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PRELIMINARY RESULTS

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Harvey Nash, the global recruitment and professional services group, announces its preliminary results for the year ended 31 January 2015, delivering growth in key service lines.

Financial Results Constant Currency
2015 2014 Change Change
Revenue £696.6m £697.3m - 0% up 4%
Gross profit £89.5m £88.6m up 1% up 5%
Adjusted operating profit1 £9.7m £9.7m - 0% up 5%
Non-recurring items (£1.3m) (£2.6m) up 48% up 44%
Operating profit £8.4m £7.1m up 18% up 22%
Adjusted profit before tax1 £9.0m £9.0m - 0% up 6%
Profit before tax £7.7m £6.4m up 19% up 26%
Adjusted earnings per share1 9.02p 8.76p up 3% up 9%
Earnings per share 7.24p 5.24p up 38% up 45%
Final dividend 2.171p 1.974p up 10%
Net cash from operating activities £7.5m £5.4m up 38%
Net cash £2.1m £3.8m up £1.7m

Group Highlights
•Revenue and profit growth achieved across key service lines2
•Strong operating cash flow up 38%
•Positive net cash position at year end with debtor days down 8%
•Final dividend increased by 10% to 2.171p (2014: 1.974p)
•Investment in the future: overall Group fee-earning capacity increased by 10%

Regional Highlights 2
•USA: Revenues +6%, gross profit +8% and headcount +11% to capitalise on strong economic growth
•UK/Ireland: Strong operating profit growth +19% with increased critical mass and new locations
•Mainland Europe: Operating profit +3% despite macro-economic weakness
•Talent IT, the Group's Belgium acquisition is on track to achieve earn out after three years
•Asia: Revenue increased by 14% and gross profit 17% with further critical mass and an acquisition in Japan

Albert Ellis, Chief Executive Officer of Harvey Nash, commented:
"The Group has delivered growth in underlying revenues and profits across all its key service lines on a constant currency basis. In the UK, strong economic growth and a buoyant jobs market lifted operating profit by 19%. In the USA, high growth technology companies were hiring aggressively, exacerbating skills shortages and widening the gap between demand and supply for software development skills. Our investment in fee-earning capacity over the past year will drive more growth in the future.

With the benefit of improved trading conditions across most of our markets, I am pleased to report that the Group has had an encouraging start to the current financial year."

Enquiries:

Harvey Nash
Albert Ellis (CEO) and Richard Ashcroft (CFO)
Tel: 020 7333 2635

Tavistock
Keeley Clarke/ Matt Ridsdale /Niall Walsh
Tel: 020 7920 3150

Key: 1 Before non-recurring costs. FY15 and FY14 costs related to acquisition, strategic review costs and restructuring of European operations.
2 On a constant currency basis


CHAIRMAN'S STATEMENT

Financial Performance
The Group delivered a strong set of results achieving growth in all service lines on a constant currency basis. Reported revenue for the year was £696.6m (2014: £697.3m) and profit before tax and non-recurring items was £9.0m (2014: £9.0m).

Revenue and gross profit increased on a constant currency basis by 4.0% and 5.3% respectively in the year as a result of strong growth in contract recruitment in the UK and contract management services in Benelux in particular. The devaluation of the Euro and the relatively subdued demand for permanent recruitment impacted mainland Europe performance, whilst buoyant markets supported growth in permanent recruitment in the US and UK. Our successful outsourcing operations in Vietnam continued to grow organically in the year, and elsewhere in Asia our recruitment operations were strengthened by the acquisition of Beaumont KK, a boutique permanent recruitment business in Japan.

Operating profit before non-recurring items for the year was in-line with the prior year despite investment in new operations in the UK and Asia and a 10% investment in fee-earning headcount facilitated by strong cash flows. A non-recurring charge of £1.3m was incurred in the year (2013: £2.6m). As previously communicated, this mainly related to the strategic review of our European telecom outsourcing business (£0.6m) and the restructuring of our Norwegian operations (£0.5m). Additional charges of £0.2m were incurred in respect of the acquisition of Beaumont KK and the closure of the French operations.

Adjusted basic earnings per share, which excludes the effect of non-recurring items, rose by 3.0% to 9.02p (2014: 8.76p). Basic earnings per share, after non-recurring costs, rose by 38.2% to 7.24p (2014: 5.24p).

Dividend
The Board is recommending a 10% increase in the final dividend to 2.2 pence per share (2014: 2.0p). This gives a total dividend for the year of 3.5 pence per share (2014: 3.2p), also up 10%, and reflects the Group's progressive and sustainable dividend policy. Subject to approval at the Annual General Meeting on 2 July 2015, the final dividend will be paid on 10 July 2015 to shareholders on the register as at 19 June 2015.

