Hays PLC (LON:HAS) warned that first-half profits will fall around 19% after bushfires in Australia, strikes in France and the UK election led to a material deterioration in net fee income for the three months to the end of December.
Group fees fell 4% in the second quarter of the FTSE 250-listed recruiter’s financial year, with an exit rate down 6%.
READ: Hays sees lower confidence in UK and Germany, offset by US and China
Net fee income shrank 11% in Australia & New Zealand (ANZ), tumbled 12% in the group’s biggest single-country market of Germany and fell 4% in the UK and Ireland.
Like-for-like fees were down 7% in ANZ compared to 2% in the first quarter, down 9% in Germany compared to a flat Q1 and remained down 4% in the UK.
Fees were down 1% in the rest of the world, which is the largest overall segment, with 1% growth on a LFL basis, which compares to 4% growth in Q1. France fell, USA was strong and Asia was dragged down to flat by a decline in China.
Hays said that, given “tough market conditions, continuing strategic investments and adverse FX moves,” it now expects first-half operating profit of circa £100mln, which would compare to £124.1mln in the same period a year ago.
The company said the bushfires hitting ANZ came amid already “tough private sector markets”, while decline in Germany reflected companies increasing cost controls as well as “reduced overall business confidence across multiple sectors”.
UK election may be catalyst
UK private sector recruitment fell 8% as it was “significantly impacted by economic and political uncertainty” in the quarter, which had also been reflected in a statement from sector rival PageGroup (LON:PAGE) earlier in the week.
“Conditions in the UK remained uncertain, particularly before the election, although the result may provide impetus over time,” said chief executive Alistair Cox.
He said the rebound from the various adverse events was being closely monitored.
“Overall, we expect near-term macro conditions to remain difficult, but see continued opportunities for growth in key specialisms like IT."
Hays shares, which had already fallen 8% in 2020, were down 3% to 167.5p on Thursday morning.
Analysts at broker Liberum noted that France, Australia and the UK make up around 45% of group fees and there was "limited visibility on the timing of a turnaround" in the second half.