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Analysts studying Hays report for clues to post-Brexit job market

Published 26/08/2016

A report from Hays is due next week
A report from Hays is due next week

Recruitment firm Hays will be watched closely next week for any signs of how the British job market is holding up following the country's vote to quit the European Union, while 888 Holdings will report its first set of results since abandoning a three-way merger with Rank Group and William Hill.

Hays is forecast to report a rise in profits for the full year next week, but the prospect of a slowdown in UK hiring is looming large over the recruitment sector following Britain's decision to quit the European Union.

The recruitment specialist managed to surprise analysts by posting better-than-expected results in the fourth quarter, reporting 5% growth in like-for-like net fees.

That figure was driven by 21% growth in continental Europe and global markets outside of the UK, Ireland and Asia Pacific. However, the company's UK operations took a hit in the run-up to the EU referendum, with its UK and Ireland business contracting 4%.

Hays said public sector recruitment was challenging, with sentiment weak ahead of the vote.

The group's chief executive Alistair Cox said: "Although there is significantly increased uncertainty in the UK, it is too early to say how the result of the referendum will impact our results going forward."

Analysts at Jefferies forecast that pre-tax profits will rise over 10% to £172.5 million for the full year.

Like its fourth quarter results, Hays' full-year earnings report will only cover the seven days following the referendum.

But investors will look for clues as to what the hiring environment and recruitment business will look like in the months following Brexit.

Kean Marden, an equity analyst at Jefferies said: "UK momentum deteriorated during the quarter and 2017 will be tougher but Hays has navigated choppy waters before."

Rahim Karim, an analyst at Liberum, said the woes felt by the UK business were unlikely to spread.

"The company has indicated that as things stand they expect to continue to grow headcount in Europe, pointing to the fact that contagion appears to be relatively limited at this stage," Mr Karim said.

Online gaming giant 888 Holdings is set to report a boost in earnings and revenues on Wednesday when it updates the City for the first time since it was spurned by takeover target William Hill.

Strong demand for sport betting in Spain and Italy is expected to bolster its financial performance despite a potential hit from currency headwinds caused by the Brexit vote.

The plunge in the value of the pound following Britain's vote to leave the European Union creates a challenge for 888, which reports in US dollars but makes 46% of its revenues in the UK.

Kevin Wright, analyst at Canaccord Genuity, has pencilled in half-year revenues to lift 14% to 250.4 million US dollars (£189.7 million) and earnings to rise 7% to 43.6 million US dollars (£33 million).

The update will come just weeks after it walked away empty handed from an attempt to team up with Rank Group and merge with FTSE 250 betting firm William Hill.

The £3.6 billion three-way merger proposal was cast to the scrap heap after William Hill's board rejected it on the grounds that it substantially undervalued the company.

888 and Rank Group said the tie-up would have delivered cost savings of £ 100 million per year and created the UK's ''largest multi-channel gambling operator''.

Their improved offer would have seen William Hill shareholders owning 48.8% of BidCo, the company being formed by 888 and Rank Group in order to buy the betting giant

The pair called on the board of William Hill to begin ''constructive discussion'' in a bid to reach a deal.

However, William Hill chairman Gareth Davis said the firm had "no merit in engaging", branding their takeover pursuit as "highly opportunistic ".

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