Day, and thank you for standing by. Welcome to the trading update for the three months ending 30th of September 2025 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Kean Marden, Head of Investor Relations and M&A. Please go ahead.
Thank you, Sharon. Good morning everyone, and thank you for joining us at the end of a busy week. I'm Kean Marden, Head of Investor Relations, and I'm joined here today by James Hilton, Chief Financial Officer, to present Hays Q1 2026 results. Before we begin, please be aware that this call is being recorded, and the replay is accessible using the number and code provided in the release. Please be aware that our discussions may contain forward-looking statements that are based on current expectations or beliefs, as well as assumptions on future events. There are risk factors which could cause actual results to differ materially from those expressed in or implied by such statements. Hays disclaims any intention or obligation to revise or update any forward-looking statements that have been made on this call, regardless of whether these statements are affected by new information, future events, or otherwise.
I'll now hand you over to James.
Thank you, Kean. Good morning everyone, and thanks for joining us today. I'll present the key points and regional details of today's trading update before taking questions. As usual, all net fee growth percentages are on a like-for-like basis versus prior year, unless stated otherwise. They also exclude our operations in Chile and Colombia, which, as we previously communicated, closed in the prior year. Group net fees decreased by 8%, with temporary and contracting down 5% and perm down 13%. We experienced a normal recovery in post-summer activity levels, and trading was stable on a seasonally adjusted basis through the quarter. Our September growth rate of -8% on a working day adjusted basis was in line with the quarter overall. Perm exited down 14%, while temp and contracting remained more resilient and exited down 4% on a working day adjusted basis.
Driven by its strong consultant fee productivity growth and good cost discipline, group pre-exceptional operating profit was broadly stable year-on-year in Q1, including year-on-year increases in UK&I and ANZ , and overall was in line with our expectations. I would highlight the following from our results. In our temporary and contracting business, net fees decreased by 5%, with activity levels and volumes rebuilding through the quarter in line with normal seasonal trends. Group tem and contracting volumes decreased by 8% year-on-year, including Germany down 9%, ANZ down 9%, UK&I down 12%, and the rest of world down 1%, which includes strong fee growth in several of our focus countries. Perm net fees decreased by 13%, driven by a 13% decline in volumes, with the average group perm fee flat.
Perm job flow and activity levels have returned to pre-summer levels in the majority of our markets, but placement volumes remain subdued due to longer than normal time to hire. Our Enterprise Solutions business was again strong, and we delivered 4% year-on-year net fee growth in Q1. Successfully providing a consistent global approach to how we engage with our clients, how we contract with them, and how we deliver services provides opportunities to capture more share of clients' spend by growing geographically and by cross-selling our suite of services. We continue to manage our consultant capacity on a business line basis, and despite challenging markets, our actions drove year-on-year consultant fee productivity growth of 7% in Q1, including notable the UK&I, ANZ , and in Germany.
This continues the encouraging trend we have demonstrated through FY 2025, and on a seasonally adjusted basis, productivity has increased now for eight consecutive quarters. Consultant headcount was reduced by 4% in the quarter and is now down 15% versus prior year. Our program to deliver GBP 18 million per annum in structural cost savings by the end of FY 2029, which comprises the GBP 35 million delivered in FY 2025 and the additional GBP 45 million target we communicated at our full-year results, continues to progress well. Our non-consultant headcount exited the quarter down 17% year-on-year. Consequently, our cost base on a periodic and constant currency basis has improved to around GBP 74 million from GBP 75 million in Q4 of 2025. The group's net debt position was around GBP 40 million, which reflected normal seasonal outflows and timing of month-end payments. DSOs were maintained at 37 days in line with prior year.
I'll now provide comments on each division in more detail. Our largest market of Germany saw fees down 7%. Temp and contracting fees decreased by 5%, with contracting volumes remaining solid overall, with fewer finishers offsetting lower starter volumes. We saw a modest year-on-year reduction in average hours worked through the quarter, which was offset by improved margin and mix. In temp, volumes and starter numbers remain weak, although automotive headwinds steadied over the summer, and the sector contributed only around 8% of the division's total net fees in the quarter, which is down from around 14% two years ago. In perm , conditions remain challenging, and fees decreased by 18%. At the specialism level, technology and engineering, our largest two specialisms, were down 1% and 16% respectively.
