Hays falls amid concern over German slowdown

Hays shares fell on Thursday even as the company's interim profits increased, amid investor fears of a slowdown in the recruitment firm's German business due to the country's economic slowdown.

For the six-month period to 31 December, pre-tax profits increased to £122.6m, a rise of 8%, as net fees grew 8% to £568m, a 9% increase on a like for like basis.

In Germany, which accounts for nearly 40% of Hays' operating profit and is the company's largest market, operating profit increased by 14% to £46.7m and net fees increased by 14% to £153.7m, down from the 17% increase seen the year before.

While the FTSE 250 traded company also admitted it was battling “economic uncertainties” in the UK as manufacturers struggle with the worst drought of workers in 30 years due to a drop in immigration from the EU, it stressed that other global markets were strong and had driven its growth in profits.

Alistair Cox, Chief Executive, said: "Conditions were supportive in most of our markets, with 20 of our 33 countries delivering record net fees. This included our largest countries by profit, Germany and Australia, as well as exciting growth markets such as China, Canada and the USA. UK&I delivered another solid result, with 6% profit growth despite economic uncertainties."

Currency movements took around £2.1m off operating profit and represented a “significant sensitivity” for the business, Hays said..

Cash and cash equivalents stood at £117.5m, up from £114.5m, and the company increased its interim dividend by 5% to 1.11p.

"Looking ahead, although we remain mindful of continuing macroeconomic uncertainty, the outlook in the vast majority of our markets remains positive. Our second half focus will be on driving consultant productivity, while selectively investing in our key markets to build on our existing scale, balance and diversity. Our financial strength and highly experienced management teams stand us in good stead for the future," said Cox.

A note to clients from analysts at Liberum reportedly said the impact of currency movements and a slowdown in German growth were expected to result in a consensus for the 2019 fiscal year to be cut by between 2% and 3%.

"Although not massive in the context of the recent share price performance, we expect investors to pay particular attention to the outlook for the group's largest region, and anticipate this being the focus of this morning's analyst presentation," the note added.

Hays' shares were down 6.69% at 148.10p at 1020 GMT.