24th Feb 2016 11:04
LONDON (Alliance News) - Recruiter Hays PLC shares suffered Wednesday after it signalled a weakening market in the UK and continued mix conditions in Asia Pacific, though this was offset in its interim results by a robust performance by its European business.
The group said said its pretax profit for the six months to the end of December was GBP82.4 million, up from GBP77.3 million a year earlier, as net fees increased to GBP396.9 million from GBP383.9 million. It declared an interim dividend of 0.91 pence per share, up from 0.87p a year earlier.
Hays Chief Executive Alistair Cox said the first half was "strong" for the group in terms of its conversion of net fees into profit growth, but he added while market conditions remain strong in some areas, including Europe, growth slowed in the UK and Australia towards the end of the first half as declining global economic activity ate into sentiment.
Hays shares were down 7.3% on Wednesday at 115.2p, one of the worst performers in the FTSE 250.
While net fees grew 3.0% in UK & Ireland in the half, more uncertainty crept into the market as the period progressed, driven by macroeconomic concerns sapping the confidence of its private sector clients and candidates and by an by increasingly challenging public sector market, particularly for local government and healthcare segments.
Conditions in the UK market remain uncertain, Hays said, particularly in public sector recruitment markets, and it said it has seen weaker activity levels in its permanent business in the first months of the second half.
The performance in the UK & Ireland dragged on the strong net fee growth of 10% delivered by Hays's Continental Europe & Rest of World business, though the translation effect of the weak euro into sterling meant constant currency net fee growth would have been 14%.
The good performance was driven by Germany, which generates about half the division's fees, with good growth in contracting and temporary placements, and complemented by very strong trading in France, Belgium, Poland and Switzerland and signs of a recovery in southern Europe.
Hays anticipates activity will remain robust in Europe in the second half but said its Americas business has continued to struggle, except for the US, which has started the second half well.
Net fees fell in Asia Pacific mostly due to the depreciation of the Japanese yen and Australian dollar against sterling in the half. Constant currency fees grew 4.0% in the half from this region.
Still, conditions in Asia Pacific remained mixed, with a better performance in some parts of Australia still mostly offset by slumping activity in the mining-focused Western Australia region. The company did deliver good growth in Japan, offset by the weak yen, and grew fees in China and Malaysia, though growth in Hong Kong was muted.
The group expects conditions in Asia Pacific to remain broadly stable in the second half, with little change expected to the situation for Western Australia as the mining industry continues to face significant pressures.
Headcount rose 10% year-on-year in the half, Hays said, as the group invested in markets where the outlook remains supportive, including in Europe, Asia and the US, though investment levels slowed as the half progressed. The group also said its operating cash flow shrunk in the half because of higher outflows due to strong growth in its European temporary recruitment business, the phasing of cash flows in December, and the reversal of a GBP20.0 million one-off benefit a year earlier.
"Looking ahead, we are mindful of increasing global uncertainties, but remain positive and see many opportunities to grow. Our business has the scale, diversity, people and technology to capture the many long-term opportunities available to us, while at the same time being nimble enough to respond to fast-changing conditions to maximise profit and cash generation along the way," Chief Executive Cox added.
By Sam Unsted; [email protected]; @SamUAtAlliance
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