TIDMHAS
RNS Number : 4980P
Hays PLC
18 February 2021
HALF YEAR REPORT
SIX MONTHSED
31 DECEMBER 2020
18 February 2021
H1 SIGNIFICANTLY IMPACTED BY THE PANDEMIC, BUT TRADING IMPROVED
THROUGH THE HALF. DIVIDS SET TO RESUME AT FULL YEAR RESULTS
Six months ended 31 December 2020 2019 Reported LFL
(In GBP's million) growth growth
--------------------------------- ----- ----- --------- -------
Net fees (1) 422.8 553.1 (24)% (24)%
--------------------------------- ----- ----- --------- -------
Operating profit 25.1 100.1 (75)% (75)%
--------------------------------- ----- ----- --------- -------
Conversion rate (2) 5.9% 18.1% (1220)bps
--------------------------------- ----- ----- --------- -------
Cash generated by operations (3) 64.6 65.2 (1)%
--------------------------------- ----- ----- --------- -------
Profit before tax 21.1 95.6 (78)%
--------------------------------- ----- ----- --------- -------
Basic earnings per share 0.75p 4.60p (84)%
--------------------------------- ----- ----- --------- -------
Dividend per share - - -
--------------------------------- ----- ----- --------- -------
Note: unless otherwise stated all growth rates discussed in this
statement are LFL (like-for-like), YoY (year-on-year) net fees and
profits, representing organic growth of continuing operations at
constant currency.
-- H1 was significantly impacted by the pandemic, although
importantly trading in all our major markets improved through the
half . Net fees declined by 24%, with operating profit down 75% to
GBP25.1 million. Group headcount decreased by 14% YoY, as we
balanced cost controls with protecting our core infrastructure and
people
-- Australia & New Zealand: fees down 23%, operating profit
down 42%. Temp fees down 18%, with Perm down 34%. Public and
Private sectors down 14% and 28% respectively
-- Germany: fees down 26% , o perating profit down 76%. T ough
market conditions, although clear improvement towards the end of
the half. Relative fee resilience in Contracting, down 13%. Temp
fees down 45%, significantly impacted by Temp redundancy costs and
under-utilisation, although these have now returned to normal
levels. Perm down 34%
-- UK & Ireland: fees down 27%, and we recorded a GBP1.0
million operating loss. Temp fees down 21%, improving through the
half, while Perm declined by 35%. Public and Private sectors down
12% and 34% respectively
-- Rest of World : fees down 21%, operating profit of GBP0.1
million. Fees in EMEA ex-Germany and the Americas both fell by 20%,
while Asia declined 28%. Fee momentum improved through the half,
most notably in the USA, Switzerland, Spain and Poland
-- Net cash: Cash collection was strong, and we ended the half
with net cash of GBP379.5 million (30 June 2020: GBP366.2 million;
31 December 2019: GBP13.2 million), excluding short-term deferrals
of tax payments
-- Core dividends and capital return timetable: the Group's
trading and cash generation have been considerably more resilient
than our modelled scenarios at the time of our equity issuance.
Accordingly, the Board intends to resume core dividends, with a
single full-year payment based on 3x earnings cover, to be declared
at our Prelims in August. Additionally, the Board has identified
GBP150 million of surplus capital, which it intends to return to
shareholders via special dividend, in two phases. We expect to
commence with a GBP100 million payment, declared at our FY21
Prelims
Commenting on the results Alistair Cox, Chief Executive,
said:
"Since the pandemic began, we have helped over 200,000 talented
people find their next job and provided advice, guidance and
training to millions of others. We have prioritised the wellbeing
of our own people and Temps, and I am proud of the steadfast way
all our colleagues have adapted to the changing world, helping
their clients and candidates at a time of great need. Their
resilience, together with the investments we have made across our
business, delivered improving profit momentum through the half with
overall trading distinctly stronger than we had earlier
anticipated.
"While our New Year 'return to work' was slightly slower than in
prior years, encouragingly activity has rebounded to pre-Christmas
levels by early February. We will continue to invest in the skills
the world needs, building businesses to match new skillsets in
demand. Our 'Return to Growth' programme has identified over 20
such projects across all our divisions and will accelerate in our
second half in areas like Technology, large Corporate Accounts,
Life Sciences and the Green Economy. Considering the latter, it is
only right that we increase our own contribution to the environment
and combatting climate change and we are committing to being a 'Net
Zero' carbon business by the end of 2021.
"Finally, with recovery in fees and our profits accelerating in
Q2, this provides us with confidence to resume paying core
dividends at our full-year results in August. We have also
identified GBP150 million of surplus capital, which we also intend
to return to shareholders in phases via special dividends, again
commencing at our results in August."
(1) Net fees comprise turnover less remuneration of temporary
workers and other recruitment agencies.
(2) Conversion rate is the conversion of net fees into operating
profit.
(3) Cash generated by operations is stated after IFRS 16 lease
payments and in FY21 before the repayment of tax deferrals of
GBP104.6 million.
(4) 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.
(5) The underlying Temp gross margin is calculated as Temp net
fees divided by Temp gross revenue and relates solely to Temp
placements in which Hays generates net fees. This specifically
excludes transactions in which Hays acts as agent on behalf of
workers supplied by third party agencies and arrangements where
Hays provides major payrolling services.
(6) Represents percentage of Group net fees and operating
profit.
Enquiries
Hays plc
+ 44 (0) 20 3978
Paul Venables Group Finance Director 2520
+ 44 (0) 20 3978
David Phillips Head of Investor Relations 3173
Finsbury
+ 44 (0) 20 7251
Guy Lamming / Anjali Unnikrishnan 3801
Results presentation & webcast
Our results webcast will take place at 8.30am on 18 February
2021, available live on our website,
www.haysplc.com/investors/results-centre . A recording of the
webcast will be available on our website later the same day along
with a copy of this press release and all presentation
materials.
Reporting calendar
Trading update for the quarter ending 31 March
2021 15 April 2021
Trading update for the quarter ending 30 June
2021 15 July 2021
Preliminary results for the year ending 30 June
2021 26 August 2021
Trading update for the quarter ending 30 September
2021 14 October 2021
Hays Group Overview
As at 31 December 2020, Hays had c.10,000 employees in 257
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 c.78% of the Group's net fees in H1 FY21, compared
with 25% in FY05.
Our consultants work in a broad range of sectors covering 20
professional and skilled recruitment specialisms, and during H1
FY21 our three largest specialisms of IT (26% of Group net fees),
Accountancy & Finance (14%) and Construction & Property
(12%) together represented 52% of Group fees.
In addition to our international and sectoral diversification,
in H1 FY21 the Group's net fees were generated 62% from temporary
and 38% 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.
Introduction & market backdrop
Trading review & net fees
Trading in the six months to 31 December 2020 remained
significantly impacted by the effects of the pandemic although,
encouragingly, performance improved through the half in all major
markets. N et fees decreased by 24% on both like-for-like and
reported bases to GBP422.8 million, representing a like-for-like
fee reduction of GBP134.4 million versus the prior year.
We entered FY21 with sequentially stable Group net fees. As
lockdown restrictions eased in our main markets during our first
quarter, client activity and fees began to show signs of sequential
improvement. Activity then accelerated in our second quarter,
including a substantial fee improvement in November and December,
despite second wave lockdowns in Australia, the UK and parts of
Europe.
Our Temp business (62% of Group net fees) fell by 19%, with Perm
down 31%. Included in our Temp net fee reduction is c.GBP6 million
relating to the redundancy costs and some under-utilisation of
German Temp workers. Excluding this, Group Temp fees declined by
17%.
Our largest global specialism of IT (26% of Group net fees) fell
by 15%, including Q2 FY21 down 8%. Accountancy & Finance and
Construction & Property were tougher, down 30% and 28%
respectively. Fees in Life Sciences and Healthcare were relatively
resilient, declining by 3% and 2% respectively. Hays Talent
Solutions, our large Corporate Account business, was also more
resilient than the Group average with fees down 9% and
encouragingly, after a slight hiatus in bid activity over the
summer as clients focused on dealing with the pandemic, we have
seen a significant pick up in our bid pipeline and have signed a
number of large contracts in recent months.
Our primary objective continues to be the protection of our
colleagues, clients, candidates and our business infrastructure.
The Board remains extremely grateful for the commitment and
innovation shown by our colleagues as they continue to operate
through challenging circumstances, including third-wave lockdowns
in many parts of the world.
Return to Growth, cost base and operating profit
Considering the significant uncertainties caused by the
pandemic, we delivered a resilient and profitable performance. We
acted quickly to manage our cost base, while protecting our core
business operations and investing in our 'Return to Growth (RTG)'
programme. RTG has identified over 20 accelerated headcount
investment projects in attractive structural growth markets such as
IT, large Corporate Accounts and Life Sciences in Australia,
Germany, the USA, UK, Asia and France. We have made good progress
and are on track to add c.250 people globally by the end of the
financial year. In FY22, we anticipate adding at least c.300
further people in RTG projects.
Like-for-like costs were reduced by 13% or GBP57.6 million
(GBP55.3 million on a reported basis), as we actively managed our
variable and discretionary costs and period-end Group headcount was
reduced by 14% year-on-year. H1 FY21 costs included GBP4 million of
investment in our RTG programme, predominantly in consultant
headcount. The overall reduction in costs is stated after GBP2.5
million in government assistance worldwide, with no benefit from UK
furlough schemes in H1 FY21 operating profit. We exited all major
government support schemes in our first quarter.
Our average cost base in Q2 FY21 was c.GBP65 million per
period(4) . This represented an increase of c.GBP2 million from
July 2020, primarily as consultant commissions increased
proportionately with the rise in net fees, and as almost all our
offices globally were open by the second quarter.
As a result of the GBP134.4 million reduction in net fees,
operating profit decreased by 75% on a like-for-like basis to
GBP25.1 million. This represented a conversion rate of 5.9%, a 1220
bps reduction versus the prior year.
We anticipate our cost base per period(4) in the second half
will increase by c.GBP1 million to c.GBP66 million, due to our
planned RTG investments. This excludes any further increase in
consultant commissions, which are primarily linked to fees.
Overall, and including RTG headcount, we expect Group consultant
headcount will increase by 2-4% in Q3 FY21.
