THE INVESTMENT COLUMN: The sun is still shining on Hays profits

Hays, the distribution and business services group, has proved a remarkably resilient performer since it came to the market in 1989. The shares have quadrupled since and earnings have grown by an average of 16 per cent.

Chairman Ronnie Frost has developed a three-legged structure based on distribution, commercial services such as document delivery and personnel that is clearly working.

The good news continued yesterday with pre-tax profits up 20 per cent to pounds 60.8m in the six months to December and earnings up by 21 per cent.

Profits in the distribution division increased by 12 per cent, with volumes with existing customers such as Waitrose and Ford increasing and new contracts signed. One of Hays strengths is its relatively small exposure to the cut-throat supermarket sector where margins are being squeezed. It only has two supermarket clients - Tesco and Waitrose and so is less exposed than rivals such as Christian Salvesen. The only hiccups were in Europe where the Paris strikes had a limited impact on the delivery business in France. In Germany the market remains difficult.

The commercial division, which includes document exchange and courier services had a good six months with profits up 20 per cent to pounds 18m. But the star performer was personnel, which specialises in temporary jobs in accountancy and information technology as well as the building professions such as architects and surveyors. Profits there increased by 38 per cent as the company benefited from the trend towards more flexible employment.

The plan is to expand in Europe as the UK accounts for three-quarters of group sales. The company is looking for a sizeable acquisition in France or Germany particularly in commercial services.

Panmure Gordon is forecasting profits of pounds 131m for the full year. With the shares down 6p yesterday to 393p they are on a forward rating of 18. High but still a good bet for the longer term.