Hays PLC experienced a sharp decline in its shares, dropping as much as 19% in early trade. The company announced that it expects to miss current market forecasts for the first half of the year, mainly due to a decrease in net fees during the second quarter of fiscal 2024.

At 1049 GMT, shares were down 9.8% at 98.25 pence, having reached a low of 87.10 pence earlier in the session. Over the past 12 months, shares have fallen by 19%.

According to the U.K. recruitment firm, it anticipates reporting a pre-exceptional operating profit of approximately £60 million ($76.5 million) for the half-year ending December 31. This figure falls short of the company-compiled consensus of £73 million, which is based on forecasts from six analysts.

The decline in net fees, a crucial industry metric, was significant, with a decrease of 10% in the quarter on a like-for-like basis and 15% in December alone. Specifically, net fees fell by 17% in the U.K. & Ireland, 20% in Australia & New Zealand, and 11% in the rest of the world.

The temporary segment saw a decline of 5% in net fees during the quarter, while permanent net fees fell by 17%, according to the company's statement.

Despite these challenges, Hays assures stakeholders that its balance sheet remains strong with net cash of £60 million, as expected.

The company acknowledges that it is too early to determine whether the drop in December fees signifies a sustained market slowdown or a temporary deferral of placements. However, it anticipates ongoing difficulties in the near future.

To mitigate these challenges, Hays has implemented cost reduction measures since its fiscal 2023 earnings report in August. These measures are expected to result in annual savings of £30 million. As part of this initiative, the company will incur a restructuring charge of £12 million in its first-half accounts, to be reported on Feb. 22. Further benefits from cost-cutting efforts are anticipated in the second half of the year.

Hays' Chief Executive, Dirk Hahn, remains optimistic about the company's future prospects. He emphasized the strategy of focusing on strengthening its market positions in attractive and skill-short markets globally, such as Germany, non-perm, and enterprise clients. Hahn believes that once the end markets stabilize, the current initiatives will significantly improve profitability.

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