- Sharp slowdown in UK job market
- Share prices fall across the sector
- Interim earnings guidance cut
The European staffing sector became a sea of red on Tuesday with share prices down sharply after FTSE 250 bellwether Hays (HAS) posted a grim account of trading in the three months to the end of December and warned half-year profits would miss expectations.
Hays shares were down as much as 19% to 87p at the open before recovering to 92p, down 14%, while shares in Robert Walters (RWA) and PageGroup (PAGE) fell 5% apiece to 519p and 444p.
Robert Walters reports on its most recent quarter this Thursday, 11 January, and PageGroup reports next Monday, 15 January.
In Amsterdam, shares in Randstad (RAND:AMS) dropped 5% to €52.30 while in Zurich shares in Adecco (ADEN:SWX) fell 6% to CHF 38.40.
DISAPPOINTING DECEMBER
For the quarter to 31 December, Hays posted a 10% drop in like-for-like fee income and a 12% fall in overall income which it said was ‘particularly impacted by a slowdown in December’.
The firm’s exit rate at the end of last month was -5% on a WDA (working day average) basis, with permanent fees down a whopping 25% on the same basis.
Net fees in the UK & Ireland, which represent a fifth of revenues, were down 17%, with temp fees (just under 60% of the divisional total) down 13% and permanent fees down 21% after slowing ‘through the quarter’.
Fees for the key London region were down 21%, while in terms of specialism Accountancy & Finance fees fell 16% and Technology fees fell 32% despite the hype around AI and the need for developers.
‘INCREASINGLY CHALLENGING’
Across the group, while overall volumes in temp and contracting were broadly stable on the previous quarter, the firm said there wasn’t the usual seasonal step-up in worker volumes, while in permanent placings volumes were down 25% although this was partly offset by an 8% hike in average fees.
‘Overall, perm markets were increasingly challenging, particularly in December, where slower client and candidate decision-making led to a lower conversion of activity to successful placements. Overall, new job registrations remained down year-on-year, but were broadly stable sequentially, with lower conversion into placements and further increases in time-to-hire’, the firm noted.
LOWERING GUIDANCE
Due to the speed and size of the slowdown, Hays now expects first-half operating profit before one-off items to be in the region of £60 million against the company-compiled consensus of £73 million.
However, it admits that given reduced client and candidate confidence there is a lot more than usual riding on the New Year ‘return to work’, and it is too early to say if December’s weakness is a sign of a more sustained slowdown, in which case there could be more bad news to come.
As a people business, Hays has few levers to pull to cut overheads, so as usual the majority of cost savings have come from layoffs, with consultant headcount down by 5% on the previous quarter and 12% on the previous year as the firm ‘managed its capacity’.
It will be interesting to see if, when business conditions improve, the firm is able to replace the level of expertise it has lost due to its ‘hire and fire’ approach.
