Final Results

Hays PLC 31 August 2000 Hays plc PRELIMINARY RESULTS FOR THE YEAR TO 30 JUNE 2000 CONTINUED GROWTH AND INVESTMENT FOR THE FUTURE Financial Highlights Year to 30 June 2000 1999 Turnover from continuing operations £2,189m £1,837m +19% Operating Profit* £280.3m £245.7m +14% Pre-tax profit* £268.4m £235.6m +14% Earnings per share** 11.1p 9.9p +12% Dividend 3.54p 3.075p +15% *Before goodwill amortisation, exceptional items and net losses on discontinued operations of £5.8 million (1999 £0.3 million profit) **Before goodwill amortisation and exceptional items Business Highlights - Strong organic growth in sales by all core activities. - Record free cash flow of £84 million (1999 £66 million) after taxation, dividends and all expenditure other than acquisitions. - Excellent results from Personnel with profit up 28% and from the mainstream logistics businesses which showed organic growth of 16%. - Substantial progress in strategy to move up the value chain to provide total integrated solutions involving the latest technology and a range of Hays' services. - Exit as planned from commodity bulk transport networks in Germany and France. - Launch of Fourth Party Solutions business supported by a partnership with i2 to provide supply chain optimisation systems and acquisition of three consultancies specialising in supply chain and customer relationship management. - Extended supply chain contracts for restaurant and convenience store chains in UK and France now represent a turnover in excess of £60 million p.a. - Acquisitions make Hays a leader in UK IT staffing to complement Hays' leading position in other professional staffing sectors. - Personnel websites being upgraded in September with launch of haysworks.com, a staffing portal with unique features of benefit to customers and candidates and which will be totally integrated with the back office. - Business Process Support successful in providing integrated new technology solutions. - Initial orders received to provide unique comprehensive statistical analysis and management information system to Police Forces throughout the UK. - Hays a key member of a consortium appointed to provide a service that will dramatically accelerate the Land Registry process for property searches. Ronnie Frost, Chairman, commented The like-for-like organic growth in sales of all the businesses that we owned at 30 June 2000 was an impressive 13%. New business prospects are the strongest in our history and we are moving ever closer to our customers by partnering them to provide effective solutions to even more complex problems. We are investing in our infrastructure and management across Europe to secure the Group's future growth. Enquiries Ronnie Frost (Chairman) Hays plc 01483 302203 John Cole (Group Managing Director) 01483 302203 Graham Williams (Executive Director) 01483 302203 Jon Coles Brunswick Group Ltd 020 7404 5959 Corinne Daniels 020 7404 5959 Hays plc (LSE HAS) provides Supply Chain Management, Customer Relationship Management and Human Resource Management Solutions to complex business problems 24 hours a day, serving blue chip customers on a European scale. (www.hays-plc.com) RESULTS In the year to 30 June 2000 turnover on continuing operations was up by 19% to £2,189 million and operating profit on continuing operations was up 14% to £268.4 million. Profit before tax, goodwill amortisation and exceptional items increased by 11% to £262.6 million; on a similar basis, our earnings per share increased by 12% to 11.1p. Excluding operating profits and losses on discontinued activities, profit before tax on the same basis increased by 14% to £268.4 million. Following a strategic decision to exit the commodity bulk transport businesses in Germany and France, the associated goodwill write-off of £32 million and other closure costs of £17 million have been treated as an exceptional item. These activities represented less than 3% of total logistics turnover and 20% of logistics sales in Germany. Trading losses incurred during the year are included as discontinued. During the year the Group invested £233 million in acquisitions and capital projects. This investment was supported by strong free cash flow which, after all outgoings other than acquisitions, grew from £66 million last year to a new high of £84 million. Despite the high level of investment interest cover remains strong at 23 times. DIVIDEND On 31 May an interim dividend of 1.15p per share was paid. The Board is recommending a final dividend of 2.39p per share in respect of the year to 30 June 2000, for payment on 30 November 2000 to shareholders on the register at 27 October 2000. The total dividend of 3.54p per share for the year is a rise of 15%. The total dividend is covered 2.2 times by earnings. The Board's policy is to provide