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Harvey Nash eyes a re-rating

Trading at Harvey Nash was flat in 2014, but the recruiter remains optimistic
May 5, 2015

Negative currency movements took any shine off full-year results from global recruitment group Harvey Nash (HVN), with revenue and adjusted operating profit both flat. However, operating cash flow and pre-tax profit were up considerably, allowing the company to reward shareholders with a 10 per cent dividend hike.

IC TIP: Buy

There were strong performances in the UK and Ireland, where operating profit leapt 17 per cent to £3.7m, and in the US, where net fees climbed 11 per cent on a constant currency basis. The weakening euro made for a more mixed picture in mainland Europe, where Harvey Nash does most of its trading, and the sanctions on Russia also weighed on trading. Despite the ongoing uncertainty in Europe, chief executive Albert Ellis is more bullish about trading this year, believing most clients have priced the market volatility into their recruitment strategies.

Greater stability should help boost adjusted pre-tax profits, which last year stood at £9m. Both Ellis and the company's broker Panmure Gordon believe passing the £10m mark - apparently a psychologically significant milestone for investors - will spark a re-rating of the shares, as it did for larger peers Robert Walters (RWA) in 2010 and Matchtech (MTEC) in 2012.

Panmure Gordon forecasts pre-tax profit of £9.6m this year and earnings per share of 9.6p (up from £9m and 9p).

HARVEY NASH (HVN)
ORD PRICE:85pMARKET VALUE:£62m
TOUCH:84.5-85p12-MONTH HIGH:125pLOW: 68p
DIVIDEND YIELD:4.2%PE RATIO:12
NET ASSET VALUE:88p*NET CASH:£2.1m

Year to 31 JanTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20114226.35.92.42
20125338.58.02.66
20135957.97.52.92
20146976.45.23.21
20156977.77.23.53
% change-0+19+38+10

Ex-div: 18 Jun

Payment: 10 Jul

*Includes intangible assets of £51.4m, or 70p a share