Interim Results

RNS Number : 5618T

Harvey Nash Group PLC

30 September 2010

 

 

HARVEY NASH GROUP PLC

("Harvey Nash" or "the Group")

 

Unaudited Interim Results for the six months ended 31 July 2010

Harvey Nash, the global professional services group, announces increased profits and cash for the six months ended 31 July 2010

 

Financial Results

	2010 H1	2009 H1	Change
Revenue	£199m	£200m	ê 1%
Gross Profit	£32.0m	£31.7m	é 1%
Operating profit	£2.8m	£2.0m	é 39%
Operating profit *	£2.9m	£2.5m	é 17%
Profit before tax	£2.6m	£1.8m	é 45%
Profit before tax *	£2.7m	£2.3m	é 20%
Non recurring items **	(£0.1m)	(£0.5m)	ê 73%
Earnings per share	2.35p	1.59p	é 48%
Interim dividend	0.935p	0.850p	é 10%
Operating cash inflow	£3.7m	£2.8m	é 33%
Net cash	£4.8m	£0.7m	é £4.1m

 

* Adjusted for non recurring items

** 2010 Professional fees in relation to the acquisition in Norway written off

2009 non-recurring restructuring costs

 

 

Highlights

·; Revenue in line with the previous two years despite the severe recession

·; Significant market share gains with multiple contract wins

·; Increased demand for flexible labour; contractor numbers up 20% since Jan 2010

·; Net fee income from permanent recruitment up over 23%

·; Operating profits up 39% and profit before taxation up 45%

·; Operating cash inflow up 33% increasing net cash to £4.8m (2009: £0.7m)

·; Increased interim dividend, up 10% to 0.935p per share (2009: 0.850p per share)

·; Market leadership consolidated in Europe with expansion into Norway and Finland

·; Second multi year telecomm outsourcing contract secured in Stuttgart, Germany

 

Commenting on the results, the Chief Executive Officer, Albert Ellis, said:

 

"The Group has performed remarkably well during the downturn, remaining profitable and generating cash, despite the severe recession in all of our markets. Our broad range of services and focus on relationships enabled the Group to continue to add value to its clients, many of which had implemented recruitment freezes.

 

"With markets now recovering, demand for recruitment has been picking up and the Group is very well positioned for the upturn."

 

 

ENQUIRIES:

Harvey Nash	Tel: 020 7333 2635
Albert Ellis, Chief Executive
Richard Ashcroft, Group Finance Director
College Hill	Tel: 020 7457 2020
Mark Garraway

 

A presentation of the results will take place at 09:30 this morning at the offices of College Hill, The Registry, Royal Mint Court, EC3N 4QN

CHAIRMAN'S STATEMENT

 

The Group has performed very well during the six months ended 31 July 2010 as demand for permanent and flexible recruitment increased. While broadly maintaining its revenues in line with the previous two years, the Group has been able to substantially increase profit before tax as a result of tight control of costs.

 

Net fee income in relation to permanent recruitment grew strongly in the period and was up by 23% on the previous year. Contract recruitment, managed services and offshore outsourcing also remained robust. The Group secured a number of new contracts and clients during the period.

 

Strong operating cash flow, up 33%, resulted in a significant increase in net cash compared to last year, after settling the initial consideration for the Group's acquisition in Norway. Accordingly, the Group will increase its interim dividend to 0.935p per share up 10% on last year.

 

With the recovery underway, management have focused on maintaining revenue generating and delivery capability, with an increase in fee-earning headcount in order to leverage the market share gains achieved during the recession.

 

Financial Results

 

The Group's revenue for the six months ended 31 July 2010 was £198.6m (2009: £199.9m), with an increase in permanent recruitment offsetting lower contracting revenue.

 

Gross profit increased to £32.0m (2009: £31.7m) mainly due to the increase in permanent recruitment. In the six months to 31 July 2010 the proportion of permanent recruitment increased to 39% of total gross profit up from 32% for the comparable period last year.

 

Operating profit, adjusted for non recurring items, increased by 17% to £2.9m (2009: £2.5m) and profit before tax increased by 45% to £2.6m (2009: £1.8m). The tax charge for the period was £0.8m (2009: £0.5m) and the tax rate, 31% (2009: 29%) due to certain unrelieved losses.

