Hays set to reveal profit slump amid tough recruitment market

The FTSE 250 commercial recruitment firm has already warned it was set for a ‘subdued summer’.

Recruitment firm Hays will update investors next week (Dan Lewis/PA) (PA Media)

Hays is set to be the latest recruiter to reveal lower profits in the face of a challenging hiring market next week.

The FTSE 250 commercial recruitment firm has already warned it was set for a “subdued summer” amid cost-cutting across the business to bolster its finances for the longer-term.

Investors will be hoping that falling interest rates and improving optimism among firms could improve the labour market outlook when Hays updates the market with a full-year trading update on Thursday, August 22.

Shares in the company are currently 14% lower for the year, after a bruising 2024 so far for the recruitment sector as a whole.

The sector saw significant growth following the Covid-19 pandemic, with the tech sector leading a surge in hiring and increases in wage offers helping to attract new candidates.

However, cost-cutting across industries including tech, caution over hiring from firms and potential candidates being reluctant to move jobs have hit recruitment firms hard.

In its previous update last month, Hays said it expected profits to be just below its guidance after a slump in net fees over the latest quarter.

Hays chief executive Dirk Hahn told shareholders in July that the market remained “challenging”, with lower levels of confidence across companies meaning they took longer to hire people for roles.

It also indicated that recent trading was hampered by the “negative effects” of elections in the UK and France.

As a result, the company is expected to post operating profits of £105 million for the year to June.

This represents a significant fall from the £197 million operating profit it delivered the previous year.

The slump in profits came despite heavy cost-cutting, with the firm slashing annual costs by £60 million in a programme which saw it close or merge 12 of its offices in the latest quarter.

Sanjay Vidyarthi, research analyst at Panmure Liberum, said the company has a “mountain to climb” after recent weak trading.

He added: “There is a lot to be done on regional productivity and cost rationalisation to achieve management’s conversion rate targets.”

The update comes after major rivals PageGroup and Robert Walters both pointed towards weakness in the sector.

Last week, PageGroup revealed that its profits for the past six months fell by more-than-half due to a reduction in new job vacancies.

Meanwhile, at the start of August, Robert Walter said net fee income slid by 18% as challenges in the labour market endured longer than previously expected.