Global recruitment firm Hays has reported continued pressure on fees as permanent hiring weakens, with analysts warning that the jobs market remains "as tough as ever".
Net fees decline amid weak permanent hiring
The London-based company, which ranks among Europe's largest recruitment agencies, reported that net fees declined 3% on a like-for-like basis during its first quarter ending 30 September.
The drop was predominantly attributed to a 7% reduction in fees from permanent placements, which chief executive Mark Dearnley described as remaining "mixed", with robust growth in North America offset by persistent fragility across Northern Europe.
Across the UK and Ireland, net fees dropped 5%, while permanent role placements tumbled 9%.
Analysts and market reaction
AJ Bell investment director Russ Mould said the company's figures demonstrated the job market was "as tough as ever, particularly for permanent roles", indicating "companies lack confidence and don't want to invest in their business for growth".
Hays saw shares plummet by as much as 12% during early trading on Monday following the market update, before stabilising around 7% lower.
Strategic review and cost cuts
Over the past year, the FTSE 250-listed business has closed its operations in Thailand and Mexico, and divested those in the Czech Republic, Denmark, Hungary, Luxembourg, Romania and Sweden.
In Monday's trading update, Hays stated it had also made "good progress" in reviewing its operations in Belgium, Brazil, Greater China, Malaysia, the Netherlands, Singapore and the United Arab Emirates, noting it was in "advanced discussions" regarding several of these businesses. The company had previously stated it intended to focus on its core 16 markets to deliver a "sharper focus" for the business.
Hays is amongst recruitment specialists currently wrestling with a difficult jobs market, which has witnessed employers taking longer to appoint candidates.
Earlier this year, the firm revealed it had reduced its global consultancy workforce by 14% during the year ending in March, alongside a 7% reduction to its non-consultancy staff.
Company and analyst outlook
Mr Dearnley said: "Permanent activity remains mixed with sustained strong growth in North America but ongoing fragility in Northern Europe."
"Our medium-term targets can be achieved through our own actions and we were pleased to make continued good progress with our structural cost and productivity initiatives during the quarter."
However, Mr Mould said: "While Hays has put a positive spin on the period, the numbers speak for themselves."
"Hays has been through enough up and down cycles to know that the key to survival is to adapt to changing market conditions."
"That's not simply just cutting back on recruitment consultants when times are harder."
"It also means pivoting to more vibrant regions and being more selective in the types of roles, such as its current strategy to target higher salary positions on the permanent side."
Richard Hunter, head of markets at interactive investor, said Hays remained in a "difficult spot" but was "well aware" of the challenges it faced, including difficult economic conditions and the impact of AI on jobs.
He said: "In response, the group is streamlining its strategy including a more focused geographical footprint as well as looking to recruit for more specialised positions which are expected to be less impacted by AI."
"Indeed, Hays' own investment in AI could improve its productivity and profitability in due course."
