Global Talent And Digital Solutions Will Shape Future Staffing

Key Takeaways

• Focus on specialized, high-demand sectors and flexible staffing solutions supports resilient, diversified growth and improved margins as market conditions normalize.
  
• Streamlined cost structure and investment in digital capabilities enhance scalability, operational efficiency, and long-term earnings potential.
  
• Advances in recruitment technology, sector exposure, market cyclicality, and cost-cutting undermine Hays' growth prospects and increase risks to margin, dividends, and talent retention.

Catalysts

Engages in the provision of recruitment services in Australia, New Zealand, Germany, the United Kingdom, Ireland, and internationally.

• Hays' strategic pivot towards higher-skilled, higher-paid, and in-demand job categories-particularly in sectors like life sciences, energy, and technology-directly positions the company to benefit from persistent global talent shortages in these areas, supporting both future revenue growth and improving net fee margins as market conditions normalize.
  
• The structural shift and ongoing investment in Temp & Contracting, enterprise, and managed service provider offerings uniquely aligns Hays with rising global client demand for flexible staffing solutions and large-scale HR outsourcing, which is expected to underpin a more resilient, diversified, and growing revenue base.
  
• Substantial and permanent back-office and operational cost reductions (£55 million per annum structurally secured) have created a materially leaner cost platform; this enhanced scalability means any top-line recovery should result in a higher drop-through to operating profit and improved net margins as cyclical market conditions rebound.
  
• Continuous investment in digital solutions (e.g., the new end-to-end digital platform and leveraging AI for internal productivity gains) is expected to drive ongoing operational efficiency, higher consultant fee productivity, and a sustained competitive advantage in matching candidates to roles at scale, which should support higher net margins and earnings growth.
  
• Success in growing and retaining large enterprise clients-demonstrated by new wins, geographic expansion with existing clients, and the roll-out of MSP/RPO-positions Hays to capture share in a consolidating market driven by globalization and heightened complexity, boosting predictable fee streams and supporting longer-term revenue and profit stability.

Hays Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Hays's revenue will decrease by 4.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from -0.2% today to 1.6% in 3 years time.
• Analysts expect earnings to reach £97.6 million (and earnings per share of £0.04) by about August 2028, up from £-14.2 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.7x on those 2028 earnings, up from -72.2x today. This future PE is lower than the current PE for the GB Professional Services industry at 21.4x.
• Analysts expect the number of shares outstanding to grow by 0.23% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.63%, as per the Simply Wall St company report.

Hays Future Earnings Per Share Growth

Risks

• The rapid advancement of automation and artificial intelligence in recruitment processes (including tools like LinkedIn's AI features) risks commoditizing Hays' services; this could erode fee income as clients can increasingly source candidates directly, which would depress long-term revenue and profitability.
  
• Structural declines in placement volumes, particularly in permanent placements (Perm down 19%, Temp & Contracting also declining), with management citing prolonged hiring cycles and subdued employer/candidate confidence in key markets, signal enduring revenue headwinds that may persist if macro trends don't improve.
  
• Over-reliance on certain cyclical/geographically concentrated industries (e.g., ongoing weakness and high exposure to the German automotive and engineering sectors) leaves Hays vulnerable to sector-specific downturns and continued market volatility, putting both revenue and net profit margins at risk.
  
• Competitive and margin pressures are intensifying from technology-enabled entrants and alternative models (digital platforms, gig marketplaces, and RPO/MSP solutions), while the agency's own dividend cover dipped below its 2x–3x target range (currently at 0.9x), suggesting ongoing earnings pressure and potential future dividend cuts.
  
• Persistent structural cost reduction programs, including significant reduction in headcount (consultant headcount down >15%, non-consultant down 18%), may impair Hays' ability to capitalize on a market recovery, limiting earnings growth potential if the company lacks sufficient operational capacity or fails to attract and retain top recruitment talent during cyclical upturns.

Valuation

• The analysts have a consensus price target of £0.817 for Hays based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £1.1, and the most bearish reporting a price target of just £0.55.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be £6.0 billion, earnings will come to £97.6 million, and it would be trading on a PE ratio of 16.7x, assuming you use a discount rate of 7.6%.
  
• Given the current share price of £0.64, the analyst price target of £0.82 is 21.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.