- Temp fees drive like-for-like growth
- Permanent market remains weak
- Dividends reflects strong cash position
Recruitment firm Hays (HAS) posted a mixed full-year trading update showing an improvement in second-half operating profit but continuing difficulties in the permanent hiring market which has slowed sharply over the last 12 months.
However, investors took heart from the fact the firm is still strongly cash-generative, as shown by a rise in the core dividend and a further return of cash through a special dividend, and the shares traded sideways at 103p.
MIXED MARKETS IN THE SHORT TERM
For the year to the end of June, net fee income was up 6% on a like-for-like basis to a touch under £1.3 billion, driven by a 9% increase in temporary placement fees and a 3% rise in permanent fees.
More than 20 countries registered record levels of income, including the firm’s largest market, Germany, while key strategic areas like technology, engineering and enterprise clients also saw record revenues.
Fee growth slowed sharply, however, from 12% in the first half to just 1% in the second half as the global economy slowed, and as of the end of June fees were 2% down on last year’s run-rate.
The temp market, which makes up 57% of group revenue, remains buoyant with 9% growth in annual fees and 6% in the second half which saw a stabilization in volumes.
On the other hand, permanent fees, which make up 43% of group revenue, went from 12% growth in the first half to a drop of 6% in the second half and volumes were down 15% in the final six months ‘as job inflow decreased and hiring processes extended’.
CONFIDENCE IN THE LONG TERM
Chief executive Alistair Cox, who steps down in September to be replaced by Dirk Hahn, who currently manages Hays Germany and CEMEA (Central Europe, Middle East and Africa), remained upbeat about the firm’s long-term prospects.
‘While we cannot control the macroeconomic environment, we do control our reaction to it. We acted swiftly to manage our capacity and costs in the face of toughening markets, delivering increased profits in our second half.
‘At the same time, we protected the investments which are successfully positioning Hays as a leader in attractive long-term growth markets. We will continue to do this, as it sets us up well for the future.
‘We also remain highly cash generative, and as a sign of confidence in our strategy and our strong financial position, the Board proposes an increased core dividend and announces a further £35.6 million cash return to shareholders.’
