Comprehensive Financial Analysis Report: Hays Plc Performance

This report provides a comprehensive financial analysis of Hays Plc, a multinational recruitment company, evaluating its performance over a five-year period (2012-2016). The analysis focuses on key financial ratios, including profitability (Net Profit ratio, Operating Profit ratio, Return on Shareholders Capital), liquidity (Current Ratio, Quick Ratio), and dividend ratios (Dividend Yield, EPS). The report examines trends in turnover, net profit, operating profit, and shareholder equity, highlighting both positive and negative indicators. Furthermore, it investigates the company's financial stability, debt-to-equity ratio, and interest coverage. Section B expands the analysis to incorporate qualitative factors, such as the company's performance in the job market, media portrayal, and corporate governance practices. The report concludes with an overall assessment of Hays Plc's financial health and provides insights into its strengths and weaknesses, offering a well-rounded view of the company's financial standing and operational effectiveness.

Finance
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Table of Contents
INTRODUCTION ...............................................................................................................................3
SECTION – A ......................................................................................................................................3
1 Profitability & Earnings Ratios Analysis ......................................................................................5
2 Dividend Ratios Analysis 5
3 Financial Stability & Liquidity ....................................................................................................6
SECTION – B.......................................................................................................................................6
1 Performance of Hays Plc...............................................................................................................6
2 Hays portrayed by journalists........................................................................................................7
3 Corporate-Governance...................................................................................................................8
4 Asset Value Per Share Along With the Market Price ...................................................................8
CONCLUSION....................................................................................................................................9
References..........................................................................................................................................10
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INTRODUCTION
In the competitive era, companies carry out an operation at a multi-national level, as they carry out operations in different parts of the nation. In
order to take rational investment decisions, investors need to analyse and examine the financial performance of the company and thereby make
an investment in that firm which has sound financial status and excellent operational excellence. Hays Plc is a leading multinational company
that provides top-quality and excellent workforce across a number of countries around the globe. It is a public limited company, listed on LSE
and constituents of FTSE 250 (Ozturk and Acaravci, 2013). The report aims at making a financial evaluation of the Hays Plc through ratio
analysis technique for the recent five years. In such respect, most important ratios that are profitability, liquidity and long-term solvency position
of the firm will be analysed. Apart from this, investors are not only concerned about the quantitative performance, but also have to examine non-
monetary (qualitative) analysis. In such regards, corporate governance report will be analysed to inform investors so as to make well-informed
and profitable decisions.
SECTION – A
Particulars Formula 2012 2013 2014 2015 2016
Turnover 3654.6 3696.9 3678.5 3842.8 4231.4
Net profit 86.5 71.7 90.9 105.6 124.5
Operating profit 128.1 125.5 140.3 164.1 181
NP ratio (NP/revenues)*100 2.37% 1.94% 2.47% 2.75% 2.94%
OP ratio (OP/revenues)*100 3.51% 3.39% 3.81% 4.27% 4.28%
Share capital 190.6 216.4 240.7 269.6 457.8
Return on shareholders capital (Net return/shareholders capital)*100 45.38% 33.13% 37.76% 39.17% 27.20%
Liquidity ratios
Current assets 577.3 605.9 627.3 670.3 833.4
Current liabilities 463.6 471.3 480.5 501.7 604.6
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Inventory 0 0 0 0 0
Prepaid expenses 187 193 198 231 277
Current ratio (Current assets/current liabilities 1.25 1.29 1.31 1.34 1.38
Quick ratio (Current assets-inventory-prepaid expenses )/Current Liabilities 0.84 0.88 0.89 0.88 0.92
