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Investing.com -- UBS Global Research has downgraded Hays (LON:HAYS) to “neutral” from “buy,” citing a prolonged hiring downturn and persistent profit pressures.
In a note dated Friday, UBS analysts lowered their 12-month price target on the stock to 70p from 100p, reflecting a sharp deterioration in hiring conditions and earnings forecasts.
The downgrade follows an unscheduled profit warning from Hays, which flagged weaker-than-expected job flow in the April to June 2025 period.
UBS said this aligns with broader industry data showing a downturn across staffing markets and decelerating job listings.
The brokerage now expects the downturn to extend for at least another six months, pushing any recovery further out than previously anticipated.
Net fee forecasts were cut by 2% to 14% through fiscal years 2025 to 2027, and adjusted EPS was reduced by 28% to 49% over the same period.
UBS expects adjusted EBIT to reach just £45.1 million in FY25, compared with £105.1 million in FY24 and £210 million in FY22. The firm projects Hays’ group conversion margin to remain around 5% through FY26, levels not seen in over 20 years.
UBS also expects a dividend policy reset. Hays’ recent 3.00p/share dividend is significantly uncovered, given the reduced profit outlook. UBS now anticipates a FY26 dividend of 0.66p/share.
Valuation metrics were adjusted to reflect the weaker outlook. UBS lowered its target EV/gross profit multiple to 1.2x from 1.5x.
The downside scenario projects the share price falling to 40p (–37%), while an upside case sees potential recovery to 120p (+90%).
UBS acknowledged that Hays could be nearing the bottom of the cycle, with upside if hiring volumes rebound.
However, continued macroeconomic uncertainty and falling volumes led the firm to conclude that risks are skewed to the downside in the near term.
Hays’ current trading multiple of 1.2x EV/GP is at the low end of its historical range as the market remains cautious on staffing stocks more broadly.
While UBS sees a long-term earnings potential of £300 million in adjusted EBIT during a full recovery, it said visibility is too poor to support a more optimistic outlook.