Preliminary results
Hays PLC
09 September 2003
9th September 2003
Hays plc
PRELIMINARY RESULTS FOR THE YEAR TO 30 JUNE 2003
Financial summary:
Year to 30 June 2003 2002
Profit and loss account
Turnover from continuing operations £2,254.4m £2,218.0m
Operating profit * £190.1m £247.3m
Profit before tax * £178.9m £232.1m
(Loss) / profit before tax, after exceptional items (£476.8m) £147.6m
Earnings per share * 7.01p 9.40p
Dividend per share .38p 4.68p
Cash flow
Cash inflow from operating activities £286.1m £303.8m
Interest cover * 11 x 13 x
Net debt at 30 June £245.8m £232.0m
* Before goodwill amortisation and exceptional items.
Business Summary:
Group Financials
• Overall Group profit before tax, goodwill amortisation and exceptional
items of £178.9m in line with market expectations.
• Operating cashflow of £286.1m, excellent across all divisions.
• 628.4m exceptional charge arising from Group transformation, primarily
non-cash.
• Dividend increased by 15% to 5.38p per share bringing the full year
total to £92.1m.
Group Transformation
• Strategy defined and implementation well under way.
• IMS and BPO businesses sold and Logistics disposal process ongoing.
• Balance sheet restructured and new facilities in place to suit future
business needs.
• Future Executive management roles defined and smooth transition assured.
Personnel
• Scale and quality of Personnel opportunities warrant undivided attention.
• Personnel operating profit before goodwill amortisation and exceptional items
of £114.3m ahead of market expectations and competition.
• Successful integration of continental European acquisitions.
UK Mail
• UK Mail to demonstrate value from new licence.
• Strengthened management team focused on growing new services.
Bob Lawson, Chairman, commented:
'We have made good progress towards transforming Hays into a pure specialist
recruitment business and the results announced today underline why we are sure
that our strategy for the future is correct. Our Personnel business has
achieved excellent results and is very well placed to exploit the exciting
market opportunities ahead. The exceptional charges in the year are an
inevitable consequence of the transformation process.'
Enquiries:
Colin Matthews CEO 01483 302203
Hays plc
John Martin Group Finance Director 01483 302203
Hays plc
Jon Coles Brunswick 020 7404 5959
Conference call:
Hays plc will conduct a conference call for shareholders at 3.30pm UK time on
Tuesday 9 September 2003. The dial-in details are as follows:
UK/European dial-in number: + 44 20 7162 0125
USA dial-in number: + 1 334 323 6203
Password: Hays
The call will be recorded and available for playback on the following:
UK/European replay dial-in number: + 44 20 8288 4459
UK/European access code: 436812
USA replay dial-in number: + 1 334 323 6222
USA access code: 436812
The Instant Replay will be available until 16 September 2003.
Presentation on the website and delayed web-cast:
The presentation to analysts will be available to view on the Hays website from
2.30pm UK time on 9 September 2003 - www.hays.com
The presentation will also be filmed and distributed by RAW Communications to
those who subscribe to that service.
Chairman's Statement
This is an important report because it marks the first occasion on which we can
tell shareholders about progress with our divestment programme and provide an
insight into the pure specialist recruitment business of the future.
Financial Highlights
The Group's overall operating performance is in line with market expectations
with profit before tax, goodwill and exceptional items of £178.9 million, 23%
below last year. Despite this reduction, our businesses continued to focus on
cash, generating cash from operations of £286.1m. Our specialist recruitment
business performed strongly, generating £114.3 million of operating profit, 60%
of the Group's total profit, from £1.1 billion of sales. We believe that our
business significantly out-performed its peer group in the year.
The Group incurred exceptional charges of £628.4m, including the write off of
£287.4m of goodwill. The charges principally arise from the write down of
assets, the cost of restructuring shared services, the cost of replacing the
Group's financing facilities and the crystallisation of certain pension
liabilities, all associated with the transformation process. As a result the
Group's loss before tax for the year was £476.8m.
Our specialist recruitment business made two acquisitions in continental Europe,
in line with our strategy of exploiting opportunities for growth through
selected acquisitions. Ascena, which provides specialist IT contractors in
Germany and Switzerland, and Inter-Office Select which provides financial staff
in Belgium, were acquired for a maximum aggregate consideration of up to £56.4m.
