TIDMHVN
RNS Number : 0208S
Harvey Nash Group PLC
28 September 2017
28 September 2017
Harvey Nash Group plc ("Harvey Nash" or "Group")
Unaudited Interim Results for the six months ended 31 July
2017
Harvey Nash Group plc (AIM: HVN), the global technology
recruitment and outsourcing group, announces its unaudited interim
results in line with expectations for the six month period ended 31
July 2017.
Highlights
-- Revenue and gross profit up 12.6% and 2.0% respectively
-- Profit before tax before non-recurring items up 4.4%
-- Profit before tax up 16.8%
-- Earnings per share up 24.9%, up 17.0% before non-recurring items
-- Interim dividend of 1.643p per share, up 5.0%
-- Transformation programme on track, delivering against strategy
-- Robust UK performance in weaker market
-- Record results in Benelux
-- Improved results from Asia Pacific
-- Move to AIM to support growth strategy
-- Two earnings-enhancing acquisitions announced
Constant
Financial Highlights 2017 2016 Change Currency
-------------------------- -------- -------- --------- ----------
Revenue 425,255 377,653 12.6% 9.2%
Gross profit 48,213 47,284 2.0% (3.7%)
Operating profit before
non-recurring items 4,225 4,174 1.2% (1.3%)
Non-recurring items* 467 - - -
Operating profit 4,692 4,174 12.4% 9.8%
Profit before tax before
non-recurring items 3,951 3,784 4.4% 1.8%
Profit before tax 4,418 3,784 16.8% 14.2%
EPS before non-recurring
items 4.19p 3.58p 17.0% 17.4%
EPS 4.47p 3.58p 24.9% 25.2%
Operating cash flows
before working capital 4,448 4,833 (8.0%)
Net Borrowings 10,025 6,819 47.0%
* Non-recurring items mainly comprise the cost of the Group
transformation programme offset by a release of aged accrued
liabilities.
Chief Executive Officer, Albert Ellis commented:
"The Group has reported encouraging results for the first half
of the year, in line with our expectations.
I am very pleased that in a challenging UK market our business
has increased its revenue and delivered a robust financial
performance. The Group's businesses in the Benelux reported record
revenues and profits, and improved results in the Nordics and Asia
Pacific reflected the actions taken to increase margins and overall
results during the period.
Our strategy is focused on the demand for executive and
technology recruitment from clients undergoing digital
transformation, and we have added to the Group's capacity with two
excellent acquisitions. The combined benefits of these and the
efficiencies from the transformation programme are expected to flow
through into the current and next year's results.
Accordingly, we enter the second half of the year on track, well
positioned to capitalise further on market opportunities as they
arise and confident about the outlook for the remainder of the
year."
Enquiries:
Harvey Nash Albert Ellis (CEO) and Mark Garratt (CFO) 020 7333
2635
Panmure Gordon (Nominated Adviser & Broker) Ben Thorne, Erik
Anderson, Andrew Potts 020 7886 2500
Hudson Sandler Hattie O'Reilly and Fern Duncan 020 7796 4133
Notes to editors
Harvey Nash is a global recruitment business, with a focus on
technology and digital talent recruitment. Our unique portfolio of
services, from executive search, professional recruitment to
offshore solutions, enables us to engage with clients at every
stage of the business cycle. Our relationship-based model underpins
the delivery of resilient financial returns and supports
sustainable returns to shareholders.
With approximately 9,000 freelancers placed from 39 offices
across Europe, USA and Asia Pacific, Harvey Nash has the reach and
resources of a global organisation, while fostering a culture of
innovation and autonomy that empowers its employees and associates
to deliver client-centric solutions.
CEO Statement
Results for the first half of the year to 31 July 2017 were in
line with expectations. Revenue increased by 12.6% to GBP425.3m
(2016: GBP377.7m), 9.2% on a constant currency basis, and profit
before tax and non-recurring items increased by 4.4% to GBP4.0m
(2016: GBP3.8m), 1.8% on a constant currency basis. This was as a
result of continued recruitment demand for technology consultants
in the UK and Benelux, as well as actions taken to reduce the
Group's cost base.
Gross profit increased by 2.0% to GBP48.2m (2016: GBP47.3m), a
decline of 3.9% on a constant currency basis. This was mainly due
to changes in revenue mix with the strongest growth in profitable
but lower-margin managed services, coupled with a slowdown in
permanent hiring in the UK during the election period. Operating
profit increased by 12.4% to GBP4.7m including a net non-recurring
credit of GBP0.5m (2016: nil). Operating profit before
non-recurring items increased by 1.2% to GBP4.2m (2016:
GBP4.2m).
Statutory profit before tax of GBP4.4m was GBP0.6m higher than
the prior period and earnings per share were 24.9% higher at 4.47p
(2016: 3.58p), 25.2% on a constant currency basis. Interest costs
were 29.7% lower at GBP274k (2016: GBP390k) and the effective tax
rate reduced to 26.9% (2016: 31.3%).
