14th Apr 2016 10:40
LONDON (Alliance News) - Recruiter Hays PLC on Thursday said its net fee income grew in the third quarter as a very strong performance in Europe offset a stuttering market in the UK & Ireland ahead of the the UK's referendum on EU membership.
Hays said its total net fee income for the third quarter to the end of March grew 5.0% year-on-year and was up 4.0% on a like-for-like, constant currency basis.
"Looking ahead, our good underlying financial performance around the world gives us confidence for our full-year prospects. Conditions in many markets remain good, and we are delivering excellent results across Europe and the US. In the UK, client sentiment remains cautious, and we expect this to continue through the fourth quarter. Against this overall backdrop, our focus remains on delivering continued strong profit growth," said Alistair Cox, chief executive of Hays.
Shares in the company were up 8.9% to 135.2 pence, one of the best performers in the FTSE 250, as investors welcomed the company's confidence on the outlook for the full year to the end of June, despite caution on the UK.
The rise in group net fee income came despite a 3.0% decline in the UK & Ireland, which Hays attributed to the timing of Easter and more challenging comparatives from a year prior.
Temporary recruitment in the UK & Ireland dipped, though was broadly stable on the second quarter, despite a continuing decline in public sector activity amid squeezed budgets, particularly in local government and healthcare activity, the latter hit by National Health Service cuts.
The permanent business saw net fee income declined 2.0%, with increased uncertainty amongst Hays' clients.
Hays CEO Cox's caution on the outlook for the UK & Ireland does indicate the company expects the slowdown to continue ahead of June 23, when the UK will go to the polls to vote on Britain's membership of the European Union, even if Hays did not specifically mention Brexit uncertainty as a driver of the sluggish performance in the UK & Ireland.
The trend, however, tracks with trading updates issued earlier this week by rival Michael Page International PLC and smaller peer Robert Walters PLC.
Michael Page on Tuesday said gross profit, another term of net fee income, was flat in the UK in the quarter to the end of March, compared to 2.0% growth in the fourth quarter of 2015. It attributed the slowdown to the uncertainty caused by the Brexit referendum, adding technical jobs and permanent placements at higher salary levels were most affected.
Robert Walters meanwhile, said on Wednesday that UK gross profit rose 2.0% in the quarter to the end of March, with a continued slowdown in recruitment activity, particularly in financial services.
This slowdown looks likely to continue at least until the Brexit referendum is out of the way, as companies put off hiring decisions until the future of Britain's place in the EU is more clear. This uncertainty has combined with cuts to local government and NHS budgets to deliver the sluggish performances for the recruiters in the UK in the first quarter.
Outside the UK & Ireland, Hays said net fee income in its Continental Europe & Rest of the World division grew 14% in the quarter. The performance was driven by a strong underlying performance for German operations, particularly in permanent recruitment.
Permanent activity proved very strong across Europe in the quarter, Hays said, with 17 countries delivering net fee income growth in excess of 10% for permanent placements. Belgium, the Netherlands and Russia all performed well, while the recovery for its Italian, Spanish and Portuguese businesses continued apace.
Conditions remained challenging in Brazil, Hays said, but constant currency net fees increased 23% year-on-year in the quarter and the rest of its Latin American business performed well. Hays said it performed well in the US, helped by the integration of an IT recruiter that Hays acquired in December 2014. Net fees in Canada declined due to challenging conditions in regions focused on the resources business.
Asia Pacific net fee income grew 2.0% year-on-year in the quarter. Underlying fees increased in Australia, but Hays said the performance was significantly varied across specialists, with the Western Australia region slumping given its high exposure to the pressured mining industry, but net fees higher in New South Wales and Victoria on good public sector growth.
Net fees grew in Japan, China and Singapore in constant currencies in the quarter, Hays said.
By Sam Unsted; [email protected]; @SamUAtAlliance
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