September 2, 2008 / 9:43 AM / 12 years ago

Recruiter Hays to cut jobs

LONDON (Reuters) - Staffing firm Hays (HAYS.L) posted better-than-expected annual profit on Tuesday but warned it would have to cut jobs of its own due to falling demand for permanent hires in Britain and Australia.

Hays, which generates most of its fees from the UK and Ireland, said it made a strong start to fiscal 2008 but demand for both temporary and permanent placements slowed markedly in the UK in the second half, which will mean cutting jobs and costs.

“UK demand for permanent placements is falling - as is Australia - and temporary has dropped off to a flat position so we need to reduce costs further, which will have an impact on our overall UK headcount,” Chief Executive Alistair Cox told reporters on a conference call.

The financial and property related sectors are being hit hardest, Cox said.

Analysts at Panmure Gordon & Co said Hays would likely focus on “profit protection rather than growth” over the next year.

Cox admitted Hays would concentrate on “profit maximisation and cash generation” in the UK but said it would look to move into new international markets if the right opportunities arise.

He said that although trading conditions particularly in the UK would be “challenging in the short-term” there was scope to “grow the business around the world”.

Hays, which has a presence in 27 countries, posted a 25 percent increase in annual profit on Tuesday driven by a solid first-half performance and strong international growth.

Pretax profit for the 12 months which ended on June 30 rose to 264.4 million pounds as like-for-like net fees grew 19 percent to 786.8 million. Revenue rose by 20 percent to 2.54 billion.

That topped the pretax profit of 243.6 million forecast in a poll of analysts by Reuters Estimates.

The recruiter said net fees for temporary placement staff rose 14 percent while those for permanent placements were up 24 percent, driven by growing oil and gas, education and healthcare hiring markets.

Shares in Hays fell almost 6 percent in early trade but were up 1.3 percent at 95.5 pence at 0910 GMT.

The stock has underperformed the UK support services sector .FTASX2790 by over 8 percent since the start of 2008.

Hays’ international business grew like-for-like new fees by 43 percent to 157.7 million pounds, with Germany and France performing especially well, complemented by strong growth in New Zealand and Asia.

In the UK and Ireland fees rose by 7 percent to 452.9 million but operating profit fell 3 percent to 137.3 million, in part due to the acquisition of James Harvard earlier in the year.

“Despite a slowing of the rate of growth in the fourth quarter, there was still positive momentum in most geographic areas of operation,” said Seymour Pierce analyst Kevin Lapwood.

Over the year, Hays bought back 73.2 million shares at a cost of 91 million pounds, representing 5 percent of the shares in issue. However, Cox said Hays was likely to “buyback more in the region of 10 million pounds this year” as the business looks to conserve cash.

Hays, which employs 9000 staff worldwide, said it would pay a final dividend of 5.80 pence compared to 5 pence last year.

Editing by Jason Neely

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