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UK – Harvey Nash’s revenues rise but profits slump

27 September 2013

International recruitment and IT outsourcing company (HVN: LSE) reported revenue of £329.2 million for the six months to 31 July 2013, an increase of +13% compared with the same period last year. Gross profit for the period increased year-on-year by +6%, from £40.8 million last year to £43.1 million this year.

Operating profit for the period dropped -44% to £2.1 million from £3.7 million a year ago. Net profit for the period was £1.3 million, a fall of -45.9% from £2.4 million for the same period last year. The company pointed the finger of blame for the decline in operating profit at the slowdown in the German mobile telecoms market which resulted in £2.2 million in redundancy costs within the company’s German outsourcing unit.

Harvey Nash had predicted that Group revenue for the six month period would reach £332 million; however their gross profit prediction of £43 million was proven accurate. Albert Ellis, CEO of Harvey Nash, commented: “The Board is pleased with the way the Group’s market leading recruitment business in the UK and mainland Europe have performed, increasing revenues and profits despite challenging market conditions and weakness in European outsourcing. Digital transformation has driven client demand for new hires in all of our markets across the world.”    

Revenue across the UK & Ireland increased to £112.2 million during the six months to 31 July 2013, a rise of +9% from £103.3 million last year. Executive recruitment revenues were flat compared to the previous year, indicating a return to stability for the weakest part of the job market. Revenues generated by financial services in the City of London were up +10%, year-on-year. 

Revenue from mainland Europe during the period was £192.4 million, rising by +16.4% from £165.3 million a year ago. Clients continued to favour temporary and contract recruitment, while the demand for permanent recruitment remained relatively weak.

The Benelux countries and France contributed £137.2 million toward European revenue, up +26.7% from £108.3 million for the same period last year. Revenue from the Nordic countries increased by +11.4% from £7 million to £7.8 million, year-on-year. The Central European countries reported a fall in revenue of -5.3%, down from £49.9 million to £47.3 million, year-on-year. 

On 29 April 2013, the Group acquired the remaining 49.9% stake of Bjerke & Luther AS in Norway for a consideration of NOK 11.5m (GBP1.3m) in cash and is transitioning the business under the existing Nordic management team and investing in expanding the fee-earning capacity. The Group's acquisition in Belgium, Talent IT NV, has performed in line with expectations and has expanded its services and headcount too.

Revenue from the United States remained stable, year-on-year, at £21.9 million. Market conditions improved resulting in a swing in demand from temporary and outsourcing, to permanent recruitment and executive search. Permanent recruitment revenues increased +29% compared with a year ago, while contracting and outsourcing were slightly down.   

Asia-Pacific revenue increased from £2.1 million to £2.7 million. Investment in two new offices in Hong Kong and Sydney resulted in growth in revenue of +27%. While not yet achieving ‘break-even’, Hong Kong achieved a number of new client wins. The slowdown in Australia’s domestic economy affected the growth of the Sydney office. 

Julie Baddeley, who was appointed Chairman of Harvey Nash in June, commented: “In the relatively stronger economy of the USA, improved demand for permanent recruitment has increased momentum into the second half. Although the market for outsourcing and recruitment in Europe remains subdued the outlook in our UK recruitment market in improving. The Group is well positioned to take advantage of the continuing improvements in the markets in which it operates. On this basis, the Board remains confident of delivering results in line with its current expectations.”

Harvey Nash is one of the largest European staffing firms, according to research from Staffing Industry Analysts. In trading today, the company’s share price fell by -6.2% to £0.90, an increase of +61% compared with a year ago. Based on its share price, the company has a current market value of £65.7 million. 

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