Hays Q2 2025 Earnings Report

Hays EPS Results

• Actual EPS: GBX 0.19
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Hays Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Hays Announcement Details

• Quarter: Q2 2025
• Date: 2/20/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, February 20, 2025
• Conference Call Time: 4:00AM ET

We are leaders in white-collar Temporary, Contracting and Permanent recruitment. Our scale and expertise covers some of the most skill-short employment areas, including Technology, Accounting & Finance, Engineering, Life Sciences and Construction. We are predominantly Private sector-focused, but also serve Public sector clients in some markets. Within our portfolio of services, we work on high service, multi-year outsourcing contracts with many of the largest organisations in the world, all the way through to one-off placements for SMEs. In practical terms, this means that in FY24 globally we helped 282,700 people find their next Permanent job or Contract assignment, and worked with over 40,000 clients to grow their own businesses by finding the skilled talent they need. For further information, watch our video and read more at: Hays (LON:HAS)plc.com/investors

Hays Q2 2025 Earnings Call Transcript

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the Interim Results Update for the six months ending thirty one December twenty twenty four Conference Call and Webcast. At this time, all participants will be in listen only mode. After the speakers' presentation, there will be a question and answer session. Please note that today's conference is being recorded.

[Operator]

I I would now like to turn the conference over to your speaker, Mr. Durk Hahn, CEO. Please go ahead.

[Dirk Hahn, CEO at Hays]

Good morning, and welcome, everyone. I'm Durk Hahn, Chief Executive, and I'm here with our CFO, James Hilton, to present our H125 interim results. Many of you will recall that our strategy includes five levers designed to build a structurally more profitable, resilient and growing business. Despite ongoing macroeconomic uncertainty, we have remained relentlessly focused on delivering them. Our presentation today will increase your confidence that we are structurally improving HACE despite challenging markets and remain relentlessly focused on driving operational rigor through business line prioritization, resource allocation and efficiency initiatives.

[Dirk Hahn, CEO at Hays]

Before we examine this in more detail later, let me briefly run through a high level overview of our first half. H125 was a half of significant operational and strategic transition against the backdrop of economic and political uncertainty, which weighed on client and candidate confidence, driving lower placement volumes and a material lengthening of time to hire. Group like for like net fees decreased by 13%. Temp and contracting down 9% was more resilient than perm down 19%. As guided at our Q2 results, pre exceptional operating profit decreased 56% year on year on a like for like basis to GBP 25,500,000.0, impacted by tough conditions in key markets, particularly towards the end of the half in Perth.

[Dirk Hahn, CEO at Hays]

And as James will examine more closely later, our cost base has declined significantly with GBP 55,000,000 per annum structurally savings now secured since the start of the last fiscal year. We are not content with current profitability, but we are pleased with how we have delivered strategic progress during the half. Firstly, business line prioritization and optimized resource allocation have resulted in a sector leading productivity increase over the last two quarters. Secondly, net fees with our enterprise clients are growing well. And thirdly, temp and contracting net fees are more resilient than perm and are growing strongly in several of our focus countries.

[Dirk Hahn, CEO at Hays]

Later in the presentation, I will provide case studies outlining how we have achieved this. But first, let me examine our divisional performance.

[Dirk Hahn, CEO at Hays]

I won't provide a detailed narrative of our financial data because many of these figures have been previously disclosed.

[Dirk Hahn, CEO at Hays]

In Germany, like for like net fees declined by 13%. We took decisive action to protect profitability and the division has been relatively resilient in a challenging market, contributing all of Group III exceptional operating profits in the first half. Contracting net fees were resilient, temp was more challenging because we have greater exposure to the automotive sector and activity levels remain subdued in perm as client decision making slowed during the half. However, year on year growth was strong in energy, defense and life science. Despite this, profit headwinds from economic conditions and fewer working hours more than offset cost efficiencies, initiatives and disciplined pricing.

[Dirk Hahn, CEO at Hays]

In The UK and Ireland, like for like net fees declined by 17% and the division reported a GBP 6,500,000.0 operating loss. We have taken significant restructuring actions to better position the business going forward. We have more actively managed our less productive consultant population to transition to a more focused core, secured structural savings in both front and back office functions, which James will cover in more detail later and have today announced an external appointment to lead the division who joins Hess in June. In ANZ, like for like net fees declined by 17% and the division reported a reduced operating profit of GBP 1,400,000.0. Our new management team has increased accountability and alignment to a performance based culture, so consultant fee productivity improved by 12% year on year to its highest level since FY 2022.

[Dirk Hahn, CEO at Hays]

We have moved up the value chain in temp and contracting and will intensify our initiatives to target high skilled roles in the most in demand shop categories with fast growing end markets. And finally, in Rest of World, like for like net fees declined by 9% and the division reported a reduced operating profit of GBP 3,100,000.0. U. S. Consultant fee productivity increased by 40% year on year, and the country has moved from monthly losses a year ago to consistent profitability.

[Dirk Hahn, CEO at Hays]

Our cost actions drove a return to profitability in China, but activity in EMEA slowed through the half, particularly with the impact of elections being felt across Northern Europe. However, temp and contracting net fee growth was positive in five of our eight focus countries, including notably strong performances in Italy and Poland. I will update later how we have delivered operational discipline and strategic progress in challenging markets. But before then, I will hand over to James to run through our financials in more detail.

[James Hilton, Group Finance Director & Director at Hays]

Thank you, Dirk, and good morning, everyone. Firstly, summarizing our financial performance. On a like for like basis, net fees decreased by 13% to $496,000,000 with pre exceptional operating profit down 56% to $25,500,000 H125 cash conversion was strong at two fifty seven percent and we finished the half with $29,000,000 cash up to paying out $32,600,000 in dividends, $21,000,000 relating to the full pension buy in and $15,900,000 of cash exceptionals. Moving on to the income statement. Turnover decreased by 3% with net fees down 13%.