As a result of the rigorous criteria applied in the appraisal of these
acquisitions, both financial performance and integration are progressing well.
The Group announced the completion of a number of disposals after the end of the
financial year for aggregate consideration of £225.5m. The businesses disposed
include IMS, BPO and related operations. They are classified as discontinued
operations but remain in the Group balance sheet at 30 June 2003.
As a consequence of our excellent cash flow, the Board is recommending a final
dividend of 3.63p which, if approved at the Annual General Meeting, will be paid
on 28 November 2003 to shareholders on the register at 24 October 2003.
Together with the interim dividend of 1.75p this represents an increase of 15%
on last year. The dividend is covered 1.3 times before goodwill amortisation
and exceptional items. Future dividends will be rebased to reflect the level
appropriate to our pure specialist recruitment business, and taking into account
its future investment needs, with a target cover in the range of 1.5 to 2.5
times. Future dividend growth will depend on the growth rate achievable by the
Personnel business across the economic cycle.
The Group had £245.8m of net debt at 30 June 2003. Cash proceeds from the
disposals completed since year-end have been used to repay debt and, in
addition, a one-off payment of £51.7m was made after the year end into Hays
Pension Scheme to address part of the deficit in that scheme. The Group will
continue to adopt a conservative approach to funding its operations. Net debt
currently amounts to approximately £120m and is within the range that the Board
considers appropriate for the Group in future. We expect to generate surplus
cash as a result of the disposal process. We plan to use cash in excess of that
required for the future development of the business to buy back shares in the
open market on conclusion of the transformation. We shall therefore seek renewal
of the mandate to buy back shares at the Annual General Meeting on 19
November 2003.
Strategy Review
The strategy review completed in February concluded that there were insufficient
linkages between the Group's operations to justify a multi-business Group over
the long term.
The Board has decided that we should focus upon our specialist recruitment
business as it represents the best opportunity to capitalise on a leading market
position in growth markets. It has a strong, stable management team and a great
track record of success. The business has achieved outstanding organic growth
over many years both from the geographic expansion of established specialisms
such as Accountancy and the addition of high growth new brands such as
Education. We believe that the specialist recruitment and HR services market
offers attractive growth rates for the future, both in the UK and
internationally, and that our business has the scale and brand strength to
capitalise on these opportunities.
Our UK Mail business will not be part of the Group in the longer term, but we
have not started a process to sell this business. The business was awarded a
long-term licence by Postcomm at the end of 2002 which presents us with a good
opportunity to deliver a range of attractive and profitable new services to our
clients. A pre-8am next-day 'to-the-door' service was launched in June 2003 and
customer interest in this, and other planned new services, is high. The UK Mail
business is sharply focused on these opportunities.
We began the disposal of the Group's other activities following our interim
announcement in March and the disposals of IMS, BPO and certain related
activities have been completed since year end. The disposal process for our
Logistics division is ongoing. We believe that this business offers an
attractive opportunity to the right buyer.
Review of Operations
We are very pleased with the strong performance of the specialist recruitment
and HR services business. Montrose, our businesses in Australia and newer brands
such as Education and HR grew strongly, as did our overall penetration of the
public sector. A slow but steady recovery in volumes is becoming evident with
the number of temporary assignments now at a record level. The number of
permanent placements has grown modestly over each of the last three quarters.
Our new Mail management team is concentrating exclusively on the profitable and
valuable UK business. Operating profits at £33.2m were down on last year due to
investment in new infrastructure, certain cost increases which could not be
passed on to customers and the loss of two customers last year. The first of
three new services was launched under our new licence from Postcomm.
In the businesses disposed of or which are in the course of disposal, operating
profits before goodwill amortisation and exceptional items declined to £42.6m.
The largest reduction in profits occurred in BPO which has been sold since the
year end. Logistics' operating profits also declined on account of margin
pressures across the industry. Management are addressing the loss making German
logistics and France transport operations. Losses in these two businesses mask
a number of important new contract wins and renewals achieved in the year. Our
French mail courier business, which faces difficult market conditions, is also
being disposed.
