TIDMHYDG
RNS Number : 7556U
Hydrogen Group PLC
02 April 2019
2 April 2019
HYDROGEN GROUP PLC
("Hydrogen Group" or the "Company" or the "Group")
(AIM: HYDG)
Final results for the year ended 31 December 2018
Hydrogen Group, the global specialist recruitment group,
announces final results for the year ended 31 December 2018.
Key points
-- Group revenue to 31 December 2018 totalled GBP135.7m (2017: GBP125.9m);
-- Full year Net Fee Income(+) ("NFI") 34% higher at GBP30.5m
(2017: GBP22.8m), partly driven by the full year impact of Argyll
Scott, but also by strong underlying growth, with Group pro-forma*
NFI up 14%;
-- Contractor gross margin increased by over 10% in the year to 10.8% (2017: 9.8%);
-- Profit conversion ratio increased to 9.7% (2017: 3.6%);
-- Underlying** profit before tax ("PBT") increased by GBP2.2m,
or 264% to GBP3.0m (2017: GBP0.8m);
-- Strong cash generation. Cash generated from operations of
GBP6.1m (2017: outflow of GBP2.5m);
-- Net cash as at 31 December 2018 of GBP4.9m (31 December 2017: net debt of GBP0.4m);
-- Statutory profit for the year of GBP2.5m (2017: loss GBP1.3m);
-- Final dividend of 1.0p per share proposed for approval at
AGM, taking dividend for the year to 1.5p (2017: 0.8p per share),
an increase of 88% for the year; and
-- Basic EPS in the year of 7.0p (2017: loss of 4.4p).
Underlying** EPS in the year of 8.0p (2017: 3.2p).
(+) Net Fee Income - which is the equivalent of gross profit
* Pro-forma NFI includes 12 months trade of Argyll Scott
Holdings Limited in the comparative.
** Underlying PBT is altered for foreign exchange
gains/(losses), amortisation of acquired intangibles, share based
payments and exceptional items
Ian Temple, CEO, commented:
"I am delighted to be reporting strong growth in Net Fee Income
on both a reported and a proforma basis, in each of the EMEA, APAC
and US regions, which, together with improving conversion rates,
has driven a transformation of the Group's profitability and net
cash position.
We look forward confidently to continued growth this year.
Furthermore, the Group is now in a strong position to accelerate
this growth through selective acquisition and is actively pursuing
opportunities."
Enquiries:
Hydrogen Group plc 020 7090 7702
Ian Temple CEO
John Hunter COO & CFO
Shore Capital (NOMAD and Joint Broker) 020 7468 7904
Edward Mansfield / James Thomas
Whitman Howard (Joint Broker) 020 7659 1234
Hugh Rich
Notes to Editors:
Hydrogen Group's mission is to empower peoples' careers whilst
powering businesses by providing their key people from a proven
global platform with clients' in over 50 countries. We deliver by
building market leading specialist teams that develop a deep
understanding of candidate and clients' needs and developing
solutions.
http://www.hydrogengroup.com
CHAIRMAN'S STATEMENT
Introduction
I am delighted to be able to report a strong performance in
2018. With the integration of Argyll Scott Holdings Limited
("Argyll Scott") complete, and all of the key objectives of the
acquisition successfully achieved, the Group has increased its Net
Fee Income ("NFI") on both a reported and a proforma basis, and its
market share, in each of the EMEA, APAC and US regions.
This growth and the associated operational gearing, together
with cost savings arising from both the integration and the
implementation of efficiency driving initiatives across the
business, have increased conversion rates and transformed the
Group's profitability.
Furthermore, we have developed an operating model, which has
been implemented across the Group, that, together with this
positive trading momentum, enables us to look forward confidently
to further sustainable long-term profit growth.
Performance
In 2018, the Group increased its NFI (or Gross Profit) by 34% to
GBP30.5m (2017: GBP22.8m). Although this was partly driven by the
full year impact of Argyll Scott, underlying NFI growth was also
strong, increasing by 14% on a proforma basis.
Although this growth has been broad based, the Group's
performance in the US has been particularly impressive. Two new
offices were opened in Austin and San Diego and US NFI increased by
110%, and by 118% on a constant currency basis, during the
year.
The Board considers that the Group's underlying profit before
exceptional items and tax is the best way to judge its trading
performance as it excludes non-trading items and non-repeatable
gains and losses. Underlying profit before exceptional items and
tax increased by GBP2.2m, or 264%, to GBP3.0m (2017: GBP0.8m). Key
adjustments include net exceptional expenses of GBPnil (2017:
GBP2.0m), foreign exchange losses of GBP0.1m (2017: GBPnil),
non-controlling profit of GBP0.2m (2017: GBPnil), share based costs
of GBP0.1m (2017: GBP0.2m) and amortisation of acquired intangibles
from Argyll Scott of GBP0.1m (2017: GBP0.1m). Underlying EPS was
8.0p (2017: 3.2p). The statutory profit for the year was GBP2.5m
(2017: loss of GBP1.3m).
Conversion rates have improved significantly during the year.
The underlying profit before tax margin (calculated as underlying
profit before exceptional items and tax divided by net fee income)
increased to 9.7% (2017: 3.6%). Pleasingly, margins improved
progressively through the year. The underlying profit before tax
margin in H2 was 11.6%.
Cash generation during the year was strong, driven both by
profit growth and improved cash conversion resulting from a focus
on working capital management. As a result, net cash at 31 December
2018 was GBP4.9m (31 December 2017 net debt of GBP0.4m).
During the year, the Group acquired a further 4.9% of Tempting
Ventures Limited ("Tempting Ventures"), increasing its holding to
49.9%. Tempting Ventures has traded well, delivering a profit in
its first full year of operation despite adding several new
investments to its portfolio. While the impact on the Group's
results is not yet significant, it is well positioned for further
profitable growth which will contribute to the Group's earnings
growth moving forward.
Strategy
Hydrogen Group's strategy is to build market leading specialist
teams in high growth markets with a focus on developing each
through a journey from incubator through fast growth to market
leader where they have much greater profit conversion. Globally,
the STEM (Science, Technology, Engineering & Mathematics) and
Professional Services markets in which we operate are being
increasingly disrupted by a combination of technological, cultural,
and political change. Our model allows us to efficiently identify
and appraise the niche skill sets for which this disruption will
drive increased demand for, and conversely those where it will
destroy demand, allowing us to deploy our resources accordingly to
drive growth.
The integration of Argyll Scott has enabled the development of a
new operating model that has been deployed across the Group, which,
by focusing on the key drivers of our Proposition, People, Platform
and Performance is further facilitating the development of
scaleable market leading teams that will drive both NFI growth and
additional improvements to conversion rates.
In 2016 we set objectives that by 2020 the Group would, inter
alia: be growing NFI by 10% per annum, have grown underlying EPS to
6.8p, and increased underlying profit before tax conversion rates
to over 10%. I am delighted to report that these objectives were
substantively achieved during 2018.
With both a strong balance sheet and a robust and scaleable
operating model in place, the Board believes that these goals may
best be achieved by supplementing continued sustainable organic
growth with selective acquisitions that meet our strict criteria
relating to financial, operational, strategic and cultural fit. As
such, the Board is actively reviewing acquisition opportunities
that it believes may meet these criteria.
People
I would like to welcome all our colleagues that joined the
Hydrogen Group during 2018. I also thank all our staff for their
hard work during the year as we continued to grow the business. I
am pleased with the progress the management team has made and our
strength and depth of talent has been further enhanced during the
year. I am also delighted at the continued growth in of our
minority interest share scheme, demonstrating our ability to
attract, retain, motivate and develop key staff.
Dividend
The Board is confident in the prospects of the Group and
believes that the Group should grow profitably and continue to
generate cash during 2019. During the year, the Board resumed
payment of a dividend and paid an annual dividend of 0.8p in
respect of 2017 (2016: nil). An interim dividend was declared and
paid in October for 2018 of 0.5p. In line with its policy of paying
a progressive and sustainable dividend, the Board now proposes a
final dividend for 2018 of 1.0p, giving a payment for the year of
1.5p representing an increase of 88% for the year. Subject to
approval at the AGM, on 23 May 2019, the dividend will be paid on
31 May 2019 to all shareholders on the register on 3 May 2019.
The Board
The Board has continued to operate to high standards of
corporate governance appropriate to Hydrogen Group's size and
market capitalisation. The Board itself has had a stable year, with
no changes in membership. In line with best practice, all Directors
will stand for re-election by shareholders at the AGM.
