2nd Apr 2020 09:07
(Alliance News) - Recruiter Hays PLC on Thursday warned its full-year profit will lag market consensus, as it ditched its interim dividend and resorted to a GBP200 million share placing to shore up its finances.
Trading between January 1 and March 31 was in line with expectations, Hays said, with net fees were down by about 5% on a like-for-like basis.
"However, since then the rapidly escalating impact of Covid-19 has driven a very material deceleration in client and candidate activity. To date, across our major markets, the impact has been felt most in Europe, and least in Australia," Hays said.
The permanent recruitment sector has taken a bigger hit than temporary, with private being more hurt than public.
Hays expects its operating profit for the year to June 30 to be "materially below" the GBP190 million consensus average compiled by Bloomberg.
"Our aim is to proactively manage our cost base in the short-term, while protecting the core of our business to take advantage of medium and longer-term opportunities," Hays said.
"To date, our actions have included stopping all hiring and appropriately managing our headcount, reducing senior management pay, eliminating all discretionary costs including non-essential capital expenditure, and reducing previously committed costs such as advertising. As in previous downturns, this will provide significant protection in the event of a prolonged downturn, albeit with a time lag."
The company also cancelled its 1.11 pence per share interim dividend, saving it GBP16.3 million.
Hays will look to raise GBP200 million through a share placing.
This represents about 12% of existing shares based on the closing share price of 109p on Wednesday, Hays said.
The company's stock was down 7.1% at 101.60p each, making it the worst performer in London's FTSE 250 index.
Hays added: "To ensure that the company has a strong balance sheet and can continue with minimal or no debt once its end markets stabilise, the board has concluded that it is prudent to now raise equity. This will both provide the company with a further liquidity buffer and importantly best allow it to pursue organic growth opportunities with new and existing blue-chip clients. The company is already seeing such opportunities begin to emerge and expect further vendor consolidation from its clients when markets stabilise."
By Eric Cunha; [email protected]
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