HARVEY NASH GROUP PLC Albert Ellis, CEO Mark Garratt, · PDF fileAlbert Ellis, CEO Mark Garratt, CFO results ahead of expectations | increased dividend | strong platform to accelerate

Albert Ellis, CEO

Mark Garratt, CFO

results ahead of expectations | increased dividend | strong platform to accelerate growth

HARVEY NASH GROUP PLC

HIGHLIGHTS

2

Results ahead of expectations

Strong operating cash inflow final dividend increased by 7%

Strengthened balance sheet and improved working capital

UK & Ireland: Performed strongly against a market decline

Rest of World: USA bad debt write off, Asia mixed

Europe: excellent results ahead of expectations

STRATEGY

3

Dispose of non-core businesses

Eliminate losses

Focus on strengths

Technology & Digital Talent

Drive growth in key geographies

Market leadership & strong brands

STREAMLINE FOCUS GROWTH

2014 - 2016 2017 - 2022

Financials

INCOME STATEMENT

5

2017 2016

£m £m %

Revenue 784.3 676.5 16

Gross profit 97.9 90.3 8

Operating profit before non-recurring items 9.3 10.2 (8)

Finance costs (0.7) (0.8) (20)

Profit before tax before non-recurring items 8.6 9.3 (7)

Non-recurring items (0.1) (0.2) (48)

Profit before tax 8.5 9.1 (6)

Tax* (2.2) (2.2) (2)

Profit after tax 6.3 6.8 (7)

* Continuing items

Strong revenue growth despite market uncertainties

6% constant currency

FY17 £m

USA bad debts (0.5)

Goodwill (0.1)

Aged accruals 0.5

Total (0.1)

Lower average borrowings

BALANCE SHEET

6

Debtor days reduced to record 38 days (2016: 41 days)

2017 2016

£m £m %

Goodwill & intangibles 55.1 50.7 9

Tangible assets 3.5 3.8 (9)

Net deferred tax 2.8 2.2 28

Long term loan receivable 2.0 1.8 13

Trade & other receivables 128.9 127.3 1

Trade & other payables (133.2) (129.7) 3

Tax liabilities (2.3) (1.6) 55

Provisions & deferred consideration (0.3) (0.6) (57)

Net cash 5.6 0.2 -

Net assets 62.0 54.1 15

Movement mainly FX

Strong cash generation

FY 2017 H2 cash inflow

Tight control of w/capital

7% reduction, debtor days

CASH FLOW STATEMENT

7

Cash generated from operating activities

2017 2016

£m £m %

EBITDA 10.7 10.8 (1)

Capex (1.1) (2.0) (47)

Interest (0.7) (0.8) (20)

Capitalised software cost - (2.1) (100)

Taxation (2.9) (3.3) (12)

Free Cash Flow 6.0 2.6 137

Working capital 7.3 5.6 34

Acquisitions / disposals (4.6) (4.8) (3)

Loan advanced (2.0) - -

Dividends (2.8) (2.7) 7

Movement in net cash 3.9 0.7 357

After non-recurring items

No longer part of the Group

2017: £4.2m NT disposal

and £0.4m Japan

consideration

2016: £2.7m NT disposal

and £2.1m Belgium

consideration

CASH FLOW

8

Strong cash generation, significantly ahead of expectations

8,525

14,404

2,131

7,359 (2,935)

(676)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Operating

profit

Non-cash

items

Working

capital

Tax paid Interest

paid

Free cash

flow

£ '000 Operating profit to free cash flow

SERVICE LINES

9

Gross Margin FY17 FY16 FY15 FY14

Perm 84.4% 85.8% 86.9% 80.7%

Contract 12.6% 12.8% 12.6% 12.7%

Managed Services 2.9% 2.8% 2.4% 2.2%

Outsourcing 38.5% 38.9% 42.8% 41.6%

Total 12.5% 13.1% 12.4% 12.0%

Gross Profit (£m) FY17 FY16 %

Perm 38.2 34.9 9.6

Contract 38.5 36.0 4.0

Managed Services 9.4 6.7 41.1

Outsourcing 11.8 11.8 0.4

Total 97.9 90.3 8.4

39%

39%

10%

12%

FY17 Gross Profit Split

Perm

Contract

Managed Services

Outsourcing

39%

41%

7%

13%

FY16 Gross Profit Split

FINAL DIVIDEND 2.5p +7.0%

C.A.G.R. 2008-17 9.5%

DIVIDEND COVER 2017: 2.2 x

INCREASING SHAREHOLDER RETURNS

0

5

10

15

20

2012 2013 2014 2015 2016 2017

£m Cash generated from operating activities

0.7 0.8 0.85 0.935 1.025

1.125 1.238

1.36 1.49 1.565

1.1 1.2

1.35 1.48

1.635 1.795

1.974 2.171

2.36 2.525

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Dividend per share (pence) Interim Final

