In an industry as cyclical as recruitment, you need to take the ups with the downs.
Suffice it to say, that City recruiter Hays PLC (LSE:HAS) is taking its fair share of the latter right now.
Per its preliminary full-year results, Hays saw net fees decline by 12% on a like-for-like basis with operating profit getting smashed 46% lower.
These results were, nonetheless, wholly unsurprising given how thoroughly they were telegraphed in through the year’s various trading updates.
Given shares in the company added nearly 3.5% from an admittedly unimpressive base following the publication of the statement, the results and accompanying guidance were also perhaps not as bad as face value suggests.
After all, when hiring is as tight as it is across the UK, Germany and Australia (aka Hays’ core markets), pulling a rabbit out of the hat can hardly be expected.
What Hays can do is manage expenses appropriated in order to weather the storm.
According to broker reactions to today’s results, it is doing this well.
Jefferies called the £30 million in annual structural cost savings by the end of 2027 “a positive” which should offset certain interest and tax charges.
These “decisive actions”, as Jefferies called them, follow chief executive Dirk Hahn’s unveiling in February of “a more precise strategy designed to increase business resilience, earnings quality and FCF through the cycle”.
Headcount reductions have inevitably featured in these decisive actions, with Hays reducing consultant headcount by 18% throughout the financial year.
Hays’ year-end net cash position of £56.8 million actually exceeded broker Panmure Liberum’s forecast of £54.7 million, adding to a sense of prudent cost management at the group.
While Panmure noted that “shares are off their lows, but not enough in this statement to sustain further momentum in our view”, Hays could represent value in the long run.
On a forward enterprise value to EBIT basis, the stock is trading at around 12.5 times, which is a fair bit cheaper than competitor Pagegroup’s 14 times valuations.
Hays stock is a buy at these relatively cheap prices, reckon both Jefferies and Panmure, though there is still a storm to weather in the near term.