4 Tax (26.0) (19.9) Profit after tax 49.9 33.5 FX impact: £1.3m net
Slide 27: Number of trading days and general seasonality
Number of trading days and general seasonality Trading days 2004/2005 2003/2004 Difference First half 129 129 - Second half 124 125 (1) 253 254 (1) Christmas and Easter holiday periods First weeks of new calendar year Winter months (December to March) in Construction & Property School holida
Slide 28: Net fees and operating expenses
Net fees and operating expenses £m 2004 2003 Growth (Restated) Temporary net fees 132.5 116.8 +13% Permanent net fees 93.6 75.6 +24% 226.1 192.4 +18% Operating expenses (145.5) (129.4) (12%) Operating profit* 80.6 63.0 +28% Conversion rate % 35.6% 32.7% +2.9% Net fees per employee £91.6k £84.2k +8.8
Slide 29: Conversion rate
Conversion rate 50% 44.3% 35.4% 37.0% 39.9% 40% 30% H1 2003/04 15.6% 20% H1 2004/05 10% 2.2% 0% Continental Europe United Kingdom Australia & New Zealand Conversion rate improved from 32.7% to 35.6% Specialist Recruitment hays.com 29
Slide 30: Specialist Recruitment interest and tax
Specialist Recruitment interest and tax 2004 2003 (Restated) Simple average net cash / (debt) 95.6 Effective rate of interest 4.0% Interest excluding associate 1.9 Profit before tax * 82.5 61.3 Effective rate 31.5% 33.1% Tax (26.0) (20.3) * Before goodwill amortisation and exceptional items Speciali
Slide 31: Cash flow
Cash flow £m Specialist Recruitment Operating profit before goodwill 80.6 Depreciation 3.9 Working capital (9.4) 75.1 Interest 1.3 Tax (17.6) Capex (3.1) Dividends (34.4) 21.3 Non-trading cash flow 15.0 Note: See appendix IV for the reconciliation to the Group cash flow 36.3 Specialist Recruitment h
Slide 32: Specialist Recruitment cash flow
Specialist Recruitment cash flow * 140% 120% 100% 80% 60% 40% 20% 0% 00 01 02 03 04 H1 05 Average of 90% of post-tax profit converted into cash over last 5 years * Before interest, but after tax of 31.5% Specialist Recruitment hays.com 32
Slide 33: Non-trading cash flow
Non-trading cash flow £m DX Services demerger 68.1 Tax (19.4) Shares repurchased & issued (30.4) Other non-trading cash flow 1.1 Disposal of associate (4.4) 15.0 Remaining 04/05 non-trading commitments* £31m (including tax) * Full provision has been made for all 04/05 commitments Specialist Recruitm
Slide 34: Disposal of associate – Albion
Disposal of associate – Albion Disposed of equity interest for consideration of £0.6m Paid £5.0m for release from indemnities and warranties Restructured and rescheduled loan notes leaving: - £20.0m of loan notes repayable 2007/8 with interest at commercial rates - £5.0m preference shares repa
Slide 35: Balance sheet
Balance sheet £m 31 Dec 30 June 2004 2004 Goodwill 95.3 99.2 Tangible fixed assets 17.5 38.7 Net current assets / (liabilities) 60.9 (15.4) Provisions for liabilities & charges (118.9) (125.4) 54.8 (2.9) Net cash 113.7 77.4 Net assets 168.5 74.5 Specialist Recruitment hays.com 35
Slide 36: Employee benefits
Employee benefits £m 31 Dec 30 June 2004 2004 (Estimate) FRS 17 deficit * 59.1 47.7 SSAP 24 prepayment * 18.5 18.5 Net impact on reserves of adoption of FRS 17 77.6 66.2 * Net of deferred tax Specialist Recruitment hays.com 36
Slide 37: Dividends & share buy-back
