Group NFI up 57% in H1 2018 for Hydrogen
The Board of Hydrogen Group plc has released its unaudited results for the half year ended 30th June 2018.
Group revenue for the period increased by 21% (22% in constant currency terms) to £68.6m (H1 2017: £56.8m). Overall, group NFI increased by 57% (61% in constant currency terms) to £14.8m (H1 2017: £9.4m). Although the principal driver of this was the contribution by Argyll Scott, underlying NFI growth was also strong with NFI increasing by 10% on a pro forma basis.
Although the UK business has grown during the period in absolute terms, the group has continued to reduce its reliance on the UK market in relative terms. The percentage of NFI denominated in currencies other than Sterling has increased to 53% (H1 2017: 44%). Foreign currency income, in general, is naturally hedged against foreign currency expenditure.
In EMEA, NFI grew by 26% to £8.7m (H1 2017: £6.9m). On a pro forma basis the EMEA region's NFI grew by 6%, with increases in both contract and permanent revenue. This was largely driven by contractor growth in the business transformation practice and strong activity in the permanent Legal practice.
APAC NFI increased by £3.6m or 189% to £5.5m (H1 2017: £1.9m) and by 197% in constant currency terms. Although this growth was largely driven by the acquisition of Argyll Scott, underlying growth was also strong with pro forma NFI increasing by 16% principally as a result of strong performances from the Singapore, Thailand and Australia offices.
In the US, NFI was flat at £0.5m (H1 2017: £0.5m) however on a constant currency basis it increased by 10%. Although the performance of the permanent business was challenging, contract NFI growth was very strong, which together with the investment made in local leadership, positions the region well for future growth.
The split between contract and permanent NFI for H1 2018 was 42% contract (H1 2017: 54%); 58% permanent (H1 2017: 46%). The change towards permanent recruitment was driven by an increase in permanent NFI of 100% to £8.5m (H1 2017: £4.3m) that principally reflects the impact of Argyll Scott, which is predominantly a permanent business. In absolute terms contract NFI has also increased, growing by 23% in the period to £6.3m (H1 2017: £5.1m). The trend of improving contract margins experienced in recent period has continued with the Group achieving a contract margin of 10.4% in H1 2018 (H1 2017: 9.7%).
Operating profit before exceptional items grew to £1.2m (H1 2017 - £0.1m) driven by both the higher NFI for the period and a proportionately smaller increase in administrative expenses resulting from the cost savings realised through the integration project. While NFI has increased by 57%, administrative expenses have only increased by 45% to £13.9m (H1 2017: £9.6m). There were no exceptional costs in the first half of 2018 (H1 2017: £0.6m).
The operating profit for the period was £1.2m (H1 2017: operating loss £0.6m). Profit before tax was £1.1m (H1 2017: loss before tax £0.6m).
Underlying PBT remains the board's preferred measure of trading performance of the business and has increased by £0.9m to £1.1m (H1 2017: £0.2m) in line with the increase in operating profit before exceptional items.
Ian Temple, CEO of Hydrogen Group plc, said, "I am pleased to be able to report a strong trading performance in the first six months of the year, with net fee income on a pro-forma basis up 10% on the first six months of 2017. The key objectives of the business combination with Argyll Scott have been successfully achieved and we have established a scalable platform that enables us to look forward confidently to further sustainable long-term organic profit growth. Furthermore, with a strong balance sheet, the Group is well placed to make acquisitions and will continue to investigate potential targets.
“With the current levels of activity, the board is confident that the underlying profit and EPS for the full year will be substantially ahead of current market expectations."
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