Hays plc · LSE:HAS
Hays — H1 FY2011 Earnings Presentation
45 slides from Hays's earnings presentation, Feb 28, 2011
Slide 1: Half Year Results, Six Months Ended 31 December 2010
HALF YEAR RESULTS SIX MONTHS ENDED 31 DECEMBER 2010
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT The information contained in this presentation is not audited, is for personal use and informational purposes only and is not intended for distribution to, or use by, any person or entity in any jurisdiction in any country where such distribution or use would be contrary to law
Slide 3: Agenda
AGENDA 1.0 FINANCIAL REVIEW - PAUL VENABLES, FINANCE DIRECTOR 2.0 OPERATING REVIEW - ALISTAIR COX, CHIEF EXECUTIVE 3.0 STRATEGY UPDATE - ALISTAIR COX, CHIEF EXECUTIVE 4.0. CURRENT TRADING - ALISTAIR COX, CHIEF EXECUTIVE APPENDICES 3
Slide 4: Financial Review
1.0 FINANCIAL REVIEW 4
Slide 5: Strong Net Fee and Earnings Growth
STRONG NET FEE AND EARNINGS GROWTH Net fees (£m) Earnings per share (pence)** Dividend per share (pence) H1 07 H106 H1 06 4.16p £297.2m 4.16p H1 07 H106 H1 06 4.16p 4.73p 4.16p H1 07 1.60p 1.60p H107 H1 H1 07 08 4.73p£374.8m 4.73p H107 H1 H1 07 08 4.73p 4.73p 6.05p H1 08 1.85p 1.85p 1.85p H1 H1 09 H
Slide 6: 38% Growth in Operating Profit
Net fees H1 H1 10 10 £265m£787m H2 H2 10 10 £293m £671m 38%* GROWTH IN OPERATING PROFIT H1 H1 11 £326m 11 £558m Income statement 6 months ended 31 December 2010 2009 Actual LFL* £m £m growth growth Turnover 1,576.0 1,288.3 22% 20% Net fees 326.1 264.8 23% 20% Operating profit ** 52.1 35.1 48% 38% Ne
Slide 7: Excellent Performances in APAC and CE&RoW
EXCELLENT PERFORMANCES IN APAC AND CE&RoW Performance by region* CE CE AC AC AC & RoW CE & RoW AP AP AP & RoW 31% 31% 38% of net fees of net fees of net fees UK&I UK&I UK&I Asia Pacific Continental Europe & RoW United Kingdom & Ireland Net fees £100.5m +38% Net fees £102.5m +33% Net fees £123.1m +1%
Slide 8: Perm Continues to Be the Key Driver of Net Fee Growth
Group net fees H1 10 59% Temp PERM CONTINUES TO BE THE KEY DRIVER OF NET H208 H1 10 57%Temp 49% Temp H109 H1 11 52% 55%Temp Temp FEE GROWTH Review of Group permanent and temporary businesses* Permanent placement business Temporary placement business +34% net fee growth +11% net fee growth +34% volum
Slide 9: Higher Group CR% Driven by Net Fee Growth and Productivity
Group CR %* H1 10 13.3%** HIGHER GROUP CR% DRIVEN BY NET FEE GROWTH H2 10 15.5%** H1 11 16.0% AND INCREASED CONSULTANT PRODUCTIVITY Group conversion rate* (%) 6 months ended 31 December 2009: 13.3%** 6 months ended 31 December 2010: 16.0% 36.5% 34.4% 13.0% 8.6% 5.1%** 1.7% Asia Pacific Continental U
Slide 10: Australian Dollar and Euro Are Meaningful FX Sensitivities
THE AUSTRALIAN DOLLAR AND EURO ARE MEANINGFUL FX SENSITIVITIES FOR THE GROUP Key FX rates and sensitivities 6 months ended 31 December 2010 Average Closing Australian $ 1.6621 1.5260 Euro € 1.1819 1.1617 Impact of a one cent change per annum Net fees Op profit Australian $ £1.3m £0.5m Euro € £1.7m £
Slide 11: Reduced ETR Due to Return to Profitability in Europe
REDUCED ‘ETR’ DUE TO RETURN TO PROFITABILITY IN MOST EUROPEAN COUNTRIES Finance charge and taxation 6 months ended 31 December 2010 2009 £m £m Finance charge Net interest charge on debt (2.5) (0.8) IAS 19 pension charge (0.8) (3.3) PPF levy (0.2) (0.6) Net finance charge (3.5) (4.7) Net finance ch
Slide 12: 70% Growth in Earnings Per Share
