TIDMHAS
RNS Number : 6234L
Hays PLC
14 January 2021
QUARTERLY UPDATE
FOR THE THREE MONTHSED
31 DECEMBER 2020
14 January 2021
Financial summary
Growth in net fees for the quarter ended 31 December 2020 (Q2
FY21)
(versus the same period last year) Growth
---------------
Actual LFL
By region:
Australia & New Zealand (ANZ) (16)% (19)%
Germany (16)% (20)%
United Kingdom & Ireland (UK&I) (20)% (20)%
Rest of World (RoW) (15)% (16)%
------------------------------------ ------- ------
Total (16)% (19)%
------------------------------------ ------- ------
By segment:
Temporary (10)% (13)%
Permanent (25)% (26)%
------------------------------------ ------- ------
Total (16)% (19)%
------------------------------------- ------- ------
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.
Overview
-- Fees down 19% (Q1 21: (29)%). Despite markets remaining
significantly impacted by the pandemic, trends improved through the
quarter in both Temp & Perm and our underlying net fee exit
rate was c.(16)%
-- As a result of stronger fees, operating profit for H1 FY21 is
now expected to be c.GBP25 million. It is too early to quantify the
negative impacts of new UK and European lockdowns on H2 FY21
-- Australia & New Zealand: fees down 19%, with signs of
improving momentum after Victoria's lockdown ended in November.
Temp and Perm fees declined by 16% and 27% respectively
-- Germany: fees down 20%, with trends improving through the
quarter, and with signs of increasing business confidence.
Contracting was relatively resilient, down 8%, although Temp fell
36% as a result of tough, but now stable, Automotive markets and
Temp worker severance costs. Perm down 31%
-- UK & Ireland: fees down 20%, with activity improving
through the quarter, particularly in Temp which declined by 14%.
Perm fell by 29%. The Public sector showed resilience, declining by
5%
-- Rest of World: fees down 16%. EMEA ex-Germany down 15%, with
France and Spain showing better momentum, down 22% and 11%
respectively, and Switzerland again resilient, down 5%. The
Americas fell by 12%, including the USA down 3%, and Asia fell by
24%, including China down 25%
-- Group consultant headcount was flat in the quarter and down 17% year-on-year
-- Cash collection was strong, with net cash of c.GBP380 million
(30 September 2020: c.GBP350 million; 31 December 2019: GBP13.2
million), excluding short-term deferrals of tax payments
Commenting on the Group's performance, Alistair Cox, Chief
Executive, said:
"Our markets remain significantly impacted by the pandemic,
although encouragingly fees grew sequentially versus the prior
quarter, with stronger momentum in both Temp and Perm. Activity in
Australia increased after its local lockdown restrictions eased,
and we saw improvement in Germany across the quarter with signs of
increasing business confidence. Fees in the UK rebounded in both
the private and public sectors, the Americas delivered good
sequential growth and Asia was broadly stable.
"I t is too early to quantify any negative impacts of new UK and
European lockdowns and, as ever, our New Year 'return to work'
trends will be a key driver of second half performance. However,
our business is rising to the challenges we face. Our 'Return to
Growth' investment programme is on track, led by our highly
experienced management teams who are focused on best positioning us
for recovery. Combined with our strong balance sheet and leading
market positions, we are confident we will continue to take further
market share as clients and candidates look for our expert
recruitment guidance, both during and after COVID."
Group
Q2 trading overview
In our second quarter, Group net fees continued to be
significantly impacted by the pandemic, decreasing by 19% on a
like-for-like basis versus the prior year. However, trends improved
through the quarter and December's underlying net fee exit rate was
minus c.16%. Since the onset of the pandemic, the Group's quarterly
net fee trend has improved from minus 34% (Q4 FY20), to minus 29%
(Q1 FY21) and now minus 19% (Q2 FY21). On an actual basis, net fees
decreased by 16%, with the weakening of Sterling versus most of our
reporting currencies modestly increasing our reported net fees.
Encouragingly, net fees in the second quarter grew by c.7%
sequentially versus Q1 FY21.
Like-for-like net fees in Temp (62% of Group fees) and Perm (38%
of Group fees) declined by 13% and 26% respectively. Overall, our
largest specialism of IT (27% of Group fees) fell by 8%,
Construction & Property fell by 22% and Accountancy &
Finance by 26%. Our large Corporate Accounts business, Hays Talent
Solutions, was relatively resilient and declined by 4%. Overall
consultant engagements with clients and candidates remained strong
during the quarter.
Our primary objective remains 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
Europe.
As previously advised, we exited all major government support
schemes globally in Q1 FY21.