We converted an excellent 257% of operating profit into
operating cash flow(3) . Year-end net cash, excluding short-term
deferrals of tax payments of GBP13.7 million, was GBP379.5 million.
This was primarily driven by an outstanding performance from our
credit control teams in reducing our debtor days to a record low 34
days (2019: 38 days), and a further unwind of our Temp debtor book
since 30 June 2020. Our total working capital unwind since the
start of the pandemic has been c.GBP130 million.
Dividend policy and return of surplus capital
The Group's cash generation and working capital management have
been considerably more resilient than our modelled scenarios at the
time of our GBP196 million equity issuance in April 2020. The Board
therefore believes the Group will be in a position, over the next
18 months, to return surplus capital to shareholders.
The Group held net cash of GBP379.5 million (net of tax
deferrals) at 31 December 2020. Going forward, we propose to
prudently increase our financial year-end 'cash buffer' from GBP50
million to GBP100 million. We are also budgeting in our cash flows
for an expected c.GBP130 million of future working capital outflow
over the next few years, as our Temp book rebuilds, and we see some
normalisation in client payment timings. This results in GBP150
million of surplus capital on our balance sheet at 31 December
2020.
We anticipate distributing this surplus capital to shareholders
via special dividends. Considering the ongoing economic
uncertainty, the Board believes it is prudent to conduct this
return on a phased basis. Assuming no material deterioration in
economic conditions and a continued recovery in the Group's
profitability, we expect to commence the repayment with a special
dividend of GBP100 million, to be declared with our full-year
results in August 2021. We currently expect a further GBP50 million
special dividend will be declared in the subsequent 12 months.
Our business model remains highly cash generative, and the
Board's priorities for our free cash flow are to fund the Group's
investment and development, maintain a strong balance sheet and
deliver a sustainable core dividend at a level which is both
affordable and appropriate. We therefore intend to resume our core
dividend at 3.0x earnings cover, commencing with a single payment
for FY21, to be declared with our full-year results in August 2021.
Our target dividend cover range will remain 2.0 to 3.0x
earnings.
The Board intends to resume ongoing special dividends over time.
Our policy for such special dividends will be based on returning
capital above our cash buffer at each financial year-end of GBP100
million. As mentioned above, we have also budgeted a further GBP130
million buffer for working capital rebuild, which will decline as
our Temp book grows and working capital increases. Any ongoing
special dividends will also be dependent on a return to more normal
levels of profitability, and a positive economic outlook.
Foreign exchange
Overall, net currency movements versus Sterling positively
impacted results in the year, increasing net fees by GBP4.1
million, and operating profit by GBP1.8 million .
Fluctuations in the rates of the Group's key operating
currencies versus Sterling represent a significant sensitivity for
the reported performance of our business. By way of illustration,
each 1 cent movement in annual exchange rates of the Australian
Dollar and Euro impacts net fees by GBP0.9 million and GBP3.1
million respectively per annum, and operating profits by GBP0.2
million and GBP0.4 million respectively per annum.
The rate of exchange between the Australian Dollar and Sterling
over the six months ended 31 December 2020 averaged AUD 1.8067 and
closed at AUD 1.7727. As at 16 February 2021 the rate stood at AUD
1.7927. The rate of exchange between the Euro and Sterling over the
six months ended 31 December 2020 averaged EUR1.1066 and closed at
EUR1.1256. As at 16 February 2021 the rate stood at EUR1.1489.
Lower Perm volumes and Temp margin, partially offset by mix
Group Perm net fees decreased by 31%, driven by a 30% decline in
placement volume and a 1% decrease in our average Perm fee.
Overall, underlying wage inflation was minimal, despite pockets of
higher inflation in certain skill-short markets.
Net fees in Temp, which incorporates our Contracting business,
and represented 62% of Group net fees decreased by 19 %. This
comprised a 16% decline in volume and an 80 bps decrease in
underlying Temp margin(5) . The decrease in Temp margin was driven
by the c.GBP6 million negative impact from German Temp worker
redundancy costs and under-utilisation, noted earlier, and client
mix, with relative resilience in our larger clients, where our
average Temp margin is lower. Excluding German Temp worker
redundancy costs and higher levels of under-utilisation, Group Te
mp margin fell by 50bps to 14.0% (2019: 14.5%). This was partially
offset by a 3% increase in mix and hours, with relative resilience
in our higher paid IT and Life sciences specialisms.
Movements in consultant headcount and office network changes
Consultant headcount at 31 December 2020 was 6,548, down 5% in
the half and down 17% year-on-year. Total Group headcount decreased
by 4% in the half and by 14% year-on-year.
In ANZ, period-end consultant headcount increased by 1% in the
half but declined by 19% year-on-year. In Germany, headcount was
flat in the half and declined by 12% year-on-year. In the UK&I,
headcount decreased by 14% in the half, in part as we exited
furlough schemes, and by 20% year-on-year. In our RoW division,
headcount decreased by 4% in the half, and by 16% year-on-year.
Within RoW, headcount in the USA and China both increased by 10% in
the first half.
We expect consultant headcount to increase by c.2-4% in Q3
FY21.
Net change
(vs. 31
31 Dec Dec 31 Dec 30 Jun
Consultant headcount 2020 2019) 2019 2020
========================== ======= =========== ======= =======
Australia & New Zealand 818 (188) 1,006 811
Germany 1,557 (202) 1,759 1,560
United Kingdom & Ireland 1,589 (402) 1,991 1,840
Rest of World 2,584 (507) 3,091 2,689
========================== ======= =========== ======= =======
Group total 6,548 (1,299) 7,847 6,900
========================== ======= =========== ======= =======
Over the last six months, we have consolidated several of our
smaller offices, mainly in the UK and Canada.
31 Dec Net opened/ 30 Jun
Office network 2020 (closed) 2020
========================== ======= ============ =======
Australia & New Zealand 41 (1) 42
Germany 25 - 25
United Kingdom & Ireland 90 (5) 95
Rest of World 101 (3) 104
Group 257 (9) 266
========================== ======= ============ =======
Purpose, Net Zero, Equality and our Communities
Our purpose is to benefit society by helping people succeed and
enabling organisations to thrive, creating opportunities and
improving lives. Becoming lifelong partners to millions of people
and thousands of organisations also helps to make our business
sustainable.
The United Nations Sustainable Development Goals (UNSDG's) call
upon businesses to advance sustainable development through the
investments they make and the practices they adopt. In FY20 Hays
endorsed two goals - Decent Work & Economic Growth and Gender
Equality.
As a business which exists to help people further their careers
and fulfil their potential, the goal of Decent Work already sits
very close to Hays' purpose. Over the last four years we have
placed over one million people worldwide in their next job. We are
proud of this as it helps the individual, their employer and
society in general. As part of our Group strategy, and reinforcing
our Decent Work and Economic Growth commitment, during lockdown
last year we launched Hays Thrive, our free-to-use online Training
& Wellbeing platform. c.16,000 clients have signed up, with
over 70,000 user accounts set up thus far. Hays Thrive is designed
to help candidates upskill and to help employees deal with very
difficult times, so was well-timed for the pandemic.
Our core company value is that we should always focus on doing
the right thing. Linked to this, we believe we have a significant
role to play in combating climate change. Accordingly, as part of
our ongoing commitment to Environmental, Social & Governance
matters (ESG), we will set material, ongoing carbon reduction
targets across our businesses, and we will become 'Net Zero' in
terms of carbon emissions by the end of 2021. We also recognise the
significant opportunities which 'Green' and 'Sustainable' economies
present. We are already a large recruiter of skilled workers into
low carbon, social infrastructure and ESG roles, and we are
actively looking to grow our ESG-related talent pools, helping to
solve skill and talent shortages globally. R einforcing our Net
Zero commitment, in FY21 we will also adopt UN SDG #13, Climate
Action.
We are focussing the Group's charitable activities on projects
which support our purpose and our ' #HaysHelps' programme, launched
last year, is progressing well. Related to our endorsement of UNSDG
#5, Gender Equality, we continue to believe that responsible
companies should have Equality, Diversity & Inclusion
(ED&I) at their heart, and last year we established a global
ED&I Council.
Investing in technology, responding to change and enhancing
intellectual property
We strongly believe that equipping our consultants with an
effective range of technology tools improves their productivity.
Our technology stack was also instrumental in ensuring our seamless
transition to remote working due to the pandemic, ensuring complete
operational continuity.
Over many years we have built deep trust with our customers and
candidates, underpinned by the reach and depth of our engagement
with them. We have achieved this by producing consistently
high-quality content globally, and by offering advice and insights
that our audience consistently responds to. Supporting this, we are
consistently ranked as the most followed staffing company globally
on LinkedIn, a position we have built over many years. By measuring
our own interactions with candidates and combining these with
learnings from key third party platforms such as LinkedIn, Google,
Xing and Stack Overflow, we can gain valuable insights which
indicate a candidate's level of engagement and approachability.
This helps to predict how likely a candidate is to respond to an
approach from Hays, supporting higher consultant productivity by
enabling them to focus their efforts in the areas most likely to
produce results. We are continually evolving this sub-system of
technology, combining our sophisticated in-house analytics with
best-in-class third-party tools to increase our understanding of a
candidate's career journey. This allows us to support candidates
with genuine value-adding services such as offering access to
learning pathways. Our technology stack helps our consultants find
the ideal candidate for our clients' roles more quickly and
effectively than in-house HR teams and our competition.
These investments are increasingly paying off. Real time data
insights drive engagement with prospective candidates and clients
and allow us to process and present to our consultants c.11.5
million CVs within minutes of the candidates engaging with our
platforms and channels giving us significant time to market
advantages. They also enable our consultants to perform complex
searches from our global 'OneTouch' database in seconds. Technology
is essential to the successful delivery of our "Find & Engage"
marketing recruitment model. In a world where speed of response and
the quality of relationships are key to success, these tools,
combined with the world class expertise of our consultants, are
generating a real competitive advantage.
H1 FY21 initiatives include the continued growth of Hays Thrive,
noted above. Our innovative 'HaysHub' app continued its growth, and
we have linked our Education training and recruitment portal
together 5,200 schools now have access, and over 200,000 education
staff have accessed training. We have now launched 'HaysHub' into
our UK Social Care and Construction & Property specialisms, and
in Australia.
