Final Results

25 April 2014

HARVEY NASH GROUP PLC

("Harvey Nash" or the "Group")

PRELIMINARY RESULTS

Harvey Nash, the global professional services group, announces its preliminary results for the year ended 31 January 2014, which show revenues and profits ahead of the prior year due to a strong recovery in the second half of the year.

Financial Results

* Before non-recurring costs

** FY14 costs related to restructuring of European operations. FY13 costs related to the relocation of the Group's London headquarters and acquisition costs.

Highlights

● Strong growth delivered in key geographies

● Further market share gained - particularly in the UK, Nordic and Benelux regions

● Remaining equity of Bjerke & Luther AS in Norway acquired

● New offices opened in the UK, Ireland and Japan

● Investment in organic growth - new offices in Hong Kong and Sydney beginning to show returns

● Total number of fee earners increased in response to growing demand

● Strategic partnership in Vietnam concluded with quoted Japanese group, Mitsui & Co

Albert Ellis, Chief Executive Officer of Harvey Nash, said:

"This is a strong set of financial results, which reflect the significant market share gains we have made during the year. Momentum gathered pace in demand for permanent recruitment in the final quarter, particularly in the USA, UK and Nordics, whilst a number of contract management wins during the year boosted revenue. Our investment in Asia is also beginning to show tangible results.

"The significant upturn in trading which the Group enjoyed in the final quarter has continued into the new financial year and I am confident that Harvey Nash is well positioned to capitalise further on the improving market conditions."

CHAIRMAN'S STATEMENT

Financial Performance

The Group has delivered another strong set of results with revenue of £697.3m (2013: £594.7m) and profit before tax and non-recurring items ahead of the previous year at £9.0m (2013: £8.7m).

Revenue and gross profit increased during the year as a result of further market share gains in the recruitment business and improving market conditions lifted demand for permanent recruitment mainly in the UK and USA. Contract recruitment in mainland Europe was robust but the market remained relatively subdued for executive recruitment. Whilst economic conditions remained challenging in Australia, our business in Hong Kong experienced a stronger finish to the year than expected.

Notwithstanding a 2.8% increase in overall adjusted operating profit for the year, growth was held back by a reduction in demand for projects in Germany, due to a general slowdown in investment in the mobile telecoms market and delays to the rollout of 4G. As a consequence, a non-recurring charge of £2.2m out of a total £2.6m was incurred during the year.

Adjusted basic earnings per share, which excludes the effect of non-recurring costs, rose by 5.2% to 8.76p (2013: 8.33p). Basic earnings per share, after non-recurring costs, fell by 30.0% to 5.24p (2013: 7.49p).

Dividend

The Board is recommending a 10% increase in the final dividend to 1.974 pence per share (2013: 1.795p), giving a total dividend for the year of 3.21 pence per share (2013: 2.92p), also up 10%. If this is approved at the forthcoming Annual General Meeting, the final dividend will be paid on 11 July 2014 to shareholders on the register as at 20 June 2014.

Strategy

The Group's strategy is to continue to grow the business, increasing revenues, profits and dividends through a balanced portfolio of services. This portfolio delivers competitive advantages and a cash generative business model, which enables the Group to grow organically through investment in new services, geographic locations and increasing headcount, as well as though earnings enhancing bolt on acquisitions.

The core of the Group's business model is its unique portfolio of services, which enables client engagement at each stage of the business cycle. This relationship model underpins the delivery of resilient financial results, demonstrated during the last downturn, and supports returns to shareholders.

A balance of permanent recruitment, contract recruitment, managed solutions and offshore services, combined with our market leading position in technology and executive recruitment, provides Harvey Nash with a competitive advantage and has ensured significant market share gains. Going forward, the Group will continue to invest in its offshore recruitment services in Vietnam, providing candidate placement services to the business in the USA, UK and parts of Europe.

During the year under review, the Group continued to invest in additional headcount in Asia, mainly in Hong Kong and Sydney, while opening a new location in Tokyo towards the end of the year. The option to acquire the remaining 49.9% of our business in Norway was exercised in April 2013, resulting in full ownership and consolidating our market leading position in the Nordic region.

Recovery in the global economy provides opportunities to grow the business further in line with the Group's strategy, not only in Asia but also in the USA and Europe as markets begin a return to growth.

Governance and Board

Harvey Nash's robust corporate governance framework underpins its performance. On my appointment as Chairman, I set out three clear priorities for the Board on which we remain firmly focused.

First, to debate the strategy for increasing shareholder value, holding the executive team accountable for its delivery. Second, to ensure we have the most talented team to execute our strategy and that we plan effectively for succession. Third, to ensure that the right corporate values are in place, supported by the appropriate governance structures and their effective implementation.

