- Fees down 14% in Q1
- Significant savings being delivered
- Hays to ‘benefit materially’ once markets rebound
Headhunter Hays (HAS) has had a hard time of late. Pre-tax profits plunged more than 90% in the year to June 2024 and the recruiter is on a losing streak of negative fee income growth amid a hiring slowdown.
The FTSE 250 firm’s fortunes failed to reverse in the first quarter of the new financial year, yet the depressed shares rallied 2.2% to 88p as Hays said it expects to ‘benefit materially’ once end markets recover.
Investors were also heartened to hear initiatives to deliver some £30 million in annual savings by the end of full year 2027 are ‘progressing well’.
DOWN ACROSS THE BOARD
Like-for-like net fees fell 14% in the first quarter ended 30 September as tough conditions prevailed in Hays’ major markets and confidence remained low.
Fees declined across all of Hays’ key regions: Germany, the UK & Ireland, Australia & New Zealand and the Rest of World.
However, with an 11% drop, income from temporary placements, which speaks for roughly 60% of the group total, held up better than income from permanent placements, which represents around 40% of the total and tumbled by 20% in the quarter.
Hays’ UK arm was badly hit with fees down 20%, including a 16% slide in temporary fees and a 26% plunge in permanent fees.
‘Activity levels remained subdued but stable through the quarter,,’ explained Hays, ‘and we continue to see longer than normal “time-to-hire”, impacted by low levels of client and candidate confidence.’
In terms of the outlook, Hays expects market conditions will remain ‘challenging’ near-term and given limited forward visibility, still expects first half pre-exceptional operating profit will be sequentially lower than the second half of last year.
PERM UNDER PRESSURE
CEO Dirk Hahn commented: ‘Net fees in the quarter were down as expected reflecting the tough market conditions, particularly in Perm where we see longer time to hire and low levels of confidence which we expect to continue. Given this backdrop, we remain resolutely focused on operational rigour through business line prioritisation, resource allocation, and efficiency initiatives and, due to our actions, group consultant productivity increased by 5% year-on-year in Q1.’
He added: ‘We have a strategy in place to build a structurally more profitable and resilient business underpinned by our culture and talented colleagues worldwide. So, I remain confident that the business will benefit materially when our end markets recover.’
HEAD ABOVE WATER
Julie Palmer, partner at Begbies Traynor (BEG:AIM), said that given sluggish employment rates, lower business confidence and an uncertain macroeconomic backdrop, it is ‘little surprise that the recruiter has struggled to generate fee income. For now, employers are unlikely to kick off significant growth plans and launch hiring programmes as leaders hold their breath for the outcome of the autumn budget.’
Palmer continued: ‘Beyond the budget, employers will be keeping a close eye on Labour’s employment rights bill, which could see the entire ecosystem change and boost labour costs even further. For the time being, the challenges faced by recruiters are unlikely to unwind quickly, but Hays’ proactive efforts at managing its cost base should stand it in good stead for an eventual recovery in the jobs market and allow it to keep its head above water in the meantime.’
