REG - Hays PLC - Second Quarter Trading Statement

HaysAnnouncement

15/01/2025 07:00

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RNS Number : 3337T  Hays PLC  15 January 2025

 

 

QUARTERLY

UPDATE

FOR THE THREE MONTHS ENDED

31 DECEMBER 2024

15 January 2025

 

Financial summary

 

 Growth in net fees for the quarter ended 31 December 2024 (Q2 FY25)
                                                      YoY Growth

                                                     Actual
                                             LFL
 Germany                                  (17)%                                 (13)%
 United Kingdom & Ireland (UK&I)          (14)%                                 (14)%
 Australia & New Zealand (ANZ)            (17)%                                 (14)%
 Rest of World (RoW)                      (12)%                                 (9)%
 Total                                    (15)%                                 (12)%
 Temp & Contracting                       (10)%                                 (7)%
 Permanent                                (21)%                                 (19)%
 Total                                    (15)%                                 (12)%

 

Note: unless otherwise stated, all growth rates discussed in this statement
are LFL (like-for-like) fees, representing year-on-year organic growth of
continuing operations at constant currency

Highlights

 

 ·                                       Group net fees down 12%, with Temp and Perm down 7% and 19% respectively. The
                                         Group's December growth rate was in line with the quarter overall
 ·                                       Temp & Contracting net fees were sequentially stable but Perm slowed
                                         through the quarter in EMEA, UK&I, and Germany. As a result, we expect H1
                                         pre-exceptional operating profit of c.£25m, towards the lower end of the
                                         consensus range*
 ·                                       Consultant productivity up 4% YoY driven by our continued focus on operational
                                         rigour and resource allocation. Consultant headcount reduced by 2% in the
                                         quarter and by 15% YoY
 ·                                       Our initiatives to deliver structural savings of c.£30m per annum by the end
                                         of FY27 are progressing well and consequently our current periodic cost base
                                         has improved to c.£77m
 ·                                       Net cash of c.£25m (30 September 2024: c.£Nil) is in line with our
                                         expectations, after paying a £33m dividend in the quarter, a £13m upfront
                                         cash contribution related to the defined benefit pension buy-in, and c.£5m
                                         cash exceptionals
 * Company compiled consensus operating profit for H1 FY25 is £27.0m with a
 £24.0-33.2m range, based on eight analysts.

 

Dirk Hahn, Chief Executive, commented:

 

"We are structurally improving Hays despite challenging markets and remain
resolutely focused on driving operational rigour through business line
prioritisation, resource allocation, and efficiency initiatives. Group
consultant productivity increased by 4% YoY in Q2, our structural cost savings
initiatives are progressing well, and the defined benefit pension buy-in is
expected to have a materially positive impact on free cash flow from FY26.

 

Temp & Contracting was sequentially stable through the quarter and our New
Year 'return to work' will again be important so we are closely monitoring
activity levels. Perm net fees slowed but it is too early to say if recent
weakness reflects a more sustained market slowdown or shorter-term deferrals
of client and candidate decision making. However, we are delivering on our
strategy to focus on long-term growth markets and build a structurally more
profitable and resilient business underpinned by our culture and talented
colleagues worldwide so I remain confident that we will benefit materially
when our end markets recover."

 

Group

 

Q2 trading overview

Group net fees decreased by 12% year-on-year on a like-for-like basis. The
December growth rate was in line with the quarter overall, with slower Perm
activity in EMEA, UK&I, and Germany but a more resilient performance in
Temp & Contracting. On an actual basis, net fees decreased by 15%
year-on-year, due to a strengthening of sterling versus the Australian Dollar
and Euro.

Temp & Contracting net fees decreased by 7% with activity levels
sequentially stable through the quarter. Group Temp volumes decreased by 6%
YoY, including Germany down 8%, ANZ down 15%, UK&I down 12%, and EMEA up
3%.

Perm net fees decreased by 19%, driven by volumes down 21% and partially
offset by a 2% increase in our Group average Perm fee. EMEA, UK&I, and
Germany became more challenging through the quarter and markets were subdued
but stable elsewhere.