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Operational Review

Strategy

Industrials Internet of Things

3D printing

Next gen automation

Infrastructure & Transport Uber, car-sharing

Driverless cars

Intelligent transport networks

Financial Investors Crowdfunding

Alternative finance

Energy & Natural Resources Renewables

Smart Grids

Internet of Things Real Estate

Flexible workplaces

Online sales

Consumer Online sales, E-commerce,

Health Monitoring, remote

diagnostics

Financial Institutions Digital Banking

Fintech disrupting of wealth,

trading, lending, forex

Technology and disruption is everywhere, requiring new talent

Dis

rup

tio

n t

hre

at

Digital Innovation

Tech, Media, Telecoms Near extinction of print media

Migration of ad revenue

IP Voice & messaging

@DIGITAL: Our clients need us more than ever

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UK & IRELAND

13

• Market share gains, revenue held up well in a declining market

• Brexit softened demand in London -3% (Financial Services)

• UK regions +2%, Ireland +15%

• Strategic wins

Recruitment Solutions seeing increased demand

Nearshore low-cost recruiting centre in Poland fully operational

2017 2016 CC

£m £m % %

Gross profit 37.0 37.0 (0) (2)

Operating profit 3.0 3.5 (14) (17)

EUROPE

14

• Currency tailwinds and return to broad economic growth

• Includes costs of new German leadership team post NT GmbH disposal

• Strong demand for contracting and managed services from Netherlands & Belgium

• Nordics: Record permanent recruitment revenues

2017 2016 CC

£m £m % %

Gross profit 39.1 32.6 20 6

Operating profit 6.1 5.2 18 3

REST OF WORLD

15

Asia

• Vietnam impacted by strong US$

• Hong Kong closed H1 FY2018, Japan and Australia profitable

USA

• Bad debt write off hides strong underlying results

• Demand for Digital & Technology – West Coast

2017 2016 CC

£m £m % %

Gross profit 21.8 20.6 6 (8)

Operating profit 0.2 1.5 (85) (85)

Strategy

“Around 47 percent of total US employment is in the high risk category. Jobs

we expect could be automated …over the next decade or two.”

The Future of Employment, University of Oxford

LOW RISK

Management Technology

Engineering Education

Arts/ Media Care

HIGH RISK Office and admin Sales & marketing Services Production Medical Transportation

FUTURE OF WORK

HN well placed to benefit from investment in automation, robotics, AI

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FOCUS ON TECHNOLOGY

18

Technology and digital talent in demand

Intelligent Automation, Robotics, AI

Digital disruption

+80% of Harvey Nash gross profit

by sector by candidate are in

the technology / digital sectors UK & I

EuropeUSA

NordicsAsia

Non-technology

Technology

UK / Ireland Europe Rest of World

CORE PROFIT GROWTH DRIVERS

EXECUTIVE GROWTH ORGANIC

Market improving Managed services

Strong growth Benelux, Turnaround Germany

USA & Asia operating profit improvement

KEY REGIONS GROWTH ACQUISITIONS

Acquisitions - UK Acquisitions - Nordics & Benelux

Organic

FY18

FY18 – FY20

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Current trading

and outlook

CURRENT TRADING

Current year started well

Good start to the year despite IR35 Financial Services in London bouncing back UK & Ireland

Positive macro economic growth outlook

Europe

Rest of World

“…despite macro uncertainty, Board confident of profitable growth in the year to Jan 2018…”

USA – strong demand in tech, cautious economic outlook Asia Pacific – improved profitability

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Cautionary Statement

The information contained in this presentation is not audited, is for personal use and informational purposes only

and is not intended for distribution to, or use by, any person or entity in any jurisdiction in any country where such

distribution or use would be contrary to law or regulation, or which would subject any member of the Harvey

Nash Group to any registration requirement.

Statements in this presentation reflect the knowledge and information available at the time of its preparation.

Certain statements included or incorporated by reference within this presentation 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 should not be placed on any

forward-looking statement. Additionally, forward-looking statements regarding past trends or activities should not

be taken as a representation that such trends or activities will continue in the future. 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 presentation should be construed as a profit forecast.

This presentation does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to

purchase 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 decision relating thereto, nor does it

constitute a recommendation regarding the shares of the Company. Past performance cannot be relied upon

as a guide to future performance. Liability arising from anything in this presentation shall be governed by English

Law. Nothing in this presentation shall exclude any liability under applicable laws that cannot be excluded in

accordance with such laws.

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