THE ULTIMATE
PEOPLE BUSINESS
Hays plc Annual Report & Financial Statements 2017
Overview
WE ARE LEADING GLOBAL
RECRUITING EXPERTS IN THE WORLD
OF QUALIFIED, PROFESSIONAL AND
SKILLED WORK
The ultimate people business
Hays is powered by our people around the world.
We focus on hiring, training and developing the
best people in our industry.
Financial summary
Another year of good financial progress with net fees
and profits up, strong cash conversion, a material increase
in core dividend and our first special dividend.
Employees
10,000
2016: 9,214
Consultants
6,884
2016: 6,268
Net fee income
£954.6m
2016: £810.3m
Operating profit
£211.5m
2016: £181.0m
As the ultimate people business, everything we do is
focused on placing the right people into the right roles,
assisting our candidates as they build careers, whilst also
helping our clients to find the skilled talent they need.
Permanent jobs filled
last year
Temporary and Contractor
roles filled last year
70,000
2016: 67,000
240,000
2016: 220,000
More information page 25
Conversion rate
22.2%
2016: 22.3%
Basic EPS
9.66p
2016: 8.48p
Profit before tax
£204.6m
2016: £173.0m
Core dividend per share
3.22p
2016: 2.90p
Special dividend per share
4.25p
2016: NIL
More information page 32
More information online:
Our award-winning investor site gives you fast
direct access to a wide range of Company information.
See haysplc.com/investors
Read our views and advice on the world of work.
See haysplc.com/viewpoint
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twitter.com/HaysWorldwide
facebook.com/HaysUK
youtube.com/user/HaysTV
Overview
Strategic report
Governance
Financial statements
Shareholder information
Every day across our business,
10,000 people work with clients and
candidates in 33 countries to power
the world of work.
The balance, scale and diversity of our
platform provides unrivalled breadth
of expertise. It means we can respond
quickly to the needs of our clients,
enabling businesses, their people and
the communities in which they operate
to flourish.
We are Hays.
The ultimate people business.
Contents
Strategic report
A description of our business model,
markets and strategy.
03 Our four-point investment case
04 Balance, scale and diversification
06 Our market
08 Mega trends
16 Chief Executive’s Review
20 Our strategy
22 Our business model
26 Key performance indicators
28 Divisional operating review
32 Financial Review
36 Principal risks
Governance report
How our Board of Directors sets
strategic direction and provides
oversight and control.
42 Chairman’s Statement
44 Board of Directors
46 Leadership
50 Relations with shareholders
51 Effectiveness
54 Accountability
58 Remuneration Report
91 Directors’ Report
96 Directors’ responsibilities
Financial statements
Financial statements for the
Group including a report from
the independent auditor.
98 Independent Auditor’s Report
104 Consolidated Group Financial
Statements
134 Hays plc Company
Financial Statements
Shareholder information
Supporting information for investors.
142 Shareholder Information
143 Financial calendar
144 Hays online
Hays plc Annual Report & Financial Statements 2017
1
OUR BUSINESS IS STRUCTURED
ACROSS THREE DIVISIONS, MADE UP
OF 33 COUNTRIES AND 250 OFFICES
A long-established and diversified worldwide network
Asia Pacific
Offices
50
Continental Europe
& Rest of World
UK & Ireland
Offices
102
Offices
98
Total employees
Total employees
Total employees
1,805
Consultants
1,336
4,737
Consultants
3,600
3,458
Consultants
1,948
Net fees
Net fees
Net fees
£230.9m
£470.8m
£252.9m
24%
of group net fees
49%
of group net fees
27%
of group net fees
33
countries
– Australia
– China
– Hong Kong
– India
– Japan
– Malaysia
– New Zealand
– Singapore
– United Kingdom
– Ireland
– Austria
– Belgium
– Brazil
– Canada
– Chile
– Colombia
– Czech Republic
– Denmark
– France
– Germany
– Hungary
– Italy
– Luxembourg
– Mexico
– The Netherlands
– Poland
– Portugal
– Russia
– Sweden
– Switzerland
– Spain
– UAE
– USA
Temp
Perm
62%
38%
Continental Europe
& Rest of World
More information page 30
Market-leading breadth
and depth of platform
20
specialisms
– Accountancy & Finance
– Construction & Property
– Information Technology
– Life Sciences
– Sales & Marketing
– Banking & Capitals Markets
– Contact Centres
– Education
– Energy, Oil & Gas
– Engineering & Manufacturing
– Executive
– Financial Services
– Health & Social Care
– Human Resources
– Legal
– Office Professionals
– Purchasing
– Retail
– Resources & Mining
– Telecoms
Temp
Perm
56%
44%
UK & Ireland
More information page 31
Asia Pacific
Temp
Perm
55%
45%
More information page 29
Net fees by specialisms
Net fees by contract type
Our strategic focus on building scale in key markets
Specialisms
Countries
2002
2017
10
20
11
33
IT
21%
Accountancy & Finance
15%
Construction & Property 15%
Engineering
9%
Office Support
7%
Other*
33%
Temporary
Permanent
59%
41%
* Major specialisms within Other include: Banking Related (7%),
Life Sciences (5%), Sales & Marketing (4%) and Education (3%).
STRATEGIC
REPORT
A description of our business
model, markets and strategy.
03 Our four-point investment case
04 Balance, scale and diversification
06 Our market
08 Mega trends
16 Chief Executive’s Review
20 Our strategy
22 Our business model
26 Key performance indicators
28 Divisional operating review
32 Financial Review
36 Principal risks
2
Hays plc Annual Report & Financial Statements 2017
Overview
Strategic report
Governance
Financial statements
Shareholder information
OUR FOUR-POINT INVESTMENT CASE
OUR BUSINESS
PHILOSOPHY
CENTRES ON THE
NEED TO INVEST
TO SUPPORT
LONG-TERM
GROWTH WHILST
DRIVING SHORT-
TERM FINANCIAL
PERFORMANCE
In practical terms, this
means we continually focus
on: consultant and business
productivity; strategic
investment where we see
clear opportunities for growth
while maximising profitability;
cash generation and returns
to shareholders.
We believe there are
four simple and compelling
reasons to invest in Hays.
1.
The breadth of our business model
across sector and contract type
– We have built a global platform with
unrivalled scale, balance and diversity.
– We have exposure across Permanent,
Temporary and Contractor recruitment
markets at a scale which is unique
amongst our peers.
– We focus on execution in each of our
local markets delivered by the best people,
sector-leading technology, recruitment
tools and a world-class single brand.
– We have strong and experienced
operational and senior regional
management teams across the Group.
– We focus on developing and delivering
the best services and products for
clients and candidates, meeting their
evolving needs.
2.
Our balanced exposure to
both mature and structural
growth markets
– Many of the 33 countries across our
global platform represent clear structural
growth opportunities, where the use of
agencies such as Hays to source skilled
employees is a relatively new practice.
– 43% of our Group net fees are generated
in these structural growth markets which
include places such as Germany, Latin
America and Japan, where the first-time
outsourcing of the recruitment of skilled
staff is a key long-term opportunity.
– The remaining 57% of net fees come from
more mature markets, such as the UK,
the US and Australia, where the use of
agencies is a long established practice in
the skilled jobs market. In these markets,
activity levels are more driven by the stage
of the economic cycle.
Countries
33
Sectors
20
3.
Our ability to deliver superior
financial performance through
the cycle
– The scale and balance adds relative
resilience to our earnings throughout
the economic cycle and contributes to
the outperformance of our business
versus the peer group.
– We aim for a mix of exposures across
different countries, job types and contract
forms. Despite this existing balance we
remain focused on further diversifying
our earnings and building scale across
our existing global platform.
– Having exceeded £200 million of
operating profit in FY17, we believe we
are well positioned to continue to drive
further material profit growth.
43%
Structural growth
markets
Group net fees
57%
Mature markets
4.
Our potential to generate
significant cashflow and dividends
– As well as our ability to drive material
profitable growth, we are a highly
cash-generative business, with a clear
set of free cash flow priorities.
– These include ongoing investment in the
development of the business, maintaining
a strong balance sheet and delivering a
sustainable and progressive dividend policy.
– Having achieved the targeted core dividend
cover of 3.0x earnings, our core dividend
will now grow in line with EPS.
– We ended the year with a net cash
position of £112 million. As previously
disclosed, it is our intention to distribute to
shareholders any free cash flow generated
over and above £50 million, assuming a
positive outlook.
– Therefore, in addition to a material increase
in core dividend, we also propose a special
dividend of 4.25 pence per share, subject
to shareholders’ approval.
FY17 operating
profit
£211.5m
Earnings
per share
9.66p
Net
cash
£111.6m
Core dividend
per share
3.22p
Hays plc Annual Report & Financial Statements 2017
3
Strategic report
BALANCE, SCALE AND
DIVERSIFICATION ARE
WHAT SETS HAYS APART
AND DRIVES PERFORMANCE
1
Balance
2
Scale
3
Geographic diversification
Unrivalled scale,
balance and diversity...
...the best people, sector-
leading technology and
a world-class brand...
...delivers the best
solutions for clients
and candidates...
4
Sectorial diversification
5
Contract form diversification
...a relatively resilient
financial performance in
tougher economic times...
...and positions the
Group for future growth.
4
Hays plc Annual Report & Financial Statements 2017
Overview
Strategic report
Governance
Financial statements
Shareholder information
THE GLOBAL JOBS MARKET
People building their careers, companies finding the talent
to grow and develop – that’s what Hays is at the centre of.
In 2017 globally we helped over 300,000 people find their
next Permanent job or Contract assignment, and worked with
over 30,000 clients to grow their own businesses by finding
the skilled talent they need.
This is the core of our business. The ways in which we do it may
be changing, as the way people choose to work or the technologies
they use to access the job market or seek to interact with us
naturally evolve.
What remains constant though is the art of matching the right
person to the right job.
1
2
3
4
Mega trends
We identify four mega trends
which are likely to influence the
future shape and direction of the
world of work and therefore how
we manage our business and
develop our strategy.
More, and varied
ways of building
a career
Skills shortages
and businesses’
demands for
flexibility
Structural
market growth
and evolving
client demands
Emergence
of new, and
evolving,
technologies
More on page 8
More on page 10
More on page 12
More on page 14
Hays plc Annual Report & Financial Statements 2017
5
Strategic report
OUR MARKET
SENTIMENT AND CONFIDENCE
LEVELS OF CANDIDATES
AND BUSINESSES ARE OFTEN
INFLUENCED BY THE ECONOMIC
OUTLOOK
The stage of the macroeconomic cycle and outlook,
and prevailing sentiment in each of our markets, have
a direct and often significant impact on activity levels
within our business. This can be both positive and negative,
particularly with respect to the confidence levels of
businesses to invest in hiring, and candidates to move
jobs. We call this ‘job churn’, and it is the primary driver
of activity in the short term.
Asia Pacific
In brief:
– Overall business confidence levels
improved in Australia and the economy
benefited from a ramp up in investment
in the private sector
– China saw further good economic growth as
the country continues its transition towards
a domestic consumption-led economy
– Economic conditions in the rest of Asia
remained broadly resilient
The macroeconomic picture in Australia improved
as the year progressed. This was initially supported
by government spending on public projects and
infrastructure and then followed by a ramp up in private
sector investment, including marginal improvements
in the resources-driven parts of the economy. This led
to a general improvement in business confidence.
Consumer confidence remained stable, despite concerns
over an overheated residential property market, along
with moderate wage inflation and rising cost of living.
Business sentiment in Asia was broadly resilient with good
growth in China and mixed conditions in other markets.
This was despite the fact that the banking sector
continued to be subdued.
More information page 29
Continental Europe & Rest of World
In brief:
– Improving economic conditions in Europe,
no impact from Brexit. Cleared political hurdles
including French elections
UK & Ireland
In brief:
– UK market sentiment was significantly
impacted by the outcome of the
UK Referendum on EU membership
– The US also enjoyed a strong economic
– Relatively high inflation and low wage growth
performance
Conditions in Europe were supportive during the year
and, despite much speculation, sentiment was not
impacted by the UK’s decision to leave the European
Union. Economic growth across Europe was broad-
based, benefiting from stronger labour markets, rising
incomes, looser fiscal policy and accommodative
monetary policy measures from the European Central
Bank. This helped strengthen consumer and business
confidence in a year during which the Eurozone had to
clear a number of political hurdles, including the Dutch
and French general elections. In the US, the election of
President Trump in November 2016 did not have a major
impact on sentiment in our markets and the strength
of the US economy led the US Federal Reserve to raise
interest rates three times over the year.
More information page 30
persisted across the year
– A snap General Election resulting in a hung
parliament created further uncertainties
Our financial year began just after the UK voted to leave
the European Union. This was an unexpected outcome
and dominated the economic and market backdrop for
a large part of the year. The value of sterling dropped
significantly on the news and the Bank of England
quickly moved to cut interest rates to a record-low 0.25%.
However, resilient economic indicators and high levels
of consumer confidence contributed to a better than
expected overall economic backdrop in the first half of
the year. During the second half of the year, weakness
in Sterling started to translate into higher inflation which,
coupled with low levels of wage growth, impacted
on consumer spending. In the latter part of the year
a snap General Election was called which resulted in
a hung parliament and political instability, as the UK
started negotiating the terms of its departure from the
European Union.
More information page 31
6
Hays plc Annual Report & Financial Statements 2017
Overview
Strategic report
Governance
Financial statements
Shareholder information
The competitive environment
We are leading global recruiting experts focusing
on the segment of the recruitment market referred
to as professional, ‘white collar’ skilled or specialist
recruitment. The salary of the candidates we
place ranges from circa £20,000 to £130,000
p.a. and we operate across 20 different areas
of specialism, including white collar professions
such as Accountancy & Finance and IT, and more
technical disciplines such as Engineering, and
Construction & Property.
The competitive landscape across most of our markets
is extremely fragmented and characterised by a large
number of companies, which are often very small and
focus on local, niche markets, and with a few large
global players.
Despite the fragmented nature of the industry, in the
majority of our markets the main competition we face
is from in-house recruiting teams within the HR function
of corporates. While we estimate that in more mature
markets like the UK or the US around 80% of addressable
skilled jobs are filled via recruitment agencies, in less
mature markets like Germany that figure is only around
20% according to our analysis. The first-time outsourcing
of the recruitment of professional staff is therefore a key
driver of growth in many of our businesses.
The main UK-listed specialist recruitment businesses we
identify are PageGroup, Robert Walters and SThree, all
of which have varying exposures and business mix, but
do have a presence in many of the markets in which we
operate. Despite this, they do not have the scale of Hays’
operations especially in some of the more technical
recruitment markets such as Construction & Property or
in some of the structural-growth markets like Germany.
We also identify many other competitors across each
of our local markets. These include larger, so called
‘generalist’ recruiters such as Adecco, Randstad and
Manpower, who also have operations in the specialist
recruitment space, but are predominantly focused on the
lower-salary ‘blue collar’ segment of the market. There
are also several other sector or region-specific businesses
such as KForce in the US or Amadeus FiRe in Germany.
We have deliberately built a business that is well-
balanced and exposed to both mature, cyclical markets
and emerging structural markets. In FY17 57% of our net
fees were generated in mature markets and 43% in more
immature markets compared to 83% and 17% respectively
10 years ago. Immature markets have significant
structural growth opportunities and are less impacted
by the economic cycle. We believe this balance, as well
as our mix of Temporary, Contractor and Permanent
recruitment combined with genuine scale across a range
of 20 specialist areas and 33 countries, is unique to the
specialist recruitment space, adds relative resilience to
our business model through the economic cycle and acts
as a genuine differentiator in our industry.
The global recruitment market
£130k
l
y
r
a
a
s
e
v
i
t
a
c
d
n
i
s
y
a
H
f
o
e
g
n
a
r
s
t
n
e
m
e
c
a
p
l
I
£20k
Executive search
Specialist recruitment
Contingent fee model
focused on highly skilled
roles in clear structural
growth markets
Generalist ‘blue
collar’ staffing
HAYS FOCUS
Net fee pool
In FY17 59% of our fees came from the Temp and
Contracting market, although this is weighted towards
three countries where Hays has a market-leading
position: Germany, Australia and the UK. In most of the
other countries in the Group we have historically been
predominantly Perm focused, however where market
conditions and local legislation have allowed it, we
have successfully been pursuing a strategy to build
a meaningful Temp and Contractor business, which
today represents one-third of our business outside
of the three core markets.
Contract type 2017
Market exposure 2017
" Despite the
fragmented
nature of the
industry, in
the majority
of our markets
the main
competition
we face is from
in-house
recruiting
teams."
Temp
Perm
59%
41%
Mature
markets
Immature
markets
57%
43%
Hays plc Annual Report & Financial Statements 2017
7
Bernhard Ott
Location: Germany
Profession:
Senior Clinical
Professional
Strategic report
MEGA TREND 1
MORE, AND VARIED WAYS
OF BUILDING A CAREER
What this means for us
We have made further strategic progress
rolling out our market-leading IT Contracting
business from Germany into other markets
where we believe the model can be successful,
including Canada, France and Japan. This,
coupled with the established IT Contracting
business we have in the US, means we are at
the forefront of this evolving market trend.
We now have more than 60,000 Temps and
Contractors on assignment all around the
world. Despite this, the vast majority of
skilled roles in the countries we operate in
consist of traditional Perm positions, with
non-Perm penetration rates still in the
single digits. We believe this segment of the
specialist recruitment market will become an
increasingly important part of the make-up of
modern workforces. Our aim is therefore to
build further scale to be able to offer a truly
globally integrated service by capitalising
on increased candidate global mobility,
increased non-Perm market penetration
rates and by leveraging cross border
client relationships.
For many skilled candidates, the
‘job for life’ has largely come to an
end. There is an increasing appetite
to embrace a more flexible, contract
style of working or project roles, with
candidates seeking interesting, often
highly paid non-Permanent roles
enabling them to build their career
flexibly, as opposed to working their
way up a single corporate ladder.
The non-Perm businesses are
becoming an increasingly important
part in many more of our markets.
The rise of the digital economy has not only
driven the creation of new job types in niche
areas but it has also enabled greater mobility
of experienced workers who can provide
their skills as independent contractors on
a more flexible basis.
This, combined with less restrictive legislation
in many countries and the secular shift
away from a ‘job for life’ towards building
a successful ‘portfolio career’, is why we
believe Contracting is a key structural growth
market and has become one of our fastest-
growing business sectors.
Group ex-UK/Germany/ANZ(1)
78%
22%
2011
Permanent
Temporary &
Contracting
67%
33%
Today
(1) Percentage of net fees.
(2) LFL (like-for-like) growth represents organic growth of continuing operations at constant currency.
8
Hays plc Annual Report & Financial Statements 2017
Overview
Strategic report
Governance
Financial statements
Shareholder information
January 2014
September 2014
November 2016
July 2015
" The projects Hays offered were
a good match for my profile,
experience and lifestyle."
Bernhard Ott
Senior Clinical Professional
+6%(2)
Group LIfe Sciences
growth in 2017
CONTRACTING IN LIFE SCIENCES: A CANDIDATE’S JOURNEY
In 2017 Life Sciences has been one of the fastest growing
specialisms in our market-leading German business.
Part of this success was due to the roll out of our German
IT Contracting model into other specialisms, including
Life Sciences, capitalising on the trend for more flexible
project-based work emerging in these markets. Key to
helping our candidates structuring their careers as a
series of projects is a deep understanding of their goals
and an ongoing supportive relationship.
Bernhard Ott is a senior clinical professional specialising
in pharmaceutical quality management and quality
assurance. We have worked with Bernhard since 2012,
placing him across some of the largest global
pharmaceutical companies, from Merck to Novartis,
where he provided GCP and GMP quality assurance
services. As the end of each project approached,
we would meet Bernhard to discuss his future plans,
ambitions and availability and match these with suitable
assignments, helping him structure the next leg of
his career. “The projects Hays offered were a good match
for my profile, experience and lifestyle. I can always count
on professional preparation ahead of interviews and,
if required, a close assistance during ongoing projects.
Some of the projects Hays placed me on were extended
beyond their initial period and my consultant handled
that in a structured and professional manner. To sum
up five years of cooperation, I would recommend Hays
as a trusted partner and I look forward to continuing
working with them.”
Hays plc Annual Report & Financial Statements 2017
9
Strategic report
MEGA TREND 2
SKILLS SHORTAGES AND BUSINESSES’
DEMANDS FOR FLEXIBILITY
A key challenge that many of
our clients across the world are
increasingly facing, is adding
flexibility to their skilled workforce
to enable them to respond to fast-
changing market conditions and
access the skilled labour they need,
when they need it. Employing skilled
people on a contract or project basis
injects more flexibility in their cost
base and enables them to benefit
from a workforce with a wide
portfolio of relevant experience
as and when they need it.
For an increasing number of
businesses therefore, Contract
and Temporary workers make
up an increasingly important part
of their skilled workforce.
What employers said were
their challenges for 2017
Skills shortages
77%
Competition from other
employers
45%
Salary levels
42%
Source: Hays UK Salary & Recruiting
Trends 2017 Guide
What this means for us
The challenge of sourcing highly skilled,
compliant contractors willing to take up a
new role remains, and in a world where these
types of workers are often in short supply,
our role is becoming increasingly important.
We act as intermediary for highly skilled
professionals searching for shorter-term
vacancies, enabling our clients to tap into
scarce talent pools of flexible workers and
helping them to manage and shape their
skilled Temp and Contractor workforces.
We see our non-Perm business as a
higher-value source of earnings, more
resilient to the cycle and our clients
increasingly see us as the go-to experts who
help them interpret and manage the risks and
obligations that are required with managing
a contingent workforce. This means that we
are continually growing market share in
places like Germany as well as establishing
new client relationships across Europe, Asia
and the Americas. We bring the expertise of
our existing Temp and Contractor businesses
and offer our clients clarity in what is a
difficult and a complex area by helping them
navigate the intricate Temp and Contractor
regulations as they evolve.
Our resilient model offers
balance between Permanent
and Temporary contracts
across specialisms
Fast response to changing
market conditions
Access to talent in
skilled-short areas
Flexibility of cost base
Compliant interim workforce
TEMP/
CONTRACTING
59%(1)
BALANCE
PERM
41%(1)
Benefit from extensive
market knowledge
Access to wider candidate
pool in skilled-short areas
Advice on candidates’
approachability
Time-efficient service,
no admin burden
(1) Represents proportion of Group net fee income.
10
Hays plc Annual Report & Financial Statements 2017
Overview
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Governance
Financial statements
Shareholder information
" Hays has been a company that
I have depended on for many years
to source talent."
Laurence Halabut
Chief HR Officer, Toyota Financial Services
DELIVERING FLEXIBLE WORKFORCE SOLUTIONS IN AUSTRALIA
The strong, long-lasting relationships we build with our
clients across the world enable us to better understand
their needs and to offer them tailored workforce solutions
to match their evolving requirements. Over the past
five years, in Australia, we have been a key recruitment
partner to Toyota Financial Services (TFS), the financial
services arm of Toyota Motor Corporation, which operates
worldwide across over 30 countries. One of their biggest
workforce challenges we have helped them with over
these years has been finding and recruiting skilled
employees and contractors across various divisions,
from contact centre roles to niche technology and
project management positions.
More recently Hays was appointed TFS’s Managed
Service Provider (MSP), looking after their contingent
workforce and also Recruitment Process Outsourcing
(RPO) provider, helping TFS finding the skilled employees
they needed for their Permanent hiring. We deployed
a dedicated onsite management team and implemented
a suite of technologies which immediately provided
tangible benefits, including more flexibility in their
labour cost base, increased compliance, better visibility
of contingent workforce and improved quality and
speed of hire.
Laurence Halabut, Chief HR Officer at TFS, noted:
“Hays has been a company that I have depended on
for many years to source talent. Their knowledge of the
business along with the successful partnership we have,
continues to create a positive impact on the delivery
of various projects at Toyota Financial Services.”
Hays plc Annual Report & Financial Statements 2017
11
Strategic report
MEGA TREND 3
STRUCTURAL MARKET GROWTH
AND EVOLVING CLIENT DEMANDS
For example, to help clients of any size
tracking all aspects of their contingent
workforce we offer technology-enabled
solutions like our 3 Story Software, a cloud-
based vendor management and workforce
management software.
Investing to
build a market-
leading
business
Outsourcing levels of skilled
recruitment in Germany(2)
80%
60%
40%
20%
0%
Perm
Temp & Contracting
Most professional recruitment around
the world is still done by in-house
HR teams, with many immature
markets, as well as some more mature
economies, increasingly opening up to
the concept of outsourcing specialist
recruitment. Amongst certain client
groups we continue to observe a shift
towards increased levels of centralised
procurement, mostly seen in large
corporates. Our services must be
tailored to these different client needs,
whether it is first-time outsourcing or
providing different specialist
recruitment delivery models.
What this means for us
We have existing scale in both mature, cyclical
and less mature structural-growth markets.
We have been building a strong presence in
markets like Germany which, despite being
a developed economy, has a low penetration
rate when it comes to the outsourcing of
recruitment services for skilled, professional
roles. Therefore, notwithstanding our
market-leading position, we still see many
growth opportunities as more businesses
start to outsource their recruitment of
skilled labour. Aside from Germany,
many international specialist recruitment
markets represent clear structural growth
opportunities and our aim is to continue to
open up these markets where the majority
of recruitment is still performed by in-house
HR teams. We see this as a key factor
contributing to driving our growth over-and-
above the economic cycle by capitalising on
first-time outsourcing.
As well as investing to capitalise on these
structural-growth opportunities, we work
with our clients, whether SMEs or large
corporates, to tailor our services to meet
their different needs.
The way we provide these services has to
adapt to new business practices and evolving
client demands. Examples include increased
levels of centralised procurement mainly in
large corporates. In response, we have
developed suitable hub-like delivery models
that match our clients’ needs for efficient
recruitment processes at scale, in the most
effective and appropriate way. For instance
we offer Managed Service Provider (MSP)
services, where we manage Temp and
Contract workforces on an outsourced basis,
as well as Recruitment Process Outsourcing
(RPO) services, where we manage all
Permanent recruitment processes on behalf
of clients. Together, these MSP and RPO
services sit under our Hays Talent Solutions
business, and represent c.15% of our net fees.
We also continue to invest in developing
new tools and resources to provide first-class
large-scale HR services.
The German Market
German GDP growth rate(1)
Despite being a developed
economy, Germany has a low
penetration rate when it comes
to the outsourcing of specialist
recruitment services. This
structural-growth opportunity,
means that in the past five years
alone we increased our Germany
operating profits organically by
c.35%, even though over the
same period German GDP grew
at an average of just over 1%.
6%
4%
2%
0
-2%
-4%
-6%
2009
2008
2010
2011
2012 2013 2014 2015
2016
(1) Source: World Bank.
(2) Hays Management estimate.
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Hays plc Annual Report & Financial Statements 2017
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Historic profile of Hays Germany
Net fees (€)
300
250
200
150
100
50
0
Operating
profit (€)
100
90
80
70
60
50
40
30
20
10
0
Net fees by Specialism
Net fees by contract type
72%
IT &
Engineering
87%
Contracting
& Temp
FY08
FY09
FY10 FY11
FY12 FY13 FY14 FY15
FY16
FY17
Net fees
Operating profit
IT
Engineering
Acc & Fin
Other
42%
30%
11%
17%
Contracting
Temp
Perm
62%
25%
13%
Number of consultants
Number of consultants
2,000
1,500
1,000
500
0
1,503
1,213
1,088
940 944
786
670
452 463 479
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
Number of offices
20
10
0
8
8
9
9
11
13
13
13
17
19
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
BUILDING A MARKET-LEADING BUSINESS IN GERMANY
Hays entered the German market in 2003
by acquiring a small IT Contracting business,
Ascena, which at the time was making
€3 million operating profit. Despite Germany
being a developed economy, many of the
skilled, professional roles are still filled by
in-house HR departments, with a relatively
low proportion being outsourced to specialist
recruitment firms. Over the past 15 years we
have witnessed a structural shift towards
more outsourcing of skilled labour and we
have invested aggressively ahead of
the curve, building a business with over
1,500 consultants. We have also diversified
our service offering across contract types
and specialisms, whilst still expanding our
core, world-class IT Contracting business.
This means that we now have a truly
market-leading business which in 2017
generated €94 million in operating profit,
a CAGR of 27.5% since the acquisition of
Ascena. Germany still represents a unique
structural opportunity for us and our focus
remains on cementing and enhancing the
breadth and scale of our operations as the
market continues to open up to first-time
outsourcing of skilled roles.
Operating Profit
CAGR 2003–2017
27.5%
Operating profit
€94m
Hays plc Annual Report & Financial Statements 2017
13
Strategic report
MEGA TREND 4
EMERGENCE OF NEW, AND
EVOLVING, TECHNOLOGIES
Technology is in many ways
transforming how people work,
enabling remote working and
impacting on how clients and
candidates engage and interact with
the jobs market and with Hays. Also,
almost every area of the jobs market
is becoming increasingly digitally
enabled and the digitalisation of both
supply and demand creates vast
quantities of data to be analysed
and put to use.
What this means for us
Clients and candidates interact with us in
multiple and evolving ways using various
channels, and it is part of our philosophy
to recognise and quickly respond to these
trends. The emergence of new routes to
market which are digitally enabled means
we have witnessed a considerable increase
in the volume of job applications received
and in the number of ways in which we
receive them. Last year we received about
seven million CVs and had around 27 million
hits to our jobs websites. This means that
our consultants need to be equipped with
the best technological tools to be able to
cope efficiently with this substantial increase
in velocity and complexity of data. However,
successfully sifting through large amounts of
data to find the right candidate for a job is not
enough anymore, as it may not be easy to
then persuade them to apply for that vacancy
if they were not already planning a job move.
This is why we use a variety of content
engagement tools to build and curate
ongoing relationships with current and
potential candidates, providing them with
insightful information relevant to their
industry and their interests. At the same
time, we have ongoing collaborations with
third-party platforms like LinkedIn, SEEK and
Xing. This allow us to examine large amounts
of data generated by their users’ activity on
a regular basis, to gain a clear understanding
of the individuals, their skills and experience.
Ultimately, our aim is to extrapolate
meaningful data patterns and develop these
into an ‘approachability index’, a measure
to gauge how open to job opportunities
a potential candidate is likely to be. By
understanding these signals of candidate
approachability, it becomes possible to find
the right moment to suggest vacancies to
people and because trust has already been
built via our engagement marketing activities,
they may be more open to an approach.
Our sector-leading technology and
collaborations ultimately help us drive growth
by improving our consultants’ productivity.
We also have an Innovation team which is
tasked with assessing the technology
landscape, identifying new industry trends,
opportunities and threats and building
partnerships with key emerging players.
PASSIVE
ACTIVE
Ongoing
engagement
Identify
and place
3rd party
data
sources
LinkedIn
Seek
Xing
Others
New candidate
and client
relationships
Bringing people
into Hays contact
Maintain contact
through content
LinkedIn content
Viewpoint
Hays Journal
Salary guides
Identifying signs
of approachability
Understanding
candidates
Job opportunities
HAYS
‘ONE TOUCH’
Building awareness/
engaging with clients
14
Hays plc Annual Report & Financial Statements 2017
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Governance
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Shareholder information
TECHNOLOGY AND USE OF DATA
The amount and variety of data that is being
generated in our industry has increased
exponentially over recent years. Capturing,
analysing and making sense of this wealth
of data remains a strategic imperative as we
continue to adapt and respond to a world
where many of our candidates’ profiles have
moved onto various social media platforms.
At the same time, we recognise that data must
be managed in an integrated manner with our
own proprietary database, OneTouch, to give
us a competitive edge. This is why we ensured
that OneTouch was built not only to be fully
integrated internally within our business, but
that it would also have the ability to interact
and connect with external platforms, as they
emerge and evolve.
Interpreting data from our own database,
together with our ability to harness valuable
insights from our relationships with external
platforms, is increasingly becoming part of
our value proposition to our clients.
With this in mind, the protection of
candidate personal data and client
confidential information remains at the
heart of our business. We have systems
and processes in operation to best ensure
that this information is held and transferred,
where appropriate, in a secure manner.
We recognise the importance of complying
with all relevant data protection and privacy
laws in each of our local markets.
CVs received
in 2017
7m
Hits on Hays’
websites
27m
Hays plc Annual Report & Financial Statements 2017
15
Strategic report
CHIEF EXECUTIVE’S REVIEW
OUR BUSINESS
PHILOSOPHY CENTRES
ON THE NEED TO INVEST
TO SUPPORT LONG-TERM
GROWTH
" We ended the financial year
with £112 million of net cash,
our strongest balance sheet
for many years."
Alistair Cox
Chief Executive, Hays plc
Our Chief Executive, Alistair Cox,
discusses the Group’s performance
in 2017 and looks ahead to our areas
of focus for 2018 and beyond.
Q. How would you describe Hays’ financial
performance this year?
A. I am very pleased at how we performed this year.
We grew our global net fees by 6%(1), and delivered
£211.5 million of operating profit. That’s at the top end
of the market’s range of expectations and well above
the levels we might have expected as we started the year.
We also converted those profits into £217 million of
operating cash flow, representing a strong cash conversion
rate of 103%. Consequently, we ended the financial year
with £112 million of net cash, our strongest balance sheet
for many years. That result, combined with the continuing
supportive market outlook as we enter the new year, has
enabled the Board to propose both an 11% increase in the
core dividend, as well as a special dividend of £61.6 million
in line with our distribution policy. This represents a key
milestone in the development and progress of our business
and is testament to the significant cash generation
potential of the model we have built. My first priority for
uses of that cash is always to reinvest in the business and
there are many examples of that, some detailed below.
Following on from our investment programme, our
second priority has long been to eliminate our net debt
and build a net cash position of around £50 million, and
that has now been achieved. The final use of cash is to
distribute to shareholders, via a long-term sustainably
covered core dividend, supplemented when appropriate
with a special dividend. The strong results we have
delivered this year have now allowed us to put in place
this final piece of our cash strategy.
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Hays plc Annual Report & Financial Statements 2017
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Turning to our individual businesses, the backdrop was
positive in the vast majority of our markets throughout
the year. Three-quarters of our net fees are derived
outside the UK and, at £170 million, our non-UK profits
reached all-time record levels. This has stood us in good
stead with the non-UK markets being supportive
throughout the year. We saw further clear structural
growth in the demand for our services in markets across
Continental Europe and Latin America, and Europe in
particular delivered an excellent performance from what
is now our biggest region, with fees increasing 12%(1).
Asia was more mixed, particularly in those markets
more exposed to Financial Services. However we ended
the year with positive momentum across the region.
The more mature markets including North America
and Australia were encouraging and we saw a marked
improvement in Australia over the course of the
year, delivering our third-best-ever annual result
from that business.
Q. Within that overall Group performance, did you
see an impact on your UK business following the
outcome of the EU Referendum?
A. In the UK, our financial year started immediately after
the EU Referendum. That introduced a significant level
of uncertainty into the market and we saw a marked step
down in activity in the weeks following the Referendum,
especially within our UK private sector Perm business.
However, activity levels stabilised over the summer and
autumn months and we saw modest improvement as the
year progressed, exiting the year with the private sector
back in modest year-on-year growth, albeit over the
full year fees for the UK & Ireland were down 7%(1) and
profits fell 21%(1). As we enter our new year, the UK market
remains subdued but the business is set up appropriately
to meet current demand and we will be quick to react to
any future market movements.
Q. You are now four years into your five-year plan
period. Where does this financial performance leave
you against your objectives?
A. Back in 2013 we outlined our five-year aspiration to
broadly double our operating profits from what was then
£125 million, towards £250 million. Clearly there were,
and continue to be, many factors which could influence
our ability to deliver this, including the economic
backdrop, currency fluctuations and our own ability
to execute on our plans. However, despite all of these
factors, I am happy to say that four years into the plan
period, we are broadly where I hoped we would be at
this stage. Operating profit has increased from its base
of £125 million to £211.5 million this year – representing
a CAGR of 14% over the past four years. Indeed, our
cumulative profit growth of c.£86 million over the plan
period to date is significantly more than that of any of our
UK listed peers. Understandably, in a business as globally
diverse as ours, we have faced headwinds and tailwinds
during the plan period. The UK business has faced
challenging conditions recently, as discussed above.
Offsetting this however, we’ve seen continued strong
profit growth in our German business, where profits
increased 9%(1) this year to £80.5 million, making
Germany our biggest profit contributor at the Group
level. Similarly, the Australian business has delivered
" Three-quarters of our net fees are
derived outside the UK and that
has stood us in good stead with the
non-UK markets being supportive
throughout the year."
Alistair Cox
Chief Executive, Hays plc
Diversification and internationalisation of the Group
Diversification and internationalisation of the Group
UK
International
2017
2005
25%
75%
75%
25%
strong growth this year, rebounding after a difficult few
years post the downturn in the mining industry. Elsewhere
around the world, there are many examples of significant
outperformance versus original expectations. Asia and
Europe in particular have increased their profit contribution
significantly versus 2013 levels. France is an excellent
example of that, having more than doubled in the past
four years and surpassing our 2018 aspiration of £10 million
operating profit a year early.
Let’s not lose sight though that our 2018 aspirations
were never designed to represent any kind of ‘peak’
for the potential of our business. Far from it. In fact, I see
significant further growth opportunities ahead in many
businesses including Germany, France, the US and across
Asia to name just a few. That’s an exciting future and with
this thought in mind, we will be hosting an investor event
in November 2017 at which we will outline our financial
and strategic aspirations for the next phase of growth
and development in our business.
Finally, our strong performance has strengthened our
balance sheet to the best position we have enjoyed for
many years. Five years ago, we had a net debt position
of £133 million. Today that debt has been eliminated
and we have built a net cash position of £112 million. Our
business is inevitably impacted by the cycle, so I believe
our current debt-free balance sheet is the most appropriate
structure to face this inherent cyclicality. We are able
to distribute significant returns to shareholders after we
have invested in the business, yet also retain strength
and flexibility to react to whatever the economic cycle
may throw at us.
(1) LFL (like-for-like) growth represents organic growth of continuing operations at constant currency.
Hays plc Annual Report & Financial Statements 2017
17
Strategic report
CHIEF EXECUTIVE’S REVIEW CONTINUED
" In the past
five years
alone, we
have grown
German
operating
profits by
£29 million,
making this
now our
biggest
business by
profits in
the world."
Alistair Cox
Chief Executive
Q. What were your primary areas of strategic focus
in the year and what progress was made?
A. Alongside our financial aspirations, we also had the
clear strategic objective to materially diversify where
our profits are made, and to reinforce and enhance our
business in a world which is constantly changing.
Over the years we have built a truly global business with
operations in 33 countries, and geographic diversification
is a key pillar of our strategy. With this network in place,
we are now focused on building scale and critical mass
across this platform as many of our countries offer
significant potential to build sizeable businesses that in
time will sit alongside Germany, Australia and the UK as
major profit contributors. Germany itself was a modest-
sized business a decade ago. In the past five years alone,
we have grown German operating profits by £29 million,
making this now our biggest business by profits in the
world. In a similar vein we have made excellent progress
in France where we just delivered over £10 million of
operating profit, making France the fourth biggest
country by profits in the Group.
We are also investing to diversify our income in other
ways too. As Temporary and Contracting roles become
increasingly prevalent in many parts of the world, we are
building the proportion of our business which is generated
from non-Perm jobs. This sector provides greater resilience
against the economic cycle and greater visibility of
earnings, as well as being a high growth market. Finally,
the world of work continues to evolve at a rapid pace.
For example, we have seen the recent emergence of
whole new job categories, especially in the technology
sector as data science, cyber security, digital marketing
and mobile development have become important skills
in the business landscape. Consequently we have invested
in building our own services in these new sectors,
ensuring that our services are as relevant for the future
markets as they have been for the more traditional.
All of this is done with the clear aim of making our
business as resilient as possible, and to ensure we have a
core value proposition which can thrive for years to come.
This has been our focus across the past four years, and
once again underpinned our approach this year, and I’d
identify three specific areas to discuss.
Firstly, we continued to organically invest in consultant
headcount in order to support growth in supportive and
improving markets, such as Australia, where headcount
was up 15% year-on-year and France, where it was up 12%.
At the same time, we continued to invest aggressively
to support the long-term structural-growth opportunity
that exists for the recruitment of skilled people in markets
like Germany, where headcount was up 24% and Latin
America where we have 7% more people than a year ago
across our four country businesses.
Secondly, we made further good progress in rolling out
our IT Contracting business, which has been so successful
within Germany over many years, to other countries.
Notable successes in this respect have been France,
Canada, and Japan. These are countries that, five years
ago, derived only 19% of their fees from non-Perm
recruitment, and that was largely in the short-tenure
Temp market. Fast forward to today however and they
are 30% Temp and Contracting, a significant proportion
of which comes from placing long-term, high skilled,
high salary contractors. It’s undoubtedly been a key
driver of recent success in each case – and will remain
a key focus area of growth going forward.
Thirdly, we remain focused on building scale in our
US business, following the acquisition we made there
in late 2014. The business we acquired, Veredus, was
100% focused on the IT space, with a platform of 120
consultants across 10 offices. Today, we’ve launched
a successful Construction & Property specialism, built
out our pre-existing, but small, Life Sciences business
and built scale in Perm recruitment. We now have 200
consultants across 12 Hays US offices and we continue
to believe that this market represents a massive growth
opportunity for our business. We will therefore continue
to invest organically to build scale, complementing local
hires with internal transfers from the rest of the Hays
business globally. We will selectively open new offices
where we see the opportunity to do so and we will
invest in and support the growth of the core, legacy
IT Contracting business.
Alongside these areas of focus in our core business,
our brand awareness remains a priority. We continue to
establish Hays as one of the most recognised, high profile
brands in the recruitment industry. Through our role as
the Official Recruitment Partner of Manchester City, the
Hays brand and messaging receives extensive broadcast
exposure in over 200 countries. Last season, viewings
of Manchester City’s home games, where Hays receives
highly visible brand exposure, reached almost 150 million.
Manchester City also share Hays’ content across their
digital channels and social platforms which, last season
alone, provided us with close to 100 million impressions
across the likes of Facebook, Twitter and China’s Weibo.
We continue to lead the industry on LinkedIn too, with
over 1.8 million followers, placing us as one of the top 30
most followed companies in the world. The Hays Journal,
a global, bi-annual publication for HR and recruitment
professionals, is now into its seventh year and recognised
as a leading authority of issues and trends impacting the
global world of work. One of the most significant benefits
of establishing a leading brand profile is evidenced by the
fact that, over the past year, we have engaged through
our marketing and consultant communications with over
290,000 client contacts and over 820,000 candidates
with whom we had no prior contact or relationship.
Q. Technology and technological change is
something that is spoken about a lot in the context
of the recruitment industry. What are your thoughts
on this and how are you approaching this issue?
A. I think it’s hard to find an industry in the world that
isn’t going through some sort of transformation or seeing
the impact of new technologies in how they operate,
either for good or bad. The specialist recruitment industry
is certainly no different. In our case, the emergence
of new technologies, especially digital and web-based,
is having an impact on the way we do business, as well
as the way our clients and candidates are seeking to do
business with us and interact with the jobs market.
Having said that, our core value creating processes and
core function, placing great, skilled candidates into their
next jobs and helping businesses secure the scarce talent
they need to continue to grow, has not changed, even
if the way we go about it, or the way our clients and
candidates expect that service to be delivered, has
evolved over time.
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Hays plc Annual Report & Financial Statements 2017
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Financial statements
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While there are many strands to this issue, and
technologies evolve quickly, our philosophy has always
been clear. We seek to innovate and build collaborations
that will allow us to fully understand all of the changes
taking place, ensuring we are at the forefront of our
industry and meaning we can best mitigate any risks
that may emerge and at the same time ensure we are
positioned to capitalise on any new opportunities to
develop, enhance or protect our own core business.
Central to this approach are the many relationships we’ve
built with digital and technology companies which we
believe are relevant to our operations and markets and
where we see clear mutual benefit in working together.
Examples include our long-established relationship with
LinkedIn, which continues to yield significant benefit
in terms of the productivity and efficiency of our people.
In Australia, we collaborate with SEEK, the largest jobs
board and recruitment data company in the market. Again,
there is clear mutual benefit. Between each company’s
dataset, we cover around 90% of the professional people
in Australia, meaning that we have unrivalled insight into
the local candidate market. This insight allows us to ensure
our interactions with those candidates are as effective
and valuable to them as possible, improving their
experience and improving our own efficiency in getting
the best, most relevant list of candidates to our clients
as quickly as possible.
Another area of change relates to data. Specifically, the
amount and type of data we need to handle as a business
which has increased dramatically over recent years.
As a result, it is essential that we equip our people with
the tools and skills they need to use and interpret this
data in the most effective way possible. We have invested
in search tools to enable real-time, targeted searches for
the best shortlist of candidates for a specific role as and
when they need to. We worked with Google to embed
their search tools within our database to do just that.
Equally, we are focused on what the power of data can
do to make us better at what we do and provide a better
service to both our clients and candidates. Knowing
which candidates are most approachable for a particular
role, or which candidates are currently active in the jobs
market, can mean we have higher quality interactions
with people, again generating better quality candidate
shortlists and more efficient processes for ourselves and
our clients. With this in mind we’ve invested in our own
internal resource, hiring specialists in Data Marketing and
Analytics, and we continue to invest to keep abreast of
new and emerging business models, technologies and
routes to market which are relevant to our industry.
We have a dedicated Innovation team in place to monitor
what is being developed so we can ensure we are
positioned to respond accordingly in whatever way we
believe makes most sense. This includes small investments
into businesses or seed capital companies which we
believe can be beneficial or additive to our core business,
as well as building our own in-house test products and
innovative services to respond to changes in certain parts
of our market.
Our approach in all of these areas is driven by a central
belief that the world of technology is changing and will
continue to bring change to the way we need to do
business. By building and nurturing relationships and
collaborations and investing in our own capabilities,
we can best understand these changes, fully capitalise
on the many opportunities that arise and understand
and mitigate any risks or threats that may emerge.
Q. What do you see as your biggest opportunities
looking ahead to 2018 and what risks are you
concerned about?
A. The vast majority of our markets around the world
are supportive, and the outlook is positive. As such we
will remain focused on investing in front-line recruitment
consultant capacity to drive growth wherever we see
opportunities to do so. At the same time, we will support
the long-term growth opportunities that exist in many
parts of the business. This will again be largely through
organic investment in headcount, as well as selective
office expansion in specific markets such as Germany
and the US where we see the most significant long-term
growth potential.
The biggest risk we see over the coming year is in the UK,
where uncertainties regarding the macroeconomic and
political outlook are likely to remain throughout the
period in which the UK negotiates its exit from the EU.
This could have a detrimental impact on candidate
confidence to move jobs, or business confidence to
invest and take on new staff. The impact on this could be
reduced volumes of placements in our UK business and
therefore reduced fees. That said, we are encouraged by
the resilience we currently see in the UK, which continues
to be broadly sequentially stable overall. Forward visibility
remains limited and outlook uncertain, but as ever we will
monitor activity levels closely.
Overall, our core business model remains robust and the
outlook for specialist recruitment is positive. Last year,
we helped over 300,000 people find their next job,
and over 30,000 companies to hire talented people into
their business. Helping businesses to grow and people’s
careers to flourish is a core function within society and
this is something we’re very proud to do. We continue
to see the emergence of new job types and new ways
of working in many markets around the world, which
present opportunities for our business and the first time
outsourcing of the recruitment process in places such as
Germany continues to drive growth. We expect that we
will see further change and evolution, for example in the
form of technological change, increased compliance or
changing regulatory environments. We will embrace
these changes as they will continue to present us with
opportunities to grow as well as create risks or threats.
Where they do, we will continue with our approach of
innovation and collaboration to ensure we preserve and
enhance our business. We see significant long-term
growth prospects for our business, and remain focused
on positioning Hays to fully capitalise on them in the
years ahead.
Alistair Cox
Chief Executive
(1) LFL (like-for-like) growth represents organic growth of continuing operations at constant currency.
Hays plc Annual Report & Financial Statements 2017
19
Strategic report
OUR STRATEGY
CLEAR, WELL-ESTABLISHED
STRATEGIC PRIORITIES TO
DELIVER OUR LONG-TERM AIMS
Our ultimate aim is to be the undisputed leader in global specialist recruitment.
As we build towards this, we have a set of four, long-established strategic priorities
which remain unchanged throughout the various stages of the economic cycle.
As well as being interlinked with each other, they are informed and driven by our
aims, as well as by the long-term mega trends we identify in our marketplace,
described on page 5.
Materially increase
and diversify Group
profits
Build critical mass and
diversity across our
global platform
Strategic
priorities
Generate, reinvest and
distribute meaningful
cash returns
Invest in people and
technology, responding
to change and build
relationships
See our business model page 22
Read about our KPIs page 26
Read about our risks page 36
Read more on our remuneration page 58
20
Hays plc Annual Report & Financial Statements 2017
Strategic priority
What we achieved in FY17
Focus FY18
Link to relevant KPIs
Materially increase and
diversify Group profits
Build critical mass and
diversity across our
global platform
Invest in people and
technology, responding
to change and build
relationships
Generate, reinvest and
distribute meaningful
cash returns
– Four years into the five-year plan to broadly double
– We will continue to focus on driving net
and diversify the Group’s profits, we remain in line
fee and profit growth in our international
with where we expected to be at this stage, having
businesses, where markets remain
increased operating profit by a further c.£30 million
in FY17 to £211.5 million
– Our profit growth this year has been driven by
supportive overall. Amongst these, we see
the biggest opportunity for profit growth
coming from Germany, and we will continue
exchange rate gains and a record profit performance
to invest organically in this business
by our international business, which more than offset
– While the UK navigates the uncertainties
a decline in the UK, primarily caused by the negative
created by the negotiations to leave the
impact that Brexit has had on clients’ and candidates’
EU, we will continue to monitor underlying
1 Like-for-like net fee growth
2 Proportion of Group net fees
generated by our international
business
4 Basic continuing earnings
per share growth
6 Like-for-like net fees
per consultant
7 Conversion rate
confidence
– In FY17 our non-UK business generated record levels
of operating profit, accounting for 80% of
the Group’s profits, up from 35% 10 years ago
activity levels closely and manage our
cost base throughout the business to
best protect profitability
– Further diversified our exposure across contract
– We will continue to focus on organic
types, continuing to invest organically in our Temp/
growth and further investment in
Contracting business, which now represents 59%
of Group net fee income
– Increased non-UK headcount by 16% year-on-year,
including Germany up 24%, USA up 20% and
Australia up 15%
headcount where conditions are supportive
– Further expand the percentage of net fee
income generated outside of our largest
businesses (the UK, Germany and Australia)
– Drive further growth in our Temp/
– Material increase in the percentage of non-Perm
Contracting business in new/existing
net fees generated in the Group, excluding the UK,
markets, including France, Japan, Canada
Germany and Australia (from 22% in 2011 to 33%
and the US
– Global office network stands at 250, of which 152
in 2017)
are non-UK
1 Like-for-like net fee growth
2 Proportion of Group net fees
generated by our international
business
3 Headline international
net fee base
– Continued to develop mutually beneficial
relationships across a range of areas, including
collaborations with SEEK in Australia, Xing in
Germany, LinkedIn and Google, amongst others
– We will continue to explore and develop
relationships and partnerships with external
organisations, to enable us to better
understand, respond to and capitalise on
5 Employee engagement
6 Like-for-like net fees
per consultant
– Invested in further developing our own capabilities
new opportunities and/or threats
within our Data Analytics and Digital Marketing
function, which has been working alongside our
existing Innovation function and Corporate
Development teams
– Further develop our internal capabilities
and expertise in terms of Data Science
and Data Analytics, to improve our
business efficiency and service to clients
– Completed phase one of the project to automate our
and candidates
German back office, ensuring it is fit for purpose in a
– Continue to evolve and shape our offering
growing Contractor business, and could drive further
to meet changing clients’ needs by
profit efficiencies in our business
– We have hired a net 786 people and internally
promoted over 2,000 of our employees
providing alternative and innovative
delivery models, supported by the latest
technologies and tools
– Good profit growth and a strong underlying cash
– We will maintain core dividend cover at
performance, ending the year with a net cash balance
3.0x earnings, and intend to grow the core
of £111.6 million
dividend in line with growth in earnings.
