Hays plc (HAS) Earnings Call Transcript

Good day, and thank you for standing by. Welcome to the trading update for the quarter ending 30 September 2026. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kean Marden, Head of Investor Relations and M&A. Please go ahead.

Good morning, everyone, and thank you for joining us today. I'm Kean Marden, Head of Investor Relations, and I'm joined here today by James Hilton, Chief Financial Officer, to present Hays' Q1 '27 results. Before we begin, please be aware that this call is being recorded, and the replay is accessible using the number and code provided in the release. Please be aware that our discussions may contain forward-looking statements that are based on current expectations or beliefs as well as assumptions on future events. There are risk factors which could cause actual results to differ materially from those expressed in or implied by such statements. Hays disclaims any intention or obligation to revise or update any forward-looking statements that have been made during this call regardless of whether these statements are affected by new information, future events or otherwise. I'll now hand you over to James.

Thank you, Kean. Good morning, everyone, and thanks for joining us today. I'll present the key points and regional details of today's trading update before taking questions. As usual, our like-for-like results exclude country exits and the disposals of our operations in 6 European countries that we previously communicated in June. Moving on to Q1 trading with all net fee growth percentages on a like-for-like basis versus prior year unless stated otherwise. Group net fees decreased by 3%, with Temp & Contracting improving to down 1% and Perm down 7%. I'd highlight the following key items from the results. Temp & Contracting net fees decreased by 1% as volumes remained sequentially stable and the decline in average hours worked in Germany was in line with our expectations and stable during the quarter. The year-on-year decline in group Temp & Contracting volumes eased to 3%, including Germany down 2%, UK&I down 7%, ANZ down 9%, and Rest of World up 5%. Perm net fees decreased by 7%, driven by a 12% decline in volumes as markets remained mixed but stable overall and the volume decline was partially offset by a 5% increase in the group average perm fee, supported by our actions to target high salary roles. We continue to target high pay roles for candidates, invest in the best tools for our consultants, and forensically allocate consultants to business lines with the most attractive productivity and long-term structural growth opportunity. These actions delivered 8% growth in average consultant net fee productivity, including notable increases in Germany and the UK&I, up 11% and 10%, respectively. Excluding the impact of country disposals and exits, group consultant headcount decreased by 1% sequentially in the quarter and by 9% year-on-year. We have made good progress with our initiatives to deliver further structural cost savings of GBP 50 million per annum in FY '27, achieving GBP 10 million in Q1. In total, we have now delivered GBP 125 million per annum of structural savings since the start of FY '24. The group's net debt position was circa GBP 45 million, which is in line with our expectations and reflects normal seasonal cash flows, cash exceptional payments and share purchases related to our non-dilutive all colleague share award. I'll now comment on the performance by each division in more detail. Our largest market of Germany saw fees down 6% year-on-year. Temp & Contracting fees decreased by 5% with volumes down 2% and a further 3% impact from negative hours and mix. Contracting volumes increased modestly year-on-year, aided by fewer terminations, and average hours worked remained stable through the quarter. Temp volumes were sequentially stable. And Perm remained challenging, but sequentially stable through the quarter with the year-on-year decline in net fees easing to 8%. In our 2 largest specialisms, net fee growth in technology accelerated to 3%, but Engineering, our second largest, was down 23%. Finance was down 9%. Construction & Property performed strongly again and increased by 28%, driven by our focus on infrastructure and the energy sector. Construction & Property now contribute 10% of our net fees in Germany. Consultant headcount decreased by 2% in the quarter and by 16% year-on-year, and consultant net fee productivity increased by 11%, driven by our ongoing focus on resource allocation, and we made good progress with our structural cost saving initiatives. In U.K. and Ireland, fees decreased by 5%. Temp & Contracting declined by 3%, but Perm remained subdued, down 9%. Fees in the private sector declined by 6%, with the public sector down 3%. At the specialism level, Finance and Construction & Property increased by 2% and 1%, respectively, while Technology decreased by 2%. Office support was down 1% as our actions to target high salary roles continued to broadly offset lower volumes in junior roles. Consultant headcount decreased by 4% in the quarter and by 13% year-on-year. Consultant net fee productivity increased by 10% year-on-year, and we made further progress in improving our operational efficiency and cost structure. Once again, a key driver of productivity has been greater focus from our consultants on high skill roles. And as a result, year-on-year growth in average candidate salary accelerated to 9% in Perm and 8% in Temp & Contracting. In ANZ, fees decreased by 3% year-on-year with Temp & Contracting down 2%, but Perm remained slightly more challenging and was down 6%. The