Australia & New Zealand (18%(6) net fees, 67%(6) operating
profit)
Tough overall market conditions, but signs of improving momentum
in Temp and Perm, particularly after lockdowns ended in
November
Growth
==============
Six months ended 31 December
(In GBP's million) 2020 2019 Actual LFL
=================================== ===== ===== ======= =====
Net fees(1) 74.4 94.8 (22)% (23)%
Operating profit 16.8 28.5 (41)% (42)%
Conversion rate(2) 22.6% 30.1%
Period-end consultant headcount 818 1,006 (19)%
=================================== ===== ===== ======= =====
In Australia & New Zealand ("ANZ"), net fees decreased by
23% to GBP74.4 million, significantly impacted by the pandemic.
Good cost control limited our operating profit decline to 42% at
GBP16.8 million, representing a conversion rate of 22.6% (2019:
30.1%). Net fees declined by 26% in Q1 and by 19% in Q2, and
currency impacts were positive in the half versus prior year,
increasing net fees by GBP1.8 million and operating profit by
GBP0.6 million.
After sharp fee declines in Q4 FY20 as the pandemic hit, trading
showed some early signs of sequential recovery in July and August.
However, the imposition of a strict lockdown in Victoria in August
dampened activity levels and had the effect of delaying recovery,
particularly in Victoria and New South Wales, together 56% of our
Australia net fees. Encouragingly though, we saw signs of positive
momentum in both Temp and Perm after lockdown ended in
November.
Temp, which represented 74% of ANZ net fees in the half, was
less impacted and decreased by 18%. Net fees in Perm decreased by
34%, with Q1 down 40% and Q2 down 27%. The Private sector, which
represented 60% of ANZ net fees, declined by 28% while the Public
sector fell by 14%.
Australia, 94% of ANZ, saw net fees decline by 24%. New South
Wales and Victoria decreased by 33% and 30% respectively.
Queensland declined by 20%, although ACT, South Australia and
Western Australia were more resilient, down 10%, 8% and 7%
respectively. At the Australian specialism level, Construction
& Property, our largest business, declined by 29%, while
Accountancy & Finance and Office Support were also tough, down
32% and 37% respectively. IT declined by 18%, while Resources &
Mining showed some relative resilience, down 10%, as did o ur
'Other' smaller specialisms, which collectively fell by 10%.
Net fees in New Zealand declined by 10%, as activity continued
to rebound following the relaxing of lockdown rules.
ANZ consultant headcount increased by 1% in the half and
decreased by 19% year-on-year.
Germany (26%(6) net fees, 37%(6) operating profit)
Tough market conditions, although clear signs of improving
business confidence in Q2, and stabilisation in the Automotive
sector
Growth
=====================
Six months ended 31 December
(In GBP's million) 2020 2019 Reported LFL
=================================== ============= ============== ============ =======
Net fees(1) 110.5 144.9 (24)% (26)%
Operating profit 9.2 37.0 (75)% (76)%
Conversion rate(2) 8.3% 25.5%
Period-end consultant headcount 1,557 1,759 (11)%
=================================== ============= ============== ============ =======
Our largest market of Germany saw net fees decline by 26% to
GBP110.5 million, significantly impacted by the pandemic. Operating
profit decreased by 76% to GBP9.2 million, which represented a
conversion rate of 8.3% (2019: 25.5%). Net fees declined by 31% in
Q1 and by 20% in Q2, and c urrency impacts were positive in the
half versus prior year, increasing net fees by GBP3.9 million and
operating profit by GBP1.0 million. There were no material trading
day impacts in the half.
Market conditions remained difficult, although encouragingly in
our second quarter there were clear signs of improving business
confidence generally, and stabilisation in the Automotive sector.
At the specialism level, IT, comprising 45% of Germany net fees,
declined by 19%, including Q2 down 10%. Engineering, our
second-largest specialism, was tougher, with fees down by 41%, and
Construction & Property and Sales & Marketing fell by 26%
and 30% respectively. Accountancy & Finance declined 17%,
although Life Sciences delivered a resilient performance, down 3%,
which included growth of 3% in Q2.
Net fees in our Temp and Contracting business, which represented
c.85% of Germany fees, decreased by 24%. Our largest area of
Contracting (c.65% of Germany net fees), which is primarily in the
IT sector and where we operate a freelance model, was relatively
resilient and declined by 13%, including Q2 down 8%. Most
assignments continued under remote working.
Temp (c.20% of Germany net fees), where we employ temporary
workers as required under German law, primarily in Automotive and
Manufacturing sectors, remained difficult and net fees declined by
45%. Average Temp volumes decreased by 30%. Given the challenging
market outlook, we released 384 temps in the half, at a cost of
GBP2.9 million, which reduced Temp net fees by c.7%. The impact of
under-utilisation of Temp workers in Q1 further reduced Temp fees
by GBP3.3 million, or c.8%. However, we saw a lessening impact of
part-time work through the half, and encouragingly there was no
material worker under-utilisation in Q2. As Temp redundancy costs
and worker under-utilisation have returned to normal levels, we do
not expect further material negative temp fee impacts in H2 FY21.
Finally, we exited the German short-time working scheme in Q1.
Perm (c.15% of Germany fees) was tough and fees decreased by
34%.
Consultant headcount was flat in the half and fell by 11%
year-on-year.
United Kingdom & Ireland (22%(6) net fees)
Tough market conditions, although trading improved through the
half, particularly in Temp
Growth
=====================
Six months ended 31 December
(In GBP's million) 2020 2019 Reported LFL
=================================== ============ ============= ============ =======
Net fees (1) 92.4 126.7 (27)% (27)%
Operating profit (1.0) 19.0 n/a n/a
Conversion rate (2) (1.1)% 15.0%
Period-end consultant headcount 1,589 1,991 (20)%
=================================== ============ ============= ============ =======
In the United Kingdom & Ireland ("UK&I") net fees
decreased by 27% to GBP92.4 million, significantly impacted by the
pandemic. Net fees declined by 34% in Q1 and by 20% in Q2. We
incurred an operating loss of GBP1.0 million in the half,
representing a conversion rate of negative 1.1% (2019: +15.0%),
although Q2 was profitable.
Our Temp business, which represented 63% of UK&I net fees,
decreased by 21%, but improved sequentially from -29% in Q1 to -14%
in Q2, driven by an increase of c.3,000 Temp workers placed. Perm,
which represented 37% of UK&I net fees and where we have a bias
to the Private sector, saw net fees decline by 35%, although also
saw better performance in Q2.
The Public sector, which represented 36% of net fees, showed
relative resilience, with fees down 12%. The Private sector was
tougher, with fees down 34%.
All UK regions traded broadly in line with the overall UK
business, except for Yorkshire & the North and the East, both
down 33%, and the North West, down 24%. Our largest region of
London decreased by 29%, while Ireland fell by 32%.
Net fees in our largest specialisms of Accountancy & Finance
and Construction & Property decreased by 38% and 27%
respectively. Fees in Education fell by 24%, comprising declines of
40% in Q1 and 6% in Q2 as schools reopened. Life Sciences, IT and
Healthcare were relative outperformers, with fees down 3%, 5% and
7% respectively. Hays Talent Solutions fell 18%.
Consultant headcount in the division decreased by 14% in the
half and by 20% year-on-year.
Rest of World (34%(6) net fees)
Tough market conditions, but improved fee momentum through the
half, particularly in EMEA, Mainland China and the USA
Growth
=====================
Six months ended 31 December
(In GBP's million) 2020 2019 Reported LFL
=================================== ============= ============= ============ =======
Net fees (1) 145.5 186.7 (22)% (21)%
Operating profit 0.1 15.6 (99)% (99)%
Conversion rate (2) 0.1% 8.4%
Period-end consultant headcount 2,584 3,091 (16)%
=================================== ============= ============= ============ =======
Our Rest of World ("RoW") division, which comprises 28
countries, saw net fees decline by 21%, significantly impacted by
the pandemic. Operating profit decreased by 99% to GBP0.1 million,
which represented a conversion rate of 0.1% (2019: 8.4%). Net fees
declined by 27% in Q1 and by 16% in Q2, and movements versus other
currencies resulted in a GBP1.8 million decrease in net fees and
GBP0.2 million increase in operating profit.
Perm, which represented 62% of fees, declined by 28%. Temp was
down 9% in the half, with fees showing a marked sequential
improvement from decreasing by 17% in Q1 to only 1% down in Q2.
EMEA ex-Germany net fees fell 20%, with most markets tough
overall, but with improving momentum through the half. France, our
largest RoW country, declined by 26%, with Belgium and Netherlands
down 34% and 21% respectively. Spain and Poland performed better,
both down 14%, and Switzerland, down 6%, and Russia, down 8%, were
good relative performers. Among our smaller markets, Hungary, up
1%, and Denmark, up 9%, notably grew fees.
Net fees in the Americas declined by 20%. The USA, our
second-largest RoW country, declined by 13%, including Q2 down 3%.
Canada was much tougher and net fees fell by 33%. In Latin America,
down 23%, Brazil net fees fell by 17%, although Mexico was tougher,
down 33%.
Asia fees fell 28% and included mixed country fee performances.
China fell by 28%, but with Mainland China significantly
outperforming Hong Kong. Japan remained very tough, with fees down
40%, although Malaysia performed strongly, down 2% overall,
including strong growth of 14% in Q2.
Consultant headcount in the RoW division was down by 4% in the
half, and down 16% year-on-year. Our headcount in EMEA ex-Germany
declined by 19% year-on-year, the Americas by 17% and Asia by
8%.
Current trading
The New Year 'return to work' was slower than in prior years,
but encouragingly Temp numbers returned to pre-Christmas levels by
early February
Although conditions in our key markets remain tough due to the
pandemic, we are continuing to see a gradual improvement in
trading. While the New Year 'return to work' was initially slower
than prior years, Temp numbers have returned to pre-Christmas
levels by early February, which is encouraging.
As previously disclosed and consistent with all prior years, due
to the timings of public holidays there are fewer working days in
our second half. This has no impact on year-on-year growth
comparatives but will act as a headwind on sequential second half
profit growth versus the first half, particularly in our Temp and
Contracting businesses.
