- Earnings to miss forecasts
- Perm market still poor
- No sign of an upturn yet
In its pre-close year-end trading update, staffing firm Hays (HAS) cut its operating profit forecast and warned weakness in the global job market was likely to persist into 2026.
The shares fell as much as 14p or 20% to 55.7p before recovering to 61p for a loss of 9p or 13%, marking an all-time low for the stock.
NO HIDING PLACE
In mid-April, Hays said it would meet its full-year profit target despite continued weakness in hiring during the third quarter, but today it admitted it would miss that target due to ‘more challenging Perm markets’.
For the year to the end of June, Hays now expects operating profit before exceptional items to come in around £45 million compared with the company-compiled consensus of £56 million, based on a survey of 10 analysts, and a profit of £105 million last year, which itself was 47% down on the previous year.
Activity levels so far in the fourth quarter ‘have reduced sequentially driven primarily by broad-based weakness in Perm markets globally, reflecting low levels of client and candidate confidence as a result of macroeconomic uncertainty,’ according to the company, which is not alone in posting disappointing updates.
On a like-for-like basis, Hays’ net fee income is expected to drop 9% during the final quarter against what the firm admits was a ‘soft’ prior-year fourth quarter, with Perm income down 14% and Temp and Contracting fees down 5% as companies resort to short-term hiring.
On a regional basis, Germany – the group’s largest market – is expected to see a 5% decline in income, while the UK & Ireland are set to see a 13% decline and Australia & New Zealand will see a similar result.
The firm expects to maintain a ‘modest’ net cash position by the end of June, whereas in previous years its net cash position was a source of great fanfare.
Meanwhile, the current ‘challenging’ market conditions are seen continuing into the new financial year to June 2026.
EXPERT VIEW
‘Hays’ share price slump implies the jobs market is going from bad to worse,’ commented AJ Bell investment director Russ Mould.
‘Companies are clearly worried about the economic outlook and they’re reluctant to take on full-time staff, potentially not replacing anyone lost to natural turnover. At the same time, individuals are worried that if they move job they’ll be in the ‘last in, first out’ firing line if companies look for new cost savings.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Ian Conway) and the editor (James Crux) own shares in AJ Bell.
