Hays boosted by Germany but UK banking market still weak

Elizabeth Fournier
SHARES in recruitment firm Hays climbed as much as 11 per cent yesterday after it posted steady growth in global net fee income, despite a drop in profits at its UK business.

CEO Alistair Cox said the UK had been hit by weakness in banking and the private sector, leading to a decline in domestic net fees of five per cent in the three months to 31 March.

The gloomy UK outlook echoes yesterday’s update from peer Michael Page, which said weak markets were dragging on growth despite reporting an uptick of seven per cent for the first quarter.

Overall growth at Hays was 10 per cent, supported by a strong performance across the group’s continental Europe practice – particularly in Germany where net fee income rose by 36 per cent. Australia and New Zealand also led expansion in Asia Pacific, contributing to a five per cent increase overall.

The international boost meant the group was able yesterday to revise its profit forecasts, saying it now expects full year operating profits to come towards the top end of market estimates that range from £108m-£130m.

Finance director Paul Venables struck a more positive note than in the company’s last update, when he admitted the firm was taking a “cautious position” on the outlook for the rest of 2012.

Yesterday he said that though markets were “complex and far from uniform” there were signs that companies should be “more positive than three months ago”.

In the UK, the overall drop in income came largely from a slowdown in the private sector, where net fee income fell by six per cent – largely due to decreased activity in the firm’s banking and “City-related specialisms”.

Fees from the public sector also lagged, falling by two per cent, while IT, legal and energy recruitment were the key areas where Hays clawed back some domestic growth.

To offset the decline, the firm said it was continuing to focus on cost cuts as a means of protecting profit margins – and admitted it had decreased consultant headcount in the UK by five per cent over the quarter.

Net debt decreased by around £18m over the period to £160m, and Venables maintained that Hays would “continue to invest selectively in certain growth areas”. But he ruled out acquisition in core market Germany, saying the company would “rather be aggressive in organic growth”.