We continue to expect that our 'Return to Growth' investment
programme will incur c.GBP15 million of additional operating
expenditure in FY21. c.GBP4 million of this occurred in H1 FY21,
with c.GBP11 million expected in H2. We are confident that these
projects, which target attractive structural growth sectors
including IT, large Corporate Accounts and Life Sciences, will
accelerate our medium-term growth and position Hays to take further
market share.
Easter falls entirely in our fourth quarter, as it did in H2
FY20. We therefore expect no impact from the timing of Easter on
our growth rates in Q3 and Q4 FY21.
Including our RTG investment plans, we expect Group consultant
headcount will increase by 2-4% in Q3 FY21 across all regions.
Australia
We saw a slightly slower 'return to work' in our Temp and
Contracting businesses post-Christmas, although by early February
this was in line with normal years. Overall momentum has improved
since mid-January.
Germany
Our 'return to work' in Temp and Contracting markets was broadly
in line with normal trends, and our rate of Contractor extensions
and renewals in December was slightly higher than normal. Temp
markets are stable overall, and Temp severance costs and worker
under-utilisation have returned to normal levels.
United Kingdom & Ireland
Our 'return to work' in Temp & Contracting was slightly
slower than trends seen in prior years, due to lockdown effects,
particularly in our Education business. Outside of Education,
overall 'return to work levels' have returned to normal levels by
early February. We estimate school closures have a negative UK fee
and profit impact of c.GBP1million per period(4) .
Expected changes in IR35 regulations in the Private sector from
April may lead to a hiatus in Temp activity in parts of the Private
sector.
Rest of World
In EMEA ex-Germany, our 'return to work' was in line with normal
levels, including our largest RoW market of France.
In the Americas, the USA has good momentum and a strong pipeline
of new client opportunities. The rest of the Americas is tough but
stable.
In Asia, markets are overall stable, but subdued. In China,
Mainland China has seen an increase in activity although Hong Kong
remains tough.
FINANCIAL REVIEW
Summary Income Statement
Growth
==================
Six months ended 31 December
(In GBP's million) 2020 2019 Reported LFL
=================================== ========== ========== ======== ========
Turnover 2,755.2 3,104.7 (11)% (12)%
Temp 261.5 319.7 (18)% (19)%
Perm 161.3 233.4 (31)% (31)%
=================================== ========== ========== ======== ========
Net fees (1) 422.8 553.1 (24)% (24)%
Operating costs (397.7) (453.0) (12)% (13)%
=================================== ========== ========== ======== ========
Operating profit 25.1 100.1 (75)% (75)%
=================================== ========== ========== ======== ========
Conversion rate (2) 5.9% 18.1%
Underlying Temp margin (3) 13.7% 14.5%
Temp fees as % of total 62% 58%
Period end consultant headcount 6,548 7,847 (17)%
=================================== ========== ========== ======== ========
(1) Net fees comprise turnover less remuneration of temporary
workers and other recruitment agencies.
(2) Conversion rate is the conversion of net fees into operating
profit.
(3) The underlying Temp gross margin is calculated as Temp net
fees divided by Temp gross revenue and relates solely to Temp
placements in which Hays generates net fees. This specifically
excludes transactions in which Hays acts as agent on behalf of
workers supplied by third party agencies and arrangements where
Hays provides major payrolling services.
(4) 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.
(5) Exchange rate as at 16 February 2021: GBP1 / AUD 1.7927 and
GBP1 / EUR1.1489.
(6) Cash generated by operations is stated after IFRS 16 lease
payments and in FY21 before the repayment of tax deferrals of
GBP104.6 million.
Turnover for the six months to 31 December 2020 decreased by 12%
(11% on a reported basis), with net fees decreasing by 24% (also
24% on a reported basis). The difference between turnover and net
fee growth was primarily due to the greater resilience of Temp, and
the relative resilience of our large Corporate Accounts, which
includes our Temp Managed Service Provider business.
Like-for-like costs decreased by GBP57.6 million (GBP55.3
million on a reported basis), as we actively managed our variable
and discretionary costs and period-end Group headcount was reduced
by 14% year-on-year. H1 FY21 costs included GBP4 million of
investment in our RTG programme, predominantly in consultant
headcount. The overall reduction in costs is stated after GBP2.5
million in government assistance worldwide, with no benefit from UK
furlough schemes in H1 FY21 operating profit. We exited all major
government support schemes in our first quarter.
Our average cost base in Q2 FY21 was c.GBP65 million per
period(4) . This represented an increase of c.GBP2 million from
July 2020, primarily as consultant commissions increased
proportionately with the rise in net fees, and as almost all our
offices globally were open by the second quarter.
Operating profit decreased by GBP76.8 million, or 75% on
like-for-like basis. This was driven by the significant GBP134.4
million like-for-like reduction in net fees and resulted in a 1220
bps decrease in the Group's conversation rate to 5.9% (2019:
18.1%). Exchange rate movements increased net fees and operating
profit by GBP4.1 million and GBP1.8 million respectively. This
resulted from the depreciation in the average rate of exchange
between Sterling and the Euro and Australian Dollar, partially
offset by modest appreciation against the US Dollar and other Asian
currencies. Currency fluctuations remain a significant Group
sensitivity.
Our average consultant headcount decreased by 16% year-on-year
to 6,602. Given the 24% reduction in net fees, this represented an
8% year-on-year reduction in underlying consultant productivity,
driven by the tough market conditions caused by the pandemic,
including slower client decision-making .
IFRS 16
The Group applies the modified retrospective approach whereby
the right-of-use asset at the date of initial application was
measured at an amount equal to the lease liability. The Group's
right-of-use assets decreased to GBP213.3 million (June 2020:
GBP216.6 million) while lease liabilities reduced to GBP224.3
million (June 2020: GBP228.7 million). Depreciation of right-of-use
lease assets was GBP23.6 million (2019: GBP23.3 million) and lease
interest charges were GBP2.6 million (2019: GBP2.8 million).
Net finance charge
The net finance charge for the half was GBP4.0 million (2019:
GBP4.5 million). Net bank interest payable (including amortisation
of arrangement fees) was GBP0.6 million (2019: GBP0.7 million). The
interest charge on lease liabilities under IFRS 16 was GBP2.6
million (2019: 2.8 million), and the charge on defined benefit
pension scheme obligations was GBP0.7 million (2019: GBP0.9
million). The Pension Protection Fund levy was GBP0.1 million
(2019: GBP0.1 million). We expect the net finance charge for the
year ending 30 June 2021 to be around GBP8.0 million, of which
c.GBP7.0 million is non-cash.
Taxation
Taxation for the half was GBP8.5 million (2019: GBP28.2
million), representing an effective tax rate ('ETR') of 40.0%
(2019: 29.5%). The increase in ETR reflects the Group's
geographical mix of profits, with the vast majority of operating
profit being generated in Australia and Germany, which are
relatively high tax jurisdictions, and the impact of trading losses
in certain countries.
As Group profits are recovering from a very low base, and as our
H1 profits were predominantly in high-tax jurisdictions, at this
stage it is very difficult to accurately predict our ETR for FY21.
Our current best estimate is that the ETR will be at c.40%. As
Group profitability returns to GBP100 million or more, we expect
the Group ETR will return to around the c.30% rate we reported in
recent years.
Earnings per share
Basic earnings per share decreased by 84% to 0.75 pence (2019:
4.60 pence), driven by the significant decline in Group operating
profit, the effect of higher effective tax rate and a 14.6%
increase in our average number of shares in issue, following our
equity issuance in April 2020.
Cash flow and balance sheet
Excellent underlying conversion of operating profit into
operating cash flow(6) of 257% (2019: 65%), which is stated after
IFRS 16 lease payments of GBP26.7 million, but excludes GBP104.6
million repayment of tax deferrals, and is therefore comparable
year-on-year. This resulted from continued strong cash generation,
including a further c.GBP30 million cash inflow due to the unwind
of our Temp trade debtor book, and a very strong performance by our
credit control teams globally. Trade debtor days improved
year-on-year to a record low 34 days (2019: 38 days).
Net capital expenditure was GBP8.8 million (2019: GBP15.1
million), with continued investments in laptops, cyber security and
to support our 'Return to Growth' programme. We expect capital
expenditure to be around GBP20 million for the year to June 2021
(2020: GBP25.8 million).
No dividends were paid in the half (2019: GBP121.6 million) and
pension deficit contributions were GBP8.3 million (2019: GBP8.1
million). Net interest paid was GBP0.5 million and corporation tax
payments were GBP20.2 million (2019: GBP31.9 million). We ended the
half with a net cash position of GBP379.5 million (2019: GBP13.2
million), or GBP393.2 million including GBP13.7 million of
short-term deferrals of payroll tax and VAT payments, which will be
repaid as scheduled by March 2021.
During the half-year we also purchased 5.8 million shares under
our treasury share purchase programme, at an average price of
109.9p per share. The shares will be held in treasury and utilised
to satisfy employee share-based award obligations over the next two
years.
Retirement benefits
The Group's pension position under IAS19 at 31 December 2020 has
resulted in a surplus of GBP12.7 million, compared to a surplus of
GBP55.2 million at 30 June 2020. The decrease in surplus of GBP42.5
million was due to changes in financial assumptions (primarily a
decrease in the discount rate), partially offset by higher asset
values and company contributions. In respect of IFRIC 14, the
Schemes' Definitive Deed and Rules is considered to provide Hays
with an unconditional right to a refund of surplus assets and
therefore the recognition of a net defined benefit scheme asset is
not restricted. Agreements to make funding contributions do not
give rise to any additional liabilities in respect of the
scheme.
During the half the Company contributed GBP8.3 million of cash
to the defined benefit scheme (2019: GBP8.1 million), in line with
the agreed deficit recovery plan. The 2018 triennial valuation
quantified the actuarial deficit at GBP43.6 million on a Technical
Provisions (TP) basis and the recovery plan remained unchanged and
comprised an annual payment of GBP15.3 million from July 2018, with
a fixed 3% uplift per year, over a period of just under six years.
The Scheme was closed to new entrants in 2001 and to future accrual
in June 2012 .
Capital structure and dividend
The Board's priorities for our free cash flow are to fund the
Group's investment and development, maintain a strong balance sheet
and deliver a sustainable core dividend at a level which is both
affordable and appropriate. The Group's cash generation and working
capital management have been considerably more resilient than our
modelled scenarios at the time of our GBP196 million equity
issuance in April 2020. We therefore intend to resume our core
dividend at 3.0x earnings cover, commencing with a single payment
for FY21, to be declared with our full-year results in August 2021.