[James Hilton, Group Finance Director & Director at Hays]

The difference between reported and life for life growth rates was primarily the strengthening of sterling versus the euro. Overall FX movements decreased net fees and operating profits by $13,300,000 and 1,600,000 respectively. The higher decline in net fees relative to turnover was due to the relative resilience of our Tempe and contracting businesses versus perm and also the impact of our enterprise MSP contracts, which delivered good levels of growth in the half. Pre exceptional earnings per share was 0.81p, a 66% decrease versus the prior year, driven by 58% lower reported operating profit and a higher net finance charge. Moving on to the performances of perm and temp.

[James Hilton, Group Finance Director & Director at Hays]

Perm net fees decreased by 19% and slowed through the second quarter in EMEA, UK and Ireland and Germany with markets stable, but subdued elsewhere. Volumes declined by 22% as job inflow decreased and hiring processes extended. As with prior years, this was partially offset by growth in our average perm fee, up 3%, albeit with wage inflation slowing in most markets. Tempur contracts in net fees decreased by 9% year on year with momentum sequentially stable through the half year. Importantly, we delivered year on year net fee growth in five of our eight focus countries.

[James Hilton, Group Finance Director & Director at Hays]

Temp volumes decreased by 6% year on year with a further 2% fee reduction from lower average hours worked per contractor in Germany. We also saw a fee decrease of 1% from margin and mix, resulting from a 40 basis point year on year decline in our underlying temp margin to 14.8% due to stronger growth in our enterprise clients. This slide sets out the ongoing actions we have undertaken through H1 to manage costs, protect profitability and better structure the business for the long term. Starting with H1 twenty four profit of $60,100,000 we deduct the negative exchange impact of $1,600,000 and a 13% decrease in our like for like fees of $74,000,000 explained on the previous slide. Like for like administrative expenses decreased by 8% or $41,000,000 driven by the following: a 40,700,000 reduction in payroll costs, resulting from the actions taken to reduce consultant and back office headcounts in the year, which were reduced by 1580% respectively an $8,900,000 decrease in commission and bonus payments driven by the decline in fees and overall financial performance and partially offsetting this, our average 3% group pay rise in July 24 increased payroll costs by $8,100,000 Our overhead cost decreased by $500,000 driven by savings in advertising, motor travel, entertainment and other overheads, broadly offset by property indexation increases and higher insurance costs.

[James Hilton, Group Finance Director & Director at Hays]

On this slide, we set out the actions we've taken to structurally improve our cost base. Our cost initiatives fell into three categories. We announced last August, our program to deliver circa $30,000,000 per annum in structural back office cost savings by by the end of FY twenty twenty seven. This is progressing well, and we exited the half with circa $30,000,000 per annum saving run rate, having completed our finance transformation in the Americas region, our global technology outsource project and restructured our global marketing function. Secondly, we generated new and further circa $12,000,000 per annum structural cost savings in the half for restructuring operations.

[James Hilton, Group Finance Director & Director at Hays]

In The UK and I, we closed our statement of work business, restructured management and back office operations and closed five offices. In Germany, we restructured our restatement of work business, exiting three locations and refocusing the business portfolio. Together with the back office initiatives I just mentioned, these projects drove our nonconsolid headcount reduction of 18% year on year. These combined circa $25,000,000 per annum structural cost savings, when added to the circa $30,000,000 per annum structural cost savings we reported in FY 2024, have now secured circa $55,000,000 per annum structural savings since the start of last fiscal year. And finally, we have continued to surgically align consultant capacity to demand in each of our business lines.

[James Hilton, Group Finance Director & Director at Hays]

As a result, group consultant headcount declined by 15% year on year, but this also included headcount investment in some markets, including Spain, India, Portugal and Austria. Our year on year productivity growth of 4% in H1 is indicative of our careful allocation of our consultant resource. As a result, on a periodic and constant currency basis, our cost base declined from around $81,000,000 per period in Q4 FY twenty twenty four to circa $77,000,000 per period in Q2 FY 'twenty five. During the half, we incurred an exceptional cost of $9,900,000 which comprised two parts. Firstly, a $4,000,000 charge relating to the restructuring of our operations in The UK and I and Germany divisions as covered on the previous slide.

[James Hilton, Group Finance Director & Director at Hays]

These restructuring has led to the redundancy of a number of employees, including senior management and back office positions. The group also incurred $5,900,000 exceptional charge in relation to the technology transformation and finance transformation programs, comprising both staff costs and third party costs. We expect to incur further exceptional costs in H225. Moving on to interest and tax. Our net finance charge for the half increased to $6,500,000 driven by a $2,100,000 increase in net bank interest payable due to higher average drawings on the group's revolving credit facility.

[James Hilton, Group Finance Director & Director at Hays]

As a result, we now expect a finance charge of circa $13,000,000 in FY 'twenty five. Our pre exceptional effective tax rate increased by 10 basis points to 32.1%. On a post exceptional basis, the effective tax rate was 67% in which a $2,100,000 tax credit in respect to the exceptional items was offset by a $2,100,000 tax charge arising from the derecognition

[James Hilton, Group Finance Director & Director at Hays]

of

[James Hilton, Group Finance Director & Director at Hays]

a deferred tax asset following the defined pension buy in. December, we completed a circa $370,000,000 full and final buy in of our defined benefit pension scheme, which ensures the remaining 68% of benefits payable from the scheme and ensures that financial and demographic risks relating to the scheme's liability are now 100% insured. The decision to finalize the buy in follows a material reduction in the scheme's buyout deficit valuation from January in June 2021 to $39,000,000 in June 2024, in line with the agreed long term strategy with the scheme trustees to achieve a full buyout of the scheme. Company pension contributions in the half were $21,000,000 which comprised $8,400,000 in respect of normal pension deficit contributions and an additional $12,600,000 relating to the full pension buy in. We anticipate a further circa $6,000,000 in expenses and true up costs over the next twelve to eighteen months through to final scheme buyout.