A review of Board effectiveness was completed during the year to
assess its overall performance. No significant concerns were noted.
The review identified three key objectives for the Board moving
forward:
-- To ensure that the business continues to deliver growth in
revenue and profit to enhance shareholder value;
-- To further develop the next level of leaders in the Group; and
-- To continue the drive to expand the Group through acquisitions.
Outlook
Trading to date during 2019 has been in line with the Board's
expectations. The Board is mindful of the challenges and
uncertainties presented by both the UK's planned exit from the
European Union, however, we are confident that we will achieve
continued growth this year.
The Group's plan for the year ahead is to continue focusing on
growing and developing its niche teams into market leading
businesses by investing in high performing individuals and our
global operating model, while continuing to explore acquisition
opportunities that both meet our selection criteria and have the
potential to accelerate our growth plans.
Stephen Puckett
Chairman
2 April 2019
BUSINESS REVIEW
We are pleased to report that we continued to make strong
progress during 2018:
The key financial highlights in 2018 were:
-- revenue increased to GBP135.7m (2017: GBP125.9m);
-- NFI increased by 34% to GBP30.5m (2017: GBP22.8m);
-- NFI earned outside the UK increased to 54% of total NFI from 48%;
-- underlying profit* in the year increased by GBP2.2m to GBP3.0m (2017: GBP0.8m);
-- strong cash generation. Cash generated from operations of
GBP6.1m (2017: outflow of GBP2.5m); and
-- net cash as at 31 December 2018 of GBP4.9m (31 December 2017: net debt of GBP0.4m).
* Altered for non-controlling interest, foreign exchange gains,
amortisation of acquired brand and database, share based payments
and exceptional items.
The integration of Argyll Scott, which was acquired in June
2017, was successfully completed during the year. The integration
has enabled the development of a new operating model which has
helped to drive the business forward during the year and we believe
will provide the basis for sustainable growth moving forward.
Proposition - By being closer to niche disrupted markets we will
take advantage of job creation and focus on what our clients and
candidates need
The Group is committed to a multi brand strategy and to
investing in developing strong operating brands with robust client
and candidate propositions. Our operating brands are sub-divided
into approximately 70 specialist niche teams each focused on a
single skill set and discipline in its local market, enabling our
consultants to provide genuine insight to their clients and
candidates. Using objective criteria, each niche is categorised as
being either an incubator, a fast growth, or a market leading
business; and each is driven, through a consistent targeting and
reporting model, to grow to be a market leader in its niche where
both profit conversion and the sustainability of earnings are
strongest.
During the year we closed eleven low growth incubator teams and
entered eight new niche markets with greater growth prospects. In
total 20 teams were either promoted from incubator to fast growth
or from fast growth to market leader, improving the balance of the
portfolio.
People - Adopting a growth mindset, we develop our people so
they can over-deliver and reap the rewards
We are committed to creating a genuine learning and development
culture throughout the Group. Bespoke training programmes have been
developed for each job function and grade, which are being
delivered across the Group by the leadership and management teams.
There is a clear promotion pathway for everybody in the Group. The
Group has a performance management system and transparent reward at
every level to support an objective and high-performance working
culture, which was recognised as 'One to Watch' by the 2019 Sunday
Times survey.
The Group launched its minority interest scheme in 2017 and we
continued to roll it out during 2018. All managers of fast growth
and market leading teams qualify to join the scheme. To date, 35
individuals have joined the scheme with a further 10 expected to
join during 2019. The Board is pleased with the way the scheme is
impacting performance through the attraction, retention, motivation
and development of key staff.
As reported in our interim statement, the Group made two
significant additions to its global leadership team in the USA and
Australia during the year. Both businesses grew strongly as a
result.
We have continued to invest in our productive headcount to drive
our revenue earning capacity forward. Total headcount has increased
by 32 (10%) from 313 to 345. Twenty eight of the net increase were
fee earners as the Group has exploited the efficiencies created by
this new operational platform.
As a diverse global organisation, we are in a position to
support our clients to ensure they get the best people irrespective
of background, gender, religion or sexual orientation and have
delivered a number of initiatives to highlight positive role models
and the benefits of a diverse workforce.
Platform - "Powering our business with technology to drive
productivity and build closer customer relationships"
Throughout 2018 the Group migrated its teams progressively onto
a single, new, global technology and CRM platform. The migration
was completed in Q4 and is promoting greater communication and
cross fertilisation of key client relationships throughout the
Group and driving a consistent and effective "go to market"
strategy.
Alongside the new CRM platform, we are continuing to develop a
digital marketing programme that supports a multi brand specialist
niche business strategy by allowing the development of key client
and candidate relationships on a scalable, but bespoke, one to one
basis
Hydrogen Group was named the 16(th) most socially engaged
staffing consultancy business in the world in 2018, out of a field
of 38,000 by LinkedIn, the second successive year it has made the
Top 25. Well over 80% of our clients and candidates are registered
users of LinkedIn, which has become a primary platform for building
customer relationships. Using social engagement, we create and
develop leads which our consultants use to facilitate sales
conversions. The ranking is driven by engagement of the platform
members with the Group.
Performance - Deeper understanding of data informs decisions and
ensures we achieve our goals
In addition to the enhanced analysis and reporting available
from our new CRM platform, we are investing in our Business
Intelligence systems to combine financial and operating data to
present appropriate, meaningful and focused management information
to different decision maker groups across the business. We are also
using innovative ways of comparing the relative performance of
different mangers to drive transparency, accountability and
competition.
EMEA
NFI increased by GBP2.8m to GBP17.6m (2017: GBP14.8m) during the
year principally as a result of the inclusion of a full year's
trade of the UK and Middle East based operations of Argyll Scott.
On a proforma basis, NFI grew by 7% or GBP1.2m. Although the growth
was broad based, demand was particularly strong in our UK Legal
practice.
Operating profit before exceptional items doubled from GBP1.4m
to GBP2.8m.
APAC
The APAC region grew strongly during the year. NFI grew by 55%
(57% in constant currency terms) to GBP11.0m (2017: GBP7.1m). As
the bulk of Argyll Scott's operations are located in the APAC
region, the inclusion of a full year of its trade had a significant
impact on reported NFI. However, on a pro-forma basis, NFI also
grow strongly by 15% (and by 17% on a constant currency basis).
This growth was broad based, however, the strong performances of
our Thai and Australian businesses is noteworthy.
Operating profit before exceptional items increased by GBP0.9m
to GBP1.3m (2017: GBP0.4m).
A key rationale for the acquisition was the opportunity to sell
our developing Hydrogen branded contract recruitment services to
Argyll Scott's established APAC client base. During 2018,
contractors were placed on site at 19 existing Argyll Scott
clients, validating this model.
USA
The Group achieved strong growth from a low base in the USA with
NFI increasing by 110% (118% in constant currency terms) to GBP1.9m
(2017: GBP0.9m) during the year. Growth accelerated through the
year with 78% of NFI being earned in H2, providing a base for
further strong growth during 2019.
The Group appointed a new leader in the US in May 2018, and as a
result has invested heavily in its US operating capacity. Total US
headcount grew from 10 to 24 during the year, and in addition to
relocating its existing Houston office to larger premises, new
offices were opened in Austin and San Diego. Since the year end, a
fourth office has been opened in the region, in Charlotte.
Despite this significant investment, operating profit before
exceptional items also increased to GBP0.1m (2017: loss of
GBP0.02m).
Permanent and Contract
Hydrogen Group places candidates in permanent roles and provides
contract solutions. Permanent placements play to the Group's
experience in satisfying demand for rare niche skills. Contract
solutions provide clients with flexible resources usually to
complete specific projects.
The Group's NFI that is derived from permanent placements grew
by 55% to GBP17.8m (2017: GBP11.5m), while NFI derived from
contract solutions increased by 13% to GBP12.7m (2017: GBP11.2m),
driving a shift in the Group's permanent NFI to contract NFI mix to
58% permanent : 42% contract (2017: 51% permanent : 49%
contract).
The variance in the relative growth rates is largely a result of
the full year inclusion of Argyll Scott, which is a business that
provides, primarily, permanent recruitment services. Argyll Scott's
operations are predominantly located in Asia and the Middle East
where white collar contract recruitment is relatively immature. The
development of contract recruitment services in these markets
offers a clear growth opportunity
for the Group. On a proforma basis, permanent NFI grew by 19% and contract NFI by 7%.
