Hays reports a 34% decline in net fees as COVID-19 halts new hiring in the fourth quarter
- Hays reports a 34% decline in net fees as COVID-19 halts new hiring in the fourth quarter.
- The leading recruitment company in the world slashes its workforce by 9% in Q4.
- The British recruiter concludes the fiscal fourth quarter with £365 million in net cash.
Hays plc (LON: HAS) reported a 34% decline in net fees in the fourth quarter on Thursday. The company attributed the decline to the Coronavirus pandemic that pushed companies into freezing new hiring. Hays also warned that its financial performance in summer is likely to remain weighed this year. Its peer, Robert Walters, also reported a 33% decline in its gross profit in the second quarter last week.
Shares of the company opened about 3% down in premarket trading on Thursday and tanked another 3% on market open. At 123 pence per share, the £2.07 billion company that has a price to earnings ratio of 12.66 is currently more than 30% down year to date in the stock market after recovering from an even lower 92 pence per share in the first week of April.
Hays slashes its workforce by 9% in Q4
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With a footprint in 33 countries, Hays finds a place in the league of the world’s largest recruiters and is listed on the UK’s FTSE 250 index. The company revealed to have slashed its workforce by 9% in Q4. Thanks to a 21% decline in the cost base, the London-listed firm broke-even in the recent quarter.
Hays, however, acknowledged the prospect of a rise in costs in the newly started fiscal year and warned that it might swing to a modest loss in the upcoming months. Market conditions, it added, are likely to remain challenging due to COVID-19. According to Finance Director Paul Venables of Hays:
“To return to profitability, we need the economy to stabilise and, primarily at this stage of countries starting to reopen and people starting to return to work, we need that to be as smooth as possible.”
Hays concludes Q4 with £365 million in net cash
In its statement on Thursday, Hays also estimated its annual operating profit to lie in the range of £130 million and £135 million for the year that ended on 30th June. In the previous year, the figure was reported at a much higher £248.8 million.
Hays boasted to have concluded the fourth quarter with £365 million in net cash, including about £200 million of equity that it raised in April, when it also announced to have suspended its dividend to further cushion the economic blow from the ongoing health crisis.
According to Jefferies, however, the company that primarily focuses on recruiting for white-collar positions has a sufficiently strong balance sheet that is likely to help reinstate dividends once the state-backed financial support ends.