TIDMHYDG
RNS Number : 3373K
Hydrogen Group PLC
10 April 2018
10 April 2018
HYDROGEN GROUP PLC
("Hydrogen Group" or the "Company" or the "Group")
(AIM: HYDG)
Final results for the year ended 31 December 2017
Hydrogen Group, the global specialist recruitment group,
announces final results for the year ended 31 December 2017.
Key points
-- Group revenue to 31 December 2017 totalled GBP125.9m (2016: GBP116.2m)
-- Full year Net Fee Income(+) ("NFI") was 29% higher at
GBP22.8m (2016: GBP17.7m), primarily due to the acquisition of
Argyll Scott which completed on 2 June
-- Underlying* profit before tax ("PBT") of GBP0.8m (2016: GBP0.8m)
-- Exceptional items in 2017 of GBP2.0m (2016: nil) arose
predominantly from the integration of Argyll Scott into the
Group
-- Statutory loss for the year of GBP1.3m (2016: profit GBP1.5m)
-- Strong balance sheet at year end with net assets of GBP21.2m (2016: GBP19.0m)
-- Dividend of 0.8p per share proposed for approval at AGM (2016: nil)
-- Basic EPS in the year of (4.4p) (2016: 6.8p). Adjusted**
basic EPS in the year of 2.6p (2016: 6.8p)
(+) Net Fee Income - which is the equivalent of gross profit
* Adjusted for foreign exchange gains/(losses), amortisation of
acquired intangibles, share based payments and exceptional
items
** Adjusted for exceptional items
Stephen Puckett, Chairman, commented:
"2017 was a transformational year for the Group principally due
to the acquisition of Argyll Scott and its subsequent integration
into the Group. I am pleased to report that the rationale behind
the acquisition has proved sound and significant progress has been
achieved against the objectives set out at the time of the
acquisition.
"Organic growth in our UK contract book together with the
opportunities for both revenue growth and cost synergies created by
the acquisition places the Group in a position to deliver profit
growth in 2018. To that end we are delighted that trading in 2018
has started well and is significantly ahead of 2017. The Board's
confidence in the Group's future prospects has enabled it to
re-initiate payment of a dividend with the intention to adopt a
progressive dividend policy."
Enquiries:
Hydrogen Group plc 020 7090 7702
Ian Temple CEO
Stephen Puckett Chairman
Shore Capital (NOMAD and Broker) 020 7468 7904
Edward Mansfield / James Thomas
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
A year of significant change that lays a foundation for future
profitable growth
2017 was a transformational year for the Group principally due
to the acquisition of Argyll Scott Holdings Limited ("Argyll
Scott") on 2 June 2017 and its subsequent integration into the
Group.
I am pleased to report that the rationale behind the acquisition
has proved sound and significant progress has been achieved against
the objectives set out in the circular to shareholders. The
combined management team is working well together and delivering on
our plans.
One of the key objectives of the acquisition was to diversify
away from the UK and in the second half of the year over 50% of
Group Net Fee Income ('NFI') was derived from overseas markets.
Performance
The Group in 2017 increased its NFI (or Gross Profit) by 29% to
GBP22.8m (2016: GBP17.7m) including seven months trading from
Argyll Scott. Underlying NFI within the existing Hydrogen
businesses (excluding Argyll Scott) declined by GBP0.5m
predominately due to a disappointing performance from the EMEA Life
Sciences practice which saw a decline in NFI of GBP1.2m. A
restructure of the EMEA Life Sciences team was completed at the
back end of 2017 and trading in 2018 has improved as a result.
I am pleased to report that following on from our H1
performance, profit before exceptional items and taxation for H2
has increased by GBP0.5m in comparison to H1. The Group's
performance has continued to improve in H1 2018.
At the time of the acquisition of Argyll Scott, cost synergies
along with economies of scales were identified and actions have
been implemented to reduce operational overheads. The Group has
invested in the development of a new global CRM and IT platform
which resulted in the impairment of previously capitalised software
costs of GBP0.6m. These costs together with other one-off costs
associated with the acquisition and integration of Argyll Scott
have been treated as an exceptional charge in 2017 of GBP2.0m
(2016: nil) as set out in note 4. The Board expects a payback of
less than two years on these exceptional costs.
