John Cole has quit as managing director of Hays after the board at the logistics and personnel group lost confidence in him. The company issued a devastating profits warning last week, prompting a collapse in the share price.
Bob Lawson, chief executive of Electrocomponents, an electrical equipment distributor, who was due to become Hays' part-time chairman from 30 June, will also take on the managing director role until a replacement for Mr Cole can be found. Ronnie Frost, the founder and chairman of Hays who is due to retire on 30 June, said the departure of his managing director was not a direct consequence of last week's earnings alert.
Mr Frost said: "The board of Hays lost confidence in him. The board holds him responsible for the company's underperformance. Whether or not we made that [earnings] statement, John would have resigned within weeks. He was not doing as good a job as we would have liked."
Mr Cole was expected to get a payoff of £700,000, equivalent to two years' salary. He also has options for 624,000 shares, which are now underwater at an average exercise price of 228p, but it was unclear whether he remained entitled to these after quitting his post.
Hays stunned the market last Thursday with the news that it would not meet expectations for the current year, largely because of a downturn in logistics, sending its shares tumbling 31 per cent on that day to 215p. The stock has subsequently continued to fall but it bounced back yesterday on heavy turnover of 69 million shares. Analysts said the rally did not reflect enthusiasm for the departure of Mr Cole. Instead, the event was an excuse for buying the stock after a big sell-off, they said, particularly as five Hays directors provided a lead yesterday, buying a total of £132,000 worth of stock. Hays shares closed up 8.5 per cent at 182.25p yesterday.
Robert Morton, of WestLB Panmure, said: "John Cole was not an unpopular figure in the City.... He is falling on his sword over this."
Hays gave no hint of a change of strategy, even though its divisions operate in disparate lines of business, a structure that has long been out of favour with the City. Mr Frost said: "Don't use that dirty word conglomerate.... You don't break up a good thing. Our businesses fit perfectly well together. There is no change in strategy."
Hays is based on a "three-legged stool". As well as personnel recruitment and logistics, Hays has a "commercial" division that has interests in chemicals, running call centres, billing services and express-mail delivery.
Julian Cater, an analyst at Morgan Stanley, said: "People [in the City] misunderstood logistics contracts, thinking they were impervious to a downturn. But everyone still expects personnel to slow, too."
Mr Frost, who has a stake of almost 5 per cent in Hays, said: "The movements in the share price don't worry me. What upsets me is that 47 per cent of our employees are shareholders, and they work their butt off to produce results.... It is more difficult to run the business when this sort of thing happens."
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