UK&I net fees decrease 4% in Q4 for Hays
Hays has released its quarterly update for the three months ended 30th June 2016.
In the fourth quarter ended 30th June 2016 net fees increased 12% on a headline basis and 8% on a like-for-like basis against the prior year, Hays’ thirteenth consecutive quarter of year-on-year growth. The difference between actual and like-for-like growth was primarily the result of the appreciation of the Euro and the Australian Dollar against Sterling.
The company estimates the exit rate for Group net fee growth for the quarter to be c.5%, which is broadly in line with underlying growth rate for the quarter as a whole. In both CE&RoW and Asia Pacific, the exit rate was in line with the underlying growth rates for the quarter as a whole. In the UK, the exit rate was 7% as June was the weakest month of the quarter in the run up to, and aftermath of, the EU Referendum, as caution among clients increased, notably in the Perm market.
The temp business, which accounted for 58% of Group net fees in the quarter, increased by 10% and the underlying temp margin was sequentially stable. Net fees in the perm business increased by 6%.
In the United Kingdom & Ireland, which represented 31% of Group net fees, net fees decreased 4% net of a positive working day impact of c.1%. The group’s temp business was down 6% primarily as a result of further challenging conditions in public sector markets. The perm business declined by 1% as increased caution among clients resulted in activity levels weakening significantly towards the end of the quarter.
Hays’ private sector business was down 2% and its public sector business was down 8% as this market remained challenging through the quarter, particularly in the local Government and healthcare focused markets.
By region, Scotland and Ireland continued to deliver good growth and were up 9% and 22% respectively. Elsewhere, other than the Midlands, which grew by 1% and the Home Counties where net fees were down 14%, every region traded broadly in line with the overall UK business. At a specialism level, its accountancy & finance business was broadly flat, however construction & property and IT were down 7% and 8% respectively.
In Asia Pacific, which represented 23% of Group net fees, Hays delivered solid growth of 4%.
In Australia & New Zealand net fees were up 6%, including a c.1% positive Easter impact. The group’s perm business was up 1% and temp, which represented 66% of net fees in the quarter, was up 8%.
In Australia Hays delivered good growth of 6%, though market conditions and performances continued to vary between states and specialisms. Its largest regions of New South Wales and Victoria, which accounted for 57% of Australia net fees in the quarter, were up 11%, and ACT (incorporating Canberra) also delivered strong growth of 10% driven by continued strength in our public sector business, up 18%. Although market sentiment remained cautious, its private sector business was up 1% overall. Conditions in the resources & mining-dominated regions remained challenging, notably in Western Australia which was down 24%, but this business is now sequentially stable and Hays saw positive performances in Queensland and South Australia, which grew by 3% and 7% respectively.
Construction & property, Hays’ largest specialism in Australia, grew 11% and IT grew 8%. Net fees in accountancy & finance were flat and resources & mining declined 9%. In New Zealand, net fees increased by 2%.
In Asia, which accounted for 24% of the division, net fees decreased 1%. China delivered good 6% growth, while net fees in Japan were down 1% and Singapore declined by 23% due largely to more challenging conditions in the banking market.
Consultant headcount in the division was flat in the quarter and up 1% year-on-year. Consultant headcount in Australia & New Zealand was up 3% in the quarter and up 5% year-on-year, and in Asia was down 4% in the quarter and down 6% year-on-year.
In Continental Europe & RoW, Hays’ largest division which represented 46% of Group net fees, we delivered excellent, broad-based growth of 21%, with an underlying growth of c.16% excluding the working day impact. Growth was excellent in Germany at 23%, including a positive working day impact of c.6%. Growth in the Germany, temp & contractor business was 21% and perm grew 34%. Growth in its core IT & engineering business was 24% and within its newer specialisms accountancy & finance delivered excellent growth of 21%.
In the rest of the division, Hays delivered excellent, broad-based 19% growth, with 12 countries growing by over 20%, including key businesses such as France, Switzerland, Belgium and the Netherlands. Hays’ businesses in Southern Europe continued strong recovery, with Italy up 18%, Spain up 23% and Portugal up 25%. France, the company’s second largest business in the division, delivered another excellent performance, with net fees up 20%, a seventh consecutive quarter of double digit growth driven partly by the continued strength of its contractor business.
In Brazil although conditions remained challenging, net fees increased 9% and Hays delivered strong growth across the rest of its Latin America businesses. Its US business delivered strong broad-based growth of 12% driven by the roll out of its newer specialisms including construction & property. Net fees in Canada grew by 15%.
Alistair Cox, chief executive, said, "We delivered a good performance to end our financial year and expect full year profits to be ahead of current market expectations. We have also achieved our goal of eliminating the Group's net debt. Europe delivered further excellent growth, benefiting from all-time record performances in Germany and France, among 13 European countries to grow by over 20%(1). Our Australian business continued its recovery, with strong growth in New South Wales, Victoria and in the public sector markets, partially offset by continued tough conditions in the mining-focused regions. In the UK the public sector recruitment market remained challenging, while private sector sentiment weakened in the run up to the EU Referendum.
“Looking ahead, conditions in most international markets remain supportive and although there is significantly increased uncertainty in the UK, it is too early to say how the result of the Referendum will impact our results going forward. We have consciously built the most diverse, balanced and resilient global business in our industry, across 20 specialisms in 33 countries. We have a strong balance sheet, experienced management teams around the world and deep expertise in the Temporary, Contractor and Permanent recruitment markets. These combined attributes are unique and more important than ever. At times like this they stand us in good stead, and we remain well placed to continue to deliver sector-leading profits and cash generation."