Under chief executive Albert Ellis, resurgent recruitment and outsourcing services group Harvey Nash beat forecasts for the year to end-January. The dynamic performance reflected a star turn from its European operations as well as continuing demand for IT and accounting staff across all regions.

On turnover up 24% to �202.3m, pre-tax profits drove 26% north to �4m, and Nash also pleased with better than expected cash generation, bringing net debt down to a lower than expected �6.4m.

Nash continues to enjoy strong momentum across all recruitment markets in Europe, where demand for IT professionals is on the rise. There was more modest growth in the UK, where operating profits were up by 10% and growth in the offshore and outsourcing services business was encouraging. Nash is making significant investment in this area to capture the growing global trend towards offshoring. During the year, the group snared a 3-year �2.7m contract with a mystery UK finance software group to build an offshore development centre for its software product business.

Elsewhere Ellis flagged up favourable trading conditions in the US, with operating profits lifted 17% and the West coast offices reporting the highest growth rates on the strength of strong recovery in the technology sector.

For January 2007, Numis Securities has raised its pre-tax estimate from �4.3m to �4.5m – mainly on the back of the buoyant European business – giving forecast earnings of 4.7p and a prospective p/e of 14.6.

The broker suggests this premium rating to peers is justified given ‘the drop-through of additional business, ongoing level of operational gearing, and the chance of further upgrades’. We still think the shares are too cheap. Buy.

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Harvey Nash Group	LSE	�37.86m	60.50p	0.00p
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