Summary

  • Hays reported 29% year on year fall in the net fees in Q1 FY21, although the performance has slightly improved sequentially.
  • The Company expects to be moderately profitable in H1 FY21.
  • PageGroup PLC reported a gross profit of £143.5 million in Q3 FY20, which declined by 33.8% year on year.
  • The gross profit from permanent recruitment business was £103.5 million, and temporary recruitment business was £40.0 million in Q3 FY20.

Hays PLC (LON: HAS) and PageGroup PLC (LON: PAGE) are in the business of support services and listed on the FTSE-250 index. Shares of HAS and PAGE were up by close to 0.27% and 2.05%, respectively from their last closing price (as on 19 October 2020, before the market close at 11:55 AM GMT+1).

Hays PLC (LON: HAS) - 17% decline in consultant headcount

Hays PLC is a UK based recruitment and human resourcing services company. Australia & New Zealand, Germany and the UK & Ireland are the main operational geographies of the Company. Hays is listed on the FTSE-250 index.

Business Overview

 

(Source: Company website)

Q1 FY2021 update (ended 30 September 2020) as reported on 15 October 2020

The Company highlighted that the pandemic has hit the business activity; however, the Temporary business segment is stable. Hays witnessed a slight recovery in the Permanent business segment in the markets where it was significantly hampered previously. The group fees were down by 29% year on year in Q1 FY21. The Temporary business fell by 26% year on year, and the Permanent business was down by 36% year on year in Q1 FY21. The Permanent business improved quarter on quarter. The net fee exit rate was down by 26% year on year. Hays reported that its consultant headcount declined by 17% year on year. The current cost base of the Company stands at £63 million per period, and the annual cost base equates to 12.5x of the cost base in the period. Out of the total cost base in a period, Hays would invest £1 million in growth projects. As on 30 September 2020, Hays had net cash of approximately £350 million. The Company also stated that the cash collection from the clients remains healthy.

Regional Performance in Q1 FY2021

The net fees in Australia & New Zealand (ANZ) region fell by 26% year on year, and the overall market condition continues to be challenging, but it has slightly improved sequentially. The Temporary business in ANZ that constitutes around 75% of net fees was down by 19% year on year. Construction & property and Office support and Accountancy continue to be some of the major target clients in Australia. The consultant headcount in ANZ was down by 21% year on year. The net fees in Germany were down by 31% year on year. The performance was mainly impacted by the cost-cutting measures taken by the clients in the automobile sector. The consultant headcount in Germany fell by 14% year on year. The UK & Ireland experienced a 34% fall in net fees in Q1 FY21.

Financial Highlights FY2020

(Source: Company website)

Share Price Performance Analysis

1-Year Chart as on October-19-2020, before the market close (Source: Refinitiv, Thomson Reuters)

Hays PLC's shares were trading at GBX 112.60 and were up by close to 0.27% against the previous closing price (as on 19 October 2020, before the market close at 11:55 AM GMT+1). HAS's 52-week High and Low were GBX 186.00 and GBX 85.25, respectively. Hays had a market capitalization of around £1.89 billion.

Business Outlook

Based on the performance in Q1 FY21, Hays expects to be modestly profitable in H1 FY21. The headcount is expected to remain flat in Q2 FY21. In FY21, it would do a capital expenditure of £7 million and an operating expenditure of £15 million. Hays highlighted that it expects any material improvement in the profitability in H2 FY21 only if there is a significant improvement in the net fees, and there is no lockdown for an extended duration.

PageGroup PLC (LON: PAGE) - Cost base is below March 2020

PageGroup PLC is a UK based specialist recruiter. It has around 7,500 employees in 36 countries. Michael Page and Page Personnel are two brands of the Company.

The business model of PageGroup

(Source: Company website)

Q3 FY20 update (ended 30 September 2020) as reported on 14 October 2020

(Source: Company website)

In Q3 FY20, the Company reported gross profit of £143.5 million, which declined by 33.8% year on year from £216.8 million reported in Q3 FY19. The Company highlighted that the trading conditions have improved from that in June 2020. The gross profit from Permanent recruitment business was £103.5 million in Q3 FY20, which fell by 36.3% year on year from £162.5 million reported in Q3 FY19. The gross profit from Temporary recruitment business was down by 26.3% year on year to £40.0 million in Q3 FY20.

At the end of the third quarter, the Permanent to Temporary recruitment ratio stood at 72:28. PageGroup earned a small profit in Q3 FY20, although cost base continues to rise as the employees returned from furlough and full salary payment was being made from 1 July 2020. However, the average monthly cost base in Q3 FY20 was down by 15% as compared to March 2020. As on 30 September 2020, PageGroup had net cash of £152 million. The Company has witnessed unprecedented interest from job seekers, and it is hiring experienced fee earners from its competitors. It has employed 300 fee earners so far in 2020 that have expertise in Technology, Healthcare and Contracting markets.

Regional performance of PageGroup in Q3 FY2020

(Source: Company website)

The trading conditions remained challenging for all regions due to the impact of covid-19. Based on the end market, business activity in technology, contracting, digital services and logistics was better than the construction and retail sector. The EMEA region reported a gross profit of £76.5 million, which was down by 24.7% year on year from £101.6 million in Q3 FY19. The Asia Pacific and Americas generated gross profit of £30.3 million and £19.1 million, which was down by 31.2% and 48.8%, respectively year on year. The gross profit for the UK region fell by 47.9% year on year to £17.6 million.

Share Price Performance Analysis

1-Year Chart as on October-19-2020, before the market close (Source: Refinitiv, Thomson Reuters)

PageGroup PLC's shares were trading at GBX 397.60 and were up by close to 2.05% against the previous closing price (as on 19 October 2020, before the market close at 11:55 AM GMT+1). PAGE's 52-week High and Low were GBX 549.50 and GBX 271.20, respectively. PageGroup had a market capitalization of around £1.28 billion.

Business Outlook

The Company highlighted that business trading conditions remain challenging, but it believes that this is the right time to invest in its business and tap opportunities. It would focus on improving the business activity and gross profit in Q4 FY20. The cost base forecast for Q4 FY20 is expected to be approximately 10% below March 2020 level.

 

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