Accountancy and finance was down 15%, but construction and property performed strongly once again, and net fees increased by 44%, driven by our focus on infrastructure and the energy sector. C&P now represents 7% of Germany net fees, and we are well positioned to benefit from the government's longer-term infrastructure commitments. Consultant headcount decreased by 2% in the quarter and by 13% year-on-year. Driven by our ongoing resource allocation and back-office efficiency initiatives, consultant fee productivity increased by 6% year-on-year in Q1, and net and non-consultant headcount reduced further. In UK&I, fees decreased by 9%. Temp and contracting fees were down 10% year-on-year and were subdued through the quarter, notably in public sector. Perm was down 9% and remained challenging but stable. Fees in the private sector declined by 5%, while public sector was tougher, with fees down 20%.
At the specialism level, accountancy and finance and technology decreased by 7% and 2% respectively. Construction and property decreased by 12%, and Enterprise performed well, with net fees up 16%. Consultant headcount decreased by 7% in the quarter and by 25% year-on-year. We have taken decisive action over the last nine months to improve consultant net fee productivity, which increased by 14% year-on-year in Q1, and have made good progress with driving operational efficiency. As a result of these actions, pre-exceptional operating profit in the U.K. and Ireland increased year-on-year in Q1. In ANZ, fees decreased by 5% year-on-year. While market conditions remain challenging, activity levels were stable through the quarter. Temp and contracting decreased by 2%, although the conversion of perm activity remained challenging, and perm net fees were down 9%.
The private sector was down 3%, with the public sector down 7%. At the ANZ specialism level, construction and property declined by 4%. Technology was down 2%. Accountancy and finance decreased by 5%, and office support was flat. ANZ consultant headcount was down 4% in the quarter and down 11% year-on-year. Driven by our focus on resource allocation, consultant net fee productivity increased by 5% year-on-year in Q1, and as a result of our actions, pre-exceptional profit in ANZ increased year-on-year. In our Rest of World division, comprising 26 countries, like-for-like fees decreased by 10%. Temp fees decreased by 4%, but the majority of our perm markets remained challenging, and fees were down 14%. As a reminder, our actual growth rates include the impact from our previously communicated action to close our operations in Chile and Colombia.
In EMEA ex-Germany, net fees were down 13%. France, our largest rest of the world country, remained tough and loss-making, with net fees down 20%, but our actions to address productivity and costs are being delivered on plan. Southern Europe was stronger, with Spain and Portugal up 18% and 5% respectively. In the Americas, net fees were down 10%, and following a subdued summer, but stronger September and improving outlook, the U.S. and Canada were down 6% and 18% respectively. LatAm was down 14%, again challenging but stable. Asian net fees increased by 2%, with mixed but improved activity overall through the quarter. Japan grew by 5% as our strategy to develop local language recruitment services alongside our existing multinational clients drove record net fees in Q1. Mainland China and Hong Kong increased by 2% and 1% respectively, and we delivered good growth in our temp and contracting business.
For the rest of the world as a whole, consultant headcount decreased by 4% in the quarter and was down 13% year-on-year. Moving on to current trading and guidance, I'd like to highlight the following. Given ongoing macro-economic uncertainty, we expect near-term market conditions to remain challenging, and although we have limited forward visibility, we continue to believe this is likely to persist through FY 2026. We were pleased with our net fee productivity through Q1 and believe our consultant headcount capacity is appropriate for current market conditions and therefore expected to remain broadly stable in Q2 as we balance focused investment in high-performing business lines with improving productivity in more challenging areas. We will continue to structurally reduce our cost base to position Hays strongly for when end markets recover, and there are no material working day impacts anticipated in either H1 2026 or in FY 2026 overall.
Overall, while it is difficult to predict timing, we know our markets will recover, and when they do, we remain confident that we will benefit materially. I will now hand you back to the administrator, and we are happy to take your questions.
Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We will now take the first question. One moment, please. Your first question today comes from the line of Andy Grobler from BNP Paribas. Please go ahead.
