UK&I net fees up 3% in Q2 2019 for Hays
Hays has released its results for the second quarter, ended 31st December 2018.
In the second quarter, ended 31st December 2018, Group net fees increased 8% on a headline basis and 9% on a like-for-like basis versus the prior year. This represented the group’s 23rd consecutive quarter of year-on-year growth. The relative strength of sterling against the Australian dollar reduced its reported net fee growth. Growth was 9% in both Hays’ temp and perm businesses, which represented 58% and 42% of net fees respectively.
In the quarter, Germany benefitted from two additional trading days versus the prior year, due to one fewer public holiday and the timing of another. Hays estimates that this had a c.3% positive impact in Germany and a c.1% positive impact on Group net fees.
The Group net fee growth exit rate was broadly in line with the Q2 growth rate. Looking ahead, Easter falls entirely in Q4 FY19, while last year it was evenly split between Q3 and Q4. Hays expects this will have a c.1% benefit to its net fees in Q3 FY19, with a corresponding c.1% negative impact in Q4 FY19.
Exchange rate movements remain a material sensitivity to the Group's reported profitability. If it re-translates FY18 profits of £243.4m at 11th January 2019 exchange rates (AUD1.7822 and €1.1209), Hays currently estimates a negative c.£1m operating profit currency headwind for FY19. This represents a negative c.£4m reversal from the position at its preliminary results on 30th August 2018.
Alistair Cox (pictured), chief executive, said, "We have delivered another good quarter of broad-based growth, with net fees up 9% and 17 of our 33 countries growing above 10%. Against increasingly tough comparatives, our International businesses grew net fees by 11%. Encouragingly, Germany, our largest market, delivered a strong 15%, and ANZ recorded its 18th consecutive quarter of growth. RoW continued to perform strongly, with excellent growth in China and Canada, and strong growth in the USA. Our UK&I business produced another solid performance with 3% net fee growth, despite continued economic uncertainties.
“While activity levels at the start of the New Year will be an important driver of the Group's second half performance, and we remain mindful of macroeconomic conditions, the outlook is good across most International markets. We continue to invest in key structural growth markets like Germany, the USA and Asia, capitalising on the clear opportunities we are seeing. Our diverse and balanced global business, together with our highly experienced management teams, mean we look to the future with confidence."
Net fee growth in the United Kingdom & Ireland (UK&I) was 3%, led by Hays’ public sector business, which represents 28% of UK&I net fees, up 12%. Although underlying public sector activity has improved slightly, this growth was in part due to easier comparatives following the negative impact of IR35 changes in the public sector, implemented in April 2017. Net fees in its private sector business, 72% of UK&I net fees, were flat with market conditions remaining broadly stable.
Both Hays’ temp and perm businesses were solid, growing net fees by 4% and 3% respectively. Growth in public sector temp was 9%, with private sector temp up 1%. In perm, public sector net fees grew strongly, up 18%, while the private sector was flat.
All regions traded broadly in line with the overall UK business, with the exception of the South West & Wales and the North West, up 14% and 9% respectively, and Scotland and the South East, down 15% and 8% respectively. Hays’ largest UK region of London grew by 3%. In Ireland, its business delivered another good performance, with net fees up 6%.
At the specialism level, IT delivered strong growth in net fees, up 13%. Accountancy & finance and office support grew by 3% and 2% respectively. Construction & property fell 1%, and education continues to be impacted by tough market conditions, with net fees down 10%.
Australia & New Zealand (ANZ) delivered another good quarter with net fees up 8%, despite increasingly tough comparatives. This represented its 18th consecutive quarter of growth. Growth in Hays’ temp business, which represented 68% of its ANZ net fees, was strong at 11%, while growth in its perm business continued to be subdued at 1%. Private sector net fees, which represented 64% of ANZ, grew by 7%, with public sector net fees up 11%.
Australia delivered another strong quarter of net fee growth, up 10%. Market conditions overall remain favourable, and growth was broad-based across most States. Hays’ largest regions of New South Wales and Victoria, representing 56% of Australia net fees, were both up by 10%. Queensland grew by 12%, with South Australia up 9% and ACT by 11%. Western Australia fell by 2%.
At an Australian specialism level, net fee growth in IT of 30% was strong, and office support grew by 13%. Net fees in construction & property, Hays’ largest business in Australia, declined by 4%, and accountancy & finance fell 5%. New Zealand trading (which represented c.5% of ANZ net fees) continued to be tough, and net fees fell 21%.
Hays’ largest market of Germany delivered another strong quarter with 15% net fee growth (underlying c.12%(1) adjusted for working days), against increasingly tough comparatives.
Hays’ temp & contracting business, which together represented 84% of Germany net fees, grew by 13%. Contracting, which represented 57% of Germany net fees, grew 5% and temp, 27% of net fees, delivered growth of 32%. Its growth in perm continued to be strong, up 26%.
Its largest specialisms of IT and engineering both grew by 11%. Growth in accountancy & finance was again strong at 28%, as was construction & property, up 21%. Sales & marketing grew by 17%.
Our Rest of World (RoW) division, encompassing 28 countries, delivered strong net fee growth of 10%, including eight country net fee records. 15 countries grew by more than 10%.
Europe-ex Germany produced good growth of 6%, despite increasingly tough year-on-year comparatives. France, its largest RoW market, and Spain both delivered record net fee quarters, growing 3% and 19% respectively. Poland also grew strongly at 16%, however Belgium was tough and net fees fell 14%.
Asia delivered a strong performance overall, with net fees up 18%. China, Hays’ third largest RoW country, produced a record quarter and grew by 33%, which includes Hong Kong up 41%. Japan had a tougher quarter and was down 6%, although Singapore returned to growth with 25%.
Net fee growth in the Americas was strong, up 15%. The USA, its second largest RoW country by net fees, grew by 10% while Canada delivered an excellent 28%. Brazil declined 2%, and Mexico remains a tough market, with net fees down 20%.