 

Basic earnings per share increased by 48% to 2.35p (2009: 1.59p), slightly higher than the increase in profit before tax as a result of a lower proportion of minority share of profits.

 

Balance Sheet

 

The Group has a sound balance sheet, with net cash increasing to £4.8m (2009: £0.7m), despite paying the final dividend and settling the initial consideration for the acquisition in Norway in cash. Although the Group has no long term debt, short term working capital funding of circa £39m is available on a rolling twelve month basis for its growing contracting and outsourcing services.

 

Net assets were lower by 5% at £56.2m (2009: £59.1m) owing to an adjustment of £2.6m in the cumulative translation reserve. Tangible fixed assets increased by £0.7m mainly as a result of project capital expenditure in Nash Technologies the majority of which is reimbursed by the client.

 

Movements in the deferred income tax asset arose due to deferred tax on losses brought forward, share option, holiday and interest accruals. Trade debtors increased by £2.2m to £65.0m (2009: £62.8m) as a consequence of higher turnover in the second quarter compared to the same period last year. Provisions for liabilities and charges mainly comprise provisions for two onerous property leases which run to December 2011 and September 2013 respectively.

 

Cash flow

 

Operating cash flow was strong at £3.7m, up 33% on the comparable period in 2009 (£2.8m) and cash from operating activities (after deducting movements in working capital) was £3.8m (2009: £1.2m), over three times the result compared to last year.

 

Due to lower profits in the previous year, the tax payments of £0.7m (2009: £1.6m) were lower during the period. This resulted in a net £3.2m of cash generated by operating activities compared to an outflow of £0.4m in the previous year.

 

Capital expenditure of £0.2m (2009: £0.4m) was incurred on technology and office infrastructure relating to the core business.

 

Acquisition costs, net of cash acquired, was £1.5m. The increased final dividend payment to shareholders in relation to the year ended 31 January 2010 amounted to £1m (2009: £0.9m), with dividends paid to non controlling interests of £0.35m (2009: £Nil). Interest incurred was down by 26% to £0.18m (2009: £0.24m) reflecting the increased cash generation and more efficient cash pooling in Europe while differences on translation accounted for £0.3m compared to £0.1m in the prior year.

 

Strategy

 

The Group's resilient financial performance during the global financial crisis demonstrated the effectiveness of a broad portfolio of services, with growth in the outsourcing business offsetting the decline in demand for permanent recruitment.

 

This strategy has underpinned the Group's profitability and resilience throughout the recession and as a result, the Group broadly maintained revenues, remained profitable and continued prudent investment for the upturn, despite the fall in demand for recruitment.

 

The Group's key assets, its strong brand and unique portfolio of services, have been crucial in maintaining and growing existing client relationships, winning additional mandates and retaining key employees. The Group's professional values place clients at the centre of its strategy and this has clearly had a positive impact over the last decade. Marketing the Group's services and engaging with clients through thought leadership activities will continue to be at the core of the business development strategy.

 

The strategic objectives for each division within the Group is to improve its market share and expand its portfolio of services geographically, building resilience for uncertain times as well as leveraging demand for permanent recruitment when economic conditions are strong.

 

Looking forward, our proven strategy of sustainable growth through organic expansion combined with bolt-on acquisitions will continue to benefit all the Group's stakeholders.

 

Operational Review

 

United Kingdom and Ireland

 

Revenue increased by 6% to £59.6m (2009: £56.4m) with gross profit improving by 9% to £13.8m (2009: £12.7m) and operating profit increasing by 64% to £1.9m (2009: £1.2m).

 

The impact of market share gains and the cost reduction measures taken during the recession, resulted in a significant uplift in operating profit.

 

The success of the UK business was marked by a return to growth in demand for higher margin permanent recruitment, with the Technology and Financial Services sectors particularly active, mitigating the predicted slow down in the Public Sector. These two sectors were profoundly affected throughout the downturn and an element of catch up has been in evidence in the hiring activity in the early part of 2010. Consolidation has also been the key driver for recruitment, as the changes have impacted management structures and technology. Demand has also arisen from global organisations actively expanding their businesses in emerging markets.

