Shares in recruitment firm Hays (HAS) jumped 4.6% to 167p on Tuesday after the company issued its third quarter trading update earlier than scheduled, raising its full year earnings forecast in the process.
IMPROVING TREND
Although the third quarter continued to be impacted by the pandemic, with group net fee income falling 10% on the previous year on a like-for-like basis, momentum accelerated from the previous quarter (down 19%) and the outcome was better than management had expected.
The improvement ‘was most evident in our largest market of Germany, driven by increased business confidence and client investments’ according to chief executive Alistair Cox.
‘Australia and the UK saw improvement, particularly in Perm, while fees in the Americas and Asia both grew sequentially, led by the USA and China. Overall, there are clear signs of skill shortages in certain industries, notably Technology and Life Sciences’, he added.
INCREASED GUIDANCE
As a result of the better than expected third quarter result and good cost control, the chief executive said he expected full-year operating profits to be ‘at least £85 million, ahead of market expectations’.
According to the firm, the market consensus for full year operating profits is in the region of £61 million, which ties in with the S&P Market Intelligence forecast of £61.7 million.
The £85 million-plus target includes £15 million of spending on Hays’s Return To Growth programme which is focused on growing the firm’s IT, Life Sciences and large corporate customers.
Another £15 million spend is already penciled in for the next financial year.
INCOME POTENTIAL
Meanwhile, with improved cash collection the firm finds itself sitting on a net cash pile of £385 million even after paying all deferred rates and taxes under the government’s Covid support scheme.
With this level of cash, it seems highly likely the firm will return to paying a special full year dividend on top of its ordinary pay-out, making it an attractive choice for income seekers.
