A continued downturn in the hiring market has led to Hays PLC (LSE:HAS) being downgraded by UBS, which forecasts that the recruitment firm will cut its dividends for the next few years.
The FTSE 250-listed group's recent profit warning suggests further deterioration in permanent hiring, which analysts at the Swiss bank described as the longest downturn in over 20 years.
“We now forecast the hiring downturn to stretch even longer,” they said, with the rating on the shares cut to 'neutral' from 'buy' and lowering its price target to 70p from 100p.
After circa 30 months of deteriorating markets, the analysts had previously believed that signs of stabilisation earlier this year were perhaps pointing to "an inflection point" ahead.
"Unfortunately, we now believe that the macroeconomic uncertainty is having a further impact on hiring intentions," they said, with Hays' recent update pointing to deteriorating job flow in the second quarter of the year alongside other signs of decelerating job listings/staffing market data.
Hays’ profit guidance implies an adjusted EBIT run-rate below £40 million currently, with a modest recovery to £50 million expected in FY26, well below the previous consensus of £80 million.
Net fee forecasts have been reduced to reflect an additional six months or more of sequential decline, with adjusted EBITA forecasts cut 20-44% over fiscal years 2025 to 2027.
UBS expects Hays to rebase its dividend policy, with dividends per share predicted to fall to 0.66p in FY26 from 3p last year.
Despite weak near-term profitability and dividends, UBS remains optimistic about a strong rebound when markets recover, with potential for adjusted EBIT to reach a new peak of around £300 million, with an "upside scenario" valuing Hays at 120p per share, though the downside scenario is 40p.