Hays feels pain as jobs crisis spirals

"It is brutal out there. There is not a sign of a green shoot in any market in any country in any region of the world," said Hays finance director Paul Venables as the company revealed appalling quarterly results.

Hays itself admitted it is contributing to the growing jobs crisis in the country by letting go 1000 of its staff — more than a quarter of its UK headcount — over the last year as it closed 28 offices.

For the three months to the end of March Hays said its fees for placing permanent and temporary staff in jobs had plunged by 37%.

That indicates how the jobs market has rapidly deteriorated this year.

In the previous six months, Hays reported its fees had dropped at a rate of 15%.

"Markets have deteriorated across all areas and all regions and they are continuing to deteriorate," said Venables.

"In our business we tend to talk of market visibility looking out over the next three to five weeks. That visibility is currently down to the next three to five days.

"We are seeing no change in the trends and we do not expect to see any change because of how the job market is panning out.

"Over the last three to six months we have seen the big job cuts being announced by the big corporates. These job cuts, however, normally take 90 days to go through because of staff consultation, so in many cases we have not seen these job losses come onto the market and it is likely to take several months yet for it to work through.

"For any green shoots in the jobs market to show there has to be some sign of stabilisation. There is none.

"If the big corporates who have been letting staff go need to recruit they are unlikely to go as permanent placement and so will fill it with a temp. All this has to work through the system before we can talk about green shoots."

Falling levels of business will hit Hays' bottom line hard, especially as there are indications that its fees are being squeezed as well.

Venables said the 1000 staff who have left the UK business were almost all a case of people walking away because there is little commission to earn and they can't make a decent living.

Hays pays staff a low base salary, around £17,000 to £18,000 in London, with the expectation that they then fill their boots with commission for placing candidates.

A star performer could previously have earned a commission-fueled £100,000 a year but still only be on a base of around £22,000.

Broker Panmure Gordon told any clients who are holding Hays stock to sell immediately. Against profits of £249 million in the 12 months to the end of last June, Panmure has slashed its forecast for the current financial year to £155 million and now expects profits in the 2010 financial year to slump even further to £110 million.

"The quarterly update suggests markets are in free fall mode," said analyst Mike Allen. "Our view is that market conditions will remain tough."

Panmure reckons a fair value for Hays shares is 48p. The stock was today down 21/4p at 713/4p.