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Harvey Nash Group plc (HVN.L, 132.5p/£97.3m) Recommended cash offer (06.08.18) | PageGroup plc (PAGE.L, 599p/£1,964m) Half year results (08.08.18)
Harvey Nash Group PageGroup PLC
Harvey Nash hosted a Capital Markets Day yesterday in which it updated investors on its Group strategy and gave an overview of its key operating regions and divisions. Following its transformation plan, Harvey Nash is now a focused technology recruiter with a portfolio of complementary brands that enables it to provide a one stop shop for its clients. Current strong trading momentum is backed by a solid balance sheet and a highly cash generative model that has enabled the group to return c.£24m in dividends over the last decade. Yesterday’s positive Q1 trading update saw shares close at five-year highs last night. We believe its current valuation continues to be highly compelling relative to its listed recruiter peers. On a current year EV/EBITDA of 5.5x and a P/E ratio of 8.4x supported by an attractive 3.9% dividend yield.
Harvey Nash Group
Harvey Nash has released a trading update covering the first quarter ended 30 April 2018, ahead of its Capital Markets Day to be held this afternoon. Performance has been robust, with the strong organic growth seen in the second half of FY17 continuing into Q1. Group gross profit is +7% YOY, driven by robust performances in the UK & Ireland and Benelux, whilst the US market remains more challenging. Today also sees the release of the KPMG Harvey Nash CIO Survey showing an improvement in the proportion of respondents reporting budget increases and an intention to hire additional headcount. A solid first quarter of trading is supportive of our investment case with results tracking ahead of budget, underpinning our full year forecasts and providing upside potential going forward. At last nights close price, the shares trade on an FY19 PE of 7.7x yielding an attractive 4.3%.
Harvey Nash Group plc (HVN.L, 103p/£75.8m) Acquisition | Norman Broadbent plc (NBB.L, 11p/£5.8m) Final results to 31 December 2017 | Staffline Group plc (STAF.L, 970p/£270m) AGM Statement
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Harvey Nash has announced the acquisition of Belgian IT solutions company eMenka, a focused provider of Microsoft specialists on both a contracted and permanent basis. The deal is a good strategic fit for the Group’s existing Belgian operations and cements Harvey Nash’s market leading position in this specific skills niche. eMenka is the Group’s third acquisition in the last year, following the purchase of Swedish HR consultancy PAT Management AB in July 2017 and UK technology talent provider Crimson last September, and proves management are delivering on the acquisition strategy that motivated their move to AIM last June. The shares have performed strongly over the last 12 months, up 34% YOY but still offer an attractive entry point to a business that is delivering against its stated objectives, supported by a solid balance sheet with FY19 net debt/EBITDA of just 0.1x. The shares trade on an FY19 PE of 7.5x offering an attractive 4.4% yield.
Harvey Nash has announced full year results for the 12 months ended 31st January 2018. The year has proven transformational for the Group with a successful migration to AIM, completion of two acquisitions and the launch of a savings initiative anticipated to deliver annualised savings of c.£2.0m. The benefit of the restructuring being undertaken is already paying off, with a meaningful pick up in profitability seen in the second half of this year and good trading momentum continuing into FY19. We make no material changes to our forecasts today, adjusting only for an improved effective tax rate and adjusting for the FY18 net debt position. At current levels the shares trade on an FY19 PE of 7.0x time and offer an attractive 4.7% dividend yield.
Harvey Nash has released a trading update ahead of final results for the year ended 31 January 2018 this morning. Overall trading was in line with market expectations, with adjusted profit before taxation up c22% compared to the prior year. We are maintaining our headline forecasts on the back of these results, and continue to believe the valuation remains compelling at this juncture.
Harvey Nash has delivered a robust set of H1 results, with adjusted EPS +17% YOY. The underlying business is performing to plan, albeit market conditions across its divisions are mixed. In addition, cost savings are being delivered to plan, and the acquisitions appear to be integrating well. We are maintaining our headline forecasts on the back of these results, and continue to believe the valuation remains compelling at this juncture.