[James Hilton, Group Finance Director & Director at Hays]

Importantly, there will be no further deficit contributions following the scheme's full buy in, which will provide a material cash flow benefit circa $19,000,000 per annum from FY 2026. We delivered a strong cash performance in the half with cash from operations of $65,500,000 This represented a conversion of pre exceptional operating profit into cash from operations of 257%. We had a working capital inflow of $31,000,000 dollars driven by the reduction in temp fees and placements. We paid tax of $6,600,000 and net interest of $3,400,000 The cash impact of exceptional restructuring costs was $15,900,000 dollars Overall, this led to free cash flow of $39,600,000 And on the right hand side, we detail how we used the cash generated. The main items were the payment of $32,600,000 of core dividends, CapEx of $9,900,000 and pension deficit payments of $21,000,000 leading to a $27,800,000 decrease in net cash.

[James Hilton, Group Finance Director & Director at Hays]

And we expect full year capital expenditure will be circa $25,000,000 in FY 2025. Our DSOs increased by one day year on year in H1, driven by the growth in enterprise fees. Our aged debt profile and bad debt write offs are both at historically low levels. During the half, we refinanced a new five year revolving credit facility at an increased level of $240,000,000 with an option to extend by a further two years at the same pricing as our previous deal. And on this slide, we compare the balance sheet of December 2024 with June 2024.

[James Hilton, Group Finance Director & Director at Hays]

The main movements were our IAS 19 defined benefit surplus on an accounting basis decreased by $19,400,000 to nil as we completed the full buy in of the scheme. Our cash position reduced by 27,800,000 as explained on the previous slide. Our priorities for free cash flow remain unchanged, namely to fund the group's investment and development, maintain a strong balance sheet, deliver a sustainable progressive and appropriate core dividend and to return surplus cash to shareholders. At this stage, the board has proposed an unchanged interim dividend of 0.95p per share. The interim dividend is covered 0.9 times by pre exceptional EPS, which is below our two to three times target range.

[James Hilton, Group Finance Director & Director at Hays]

In summary, fees declined by 13% with challenging markets continuing to persist. Volumes declined in both temp and perm, although we saw increases in average perm pricing as we targeted the most skill short and higher value areas of the market. Operating profit declined by 56% due to tough market conditions. However, we have delivered circa $40,000,000 per annum cost savings, of which $25,000,000 are structural, meaning that we have now delivered $55,000,000 of structural cost savings since the start of FY 'twenty four and continue to make good progress on our back office efficiency and operational restructuring programs. We continue to maintain a strong balance sheet underpinned by good levels of cash conversion and a new five year RCF facility supported by the full pension buy in, which will drive a material long term free cash flow benefit.

[James Hilton, Group Finance Director & Director at Hays]

Finally, we maintained our interim dividend at 0.95p. Despite the difficult trading environment, I'm confident that our actions have better positioned Hayes to benefit from the market recovery when it comes. Turning to current trading, our Tempe and Contracting New Year return to work has been in line with the prior year in The UK and Ireland and Australia and New Zealand. In Germany, temp and contracting volumes are rebuilding modestly behind the prior year, driven primarily by automotive related headwinds in Temp. Germany, temp and contracting average hours worked remain sequentially stable.

[James Hilton, Group Finance Director & Director at Hays]

And as expected due to the easier comparable, the year on year headwind is likely to be modest in Q3. Perm job flow and activity are in line with pre Christmas levels and remain tough in EMEA, particularly in France, The UK and Ireland and Germany. We continue to see slower client and candidate decision making, leading to longer times higher. As previously reported, we expect group consultant headcount will remain broadly stable in Q3 with reductions to capacity in more difficult markets, but also selected investments where we see opportunities. We will also continue to deliver further structural cost efficiencies, which will further reduce our cost base per period in H2.

[James Hilton, Group Finance Director & Director at Hays]

I'd now like to hand back to Dirk to cover strategy.

[Dirk Hahn, CEO at Hays]

Thank you, James. I wanted to take a few moments to update you on our initiatives to build a structurally more profitable, resilient and growing business underpinned by our culture and talented colleagues worldwide and our golden rule to maintain a disciplined approach to consultant headcount investment. Through our five levers, we will achieve this by increasing our exposure to: one, the most in demand future top categories two, growing industries and end markets three, higher skilled and higher paid roles four, non perm recruitment and five, large enterprise clients. Our strategy is not one size fits all and we will tailor each region and country to its market and customer needs. Despite challenging markets, we have been highly disciplined and made good progress during the half.

[Dirk Hahn, CEO at Hays]

Consultant fee productivity increased by 4% year on year. Net fee growth in enterprise accelerated to 12% in Q2. And as James just outlined, our structural cost saving initiatives are progressing well. Over the next few slides, I will provide greater insight into how we are structurally improving HACE despite challenging markets and how we will benefit materially when our end markets recover. Since launching the new strategy, we have instigated a cultural shift in our mindset to focus as much on delivering profit growth as well as net fee growth.

[Dirk Hahn, CEO at Hays]

We intend to maintain operational rigor, retain structural cost savings and deliver a healthy drop through to operating profit during an upturn. Guided by our golden rule, we will maintain a disciplined approach to consultant headcount investment. We have applied a more forensic analysis of our business lines to focus on those with most attractive productivity and conversion rates and have removed split perm temp desks and 180 degree consultants where appropriate to optimize our delivery models. To provide you with further confidence that cultural change has been embedded, I would like to highlight several people changes over the last eighteen months. Our executive leadership team now includes dedicated Chief Technology Officer and Chief People Officer leadership positions.

