Recruitment firm Hays has painted a pretty dismal picture of trading conditions in an update released on Thursday.
The firm warned it expects pre-exceptional operating profit of around £45 million for the year ending 30 June, well below the analyst consensus of £56.4 million, as challenging permanent recruitment markets hit performance.
Hays shares were down 13% at the time of writing.
Yesterday, we reported on plant hire company Speedy Hire’s struggles with slow economic conditions. It appears the recruitment industry is also facing similar headwinds.
The company said activity levels declined during its fourth quarter, driven by broad-based weakness in permanent recruitment markets globally due to low client and candidate confidence amid macroeconomic uncertainty.
Temporary and contracting activity proved more resilient, but still contracted.
Group like-for-like net fees are expected to fall 9% year-on-year in the fourth quarter, with permanent recruitment down 14% and temporary and contracting declining 5%. This will be a blow to investors, but not entirely unexpected.
Hays is a global operation, and although regional performance varied significantly, there was a strong theme of weakness throughout most markets.
Germany, Hays’ largest market, saw net fees drop 5% with particular weakness in the automotive sector. The UK and Ireland division faced a 13% decline in net fees, whilst Australia and New Zealand fell 9%.
Rest of world net fees declined 9% overall, with EMEA excluding Germany down 13% due to challenging permanent markets, particularly in France. Asia remained relatively stable with fees down 3%, whilst the Americas saw only a 1% decline, supported by 5% growth in North America.
Despite cost-cutting efforts to reduce the cost base, Hays only managed a £1 million savings to lower costs to around £75 million from £76 million in the third quarter. The largely fixed nature of costs meant lower fees flowed through directly to reduced profitability.
Hays expects current challenging conditions to persist into the next financial year. Investors aren’t sticking around to see what this looks like, and shares sank on Thursday.