Group fee exit rate, H1 operating profit, near-term outlook
& headcount
The Group's underlying net fee exit rate was minus c.16% in
December. It is too early to quantify the negative impact of new
lockdowns in the UK and some of our key European markets. Also, the
unpredictable nature of the pandemic means our forward visibility
is less than usual.
Our cost base increased slightly in the quarter to c.GBP65
million per period(1) , primarily as consultant commissions
increased proportionately with the rise in net fees, and as almost
all our offices globally were open in the quarter.
As a result of stronger net fee performance, Group operating
profit for H1 FY21 is expected to be c.GBP25 million. As previously
noted, any material sequential increase in profitability in H2 FY21
versus H1 FY21 will require a further significant uplift in net
fees. This is in part because:
1) As previously disclosed and as with all prior years, due to
the timings of public holidays there are fewer working days in our
second half. In H2 FY21, Germany has eight fewer working days than
H1 FY21, Australia six fewer and the UK five fewer working days.
This will have 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.
2) 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, Life Sciences and large Corporate Accounts, will
accelerate medium-term growth and position Hays to take further
market share. We expect our 'Return to Growth' programme will add
c.GBP1 million of incremental costs per period(1) in H2 FY21 versus
our current run-rate.
Group consultant headcount was flat in the quarter and decreased
by 17% year-on-year. Overall, we expect Group headcount will
increase by c.2-4% in Q3 FY21, mainly due to the acceleration in
our 'Return to Growth' investment programme. As with FY20, Easter
falls entirely in our fourth quarter. We therefore expect no
material year-on-year working day effects in either Q3 or Q4
FY21.
(1) 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.
Australia & New Zealand (17% net fees)
Net fees in A ustralia & New Zealand (ANZ) declined by 19%,
although we saw signs of positive momentum in both Temp and Perm
after Victoria's lockdown ended in November.
Our Temp business, which represented 73% of our ANZ net fees,
continued to show relative resilience, reducing by 16%. Perm net
fees fell by 27%, although improved through the quarter, especially
in the private sector. Public sector net fees, which represented
39% of ANZ, decreased by 16%, while Private sector net fees fell by
22%.
Australia net fees decreased by 20%. Our largest regions of New
South Wales and Victoria, which represented 49% of Australia net
fees, declined by 31% and 26% respectively. Queensland and ACT
demonstrated relative resilience, down 16% and 9% respectively, and
encouragingly Western Australia grew by 1%.
At the Australia specialism level, Construction & Property,
our largest business, declined by 27%. Office Support and
Accountancy & Finance were also tough, down 35% and 26%
respectively. IT was however less impacted than our overall
Australian fees, decreasing by 14%, as were our 'Other' smaller
specialisms, which collectively fell by 5%. Resources & Mining
grew by a solid 4%.
New Zealand decreased 5%, as activity rebounded following the
relaxing of lockdown rules.
ANZ consultant headcount increased by 1% in the quarter and
declined by 19% year-on-year.
Germany (26% net fees)
Net fees in Germany fell by 20%. Market conditions remained
difficult, although encouragingly there are clear signs of
improving business confidence generally, and stabilisation in the
Automotive sector.
Our largest Germany specialism of IT (46% of Germany net fees)
decreased by 10%, while our second largest, Engineering, declined
by 31%. Accountancy & Finance fell by 15%, although Life
Sciences grew by 3%. We also saw good growth in fees in the Public
sector (15% of Germany fees), which increased by 7%.
Our largest area of Contracting (c.62% of Germany net fees),
which is primarily in the IT sector and where we operate a
freelance model, improved through the quarter and fees declined by
8%. Most assignments have continued under remote working.
Temp (c.23% of Germany net fees), where we employ temporary
workers as required under German law, primarily in Automotive and
Manufacturing sectors, remained weak and net fees declined by 36%.
Average Temp volumes decreased by c.30%, in line with the previous
quarter. Given the challenging market outlook, we released a
further 124 temps in the quarter at a cost of c.GBP1.0 million,
which reduced Temp net fees by a further c.6%. Overall Temp trends
improved through the quarter, and Temp worker under-utilisation was
minimal . Based on current market conditions, we do not expect
further material negative impacts from Temp severance costs or
worker under-utilisation in H2 FY21.
Perm, which represented c.15% of Germany net fees, declined by
31%.
Consultant headcount increased by 1% in the quarter and declined
by 12% year-on-year.
