hydrogen group investor presentation 2014

Results for the year ended 31 December 2013March 2014

Ian Temple – Chairman Tim Smeaton – CEOJohn Glover – Finance Director

Results for the year ended 31 December 2013 - March 2014

Hydrogen profiles

Ian is one of the founders of Hydrogen Group. As Chairman, he is responsible for ensuring the Board effectively sets the Group’s strategy and direction. He also has responsibility for investor relations.

Ian TempleChairman

Tim is one of the founders of Hydrogen Group and has been CEO since 2008. Tim has led the Group through significant global expansion and operational change and heads the Executive Board of senior regional and operational directors managing the business day to day.

Tim SmeatonCEO

John joined Hydrogen Group in 2007 as Finance Director. Under John’s financial leadership, the company has the financial controls to support its ambitious growth targets. John’s key priorities are maintaining strong financial control and leading the IT strategy to generate competitive advantage for the business.

John GloverFinance Director


Summary

> 9% growth in international NFI despite difficult trading conditions in Australia

> 17% growth in Technical and Scientific practices

> Record year end sales headcount: business positioned for improving markets

> Houston and Stavanger offices opened

> Investment led to a decline in short term profitability

> Final dividend increased by 3% to 3.1p per share (2012: 3.0p)


2014: Operational infrastructure to deliver for our clients globally

Candidates placed in more than 80 countries in 2013

Technical & Scientific (T&S)

> Oil and Gas

> Life Sciences

> Power

> Mining

Professional Support Services (PSS)

> Business Transformation

> Finance

> Legal

> Technology

Eight offices globally:

Dubai, Edinburgh, Hong Kong, Houston, London, Singapore, Stavanger and Sydney

Regional growth driven out of Hubs

Stavanger

Dubai Hong Kong

Edinburgh

Houston

London

Singapore

Hubs

Spokes

Legal entities

Kuala Lumpur

Countries where Hydrogen places candidates

Netherlands

Sydney

Financials


Financial highlights

> Group Net Fee Income (NFI) increased by 2% to £31.9m (2012: £31.3m)

> Contract NFI increased by 5% to £16.9m (2012: £16.1m), a new group record

> A 25% reduction in profit before tax to £2.4m (2012: £3.2m)

> Basic earnings per share 6.79p (2012: 10.28p)

> Productivity per head at highest level since 2007

> Strong cash flow from operations of £3.4m (2012: £3.7m)

> Tight control over working capital; Days of Sales Outstanding (DSO) 23 days


Income statement

Year ended 31 December 2013 Year ended 31 December 2012 Change

Revenue £181.6m £167.0m 9%

Gross Profit (Net Fee Income) £31.9m £31.3m 2%

- Permanent NFI £15.0m £15.2m (1 %)

- Contract NFI £16.9m £16.1m 5%

Administration costs £29.4m £27.9m (5%)

Profit before taxation £2.4m £3.2m (25%)

Profit for the period £1.5m £2.3m (35%)

Basic earnings per share 6.79p 10.28p (34%)

Diluted earnings per share 6.46p 9.73p (34%)

Proposed dividend for year 4.6p 4.5p 2%

KPIs

Conversion ratio 7.9% 10.8% (2.9%)

Period end headcount 294 274 7%

> Operating profit impacted by investment in senior headcount, infrastructure, IT and offices

> Effective tax rate of 36% (2012: 30%) due to derecognition of previously recognised tax losses in Australia, disallowed expenditure and unutilised losses arising in 2013 in overseas operations

> Globally, £1.8m of tax losses available to offset against future profits

> Proposed final dividend of 3.1p (2012: 3.0p) to be paid on 30 May 2014 to shareholders on the register on 2 May 2014


Summary financial position

Year ended 31 December 2013 Year ended 31 December 2012

Non–current assets £17.1m £16.3m

Intangible assets £14.8m £14.8m

Tangible assets £1.9m £0.8m

Other assets £0.4m £0.7m

Current assets £33.3m £31.0m

Debtors £29.7m £28.3m

Cash and cash equivalents £3.6m £2.7m

TOTAL ASSETS £50.4m £47.3m

Current liabilities £23.8m £20.9m

Non-current liabilities - £0.1m

TOTAL LIABILITIES £23.8m £21.0m

NET ASSETS £26.6m £26.3m

Debtor days 23 21

> Consistent performance reflected in little movement in balance sheet headings

> Net assets increased by £0.3m (2012: £1.4m)

> Small increase in Days of Sales Outstanding (DSO)


Summary funds flow and net funds / (debt) position

Year ended 31 December 2013 Year ended 31 December 2012

Cash from operations £3.4m £3.7m

Working capital movement (£0.4m) (£2.1m)

Finance costs (£0.1m) (£0.1m)

Tax paid (£0.8m) (£1.2m)

Net cash invested (£1.9m) (£0.7m)

Equity dividends paid (£1.0m) (£1.0m)

Forex movement (£0.4m) -

DECREASE IN FUNDS (£1.2m) (£1.4m)

Net debt at beginning of period (£2.8m) (£1.4m)

