- Temp demand strong as clients stay ‘flexible’
- UK market still difficult to navigate
- Both firms keep full-year earnings outlook
Executive recruitment firms Hays (HAS) and PageGroup (PAGE) both stuck to their full-year earnings targets this week even after reporting weak quarterly fee generation.
Hays shares eased 1.5% to 103p while PageGroup shares gave up 1.2% after gaining 3% yesterday following its trading update.
MANAGING A TWO-SPEED MARKET
Both firms are lapping strong prior-year quarters, so the comparisons were always going to be tough, and both are seeing the same trends not just in the UK but globally.
Demand for temporary and contract roles, which represent 58% of Hays’ net fee income and 26% of PageGroup’s income, continues to outstrip demand for permanent workers with Hays reporting a 4% increase and PageGroup seeing an 11% increase ‘as clients seek more flexible options’ according to the firm.
In contrast, fee income for permanent roles, which make up 42% of Hays’ fees and 74% of PageGroup’s, were down 9% and 11% respectively, with Hays flagging ‘reduced client and candidate confidence’ and delays in the hiring process.
In the UK & Ireland, Hays posted a 7% drop in fee income with temp activity flat but permanent activity down 15% ‘as activity levels slowed’, while PageGroup saw a 17% drop in fees with temp activity up 6% and perm down 24% due to ‘clients deferring hiring decisions and candidates cautious about accepting offers’.
Fortunately for both firms the UK and Ireland are a small percentage of their total fee income – 20% in the case of Hays and 12% in the case of PageGroup – so at a group level fees were down just 2% and 6.5% respectively in the three months to June.
On a positive note, hiring in continental Europe, the Middle East and Africa – which makes up more than half of both firm’s group income – was positive thanks to demand in Germany and in their technology franchises.
FULL-YEAR FORECASTS MAINTAINED
Investors breathed a sigh of relief that both firms stuck to their existing profit guidance, in spite of the clear headwinds in permanent hiring.
Hays confirmed its operating profit for the year to June 2023 would be in line with market forecasts of around £196 million thanks to the positive effect of mix and margins from a higher proportion of temp and contract placings.
PageGroup, whose financial year ends in December, also confirmed its operating profit would be in line with the company-compiled consensus of around £137 million thanks to high fee rates and its ability to cut costs as needed.