The trend of improving contract margins experienced in recent
years has continued with the Group achieving a contract margin of
10.8% in 2018 (2017: 9.8%).
Clients and Candidates
Hydrogen Group has built strong and effective relationships with
its clients based around its longstanding track record of delivery
in specialist markets. We would like to thank all our clients for
their support over the last year.
The Group has a very strong candidate database and a proven
methodology for building candidate relationships in our niche
specialist teams. The Group works with highly talented candidates
and contractors and would like to thank them for trusting us to
empower their careers.
Brexit
The UK is the largest geographical market for the Group,
representing some 46% of NFI during 2018. Therefore, we have
continued to review the possible impact on the business should the
UK leave the European Union.
Possible positive impact on the business:
-- Continued UK talent shortages may increase the use of recruitment consultancies in the UK;
-- The ability to use our international network to bring talent
to the UK from outside the European Union due to new visa
processes;
-- Business transformation projects driven by change in
arrangements and regulation creating demand for our specialist
staff;
-- Possible faster growth in the UK economy, increasing
employment growth, as it builds trade with faster growing
international markets than the EU; and
-- Should Sterling devalue, our overseas reported revenue and profit increase.
Possible negative impact on the business:
-- Delay of projects affecting the demand for resource until
greater certainty of the future landscape;
-- Possible slowdown in the UK economy, decreasing employment
growth and therefore the demand for staff; and
-- A strengthening of Sterling decreases our reported overseas revenue and profit.
FINANCIAL REVIEW
Revenue
Group revenue for 2018 totalled GBP135.7m (2017: GBP125.9m).
Key performance measures
We measure progress against strategic objectives using the
following key performance indicators:
Profit conversion
Profit conversion is the underlying profit before tax (PBT
adjusted for foreign exchange gains, amortisation of acquired brand
and database, share based payments, NCI profit or loss, non-trading
items and exceptional items) divided by total NFI. This is key for
the business to assess the level of underlying profitability.
In 2018, profit conversion in the Group increased to 9.7% (2017:
3.6%).
Productivity per head
Productivity per head represents total NFI divided by the
average number of employees. This is important to the business to
monitor the levels of activity in the business and identify fee
earners who are not at full productivity.
Productivity per head fell in 2017, primarily due to the impact
of Argyll Scott's operations in emerging markets in Asia where
candidate salary levels and the Group's operating costs are lower.
In 2018, productivity per head grew 15%, driven by the
implementation of the Group's operating model, to GBP91,000 (2017:
GBP79,000).
NFI split between the UK and the rest of the world
This is the NFI from the UK and the rest of the world expressed
as a percentage of total NFI indicating the diversification of the
business.
NFI from the rest of the world has increased by GBP5.6m to
GBP16.6m and now represents 54% of the NFI for the year (2017:
48%).
Net fee income (NFI - equivalent to gross profit)
During 2018, Group NFI grew by 34% to GBP30.5m (2017:
GBP22.8m).
The fluctuation of sterling decreased the value of reported NFI
from overseas by 1% (GBP0.2m) during the year.
Operating segments
Our current management and reporting structure focuses on the
performance of our three core markets: EMEA, USA and APAC. The
segmental analysis disclosed in note 1 reflects this. The operating
model of the business is to build market leading niche businesses.
Each operating segment is made up of specialist teams that focus on
a niche market defined by location, sector, role type and type of
service. Each team is categorised by its size as being an
incubator, a fast growth or a market leading business.
NFI from the EMEA operating segment totalled GBP17.6m (2017:
GBP14.8m) and contributed 58% (2017: 65%) of total NFI. NFI from
the US operating segment totalled GBP1.9m (2017: GBP0.9m) and
contributed 6% (2017: 4%) of total NFI. NFI from the APAC operating
segment totalled GBP11.0m (2017: GBP7.1m) and contributed 36% of
total NFI (2017: 31%).
Exceptional costs
Net exceptional administration costs incurred in the year
amounted to GBPnil and principally relate to two material
offsetting factors. The first being a one-off rates rebate
received, and the second being the provision for an onerous lease
that was identified during the year. Further details are set out in
note 4.
Finance cost/income
Group finance cost for the year remained stable at GBP0.1m
(2017: GBP0.1m).
Profit and loss before taxation
Reported profit before taxation (PBT) for the year was GBP2.8m
(2017: GBP1.4m loss).
The Board's preferred measure of trading performance of the
business removing one off and non-trading items has increased
significantly with underlying PBT of GBP3.0m (2017: GBP0.8m).
Underlying PBT is calculated as follows:
2018 2017
GBP'm GBP'm
-------------------------------------- ------- --------
Profit Before Tax / (Loss Before
Tax) 2.8 (1.4)
Exceptional items - 2.0
Non-controlling interest (profit) (0.2) -
Non-trading items* 0.1 -
Amortisation of acquired intangibles 0.1 0.1
Share based payments 0.1 0.2
Foreign exchange losses 0.1 -
-------------------------------------- ------- --------
Underlying PBT 3.0 0.8
---------------------------------------- ------- --------
*Non trading costs incurred in the year relate to professional
fees on potential acquisitions. These are included within
administrative expenses in the Consolidated Statement of
Comprehensive Income.
Underlying EPS is calculated as follows:
2018 2017
GBP'm GBP'm
---------------------- ------- -------
Underlying PBT 3.0 0.8
Tax (expense)/credit (0.4) 0.1
------------------------ ------- -------
Underlying PAT 2.6 0.9
------------------------ ------- -------
Number of shares 32.6 28.2
------------------------ ------- -------
Underlying EPS 8.0p 3.2p
------------------------ ------- -------
Taxation
There was a GBP0.4m tax charge for the year (2017: credit of
GBP0.1m), giving an effective tax rate of 13% (2016: credit rate of
7%).
At 31 December 2018 the Group had unutilised tax losses of
GBP6.5m (2017: GBP7.8m) available for offset against future
profits. The Group has potential deferred tax assets of GBP1.4m
(2017: GBP1.6m) which have not been recognised.
Dividend
The Board is confident in the prospects of the Group. As a
result, the Board proposes a final dividend for the year 2018 of
1.0p to be agreed at the AGM on 23 May 2019. Subject to approval at
the AGM, the dividend will be paid on 31 May 2019 to all
shareholders on the register on 3 May 2019.
Profit per share
The basic profit per share was 7.0p (2017: loss of 4.4p).
Diluted profit per share was 6.4p (2017: loss of 4.4p).
Balance Sheet
Net assets at 31 December 2018 increased by GBP0.9m to GBP21.1m
(2017: GBP20.2m).
Goodwill remained flat at GBP12.2m. There were no impairments to
the carrying value of goodwill in 2018 (2017: GBPnil).
Current trade and other receivables decreased by 17% to GBP19.7m
(2017: GBP23.8m). The largest single component is trade
receivables, which at year end have decreased by GBP3.2m to
GBP10.8m (2017: GBP14.0m) as a result of improvements to
transactional finance processes and a focus on working capital
management. Consequently, days sales outstanding at 31 December
2018 decreased to 28 days (2017: 40 days).
The decrease of GBP3.8m in current liabilities is principally a
result of two factors. A reduction in trade and other payables of
GBP0.9m due to timing differences, and a decrease of GBP2.8m in
borrowings resulting from the improvement in operating cash levels
within the business.
Non-current liabilities increased by GBP1.0m largely due to the
revalued redemption liability in relation to the expected future
earn out payments associated to the purchase of certain minority
interest holdings in certain subsidiaries of Argyll Scott, the
arrangements for which were in place at the time of the acquisition
in 2017. Further details are set out in note 21.
Short term bank deposits remain positive at GBP5.2m (2017:
GBP2.8m).
Reserves
As a result of the Group's strong trading performance in the
year and the impact of the revised redemption liability (note 21),
total equity has increased by GBP0.9m to GBP21.1m (2017:
GBP20.2m).
Treasury management and currency risk
Approximately 73% of the Group's revenue in 2018 (2017: 75%) was
denominated in Sterling. The Group aims to match cost and revenue
in the same currency to provide a natural hedge in its major
markets which it achieved with the exception of the Euro.
The Group did not enter into any forward contracts and no
foreign currency contracts were open as at 31 December 2018.
Cash flow and cash position
Net cash at 31 December 2018 was GBP4.9m (2017: net debt of
GBP0.4m). Strong trading in the year boosted cash generation in the
Group before working capital by GBP2.0m. Further improvements in
working capital management resulted in positive cash inflows of
GBP3.2m (2017: outflow of GBP3.0m) before taxes and financing
costs. Total inflows as a result of operating activities were
GBP6.1m (2017: outflow of GBP2.5m).
