Hydrogen Benefit from Technical & Scientific
Hydrogen Benefit from Technical & Scientific
The Board of Hydrogen Group plc is pleased to announce its unaudited interim results for the six months ended 30 June 2012.
?Net fee income (“NFI”) increased by 3% to £15.6m (1H 2011: £15.1m)
?NFI from permanent placements increased by 9% to £7.6m (1H 2011: £7.0m)
?Contract NFI broadly unchanged at £8.0m (1H 2011: £8.1m)
?Profit before tax of £1.9m (1H 2011: £1.8m)
?Profit conversion (the ratio of profit before tax to net fee income) unchanged at 12% (1H 2011:
?Basic EPS increased to 6.13p (1H 2011: 6.01p)
?Interim dividend increased by 7% to 1.5p (2011: 1.4p)
?NFI from markets outside the UK increased to 41% of Group NFI (1H 2011: 33%), driven by the
AsiaPacific region and Technical & Scientific practices
?NFI from Technical & Scientific increased by 53% to £5.8m (1H 2011: £3.8m) – representing 37%
of Group NFI (1H 2011: 25%)
?More than 50% of sales headcount at 30 June 2012 servicing markets outside the UK (31 Dec
?Strong cash collection maintained with trade debtors measured as days of sale outstanding
(DSOs) at 23 days (1H 2011: 22 days)
Commenting, Ian Temple, Executive Chairman of Hydrogen Group plc said:
“Strong performances from our international operations and our Technical & Scientific practices
have enabled us to deliver NFI and profit growth in the first half of 2012 despite difficult market
The Group has continued to trade in line with the Board’s expectations since the period end, with
no adverse impact on recruitment activity in the UK from the Olympic Games, and remains on
target to meet our expectations for the year as a whole.
We expect the overall economic backdrop to remain challenging but will continue to develop our
practice-led strategy, investing in markets where we see potential for growth.”
CHAIRMAN & CEO’S STATEMENT
The Group delivered a strong performance in the first six months of the year, given the challenging
macro economic conditions affecting recruitment markets globally, growing Net Fee Income (“NFI”) by 3% and delivering increased profit before tax of £1.9m (1H 2011: £1.8m). This result has been driven predominantly by further progress on our strategy of internationalisation and diversification into new practices, with NFI from Technical & Scientific practices increasing impressively by 53% year on year to £5.8m (1H 2011: £3.8m) and markets outside the UK contributing 41% of Group NFI (1H 2011: 33%).
Group revenue for the period increased by 3% to £82.0m (1H 2011: £80.0m), with Group NFI growing
by 3% to £15.6m (1H 2011: £15.1m). This was driven by a 9% increase in NFI from permanent
placements to £7.6m (H1 2011: £7.0m), whilst contract NFI remained broadly unchanged at £8.0m
(1H 2011: £8.1m).
The Group continues to keep a tight control of costs, with administration costs growing 4% to £13.7m
(1H 2011: £13.2m). Adjusting for the swing in exchange on translation of receivables from a gain of
£0.1m in 1H 2011 to a loss of £0.2m in the current period, the underlying increase in costs was 2%.
Profit before tax increased marginally to £1.9m (1H 2011: £1.8m) as Hydrogen maintained its profit
conversion (the ratio of profit before tax to NFI) at 12% (1H 2011: 12%).
Basic earnings per share increased by 2% to 6.13p (1H 2011: 6.01p).
The Group continued to exercise tight control of working capital and maintained its strong track record on cash collection with trade receivables measured as days of sales outstanding (DSOs) of 23 days (1H 2011: 22 days).
Net debt at the start of the period stood at £1.4m. In the first six months the Group generated cash
from operations before movements in working capital of £2.1m (1H 2011: £1.8m). An investment in
working capital of £2.4m (1H 2011: £0.4m) was required during the period primarily to fund increases
in contractor accrued income arising from higher contractor numbers and higher activity in the final
month of the period, higher permanent accrued income from permanent placements and increases in
After tax payments of £0.5m (1H 2011: £0.2m), capital expenditure of £0.5m (1H 2011: £0.8m) and
dividend payments of £0.6m (1H 2011: £0.6m), the Group finished the period with net debt of £3.3m,
representing an increase in net debt of £1.9m, comfortably within its £18m borrowing facility.
The Board has declared a 7% increase to the interim dividend to 1.5p (1H 2011: 1.4p). The increase
reflects the Group’s strong performance in the first half as well as the Board’s confidence in
Hydrogen’s future prospects. This will be payable on 9 November 2012 to shareholders on the
register as at 12 October 2012.