Strategy
The Group's strategy is to continue to grow the business through a balanced portfolio of services, increasing revenues, profits and dividends. This portfolio delivers competitive advantages and results in a cash generative business model, which enables the Group to grow organically through investment in new services, geographic locations and increasing headcount, as well as through earnings enhancing bolt-on acquisitions.

The core of the Group's business model is its unique portfolio of services, which enables client engagement at each stage of the business cycle. This relationship model underpins the delivery of resilient financial results, demonstrated during the last downturn, and supports returns to shareholders.

A balance of permanent recruitment, contract recruitment, managed solutions and offshore services, combined with our market leading position in technology and executive recruitment, provides Harvey Nash with a competitive advantage and has ensured significant market share gains. Going forward, the Group will continue to invest in its offshore recruitment services in Vietnam, providing candidate placement services to the business in the USA, UK and parts of Europe.

During the year under review, the Group made the small but strategically valuable acquisition of Beaumont KK in Japan, thereby consolidating our presence in Japan and leaving us well positioned to achieve our strategic growth objectives in the broader Asia-Pacific region.

Board
Tom Crawford and Margot Katz both stepped down from the Board in July 2014. Margot continues to work with us on a consultancy basis on the next phase of our talent strategies, which we consider vital to our continuing growth and success. Kevin Thomas, a main board Director of FTSE 100 listed business Babcock International joined us in May 2014. He has valuable experience of growing businesses of substantial scale both organically and through acquisition and has made a significant contribution to the development of our strategic planning in recent months.

Outlook
The Group has reported growth in underlying revenues and profits across all its key service lines on a constant currency basis. The softening of permanent recruitment demand experienced in the fourth quarter in Mainland Europe appears to have stabilised and the macro outlook is currently supportive in the USA, UK, Ireland, Vietnam and parts of mainland Europe, such as Germany and Sweden.

As we look ahead we expect similar trends in trading conditions prevailing across our major markets. Sterling remains strong in relation to the Euro and whilst this will continue to impact reported growth rates, we are nevertheless encouraged by the start of the current year. With the level of visibility we have after two reporting months, the Board believes the outturn for the year will be in line with its expectations.

Julie Baddeley
Chairman


CEO REVIEW

The Group enjoyed another year of significant progress, particularly in expanding capacity across the world, adding critical mass in underutilised locations and opening up new markets. Where trading conditions were favourable, such as in the USA and UK, the Group increased revenues and profits whilst investing in future growth by adding to headcount.

Despite weak demand for permanent hiring in Mainland Europe, the Group increased profit contribution from Sweden and Belgium and improved financial performance in Germany in the second half. In markets where trading conditions were challenging, management focussed on restructuring the businesses affected. In Norway, the recruitment business was restructured following a sharp downturn in the domestic economy, and in Germany a strategic review of the outsourcing business is underway, re-aligning it towards growth markets and making investment available to develop innovative software products.

Currency headwinds and Sterling-based reported results mask a strong operational and financial performance particularly at local currency level in relation to the prior year. For example, the depreciation of the Euro and the Swedish Krona were two main factors in translating underlying growth in turnover of 3.9%* and therefore growth in market share into a reported decline in revenues in Europe of 1.9%. Currency depreciation was gradual over the period with the impact increasing toward the end of the year. Until exchange rates stabilise year-on-year this effect will continue to mask the underlying strength of the Group's performance.

In addition, the Group has been investing in Asia with the longer-term strategic goal of deriving new sources of revenues and profits to add to its European and USA footprint. With the exception of Vietnam, progress at the contribution level was slower than expected, as the Group had planned breaking into profit earlier than is now realistic. The main driver for this was the continued challenging Australian market caused by the decline in the resources sector and the slowdown in Hong Kong and China. Finally, the office in Tokyo benefited from the acquisition of Beaumont KK, an executive search team, resulting in synergies between the existing outsourcing service and the new recruitment team.

More detail about the performance of the business is set out below by region.

United Kingdom and Ireland
Revenue in the UK and Ireland increased by 2.7% to £229.8m (2014: £223.7m) and gross profit increased by 8.4% to £36.2m (2014: £33.4m). Operating profit was up 16.6% at £3.7m** compared to £3.2m the previous year. 2015
Actual 2015
Constant currency 2014
Turnover (£m) 229.8 + 2.7% 231.7 + 3.6% 223.7
Gross profit (£m) 36.2 + 8.4% 36.5 + 9.5% 33.4
Operating profit** (£m) 3.7 + 16.6% 3.8 + 18.7% 3.2