During the period, there were a number of items which fell
outside the usual course of business. These costs are presented as
non-recurring items and are discussed below.
Transformation programme
During the period, management undertook a thorough review of the
Group's operations and cost base. Consequently, a transformation
programme was implemented, including actions to streamline the
business, review underperforming offices and reduce central
overhead costs. Expected savings from this programme in the current
financial year are GBP1.1m and GBP2.2m in FY19.
One-off costs were incurred in relation to under-performing
offices and service lines across the world, which were either
closed or the operations moved to more suitable locations. Central
services, provided globally from the UK, are being reviewed and,
where appropriate, reduced or delivered locally. Opportunities for
efficiencies are being identified where investment in technology
can reduce the cost of delivery and longer-term financial planning
is underway to remove tax and structural inefficiencies in a
geographically diverse Group. This process is anticipated to be
complete by the end of the financial year with the full benefits
expected to be realised in FY19.
The accounting estimate for aged accrued liabilities in the
Netherlands was re-assessed following a detailed review. The
resultant GBP3.5m reduction in the accrual has been treated as a
non-recurring item.
Move to AIM
On 28 July 2017, the Group's shares were admitted to AIM and its
listing on the London Stock Exchange's Main Market was cancelled.
The move provides an environment more appropriate to the Group's
scale and acquisition strategy.
Acquisitions
On 3 July 2017, the Group announced and completed the
acquisition of PAT Management AB ("PAT"), a human resource
consultancy based in Sweden, for an initial cash consideration of
SEK 18.2m (GBP1.7m) with a further SEK 19m (GBP1.7m) of potential
deferred consideration. Leadership consultancy is one of the
fastest-growing services within the executive recruitment market
and clients are increasingly commissioning assessment and other HR
related projects alongside traditional recruitment assignments.
This acquisition provides our market-leading Alumni executive
search business in the Nordics with enhanced capability and a
broader client base and supports the Group's strategy of increasing
its annuity revenues.
On 12 September 2017, the Group announced and completed the
acquisition of Crimson Limited ("Crimson"), a UK-based technology
solutions and recruitment consultancy specialising in digital and
technology transformation solutions as well as offering a full
range of recruitment services, both permanent and contract. For the
year ended 31 March 2017, Crimson reported a profit before tax of
GBP1.7m on revenue of GBP23.5m. Under the terms of the acquisition
the Group has acquired 100% of the shares in Crimson for an initial
cash consideration of GBP6.0m with deferred cash consideration of
up to GBP4.0m payable in two equal tranches on the first and second
anniversary of completion with 50% guaranteed and 50% subject to
achieving a minimum level of EBITDA. In addition to this, an
earn-out of up to GBP5.0m will be payable in cash based on EBITDA
targets in the second and third years post acquisition. Total
consideration is capped at GBP15m.
These acquisitions are both expected to be earnings-enhancing
and represent important steps in our growth strategy, supported by
the move to AIM. In particular, Crimson is a transformative
acquisition for the Group's UK & Ireland business, firmly
establishing its position as one of the leading providers of
technology talent services to the IT and Digital sectors.
The Group continues to assess and pursue value enhancing
acquisitions in its core geographies.
Balance sheet
Net assets at 31 July 2017 grew by 2.5% to GBP63.6m compared to
GBP62.0m at 31 January 2017. Intangible assets increased by 4.9%
(GBP2.7m) to GBP57.8m due to the goodwill on the acquisition of
PAT.
Net debt at 31 July 2017 was GBP10.0m, compared to a net cash
position of GBP5.6m at the start of the period. However, average
borrowings over the six months to 31 July 2017 were lower than the
comparative period, as reflected by the 29.7% reduction in finance
costs.
Trade and other receivables increased by GBP23.7m to GBP152.6m
(31 January 2017: GBP128.9m) reflecting the growth in contract
services over the period. Trade and other payables increased to
GBP140.0m (31 January 2017: GBP133.2m). Tight control of working
capital continued, with debtor days at 31 July of 41.4 compared to
41.8 in July 2016.
Deferred consideration increased by GBP1.2m to GBP1.4m following
the acquisition of PAT and the GBP0.1m increase in liability for
Japan booked as a non-recurring cost. Provisions increased from
GBP0.1m at 31 January 2017 to GBP1.4m at 31 July 2017 as a result
of future commitments under the Group's transformation
programme.
Cash flow
Operating cash flow before changes in working capital decreased
by GBP0.4m to GBP4.4m due to a payment relating to the 2016
disposal of Nash Technologies GmbH. Taking account of working
capital, there was an outflow of cash from operating activities in
the period of GBP8.0m (2016: inflow of GBP3.4m). This is the result
of the increase in trade receivables referred to above.
The cash impact of non-recurring items was an outflow of GBP1.5m
(2016: nil) and income tax paid increased by GBP0.2m to
GBP2.1m.
