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By their standards, it was a disappointing first half of the 2023 financial year for Hays globally.

Hays’s global July to December 2022 half-year results saw net fees rise 12%, on a like-for-like basis, to a new record but operating profit declined 8% and pre-tax profit dropped 7 per cent.

All Hays regions reported net fee growth, except Australia and New Zealand.

Fee growth in the UK & Ireland (+7%) and the Rest of the World (+12%) was dampened by operating profit declines in both markets (-16% and -7%, respectively).

Hays ANZ net fees were down 1% (perm up 7% and temp down 6%, Aus down 3%, NZ up 17%) with operating profit down 36% to $31.1 million.

Hays ANZ consultant headcount was 1,110 consultants, a 2% decline compared to 30 June 2022.

On a specialism basis, net fees in Hays ANZ reported positive results (compared to the same period in 2021) in Construction & Property (+12%); IT (+4%) and Accounting & finance (+15%) but declines in Banking (-37%), Sales & Marketing (-13%) and HR (-9%).

Hays also announced that a process to identify a successor to Global CEO, Alistair Cox (pictured above, left), is now underway. Cox, appointed in 2007, will remain as CEO until a suitable replacement has been appointed.

One of the great strengths of Hays’s global leadership has been its stability so it is curious that three of the most senior and experienced executives within the Hays global leadership team will depart within a twelve-month period of each other.

After more than sixteen years as Group Finance Director, Paul Venables (pictured above, middle) passed the baton to Group Financial Controller, James Hilton last September and former Hays ANZ MD, Nigel Heap (pictured above, right) left Hays last November.

Heap’s most recent role, as part of the Hays global management board, was Regional Managing Director – EMEA and ANZ.

Assuming Cox’s successor starts around the beginning on the new financial year (1 July) and he leaves the building soon afterward then nearly 70 years of Hays-specific executive leadership experience of the most senior kind will have been lost to Hays in less than a year.

Is it just a coincidence that Heap left Hays shortly before the public announcement of the process to identify and hire (or promote) Cox’s successor?

If a public announcement lauding Heap’s extraordinary 34-year career at the world’s sixth-largest recruitment company (by revenue) was made at the time of his exit then I must have missed it.

I’m curious how a well-run company like Hays has not been able to stagger the departures of key executives across a longer period of time although Heap (58), Cox (61), and Venables (62) each match the retirement age profile of senior executives within publicly-listed global companies.

The announcement of Cox’s medium-term departure without the accompanying appointment of a new CEO leads me to speculate that an external candidate is a stronger likelihood than an internal one.

Alistair Cox joined Hays after a twenty-five-year career in engineering, management consulting, and IT, replacing founder Dennis Waxman – a very hard act to follow (I started my recruitment career in a Hays street-level London office that housed Waxman on level 3. He would regularly drop into our office to see how things were going).

A comparison of some metrics for the most recently completed financial year (2022) and the last completed financial year before Waxman retired (2007) provides an insight into Hays during the Cox era.

Hays plcFY 2022FY2007
Net fee income£1,189 million£633 million
Operating profit£210 million£216 million
Conversion rate^17.7%34.1%
Total employees13,2347,753
Total consultants9,0375,022
Total offices 253376
Offices (outside UK & Ire)166119
Net fees split: Temp/perm55% - 45%51% - 49%
Net fees split: Private sector/Public sector85% - 15%82% - 18%
Net fees per consultant*£144,600£137,400
Net fees per employee£89,800£81,600
^Calculated as operating profit divided by net fees
*Calculated as total Group net fees (on a constant-currency basis) divided by the average number of consultants.

Cox’s base salary for the current financial year is £822k and his total FY 2022 remuneration amounted to £2.52 million (AUD 4.62 million, based on the average AUD GBP exchange rate over the year).

In Waxman’s final year (2007) as Group MD his base salary was £560k and he was paid a total remuneration package of £1.2 million.

Cox, in partnership with Finance Director Paul Venables (who joined Hays the year before Cox),  has driven the full globalisation of Hays’s business and significantly reduced the company’s traditional reliance on their two most mature markets, the UK and Australia, to deliver a large proportion of the company’s profits.

Germany has been the market in which Cox has been able to leverage the strengths of Hays to the largest degree.

In the 2007 financial year Hays Germany generated £40 million in net fees (6.3% of the group’s total net fees) from 160 consultants (3.2% of the group’s consultants) across six offices (1.6% of the group’s offices), predominantly in the IT and Engineering contracting markets.

In the July to December 2022 half year, Hays Germany was the group’s standout global performer with net fees up 24% to £180 million (27.7% of the group’s net fees) and operating profit up 17% to £43 million (45.7% of the group’s operating profit).

Consultant headcount across Hays Germany rose 19% in the 2022 calendar year to reach 2,072 (22.9% of the group’s consultants) across 26 offices (10.3% of the group’s offices).

Hays Germany is on track this financial year to be about ten times the size it was in 2007

As of the end of December last year, Hays Germany had the same number of consultants as the UK, but in 70 per cent fewer offices.

By any measure, Hays Germany has been the crowning achievement of Cox’s reign as global CEO, and there’s no sign of the momentum slowing.

By contrast, Hays UK & Ireland, built on the foundation of accounting and finance recruitment, has declined in all key measures since 2007.

In the 2007 financial year, Hays UK & Ireland’s 3,134 consultants across 257 offices produced an operating profit of £141 million (62% of the group’s operating profit) from net fees of £417 million (66% of the group’s net fees).

For the 2023 financial year, Hays UK & Ireland’s 2,082 consultants across 87 offices are on track to produce an operating profit of £32 million (16% of the group’s operating profit) from net fees of £280 million (22% of the group’s net fees).

The conversion rate of net fees to operating profit in Hays UK & Ireland has fallen from 33.8% in 2007 to 11.1% this year.

The importance of temp and contracting’s profitability, compared to permanent recruitment is seen in Hays Germany generating 83% of net fees from contracting and temp, compared to the UK & Ireland’s equivalent figure of 55%.

The mid-noughties, in the final years of Waxman’s leadership, was the golden era of high-growth and high-margin recruitment for Hays.

In the three financial years 2006, 2007 and 2008  Hays grew net fees by 15%, 17% and 19% respectively (per annum) and operating profit grew by 15%, 15% and 13% respectively (per annum) with a conversion rate^ in each of those three years of 34.1%, 34.1%, and 32.1% respectively.

In the 2009 financial year, which included the initial impact of the GFC, the conversion rate dropped to 23.6% and has never risen above that figure in the thirteen subsequent financial years. The conversion rate’s peak since 2010 was 22.7% in 2018 and the median conversion rate across those thirteen years is 17.7%.

At the end of 1999, the Hays share price hit £4.42. When Alistair Cox joined Hays the share price had fallen to £1.50. Yesterday it traded at £1.18, having hit a Cox-era peak of £2.04 in September 2008.

Whoever succeeds Alistair Cox will be only the third CEO in the company’s 54-year existence; it’s certainly going to be a tough act stepping into the legacy of Dennis Waxman, built on very effectively by Alistair Cox.

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