TIDMHAS
RNS Number : 1447T
Hays PLC
16 July 2020
QUARTERLY UPDATE
FOR THE THREE MONTHSED
30 JUNE 2020
16 July 2020
Financial summary
Growth in net fees for the quarter ended 30 June 2020 (Q4
FY20)
(versus the same period last year) Growth
Actual LFL
By region:
Australia & New Zealand (31)% (28)%
Germany (32)% (33)%
United Kingdom & Ireland (42)% (42)%
Rest of World (30)% (31)%
Total (34)% (34)%
By segment:
Temporary (26)% (26)%
Permanent (44)% (44)%
Total (34)% (34)%
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. Please see the appendix for our Q3 FY20 LFL fees.
Overview
-- Group fees down 34%, with markets greatly impacted by the
Covid pandemic. Overall, May / June fees were sequentially stable.
While current activity levels have improved, no signs yet of
positive fee momentum
-- Full-year operating profit before exceptional items expected
to be between c.GBP130-135 million. Cost base reduced by 21% versus
pre-Covid levels, partially helped by certain temporary cost
savings
-- Australia & New Zealand (ANZ): fees down 28%. Relative
resilience in Temp, representing 80% of ANZ fees, which fell by
18%. Perm down 52%, impacted by extremely tough Private sector
markets
-- Germany: fees down 33%. Temp & Contracting down 34%, with
resilience in Contracting, although Temp was very difficult with
significant under-utilisation of workers and one-off costs. Perm
down 29%
-- UK & Ireland: fees down 42%. Temp down 30% and Perm down
58%. Private sector markets were particularly tough with fees down
46%; Public sector down 30%
-- Rest of World: fees down 31%. EMEA ex-Germany declined by
32%, with France and Belgium both down 44%, although Switzerland
performed strongly with fees up 6%. The Americas fell by 30%,
including the USA down 18%. Asia fell 28%, with Japan and Greater
China down 29% and 33% respectively
-- Net cash of c.GBP365 million (or c.GBP485 million including
short-term deferrals of tax payments; 31 Dec 2019: GBP13.2 million;
30 June 2019: GBP129.7 million). Strong underlying cash generation,
with c.GBP110 million inflow driven by a partial unwind in Temp
debtors. Our c.GBP196 million equity raise adds substantial
financial strength
Commenting on the Group's performance, Alistair Cox, Chief
Executive, said:
"The pandemic has severely impacted all our markets globally. As
it developed, our priority was to look after all our people and to
support our business as it adjusted immediately to new realities.
Facing conditions far harsher than any I have known, our business
stood up well to that test. I am immensely proud of the commitment
and innovation shown by all our colleagues in helping our clients
and candidates deal with the crisis. Overall, we have both
protected our business, while taking actions to appropriately
reduce costs.
"Conditions in all regions were extremely tough, although ANZ,
the USA and Asia performed better than the Group average, as did
IT, our largest global specialism. Overall, Temp outperformed Perm,
illustrating the relative resilience of the business we have
purposely built. Looking ahead, although the outlook remains highly
uncertain there are tentative signs of stability. With our
strongest ever balance sheet and market leading positions in key
businesses, we are confident we can take further market share and
will invest in organic opportunities to accelerate our return to
growth. Lastly, I would like to sincerely thank our shareholders,
colleagues and other stakeholders as their deep support and
commitment has helped ensure we can face our future with confidence
."
Group
Q4 trading review
In our fourth quarter, ended 30 June 2020, Group net fees
decreased by 34% on a headline and like-for-like basis versus the
prior year.
Like-for-like net fees in Temp (64% of Group fees) and Perm (36%
of Group fees) declined by 26% and 44% respectively. Overall, our
largest specialism of IT (29% Group fees) fell by 17%, Construction
& Property fell by 44% and Accountancy & Finance by
39%.
Throughout the pandemic, our primary aim has been to protect our
colleagues, clients and candidates, and our business
infrastructure. The Board would like to sincerely thank our
colleagues for ensuring complete business continuity through hugely
challenging circumstances. Excluding the UK, 85% of our offices are
currently open and are working under a hybrid model.
Throughout remote working, consultant interactions with clients
and candidates have remained very strong, and we saw some notable
client wins in Hays Talent Solutions, including nine new clients
and five existing clients expanding to new geographies. We also
launched Hays Thrive globally, our unique and free-to-use employee
training and wellbeing platform. This has been highly successful,
and we are excited by its potential, with 13,000 client sign-ups
(including 5,000 new clients) thus far and 51,000 individuals
registering learning accounts.
