Harvey Nash Grp Share Discussion Threads

[rivaldo] 19/1/2016 09:49

Good post Thorpematt. HVN should certainly be benefiting nicely now currency-wise.

Good to see Miton increasing their stake - they've bought another 550,000 shares and are up to 7.65m, or 10.41%:

Htp://www.investegate.co.uk/harvey-nash-group--hvn-/rns/holding-s--in-company/201601151519110813M/

[thorpematt] 18/1/2016 22:11

I am aware of DSG it has some nice numbers. It is way too small for me to invest under my portfolio rules however and thus my research there is limited to basics. I do know the op margin at DSG has an interesting 5 year trend though. It’s a steady faller. (Almost linear). I don’t know why, but it is a tad odd. Capex PS shows a steady rise and so I might look there as my first suspect.

Of course It is never wise to look at one metric alone when comparing stocks or assessing the quality of a company. I think that goes without saying. But with regard to comparisons for operating margins I think it’s important to get context by understanding business models. If we compare almost all stocks with Diageo, HSBC, Rightmove (>70%) and Sage we’ll see that others’ op margins look a bit weak!

In some respect the differences between Sage and DSG might make those 2 businesses more comparable than HVN and DSG. Personally I wouldn’t compare any of them with each other because simply put they are all different.

Incidentally DSG sits in sub sector Software & IT Services (Technology) and so FDM, DTOD and Kainos might be comparable. Their margins are pretty strong as is the way with such business models.

Whist HVN is Professional & Commercial Services (Industrials) – much slimmer net margins, particularly in recruiters.


Anyway back to HVN:-
With regard to currency exchange there are natural hedging dynamics for HVN since costs and revenues are both matched in currency as are loans.

Repatriation of profit of course would give foreign profits a boost were the £ to weaken against the euro. So a tailwind I'd concur or 2016 is likely.


% of business IT related. Not anything like is being touted. Refer to:-

sectors


what we do


current vacancies listed as an example


The Asian operations which revolves more around the IT aspect is tiny in comparison and fledgling.

FWIW one metric I do find works well for all sectors is a Robbie Burns Mantra (in the voice of Alan Sugar). “What’s your company worth and how much profit does it make”. Or as I like to put it EV/ PBT. This one has steady PBT (so a mid term projection can be made) and it’s a bloody bargain (IMO).

I would say the market right now is somewhat bearish (in case you hadn’t noticed) and BREXIT is rather the buzzword affecting sentiment over any stocks with exposure to that. HVN are in that category I think and there’s some heavy Institutional holders here so I like the opportunity here to pick up stock on the dip. Of course Brexit gives a wekening £ also I suspect so one could argue that risk is hedged or overplayed. In any event quality company, cheap price.

[edmundshaw] 18/1/2016 18:35

Jimmy makes a good point on currency: The Euro is now stronger against the pound than at any time since last February (barring any short spikes that might not get on my annual chart) - the Euro has been looking quite perky over the last two months in particular...

[jimmywilson612] 18/1/2016 17:53

Good discussion going on and ill add my 2 cents here - I am a holder - average about 90p so in the red by a bit but looking longer term. I also work in Recruitment (Not Harvey Nash) so will hopefully have a good insight to the market as well.

Net fee growth was 1% last year - but increased by 5.3% (Annual report) on a constant currency basis. Europe provides over 50% of the operating profit - looking at the exchange rate this is going to really help Harvey Nash in the future.

If the £ continues to fall, the profits here will continue to rise and thus in my opinion is why this is cheap at the moment.

[amoore70] 18/1/2016 17:34

zoolook - I am talking about contract margins, don't really know much about permie rates as not my thing. So yes you are right it is low margins. Although easy money as they actually don't do much to earn it.

[zoolook] 18/1/2016 15:48

shauney2

Sept interims for DSG here:

[zoolook] 18/1/2016 15:43

amoore70

Yes - thats what Im saying. IT recruitment is a low margin commodity market. Other recruitment sectors aremor eprofitable.

Just to be clear you aren't talking about individual perm fee rates and/or contract margins?

[edmundshaw] 18/1/2016 15:38

HVN in top management recruitment too. Anyways, the price looks to have got a bit silly so I added some.

[shauney2] 18/1/2016 15:19

I think i would rather be in HVN than DSG.Did DSG make any profit last year?

[amoore70] 18/1/2016 15:11

zoolook - Margins should not be 20%+. I work in IT and margins are about 12% on average. A lot of agencies are around 10% nowadays.

[zoolook] 18/1/2016 14:59

If you like exposure to the recruitment sector and a juicy yield take a look at Dillistone (DSG). Harvey Nash is one of their customers :-)

[zoolook] 18/1/2016 14:36

They are not diversified in sector though are they. It is virtually all IT recruitment (temp or perm) as far as I know though the report seems to go to some trouble to obfuscate that. And IT recruitment is cut throat. I would be interested to know how much non-IT recruitment they do if you have that info. A recruitment business has few overheads other than staff costs and margins should be 20%+ rather than low single digits. I don't know what they are doing wrong as they have a strong brand name but on the face of it the current PE of 11 (according to ADVFN) seems reasonable.

[thorpematt] 16/1/2016 00:25

zoolok,
Yes operating margins at HVN have historicaly been low. The reported margin does include non-recrurring items and last year if I remember around £1.3m, a lot of which was Nash restructure costs.

Of course as Ben Graham wrote, exceptionals are NOT exceptional if they keep happenning (that's probably NOT exactly what he wrote but that was the gist as I recall it).

In any event, depsite always reporting wafer-margins, HVN has been consistent at turning profit and spinning cash. The divi growth is persistently adding 10% per annum(!) and the cover has remained at or around x2 consistently, whilst the debt is modest.

Generally speaking the ability to pay down debt from that cashflow has been masked by the acqusition trail and the hefty payout to divis. Nevertheless the balance sheet reamins strong and the shares in issue steady. You could argue that EPS growth could have been more consitent but its rare that any company is smooth in this regard.

The company report stresses the principle of resilience in earnings via diversification of sectors and markets and looking back at the numbers that concept appears evident. Of course Ben Graham would have said something along the lines of "past performance is not necessarily an indicator of future performance" but then again if we apply his maths to valuation here it pans out to be worth somewhere close to £1.50 a share. (he'd call that a nice margin of safety)

Whatever the case being comfortable with your investment trumps all of what I have written (Graham wrote essays and chapters on that too!), so I would totally endorse staying away from any investment you are not comfortable with.

[zoolook] 15/1/2016 16:07

Margins are wafer thin here so profitability vulnerable. IT recruitment is commoditised more than most areas of recruitment.I don't know if this is why they are on the rating they are on but they are the things that makes me nervous and why I would not have as an LTBH

[thorpematt] 13/1/2016 20:46

rivaldo,
that is interesting I never relaised the correlation.

Of course HVN is not a well-covered stock (broker-wise) and so any catalyst which incurrs it to become so or for it to become available to fund mangagers could very readily spark a rise in the share price

I have to say I find it to be very undervalued and so I am a patient longer term holder on this one.

[rivaldo] 13/1/2016 11:46

Forecasts for the year ending this month remain at 9.2p, with a 3.87p dividend.

With 4.42p EPS in H1 alone this seems eminently achievable, especially given the confidence in the H1 outlook.

The year about to start shows 9.97p EPS and a 4.06p dividend.

Interesting comment from the IC:



"In terms of valuation, Harvey Nash (HVN) is at an interesting juncture. The technology specialist is poised to deliver pre-tax profits in excess of £10m. Historically, the level has represented a catalyst for recruiters to be materially re-rated - for example, Matchtech (MTEC) re-rated early 2012, CPL summer 2012, Robert Walters summer 2010. At the moment, Harvey Nash is trading on a 44 per cent discount to larger recruiters, providing material scope for outperformance."

[rubberbullets] 22/12/2015 23:02

looks like profit warning comig on the chart

[jimmywilson612] 16/12/2015 17:41

hxxp://www.recruiter.co.uk/news/2015/09/financials-technology-skill-shortages-boosts-harvey-nashs-bottom-line/

This is widely known but worth sharing again - from the 30th Sept with Albert Ellis.

"A strategic review of its German outsourcing business continues and is expected to be completed within 12 months. Following that, the company will “kick start” its acquisitions strategy."

So thats the outsourcing business out the way - hopefully pick up some interesting recruitment organisations to add to the profitability.

[jon123] 16/12/2015 16:00

i wouldn't be too surprised to see 70p

the sets systems really doesn't do this share any favours but it works both ways up n down all my own opinion

[professor x] 16/12/2015 15:54

Chart on good support here. I've added on the hope we turn from here on in:


free stock charts from uk.advfn.com

[abcurtis] 16/12/2015 15:29

I would appreciate constructive criticism, here are my thoughts about the announcement:

Looks to me like 8.8m fixed assets disappear, a 1.7m secured loan asset and a 4.1m liability will appear on the HN Balance Sheet. The liability will be realised or written off within 9 month and the loan might provide interest income.

On the P&L, the 0.3m loss will not continue. If NT Group is sold before 2022 then HN get max 6.5m.

So Equity owners (us) lost 11.2m gbp, the ROCE should improve and the earnings yield should improve. So the value of the company went down but the profitability improves?

[jimmywilson612] 15/12/2015 17:52

I've added to my position here in recent days.

4.26% Yield
9.22 PE Ratio
7% growth (10% without currency swings)

Diverse sectors which minimise risks.

I am confident in the company and therefore I am seeing this downturn as a buying opportunity to add. Who knows if this will pay off longer term?

[yf23_1] 15/12/2015 08:39

Broken uptrend to downside, so any rise will be capped at about 92 upside.
Its not much upside considering spread.

[mayers] 14/12/2015 20:42

Time to get out I felt at 87p in spite of fundamentals. Sad to see profit, albeit paper, decline. Will continue to watch for re-entry. Good luck holders.