Our target dividend cover range will remain 2.0 to 3.0x
earnings.
The Board also believes the Group will be in a position, over
the next 18 months, to return surplus capital to shareholders. The
Group held net cash of GBP379.5 million (net of tax deferrals) at
31 December 2020. Going forward, we propose to prudently increase
our financial year-end 'cash buffer' from GBP50 million to GBP100
million. We are also budgeting in our cash flows for an expected
c.GBP130 million of future working capital outflow over the next
few years, as our Temp book rebuilds, and we see some normalisation
in client payment timings. This results in GBP150 million of
surplus capital on our balance sheet at 31 December 2020.
We anticipate distributing this surplus capital to shareholders
via special dividends. Considering the ongoing economic
uncertainty, the Board believes it is prudent to conduct this
return on a phased basis. Assuming no material deterioration in
economic conditions, and a continued recovery in the Group's
profitability, we expect to commence the repayment with a special
dividend of GBP100 million, to be declared with our full-year
results in August 2021. We currently expect a further GBP50 million
special dividend will likely be declared in the subsequent 12
months.
The Board intends to resume ongoing special dividends over time.
Our policy for such special dividends will be based on returning
capital above our cash buffer at each financial year-end of GBP100
million. As mentioned above, we have also budgeted a further GBP130
million buffer for working capital rebuild, which will decline as
our Temp book grows and working capital increases over the next few
years. Any ongoing special dividends will also be dependent on a
return to more normal levels of profitability, and a positive
economic outlook.
Treasury management
The Group's operations are financed by retained earnings and
bank borrowings. The Group has in place a GBP210 million revolving
credit facility that reduces in November 2024 to GBP170 million and
expires in November 2025. This provides considerable headroom
versus current and future Group funding requirements.
The covenants within the facility require the Group's interest
cover ratio to be at least 4:1 (ratio as at 31 December 2020: 99:1)
and its leverage ratio (net debt to EBITDA) to be no greater than
2.5:1 (as at 31 December 2020 the Group held a net cash position).
The interest rate of the facility is on a ratchet mechanism with a
margin payable over LIBOR in the range 0.70% to 1.50%.
During Q4 FY20, we were admitted into the Bank of England's
uncommitted Covid Corporate Financing Facility (CCFF). This
facility has provided Hays with an additional form of short-term
financing, but it has not been utilised, and closes for new
issuance to all businesses in March 2021. Based on current
forecasts we are highly unlikely to use this facility.
The Group's UK-based Treasury function manages the Group's
currency and interest rate risks in accordance with policies and
procedures set by the Board and is responsible for day-to-day cash
management; the arrangement of external borrowing facilities; and
the investment of surplus funds. The Treasury function does not
engage in speculative transactions and does not operate as a profit
centre, and the Group does not hold or use derivative financial
instruments for speculative purposes.
The Group's cash management policy is to minimise interest
payments by closely managing Group cash balances and external
borrowings. Euro-denominated cash positions are managed centrally
using a cash concentration arrangement which enhances liquidity by
utilising participating country bank balances on a daily basis. Any
Group surplus balance is used to repay any maturing loans under the
Group's revolving credit facility or is invested in overnight money
market deposits. As the Group holds a Sterling denominated debt
facility and generates significant foreign currency cash flows, the
Board considers it appropriate in certain cases to use derivative
financial instruments as part of its day-to-day cash management.
The Group does not use derivatives to hedge balance sheet and
income statement translation exposure.
The Group is exposed to interest rate risk on floating rate bank
loans and overdrafts. It is the Group's policy to limit its
exposure to interest rates by selectively hedging interest rate
risk using derivative financial instruments. However, there were no
interest rate swaps held by the Group during the current or prior
year. Counterparty credit risk arises primarily from the investment
of surplus funds. Risks are closely monitored using credit ratings
assigned to financial institutions by international credit rating
agencies. The Group restricts transactions to banks that have an
acceptable credit profile and limits its exposure to each
institution accordingly.
Principal risks facing the business
Hays plc operates an embedded risk management framework, which
is monitored and reviewed by the Board. There are a number of
potential risks and uncertainties that could have a material impact
on the Group's financial performance and position. These include
risks relating to the Covid-19 pandemic, the cyclical nature of our
business, business model, talent recruitment and retention,
compliance, reliance on technology, cyber security, data protection
and contracts. These risks and our mitigating actions remain as set
out in the 2020 Annual Report.
As noted in our preliminary results on 29 August 2019, legal
proceedings commenced against a number of recruitment agencies in
Australia, including Hays, in relation to the employment status of
certain workers engaged on a casual (temporary) basis in the coal
mining sector. There have been no material developments since that
date.
Responsibility Statement
We confirm that, to the best of our knowledge:
-- the unaudited condensed consolidated interim financial
statements have been presented in accordance with IAS 34 "Interim
Financial Reporting" as adopted by the European Union and give a
true and fair view of the assets, liabilities, financial position
and profit for the Group;
-- the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months of the financial year and their impact
on the condensed financial statements, and description of principal
risks and uncertainties for the remaining six months of the
financial year); and
-- the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions in the first six months of the financial year and any
changes in the related parties transactions described in the last
Annual Report).
This Half Year Report was approved and authorised for issue by
the Board of Directors on 17 February 2021.
Alistair Cox Paul Venables
Chief Executive Group Finance Director
H ays plc
20 Triton Street
London
NW1 3BF
haysplc.com/investors
Cautionary statement
This Half Year Report (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
Independent Review Report of Hays plc
Report on the consolidated interim financial statements
Our conclusion
We have reviewed Hays plc's consolidated interim financial statements
(the "interim financial statements") in the Half year report of Hays
plc for the 6 month period ended 31 December 2020 (the "period").
Based on our review, nothing has come to our attention that causes us
to believe that the interim financial statements are not prepared, in
all material respects, in accordance with International Accounting Standard
34, 'Interim Financial Reporting', as adopted by the European Union and
the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
* the Condensed Consolidated Balance Sheet as at 31
December 2020;
* the Condensed Consolidated Income Statement and
Condensed Consolidated Statement of Comprehensive
Income for the period then ended;
* the Condensed Consolidated Statement of Changes in
Equity for the period then ended;
* the Condensed Consolidated Cash Flow Statement for
the period then ended; and
* the explanatory notes to the interim financial
statements.
The interim financial statements included in the Half year report of
Hays plc have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the European
Union and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the financial
reporting framework that has been applied in the preparation of the full
annual financial statements of the group is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Half year report, including the interim financial statements, is
the responsibility of, and has been approved by the directors. The directors
are responsible for preparing the Half year report in accordance with
the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial
statements in the Half year report based on our review. This report,
including the conclusion, has been prepared for and only for the company
for the purpose of complying with the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority
and for no other purpose. We do not, in giving this conclusion, accept
or assume responsibility for any other purpose or to any other person
to whom this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on
Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial
Information Performed by the Independent Auditor of the Entity' issued
by the Auditing Practices Board for use in the United Kingdom. A review
of interim financial information consists of making enquiries, primarily
of persons responsible for financial and accounting matters, and applying
analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does
not enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not
express an audit opinion.
We have read the other information contained in the Half year report
and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
17 February 2021
Condensed Consolidated Income Statement
Six months Six months
to to Year to
31 December 31 December 30 June
2020 2019 2020
(In GBPs million) Note (unaudited) (unaudited) (audited)
---------------------------------------------------- ----- ------------ ------------ ----------
Turnover 2 2,755.2 3,104.7 5,929.5
Net fees (1) 2 422.8 553.1 996.2
----- ------------ ------------
Operating costs (2) (397.7) (453.0) (861.2)
----------------------------------------------------
Operating profit before exceptional items 2 25.1 100.1 135.0
Exceptional items 3 - - (39.9)
---------------------------------------------------- ----- ------------ ------------ ----------
Operating profit 25.1 100.1 95.1
Net finance charge 4 (4.0) (4.5) (8.8)
---------------------------------------------------- ----- ------------ ------------ ----------
Profit before tax 21.1 95.6 86.3
Tax 5 (8.5) (28.2) (38.8)
----------------------------------------------------
Profit after tax 12.6 67.4 47.5
---------------------------------------------------- ----- ------------ ------------ ----------
Profit attributable to equity holders of
the parent company 12.6 67.4 47.5
---------------------------------------------------- ----- ------------ ------------ ----------
Earnings per share before exceptional items
(pence)
- Basic 7 0.75p 4.60p 5.28p
- Diluted 7 0.75p 4.56p 5.23p
Earnings per share (pence)
- Basic 7 0.75p 4.60p 3.14p
- Diluted 7 0.75p 4.56p 3.10p
(1) Net fees comprise turnover less remuneration of
temporary workers and other recruitment agencies.
(2) Operating costs include impairment loss on trade
receivables of GBP1.6 million (2019: GBP3.3 million).
