Half-year Results

SIX MONTHS ENDED 31 DECEMBER 2023

DECISIVE ACTIONS TAKEN IN CHALLENGING MARKETS. FOCUSED STRATEGY TO IMPROVE MEDIUM-TERM PROFITABILITY & GROWTH, UNDERPINNED BY OPERATIONAL EXECUTION

Note: unless otherwise stated all growth rates discussed in this statement are LFL (like-for-like), YoY (year-on-year) net fees and profits, representing organic growth of continuing operations at constant currency. WDA = working-day adjusted.

Dirk Hahn, Chief Executive, commented:

"As previously reported, the half-year saw increasingly challenging conditions, with a clear slowdown in most Perm markets in December, while our larger Temp & Contracting business again showed greater resilience. We acted decisively to drive consultant productivity, better align our operations to market conditions and opportunities, and reduce costs. Consequently, we delivered £30 million of annualised savings between August and December and are on track to deliver a further c.£20 million in H2.

This said, I am not satisfied with our profit performance. Our focused strategy targets the many structural growth opportunities we see, while driving profitability through increased resilience, operational rigour and enhanced execution. We will also be guided by our 'Golden Rule' for our businesses, namely that operating profit growth should exceed fee growth, which in turn should exceed headcount growth through the cycle. As our end markets stabilise and then recover, I am confident we can return to, and then exceed, our previous peak profits. While our markets today are challenging, and we are making some difficult decisions, Hays is a strong business with a great team of talented colleagues, and I am excited about what we can achieve together".

Our results webcast will take place at 8.30am on 22 February 2024. To register for the webcast only, please click or copy https://edge.media-server.com/mmc/p/ykfj3bz6. To register and be able to ask questions via our audio link, please click or copy this link https://register.vevent.com/register/BI361365ca7ade4a5c9e434702d958253e.

Reporting calendar

Hays Group Overview

As at 31 December 2023, Hays had c.12,300 employees in 249 offices in 33 countries, and our global network helps position us in the most attractive long-term structural growth sectors. In many of our global markets, the majority of professional and skilled recruitment is still done in-house, with minimal outsourcing to recruitment agencies, which presents substantial long-term structural growth opportunities. This has been a key driver of the diversification and internationalisation of the Group, with the International business representing 80% of the Group's net fees in Q2 24, compared with 25% in FY05.

Our consultants work in a broad range of industries covering recruitment in 21 professional and skilled specialisms. In H1 24 our four largest specialisms of Technology (25% of Group net fees), Accountancy & Finance (15%), Engineering (11%) and Construction & Property (10%) collectively represented c.61% of Group fees.

In addition to our international and sectoral diversification, in H1 24 the Group's net fees were generated 59% from temporary and 41% from permanent placement markets. This well-diversified business model continues to be a key driver of the Group's financial performance.

In our 2023 employee 'YourVoice' survey, 81% of employees said they would recommend Hays as a great place to work.

Current trading

New Year Temp & Contracting 'Return to work' volumes are building in line with the prior year in the UK and Australia, although are 2% behind the prior year in Germany. Perm remains tough overall, with slower decision-making

Group commentary

While we remain mindful of market conditions, our Temp & Contracting ('T&C') New Year 'return to work' has been in line with the prior year in the UK&I and ANZ, with Germany volumes rebuilding 2% behind the prior year. Overall Group T&C volumes are down 8% versus the prior year (Q2 24: down 8%).

In Perm, following previously reported December weakness, we have seen New Year job flow and activity levels in line with Q2. However, we continue to see slower client and candidate decision-making, leading to a longer time-to-hire.

Our key markets continue to be supported by skill shortages, and we expect to see some further fee benefit in the second half from the positive effects of wage inflation globally, albeit at lower levels than in H1, with fee margins stable.

There are no material working-day effects year-on-year in the second half. However, Easter is evenly split between Q3 and Q4, while in FY23 it fell entirely in Q4. We expect this to have a c.1-2% negative impact on net fees at Group level in Q3 24, primarily via our Temp business, with a corresponding benefit to Q4 24.

As previously reported, we expect total Group headcount will reduce by c.3-4% in Q3 24 as we continue to focus on consultant productivity and deliver further back-office efficiencies. This will further reduce our cost base per period(8) in H2.

Germany

New Year Temp & Contracting volumes are rebuilding 2% behind the prior year. Overall T&C volumes are currently down 5% YoY, partially offset by ongoing positive effects of mix and margins. Perm activity is relatively resilient but is modestly down versus Q2.

UK&I and ANZ

New Year T&C volumes are rebuilding in line with the prior year. T&C volumes are currently down 11% YoY in UK&I and down 17% in ANZ. Perm markets remain tough but are broadly stable, with new job inflows in line with Q2.

RoW

EMEA activity levels are broadly consistent with Q2 24. The Americas and Asia are also stable sequentially.

Group Strategic & Operational update

Our focused strategy is designed to build the leading Talent & Workforce Solutions business globally, recognised for powering progress through people. It focuses on the many structural growth opportunities we see and is designed to increase our business resilience, quality of earnings and cash generation. This will allow us to return to, and then exceed, previous peak profits.

