Interim Results
10th September 2001
Hays plc
PRELIMINARY RESULTS FOR THE YEAR TO 30 JUNE 2001
CONTINUED GROWTH AND INVESTMENT FOR THE FUTURE
Financial Highlights:
Year to 30 June 2001 2000
Turnover from continuing operations £2,453.3m £
2,009.9m +22%
Operating profit* £288.4m £261.4m +10%
Pre-tax profit* £262.1m £249.5m +5%
Earnings per share** 11.4p 11.1p +3%
Dividend per share 4.07p 3.54p +15%
* Before goodwill amortisation, exceptional items and operating profits from
discontinued operations of £ 9.6 million (2000 - £ 13.1 million).
** Before goodwill amortisation and exceptional items.
Business Highlights:
Group
Strong organic growth in sales by every core activity.
Increasingly focussed Group with the disposal of Mail Services in Spain and the
sale of a majority shareholding in Chemicals.
Commercial
Business Process Outsourcing grew sales and profit by more than 20% .
National contract won to provide a management information system to all 4 3
Police Forces in England and Wales.
Licence applications to provide specialist mail services in the UK have
received the support of Postcomm.
Personnel
Superb result with operating profit up 24 %. Organic growth in operating profit
18%.
Strong growth in outsourced HR Solutions and in revenue with the public sector.
Expansion in France, Holland, Belgium and Portugal.
Logistics
Sales up 16% with contract wins during the year totalling £ 165 million p.a.
Lower volumes in specialist networks, serving the telecommunications and retail
support sectors, and new business start up costs, have reduced profits in the
year.
Bob Lawson, Chairman, commented
'The growth in sales by the Group demonstrates the inherent quality of Hays'
services.
Notwithstanding the current difficult economic climate, sales in Personnel are
ahead of prior year although the Division's profit for the first two months of
2001/02 is similar to last year. The other divisions of Hays are less affected
by changes in business confidence or rates of economic growth and their outlook
is unchanged.
Overall the Group's mix of businesses gives it considerable resilience and we
are continuing to invest for the future as well as increasing our business
focus to deliver premium returns and growth for our shareholders. We are well
placed to exploit the growing trend across Europe towards the outsourcing of
business critical processes'.
Enquiries:
Bob Lawson Chairman 01483 302203
Hays plc
Neil McLachlan Group Finance Director 01483 302203
Hays plc
Jon Coles Brunswick 020 7404 5959
Conference call
Bob Lawson, Neil McLachlan and Graham Williams of Hays plc will conduct a
conference call for analysts at 3pm UK time on 10 September 2001. The dial-in
details are as follows:
UK/European dial-in number: +44 (0)20 8240 8240
USA dial-in number: +44 1 800 521 5428
Password: Hays
The call will be recorded and available for playback for 10 working days on the
following:
UK/European replay dial-in number: +44 (0)20 8288 4459
UK/European access code: 690452
USA replay dial-in number: +1 800 625 5288
USA access code: 1172635
The Instant Replaywill be available until 21st September 2001.
Presentation on the web-site and delayed web-cast:
The presentation to analysts will be available to view on the Hays website from
14:00 UK time on 10 September 2001 - www.hays-plc.com
The presentation will also be filmed and distributed by RAW Communications to
those who subscribe to that service.
Chairman's Statement
This is my first Report to you as Chairman following Ronnie Frost's retirement
on 30 June 2001, at the end of the financial year. Ronnie, who created the
modern Hays, prepared me well for the challenges ahead.
Although we issued a trading statement in June which reduced market
expectations, the Group has fundamental strength which will show through in the
coming months and years.
Financial Highlights
In the year to 30 June 2001 turnover on continuing operations was up by 22% to
£2,453.3 million and operating profit on continuing operations was up 10% to £
288.4 million before goodwill amortisation and exceptional items and on a
similar basis profit before tax increased by 5% to £262.1 million. Earnings per
share before goodwill amortisation and exceptional items increased by 3% to
11.4p.
Exceptional charges totalled £87.4 million. £64.9 million (including £60.3
million of goodwill) represented the loss on disposal of our Chemical
activities and mail services in Spain. The balance of £22.5 million related to
reorganisation costs, the impairment of goodwill, tangible and intangible
assets and related balances. The net cash impact of these items was an £8.1
million cash inflow.
During the year we invested £158.5 million in capital projects and
acquisitions. Interest was covered 11 times before goodwill amortisation and
exceptional items.
Dividend
We paid our shareholders an interim dividend of 1.32p per share on 31 May 2001.
