Shares in leading recruitment firm Hays (HAS) were flat at 163p in spite of a first half which saw it face negative events in a number of its key markets.

Net fee income for the six months to the end of December were down 3% to £553m while operating profits were down 19% to £100.1m due to increased strategic investments.

Despite these headwinds, cash generation remained strong. Hays has paid out £400m in ordinary and special dividends in the last three years, including £121.6m last November, and chief finance officer Paul Venables is confident that the trend will continue.

SLOWDOWN IN FEES

Fee growth slowed ‘significantly’ during the first half as several of Hays’ major markets were impacted by reduced business confidence, particularly Germany and China.

Trading in Germany was ‘increasingly difficult’ with net fees down 2% in the first quarter and 9% in the second quarter as more clients cut back on costs and froze hiring.

As well as the automotive sector, which represents a large proportion of German exports, other manufacturing industries have started to feel the effects of the US-China trade war and higher tariffs, denting confidence.

China itself, as well as contending with the trade war and a slowing economy, has also been impacted by the social unrest in Hong Kong, with the result that net fees fell 9% in the second quarter.

Due to the coronavirus outbreak, the outlook for hiring this quarter is even worse and for now Hays is managing the situation as best it can.

There were also three specific external events which took their toll on group fee income. The UK election and the potentially binary outcome led employers to sit on their hands last quarter, while the general strike in France and the bush fires in Australia affected hiring in those countries.

COST CONTROL AND INNOVATION

Having taken £5m of costs out of the business in the last financial year, finance chief Venables is looking to do the same in the second half of this year.

At the same time the firm is investing another £5m globally in its IT specialism so that its consultants are more productive, finding the right candidates faster and more effectively than in-house human resources teams and its rivals.

Its proprietary tools already allow it process more than 10m CVs a year, which are added to its database not only improving its ability to recruit the right candidate but also helping to grow market share and increase profitability.

 

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Issue Date: 20 Feb 2020