[Dirk Hahn, CEO at Hays]

Plus, I'm pleased to announce today an external appointment to lead The UK and Ireland business who joins HACE in June. Disappointments add external experience and fresh thinking, which complements the deep operational knowledge provided by me, James and the divisional CEOs. Despite challenging markets, we are delivering on our strategy and we are pleased with progress during the quarter. Firstly, business line prioritization and optimized resource allocation have resulted in a sector leading productivity increase over the last two quarters secondly, our enterprise net fees are growing rapidly and finally, our temp and contracting net fees are more resilient than perm. Let's explore these three themes in more detail.

[Dirk Hahn, CEO at Hays]

Consultant net fee productivity increased by 54% respectively in Q1 and Q2 and has been sector leading over this period. And if we adjust for our seasonal quarter second quarter, productivity has increased now for five consecutive quarters. Let me provide you with a few examples why. In The U. S, productivity rose 40% year on year, and the business has moved from monthly losses a year ago back to profitability.

[Dirk Hahn, CEO at Hays]

After an extensive review, our new management team closed business units and offices where we lacked critical mass and now has a highly focused core. With the correct operational rigor now in place, we intend to size growth opportunities and scale up, while maintaining our disciplined approach to headcount investment and our golden rule. In ANZ, productivity increased by 12% year on year to its highest level since FY 2022. Our new management team has removed split perm temp desks, more clearly differentiated between one hundred and eighty and three sixty degree consultants and moved up the value chain in temp and contracting. Going forward, we will intensify our initiatives to target high skilled roles in the most in demand job categories with fast growing end markets.

[Dirk Hahn, CEO at Hays]

In The UK and Ireland, we have more actively managed our consultants to transition to a more focused core and secured structural savings in both front and back office functions. We transferred more than 50 healthcare and social care consultants to current structure and property and senior finance, reallocating them from roles with low productivity and conversion rates to specialisms where they can generate higher productivity and the mid teens percentage conversion rate within twelve months. Technology and enterprise were highlights during the half, with productivity up double digits, driven mainly by temp and contracting. I reminded you earlier that our five levers include a commitment to increase our exposure to large enterprise clients. When we talk about enterprise clients, we mean the provision of recruitment and other HR services to blue chip, government and large organization.

[Dirk Hahn, CEO at Hays]

These tend to be delivered under more complex and structured agreements such MSP. At the twenty twenty two Capital Markets Day, we told you the global enterprise client market was huge. We explained how our platform would enable us to take significant market share and structurally grow. Enterprise delivered a strong performance in the half with 9% net fee growth, including an acceleration to 12% in the second quarter, driven by in contract growth with existing clients and several new wins. In our view, net fees are likely to be approximately GBP $225,000,000 to GBP $250,000,000 this year, which in contrast to broader labor markets is stable versus FY 2023 peak and validates our strategy to target these clients.

[Dirk Hahn, CEO at Hays]

Our positive momentum was supported by three factors. Firstly, we grew within existing clients, driven by higher fill rates and geographic expansion. 24 enterprise clients appointed HACE to provide services in additional countries in the first half. Secondly, we secured new clients, including first generation MSP outsourcing opportunities and rewarding wins from competitors. And thirdly, underpinned by our service quality, we retained key contracts, including a three year renewal with AstraZeneca, which will extend our relationship to twenty five continuous years.

[Dirk Hahn, CEO at Hays]

Enterprise currently has a substantial bid pipeline, and we look forward to updating you further during 2025. Our five levers include the intention to increase the proportion of non perm fees in our business. Tempe and Contracting was resilient and sequentially stable through the half and its contribution to group net fees increased to 62% from 59% in H1 twenty twenty four. On a year on year basis, the decline in net fees moderated to 9% in H1. Growth was positive in five of our eight focus countries in the first half, including notably strong performances in USA, Spain, Poland and Italy, and profitability increased.

[Dirk Hahn, CEO at Hays]

For example, Italy grew by 42% in the half as our business line prioritization and resource allocation initiatives generated attractive returns. Poland grew by 27% due to strong handling of large contracting accounts and an agile MSP offering. And The USA grew by 7% as it focused on a narrow range of business lines and won new enterprise clients. In our view, delivering our strategy will eventually result in a structurally more profitable, resilient and growing business. Here are a few examples how.

[Dirk Hahn, CEO at Hays]

Firstly, consultant fee productivity. Two of our five levers increasing exposure to higher skilled, higher paid roles and the most in demand future job categories have positive implications for consultant fee productivity. In addition, we provided you with examples earlier how we have reallocated consultants from low to high potential productivity areas and that under our golden rule. We will maintain a disciplined approach to headcount investment. These factors would increase the net fees with a potentially high drop through to operating profit.

[Dirk Hahn, CEO at Hays]

Secondly, operational efficiency. Last year, operational and back office restructuring undertaken across the business better aligned us to market opportunities, improved efficiencies and captured a million structural cost saving. As James mentioned earlier, since then, we have added a further million, bringing total structural savings secured since the start of the last fiscal year to GBP 55,000,000. This will also build a more scalable back office function, which will drive stronger profit leverage in the recovery. Finally, cyclical recovery.

[Dirk Hahn, CEO at Hays]

It is taking longer on average to secure a placement, although in terms of input activity, our teams are as busy as ever. This creates a material drag on the average number of placements per consultant and our profitability. We don't control the cycle, but eventually client and candidate confidence will improve and the economy will recover. When it does, we will deliver a healthy drop through to operating profit. So to close, markets remain challenging in the first half of twenty twenty five, and the board and I are very grateful for the deep commitment shown by all our colleagues through this period.

[Dirk Hahn, CEO at Hays]

We have the right strategy in place and have already started to make progress. We have the right team, which blends HACE experience with new external perspectives. And we have structurally improved HACE during the half. While it is difficult to predict timing, we know that markets will eventually recover. When they do, we will benefit materially and will be firmly focused on delivering a high drop through of net fee growth to profits.

[Dirk Hahn, CEO at Hays]

I will now hand you back to the administrator, and we are happy to take your questions.

