In an update for the three months ended 31 December, the FTSE 250 group reported a 4% like-for-like (LFL) drop in net fees, while the actual decline was 7%.
The drop was led by a 9% LFL decline in the German market, with Australia & New Zealand (ANZ) down 7% and the UK falling 4%. The Rest of World division was the only segment to report LFL growth, rising 1% in the period.
Aside from the aforementioned events, Hays also blamed “challenging economic conditions and low business confidence” for its decline, particularly in Germany, where it said economic uncertainties had caused clients to reign in costs.
Looking ahead, Hays chief executive Alistair Cox said given the year-end slowdown, the New Year ‘return to work’ period was “particularly important” and the firm was closely monitoring activity levels.
“Overall, we expect near-term macro conditions to remain difficult, but see continued opportunities for growth in key specialisms like IT. Our task is to balance such investment opportunities with managing our cost base, while protecting our infrastructure and market leadership”, Cox added.
The company also said that given the tough market conditions, “adverse” foreign exchange movements and strategic investments, it now expects to deliver an operating profit of £100mln for the first half of 2020, down from £124.1mln a year ago.
Broker downgrades to ‘hold’, does not expect “swift rebound” in Germany
In a note to clients, analysts at Liberum downgraded Hays to ‘hold’ from ‘buy’ and cut their target price to 160p from 185p, saying they did “not see a swift rebound” in the firm’s German market, which accounts for around 26% of the company’s fees.
“While there are market specific reasons behind this, we think that it will take time to get back onto the previous growth trajectory, given investments being made”, Liberum said.
Investors, meanwhile, were fairly neutral around the situation, with the shares down 0.2% at 164.8p in mid-morning trading on Wednesday.