– In line with our dividend policy, having reached our
Should future earnings fall, the core
targeted core dividend cover of 3.0x EPS this year,
dividend will be protected and unchanged
we increased the core dividend by 11%, with a full year
– We will maintain a net cash buffer of
dividend of 3.22 pence per share. Additionally, in line
around £50 million and it is our intention
with our excess cash returns policy, having built a net
that any free cash flow generated over
cash position above £50 million, we propose a special
and above this level will be distributed to
dividend of 4.25 pence per share to supplement the
shareholders, provided our market outlook
core dividend, subject to shareholder approval
is positive
1 Like-for-like net fee growth
4 Basic continuing earnings
per share growth
8 Cash conversion
Overview
Strategic report
Governance
Financial statements
Shareholder information
Strategic priority
What we achieved in FY17
Focus FY18
Link to relevant KPIs
Materially increase and
diversify Group profits
Build critical mass and
diversity across our
global platform
Invest in people and
technology, responding
to change and build
relationships
Generate, reinvest and
distribute meaningful
cash returns
– Four years into the five-year plan to broadly double
and diversify the Group’s profits, we remain in line
with where we expected to be at this stage, having
increased operating profit by a further c.£30 million
in FY17 to £211.5 million
– Our profit growth this year has been driven by
exchange rate gains and a record profit performance
by our international business, which more than offset
a decline in the UK, primarily caused by the negative
impact that Brexit has had on clients’ and candidates’
confidence
– In FY17 our non-UK business generated record levels
of operating profit, accounting for 80% of
the Group’s profits, up from 35% 10 years ago
– We will continue to focus on driving net
fee and profit growth in our international
businesses, where markets remain
supportive overall. Amongst these, we see
the biggest opportunity for profit growth
coming from Germany, and we will continue
to invest organically in this business
– While the UK navigates the uncertainties
created by the negotiations to leave the
EU, we will continue to monitor underlying
activity levels closely and manage our
cost base throughout the business to
best protect profitability
1 Like-for-like net fee growth
2 Proportion of Group net fees
generated by our international
business
4 Basic continuing earnings
per share growth
6 Like-for-like net fees
per consultant
7 Conversion rate
– Further diversified our exposure across contract
types, continuing to invest organically in our Temp/
Contracting business, which now represents 59%
of Group net fee income
– Increased non-UK headcount by 16% year-on-year,
including Germany up 24%, USA up 20% and
Australia up 15%
– Material increase in the percentage of non-Perm
net fees generated in the Group, excluding the UK,
Germany and Australia (from 22% in 2011 to 33%
in 2017)
– Global office network stands at 250, of which 152
are non-UK
– We will continue to focus on organic
growth and further investment in
headcount where conditions are supportive
– Further expand the percentage of net fee
income generated outside of our largest
businesses (the UK, Germany and Australia)
– Drive further growth in our Temp/
Contracting business in new/existing
markets, including France, Japan, Canada
and the US
1 Like-for-like net fee growth
2 Proportion of Group net fees
generated by our international
business
3 Headline international
net fee base
– Continued to develop mutually beneficial
– We will continue to explore and develop
relationships across a range of areas, including
collaborations with SEEK in Australia, Xing in
Germany, LinkedIn and Google, amongst others
– Invested in further developing our own capabilities
within our Data Analytics and Digital Marketing
function, which has been working alongside our
existing Innovation function and Corporate
Development teams
– Completed phase one of the project to automate our
German back office, ensuring it is fit for purpose in a
growing Contractor business, and could drive further
profit efficiencies in our business
– We have hired a net 786 people and internally
promoted over 2,000 of our employees
relationships and partnerships with external
organisations, to enable us to better
understand, respond to and capitalise on
new opportunities and/or threats
– Further develop our internal capabilities
and expertise in terms of Data Science
and Data Analytics, to improve our
business efficiency and service to clients
and candidates
– Continue to evolve and shape our offering
to meet changing clients’ needs by
providing alternative and innovative
delivery models, supported by the latest
technologies and tools
– Good profit growth and a strong underlying cash
– We will maintain core dividend cover at
performance, ending the year with a net cash balance
of £111.6 million
– In line with our dividend policy, having reached our
targeted core dividend cover of 3.0x EPS this year,
we increased the core dividend by 11%, with a full year
dividend of 3.22 pence per share. Additionally, in line
with our excess cash returns policy, having built a net
cash position above £50 million, we propose a special
dividend of 4.25 pence per share to supplement the
core dividend, subject to shareholder approval
3.0x earnings, and intend to grow the core
dividend in line with growth in earnings.
Should future earnings fall, the core
dividend will be protected and unchanged
– We will maintain a net cash buffer of
around £50 million and it is our intention
that any free cash flow generated over
and above this level will be distributed to
shareholders, provided our market outlook
is positive
5 Employee engagement
6 Like-for-like net fees
per consultant
1 Like-for-like net fee growth
4 Basic continuing earnings
per share growth
8 Cash conversion
See pages 26 and 27
Hays plc Annual Report & Financial Statements 2017
21
Strategic report
OUR BUSINESS MODEL
A GLOBALLY INTEGRATED
PLATFORM WITH LOCAL
EXPERTISE
We believe that having a balanced exposure within
and between our markets is key to driving superior
and resilient financial performance, and better results
for our clients, throughout the economic cycle.
We have a business with scale, breadth and diversity
of exposure, which is built to take into account the mega
trends driving change in our industry, the short-term
market movements we experience and positions us to
work towards our long-term aims and strategy.
A balanced and diverse model
We have deliberately and strategically built a business
which is balanced and diverse.
Within our network of 33 countries, we have exposure
to both more cyclical, mature markets such as the UK
and more immature, structural growth markets such as
Germany. We are exposed to the Temporary, Contractor
and Permanent recruitment markets and have long-
established scale and expertise in 20 specialist areas
of skilled employment.
We are predominantly private sector-focused, but also
serve public sector clients in some markets. Within our
portfolio of services, we work on one-off placements
for SMEs and global multinationals as well as contract-
based higher volume recruitment for our larger clients.
The balance, breadth and scale of our business is unique
in the world of specialist recruitment.
This is a key differentiator, and we believe it is important
as it makes our business and its earnings relatively more
resilient to today’s ever-changing macroeconomic and
political landscape.
Exposure to mature and
less-mature markets
Structural-growth markets are those where the use
of agencies like Hays to source skilled candidates is
a relatively new practice. Traditionally in these markets,
this recruitment is undertaken by companies themselves,
using hiring teams within their own HR functions. A key
driver of our growth is therefore the first-time outsourcing
of this recruitment to third parties. This means that these
markets are relatively less cyclical by nature, and less
driven by the prevailing economic backdrop, or short-
term sentiment.
More mature markets are those where the use of agencies
is a well-established, long-standing norm. Here, clients
will use agencies to help them fill roles in the majority of
cases. As such, these markets tend to be more cyclical
in nature, with activity levels dependent far more on
the amount of job churn occurring at any particular time.
That is, the confidence of clients to replace leavers in their
businesses, or hire extra people, and the confidence
amongst candidates to move jobs.
22
Hays plc Annual Report & Financial Statements 2017
Overview
Strategic report
Governance
Financial statements
Shareholder information
Balanced exposure across markets
Breadth of expertise
Net fees by clients
Net fees by Geography
Top 40
C.15%
Other clients
C.85%
Net fees by specialisms
24%
49% 27%
Asia Pacific
Continental Europe
& Rest of World
UK & Ireland
Contract type
Contract type
Private
85%
Public
15%
Temp
Perm
59%
41%
IT
21%
Accountancy & Finance 15%
Construction & Property 15%
Engineering
9%
Office Support
7%
Other*
33%
* Major specialisms within Other include:
Banking Related (7%), Life Sciences (5%), Sales &
Marketing (4%) and Education (3%).
Net fees by geography, type and market maturity
Structural/immature
43%
Cyclical/mature
57%
0-30% market penetration
>30-70% market penetration
>70% market penetration
28%
Temp
14%
Temp
87%
Temp
44%
Temp
66%
Temp
56%
Temp
86%
Perm
72%
Perm
56%
Perm
44%
Perm
34%
Perm
13%
Perm
LatAm, Russia
& Rest of Europe
Asia
Germany
France, US, Canada
& The Netherlands
Australia & New Zealand
UK & Ireland
Hays plc Annual Report & Financial Statements 2017
23
Strategic report
OUR BUSINESS MODEL CONTINUED
CREATING VALUE FOR
ALL STAKEHOLDERS
A balanced and diverse model
What we need to make our business
model work.
We earn fees primarily on a contingent
basis, when we successfully place
a candidate in a role with a client. These
fees, paid by the client, are derived as
a percentage of the candidate’s pay.
Our consultants develop long-term relationships with
clients and candidates to understand their local markets
and are equipped with the latest technology, tools and
data to match candidates to roles.
We understand the needs and challenges of our
clients and candidates locally and employ the power
of our integrated global business to meet them quickly
and effectively.
People and culture
Our people
Hays is the ultimate people business and
as such the ability to attract, develop,
enable and retain the very best consultants
and managers in our industry is vital to
our success. We aim to create an exciting
and vibrant work environment and we
work continuously to provide our people
with attractive career paths that will make
them experts in their fields.
Society
We believe that what we do makes a
big difference to the world around us.
We help hundreds of thousands of people
every year to secure the next leg on their
personal career journey, and companies
source the skilled employees they need
to grow. This all contributes to the wider
growth and success of the economies
and communities in which we operate.
Brand, technology and data
Brand
Our reputation as a world-leader in the
specialist recruitment market is supported
and reinforced by our world-class global
brand, which is consistent in each of our
markets around the world. We constantly
focus on building wider recognition and
awareness of Hays as a market leader
both through partnerships with other
organisations and by building a portfolio
of high quality and respected publications
that demonstrate the thought-leadership
credential of Hays and our people.
Relationships
Partnerships and collaborations
Our philosophy is not just to invest in
technology solutions, but also to build
strong collaborations with leading
innovators and influential organisations,
creating mutually beneficial relationships
which help us better understand and
serve our clients and candidates.
This philosophy extends beyond the
technology sector and enhances our
ability to better respond to fast-moving
market developments.
Technology and data
We have built a sector-leading global
technology platform that is able to
interact with other applications and
third-party technologies. This, together
with our investment in data science and
digital marketing capabilities, enables
our consultants to make sense of the
vast amount of data generated in
today’s world, source real-time, accurate
information on their market and ultimately
to get the best candidates to clients faster
than anyone else.
Client and candidate relationships
Forming and maintaining strong
relationships with our clients and
candidates is at the heart of what we do.
Our extensive engagement marketing
programme offers them industry-leading
content, with the aim of helping them
succeed in their careers and source the
right talent for their business. This also
includes making connections with people
who are not yet clients or candidates
and building a relationship which would
make them more likely to be open to
future approaches.
24
Hays plc Annual Report & Financial Statements 2017
y
m
Macroeco n o
C
o
m
p
etitiv
e
e
n
v
i
r
o
n
m
e
n
t
Overview
Strategic report
Governance
Financial statements
Shareholder information
How we create value
As the ultimate people business, everything
we do is focused on placing the right people
into the right roles.
Stakeholder benefits
The value we create not only generates
returns for our shareholders, but also
for our other stakeholders.
y
m
Macroeco n o
G l o b a l
i n tegrated platform
C
o
m
p
etitiv
e
e
n
v
i
r
o
n
m
e
n
t
Market
expertise
Understanding
client needs
Finding clients
great talent
Data, tools
and products
Candidate
relationships
Local expertise an d d e l
i v e
Recruitment market m e g a
t
r
y
r
s
d
n
e
Capital reinvestment
Our priority for free cash flow remains to fund
the Group’s investment and development.
Clients
We work closely with our clients to help them
find the skilled people they need to drive growth
in their businesses. We work with thousands of
companies every year, with no single client
representing more than 1% of Group net fees.
Number of clients
Private/Public sector
>30,000
85:15
Candidates
We help candidates securing their next Perm job
or Temp/Contracting assignment. We connect
our candidates with the world of work through an
array of events, debates, seminars and networking
opportunities across our network of 33 countries.
2017 Perm
placements
70,000
2017 Temp/Contracting
assignments
240,000
Employees
We invest a significant amount of time and effort
to ensure Hays is a great place to work. We offer
our consultants the best training to become
experts in their market and develop their careers,
along with the best technology and tools in the
industry to enable them to be as productive and
successful as possible.
2017 Internal
promotions
2,162
2017 Formal
training days
2,322
Shareholders
We are working towards our objective of building
the world’s pre-eminent specialist recruitment
business and in doing so we aim to create
long-term sustainable value for our shareholders.
The breadth, scale and balance of our business
model, together with our industry-leading
operating leverage, allow us to deliver superior
financial performance through the cycle. This,
combined with our focus on working capital
management and the cash generative nature
of our business, means we have the potential
to generate meaningful shareholder returns as
our business grows.
2017 EPS
growth
14%
2017 total dividends
pay-out
£108.3m
Hays plc Annual Report & Financial Statements 2017
25
Strategic report
KEY PERFORMANCE INDICATORS
Our long-term aim is to be the undisputed leader
in global specialist recruitment. Along the way, we are
focused on delivering well-diversified, profitable and
cash-generative net fee growth.
We measure our progress in this respect, as well as against
our areas of operational focus, using a series of KPIs.
Measured against
our strategy
We clearly link
each of our KPIs to
our four strategic
priorities:
Materially increase
and diversify
Group profits
Build critical mass
and diversity across
our global platform
Invest in people
and technology,
responding to
change and build
relationships
Generate, reinvest
and distribute
meaningful cash
returns
Strategic priorities
page 20
1. Like-for-like(1) net fee growth (%)
2. Proportion of Group net fees generated by our
international business (%)
2017
2016
2015
2014
2013
–1
6
7
5
9
2017
2016
2015
2014
2013
75
66
64
66
69
Measure
How the Group’s business is developing and growing
over time, measured as net fee growth on a constant
currency basis.
Progress made in 2016–17
Good net fee growth of 6%, primarily driven by our
International businesses. The rate of growth slowed
versus last year due mainly to slower growth in the UK.
Measure
The Group’s relative exposure to markets which are
typically more immature and underpenetrated than the
UK, calculated as the percentage of non-UK net fees.
Progress made in 2016–17
75% of Group net fees were generated outside of the UK
this year, led by a material increase in net fees coming from
our Australian and German businesses and exchange.
Link to relevant strategic priority
Link to relevant strategic priority
5. Employee engagement (%)
6. Like-for-like net fees per consultant (£000s)
2017
2016
2015
2014
2013
86
83
84
85
84
2017
2016
2015
2014
2013
144
143
138
141
137
Measure
Based on the results of our internal employee engagement
survey which tracks their sense of belonging, discretionary
effort, personal motivation and job satisfaction.
Progress made in 2016–17
Over 80% of our employees again engaged in our annual
TALKback survey this year, reflecting our continuous efforts
to focus on employee training, retention and effectiveness.
Measure
The productivity of the Group’s fee earners. Calculated as
total Group net fees divided by average consultant numbers.
Progress made in 2016–17
Group like-for-like(1) net fees per consultant increased 1% in the
year. In APAC consultant productivity increased by 2%, driven
by operating leverage and strong profit growth in Australia.
Link to relevant strategic priority
Link to relevant strategic priority
(1) LFL (like-for-like) growth represents organic growth of continuing operations at constant currency.
26
Hays plc Annual Report & Financial Statements 2017
Overview
Strategic report
Governance
Financial statements
Shareholder information
Why we have
chosen these KPIs
We have chosen a
range of KPIs which
are both financial
and non-financial.
They are focused
on the overall Group
financial performance,
as well as changes we
are making within the
Group, such as the
internationalisation
of the business.
As well as growth,
we measure KPIs
which illustrate the
efficiency of our
operations, such as
the Conversion Rate
and Cash Conversion.
As we work towards
our aims, and the
shape and size of
our business or our
strategic priorities
evolve, then our KPIs
will evolve too.
3. Headline international net fee base (£m)
4. Basic continuing earnings per share growth (%)
2017
2016
2015
2014
2013
539
492
479
497
712
2017
2016
2015
2014
2013
–6
14
14
21
19
Measure
The absolute scale of the non-UK businesses in net fee
terms (Asia Pacific and Continental Europe & RoW).
Measure
The underlying profitability of the Group, measured by the
Earnings per share of the Group’s continuing operations.
Progress made in 2016–17
The largest component of the growth in international fees was
exchange; additionally, like-for-like(1) net fees in the international
business grew by 11% in the year, where we saw an acceleration
of growth in Australia and strong, broad-based growth across
many European markets, including Germany and France.
Progress made in 2016–17
Basic earnings per share increased by 14% to 9.66 pence,
reflecting the Group’s higher operating profit, partially offset
by the higher effective tax rate.
Link to relevant strategic priority
Link to relevant strategic priority
7. Conversion rate (%)
8. Cash conversion (%)
2017
2016
2015
2014
2013
22.2
22.3
21.5
2017
2016
2015
2014
2013
19.4
17.5
103
88
116
125
109
Measure
Calculated as operating profit divided by net fees.
Measures the Group’s effectiveness in managing our level
of investment for future growth and controlling costs.
Measure
The Group’s ability to convert profit into cash. Calculated as
cash generated by operations as a percentage of operating
profit from continuing operations.
Progress made in 2016–17
Despite the material slowdown in our UK business, our
conversion rate was broadly flat at 22.2% as a result of strong
international net fee growth, exchange gains, the ongoing
benefit of our largely automated back-office platform and
our continued strong control of operating costs.
Progress made in 2016–17
103% cash conversion was a result of good working capital
management throughout the year, especially considering
the strong growth in our German and European Contracting
business, which are relatively working-capital intensive.
Link to relevant strategic priority
Link to relevant strategic priority
Hays plc Annual Report & Financial Statements 2017
27
Strategic report
DIVISIONAL OPERATING REVIEW
OUR ORGANISATIONAL
STRUCTURE IS SIMPLE AND
IS BUILT AROUND THREE
REGIONS GLOBALLY
Within this structure, our 6,884 consultants
operate from 250 offices in 33 countries –
an unrivalled footprint in specialist recruitment.
28
Hays plc Annual Report & Financial Statements 2017
Overview
Strategic report
Governance
Financial statements
Shareholder information
ASIA PACIFIC
In Australia & New Zealand net fees were up 11%(1) and
operating profit was up 14%(1). Our Perm business grew
by 8%(1) and Temp, which represented 66% of net fees
in the year, grew by 13%(1). In Australia net fee growth
accelerated to 13%(1), driven by improved activity in the
private sector, up 14%(1). Growth was broad-based across
all regions and most specialisms. New South Wales and
Victoria, which together accounted for 57% of Australia
net fees, were up 14%(1) and 16%(1) respectively, and ACT
(Canberra) also delivered a strong performance, with net
fees up 13%(1), driven by the continued strength in our
public sector business, up 11%(1). Elsewhere, we saw
Queensland and Western Australia returning to growth,
up 15%(1) and 7%(1) respectively, while net fees in South
Australia increased by 8%(1). At the specialism level, we
delivered strong 13%(1) growth in Construction & Property,
our largest specialism in Australia and increased net fees
by 23%(1) in IT and by 8%(1) in Accountancy & Finance.
Net fees in New Zealand were down 4%(1).
In Asia, which accounted for 22% of the division’s net
fees, trading conditions remained tough, although they
stabilised in the second half of the year. As a result, net
fees were flat(1) and operating profit down 18%(1) to
£6.5 million. China, our second largest business in Asia,
delivered excellent net fee growth of 15%(1) and Hong
Kong also grew 15%(1). Offsetting this, net fees in Japan
decreased 7%(1) and Singapore declined by 24%(1), in
part due to continuing challenging conditions in the
banking markets.
Consultant headcount in the Asia Pacific division
increased by 10% year-on-year. Consultant headcount
in Australia & New Zealand increased by 12% and in
Asia it was up 7%.
Net fees by specialism
Net fees by
country/sub-group
Construction & Property 22%
Accountancy & Finance
13%
IT
12%
Office Support
10%
Banking
10%
Sales & Marketing
6%
Other
27%
Australia
Japan
New Zealand
China
Hong Kong
Singapore
Malaysia
72%
8%
6%
5%
4%
3%
2%
Net fees by contract type Net fees by sector
Temp
Perm
55%
45%
Private
74%
Public
26%
Consultants
1,336
2016: 1,210
Offices
50
2016: 49
Net fees (m)
£230.9
2016: £176.1
Operating profit (m)
£69.3
2016: £50.2
Acceleration of growth in Australia driven by the Temp
& Contracting business; Asia tough but broadly stable
In Asia Pacific, net fees increased by 31% (9% on a
like-for-like basis(1)) to £230.9 million and operating profit
increased 38% (up 10% on a like-for-like basis(1)) to £69.3
million, representing a conversion rate(3) of 30.0% (2016:
28.5%). The difference between actual and like-for-like
growth rates was primarily the result of the significant
appreciation in the average rate of exchange between
the Australian Dollar and Japanese Yen versus Sterling
during the year, which increased net fees in the division
by £36.5 million and operating profits by £13.0 million.
Operating performance
Year ended 30 June
Net fees (£m)
Operating profit
Conversion rate(2)
Period-end consultant headcount(3)
2017
230.9
69.3
30.0%
1,336
2016 Actual growth
31%
176.1
38%
50.2
28.5%
1,210
10%
LFL growth(1)
9%
10%
(1) LFL (like-for-like) growth represents organic growth of continuing operations at constant currency.
(2) Conversion rate is the proportion of net fees converted into operating profit.
(3) Closing consultant headcount as at 30 June.
Hays plc Annual Report & Financial Statements 2017
29
Strategic report
DIVISIONAL OPERATING REVIEW CONTINUED
CONTINENTAL EUROPE & REST OF WORLD
as we continued to significantly invest in new consultant
headcount, notably across several continental European
markets, including Germany and France, as well as in
the US.
Germany, which represented 49% of the division’s net
fees, delivered strong growth of 14%(1) and a record
net fee performance in the year. This was underpinned
by strong growth across Contracting and Temp, which
together grew by 13%(1), while Perm net fees grew by
an excellent 27%(1).
Net fees in our market-leading IT & Engineering business,
which represented 73% of German net fees, grew by
15%(1). We also saw strong growth in our newer specialisms,
particularly Accountancy & Finance, which grew 14%(1),
Life Science, up 23%(1) and Sales & Marketing, up 47%(1).
As we continue to work towards our strategic objective
of building further material scale in Germany, we invested
significantly in consultant headcount, which was up 24%
year-on-year. Despite this level of investment, and the
negative impact of three less working days in the year,
our profit performance was good, up 9%(1) to £80.5 million.
Across the rest of the division, net fees were up 11%(1)
and operating profit increased to £20.2 million. This was
driven by a strong performance across Europe, including
France, our second-largest business in Europe, which
delivered a record performance with net fee growth
of 16%(1) and operating profit in excess of £10 million.
In addition, we delivered strong growth of over 10%(1) in
10 further European countries, including The Netherlands,
up 12%(1), Spain, up 12%(1) and Poland where net fees
increased by 20%(1).
In the Americas net fees grew by 7%(1). Within this we
delivered good growth in the USA, up 7%(1), Canada, up
5%(1) and Brazil, where we grew 10%(1), despite continued
challenging market conditions. Elsewhere, Colombia grew
29%(1), while net fees in Mexico were flat(1) among more
mixed market conditions.
Consultant headcount in the division increased by 19%
year-on-year, including increases of 12% in France and
24% in Germany, where our consultant headcount now
exceeds 1,500.
Net fees by specialism
Net fees by
country/sub-group
IT
32%
Engineering
19%
Accountancy & Finance
13%
Construction & Property 9%
Life Sciences
7%
Sales & Marketing
5%
Other
15%
Germany
France
Benelux
USA
Switzerland
Canada
Other
49%
12%
7%
7%
4%
4%
17%
Net fees by contract type Net fees by sector
Temp
Perm
62%
38%
Private
Public
97%
3%
Consultants
3,600
2016: 3,034
Offices
102
2016: 103
Net fees (m)
£470.8
2016: £362.5
Operating profit (m)
£100.7
2016: £78.7
Record performances in Germany and France; strong,
broad-based growth in rest of the division
In Continental Europe & RoW, we delivered strong net
fee growth of 30% (12% on a like-for-like basis(1)) to
£470.8 million, driving operating profit growth of 28%
(7% on a like-for-like basis(1)) to £100.7 million. The
difference between actual and like-for-like growth rates
was primarily the result of the significant appreciation in
the average rate of exchange between the Euro versus
Sterling during the year, which increased net fees in
the division by £56.1 million and operating profits by
£15.4 million. The conversion rate(3) of the division stood
at 21.4% (2016: 21.7%), marginally down on the prior year
Operating performance
Year ended 30 June
Net fees (£m)
Operating profit
Conversion rate(2)
Period-end consultant headcount(3)
2017
470.8
100.7
21.4%
3,600
2016 Actual growth
30%
28%
LFL growth(1)
12%
7%
362.5
78.7
21.7%
3,034
19%
(1) LFL (like-for-like) growth represents organic growth of continuing operations at constant currency.
(2) Conversion rate is the proportion of net fees converted into operating profit.
(3) Closing consultant headcount as at 30 June.
30
Hays plc Annual Report & Financial Statements 2017
Overview
Strategic report
Governance
Financial statements
Shareholder information
UK & IRELAND
as of June 2017 was down a further 4% year-on-year,
all by natural attrition. Operating profit was £41.5 million,
down 21%(1), representing a conversion rate(3) of 16.4%
(2016: 19.2%).
Following a marked step-down in Perm activity levels
immediately after the EU Referendum, the UK Perm
business stabilised and ended the year down 6%(1), as
despite modest signs of improvement in the second half,
client confidence remained subdued. Net fees in our
private sector business, representing 74% of the division,
were down 5%(1), but we exited the year with moderate
underlying growth. Our Temp business was down 8%(1)
primarily as a result of continuing challenging conditions
in the public sector, down 13%(1), exacerbated by the
uncertainties created by the implementation of the IR35
regulations during the year.
All regions traded broadly in line with the overall UK
business, with the exception of London, which was down
10%, and Scotland & Northern Ireland, where net fees
were down 1%. Ireland delivered strong net fee growth
of 14%(1).
At the specialism level, Accountancy & Finance, our
largest business in the division, was down 3%(1), while
Construction & Property and Office Support were down
5%(1) and 3%(1) respectively. Net fees in IT and Education
decreased 14%(1) and 11%(1), as they both continued to be
negatively impacted by the sharp decline in the public
sector market.
Net fees by specialism
Accountancy & Finance 22%
Construction & Property 20%
Office Support
11%
Education
10%
IT
9%
Banking
8%
Other
20%
Net fees by
country/sub-group
London
North & Scotland
Midlands
Home Counties
South West & Wales
Ireland
34%
27%
17%
10%
8%
4%
Net fees by contract type Net fees by sector
Temp
Perm
56%
44%
Private
74%
Public
26%
Consultants
1,948
2016: 2,024
Offices
98
2016: 100
Net fees (m)
£252.9
2016: £271.7
Operating profit (m)
£41.5
2016: £52.1
Conditions overall challenging but broadly sequentially
stable, with continued signs of modest improvement in
the private sector
In the United Kingdom & Ireland net fees decreased 7%(1)
to £252.9 million. This reduction in net fees took place
primarily in the first half of the financial year, following
the outcome of the UK Referendum on EU membership.
Having already taken early action in the last financial year
to adjust the cost base of the business in response to
changing market conditions, our consultant headcount
Operating performance
Year ended 30 June
Net fees (£m)
Operating profit
Conversion rate(2)
Period-end consultant headcount(3)
2017
252.9
41.5
16.4%
1,948
2016 Actual growth
(7)%
271.7
(20)%
52.1
19.2%
2,024
(4)%
LFL growth(1)
(7)%
(21)%
(1) LFL (like-for-like) growth represents organic growth of continuing operations at constant currency.
(2) Conversion rate is the proportion of net fees converted into operating profit.
(3) Closing consultant headcount as at 30 June.
Hays plc Annual Report & Financial Statements 2017
31
Strategic report
FINANCIAL REVIEW
RECORD LEVELS
OF INTERNATIONAL
PROFIT AND FIRST
SPECIAL DIVIDEND
" We have proposed the payment
of the Group’s first special dividend,
of £61.6 million, to supplement
a core dividend which has itself
increased by 11%."
Paul Venables
Group Finance Director, Hays plc
32
Hays plc Annual Report & Financial Statements 2017
Performance highlights
Operating profit up 17% to £211.5 million, driven by
exchange rate gains and International profit growth
Sector-leading conversion rate(3), the proportion
of net fees converted into operating profit,
broadly stable at 22.2%
Consultant headcount up 10%, with significant
investment in markets such as Europe and
Australia, partially offset by reductions in the UK,
all through natural attrition
Strong underlying cash performance with 103%
conversion of operating profit into operating cash
flow. Year-end cash position of £111.6 million
Strong EPS growth of 14%, reflecting the Group’s
higher operating profit, partially offset by the
higher effective tax rate
Proposed increase in full-year core dividend of 11%
to 3.22p per share and special dividend of £61.6
million (4.25p per share), resulting in total dividend
pay-out of £108.3 million (2016: £41.7 million)
Increase in Group
net fee income(1)
Increase in operating
profit(1)
+6%
2016: +7%
+1%
2016: +13%
Conversion rate(3)
of Group net fees into
operating profit
+22.2%
2016: +22.3%
Group consultant
headcount up 10%
year-on-year
6,884
2016: 6,268
Introduction
Turnover for the year to 30 June 2017 was up 20%
(8% on a like-for-like basis(1)) and net fees increased by 18%
(6% on a like-for-like basis(1)). The difference between the
like-for-like growth in turnover and net fees is primarily due
to the higher growth in our Temp business versus Perm.
Operating costs were 18% higher than prior year, primarily
due to the impact of movements in foreign exchange rates.
On a like-for-like basis(1) costs were 7% higher, primarily
due to the 10% investment to increase Group consultant
headcount and to a rise in commission payments in line
with the increase in net fees.
Operating profit increased by 17% (1% on a like-for-like
basis(1)). Exchange rate movements increased net fees
and operating profit by £93.7 million and £28.9 million
respectively, as a result of the significant appreciation in
the average rate of exchange between the major currencies
to which the Group has exposure versus Sterling, most
notably the Australian Dollar and the Euro. Currency
fluctuations remain significant sensitivities for the Group.
Overview
Strategic report
Governance
Financial statements
Shareholder information
Operating
profit £m
Conversion
rate(3) %
exchange rates, the actual reported result would
increase by c.£12 million to c.£223 million.
240
200
160
120
80
40
0
211.5
181.0
164.1
140.3
125.5
2013
2014
2015
2016
2017
25
20
15
10
5
0
Conversion rate
The Group’s conversion rate(3) was broadly stable at
22.2% (2016: 22.3%) primarily as a result of favourable
exchange rates and improvements in our international
businesses, offset by a significant reduction in UK
operating profit.
Foreign exchange
Currency movements versus Sterling provided a material
benefit to our reported performance. Over the course
of the year to June 2017, the total impact of exchange
movements on net fees and operating profit was £93.7
million positive and £28.9 million positive respectively.
Fluctuations in the rates of the Group’s key operating
currencies versus Sterling continue to represent a
significant sensitivity for the reported performance of
our business. By way of illustration, each 1 cent movement
in annual exchange rates of the Australian Dollar and
Euro impacts net fees by £1.0 million and £3.2 million
respectively per annum; and operating profits by
£0.4 million and £1.1 million respectively per annum.
The rate of exchange between the Australian Dollar
and Sterling over the year ended 30 June 2017 averaged
AUD 1.6836 and closed at AUD 1.6952. As at 29 August
2017 the rate stood at AUD 1.6327. The rate of exchange
between the Euro and Sterling over the year ended
30 June 2017 averaged €1.1642 and closed at €1.1406.
As at 29 August 2017 the rate stood at €1.0764.
The impact of these material movements in foreign
exchange rates means that if we retranslate the Group’s
full-year operating profit of £211.5 million at current
Operating performance
Year ended 30 June
Turnover(5)
Net fees(2)
Operating profit from continuing operations
Cash generated by operations
Profit before tax
Basic earnings per share
Dividend per share
" Currency
movements
versus sterling
represented
a material
benefit to
our reported
performance."
Strong growth in International Temp and Perm,
partially offset by UK decline
Net fees in Temp, which incorporates our Contracting
business and represented 59% of Group net fees,
increased by 7%(1). This comprised a volume increase of
8% and an increase in mix/hours worked of 1%, partially
offsetting this, underlying Temp margins(4) were down
30bps at 16.4% (2016: 16.7%), primarily due to mix and a
reduction in Temp margin in our Australia and UK markets.
Net fees in Perm increased by 4%(1), all driven by volume,
with good, broad-based growth in International
businesses, partially offset by declines in the UK.
Movements in consultant headcount
Consultant headcount ended June 2017 at 6,884, up 10%
year-on-year. In Asia Pacific, consultant headcount was
up 10% year-on-year, within which Australia was up 15%
and Asia up 7%. In the UK & Ireland, following the early
pre-emptive actions we took in 2016 to reduce our
headcount in response to declining market conditions, the
division’s consultant headcount was down a further 4%
in the year, all by natural attrition. In Continental Europe
& Rest of World (CE&RoW) we increased consultant
headcount by 19% year-on-year, including continued
material investments in Germany and France, our two
largest businesses in the division, where headcount was up
24% and 12% respectively. Over the past six months, Group
consultant headcount was up 4% (versus December 2016).
Operating profit bridge: year-on-year growth £m
250
200
150
181.0
FY16
operating
profit
International
profit growth
28.9
6.1
6.6
(11.1)
211.5
FX impact
APAC
CE&RoW
UK&I
FY17
operating
profit
2017
£5,081.0m
£954.6m
£211.5m
£217.0m
£204.6m
9.66p
3.22p
2016 Actual growth
20%
18%
17%
36%
18%
14%
11%
£4,231.4m
£810.3m
£181.0m
£159.3m
£173.0m
8.48p
2.90p
LFL growth(1)
8%
6%
1%
(1) LFL (like-for-like) growth represents organic growth of continuing operations at constant currency.
(2) Net Fees comprise turnover less remuneration of Temporary workers and other recruitment agencies.
(3) Conversion rate is the proportion of net fees converted into operating profit.
(4) The underlying Temp gross margin is calculated as Temp net fees divided by Temp gross revenue and relates solely to Temp placements
in which Hays generates net fees and specifically excludes transactions in which Hays acts as agent on behalf of workers supplied by
third-party agencies and arrangements where the Company provides major payrolling services.
(5) Net fees of £954.6 million (2016: £810.3 million) are reconciled to statutory turnover of £5,081.0 million (2016: £4,231.4 million)
in note 5 to the Consolidated Financial Statements.
Hays plc Annual Report & Financial Statements 2017
33
Strategic report
FINANCIAL REVIEW CONTINUED
" We continue
to see good
overall net
fee growth
across our
International
businesses.
Conditions
in the UK are
overall broadly
stable."
Current trading
We continue to see strong overall net fee growth
across our International businesses. We will therefore
continue to invest in a targeted way to capitalise on
these opportunities. Conditions in the UK are overall
broadly stable.
Movements in the rates of exchange of the Group’s key
currencies, notably the Australian Dollar and the Euro,
remain a material sensitivity to our reported financial
performance. If we retranslate the Group’s full-year
operating profit of £211.5 million at current exchange
rates, the actual reported result would increase by
c.£12 million to c.£223 million.
In FY18 our Germany business will have three fewer
working days compared to FY17, all of which relate to H1.
We estimate that this will have a negative impact on
profit of c.£4 million.
Asia Pacific
We continue to see strong activity levels in Australia
across all states and most specialisms. Growth in Asia
is good. After significant investment in FY17, we expect
headcount to increase between 2%-4% in Q1 FY18.
Continental Europe & ROW
In Continental Europe & RoW, growth remains strong
overall, despite tough comparators. In Germany and
across the rest of Europe we continue to see strong
growth and in the Americas conditions remain mixed.
Overall we expect headcount to continue to increase
across the division in Q1 FY18, particularly in Germany,
France and the USA, with additions on a more selective
basis elsewhere.
United Kingdom & Ireland
In the UK conditions remain subdued but broadly
sequentially stable. We have seen a continuation of
the early signs of modest improvement in the private
sector market. The public sector market remains tough.
We expect headcount to increase modestly in Q1 FY18,
including our normal seasonal graduate intake.
Net finance charge
The net finance charge for the year was £6.9 million
(2016: £8.0 million). The average interest rate on gross
debt during the period was 2.2% (2016: 2.3%), generating
net bank interest payable including amortisation of
arrangement fees of £2.1 million (2016: £2.9 million).
The net interest charge on defined benefit pension
scheme obligations was £2.4 million (2016: £3.9 million).
The Pension Protection Fund levy was £0.5 million (2016:
£0.3 million) and the interest unwind on the deferred
acquisition liability related to the Veredus transaction
was £1.1 million (2016: £0.9 million). We expect the net
finance charge for the year ending 30 June 2018 to be
around £5.0 million.
Taxation
Taxation for the year was £65.5 million (2016: £51.9 million),
representing an effective tax rate of 32.0% (2016: 30.0%).
The effective tax rate reflects the Group’s geographical
mix of profits, with the increase in the rate due to the
significant decrease in profitability in the UK, coupled
with increases in profitability in higher-tax jurisdictions
such as Germany and Australia. The Group’s effective tax
rate for the year to June 2018 will be driven by the mix
of profits generated during the year. We currently expect
the rate to be 31.5%.
Earnings per share
Basic earnings per share increased by 14% to 9.66 pence
(2016: 8.48 pence), reflecting the Group’s higher operating
profit, partially offset by the higher effective tax rate.
Pence per share
10
8
6
4
2
0
9.66
8.48
7.44
6.13
5.14
2013
2014
2015
2016
2017
Cash flow and balance sheet
Strong underlying cash performance with 103%
conversion of operating profit into operating cash flow
(2016: 88%). This was a result of good working capital
management throughout the year, especially considering
the strong growth in our German and European
Contracting businesses, which are relatively working
capital-intensive. Trade debtor days were at 39 days
(2016: 37 days).
Net capital expenditure was £21.4 million (2016: £14.9
million), with the increase primarily due to investments
in IT capabilities, cyber security and automation of our
German back-office. We expect capital expenditure to be
around £20 million for the year to June 2018. Additionally,
in FY18 there will be an USD18.5 million payment related
to the acquisition of the remaining 20% equity in
Veredus Corp.
Dividends paid in the year totalled £42.6 million and
pension deficit contributions were £14.8 million. Net
interest paid was £1.9 million and the cash tax payment
was £68.2 million.
Having eliminated net debt in 2016, we ended the year
with a net cash position of £111.6 million.
Retirement benefits
The Group’s pension liability under IAS19 at 30 June 2017
of £0.2 million decreased by £14.1 million compared to
June 2016, primarily due to an increase in asset values
together with company contributions offset by a change
in financial assumptions (decrease in discount rate and
increase in inflation rate).
During the year the Company contributed £14.8 million
of cash to the defined benefit scheme (2016: £14.4 million),
in line with the agreed deficit recovery plan. The 2015
triennial valuation quantified the actuarial deficit at
c.£95 million and the recovery plan comprises an annual
payment of £14.0 million from July 2015 with a fixed 3%
uplift per year, over a period of just under 10 years. The
scheme was closed to new entrants in 2001 and to future
accrual in June 2012.
Capital structure and dividend
The Board’s priorities for free cash flow are to fund the
Group’s investment and development, maintain a strong
balance sheet and deliver a sustainable core dividend at
a level which is both affordable and appropriate.
We target a core dividend cover range of 2.0x to 3.0x
full-year earnings and our strategy is to build and
maintain cover towards the upper-end of that range.
34
Hays plc Annual Report & Financial Statements 2017
Overview
Strategic report
Governance
Financial statements
Shareholder information
Having reached this level, it is our intention that in future
years, increases in core dividend will match increases in
full-year earnings. Additionally, as a reminder, our policy
regarding the uses of excess free cash flow is as follows.
Assuming a positive outlook, it is our intention that
any excess free cash flow generated over-and-above
£50 million, that is not needed for the priorities outlined
above, will then be distributed to shareholders via special
dividends, or other appropriate methods, to supplement
the core dividend at year end.
With reference to the above, and taking into account the
good financial performance of the Group this year, the
Board proposes to increase the final core dividend by
14% to 2.26 pence per share resulting in an increase to
the full year dividend to 3.22 pence, up 11% on prior year.
As such, the full-year dividend will be covered 3.0x by
earnings. Additionally, in line with the above policy on
uses of excess cash flow, the Board recommends the
payment of a special dividend of £61.6 million, equivalent
to 4.25 pence per share.
The final dividend and the special dividend will be paid,
subject to shareholder approval, on 17 November 2017
to shareholders on the register on 6 October 2017.
Treasury management
The Group’s operations are financed by retained earnings
and bank borrowings. The Group has in place a £210 million
revolving credit facility, maturing in April 2020, which
provides considerable headroom versus current and
future Group funding requirements. The covenants within
the facility require the Group’s interest cover ratio to be at
least 4:1 (ratio as at June 2017: 65:1) and its leverage ratio
(net debt to EBITDA) to be no greater than 2.5:1 (as at
June 2017 the Group held a net cash position). The interest
rate of the facility is on a ratchet mechanism with a
margin payable over LIBOR in the range 0.90% to 1.55%.
The Group’s UK-based treasury function manages the
Group’s treasury risks in accordance with policies and
procedures set by the Board, and is responsible for
day-to-day cash management; the arrangement of
external borrowing facilities; the investment of surplus
funds; and the management of the Group’s interest rate
and foreign exchange risks. The treasury function does not
engage in speculative transactions and does not operate
as a profit centre, and the Group does not hold or use
derivative financial instruments for speculative purposes.
111.6
36.8
Closing net cash/(net debt) £m
120
90
60
30
0
-30
-60
-90
-120
(30.7)
(62.7)
(105.2)
Earnings per share
9.66p
2016: 8.48p
Net cash
£111.6m
2016: £36.8m
Total dividends
pay-out
£108.3m
2016: £41.7m
The Group’s cash management policy is to minimise
interest payments by closely managing Group cash
balances and external borrowings. Euro-denominated
cash positions are managed centrally using a cash
concentration arrangement which provides visibility
over participating country bank balances on a daily basis.
Any Group surplus balance is used to repay any maturing
loans under the Group’s revolving credit facility or is
invested in overnight money market funds. As the Group
holds a Sterling-denominated debt facility and generates
significant foreign currency cash flows, the Board considers
it appropriate in certain cases to use derivative financial
instruments as part of its day-to-day cash management.
The Group does not use derivatives to hedge balance sheet
and income statement translation exposure.
The Group is exposed to interest rate risk on floating rate
bank loans and overdrafts. It is the Group’s policy to limit
its exposure to interest rates by selectively hedging
interest rate risk using derivative financial instruments.
Counterparty credit risk arises primarily from the
investment of surplus funds. Risks are closely monitored
using credit ratings assigned to financial institutions by
international credit rating agencies. The Group restricts
transactions to banks and money market funds that have
an acceptable credit profile and limits its exposure to
each institution accordingly.
Paul Venables
Group Finance Director
30 August 2017
Operating profit to free cash flow conversion £m
Operating cash flow
£217.0m (FY16 £159.3m)
33.7
211.5
(28.2)
280
240
200
160
120
(68.2)
(1.9)
146.9
2013
2014
2015
2016
2017
80
Operating
profit
Non-cash
items
Working
capital
Tax
paid
Interest
paid
Free cash
flow
Hays plc Annual Report & Financial Statements 2017
35
Strategic report
PRINCIPAL RISKS
MANAGING RISKS SO WE ACHIEVE
OUR STRATEGIC GROWTH TARGETS
We focus on key risks which could impact on the
achievement of our strategic goals and therefore
on the performance of our business.
Our risk appetite
Hays has a proactive approach to measuring
performance and considers risk as an integral part
of decision-making, both about current and future
performance throughout the global businesses. With
the Board being responsible for the level of risk that the
Group is willing to accept, the Board manages this by
linking risk appetite to its strategic objectives, being
mapped against defined impact and likelihood scales,
in order to define where the level of risk sits.
The principal risks have all been mapped through the risk
appetite process in order to identify both position and
tolerance levels and to assess the mitigating actions.
Hays operates a measured risk appetite position due
to the nature of the recruitment market, being a cyclical
business and highly sensitive to macroeconomic
conditions, which results in a lack of forward visibility
of fees and increases the overall risk environment.
Risk attributes
When considering the risk appetite the Board considers
this in terms of the following attributes:
– Experienced and stable management team globally;
– Strong balance sheet, including the level of
operational gearing;
– Clear and open communication channels.
Risk governance – identifying, evaluating
and managing risk
The Board has overall responsibility for the Group’s
internal control systems and for reviewing their
effectiveness. This has been designed to assist the Board
in making better, more risk-informed, strategic decisions
with a view to creating and protecting shareholder value.
In practice, the Board delegates the task of implementing
its policies on risk and control to management and needs
to assure itself on an ongoing basis that management is
responding appropriately to these risks and controls.
The Board delegates to management ownership
and responsibility for operating risk management and
controls, and management need to provide leadership
and direction to the employees to ensure the
organisation’s overall risk-taking activity is managed
in relation to the agreed level of risk appetite.
To manage the effectiveness of this the Board and
management need to rely on adequate line functions,
including monitoring and assurance functions, within
the organisation. As such the organisation operates the
‘Three Lines of Defence’ model as a way of explaining the
relationship between these functions and demonstrating
how responsibilities are allocated:
– The first line of defence – responsibility to own
and manage risk;
– The second line of defence – responsibility to monitor
and oversee risk;
– The third line of defence – functions that provide
independent assurance.
The Group Risk Committee, chaired by the Group
Finance Director and comprising senior operational, IT,
legal and finance representatives, assists in the strategic
management of risk in the Group.
How we monitor our progress – three lines of defence
Chief Executive
Management Board
First line of defence:
– Management Controls
– Policies and Procedures
– Internal Control
Second line of defence:
– Financial Control
– Security
– Risk Management
– KPIs
– Compliance
– Group Risk Committee
Third line of defence:
– Internal Audit
– External Advisers
Ownership & Management
Monitor & Oversight
Independent Assurance
36
Hays plc Annual Report & Financial Statements 2017
Overview
Strategic report
Governance
Financial statements
Shareholder information
The sensitivity analysis included loss of business arising
from a prolonged global downturn, material movements
in foreign exchange rates, and a detailed assessment of
a range of possible outcomes arising from the UK’s vote
to leave the European Union.
Set against these downside risks the Board considered
key mitigating factors including the geographic diversity
of the Group, its balanced business model across
Temporary, Permanent and Contract recruitment
services, and the significant working capital inflows which
arise in periods of severe downturn, particularly in the
Temporary recruitment business, thus protecting liquidity
as was the case during the global financial crisis of
2008–09.
In addition, the Group’s history of strong cash generation,
tight cost control and flexible workforce management
provide further protection. The Group also has in place
a £210 million revolving credit facility with a suite of banks
until 2020, and the latest actuarial valuation of its defined
benefit pension scheme maintains cash outflows broadly
at their existing level.
Confirmation of longer-term viability
Based on the above assessment the directors confirm
that they have a reasonable expectation that the
Company will be able to continue in operation and meet
its liabilities as they fall due over the three-year period
to 30 June 2020.
Going concern
The Group’s business activities, together with the factors
likely to affect its future development, performance and
position are set out in the Strategic Report. The financial
position of the Group, its cash flows and liquidity position
are described in the Financial Review, with details of the
Group’s treasury activities, long-term funding arrangements
and exposure to financial risk included in notes 18 to 20 to
the Consolidated Financial Statements.
The Group has sufficient financial resources which,
together with internally generated cash flows, will continue
to provide sufficient sources of liquidity to fund its current
operations, including its contractual and commercial
commitments and any proposed dividends. The Group
is therefore well placed to manage its business risks. After
making enquiries, the directors have formed the judgment
at the time of approving the financial statements, that
there is a reasonable expectation that the Group has
adequate resources to continue in operational existence
for the foreseeable future. For this reason, they continue
to adopt the going concern basis of accounting in
preparing the Consolidated Financial Statements.
Risk trends
The ongoing review of the Group’s principal risks includes
how these risks evolve. Changes in the trend/direction
of our principal risks are noted against each risk on the
following pages of this Report.
Risk identification and impact – Hays’ principal
risks are analysed on a gross (pre-mitigation) and
net (post-mitigation) basis
The Management Board oversees an enterprise risk
management framework, which allows for a holistic,
top-down and bottom-up view of key risks facing the
business. These are recorded in a Group risk register,
which is reviewed at least annually by the Management
Board and submitted to the Board thereafter to enable it
to carry out its risk oversight responsibility. This exercise
involves a current and forward look at various risks
affecting the business and prioritising them according
to risk magnitude and likelihood. Risks covered include
operational, financial and reputational risks, as well as
compliance and people-related risks. Each risk is assigned
an owner with current and future risk mitigation
procedures detailed, with the continuing monitoring of
these undertaken on an ongoing basis.
Viability statement
In accordance with provision C.2.2 of the UK Corporate
Governance Code 2016, the directors have assessed the
prospects of the Group over a period longer than the
12 months from the approval of the financial statements.
The directors believe that a three-year period ending
30 June 2020 is the most relevant time period over which
to provide the viability statement, being supported by
the appraisal of the principal risks and mitigating internal
controls. This allows the directors to assess and conclude
that the Group will be able to operate within its existing
bank covenants and maintain appropriate bank facilities
to meet its funding requirements over a three-year
period, being backed by the £210 million banking facility
in place until April 2020, which the company anticipates
no problem in renewing and fully intends to do so.
This three-year period also reflects the three-year planning
cycle, which covers the same period, and considers the
fast moving nature of the industry. As such, collectively
these factors allow the directors a reasonable expectation,
predicated on the basis that there are no unforeseen
events outside of the Group’s control that inhibit the
Company’s ability to continue trading, and that using
a three-year period it is possible to form a reasonable
expectation as to the Group’s longer-term viability.
Process to assess the Group’s prospects
As in prior years, the Board undertook a strategic business
review in the current year taking into account the Group’s
current position and the potential impact of the principal
risks set out on pages 38 to 40 of the Annual Report.
In addition and in making this statement, the Board
carried out a robust assessment of the principal risks
facing the Group, including those that would threaten
the Group’s business model, future performance and
liquidity. While the review has considered all the principal
risks identified by the Group, the resilience of the Group
to the occurrence of these risks in severe yet plausible
scenarios has been evaluated.
Stress testing
The Board approves an annual budget and reviews
monthly management reports and quarterly forecasts.
The output of the planning and budgeting processes has
been used to perform a sensitivity analysis to the Group’s
cash flow to model the potential effects should principal
risks actually occur either individually or in unison.
Hays plc Annual Report & Financial Statements 2017
37
Strategic report
PRINCIPAL RISKS CONTINUED
1. Macroeconomic/cyclical
2. Business model
3. Talent
4. Compliance
5. Reliance on technology
6. Data governance
business exposure
Movement in year
Movement in year
Movement in year
Movement in year
Movement in year
Movement in year
Risk description
The performance of the Group is significantly
impacted by changes to underlying
economic activity, the levels of business
confidence as businesses consider
Permanent and Temporary hiring decisions
and levels of candidate confidence, which
impact their propensity to change jobs,
particularly in the UK, Germany and Australia.
Risk description
The Group faces competition from the
increasing use of social media for recruitment
purposes and a growing trend towards
outsourced recruitment models with
associated margin pressures, which may
impact materially on the business should
Hays not continue to take appropriate actions
and respond effectively.
Risk description
The Group is reliant on its ability to recruit,
develop and retain staff to protect the
business it has today and to deliver its future
growth plans, especially internationally,
both at a manager and consultant level.
Its strategy is to grow and nurture talent
internally into senior roles wherever possible.
