Harvey Nash, the global executive recruitment and professional services group, today issues a trading statement covering the period from 1 August 2014 to 24 November 2014. There have been no material events or transactions in the period other than those detailed in this statement. The Group’s financial year ends on 31 January 2015.
Trading in the quarter ended 31 October 2014 (“Q3”)
The robust demand for recruitment and offshore services reported in the Group’s half-yearly results continued in Q3 in the United States, United Kingdom, Sweden and parts of Asia. Permanent recruitment in mainland Europe, however, deteriorated further due to ongoing macro-economic weakness. This, exacerbated by currency headwinds, held back the Group’s actual financial results in Q3.
Year on year Q3 performance
* 2014 figures re-translated at 2013 rates
UK and Ireland
The UK & Ireland delivered growth in all service lines. Investment in new offices and fee-earners, combined with higher numbers of contractors working, were the key drivers of growth.
Economic weakness continued to impact results with weaker demand in permanent recruitment and outsourcing. Contracting and temporary recruitment continue to be resilient.
While Sweden showed improved results, challenging local market conditions in Norway continued. As previously announced, a restructuring of this business has been implemented, with costs to be incurred in the final quarter estimated at circa £0.5m, to ensure its cost base is better aligned with current levels of demand.
Good market conditions resulted in higher levels of permanent recruitment and offshore projects at the expense of contract and temporary recruitment.
Strong growth was achieved through organic investment in headcount in Hong Kong and Vietnam, the acquisition of the Japanese executive recruitment business in Tokyo and a stabilisation of market conditions in Australia.
Financial position and interim dividend
Actions to reduce debtor days since the half year have been successful despite seasonally higher levels of trading over the quarter. The Group continues to maintain substantial headroom in its banking facilities, which total £52 million. It has no term debt.
As set out in the interim results announcement on 30 September 2014, the Group paid an increased interim dividend of 1.360 pence per share, up 10% on the prior year (2014: 1.238p) on 21 November 2014 to shareholders on the register as at 24 October 2014.
On 21 August 2014, the Group completed the acquisition of Beaumont KK, an executive recruitment company based in Tokyo, and actions to realise synergies on property and accounting overheads were on track during the period under review.
Following an ongoing review process, the Board has concluded that the European telecom outsourcing business is non-core. Specialist advisers have been appointed to make recommendations to the Board on strategic options. Non-recurring costs of circa £0.5 million associated with further restructuring and this process are expected to be incurred in the final quarter.
Since the start of the current financial year, the Group has invested in an 8% increase in headcount to drive business growth. This, coupled with challenging conditions in permanent recruitment in mainland Europe and ongoing currency headwinds, has held back the uplift in the Group’s adjusted operating profit for the first nine months to 7% on a year on year constant currency basis and 1% on an actual basis.
While like-for-like growth and strong trading has been achieved in many of the Group’s businesses in the period under review, the Board now believes that overall operating profit for the current financial year is likely to be broadly similar to the year ended 31 January 2014.
Our business model provides resilience across geographies and markets, so that the effect of challenging trading conditions in parts of Europe is mitigated by more buoyant markets in the USA, UK and Asia. The Board believes the broad portfolio of services, including permanent and temporary recruitment and offshore services, provides the Group with a solid platform for future growth.