Gross borrowings decreased during the year by GBP2.8m to
GBP0.3m.
The Group has an Invoice Discounting facility of GBP18.0m with
HSBC with a commitment to January 2021. After this date the
facility shall continue until terminated by either party giving to
the other not less than three months written notice.
The average facility available during the year was GBP7.3m.
Average utilisation in the year was 42% (GBP2.1m). The average
available funds (including cash) for the Group grew by GBP2.6m to
GBP8.4m.
Foreign Exchange Risk
The appreciation of Sterling during the year had a negative
impact on the translation of the earnings of the Group's overseas
subsidiaries. The extent of the appreciation of Sterling is
detailed below:
Major currencies Depreciation/(Appreciation) 2018 NFI in local
in Sterling over the currency as a proportion
2018 financial year of Group NFI
(average rates)
Singapore Dollar (1%) 14%
Hong Kong Dollar (4%) 10%
Euro 1% 5%
United States of
America Dollar (3%) 8%
Malaysian Ringgit 3% 2%
Australian Dollar (5%) 3%
Thai Bhat 2% 6%
United Arab Emirates
Dirham (3%) 4%
Swiss Franc (2%) 1%
The Group is currently not hedged against this translation
exposure.
Going concern
It should be recognised that any consideration of the
foreseeable future involves making a judgement, at a particular
point in time, about future events, which are inherently
uncertain.
The Group has two revenue streams, permanent and contract
solutions. The cash flow characteristics of the two streams
interact in a complementary fashion. The permanent business, which
has minimal working capital requirement, is cash generative during
the growth phase, and with tight cost control, near to cash neutral
in a downturn. By contrast, the contract business has a large
working capital requirement, and requires significant cash
investment during a period of growth but is cash generative in the
first periods of a downturn.
The Group has prepared financial forecasts for the period ending
30 June 2020 and the Directors have a reasonable expectation that
the Group will have sufficient cash flow and available resources to
continue operating in the foreseeable future. On these grounds the
Board has continued to adopt the going concern basis for the
preparation of the financial statements.
Consolidated statement of comprehensive income
For the year ended 31 December 2018
2018 2017
Note GBP'000 GBP'000
-------------------------------------- ------- ---------- ----------
Revenue 1 135,637 125,853
Cost of sales (105,111) (103,060)
-------------------------------------- ------- ---------- ----------
Gross profit 1 30,526 22,793
---------- ----------
Other administrative expenses (28,237) (22,605)
Exceptional administrative
expenses 4 (1) (1,963)
---------- ----------
Administrative expenses (28,238) (24,568)
Other income 1 529 539
Operating profit before exceptional
items 1 2,818 727
Exceptional items (1) (1,963)
---------- ----------
Operating profit/(loss) 2,817 (1,236)
Share of profit/(loss) in
associate 70 (100)
Finance costs 2 (100) (123)
Finance income 3 22 12
Profit/(loss) before taxation 2,809 (1,447)
Income tax (expense)/credit 6 (358) 107
-------------------------------------- ------- ---------- ----------
Profit/(loss) for the year 2,451 (1,340)
-------------------------------------- ------- ---------- ----------
Other comprehensive gains
and losses:
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translating foreign
operations 6 141
Exchange differences on intercompany
loans 207 (391)
Other comprehensive profit/(loss) for the
year, net of tax 213 (250)
----------------------------------------------- ---------- ----------
Total comprehensive gains/(losses)
for the year 2,664 (1,590)
----------------------------------------------- ---------- ----------
Profit attributable to:
Equity holders of the parent 2,292 (1,232)
Non-controlling interest 159 (108)
-------------------------------------- ------- ---------- ----------
Total comprehensive income
attributable to:
Equity holders of the parent 2,505 (1,482)
Non-controlling interest 159 (108)
-------------------------------------- ------- ---------- ----------
Profit/(loss) per share:
Basic profit/(loss) per share
(pence) 19 7.0p (4.4p)
Diluted profit/(loss) per
share (pence) 19 6.4p (4.4p)
The above results relate to continuing
operations.
Consolidated statement of financial position
As at 31 December 2018
2018 2017
Note GBP'000 GBP'000
----------------------------- ------- --------- ---------
Non-current assets
Goodwill 7 12,244 12,214
Investment in associate 8 120 50
Other intangible assets 9 710 789
Property, plant and
equipment 10 947 882
Deferred tax assets 11 112 181
Other financial assets 12 274 312
----------------------------- ------- --------- ---------
14,407 14,428
----------------------------- ------- --------- ---------
Current assets
Trade and other receivables 12 19,709 23,765
Current tax receivable - 290
Cash and cash equivalents 13 5,227 2,770
----------------------------- ------- --------- ---------
24,936 26,825
----------------------------- ------- --------- ---------
Total assets 39,343 41,253
----------------------------- ------- --------- ---------
Current liabilities
Trade and other payables 14 (14,705) (15,647)
Redemption liability 21 (615) (69)
Current tax payable (2) -
Borrowings 15 (293) (3,132)
Provisions 16 - (602)
----------------------------- ------- --------- ---------
(15,615) (19,450)
----------------------------- ------- --------- ---------
Non-current liabilities
Redemption liability 21 (1,640) (951)
Deferred tax liabilities 11 (117) (136)
Provisions 16 (839) (503)
----------------------------- ------- --------- ---------
(2,596) (1,590)
----------------------------- ------- --------- ---------
Total liabilities (18,211) (21,040)
----------------------------- ------- --------- ---------
Net assets 21,132 20,213
----------------------------- ------- --------- ---------
Equity
Share capital 17 341 334
Share premium 3,520 3,520
Merger reserve 19,240 19,240
Own shares held (1,546) (1,338)
Share option reserve 2,014 1,735
Translation reserve (386) (599)
Forward purchase reserve (2,255) (1,020)
Retained earnings/(Deficit) (61) (1,871)
----------------------------- ------- --------- ---------
20,867 20,001
Non-controlling interest 265 212
Total equity 21,132 20,213
----------------------------- ------- --------- ---------
The financial statements were approved by the Board of Directors
and authorised for issue on 2 April 2019 and were signed on its
behalf by:
Ian Temple
Chief Executive
Consolidated statement of changes in equity
As at 31 December 2018
Share Own Share Trans-lation Forward (Deficit)/
Share premium Merger shares option reserve purchase Retained Total
capital account reserve held reserve GBP'000 reserve earnings Owners NCI equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- --------- -------- --------- ---------- -------- ------------- ---------- ----------- ---------- --------- ----------
At 1 January
2017 239 3,520 16,100 (1,338) 2,544 (788) - (1,262) 19,015 - 19,015
Acquisition
of Argyll
Scott 90 - 3,140 - - - - - 3,230 320 3,550
New shares
issued 5 - - - 54 - - - 59 - 59
Movement in
redemption
liability - - - - - - (1,020) - (1,020) - (1,020)
Share option
charge - - - - 199 - - - 199 - 199
Transactions
with owners 95 - 3,140 - 253 - (1,020) - 2,468 320 2,788
Reduction to
share option
reserve - - - - (1,062) - - 1,062 - - -
Translation
transfer - - - - - 439 - (439) - - -
Loss for the
year - - - - - - - (1,232) (1,232) (108) (1,340)
Other comprehensive
income:
Exchange differences
on intercompany loans
- - - - - (391) - - (391) - (391)
Foreign
currency
translation
charge - - - - 141 - - 141 - 141
---------------- --------- -------- --------- ---------- -------- ------------- ---------- ----------- ---------- --------- ----------
Total
comprehensive
loss for the
year - - - - (1,062) 189 - (609) (1,482) (108) (1,590)
At 31
December
2017 334 3,520 19,240 (1,338) 1,735 (599) (1,020) (1,871) 20,001 212 20,213
New shares
issued 7 - - - 204 - - - 211 - 211
NCI purchase - - - - - - 142 (62) 80 (106) (26)
Movement in
redemption
liability - - - - - - (1,377) - (1,377) - (1,377)
Share
repurchase - - - (208) - - - - (208) - (208)
Share option
charge - - - - 75 - - - 75 - 75
Dividends - - - - - - - (420) (420) - (420)
---------------- --------- -------- --------- ---------- -------- ------------- ---------- ----------- ---------- --------- ----------
Transactions
with owners 7 - - (208) 279 - (1,235) (482) (1,639) (106) (1,745)
---------------- --------- -------- --------- ---------- -------- ------------- ---------- ----------- ---------- --------- ----------
Profit for
the year - - - - - - - 2,292 2,292 159 2,451
Other comprehensive
income:
Exchange
differences
on
intercompany
loans - - - - - 207 - - 207 - 207
Foreign
currency
translation
charge - - - - - 6 - - 6 - 6
---------------- --------- -------- --------- ---------- -------- ------------- ---------- ----------- ---------- --------- ----------
Total
comprehensive
profit for
the year - - - - - 213 - 2,292 2,505 159 2,664
At 31 December
2018 341 3,520 19,240 (1,546) 2,014 (386) (2,255) (61) 20,867 265 21,132
---------------- --------- -------- --------- ---------- -------- ------------- ---------- ----------- ---------- --------- ----------
Consolidated statement of cash flows
For the year ended 31 December 2018
2018 2017
Note GBP'000 GBP'000
----------------------------------- ------- ------------- ---------
Net cash generated/(used) from
operating activities 20a 6,140 (2,501)
Investing activities
Investment in associate 8 - (150)
Purchase of property, plant
and equipment 10 (269) (46)
Purchase of software assets 9 (102) (255)
Net cash used in investing
activities (371) (451)
----------------------------------- ------- --------- ---------
Financing activities
(Decrease)/increase in borrowings 15 (2,839) 2,045
Decrease in redemption liability (142) -
on NCI pay-out
Purchase of treasury shares (208) -
Equity dividends paid 5 (420) -
Net cash (used)/generated from
financing activities (3,609) 2,045
----------------------------------- ------- --------- ---------
Net increase/(decrease) in
cash and cash equivalents 2,160 (907)
Cash and cash equivalents at
beginning of year 13 2,770 3,106
Exchange gain on cash and cash
equivalents 297 571
----------------------------------- ------- --------- ---------
Cash and cash equivalents at
end of year 13 5,227 2,770
----------------------------------- ------- --------- ---------
Notes to the consolidated financial statements
As at 31 December 2018
Basis of preparation
Hydrogen Group plc is the Group's ultimate parent company. The
Company is a limited liability company incorporated and domiciled
in the United Kingdom. The registered office address and principal
place of business is 30 Eastcheap, London, EC3M 1HD, England.