Condensed Consolidated Statement of Comprehensive Income
Six months Six months
to to Year to
31 December 31 December 30 June
2020 2019 2020
(In GBPs million) (unaudited) (unaudited) (audited)
---------------------------------------------------- ----- ------------ ------------ ----------
Profit for the period 12.6 67.4 47.5
---------------------------------------------------- ----- ------------ ------------ ----------
Items that will not be reclassified subsequently
to profit or loss:
Actuarial remeasurement of defined benefit
pension schemes (50.1) 2.3 21.3
Tax relating to components of other comprehensive
income 8.1 (0.4) (4.4)
---------------------------------------------------- ------------
(42.0) 1.9 16.9
---------------------------------------------------- ----- ------------ ------------ ----------
Items that may be reclassified subsequently
to profit or loss:
Currency translation adjustments (12.2) (29.0) 5.7
Tax relating to components of other comprehensive - 1.4 -
income
---------------------------------------------------- ------------
Other comprehensive (loss)/income for the
period net of tax (54.2) (25.7) 22.6
---------------------------------------------------- ----- ------------ ------------ ----------
Total comprehensive (loss)/income for the
period (41.6) 41.7 70.1
---------------------------------------------------- ----- ------------ ------------ ----------
Attributable to equity shareholders of the
parent company (41.6) 41.7 70.1
---------------------------------------------------- ----- ------------ ------------ ----------
Condensed Consolidated Balance Sheet
31 December 31 December 30 June
2020 2019 2020
(In GBPs million) Note (unaudited) (unaudited) (audited)
-------------------------------------- ----- ------------ ------------ -----------
Non-current assets
Goodwill 204.0 220.4 209.0
Other intangible assets 47.8 42.6 48.9
Property, plant and equipment 28.6 31.7 31.4
Right-of-use assets 8 213.3 218.7 216.6
Deferred tax assets 13.5 22.8 11.1
Retirement benefit surplus 9 12.7 29.2 55.2
-------------------------------------- -----
519.9 565.4 572.2
Current assets
Trade and other receivables 748.7 910.0 878.8
Corporation tax debtor 4.3 - 4.3
Cash and cash equivalents 393.2 103.2 484.5
Derivative financial instruments - - 0.1
--------------------------------------
1,146.2 1,013.2 1,367.7
-------------------------------------- ----- ------------ ------------ -----------
Total assets 1,666.1 1,578.6 1,939.9
-------------------------------------- ----- ------------ ------------ -----------
Current liabilities
Trade and other payables (597.8) (601.7) (800.3)
Lease liabilities 8 (39.6) (40.6) (43.8)
Current corporation tax liabilities (13.2) (15.7) (24.0)
Provisions 10 (12.0) (0.5) (16.8)
(662.6) (658.5) (884.9)
Non-current liabilities
Bank loans - (90.0) -
Deferred tax liabilities - (10.0) (6.9)
Lease liabilities 8 (184.7) (187.4) (184.9)
Provisions 10 (9.7) (7.1) (9.8)
--------------------------------------
(194.4) (294.5) (201.6)
-------------------------------------- ----- ------------ ------------ -----------
Total liabilities (857.0) (953.0) (1,086.5)
-------------------------------------- ----- ------------ ------------ -----------
Net assets 809.1 625.6 853.4
-------------------------------------- ----- ------------ ------------ -----------
Equity
Called up share capital 16.8 14.7 16.8
Share premium 369.6 369.6 369.6
Merger reserve 193.8 - 193.8
Capital redemption reserve 2.7 2.7 2.7
Retained earnings 132.6 167.0 161.0
Cumulative translation reserve 79.8 57.3 92.0
Equity reserve 13.8 14.3 17.5
--------------------------------------
Total equity 809.1 625.6 853.4
-------------------------------------- ----- ------------ ------------ -----------
Condensed Consolidated Statement of Changes in Equity
For the six months ended 31 December 2020
Called
up Capital Cumulative
share Share Merger redemption Retained translation Equity Total
(In GBPs million) capital premium reserve reserve earnings reserve reserve equity
---------------------- --------- --------- --------- ------------ ---------- ------------- --------- ---------
At 1 July 2020 16.8 369.6 193.8 2.7 161.0 92.0 17.5 853.4
Currency translation
adjustments - - - - - (12.2) - (12.2)
Remeasurement of
defined
benefit pension
schemes - - - - (50.1) - - (50.1)
Tax relating to
components
of other
comprehensive income - - - - 8.1 - - 8.1
Net expense
recognised in
other comprehensive
income - - - - (42.0) (12.2) - (54.2)
Profit for the period - - - - 12.6 - - 12.6
---------------------- --------- --------- --------- ------------ ---------- ------------- --------- ---------
Total comprehensive
loss
for the period - - - - (29.4) (12.2) - (41.6)
Purchase of own
shares - - - - (6.4) - - (6.4)
Share-based payments - - - - 7.4 - (3.7) 3.7
At 31 December 2020
(unaudited) 16.8 369.6 193.8 2.7 132.6 79.8 13.8 809.1
---------------------- --------- --------- --------- ------------ ---------- ------------- --------- ---------
For the six months ended 31 December 2019
Called
up Capital Cumulative
share Share Merger redemption Retained translation Equity Total
(In GBPs million) capital premium reserve reserve earnings reserve reserve equity
---------
At 1 July 2019 14.7 369.6 - 2.7 206.7 86.3 21.5 701.5
Currency translation
adjustments - - - - - (29.0) - (29.0)
Remeasurement of
defined
benefit pension
schemes - - - - 2.3 - - 2.3
Tax relating to
components
of other
comprehensive income - - - - 1.0 - - 1.0
Net expense
recognised in
other comprehensive
income - - - - 3.3 (29.0) - (25.7)
Profit for the period - - - - 67.4 - - 67.4
---------------------- --------- --------- --------- ------------ ---------- ------------- --------- ---------
Total comprehensive
income
for the period - - - - 70.7 (29.0) - 41.7
Dividends paid - - - - (121.6) - - (121.6)
Share-based payments - - - - 11.0 - (7.2) 3.8
Tax on share-based
payment
transactions - - - - 0.2 - - 0.2
At 31 December 2019
(unaudited) 14.7 369.6 - 2.7 167.0 57.3 14.3 625.6
---------------------- --------- --------- --------- ------------ ---------- ------------- --------- ---------
For the year ended 30
June
2020
Called
up Capital Cumulative
share Share Merger redemption Retained translation Equity Total
(In GBPs million) capital premium reserve reserve earnings reserve reserve equity
---------
At 1 July 2019 14.7 369.6 - 2.7 206.7 86.3 21.5 701.5
Currency translation
adjustments - - - - - 5.7 - 5.7
Remeasurement of
defined
benefit pension
schemes - - - - 21.3 - - 21.3
Tax relating to
components
of other
comprehensive income - - - - (4.4) - - (4.4)
Net income recognised
in
other comprehensive
income - - - - 16.9 5.7 - 22.6
Profit for the year - - - - 47.5 - - 47.5
---------------------- --------- --------- --------- ------------ ---------- ------------- --------- ---------
Total comprehensive
income
for the year - - - - 64.4 5.7 - 70.1
New shares issued 2.1 - 193.8 - - - - 195.9
Dividends paid - - - - (121.6) - - (121.6)
Share-based payments - - - - 11.4 - (4.0) 7.4
Tax on share-based
payment
transactions - - - - 0.1 - - 0.1
At 30 June 2020
(audited) 16.8 369.6 193.8 2.7 161.0 92.0 17.5 853.4
---------------------- --------- --------- --------- ------------ ---------- ------------- --------- ---------
Condensed Consolidated Cash Flow Statement
Six months Six months
to to Year to
31 December 31 December 30 June
2020 2019 2020
(In GBPs million) Note (unaudited) (unaudited) (audited)
----------------------------------------------------- ----- ------------ ------------ ----------
Operating profit 25.1 100.1 95.1
Adjustments for:
Exceptional items 3 - - 39.9
Depreciation of property, plant and equipment 5.5 5.7 10.9
Depreciation of right-of-use lease assets 8 23.6 23.3 45.5
Amortisation of intangible assets 5.4 3.1 6.5
Loss on disposal of business assets - - 0.1
Net movements in provisions (excluding
exceptional items) 0.9 (0.6) 6.9
Share-based payments 4.1 3.6 7.8
39.5 35.1 117.6
----------------------------------------------------- ----- ------------ ------------ ----------
Operating cash flow before movement in working
capital 64.6 135.2 212.7
Movement in working capital:
Decrease in receivables 125.3 88.3 157.8
(Decrease)/increase in payables (1) (203.2) (134.2) 41.6
------------ ------------ ----------
Movement in working capital (77.9) (45.9) 199.4
----------------------------------------------------- ----- ------------ ------------ ----------
Cash (used in)/generated by operations (13.3) 89.3 412.1
Cash paid in respect of exceptional items
from current and prior year (5.7) - (12.0)
Pension scheme deficit funding (8.3) (8.1) (16.1)
Income taxes paid (20.2) (31.9) (29.8)
----------------------------------------------------- ----- ------------ ------------ ----------
Net cash (outflow)/inflow from operating
activities (47.5) 49.3 354.2
Investing activities
Purchase of property, plant and equipment (3.3) (5.8) (9.4)
Proceeds from sales of business assets - 0.1 -
Purchase of own shares (6.4) - (0.2)
Purchase of intangible assets (5.5) (9.3) (16.4)
Interest received 0.3 0.3 0.6
-----------------------------------------------------
Net cash used in investing activities (14.9) (14.7) (25.4)
Financing activities
Interest paid (0.8) (1.0) (2.0)
Lease liability principal repayment 8 (26.7) (24.1) (46.4)
Equity dividends paid 6 - (121.6) (121.6)
Proceeds from issue of new shares net of
transaction costs - - 195.9
Proceeds from exercise of share options - 0.6 0.6
Increase in bank loans and overdrafts - 90.0 -
-----------------------------------------------------
Net cash (used in)/from financing activities (27.5) (56.1) 26.5
----------------------------------------------------- ----- ------------ ------------ ----------
Net (decrease)/increase in cash and cash
equivalents (89.9) (21.5) 355.3
Cash and cash equivalents at beginning of
period 484.5 129.7 129.7
Effect of foreign exchange rate movements (1.4) (5.0) (0.5)
-----------------------------------------------------
Cash and cash equivalents at end of period
(1) 11 393.2 103.2 484.5
----------------------------------------------------- ----- ------------ ------------ ----------
(1) Cash balance at 31 December 2020 of GBP393.2 million includes GBP13.7
million of short-term tax payment deferrals. At 30 June 2020 the cash
balance of GBP484.5 million included GBP118.3 million of short-term tax
payment deferrals. The repayment of GBP104.6 million of these tax deferrals
is shown in the movement in payables.
The notes below form part of these interim financial statements.
Notes to the condensed consolidated interim financial statements
For the six months ended 31
December 2020
1 Basis of preparation
The condensed consolidated interim financial statements ("interim financial
statements") are the results for the six months ended 31 December 2020.
The interim financial statements have been prepared under International
Financial Reporting Standards ("IFRS") as adopted by the European Union,
in accordance with International Accounting Standard 34 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules of the Financial
Conduct Authority. They are unaudited but have been reviewed by the auditors
and their report is attached.