This was a strong performance, as the business capitalised on market share gains and continued with investment to expand capacity during the recession.
Demand for contingent technology professionals continued to be the strongest area of the market. London, and the Finance and Banking sectors in particular, were buoyant. It has been widely reported that broader demand for executive and higher salary positions did not demonstrate similar growth and this has been the Group's experience too. However, Education, Health, Consumer and Board recruitment has been active. We have also seen clients recruit strategic hires with an emphasis on gender balance and diversity. Interim management reported a steady performance with an increasing pipeline of opportunities as the economy continued to improve.
Growth came from the recently established locations in the UK, Newcastle, Bristol and Warrington, with the larger hubs such as Birmingham and Manchester broadly flat against record results in the prior year. In Scotland, the referendum reduced demand for permanent hires, but the number of contractors out at the year-end was up by 87% compared to the previous year. In Ireland, continued strong demand from mainly US and European multinationals for IT contractors drove overall growth up 22%* in gross profit on the prior year. The recently established office in Cork also delivered good growth albeit from a low base, up 94%* on the prior year.
Gross profit from Offshore IT Services was once again the fastest growing service up 17% following a strong year of new business sales, underpinning the UK profitability and cementing key recruitment client relationships.
* On a constant currency basis.
** Before non-recurring items.

Mainland Europe
Revenue in mainland Europe was £413.2m (2014: £421.2m) and gross profit was £37.4m (2014: £40.2m). On a constant currency basis, revenue increased by 3.9% and gross profit remained level. Operating profit was materially aligned to the prior year at £5.5m (2014: £5.6m) but increased by 3.0% on a constant currency basis. 2015
Actual 2015
Constant currency 2014
Turnover (£m) 413.2 - 1.9% 437.6 + 3.9% 421.2
Gross profit (£m) 37.4 - 6.9% 40.2 - 40.2
Operating profit** (£m) 5.5 - 2.1% 5.8 + 3.0% 5.6

Currency headwinds were the key feature of the Eurozone results. The decline in revenue was mainly due to the impact of the weakening Euro, a change in the mix in favour of higher margin contract recruitment and a decline in permanent revenues in the Eurozone with Holland, Belgium, Switzerland and Germany all reporting declines.
Results from the Benelux were robust with revenue overall increasing 7.5%* as clients continued to favour temporary recruitment over permanent recruitment. The business acquired in 2012, Talent IT in Antwerp, delivered a strong result in its final earn out year with gross profit up 25%*. Holland reported a small decline of 2% in gross profit* mainly related to lower permanent recruitment.
In the Nordics, gross profit declined overall as a result of the weak performance in Norway. The Group's business in Sweden performed well with overall gross profit up 16%* despite challenging trading conditions, with the interim management business reporting the strongest growth, up 43%*. Finland and Denmark, although small, both reported strong increases in gross profit. Norway's economy has been impacted by weakening domestic demand in the first half of the year and a significant decline in the price of oil in the second half such that gross profit was down by 37%*. The downsizing of the operation and property was not sufficient to return the Norwegian business to breakeven by the end of the year although we expect a smaller loss going into the 2016 financial year.
The results from Central & Eastern Europe, which include Germany, Switzerland and Poland, were also mixed. In Switzerland and Germany, recruitment gross profit declined by 4%* and 6%* respectively. However, in Germany a weak first half was offset by a much stronger second half mainly due to increasing demand for engineering and employed IT consultants. Executive recruitment in Poland was lower than the previous year, however technology recruitment was strong with a 94% increase in gross profit*.

United States
Revenue in the USA increased by 1.6% to £47.7m (2014: £46.9m) and gross profit increased by 3.7% to £11.8m (2014: £11.4m), whilst operating profit remained flat. 2015
Actual 2015
Constant currency 2014
Turnover (£m) 47.7 + 1.6% 49.7 + 5.9% 46.9
Gross profit (£m) 11.8 + 3.7% 12.3 + 7.9% 11.4
Operating profit** (£m) 0.9 + 1.5% 0.9 + 7.9% 0.9

The US economy was the strongest economy across the Group during the year to January 2015. The business invested in headcount (+11%) as confidence in the recovery grew stronger. Permanent recruitment was robust as the pipeline of orders for permanent hires continued to improve with net fees up 10.9%* on the prior year, with the Seattle office generating the highest proportion. Executive search was up 15%* boosted by demand for senior executives to drive technology-based digital business strategies in larger companies reflecting the strength of the US jobs market.
A natural swing in demand occurred during the year from contract to permanent as clients switched their resourcing strategies to filling long-term permanent positions. This impacted contribution and led to a small decline in core, higher margin, contracting gross profit over the year. This decline was offset by strong growth in the new Enterprise Technical Delivery Service, which grew by 31%*. This service provides contract resources to large enterprises mainly through a vendor management programme using the Group's unique offshore sourcing strategy.
The acute skills shortage combined with investment in digital resulted in many clients, mainly in the media sector, resourcing projects with offshore skills based in Vietnam, resulting in an increase of 26% in gross profit* from this service.
* On a constant currency basis.
** Before non-recurring items.

