TIDMHAS
RNS Number : 9567Z
Hays PLC
16 January 2020
QUARTERLY UPDATE
FOR THE THREE MONTHSED
31 DECEMBER 2019
16 January 2020
Financial summary
Growth in net fees for the quarter ended 31 December 2019 (Q2
FY20)
(versus the same period last year) Growth
--------------
Actual LFL
By region
Australia & New Zealand (ANZ) (11)% (7)%
Germany (12)% (9)%
United Kingdom & Ireland (UK&I) (4)% (4)%
Rest of World (RoW) (1)% 1%
------------------------------------ ------- -----
Total (7)% (4)%
------------------------------------ ------- -----
By segment
Temporary (5)% (3)%
Permanent (8)% (6)%
------------------------------------ ------- -----
Total (7)% (4)%
------------------------------------- ------- -----
Note: unless otherwise stated, all growth rates discussed in
this statement are LFL (like-for-like) fees, representing
year-on-year organic growth of continuing operations at constant
currency.
Highlights
-- Group fees down 4%, with an exit rate down 6%. Specific
external events in France, Australia and the UK, together c.45% of
Group fees, drove a deceleration in December. Given tough market
conditions, continuing strategic investments and adverse FX moves,
we anticipate H1 FY20 operating profit of c.GBP100 million
-- Australia & New Zealand (ANZ): net fees down 7%, with a
resilient performance in Temp, down 2%. Perm down 15%, impacted by
tough private sector markets and, latterly, the catastrophic
bushfires
-- Germany: net fees fell by 9% in tough macroeconomic
conditions, with increased client cost controls and reduced overall
business confidence across multiple sectors. Temp & Contracting
net fees down 10%, with Perm down 3%
-- UK & Ireland (UK&I): net fees down 4%, with Temp and
Perm decreasing by 1% and 7% respectively. Private sector
significantly impacted by economic and political uncertainty and
fell by 8% in the quarter
-- Rest of World: net fee growth of 1%. EMEA ex-Germany declined
by 1%, and slowed in December, particularly France which fell 3%
overall, impacted by the general strike. The Americas grew by 6%,
led by strong USA fees, up 13%. Asia fees flat, with strong growth
in Japan of 12% but China down 9%
-- Group consultant headcount was down 1% in the quarter and by 2% year on year
-- Cash performance has been good. After paying GBP121.6 million
of special and final dividends in November, we ended Q2 with
c.GBP15 million cash (30 Sept 2019: c.GBP90 million, 31 Dec 2018:
GBP32.5 million)
Commenting on the Group's performance, Alistair Cox, Chief
Executive, said:
"Growth slowed markedly in December, driven by specific events
in key markets: general strikes in France, tragic Australian
bushfires and the UK election. Each event impacted markets already
facing challenging economic conditions and low business confidence.
Germany weakened further, with economic uncertainties driving
increased client cost controls. The Americas performed well, with
the USA a standout, while Asia was flat. Conditions in the UK
remained uncertain, particularly before the election, although the
result may provide impetus over time."
"The rebound from these events and our New Year 'return to work'
are thus particularly important, and we are closely monitoring
activity levels. Overall, we expect near-term macro conditions to
remain difficult, but see continued opportunities for growth in key
specialisms like IT. Our task is to balance such investment
opportunities with managing our cost base, while protecting our
infrastructure and market leadership. Our highly experienced
management teams, combined with our financial strength, gives us
confidence in achieving this balance."
Group
In the second quarter, ended 31 December 2019, Group net fees
decreased by 7% on a headline basis and by 4% on a like-for-like
basis against the prior year. The strengthening of Sterling,
primarily versus the Euro and Australian Dollar, reduced our
reported net fee growth.
Like-for-like net fees in our Temp and Perm businesses declined
by 3% and 6% respectively. Temp represented 58% of Group net fees,
and Perm 42%.
The Group net fee exit rate was down 6%. It was materially
impacted by the general strike in France, tragic bushfires in
Australia, the UK election and, to a lesser extent, a further
slowdown in activity in Germany. When combined with our continuing
investments in strategically important, long-term growth markets,
plus recent adverse FX movements, we anticipate that H1 FY20
operating profit will be around GBP100 million.
