News Column

Hays Grows Strongly In UK, But Sterling Strength Wipes Out Fee Gains

July 10, 2014

Steve McGrath

LONDON (Alliance News) - Recruiter Hays PLC Thursday said net fee income was flat in its fiscal fourth quarter, as the strength of sterling against the euro and Australian dollar wiped out strong growth in the UK during the period, although it still expects to report strong operating profit growth for the year as a whole.

The company said net fee income was up 11% in the UK in the three months to end-June, driven by 17% growth in fees from permanent placements. It said its major specialisations of accountancy and finance, construction and property and IT all grew by over 15%.

The UK net fee growth was slower than the 14% growth Hays had reported in the UK in its fiscal third quarter, but stronger than the 9% growth posted in the first half of the financial year.

The figures support recent economic data in the UK suggesting that the recovery is accelerating and businesses are becoming more confident about taking on permanent staff again.

"Activity levels were strong and broad-based as all regions delivered year-on-year net fee growth. We saw particularly strong performances from Scotland, Northern Ireland, the North, North West, Midlands, the East of England, the South Coast and the Home Counties, all of which grew by more than 10%," it said in a statement.

The company's UK operations contribute about 35% of its total net fee income.

Hays also said net fees grew 7% in continental Europe in the quarter at constant exchange rates and exclusing acquisitions, but the strength of sterling against the euro meant that organic growth was just 1% at actual rates. The growth was driven by temporary hiring in Germany, with fees up 5% overall at constant rates. It also said 12 countries delivered net fee growth of 10% at constant rates, with Belgium and Poland reporting growth of over 15%. Net fees were up 7% at constant rates in France, the second-biggest business in this unit.

The big drag continued to be Asia Pacific, where there was no growth at constant currency rates, and a 13% decline in net fee income taking into account sterling's rise against the Australian dollar.

Net fees fell 5% at constant currency rates in Australia and New Zealand, although the company said it has now seen a "brad-based stability in activity levels" for six months. That offset fee growth of 45% or more in China and Hong Kong, 20% growth in Japan including a record month for the Japanese business in June, and growth of over 10% in Malaysia and Singapore.

Hays reiterated the guidance it gave in April that it expects to report full-year operating profit of about GBP140 million for the year that ended June 30. It had reported an operating profit of GBP125.5 million in fiscal 2013 and GBP128.1 million in fiscal 2012.

"Looking ahead we see clear growth opportunities for the group and therefore during the quarter we increased consultant headcount by 3%, the highest quarterly rise since September 2011. We will continue to invest to capture all opportunities for growth and maintain our focus on driving productivity to deliver on our long-term profit and cash objectives," Chief Executive Alistair Cox said in the statement.

Hays shares were down 1.3% at 135.90 pence early Thursday, one of the biggest declines on the FTSE 250.

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Source: Alliance News

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