Earnings per share* H1 10 1.38p** H2 10 1.87p** 70% GROWTH IN EARNINGS PER SHARE H1 11 2.34p Earnings per share* 6 months ended 31 December 2010 2009** Change Basic earnings pre-exceptional items £32.1m £19.0m 69% Weighted average number of shares 1,374m 1,377m Basic earnings per share pre-exception
Slide 13: £24.7m Operating Cash Flow
Cash from operations H1 10 £36m* H2 10 £42m* £24.7M OPERATING CASH FLOW H1 11 £25m Operating profit to free cash flow conversion Uses of cash flow Operating cash flow £24.7m (2009: £36.1m*) 70 £15.5m 60 £52.1m 50 40 Capex £7.9m 30 Pensions 20 £(42.9)m £14.6m £6.0m £(4.4)m 10 £(5.7)m Dividend £54.3m
Slide 14: A Strong Balance Sheet
A STRONG BALANCE SHEET Balance sheet analysis £m 31 Dec 30 June 2010 2010 GOODWILL AND INTANGIBLES Goodwill & intangibles 252.1 247.7 • Goodwill increased primarily due to exchange rate differences Property, plant & equipment 21.3 23.8 Net deferred tax 22.0 29.0 NET WORKING CAPITAL • Increase in NWC
Slide 15: Increase in Net Debt to £126m
Free cash flow** H1 10 £30m INCREASE IN NET DEBT TO £126M H2 10 £23m H1 11 £15m Net (debt) / net cash (£m) £(125.7)m £(114.9)m £300M BANK FACILITY IN PLACE - facility to January 2014 £(81.1)m £(77.2)m NET DEBT / EBITDA RATIO: 1.1X* £(54.6)m - debt covenant: < 2.5 £(38.4)m EBITDA / INTEREST RATIO: 42
Slide 16: Interim Dividend Held at 1.85p
Interim dividend H1 09 1.85p INTERIM DIVIDEND HELD AT 1.85p H1 10 1.85p H1 11 1.85p Dividend Earnings per share* 2010 2009 2.57p 2.34p 1.87p Interim dividend 1.85p 1.85p 1.38p Represents cash June 10 June 09 £25.3m £25.3m Dec 09 Dec 10 payment of: The interim dividend will be payable on 15 April t
Slide 17: Financial Summary
FINANCIAL SUMMARY STRONG GROUP NET FEE GROWTH - Broad based recovery driving 36%* net fee growth in the International business - Net fees flat in the UK with strong private sector growth offset by difficult public sector markets 70% GROWTH IN EARNINGS PER SHARE - Strong conversion of net fee growth
Slide 18: Operating Review
2.0 OPERATING REVIEW 18
Slide 19: Excellent Net Fee Growth with 15% Sequential Headcount Increase
APAC net fees H1 10£85.7m 06 £64m £176m EXCELLENT NET FEE GROWTH WITH 15% H2 H2 10 07 10 £82m £114.0m H1 08 11 SEQUENTIAL CONSULTANT HEADCOUNT INCREASE £101m £[ ]m Asia Pacific review Australia & New Zealand (net fees: £86.7m) Excellent 51%* YoY growth in perm net fees as we capitalised on improvi
Slide 20: Excellent Growth Across the Region Led by Germany
CE & RoW net fees H1 10 £79m EXCELLENT GROWTH ACROSS THE REGION LED H2 10 £89m BY GERMAN PERFORMANCE H1 11 £103m Continental Europe & RoW review Germany (net fees: £50.9m) Excellent net fee growth of 38%* YoY with increased momentum through the half CE Rapid diversification with 25% of fees outs
Slide 21: Strong Private Sector Growth Offsetting Tough Public Sector
UK&I net fees H1 10 £122m £453m STRONG PRIVATE SECTOR GROWTH OFFSETTING H2 10 £122m £331m H1 11£244m £123m TOUGH PUBLIC SECTOR MARKETS United Kingdom & Ireland review Private sector: 74% of UK net fees (2009: 59%) - strong net fee growth of 27% YoY - strong performances in City-related 38% recruit
Slide 22: Strategy Update
3.0 STRATEGY UPDATE 22
Slide 23: Strategic Progress: Building a Global Business