We are closely monitoring the rebound from these events, plus
our New Year 'return to work' levels. During the quarter, we
reviewed our cost base in detail, and as a result we expect our
overhead costs to reduce by c.GBP5 million in the second half.
Additionally, given the step down in Germany, we are reviewing the
cost base of that business.
Consultant headcount decreased by 1% in the quarter and by 2%
year-on-year. We expect Group headcount to be down in Q3 FY20.
During the quarter we opened one new office in Australia.
Our main markets of Germany, ANZ and UK&I each had the same
number of trading days versus the prior year, meaning there were no
material trading day impacts in the quarter. Looking ahead, Easter
falls entirely in our fourth quarter. We therefore expect minimal
impact from the timing of Easter on our growth rates in Q3 and Q4
FY20.
For comparison purposes, if we re-translate our FY19 profits of
GBP248.8 million at current exchange rates (AUD1.8870 and EUR1.1701
as at 14 January 2020), the actual reported result would be
c.GBP245 million. This is c.GBP3 million lower than the position at
our Q1 trading update in October and represents a c.GBP9 million
reduction versus the number stated at our preliminary results in
August 2019. Looking forward, exchange rate movements remain a
material sensitivity to the Group's reported profitability.
Australia & New Zealand (17% net fees)
The bushfires in Australia are a tragic and unprecedented
situation and our first priority is the safety and well-being of
our colleagues, temps and clients. We will do everything we can to
provide any support that they need at this very difficult time.
Net fees in Australia & New Zealand (ANZ) declined by 7%,
versus a tough growth comparative. Having been broadly sequentially
stable in October and November, the Perm market slowed materially
in December, with sentiment heavily impacted by the bushfires.
Our Temp business, which represented 70% of our ANZ net fees,
was resilient and declined by 2%, while Perm net fees fell by 15%.
Public sector net fees, which represented 37% of ANZ, decreased by
2% while Private sector net fees fell by 9%.
Australia net fees decreased by 7%. Our largest regions of New
South Wales and Victoria, which represented 56% of Australia net
fees, declined by 7% and 11% respectively. Queensland decreased by
6%, Western Australia by 5% and ACT by 4%.
At the Australian specialism level, Office Support fell by 19%,
and Construction & Property, our largest business representing
c.20% of Australian net fees, remains challenging and declined by
14%. Accountancy & Finance was also difficult and reduced by
14%, while IT fell by 2%. However, net fee growth in HR was strong
at 12%, and Sales & Marketing grew by 4%.
New Zealand (which represented c.5% of ANZ net fees) grew by a
solid 4%.
Consultant headcount decreased by 1% in the quarter and by 6%
year-on-year.
Germany (26% net fees)
Net fees fell by 9% in Germany, versus a tough growth
comparative. There are broad signs of reduced business confidence
and increased levels of client cost control, particularly evident
in the Manufacturing and Automotive sectors. There are also clear
signs that weakness has begun to spread to the Financial and
Services sectors.
Our Temp & Contracting business, which represented 83% of
Germany net fees, decreased by 10% as we experienced a c.4%
reduction in assignment volumes, plus a reduction in average hours
worked per Contracting & Temp assignment of c.6% year-on-year.
Perm, which represented 17% of Germany net fees, also slowed and
declined by 3%.
Our largest Germany specialism of IT decreased 6%, while our
second largest, Engineering, declined by 12%. Construction &
Property and Accountancy & Finance were also tough, down 17%
and 9% respectively. However, Sales & Marketing and Legal grew
by a strong 16% and a good 7% respectively.
Consultant headcount decreased by 2% in the quarter and by 4%
year-on-year.
United Kingdom & Ireland (23% net fees)
Net fee growth in the United Kingdom & Ireland (UK&I)
decreased by 4%. Growth in our Public sector business, which
represented 31% of UK&I net fees, was good at 8%. In the
Private sector, net fees fell by 8%, significantly impacted by
continued economic and political uncertainty. Candidate confidence
weakened through the quarter, and client confidence also reduced,
particularly in December.
