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Resilient performance, increased dividend and current financial year started well

Resilient performance, increased dividend and current financial year started well

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Group Highlights

  • Revenue increased by 16% and gross profit by 8% (constant currency +6% and -1% respectively)
  • Strong cash inflow from operating activities of £15.1m, with net cash increased by £5.4m on prior year
  • Final dividend increased by 7.0% to 2.525p (2016: 2.360p)
  • UK & Ireland revenue and gross profit flat on prior year, notwithstanding the UK referendum, growing market share
  • Operating profit in Europe up by 18.2% (constant currency 2.5%) with strong performances in Benelux & Nordics
  • Operating profit in Rest of World held back by bad debts in the USA and challenges in Hong Kong; good results in Japan and Australia, both profitable in the year
  • Proposed move to the AIM

Albert Ellis, Chief Executive Officer of Harvey Nash, commented:
"The Group has a robust and diverse business model, which has delivered strong performances despite the challenging economic backdrop in some of the Group's markets, not least the UK. The results are underpinned by stronger than expected cash generation and an increased dividend.

"During the year, we took several initiatives to streamline the business and we have a clear strategy to grow the business both organically and by acquisition. Our vision is to be Europe's market leading technology and digital talent provider with challenger businesses in the US and Asia.

"We are confident of driving profitable growth in the year to January 2018, whilst remaining flexible in response to changes in market conditions. The current financial year has started well, with performance marginally ahead of expectations."

Harvey Nash Albert Ellis (CEO) and Mark Garratt (CFO) Tel: 020 7333 2635
Hudson Sandler Michael Sandler and Hattie O'Reilly Tel: 020 7796 4133

1 2016 results are disclosed on a continuing operations basis. There were no discontinued operations in 2017 with the exception of a historical tax charge arising from the 2016 discontinued operations.
2 2017 non-recurring costs relate to historical bad debt write-offs in USA, a goodwill impairment and the release of accrued liabilities aged beyond local statutes of limitation.

Chairman's Statement
The Group has delivered a resilient trading performance, underpinned by stronger than expected cash generation and an increased dividend. In the UK, the Group delivered a very strong performance relative to market conditions. In Europe, Netherlands, Belgium and Sweden reported double digit revenue and profit growth. Across the Group, loss-making offices were returned to profit and steps taken to close offices where weak market conditions continue to prevail.

Financial Performance
Revenue increased by 15.9% to £784.3m, and gross profit increased by 8.4% to £97.9m. On a constant currency basis, growth in revenue was 5.8% and gross profit decreased by 0.6%.

Despite political and economic turbulence in key territories, and continued uncertainty following the outcome of the UK Referendum, the results are in line with expectations with the net cash balance at 31 January 2017 significantly higher than last year. This reflects the success of our strategic priority of supporting our clients at each stage of the business cycle with a balance of permanent recruitment, contracting and offshore services.

The UK business performed well, with revenue and gross profit broadly similar to the prior year while the market declined. Following the fall in Sterling, currency tailwinds buoyed already strong growth in Benelux and Nordics regions. This growth was offset by a disappointing performance in Hong Kong, currency headwinds in Vietnam and bad and doubtful debt write-offs in the USA.

Priorities for the Board
Harvey Nash adopts a high standard of corporate governance which underpins the business and forms the foundation for sustainable growth. We remain focused on our three priorities:

  • to execute the strategy for increasing shareholder value in ever-changing market conditions;
  • to ensure we continue to have a highly talented team capable of executing our strategy and to hold them accountable for its delivery; and
  • to make sure the right culture and corporate values are in place, supported by the appropriate governance structures and their effective implementation.

Also during the year, we completed the disposal of our German outsourcing business and a focus on working capital yielded strong cash generation.

In September 2016, Richard Ashcroft notified the Company of his intention to step down from the Board during the course of 2017 after ensuring a smooth handover to his successor as Group Finance Director. The Board wishes to thank Richard for more than a decade of loyal service to the Company and the Board, during which time there has been a near four-fold increase in the Group’s revenue.

In March 2017, the Board appointed Mark Garratt, who joined the Board in April 2017. Mark’s extensive knowledge of the recruitment sector, as well as his corporate finance experience, will be important as we continue to develop the Group’s businesses.

The Board is recommending a 7.0% increase in the final dividend to 2.525 pence per share (2016: 2.360p). This gives a total dividend for the year of 4.09 pence per share (2016: 3.85p), an increase of 6.2%, which reflects the Group’s progressive and sustainable dividend policy. Subject to approval at the Annual General Meeting on 29 June 2017, the final dividend will be paid on 7 July 2017 to shareholders on the register at 16 June 2017.

Proposed move to the AIM
To support the Group’s strategy to grow the business and deliver value to shareholders, we will be recommending a move from the Main Market to the AIM in due course.

Such a move will provide an environment more suited to the Group’s current size and strategic intent to enhance shareholder value by organic growth and acquisitive activity. It will simplify the administrative and regulatory requirements of the Group, and enable us to execute strategic acquisitions more efficiently.

The Board believes that moving to the AIM will be of significant benefit to the Group and its shareholders going forward, and we currently intend to seek shareholder approval at an Extraordinary General Meeting to be held immediately following the Annual General Meeting on 29 June 2017.

Looking ahead
The year ended 31 January 2017 saw several unexpected political and economic changes in some of our key territories which affected trading.

The Executive Directors recently completed a comprehensive long-term strategic review in response to the range of political and economic challenges internationally and the changing information technology landscape. This has resulted in a clear plan to develop the business and grow shareholder value by increasing our focus on technology staffing and by investment in selected geographies through both organic and acquisitive means.

Growth in the IT industry, our largest sector, and high investment into research and development continues across the globe and we remain poised to respond quickly to market opportunities.

Julie Baddeley

Read full results here