Hays earnings under pressure as elections impact jobs market

Recruitment firm Hays has warned it expects earnings to be at the lower end of forecasts after election uncertainty kept job markets under pressure.

The group said like-for-like net fees plunged 15% in its fourth quarter to June 30, but the decline worsened to 18% last month.

Hays said trading was hampered by the “negative effects” of elections in the UK and France, as well as challenging conditions in Germany and Australia.

The group said there were few signs of a turnaround in the jobs market, adding it was too early to say if there would be a “meaningful recovery” in the UK after Labour’s landslide win in the General Election.

It warned that operating profits are expected at around £105 million – just below consensus expectations of between £106 million to £113 million.

The results follow a profit warning from rival PageGroup on Tuesday after it saw gross profits fall 12% on a constant currency basis to £224.3 million in the three months to the end of June and worsen through the quarter.

Hays also revealed it cut its consultant workforce by another 18% year-on-year in the three months to the end of June, while back office staff numbers fell by 9%.

It closed or merged 12 offices in the quarter, ending the financial year with 236, as part of wider moves that saw annual costs slashed by about £60 million.

Hays chief executive Dirk Hahn said: “Market conditions remained challenging in the quarter.

“Overall, we continued to see longer-than-normal ‘time-to-hire’, impacted by low levels of confidence.

“Given this backdrop, we have remained focused on driving consultant productivity and tight cost control.

“Given ongoing global uncertainties, in the near term we expect our key markets will remain challenging.”

The update showed that in the UK and Ireland, net fees tumbled 17% on a like-for-like basis, while they were 22% lower in Australia and New Zealand, 17% down in Germany and 11% off in the rest of the world division.

“In the UK and Ireland and France we expect a subdued summer, and it is too early to determine when we will see a meaningful recovery,” Hays said.