Interim Results

HARVEY NASH GROUP PLC

("Harvey Nash" or "the Group")

Unaudited Half Year Results for the six months ended 31 July 2015

Harvey Nash, the global professional services group, announces its Half Year results, which show double-digit growth in underlying operating profit on a constant currency basis and are in line with management's expectations.

Financial Results

Operational highlights

· Strong growth in underlying gross profit of 6.1% (9.4% on a constant currency basis1)

· Significant improvement in gross margin to 13.7% (2014: 12.3%) - up 12.1%

· Increase in adjusted operating profit2 of 7.3% despite foreign exchange headwinds (12.6% on a constant currency basis1)

· Interim dividend increased by 9.6% to 1.49p (2014: 1.36p)

· Cash outflows due mainly to expansion of working capital

· Outstanding performance in the USA with gross profit increased by 34.8% and operating profit by 60.9%

· Excellent growth in net fee income in Asia - up 50.2%

· Good performance from UK & Ireland with gross profit up by 7.1% and operating profit up by 9.5%

· Underlying results in Mainland Europe were broadly stable on a constant currency basis1

· Group fee-earner headcount rose by 9.6% - investment in growth in the UK, USA and Asia

Albert Ellis, Chief Executive Officer, said:

"The Group has delivered a strong financial performance, in the USA, UK and Asia with double-digit growth in underlying operating profit1 on a constant currency basis.

"Strategic investment in the USA and a favourable market has driven growth in operating profit of 60.9% and expansion in Asia has delivered an increase of 50.2% in net fees in those businesses. In the UK, strong demand for software developers accelerated growth with net fees improving by 18.0% on the prior year. In Europe, despite currency headwinds, steady demand for temporary and contract labour continued to drive solid improvement in operating profit1."

ENQUIRIES:

1 On a constant currency basis which is calculated by re-translating current year figures at prior year rates.

2 Stated before non-recurring costs of £0.4m relating to the strategic review of the German outsourcing business.

CHAIRMAN'S STATEMENT

Financial results

The Group has reported strong results for the six months ended 31 July 2015 with double-digit growth in underlying adjusted operating profit on a constant currency basis.

Revenue increased by 0.5% on a constant currency basis, although there was a slight decline in reported currency of 5.3% to £337.0m due to the strength of Sterling. Gross profit rose by 6.1% (9.4% on a constant currency basis) to £46.3m (2014: £43.6m), partly reflecting the 50.2% increase in the Group's Asian businesses.

Adjusted operating profit was 7.3% higher at £4.9m (2014: £4.6m) and 12.6% higher on a constant currency basis due in part to excellent performances from the UK and the USA, with growth in demand for both contract and permanent technology staff continuing.

Non-recurring items of £0.4m (2014: £nil) in the period related to advisory fees and other costs in respect of the ongoing strategic review of the German outsourcing business.

Adjusted basic earnings per share rose by 6.3%, to 4.42p (2014: 4.16p), as the tax rate remained steady. The tax charge for the period was £1.3m (2014: £1.2m) with an unchanged effective rate of tax before non-recurring items of 28.1%.

Balance Sheet

Euro related foreign exchange variances affected net assets, which were 2.3% lower at £62.8m (2014: £64.2m). High levels of capital investment on infrastructure, new databases and software licences lifted tangible fixed assets by 10.2% to £4.1m (2014: £3.7m).

Intangible fixed assets increased to £2.5m from £0.7m in the prior year, representing the ongoing software development in relation to a vehicular small cell solution developed for the automotive industry in Germany.

Good growth in contracting in the USA, UK & Benelux has absorbed more cash than normal at the seasonal peak. This impact was exacerbated by a five-week billing month ending on the half-year date, 31 July 2015, compared to four weeks in the prior year. Accordingly, trade and other receivables were higher at £137.3m (2014: £133.5m), despite lower revenue and improved debtor days (2015: 45.6 vs. 2014: 46.1). Trade and other payables decreased by 4.6% to £112.1m (2014: £117.5m), mainly due to the unfavourable timing of certain contractor payrolls. As a result, net borrowing at 31 July 2015 was £15.7m (2014: £4.3m).

The deferred tax asset increase of £0.1m to £2.8m over the prior year was due to short-term timing differences. Contingent consideration increased by £0.2m to £2.3m, mainly due to deferred consideration for the Group's acquisition in Japan, Beaumont KK. The weakness of the Euro reduced slightly the Sterling value of deferred consideration in relation to the Belgium acquisition, Talent-IT BVBA, which was settled during August 2015.

Cash Flow

The Group's cash generation was affected by three key items at 31 July 2015: growth in working capital driven by higher contractor numbers and seasonal swings, increased capital expenditure and higher tax payments. Other than with respect to ongoing investment in software development referred to above, the Group's cash is expected to improve in the second half, as working capital swings substantially reverse and catch-up tax payments and capital expenditure flows normalise.

