Hays plc (HAS:LSE), the world’s seventh-largest staffing firm, reported net fees, or gross profit, decreased by 14% on a like-for-like (LFL) basis in its fiscal third quarter ended 31 March 2024. On a reported basis, net fees fell by 17%. On a working-day adjusted (WDA) basis, net fees declined by 13%.

Temp fees were down 12% and perm down 18%, versus a record quarter in the prior year. The group’s fee exit rate, on a WDA basis, was in line with the quarter, versus an all-time record month in March 2023.

Dirk Hahn, chief executive, said, “Market conditions remained challenging through the quarter. In Australia and UK&I, temp activity was stable through Q3, although volumes in each are down circa 15% year-on-year (YoY), and slightly below pre-Christmas levels. In Germany, temp & contractor volumes decreased by 5% YoY, and fees were also impacted by lower-than-normal average hours worked per assignment.”

Hahn continued, “Group perm activity was stable through the quarter, however we continued to see extended ‘time-to-hire’, impacted by low levels of client and candidate confidence.”

Net fees

Hays said it continued to manage its overall capacity on a business line basis, and drove a 2% improvement in consultant productivity, despite the tougher markets.

Group consultant headcount decreased by 6% in the quarter and by 16% year-on-year. Total group headcount decreased by 5% in the quarter, and by 13% YoY as the group focused on its efficiency programmes.

Since its FY23 preliminary results in August, the group’s actions have reduced its costs per period by circa £4 million, and Hays said it is well on track to deliver the previously announced annualised cost savings of circa £50 million by the end of FY24, of which circa £20 million is expected to be structural. As a result, Hays incurred a £12.6 million exceptional restructuring charge in H1 FY24, with further restructuring charges expected in H2 24.

Unless otherwise stated, all growth rates discussed below are LFL (like-for-like) fees, representing year-on-year organic growth of continuing operations at constant currency.

Germany

Germany fees were down 13%, or down 11% on a working day-adjusted basis. Temp & contracting fees decreased by 15% (down 13% WDA). Volumes reduced by 5%, in line with the group’s expectations, with the New Year return to work 2% behind the prior year.

The largest specialism of technology (32% of Germany fees) decreased by 19%, with the second largest, engineering, down 10%. Accountancy & finance declined by 13%, although construction & property was stronger and increased by 4%. Perm fees, which represented 17% of Germany fees, decreased by 5% YoY. Consultant headcount decreased by 5% in the quarter and by 7% year-on-year.

UK & Ireland

Net fees in the UK & Ireland decreased by 16%. Temp fees (59% of UK&I fees) decreased by 15%, with perm down 18%. The private sector (68% of UK&I fees) reduced by 17%, with the public sector down 14%.

Most regions traded broadly in line with the overall UK&I business, apart from Scotland and the South West & Wales regions, down 26% and 23% respectively. The largest region of London decreased by 18%, and in Ireland, the business decreased by 11%. At the specialism level, accountancy & finance and construction & property decreased by 11% and 8% respectively. Technology decreased by 31%, although education fees were more resilient, down 2%. Consultant headcount decreased by 6% in the quarter and by 16% year-on-year.

Australia & New Zealand

Net fees in Australia & New Zealand (ANZ) fell by 23%. Temp(65% of ANZ) decreased by 16%, with perm down 33%. Private sector fees(65% of ANZ) decreased by 25%, with the public sector down 18%. Australia net fees decreased by 20%. The largest regions of New South Wales and Victoria, which together represented 50% of Australia fees, decreased by 25% and 15% respectively.

ACT (Australian Capital Territory) and Western Australia fell by 29% and 22%, with Queensland down 18%. At the ANZ specialism level, construction & property (21% of ANZ fees) decreased by 25%. Technology fell by 17%, while accountancy & finance and HR decreased by 22% and 21% respectively.

New Zealand, 7% of ANZ net fees, decreased by 45%. ANZ consultant headcount decreased by 7% in the quarter and by 24% year-on-year.

Rest of World

Fees in the Rest of World (RoW) division, comprising 28 countries, decreased by 11%. Perm, which represented 61% of RoW net fees, decreased by 18%, with temp fees up 1%. EMEA ex-Germany (66% of RoW) fees decreased by 9%. France, the largest RoW country, declined by 10%, with Poland and Switzerland down 29% and 11% respectively. The UAE and Italy performed strongly, up 14% and 10% respectively.

The Americas (20% of RoW) fees decreased by 19%, with challenging but stable conditions through the quarter. Canada and the USA decreased by 20% and 16% respectively, with LATAM down 27%. Asia (14% of RoW) fees decreased by 8%, with conditions stable through the quarter.

China was flat and improved through the quarter. Fees in Japan were also flat, although Malaysia was more difficult, down 14%. RoW consultant headcount decreased by 7% in the quarter and by 18% year-on-year.

Hahn said, “While economic uncertainties remain, we have a strong and clear strategy and will continue to build a more resilient business through greater focus, increased operational rigour and strong cost management. As set out at our H1 results, we are firmly focused on targeting the many structural growth opportunities we see and, over time, rebuilding our conversion rate. Driven by our strong teams of talented colleagues worldwide, I am excited by what we can achieve once our end markets recover.”

Hays expects overall near-term market conditions to remain challenging, but broadly stable.

The impact of temp & contracting hours worked in Germany will be an important sensitivity to fee and profit performance going forward, and it is too early to determine whether there will be a meaningful rebound in Q4, the group added.

“We remain focused on driving improved consultant productivity through increased operational performance and rigour, while delivering our cost reduction and efficiency programmes,” Hays stated. “Once our end markets stabilise and recover, our actions to deliver our focused strategy should ensure a high drop-through of fee growth to operating profit, in line with our ‘Golden rule’ that group profit growth should exceed fee growth, which should in turn exceed headcount growth.”

“There are no material working-day effects year-on-year in the second half,” Hays stated. “However, as Easter fell evenly between Q3 and Q4 this year, while in FY23 it fell entirely in Q4, we expect the 1% negative Q3 24 Group Easter fee impact will lead to a corresponding fee benefit in Q4 24.”

Yesterday, rival PageGroup reported Q1 gross profit was down amid headcount reductions.

Hays shares last traded at £88.75, down 4.05% on the day and 1.89% above its 52-week low of £87.10, set on 9 January 2024. The company has a market cap of £1.47 billion.