Recruitment group Hays has reported its first annual loss in 23 years after an aggressive cost-cutting drive failed to offset weaker hiring activity.
The firm posted an annual pre-tax loss of £54.5 million in the year to June 30, falling from a profit of £1.5 million in the previous year. Total net fees dropped 8 per cent to £905.5 million, as artificial intelligence and geopolitical tensions weighed on recruitment.
The business makes money by charging companies a fee to find and place candidates in jobs, but it has been impacted by a wider slowdown across many global markets. Hays, which focuses on recruitment across technology, finance and engineering, said employers are delaying hiring and candidates are reluctant to change jobs.
The performance of the company is closely tied to the strength of the jobs market for office-based roles in locations including the UK, Germany and France.
Permanent recruitment remained the weaker part of its operations, with net fees down 12 per cent, while temporary and contracting fees fell 5 per cent.
Chief executive Mark Dearnley has overseen significant cuts to costs, with the number of employees falling from 9,523 to 8,125.
Regional performance
The company said its pre-tax loss followed a number of one-off actions, while operating profits of £48.6 million beat market expectations.
In Germany, the group's largest market, net fees dropped 9 per cent and operating profit fell 24 per cent to £41.2 million.
The UK and Ireland business experienced "tougher market conditions" in the public sector but "relative resilience" in the private sector. Net fees in the region fell 10 per cent to £174 million, but it returned to a pre-exceptional operating profit of £4 million from a £5.8 million loss a year ago.
There had been some hope from rival recruiters that conditions had started to improve, but Hays said there had been "no significant change to activity levels" in recent weeks.
Shares in Hays fell 3.45 per cent, or 2.47p, to 68.98p on Thursday morning, having risen around 8 per cent in the past year. The business proposed an unchanged final dividend of 0.29p per share, taking the full-year payout to 0.44p.
Momentum strategy
The business launched its "Momentum" strategy, targeting more than 50 per cent growth in net-fee productivity over the medium term and around £50 million of additional annual structural cost savings this year.
Dearnley said the new strategy would sharpen the focus of Hays and improve profitability and returns.
"We will continue to invest in our digital platforms to create the 'talent workspace of the future', and our colleagues through the Hays Academy and an all-colleague share award," he said.
"The decline in Group net fees eased to 8 per cent in FY26, despite softer Permanent recruitment activity through the year, and we continued to execute our strategy well reporting our 11th consecutive quarter of consultant net fee productivity growth and exceeding our structural cost savings target three years ahead of schedule."
Market reaction
Axel Rudolph, chief technical analyst at IG, said: "Hays has endured another difficult year, with weaker demand hitting fees, but the underlying business has shown resilience as productivity gains and cost savings helped support operating profit."
"The restructuring charge makes the headline results look considerably worse, but the launch of its new Momentum strategy suggests management is determined to sharpen its focus and build a leaner business," Rudolph said.
"With trading currently in line with expectations, investors will now want to see whether this more focused approach can finally deliver a sustainable recovery in growth."
