One of the UK’s largest recruitment companies Hays has reported a three per cent drop in pre-tax profits and a six per cent drop in earnings per share for the year ended June 2013, as strong growth in Europe fails to offset difficult market conditions in Australia. The group added that conditions in UK banking and finance remained tough.
Pre-tax profits fell to £118.5m from £122.4m, while basic earnings per share fell to 5.14p from 5.47p. Shares fell 1.8 per cent in early trading on the news.
The group reported a one per cent fall in net fee growth to £222.0m in the UK and Ireland, although the company did return to growth in the second half. Consultant headcount in the region remained more or less flat at 1,929.
Activity was broad-based and net fees in our Home Counties, London (excluding City-related), Midlands, Scotland & Northern Ireland and Yorkshire regions grew in the year.
In our private sector business, which represented 72% of the division's net fees, net fees declined by 6%. Markets remained difficult in our Banking and City-related specialisms, but we saw good growth in several areas including Human Resources, Life Sciences and Sales & Marketing.
In our public sector business, which represented 28% the division's net fees, we delivered net fee growth of 14%, although activity in this market remained subdued and growth was driven by perm job-churn. We delivered particularly good performances in our Education and Healthcare businesses.
The £12.1 million improvement in profitability in the UK & Ireland business has been primarily the result of the successful delivery of a range of cost reduction measures we announced in February 2012. We have reduced the cost base in the division by over 30% from peak levels and we continue to review all aspects to seek further efficiency savings, focussing primarily on Back Office and overhead costs. Additionally, our office network now consists of 102 offices versus a peak of 235.
Hays also reported a 10 per cent net fee growth in continental Europe and the rest of the world, with 13 countries reporting growth (including Germany (13 per cent), France (one per cent), Canada (31 per cent) and Russia (40 per cent) and seven seeing a decline. The number of consultants operating in this region was increased by six per cent to 2,084, making up 41 per cent of total headcount.
However, Asia Pacific net fees fell by 13 per cent, driven by a 16 per cent fall in Australia due to a notable decrease in resources and mining activity and 25 per cent drop in permanent fees. Asia experienced fee growth of four per cent. The number of consultants operating in this region was decreased by 7.9 per cent to 1,024.
Chief executive Alistair Cox said:
We have delivered a resilient financial performance against a backdrop of fragile market conditions. This highlights the strength of our diverse business model and our ability to react quickly to fast-changing markets. Our unrivalled sector coverage, mix of contract type and market-leading positions in both mature and structural growth markets set us apart in today's market.
Our focus on controlling costs and driving productivity improvements has returned the UK business to profit. We have invested to drive growth in stronger markets such as Germany and Canada, and we have reacted quickly to reduce costs in more challenging areas, such as Australia, to best defend our financial performance.
Looking ahead to 2014 we expect overall market conditions to remain mixed. While some markets are likely to remain challenging, there are also clear opportunities for growth. We will continue to react quickly to changing market conditions, investing in stronger markets while reducing costs where market conditions or outlook are more challenging. Our focus remains on ensuring the Group is positioned for long-term growth whilst driving our profits along the way.