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Recruiter Hays announced a widely-predicted profits plunge for its full financial year as conditions in the labour market worsened.
At 97.5p per share, the Hays share price was last 2.6% higher following Thursday’s announcement.
Net fees plummeted 14% in the 12 months to June, to £1.11 billion. On a like-for-like basis fees were down 12% year on year.
At Hays’ Temp division, net fees dropped 8% as volumes reversed 7%. Perm volumes sank by a more pronounced 25%, although wage inflation and improved average pricing meant the net fee reduction was limited to 17%.
Tough Times
Hays — which has operations in 33 countries — said that net fees and operating profit in its largest market of Germany dropped 7% and 31% respectively during financial 2024.
Fees and client activity slowed through the second half of the year and especially during quarter four, the firm noted.
In the UK, its second largest territory, net fees dropped 15%, while operating profit collapsed 78%. It said that activity levels dropped in the lead-up to July’s general election and have remained subdued since.
Hays’ operating profit before exceptionals plummeted 47% year on year, to £105.1 million. Adjusted pre-tax profit was down 51% at £94.7 million.
The business had net cash of £56.8 million on the balance sheet as of June. This was down sharply from £135.6 million a year earlier.
It kept the full-year dividend on hold at 3p per share.
“Increasingly Challenging”
Chief executive Dirk Hahn commented that “we saw increasingly challenging market conditions [last year] in both Perm and Temp, with low confidence levels and longer-than-normal ‘time-to-hire’, and our profitability was significantly impacted, including our three largest markets of Germany, Australia and the UK.”
He said that “against this backdrop, we have focused on enhanced operational rigour, driving consultant productivity and strong cost management, and are determined to build a more resilient Hays.“
Hahn added that “our key markets are also being driven by powerful, supportive megatrends and remain characterised by significant talent shortages… Our actions are better positioning Hays to benefit when markets recover, and when they do, we can return to, and then exceed, prior peak profits.”
Hays said trading conditions remain “challenging but in line with our expectations.” It added that “September is the key trading month in our first quarter, and it is too early to assess trends.”
Uncertain Outlook
Analyst Mark Crouch of Edison Group noted that “it wasn’t too long ago that the recruitment industry was flourishing, and for the tech sector, which is a significant arm of Hays’ operations, growth and expansion was abundant. However, following a prolonged period of high inflation and higher interest rates, the sector is experiencing a serious lull in confidence.”
He said that recruiters have suffered as cost-cutting has become increasingly important for businesses.
Crouch added that “with job seekers holding off on switching roles, and employers much more tentative when hiring, the year ahead looks uncertain.”