The Board considers that the underlying profit before tax of the
business is the best way to judge its trading performance as it
excludes one off non-repeatable gains and losses. Key adjustments
include exceptional costs of GBP2.0m (2016: nil) and foreign
exchange gains in 2016 of GBP1.2m which are nil in 2017. Excluding
these items, the underlying profit before tax was GBP0.8m (2016:
GBP0.8m). The statutory loss for the year was GBP1.3m (2016: profit
GBP1.5m).
Organic growth in our UK contract book together with the
opportunities for both revenue growth and cost synergies created by
the acquisition of Argyll Scott places the Group in a position to
deliver profit growth in 2018.
In 2017 the Group acquired a 45% minority interest in CBFG
Limited (which trades as Tempting Ventures), a start-up investment
business that provides funding and advisory services to early stage
recruitment businesses to help them scale and create value. Its
founders have strong track records in this field and their model
complements both Hydrogen and Argyll Scott's entrepreneurial roots.
Tempting Ventures is operating ahead of its business plan with a
small loss of GBP0.1m in 2017 and a profit anticipated in 2018.
Strategy
Hydrogen Group was built on building market leading specialist
teams with a focus on building our teams through a journey from
incubator through fast growth to market leader where we have a much
greater profit conversion. Building market leading teams is
supported by our minority interest share scheme which allows
managers and leaders of the teams to take a stake in their niche
businesses which is realised in the form of Hydrogen Group shares
over time dependent on performance. The minority interest scheme
was rolled out during the year following shareholder approval at
the AGM in June 2017. I am pleased with the way this has been
received within the business and it has already begun to impact the
attraction, retention, motivation and development of key staff. We
have also launched across the Group a revamped learning and
development program to ensure the relevant personal development of
all staff.
The Group aims to improve profit conversion by developing more
of its ultra-niche teams through to market leading businesses
leveraging off our global platform. The Group is committed to a
multi brand strategy with each business having a strong brand and
proposition. Significant progress has been made moving to one
global IT platform which should provide both significant cost
savings and improved usability. Our digital marketing capability
was significantly enhanced during the year with Hydrogen being
named as the 21(st) most socially engaged staffing consultancy in
the world by LinkedIn. Our digital marketing trials have
demonstrated the value that can be added to the business and we
will be rolling these out across the Group in 2018. There has been
increasing focus on cross fertilisation of clients across our
specialisations and brands which has improved the strength and
depth of our client relationships. The combination of our market
leading knowledge and our immersion into tight markets, unlocks the
relationships that make a difference to both clients and
candidates.
Our focus now is taking advantage of the opportunities available
to the Group through to 2020, aiming to grow NFI by at least 10%
per annum and driving up profit conversion (underlying profit
before tax divided by NFI) to over 15%.
People
I would like to welcome our colleagues from Argyll Scott and
Tempting Ventures to the Hydrogen Group. I would also like to thank
all our staff for their hard work in 2017 as we completed the
integration process which gives the Group a much stronger base to
move forward. I am pleased with the progress the combined
management team has made and our strength and depth of talent has
been significantly enhanced during the year.
Dividend
The Board is confident in the prospects of the Group and
believes that the Group should grow profitably and generate cash
during 2018. Consequently, the Board proposes to resume payment of
a dividend and will pay an initial annual dividend of 0.8p for 2017
(2016: nil). If approved by the shareholders at the Annual General
Meeting on 25 May 2018, the dividend (approx. GBP0.3m) will be paid
on 6 July 2018 to shareholders on the register at the close of
business on 1 June 2018. The Board plans to return to paying a
regular and progressive dividend going forward and will review
future dividends in light of the performance of the business.