Our strategy is based on five key strategic levers. These are proven drivers of resilient, long-term growth, having been the cornerstone of our successful strategy in Germany, where we have grown organically from £3 million of operating profit in 2003, to over £100 million today:

Recognising that each Hays country faces a different starting point, we have defined three categories of countries based on current market position, expertise, management capability and the strength and depth of these five strategic levers:

Overall, we are targeting greater fee resilience within each Hays country, with more countries driving material profit contributions.

Enhanced operational delivery

Underpinning our strategy is an increased focus on operational execution, which we are driving across the Group. We will improve medium-term consultant productivity in excess of inflation, with a greater focus on dynamic pricing, technology tools and data. We have also identified efficiencies from greater consistency of operating models globally, and we will better leverage our overhead costs.

For strategic levers 1, 2 and 3 we will make better use of data to track growth in job categories and evaluate each business line's performance against local market opportunities. We are closely tracking our progress in areas like STEM recruitment, and the development of our pricing and average candidate salary. For lever 4, we will assess the delivery models in place and drive productivity further in our delivery teams. In Enterprise clients, we will better understand the client's needs and structure, and increase our network effect within clients to win market share. For lever 5, in addition to non-Perm being highly complementary to many of our future job categories and targeted resilient industries, we will closely manage our resources in-country, and better automate our end-to-end Temp workflow, reducing compliance and admin time, and costs.

We have accelerated our back-office efficiency programmes, to standardise and globalise processes, removing duplicated costs and better leveraging our shared service centres. We will also drive significant medium-term benefits from investing in our own technology stack, working with best-in-class partners, and bringing in the best of AI and automation into our processes worldwide.

Outcomes

We have strong, market leading businesses, many of which are implementing our strategy well. But we need to ensure this is happening across all countries, and we expect all businesses to be able to deliver a conversion rate of at least 25%. Large businesses like Germany and Switzerland, which have proven to be resilient over time, have delivered high compound growth. However, we also have some businesses which are volatile and more cyclical, and we have a plan to address this. We can improve our focus on the key growth industries and job categories of the future in all countries. And we have some business lines which are sub-scale, and which are not profitable enough, which we are addressing, and some may close.

Overall, we are implementing a 'Golden Rule' for all countries that operating profit growth should be greater than fee growth, which should in turn exceed headcount growth through the cycle. This underpins our long-term focus on growing consultant productivity at least in line with inflation and increasing operating leverage to drive greater profitability through the cycle, with a medium-term Group conversion rate target of 22-25%.

H1 Financial & Operational review

Summary Income Statement

Growth

H1 24: lower fees in challenging market conditions

Turnover for the six months to 31 December 2023 decreased by 5% (8% on a reported basis). Net fees in the six months to 31 December 2023 decreased by 9% on a like-for-like basis, and by 11% on a reported basis, to £583.3 million. This represented a like-for-like fee decline of £55.1 million versus the prior year, with the fee decline accelerating through the half-year, including a December net fee exit rate of minus 13% WDA(5).

The decrease in Group fees was due to lower volumes in both Temp and Perm, partially offset by increases in our average fees per placement, which were driven by management actions and the impact of wage inflation. The higher net fee decline compared to turnover was due to relatively resilient performance in Temp fees versus Perm.

Temp fees (59% of Group) were relatively resilient and decreased by 3%, or down 2% WDA(5). Temp volumes decreased by 7% YoY, with a further 1% decline from fewer working days YoY, partially offset by 5% growth from positive mix effects and higher Temp rates. Our underlying Temp margin(6) was stable YoY at 15.2%. Temp volumes remained stable sequentially through our second quarter but did not benefit from our normal seasonal uplift through Q2.

Perm fees (41% of Group) decreased by 15%, with activity slowing through the half-year. Overall, Perm volumes decreased by 25% as job inflow decreased and hiring processes extended, notably in December. As with FY23, this was partially offset by good growth in our average Perm fee, up 10%.

Fees in the Private sector (83% of Group), decreased by 10%, with the Public sector more resilient, down 1%.

Our largest global specialism of Technology (25% of Group fees) decreased by 10%, with Accountancy & Finance down 6%, which included Senior Finance hires outperforming lower salary levels. Engineering performed well and grew by 6%, although Construction & Property decreased by 14%. Direct and indirect outsourcing fees with Enterprise clients decreased by 5%, although we continue to have a good pipeline of opportunities.

H1 operating profit impacted by lower fees, however decisive cost actions taken

H1 24 pre-exceptional(2) Group operating profit of £60.1 million represented a like-for-like decrease of 37% (down 33% WDA(5)). Group conversion rate(2) decreased by 460 bps year-on-year to 10.3% (10.8% WDA(5)). As reported at our Q2 results, given the deceleration in fees we saw at the end of the quarter (December fees decreased by 15% on a reported basis), the December fee slowdown directly impacted our H1 24 operating profit.

