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UK — Hays returns to year-on-year growth driven by international business

08 July 2010

Hays Plc (HAS:LSE), the fifth largest staffing company in Europe, has today released an interim management statement for the final quarter of the Company’s financial year ended 30 June 2010.

Net fees were up by +14% (+8% on a like-for-like basis) versus the same period last year. Like-for-like (LFL) growth represents organic growth at constant currency.

Net fees from the permanent placement business increased LFL by +26% but this was partially offset by a -3% decrease in net fees from the temporary placement business due to its higher weighting to the United Kingdom & Ireland public sector market.


On a sequential basis, total group net fees increased LFL by +8% versus the previous quarter. The underlying temporary placement margin remained broadly flat through the quarter. The group's consultant headcount increased by 1% during the quarter with ongoing investment in Australia, Asia, Germany and Brazil partially offset by some reductions in the United Kingdom & Ireland.

Overall, the group's performance in the quarter has been in line with the board's expectations.

The group incurred a non-recurring restructuring cost of 14 million Pounds at the end of the quarter. This principally relates to impending back office staff redundancy costs and non-cash asset write-downs following the near completion of the United Kingdom back-office automation project. The group will recognise this cost as an exceptional item in its results for the year ended 30 June 2010.

In the United Kingdom & Ireland net fees remained broadly flat versus the previous quarter and decreased by -6% versus the prior year. In the private sector, the group achieved a +10% sequential net fee growth versus the previous quarter, with strong growth in Pharma, City-related recruitment and Corporate Accounts. In the public sector, demand for frontline services, like Education and Healthcare, was stable during the period. However demand for administrative and other non-frontline services continued to weaken across the quarter. Public sector net fees in total, which represent a third of the division's net fees, decreased by -14% sequentially versus the previous quarter. Finance Director, Paul Venables said that he expected private sector growth in the UK to offset any declines in the public sector. Whilst the group continues to redirect consultants from the public sector to the private sector, the overall consultant headcount decreased by -2% during the quarter. Hays has been the largest recruiter in the UK for some years, however, recent acquisitions by Adecco (who do not announce their results until 11 August) combined with Hays’ exposure to the public sector may have demoted them to second place.

In Continental Europe & Rest of World, Hays recorded +12% LFL sequential net fee growth versus the previous quarter, with net fees increasing by +16% on a LFL basis versus the prior year. The German business achieved +17% LFL sequential net fee growth versus the previous quarter with a strong return to growth in IT staffing. The Brazilian, Portuguese and Hungarian businesses each achieved record fee months during the quarter whilst trends continued to improve in most other countries. 11% of the division's net fees are based in the Southern and Eastern European countries and to date these markets have not been impacted by the sovereign debt issues. Given good prospects in Latin America, Hays plans to enter the Mexican market in September and the Argentinian market next year. Consultant headcount in this region was flat during the quarter, with investment in Germany and Brazil offset by reductions in UAE and Spain.

In Asia Pacific Hays recorded a +13% LFL sequential net fee growth versus the previous quarter, being the fourth consecutive quarter of growth, with net fees increasing by +28% on a LFL basis versus the prior year. In its Australian business, Hays continued to capitalise on improving market conditions across all regions and sectors, particularly in the group's permanent placement business which achieved net fee growth of +59% on a LFL basis versus the prior year. The temporary placement business is recovering at a slower rate, recording a LFL increase in net fees of +3% versus the prior year. In Asia, representing 14% of divisional net fees, the group more than doubled net fees versus the prior year with Japan, China and Singapore achieving record fee months during the quarter. All countries in Asia are now performing at above pre-downturn levels and the group sees good prospects for growth within its existing Asian network. Overall consultant headcount in the division was increased by +10% during the quarter. This marks a +22% increase since December and Hays will continue to invest as markets improve.

Alistair Cox, Chief Executive of Hays, said "this has been an encouraging quarter which has seen us return to year on year growth for the first time in two years. We have capitalised on the strong market recovery across Asia Pacific and improving trends in most of our other international markets, particularly in Germany and Brazil. With nearly 60% of group net fees now generated outside the UK, we are well positioned to benefit from both the cyclical and structural growth in the international specialist recruitment markets."

"In the UK, as expected, we have seen continuing weakness in certain parts of the public sector, which collectively represent less than 10% of group net fees. This has been offset by growth in the private sector. Whilst we remain mindful of the risks to the economic recovery in many of the countries in which we operate, the outlook in our markets continues to improve."

"The investments we have made during the recession in technology, marketing, and training, combined with our continued international diversification, mean that Hays is returning to growth with a stronger, broader based and more efficient business than ever before."

Hays has experienced a permanent recruitment led recovery in Asia and a temporary staffing led recovery in Europe indicating that European businesses remain more cautious about the shape of the recovery. Through the quarter, Hays saw sequential improvements in net fees month on month exiting June with low double-digit growth, however, the UK remained flat.

In early trading Hays's shares were up by 5.52% to 95.55 Pence.

 

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