Shares in Hays (LON:HAS) rallied after the staffing company said it expects FY26 profits to come in at the top end of the consensus range.
Q4 proved another period of subdued recruitment activity for Hays. However, cost reductions and a return to year-on-year growth in H2 helped drive an unexpected upgrade.
Top end of the guide
FY26 pre-exceptional operating profit is now expected to be at the top of the £37 million to £46 million consensus range, said Hays. In Q4, the FTSE 250 recruiter saw the decline in group net fees moderate.
Furthermore, in FY26, Hays delivered annualised cost savings of £50 million three years ahead of schedule.
Group net fees fell 5% in the three months to 30 June. Temporary and contracting fees fell 3%, while permanent fees reduced by 7% as hiring softened through the quarter.
Germany, Hays’ largest market, remained stable, with average hours worked in line with expectations. Elsewhere, the company reported further good temporary and contracting net fee growth in Japan and Spain.
Sharpening the focus
Over the last year, Hays has reshaped its country portfolio in response to a tough hiring backdrop. The company is now focused on 16 core countries. CEO Mark Dearnley is focused on building scale in high performing and high potential markets where the company has ‘an ability to establish and grow leading positions’.
Hays recently sold its operations in six European countries – the Czech Republic, Denmark, Hungary, Luxembourg, Romania, and Sweden. The London-based company is also exploring options relating to its businesses in Belgium, Brazil, Greater China, Malaysia, The Netherlands, Singapore, and UAE.
Limited visibility
‘Although we have limited forward visibility, we are mindful of heightened global macro -economic uncertainty and expect near term market conditions to remain challenging,’ warned Hays.
The company expects to see greater resilience in its temporary and contracting businesses than in its permanent hiring activities.
Hays’ shares have lost 75% of their value over the past five years. Expectations heading into today’s update were subdued, so the surprise upgrade triggered a bounce in the stock. But we aren’t big fans of the cyclical recruitment sector.
Despite its geographically-diversified business, Hays is at the mercy of clients’ tightening recruitment budgets in many markets. And the company can only make cuts to meet its numbers for so long.
Another headwind is AI, which is eradicating the need for many professional jobs. We reckon Hays will struggle to generate meaningful growth in the years ahead. So investors should avoid the stock.
Read the press release here: https://www.haysplc.com/investors