Risk description
Risk description
Risk description
The Group operates in 33 countries, with
Our dependence on technology in our
The business works with personal data
each operating its own legislative, regulative,
day-to-day business means that systems
in all 33 countries on a daily basis under a
compliance and tax rules, especially for
failure due to technical issues or cyber
variety of laws and regulations. A material
Temporary workers, with any non-compliance
attack may have a significant impact on our
data breach or data loss could expose
increasing the Group’s exposure to potential
operations and ability to deliver our services
the Group to potential legal, financial and
legal, financial and reputational risk.
if it continued for a number of days and, as
reputational risks in the form of penalties
such, could negatively impact our financial
and loss of business.
performance and reputation.
Brexit specific: The Brexit decision coupled
with the political environment in the UK
increased the level of uncertainty and
therefore increases the risk of negatively
impacting the trading performance in our
UK business, as clients have become more
cautious in headcount investment.
Risk impact
– Financial
Risk impact
– Operational
– Financial
Risk impact
– People
– Financial
Risk mitigation
Hays has continued to diversify its operations
to include a balance of both Temporary and
Permanent recruitment services to private
and public sector markets, and operates
across 33 countries and 20 sector specialisms.
Progress is being made to further diversify
the business to reduce the Group’s reliance
on the UK, Germany and Australia, which
currently represent 70% of the Group’s
net fees.
Hays’ cost base is highly variable and
carefully managed to align with business
activity, and can be focused and scaled
accordingly to react to the individual markets,
with Temporary recruitment being more
resilient in times of economic uncertainty
or downturn.
Hays is highly cash generative, requiring low
levels of asset investment. Cash collection is a
priority and the Group has made appropriate
investment in its credit control and working
capital management processes, resulting in
the elimination of Group net debt and a
year-end net cash positive position.
In the run up to and the immediate aftermath
of the EU referendum, we saw a significant
reduction in UK activity and thus fees and
profits. While this had stabilised by
November 2016, we clearly face significant
potential uncertainty over the next few years.
Risk mitigation
Hays monitors industry trends and
opportunities, including social media and
insourcing, and continues to invest in our
online presence to provide a high-quality
customer experience.
Our key relationships (such as with SEEK
in Australia) increase our exposure to online
professional networking and recruitment
portals and enhance our value proposition
to clients and candidates.
Our expert and specialised consultants are
trained in utilising social media to enhance
their day-to-day activities in providing the
best quality candidates to our clients.
We continue to leverage our broad
geographical and sectoral footprint to
win and maintain a significant number
of multispecialism contracts with large
corporate organisations, which has
strengthened our relationship with these
clients and increased our share of their
recruitment spend.
Significant investment was made in
FY16 and FY17 to enhance data analytics in
order to significantly improve our approach
to, and engagement with, candidates. The
initiative is overseen by the Group Data
Marketing Director.
Risk mitigation
Hays provides a defined and sustainable
career development path for new hires,
starting with a structured induction
programme and ongoing training as they
advance their careers, supported by
formalised performance and career tracking.
Development Centres focus on the progress
of high-potential individuals, providing
further development opportunities and
also helping to identify any talent gaps and
training needs. Leadership and development
programmes are aligned with the Group’s
business strategy.
Overall remuneration packages are
competitive, including an employee benefit
programme, together with a long-term
incentive scheme that is offered to broadly
350 senior managers, which encourages a
performance-led culture and aids retention.
Succession plans identify future potential
leaders of the business and produce
individual development plans in which
to harness and cultivate talent.
The Group’s standard employment
contracts include notice periods and
non-solicitation provisions in the event
of an employee leaving.
Link to relevant strategic priority
Link to relevant strategic priority
Link to relevant strategic priority
Link to relevant strategic priority
Link to relevant strategic priority
Link to relevant strategic priority
38
Hays plc Annual Report & Financial Statements 2017
Hays is preparing for the introduction of
the EU General Data Protection Regulation,
which will necessitate certain changes to
our data collection and processing activity
by May 2018.
Risk impact
– Compliance
– Financial
– Reputational
Risk mitigation
Risk impact
– Operational
– Financial
– Reputational
Risk mitigation
Risk impact
– Compliance
– Financial
– Reputational
Risk mitigation
Compliance processes and monitoring
The Group’s technology strategy is
are tailored to specific specialisms, ensuring
continually reviewed to ensure that the
additional focus is given to higher-risk
systems it operates across the Group
specialisms such as Education and Healthcare
support its strategic direction.
Robust procedures for processing, retention
and transfer of personal data are in place
across the Group, on both a physical and
logical information security basis.
Ongoing asset life-cycle management
programmes mitigate risks of hardware
Comprehensive data protection and
information security policies and procedures
in the UK, Construction & Property in
Australia and specialised corporate contracts
through Hays Talent Solutions.
Employees receive training in respect of the
operating standards applicable to their role,
with additional support provided by
compliance functions, regional legal teams
and, where necessary, external advisers.
and software obsolescence.
Technology systems are housed in various
data centres and the Group has capacity to
cope with a data centre’s loss through the
establishment of disaster recovery sites, that
are physically based in separate locations to
All staff receive regular training to ensure
the ongoing operations, intrinsically linked
that legal and compliance updates are
to the country business continuity plans.
understood and applied. In territories where
legislation sets out additional compliance
requirements, specialists are employed.
Dedicated compliance auditors conduct
Across the regions we have established
dedicated security teams in order to ensure
that the systems are best protected from
unauthorised access, both externally and
are in place across the Group and, where
data protection and privacy legislation
allows, protective email monitoring
programmes are undertaken to address
potential areas of concern, to best protect
our confidential information and candidates’
personal data.
Attention has been focused in this area, with
the increased threat of cyber crime globally,
and security vulnerability is assessed as part
of the ongoing IT strategy across the Group.
We use external advisers to perform regular
sample checks to ensure that the appropriate
internally, and includes best ensuring that
external and internal physical and logical
candidate vetting checks and due diligence
anti-virus software is in place and up-to-date,
penetration tests on all major systems and
obligations are carried out in line with legal
with regular testing of these environments by
operations and implement any required
and contractual requirements.
external providers.
The Group holds all standard business
insurance cover, including employers’
liability, public liability and professional
indemnity insurance.
improvements coming out of such tests as
part of a continuous improvement process.
We use external advisers to perform regular
external and internal physical and logical
A project team led by our General Counsel,
penetration tests on all major systems and
consisting of our global legal team together
operations and implement any required
with operational, marketing and technical
improvements coming out of such tests as
leads, is in place to ensure GDPR compliance
part of a continuous improvement process.
by May 2018.
Overview
Strategic report
Governance
Financial statements
Shareholder information
1. Macroeconomic/cyclical
2. Business model
3. Talent
4. Compliance
5. Reliance on technology
6. Data governance
business exposure
Movement in year
Movement in year
Movement in year
Movement in year
Movement in year
Movement in year
Risk description
Risk description
Risk description
The performance of the Group is significantly
The Group faces competition from the
The Group is reliant on its ability to recruit,
impacted by changes to underlying
increasing use of social media for recruitment
develop and retain staff to protect the
economic activity, the levels of business
purposes and a growing trend towards
business it has today and to deliver its future
confidence as businesses consider
outsourced recruitment models with
Permanent and Temporary hiring decisions
associated margin pressures, which may
growth plans, especially internationally,
both at a manager and consultant level.
and levels of candidate confidence, which
impact materially on the business should
Its strategy is to grow and nurture talent
impact their propensity to change jobs,
Hays not continue to take appropriate actions
internally into senior roles wherever possible.
particularly in the UK, Germany and Australia.
and respond effectively.
Risk description
The Group operates in 33 countries, with
each operating its own legislative, regulative,
compliance and tax rules, especially for
Temporary workers, with any non-compliance
increasing the Group’s exposure to potential
legal, financial and reputational risk.
Risk description
Our dependence on technology in our
day-to-day business means that systems
failure due to technical issues or cyber
attack may have a significant impact on our
operations and ability to deliver our services
if it continued for a number of days and, as
such, could negatively impact our financial
performance and reputation.
Risk description
The business works with personal data
in all 33 countries on a daily basis under a
variety of laws and regulations. A material
data breach or data loss could expose
the Group to potential legal, financial and
reputational risks in the form of penalties
and loss of business.
Hays is preparing for the introduction of
the EU General Data Protection Regulation,
which will necessitate certain changes to
our data collection and processing activity
by May 2018.
Risk impact
– Compliance
– Financial
– Reputational
Risk impact
– Operational
– Financial
– Reputational
Risk impact
– Compliance
– Financial
– Reputational
Risk mitigation
Compliance processes and monitoring
are tailored to specific specialisms, ensuring
additional focus is given to higher-risk
specialisms such as Education and Healthcare
in the UK, Construction & Property in
Australia and specialised corporate contracts
through Hays Talent Solutions.
Employees receive training in respect of the
operating standards applicable to their role,
with additional support provided by
compliance functions, regional legal teams
and, where necessary, external advisers.
All staff receive regular training to ensure
that legal and compliance updates are
understood and applied. In territories where
legislation sets out additional compliance
requirements, specialists are employed.
Dedicated compliance auditors conduct
sample checks to ensure that the appropriate
candidate vetting checks and due diligence
obligations are carried out in line with legal
and contractual requirements.
The Group holds all standard business
insurance cover, including employers’
liability, public liability and professional
indemnity insurance.
Risk mitigation
The Group’s technology strategy is
continually reviewed to ensure that the
systems it operates across the Group
support its strategic direction.
Ongoing asset life-cycle management
programmes mitigate risks of hardware
and software obsolescence.
Technology systems are housed in various
data centres and the Group has capacity to
cope with a data centre’s loss through the
establishment of disaster recovery sites, that
are physically based in separate locations to
the ongoing operations, intrinsically linked
to the country business continuity plans.
Across the regions we have established
dedicated security teams in order to ensure
that the systems are best protected from
unauthorised access, both externally and
internally, and includes best ensuring that
anti-virus software is in place and up-to-date,
with regular testing of these environments by
external providers.
We use external advisers to perform regular
external and internal physical and logical
penetration tests on all major systems and
operations and implement any required
improvements coming out of such tests as
part of a continuous improvement process.
Risk mitigation
Robust procedures for processing, retention
and transfer of personal data are in place
across the Group, on both a physical and
logical information security basis.
Comprehensive data protection and
information security policies and procedures
are in place across the Group and, where
data protection and privacy legislation
allows, protective email monitoring
programmes are undertaken to address
potential areas of concern, to best protect
our confidential information and candidates’
personal data.
Attention has been focused in this area, with
the increased threat of cyber crime globally,
and security vulnerability is assessed as part
of the ongoing IT strategy across the Group.
We use external advisers to perform regular
external and internal physical and logical
penetration tests on all major systems and
operations and implement any required
improvements coming out of such tests as
part of a continuous improvement process.
A project team led by our General Counsel,
consisting of our global legal team together
with operational, marketing and technical
leads, is in place to ensure GDPR compliance
by May 2018.
Link to relevant strategic priority
Link to relevant strategic priority
Link to relevant strategic priority
Link to relevant strategic priority
Link to relevant strategic priority
Link to relevant strategic priority
Hays plc Annual Report & Financial Statements 2017
39
Brexit specific: The Brexit decision coupled
with the political environment in the UK
increased the level of uncertainty and
therefore increases the risk of negatively
impacting the trading performance in our
UK business, as clients have become more
cautious in headcount investment.
Risk impact
– Financial
Risk impact
– Operational
– Financial
Risk impact
– People
– Financial
Risk mitigation
Risk mitigation
Risk mitigation
Hays has continued to diversify its operations
Hays monitors industry trends and
to include a balance of both Temporary and
opportunities, including social media and
Hays provides a defined and sustainable
career development path for new hires,
Permanent recruitment services to private
insourcing, and continues to invest in our
starting with a structured induction
and public sector markets, and operates
online presence to provide a high-quality
programme and ongoing training as they
across 33 countries and 20 sector specialisms.
customer experience.
Progress is being made to further diversify
the business to reduce the Group’s reliance
on the UK, Germany and Australia, which
currently represent 70% of the Group’s
net fees.
Hays’ cost base is highly variable and
carefully managed to align with business
activity, and can be focused and scaled
accordingly to react to the individual markets,
with Temporary recruitment being more
or downturn.
Hays is highly cash generative, requiring low
levels of asset investment. Cash collection is a
priority and the Group has made appropriate
investment in its credit control and working
capital management processes, resulting in
the elimination of Group net debt and a
year-end net cash positive position.
In the run up to and the immediate aftermath
of the EU referendum, we saw a significant
reduction in UK activity and thus fees and
profits. While this had stabilised by
November 2016, we clearly face significant
potential uncertainty over the next few years.
advance their careers, supported by
formalised performance and career tracking.
Our key relationships (such as with SEEK
in Australia) increase our exposure to online
Development Centres focus on the progress
professional networking and recruitment
of high-potential individuals, providing
portals and enhance our value proposition
further development opportunities and
to clients and candidates.
Our expert and specialised consultants are
trained in utilising social media to enhance
their day-to-day activities in providing the
also helping to identify any talent gaps and
training needs. Leadership and development
programmes are aligned with the Group’s
business strategy.
best quality candidates to our clients.
Overall remuneration packages are
geographical and sectoral footprint to
win and maintain a significant number
of multispecialism contracts with large
corporate organisations, which has
clients and increased our share of their
recruitment spend.
Significant investment was made in
competitive, including an employee benefit
programme, together with a long-term
incentive scheme that is offered to broadly
350 senior managers, which encourages a
performance-led culture and aids retention.
leaders of the business and produce
individual development plans in which
to harness and cultivate talent.
strengthened our relationship with these
Succession plans identify future potential
FY16 and FY17 to enhance data analytics in
The Group’s standard employment
order to significantly improve our approach
contracts include notice periods and
to, and engagement with, candidates. The
non-solicitation provisions in the event
initiative is overseen by the Group Data
of an employee leaving.
Marketing Director.
resilient in times of economic uncertainty
We continue to leverage our broad
Strategic report
PRINCIPAL RISKS CONTINUED
7. Contracts
Movement in year
Risk description
The Group enters into contractual
arrangements with clients, some of which
can be on onerous terms and/or impacted
by local regulatory requirements, especially
in relation to Temp/Contracting markets.
Risk impact
– Operational
– Financial
– Reputational
Risk mitigation
During contract negotiations management
seek to minimise risk and ensure that the
nature of risks and their potential impact
is understood.
Our global legal team has the depth of
knowledge and experience to enable them
to advise management on the level of risk
presented in increasingly onerous contracts,
with clear guidelines in operation.
The Group Finance Director reviews all
commercial contracts with onerous non-
standard terms in accordance with the
Group’s risk appetite. In addition the Group’s
Insurance Manager reviews onerous contracts
and where necessary engages with insurance
providers to ensure that risks are covered.
Reviews are performed on a risk basis across
key contracts to identify compliance and
agree improvements to the way in which
we deliver services to clients.
Assurance work is undertaken in key countries
by Internal Audit to ensure contractual
obligations are appropriately managed.
Link to relevant strategic priority
By order of the Board
Doug Evans
Company Secretary
30 August 2017
40
Hays plc Annual Report & Financial Statements 2017
GOVERNANCE
How the Hays Board sets
strategic direction and provides
oversight and control.
42 Chairman’s Statement
44 Board of Directors
46
Leadership
50 Relations with shareholders
51
Effectiveness
54 Accountability
58 Remuneration Report
91 Directors’ Report
96 Directors’ responsibilities
Governance
CHAIRMAN’S STATEMENT
SOLID CORPORATE
GOVERNANCE IS THE
FOUNDATION ON
WHICH THE BUSINESS
IS MANAGED
" Maintaining a high degree of
integrity and transparency in the
business is extremely important."
Alan Thomson
Chairman, Hays plc
Dear Shareholder
I am pleased to present to you the Governance section
of our 2017 Annual Report and, further, confirm that
Hays plc has complied in full with the principles of the
UK Corporate Governance Code (April 2016 edition).
Solid corporate governance continues to be the
foundation on which the Board ensures the business is
managed appropriately and successfully. We take into
consideration the many stakeholders that will be affected
by what we do, not simply the candidates and clients
with whom we work on a daily basis. Maintaining a high
degree of integrity and transparency in the business is
extremely important and will continue to be so; it is no
surprise to me as one fortunate enough to Chair a
company such as Hays that there is increased scrutiny
of the way businesses operate in the private sector, both
publicly and privately owned, and I want to assure you
that your Board of Directors take their responsibilities
extremely seriously.
During the year the Board visited our US business,
in particular the headquarters of the Veredus business
we acquired in December 2014. This was the first time
collectively as a Board we have visited them since
the acquisition (I and other members have visited
independently on previous occasions) and it was
valuable to spend time with the senior management
team there and learn first-hand about the challenges
and opportunities of that market. We are building our
presence within the US, across many sectors, not simply
a roll out of the IT contracting business acquired with
Veredus, and I look forward to talking more in the coming
years about our progress there.
Two of our current complement of non-executive directors
are not standing for re-election at this year’s AGM, as
announced when their replacements were appointed in
July 2017, namely Paul Harrison and Pippa Wicks. During
their 10 and six years respectively, they have made an
immense contribution to the Company. Paul has been
an excellent Chair of our Remuneration Committee and
is serving it well to the very end, having undertaken
our Remuneration Policy consultation during this, his
final year, in addition to his role as Senior Independent
Director. Pippa joined us at a time when the UK economy,
and consequently Hays UK business – which was a
much greater proportion of the Group then – had been
adversely impacted by the global financial crisis; her
experience and wise counsel proved immensely valuable.
42
Hays plc Annual Report & Financial Statements 2017
Overview
Strategic report
Governance
Financial statements
Shareholder information
Statement of
Code Compliance
Hays plc is subject
to the UK Corporate
Governance Code
(the Code) issued by
the Financial Reporting
Council (available at
frc.org.uk), which was
published in April 2016.
As a listed company,
Hays is required to
report on how it has
applied the principles
of the Code and this is
set out in the following
pages. The Board is
pleased to report that
Hays has complied with
all of the provisions of
the Code throughout
the year ended 30 June
2017 and to the date of
this document.
They both leave with our sincere thanks and best wishes
for the future. As one chapter ends, so another begins,
and it was with great pleasure that we welcomed Paul
and Pippa’s replacements to the Board in July. Andrew
Martin will take over as Senior Independent Director and
Susan Murray will take over as Chair of our Remuneration
Committee at the conclusion of our AGM in November
and I can assure you we are in good hands with both of
them based on their experience.
Finally, I would like to acknowledge the sterling efforts of
the Hays Management Team in achieving what they have
over the financial year in many areas, not least of which
is the building of a surplus cash position to enable us to
propose to shareholders the distribution of some of this
by way of a special dividend. I trust this is a decision taken
by your Board with which you are happy as investors,
as we are aware there are other uses for ‘surplus’ cash;
we felt this was the right thing to do at this time.
I look forward to meeting any shareholders who can join
us at our AGM in November, and extend my thanks to you
all for your continued support as we look forward to the
year ahead.
Alan Thomson
Chairman
Our governance framework
Responsibility for good governance rests with the
Board; this is underpinned by an effective governance
framework which, the Board believes, fits the
requirements of Hays’ business.
The Board retains certain matters for its own preserve;
other specific responsibilities are delegated to its
principal Committees, namely the Audit Committee,
the Remuneration Committee and the Nomination
Committee. Each of these Committees operates
within defined terms of reference, which are available
on the Company’s website. The Board has also
delegated to a sub-committee certain matters which
are routine in nature, or which have been agreed in
principle by the Board; such matters require a meeting
of three directors, with an appropriate mix of executives
and non-executives. Such matters are reported to the
full Board.
The Chairman of each Committee reports to the Board
on its proceedings, and minutes of the meetings are
available as appropriate.
Board of Directors
Responsible for the overall management of the organisation of our business
– Set standards, policies and strategic aims
– Ensures we have the resources in place to meet our objectives
– Monitors and reviews material strategic issues, financial performance and risk management
More details page 46
Audit Committee
– Reviews and monitors
financial statements
– Oversees external audit
– Reviews internal audit plans
More details page 54
Nomination Committee
– Makes recommendations to the
Board on its composition and that
of its Committees
More details page 51
Remuneration Committee
– Sets, reviews and recommends
overall remuneration policy
and strategy
– Reviews and approves
remuneration arrangements for
executive directors and senior
management
More details page 58
Chief Executive
Management Board
– Day-to-day management of our business and operations, responsibility
for monitoring detailed performance of all aspects of our business
More details page 46
Group Risk Committee
– Provide strategic leadership, direction and oversight of risk
More details page 49
Hays plc Annual Report & Financial Statements 2017
43
Governance
BOARD OF DIRECTORS
A STRONG TEAM WITH A BROAD
AND COMPLEMENTARY MIX OF
SKILLS AND EXPERIENCE
1
2
3
4
5
6
1. Alan Thomson (70)
Non-Executive Chairman
Appointed: 1 October 2010
Committees: Nomination (Chairman)
Skills and experience: A post-graduate of Glasgow
University and a Chartered Accountant, Alan’s early
career was with Arthur Andersen and Price Waterhouse.
This was followed by senior management roles with
Rockwell International plc, Raychem Ltd and Courtaulds
plc, after which he became Finance Director of Rugby
Group plc and then Smiths Group plc. Alan is a former
Non-Executive Director of Johnson Matthey plc and
Alstom SA, former Chairman of Polypipe Group plc and
a past President of the Institute of Chartered Accountants
of Scotland.
Principal external appointments: Chairman of Bodycote
plc and Oxford Instruments plc.
2. Alistair Cox (56)
Chief Executive
Appointed: 1 September 2007
Skills and experience: A Chartered Engineer with an
MBA from Stanford University, Alistair’s early career
was in various field engineering, management and
research science roles with British Aerospace and then
Schlumberger. Following his MBA, Alistair worked for
McKinsey & Company before joining Blue Circle Industries,
where he was the Group Strategy Director and then the
Regional Director for Asia. Prior to joining Hays, Alistair
was Chief Executive of Xansa plc. Alistair was, until
November 2015, a non-executive director of 3i Group plc.
Principal external appointments: Non-Executive Director
of Just Eat plc.
3. Paul Venables (55)
Group Finance Director
Appointed: 2 May 2006
Skills and experience: A Chartered Accountant and also
USA qualified, Paul started his career at Deloitte & Touche
where he was a Senior Manager in its USA practice. This
was followed by a 13-year career at Exel plc where he
held a number of senior finance and operational roles
including Deputy Group Finance Director and was a
member of the Executive Board of Exel plc and Chairman
of their Acquisitions and Project Review Board. Following
the acquisition of Exel plc by Deutsche Post, Paul worked
in its DHL Logistics division before joining Hays. Paul was,
until July 2015, Senior Independent Non-Executive
Director of Wincanton plc.
Executive Board member
Senior Independent Non-Executive Director
Non-Executive Director
4. Paul Harrison (53)
Senior Independent Non-Executive Director
Appointed: 8 May 2007
Committees: Remuneration (Chairman),
Audit and Nomination
Skills and experience: Paul trained as a Chartered
Accountant with Price Waterhouse. He joined The Sage
Group plc as Financial Controller in 1997 and was Group
Finance Director from 2000 to 2013. From September
2013 to September 2016, Paul was Chief Financial Officer
of WANdisco plc.
Principal external appointments: Paul is Chief Financial
Officer of Just Eat plc and also a Non-Executive Director
of Ascential plc where he is the Chairman of the
Audit Committee and is also a member of the
Remuneration Committee.
5. Victoria Jarman (45)
Independent Non-Executive Director
Appointed: 1 October 2011
Committees: Audit (Chairman), Nomination and
Remuneration
Skills and experience: An engineering graduate of the
University of Leicester and a Chartered Accountant,
Victoria started her career with KPMG before moving
to Lazard Corporate Finance, where she was Chief
Operating Officer of Lazard’s London and Middle East
operations and a member of its European Management
Committee. Victoria was, until July 2016, a Non-Executive
Director of De La Rue plc.
Principal external appointments: Victoria is a Non-
Executive Director of Equiniti Group plc where she is the
Chairman of the Audit Committee and a member of the
Risk and Remuneration Committees.
6. Torsten Kreindl (54)
Independent Non-Executive Director
Appointed: 1 June 2013
Committees: Audit, Nomination and Remuneration
Skills and experience: A graduate from Johannes Kepler
University in Linz, Austria with a PhD in industrial
engineering and technical chemistry. Torsten has held
senior executive positions for Booz Allen Hamilton
and Deutsche Telekom AG and was, until April 2016,
a member of the Swisscom AG Board.
Principal external appointments: Torsten is a partner
in Grazia Equity, a Munich-based capital firm.
44
Hays plc Annual Report & Financial Statements 2017
7
8
9
10
11
12
Overview
Strategic report
Governance
Financial statements
Shareholder information
Board diversity
Board tenure
Board experience
Board composition
Male
Female
64%
36%
0-3 years
3-6 years
6+ years
36%
28%
36%
Finance
Engineering and
technology
Media and marketing
Operations
18%
37%
27%
18%
Non-Executive
Chairman
Executive
73%
9%
18%
7. Andrew Martin (57)
Independent Non-Executive Director
10. Pippa Wicks (54)
Independent Non-Executive Director
Appointed: 12 July 2017
Committees: Audit, Nomination and Remuneration
Appointed: 1 January 2012
Committees: Audit, Nomination and Remuneration
Skills and experience: Andrew trained as a Chartered
Accountant at Peat Marwick before moving to Arthur
Andersen where he became a partner. He was, until 2015,
Group Chief Operating Officer, Europe and Japan, for
Compass Group plc, having previously been their Group
Finance Director from 2004 to 2012. Before joining
Compass Group, Andrew was Group Finance Director
at First Choice Holidays plc and prior to that held a
number of Senior Finance roles at Granada Group plc.
Skills and experience: A post-graduate of Oxford
University with a diploma in corporate finance from
the London Business School, Pippa started her career
with Bain & Company. She subsequently became Chief
Financial Officer of Courtauld Textiles plc and then
Chief Executive Officer of FT Knowledge, the corporate
training division of Pearson plc. Her previous non-
executive directorships have been with Ladbrokes plc,
Hilton International plc and Arcadia plc.
Principal external appointments: Andrew is a Non-
Executive Director of easyJet plc, Chairing their IT
Governance and Oversight Committee and Finance
Committee, and a Non-Executive Director at Intertek
Group plc, Chairing their Audit Committee.
8. Susan Murray (60)
Independent Non-Executive Director
Appointed: 12 July 2017
Committees: Audit, Nomination and Remuneration
Skills and experience: Susan’s executive career was spent
in consumer goods and retail, with organisations such as
Colgate Palmolive, Kraft, Duracell and Diageo and, most
recently, as CEO of Littlewoods Stores. Susan has served
as a Non-Executive Director of Compass Group plc,
Imperial Tobacco Group (now Imperial Brands plc) and
Enterprise Inns (now EI Group plc).
Principal external appointments: Susan is a Non-Executive
Director of Grafton Group plc, where she also chairs their
Remuneration Committee.
9. MT Rainey (62)
Independent Non-Executive Director
Appointed: 14 December 2015
Committees: Audit, Nomination and Remuneration
Skills and experience: An experienced media and
marketing professional, MT Rainey has worked extensively
in the UK and the US. MT founded the advertising agency
Rainey Kelly Campbell Roalfe, which she grew to a top 20
agency before it was sold to Y&R, a subsidiary of WPP plc,
and where MT was CEO then Chair until 2005. In addition
she was Chair of the leading digital strategy agency
Th_nk Ltd from 2008–2015.
Previous non-executive directorships held by MT include
WH Smith plc, Pinewood Group plc and STV Group plc.
MT has Masters’ degrees from Aston University and
Glasgow University.
Principal external appointments: MT is a Non-Executive
Director of Channel 4 Television.
Principal external appointments: Pippa is presently
Deputy Chief Executive of the Co-op Group and Chair of
AlixPartners UK turnaround and restructuring business.
11. Peter Williams (64)
Independent Non-Executive Director
Appointed: 24 February 2015
Committees: Audit, Nomination and Remuneration
Skills and experience: Peter has a Law degree from
Cambridge University and is a Chartered Accountant.
He was, until 2011, Group Finance Director of Daily Mail
& General Trust plc, a role he performed for 19 years,
making him one of the longest serving CFOs in the FTSE.
Principal external appointments: Since 2011 Peter has
been a Non-Executive Director of Perform Group, a
leading digital sports media company; he is also a Trustee
of the Royal Academy and a member of the Industrial
Advisory Board of GVQ Asset Management, a UK equity
management company.
12. Doug Evans (54)
Company Secretary and General Counsel
Appointed: 4 February 2013
Skills and experience: A law graduate from Rhodes
University who began his career with Webber Wentzel
in South Africa, specialising in corporate and commercial
law before moving in-house. Doug has previously held
the posts of Company Secretary & Corporate Legal
Director at Exel plc and Group General Counsel at Royal
Mail Limited. Prior to joining Hays, Doug was an Executive
Director, Company Secretary & General Counsel at
Mitchells & Butlers plc.
Hays plc Annual Report & Financial Statements 2017
45
Governance
LEADERSHIP
The Hays Board
Composition of the Board
The Board is currently made up of two executive directors and nine
non-executive directors, including the Chairman. Their biographies,
including prior experience, are set out on pages 44 and 45.
Board changes during the year
There were no changes to the Board during the Financial Year
being reported on. However, on 12 July 2017 Andrew Martin and
Susan Murray joined the Board.
Election and re-election of directors at the 2017 AGM
In accordance with the Company’s Articles of Association and
the principles of the Code, all Directors of the Company will offer
themselves for election or re-election at the 2017 AGM with the
exception of Paul Harrison and Pippa Wicks. Having received advice
from the Nomination Committee, the Board is satisfied that each
director standing for election/re-election is qualified for election
or re-election by virtue of their skills, experience and commitment
to the Board.
Operational governance
The Management Board
Responsibility for the day-to-day management of our business and
operations rests with the Chief Executive, who operates through the
Management Board – the principal executive committee within Hays.
In performing this role, the Management Board also has responsibility
for monitoring detailed performance of all aspects of our business.
The Management Board, which meets monthly, is chaired by the
Chief Executive and also comprises the Group Finance Director, the
Company Secretary & General Counsel, the Chief Marketing Officer,
the Group Technology Director, the Group Head of People and
Culture and the Managing Directors of the Group’s operating
divisions. Each Management Board member has a clearly defined
remit, business objectives and financial budget within which they
operate. Our organisational structure is built around three regions
globally: UK & Ireland; Continental Europe & Rest of World; and Asia
Pacific. Regional Managing Directors operate their business through
regional boards, which comprise key business and functional
managers with specific responsibilities within those regions. Each
business is given operational autonomy, as far as possible, within a
well-established internal control framework which consists of, among
other things, a Group-wide set of policies and procedures, operational
delegated authorities and policies on anti-bribery and corruption,
competition compliance, conduct and ethics, and whistleblowing.
The role of the Hays plc Board
The plc Board is collectively responsible to the Company’s shareholders
for the long-term success of the Company. It sets the Company’s
strategic objectives and determines the risk appetite and control
framework within which those objectives are achieved. The Board
provides effective oversight of the Company and its businesses within
a robust governance structure that helps achieve the long-term
success of the Company and deliver sustainable shareholder value.
The Board also provides leadership of the Company and direction
for management, ensuring that the necessary resources are in place
for the Company to meet its objectives and it keeps under review
management’s performance in regard to achieving those objectives.
46
Hays plc Annual Report & Financial Statements 2017
Our aim is to be the world’s pre-eminent specialist recruitment
business. In pursuit of that aim, our employees across the globe work
towards achieving our Strategic Priorities, set out on page 20. The
Board closely monitors management and its delivery of a sustainable
and profitable business, ensuring it continues to operate within the
appropriate risk-reward culture. The Board has established a core
set of brand values, which it promotes throughout the Group. These
values, which underpin our skills, behaviours and way of doing
business, are being ambitious, being passionate about people, being
expert at what we do and being inquisitive about the world of work.
These values serve to engender an entrepreneurial culture within
Hays, which is critical to our continued success without promoting
excessive risk-taking.
Role of the Non-Executive Directors
Hays’ non-executive directors have a broad and complementary mix
of business skills, knowledge and experience acquired across sectors
and geographies. This allows them to provide strong, independent
and external perspectives to Board discussions, which complement
the skills and experience of the executive directors. In turn, this leads
to a diversity of views being aired at Board meetings, robust and
constructive debate and optimal decision-making. At the same time,
it also reduces the likelihood of any one perspective prevailing unduly.
A key role performed by the non-executive directors is the scrutiny of
executive management in meeting agreed objectives and monitoring
the reporting of performance. They also ensure that financial controls
and systems of risk management are both rigorous and appropriate
for the needs of the business.
The terms and conditions of appointment of non-executive directors,
including the expected time commitment, are available for inspection
at the Company’s registered office, and a pro forma letter of
appointment is also available on the Company’s website.
During the year, the Board considered the independence of each of
the non-executive directors, save for the Chairman who was deemed
independent by the Board at the date of his appointment. In doing so,
it concluded that each non-executive director remained independent
of management and free from any relationship that could interfere
with the exercise of their independent judgment. In making the
assessment, the Board recognised that 15 November 2016
represented nine years since Paul Harrison was first elected by
shareholders; notwithstanding the length of his tenure, the Board
believe Paul Harrison continues to demonstrate independence of
thought and judgment and as such the Board continued to deem him
independent for the purposes of the Code. All of Hays’ directors are
expected to act in the best interests of the Company.
Chairman and Chief Executive
The roles of the Chairman and Chief Executive are separate, with
a clear division of responsibilities between them which is set out in
writing; the responsibility for this separation of duties rests formally
with the Board.
As Chairman, Alan Thomson presides over the Board and is
responsible for its leadership and overall effectiveness. In doing so,
he fosters and helps to maintain an effective working relationship
between the executive and non-executive directors.
As Chief Executive, Alistair Cox has responsibility for the day-to-day
management of the Company’s business and the implementation and
delivery of the Board strategy.
This separation of roles enhances the independent oversight of
executive management by the Board and more closely aligns the
Board with shareholders. It also means that no one individual within
the Company has unfettered powers of decision making.
Overview
Strategic report
Governance
Financial statements
Shareholder information
Our governance framework
Alan Thomson
Non-Executive Chairman
– Leadership and the effective operation of the Board
– Chairing the Board and Nomination Committee
– Setting the agenda, style and tone of Board discussions including
promoting openness, debate and effective individual contribution
– Ensuring that all directors receive clear and accurate
information on a timely basis
– Ensuring the effectiveness of the Board through induction,
ongoing training and regular evaluations
– Effective communications with shareholders
Alistair Cox
Chief Executive
– Day-to-day management of the Group’s business
– Formulating strategic business objectives for Board approval
and implementing approved strategic objectives and policies
– Managing and optimising the operational and financial
performance of the business in conjunction with the Group
Finance Director
– Fostering a good working relationship with the Chairman
– Chairing the Management Board and developing senior talent
within the business for succession planning
Paul Harrison
Senior Independent Director
– Acting as a sounding board for the Chairman
– Serving as an alternative contact and intermediary for other
directors and shareholders
Doug Evans
Company Secretary and General Counsel
– Acting as Secretary to the Board, its Committees and the
Management Board
– Providing legal and governance support to the Board as a whole
– Leading the Chairman’s annual performance appraisal
and directors individually
and ultimate succession
– Ensuring that the Group complies with all relevant legal,
regulatory and governance requirements
Senior Independent Director
The Board appointed Paul Harrison to the position of Senior
Independent Director on 9 November 2011. In performing this role
Paul provides shareholders with someone to whom they can turn
if ever they have concerns which they cannot address through the
normal channels, for example with the Chairman or executive
directors. Similarly, as Senior Independent Director Paul is available
as an intermediary between his fellow directors and the Chairman.
While there were no requests from directors or shareholders for
access to the Senior Independent Director during the year, the role
serves as an important check and balance in Hays’ governance
process. In the fulfilment of his role Paul ensures he maintains a
thorough understanding of the views of the Company’s shareholders.
When Paul steps down from the Board at the 2017 AGM, the role of
Senior Independent Director will be taken over by Andrew Martin.
Key roles and responsibilities of these positions, and that of the
Company Secretary, are provided above.
Matters reserved for the Board
A schedule of formal matters reserved for the Board’s decision and
approval is available on our website, haysplc.com. These largely relate
to matters of governance and business where independence from
executive management is important, and include the following:
– Approving financial results and other financial, corporate and
governance matters;
– Approving Group strategy;
– Approving appointments to the Board;
– Approving and recommending dividends as appropriate and
deciding dividend policy;
– Reviewing material litigation;
– Approving major capital projects, acquisitions and disposals;
– Approving material contracts;
– Reviewing annually the effectiveness of internal control and the
nature and extent of significant risks identified by management
and associated mitigation strategies; and
– Approving the annual budget.
No changes to the schedule of matters were made during the year.
Board decisions are usually by consensus at Board meetings. On
occasion, decisions may be taken by a majority of Board members.
In the case of an equality of votes, Hays’ Articles of Association
provide the Chairman with a second or casting vote.
Board commitment
The Board has established a policy permitting its executive directors
to hold only one external non-executive directorship, subject to any
possible conflict of interest. This ensures that executive directors
retain sufficient time for and focus on the Company’s business, whilst
allowing them to gain external Board exposure as part of their
leadership development. Executive directors are permitted to retain
any fees paid for such services. Details of the annual rate of fees
payable are shown below:
Director
Alistair Cox(1)
Fee
External
appointment
£60,000
Just Eat plc
(1) Became a non-executive director of Just Eat plc on 2 May 2017. Fee shown
is annual fee.
While the Company does not have a similar policy for non-executive
directors, their key external commitments are reviewed each year
to ensure that they too have sufficient time commitment for the
fulfilment of their Board responsibilities. Key external commitments
of the Board are included within their biographies on pages 44 and 45.
The Board considered the commitments of the Chairman and is
satisfied that he has sufficient time to devote to his Board
responsibilities with Hays.
Hays plc Annual Report & Financial Statements 2017
47
Governance
LEADERSHIP CONTINUED
Information and support
The Board meets regularly throughout the year and agrees a forward
calendar of matters that it wishes to discuss at each meeting.
Standing items, including operational, functional and financial reviews
and Committee updates are considered at each scheduled Board
meeting, with unplanned items such as commercial or property-
related decisions being considered as and when required. The
Chairman, in conjunction with the Chief Executive and Company
Secretary, plans the agenda for each Board meeting and ensures that
supporting papers are clear, accurate, timely and of sufficient quality
to enable the Board to discharge its duties.
All Board directors have access to the Company Secretary, who advises
them on Board and governance matters. As well as the support of
the Company Secretary, there is a procedure in place for any director
to take independent professional advice at the Company’s expense
in the furtherance of their duties, where considered necessary.
Our values and culture
Hays is a people business and people are at the core of what we do.
As such we foster a meritocratic and entrepreneurial culture, which is
reflected in our four brand values of:
– Expert;
– Ambitious;
– Passionate about People; and
– Inquisitive.
To support this culture we maintain an open style of communication,
which is designed to both identify issues early, and also to recognise
potential opportunities, so that in both cases appropriate action can
be taken in terms of reducing any negative impact on the business
whilst ensuring opportunities are exploited.
These characteristics and brand values are core to our Group culture
and are supported via the following mediums and underpinned by the
Hays Group Policies and Procedures:
– Corporate communications;
– Global intranet; and
– Hiring, induction, training and promotion criteria.
Board focus during 2017 – What the Board has done in the year
Percentage of time spent by the Board
Developing a successful strategy
30%
Ensuring appropriate financial management 30%
Implementing governance and
ethics and monitoring risk
Stakeholder engagement
25%
15%
1. Developing a successful strategy
– Attended a Group strategy day, with members of the
Management Board and other senior executives, to consider
key strategic priorities and challenges faced across the business
– Approved the Group strategy and reviewed associated
performance
– Visited operations in the USA and the UK, receiving presentations
from senior management on business performance, the state of
the market, strategy, succession planning and opportunities
– Reviewed strategy plans and received reports on the operational
performance for the Group’s regions
– Received reports on technology and innovation and related
industry developments
– Reviewed Group risk
48
Hays plc Annual Report & Financial Statements 2017
2. Ensuring appropriate financial management
– Received and considered regular reports on the
Group’s financial performance
– Approved financial announcements for publication
– Approved the annual budget
– Approved dividend policy, payments and recommendations
as appropriate, including consideration of a special dividend
– Reviewed the status of the Company’s closed defined benefit
pension scheme
– Met with the Company’s financial adviser and corporate brokers
– Considered ad hoc property and finance-related transactions
3. Implementing governance and ethics and monitoring risk
– Performed the annual review of the effectiveness of internal
control and the nature and extent of risks identified together
with mitigation plans
– Reviewed regular reports on legal and compliance matters from
the Company Secretary
– Received formal training updates on corporate reporting, legal
and regulatory matters
– Reviewed Board and Committee effectiveness
– Reviewed and approved minor changes to the terms of reference
of the Board Committees
– Reviewed the Directors’ Conflicts of Interest procedures
– Reviewed the Company’s compliance with the Code
– Received further updates in connection with the implementation
of the Market Abuse Regulation
4. Stakeholder engagement
– Considered the results from TALKback, the Group’s employee
engagement survey
– Considered and approved invitations under the Company’s
all-employee share plans
– Received regular updates on views and feedback from investors
– Considered the Company’s investor relations strategy
– Considered and reviewed the leadership and
development strategy
– Reviewed the Group’s succession plans and assessed risks
and options
Overview
Strategic report
Governance
Financial statements
Shareholder information
Board attendance
The Board met a total of seven times during the year. In addition, the Board attended an annual Strategy Review meeting with the
Management Board being present. Six Board meetings were held in the UK and one in Tampa, Florida, USA.
Board and Committee attendance for scheduled meetings during the year are shown below.
Board and Committee attendance
Alan Thomson
Alistair Cox
Paul Venables
Paul Harrison(1)
Victoria Jarman(2)
Torsten Kreindl(3)
MT Rainey
Pippa Wicks(2)
Peter Williams
Board
7 of 7
7 of 7
7 of 7
6 of 7
7 of 7
7 of 7
7 of 7
7 of 7
7 of 7
Audit
Committee
Nomination
Committee
Remuneration
Committee
–
–
–
3 of 4
4 of 4
4 of 4
4 of 4
4 of 4
4 of 4
3 of 3
–
–
2 of 3
3 of 3
2 of 3
3 of 3
3 of 3
3 of 3
–
–
–
5 of 5
4 of 5
5 of 5
5 of 5
4 of 5
5 of 5
(1) Unable to attend one Board meeting, one Audit Committee meeting and one Nomination Committee meeting due to a prior commitment.
(2) Unable to attend one Remuneration Committee meeting due to a prior commitment.
(3) Unable to attend one Nomination Committee meeting due to a prior commitment.
Risk management and internal control
The Board has overall responsibility for the Group’s internal control
systems and for reviewing their effectiveness. This has been designed
to assist the Board in making better, more risk-informed, strategic
decisions with a view to creating and protecting shareholder value.
In practice, the Board delegates the task of implementing its policy
on risk and control to management. Further support and assistance
is provided by an independent Internal Audit function, details of
which are provided in the Audit Committee Report.
The Management Board oversees an enterprise risk management
system which allows for a holistic, top-down and bottom-up view
of key risks facing the business. These are recorded in a Group risk
register, which is reviewed at least annually by the Management
Board and submitted to the Board thereafter to enable it to carry out
its risk oversight responsibility. This exercise involves a current and
forward look at various risks affecting the business and prioritising
them according to risk magnitude and likelihood. Risks covered
include operational, business and compliance risks as well as financial
risks. Each risk is assigned an owner with current and future risk
mitigation procedures detailed, with the continuing monitoring of
these undertaken on an ongoing basis. The principal risks currently
facing the business are detailed in the Strategic Report.
The Group Risk Committee assists the Management Board in
providing strategic leadership, direction, reporting and oversight
of the Group’s risk framework. The Committee is chaired by the
Group Finance Director and membership includes representation
across the global network and comprises operational, IT and finance
functions. Meetings are held at least three times a year, with activities
and recommendations reported to the Management Board. The Hays
plc Board also has oversight of the Committee and its activities.
The Board reviews the Group strategy and approves a budget for the
organisation each year, to ensure that the performance of the business
is in line with the plan and financial and operational reporting
procedures are in place. Comprehensive annual budgets and
quarterly forecasts are approved by the Management Board and
business divisions. Monthly progress and variances are reported
to the Management Board and subsequently to the Board at each
meeting as part of the ongoing internal control process.
Complementing these financial controls is a set of Group-wide
policies and procedures addressing non-quantifiable risks. These
include security policies, the Group’s Code of Conduct and Ethics,
Anti-Bribery and Corruption Policy, and whistleblowing arrangements.
The Board regularly receives management and Committee reports
which also form part of the internal control system.
The Group’s internal control procedures are subject to regular review
and provide an ongoing process for identifying, evaluating and
managing significant risks. This is in accordance with the Guidance
on Risk Management and Internal Control and Related Financial and
Business Reporting (September 2014). The Board recognises that
such a system has its limitations in that risk management requires
independent judgment on the part of directors and executive
management. Internal controls are designed to manage rather than
eliminate the risk of failure to achieve business objectives, and can
provide only reasonable and not absolute assurance against material
misstatement or loss.
In accordance with its regulatory obligations, the Board, with the
assistance of the Audit Committee, carried out an annual assessment
of the effectiveness of the Group’s risk management and internal
control system during the reporting period. During the course of its
review, the Board did not identify or hear of any failings or weaknesses
that it determined to be significant and it therefore concluded that
they are operating effectively.
Conflicts of interest
Procedures are in place for the disclosure by directors of any interest
that conflicts, or possibly may conflict, with the Company’s interests
and for the appropriate authorisation to be sought if a conflict arises,
in accordance with the Company’s Articles of Association.
In deciding whether to authorise a conflict or potential conflict of
interest only those directors that have no interest in the matter under
consideration will be able to take the relevant decision; in taking such
a decision the directors must act in a way they consider, in good faith,
will be most likely to promote the success of the Company and may
impose such limits or conditions as they think fit. The Board has
reviewed the procedures in place and considers that they continue
to operate effectively. There were no actual or potential conflicts
of interest which were required to be authorised by the Board during
the year under review or to the date of this report.
Hays plc Annual Report & Financial Statements 2017
49
Governance
RELATIONS WITH SHAREHOLDERS
Engagement with investors
Responsibility for shareholder relations rests with the Chairman,
Chief Executive and Group Finance Director. They ensure that there
is effective communication with shareholders on matters such as
governance and strategy, and are responsible for ensuring that the
Board understands the views of major shareholders on such matters.
The Company’s investor relations programme is supported by a
dedicated Investor Relations team which acts as the primary point of
contact with the investor community and is responsible for managing
ongoing relations with investors and shareholders. The Board receives
regular reports from the Investor Relations team. Feedback from
meetings held between executive management, or the Investor
Relations team, and institutional shareholders is also reported
to the Board.
As a part of a comprehensive investor relations programme, formal
meetings are scheduled with investors and analysts to discuss the
Group’s half- and full-year results. In the intervening periods, Hays
continues its dialogue with the investor community by meeting key
investor representatives, holding investor roadshows and
participating in conferences. Meetings with debt providers, principally
the Company’s banks, also take place on a regular basis. During the
year, the executive directors and senior management met with
some two hundred institutions around the world, interacting with
shareholders and potential shareholders. Presentations to analysts
are posted on the Company’s website at haysplc.com and if you
would like to know more about our relations with shareholders
please contact ir@hays.com.
Investor meetings held in FY17
Executive Management
Investor Relations team
Other senior management
Annual General Meeting
The Board uses the Company’s AGM to communicate with investors
and welcomes their participation. All shareholders are entitled to
attend the AGM, at which the Board members are present. The Board
views the AGM as a good opportunity to meet with its smaller, private
shareholders. A summary presentation of results is given by the Chief
Executive before the formal business of the meeting is conducted.
All shareholders present can question the Chairman, the Chairmen
of the Committees and the rest of the Board both during the meeting
and informally afterwards.
The Notice of AGM and related papers are sent to shareholders at
least 20 working days before the meeting. Voting on all resolutions at
the AGM is by means of a poll, which, reflecting the number of voting
rights exercisable by each member, is considered by the Board to be
a more democratic method of voting. As soon as practicable following
the conclusion of the AGM, the proxy votes cast, including details of
votes withheld, are announced to the London Stock Exchange via the
Regulatory News Service and published on our website.
United Kingdom
Continental
Europe
North America
147
157
10
21
40
3
43
76
14
Total
211
273
27
Geographic breakdown of investor meetings
United Kingdom
Continental Europe
North America
61%
13%
26%
50
Hays plc Annual Report & Financial Statements 2017
Overview
Strategic report
Governance
Financial statements
Shareholder information
EFFECTIVENESS
NOMINATION COMMITTEE REPORT
" Senior leadership
profile is key to
the Company’s
agility in the
current business
landscape."
Alan Thomson
Chairman of the
Nomination Committee
Dear Shareholder
Planning for Paul Harrison’s and Pippa Wicks’ succession
has been a focus for the Committee over the last year.
Paul holds two key roles within the Company, as Senior
Independent Director and Chair of our Remuneration
Committee and it is essential that the Nomination
Committee ensures these roles are filled by the right
person, or people. To this end, we announced the
appointment of two new Non-Executive Directors on
12 July 2017, Andrew Martin and Susan Murray.
The Nomination Committee supported the Board during
the year in ensuring the right balance of skills, experience,
independence and knowledge were maintained to best
serve the business and fulfil the Board’s responsibility to
stakeholders and I am delighted Andrew and Susan
agreed to join the Board.
The Zygos Partnership was appointed to facilitate the
recruitment of Andrew Martin and Susan Murray.
Succession planning remains an area of focus for the
Committee across the executive and non-executive
spectrum. The landscape in which the Company operates
is continually changing; for companies to succeed they
need to remain agile, able not only to respond to, but to
anticipate and facilitate, change to remain competitive.
The profile of the senior leadership of the Company, and
therefore the membership of the plc Board of Directors
and the Company’s senior executive team, is a key
element to that agility and your Nomination Committee
has this front of mind in its deliberations.
Board appointments will continue to be made on merit,
and the Committee recognises the benefits of diversity
and, provided we remain true to our key principles, we
will aim to build on our existing diverse composition in
the future and note the changes within the Disclosure
Guidance and Transparency Rules applying to future
financial years which build on the existing Code provisions.
Alan Thomson
Nomination Committee Chairman
30 August 2017
Role of the Nomination Committee
The role of the Committee is summarised below and
detailed in full in its terms of reference, a copy of which
is available on the Company’s website (haysplc.com)
under Corporate Governance.
and its Committees and make recommendations
to the Board with regard to any changes;
– Consider succession planning for directors and
other senior executives;
The main responsibilities of the Committee are to:
– Review the structure, size and composition (including
skills, knowledge, experience, diversity and balance of
executive and non-executive directors) of the Board
– Identify and nominate for the approval of the
Board, candidates to fill Board vacancies; and
– Keep under review the time commitment expected
from the Chairman and the non-executive directors.
Membership and meetings
The Committee is appointed by the Board. It is chaired
by the Chairman of the Board and comprises the
non-executive directors, all of whom are independent,
save for the Chairman who was independent on
appointment. The names and qualifications of the
Committee’s current members are set out in the
directors’ biographies on pages 44 and 45.
Committee member
Alan Thomson (Chairman)
Paul Harrison
Victoria Jarman
Torsten Kreindl
MT Rainey
Pippa Wicks
Peter Williams
The Committee meets as required and did so on three
occasions during the year and all members were in
attendance at each meeting, with the exception of
Torsten Kreindl and Paul Harrison who each missed
one meeting due to prior commitments. Other regular
attendees at Committee meetings include the Company
Secretary and, on invitation, the Chief Executive and
Group Finance Director.
January
2017
February
2017
May
2017
Main Committee activities during the financial year
– Considered Board succession plans
– Reviewed the composition of the Board and
its Committees
– Considered, and recommended to the Board, the
appointment of two non-executive directors
– Considered and recommended the election and
– Reviewed the Committee’s terms of reference
re-election of each director, as appropriate, at the AGM
Hays plc Annual Report & Financial Statements 2017
51
Governance
EFFECTIVENESS CONTINUED
Non-executive director appointment process
The Company adopts a formal, rigorous and transparent
procedure for the appointment of new directors and
senior executives with due regard to diversity. Prior to
making an appointment, the Committee will evaluate
the balance of skills, knowledge, experience and diversity
on the Board and, in light of this evaluation, will prepare
a description of the role and capabilities required, with a
view to appointing the best-placed individual for the role.
