Hays has delivered annual operating profit ahead of market expectations despite persistent weakness in permanent recruitment, as restructuring and cost reductions offset lower fee income.
The recruitment group reported pre-exceptional operating profit of £48.6m for the year to 30 June, ahead of company-compiled consensus of £45.3m and 7% higher than the previous year.
The result came against a difficult trading backdrop. Employers in several major markets have delayed hiring decisions, while weaker confidence has made candidates less inclined to change jobs.
Permanent recruitment has been particularly exposed. In the final quarter, group net fees fell 5% on a like-for-like basis, with permanent fees down 7% and temporary and contracting fees down 3%.
UK and Ireland net fees declined 8% in the quarter. Hays nevertheless recorded an 8% improvement in consultant net-fee productivity, allowing it to offset part of the fall in activity.
The company has accelerated structural cost reduction and concentrated resources on markets where it believes it can build stronger positions. Approximately £50m of annualised savings have already been secured, three years ahead of the timetable previously associated with its longer-term programme.
Statutory performance was less favourable because restructuring charges and other exceptional items contributed to a pre-tax loss. The difference between statutory and underlying earnings illustrates the near-term cost of reshaping the business while recruitment demand remains subdued.
Chief executive Mark Dearnley has been reducing Hays’ geographic footprint and directing investment towards higher-value specialisms, enterprise recruitment services, and markets where greater scale can improve returns.
The strategy reflects conditions across the recruitment industry. Large international recruiters expanded consultant numbers as labour markets tightened after the pandemic, then faced a prolonged slowdown as higher interest rates, weak confidence, and economic uncertainty reduced hiring.
Permanent recruitment is more sensitive to that cycle because employers can postpone adding headcount when visibility is poor. Temporary and contract hiring can prove more resilient where companies need additional skills without committing to permanent employment.
Recent UK labour-market indicators show a similar divide. Vacancy levels have weakened and recruitment conditions remain soft, although some measures suggest the pace of deterioration in permanent hiring has eased.
Technology is adding another layer. Demand remains strong for selected AI, data, cyber, and specialist technical skills at the same time as employers assess how automation could change staffing requirements across administrative and professional functions.
Recruiters are consequently operating in a market where aggregate hiring can remain weak even as shortages persist in particular occupations. Specialist networks can therefore become more valuable while general recruitment volumes fall.
Hays’ cost programme is intended to make the group profitable at lower levels of activity and create operating leverage if recruitment eventually recovers. The challenge is retaining enough consultant capacity to respond when demand improves.
Recruitment businesses rely heavily on relationships and specialist knowledge. Reducing headcount can protect near-term margins, but excessive cuts may make it harder to rebuild revenue quickly when vacancies return.
Hays said trading in July and August remained broadly consistent with the preceding three months, indicating that the start of its new financial year has not produced a significant change in recruitment activity.
Underlying earnings are therefore being driven more by internal productivity than by market growth. The company enters the year with a smaller cost base, a more concentrated country portfolio, and greater emphasis on temporary, contracting, and specialist recruitment.
A sustained improvement in profit will eventually require stronger hiring demand as well. The latest result demonstrates that Hays can protect underlying earnings during a difficult market, while the continued fall in fees shows that the broader recruitment cycle has yet to turn decisively.
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