Our Enterprise business was strong and net fee growth accelerated to 12% in
Q2, driven by resilient performance in MSP contracts and several new client
wins.

Group headcount and costs: Periodic cost base has improved further to c.£77m

We continued to manage our consultant capacity on a business line basis and,
despite tougher markets, our resource allocation actions drove a 4% YoY
improvement in average consultant net fee productivity. Group consultant
headcount decreased by 2% in the quarter, mainly in the UK, and by 15%
year-on-year.

FY25 will benefit from the annualisation of c.£60m cost savings secured last
year with an initial contribution from the c.£30 million per annum structural
savings we target by the end of FY27. This programme is progressing well and
consequently our current periodic cost base has improved to c.£77m from
c.£80m in Q1 representing a c.£2m underlying reduction and a modest benefit
from exchange rate movements.

Building a structurally more profitable and resilient business

We are delivering on our strategy to build a structurally more profitable and
resilient business underpinned by our culture and talented colleagues
worldwide. Through our Five Levers, we will achieve this by increasing our
exposure to the most in-demand future job categories, growing industries and
end-markets, higher skilled and higher paid roles, non-perm recruitment and
large Enterprise clients. Our strategy is not 'one-size-fits-all' and we will
tailor each region and country to its market and customer needs.

Business line prioritisation, optimised resource allocation, and scaling our
eight Focus countries will establish a broader base and enable the Group to
return to, and then exceed, our previous peak profits of £250m.

Trading Outlook

We expect H1 pre-exceptional operating profit of c.£25m, towards the lower
end of the consensus range. Given ongoing economic uncertainty, our New Year
Temp & Contracting 'return to work' will again be particularly important
in FY25 and we are closely monitoring activity levels.

It is too early to say if recent Perm weakness in EMEA, UK&I, and Germany
reflects a more sustained market slowdown, or shorter-term deferrals of client
and candidate decision making. However, we expect near-term market conditions
to remain subdued.

We have maintained good levels of productivity through Q2, believe our overall
consultant headcount capacity is appropriate for current market conditions,
and therefore expect it to remain broadly stable in Q3 25. Our focus on
business line prioritisation and optimal resource allocation will position
Hays strongly for when end markets recover.

At a Group level there are no material working-day effects in H2 FY25.
However, Easter falls entirely in Q4, while in FY24 it was evenly split
between Q3 and Q4. We expect this to have a c.1% positive impact on
year-on-year net fee growth in Q3 FY25, with a corresponding c.1% headwind to
Q4 FY25.

 

Divisional Net Fee Analysis

 

                               Temp & Contracting                      Perm                             Total
                               % of Divisional net fees  LFL           % of Divisional net fees  LFL    % of Group net fees  LFL
 Germany                       84%                       (10)%         16%                       (27)%  31%                  (13)%
 United Kingdom & Ireland      60%                       (11)%         40%                       (19)%  20%                  (14)%
 Australia & New Zealand       68%                       (9)%          32%                       (23)%  12%                  (14)%
 Rest of World                 43%                       3%            57%                       (16)%  37%                  (9)%
 Total                         62%                       (7)%          38%                       (19)%  100%                 (12)%

 

 

Germany: Resilient performance in Contracting; Slower Perm activity

 

Germany net fees were down 13%. Temp & Contracting decreased by 10% with
volumes down 8%, in line with our expectations. We continue to see greater
resilience in Contracting but more challenging markets in Temp where we have
greater exposure to the Automotive sector. Client cost controls once again
drove a 5% reduction in average hours worked but the comparable eases next
quarter. Temp margin and mix increased 3% versus prior year.

Activity levels remain subdued in Perm and net fees decreased by 27% as client
decision making slowed during the quarter.

Our largest specialism of Technology, 33% of Germany fees, decreased by 13%,
with our second largest, Engineering, down 18%. Accountancy & Finance was
down 3% and Construction & Property increased by 12%. Public sector fees,
which represented 16% of Germany, were relatively resilient and decreased by
9%.

Consultant headcount decreased by 3% in the quarter and by 13% year-on-year.

