Hays shares plummet as recruiter issues profit warning due to hiring slowdown

Shares in Hays tumbled as the group warned about profits after it emerged there was a ‘marked slowdown’ in December.

Recruitment firm FTSE 250 said group fees fell by 15 percent last month and 10 percent in the three months to the end of December.

Shares in Hays fell 9.19 percent to 97.80p in afternoon trading on Tuesday.

It now expects first-half profits of £60 million, below market expectations of £73 million.

Compensation for permanent hires fell 17 percent in the three months to the end of December, while volumes fell 25 percent.

In Britain and Ireland, the number of consultants fell by 3 percent in the quarter and by 10 percent year-on-year.

The group added that it expects to incur an exceptional restructuring charge of £12 million in the first half of the 2024 financial year.

Dirk Hahn, Managing Director of Hays, said: ‘Overall market conditions became increasingly challenging throughout the quarter, including a clear slowdown in most markets in December, particularly in our Permian business, as customer and candidate decision-making slowed.

“Staffing volumes remained broadly stable throughout the quarter, but declined year-on-year as we did not see our normal seasonal increase in workforce numbers. As a result, we expect operating profit to be approximately £60 million in the first half, despite our continued measures to reduce costs.”

In October, fellow recruiter Robert Walters reported another significant decline in gross profit as economic uncertainty continues to weigh on the sector.

Net fee and commission income at the white-collar specialist fell 13 percent at constant exchange rates to £93.4 million for the three months ending September 2023, compared with a 10 percent decline in the previous quarter.

The workforce shortage has been a huge financial boon for the UK recruitment sector in 2021 and 2022 after pandemic restrictions began to be eased.

However, interest rate increases subsequently resulted in a slowdown in GDP growth and rising financing costs.

This led to more and more companies scaling back their investments and freezing new hires, or even reducing their workforce.

Hahn added: “It is too early to say whether December’s weakness reflects a continued market slowdown or placement postponement. However, we expect market conditions to remain challenging in the near term.

‘That’s why we accelerated our cost reduction and efficiency programs, while focusing on improved operational performance and accuracy.

‘Looking ahead, our strategy is increasingly focused on strengthening our leading positions in the most attractive skills shortage markets globally, including Germany, non-Permian and Enterprise customers. I am confident that our current initiatives will materially improve profitability once our end markets stabilize.”