As market conditions became more challenging, we moved decisively to align consultant capacity to market demand and reduced consultant headcount, while protecting our core business. Overall, Group consultant headcount in H1 24 was decreased by 619, or 7%, and by 12% YoY, through a mix of natural attrition and performance management. We also restructured operations in several regions which included refocusing and delayering of management and accelerated our back-office efficiency programmes. This led to a 3% reduction in non-consultant headcount in Q2 24.

Since our FY23 preliminary results in August, our actions have reduced our costs per period(8) by c.£2.5 million, which equates to annualised Group cost savings of £30 million. Of these savings, c.£20 million arose from the 7% reduction in consultant headcount delivered in H1. A further c.£10 million of savings resulted from the restructuring of operations and back-office functions, which resulted in an exceptional restructuring charge in H1 of £12.6 million(2), detailed below. Looking ahead, we expect our ongoing actions will deliver further annualised Group cost reductions of c.£20 million in H2 24.

Like-for-like costs decreased by 4% YoY or £20.0million (£31.7 million on reported basis). This was driven by a 9% lower Group headcount, lower commissions and bonuses and reduced operational overhead spend. This was partially offset by our own salary increases and underlying cost inflation, notably in property and insurance costs.

Overall Group average fee productivity per consultant was solid, given market conditions, but remained below peak levels. Productivity was supported by our actions to manage consultant headcount, increase our fee margins and focus on higher value roles. Market conditions meant that Group average volume productivity per consultant was down significantly YoY, and versus pre-pandemic levels. We remain focused on driving productivity in H2 24 and beyond.

Exchange rate movements decreased net fees and operating profit by £13.5 million and £1.8 million, respectively. This resulted from the strengthening in the average rate of exchange of sterling versus our main trading currencies, notably the Australian dollar. Currency fluctuations remain a significant Group sensitivity.

Working-day adjustments

As previously reported, our Germany business had two fewer working days versus the prior year, which impacted our fees and operating profit by c.£3.5 million. Therefore, on a WDA basis Group operating profit was £63.6 million, down 33% YoY, and represented a conversion rate of 10.8%. There are no material working-day impacts in H2. However, in H2 Easter is evenly split between Q3 and Q4, while in FY23 it fell entirely in Q4. We expect this to have a c.1-2% negative impact on net fees at Group level in Q3 FY24, primarily via our Temp business, with a corresponding benefit to Q4 24.

Impairment of goodwill and exceptional restructuring charge

During the half-year, the Group incurred an exceptional charge of £27.9 million (2022: £nil). Of this, £15.3 million is a non-cash exceptional charge resulting from the partial impairment of the carrying value of goodwill relating to the 2014 Veredus acquisition in the USA, given ongoing challenges in the US market. The goodwill impairment charge is a material non-cash item that based on its size and nature is considered to be exceptional. The remaining Veredus goodwill balance at 31 December 2023 is £7.1 million

In a direct and decisive response to increasingly challenging market conditions and a clear slowdown in most markets, we restructured the business operations of several countries across the Group, to better align business operations to market opportunities and reduce operating costs. The restructuring exercise led to the redundancy of a number of employees, including senior and operational management and back-office positions. As reported at our Q2 results, the combined costs relating to this were £12.6 million, and are considered exceptional given their size and impact on business operations. The cash impact of the exceptional charge in the half-year was £6.8 million, with a further £2.5 million cash outflow expected in the six months to 30 June 2024. We estimate that these restructuring actions will result in c.£10 million per annum in longer-term cost savings, which are included in the overall £30 million of annualised cost savings resulting from our H1 actions.

Net finance charge

The net finance charge for the half-year was £4.6 million (2022: £3.0 million). The increase YoY was primarily due to a £0.8 million charge on defined benefit pension scheme obligations (2022: credit of £0.4 million), and is non-cash. Net bank interest payable (including amortisation of arrangement fees) was £1.3 million (2022: £1.3 million). The interest charge on lease liabilities under IFRS 16 was £2.4 million (2022: £2.0 million), and the Pension Protection Fund levy was £0.1 million (2022: £0.1 million). We expect the net finance charge for FY24 to be c.£9 million, modestly higher YoY driven by higher non-cash items of c.£6 million.

Taxation

Taxation for the half-year was £15.3 million (2022: £27.3 million), representing a pre-exceptional(2) effective tax rate (ETR) of 32.0% (2022: 29.0%). The increase in the ETR year-on-year is primarily driven by the geographic mix of operating profit, notably the impact of Germany, which has one of our highest country tax rates and which accounted for 68% of group profits in the half-year. We expect the Group's ETR will be c.32% in FY24.

Earnings per share

The Group's pre-exceptional basic Earnings per share (EPS) of 2.37p was 42% lower than the prior year. The reduction was primarily driven by 37% lower pre-exceptional operating profit. In addition, we incurred a modestly higher net finance charge and a higher ETR, both noted above. The impact on EPS was partially offset by a 2.1% reduction in average shares in issue, resulting from our FY23 share buyback programme.

