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European weakness hits Harvey Nash

RESULTS: An uninspiring European performance sent Harvey Nash's shares lower - but cash generation is robust and and the shares are inexpensively rated
April 30, 2013

Harvey Nash's (HVN) shares slipped about 4 per cent on the back of these full-year figures after the recruiter revealed an uninspiring European performance. Moreover, and while group net fee income (NFI) rose 6 per cent to £83m, headline profit was hit by £800,000 in exceptional charges - largely related to the relocation of the head office to Heron Tower in London. But that should deliver £900,000 in annualised savings.

IC TIP: Buy at 77p

In Europe, net fee income (NFI) slipped 2 per cent to £38m - although, reflecting tight cost controls and changes in revenue mix towards temporary and contract recruitment, operating profit there rose 5 per cent to £5.9m. The acquisition of Talent-IT in Belgium also helped - indeed the Benelux operations were the region's strongest and NFI there rose 18 per cent while operating profit jumped 38 per cent. Harvey Nash also spent £1.3m buying the remainder of Norwegian executive search company Bjerke & Luther - it had previously held a 49.9 per cent stake. The UK and Ireland business, meanwhile, grew NFI 9 per cent to £31.2m as public sector demand in healthcare and education offset weak financial sector conditions. And US gross profit rose 11 per cent to £11m, with operating profit up 14 per cent to £1m.

Broker Panmure Gordon expects adjusted pre-tax profit of £8.8m for 2014, giving EPS of 8.3p.

HARVEY NASH (HVN)

ORD PRICE:77pMARKET VALUE:£57m
TOUCH:76-77p12-MONTH HIGH:81pLOW: 47p
DIVIDEND YIELD:3.8%PE RATIO:10
NET ASSET VALUE:93p*NET CASH:£5m

Year to 31 JanTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20094209.539.002.00
20103761.281.092.20
20114226.255.852.42
20125338.547.972.66
20135957.877.492.92
% change+12-8-6+10

Ex-div: 19 Jun

Payment: 12 Jul

*Includes intangible assets of £52m, or 71p a share