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Harvey Nash Group PLC  -  HVN   

Interim Management Statement

Released 07:00 30-Nov-2012

RNS Number : 3741S
Harvey Nash Group PLC
30 November 2012


('Harvey Nash' or 'the Group')


Interim Management Statement


The Board of Harvey Nash is today issuing an Interim Management Statement covering the period from 1st August 2012 to 29th November 2012. There have been no material events or transactions in the period other than as detailed in this statement.  The Group's financial year concludes on 31st January 2013.


Current Trading 


The Board is pleased to report that the Group's trading for the period under review has been ahead of Management expectations mainly driven by increased revenues and profits in the UK and Ireland, temporary and contract recruitment in Northern Europe, and an improving result from Asia.


Revenue and gross profit for the quarter ended 31st October 2012 increased by 10% and 5% respectively when compared to the same period in 2011. Operating profit increased by 7% before higher interest costs in relation to increased working capital requirements resulted in profit before tax being 3% ahead of the previous year.


There were no exceptional or non-recurring items during the quarter and all items relating to the acquisition in Europe and the London office move were prior to the 1st August. The increased profit includes continued investment in the Group's two new offices in Asia Pacific and an office in Europe opened in the first quarter of the year.


Geographic split and market conditions


In the USA, gross profit was up 14%. Whilst the election and so-called "fiscal cliff" has resulted in a short-term pause in the market, the business reports an on-going recovery in demand confirming macro-economic trend indicators, which are increasingly turning positive.


Despite the widely reported slowdown in Europe, which has affected senior executive recruitment and reduced revenues from outsourcing, the impact has mostly been offset by an increase in contract recruitment. Accordingly, overall gross profit is lower by 5% compared to 2011 but with continued robust contract recruitment demand particularly in the Benelux and Germany, the result for the year is likely to be better than our previous expectations.


In the UK and Ireland, gross profit was up 10% on the same period last year driven by increased turnover in managed services and offshoring. Whilst permanent recruitment is slightly subdued at 4% below the same period last year, outsourcing is up 40% and contractor numbers are up 19%.


The Group's new offices in Hong Kong and Sydney are making good progress and integration of the Talent IT business in Belgium, acquired in May of this year, remains on track.


Financial position


In its interim statement for the six months ended 31st July 2012, the Group reported that outstanding receivables had increased in line with higher levels of trading in contracting and temporary recruitment combined with an increase in debtor days.


The Board is delighted to report that despite the seasonally stronger trading levels since the half year, cash generation has been robust and actions taken to reduce debtor days have been successful resulting in net borrowings reducing to £11.6m as at 31st October 2012 (31st July 2012: £14.1m).


The Group has no long-term debt and continues to enjoy good levels of headroom in relation to its working capital facilities.






On 23rd November 2012 an interim dividend of 1.125p per share in respect of the six months ended 31st July 2012 was paid, an increase of 10% on the previous year's interim dividend (2011: 1.025p).




As we have seen throughout the financial crisis since 2007 and as this set of results has demonstrated, the Group's broad portfolio of services, aligned to the various stages of the business cycle, underpins and drives financial performance. Contract recruitment, managed and offshore services provide clients with alternatives to permanent hiring at a time of uncertainty, market volatility, fresh recruitment freezes and downward pressures on margins.


Looking forward, the final quarter will continue to be challenging for permanent recruitment, particularly in Europe, and it is premature to comment on the following year, which ends on 31 January 2014.


However, with relatively good visibility from the Group's contract recruitment businesses and a robust forward order book in the offshoring business, the Board is confident that the out turn for the full year's profit before tax (adjusted for exceptional and non-recurring items), is now likely to be in the region of 10% higher than its expectations.


Albert Ellis, Chief Executive of Harvey Nash, commented:-


"The new digital economy continues to provide forward momentum in what is a lacklustre overall recruitment market. Skills shortages in the mobile and digital sectors have appeared just as consumers have migrated their spending online and are buying smartphones in record numbers.


The economic uncertainty throughout the world has meant that clients have tended to favour flexible contract and temporary hiring above permanent recruitment. In addition, much of the increased demand is for specialist software engineers to design and deliver mobile and web based commercial applications. All of these factors favour the portfolio of services we offer.


I am pleased that a sharp strategic focus in these areas has increased the Group's revenues in each of the three quarters so far this year resulting in good growth in underlying like for like profits and a further 10% increase in the dividend. We look forward to the future with confidence."


30th November 2012




Harvey Nash

Tel: 020 7333 2635

Albert Ellis, Chief Executive Officer

Richard Ashcroft, Group Finance Director

College Hill

Tel: 020 7457 2020

Mark Garraway,  Helen Tarbet


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Interim Management Statement - RNS