Net debt at end of period (£4.0m) (£2.8m)

> 9% increase in revenue led to small increase in working capital

> Net debt increased to £4m following major investment in fit-out of new London headquarters, but 21 month rent-free period to be enjoyed in 2014/15 - £1.3m


Core KPIs: UK and international

> NFI from outside the UK grew by 9% to £13.9m (2012: £12.8m) despite difficult trading conditions in Australia

> NFI from outside the UK represented 44% of NFI (2012: 41%)

> Driven by strong performance from Asian region

> UK NFI declined by 3% to £18.0m (2012: £18.5m) as finance sector remained subdued

0

10

20

30

40

50

60

70

80

90

100

2007 NFI 2008 NFI 2009 NFI 2010 NFI 2011 NFI 2012 NFI 2013 NFI

International

UK

% NFI


Core KPIs: segment analysis

0

10

20

30

40

50

60

70

80

90

100

pre 2008 NFI 2008 NFI 2009 NFI 2010 NFI 2011 NFI 2012 NFI 2013 NFI

Technical & Scientific (T&S)

Professional Support Services (PSS)

> NFI from T&S grew 17% to £14.3m (2012: £12.2m)

> T&S represented 45% of Group NFI (2012: 39%)

> 14% increase in Oil & Gas; 28% in Life Sciences

% NFI


Core KPIs: split of sales headcount at period end

> Sales heads up 7% at period end

> Migration of staff from UK to export markets continued

> Headcount serving international markets 60% at period end

International

International focus, UK based

UK sales

2005 2006 2007 2008 2009 2010 2011 2012 2013

191209

247

197 193

237

269 274

0

50

100

150

200

250

300294


Core KPIs: productivity per head

2005 2006 2007 2008 2009 2010 2011 2012 2013

0

20

40

60

80

100

120

908586

90

70

87

99107

90

> Productivity per head relatively increased by 5% to £90k (2012: £85k)

> Highest level of productivity since 2007, marginally ahead of 2010

> Continuing to drive productivity improvements in 2014, using system to generate enhanced MI


Core KPIs: permanent and contract

> Continue to balance business mix between contract and permanent

> New opportunities for contract recruitment in large-scale projects

Contract

0

10

20

30

40

50

60

70

80

90

100

2005 2006 2007 2008 2009 2010 2011 2012 2013

Perm

% NFI

Our strategy


2016 Strategy

INFRASTRUCTUREAND

CAPABILITY

Simple levers to manage the business

Ability to transact in multiple locations

Long term relationships with candidates and clients

Exceptional Hydrogen people, acting as brand ambassadors

Three key areas of focus:

> Differentiates Hydrogen

> Global client agreements

> Candidate mobility

> Agility to respond to growth markets

> Proven incubator model

> Central research function

> Single platform

> Single brand

> Operational expertise


Joined up practices

> Practices are our candidate specialisms. They offer both candidate and client access to specialist recruiters, supported by a global network

> Joining up our practices allows us to differentiate ourselves from local competition and disparate global players

> Our key global growth practices are: Oil & Gas and Life Sciences (within T&S) and Technology (within PSS)

> Oil & Gas strengthened this year by opening of offices in Houston and Stavanger

> Houston to become multi-practice over time

Stavanger

Dubai Hong Kong

Edinburgh

Houston

London

Singapore

Hubs

Spokes

Legal entities

Kuala Lumpur

Countries where Hydrogen places candidates

Netherlands

Sydney


Market selection

> Researched marketplace using central strategy team

> Identified niché specialisms where demand outstrips supply

> Incubator created in SAP, Data Analytics and Cloud

> 25 hires into incubator

> Developed client proposition

> Sales support materials created

> Key clients identified and meetings in place

Technology (SAP, Cloud, Data Analytics)

StrategyBusiness development and marketing

> 40 new clients onboard in 6 months

> Increased margins around Technology

Client wins

> Rolling out practice strategy to Asia, Australia and US

Other regions01 02 03 04


Driving competitive advantage

Capability > Centralised operations function supporting

future growth

> Recruiting, developing and retaining exceptional staff

> New senior hires adding external viewpoint alongside talent already grown in-house talent

> Strong culture and values being lived and breathed by our people

Infrastructure > Creating competitive advantage by turning

data in the system into knowledge

> New MI uses intelligent analytics to drive behaviours

> Cloud technology enables access to clients and candidates in any location

> All practices under Hydrogen brand

> Brand recognition growing in newer markets

> Fourth year of award winning “Global professionals on the move” report gaining multinational media coverage

One global search database for candidates and clients

More than 100 people through our fastrack leadership training

In Sunday Times ‘Top 100 Best Companies to Work For’ list, for the fourth consecutive year

