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
SECTION – A
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 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.
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 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.
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 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.
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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