During the past year, Tom Crawford announced his decision to retire at the forthcoming AGM, and I would like to thank him for his contribution to the success of Harvey Nash over so many years. Margot Katz has completed her three-year term as agreed and will not be standing for re-election at the AGM. I am delighted that she will continue her work with us on the next phase of our talent strategy, which is so vital to our continuing growth.

David Bezem was appointed to the Board in June 2013 and we have recently announced that Kevin Thomas will also be joining us in May 2014. David spent over 25 years as an investment banker, providing corporate finance advice to UK quoted companies, and has considerable knowledge of our sector. Kevin is a main board Director of FTSE 100 listed business, Babcock International. He has valuable experience of growing businesses of substantial scale both organically and through acquisition. These appointments bring significant additional experience to the Board and will help us support the Group's plans for growth.

Outlook

The demand for recruitment services is improving in all our key markets. Permanent recruitment has strengthened in the USA, UK & Ireland, with signs of improvement in the Nordics and Asia Pacific. The pipeline of opportunities for offshore services is stable and demand for contract recruitment remains robust particularly in mainland Europe.

The momentum generated in the second half of the year under review has continued into the new financial year. The Board is encouraged by the improving market conditions and is, therefore, confident that the Group is in a strong position to make further progress in the year ending 31 January 2015.

Julie Baddeley

Chairman

25 April 2014

CEO REVIEW

United Kingdom and Ireland

Revenue in the UK and Ireland increased by 6% to £223.7m (2013: £210.4m) and gross profit increased by 7% to £33.4m (2013: £31.2m). Operating profit improved by 17% to £3.2m, compared to £2.7m the previous year. This is another strong performance from the Group, which reflects market share gains and an improving market.

An increase in permanent recruitment in the second half lifted operating profit, particularly in the fourth quarter. Demand for technology professionals was robust and this is reflected in the performance of the technical specialist recruitment business, which saw net fees increase by 8%. Gross profit generated in the financial services practice in London rose by 19% compared to the prior year. The market for executive recruitment remained subdued throughout the year. A small year on year increase in net fees was, therefore, a good result in a difficult market.

The UK regional offices performed well, experiencing growth in both permanent and contracting, with gross profit up by 19% compared to the previous year. The businesses in Scotland and in Manchester performed particularly well with strong performances in both permanent and contract recruitment. Growth in the West Midlands was generated by professional technology recruitment, as well as new areas such as Finance and HR. The new office in Newcastle secured a major new client and implemented a managed recruitment service.

The offshore IT projects business was held back in the first half by contract over-runs. However, additional investment resulted in an improved performance in the second half, leading to increased profitability overall in the full year when compared to the previous year.

In Ireland, strong demand from multinationals for IT contractors plus a new managed services win in the financial services sector continued to drive growth. A second office was opened in Cork and a team hired to meet growing client demand.

Mainland Europe

Revenue in mainland Europe increased by 26% to £421.2m (2013: £334.0m) and gross profit increased by 6% to £40.2m (2013: £38.0m). The growth in revenue was driven primarily by contracting and contract services. Operating profit before non-recurring items decreased by 4% to £5.6m (2013: £5.8m), mainly as a result of a weaker market for executive recruitment in the Nordic region and the reduction in telecom related projects in Germany. Despite these challenges, the performance of the European business in a challenging market was highly satisfactory.

A change in the revenue mix in favour of lower margin contracts services was responsible for the reduced margin. The gross performance of permanent in mainland Europe was mixed with strong performances in Belgium (up 40%), Switzerland (up 34%) and Germany (up 7%), being offset by weak conditions in the Netherlands (down 59%) and France (down 23%). Continued weak trading in France led our decision to downsize this small operation with a non-recurring restructuring provision of £0.3m being taken in the second half.

Results from the Benelux were excellent with revenue increasing by 42% and gross profit increasing by 29%. Demand for temporary recruitment and managed contract services was robust with growth in two major accounts plus an additional account win. The business acquired in 2012, Talent IT in Antwerp, delivered a strong finish to the year following a slow start and is in a good position to achieve its earnout targets.

Norway was impacted by a decline in demand for permanent and executive recruitment, as the economy slowed down in response to global uncertainty relating to demand for resources. In April 2013, the Group exercised its option to acquire the remaining 49.9% of Bjerke & Luther in Norway and, while the slowdown in the economy was responsible for an adverse trading result for the year, the business is now fully integrated into the Group, the costs of which have been included in the operating results. In common with our other Nordics businesses, the outlook for Bjerke & Luther is improving.

The results from Central & Eastern Europe, which includes Germany, Switzerland and Poland, were mixed. In Switzerland, gross profit and operating profit were up on the previous year, owing mainly to improved demand for permanent recruitment from the financial services sector. There was an improvement in levels of permanent recruitment in Germany, while contracting was stable. Demand for executive recruitment in Poland was weaker than expected and, accordingly, the business reported a small loss.