INFRASTRUCTUREAND

CAPABILITY


Leveraging the Hydrogen brand

Global Professionals on the Move report 2013

#GPM2013

Working abroad brings personaland professional benefi ts

01

72%

83%

77%

Benefi tted career Enhancedtheir salaries

98%

Would recommend the experience to others

Acceleratedpersonal development

CNBC

2

Global

professionals

on the move

—2013

#GPM2013

Asian return-homers,a highly prized talent

Why Asia is seekingreturn-homers

Skilled professionals

Lived / living in Asia

Understand local cultures and customs

International business experience

Speak the language

06

Half of the world’s GDP from emerging markets by 2020

50%

Income tax rate for Malaysians returning from overseas

Tax rate15%

#GPM2013

Professionals arestaying abroad longer

04

86%Stay abroad longer than anticipatedUAE Hong Kong

01 02 03

Long stay locations

52% Of those surveyed said home was “Anywhere in the world”

Respondents abroad are considering applying for permanent residency½of

all

Six years63% of people already working abroad have stayed for more than six years

Spain

Top three long stay locations


Growing a balanced business

UK

International

Professional Support Services

Technical & Scientific

PUBLISHEDRESULTS

2016GOALS

PUBLISHEDRESULTS

2016GOALS

0%

20%

40%

60%

80%

100%

Contract

Permanent

0%

20%

40%

60%

80%

100%

PUBLISHEDRESULTS

2016GOALS

0%

20%

40%

60%

80%

100%

2008

2009

2010

2011

2012

2013

2014

2015

2016

2008

2009

2010

2011

2012

2013

2014

2015

2016

2008

2009

2010

2011

2012

2013

2014

2015

2016

55%

45%

56%

44%

53%

47%

> Predictability of contract earnings and growth potential of permanent fees in niche markets

> Further growth in international placements, providing a global platform for candidate and client services

> Diverse and agile to markets with different economic cycles, balanced portfolio of client and candidate disciplines

2016 target: approximately 50% contract 2016 target: at least 65% international 2016 target: at least 50% Technical & Scientific


Current trading

> Beginning to see increased activity in areas following the investments we made in 2013

> Signs of recovery in some of the traditional recruitment sectors

> Visibility of future business remains limited

> Nonetheless, we are confident that we can capitalise on opportunities as they arise, for growing and adding more clients and candidates and for increasing long term value for our shareholders


Investment summary

> Proven financial track record

> Experienced and proven senior management team with “skin in the game”

> Joined up global practices

> Track record of converting incubators into profitable practices

> Strong momentum in Technical & Scientific

> International opportunities with global clients

> Sustainable dividend with opportunity for growth

> Highly operationally geared with significant investments already made

> We’ve demonstrated our ability to identify and grow in hot markets, remaining agile and creating a balanced business

> �Strategy�to�2016�is�clear�and�is�driving�focus�on�client�development,�innovative�resourcing�solutions�and�increased�profit

> Well invested to capitalise on economic recovery

Dividends paidpence per share

2009 2010 2011 2012 2013

0

1

2

3

4

54.64.5

4.34.14.1


Cautionary Statement

> The information contained in this presentation is not audited; it is for personal use and informational purposes only and is not intended for distribution to, or use by, any person or entity in any jurisdiction in any country where such distribution or use would be contrary to law or regulation, or which would subject any member of the Hydrogen Group to any registration requirement.

> Statutory reports and accounts will be available on the Group’s website and will be filed at Companies House.

> Certain statements included or incorporated by reference within this presentation may constitute “forward–looking statements” that are based on current expectations or beliefs, as well as assumptions about future events. There are risk factors that can cause actual results to differ materially from those expressed in or implied by such statements. Accordingly, no assurance can be given that any particular expectation will be met and reliance should not be placed on any forward-looking statement.

> Hydrogen Group disclaims any intention or obligation to revise or update any forward-looking statements that may be made in this presentation, regardless of whether those statements are affected as a result of new information, future events or otherwise. Nothing in this presentation should be construed as a profit forecast.

> This presentation does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase any shares in the Company, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment or investment decision relating thereto, nor does it constitute a recommendation regarding the shares of the Company. Past performance cannot be relied upon as a guide to future performance. Liability arising from anything in this presentation shall be governed by English Law. Nothing in this presentation shall exclude any liability under applicable laws that cannot be excluded in accordance with such laws.

Hydrogen Group plc > 30 Eastcheap, London EC3M 1HD, United Kingdom > E: [email protected] > T: +44 (0)20 7002 0000 > F: +44 (0)20 7929 1200

Registered in England & Wales No. 5563206

© Hydrogen 2014

Hydrogen is a global specialist recruitment business, placing exceptional, hard to find�candidates�in�over�75�countries.�Our�joined�up�practices�combine�international�reach with local expertise and specialist knowledge.

Whilst many recruiters are location focused, Hydrogen believes the best way to deliver service to its clients and candidates is to base our offering around these practices,�which�cover�both�Technical�&�Scientific�(Power,�Mining,�Oil�&�Gas�and�Life Sciences), and Professional Support Services (Business Transformation, Finance, Legal and Technology). By being practice led and using the latest technology we provide our clients with global visibility of the best candidates.

We invest in building strong relationships with candidates over the long-term, not just when they are actively looking to move.

hydrogen group investor presentation 2014

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