private sector grew by 3%, but the public sector was again tougher, down 14%. At the specialism level, growth in Construction & Property, our largest at 26% of Australia and New Zealand fees, accelerated to 5% and Resources and Mining grew by 10%. Technology and finance were down 4% and 2%, respectively. Australia fees were down 3% year-on-year and New Zealand eased to down 5%. ANZ consultant headcount was up 1% through the quarter, but decreased by 4% year-on-year. Consultant net fee productivity increased by 3% to a 9-year high, driven by focus on resource allocation. As with the U.K. and Ireland, a key driver of our profit recovery has been greater focus from our consultants on high skilled roles. As a result, year-on-year growth in our average salary of our Perm placements accelerated to 10%. In addition, we continue to make good progress with our cost actions. Our Rest of World division currently comprises 18 countries. And as a reminder, our total actual growth rate includes the impact from our previously communicated exits from Thailand and Mexico and the disposal of 6 European countries in June. Like-for-like net fees were flat year-on-year. Temp & Contracting delivered positive year-on-year growth for the third consecutive quarter and accelerated to 8%. Perm declined by 7%. In EMEA ex Germany, net fees decreased by 5%. France, our largest Rest of World country, remained challenging, with fees down 16% as weakness in Perm offset growth in Temp & Contracting. Portugal, up 42%, achieved record quarterly net fees, and Spain performed strongly again, up 15%, with a record Q1. Poland grew by 5%. In Americas, net fees increased by 9%, driven by strong growth in Construction & Property, the mobilization of recent Solutions contract wins and strong consultant net fee productivity. The U.S. and Canada grew by 8% and 12%, respectively, and we expect contract wins to contribute further to net fees over the coming quarters. Asia net fees increased by 6%. Japan grew by 2%, driven by strong growth in our Temp & Contracting business despite public holiday headwinds over the summer, while Greater China grew by 27% with improved activity in Perm. The rest of the world as a whole, consultant headcount increased by 1% in the quarter. It was down 3% year-on-year. Before moving to current trading, I'd like to take a few moments to update you on our strong strategic and operational progress during the quarter. Mark and I have visited our colleagues across all divisions over the last few months. There is real energy across Hays, and we are executing our Momentum strategy at pace. As we've previously shared with you, our initiatives to improve consultant net fee productivity in real terms and structurally improve our cost base will be key drivers of profit recovery. So we were encouraged once again by our good progress in the quarter. Consultant fee productivity growth remained at 8% in Q1, has now increased for 12 consecutive quarters, and fee productivity have increased by 21% in aggregate over the last 3 years, and that's an accelerating rate in recent quarters. And our programs to structurally reduce our cost base by GBP 50 million this year are progressing well. Our people and digital initiatives will help us maintain this positive momentum and support our ambition to increase net fee productivity by more than 50% over the medium term. For example, we recently signed a strategic partnership with Synthesia to scale skills development, accelerate AI adoption and examine consulting performance drivers. This AI platform is a key enabler for Hays Academy and our digital initiatives. In addition, we commenced the phased go-live of our proprietary OneTouch 26 CRM system across Europe following successful deployment in APAC, which will support our AI agent and Search & Match initiatives. And finally, we are making good progress exploring strategic options relating to our businesses in Belgium, Brazil, Greater China, Malaysia, The Netherlands, Singapore and UAE. And I'm pleased to share that we are in advanced discussions with several of these processes. As a reminder, in every market we compete in, our ambition remains clear: to grow, achieve leadership and deliver the benefits that come with it, including faster matching, greater exposure to high-value roles, stronger margins and better outcomes to clients and candidates. Where we can't, we'll step back and reallocate investments to generate superior returns elsewhere. Moving on to current trading. Our September net fee growth rate was minus 2%, and we expect stable market conditions in the near term with greater resilience in Temp & Contracting and in Perm. 50% of Hays is now delivering positive year-on-year net fee growth, an encouraging improvement from 30% in the previous quarter. We continue to relentlessly focus on our structural cost and productivity initiatives, supported by investments in our digital platforms as we create a talent workspace of the future and our colleagues as we seek to achieve our medium-term targets through our own actions. There are no material working day impacts expected in Q2 '27. And the sharp-eyed among you may have noticed that we have not provided consultant headcount guidance for Q2. We will continue to carefully invest in headcount in the most attractive business lines and reallocate from elsewhere, so the net impact is difficult to predict from quarter-to-quarter. Moreover, in the medium term, our path to more than GBP 1 billion net fees will be driven more by productivity growth and increased consultant headcount. I will now hand you back to the administrator, and we are happy to take your questions.

