23 Feb 18 Numis Hold 193.60 180.00 190.00 Retains
23 Feb 18 JP Morgan Cazenove Neutral 193.60 177.10 177.10 Reiterates
23 Feb 18 Deutsche Bank Sell 193.60 - - Reiterates
22 Feb 18 Liberum Capital Buy 193.60 195.00 195.00 Reiterates
(ShareCast News) - Interim profit at FTSE 250 recruiter Hays rose 18% on the back of strong growth in its international markets and good cost control in the UK.
In the six months to 31 December 2017, pre-tax profit increased to £113.9m from £96.2m in the same period a year ago, with net feet fees up 13% to £525.8m and operating profit 16% higher at £116.5m.
Basic earnings per share pushed up to 5.39p from 4.55p and the dividend per share was lifted 10% to 1.06p.
The company said it saw strong conditions in the majority of its international markets, with the UK subdued and broadly stable. Net fee growth in Australia and New Zealand and Rest of World was up 15%, while Germany saw growth of 17%. In the UK & Ireland, however, net fees grew just 1%.
Hays also said that its investments in technology were increasingly paying off, allowing it to receive and process more than 10 million CVs a year and enabling its consultants to perform complex searches of its global OneTouch database in seconds. The group has constructed proprietary systems and fostered relationships with the likes of Google, LinkedIn, SEEK and, more recently, Xing in Germany.
Chief executive Alistair Cox said: "Conditions were supportive in the vast majority of our markets, with 22 countries growing net fees by more than 10% and 20 countries delivering record performances. This is a clear sign of the strength of our diversified global portfolio, as we take advantage of our leading positions in key markets.
"Our largest business, Germany, delivered another all-time record performance and we accelerated investment there, increasing consultant headcount by 30% and opening three new offices. Australia delivered strong broad-based growth and while the UK market remained subdued, it was stable overall.
"Looking ahead, the scale, balance and diversity of our businesses, combined with our strong balance sheet and highly experienced management teams, stand us in good stead. The outlook in the vast majority of our markets remains positive and we have made an encouraging start to our new five-year plan to broadly double our operating profits by 2022."
"Is it too late in the cycle to hold recruitment stocks, or is this sector a primeÂ "momentum"play for 2018? Moreover, should a bigger international stock be preferred over a smaller one, lest any economic shocks do materialise?Thus, a comparison ..."
"With earnings season well and truly underway, we've plenty to get our teeth stuck into. What's been particularly interesting over the last few days are the differing reactions to updates from a trio of globally diversified ..."
"A free Ferrari (NYSE:RACE) and Hays (LSE:HAS)There's sometimes a strange phenomena with the markets, one we always hesitate to comment on as it's perhaps a bit stupid.But when we allocate shares for manual analysis once the markets end-of-day ..."
" A FREE FERRARI & HAYS (NYSE:RACE & LSE:HAS) There's sometimes a strange phenomena with the markets, one we always hesitate to comment on as it's perhaps a bit stupid. But when we allocate shares for manual analysis once the markets End of Day ..."
Despite all that is happening on the overall financial scene Hays is doing very well. It is totally a mystery to me why the share price has dropped so much. If anyone can throw any light on this it would be appreciated.
Does anyone know why Hays share price has fallen over four percent this morning? The company is due to report on Wednesday. Hope this doesn't mean an insider knows the report will contain some nasties and is getting out early. Ideas?
"Just two months ago recruiter LSE:HAS:Hays was confident its five-year plan to double operating profit to Â£250 million by 2018 would succeed. It's still on, but it is getting increasingly difficult to beat last year's numbers. Net fee growth ..."
I attach the chart here with my view on the support and resistance levels. ( my view not set in stone )
Plus what seems like a bearish divergence and possible retest of the 147/148 levels
Note am long at 157,5 and missed my chance to close at the 162/3 levels of Friday . Mistake of mine .
Now I will have to sit the bearish potential out . I don't have a stop loss issue here as even at a very low level I don't get much pain, just time wasting I suppose. I will close the trade out in profit eventually . Just not as soon as I had wanted.
See chart for my thought and visual of why I call this a bearish divergence
(HAS) have reported strong first- and third-quarter results respectively, although both sets of trading figures were marginally behind consensus forecasts. Hays achieved group net fee income (NFI) growth of 8 per cent on a constant currency basis during the first three months of the year, compared with consensus estimates of 9 per cent. Michael Page increased its NFI by 11 per cent, just shy of 12 per cent consensus estimates.
