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World – Hays reports full-year revenue and profit growth

27 August 2015

International recruitment firm Hays (HAS: LSE) today reported revenue of £3.8 billion for the year ending 30 June 2015, an increase of 9% on a like-for-like (LFL) basis compared with £3.7 billion during the previous year. 

  FY 2015 FY 2014 Change LFL
Revenue £3,842.8 million £3,678.5 million +4.5% +9.0%
Net Fees £764.2 million £724.9 million +5.4% +9.0%
Operating Profit £164.1 million £140.3 million +17.0% +25.0%

According to Hays’ financial statement, the company achieved 17% headline growth in operating profit despite a £9.6 million foreign exchange headwind.

Alistair Cox, Chief Executive of Hays, commented: “This is another strong financial performance as we delivered excellent 25% (LFL) operating profit growth and further increased our sector leading conversion rate. All three divisions delivered good growth and we are on schedule to deliver our five-year aspiration to broadly double the group’s operating profits by 2018, despite the material negative impact of foreign exchange movements.”

“In the UK we delivered excellent profit leverage and strong fee growth across all regions. Our Australia business returned to growth, driven by Perm, though the mining-focused regions remained tough. In Germany, our trading performance was good and around the rest of the Group, we continued to deliver good broad-based growth as 21 countries delivered net fee growth of 10% (LFL) or more.”

“We have made further significant strategic and operational progress this year, building on the existing strength of our business globally. We acquired Veredus in the US, giving us a significant platform from which to build a large business in the world’s biggest recruitment market, and continued the rollout of our contractor model,” Mr Cox added.  

Net fees for the company’s Temp business, which represents 58% of Group net fees, increased by 7% (LFL). Net fees in the Perm business increased by 13% (LFL) driven by improved client and candidate confidence in several key markets, most notably the UK, Australia, and several European countries. This was supported by an increase in the average fee per placement of 3%, as the company saw a general increase in wage inflation, especially where candidate shortages became apparent.

The integration of US-based Veredus Corp, a pure play IT staffing company acquired in December 2014, is reported to be proceeding well. The business delivered record temporary staffing levels and permanent fees in June. Since its acquisition Veredus delivered net fees of £10 million and operating profit was break-even, with a good trading performance offset by the amortisation of the legacy Veredus brand, and one of costs related to the transaction and post-acquisition development of the business.

Hays breaks down net fees into three regions, as follows:

  FY 2015 FY 2014 Change LFL
Asia Pacific £178.5 million £173.9 million +3.0% +8.0%
Continental Europe and Rest of World £313.8 million £305.0 million +3.0% +9.0%
UK & Ireland £271.9 million £246.0 million +11.0% +11.0%

Across Asia Pacific net fees increased by 3% (8% on a like-for-like basis) to £178.5 million in 2015. Operating profit was flat at £49.7 million, representing an increase of 7% (LFL). 

In Australia & New Zealand net fees increased by 7% (LFL) and operating profit was up 5% (LFL) compared with the previous year. Growth was driven by the permanent recruitment business, which delivered strong net fee growth of 17% (LFL), as candidate confidence improved in several key markets. Temporary net fees grew by 2% (LFL).

In Australia Hays delivered good net fee growth of 7% (LFL), although reduced activity in the Resources & Mining sector continued to significantly impact trading across Western Australia. Good net fee growth of 9% (LFL) was reported in New Zealand.

In Asia, which accounted for 22% of the division’s net fees, Hays delivered strong net fee growth of 13% (LFL) and operating profits increased by 22% (LFL) to £5.5 million compared with last year. All countries in the region delivered record net fees. In Japan, net fees increased by 15% (LFL) and market conditions were good throughout the year. Net fees in China grew 17% (LFL), Hong Kong 10% (LFL), Malaysia 52% (LFL) and Singapore 1% (LFL).

In Continental Europe & Rest of World, Hays delivered net fee growth of 3% (9% LFL) to £313.8 million, driving operating profit growth of 7% (18% LFL) to £68.7 million.

Germany, which represented 50% of the division’s net fees, delivered good net fee growth of 6% (LFL). The company saw growth across its Contracting and Temporary divisions, which together grew by 6% (LFL), and Permanent which also grew by 6% (LFL).

Strong growth in the company’s newer specialisms (Accountancy & Finance, Sales & Marketing, and Healthcare), which now represent 27% of net fees in Germany, all grew by more than 10% (LFL). Net fees in IT, which represents 41% of the Germany business, grew by 7% (LFL), whilst net fees in Engineering increased by 2% (LFL).

Across the rest of the division, net fees were up by 12% (LFL) and operating profit increased by £7.1 million (LFL). France, Hays’ second largest market in Continental Europe & Rest of World, delivered strong net fee growth of 10% (LFL), and operating profit growth of 48% (LFL) against a subdued market backdrop.

In North America, Canada delivered strong net fee growth of 10% (LFL) with the US business, excluding the Veredus acquisition, continued to perform well and increased net fees by 34% (LFL). In Latin America, Chile, Colombia and Mexico all grew rapidly, although Brazil remained challenging and net fees were down 13% (LFL).

Within the division, 16 countries delivered net fee growth of 10% (LFL) or more and 14 countries; including Germany, Belgium, Canada, Poland and Switzerland, delivered record net fee performances.

In its home market, the UK & Ireland, Hays delivered net fee growth of 11% to £271.9 million (LFL) and operating profit growth of 75% (LFL) to £45.7 million.

Activity levels were strong and broad-based, with all regions and most specialisms delivering net fee growth. Stand out performances were reported in the North West, Midlands, East, London (ex-City) and South of England, each of which grew by more than 15%. In Ireland Hays’ business delivered net fee growth of 1% (LFL).

At the specialism level, IT delivered excellent growth of 22% (LFL), Construction & Property performed strongly and was up 14% (LFL), whilst net fees in the company’s largest specialism of Accountancy & Finance grew by 13% (LFL), within which the Senior Finance business alone grew by 12% (LFL).

Hays’ private sector business, which represented 71% of the division’s net fees, delivered strong net fee growth of 11% (LFL) and the public sector business also delivered strong net fee growth of 11% (LFL), driven by particularly good performances in Education and IT.

In November 2013 Hays outlined its aspiration to broadly double the group’s operating profit to £250 million by June 2018, and materially diversify where the company generates those profits. Two years into the five-year plan Hays advised that it is on schedule to deliver on these aspirations.

Since June 2013 operating profits have increased from £125 million to £164 million. Translating Hays’ 2018 operating profit aspiration of £250 million to current prevailing exchange rates, it would be some £30 million lower. However, despite this the company remains confident of delivering the company’s operating profit aspiration.

Mr Cox concluded: “We enter our new year in a position of strength, with unrivalled breadth, scale and balance around the world and the best people and technology tools in our industry. We see many clear opportunities to grow further and are focused on capturing these while simultaneously driving profits and cash generation along the way.”

In trading today, the company’s share price rose by 2.4% to £1.58, an increase of 24.3% compared with a year ago. Based on its current share price, the company has a market value of £2.2 billion.