Overall picture: Hays has been doing well with its castoff of
subsidiaries unrelated to recruitment. After a 476m pre-tax loss in
2003, the company divested itself of its subsidiary companies and now
has been making large profits in the UK recruitment business.
1. New Focus on Recruitment--
Hays has divested itself of companies it owned that drifted from
recruiting and has refocused on its specialty of recruiting. The last
piece of the puzzle was selling off DX Services in October 2004. Now
Hays can focus on what it does best, recruiting.
2. Growth in Revenues--
Last year, Hays had a record year with generated fees in excess of
£470.6m. 2004 profits were £404.7m. In 2004, pretax profits were
181.0 mln stg. and up from 178.9 mln the year before. These are very
high revenues, even compared to other companies such as Michael Page
which is profiled below.
3. Strong UK Base--
Hays is the leading contender for business recruiting in the UK. Its
pretax profits are twice that of some of its biggest competitors. It
has a strong market share.
1. Global expansion
Hays is predominantly a UK company at the moment-- based in the United
Kingdom and with forays into other territory over which the Queen
reigns, including Australia and Canada, and with the addition of
continental Europe. Like other companies have chosen to, it could
expand into global markets and reap the rewards. This exists as both
an opportunity and a threat; if Hays doesn't take the initiative to
expand, other companies will get that business and possibly encroach
on Hays in the UK market.
2. Emerging markets in places already established.
Continental Europe prices were up; the company is seeing the benefits
of some emerging markets in Germany and France, areas where specialty
recruitment is in its infancy.
1. Stock prices--
Hays' stock has gone down quite a bit of recent years, after reaching
record highs. Last year, the company was demoted from the FTSE 100
Index (the 100 companies with highest stocks which are primarily
located on the London Stock Exchange) to the FTSE 250 due to its
falling stock prices. The company had been a member of the FTSE 100
for almost 10 years, since 1996. This is despite the fact that the
company made record profits that year.
Mike Murphy of Panmure Gordon explained the situation: "We've seen
upgrades for others in the sector like Michael Page, but this has not
happened with Hays. There is quite a bit of uncertainty, such as
concerns that it might drop out of the FTSE 100, as well as fears
about the UK economy. So there are all sorts of reasons not to buy at
The company has also participated in stock buyback schemes the last
few years. In 2005 they used £300m of their money to buy back their
own shares and cause the other shares to rise in value. A stock
buyback scheme can often be a sign that management believes that
stocks are undervalued. Using extra cash to buy back stocks is good
for stockholders, but those are fewer cash reserves that the company
has in case of financial downtime.
Rather than simply using cash reserves for the stock purchases, the
company has used increasing debt in its buybacks. Cash reserves,
however, might be able to help the company in case of downtime, so
this may not be prudent.
Most recently, on June 29, after an announcement of higher than
expected profits for the quarter, the stock prices fell on account of
worries over British unemployment.
2. Slow Growth in the UK market.
Hays makes most of its profits from Britain. On June 29 of this year,
the company announced that its rate of growth in Britain has slowed
and will be lower than expected this year. They have not expanded
enough globally to survive well if they lose the UK aspect of their
business. This year, profits will increase 7 percent in the UK and
Ireland, less than expected in forecasts.
Paul Venables, the group's financial director, said, "In the UK
market, growth has been somewhat slower in the fourth quarter than in
the third quarter. In the public sector, growth has been slightly
lower than the overall market."
1. Expansion into China.
In May of 2006, Hays announced that it had bought St George's Harvey
Nash Ltd, a recruitment firm located in China and Hong Kong. China is
one of the world's largest and fastest growing economies, and
eventually will overtake the United States as the world's biggest
economy at its current rate of growth. It is a ripe market for a
recruiting firm. This buyout of the firm serves two purposes: it
gives Hays a footprint in China and it does it by taking out a
competitor, a fellow recruitment firm. For 7.5 million sterling, it
seems to be a well-thought business deal (5 million of that is held
out for performance ratings, which is also a good sign).
The CEO of Hays said, "The acquisition of St George's Harvey Nash
provides Hays with a strong platform to expand the Hays business model
into the Chinese market."
He is certainly correct.
China would present a ripe opportunity if growth continues to slow in the UK.
1. Lack of worldwide expansion.
Hays has not expanded into worldwide markets as much as its competitor
Michael Page or other companies. It has three main markets-- Europe,
Australia and New Zealand, and Canada. It has not expanded into some
ripe markets, including America.
2. Problems in the UK economy.
Most of Hays' profits come from the UK. Growing fears about a
downslide in Britain are partly what led to the downgrade from the
FTSE 100 for Hayes and would most likely have a significant impact on
profits. Since the company has decided to specialize in recruiting, if
the economy takes a downturn and no one is hiring, no one will be
looking to recruit or be recruited away from their current jobs. 220
of its 300 offices are located in the UK, so its financial health is
closely tied to those of most Britons' and their companies.
