International recruitment firm Hays (LON: HAS) reported net fees today of £583.3 million for the six months ended 31 December 2023, a 9% decrease on a like-for-like basis compared to the previous year. The company has a number of restructuring initiatives underway to improve performance in key markets.

The decrease in group fees was due to lower volumes in both Temp and Perm, partially offset by increases in average fees per placement, which were driven by management actions and the impact of wage inflation.

Turnover amounted to £3.53 billion, down 5% on a like-for-like basis.

The higher net fee decline compared to turnover was due to relatively resilient performance in Temp fees versus Perm.

Chief Executive Dirk Hahn said, “As previously reported, the half-year saw increasingly challenging conditions, with a clear slowdown in most Perm markets in December, while our larger Temp & Contracting business again showed greater resilience. We acted decisively to drive consultant productivity, better align our operations to market conditions and opportunities, and reduce costs. Consequently, we delivered £30 million of annualised savings between August and December and are on track to deliver a further circa £20 million in H2.”

Hahn said he is “not satisfied with our profit performance.”

“Our focused strategy targets the many structural growth opportunities we see, while driving profitability through increased resilience, operational rigour and enhanced execution. We will also be guided by our ‘Golden Rule’ for our businesses, namely that operating profit growth should exceed fee growth, which in turn should exceed headcount growth through the cycle. As our end markets stabilise and then recover, I am confident we can return to, and then exceed, our previous peak profits. While our markets today are challenging, and we are making some difficult decisions, Hays is a strong business with a great team of talented colleagues, and I am excited about what we can achieve together.”

Temp net fees were down 5% on a reported basis and 3% on a like-for-like basis. Perm net fees fell by 17% on a reported basis and was down 15% on a like-for-like basis.

Profit before tax (before exceptional items) stood at £55.5 million, down 40% on a like-for-like basis compared to the prior year.

Net Fees by Geography

Unless otherwise stated all growth rates below are LFL (like-for-like), YoY (year-on-year) net fees and profits, representing organic growth of continuing operations at constant currency. WDA = working-day adjusted.

The group’s largest market of Germany saw net fees increase by 3% to £186.2 million. Operating profit decreased by 6% to £40.8 million, mainly due to two fewer working days in H1 24 versus the prior year, which as previously reported impacted fees and profit by £3.5 million. Temp and Contracting, (82% of Germany fees), increased by 3%, or up 5% WDA.  This was driven by 1% growth in volumes and 5% from the positive impact of price and mix, partially offset by 2% from two fewer working days and 1% from slightly lower average hours worked. Perm, 18% of Germany fees, increased by 2%. This included a 10% increase in the average Perm fee, partially offset by 8% lower Perm volumes.

In the United Kingdom & Ireland (UK&I), net fees decreased by 14% to £118.1 million. Operating profit of £5.7 million represented a decrease of 63% versus the prior year, and a conversion rate of 4.8% (2023: 11.1%). Perm markets slowed materially through the half-year, impacted by negative GDP and decreased client and candidate confidence, with Temp remaining broadly stable sequentially, but down over the year. UK&I costs decreased by 8%, driven by headcount reductions, and costs will reduce further in H2 as a number of restructuring projects complete. However, given the pace of decline in fees through the half-year, Hays incurred negative operating profit leverage, particularly in Q2, amplified by December’s fee exit rate of minus 20%.

Temp (56% of UK&I), decreased by 11%, with Temp volumes also down 11% and the mix of price and margin flat over the year. The Perm business saw fees decrease by 17%, with volumes down 28%, partially offset by an 11% increase in average Perm fee.

In Australia & New Zealand (ANZ), net fees decreased by 19% to £74.3 million, with operating profit down 60% to £6.4 million. This represented a conversion rate of 8.6% (2023: 17.8%). Currency impacts were negative in the half-year, decreasing net fees by £8.5 million. Cost decreases of 10% were driven by 15% lower average consultant headcount in the half-year, partially offset by the company’s own cost inflation. Having changed their ANZ leadership team in H2 23, Hays continued to take decisive action to improve its performance, the group stated.

Temp (63% of ANZ) decreased by 15%, with volumes down 17%, but remained sequentially stable through the half-year. Fees continued to be impacted by the Federal government’s policy decision to reduce the use of Temps in the public sector, and by reduced activity in some large Enterprise clients. Perm fees decreased by 25%, with volumes down 21% and slowing through the half-year, including a particularly difficult December.

Fees in the Rest of World division, which comprises 28 countries, decreased by 11%. Fees in Temp (37% of RoW) were resilient and flat YoY, with Perm down 16% as markets slowed through the half-year. Operating profit decreased by 65% to £7.2 million.

EMEA ex-Germany (63% of RoW) fees decreased by 4%. France, the largest RoW country, delivered flat fees, however activity slowed through the half-year. Belgium and Spain increased by 6% and 1% respectively, and the UAE delivered record fees, up 26%.

Switzerland and Poland decreased by 4% and 23% respectively. In response to market conditions, Hays reduced EMEA ex-Germany headcount at the end of the half-year.

The Americas (21% of RoW) fees decreased by 26% and with tough conditions throughout the region. The USA declined by 26%, Latin America by 27% and Canada by 28%. Given the extent of the fee declines, the Americas was modestly loss-making in the half-year.

Asia (16% RoW) fees decreased by 14%, with China down 22%. Japan and Malaysia decreased by 2% and 5% respectively. Overall, Hays made a small operating profit in Asia, however Mainland China was modestly loss-making. In response to market conditions, Hays restructured its Americas and Asia businesses, including a right-sizing and delayering of operational management, and a reduction in non-fee earner headcount.

As for current trading, Hays said Temp & Contracting New Year ‘return to work’ has been in line with the prior year in the UK&I and ANZ, with Germany volumes rebuilding 2% behind the prior year. Overall Group temporary and contract volumes are down 8% versus the prior year (Q2 24: down 8%). In Perm, following previously reported December weakness, Hays has seen New Year job flow and activity levels in line with Q2. However, it continues to see slower client and candidate decision-making, leading to a longer time-to-hire.

The group’s key markets continue to be supported by skill shortages, and the group expects to see some further fee benefit in the second half from the positive effects of wage inflation globally, albeit at lower levels than in H1, with fee margins stable.

Hays shares last traded at £96.50, up 0.94% on the day and 10.79% above the 52 week low of £87.10 set on 9 January 2024. The company has a market cap of £1.53 billion.