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Harvey Nash (HVN:LSE) issued its first Interim Management Statement for the financial year 2013. The Board reported that the Group performed ahead of budget during the first quarter ended 30 April 2012. Revenue rose 18% and gross profit was up 6% compared with the same period last year. According to the statement, the increase in revenue is being driven by a greater proportion of flexible labour services in their business mix. Operating profit, stated before non-recurring items and other items is 10% ahead of last year.
Trading in the US remains encouraging with good growth seen in the first quarter. As expected and in line with the view expressed in the company’s preliminary results statement, UK and European trading is more modest. Outsourcing continues to perform well.
The company also announced the acquisition of Talent-IT BVBA ("Talent-IT"), a Belgium based IT project and recruitment company, for an initial cash consideration of €1.8 million (including subsidiaries). Talent-IT is headquartered in Antwerp and specialises in providing clients with highly skilled IT professionals for their permanent or project based vacancies.
According to the company this acquisition marks another important step in the ongoing development of Harvey Nash's portfolio of services across its most profitable geographic regions. The company claims the acquisition will result in Harvey Nash's Benelux business becoming the market leader in the region. It will also increase the total contribution of that business to 30% of the Group's mainland Europe revenue.
In the year ended 31 December 2011, Talent-IT and its wholly owned subsidiary Team4Talent BVBA reported a combined profit before taxation of approximately €0.7 million, turnover of approximately €11.3 million and as at 31 December 2011 had gross assets of €4.4 million and net assets of €0.5 million. This acquisition values the business at 2.5xPBT.
The sellers are to remain with Talent-IT and Team4Talent. Subject to certain earn-out thresholds being met, they will receive, in aggregate, up to a maximum of €2.8 million in deferred consideration over the next three years to be funded out of Harvey Nash's existing cash resources.
In other news, the company has invested approximately £0.8 million in two new office openings in Hong Kong and Sydney with effect from 1 February 2012. The Group is also relocating its London office achieving approximately £0.8 million of annualised like-for-like savings, at a one-off cost of circa £0.6 million. A sizeable amount of the investment in Asia and all of the relocation costs are budgeted for the first half of the current financial year.
Speaking about the results Albert Ellis, Chief Executive of Harvey Nash, said: "We are delighted with the first quarter financial results given the economic uncertainty right now. We are also very pleased with the acquisition of Talent-IT which when merged with our existing successful Harvey Nash business, the merged entity will be the clear market leader in Technology recruitment in the profitable Benelux region."
Looking to the future, there has been no change to the firms cautious outlook for the Eurozone reported in February (see our news story of 17th February 2012).
Given recent market volatility, the firms however sees unique opportunities, such as the acquisition of Talent-IT. In these situations they believe they will be able to drive growth and create new market leaders in key geographies, when the market conditions improve.
The outlook for freelance contracting remains encouraging with little evidence of a slowdown. As a result, the Board is pleased to report that underlying organic first quarter trading is on track and the acquisition of Talent-IT is expected to contribute an additional 5% increase to Group PBT (before non-recurring items) this year and a 10% increase next year.
Harvey Nash Group is a professional recruitment and outsourcing consultancy that operates in three geographical segments: UK and Ireland, Rest of Europe and United States, whereby Asia Pacific is included in the UK and Ireland. The firm’s professional recruitment includes technology, finance and engineering recruitment.
In Staffing Industry Analysts’ ranking of the top recruitment firms in the UK, Harvey Nash ranked 26th.
In early trading this morning, the company shares went up +9.38% at £52.50, which is above yesterday’s 52-week low of £47.59 but 40.34% below the price last year. This currently values the company at £35.26 million.xx