Hydrogen Group sees group NFI rise 4% in H1 2019
Hydrogen Group plc has released its unaudited results for the half year ended 30th June 2019
The Group has adopted IFRS 16, with respect to the recognition and measurement of leases, retrospectively from 1st January 2018. The change resulted in a £1.0m decrease in net assets as at 1st January 2018 and an increase of £0.1m to profit before tax in H1 2018.
Although it was somewhat offset by increased and higher margin contract activity in the USA, lower demand for contractors in the UK drove a decline in Group revenue for the period of 7% (9% in constant currency terms) to £64.1m (H1 2018: £68.6m).
Group NFI increased by 4% (fell by 2% in constant currency terms) to £15.3m (H1 2018: £14.8m) due to both permanent revenue growth and improved contract margins. This increase in NFI was achieved despite a significant drop in activity levels at the Group's largest client, which accounted for just 3% of NFI (H1 2018: 8%) during the period.
The Group has continued to improve the geographic diversification of its revenues, reducing its reliance on the UK market in relative terms. The percentage of NFI denominated in currencies other than Sterling has increased to 57% (H1 2018: 53%). Foreign currency income, in general, is naturally hedged against foreign currency expenditure.
EMEA NFI was broadly flat at £8.6m (H1 2018: £8.7m) on both a reported and constant currency basis. While our Middle East business grew strongly, in the UK, which accounts for the greater part of the Group's EMEA operations, client demand and confidence levels have been impacted by Brexit related uncertainty. Notwithstanding this, NFI grew in all core UK practice areas save for business transformation, where demand was particularly adversely impacted by the significant fall in activity levels, due to the completion of existing projects and a lack of new projects, at the Group's largest client.
In APAC, NFI fell by 12% (16% in constant currency terms) to £4.9m (H1 2018: £5.5m). Market conditions have been challenging in Hong Kong and Singapore, which has been partially offset by continued growth in Australia and Thailand. Activity levels have improved during Q3, positioning the region for a more robust performance in H2.
USA NFI grew exceptionally strongly by 255% (233% in constant currency terms) to £1.9m (H1 2018: £0.5m). Growth was driven by the life sciences and technology practices both across our more established office in Houston together and our newer offices in Austin and San Diego. A fourth office in the region was opened during the period in Charlotte.
The split between contract and permanent NFI for H1 2019 has remained broadly stable at 40% contract (H1 2018: 42%); 60% permanent (H1 2018: 58%). The small change in mix towards permanent recruitment was driven by an increase in permanent NFI of 8% to £9.2m (H1 2018: £8.5m) and a marginal fall in contract NFI of 2% to £6.1m (H1 2018: £6.3m). The trend of improving contract margins experienced in recent periods has continued, with the Group achieving a contract margin of 11.2% in H1 2019 (H1 2018: 10.4%).
Operating profit for the period grew to £1.4m. (H1 2018 as restated: £1.3m), while profit before tax was £1.4m (H1 2018 as restated: £1.2m).
Underlying PBT remains the Board's preferred measure of trading performance of the business and has increased by £0.7m to £1.9m (H1 2018 as restated: £1.2m).
Ian Temple, CEO of Hydrogen Group plc, said, "I am delighted to be able to report continued strong earnings growth despite the Group experiencing more challenging market conditions in a number of Asian markets, and the impact of Brexit related uncertainty on demand levels for certain skill sets in the UK. The performance is a testament to both the operating model that we have developed and our agile business model that has allowed us to pivot investment into higher growth markets, particularly in the USA. Our balance sheet remains strong, and the Group continues to be well placed to make acquisitions and investigate potential targets. The Board remains confident that the full year outturn will be in line with current market expectations.
"I would like to take this opportunity to thank all our staff for their commitment and hard work over the period."
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