Asia Pacific
Revenue in Asia Pacific increased by 8.8% to £6.0m (2014: £5.5m) and gross profit increased by 11.4% to £4.0m (2014: £3.6m). Operating loss was £0.3m (2014: £0.1m profit) due to investment in fee-earning headcount and new offices. 2015
Actual 2015
Constant currency 2014
Turnover (£m) 6.0 + 8.8% 6.3 + 14.2% 5.5
Gross profit (£m) 4.0 + 11.4% 4.2 + 17.2% 3.6
Operating profit** (£m) (0.3) - 462.0% (0.3) - 433.9% 0.1

Although progress was slower than initially expected, results from the region were still encouraging with core revenues excluding business process outsourcing up 33% in reported currency. Continued investment in headcount organically in Hong Kong and Vietnam, and by acquisition in Tokyo resulted in a 16% increase overall. Whilst Australia remains challenging, Hong Kong and Vietnam continue to grow their pipelines and headcount. The Tokyo team have experienced a mixed six months with the integration process a distraction as they settle into the Group. However, we are confident the business will be back on track in the year ahead.

Future
During the 2015 financial year, the Group expanded fee-earning capacity by a significant 10% overall as the recovery gradually took hold. With stronger economic growth, low unemployment and rising business confidence in the US and the UK, stability in Europe and a return to growth in Asia, the jobs markets will continue to improve. In Mainland Europe, stability appears to be returning to the sector after the uncertainty in the latter part of 2014. A strategic review to explore options going forward is underway in relation to the German outsourcing business. In Asia, pipelines are indicating an improving trend into the second quarter of the 2016 financial year.
By continuing to invest in the Group's capacity, including its ability to source and recruit anywhere in the world from its offshore location in Vietnam, there is confidence that, subject to further volatility in the currency markets, the Group has every prospect of growing now and in the future.
* On a constant currency basis.
** Before non-recurring items.

FD REVIEW

Revenue was in line with the previous year at £696.6m (2014: £697.3m) but 4.0% higher on a constant currency basis, while gross profit was 1.0% higher at £89.5m (2014: £88.6m) and 5.3% higher on a constant currency basis. Gross profit (on a constant currency basis) from permanent recruitment was 3.0% higher, from contracting was 6.3% higher and from offshore solutions was 7.8% higher. During the year, in the light of the improving outlook in key markets, a decision was taken to invest in fee-earner headcount, which increased by 9.8% to 600 (2014: 546).
The net finance charge of £0.7m remained in-line with the prior year, resulting in an overall increase in profit after tax for the year of 36.8% to £5.3m (2014: 3.9m).

Taxation
The overall effective rate of tax is a function of the mix of profits between the various countries in which the group operates with higher rates in the United States, Germany and Belgium in particular being offset by lower rates elsewhere.
The tax charge for the year was £2.4m (2014: £2.5m) giving an overall effective rate of tax before non-recurring items of 27.1% (2014: 28.2%). The deferred income tax asset increased by £0.2m, relating to UK tax losses. The deferred tax asset of £2.8m (2014: £2.6m) relates primarily to accrued Group interest charges payable by the US business (£1.0m), tax losses (£0.8m) and post-employment liabilities (£0.4m) and was partially offset by a deferred tax liability of £0.3m relating mainly to unremitted earnings (£0.1m) and accrued revenue (£0.2m).

Earnings per Share
Adjusted basic earnings per share, which excludes the effect of non-recurring costs, rose by 2.97% to 9.02p (2014: 8.76p). Basic earnings per share rose by 38.2% to 7.24p (2014: 5.24p).

Balance Sheet
Total net assets at the year-end were £64.6m (2014: £65.5m), a decrease of 1.3% due to currency movements being greater than retained profits.
Property, plant and equipment increased by £0.1m as capital additions exceeded depreciation. Fixed asset disposals of £0.6m were made, of which £0.5m were fully depreciated.
Intangible assets increased by £1.0m to £51.4m due to software capitalisation of £1.7m and the acquisition of Beaumont £0.7m offset by exchange adjustments (£1.4m) and brand amortisation (£0.1m).
Net trade receivables decreased to £80.0m (2014: £112.6m), as a result of a combination of efficient working capital management and the timing of invoicing. Prepayments and accrued income rose by £13.9m, due mainly to increases in accrued revenue in the Netherlands as a result of the timing of invoicing. Debtor days decreased to 42.5 days (2014: 46.1 days). Trade payables decreased by £7.8m to £59.1m, again due mainly to the timing of payments. Accruals for taxes and social security payable decreased by £4.1m due mainly to the earlier payment of VAT. Other accruals decreased by £3.5m due mainly to lower accruals for contractor costs in the Netherlands.
Contingent consideration also increased by £0.2m to £2.4m (2014: £2.2m), being deferred consideration payable of £0.5m for the acquisition of Beaumont and offset by foreign exchange movements. The closing balance includes £2.0m estimated as payable during the 2016 financial year, following the completion of the earn out period which commenced on acquisition of the Talent IT business. The overall decrease of £0.7m in provisions for liabilities and charges relates predominantly to the utilisation of the provision for German termination costs and costs in respect of the closure of the French office which will be completed in 2015, partially offset by costs relating to the restructuring of the Norwegian business.
The Group had a positive net cash position at 31 January 2015 of £2.1m (2014: £3.8m) and has no long-term debt.

