Acquisitive Hays set for next pounds 100m buy
Thursday 21 August 1997
Speaking yesterday after the group announced its biggest acquisition to date, the pounds 93.4m purchase of two continental European logistics businesses from Australian transport group Mayne Nickless, Hay's chairman Ronnie Frost said the group's commercial division remained the focus of growth.
Hays was looking to add a new activity to the commercial side which includes high-margin businesses like mail order, billing and supplying surgeon's operating packs to hospitals.
Mr Frost quashed speculation that the group might consider a hostile bid for rival Christian Salvesen, having had its friendly approaches rebuffed last August. "It really has gone. I would have loved to do a deal if we had got a recommendation. But as soon as Salvesen went public, they killed it."
More such deals in logistics are likely over the next year, according to Mr Frost, including a move into Italy, possibly to support a French customer looking to expand, and later Spain. Hays is also looking to make a small acquisition, probably less than pounds 50m, in German food distribution to complement its Mordhurst business.
Though Hays has low gearing, Mr Frost emphasised the importance of finding the right opportunity.
Analysts were positive on this latest deal, but preferred to see the group expanding in faster growing areas. Andrew Ripper of Merrill Lynch said: "I'd rather they do this kind of small acquisition than buy Salvesen. Hays has performed well in distribution, but the logistics sector generally has been abysmal. If Hays were a pure logistics company and not in areas like personnel, they would not have such a good rating."
Mr Frost said the acquisition of FDS in France and the smaller Van der Heijden distribution business in Holland for pounds 72m cash plus debt would enhance earnings by around 3 per cent in the first year after pounds 5m integration costs, and with combined profits of pounds 8.8m and "substantial" growth prospects could add at least pounds 5m to profits. Prior to the acquisitions, analysts had pencilled in pounds 180m for the year to June 1998.
Mr Frost said that the new businesses, which have combined sales of pounds 150m were a good fit with the group's existing pounds 255m logistics operations in continental Europe. He said that adding FDS, which distributes non-chilled food and other goods to Hays' Frils business in France, which is mainly a chilled goods distributor, would offer customers in both businesses a greater choice.
Van der Heijden adds pounds 35m of sales to Hay's pounds 11m Dutch distributor, making the company a key player in Holland. Analysts said the strengthening logistics on the continent relative to the more difficult UK market, where margins have been under pressure from the supermarkets was positive.
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