Analyst & Investor Presentation Interim results to 30 June 2011 Ian T emple - Executive Chairman Tim Smeaton - Chief Executive Officer John Glover - Finance Director www.hydrogengroup.com
Summary Introduction Contract continued to grow strongly following our investment in 2010 Hong Kong office opened April 2011 Profit before tax increased 64% to £1.8m (1H 2010: £1.1m) Strong performance from Energy & Pharma disciplines Net Debt £1.5m (31 December 2010 £2.2m) after payment of year end dividend of £0.6m PAGE 1 | HYDROGEN GROUP INTERIM RESULTS TO 30 JUNE 2011
Our heritage Hydrogen Group has been recognised for our exceptional performance with an impressive number of prestigious awards and accreditations. Here are some of our more recent achievements: Who are we? Introduction • Britain's Top Employers 2011 • ‘Best Company Two Star Status’ 2011 • Sunday Times ‘Best Companies To Work For’ 2011 “ Hydrogen builds relationships with • Industry Award Winner 2011- Best Training and Development amazing candidates clients cannot find themselves ” • Britain's Top Employers 2010 - No. 2 • Best Company Accreditation - ‘One to Watch’ 2010 Currently approximately 350 employees globally (40% of which Internationally facing) Placed candidates in over 40 countries in the last • Britain's Top Employers 2009 - No. 2 12 months • Sunday Times ‘Best Companies To Work For 2009’ Value creation through organic growth Driven by long-standing senior management team • Britain's Top Employer 2008 - No. 1 • Sunday Times 'Best Company to Work for' 2008 • • Britain's Top Employer 2007 - No. 1 Britain's Top Employer 2007 - No. 1 • • 'Best Company Three Star Status' 2007 'Best Company Three Star Status' 2007 • • Sunday Times 'Best Companies to Work for' 2007 Sunday Times 'Best Companies to Work for' 2007 PAGE 2 | HYDROGEN GROUP INTERIM RESULTS TO 30 JUNE 2011
Approaching pre recession levels Introduction 18 £ Millions 16.9 16 15.1 15.1 14.9 14.7 14.4 14 13.4 13.2 11.9 12 10 8.9 7.9 8 6 1H 06 2H 06 1H 07 2H 07 1H 08 2H 08 1H 09 2H 09 1H 10 2H 10 1H 11 NFI NFI £millions 35 30 25 Last recruitment downturn 2000 - 2002, followed by 5 years of strong growth 20 15 10 Positive momentum started in 2H 2009 continued in 2011 5 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 PAGE 3 | HYDROGEN GROUP INTERIM RESULTS TO 30 JUNE 2011 Year
6.0p 5.0p Pence per s h a re 4.0p Cash generation 3.0p Introduction 2.0p 1.0p 20 0.0p 2007A 200 8 A 2009A 2010A 2011A Cumulative cash flow (after WC, Interim Dividend (pence per share) tax and interest) over previous economic cycle 15 10 £ Million s 5 0 - 5 2001A 2002A 2003A 2004A 2005A 2006A 2007A 200 8 A 2009A PAGE 4 | HYDROGEN GROUP INTERIM RESULTS TO 30 JUNE 2011
Financials
Financial highlights Financials Net Fee Income (NFI) increased by 14% to £15.1m (1H 2010: £13.2m) Contract NFI increased by 41% to £8.1m (1H 2010: £5.7m), another record for the Group International NFI increased by 8% to £5.0m representing 33% of Group NFI (1H 2010: 35%) NFI from Engineering increased by 71% to £2.9m (2010: £1.7m) Profit conversion increased by 50% to 12% (1H 2010: 8%) Profit before tax increased by 64% to £1.8m (1H 2010: £1.1m) Basic EPS increased by 76% to 6.01p (1H 2010: 3.42p) Trade receivables 22 days, ahead of our target (31 December: 25 days) Net debt reduced to £1.5m (31 December 2010: £2.2m) £18m Invoice Discounting Facility signed up to 2014 Interim dividend 1.4p (2010: 1.4p) PAGE 6 | HYDROGEN GROUP INTERIM RESULTS TO 30 JUNE 2011
Income statement Financials Period ended 30 June 2011 Period ended 30 June 2010 Change £80.0m £55.2m 45% Revenue £15.1m £13.2m 14% Gross Profit (Net Fee Income) £1.8m £1.1m 64% Profit before taxation £1.3m £0.8m 63% Profit for the period 6.01p 3.42p 76% Basic earnings per share 5.61p 3.24p 73% Diluted earnings per share Proposed dividend 1.4p 1.4p - 12% 8% 50% Conversion ratio 1 8 30% Significant increase in conversion ratio driven by 16 25% increasing NFI and focus on administration costs 14 % Conversion 20% NFI £m 12 15% 10 8 10% 6 Increase in EPS driven by higher profitability 5% 4 0% 2 0 -5% 1H 07 2H 07 1H 0 8 2H 0 8 1H 09 2H 09 1H 10 2H 10 1H 11 NFI Conver s ion of NFI to PBT PAGE 7 | HYDROGEN GROUP INTERIM RESULTS TO 30 JUNE 2011
