Outlook for recruiter Hays finds favour with analysts

Recruitment firm Hays delivered a boost to profit forecasts yesterday, despite ongoing weakness in its loss-making UK division.

The group, which employs 7,620 staff in 31 countries, said UK net fees declined 5 per cent on a like-for-like basis in the quarter ended 31 March, as the banking and City-related sector continued to feel pressure.

As a result, UK private sector fees fell 6 per cent, while the public sector business, which has been hit by far-reaching government spending cuts, declined 2 per cent.

However, strong growth overseas meant group net fees increased 10 per cent on a like-for-like basis, driven by strong growth in Germany in its continental Europe division, as well as its Asia-Pacific region.

Hays, which in February reported a £3 million half-year loss for the UK, did not give a specific range of estimates but said it would now deliver operating profits at the top end of expectations for the year to June. The group’s shares closed 7.25p, or 8.9 per cent, higher at 88.5p, as analysts expressed surprise at the strength of trading in the company’s third quarter.

Robert Morton, of Investec Securities, increased his forecast for the current financial year by 6 per cent and said he no longer expects a decline the following year after bumping up his estimate by more than a third.

Kevin Lapwood, an analyst at stockbroker Seymour Pierce, also removed his “sell” rating on Hays stock following yesterday’s update. He added: “Given that we are now in a more normal recruitment market recovery phase, with temporary placements leading the way, Hays is well-placed to benefit.

“The UK and Europe – excluding Germany – remain a worry but this is reflected in the current rating.”

Last week, rival recruiter Robert Walters told the City that it had made a strong start to 2012, but noted that clients and job candidates were still very cautious in uncertain economic times.