shareholders with a steadily rising income while maintaining our ability to invest in future growth of the Group. MARKET BACKGROUND It has been an exciting year. The pace of change in all the Group's markets has accelerated. Customers increasingly seek Hays' involvement in the design and implementation of radical solutions to business problems, enabling them to respond to changes in their own markets. Hays adds value by working in partnership with them on key strategic projects, often at the heart of the change management process. In addition, recent advances in technology have further enhanced our unique ability to provide integrated solutions to complex problems spanning Supply Chain, Customer Relationship and Human Resource Management and often on a pan-European scale. During the year the Group made good progress on the evolution of a strategy to ensure Hays continues to move up the value chain and responds effectively to future customer needs across Europe. Through this strategy the Group will be well placed to continue to deliver shareholder value. TRADING This period of strategic transition is being managed with care, particularly in the context of meeting short-term customer needs and sustaining organic revenue growth. For the Group, like-for-like organic revenue growth was 13% and year-end sales prospects in all activities are excellent. The investment needed to achieve this has led to a slight decline in margins. It is pleasing that so much strategic progress has been made at the same time as achieving good profit growth. Distribution The Logistics Division achieved like-for-like organic revenue growth of 16%. The margin on sales was 7% after significant revenue investment in management, systems, tender preparation and geographic expansion. At constant exchange rates the total profit increased by 10% to £62.3 million. Within this total the mainstream businesses in the UK, France and Benelux produced an organic profit increase of 16% whilst the smaller businesses were impacted by start up costs and one off events. In line with our strategic objectives the Group's consultancy capabilities have been expanded. A European partnership with i2 Technologies (a world leader in supply chain optimisation software) has been established and a 'Fourth Party Solutions' business has been created. Hays is in a leading position to provide customers with solutions to complex supply chain problems on a European scale. The revenue associated with each potential new contract continues to increase and the sales prospects are excellent. Our strategy to provide solutions involving a range of Hays' services has moved forward and many logistics contracts include elements of the Customer Relationship Management capabilities offered by the Commercial Division. In a tough market the packaged Chemical Distribution business had another good year, increasing market share through innovative marketing. The Process Chemicals business had a difficult year, due to the depressed price of caustic soda, a world commodity. The impact on profit of this factor alone was nearly £4 million. Excluding profit from Hays Ingredients, which was sold in autumn 1999, profits from the total Chemical activity decreased by £2.6 million. Commercial Within the Commercial Division the Mail & Express business has achieved organic revenue growth of 9%. Progress was made in creating a European network through acquisitions in France and Spain, but margins were diluted as a result of the investment in automation in the UK and, more particularly by the costs of integrating our recent acquisitions and the impact of the current very price competitive market on the continent. In Business Process Support (BPS) the overall organic revenue growth of 13% was held back by the weak Energy market which affected part of the archive storage business and by the 'Y2K effect' on the IT related activities. Both sectors are now showing signs of recovery. There has been considerable revenue investment in the newer BPS activities, not just in the sales and marketing area, but also in the provision of complex systems solutions for customers. Orders are now being received from a number of Police Forces, including the Metropolitan Police, to assist management in accessing and analysing large quantities of data. These solutions will form part of future proposals for other customers. Furthermore, Hays is a key member of a consortium that is the preferred supplier in a major project that will revolutionise the Land Registry process and dramatically speed up property searches. Overall operating profit in the Commercial activities increased by 10% to £84.8 million. Personnel The Personnel Division had another excellent year with a 28% increase in profit to £117.5 million. Organic profit growth was 17% and margins