Hays shares could slump after full-year earnings amid dire job market

The coronavirus pandemic has ‘severely impacted’ global job markets, with Hays’ share price at risk of falling after if its full-year earnings on Thursday 27 August end up disappointing investors.

‘Facing conditions far harsher than any I have known, our business stood up well to that test,’ Hays CEO Alistair Cox said. ‘Conditions in all regions were extremely tough, although ANZ, the USA and Asia performed better than the Group average, as did IT, our largest global specialism.’

Hays closed 2% higher on Monday at 119p per share, with the stock down 35% year-to-date.

Hays outlook remains ‘uncertain’

Overall, the company’s temp business outperformed its permeant unit, illustrating the relative resilience of the business and the unclear market conditions as a result of Covid-19.

Looking ahead, the recruitment company admitted that its outlook remains ‘highly uncertain’ despite promising signs that the UK economy will be in far better shape over the second half of 2020.

As such, Hays is hoping that the resilience of strongest ever balance sheet and market leading positions in key businesses will mean it is well-positioned to secure further market share.

The company also intends to invest in ‘organic opportunities’ to accelerate its return to growth after months of uncertainty and economic turmoil.

Given the level of uncertainty for Hays, analysts at Citigroup unsurprisingly reiterated their hold rating for the stock and issued a target price of 125p per share, implying a potential upside of 5%.

UK employment outlook looks dire, spelling bad news for Hays

Hays is doing its best to remain upbeat amid a myriad of headwinds, but it will be interesting to see how its share price performs against a sombre outlook for UK employment.

The EU Commission’s economic sentiment index may showed that the UK had improved its reading of 65.2 in June to 75.5 in July. However, weighted average of the net balance of employers anticipating increased hiring over the next three months only climbed from -34 to -35, according to Samuel Tombs of Pantheon Macroeconomics.

Readings for firms and businesses were consistent with a wave of job losses as employers lost the support of the government's Coronavirus Job Retention Scheme between August and October.

A separate survey meanwhile released earlier this year revealed that 25% of workers in the UK remained furloughed, even though the proportion of businesses that were actively trading had recovered to 93% of the pre-Covid-19 level.

‘It now looks likely that many furloughed staff members either will be fired or brought back only on a part-time basis in [the third quarter],’ the survey said.

Hays: technical analysis

Hays has seen bullish momentum wane since June, a feature common among UK stocks, but it has managed to hold the rising trendline from the April low, according to Chris Beauchamp, chief market analyst at IG.

‘A break above 125p would clear trendline resistance, and perhaps open the path to 132p and the June high,’ he added. ‘A more bearish view requires a drop below 112p, which would put the price below trendline support, before bringing the 3 August low at 107.5p into view.’

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