Hydrogen Group plc's shares are listed on the AIM Market.
Registered company number is 05563206.
The consolidated financial statements of Hydrogen Group plc have
been prepared under the historical cost convention, apart from the
treatment of certain financial assets, and in accordance with
International Financial Reporting Standards ("IFRS") as endorsed by
the European Union and also comply with IFRIC interpretations and
Company Law applicable to companies reporting under IFRS. The
Group's accounting policies have been consistently applied to all
the periods presented other than for the adoption of IFRS 9 and 15
and the change in accounting policy for the redemption
liability.
The factors considered by the Directors in exercising their
judgement of the Group's ability to continue to operate in the
foreseeable future are set out in the Annual Report and summarised
in the Financial Review. The Group has prepared financial forecasts
for the period to 30 June 2020 and the Directors have a reasonable
expectation that the Group will have sufficient cash flow and
available resources to continue operating in the foreseeable
future. Consequently, the Board has continued to adopt the going
concern basis for the preparation of the financial statements.
The consolidated financial statements for the year ended 31
December 2017 (including comparatives) are presented in GBP '000
and were approved and authorised for issue by the Board of
Directors on 9 April 2018.
1 Segment reporting
Segment operating profit is the profit earned by each operating
segment excluding the allocation of central administration costs,
and is the measure reported to the Group's Board, the Group's Chief
Operating Decision Maker (CODM), for performance management and
resource allocation purposes.
(a) Revenue, gross profit, and operating profit by
discipline
For management purposes, the Group is organised into the
following three operating segments based on the geography of the
business unit: EMEA (covering Europe, Middle East and Africa); USA;
and APAC (covering Asia and Australia). The operating segments
noted reflect the information that is regularly reviewed by the
Group's Chief Operating Decision Maker which is the Board of
Hydrogen Group plc. All operating segments have similar economic
characteristics and share a majority of the aggregation criteria
set out in IFRS 8:12.
31 December 2018 31 December 2017
EMEA USA APAC Group Total EMEA USA APAC Group Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- -------- --------- ------------ -------- -------- -------- ---------
Revenue 108,060 6,895 20,671 30 135,637 104,055 3,898 17,900 - 125,853
Gross profit 17,617 1,921 10,958 30 30,526 14,811 916 7,066 - 22,793
Depreciation
and
amortisation (226) (2) (75) (89) (392) (351) - (41) (52) (444)
Other income 529 - - - 529 539 - - - 539
Operating
profit
before
exceptional
items 2,817 148 1,331 (1,478) 2,818 1,447 (19) 371 (1,072) 727
Exceptional
items (1) - - - (1) (1,408) - (230) (325) (1,963)
Operating
profit
/(loss) 2,816 148 1,331 (1,478) 2,817 39 (19) 141 (1,397) (1,236)
-------- -------- -------- -------- --------- ------------ -------- -------- -------- ---------
Finance costs (100) (123)
Finance income 22 12
Profit/(loss) from
associate 70 (100)
--------- ---------
Profit/(loss) before
tax 2,809 (1,447)
--------- ---------
Total Assets 13,333 1,661 5,901 18,448 39,343 16,621 1,083 6,377 17,172 41,253
Total
Liabilities (8,330) (775) (2,053) (7,053) (18,211) (15,758) (344) (1,919) (3,019) (21,040)
Group costs represent central management costs that are not
allocated to operating segments.
The majority of exceptional items included in prior year are in
relation to acquisition costs for Argyll Scott. Refer to note 4 for
a breakdown.
Revenue reported above is generated from external customers.
There were no sales between segments in the year (2017: nil).
The accounting policies of the operating segments are the same
as the Group's accounting policies described above. Segment profit
represents the profit earned by each segment without allocation of
Group administration costs, finance costs and finance income.
Other income relates to rentals receivable by the Group for the
two floors subleased in London.
There is one external customer that represented 21% (2017: 22%)
of the entity's revenues, with revenue of GBP29.1m (2017:
GBP27.5m), and approximately 8% (2017: 9%) of the Group's Net Fee
Income ("NFI") which is included in the EMEA segment.
(b) Revenue and gross profit by geography:
Revenue Gross profit
---------------- -------------------- -------------
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------- --------- ----------------- ---------
UK 98,822 94,984 13,903 11,795
Rest of world 36,815 30,869 16,623 10,998
--------- --------- ----------------- ---------
135,637 125,853 30,526 22,793
--------------- --------- --------- ----------------- ---------
The 'Rest of world' revenue and gross profit numbers disclosed
above have been accumulated for geographies outside of the UK on
the basis that no one geography is significant in its entirety,
other than the UK.
(c) Revenue and gross profit by recruitment classification:
Revenue Gross profit
----------- -------------------- --------------------
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
----------- --------- --------- --------- ---------
Permanent 17,828 11,626 17,802 11,549
Contract 117,809 114,227 12,724 11,244
--------- --------- --------- ---------
135,637 125,853 30,526 22,793
----------- --------- --------- --------- ---------
The information reviewed by the Chief Operating Decision Maker,
or otherwise regularly provided to the Chief Operating Decision
Maker, does not include information on total assets and
liabilities. The cost to develop this information would be
excessive in comparison to the value that would be derived.
2 Finance costs
2018 2017
GBP'000 GBP'000
-------------------------------------- --------- ---------
Invoice discounting and associated
costs 100 123
---------------------------------------- --------- ---------
100 123
-------------------------------------- --------- ---------
3 Finance income
2018 2017
GBP'000 GBP'000
----------------- --------- ---------
Bank interest 22 12
------------------- --------- ---------
22 12
----------------- --------- ---------
4 Exceptional administrative items
Exceptional items are costs/(income) that are separately
disclosed due to their material and non-recurring nature.
2018 2017
GBP'000 GBP'000
------------------------- --------- ---------
Restructuring costs 66 201
Impairment of software - 589
IT integration - 236
Rates rebate (520) -
Onerous leases 455 692
Professional fees - 245
Total 1 1,963
------------------------- --------- ---------
Restructuring fees are in respect to final costs incurred due to
the acquisition of Argyll Scott. The rates rebate in the year
relates to the net repayment of overpaid rates from the period of
2012 to 2017.
