ii view: Hays shares stuck near record low after latest results

Third-quarter trading update to 31 March

• Total net fees down 8%
• German net fees down 11%
• UK and Ireland net fees down 10%

Guidance:

• Expects annual profit for 2026 to broadly match City forecasts of around £45.2 million, similar to last year’s £45.6 million

Interim chief executive Mark Dearnley said:

“We continue to deliver strong consultant productivity growth, good Temp & Contracting growth in several of our Focus countries, and our substantial bid pipeline with Enterprise clients is converting well. 

“Looking ahead, we remain mindful of heightened global macro-economic uncertainty and the impact this could have on the wider economy. However, we are executing well and taking decisive actions to improve our portfolio and restore our financial performance.”

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ii round-up:

Global recruiter Hays (LSE:HAS) reported a fall in fees that beat City expectations, with the decline marginally better than the prior quarter. 

Currency-adjusted third-quarter fees to late March fell 8% from a year ago, exceeding analyst estimates for a fall of 9%. That was an improvement from the 10% decline the previous quarter. 

Despite increased global economic uncertainty, Hays continues to expect annual operating profit to broadly match City forecasts of around £45.2 million, similar to last year. 

Shares in the FTSE 250 company rose 5% following the update, leaving them just above a recent record closing low of 29.65p. Like rival PageGroup (LSE:PAGE), Hays shares have more than halved over the last year. The FTSE 250 index is up by close to fifth during that time. 

Hays recruits across industries including IT, accountancy and engineering with average candidates earning between £35,000 and £200,000.

Temporary hiring remained more buoyant than permanent. Fees for temp jobs fell 6% compared to 12% for permanent hires. 

Geographically, German fees, accounting for almost a third of all fees, fell 11%. UK and Irish fees, Hays second biggest country at close to a fifth of all fees, retreated 10%.

Those for Australasia, making up 12% of all fees, dropped 2%. The rest of the world and including the USA, witnessed a 6% fall.  

Under interim head Mark Dearnley, Hays has continued to push productivity improvements, highlighting a tenth consecutive quarter of consultant net fee improvements. 

Group net debt of £1.5 million compared to net cash held of £40.5 million as of late December. A fourth-quarter trading update is due on 10 July. 

ii view:

Started over a century ago, Hays today fills over 1,000 jobs per day. Recruiting for 21 specialisms, technology related jobs generate most fees over its last financial year at 25%. That was followed by accountancy & finance at 15%, engineering 11%, construction and property 11%, and other areas the balance of 38%. The FTSE 250 company employs around 8,700 staff in 191 offices across 29 countries.  

For investors, tough economic conditions at its two biggest markets - Germany and the UK & Ireland - continue to dent confidence among corporate client and job seeking candidates, particularly for permanent positions, and related fees. A previous cut to the dividend payment now leaves the shares on a forecast dividend yield of around 1.4% compared to 4%-plus before, while a forecast price/earnings (PE) ratio above the three- and 10-year averages may suggest the shares are not obviously cheap.

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On the upside, initiatives to generate cost savings of £45 million per annum by the end  
of the full year 2029 continue to be pursued. A diversity of client industries and geographical locations exist. A new chief executive waiting in the wings could rejuvenate strategy, while the group’s own investment in AI could eventually help improve productivity and profits going forward.   

For now, and while exposure to an eventual economic recovery offers interest, more cautious investors are likely to await better evidence of an upturn in core regions such as Germany.

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:

Strong hold