Shares in recruitment firm Hays (HAS) leapt 6% to 152p in early trade after a reasonably positive first quarter trading update.
Net fees on a working day-adjusted basis were down 1% overall, as the company had guided at the beginning of the quarter, yet eight countries still delivered record quarterly income including key markets such as the USA and China.
GLOBAL REACH PAYS OFF
Despite tough economic conditions and reduced business confidence, fees in both temporary and permanent hiring were flat across the group and 10 countries managed fee growth of more than 10%.
By region, both the Americas (7.4% of group fees) and Asia (6.4%) racked up increases of 7% with the USA reporting a record quarter up 12% and China also reporting a record quarter up 7% despite the disturbance to business in Hong Kong from the ongoing protests.
Australia and New Zealand, which together account for 18% of group fees, saw a 2% dip in fees although the market was ‘broadly stable at near-record levels’ compared with the previous quarter. New Zealand actually returned to growth with fees up by 19% although it is a small part of the business.
EUROPE MIXED
Europe excluding Germany grew fees by 2%, with France up 3%, Switzerland up 7% and Italy up 11%. However Belgium and the Netherlands were less robust with fees down 7% and 12% respectively.
Germany, the firm’s largest single market at 27% of net fees, remained sluggish with fees down 2% on a working day-adjusted basis due to lower demand from the manufacturing sector. Given the weakness of sentiment in German manufacturing, with the Purchasing Managers Index having tracked below the crucial 50% level all year, investors were probably braced for a worse performance.
Similarly, fees in the UK & Ireland (23% of the group) were down 5% on a working day-adjusted basis, which given the hit to both business and candidate confidence due to the continued uncertainty over Brexit is probably better than many had feared.
FUTURE GROWTH
Like its rivals, Hays has been through similar downturns before and is well-versed in trimming costs while making sure it is still poised for growth as and when demand picks up again.
Consultant headcount rose slightly, despite a lower graduate intake than in previous years, as the firm opened a new office in Germany and added staff in countries like the USA where it is leveraging its number one position in Construction and Property to expand into other sectors.
As chief executive Alistair Cox commented, with its experienced management team and strong balance sheet - net cash was £90m at the end of the quarter against £80m the previous year - Hays can ‘balance investing for the long term while managing the more challenging markets’ it currently faces.
