Hays predicts H1 profit decline as tough conditions drag on

(Sharecast News) - Recruitment firm Hays says it expects earnings to be sequentially lower in the first half as a result of ongoing challenging market conditions, which resulted in a big drop in fees in the first quarter. Net fees declined by 14% year-on-year on a like-for-like basis in the three months to 30 September, with a 10% drop in temporary and contracting fees (which account for 61% of group fees) met with a 20% plunge in the permanent category.

"Net fees in the quarter were down as expected reflecting the tough market conditions, particularly in Perm where we see longer time to hire and low levels of confidence which we expect to continue," said chief executive Dirk Hahn.

Hays said that consultant productivity was up 5% on last year due to its "continued focus on operational rigour and resource allocation", while the number of consultants was reduced by 2% over the three-month period.

Net fees fell across all of the company's main operating regions, declining 13% in Germany, 20% in the UK and Ireland, 20% in Australia and New Zealand, and 9% across its other geographies combined.

In Germany, its largest division which accounts for 32% of net fees, Hays said the temp market continues to be challenging due to its exposure to the automotive sector, while perm activity remains at a "subdued but stable level".

Meanwhile, in the UK and Ireland (20% of net fees), temp volumes in the public sector have fallen while perm remains weak "with no clear signs of improvement in activity".

"Given we have limited forward visibility, unless we see a material recovery in end markets, we continue to expect that pre-exceptional operating profit in H1 25 will be sequentially lower than H2 24," the company said.

Pre-exceptional operating profit in the year to 30 June was down 47% at £105.1m, split between £60.1m in the first half and £45m in the second.