Interim results from Harvey Nash, the specialist technology recruiter, highlight the on-going transformation of the group. Fee trends are improving in key areas (notably UK regions, Benelux and the Nordics). Moreover, recent restructuring and acquisitions should drive an expansion in the conversion ratio. We expect the ratio will increase from 9.5% (FY17) to 11.3% (FY18E) and 12.4% (FY19E). The shares have performed well but the valuation (P/E 8.2x FY18E) is undemanding and dividend yield (4.9% FY18E) is undoubtedly attractive. Therefore, as the transformation programme delivers further positive newsflow, the re-rating should continue.
Harvey Nash, the specialist technology recruiter, has announced another acquisition (it’s second in as many months). It is acquiring Crimson, a UK based technology solutions and IT recruitment business for an initial consideration of £6.0m (maximum consideration £15.0m). We estimate the deal will be at least 10.9% accretive in the first full year (i.e. FY19E). The transaction plugs directly into the ‘transformation strategy’, where management is investing in markets where it already has a strong market position and where it can deliver on-going margin improvements.
Harvey Nash is an international recruiter specialising in the technology sector. The group has a strong portfolio of powerful brands and operations spanning more than 40 countries. In its AGM statement in June, it announced a transformation plan aimed at streamlining the business, with £700k in savings already identified for FY18. The Group has a solid balance sheet and has utilised this morning by acquiring UK based Crimson IT, which is expected to increase PBT by >£2.0m on an annualised basis (potential for >£3.0m). The business is cash generative and offers an above average dividend yield of 5.2%, which we feel is secure given the Group’s low gearing and a cover building to 3.0x by 2019E. Harvey Nash trades at a substantial discount to other UK listed recruiters; an FY18 EV/EBITDA of 4.5x and a PER of 7.6x equates to a 45% and 37% discount versus its UK listed peer group.
Today Harvey Nash shares start trading on AIM. We believe the move represents another important step in the transformation of the specialist recruiter and will enable management to execute more effectively its M&A strategy. Indeed, in recent weeks we have already seen them complete their first proper corporate deal in a while. Moreover, with a strong balance sheet and many opportunities available to add value, we expect further deal flow.
Harvey Nash has this afternoon announced it is acquiring PAT Management, a Swedish human resource consultancy. The deal extends its position in leadership consultancy in Sweden, complementing Harvey Nash’s existing executive search business in the region (Alumni AB). We estimate the deal will be at least 5.2% accretive in the first full year (FY19E). As a consequence, we are moving our 12 month target price from 125p to 135p. Note that we only just raised the target last week following the positive AGM statement.
Harvey Nash, the specialist technology recruiter, has announced that trading in the first four months of FY18 is progressing well. Fee trends are improving in key areas (notably in UK and on the contractor side of the business). Conversion ratios across the three divisions are strengthening. This reflects the on-going streamlining of the group, a process which started +18 months ago. Cost savings of £1.0m should be achieved in the current financial year. As a consequence, we are increasing our FY18E PBT forecasts to £10.1m (+11.0% upgrade) and increasing our TP to 125p from 110p.
Investors are beginning to recognise that Harvey Nash has a powerful specialist recruitment brand, with focus on tech and digital exec placements. The recent streamlining and a more benign macro environment are driving earnings. FY17 results were ahead of expectations. PBT £8.6m vs forecast of £8.3m. Outlook is positive and we are upgrading our estimates (e.g. PG PBT FY18 estimate raised from £8.6m to £9.1m). Moreover, already healthy strong cash flows are trending higher (average FCF of £10.3m pa FY15-FY17). This is providing the platform for dividend growth (FY17 final +7%). However, the shares are trading on a 37% discount to sector P/E and the dividend yield is over 6%.
