ii view: Hays’ profit plunges

Full-year results to 30 June

• Overall, like-for-like (LFL) net fees down 14% to £1.11 billion
• Operating profit down 47% to £105 million
• Pre-tax profit including exceptional items down 92% to £14.7 million
• Final dividend of 2.05p per share
• Total ordinary dividend for the year unchanged at 3p per share
• Net cash held of £57 million, improved from net debt of £20 million in late March

Chief executive Dirk Hahn said: “We saw increasingly challenging market conditions throughout FY24 in both Perm and Temp, with low confidence levels and longer-than-normal ‘time-to-hire’, and our profitability was significantly impacted, including our three largest markets of Germany, Australia and the UK. 

“Against this backdrop, we have focused on enhanced operational rigour, driving consultant productivity and strong cost management, and are determined to build a more resilient Hays.”

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ii round-up:

Hays (LSE:HAS) today detailed a fall in profits broadly matching City expectations with the global employment agency reiterating ongoing challenging trading.

Full-year net fees to the end of June fell 14% to £1.11 billion, pushing operating profit down 47% to £105 million. Accompanying current trading comments pointed to July and August trading in line with management forecasts, although with trends for September, the key first-quarter trading month, it is too early to assess.

Shares for the FTSE 250 recruiter rose 2% in UK trading having come into these latest results down 13% year-to-date. That’s similar to rival PageGroup (LSE:PAGE) and ahead of a 20% decline for smaller peer Robert Walters (LSE:RWA). The 250 index itself is up almost 9% during 2024.

Hays recruits across 21 specialisms with information technology its biggest at around a quarter of total fees, followed by accountancy and finance at 15%, engineering at 12% and construction and property 10%. 

Annualised cost savings came in at £60 million for the full year with a further £30 million per year currently being targeted to full year 2027.

Group headcount reduced by 15% over the year including a cut in consultants to 7,045 from 8,590 a year ago. Annual restructuring charges of over £40 million pushed full year pre-tax profit, when including these exceptional items, down 92% to £14.7 million.  

A final dividend of 2.05p per share leaves the total ordinary payment for the full year unchanged at 3p per share, with no special dividend payments being made, unlike in the previous year. 

A first-quarter trading update to the end of September is scheduled for 11 October. 

ii view:

Hays is a UK and overseas recruitment company employing just over 11,000 staff in 236 offices across 33 countries. Founded over a century ago and headquartered in London, Germany generated its biggest slug of operating profit over this latest financial year at 65%, followed by Australia and New Zealand at 11%, the UK & Ireland at 6%, and the Rest of the World the balance of 18%.  

For investors, the difficult economic backdrop continues to hinder both corporate client and job-seeking candidate confidence. Costs generally for businesses, and including wages, remain elevated. Currency movements such as those for its Australia and New Zealand business can impact performance, while a forecast dividend yield of around 3.2% sits below the near 5% forecast yield at rival PageGroup.   

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On the upside, diversity in both customer industry sector and geographical region exist. A high management focus on increasing efficiency persists and includes ongoing cost cuts. A return to net cash held points to a robust balance sheet, while the previous payment of both ordinary and special dividends in better economic times is also worth remembering. 

In all, a consensus analyst estimate of fair value sat at 110p per share suggests room for potential reward once an economic recovery takes hold. That said, more cautious investors are likely to await evidence of a profit recovery before taking any interest. 

Positives: 

• Business sector and geographical diversity
• Focus on improving efficiency

Negatives:

• Economic outlook uncertainty
• Currency moves can impact

The average rating of stock market analysts:

Buy