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UK – Hays sees strong international performance

28 February 2011

Revenues were up by +22% from 1.288 billion Pounds during the six months ended 31 December 2009 to 1.576 billion Pounds during the six months ended 31 December 2010 at Hays Plc (HAS:LSE), the fifth largest staffing company in Europe. At constant currency, revenues were up by +20%.

Half year results published today reveal that net fees were up by +23% from 264.8 million Pounds in H2 2009 to 326.1 million Pounds in H2 2010. At constant currency, net fees were up by +20%.

Net fees from permanent placements were up by +37% from 107.5 million Pounds in H2 2009 to 147.4 million Pounds in H2 2010. At constant currency, net fees from permanent placements were up by +34%.

Net fees from temporary placements were up by +14% from 157.3 million Pounds in H2 2009 to 178.7 million Pounds in H2 2010. At constant currency, net fees from temporary placements were up by +11%.

62% of group net fees were generated outside the United Kingdom.

Profit before tax, before exceptional items (27 million Pounds Office of Fair Trading fine in 2009 currently under review) was up by +60% from 30.4 million Pounds in H2 2009 to 48.6 million Pounds in H2 2010. After exceptional items, profit before tax was up from 3.4 million Pounds in H2 2009 to 48.6 million Pounds in H2 2010.

In the United Kingdom and Ireland, net fees were up by +1% from 121.5 million Pounds in H2 2009 to 123.1 million Pounds in H2 2010. Operating profit was down by -66% from 6.2 million Pounds in H2 2009 to 2.1 million Pounds in H2 2010.

Net fees increased by +16% in the permanent placement business.

In the temporary placement business net fees declined by -7% due to its greater weighting to the public sector markets, despite temporary placement net fee growth in the private sector of +18%. The conversion rate declined from 5.1% to 1.7% reflecting a modest increase in the operating cost base as a result of dual-running costs of the back office automation project and modest cost inflation.

Overall net fee trends have continued to be stable against both the previous six month period and the prior year. In the private sector, Hays saw a return to strong growth with net fees increasing by +27% versus prior year.

The recovery has been broad-based with notable growth in the Accountancy & Finance, IT, Corporate Accounts and City-related business. In the Corporate Accounts market and the group has won a number of important new contracts including American Express, Goldman Sachs and RBS in the period.

In the public sector business, net fees have decreased by -36% versus prior year, and are now down -45% from peak levels. The front-line businesses have been relatively more resilient, with net fees down -7% versus prior year. The public sector Back Office and Construction & Property businesses continue to face difficult market conditions, with net fees now down around -60% from peak levels.

The UK public sector business currently represents 26% of UK net fees and 9% of group net fees.

Consultant headcount in the United Kingdom & Ireland decreased by -7% during the half. The group expects to maintain consultant headcount at broadly similar levels in the second half of the year. The back office automation project is substantially complete and hays are now moving a number of administrative processes to India.

In Continental Europe and the rest of the world (RoW), net fees were up by +30% from 79.1 million Pounds in H2 2009 to 102.5 million Pounds in H2 2010. At constant currency, net fees were up by +33%.

Continental European and RoW operating profit was up by +96% from 6.8 million Pounds in H2 2009 to 13.3 million Pounds in H2 2010. At constant currency, operating profit was up by +114%.

The difference between actual growth and like-for-like growth was mainly due to the modest depreciation in the Euro. The conversion rate increased from 8.6% to 13.0% during this period due to the strong net fee growth and the return to profitability in the majority of countries across the region.

The German business, representing 50% of the division's net fees and most of the division's profit, recorded a +38% (at constant currency) increase in net fees versus prior year.

Demand in Germany accelerated through the half as net fees in each of the contracting, temporary placement and permanent placement businesses returned to pre-downturn levels during the second quarter. Hays's strategy of diversifying the German business into Accountancy & Finance, Construction & Property, Sales &Marketing, Legal and Pharma, continues apace with these businesses collectively accounting for 25% of total net fees in the period.

In other businesses in this division, covering 21 countries, Hays saw broad-based and accelerating net fee growth in the half. In France, the second largest country in the division, the group recorded +18% (at constant currency) net fee growth versus prior year with momentum building through the half.

Brazil, now the third largest country in the division, recorded an exceptional +60% (at constant currency) net fee growth and the group recorded net fee growth in excess of +40% (at constant currency) in a further seven countries, with Austria, Brazil, Denmark and Poland recording new highs during the half compared to their pre-recession peaks.

Consultant headcount increased by +12% during the half with additions across most countries in the region, led by an +11% increase in Germany and +30% increase in Brazil. The outlook for the second half of the year remains strong.

Alistair Cox, Chief Executive of Hays, said "our performance this half has been very encouraging with profit up almost +50%. 18 countries around the world grew net fees by more than +25% (at constant currency), showing the depth and breadth of momentum across the business. Our outlook remains positive across nearly all of the markets in which we operate."

"We continue to invest for growth and have increased our International consultant headcount by +13% this half, with further increases planned for the next six months. Our IT investment projects are now substantially complete and our focus has moved on to fully utilising these systems to drive productivity, efficiency and customer service."

"We opened businesses in Mexico and the United States in the second quarter, bringing the total number of country operations to 30. With almost two thirds of our net fees now generated outside the UK the business is well placed to capitalise on the excellent long term structural growth prospects ahead."

In early trading Hays's shares were up by 2.33% to 122.80 Pence.

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