Recruitment group Hays warns profits will almost halve this year
‘No signs yet’ of businesses returning to hiring as lockdowns ease worldwide
Hays, the UK-based recruitment company, cut 1,000 jobs and warned its profit this year would almost halve as there were “no signs yet” of companies restarting hiring as lockdowns ease across the world.
In a trading update on Thursday, the Hays said fees earned from making placements in the three months to the end of June had dropped 34 per cent year on year. It expected annual operating profit to be between £130m and £135m, compared with £248.8m in 2019.
“Without a doubt these have been the toughest trading conditions that we’ve faced in 14 years,” said Paul Venables, chief financial officer.
The hiring group, which operates in 33 countries covering sectors from IT to construction, was hardest hit in Europe and the UK, where fees dropped more than 40 per cent. Fees were down by about 30 per cent in the US, Asia, and Australia and New Zealand.
“In many respects the difference between regions is driven by how hard and long the lockdowns have been,” Mr Venables said, adding that Hays’s specialism in the UK construction sector had left it particularly exposed when sites closed at the start of the lockdown. In regions such as Australia sites remained open.
Hays’s update added to a gloomy picture for the UK, which has lost more than half a million jobs since the lockdown started in mid-March, despite a number of government support measures aiming to keep people on payroll.
Hays has reduced its global headcount by 9 per cent, triggering about 1,000 job losses. However, Mr Venables said part of this was a result of a naturally high turnover rate in the industry and jobs that had not been filled, rather than redundancies.
“It ties with the pretty poor data that we’ve had coming out of the UK today,” said Thomas Callan, analyst at Investec. “But it’s to be expected, and it’s important not to get too hung up on the UK market,” he added, referring to the fact that more than 75 per cent of Hays’s income comes from outside of the UK.
Mr Venables said Hays expected to be lossmaking over the summer months as the cost of reopening offices was coupled with a seasonal lull in hiring.
Mr Callan said the company had managed to exceed profit expectations and the decline of a third in the fourth quarter was less than the expected 50 per cent drop. But he said Hays had been “extremely cautious” in a call with analysts on Thursday.
“Basically July trading has been really weak, there’s no real sign of positive momentum coming through,” Mr Callan said. “The group remains pretty nervous about the prospect of second outbreaks.”
Hays’s share price was down by about 3 per cent at lunchtime trading on Thursday.