Hi, good morning. Just a couple from me, if I may. You mentioned that profitability had the U.K. and Australia , and I just wondered whether you could talk through your expectations for phasing of profit through the first half and the full year. Secondly, in the U.S., a bit weaker through the quarter, but September was stronger. Can you just talk about what's moving, what are the moving parts within that business, and what the underlying market feels like at this point? Thank you.
Right, Andy, I'll kick off with the first question on the U.K. and Ireland and Australia profitability. We were pleased with the profit performance in both of those regions in Q1. In fact, this time last our U.K. business was slightly loss-making, so it's good to return that back into profitability. Why is that? We've worked really hard at driving consultant [potency] across both of those regions. You can see from the statement that they were both heavily up year-on-year, notably the U.K. actually it was up 14%, which is significant. We've done an awful lot of work to right-size the infrastructure of those businesses in the U.K. We closed a number of offices that we felt we didn't need to be in. In Australia , we closed two or three offices as well.
Both businesses we've worked hard in back-office areas and in our overall management structure, so the overhead cost base is in much better shape. In terms of the profit phasing, I think we'll probably have a similar result in Q2 in both of those regions to where we were in Q1. I don't think there's any real change in the top-line momentum in those businesses at the moment, and I think the cost base in both is in pretty decent shape. It may come down slightly in the U.K. and Ireland, but I think overall it will stay fairly consistent through the half year. Into the second half is probably a little bit too hard to call, Andy, from a profit perspective. I mean, really it'll be dominated by the top line and whether we see any material change there.
Overall for the group, as we highlighted in the statement, we're pretty pleased with where we've landed from a profit perspective. Whilst top line is down 8% overall at the group level, we're there or thereabouts on profit in Q1, which is, you know, it's got us off to a decent start for the year. Picking up the second question on the U.S. We had a bit of a subdued July and early August. It actually came back stronger in later August and then a better September. We actually were up 3%, 4% in the U.S. in September, which is where I expected the business to be, i.e., in modest growth. We're not seeing hugely improving market conditions there, but the outlook is certainly, it's not deteriorated at all. We grew through the second half of last financial year.
We had a bit of a dip in the summer, a bit of holidays and so on and so forth, but we actually had a pretty decent September. Outlook for October and November is a pretty similar level. I expect to see modest growth in the next quarter, but not material growth in the U.S. It's quite difficult to call much further out than that, but I think things have picked up how we were expecting to. We do have a decent pipeline of some large contracts there, but the timing of those is always quite uncertain. We will get those when we get them. So far, we're trading pretty well over there.
Great, thank you very much.
Thanks, Andy.
Thank you. Your next question comes from the line of Simon Lechipre from Jefferies. Please go ahead.
Yes, good morning. Two questions for me. First of all, just looking at the consensus for this year, it points to a bit more than GBP 50 million EBIT. I mean, mindful, it's still early in the year, but I mean, how do you feel about this given the start of this year? Secondly, France, could you comment on the magnitude of the losses and also if you could detail a little bit the action plan you are putting in place? Basically, do you need to see market trends improving to be profitable again, or are you confident that your cost action would bring you back to profitability in this market?
Great. Thanks, Simon. First question on full-year consensus. I think it's around GBP 51 million, as you highlighted. We're very early, obviously, in the year. We're three months in, and I think there's a lot of road ahead of us to get over the next nine months to see where we get to. At this stage, Simon, I'm comfortable with where the market is. I don't really see it either way, to be honest. I think, as I said before, we've had a decent start to the year from a profit perspective, but it's very, very early days. I wouldn't want to get drawn on that number too much. Second question on France. As I said, it's been a tough quarter over there. We've had a tough 12 months, to be honest. It's a really challenging market, as you're probably well aware, as a Frenchman. It's a difficult macro there.
There's a lot of instability. There's a general lack of business confidence. We, like many of our competitors, are finding that a very challenging market to operate in. Our business in France is around 70%, 70%-75% perm . Clearly, it has an impact. We were down 20% year-on-year in the quarter, which is representative of that. We're not seeing any pickup at all. Top line is still really challenging. We've done a lot of work on the cost base, but as you'll also be aware, that takes some time in France. We've been through a social plan, which is time-consuming and is necessary to make the kind of corrections that we need to to our cost base, but the plans are going well. I expect that to land in the next quarter.