 

The outsourcing division benefited from new contracts secured during the downturn and a release of new projects and software development work from existing clients.

 

All markets reported a positive contribution during the period, including Ireland. An additional location has been established in South East England, and the Group has also consolidated its positioning within the financial services sector with a new City office focusing exclusively on recruitment within this sector.

 

Rest of Europe

 

Revenue in mainland Europe declined by 4% to £122.4m (2009: £127.8m), with gross profit 2% lower to £13.9m (2009: £14.2m) and operating profit decreased by 30% to £0.8m (2009: £1.2m).

 

As expected, demand for recruitment continued to be weak in mainland Europe, as the impact of the financial crisis lagged the UK and the US. While HR and IT outsourcing services continued to provide profitable support to the results, demand for permanent recruitment was mixed with a recovery in Sweden and Norway partly offsetting the overall decline.

 

During the period under review, the Group acquired a leading recruitment business in Norway and also opened an office in Helsinki, Finland. The acquisition in Norway and organic expansion in Finland significantly enhances Harvey Nash's Northern European footprint and further strengthens its market leading business across the Nordic region. Harvey Nash Alumni is now the Nordic region's largest provider of executive and specialist recruitment.

 

On the 30 April 2010 an additional contract was secured by Nash Technologies worth €43m over a number of years. A new development centre was added in Stuttgart, Germany to support the German fixed line telecommunications market. In relation to the extension of the Group's existing strategic partnership in Nuremberg, discussions are ongoing and although not yet concluded, are expected to result in a satisfactory outcome in due course.

 

With the exception of the Netherlands, a recovery in Europe led by Germany and the Nordics began toward the end of the second quarter, with new assignments and increased contractor numbers when compared to the previous quarter.

 

United States

 

In the US, revenue increased by 5% to £16.6m (2009: £15.7m) but as a result of changes in the mix favouring lower margin contract recruitment, gross profit declined by 11% to £4.3m (2009: £4.8m) with operating profits broadly similar to the previous year.

Our US business has shown remarkable resilience delivering annual profits and cash throughout the recession. As in Europe, maintaining our capacity and continuing to deliver profits was a key objective. This was delivered by focusing on the outsourcing and offshoring division, assisting clients through cost reduction and efficiencies during the recession. Now, as the markets recover, prudent investment in additional fee-earners in the recruitment business is being made as client hiring activities increase including opening a location in Houston, Texas.

 

Despite mixed signals on the macro employment picture in the US, much higher levels of demand for flexible labour provides good visibility into the third quarter and the pace of improvement in permanent recruitment has continued to reflect an uplift in demand.

 

Board

The Board is pleased to announce the appointment of Ian Davies MBA FCA CF as an independent non executive director and chairman of the audit committee with immediate effect. Ian is a former audit partner, and has publicly listed Board experience. He is currently deputy chairman of BMT Group Limited, and a member of the Council at the Institute of Chartered Accountants.

Dividends

 

The Group will pay an interim dividend of 0.935p per share (2009: 0.850p) an increase of 10%, on 26 November 2010 to shareholders on the register at 29 October 2010.

 

Outlook

 

Whilst the economic outlook remains unclear, demand for recruitment has been picking up and we are therefore confident of delivering a result for the year in line with the Board's expectations.

 

Ian Kirkpatrick

Chairman

29 September 2010

 

 

 

Consolidated Interim Income Statement

 

		Unaudited 6 months ended 31 July 2010 £'000	Unaudited 6 months ended 31 July 2009 £'000	Audited 12 months ended 31 January 2010 £'000
Revenue		198,588	199,902	376,209
Cost of sales		(166,619)	(168,209)	(315,789)
Gross profit		31,969	31,693	60,420
Total administrative expenses		(29,199)	(29,693)	(58,775)
Operating profit before non-recurring items		2,900	2,480	4,463
Non-recurring items		(130)	(480)	(2,818)
Operating profit		2,770	2,000	1,645
Finance income		12	36	86
Finance costs		(178)	(240)	(448)
Profit before tax		2,604	1,796	1,283
Income tax expense		(804)	(521)	(415)
Profit for the period		1,800	1,275	868
Attributable to:
Equity holders of the Company		1,710	1,157	795
Non-controlling interests		90	118	73
		1,800	1,275	868
Basic earnings per share		2.35p	1.59p	1.09p
Diluted earnings per share		2.34p	1.57p	1.08p