Cash used in investing activities decreased by GBP4.4m to
GBP2.1m (2016: GBP6.5m). The current period includes the
acquisition of PAT Management AB for GBP1.5m and fixed asset
additions of GBP0.5m. The comparative period included a GBP6.0m
outflow relating to the disposal of Nash Technologies GmbH and a
similar level of fixed asset additions.
Dividend
The Board has declared an interim dividend of 1.643p per share
(2016: 1.565p per share) representing an increase of 5.0%, which
will be paid on 17 November 2017 to shareholders on the register on
20 October 2017.
Operational review
United Kingdom & Ireland
31 31 July
July 2016
GBP'000 2017
------------------------- ------- --------
Gross profit 18,200 18,420
Operating profit before
non-recurring items 1,580 1,620
% of Group net fee
income 38% 39%
The Group increased its market share and revenue in the UK and
Ireland, despite the impact of political uncertainty surrounding
the UK General Election and changes to the tax treatment of
freelancers working in the public sector. Gross profit of GBP18.2m
was 1.2% down on last year, mainly due to a slowdown in the level
of higher-margin permanent hiring during the election period.
Gross profit from Ireland showed strong growth (up 33%), with
offices in the North of England (up 14%) and Scotland (up 6%)
offsetting the Midlands, South West and London (each down by 4%).
Investment in headcount (up 4% on the prior year) resulted in an
operating profit of GBP1.6m, down 2.5% on the prior period.
Executive recruitment reported growth but interim placement
activity was mixed compared to the prior year. Demand from the
Financial Services sector was strong, with increased compliance and
regulation measures in preparation for Brexit driving the
recruitment of technology specialists.
The introduction of IR35 legislation resulted in significant
activity within the public sector to transition existing
freelancers and demand for new recruitment fell as a result.
Despite this, overall the number of freelancers in the UK &
Ireland at 31 July 2017 grew by 7.9% on the prior year, improving
the outlook for the seasonally more productive second half.
Mainland Europe
31
July 31 July
GBP'000 2017 2016
------------------------- ------- --------
Gross profit 19,447 17,807
Operating profit before
non-recurring items 2,565 2,487
% of Group net fee
income 40% 38%
Revenue grew in Mainland Europe by 15.9%, whilst gross profit
increased by 9.2% to GBP19.4m (2016: GBP17.8). Performance was
varied across the regions of Europe with a strong performance in
Benelux offset by more challenging conditions in Central Europe.
Operating profit increased by 3.1% to GBP2.6m (2016: GBP2.5m) which
comprises GBP2.3m in Benelux (2016: GBP1.9m), GBP0.2m in Nordics
(2016: GBP0.2m) and GBP0.1m in Central Europe (2016: GBP0.4m).
We have a strong platform in Europe. Skills shortages in Benelux
drove demand for freelancers, project teams and managed services as
more companies outsource the management of their temporary staff.
In the Nordics, gross profit growth of 6.2% was helped by the first
month of post-acquisition results from PAT. Specialist recruitment
and interim services offset lower executive search fees. Norway
continues its turnaround with gross profit up 29%.
In Central Europe, Poland reported a 66% increase in gross
profit but the larger businesses in Germany and Switzerland saw
gross profit fall by 23% and 18%. Germany saw a decline in
freelancers exacerbated by regulatory changes to the freelance
labour market and the strong currency in Switzerland led to weaker
demand for permanent recruitment. Actions were taken in both
countries to align costs with revenues, to refocus investment in
growth areas and to reduce fixed overheads.
Rest of World
31
July 31 July
GBP'000 2017 2016
------------------------- ------- --------
Gross profit 10,566 11,057
Operating profit before
non-recurring items 81 67
% of Group net fee
income 22% 23%
Performance in the Rest of World was much improved compared to
the prior year. Gross profit decreased by 4.4% to GBP10.6m (2016:
GBP11.1m) but operating profit grew by 20.5% to GBP0.08m (2016:
GBP0.07m).
In the USA, demand continues to swing in favour of permanent
recruitment but record executive search revenues were offset by a
decline in freelancers. Overall gross profit decreased by 10.8% to
GBP7.6m (2016: GBP8.5m) and operating profit reduced to GBP0.3m
(2016: GBP0.6m). Acute skills shortages in the technology sector
are creating unexpected challenges, particularly in Seattle, where
major global technology companies are competing for talent. The US
business has implemented a range of measures to improve conversion
from open vacancies into placements, the benefits of which should
be seen in the second half.
Gross profit in Asia Pacific increased by 16.9% to GBP3.0m with
much of this growth in Vietnam (GBP0.5m) and Singapore (GBP0.1m)
offset by a weak recruitment in Australia (down GBP0.1m). The
operating loss was reduced to GBP0.2m (2016: loss of GBP0.5m) due
to productivity gains in Vietnam and reduced losses in Hong Kong as
this office winds down.
Board changes
Mark Garratt assumed the role of Group Finance Director on 27
April 2017, having joined the Board on 3 April 2017, following
Richard Ashcroft's decision to step down from the Board during
2017, as announced in September 2016.
