Hays on look-out for acquisitions: Business services group says it has money, but would make a rights issue if necessary for big deal

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The Independent Online
HAYS, the business services group, says that it is prepared to tap investors to fund its expansion programme.

Ronnie Frost, chairman, said the company's finances could stand up to three further acquisitions costing between pounds 20m and pounds 40m each in the next 18 months without a rights issue.

'But if we came across one that is pounds 200m that is right for Hays then we will do it.'

Mr Frost said a cash call was not imminent. 'There is nothing in the pipeline at the moment, and we are not issuers of confetti. We look at hundreds of different things. But there is a lot of rubbish out there.'

Hays has four teams of staff looking at acquisitions. Their numbers have doubled to 18 in the past year.

The group's gearing is less than 44 per cent of shareholders' funds of pounds 126m, and the management is not prepared to let it rise above 50 per cent. Available cash in the bank totals pounds 26m.

Mr Frost said that after a single medium-sized acquisition, 'we could bring gearing back to the middle forties in a year as we are cash-rich'. Britdoc, the only licensed mail service in Britain apart from the Royal Mail, 'virtually prints money', he added.

Mr Frost said it was essential for distribution groups to become fully European, indicating that Hays intended to bolt on smaller companies to operations already established on the Continent.

Acquisitions, principally the purchase of Rockall Scotia Resources in April, accounted for 12 per cent of a pounds 23.9m increase to pounds 92.6m in group operating profits for the year to 30 June, announced yesterday. Rockall provides data storage services for oil companies.

A rise in interest charges from pounds 2.3m to pounds 5.1m trimmed the profit advance to 32 per cent to pounds 87.6m before tax. Analysts slightly upgraded forecasts for this year to between pounds 103m and pounds 108m. The total dividend is 6.1p, up from 5.3p, and is covered more than twice by earnings per share of 14.7p.

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