The interim financial statements do not constitute statutory accounts
as defined in Section 434 of the Companies Act 2006 as they do not include
all of the information required for full statutory accounts. The interim
financial statements should be read in conjunction with the statutory
accounts for the year ended 30 June 2020, which were prepared in accordance
with IFRS as adopted by the European Union and have been filed with the
Registrar of Companies. The auditors' report on those accounts was unqualified,
did not draw attention to any matters by way of emphasis and did not contain
a statement under Section 498 (2) or (3) of the Companies Act 2006.
Accounting policies
The interim financial statements have been prepared on the basis of the
accounting policies and methods of computation applicable for the year
ended 30 June 2020. These accounting policies are consistent with those
applied in the preparation of the financial statements for the year ended
30 June 2020 except as where stated below.
* The basis of tax accounting under IAS 34 is different
to the year ended 30 June 2020 because it is based on
the effective rate expected for the year ending 30
June 2021.
The fair value of trade receivables, trade payables, financial assets,
bank loans and overdraft is not materially different to their book value.
The following are new standards or improvements to existing standards
that are mandatory for the first time in the Group's accounting period
beginning on 1 July 2020 and no new standards have been early adopted.
The Group's December 2020 interim financial statements have adopted these
amendments to IFRS, none of these have had any material impact on the
Group's results or financial position:
* Amendments to IAS 1 Presentation of Financial
Statements and IAS 8 Accounting Policies, changes in
accounting estimates and errors - Definition of
material (effective 1 January 2020)
* IFRS 3 (amendments) Business Combinations (effective
1 January 2020)
* Amendments to IFRS 9, IAS 39, and IFRS 17 - Interest
rate benchmark reform (effective 1 January 2020)
* Amendments to the Conceptual framework (effective 1
January 2020)
The Group's accounting policies align to the requirements of IAS 1 and
IAS 8. There have been no alterations made to the accounting policies
as a result of considering all of the other amendments above that became
effective in the period, as these were either not material or were not
relevant.
The Group has not yet adopted certain new standards, amendments and interpretations
to existing standards, which have been published but which are only effective
for the Group accounting periods beginning on or after 1 July 2021. These
new pronouncements are listed as follows:
* IFRS 17 - Insurance contracts (effective 1 January
2023)
* IAS 1 (amendments) - Presentation of Financial
Statements, on classification of liabilities
(effective 1 January 2023)
The directors are currently evaluating the impact of the adoption of all
other standards, amendments and interpretations but do not expect them
to have a material impact on the Group's financial position or results.
Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance and financial position, including
its cash flows and liquidity position are described in the Half Year Report.
In addition, and in making this statement, the Board carried out a robust
assessment of the principal risks facing the Group, including those that
would threaten the Group's business model, future performance and liquidity.
While the review has considered all the principal risks identified by
the Group, the resilience of the Group to the occurrence of these risks
in severe yet plausible scenarios has been evaluated.
Financial Position
At 31 December 2020 the Group had a net cash position of GBP393.2 million,
or GBP379.5 million after deducting tax payments which had been deferred
in agreement with local country tax regimes. In addition, the Group currently
has an unsecured revolving credit facility of GBP210 million that reduces
in November 2024 to GBP170 million, and expires in November 2025. This
facility is undrawn.
Stress Testing
The Board approves an annual budget and reviews monthly management reports
and quarterly forecasts. The output of the planning and budgeting processes
has been used to perform a sensitivity analysis to the Group's cash flow
to model the potential effects should principal risks actually occur either
individually or in unison.
For the year ended 30 June 2020 the Group considered a range of downside
scenarios arising from a prolonged global downturn as a result of the
Covid-19 pandemic as well as the potential impact of further lockdown
restrictions across our key markets. The downside scenarios forecasted
a strong cash position throughout the Going Concern period, with the revolving
credit facility remaining undrawn with significant headroom against its
banking covenants. The performance of the business in the six months to
31 December 2020 was ahead of the initial expectations of the Group, therefore
the downside scenarios remain appropriate in assessing the going concern
assumption.
Set against these downside trading scenarios, the Board considered key
mitigating factors including the geographic and sectoral diversity of
the Group, its balanced business model across Temporary, Permanent and
Contract recruitment services, and the significant working capital inflows
which arise in periods of severe downturn, particularly in the Temporary
recruitment business, thus protecting liquidity as was the case during
the Global Financial Crisis of 2008/09 and which we again experienced
in the year ended 30 June 2020 and in the earlier part of the half year
ended 31 December 2020.
In addition, the Group is in a strong financial position with GBP379.5
million cash balance (net of short-term deferral of tax payments) and
with no debt obligations. The Group's history of strong cash generation,
tight cost control and flexible workforce management provides further
protection. The Group also has in place its GBP210 million revolving credit
facility which is currently undrawn. In addition, during the year ended
30 June 2020 the Group was admitted into the Bank of England's uncommitted
Covid Corporate Financing Facility (CCFF). While this provides access
to an additional short-term form of financing of up to GBP600 million,
based on all stress-test scenarios the Group is highly unlikely to utilise
this facility, although it has until March 2021 in which to do so if required.
The Group has sufficient financial resources which, together with internally
generated cash flows, will continue to provide sufficient sources of liquidity
to fund its current operations, including its contractual and commercial
commitments and any proposed dividends. The Group is therefore well-placed
to manage its business risks. After making enquiries, the Directors have
formed the judgment at the time of approving the interim financial statements,
that there is a reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future. For this
reason, they continue to adopt the going concern basis of accounting in
preparing the interim financial statements.
2 Segmental information
IFRS 8, Operating segments
IFRS 8 requires operating segments to be identified on the basis of internal
reports about components of the Group that are regularly reviewed by the
chief operating decision maker to allocate resources to the segment and
to assess their performance.
As a result, the Group segments the business into four regions, Australia
& New Zealand, Germany, United Kingdom & Ireland and Rest of World. There
is no material difference between the segmentation of the Group's turnover
by geographic origin and destination.
The Group's operations comprise one class of business, that of qualified,
professional and skilled recruitment.
Turnover, net fees and operating profit
The Group's Management Board, which is regarded as the chief operating
decision maker, uses net fees by segment as its measure of revenue in
internal reports rather than turnover. This is because net fees exclude
the remuneration of temporary workers, and payments to other recruitment
agencies where the Group acts as principal, which are not considered relevant
in allocating resources to segments. The Group's Management Board considers
net fees for the purpose of making decisions about allocating resources.
The Group does not report items below operating profit by segment in its
internal management reporting. The full detail of these items can be seen
in the Income Statement.
Six months Six months
Turnover to to Year to
31 December 31 December 30 June
2020 2019 2020
(In GBPs million) (unaudited) (unaudited) (audited)
------------------------------------------------------- ------------ -------------- ------------- ------------
Australia & New Zealand 742.1 802.1 1,545.6
Germany 697.0 803.0 1,513.5
United Kingdom & Ireland 747.6 867.4 1,641.3
Rest of World 568.5 632.2 1,229.1
-------------------------------------------------------
Total turnover 2,755.2 3,104.7 5,929.5
------------------------------------------------------- ------------ -------------- ------------- ------------
Six months Six months
Net fees to to Year to
31 December 31 December 30 June
2020 2019 2020
(In GBPs million) (unaudited) (unaudited) (audited)
------------------------------------------------------- ------------ -------------- ------------- ------------
Australia & New Zealand 74.4 94.8 170.5
Germany 110.5 144.9 259.8
United Kingdom & Ireland 92.4 126.7 225.6
Rest of World 145.5 186.7 340.3
-------------------------------------------------------
Total net fees 422.8 553.1 996.2
------------------------------------------------------- ------------ -------------- ------------- ------------
Operating profit 2020
Six months Six months
to to Before 2020 Year to
31 December 31 December exceptional Exceptional 30 June
2020 2019 items items 2020
(In GBPs million) (unaudited) (unaudited) (audited) (audited) (audited)
-------------------------------------- --------------- ------------ -------------- ------------- ------------
Australia & New Zealand 16.8 28.5 48.2 - 48.2
Germany 9.2 37.0 53.2 (12.6) 40.6
United Kingdom & Ireland (1.0) 19.0 16.6 (2.2) 14.4
Rest of World 0.1 15.6 17.0 (25.1) (8.1)
--------------------------------------
Total operating profit 25.1 100.1 135.0 (39.9) 95.1
-------------------------------------- --------------- ------------ -------------- ------------- ------------
3 Exceptional items
There were no exceptional items in the six months to 31 December 2020
(2019: GBPnil). During the second half of the prior year, the Group incurred
an exceptional charge of GBP39.9 million in relation to the following
items.
The Group recognised an exceptional charge of GBP20.3 million resulting
from the partial impairment of the carrying value of goodwill in relation
to the US business that was acquired in December 2014. This charge was
a non-cash item.
During the second half of the prior year, the Group undertook a restructure
of its business operations in Germany in order to provide greater focus
and alignment to the mid-sized enterprises known as the Mittlestand, together
with a dedicated large Corporate Accounts division at a cost of GBP12.6
million. In addition, following the subsequent Covid-19 pandemic, and
the immediate reduction in demand for recruitment services, the business
operations of several other countries across the Group were restructured,
primarily to reduce operating costs. The restructuring exercise led to
the redundancy of a number of employees, including senior management positions
and incurred costs of GBP7.0 million.
The exceptional charge in the prior year generated a tax credit of GBP7.4
million.
4 Net finance charge
Six months Six months
to to Year to
31 December 31 December 30 June
2020 2019 2020
(In GBPs million) (unaudited) (unaudited) (audited)
-------------------------------------------------------
Interest received on bank deposits 0.3 0.3 0.6
Interest payable on bank loans and
overdrafts (0.8) (0.9) (1.7)
Other interest payable (0.1) (0.1) (0.3)
Interest on lease liabilities (2.6) (2.8) (5.3)
Pension Protection Fund levy (0.1) (0.1) (0.2)
Net interest on pension obligations (0.7) (0.9) (1.9)
------------------------------------------------------- ------------ -------------- ------------- ------------
Net finance charge (4.0) (4.5) (8.8)
------------------------------------------------------- ------------ -------------- ------------- ------------
5 Tax
The Group's consolidated effective tax rate for the six months to 31 December
2020 is based on the estimated effective tax rate for the full year of
40.0% (31 December 2019: 29.5%, 30 June 2020: 45.0%, 30 June 2020 before
exceptional items: 36.6%).