Cash Flow
Free cash flow from operating activities before movements in working capital was once again strong at £10.2m (2014: £9.2m). Overall net cash at 31 January 2015 of £2.1m was £1.7m lower than the previous year owing mainly to a combination of higher working capital (£0.5m), share purchases for the Employee Benefit Trust (£1.6m), cash outflow on non-recurring items (£2.0m), the purchase of Beaumont for cash (£0.4m) and dividend payments (£2.4m). Cash outflow on capital expenditure in the year was £0.1m higher than the previous year, and income taxes paid were £0.7m higher.

Banking Facilities
The Group maintains substantial headroom in its banking facilities to fund working capital with £50m invoice discounting facilities of which £25m is in the United Kingdom, the equivalent in Euros of £15m is in the Netherlands, the equivalent in US Dollars of £5m is in the United States and the equivalent in Euros of £5m is in Belgium, plus a £2m overdraft facility in the United Kingdom.

Key risks
Risk Description Mitigation
Technological development and digital innovation The risk of disruption to the recruitment sector through digital innovation is mainly considered to be the growing use of social media to source candidates. The Group has invested time both at Board level and in the operational context to design suitable strategies to capture the benefits of the current disruption and mitigate potential erosion of the Group's market share. The Group has also invested significantly in developing its in-house expertise in utilising social media channels to accelerate sourcing and recruiting.
Economic environment The performance of the Group is impacted by the economic cycles of the economies of the countries in which it operates. The Group developed a broad portfolio of services appropriate to different stages of the economic cycle and a continued focus on annuity revenue streams providing enhanced visibility and improving client retention rates during downturns.
Foreign exchange The global nature of Group operations naturally give rise to exposure to a basket of currency movements, both in actual cash gains / losses and translation differences. The Group ensures natural hedging takes place as the majority of its costs are aligned with revenues in single currencies, and manages its exposure on equity investments in overseas subsidiaries through foreign currency borrowings. Cash gains or losses are limited through active management of working capital and appropriate accounting policies and financial controls. Variances on translation arise as part of the strategy of increasing international exposure and are not actively hedged.
Key clients The Group is not overly reliant on any one key client, however there is a risk that business performance may be impacted if a number of key clients were lost. The Group's client centric strategy places great emphasis on the client and the retention of the relationship. A diversified geographical footprint and sector focus also reduces the risk of key client losses affecting the overall Group due to adverse country or sector specific conditions.
Talent The loss of senior management or key personnel could adversely affect the Group's results. Sponsored by the Executive Council and implemented by the Group's Head of Talent a programme of on-going investment in talent management is focused at maintaining high retention rates of identified key consultants and leaders.
Regulatory environment The recruitment industry is governed by an increasing level of compliance, which varies from country to country and market to market. The Group utilises high quality external professional advice to reduce risk in this area. Robust internal controls ensure high levels of compliance in relation to legal and contractual risks and obligations.
Data protection The Group operates with a number of complex systems which maintain confidential data. Data protection is a key priority. The Group has data protection and security policies in place and regularly reviews the effectiveness of these policies.

Consolidated Income Statement
for the year ended 31 January 2015

Notes 2015
£ '000 2014
£ '000
Revenue 4 696,627 697,321
Cost of sales (607,170) (608,751)
Gross profit 4 89,457 88,570
Administrative expenses (81,057) (81,443)
Operating profit before non-recurring items 4 9,739 9,706

Non-recurring items 7 (1,339) (2,579)

Operating profit 4 8,400 7,127
Finance income - 21
Finance costs (736) (721)
Profit before tax 7,664 6,427
Income tax expense 5 (2,400) (2,543)
Profit for the year 5,264 3,884

Attributable to:
Owners of the parent 5,264 3,846
Non-controlling interest - 38
5,264 3,884

Earnings per share for profit attributable to owners of the parent
- Basic earnings per share 6 7.24p 5.24p
- Diluted earnings per share 6 7.20p 5.22p

- Adjusted basic earnings per share* 6 9.02p 8.76p
- Adjusted diluted earnings per share* 6 8.98p 8.72p

All results presented are derived from continuing operations.

