Hays launches £200m cash-call amid profit warning as lockdown hits fees
Recruitment giant Hays has launched a £200 million investor cash call after seeing fees plummet as firms have frozen hiring plans due to the coronavirus pandemic.
The group said the equity raise will boost its balance sheet and confirmed directors of the firm and executive managers – including the chairman and chief executive – plan to buy around £100,000 in shares under the move.
It comes as Hays warned it expects full-year earnings to be significantly lower than expected after seeing a “very material deceleration” in recruitment activity since mid-March, with the impact being felt most in Europe.
It is unable to estimate the hit but said it is set to be “substantial”, and it has stress-tested the group for a potential 70% drop in net fees during the lockdown.
Shares fell as much as 18% on opening, before paring back losses to stand 7% down.
Hays said fees have fallen the most across permanent recruitment, which accounts for 42% of group income, with the private sector also more badly impacted than the public sector.
It has launched a raft of measures to cut costs, including freezing hiring, cutting senior management pay, axing non-essential costs and reducing advertising spend.
It believes costs could be cut by up to around £20 million a month by the end of the year.
Alistair Cox, chief executive of Hays, said: “The past few weeks have been unlike anything the world has seen in modern times and has severely impacted recruitment markets globally.
“Today’s equity fundraise is designed to further reinforce our business so that we are strongly placed to build on our market leading positions globally by supporting our clients and capturing additional market share.”
The group also said there were signs in recent weeks that large clients were turning to “financial strong” recruitment agencies.
Hays said: “We believe that our industry is likely to see a material ‘flight to quality’ both during and in the aftermath of Covid-19.
“Therefore, while the current environment is highly challenging, there remain significant and attractive opportunities in our markets – both in the short and longer term.”
Fellow recruiter Robert Walters also said it has slashed its costs by more than 15% and is applying for a raft of government subsidies around the world.
It is also axing its final shareholder divi payout, but sought to assure it “believes that the business is well-placed to cope with future uncertainties”.