Recruiters are good bellwethers for the health of economies and next week’s updates from Hays PLC (LSE:HAS) and PageGroup will give a good indication of where the real world stands at present.
Surveys suggest the mood among UK employers is not optimistic but it is now only a modest part of Hays and Page’s business, so while a good indicator of what’s happening in Britain, it is mainland Europe, Asia and the US that matter more.
That said the numbers generally won’t be pretty. UBS forecasts Page to report a fourth-quarter income decline of 13.4% in line with the previous three months.
“Hiring activity levels continue to deteriorate in an uncertain macro/geopolitical environment.
“The current FY'24e outlook remains cautious with management expecting FY'24e EBITA [underlying earnings].
Against that, UBS adds that PageGroup currently trades on a near-trough gross profit (GP) multiple some 24% below the 'through cycle' average.
Hays is tipped to report a quarter two drop in income of 14.8% with the forward outlook expected to be cautious for the remainder of 2025.
Current management guidance is for interim underlying profits of £35 million, though UBS sees this as optimistic.
“Hays currently trades on a trough multiple of 1.2 times EV (enterprise value)/GP suggesting that investors continue to price in severe further earnings pressure.”