Gearing ratios
Long-term debt 170 145 110 100 25
shareholder's equity 190.6 216.4 240.7 269.6 457.8
Debt to equity ratio (Long-term Debt/Shareholders Equity) 0.89 0.67 0.46 0.37 0.05
Interest payment 8 7.7 5.5 5 4.3
Interest coverage ratio EBIT/Interest expenses 16.01 16.30 25.51 32.82 42.09
Investment ratios
EPS (Earning for shareholders/Number of outstanding shares) 5.47 5.14 6.13 7.44 8.48
EPS growth 5.39% -6.03% 19.26 % 21.37% 13.98%
DPS 4.78 2.5 2.5 2.67 2.8
Dividend yield (DPS/EPS) 0.87 0.49 0.41 0.36 0.33
Market price 82.3 129.8 145.6 145.9 149.3
Price earning ratio (Market price/EPS) 15.05 25.25 23.75 19.61 17.61
Price earning growth 2.50% 67.84% -5.94% -17.44% -10.22%
Net assets value 190.6 216.4 240.7 269.6 457.8
NAVPS (Excluding intangibles) -3.03 -0.38 2.39 2.91 15.06
1 Profitability & Earnings Ratios Analysis
While making investing decisions, one has to analyse the financial statements of the company and draw relevant conclusions. A more effective
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and profitable investing decisions can be made by analysing the financial ratios of the last five years. Hence above stated table shows the
calculations of the last five years of Hays Plc. In the accounting year 2013, NP ratio of the firm decreased from 2.37% to 1.94% which is not the
good indicator for the firm. It shows that during such period business unit failed to attract a large number of professional customers. Hence, Hays
Plc needs to make the focus on the promotional aspects or campaign for providing information to the customers about the recruitment services
offered by it. Along with this, the business unit also needs to make the focus on raising the quality of services which in turn helps them in
enhancing the revenue and thereby profit margin. The net profitability ratios are showing an increasing trend throughout except in the year 2013
in which there is a slight decrease (Dolvin, Jordan, and Miller, 2012). Also, the net profits are almost constant except in the year 2014 in which
there is a significant increase. Apart from this, the operating profit ratios are also showing an increasing trend except in the year 2013. There is a
significant increase in the operating profitability ratios every year till 2016. The increase in profitability and earnings of the company is due to
the better customer services which have led to the increase in the customer base in the year 2016. However, there is a fluctuating trend in return
on the shareholders capital which is due to the increase in the capital infusion into the company, but the earnings were not increased in the similar
proportions. At the end of the accounting year 2016, NP ratio of Hays Plc was 2.94% which is highly lower as compared to the average industry
level. Thus, the business unit needs to place emphasis on making high control on the level of expenses. Thus, by reducing the proportion of
indirect expenses business unit can maximise the net profit margin to the significant level (Behrens, Corcos, and Mion, 2013).
2 Dividend Ratios Analysis
As the earning per share of the company is showing an increasing trend since last three years which suggests that the shareholders can derive a
better return on their investments. The increase in the earnings will have a positive impact on the dividends distributions. Hays Plc has been
following a fluctuating dividend policy that means the dividends distributed are depending on the various factors other than the earnings.
However, in the year 2016, the dividend payout ratio has been increased from that of previous years. This means that the company has retained
fewer earnings for the purpose of ploughing it back into the business. This also means that the company might not be expecting the increase in
the investing opportunities for the next year. However, the dividend distributions are almost constant and do not vary much except in the case of
the unusual fluctuations in any year.
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3 Financial Stability & Liquidity
The liquidity situations of the company help us in analysing the ability of the company to meet its present obligations. It suggests us how well
the company can manage its working capital in order to meet all the present liabilities. The liquidity ratios help to find out the bankruptcy
condition of the company. Hence it is very important to analyse the liquidity position of any company while making any investment decisions.
The analytical tools for the liquidity are the current assets ratios and the quick ratios. In the case of Hays Plc, the current asset ratios are showing
an increasing trend The current asset ratio for the year 2016 is 1.38 which is quite acceptable and somewhat close to the ideal ratio that is 2:1.