As set out in further detail in a separate announcement today,
with effect from 1 October 2017, Harvey Nash has appointed Adrian
Gunn as a nominee non-executive director on behalf of the
investment adviser of the Company's largest shareholder, DBAY
Advisors Limited.
Outlook
As we stated in the Group's preliminary results in April 2017,
the Group has a clear strategy to grow the business and our vision
is to be Europe's market-leading technology and digital talent
provider with challenger businesses in the US and Asia. With 80% of
our clients, services and skills in the technology sector, our plan
for growing the business and increasing shareholder value is based
on capitalising on our strong market positions and investing in
selected geographies both organically and by acquisition. To
accelerate our growth plans, we embarked on a programme to
streamline the business and reduce costs.
With benefits from the transformation programme and the
acquisitions of PAT and Crimson resulting in full-year profit
forecasts being upgraded three times since the AGM on 29 June 2017,
we enter the second half of the year well positioned to capitalise
further on market opportunities as they arise and are confident
about the outlook for the remainder of the year.
Consolidated Income Statement
Unaudited Unaudited Audited
Notes 6 months 6 months 12 months
ended ended ended
31 July 31 July 31 January
2017 2016 2017
GBP'000 GBP'000 GBP'000
============================ ======== ========== ========== ============
Continuing operations
Revenue 425,255 377,653 784,328
Cost of sales (377,042) (330,369) (686,449)
Gross profit 3 48,213 47,284 97,879
Administrative expenses (43,988) (43,110) (88,559)
============================ ======== ========== ========== ============
Operating profit before
non-recurring items 4,225 4,174 9,320
Non-recurring items 9 467 - (119)
============================ ======== ========== ========== ============
Operating profit 3 4,692 4,174 9,201
Finance costs 4 (274) (390) (676)
============================ ======== ========== ========== ============
Profit before tax 4,418 3,784 8,525
Income tax expense 5 (1,170) (1,184) (2,206)
============================ ======== ========== ========== ============
Profit for the year from
continuing operations 3,248 2,600 6,319
============================ ======== ========== ========== ============
Discontinued operations
Loss from discontinued
operations 11 - - (340)
Profit for the year attributable
to owners of the Company 3,248 2,600 5,979
====================================== ========== ========== ============
Earnings per share from
continuing operations
- Basic 6 4.47p 3.58p 9.42p
- Diluted 6 4.47p 3.58p 9.38p
Earnings per share from continuing
and discontinued operations
- Basic 6 4.47p 3.58p (10.48)p
- Diluted 6 4.47p 3.58p (10.44)p
============================ ======== ========== ========== ============
Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 July 31 July 31 January
2017 2016 2017
GBP'000 GBP'000 GBP'000
--------------------------------- ---------- ---------- ------------
Profit for the period 3,248 2,600 5,979
Items which may be subsequently
reclassified into income:
--------------------------------- ---------- ---------- ------------
Foreign currency translation
differences (1) 121 2,406 4,669
---------------------------------- ---------- ---------- ------------
Other comprehensive income
for the period 121 2,406 4,669
---------------------------------- ---------- ---------- ------------
Total comprehensive income
for the period attributable
to owners of Company 3,369 5,006 10,648
---------------------------------- ---------- ---------- --------------
(1) These differences may be recycled into the Consolidated
Income Statement if specific conditions are met.
Consolidated Balance Sheet
Notes Unaudited Unaudited Audited
31 July 31 July 31 January
2017 2016 2017
GBP'000 GBP'000 GBP'000
----------------------------- ------ ---------- ---------- ------------
ASSETS
Non-current assets
Intangible assets 10 57,750 53,811 55,074
Property, plant and
equipment 2,966 3,334 3,201
Investments 250 253 264
Deferred tax assets 2,173 1,801 2,167
Loans receivable 11 2,057 1,937 1,976
----------------------------- ------ ---------- ---------- ------------
65,196 61,136 62,682
Current assets
Trade and other receivables 152,585 136,325 128,926
Deferred tax assets 794 702 794
Cash and cash equivalents 7 16,107 10,935 20,250
169,486 147,962 149,970
Total assets 234,682 209,098 212,652
----------------------------- ------ ---------- ---------- ------------
LIABILITIES
Current liabilities
Trade and other payables (140,034) (131,333) (133,186)
Current income tax
liabilities (1,971) (1,614) (2,307)
Borrowings 7 (26,132) (17,754) (14,694)
Deferred consideration 11 (270) - (171)
Provision for liabilities
and charges (1,432) (115) (96)
----------------------------- ------ ---------- ---------- ------------
(169,839) (150,816) (150,454)
----------------------------- ------ ---------- ---------- ------------
Net current liabilities (353) (3,556) (484)
----------------------------- ------ ---------- ---------- ------------
Non-current liabilities
Deferred consideration 10 (1,110) (596) -
Deferred tax liabilities (159) (159) (159)
(1,269) (755) (159)
Total liabilities (171,108) (151,571) (150,613)
----------------------------- ------ ---------- ---------- ------------
Net assets 63,574 57,257 62,039
----------------------------- ------ ---------- ---------- ------------
EQUITY
Ordinary shares 3,673 3,673 3,673
Share premium 8,425 8,425 8,425
Fair value and other
reserves 15,079 15,079 15,079
Own shares held (910) (914) (910)
Cumulative translation
