Thursday 29 August 2019 8:39 am

Hays profits subdued by restructuring costs as recruiter braces for economic slowdown

Recruiter Hays’ full-year profits have been weighed down by stalling economic growth in some of its biggest markets, as well as one-off costs related to reshaping its European operations.

Shares in the FTSE 250 listed company fell 3.6 per cent in early morning trading after it reported the impact of a macroeconomic slowdown in the UK, Germany and Australia.

Hays provides recruitment services for companies across 33 countries, and is regarded as a barometer of economic activity, especially in the UK where doubts persist among businesses about the conditions of Britain’s exit from the EU, affecting business decision making.

The figures

Pre-tax profit was £231.2m for the year ending 30 June, a three per cent year-on-year drop. Net fees grew five per cent to £1.13bn.

Earnings per share fell three per cent to 11.10p, while the core dividend per share was 3.97p. Net cash was up six per cent at £129.7m.

In Hays’ core UK and Ireland market it saw a two per cent growth in net fees, while in Germany it managed record net fees of nine per cent despite weakening market conditions.

Why it’s interesting

Profits were hit by a legal decision that forces companies to make pensions provisions for men and women equal, resulting in £8m one-off costs.

Weakness in Germany’s manufacturing sector, meanwhile, has hampered frees growth. Hays said it had seen “increasing signs of cost control and slower decision-making”.

In the UK, the firm said fee growth in the fourth quarter up until the end of June had been “understandably more subdued” as economic uncertainty due to Brexit took hold of companies’ decisions.

What Hays said

Chief executive Alistair Cox told City A.M: “Since Brexit, the UK has been flat as a pancake. It’s grown at two per cent in the last 12 months. And through good cost control, we’ve managed to eke out four per cent profit growth, so I think that was a great performance.

“Undoubtedly, the markets around the world got a little weaker as the year went by. So given that backdrop, I thought it was a very solid set of results. Actually, the business is operating at close to peak levels in a number of areas.

“Nineteen of our 33 countries hit their own individual record. That’s testament to how the markets have actually been even though some of the economic headlines have been a little gloomier. Operating profit was pretty close to our all-time record as well.”

Main image: Leon Neal/Getty Images