Hays Q1 fees fall

LONDON (Reuters) - The nation's largest recruiter Hays (HAYS.L) reported a 40 fall in first-quarter net fees and said conditions remained challenging though job markets in Britain and the Asia Pacific region had begun to stabilise.

Recruitment companies have suffered this year as companies around the world cut staff to save costs owing to the recession.

Earlier this week recruiter Michael Page (MPI.L) reported a 45 percent drop in third-quarter gross profit but said it too was beginning to see signs of stabilisation.

In a trading update for the three months to the end of September, Hays said net fees, income recruitment firms make from placing job seekers, were down 40 percent on a like for like basis compared to the same period last year.

Hays said public sector recruitment markets were becoming increasingly difficult and the situation in continental Europe continued to deteriorate.

"Whilst markets remain challenging, we continue to see early signs of stabilisation in the UK market and broader signs of stabilisation in Australia," Paul Venables, the company's finance director, said.

The company, which cut headcount 26 percent in the last financial year, said it planned no further job cuts. Shares in the company fell as much as 2.3 percent and rose as much as 1.8 percent in choppy morning trade and were down 0.09 percent by 10:02 a.m. British time, underperforming the FTSE mid-cap index .FTMC, which was up 1.47 percent.

"They were a bit worse than we were going for," Kevin Lapwood of Seymour Pierce said of the fees figures.

"It's very difficult to make the case that things have stabilised," he said, adding that he thought fee income might continue to fall this year.

FINE

Hays said it would take a 25 million pound exceptional charge this year for a 30.4 million pound fine imposed last month by the consumer watchdog, the Office of Fair Trading (OFT), for price fixing and forming a cartel with several other staffing agencies.

The charge is equivalent to around half the company's estimated 2010 net profit.

Venables called the fine "arbitrary, wholly disproportionate and unjust" and said Hays would appeal the OFT's decision.

But Lapwood said the fine would not affect underlying profits, and that cash flow was unlikely to suffer as Hays's balance sheet was strong.

"The only issue we would have with that is if it dented their cash flow sufficiently for them to change their dividend payment policy," he said, moving the stock to hold from outperform. "My view is that it won't."

(Editing by Lin Noueihed)