Hence it can be concluded that the company can meet its short-term obligations effectively or the company has adequate resources for the
purpose of paying its outstanding liabilities. However, for maintaining the high level of liquidity company needs to make a focus on the
maintenance of current assets (Healy and Palepu, 2012). This, in turn, helps it in strengthening the liquidity position or aspect to a large extent.
The quick ratio implies the immediate cash or cash convertible assets available with the company in order to make payment of its demand
liabilities. In a case of Hays Plc, the quick ratio is constantly increasing except in the year 2015 (Slight decline) that suggests that the company is
making best possible efforts to pay out its immediate obligations. The overall analysis of the liquidity positions shows that the company has
sound liquidity position. In 2016, a quick ratio of Hays Plc inclined from .84 to .92 which shows that business unit has a large number of current
assets which can be easily converted into cash. Along with this, such ratio of the firm is higher than the ideal ratio that is .5:1. Thus, a company
needs to make a focus on employing money in the other profitable investment opportunities which in turn helps a company in improving the
financial position and performance to a large extent (Behrens, Corcos, and Mion, 2013).
SECTION – B
1 Performance of Hays Plc
Hays Plc is an unrivalled job search engine extending its services across the globe. It helps thousand of job seekers to find jobs whether
temporary or permanent as per their requirements. The business of the company is build in the way which is well balanced in order to serve the
needs of both structural and cyclical markets. 63 % of the revenues of the company is earned in mature markets like that of Ireland and the UK.
The rest is from the remaining structural markets. This way the company has become one of the leading global experts in the providing the
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placement services to the skilled, qualified and professional workforce all over the world (Hays Recruiting Experts Worldwide,2017). Each day
thousands of job seekers avail the services of the company and find suitable jobs. The company placed 63000 people in the permanent jobs and
200000 people in the temporary roles. The company operates in the contingent fee model with the fees paid in proportion to the salary of the
candidate in case of placing for permanent roles while for a temporary role the fees are recognised based on the tenure for which the respective
person was active on the job. Hence the company performed very well by earning the revenues of £4231.4 in the year 2016 which far more as
compared to its competitors. Also, the company can earn good percentages of operating profits by effectively managing its costs. Hence it can be
said that the company has been performing very well in the industry and is becoming a benchmark for that of its competitors.
2 Hays portrayed by journalists
As per the recruiting expert's opinion, Hays Plc promotes job growth opportunities for the skilled professionals. As per the experts, the company
will work with a blended workforce for the purpose of increasing the use of temporary and contract assignments. Employers of the various
company's will factor these respective assignments into their planning for the workforce and therefore in making recruitments. In 2017 the
company is planning to use more super temps of highly skilled and professional people who can be appointed to senior and other executive roles.
There is going to a shortage of highly skilled and experienced people in the Western Australia, Queensland and New South Wales and Victoria.
Although the company plans to meet some of the demand by the oversees migrants but not the entire requirement can be fulfilled. Hence there is
going to be a shortage of skilled professionals (Ozturk and Acaravci, 2013). The financial reports of the company suggest that the company is
progressing with its flexible set of services which is ultimately helped in increasing its customers throughout the world. Also, the policies of the
company are clear and understandable, and hence its achieves clients satisfaction to a larger extent. Presently the company is serving the
employers and the candidates of over the 33 largest countries of the world. The effective policies of the company have contributed a lot in
increasing its revenues and profitability.
