Recruiter Hays sounds profit warning as December hiring slows

(Reuters) - Recruitment firm Hays Plc HAYS.L warned of lower first-half operating profit on Thursday, as it struggled with a hiring squeeze that worsened in December in some of its largest markets including Britain, France and Australia.

FILE PHOTO: Hays CEO Alistair Cox speaks at the annual CBI Conference in London, Britain November 18, 2019. REUTERS/Simon Dawson/File Photo

London-listed shares of the company fell as much as 9% in early morning trade before recovering to trade 2.5% lower as of 0930 GMT.

Global recruiters have been pummelled by widespread uncertainties around the globe, ranging from Brexit worries in the United Kingdom to protests in Hong Kong and poor market sentiment due to the U.S.-China trade war.

Its peers PageGroup Plc PAGE.L and Robert Walters RWA.L also had a tough quarter ending December, with weakness in hiring seen in similar markets including China, UK and France.

Hays’ profit warning was the first this year among its peers but comes just three months after similar warnings from PageGroup and Robert Walters.

First-half 2020 operating profit is expected to be about 100 million pounds ($130.36 million), Hays said, compared with 124.1 million pounds it reported last year.

Hays said it expects to reduce overhead costs by 5 million pounds in the second half of the year, following a review of its cost base in the second quarter of 2019.

“Hopefully, a clear UK election result and a trade deal between the U.S. and China should position us to return to growth over the next year or two,” Finance Director Paul Venables told Reuters.

Hays reported a 4% drop in like-for-like net fees in the second-quarter, also blaming a stronger pound for the fall.

Venables said net fees were initially down 3% during most of the quarter, driven primarily by deterioration in Germany, before falling further due to the spread of general strikes in France, the British election and bush fires in Australia.

“Each event impacted markets already facing challenging economic conditions and low business confidence,” Chief Executive Alistair Cox said in a statement.

Germany, its largest market, saw further decline in net fees of 9% in the quarter as business confidence continued to be subdued and companies reined in costs and deterred hiring, particularly in the manufacturing and automotive sector.

In China, where the recruiter derived some strength in the previous quarters, net fees also declined 9% and was driven by a slowdown in investment in the manufacturing sector, Venables said.

(This story corrects to remove reference to consultant headcount in paragraph seven)

Reporting by Yadarisa Shabong in Bengaluru; Editing by Shailesh Kuber and Emelia Sithole-Matrise