There was a little more room for optimism – or shall we say less pessimism – in multidiscipline, global recruitment firm Hays’ trading statement, with CEO Alistair Cox reporting “stabilisation in demand in all major markets”. But the word “recovery” was nowhere to be found, echoing sentiments expressed the prior quarter (see Hays sees no signs of recovery).
The good news, if we can take the ‘glass half full’ view, is that the yoy decline in net fee income (gross profit) is slowing, down 30% like-for-like across the business and the same across the UK. A quarter ago the decline was 40% and 41% respectively. Indeed UK private sector net fees increased ‘modestly’ quarter on quarter, but this was offset by a decline in the public sector, “particularly in administrative and non-front line placements”.
No specific comment on UK IT recruitment trends (<10% of Hays’ UK business) but this is heavily weighted towards the financial services and IT vendor sectors – only 10% comes from the public sector. However, Hays reported a small sequential net fee increase in Germany, which is primarily an IT contracting business.
Contractor margins slipped 140bps yoy across the board due to a combination of pricing pressure and profit-squeezing, high-volume contracts.
When I met Alistair Cox a few weeks back he told me that the banking sector was “surprisingly buoyant, surprisingly quickly”, more so in the UK. He felt this foreshadowed the return of major IT decisions for new applications and upgrades to core banking systems, which would drive both contract and permanent recruitment volumes. He seemed unphased about the margin squeeze from large volume contracts as this was still driving higher absolute profit (and profit per consultant).
I think “stabilisation” will become the word of the year in 2010 and that may well be as good as it gets. Our sense is still that IT demand will start to recover in H2 but the deals will remain vigorously contested keeping pricing down. IT recruitment volumes (rather than profits) will be the lead indicator here and I could see nothing in Hays’ statement that put a positive gloss on that. There’s a concall later and TechMarketView Foundation Service clients can see more on UKHotViews Extra.