 

 

 

 

Consolidated Statement of Comprehensive Income

 

	Unaudited 6 months ended 31 July 2010 £'000	Unaudited 6 months ended 31 July 2009 £'000	Audited 12 months ended 31 January 2010 £'000
Profit for the period	1,800	1,275	868
Foreign currency translation differences	(1,214)	(385)	(1,791)
Other comprehensive income for the period	(1,214)	(385)	(1,791)
Total comprehensive income for the period	586	890	(923)
Total comprehensive income attributable to:
Equity holders of the company	496	772	(996)
Non-controlling interests	90	118	73
	586	890	(923)

 

 

 

 Consolidated Interim Balance Sheet

		Unaudited 31 July 2010 £'000	Unaudited 31 July 2009 £'000	Audited 31 January 2010 £'000
ASSETS
Non-current assets
Property, plant and equipment		3,811	3,099	3,223
Intangible assets		47,986	45,516	46,151
Deferred income tax assets		2,573	1,989	2,761
		54,370	50,604	52,135
Current assets
Cash		4,768	689	5,146
Trade and other receivables		79,178	80,361	73,638
Total assets		138,316	131,654	130,919
LIABILITIES
Non-current liabilities
Contingent consideration		(19)	(19)	(19)
Deferred income tax liabilities		(186)	(266)	(228)
Provision for liabilities and charges		(329)	-	(424)
		(534)	(285)	(671)
Current liabilities
Trade and other payables		(80,245)	(70,633)	(72,144)
Current income tax liabilities		(1,029)	(1,586)	(954)
Provisions for liabilities and charges		(274)	(90)	(359)
		(81,548)	(72,309)	(73,457)
Total liabilities		(82,082)	(72,594)	(74,128)
Net assets		56,234	59,060	56,791
Capital and reserves attributable to equity shareholders
Share capital		3,673	3,669	3,673
Share premium		8,425	8,422	8,425
Shares to be issued		49	86	49
Fair value and other reserves		15,079	15,079	15,079
Own shares held		(362)	(466)	(412)
Cumulative translation reserve		4,574	7,194	5,788
Retained earnings		24,293	24,465	23,603
		55,731	58,449	56,205
Non-controlling interest in equity		503	611	586
Total equity		56,234	59,060	56,791

 

 

 

 Unaudited Consolidated Interim Statement of Changes in Equity

 

	Share capital	Share premium	Shares to be issued	Fair value and other reserves	Own shares held	Cumulative translation reserve	Retained earnings	Total equity
	£ '000	£ '000	£ '000	£ '000	£ '000	£ '000	£ '000	£ '000
Balance at 1 February 2009	3,669	8,412	86	15,079	(120)	7,579	24,107	58,812
Profit for the period	-	-	-	-	-	-	1,157	1,157
Currency translation adjustments	-	-	-	-	-	(385)	-	(385)
Total recognised income and expense for the period	-	-	-	-	-	(385)	1,157	772
Employee share option and bonus plan	-	10	-	-	1	-	64	75
IFRS 2 Deferred Tax to equity	-	-	-	-	-	-	6	6
Dividends paid	-	-	-	-	-	-	(869)	(869)
Own shares purchased	-	-	-	-	(347)	-	-	(347)
31 July 2009	3,669	8,422	86	15,079	(466)	7,194	24,465	58,449
Profit for the period	-	-	-	-	-	-	(289)	(289)
Currency translation adjustments	-	-	-	-	-	(1,406)	-	(1,406)
Total recognised income and expense for the period	-	-	-	-	-	(1,406)	(289)	(1,695)
Employee share option and bonus plan	4	3	-	-	2	-	60	69
IFRS 2 Deferred Tax to equity	-	-	-	-	-	-	(2)	(2)
Acquisitions in the year	-	-	(37)	-	52	-	(15)	-
Dividends paid	-	-	-	-	-	-	(616)	(616)
31 January 2010	3,673	8,425	49	15,079	(412)	5,788	23,603	56,205
Profit for the period	-	-	-	-	-	-	1,710	1,710
Currency translation adjustments	-	-	-	-	-	(1,214)	-	(1,214)
Total recognised income and expense for the period	-	-	-	-	-	(1,214)	1,710	496
Employee share option and bonus plan	-	-	-	-	50	-	(39)	11
Dividends paid	-	-	-	-	-	-	(981)	(981)
31 July 2010	3,673	8,425	49	15,079	(362)	4,574	24,293	55,731