In identifying suitable candidates, the Committee uses
open advertising or the services of external advisers
to facilitate the search and considers candidates on
merit and against objective criteria and ensuring that
appointees have sufficient time to devote to the position,
in light of other significant commitments, and no conflicts
of interest.
A long-list of potential candidates would be drawn up,
from which an appropriate number would be shortlisted
for interview based upon their fulfilment of the
appointment criteria. The Committee would then
recommend to the Board the appointment of the
preferred candidate (or candidates, if there is more than
one considered suitable) for subsequent appointment.
During the year the Committee retained The Zygos
Partnership in respect of Andrew Martin and Susan
Murray’s appointments. The Zygos Partnership is an
independent executive search consultancy and it has
no other connection with the Company.
In the year ahead, the Committee will continue to assess
the Board’s composition and how it may be enhanced
and will consider diversity (including, but not limited to,
gender and experience) and geographic representation
and continue to use independent consultants as
appropriate to ensure a broad search for suitable
candidates.
Board composition is routinely reviewed to ensure that
the balance of skills, knowledge and experience of the
Hays Board remains appropriate to its business.
Hays’ Group policy is to hire the best candidates
for all positions at all levels throughout the business,
irrespective of gender, including candidates at
Board level.
The Board has not set any specific aspirations in respect
of gender diversity at Board level and supports fully
the Code principles in respect of diversity. However, the
Board is of the view that diversity is less about quotas,
and recognises the benefits of diversity, of which gender
is one aspect, and it will continue to ensure that this is
taken into account when considering any particular
appointment, whilst ensuring appointments are made
on merit and ability to enhance the performance of
the business.
Succession planning
A key task of the Committee is to keep under review the
Company’s succession plans for members of the Board
over the short, medium and longer term, to ensure the
Board remains appropriately balanced between new and
innovative thinking and longer-term stability. The focus
during the 2017 financial year was in identifying a suitable
replacement for Paul Harrison and Pippa Wicks, as well as
planning for the succession of other Board members.
Board appointment criteria are considered automatically
as part of the Committee’s approach on succession
planning. The Committee believes that limited tenure
and the subsequent enforced retirement of directors
is not always appropriate for sound business leadership.
Accordingly, matters of director tenure are viewed on
a case-by-case basis.
At present, the Board has not set any specific aspirations
in respect of gender diversity though it believes that
refreshment of the Board should take into account the
need to consider diversity in all forms.
Tenure of non-executive directors
Appointments to the Board are made for initial terms
not exceeding three years and are ordinarily limited to
three such terms in office. Each director stands for
re-election annually.
Director performance
Having reviewed the independence and contribution of
directors, the Committee confirms that the performance
of each of the directors standing for election or
re-election at the 2017 AGM continues to be effective
and demonstrates commitment to their roles, including
independence of judgment, commitment of time for
Board and Committee meetings and any other duties.
Accordingly, the Committee has recommended to the
Board that all current directors of the Company, with the
exception of Paul Harrison and Pippa Wicks, be proposed
for election or re-election, at the forthcoming AGM.
Board induction and development
On appointment, each director takes part in a tailored
and comprehensive induction programme which is
designed to give him or her a deep understanding of
the Company’s business, governance and stakeholders.
Elements of the programme include:
– Senior management briefings to provide a business
overview, current trading conditions and strategic
commercial issues;
– Meetings with the Company’s key advisers and major
shareholders, where necessary;
– Business site visits across regions;
– A legal and regulatory briefing on the duties of
directors of listed companies;
– Details of the Group corporate structure, Board and
Committee structures and arrangements, and key
policies and procedures; and
– The latest statutory financial reports and
management accounts.
52
Hays plc Annual Report & Financial Statements 2017
Overview
Strategic report
Governance
Financial statements
Shareholder information
The Chairman, in conjunction with the Company
Secretary, ensures that directors are provided with
updates on changes in the legal and regulatory
environment in which the Company operates. These
are incorporated into the annual agenda of the Board’s
activities along with wider business and industry updates;
the Chairman also keeps under review the individual
training needs of Board members. The Company’s
principal external advisers provide updates to the Board,
at least annually, on the latest developments in their
respective fields, and relevant update sessions are
included in the Board’s strategy meetings. The Company
Secretary presents corporate governance reports to the
Board as appropriate, together with any relevant technical
directives issued by the Company’s auditor. In this way,
each director keeps their skills and knowledge current so
they remain competent in fulfilling their role both on the
Board and on any Committee of which they are a member.
Board evaluation
During the 2017 financial year the Board assessed its
own effectiveness through an internal Board evaluation
process. The 2017 evaluation was facilitated by the
Chairman. Directors completed an evaluation questionnaire,
followed up with one-to-one meetings with the Chairman
as appropriate.
The questionnaire covered a broad base of subject
matter in order to assess effectiveness, such as the
conduct of Board meetings and their administration; risk;
strategy; culture; stakeholder interests; Board composition
and member performance; and the broader challenges
faced by the Board and how those are managed.
Committee effectiveness was also assessed separately.
Results were presented to the Board and minor areas
for improved operation identified and agreed, including
dissemination of information and issues around succession
planning. There was general agreement that, overall,
the Board and its Committees continued to operate
effectively throughout the period and that its operation
had improved over the course of the year.
In addition to the Board and Committee evaluation, the
Chairman evaluated the individual performance and
effectiveness of each director. The Senior Independent
Director led a separate appraisal of the Chairman’s
performance with his fellow non-executive directors,
which took into consideration both the executive and
non-executive directors’ views.
Good progress against the action points identified in the
2016 (external) Board evaluation has been made during
the year. These included an increased focus on risk, Board
scheduling and contact between the Chairman and other
members of the Board between formal meetings.
Hays plc Annual Report & Financial Statements 2017
53
Governance
ACCOUNTABILITY
AUDIT COMMITTEE REPORT
" The Audit
Committee keeps
the Company’s
enterprise risk
management
framework under
close scrutiny."
Victoria Jarman
Chairman of the
Audit Committee
You will find below further detail on the Committee’s
activities during the year under review, which include
discharging its financial reporting, internal control and
risk management responsibilities, supporting the Board in
ensuring the Annual Report, as a whole, is fair, balanced
and understandable, and consideration of, amongst other
matters, audit effectiveness (both internal and external),
non-audit services policy and the Group’s whistleblowing
policy and procedures. I hope this will provide shareholders
with the necessary information for them to assess the
Company’s performance, business model and strategy.
During the year the Financial Reporting Council’s
Corporate Reporting Review Team (‘CRRT’) carried out
a review of the Company’s Annual Report for the year
ended 30 June 2016. The response by the Company to
the request for information was discussed with me in my
capacity as Chairman of the Audit Committee prior to
responding to the CRRT. Details of the enquiry raised by
the CRRT and the Company’s response thereto were also
considered by the Committee. The CRRT have closed
their enquiries with no requirements to restate any
disclosures. Undertakings of a limited nature were given
to enhance certain disclosures in the future in response
to the CRRT review. The Committee is satisfied that the
enhancements proposed and agreed with the CRRT have
been appropriately incorporated in the 2017 Annual Report.
Victoria Jarman
Audit Committee Chairman
30 August 2017
Dear Shareholder
I am pleased to present to you the Audit Committee
report prepared in accordance with the 2016 edition
of the Code.
This is our first year of working with our new external
auditor, PricewaterhouseCoopers. The move from one
auditor to another can be a difficult process but I would
like to express my thanks to both audit firms and the
internal finance team for a smooth and successful
transition. Notwithstanding that Deloitte were not
being put forward to shareholders for re-election, the
Committee undertook a review of their performance as
there was value in this for all concerned and it can inform
our planning for the forthcoming year regardless. I am
also pleased to say that feedback from the exercise
continued to be positive.
The Committee has again supported the directors in their
assessment of the long-term viability of the Company for
the purposes of the Code. I am mindful that our chosen
‘viability period’, of three years, is common to the
majority of companies; however, I would like to reassure
you that we have not simply chosen this time frame as
a default option, but have taken into account a great
number of factors, not least of which include the limited
forward visibility in our sector and the diversity of our
business, both sectorally and geographically. The
strength of our risk assessment process provides further
support underpinning our rationale for this time frame
being chosen again.
The Group Risk Committee becomes further embedded
in the way risk is managed within the Company’s
enterprise risk management framework with each
passing year. The Audit Committee keeps this framework
under close scrutiny and the Audit Committee continues
to be satisfied that the Board maintains sound risk
management and internal controls.
Role of the Audit Committee
The Committee’s terms of reference are available on
the Company’s website (haysplc.com) under Corporate
Governance.
– Monitor the relationship with the Company’s external
Auditor, including consideration of fees, audit scope
and terms of engagement;
The key responsibilities of the Committee are to:
– Monitor the integrity of the financial statements of
the Company, including annual and half year reports,
interim management statements, and other formal
announcements relating to its financial performance,
and reviewing and reporting to the Board on
significant financial reporting issues and judgments;
– Where requested by the Board, review the content of
the Annual Report and advise the Board whether,
taken as a whole, it is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the Company’s
performance, business model and strategy;
– Recommend to the Board for approval by
shareholders, the appointment, reappointment or
removal of the external Auditor;
– Review the effectiveness and objectivity of the
external audit and the Auditor’s independence;
– On engagement of the external Auditor, review the
policy for the provision of non-audit services and
monitor compliance;
– Monitor and review the Company’s internal control
and risk management systems;
– Monitor and review the effectiveness of the
Company’s Internal Audit function; and
– Ensure compliance with laws, regulations, ethical and
other issues, including that the Company maintains
suitable arrangements for employees to raise
concerns in confidence.
54
Hays plc Annual Report & Financial Statements 2017
Overview
Strategic report
Governance
Financial statements
Shareholder information
Membership and meetings
The Committee is appointed by the Board from its independent non-executive directors.
Biographies of the Committee’s current members are set out on pages 44 and 45.
August
2016
November
2016
February
2017
May
2017
Committee member
Victoria Jarman (Chairman)
Paul Harrison
Torsten Kreindl
MT Rainey
Pippa Wicks
Peter Williams
The Chairman of the Committee, Victoria Jarman,
is a Chartered Accountant and its financial expert, who
also chairs the Audit Committee of Equiniti Group plc.
All Committee members are financially literate.
The Committee discharges its responsibilities through
a series of scheduled meetings during the year,
the agenda of which is linked to events in the financial
calendar of the Company. The Committee met four
times during the financial year and all members
were in attendance at all meetings, with the exception
of Paul Harrison who missed one meeting due to a
prior commitment.
The Committee commissions reports, either from
external advisers, the Head of Internal Audit or Group
management, as required, to enable it to discharge
its duties. The Group Finance Director attends its
meetings, as do the external Auditor and the Head of
Internal Audit, both of whom have the opportunity
to meet privately with the Committee Chairman,
in the absence of Group management. The Chairman
of the Board and the Chief Executive are also invited
to, and regularly attend, Committee meetings.
Main Committee activities during the financial year
– Approved the annual Committee programme
– Reviewed financial results for publication
– Considered the external audit plan and reviewed the
results of the audit
– Considered the FRC CRRT review
– Reviewed the performance and effectiveness
of the external auditor
– Reviewed the performance and effectiveness
– Approved the internal audit plan and reviewed
of the internal audit function
its findings
– Reviewed the new requirements relating to external
auditor appointments and audit partner rotation
– Reviewed the non-audit services provided by the
external auditor
– Reviewed the Group’s whistleblowing arrangements
– Carried out a review of the Committee’s effectiveness
and reviewed progress on matters arising from
previous assessments
– Considered the Code requirements concerning fair,
– Reviewed the risk management and controls
balanced and understandable reporting
framework and its effectiveness, together with the
Group’s principal risks
– Considered the Company’s long-term viability
– Recommended the Audit Committee Report for
– Considered all aspects of IT operations and risks
– Considered the growing threat of cyber-related
attacks and associated responses across the business
approval by the Board
– Held discussions with the external auditor and the
Head of Internal Audit without management
being present
Fair, balanced and understandable
In addition to its work described here, the Committee has
reviewed the financial and narrative disclosures in this
year’s Annual Report. It has advised the Board that, in its
view, taken as a whole, the Annual Report is fair, balanced
and understandable and provides the information
necessary for shareholders to assess the Group’s
performance, business model and strategy.
In making its recommendation to the Board, the
Committee’s robust governance approach included:
– Comprehensive Group and subsidiary accounts
process, with written confirmations provided by the
regional senior management teams on the health of
the financial control environment;
Hays plc Annual Report & Financial Statements 2017
55
Governance
ACCOUNTABILITY CONTINUED
– Reviews of the Annual Report undertaken at different
levels of the Group and by the senior management
team that aim to ensure consistency and overall balance;
– External audit review;
– Clear guidance and instruction of the requirement
provided to contributors;
– Written confirmation that information provided has
been done so on a fair and balanced basis;
– Additional scrutiny by senior management; and
– Additional reviews by the Committee Chairman of the
draft Annual Report in advance of the final sign-off in
the context of the revised Code provision.
Final sign-off is provided by the Board, on the
recommendation of the Committee.
Significant issues considered during the year
In reviewing both the half and full year financial
statements, the following issues of significance were
considered by the Committee and addressed as
described. These matters are described in more detail
in note 3 to the Consolidated Financial Statements.
Debtor and accrued income recoverability
The recoverability of trade debtors, accrued income and
the level of provisions for bad debt are considered to be
areas of significant judgment due to the pervasive nature
of these balances to the financial statements and the
importance of cash collection in the working capital
management of the business. The Committee considered
the level and ageing of debtors and accrued income,
together with the appropriateness of provisioning, by
reviewing previous experience of bad debt exposure and
the consistency of judgments made year-on-year. The
Committee was satisfied that the level of provision and
the carrying value of debtors and accrued income
is appropriate.
Revenue recognition
The main areas of judgment in revenue recognition
relate to (i) cut-off as we recognise permanent placement
income on the day a candidate starts work, and temporary
placement income over the duration of the placement;
and (ii) the recognition of temporary contractual
arrangements where we act as principal on a gross basis
rather than net basis. The Committee discussed and
reviewed these areas with both management and the
Auditor and remains satisfied that Group accounting
policies with regard to revenue recognition have been
adhered to and that judgments made remain appropriate.
Goodwill
The Committee assessed the carrying value of goodwill
by reviewing a report by management which set out the
values attributable across the cash-generating units
(CGU), compiled using projected cash flows based on
assumptions related to discount rates and future growth
rates. The Committee also considered the work
undertaken by PwC and management’s sensitivity
analysis on key assumptions. In the case of the Veredus
goodwill the Committee considered the disclosure in
respect of this CGU. After discussion, the Committee
was satisfied that the assumptions used were
appropriate.
Pension accounting
Pension accounting is complex and contains areas of
significant judgment, most notably those in respect of the
discount and inflation rates used in the valuation of the
net deficit disclosed in note 22. The Committee reviewed
the pension items by discussing a report prepared
by management based on work performed by the
Company’s actuary which set the key assumptions
used in the calculation of the deficit and related income
statement items. The Committee also considered the
work performed by PwC in testing the assumptions
and was satisfied that the assumptions used and the
disclosures in the financial statements are appropriate.
External Auditor
Both the Committee and the Board keep the external
Auditor’s independence and objectivity under close
scrutiny, particularly with regard to its reporting to
shareholders. PwC were appointed external Auditor of
the Group at the 2016 AGM. Professional rules require
that the Company’s audit partner at PwC be rotated
every five years.
The Competition and Markets Authority Statutory
Audit Services Order 2014 sets out certain regulations in
respect of audit tendering and appointments and related
audit committee responsibilities, which came into effect
for financial years commencing on or after 1 January 2015.
The Company has complied with the provisions of the
Order for the financial year ended 30 June 2017.
Auditor Independence and Non-Audit Services Policy
The Committee believes that the issue of non-audit
services to Hays is closely related to external Auditor
independence and objectivity. The Committee recognises
that the independence of the external Auditor may
reasonably be expected to be compromised if they also
act as the Company’s consultants and advisers. Having
said that, the Committee accepts that certain work of
a non-audit nature is best undertaken by the external
Auditor. To keep a check on this, the Committee has
adopted a policy to ensure that the provision of any
non-audit services by its external Auditor does not
impair its independence or objectivity.
The key features of the non-audit services policy are
as follows:
– The provision of non-audit services provided by the
Company’s external Auditor be limited to a value of
70% of the average audit fees over a three-year period;
– Any non-audit project work which could impair the
objectivity or independence of the external Auditor
may not be awarded to the external Auditor; and
– Delegated authority by the Committee for the approval
of non-audit services by the external Auditor is as follows:
Authoriser
Group Financial Controller
Group Finance Director
Audit Committee
Value of services per
non-audit project
Up to £25,000
Up to £150,000
Above £150,000
PwC's fee in respect of its 2017 financial year audit of
Hays was £1.1 million. Accordingly, the maximum value of
non-audit services that PwC could have been engaged
by Hays to provide during the financial year 2017 was
£0.7 million (noting that PwC have only been engaged
this year). The total fee for non-audit services provided
by PwC during the 2017 financial year was £0.6 million
(2016: £0.6 million), excluding the FY17 half-year review
fee of £0.1 million (2016: £0.1 million). The main component
of the non-audit services was a change management
programme in Germany which was underway prior to
the external audit tender, where PwC are providing
56
Hays plc Annual Report & Financial Statements 2017
Overview
Strategic report
Governance
Financial statements
Shareholder information
project management and communication support for
the project. PwC's involvement in the project will cease
by September 2017.
The Company did not pay any non-audit fees to PwC
on a contingent basis. A summary of the fees paid to the
external Auditor is set out in note 6 to the Consolidated
Financial Statements.
Having reviewed Hays’ non-audit services policy this year,
the Committee is satisfied that adequate procedures are
in place to safeguard the external Auditor’s objectivity
and independence.
Effectiveness of the external Auditor
The annual effectiveness review in respect of financial
year 2016 was conducted under the guidance of the
Committee Chairman, on behalf of the Committee,
notwithstanding that Deloitte were not being proposed
for re-election as external Auditor. It covered amongst
other things a review of the audit partners, audit
resource, planning and execution, Committee support
and communications. Overall feedback was positive.
On the basis of this review, the Committee was satisfied
with the performance of Deloitte in the fulfilment of its
obligations as external Auditor and of the effectiveness
of the audit process in FY16.
Risk management and internal control
The Board is responsible for the adequacy and
effectiveness of the Group’s internal control system and
risk management framework, which in order to fulfil its
responsibilities the Board has delegated authority to the
Committee.
In order to establish an assessment from both a financial
and operational control perspective, the Committee looks
to the work of the Internal Audit function, specifically
to consider whether significant process and control
weaknesses are identified, improved and monitored and
that risks have been identified, evaluated and managed.
The Committee considered the Group’s risk assessment
process, which included coverage across the regions,
businesses and functions within the Group, reviewing
the effectiveness of the risk methodology employed,
the risk mitigation measures implemented and future
risk management and monitoring.
Internal Audit
The Committee oversees and monitors the work of
the Internal Audit function, which reviews key controls
and processes throughout the Group on a rolling basis,
including resources, scope and effectiveness of
the function.
The Group Head of Internal Audit has direct access
to the Committee and meets regularly with both the
Committee and its Chairman, without the presence
of management, to consider the work of Internal Audit.
The Committee approved the programme of work for
the Internal Audit function in respect of the 2017 financial
year, which was focused on addressing both financial and
overall risk management objectives across the Group.
During the year, 30 Internal Audit reviews were undertaken,
with the findings reported to both the Management Board
and the Committee, with recommendations tracked and
progress subsequently reported back to the Committee.
No significant weaknesses were identified as a result of
risk management and internal control reviews undertaken
by Internal Audit during the reporting period.
The Committee believes that the Group’s enterprise risk
management framework needs to continue to evolve in
accordance with the growth of the Hays business around
the world. Throughout the financial year the Internal
Audit team has continued to enhance the enterprise
risk management framework and work with the Group
Finance Director and the operating companies across
the globe to further develop and embed the framework
methodology at a local level. The Group Risk Committee,
chaired by the Group Finance Director and comprising
senior operators from each region, together with
representation from IT and finance, assists in the
management of risk in the Group.
Raising concerns at work
The whistleblowing procedure in place across the Group
ensures that employees are able to raise any concerns
about any possible improprieties in business practices,
or other matters, in confidence; this is managed and
reported through an external third party.
The disclosures under this arrangement are investigated
promptly by the Company Secretary, with the support
of Internal Audit, and escalated to the Management
Board and the Committee as appropriate, with follow-up
action being taken as soon as practicable thereafter.
The Committee, as part of its overall review of the Group’s
system of internal control, reviewed the procedures in
place during the reporting period and is satisfied that
they are appropriate to the size and scale of the Group.
Anti-bribery and corruption
Hays has a zero-tolerance approach to bribery and
corruption. The Group Anti-Bribery and Corruption Policy
(with specific reference to the UK Bribery Act 2010) is
issued to all employees. Overall responsibility for, and
oversight of, the Policy lies with the plc Board. Training is
provided to all employees annually in local languages and
ongoing support is provided when and where necessary.
In addition, risk assessments are carried out on an ad hoc
basis, for example when new countries are under
consideration (whether they are considered to be low or
high risk) or prior to entry into new public sector markets.
The Committee reviewed the effectiveness of the Policy
during the year and concluded that it was sufficient for
managing the anti-bribery and corruption risks faced by
the Group.
Audit Committee effectiveness
The Committee considered its effectiveness in
discharging its duties during the year. The Committee
looked at the work it had carried out during the year and
considered that its performance during the year was
effective when measured against its terms of reference
and general audit committee best practice. Details of
the main activities of the Committee and its role and
responsibilities have been detailed earlier in this Report.
The Chairman of the Committee will be available at
this year’s AGM to answer any questions on the work
of the Committee.
Hays plc Annual Report & Financial Statements 2017
57
Governance
REMUNERATION REPORT
CHAIRMAN’S ANNUAL STATEMENT AND SUMMARY
" Reward aligned
with performance
and reflecting
a cyclical
business."
Paul Harrison
Chairman of the
Remuneration
Committee
Dear Shareholder
I am pleased to introduce our Directors’ Remuneration
Report for 2017.
Full details of the executive directors’ remuneration for
2017 can be found in the Single Figure on page 72 and the
full Annual Report on Remuneration on pages 72 to 90.
Backdrop to the FY17 targets and FY17 Business Review
Annual Bonus targets for FY17
As we set out in last year’s remuneration report, when
the Committee met to finalise the targets for FY17, it was
in the context of a more uncertain economic outlook,
especially in the UK, where activity levels had materially
decreased in the immediate aftermath of the
EU referendum decision in June 2016.
The Committee carefully considered the targets it should
apply to incentive awards (both annual bonus and PSP
awards) for FY17. Specifically, we decided to significantly
widen the range around the EPS targets for the FY17
annual bonus to reflect the increased uncertainty on FY17
earnings and to ensure that any maximum bonus target
would require a level of profit achievement above the
then consensus external forecast and that achieved in
FY16. Additionally, the mid-point of the target range was
consistent with external forecasts at that time.
Against a mixed market backdrop our business
continues to outperform the market
Against this market backdrop, 2017 has been a good
year for Hays. The financial performance delivered was
significantly in excess of both the Board’s expectations
at the start of the year and that of the market and this
helped lead to two profit upgrades during the year,
which contributed to a strong share price performance.
With our markets outside of the UK broadly supportive,
management invested to deliver overall good like-for-like
net fee growth of 6% and delivered a solid profit
performance up 1%. The international business delivered
record headline and like-for-like fees and profits. This
growth more than offset the declines in the UK business,
where trading was tough. Finally, cash performance was
strong and this, allied to the strong growth in EPS, led to
a material increase in dividends to shareholders.
This is the third year in a row that Hays has delivered
market-leading results and this has directly contributed
towards the reward outcomes for the executive directors
both in the annual and long-term incentives as will be
covered below.
Our executive reward for 2017 reflects these results
and links pay to performance
Annual Bonus
Annual Bonus awards reflected the 2017 performance
and were 92.53% of the maximum award (115.67% of base
salary out of a maximum of 125% of base salary) for the
CEO and CFO. 40% of each award will be deferred for
three-years.
2014 Performance Share Plan (PSP)
The 2014 PSP vested at 59.76% of the maximum award
(104.57% of salary out of a maximum of 175%) reflecting
the three-year performance period that ended on
30 June 2017.
The Committee takes very seriously its duty to exercise
judgment and ensure outcomes are reflective of the
Company’s underlying performance and shareholder
experience.
No discretion on any element of remuneration was
exercised during FY17.
Remuneration for FY18
The executive directors received base salary increases of
2.0% effective from 1 July 2017. This was in line with the
average pay increase for other UK relevant employees.
The FY18 Bonus and PSP structures for the executive
directors are subject to the outcome of the shareholders’
binding vote on the Remuneration Policy (the Policy)
at the November 2017 AGM. It is proposed that executive
directors will receive an FY18 PSP grant of 150% of base
salary (reduced from 175%) which will vest in 2020
dependent on the performance criteria being met. The
Annual Bonus potential will also be 150% of base salary
(increased from 125%). Although the short- and long-term
incentive plans have been slightly rebalanced for FY18,
there is no increase to overall quantum.
The approach to setting our new Policy is explained
below and the proposed modest changes are outlined in
the At A Glance section on page 61. Further details are
given on page 62 as well as in the Policy subject to the
binding vote which can be found on pages 64 to 71.
Executive Remuneration Policy Review
During 2017, the Committee concluded its in-depth
review of the overall executive remuneration policy
and structure with a view to ensuring that it is still fit for
purpose in light of our strategy over the coming years
and the continuing cyclical nature of our business.
While we have a diversified portfolio designed to try and
mitigate substantial swings in business performance by
embracing both temporary and permanent candidate
placements, wide-ranging business specialisms and a
global geographical footprint, we nevertheless are
subject to the volatility and vagaries of the economic
markets which can create sudden changes within the
recruitment industry. As we move forward and encounter
the outcomes of economic changes such as the effect of
the ‘Brexit’ referendum in the UK, the Committee wants
to ensure that our reward structure and remuneration
policy complement our future strategy and incentivise
our executives to drive long-term shareholder value.
In such challenging environments, where it is extremely
difficult to give an accurate, robust long-term prediction
of the economy, the Committee believes it is important
that the executives’ reward is consistent with the need to
be agile in managing the business. It is for this reason that
the Committee is proposing some modest adjustments to
the focus of its incentive plans.
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Hays plc Annual Report & Financial Statements 2017
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Financial statements
Shareholder information
What we are proposing
A modest rebalance of the incentive plans:
Annual Bonus will be increased from 125% of salary to 150%
of salary to place increased importance on the shorter-
term profit targets of the company during a potentially
volatile economic period during which agility and fast
response in managing the business will be required.
The Performance Share Plan (PSP) will be decreased
from 175% to 150% of salary. Metric weightings will be
rebalanced to place increased emphasis on operational
cash generation. This focuses on long-term business
efficiency and return to shareholders through dividend
payments which is in line with our strategic priority
to generate and distribute meaningful cash returns
to investors.
The TSR weighting will be reduced to recognise the
reduction in a meaningful comparator group of similar
size and business mix.
Overall quantum (Annual Bonus and PSP) remains
the same.
Bonus deferral has been increased from 40% to 50% to
ensure the cash element stays at the same level and so
that the time horizon for delivery of awards is not
shortened.
In addition, we have introduced a two-year Holding Period
following PSP vesting and increased the CFO’s shareholding
requirement from 100% to 200% of base salary to align
him with the CEO. As shown on page 82, the CEO’s
and CFO’s current shareholdings significantly exceed
these levels.
Other Committee activities in FY17
Appointment of a new Independent Adviser to
the Committee
Following the appointment of PwC as the Company’s
new Auditor, from 1 July 2016, PwC no longer acted as the
independent adviser to the Committee.
The Committee appointed FIT Remuneration Consultants
as an interim adviser while a full formal tender was
conducted, following which Deloitte was appointed as
Independent Adviser from November 2016. Further
details can be found on page 90.
Regular agenda items
Our key regular agenda items include reviewing the basic
pay, bonus and PSP awards for the executive directors
and other senior executives. The Committee ensures
that their targets and objectives are suitably stretching,
including the principal Company financial performance
indicators together with longer-term strategic initiatives
and take into account Group risk. We also consider the
relationship between executive reward and the reward
structures in place for other Group employees. The
Committee is always mindful to ensure the strength of
the link of performance to reward and that it does not
reward for failure.
The Committee also reviewed the Chairman’s fee which
was increased by 2%. NED fees were also increased as
outlined on page 88.
We aim to be clear, concise and straightforward in
our reporting
We aim to make the Directors’ Remuneration Report clear,
concise and easy to follow.
For new executive appointments we have lowered our
pension contribution to ‘up to 15%’ of base salary.
The proposed changes to our Policy are set out in more
detail on page 62.
To help with understanding the FY17 remuneration
outcomes in relation to our current Policy, we have
included a Remuneration At A Glance page.
We hope that readers will find this helpful.
Shareholder consultation
The Committee is committed to open and honest dialogue
with its shareholders and engaged with, and sought
feedback from, 27 of its shareholders and from investor
advisory bodies with respect to the proposed changes
to the Policy. The Committee is very appreciative of the
time, constructive dialogue and engagement received.
Overall, feedback from shareholders has indicated
positive support for the proposed Policy changes and,
subject to the outcome of the binding vote, it is the
Committee’s expectation that it will operate the Policy
for the next three years.
We trust that this report demonstrates how we balance
performance, reward and underlying associated
behaviours and that we place great importance on
our duty to shareholders.
Paul Harrison
Chairman of the Remuneration Committee
30 August 2017
See the Committee’s Terms of Reference online at
haysplc.com
Hays plc Annual Report & Financial Statements 2017
59
Governance
CHAIRMAN’S ANNUAL STATEMENT AND SUMMARY CONTINUED
Membership and meetings
Five formal meetings were held during FY17 in July 2016,
August 2016, January 2017, March 2017 and May 2017.
Attendance is shown below. In addition, members
attended telephone briefings or discussions as required.
Membership and meetings
Name
Paul Harrison
Torsten Kreindl
Victoria Jarman
Pippa Wicks
Peter Williams
MT Rainey
Position
Chairman of Remuneration Committee
and Senior dependent Director
Independent non-executive director
Independent non-executive director
Independent non-executive director
Independent non-executive director
Independent non-executive director
July
2016
August
2016
January
2017
March
2017
May
2017
–
–
Note: Susan Murray and Andrew Martin joined the Committee on 12 July 2017 and are therefore not listed above.
This report is structured as follows:
Section
Letter from the Remuneration
Committee Chairman
page 58
Remuneration At A Glance
page 61
Summary of our proposed Remuneration
Policy changes
page 62
Remuneration Policy submitted
for a binding vote
pages 64 to 71
Annual Report on Remuneration
pages 72 to 90
Our full current Remuneration Policy
What it includes
1. Single Figure of Remuneration
2. Long-term value creation
3. Remuneration in the broader context
4. Statement of Implementation of the Remuneration
Policy in the following financial year
5. Governance
Our full current Remuneration Policy as applicable to
FY17 can be found on our website at haysplc.com
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REMUNERATION REPORT
REMUNERATION AT A GLANCE
How have we performed?
More details page 74
Bonus - maximum potential 125% of base salary
Metrics measure success of the day-to-day management
of a volatile and cyclical business.
Metric
EPS
Cash Conversion
Personal CEO/CFO
Target
7.13p
86%
Actual
9.275p
92.62%
85%
% of max
achieved
100%
77.66%
As explained in the backdrop section earlier in the report, we set the maximum
payout at EPS of 8.51p
September 2014 PSP award – grant 175% of base salary
Metrics measure success of managing the long-term
sustainability of the business.
Metric
EPS
Cash Conversion
Relative TSR
Threshold
21.51p
71%
Median of
comparator
group
Maximum
25.17p
Actual
25.70p
% of max
achieved
100%
101% 93.23% 79.27%
0%
19.61%
(6th)
Upper
quartile of
comparator
group
Total % of award vesting: 59.76%
% of Salary: 104.57%
Key general business highlights
– Like-for-like net fee growth of 6%
– Record international net fees and profits
– Profit performance materially ahead of Board and market
expectations
– Strong cash performance
Summary of our current Remuneration Policy
and Structure for FY17
Key Reward component
Key features
Base Salary and
Core benefits
– Competitive salary and benefits
to attract right calibre of executive
Annual Bonus
– 60% EPS
– 20% Cash Conversion
– 20% Personal
Performance Share Plan
– 1/3 EPS
– 1/3 Cash Conversion
– 1/3 TSR
Shareholding
Requirements
– Max potential 125% of salary
– Key financial KPIs and personal
objectives
– Max potential 175% of salary
– KPIs focused on long-term
sustainability and shareholder
returns
– CEO: 200% of salary
– CFO: 100% of salary
– Ensure material personal stake
in the business
– Strong link of performance with reward
– Take into account risk management and incorporate
malus and clawback
Reward linked to performance – what did we do?
More details page 72
Reward Component What we have done
Base salary
– Increased salaries for CEO and CFO by 2.0%.
– Increase in line with budget set for UK
employees of 2.0%
Bonus
– CEO: 92.53% of maximum, i.e. 115.67%
of salary equating to £836,813
– CFO: 92.53%% of maximum, i.e. 115.67%
of salary equating to £603,341
– 40% of the above awards deferred into
shares for three years
PSP
– 150% of salary to be awarded subject to
shareholder approval of Policy
– CEO: 957% of base salary
– CFO: 668% of base salary
Shareholdings
Beneficial
ownership
The Single Figure can be found on page 72
What changes have we proposed to the
Remuneration Policy for FY18?
More details page 62
This Policy is subject to shareholder approval
at the November 2017 AGM
Annual Bonus
– Moved from 125% to 150% of base salary
– Deferral increased from 40% to 50% of bonus – therefore there
is no change to the level of the cash element which remains at
75% of salary and the time frame for delivery remains the same
– No change to performance metric weightings
PSP
– Moved from 175% to 150% of base salary
– Performance Metrics remain the same but are reweighted:
Metric
EPS
Cash Conversion
Relative TSR
From
One-third
One-third
One-third
To
30%
50%
20%
– Introduced a two-year Holding Period post vesting
– Overall variable incentive quantum remains unchanged
Shareholding requirements
– Increased shareholding requirement for CFO from 100%
to 200% of base salary in line with CEO
Pension
– Pension for new executive director recruitment will be up
to 15% of base salary to align with the Management Board
(reduction from past Policy of 30%)
Rationale for Changes
– The modest rebalance of incentives helps to align with the
need to proactively manage the business during a potentially
challenging economic period, recognising that Hays is a highly
cyclical business
– It therefore places increasing importance on shorter-term profit
through EPS in the annual bonus and long-term business efficiency
through the increased weighting on the cash element of the PSP,
and extends the long-term focus through the introduction of the
Holding Period without any increase to overall quantum
Hays plc Annual Report & Financial Statements 2017
61
Governance
REMUNERATION REPORT CONTINUED
BACKGROUND TO OUR PROPOSED REMUNERATION POLICY
(THE POLICY) CHANGES
The Committee conducted an in-depth review of the Policy with a
view to ensuring it is still fit for purpose in light of both our strategy
and the continuing cyclical nature of our business. We have also taken
into consideration the views and guidelines issued by investor bodies
and market practice developments.
As a result of this review, the Committee determined that the current
Policy remained broadly fit for purpose. The main challenge we face is
the cyclicality of our business which we feel can be best addressed by
increasing the short-term focus on profit and the long-term focus on
cash generation, which can be achieved without changing the overall
levels of reward. In the light of this, we have proposed some modest
changes to the Policy that are outlined below.
Business context
Our strategic priorities remain the same: to deliver relative superior
financial performance through the cycle.
Our current strategy is built around four strategic priorities and we
see these priorities continuing over the next three years. These are to:
– Materially increase and diversify Group profits;
– Build critical mass and diversity across our global platform;
– Invest in people and technology, responding to change and
building relationships; and
– Generate, reinvest and distribute meaningful cash returns.
Hays is a highly cyclical business and has built a diversified portfolio
designed to try and best mitigate this by:
– Balancing the business between permanent (42%), and temporary/
contractor candidate placements (58%);
– Having a wide range of business specialisms covering
20 professional sectors; and
– Having a global geographic footprint in 33 countries.
Nevertheless, the Company is subject to the volatility and vagaries
of the economic markets which can create sudden changes within
the recruitment market and industry.
As we stated in the 2016 Directors’ Remuneration Report, over the
last year this has manifested itself through the general uncertainty
triggered by the ‘Brexit’ referendum in the UK.
Proposed changes
Rebalancing
In this environment, where it is extremely difficult to give an accurate,
robust long-term prediction of the economy, the Committee believes
it is important that the executives’ reward is consistent with the
need to be agile in managing the business. It is for this reason that
the Committee has proposed some modest adjustments to the focus
of its incentive plans.
Proposed Changes
Incentive mix
Rebalance the short- and long-term
variable incentives from 125% and 175% of
base salary to 150% and 150% respectively.
Performance metrics
The metrics and weightings remain the same
in the Annual Bonus:
– EPS: 60%
– Cash Conversion: 20%
– Personal objectives: 20%
The metrics in the PSP remain the same but
the weightings move from equal thirds to:
– EPS: 30%
– Cash Conversion: 50%
– Relative TSR: 20%
Comments
The overall quantum remains the same.
The weighting on the relative TSR metric in the PSP has been reduced, recognising that the
comparator group of companies of similar size and business mix has reduced over time and
therefore represents a less meaningful comparison and incentive tool.
The weighting has been rebalanced towards the cash element of the PSP. This focuses on
long-term business efficiency and return to shareholders through dividend payments
which is in line with our strategic priority aim to generate and distribute meaningful cash
returns to investors.
Historically, Cash Conversion is defined as the operating cash flow of the Company after
deducting net Capital Expenditure stated as a percentage of Operating Profit before
exceptional items. Going forward, the Committee wants to place particular focus on
Operating Cash Flow pre Capital Expenditure. This adjustment is designed to increase
the focus on ongoing operational cash efficiency, whatever the trading circumstances
of the business.
As in the current Policy, the Committee will continue to take into account the following
factors when setting EPS targets for the PSP in the proposed Policy:
– Budget (the setting of which is a robust and transparent process);
– Strategic direction of the business over the period covered by the PSP award;
– Market conditions and visibility of future trading; and
– Analyst forecasts.
Historically, targets have been based off an RPI level. However, as RPI is a UK only index
and the UK now represents only c.25% of the Group, combined with the fact that over the
last five years RPI and wage inflation in our markets have been de minimis, it is no longer
appropriate or relevant for RPI to be used in setting the growth targets.
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Proposed Changes
Bonus deferral
The split of cash and deferral in the Annual
Bonus increases from 60%:40% to
50%:50% respectively.
Introduction of a holding period
The PSP will have an additional two-year
Holding Period post vesting.
Alignment of shareholding requirements
The CFO’s shareholding requirement will be
increased to 200% of base salary to align
with that of the CEO.
Future pension provisions
For the new recruitment Policy it is
proposed to have a pension contribution/
allowance of up to 15% of base salary
(currently 30%).
Comments
This maintains the same actual level of cash payment equating to 75% of base salary.
It also ensures that long-term focus through deferral is maintained.
This creates further long-term alignment with shareholders.
This ensures both the CEO and CFO have a material personal stake in the business and
align to shareholders.
This aligns more closely to the senior management employees.
Current structure
Proposed structure
Base salary
Pension
Cash bonus
Deferred bonus
PSP
100%
30%
75%
50%
175%
Base salary
Pension(1)
Cash bonus
Deferred bonus
PSP
100%
30%
75%
75%
150%
(1) For existing executive directors.
As illustrated below, the changes result in a clear focus on annual profit growth in the Annual Bonus Plan and,
by changing the weighting of the metrics in the PSP, place emphasis on long-term cash generation.
Relative weighting of measures
Current structure
Proposed structure
Bonus
Individual,
20
Cash, 20
EPS, 60
PSP
TSR,
One-third
Cash,
One-third
EPS,
One-third
Bonus
Individual,
20
Cash, 20
EPS, 60
PSP
TSR, 20
Cash, 50
EPS, 30
Hays plc Annual Report & Financial Statements 2017
63
Governance
REMUNERATION REPORT CONTINUED
REMUNERATION POLICY
Introduction
In accordance with the regulations, the Directors’ Remuneration
Policy (the Policy) as set out below will become formally effective
at the Annual General Meeting on 15 November 2017 and is expected
to apply for the period of three years from the date of approval.
Policy summary
The Committee determines the Policy for the Chairman, executive
directors and other senior executives for current and future years and
this is reviewed on an annual basis. The Policy is designed to support
the strategic objectives of the Company and to allow the business to
attract, retain and motivate the quality of individuals needed to shape
and execute the strategy and deliver shareholder value.
The Policy is designed around the following key principles:
– Ensure a strong link between reward and individual and Company
performance to align the interests of senior executives with those
of shareholders;
– Provide a balanced package with a focus on variable pay;
– Take into account the associated risks of each aspect of
remuneration;
– Encourage a material, personal stake in the business and
a long-term focus on sustained growth through long-term
shareholding;
– Maintain a competitive package against businesses of a comparable
size in the FTSE and comparable peer group businesses in the
recruitment sector with reference to the breadth of the role and
experience the role holder brings to the Company; and
– Operate a consistent reward and performance philosophy
throughout the business.
The Committee considers that a successful Policy needs to be
sufficiently flexible to take account of future changes in the
Company’s business environment and in remuneration practice.
Discretion
The Committee has discretion in several areas of policy as set out
in this Report. The Committee may also exercise operational and
administrative discretions under relevant plan rules approved by
shareholders as set out in those rules. In addition, the Committee
has the discretion to amend the Policy with regard to minor or
administrative matters where it would be, in the opinion of the
Committee, disproportionate to seek or await shareholder approval.
Prior commitments
The Committee reserves the right to make any remuneration
payments and/or payments for loss of office (including the exercise
of any discretions available to it in connection with such payments)
notwithstanding that they are not in line with the Policy where the
terms of the payment were (i) agreed before 12 November 2014
(when the Company’s first shareholder-approved Directors’
Remuneration Policy came into effect); (ii) before the Policy came
into effect, provided that the terms of the payment were consistent
with the shareholder-approved Directors’ Remuneration Policy in
force at the time they were agreed; and (iii) at a time when the
individual to whom the payment is made was not a director of the
Company and, in the opinion of the Committee, the payment was not
in consideration for the individual becoming a director of the Company.
For these purposes, ‘payments’ include the Committee satisfying
awards of variable remuneration and, in relation to an award over shares,
the terms of the payment are agreed at the time the award is granted.
Differences in policy from the wider employee population
The Group aims to provide a remuneration package for all employees
that is market competitive and consistent. Employees receive base
salary and benefits and may receive bonus, pension and share awards
with levels varying depending on the individual’s location, seniority
and responsibilities. Salary increases for executive directors are
generally in line with those for UK-based employees.
Performance conditions
and assessment
N/A
Remuneration structure (policy table)
Elements of executive director remuneration package
Element
Base salary
Objective and link
to the strategy
Base salary
recognises individual
contribution, changes
in responsibilities
and competitive
market rates.
Provides a base level
of remuneration to
support recruitment
and retention of
directors with the
necessary experience
and expertise to
deliver the Group’s
strategy.
Key element of core
fixed remuneration.
Operation
Base salary is normally set annually on 1 July.
When determining the base salary of the
executive directors the Committee takes into
consideration:
– The levels of base salary for similar positions
with comparable status, responsibility and skills
in organisations of broadly similar size and
complexity;
– The comparator groups currently include the
FTSE 250, the companies in the Company’s
Total Shareholder Return (TSR) comparator
group used for PSP awards and UK companies
of a similar size and complexity. The Committee
intends to review the comparator groups each
year and may add or remove companies from
the group as it considers appropriate. Any
changes made in future to the comparator
group will be disclosed to shareholders in
setting out the operation of the policy for
the subsequent year in the section headed
Implementation of Remuneration Policy in
the Following Financial Year;
Maximum
potential value
Whilst there is no prescribed maximum
level of salary, increases will normally be
in line with the market and the average
base pay increase for other employees
in the UK.
Higher levels of increases may be made
where there is a significant change to the
individual’s responsibilities or where
there is significant difference to the
market, for example in case of individuals
who are recruited, or promoted to the
Board who may, on occasion, have their
salaries set below the targeted policy
level until they become established in
their role. In such cases subsequent
increases in salary may be higher than
the average until the target positioning
is achieved.
The Company will normally set out in
the section headed Implementation of
Remuneration Policy in the Following
Financial Year the salaries for that year
for each of the executive directors
(see page 87).
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Elements of executive director remuneration package (continued)
Element
Objective and link
to the strategy
Annual
bonus
To align reward to key
annual objectives
relating to the Group’s
financial performance
and operational
strength.
The three-year
deferral into shares
aligns the interests
of executive directors
with those of
shareholders and
also assists with
their retention.
Maximum
potential value
Performance conditions
and assessment
Maximum 150% of base salary.
Threshold level of performance earns
24% of salary based on achieving
threshold EPS and cash conversion.
Zero payment for below threshold
performance.
The current bonus
performance
conditions are:
– Earnings per share;
– Cash conversion; and
– Personal objectives.
The Remuneration
Committee is of the
opinion that given the
commercial sensitivity
arising in relation to
the detailed financial
targets used for the
annual bonus,
disclosing precise
targets for the bonus
plan in advance would
not be in shareholder
interests. This avoids
the risk of the
Company inadvertently
providing a profit
forecast, because
profit targets are
linked to budgets,
and giving competitors
an unfair advantage
because they are not
required to report to
the same disclosure
standard as a UK-listed
company. Actual
targets, performance
achieved and awards
made will be published
at the end of the
performance periods
so shareholders can
fully assess the basis
for any payouts under
the annual bonus.
Operation
– The performance of the individual
executive director;
– The individual executive director’s experience
and responsibilities; and
– Pay and conditions throughout the
Company. The Committee has access to pay
and conditions of other employees within the
Group when determining remuneration for the
executive directors and also considers the
relationship between general changes to pay
and conditions within the Group as a whole.
50% of bonus earned will be paid in cash and
50% deferred into shares for three years under
the deferred annual bonus plan (the DAB).
Malus and Clawback provisions may be
applied in case of:
– Material misstatement resulting in an
adjustment to the audited accounts;
– Incorrect assessment of any performance
conditions or award calculations due to an
error or misleading information; and
– Fraud and Gross misconduct.
Malus provisions allow the Committee to reduce
or eliminate share awards granted under DAB.
Discretion may also be exercised in cases where
the Committee believes that the bonus outcome
is not a fair and accurate reflection of business
performance.
The Committee has discretion to reduce the
number of shares vesting if the underlying
financial performance of the Company is not
satisfactory over the three-year deferral period.
The Company operates in a rapidly changing
sector and therefore the Committee may change
the balance of the measures, or use different
measures for subsequent financial years, as
appropriate, to reflect this provided that at least
80% are normally based on financial performance.
The Company will disclose the nature of the
targets and their weightings at the end of each
year in the relevant Annual Report on
Remuneration. The performance conditions,
targets, weightings and their level of satisfaction
for the year being reported on, are contained in
the Annual Report on Remuneration on page 74.
The Committee retains discretion in exceptional
circumstances to change the performance
measures and targets and their respective
weightings part way through a performance year
if there is a significant and material event which
causes the Committee to believe the original
measures, weightings and targets are no longer
appropriate. Discretion may also be exercised
in cases where the Committee believes that
the bonus outcome is not a fair and accurate
reflection of business performance.
Dividend equivalents may be provided on
deferred shares.
Hays plc Annual Report & Financial Statements 2017
65
Governance
REMUNERATION REPORT CONTINUED
Elements of executive director remuneration package
Element
Performance
Share Plan
(PSP) award
Objective and link
to the strategy
To incentivise the
delivery of sustained
long-term
performance and
align with share price
and dividend growth
over the long-term.
Pension
allowance
To provide a
competitive
retirement benefit.
Operation
In accordance with plan rules, PSP awards are
granted annually and vesting is dependent on
the achievement of performance conditions.
Awards are subject to a two-year Holding Period.
Malus provisions may be applied during the
Performance Period and Clawback provisions
may be applied during the Holding Period in
case of:
– Material misstatement resulting in an
adjustment to the audited accounts;
– Incorrect assessment of any performance
conditions or award calculations due to an
error or misleading information; and
– Fraud and Gross misconduct.
Reviewed annually to ensure that grant levels,
performance criteria and other features remain
appropriate to the Company’s current
circumstances, and to ensure that there are no
features of the plan that could inadvertently
motivate irresponsible behaviour.
Dividend equivalents may be provided on
released shares.
Company pension contribution or salary
supplement in lieu of pension contributions.
Salary supplements will not be included in
calculating any benefit based on salary including
the levels under the Company’s incentive
arrangements.
Other
benefits
To provide
competitive
employment benefits.
Benefits will generally include:
– Car benefit or equivalent;
– Private medical insurance;
– Permanent health insurance; and
– Life assurance.
Shareholding
policy
To ensure that
executive directors’
interests are aligned
with those of
shareholders over a
longer time horizon.
The level of benefits provided is reviewed every
year to ensure it remains market competitive.
Other benefits may be provided if considered
reasonable and appropriate (e.g. in case of
relocation).
The Committee requires the Chief Executive and
Chief Financial Officer to build and maintain a
material shareholding in the Company of at least
two-times base salary over a reasonable time
frame, which would normally be five years.
Only shares which are beneficially owned by
the executives or subject to a holding period
count towards this requirement.
The Committee has discretion to increase the
shareholding requirement.
Maximum
potential value
Normal awards will be
150% of base salary for
executive directors
with absolute
maximum of 200%
of base salary in
exceptional
circumstances.
Maximum and
threshold vesting
levels for performance
conditions are 100%
and 25% respectively.
Performance conditions
and assessment
Performance period of three financial
years.
The performance conditions will be:
– 30% based on cumulative earnings
per share;
– 50% based on cumulative cash
conversion; and
– 20% based on total shareholder return
relative to the comparator group with
vesting subject to satisfactory financial
performance over the period, as
determined by the Committee.
The Company operates in a rapidly
changing sector and therefore the
Committee may change the balance of
the measures, or use different measures
for subsequent awards, as appropriate.
No material change will be made to the
type of performance condition without
prior shareholder consultation.
Details of the performance conditions for
grants made in the year will be set out in
the Annual Report on Remuneration.
N/A
N/A
Maximum 30% of base
salary for current
directors. As outlined
in the recruitment
section, new directors
will receive up to 15%
of base salary.
The maximum will
be set at the cost of
providing the listed
benefits. For example,
current car allowance
is £18-20,000 p.a.
N/A
N/A
Sharesave
Schemes
To encourage wide
employee share
ownership and
thereby align
employees’ interests
with shareholders.
The Company operates Sharesave Schemes
in which the executive directors are eligible to
participate (which in the UK is HMRC approved
and is open to all eligible staff in the UK).
UK scheme in line
with HMRC limits as
amended from time
to time.
There are no performance conditions, in
line with HMRC requirements, other than
the inherent share price growth required
to receive a benefit.
The Company retains the discretion to introduce
additional plans, and to make directors eligible
for these as appropriate.
Overseas schemes
broadly in line with
UK values.
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Hays plc Annual Report & Financial Statements 2017
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Financial statements
Shareholder information
Non-executive director remuneration
Element
Non-
executive
director fees
Objective and link
to the strategy
Competitive fees
for Chairman and
non-executive
directors with the
necessary skills and
experience to advise
and assist with
establishing and
monitoring the Group’s
strategic objectives.
Operation
The remuneration of the non-executive
directors is determined by the Board annually.
The responsibility of the role and international
nature of the Group are fully considered when
setting the fee levels, along with external
benchmarking market data on the chairmanship
of, and participation in, Board committees.