Strong balance sheet and cash generation

Our net cash position at 31 December 2023 was £66.9 million. We converted 112% of operating profit(2) into operating cash flow(4), significantly up YoY (2022: 68%(4)). We saw a working capital outflow of £3.6 million in the half-year (2022: £44.3 million outflow), with a reduction in our Temp debtor book offset by a decrease in payables, and a modest increase in debtor days to 36 days (2022: 35 days), due to the timing of customer payments and geographic mix of business. Debtor days remain below pre-pandemic levels.

Cash tax paid in the half-year was £28.5 million (2022: £33.2 million) and included some pre-payments to certain tax authorities. Net capital expenditure was £13.7 million (2022: £12.3 million), with continued investments in technology infrastructure and cyber security. We expect capital expenditure will be c.£30 million in FY24.

Company pension contributions were £9.1 million (2022: £8.8 million) and net interest paid was £1.3 million (2022: £1.4 million). The cash impact of the exceptional restructuring charge in H1 24 was £6.8million.

During the half-year we paid a £32.6 million final core dividend for FY23 and a special dividend of £35.7 million. During the half-year we also purchased £12.3 million in shares under our Treasury share buyback programme announced in September 2023, which has been completed.

Retirement benefits

The Group's defined benefit pension scheme position under IAS 19 at 31 December 2023 has resulted in a surplus of £26.4 million (30 June 2023: surplus of £25.7 million). This £0.7 million increase in surplus was driven by employer contributions of £9.1 million, plus higher-than-expected return on the scheme assets, partially offset by a decrease in the discount rate adopted within the key financial assumptions, which increased the calculation of the schemes' liabilities.

During the half-year, the Group contributed £9.1 million of cash to the defined benefit scheme (2022: £8.8 million), in line with the agreed deficit recovery plan. The 2021 triennial valuation quantified the actuarial deficit at £23.9 million on a Technical Provisions basis. Our long-term objective continues to be reaching full buy-out of the scheme and therefore our recovery plan remained unchanged and comprised an annual payment of £16.7 million from July 2021, with a fixed 3% uplift per year. The scheme was closed to new entrants in 2001 and to future accrual in June 2012.

Capital allocation

Our business model remains highly cash generative. The Board's free cash flow priorities are to fund the Group's investment and development, maintain a strong balance sheet, deliver a progressive, sustainable and appropriate core dividend and to return any surplus cash to shareholders through a combination of special dividends and share buybacks, subject to the economic outlook.

The Board has declared an unchanged interim core dividend of 0.95 pence per share, reflecting our strong financial position and the Board's confidence in the Group's strategy. This represents pre-exceptional dividend cover of 2.5x, within our target core full year dividend cover range of 2.0 to 3.0x earnings. The ex-dividend date is 29 February 2024, and our dividend payment date will be 9 April 2024.

Our policy for returning surplus cash to shareholders remains unchanged and is based on paying capital above our cash buffer at each financial year-end (30 June) of £100 million, subject to the economic outlook. We have a strong track record of paying cash to shareholders, with c.£950 million in core and special dividends paid in respect of FY17 to FY23, and additionally £93.2 million of share buybacks since April 2022.

Foreign exchange

Overall, net currency movements versus sterling negatively impacted results in the half-year, decreasing net fees by £13.5 million, and operating profit by £1.8 million, primarily due to the strengthening of sterling versus the Australian dollar.

Fluctuations in the rates of the Group's key operating currencies versus sterling represent a significant sensitivity for the reported performance of our business. By way of illustration, based on our H1 24 results, each 1 cent movement in annual exchange rates of the euro and Australian dollar impacts net fees by c.£4.9 million and c.£0.8 million respectively per annum, and operating profits by c.£1.2 million and c.£0.1 million respectively per annum.

The rate of exchange between the Australian dollar and sterling over the half-year averaged AUD $1.9205 and closed at AUD $1.8661. As at 20 February 2024 the rate stood at AUD 1.9271. The rate of exchange between the euro and sterling over the half-year averaged €1.1587 and closed at €1.1517. As at 20 February 2024 the rate stood at €1.1690.

The strengthening of sterling versus our main trading currencies of the euro and Australian dollar is currently a headwind to Group operating profit in FY24.

Movements in consultant headcount and office network changes

Consultant headcount at 31 December 2023 was 7,971, down 12% year-on-year and 7% lower than June 2023. Total Group headcount decreased by 9% year-on-year. We expect total headcount will decrease by c.3-4% in Q3 FY24, as we continue our focus on improving productivity and managing our overall cost base.

We consolidated several smaller locations, meaning our office network decreased by a net three locations in the half-year.

Germany (32%(7) net fees, 68%(7) operating profit)

Resilient performance, with operating profit up 3% WDA(5) despite a tougher economic backdrop

Growth

Our largest market of Germany saw net fees increase by 3% to £186.2 million. Operating profit decreased by 6% to £40.8 million, mainly due to two fewer working days in H1 24 versus the prior year, which as previously reported impacted fees and profit by £3.5 million. Adjusting for two fewer working days, fees increased by 5% and operating profit growth was 3%. Conversion rate was 21.9% (2023: 24.0%), or 23.4% WDA(5). Currency impacts were minimal in the half-year.

