pivot

1. Materially increase and diversify Group profits

Description

We are now three years into our five-year plan to broadly double and materially diversify the Group’s profits by 2018. We have a clear framework for how we prioritise investment in order to build towards these aspirations. Our plan is underpinned by some clear assumptions: a continued gradual economic recovery, no material economic shocks or recessions in any of our major markets and a modest acceleration of growth in the outer two years of the plan.


What we achieved in FY16

  • Three years into the plan period, we are in line with where we expected to be at this stage
  • The mix of profitability is different to that which we had assumed, but given the lack of visibility inherent in our business, this was always likely to be the case. In particular, after three years, the UK has outperformed expectations
  • So far over the three years to date, we’ve experienced material FX headwinds of £22 million in our International business, but this has been mitigated ahead-of-plan operating performance

Our objectives for FY17

  • There is material increased uncertainty in the UK market as a result of the vote to leave the EU and this is likely to have an impact on our UK earnings in the current year, though it remains too early to fully assess what that impact may be, and we will continue to monitor activity levels closely
  • In our international businesses, where markets remain supportive, we will continue to focus on driving fee and profit growth as we work towards our objectives

2. Build critical mass and diversity across our global platform

Description

Increased geographic and sectoral diversification and exposure to perm, temp and contractor markets across the business reduces the relative volatility of earnings through the various stages of the economic cycle. We invest to rapidly build our own headcount, office capacity and introduce new specialisms where and when appropriate. Our investment approach is driven by the long-term opportunity to reach significant scale where we see the potential, as well as the shorter-term need to deliver profits along the way.


What we achieved in FY16

  • Further expansion of our temp/contracting business, which now represents a material proportion of Group net fee income
  • Material increase in the percentage of non-perm net fees generated in the Group, excluding the UK, Germany and Australia (from 22% in 2011 to 33% in 2016)
  • Successfully completed the integration of our contractor-focused Veredus business and expanded our footprint in the US by opening one new office

Our objectives for FY17

  • We will focus on organic growth and further investment in headcount where conditions are supportive
  • Continue to expand the percentage of net fee income generated outside of our largest businesses (the UK, Germany and Australia)
  • Drive further growth in our contracting business in newer markets and invest to grow the US business

3. Invest in people and technology, responding to change and build relationships

Description

We believe that hiring, training and developing the best people in our industry is key to our success. We also think that by equipping those people with the most advanced tools and technology products, we can make them even more effective and better serve our customers. We recognise that our operating environment and the demands of our customers is evolving constantly, with new routes to market emerging and the amount and type of data we need to interact with constantly increasing. We are proactive in responding to these changes investing in internal expertise, processes and technology as well as seeking to form mutually beneficial external relationships.


What we achieved in FY16

  • We have continued to develop external relationships across a range of areas, most recently with SEEK in Australia, adding to existing relationships with LinkedIn and Google, amongst others.
  • We established a dedicated Data Analytics & Marketing function, working alongside our existing R&D function and Corporate Development teams
  • We made further progress with a project to automate our German back office, ensuring it is fit for purpose in a growing contractor business, and could drive further profit efficiencies in our business

Our objectives for FY17

  • We will continue to explore and develop mutually beneficial relationships and partnerships with other organisations, and further develop our internal capabilities and expertise in terms of data science and analytics, bringing those to bear to improve our business efficiency and service to clients and candidates
  • Further explore new and emerging business models to ensure we understand all new market opportunities, and ways to make our own business more effective, as well as potential threats to our existing model

4. Generate and distribute meaningful cash returns

Description

Our business is highly cash generative with low capital requirements and we have a clear policy in place when it comes to shareholder distributions. We have a core dividend which is set to a level which we believe to be secure under all predictable scenarios, is well covered by earnings and therefore appropriately reflects the cyclicality inherent in our business. We also have a long-standing goal of eliminating the Group’s net debt, and building a net cash position of around £50 million. Once this is achieved, we anticipate that any free cash flow which is generated every year over-and-above this level will be distributed to shareholders, assuming a positive outlook, most likely in the form of a special dividend.


What we achieved in FY16

  • Strong profit growth and a good underlying cash performance meant that we achieved our longstanding aim of eliminating the Group’s net debt this year, finishing the year with a net cash balance of £36.8 million, ahead of expectations
  • We increased the core dividend this year by 5%, with a full year dividend of 2.90 pence, and cover of 2.9x EPS, in line with our policy of building cover towards 3x

Our objectives for FY17

  • Once core dividend cover reaches 3x earnings, we intend to grow the core dividend in line with growth in earnings
  • Build our net cash position to £50 million. Once we achieve this net cash position, it is our intention that any excess cash that is generated over and above this level will be distributed to shareholders, provided our market outlook is positive