Cash generated from operating activities during the period, before movements in working capital, was £5.2m (2014: £5.4m). In the six months to 31 July 2015, there was a net increase in working capital of £16.3m (2014: £7.9m).

Capital expenditure in the period totalled £1.2m (2014: £0.7m). This mainly relates to modernisation and updating of the Group's technology platforms and databases, technology and office infrastructure spend and software licences in Vietnam. An amount totalling £1.4m (2014: £0.7m) was capitalised in relation to software development for a vehicular small cell solution in Germany.

Tax paid in the period was £2.6m (2014: £1.3m). The increase was due to payment of prior year taxes in Belgium and Germany.

Dividend payments of £1.6m (2014: £1.4m) and net interest paid of £0.4m (2014: £0.3m) resulted in an overall net cash outflow in the six months to 31 July 2015 of £17.8m (2014: £8.2m).

Operational Review

United Kingdom and Ireland

Revenue in the UK and Ireland increased by 2.4% to £116.9m (2014: £114.2m) and gross profit increased by 7.1% to £19.0m (2014: £17.7m). Operating profit increased strongly by 9.5% to £2.1m (2014: £1.9m).

Strong results were reported from Scotland and the new UK regional locations of Newcastle and Bristol made their first positive contributions. In London, significant growth was generated from Finance and Banking, which was mitigated by weaker results from Oil & Gas. Contract demand for technology specialists was robust as the acute skills shortage continued.

While results from the senior interim business were improved on the prior year, the UK election impacted demand for permanent executives in the first quarter in Local Government, Education, and Healthcare (NHS). However, the Healthcare market is returning to normal with net fees for the half year up by 8.6% and increased demand for international mandates.

In Ireland, gross profit increased by 9.3%1, led by demand for finance professionals and technology specialists for Dublin-based US multi-nationals, and an improved performance from the recently opened office in Cork.

Mainland Europe

On a constant currency basis, both gross profit and operating profit2 increased in mainland Europe. Revenue in mainland Europe decreased by 2.6%1 while gross profit increased by 4.9%1, indicating improved profitability due to a change in mix in favour of higher margin contracting. Operating profit was 4.2%1 higher.

Operating profits rose in Central Europe with increases in Switzerland, Poland and Germany. Gross profit in Germany was 29.4%1 higher, due to the increasing demand for flexible technology and engineering labour and a significant rise in permanent recruitment, with placements more than doubling on the prior period as business confidence improved.

In the German outsourcing business, revenue for the period was £8.5m, representing a 6.4% decline on a constant currency basis, producing gross profit of £1.7m (2014: £2.2m) and a loss of £0.2m2 (2014: £0.1m). As a result, further restructuring is being undertaken in the legacy telecoms outsourcing services business in the second half of the year to reduce costs in line with revenues.

In the innovations business, software development totalling £1.1m (2014: £0.7m) was capitalised in relation to the ongoing development of a vehicular small cell solution for the German automotive industry. Key milestones in support of the policy of capitalisation were achieved. The process of reviewing all options for the future of the German outsourcing business is progressing.

The performance of the Group's operations in the Benelux was steady with revenues decreasing by 1.9%1 and gross profit unchanged from the prior year1. Challenging market conditions in the Netherlands and reduced margins for managed services across the Benelux held back overall gross profit. Additional investment for growth in Belgium reduced the short-term contribution in Antwerp and Brussels. However, demand for permanent placements increased during the period. The process of closing the French executive search office, which began in the prior year, finally completed during May 2015.

In the Nordics, revenue increased by 15.9%1, whilst gross profit improved by 6.7%1 and operating profit doubled1 albeit from a low base. Due to the devaluation of the Swedish krona and Norwegian kroner, reported revenue and gross profit were down by 3.8% and 8.6% respectively, although operating profit rose on a reported basis.

The Group's business in Sweden continued to grow, further consolidating its market leading position in senior and professional recruitment and leadership services, with 15.2%1 growth in gross profit. Good permanent recruitment activity facilitated a 22.2% increase in fee earners, particularly in the smaller locations such as Finland and Norway. Following the restructuring of the business in Norway last year, the loss in the period was significantly reduced.

1 On a constant currency basis which is calculated by re-translating current year figures at prior year rates.

2 Stated before non-recurring costs of £0.4m relating to the strategic review of the German outsourcing business.

Rest of World

In the USA, favourable market conditions and strong demand for technology professionals enabled a significant uplift in revenue of 21.3% to £26.9m (2014: £22.1m), with gross profit increasing by 34.8% to £7.2m (2014: £5.3m) and operating profit by 60.9% to £0.8m (2014: £0.5m). Permanent placement revenues improved by 19.9% on the prior year, while gross profit from contracting and outsourcing grew by 51.3% and 36.4% respectively. The Group's investment in fee-earning capacity continued, rising by 13.9%, leveraging the strong trading conditions.