The Group’s continued investment in international growth was rewarded with a 26% increase in NFI
from markets outside the UK to £6.3m (1H 2011: £5.0m), representing 41% (1H 2011: 33%) of Group
NFI. This performance was partly driven by a strong demand in the Asia Pacific region as well as the
significant growth achieved in our Technical & Scientific practices which primarily serve markets
overseas. Hydrogen continues to invest in growing an increasingly global presence in its specialist
markets, with a pipeline of new offices, two of which, both focused on the Oil & Gas industry, in
Houston, United States and Stavanger, Norway, are in the incubator stage. As at the period end,
more than 50% (1H 2011: 40%) of client facing employees were servicing markets overseas.
The Group has been vindicated in focusing its growth in the first half in its Technical & Scientific
practices (Oil & Gas and Life Sciences), which delivered another outstanding performance with a 53%
increase in NFI to £5.8m (1H 2011: £3.8m) accounting for 37% of Group NFI (1H 2011: 25%). The
rapid growth of these recently established practices is strong evidence of Hydrogen’s ability to identify attractive markets to invest in as well as its all-round ability to capitalise efficiently on the growth opportunities available. The Group currently has incubators running in two new practices, Mining and Power, with the intention that these will develop into profitable businesses over time.
Demand in Professional & Support Services, particularly within financial services, remains subdued
globally. However, the Group is confident that it is well positioned with the necessary infrastructure,
client and candidate relationships to take advantage of any future increase in demand.
NFI from permanent placements increased year on year by 9%, largely driven by the Group’s strong
international performance where markets are predominantly permanent recruitment. Against strong
comparatives in the previous year, contract NFI was broadly flat at £8.0m (1H 2011: £8.1m). For the
period, NFI was split 51:49 in favour of contract (H1 2011: 54:46 in favour of contract), in line with our
Ensuring that Hydrogen has the right infrastructure to support its long term growth aspirations is
crucial. Over the first six months of the year the Group piloted its new cloud-based client relationship
management (“CRM”) system, and we currently have a practice trading on the system with promising
results. Feedback from the pilot is being used to optimise the system before a scheduled roll-out in
the second half of the year. The new system will provide Hydrogen with the scalable platform to
support the Group’s future growth plans.
The Group has also made good progress in bringing all of its individual UK practices under the single
Hydrogen brand, including the launch of the new Hydrogen website which went live in June.
Group headcount has been maintained with 363 employees at the period end (31 Dec 2011: 362) and
we continue to redeploy heads into markets where we see prospects for growth, particularly in
Productivity per head in the period remained in the £80k - £90k range at £86k, 9% lower than the
comparative period (1H 2011: £91k), a consequence of the Group’s investment in headcount during
the second half of 2011.
Training and development of our staff is key to the Group’s long term success, and we were delighted
that in the first half of the year Hydrogen was presented with the & lsquo;Best In-House Training’ award at
The Global Recruiter Industry Awards. The Group was also listed in & lsquo;Best Companies to Work For’ by
The Sunday Times for the 8th year in a row.
On behalf of the Board we would like to take this opportunity to thank all employees for their hard
work and commitment during the period.
As disclosed in a separate announcement made today, the Group announces its planned succession
to the Board of Directors. Senior Independent Non-Executive Director, Ishbel Macpherson, and Non-
Executive Director, Ian Fallmann have stepped down from the Board. Ishbel has served on the Board
for six years, and has made an enormous contribution to the business as Hydrogen has grown from a
primarily UK-focused recruiter into the global and diversified business it is today. Likewise, Ian has
made a very valuable contribution over the past two years, with his experience and knowledge in
particular helping drive our expansion in Asia Pacific. Aided by their experience we are on course to
deliver the 2012 goals we set out in 2008, and on behalf of the rest of the Board and the Group, we
would like to take this opportunity to thank Ishbel and Ian for their contribution. Martyn Phillips will
remain on the Board as Senior Independent Non-Executive Director.
Contemporaneously, the Board is delighted to announce the appointments of Stephen Puckett,
Barbara Anderson and Anne Baldock as Non-Executive Directors. Stephen Puckett brings significant
knowledge and experience of the global recruitment industry having recently retired from the Board of Michael Page International after more than 11 years as Group Finance Director. Barbara Anderson
has a background in strategy consulting and brings international Board-level experience to Hydrogen
having held a number of Non-Executive positions focused on the development and implementation of
global growth strategies. Anne has recently retired from the global law firm Allen & Overy where she
had a distinguished career as a Partner and member of the Global Board, focusing on large
These changes to the composition of Hydrogen’s Board represent the next stage in our journey as the
Group plans its strategy and goals for the period to 2015.
Current Trading and Outlook
The Group has continued to trade in line with the Board’s expectations since the period end, and we
did not experience the negative impact on recruitment activity in the UK from the Olympic Games that had been feared.
Hydrogen continues to invest in growing a balanced business and we are currently employing our low
risk incubator model to new, robust geographies and practices which we have identified as offering
significant long term growth opportunities.
Whilst the uncertain macro-economic outlook means that visibility across global recruitment markets
remains limited, the Group remains on target to meet its expectations for the year as a whole, and is
well positioned for the long term.