Management and Organisational Structure
Last November, when Colin Matthews joined Hays and launched our strategy review,
the Board expected significant structural change to the Group. In the event,
led by Colin, the Board was convinced in February of this year that
shareholders' interests were best served by an even more radical simplification
and re-focusing. As the disposal programme progresses Hays will cease to be a
diverse group and, accordingly, the principal tasks of our Group CEO will be
completed as the transformation moves towards conclusion. In the future, Hays
will require a CEO who will focus on our continuing activity and Colin has made
it clear that his interests and future aspirations do not lie in leading the
specialist recruitment business. Equally Denis Waxman, who founded the original
business and runs Hays Personnel today, is the natural choice to become CEO when
the transformation is complete. We expect that Denis will assume the role of
CEO during the course of calendar 2004.
I would like to take this opportunity to thank both Denis and Colin for their
ongoing contributions to our Company. Denis and his team have built the long
established specialist recruitment business which is becoming our core. Colin
remains fully committed to the successful transformation of the Group, including
the sale of Logistics and setting the strategy to dispose of Mail.
It is my sad duty to advise that the health of Neil McLachlan, our former
Finance Director, has not recovered sufficiently to enable him to work in the
demanding role of a full time Executive Director. Consequently, Neil has
resigned from the Board with effect from 8 September 2003. He is missed by
everyone in the Group and we all wish him a speedy and complete recovery.
The Board for the future Group will consist of two Executive Directors, Denis
Waxman as Chief Executive Officer and John Martin as Finance Director, with the
Non-Executive component remaining unchanged. We have recently announced to
staff our proposal to relocate the Group Head Office from Guildford to the
current Personnel offices in Moorgate, London, with Group administration being
centralised at New Malden.
During this difficult year our people have stood up to many challenges,
remaining extremely loyal and understanding throughout. On behalf of the
shareholders and the Board, I would like to thank them all, including those who
have left the Group, for their support and hard work.
Outlook
In our Personnel business, gross fees in the seasonally quiet summer months have
been 2% to 3% ahead of the same period last year, continuing the trend
established during the second half of our financial year. In the current
economic climate, the outlook for future trading of the specialist recruitment
market is uncertain. Within the UK Mail business, volumes through the existing
DX network remain flat and future volume growth is principally expected to arise
from the rollout of new services. Whilst the prospects to build high quality
future income streams are good, the impact of new services in the current year
is expected to be modest. Elsewhere, the outlook for the Logistics business is
satisfactory, whereas market conditions in the French mail courier market are
demanding.
Summary
We have made good progress towards transforming Hays into a pure specialist
recruitment business and the results announced today underline why we are sure
that our strategy for the future is correct. Future trading will depend upon
the economic outlook which remains uncertain, and we are confident that
Personnel will continue to out-perform, thus delivering premium value to
shareholders.
Hays plc
Consolidated Profit and Loss Account
for the year ended 30 June 2003