United Kingdom & Ireland: Sequentially stable in Temp; Perm slowed through
the quarter

 

Net fees in the United Kingdom & Ireland decreased by 14% with Temp and
Perm down 11% and 19% respectively. Temp & Contracting net fees were
sequentially stable but Perm slowed through the quarter. The Private sector
(68% of UK&I fees) declined by 10% YoY but the Public sector was tougher,
down 21%.

Most regions traded broadly in line with the overall UK&I business, apart
from Northern Ireland, down 1%, and the North, down 29%. Our largest region of
London decreased by 12%, and Ireland decreased by 30%.

At the specialism level, Accountancy & Finance and Construction &
Property decreased by 13% and 5% respectively. Technology decreased by 22%,
although Enterprise fees performed strongly, up 11%.

Consultant headcount decreased by 6% in the quarter and by 17% year-on-year as
we continued to focus on improving productivity against a challenging market
backdrop.

Australia & New Zealand: Continued sequential stability

 

Net fees in Australia & New Zealand fell by 14% with activity stable
through the quarter. Temp decreased by 9%, and Perm was down 23%. Private
sector fees, 61% of ANZ, decreased by 11%, with the Public sector down 18%.

Australia net fees decreased by 13%. Our largest regions of New South Wales
and Victoria, which together represented 47% of Australia fees, decreased by
18% and 20% respectively. ACT and Western Australia fell by 14% and 17%, with
Queensland down 4%. New Zealand, 6% of ANZ net fees, was tough and decreased
by 24%.

At the ANZ specialism level, Construction & Property (19% of ANZ fees)
decreased by 13%. Technology fell by 10%, while Accountancy & Finance and
Office Support decreased by 20% and 14% respectively.

Consultant headcount decreased by 2% in the quarter and by 20% year-on-year.

 

Rest of World: Weaker Perm activity in EMEA; Return to growth in North
America; Asia stable

Net fees in our Rest of World division, comprising 28 countries, decreased by
9% with Temp up 3% and Perm down 16% respectively.

EMEA ex-Germany (61% of RoW) net fees decreased by 13%. Temp & Contracting
fees were sequentially stable but Perm slowed through the quarter. France, our
largest RoW country, declined by 21% and we saw a clear step-down in Perm
activity during the quarter. Poland and Switzerland were down 11% and 13%
respectively but Spain and Netherlands performed better, up 1% and 5%
respectively.

The Americas (23% of RoW) net fees grew by 2% led by stronger performances in
Canada and the US, up 10% and 7% respectively. Latam, down 26%, was more
challenging.

Asia (16% of RoW) net fees decreased by 6%, with mixed but overall stable
activity through the quarter. Mainland China increased by 18% and Singapore
was up 5% although Hong Kong remained tough, down 38%, and Japan was down 5%.

RoW consultant headcount increased by 1% in the quarter although down by 13%
year-on-year.

 

Cash flow and balance sheet

Net cash of c.£25m (30 September 2024: c.£Nil) is in line with our
expectations, after paying a £33m dividend in the quarter, a £13m upfront
cash contribution related to the defined benefit pension buy-in, and c.£5m
cash exceptionals. The buy-in was announced on 9th December 2024, eliminates
pension related balance sheet volatility and is expected to have a materially
positive impact on Group free cash flow from FY26.

Enquiries

 Hays plc                                                  Group Finance Director

James Hilton
Head of Investor Relations & ESG

Kean Marden                                                                                     +44 (0) 203 978 2520

+44 (0) 333 010 7092
 FGS Global

Guy Lamming / Anjali Unnikrishnan / Richard Crowley

                                                                                                  hays@fgsglobal.com

( )

The person responsible for releasing this announcement is Rachel Ford, General
Counsel & Company Secretary.

( )

Conference call

James Hilton and Kean Marden will conduct a conference call for analysts and investors at 8:00am United Kingdom time on 15 January 2025. Participants are invited to register via the URL link below:

https://register.vevent.com/register/BIbe7f557c2ab64d85aa60a21445d30970
(https://register.vevent.com/register/BIbe7f557c2ab64d85aa60a21445d30970)

 

Once registered, you will receive a confirmation email, with the details of the call and a personal login link and PIN which will place you directly into the call, without the need to speak to an operator. The call will be recorded and will also be available for playback via
the results centre on our investor website (https://www.haysplc.com/investors/results-centre)
.

