City recruiting freeze chills Hays

PERSONNEL and logistics combine Hays today laid bare the extent of the recruitment freeze in the City, saying that permanent placements are down 21% over the past year. But its gloomy picture is not as bad as that being revealed by some. Whitehead Mann, which claims to fill more senior City posts than any other headhunter, on Tuesday reported a decline in investment banking assignments of 'at least 50%'.

Hays finance director Neil McLachlan said the fall in permanent placements by the company is almost entirely due to the sharp declines in recruitment in the Square Mile as a whole and in investment banking in particular. McLachlan reported that business in the temporary recruitment market, in which it is more of a specialist, is holding up although fees are lower.

'Hays Personnel continues to perform well in difficult trading conditions and results are expected to be slightly above consensus,' said the group in a trading statement ahead of the end of its financial year later this month. Analysts have cut their forecasts for underlying group pre-tax profits for the year to £230m.

The personnel division accounts for about two-fifths of group turnover and more than half of Hays' annual profits.

The statement, which sought to calm jitters in the City about the tough markets in which Hays is operating, sent the shares 8 1/2p lower to 157p. That is significantly less than half the price they were 12 months ago when the group put out a shock profit warning and announced the departure of managing director John Cole, who still has to be replaced.

The group told the Stock Exchange: 'The economic outlook for many business sectors in Europe remains uncertain, making it difficult to predict when our businesses will return to growth from their current stable trading positions.'

While Hays said results from its high-turnover low-margin logistics business remain in line with analysts' redrawn expectations, there are problems in the commercial division, which comprises a number of support services operations. The group admitted that profits from the division, which account for a third of Hays' annual earnings, will be worse than expected because of the failure to deliver on time the new National Management Information System to police forces around the country.

It added that the dive in the technology market will lead it to write down by £50m the value of acquisitions in its IT solutions business.