Consolidated Statement of Comprehensive Income
for the year ended 31 January 2015
2015
£ '000 2014
£ '000
Profit for the year 5,264 3,884
Foreign currency translation differences** (2,577) (1,339)
Other comprehensive income for the year (2,577) (1,339)

Total comprehensive income for the year 2,687 2,545

Total comprehensive income attributable to:
Owners of the parent 2,687 2,507
Non-controlling interest - 38
2,687 2,545
* excluding non-recurring items ** which may be recycled into the consolidated income statement if specific conditions are met

Consolidated Balance Sheet

as at 31 January 2015
Notes 2015
£ '000 2014
£ '000

ASSETS
Non-current assets
Property, plant and equipment 3,894 3,830
Intangible assets 9 51,402 50,386
Investments 235 217
Deferred tax assets 2,757 2,552
58,288 56,985
Current assets
Cash and cash equivalents 18,996 15,881
Trade and other receivables 118,689 136,083
137,685 151,964

Total assets 195,973 208,949

LIABILITIES
Non-current liabilities
Contingent consideration 9 (460) (2,150)
Deferred tax liabilities (314) (355)
(774) (2,505)
Current liabilities
Trade and other payables (108,765) (126,796)
Current income tax liabilities (2,569) (988)
Borrowings (16,885) (12,050)
Contingent consideration (1,968) -
Provision for liabilities and charges 8 (414) (1,142)
(130,601) (140,976)

Total liabilities (131,375) (143,481)
Net assets 64,598 65,468

EQUITY
Capital and reserves attributable to equity shareholders
Ordinary shares 3,673 3,673
Share premium 8,425 8,425
Fair value and other reserves 15,079 15,079
Own shares held (1,032) (172)
Cumulative translation reserve 2,191 4,768
Retained earnings 36,262 33,695
Total shareholders' funds and total equity 64,598 65,468

Consolidated Statement of Changes in Equity

for the year ended 31 January 2015

Share capital Share premium Fair value and other reserves Own shares held Cumulative translation reserve Retained earnings
Total Non-controlling interest in equity Total equity
£ '000 £ '000 £ '000 £ '000 £ '000 £ '000 £ '000 £ '000 £ '000
Balance at
1 February 2013 3,673 8,425 15,079 (50) 6,107 33,477 66,711 252 66,963
Profit for the year - - - - - 3,846 3,846 38 3,884
Currency translation adjustments - - - - (1,339) - (1,339) - (1,339)
Total comprehensive income and expense for the year - - - - (1,339) 3,846 2,507 38 2,545
Dividends paid to non-controlling interests - - - - - - - (180) (180)
Acquisition of non-controlling interest** - - - - - (1,173) (1,173) (110) (1,283)
Employee share option and bonus plan* - - - 828 - (230) 598 - 598
Own Shares purchased* - - - (950) - - (950) - (950)
Dividends paid - - - - - (2,225) (2,225) - (2,225)
31 January 2014 3,673 8,425 15,079 (172) 4,768 33,695 65,468 - 65,468

1 February 2014 3,673 8,425 15,079 (172) 4,768 33,695 65,468 - 65,468
Profit for the year - - - - - 5,264 5,264 - 5,264
Currency translation adjustments - - - - (2,577) - (2,577) - (2,577)
Total comprehensive income and expense for the year - - - - (2,577) 5,264 2,687 - 2,687
Employee share option and bonus plan* - - - 706 - (269) 437 - 437
Own Shares purchased* - - - (1,566) - - (1,566) - (1,566)
Dividends paid - - - - - (2,428) (2,428) - (2,428)
31 January 2015 3,673 8,425 15,079 (1,032) 2,191 36,262 64,598 - 64,598

* The movements in the Own Shares held reserve relate to shares awarded from and purchased by the Employee Benefit Trust.
** Acquisition of non-controlling interest relates to the acquisition of the remaining shares in Bjerke and Luther AS.

Consolidated Cash Flow Statement

for the year ended 31 January 2015
Notes 2015
£ '000 2014
£ '000
Profit before tax (before non-recurring items) 9,003 9,006
Adjustments for:
- depreciation 1,596 1,911
- amortisation 75 75
- loss on disposal of property, plant and equipment 82 86
- finance income - (21)
- finance costs 736 721
- share based employee settlement and share option charge 17 30
- non-recurring items 7 (1,339) (2,579)
Operating cash flows before changes in working capital 10,170 9,229
Changes in working capital (excluding the effects of acquisition and exchange differences on consolidation)
- Decrease/ (increase) in trade and other receivables 12,489 (24,755)
- (Decrease) / increase in trade and other payables (11,913) 22,053
- (Decrease) / increase in provisions 8 (698) 829
Cash flows from operating activities 10,048 7,356
Income tax paid (2,591) (1,936)
Net cash generated from operating activities 7,457 5,420

Cash flows from investing activities
Purchases of property, plant and equipment (1,811) (1,742)
Capitalised software development costs (1,749) -
Cash acquired with acquisitions 9 263 -
Purchase of subsidiary undertakings 9 (360) (1,294)
Interest received - 21
Net cash used in investing activities (3,657) (3,015)