 

Reporting calendar

 Half-year results for the six months ending 31 December 2024 (H1 FY25)  20 February 2025
 Trading update for the quarter ending 31 March 2025 (Q3 FY25)           16 April 2025
 Trading update for the quarter ending 30 June 2025 (Q4 FY25)            11 July 2025

 

Hays Group overview

As at 31 December 2024, Hays had c.10,300 employees in 225 offices in 33
countries. In many of our global markets, the vast majority of professional
and skilled recruitment is still done in-house, with minimal outsourcing to
recruitment agencies, which presents substantial long-term structural growth
opportunities. This has been a key driver of the diversification and
internationalisation of the Group, with the International business
representing 80% of the Group's net fees in Q2 FY25, compared with 25% in
FY05.

Our consultants work in a broad range of industries covering recruitment in 21
professional and skilled specialisms. Our four largest specialisms of
Technology (25% of Group net fees), Accountancy & Finance (15%),
Engineering (11%) and Construction & Property (11%) collectively
represented c.62% of Group fees in FY24.

In addition to our international and sectoral diversification, in Q2 FY25 the
Group's net fees were generated 62% from temporary and 38% from permanent
placement markets. This well-diversified business model continues to be a key
driver of the Group's financial performance.

Purpose, Net Zero, Equity and our Communities

Our purpose is to benefit society by investing in lifelong partnerships that
empower people and organisations to succeed, creating opportunities and
improving lives. Becoming lifelong partners to millions of people and
thousands of organisations also helps to make our business sustainable. Our
core company value is that we should always strive to 'do the right thing' by
acting in the best interests of our candidates, clients, colleagues and
communities. Linked to this and our commitment to Environmental, Social &
Governance (ESG) matters, Hays has shaped its Sustainability Framework around
the United Nations Sustainable Development Goals (UNSDG's), and further
details can be found on pages 48-78 of our FY24 Annual report
(https://www.haysplc.com/investors/annual-report-2024) .

Cautionary statement

This Quarterly Update (the "Report") has been prepared in accordance with the
Disclosure Guidance and Transparency Rules of the UK Financial Conduct
Authority and is not audited. No representation or warranty, express or
implied, is or will be made in relation to the accuracy, fairness or
completeness of the information or opinions contained in this Report.
Statements in this Report reflect the knowledge and information available at
the time of its preparation. Certain statements included or incorporated by
reference within this Report may constitute "forward-looking statements" in
respect of the Group's operations, performance, prospects and/or financial
condition. By their nature, forward-looking statements involve a number of
risks, uncertainties and assumptions and actual results or events may differ
materially from those expressed or implied by those statements. Accordingly,
no assurance can be given that any particular expectation will be met and
reliance shall not be placed on any forward-looking statement. Additionally,
forward-looking statements regarding past trends or activities shall not be
taken as a representation that such trends or activities will continue in the
future. The information contained in this Report is subject to change without
notice and no responsibility or obligation is accepted to update or revise any
forward-looking statement resulting from new information, future events or
otherwise. Nothing in this Report shall be construed as a profit forecast.
This Report does not constitute or form part of any offer or invitation to
sell, or any solicitation of any offer to purchase or subscribe for any shares
in the Company, nor shall it or any part of it or the fact of its distribution
form the basis of, or be relied on in connection with, any contract or
commitment or investment decisions relating thereto, nor does it constitute a
recommendation regarding the shares of the Company or any invitation or
inducement to engage in investment activity under section 21 of the Financial
Services and Markets Act 2000. Past performance cannot be relied upon as a
guide to future performance. Liability arising from anything in this Report
shall be governed by English Law, and neither the Company nor any of its
affiliates, advisors or representatives shall have any liability whatsoever
(in negligence or otherwise) for any loss howsoever arising from any use of
this Report or its contents or otherwise arising in connection with this
Report. Nothing in this Report shall exclude any liability under applicable
laws that cannot be excluded in accordance with such laws.

 

LEI code: 213800QC8AWD4BO8TH08

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