Hays (HAS: LSE) today reported net fees fell by 7% on a like-for-like basis for the first quarter ended 30 September 2022, compared with the same period last year.

The 7% decrease in net fees was in-line with the company’s expectations and compared to a record quarter in the prior year, Hays noted.

The group noted a resilient performance in the Temp segment, with net fees flat on a like-for-like (LFL) basis. Permanent was down 15% (LFL), with tough conditions and increased time-to-hire.

On an actual basis, group net fees decreased by 9%, with a weakening of the Australian dollar versus sterling in particular decreasing group fees. The group’s year-on-year fee decline was consistent through the quarter, and the company’s September fee exit rate was in-line with Q1 overall at 7%.

In August, Hays announced the appointment of Dirk Hahn as CEO with effect from 1 September 2023.

Hahn said, “I am deeply proud to have been appointed chief executive and I look forward to driving our business forward, with the help of our highly experienced management teams worldwide. We are market leaders in highly attractive structural growth markets, including Germany, Enterprise clients and Technology, and we have a clear strategy going forward. My focus is on excellence of execution, including driving consultant productivity and increasing group profitability.”

Net fees by division

Net fees by segment

Percentage changes noted below are on a like-for-like (LFL) basis unless otherwise noted.

In Germany, the largest specialism of Technology, 33% of Germany fees, increased by 1%, with the second largest, Engineering, up 17%. Accountancy & Finance grew by 4%, with HR up 7%. Private sector fees increased by 4%, with the Public sector up 21%. Contracting delivered solid growth, with fees up 6% and 8% Working Days Adjusted (WDA). This was driven by 1% growth in contractor volumes and 7% from higher margins, partially offset by a 2% reduction from one fewer working day year-on-year.

Fees in Temp increased by 12% (14% WDA). This was driven by 5% growth in Temp volumes, 9% from higher margins and average Temp hours worked, partially offset by a 2% reduction from one fewer working day year-on-year. Perm, which represented 17% of Germany fees, increased by 2%.

Net fees in the UK & Ireland decreased by 11%. Temp fees decreased by 8%, with Perm down 14%. The Private sector declined by 16%, with the Public sector up 4%.

Most regions traded broadly in line with the overall UK&I business, including the largest region of London which decreased by 14%. In Ireland, the business decreased by 10%. At the specialism level, the two largest UK&I businesses, Accountancy & Finance and Technology, decreased by 6% and 20% respectively. Education increased by 7%, although Construction & Property decreased by 10%.

Net fees in Australia & New Zealand fell by 17%. Temp, 62% of ANZ, decreased by 13%, with Perm down 24%. Private sector fees, 64% of ANZ, decreased by 20%, with the public sector down 11%, impacted by tough market conditions, particularly in Temp.

Australia net fees decreased by 17%. The largest regions of New South Wales and Victoria, which together represented 51% of Australia fees, decreased by 22% and 20% respectively. Queensland and Western Australia fell 10% and 8%, with ACT (Australian Capital Territory) down 20%.

At the ANZ specialism level, Construction & Property (19% of ANZ fees) decreased by 24%. Technology, the second largest specialism, fell by 21%, while Accountancy & Finance and HR decreased by 12% and 9% respectively.

New Zealand, 9% of ANZ net fees, decreased by 17%.

Fees in the Rest of World (RoW) division, comprising 28 countries, decreased by 11%. Perm, which represented 63% of RoW net fees, decreased by 17%, with Temp fees up 4%.

EMEA ex-Germany fees were flat. France, the largest RoW country, grew by 6%, with the UAE and Italy up 25% and 10% respectively. Belgium and Switzerland increased by 2% and 3% respectively, although fees in Poland declined by 21%.

The Americas fees decreased by 28%, with conditions difficult through the quarter, particularly in Perm. Canada and USA were tough, down 31% and 27% respectively, as was Latin America, down 29%.

Asia fees decreased by 17%. Japan decreased by 4%, with Malaysia down 15%. China decreased by 25%, with no signs of any material post-pandemic recovery in Mainland China, which continued to underperform Hong Kong.

Overall group consultant headcount decreased by 2% in the quarter and decreased by 9% year-on-year, as the group managed its overall capacity in line with market conditions.

The group said it remains firmly focused on driving consultant productivity, which is at good overall levels, despite more difficult markets, particularly in Perm. The strengthening of sterling versus the main trading currencies of the euro and Australian dollar remains a headwind to group operating profit in FY24. Outlook

Looking ahead, Hays said, overall, FY24 has begun in line with its expectations, and it continued to benefit from the positive effects of mix and margins. Volumes remain broadly stable overall in Temp and Contracting, with modestly lower numbers of new assignments offset by greater contract extensions. In Perm, Hays continued to see lower client and candidate confidence, with increased time-to-hire.

Given that group net fees will decline year-on-year in H1 FY24, in part due to the currency effects and working day impacts noted above, Hays said it will continue to expect conversion rate and operating profit will also decline, as it protects key strategic investments to benefit from future recovery and structural growth opportunities.

Hahn said, “Our key markets remain characterised by skill shortages and continue to be positively impacted by wage inflation. We have a strong balance sheet and flexible business model and are well-positioned to adapt to near-term market conditions, while continuing to target structural growth opportunities and deliver shareholder value.”

Hays shares last traded at £104.20, up 1.26% on the day and 7.53% above its 52-week low of £96.90, set on 7 July 2023. The company has a market cap of £1.63 billion.