[Operator]

Thank you. We are now going to proceed with our first question. The questions come from the line of Andy Grobler from BNP Paribas Exam. Please ask your question.

[Andrew Grobler, Financial Analyst at Exane BNP Paribas]

Hi, good morning, everybody. Three questions from me, if I may. The first one, just around the savings. There's been quite a few in recent quarters. Could you just talk through the phasing of when those are going to land?

[Andrew Grobler, Financial Analyst at Exane BNP Paribas]

If you have any more plans to increase that number from $55,000,000 and also any exceptionals that may land either in the second half of fiscal 'twenty five or into next year? So it's a three part question. Secondly, just on the dividend, it might be a bit premature to ask this, but it wasn't covered in for the interim. What are your thoughts for the full year looking at where consensus currently sits? And then thirdly, just on AI, sorry to bring that up, but Manpower put in their 10 ks an additional risk to the business that AI would start to impact the job market and there may be less demand for their activities.

[Andrew Grobler, Financial Analyst at Exane BNP Paribas]

Is that a trend that you are beginning to see impact some of your end markets? Thanks very much.

[Dirk Hahn, CEO at Hays]

So I would say the first two questions are for James and I'll take then the third one, right? Yes.

[James Hilton, Group Finance Director & Director at Hays]

Shall I cover the first two then Dirk? And the on the savings, last year we talked about $30,000,000 of structural cost savings, which are obviously in the cost run rate through this half. In terms of the new savings that we've delivered through the half in two buckets, first of all, we've made about $13,000,000 of annualized savings through the half against our back office objective for FY 2027. And in terms of the timing of that, it's probably about $4,000,000 or so of cost savings in the half that are already we booked in the half and then clearly we get the run rate of that through into the second half. And then we had about $12,000,000 of savings through the half in other operational areas as we set out there.

[James Hilton, Group Finance Director & Director at Hays]

And that was more backend loaded and probably had about $2,000,000 of savings in the P and L in this half. And then obviously going into the next half, we'd get the full sort of run rate saving on those. So that hopefully gives you a bit of a feel that it's about 6,000,000 of those new structural savings in the half year in terms of the P and L. I guess the second part of the question is plans for H2. Yes, we do have some plans for H2 both within some of the back office areas, which are ongoing and also some more operational stuff as well.

[James Hilton, Group Finance Director & Director at Hays]

I don't want to get too drawn into that and that will be something for us to talk about as we progress through the half and also the final year results in August. But we do have some plans for H2 And with alongside that, I would expect further exceptional costs in the second half as well. You can see that in the first half, we had $9,900,000 of exceptionals, which related specifically to those four areas of work that we've done in the half. I haven't got a clear view yet on exactly what that will be, but there will be some exceptions in the second half. Second question was on the dividend and as you point out, Andy, that the dividend, the interim dividend we held in line with prior year, but that isn't covered by EPS.

[James Hilton, Group Finance Director & Director at Hays]

I think we're at 0.9 times cover, which is outside of our two to three times target cover now. We decided to hold the interim dividend. It's important to us and to our shareholders and also we have a balance sheet with $29,000,000 of cash. So we felt it was the right thing to do to maintain that. I think your question regarding the thoughts for the full year dividend is clearly a decision for the Board in August.

[James Hilton, Group Finance Director & Director at Hays]

And there's a long time between now and then and we'll have to see, first of all, how does current trading map out in the second half of the year? What's our financial position? And importantly, what's our outlook? And I can't really speculate on that. So I think it will be a decision for August.

[James Hilton, Group Finance Director & Director at Hays]

But I guess as a pointer, our full year dividend is about GBP 47,000,000 in cash. And now that we've secured the pension buy in and that's important because that saves us about GBP 90,000,000 a year in perpetuity in the long term. That means that we need about GBP 80,000,000 to GBP 85,000,000 of operating profit to cover that from free cash flow. So I think that's a helpful bit of mathematics just to sort of put that in perspective. I'll hand over to Dirk for the AI question.

[Dirk Hahn, CEO at Hays]

Yes. Andy, for AI, I think AI is a topic for all industries and for all clients, that's true. And for sure, we are talking a lot to our clients and some are in early stage and other more advanced. And we are screening the market for sure. And you have platforms like LinkedIn, for instance, where they introduce new AI tools and so on.

[Dirk Hahn, CEO at Hays]

So that's ongoing. So I would say for me, it's still I keep going saying with for me, it's a positive trend because on one hand, there will we create new jobs on one hand or there will be created new jobs on one hand and further some more at risk, put it this way. And most companies are using this really for productivity efficiency programs and to increase productivity. So I strongly believe in this. And we have several use cases also internally how we can optimize our productivity with generative AI.

[Dirk Hahn, CEO at Hays]

We launched, for instance, last summer, end to end digital platform called TribeWorks, and we learned a lot, trust you already during the development phase. It's not just since it's up and running, we learn a lot of what how clients reacting with a totally digital process or not. I think that's really important to stay ahead of the development and have an overview. So I keep going and saying that this is a positive trend. And yes, I think we are on top of it.

[Andrew Grobler, Financial Analyst at Exane BNP Paribas]

Okay. And just on that last one, as you use technology to become more productive, so your people can do more with less or the same capabilities. Do you think your clients will do the same thing and therefore the demand for human capital may decline through that period with implications for the agencies?

[Dirk Hahn, CEO at Hays]

I don't think so. It depends. If you see that there are always tools who may be helping the client for to be more efficient and so on. But it always depends, for instance, when you see the LinkedIn tool, for instance, and how to make to handle more efficient candidates. So I think for our target group in perm, this is the SME world.

[Dirk Hahn, CEO at Hays]

So that the challenge for them is maybe not how to handle so many incoming CVs because you always need an agency or somebody who brings your candidate in when you have no employer branding. This is maybe true for the big companies. They have a volume problem or challenge. And we've been working with many, many of our clients in the RPO world to help them. And we also have some tools in place to help them to make their process more efficient.

