Investing.com — Hays (LON:) warned on Wednesday in a stock exchange filing that operating profit before exceptionals for the first half of its fiscal year is likely to be lower than market expectations.
The UK-based recruitment group has indicated it expects to make a profit of around £25m in the six months to December 2024, putting it at the lower end of the analyst consensus range of £24m to £33.2m. do.
The warning comes amid tough economic conditions and a slowdown in hiring for permanent positions, particularly in major markets.
The Group's net commissions in the second quarter were down 12% year-on-year on a like-for-like basis, driven by a 19% decline in permanent hiring commissions as employers delayed hiring decisions.
Temporary and contract recruitment activity was somewhat resilient, with commissions down 7% and activity levels stable over the period.
haze reported that its results were significantly impacted by weaker performance in the UK and Ireland, Germany and the wider EMEA region.
In the UK and Ireland, net commissions fell by 14%, driven by an 11% decline in temporary employment and a significant 19% decline in permanent employment.
Private sector activity, which makes up the bulk of Hays' UK business, fell by 10%, while public sector activity contracted more sharply, down 21%.
In Germany, one of the company's key markets, net fees decreased by 13%. Temporary and contract work activity decreased by 10%, reflecting lower demand in the automotive sector and a 5% decline in average working hours.
Permanent recruitment in Germany was particularly weak, with net commissions down 27% due to slower customer decision-making.
“While business recovery continues to be delayed as candidate and client confidence remains strong, we continue to believe the sector's slump will be lifted sooner rather than later,” RBC Capital Markets analysts said in a note. said.
The EMEA region, excluding Germany, also faced significant challenges. France, Hays' largest market in the region, reported a 21% decline in commissions due to a slowdown in permanent hiring during the quarter.
However, some markets such as Spain and the Netherlands managed to buck this trend with modest increases in net fees of 1% and 5% respectively.
Elsewhere, Australia and New Zealand saw a 14% decline in net commissions, a 23% decline in permanent employment and a 9% decline in temporary employment.
In the Americas, net fees rose 2%, providing some relief, supported by strong performance in Canada and the United States.
Performance in Asia was mixed, with net fees down 6%. Mainland China and Singapore grew, but Hong Kong and Japan struggled.
Consultant headcount decreased 2% during the quarter and was down 15% year-over-year. This reflects the Group's focus on managing resources in line with market conditions.
The company also noted that it had made progress in structural cost savings of £30m per year by FY27, contributing to a £3m reduction in its quarterly cost base to £77m.
Going forward, Hayes said it is closely monitoring trends in temporary hiring at the beginning of the year, a traditionally important time for the sector.
The company said the slowdown in permanent hiring could be due to broad market weakness or short-term delays in customer or candidate decision-making.
The Group remains focused on its long-term strategy of shifting its business mix towards high-growth sectors and large corporate customers, which it believes will strengthen its profitability and resilience.
But for now, weak market conditions and economic uncertainty are likely to weigh on near-term results.
Hays ended the quarter with net cash of approximately £25m, excluding outflows related to dividends, pension commitments and special charges.
The company said recently completed pension purchases will reduce balance sheet volatility and improve free cash flow from FY26 onwards.
“Despite the current slowdown in activity, we believe Hays has significant long-term upside potential. On a full-cycle basis, we expect meaningful shareholder returns through special dividends. However, current estimates assume that no special dividend will be proposed in FY25 or FY26,” RBC added.
