Highlights
Strong 15% operating profit growth, with a 40% drop-through of incremental net fees into operating profit
Strong, broad-based 14% net fee growth in Continental Europe & Rest of World; operating profit up 17%
- Strong net fee growth of 12% in Germany and 14% in France
- 15 further countries delivered net fee growth of over 10%, including Poland, Spain and Switzerland
- Excellent profit growth of £3.6m in the Division outside of Germany
UK & Ireland net fee growth of 3%; private sector up 4%, public sector up 1%
- Operating profit up 20% to £25.3m with 93% drop-through of incremental net fees into operating profit
- Markets overall were sequentially stable through the half. We saw low growth in the private sector, and public sector markets became increasingly challenging as the half progressed
Solid Asia Pacific net fee growth of 4%, with operating profit up 6%
- Australia net fees up 3% driven by Perm up 7%, as conditions remained mixed, though sequentially stable overall
- Asia net fees grew 7%, driven by all-time records in Japan, up 8% and China, up 16%
Consultant headcount was up 10% year-on-year as we invested where markets and outlook were supportive, notably Europe, Asia and the US, though investment slowed as the half progressed
Reduction in operating cash flow driven by higher working capital outflow due to strong growth in European Temp business, the reversal of a c.£20m year-end timing benefit, and phasing of cash flows in December
Net debt ended December at £56.1m, down £23m year-on-year. We expect net debt to reduce materially in the second half as we continue to target a net cash position
Interim dividend increase of 5%, in line with our strategy to build full year cover towards 3.0x earnings
Capital structure and dividend
The Board's priorities for our free cash flow are to fund the Group's investment and development, maintain a strong balance sheet and deliver a sustainable core dividend at a level which is both affordable and appropriate.
We target a core dividend cover range of 2.0x to 3.0x full year earnings and our strategy is to build cover towards the upper end of that range. Following the increase in the Group's core dividend in the year to June 2015, and taking into account the strong financial performance of the Group in the first half, the Board is increasing the interim core dividend by 5% to 0.91p per share (2014: 0.87p).
The Board remains committed to this sustainable and progressive dividend policy and will continue to review the core dividend level in line with our stated dividend cover policy. Additionally, we reiterate our policy regarding the uses of excess free cash flow as follows. Once we have built a net cash position in the region of £50 million and assuming a positive outlook, it is our intention that any excess free cash flow generated over-and-above this net cash position, that is not needed for the priorities outlined above, will then be distributed to shareholders via special dividends, or other appropriate methods, to supplement the core dividend.
The interim dividend payment date will be 5 April 2016 and the ex-dividend date is 3 March 2016.
Commenting on the results Alistair Cox, Chief Executive, said:
"This is a strong first half performance as we converted good 8%(1) net fee growth into 15%(1) profit growth. Market conditions remained good in many areas, particularly Europe, but growth slowed toward the end of the half in the UK and Australia as increased global uncertainty impacted sentiment. Against this backdrop, we successfully balanced further investment with improved business efficiency to deliver excellent operating leverage and a further improvement in our sector leading conversion of net fees into profits.
This balanced approach sets our performance apart. We invested quickly wherever market conditions and outlook were supportive. As a result we delivered 18 record first half net fee performances, including Germany, France, China and Japan. In the UK, we grew net fees by 3%(1) and improved business productivity to drive exceptional profit leverage. In Australia, although conditions remained mixed we delivered further net fee and profit growth.
Looking ahead, we are mindful of increasing global uncertainties, but remain positive and see many opportunities to grow. Our business has the scale, diversity, people and technology to capture the many long-term opportunities available to us, while at the same time being nimble enough to respond to fast-changing conditions to maximise profit and cash generation along the way."
