Hays reveal UK & Ireland net fee growth of 13% in Q1
Growth in net fees for the quarter ended 30 September 2014 (Q1 FY15)
(versus the same period last year)
Continental Europe & Rest of World
United Kingdom & Ireland
· Good Group net fee performance with year-on-year growth(1) in every regionand in each of our largest three businesses - Australia, Germany and the UK
· Strong Perm growth of 12%(1) and continued good Temp growth of 7%(1)
· Strong, broad-based growth of 13%(1) in the UK & Ireland, driven by excellent Perm growth of 20%(1). Major specialisms of Accountancy & Finance, Construction & Property and IT all grew by over 15%(1)
· Continued good growth of 8%(1) in Continental Europe & Rest of World, including 7%(1) growth in both Germany and France. Elsewhere in the region, 13 countries delivered growth of 10%(1) or more
· Good growth of 6%(1) in Asia Pacific. Australia returned to growth for the first time in two years with net fees up 2%(1), driven by a strong Perm performance. Asia delivered further strong growth of 13%(1)
· Group consultant headcount was up 4% during the quarter and 8% year-on-year
Commenting on the Group's performance, Alistair Cox, Chief Executive, said:
"We have made a good start to the new financial year and have grown in all regions around the world. Importantly each of our three largest businesses, Australia, Germany and the UK, grew simultaneously for the first time in nearly four years. Elsewhere many European, Americas and Asian markets continued to improve and 11 of our businesses delivered record quarterly net fees, including key businesses such as Canada, Switzerland and Germany.
While we are mindful of the risks our world faces today, most of our markets continue to improve and we are focused on capitalising on the opportunities this presents us. This means continuing to invest to make our business more productive, while simultaneously increasing consultant capacity where market demand dictates. Having built the largest global platform in our industry, we are ideally positioned now to take advantage of these improved market conditions."
In the first quarter ended 30 September 2014 net fees increased 4% on a headline basis and 9% on a like-for-like basis(1) against the prior year. The difference between actual and like-for-like net fee growth rates was primarily the result of a material depreciation of both the Australian Dollar and the Euro against Sterling. If the rates of exchange of the Group's key operating currencies remained as at 6 October levels through the remainder of the year, it would reduce operating profit by c.£7m versus FY14.
The Temp business, which accounted for 58% of Group net fees in the quarter, increased by 7%(1) and the underlying temp margin(2) was broadly stable. The Perm business increased by 12%(1).
The exit rate of overall Group net fee growth was broadly in line with the quarter as a whole, with no significant differences by region.
Consultant headcount was up 4% in the quarter and 8% year-on-year as we invested selectively across the Group where market conditions and outlook were supportive.
In the normal course, on a like-for-like basis we expect the percentage rate of growth in operating profit for the year to be between 2x and 3x the percentage rate of growth in net fees.
In Asia Pacific, which represented 24% of Group net fees, net fees increased by 6%(1).
In Australia & New Zealand we delivered net fee growth of 4%(1). Temp, which represented 66% of net fees in the quarter, increased by 1%(1). Encouragingly we delivered Perm growth of 10%(1).
In Australia net fees increased by 2%(1), within which the major regions of New South Wales and Victoria were up 2%(1) and Queensland and Western Australia were flat(1). Growth returned in the technical specialisms where Construction & Property, our largest specialism in Australia, grew by 9%(1), IT grew by 3%(1) and Resources & Mining increased by 11%(1). Accountancy & Finance remained tough and was down 14%(1). In New Zealand, we saw excellent growth of 29%(1).
In Asia, which accounted for 20% of the division, net fees increased by 13%(1). Japan, our largest business in Asia, delivered strong growth of 12%(1). Hong Kong and China delivered strong growth of 13%(1) and 16%(1) respectively. Across the region, record quarterly net fee performances were reported in both China and Malaysia.
Consultant headcount in the division was up 5% in the quarter and 7% year-on-year. Consultant headcount in Australia & New Zealand was up 4% in the quarter and 2% year-on-year, and in Asia was up 7% in the quarter and 17% year-on-year.
Continental Europe & Rest of World ('RoW')
In Continental Europe & RoW, our largest division which represented 41% of Group net fees, we delivered continued good growth of 8%(1). Net fee growth of 7%(1) in Germany was good, driven by solid growth of 5%(1) in our core IT & Engineering business and continued strong growth in our newer specialisms including Accountancy & Finance which grew by 13%(1). Germany Temp net fees increased by 7%(1) and Perm by 1%(1).
Net fees increased by 10%(1) in the rest of the division, which is primarily a Perm business. Within this, 13 countries delivered growth of 10%(1) or more, including key businesses such as Switzerland, Spain and Canada, the latter of which delivered excellent 31%(1) growth. France, our second largest business in the division, delivered another good performance with net fees up 7%(1).
Consultant headcount in the division was up 6% in the quarter and 9% year-on-year.
United Kingdom & Ireland
In the United Kingdom & Ireland, which represented 35% of Group net fees, we delivered strong growth of 13%(1). Temp delivered good growth of 7%(1) and Perm delivered excellent growth of 20%(1) as candidate confidence remained strong. Activity levels were broad-based and we delivered excellent performances in East of England, Midlands, the North, London (ex City) and South Coast, all of which grew by more than 20%(1). Ireland delivered solid growth of 5%(1).
Accountancy & Finance, our largest specialism, delivered excellent growth of 21%(1), within which our Senior Finance business grew by 19%(1). IT delivered excellent growth of 22%(1) and Construction & Property performed strongly, up 15%(1). Education, a predominantly public sector business, delivered excellent growth of 26%(1) and recorded an all-time record performance in September.
Our private sector business, which represented 72% of the division's net fees, and our public sector business both delivered strong growth of 13%(1).
Consultant headcount in the division was up 2% in the quarter and 9% year-on-year as we invested to capitalise on the clear, continued, strong opportunities for growth.
Cash flow and balance sheet
Cash performance in the quarter was in line with expectations, with net debt at the end of September at c.£60 million (30 June 2014: c.£63 million, 30 September 2013: c.£97 million). Subject to shareholder approval, the Group's final dividend for the year ended 30 June 2014 will be paid on the 14 November.
(1) LFL (like-for-like) growth represents organic growth at constant currency.
(2) The underlying Temp gross margin is calculated as Temp net fees divided by Temp gross revenue and relates solely to Temp placements in which Hays generates net fees and specifically excludes transactions in which Hays acts as agent on behalf of workers supplied by third party agencies and arrangements where the Company provides major payrolling services.