[Dirk Hahn, CEO at Hays]

So I think I don't see this really at all, but you never know. So for sure, we are analyzing the market and it's always you never know what happens. But so far, I'm really positive that this is the market is it's been changing always, and we always have to adapt and we control the controllables, I think. And so far, I don't see this any.

[Andrew Grobler, Financial Analyst at Exane BNP Paribas]

Okay, brilliant. Thank you very much.

[Operator]

We are now going to proceed with our next question. The next question is coming from the line of Rory McKenzie from UBS. Please ask your question.

[Rory Mckenzie, Executive Director at UBS Group]

Good morning, Rory here. Three questions, please. Firstly, on the German current trading, can you just say how much auto Tempest has fallen now? And then outside of that, can you give a bit more detail on the contractor volume so far this year compared to last year? And secondly, within Rest of the World, Temfin contractor plus 3% year over year is good and must represent market share gains and expansion.

[Rory Mckenzie, Executive Director at UBS Group]

Can you give a bit more detail on where you're driving that? And also just talk about where your actual rest of the world temp contractor headcount is compared to last year? I know there's been a lot of kind of reshaping of that division. And then finally, just on some of the local specialism closures, you've announced the closure of some statement of work businesses in The UK. Can you explain the thinking there and maybe any comments on just how far through that kind of portfolio review you are now Dirk since you joined?

[Rory Mckenzie, Executive Director at UBS Group]

Thank you.

[James Hilton, Group Finance Director & Director at Hays]

Rory, perhaps if I just pick up the first question, which was relating to current trading and some of the trends we're seeing in Germany Tempur contracts and then I'll hand over to Dirk for some of the more strategic stuff around the term contracting growth around rest of the world and the impact on contractors, etcetera. So we've clearly put some guidance in current trading on our return to work in Germany, where we're about two to three percentage points behind in terms of volume recovery post Christmas than what we'd normally expect to see. If I look at how that breaks down, our contracting business is more resilient and it's down about 1% versus prior year. Our temp business though is weaker and we're down sort of 5% to 6% behind where we would normally expect to be. Within that, the specific weakness is in autos and that is a trend that clearly we've been highlighting now for some time and there's been a drag on that business.

[James Hilton, Group Finance Director & Director at Hays]

Actually, if you look at the volume of workers that we have in the autos, it's about 1,500, 14 hundred, 15 hundred temps out of a population of about 3,600 temps and out of a total external headcount population of about just over 14,000. So that gives you a feel for our overall exposure into the automotive sector. I would highlight and say that we have been relatively resilient within that marketplace. And I think we've taken quite a bit of market share as other players have kind of come out of that market. So whilst it's weaker than the rest of the business, I do feel that we've managed to hold more than hold our own within that weaker market.

[James Hilton, Group Finance Director & Director at Hays]

Hopefully, that gives you a bit of a feel for kind of what we're seeing on the ground, Rory, in Germany. I'll hand over to Dirk though to talk about the more strategic aims and objectives around Tempe and contracting in rest of the world and our opportunities there.

[Dirk Hahn, CEO at Hays]

Okay. Thank you, James. Hi, Rory. The contracting is an important part of our five levers because we are convinced that this leads to a more resilient business and you see this also in the figures even if we are going down year on year, then you see this that contracting is much more stable than perm. And I think that's really important.

[Dirk Hahn, CEO at Hays]

But we have some several countries around the world who used to be mainly perm focused, several also in Europe. And we established in some of these countries our contracting business, especially in the focus countries. And we see huge progress there, for instance, in Spain and Italy and in Poland. And I think we are growing really in the right way even in a tricky market. So this is a huge success and a proof of concept of our strategy.

[Dirk Hahn, CEO at Hays]

And then coming to The U. S, I think The U. S, it's been a contracting country for us. Our U. S.

[Dirk Hahn, CEO at Hays]

Business is a contracting country for us. And so they were loss making last year, and we turned it with higher focus and improving also their contracting business in combination with enterprise clients. And we see huge growth rates there, and so we are on the right track. So I'm for me, this is just a proof of concept that we have the right strategy overall. And coming on to the statement of work thing, we as I said, we have some countries where we are a bit further away from contracting or had more perm history.

[Dirk Hahn, CEO at Hays]

And for instance, in Germany, we keep going with the statement of work business because that's the extension. We have some service contracts with the Liberals, but statement of work in our definition is a huge market. For instance, in Germany, it's 50% of the engineering market. But this is really deliberate onshore development having whole teams and technical capacities. And I think our German business was a big dominated contracting business.

[Dirk Hahn, CEO at Hays]

It's the closest within Hays, and therefore, we keep going. But this is just trust maybe is not the right word, but this is a pilot for us and to see how it is going. But this is just an add on, honestly. We are focusing on our core business that's contracting temp and perm, MSP and RPO. And the statement of work, we keep going with this in Germany because we think especially in the auto industry in these tough times, it helps us.

[Dirk Hahn, CEO at Hays]

But outside of Germany, we realized it is just too far away from our core business and our understanding and our culture. And this is the reason why we closed, for instance, The UK business. So I think, as I said, we are focusing on our core businesses.

[Rory Mckenzie, Executive Director at UBS Group]

Thanks, Bert. That's helpful.

[Operator]

We are now going to proceed with our next question. And the question comes from the line of Ryan Flite from Jefferies. Please ask your question.

[Ryan Flight, Equity Research Analyst at Jefferies]

Yes, good morning, all. It's Ryan Flite from Jefferies here and just free from me, if I may, building on previous questions. So number one, and I know you've mentioned autos, but any other particular industry trends and particularly incremental strength or weakness that you could call out would be really useful. Number two, and again, I know it's difficult, but if you could provide any further color on market share dynamics and kind of competitive landscape in your key markets? And then final question, number three, given the structural cost savings, I wonder if you could provide any further color on how we think about the capacity of the group when we're thinking about the eventual recovery, that would be really useful.

