Analyst presentation Year-end results for 2009 www.hydrogengroup.com
Our heritage Who we are Hydrogen Group has been recognised for our exceptional performance with an impressive number of prestigious awards and Introduction accreditations. Here are some of our more recent achievements: • Britain's Top Employers 2009 - No. 2 Award-winning international recruitment specialist focused on hiring • The Sunday Times ‘Best Companies To Work For’ mid- to senior-level professionals Currently 250 employees globally Widely recognised for our track record as a top employer: -Britain’s Top Employer (The Guardian) Winner 2007 and 2008 • Britain's Top Employer 2008 - No. 1 • Sunday Times 'Best Company to Work for' 2008 94% of the clients we worked with 3+ years ago, still work with us today 4 Key sectors: - Technology - Finance - Professional • Britain's Top Employer 2007 - No. 1 - Engineering • 'Best Company to Star Status' 2007 • Sunday Times 'Best Company to Work for' 2007 • Investors in People Outstanding Workplace of the Year Award • Sunday Times 'Best Small Company to Work for' 2006 PAGE 1 | HYDROGEN GROUP YEAR-END RESULTS 2009
History Introduction F u rther glob a l office s pl a nned for 2010 PRO a nd P a rtner s S ydney office S ing a pore office Gro u p merge to Profe ss ion a l s cre a te Hydrogen l au nched November l au nched J a n ua ry l au nched 2007 2010 Gro u p in 2005 2000 2006 200 8 1997 1997 2000 2006 200 8 1999 2005 2007 2010 1999 2005 2007 2010 P a rtner s Gro u p Li s ted on AIM Engineering PRO e s t a bli s hed e s t a bli s hed in 2000 in 1997 in 2006 l au nched Technology Fin a nce l au nched l au nched PAGE 2 | HYDROGEN GROUP YEAR-END RESULTS 2009
What we do Introduction Providing candidates with global Consistent experience for clients, Balanced business agile to market opportunities and clients access to a 3 1 2 candidates and staff conditions global candidate pool PAGE 3 | HYDROGEN GROUP YEAR-END RESULTS 2009
Historic performance through the cycles Introduction Our ability to scale the business in line with market conditions has been critical to our success NFI returned to growth in the second half of 2009, growing 12% on the first half of 2009 PAGE 4 | HYDROGEN GROUP YEAR-END RESULTS 2009
Proposition Introduction We focus on finding and building relationships with the high-quality, sought-after specialist candidates that our clients cannot source themselves With international research teams directly sourcing candidates spanning over 40 countries, we can offer clients access to the best specialist candidates in both the local and international marketplaces Our candidates are hard to find and in high demand, they work with us because our proposition is to give them access to the best jobs and exceptionally high service and delivery levels We minimise the time clients have to invest in the recruitment process and ultimately save them money through quality of processes that reduce time-to-hire PAGE 5 | HYDROGEN GROUP YEAR-END RESULTS 2009
Financials
Financial highlights Financials Group Revenue of £74.1m (2008:£96.2m) Operating profit before exceptional items of £0.3m (2008:£3.7m) Continued focus on cost reduction and debtor management with trade debtors reduced by 11 days to 29 days (2008:40 days) Net funds at 31 December 2009 of £3.1m (2008:net debt of £0.9m) Total dividend for the year 4.1p per share (2008:4.1p) PAGE 7 | HYDROGEN GROUP YEAR-END RESULTS 2009
Income statement Financials Year ending 31st Dec 2009 Year ending 31st Dec 2008 Change £74.1m £96.2m (23%) Revenue £16.8m £26.7m (37%) Gross Profit (Net Fee Income) £0.3m £3.7m (92%) Profit before taxation and exceptional items (£5.2m) £1.0m (620%) (Loss)/ profit for the year (22.25p) 4.38p (608%) Basic (loss)/earnings per share 2.42p 11.84p (75%) Adjusted (loss)/earnings per share 4.1p 4.1p - Dividend for year NFI and conversion of NFI to PBT declined until the second half of 2009 when the business returned to profitable growth % Conversion NFI £m The level of dividend is both appropriate and sustainable, given the cash generative characteristics of the group and its strong balance sheet and will seek to review it, as and when profitability improves PAGE 8 | HYDROGEN GROUP YEAR-END RESULTS 2009
Exceptional items Financials 2009 £5.6m Impairment of goodwill established on creation of Hydrogen Group £0.5m Provision for onerous contract re leasehold property at Old Bailey (£0.3m) Release of excess provision for costs re abortive Imprint acquisition TOTAL £5.8m Goodwill impairment has no cash impact Leasehold property at Old Bailey successfully sub-let to the end of the lease All fees settled relating to abortive Imprint acquisition PAGE 9 | HYDROGEN GROUP YEAR-END RESULTS 2009
