Recruitment firm Hays (HAS) sounded surprisingly positive in its first quarter trading update and is readying itself for a recovery in demand with a focus on specialist areas such as IT and Life Sciences.

Although group net fee income for the quarter to the end of September was down 29% on an organic basis, the exit rate at the end of last month was minus 26%, a mild improvement, and chief finance officer Paul Venables is ‘confident we have seen the worst of this crisis’.

Indeed, Hays’ performance from the May low has been ‘very predictable’ according to Venables, with the worst-hit markets such as the UK and Spain rebounding the most and permanent hiring recovering as job vacancies which were frozen at the height of the pandemic being filled once confidence began to return over the summer.

The firm’s Large Corporate Accounts business also fared better than the rest of the group with just a 13% decline in net fee income. ‘Large clients are much less fearful than during the 2008 crisis, they know the banking system is solid and they aren’t worried about liquidity’, said Venables.

While demand for professionals in IT, accounting and other white-collar roles remains healthy, the firm’s exposure to automotive and other manufacturing sectors was a big drag on fees, although fortunately it has no exposure to the hospitality sector or the airline industry which have borne the brunt of the job cuts.

Looking towards a recovery, the company is spending £1 million a month on its Return To Growth initiative, beefing up its strongest specialisms such as IT and Life Sciences both with internal appointments and with selective external hires.

Meanwhile its net cash pile of £350 million gives it flexibility should it decide to take further market share though bolt-on deals, and it holds out the prospect of the firm re-instating its ordinary dividends and potentially paying a special dividend come the end of the financial year.

Shares were down 1.9% to 113.7p in late morning trade, slightly better than the FTSE which was 2.3% lower.

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Issue Date: 15 Oct 2020