ii view: Hays shares crash to lowest since financial crisis – here’s why

Fourth-quarter and full-year trading update to 30 June

• Fourth-quarter net fees down 9%
• Now expects full-year operating profit of £45 million, down from previous estimates of £56 million

ii round-up:

In an unscheduled update, global recruitment company Hays (LSE:HAS) today cut expectations for full-year profit given weaker-than-expected fourth-quarter trading.

Exposure to sectors such as German car makers and UK public sector jobs underpinned a 9% year-over-year fall in net fees. That compares to City hopes for a 6.5% retreat. Hays now expects annual profit up to late June of £45 million, down from forecasts of £56 million and with challenging conditions expected to persist into 2026. 

Shares in the FTSE 250 recruiter dropped 12% in UK trading having come into this latest news down by close to a third over the last year. That’s comfortably below a near 4% gain for the FTSE 250 index. Rival PageGroup (LSE:PAGE) is down by a similar amount to Hays over that time. 

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Hays recruits across industries including IT, accountancy and engineering, with offices in more than 30 countries. Germany and the UK are its two biggest revenue generators. 

Fourth-quarter like-for-like net fees in Germany are expected to fall 5%, hit by weaker conditions for permanent and temporary hiring, and despite stability in contracting.

UK fees are expected to fall 13% during the quarter, with fees for Australasia, another core region, falling 9%. France provided weakness within the broader Europe, Middle East and Africa (EMEA) region, with fees for the remaining Asia and North American areas summarised as stable. 

Annual results to 30 June are scheduled for 21 August. 

ii view:

Started in 1867, Hays today employs around 10,000 people. Recruiting across 21 specialisms, information technology generates most fee at around a quarter. Accountancy and finance come next at 15%, then engineering at 11%, construction and property 11%, office support 5%, and other industries 33%.

For investors, the difficult economic backdrop continues to hinder both corporate client and job seeking candidate confidence, particularly for permanent positions. US trade tariffs could further hit clients in Germany and France. Currency movements such as those for its Australia & New Zealand business can impact performance, while a forecast dividend yield of around 4% is less than the 6% or more at PageGroup.   

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On the upside, measures introduced to weather the downturn include reducing staff, with the group’s cost base falling to £75 million in Q4 from £76 million in Q3. A diversity of client industries and geographical locations exist. An expected modest net cash position as of 30 June suggests a robust balance sheet, while the previous payment of both ordinary and special dividends in better economic times is also worth remembering.

For now, exposure to an eventual economic recovery offers interest and Hays shares have dropped to a significant technical support level at around 60p. That said, more cautious investors will likely demand evidence of an upturn in core regions such as Germany before taking action.   

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