When it does, the cost base should come down to get us back to a position where we're around the break-even. In the first quarter, we lost about GBP 1.5 million.
Thanks for that .
Thanks, Simon.
Thank you. Your next question comes from the line of Rory Mckenzie from UBS. Please go ahead.
Morning, Rory here. Two questions, please. You've already given the exit rate in September, but could you talk about how some of the KPIs within that look at the moment? You know, temp and contractor, starters versus finishers, and maybe anything on perm job flow. I guess September can kind of set the tone for the rest of the year. Just interested to know if there's anything worth reading into in terms of client behavior after the summer. Secondly, while markets overall sound broadly stable, I guess consultant headcount was down 4% in the quarter, which maybe was a bit faster than expected. Can you just talk about the kind of balance within that of where you're removing heads and maybe the number of areas where actually you're seeing net adds and how that adds up to a flattish picture from here?
Great. Thanks, Rory. I'll pick the first question up on KPIs and what have we been seeing through September. I'll kick off with perm, and our perm job flow is back to where we were in May and June. It has picked up. We always see a drop-off through July and into August, as you can imagine. Our September job flow in the vast majority of markets, and actually overall at the group level, is consistent with where we were through the second part of Q4. Remember that we did see a slowing down through our Q4, but we're consistent with levels through May and June. Same on interview numbers, actually. Interview numbers are pretty consistent as well, but it's still challenging to convert all the activity into placements. I think that's reflective of still challenging business confidence. We are seeing activity come through. Everyone's busy.
There's plenty of work going on. Getting that work over the line is still challenging in perm in the majority of markets. Not everywhere. We still have pockets where we're seeing pretty decent conversion. Southern Europe is a really good example. We had a really good performance in Spain and in Portugal. In Japan, we had a good quarter as well, a record quarter, in fact. It's not everywhere, but the majority of markets are still pretty challenging. Temp, we're seeing starter numbers again consistent with where we were at the back end of the last financial year. Overall, temp volumes are slightly behind where we were in June, but that's normal at this stage because it takes a little bit of time to rebuild. I expect that rebuild to continue now over the next few weeks.
Normally by late October into November, we should be back at where we were in June. I expect to be there or thereabouts. There's a couple of pockets of weakness, which we've highlighted in the statement. Temp in Germany is still subdued. I think a lot of that weakness has played through, though, as you've seen in the statement. Our exposure now to the temp automotive sector is materially lower than where we were a couple of years ago, but it's still a headwind for us. I would also highlight public sector, both in the U.K. and in Australia, is still challenging. Obviously, we have quite a lot of temp business in each of those markets. Outside of that, the private sector on the whole feels pretty resilient, and we are back at the levels of volumes of where we were pre-summer in the private sector.
Just your question on consultant headcount. We were down 4% in the quarter. I'll be honest, it's probably a percentage point or two higher than where I expected it to be, but these things are never an exact science. What we are doing is very much balancing investment in areas where we've got high performance and high potential. We're still throttling back on areas where we're seeing underperformance or we're not seeing the level of productivity or profitability that we need. It's a bit of a balancing that right now. We are looking to expand headcount in some markets, as I highlighted before, Southern Europe, Japan, Asia, one or two other markets outside of Japan. We are adding headcount selectively. Also in some of our bigger businesses as well, such as the U.K. and Australia .
There's very much parts of the senior professional areas, some of the technical areas in life sciences, and some elements of the technology businesses in contracting we are investing in. It's not a one-size-fits-all at all at this stage. It's very much nimble market-by-market selection of where we really want to add heads. I don't want really to see headcount fall much further than it is now for the markets we've got.
Great. Thank you. Just to follow up on the KPIs, can you talk about any changes in the salary offers that you're seeing? I think within perm, the wage and fee kind of tailwind is now 0% for you. Is wage inflation really kind of stalling at the moment?
I think that's there, Rory. Actually, we had a flat year-on-year average perm fee. I think that's the first time in three or four years that we've seen that come off to about a flat result. Interestingly, if you see the rec data that just came out this morning in the U.K., they say a very similar kind of trend in the U.K. specifically, that there's little to no wage inflation coming through now. I think that's reflective of the world we're in.