The Board is recommending a final dividend of 2.75p per share in respect of the
year to 30 June 2001, for payment on 30 November 2001 to shareholders on the
register at 26 October 2001. The total dividend of 4.07p per share for the year
is a rise of 15%.
The Board's policy is to continue to provide shareholders with a steadily
rising income whilst maintaining our ability to invest in future growth.
Group Overview
In the last months of the financial year John Cole left the Group. He gave
much to the strategic development of the Group and I wish him well. At this
point we are considering all options for the future appointment of the next
Chief Executive Officer. Work has commenced with a leading executive search
consultancy, but I do not expect an appointment to be made in the short term.
Fortunately this has given me an ideal opportunity to assess the Group in
detail as the Chief Executive Officer.
The strategy of Hays remains absolutely unchanged, but we are currently
focusing the Divisions much more to ensure leadership in their sectors and
hence higher value creation for our customers and shareholders. Our objective
is that all Hays' Divisions should operate as leaders in each segment
addressed. This is critical to enable the Group to earn the optimum return on
its investment. For each Division and the segments within, this is the first
priority and currently we are reviewing our plans to ensure that this objective
has either been attained or can be achieved.
As has been previously reported, the emerging growth driver for the Group is to
combine the market-leading elements of the individual Hays' Divisions to
provide a unique integrated service solution that gives value to our customers.
These major integrated service propositions are of interest to the largest
European companies allowing them to concentrate on their 'core competencies'.
They are large complex projects involving substantial change and shift in
resource for the customer. Inevitably they take time to develop and to
implement.
Personnel
Hays Personnel has had an exceptional year with significant growth in profits
by 24% to £146.0 million, and also considerable expansion of its operations in
Continental Europe and Australia. The Internet portal, haysworks.com has
achieved UK leadership in its specialised markets with over 46,000 visitors per
week. A key component of its success has been the ability to leverage the
market leading Hays Personnel brands through this channel. Personnel has now
focused on the organic development of its European network centred upon Hays
Accountancy Personnel, Hays Montrose (personnel provision to the construction
industries) and Hays IT. Alongside our specialist temporary and permanent
recruitment activities we are developing a fast growing HR Solutions business
which provides a complete outsourced HR service for our customers. The
prospects for this core division remain exceptional.
Business Process Outsourcing
This is an exciting and developing opportunity for the Group which during the
year has been consolidated into two sub Divisions, Data Solutions and IT &
Consulting Solutions. Hays' offshore services have been strengthened to offer
UK enterprises outsourced data entry and synthesis at lower prices and with a
substantial enhancement in quality. During the year we were delighted to win a
national contract to install a new information system in all 43 Police Forces
in England and Wales. The development of Business Process Outsourcing will be a
major emphasis for growth by the Group, initially centred upon the UK and to be
followed by a drive to take our market leading services to Continental Europe.
Mail and Express
The Hays Document Exchange business in the UK remains the leader in reliable
cost effective delivery of mail between central exchanges. Volumes continue to
grow by 5% - 6% per annum. Development of the business has been constrained by
the monopoly position of Consignia. However, this position is now changing and
Hays has applications for three licences under consideration by Postcomm, the
Government agency for liberalisation. The prospects for development for Hays DX
will become more attractive on receipt on these licences. Hays DX France is in
the process of being returned to profits under the guidance of strengthened
local management. Hays DX Spain could not achieve Hays' corporate objectives
and was sold for £0.5 million with an exceptional charge of £10.2 million
(including £7.7 million of goodwill).
Logistics
Hays Logistics was the foundation upon which the modern Hays was built.
However, elements of conventional logistics are rapidly becoming a commodity
business with margins that are unattractive to the Group and in some cases we
have decided not to renew contracts. In France developments to share major
infrastructure investments between different customers are enabling us to give
exceptional value to our customers and generate more attractive margins. On the
Continent of Europe we are pleased with the value of new contracts won last
year (notably Auchan, Siemens, Unilever and Sara Lee). In the UK the emphasis
has been on the provision of value added services to major supermarkets. The
provision and management of crates for fresh produce, particularly with
Sainsbury's, has grown significantly.
Total supply chain management for major European groups utilising other Hays'
divisional skills remains our development focus. To be credible to a customer
in such rapidly evolving markets we must have proven conventional logistics
skills as well as a strong consulting, solution design, IT and change
management capability. It is this foundation on which future value added
services will be built.