Cash flows from financing activities
Proceeds from employee share options exercise 393 508
Purchase of own shares (1,566) (950)
Dividends paid to group shareholders (2,428) (2,225)
Dividends paid to non-controlling interests - (180)
Interest paid (736) (721)
Increase in borrowings 4,696 2,206
Net cash generated / (used) in financing activities 359 (1,362)

Increase in cash and cash equivalents 4,159 1,043
Cash and cash equivalents at the beginning of the year 15,881 14,346
Exchange (losses) / gains on cash and cash equivalents (1,044) 492
Cash and cash equivalents at the end of the year 18,996 15,881

Notes to the Preliminary Statement

1. Publication of non-statutory accounts
The financial information set out in this preliminary announcement does not constitute statutory accounts for the years ended 31 January 2015 or 2014, for the purpose of the Companies Act 2006, but is derived from those accounts.
The statutory accounts for 2014 have been filed with the Registrar of Companies. The statutory accounts for 2015 will be filed with the Registrar of Companies following the Group's next Annual General Meeting. The Group's auditors have reported on the 2014 and 2015 statutory accounts; their reports were unqualified and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.

2. Basis of preparation
Whilst the financial information included in this preliminary announcement has been prepared in accordance with the International Financial Reporting Standards (IFRSs) as adopted for use in the European Union and as issued by the International Accounting Standards Board, this announcement does not itself contain sufficient information to comply with IFRS. The accounting policies applied in preparing this financial information are consistent with the Group's financial statements for the year ended January 2014 with the exception of the following new accounting standards and amendments which were mandatory for accounting periods beginning on or after 1 February 2014, none of which had any material impact on the Group's results or financial position:
•IFRS 10 'Consolidated Financial Statements'
•IFRS 11 'Joint Arrangements'
•IFRS 12 'Disclosure of Interests in Other Entities'
•IAS 27 (Revised 2011) 'Separate Financial Statements'
•Amendment to IAS 32 'Financial Instruments: Presentation'
•Amendment to IAS 36 'Impairment of Assets'
•Amendment to IAS 39 'Financial Instruments'
•IFRIC 21 'Levies'
•Annual Improvements to IFRSs: 2011

3. Going concern
The Group's business activities for the year are described in the Chairman's statement, CEO Review and FD Review and the statement of financial performance, position and cash flow within this preliminary announcement. The directors have reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. As a result they continue to adopt the going concern basis of accounting in the preparation of the financial statements.

4. Segment information
IFRS 8 requires disclosure of information about the Group's operating segments. It requires a management approach under which segment information is presented on a similar basis as that used for internal reporting purposes. The chief operating decision maker has been identified as the Group Board. Services provided by each reportable segment are permanent recruitment, contracting and outsourcing.

The Group Board analyses segmental information as follows:

Revenue
2015
£ '000 2014
£ '000
United Kingdom & Ireland 229,816 223,741
Mainland Europe 413,160 421,161
Benelux and France 315,374 310,475
Nordics 15,614 15,293
Central Europe 82,172 95,393
Rest of World 53,651 52,419
United States 47,687 46,938
Asia Pacific 5,964 5,481

Total 696,627 697,321


There was no one customer that generated in excess of 10% of the consolidated revenue of the Group in this or the previous financial year.

Gross profit
2015
£ '000 2014
£ '000
United Kingdom & Ireland 36,172 33,360
Mainland Europe 37,445 40,204
Benelux and France 13,066 13,186
Nordics 11,522 11,869
Central Europe 12,857 15,149
Rest of World 15,840 15,006
United States 11,817 11,394
Asia Pacific 4,023 3,612

Total 89,457 88,570



Operating profit (before non-recurring items)
2015
£ '000 2014
£ '000
United Kingdom & Ireland 3,685 3,161
Mainland Europe 5,493 5,609
Benelux and France 4,343 4,052
Nordics 351 314
Central Europe 799 1,243
Rest of World 561 936
United States 865 852
Asia Pacific (304) 84

Total 9,739 9,706



4. Segment information (continued)
Profit before tax
2015
£ '000 2014
£ '000
Operating profit:
United Kingdom & Ireland 3,501 3,161
Mainland Europe 4,338 3,030
Benelux and France 4,302 3,723
Nordics (138) 314
Central Europe 174 (1,007)
Rest of World 561 936
United States 865 852
Asia Pacific (304) 84
7,127
Total operating profit 8,400 7,127
Finance income - 21
Finance costs (736) (721)
Profit before tax 7,664 6,427

Non-recurring items are disclosed within note 7.

