Worried jobseekers crimp recruiter Hays' fees in U.K.

Speaking after the company reported an overall four per cent dip in fees for the six months to Dec. 31, finance director Paul Venables said conditions in the United Kingdom and Ireland, which account for almost one-third of total net fees, are likely to remain weak.

"The permanent market continues to be tough and fragile," Venables told Reuters. "It's not so much our clients that are driving this but candidates.. (who) have got to be confident to take a risk in changing jobs and that is still pretty subdued."

Hays' group operating profit for the half-year period fell to £60.3 million (C$94.2 million), down four per cent from 2011 or two per cent on a like-for-like basis showing growth at constant currency.

Fees from higher-margin permanent jobs, which contribute 41 per cent of Hays group net fees, fell to £148 million (C$231 million), down 10 per cent from 2011, or seven per cent on a like-for-like basis.

David O'Brien, an analyst at Shore Capital with a "hold" rating on Hays, saw the company's profitability continuing to decline in the second half unless there was an uptick in the permanent sector.

"It's not about new job creation, that's not what drives the market. It's about churn of existing employees moving to new roles. (If there is) no churn or limited churn we see profitability being lower second half versus first half," O'Brien said.

Hays said its British arm posted a return to profitability in the six months to Dec. 31 thanks to an ongoing cost-cutting program. It achieved an operating profit of £500,000 (C$781,000) against a loss of £3.1 million (C$4.8 million) in the same period last year.

"We're back to modest profitability... but to really get to significant levels of profit we need a little bit of improvement in candidate sentiment for more permanent jobs," Venables said, adding that its businesses in southern Europe and Australia in particular faced similar issues.

Employment in Britain has been growing in recent months, with the number of people in work reaching an all-time high in the last quarter of 2012. However, most of the additions in the workforce are thought to have come from temporary and self-employed workers, while the amount of full-time jobs fell.

Hays' Australian division continued to be a weak point. Fees fell 13 per cent due to a slowdown in activity in its lucrative resources and mining sector. The German division, its largest in continental Europe, continued to outperform, with fees rising 19 per cent, while fees in France were flat.