Annual Report and Accounts 2008 Building the gl bal leader in specialist recruitment Financial Highlights Year ended 30 June Actual LFL* (In £’s million) 2008 2007 growth growth Net fees 786.8 633.6 24% 19% Operating profit from continuing activities** 253.8 216.1 17% 13% Cash from operations 256.0 232.1 10% Profit before tax 264.4 211.7 25% Profit before tax (before exceptional items)** 249.1 211.7 18% Basic earnings per share** 12.59p 10.19p 24% Dividend per share 5.80p 5.00p 16% Strong like-for-like net fee growth of 19% and operating profit growth of 13%* Earnings per share up 24%** and dividend per share up 16% Excellent cash flow from operations of £256.0 million (101% of operating profit) Strong balance sheet position with net debt of £81.1 million Operational Highlights International business increased net fees and operating profit by 40%* and now represents 42% of Group net fees Temporary placement net fees up 14% and permanent placement net fees up 24%* Performance of UK business impacted by deteriorating market conditions in second half Increased investment in key efficiency projects, including automating back office functions and upgrading our front office technology Net fees £m Profit from continuing activities £m** Basic earnings per share pence** 800 300 15.0 720 270 13.5 786.8 .8 240 3 12.0 640 .6 25 12.59 33 560 6 210 10.5 .0 8.2 216.1 3 3 180 9.0 480 10.19 5 19 150 7. 5 8.69 400 470.6 166.2 .4 404.7 320 120 6.0 6.82 33 1 90 4.5 240 5.29 160 60 3.0 80 30 1.5 04 05 06 07 08 04 05 06 07 08 04 05 06 07 08 Cash from operations £m Dividend per share pence Number of offices 300 10 400 3 9 3 76 270 9 360 3 52 3 240 8 320 26 3 256.0 2.1 3 210 7 280 299 2 180 .1 6 240 3 3 18 150 5 5.80 200 5 161. 5.00 120 4 3 160 4. 90 3 .40 120 3 .00 104.8 60 2 3 80 30 1 40 04 05 06 07 08 04 05 06 07 08 04 05 06 07 08 * LFL (like-for-like) growth represents organic growth for continuing activities at constant currency, pre exceptional items. No adjustment is made for the one additional trading day in 2008. ** continuing activities only, pre exceptional items. The 2004 results represent profit from continuing operations before goodwill amortisation and exceptional items under UK GAAP. United Kingdom* Ireland Areas of Operation Canada Aberdeen Cork Calgary Belfast Dublin Edmonton Birmingham Dun Laoghaire Kitchener Brighton Galway China Mississauga Bristol Limerick Montréal Beijing Cambridge Waterford North York Guangzhou Cardiff A world of opportunity Ottawa Shanghai Edinburgh Toronto Shenzen Glasgow Vancouver Hong Kong Ipswich Leeds Japan Leicester Osaka Liverpool Tokyo London Singapore Luton Manchester Milton Keynes Newcastle Nottingham Reading Southampton Australia Adelaide Brisbane Burwood Camberwell Canberra Chatswood Darwin Geelong Gold Coast Hobart Brazil Hurstville São Paulo Liverpool Rio de Janeiro Melbourne Mt Gravatt Maroochydore Mulgrave Activities by specialism Newcastle North Sydney Parramatta UK & Ireland & NZAus China & HK Japan Singapore Austria Belgium Brazil Canada Rep. Czech Denmark France Germany Hungary Italy Luxembourg Netherlands Poland Portugal Slovakia Spain Sweden Switzerland UAE Perth >10% of country net fees <10% of country net fees St Kilda Road Sydney Townsville Wollongong New Zealand Accountancy & Finance Auckland Construction & Property Christchurch Information Technology Wellington Sales & Marketing Banking Contact Centres Austria Czech Paris Hungary Tilburg Madrid Education Vienna Republic Rennes Budapest Utrecht Sevilla Brno Rouen Valencia Executive Belgium Italy Poland Prague Strasbourg Financial Services Antwerp Bologna Katowice Sweden Toulouse Bruges Denmark Milan Warsaw Malmo Healthcare Tours Brussels Copenhagen Rome Wroclaw Stockholm Human Resources Dendermonde Germany France Luxembourg Portugal Switzerland Legal Gent Berlin Aix en Lisbon Basel Kortrijk Düsseldorf Netherlands Oil & Gas Provence Oporto Geneva Roeselare Frankfurt Amsterdam Bordeaux Zürich Pharmaceutical Wavre Hamburg Breda Slovakia Lille Purchasing Zaventem Mannheim Den Bosch Bratislava United Arab Lyon Munich Eindhoven Emirates Resource Management Key to regions Nancy Spain UK & Ireland Nürnberg Nijmegen Dubai Resources & Mining Nantes Barcelona Asia Pacific Stuttgart Rotterdam Continental Europe & Rest of World Nice Bilbao * Major United Kingdom office locations only. Directors’ Report – Business Review Directors’ Report – Governance Financial Statements 02 Business Overview 36 Board of Directors 59 Independent Auditors’ Report on the 04 Chairman’s Statement 38 Corporate Governance Consolidated Financial Statements 06 Chief Executive’s Review 42 Audit Committee Report 60 Consolidated Financial Statements 16 Operating Review: UK & Ireland 44 Other Statutory Information 63 Notes to the Consolidated Financial 20 Operating Review: Asia Pacific Statements 24 Operating Review: Continental Remuneration Report 87 Independent Auditors’ Report Europe & Rest of World 47 Remuneration Report on the Hays plc Company 28 Financial Review Financial Statements 32 KPIs 88 Hays plc Company Balance Sheet 33 Principal Risks 89 Notes to the Hays plc Company 34 Corporate Responsibility Financial