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Hays announces 30% profit growth in H1 report

EXCELLENT OPERATING LEVERAGE DRIVES 30%(1) PROFIT GROWTH FROM STRONG 10%(1) NET FEE GROWTH

Six months ended 31 December
(In &pound's million)

2014

2013

Actual
growth

LFL(1)
growth

Net fees

383.9

363.4

6%

10%

Operating profit

81.5

66.7

22%

30%

Conversion rate

21.2%

18.4%

280bps

Cash generated by operations

78.5

59.9

31%

Profit before tax

77.3

62.5

24%

Basic earnings per share

3.64p

2.90p

26%

Dividend per share

0.87p

0.83p

5%

More highlights

•     Good Asia Pacific net fee growth of 8%(1), operating profit up 7%(1)

-   Australia returned to growth with net fees up 5%(1), driven by Perm up 13%(1)

-   Strong broad-based 13%(1) growth in Asia, delivering record net fees and operating profit

•     Good 9%(1) net fee growth in Continental Europe & Rest of World drives excellent 21%(1) operating profit growth

-   Germany net fees up 7%(1), France up 11%(1) and Canada up 21%(1)

-   16 countries delivered net fee growth of over 10%(1), including Poland, Spain and Switzerland

•     Consultant headcount up 9%(5) year-on-year as we quickly invested where markets and outlook were supportive

•     On 4 December 2014, Hays acquired 80% of Veredus Corp., a US pure-play IT staffing company, for an initial consideration of approximately $44 million (c.&pound29 million)

•     Growth in EPS of 26%, reflecting excellent operating profit performance and lower effective tax rate

•     Strong cash performance, with 96% conversion of operating profit into operating cash flow

•     Interim dividend increase of 5%, in line with our strategy to build full year cover towards 3.0x earnings

Commenting on the results Alistair Cox, Chief Executive, said:

"This is an excellent first half performance, driven by an acceleration in the permanent recruitment market, as candidate confidence continued to improve in many countries.

Conditions remained supportive in most markets and we rapidly invested in headcount to deliver strong fee growth alongside profit leverage. As a result 19 countries delivered record first half net fee performances, including the key businesses of Germany, France, Canada and Japan, and Australia returned to growth. In the UK we grew net fees by 13%(1), where our investment in headcount, focus on improving consultant productivity and the on-going benefits of our largely automated back office platform, drove excellent profit leverage as 71%(1) of incremental net fees converted into operating profit.

This combination of profit leverage and targeted revenue investment is key to how we manage the company. In addition, through the half we continued to make significant progress against each of our operational and strategic objectives, notably the acquisition of Veredus in the US which gives us a significant platform in the world's largest recruitment market.

Looking ahead we exit the first half in a position of strength and we are confident in our outlook. We have the scale, diversity, people and technology to capture the many long-term opportunities available to us, as well as driving our profits along the way."

(1)  LFL (like-for-like) growth represents organic growth of continuing operations 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.

(3)  Exchange rate as at 23 February 2015: &pound1 / &euro1.3643 &pound1 / AUD1.9815.

(4)  Average consultant headcount for the six months ended 31 December 2014 compared to the average consultant headcount for the six months ended 31 December 2013.

(5)  Excludes the impact of the Veredus acquisition.

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