ii view: recruiter Hays now leaner and awaiting an upturn

First-half results to 31 December

• Overall, like-for-like (LFL) net fees down 15% to £496 million
• Pre-tax profit before exceptional items down 66% to £19 million
• Unchanged interim dividend of 0.95p per share
• Net cash held of £29 million, down from £57 million as of late June

Guidance:

• Reiterated long-term objective to return to and exceed the previous peak in profits of £250 million

Chief executive Dirk Hahn said:

“We remain focussed on long-term growth markets underpinned by our culture and talented colleagues worldwide. Our key markets are being driven by powerful, supportive megatrends and remain characterised by significant talent shortages, which we help solve for our clients. 

“When client and candidate confidence improves and the cycle recovers, I am confident we will deliver a healthy drop through of net fees to operating profit."

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ii round-up:

Hays (LSE:HAS) is a UK and overseas recruitment company. It employs around 10,300 staff in 225 offices across 33 countries. 

Hays recruits across 21 specialisms with information technology its biggest at around a quarter of fees. That’s followed by accountancy and finance at 15%, engineering 11%, construction and property 11%, office support 5%, and other industries 33%.

For a round-up of these latest results on 20 February, please click here. 

ii view:

Hays was founded over a century ago and is today headquartered in London. Germany generated its biggest slug of operating profit in its last financial year to 30 June 2024 at 65%. That was 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 confidence among both corporate client and job seeking candidates. Current trading trends for Germany, its biggest market, remain subdued. Currency movements such as those for its Australia & New Zealand business can impact performance, while a forecast dividend yield of around 3.5% sits below the more than 5% yield at rival PageGroup (LSE:PAGE).   

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To the upside, measures to improve efficiency and make Hays more profitable during an upturn include a reduction in staff count to 10,300 from around 12,000 in early 2022. Annualised cost savings came in at £60 million for its last full year with a further £30 million per year currently being targeted to 2027. A group net cash position 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, a consensus analyst estimate of fair value sat at 96p per share suggests room for potential reward once better economic times, particularly in Germany, take hold. That said, more cautious investors may wish to await evidence of a profit recovery before taking an 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