Depreciation and amortisation charge
Depreciation Charge 2015
£ '000 2014
£ '000
United Kingdom & Ireland 482 440
Mainland Europe 564 936
Benelux and France 153 159
Nordics 49 43
Central Europe 362 734
Rest of World 550 535
United States 53 73
Asia Pacific 497 462

Total 1,596 1,911

Amortisation
Amortisation of £0.1m (2014: £0.1m) was charged to the Mainland Europe segment.

5. Income tax expense
2015
£ '000 2014
£ '000
Corporation tax on profits in the year - UK 172 -
Corporation tax on profits in the year - overseas 2,519 2,538
Adjustments in respect of prior years (45) -
Total current tax 2,646 2,538
Deferred tax (246) 5
Total tax charge 2,400 2,543

The tax for the year is higher (2014: higher) than the standard UK corporation tax rate applied to pre-tax profit. The standard rate of corporation tax in the UK changed from 23% to 21% with effect from the 1 April 2014. Accordingly, the Group's profits for this accounting period are taxed at an effective standard rate of 21.33% before non-recurring items.

6. Earnings per share
2015 2014
Profit attributable to shareholders £'000 5,264 3,846
Weighted average number of shares 72,754,076 73,351,850
Basic earnings per share 7.24p 5.24p

2015 2014
Profit attributable to shareholders (excluding non-recurring items) £'000 6,563 6,425
Weighted average number of shares 72,754,076 73,351,850
Basic earnings per share (excluding non-recurring items) 9.02p 8.76p

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, excluding those held in the employee share trust, which are treated as cancelled.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has two categories of potential ordinary shares: those share options granted to employees where the exercise price is less than the average price of the Company's ordinary shares during the year, and deferred consideration shares to be issued.

2015 2014
Profit attributable to shareholders £'000 5,264 3,846
Weighted average number of shares 72,754,076 73,351,850
Effect of dilutive securities 350,728 335,539
Adjusted weighted average number of shares 73,104,804 73,687,389
Diluted earnings per share 7.20p 5.22p

2015 2014
Profit attributable to shareholders (excluding non-recurring items) £'000 6,563 6,425
Weighted average number of shares 72,754,076 73,351,850
Effect of dilutive securities 350,728 335,539
Adjusted weighted average number of shares 73,104,804 73,687,389
Diluted earnings per share (excluding non-recurring items) 8.98p 8.72p

7. Non-recurring items
Non-recurring items of £1.3m were incurred in the year, of which £0.6m related to the strategic review of Nash Technologies and relocation of laboratory assets. £0.5m related to the restructuring of Norwegian operations leaving the business well placed to capitalise on future opportunities. £0.2m was incurred in the UK in respect of acquisition cost of Beaumont KK. The current year tax credit as a result of these items was £40,000.

Non-recurring costs of £2.6m were incurred in the prior year, of which £2.3m related to termination costs associated with the restructuring of the Nash Technologies business. Costs of £0.3m were incurred in respect of the closure of the French office.

8. Provisions

2015
£ '000
At 1 February 2014 1,142
Foreign exchange movements (30)
Charge in the year 266
Utilised in the year (964)
At 31 January 2015 414

Provisions relate to termination costs for employees in Germany, the closure of French operations and the restructure of our Norwegian operations.

All provisions fall due within one year.

9. Business combinations
On 21 August 2014, the Group acquired 100% of the share capital of Beaumont KK, a recruitment business in Tokyo, Japan, for an initial cash consideration of JPY 61,163,000 (£0.4m). The contingent consideration arrangements require the Group to pay the former owners of Beaumont KK based on a multiple of profit before tax, over threshold performance, for the three years ending August 2017 up to a maximum of JPY 81,077,000 (£0.5m).

The acquired business contributed revenues of £17,000 and an operating loss of £28,000 to the Group for the period from acquisition to 31 January 2015. If the acquisition had occurred on 1 February 2014, consolidated revenue and consolidated profit for the year ended 31 January 2015 would have been £696,610,000 and £5,226,000 respectively.

The provisional fair value of the net assets acquired is approximately equal to the acquiree's carrying amount.

The excess of consideration above net asset values has been attributed in full to goodwill as no other intangible assets have been identified.

Details of the net assets acquired and the goodwill recognised were as follows:
£ '000
Cash consideration 360
Contingent consideration 478
Fair value of net identifiable assets acquired (108)
Cost of Goodwill recognised at date of acquisition 730
Foreign exchange movements (28)
Cost of Goodwill at 31 January 2015 702

Acquisition-related costs amounted to £0.2m.

The assets and liabilities arising at the date of acquisition were as follows:
£ '000
Tangible fixed assets 7
Cash 263
Receivables 218
Payables (291)
Bank loans (89)
Net identifiable assets acquired 108

The outflow of cash to acquire the business, net of cash acquired, was:
£ '000
Cash consideration 360
Cash and cash equivalents in subsidiary acquired (263)
Cash outflow on acquisition 97

This information is provided by RNS
The company news service from the London Stock Exchange