Hays (HAS) maintains the cautiously upbeat sentiment in recruitment as it wraps up first quarter updates for the largest London-listed players.

Gaining 8.9% to 135p, investors are looking through a slowdown in net fee income (NFI) growth to focus on bullish guidance from management on full-year profit.

NFI gained 4% across the business in the three months through March, down from 7% in the fourth quarter of 2015.

Forecast earnings before interest, tax and amortisation (EBITA), a measure of underlying performance, were upgraded slightly by analysts following the trading update because of favourable currency movements and higher than expected margins.

Profitability in the UK is rising despite a 3% decline in NFI, management says, because of canny management of costs ahead of the UK’s referendum on membership of the EU.

‘There are a number of encouraging parts in these results,’ says finance officer Paul Venables in an interview with SHARES.

‘Like-for-like fee growth is 4% and if you adjust for the early Easter holiday that rises to 6%.

‘We had 20 countries growing more than 10%, 13 of which were in Europe and three of those were all-time record NFI performances for the business.

‘Clearly the market has noted that we converted that into good bottom line growth and some of the analysts have upgraded their forecasts.’

Confidence in the full-year outlook, which at Hays is reported as the year to 30 June, has also buoyed investors.

Strong growth expected in Europe during the fourth quarter should underpin profit expectations, Venables says.

Continental Europe and Rest of the World, Hays’ largest geography, delivered net fee income growth of 11% at constant currencies – more than offsetting the 3% decline in the UK.

GDP growth of around 1% in Europe is enough for Hays to grow that business ‘strongly’, Venables adds.

After two years of the UK driving its NFI performance, Europe is now gathering steam with growth of 19% in France, Hays’ fourth-largest market, a highlight.

NFI growth in Asia-Pacific was 3%.

Consultant headcount, an indicator of management's confidence on market conditions, declined 3% through the quarter but increased 4% year-on-year.

Over the next 12 months, Venables indicated head count growth may run at between 1% and 2%, mainly through increases in Europe and Rest of the World.

Issue Date: 14 Apr 2016