Harvey Nash to exceed expectations by 10 per cent

Recruitment firm Harvey Nash expects to beat full-year forecasts by 10 per cent driven by strong third-quarter trading in temporary and contract placements, although permanent recruitment remains challenging.

The company said that with relatively good visibility from its contract recruitment businesses and a robust forward order book in the offshoring business, it was "confident that the out turn for the full year's profit before tax (adjusted for exceptional and non-recurring items), is now likely to be in the region of 10% higher than its expectations."

Although it did warn that "the final quarter will continue to be challenging for permanent recruitment, particularly in Europe, and it is premature to comment on the following year, which ends on January 31st 2014."

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Consensus estimates for the full year ending January 31st 2013 are for pre-tax profits of £7.71m on turnover of £445.98m, rising in 2014 to £8.88m and £467.83m, respectively.

The statements were delivered as part of a trading update covering August 1st to November 29th.

Revenue and gross profit for the quarter ended October 31st increased by 10% and 5%, respectively, when compared to the same period in 2011. Operating profit increased by 7% before higher interest costs in relation to increased working capital requirements resulted in profit before tax being 3% ahead of the previous year.

Analysis of the geographic split for the third quarter showed that in the US, gross profit was up 14%. In mainland Europe, gross profit was down 5% but the company stated that "the result for the year is likely to be better than our previous expectations."

In the UK and Ireland, gross profit was up 10% on the same period last year driven by increased turnover in managed services and offshoring. Although permanent recruitment was slightly subdued at 4% below the same period last year, outsourcing was up 40% and contractor numbers increased 19%.

Harvey Nash also reported that despite the seasonally stronger trading levels since the half year, cash generation has been robust and actions taken to reduce debtor days have resulted in net borrowings falling to £11.6m as at October 31st (July 31st: £14.1m).

CM