ACTIVITIES

Following a Strategic Review of the Group’s activities, on 4 March 2003 the Group announced its intention to focus in future on its Personnel activities and to take advantage of the deregulation of the UK mail market before considering a disposal of the Mail business. All of the other businesses of the Group are to be disposed. The range of activities provided by the Group during the period can be summarised as follows:

REVIEW OF THE BUSINESS

The Group’s results are set out in the financial statements on pages 22 to 54. Details of the Group’s operations and future prospects are set out in the Chairman’s Statement and the Review of Operations on pages 2 to 7 and 60 to 73.

RESULTS AND DIVIDENDS

The financial results for the year ended 30 June 2003 are set out in the accompanying financial statements which were approved by the Board on 8 September 2003. They show an operating profit before goodwill amortisation and exceptional items of £190.1 million. Exceptional charges of £628.4 million were incurred in the year, details of which are included in note 3 to the financial statements. The Group incurred a loss before tax of £476.8 million and a loss after tax and minority interests of £517.7 million.
An interim dividend of 1.75p per share in respect of the year to 30 June 2003 was paid on 30 May 2003. The Directors recommend a final dividend of 3.63p per share which, if approved at the Annual General Meeting, will be paid on 28 November 2003 to shareholders on the register on 24 October 2003. £609.8 million has been transferred from reserves.

SHARE CAPITAL

The authorised and issued share capital of the Company, together with details of the shares issued during the period, are shown in note 20 to the financial statements.
During the year, 335,384 Ordinary shares of 1p each were allotted in accordance with the rules of the Hays plc 1989 Executive Share Option Scheme and 13,524 Ordinary shares of 1p each were allotted in accordance with the rules of the Hays plc 1996 Company Share Option Plan.

SUBSTANTIAL SHAREHOLDINGS

The following shareholders had advised the Company of holding an interest of 3% or more in the issued share capital of the Company at 8 September 2003:

Morgan Stanley Investment Management Ltd advised the Company that investment management clients of companies within the Morgan Stanley Group were, in aggregate, interested in 12.0% of the issued share capital of the Company as at 8 September 2003.
FMR Corporation and Fidelity International (which is not an ‘authorised person’ under the Financial Services Act) advised the Company that investment management clients of companies within its group were, in aggregate, interested in 3.1% of the issued share capital of the Company as at 8 September 2003.

DIRECTORS

The following were Directors during the year and held office throughout the year, unless otherwise indicated:

R A Lawson Chairman
C S Matthews Chief Executive (appointed 1 November 2002)
P Danon*
L M S Knox*
J W Martin (appointed 4 March 2003)
N A McLachlan (resigned 8 September 2003)
C S Taylor*
X F E Urbain
B G Wallace*
D R Waxman
G J Williams (retired 30 April 2003)

* Non-executive Directors

Mr J W Martin, having been appointed since the last Annual General Meeting, will retire in accordance with the Company’s Articles of Association and, being eligible, offers himself for re-election. Messrs Urbain, Wallace and Waxman will retire by rotation and, being eligible, offer themselves for re-election.
Biographical details for the current Directors are shown on pages 8 and 9.

The beneficial interests of Directors in office at 30 June 2003 in the shares of the Company at 30 June 2003 are set out below:

Details of Directors’ options are shown on pages 20 and 21.

Shares do not include potential entitlements under the Performance Share Scheme, further details of which are set out on page 21.
The executive Directors are regarded as being interested for the purposes of the Companies Act in 18,508,455 Hays plc shares currently held by the Hays plc Employee Share Trust and in 5,010,872 shares currently held by the Hays plc Qualifying Employee Share Ownership Trust (the ‘Trusts’) since they are, together with other Hays Group employees, beneficiaries of the Trusts.
There have been no changes in the above interests between 30 June 2003 and the date of this report with the exception of small changes in the holdings of the Trusts. Except as shown above, no Director had any interest in the shares of the Company or any subsidiary (other than as nominee for the Company) and no right to subscribe for shares in, or debentures of, the Company or any subsidiary was granted to or exercised by any Director or any member of their immediate family during the year.
Apart from that disclosed below, no Director had an interest at any time during the year in any significant contract or arrangement to which the Company or its subsidiaries were party, other than the service agreements of the executive Directors with the Company.
In the case of a successful disposal of the Logistics business and subject to certain parameters, including length of tenure with the new owner, Mr X F E Urbain is entitled to a bonus payment.

