Hays hampered by FX market

The recruitment-firm will announce its third-quarter sales and revenue update on Friday 10 April.

A jobs fair
Source: Bloomberg

It was a strong first six months for HaysHays, as operating profits rose by 30% on like-for-like basis, even though headwinds in the foreign exchange markets held the company back.

The UK and Ireland division was, by far, the best performer as it posted a 13% increase in net fees, while continental Europe registered a 2% growth in fees. It is hardly surprising that the German business was the best performer out of the eurozone region, but the depreciation of the single currency hit the first-half figures, and the more recent slump in the euro will dent this year’s third-quarter and final results.

Even though CEO Alastair Cox described the first-half as ‘excellent’, there are still some concerns hanging over the company. The slowdown in the Brazilian economy led to a drop in net fees, and this held back the South American division. Australia and New Zealand posted high single-digit growth, but the decline of the Australian dollar took the shine off the numbers.

The UK operation is experiencing growth across all its regions, and even though The City provided a sizeable portion of the divisions' earnings, it is now starting to even out, and the outlook for the second half is positive.

The bulk of Hays’ business is witnessing growth, and the 5% rise in the interim dividend was welcomed by shareholders. The recruitment specialist has sighted the euro and the Australian dollar as areas of concern, and both currencies are expected to continue to lose value as monetary easing is in the pipeline from the respective central banks.

Hays will reveal its full-year figures in August, and the consensus is for revenue of £3.86 billion and adjusted net income of £106 million. These forecasts equate to a 5% rise in revenue and a 17% increase in adjusted net income. The recruiter’s first-half figures were well received, with revenue coming in at £1.91 billion and adjusted net income at £51 million, compared with expectations of £1.95 billion and £50 million respectively.

Equity analysts are very bullish on the stock; out of the 24 ratings, 16 are buys, seven are holds, and one is a sell. The average target price is 163p, which is 4% above the current price. Investment banks are bullish on rival Michael Page International, and out of the 21 recommendations, ten are buys, ten are holds, and one is a sell. The average target price is £5.24 which is marginally below the current price.

The share price has been in an uptrend since December 2011, and the 200-hour moving average (MA) is providing support at 156p. If this level is held the initial target will be 170p, and beyond that traders will look to 180p. If the 200-hour MA is punctured the support at 150p will be brought into play, and if that level is cleared the 200-day MA at 137p will be the next metric to watch.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.