Costs & FY20 operating profit outcome
The Group's periodic cost base decreased from c.GBP73 million
pre-Covid to c.GBP58 million as we exited the quarter, a reduction
of 21%. We actively reduced our variable and discretionary costs,
and Group headcount decreased by 9% in the quarter and by 9%
year-on-year. In addition, at 30 June 2020, 18% of Group employees
were either in job support schemes, short-time working arrangements
or had voluntarily reduced their pay, including senior management.
Given the tough environment, the Executive Directors agreed that no
FY20 bonuses will be paid to them, or members of the Management
Board.
These cost reduction measures meant that the Group traded at a
broadly break-even level through the fourth quarter. We expect
full-year operating profit before exceptional items to be in the
GBP130-135 million range for the year to 30 June 2020.
Exit rate & near-term outlook
The Group's net fee exit rate on a working day-adjusted basis
was in line with the overall like-for-like net fee growth rate in
the quarter.
While we will remain focused on managing our costs, we expect
our cost base to increase as we enter FY21. We will incur more
normal levels of operating and employee costs as we begin to return
to normal working practices, reverse voluntary pay reductions and
as job support arrangements end. These cost increases and continued
tough market conditions mean that we anticipate being modestly
loss-making over the summer months. A return to profitability
thereafter will require a sequential increase in fees, which in the
early phase of a recovery should deliver a very high rate of
incremental profit drop-through.
We have recently completed a strategic 'Return to Growth' review
of each division and agreed accelerated investment plans in
attractive structural growth markets, such as our IT and large
Corporate Accounts businesses. We are confident that these
investment projects can accelerate our medium-term growth and
position us to take market share.
Looking forward, exchange rate movements remain a material
sensitivity to the Group's reported profitability.
Australia & New Zealand (18% net fees)
Net fees in A ustralia & New Zealand (ANZ) declined by 28% .
While market conditions were very difficult, lockdown restrictions
in Australia were relatively less impactful on our business than in
other parts of the world.
Our Temp business, which represented 80% of our ANZ net fees,
showed relative resilience including some short-term Covid related
contract wins, and declined by 18%. Perm net fees fell by 52%.
Public sector net fees, which represented 37% of ANZ, decreased by
22% while Private sector net fees fell by 31%.
Australia net fees decreased by 28%. Our largest regions of New
South Wales and Victoria, which represented 52% of Australia net
fees, declined by 35% and 31% respectively. Queensland decreased by
27%, Western Australia by 16% and ACT by 12%.
At the Australia specialism level, Construction & Property,
our largest business, declined by 34%. Office Support and
Accountancy & Finance were also very difficult, both decreasing
by 48%. More positively, IT was far less impacted, down 13%, as
were larger clients, with Hays Talent Solutions down 4%.
New Zealand, which had a more stringent lockdown than Australia
and which represented c.4% of ANZ net fees, decreased 42%.
Consultant headcount decreased by 13% in the quarter and by 20%
year-on-year.
Germany (26% net fees)
Net fees in Germany fell by 33%, heavily impacted by the effect
of the pandemic, and specifically by under-utilisation in our Temp
business. Excluding the impact of Temp severance costs, Germany
fees decreased by 27%. Overall business confidence remains low and
clients are closely controlling costs, particularly in the
Manufacturing and Automotive sectors, although there are some signs
of stability in sectors such as IT and Life Sciences.
Our largest Germany specialism of IT decreased 23%, while our
second largest, Engineering, declined by 52%. Construction &
Property and Accountancy & Finance were also tough, down 26%
and 24% respectively. Life Sciences and Sales & Marketing were
relative outperformers, down 12% and 14% respectively.
Our largest area of Contracting (70% of Germany fees), which is
primarily in the IT sector and where we operate a freelance model,
was resilient and fees declined by 12%. Most assignments continued
under remote working.
Temp (12% of fees), where we employ temporary workers as
required under German law, primarily in Automotive and
Manufacturing sectors, was significantly weaker and fees declined
by 72%. Average Temp volumes decreased by 22%, but fees were also
significantly impacted by the under-utilisation of our Temp workers
due to the widespread client closures of their Engineering and
Manufacturing sites. Although we received some support from the
German short-time working scheme, the net reduction in billable
hours impacted fees by GBP6.8 million, or down 30% year-on-year. In
addition, given the significantly reduced levels of demand from our
clients and the tough market outlook, we took the decision to
release c.420 Temps at a one-off cost of GBP4.3m, and which reduced
net fees by a further 20% in the quarter.
Perm, which represented 18% of Germany net fees, declined by
29%.
Consultant headcount decreased by 6% in the quarter and by 12%
year-on-year.