The Group's fastest growing geographic region was Asia Pacific where revenue increased by 77.7% to £4.3m (2014: £2.4m). This was driven by senior executive recruitment in Hong Kong and Japan, an encouraging start in the new Singapore office and continued strong trading in Vietnam. In Vietnam, the recruitment business reported an increase in permanent revenues of 15.9%. In Australia, a focus on productivity and costs partly mitigated the 16.8% decline in gross profit against the prior period. This was due in part to the weakening Australian Dollar but mainly the challenging operating conditions experienced in the first quarter. In aggregate, Asia Pacific increased gross profit by 50.2% to £2.5m (2014: £1.7m) and reduced the overall loss by 60.0%

Dividends

The Board has approved the payment of an interim dividend of 1.49p per share (2014: 1.36p), an increase of 9.6%. This will be paid on 20 November 2015 to shareholders on the register as at 23 October 2015.

Outlook

The Group has continued to drive growth in the first half of the year, in both established markets such as the USA, UK, Germany and Sweden and many of the new geographies. The performance of Asia Pacific was particularly encouraging with mainly organic growth in revenues and the successful establishment of the Group's brand and services in that region.

The Board is pleased with the Group's overall adjusted operating profit for the six months which has been in line with management's expectations, and since 31 July 2015 this has continued to be the case. Since the end of the first half, global macro-economic uncertainty has increased, notably with respect to China, and currency headwinds continue. However, the Board remains positive about the outlook for the remainder of the financial year, reflecting the strong market position of our businesses and the positive trading momentum to date across the Group.

Julie Baddeley

Chairman

30 September 2015

Consolidated Income Statement

Consolidated Statement of Comprehensive Income 

Key: * excluding non-recurring items  Consolidated Balance Sheet

 Consolidated Statement of Changes in Equity

 Consolidated Cash Flow Statement

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

1. Corporate information

Harvey Nash Group plc ("the Company") and its subsidiaries (together "the Group") is a leading provider of specialist recruitment and outsourcing solutions. The Group has offices in the United Kingdom, Europe, United States, Hong Kong, Australia, Japan, Singapore and Vietnam.

The Company is a public listed company incorporated in the United Kingdom. Its registered address is 110 Bishopsgate, London, EC2N 4AY and its primary listing is on the London Stock Exchange.

The condensed consolidated interim financial information for the six months ended 31 July 2015 was approved for issue on

30 September 2015.

2. 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, which remain the same as those reported on page 20 of the consolidated financial statements of the Group for the year ended 31 January 2015:

3. Accounting policies

Basis of preparation

This condensed consolidated interim financial information for the six months ended 31 July 2015 has been prepared in accordance with IAS 34 'Interim financial reporting' and the disclosure and transparency directives of the FCA. It does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006 as it does not include all the information required for full statutory accounts. The interim financial statements should be read in conjunction with the statutory accounts for the year ended 31 January 2015, which were prepared in accordance with IFRS as adopted by the European Union and were approved by the Board of Directors on 29 April 2015 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the

Companies Act 2006. This condensed consolidated interim financial information has not been reviewed or audited by the Group's auditors Deloitte LLP.

Significant accounting policies

Except as noted below, the same accounting policies, methods of computation and presentation have been applied as those set out in the Harvey Nash Group plc Annual Report for the year ended 31 January 2015. The accounting policies are drawn up in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as endorsed by the European Union.

New and amended standards adopted by the Group

The Group has adopted the following new interpretation during the current financial period which had no impact on the Group:

· · IFRIC 21 (Issued) 'Levies' - effective for periods starting on or after 17 June 2014

At the date of approval of these condensed consolidated interim financial statements the following amended standard, which has not been applied and when adopted will have no material impact on the Group, was in issue but not yet effective:

· IAS 19 (Amended) 'Employee Benefits' - effective for periods beginning on or after 1 February 2015

At the date of approval of these condensed consolidated interim financial statements the following new and amended standards, which have not been applied and when adopted will have no material impact on the Group, were not yet endorsed by the EU and have no effective date:

· IFRS 9 (Issued) 'Financial Instruments'

· IFRS 10 (Amended) 'Consolidated Financial Statements'

· IFRS 11 (Amended) 'Joint Arrangements'

· IFRS 12 (Amended) 'Disclosure of Interests in Other Entities'

· IFRS 15 (Issued) 'Revenue from Contracts with Customers'

· IAS 1 (Amended) 'Presentation of Financial Statements'

· IAS 16 (Amended) 'Property, Plant and Equipment'

· IAS 27 (Amended) 'Separate Financial Statements'

· IAS 28 (Amended) 'Investments in Associates and Joint Ventures'

· IAS 38 (Amended) 'Intangible Assets'

·

Annual Improvements are implemented when effective and will have no material impact on the Group.