Net fees in Temp, which represented 59% of UK&I net fees,
decreased by 1%, although Perm markets were tougher and net fees
decreased by 7%.
All regions traded broadly in line with the overall UK business,
with the exception of Northern Ireland which grew by 4%, and the
North West, down 12%. Our largest UK region of London fell by 1%,
and in Ireland our business declined by 7%.
At the specialism level, IT delivered strong growth with net
fees up by 11%. Accountancy & Finance and Office Support fell
by 4% and 3% respectively, while Construction & Property fell
by 8%. After a number of difficult quarters, Education showed some
signs of stabilisation, with net fees down 3%.
Consultant headcount decreased by 1% in the quarter but
increased by 1% year-on-year, driven by investment in our IT
specialism.
Rest of World (34% net fees)
Our Rest of World (RoW) division, comprising 28 countries,
delivered net fee growth of 1%, versus a tough growth comparative.
Perm, which represented 66% of RoW net fees, fell by 4% while Temp
grew a strong 12%. Five countries delivered growth of more than
10%.
EMEA ex-Germany (59% of RoW net fees) net fees decreased by 1%.
Fees were sequentially stable in October and November, however we
saw a significant step down in growth in December, primarily in our
largest RoW country of France, which was impacted by the general
strike and declined by 3% overall in the quarter. The Netherlands
was tough, down 12%, and Spain fell by 2%. Growth in Italy and
Belgium was good, up 9% and 6% respectively.
The Americas (23% of RoW) increased net fees by 6%. This was
driven by a strong quarter in the USA, our second-largest RoW
country, with 13% growth. Mexico grew by a superb 57% and Brazil by
1%, although Canada was weaker and fell by 5%.
Asia (18% of RoW) was flat overall, led by strong 12% growth in
Japan. China, our largest Asian country, declined by 9%, with
conditions in Hong Kong SAR becoming increasingly difficult and net
fees declining by 10%. Malaysia grew by an excellent 25%.
Consultant headcount increased by 1% in the quarter but
decreased by 1% year-on-year.
Cash flow and balance sheet
Net cash was c.GBP15 million as at 31 December 2019 (30
September 2019: c.GBP90 million; 31 December 2018: GBP32.5
million). This represents a good performance and was after the
payment of GBP121.6 million of special and final dividends in
November 2019.
Enquiries
Hays plc
Paul Venables
David Phillips +44 (0) 20 3978 2520
+44 (0) 20 3978 3173
Finsbury
Guy Lamming Group Finance Director
Anjali Unnikrishnan Head of Investor Relations + 44 (0) 20 7251 3801
Conference call
Paul Venables and David Phillips of Hays plc will conduct a
conference call for analysts and investors at 8:00am United Kingdom
time on 16 January 2020. The dial-in details are as follows:
+44 (0) 20 3003
Dial-in number 2666
Dial-in number (UK +44 (0) 80 8109
toll free) 0700
Password Hays
The call will be recorded and available for playback for seven
days as follows:
+44 (0) 20 8196
Replay dial-in number 1998
Access code 4656156#
Reporting calendar
Half-year results for the six months ended 31
December 2019 20 February 2020
Trading update for the quarter ending 31 March
2020 16 April 2020
Trading update for the quarter ending 30 June
2020 16 July 2020
Full-year results for the year ending 30 June
2020 27 August 2020
Hays Group overview
As at 31 December 2019, Hays had c.11,600 employees in 266
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.77% of the Group's net fees, compared with 25% in
2005.
Our c.7,800 consultants work in a broad range of sectors. Our
expertise stretches across 20 professional and skilled recruitment
specialisms, and as at 30 June 2019 our three largest sectors of IT
(23% of Group net fees), Accountancy & Finance (15%) and
Construction & Property (13%) together represented 51% of Group
net fees.
In addition to this international and sectoral diversification,
the Group's net fees are generated 58% from temporary and 42%
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.
Cautionary statement
This Quarterly Update (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
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END
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