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UK – Harvey Nash sees “robust” H1 performance

28 September 2012

International recruiter Harvey Nash (HVN:LSE) remains on track to deliver full-year results in line with expectations after seeing increased demand in temporary employment, the firm reported today.

Looking ahead, the firm expects “that mainland Europe will continue to be weak for the rest of the year, however demand has improved in the USA, and the UK is stable,” according to an interim statement.

The firm has benefitted from increased demand in temporary and contract recruitment with revenues for the six months to July 2012 increasing by +15% to £292.5 million from £253.4 million a year ago. 

Gross profit was up by +6% to £40.8 million, compared to £38.6 million at the same time last year But the gross margin dropped from 15.2% to 13.9% due to a change in the mix of services from permanent to contract and temporary recruitment.

Operating profit fell to £3.7 million from £4.1 million seeing a decline of -8%.  

“Given the uncertainty in the market, this has been a robust first half performance, demonstrating the value of a diversified geographical footprint and a broad portfolio of services to offer clients,” said chief executive officer Albert Ellis.

“The general trend across our markets is for a shift away from permanent employment in favour of temporary and contract recruitment, to which we have been swift to adapt.

“We are also continuing to focus on fast growing technology markets, in particular the digital, mobile and social media sectors. The Board is confident that the Group remains on track to deliver full year results in line with expectations.”

United Kingdom and Ireland

Revenues in the UK & Ireland increased by +26% to £105.5 million while gross profit was up by +10% to £16.7 million in the six months to July. The firm said it performed robustly given the current market conditions as operating profit rose +15% to £2.5 million.

Revenue was driven by increased demand seen for temporary and contract recruitment although demand for executive and permanent recruitment was softer, particularly in the banking and finance sector.

Performance in Ireland was strong, with net fees up +31% on the previous year due to demand from US multinationals such as Google and Fidelity.

Rest of Europe

In mainland Europe, revenue grew by +8% to £164.4 million but gross profit was down by -3% to £18.3 million due to a decline in permanent staffing. Operating profit was up +18% to £1.8 million, driven by strong performance in contract recruitment in the Benelux countries and Germany.

The Nordic market, which is heavily focused on executive and permanent recruitment, saw a -5% decline in revenue. In Switzerland, the firm was affected by a decline in various sectors including financial services and pharmaceuticals.  

In France demand has also declined, with revenues down sharply by -63%, particularly following the elections in May this year. Revenues in the Netherlands increased +2% as demand for contract recruitment rose in line with the rest of Europe. In Belgium, revenues were up +49% in constant currency terms, also helped by an acquisition in the first half of the year.

Recruitment demand was relatively strong in Germany particularly in the South where growth reached +25%. The firm is achieving higher margins in niche market where skills shortages are acute.

United States

In the US, revenue increased by +25% to £21.9 million, and gross profit was up by +16% to £5.4 million. Operating profit rose +42% to £0.5 million, driven by growth in contract recruitment and offshore projects.

Asia Pacific

During the first half, the company opened two new offices in Hong Kong and Sydney. Demand in Hong Kong is driven mainly by global multinational investment in the Asian market. Revenues overall have been ahead of budget and amounted to £0.8 million while gross profit was £0.5 million. The firm saw a “better than expected” half-year loss of £0.3 million.

Harvey Nash Group is a professional recruitment and outsourcing consultancy. In early trading this morning, the share price responded favourably to the announcement, increasing +3.2% to 60.00 pence, a -2.0% fall form a year ago and +5.2% below its 52-week high of 70.75 pence seen in February. The firm has a market value of £42.88 million.  


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