Global recruitment giant Hays has become the latest industry player to report a dismal set of results, citing cost-cutting at previously high-spending firms and cautious hiring.
The FTSE-250 company had already warned it was set for a “subdued summer” due to expenses related to its cost-cutting drive designed to boost long-term profitability in a tough market. The programme saw the company cut 15 per cent of jobs, restructure operations and improve efficiency.
This led to a £42.2m exceptional charge, which – along with £37.8m in non-cash asset write downs – led to a 92 per cent fall in overall profit before tax, to £14.7m.
But even disregarding exceptional items, profit before tax fell by 51 per cent to £94.7m.
Group fees decreased by 12 per cent, while pre-exceptional operating profit decreased 46 per cent year on year £105.1m, impacted by “tough conditions in key markets”, the company said.
Cash generation fell by 44 per cent to £112.3m, while earnings per share fell by 53 per cent to reach 4.03p. Including the one-off costs, earnings per share fell by 104 per cent to reach -0.31p.
Chief executive Dirk Hahn said that market conditions were “increasingly challenging… with low confidence levels and longer-than-normal ‘time-to-hire’.”
“Our profitability was significantly impacted, including our three largest markets of Germany, Australia and the UK,” he added. “Against this backdrop, we have focused on enhanced operational rigour, driving consultant productivity and strong cost management, and are determined to build a more resilient Hays.”
The sector saw significant growth following the Covid-19 pandemic after the tech sector led to a surge in hiring and increases in wage offers helped to to attract new candidates.
But cost-cutting across industries including tech, caution over hiring from firms and potential candidates being reluctant to move jobs have hit recruitment firms hard.
Hays’ share price has fallen by about a third since late 2021, when Covid restrictions began to ease.
Earlier in August, Pagegroup revealed that its profits for the past six months fell by more than half, while Robert Walters said net fee income slid by 18 per cent.
Pagegroup have cut around 250 since January, leaving the total headcount at 5,598 – down from a high of just over 7,000 in September 2022 – while Robert Walters has cut its staff by 13 per cent since last year to 3,812.
Julie Palmer, Partner at Begbies Traynor said: “The extent to which the global jobs market continues to be affected by reduced confidence was laid bare by Hays’ full year results this morning, with the recruiter reporting an over 90 per cent drop in profit before tax for the twelve months.
“It is no surprise that conditions have been challenging of late for the recruiter… Hays is just one of a number of recruitment firms who have recently highlighted how difficult the market is as workers remain reluctant to change jobs amid economic and political uncertainty.
“If things do improve, Hays might be one of the first beneficiaries as firms worldwide start rehiring. Until that point, it will need to batten down the hatches and do everything it can to maintain its relatively robust financial position”.