Summary financial position Financials Year ending 31st Dec 2009 Year ending 31st Dec 2008 Non-current assets £14.7m £20.3m Intangible assets £13.6m £19.4m Tangible assets £0.4m £0.5m £0.7m £0.4m Other assets Current assets £18.1m £20.2m £15.0m £19.6m Debtors Cash and cash equvalents £3.1m £0.6m TOTAL ASSETS £32.8m £40.5m £9.7m £11.7m Current liabilities £0.6m £0.8m Non-current liabilities TOTAL LIABILITIES £10.3m £12.5m Net assets £22.5m £28.0m Debtor days 29 40 Focus on working capital • Debtor days at 29 vs 40 in previous year • Debtor ageing improved • All debt repaid/cash surplus PAGE 10 | HYDROGEN GROUP YEAR-END RESULTS 2009
Summary cash flow Financials Year ending 31st Dec 2009 Year ending 31st Dec 2008 £0.76m £4.86m Cash from operations £4.46m £3.77m Working capital movement Exceptional costs (£0.35m) (£0.86m) Finance costs (£0.04m) (£0.30m) (£0.03m) (£1.97m) Tax paid £0.02m £0.24m Proceeds from share issue Net cash invested (£0.13m) (£0.48m) Repayment of borrowings (£1.48m) (£3.09m) Contribution to EBT (£0.17m) (£0.61m) (£0.56m) (£1.39m) Equity dividends paid - £0.05m Other INCREASE IN CASH £2.48m £0.22m PAGE 11 | HYDROGEN GROUP YEAR-END RESULTS 2009
Cash generated trend Financials 8 70 65 6 60 4 55 2 50 £m Day s 0 45 1H 06 2H 06 1H 07 2H 07 1H 0 8 2H 0 8 1H 09 2H 09 40 -2 3 5 -4 3 0 -6 25 Ca s h from operation s D S O' s - 8 20 The focus on debtor reduction and decline in working capital has allowed the Group to continue to generate cash and repay all borrowings £19.7m cash from operations generated over the last 3 years PAGE 12 | HYDROGEN GROUP YEAR-END RESULTS 2009
Operational review
UK and International trend analysis Operational review 2009 NFI 2007 NFI 2008 NFI Intern a tion a l UK Having built successful UK businesses in the four key markets using a low risk incubator model, the Group is using the same approach for international expansion. The aim is to have 50% of NFI from international in the next 5 years PAGE 14 | HYDROGEN GROUP YEAR-END RESULTS 2009
Permanent and contract trend analysis Operational review % NFI Contract placements proved more resilient than permanent during economic slowdown 2009 NFI 2008 NFI Our objective is to maintain a 50% contract mix to give the right balance of cash generation, profitability and resilience PAGE 15 | HYDROGEN GROUP YEAR-END RESULTS 2009
Financial services and Industry and Commerce trend analysis Operational review % NFI 2009 NFI 2008 NFI Our objective is to maintain a balance between Industry and Commerce and Financial services to ensure the business is resilient and well placed to take advantage of growth sectors. Financial services was hit more severely from the slowdown than Industry and Commerce PAGE 16 | HYDROGEN GROUP YEAR-END RESULTS 2009
Analysis by sector Operational review 2008 NFI 2009 NFI Engineering is the newest sector and was started after analysing the market and identifying it as a growth market with an imbalance of demand and supply of high quality candidates PAGE 17 | HYDROGEN GROUP YEAR-END RESULTS 2009
Productivity per head Headcount trend analysis Operational review Sales headcount has grown by 10% since low point at 30 June 2009 Total Billing to employees operations ratio PAGE 18 | HYDROGEN GROUP YEAR-END RESULTS 2009
Operational highlights Operational review Good performance delivered despite challenging trading environment Continued selective investment into more robust market sectors and geographies Strong performance from Engineering business with NFI up by 50% to £1.5m (2008: £1.0m) International operations grew 20% and contributed 22% of total Group NFI (2008: 12%) Strong performance from Australia with NFI up 183% for the period First office in Far East Asia opened in Singapore, since the year end PAGE 19 | HYDROGEN GROUP YEAR-END RESULTS 2009
Current trading summary Operational review Increase in overall activity levels since the beginning of 2010 Increase in contractor numbers in UK businesses Australia has shown strong growth Singapore office has opened and is performing well Investment in working capital if growth continues Dividend sustainable at current level and will be reviewed should profitabity increase We continue to invest in robust markets using our proven incubator model Cautiously optimistic PAGE 20 | HYDROGEN GROUP PAGE 20 | HYDROGEN GROUP YEAR-END RESULTS 2009 YEAR-END RESULTS 2009
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