2003 2003 2003 2002
(In £'s million) Pre- Exceptional Total Total
exceptional items
TURNOVER
Continuing operations 2,254.4 - 2,254.4 2,218.0
Acquisitions 39.6 - 39.6 -
2,294.0 - 2,294.0 2,218.0
Discontinued operations 204.4 - 204.4 236.7
2,498.4 - 2,498.4 2,454.7
OPERATING PROFIT/(LOSS)
Before goodwill amortisation and
exceptional items 190.1 - 190.1 247.3
Goodwill amortisation (27.3) - (27.3) (25.0)
Exceptional operating items - (490.0) (490.0) (59.4)
162.8 (490.0) (327.2) 162.9
OPERATING PROFIT/(LOSS)
Continuing operations 150.1 (487.7) (337.6) 145.1
Acquisitions 1.7 - 1.7 -
151.8 (487.7) (335.9) 145.1
Discontinued operations 11.0 (2.3) 8.7 17.8
162.8 (490.0) (327.2) 162.9
Share of operating profit of associates 6.1 - 6.1 4.0
EXCEPTIONAL ITEMS
Loss on disposal of businesses - (85.3) (85.3) (0.1)
Amounts written off investments - (32.0) (32.0) -
Net interest payable (17.3) (21.1) (38.4) (19.2)
PROFIT/(LOSS) ON ORDINARY
ACTIVITIES BEFORE TAXATION 151.6 (628.4) (476.8) 147.6
Tax on profit/(loss) on ordinary
activities (58.8) 18.0 (40.8) (65.2)
PROFIT/(LOSS) ON ORDINARY
ACTIVITIES AFTER TAXATION 92.8 (610.4) (517.6) 82.4
Equity minority interests (0.1) - (0.1) -
PROFIT/(LOSS) FOR THE
FINANCIAL YEAR 92.7 (610.4) (517.7) 82.4
Dividends (92.1) - (92.1) (79.5)
Transferred to/(from) reserves 0.6 (610.4) (609.8) 2.9
EARNINGS PER SHARE
Basic (30.26)p 4.82p
Before goodwill amortisation
and exceptional items 7.01p 9.40p
Diluted earnings per share (30.24)p 4.79p
DIVIDEND PER SHARE 5.38p 4.68p
Interest cover before exceptional
items and goodwill amortisation 11 X 13 X
Hays plc
Consolidated Balance Sheet
at 30 June 2003
(In £'s million) 2003 2002
FIXED ASSETS
Intangible assets 113.6 220.0
Tangible assets 326.0 509.9
Investments 62.8 103.0
502.4 832.9
CURRENT ASSETS
Stocks 17.3 25.2
Debtors 499.6 478.6
Cash at bank and in hand 154.6 120.8
671.5 624.6
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Borrowings (196.7) (26.3)
Other creditors (627.7) (548.2)
(824.4) (574.5)
NET CURRENT (LIABILITIES)/ ASSETS (152.9) 50.1
TOTAL ASSETS LESS CURRENT LIABILITIES 349.5 883.0
CREDITORS: AMOUNTS FALLING DUE AFTER
MORE THAN ONE YEAR
Borrowings (203.7) (326.5)
Other creditors (9.4) (2.8)
PROVISIONS FOR LIABILITIES AND CHARGES (121.3) (83.6)
NET ASSETS 15.1 470.1
CAPITAL AND RESERVES
Called up share capital 17.3 17.3
Share premium account 368.9 368.7
Profit and loss account (371.7) 83.3
EQUITY SHAREHOLDERS' INTERESTS 14.5 469.3
EQUITY MINORITY INTERESTS 0.6 0.8
15.1 470.1
Reconciliation of Movements in Equity Shareholders' Interests
for the year ended 30 June 2003
(In £'s million) 2003 2002
(Loss)/profit for the financial year (517.7) 82.4
Dividends (92.1) (79.5)
(609.8) 2.9
Other recognised gains and losses relating to the year 1.8 0.3
New share capital subscribed 0.2 3.2
Goodwill written back relating to impairment charge 151.8 1.4
Goodwill written back 1.2 -
Net (decrease)/increase in equity shareholders' interests (454.8) 7.8
Opening equity shareholders' interests 469.3 461.5
Closing equity shareholders' interests 14.5 469.3
Hays plc
Summarised Consolidated Cash Flow Statement
for the year ended 30 June 2003
(In £'s million) 2003 2002
CASH INFLOW FROM OPERATING ACTIVITIES 286.1 303.8
Returns on investments and servicing of finance (10.6) (18.9)
Taxation (62.6) (70.1)
Net capital expenditure and net financial investment (74.5) (71.8)
NET CASH INFLOW BEFORE ACQUISITIONS AND DISPOSALS 138.4 143.0
Net (acquisitions) and disposals (52.6) 36.4
Equity dividends paid (84.0) (72.9)
NET CASH INFLOW BEFORE FINANCING 1.8 106.5
Financing 40.1 (130.5)
INCREASE/(DECREASE) IN CASH IN THE YEAR 41.9 (24.0)
RECONCILIATION OF NET CASH FLOW TO
MOVEMENT IN NET DEBT
INCREASE/(DECREASE) IN CASH IN THE YEAR 41.9 (24.0)