We have delivered this growth despite German GDP declining over the last 18 months, highlighting the relative resilience of demand for skilled Contractors and Temps, driven by talent shortages. At the specialism level, our largest specialism of Technology (33% of Germany fees), decreased by 3%, with Engineering, our second largest, up 11%. Accountancy & Finance and Construction & Property increased by 4% and 6% respectively, with HR flat. Fees in our Public sector business (15% of Germany fees) increased by 16%.

Temp and Contracting, (82% of Germany fees), increased by 3%, or up 5% WDA(5). This was driven by 1% growth in volumes and 5% from the positive impact of price and mix, partially offset by 2% from two fewer working days and 1% from slightly lower average hours worked. Pricing and mix remained solid in the half-year and is expected to remain a positive tailwind in H2 24, albeit at lower levels than H1. As previously reported at our Q2 results, Temp and Contracting volumes were sequentially stable through H1, however we did not see our normal seasonal volume increase in Q2.

Perm, 18% of Germany fees, increased by 2%. This included a 10% increase in our average Perm fee, partially offset by 8% lower Perm volumes.

Consultant headcount decreased by 1% year-on-year and increased by 1% in the half.

United Kingdom & Ireland (20%(7) net fees, 9%(7) operating profit)

Markets slowed sharply through the half-year, particularly in Perm, significantly impacting profit

Growth

In the United Kingdom & Ireland ("UK&I"), net fees decreased by 14% to £118.1 million. Operating profit of £5.7 million represented a decrease of 63% versus the prior year, and a conversion rate of 4.8% (2023: 11.1%).

Perm markets slowed materially through the half-year, impacted by negative GDP and decreased client and candidate confidence, with Temp remaining broadly stable sequentially, but down YoY. Our UK&I costs decreased by 8%, driven by headcount reductions, and costs will reduce further in H2 as a number of restructuring projects complete. However, given the pace of decline in fees through the half-year, we incurred negative operating profit leverage, particularly in Q2, amplified by December's fee exit rate of minus 20%.

Temp (56% of UK&I), decreased by 11%, with Temp volumes also down 11% and the mix of price and margin flat YoY. Our Perm business saw fees decrease by 17%, with volumes down 28%, partially offset by an 11% increase in average Perm fee. The Private sector (67% of UK&I fees) declined by 18%, with the Public sector down 3%.

All UK&I regions traded broadly in line with the overall UK&I business, except for Yorkshire & the North, down 5%, and Scotland, down 20%. Our largest region of London decreased by 18%, while Ireland declined by 6%. Direct fees with Enterprise clients were more resilient, up 9%.

Our largest UK&I specialism of Accountancy & Finance decreased by 10%, with Construction & Property down 11%. Technology and Office Support decreased by 26% and 21% respectively.

Consultant headcount decreased by 14% year-on-year and decreased by 7% in the half.

Australia & New Zealand (13%(7) net fees, 11%(7) operating profit)

Markets slowed sharply through the half-year, particularly in Perm, significantly impacting profit

Growth

In Australia & New Zealand ("ANZ"), net fees decreased by 19% to £74.3 million, with operating profit down 60% to £6.4 million. This represented a conversion rate of 8.6% (2023: 17.8%). Currency impacts were negative in the half-year, decreasing net fees by £8.5 million.

Cost decreases of 10% were driven by 15% lower average consultant headcount in the half-year, partially offset by our own cost inflation. Having changed our ANZ leadership team in H2 23, we continued to take decisive action to improve our performance. We undertook a restructuring of the business, focusing on improving consultant productivity and driving operational efficiencies. We also conducted a full review of operational management capacity, which we aligned to market conditions. This said, the pace of decline in fees through the half-year meant we incurred negative operating profit leverage, which was amplified by the further slowdown in December.

Temp (63% of ANZ) decreased by 15%, with volumes down 17%, but remained sequentially stable through the half-year. Fees continued to be impacted by the Federal government's policy decision to reduce the use of Temps in the Public sector, and by reduced activity in some large Enterprise clients. Perm fees decreased by 25%, with volumes down 21% and slowing through the half-year, including a particularly difficult December. The Private sector (62% of ANZ fees), declined by 22%, with Public sector fees down 13%.

Australia, 92% of ANZ, saw fees decrease by 18%. New South Wales and Victoria decreased by 22% and 19% respectively. Queensland fell by 11%, with ACT down 22%. At the ANZ specialism level, Construction & Property (19% of fees), decreased by 24%, with Technology down 20%. Accountancy & Finance decreased by 16%, although Banking and HR were less impacted, down 11% and 9% respectively. New Zealand fees decreased by 26%.

ANZ consultant headcount decreased by 20% year-on-year and decreased by 17% in the half.

