Hays has released its results for the first quarter of 2020.
In the first quarter, ended 30th September 2019, group net fees increased by 1% on a headline basis and were flat on a like-for-like basis against the prior year. The modest weakening of Sterling, primarily versus the Euro, increased the company’s reported net fee growth. Like-for-like net fees in both its temp and perm business were flat year-on-year. Temp represented 57% of group net fees, and perm 43%.
There was one additional trading day in the quarter in Hays’ main markets of Australia, Germany and the UK. The company estimates that this increased net fees by c.1%, and therefore its WDA net fees decreased by 1% year-on-year. The Group net fee exit rate was in-line with the WDA rate of growth in the quarter.
For comparison purposes, if Hays re-translates its FY19 profits at the average exchange rates seen to date during FY20, its reported operating profit of £248.8m would be c.£248m. This is a c.£6m reduction versus the re-translated c.£254m position at its preliminary results on 29th August 2019. Looking forward, exchange rate movements remain a material sensitivity to the group's reported profitability.
Net fee growth in the United Kingdom & Ireland (UK&I) decreased by 4% (WDA down c.5%). Growth in the public sector business, which represented 28% of UK&I net fees, was good at 6%. In the private sector, net fees fell by 7%, as business confidence continued to be impacted by ongoing uncertainties. Additionally, candidate confidence also weakened across the quarter. Net fees in temp, 57% of UK&I net fees, were flat, although perm markets were tougher and net fees decreased by 8%.
All regions traded broadly in line with the overall UK business, with the exception of the South West & Wales, which grew by 4%, and the Midlands and the North, down 10% and 7% respectively. Its largest UK region of London fell by 2%. In Ireland, the business declined by 13%. At the specialism level, IT delivered solid growth with net fees up by 5%. Accountancy & finance and office support both fell by 4%, while construction & property fell by 7%. Education continues to be impacted by difficult market conditions in Perm, with net fees down 11%.
Alistair Cox (pictured), chief executive, said, "We have delivered a solid quarter of stable net fees, despite tougher global macroeconomic conditions and reduced business confidence. Even with these challenges, ten countries grew fees by more than 10%, and we produced eight quarterly country fee records, including the USA and China. Asia and the Americas performed well, both growing by 7%. Fees were down slightly in Australia, but remained at near-record levels, while EMEA ex-Germany remained stable. Germany saw increased signs of client cost control, and the UK private sector remained tough.
"Over many years we have built a highly diversified business which gives us access to the world's most exciting markets and sectors. Looking ahead, our strong market positions, combined with our highly experienced management teams and financial strength, means I am confident we will continue to appropriately balance investing for the long-term while managing the more challenging markets we currently face."
Net fees in Australia & New Zealand (ANZ) declined by 2% in the quarter (WDA down c.3%), versus a tough year-on-year growth comparative. The overall market is broadly sequentially stable at near-record levels, although conditions in construction & property remain tough. The company’s temp business, which represented 68% of its ANZ net fees, declined by 1% and perm net fees fell by 3%. Public sector net fees, which represented 34% of ANZ, decreased by 1% while private sector net fees fell by 2%.
Australia net fees decreased by 3%. Hays’ largest regions of New South Wales and Victoria, which represented 57% of Australia net fees, declined by 6% and 5%, respectively. Queensland fell by 2%, although South Australia grew by 5% and ACT by 1%. At the Australian specialism level, net fee growth in IT was strong at 11%, and HR grew by 6%. Construction & property, the company’s largest business with 20% of Australian net fees, remains challenging and declined by 16%, while accountancy & finance was also difficult and reduced by 13%.
Encouragingly, New Zealand (which represented c.6% of ANZ net fees) returned to growth with a strong 19%.
Hays’ largest market of Germany delivered flat net fees (WDA down c.2%), versus tough growth comparatives and broad signs of reduced business confidence and increased client cost control. This was especially evident in the manufacturing and automotive sectors. The company’s temp & contractor business, which represents 83% of Germany net fees, was flat on a like-for-like basis. Contracting, the larger of the two businesses, declined by 2%, while temp delivered solid growth of 5%. Perm continued to slow and decreased by 2%.
Its largest Germany specialism of IT grew by a solid 4%, with engineering down 5%. Sales & marketing grew by 21%, although construction & property was difficult and declined 16%. Net fees in accountancy & finance were flat.
Hays’ rest of world (RoW) division, encompassing 28 countries, delivered net fee growth of 4%, versus a tough growth comparative. Growth in perm, which represented 69% of RoW net fees, was 6% while temp was flat. Nine countries delivered growth of more than 10%, including eight all-time quarterly records. As its net fees in RoW are predominantly perm, the company estimates there was no material trading day impact year-on-year.
EMEA ex-Germany (57% of RoW net fees) delivered 2% net fee growth and was broadly sequentially stable. Hays’ largest RoW country, France, grew by 3%, Switzerland grew by 7% and Italy increased by 11%. However, the Netherlands and Belgium were tougher, decreasing by 12% and 7% respectively, and Spain declined by 6%.
The Americas (23% of RoW) increased net fees by 7%. This was driven by a record quarter in the USA, its second-largest RoW country, with strong 12% growth. Mexico grew by 36%, although Canada was weaker and fell by 5%.
Asia (20% of RoW) also grew by a good 7% overall, led by a quarterly record in China, its largest Asian country, also up 7%. Japan grew by 3%, while growth in Malaysia was 32%.