The comparator groups used are consistent
with those used for the executive directors.
The non-executive directors’ fees are non-
pensionable and non-executive directors are
not eligible to participate in any incentive plans.
Performance conditions
and assessment
None
Maximum
potential value
The fees are set normally around the
median compared to the Company’s
comparator groups and will be within
the Articles of Association limits.
Additional fees are paid to individuals
chairing a committee and to the Senior
Independent Director.
The non-executive directors’ fees are
non-pensionable and non-executive
directors are not eligible to participate
in any incentive plans.
The Chairman and non-executive directors
will be reimbursed by the Company for
all reasonable expenses incurred in
performing their duties. This may include
costs associated with travel where
required and any tax liabilities payable.
Notes to the policy table:
The Committee believes that incentive metrics
should be simple and aligned with the delivery
of the annual business plan and with long-term
sustainable growth.
The three main measures currently used are EPS,
Cash Conversion and relative TSR, with a clear
focus on annual profit growth in the Annual Bonus
Plan and main emphasis on long-term cash
generation in the PSP.
(1) EPS metric is a key performance measure
aligned with shareholder interests.
(2) Cash Conversion promotes sustained free
cash flow and is a key indicator of ongoing
operational cash efficiency.
(3) The Annual Bonus includes an element of
Personal Objectives linked to the delivery of
key projects designed to enhance the Group’s
operational strength and competitiveness in
line with future strategy.
(4) Relative TSR is a measure favoured by a
number of shareholders and provides for
reward for outperformance of a number
of comparators.
The current constituents of the Company’s
TSR comparator group are shown below:
– Adecco SA
– Kelly Services Inc
– Manpower Inc
– Page Group plc (previously Michael Page
International plc)
– Randstad Holdings NV
– Robert Half International Inc
– Robert Walters plc
– SThree plc
The peer group has been chosen to reflect most
closely the mix of the Company’s business.
Awards under any of the Company’s share plans
referred to in this report may:
(a) Be granted as conditional share awards or
nil-cost options or in such other form that
the Committee determines has the same
economic effect;
(b) Have any performance condition applicable
to them amended by the Committee if the
Committee determines that it has ceased to
be a fair measure of performance provided
that the amended condition is not, in the
Committee’s reasonable opinion, materially
less difficult to satisfy;
(c) Incorporate the right to receive an amount
(in cash or additional shares) equal to the value
of dividends which would have been paid
on the shares under an award that vest until
the award is satisfied. This amount may be
calculated assuming that the dividends have
been reinvested in the Company’s shares on
a cumulative basis;
(d) Be settled in cash at the Committee’s
discretion; and
(e) Be adjusted in the event of any variation of
the Company’s share capital or any demerger,
capital distribution or other event that may
materially impact the Company’s share price.
Hays plc Annual Report & Financial Statements 2017
67
Governance
REMUNERATION REPORT CONTINUED
Service contracts
The Committee’s policy for setting notice periods is that a maximum 12-month period will apply for executive directors. The Committee may in
exceptional circumstances arising on recruitment, allow a longer period, which would in any event reduce to 12 months following the first year
of employment.
In the event of early termination of a director’s service contract, the Company would be required to pay compensation reflecting the salary,
pension allowance and benefits to which the director would have become entitled under the contract during the notice period. Alternatively,
the Company may, at its discretion, pay a predetermined sum in lieu of notice. In the event of early termination, the Committee will give careful
consideration to what compensation should be paid, taking into account the circumstances and the responsibility of the individual to
mitigate loss.
The contract of the Chief Executive was agreed prior to 27 June 2012 and includes in his sum in lieu of notice an amount equal to his on-target
bonus pro-rated for time. All future contracts will contain a ‘PILON’ clause based purely on salary, pension allowance and benefits with
payments staged over the notice period and an obligation to mitigate loss.
Alistair Cox
Paul Venables
September 2007
May 2006
Indefinite
Indefinite
One-year
One-year
One-year
Six months
Current contract start date
Unexpired term
Notice period from Company
Notice period from executive
The non-executive directors do not have service contracts with the Company, but are appointed to the Board under letters of appointment
for an initial three-year period. They have agreed to annual retirement and reappointment by shareholders at the Company’s annual general
meeting and, with the exception of the Chairman, appointments can be terminated immediately by the Company. Letters of appointment are
available for review from the Company Secretary and a pro forma letter of appointment can be viewed on the Company’s website haysplc.com.
Susan Murray and Andrew Martin were appointed to the Board and Remuneration Committee on 12 July 2017.
Non-executive director
Date appointed to the Board
Date of current letter of appointment
Alan Thomson
Peter Williams
Paul Harrison
Victoria Jarman
Torsten Kreindl
MT Rainey
Pippa Wicks
1 October 2010
24 February 2015
8 May 2007
1 October 2011
1 June 2013
14 December 2015
1 January 2012
14 July 2010 (Renewed)
24 February 2015
31 August 2011
31 August 2011
30 May 2013
14 December 2015
30 November 2011
Notice period
Three months
None
None
None
None
None
None
Payments to departing directors
The Committee will honour executive directors’ contractual entitlements. Service contracts do not contain liquidated damages clauses.
If a contract is to be terminated, the Committee will determine such mitigation as it considers fair and reasonable in each case. There are
no contractual arrangements that would guarantee a pension with limited or no abatement on severance or early retirement. There is no
agreement between the Company and its directors providing for compensation for loss of office or employment that occurs because of a
takeover bid. The Committee reserves the right to make any other payments in connection with a director’s cessation of office or employment
where such payments are made in good faith in discharge of an existing legal obligation (or by way of damages for breach of such an
obligation); or by way of settlement or compromise of any claim arising in connection with the termination of an executive director’s office
or employment or for any fees or outplacement assistance and/or the director’s legal and/or professional advice fees in connection with his
cessation of office or employment.
When determining any payment for a departing individual the Committee will always seek to minimise cost to the Company while seeking
to address the circumstances at the time.
The table below shows the approach the Committee will apply in respect of base salary, benefits and pension in respect of departing directors.
Component
Approach
Application of Remuneration
Committee Discretion
Base salary, benefits and
pension
In the event of termination by the Company, there will be no compensation for departure
due to misconduct.
None
In other circumstances, executive directors may be entitled to receive payment in lieu of
notice. Payment in lieu of notice will be equivalent to the salary payments, benefit value and
pension contributions that they would have received if still employed by the Company for a
maximum of 12 months.
Other contractual obligations
There are no other contractual provisions other than those set out above agreed prior
to 27 June 2012.
N/A
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Financial statements
Shareholder information
The rules of the Performance Share Plan and the Deferred Annual Bonus (DAB) set out the treatment of specific categories of leavers as set
out in the table below. In other cases where an executive leaves employment during the DAB period or during the PSP Performance Period, the
Committee will consider the specific details of each case before determining whether to award Good Leaver status. The Committee will provide
a full explanation to shareholders when it is determined that an executive director is a Good Leaver. The Committee is unequivocally against
rewards for failure.
Category
Injury/Ill-health/
Disability
Cash Annual Bonus
Bonus paid at normal time, subject to
performance with pro-rating for time.
DAB (Deferred Bonus Shares)
Awards vest in full at normal vesting date.
Death, or sale of
employing entity
out of the Group
Bonus paid immediately based on
estimated performance with pro-rating
for time.
Awards vest in full on cessation of
employment.
Change of control
Bonus payment subject to pro-rating
for time and performance.
Immediate vesting of awards in full in
accordance with plan rules.
PSP
To the extent that performance conditions
are met, awards are pro-rated for service
during the performance period and
released at the vesting date.
To the extent that performance conditions
are met, awards are pro-rated for service
during the performance period but
released early.
In accordance with the plan rules, where
no replacement award, there will be early
vesting of awards pro-rated for service
during the performance period and
performance.
Notes:
(1) It should be noted that shares vesting under
the DAB rules are shares related to previously
earned bonus and therefore the performance
conditions for the relevant annual bonus had
to be met before the shares were awarded.
(2) Under the DAB rules the Committee has the
discretion to allow the award to vest early in
‘exceptional circumstances’ following
cessation of employment as a good leaver.
It is anticipated that this would only apply
in the case of death in service.
(3) The Committee has discretion under the rules
of the PSP to bring forward the date of vesting
for a good leaver to the date of the cessation
of employment subject to the award being
pro-rated for time during the performance
period and to the extent that performance is
met. It is not the current intention of the
Committee to use this discretion.
(4) Any shares in the PSP Holding Period would be
released upon an executive leaving Hays for
reason other than Gross Misconduct and
would be subject to any Clawback provisions
prior to release. Clawback provisions would
continue to apply after release until the end of
the normal Holding Period timeframe.
(5) In the event that the Committee determines
Good Leaver status to be applicable, it may
impose certain conditions for an executive
receiving shares under DAB or PSP on
cessation of employment.
(6) Executives would be treated in accordance
with the scheme rules in respect of the HMRC
approved Hays Sharesave.
Hays plc Annual Report & Financial Statements 2017
69
Governance
REMUNERATION REPORT CONTINUED
The Chairman and non-executive directors do not have service contracts but instead have letters of appointment. On termination,
they are only entitled to accrued fees to the date of termination.
Setting payments for new appointments
The Company’s principle is the remuneration of any new recruit will be assessed in line with the same principles for the executive directors,
as set out in the remuneration policy table above. The Committee’s approach to recruitment remuneration is to pay no more than is
necessary to attract candidates of the appropriate calibre and experience needed for the role from the international market in which the
Company competes.
The Remuneration Committee will not pay more than it considers necessary to secure the preferred candidate and will have regard to
guidelines and shareholder sentiment regarding one-off or enhanced short-term or long-term incentive payments made on recruitment
and the appropriateness of any performance measures associated with an award.
The table below summarises the Company’s key policies with respect to recruitment remuneration for executive directors:
Component
Base salary, benefits
and pension
Policy
The salary level will be set taking into account a number of factors including market practice, the individual’s experience
and responsibilities and other pay structures within the Company and will be consistent with the salary policy for
executive directors.
Pension
Annual Bonus (and
Deferred Bonus)
The executive director shall be eligible to receive benefits in line with the Company’s benefits policy as set out in the
remuneration policy table.
A pension allowance of up to 15% of base salary. The Company may choose to give part or all as a cash allowance rather than
pay into a Group pension fund. Normal payroll deductions (for example income tax and National Insurance/social security)
will be deducted from the gross cash allowance.
An executive director will be eligible to participate in the annual bonus arrangements as set out in the remuneration policy table.
For the first year only, the Committee retains the discretion to set performance conditions in the context of the business
priorities on joining and the time frame available to year end.
Awards may be granted up to the maximum opportunity allowable in the remuneration policy table at the Committee’s
discretion.
Performance Share Plan
An executive director will be eligible to participate in the PSP as set out in the remuneration policy table. Awards may be
granted up to the maximum opportunity allowable under plan rules at the Committee’s discretion.
Share buy-outs/
replacement awards
The Committee’s policy is not to provide buy-outs as a matter of course.
However, should the Committee determine that the individual circumstances of recruitment justified the provision of a buy-out,
the value of any incentives that will be forfeited on cessation of a director’s previous employment will be calculated taking into
account the following:
– The proportion of the performance period completed on the date of the director’s cessation of employment;
– The performance conditions attached to the vesting of these incentives and the likelihood of them being satisfied; and
– Any other terms and condition having a material effect on their value (lapsed value).
The Committee may then grant up to the equivalent value as the lapsed value, where possible, under the Company’s incentive
plans. To the extent that it was not possible or practical to provide the buy-out within the terms of the Company’s existing
incentive plans, a bespoke arrangement would be used.
Relocation policies
In instances where the new executive director is expected to relocate, the Company will provide one-off/ongoing payment(s)
as part of the relocation benefits compensation.
The level of relocation package will be assessed on a case by case basis but will take into consideration any differences in the
cost of living/housing/schooling.
Where an existing employee is promoted to the Board, the policy set out above would apply from the date of promotion but there would
be no retrospective application of the policy in relation to subsisting incentive awards or remuneration arrangements. Accordingly, prevailing
elements of the remuneration package for an existing employee would be honoured and form part of the ongoing remuneration of the person
concerned. These would be disclosed to shareholders in the Annual Remuneration Report for the relevant financial year.
The annual fees payable to newly recruited non-executive directors will be in line with the fees payable to existing non-executive directors.
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Hays plc Annual Report & Financial Statements 2017
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Financial statements
Shareholder information
Remuneration scenario graphs for executive directors
The charts opposite illustrate the remuneration that would be paid
to each of the executive directors, based on salaries at the start
of financial year 2018, under three different performance scenarios:
(i) Minimum; (ii) On-target; and (iii) Maximum. The elements
of remuneration have been categorised into three components:
(i) Fixed; (ii) Annual Bonus; and (iii) PSP.
PSP
Annual Bonus
Fixed
Value of package (£’000)
3,500
3,000
2,500
2,000
1,500
2,363
29.3%
28.1%
1,000
1,007
100%
42.6%
500
0
3,500
3,221
3,000
34.4%
2,500
2,000
34.4%
1,500
1,000
31.2%
500
0
2,322
34.4%
34.4%
1,703
29.3%
28.1%
726
100%
42.6%
31.2%
Minimum On-target Maximum
Minimum On-target Maximum
Chief Executive
Group Finance Director
Each element of remuneration is defined in the table below:
Element
Fixed
Annual Bonus
PSP
Description
Total amount of salary and pension in respect of the 2018 financial year and benefits as disclosed under the FY17 single figure.
Money or other assets received or receivable where performance measures relate to one financial year,
i.e. annual bonus payments.
Money or other assets received or receivable where performance measures relate to more than one financial year,
i.e. PSP payments.
Assumptions used in determining the level of payout under given scenarios are as follows:
– Minimum performance scenario assumes fixed pay only and no variable payments under the annual bonus and PSP;
– On-target performance scenario assumes performance in line with the Company’s expectations, resulting in 93.8% base salary payout
in respect of the PSP (62.5% of maximum award of 150% of base salary) and 90% base salary payout in respect of the annual bonus
(60% of maximum bonus of 150%). There is no formal on-target figure for the PSP, 62.5% is midway between the 25% threshold and
the maximum, based on an award of 150% of basic salary; and
– Maximum performance scenario assumes outstanding level of performance, resulting in 150% base salary payout in respect of the
PSP and 150% base salary payout in respect of the annual bonus.
In accordance with the regulations share price growth has not been included. In addition, dividend equivalents have not been added
to deferred share bonus and PSP share awards.
Statement of conditions elsewhere in the group
Each year, prior to reviewing the remuneration of the executive directors and the members of the Management Board, the Committee
considers a report prepared by the Group Head of Reward detailing remuneration practice across the Group. The report provides a regional
overview of how employee pay compares to the market, any material changes during the year and includes detailed analysis of basic pay and
variable pay changes within the UK where all of the executive directors and most of the Management Board are based. While the Company
does not directly consult with employees as part of the process of reviewing executive pay and formulating the remuneration policy set out
in this report, the Company does receive an update and feedback from the broader employee population on an annual basis using an
engagement survey which includes a number of questions relating to remuneration.
The Company does not use remuneration comparison measurements.
Consideration of shareholder views
The Committee takes the views of the shareholders seriously and these views are taken into account in shaping and reviewing remuneration
policy and practice. Shareholder views are considered when evaluating and setting remuneration strategy and the Committee commits to
consulting with key shareholders prior to any significant changes to its remuneration policy.
In line with this commitment the Committee consulted this year with shareholders on the rebalancing of the Annual Bonus and PSP and the
reweighting of the performance measures in the PSP. The Committee is grateful for the comments and feedback. At the end of this process the
Remuneration Committee is pleased that a strong majority of shareholders consulted have indicated they are supportive of the changes to the Plans.
The reweighting of the financial measures more clearly differentiates the role of these measures in the annual bonus and PSP with now a
clearer focus on profit in the bonus and sustainable cash generation in the PSP which mitigates some comments we had received in previous
years regarding the use of the same measures in both plans. Our shareholders have mixed views on relative TSR. We have retained this
measure although acknowledge the reduction in the peer group over time given consolidation in the industry and the challenge in determining
a relevant peer group even in the same industry given the differences in business model and the countries that recruitment companies operate
in. As a result, the Committee determined to reduce its weighting.
The reduction in pension provision for future directors was notably a result of us monitoring emerging views of shareholders on specific
aspects of the Policy.
Hays plc Annual Report & Financial Statements 2017
71
Governance
REMUNERATION REPORT CONTINUED
ANNUAL REPORT
ON REMUNERATION
Section 1 – Total reward for FY17
In this section:
1.1
FY17 Single Figure for
executive directors
1.1.1 Salary
1.1.2 Benefits
1.1.3 Pension
1.1.4 Other benefits
1.1.5 Annual bonus
1.1.6 PSP
1.2
FY17 fees for non-
executive directors
(NEDs)
Section 1 – Total Reward for FY17
Remuneration for FY17 reflects the Policy approved by Shareholders at the 2014 AGM
1.1 FY17 Single Figure for executive directors
Single Figure of remuneration (audited)
The following table shows the total single figure of remuneration for each executive director in respect of qualifying services for the 2017
financial year. Comparative figures for the 2016 financial year have also been provided. Details of non-executive directors’ (NEDs) fees are set
out in 1.2 on page 78.
£000s
Executive director
2017
Alistair Cox
Chief Executive
Paul Venables
Group Finance Director
2016
Alistair Cox
Paul Venables
Salary
Note 1
Benefits
Note 2
Pension
Note 3
Other
Note 4
Annual
Bonus
Note 5
Total
remuneration
excluding PSP
PSP(1)
Total
Note 6
remuneration(1)
723
522
709
511
48
34
44
34
217
156
213
153
3
2
0
2
837
603
583
420
1,828
1,317
1,549
1,120
1,038
2,866
749
2,066
1,247
899
2,796
2,019
(1) 2016 PSP figures now reflect the actual vesting price on 12 September 2016 of £1.316259.
The column Total Remuneration excluding PSP includes Salary, Benefits, Pension, Other and Annual Bonus.
Components of the Single Figure and how the calculations are worked
The following tables explain how the Single Figure has been derived.
1.1.1 Salary – note 1 (audited)
Policy summary
– Set annually from 1 July.
– Broadly aligned with salary increases for relevant UK employees.
What has happened
Salaries were increased by 2.0% with effect from 1 July 2016.
This increase was the same as the wider budget set for relevant
UK employees.
Name
Alistair Cox
Paul Venables
1.1.2 Benefits – note 2 (audited)
Salary for
FY17
£723,480
£521,628
%
increase over
FY16
2.0%
Salary for
FY16
£709,294
2.0%
£511,400
Policy summary
– Core benefits align with those for other UK employees.
What has happened
There were no changes in FY17.
£000s
Executive director
2017
Alistair Cox
Paul Venables
2016
Alistair Cox
Paul Venables
Private Medical
Insurance (PMI)
Life
assurance
Income
protection
Travel and
mileage
Car
allowance
3
3
3
3
9
4
8
4
12
9
9
9
4
–
4
–
20
18
20
18
Total
48
34
44
34
PMI, life assurance and income protection figures represent the annual premiums.
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Financial statements
Shareholder information
1.1.3 Pension – note 3 (audited)
Policy summary
– Other than a cash payment in lieu of pension at the rate of
30% of base salary, there are no other pension arrangements
for the directors.
– For the sake of clarity, neither executive director has any defined
benefit pension provision.
What has happened
There were no changes in FY17.
£000s
Executive director
2017
Alistair Cox
Paul Venables
2016
Alistair Cox
Paul Venables
Pension
217
156
213
153
1.1.4 Other benefits – note 4 (audited)
Policy summary
– The executive directors are able to participate in the Hays UK
Sharesave Scheme in the same way as other eligible employees.
What has happened
Alistair Cox and Paul Venables had a ‘theoretical’ gain on date of
exercise which is shown below. However, they did not sell the shares.
Alistair Cox and Paul Venables participated in the March 2017 Hays
Sharesave Scheme and have options which are due for exercise from
1 May 2020 to 31 October 2020. Details are shown on page 79.
£000s
Executive director
2017
Alistair Cox
Paul Venables
2016
Alistair Cox
Paul Venables
1.1.5 Annual Bonus – note 5 (audited)
Policy summary
– Maximum bonus potential is 125% of base salary, of which 60%
is paid in cash and 40% of any award is deferred into shares.
– Bonus is based on financial KPIs and personal objectives.
Other
£000
3
2
0
2
What has happened
The figure shown is the total bonus awarded in relation to
performance in the year, including the portion that is deferred.
For bonus awarded in relation to 2017 and 2016 performance,
40% of the figure shown is deferred into shares for three years.
There are no further performance conditions but leaver terms apply.
The cash element of the bonus award in relation to performance in
2017 is subject to Clawback for three years from award. The deferred
element is subject to Malus for the three year holding period.
See pages 74 and 75 for detailed information on performance
against targets.
Hays plc Annual Report & Financial Statements 2017
73
Governance
REMUNERATION REPORT CONTINUED
1.1.5 Annual Bonus – note 5 (audited) continued
Annual
Bonus
Of which
cash –
60%
Of which
deferred –
40%
% of
salary
achievement
837
603
583
420
502
362
350
252
335
241
233
168
115.67%
115.67%
82.20%
82.20%
Assessment
The Committee reviews both the
Company’s results and executive
directors’ performance against their
personal objectives.
Achievement and what happens now
Alistair Cox
Achieved 115.67% of salary
(out of 125% maximum potential,
i.e. 92.53% of maximum).
The basic EPS targets and actual
performance were measured at budget
exchange rates.
This equates to a bonus of £836,813
(as stated in the Single Figure) of which:
– 60% or £502,088 will be paid as cash;
Cash conversion is the operating cash
flow of the Company after deducting net
capital expenditure items for the financial
year, stated as a percentage of operating
profit before exceptional items.
In addition to assessment of the individual
executives’ overall performance against
key objectives, the Committee also takes
into account its view of the directors’
regulatory compliance and approach to
risk (including environmental, social or
governance (ESG) risks).
The Committee has not exercised any
discretion in relation to bonus outcomes.
and
– 40% or £334,725 will be deferred
into shares for three years. There are
no further performance conditions.
Paul Venables
Achieved 115.67% of salary
(out of 125% maximum potential,
i.e. 92.53% of maximum).
This equates to a bonus of £603,341
(as stated in the Single Figure) of which:
– 60% or £362,005 will be paid as cash;
and
– 40% or £241,336 will be deferred into
shares for three years. There are no
further performance conditions.
Clawback and malus
The cash element of the bonus is subject
to clawback for three years from the date
of award. The deferred element is subject
to malus for the three-year deferral period.
Summary
£000s
Executive director
2017
Alistair Cox
Paul Venables
2016
Alistair Cox
Paul Venables
Details of the FY17 Annual Bonus
The performance metrics and objectives
60% on earnings per share (EPS): focuses
on shareholder returns;
20% on cash conversion: ensures ongoing
business efficiency; and
20% on personal objectives: safeguard and
plan for the Company’s future.
Personal objectives for FY17 included:
Alistair Cox:
– Further expansion of our Construction
& Property and Life Sciences businesses
in the US;
– Continue to develop the business in
certain Digital Marketing and innovation
projects;
– Satisfactorily complete a number of key
operational people changes in certain
named countries/regions; and
– Work closely with the business to best
mitigate any impact from the Brexit vote
on our UK business.
Paul Venables:
– Completion of phase one of the German
back-office transformation project;
– Further embedding strong risk
management processes and mitigation
into a number of additional countries in
the group;
– Satisfactorily complete a number of key
finance people changes in certain named
countries/regions; and
– Work closely with the business to best
mitigate any impact from the Brexit vote
on our UK business.
Overall both executives achieved very high
performance against these objectives.
Due to the strategic nature of the personal
objectives for the Chief Executive and
Group Finance Director, the Company feels
that disclosing any more detail would be
commercially sensitive.
74
Hays plc Annual Report & Financial Statements 2017
Overview
Strategic report
Governance
Financial statements
Shareholder information
Calculation of actual results (audited)
Annual Bonus 2017 outcome
Alistair Cox
Paul Venables
Threshold
performance
required
5.74p
Maximum
performance
required
8.51p
Actual
performance
9.275p
Weighting
60%
Annual bonus
value for meeting
threshold and
maximum
performance
(% Salary)
15 – 75
20%
20%
100%
71%
–
101%
100%
92.62%
85%
5 – 25
0 – 25
These totals are in the 2017
Single Figure
Performance
condition
EPS
Cash
Conversion
Personal
Total 2017
*
Both the target and actual performance were based on budget exchange rates.
Therefore actual performance is higher than the reported performance due to
movements in exchange rates during the year.
Achievement
% salary
75%
19.42%
21.25%
115.67%
Of which cash
Of which
deferred – 40%
Bonus
value
£000s
543
140
154
Achievement
% salary
75%
Bonus
value
£000s
391
19.42%
21.25%
837
502 Of which cash
115.67%
Of which
deferred – 40%
335
Both Alistair Cox and Paul Venables achieved 85% of their personal objectives.
Total bonus
achieved in 2016
82.20%
583
82.20%
Of which cash
Of which
deferred – 40%
350 Of which cash
Of which
deferred – 40%
233
Both Alistair Cox and Paul Venables achieved 85% of their personal objectives which are outlined on page 74.
101
111
603
362
241
420
252
168
1.1.6 PSP – note 6
Policy summary
– Maximum potential for executive directors is 175% of base salary.
– Normally granted annually.
– KPIs are focused on long-term sustainability and shareholder
returns.
– Performance period is three years.
– Threshold performance equates to 25% of the award, i.e. 43.75%
of salary.
– Award is subject to malus provisions prior to vesting.
– Awards made from FY16 are subject to clawback provisions
for up to two-years post vesting.
What has happened
59.76% of the 2014 award vested in 2017, i.e. 104.57% of base salary
(maximum 175%). No Malus was exercised.
PSP 2014 (granted in FY15) vesting in 2017
The value of the 2014 PSP (vesting in November 2017) is based on a share price of £1.6735, which was calculated using an average for the final
quarter of the financial year in accordance with the Regulations as the vesting will occur after the date of this Report. The share price on award
was 124.6 pence. The award vested at 59.76% of the maximum i.e. 104.57% of base salary.
See pages 76 and 77 for detailed information on performance against targets.
Executive director
2017
Alistair Cox
Paul Venables
Value £000s in Single Figure
based on share price of £1.6735
Restatement
Value will be restated in
FY18 report when vesting
share price is known.
1,038
749
Hays plc Annual Report & Financial Statements 2017
75
Governance
REMUNERATION REPORT CONTINUED
Details of PSP 2014 (granted in FY15) vesting in 2017
This PSP was granted under the Policy approved by shareholders in 2014.
The performance metrics and objectives
Assessment
Achievement and what happens now
Three-year plan
Performance period: 1 July 2014
to 30 June 2017.
Granted: 14 November 2014 and will vest
14 November 2017.
Performance Metrics
One-third on cumulative earnings per
share (EPS): focuses on longer-term
shareholder returns.
One-third on Cumulative Cash Conversion:
focuses on ongoing business cash
efficiency, whatever the trading
circumstances of the company.
One-third on relative total shareholder
return (TSR):
Ranks the performance of Hays against
a sector group of comparator companies:
Adecco SA
CDI Corporation
Kelly Services Inc
Manpower Group Inc
Page Group plc (previously Michael Page
International plc)
Randstad Holdings nv
Robert Half International Inc
Robert Walters plc
SThree plc
USG People nv (1)
(1) During FY16 USG People nv was purchased by
Recruit Holdings Co. Ltd and its shares delisted. The
TSR calculation was conducted in line with the Plan
rules under these circumstances.
Cumulative Earnings Per Share is the
consolidated basic earnings per share of
the Company calculated in accordance with
IAS 33 for each financial year cumulative
over the performance period. Goodwill
impairments arising from acquisitions prior
to 30 June 2006 are excluded from the
earnings per share calculation.
The Committee may make adjustments to
the calculations of cumulative earnings per
share, including taking into account unusual
or non-recurring items that do not reflect
underlying performance.
Cumulative Cash Conversion three-year
Cash Conversion is the cumulative operating
cash flow of the Company after deducting
net capital expenditure items stated as a
percentage of cumulative operating profit
before exceptional items.
TSR for each company is the difference
between the average market values (in
sterling terms) of a notional shareholding
(including dividends) in that company on all
dealing days for the three-month period prior
to the start and end of the performance
period, divided by the average market values
(in sterling terms) of a notional shareholding
in that company on all dealing days for the
three-month period to the start of the
performance period. The TSR for Hays’
shares is ranked against the respective TSR
performance of the comparator group.
Vesting will be subject to satisfactory
financial performance over the performance
period as determined by the Committee.
The Committee has not exercised any
discretion in relation to PSP outcomes.
Alistair Cox
Awarded 976,666 shares in 2014.
59.76% of the award has vested.
620,457 shares will be released in
November 2017 which includes accrued
dividend equivalent shares, with the
exception of those relating to the dividends
to be approved at this year’s AGM.
This equates to a value of £1,038,335 using
a preliminary share price of £1.6735 – see
page 75.
This value will be restated in 2018’s Report
once the final share price and number of
dividends are known.
Paul Venables
Awarded 704,175 shares in 2014.
59.76% of the award has vested.
447,348 shares will be released in
November 2017 which includes accrued
dividend equivalent shares, with the
exception of those relating to the dividends
to be approved at this year’s AGM.
This equates to a value of £748,637 using
a preliminary share price of £1.6735 – see
page 75.
This value will be restated in 2018’s Report
once the final share price and number of
dividends are known.
Actual results
PSP 2014 (granted in FY15) vesting in 2017 (audited)
The share price used to calculate the award was 124.6 pence, being the closing price on the day preceding the grant date.
Performance period
Grant date
Release date
1 July 2014 to 30 June 2017
14 November 2014
14 November 2017
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Hays plc Annual Report & Financial Statements 2017
Overview
Strategic report
Governance
Financial statements
Shareholder information
Performance condition
Relative TSR
EPS(1)
Cash conversion
Total
Weighting
Threshold
performance
required
1/3 Median of the
comparator
group
Maximum
performance
required
Upper quartile
of the
comparator
group
1/3
1/3
100%
21.51p
71%
25.17p
101%
PSP value as % of salary for:
Below
threshold
0
Threshold
14.583
Maximum
58.33
Actual
Performance
19.61% (6th)
PSP Value
achieved as %
of base salary
0%
0
0
0
14.583
14.583
43.75
25% of
award
58.33
58.33
175
100% of
award
25.70p
93.23%
58.33%
46.24%
104.57%
(1) The Committee took into account the following factors when setting the EPS targets:
– Budget (the setting of which is a robust and transparent process):
– Company budget for FY15 and the expectations for performance;
– Strategic direction of the business over the period covered by the PSP award;
– Market conditions and visibility of future trading;
– Analysts’ forecasts;
– Real growth around an assumed RPI of 3% per annum. The final Threshold and Maximum figures have been adjusted to reflect the actual RPI now known.
Maximum
number of
shares
including
dividend
equivalent
shares,
with the
exception
of those
relating to the
dividends to be
approved at
this year’s AGM
Number of
shares that
vested
including
dividend
equivalent
shares,
with the
exception
of those
relating to
the dividends
to be
approved at
this year’s
AGM
% of FY15
salary
awarded
Face
value at
award
£000s
Share
price at
award
£
Maximum
number of
shares
excluding
dividends
175
175
1,217
1.246
976,666
1,038,249
620,457
877
1.246
704,175
748,576
447,348
Name
Alistair Cox
Paul Venables
Value (figure
shown in
Single
Figure of
Remuneration)
£000s(1)
2013 award
that vested in
2016 as stated
in the 2016
Single Figure
£000s
2013 award
value restated
using share
price at release
date
£000s(2)
1,038
749
1,194
861
1,247
899
Release date
14 November
2017
14 November
2017
(1) The value of the 2014 PSP is based on a share price of £1.6735 which was calculated using an average for the final quarter of the 2017 financial year in accordance with
the Regulations as the vesting will occur after the date of this report.
(2) The value of the 2013 PSP disclosed in the 2016 Single Figure was based on a share price of £1.261 which was calculated using an average for the final quarter of the 2016
financial year in accordance with the Regulations as the vesting occurred after the date of the Report. The share price on award was £1.139. The actual share price on the
date of vesting on 12 September 2016 was £1.316259. This price has been used to restate the value of the 2013 PSP awards in the Single Figure for 2016 in the table
above and the Single Figure table on page 72.
Performance Conditions
The Committee believes that the performance conditions for all incentives are:
– Suitably demanding;
– Have regard to business strategy;
– Incorporate an understanding of business risk;
– Consider shareholder expectations; and
– Take into account, to the extent possible, the cyclicality of the recruitment markets in which the Group operates.
To the extent that any performance condition is not met, the relevant part of the award will lapse. There is no re-testing of performance.
Hays plc Annual Report & Financial Statements 2017
77
Governance
REMUNERATION REPORT CONTINUED
PSP 2013 (granted in FY14) vesting in 2016
The value of the 2013 PSP (which vested in 2016 and was disclosed in the 2016 Single Figure) was based on a share price of £1.261 which was
calculated using an average for the final quarter of the 2016 financial year in accordance with the Regulations as the vesting occurred after
the date of the Report. The share price on award was £1.139. The actual share price on the date of vesting on 12 September 2016 was £1.316259.
This price has been used to restate the value of the 2013 PSP awards in the Single Figure for 2016 in the table above and the Single Figure table
on page 72.
£000s
Executive director
2016
Alistair Cox
Paul Venables
Value in 2016 Single Figure
based on share price of £1.261
Value restated based on actual
share price at vesting
of £1.316259
1,194
861
1,247
899
1.2 Non-executive directors FY17 fees (audited)
The table below shows the current fee structure and actual fees paid in 2017. There were no taxable benefits paid in 2017 or 2016.
£000s
Non-executive director
Alan
Thomson
Chairman
Paul
Harrison
SID
MT
Rainey
Victoria
Jarman
Torsten
Kreindl
Pippa
Wicks
Peter
Williams
N
250
–
–
–
250
245
R
N
A
55
–
12
10
77
76
R
N
A
55
–
–
–
55
27
R
N
A
55
–
12
–
67
66
R
N
A
55
–
–
–
55
54
R
N
A
55
–
–
–
55
54
R
N
A
55
–
–
–
55
54
Base
Committee fee
Committee Chairman(1)
SID
Total fee 2017
Total fee 2016
Key
R
A
N
SID
R N A Chairman of relevant Committee
Remuneration Committee member
Audit Committee member
Nomination Committee member
Senior Independent Director
(1) There is no additional Committee Chair fee for the Nomination Committee.
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Hays plc Annual Report & Financial Statements 2017
Overview
Strategic report
Governance
Financial statements
Shareholder information
Section 2 – Long-term value creation
In this section:
2.1
Outstanding deferred
annual bonus
2.2 Share options
2.3 Outstanding PSP awards
2.4
Statement of directors’
shareholdings
2.5 TSR chart and table
2.6 Payments to past
directors/payment for
loss of office
during FY17
2.1 Outstanding deferred annual bonus awards (DAB) (audited)
The table below shows the shares held under the DAB and those that were awarded or vested during the FY17. The shares that vested related
to deferred annual bonus from previous years. The shares awarded in the financial year 2017 relate to deferred annual bonus in relation to
performance in the financial year 2016. Dividend equivalent shares which accrue under the DAB have been ignored in the table below. There
are no further performance conditions.
Name
Alistair Cox
Paul Venables
Awards
outstanding at
1 July 2016
756,386
543,802
Awards
granted in
FY17
168,747
121,666
Grant price
(Market price
at date
of award)
£
1.382
Face value of
award granted
in FY17
(at grant price)
£
233,209
1.382
168,143
Awards
vesting in
FY17
312,881
225,586
Awards
outstanding
as at
30 June 2017
651,591
468,210
2.2 Share options
Both executive directors participate in the UK Sharesave Scheme (approved by HMRC) on the same terms as other eligible employees.
The following table shows outstanding options over Ordinary shares held by the executive directors during the year ended 30 June 2017.
Name
Alistair Cox
Scheme
date of grant
31 March 2014
Balance
1 July 2016
6,870
Granted
during
2017(1) Exercised
6,870
–
Balance
30 June
2017
–
Option
Price
£
Exercise
date
1.31 2 May 2017
Market price
on date
of exercise
£
1.742
Gain
£000
3
Date
from which
exercisable
1 May 2017
Expiry
date
31 October 2017
Alistair Cox
31 March 2017
–
6,293
– 6,293
1.43
–
Paul Venables 31 March 2014
Paul Venables 31 March 2016
4,122
3,364
–
–
Paul Venables 31 March 2017
–
3,776
4,122
–
1.31 2 May 2017
– 3,364
–
3,776
1.07
1.43
–
–
–
1.742
–
–
– 1 May 2020 31 October 2020
2
–
1 May 2017
31 October 2017
1 May 2019
31 October 2019
– 1 May 2020 31 October 2020
(1) The share price at date of grant was £1.57.
The value of the options at date of grant was therefore:
Alistair Cox £9,880; and
Paul Venables £5,928.
The option price of £1.43 included a 10% discount.
Hays plc Annual Report & Financial Statements 2017
79
Governance
REMUNERATION REPORT CONTINUED
2.3 Outstanding PSP awards
The tables below show the outstanding PSP awards where vesting will be determined according to the achievement of performance
conditions that will be tested in future reporting periods. The awards were made in line with the PSP in the Remuneration Policy approved
by shareholders at the 2014 AGM.
2015 PSP (granted in FY16) vesting 2018
The share price used to calculate the award is £1.622, being the closing price on the day preceding the grant date.
Performance period
Grant date
Release date
Performance condition
Relative TSR(1)
EPS(2)
Cash Conversion
Total
Name
Alistair Cox
Paul Venables
Threshold
performance
required
Median of the
comparator group
25.06p
71%
Weighting
1/3
1/3
1/3
100%
1 July 2015 to 30 June 2018
10 September 2015
10 September 2018
Maximum
performance
required
Upper quartile of the
comparator group
PSP value as % of salary for:
Below
threshold
0
Threshold
14.583
Maximum
58.33
29.32p
101%
Face
value at
award
£000s
1,241
895
0
0
0
14.583
14.583
43.75
25% of
award
Share price
at award
£
1.622
1.622
Maximum
number of
shares
765,268
551,757
58.33
58.33
175
100% of
award
Threshold
number
of shares
191,317
137,939
% of FY16
salary
awarded
175
175
(1) TSR is measured against a bespoke comparator group, with vesting subject to satisfactory financial performance as determined by the Committee. The comparator
group is Adecco SA, CDI Corporation, Kelly Services Inc, Manpower Inc, Michael Page International Plc (now Page Group), Randstad Holdings nv, Robert Half
International Inc, Robert Walters Plc, SThree Plc and USG People nv (delisted during 2016 following purchase by Recruit Holdings Co. Ltd. The TSR calculation
will take this into account in line with the plan rules).
(2) The Committee took into account the following factors when setting the EPS targets:
– Budget (the setting of which is a robust and transparent process):
– Company budget for FY16 and the expectations for performance;
– Strategic direction of the business over the period covered by the PSP award;
– Market conditions and visibility of future trading;
– Analysts’ forecasts;
– Real growth around an assumed RPI of 3% per annum. The final Threshold and Maximum figures will be adjusted once the actual RPI is known.
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Hays plc Annual Report & Financial Statements 2017
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Financial statements
Shareholder information
2016 PSP (granted in FY17) vesting 2019
The share price used to calculate the award is £1.373, being the closing price on the day preceding the grant date.
Performance period
Grant date
Release date
Performance condition
Relative TSR(1)
EPS(2)
Cash Conversion
Total
Name
Alistair Cox
Paul Venables
Threshold
performance
required
Median of the
comparator group
22.01p
71%
Weighting
1/3
1/3
1/3
100%
1 July 2016 to 30 June 2019
12 September 2016
12 September 2019
Maximum
performance
required
Upper quartile of the
comparator group
PSP value as % of salary for:
Below
threshold
0
Threshold
14.583
Maximum
58.33
25.75p
101%
Face
value at
award
£000s
1,266
913
0
0
0
14.583
14.583
43.75
25% of
award
Share price
at award
£
1.373
1.373
Maximum
number of
shares
922,134
664,857
58.33
58.33
175
100% of
award
Threshold
number
of shares
230,533
166,214
% of FY17
salary
awarded
175
175
(1) TSR is measured against a bespoke comparator group, with vesting subject to satisfactory financial performance as determined by the Committee. The comparator
group is Adecco SA, CDI Corporation, Kelly Services Inc, Manpower Inc, Michael Page International plc (now Page Group), Randstad Holdings nv, Robert Half
International Inc, Robert Walters Plc and SThree Plc.
(2) The Committee took into account the following factors when setting the EPS targets for the award:
– Budget (the setting of which is a robust and transparent process):
– Company budget for FY17 and the expectations for performance;
– Strategic direction of the business over the period covered by the PSP award;
– Market conditions and visibility of future trading;
– Analysts’ forecasts;
– An assumed RPI of 3% per annum. The final Threshold and Maximum figures will be adjusted once the actual RPI is known.
(3) The award is subject to malus for the three-year performance period and clawback for two-years post vesting.
The Committee notes that the EPS target range is lower in absolute terms than the targets applied to the awards made in FY16. However, the
Committee is entirely comfortable that these targets are no less challenging in relative terms than the targets applied to the FY16 award and
reflect external forecasts.
Hays plc Annual Report & Financial Statements 2017
81
Governance
REMUNERATION REPORT CONTINUED
2.4 Statement of directors’ shareholdings and share interests (audited)
Policy summary
– Shareholding requirements in operation at Hays are currently
200% of base salary for the Chief Executive and 100% of base
salary for the Group Finance Director. Both are required to build
up their shareholdings over a reasonable amount of time which
would normally be five years.
What has happened
The number of shares of the Company in which current directors
had a beneficial interest and details of long-term incentive interests
as at 30 June 2017 are set out in the table below.
Name
Alistair Cox
Paul Venables
Shareholding
requirement
% of salary
200%
Number of
shares owned
outright/
vested shares
4,170,235
Share price as
at 30 June
2017
£1.66
Base salary as
at 1 July
2016
£723,480
Actual share
ownership
as % of
base salary
957%
100%
2,100,035
£1.66
£521,628
668%
Guidelines
met
Yes
Yes
Shares used for the above calculation exclude those with performance conditions, i.e. those awarded under the PSP which are still within their
performance period, any unexercised options, those shares subject to a period of deferral and any shares held in a private Trust where the
executive director is not a Trustee. They include vested shares where the executive directors have beneficial ownership, shares independently
acquired in the market and those held by a spouse or civil partner or dependent child under the age of 18 years. The executive directors’ total
shareholdings, including shares subject to deferral but excluding Sharesave Options, are shown below.
Number of
owned
outright/
vested shares
4,170,235
Value of
owned
outright/
vested
shares(2)
£
6,922,590
2,100,035
3,486,058
Number
of shares
subject to
deferral/
holding
period(1)
651,591
468,210
Number of
total
vested and
unvested
shares
(excludes any
shares with
performance
conditions)
4,821,826
Value of total
vested and
unvested
shares
(excludes any
shares with
performance
conditions)(2)
£
8,004,231
Value of
shares
subject to
deferral/
holding
period(2)
£
1,081,641
Share
ownership
as % of base
salary using
vested and
unvested
shares
1,106%
PSP share
Interests
excluding
dividends
subject to
performance
conditions
2,760,438
777,229
2,568,245
4,263,287
817%
1,990,272
Name
Alistair Cox
Paul Venables
(1) Unvested shares will be subject to payroll deductions for tax and social security on vesting. Number excludes dividend equivalent shares.
(2) Share price as at 30 June 2017 and used in the above table was £1.66
There have been no changes to the above holdings as at the date of this Report.
The table below shows the NEDs’ shareholdings as at 30 June 2017 – this table has been audited.
Non-executive director
Alan Thomson
Paul Harrison
Victoria Jarman
Torsten Kreindl
Pippa Wicks
Peter Williams
MT Rainey
Note:
There have been no changes to the above holdings as at the date of this Report.
Andrew Martin and Susan Murray were appointed to the Board on 12 July 2017. They hold no shares as at the date of this Report.
Shares held
at 30 June
2017
Shares held
at 30 June
2016
250,000
250,000
8,678
14,000
–
–
8,678
14,000
–
–
15,000
6,946
–
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Hays plc Annual Report & Financial Statements 2017
Overview
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Governance
Financial statements
Shareholder information
2.5 Total Shareholder Return (TSR)
The graph shows the value of £100 invested
in the Company’s shares compared to the
FTSE 350 index. The graph shows the total
shareholder return generated by both the
movement in share value and the
reinvestment over the same period of
dividend income. The Committee considers
that the FTSE 350 is the appropriate index
because the Company has been a member
of this index throughout the period. This
graph has been calculated in accordance
with the Regulations.
Note that following the UK Referendum to
leave the EU, Hays’ share price fell from
136.9 pence on 23 June 2016 to 97.65 pence
on 30 June 2016.
TSR chart £
300
250
200
150
100
50
0
Jun-09
Jun-10
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FTSE 350
Hays plc
Chief Executive historical remuneration
The table below sets out the total remuneration delivered to the
Chief Executive over the last eight years, valued using the methodology
applied to the total single figure of remuneration. The 2016 figure has
been restated to take into consideration the actual share price on date
of PSP vesting, as previously explained on page 78.
Chief Executive
Total Single Figure (£000s)
Annual bonus payment level achieved
(% of maximum opportunity)
PSP vesting level achieved
(% of maximum opportunity)
DAB match vesting level achieved
(% of maximum opportunity)
2010
1,634
89%
0%
N/A
2011
2,157
80%
50%
59%
2012
1,328
37%
0%
60%
2013
2,012
95%
22%
N/A
2014
2,826
98%
2015
3,996
98%
2016
2,796
2017
2,866
65.76%
92.53%
50%
100%
85.59%
59.76%
N/A
N/A
N/A
N/A
2.6 Payments to past directors/payment for loss of office during FY17
There were no payments made in relation to either of the above in the financial year 2017.
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Section 3 – Remuneration in the broader context
In this section:
3.1 Remuneration for
employees below Board
3.2 Change in Chief
Executive’s remuneration
compared to other
employees
3.3 External appointments
3.4
Relative importance
of spend on pay
3.1 Remuneration for employees below Board
Our remuneration philosophy is cascaded throughout the organisation. Our Management Board has an annual bonus scheme that is measured
against Group and Regional financial targets and personal and strategic objectives. 40% of any award is deferred into shares for three years
and subject to malus provisions. Members of the Management Board also participate in the Performance Share Plan (PSP) with the same
performance conditions as the executive directors.
Employees below the Management Board receive salary and benefits which are benchmarked to the local markets and countries in which they
work. These are reviewed annually. There is a strong tie of performance to reward which is recognised through annual bonuses, commission or
other non-financial recognition. Employees who hold key strategic positions or are deemed critical to the business through their performance
are also offered the opportunity to participate in the Performance Share Plan with performance conditions based on Group EPS results
measured over one-year. Any shares that crystallise at the end of the performance period have a further two-year holding period prior to
vesting. During this time there is also a personal performance underpin. In addition nine countries offer a Sharesave plan to employees.
A Resolution was passed at the 2016 AGM to enable the future introduction of a US Stock Purchase Plan for employees in the USA.
As stated in our Remuneration Policy, each year, prior to reviewing the remuneration of the executive directors and the members of the
Management Board, the Committee considers a report prepared by the Group Head of Reward detailing remuneration practice across the
Group. The report provides a regional overview of how employee pay compares to the market, any material changes during the year and
includes detailed analysis of basic pay and variable pay changes within the UK where all of the executive directors and most of the
Management Board are based.
While the Company does not directly consult with employees as part of the process of reviewing executive pay and formulating the
remuneration policy, the Company takes account of feedback from the broader employee population on an annual basis using the engagement
survey which includes a number of questions relating to remuneration.
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The table below summarises the above.
Principles
Components
Base Salary
Based on skill and experience
and benchmarked to local
market.
Operate a consistent reward
and performance philosophy
throughout the business.
Provide a balanced package with
a strong link between reward and
individual and Group performance.
Encourage a material, personal
stake in the business to give a
long-term focus on sustained
growth.
Annual bonus
Employees who hold positions
that influence the business
strategy and direction, or hold
key roles that have a direct
effect on business results, have
annual bonuses based on a
combination of Group, Regional
and/or local business targets
and personal or strategic
objectives.
For members of the
Management Board, 40% of
any bonus earned is deferred
into shares for three years and
is subject to Malus.
Benefits
Benchmarked to local market
and can include pension, life
assurance, health cover and
discounted voluntary benefits.
In the UK the executive directors
participate in the same plans as
other UK employees.
Commission
Client-facing employees have
annual bonuses based on
personal objectives and/or
commission directly related to
personal business performance.
Timeline
Fixed
Variable
Long-term/Ongoing
Performance Share Plan (PSP)
and Sharesave
Members of the Management
Board participate in the same
PSP Plan as executive directors
subject to Remuneration
Committee approval. The PSP
is subject to Malus provisions.
Management Board members
are encouraged to retain shares.
Below the Management Board,
broadly 350 key employees each
year participate in a PSP which
has a one-year performance
period and two-year holding
period. Financial targets are
based on Group EPS results.
Nominations are reviewed and
approved by the Remuneration
Committee.
Employees in nine countries can
participate in a Sharesave scheme
with the option to purchase shares
after three years.
Talkback Survey
An annual global employee
engagement survey is
conducted across all Hays’
employees in all countries to
ascertain overall engagement,
This includes a number
of questions relating to
remuneration.
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3.2 Change in Chief Executive’s remuneration compared to other employees
The following table sets out the change in the remuneration paid to the Chief Executive from 2016 to 2017 compared with the average
percentage change for UK employees.
The Chief Executive’s remuneration disclosed in the table below has been calculated to take into account base salary, taxable benefits,
excluding his allowance in lieu of pension, and annual bonus (including any amount deferred). The UK employee pay (on which the average
percentage change is based) is calculated using the increase in the earnings of UK-based, full-time employees who are eligible for increases
in salary/benefits and who participate in the standard discretionary (i.e. not commission based) annual bonus plans (employees who receive
bonuses on a monthly or other time-scale basis are excluded). It uses P11d data from tax years 2016 and 2017. Part-time employees have been
excluded from the analysis as many will have experienced material changes in pay during the period due to their change of hours.
The comparison figures are based on relevant UK employees (as described above) as both executive directors and most of the Management
Board are UK based and this is considered to be an appropriate comparison.
Chief Executive
Other relevant employees
% change in salary
FY17 vs FY16
% change
in taxable benefits
FY17 vs FY16
2%
4%
9%
4%
% change
in variable pay
FY17 vs FY16
44%
21%
3.3 External appointments
The Company considers that certain external appointments can help to broaden the experience and contribution to the Board of the executive
directors. Any such appointments are subject to prior agreement by the Company and must not be with competing companies. Subject to the
Company’s agreement, any fees may be retained by the individual.
For the 12 months ended 30 June 2017, the fees earned and retained by the executive directors were as follows:
– Alistair Cox: Alistair was appointed as a non-executive director at Just Eat plc on 2 May 2017. His annual fee is £60,000 and was pro-rated in
line with service during the period.
– Paul Venables: Paul holds no external appointments.
3.4 Relative importance of spend on pay
The table below sets out the relative importance of the spend on pay in the 2017 financial year and the 2016 financial year compared with other
disbursements. All figures are taken from the relevant Hays Annual Report.
Profit distributed by way of dividend
Overall spend on pay including directors
Disbursements
from profit in 2017
financial year
£m
Disbursements
from profit in 2016
financial year
£m
108.3
563.0(1)
41.7
476.3
% change
160%
18%
(1) 60% of the overall increase in pay is due to the impact of movement in foreign exchange rates. The rest of the increase is primarily due to the increase in consultant
headcount and rise in commission payments in line with increase in fees.
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Section 4 – Statement of implementation
of Remuneration Policy in the following
financial year
In this section:
4.1 Executive directors
4.2 Non-executive directors
4.3 Voting outcome
Below are the Remuneration Policy decisions for the financial year 2018. The change to the Annual Bonus and PSP structures for FY18 are
subject to shareholder approval of the proposed Remuneration Policy at the November 2017 AGM.
