Q&A with Mike Allen Head of Research at Zeus Capital: Harvey Nash Group plc (LON:HVN)

Harvey Nash Group plc (LON:HVN) is the topic of conversation when Zeus Capital’s Head of Research Mike Allen caught up with DirectorsTalk for an exclusive interview


Q1: Harvey Nash Group, they released their preliminary results for year-end 31st January, can you talk us through the highlights?

A1: The company delivered a very good set of results. They were slightly ahead of our expectations at the PBT level, so they came in at 10.8 million against our 10.6 million. Earnings were about 7% ahead of our forecast due to a lower tax rate and we’ve seen lower tax guidance going forward as well. They continued their impressive dividend growth track record as well, growing that 5% which is in line with our expectations. Headline growth was very good so PBT growth was well in excess of 20% and that’s despite some mixed market conditions in some of their markets but shows that their strategy is working well.


Q2: What can you tell us about the market that Harvey Nash is in?

A2: I think regionally the UK business saw a good uplift in gross profits and that was against a challenging backdrop of Brexit-related uncertainty, but they certainly appear to be in the right areas there, very focussed.

Europe continues to go well for them as well, we saw very strong performance in the Benelux and the Rest of the World was fairly mixed which has already been well flagged and they’ve undertaken some restructuring in Asia-Pacific and in the US as well, so we think those measures will benefit future years.


Q3: With this in mind then, have the results affected your forecasts in any way?

A3: The second half from run rate was very strong and I think that gave rise for a confident outlook for the coming year, there are still some uncertainties there, but they’ve certainly started the new year well. We trigged up our forecast really just due to the lower improved effective tax rate that we’ve seen so there was a small upgrade to forecast but really tax driven.


Q4: In terms of Harvey Nash Group’s valuation, what are the key things we should be looking at?

A4: I think the first thing I’d probably say is that this company has delivered on its strategy, the strategy of delivering growth in its markets. Also, the transformation programme of making it a more efficient business is working well and the acquisitions that they’ve done have also embedded well into the business.

So, we think the share price, the PE of just 8 times I think doesn’t reflect all of the progress they’ve made on those fronts and also, I think the dividend yield of 5% also of note as well so I think on those valuation metrics, given the progress delivered, there’s still a lot of value in the shares in our view.

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