STRATEGIC PROGRESS: BUILDING A GLOBAL BUSINESS Achievements in H1 FY11 Group net fees by division (% split) 1. CONTINUED DIVERSIFICATION H103 10% 4% 86% 62% of fees from International business H106 16% 13% 71% 2. CAPITALISED ON GROWTH MARKETS International consultant headcount up 13% H107 17% 16% 67
Slide 24: International Consultant Base Up 13% Sequentially
INTERNATIONAL CONSULTANT BASE UP 13% SEQUENTIALLY Consultant headcount projections in International businesses* Australia & NZ Germany** Dec-09 631 Dec-09 398 Dec-10 780 +10% in H1 Dec-10 500 +11% in H1 Last peak 1,100 Last peak 477 Dec-14P 1,250 1,650 Dec-14P 850 1,100 base projection stretch Asia
Slide 25: Case Studies: Investing for Growth
CASE STUDIES: INVESTING FOR GROWTH GERMANY HUGE MARKET POTENTIAL, ESTABLISHED LEADERSHIP POSITION JAPAN DEVELOPED ECONOMY, EMBRYONIC RECRUITMENT MARKETS US & MEXICO NEW MARKET OPPORTUNITIES, BUILT WITH HAYS “DNA”
Slide 26: Case Study: Germany
Case study: Germany 38%* NET FEE GROWTH IN H1 11 HUGE MARKET Net fees (£m) 2004 POTENTIAL H1 05 11 H1 06 H1 07 15 19 29% net fee CAGR ESTABLISHED H1 08 H1 09 28 2005-11 45 LEADERSHIP POSITION H1 10 H1 11 39 51 Net fee diversification H1 05 97% 3% H1 11 75% 25% IT & Engineering New specialisms Consul
Slide 27: Case Study: Japan
Case study: Japan 43%* NET FEE GROWTH IN H1 11 Net fees (£m) DEVELOPED H1 08 2.8 35% net ECONOMY H1 09 3.9 fee CAGR 2008-11 EMBRYONIC H1 10 H1 11 4.2 6.9 RECRUITMENT Office locations MARKETS Tokyo Osaka 80 CONSULTANTS AND 2 OFFICES Major city populations Tokyo TOKYO 8.8m metropolitan YOKOHAMA 3.7m 3
Slide 28: Case Study: US & Mexico
Case study: US & Mexico US PHARMA ENTRY LED BY: MD North America: also MD NEW MARKET Global Healthcare. 2 years at Hays Director North America: OPPORTUNITIES previously UK Divisional Manager. 6 years at Hays BUILT WITH Consultants: relocated from UK, Japan, Hungary & local hires HAYS “DNA” New Jerse
Slide 29: Key Priorities for H2 FY11
KEY PRIORITIES FOR H2 FY11 1. CONTINUED INTERNATIONAL DIVERSIFICATION - International business now almost 2/3rds of Group net fees - on track to double the number of consultants in the International business by 2014* 2. CAPITALISE ON THE RECOVERY AND STRUCTURAL GROWTH OPPORTUNITIES - build scale rap
Slide 30: Current Trading
4.0 CURRENT TRADING 30
Slide 31: Outlook Positive Across Nearly All of Our Markets
OUTLOOK POSITIVE ACROSS NEARLY ALL OF OUR MARKETS Current trading conditions by region Good growth in Australia & New Zealand and APAC strong growth in Asia Strong growth in Germany and across rest of the CE & division RoW Strong growth in the private sector continues to UK&I be offset by toug
Slide 32: Appendices
APPENDICES 32
Slide 33: A Balanced Portfolio
A BALANCED PORTFOLIO Net fees by type* 100% Public Top 40 90% Recruitment sector ~ 15% Other contracts 17% ~ 25% UK 33% 80% 38% Temp 70% 55% IT 60% 22% 50% CE&RoW 31% Construction 40% Spot Private 30,000 & Property sector customers ~75% 17% 30% 83% ~ 85% Perm 20% Accountancy 45% APAC & Finance 10% 3
Slide 34: Activities by Specialism: A Balanced Portfolio
ACTIVITIES BY SPECIALISM: A BALANCED PORTFOLIO APAC APAC Continental Europe & Rest of World UK Luxembourg Netherlands Switzerland China & HK Singapore Aus & NZ Germany Denmark Portugal Hungary Belgium Sweden Canada Austria Mexico Poland France Russia Czech Japan Brazil Spain UK&I India UAE USA Italy
Slide 35: Asia Pacific Profile
