Hays insider sells down

Recruiters have naturally benefited from rising expectations of a sharper economic recovery following the UK roll-out of coronavirus vaccines. In keeping with that optimistic outlook, shares in Hays (HAS) reached a 12-month high earlier this month. So, perhaps, unsurprising timing for president of the group’s Americas operations, John Faraguna, to sell down part of his holding, disposing of just over £150,000 in shares. 

The sale was made on the same day that the recruiter reported first-half results, revealing that it would resume ordinary dividends in August and pay a special dividend totalling £100m as part of plans to return £150m in surplus capital. Cash generation had proven more resilient than anticipated at the time of its £200m equity raise in April, management said. Brokerage Numis forecasts an annual dividend of 6.67p a share for the current financial year. 

Like rivals, Hays has suffered as companies have cut back on hiring new staff. The decline in fees slowed to 19 per cent during the second quarter, compared with a 29 per cent fall in the first three months of the year. Net fees were down almost a quarter over the first half, which translated to operating profits dropping by around three-quarters. That was despite a 14 per cent drop in headcount as the group attempted to control costs. 

The pace of Hays’ earnings recovery is largely dependent on how quickly hiring activity returns to pre-pandemic levels. The UK unemployment rate hit 5 per cent during the three months to December, according to the Office for National Statistics, but the number of payroll employees increased in January for the second consecutive month. Unemployment could rise higher once the government’s furlough scheme comes to an end, which is currently scheduled in April but could be extended in the chancellor’s 3 March Budget. 

Earnings for Hays are forecast to drop to a trough of 2p a share this year, before rebounding to 5.83p in 2022. However, recovery prospects are fully accounted for in the shares’ valuation. Hold. 

Last IC view: Hold, 156p, 18 Feb 2021