Chemicals
The Chemicals Division was non-core to Hays' future and was sold to Albion
Chemicals Ltd on 27 July 2001. To facilitate the sale, Hays retained 49% of the
equity and Neil McLachlan and Graham Williams will join the Board of the new
Company to represent our interests. I am confident that the combination of the
former Hays Chemical infrastructure and activities with the Albion team
expertise will enable Albion to achieve sustainable higher standards and
profitability.
Management
The Executive management team is high quality and is the nucleus of Hays'
future. We continue to invest in the development and training of all Hays'
people as it is their skills that create a differential advantage for the Group
with each of its customers.
No report to you would be complete without recording Ronnie Frost's retirement.
Ronnie devoted 40 years of his life to creating and building the modern Hays,
its people and its market position. Whilst in the last few months the Group
experienced a change in investor sentiment, the fundamental underlying strength
and quality of the Group remains intact. Ronnie has bequeathed to the Group an
inherent strength which will show through in the years ahead. It is a pleasure
on behalf of all Hays' people and shareholders to wish Ronnie and his wife
Beryl many happy years of retirement.
Finally, can I thank all the people of Hays on two fronts; the first is for all
their hard work and attention to customers over the last year, secondly for
making me so welcome.
Prospects
The growth in sales by the Group demonstrates the inherent quality of Hays'
services. Notwithstanding the current difficult economic climate sales in
Personnel are ahead of prior year although the division's profit for the first
two months of 2001/02 is similar to last year. The other divisions of Hays are
less affected by changes in business confidence or rates of economic growth and
their outlook is unchanged.
Such market changes create opportunities for outsourced services as businesses
address their cost base and concentrate on their core activities. Hays will
continue to invest in its core divisions to ensure that they are positioned to
win such new business as and when it arises. Costs will be managed to ensure
that Hays remains lean and responsive. These tactics, combined with our clear
and unchanged strategy, will deliver major benefits to our shareholders,
customers and people.
Overall the Group's mix of businesses gives it considerable resilience and we
are continuing to invest for the future as well as increasing our business
focus to deliver premium returns and growth for our shareholders. We are well
placed to exploit the growing trend across Europe towards the outsourcing of
business critical processes.
Hays plc
Consolidated Profit and Loss Account
for the year ended 30 June 2001
(In £'s million) 2001 2001 2001 2000
Pre-exceptional Total
Exceptional Total
Items
TURNOVER
Continuing operations 2,436.3 - 2,436.3 2,009.9
Acquisitions 17.0 - 17.0 -
2,453.3 - 2,453.3 2,009.9
Discontinued operations 181.0 - 181.0 206.5
2,634.3 - 2,634.3 2,216.4
PROFIT FROM OPERATIONS
Continuing operations 286.2 (22.5) 263.7 261.4
Acquisitions 2.2 - 2.2 -
288.4 (22.5) 265.9 261.4
Discontinued operations 9.6 - 9.6 13.1
298.0 (22.5) 275.5 274.5
GOODWILL AMORTISATION (18.5) - (18.5) (10.3)
OPERATING PROFIT
Continuing operations 270.7 (22.5) 248.2 251.7
Acquisitions (0.4) - (0.4) -
270.3 (22.5) 247.8 251.7
Discontinued operations 9.2 - 9.2 12.5
279.5 (22.5) 257.0 264.2
EXCEPTIONAL ITEMS
Loss on disposal and closure of - (64.9) (64.9) (46.0)
businesses
Loss on disposal of fixed assets - - - (2.7)
279.5 (87.4) 192.1 215.5
Net interest payable (26.3) - (26.3) (11.9)
PROFIT ON ORDINARY ACTIVITIES BEFORE 253.2 (87.4) 165.8 203.6
TAXATION
Tax on profit on ordinary (77.4) 5.3 (72.1) (72.3)
activities
PROFIT ON ORDINARY ACTIVITIES 175.8 (82.1) 93.7 131.3
AFTER TAXATION
Equity minority interests (0.2) - (0.2) (0.5)
PROFIT FOR THE FINANCIAL YEAR 175.6 (82.1) 93.5 130.8
Dividends (69.2) - (69.2) (60.3)
Transferred to reserves 106.4 (82.1) 24.3 70.5
EARNINGS PER SHARE
Basic 5.5p 7.7p
Before goodwill and exceptional items 11.4p 11.1p
Diluted earnings per share 5.4p 7.6p
Dividend per share 4.07p 3.54p
Interest cover before exceptional items and goodwill 11X 23X
amortisation
Hays plc
Consolidated Balance Sheet
At 30 June 2001
(In £'s million) 2001 2000
FIXED ASSETS