reserve 6,761 4,377 6,640
Retained earnings 30,546 26,887 29,132
----------------------------- ------ ---------- ---------- ------------
Total equity 63,574 57,527 62,039
----------------------------- ------ ---------- ---------- ------------
Consolidated Statement of Changes in Equity
Share Share Fair Own Cumulative Retained Total
capital premium value shares translation earnings
and held reserve
other
reserves
----------------------- -------- -------- --------- ------- ------------ --------- -------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- -------- --------- ------- ------------ --------- -------
1 February 2016 3,673 8,425 15,079 (1,032) 1,971 26,002 54,118
Loss for the period - - - - - 2,600 2,600
Currency translation
adjustments - - - - 2,406 - 2,406
----------------------- -------- -------- --------- ------- ------------ --------- -------
Total comprehensive
income for the period - - - - 2,406 2,600 5,006
Employee share option
and bonus plan - - - 118 - - 118
Dividends paid - - - - - (1,715) (1,715)
----------------------- -------- -------- --------- ------- ------------ --------- -------
31 July 2016 3,673 8,425 15,079 (914) 4,377 26,887 57,527
----------------------- -------- -------- --------- ------- ------------ --------- -------
1 August 2016 3,673 8,425 15,079 (914) 4,377 26,887 57,527
----------------------- ----- ----- ------ ----- ----- ------- -------
Profit for the period - - - - - 3,379 3,379
Currency translation
adjustments - - - - 2,263 - 2,263
----------------------- ----- ----- ------ ----- ----- ------- -------
Total comprehensive
income for the period - - - - 2,263 3,379 5,642
Employee share option
and bonus plan - - - 4 - - 4
Dividends paid - - - - - (1,134) (1,134)
----------------------- ----- ----- ------ ----- ----- ------- -------
31 January 2017 3,673 8,425 15,079 (910) 6,640 29,132 62,039
----------------------- ----- ----- ------ ----- ----- ------- -------
1 February 2017 3,673 8,425 15,079 (910) 6,640 29,132 62,039
----------------------- ----- ----- ------ ----- ----- ------- -------
Profit for the period - - - - - 3,248 3,248
Currency translation
adjustments - - - - 121 - 121
----------------------- ----- ----- ------ ----- ----- ------- -------
Total comprehensive
income for the period - - - - 121 3,248 3,369
Dividends paid (note
8) - - - - - (1,834) (1,834)
----------------------- ----- ----- ------ ----- ----- ------- -------
31 July 2017 3,673 8,425 15,079 (910) 6,761 30,546 63,574
----------------------- ----- ----- ------ ----- ----- ------- -------
Consolidated Cash Flow Statement
Notes Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 July 31 July 31 January
2017 2016 2017
GBP'000 GBP'000 GBP'000
------------------------------------------------------------------ ---------- ---------- ------------
Profit before tax 4,418 3,784 8,525
Non-recurring items 9 (467) - 119
-------------------------------------------------------------- --- ---------- ---------- ------------
Profit before tax and non-recurring
items 3,951 3,784 8,644
Adjustments for:
* depreciation 548 622 1,284
* amortisation 34 35 70
* loss on disposal of property, plant and equipment 6 - 101
* finance costs 4 274 392 676
* loss from discontinued operations 11 (365) - -
Operating cash flows before
changes in working capital 4,448 4,833 10,775
Changes in working capital:
* (increase) / decrease in trade and other receivables (20,211) 173 9,633
* increase / (decrease) in trade and other payables 6,468 (1,542) (2,239)
* increase / (decrease) in provisions 1,336 (30) (35)
Cash flows from operating
activities (7,959) 3,434 18,015
Cash flow of non-recurring
items 9 (1,536) - (119)
Income tax paid (2,068) (1,906) (2,935)
-------------------------------------------------------------- --- ---------- ---------- ------------
Net cash generated from
operating activities (11,563) 1,528 15,080
-------------------------------------------------------------- --- ---------- ---------- ------------
Cash flows from investing
activities
Purchases of property,
plant and equipment (531) (462) (1,049)
Purchase of subsidiary
undertaking 10 (1,511) - -
Disposal of subsidiary - (5,991) (6,166)
Settlement of deferred
consideration (33) - (439)
Net cash used in investing
activities (2,075) (6,453) (7,654)
-------------------------------------------------------------- --- ---------- ---------- ------------
Cash flows from financing
activities
Proceeds from employee
share option exercise - 60 60
Dividends paid to group
shareholders 8 (1,834) (1,715) (2,849)
Interest paid 4 (274) (392) (676)
Increase / (decrease) in
borrowings 7 11,292 (1,450) (4,104)
-------------------------------------------------------------- --- ---------- ---------- ------------
Net cash generated / (used)
in financing activities 9,184 (3,497) (7,569)
-------------------------------------------------------------- --- ---------- ---------- ------------
Decrease in cash and cash
equivalents 7 (4,454) (8,422) (143)
Cash and cash equivalents
at the beginning of the period 20,250 18,506 18,506
Exchange movements on cash
and cash equivalents 7 311 851 1,887
-------------------------------------------------------------- --- ---------- ---------- ------------
Cash and cash equivalents
at the end of the period 16,107 10,935 20,250
-------------------------------------------------------------- --- ---------- ---------- ------------
Notes to the Consolidated Financial Statements
1. General information
Harvey Nash Group plc ('the Company') and its subsidiaries
(together 'the Group') is a leading provider of specialist
recruitment and outsourcing solutions. The Group has offices in
United Kingdom, Europe, United States and Asia Pacific.
