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UK – Harvey Nash trading update optimistic

21 August 2013

Harvey Nash (HVN: LSE), the international recruitment and IT outsourcing Group, has released a trading update for the second quarter, ending 31 July 2013. Momentum returned across most of the Group’s businesses during the second quarter following a slower than expected start to the year, and this has been maintained into the second half.

The Group expects to report a +13% increase in H1 revenue to circa £332 million (H1 2012: £293 million) and a +6% increase in gross profit to circa £43 million (H1 2012: £41 million). Operating profit before non-recurring restructuring charges is expected to be less than -5% below the prior year for the six months to 31 July 2013, an improvement over the -14% reduction against prior year in the first quarter, announced in May 2013.

First half results have in part been held back by a reduction in our outsourcing project pipeline in Germany, as a result of the slowdown in the telecoms market. A structural re-shaping of the business to align the cost base with longer term demand is well underway and this will result in a non-recurring restructuring charge which, whilst yet to be finalised, is expected to be in the region of £2 million. This will be expensed in the current year. The payback period is expected to be no longer than twelve months.

The Group had a positive cash balance at 31 July 2013 of circa £1 million (31 July 2012: net borrowing £14.1 million). The improvement compared to the position at 31 July 2012 was due to strong trading cash flows, improved working capital management and property cost savings in London. During the period, the Group acquired the remaining 49.9% of the Group’s Norwegian subsidiary, Bjerke & Luther AS, for a consideration of £1.3 million. Increased facilities to fund future growth were secured in February 2013, bringing the total available to circa £52 million.

The Board remains confident of delivering results for the current year, pre-restructuring changes, in line with its expectations. The Group is continuing to secure market share gains in its key geographies. Revenue and profit momentum have continued into the second half with cash flow substantially better than expected. 

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