United States

Revenue in the USA increased by 3% to £46.9m (2013: £45.6m) and gross profit rose by 4% to £11.4m (2013: £11.0m). Improved business confidence following the so called "fiscal cliff" resulted in a swing in demand towards permanent recruitment. Revenue from permanent recruitment was 34% higher than the previous year, while gross profit from contracting was 13% lower. Gross profit from offshore services increased by 25% over the full year owing mainly to a new managed IT services contract with a global investment bank. Demand continues to be strongest in Seattle and Chicago. On a like for like basis, the USA reported its best results in the Group yet. Headcount increased by 24% on the prior year, reflecting the strong recovery in demand in the US market.

Asia Pacific

Results from the two new offices in Hong Kong and Sydney were mixed. The first half of the year was slower than expected but Hong Kong delivered a strong second half performance with revenue up 106% and a strong pipeline of activity going into the current year ending 31 January 2015. Sydney showed few signs of recovery, although the market was stable. Notwithstanding these challenging trading conditions, revenues were up 16% on the prior year.

Our offshore services business in Vietnam mainly serves clients in the United Kingdom, United States and Germany via offshore development centres. The revenues and profits from these activities are recorded in the country of destination. Other activities in Vietnam, including BPO sold locally and recruitment are accounted for within the Asia Pacific segment.

During the year, the Group concluded an agreement with the Japanese quoted group Mitsui & Co to build the largest call centre in Vietnam and promote software development and business process outsourcing to the Japanese market. Under the venture, Harvey Nash Vietnam took a 15% stake in MOCAP Vietnam and transferred its non-core call centre business to the new strategic partnership. The MOCAP venture is on track and the relationship has supported our entry into the Japanese market.

FD REVIEW

Revenue was 17% higher than the previous year, while gross profit was 7% higher. Gross profit from permanent recruitment was 10% higher, gross profit from contracting was 8% higher and gross profit from offshore solutions was 6% lower. Headcount increased by 10% reflecting our decision to invest in fee-earning staff in the light of the improved confidence in business performance.

Taxation

The overall effective rate of tax is a function of the mix of profits between the various countries in which the group operates with higher rates in the United States, Germany and Belgium in particular being offset by lower rates elsewhere.

The tax charge for the year was £2.5m (2013: £2.3m) giving an overall effective rate of tax before non-recurring items of 28.2% (2013: 25.9%). The deferred income tax asset decreased by £0.1m, due to utilisation of UK bought forward losses. The deferred tax asset of £2.6m (2013: £2.7m) related primarily to accrued Group interest charges payable by the US business (£1.0m), tax losses (£0.9m) and post-employment liabilities (£0.5m) and was offset by a deferred tax liability (£0.4m) relating mainly to unremitted earnings (£0.2m) and accrued revenue (£0.2m).

Earnings per Share

Adjusted basic earnings per share, which excludes the effect of non-recurring costs, rose by 5.2% to 8.76p (2013: 8.33p). Basic earnings per share, after non-recurring costs, fell by 30.0% to 5.24p (2013: 7.49p).

Balance Sheet

Total net assets at the year-end were £65.5m (2013: £67.0m), a decrease of 2.2% due to currency movements being greater than retained profits.

Property, plant and equipment decreased by £0.5m as depreciation exceeded capital additions. Fixed asset disposals of £1.3m were made, of which £1.1m were fully depreciated, £0.1m of these disposals related to the transfer of call centre assets into the MOCAP investment in exchange for a 15% shareholding in the venture.

Intangible assets decreased by £1.9m to £50.4m owing to exchange adjustments (£1.8m) and brand amortisation (£0.1m).

Net trade receivables rose to £112.6m (2013: £86.6m), as a result of a higher proportion of contract management services in Belgium and Holland, which led to higher debtor days, the timing of receipts and revenue growth. Debtor days increased to 46.1 days (2013: 42.5 days). Prepayments and accrued income rose by £3.1m, owing mainly to increases in accrued revenue in Holland. Trade payables increased by £19.4m to £66.9m owing mainly to a combination of higher business volumes and an increase in contract services in the mix in the Benelux. Accruals for taxes and social security payable rose by £0.7m owing mainly to higher corporate taxes and higher staff numbers. Other accruals rose by £5.4m owing to mainly to higher accruals for contractor costs in the Netherlands. The overall increase of £0.8m in provisions for liabilities and charges relates to the remainder of the German termination costs and the estimated costs in respect of the closure of the French office which will be completed in 2014, offset by the utilisation during the year of a provision for an onerous lease.

The Group had a positive net cash position at 31 January 2014 of £3.8m (2013: £5.0m) and has no long-term debt.