Cash (outflow)/inflow from movement in debt and lease financing (39.5) 134.8
Change in net debt resulting from cash flows 2.4 110.8
Borrowings disposed 3.2 -
Loan notes issued (2.2) -
Exchange adjustments (17.2) (21.9)
MOVEMENT IN NET DEBT IN THE YEAR (13.8) 88.9
OPENING NET DEBT (232.0) (320.9)
CLOSING NET DEBT (245.8) (232.0)
Hays plc
Segmental Information
Profit and Loss Account Extract for the year ended 30 June 2003
(In £'s million) Personnel UK Mail Businesses Group
being
disposed
TURNOVER
Continuing operations 1,080.5 127.6 1,046.3 2,254.4
Acquisitions 26.6 - 13.0 39.6
Discontinued operations - - 204.4 204.4
1,107.1 127.6 1,263.7 2,498.4
OPERATING PROFIT/(LOSS)
(before goodwill amortisation and
exceptional items) 114.3 33.2 42.6 190.1
Goodwill amortisation (13.0) - (14.3) (27.3)
Exceptional operating items (26.1) - (463.9) (490.0)
75.2 33.2 (435.6) (327.2)
OPERATING PROFIT/(LOSS)
Continuing operations 73.9 33.2 (444.7) (337.6)
Acquisitions 1.3 - 0.4 1.7
Discontinued operations - - 8.7 8.7
75.2 33.2 (435.6) (327.2)
TURNOVER
Continuing operations
United Kingdom 911.3 127.6 404.3 1,443.2
Continental Europe 89.7 - 620.0 709.7
Rest of the World 106.1 - 35.0 141.1
1,107.1 127.6 1,059.3 2,294.0
Discontinued operations - - 204.4 204.4
1,107.1 127.6 1,263.7 2,498.4
OPERATING PROFIT/(LOSS)
(before goodwill amortisation and
exceptional items)
Continuing operations:
United Kingdom 103.6 33.2 15.9 152.7
Continental Europe (2.3) - 15.1 12.8
Rest of the World 13.0 - (2.3) 10.7
114.3 33.2 28.7 176.2
Discontinued operations - - 13.9 13.9
114.3 33.2 42.6 190.1
OPERATING PROFIT/(LOSS)
(after goodwill amortisation and
exceptional items)
Continuing operations:
United Kingdom 96.3 33.2 (188.2) (58.7)
Continental Europe (34.1) - (244.7) (278.8)
Rest of the World 13.0 - (11.4) 1.6
75.2 33.2 (444.3) (335.9)
Discontinued operations - - 8.7 8.7
75.2 33.2 (435.6) (327.2)
Hays plc
Segmental Information
Profit and Loss Account Extract for the year ended 30 June 2002
(In £'s million) Personnel UK Mail Businesses Group
being
disposed
TURNOVER
Continuing operations 1,076.9 131.0 1,010.1 2,218.0
Discontinued operations - - 236.7 236.7
1,076.9 131.0 1,246.8 2,454.7
OPERATING PROFIT/(LOSS)
(before goodwill amortisation and
exceptional items) 122.5 44.0 80.8 247.3
Goodwill amortisation (5.7) - (19.3) (25.0)
Exceptional operating items - (6.4) (53.0) (59.4)
116.8 37.6 8.5 162.9
OPERATING PROFIT/(LOSS)
Continuing operations 116.8 37.6 (9.3) 145.1
Discontinued operations - - 17.8 17.8
116.8 37.6 8.5 162.9
TURNOVER
Continuing operations
United Kingdom 918.0 131.0 430.3 1,479.3
Continental Europe 71.9 - 547.7 619.6
Rest of the World 87.0 - 32.1 119.1
1,076.9 131.0 1,010.1 2,218.0
Discontinued operations - - 236.7 236.7
1,076.9 131.0 1,246.8 2,454.7
OPERATING PROFIT/(LOSS)
(before goodwill amortisation and
exceptional items)
Continuing operations:
United Kingdom 111.4 44.0 35.2 190.6
Continental Europe 0.8 - 24.9 25.7
Rest of the World 10.3 - (0.7) 9.6
122.5 44.0 59.4 225.9
Discontinued operations - - 21.4 21.4
122.5 44.0 80.8 247.3
OPERATING PROFIT/(LOSS)
(after goodwill amortisation and
exceptional items)
Continuing operations:
United Kingdom 107.5 37.6 (22.7) 122.4
Continental Europe (1.0) - 19.4 18.4
Rest of the World 10.3 - (0.7) 9.6
116.8 37.6 (4.0) 150.4
Discontinued operations - - 12.5 12.5
116.8 37.6 8.5 162.9
Hays plc
Segmental Information
Consolidated Balance Sheet Extract
at 30 June 2003
(In £'s million) Personnel UK Mail Businesses Other Group
being
disposed
Intangible assets 113.2 - 0.4 - 113.6
Tangible assets & investments 16.2 19.1 292.0 61.5 388.8
Stocks - 0.1 17.2 - 17.3
Debtors 191.9 23.0 269.8 14.9 499.6
Creditors (126.5) (54.7) (325.3) (130.6) (637.1)
Provisions for liabilities and (1.2) - (44.8) (75.3) (121.3)