EMPLOYEE INVOLVEMENT AND EMPLOYMENT OF THE DISABLED

The Group maintains a strong commitment to employee involvement. Typically, this includes staff committees, briefing groups, in-house newspapers, special publications and videos on particular subjects of interest. The Group has established various share schemes to encourage the involvement of employees in the Group’s performance.
The Group’s policy on recruitment is based on the ability of a candidate to perform the job. Full and fair consideration is given to applications for employment from the disabled where they have the appropriate skills and abilities to perform the job. If employees become disabled during the course of their employment with the Group and, as a result, are unable to perform their normal jobs, every effort is made to offer suitable alternative employment to them and to provide assistance with retraining. It is Group policy to encourage the training and further development of all its employees where this is of benefit to the individual and to the subsidiary concerned. This, of course, includes the provision of training to meet the special needs of disabled employees.
Details of the Group’s social and environmental policies are set out in the Corporate Responsibility statement.

CHARITABLE AND POLITICAL DONATIONS

Charitable donations made during the year totalled £59,644 (2002 – £78,108). No payments were made to political parties.

PAYMENTS TO CREDITORS

It is the Group’s policy to make payments to suppliers in accordance with agreed terms provided that the supplier has performed in accordance with the relevant terms and conditions. Creditor days for the Group for the year ended 30 June 2003 were an average of 42 (2002 – 43). The Company creditor days at 30 June 2003 were 12 (2002 – 22).

POST BALANCE SHEET EVENTS

The following disposals have been completed since the balance sheet date:

All of these businesses formed part of the former Commercial Division. The only remaining activities of that division are those of Rentacrate.
On 29 August 2003, the Group repaid £150.8 million of unsecured loan notes 2012.
On 5 September 2003, the Group made a one-off contribution of £51.7 million to address in part the funding deficit within the Hays Pension Scheme.

AUDITORS

Deloitte & Touche LLP have indicated that they are willing to continue in office. Their reappointment, at a remuneration to be agreed by the Directors, will be proposed at the Annual General Meeting.

SPECIAL BUSINESS AT THE ANNUAL GENERAL MEETING

The notice of the Annual General Meeting on pages 56 and 57 sets out the following special business (resolutions 10, 11 and 12).

ALLOTMENT OF SHARES

Resolution 10 authorises the Directors to allot Ordinary shares of the Company up to an aggregate nominal amount of £5,783,762 being approximately one third of the Company’s issued share capital. This authority will expire at the conclusion of the next Annual General Meeting. The Directors have no present intention of using this authority.
Resolution 11 empowers the Directors to allot Ordinary shares of the Company as if the pre-emption provisions of Section 89 of the Companies Act 1985 did not apply, provided that such power of the Directors is limited to the allotment of Ordinary shares up to an aggregate nominal amount of £867,564 (being 5% of the Company’s issued share capital) other than the allotment of Ordinary shares pursuant to a rights issue. This power will expire at the conclusion of the next Annual General Meeting.
These two resolutions comply with the guidelines issued by the various investor protection committees.

AUTHORITY TO PURCHASE OWN SHARES

Historically, the Company has sought general authority to re-purchase up to approximately 10% of its issued share capital at or between the maximum and minimum prices specified in the resolution giving the authority. No purchase of shares has been made pursuant to last year’s authority which expires at the conclusion of this year’s Annual General Meeting, but the Directors consider it desirable that the possibility of making such purchases under appropriate circumstances remains available. In the preliminary results announcement, it was stated that the Company expected to generate surplus cash as a result of the disposal process and planned to use cash in excess of that required for the future development of the business to buy back shares in the open market on conclusion of the transformation to a pure specialist recruitment business. In these circumstances, Resolution 12 seeks general authority for the Company to re-purchase up to 260,000,000 of its own shares in the market, being just under 15% of the Company’s issued share capital. The Directors have no immediate intention of using such authority and, in reaching a decision to purchase shares, will take into account the Company’s cash resources, capital requirements and the effect of any purchase on earnings per share. It is intended that the authority will only be exercised if to do so would result in an increase in earnings per share and is in the best interest of shareholders generally. It is anticipated that renewal of the authority will be requested at subsequent Annual General Meetings.

DIRECTORS’ RESPONSIBILITIES

The Directors are obliged under United Kingdom company law to prepare financial statements for each financial year and to present them annually to the Company’s members in Annual General Meeting.
The financial statements, of which the form and content is prescribed by the Companies Act 1985, must give a true and fair view of the state of affairs of the Company and the Group at the end of the financial year and the profit or loss for that period, and they must comply with applicable accounting standards.
The Directors are also responsible for the adoption of suitable accounting policies and their consistent use in the financial statements supported, where necessary, by reasonable and prudent judgements.
The Directors confirm that the above requirements have been complied with in the financial statements.
In addition, the Directors are responsible for maintaining adequate accounting records and sufficient internal controls to safeguard the assets of the Group and to prevent and detect fraud or any other irregularities.

By order of the Board

S J Charnock
Company Secretary
8 September 2003