24th Aug 2023 10:18
(Alliance News) - Hays PLC on Thursday announced the appointment of long-standing board member Dirk Hahn as its new chief executive officer from September 1, as it posted a decline in annual profit and significantly lowered its special dividend compared to a year ago.
Neil Shah, executive director at Content & Strategy at Edison Group, said Hahn assumes the role at a "pivotal juncture" in the recruitment industry, marked by the UK witnessing a "record" growth rate in wages and ongoing discussions between employers and employees regarding flexible work arrangements.
"It will be interesting to see how Hahn navigates these challenges," Shah said.
The London-based recruitment company said for the financial year to June 30, pretax profit fell 6.0% to GBP192.1 million from GBP204.3 million a year prior.
However, it reported "record" net fees of GBP1.29 billion, up 8.8% from GBP1.19 billion. This was driven by a good performance in Temp, though Perm also saw modest growth.
"Growth [was] driven by our actions to increase fee margins, supported by positive effects of wage inflation globally, offsetting volume decline as Perm markets toughened through the year," Hays explained.
Hays reported other comprehensive loss for the year net of tax of GBP91.2 million for financial 2023, compared to other comprehensive income of GBP41.5 million a year prior.
Further, it announced a negative charge of GBP95.1 million relating to the actuarial remeasurement of defined benefit pension schemes, compared to a gain of GBP39.6 million a year prior.
Victoria Scholar, head of investment at interactive investor, said the recruitment firm managed to beat earnings expectations thanks to growth in temporary worker demand offsetting weakness in permanent hires.
"Hays has also benefitted from wage inflation, allowing the business to earnings greater fees, and helping to offset the overall volume weakness in the recruitment market. However, this fiscal year looks set to be more challenging amid weak confidence and softness in the permanent hiring market," Scholar cautioned.
Hays announced on Thursday that it will reduce its consultant headcount by around 3% to 4% in the first quarter of financial 2024, which ends on September 30.
As at June 30, the consultant headcount had decreased 4.9% to 8,590 from 9,037 a year prior. The company stated that it continued "our focus on driving consultant productivity and returns from our investments."
Edison Group's Neil Shah said the reduction in the consultant headcount raises "broader economic concerns" for Hays, though he added that the company has countered this with a proposed increased core dividend and an additional GBP35.6 million cash distribution to shareholders, displaying "confidence" in its strategy.
The firm proposed a 5.3% increase to core dividends at 3.00p, up from 2.85p, as well as a further 2.24p special payout, down sharply from 7.34p. This lowers the total dividend by 49% to 5.24p from 10.19p a year prior.
Looking forward, analysts at UBS said it saw "no reason" to change its forecasts as current trading in the "seasonally-quiet" July to August period is "stable" with a 2% year-on-year decline exit rate reported for June.
UBS forecasts financial 2024 adjusted earnings before interest and tax around GBP174 million. This compares to Hays' current consensus range of GBP154 million to GBP223 million.
For the first half of the financial year, it forecasts adjusted earnings before interest, tax and amortisation of GBP80 million but added it sees scope for recovery thereafter.
"We continue to see an attractive risk/reward given an implied valuation of 1.4 times [enterprise value-to-gross profit ratio] versus through cycle range of 1.25 to 2.5 times," UBS said.
By Heather Rydings, Alliance News senior economics reporter
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