30 March 2017

Hays 2015/16 results: Germany surges, UK and Asia Pacific marking time

Any smart recruitment agency owner or investor in the recruitment industry keeps an eye on what’s happening at Hays. As a London-listed specialist recruitment company Hays has operations in 33 countries across three divisions (UK & Ireland, Continental Europe & Rest of the World, Asia Pacific) and has consistently been one of the most profitable recruitment companies in the world, in terms of converting net fees to operating profit. 
 
The Hays plc annual report for 2016 covers the 1 July 2015 – 30 June 2016 financial year and is available for download here.
 
Here’s a summary of the data and commentary points that I found the most interesting along with a comparison to the key data from the same reporting period, two years and four years ago, respectively:
 
Table 1

 
Result for period 1 July – 30 June
24 month change 2014 - 2016
m = million
2012
2014
2016
Global Net fees
£734 m
£724.9 m
£810.3 m
+11.9%
Temp net fees
£414.0 m
(56% of total)
£427 m
(59%)
£470 m
(58%)
+10%
Perm net fees
£320.0 m
(44% of total)
£297 m
(41%)
£340.3 m (42%)
+14.5%
Global Operating Profit
£128.1 m
£140.3 m
£181 m
+29.1%
 
 
 
 
 
Asia Pac consultants
1,112
1,055
1,210
+14.7%
UK/Ire consultants
1,934
2,157
2,024
-6.1%
Europe/RoW consultants
1,967
2,145
3,034
+41.4%
 
 
 
 
 
Asia Pacific net fees
£242.2 m
£173.9 m
£176.1 m
+0.1%
APAC Operating profit
£90.9 m
£49.7 m
£50.2 m
+0.1%
 
 
 
 
 
UK & Ire net fees
£225.3 m
£246.9 m
£271.7 m
+10.1%
UK & Ire operating profit
-£6.5 m
£26.2 m
£52.1 m
+99%

Table 2

 
Asia Pacific* largest specialisms by net fees
2013/14 Actual Net Fees AUD$#
% of total Asia Pacific net fees
2015/16 Actual Net Fees AUD$#
% of total Asia Pacific net fees
1.
Construction and property
$66m
21%
$67m
21%
2.
Accountancy & finance
$50m
16%
$44m
14%
3.
Office support
$35m
11%
$35m
11%
4.
IT
$31.5m
10%
$35m
11%
5/6.
Resources and mining
$10m
7%
 
 
6/5.
Sales & marketing
 
 
$19m
6%

* Asia Pacific (by percentage of net fees for year ending 30 June 2016) comprises: Australia 69%, Japan 9%, New Zealand 7%, China 6%, Singapore 4%, Hong Kong 4%, Malaysia 1%
# Using sterling/AUD exchange rate on 30 June, 2016 of £1 = AUD$1.80
Overall note re year-on-year comparisons: Exchange rate movements decreased net fees and operating profit by £16.4 million and £4.5 million respectively, primarily as a result of a material depreciation in the average rate of exchange of the major currencies to which the Group has exposure versus sterling, most notably the Australian Dollar and the Euro
 
Understandably the Hays board are pleased with the continued acceleration in global sales and profit after the relatively modest gains achieved across the 2012 – 2014 period. Especially positive was the continued year-on-year like-for-like net fee growth of 7% (2016), 9% (2015), 5% (2014) and the critical metric of Group Conversion Rate (operating profit divided by net fees) which continued its steady climb to 22.3%; up from 21.5% in 2015 and 19.4% in 2014.
 
In 2016 Germany net fees increased 13% on the 2015 result, (2016 net fees of £174m) to now rival the whole Asia Pacific region (£176m) in size, powered by 24% rise in perm fees and a 12% growth in temp and contracting margin. The consultant headcount in Germany rose 11%, pointing to significant near-to-medium term optimism about the growth opportunities in the German market.
 
Across the Channel in the UK & Ireland business was more subdued with net fees flat year-on-year but profit grew from £45.7m in 2015 to £52.1m in 2014 on the back of a 8.8% decline in consultant headcount. Ireland was the star performer of the division with net fees up 24%.
 