The Company is a public listed company incorporated in the
United Kingdom. Its registered address is 110 Bishopsgate, London,
EC2N 4AY and its listing is on the London Stock Exchange (AIM).
2. Accounting policies
The principal accounting policies adopted in the preparation of
these financial statements are set out below. These policies have
been consistently applied across the Group in both years
presented.
Basis of preparation
This condensed consolidated interim financial information for
the six months ended 31 July 2017 has been prepared in accordance
with International Accounting Standards ('IAS') 34 'Interim
financial reporting' and the disclosure and transparency directives
of the FCA. It does not comprise statutory accounts within the
meaning of section 434 of the Companies Act 2006 as it does not
include all the information required for full statutory accounts.
The interim financial statements should be read in conjunction with
the statutory accounts for the year ended 31 January 2017, which
were prepared in accordance with International Financial Reporting
Standards ('IFRS') as adopted by the European Union and were
approved by the Board of Directors on 26 April 2017 and delivered
to the Registrar of Companies. The report of the auditors on those
accounts was unqualified, did not contain an emphasis of matter
paragraph and did not contain any statement under section 498 of
the Companies Act 2006. This condensed consolidated interim
financial information has not been reviewed or audited by the
Group's auditor Deloitte LLP.
Significant accounting policies
Except as noted below, the same accounting policies, methods of
computation and presentation have been applied as those set out in
the Harvey Nash Group plc Annual Report for the year ended 31
January 2017. The accounting policies are drawn up in accordance
with IAS and IFRS as endorsed by the European Union.
Principal risks and uncertainties
Principal risks and uncertainties affecting the business
activities of the Group are the same as those detailed within the
Strategic Report on pages 14 to 16 of the Group's 2017 Annual
report.
New and amended standards adopted by the Group
There are no new standards or IFRIC interpretations that were
effective during the period that significantly affect this interim
financial information.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these condensed consolidated interim financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
consolidated financial statements for the year ended 31 January
2017.
Going concern basis
The Group meets its day-to-day working capital requirements
through its bank facilities. The current economic conditions
continue to create uncertainty particularly over (a) the level of
demand for the Group's services; and (b) the availability of bank
finance for the foreseeable future. The Group's forecasts and
projections, taking account of reasonably possible changes in
trading performance, show that the Group should be able to operate
within the level of its current facilities. After making enquiries,
the directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. The Group therefore continues to adopt the
going concern basis in preparing its consolidated interim financial
statements.
3. Segment information
IFRS 8 'Operating Segments' 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 to that used for internal reporting purposes. The chief
operating decision maker in the business 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:
Gross profit
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 July 31 July 31 January
2017 2016 2017
GBP'000 GBP'000 GBP'000
United Kingdom
& Ireland 18,200 18,420 37,024
Mainland Europe 19,447 17,807 39,086
Benelux 9,082 6,996 16,306
Nordics 6,753 6,360 13,996
Central Europe 3,612 4,451 8,784
-------------------- --------- --------- -------------
Rest of World 10,566 11,057 21,769
United States 7,608 8,526 16,607
Asia Pacific 2,958 2,531 5,162
-------------------- --------- --------- -------------
Gross profit 48,213 47,284 97,879
--------------------- --------- --------- -------------
Operating profit
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 July 31 July 31 January
2017 2016 2017
GBP'000 GBP'000 GBP'000
United Kingdom
& Ireland 1,580 1,620 2,975
Mainland Europe 2,564 2,487 6,116
Benelux 2,320 1,893 4,916
Nordics 175 187 594
Central
Europe 69 407 606
-------------------------------- --------- --------- -----------
Rest of World 81 67 229
United States 303 609 745
Asia Pacific (222) (542) 516
-------------------------------- --------- --------- -----------
Total operating profit
before non-recurring items 4,225 4,174 9,320
----------------------------------- --------- --------- -----------
Non-recurring items (note
9) 467 - (119)
----------------------------------- --------- --------- -----------
Operating profit 4,692 4,174 9,201
----------------------------------- --------- --------- -----------
4. Net finance costs
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 July 31 July 31 January
2017 2016 2017
GBP'000 GBP'000 GBP'000
-------------------------- ---------- ---------- ------------
Interest payable on bank
borrowings 280 390 697
Interest received (note
11) (6) - (21)
-------------------------- ---------- ---------- ------------
Net finance costs 274 390 676
-------------------------- ---------- ---------- ------------
5. Tax
Taxation for the six-month period is charged at 26.5% (31 July
2016: 31.3%), representing the best estimate of the average annual
effective tax rate expected for the full year, applied to the
pre-tax income of the six-month period. The tax effect on
non-recurring items is a charge of GBP265,000 resulting in an
effective tax rate before non-recurring items of 22.9% (2016:
31.3%).