5 Dividends
2018 2017
GBP'000 GBP'000
----------------------------------------------------- --------- -----------------
Amounts recognised and distributed to shareholders
in the year
Final dividend for the year ended 31 December 257 -
2017 of 0.8p per share (2016: nil per share)
Interim dividend for the year ended 31 December 163 -
2018 of 0.5p per share (2017: nil per share)
----------------------------------------------------- --------- -----------------
420 -
----------------------------------------------------- --------- -----------------
A final dividend of 1.0p has been proposed but not yet approved
for the year ended 31 December 2018.
6 Tax
(a) Analysis of tax charge for
the year: 2018 2017
GBP'000 GBP'000
The charge based on the profit
for the year comprises:
-------------------------------------------------- ---------- ---------
Corporation tax:
UK corporation tax on profits
for the year 348 39
Adjustment to tax charge in respect
of previous periods (44) 81
---------------------------------------------------- ---------- ---------
Foreign tax 304 120
Current tax 4 80
Total current tax 308 200
---------------------------------------------------- ---------- ---------
Deferred tax:
Origination and reversal of temporary
differences 62 (72)
Adjustment to tax charge in respect
of previous periods (12) (235)
Total deferred tax 50 (307)
---------------------------------------------------- ---------- ---------
Tax charge/(credit) on profit
for the year 358 (107)
---------------------------------------------------- ---------- ---------
UK corporation tax is calculated at 19.00% (2017: 19.25%) of
the estimated assessable profits for the year. Taxation for
other jurisdictions is calculated at the rates prevailing in
the respective jurisdictions.
(b) The charge for the year can be reconciled to the profit
per the Consolidated Statement of Comprehensive Income as follows:
Profit/(loss) before tax 2,809 (1,447)
---------------------------------------------------- ---------- ---------
Tax at the UK corporation tax rate of 19.00%
(2017: 19.25%) 534 (279)
Effects of:
Fixed asset differences 1 30
Expenses not deductible for tax
purposes 80 110
Income not taxable (68) -
Effect of difference in tax rates (33) 48
Utilisation of tax losses and
other deductions (224) (91)
Tax losses carried forward not
recognised for deferred tax 122 157
R&D additional tax relief - (17)
Adjustment to tax charge in respect
of prior periods (29) (155)
Share-based payments (25) (20)
Other short term timing differences - 110
Tax charge/(credit) for the year 358 (107)
---------------------------------------------------- ---------- ---------
There has been no deferred tax charge relating to share options
charged directly to equity (2017: nil).
In total, at the reporting date, the Group had unutilised tax
losses of GBP6.5m (2016: GBP7.8m) available for offset against
future profits, for which no deferred tax assets had been
recognised.
7 Goodwill
2018 2017
GBP'000 GBP'000
-------------------------------------------- ---------- ----------
Cost
At 1 January 21,301 19,228
Additions 30 2,073
-------------------------------------------- ---------- ----------
At 31 December 21,331 21,301
Accumulated impairment losses
At 1 January (9,087) (9,087)
Impairment charge for the year - -
At 31 December (9,087) (9,087)
Carrying amount at 31 December 12,244 12,214
-------------------------------------------- ---------- ----------
Allocation of goodwill to cash generating
units (CGU):
EMEA (including USA) Professional
Support Services 10,141 10,141
Argyll Scott Group 2,103 2,073
-------------------------------------------- ---------- ----------
Goodwill arising on business combinations is tested annually for
impairment or more frequently if there are indications that the
value of goodwill may have been impaired. Goodwill has been tested
for impairment by comparing the carrying value with the recoverable
amount.
The recoverable amount is determined on a value-in-use basis
utilising the value of cash flow projections over five years with a
terminal value added. Multiple scenarios were tested, firstly using
the 2018 actuals (of which key assumptions are detailed below) and
secondly using detailed budgets prepared as part of the Group's
performance and control procedures. Subsequent years are based on
further extrapolations using the key assumptions listed below. Cash
flows are discounted by the cash generating unit's weighted average
cost of capital. Management believes that no reasonably possible
change to the key assumptions given below would cause the carrying
value to materially exceed the recoverable amount. Management
determines that there has been no impairment in the carrying value
of goodwill in 2018.
The key assumptions for revenue growth rates and discount rates
used in the impairment review are stated below:
Growth rates
Discount
rate
Net fee income growth rate on actuals 2019 2020-2023 %
% %
EMEA (including USA) Professional Support
Services 2.5% 2.5% 7.3%
Argyll Scott Group 2.5% 2.5% 7.2%
------------------------------------------- --------- -------------- ----------
For the purposes of the goodwill impairment review, the Board
consider it prudent to assume a 2.5% revenue growth on pre-tax
actuals for 2019 through to 2023. The revenue growth rates for
2019-2023 are the Group's own internal forecasts, supported by
external industry reports predicting improving conditions in the
industry, with demand for the industry's services anticipated to
pick up. The discount rate used is an estimate of the Group's
weighted average cost of capital, based on the risk adjusted
average weighted cost of its debt and equity financing. The Group
has sensitised both the discount rate and growth rate by 2.5% with
no material impact (and no impairments) noted.
8 Investment in associate
The following table provides summarised information of the
Group's investment in the associated undertaking:
2018 2017
GBP'000 GBP'000
---------------------- --------- ---------
1 January 50 -
Investment acquired - 150
Share of associate's
profit/(loss) 70 (100)
---------------------- --------- ---------
31 December 120 50
---------------------- --------- ---------
Principle associate Investment Principal Country of Equity
held by activity incorporation interest
---------------------- ---------------- ------------------- ---------------- ----------
Tempting Ventures
Limited (previously Hydrogen Group
CBFG Limited) Plc Advisory services UK 49%
Tempting Ventures Limited consolidated results
as at 31 December 2018
Net Assets: GBP0.0m
Gross Profit: GBP4.7m
Net Profit GBP0.5m
9 Other intangible assets
Computer
software Database Brand Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ---------- ----------- ---------- ----------
Cost
At 1 January 2017 2,317 - - 2,317
Additions 255 - - 255
Assets acquired - 500 125 625
Disposals (447) - - (447)
At 31 December 2017 2,125 500 125 2,750
Additions 102 - - 102
At 31 December 2018 2,227 500 125 2,852
------------------------------ ---------- ----------- ---------- ----------
Amortisation and impairment
At 1 January 2017 (1,525) - - (1,525)
Charge for the year (242) (42) (10) (294)
Disposals 447 - - 447
Impairment (589) - - (589)
At 31 December 2017 (1,909) (42) (10) (1,961)
Charge for the year (93) (70) (18) (183)
At 31 December 2018 (2,002) (112) (28) (2,142)
------------------------------ ---------- ----------- ---------- ----------
Net book value at 31
December 2018 225 388 97 710
------------------------------ ---------- ----------- ---------- ----------
Net book value at 31
December 2017 216 458 115 789
------------------------------ ---------- ----------- ---------- ----------
Amortisation of intangible assets is charged to administration
expenses in the Consolidated Statement of Comprehensive Income.
Impairment of GBP0.6m noted in 2017 on software development that
does not support the future economic value to the Group. This has
been included within exceptional IT costs in note 4.
10 Property, plant and equipment
Computer
and office Leasehold
equipment improvements Total
GBP'000 GBP'000 GBP'000
--------------------------------- ------------ -------------- ----------
Cost
At 1 January 2017 859 1,918 2,777
Additions 31 15 46
Assets Acquired 59 26 85
Disposals (281) - (281)
At 31 December 2017 668 1,959 2,627
Additions 255 14 269
At 31 December 2018 923 1,973 2,896
--------------------------------- ------------ -------------- ----------
Accumulated depreciation and
impairment
At 1 January 2017 (792) (1,127) (1,919)
Charge for the year (58) (79) (137)
Disposals 281 - 281
Exchange differences 25 5 30
At 31 December 2017 (544) (1,201) (1,745)
Charge for the year (122) (88) (209)
Exchange differences 5 - 5
At 31 December 2018 (661) (1,289) (1,949)
--------------------------------- ------------ -------------- ----------
Net book value at 31 December
2018 263 684 947
--------------------------------- ------------ -------------- ----------
Net book value at 31 December
2017 124 758 882
--------------------------------- ------------ -------------- ----------
11 Deferred tax
Short term timing Accelerated
differences depreciation Total
Deferred tax asset GBP'000 GBP'000 GBP'000
--------------------------- ------------------ -------------- -----------
At 1 January 2018 152 29 181
Charged to profit or loss (55) (14) (69)
At 31 December 2018 97 15 112
--------------------------- ------------------ -------------- ---------
Accelerated
capital Intangible
allowances Assets Total
Deferred tax (liability) GBP'000 GBP'000 GBP'000
--------------------------- ------------ ------------- ----------
At 1 January 2018 (21) (115) (136)
Credited to profit or
loss 1 18 19
At 31 December 2018 (20) (97) (117)
---------------------------- ------------ ------------- ----------
No reversal of deferred tax is expected within the next twelve
months (2017: nil).
