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Harvey Nash Group Plc (HVN:LSE) today said that results for the year ended 31 January 2012 exceeded expectations due to the Group's portfolio of services and significant market share gains. The full-year results show that revenue increased by +26% to £533 million, compared to £422 million a year ago.
Gross profit was also up by +15% at £78.5 million from £68.5 million in 2011 while operating profit surged +41% to £9.0 million from £6.4 million in the previous year. The firm made £5.9 million in profit after tax, up from £4.3 million a year ago.
The staffing group said that current trading was in line with expectations as CEO Albert Ellis spoke of “another excellent set of financial results, which exceeded expectations. We are seeing the benefits of our focus both on high growth technology markets and on the robust economies of Northern Europe.”
“We made significant market share gains which delivered an increase in operating profit of 19% in the UK despite the widely reported weakness in the recruitment market and a 59% increase in operating profit in Europe against a background of uncertainty over the Euro zone.”
Revenue and gross profit grew in each region, particularly in the Nordic countries and Germany. Permanent revenue increased in the year by +23%, contracting revenue by +17%, outsourcing revenue by +4% and revenue from Managed Services by +41%. For Harvey Nash, managed services is defined as taking responsibility for the full management of critical IT infrastructure functions, such as data centre operations, help desk services and network administration.
The Group said that full-year results in the United Kingdom and Ireland were “excellent” given the challenging market. Revenue increased by +36% to £178.4 million from £131.5 million in 2011. Gross profit was up +8% to £30.7 million from £28.3 million. Operating profit also increased +19% to £3.2 million compared to £2.7 million the previous year.
The firm also said that in the region, permanent recruitment appears to be growing again due to a reduction of temporary workers. Across regional offices, Scotland reported the highest increase in revenue at 30% despite the weak overall UK economy. Due to a relocation of the firm’s London office in June 2012, non-recurring costs of £0.8 million are expected in the first half year.
In Mainland Europe, where demand for flexible labour is not slowing down, revenue was up +24% to £317.8 million from £256.4 million a year ago. Gross profit increased by +23% to £38.3 million from £31.1 million while operating profit was +59% higher at £5.1 million compared to £3.2 million in the previous year.
“We are pleased with the result of our strategic focus, both geographically in the Nordics and also successfully leveraging the demand for flexible labour at a time of uncertainty in the Euro zone combined with strong export led demand from the German economy. This continued demand for freelance labour is providing stability whilst demand for permanent staff is lower compared to the prior year,” the firm said.
During the year demand for permanent staff was strongest in the Nordic region with overall revenues increasing by +37% and professional recruitment in Sweden rising by +64%. Revenue growth was strongest in the mid-market professional sector with gross profit rising 64%. The firm said that local markets are robust and the acquisition in Norway of Bjerke & Luther AS, resulting in a +24% rise in revenues.
In Switzerland the firm recorded an increase in revenues and market share despite the weakness in the overall recruitment market. However, in the Netherlands cost reduction measures have resulted in a -10% lower contribution despite an overall +5% increase in revenues.
In Belgium the Group benefited from strong demand for flexible labour while permanent recruitment was lower than the previous year.
France was also on the road to recovery, reflected in increased revenues of 57%, albeit from a low base, reducing the prior year loss to broadly breakeven.
German operations represented 40% of the Group's European results, the largest single contribution outside of the UK. Recruitment growth was strong with gross profit up +33%.
In the United States revenue was up +7% at £36.7 million from £34.4 million a year ago while gross profit increased +4% to £9.5 million from £9.1 million. Operating profit was up +17% to £0.7 million from £0.6 million. The firm said that the US recruitment market has been very challenging over the last two years but business sentiment is improving with jobs and employment increasing.
While the firm performed ahead of expectations, it cautioned that the ongoing economic uncertainty in the Eurozone had affected hiring trends of permanent staff, which also impacted demand for executive recruitment in the UK, the Nordic countries and mainland Europe. Due to rising client demand in the Asia Pacific region, the firm will this year invest £0.75 million in new offices there. Looking ahead, the Group said that prospects for “freelance contracting remains encouraging with little evidence of a slowdown. As a result, the Board is pleased to report that first quarter trading is on track to deliver in line with current expectations.”
Harvey Nash Group is a professional recruitment and outsourcing consultancy that operates in three regions: UK and Ireland, Rest of Europe and United States, whereby results from Asia Pacific are included in the UK and Ireland region. 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’s share price remained unchanged at £63.00, down -13% from a year ago and +31% above the 52-week low of £48.04 set on 3 January 2012. This values the company at £46.27 million.