UK staffing firm Hays plc (LON:HAS) expects full year profits to reach the top end of market forecasts after achieving record quarterly net fees as international growth offset a decline in Brexit-hit Britain.
Group net fees rose 10% on a like-for-like basis in the third quarter ended 31 March, boosted by the Continental Europe and the rest of the world division and two extra working days as a result of a later Easter this year.
The Continental Europe and the rest of the world arm, which represents 50% of group net fees, delivered an 18% increase in like-for-like net fees, driven by Germany and France.
Like-for-like net fees in the UK and Ireland fell 4% as Britain’s vote to leave the European Union last June continued to see employers more cautious about hiring.
The UK and Ireland accounts for 26% of group net fees. The private sector in the UK and Ireland, representing 74% of net fees, posted a drop 1% while the public sector saw a 13% decrease.
Hays said while the public sector market remained tough there were signs of improvement in the private sector market following the initial shock following the Brexit vote.
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In the Asia Pacific, like-for-like net fees increased 12%, buoyed by Australia and New Zealand.
Full year profit guidance raised...
Group consultant headcount rose 8% compared to the same period a year earlier and 2% on the prior quarter.
Net fees in temporary placements edged up a like-for-like 12% while permanent placements increased 7%. The group’s net fees are generated 59% from temporary and 41% from permanent placements.
"We have delivered an all-time quarterly record net fee performance, capitalising on the many growth opportunities around the group,” said chief executive Alistair Cox.
“This gives us confidence to increase our expectations for full year profits, to the top of the current range of market estimates.”
The range of market estimates for operating profit in the year to 30 June 2017 is £199mln to £209mln, the company said, citing Factset.
Hays ended the quarter with net cash of £40mln compared to £47.9mln at the end of 2016.
Outlook for markets...
“Looking ahead, conditions remain good in the vast majority of our markets, notably Australia, Europe and North America,” Cox added.
“In the UK, market conditions remain in line with the underlying third quarter trends.”
Cox said the company’s diversified business and focus on driving profitable, cash-generative growth put it in “good stead and mean we continue to look to the future with confidence”.
Net fee income beats forecasts...
Liberum said net fee income was ahead of consensus forecasts for 6% growth and its expectations for a 5% increase.
While the timing of Easter helped, underlying growth of 18% in the Continental Europe and the rest of the world business "is extremely impressive and reflects the return of historic investment in head count", the broker said.
Liberum also noted an improvement in UK trading, as the 4% like-for-like decrease in net fee compared to a 10% drop in the previous quarter. Similarly, sector peers Robert Walters plc (LON:RWA) and PageGroup plc (LON:PAGE) reported a pick-up in UK recruitment in quarterly trading statements yesterday.
Liberum added: "Given the unknown impact on fourth quarter growth given the timing of Easter, we believe that the risks to this guidance is to the upside."
Shares fell 0.59% to 167.10p in morning trading.