In total, at the reporting date, the Group had unutilised tax
losses of GBP6.5m (2016: GBP7.8m) available for offset against
future profits, for which no deferred tax assets had been
recognised.
12 Trade and other receivables
Trade and other receivables are as 2018 2017
follows: GBP'000 GBP'000
------------------------------------ --------- ---------
Trade receivables 10,780 14,003
Expected credit losses (279) (135)
Contract assets (accrued income) 7,414 8,329
Prepayments 749 792
Other receivables:
- due within 12 months 1,045 776
- due after more than 12 months 274 312
Total 19,983 24,077
------------------------------------- --------- ---------
Current 19,709 23,765
Non- current 274 312
------------------------------------- --------- ---------
As at 31 December 2018, the average credit period taken by
clients was 28 days (2017: 40 days) from the date of invoicing, and
the receivables are predominantly non-interest bearing. Expected
credit losses of GBP279,000 (2017: GBP135,000) has been made for
estimated irrecoverable amounts. Due to the short-term nature of
trade and other receivables, the Directors consider that the
carrying value approximates to their fair value.
Contract assets (accrued income) principally comprises accruals
for amounts to be billed for contract staff for time worked in
December. Other receivables due after more than 12 months are
predominantly rental deposits on leasehold properties.
The Group does not provide against receivables solely on the
basis of the age of the debt, as experience has demonstrated that
this is not a reliable indicator of recoverability. The Group
provides fully against all receivables where it has positive
evidence that the amount is not recoverable.
The Group uses an external credit scoring system to assess the
creditworthiness of new customers. The Group supplies mainly major
companies and major professional partnerships.
Included in the Group's trade receivable balances are
receivables with a carrying amount of GBP2.9m (2017: GBP5.4m) which
are past due date at the reporting date for which the Group has not
provided as the amounts are still considered recoverable. The Group
does not hold any collateral over these balances.
Ageing of past 30 days but not impaired 2018 2017
trade receivables: GBP'000 GBP'000
(Number of days overdue)
----------------------------------------------- --------- ---------
0-30 days 1,963 2,579
30-60 days 658 1,544
60-90 days 161 408
90+ days 99 899
------------------------------------------------ --------- ---------
31 December 2,881 5,430
------------------------------------------------ --------- ---------
Movement in expected credit 2018 2017
losses: GBP'000 GBP'000
------------------------------------------ --- --------- -----------
1 January (135) (142)
Impairment losses recognised
on receivables - (139)
Expected credit losses (279) -
Impairment losses reversed 135 146
31 December (279) (135)
------------------------------------------ --- --------- -----------
In determining the recoverability of trade receivables, the
Group considers any change in the credit quality of the trade
receivable from the date credit was initially granted up to the
reporting date. The Directors believe that there is no further
credit provision required.
There are no individually impaired trade receivables that have
been placed in administration or liquidation included in
calculation of expected credit losses (2017: nil).
Gross carrying Expected Total
Ageing of expected credit amount loss rate GBP'000
losses: %
----------------------------- --------------- ----------- ---------
0-30 days 6,715 0.5 34
31-60 days 2,236 1.5 34
61-90 days 978 2.5 24
90+ days 851 3.6 31
31 December 10,780 123
------------------------------ --------------- ----------- ---------
As at 31 December 2018 trade receivables of GBP156,000 (2017:
nil) had lifetime credit losses of the full value of receivables.
The receivables due at the end of the financial year relate to one
customer, which experienced a delay in raising capital to launch
their platform.
As at 31 December 2018 trade receivables to a value of GBP6.2m
were subject to an invoice financing facility (2017: GBP6.8m).
13 Cash and cash equivalents
Cash and cash equivalents are 2018 2017
as follows: GBP'000 GBP'000
------------------------------- --------- ---------
Short-term bank deposits 5,227 2,770
5,227 2,770
------------------------------- --------- ---------
Cash and cash equivalents comprise cash held by the Group and
short-term bank deposits with an original maturity of three months
or less, less bank overdrafts repayable on demand. The carrying
amount of these assets approximates their fair value.
14 Trade and other payables
Trade and other payables are
as follows: 2018 2017
GBP'000 GBP'000
--------------------------------- ---------- ----------
Trade payables 1,516 2,490
Other taxes and social security
costs 1,279 1,315
Other payables 1,710 1,496
Accruals 10,200 10,346
14,705 15,647
--------------------------------- ---------- ----------
Accruals principally comprise accruals for amounts owed to
contract staff for time worked in December, in addition to a rental
accrual and a bonus and commission accrual.
The average credit period taken on trade purchases, excluding
contract staff costs, by the Group is 20 days (2017: 38 days),
based on the average daily amount invoiced by suppliers. Interest
charged by suppliers is at various rates on payables not settled
within terms. The Group has procedures to ensure that payables are
paid to terms wherever possible. Due to the short-term nature of
trade and other payables, the Directors consider that the carrying
value approximates to their fair value.
15 Borrowings
2018 2017
GBP'000 GBP'000
--------------------- --------- ---------
Invoice discounting 293 3,132
293 3,132
--------------------- --------- ---------
As at 31 December 2018, the Group had two (2017: two) invoice
discounting facilities in operation.
The HSBC facility has a maximum drawdown of GBP18.0m with no
year-end balance outstanding. Interest on the facility is charged
at 1.7% over UK Base Rate on actual amounts drawn down, and the
margin is fixed to January 2021.
The Barclays facility was terminated in January 2019. At year
end the facility had a maximum drawdown of GBP1.0m with a year-end
balance outstanding of GBP0.3m. Interest on the facility was
charged at 2.3% over UK Base Rate on actual amounts drawn down.
16 Provisions
Leasehold Onerous System Onerous
dilapidations Leaseholds Integration contracts Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------------- ------------ ------------- ----------- ----------
At 1 January 2017 309 - - - 309
New provision 138 692 217 62 1,109
Utilised - (313) - - (313)
At 31 December 2017 447 379 217 62 1,105
New provision 11 455 - - 466
Utilised (74) (379) (217) (62) (732)
----------------------- --------------- ------------ ------------- ----------- ----------
At 31 December 2018 384 455 - - 839
----------------------- --------------- ------------ ------------- ----------- ----------
Current - - - - -
Non-current 384 455 - - 839
----------------------- --------------- ------------ ------------- ----------- ----------
The dilapidations provisions relate to the Group's current
leased offices in London, Singapore, Hong Kong, Kuala Lumper and
Thailand. This provision will unwind over the course of the leases
agreements. Leaseholds in the Group range from 2-10 years.
The onerous lease contract relates to surplus office space in
our London office identified during 2018. Following discussions
with advisors, the Group has taken an exceptional charge for 33
months' costs, starting from 1 October 2020 to 30 June 2023,
relating to costs to cover the marketing void and rent free
incentive that is assumed would be required to sublet this space
along with a 35% rent shortfall for the duration of any sub-lease
eventually granted.
17 Share capital
The share capital at 31 December 2018 was as follows:
2018 2017
----------------------------- ---------------------
Ordinary shares of 1p each Number Number
of shares GBP'000 of shares GBP'000
-----------------------------
Issued and fully paid:
At 1 January 33,425,823 334 23,903,713 239
Issuance of new shares 702,104 7 9,522,110 95
31 December 34,127,927 341 33,425,823 334
During 2018, 400,000 options were exercised (2017: 450,000), all
of which were satisfied by the issuance of new shares.
At 31 December 2018, 1,162,051 (2017: 1,162,051) shares were
held in the EBT.
At 31 December 2018, 385,000 (2017: nil) shares were held in
Treasury.
At 31 December 2018, 211,414 (2017: 211,414) ordinary shares
were held in the Hydrogen Group plc Share Incentive Plan trust for
employees.
18 Own shares held
During the year, there was no movement in the number of shares
held by the EBT.