Rest of World (35%(7) net fees, 12%(7) operating profit)

Slowing markets in EMEA and challenging conditions in China and the Americas negatively impacted operating profit

Growth

Fees in our Rest of World ("RoW") division, which comprises 28 countries, decreased by 11%. Fees in Temp (37% of RoW) were resilient and flat YoY, with Perm down 16% as markets slowed through the half-year. Operating profit decreased by 65% to £7.2 million, with RoW operating costs down 6% YoY, representing a conversion rate of 3.5% (2023: 8.9%). Currency impacts were negative in the half-year, decreasing fees by £5.1 million and operating profit by £0.1 million.

EMEA ex-Germany (63% of RoW) fees decreased by 4%. France, our largest RoW country, delivered flat fees, however activity slowed through the half-year. Belgium and Spain increased by 6% and 1% respectively, and the UAE delivered record fees, up 26%. Switzerland and Poland decreased by 4% and 23% respectively. In response to market conditions, we reduced EMEA ex-Germany headcount at the end of the half-year.

The Americas (21% of RoW) fees decreased by 26% and with tough conditions throughout the region. The USA declined by 26%, Latin America by 27% and Canada by 28%. Given the extent of the fee declines, the Americas was modestly loss-making in the half-year.

Asia (16% RoW) fees decreased by 14%, with China down 22%. Japan and Malaysia decreased by 2% and 5% respectively. Overall, we made a small operating profit in Asia, however Mainland China was modestly loss-making.

In response to market conditions, we restructured our Americas and Asia businesses, including a right-sizing and de-layering of operational management, and a reduction in non-fee earner headcount. Overall consultant headcount in the RoW division decreased by 16% year-on-year. EMEA ex-Germany consultant headcount decreased by 10%, the Americas decreased by 33% and Asia was down 10%.

Purpose, Net Zero, Equity and our Communities

Our purpose is to benefit society by investing in lifelong partnerships that empower people and organisations to succeed, creating opportunities and improving lives. Becoming lifelong partners to millions of people and thousands of organisations also helps to make our business sustainable. Our core company value is that we should always strive to 'do the right thing'. Linked to this and our commitment to Environmental, Social & Governance (ESG) matters, Hays has shaped its Sustainability Framework around the United Nations Sustainable Development Goals (UNSDG's), and further details can be found in our FY23 ESG report.

Treasury management

The Group's operations are financed by retained earnings and cash reserves. In addition, the Group has in place a £210 million revolving credit facility, which reduces in November 2024 to £170 million and expires in November 2025. This 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 31 Dec 2023: 177:1) and its leverage ratio (net debt to EBITDA) to be no greater than 2.5:1 (as at 31 December 2023 the Group held a net cash position). The interest rate of the facility is on a ratchet mechanism with a margin payable over Compounded Reference Rate in the range of 0.70% to 1.50%.

As at 31 December 2023, £125 million of the committed facility was undrawn (31 December 2022: £120m of the committed facility was undrawn).

Principal risks facing the business

Hays plc operates a comprehensive enterprise risk management framework, which is monitored and reviewed by the Board. There are a number of potential risks and uncertainties that could have a material impact on the Group's financial performance and position. These include risks relating to the cyclical nature of our business and inflation, business model, talent recruitment and retention, compliance, reliance on technology, cyber security, data protection, contracts and the covid pandemic. These risks and our mitigating actions are set out in the 2023 Annual Report, and remain relevant. There are no additional risks since this date which impact Hays' financial position or performance, although as noted earlier in this statement, with macroeconomic uncertainties increasing, we are closely monitoring our activity levels and KPI's.

Dirk Hahn James Hilton

Chief Executive Group Finance Director

Hays plc

20 Triton Street

London

NW1 3BF

haysplc.com/investors

Independent Review Report to Hays plc

Report on the Condensed Consolidated Interim Financial Statements

Our conclusion

We have reviewed Hays plc's condensed consolidated interim financial statements (the "interim financial statements") in the Half-year report of Hays plc for the 6 month period ended 31 December 2023 (the "period").

The interim financial statements comprise:

The interim financial statements included in the Half-year report of Hays plc have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Basis for conclusion

Conclusions relating to Going Concern

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the Directors

PricewaterhouseCoopers LLP

Chartered Accountants

London

Condensed Consolidated Income Statement

• Administrative expenses include impairment loss on trade receivables of £1.7 million (2022: £2.4 million).
• Exceptional items for the six months to 31 December 2023 comprise goodwill impairment of £15.3 million and a restructuring charge of £12.6

million.

• The tax charge for the six months ended 31 December 2023 of £15.3 million included a £2.5 million tax credit in respect of exceptional items. The

pre-exceptional tax charge of £17.8 million represents an effective tax rate of 32.0% against a pre-exceptional profit before tax of £55.5 million. On a

post-exceptional basis the effective tax rate was 55.4%.

Condensed Consolidated Statement of Comprehensive Income

Items that will not be reclassified subsequently to profit or loss:

Items that may be reclassified subsequently to profit or loss:

• The Share-based payments charged to the Consolidated Income Statement and Share-based payments settled on vesting were previously presented net as "Share-based payments". The presentation for the six months ended 31 December 2022 has been updated to enhance the consistency and understandability of the disclosures. There has been no change in the underlying activity.