 

 

 

 

 

 Consolidated Interim Cash Flow Statement

		Unaudited 6 months ended 31 July 2010 £'000	Unaudited 6 months ended 31 July 2009 £'000	Audited 12 months ended 31 January 2010 £'000
Profit before taxation		2,604	1,796	1,283
Adjustments for:
- depreciation		896	680	1,359
- amortisation		24	37	49
- loss on disposal of fixed assets		-	-	167
- finance income		(12)	(36)	(86)
- finance costs		178	240	448
- share based employee settlement and share option charge		11	64	127
Operating cash flows before changes in working capital		3,701	2,781	3,347
Changes in working capital (excluding the effects of acquisition and exchange differences on consolidation)
- (Increase)/decrease in trade and other receivables		(9,088)	22,237	29,469
- Increase/(decrease) in trade and other payables		9,399	(23,931)	(24,845)
- (Decrease)/increase in provisions for liabilities and charges		(179)	90	783
Cash inflows from operating activities		3,833	1,177	8,754
Income tax paid		(666)	(1,600)	(2,935)
Net cash generated from/(absorbed by) operating activities		3,167	(423)	5,819
Cash flows from investing activities
Purchases of property, plant and equipment		(223)	(403)	(638)
Purchases of property, plant and equipment rechargeable to clients		(86)	(1,423)	(2,071)
Cash acquired with acquisitions		575	-	-
Purchase of subsidiary undertakings		(2,043)	(33)	(31)
Interest received		12	36	86
Net cash absorbed from investing activities		(1,765)	(1,823)	(2,654)
Cash flows from financing activities
Purchase of own shares		-	(347)	(347)
Proceeds from issue of ordinary shares		-	11	17
Dividends paid to group shareholders		(981)	(869)	(1,485)
Dividends paid to non-controlling interests		(354)	-	-
Interest paid		(178)	(240)	(448)
Net cash used in financing activities		(1,513)	(1,445)	(2,263)
(Decrease)/increase in cash and cash equivalents		(111)	(3,691)	902
Cash and cash equivalents at the beginning of the period		5,146	4,458	4,458
Exchange loss on cash and cash equivalents		(267)	(78)	(214)
Cash and cash equivalents at the end of the period		4,768	689	5,146

 

 

 

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 UK, Europe, the United States and Vietnam.

 

The Company is a public listed company incorporated in the UK. Its registered address is 13 Bruton Street, London, W1J 6QA and its primary listing is on the London Stock Exchange.

 

The condensed consolidated interim financial information for the six months ended 31 July 2010 was approved for issue on 29 September 2010.

 

 

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 unchanged from those reported in the consolidated financial statements of the Group for the year ended 31 January 2010 :

 

·; Economic Environment In the current global slowdown the group has a number of policies in place to mitigate economic risks. These include a unique portfolio of services which caters for all stages of the economic cycle and a focus on annuity revenue streams which provide greater visibility of revenue.

·; Key Clients The risk of loss of a key client is lessened by the Group not being overly reliant on any one client. The Group also ensures that there are regular reviews of relationships with all clients.

·; Personnel The loss of senior management or key personnel could adversely affect the Group's results. This is mitigated by an ongoing talent management programme, sponsored by the Group's Executive Council.

