APAC net fees up 11% YoY in Q4 2017 for Hays
Hays has released a trading update for the fourth quarter ended 30th June 2017.
In the fourth quarter, group net fees increased 15% on a headline basis and 7% on a like-for-like basis against the prior year, its 17th consecutive quarter of year-on-year growth. The difference between headline and like-for-like growth was primarily the result of the significant appreciation of the Euro and the Australian Dollar against Sterling. Looking forward to FY18, exchange rate movements remain a material sensitivity to the Group's reported profitability.
Q4 had two fewer trading days versus the prior year due to the timing of Easter, which this year fell entirely into our fourth quarter. This negatively impacted activity levels in the major temp and contractor businesses, most notably Germany, Australia and the UK. In addition, Germany also had one fewer trading day in the quarter. This had an estimated 2% negative impact on Q4 Group net fee growth, which offsets the working day benefit seen in Q3. The estimated negative impact on a regional level was c.2% in Asia Pacific, c.3% in Continental Europe & RoW (including c.5% in Germany) and c.2% in the UK & Ireland.
Once the impact of trading days is taken into account, Hays estimates the exit rate for Group net fee growth to be broadly in line with the underlying performance of the quarter as a whole.
The temp business, which accounted for 58% of Group net fees in the quarter, grew by 6% and the underlying temp margin was broadly stable versus the prior quarter. Net fees in the Perm business increased by 7%.
For the financial year ended 30th June 2017, Hays expects operating profit to be marginally ahead of the current market expectations, which it understands to be £209.5 million.
In Asia Pacific, which represented 25% of Group net fees, Hays delivered strong growth of 11%.
In Australia & New Zealand net fees were up 12% (underlying growth of c.14% adjusted for working days). The temp business, which represented 66% of net fees in the quarter, posted a quarterly record performance and was up 11%. Perm net fees increased 14%.
Australia continued to delivered double-digit growth, up 13%, led by the private sector business, up 16%. Growth was uniform and broad-based across most regions and specialisms, as it continued to proactively invest in consultant headcount. Its largest regions of New South Wales and Victoria, which account for 56% of Australia net fees, were up 10% and 16% respectively and it continued to see strong growth in Queensland and Western Australia, where net fees were up 14% and 30% respectively. ACT (Canberra) also delivered a strong performance, up 10% driven by continued strength in its public sector business, up 8%.
At the specialism level, Hays delivered strong 10% growth in construction & property, its largest business in Australia. Accountancy & finance grew 14%, office support was up 8% and IT continued to perform strongly, up 19%(1). Net fees in New Zealand decreased 2%.
In Asia, which accounted for 22% of the division, net fees grew 6%, partially due to easier comparators. China, its second largest business in Asia, delivered excellent growth, up 32% while Hong Kong grew 22% and Malaysia was up 39%. Net fees in Japan were down 8% and Singapore declined by 9% largely due to continuing challenging conditions in the banking market.
Alistair Cox (pictured), chief executive, said, "We have ended our financial year with a record quarterly net fee performance and expect full year operating profit to be marginally ahead of the current market expectations(4). Additionally, the excellent cash position we have delivered enables the Board to consider increasing shareholder returns in line with our dividend policy. Our International businesses continued to be the key drivers of growth. Europe delivered strong results, led by an excellent performance in Germany, where we have increased consultant headcount by over 20% during the year. Growth in Australia remained strong and was broad-based across all states and specialisms. The underlying trends in the UK remained sequentially stable, with modest improvements in the private sector offset by a tough public sector market.
“Looking ahead, conditions remain good in the vast majority of our international markets. In the UK, market conditions remain stable overall. The scale, balance and diversity of the business we have built is unrivalled in our industry and our focus remains to deliver sector-leading profits and strong cash generation. These strengths, combined with a strong balance sheet and our world-class, highly experienced teams around the world, stand us in good stead and mean we continue to look to the future with confidence."
In the United Kingdom & Ireland, which represented 25% of the Group, net fees decreased 5% (underlying decrease of c.3% adjusted for working days) although remained broadly sequentially stable. Net fees in its private sector business, representing 77% of the division, were down 1% as modest signs of improvement continued and it exited the year with moderate underlying growth. This was particularly evident in the perm business, which was flat in the quarter. Temp decreased 9% as it was negatively impacted by fewer trading days, compounded by continued tough market conditions in the public sector and uncertainties created by the recent implementations of the IR35 regulations. Overall, public sector net fees were down 17%.
All regions traded broadly in line with the overall UK business, with the exception of London, where net fees were down 9% as conditions remained challenging, and the South West & Wales, where net fees grew 2%. In Ireland, Hays’ business delivered another excellent performance, with net fees up 26%.
At a specialism level, accountancy & finance, its largest business in the division, was down 4%, while net fees in construction & property and office support decreased 1% and 5% respectively. IT was down 16% as it continued to be impacted by the sharp decline in the public sector market.
In Continental Europe & RoW, Hays’ largest division which represented 50% of Group net fees, it delivered another quarter of strong growth, with net fees up 11%. In Germany, net fees grew 16%(underlying growth of c.21% adjusted for working days), with strong growth in its temp & contractor business, up 14% and excellent 26% growth in perm. Net fees in its core IT & engineering business increased 15% and within its newer specialisms accountancy & finance grew 19% and life science was up 27%.
The rest of Continental Europe delivered 10% growth, with 10 countries growing by over 10%, including Spain, Poland, the Netherlands and Russia. France, the second largest business in the division, delivered another strong, broad-based performance, up 14%, its eleventh consecutive quarter of double digit growth. Hays’ top two specialisms in France, accountancy & finance and construction & property grew net fees by 32% and 23% respectively.
In the Americas net fees grew by 1%. Within this, the USA was up 6% while net fees in Canada decreased 7% mainly due to tough comparators in the prior year. In Latin America, while Chile was up 20%, net fees in Brazil and Mexico declined 2% and 10% respectively.