improved as a result of the buoyant market and the higher proportion of permanent placements. Our acquisitions in both France and Holland made good progress and integration of the French IT businesses was completed. In Australia, Hays Personnel has expanded successfully from Accountancy Personnel into other new sectors, including banking, technical and IT staff. In the UK, the acquisitions of Hutchinson Smith and Myriad in the IT sector were completed and targeted cost savings and synergies are being achieved. In just one year Hays has become one of the leaders in this sector in both the UK and France and is well placed as the 'Y2K effect' passes and the market starts to grow again. Following significant research and investment, Personnel's existing well used websites are being upgraded in September with the launch of haysworks.com, a staffing portal with unique features of benefit to both customers and candidates and which will be totally integrated with the back office. We believe, and it is increasingly accepted, that staffing solutions are best provided by a branch network manned by professional and well trained staff, coupled with and supported by the latest IT technology. GROUP MANAGEMENT AND STAFF In November 1999 Bob Lawson, who has been a non-Executive Director for more than two years, was appointed Deputy Chairman. He is now involved with our new management team on a weekly basis. Also during the year Robert Morgan was appointed to the Board. He joined Hays in 1991 and has held a number of senior management roles. Below Board level the Group has continued to develop strong management in each of the countries where Hays carries on business. As the Group's presence in those markets grows Hays is well able to attract and develop managers of the right quality to further develop and expand its businesses. Nearly half of Hays' employees are now based outside the UK. Following the extension of the Group's All Employee Share Option Scheme beyond the UK, a further 1,800 employees have joined and almost a third of the Group's workforce are now direct or indirect shareholders in Hays. The Board strongly believes that share schemes play a valuable part in aligning the interests of employees and shareholders, and thus in the success of Hays. PROSPECTS New business prospects are the strongest in our history and we are moving ever closer to our customers by partnering them to provide effective solutions to even more complex problems. We are investing in our infrastructure and management across Europe to secure the Group's future growth. Hays plc will be making the following information available on the Company website www.hays-plc.com from 2:00 pm on 31 August. - Webcast presentation of Preliminary Results - Powerpoint presentation with notes These can be accessed directly from the Hays plc home page. Clients of RAW Communications can also view the video presentation in Broadband format. Hays plc Consolidated Profit and Loss Account For the year ended 30 June 2000 (In £'s million) 2000 1999 Increase TURNOVER Continuing operations 2,089.0 1,836.6 Acquisitions 99.9 - _______ _______ 2,188.9 1,836.6 +19% Discontinued operations 27.5 39.2 _______ _______ 2,216.4 1,875.8 ======= ======= PROFIT FROM OPERATIONS Continuing operations 273.1 245.7 Acquisitions 7.2 - _______ _______ 280.3 245.7 +14% Discontinued operations (5.8) 0.3 _______ _______ 274.5 246.0 _______ _______ GOODWILL AMORTISATION Continuing operations (6.8) (3.6) Acquisitions (3.5) - _______ _______ (10.3) (3.6) _______ _______ OPERATING PROFIT Continuing operations 266.9 242.1 Acquisitions 3.1 - _______ _______ 270.0 242.1 Discontinued operations (5.8) 0.3 _______ _______ 264.2 242.4 EXCEPTIONAL ITEMS Loss on disposal and closure of (46.0) - businesses Loss on disposal of fixed assets (2.7) - _______ _______ PROFIT BEFORE INTEREST 215.5 242.4 Net interest payable (11.9) (10.1) _______ _______ PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 203.6 232.3 Tax on profit on ordinary activities (72.3) (65.1) _______ _______ Profit on ordinary activities after 131.3 167.2 taxation Equity minority interests (0.5) (0.5) _______ _______ PROFIT FOR THE FINANCIAL YEAR 130.8 166.7 Dividends (60.3) (52.3) _______ _______ Transferred to reserves 70.5 114.4 ======= ======= EARNINGS PER SHARE Basic 7.7p 9.7p Before goodwill and exceptional items 11.1p 9.9p +12% Dividend per share 3.54p 3.075p +15% Interest cover* 23X 24X Dividend cover 2.2X 3.2X *before goodwill amortisation and exceptional items Hays plc Consolidated Balance Sheet At 30 June 2000 (In £'s million) 2000 1999 Restated FIXED ASSETS Intangible assets 298.7 142.5 Tangible assets 490.9 471.8 Investments 38.9 17.7 _______ _______ 828.5 632.0 _______ _______ CURRENT ASSETS Stocks 36.6 32.5 Debtors 513.2 394.3 Cash at bank and in hand 