[Dirk Hahn, CEO at Hays]

Okay. I'll take the first one. I think it's hard to say overall industries across which are more in demand or not. But when we come to our core countries in Germany, for instance, we see energy, for instance, life science and defense are important industries. And life science is maybe one of the only industries I would highlight globally, which are normally always in demand.

[Dirk Hahn, CEO at Hays]

So I would say this is definitely a trend. And in The U. K, I think we I think it is the traditional ones when you see it's in C and P and finance. It depends more or less in perm. It's always tricky in all of the industries, but we see something some positive signs in The UK also in contracting, for instance, or in the senior perm finance.

[Dirk Hahn, CEO at Hays]

I think there are always pockets where are more interesting, but it is hard to say globally this is an industry which is dominant. And in terms of market share, from my perspective in Germany, even in this tough market or especially in this tough market, we are taking market share. When you think about just the temp population in Germany, at its peak before COVID, I would say it was 1,000,000 temp workers out. And at the moment, these are just 600,000 temp workers out. And we reduced our headcount from whatever 4,210 workers to 3,600 if you compare just the size.

[Dirk Hahn, CEO at Hays]

So I'm we are taking definitely market share. And in contracting, it's the same. So I think mainly also in this downturn, we are taking market share. And the same in ANZ with our focusing more on productivity and going to the more in demand role types and so on. And I think we are also taking market share there.

[Dirk Hahn, CEO at Hays]

And in The U. K, it's tricky to say, but if you compare this with our core competitors, I would say there are also some statistics where we say we are taking market share also in The U. K. That's my view. But James, maybe you.

[Dirk Hahn, CEO at Hays]

Yes, I think that's right, Dirk. And I think it's importantly in

[James Hilton, Group Finance Director & Director at Hays]

a number of our focus countries where specifically in the Tempe and Contract and Astyrk set out in the presentation, I think some of the growth rates there are clearly we think that's a long term structural growth market, but I'd also think we're increasing our share in those markets as well. I think, Ryan, just going back to your question on the cost savings and capacity, clearly, we set out what we've done in terms of the structural areas. In terms of the capacity question, I think is what Dirk and I have been heavily focused on over the last twelve, eighteen months is really getting the right people in the right desks focused on the right parts of the market. And I think we started to see the impact of that coming through in the consultant productivity growth over the last twelve months. And I think that's really, really important, good progress there.

[James Hilton, Group Finance Director & Director at Hays]

In terms of excess capacity, we've been two years into a hard market and we've clearly brought our consultant headcount down by over 20% over the last eighteen months. So we've continued to work at this hard as you can imagine. So in terms of surplus capacity, there is some and there is always new joiners coming into the business. But I would say that we've worked hard on that to make sure that we're not carrying too much capacity because clearly we've got to work for the markets that we've got today. What we do have though, as Dirk mentioned in his presentation, is all of our consultants are working in harder markets where the funnel takes longer to complete from outbound activity and the BD calls with clients and client visits through to job registrations and interviews and then converting those into placements is all taking longer.

[James Hilton, Group Finance Director & Director at Hays]

So there is a latent capacity within the business, which is largely driven by the cycle and the fact that it's a harder market than normal and there's a huge amount of work going on to make the placements we do. So it's always there's always a fine balance between taking capacity out and keeping capacity in because we need the consultants in to make us the fees. So I think we've done a pretty decent job at that so far and we'll continue to manage it market by market and business line by business line.

[Ryan Flight, Equity Research Analyst at Jefferies]

That's great. Thank you.

[Operator]

We are now going to take our next question. The question has come from the line of Afonso Osorio from Barclays. Please ask your question.

[Afonso Osório, Vice President at Barclays]

Hello. Yes. Thank you for the presentation, guys. There's a lot of detail, so yes, appreciate that. A few last ones for me, if I can.

[Afonso Osório, Vice President at Barclays]

One on the cost run rate. I think, James, I think we spoke about this before, but and you're still mentioning the $77,000,000 run rate. But given the incremental savings, you continue to deliver in fines. I was just wondering if you can see any possibility to improve this run rate further in the second half or maybe into next year? Just the first one.

[Afonso Osório, Vice President at Barclays]

And then secondly, on the free cash flow, I see $31,000,000 working capital inflow here. So can you expand a little bit on what drove that through the first half? And if we expect a similar pattern in the second half perhaps? And on the same topic, cash, on the pension scheme buy in, can you remind us what is the impact this is going to have on your full year 2025 from a cash perspective? But also if there is any impact on the net interest line of the P and L.

[Afonso Osório, Vice President at Barclays]

And now that I have chance like one last one for you, Dorek. Thank you for the update on the enterprise lines. I think that's very interesting. 20% of the group now, given how resilient this business still is, do you think you can contribute a bit more down the line like long term for your business, especially as the legacy business continue to face some pressure in the short term? And also I appreciate this is a global business, but what would be the main country exposures within this particular business here?

[Afonso Osório, Vice President at Barclays]

Thank you.

[James Hilton, Group Finance Director & Director at Hays]

Okay. I'll start off, Alfonso, on those. The first one was around cost run rate. And as you mentioned, we look at this relatively simplistically and look at it on a periodic basis and how much is the cost base come down over time as as we work through programs and manage the costs. And in Q2, we're around about $77,000,000 per period on a constant currency basis.

[James Hilton, Group Finance Director & Director at Hays]

I do expect that to come down a little bit further in the second half year. As we've given clear guidance on consultant headcount, which we expect to be broadly stable, it may be up a bit in one or two places and down a bit in one or two places as well, but broadly stable. So the cost reductions that we do expect in H2 will be largely in the nonconsultant areas, but those are in flight now and we'll talk about them as and when we work through the second half. So we'll come back to them I'm sure that the next set of interim the next set of results or the prelims. Free cash flow, we had a good working capital performance in H1 where we saw largely because of the temp and contracts in business is a little bit down on the prior year.