The Board
As previously announced, Colin Adams resigned from the Board as
Group Chief Financial Officer with effect from 4 April 2017 and I
would like to thank Colin for his support and guidance over his
tenure with the Group.
On completion of the Argyll Scott acquisition, John Hunter
joined the Board as Managing Director and has taken responsibility
for the Group's Finance and IT functions in addition to his other
operational responsibilities. As a trained chartered accountant,
John comes with a strong financial background and over 17 years'
recruitment industry experience.
Outlook
Trading in 2018 has started well and is significantly ahead of
2017. The actions taken in 2017 are improving profitability which
increases our confidence that we will achieve profit growth this
year.
The Group's plan for the year ahead is to continue focusing on
growing and developing its niche businesses into market leading
businesses by investing in high performing individuals and our
global, technology and marketing platform.
Stephen Puckett
Chairman
9 April 2018
BUSINESS REVIEW
We are pleased to report that the structural and operational
changes resulting from the acquisition of Argyll Scott have
significantly enhanced the prospects of the Group.
The key financial highlights in 2017 were:
-- revenue increased to GBP125.9m (2016: GBP116.2m);
-- NFI increased by 29% from GBP17.7m to GBP22.8m, primarily due
to the acquisition of Argyll Scott;
-- underlying profit* in the year remained unchanged from 2016 at GBP0.8m; and
-- exceptional items of GBP2.0m arose predominantly from the
integration of Argyll Scott into the Group.
* Adjusted for foreign exchange gains, amortisation of acquired
brand and database, share based payments and exceptional items.
Although globally Group NFI growth was strong, performance was
adversely impacted by a decline in our EMEA Life Sciences practice
(NFI dropped by 31% from GBP3.9m to GBP2.7m) due to a number of
staff issues. Additionally, our Singapore operations were impacted
by the integration of the local operations of Argyll Scott and
Hydrogen affecting the overall performance in APAC. Across the
Group six office moves were completed during the year as a result
of the integration. The Group has benefited from greater
geographical and client diversification and these benefits have
accelerated in 2018.
During the year, there have been strong performances in a number
of our business practices including Technology Transformation which
saw growth in global NFI of 31% to GBP3.1m as we took advantage of
the growth in new technology rollouts by clients. Business
Transformation also continued to perform strongly with NFI of
GBP5.6m driven by a number of significant new client wins.
EMEA (including USA)
NFI increased by GBP1.3m during the year principally as a result
of the inclusion of seven months' trade of the UK and Middle East
based operations of Argyll Scott, and of increased trading in our
US business. Trading in many of our core markets remains buoyant;
however, the disappointing performance from Life Sciences weakened
the Groups overall EMEA performance.
Operating profit before exceptional items remained flat at
GBP1.4m. The Group continues to roll out new disciplines with a
goal to drive increased productivity and as a result improved
conversion rates.
APAC
The most notable change during the year was the growth in the
APAC region where the bulk of Argyll Scott's operations are based.
NFI grew to GBP7.1m (2016: GBP3.3m). Operating profit before
exceptional items increased to GBP0.4m from GBP0.3m in 2016 and the
Board believes that the business is well positioned to grow
profitably in 2018.
As Argyll Scott is predominantly a permanent business in APAC, a
key focus in the region continues to be the development and
expansion of the predominantly Hydrogen branded contract operations
into Argyll Scott's client base and office infrastructure.
Permanent and Contract
We place candidates in permanent roles and provide contract
solutions. Permanent placements play to our experience in
satisfying the demand for rare niche skills. Contract solutions
provides more predictable revenue stream.
The proportion of the Group's NFI from permanent placements grew
from 35% to 51% (GBP6.1m to GBP11.5m), mainly as a result of Argyll
Scott's predominately permanent business base. Contract NFI has
declined slightly by 4% to GBP11.2m mainly due to the challenges in
the EMEA Life Sciences practice where contract NFI dropped by 57%
to GBP1.3m. Globally we commenced 2017 with 977 live contractors
and grew that during the year to 1,157 contractors including 88
acquired with Argyll Scott. This growth in the contractor book
during the year has created a strong platform to further grow
contractor NFI during 2018.
