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Corporate Reporting of Hays Plc

University: N/A

  • Unit No: N/A
  • Level: High school
  • Pages: 14 / Words 3584
  • Paper Type: Assignment
  • Course Code:

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  • Downloads: 57
Organization Selected : Hays Plc
Question :

This assignment will cover the following questions which are explained below:

  • Give an introduction of the company and the business model
  • Enlist the assumption for the given topic
  • Analysis and interpretation of entire business performance, profitability ratio, liquidity management and the financial structure.
Answer :

INTRODUCTION

1.1 Company name along with its external auditors

The main objective of this report is to give information about various shareholder which might be interested to invest in Hays Plc. This report would be providing appropriate analysis of financial statements of Hays Plc for year 2017 and 2018 which is audited by Pricewaterhousecoopers LLP.

In the similar aspect, it would be observing percentage change from year 2017 to 2018 along with proper ratio analysis such as profitability, liquidity, solvency, investment and efficiency. Furthermore, it would be using various financial statements for analysing its financial performance and position of Hays Plc of these two consecutive years. Simultaneously, there will be discussion of improvements which must be formed for enhancing other opportunities of investment.

1.2 Business model

The revenue model is very simple in this organization as they gain percentage fee on contingent aspect if any candidate is placed in particular role with specific client. In the similar aspect, its delivery model is with reference to deep industry expertise among contract, permanent and temporary recruitment markets. The most important thing is that there consultants are long termed, trusted to both candidates and clients as well. They have equipped various technology, data analytics and tools in this industry as there focus is on net fees instead of turnover which is simply contributed from temp salary. Their capability for converting its net fees into operating profit is considered as key profit metric. The highest conversion rate is at 22% in this industry.

There main belief is to have balanced exposure in their markets which is referred as key for driving superior and resilient financial performance along with better outcome for their clients via economic cycle. During this exposure, there recruitment market would be having deep scale and expertise in 20 specialist areas on basis of skilled employment. Its market capitalisation is as 2.241 Billion (Hays plc (HAS.l), 2018).

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ASSUMPTIONS

In this report, it has shown % increase or decrease in specific financial variables of two year 2017 and 2018 for articulating worse or better position of its performance. Further, the performance would be measured through various financial ratios such as activity, profitability, investment and liquidity. There is consideration of annual report of both specified year and this would be helping investors and potential shareholders.

ANALYSIS AND INTERPRETATION

3.1 Stating overall performance

Profit and Loss statement

2018

2017

% change (Increase/ Decrease)

Better/ Worse/ Constant)

Revenue

5753

5081

13.23%

Better

Cost of Goods sold

4681

4126

13.45%

N/A

Gross profit

1072

955

12.25%

Better

Operating Income

247

215

14.88%

Better

Net profit

166

139

19.42%

Better

Balance sheet

2018

2017

 

 

Non current assets

375

289

29.76%

Better

Current Assets

1133

1020

11.08%

Better

Current Liability

785

717

9.48%

Worse

Non Current liability

24

6

300.00%

Worse

Equity

701

586

19.62%

Better

Cash flow statement

2018

2017

 

 

Cash produced from operations

163

134

21.64%

Better

Cash inflow from operations

163

134

21.64%

Better

Cash inflow from investing activity

-38

-21

-80.95%

Worse

Cash inflow from financing activity

-111

-70

-58.57%

Worse

Net cash increase in cash

14

43

-67.44%

Worse

Interpretation: The Return on capital employed has decreased over year 2017 to 2018 as 36.32% to 34.12% which shows that overall performance of Hay Plc is decreasing as it could be observed with reduction in turnover from asset. The above table is representing worsen and better performance of Hay Plc with its important financial statements. With context of statement of profit and loss, it could be interpreted that it is making profit in efficient aspect as its revenue is raising by 13.23% along with cost of goods sold as well but its gross profit is in better position by 12.25%. Even its net income is raising with contribution of each aspect.

In the similar aspect, there is analysis of balance sheet which shows position of its total assets and liabilities. It has been observed that its non current and current assets are raising with good percentage. Current assets include trade receivables and cash equivalents as accrued income which has been primarily arisen when it workers on temporary are given services but that particular amount incur and earned margin is yet to be invoices on client because of time factor. Its non current and current asset are rising by 29.76% and 11.08% in 2018. On the contrary, its liabilities are in worse position as its current liability is increasing but not with huge proportion whereas non current liabilities are raising by approx 300% due to high increment in deferred tax liability of year 2018.There are taxable temporary variation on basis of investment in subsidiaries where DTL are not recognised as they are attributable as foreign subsidiaries and tax thereon. In the same series, equity plays vital role in balance sheet which is increasing by 19.62% is good for business entity (Annual Report of Hays Plc, 2018).

Furthermore, there is description of cash flow statement from year 2017 to 2018 with its major elements such as operating, investing and financing activity with there percentage change. It could be easily observed that, organization is moving in positive aspect with its operations but on the contrary, its investing and financing activity are having worsen situation. In the similar aspect, its cash position is not performing well with reference to investing and financing activity over the year 2017 and 2018.

Segmental Analysis

2018

2017

% change (Increase/ Decrease)

Australia and New Zealand

69.1

62.8

10.03%

Germany

86

80.85

6.37%

United Kingdom and Ireland

47

41.5

13.25%

Rest of world

41.3

26.7

54.68%

Interpretation: Hays Plc is considered as leading global recruiting experts which are highly focusing on every segment of recruitment market as it has 4 reported segments which are stated above. There is absence of material difference among segmentation of turnover of group through geographic destination and origin. The continuing operation consist of 1st class if business which are professional, skilled and qualified recruitment. It has been articulated that Germany has huge proportion from its operation which is followed by Australia and New Zealand and then United Kingdom. This trend had been continued in 2018 as well but rest of world has change of 54% and UK has 13.25%. The country which has high operating income is increasing by only 6.37%in year 2018.