At 31 December 2018, the total number of ordinary shares held in
the EBT and their values were as follows:
Shares held for share option 2018 2017
schemes
Number of shares 1,162,051 1,162,051
GBP'000 GBP'000
Nominal value 12 12
Carrying value 1,338 1,338
At 31 December 2018, the total number of ordinary shares held in
Treasury and their values were as follows:
Shares held in Treasury 2018 2017
Number of shares 385,000 -
GBP'000 GBP'000
Nominal value 4 -
Carrying value 208 -
Reconciliation of own shares held
2018 2017
GBP'000 GBP'000
As at 1 January 1,338 1,338
Additions 208 -
As at 31 December 1,546 1,338
19 Earnings/(loss) per share
Earnings/(loss) per share is calculated by dividing the
profit/(loss) attributable to equity holders of the Group by the
weighted average number of ordinary shares in issue.
Diluted earnings/(loss) per share is calculated by adjusting the
weighted average number of ordinary shares by existing share
options and share incentive plans, assuming dilution through
conversion of all existing options and shares held in share plans.
The Employee Benefit Trust shares are ignored for the purposes of
calculating the Group's earnings per share.
From continuing operations 2018 2017
GBP'000 GBP'000
Earnings
Profit/(loss) attributable to
equity holders of the parent 2,292 (1,232)
Adjusted earnings
Profit/(loss) for the year 2,292 (1,232)
Add back: exceptional costs 1 1,963
2,293 731
2018 2017
Number of shares
Weighted average number of shares used
for basic and adjusted earnings per share 32,608,110 28,176,049
Dilutive effect of share plans* 3,211,955 2,597,754
Diluted weighted average number
of shares used to calculate
diluted and adjusted diluted
earnings per share 35,820,065 30,773,803
Basic profit/(loss) per share
(pence) 7.03p (4.37p)
Diluted profit/(loss) per share
(pence) 6.40p (4.37p)
Adjusted basic profit earnings
per share (pence) 7.03p 2.59p
Adjusted diluted profit earnings
per share (pence) 6.40p 2.38p
*The calculation of diluted earnings per share does not assume
conversion, exercise, or other issue of potential ordinary shares
that would have an antidilutive effect on earnings or loss per
share. (An antidilution is a reduction in the loss per share or an
increase in the earnings per share).
20 Notes to the cash flow statement
a. Reconciliation of profit before tax to net cash inflow from
operating activities
2018 2017
GBP'000 GBP'000
Profit/(loss) before taxation 2,809 (1,447)
(Profit)/loss from associate (70) 100
Add back exceptional items 1 1,963
Adjusted profit 2,740 616
Adjusted for:
Depreciation and amortisation 392 431
Increase/ (decrease) in non-exceptional
provisions 11 (7)
FX unrealised losses/(gains) 67 (6)
Share-based payments 75 199
FX realised losses 34 111
Operating cash flows before movements in
working capital 3,319 1,344
Decrease/(increase) in receivables 3,937 (6,126)
(Decrease)/increase in payables (786) 3,154
Income tax (expense)/credit (358) 107
Cash generated/(used) in operating activities 6,112 (1,521)
Income taxes paid (25) (354)
Finance costs (100) (123)
Finance income 22 78
Net cash outflow from operating activities
before exceptional items 6,009 (1,920)
Cash flows arising from exceptional costs 131 (581)
Net cash outflow from operating activities 6,140 (2,501)
b. Reconciliation of net cash and borrowings:
2018 2017
GBP'000 GBP'000
Cash and cash equivalents at the
end of the year 5,227 2,770
Borrowings at the start of the
year (3,132) (1,087)
Decrease/(Increase) in borrowings 2,839 (2,045)
Borrowings at the end of the year (293) (3,132)
Net cash at the end of the year 4,934 (362)
c. Reconciliation of financing
cashflows
At 1 January Financing Other non-cash 31 December
2017 cash flows changes 2017
Borrowings (1,087) (2,045) - (3,132)
Redemption liability - - (1,020) (1,020)
(1,087) (2,045) (1,020) (4,152)
At 1 January Financing Other non-cash 31 December
2018 cash flows changes 2018
Borrowings (3,132) 2,839 - (293)
Redemption liability (1,020) 142 (1,377) (2,255)
(4,152) 2,981 (1,377) (2,548)
21 Acquisition of Argyll Scott Holdings
On 2 June 2017, Hydrogen Group plc acquired the entire issued
share capital of Argyll Scott Holdings for GBP3.2m, satisfied by
the issuance of 9,034,110 ordinary shares in Hydrogen Group Plc.
Net assets acquired totalled GBP1.2m with goodwill arising of
GBP2.1m.
As part of the acquisition for Argyll Scott, Hydrogen Group plc
has entered into an agreement to buy back the remaining
shareholding in the relevant subsidiaries so that all entities are
100% owned by the Group based on a multiple of profit after tax. As
a result, a forward purchase reserve has been created which
represents the unconditional amounts due to the non-controlling
interests together with, where relevant, the best estimate of
amounts due on the satisfaction of employment conditions for
certain non-controlling interests with a redemption liability
included on the face of the Statement of Financial Position.
The conditions on the buy-back are as follows:
Entity Shareholding Repayment Consideration Dividend
buy-back dates payable
Argyll Scott International 10% 30 April P/E Ratio Subject
Ltd 2021 (75% of Group to permissible
PE with a laws and
floor of 5 sufficient
and a cap distributable
of 7.5) multiplied reserves,
by average a dividend
PAT of 2019 of no less
and 2020 audited than 50%
accounts. of the
statutory
PAT in
the relevant
year will
be paid.
Argyll Scott Technology 7.5% 30 April P/E Ratio
Ltd 2018 (75% of Group
Argyll Scott International 7.5% PE with a
(Hong Kong) Ltd 30 April floor of 5
Argyll Scott Hong Kong 7.5% 2019 and a cap
Ltd of 7.5) multiplied
Argyll Scott International 7.5% 30 April by PAT of
(Singapore) Ltd 2020 previous years
Argyll Scott Singapore audited accounts.
Ltd 30 April
Argyll Scott Recruitment 2021
(Thailand) Ltd
Argyll Scott Malaysia
Sdn Bhd
During the year, Hydrogen Group plc, bought back 7.5% of the
relevant entities noted on the above schedule. A total of GBP0.1m
was paid out for the shares in Argyll Scott International (Hong
Kong) Ltd, Argyll Scott Hong Kong Ltd, Argyll Scott International
(Singapore) Ltd, Argyll Scott Singapore Ltd, Argyll Scott
Recruitment (Thailand) Ltd and Argyll Scott Malaysia Sdn Bhd.
Redemption Liability
A financial liability is recognised in respect of the forward
purchase at fair value. Movements in the year are as follows:
2018 2017
GBP'000 GBP'000
As at 1 January 1,020 -
Liability acquired - 1,020
NCI pay-out (142)
Fair value adjustment 1,377 -
As at 31 December 2,255 1,020
Current 615 61
Non-current 1,640 951
The redemption liability relates to future consideration due in
respect of the acquisition of Argyll Scott. The fair value
adjustment reflects an upward revision of the Board's estimate of
Argyll Scott's further trading prospects, and certain changes to
the agreement in respect of the future consideration relating to
employment conditionality. Under the terms of the original purchase
agreement, certain payments were only payable in the event that
employment conditions were satisfied. During the current year, the
terms of the agreement were changed such that the employment
conditions were removed. As a result, the Directors' best estimate
of the redemption liability has increased as the full expected
liability has been recognised whereas, in the prior year, any
amounts relating to employment were being recognised over time as
service was provided.
22 Statutory report classification
The financial information for the year ended 31 December 2018
and the year ended 31 December 2017 does not constitute the
company's statutory accounts for those years.
Statutory accounts for the year ended 31 December 2017 have been
delivered to the Registrar of Companies. The statutory accounts for
the year ended 31 December 2018 will be delivered to the Registrar
of Companies following the Company's Annual General Meeting.
The auditors' reports on the accounts for 31 December 2018 and
31 December 2017 were unqualified, did not draw attention to any
matters by way of emphasis, and did not contain a statement under
498(2) or 498(3) of the Companies Act 2006
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UAVBRKWASRAR
(END) Dow Jones Newswires
April 02, 2019 02:00 ET (06:00 GMT)
Hydrogen (LSE:HYDG)
Historical Stock Chart
From Jan 2025 to Feb 2025
Hydrogen (LSE:HYDG)
Historical Stock Chart
From Feb 2024 to Feb 2025