3 Corporate-Governance
Hays Plc follows one of the most effective and solid governance structure than that of its competitors. During the year ended 2016, the Board of
Directors undertook an external evaluation of their own performance in the company. With great commitment, the directors assisted in carrying
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out the evaluation and took its recommendations very seriously. The Board of the company consists of the experienced and senior level directors
who designs the policies of the company which leads to the increased progress of the company manifold. Also, there is a blend of female and
male diversity in the board of the company which is based on the gender equality concept. Various committees are formed in the company for
convenient administration and transparent reporting (Hays Recruiting Experts Worldwide, 2017). Audit Committee is framed with respective
directors as its members who have the responsibility of reviewing the financial statements, external audit aspects along with the internal audit
plans. Also, there is remunerations committee which is assigned with the responsibility of setting, reviewing and recommending the overall
remuneration strategy and policies at the various level of the company (Jensen, 2013). The Committee also is entrusted with the responsibility of
the reviewing and approval of the remuneration policy of the senior management and that of the executive directors. Then there is Nomination
Board which is responsible for the making recommendations to the board for the purpose of board composition and that of its committees. Then
there is another committee named as Group Risk Committee which is entrusted with the role of providing effective leadership strategy, oversight
and direction of the various risks that Hays Plc is exposed to in the market.
4 Asset Value Per Share Along With the Market Price
As per the calculations are done on the table the net asset value of Hays Plc is increasing significantly which rises to £457.80 in the year 2016.
Therefore it can be said that the company is performing well and earning a good share on the net assets employed in the business. The increasing
trends show the higher returns earned by the company in employing its capital. Thus there is a favourable net asset value of the company which
suggests the investor make investments into the company in order to earn higher returns. The other performance evaluator is the market price of
the company (Behrens, Corcos, and Mion, 2013). The increase in the market price reflects the increase in the demand for the shares or other
securities of the company. The more the market price, the more popular and profitable the investment opportunity for the prospective investors
into the company. The market price of Hays Plc is showing an increasing trend which rises to £149.3 in the year 2016. This shows that the
company is performing really well in order and has become a good investment opportunity for the investors to earn capital gains in a short
period. However, the gains will be higher in a case of long-term investment decisions as the company is in its growth phase. Thus based on the
above analysis the investment in the shares of Hays Plc is highly recommended.
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CONCLUSION
The above analysis was conducted on the recruiting and consultancy firm Hays Plc on the various financial parameters like the net asset value,
market prices, net profitability, etc. Based on the above-conducted analysis it can be inferred that Hays Plc is growing with a fast pace and in a
very short span of time, it has become a leading company operating across the globe. Hence it beneficial to make an investment in such company
by the prospective investors.
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REFERENCES
Books and Journals
Behrens, K., Corcos, G. and Mion, G., 2013. Trade crisis? What trade crisis?. Review of economics and statistics,.95(2).pp.702-709.
Dieckmann, S. and Plank, T., 2012. Default risk of advanced economies: An empirical analysis of credit default swaps during the financial crisis.
Review of Finance.16(4). pp.903-934.
Dolvin, S. D., Jordan, B .D. and Miller Jr, T.W., 2012. Fundamentals of investments: valuation and management.
Healy, P. M. and Palepu, K. G., 2012. Business Analysis Valuation: Using Financial Statements. Cengage Learning.
Jensen, K., 2013. Coloured Petri nets: basic concepts, analysis methods and practical use (Vol. 1). Springer Science & Business Media.
Kou, G., Peng, Y. and Wang, G., 2014. Evaluation of clustering algorithms for financial risk analysis using MCDM methods. Information
Sciences, 275, pp.1-12.
Ozturk, I. and Acaravci, A., 2013. The long-run and causal analysis of energy, growth, openness and financial development on carbon emissions
in Turkey. Energy Economics, 36, pp.262-267.
Vanhegan, I. S., and et.al., 2012. A financial analysis of revision hip arthroplasty. J Bone Joint Surg Br. 94(5). pp.619-623.
Vogel, H. L., 2014. Entertainment industry economics: A guide for financial analysis. Cambridge University Press.
Zimlichman, E., and et.al., 2013. Health care–associated infections: a meta-analysis of costs and financial impact on the US health care system.
JAMA internal medicine, 173(22), pp.2039-2046.
Online
Hays Recruiting Experts Worldwide. 2017 [ONLINE] Available through <https://www.haysplc.com/> [Assessed on 02nd January 2017].
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