Harvey Nash (HVN: LSE) reported revenue rose 9.2% in constant currency in 2017, but operating profit fell 40.3%, according to preliminary results released last week. The London-based global IT recruitment and services firm also reported wrapping up its transformation program, and looking ahead.

“We’ve done the transformation, it’s effectively finally completed, probably the next few months,” CEO Albert Ellis said in a video interview announced by the firm. “We’ve actually implemented some really good housekeeping, call it self-help measures if you like, but we’ve also grown the business, both organically and by acquisition. And as someone said to us recently, that’s a pretty good scorecard to have done all those things in one year. What I’m really delighted about is it clears the way for the future.”

The company described its transformation programme as:

• focusing on the company’s key strength in the Technology and Digital Transformation markets,
• investing in market-leading businesses in the UK, Europe and Vietnam,
• streamlining operations by closing underperforming offices, reviewing overheads and driving efficiencies,
• moving the company’s listing to AIM (Alternative Investment Market) which it regards as a more appropriate environment for the company’s acquisition strategy (effected in July 2017).

The company claims the success of the transformation is reflected in the improvement of the conversion ratio (operating profit as a proportion of gross profit) on a core basis to 12.6% for the second half of the year. Full year conversion was 10.7% on a statutory basis (2017: 9.5%).

The company reported gross profit rose by 7.2% in the UK and Ireland during 2017 despite the Brexit uncertainty. London was most affected by Brexit, but it’s prompting the financial service sector to hire, Ellis said. The firm’s London financial services division saw revenue rise 28%. There wasn’t much of an impact in the rest of the UK from Brexit. Changes to the tax treatment of freelancers working in the UK public sector (IR35 legislation) resulted in some disruption in the first half of the year but demand and profits rebounded in the second half.

In other parts of Europe, gross profit rose 16.9% in Benelux, and gross profit was up 5.3% in the Nordics. Actions were taken to restructure businesses in Norway, Switzerland and Germany by reducing headcount and property costs.

Outside of Europe, gross profit fell 11.9% though operating profit in Vietnam increased by 60.3%. The company took a number of actions in Asia to improve performance including the closure of the Hong Kong office and the executive search businesses in Japan and Singapore. The US technology recruitment business faced acute skills shortages particularly on the West Coast, which reduced conversion rates from vacancies into placements reducing contractor numbers and the level of permanent placements compared to the prior year. US gross profit declined by 16.4% to £13.9m (down 18.9% on a constant currency basis) and the loss-making Denver office was closed. 

Acquisitions by Harvey Nash in 2017 included Crimson Limited, a UK-based IT solutions and recruitment company, and PAT Management AB, a Swedish human resource consultancy.

Regarding the outlook and current trading, the company reported that they are encouraged by the strong trading momentum in the second half of the year to January 2018 which has continued into the current year. As a result, the Board is confident the Group will continue to make significant progress in the year ahead.