[Operator Instructions] And this question comes from the line of Tom Burlton from BNP Paribas.

Just 2 for me, please. First one, could you talk through the trends in Germany in a bit more detail based on Temp & Contracting? And I guess, in particular, are you seeing any tailwinds from fiscal spending there? And the second one on France. I think you touched on the situation is challenging. Just curious there in terms of progress given political uncertainty in particular and what you're seeing in that regard, please?

Sure. Thanks, Tom. I'll kick off with the question on Germany and the trends we're seeing. So yes, I mean, interesting that this was the first quarter where we saw year-on-year volume growth in our Contracting business. And our Contracting business, as you know, is our biggest business there. And we've seen good numbers of new starters. So the number of placements we've made over the last 3 months has been in line with our expectations. And we continue to see slightly fewer finishes and terminations of assignments. So that overall put together has put us back into volume growth in Contracting for the first time in a while. We do still continue to see a headwind from working hours in Germany in Contracting, but it's stable over the last 6 months and hasn't got any worse. And when you put that together with the mix of slightly higher margin and higher value placements, it's about a 3% drag on fees. But it's good to see that the business is back in volume growth. Temp, as you know, is where we have the exposure to the automotive sector, which is still heavily down, and you can see that in the numbers this quarter again. And really, we're seeing pretty flat trends in Temp volumes. So we're down about 20% in Temp year-on-year in volume, but it's pretty stable. It's a stable trend. Our Temp volumes compared to where we were 6 months ago is pretty stable. And we're not seeing any real deviation in that. And then in Perm, like elsewhere in Northern Europe, it's pretty challenging and quite bumpy. So good month, weaker month, followed by a better month again. So it's a bit inconsistent, but around a stable trend. So again, if I put the Perm fees in Germany versus in September versus where we were in March, it's consistent. It's not getting any worse, but it's not getting materially better either. And as I say, there's a level of variability from month to month. Over in France, again, it's a tough Perm market there, particularly in the junior end of the market. But actually, we're seeing some positive signs in our Temp & Contracting business, for example, where we were up 15% year-on-year. So that's performing pretty well. But we're seeing 25% of our business in France is in the Perm market and particularly the lower end of the Perm market is really challenging. We've historically had a bigger business in office support, in the banking market, and that's against a pretty tough market. But there are some signs of life in some of the more technical areas such as Construction & Property and Technology where things are a little bit better. So again, Northern Europe in Perm is still pretty inconsistent. In France, we had a pretty decent September, but we had a tough July and August. Part of that is holiday season there and it's to be expected. But it's quite, again, variable month-to-month.

We are now going to take our next question, and this one comes from the line of Rory McKenzie from UBS.