Clients and Candidates
We have built strong and effective relationships with our
clients based around our longstanding track record of delivery and
powering their businesses forward. We would like to thank all our
clients for their support over the last year and look forward to
powering your businesses in the future.
We have a very strong candidate database and proven methodology
for building candidate relationships in our core practices. We work
with highly talented candidates and contractors and would like to
thank them for trusting us to empower their careers.
People
Hydrogen Group is very much a people business and we have
continued to invest in our staff to increase our productivity and
productive headcount. I would like to welcome all our colleagues
from Argyll Scott to the Group who have greatly enhanced the
breadth and depth of our internal talent pool. We have a very clear
promotion pathway which we have supported by rolling out a new
learning and development program for everybody in the Group. We
have a performance management system and transparent reward at
every level of the business to support an objective and high
performance working culture which was recognised by being named as
'One to watch' by the Sunday Times Best Companies to work for
survey.
The minority interest scheme has been rolled out to the first
qualifiers and launched across the Group. The scheme supported by
our track record of developing our staff has greatly enhanced our
ability to attract and motivate talented people.
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.
Technology
One of the key opportunities identified at the time of the
acquisition of Argyll Scott was the scope for improvement in the
combined Group's technology platform whilst reducing the cost per
user.
During the year, after an extensive review, it was decided to
outsource our IT infrastructure to a specialist provider which puts
the business on one platform with 24/7/365 global support. This
project is being rolled out in Q2 2018 and the cost savings should
be realised from H2 2018.
We have also commenced the roll out a new client relationship
management system (CRM) across the Group. The new CRM, based on
salesforce.com was rolled out in Argyll Scott APAC during 2017 and
is being rolled out across the rest of the Group during 2018. This
platform provides the opportunity to further enhance and automate
our processes.
These projects resulted in exceptional charges of GBP0.8m during
the year, as set out in note 4 to the accounts.
Marketing
The Hydrogen Group continues to focus on building market leading
ultra-niche businesses to drive its business forward. This is the
original model that built Hydrogen and with the power of digital
marketing presents a huge opportunity to the business. We signed an
agreement with LinkedIn which gives all the consultants in the
Group access to the premium licence and as we roll out our new CRM
will enable cross system awareness. Hydrogen Group has strong
brands that are highly recognisable within their niche markets, and
we have the clients, candidates, staff and infrastructure to take
advantage of these opportunities.
FINANCIAL REVIEW
Revenue
Group revenue for 2017 totalled GBP125.1m (2016: GBP116.2m).
This growth was primarily due to the inclusion of seven months'
revenue from Argyll Scott.
Key performance measures
We measure our progress against our 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 and exceptional items) divided
by total NFI. This is key for the business to assess the level of
underlying profitability.
In 2017, profit conversion in the Group reduced to 4% (2016: 5%)
and remains behind the Group's target of 15%. Following on from the
acquisition of Argyll Scott and the benefits identified in the
Chairman's Report, the Board believes that this target is
achievable.
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.
In 2017, productivity per head decreased to GBP79,000 (2016:
GBP83,000). This was predominantly due to a lower productivity per
head at Argyll Scott which has a greater exposure to higher growth
developing markets that tend to have lower unit fees (and
associated costs) than more mature markets.
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 GBP3.5m to
GBP11.0m and represents 48% of the NFI for the year (2016: 43%)
principally driven by the acquisition of Argyll Scott, which
predominately operates outside the UK.
Net fee income (NFI - equivalent to gross profit)
Overall, there was an increase in Group NFI of 29% to GBP22.8m
(2016: GBP17.7m). The major driver for this increase in NFI was the
acquisition of Argyll Scott.
Permanent NFI grew in the year by 71% to GBP11.5m with the
majority of Argyll Scott's NFI coming from the permanent APAC
market. Contract NFI declined to GBP11.2m (2016: GBP11.6m)
principally as a result of the challenges in the EMEA Life Sciences
practice.