Statements 96 Shareholder Information 97 Directory “Hays plc is the leading global specialist recruitment group. It is the market leader in the UK and Australia, and one of the market leaders in Continental Europe. In 2008, we placed approximately 80,000 people into permanent jobs and found temporary assignments for approximately 300,000 people. The Group employs 8,872 staff operating from 393 offices in 27 countries across 17 specialisms. Our aim is to build the pre-eminent global business in specialist recruitment.” Bob Lawson Alistair Cox Paul Venables Chairman Chief Executive Group Finance Director Hays plc Annual Report and Accounts 2008 1 Directors’ Report – Business Review Business Overview Building the global leader our platform for growth Key market drivers A platform for growth The multiplier effect and Pure play specialist Attractive markets cyclical growth As positions are filled new vacancies recruitment worldwide are automatically created generating a multiplier effect on demand. Hence economic growth has a leveraged impact on our business. £2.5bn revenue with strong long-term Increasing deregulation 393 offices growth drivers Deregulation, particularly in Continental Europe, is opening up new markets for our services, generally making it easier for us to operate and grow. Balanced Business model portfolio replicates Cultural changes Increasing awareness and willingness to use specialist recruitment services in sectors and countries which have 27 countries historically not been familiar with 17 specialisms on global scale with specialist recruitment services. temp & perm low expansion risk Increasing skills shortage Increasing skill shortages means more Market leading Highly cash businesses are using our services positions generative to help fill highly skilled roles. Increasing flexibility demands Increasing demand by employers and employees for flexible employment is driving growth in the temporary placement market. number 1 in UK and Australia with low capital intensity Increasing job velocity Strong cost Strong People are changing jobs more frequently and are creating a control management greater demand for our services. market leading conversion with proven track record rate and flexible cost base underpinned by ‘Hays DNA’ 2 www.haysplc.com Directors’ Report – Business Review Group profile £786.8m Net fees £m Operating profit £m* Net fees 800 300 % 720 42 270 640 240 % % 46 4 3 560 210 % 5 % 3 % 0 480 3 180 % % 29 % % 25 % 17 % 22 400 58 150 % 22 % % 66 % 32.3% % % 65 320 70 % 120 54 71 Conversion rate 75 78 78 3% 240 90 8 160 60 80 30 04 05 06 07 08 04 05 06 07 08 UK & Ireland UK & Ireland £253.8m International International Operating profit* Net fees by specialism % Net fees by division % Accountancy & Finance UK & Ireland Construction & Property Asia Pacific IT 20 Continental Europe 26 Other & Rest of World 8,872 36 Number of employees 58 14 22 24 27 Temporary: Permanent % Private: Public sector % Number of countries 49% 51% 80% 20% Temporary Permanent Private Public 17 Number of specialisms * continuing activities only, pre exceptional items. Hays plc Annual Report and Accounts 2008 3 Directors’ Report – Business Review Chairman’s Statement Hays 2008: an excellent year Hays has achieved another strong financial performance with 24% growth in basic earnings per share* against a weakening economic backdrop. It has also been an exciting year for Hays during which Alistair Cox joined as Chief Executive following Denis Waxman’s retirement. This transition was extremely smooth and, since his appointment, Alistair has built on Denis’s legacy. He has considerably strengthened his Management Board, taken personal responsibility for the United Kingdom & Ireland business and continued the development and diversification of our International business. It has been a year of significant progress for Hays. In the United Kingdom & Ireland we are refining the way we manage the business, automating many processes, improving working practices and upgrading the technology we use. Whilst it will take time for these changes to convert into financial performance, particularly given the current market environment, these actions will considerably strengthen the business for the long-term. Meanwhile, the International business achieved outstanding growth underlining the great opportunities available to Hays worldwide and our capability to capitalise on these opportunities. Very few businesses have achieved such strong growth across so many countries in specialist recruitment. Like all recruitment businesses, we have seen a sharp fall in our share price during the year. Whilst we share the concerns about the short-term economic prospects, the Board is confident that Hays is well positioned to deal with the challenges ahead and will emerge “Our business model from any downturn a more efficient business with an increased market share. has both the flexibility in the short-term to deal Dividend Our dividend policy is designed to support a sustainable dividend across the economic cycle with more challenging whilst also delivering a progressive dividend during periods of growth.