Condensed Consolidated Cash Flow Statement

The notes on pages 22 to 29 form part of these Interim Financial Statements.

Notes to the Condensed Consolidated Interim Financial Statements

For the six months ended 31 December 2023

The condensed Consolidated Interim Financial Statements ("Interim Financial Statements") are the results for the six months ended 31 December 2023. The Interim Financial Statements have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules (DTR) sourcebook of the United Kingdom's Financial Conduct Authority. The Interim Financial Statements are presented in sterling, the functional currency of Hays plc.

The Interim Financial Statements represent a 'condensed set of financial statements' as referred to in the DTR. Accordingly, they do not include all of the information required for a full annual financial report and are to be read in conjunction with the Consolidated Financial Statements for the year ended 30 June 2023 which have been prepared in accordance with UK adopted International Accounting Standards.

The Interim Financial Statements do not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial information for the year ended 30 June 2023 included in this report was derived from the statutory accounts for the year ended 30 June 2023, a copy of which has been delivered to the Registrar of Companies. The auditor's report on these accounts was unqualified, did not include a reference to any matters to which the auditor drew attention by way of an emphasis of matter and did not contain a statement under sections 498 (2) or (3) of the Companies Act 2006.

Accounting policies

The Interim Financial Statements have been prepared on the basis of the accounting policies and methods of computation applicable for the year ended 30 June 2023. These accounting policies are consistent with those applied in the preparation of the Consolidated Financial Statements for the year ended 30 June 2023, except as where stated below:

The fair value of trade receivables, trade payables, financial assets, bank loans and overdraft is not materially different to their book value.

The following new standard is mandatory for the first time in the Group's accounting period beginning on 1 July 2023 and no new standards have been early adopted. The Group's interim financial statements have adopted the new standard, but it has had no material impact on the Group's results or financial position:

The Group's accounting policies align to the requirements of IAS 1 and IAS 8. There have been no alterations made to the accounting policies as a result of considering all of the other amendments above that became effective in the period, as these were either not material 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 2024. These new pronouncements include:

The Directors are currently evaluating the impact of the adoption of all standards, amendments and interpretations but do not expect them to have a material impact on the Group's operations or results.

Going Concern

The Group's business activities, together with the factors likely to affect its future development, performance and financial position, including its cash flows and liquidity position, are described in the Half-year 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. Whilst 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.

At 31 December 2023, the Group had a net cash position of £66.9 million. In addition, the Group currently has an unsecured revolving credit facility of £210 million that reduces to £170 million in November 2024, and expires in November 2025. As at 31 December 2023, £125 million of the committed facility was undrawn. The net cash position is stated after deducting the amount drawn on the RCF.

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 forecast the Group's cash flow throughout the Going Concern period, being at least 12 months from the date of approval of the Interim Financial Statements.

The Board also considered the possible impact on the Group's financial position in the event of a sustained loss of business arising from a prolonged global downturn, similar in scale to the one caused by the Covid-19 pandemic in the year ended 30 June 2020. This scenario also forecasted both a strong net cash position and for the drawdown on the revolving credit facility to reduce throughout the Going Concern period, with significant headroom against its banking covenants.

In addition, the Group's strong balance sheet position and history of strong cash generation, tight cost control and flexible workforce management provides further protection.

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 Interim Financial Statements that there is a reasonable expectation that the Group has adequate resources to continue in operational existence throughout the Going Concern period, being at least 12 months from the date of approval of the Interim Financial Statements. For this reason, they continue to adopt the Going Concern basis of accounting in preparing the Interim Financial Statements.

IFRS 8, Operating segments

Turnover, net fees and operating profit

The Group's Executive 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 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 Executive 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 Condensed Consolidated Income Statement.

During the six months ended 31 December 2023, the Group incurred an exceptional charge of £27.9 million (2022: £nil). Of this, £15.3 million is a non-cash exceptional charge resulting from the partial impairment of the carrying value of goodwill relating to the 2014 Veredus acquisition in the USA, which was partially impaired in the year ended 30 June 2020. The goodwill impairment charge is a material non-cash item that based on its size and nature is considered to be exceptional. The remaining Veredus goodwill balance at 31 December 2023 is £7.1 million.

In response to increasingly challenging market conditions and a clear slowdown in most markets, we restructured the business operations of several countries across the Group, to better align business operations to market opportunities and reduce operating costs. The restructuring exercise led to the redundancy of a number of employees, including senior and operational management and back-office positions and the closure of several offices. Effective 31 August 2023, after 16 years of service, Alistair Cox stepped down as CEO and from the Board. The combined costs relating to this were £12.6 million, and are considered exceptional given their size and impact on business operations. The cash impact of the exceptional charge in the half-year was £6.8 million, with a further £2.5 million cash outflow expected in the six months to 30 June 2024.

In total the exceptional charge generated a tax credit of £2.5 million (2022: £nil).