The devaluation of sterling increased the value of reported NFI
from overseas by 5.5% (GBP0.6m) during the year.
Operating segments
Our current management structure and reporting focuses on
performance of our two core markets: EMEA (including 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
businesses that focus on a niche market defined by location,
sector, role type and type of service. Each business is defined by
its size as being one of an incubator, fast growth or market
leading business.
NFI from the EMEA operating segment totalled GBP15.7m (2016:
GBP14.4m) and contributed 69% (2015: 81%) of total NFI. NFI from
the APAC operating segment totalled GBP7.1m (2016: GBP3.3m) and
contributed 31% of total NFI (2016: 19%).
Exceptional costs
Exceptional administration costs totalled GBP2.0m (2016: Nil)
and principally relate to the integration of property and IT
platforms following the acquisition of Argyll Scott. More details
can be found on note 4.
Headcount
Total headcount at 31 December 2017 was 46% higher than the
prior year, at 313 (2016: 215). Average total headcount for the
year was 287, a 34% increase on the previous year (2016: 214).
Finance cost/income
Group finance cost for the year was GBP0.1m compared to net
finance income in 2016 of GBP1.0m. In 2016 there was a GBP1.0m gain
based on fluctuations in foreign exchange rates and trading
movements within the loan balances to the Group's foreign
subsidiaries. During 2017, the Group restructured its loan
facilities within the Group and reclassified the majority of the
balances as non-current to limit the risk of large fluctuations in
the reported profit and loss from foreign exchange and to allow the
better representation of the Group's underlying performance. As a
result, any gains or losses on these non-current loans due to
foreign exchange are included within other comprehensive income.
Finance costs in the year have remained stable at GBP0.1m (2016:
GBP0.1m).
Profit and loss before taxation
Reported loss before taxation (LBT) for the year was GBP1.4m
(2016: GBP1.7m profit).
The Board's preferred measure of trading performance of the
business removing one off adjustments is flat with underlying
profit before tax (PBT) of GBP0.8m (2016: GBP0.8m).
Underlying PBT is calculated as follows:
2017 2016
GBP'000 GBP'000
--------------------------------- ---------- ---------
(LBT)/PBT (1,447) 1,667
Exceptional items 1,963 -
Amortisation of acquired 52 -
intangibles
Share based payments 199 331
Foreign exchange losses/(gains) 44 (1,220)
----------------------------------- ---------- ---------
811 778
--------------------------------- ---------- ---------
Taxation
There was a GBP0.1m tax credit for the year (2016: charge of
GBP0.1m), giving an effective credit tax rate of 7% (2016: charge
of 8%).
At 31 December 2017 the Group had unutilised tax losses of
GBP7.8m (2016: GBP3.7m), which grew primarily from acquired tax
losses within Argyll Scott, available for offset against future
profits. The Group has potential deferred tax assets of GBP1.6m
which have not been recognised.
Dividend
The Board is proposing resuming dividends with an annual
dividend of 0.8p for 2017 (2016: nil). This will be put before
shareholders for approval at the Annual General Meeting on 25 May
2018.
Loss per share
The basic loss per share was 4.4p (2016: profit of 6.8p).
Diluted loss per share was 4.4p (2016: profit of 6.5p).
An adjusted basic earnings per share has been calculated,
excluding exceptional items of 2.6p (2016: 6.8p). Adjusted diluted
earnings per share of 2.4p (2016: 6.5p).
Balance Sheet
Net assets at 31 December 2017 increased by GBP1.2m to GBP20.2m
(2016: GBP19.0m).
Goodwill increased in the year to GBP12.2m (2016: GBP10.1m)
following the acquisition of Argyll Scott. There were no
impairments to the carrying value of goodwill in 2017 (2016:
nil).
Current trade and other receivables increased by 33% to GBP23.8m
(2016: GBP17.9m). The largest single component is trade receivables
which at year end had risen by GBP4.3m to GBP13.3m (2016: GBP9.7m)
principally due to the acquisition of Argyll Scott which accounted
for GBP2.5m of the balance. Additionally, several large clients
paid significant balances in January rather than in December and as
a consequence day's sales outstanding at 31 December 2017 increased
to 40 days (2016: 30 days).