Hays' Asia-Pacific business put in the best performance, delivering 9 per cent NFI growth. In Japan, at one of the group's four "future material profit drivers" and its largest Asian business, NFI rose by more than a quarter.
Unsurprisingly, macroeconomic factors continue to drag on the recruitment industry in Brazil, where NFI was down 14 per cent for Hays. But its German business showed signs of a turnaround, posting 4 per cent net fee growth, as the group added 40 consultants to the business. Finance director Paul Venables said the group intends to repeat this during the next quarter, as it seeks to take advantage of the opportunities presented by the country's immature recruitment market.
While NFI for the UK and Ireland business grew 8 per cent, it slowed through the quarter. Mr Venables said public sector clients had been more cautious due to the upcoming general election. He also cited "tougher comparables" with last year, when its domestic business delivered its strongest NFI growth in six years at 14 per cent.
First-quarter results for rival Michael Page told a similar story. On a constant currency basis its Emea business fared the best, with NFI up 12 per cent. Southern Europe and Germany were particularly strong, growing 29 per cent and 17 per cent, respectively. Its US business faced tougher comparatives and grew 7 per cent on a constant currency basis, offset by a stellar 35 per cent NFI surge in Canada. Chief executive Steve Ingham said NFI performance in the US was also depressed due to extreme winter weather conditions on the east coast.
The recruitment sector has enjoyed a good run over the past six months. Weakness in Brazil and Australia for the recruiters is hardly surprising. But the improving economic situation in Europe should provide higher candidate churn, boosting NFI. Shares in Hays and Michael Page are up 28 per cent and 19 per cent respectively since we first tipped them. However, with both groups' conversion rates still some way off their pre-financial crisis peaks, we expect more upside to come. Buy.
Valuations for recruitment companies have risen considerably since the final quarter of 2014 - and with good reason. Investors have woken up to the renewed business confidence that is driving profits in the recruitment industry domestically. And while it's no secret that UK recruiters have been steadily expanding their footprints in emerging economies, they are also applying years of homegrown expertise to exploit mature labour markets. This dual approach has increased opportunities for recruiters, as they adapt to the changing needs of employers both home and abroad.
The German labour market provides a case in point. Strict labour laws, combined with limitations on the amount of personal data that can be held by companies, have historically hindered the development of a dynamic recruitment industry. However, Hays
(HAS) has identified the German recruitment market as a core profit driver for the near term. The country accounted for more than half of net fee income for Hays' continental Europe business in 2014, but permanent placements are taking a back seat; around 90 per cent of Hays' net fee income in Germany is generated through temporary contracts.
Management hopes to grow operating profits in Germany to at least £85m by 2018. One way the company hopes to achieve this is by taking advantage of recruitment outsourcing by German employers, which chief financial officer Paul Venables said is growing year on year. Given fee income for its German business grew 6 per cent to £62m during the 2014 financial year, the target looks achievable. Contract hires have also risen across continental Europe, with net fees growing 13 per cent as employers look to increase flexibility in their workforces. The recruiter will continue to roll out its contractor model across continental Europe, taking advantage of reforms to strict labour laws in France and Germany. 1
Germany's recruitment market has become a lucrative destination for industry rival Michael Page International
(MPI). Following tough trading conditions in continental Europe during 2013, its EMEA business returned to growth during the first half of last year. The German market put on a particularly impressive showing, increasing profits by 14 per cent year on year.
An improved US economic outlook has fuelled expansion on the other side of the Atlantic for global recruiters. In December, Hays announced the acquisition of US-based IT staffing business Veredus, which effectively doubled its presence in the country. Michael Page has recently expanded its US footprint. Indeed, it was the group's strongest market in the final quarter of 2014, with gross profits up a fifth on the previous year.
Within the Asia Pacific region, increasing demand for bilingual candidates by multinational companies has made Japan a prime target for growth opportunities. Robert Walters
(RWA), like rivals Hays and Page, is targeting growth in the region. With two offices already established in Japan, management has said the business has the potential to become its fastest growing and largest segment within the group. Chief operating officer Giles Daubeney said demand for candidates with both fluent English and Japanese is such that the business can earn fees equivalent to 30-40 per cent of a candidate's first-year salary, compared with a rate of 20-25 per cent in the UK. Hays now has about 130 consultants in Japan; however, there is scope for much greater expansion. Mr Venables said if the business had the same level of penetration as the UK, it would employ about 2,000 to 3,000 staff. The group has identified the business as a 'future material profit driver' within the next five years.
However, the recruiters are not taking a uniform approach in Japan. Michael Page is pursuing a more localised strategy by winning clients among homegrown Japanese businesses. It has about 100 consultants based in the country - but that could rise significantly once the business is entrenched.
