UK-based IT staffing firm Harvey Nash (HVN: LSE) has announced its preliminary results for the six months ended 31 July 2017. The company reported revenue £425.2 million, an increase of 9.2% in constant currency compared with the previous year, but a decrease in operating profit of 1.3% (at constant currency). 

The decrease (constant currency) in Gross Profit was mainly due to changes in revenue mix with the strongest growth in profitable but lower-margin managed services, coupled with a slowdown in permanent hiring in the UK during the election period.

Harvey Nash also reported Profit Before Tax of £4.4 million, up 14.2% in constant currency over last year.

During the period, Harvey Nash stated that management undertook a thorough review of the group’s operations and cost base. Consequently, a transformation programme was implemented, including actions to streamline the business, review underperforming offices and reduce central overhead costs. Expected savings from this programme in the current financial year are £1.1 million and £2.2 million in FY19.

On 3 July 2017, the group announced and completed the acquisition of PAT Management AB, a human resource consultancy based in Sweden, for an initial cash consideration of SEK 18.2m (£1.7m) with a further SEK 19m (£1.7m) of potential deferred consideration. 

Earlier this month, Harvey Nash also announced and completed the acquisition of Crimson Limited, a UK based technology solutions and recruitment consultancy specialising in digital and technology transformation solutions as well as offering a full range of recruitment services, both permanent and contract.

Gross Profit by geography was broken down as follows:

In the UK and Ireland, the group stated it increased its market share and revenue, despite the impact of political uncertainty surrounding the UK general election and changes to the tax treatment of freelancers working in the public sector. Gross profit was down on last year, mainly due to a slowdown in the level of higher-margin permanent hiring during the election period.

In Mainland Europe, performance was varied across regions with a strong performance in Benelux offset by more challenging conditions in Central Europe. Skills shortages in Benelux drove demand for freelancers, project teams and managed services as more companies outsource the management of their temporary staff. Germany saw a decline in freelancers exacerbated by regulatory changes to the freelance labour market and the strong currency in Switzerland led to weaker demand for permanent recruitment. Harvey Nash stated that actions were taken in both countries to align costs with revenues, to refocus investment in growth areas and to reduce fixed overheads.

For the Rest of the World, demand in the US continues to swing in favour of permanent recruitment but record executive search revenues were offset by a decline in freelancers. Gross profit in Asia Pacific increased by 16.9% to £3.0 million with much of this growth in Vietnam and Singapore offset by a decrease in Australia.

Mark Garratt assumed the role of Group Finance Director on 27 April 2017, having joined the Board on 3 April 2017, following Richard Ashcroft’s decision to step down from the Board during 2017, as announced in September 2016.  Harvey Nash also announced that it has appointed Adrian Gunn as a nominee non-executive director on behalf of the investment adviser of the Company's largest shareholder, DBAY Advisors Limited.

Chief Executive Officer, Albert Ellis commented, “The group has reported encouraging results for the first half of the year, in line with our expectations. I am very pleased that in a challenging UK market our business has increased its revenue and delivered a robust financial performance.”

“The group’s businesses in the Benelux reported record revenues and profits, and improved results in the Nordics and Asia Pacific reflected the actions taken to increase margins and overall results during the period. Our strategy is focused on the demand for executive and technology recruitment from clients undergoing digital transformation, and we have added to the group’s capacity with two excellent acquisitions. The combined benefits of these and the efficiencies from the transformation programme are expected to flow through into the current and next year’s results. Accordingly, we enter the second half of the year on track, well positioned to capitalise further on market opportunities as they arise and confident about the outlook for the remainder of the year,” Ellis said.

In trading today, Harvey Nash Group traded at £90.00, up 2.13% on the day and 13.25% below its 52-week high of £103.75, set on 14 July 2017. Based on its current share price the company has a market value of £64.73 million.