United Kingdom & Ireland (22% net fees)
Net fees in the United Kingdom & Ireland (UK&I) declined
by 20%. Market conditions remained difficult, although
encouragingly activity levels improved through the quarter. This
was particularly evident in our largest business of Temp, 64% of
UK&I fees, which fell by 14%. Perm fees decreased by 29% .
The Public sector, 38% of UK&I net fees, again showed
relative resilience and decreased by 5%, although the Private
sector was tougher and fell by 27%.
All regions traded broadly in line with the overall UK business,
apart from the North West which declined by 9% and the East of
England, which fell by 28%. Our largest UK region of London fell by
23%, and in Ireland our business decreased by 28%.
At the specialism level, IT performed robustly, with fees up 2%,
and Education saw a significant sequential rebound, with fees down
6%. Life Sciences and Healthcare again demonstrated resilience,
with fees up 2% and down 6% respectively, while our large Corporate
Accounts business Hays Talent Solutions was also less impacted and
fell by 13%. However, Accountancy & Finance and Office Support
were much tougher, falling 34% and 40% respectively, and
Construction & Property declined by 18%.
Consultant headcount increased by 1% in the quarter and declined
by 20% year-on-year.
Rest of World (35% net fees)
Our Rest of World (RoW) division, comprising 28 countries, saw
net fees decline by 16%, with improvement across all sub-regions .
Perm, which represented 63% of RoW net fees, fell by 23% while Temp
showed stronger momentum and declined by 1%.
EMEA ex-Germany (61% of RoW net fees) net fees decreased by 15%.
Fees in our largest RoW country of France declined by 22%, while
Belgium and Spain declined by 27% and 11% respectively. Switzerland
and Poland demonstrated relative resilience, with fees down 5% and
1% respectively, and Hungary returned to growth, up a strong
23%.
The Americas (22% of RoW) net fees decreased by 12%. The USA,
our second-largest RoW country, showed resilience and decreased by
3%, although Canada was weaker and fell by 32%. Latin America fell
by 11%, including Brazil down 4%.
Asia (17% of RoW) net fees decreased by 24%. China fell by 25%,
with Mainland China again significantly outperforming Hong Kong.
Japan was very tough, with fees down 36%, although Malaysia
continued to perform strongly and grew by 14%.
RoW consultant headcount decreased by 1% in the quarter and by
16% year-on-year.
Cash flow and balance sheet
Net cash of c.GBP380 million as at 31 December 2020 (30
September 2020: c.GBP350 million; 31 December 2019: GBP13.2
million), excluding c.GBP13 million of short-term deferrals of tax
payments. Cash collection from our clients remained strong.
During the quarter we 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.
Enquiries
Hays plc +44 (0) 20 3978 2520
Paul Venables Group Finance Director +44 (0) 20 3978 3173
David Phillips Head of Investor Relations
Finsbury hays@finsbury.com
Guy Lamming
Anjali Unnikrishnan
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 14 January 2021. The dial-in details are as follows:
+44 (0) 330 551
Dial-in number 0200
Dial-in number (UK +44 (0) 808 109
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 1480
Access code 8197319#
Reporting calendar
Half-Year Report for the six months ended 31
December 2020 18 February 2021
Trading update for the quarter ending 31 March
2021 15 April 2021
Trading update for the quarter ending 30 June
2021 15 July 2021
Hays Group overview
As at 30 June 2020, Hays had c.10,400 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 in FY20, compared with 25% in 2005.
Our consultants work in a broad range of sectors covering 20
professional and skilled recruitment specialisms, and during FY20
our three largest specialisms of IT (25% of Group net fees),
Accountancy & Finance (15%) and Construction & Property
(12%) together represented 52% of Group fees.
In addition to our international and sectoral diversification,
in FY20 the Group's net fees were generated 59% from temporary and
41% 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.
Purpose, 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.
Our key company value is that we should always try to focus on
doing the right thing. As part of this, Hays has endorsed two
United Nations Sustainable Development Goals. These call upon
businesses to advance sustainable development through the
investments they make, the solutions they develop and the practices
they adopt. We have initially focused on the 'Decent Work &
Economic Growth' and 'Gender Equality' goals. 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 past four years we have placed over 1 million
people worldwide in their next job. We are proud of this as it
helps the individual, their employer and society in general.
We have reinforced our Decent Work and Economic Growth
commitment through the launch of Hays Thrive, our free-to-use
online Training & Wellbeing platform, which is designed to help
candidates upskill and to help employees deal with very difficult
times.
We also believe that responsible companies should have Equality,
Diversity & Inclusion (ED&I) at their heart. Our global
ED&I council helps co-ordinate and drive our actions, sharing
best practice from many successful regional programmes.
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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