UK and Ireland net fees decrease 3% in Q3 for Hays
Hays has released its financial summary for the third quarter, ended on 31st March 2016.
In the third quarter, the group’s net fees increased 5% on a headline basis and 4% on a like-for-like basis. It says that the difference between actual and like-for-like growth was primarily the result of the appreciation of the Euro against Sterling, which more than offset the impact of the depreciation of the Australian Dollar against Sterling.
Hays states that the timing of Easter, which this year fell entirely into the third quarter, negatively impacted activity levels in the major temp and contractor businesses, most notably Germany (estimated negative impact of c.5%), Australia (negative impact of c.1%), and the UK (negative impact of c.1%). Overall, it estimates a negative impact on group net fee growth of c.2%.
The temp business, which accounted for 58% of group net fees in the quarter, increased by 2% and the underlying temp margin was sequentially stable. The perm business increased by 8%.
In the United Kingdom & Ireland, which represented 33% of group net fees, net fees decreased 3% including a negative impact of c.1% as a result of the timing of Easter, and against more challenging comparatives. The group’s temp business was down 4% but was broadly sequentially stable, although public sector activity levels continued to decline. The perm business declined by 2% as increased caution amongst clients resulted in more subdued activity levels across the business.
Hays’ private sector business was flat, with broadly stable activity levels through the quarter. Its public sector business was down 9% as this market remained challenging through the quarter, particularly in the local Government and healthcare focused markets.
By region, other than Scotland which delivered solid growth of 7%, and the North where net fees were down 15%, every region traded broadly in line with the overall UK business. This was also the case by specialism, although the group states that it did see significant differences in the performance within specialisms between the public and private sectors. For example, in accounting & finance, net fees overall were flat with public sector down 11% and private sector up 2%, and in IT which was up 2% overall, public sector was down 9% whilst private sector was up 7%.
In Asia Pacific, which represented 22% of group net fees, Hays delivered growth of 3%.
In Australia & New Zealand, net fees were up 3%, despite a c.1% negative impact of the timing of Easter. The group’s perm business grew 7% and temp, which represented 63% of net fees in the quarter, was up 1%.
Australia net fees grew 3% as market conditions continued to vary significantly between states and specialisms. The largest regions of New South Wales and Victoria, which accounted for 58% of Australia net fees in the quarter, were up 11%, and ACT (incorporating Canberra) delivered further growth of 23%, which Hays says was driven by continued strength in its public sector business, up 15%. The group’s private sector business was down 2% overall as market sentiment remained cautious and challenging conditions in the resources & mining-dominated regions continued to impact activity levels, notably in Western Australia which was down 31%(1).
Construction & property, the group’s largest specialism in Australia, grew 7% and IT grew 9%. Net fees in accountancy & finance were flat and resources & mining declined 24%. In New Zealand, net fees were flat.
In Asia, which accounted for 24% of the division, net fees grew 5%. Japan delivered solid 4% growth and China delivered strong 11% growth, whilst Singapore grew by 3%.
In Continental Europe & the Rest of World (RoW), Hays delivered strong, broad-based growth of 11%. Underlying growth continued to be strong in Germany at 5%, despite a negative impact of the timing of Easter of c.5%. Germany temp growth was 3% whilst perm grew by 29%. Growth in its core IT & engineering business was 3% and within our newer specialisms accountancy & finance delivered strong growth of 12%.
In the rest of the division, which is primarily a perm business, we delivered excellent 16% growth, which was broad-based, with 17 countries which grew by more than 10%, including key businesses such as Belgium, the Netherlands and Russia. The group’s businesses in Southern Europe continued their recovery, with Italy up 23%, Spain up 27%, both quarterly records, and Portugal up 63%. In France, its second largest business in the division, net fees were up 19%.
In Brazil, although conditions remained challenging, net fees increased 23% and the group says it delivered strong growth across the rest of our Latin America businesses. Its US business, incorporating Veredus, delivered broad-based growth of 25% driven by the core IT contracting business and the roll out of our newer specialisms. In Canada, net fees decreased 9% due to challenging conditions in the resources focused regions, and general macro-economic uncertainties.
Alistair Cox, chief executive, said, "We had a good start to the second half and delivered our twelfth consecutive quarter of year-on-year growth. Europe delivered excellent results, including a strong underlying performance in Germany and France, 13 countries growing by over 10%, and record performances in important businesses such as Belgium and Spain. Elsewhere, the US, which is now our fifth largest business, delivered excellent results and grew by 25%. Market conditions in Australia remained stable but mixed, with strong growth in New South Wales, Victoria and in the public sector markets, offset by continued tough conditions in the mining-focused regions. In the UK the public sector recruitment market remained challenging, while private sector sentiment was cautious, but activity was stable overall.
“Looking ahead, our good underlying financial performance around the world gives us confidence for our full year prospects. Conditions in many markets remain good, and we are delivering excellent results across Europe and the US. In the UK, client sentiment remains cautious and we expect this to continue through Q4. Against this overall backdrop, our focus remains on delivering continued strong profit growth."