96.5 79.8 _______ _______ 646.3 506.6 _______ _______ CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Borrowings (49.6) (8.8) Other creditors (635.2) (501.1) _______ _______ (684.8) (509.9) _______ _______ NET CURRENT LIABILITIES (38.5) (3.3) _______ _______ TOTAL ASSETS LESS CURRENT LIABILITIES 790.0 628.7 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Borrowings (323.9) (268.0) Other creditors (36.3) (42.0) PROVISIONS FOR LIABILITIES AND CHARGES (21.0) (20.0) _______ _______ 408.8 298.7 ======= ======= CAPITAL AND RESERVES Called up share capital 17.3 8.6 Share premium account 359.2 356.7 Profit and loss account 30.8 (68.1) ======= ======= EQUITY SHAREHOLDERS' INTERESTS 407.3 297.2 EQUITY MINORITY INTERESTS 1.5 1.5 _______ _______ 408.8 298.7 ======= ======= NET DEBT AS % OF SHAREHOLDERS' FUNDS AND 68% 66% MINORITY INTERESTS Hays plc Summarised Consolidated Cash Flow Statement For the year ended 30 June 2000 (in £'s million) 2000 1999 Operating activities Operating profit 264.2 242.4 Depreciation and amortisation 65.4 52.0 Other operating items 0.7 (2.2) Increase in working capital (21.8) (27.3) _______ _______ Net cash inflow from operating activities 308.5 264.9 Returns on investments and servicing of (12.0) (10.1) finance Tax paid (76.6) (53.8) Capital expenditure (net) (81.4) (87.2) _______ _______ Net cash inflow before acquisitions and disposals 138.5 113.8 Acquisitions and disposals (net) (146.9) (106.9) Equity dividends paid (54.8) (47.7) _______ _______ Net cash outflow before financing (63.2) (40.8) Financing Issue of ordinary share capital 7.5 7.8 (Purchase)/disposal of own shares (20.8) 7.5 Increase in borrowings 97.4 15.8 Capital element of finance lease rentals (2.8) (4.7) _______ _______ Net cash inflow from financing 81.3 26.4 _______ _______ Increase/(decrease) in cash 18.1 (14.4) ======= ======= (In £'s million) 2000 1999 Movement in net debt For the year ended 30 June 2000 Increase in net borrowing (84.9) (51.0) Foreign exchange movement 4.9 (0.4) Opening net debt (197.0) (145.6) _______ _______ Closing net debt (277.0) (197.0) ======= ======= Hays plc Segmental Information For the year ended 30 June 2000 (In £'s million) 2000 2000 1999 1999 Total Operating Total Operating Turnover Profit Turnover Profit BY BUSINESS SECTOR Continuing operations Logistics 781.4 60.3 698.3 56.5 Chemical 159.9 17.7 157.7 20.3 Distribution ________ ________ ________ ________ Distribution 941.3 78.0 856.0 76.8 Commercial 445.0 84.8 345.0 77.3 Personnel 802.6 117.5 635.6 91.6 ________ ________ ________ ________ 2,188.9 280.3 1,836.6 245.7 Discontinued 27.5 (5.8) 39.2 0.3 operations Goodwill amortisation - (10.3) - (3.6) ________ ________ ________ ________ 2,216.4 264.2 1,875.8 242.4 ======== ======== ======== ======== BY GEOGRAPHICAL AREA Continuing operations United Kingdom 1,454.3 224.3 1,207.4 191.6 Other Europe 612.3 38.4 542.1 43.4 Rest of the 122.3 17.6 87.1 10.7 World ________ ________ ________ 2,188.9 280.3 1,836.6 245.7 Discontinued operations 27.5 (5.8) 39.2 0.3 Goodwill amortisation - (10.3) - (3.6) ________ ________ ________ ________ 2,216.4 264.2 1,875.8 242.4 ======== ======== ======== ======== Reconciliation of movements in equity shareholders' interests For the year ended 30 June 2000 (In £'s million) 2000 1999 restated Profit for the financial year 130.8 166.7 Dividends (60.3) (52.3) ________ ________ 70.5 114.4 Other recognised gains and losses relating to the year (2.2) (1.0) New share capital subscribed 7.6 7.8 Goodwill written off (net) 34.2 (1.8) ________ ________ Net increase in equity shareholders' interests 110.1 119.4 Opening equity shareholders' interests 297.2 177.8 ________ ________ Closing equity shareholders' interests 407.3 297.2 ======== ======== Hays plc Exceptional Items For the year ended 30 June 2000 (In £'s million) 2000 LOSS ON DISPOSAL AND CLOSURE OF BUSINESSES Bulk transport businesses Loss on closure before goodwill written off (13.1) Goodwill written off (31.9) Provision for losses to date of closure (4.0) ________ (49.0) Profit on other businesses disposed (net) 3.0 LOSS ON DISPOSAL OF FIXED ASSETS (2.7) ________ (48.7) ======== During the year, the Group announced the termination of its interest in the bulk transport businesses in Germany and France. The closure and disposal of these businesses gives rise to a total loss of £49.0m including the write off of related goodwill. The disposal of the animal feed ingredients operations and the Crescent Wharves business resulted in a net profit of £3.0m. The trading results of these businesses are shown as discontinued operations. The loss on disposal of fixed assets relates to superseded IT assets. Exceptional items in 2000 resulted in a cash inflow of £13.6 million in the period.

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