Hays UK to sell core businesses
STRUGGLING support services group Hays hung a “for sale” sign around the necks of three of its four businesses yesterday, after posting a 23 per cent dive in first-half profits.
In an attempt to get back on track, Hays said its business services, haulage, and even its fledgling mail delivery business will be sold off, leaving the group to concentrate on its recruitment division.
Investors gave a cautious welcome to the plans, sending the shares up more than 1 per cent to 73.75p. But concerns were voiced over how much money would be raised from the sales.
Chief executive Colin Matthews, a former executive at both Transco and British Airways parachuted in last November, said there were “insufficient linkages” between the four divisions.
He added: “I have certainly received a number, a considerable number, of expressions of interest over the last month regarding all our divisions.”
Hays said pre-tax profits for the six months to 31 December had fallen to £76.1 million from £103 million in the same period of 2001 while sales had been broadly flat at £1.2 billion.
Only last month, the group won a seven-year licence from postal regulator Postcomm to deliver mail across the UK. The move followed trials of business to business post operations in a number of cities across the UK, including Edinburgh.
City analysts have tipped Deutsche Post, already launching mail delivery services in the UK market, as a likely bidder for Hays’ postal business.
Matthews refused to set out a timetable as to when the disposals would be completed, but sources close to the company indicated that Hays may hang on to its postal business for at least the next 12 months.
One insider said: “The sale of the logistics and commercial divisions are immediate priorities. But the sale of the mail division seems to be something that would happen further down the line. They’ll want to begin to reap the benefits of the deregulated postal market first.”
Matthews said the group’s personnel division had the greatest potential to create future value and would become the focus of the group.
The UK and Australian markets will be developed by growing existing activities and adding new specialist sectors. And Hays has acquired Ascena, an IT recruitment firm with operations in five cities in Germany and Switzerland, as part of its efforts to expand into Europe.
The recruitment arm is the biggest, traditionally the most profitable and a good cash generator, Matthews said. Nonetheless, over 2002, profits at the division tumbled 14 per cent as the downturn in banking and accounting took its toll.
Hays is not planning to cut any jobs while it carries out the disposal plans. Some one-off costs will be spawned by the change of direction. Cash is also expected to be returned to shareholders “in due course”. Shareholders have demanded changes at the group after poor trading and two profit warnings led to a collapse in the share price during 2002.
Standard Life Investments analyst Amanda Forsyth said: “Certainly the indications are that the management are looking at the right thing, and the market is pleased with that. The big question mark is going to be how much serious interest they have had and what kind of prices they are likely to get.”