The last time that the Group recognised an exceptional restructuring charge was in the year ended 30 June 2020, in the immediate aftermath of the Covid-19 pandemic.

The Group's consolidated effective tax rate for the six months ended 31 December 2023 is based on the forecasted pre-exceptional effective tax rate for the full year of 32.0% (31 December 2022: 29.0%, 30 June 2023: 28.0%). The tax rate is higher than the UK statutory tax rate of 25.0% due to higher tax rates in a number of jurisdictions in which the Group operates.

The tax charge for the six months ended 31 December 2023 of £15.3 million included a £2.5 million tax credit in respect of the exceptional charge. The pre-exceptional tax charge of £17.8 million represents an effective tax rate of 32.0% against a pre-exceptional profit before tax of £55.5 million. On a post-exceptional basis the effective tax rate was 55.4%.

The net deferred tax balance at 31 December 2023 is an asset of £18.5 million (31 December 2022: asset of £16.4 million, 30 June 2023: asset of £18.6 million).

On 20 June 2023, Finance (No 2) Act 2023 was substantively enacted in the UK, introducing a global minimum effective tax rate of 15%. The legislation implements a domestic top-up tax and a multinational top-up tax, effective for accounting periods starting on or after 31 December 2023. The Group applied the exception under the IAS12 amendment to recognising and disclosing information about deferred tax assets and liabilties related to top-up income taxes.

The following dividends were paid by the Group and have been recognised as distributions to equity shareholders:

The final dividend for the year ended 30 June 2023 of 2.05 pence per share and the special dividend for the year ended 30 June 2023 of 2.24 pence per share were paid out of retained earnings.

The proposed interim dividend for the six months ended 31 December 2023 of 0.95 pence per share is not included as a liability in the balance sheet as at 31 December 2023.

Goodwill arising on business combinations is reviewed and tested on an annual basis for impairment, or more frequently if there is an indication that goodwill might be impaired. Goodwill as at 31 December 2023 has been assessed for triggers for impairment as required under IAS 34 and accordingly, an impairment loss of £15.3m has been recorded in respect of the US business. At this stage, the remaining carrying value of goodwill is £7.1 million, however dependent upon the future impact of the current trading conditions, there is potential for change in the key assumptions that may give rise to an additional impairment. Refer to note 3.

The required provision for impairment of both trade receivables and accrued income is analysed using a provision matrix to measure the expected credit losses, in which the allowance for impairment increases as balances age. Expected credit losses are measured using historical losses for the past five years, adjusted for forward-looking factors impacting the economic environment, such as the GDP growth outlook, and commercial factors deemed to have a significant impact on expected credit loss rates. The provision for impairment has decreased compared to 31 December 2022 in line with movement on trade receivables.

The £7.6 million loss on the remeasurement of the net defined benefit surplus is mainly due to a decrease in the discount rate adopted within the key financial assumptions, which increased the calculation of the schemes' defined benefit obligation, partially offset by a higher than expected return on the scheme assets.

In respect of IFRIC 14, the Schemes' Definitive Deeds and Rules are 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. Agreements to make funding contributions do not give rise to any additional liabilities in respect of the scheme.

Restructuring provisions are disclosed in note 3. Of the £12.6 million restructuring charge, £1.5 million related to early vesting on Performance Share Plans (PSPs) and has been charged to equity.

As a global specialist in recruitment and workforce solutions and in common with other similar organisations, in the ordinary course of our business the Group is exposed to the risk of legal, tax and other disputes. Where costs are likely to arise in defending and concluding such disputes, and these costs can be measured reliably, they are provided for in the Consolidated Financial Statements. These items affect various Group subsidiaries in different geographic regions and the amounts provided for are based on management's assessment of the specific circumstances in each case. The timing of settlement depends on the circumstances in each case and is uncertain.

Management does not consider it reasonably possible that any of these balances will materially change in the next 12 months.

The Group's £210 million unsecured revolving credit facility matures in November 2025, although at the lower value of £170 million in its final year due to reduced lender commitments received. The financial covenants within the facility remain unchanged and require the Group's interest cover ratio to be at least 4:1 (ratio as at 31 December 2023: 177:1) and its leverage ratio (net debt to EBITDA) to be no greater than 2.5:1 (as at 31 December 2023 the Group held a net cash position). The interest rate of the facility is based on a ratchet mechanism with a margin payable over SONIA in the range of 0.70% to 1.50%.

As at 31 December 2023, £125 million of the committed facility was undrawn (31 December 2022: £120 million of the committed facility was undrawn).

There are no significant events after the balance sheet date to report.

Like-for-like results represent organic growth of operations at constant currency. For the six months ended 31 December 2023 these are calculated as follows:

H1 2024 is the period from 1 July 2023 to 31 December 2023.

The Q1 and Q2 net fee like-for-like growth percentages are as reported in the Q1 and the Q2 Quarterly Updates.

IFRS 15 requires entities to disaggregate revenue recognised from contracts with customers into relevant categories that depict how the nature, amount and cash flows are affected by economic factors. As a result, the following information is considered to be relevant: