Harvey Nash Group Plc Acquisition of eMenka NV – Zeus Comments

Harvey Nash Group Plc (LON:HVN) 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.

eMenka is a Belgian IT solutions company which focuses on placing Microsoft specialists as both contractors and full-time employees. Harvey Nash is acquiring 100% of eMenka’s share capital for initial consideration of €1.0m with deferred consideration of up to €1.0m to be paid in 3 years-time, subject to EBIT performance over the earn-out period. Consideration will be funded from existing cash resources. For the 12 months to 31 December 2017 eMenka generated €820k of gross profit and EBIT of €220k at a conversion rate of 26.9%. This compares favourably to the 11.7% Group average conversion rate achieved in FY18 and management believe profitability can be improved further once synergies with its existing Belgian operations are realised.

Strategic fit: eMenka is an important bolt-on to the Group’s Belgian business, giving it a market leading position in a specific skill niche. The Belgium region has performed strongly in recent years with Harvey Nash and Talent IT achieving double digit growth in FY18 whilst generating the highest margins of the Group at an operating profit conversion ratio of 37.6%. eMenka will contribute towards a targeted €500m in revenue for the region.

Forecasts: We leave our earnings forecasts unchanged this morning reflecting the scale of earnings contribution expected from eMenka in the current year, and relatively low visibility over the medium term. We take confidence that today’s announced acquisition and a strong start to trading in FY19 underpin our forecasts at this early stage in the year, providing some upside potential to our projections going forward.

Valuation: Harvey Nash trades on an FY19 P/E of 7.5x and offers an attractive 4.4% dividend yield. The shares have performed strongly over the last 12 months and we feel there is further potential for multiple expansion as it delivers against its stated acquisition strategy, backed by a solid balance sheet and reaps the rewards of its transformation plan.

Click to view all articles for the EPIC:
Or click to view the full company profile:
    Share on facebook
    Facebook
    Share on twitter
    Twitter
    Share on linkedin
    LinkedIn
    Harvey Nash Group

    More articles like this

    Harvey Nash Group

    Cognizant invests in Future Skills

    Cognizant, a leading provider of information technology, consulting, and business process outsourcing services, are investing in apprentices within Digital Engineering. Cognizant will utilise their apprenticeship levy to train and develop talent, working within their Digital Engineering practice, responsible

    Harvey Nash Group

    How To Outsource IT Like An Aussie

    Does the Southern Hemisphere show a little more outsourcing gumption than the Northern one? As a chief digital technology officer (CDTO) who works frequently in both hemispheres, I sometimes find myself wishing I could sprinkle a bit of

    Harvey Nash Group

    5 Major Human Resource Innovations in 2019

    Blind Hiring Technology The focus on increasing diversity to improve company-wide performance and workplace culture is already on the rise. An HR survey by Harvey Nash found that organizations are increasingly expanding diversity hiring goals to focus on inclusion around

    Harvey Nash Group

    Harvey Nash win Diversity and Inclusion Award

    Harvey Nash Group, the global technology recruitment, IT outsourcing and leadership services organisation, has been awarded the Business Culture Diversity and Inclusion Initiative Award at the Business Culture Awards. The Group were against stiff competition, including well known

    Harvey Nash Group

    A Delicate Balance

    Ask any trapeze artist and they will tell you how important balance is in their job; take a step wrong and they will be tumbling. But in other fields of work ‘getting the balance right’ isn’t always a

    Harvey Nash Group

    How can we close the tech skills gap?

    One of the most profound challenges faced by technology companies today is talent. According to the latest Harvey Nash survey, 65 per cent of CIOs believe that a shortage of tech skills is affecting their ability to respond to change.

    Harvey Nash Group

    Harvey Nash shortlisted for three prestigious culture awards

    Harvey Nash Plc, the global technology recruitment and IT outsourcing organisation, have been shortlisted for three prestigious awards in recognition of its leading role in championing diversity and inclusion. As part of the Business Culture Awards, the Group

    Harvey Nash Group

    Edinburgh – CIO Event 2018 – Photos and Blog

    Last night Edinburgh saw the successful launch of Harvey Nash and KPMG’s annual CIO Survey at “The Place” in the centre of Edinburgh City. See photos from the event here An excellent evening was had by all in