Growth in US and APAC boosts Harvey Nash’s Y/E 2016 results
Harvey Nash has announced its preliminary results for the year ended 31st January 2016, delivering growth in key service lines.
The Group says it has delivered another year of growth from continuing operations in all service lines on a constant currency basis. The results were in line with expectations despite being affected for a second year by the strength of sterling. In addition, cash balances at 31st January 2016 were slightly higher than expectations.
Revenue from continuing operations was in line with the prior year at £676.5m (2015: £677.9m), gross profit increased by 6.4% to £90.3m (2015: £84.9m) and operating profit from continuing operations before non-recurring items for the year increased by 4.1% to £10.2m (2015: £9.8m). Adjusted profit before tax from continuing operations was in line with expectations at £9.3m (2015: £9.2m).
Basic earnings per share from continuing operations increased by 10.7% to 9.42p (2015: 8.51p). Basic earnings per share from continuing operations before non-recurring costs increased by 3.3% to 9.73p (2015: 9.42p).
In constant currency, revenue and gross profit increased by 4.9% and 9.1% respectively, with adjusted operating profit up 9.2%, reflecting an overall improvement to the net profit margin.
Harvey Nash stated that key to the success during the year has been the record growth reported from it US business, where gross profit was up 25% and operating profit was up 56%, combined with strong trading results from Asia Pacific, where revenue increased by 77%, following the group's investment in both of those regions in 2015. Trading conditions in the USA have been favourable with strong demand for technology skills, in executive, technical and offshore services. In Asia, revenues and gross profits grew strongly as productivity continued to improve and a new office was opened in Singapore.
Currency headwinds in mainland Europe masked good underlying growth despite a strong performance in contract recruitment, the group said. Both Germany and Sweden grew significantly in a recruitment market recovering from the uncertainty of the Euro crisis. In the UK, notwithstanding a generally weaker permanent recruitment market, particularly in the final two months of the year, contract recruitment was robust and offshore services reported record growth.
Following a full review of all the strategic options, in December 2015, Nash Technologies GmbH ("NT Group"), the German outsourcing business was disposed of by way of a management buy-out. This transaction provided an exit from non-core, loss-making activities and lowered the group's financial risk profile, whilst retaining the upside potential of possible further consideration depending on the future performance of the NT Group. This resulted in a £13.6m (2015: £0.6m) loss on disposal. The NT Group's loss before tax on discontinued operations for the year was £0.4m (2015: £0.9m).
The group also decided to close its oil & gas operations in Warrington due to a downturn in the energy market. The business incurred a loss before tax of £0.2m (2015: £0.1m profit) and the non-recurring costs resulting from closure were also £0.2m (2015: £nil).
In Belgium, the group's acquisition of Talent IT in Antwerp delivered a record performance. The final payment of £2.1m under the earn-out was settled in August resulting in excess consideration payable of £0.2m.
Taking into account these events, the Group's statutory loss for the year was £7.6m (2015: £5.3m profit).
Albert Ellis, chief executive officer of Harvey Nash, commented, "The Group has delivered another year of robust underlying growth in gross profit and operating profit while cashflow was ahead of expectations.
“Results were excellent in the USA where a booming technology sector and an acute skills shortage led to record revenues and operating profits. Revenue increased 77% in Asia, driven in particular by outstanding results in Vietnam and Japan.
“In Europe, currency headwinds held back results and in the UK the final quarter was affected by weaker business confidence, a slowing economy and fears over Brexit.
“The Group continues to win market share and invest in headcount in key locations, focusing on driving profitable growth, whilst remaining flexible and agile."