charges
193.6 (12.5) 209.3 (129.5) 260.9
Net debt - - - (245.8) (245.8)
Net assets/(liabilities) 193.6 (12.5) 209.3 (375.3) 15.1
at 30 June 2002
(In £'s million) Personnel UK Mail Businesses Other Group
being
disposed
Intangible assets 97.3 - 122.7 - 220.0
Tangible assets & investments 17.0 22.5 471.5 101.9 612.9
Stocks - 0.1 25.1 - 25.2
Debtors 178.8 25.6 260.7 13.5 478.6
Creditors (115.2) (53.4) (309.7) (72.7) (551.0)
Provisions for liabilities and (0.8) - (20.2) (62.6) (83.6)
charges
177.1 (5.2) 550.1 (19.9) 702.1
Net debt - - - (232.0) (232.0)
Net assets/(liabilities) 177.1 (5.2) 550.1 (251.9) 470.1
Creditors are all creditors of the respective businesses, both current and
non-current, but excluding amounts owed to other members of the Hays Group. Net
debt is cash, net of all borrowings, both current and non-current.
Hays plc
Segmental Information
Consolidated Cash Flow Statement Extract
for the year ended 30 June 2003
(In £'s million) Personnel UK Mail Businesses Other Group
being
disposed
OPERATING ACTIVITIES
Total operating profit 101.3 33.2 28.3 - 162.8
Depreciation and amortisation 19.5 5.1 71.7 - 96.3
Other operating activities (0.1) - (1.2) - (1.3)
Movement in working capital and provisions 25.9 9.1 7.2 - 42.2
NET CASH INFLOW FROM OPERATING
ACTIVITIES (before exceptional items) 146.6 47.4 106.0 - 300.0
NET CASH FLOW FROM
EXCEPTIONAL ITEMS - - (13.9) - (13.9)
NET CASH FLOW FROM
OPERATING ACTIVITIES 146.6 47.4 92.1 - 286.1
Returns on investments and servicing of - - - (10.6) (10.6)
finance
Tax paid - - - (62.6) (62.6)
Net capital expenditure (4.3) (3.9) (66.3) - (74.5)
CASH INFLOW/(OUTFLOW) BEFORE
ACQUISITIONS AND DISPOSALS 142.3 43.5 25.8 (73.2) 138.4
Net acquisitions and disposals (48.9) - (3.7) - (52.6)
Equity dividends paid - - - (84.0) (84.0)
NET CASH INFLOW/(OUTFLOW) BEFORE
FINANCING 93.4 43.5 22.1 (157.2) 1.8
for the year ended 30 June 2002
(In £'s million) Personnel UK Mail Businesses Other Group
being
disposed
OPERATING ACTIVITIES
Total operating profit 116.8 44.0 61.5 - 222.3
Depreciation and amortisation 11.7 3.8 74.1 - 89.6
Other operating activities (0.5) 1.3 34.9 - 35.7
Movement in working capital and provisions 15.0 (9.4) (42.6) - (37.0)
NET CASH INFLOW FROM OPERATING
ACTIVITIES (before exceptional items) 143.0 39.7 127.9 - 310.6
Net cash flow from
exceptional items - (6.4) (0.4) - (6.8)
NET CASH INFLOW FROM OPERATING
ACTIVITIES 143.0 33.3 127.5 - 303.8
Returns on investments and servicing of - - - (18.9) (18.9)
finance
Tax paid - - - (70.1) (70.1)
Net capital expenditure (3.1) (7.6) (61.1) - (71.8)
CASH INFLOW/(OUTFLOW) BEFORE
ACQUISITIONS AND DISPOSALS 139.9 25.7 66.4 (89.0) 143.0
Net acquisitions and disposals - - 36.4 - 36.4
Equity dividends paid - - - (72.9) (72.9)
NET CASH INFLOW/(OUTFLOW) BEFORE
FINANCING 139.9 25.7 102.8 (161.9) 106.5
Hays plc
Exceptional Items
for the year ended 30 June 2003
(In £'s million) Note 2003 2002
EXCEPTIONAL OPERATING ITEMS
Impairment of goodwill and tangible assets (i) (442.8) -
Restructuring costs (ii) (47.2) (59.4)
TOTAL EXCEPTIONAL OPERATING ITEMS (490.0) (59.4)
OTHER EXCEPTIONAL ITEMS
Loss on disposal of businesses
Net losses on disposal of businesses (iii) (21.9) (0.1)
Provision for losses in respect of asset values
of businesses sold after the year end (iv) (63.4) -
Amounts written off investments (v) (32.0) -
Exceptional finance charges (vi) (21.1) -
(628.4) (59.5)
TOTAL EXCEPTIONAL ITEMS
(i) On 4 March 2003 the Group announced that it was to commence the disposal of a number of non-core
operations. The disposal process has not yet been completed, but the Group has reviewed the carrying value
of tangible and intangible assets utilised in these operations and concluded that goodwill totalling £197.1