6 Dividends
The following dividends were paid by the Group and have been recognised
as distributions to equity shareholders:
Six months Six months
to to Year to
31 December 31 December 30 June
2020 2019 2020
(In GBPs million) (unaudited) (unaudited) (audited)
------------------------------------------------------- ------------
Final dividend for the year ended 30 June 2019
of 2.86 pence per share - 41.9 41.9
Special dividend for the year ended 30 June
2019 of 5.43 pence per share - 79.7 79.7
Total dividends paid - 121.6 121.6
--------------------------------------------------------------------- -------------- ------------- ------------
7 Earnings per share
Six months Six months
to to Year to
31 December 31 December 30 June
2020 2019 2020
(In GBPs million) (unaudited) (unaudited) (audited)
------------------------------------------------------- ------------ -------------- ------------- ------------
Earnings from operations before exceptional
items 21.1 95.6 126.2
Tax on earnings from operations before exceptional
items (8.5) (28.2) (46.2)
---------------------------------------------------------------------
Basic earnings before exceptional items 12.6 67.4 80.0
--------------------------------------------------------------------- -------------- ------------- ------------
Earnings after exceptional items 21.1 95.6 86.3
Tax on earnings after exceptional items (8.5) (28.2) (38.8)
Basic earnings after exceptional items 12.6 67.4 47.5
--------------------------------------------------------------------- -------------- ------------- ------------
Number of shares (million):
Weighted average number of shares 1,678.1 1,463.8 1,514.4
Dilution effect of share options 12.6 15.3 15.7
Weighted average number of shares used for
diluted EPS 1,690.7 1,479.1 1,530.1
--------------------------------------------------------------------- -------------- ------------- ------------
Before exceptional items (in pence) :
Basic earnings per share before exceptional
items 0.75p 4.60p 5.28p
Diluted earnings per share before exceptional
items 0.75p 4.56p 5.23p
--------------------------------------------------------------------- -------------- ------------- ------------
After exceptional items (in pence)
:
-------------- ------------- ------------
Basic earnings per share 0.75p 4.60p 3.14p
Diluted earnings per share 0.75p 4.56p 3.10p
--------------------------------------------------------------------- -------------- ------------- ------------
Reconciliation of earnings
Six months Six months
to to Year to
31 December 31 December 30 June
2020 2019 2020
(In GBPs million) (unaudited) (unaudited) (audited)
------------------------------------------------------- ------------ -------------- ------------- ------------
Basic earnings before exceptional
items 12.6 67.4 80.0
Exceptional items (note 3) - - (39.9)
Tax credit on exceptional
items (note 3) - - 7.4
Basic earnings after exceptional
items 12.6 67.4 47.5
-------------------------------------- --------------- ------------ -------------- ------------- ------------
Lease accounting
under
8 IFRS 16
Right-of-use assets
Motor Other Total Lease
(In GBPs million) Property vehicles assets lease assets liabilities
-------------------------------------- --------------- ------------ -------------- ------------- ------------
As at 1 July 2020 205.6 10.7 0.3 216.6 (228.7)
Foreign exchange (3.9) (0.1) - (4.0) 4.6
Lease additions 23.3 2.0 - 25.3 (25.3)
Lease disposals (0.9) (0.1) - (1.0) 1.0
Depreciation of right-of-use
lease assets (20.2) (3.3) (0.1) (23.6) -
Lease liability principal
repayments - - - - 26.7
Interest on lease liabilities - - - - (2.6)
As at 31 December 2020 (unaudited) 203.9 9.2 0.2 213.3 (224.3)
-------------------------------------- --------------- ------------ -------------- ------------- ------------
Current (39.6)
Non-current (184.7)
As at 31 December 2020 (unaudited) (224.3)
-------------------------------------- --------------- ------------ -------------- ------------- ------------
Retirement benefit
9 surplus/obligations
Six months Six months
to to Year to
31 December 31 December 30 June
2020 2019 2020
(In GBPs million) (unaudited) (unaudited) (audited)
------------------------------------------------------- ------------ -------------- ------------- ------------
Surplus in the scheme brought forward 55.2 19.7 19.7
Administration costs (1.2) (1.1) (2.5)
Employer contributions (towards funded and
unfunded schemes) 8.3 8.1 16.1
Net interest income 0.5 0.2 0.6
Remeasurement of the net defined benefit surplus (50.1) 2.3 21.3
---------------------------------------------------------------------
Surplus in the scheme carried forward 12.7 29.2 55.2
--------------------------------------------------------------------- -------------- ------------- ------------
The GBP50.1 million loss on the remeasurement of the net defined benefit
surplus is primarily due to a change in financial assumptions (primarily
a decrease in the discount rate).
10 Provisions
(In GBPs million) Restructuring Other Total
--------------------------------------------------------------------- -------------- ------------- ------------
At 1 July 2020 11.5 15.1 26.6
Foreign exchange (0.1) - (0.1)
Charged to income statement - 5.0 5.0
Utilised (5.7) (4.1) (9.8)
At 31 December 2020 (unaudited) 5.7 16.0 21.7
--------------------------------------------------------------------- -------------- ------------- ------------
Current 12.0
Non-current 9.7
At 31 December 2020 (unaudited) 21.7
--------------------------------------------------------------------- -------------- ------------- ------------
Restructuring provisions arose in the prior year and are as disclosed
in note 3. Other provisions relate to exposures arising from business
operations overseas, a redundancy provision of GBP2.9 million in relation
to Temp employees in Germany and GBP2.5 million for certain indirect tax
exposures.
11 Movement in net cash
31 December
1 July Cash Exchange 2020
(In GBPs million) 2020 flow movement (unaudited)
------------------------------------------------------- ------------
Cash at bank and in hand 484.5 (89.9) (1.4) 393.2
Cash balance at 31 December 2020 of GBP393.2 million includes the benefit
of GBP13.7 million short-term tax deferral of payments, and therefore
the Group's underlying cash position was GBP379.5 million. The cash balance
at 1 July 2020 included GBP118.3 million short-term deferral of tax payments,
with a total repaid in the six months to 31 December 2020 of GBP104.6
million.
On 19 October 2020, the Group extended the maturity of its GBP210 million
unsecured revolving credit facility by one year to November 2025 at the
lower value of GBP170 million in its final year due to reduced lender
commitments received. The financial covenants within the facility remain
unchanged and require the Group's interest cover ratio to be at least
4:1 and its leverage ratio (net debt to EBITDA) to be no greater than
2.5:1. The interest rate of the facility is based on a ratchet mechanism
with a margin payable over LIBOR in the range of 0.70% to 1.50%.
As at 31 December 2020 the facility was undrawn (31 December 2019: GBP120
million undrawn).
12 Events after the balance sheet date
There are no significant events after the balance sheet date to report.
13 Like-for-like results
Like-for-like results represent organic growth of operations at constant
currency. For the six months ended 31 December 2020 these are calculated
as follows:
Six months Six months
to 31 December to
31 December Foreign 2019 31 December
2019 exchange at constant Organic 2020
(In GBPs million) (unaudited) impact currency growth (unaudited)
-------------------------------------- --------------- ------------ -------------- ------------- ------------
Net fees
Australia & New Zealand 94.8 1.8 96.6 (22.2) 74.4
Germany 144.9 3.9 148.8 (38.3) 110.5
United Kingdom & Ireland 126.7 0.2 126.9 (34.5) 92.4
Rest of World 186.7 (1.8) 184.9 (39.4) 145.5
--------------------------------------
Total net fees 553.1 4.1 557.2 (134.4) 422.8
-------------------------------------- --------------- ------------ -------------- ------------- ------------
Operating profit
Australia & New Zealand 28.5 0.6 29.1 (12.3) 16.8
Germany 37.0 1.0 38.0 (28.8) 9.2
United Kingdom & Ireland 19.0 - 19.0 (20.0) (1.0)
Rest of World 15.6 0.2 15.8 (15.7) 0.1
--------------------------------------
Total operating profit 100.1 1.8 101.9 (76.8) 25.1
-------------------------------------- --------------- ------------ -------------- ------------- ------------
14 Like-for-like results H1 analysis by division
Net fee growth versus same period last
year Q1 Q2 H1
2021 2021 2021
(unaudited) (unaudited) (unaudited)
-------------------------------------- -------------- -------------
Australia & New Zealand (26%) (19%) (23%)
Germany (31%) (20%) (26%)
United Kingdom & Ireland (34%) (20%) (27%)
Rest of World (27%) (16%) (21%)
-------------------------------------- --------------- ------------
Group (29%) (19%) (24%)
-------------------------------------- --------------- ------------ -------------- ------------- ------------
H1 2021 is the period from 1 July 2020 to 31 December 2020.
The Q1 and Q2 net fee like-for-like growth percentages are as reported
in the Q1 and the Q2 Quarterly Updates.
15 Disaggregation of net fees H1 2021
IFRS 15 requires entities to disaggregate revenue recognised from contracts
with customers into relevant categories that depict how the nature, amount
and cash flows are affected by economic factors. As a result, we consider
the following information to be relevant:
United
Australia Kingdom Rest of
(unaudited) & New Zealand Germany & Ireland World Group
-------------------------------------- --------------- ------------ -------------- ------------- ------------
Temporary placements 74% 85% 63% 38% 62%
Permanent placements 26% 15% 37% 62% 38%
Total 100% 100% 100% 100% 100%
------------------ ------------------ --------------- ------------ -------------- ------------- ------------
Private sector 60% 84% 64% 99% 81%
Public sector 40% 16% 36% 1% 19%
-------------------------------------- --------------- ------------ -------------- ------------- ------------
Total 100% 100% 100% 100% 100%
------------------ ------------------ --------------- ------------ -------------- ------------- ------------
Accountancy & Finance 9% 16% 18% 12% 14%
IT 14% 45% 14% 27% 26%
Engineering 0% 22% 1% 6% 8%
Construction & Property 21% 5% 19% 9% 12%
Other 56% 12% 48% 46% 40%
Total 100% 100% 100% 100% 100%
------------------ ------------------ --------------- ------------ -------------- ------------- ------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR FLFEAFSIDLIL
(END) Dow Jones Newswires
February 18, 2021 02:00 ET (07:00 GMT)
Hays (LSE:HAS)
Historical Stock Chart
From Apr 2024 to May 2024
Hays (LSE:HAS)
Historical Stock Chart
From May 2023 to May 2024