1. Variable costs move up very slowly in relation to increased turnover.
2. Very high margins
3. Profits increase disproportionately to the increase in turnover.
4. Once fixed and variable costs are covered most ot the profits are available for dividends.
5. Timing for this market has to be about perfect at the moment.
Hays has had six very successfull months, with sustained growth in all its Markets. The next Jan to June period, the stronger half of the year, should accelerate the profitability substantially.
I look forward to topping 2 pounds by mid year. Good luck to all holders.
It would seem that Hays share have limited support. Encouraging update with fee growth of 11% by the UK's largest recruitment group. Details below
· Strong Group performance with quarterly net fee growth accelerating to 11%(1), driven by Perm
· Strong growth in Asia Pacific, including an acceleration in Australia & New Zealand to 10%(1), driven by Perm up 19%(1). Asia delivered further strong growth of 13%(1)
· Strong broad-based growth in the UK & Ireland, including excellent Perm growth of 23%(1). Major specialisms of Accountancy & Finance, Construction & Property and IT all grew by over 15%(1)
· Good growth in Continental Europe & Rest of World, including good growth of 6%(1) in Germany and strong 14%(1) growth in France, one of 15 countries in the region delivering 10%(1) growth or more
· On 4 December 2014, Hays acquired 80% of Veredus Corp., a US IT staffing company, for an initial consideration of approximately $44 million (c.£28 million)
Recruitment group Hays saw good net fee performance in the three months to the end of September with year-on-year growth in every region and in each of its largest three businesses - Australia, Germany and the UK.
In the first quarter ended 30 September net fees increased 4% on a headline basis and 9% on a like-for-like basis against the prior year.
The difference between actual and like-for-like net fee growth rates was primarily the result of a material depreciation of both the Australian dollar and the euro against sterling. If the rates of exchange of the group's key operating currencies remained as at 6 October levels through the remainder of the year, it would reduce operating profit by c.£7m versus FY14.
Chief executive Alistair Cox said: "We have made a good start to the new financial year and have grown in all regions around the world. Importantly each of our three largest businesses, Australia, Germany and the UK, grew simultaneously for the first time in nearly four years. Elsewhere many European, Americas and Asian markets continued to improve and 11 of our businesses delivered record quarterly net fees, including key businesses such as Canada, Switzerland and Germany.
"While we are mindful of the risks our world faces today, most of our markets continue to improve and we are focused on capitalising on the opportunities this presents us. This means continuing to invest to make our business more productive, while simultaneously increasing consultant capacity where market demand dictates. Having built the largest global platform in our industry, we are ideally positioned now to take advantage of these improved market conditions."
"LSE:MKS:Marks and Spencer will kick off Thursday's company news with the release of its fourth-quarter trading update for 2013.Analysts' expectations: Analyst at Deutsche Bank Charlie Muir-Sands expects a deceleration in food offsetting a ..."
Good Group performance with accelerating quarterly net fee growth and continued improvement in conditions across many key markets
· Strong, broad-based growth of 14%(1) in the UK & Ireland driven by excellent Perm growth of 25%(1). All major specialisms grew by over 10%(1), including Accountancy & Finance, Construction & Property and IT
· Strong growth of 11%(1) in Continental Europe & Rest of World. Growth accelerated to 12%(1) in Germany and 14 other countries delivered net fee growth of over 10%(1), including Belgium, Spain and Switzerland
· Asia Pacific net fees decreased by 4%(1). Australia net fees decreased by 12%(1) but we saw broad-based stability in activity levels in the quarter. Asia delivered continued excellent growth of 25%(1)
· Group consultant headcount was up 1% during the quarter and increased by 2% year-on-year
· We expect full year operating profit to be towards the top of the current range of market estimates, which we understand to be £141 million(2), based on a good start to the second half overall and strong performances in key markets such as the UK and Germany
Recruiters are notoriously cyclical and Hays (HAS) is no exception. Back in 2008, its UK business turned an operating profit of £137m, which was just over half of the group's total operating profit that year. Then the UK economy crumbled. By the 2011-12 financial year, the UK division was making a small loss. Banking and City-related specialisms were particularly weak but the broader recruitment market was also tough as hiring decisions were placed on ice amid uncertain economic conditions."
Good Article / Tip in yesterdays Investors Chronicle:
Sizeable potential for UK profits to recover
Recruitment markets improving in many regions
Two consecutive quarters of better than expected net fee growth
Valuation discount versus other large recruiters
Australian business hit by resource market weakness
Highly geared to economic recovery
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