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UK&I net fees up 3% in Q3 2019 for Hays

Hays has released its results for the three months ended 31st March 2019.


In the third quarter, ended 31st March 2019, Group net fees increased 5% on a headline basis and 6% on a like-for-like basis versus the prior year. This represented Hays’ 24th consecutive quarter of year-on-year growth. The relative strength of Sterling against the Euro and Australian Dollar reduced its reported net fee growth.


Net fee growth was 5% in its temp business and 7% in perm, which represented 58% and 42% of net fees respectively. Easter falls entirely in Q4 this year, whereas in FY18 it was split between Q3 and Q4. Hays estimates this had a c.1% benefit to Group net fees in Q3 FY19, with a corresponding c.1% negative impact anticipated in Q4 FY19. Additionally, Q4 FY19 has one fewer trading day year-on-year in Germany.


Exchange rate movements remain a material sensitivity to the Group's reported profitability. If Hays re-translates FY18 profits of £243.4m at 12th April 2019 exchange rates (AUD1.8249 and €1.1581), it currently estimates a negative c.£4 million operating profit currency headwind for FY19. This represents a further negative c.£1 million move since it reported its half-year results on 21st February 2019, and a c.£7 million reversal from the position at its preliminary results on 30th August 2018.


Alistair Cox (pictured), chief executive, said, "Against increasingly tough comparatives, we have delivered another good quarter of broad-based growth, with net fees up 6% and 17 of our 33 countries growing above 10%. Asia performed strongly, up 12%, and our Americas business continued to do well, growing by 7%. Despite a mixed economic backdrop across Europe, our largest business of Germany grew by 6% and EMEA ex-Germany grew 10%. ANZ recorded its 19th consecutive quarter of growth, and despite political uncertainties our UK&I business produced another highly creditable performance, with net fees up 3%. Our underlying cash generation also continues to be good.


“While we remain mindful of macroeconomic conditions, the outlook remains positive across most of our markets. Our consistent focus is to drive consultant productivity, while selectively investing in our key markets to reinforce our market leadership and capture the many opportunities the changing world of work is presenting us with. Our financial strength and highly experienced management teams give us an excellent platform to balance our short-term performance with our long term strategic goals."


Net fee growth in the United Kingdom & Ireland (UK&I) was solid at 3% (underlying c.2% adjusted for Easter), led by its public sector business, which represented 29% of UK&I net fees, up 14%. Net fees in the private sector business, 71% of UK&I net fees, fell 1%, with market conditions remaining broadly stable. Both its temp and perm businesses were solid, growing net fees by 4% and 2% respectively.


All regions traded broadly in line with the overall UK business, with the exception of the South West & Wales and Northern Ireland, up 20% and 18% respectively, and Scotland and the North, down 12% and 6% respectively. Hays’ largest UK region of London grew by 3%. In Ireland, the business delivered a good performance, with net fees up 6%. At the specialism level, IT again delivered strong growth in net fees, up 15%. Accountancy & finance and office support grew by 6% and 4% respectively. Construction & property was flat, and education continues to be impacted by tough market conditions, with net fees down 6%.


Australia & New Zealand (ANZ) delivered a solid quarter with net fees up 3% (underlying c.2% adjusted for Easter), against increasingly tough year-on-year growth comparatives and mixed market conditions. This represented its 19th consecutive quarter of growth. The company’s temp business, which represented 67% of its ANZ net fees, grew by a good 6%, although the perm business continued to be more subdued and declined 4%. Private sector net fees, which represented 66% of ANZ, grew by 1%, with public sector net fees up 7%.


Australia delivered a solid quarter of net fee growth, up 3%, although growth slowed over the quarter, mainly in perm and in line with the broader market. Its largest regions of New South Wales and Victoria, which represented 59% of Australia net fees, were up 11% and 3% respectively. Queensland grew by 2%, and ACT by a good 9%, while South and Western Australia were tougher and fell by 14% and 12% respectively.


At the Australian specialism level, net fee growth in IT of 20% was again strong, and HR grew by 9%. Construction & property, its largest business in ANZ, remained tough and net fees declined 7%, and accountancy & finance fell 4%.


New Zealand trading (which represented c.5% of ANZ net fees) continued to be tough and net fees fell 8%, although, encouragingly, momentum improved through the quarter.


Hays’ largest market of Germany delivered good net fee growth of 6% (underlying c.5% adjusted for Easter), against tough comparatives and a more challenging macroeconomic backdrop. Its temp & contracting business, which together represented 85% of Germany net fees, grew by 6%. Within this, contracting, which represented 56% of Germany net fees, grew 3% and temp, 29% of net fees, delivered growth of 14%. Growth in perm net fees was good at 7%. Its largest specialism of IT grew net fees by a good 9%, while growth in its second largest, engineering, slowed to 2%, in part due to weaker Automotive markets. Growth in accountancy & finance was good at 7%, and sales & marketing strong at 19%.


Asia delivered another strong performance overall, with net fees up 12%. Greater China, its third largest RoW country, grew by an excellent 21%, including Hong Kong up 34%, despite very tough comparatives. Japan was tougher, down 5%, although Singapore continued to rebound and delivered an excellent 29% growth.


Net fee growth in the Americas was good, up 7%, led by strong 18% growth in Canada. The USA, its second largest RoW country, was flat against a tough growth comparator from the prior year. Brazil grew by 2%, and Mexico returned to growth with net fees up 15%.


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