million (of which £120.0 million had previously been written off to reserves) and tangible assets of £219.6
million are impaired. The Group also reviewed the goodwill relating to the ongoing Personnel business, as a
result of which management has concluded that capitalised goodwill relating to the French IT services
business totalling £26.1 million has insufficient future revenue prospects to justify continued
capitalisation.
(ii) £47.2 million has been charged for restructuring in the year. £10.6 million of this charge relates to the
restructuring of the BPO, German Logistics and Dutch Logistics operations during the year. A further £36.6
million relates to the reorganisation and termination of certain shared facilities that have been employed
by the Group to secure economies of scale in UK support operations. The Group is obliged to continue to
operate these facilities for agreed periods of up to 12 months after the disposal of various non-core
operations, after which the facilities will be closed. The charge relates to the cost of asset
write-downs, onerous property obligations and related liabilities. Exceptional operating items in the
prior year include a £53.0 million impairment charge in relation to the goodwill and intangible assets of
the IT Solutions business and £6.4 million of costs incurred in settlement of a claim from Consignia.
(iii) During the year the Group completed the disposal of its French call centre business and a 50% stake in a
secure destruction business. These transactions gave rise to net losses on disposal of £21.9 million after
writing off goodwill of £13.5 million.
(iv) Since 30 June 2003 the Group has completed the disposal of substantially all of the businesses within its
former commercial division. The Group has provided for the whole of the goodwill attributable to these
businesses of £50.7 million (of which £31.8 million had previously been written off to reserves) and £12.7
million against the tangible assets of these businesses.
(v) The Hays plc Employee Share Trust ('the Trust') holds shares in the Company to provide a hedge against
fluctuations in the Company's share price over time, broadly matching share options awarded to shares
purchased. The Trust held 18.5 million shares as at 30 June 2003. On implementation of the new strategy
these hedging arrangements will no longer be required and the shares have been written down to their market
value at 30 June 2003.
(vi) Implementation of the strategy announced on 4 March 2003 has required the replacement of substantially all
of the funding facilities of the Group. £21.1 million of exceptional financing costs have been charged in
the period. These predominantly relate to the early repayment of £150.8 million of unsecured loan notes
2012 which were raised in the US private placement market in 2000. The notes carried a fixed rate of
interest of 7.0% and the exit charges arise as a result of the difference between the coupon rate and the
current market interest rate, and also as a consequence of currency movements.
Exceptional items in the year resulted in a cash outflow of £13.9 million and a
tax credit of £18.0 million.
Hays plc
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 2003 and 30 June 2002. The financial statements
for 30 June 2003, upon which the auditors issued an unqualified opinion, that
did not contain a statement under Section 237 (2) or (3) of the Companies Act
1985, have yet to be delivered to the Registrar of Companies. The financial
statements for 30 June 2002 upon which the auditors issued an unqualified
opinion, have been delivered to the Registrar of Companies.
This information is provided by RNS
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