Recruiter Hays earns record result due to weaker pound and wage hikes

Salary inflation and a depreciating pound helped recruiting firm Hays deliver its best quarterly performance ever in the three months to October.

The London-listed company’s net fees were up 19 percent in the period, compared to the same period last year, thanks to continuously increasing margins.

Since pandemic restrictions began to ease last year, widespread labor shortages in the developed world have forced companies to raise wages to attract candidates in a cutthroat job market.

This has resulted in a financial boon to the UK recruiting industry, whose business model usually means they receive commissions every time they successfully place a job seeker with an employer.

Hays delivered record results in 11 countries in the last quarter, including in its largest territory, Germany, where net income rose by more than a quarter due to skills shortages, pushing contractor volumes to their all-time high.

The division further benefited from skyrocketing hire fees, record tenure earnings and strong expansion in sectors such as engineering, accountancy and finance.

More revenue was earned in September than in any previous month, while Latin America, Malaysia and the technology sector also recorded record numbers.

In the British Isles, net rates rose 11 percent, with demand supported by revenues from technology and education specialties and rate growth of more than a third in the Republic of Ireland.

Demand in Australia and the United States was relatively weak compared to other markets, but Hays noted that sterling’s weakness against the Australian and US dollars resulted in significant sales growth.

The pound has fallen since the summer of 2021 following a rise in inflation, driven in part by the easing of Covid-19 restrictions, Russia’s large-scale invasion of Ukraine and interest rate hikes by the US Federal Reserve.

Hays has calculated that at the current value of the pound against its two main trading currencies, the euro and the Australian dollar, last year’s operating profit of £210.1 million would be about £9 million higher.

Hays CEO Alastair Cox praised the company’s “good start” to the fiscal year, although he noted that activity had declined in some markets as economic problems worsened.

Earlier this week, fellow recruiter PageGroup revealed that dampening client confidence had led to a slowdown in hiring in certain places, and Robert Walters said his UK operations had been harmed by a ‘volatile’ political and economic situation.

Many companies have begun to curb hiring plans amid severe inflationary pressures, monetary policy tightening and heightened recession fears, as vacancy rates begin to fall from historically high levels.

Julie Palmer, partner at corporate restructuring specialist Begbies Traynor, said: “The current environment cannot last forever, and the uncertain economic outlook suggests companies may need to start reining in spending if they are to mitigate the impact of rising inflation.

She added: “In the coming months, people like Hays will be watched closely as economists and investors alike look for any sign of weakness.”

Hays Shares closed 3.8 percent higher at 107.1p Thursday, but their value is down more than a third in the past 12 months.