International recruitment agency Hays (HAS) has increased both its normal and special dividend by 18%, bringing the total payout for the past financial year to 8.81p per share. This equates to £128.4m being returned to shareholders, a substantial increase on 2017’s £108.2m.
The company’s full year earnings per share figure beat market forecasts by 2%, coming in at 11.44p. Hays managed double digit growth across all headline figures including net fee income improving by 12% to £1.07bn and pre-tax profit up 17% to £238.5m.
Despite these impressive numbers and generous dividend payments, investors seem to have concerns given the company’s share price is down 3.3% to 196.2p.
While Hays says its profit growth has been driven by ‘strong growth’ in its international divisions, the UK still makes up for around a quarter of the company’s business and here the news is not so rosy.
The company managed just 2% growth in net fee income in the UK and also was the only region where employee headcount declined, losing 31 consultants during the year.
As recruitment is a business whereby the consultants bring in fees, a decline in their numbers is not great news. It also closed an office in the UK and Ireland.
LANDMARK YEAR
Despite Brexit-related uncertainty impacting Hays’ UK operations, chief executive Alistair Cox still hailed 2018 a ‘landmark year’ for the company.
Hays has made good on its 2013 plan to surpass £1bn in net fees and 22 countries delivered all-time records according to Cox.
The UK’s largest recruitment firm by market cap is enjoying the fruits of global economic growth as being a cyclical business, it moves in tandem with the world economy.
Analysts at investment bank UBS are clearly impressed with the company saying ‘we believe that Hays remains a best-in-class staffing company and our analysis leads us to expect best-in-class conversion margin expansion at this point of the cycle’.
UBS expects strong earnings momentum to be driven by operations in Germany and Australia.
Hays trades on 15.7 times 2019’s earnings of 12.51p using UBS’ forecasts. It is also paying a prospective dividend yield of 4.7% for 2019 which should ‘particularly appeal to income investors’ according to Jefferies analyst Kean Marden.