Dividends & share buy-back 2004 2003 Growth Interim dividends 1.13p 1.00p +13% 5 Nov - 31 Dec 1 Jan - 1 Mar Total to date Number of shares 27.1m 16.2m 43.3m % of issued capital* 1.6% 0.9% 2.5% Total cost £33.1m £19.7m £52.8m * Calculated using 1,712.8m shares Specialist Recruitment hays.com 37
Slide 38: IFRS conversion
IFRS conversion Preparation and audit of 30 June 2004 balance sheet underway IFRS 1 First time adoption decisions made IFRS 2 Share based payments – some impact of “fair value” vs “expected value” IAS 17 Leases – may be some modest recategorisation IAS 19 Employee benefits IAS 39 Embedde
Slide 39: Denis Waxman, Group Chief Executive – Outlook
Denis Waxman Group Chief Executive Outlook Specialist Recruitment hays.com
Slide 40: Current trading
Current trading 20 Net fee 15 Growth 10 % +15% +18% +17% 5 +5% 113 H1 04 H2 04 H1 05 Jan to Feb 05 Specialist Recruitment hays.com 40
Slide 41: Outlook
Outlook Jan & Feb net fee growth of 17% broadly consistent with recent growth rates New year temp return rates are encouraging Permanent placement orders continue to grow Planned acceleration of investment in the second half Performance for the full year continuing in line with our expecta
Slide 42: APPENDICES
APPENDICES Specialist Recruitment hays.com
Slide 43: Appendix I – segmental profit and loss
Appendix I – segmental profit and loss £m Specialist Other Group Recruitment Turnover 800.7 42.6 843.3 Operating profit 80.6 9.7 90.3 Associate 0.0 1.4 1.4 Interest 1.9 (0.6) 1.3 Goodwill amortisation (6.6) 0.0 (6.6) Profit before tax 75.9 10.5 86.4 Tax (26.0) (3.3) (29.3) Profit after tax 49.9 7.2
Slide 44: Appendix II – impact of exchange movements
Appendix II – impact of exchange movements Gross fees Net fees Operating profit Australia & New Zealand (3.0) (0.9) (0.4) Continental Europe (1.8) (0.4) - Total (4.8) (1.3) (0.4) Specialist Recruitment hays.com 44
Slide 45: Appendix III – restatement of prior year interim figures
Appendix III – restatement of prior year interim figures The prior year interim figures have been restated from 24 weeks to 6 calendar months £m 2003 2003 Increase Reported Restated % Turnover 623.2 661.8 +6% Net fees 180.6 192.4 +7% Operating profit 60.1 63.0 +5% Interest (3.0) (3.0) Goodwill amort
Slide 46: Appendix IV – segmental cash flow
Appendix IV – segmental cash flow £m Specialist Other Total Recruitment Operating profit before goodwill 80.6 9.7 90.3 Depreciation 3.9 - 3.9 Working capital (9.4) (17.4) (26.8) Cash flow from operating activities 75.1 (7.7) 67.4 Interest 1.3 - 1.3 Tax (17.6) (19.4) (37.0) Capex (3.1) 3.3 0.2 Divide
Slide 47: Appendix V - consultants
Appendix V - consultants Dec June Dec 2004 2004 2003 United Kingdom Accountancy & Finance 1,044 931 969 Construction & Property 847 774 748 Information Technology 148 122 109 Other 544 501 497 United Kingdom 2,583 2,328 2,323 Australia & New Zealand 437 384 344 Continental Europe 421 395 358 Total 3
Slide 48: Appendix VI – segmental summary
Appendix VI – segmental summary H104/05 H104/05 H104/05 H103/04 H103/04 H103/04 Gross Net Operating* Gross Net Operating* fees fees profit fees fees profit £m £m £m £m £m £m UK Accountancy & Finance 177.6 79.3 33.6 168.1 70.4 28.4 Construction & Property 189.8 53.2 20.5 160.1 47.0 17.9 Information T