·; Regulatory Environment

 

 

The recruitment industry is governed by an increasing level of compliance, which varies from country to country and market to market. The Group mitigates this risk by taking external professional advice where appropriate and maintaining robust internal controls and processes to ensure compliance with respect to legal and contractual obligations.

 

3. Accounting Policies

 

Basis of preparation

This condensed consolidated interim financial information for the six months ended 31 July 2010 has been prepared in accordance with IAS 34, 'Interim financial reporting' and the disclosure and transparency directives of the FSA.

It does not include all the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 January 2010. This condensed consolidated interim financial information has not been reviewed or audited by the Group's auditors, PricewaterhouseCoopers LLP.

 

Nature of financial information

The interim financial information does not constitute statutory financial statements as defined under Section 434 of the Companies Act 2006. The financial information for the year ended 31 January 2010 has been extracted from the statutory accounts for that year which have been delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain any statement under Section 498 of the Companies Act 2006.

 

Significant accounting policies

In preparing these interim financial statements 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 2010. 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.

The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 January 2010, except as disclosed below.

 

In the current financial year, the Group has adopted International Financial Reporting Standard 3 "Business Combinations" (revised 2008) and International Accounting Standard 27 "Consolidated and Separate Financial Statements" (revised 2008). The adoption of these standards has not resulted in any significant changes for the Group, apart from the treatment of acquisition costs which have been expensed to the Income Statement, see note 9.

 

4. Segment Information

The chief operating decision maker has been identified as the Group Board. There have been no changes since year end January 2010, in the way the Group Board analyses segmental information.

Norway has been included in the 'Rest of Europe' segment.

Services provided by each reportable segment are permanent recruitment, contracting and outsourcing.

 

The Group Board analyses segmental information as follows:

 

 

Revenue

 

		Unaudited 6 months ended 31 July 2010 £'000	Unaudited 6 months ended 31 July 2009 £'000	Audited 12 months ended 31 January 2010 £'000
United Kingdom & Ireland		59,568	56,395	110,254
Rest Of Europe		122,415	127,761	236,687
United States		16,605	15,746	29,268
Total		198,588	199,902	376,209

 

 

Gross Profit

 

		Unaudited 6 months ended 31 July 2010 £'000	Unaudited 6 months ended 31 July 2009 £'000	Audited 12 months ended 31 January 2010 £'000
United Kingdom & Ireland		13,775	12,683	24,914
Rest Of Europe		13,893	14,201	27,261
United States		4,301	4,809	8,245
Total		31,969	31,693	60,420

 

 

Operating Profit

 

		Unaudited 6 months ended 31 July 2010 £'000	Unaudited 6 months ended 31 July 2009 £'000	Audited 12 months ended 31 January 2010 £'000
United Kingdom & Ireland		1,947	1,186	1,909
Rest Of Europe		803	1,151	2,523
United States		150	143	31
Operating profit before non-recurring items		2,900	2,480	4,463
Non- recurring items		(130)	(480)	(2,818)
Total		2,770	2,000	1,645

 

 

 

5. Taxation

 

		Unaudited 6 months ended 31 July 2010 £'000	Unaudited 6 months ended 31 July 2009 £'000	Audited 12 months ended 31 January 2010 £'000
Current tax:
Tax on profit in the period		659	894	1,334
Adjustments in respect of prior periods		-	-	264
Total current tax		659	894	1,598
Deferred tax:
Origination and reversal of timing differences		145	(380)	(1,190)
Deferred tax to equity		-	7	4
Other adjustments		-	-	3
Total deferred tax charge/(credit)		145	(373)	(1,183)
Total tax charge		804	521	415

 

 

6. Earnings per Share

 

		Unaudited 6 months ended 31 July 2010	Unaudited 6 months ended 31 July 2009	Audited 12 months ended 31 January 2010
Profit for the period £'000		1,710	1,157	795
Weighted average number of shares		72,654,784	72,860,193	72,675,773
Basic earnings per share		2.35p	1.59p	1.09p

 

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.