Harvey Nash, the specialist technology recruiter, has issued a positive update for the 12 months ending Jan-17. Gross profit given a significant boost from FX (sterling reported GP +8%); Nordics and Benelux strong; UK gross profit down due to Ireland but Harvey Nash out-performing market; cash generation massively ahead of forecasts (balance sheet ungeared). The refocused Harvey Nash is delivering and given the strong cash flow investors will start to appreciate that the >6% yield is real (and sustainable).
Staffing firms typically enjoy a material re-rating as their earnings approach/pass through the £10m mark (e.g. CPL early 2013, Matchtech early 2013, Robert Walters 2010). Empresaria provides the latest example, with the shares +69% over the last 12 months. Whilst the rating remains at a significant discount to its larger peers, its’ forward P/E has expanded from 7.2x (Feb-16) to 10.2x (today). The next staffing firm likely to reach the £10m mark is Harvey Nash, which is currently trading on a 30% discount to Empresaria.
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Interim results show that Harvey Nash has gained market share (revenues +14.9% and gross profit +6.5% 1H17), with particular successes in Benelux, Norway, Sweden and the US. The disposal of Nash Technologies (announced Dec-15) has provided greater focus. This is enabling the Central European division to realign its priorities, which is already yielding returns. Therefore, whilst trading in the UK remains mixed, we anticipate group EBIT will be 16% higher 2H17 vs 1H17.
Given the unprecedented level of macro uncertainty, it is reassuring to see Harvey Nash delivering a trading in-line AGM update. Overall fees / gross profit were +4% in the four months to May-16 (CFX basis). In terms of post referendum trading, management has not seen any negative knee jerk reaction from either candidates or clients. However, (like ourselves) they are mindful of the risks to UK trading. But FX movements have clearly created a material tailwind for earnings and the dividend is more than twice covered (yield 7.7%).
FY16 results (Jan Year End) should please investors, with both earnings and cashflow in-line with PG estimates: PBT +8% to £9.3m, net cash £0.2m (Jan-16) vs £2.1m (Jan-15). In terms of geography: UK is challenging but showing signs of stabilisation, Europe firm. As a consequence, there is no change to our forecasts. Harvey Nash is clearly delivering but the P/E is sitting on a material discount to the sector.
Harvey Nash, the specialist technology staffer, has released a trading in-line pre close update (12 months to Jan-16). Given the recent negative news flow from the sector this represents a decent performance. Gross profit (ex-Nash Technologies, sold 9th Dec) was +9% driven by AsiaPac and the US. In addition the balance sheet has ended with a small net cash figure (£0.2m) against an estimated net debt balance of £1.0m.
Harvey Nash, the specialist technology recruiter, has released a trading in-line update for the nine months to Oct-15 (fees and profits both +7%, 10% on a CFX basis). It has also sold its non-core Nash Technologies operation to management, for (effectively) €2.3m plus a potential earn-out. This will free up management time and financial resources. The operations recently have made no profit contribution to the group and the prospects for a material turnaround in the short term were minimal. Therefore, the deal must be regarded as a sensible one. We re-iterate our Buy recommendation and 129p target price.
Harvey Nash, the international white collar specialist recruiter, has released an upbeat set of interim results. Net fees (gross profit) were +9.4% on a constant currency basis and EBIT +12.6%. Principally due to the timing of when contractors are paid there was a material working capital outflow £16.3m. This appears to be a re-run of FY13 and we expect a reversal of the cash outflow due 2H16. Despite FX headwinds, the interim dividend is +9.6% to 1.49p (PG estimate 1.39p), reflecting management's confidence in the final outturn for the year. We are essentially leaving our FY16 earnings estimates unchanged and re-iterate our 129p price target.
Harvey Nash has issued a trading in-line AGM statement, covering the first four months of FY16. Net fee income (gross profit) was +8% on constant currency like-for-like basis. Recent trading would indicate this trend is likely to continue and £10m PBT should be exceeded by next year (Jan-17). Crucially, this is a level that staffing firms typically get re-rated thereby providing a potentially significant catalyst for investor sentiment.
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