By specialism, Office Support delivered the best growth in the UK & Ireland (6%), followed by IT (3%) while at the other end of the spectrum, Banking sunk by 12%. The more positive news is that over the past three years, the UK and Ireland business has converted over 90% of incremental net fees into operating profits, way ahead of company historical norms.
 
Although overall Asia Pacific net fees decreased, they increased 4% on a like-for-like basis and operating profit increased 8% on a like-for-like basis. The difference between actual growth and like-for-like growth rates is primarily the result of the depreciation in the average rate of exchange between the Australian Dollar and Japanese Yen versus sterling during the year, which reduced net fees in the division by £9.4 million and operating profits by £3.4 million.
 
Other interesting snippets from the annual report include:
  • Hays has 9,214 global employees (8,237 in 2014) including 6,268 consultants, (5,357 in 2014) in 252 offices (237 in 2014) in 33 countries
  • Gender split (male/female): PLC board members 6/3, Senior Management 46/17 (73%/27%), employees 3528/5686 (38%/62%)
  • Employee engagement was 83%; a slight dip on the 84% recorded in 2015
  • IT (20%), Accountancy & Finance (15%), Construction & Property (15%), Office Support (8%) and Engineering (8%), are the largest fee earning specialisms, representing 66% of Group net fees
  • 83% of group net fees are earned from the private sector and 17% from the public sector
  • In 2016 Hays filled 220,000 temp and contract assignments and 67,000 permanent jobs
  • There were 2,800 internal promotions in 2016 and 59 international employee transfers
  • Like-for-like net fees per consultant per annum grew to £128k (AUD$230k) from £127k (AUD$228k) in 2015
  • Net debt eliminated during the year finishing the year with a net cash balance of £36.8 million, ahead of expectations 
  • In the 2016 Glassdoor Employees’ Choice Award (UK) Hays ranked second overall in the Best Places to Work, and the top rated recruiter listed.
  • Net fee growth in Australia was 5% with public sector business was up 18%, while the private sector declined by 2%. Consultant headcount in Australia & New Zealand increased by 5%
  • Net fees in New Zealand were flat
  • 4,000 days of training were delivered across the global business, “designed to make our consultants expert in their jobs and to further develop our management teams to run ever-larger businesses.”
The Hays formula for success is very simple:
 
“Hire the very best people to work for Hays, provide them with world-class training and career development opportunities, equip them with state-of-the-art technology tools to be better at their jobs than their competitors and reward them based on their performance. All our investments are designed so that our teams can better help our clients find the scarce talent they need and help millions of candidates we are connected to secure the perfect next role in their career.”
(Hays Annual Report and Financial Statements 2016, page 15)
 
While it may be a simple formula, Hays are very aware of the downside of having high performing people: the attractiveness of these high performers to competitors and the potential personal ownership ambitions of these high performers in an industry that can deliver phenomenal returns on capital investment. 
 
Key to our growth and continuing success therefore will remain our ability to hire, train, motivate and retain the best people in our industry. That’s why people risk is one of the key challenges we face. It’s why we are so focused on the global mobility of our people, moving high performers from established businesses to help grow and develop newer ones.
 
“We address the risk of losing key people through industry-leading training and development programmes, succession planning and incentive schemes. Over the years, we have invested to build the resources and infrastructure to manage these things well but we will continue to invest in upgrading this capability.”
 
(Hays Annual Report and Financial Statements 2016, page 15)
 
Hays: What an outstanding example of operational efficiency they are; only a fool would dismiss them or take them lightly.
 
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2 comments:

  1. Hays are a consistently excellent business - forward thinking and well run. I'm still grateful for the sales training and network I learned there (was there for 5-6 years)

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    Replies
    1. I agree, Sean. You might be interested in this excellent interview with Global CEO, Alistair Cox, that was published in The Telegraph last week http://www.telegraph.co.uk/business/2017/04/01/boss-recruitment-giant-hays-need-right-person-not-person/

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