Hays plc, the world’s seventh-largest staffing firm, reported a slowdown in most of its markets in December — particularly affecting its perm business — as markets became more challenging throughout its fiscal second quarter ended Dec. 31, 2023.

“Temp volumes remained broadly stable sequentially through the quarter but declined [year-over-year] as we did not see our normal seasonal step-up in worker volumes,” Hays Chief Executive Dirk Hahn said in a press release. “As a result, we expect operating profit in our first half to be [approximately] £60 million (US$76.3 million), despite our ongoing actions to reduce costs.”

The forecast operating profit is below the current market consensus expectations of approximately £73 million (US$92.9 million).

“Given increased uncertainties and reduced client and candidate confidence, our New Year ‘return to work’ is particularly important, and we are closely monitoring activity levels,” Hahn said. “It is too early to say if December’s weakness reflects a sustained market slowdown or some placement deferrals, however, we expect near-term market conditions to remain challenging.”

Hays accelerated its cost reduction and efficiency programs in response to the market slowdown, he said.

For the fiscal second quarter, Hays reported net fees, or gross profit, fell by 10% year over year, on a “like-for-like basis,” which refers to organic growth of continuing operations in constant currency.

Second-quarter gross profit fell for permanent placement and temporary staffing, while all regions, except for Germany, reported a downturn for the second quarter.

Unless otherwise stated, all growth rates mentioned below are like for like:

Temp and contracting (59% of company gross profit) declined by 5% against a challenging annual growth comparative. The decline was 4% when also adjusted for working days.

While overall volumes in temp and contracting remained broadly stable on a sequential basis, Hays did not see its normal seasonal step-up in worker volumes and therefore volumes were down circa 8% year over year, according to the company. Hays added that it continued to see some benefit from its actions to increase fee margins and focus on higher value markets, together with the positive effects of wage inflation.

Gross profit in perm (which accounts for 41% of the company’s gross profit) decreased by 17%. Overall, perm markets were increasingly challenging, particularly in December, where slower client and candidate decision-making led to a lower conversion rate. Overall, new job registrations remained down year over year but were broadly stable sequentially, with lower conversion into placements and further increases in time-to-hire.

By geography

In Germany, gross profit was flat year over year, or up 2% on a working day-adjusted basis. The largest specialism of technology, 33% of Germany’s gross profit, decreased by 7%, with the second-largest, engineering, up 12%. Accountancy and finance declined by 1%, with construction and property up 4%. Temp and contracting gross profit was flat year over year, or up 2% working-day adjusted. This was driven by a 5% increase from higher margins, offset by a 1% reduction in volumes, a 2% reduction from fewer working days year-on-year, a 2% reduction from hours worked and higher sickness rates. The volume decline was driven by lower new assignment sales year on year through the quarter. Perm fees, which represented 18% of Germany’s gross profit, were flat year over year.

Gross profit in the UK and Ireland decreased by 17%. Temp (58% of UK and Ireland gross profit) gross profit decreased by 13%, with perm slowing through the quarter and down 21%. The private sector (64% of UK and Ireland gross profit) declined by 21%, with the public sector down 6%.

Most regions traded broadly in line with the overall UK and Ireland business, apart from the Midlands and North of England, each down 10%, and Scotland, down 26%.

Gross profit in Australia and New Zealand fell by 20%. Temp, 65% of Australia and New Zealand gross profit, decreased by 16%, with perm slowing through the quarter and down 27%. Private-sector gross profit, 59% of Australia and New Zealand, decreased by 25%, with the public sector down 13%.

Australia gross profit decreased by 19%. The largest regions, New South Wales and Victoria — which combined represented 51% of Australian gross profit — decreased by 24% and 17%, respectively. Australian Capital Territory and Western Australia fell by 21% and 14%, with Queensland down 12%. By sector, construction and property (19% of Australia and New Zealand gross profit) decreased by 23%. Technology, the second largest specialism, fell by 19%, while accountancy and finance and HR decreased by 21% and 7%, respectively.

In New Zealand (8% of Australia and New Zealand), gross profit decreased by 35%.

Gross profit in the “rest of world division,” comprising 28 countries, decreased by 11%. Perm, which represented 61% of rest-of-world gross profit, decreased by 17%, with temp fees down 1%.

Here’s a breakdown of rest-of-world markets:

• EMEA excluding Germany (64% of rest-of-world gross profit) saw a 6% decrease in gross profit. France, the largest rest-of-world country, declined by 5%, with Poland and Switzerland down 25% and 9% respectively. United Arab Emirates, Belgium and Italy performed stronger, up 28%, 10% and 8% respectively, while Spain was flat year over year.
• In the Americas, gross profit fell by 25%, with challenging but broadly stable conditions through the quarter. The US and Canada remained tough, down 24% and 25% respectively, with Latin America down 27%. The Americas represent 21% of the company’s gross profit.
• Gross profit in Asia fell by 11%, with conditions broadly stable through the quarter. China decreased by 18%, with Mainland China down 14% and improving through the quarter, although Hong Kong fell 21%. Gross profit in Japan was flat, while Malaysia was more resilient and grew by 8%. Asia represents 15% of the company’s gross profit.

Hays’ consultant headcount decreased by 5% in the quarter and 12% year on year.

Click to enlarge.

Share price

Shares in Hays closed down 7.15% today in London to £100.00 (US$127.23). They set a new 52-week low in today’s trading session when they reached £87.10 (US$110.82).