A shortage of software developers in the UK and Northern Europe has created a healthy tailwind for tech recruitment specialist Harvey Nash.
According to Albert Ellis, Nash’s chief executive, some niche sectors face ‘acute’ skills shortages.
That is in addition to more general concerns over regulation, cybersecurity and other operational issues that are driving IT staff recruitment.
Evidence of this was apparent in Harvey Nash’s latest annual survey of chief information officers.
In demand: 23 per cent more companies are planning improvements in cyber-security
Compiled in conjunction with KPMG, the survey is the largest of its kind in the world and analyses responses from organisations with a combined annual cyber-security spend of $46billion.
The survey found that managing operational risk and compliance had become ‘significantly increased priorities’ at board level.
In response to numerous high-profile hacking attacks, some 23 per cent more respondents were planning improvements in cyber-security.
In addition, firms were spending more on data security and privacy due to the need to become compliant with the general data protection regulations (GDPR) that came into effect in the European Union on May 25.
‘IT leaders today face the challenging task of delivering rich, customer-centric data in an environment laden with risk,’ said the survey.
‘Securing the business from a cyber-attack has jumped further up the boardroom agenda than any other item and IT leaders are being encouraged to make their defences the best that they can be.’
The drive towards data protection has caused a huge demand for ‘security and resilience’ skills, which experienced the biggest jump in shortages rising 25 per cent year-on-year, the report revealed.
For a tech recruitment specialist that is very good news and Harvey Nash had already indicated business was going well when it posted record revenues in the year to January.
In June, Albert Ellis repeated that business was buoyant with gross profit – the key measure for recruitment companies – 7 per cent higher in the current financial year.
In particular, there was a 20 per cent uplift in the UK and Ireland as financial services firms were especially busy, driven by the fears over cyber-security, tighter regulation, new MIFID broking rules and a shift to online banking.
The tome of the statement marked a major shift in mood from two years earlier, when in the aftermath of the Brexit vote the immediate response of companies had been briefly to stop hiring while they worked out the implications.
There was also a big disruption from changes to the IR35 rules on tax, which especially had a major impact on the IT sector.
Ellis says the market has now fully recovered after the EU vote and adds it has even sparked some beneficial changes within the IT sector for companies like his.
‘Brexit has really made companies look at their supply chain and procurement needs,’ he says.
Ellis expects to benefit from this and become a consolidator in the sector where clout and size in markets will increasingly be what large companies want.
Acquisitions: Harvey Nash took over Microsoft staff specialist eMenka earlier this year
Harvey Nash stepped up the pace of its own acquisition programme over the past year. The company made two purchases in 2017 including UK-based Crimson, which cost an initial £6million that can rise to £15million.
Earlier this year Microsoft staff specialist eMenka in Belgium was acquired to strengthen its presence in Northern Europe. Based near Antwerp, eMenka focuses on placing Microsoft specialists both in full-time employee and independent contractor roles.
The business generated pre-tax profits of €210,000 in 2017 for an initial consideration of €1million It’s fair to assume that more deals will follow.
Geographical diversity is one of the company’s strengths with turnover split 40/40/20 between the UK, Europe and Asia/US. Some 60 per cent of revenues come from temporary placement and 40 per cent permanent, though this balance shifted a little following the recent acquisition of Crimson.
Harvey Nash is also slightly unusual in that it is one of a handful of companies that have swapped a main market listing for a quote on AIM. As a result, it is now one of the junior market’s dividend payers.
The shares yield 3.5 per cent currently following a 5 per cent rise in the pay-out with the full year numbers to January.
Those figures also revealed underlying profits rose 24 per cent to £10.8million on revenues of £889million (£784million).
The group is valued at £91million at its current share price of 123p , which is the highest it’s been for some time but – as Harvey Nash’s survey suggests – the company is in a very handy position and poised to push on.