Recession hit Hays sees fall in demand for permanent staff

Hays, whose largest markets are in Britain and Australia, said operating profit from continuing operations declined by 16 percent to £105.1 million ($149.7 million).

That was ahead of forecasts, which ranged between £100 and £104 million, according to a Reuters poll of three analysts.

Hays said demand for permanent placements is falling at an increasing rate in all countries in which it operates, but demand for temporary placements had been relatively resilient.

On a conference call with reporters, Finance Director Paul Venables said current forecasts for the full year ranged between £159 million and £206 million and he expected analysts at the top end of that range to revise their estimates downwards.

"We expect the ones towards the top end of the range to reduce their estimates but we're certainly comfortable with the range. We'd expect it to be closer to £170-175 million, that sort of number," Venables said.

The company said it had benefited from taking early action to cut costs by reducing headcount in response to the deteriorating trading conditions and had developed its business in more resilient areas such as the public sector.

The group, which operates in 27 countries has reduced global headcount by about 8 percent over the last twelve months to the current level of just under 8,300. 540 jobs were axed in the second half, including 450 in the UK.

Total net fees increased by 2 percent to 383.7 million pounds during the half year, boosted by the group gaining market share in the public sector which now accounts for about 21 percent of total net fees.

The company said it would keep its interim dividend unchanged at 1.85 pence.

Venables expressed confidence about preserving the dividend in 2009 - analysts expect it to remain unchanged at 5.8 pence - but declined to give a forecast beyond that.

"There's no concerns for this year and it's just too early to tell for anything beyond that," he said.

Shares in Hays, which have outperformed the FTSE All Share Support Services Index <Q.FTASX2790>, by 13 percent this year, were down 4.1 percent at 75.75 pence by 1115 GMT.

In contrast, shares in Dutch staffing company Randstad NV <RAND.AS>, which on Thursday scrapped its dividend for the first time ever after reporting a fourth-quarter net loss, plunged almost 12 percent.

Panmure, which reiterated its 'sell' recommendation and 48 pence price target on the stock, cut its 2009 and 2010 pretax profit forecasts to £165.1 million and £155.1 million respectively.

"As market conditions deteriorate across the board, Hays' permanent revenue streams are now in free fall with no sign of this stabilising in the short term," said Panmure analyst Mike Allen in a research note.