Intangible assets 286.7 298.7
Tangible 555.2 490.9
assets
Investments 54.3 38.9
896.2 828.5
CURRENT ASSETS
Stocks 40.3 36.6
Debtors 541.9 513.2
Cash at bank and in hand 133.0 96.5
715.2 646.3
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Borrowings (45.3) (49.6)
Other creditors (609.6) (635.2)
(654.9) (684.8)
NET CURRENT ASSETS/(LIABILITIES) 60.3 (38.5)
TOTAL ASSETS LESS CURRENT LIABILITIES 956.5 790.0
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Borrowings (408.6) (323.9)
Other creditors (25.6) (36.3)
PROVISIONS FOR LIABILITIES AND CHARGES (37.0) (21.0)
485.3 408.8
CAPITAL AND RESERVES
Called up share capital 17.3 17.3
Share premium account 365.5 359.2
Profit and loss account 101.7 30.8
EQUITY SHAREHOLDERS' INTERESTS 484.5 407.3
EQUITY MINORITY INTERESTS 0.8 1.5
485.3 408.8
NET DEBT AS % OF SHAREHOLDERS' FUNDS 66% 68%
AND MINORITY INTERESTS
Hays plc
Summarised Consolidated Cash Flow Statement
For the year ended 30 June 2001
(In £'s million) 2001 2000
OPERATING ACTIVITIES
Operating profit 257.0 264.2
Depreciation, amortisation and amounts written off intangible 95.9 65.4
fixed assets
(Profit)/loss on sale of fixed assets (20.0) 0.9
Increase in working capital (31.9) (22.0)
NET CASH INFLOW FROM OPERATING ACTIVITIES 301.0 308.5
Returns on investments and servicing of finance (27.0) (12.0)
Tax paid (83.1) (76.6)
Capital expenditure (net) (111.7) (81.4)
NET CASH INFLOW BEFORE ACQUISITIONS AND DISPOSALS 79.2 138.5
Acquisitions and disposals (net) (46.8) (146.9)
Equity dividends paid (63.1) (54.8)
Net cash outflow before financing (30.7) (63.2)
FINANCING
Issue of ordinary share capital 6.3 7.5
Purchase of own shares (15.7) (20.8)
Increase in borrowings 81.4 97.4
Capital element of finance lease rentals (3.6) (2.8)
NET CASH INFLOW FROM FINANCING 68.4 81.3
INCREASE IN CASH 37.7 18.1
Movement in net debt
For the year ended 30 June 2001
(In £'s million) 2001 2000
Increase in net borrowing (53.6) (84.9)
Foreign exchange movement 9.7 4.9
Opening net debt (277.0) (197.0)
CLOSING NET DEBT (320.9) (277.0)
Hays plc
Reconciliation of movements in equity shareholders' interests
For the year ended 30 June 2001
(In £'s million) 2001 2000
Profit for the financial year 93.5 130.8
Dividends (69.2) (60.3)
24.3 70.5
Other recognised gains and losses relating to the year (2.5) (2.2)
New share capital subscribed 6.3 7.6
Goodwill written back 49.1 34.2
Net increase in equity shareholders' interests 77.2 110.1
Opening equity shareholders' interests 407.3 297.2
Closing equity shareholders' interests 484.5 407.3
Hays plc
Segmental Information
For the year ended 30 June 2001
Before goodwill amortisation and exceptional items
(In £'s million) 2001 2001 2001 2000 2000 2000
Turnover Operating Operating Turnover Operating Operating
profit net profit net
assets assets
BY BUSINESS
SECTOR
Continuing
operations
476.3 89.0 120.8 439.1 84.9 130.5
Commercial
1,084.0 146.0 121.1 802.6 117.5 81.3
Personnel
893.0 53.4 297.8 768.2 59.0 278.4
Logistics
2,453.3 288.4 539.7 2,009.9 261.4 490.2
Discontinued 181.0 9.6 74.6 206.5 13.1 71.9
operations
2,634.3 298.0 614.3 2,216.4 274.5 562.1
BY GEOGRAPHICAL
AREA
Continuing
operations
United 1,617.4 232.4 306.8 1,281.2 205.3 282.9
Kingdom
Other 686.9 37.1 217.1 606.4 38.5 189.7
Europe
Rest of 149.0 18.9 15.8 122.3 17.6 17.6
the World
2,453.3 288.4 539.7 2,009.9 261.4 490.2
Discontinued 181.0 9.6 74.6 206.5 13.1 71.9
operations
2,634.3 298.0 614.3 2,216.4 274.5 562.1
After goodwill amortisation and operating exceptional items
(In £'s million) 2001 2001 2001 2000 2000 2000
Turnover Operating Operating Turnover Operating Operating
profit net profit net
assets assets
BY BUSINESS SECTOR
Continuing
operations
Commercial 476.3 67.4 120.8 439.1 78.6 130.5
Personnel 1,084.0 138.3 121.1 802.6 114.4 81.3
Logistics 893.0 42.1 297.8 768.2 58.7 278.4
2,453.3 247.8 539.7 2,009.9 251.7 490.2
Discontinued 181.0 9.2 74.6 206.5 12.5 71.9
operations
2,634.3 257.0 614.3 2,216.4 264.2 562.1
BY GEOGRAPHICAL
AREA
Continuing
operations
United 1,617.4 203.2 306.8 1,281.2 199.6 282.9
Kingdom
Other 686.9 25.7 217.1 606.4 34.5 189.7
Europe
Rest of 149.0 18.9 15.8 122.3 17.6 17.6
the World
2,453.3 247.8 539.7 2,009.9 251.7 490.2
Discontinued 181.0 9.2 74.6 206.5 12.5 71.9
operations
2,634.3 257.0 614.3 2,216.4 264.2 562.1
Operating net assets are net assets excluding interest bearing assets,
goodwill, corporation tax, and dividend balances.