The increase of GBP4.2m in trade and other payables is mainly a
result of two factors. Increased sales taxes payable across the
Group due to a growth in turnover, and the recognition of a
redemption liability in relation to the expected future earn out
payments associated to the purchase of certain minority interest
holdings in some subsidiaries of Argyll Scott, the arrangements for
which were in place at the time of the acquisition. Accruals
principally comprise amounts owed to contract staff which grew in
line with the growth in contractors during the year.
Short term bank deposits remain positive at GBP2.8m (2016:
GBP3.1m).
Reserves
As a result of the Group's trading performance in the year and
the impact of the acquisition of Argyll Scott, total equity has
increased by GBP1.2m to GBP20.2m (2016: GBP19.0m).
Treasury management and currency risk
Approximately 75% of the Group's revenue in 2017 (2016: 77%) 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 entered into a GBP0.5m Euro forward contract in the
year to manage the foreign exchange risk. This was settled before
the year end and no foreign currency contracts were open as at 31
December 2017.
Cash flow and cash position
Net debt at 31 December 2017 was GBP0.4m (2016 - net cash of
GBP2.0m). The balance was adversely impacted by a timing difference
at the year end when a number of key clients delayed payment of
GBP1.2m until the first week of January. Additionally, the Group
made cash investments and loans totalling GBP0.4m to CBFG, and the
cash cost of exceptional items associated with the acquisition and
integration of Argyll Scott amounted to GBP0.7m.
Gross borrowings increased during the year by GBP2.0m to
GBP3.1m.
The Group has an Invoice Discounting Facility of GBP18.0m with
HSBC with a commitment to May 2019. After this date the facility
shall continue until terminated by either party giving to the other
not less than three months' written notice.
The Group also has an additional Invoice Discounting Facility of
GBP1.0m with Barclays with a commitment to January 2019.
The average facility available during the year stood at GBP5.9m.
Average utilisation in the year was noted at 56% (GBP3.3m). The
average available funds (including cash) for the Group grew by
GBP1.1m to GBP5.8m.
Foreign Exchange Risk
The depreciation of Sterling during the year had a positive
impact on the translation of the earnings of the Group's overseas
subsidiaries. The extent of the depreciation of Sterling is
detailed below:
Major currencies Depreciation in 2017 NFI in
Sterling over the local currency
2017 financial as a proportion
year (average rates) of Group NFI
Singapore Dollar 5% 12%
Hong Kong Dollar 4% 9%
Euro 7% 7%
United States
of America Dollar 5% 6%
Malaysian Ringgit 1% 3%
Australian Dollar 8% 3%
Thai Bhat 9% 3%
United Arab Emirates
Dirham 5% 3%
Swiss Franc 5% 2%
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 2019 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.
Ian Temple
Chief Executive Officer
9 April 2018
HYDROGEN GROUP PLC
Consolidated statement of comprehensive income
For the year ended 31 December 2017
2017 2016
Note GBP'000 GBP'000
----------------------------- ------ ---------- ----------
Revenue 1 125,853 116,246
Cost of sales (103,060) (98,508)
----------------------------- ------ ---------- ----------
Gross profit 1 22,793 17,738
---------- ----------
Other administrative
expenses (22,605) (17,541)
Exceptional administrative
expenses 4 (1,963) -
---------- ----------
Administrative expenses (24,568) (17,541)
Other income 1 539 553
Operating profit before
exceptional items 1 727 750
Exceptional items (1,963) -
---------- ----------
Operating (loss)/profit (1,236) 750
Share of loss in associate (100) -
Finance costs 2 (123) (63)
Finance income 3 12 980
(Loss)/profit before
taxation (1,447) 1,667
Income tax (credit)/expense 6 107 (135)
----------------------------- ------ ---------- ----------
(Loss)/profit for the
year (1,340) 1,532
----------------------------- ------ ---------- ----------
Other comprehensive
gains and losses:
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on
translating foreign operations
141 (539)
Exchange differences on
intercompany loans (391) 347
Other comprehensive losses for
the year, net of tax (250) (192)
------------------------------------- ---------- ----------
Total comprehensive (loss)/gains
for the year (1,590) 1,340
------------------------------------- ---------- ----------
Profit attributable
to:
Equity holders of the
parent (1,232) 1,532
Non-controlling interest (108) -
----------------------------- ------ ---------- ----------
Total comprehensive
income attributable
to:
Equity holders of the
parent (1,482) 1,340
Non-controlling interest (108) -
----------------------------- ------ ---------- ----------
(Loss)/profit per share:
Basic (loss)/profit
per share (pence) 19 (4.4p) 6.8p
Diluted (loss)/profit
per share (pence) 19 (4.4p) 6.5p
The above results relate
to continuing operations.
