Hays boss finalises DX deal

HAYS boss Colin Matthews unveiled the final steps in the company's transformation into an independent specialist recruiter with the full demerger of DX and announced his own new role as the chief executive designate of Severn Trent.

The water utility has been looking for a new leader following Robert Walker's decision to step down in February at the age of 60. Matthews's appointment appears to have been at the expense of Brian Duckworth, who has been managing director of Severn Trent for 10 years.

Duckworth said today he will step down from the board in August and leave next year following the AMP4 review.

Duckworth said: 'I feel its the right time for me at the age of 55 to seek fresh opportunities.' Severn used headhunters to draw up a list of both internal and external candidates but refused to comment on individuals who might have been considered.

Matthews, 48, joined the board of Birmingham-based Severn Trent as a non-executive in October and impressed them with his engineering background. Matthews will be paid a basic salary of around £500,000. Last year Severn Trent's boss was awarded a bonus of £200,000.

Severn Trent has already suffered unwanted attention over the appointment and defection among its top brass. Chairman David Arculus is leaving the water company to chair mobile phone group mmO2. Earlier, he was thought to have wanted to keep doing both chairman jobs, which caused upset on the water company's board.

Meanwhile, back in London Matthews was explaining his decision to demerge DX rather than sell or float the mail business.

According to company advisers there were three powerful reasons: 'Good management, good prospects and incredible cash generation.'

Shareholders should benefit as DX continues to pick up new postal business. Under the new era of postal deregulation, Matthews thinks DX should be able grow in the B2B mail sector. But with a new job looming, Matthews may not have wanted to wait any longer. Advisers to Hays also admitted that the IPO market isn't strong and a demerger gives execution certainty.

According to City insiders, the DX business made a pre-tax profit of £28m. Based on these figures with a dividend cover of 1.75 times, and a generously-calclated yield of 6%, shareholders are looking at an equity value of £175m. Throwing in debt of around £75m gives an enterprise value of around £250m.

However, Hays warned that due to investment in the network management and infrastructure needed to cope with the new amounts of business, DX's operating profit will be slightly below last year's.