Shares in the world’s largest recruitment firm Hays (HAS) are down 4% to 157p this morning after its third quarter trading update prompted a round of selling at the open.

Group net fee income grew by 5% in the three months to the end of March, adjusted for the timing of Easter, which marked a slowdown from the 9% growth posted in the second quarter.


Hays’ key markets are Germany, which makes up 27% of net fees, the UK and Ireland, which make up 23% of net fees, and Australia and New Zealand, which make up 17% of net fees.


Fee growth in Germany slowed from 12% in the second quarter to 5% in the third quarter, adjusted for the number of working days, due to what the firm calls ‘a more challenging macroeconomic backdrop’.

Demand for staff with IT skills remained strong, with fees up 9% against 11% in the second quarter, but fee growth in Engineering slowed to just 2% compared with 11% the previous quarter as industrial firms including the big car makers reined in hiring.

Finance director Paul Venables points out that ‘with half of the German economy based on exports, a slowdown in global growth and the trade dispute between the US and China is affecting confidence’.

Fee growth in Australia and New Zealand also slowed sharply to 2% compared with 8% the previous quarter on an underlying basis. IT skills were again in high demand with fees up 20% but construction and property, the firm’s biggest business in the region, saw a 7% drop in fees, compounding the previous quarter’s 4% drop.


On the face of it 3% growth in net fee income in the UK and Ireland isn’t very impressive but given the lack of progress on Brexit, grinding out a similar increase to the previous quarter is no mean feat.

Again, across both the public and private sector, staff with IT skills top the list of requirements and fees from IT recruitment rose by 15% against 13% the previous quarter. Overall, however, private sector fees were down and it was the public sector, where the NHS is a major customer, which picked up the slack.


Shareholders will recall that Hays paid a special dividend of 5p per share last November which when added to the combined interim and final dividends of 3.8p meant a total return of 5.6% on a share price of 156p the day before dividends were paid.

It's worth noting that at the end of March the firm had cash on the balance sheet of £30m compared with just £5m a year ago, so assuming that the fourth quarter ending in June sees no worsening of the current trends there is a reasonable chance that the special dividend will be repeated or even increased.

Investors looking for income might want to bookmark the 30th June which is when Hays updates the market on the fourth quarter and the 29 August which is when it releases its preliminary full year results.

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Issue Date: 16 Apr 2019