6. Earnings per share
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 July 31 July 31 January
2017 2016 2017
GBP'000 GBP'000 GBP'000
----------------------------------- ----------- ----------- ------------
Earnings
Profit from continuing operations
before non-recurring items 3,046 2,600 6,438
Non-recurring items(1) 202 - (119)
Profit from continuing operations 3,248 2,600 6,319
Loss on discontinued operations - - (340)
Profit attributable to owners
of the Company 3,248 2,600 5,979
Number of shares
Weighted average number of
shares 72,655,733 72,588,365 72,621,076
Dilutive effect of share - 9,481 -
plans
Diluted weighted average
number of shares 72,655,733 72,597,846 72,621,076
----------------------------------- ----------- ----------- ------------
(1) The tax effect on non-recurring items is a charge
of GBP265,000.
From continuing operations
Basic EPS 4.47p 3.58p 8.70p
Basic EPS before non-recurring
items 4.19p 3.58p 8.86p
Diluted EPS 4.47p 3.58p 8.70p
Diluted EPS before non-recurring
items 4.19p 3.58p 8.26p
From continuing and discontinued
operations
Basic and Diluted EPS n/a n/a 8.23p
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 benefit 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.
7. Analysis of changes in net funds
Foreign
1 February Cash exchange 31 July
2017 flow movements 2017
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ----------- --------- ----------- ---------
Cash and cash equivalents 20,250 (4,454) 311 16,107
Borrowings (14,694) (11,292) (146) (26,132)
--------------------------- ----------- --------- ----------- ---------
Net funds 5,556 (15,746) 165 (10,025)
--------------------------- ----------- --------- ----------- ---------
Net funds comprise cash and cash equivalents less overdraft and
utilisation of the Group's invoice discounting facility.
8. Dividends
The Group paid a final dividend of 2.525p per share on 7 July
2017 to shareholders on the register as at 16 June 2017 (2016:
2.360p per share).
9. Non-recurring items
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 July 31 July 31 January
2017 2016 2017
GBP'000 GBP'000 GBP'000
------------------------------- ---------- ---------- ------------
Group transformation 2,564 - -
Listing on AIM 245 - -
Release of aged accruals (3,515) - (539)
Excess deferred consideration 134 - -
payable
Acquisition costs 106 - -
Bad debt write-off - - 559
Impairment of goodwill - - 99
Total (467) - 119
------------------------------- ---------- ---------- ------------
In the period, the Executive Directors commenced a review of the
Group's operations and cost base. They have implemented a
transformation programme to review underperforming offices,
streamline the business and reduce central overheads. Offices in
Geneva, Dusseldorf and Denver were closed at a cost of GBP0.6m and
contracting services ended in Japan at a cost of GBP0.3m. The Hong
Kong office continues to trade but is being wound down with
anticipated closure costs of GBP0.6m recognised. Businesses were
streamlined in UK, Nordics and Central Europe at a cost of GBP0.2m,
GBP0.2m and GBP0.3m respectively. Restructuring of central costs
totalled GBP0.4m, split between USA and UK. The recruitment of a
new Group Finance Director and consequent overlapping costs are
considered the first step in this transformation and as such these
costs are included within the central costs restructuring charge of
GBP0.4m. This transformation programme is anticipated to complete
by the end of the financial year at a further cost of approximately
GBP1.0m.
On 28 July 2017, the Group's shares were admitted to AIM and its
listing on the London Stock Exchange's Main Market was cancelled.
The cost of this listing was GBP0.2m.
The accounting estimate for aged accrued liabilities in
Netherlands was re-assessed following a detailed review resulting
in a release of aged accrued liabilities totalling GBP3.5m.
The final deferred consideration payable for the Beaumont KK
acquisition in Japan exceeded initial estimates and the GBP0.1m
shortfall was booked as a non-recurring item.
10. Business combinations
On 3 July 2017, the Group acquired 100% of the share capital of
PAT Management AB, a recruitment business in Lund, Sweden, for an
initial cash consideration of SEK 18.2m (GBP1.7m) and deferred cash
consideration of up to SEK 19m (GBP1.8m). The contingent
consideration arrangements require the Group to pay the selling
company, PAT Invest AB, based on a multiple of earnings before
interest and tax ('EBIT'), over threshold performance, for the
three years ending January 2020. Acquisition-related costs amounted
to GBP0.1m.
