- Recruitment specialist Hays issues profit warning
- FTSE 250 firm cites very soft December
- Weakness has spread to temporary as well as permanent hires
- Firm continues to trim its own headcount
- All eyes now on scheduled updates from Robert Walters (Thursday 11 January) and PageGroup (Monday 15 January)
“An unexpectedly weak December has forced recruitment specialist Hays into dishing out a profit warning and has driven its shares back towards a three-year low,” says AJ Bell investment director Russ Mould. “Company management is unsure as to whether this is just a blip, caused by deferred decision making, or a sign of a more sustained slowdown in the jobs market, but equity investors will be hoping it is the former given how share prices are discounting a soft economic landing rather than a hard one.
“Hays’ chief executive Dirk Hahn, who only took the post on 1 September last year, has flagged a 12% year-on-year drop in net fees in the second quarter of the company’s fiscal year to June 2024. As a result, Mr Hahn now expects first-half operating profit to undershoot expectations and drop to around £60 million, from £97 million in the equivalent six-month period a year ago.
“The second quarter’s decline is the third consecutive year-on-year drop in net fee income and a further acceleration in the rate of decline.
Source: Company accounts. Fiscal year to June
“Australia and New Zealand was again the weakest area but at least the decline was not as bad in the second quarter as it had been in the first. The UK & Ireland, however, showed a deeper fall in the period.
Source: Company accounts
“Of particular concern is how the weakness has spread to temporary hires. When they are feeling confident, firms will focus on permanent hires. When they are not, they may be more careful and switch to hiring more temporary positions, to give themselves greater flexibility should trade deteriorate any further. A decline in temporary hiring activity could therefore be a warning of a wider softening in the labour markets, a scenario which stock markets are not currently entertaining.
“If there is any good news here, it is that the rate of decline in permanent hiring did not get any worse in the second quarter.
Source: Company accounts. Fiscal year to June
“Hays is wisely taking precautions of its own, in the form of cost cuts. Headcount fell again in the quarter and is now 12% lower than it was a year ago, a trend that may prove telling in that a recruitment agent is itself pulling in its horns.”
Source: Company accounts. Fiscal year to June
