Profits warning from Hays wipes £1.6bn off market value

More than £1.6bn was wiped off the stock market value of Hays yesterday after the logistics, personnel and private postal delivery group issued a profits warning.

Shares in the company fell 30 per cent to 215p after a warning that profits in its logistics division, which provides haulage and distribution services for companies such as Sainsbury's, would be "significantly below" previous expectations.

Hays said results for the current year would consequently be lower than expected, although it would still beat last year's pre-tax profits of £263m. Analysts had been expecting profits for the year ending 30 June to reach £290m-£295m. Their forecasts have now been cut to £268m-£272m. The warning hit the share prices of other logistics and outsourcing groups such as Exel and Capita.

The sharp fall in profits from Hays' logistics division has been compounded by problems in its express mail delivery operations in France and Spain.

Graham Williams, an executive director of Hays, said losses in France had been stopped, and the group was taking urgent action to address difficulties in Spain, although he refused to elaborate. The UK logistics business has been particularly hard hit by weak prices and a reduction in business from telecoms and automotive customers.

Hays supplies the Ford Halewood and the Vauxhall Luton car factories, both of which are closing. The downturn in telecoms has also badly affected a Hays business that distributes and repairs mobile phones. Mr Williams estimated that cost-cutting would result in 300-400 job losses. But he said overall staffing levels across the group were rising to cope with a 20 per cent rise in sales.

He also said Hays expected to return to its more normal double-digit growth rates next year, provided that the economic outlook did not weaken further. The group is seeking to concentrate on more profitable parts of the logistics market and has recently won a contract to manage the pool of plastic crates used by Sainsbury's to distribute fresh produce. Mr Williams also said it has applied for three licences to compete with Consignia, formerly the Post Office. If awarded, they could have a significant impact on its postal delivery business, the main part of which is the BritDoc next-day document service.

Hays said its personnel recruitment division, which accounts for half of group profits, was continuing to perform strongly and grow at 15 per cent a year.