[James Hilton, Group Finance Director & Director at Hays]

We saw a cash inflow in the half. Remember, we always have a lot of cash flow going through the business at any one point in time. We collect about £130,000,000 worth of cash every week. So, there's always going to be a little bit of volatility just depending on when month end is and also impacts of things like VAT payments, etcetera. So, I'm pretty pleased with how we've got on.

[James Hilton, Group Finance Director & Director at Hays]

From a working capital perspective, our aged debt book is in as good a shape as it has been in my time. And also we've had a record low levels of insolvencies and debt write offs in the half. So, I think we've done a pretty good job on that. We'll continue to manage it carefully in the second half. In terms of what I expect to see in the second half and going back to an earlier question around free cash flow, clearly at the levels of profitability that we're at right now, once we pay our tax, we've clearly given some CapEx guidance and we've got a $15,000,000 dividend to pay in April.

[James Hilton, Group Finance Director & Director at Hays]

There won't be a huge movement there, I don't think in the cash positions through the second half year, but clearly there's always a little bit of volatility around where it exactly lands in June. Going back to the question on pension scheme buy in and impact that, so we've been putting about $18,000,000 or just over next year. But clearly the pension buy in will make no further contributions into that from now on. We have put in there clearly that there'll be some further admin costs, expenses and potential true up costs over the next twelve months as we work through to buyout. That may or maybe hopefully sort of around that sort of $4,000,000 5 million dollars 6 million dollars number, but we'll have to pay for that as we go through to the full buy in, but that's buyout, that's just admin expenses.

[James Hilton, Group Finance Director & Director at Hays]

In terms of an interest line perspective, we have an interest charge in there, which relates to the pension deficit. Clearly, that will drop away from next financial year as that saves us about 1,500,000.0 on the interest line on an annual basis. And I'll hand it back over to Dirk for the last question.

[Dirk Hahn, CEO at Hays]

Alfonso, I'm not sure if I got the question right. It was a bit broken, but let me talk about the enterprise world, why it is so important for us and then you can come back to me if I haven't answered your question. So enterprise clients is an important part of our five lever strategy. And honestly, when you see in Germany the success story of the German business is contracting in combination with enterprise clients. We are doing 70% of our net fees with three fifty clients in Germany.

[Dirk Hahn, CEO at Hays]

And this is highly profitable as you're aware. And so this is the reason why we roll this out globally also. I strongly believe in this. And when we talk about enterprise clients, we are talking not just about the MSP programs, for instance, or RPO programs. It is more, we call it bottom up sales.

[Dirk Hahn, CEO at Hays]

So you address the bigger clients, say, clients with a certain number of employees or with a certain number of external contractors or temp headcount, and then you structure these clients and therefore, you need a certain management structure and knowledge how to handle these clients and really develop these clients. And then we have the strategic approach with MSP managed service providing. Then you have the strategic salespeople coming in and then really try to bundle the external workforce of these clients with our MSP offering. And altogether, this is our strategy in the enterprisecontracting world. And so we are convinced this is the right one.

[Dirk Hahn, CEO at Hays]

And from our perspective, it is highly profitable. Have I answered your question? I'm not sure.

[Afonso Osório, Vice President at Barclays]

No, you have it. Thank you very much both for that. Appreciate it.

[Operator]

We are now going to proceed with our next question. The questions come from the line of Zack Alkaiti from Morgan Stanley. Please ask your question. Your line is open.

[Zachariah Al-Qaryooti, Analyst at Morgan Stanley]

Good morning. Just one more in the context of these structural cost savings. Could you please just elaborate on the impact on the operating leverage and drop through once the recovery starts to materialize? So should we expect this to be much stronger versus previous cyclical recoveries?

[James Hilton, Group Finance Director & Director at Hays]

Thanks, Zack. Yes, I mean, it's talking about the recovery, I'm getting almost excited now. But I mean, clearly these are the reason we call them structural cost savings are we see these as savings that we should secure for the longer term as opposed to the more cyclical type savings, which really are for us the management of our consultant capacity to meet current demand, and also the short term management of overhead costs. So these are things like, as I say, restructurings of operations in order to face the markets the way we want to, or there are things in the back office where we make transformations and those are longer term savings that we would hope to keep. So yes, absolutely, as and when the recovery comes, we would expect that element of cost to remain fairly fixed as opposed to scaling back up and therefore should secure a better lock through of fee increase into profit increase over the long term.

[James Hilton, Group Finance Director & Director at Hays]

So absolutely, and I see that is a key part of making the business structurally more profitable over the long term and that's why it's difficult work. These are longer term projects. They take longer to put into place and I think we've made some really good progress over the last twelve months in delivering those. Hopefully, that was clear. Is that?

[Zachariah Al-Qaryooti, Analyst at Morgan Stanley]

Yes. Thank you very much.

[James Hilton, Group Finance Director & Director at Hays]

Great. Thank you.

[Operator]

We have no further questions registered. So this concludes the question and answer session. I will now hand back to James and Dirk for closing remarks.

[James Hilton, Group Finance Director & Director at Hays]

Okay. Dirk and I would like to thank you all for joining us today. Kean, Rob and myself will be available for any questions for the rest of the day. And we look forward to seeing shareholders over the next couple of weeks. Our next announcement will be out our Q3 IMS on the April 16.

[James Hilton, Group Finance Director & Director at Hays]

Many thanks. Bye bye.

[Operator]

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.

Participants

Executives

• Dirk Hahn, CEO
• James Hilton, Group Finance Director & Director

Analysts

• Andrew Grobler, Financial Analyst at Exane BNP Paribas
• Rory Mckenzie, Executive Director at UBS Group
• Ryan Flight, Equity Research Analyst at Jefferies
• Afonso Osório, Vice President at Barclays
• Zachariah Al-Qaryooti, Analyst at Morgan Stanley