Critical accounting judgements and key sources of estimation uncertainty

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 January 2015.

Going concern basis

The Group meets its day-to-day working capital requirements through its bank facilities. The current economic conditions continue to create uncertainty particularly over (a) the level of demand for the Group's services; and (b) the availability of bank finance for the foreseeable future. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current facilities. After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consolidated interim financial statements.

4. Segment information

The chief operating decision-maker has been identified as the Group Board. There have been no changes since the year ended

31 January 2015 in the way the Group Board analyses segmental information. Services provided by each reportable segment are permanent recruitment, contracting and outsourcing. The Group Board analyses segmental information as follows:

Revenue

Gross profit

Operating profit before non-recurring items

4. Segment information (continued)

Profit before tax

Depreciation

5. Taxation

Taxation (before non-recurring items) for the six-month period is charged at 28.1% (2014: 28.1%), representing the best estimate of the average annual effective tax rate expected for the full year, applied to the pre-tax income of the six-month period.

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's potential ordinary shares are comprised of share options granted to employees where the exercise price is less than the average price of the Company's ordinary shares during the period.

7. Analysis of changes in net funds

Net funds comprise cash and cash equivalents less invoice discounting and overdrafts utilised.

8. Dividends

The Group paid a final dividend of 2.171p per share on 10 July 2015 to shareholders on the register as at 19 June 2015 (2014: final dividend of 1.974p per share was paid on 11 July 2014).

9. Purchases of property, plant and equipment

The Group made cash purchases of property, plant and equipment of £1.2m (2014:£0.7m) in the period. The Group also capitalised costs of £1.4m (2014: £0.7m) in relation to internal and client software development.

10. Capital commitments

The Group had no capital commitments at 31 July 2015 (2014: £nil).

11. Related party transactions

There have been no related party transactions or changes in the related party transactions described in the January 2015 Annual Report in the six month period to 31 July 2015.

12. Non-recurring items

Non-recurring costs of £0.4m were incurred relating to the strategic review of the German outsourcing business. In the year ended 31 January 2015, non-recurring costs amounted to £1.3m, of which £0.6m related to the strategic review of the German outsourcing business and relocation of laboratory assets. £0.5m related to the restructuring of the Norwegian operations and £0.2m was incurred in respect of the acquisition of Beaumont KK.

13. Post balance sheet events

On 21 August 2015, following the completion of the earn-out period, the Group settled the deferred consideration of £2.0m in respect of the Belgium acquisition of Talent IT.

Statement of Directors' Responsibilities

The directors confirm that, to the best of their knowledge, these condensed consolidated interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union. The interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:

· an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

· material related-party transactions in the first six months of the financial year and any material changes in the related party transactions described in the last Annual Report.

The directors of Harvey Nash Group plc are listed in the Harvey Nash Group plc Annual Report for 31 January 2015. A list of current directors is maintained on the Harvey Nash Group plc website: www.harveynash.com

The directors are also responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

By order of the Board.

Richard Ashcroft

Group Company Secretary

30 September 2015

Cautionary statement

This Half Year Report (the "Report") has been prepared in accordance with the Disclosure Rules and Transparency Rules of the UK Financial Conduct Authority and is not audited. No representation or warranty, express or implied, is or will be made in relation to the accuracy, fairness or completeness of the information or opinions contained in this Report. Statements in this Report reflect the knowledge and information available at the time of its preparation. Certain statements included or incorporated by reference within this Report may constitute "forward-looking statements" in respect of the Group's operations, performance, prospects and/or financial condition. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions and actual results or events may differ materially from those expressed or implied by those statements. Accordingly, no assurance can be given that any particular expectation will be met and reliance shall not be placed on any forward-looking statement. Additionally, forward-looking statements regarding past trends or activities shall not be taken as a representation that such trends or activities will continue in the future. The information contained in this Report is subject to change without notice and no responsibility or obligation is accepted to update or revise any forward-looking statement resulting from new information, future events or otherwise. Nothing in this Report shall be construed as a profit forecast. This Report does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase or subscribe for any shares in the Company, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment or investment decisions relating thereto, nor does it constitute a recommendation regarding the shares of the Company or any invitation or inducement to engage in investment activity under section 21 of the Financial Services and Markets Act 2000. Past performance cannot be relied upon as a guide to future performance.