Overall, fees for the company’s final quarter were up by 3%, with temporary hiring doing better than permanent, up 6% versus a fall of 1%. The UK saw growth of 7&, in line with 9% growth in Germany and 10% in France. However, in Asia Pacific fees were down by 13%, while Australia slumped by 18%.
Full-year operating profit is forecast to be at the top end of expectations, even while overall conditions are difficult. The improvement in temporary hiring is a welcome sign, but the ongoing weakness in the permanent division is a cause for concern. It signals that companies are still sufficiently nervous about the outlook that they are unwilling to embark on expansion in personnel. This has been a long-standing problem in the economies of western Europe, but the sign that it has spread to other developed world markets is a cause for concern.
Hays has seen steady revenue growth since 2009, while the 2010 low in pre-tax profit has been put firmly behind it through ruthless cost control. With signs of job growth showing in the UK, where economic data is beginning to improve tentatively, Hays and the broader recruitment sector will be well-placed to benefit.
On a PE of 17.6 the shares are fairly valued, while a dividend yield of 2.6% makes the stock attractive from an income perspective. The shares have gained almost 6% in the wake of the recent update, and are currently clinging on at the 100p level. The price briefly pushed to 102p back in mid-April, the highest level for the year, so we are sitting right on a key resistance level.
100p is the line that needs to hold, and a solid break above 103p would suggest that there is further upside. If the shares hold from here, then I would rate them a ‘buy’, as a play on the return to health of the UK economy.