Hays plummets on profit warning

June 7, 2001
Web Posted at 1132 GMT

LONDON, June 7 (Reuters) - Shares in British support services firm Hays Plc's plunged to a 30-month low on Thursday, wiping almost a third off the group's value after it issued a profit warning for the current financial year.

By 1018 GMT, the shares had fallen 29.3 percent to 222 pence in heavy volumes. News that slowing economic activity in several markets was hurting Hays' logistics business also knocked UK rivals Exel and Capita Group lower.

Analysts responded immediately by downgrading their forecasts for the year to June 30 2001 and the following year.

Hays said logistics profits would be “significantly” below expectations and blamed pricing pressure and lower volumes, primarily in the telecoms and automotive sectors.

Its commercial division was making satisfactory progress and the personnel business continued to strengthen its market position through organic growth. The company is due to report its full year results to the end of June 2001 on September 10.

Hays -- whose activities cover express mail delivery, document storage and goods distribution -- said profits for the year would beat last year when it reported a pre-tax profit of 268.4 million pounds.

Provided the economic outlook did not weaken further, it expected to return to more normal organic growth rates in the year to June 2002, it said.

A range of measures were already being implemented to improve focus, reduce costs and increase returns, including up to 500 previously announced job cuts, a spokeswoman said.

Full-year costs were expected to include exceptional operating costs of around 20 million pounds ($28 million) for reorganisation costs and impairment of assets.

Deutsche Bank analyst Paul Ginocchio said he would probably cut his earnings forecast for the company in the year to June 30, 2001 by eight percent to 11.5 pence per share. For 2001/2002, he would cut earnings per share by 11 percent to 12.6 pence.

In April, consensus forecasts for Hays for the current financial year stood at 12.6 pence per share.

In the same sector, shares in UK logistics firm Exel were down 5.10 percent at 725-1/2p, while Capita Group fell 3.14 percent to 494 pence at 1021 GMT.

“Hays is today's big story. The profits warning has hit the sector with the knock on effects being felt in Capita and Exel,” said one senior equity salesman.

The rest of the UK support services sector remained largely untouched by the warning.