Investor Presentation Results year ended 31 December 2019 Ian - - PowerPoint PPT Presentation

Investor Presentation

Results year ended 31 December 2019

Ian Temple, Chief Executive Officer John Hunter, Chief Financial Officer / Chief Operating Officer

2019 Results

Covid-19 Portfolio management Financial and operating highlights Mergers and acquisitions Appendices Current trading & outlook

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• To date disruption primarily manifested itself in candidate start dates being delayed within APAC
• Situation has now escalated, impacting our EMEA and US businesses.
• It is not yet clear how long the pandemic will last or its financial impact.
• Current evidence suggests:
• Client demand will be the biggest issue rather than our operational capability to transact work
• Permanent recruitment activity will be more impacted than contract recruitment
• Some sectors and markets will be affected more than others (e.g: consumer markets)
• Group’s balance sheet is strong.
• We have significant, largely unutilised, banking facilities in place.
• Government support should help mitigate the downturn.
• Stress testing shows the Group can withstand both a material and prolonged decline in revenue.
• Dividend suspended. Board will review whether it is appropriate to pay a “catch up” dividend in due course.

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COVID-19 update

• NFI 4% lower at £29.4m (2018: £30.5m) driven by:
• Impact of political uncertainty and IR35 in the UK
• Slowdown in some Asian markets, exacerbated by political protests in Hong Kong
• Proforma NFI growth/(decline):
• EMEA (9%)
• APAC (12%) (13% CC)
• USA 82% (81% CC)
• As a result underlying PBT decreased by £0.3m to £2.9m (2018: £3.2m*)
• Profit conversion ratio fell to 9.9% (2018: 10.5%*);
• Net cash generated from operations of £3.4m (2018: £7.8m*)
• Net cash £4.5m (2018: £4.9m)
• Underlying EPS at 7.5p (2018: 8.9p*)

* Restatement following the application of IFRS 16.

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Financial and operational highlights

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55% 12% 33% EMEA USA APAC

Permanent/Contract Regionals Sector

NFI analysis

Technology 24% Business Transformation 19% Legal 14% Life Sciences 13% Sales & Marketing 9% Finance 9% Other 7% Energy 5%

60% 40% Permanent Contract

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Portfolio management

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Trading summary

2019 2018 (as restated) Revenue £121.3m £135.7m Gross profit (Net fee income) £29.4m £30.5m

• Permanent NFI

£17.6m £17.8m

• Contract NFI

£11.8m £12.7m Operating costs (£27.3m) (£27.9m) Other income £0.5m £0.5m Operating profit before exceptional items £2.6m £3.1m Exceptional items (£0.9m)

• Operating profit after exceptional items

£1.7m £3.1m Underlying profit before tax* £2.9m £3.2m

* Underlying PBT excludes amounts in respect of NCI profit or loss, foreign exchange gains/(losses), amortisation of acquired intangibles, share based payments and exceptional items.

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Balance sheet

2019 2018 (as restated) Non-current assets £16.6m £16.9m

• Intangible assets

£12.9m £13.0m

• Tangible assets

£0.9m £0.9m

• Right of use assets

£1.9m £2.3m

• Other assets

£0.9m £0.7m Current assets £21.8m £24.9m

• Debtors

£17.2m £19.7m

• Cash and cash equivalents

£4.6m £5.2m Total assets £38.4m £41.8m

• Current liabilities

£12.1m £15.3m

• Non-current liabilities

£2.8m £4.5m Total liabilities £14.9m £20.1m Net assets £23.5m £21.7m Net assets have increased in the year by £1.8m Net cash at year end of £4.5m Current ratio of 1.8 (2018: 1.6)

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Cashflow statement

2019 2018 (as restated) Cash generated from operating activities £3.4m £7.8m Cash used in investing activities (£0.3m) (£0.4m) Cash used in financing activities (£2.9m) (£5.0m) Exchange (loss)/gain on cash (£0.8m)

• Cash at year end

£4.6m £5.2m Borrowings at year end (£0.1m) (£0.3m) Net cash £4.5m £4.9m Average available funds £10.5m £8.4m Equity dividends paid £0.5m £0.4m

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M&A strategy

STAGE 1 - OBJECTIVE FIT

• > £5m NFI
• > £1m EBITDA
• Contract led
• Complementary service lines
• Developed markets/ economies

STAGE 2 – HOW WE ADD VALUE

• Market & proposition
• People
• Platform
• Finance
• Funding

• Challenging and highly uncertain trading conditions – Covid-19
• IR35 legislation delayed but impact still remains
• Focus on
• Cash preservation
• Maintaining critical mass in key markets

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Outlook and current trading

Appendices

V1

Purpose, mission & vision – Hydrogen Group

Powering Customer Intimacy Enabling people to achieve their goals. A world where more people love their work and achieve their goals. Group Purpose Using technology, expertise and insight to help our businesses deliver deep and effortless customer intimacy in disrupted markets. Group Mission Group Vision

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Operating model

By being closer to niche disrupted markets we will take advantage of job creation Adopting a growth mindset, we develop our people so they can

• ver-deliver and reap the rewards

Powering us to become leaders in machine-enabled customer intimacy Deeper understanding of data informs decisions and ensures we achieve our goals Proposition Performance Platform People

Core current principles

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Team Journey

Incubator Up to £100k NFI over two quarters Fast Growth £100k minimum NFI per quarter Market Leader £200k minimum NFI per quarter What’s next? What’s next? Focus:

• Proving there is a

market that we can get to Market Leader

• Grow NFI

Financial:

• 10% - 20% EBIT

conversion Focus:

• Grow profit
• Leverage position

Financial:

• Breakeven

Focus:

• Growing NFI & what

needs to happen to get you to Market Leader Financial:

• 30% to 50% EBIT

conversion

Building Market Leading businesses Case study – Technology Texas

£ Q4 17 Q1 18 Q2 18 Q3 18 INCUBATOR FAST GROWTH MARKET LEADER

NFI £81k PPH £9k EBIT 0% NFI £120k PPH £10k EBIT 11% NFI £362k PPH £18k EBIT 41%