ASIA PACIFIC PROFILE Objective: continue market beating performance in Australia & New Zealand and build scale in our business in Asia Net fees: £100.5m Net fees by specialism Net fees by country Operating profit: £36.7m Conversion rate: 36.5% 7% Countries: 6 26% 34% Consultants: 1,012 Offices: 45 4
Slide 36: Continental Europe & RoW Profile
CONTINENTAL EUROPE & ROW PROFILE Objective: aggressively grow our business to establish top 3 market positions in all of our geographies APAC PROFILE Net fees: £102.5m Net fees by specialism Net fees by country Operating profit: £13.3m Conversion rate: 13.0% 12% 17% 16% Countries: 22 7% 4% Consultan
Slide 37: UK & Ireland Profile
UK & IRELAND PROFILE Objective: maintain SME market leadership, gain share in large APACcorporate PROFILE market & drive efficiencies Net fees by specialism Net fees by region Net fees: £123.1m Operating profit: £2.1m Conversion rate: 1.7% 8% 3% Consultants: 2,111 30% 32% 16% 34% Offices: 129 8% 15%
Slide 38: UK Public Sector Under Pressure but Only 9% of Group Net Fees
UK PUBLIC SECTOR IS UNDER PRESSURE BUT IT IS ONLY 9% OF GROUP NET FEES UK & I public sector net fees as % of Group* UK Front line services (~40%) PUBLIC - expect resilience SECTOR Construction & Property (~25%) - under pressure Back office (~35%) REST OF REST OF - under pressure HAYS HAYS GROUP GROU
Slide 39: By Region Summary
BY REGION SUMMARY Net fees Operating profit** 6 months ended 31 Dec 2010 2009 Actual LFL* 2010 2009 Actual LFL* £m £m growth growth £m £m growth growth Asia Pacific 100.5 64.2 57% 38% 36.7 22.1 66% 45% Continental Europe & RoW 102.5 79.1 30% 33% 13.3 6.8 96% 114% United Kingdom & Ireland Accountancy
Slide 40: Like-for-Like Summary
LIKE-FOR-LIKE SUMMARY 6 months ended 31 Dec 2009 FX Organic 2010 LFL* £m impact growth Net fees Asia Pacific 64.2 8.4 27.9 100.5 38% Continental Europe & RoW 79.1 (2.0) 25.4 102.5 33% United Kingdom & Ireland 121.5 (0.1) 1.7 123.1 1% 264.8 6.3 55.0 326.1 20% Operating profit** Asia Pacific 22.1 3.3
Slide 41: H1 FY11 v H2 FY10: Analysis by Division
H1 FY11 v H2 FY10: ANALYSIS BY DIVISION Net fee growth (LFL*) Q3 10 Q4 10 H2 10 Q1 11 Q2 11 H1 11 versus same period last year Asia Pacific 3% 28% 11% 39% 36% 38% Continental Europe & RoW (7)% 16% 1% 27% 37% 33% United Kingdom & Ireland (18)% (6)% (11)% 1% 1% 1% Operating profit growth (LFL*) versus
Slide 42: Continental Europe & RoW Performance by Country
CONTINENTAL EUROPE & ROW PERFORMANCE BY COUNTRY Relative size Net fee Country / sub region growth # of consultants # of offices (ranked by fees) (LFL*) Germany 38% 9 500 France 18% 15 225 Benelux 26% 16 137 Brazil 60% 3 73 Canada 21% 8 63 Spain 27% 6 79 Other** (14 countries) 35% 26 391 *Percentages
Slide 43: Recruitment Consultant Headcount
RECRUITMENT CONSULTANT HEADCOUNT Change in headcount* Change Change As at As at since As at since Dec June June Dec Dec 2010 2010 2010 2009 2009 Asia Pacific 1,012 881 15% 753 34% Continental Europe & RoW 1,468 1,310 12% 1,227 20% United Kingdom & Ireland 2,111 2,272 (7)% 2,328 (9)% 4,591 4,463 3% 4
Slide 44: Office Network
OFFICE NETWORK Number of offices 30 June Opened/ 31 Dec 2010 (Closed)* 2010 Asia Pacific 43 2 45 Continental Europe & RoW 79 4 83 United Kingdom & Ireland 148 (19) 129 Total 270 (13) 257 *Offices opened is shown net of closed and merged offices. 44
Slide 45: Trading Days
TRADING DAYS Number of trading days H1 H2 Year Year ended 30 June 2009 129 124 253 Year ended 30 June 2010 129 124 253 Year ending 30 June 2011 129 123 252 45