Looking at full-year figures from Harvey Nash (HVN), one could be forgiven for wondering why the shares were up 6 per cent immediately following their release. At face value, the metrics make for grim reading, but the recruiter has been stripping out costs, closing underperforming offices, and investing in operations in the UK, Europe and Vietnam – all of which constrict reported profitability. So, while statutory pre-tax figures plummeted through the period, strip out non-recurring items and the impact of the closures, and underlying pre-tax profit came in 24.4 per cent to the good at £10.8m.
Indeed, the initiatives have already fed through to the conversion ratio (gross profit to operating profit), which hit 12.6 per cent in the six months to January 2018, up from 10.7 per cent over the full year and 9.5 per cent the year before. Working capital increases arising from growing activity in the contract business (and acquisitions) have also impacted earnings, but are expected to reverse in the near term.
Broker Zeus Capital is forecasting adjusted pre tax profits of £13.4m in FY 2019, giving EPS of 13.7p (from £10.8m and 11.5p in the last financial year).
| HARVEY NASH (HVN) | ||||
| ORD PRICE: | 102p | MARKET VALUE: | £75m | |
| TOUCH: | 100-102p | 12-MONTH HIGH: | 104p | LOW: 70p |
| DIVIDEND YIELD: | 4.2% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 83p* | NET DEBT: | 11% | |
| Year to 31 Jan | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 697 | 6.4 | 5.2 | 3.21 |
| 2015 | 697 | 7.7 | 7.2 | 3.53 |
| 2016 | 677 | 9.1 | 9.4 | 3.85 |
| 2017 | 784 | 8.5 | 8.7 | 4.09 |
| 2018 | 889 | 5.4 | 4.8 | 4.30 |
| % change | +13 | -36 | -45 | +5 |
| Ex-div: | 14 Jun | |||
| Payment: | 6 Jul | |||
| *Includes intangible assets of £62m, or 85p a share | ||||
