Shares in the UK’s biggest quoted recruitment firm Hays (HAS) dropped 4% to 121p after it posted a downbeat report for the final quarter of its financial year to the end of June.

Group net fee income fell 34% on a like-for-like basis due to a 44% fall in fees for permanent placings as the global job market felt the impact of the Covid pandemic.

Disappointingly, while revenues were broadly stable from May to June, the firm said it has seen no sign yet of positive momentum in fees, with the ‘exit rate’ in June broadly in line with decline during the quarter.


Unfortunately for the recruiters, the first reaction of most firms when the pandemic hit was to stop all non-essential spending including new hires, hence the 44% fall in fees for permanent placings (36% of group income) and the 26% fall in temporary fees (64% of income).

By specialty, Hays’ IT division – which makes up 29% of income – registered a 17% drop in fees, while Construction & Property saw a 44% drop and Accounting & Finance saw a 39% drop.

By region, Germany – Hays’ largest single country exposure – registered a 33% fall in net fees, with customers ‘closely controlling costs, particularly in the manufacturing and automotive sectors.’

The UK & Ireland, the next biggest region, experienced ‘extremely tough market conditions’ leading to a 42% fall in fee income. Private sector fees, which make up nearly 70% of the total, dropped 46% compared with a 30% drop in public sector fees where hiring was more stable.

Fees in France, Belgium and Spain were all down over 40% while in the US they fell by 18% thanks to continued demand for IT staff despite the pandemic. However, Canada registered a 45% drop and Latin America was even worse with fees down 51%.


Having run at ‘broadly break-even’ during the fourth quarter, the firm expects full year operating profits before exceptional items to be between £130 million and £135 million against £249 million the previous year.

However, unlike one or two of its rivals, there isn’t a sense that Hays believes the worst of the crisis has passed. It expects to be ‘modestly loss-making over the summer months’ and says that any return to profitability depends on a sequential increase in fees.

If that happens the incremental drop-through from revenues to profits could be ‘very high’, but the firm is clearly not banking on a swift recovery.

Operating and staff costs are set to increase ‘as we begin to return to normal working practices, reverse voluntary pay reductions and as job support arrangements end’, and foreign exchange movements will continue to have ‘a material sensitivity’ on the firm’s profitability.

On a happier note, Hays says it made some ‘notable client wins’ in Talent Solutions during the quarter, including nine new clients and five existing clients who have expanded their brief to cover new geographies.

It has plenty of liquidity thanks to the £196m capital raise in April which takes its available cash to £365 million, or £485 million including short-term deferrals of tax payments.

It also has access to £600 million of financing under the government’s Covid financing facility, but based on its forecasts it says it is ‘highly unlikely’ to need it as it has its own £210 million borrowing facility which runs to 2024.


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Issue Date: 16 Jul 2020