Hays plc
Exceptional Items
For the year ended 30 June 2001
(In £'s million) Note 2001
EXCEPTIONAL OPERATING COSTS
Net credit on reorganisation of the information (i) 6.2
management business
Other reorganisation costs (ii) (13.0)
Provision against impairment of goodwill, tangible and (iii) (15.7)
intangible assets
TOTAL EXCEPTIONAL OPERATING COSTS (22.5)
OTHER EXCEPTIONAL ITEMS
(iv) (10.2)
Loss on disposal of Spanish mail services
operations
Impairment of goodwill in anticipation of disposal of (v) (54.7)
business
TOTAL OTHER EXCEPTIONAL ITEMS (64.9)
TOTAL EXCEPTIONAL ITEMS (87.4)
(i) During the year the Group commenced a
substantial investment programme to modernise its information management
business. This involves site consolidation, relocation of the business to state
of the art new premises and the disposal of less suitable properties. The
modernisation programme will take 24 months to complete and will be financed
from the proceeds of disposal of vacated properties. The related profit on sale
of property in the period amounted to £18.1 million. A charge of £11.9 million
has been made to reflect the anticipated reorganisation costs associated with
the programme.
(ii) In response to the sharp economic turndown, the Group acted to reduce
overhead costs, particularly in respect of network operations, in the year and
incurred restructuring and associated costs of £13.0 million, principally in
relation to redundancy and termination costs.
(iii) A review of goodwill, intangible assets and related balances was
conducted during the year. As a result management have concluded that assets
totalling £15.7 million have insufficient or uncertain future revenue prospects
to justify continued capitalisation. £4.0 million of this relates to goodwill
purchased in prior years.
(iv) During the year the Group disposed of its loss making Spanish mail
services operations. This transaction gave rise to a loss on disposal of £10.2
million including the write off of £7.7 million of goodwill.
(v) The Group announced the completion of the disposal of its non-core
chemical activities on 27 July 2001. The Group has written off the whole of the
goodwill attributable to the business of £51.5 million, a substantial part of
which relates to an allocation of goodwill arising from the buyout in 1987. The
Group disposed of its small retail installation services business on 29 August
2001 and a provision for impairment of assets of £3.2 million (including £1.1
million of goodwill) was made as a result.
The trading results of the Chemicals, Spanish mail services and retail
installation services businesses are shown in discontinued operations.
Exceptional items resulted in a cash inflow of £8.1 million and a tax credit of
£5.3 million.
Note 1 STATEMENT UNDER S240 - PUBLICATION OF NON STATUTORY ACCOUNTS
The financial information contained in this preliminary announcement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985. The financial information is based on the statutory accounts for the
financial years ended 30 June 2001 and 30 June 2000. The financial statements
for 30 June 2001, upon which the auditors issued an unqualified opinion have
yet to be delivered to the Registrar of Companies. The financial statements for
30 June 2000 upon which the auditors issued an unqualified opinion, have been
delivered to the Registrar of Companies.
Latest directors dealings
- 6 hours ago Alphawave IP Group
- 7 hours ago WH Smith
- 7 hours ago Staffline Group
- 7 hours ago Manchester & London Investment Trust
- 8 hours ago Associated British Foods