Cash Flow

Free cash flow from operating activities before non-recurring items and movements in working capital was once again strong at £11.8m (2013: £11.8m). Overall net cash at 31 January 2014 of £3.8m was £1.2m lower than the previous year owing mainly to a combination of higher working capital (£2.7m), cash outflow on non-recurring items (£1.8m), the purchase of the balance of the equity of our Norwegian subsidiary, Bjerke & Luther AS, for cash (£1.3m) and dividend payments (£2.2m). Cash outflow on capital expenditure in the year was £0.9m lower than the previous year, while income taxes paid were £1.0m lower.

Banking Facilities

As at the 31 January 2014, the Group had total borrowings of £12.1m (2013: £9.4m). The Group maintains substantial headroom in its banking facilities to fund working capital with a £50m invoice discounting facilities of which £25m is in the United Kingdom, the equivalent in Euros of £15m is in the Netherlands, the equivalent in US $ of £5m is in the United States and the equivalent in Euros of £5m is in Belgium, plus a £2m overdraft facility in the United Kingdom.

Risk Management

The Board reviews the key risks facing the business regularly. Outlined below are the main risks that could potentially impact the Group's operating and financial performance:

Consolidated income statement

for the year ended 31 January 2014

Consolidated statement of comprehensive income

for the year ended 31 January 2014

Key: * excluding non-recurring items ** which may be recycled into the profit if specific conditions are metConsolidated balance sheet

as at 31 January 2014

Consolidated statement of changes in equity

for the year ended 31 January 2014

* The movements in the Own Shares held reserve relate to shares awarded from and purchased by the Employee Benefit Trust.

** Acquisition of non-controlling interest relates to the acquisition of the remaining shares in Bjerke and Luther AS.

Consolidated cash flow statement

for the year ended 31 January 2014

1. Publication of non-statutory accounts

The financial information set out in this preliminary announcement does not constitute statutory accounts for the years ended 31 January 2014 or 2013, for the purpose of the Companies Act 2006, but is derived from those accounts.

The statutory accounts for 2013 have been filed with the Registrar of Companies. The statutory accounts for 2014 will be filed with the Registrar of Companies following the Group's next annual general meeting. The Group's auditors have reported on the 2013 and 2014 statutory accounts; their reports were unqualified and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.

2. Basis of preparation

Whilst the financial information included in this preliminary announcement has been prepared in accordance with the International Financial Reporting Standards (IFRSs) as adopted for use in the European Union and as issued by the International Accounting Standards Board, this announcement does not itself contain sufficient information to comply with IFRS. The accounting policies applied in preparing this financial information are consistent with the Group's financial statements for the year ended January 2013 with the exception of the following new accounting standards and amendments which were mandatory for accounting periods beginning on or after 1 February 2013, none of which had any material impact on the Group's results or financial position:

● Amendment to IAS 1 'Financial Statement Presentation', regarding other comprehensive income

● Amendment to IFRS 7 'Financial Instruments: Disclosures', on asset and liability offsetting

● IFRS 13 'Fair Value Measurement'

● Annual Improvements 2011

These changes have no material impact on the consolidated result, financial position or cash flows of the Group.

3. Going concern

The Group's business activities for the year are described in the operational and financial reviews and the statement of financial performance, position and cash flow within this preliminary announcement. The directors have reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. As a result they continue to adopt the going concern basis of accounting in the preparation of the financial statements.

4. Segment information

IFRS 8 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 as that used for internal reporting purposes. The chief operating decision maker 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:

Revenue

4. Segment information (continued)

Gross profit

Operating profit (before non-recurring items)

The results are stated before non-recurring items of £2.58m, £2.25m of which was attributable to Central Europe and £0.33m to Benelux and France. (2013: £0.82m of which £0.61m was attributable to United Kingdom and Ireland and £0.19m to Benelux).

Depreciation and amortisation charge

Amortisation

Amortisation of £0.1m (2013: £0.1m) was charged to the Mainland Europe segment.

5. Income tax expense

6. Earnings per share

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 share 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. The Group has two categories of potential ordinary shares: those share options granted to employees where the exercise price is less than the average price of the Company's ordinary shares during the year, and deferred consideration shares to be issued.

7. Non-recurring items

Non-recurring costs of £2.57m were incurred in the current year, of which £2.25m related to termination costs associated with the restructuring of the Nash Technologies business. Costs of £0.33m were incurred in respect of the closure of the French office.

In the prior year the Group relocated its head office to Heron Tower, the non-recurring costs incurred in respect of the relocation were £0.65m and predominantly related to the payment of rent and associated charges for the old and new premises concurrently. Other non-recurring items included legal fees incurred on the acquisition of Talent IT of £0.13m and a charge of £0.04m for the buy back of an option in Belgium which also related to the acquisition.

8. Provisions

Provisions relate to termination costs for employees in Germany and France.

All provisions fall due within one year.

9. Prior year adjustment

The other debtors and cumulative translation reserve account lines are restated to reflect a historic error of £1.5m.