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Hays PLC (LSE:HAS), a global leader in recruitment services, announced a 12% decrease in group fees for the fiscal year, with temporary (Temp) placements down 8% and permanent (Perm) placements declining by 17%. The company’s pre-exceptional operating profit plummeted by 46% year-over-year to £105.1 million, reflecting the tough conditions in key markets.
Decisive Cost-Cutting Measures
In response to these challenges, Hays undertook decisive actions to reduce costs, achieving an annualized savings of approximately £60 million. Notably, half of these savings are structural, positioning the company for greater efficiency moving forward. The company's workforce was reduced by 15%, and operations were restructured to streamline processes, leading to a £42.2 million cash exceptional charge and an additional £37.8 million in non-cash asset write-downs.
Productivity and Future Prospects
Despite the reduced market volumes, Hays maintained strong overall productivity, which remained near record levels, increasing by 1% year-over-year. The company attributes this resilience to its strategic alignment of capacity with current market conditions and the closure of unprofitable business lines. Looking ahead, Hays sees significant potential to increase both fees and operating profit as market conditions normalize and average placement volumes per consultant improve.
Hays is also focused on delivering further structural cost savings, with plans to save an additional £30 million per annum by the end of FY27 through ongoing back-office efficiency programs, particularly within its technology and finance functions.
Financial Strength and Dividend Confidence
Hays reported a strong balance sheet with net cash of £56.8 million and a solid cash conversion rate of 107%. Given the Board’s confidence in the company’s strategy and financial position, a final dividend of 2.05 pence per share has been proposed, maintaining the full-year FY24 dividend at 3.00 pence per share.
Outlook and Medium-Term Targets
Current trading in July and August has aligned with expectations, though the company notes that September will be a key month for assessing trends in the first quarter. Hays reiterated its medium-term conversion rate target of 22-25%. To achieve this, the company plans to drive consultant productivity beyond inflation levels through strategic pricing, technology tools, and data utilization. Additionally, Hays has identified further efficiencies by standardizing operating models and reducing group overhead costs.