There have been no changes to our Remuneration Policy during FY17.
4.1 Executive directors
Summary
Position
CEO
Name
Alistair Cox
CFO
Paul Venables
Base salary
from 1 July 2017
£737,950
£532,061
Maximum bonus potential
as % of salary
Maximum PSP award
as % of salary
150%
(previously 125%)
150%
(previously 125%)
150%
(previously 175%)
150%
(previously 175%)
Benefits and
pension
No change
No change
The salaries for the CEO and
CFO were increased by 2.0%,
in line with the pay review
budget for other employees
in the UK.
Subject to shareholder
approval at the
November 2017 AGM.
See below for
performance conditions.
Subject to shareholder
approval at the
November 2017 AGM.
See grant summary below
Bonus performance conditions
The weighting of the performance conditions remain as follows for FY18:
Performance condition
Weighting
EPS
Cash conversion
Personal
Total
20%
60% The operation of the Bonus Plan is as set out in the proposed Remuneration Policy on pages 64 to 71.
It should be noted that the Committee views the disclosure of the actual performance targets as
commercially sensitive. The Committee will provide retrospective disclosure of the performance
targets for the financial measures to allow shareholders to judge the bonus earned in the context
of the performance delivered. The Committee believes that some of the personal objectives may
continue to be commercially sensitive.
20%
100%
50% of any award will be deferred into shares and held for three years from the date of award and will subject to Malus conditions for the
three-year holding period.
Any cash award is subject to Clawback conditions for three years from the date of award.
The Malus and Clawback provisions are:
– Material misstatement resulting in an adjustment to the audited accounts;
– Incorrect assessment of any performance conditions or award calculations due to an error or misleading information; and
– Fraud and Gross misconduct.
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2017 PSP (to be granted in FY18) vesting in 2020
Performance period
Grant date
Release date
Performance condition
Relative TSR(1)
EPS(2)
Cash conversion
Total
Weighting
20%
30%
50%
100%
1 July 2017 to 30 June 2020
21 November 2017
21 November 2020
Threshold
performance
required
Median of the
comparator group
32.21p
71%
Maximum
performance
required
Upper quartile of the
comparator group
37.73p
101%
PSP value as % of salary for:
Below
threshold
0
Threshold
7.5%
Maximum
30%
0
0
0
11.25%
18.75%
37.50%
25% of
award
45%
75%
150%
100% of
award
(1) TSR is measured against a bespoke comparator group, with vesting subject to satisfactory financial performance as determined by the Committee. The comparator
group for FY18 is: Adecco SA, Kelly Services Inc, Manpower Inc, Page Group (previously Michael Page International plc), Randstad Holdings nv, Robert Half International
Inc, Robert Walters plc and SThree plc. During FY16 USG People nv was purchased by Recruit Holdings Co. Ltd and its shares delisted. CDI Corporation has also been
removed because it is no longer considered a relevant comparator.
(2) The Committee took into account the following factors when setting the EPS targets for the award:
– Budget (the setting of which is a robust and transparent process):
– Company budget for FY18 and the expectations for performance;
– Strategic direction of the business over the period covered by the PSP award;
– Market conditions and visibility of future trading;
– Analysts’ forecasts;
– Threshold and maximum ongoing growth expectations for years two and three are set around a fixed range.
(3) There is a two-year holding period post vesting for any shares that vest as a result of performance conditions being met.
(4) The award is subject to malus for the three-year performance period and clawback during the two-year holding period.
The Malus and Clawback provisions are:
– Material misstatement resulting in an adjustment to the audited accounts;
– Incorrect assessment of any performance conditions or award calculations due to an error or misleading information; and
– Fraud and Gross misconduct.
Shareholding requirements
For FY18 and going forwards, the shareholding requirement for the CFO will increase from 100% of base salary to 200% of base salary.
This brings him in line with the shareholding requirement for the CEO. The CFO already holds above this level of shares – see page 82.
4.2 Non-executive directors
The Committee reviewed the Group Chairman’s fee during FY17 and determined that it should increase by 2.0% for FY18. This is in line with
other increases across the Company.
The Board reviewed the fees for the other non-executive directors (NEDs) during FY17. They determined that their base fee should increase by
2.0% for FY18 in line with other increases across the Company. In addition, it was determined that the SID fee and Committee Chairman fees
should increase to reflect the increasing responsibilities and time commitment of these roles.
All increases were effective from 1 July 2017.
The table below shows the changes.
Position
Chairman
Base fee
Committee Chairman
SID
4.3 Voting outcome for the Annual Report on Remuneration FY16 at the 2016 AGM
Votes
Votes for
Votes against
Votes withheld
Number of Votes
1,121,184,706
38,040,863
81,710
%
96.72%
3.28%
–
Fee for
FY18
£000s
255
56
13
11
Fee for
FY17
£000s
250
55
12
10
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Section 5 – Governance
In this section:
5.1
Remuneration
Committee members and
attendees
5.2 Terms of reference
5.3 Meetings in FY17
5.4
5.5
Advisers to the
Remuneration
Committee
Engagement with
shareholders
5.6 Considering risk
5.7 General governance
5.1 Remuneration Committee members and attendees
The table below shows the members and attendees of the Remuneration Committee during FY17.
Remuneration Committee members
Position
Paul Harrison
Victoria Jarman
Torsten Kreindl
Pippa Wicks
Peter Williams
MT Rainey
Chairman of the Remuneration Committee
Member from 1 October 2011
Member from 1 June 2013
Member from 1 January 2012
Member from 24 February 2015
Member from 14 December 2015
Comments
Independent
Independent
Independent
Independent
Independent
Independent
Susan Murray and Andrew Martin were appointed to the Board on 12 July 2017. They will be members of the Remuneration Committee in FY18.
Remuneration Committee attendees
Position
Alan Thomson
Alistair Cox
Group Chairman and standing attendee
by invitation
Chief Executive
Other executives
The Group Head of Reward
The Company Secretary
Comments
Independent upon appointment on
1 October 2010.
Attends by invitation but does not participate
in any discussion about his own reward.
Attends by invitation as the executive
responsible for advising on
the remuneration policy.
Acts as Secretary to the Committee.
FIT Remuneration Consultants
and Deloitte
Committee’s independent advisers during FY17
Attended by invitation.
No person is present during any discussion relating to his or her own remuneration.
5.2 Terms of reference
The Board has delegated to the Committee, under agreed Terms of Reference, responsibility for the remuneration policy and for determining
specific packages for the executive directors, the Chairman and other senior executives. The Company consults with key shareholders in
respect of remuneration policy and the introduction of new incentive arrangements. The Terms of Reference for the Committee are available
on the Company’s website, haysplc.com, and from the Company Secretary at the registered office.
5.3 Meetings in FY17
The Committee normally meets at least four times per year. During FY17, it formally met five times as well as having ongoing dialogue via email
or telephone discussion. The meetings principally discussed the following key issues and activities:
– A review of the basic pay, bonus and PSP awards of the executive directors and other senior executives;
– Consideration of the appropriateness of the existing arrangements for the 2017 financial year;
– A review of the reward strategy in the context of Group risk;
– Consideration of the relationship between executive reward and the reward structures in place for other Group employees;
– A review of the Committee’s Terms of Reference;
– The selection of a new Independent Adviser; and
– Review of the future structure and appropriateness of the remuneration for executive directors in the light of being a cyclical business and
in consideration of the new binding vote in 2017. This included consideration of any feedback received as a result of shareholder consultation.
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5.4 Advisers to the Remuneration Committee
Following the successful tender by PwC to become the Company’s new Audit partner, from 1 July 2016 PwC no longer acted as the
independent adviser to the Remuneration Committee.
FIT Remuneration Consultants were appointed as interim advisers for the period July 2016 to November 2016 while a formal tender was
conducted. During this period they principally assisted the Committee with compliance of the Directors’ Remuneration Report. FIT adheres
to the Remuneration Consultants’ Code of Conduct. FIT provided no other advice or work to Hays during this period.
Following the results of the tender, Deloitte was appointed as the independent adviser to the Committee with effect from November 2016.
Since their appointment, Deloitte has advised the Committee on all aspects of the current remuneration policy for executive directors and
members of the Management Board. They have also assisted the Committee in its review of the Policy and the proposed changes being put
forward to the binding vote at the November 2017 AGM.
Deloitte also provided advice to the Company in relation to taxation compliance work and tax advice including transfer pricing work. This work
is carried out by entirely different areas and employees within Deloitte and is not felt to be in conflict with the independence and objectivity of
the work carried out for the Committee.
The Committee is satisfied that the advice received was objective and independent. Deloitte is a member of the Remuneration Consultants’
group and the voluntary code of conduct of that body is designed to ensure objective and independent advice is given to Remuneration
Committees.
The total fee for 2017 in relation to Committee work was £17,967 excluding VAT for FIT Remuneration Consultants and £91,450 excluding VAT
for Deloitte. While fee estimates are generally required for each piece of work and set fees have been agreed for certain regular work, fees are
generally calculated based on time, with hourly rates in line with the level of expertise and seniority of the adviser concerned.
5.5 Engagement with shareholders
The Committee seeks to maintain an active and productive dialogue with investors on developments in the remuneration aspects of corporate
governance generally and any changes to the Company’s executive pay arrangements in particular. During 2017 the Committee engaged with
and sought feedback on its proposed Remuneration Policy from 27 of its shareholders as well as other investor bodies. The Committee would
like to thank shareholders and the institutions for their time, engagement and constructive dialogue and feedback. The Committee is cognisant
that views can differ between shareholders and in the market generally. It has sought to put forward a Policy that recognises the increased
importance being placed on executives having a long-term personal stake in the business and has introduced a two-year holding period post
vesting for the PSP and increased the shareholding requirement for the CFO to align with that of the CEO. In addition, it has sought to make
modest adjustments to the structure of the incentive plans and rebalanced them while ensuring that overall quantum remains the same.
Overall, feedback received from shareholders has indicated positive support for the proposed Policy changes. Subject to the results of the
binding vote, it is the Committee’s expectation to operate the Policy for the next three years.
5.6 Considering risk
Each year, the Committee considers the executive remuneration structure in the light of its key areas of risk. The Committee takes into
consideration whether the achievement of objectives and any payment from plans have taken into account the overall risk profile of the
Company when it evaluates the executives’ performance.
5.7 General governance
The Directors’ Report on Remuneration has been prepared in accordance with Schedule 8 to The Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations 2008 (as amended), the revised provisions of the Code and the Listing Rules.
By order of the Board
Paul Harrison
Chairman of the Remuneration Committee
30 August 2017
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Financial statements
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DIRECTORS’ REPORT
Hays is incorporated in the UK and registered as a public
limited company in England and Wales. Its headquarters
are in London and it is listed on the main market of the
London Stock Exchange.
Strategic Report
A description of the Company’s business model and
strategy is set out in the Strategic Report along with the
factors likely to affect the Group’s future development,
performance and position. An overview of the principal
risks and uncertainties faced by the Group are also
provided in the Strategic Report.
The Statement of Compliance with the Code for the
reporting period is contained in the Corporate
Governance Statement.
Information relating to matters addressed by the Audit,
Remuneration and Nomination Committees, which
operate within clearly defined terms of reference, are set
out within the Audit, Remuneration and Nomination
Committee Reports.
All of the matters above are incorporated by reference
into this Directors’ Report.
The purpose of this Report is to provide information to
the members of the Company, as a body. The Company,
its directors, employees, agents or advisers do not accept
or assume responsibility to any other person to whom
this document is shown or into whose hands it may
come and any such responsibility or liability is expressly
disclaimed. This Report contains certain forward-looking
statements with respect to the operations, performance
and financial condition of the Group. By their nature,
these statements involve uncertainty since future events
and circumstances can cause results and developments
to differ from those anticipated. The forward-looking
statements reflect knowledge and information available
at the date of preparation of this Report. Nothing in this
Report should be construed as a profit forecast.
Related party transactions
Details of the related party transactions undertaken
during the reporting period are contained in note 26 to
the Consolidated Financial Statements.
Post balance sheet events
There have been no significant events to report since the
date of the balance sheet.
Dividends
An interim dividend of 0.96 pence (2016: 0.91 pence) per
Ordinary share was paid to shareholders on 7 April 2017.
The Board recommends the payment of a final dividend
of 2.26 pence (2016: 1.99 pence) per Ordinary share.
In addition, the Board is also recommending the payment
of a special dividend of 4.25 pence per Ordinary share.
These three dividend payments will represent a total
dividend of 7.47 pence (2016: 2.90 pence) per Ordinary
share for the financial year ended 30 June 2017. Subject
to the shareholders of the Company approving these
recommendations at the 2017 AGM, the final and special
dividends will be paid, in aggregate, on 17 November 2017
to those shareholders appearing on the register of
members as at 6 October 2017. The ex-dividend date
is 5 October 2017.
Financial instruments
Details of the financial instruments used by the Group
are set out in notes 18 to 20 to the Consolidated Financial
Statements. A general outline of Hays’ use of financial
instruments is set out in the treasury management section
on page 35 of the Financial Review of this Report.
Directors
Biographies of the serving directors of Hays are provided
on pages 44 and 45 of this Report. They all served on
the Board throughout the 2017 financial year, with the
exception of Andrew Martin and Susan Murray, who
joined the Board on 12 July 2017.
General powers of the directors
The powers of the directors are contained in the
Company’s Articles of Association (Articles). These
powers may be exercised by any meeting of the Board
at which a quorum of three directors is present. The
power of the Board to manage the business is subject
to any limitations imposed by the Companies Act 2006,
the Articles or any directions given by special resolution
of the shareholders applicable at a relevant time.
The Articles contain an express authority for the
appointment of executive directors and provide the
directors with the authority to delegate or confer upon
such directors any of the powers exercisable by them
upon such terms and conditions and with such
restrictions as they see fit. The Articles contain additional
authorities to delegate powers and discretions to
committees and sub-committees.
Directors’ powers to allot and buy back shares
The directors have the power to authorise the issue and
buy-back of the Company’s shares by the Company,
subject to authority being given to the directors by the
shareholders in general meeting, applicable legislation
and the Articles.
Appointment and replacement of directors
Shareholders may appoint any person who is willing to
act as a director by ordinary resolution and may remove
any director by ordinary resolution. The Board may
appoint any person to fill any vacancy or as an additional
director, provided that they are submitted for election by
the shareholders at the AGM following their appointment.
Specific conditions apply to the vacation of office,
including cases where a director becomes prohibited by
law or regulation from holding office, or is persistently
absent from directors’ meetings, or if three-quarters of
appointed directors request his or her resignation or in
the case of mental incapacity or bankruptcy.
Directors’ indemnities
The Company continues to maintain third-party directors’
and officers’ liability insurance for the benefit of its
directors. This provides insurance cover for any claim
brought against directors or officers for wrongful acts
in connection with their positions. The directors have
also been granted qualifying third-party indemnities,
as permitted under the Companies Act 2006, which
remain in force. Neither the insurance nor the indemnities
extend to claims arising from fraud or dishonesty and
do not provide cover for civil or criminal fines or penalties
provided by law.
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DIRECTORS’ REPORT CONTINUED
Directors’ interests
Details of the interests of Hays’ directors and their
connected persons in the Ordinary shares of the
Company are outlined in the Remuneration Report.
Share capital
Hays has one class of Ordinary shares which carry no
right to fixed income or control over the Company. These
shares may be held in certificated or uncertificated form.
On 30 June 2017, the Company had 1,464,096,566 fully
paid Ordinary shares in issue, of which 21,079,129
Ordinary shares were held in treasury by the Company.
The rights and obligations attaching to the Company’s
Ordinary shares are contained in the Articles. In brief, the
Ordinary shares allow holders to receive dividends and to
exercise one vote on a poll per Ordinary share for every
holder present in person or by proxy at general meetings
of the Company. They also have the right to a return of
capital on the winding up of the Company.
There are no restrictions on the size of holding or the
transfer of shares, which are both governed by the
general provisions of the Company’s Articles and
legislation. Under the Articles, the directors have the
power to suspend voting rights and the right to receive
dividends in respect of Ordinary shares and to refuse to
register a transfer of Ordinary shares in circumstances
where the holder of those shares fails to comply with a
notice issued under Section 793 of the Companies Act
2006. The directors also have the power to refuse to
register any transfer of certificated shares that does not
satisfy the conditions set out in the Articles.
The Company is not aware of any agreements between
shareholders that might result in the restriction of
transfer of voting rights in relation to the shares held
by such shareholders.
Treasury shares
As Hays has only one class of share in issue, it may hold
a maximum of 10% of its issued share capital in treasury.
As at 30 June 2017, 1.44% of the Company’s shares were
held in treasury. Legislation restricts the exercise of rights
on Ordinary shares held in treasury. The Company is not
allowed to exercise voting rights conferred by the shares
whilst they are held in treasury. It is prohibited from
paying any dividend or making any distribution of assets
on treasury shares. Once in treasury, shares can only be
sold for cash, transferred to an employee share scheme
or cancelled. During the 2017 financial year, Hays
transferred 10,084,615 shares out of treasury to satisfy
the award of shares under the Company’s employee
share schemes.
Shares held by the Employee Benefit Trust
The Hays plc Employee Share Trust (the Trust) is an
employee benefit trust which is permitted to hold
Ordinary shares in the Company for employee share
schemes purposes. No shares were held by the Trust
as at the year end. Shares held in the Trust may be
transferred to participants of the various Group share
schemes. No voting rights are exercisable in relation
to shares unallocated to individual beneficiaries.
Dilution limits in respect of share schemes
The current Association of British Insurers (ABI) guidance
(responsibility for which now rests with the Investment
Association) on dilution limits provide that the overall
dilution under all share plans operated by a company
should not exceed 10% over a 10-year period in relation
to the Company’s share capital, with a further limitation
of 5% in any 10-year period on executive plans.
The Company’s share plans operate within these
recommended guidelines on dilution limits.
Major shareholders
As at 30 June 2017, the following shareholders held
an interest of 3% or more of the Company’s issued
share capital:
Cedar Rock Capital Limited
Virtus Trust
Marathon Asset Management
Baillie Gifford & Co
Columbia Threadneedle Investments
BlackRock Inc
Heronbridge Investment Management LLP
Silchester International Investors
% of total
voting rights
7.7%
7.1%
6.2%
6.1%
5.4%
3.8%
3.7%
3.1%
Human rights
At Hays we are committed to our Code of Conduct and
Ethics Policy, which reflects the way we operate including
in relation to human rights. All staff within Hays are
expected to act with integrity and honesty and behave
in a way that is above reproach, as well as treat people
fairly, with courtesy and respect, be responsible, respect
diversity and communicate openly. Included in our Code
of Conduct is an Equal Opportunity Policy. We make
every effort to ensure that no discrimination arises
during the recruitment, employment and period after
employment of any employee for reasons of gender,
sexual orientation, marital status, creed, colour, race,
nationality, ethnic or national origin, religious or other
belief, political opinion, spent convictions, disability or age,
and all employees are expected to deal with all persons
with the same attention, courtesy and consideration.
This support of equal opportunities applies not only as a
direct employer but also in our introduction of candidates
to clients. The Company’s Modern Slavery Act statement
can be found on our website, haysplc.com.
Supplier Code of Conduct
We expect our suppliers to operate in an ethical, legally
compliant and professional manner. The standards we
expect are detailed in our Supplier Code of Conduct,
a copy of which can be found on our website, haysplc.com.
Community support
As the ultimate people business, our employees are keen
to support their local communities and charities in any
way they can. This effort is operated on local and national
levels to great effect through volunteering, fundraising
activities and donations. Activities undertaken during the
year include homework cafés in Denmark, established
across the country for regular students and studying
inmates, to provide them with, amongst other things,
help for their education; house building in Colombia for
people with really low or non-existent incomes; a Get
Active for Summer charity campaign in Canada that
raised around C$15,000 for Jumpstart Canada, a charity
that funds sports activities for children; and in Belgium
we work with over 50 schools and universities to offer
information on job searching and delivering workshops.
The end of the financial year marked the end of a
two-year collaboration between Hays UK and the charity
92
Hays plc Annual Report & Financial Statements 2017
Overview
Strategic report
Governance
Financial statements
Shareholder information
Together for Short Lives, during which Hays UK reached
the fundraising target of £250,000, raising vital funds
and helping Together for Short Lives to provide 12,500
hours of care to seriously ill children in hospices across the
UK. In Spain, Hays joined the Alianza FP Dual, a network
made up of institutions and companies whose main goal is
to promote and develop the quality and relevance of dual
vocational training in Spain. In the Czech Republic, Hays
continued their collaboration with SOS Children Villages,
and provided support for Klokánek (a fund for children in
danger) contributing food, toys and clothes for children.
Employees
Our goal is for our people to reach their full potential and
to give of their best as individuals and in teams. In this
context, we are committed to never discriminating on
the grounds of race, colour, creed, disability, religion,
ethnic origin, gender, sexual orientation or age. All Hays
employees are required to abide by these principles
which are set out in the Group’s Equal Opportunities
Policy and Code of Conduct.
Hays gives full consideration to applications for
employment from disabled persons where they have the
right skills and abilities for the role. Should an employee
become disabled whilst working for the Group, Hays
would make every effort to accommodate them, to assist
them in any re-training or to find suitable alternative
employment within the Group.
Diversity at Hays
At Hays, diversity means understanding and reflecting
the community in which we operate, and building loyalty
with our colleagues, candidates and clients. Differences
such as age, gender, ethnicity, physical appearance,
religion, education and beliefs are valued and everyone
has the opportunity to contribute to the Company and
fulfil their potential.
Respect for people and becoming an ‘Employer of
Choice’ are the core values in our approach. Our aim is
to create an open, honest and unprejudiced working
environment and to ensure that all our colleagues feel
part of Hays and are respected as individuals.
We value and utilise the differences that our people bring
to our business and in the competitive environment in
which we operate it is essential that we attract and retain
the best people and those that reflect the client and
candidate groups we serve.
At Hays, our culture is meritocratic; we share a passion
for creating opportunities for our people to flourish
and succeed, whatever their background. We know
that diversity of perspective and an inclusive approach
is great for business and careers with us. By reflecting
our marketplace and embracing difference we can
continue to drive an outstanding organisation culture
that impacts business results and delivers world-class
service to our customers. Fundamental to our leading
expertise is a shared commitment to equality and to
harnessing the dynamism that diversity and inclusion
bring to our workplace.
Hays have partnered with the Australian Indigenous
Mentoring Experience (AIME) as part of our commitment
to Diversity@Hays. AIME gives university students
the opportunity to volunteer as a mentor to indigenous
high-school children to improve their pathways to
further education or employment. AIME started with
just 25 children in their programme and since 2005,
over 10,000 high-school students and 5,000 university
students been through the programme. The programme
works on a ‘mentor the mentor’ structure, ensuring that
learnings are passed on to the people within AIME and
as a flow-on effect, the indigenous schoolchildren.
Employee involvement
Ongoing communication forms the basis of the
partnership between Hays’ leadership and its employees.
Employees receive business performance updates from
Alistair Cox, the Chief Executive, and from their
respective regional Managing Directors, by email on
a four-weekly basis. These are posted on the Group’s
intranet, which acts as a source of reference for the
Group’s brand values, policies and procedures. Regular
presentations are also made to employees by the Chief
Executive and regional Managing Directors during office
visits made over the course of the year. Hays continues
to provide tailored training to the people who are in the
front line of delivering recruitment solutions as well as in
management and leadership roles. These programmes
take a number of different guises across the Group’s
regional businesses but all share the common goal of
improving the service we provide to clients.
To ensure that employees remain engaged in our
business, an annual employee engagement survey,
known as TALKback, is carried out each year. This allows
employees to voice their views and opinions on all aspects
of their workplace environment, training and development,
work culture, leadership and client relations. The results
which indicate employee engagement levels and highlight
any areas of concern, are presented to the Management
Board and to the Board.
Split of PLC Board members
Split of Senior Management
team members
Split of employees
Male
Female
64%
36%
Male
Female
73%
27%
Male
Female
39%
61%
Hays plc Annual Report & Financial Statements 2017
93
Governance
DIRECTORS’ REPORT CONTINUED
Hays believes in the value of loyalty and considers its
employee incentive programme of commission schemes,
performance-related cash bonuses and share schemes to
be important factors in keeping its employees motivated.
The employee share schemes have been running
successfully since inception and provide many employees
with an additional stake in the business.
In the 2017 Glassdoor Employees’ Choice Award we
were the highest ranked recruiter and fifth overall in the
Best Places to Work in the UK. The Employees’ Choice
Awards programme relies solely on the input of employees,
who provide feedback on their jobs, work environments
and companies via Glassdoor’s anonymous online
company reviews survey.
Hays in Germany, Austria and Switzerland received the
title ‘Top Employer 2017’ for outstanding and modern
personnel management, which is a great honour for us.
Greenhouse gas emissions
Hays gathers data from every office around the world
in order to calculate our greenhouse gas (GHG) emissions
in accordance with the World Resources Institute (WRI)
Greenhouse Gas Protocol. We measure our annual
emissions in relation to employees (our ‘intensity ratio’).
As a people-based business, number of employees
is a quantifiable factor associated with our activities.
Our reporting year for GHG emissions is 1 April 2016 to
31 March 2017, and this year our employee intensity per
tonne CO2e was 1.58 (against 1.66 last year (restated)).
FTSE4Good Index
FTSE Russell (the trading name of FTSE International
Limited and Frank Russell Company) confirms that Hays
plc has been independently assessed according to the
FTSE4Good criteria, and has satisfied the requirements
to become a constituent of the FTSE4Good Index Series.
Created by the global index provider FTSE Russell, the
FTSE4Good Index Series is designed to measure the
performance of companies demonstrating strong
Environmental, Social and Governance (ESG) practices.
The FTSE4Good indices are used by a wide variety of
market participants to create and assess responsible
investment funds and other products.
Articles of Association
The Company’s Articles may only be amended by
special resolution of the shareholders.
Disclosure of information to the Auditor
So far as the directors who held office at the date of
approval of this Report are aware, there is no relevant
audit information of which the external Auditor is unaware
and each director has taken all steps that he or she ought
to have taken as a director to make himself or herself
aware of any relevant audit information and to establish
that the external Auditor is aware of that information.
This confirmation should be interpreted in accordance
with Section 418 of the Companies Act 2006.
2017 Annual Report and Financial Statements
On the recommendation of the Audit Committee and
having considered all matters brought to the attention
of the Board during the financial year, the Board is
satisfied that the Annual Report and Financial
Statements, taken as a whole, is fair, balanced and
understandable. The Board believes that the disclosures
set out in the Annual Report provide the information
necessary for shareholders to assess the Company’s
performance, business model and strategy.
Annual General Meeting
The Company’s AGM will be held at 12 noon on
15 November 2017 at the offices of UBS, 5 Broadgate,
London EC2M 2QS.
The Notice of Meeting sets out the resolutions to be
proposed at the AGM and gives details of the voting
record date and proxy appointment deadline for that
Meeting. The Notice of Meeting is contained in a separate
circular to shareholders which is being mailed or
otherwise provided to shareholders at the same time
as this Report.
Auditor
Resolutions 15 and 16 at the forthcoming AGM
will respectively propose the reappointment of
PricewaterhouseCoopers LLP as Auditor of the
Company and authorise the directors to determine its
remuneration. These resolutions will be proposed as
ordinary resolutions and shall have effect until the
conclusion of the next general meeting of the Company
at which accounts are laid.
Impact
Direct
Scope
Scope 1
Indirect
Scope 2
Scope 3
Resource
Operational fuel
Vehicle fuel
Refrigerant
Electricity(2)
District heating
Air travel
Rail travel
Electricity T&D losses
Private cars (business use)
2017
Total GHGs
(tonnes
%
contribution
to total
1
30
2
37
3
21
2
3
1
100
CO2e)(1)
115
4,511
383
5,590
396
3,292
260
540
192
15,279
2016
Total GHGs
(tonnes
%
contribution
to total
2
28
2
38
2
21
2
4
1
100
CO2e)(1)
245
4,331
344
5,775
396
3,219
329
570
153
15,362
Total direct and indirect
(1) Greenhouse gas emissions are stated in tonnes of CO2e (carbon dioxide equivalent, comprising carbon dioxide, methane and nitrous oxide)
for the 12-month period ended 31 March 2017. Out of scope Indirect emissions, which were the biogenic part of vehicle fuels, totalled 167
tonnes of CO2e (167 tonnes in FY16).
(2) All electricity totals are calculated using 2016 government location-based conversion factors.
94
Hays plc Annual Report & Financial Statements 2017
Overview
Strategic report
Governance
Financial statements
Shareholder information
Notice of general meetings
The notice period required by the Companies Act 2006
for general meetings of the Company is 21 clear days,
unless shareholders approve a shorter notice period,
which cannot however be less than 14 clear days.
At last year’s AGM, shareholders authorised the calling
of general meetings other than an AGM on not less than
14 clear days’ notice and Resolution 21 will be proposed
as a special resolution and seeks to renew this authority.
The authority granted by this resolution, if passed, will be
for a period expiring at the conclusion of the 2018 AGM.
The flexibility offered by this resolution will be used
where, taking into account the circumstances, the
directors consider this appropriate in relation to the
business to be considered at the meeting and in the
interests of the Company and shareholders as a whole.
Recommendation
The directors consider that all the resolutions to be put to
the meeting are in the best interests of the Company and
its shareholders as a whole. Your Board will be voting in
favour of them and unanimously recommends that you
do so as well.
By order of the Board
Doug Evans
Company Secretary
30 August 2017
Political donations
The Company made no political donations during the
year and intends to maintain its policy of not making such
payments. It will however as a precautionary measure
to avoid inadvertent breach of the law, seek shareholder
authority at the 2017 AGM to make limited donations
or incur limited political expenditure, although it has no
intention of using the authority.
Resolution 17 will be proposed as an ordinary resolution
to seek authority to make political donations, and if
passed, such authority shall expire at the conclusion
of the 2018 AGM.
Authority to allot shares
At the 2016 AGM, shareholders authorised the directors,
subject to the Companies Act 2006, to allot Ordinary
shares or grant rights to subscribe for or grant rights to
subscribe for or convert any securities into shares without
the prior consent of shareholders. This authority expires
at the conclusion of the 2017 AGM.
Accordingly, Resolution 18 will be proposed as an
ordinary resolution to renew this authority for a period
expiring at the conclusion of the 2018 AGM. The directors
have no present intention of exercising this authority.
Disapplication of pre-emption rights
Also at last year’s meeting, a special resolution was
passed under the Companies Act 2006 empowering
the directors to allot equity securities for cash without
first being required to offer such shares to existing
shareholders. Resolution 19 will seek to renew this
authority. If approved, the resolution will authorise
directors in accordance with the Articles to issue shares
in connection with a rights issue and otherwise to issue
shares for cash up to a specified maximum nominal
amount which includes the sale on a non pre-emptive
basis of any shares held in treasury.
Resolution 19 will be proposed as a special resolution
to renew this authority for a period expiring at the
conclusion of the 2018 AGM.
Authority to purchase own shares
A special resolution was also passed at last year’s
meeting enabling the Company to purchase its own
shares in the market. Resolution 20 will seek to renew
this authority. The directors intend only to exercise this
authority if to do so would, in their opinion, enhance
shareholder value. The Company will have the option of
holding, as treasury shares, any of its own shares that it
purchases pursuant to the authority conferred by this
resolution. This would give the Company the ability to sell
treasury shares, providing the Company with flexibility
in the management of its employee shares schemes.
No dividends will be paid on shares whilst held in treasury
and no voting rights will attach to the treasury shares.
The price paid for Ordinary shares will not be less than
the nominal value of 1 pence per share and not more than
the higher of 5% above the average of the middle market
quotations of the Company’s Ordinary shares as derived
from the London Stock Exchange.
Resolution 20 will be proposed as a special resolution
to renew this authority for a period expiring at the
conclusion of the 2018 AGM.
Hays plc Annual Report & Financial Statements 2017
95
Governance
DIRECTORS’ RESPONSIBILITIES
The directors consider that the Annual Report and
Financial Statements, taken as a whole, is fair, balanced
and understandable and provides the information
necessary for shareholders to assess the Group’s and
Company’s performance, business model and strategy.
Each of the directors, whose names and functions are
listed in Governance Report confirm that, to the best of
their knowledge:
– The Company financial statements, which have
been prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 101
‘Reduced Disclosure Framework’, and applicable law),
give a true and fair view of the assets, liabilities,
financial position and profit of the Company;
– The Group financial statements, which have been
prepared in accordance with IFRSs as adopted by the
European Union, give a true and fair view of the assets,
liabilities, financial position and profit of the Group; and
– The Strategic Report includes a fair review of the
development and performance of the business and
the position of the Group and Company, together with
a description of the principal risks and uncertainties
that it faces.
By order of the Board
Alistair Cox
Chief Executive
Paul Venables
Group Finance Director
30 August 2017
The directors are responsible for preparing the Annual
Report and the Financial Statements in accordance with
applicable law and regulation.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors have prepared the Group financial statements
in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union and
company financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, comprising FRS
101 ‘Reduced Disclosure Framework’, and applicable law).
Under company law the directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the
Group and Company and of the profit or loss of the
Group and Company for that period. In preparing the
financial statements, the directors are required to:
– Select suitable accounting policies and then apply
them consistently;
– State whether applicable IFRSs as adopted by the
European Union have been followed for the Group
financial statements and United Kingdom Accounting
Standards, comprising FRS 101, have been followed
for the Company financial statements, subject to any
material departures disclosed and explained in the
financial statements;
– Make judgments and accounting estimates that are
reasonable and prudent; and
– Prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Group and Company will continue in business.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Group’s and Company’s transactions and disclose
with reasonable accuracy at any time the financial
position of the Group and Company and enable them to
ensure that the financial statements and the Directors’
Remuneration Report comply with the Companies Act
2006 and, as regards the Group financial statements,
Article 4 of the IAS Regulation.
The directors are also responsible for safeguarding the
assets of the Group and Company and hence for taking
reasonable steps for the prevention and detection of
fraud and other irregularities.
The directors are responsible for the maintenance and
integrity of the Company’s website. Legislation in the
United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
96
Hays plc Annual Report & Financial Statements 2017
FINANCIAL
STATEMENTS
Financial Statements for the
Group including the report from
the independent Auditor.
Independent Auditor’s Report
98
104 Consolidated Group Financial Statements
134 Hays plc Company Financial Statements
Financial statements
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF HAYS PLC
To the best of our knowledge and belief, we
declare that non-audit services prohibited by
the FRC’s Ethical Standard were not provided
to the Group or the Company.
Other than those disclosed in note 6 to the
fi nancial statements, we have provided
no non-audit services to the Group or the
Company in the period from 1 July 2016 to
30 June 2017.
Our audit approach
Overview
– £10.0 million – Group fi nancial statements
– Based on approximately 5% of profi t
before tax from continuing operations
– £9.3 million – Company fi nancial
Materiality
statements
Audit scope
Key audit
matters
The scope of our audit
As part of designing our audit, we
determined materiality and assessed the
risks of material misstatement in the fi nancial
statements. In particular, we looked at where
the directors made subjective judgments, for
example in respect of signifi cant accounting
estimates that involved making assumptions
and considering future events that are
inherently uncertain. As in all of our audits we
also addressed the risk of management
override of internal controls, including
evaluating whether there was evidence of
bias by the directors that represented a risk
of material misstatement due to fraud.
– Based on approximately 1% of total assets
– 89% of Group net fees and 97% Group
profi t before tax from continuing
operations covered through full scope
audit procedures
– Australia, UK and Germany considered to
be fi nancially signifi cant due to their
relative contributions to the Group’s net
fees and profi t before tax
– Five country operations visited by the
Group audit team during the year
– Recoverability of accrued income and
trade receivables
– Fraud in revenue recognition
– Goodwill impairment assessment
Key audit matters
Key audit matters are those matters that, in
the auditor’s professional judgment, were of
most signifi cance in the audit of the fi nancial
statements of the current period and include
the most signifi cant assessed risks of material
misstatement (whether or not due to fraud)
identifi ed by the auditors, including those
which had the greatest eff ect on: the overall
audit strategy; the allocation of resources
in the audit; and directing the eff orts of the
engagement team. These matters, and any
comments we make on the results of our
procedures thereon, were addressed in
the context of our audit of the fi nancial
statements as a whole, and in forming our
opinion thereon, and we do not provide a
separate opinion on these matters. This is
not a complete list of all risks identifi ed by
our audit.
Report on the audit of the
fi nancial statements
Opinion
In our opinion:
– Hays plc’s Group fi nancial statements
and Company fi nancial statements
(the ‘fi nancial statements’) give a true and
fair view of the state of the Group’s and of
the Company’s aff airs as at 30 June 2017
and of the Group’s profi t and cash fl ows
for the year then ended;
– The Group fi nancial statements have been
properly prepared in accordance with
IFRSs as adopted by the European Union;
– The Company fi nancial statements have
been properly prepared in accordance
with United Kingdom Generally Accepted
Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 101
‘Reduced Disclosure Framework’, and
applicable law); and
– The fi nancial statements have been
prepared in accordance with the
requirements of the Companies Act 2006
and, as regards the Group fi nancial
statements, Article 4 of the IAS Regulation.
We have audited the fi nancial statements,
included within the Annual Report and
Financial Statements, which comprise: the
Consolidated and Company Balance Sheets
as at 30 June 2017; the Consolidated Income
Statement and Statement of Comprehensive
Income, the Consolidated Cash Flow
Statement, and the Consolidated and
Company Statements of Changes in Equity
for the year then ended; and the notes to
the fi nancial statements, which include
a description of the signifi cant accounting
policies.
Our opinion is consistent with our reporting
to the Audit Committee.
Basis for opinion
We conducted our audit in accordance
with International Standards on Auditing (UK)
(ISAs (UK)) and applicable law. Our
responsibilities under ISAs (UK) are further
described in the Auditor’s responsibilities for
the audit of the fi nancial statements section
of our report. We believe that the audit
evidence we have obtained is suffi cient and
appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in
accordance with the ethical requirements
that are relevant to our audit of the fi nancial
statements in the UK, which includes the
FRC’s Ethical Standard as applicable to
listed public interest entities, and we have
fulfi lled our other ethical responsibilities
in accordance with these requirements.
98
Hays plc Annual Report & Financial Statements 2017
Key audit matter
How our audit addressed the key audit matter
Recoverability of accrued income and
trade receivables
Refer to page 56 (Audit Committee Report)
and notes 2 and 3 to the financial statements
for the Directors’ disclosures of the related
accounting policies, judgments and estimates.
At 30 June 2017, the total receivables and
accrued income balances net of provisions
included in note 17 was £860.0 million
(2016: £695.8 million).
The recoverability of trade receivables,
accrued income and the level of provisions
for bad debts are considered to be a key
risk due to the pervasive nature of these
balances to the financial statements, and
the importance of cash collection with
reference to the working capital
management of the business.
Fraud in revenue recognition
Refer to page 56 (Audit Committee Report)
and notes 2 and 3 to the financial statements
for the directors’ disclosures of the related
accounting policies, judgments and estimates.
There is a degree of judgment specifically
around year-end cut-off and accruing for
income, particularly in respect of the time
worked by contractors that has not been
processed in the Group’s financial systems.
There also may be an incentive for
consultants to record more placements
or not remove unplaced contractors in
order to receive commissions or to meet
bonus targets.
The audit risk includes both of the
above aspects. We determined that this
specifically impacts the occurrence and
cut-off assertions.
In order to test the recoverability of accrued income and trade receivables, we performed
the following procedures:
– Verified that billings had been raised against accrued income balances subsequent to
the year end and validated any reasons for delays;
– Requested confirmations for a sample of client receivable balances in certain locations;
– Where a response to our request was not received, we sought to agree the relevant
trade receivables balances to post year-end cash receipts;
– Where both a response and cash had not been received post year-end, we performed
alternative procedures by agreeing amounts recorded to underlying sales contracts and
completion documentation;
– Discussed and assessed the reasons that the amounts were not yet paid with Hays’ local
management teams; and
– Considered the consistency of judgments regarding the recoverability of trade
receivables and accrued income made year on year to consider whether there is
evidence of management bias.
We did not encounter any issues through these audit procedures that indicated further
provisioning against accrued income and trade receivables was required.
We also evaluated the Group’s credit control procedures and assessed the ageing profile
of accrued income and trade receivables, focusing on older items.
We challenged management as to the recoverability of the older, unprovided amounts,
corroborating management explanations with underlying documentation and
correspondence with the customer. We also challenged management as to whether the
methodology applied in determining bad debt provisions appropriately reflected the level
of risk in the total receivables balance with consideration given to individual counterparty
credit risk and the general economic conditions in each jurisdiction.
Based upon the above, we are satisfied that management had taken reasonable judgments
that were materially supported by the available evidence in respect of the relevant
receivable balances.
We performed the following procedures to address the risk that revenue had been
recorded fraudulently:
– We assessed the design and implementation of key controls around all streams of
revenue recognised;
– We tested the occurrence of revenue journals posted through the year using a
combination of data auditing techniques and corroborating of sales transactions to third
party documentation;
– We tested the accrued income associated with work performed by contractors before
the year end, by comparing the amounts to timesheets submitted after year end;
– We considered the appropriateness and accuracy of any cut-off adjustments processed
by considering the start date of permanent placements and the term of a temporary
placement with reference to the year-end date, as well as any central adjustments
recorded to align weekly country reporting with the Group’s year-end date; and
– We evaluated whether revenue has been recognised in accordance with IAS 18 ‘Revenue’
and with Hays’ accounting policy by reviewing details of the Group revenue recognition
policy, the application of this, and any significant new contracts.
There were no material issues identified by our testing of revenue recognition in the period.
99
Hays plc Annual Report & Financial Statements 2017 Strategic reportGovernanceShareholder informationFinancial statementsOverview INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF HAYS PLC CONTINUED
Key audit matter
How our audit addressed the key audit matter
Focusing on the Veredus business, we evaluated and challenged the directors’ future cash
flow forecasts and the process by which they were drawn up, and tested the underlying
value in use calculations. We compared management’s forecast with the latest Board-
approved budget and found them to be reasonable.
We challenged:
– The key assumptions for short- and long-term growth rates in the forecasts by comparing
them with historical results, as well as economic and industry forecasts for the US
recruitment market; and
– The discount rate used in the calculations by assessing the cost of capital for the Group
and comparable organisations, and assessed the specific risk premium applied to the
Veredus CGU.
We performed sensitivity analysis on the key assumptions within the cash flow forecasts.
This included sensitising the discount rate applied to the future cash flows, and the short-
and longer-term growth rates and profit margins forecast.
We ascertained the extent to which a change in these assumptions, both individually or in
aggregate, would result in a goodwill impairment, and considered the likelihood of such
events occurring. We also ensured that sufficient and appropriate disclosure regarding
such events was included in the Group’s financial statements.
Based on the procedures described above, we were satisfied that the carrying value of
goodwill in respect of Veredus had been appropriately assessed.
Goodwill impairment assessment
Refer to page 56 (Audit Committee Report),
note 3 (Critical accounting estimates)
and note 13 for the related disclosures
on goodwill.
The Group carried £223.3 million of goodwill
at 30 June 2017 (2016: £220.4 million).
The carrying value of goodwill is contingent
on future cash flows of the underlying
cash-generating units (CGUs) and there is
a risk that if these cash flows do not meet
the directors’ expectations, the goodwill
will be impaired.
No impairment charge was recognised in the
year ended 30 June 2017.
We focused our assessment on the Veredus
CGU in the US, which has a goodwill carrying
value of £41.3 million (2016: £40.5 million).
Management’s investment in headcount to
drive long-term growth has reduced short-
term profitability. This has resulted in a
reduction in headroom over the carrying
value of the CGU to £2.4 million (2016:
£3.4 million).
There was a risk that small and reasonably
possible changes in key assumptions could
have resulted in an impairment to Veredus.
How we tailored the audit scope
We tailored the scope of our audit to ensure
that we performed enough work to be able
to give an opinion on the financial statements
as a whole, taking into account the structure
of the Group and the Company, the
accounting processes and controls, and the
industry in which they operate.
The business’s 33 trading countries are
structured across three reported segments,
Asia Pacific (APAC), UK & Ireland, and
Continental Europe & Rest of World
(CE&RoW).
Of the 33 trading countries, the UK, Germany
and Australia together represent 68% of the
Group’s net fees and 77% of the Group’s
profit before tax from continuing operations.
We therefore considered these three countries
to be financially significant to the Group.
A further 18 other countries were also subject
to full scope audits by PwC teams in each of
these countries, representing 21% of Group
net fees and 20% of Group profit before
tax from continuing operations. In addition
to this, the Group audit team performed
specified audit procedures in two other
countries, representing 5% of Group net
fees and 1% of Group profit before tax from
continuing operations.
Central review procedures were performed
by the Group audit team on the remaining
10 countries that were not subject to full
scope or specified audit procedures. These
countries represented the remaining 6%
of net fees and 2% of profit before tax from
continuing operations for the Group.
The Group audit team, over the course of the
year, visited the Group’s operations in the UK,
Germany, France, the US and Canada, having
previously visited the Australia operations.
The Group team held regular meetings with
the component audit teams in Australia,
Germany and the UK, and also reviewed the
audit workpapers of each of those teams.
This helped to ensure that the Group audit
team was sufficiently involved in both the
planning and the execution of the audit
procedures in these countries.
The Group audit team also joined the audit
clearance meetings for each of the other
20 countries that were subject to full scope
and specified audit procedures, as well as
holding calls with the regional management
teams responsible for each of the 10 countries
subject to central review procedures.
Materiality
The scope of our audit was influenced by our
application of materiality. We set certain
quantitative thresholds for materiality. These,
together with qualitative considerations,
helped us to determine the scope of our audit
and the nature, timing and extent of our audit
procedures on the individual financial
statement line items and disclosures and in
evaluating the effect of misstatements, both
individually and in aggregate, on the financial
statements as a whole.
100
Hays plc Annual Report & Financial Statements 2017 Financial statements Based on our professional judgment, we determined materiality for the financial statements as a whole as follows:
Overall materiality
How we determined it
Rationale for benchmark
applied
Group financial statements
£10.0 million
Approximately 5% of profit before tax from
continuing operations.
We believe that profit before tax from continuing
operations is the primary measure used by the
shareholders in assessing the performance of
the Group, and is a generally accepted
auditing benchmark.
Company financial statements
£9.3 million
Approximately 1% of total assets.
We believe that total assets is the most appropriate
measure to assess a holding company, and is a
generally accepted auditing benchmark.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. Our audit work
was executed at levels of materiality applicable to each individual entity which were lower than Group materiality and ranged from £0.5 million
to £7.5 million. Certain components were audited to a local statutory audit materiality that was also less than our overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £500,000 (Group audit)
and £500,000 (Company audit) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
We are required to report if we have anything material to add or draw attention to in respect of the
directors’ statement in the financial statements about whether the directors considered it appropriate to
adopt the going concern basis of accounting in preparing the financial statements and the directors’
identification of any material uncertainties to the Group’s and the Company’s ability to continue as a
going concern over a period of at least 12 months from the date of approval of the financial statements.
We are required to report if the directors’ statement relating to Going Concern in accordance with Listing
Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit.
Outcome
We have nothing material to
add or to draw attention to.
However, because not all future
events or conditions can be
predicted, this statement is not
a guarantee as to the Group’s
and Company’s ability to
continue as a going concern.
We have nothing to report.
Reporting on other information
The other information comprises all of the information in the Annual Report and Financial Statements other than the financial statements and
our auditor’s report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report,
any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on
the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report based on these responsibilities.
With respect to the Strategic Report, Directors’ Report and Corporate Governance Statement, we also considered whether the disclosures
required by the UK Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006, (CA06), ISAs
(UK) and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and matters as described below
(required by ISAs (UK) unless otherwise stated).
101
Hays plc Annual Report & Financial Statements 2017 Strategic reportGovernanceShareholder informationFinancial statementsOverview INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF HAYS PLC CONTINUED
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report
for the year ended 30 June 2017 is consistent with the financial statements and has been prepared in accordance with applicable legal
requirements. (CA06)
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
Corporate Governance Statement
In our opinion, based on the work undertaken in the course of the audit, the information given in the Corporate Governance Statement
(on page 49) about internal controls and risk management systems in relation to financial reporting processes and about share capital structures
in compliance with rules 7.2.5 and 7.2.6 of the Disclosure Guidance and Transparency Rules sourcebook of the FCA (DTR) is consistent with
the financial statements and has been prepared in accordance with applicable legal requirements. (CA06)
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did
not identify any material misstatements in this information. (CA06)
In our opinion, based on the work undertaken in the course of the audit, the information given in the Corporate Governance Statement
(on page 43) with respect to the Company’s corporate governance code and practices and about its administrative, management and
supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the DTR. (CA06)
We have nothing to report arising from our responsibility to report if a corporate governance statement has not been prepared by the
Company. (CA06)
The directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity
of the Group
We have nothing material to add or draw attention to regarding:
– The directors’ confirmation on page 37 of the Annual Report and Financial Statements that they have carried out a robust assessment
of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity;
– The disclosures in the Annual Report and Financial Statements that describe those risks and explain how they are being managed or
mitigated; and
– The directors’ explanation on page 37 of the Annual Report and Financial Statements as to how they have assessed the prospects of the
Group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they
have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
We have nothing to report having performed a review of the directors’ statement that they have carried out a robust assessment of the
principal risks facing the Group and statement in relation to the longer-term viability of the Group. Our review was substantially less in scope
than an audit and only consisted of making inquiries and considering the directors’ process supporting their statements; checking that the
statements are in alignment with the relevant provisions of the UK Corporate Governance Code (the Code); and considering whether the
statements are consistent with the knowledge and understanding of the Group and Company and their environment obtained in the course
of the audit. (Listing Rules)
Other Code Provisions
We have nothing to report in respect of our responsibility to report when:
– The statement given by the directors, on page 94, that they consider the Annual Report and Financial Statements taken as a whole
to be fair, balanced and understandable, and provides the information necessary for the members to assess the Group’s and Company’s
position and performance, business model and strategy is materially inconsistent with our knowledge of the Group and Company
obtained in the course of performing our audit;
– The section of the Annual Report and Financial Statements on pages 54 to 57 describing the work of the Audit Committee does not
appropriately address matters communicated by us to the Audit Committee; and
– The directors’ statement relating to the Company’s compliance with the Code does not properly disclose a departure from a relevant
provision of the Code specified, under the Listing Rules, for review by the auditors.
Directors’ remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies
Act 2006. (CA06)
102
Hays plc Annual Report & Financial Statements 2017 Financial statements Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the financial statements
in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for
such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Company’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3
of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our
prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
– We have not received all the information and explanations we require for our audit; or
– Adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches
not visited by us; or
– Certain disclosures of Directors’ remuneration specified by law are not made; or
– The Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 9 November 2016 to audit the financial
statements for the year ended 30 June 2017 and subsequent financial periods. This is therefore our first year of uninterrupted engagement.
