Hays shares tumble as recruiter issues profit warning due to hiring slowdown

Hays shares tumbled as the group cautioned over profits after it revealed that it experienced a ‘clear slowdown’ in December.

The FTSE 250 recruitment firm said group fees were down by 15 per cent last month and down 10 per cent in the three months to the end of December. 

Shares in Hays dropped by 9.19 per cent to 97.80p in midday trading on Tuesday.

It now expects first-half profits of £60million, which is down from market expectations of £73million.

Fees earned for permanent hiring decreased 17 per cent in the three months to the end of December, with volumes down by 25 per cent.

In the UK and Ireland, consultant headcount decreased by 3 per cent in the quarter and by 10 per cent year-on-year. 

The group added that it expects to incur an exceptional restructuring charge in the first half of the 2024 financial year of £12million.

Dirk Hahn, chief executive of Hays said: ‘Overall market conditions became increasingly challenging through the quarter, including a clear slowdown in most markets in December, notably in our Perm businesses as client and candidate decision-making slowed. 

‘Temp volumes remained broadly stable sequentially through the quarter, but declined year-on-year as we did not see our normal seasonal step-up in worker volumes. As a result, we expect operating profit in our first half to be c.£60 million, despite our ongoing actions to reduce costs.’

In October, fellow recruiter Robert Walters reported another a significant drop in gross profits as economic uncertainty continues to weigh on the industry.

Net fee income at the white collar specialist fell 13 per cent at constant currency levels to £93.4million for the three months ending September 2023, compared to a 10 per cent fall in the prior quarter.

Staff shortages provided a massive financial boon for Britain’s recruitment industry during 2021 and 2022 after pandemic restrictions started being loosened. 

However, interest rate hikes then resulted in slowing GDP growth and soaring borrowing costs.

This led to more businesses reducing investment and freezing new hires, or even cutting their overall headcount. 

Hahn added: ‘It is too early to say if December’s weakness reflects a sustained market slowdown or some placement deferrals, however, we expect near-term market conditions to remain challenging.

‘Consequently, we accelerated our cost reduction and efficiency programmes, while focusing on increased operational performance and rigour.

‘Looking ahead, our strategy is increasingly focused on enhancing our leading positions in the most attractive and skill-short markets globally, including Germany, non-Perm and Enterprise clients. I am confident our current initiatives will materially benefit profitability once our end markets stabilise.’