Although profits were up overall last year, profits in the UK remained
stagnant. This was not a good sign for things to come for Hays.
When the CEO, Denis Waxman, announced profits for 2004, he declared
that things were looking good ""with the caveat of what happens on the
economy" (3). Hays' performance is VERY tied to the overall economy--
as the UK economy went down 2-3 years ago, Hays' profits did also.
Analyst Kevin Lapwood of Seymour Pierce said this year when "The
company still relies heavily on the UK for its profits. The employment
background in the UK appears to be getting worse with unemployment
levels rising consistently this year."
2. Financial Times:
"Hays buys China, Hong Kong recruitment co for up to 7.5 mln stg"
Published: May 05, 2006
3. Financial Times
"Hays signals end of downturn in UK executive recruitment UPDATE"
AFX Europe (Focus)
Published: Sep 07, 2004
hays profits 2005
hays annual report
site:ft.com hays plc
1. Natural Growth
"Michael Page is unique in the industry having grown entirely by
organic expansion rather than through mergers or acquisitions.
Established as a specialist recruiter in 1976, the group has undergone
rapid expansion by opening a network of offices through the UK and the
Its largest markets are the UK and Australia.
2. Growth in Turnover and Profits
In 2004 the groups? annual global turnover was £433.7 million a growth
of 16% from the previous year. In 2005, the company did even better,
with a further 20 percent growth in that year to global turnover of
£523.8 million. Pre-tax profits were up 70 percent to £66.1 million,
and all their businesses increased profits.
This placed it in 153rd place on the FTSE 250, the list of the 101st
to 250th largest companies with primarily listing on the London Stock
In fact, on July 6, 2006, the company revealed that gross profit was
up 28 percent for them in the second quarter of this year, they had no
reason to worry about the global economy, and they were well-placed to
continue with their rise in profits. The second quarter profits were
Total profits so far this year have been £128.1m. If this pace
continues, the company will have profits in 2006 of more than double
what they did last year, an astonishing growth rate.
Britain accounts for half of profits and was up 19 percent in the
latest report; the company is expanding in continental Europe and
profits were up there by 46 per cent or 31.1 million pounds. Profits
rose 12 percent in the Asian Pacific and 59 percent in the United
States. The only place with disappointing growth was Australia.
3. Happy Employees
* A Sunday Times Best 100 Company to Work For 2005
"This list recognises organisations applauded by their employees
for providing a supportive environment where they feel rewarded,
appreciated and encouraged to develop."
Page was also listed as one of the Guardian's "Top 100 Companies to
Work For" in the UK.
4. Nice branding
Michael Page, for the fourth consecutive list (published every 18
months), has been recognized as a UK Business Superbrand, a merit
rewarded to companies which sport Britain's best and biggest brands.
The official definition of a Superbrand is thus: ?A Superbrand has
established the finest reputation in its field and offers consumers
emotional and tangible advantages over other brands, which
(consciously or sub-consciously) consumers want and recognize.?
The UK accounts for half of the company's profit so it certainly helps
them to sport an easily recognisable and trusted brand in Britain.
5. Development of new areas in recruiting.
A fourth of the company's profits come from new areas it has recently
accessed such as human resources. These areas are experiencing rapid
growth and shall help it outpace competitors, such as Hays, which have
limited themselves to certain areas. These areas include engineering
and property in addition to HR.
1. Despite the company's record profits and growth, its share price
has fallen consistenly in the last few months. A chart can be seen
While expansion can lead to increased profits, it can also cost
millions up front and not be worth the risk in the long term. In
order to increase business in continental Europe, where recently it
has experienced great growth, Page recently opened an office in Poland
and plans to expand further into central Europe. These expansion plans
could hurt the company by requiring massive outlays of cash to build
offices and develop teams of workers. It could pay off, or it could be
3. New CEO--
Michael Page's chief executive, Terry Benson, stepped down in May of
2006 and was replaced by Steven Ingham. With 19 years' experience,
Ingham seems to be a good candidate. However, the company's growth of
the last few years (and this year) has been under the guidance of
Benson, so the effect of the new leader remains to be seen. The
Independent reported on Benson's retirement thusly: "He has led the
country's second-biggest recruitment consultancy for 12 years, during
which time he built the London-based firm into a global player."
Ingham will have big shoes to fill and will have to step up to
continue Benson's global efforts. Ingham's last role was as Managing
Director for the UK and so he has not worked on a global scale before.
1. Other companies' dirty deeds will help American business--
America has clamped down on companies and their illegal behavior after
the Enron fiasco, in which hundreds of employees lost their entire
livelihood and retirement accounts due to a company cover-up.
