Making Hays

Hays plc, widely regarding as a bell-weather for the UK – and global – recruitment industry, has published its half year results to 31 December 2013. It made for encouraging reading for participants in the highly cyclical staffing sector, which has been in the doldrums for several years. While booking a modest 2% increase in global net fees to £363m, Hays delivered operating profits up a healthy 15% to £66.7m.

In the UK and Ireland, Hay’s revenues increased 9%, with the public sector, which includes Healthcare and Education, growing a healthy 15% year-on-year. More impressively, 95% of UK net fee growth converted into operating profit. This is a graphic demonstration of the way in which many staffing businesses are operationally geared – having pared its consultant base back to the minimum required for a sustainable business, recent improvement in volumes has flowed largely to the bottom line.  In Hays’ speak, “we have positioned the group to capitalise on the upturn.”

However, Hays’ accompanying announcement that it would be looking to bolster consultant numbers in the UK and Ireland by 10% is also a salutary reminder that recruitment businesses only scale by investing in headcount, and true talent is as hard to come by in the staffing industry as any other people business. To sustain its growth, Hays will need to continue to increase its consultant numbers significantly. From long experience, an increased requirement for consultants at a time when there is a cyclical shortage of available talent is an important catalyst for kick-starting M&A activity in the sector. This is particularly so where Hays’ strategy of diversification requires the group to be looking to establish or enhance a presence in new specialisms and territories (eg. China, Russia and the USA).

I am anticipating a marked increase in M&A activity in the recruitment sector from 2014 onwards. For the many owners of successful, growing and differentiated consultancies that have been waiting for the market to re-open, this is indeed good news.


Hays’ has provided investors with a very clear summary of its strategy (see section 2.0 of the Investor Presentation prepared for the Interim Announcement). Very simply put (and in Hays’ own words), the strategy is that ‘balance, scale and diversification are what sets the Hays business model apart and drives outperformance.’ These are themes which resonate across Livingstone’s clients within the Human Capital sector and we would commend ambitious companies in the recruitment sector to review Hays’ publicly-articulated strategy (even if through gritted teeth!).

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