3.2 Profitability ratios

Profitability Ratio

Formula

2017

2018

Gross profit ratio

(Gross Profit/ Sales)*100

18.80%

18.65%

Return on capital employed

Net operating profit/ Capital employed)

36.32%

34.12%

Operating profit margin

(Operating income/ Capital employed)*100

36.32%

57.60%

Interpretation: Profitability ratio is referred as financial metrics which is used through investors and analysts for evaluating and measuring capability of Hays Plc for generating profit on basis of balance sheets assets and revenue. The above table is representing various parameters which are used such as gross profit, return on capital employed and operating profit margin. The gross profit over two years are not having any difference but its return on capital employed has been decreased by 2.2% which is giving impact on overall financial performance of Hays Plc. This stable amount of gross profit margin is because of increment due to the best management of cost of sales with reference to revenue as its segmentation is appropriately done which is major driver for increment in turnover. In year 2017, it was getting return of 36.32% on employed capital whereas in 2018, it was giving 34.12% which is not highly preferable as compared to previous year.

In the similar aspect, its operating profit margin has huge variation from year 2017 to 2018 which is positive impact on business entity. Its segmental revenue is also increasing from previous year and by observing cash produced from operations of whole group is about 21.64%. It had been underlined that high operating margin is highly preferable as compared to low ratio as it reflects organization is creating enough money with its various ongoing operation for repaying its variable cost along with fixed cost as well.

The sales of year 2017 has been increasing in 2018 by approx 700 £s million which will lead to increment in fees with its candidate and client perspective as it is focussing its business. It has been observed that organization is having zero inventory over year 2017 and 2018.

3.3 Activity Ratio

Activity ratio

Formula

2017

2018

Asset Turnover Ratio

Net sales/ Average total asset

4.19

4.08

Trade Receivables turnover

(Trade Receivable/ Revenue)*365

42.10

40.16

Trade Payable turnover

(Trade Payable/ Cost of goods sold)*365

18.93

19.10

Interpretation: Activity ratio is considered as metric which will identify capability of Hays Plc for transforming account of balance sheet in revenue. It has been traced with various parameters such as asset, Trade receivables and payable turnover ratio over year 2017 and 2018. The turnover on asset has been decreasing but by 0.11 which could be negotiable as it means that net sales are equal to average total assets by 4.08 in 2018.

In the similar aspect, trade receivable and payable ratio has been traced over these two years. The period of trade payables had raised from 18 days in 2017 to 19 days in 2018 as it could be interest free method for increasing fund and might create increment in liquidity of Hays Plc. On the contrary, it might face extra cost because of late payment fines if they have not created any agreement for extending terms of credit.

Furthermore, trade receivables are decreasing by 2 days that small proportion of consumers are preferring credit payments as low trade receivable turnover is constant 2 days of this past two years. In this activity ratio, Hays Plc has zero inventory so has to grab specific opportunity.

3.4 Liquidity management

Liquidity Ratio

Formula

2017

2018

Current Ratio

Current Asset/ Current Liability

1.42

1.44

Quick ratio

(Current asset- Inventory)/Current Liability

1.36

1.38

Interpretation: Hays Plc's liquidity has been measured through current and quick ratio as they remained constant across past two years 2017 and 2018. The ideal ratio of current ratio is 2:1 which signifies capability for repay its short term obligations with its current assets. In year 2017 it was 1.42 which was improved by only 0.02 in 2018 which means that it has to work for improving its current asset against to current liabilities.

In the similar aspect, it has measured capability for repaying its short term obligations with its quick assets in short duration. The ideal ratio is 1:1 and it has been observed that it is very good position as exceeding the set amount. Hence, organization's liquidity and appropriate management of its resources during year 2017 and 2018.

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3.5 Financial structure and gearing

Financing ratio

Formula

2017

2018

Interest coverage ratio

Operating income/ Finance (Interest) cost

30.71

83.40

Gearing ratio

('Debt'/ 'Debt'+'Equity')*100

1.01

3.31

Interpretation: The above table is analysing gearing ratio and financial structure of year 2017 and 2018 with interest coverage and leverage ratio as gearing ratio. In year 2017, it is rising with huge duration as it is because of operating income along with finance cost. In the similar aspect, gearing ratio is raised with optimal capital structure with year which is improving the situation (Annual Report of Hays Plc, 2017).

3.6 Investment Ratios

Investment ratio

Formula

2017

2018

Return on Equity

Profit after tax/ Net worth

23.72%

23.68%

Interpretation: The above table is specifying investment ratio with context of returns on equity which is constant as equities are increasing in huge proportion but its net worth is balanced in such aspect than it has equal return on equity so it is preferable to its investors (Return on Equity, 2018).

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CONCLUSION

From the above study it has been concluded that there is absence of improvements of financial performance of Hays Plc over 2 years. It has been articulated that corporate accounting plays essential role for assessing its financial performance with appropriate analysis. Hays Plc is generating the highest revenue from Germany which must grab opportunities in other regions by setting it as benchmark. Consequently, financial position of Hays Plc is trying to raise its performance from year 2017 to 2018.

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