 

 

 

		Unaudited 6 months ended 31 July 2010	Unaudited 6 months ended 31 July 2009	Audited 12 months ended 31 January 2010
Profit for the half year £'000		1,710	1,157	795
Weighted average number of shares		72,654,784	72,860,193	72,675,773
Effect of dilutive securities		518,711	688,871	625,171
Adjusted weighted average number of shares		73,173,495	73,549,064	73,300,944
Diluted earnings per share		2.34p	1.57p	1.08p

 

 

7. Analysis of Changes in Net Funds

 

	1 February 2010 £'000	Unaudited Cash flow £'000	Unaudited Foreign exchange movements £'000	Unaudited 31 July  2010 £'000
Cash and cash equivalents	5,146	(111)	(267)	4,768

 

8. Business Combinations

 

On 29 April 2010, the Group acquired 50.1% of the share capital of Bjerke & Luther AS, an Executive search and selection firm in Norway, for a consideration of £2.0m.

 

Harvey Nash has been granted a call option to acquire the additional 49.9 % of the shares in Bjerke & Luther AS from the sellers which may be exercised at the option of Harvey Nash between February 1, 2013 and April 2, 2013, based upon a multiple of the average profit before tax of Bjerke & Luther AS over a 3 year period until 31 January 2013. The value of the call option has been considered and at the balance sheet date is deemed to reflect the fair value of the final consideration due should the remaining 49.9% be acquired and as such no asset has been recognised in respect of the option.

 

If Harvey Nash does not exercise the call option the sellers will have an option to acquire the initial shares from Harvey Nash for a consideration equal to the consideration paid by Harvey Nash plus outstanding dividends.

 

The acquired business contributed revenues of £0.6m and operating profit of £0.2m to the Group for the period from acquisition to 31 July 2010. If the acquisition had occurred on 1 February 2010, consolidated revenue and consolidated profit for the half-year ended 31 July 2010 would have been £199.2m and £2.8m respectively.

 

As allowed under IFRS 3, the Group is using the 12 months after acquiring the business to consider whether there are intangible assets that should be recognised separately from goodwill.

 

The provisional fair value of the net assets acquired is approximately equal to the acquiree's carrying amount.

 

Details of the provisional net assets acquired and the intangible asset are as follows:

 

	£'000
Cash consideration	2,043
Fair value of net identifiable assets acquired	(177)
Intangible Asset	1,866

 

 

The assets and liabilities arising from the acquisition are as follows:

 

	£'000
Tangible Fixed Assets	106
Cash	575
Receivables	364
Payables	(691)
	354
Non-controlling interest	(177)
Net identifiable assets acquired	177

 

 

Outflow of cash to acquire business, net of cash acquired:

 

	£'000
Cash Consideration	2,043
Cash and Cash equivalents in subsidiary acquired	(575)
Cash outflow on acquisition	1,468

 

 

9. Non-recurring Items

 

Non- recurring items relate to professional fees incurred for the acquisition of Norway on 29 April 2010. Non- recurring items in the prior year relate to restructuring costs.

 

10. Dividends

 

The Group paid a final dividend of 1.35p per share on 16 July 2010 to shareholders on the register as at 25 June 2010 (2009: final dividend of 1.20p per share was paid on 17 July 2009).

 

11. Purchases of property, plant and equipment

 

The Group made cash purchases of property, plant and equipment of £0.3m in the period. £0.1m of this was recharged to a client. In addition the Group purchased assets of £1.2m in relation to Nash Technologies which remain in trade creditors at 31 July 2010.

 

12. Capital Commitments

 

The Group had capital commitments of £0.5m at 31 July 2010 (2009: £0.72m) for which no provision has been made in the accounts. These relate to the acquisition of property, plant and equipment. At 31 July 2010 it is all rechargeable to a client (2009: £0.68m).

 

13. Distribution of Interim Financial statements

 

Copies of this statement are being dispatched to shareholders who voted to receive a paper copy, and are available to members of the public on the Group's website at www.harveynash.com or from the registered office at 13 Bruton Street, London, W1J 6QA.

 

 

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 2010. 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 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.

 

Albert Ellis

Chief Executive Officer

29 September 2010

 

 

 

 

 

 

Richard Ashcroft

Group Finance Director

29 September 2010

This information is provided by RNS

The company news service from the London Stock Exchange