Hays demerges DX mail business to complete shake-up

The recruitment company Hays said it plans to spin off its mail delivery business into a separately listed company, a move that completes a 15-month turnaround of the business.

Colin Matthews, the outgoing chief executive of Hays, said yesterday: "We have been transforming the group to focus on recruitment, and after selling our logistics business, demerging DX is the final part of that process."

The overhaul has raised about £420m, and following the demerger of DX, Hays will be a standalone recruitment business. DX also stands to benefit from the growing deregulation of the mail delivery market and a number of shareholders had expected a trade sale. Hays said it did have approaches from a number of parties for the mail business, but that none of them was high enough to meet the board's expectations.

DX made an operating profit of £33.3m in 2003, sales were £129.4m and the estimated enterprise value of DX is about £350m. It will have some debt on its balance sheet when it separates from Hays.

"A demerger gives us control of the transformation and will allow us to get ready to be a focused recruitment company," Mr Matthews said. "We believe there is a real investment story with DX." Shareholders will be given one share in the newly demerged DX for every Hays share they own.

Hays' shares fell more than 2 per cent on the news, however, to close at 121p, as shareholders felt less value would be returned to them than through a sale. The board said it would still consider bids if any were forthcoming.

Mr Matthews, who said he would step down when the transformation of the business was complete, will leave the company at the end of this month. He will become chief executive of Severn Trent next year, taking over from Robert Walter, who is retiring. Denis Waxman will take over as the chief executive of the new Hays group. The managing director of DX, Peter Brougham, will become the chief executive of the mail business after the demerger.

DX is expected to list on the London Stock Exchange by the end of the year. It employs about 1,200 people and was one of the first companies to be granted a licence to deliver mail to business addresses after the market was opened upin 2002.