Hays sees full-year operating profit ahead of market expectations

Recruiter Hays posted a rise in net fees for the final quarter of the year on Friday and said it expects full-year operating profit to be "marginally" ahead of current consensus market expectations.

In the quarter to 30 June, like-for-like net fees grew a record 15%, with net fee growth of 23% in Rest of World, which accounts for 32% of total net fees, and 16% in Germany, which accounts for 25%.

The UK & Ireland saw net fee growth of 5% on a like-for-like basis, which was an improvement on the 2% decline seen in the previous quarter. Hays said the performance was partly due to easier comparatives following the negative impact of the IR35 changes in the public sector implemented in April last year. The UK & Ireland accounts for 24% of total net fees.

In the temp business, which represents 57% of group net fees, fees grew 11% in the quarter, while net fees in the perm business, which makes up 43% of quarterly group net fees, grew 20%.

The company said it now expects operating profit for the year to be ahead of consensus expectations of around £240.9m.

Hays ended the quarter with net cash of around £123m versus £111.6m in the same period a year ago. This, along with underlying trading, "will enable the board to consider increasing shareholder returns significantly, in line with our dividend policy", it said.

Chief executive Alistair Cox said: "We have ended our financial year with another record quarterly net fee performance, excellent cash generation, and expect full-year operating profit to be marginally ahead of current market expectations.

"Looking ahead, conditions remain positive in virtually all of our markets. We continue to invest significantly in key growth markets where we see structural and market share opportunities, notably Germany, France and the USA. Our focus continues to be on driving profitable, cash-generative growth, leveraging the largest and most balanced global platform in our industry. That allows us to look to the future with confidence."

Mike van Dulken, head of research at Accendo Markets, said: "The strong growth makes for a solid close to the year and boosts hopes that the trend continues into the new year. The new guidance is likely to lead analysts to tweak forecasts for this year, with a positive knock-on for future years. This could, in turn, see upgrades to both valuations and ratings.

"The shadow of economic uncertainty may still be hovering over the UK, with Brexit looming, but the region still grew, albeit modestly (UK & Ireland +4% underlying)."

At 0920 BST, the shares were up 5.1% to 201p.