Thank you.
Thanks, Rory.
Thank you. Your next question comes from the line of Zach Al-Qaryooti from Morgan Stanley. Please go ahead.
Morning, James. Morning, Kean. Two questions, please. Firstly, regarding the remaining GBP 45 million cost savings that's targeted, could you help us quantify the amount of exceptional costs you'd expect to come with that? Secondly, the GBP 40 million of net debt is a little more elevated than we expected. Could you maybe elaborate on the moving parts there and help us understand how much was just driven by timing of cash flows at the end of the month that should reverse? Thank you.
Sure. Thanks, Zach. On the exceptional cost, it's really hard to call how much that will be because clearly it's over a timeline of three to four years. It also depends on where it is. I wouldn't want to get drawn too much on it. What I would highlight is last year we saved about GBP 35 million in structural costs, and we incurred a GBP 30 million exceptional. It wasn't quite one -for- one, but it wasn't a million miles away. As I stand here today, as a broad rule of thumb, I think that's probably not a bad yardstick to guide by. Clearly, there's a lot of sensitivity around that depending on where it is and exactly what decisions get made. I think that's probably a sensible guideline on that. In terms of the GBP 40 million net debt, it's a little bit behind where I was expecting it to be.
We normally do see a cash outflow in Q1. It's normally more around GBP 50 million or so, but clearly this time it's a bit higher. It's about GBP 75 million. Part of that actually was that we slightly overshot in June. If I look back to where we landed at GBP 37 million, it was probably GBP 15 million better than I was expecting. We've seen that reverse through this quarter. I don't see any underlying issues in the debt ledger. The DSOs are still fine. Aging is fine. I'm not seeing any of that stretching out. It really is a seasonal impact. I expect to recover that position back through the next quarter, which is what we did last year, and I expect to do the same again.
Thank you.
Thanks.
Thank you. Your next question, please, comes from the line of Karl Green from RBC Capital Markets. Please go ahead.
Yeah, thanks very much. Good morning. Just a couple of remaining questions from me. You talked obviously about the cadence of profitability in the U.K. and Australia between H1, H2. Just at the group level, very broadly, what kind of percentage split would you expect to see based on current consensus between the first and second halves? The second question, just going back to this issue of consultant productivity and redeployment, it might not be a stat that you've got to hand, but what would you hazard a guess as to the proportion of consultants currently seeing productivity increases versus those seeing decreases in productivity? I guess the underlying question is, you know, what's the residual tolerance of pain here in terms of preserving capacity to benefit when the upturn comes?
That second one's going to be a difficult one to answer, but I'll have a go at the first one. It's probably slightly easier for me, Karl. I mean, historically, we've generally had slightly better profitability in the second half of the year than in the first half, but clearly, we've been through some pretty choppy waters over the last two or three years, so you haven't always seen that seasonality. We do have more working days in the second half. Put simply, in the first half, we have a combination of summer and Christmas, and in the second half, we have Easter. You generally have a little bit of tailwind into the second half, but that's clearly dependent on a relatively stable top line.
If the world was stable and we saw stability through the year, I'd expect generally to make about GBP 10 million more profit in the second half than in the first half. On the second question, that's a challenge. I'd have to sit there and look at all sort of 6,500 consultants and figure out who's up and who's down. Joking aside, what we are doing is managing our business on a very detailed basis, a business line by business line. Dirk's absolute resolute focus is making sure that all of our performance is understood, that our business is performing, and we are hitting the kind of metrics and measures that we would expect to in all of our businesses. Many of our businesses are performing well with very good productivity, in fact, record productivity in some areas.
Those are absolutely the businesses that we want to double down on and grow because if we're performing well, we're performing profitably, and the market outlook is good and it's an area of long-term potential, absolutely the right thing to do is to double down on that. Do we still have some pockets of weakness in the business? Yes, we do. There are still some areas of performance that aren't quite where we are. In each one of those is a careful, considered decision on whether we kind of stick or twist, really, on it, Karl. Is it something that we feel is doing well in the market it is in, and therefore we should keep and therefore hold and preserve, or not? Each one of those is a market-by-market call with its own individual set of circumstances.