Summary financial position Financials Period ended 30 June 2011 Year ended 31 December 2010 Period ended 30 June 2010 Non-current assets £16.0m £16.8m £15.0m Intangible assets £13.7m £13.7m £13.6m Tangible assets £1.4m £1.4m £0.4m £0.9m £1.6m £1.0m Other assets Current assets £32.1m £27.1m £25.9m £30.3m £26.3m £24.7m Debtors Cash and cash equivalents £1.8m £0.8m £1.2m TOTAL ASSETS £48.1m £43.9m £40.9m Current liabilities £23.2m £20.4m £18.2m £0.4m £0.4m £0.4m Non-current liabilities TOTAL LIABILITIES £23.6m £20.8m £18.6m NET ASSETS £24.5m £23.1m £22.3m Debtor days 22 25 31 £18m invoice discounting facility with HSBC to February 2014 Base rate +185 bps Currently utilising £12m at mid month peak PAGE 8 | HYDROGEN GROUP INTERIM RESULTS TO 30 JUNE 2011
Summary funds flow and net funds / (debt) position Financials Period ended 30 June 2011 Period ended 30 June 2010 £2.18m £1.41m Cash from operations (£0.36m) (£3.64m) Working capital movement (£0.07m) (£0.04m) Finance costs Tax paid (£0.25m) (£0.15m) Net cash invested (£0.16m) (£0.16m) Proceeds from share options exercised £0.11m - (£0.13m) (£0.50m) Contribution to EBT (£0.61m) (£0.81m) Equity dividends paid INCREASE (DECREASE) IN FUNDS £0.71m (£3.89m) (Debt)/Net funds at beginning of period (£2.21m) £3.11m Effect of Forex movements - (£0.02m) Net (debt) at end of period (£1.50m) (£0.80m) Further tightening of working capital resulted in reduction in net debt position during the period despite growth in revenue PAGE 9 | HYDROGEN GROUP INTERIM RESULTS TO 30 JUNE 2011
Operational review
Global practices Operational review Proposition Select key niche in each practice with an imbalance of supply and demand of high calibre candidates Build relationships with passive candidates Activate candidates and move around the world to areas of high demand giving clients access to a new talent pool (%) = 2010 NFI PAGE 11 | HYDROGEN GROUP INTERIM RESULTS TO 30 JUNE 2011
UK and International trend analysis Operational review Intern a tion a l UK 8% growth in non-UK NFI 1H 2011 v 2H 2010 masked by strong UK growth 2007 NFI 2008 NFI 2009 NFI 2010 NFI 2011 1H NFI PAGE 12 | HYDROGEN GROUP INTERIM RESULTS TO 30 JUNE 2011
Productivity per head Operational review £/he a d 120,000 110,000 100,000 90,000 8 0,000 70,000 60,000 50,000 2005 1H 06 2H 06 1H 07 2H 07 1H 0 8 2H 0 8 1H 09 2H 09 1H 10 2H 10 1H 11 Productivity improvements resumed in 1H 2011 but still below previous peak PAGE 13 | HYDROGEN GROUP INTERIM RESULTS TO 30 JUNE 2011
Headcount trend analysis Operational review 3.5 400 350 350 329 329 307 3.0 282 300 261 252 248 250 230 2.5 Total Billing to 200 employees operations at period 2.0 ratio end 150 100 1.5 50 0 1.0 2005 2006 2007 200 8 J u n -09 Dec -09 J u n -10 Dec -10 J u n -11 Op s Op s UK sa le s UK sa le s Int sa le s Int sa le s R a tio sa le s :op s (2Y) R a tio sa le s :op s (2Y) Headcount increased by 6% since start of the year, 7% in fee earners and 4% in support staff The growth continues to be focused on international markets with 13% increase since start of the year, and 40% of consultants servicing markets outside UK at 30 June 2011 PAGE 14 | HYDROGEN GROUP INTERIM RESULTS TO 30 JUNE 2011
Contract/Perm NFI split Contract NFI 1H Operational review 2011 NFI £m 9 8 7 2010 NFI 6 5 4 3 2 2009 NFI 1 0 1H 06 2H 06 1H 07 2H 07 1H 0 8 2H 0 8 1H 09 2H 09 1H 10 2H 10 1H 11 Contract fees provide greater visibility of earnings than permanent recruitment 2008 NFI Our objective is to maintain a minimum 40% and maximum 60% NFI from contract to balance cash generation, profitability and resilience through the cycle Perm Contr a ct PAGE 15 | HYDROGEN GROUP INTERIM RESULTS TO 30 JUNE 2011
Factors we control Operational review Market selection People plan System and infrastructure PAGE 16 | HYDROGEN GROUP INTERIM RESULTS TO 30 JUNE 2011
Current trading summary Operational review Visibility in the recruitment market remains limited Trading in July and August has been broadly consistent with that of the previous quarter We will continue to invest in the business, particularly overseas, where the Group is positioning itself to capitalise on the medium term growth drivers. Strong balance sheet and good cash generation PAGE 17 | HYDROGEN GROUP INTERIM RESULTS TO 30 JUNE 2011
Appendix 1 History of organic growth Appendix Ph a rm a l au nched S ydney office S ing a pore office l au nched November l au nched J a n ua ry Technology 2007 2010 Fin a nce l au nched l au nched 1999 2006 200 8 2011 1999 2006 200 8 2011 2000 2007 2010 1997 2007 1997 2010 2000 L a w Li s ted on AIM Engineering Hong Kong opened l au nched in 2006 l au nched April 2011 PAGE 18 | HYDROGEN GROUP INTERIM RESULTS TO 30 JUNE 2011
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