It's Rory here. Just 3 questions, please. Firstly, good to see more areas of the group moving into positive year-over-year growth. Can you just describe a bit more what's happening within the Americas and Asia in particular? Secondly, at a group level, you say that within the net fees, there was a 4% increase in average salaries. How much of that do you think is from your own repositioning compared to just kind of market level and inflation? And can you just talk about where that's strongest or weakest across the group? And then just finally, on the cost savings, good progress towards that GBP 50 million target. Anything to call out in terms of phasing of those cost savings or the benefits to land within this year?

Okay. Great. I'll kick off with the areas in growth and obviously, already highlighted the Americas and Asia. And actually, when I look at the Americas result, we're seeing, I think, 2 or 3 factors in there. First of all, we've got a decent sized business in Construction & Property, and the Perm market there is particularly strong. So we're seeing growth of about 30%, 40% in Construction & Property in the U.S. and in Canada. So that's a very buoyant market. We're seeing lots of demand across clients in the world such as data centers, infrastructure investment, energy renewables. That's all pretty strong and underpinning that C&P growth that we're seeing there. The Tech Contracting business there, which is our biggest business, is doing pretty well, sort of mid-single-digit growth there in Contracting. And we're seeing an improvement in our Solutions business with a couple of bigger wins coming on stream, which has brought that business back into growth. I think if we think back a year ago, we were talking about a lost RPO contract, which put that business backwards. It's quite encouraging to see a couple of good wins there in the Solutions business, and we've got a couple more in the pipeline. So that's moving forward quite nicely. So a decent quarter over there. And in Asia, we're seeing quite a mixed picture again, I mean, the Greater China market, as you can see, is for us pretty much all a Perm market, and that was pretty strong. We're seeing better performance in financial services and banking and actually quite broad. Life Sciences is very strong there. We have a good sized life sciences business in China. And in Hong Kong, particularly, that's quite a lot of financial services and banking market. Japan has been a real good performance for us over the last couple of years. Really strong growth in Temp & Contracting. So particularly in the Technology Contracting business, really going forward well there. I think we're up about 60% in the quarter in Temp & Contracting. On contrast to that, Perm has been quite disrupted this quarter in Japan, particularly in late August into September. We've had a combination of Silver Week there and the normal holiday season that we have has been quite extended. So our Perm business is actually slightly down year-on-year in Japan for the first time in a while. Actually, the underlying activity is pretty good. It's just a lot of disruption on start dates and getting placements over the line. So we're still pretty confident that we'll have a good second quarter in Japan. I think that 2% will hopefully move further forward. Second question was around the placement value. Wasn't it, 4% average placement salary versus, I guess, underlying wage inflation and where is that taking us? It's probably 2% to 3%. So I think we're probably a percentage point or 2 ahead of that. So you can see in areas such as the U.K. and Australia, we've really focused sort of perhaps in the areas of the business where historically, we've had more business in the lower end of the market, perhaps on the other hand, Germany, where we've always had a higher value business, probably less of a tailwind there. But certainly, in the U.K. and Australia, we've really got focus on bringing ourselves further up salary ranges, and that started to really help productivity in those businesses, which is moving forward well. So yes, pretty pleased on that. And it's across both Temp and Perm as well, Rory. So it's good to see it coming through both for us, which is good. And then on the cost savings, we did about GBP 10 million or so in the first quarter. I mean, obviously, you've got summer right at the start of the year, so it's difficult to get going right at the beginning of the year. But no, we've made good progress. We gave the target of GBP 50 million for the full year. So we're in line with where we're expecting to be at this stage and making good progress to where we want to be at the half year. In terms of overall phasing, I'd like to think I'd be at a good sensible midpoint towards that target by the half year. And then you can think through the phasing H1 versus H2. So I mean, we'll talk more about it at Q2, I guess, and the interim results in February. But yes, we've had a good start to the year, and we've got our plans up and running. So we expect to make good progress there. Did I cover everything, Rory? Apologies if I didn't. Hope it was helpful.

No, it was very helpful.