16 June 2016

Hays: Still a force but Japanese invaders pose new threat

Last week I wrote about the recognition Hays Australia recently received as a top performing business (using the measure of return on shareholders’ funds).

This week I have a closer look at the trends of the local Hays business over the past five years. The information I have listed below is for the combined Australia and New Zealand operations, as separate reporting of the two countries is not publically provided by Hays. The year listed is the financial year ie 1 July (the previous year) until 30 June (of the year listed).

All numbers are an approximation based on information in Hays Plc Annual Reports (Asia Pacific Region) and other public releases of Hays’ financial data as reported by industry news service ShortList.  

Key Indicator 2016@ 2015 2014 2013 2012 2011
Net fees^ AUD $million (i) 275 270 255 266 321 291
Operating profit AUD $million (ii) 87 85 81 87 115 105
Consultant headcount # 800 775 705 720 840 815

^ net fees is the aggregation of permanent placement revenue and net temp/contractor margin

(i) represents the AUD$/GBP£ exchange rate used in the Hays public release of Australia & New Zealand half year results each year

(ii) I have used the Australia & New Zealand half year operating profit as a ratio of reported net fees for the half year as the constant ratio for the full financial year.

# calculated on consultant headcount data changes as listed in the Hays Annual Report using the reference point of the Aus & NZ combined headcount of 706, as at 30 June 2010 (ShortList, 3 September 2010).

@ 2016 results and consultant headcount represent my estimate based on the July – December 2015 half year results reported in ShortList (25 February 2016)

Year
Hays Annual Report commentary (edited) specific to Australia & NZ
2015
Aus net fee growth of 7%. Net fee growth of 9% in NZ. In NSW and Victoria (52% of Aus net fees). Net fees were up 15% and 5% respectively. Qld was up 3%, WA was down 12%. The remaining smaller states delivered excellent growth, notably ACT (+53%). Consultant headcount in Aus & NZ increased by 10%.
2014
Aus net fee decline of 13%. Temp (70% of total net fees) down 9%. Perm down 24%. Depreciation in the rate of exchange between the Australian Dollar and Japanese Yen versus Sterling reduced net fees in the division by £26.4 million and operating profits by £9.2 million. Consultant headcount in Aus & NZ down 2% year-on-year.
2013
Aus net fee decline of 16%. NZ net fee growth of 4%. Aus temp down 10% and perm down 25%. In NSW and Victoria (47% of total Aus business) net fees decreased by 15%. WA and Qld down 21%. Aus & NZ consultant headcount decreased by 14%.
2012
Aus & NZ net fees up 10%. Temp up 18%. Perm down 1% with an excellent performance in the resource-based regions of WA and Qld offset by increasingly tough market conditions in NSW and Vic. NZ up 34%. The public-sector business, which accounts for 24% of net fees in A & NZ was up 13%. Consultant headcount up 3%.
2011
Aus & NZ net fees up 27%. Temp up 23%. Perm up 33%. Especially strong in the resource-based regions of WA and SA and notably in Accountancy & Finance, IT and Resources & Mining. Public sector accounts for 23% of net fees in Aus & NZ, had fees increase 14%. Consultant head count up 15%.

The available data demonstrates that Hays benefited enormously from the resources boom in Australia; capitalising on a strong existing office and specialism infrastructure.

Since the end of the resources boom gross profit for Hays has, firstly, plummeted, bottomed out then slowly begun rising again. The big difference this time is that the glory days of a fee conversion rate (the percentage of gross profit that turns into operating profit) in the 40s (47.9% was reported in ShortList on 27 February 2008 for the previous half year) are long gone. It’s likely this year’s conversion rate for Hays Australia and New Zealand will be approximately 31%.

Hays continues to be the most formidable recruitment company in Australia and New Zealand and their profit record is one that no company in our sector has come close to matching. However the aggressive entry into the Australian recruitment market of the Japanese (Recruit Holdings & Outsourcing Inc) could open up a period of more substantial competition than Hays have experienced previously.


Watch this space.

1 comment:

  1. Would be interested to hear more of your thoughts on the Japanese invaders.

    ReplyDelete