I can't really answer that at a macro level other than to say we've been incredibly surgical and very, very thorough and detailed in how we look at the business and how we're managing it.
That's clear. Maybe phrasing it slightly differently and easier, we shouldn't interpret sequential headcount stability as a willingness at the group level to see productivity dip necessarily because of the churn and because of the redeployments, etc.
No, we still expect to see productivity growth, Karl, not just in the next quarter, over the longer term. I think that's how we measure the improving quality of business mix over a period of time. That will be a really important part of how we rebuild profitability over the long term. Put simply, we see consultant fee productivity growth, be it in inflation, as being really critical to the long-term profitability of the business and rebuilding that. We'll continue to manage it that way.
Great. Thank you.
Thank you. Your next question comes from the line of James Rowland Clark from Barclays. Please go ahead.
Hi, good morning. I just had a follow-up on the productivity question from Karl just a moment ago. You mentioned the release that the U.K. has seen the strongest year-on-year gains. I just wondered if that is a pure reflection of the mix of sort of taking out your least profitable consultants, or is there anything that you've learned from the U.K. that are specific to the market that you can perhaps roll out across your other consultant base? Was the U.K. perhaps just lagging on productivity versus the other markets and had some catch-ups? I guess any color there specifically as to why it's been so strong and can it be replicated across the group? Thank you.
I think it's probably slightly more of the latter than the former, if I'm honest, James. I think we did have a bit of work to do and a bit of catch-up to be done in the U.K. Part of that was that we've had really tough markets in the U.K., particularly in a number of our perm areas. We had to address some of the levels of performance and productivity and make corrections. You can see that our consultant headcount is down 25% year-on-year. We've had to make some really tough decisions and hard decisions in order to improve that. I think it's come through really well. I think the team have done an absolutely fantastic job, actually, of managing that really well. That business is now back into profitability, which is really, really important for us. The productivity is in a pretty good place now.
I'd put it against most of the other businesses across the group in terms of fees per consultant, which is where it should be and where we expect it to be and where we expect it to remain. I think we've done a really good job there. Interestingly, now we are looking at pockets of investment in the U.K. There are some good markets out there where we think performance is good. We've got the opportunity to get back on the front foot, which is great. There are still some areas where we're not quite happy with the performance, and we might have to take a few corrective measures as well. Overall, I think we'll be in a pretty stable position on U.K. headcount, maybe even slightly up in the next quarter, but we'll see.
Thank you.
Great. Thanks, James.
Thank you. As a reminder, if you would like to ask a question, please press star one and one on your telephone. We will now go to the next question. The question was withdrawn. It's just come back. Apologies. One moment, please. Your next question comes from the line of Simon Oppen from Kepler Cheuvreux. Please go ahead.
Good morning. I would like to zoom in on Germany a bit more. Quite interesting to see that your construction and property business performed strongly, whereas the broader market in Germany remains subdued. Could you give a little bit more color on the dynamics that you are currently seeing in Germany and the sentiment among your clients there?
Yeah, thanks, Simon. Thanks for highlighting that. I think we've been really pleased with the action taken by the team in Germany to pivot the business quickly and effectively away from challenging markets, of which we've been discussing for some time in autos, for example, into where a lot of the opportunities are. Our successes in construction and property are a testament to that. I think they've done a really good job. You look at the size of that C&P business today, it's virtually as big as our auto business. I never would have thought of that three years ago. It just shows how much action's been taken. We're positioned quite well for our biggest clients there, a combination of public sector and private sector across infrastructure. We do a lot of work in the utilities and energy sector and increasingly now into the defense sector.
I think we're positioned well for what should hopefully be some stimulus and some tailwind from the infrastructure projects that the government has outlined and is now starting to fund. I think the team have done a great job of pivoting away from some of our sort of historic businesses towards new areas of opportunity. Well done, well done to them.
Okay, thank you.
Thank you. As there are no further questions, I will now hand back to James Hilton for closing remarks.
Thank you. If that's all for questions today, thank you again for joining the call. I look forward to speaking to you next at our Q2 results on the 14th of January. Should anyone have any follow-up questions, Kean, Prash, and myself will be available for the rest of the day to take any calls. Thank you.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.