Congress passed the Sarbanes-Oxley Act which has gone into effect and
hurt many businesses, especially small businesses. However, the
opposite effect has occurred at Michael Page. Sarbanes-Oxley has
spurred a demand for accountants in the US and has contributed to the
59 percent growth that the company has seen in the United States of
The company opened an office in Philadelphia last year and another
office in Toronto to facilitate North American business. It should be
well-positioned to continue its growth in the US.
2. Ample room to grow--
Despite its massive growth in recent years, Michael Page certainly is
able to grow much more in the marketplace. The company is planning new
offices even in the UK, business in Scotland last year was up 50
percent, and worldwide there are many markets that the company has not
reached and should have the ability to expand into.
2a. South America--
The South American market has not been thoroughly tapped into by the
company. With the opening of a Rio de Janeiro office, profits were up
last year by an amazing 96 percent in Brazil. With a South American
office, the company should be able to expand into other South American
countries and maximize profit there as well.
The company has opened an office in Mexico City this year which they
are hoping will equal their great expansion in Brazil.
3. British Economy Slows Downturn of Competitors.
Hays PLC has had a rough time of it lately in Britain. Its main market
has experienced a reduction in growth this year and for the past few
years. Fortunately for Michael Page, it has worldwide markets to turn
to and it only relies on the UK for half of its profits. While the UK
economy has harmed its competitors, MP's profits in the UK are
increasing to record highs. Its competitors' problems are a good
opportunity for MP to gain market share in its home country.
How has Michael Page not been affected by the economy?
CEO Steve Ingham says that it is because MP focuses on finance, sales
and marketing jobs, which are not affected by the economy as much as
other areas focused on by competitors.
(from the article:
MICHAEL PAGE INT. (MPI)
Investors Chronicle - United Kingdom
Published: Jul 14, 2006)
1. The global economy.
If the world financial markets take a turn for the worse, Michael Page
could also. It thrives on growing global markets that are closely
related to the general economy-- if the economy is terrible, companies
won't be hiring and certainly won't need recruiters to help them.
Their chief executive, Steve Ingham, had this to say about the global economy:
?We are not seeing anything bad in terms of where the economy is
going. We are not economists but as we sit here today everything looks
Chief Executive Ingham has committed to maintaining the company's
infrastructure during economic slowdowns and believes that the
company's success to now legitimises his position. While this
strategy seems to have worked for Page in the past, spending too much
money on infrastructure during times of economic trouble has felled
many companies before.
Economists, however, seem to be speaking a different tune these days,
and this would probably hurt their business.
--check previous bad economies and how they did
2. Slow growth in Australia.
The company has seven Australian offices and just completed a
relocation in Melbourne. If Australia doesn't prove as profitable as
Page has hoped, these expansion efforts might put the company in a bad
place to compete for Australians' business. Hays is the leading
recruitment firm in Australia and MP might be hard-pressed to compete
for business there.
3. The stock market
When Michael Page announced its 2006 earnings so far at the beginning
of this month (and how they had practically already matched last
year's entire earnings), the price of their stock actually fell. Why
this happened must be chalked up to the eternal mysteries of the stock
market. Unfortunately, sometimes a company's performance has nothing
to do with the price of its stock shares. For the past few years,
Michael Page has bought back 10 percent of its stock on the market and
cancelled the stock. A stock repurchase such as this is often a sign
that a company believes its stock to be undervalued. If the company's
stock is undervalued, that's bad news for shareholders. It is good
for the stockholders, however, as the share price of their stock goes
4. Hays and BLT and other competitors.
BLT was listed above Page as the best recruitment consulting firm by
Top-Consultant.com. BLT is one of Page's primary competitors. BLT, or
Beament Leslie Thomas, is UK-based and is also expanding globally. The
firm is younger than Page, founded in 1987, but has outpaced its
growth. BLT's approach is a bit different than Page's, however. BLT
focuses more on certain areas and try to find a niche in recruitment
Hays has focused more on the UK market, where most of its profits
arise, but has outpaced Michael Page there by far. Its pretax profits
are easily twice those of Page. Especially if something occurs in the
economy, Page will face increased competition from Hays. However,
Hays' growth is slowing and is affected by the bad economy in the UK,
whereas Page is growing business there at a rapid clip.
The overall outlook for Michael Page seems spectacular, at least in
the short run. The company has experienced exponential growth and
seems to be on pace to become a true global leader in recruiting,
after only a decade of expansion.
Paul Jones, an analyst at Numis Securities, had this to say about Page
last year after profits were announced in the middle of the year: It
was "a spectacular update from Michael Page, well above any
expectations and suggesting a significantly brighter future in the
Their profits of late truly have been spectacular and show no signs of
stopping any time soon. Their biggest threats are direct competitors
such as BLT and Hays and the new CEO.
4. Michael Page International Annual Report
michael page international
site:www.ft.com "michael page"
"michael page" stock prices
michael page annual report
If you need any additional help or have any queries feel free to let me know.