HAYPY Hays Plc (PK)

The U.K.'s largest recruiter Hays PLC (HAS.LN) Thursday said it has returned to year-on-year growth in net fees for the first time in two years, despite continued woes in the U.K. public sector.

The company, which was hit in the recession as weak consumer confidence discouraged workers from changing jobs, saw its business boosted by permanent recruitment and by its international operations.

Temporary recruitment, which usually holds up better than permanent during a recession, grew only 3% while permanent placements grew 33%.

In order to reduce its reliance on one market, Hays has been working hard to expand its business internationally and now makes 59% of its net fees outside the U.K.

It reported fourth-quarter net fee growth of 14%, or 8% organic growth and at constant currency, with Asia Pacific showing the strongest growth followed by Continental Europe and the rest of the world division.

Investors cheered the news. At 0820 GMT, Hays shares traded up 5 pence, or 5.5%, at 96 pence in a broadly higher London market.

Still, Finance Director Paul Venables expects a further fallout from spending cuts in the U.K. public sector, and is waiting for the government to announce how many jobs will be cut in its autumn spending review.

While Hays normally benefits from workers switching jobs, Venables doesn't expect to find masses of new clients once public-sector jobs are cut. He said it will not be easy to transfer public-sector employees into the private sector, as they lack a natural skill set and the working pace is faster in the private sector.

"It's not an easy transfer so it will take a couple of years," he said.

The company saw a fallout in the public sector about 15 months ago, when authorities made a decision not to replace staff that left and movement between jobs declined, but Venables said this accelerated three months ago, partly due to the current environment of austerity.

While U.K. private sector net fees grew 10% from the previous quarter, in the public sector, net fees fell 14%, resulting in an overall fall of 6% in the U.K. and Ireland. The company now is redirecting consultants from the public sector to the private sector and cut 2% of its headcount in the U.K.

But KBC Peel Hunt analyst Henry Carver said that the anticipated fall-off in the U.K. public sector already is in the numbers and share price. Seymour Pierce analyst Caroline de La Soujeole welcomed the performance, saying that "the return to year-on-year growth is clearly a good sign, however, growth rates achieved are slightly disappointing compared to those reported by peers."

Chief Executive Alistair Cox said in the statement, "Whilst we remain mindful of the risks to the economic recovery in many of the countries in which we operate, the outlook in our markets continues to improve."

Venables agreed, saying, "The important thing is that the job market in the U.K. is recovering more broadly ... although Scotland and the north of England still lag behind," but otherwise recovery is U.K.-wide.

The company is continuing with its international expansion as its international divisions are performing strongly. Hays plans to enter Mexico in September and expand further into the U.S. through a pharmaceutical subsidiary. Venables said that the move further into the U.S. has been requested by clients so it is relatively risk-free.

Hays will also move into Argentina next year. Expansion into South America began in 2006 with Brazil, which has been growing strongly and this year will become Hays' sixth-biggest market globally, Venables said.

-By Anita Likus, Dow Jones Newswires; +44 20 7842 9407; anita.likus@dowjones.com

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