United Kingdom & Ireland (21% net fees)
Net fee growth in the United Kingdom & Ireland (UK&I)
decreased by 42%, in extremely tough market conditions . The
Private sector, 68% of UK&I net fees, fell by 46% and was more
impacted than the Public sector, which decreased by 30%.
Net fees in Temp, which represented 70% of UK&I net fees,
decreased by 30%, while Perm markets were tougher still and
decreased by 58% .
All regions traded broadly in line with the overall UK business,
although our largest UK region of London slightly outperformed the
UK average and decreased by 37%, while the North West declined by
53%. Hays Talent Solutions, which services larger corporate
clients, was less impacted and fell by 28%. In Ireland our business
declined by 44%.
At the specialism level, IT was a relative outperformer, with
fees down 9%. However, Accountancy & Finance and Office Support
were much tougher, both falling 53%, as was Construction &
Property which fell by 51%. Life Sciences was the sole sector to
grow, benefiting from some additional Covid-19 contract work, up a
strong 25%.
Consultant headcount decreased by 7% in the quarter and by 6%
year-on-year.
Rest of World (35% net fees)
Our Rest of World (RoW) division, comprising 28 countries, saw
net fees decline by 31% in very tough conditions . Perm, which
represented 61% of RoW net fees, fell by 39% while Temp was less
impacted and fell by 13%.
EMEA ex-Germany (57% of RoW net fees) net fees decreased by 32%.
Fees in our largest RoW country of France declined by 44%, while
Belgium and Spain declined by 44% and 47% respectively. However,
Switzerland was a significant stand-out with fees up 6%, while
Poland fell by 14%.
The Americas (22% of RoW) net fees decreased by 30%. The USA,
our second-largest RoW country, decreased by 18%, helped by our
significant exposure to IT and despite very tough Construction
& Property markets, although Canada was much weaker and fell by
45%. Latin America was also very tough and fell by 51%.
Asia (21% of RoW) net fees decreased by 28%. Greater China fell
by 33%, although we did see some improvement through the quarter.
Fees in Japan fell by 29%, although Malaysia was a stand-out
performer and grew by an excellent 23%.
Consultant headcount decreased by 10% in the quarter and by 8%
year-on-year.
Cash flow and balance sheet
Net cash of c.GBP365 million (c.GBP485 million including
short-term deferrals of tax payments ; 31 Dec 2019: GBP13.2
million; 30 June 2019: GBP129.7 million). Strong underlying cash
generation in the quarter, with c.GBP110 million inflow driven by a
partial unwind of our Temp trade debtor book and an excellent
reduction in debtor days in the quarter to 34 days (30 June 2019:
35 days).
On 2 April 2020 we raised c.GBP196 million net of fees via an
equity raise. Our financial strength underpins our strategy and
gives us significant confidence for the future, despite highly
uncertain markets. We are very grateful for the support of our
shareholders and are determined to build on our market-leading
positions globally by supporting our clients and capturing
additional market share.
During the quarter, we were 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 up to
GBP600 million, based on current forecasts we are highly unlikely
to utilise this facility . This is in addition to our GBP210
million revolving credit facility, which runs until 2024.
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 16 July 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 6141874#
Reporting calendar
Full-year results for the year ended 30 June
2020 27 August 2020
Trading update for the quarter ending 30 September
2020 15 October 2020
Trading update for the quarter ending 31 December
2020 14 January 2021
Appendix: Q3 FY20 net fee summary
In our trading statement of 2 April 2020, we reported
like-for-like Group net fees of (5)% for the period 1 January 2020
- 13 March 2020. To help analysts and investors, and retain
consistent quarterly disclosures, the table below presents Group
net fees for the three months to 31 March 2020:
Growth in net fees for the quarter ended 31 March 2020 (Q3
FY20)
(versus the same period last year) Growth
Actual LFL
By region
Australia & New Zealand (ANZ) (13)% (7)%
Germany (11)% (10)%
United Kingdom & Ireland (UK&I) (7)% (7)%
Rest of World (RoW) (5)% (4)%
Total (8)% (7)%
By segment
Temporary (6)% (5)%
Permanent (11)% (10)%
Total (8)% (7)%
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 c.7,000 consultants work in a broad range of sectors. Our
expertise stretches across 20 professional and skilled recruitment
specialisms, and during FY20 our three largest sectors of IT (25%
of Group net fees), Accountancy & Finance (15%) and
Construction & Property (12%) together represented 52% of Group
net fees.
In addition to this international and sectoral diversification,
in FY20 the Group's net fees were generated 59% from temporary and
41% 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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