Andrew Paynter
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
30 August 2017
103
Hays plc Annual Report & Financial Statements 2017 Strategic reportGovernanceShareholder informationFinancial statementsOverview CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2017
(In £s million)
Turnover
Continuing operations
Net fees(1)
Continuing operations
Operating profit from continuing operations
Net finance charge
Profit before tax
Tax
Profit from continuing operations after tax
Profit from discontinued operations
Profit attributable to equity holders of the parent company
Earnings per share from continuing operations
– Basic
– Diluted
Earnings per share from continuing and discontinued operations
– Basic
– Diluted
(1) Net fees comprise turnover less remuneration of temporary workers and other recruitment agencies.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2017
(In £s million)
Profit for the year
Items that will not be reclassified subsequently to profit or loss:
Actuarial remeasurement of defined benefit pension schemes
Tax relating to components of other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Currency translation adjustments
Tax relating to components of other comprehensive income
Other comprehensive income for the year net of tax
Total comprehensive income for the year
Attributable to equity shareholders of the parent company
Note
2017
2016
5,081.0
4,231.4
4
4
8
9
10
12
12
12
12
954.6
211.5
(6.9)
204.6
(65.5)
139.1
–
139.1
9.66p
9.54p
9.66p
9.54p
2017
139.1
1.7
1.4
3.1
17.4
(1.8)
18.7
157.8
157.8
810.3
181.0
(8.0)
173.0
(51.9)
121.1
3.4
124.5
8.48p
8.37p
8.72p
8.60p
2016
124.5
35.5
(7.2)
28.3
64.3
–
92.6
217.1
217.1
104
Hays plc Annual Report & Financial Statements 2017 Financial statements
CONSOLIDATED BALANCE SHEET
AT 30 JUNE
(In £s million)
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax assets
Current assets
Trade and other receivables
Cash and cash equivalents
Derivative financial instruments
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Bank loans and overdrafts
Acquisition liabilities
Provisions
Non-current liabilities
Bank loans
Acquisition liabilities
Retirement benefit obligations
Provisions
Total liabilities
Net assets
Equity
Called up share capital
Share premium
Capital redemption reserve
Retained earnings
Cumulative translation reserve
Equity reserve
Total equity
Note
2017
2016
13
14
15
16
17
18
19
21
20
29
23
20
29
22
23
24
223.3
18.6
24.0
23.3
289.2
908.2
112.0
–
1,020.2
1,309.4
(676.5)
(23.5)
(0.4)
(13.6)
(2.6)
(716.6)
–
–
(0.2)
(6.2)
(6.4)
(723.0)
586.4
14.7
369.6
2.7
94.1
83.8
21.5
586.4
220.4
21.6
19.8
23.9
285.7
763.9
62.9
6.6
833.4
1,119.1
(573.3)
(27.1)
(1.1)
–
(3.1)
(604.6)
(25.0)
(11.2)
(14.3)
(6.2)
(56.7)
(661.3)
457.8
14.7
369.6
2.7
(15.8)
66.4
20.2
457.8
The Consolidated Financial Statements of Hays plc, registered number 2150950, were approved by the Board of Directors and authorised for
issue on 30 August 2017.
Signed on behalf of the Board of Directors
A R Cox
P Venables
105
Hays plc Annual Report & Financial Statements 2017 Strategic reportGovernanceShareholder informationFinancial statementsOverview
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2017
(In £s million)
At 1 July 2016
Currency translation adjustments
Remeasurement of defined benefit pension schemes
Tax relating to components of other comprehensive income
Net expense recognised in other comprehensive income
Profit for the year
Total comprehensive income for the year
Dividends paid
Share-based payments
Tax on share-based payment transactions
Called
up share
capital
Share
premium
Capital
redemption
reserve
Retained
earnings
Cumulative
translation
reserve
Equity
reserve
14.7
–
–
–
–
–
–
–
–
–
369.6
–
–
–
–
–
–
–
–
–
2.7
–
–
–
–
–
–
–
–
–
(15.8)
–
1.7
(0.4)
1.3
139.1
140.4
(42.6)
11.3
0.8
94.1
66.4
17.4
–
–
17.4
–
17.4
–
–
–
20.2
–
–
–
–
–
–
–
1.3
–
Total
equity
457.8
17.4
1.7
(0.4)
18.7
139.1
157.8
(42.6)
12.6
0.8
At 30 June 2017
14.7
369.6
2.7
83.8
21.5 586.4
FOR THE YEAR ENDED 30 JUNE 2016
(In £s million)
At 1 July 2015
Currency translation adjustments
Remeasurement of defined benefit pension schemes
Tax relating to components of other comprehensive income
Net expense recognised in other comprehensive income
Profit for the year
Total comprehensive income for the year
Dividends paid
Share-based payments
Tax on share-based payment transactions
At 30 June 2016
The equity reserve is generated as a result of IFRS 2 ‘Share-based payments’.
Called
up share
capital
Share
premium
Capital
redemption
reserve
Retained
earnings
Cumulative
translation
reserve
Equity
reserve
14.7
–
–
–
–
–
–
–
–
–
14.7
369.6
–
–
–
–
–
–
–
–
–
369.6
2.7
–
–
–
–
–
–
–
–
–
2.7
(138.2)
–
35.5
(7.2)
28.3
124.5
152.8
(39.9)
10.2
(0.7)
(15.8)
2.1
64.3
–
–
64.3
–
64.3
–
–
–
66.4
18.7
–
–
–
–
–
–
–
1.5
–
20.2
Total
equity
269.6
64.3
35.5
(7.2)
92.6
124.5
217.1
(39.9)
11.7
(0.7)
457.8
106
Hays plc Annual Report & Financial Statements 2017 Financial statements CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2017
(In £s million)
Operating profit from continuing operations
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Profit on disposal of property, plant and equipment
Net movements in provisions
Share-based payments
Operating cash flow before movement in working capital
Movement in working capital:
Increase in receivables
Increase in payables
Cash generated by operations
Pension scheme deficit funding
Income taxes paid
Net cash inflow from operating activities
Investing activities
Purchase of property, plant and equipment
Proceeds from sales of business assets
Purchase of intangible assets
Interest received
Net cash used in investing activities
Financing activities
Interest paid
Equity dividends paid
Proceeds from exercise of share options
Decrease in bank loans and overdrafts
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate movements
Cash and cash equivalents at end of year
(In £s million)
Bank loans and overdrafts at beginning of year
Decrease in year
Effect of foreign exchange rate movements
Bank loans and overdrafts at end of year
Net cash at end of year
Note
28
28
Note
28
2017
211.5
8.9
12.8
(0.5)
(0.5)
13.0
33.7
245.2
(111.4)
83.2
(28.2)
217.0
(14.8)
(68.2)
134.0
(12.9)
0.6
(9.1)
0.6
(20.8)
(2.5)
(42.6)
1.0
(25.8)
(69.9)
43.3
62.9
5.8
112.0
2017
(26.1)
25.8
(0.1)
(0.4)
111.6
2016
181.0
7.7
14.2
–
(1.2)
11.9
32.6
213.6
(98.8)
44.5
(54.3)
159.3
(14.4)
(41.7)
103.2
(10.3)
0.1
(4.7)
0.5
(14.4)
(4.1)
(39.9)
1.5
(74.4)
(116.9)
(28.1)
69.8
21.2
62.9
2016
(100.5)
74.4
–
(26.1)
36.8
107
Hays plc Annual Report & Financial Statements 2017 Strategic reportGovernanceShareholder informationFinancial statementsOverview
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. General information
Hays plc is a Company incorporated in the
United Kingdom and registered in England
and Wales and its registered office is
250 Euston Road, London NW1 2AF.
The Consolidated Financial Statements
have been prepared in accordance with
International Financial Reporting Standards
(IFRSs) and IFRS Interpretation Committee
interpretations (IFRICs) as adopted by the
European Union and therefore comply with
Article 4 of the European Union International
Accounting Standard (IAS) Regulation.
New standards and interpretations
The Consolidated Financial Statements have
been prepared on the basis of the accounting
policies and methods of computation
applicable for the year ended 30 June 2017.
These accounting policies are consistent
with those applied in the preparation of
the financial statements for the year ended
30 June 2016 with the exception of the
following new accounting standards,
amendments and interpretations which were
mandatory for accounting periods beginning
on or after 1 January 2016, none of which had
any material impact on the Group’s results or
financial position.
– IFRS 11 (amendments) Accounting for
Acquisitions of Interests in Joint
Operations (effective 1 January 2016)
– IAS 1 (amendments) Disclosure Initiative
(effective from 1 January 2016)
– IAS 16 and IAS 38 (amendment)
Clarification of Acceptable Methods of
Depreciation and Amortisation (effective
1 January 2016)
– IAS 27 (amendments) Equity Method in
Separate Financial Statements (effective
from 1 January 2016)
– Annual Improvements to IFRSs 2014
(effective 1 January 2016)
There have been no alterations made to the
accounting policies as a result of considering
all IFRS and IFRIC amendments and
interpretations that became effective during
the financial year, as these were either not
material to the Group’s operation, or were
not relevant.
The Group has not yet adopted certain new
standards, amendments and interpretations
to existing standards, which have been
published but which are only effective for the
Group accounting periods beginning on or
after 1 July 2017. These new pronouncements
are listed as follows:
– IAS 12 (amendments) Income Taxes
(effective from 1 January 2017)
– IAS 7 (amendments) Statement on
Cashflows on Disclosure Initiative (effective
from 1 January 2017)
– IFRS 2 (amendments) Share Based
Payments (effective 1 January 2018)
– IFRS 9 Financial Instruments (effective
1 January 2018)
– IFRS 15 Revenue from Contracts and
Customer (effective 1 January 2018)
– IFRS 15 (amendments) Revenue from
Contracts and Customer (effective
1 January 2018)
– IFRS 16 Leases (effective 1 January 2019)
– Annual Improvements to IFRSs 2016
(effective 1 January 2018)
– IFRIC 22 Foreign Currency Transactions
and Advance Consideration (effective
1 January 2018)
– IFRIC 23 Uncertainty over Income Tax
Treatments (effective 1 January 2019)
An assessment of the impact of IFRS 15 has
been completed following a comprehensive
review of the contracts that exist across the
Group’s revenue streams. The review has
concluded that revenue recognition under
IFRS 15 is expected to be consistent with
current practice for the Group’s revenue and
had IFRS 15 been applied in the current
reporting period, it would not have had a
material impact on the financial statements.
IFRS 16 is expected to have a significant
impact on the amounts recognised in the
Group’s Consolidated Financial Statements.
On adoption of IFRS 16 the Group will
recognise within the balance sheet a right of
use asset and lease liability for all applicable
leases. Within the income statement,
operating lease rentals payable will be
replaced by depreciation and interest
expense. This will result in an increase
in operating profit and an increase
in finance costs.
The standard will also impact a number of
statutory measures such as operating profit,
and cash generated from operations, and
alternative performance measures used by
the Group. The full impact of IFRS 16 is
currently under review, including
understanding the practical application of
the principles of the standard. It is therefore
not practical to provide a reasonable
estimate of the financial effect until this
review is complete. IFRS 16 will become
effective in the Group’s financial year 2020.
The directors expect to be able to provide an
indication of the impact on the Group’s
financial statements by 30 June 2019.
IFRS 9 introduces a new classification
approach for financial assets and liabilities.
The categories of financial assets will be
reduced from four to three and financial
liabilities will be measured at amortised cost
or fair value through profit and loss. The
standard also prescribes an ‘expected credit
loss’ model for determining the basis of
providing for bad debts. The directors do not
expect this to have a material impact on the
financial statements.
The directors are currently evaluating the
impact of the adoption of all other standards,
amendments and interpretations but do not
expect them to have a material impact on the
Group operation or results.
The Group’s principal accounting policies
adopted in the presentation of these financial
statements are set out below and have been
consistently applied to all the periods
presented.
2. Significant accounting policies
a. Basis of preparation
The Consolidated Financial Statements have
been prepared on the historical cost basis
with the exception of financial instruments
and pension assets. Financial instruments
have been recorded initially on a fair-value
basis and then at amortised cost. Pension
assets have been measured at fair value.
b. Going concern
The Group’s business activities, together
with the factors likely to effect its future
development, performance and viability are
set out in the Strategic Report on pages 3
to 40. The financial position of the Group,
its cash flows and liquidity position are
described in the Financial Review on pages
32 to 35. In addition, notes 18 to 20 to the
Consolidated Financial Statements include
details of the Group’s treasury activities,
long-term funding arrangements and
exposure to financial risk.
108
Hays plc Annual Report & Financial Statements 2017 Financial statements The Group has sufficient financial resources
which, together with internally generated
cash flows, will continue to provide sufficient
sources of liquidity to fund its current
operations, including its contractual and
commercial commitments and any proposed
dividends. Therefore the Group is well placed
to manage its business risks.
After making enquiries the directors have
formed the judgment that at the time of
approving the Consolidated Financial
Statements there is a reasonable expectation
that the Group has adequate resources to
continue in operational existence for the
foreseeable future. For this reason, the
directors continue to adopt the going
concern basis in preparing the Consolidated
Financial Statements.
c. Basis of consolidation
Subsidiaries are fully consolidated from
the date on which power to control is
transferred to the Group. They are
deconsolidated from the date on which
control ceases.
The acquisition method of accounting is used
to account for the acquisition of subsidiaries
by the Group whereby the identifiable
assets, liabilities and contingent liabilities
are measured at their fair values at the date
of acquisition. The excess of the cost of
acquisition over the fair value of the Group’s
share of the identifiable net assets acquired is
recorded as goodwill. The financial
statements consolidate the accounts of Hays
plc and all of its subsidiaries. The results of
subsidiaries acquired or disposed during the
year are included from the effective date of
acquisition or up to the effective date
of disposal as appropriate.
All intra-Group transactions, balances,
income and expenses are eliminated
on consolidation.
d. Turnover
Turnover is measured at the fair value of the
consideration received or receivable and
represents amounts receivable for goods and
services provided in the normal course of
business, net of discounts, VAT and other
sales-related taxes.
Turnover arising from the placement of
permanent candidates, including turnover
arising from Recruitment Process
Outsourcing (RPO) services, is recognised at
the time the candidate commences full-time
employment. Where a permanent candidate
starts employment but does not work for the
specified contractual period, a provision is
made in respect of the required refund or
credit note due to the client.
Turnover arising from temporary placements,
including turnover arising from Managed
Service Programme (MSP) services, is
recognised over the period that temporary
workers are provided. Where the Group
is acting as a principal, turnover represents
the amounts billed for the services of the
temporary workers, including the
remuneration costs of the temporary workers.
Where Hays acts as principal in arrangements
that invoice on the costs incurred with other
recruitment agencies as part of the MSP
service provided and manage the recruitment
supply chain, turnover represents amounts
invoiced on from other recruitment agencies,
including arrangements where no commission
is directly receivable by the Group.
Where the Group is acting as an agent in
arrangements that invoice on behalf of other
recruitment agencies as part of the MSP
service provided, turnover represents
commission receivable relating to the supply
of temporary workers and does not include
the remuneration costs of the other agency
temporary workers.
The critical accounting judgment in respect
of revenue recognition is described further
in note 3 to the Consolidated Financial
Statements.
e. Net fees
Net fees represent turnover less the
remuneration costs of temporary workers
for temporary assignments and remuneration
of other recruitment agencies. For the
placement of permanent candidates, net fees
are equal to turnover.
f. Foreign currencies
On consolidation, the tangible and intangible
assets and liabilities of subsidiaries
denominated in foreign currencies are
translated into sterling at the rates ruling at
the balance sheet date. Income and expense
items are translated into sterling at average
rates of exchange for the period. Any
exchange differences which have arisen from
an entity’s investment in a foreign subsidiary,
including long-term loans, are recognised as
a separate component of equity and are
included in the Group’s translation reserve.
On disposal of a subsidiary, any amounts
transferred to the translation reserve are
included in the calculation of profit and loss
on disposal. All other translation differences
are dealt with in the Consolidated Income
Statement.
Goodwill and fair value adjustments arising
on the acquisition of a foreign entity are
treated as assets and liabilities of the foreign
entity and translated at the closing rate.
g. Retirement benefit costs
The expense of defined benefit pension
schemes and other post-retirement
employee benefits is determined using the
projected-unit credit method and charged to
the Consolidated Income Statement as an
expense, based on actuarial assumptions
reflecting market conditions at the beginning
of the financial year. All remeasurement gains
and losses are recognised immediately in
reserves and reported in the Consolidated
Statement of Comprehensive Income in the
period in which they occur. Past service
costs, curtailments and settlements are
recognised immediately in the Consolidated
Income Statement.
The Group has chosen under IFRS 1 to
recognise in retained earnings all cumulative
remeasurement gains and losses as at 1 July
2004, the date of transition to IFRS. The
Group has chosen to recognise all
remeasurement gains and losses arising
subsequent to 1 July 2004 in reserves and
reported in the Consolidated Statement of
Comprehensive Income.
The retirement benefit obligation recognised
in the Consolidated Balance Sheet represents
the present value of the defined benefit
obligation as reduced by the fair value of
scheme assets.
The Hays Pension Scheme Definitive Deed
and Rules is considered to provide Hays with
an unconditional right to a refund of surplus
assets and therefore the recognition of a net
defined benefit scheme asset is not restricted
and agreements to make funding
contributions do not give rise to any
additional liabilities in respect of the scheme.
Payments to defined contribution schemes
are charged as an expense in the Consolidated
Income Statement as they fall due.
h. Share-based payments
The fair value of all share-based remuneration
that is assessed upon market-based
performance criteria is determined at the
date of grant and recognised as an expense
in the Consolidated Income Statement on
a straight-line basis over the vesting period,
taking account of the estimated number
of shares that will vest.
109
Hays plc Annual Report & Financial Statements 2017 Strategic reportGovernanceShareholder informationFinancial statementsOverview 2. Significant accounting policies
continued
The fair value of all share-based remuneration
that is assessed upon non-market-based
performance criteria is determined at the
date of the grant and recognised as an
expense in the Consolidated Income
Statement over the vesting period, based
on the number of shares that are expected
to vest. The number of shares that are
expected to vest is adjusted accordingly to
the satisfaction of the performance criteria
at each period end.
The fair values are determined by use of the
relevant valuation models. All share-based
remuneration is equity settled.
i. Borrowing costs
Interest costs are recognised as an expense
in the Consolidated Income Statement in
the period in which they are incurred.
Arrangement fees incurred in respect of
borrowings are amortised over the term
of the agreement.
j. Taxation
The tax expense comprises both current and
deferred tax.
The tax currently payable is based on taxable
profit for the year. Taxable profit differs from
net profit as reported in the Consolidated
Income Statement because it excludes items
of income or expense that are taxable or
deductible in other years and it further
excludes items that are never taxable or
deductible. The Group’s liability for current
tax is calculated using tax rates that have
been enacted or substantively enacted by
the balance sheet date.
Deferred tax is provided in full on all
temporary differences, at rates that are
enacted or substantively enacted by the
balance sheet date. Deferred tax assets are
recognised only to the extent that it is
probable that taxable profits will be available
against which to offset the deductible
temporary differences. Deferred tax assets
and liabilities are offset when there is a
legally enforceable right to set off current tax
assets against current tax liabilities and when
they relate to income taxes levied by the
same taxation authority and the Group
intends to settle its current tax assets and
liabilities on a net basis.
110
l. Intangible assets
Intangible assets acquired as part of a
business combination are stated in the
Consolidated Balance Sheet at their fair value
as at the date of acquisition less accumulated
amortisation and any provision for
impairment. The directors review intangible
assets for indications of impairment annually.
Internally generated intangible assets are
stated in the Consolidated Balance Sheet
at the directly attributable cost of creation
of the asset, less accumulated amortisation.
Intangible assets are amortised on a
straight-line basis over their estimated useful
lives up to a maximum of 10 years. Software
incorporated into major Enterprise Resource
Planning (ERP) implementations that
support the recruitment process and
financial reporting process is amortised over
a life of up to seven years. Other software
is amortised between three and five years.
m. Property, plant and equipment
Property, plant and equipment is recorded
at cost, net of depreciation and any provision
for impairment. Depreciation is provided on a
straight-line basis over the anticipated useful
working lives of the assets, after they have
been brought into use, at the following rates:
Freehold land – No depreciation is provided
Freehold buildings – At rates varying
between 2% and 10%
Leasehold properties – The cost is written
off over the unexpired term of the lease
Plant and machinery – At rates varying
between 5% and 33%
Fixtures and fittings – At rates varying
between 10% and 25%
n. Trade and other receivables
Trade and other receivables are initially
measured at fair value and then at amortised
cost after appropriate allowances for
estimated irrecoverable amounts have been
recognised in the Consolidated Income
Statement where there is objective evidence
that the asset is impaired.
o. Cash and cash equivalents
Cash and cash equivalents comprise
cash-in-hand and current balances with
banks and similar institutions, which are
readily convertible to known amounts of
cash and which are subject to insignificant
risk of changes in value.
p. Trade payables
Trade payables are measured initially at fair
value and then at amortised cost.
Temporary differences arise where there is a
difference between the accounting carrying
value in the Consolidated Balance Sheet and
the amount attributed to that asset or liability
for tax purposes. Temporary differences
arising from goodwill and, except in a
business combination, the initial recognition
of assets or liabilities that affect neither
accounting profit nor taxable profit, are not
provided for. Deferred tax liabilities are
recognised for taxable temporary differences
arising on investments in subsidiaries and
associates except where the Group is able
to control the reversal of the temporary
differences and it is probable that the
temporary difference will not reverse in
the foreseeable future.
The calculation of the Group’s total tax
charge necessarily involves a degree of
estimation and judgment in respect of
certain items whose tax treatment cannot be
finally determined until resolution has been
reached with the relevant tax authority, or, as
appropriate, through a formal legal process.
Provisions for tax contingencies require
management to make judgments and
estimates in relation to tax audit issues and
exposures. Amounts provided are based on
management’s interpretation of applicable
tax law and the likelihood of settlement, and
are derived from the Group’s best estimation
and judgment. However, the inherent
uncertainty regarding the outcome of these
items means the eventual resolution could
differ from the provision and in such event
the Group would be required to make an
adjustment in a subsequent period.
k. Goodwill
Goodwill arising on consolidation represents
the excess of purchase consideration less
the fair value of the identifiable tangible and
intangible assets and liabilities acquired.
Goodwill is recognised as an asset and
reviewed for impairment at least annually.
For the purpose of impairment testing, assets
are grouped at the lowest level for which
there are separately identifiable cash flows,
known as cash-generating units (CGUs). Any
impairment is recognised immediately in the
Consolidated Income Statement and is not
subsequently reversed.
On disposal of a business the attributable
amount of goodwill is included in the
determination of the profit or loss on disposal.
Goodwill arising on acquisitions before the
date of transition to IFRS (1 July 2004) has
been retained at the previous UK GAAP
amounts, subject to being tested for
impairment at that date. Goodwill arising on
acquisitions prior to 1 July 1998 was written
off direct to reserves under UK GAAP. This
goodwill has not been reinstated and is not
included in determining any subsequent
profit or loss on disposal.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUEDHays plc Annual Report & Financial Statements 2017 Financial statements q. Bank borrowings
Interest-bearing bank loans and overdrafts
are recorded initially at fair value and
subsequently measured at amortised cost.
Fair value measurements
The information below sets out how the
Group determines fair value of various
financial assets and financial liabilities.
Finance charges, including premiums
payable on settlement or redemption and
direct-issue costs, are accounted for on an
accrual basis in the Consolidated Income
Statement using the effective interest rate
method and are added to the carrying
amount of the instrument to the extent that
they are not settled in the period in which
they arise.
r. Derivative financial instruments
The Group may use certain derivative
financial instruments to reduce its exposure
to foreign exchange movements. The Group
held four foreign exchange contracts at the
end of the current year (2016: eight) to
facilitate cash management within the Group.
The Group does not hold or use derivative
financial instruments for speculative
purposes.
The fair values of foreign exchange swaps are
measured using inputs other than quoted
prices that are observable for the asset or
liability, either directly or indirectly. It is the
Group’s policy not to seek to designate these
derivatives as hedges. All derivative financial
instruments not in a hedge relationship are
classified as derivatives at fair value in the
income statement. The fair value of long-
term borrowing is calculated by discounting
expected future cash flows at observable
market rates.
The following provides an analysis of financial
instruments that are measured subsequent
to initial recognition at fair value, grouped
into Levels 1 to 3 based on the degree to
which the fair value is observable.
– Level 1 fair value measurements are those
derived from quoted prices (unadjusted)
in active markets for identical assets or
liabilities;
– Level 2 fair value measurements are those
derived from inputs other than quoted
prices included within Level 1 that are
observable for the asset or liability either
directly (i.e. as prices) or indirectly
(i.e. derived from prices); and
– Level 3 fair value measurements are those
derived from valuation techniques that
include inputs for the asset or liability that
are not based on observable market data
(unobservable inputs).
s. Leases
Leases where a significant portion of risks
and rewards of ownership are retained by
the lessor are classified as operating leases
by the lessee.
Rentals payable under operating leases
are charged to the Consolidated Income
Statement on a straight-line basis over the
lease term.
Benefits received and receivable as an
incentive to enter into an operating lease are
recognised on a straight-line basis over the
lease term.
t. Provisions
A provision is recognised when the Group
has a present legal or constructive obligation
as a result of a past event for which it is
probable that an outflow of resources will be
required to settle the obligation and when
the amount can be reliably estimated. If the
effect is material, provisions are determined
by discounting the expected future cash
flows at a pre-tax rate that reflects the
current market assessments of the time value
of money and the risks specific to the liability.
3. Critical accounting judgments
and key sources of estimation
uncertainty
Critical accounting judgments
Revenue recognition
The main areas of judgment in revenue
recognition relate to (i) cut-off as revenue is
recognised for permanent placements on the
day a candidate starts work and temporary
placement income over the duration of the
placement; and (ii) the recognition of
temporary contractual arrangements where
Hays act on a gross basis (principal basis)
rather than a net basis (agent basis).
The factors considered by management on
a contract by contract basis when concluding
the Company is acting as principal rather
than agent are as follows:
– The client has a direct relationship
with Hays;
– Hays has the primary responsibility for
providing the services to the client, and
engages and contracts directly with the
temporary worker or other recruitment
companies;
– Hays has latitude in establishing the rates
directly or indirectly with all parties; and
– Hays bears the credit risk on the receivable
due from the client.
Turnover and Net fees are described in note 2
(d) and (e) to the Consolidated Financial
Statements.
Provisions in respect of recoverability
of trade receivables
As described in note 17, provisions for
impairment of trade receivables have been
made. In reviewing the appropriateness of
these provisions, consideration has been
given to the ageing of the debt and the
potential likelihood of default, taking into
account current economic conditions.
Estimation uncertainty
Goodwill impairment
Goodwill is tested for impairment at least
annually. In performing these tests
assumptions are made in respect of future
growth rates and the discount rate to be
applied to the future cash flows of income-
generating units. These assumptions are set
out in note 13 to the Consolidated Financial
Statements.
Pension accounting
Under IAS 19 ‘Employee Benefits’, the Group
has recognised a pension deficit of £0.2 million
(2016: £14.3 million). A number of assumptions
have been made in determining the pension
deficit and these are described in note 22 to
the Consolidated Financial Statements.
111
Hays plc Annual Report & Financial Statements 2017 Strategic reportGovernanceShareholder informationFinancial statementsOverview 4. Segmental information
IFRS 8 Operating Segments
IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed
by the chief operating decision maker to allocate resources to the segment and to assess their performance.
As a result, the Group continues to segment the business into three regions, Asia Pacific, Continental Europe & Rest of World, and United
Kingdom & Ireland. There is no material difference between the segmentation of the Group’s turnover by geographic origin and destination.
The Group’s continuing operations comprise one class of business, that of qualified, professional and skilled recruitment.
Net fees and operating profit from continuing operations
The Group’s Management Board, which is regarded as the chief operating decision maker, uses net fees by segment as its measure of revenue
in internal reports, rather than use turnover. This is because net fees exclude the remuneration of temporary workers, and payments to other
recruitment agencies where the Group acts as principal, which are not considered relevant in allocating resources to segments. The Group’s
Management Board considers net fees for the purpose of making decisions about allocating resources. The Group does not report items below
operating profit by segment in its internal management reporting. The full detail of these items can be seen in the Group Consolidated Income
Statement on page 104. The reconciliation of turnover to net fees can be found in note 5.
(In £s million)
Net fees from continuing operations
Asia Pacific
Continental Europe & Rest of World
United Kingdom & Ireland
(In £s million)
Operating profit from continuing operations
Asia Pacific
Continental Europe & Rest of World
United Kingdom & Ireland
2017
2016
230.9
470.8
252.9
954.6
176.1
362.5
271.7
810.3
2017
2016
69.3
100.7
41.5
211.5
50.2
78.7
52.1
181.0
Net trade receivables
For the purpose of monitoring performance and allocating resources from a balance sheet perspective, the Group’s Management Board
monitors trade receivables net of provisions for impairments only on a segment by segment basis. These are monitored on a constant currency
basis for comparability through the year. These are shown below and reconciled to the totals as shown in note 17.
Net trade receivables
(In £s million)
Asia Pacific
Continental Europe & Rest of World
United Kingdom & Ireland
As reported
internally
Foreign
exchange
90.8
307.6
167.3
565.7
4.6
15.2
0.6
20.4
2017
95.4
322.8
167.9
586.1
As reported
internally
Foreign
exchange
58.2
202.4
180.3
440.9
7.6
34.5
3.9
46.0
2016
65.8
236.9
184.2
486.9
Major customers
In the current year and prior year there was no one customer that exceeded 10% of the Group’s turnover.
112
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUEDHays plc Annual Report & Financial Statements 2017 Financial statements 5. Operating profit from continuing operations
The following costs are deducted from turnover to determine net fees from continuing operations:
(In £s million)
Turnover
Remuneration of temporary workers
Remuneration of other recruitment agencies
Net fees
Operating profit is stated after charging the following items to net fees of £954.6 million (2016: £810.3 million):
(In £s million)
Staff costs (note 7)
Depreciation of property, plant and equipment
Amortisation of intangible assets
Operating lease rentals payable (note 27)
Impairment loss on trade receivables
Auditor remuneration (note 6)
– for statutory audit services
– for other services
Other external changes
6. Auditor remuneration
(In £s million)
Fees payable to the Company’s Auditor for the audit of the Company’s annual financial statements
Fees payable to the Company’s Auditor and their associates for other services to the Group:
The audit of the Company’s subsidiaries pursuant to legislation
Total audit fees
Half year review
Other services
Total non-audit fees
2017
5,081.0
(3,930.6)
(195.8)
954.6
2016
4,231.4
(3,236.5)
(184.6)
810.3
2017
563.0
8.9
12.8
42.1
3.2
1.1
0.7
111.3
743.1
2017
0.2
0.9
1.1
0.1
0.6
0.7
2016
476.3
7.7
14.2
34.0
3.0
0.9
0.7
92.5
629.3
2016
0.2
0.7
0.9
0.1
0.6
0.7
Following approval at the Annual General meeting on 9 November 2016, PricewaterhouseCoopers LLP (PwC) were appointed as the
Company’s auditor and therefore the total audit and non-audit fees in the current year relate solely to the newly appointed external auditor.
The total audit and non-audit fees in the prior year relate solely to the Company’s previous external auditor Deloitte LLP.
Other services fees incurred in the current year relate to consultancy services provided in respect of project management and communication
support for a specific back-office change management programme in Germany. PwC involvement in this project will cease by September 2017.
113
Hays plc Annual Report & Financial Statements 2017 Strategic reportGovernanceShareholder informationFinancial statementsOverview
7. Staff costs
The aggregate staff remuneration (including executive directors) was as follows:
(In £s million)
Wages and salaries
Social security costs
Pension costs
Share-based payments
Average number of persons employed during the year (including executive directors):
(Number)
Continuing operations
Asia Pacific
Continental Europe & Rest of World
United Kingdom & Ireland
Closing number of persons employed at the end of the year (including executive directors):
(Number)
Continuing operations
Asia Pacific
Continental Europe & Rest of World
United Kingdom & Ireland
8. Net finance charge
(In £s million)
Interest received on bank deposits
Interest payable on bank loans and overdrafts
Other interest payable
Interest unwind on acquisition liability
Pension Protection Fund levy
Net interest on pension obligations
Net finance charge
2017
474.4
61.0
14.6
13.0
563.0
2016
400.5
50.0
13.9
11.9
476.3
2017
2016
1,750
4,411
3,479
9,640
1,662
3,923
3,668
9,253
2017
2016
1,805
4,737
3,458
10,000
1,660
4,040
3,514
9,214
2017
0.6
(2.7)
(0.8)
(1.1)
(0.5)
(2.4)
(6.9)
2016
0.5
(3.4)
–
(0.9)
(0.3)
(3.9)
(8.0)
114
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUEDHays plc Annual Report & Financial Statements 2017 Financial statements 9. Tax
The tax (expense)/credit for the year is comprised of the following:
Current tax
(In £s million)
Current tax expense in respect of the current year
Adjustments recognised in the current year in relation to the current tax of prior years
Deferred tax
(In £s million)
Deferred tax charge in respect of the current year
Adjustments to deferred tax in relation to prior years
Total income tax expense recognised in the current year relating to continuing operations
Current tax expense for the year comprised of the following:
(In £s million)
UK
Overseas
The income tax expense for the year can be reconciled to the accounting profit as follows:
(In £s million)
Profit before tax from continuing operations
Income tax expense calculated at 19.75% (2016: 20.00%)
Net effect of items that are non-taxable/(non-deductible) in determining taxable profit
Effect of unused tax losses not recognised as deferred tax assets
Effect of tax losses not recognised as deferred tax utilised in the year
Effect of other timing differences not recognised as deferred tax assets
Effect of different tax rates of subsidiaries operating in other jurisdictions
Effect of share-based payment charges and share options
Adjustments recognised in the current year in relation to the current tax of prior years
Adjustments to deferred tax in relation to prior years
Income tax expense recognised in the Consolidated Income Statement relating to continuing operations
Effective tax rate for the year on continuing operations
2017
(64.0)
1.3
(62.7)
2017
(0.7)
(2.1)
(2.8)
(65.5)
2017
(6.2)
(57.8)
(64.0)
2017
204.6
(40.4)
(4.2)
(1.0)
0.9
(0.8)
(19.3)
0.1
(64.7)
1.3
(2.1)
(65.5)
32.0%
2016
(49.2)
–
(49.2)
2016
(3.1)
0.4
(2.7)
(51.9)
2016
(6.5)
(42.7)
(49.2)
2016
173.0
(34.6)
(1.4)
(1.5)
0.7
–
(14.6)
(0.9)
(52.3)
–
0.4
(51.9)
30.0%
The tax rate used for the 2017 reconciliations above is the corporate tax rate of 19.75% (2016: 20.00%) payable by corporate entities in the
United Kingdom on taxable profits under tax law in that jurisdiction.
115
Hays plc Annual Report & Financial Statements 2017 Strategic reportGovernanceShareholder informationFinancial statementsOverview 2017
2016
0.4
0.4
0.8
0.9
(1.6)
(0.7)
2017
2016
–
(1.8)
1.4
(0.4)
1.8
–
(9.0)
(7.2)
2016
4.6
4.6
(1.2)
3.4
9. Tax continued
Income tax recognised directly in equity
(In £s million)
Current tax
Excess tax deductions relating to share-based payments
Deferred tax
Excess tax deductions relating to share-based payments
Total income tax recognised in equity
Income tax recognised in other comprehensive income
(In £s million)
Current tax
Contributions in respect of defined benefit pension scheme
Charge in respect of foreign exchange
Deferred tax
Actuarial loss/(gain) in respect of defined benefit pension scheme
Total income tax recognised in other comprehensive income
10. Discontinued operations
The results of the discontinued operations which have been included in the Consolidated Income Statement were as follows:
(In £s million)
Profit from discontinued operations
Profit before tax
Tax charge
Profit from discontinued operations after tax
2017
–
–
–
–
There was no profit or loss from discontinued operations in the current year. In the prior year the profit of £3.4 million arose primarily from the
write-back of provisions that were no longer required. The provisions were established when the Group completed the disposal of its non-core
activities between March 2003 and November 2004.
The cash outflows generated from discontinued operations were £0.3 million (2016: £0.6 million) and are recorded within net movements in
provisions on the Consolidated Cash Flow Statement.
There were no cash inflows generated from discontinued operations (2016: nil).
116
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUEDHays plc Annual Report & Financial Statements 2017 Financial statements 11. Dividends
The following dividends were paid by the Group and have been recognised as distributions to equity shareholders in the year:
Previous year final dividend
Current year interim dividend
2017
pence per
share
1.99
0.96
2017
£s million
28.7
13.9
42.6
The following dividends have been paid/proposed by the Group in respect of the accounting year presented:
Interim dividend (paid)
Final dividend (proposed)
Special dividend (proposed)
2017
pence per
share
0.96
2.26
4.25
7.47
2017
£s million
13.9
32.8
61.6
108.3
2016
pence per
share
1.89
0.91
2016
pence per
share
0.91
1.99
–
2.90
2016
£s million
26.9
13.0
39.9
2016
£s million
13.0
28.7
–
41.7
The final dividend for 2017 of 2.26 pence per share (£32.8 million) along with a special dividend of 4.25 pence per share (£61.6 million) will be
proposed at the Annual General Meeting on 15 November 2017 and has not been included as a liability as at 30 June 2017. If approved, the final
and special dividend will be paid on 17 November 2017 to shareholders on the register at the close of business on 6 October 2017.
12. Earnings per share
For the year ended 30 June 2017
Continuing operations:
Basic earnings per share from continuing operations
Dilution effect of share options
Diluted earnings per share from continuing operations
For the year ended 30 June 2016
Continuing operations:
Basic earnings per share from continuing operations
Dilution effect of share options
Diluted earnings per share from continuing operations
Discontinued operations:
Basic earnings per share from discontinued operations
Dilution effect of share options
Diluted earnings per share from discontinued operations
Continuing and discontinued operations:
Basic earnings per share from continuing and discontinued operations
Dilution effect of share options
Diluted earnings per share from continuing and discontinued operations
The weighted average number of shares in issue for both years exclude shares held in treasury.
Weighted
average
number of
shares
(million)
1,440.7
18.1
1,458.8
Weighted
average
number of
shares
(million)
1,428.4
19.0
1,447.4
1,428.4
19.0
1,447.4
1,428.4
19.0
1,447.4
Earnings
(£s million)
139.1
–
139.1
Earnings
(£s million)
121.1
–
121.1
3.4
–
3.4
124.5
–
124.5
Per share
amount
(pence)
9.66
(0.12)
9.54
Per share
amount
(pence)
8.48
(0.11)
8.37
0.24
(0.01)
0.23
8.72
(0.12)
8.60
117
Hays plc Annual Report & Financial Statements 2017 Strategic reportGovernanceShareholder informationFinancial statementsOverview 13. Goodwill
(In £s million)
Cost
At 1 July
Exchange adjustments
At 30 June
2017
2016
220.4
2.9
223.3
198.4
22.0
220.4
Goodwill arising on business combinations is reviewed and tested on an annual basis or more frequently if there is indication that goodwill
might be impaired. Goodwill has been tested for impairment by comparing the carrying amount of each cash-generating unit (CGU), including
goodwill, with the recoverable amount. The recoverable amounts of the CGUs are determined from value-in-use calculations.
The key assumptions for the value-in-use calculations are as follows:
Assumption
How determined
Operating profit
The operating profit is based on the latest one-year forecasts for the CGUs approved by the Group’s Management
Board which are compiled using expectations of fee growth, consultant productivity and operating costs. The
Group prepares cash flow forecasts derived from the most recent financial forecasts approved by management
and extrapolates cash flows in perpetuity based on the long-term growth rates and expected cash conversion rates.
Discount rates
The pre-tax rates used to discount the forecast cash flows range between 9.1% and 13.3% (2016: 9.3% and 16.7%)
reflecting current market assessments of the time value of money and the country risks specific to the relevant CGUs.
Growth rates
The discount rate applied to the cash flows of each of the Group’s operations is based on the weighted average cost
of capital (WACC), taking into account adjustments to the risk-free rate for 20-year bonds issued by the
government in the respective market. Where government bond rates contain a material component of credit risk,
high-quality local corporate bond rates may be used.
These rates are adjusted for a risk premium to reflect the increased risk of investing in equities and, where appropriate,
the systematic risk of the specific Group operating company. In making this adjustment, inputs required are the
equity market risk premium (that is the increased return required over and above a risk-free rate by an investor who
is investing in the market as a whole) and the risk adjustment beta, applied to reflect the risk of the specific Group
operating company relative to the market as a whole.
The medium-term growth rates are based on management forecasts. These are consistent with a minimum average
estimated growth rate of 5.0% (2016: 5.0%), with the exception of the United Kingdom where an average of 1.0%
has been applied for years two to five and the United States where an average of 20.0% has been applied for years
two to five following the completion of the initial investment phase in the business. The growth estimates reflect
a combination of both past experience and the macroeconomic environment, including GDP expectations driving
fee growth.
The long-term growth rates are based on management forecasts, which are consistent with external sources of an
average estimated growth rate of between 2.0% to 3.5% (2016: 2.0%), reflecting a combination of GDP expectations
and long-term wage inflation driving fee growth.
GDP growth is a key driver of our business, and is therefore a key consideration in developing long-term forecasts.
Wage inflation is also an important driver of net fees as net fees are derived directly from the salary level of
candidates placed into employment. Based on past experience a combination of these two factors is considered
to be an appropriate basis for assessing long-term growth rates.
Management has determined that there has been no impairment to any of the CGUs and in respect of these a sensitivity analysis has been
performed in assessing recoverable amounts of goodwill. This has been based on changes in key assumptions considered to be reasonably
possible by management. This included a change in the pre-tax discount rate of up to 1% and changes in the long-term growth rate of between
0% and 2% in absolute terms.
The sensitivity analysis shows that no impairment would arise in isolation under each scenario for any of the CGUs with the exception of the
Veredus business.
The Veredus business, which is part of the Continental Europe & Rest of World segment, was acquired in December 2014 and continues to
perform in line with management expectations. As a result the Group has continued to make significant investments in the business to
accelerate its growth in line with the Group’s strategy to build a strong presence in the USA, and maximise the long-term growth opportunities
available in the market. As a consequence of this investment, the headroom on goodwill based on the assumptions used in the goodwill
calculation is £2.4 million arising on goodwill of £41.3 million. The key assumptions in determining the value-in-use calculation are the pre-tax
discount rate used which is 11.7%, the short-term growth rate which is 20% and the long-term growth rate which is 3.5%. In isolation, an increase
in the pre-tax discount rate by 1%, a reduction in the short-term growth rate by 3% or a reduction in the long-term growth rate by 1%, all in
absolute terms and considered to be reasonably possible by management, would result in a small immaterial impairment of between
£1.4 million to £2.7 million.
118
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUEDHays plc Annual Report & Financial Statements 2017 Financial statements Goodwill acquired in a business combination is considered its own CGU or allocated to the groups of CGUs that are expected to benefit from
that business combination. Individual CGUs are either country or brand specific. For the purpose of disclosure individual CGUs have been
aggregated and disclosed in accordance with segmental reporting. The carrying amount of goodwill has been allocated as follows:
(In £s million)
Asia Pacific
Continental Europe & Rest of World
United Kingdom & Ireland
14. Other intangible assets
(In £s million)
Cost
At 1 July
Exchange adjustments
Additions
At 30 June
Amortisation
At 1 July
Exchange adjustments
Charge for the year
At 30 June
Net book value
At 30 June
At 1 July
2017
24.6
105.6
93.1
223.3
2016
25.8
101.5
93.1
220.4
2017
2016
101.8
1.3
9.1
112.2
80.2
0.6
12.8
93.6
18.6
21.6
93.2
3.9
4.7
101.8
63.4
2.6
14.2
80.2
21.6
29.8
All other intangible assets relate mainly to computer software additions, and of the additions in the current year, £4.2 million relate to internally
generated assets (2016: £3.5 million).
The estimated average useful life of the computer software related intangible assets is seven years (2016: seven years). Software incorporated
into major Enterprise Resource Planning (ERP) implementations is amortised on a straight-line basis over a life of up to seven years. Other
software is amortised on a straight-line basis between three and five years.
There were no capital commitments at the year end (2016: £nil).
119
Hays plc Annual Report & Financial Statements 2017 Strategic reportGovernanceShareholder informationFinancial statementsOverview Freehold
properties
Leasehold
properties
(short)
Plant and
machinery
Fixtures and
fittings
0.7
–
–
(0.6)
0.1
0.5
–
–
(0.5)
–
0.1
0.2
15.7
0.5
3.6
(0.7)
19.1
11.1
0.4
2.1
(0.7)
12.9
6.2
4.6
33.5
0.8
5.9
(1.3)
38.9
26.1
0.7
3.9
(1.3)
29.4
9.5
7.4
29.1
0.7
3.4
(2.4)
30.8
21.5
0.5
2.9
(2.3)
22.6
8.2
7.6
Freehold
properties
Leasehold
properties
(short)
Plant and
machinery
Fixtures and
fittings
0.6
0.1
–
–
0.7
0.4
0.1
–
–
0.5
0.2
0.2
12.4
2.1
2.0
(0.8)
15.7
9.2
1.5
1.2
(0.8)
11.1
4.6
3.2
29.1
2.6
3.8
(2.0)
33.5
22.2
2.0
3.9
(2.0)
26.1
7.4
6.9
22.6
2.1
4.5
(0.1)
29.1
17.3
1.7
2.6
(0.1)
21.5
7.6
5.3
Total
79.0
2.0
12.9
(5.0)
88.9
59.2
1.6
8.9
(4.8)
64.9
24.0
19.8
Total
64.7
6.9
10.3
(2.9)
79.0
49.1
5.3
7.7
(2.9)
59.2
19.8
15.6
15. Property, plant and equipment
(In £s million)
Cost
At 1 July 2016
Exchange adjustments
Capital expenditure
Disposals
At 30 June 2017
Accumulated depreciation
At 1 July 2016
Exchange adjustments
Charge for the year
Disposals
At 30 June 2017
Net book value
At 30 June 2017
At 1 July 2016
There were no capital commitments at the year end (2016: £nil).
(In £s million)
Cost
At 1 July 2015
Exchange adjustments
Capital expenditure
Disposals
At 30 June 2016
Accumulated depreciation
At 1 July 2015
Exchange adjustments
Charge for the year
Disposals
At 30 June 2016
Net book value
At 30 June 2016
At 1 July 2015
120
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUEDHays plc Annual Report & Financial Statements 2017 Financial statements 16. Deferred tax assets
Deferred tax assets in relation to:
(In £s million)
Accelerated tax depreciation
Acquired tangibles and intangibles
Retirement benefit obligation
Share-based payments
Provisions
Tax losses
Other short-term timing differences
(In £s million)
Accelerated tax depreciation
Acquired tangibles and intangibles
Retirement benefit obligation
Share-based payments
Provisions
Tax losses
Other short-term timing differences
(Charge)/
credit to
Consolidated
Income
Statement
(Charge)/
credit to
other
comprehensive
income
(Charge)/
credit to
equity
Exchange
difference
30 June
2017
(1.1)
(0.3)
(4.1)
0.6
0.5
(0.2)
1.8
(2.8)
–
–
1.4
–
–
–
–
1.4
–
–
–
0.4
–
–
–
0.4
–
–
–
–
0.2
–
0.2
0.4
(Charge)/
credit to
Consolidated
Income
Statement
(Charge)/
credit to
other
comprehensive
income
(Charge)/
credit to
equity
Exchange
difference
(1.1)
(0.9)
–
(0.7)
0.5
(1.0)
0.5
(2.7)
–
–
(9.0)
–
–
–
–
(9.0)
–
–
–
(1.6)
–
–
–
(1.6)
0.2
(0.3)
–
–
0.3
0.1
0.5
0.8
12.7
(2.7)
–
3.2
3.6
0.1
6.4
23.3
30 June
2016
13.8
(2.4)
2.7
2.2
2.9
0.3
4.4
23.9
1 July
2016
13.8
(2.4)
2.7
2.2
2.9
0.3
4.4
23.9
1 July
2015
14.7
(1.2)
11.7
4.5
2.1
1.2
3.4
36.4
The UK deferred tax asset of £15.6 million (2016: £18.2 million) is recognised on the basis of the UK business performance in the year and the
forecast approved by management. Other deferred tax assets of £7.7 million (2016: £5.7 million) arise in the other jurisdictions (primarily
Australia) in which the Group operate.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the periods in which they reverse. The date
enacted or substantively enacted for the relevant periods of reversal are: 19% from 1 April 2017 and 17% from 1 April 2020 in the UK (2016: 19%)
and 30% in Australia.
Unrecognised deductible temporary differences, unused tax losses and unused tax credits
Deductible temporary differences, unused tax losses and unused tax credits for which no deferred tax assets have been recognised are
attributable to the following:
(In £s million)
Tax losses (revenue in nature)
Tax losses (capital in nature)
(In £s million)
Unrecognised deductible temporary differences
Gross
2017
143.5
22.1
165.6
Gross
2017
7.7
Tax
2017
36.7
3.8
40.5
Tax
2017
2.6
Gross
2016
150.7
20.0
170.7
Gross
2016
1.9
Tax
2016
37.8
3.9
41.7
Tax
2016
0.7
In tax losses (revenue in nature) £2.1 million is due to expire in 2023, £1.5 million in 2027, £5.0 million in 2033 and £9.8 million in 2036–37. The
remaining tax losses have no fixed expiry date.
Unrecognised taxable temporary differences associated with investments and interests
(In £s million)
2017
2016
Taxable temporary differences in relation to investments in subsidiaries, for which deferred tax liabilities have not
been recognised are attributable to the following:
Foreign subsidiaries
Tax thereon
5.9
0.3
4.9
0.3
121
Hays plc Annual Report & Financial Statements 2017 Strategic reportGovernanceShareholder informationFinancial statementsOverview 17. Trade and other receivables
(In £s million)
Trade receivables
Less provision for impairment
Net trade receivables
Accrued income
Prepayments and other debtors
2017
604.3
(18.2)
586.1
273.9
48.2
908.2
2016
503.2
(16.3)
486.9
208.9
68.1
763.9
The directors consider that the carrying amount of trade receivables approximates to their fair value. The average credit period taken is 39 days
(2016: 37 days).
Accrued income primarily arises where temporary workers have provided their services but the amount incurred and margin earned thereon
has yet to be invoiced onto the client due to timing.
The ageing analysis of the trade receivables not impaired is as follows:
(In £s million)
Not yet due
Up to one month past due
One to three months past due
2017
537.0
42.5
6.6
586.1
2016
435.5
41.7
9.7
486.9
The Group’s exposure to foreign currency translation is primarily in respect of the Euro and the Australian Dollar. The sensitivity of a 1 cent
change in the year end closing exchange rates in respect of the Euro and Australian Dollar would result in a £2.5 million and £0.5 million
movement in trade receivables respectively.
The movement on the provision for impairment of trade receivables is as follows:
(In £s million)
At 1 July
Exchange movement
Charge for the year
Uncollectable amounts written off
At 30 June
2017
16.3
0.5
3.2
(1.8)
18.2
2016
15.5
1.3
3.0
(3.5)
16.3
The ageing of impaired trade receivables relates primarily to trade receivables over three months past due.
Credit risk
The Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the Consolidated Balance Sheet are net of
allowances for doubtful receivables. An allowance for impairment is made where there is an identified loss event which, based on previous
experience, is evidence of a likely reduction in the recoverability of the cash flows. The Group reduces risk through its credit control process and
by contractual arrangements with other recruitment agencies in situations where the Group invoices on their behalf. The Group’s exposure is
spread over a large number of customers.
The risk disclosures contained on pages 36 to 40 within the Strategic Report form part of these financial statements.
122
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUEDHays plc Annual Report & Financial Statements 2017 Financial statements 18. Cash and cash equivalents
(In £s million)
Cash at bank and in hand
2017
112.0
2016
62.9
The effective interest rate on short-term deposits was 1.3% (2016: 1.0%). The average maturity of short-term deposits was one day (2016: one day).
Capital management
The Board’s priorities for free cash flow are to fund the Group’s investment and development, maintain a strong balance sheet and deliver a
sustainable dividend at a level that is affordable and appropriate. The Board targets a dividend cover range of 2.0x to 3.0x, full year earnings
and remains committed to paying a sustainable and progressive dividend. Further details including the Group’s policy on uses of excess free
cash flow and payment of special dividends can be found in the Financial Review on pages 34 to 35.
The capital structure of the Group consists of net cash/(debt), which is represented by cash and cash equivalents, bank loans and overdrafts
(note 20) and equity attributable to equity holders of the parent, comprising issued share capital, reserves and retained earnings.
The Group is not restricted to any externally imposed capital requirements.
Risk management
A description of the Group’s treasury policy and controls is included in the Financial Review on page 35.
Cash management and foreign exchange risk
The Group’s cash management policy is to minimise interest payments by closely managing Group cash balances and external borrowings.
Euro-denominated cash positions are managed centrally using a cash concentration arrangement which provides visibility over participating
country bank balances on a daily basis. Any Group surplus balance is used to repay any maturing loans under the Group’s revolving credit
facility or invested in overnight money market funds. As the Group holds a sterling-denominated debt facility and generates significant foreign
currency cash flows, the Board considers it appropriate in certain cases to use derivative financial instruments as part of its day-to-day cash
management to reduce the Group’s exposure to foreign exchange risk.
