Harvey Nash Group reports 17.7% EBITDA growth while 2.8% Revenue decline

30 Apr 2015 • About Harvey Nash Group ($HVN) • By InTwits

Harvey Nash Group reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

EBITDA Margin is relatively stable: 1.6% in FY2015 vs. 1.3% in FY2014 vs. 2.0% in FY2011
Harvey Nash Group has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.4%.
The company has business model with average profitability: ROIC is at 11.7%

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Harvey Nash Group ($HVN) key annual financial indicators

mln. £	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	422.3	533.0	594.7	697.3	677.9	-2.8%
Gross Profit	68.5	78.5	83.0	88.6	84.9	-4.2%
SG&A	62.1	69.5	73.5	78.9	75.1	-4.8%
EBITDA	8.4	11.3	11.0	9.1	10.7	17.7%
Net Income	4.3	5.8	5.5	3.8	5.3	36.9%
Balance Sheet
Cash	15.6	18.6	14.3	15.9	19.0	19.6%
Short Term Debt	7.3	13.4	9.4	12.1	16.9	40.1%
Long Term Debt	0.0	0.0	0.0	0.0	0.0
Cash flow
Capex	2.5	2.0	2.8	1.7	1.8	4.0%
Ratios
Revenue growth	12.3%	26.2%	11.6%	17.3%	-2.8%
EBITDA growth	174.5%	34.9%	-2.7%	-17.1%	17.7%
Gross Margin	16.2%	14.7%	13.9%	12.7%	12.5%	-0.2%
EBITDA Margin	2.0%	2.1%	1.8%	1.3%	1.6%	0.3%
Net Income Margin	1.0%	1.1%	0.9%	0.6%	0.8%	0.2%
SG&A, % of revenue	14.7%	13.0%	12.4%	11.3%	11.1%	-0.2%
CAPEX, % of revenue	0.6%	0.4%	0.5%	0.2%	0.3%	0.0%
ROIC	10.0%	12.5%	11.3%	9.4%	11.7%	2.3%
ROE	7.3%	9.4%	8.3%	5.8%	8.1%	2.3%
Net Debt/EBITDA	-1.0x	-0.5x	-0.5x	-0.4x	-0.2x	0.2x

Revenue and profitability

Harvey Nash Group's Revenue decreased on 2.8% in FY2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.1 pp from 16.8% to 17.9% in FY2015.

Gross Margin showed almost no change in FY2015. SG&A as a % of Revenue showed almost no change in FY2015.

Net Income marign showed almost no change in FY2015.

Capital expenditures (CAPEX) and working capital investments

Harvey Nash Group's CAPEX/Revenue was 0.27% in FY2015. The company's CAPEX/Revenue showed almost no change from FY2012 to FY2015. Average CAPEX/Revenue for the last three years was 0.33%.

Return on investment

The company operates at low ROIC (11.68%) and ROE (8.09%). ROIC increased on 2.3 pp from 9.4% to 11.7% in FY2015. ROE increased on 2.3 pp from 5.8% to 8.1% in FY2015.

Leverage (Debt)

Company's Net Debt / EBITDA is -0.2x and Debt / EBITDA is 1.6x. Net Debt / EBITDA surged on 0.2x from -0.4x to -0.2x in FY2015. Debt jumped on 40.1% in FY2015 while cash surged on 19.6% in FY2015.

Appendix 1: Peers in Support Services

Below we provide Harvey Nash Group benchmarking against other companies in Support Services industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Petards Group ($PEG)	6.5%	-25.7%	-30.6%	115.1%
Optimal Payments ($OPAY)	107.9%	39.9%	41.5%	44.0%
1Spatial ($SPA)	15.4%	98.7%	131.4%	42.7%
Inspired Energy ($INSE)	32.9%	83.8%	44.8%	42.2%
Interquest Group ($ITQ)	7.8%	-6.8%	2.0%	31.2%
Median (50 companies)	10.0%	6.8%	4.0%	5.1%	3.5%
Harvey Nash Group ($HVN)		26.2%	11.6%	17.3%	-2.8%

