Prolonged period of special dividends ahead at Hays, Credit Suisse says

Analysts at Credit Suisse bumped up their recommendation on shares of Hays, hailing the firm´s growth prospects, cash generation ability and the likelihood of a prolonged period of special dividends.

The broker´s Andy Grobler marked up his estimates for the global specialist recruitment group's earnings per share for 2017 and 2018 by 5.0% and 8.0%, respectively.

Hay´s international operations would grow at a 9% compound rate over each of the next three years, he said, with organic earnings before interest and taxes ahead by 12% for each year.

However, whereas Hay´s had projected that profits in Germany would double over the next five years, Credit Suisse was expecting growth of just 70%.

Grobler upgraded his recommendation the shares from 'Neutral' to 'Outperform' and his target price from 160.0p to 170.0p.

In Australia, the analyst said Hays was benefitting from its relationship with SEEK, providing a differentiated offering.

As regards dividends, London-based Hays was projected to have £48m of net cash sitting on its balance sheet by December 2017 and to begin returning excess cash, via special dividends, at the end of this fiscal year.

A focus on temp and consultancy, which accounted for 59.0% of group profit in the first half of 2017, provided a more stable cash profile than permanent recruitment.

This, Grobler said, should "support a prolonged period of special dividends, even if end markets slow."

Among the risks to watch out for the Swiss broker included technological disintermediation in its permanent recruitment operations.