The Group had no cash pooling arrangements as at 30 June 2017. As at 30 June 2016, £88 million of overdraft balances were offset against
£88 million of cash balances under the European cash pool facility that existed at that date and which the Group had legal set-off.
The Group’s operating profit exposure to foreign currency translation is primarily in respect of the Euro and the Australian Dollar. The sensitivity
of a 1 cent change in the average exchange rates for the year in respect of the Euro and Australian Dollar would result in a £1.1 million and
£0.4 million change in operating profit respectively.
The Group does not use derivatives to hedge balance sheet and income statement translation exposure.
Interest rate risk
The Group is exposed to interest rate risk on floating rate bank loans and overdrafts. It is the Group’s policy to limit its exposure to fluctuating
interest rates by selectively hedging interest rate risk using derivative financial instruments, however there were no interest rate swaps held by
the Group during the current or prior year. Cash and cash equivalents carry interest at floating rates based on local money market rates.
Counterparty credit risk
Counterparty credit risk arises primarily from the investment of surplus funds. Risks are closely monitored using credit ratings assigned to
financial institutions by international credit rating agencies. The Group restricts transactions to banks and money market funds that have an
acceptable credit profile and limits its exposure to each institution accordingly.
19. Derivative financial instruments
As at 30 June 2017, the Group had entered into four forward exchange contracts arrangements with counterparty banks:
(In £s million)
Net derivative asset
2017
–
2016
6.6
As set out in note 18 and in the Treasury management section of the Financial Review on page 35, in certain cases the Group uses derivative
financial instruments to manage its foreign exchange exposures as part of its day-to-day cash management.
As at 30 June 2017, the Group had entered into four forward exchange contract arrangements with counterparty banks (2016: eight forward
contracts). The fair market value of the contracts as at 30 June 2017 gave rise to an immaterial unrealised gain resulting in the presentation of
a net derivative asset of £nil (2016: £6.6 million) in the Consolidated Balance Sheet.
Some of the derivative assets and liabilities meet the offsetting criteria of IAS 32 paragraph 42. Consequently, the qualifying gross derivative
liabilities are set off against the qualifying gross derivative assets. The derivative liabilities not qualifying for offset is less than the rounding
factor presented in the financial statements and thus presented as £nil (2016: £nil).
123
Hays plc Annual Report & Financial Statements 2017 Strategic reportGovernanceShareholder informationFinancial statementsOverview 19. Derivative financial instruments continued
The Group does not use derivatives for speculative purposes and all transactions are undertaken to manage the risks arising from underlying
business activities. These instruments are classified as Level 2 in the IFRS 7 fair value hierarchy.
Categories of financial assets and liabilities held by the Group are as shown below:
(In £s million)
Financial assets
Net trade receivables
Accrued income
Cash and cash equivalents
Derivative financial instruments
Financial liabilities
Trade creditors
Other creditors
Accruals
Bank loans and overdrafts
20. Bank loans and overdrafts
(In £s million)
Bank loans
Overdrafts
2017
2016
586.1
273.9
112.0
–
972.0
213.9
40.8
352.7
0.4
607.8
2017
–
0.4
0.4
486.9
208.9
62.9
6.6
765.3
170.0
25.5
312.7
26.1
534.3
2016
25.0
1.1
26.1
Risk management
A description of the Group’s treasury policy and controls is included in the Financial Review on page 35.
Committed facilities
The Group has a £210 million unsecured revolving credit facility which expires in April 2020. The financial covenants require the Group’s interest
cover ratio to be at least 4:1 and its leverage ratio (net debt to EBITDA) to be no greater than 2.5:1. The interest rate of the facility is based on a
ratchet mechanism with a margin payable over LIBOR in the range of 0.90% to 1.55%.
At 30 June 2017, £210 million of the committed facility was undrawn.
Maturities of bank loans and overdrafts
The maturity of borrowings are as follows:
(In £s million)
Within one year
More than one year
2017
0.4
–
0.4
2016
1.1
25.0
26.1
Fair values of financial assets and bank loans and overdrafts
The fair value of financial assets and bank loans and overdrafts is not materially different to their book value due to the short-term maturity of
the instruments, which are based on floating rates.
The interest rate profile of bank loans and overdrafts is as follows:
(In £s million)
Floating rate – sterling
2017
0.4
2016
26.1
The floating rate liabilities comprise bank loans and unsecured overdrafts bearing interest at rates based on local market rates.
Interest rates
The weighted average interest rates paid were as follows:
Bank borrowings
2017
2.2%
2016
2.3%
For each 10 basis point fall or rise in the average LIBOR rate in the year there would be a reduction or increase in profit before tax by
approximately £0.1 million.
124
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUEDHays plc Annual Report & Financial Statements 2017 Financial statements 21. Trade and other payables
(In £s million)
Current
Trade creditors
Other tax and social security
Other creditors
Accruals
2017
2016
213.9
69.1
40.8
352.7
676.5
170.0
65.1
25.5
312.7
573.3
The directors consider that the carrying amount of trade payables approximates to their fair value. The average credit period taken for trade
purchases is 32 days (2016: 29 days).
Accruals primarily relate to the remuneration costs for temporary workers and other agencies that have provided their services but
remuneration has yet to be made due to timing.
22. Retirement benefit obligations
The Group operates a number of retirement benefit schemes in the UK and in other countries. The Group’s principal schemes are within the
UK where the Group operates one defined contribution scheme and two defined benefit schemes. The majority of overseas arrangements are
either defined contribution or government-sponsored schemes and these arrangements are not material in the context of the Group results.
The total cost charged to the Consolidated Income Statement in relation to these overseas arrangements was £8.1 million (2016: £7.7 million).
UK Defined Contribution Scheme
The Group’s principal defined contribution retirement benefit scheme is the Hays Group Personal Pension Plan which is operated for all qualifying
employees and is funded via an employee salary sacrifice arrangement, and for qualifying employees additional employer contributions.
Employer contributions are in the range of 2% to 12% of pensionable salary depending on the level of employee contribution and seniority.
The total cost charged to the Consolidated Income Statement of £6.5 million (2016: £6.2 million) represents employer’s contributions payable
to the money purchase arrangements. There were no contributions outstanding at the end of the current year or prior year. The assets of the
money purchase arrangements are held separately from those of the Group.
UK Defined Benefit Schemes
The Group’s principal defined benefit schemes are the Hays Pension Scheme and the Hays Supplementary Scheme both in the UK. The Hays
Pension Scheme is a funded final salary defined benefit scheme providing pensions and death benefits to members. The Hays Supplementary
Scheme is an unfunded unapproved retirement benefit scheme for employees who were subject to HMRC’s earnings cap on pensionable
salary. The Schemes were closed to future accrual from 30 June 2012 with pensions calculated up until the point of closure. The Schemes are
governed by a trustee board, which is independent of the Group and is subject to full actuarial valuation on a triennial basis.
The last formal actuarial valuation of the Hays Pension Scheme was performed at 30 June 2015 and quantified the deficit at c.£95 million.
A revised deficit funding schedule was agreed with effect from 1 July 2015 which maintained the annual contribution at its previous level,
subject to a 3% per annum fixed uplift over a period of just under 10 years. During the year ended 30 June 2017, the Group made a contribution
of £14.4 million to the Hays Pension Scheme (2016: £14.0 million) in accordance with the agreed deficit funding schedule. The cash contributions
during the year mainly related to deficit funding payments.
In respect of IFRIC 14, The Hays Pension Scheme Definitive Deed and Rules is considered to provide Hays with an unconditional right to a
refund of surplus assets and therefore the recognition of a net defined benefit scheme asset is not restricted and agreements to make funding
contributions do not give rise to any additional liabilities in respect of the scheme.
The defined benefit schemes expose the Group to actuarial risks, such as longevity risk, inflation risk, interest rate risk and market (investment)
risk. The Group is not exposed to any unusual, entity-specific or scheme-specific risks.
125
Hays plc Annual Report & Financial Statements 2017 Strategic reportGovernanceShareholder informationFinancial statementsOverview 22. Retirement benefit obligations continued
The net amount included in the Consolidated Balance Sheet arising from the Group’s obligations in respect of its defined benefit pension
schemes is as follows:
(In £s million)
Present value of defined benefit obligations
Less fair value of defined benefit scheme assets:
Equities
Bonds and gilts
Absolute return funds
LDI funds
Real estate
Cash
Total fair value of defined benefit scheme assets
Net liability arising from defined benefit obligation
(In £s million)
Asset category
Equities
Bonds and gilts
Absolute return funds
LDI funds
Real estate
Cash
Total scheme assets
2017
(784.9)
2016
(726.3)
119.3
320.9
46.7
237.0
48.6
12.2
784.7
(0.2)
132.3
293.3
36.6
224.7
22.7
2.4
712.0
(14.3)
Quoted
Unquoted
Total
110.9
138.0
46.7
932.3
3.0
12.2
1,243.1
8.4
182.9
–
(695.3)
45.6
–
(458.4)
119.3
320.9
46.7
237.0
48.6
12.2
784.7
The trustee board is responsible for determining the Hays pension schemes investment strategy, after taking advice from the Schemes’
investment advisor Mercer Limited. The investment objective for the trustee of the Scheme is to maintain a portfolio of suitable assets of
appropriate liquidity which will generate investment returns to meet, together with future contributions, the benefits of the defined benefit
scheme as they fall due. The current strategy is to hold investments that share characteristics with the long-term liabilities of the Scheme.
The majority of assets are invested in equities, corporate bonds and a Liability Driven Investment (LDI) portfolio. The Scheme assets do not
include any directly held shares issued by the Company or property occupied by the Company.
The fair value of financial instruments has been determined using the fair value hierarchy. Where such quoted prices are unavailable, the price
of a recent transaction for an identical asset, adjusted if necessary, is used. Where quoted prices are not available and recent transactions of
an identical asset on their own are either unavailable or not a good estimate of fair value, valuation techniques are employed using observable
market data and non-observable data.
In relation to the LDI funds the valuations have been determined as follows:
– Repurchase agreements (where the Scheme has sold assets with the agreement to repurchase at a fixed date and price) are included in the
financial statements at the fair value of the repurchase price as a liability. The assets sold are reported at their fair value reflecting that the
Scheme retains the risks and rewards of ownership of those assets.
– The fair value of the forward currency contracts is based on market forward exchange rates at the year end and determined as the gain or
loss that would arise if the outstanding contract was matched at the year end with an equal and opposite contract.
– Swaps represent current value of future cash flows arising from the swap, determined using discounted cash flow models and market data
at the reporting date.
126
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUEDHays plc Annual Report & Financial Statements 2017 Financial statements
The analysis of the LDI funds included within the pension scheme assets is as follows:
(In £s million)
LDI funds summary valuation
Corporate bonds
Government bonds
Government index linked
Interest rate swaps
Fixed incomes futures
Liquidity
Gross funds
Repurchase agreements
Asset swaps
RPI swaps
Futures
Gross liabilities
Total LDI funds
Quoted
Unquoted
Total
7.2
478.6
435.4
–
–
11.1
932.3
–
–
–
–
–
932.3
–
–
–
62.8
24.6
–
87.4
(634.3)
(103.3)
(20.5)
(24.6)
(782.7)
(695.3)
7.2
478.6
435.4
62.8
24.6
11.1
1,019.7
(634.3)
(103.3)
(20.5)
(24.6)
(782.7)
237.0
The LDI portfolio is managed by Insight (a Bank of New York Mellon company) under an active mandate and uses government bonds and
derivative instruments (such as interest rate swaps, inflation swaps and gilt repurchase transactions) to hedge the impact of interest rate and
inflation movements in relation to the long-term liabilities.
Under the Scheme’s LDI strategy, if interest rates fall, the value of LDI investments will rise to help match the increase in actuarial liabilities
arising from the fall in discount rate. Similarly if interest rates rise, the LDI investments will fall in value, as will the liabilities because of the
increase in the discount rate. The extent to which the liability interest rate and inflation risk is not fully matched by the LDI funds represents the
residual interest rate and inflation risk the Scheme remains exposed to.
In addition to the above risk, the LDI portfolio forms part of a diversified investment portfolio for the Scheme, with this diversification seeking
to reduce investment risk.
The Scheme is subject to direct credit risk because the Scheme invests in segregated mandates with the Insight LDI portfolio. Credit risk arising
on bonds held directly within the LDI portfolio is mitigated by investing mostly in government bonds where the credit risk is minimal.
Credit risk arising on the derivatives held in the LDI mandate depends on whether the derivative is exchange traded or over the counter (OTC).
OTC derivative contracts are not guaranteed by any regulated exchange and therefore the Scheme is subject to risk of failure of the counterparty.
The credit risk for OTC swaps held in the LDI portfolio is reduced by collateral arrangements.
The change in the present value of the defined benefit obligation was:
(In £s million)
Change in benefit obligation
Opening defined benefit obligation at 1 July
Administration costs
Effect of settlement
Interest on defined benefit scheme liabilities
Net remeasurement losses – change in experience assumptions
Net remeasurement gains – change in demographic assumptions
Net remeasurement losses – change in financial assumptions
Benefits and expenses paid
Closing defined benefit obligation at 30 June
Analysis of defined benefit obligation
Plans that are wholly or partly funded
Plans that are wholly unfunded
Total
2017
2016
(726.3)
(2.2)
–
(19.4)
(4.1)
–
(70.1)
37.2
(784.9)
(772.5)
(12.4)
(784.9)
(685.3)
(1.9)
19.5
(25.7)
28.9
14.7
(99.2)
22.7
(726.3)
(714.7)
(11.6)
(726.3)
The defined benefit schemes’ liability comprises 64% (2016: 65%) in respect of deferred scheme participants and 36% (2016: 35%) in respect
of retirees.
The weighted average duration of the UK defined benefit scheme liabilities at the end of the reporting period is 22.0 years (2016: 22.0 years).
127
Hays plc Annual Report & Financial Statements 2017 Strategic reportGovernanceShareholder informationFinancial statementsOverview 22. Retirement benefit obligations continued
The change in the fair value of defined benefit schemes assets was:
(In £s million)
Change in the fair value of scheme assets
Fair value of plan assets at 1 July
Effect of settlement
Interest income on defined benefit scheme assets
Return on scheme assets
Employer contributions (towards funded and unfunded schemes)
Benefits and expenses paid
Fair value of plan assets at 30 June
2017
2016
712.0
–
19.2
75.9
14.8
(37.2)
784.7
626.6
(21.1)
23.7
91.1
14.4
(22.7)
712.0
During the year the Company made deficit funding contributions of £14.4 million (2016: £14.0 million) into the funded Hays Pension scheme,
and made pension payments amounting to £0.4 million (2016: £0.4 million) in respect of the unfunded Hays Supplementary Scheme. The
amount of deficit funding contributions expected to be paid into the funded Hays Pension scheme in the year to 30 June 2018 is £14.8 million.
Following the closure of the Schemes in 2012 future service contributions are no longer payable.
The net expense recognised in the Consolidated Income Statement comprised:
(In £s million)
Net interest expense
Administration costs
Effect of settlement
Net expense recognised in the Consolidated Income Statement
The net interest expense and administration costs in the current year and prior year were recognised within finance costs.
The amounts recognised in the Consolidated Statement of Comprehensive Income are as follows:
(In £s million)
The return on plan assets (excluding amounts included in net interest expense)
Actuarial remeasurement
Net remeasurement gains – change in experience assumptions
Net remeasurement gains – change in demographic assumptions
Net remeasurement losses – change in financial assumptions
Remeasurement of the net defined benefit liability
2017
(0.2)
(2.2)
–
(2.4)
2017
75.9
(4.1)
–
(70.1)
1.7
2016
(2.0)
(1.9)
(1.6)
(5.5)
2016
91.1
28.9
14.7
(99.2)
35.5
A roll forward of the actuarial valuation of the Hays Pension Scheme to 30 June 2017 and a valuation of the Hays Supplementary Pension
Scheme have been performed by an independent actuary, who is an employee of Hymans Robertson LLP.
The key assumptions used at 30 June 2017 are listed below.
Discount rate
RPI inflation
CPI inflation
Rate of increase of pensions in payment
Rate of increase of pensions in deferment
2017
2.7%
3.3%
2.3%
3.2%
2.3%
2016
2.8%
2.8%
1.8%
2.8%
1.8%
The discount rate has been constructed to reference the Hymans Robertson AA corporate bond curve (which fits a curve to iBoxx AA
corporate data). The corporate bond yield curve has been used to discount the Scheme cash flows using the rates available at each future
duration and this had been converted into a single flat rate assumption to give equivalent liabilities to the Scheme’s cash flows. The duration of
the Scheme’s liabilities using this approach is circa 22 years.
The RPI inflation assumption has been set as gilt market implied RPI appropriate to the duration of the liabilities (circa 22 years) less a 0.2% per
annum inflation risk premium. The CPI inflation assumption has been determined as 1% per annum below the RPI assumption. This approach for
both RPI and CPI assumptions is consistent with last year.
128
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUEDHays plc Annual Report & Financial Statements 2017 Financial statements The life expectancy assumptions have been calculated using Club Vita base tables and future improvements in line with the CMI 2013 model
with a long-term improvement rate of 1.5% per annum and ‘non peaked’ short-term future improvements. On this basis a 65-year-old current
pensioner has a life expectancy of 24.5 years for males (2016: 24.3 years) and 25.0 years for females (2016: 24.8 years).
A sensitivity analysis on the principal assumptions used to measure the Schemes liabilities at the year end is:
Discount rate
RPI inflation
Pension increase sensitivity
Assumed life expectancy at age 60 (rate of mortality)
Change in
assumption
Impact on
Schemes
0.5%
0.5%
0.5%
+1 Year
£97m
£57m
£40m
£31m
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that
the change in assumptions would occur in isolation to one another as some of the assumptions may be correlated.
In presenting the above sensitivity analysis the present value of the defined benefit obligation has been calculated using the projected unit
credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability
recognised in the Consolidated Balance Sheet.
23. Provisions
(In £s million)
At 1 July 2016
Utilised
At 30 June 2017
(In £s million)
Current
Non-current
Discontinued
Continuing
6.9
(0.3)
6.6
2.4
(0.2)
2.2
2017
2.6
6.2
8.8
Total
9.3
(0.5)
8.8
2016
3.1
6.2
9.3
Discontinued provisions comprise potential exposures arising as a result of the business disposals that were completed in 2004, together with
deferred employee benefits relating to former employees.
Of the total provisions of £8.8 million, £1.2 million relates to deferred employee benefit obligations, and the remaining £7.6 million relate mainly
to potential warranty claim liabilities arising from the business disposals which took place in 2004. Of the provisions that remain, £2.6 million is
expected to be paid in the next 12 months and it is not possible to estimate the timing of the payments for the other items.
24. Called up share capital
Called up, allotted and fully paid Ordinary shares of 1 pence each
At 1 July 2016 and 30 June 2017
Share capital
number
(thousand)
1,464,097
Share
capital
£s million
14.7
In accordance with the Companies Act 2006, the Company no longer has an authorised share capital.
The Company is allowed to hold 10% of issued share capital in treasury.
As at 30 June 2017, the Company held 21.1 million (2016: 31.2 million) Hays plc shares in treasury. The shares held in treasury are used to satisfy
the exercises in relation to equity-settled share-based payment awards.
129
Hays plc Annual Report & Financial Statements 2017 Strategic reportGovernanceShareholder informationFinancial statementsOverview 25. Share-based payments
During the year, £13.0 million (2016: £11.9 million) was charged to the Consolidated Income Statement in relation to equity-settled share-based
payments.
Share options
At 30 June 2017 the following options had been granted and remained outstanding in respect of the Company’s Ordinary shares of 1 pence
each under the Company’s share option schemes:
Hays UK Sharesave Scheme
Hays International Sharesave Scheme
Total Sharesave options outstanding
Number of
shares
218,569
819,701
1,973,168
847,246
3,858,684
101,626
339,312
765,264
519,046
1,725,248
5,583,932
Nominal
value of
shares
£
2,186
8,197
19,732
8,472
38,587
1,016
3,393
7,653
5,190
17,252
55,839
Subscription
price
pence/share
Date
normally
exercisable
131
142
107
143
131
142
107
143
2017
2018
2019
2020
2017
2018
2019
2020
The Hays International Sharesave Scheme is available to employees in Australia, New Zealand, Germany, the Republic of Ireland, Canada, Hong
Kong, Singapore and the United Arab Emirates.
Details of the share options outstanding during the year are as follows:
Sharesave
Outstanding at the beginning of the year
Granted during the year
Forfeited/cancelled during the year
Exercised during the year
Expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
2017
Number of
share
options
(thousand)
2017
Weighted
average
exercise
price
(pence)
2016
Number of
share
options
(thousand)
2016
Weighted
average
exercise
price
(pence)
6,371
1,409
(1,155)
(948)
(93)
5,584
320
117
143
120
109
104
124
131
6,252
3,457
(1,545)
(1,748)
(45)
6,371
567
111
107
110
85
91
117
88
The weighted average share price for all options exercised during the year was 153p (2016: 135p).
The options outstanding as at 30 June 2017 had a weighted average remaining contractual life of 1.9 years.
130
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUEDHays plc Annual Report & Financial Statements 2017 Financial statements On 31 March 2017, 1.4 million Sharesave options were granted. The aggregate of the estimated fair values of the options granted on that date is
£0.4 million. In the prior year, 3.5 million Sharesave options were granted. The aggregate of the estimated fair values of the options granted in
the prior year was £0.9 million.
The inputs into the valuation model (a binomial valuation model) are as follows:
Share price at grant
Exercise price
Expected volatility
Expected life
Risk-free rate
Expected dividends
159 pence
143 pence
31.4%
3.34 years
0.13%
4.15%
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous three years.
Performance Share Plan (PSP) and Deferred Annual Bonus (DAB)
The PSP is designed to link reward to the key long-term value drivers of the business and to align the interests of the executive directors and
approximately 320 of the global senior management population with the long-term interests of shareholders. PSP awards are discretionary and
vesting is dependent upon the achievement of performance conditions measured over either a three-year period or a one-year period with a
two-year holding period.
Only the executive directors and other members of the Management Board participate in the DAB which promotes a stronger link between
short-term and long-term performance through the deferral of annual bonuses into shares for a three-year period.
Further details of the schemes for the executive directors can be found in the Remuneration Report on pages 64 to 66.
Details of the share awards outstanding during the year are as follows:
Performance Share Plan
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Lapsed during the year
Outstanding at the end of the year
2017
Number of
share
options
(thousand)
2017
Weighted
average
fair value
at grant
(pence)
2016
Number of
share
options
(thousand)
2016
Weighted
average
fair value
at grant
(pence)
22,688
8,559
(7,620)
(1,860)
21,767
122
131
106
135
131
25,762
6,755
(8,729)
(1,100)
22,688
97
153
74
123
122
The weighted average share price on the date of exercise was 132p (2016: 142p).
The options outstanding as at 30 June 2017 had a weighted average remaining contractual life of 1.3 years.
Deferred Annual Bonus
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Outstanding at the end of the year
2017
Number of
share
options
(thousand)
2017
Weighted
average
fair value
at grant
(pence)
2016
Number of
share
options
(thousand)
2016
Weighted
average
fair value
at grant
(pence)
2,663
595
(1,051)
2,207
130
138
107
143
2,628
747
(712)
2,663
107
162
80
130
The weighted average share price on the date of exercise was 134p (2016: 154p).
The options outstanding as at 30 June 2017 had a weighted average remaining contractual life of 1.1 years.
131
Hays plc Annual Report & Financial Statements 2017 Strategic reportGovernanceShareholder informationFinancial statementsOverview 26. Related parties
Remuneration of key management personnel
The remuneration of the Management Board and non-executive directors, who are key management personnel of the Group, is set out below
in aggregate for each of the categories specified in IAS 24 ‘Related Party Disclosures’ and represents the total compensation costs incurred by
the Group in respect of remuneration, not the benefit to the individuals. Further information about the remuneration of executive and non-
executive directors is provided in the Directors’ Remuneration Report on pages 72 and 78.
(In £s million)
Short-term employee benefits
Post-employment benefits
Share-based payments
Information relating to pension fund arrangements is disclosed in note 22.
27. Operating lease arrangements
The Group as lessee
(In £s million)
Land & Buildings
Motor Vehicles
Lease payments under operating leases recognised as an expense for the year
2017
9.0
–
6.4
15.4
2017
34.7
7.4
42.1
2016
9.2
0.1
5.2
14.5
2016
27.4
6.6
34.0
At 30 June 2017, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases which
fall due as follows:
(In £s million)
Within one year
Between two and five years
After five years
2017
46.7
102.0
20.9
169.6
2016
39.4
70.3
6.6
116.3
IFRS 16 ‘Leases’ will become effective in the Group’s financial year 2020 and will primarily change the lease accounting requirements for
lessees as currently disclosed above.
28. Movement in net cash/(debt)
(In £s million)
Cash and cash equivalents
Bank loans and overdrafts
Net cash
1 July
2016
62.9
(26.1)
36.8
Cash
flow
43.3
25.8
69.1
Exchange
movement
5.8
(0.1)
5.7
30 June
2017
112.0
(0.4)
111.6
The table above is presented as additional information to show movement in net cash/(debt), defined as cash and cash equivalents less bank
loans and overdrafts.
132
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCONTINUEDHays plc Annual Report & Financial Statements 2017 Financial statements 29. Acquisition liabilities
(In £s million)
At 1 July 2016
Exchange adjustments
Charge to income statement
Interest unwind on acquisition liability
At 30 June 2017
Total
(11.2)
(0.2)
(1.1)
(1.1)
(13.6)
Acquisition liabilities relate to the deferred consideration payable following the acquisition of 80% of Veredus Corp., a pure play US IT staffing
company in December 2014. The business was acquired for a total cash consideration of £36.1 million and to reflect the substance of the
transaction using the principles of IFRS 10, the acquisition was accounted for as if 100% of the equity had been acquired.
The deferred consideration is subject to a put/call arrangement which provides Hays with an option to acquire the remaining 20% of the equity
from the shareholders. The option is first available for exercise in March 2018. On 17 January 2017 there was an amendment to the arrangement
that fixed the purchase price for the remaining 20% of the equity from shareholders at $18.5 million. This has resulted in an additional charge of
£1.1 million being recognised in the income statement during the year. The unwind of the discount in the year of £1.1 million is recognised as a
finance cost in the income statement. A liability of £11.2 million was recognised in the prior year representing management’s best estimate of
the amount payable, discounted to its present value.
30. Subsequent events
The final dividend for 2017 of 2.26 pence per share (£32.8 million) together with a special dividend of 4.25 pence per share (£61.6 million) will be
proposed at the Annual General Meeting on 15 November 2017 and has not been included as a liability as at 30 June 2017. If approved, the final
dividend will be paid on 17 November 2017 to shareholders on the register at close of business on 6 October 2017.
133
Hays plc Annual Report & Financial Statements 2017 Strategic reportGovernanceShareholder informationFinancial statementsOverview COMPANY BALANCE SHEET
AT 30 JUNE 2017
(In £s million)
Non-current assets
Property, plant and equipment
Investment in subsidiaries
Trade and other receivables
Deferred tax assets
Current assets
Trade and other receivables
Cash and bank balances
Total assets
Current liabilities
Trade and other payables
Net current liabilities
Total assets less current liabilities
Non-current liabilities
Retirement benefit obligations
Provisions
Total liabilities
Net assets
Equity
Called up share capital
Share premium
Capital redemption reserve
Retained earnings
Equity reserve
Total equity
Note
2017
2016
4
5
6
7
8
9
10
0.3
910.4
150.5
0.2
1,061.4
12.7
1.0
13.7
1,075.1
(379.2)
(365.5)
695.9
(0.2)
(5.0)
(5.2)
(384.4)
690.7
14.7
369.6
2.7
282.3
21.4
690.7
0.9
910.4
115.9
3.0
1,030.2
11.5
3.1
14.6
1,044.8
(352.8)
(338.2)
692.0
(14.3)
(5.3)
(19.6)
(372.4)
672.4
14.7
369.6
2.7
265.2
20.2
672.4
The financial statements of Hays plc, registered number 2150950, were approved by the Board of Directors and authorised for issue on
30 August 2017.
Signed on behalf of the Board of Directors
A R Cox
P Venables
134
Hays plc Annual Report & Financial Statements 2017 Financial statements
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2017
(In £s million)
At 1 July 2016
Remeasurement of defined benefit pension schemes
Tax relating to components of other comprehensive income
Net expense recognised in other comprehensive income
Profit for the year
Total comprehensive income for the year
Dividends paid
Share-based payments
Called up
share
capital
Share
premium
Capital
redemption
reserve
Retained
earnings
Equity
reserve
14.7
–
–
–
–
–
–
–
369.6
–
–
–
–
–
–
–
2.7
–
–
–
–
–
–
–
265.2
1.7
1.4
3.1
45.3
48.4
(42.6)
11.3
20.2
–
–
–
–
–
–
1.2
21.4
At 30 June 2017
14.7
369.6
2.7
282.3
FOR THE YEAR ENDED 30 JUNE 2016
(In £s million)
At 1 July 2015
Remeasurement of defined benefit pension schemes
Tax relating to components of other comprehensive income
Net expense recognised in other comprehensive income
Profit for the year
Total comprehensive income for the year
Dividends paid
Share-based payments
At 30 June 2016
Called up
share
capital
Share
premium
Capital
redemption
reserve
Retained
earnings
Equity
reserve
14.7
–
–
–
–
–
–
–
14.7
369.6
–
–
–
–
–
–
–
369.6
2.7
–
–
–
–
–
–
–
2.7
223.4
35.5
(7.2)
28.3
43.3
71.6
(39.9)
10.1
265.2
18.7
–
–
–
–
–
–
1.5
20.2
Total
equity
672.4
1.7
1.4
3.1
45.3
48.4
(42.6)
12.5
690.7
Total
equity
629.1
35.5
(7.2)
28.3
43.3
71.6
(39.9)
11.6
672.4
135
Hays plc Annual Report & Financial Statements 2017 Strategic reportGovernanceShareholder informationFinancial statementsOverview NOTES TO THE COMPANY FINANCIAL STATEMENTS
1. Accounting policies
a. Basis of accounting
The financial statements have been prepared under the historical cost convention, in accordance with Financial Reporting standard 101
(FRS101) ‘Reduced Disclosure Framework’ as issued by the Financial Reporting Council.
As permitted by Section 408 of the Companies Act 2006, the Company’s income statement has not been presented. The Company, as permitted
by FRS101, has taken advantage of the disclosure exemptions available under that standard in relation to share-based payments, financial
instruments, certain disclosures regarding the Company’s capital, capital management, presentation of comparative information in respect
of certain assets, presentation of a cash flow statement, certain related party transactions and the effect of future accounting standards not
yet adopted. Where required, equivalent disclosures are provided in the Group Financial Statements of Hays plc.
The significant accounting policies and significant judgments and key estimates relevant to the Company are the same as those set out in
note 2 and note 3 to the Group Financial Statements.
2. Employee information
There are no staff employed by the Company (2016: none). Therefore no remuneration has been disclosed. Details of directors’ emoluments
and interests are included in the Remuneration Report on pages 72 to 82 of the Annual Report.
3. Profit for the year
Hays plc has not presented its own income statement and related notes as permitted by Section 408 of the Companies Act 2006. The profit
for the financial year in the Hays plc Company Financial Statements is £45.3 million (2016: profit £43.3 million).
4. Investment in subsidiaries
(In £s million)
Cost
At 1 July 2016 and 30 June 2017
Provision for impairment
At 1 July 2016 and 30 June 2017
Total
At 30 June 2016 and 30 June 2017
Investments in subsidiaries are stated at cost less any impairment in recoverable value.
The principal subsidiary undertakings of the Group are listed in note 11.
5. Trade and other receivables: amounts falling due after more than one year
(In £s million)
Prepayments
Amounts owed by subsidiary undertakings
The Company charges interest on amounts owed by subsidiary undertakings at a rate of three-month LIBOR plus 1%.
6. Deferred tax assets
Deferred tax assets in relation to:
(In £s million)
Retirement benefit obligations
Other short-term timing differences
136
Shares in
subsidiary
undertakings
910.4
–
910.4
2017
1.0
149.5
150.5
2017
–
0.2
0.2
2016
1.5
114.4
115.9
2016
2.7
0.3
3.0
Hays plc Annual Report & Financial Statements 2017 Financial statements 7. Trade and other receivables: amounts falling due within one year
(In £s million)
Corporation tax debtor
Prepayments
8. Trade and other payables
(In £s million)
Accruals
Amounts owed to subsidiary undertakings
2017
9.9
2.8
12.7
2017
18.4
360.8
379.2
2016
8.8
2.7
11.5
2016
15.9
336.9
352.8
Amounts owed to subsidiary undertakings are repayable on demand. The Company is charged interest on amounts owed to subsidiary
undertakings at a rate of three-month LIBOR less 1%.
9. Retirement benefit obligations
(In £s million)
Defined benefit scheme deficit
2017
0.2
2016
14.3
The details of this UK scheme, for which Hays plc is the sponsoring employer, are set out in note 22 to the Group financial statements.
10. Provisions
(In £s million)
At 1 July 2016
Utilised during the year
At 30 June 2017
5.3
(0.3)
5.0
Provisions comprise of potential exposures arising as a result of the business disposals relating to the Group transformation that concluded in
2004. It is not possible to estimate the timing of payments against the remaining provisions.
137
Hays plc Annual Report & Financial Statements 2017 Strategic reportGovernanceShareholder informationFinancial statementsOverview NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
11. Subsidiaries
Hays Specialist Recruitment (Australia) Pty Limited
Hays Österreich GmbH
Hays Professional Solutions Österreich GmbH
Hays NV
Hays Services NV
Hays Recruitment and Selection Ltda
Hays Specialist Recruitment (Canada) Inc.
Hays Especialistas En Reclutamiento Limitada
Hays Specialist Recruitment (Shanghai) Co. Limited*
(90% owned)
Hays Colombia SAS
Hays Czech Republic s.r.o
Hays Information Technology s.r.o
Hays Specialist Recruitment (Denmark) A/S
Axis Resources Holding Limited
Axis Resources Limited
EPS Pension Trustees Limited
H101 Limited
Hays Commercial Services Limited
Hays Finance Technology Limited
Hays Group Holdings Limited †
Hays Healthcare Limited
Hays Holdings Ltd †
Hays International Holdings Limited †
Hays Nominees Limited
Hays Overseas Holdings Limited †
Hays Pension Trustee Limited †
Hays Personnel (Managed Solutions) Limited
Hays Personnel Payroll Services Limited
Hays Personnel Services Limited
Hays Pharma Consulting Limited
Hays Pharma Limited
Hays Project Solutions Limited
Hays Property Holdings Limited
Hays Recruitment Services Limited
Hays Social Care Limited
Hays Specialist Recruitment (Holdings) Limited †
Hays Specialist Recruitment Limited
Hays SRA Limited
Hays Stakeholder Life Assurance Trustee Limited †
Hays ZMB Limited
James Harvard International Group Limited
Krooter Limited
Myriad Computer Services Limited
Oval (1620) Limited
Owen, Thornhill and Harper Limited
Paperstream Limited
Recruitment Solutions Group Limited (IOM)
RSG EBT Limited
Weyside 23 Limited
Weyside Group Limited
Weyside Office Services Limited
138
Registered Address and Country of Incorporation
Level 13, The Chifley Tower, 2 Chifley Square, Sydney, NSW 2000, Australia
Europaplatz 3/5, 1150 Wien, Austria
Europaplatz 3/5, 1150 Wien, Austria
B – 8500 Kortrijk, Brugsesteenweg 255 box 2, Belgium
B – 8500 Kortrijk, Brugsesteenweg 255 box 2, Belgium
Rua Pequetita, No.215, 13th Floor, Sao Paulo, Brazil
1500 Don Mills Road, Suite 402 North York ON M3B 3K4, Canada
Cerro El Plomo 5630, Of. 1701, Las Condes, P.O. 7560742, Santiago, Chile
Unit 0304, 19/F Shui On Plaza, 333 Huaihai Road, Lot No.7 Luwan District,
Shanghai 200020, CN, 0, China
AK 45 No. 108-27 Torre 2 Oficina 1105, Bogotá, Colombia
Olivova 4/2096, 110 00 Praha 1, Czech Republic
Olivova 4/2096, 110 00 Praha 1, Czech Republic
Kongens Nytorv 8, 1050 København K, Denmark
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
15 – 19 Athol Street, Douglas, Isle of Man, IM1 1LB
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
Hays plc Annual Report & Financial Statements 2017 Financial statements Weyside Telecoms Limited
Weyside Turngate Limited
Hays BTP & Immobilier SASU
Hays Clinical Research SASU
Hays Consulting SASU
Hays Corporate SASU
Hays Est SASU
Hays Executive SASU
Hays Finance SASU
Hays France SAS
Hays Ile de France SASU
Hays IT Services SASU
Hays Life Sciences Consulting SASU
Hays Life Sciences Services SASU
Hays Media SASU
Hays Méditerranée SASU
Hays Nord Est SASU
Hays Ouest SASU
Hays Outsourced Solutions SASU
Hays Pharma Consulting SASU
Hays Pharma SASU
Hays Pharma Services SASU
Hays Pharma Technology SASU
Hays Pharma Technology Consulting SASU
Hays Pharma Technology Services SASU
Hays Sud Est SASU
Hays Sud Ouest SASU
Hays Talent Solutions SASU
Hays Travail Temporaire SASU
Hays AG
Hays Talent Solutions GmbH
Hays Holding GmbH
Hays Technology Solutions GmbH
Hays Professional Solutions GmbH
Hays Hong Kong Limited
Hays Specialist Recruitment Hong Kong Limited
Hays Hungary Kft.
Hays Business Solutions Private Limited
Hays Specialist Recruitment Private Limited
Hays Business Services Ireland Limited
Hays Specialist Recruitment (Ireland) Limited
Hays Professional Services S.r.l
Hays S.r.l
Hays Resource Management Japan K.K.
Hays Specialist Recruitment Japan K.K.
Hays Finance (Jersey) Limited
Hays S.a.r.l
Hays Travail Temporaire Luxembourg
Hays Specialist Recruitment (Malaysia) Sdn. Bhd.* (49% owned)
Registered Address and Country of Incorporation
250 Euston Road, London, NW1 2AF, United Kingdom
250 Euston Road, London, NW1 2AF, United Kingdom
147 boulevard Haussmann, 75008 Paris, France
147 boulevard Haussmann, 75008 Paris, France
147 boulevard Haussmann, 75008 Paris, France
147 boulevard Haussmann, 75008 Paris, France
34 rue Stanislas, 54000 Nancy, France
147 boulevard Haussmann, 75008 Paris, France
147 boulevard Haussmann, 75008 Paris, France
147 boulevard Haussmann, 75008 Paris, France
147 boulevard Haussmann, 75008 Paris, France
147 boulevard Haussmann, 75008 Paris, France
147 boulevard Haussmann, 75008 Paris, France
147 boulevard Haussmann, 75008 Paris, France
147 boulevard Haussmann, 75008 Paris, France
369/371 Promenade des anglais – Immeuble Crystal Palace,
06000 Nice, France
6, rue Jean Roisin, 59000 Lille, France
36 boulevard Guist’Hau, 44000 Nantes, France
147 boulevard Haussmann, 75008 Paris, France
147 boulevard Haussmann, 75008 Paris, France
147 boulevard Haussmann, 75008 Paris, France
147 boulevard Haussmann, 75008 Paris, France
147 boulevard Haussmann, 75008 Paris, France
147 boulevard Haussmann, 75008 Paris, France
147 boulevard Haussmann, 75008 Paris, France
Immeuble Grand Bazar, 2 rue Grolee, 69002 Lyon, France
23 rue Lafayette, 31000 Toulouse, France
23 rue Lafayette, 31000 Toulouse, France
147 boulevard Haussmann, 75008 Paris, France
Willy-Brandt-Platz 1-3, 68161 Mannheim, Germany
Völklinger Straße 4, 40219 Düsseldorf, Germany
Willy-Brandt-Platz 1-3, 68161 Mannheim, Germany
Willy-Brandt-Platz 1-3, 68161 Mannheim, Germany
Völklinger Straße 4, 40219 Düsseldorf, Germany
Unit 6604-06, 66/F, International Commerece Centre,
1 Austin Road West, Kowloon, Hong Kong
Unit 6604-06, 66/F, International Commerece Centre,
1 Austin Road West, Kowloon, Hong Kong
1054 Budapest, Szabadság tér 7, Bank Center, Hungary
Buildings 9B, 11th Floor, DLF Cyber City, Gurgaon, Haryana-HR, India
Level 3, Neo Vikram, New Link Road, Above Audi Showroom,
Andheri West, Mumbai, Maharashtra-MH, India
26/27a Grafton St, Dublin 2, Ireland
26/27a Grafton St, Dublin 2, Ireland
Corso Italia 13, CAP 20122, Milano, Italy
Corso Italia 13, CAP 20122, Milano, Italy
Izumi Garden Tower 28F 1-6-1 Roppongi, Minato-ku, Tokyo 106-6028 Japan
Izumi Garden Tower 28F 1-6-1 Roppongi, Minato-ku, Tokyo 106-6028 Japan
44 Esplande St, Helier, Jersey JE4 9WG
65 Avenue de la Gare – L 1611 Luxembourg
65 Avenue de la Gare – L 1611 Luxembourg
B4-3A-6, Solaris Dutamas, No 1, Jalan Dutamas 1, 50480
Kuala Lumpur, Malaysia
139
Hays plc Annual Report & Financial Statements 2017 Strategic reportGovernanceShareholder informationFinancial statementsOverview NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
11. Subsidiaries continued
Hays Solutions Sdn. Bhd.
Hays Specialist Recruitment Holdings Sdn. Bhd.
Hays Servicios, S.A. de C.V.
Hays, S.A. de C.V.
Hays B.V.
Hays Commercial Services B.V.
Hays Holdings B.V.
Hays Services B.V.
Hays Temp B.V.
Hays Specialist Recruitment (NZ) Limited
Hays Document Management (Private) Limited
Hays Outsourcing Sp. z.o.o.
Hays Poland Sp. z.o.o.
Hays Poland Centre of Excellence sp. z.o.o.
Hays Recrutamento Seleccao e Empresa de Trabalho Temporario
Unipessoal LDA
Hays Specialist Recruitment Romania SRL
Hays Business Solutions Limited Liability Company
Hays IT Solutions Limited Liability Company
Hays Specialist Recruitment Limited Liability Company
Hays Specialist Recruitment P.T.E Limited
Hays Business Services S.L.
Hays Personnel Espana Empresa de Trabajo Temporal SA
Hays Personnel Services Espana SA
Hays Specialist Recruitment AB
Hays (Schweiz) AG
Hays Talent Solutions (Schweiz) GmbH
Hays FZ-LLC
3 Story Software LLC
Hays Holding Corporation
Hays Specialist Recruitment LLC
Hays Talent Solutions LLC
Hays USA Holdings Inc
Veredus Corporation* (80% owned)
Veredus Government Solutions, LLC* (80% owned)
Veredus Holdings. Inc.* (80% owned)
Veredus, LLC* (80% owned)
Registered Address and Country of Incorporation
B4-3A-6, Solaris Dutamas, No 1, Jalan Dutamas 1, 50480
Kuala Lumpur, Malaysia
B4-3A-6, Solaris Dutamas, No 1, Jalan Dutamas 1, 50480
Kuala Lumpur, Malaysia
Avenida Paseo de las Palmas No. 405, 1003, Colonia Lomas de Chapultepec
VII Seccion, C.P. 11000, México, CD.MX.
Avenida Paseo de las Palmas No. 405, 1003, Colonia Lomas de Chapultepec
VII Seccion, C.P. 11000, México, CD.MX.
Ellen Pankhurststraat 1G, NL-5032 MD, Tilburg, Netherlands
Ellen Pankhurststraat 1G, NL-5032 MD, Tilburg, Netherlands
Ellen Pankhurststraat 1G, NL-5032 MD, Tilburg, Netherlands
Ellen Pankhurststraat 1G, NL-5032 MD, Tilburg, Netherlands
Ellen Pankhurststraat 1G, NL-5032 MD, Tilburg, Netherlands
Level 12, Pwc Tower, 188 Quay Street, Auckland, 1010, New Zealand
6th Floor, AWT Plaza, I.I Chundrigar Road, Karachi, Pakistan
Złota 59, 00-120 Warszawa, Poland
Złota 59, 00-120 Warszawa, Poland
Złota 59, 00-120 Warszawa, Poland
Avenida da Republica, no 90 – 1º andar, fração 4,
1600-206 – Lisbon, Portugal
30 Frumoasa Street, 1st Floor, zone A, module 1.32,
1st District, Bucharest, Romania
Citydel Business Centre, 9 Zemlyanoy Val Street, Moscow 305064, Russia
Citydel Business Centre, 9 Zemlyanoy Val Street, Moscow 305064, Russia
Citydel Business Centre, 9 Zemlyanoy Val Street, Moscow 305064, Russia
80 Raffles Place, #27-20 UOB Plaza 2, Singapore
Paseo de la Castellana 81, 28046 Madrid, Spain
Paseo de la Castellana 81, 28046 Madrid, Spain
Paseo de la Castellana 81, 28046 Madrid, Spain
Stureplan 4 C, 114 35, Stockholm, Sweden
Nüschelerstrasse 32, CH-8001 Zurich, Switzerland
Nüschelerstrasse 32, CH-8001 Zurich, Switzerland
Block 19, 1st Floor, Office F-02, Knowledge Village,
Dubai 500340, United Arab Emirates
615 West Johnson Ave #202 Cheshire, CT 06410 USA
160 Greentree Dr. Suite 101 Dover DE 19904 USA
160 Greentree Dr. Suite 101 Dover DE 19904 USA
160 Greentree Dr. Suite 101 Dover DE 19904 USA
1209 Orange Street, Wilmington, DE 19801, USA
4300 W Cypress Street Suite 900 Tampa FL 33607 USA
101 E. Kennedy Blvd Suite 2700 Tampa, FL 33602 USA
1200 South Pine Island Road, Plantation FL 33324 USA
1200 South Pine Island Road, Plantation FL 33324 USA
As at 30 June 2017, Hays plc and/or a subsidiary or subsidiaries in aggregate owned 100% of each class of the issued shares of each of these
companies with the exception of companies marked with an asterisk (*) in which case each class of issued shares held was as stated.
Shares in companies marked with a (†) were owned directly by Hays plc. All other companies were owned by a subsidiary or subsidiaries of Hays plc.
12. Other related party transactions
Hays plc has taken advantage of the exemption granted under paragraph 8(k) of FRS101 not to disclose transactions with fellow wholly owned
subsidiaries. Transactions entered into and trading balances outstanding that were owed to Hays plc at 30 June 2017 with other related parties
was £1.1 million (2016: £1.7 million).
140
Hays plc Annual Report & Financial Statements 2017 Financial statements SHAREHOLDER
INFORMATION
Supporting information for investors.
142 Shareholder information
143 Financial calendar
144 Hays online
Shareholder information
SHAREHOLDER INFORMATION
Registrar
The Company’s registrar is:
Equiniti Limited
Aspect House, Spencer Road, Lancing
West Sussex BN99 6DA
www.shareview.co.uk
Telephone: 0371 384 2843(1)
International: +44 121 415 7047
Textphone: 0371 384 2255
ID fraud and unsolicited mail
Share-related fraud and identity theft affects
shareholders of many companies and we
urge you to be vigilant. If you receive any
unsolicited mail offering advice, you should
inform Equiniti immediately.
As the Company’s share register is, by law,
open to public inspection, shareholders may
receive unsolicited mail from organisations
that use it as a mailing list. To reduce the
amount of unsolicited mail you receive,
contact the Mailing Preference Service,
FREEPOST 29 LON20771, London W1E 0ZT.
Telephone: 0845 703 4599 or 020 7291 3310.
Website: www.mpsonline.org.uk
ShareGift
ShareGift is a charity share donation
scheme for shareholders and is administered
by the Orr Mackintosh Foundation. It is
especially useful for those shareholders
who wish to dispose of a small number of
shares whose value makes it uneconomical
to sell on a normal commission basis.
Further information can be obtained from
www.sharegift.org or from Equiniti.
Website
The Company has a corporate website at
haysplc.com, which holds, amongst other
information, a copy of our latest Annual
Report & Financial Statements and copies
of all announcements made over the last
12 months.
Registered office
250 Euston Road
London
NW1 2AF
Registered in England & Wales no. 2150950
Telephone: +44 (0) 20 7383 2266
Company Secretary
Doug Evans
Email: cosec@hays.com
Investor Relations contact
David Walker, Head of Investor Relations
Email: ir@hays.com
Equiniti provides a range of services for shareholders:
Service
Shareholder
service
Enquiries
relating to your
shareholding
Dividend payments
What it offers
You can access details of your
shareholding and a range of other
shareholder services.
You can inform Equiniti of lost share
certificates, dividend warrants or tax
vouchers, change of address or if
you would like to transfer shares
to another person.
Dividends may be paid directly into your
bank or building society account. Tax
vouchers will continue to be sent to the
shareholder’s registered address.
How to participate
You can register at
www.shareview.co.uk
Please contact Equiniti.
Complete a dividend
bank mandate instruction
form which can be
downloaded from
www.shareview.co.uk or
by telephoning Equiniti.
Dividend payment
direct to bank
account for
overseas
shareholders
Dividend
Reinvestment
Plan (DRIP)
Amalgamation
of accounts
Share dealing
service(2)
Individual Savings
Accounts (ISAs)(2)
Equiniti can convert your dividend in
over 83 currencies to over 90 countries
worldwide and send it directly to your
bank account.
For more details
please visit
www.shareview.co.uk
or contact Equiniti.
The Company has a DRIP to allow
shareholders to reinvest the cash
dividend that they receive in Hays plc
shares on competitive dealing terms.
If you receive more than one copy of the
Annual Report & Financial Statements,
it could be because you have more
than one record on the register. Equiniti
can amalgamate your accounts into
one record.
Equiniti offers Shareview Dealing, a
service which allows you to sell your
Hays plc shares or add to your holding if
you are a UK resident. If you wish to deal,
you will need your account/shareholder
reference number which appears on
your share certificate.
Alternatively, if you hold a share
certificate, you can also use any
bank, building society or stockbroker
offering share dealing facilities to buy
or sell shares.(2)
Investors in Hays plc Ordinary shares
may take advantage of a low-cost
individual savings account (ISA) and/or
an investment account where they can
hold their Hays plc shares electronically.
The ISA and investment account are
operated by Equiniti Financial Services
Limited and are subject to standard
dealing commission rates.
Further information is
available from the Share
Dividend helpline on
0371 384 2268 or visit
www.shareview.co.uk
Please contact Equiniti.
You can deal in your
shares on the internet
or by phone. For more
information about this
service and for details
of the rates, log on to
www.shareview.co.uk/
dealing or telephone
Equiniti on 0345 603 7037
between 8.00am and
4.30pm, Monday
to Friday.
For further information
or to apply for an ISA or
investment account, visit
Equiniti’s website at
www.shareview.co.uk/
dealing or telephone
them on 0345 300 0430.
(1) Lines open 8.30am to 5.30pm (UK time), Monday to Friday (excluding public holidays in England and Wales).
(2) The provision of share dealing services is not intended to be an invitation or inducement to engage
in an investment activity. Advice on share dealing should be obtained from a professional independent
financial adviser.
142
Hays plc Annual Report & Financial Statements 2017
Overview
Strategic report
Governance
Financial statements
Shareholder information
FINANCIAL CALENDAR
2017
12 October
9 November
15 November
17 November
2018
11 January
Trading Update for quarter ending 30 September 2017
Investor Day, London
Annual General Meeting
Payment of final and special dividends
Trading Update for quarter ending 31 December 2017
Hays plc Annual Report & Financial Statements 2017
143
Shareholder information
HAYS ONLINE
Our award-winning investor site gives
you fast direct access to a wide range
of Company information.
See haysplc.com/investors
Our investor site includes:
– Investment case
– Results centre
– Events calendar
– Corporate governance
– Investor day
– Regulatory news
– Alerts
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144
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