Top companies by Gross margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Inspired Energy ($INSE)		94.6%	86.8%	78.7%
Ienergizer Ltd ($IBPO)	48.1%	56.2%	78.4%	76.8%
Vianet Group ($VNET)	53.1%	53.3%	51.3%	58.8%
Prime People ($PRP)	57.6%	63.4%	58.3%	57.7%
Murgitroyd Group ($MUR)	59.9%	58.4%	61.4%	57.6%
Median (44 companies)	30.4%	31.4%	28.6%	29.8%	27.5%
Harvey Nash Group ($HVN)	16.2%	14.7%	13.9%	12.7%	12.5%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Northgate ($67GX)		41.2%	40.4%	40.6%	39.4%
21St Century Technology ($C21)	11.4%	13.4%	-0.2%	36.0%
Vp ($VP.)	24.4%	23.9%	24.5%	24.2%
Ienergizer Ltd ($IBPO)	34.5%	27.6%	27.8%	23.6%
Capital Drilling Ltd ($CAPD)	26.3%	24.1%	15.7%	21.7%
Median (50 companies)	8.1%	7.1%	6.6%	7.3%	8.1%
Harvey Nash Group ($HVN)	2.0%	2.1%	1.8%	1.3%	1.6%

Top companies by CAPEX/Revenue, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Vp ($VP.)	15.5%	21.4%	17.7%	21.6%
Norish ($NSH)	5.0%	10.2%	1.4%	15.4%
Capital Drilling Ltd ($CAPD)	20.5%	18.9%	4.9%	13.9%
Falkland Islands Hldgs ($FKL)	2.6%	3.7%	6.8%	12.9%
Augean ($AUG)	11.2%	9.8%	15.9%	12.3%
Median (50 companies)	1.0%	1.1%	1.1%	1.1%	0.8%
Harvey Nash Group ($HVN)	0.6%	0.4%	0.5%	0.2%	0.3%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
21St Century Technology ($C21)	16.2%	20.3%	-2.9%	45.6%
Petards Group ($PEG)	25.6%	35.5%	-78.0%	24.7%
Driver Group ($DRV)	6.5%	18.7%	27.9%	24.0%
Optimal Payments ($OPAY)	-2.9%	7.1%	27.7%	23.8%
Premier Farnell ($PFLA)		33.2%	21.0%	23.2%	18.5%
Median (50 companies)	10.0%	10.4%	8.1%	10.7%	14.7%
Harvey Nash Group ($HVN)	10.0%	12.5%	11.3%	9.4%	11.7%

Top companies by Net Debt / EBITDA


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Inspired Energy ($INSE)	-0.8x	0.8x	0.6x	19.4x
Mitsubishi Corp ($MBC)	7.2x	9.9x	15.9x	14.3x
Ceps ($CEPS)	4.1x		3.0x	6.6x
Redhall Group ($RHL)		22.8x	5.8x	6.6x
Kellan Group(The ($KLN)	194.4x			6.5x
Median (49 companies)	0.8x	0.9x	0.9x	0.6x	1.9x
Harvey Nash Group ($HVN)	-1.0x	-0.5x	-0.5x	-0.4x	-0.2x

Harvey Nash Group stock price chart

Harvey Nash Group financials

mln.	FY2010	FY2011	FY2012

Revenue	376.2	422.3	533.0
EBITDA	3.053	8.379	11.304
Net income	0.795	4.253	5.815
CAPEX	2.709	2.509	1.996
Debt	7.013	7.310	13.366
Cash	12.159	15.588	18.550

About Harvey Nash Group

Harvey Nash Group plc, together with its subsidiaries, provides professional recruitment and outsourcing solutions for companies, governments and non-governmental institutions, banks, and privately owned organizations in Europe, the United States, Vietnam, Australia, Hong Kong, and Japan. It offers various leadership services, including executive search, which supports multinational organizations and smaller niche companies to attract, recruit, and retain outstanding board members, top executives, senior management, and future leaders; interim management consultancy services; and strategic leadership services comprising board evaluations, leadership development, management development, management audits, assessments, and strategic HR consulting for owners, boards, and executive management. The company also provides technology, finance, HR, and engineering management recruitment services on contract and permanent basis. In addition, it offers offshore services, such as application development, third party software maintenance, and outsourced software services; vendor-independent wireless and wireline networks research and development services; and managed services/business process outsourcing services. The company was founded in 1988 and is headquartered in London, the United Kingdom.