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:
GBP'000
--------------------------------------- --------
Cash consideration 1,602
Estimated deferred consideration 1,077
Fair value of net identifiable assets
acquired (227)
Cost of Goodwill recognised at date
of acquisition 2,452
Foreign exchange movements 43
---------------------------------------- --------
Cost of Goodwill at 31 July 2017 2,495
---------------------------------------- --------
The assets and liabilities arising at the date of acquisition
were as follows:
GBP'000
---------------------------------- --------
Tangible fixed assets 11
Cash 147
Receivables 290
Payables (221)
Net identifiable assets acquired 227
----------------------------------- --------
The outflow of cash to acquire the business, net of cash
acquired, was:
GBP'000
----------------------------------------- --------
Cash consideration 1,602
Cash and cash equivalents in subsidiary
acquired (148)
Acquisition costs 57
Cash outflow on acquisition 1,511
------------------------------------------ --------
Deferred consideration of GBP0.5m was recognised following the
acquisition of Beaumont KK, a recruitment business in Tokyo, Japan,
in 2014. Deferred consideration of GBP0.3m (2016: GBP0.6m) remains
on the balance sheet for the final earn-out payable in October
2017.
11. Discontinued operations
On 6 December 2015, the Group entered into a sale agreement to
dispose of the German telecommunications outsourcing business Nash
Technologies GmbH and its two fully owned subsidiaries, Nash
Technologies Stuttgart GmbH and Nash Innovations GmbH ("NT Group").
On the disposal date, full control passed to the acquirer.
Under the sale agreement, the Group remains liable, subject to a
cap, for taxes owed by the entities up to the sale date. In the
year ended 31 January 2017, an audit by the German tax office of
the NT Group resulted in a tax charge of GBP0.4m relating to prior
years, which was paid in July 2017.
A loan receivable of GBP2.1m (31 July 2016: GBP1.9m) from Nash
Technologies is included within non-current assets and is due to
mature on 30 June 2025. The rate of interest is 3-month EURIBOR
plus 1.5% and the interest received in the period amounted to
GBP6,000 (31 July 2016: GBPnil).
12. Post balance sheet events
On 12 September 2017 the Group announced and completed the
acquisition of 100% of the shares in Crimson Limited, a UK based IT
solutions and recruitment consultancy for an initial cash
consideration of GBP6.0m, deferred cash consideration of up to
GBP4.0m and an earn-out of up to GBP5.0m. Consideration is capped
in total at GBP15.0m.
Statement of Directors' Responsibilities
The Directors confirm that, to the best of their knowledge,
these condensed consolidated interim financial statements have been
prepared in accordance with IAS 34 as adopted by the European
Union. The interim management report includes a fair review of the
information required by DTR 4.2.7R and DTR 4.2.8R, namely:
- an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements, and a description of the
principal risks and uncertainties for the remaining six months of
the financial year; and
- material related-party transactions in the first six months of
the financial year and any material changes in the related party
transactions described in the last Annual Report.
The Directors of Harvey Nash Group plc are listed in the Harvey
Nash Group plc Annual Report for 31 January 2017. A list of current
directors is maintained on the Harvey Nash Group plc website:
www.harveynash.com
The Directors are also responsible for the maintenance and
integrity of the Company's website. Legislation in the United
Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
By order of the Board.
Mark Jonathan Garratt
Group Finance Director
28 September 2017
Cautionary statement
This Half Year Report (the "Report") has been prepared in
accordance with the Disclosure Rules and Transparency Rules of the
UK Financial Conduct Authority and is not audited. No
representation or warranty, express or implied, is or will be made
in relation to the accuracy, fairness or completeness of the
information or opinions contained in this Report. Statements in
this Report reflect the knowledge and information available at the
time of its preparation. Certain statements included or
incorporated by reference within this Report may constitute
"forward-looking statements" in respect of the Group's operations,
performance, prospects and/or financial condition. By their nature,
forward-looking statements involve a number of risks, uncertainties
and assumptions and actual results or events may differ materially
from those expressed or implied by those statements. Accordingly,
no assurance can be given that any particular expectation will be
met and reliance shall not be placed on any forward-looking
statement. Additionally, forward-looking statements regarding past
trends or activities shall not be taken as a representation that
such trends or activities will continue in the future. The
information contained in this Report is subject to change without
notice and no responsibility or obligation is accepted to update or
revise any forward-looking statement resulting from new
information, future events or otherwise. Nothing in this Report
shall be construed as a profit forecast. This Report does not
constitute or form part of any offer or invitation to sell, or any
solicitation of any offer to purchase or subscribe for any shares
in the Company, nor shall it or any part of it or the fact of its
distribution form the basis of, or be relied on in connection with,
any contract or commitment or investment decisions relating
thereto, nor does it constitute a recommendation regarding the
shares of the Company or any invitation or inducement to engage in
investment activity under section 21 of the Financial Services and
Markets Act 2000. Past performance cannot be relied upon as a guide
to future performance.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR OKODBABKDCCB
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