Consolidated statement of financial position
As at 31 December 2017
2017 2016
Note GBP'000 GBP'000
--------------------------- ------- --------- ---------
Non-current assets
Goodwill 7 12,214 10,141
Investment in associate 8 50 -
Other intangible
assets 9 789 792
Property, plant
and equipment 10 882 858
Deferred tax assets 11 181 104
Other financial
assets 12 312 99
--------------------------- ------- --------- ---------
14,428 11,994
--------------------------- ------- --------- ---------
Current assets
Trade and other
receivables 12 23,765 17,852
Current tax receivable 290 232
Cash and cash equivalents 13 2,770 3,106
--------------------------- ------- --------- ---------
26,825 21,190
--------------------------- ------- --------- ---------
Total assets 41,253 33,184
--------------------------- ------- --------- ---------
Current liabilities
Trade and other
payables 14 (15,647) (12,493)
Redemption liability (69) -
Borrowings 15 (3,132) (1,087)
Provisions 16 (602) -
--------------------------- ------- --------- ---------
(19,450) (13,580)
--------------------------- ------- --------- ---------
Non-current liabilities
Redemption liability (951) -
Deferred tax liabilities 11 (136) (280)
Provisions 16 (503) (309)
--------------------------- ------- --------- ---------
(1,590) (589)
--------------------------- ------- --------- ---------
Total liabilities (21,040) (14,169)
--------------------------- ------- --------- ---------
Net assets 20,213 19,015
--------------------------- ------- --------- ---------
Equity
Share capital 17 334 239
Share premium 3,520 3,520
Merger reserve 19,240 16,100
Own shares held (1,338) (1,338)
Share option reserve 1,735 2,544
Translation reserve (599) (788)
Forward purchase (1,020) -
reserve
(Deficit)/ Retained
earnings (1,871) (1,262)
--------------------------- ------- --------- ---------
20,001 19,015
Non-controlling 212 -
interest
Total equity 20,213 19,015
--------------------------- ------- --------- ---------
The financial statements were approved by the Board of Directors
and authorised for issue on 9 April 2018 and were signed on its
behalf by:
Ian Temple
Chief Executive
HYDROGEN GROUP PLC
Consolidated statement of changes in equity
As at 31 December 2017
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
2016 239 3,520 16,100 (1,338) 2,213 (596) - (2,794) 17,344 - 17,344
Share option
charge - - - - 331 - - - 331 - 331
Transactions
with owners - - - - 331 - - - 331 - 331
Profit for
the year - - - - - - - 1,532 1,532 - 1,532
Other comprehensive
income:
Exchange differences
on intercompany
loans - - - - - 347 - - 347 - 347
Foreign
currency
translation
loss - - - - - (539) - - (539) - (539)
---------------- --------- -------- --------- -------- -------- ------------- ---------- ----------- ---------- --------- ---------
Total
comprehensive
profit for
the year - - - - - (192) - 1,532 1,340 - 1,340
At 31
December
2016 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
Share option
charge - - - - 199 - - - 199 - 199
---------------- --------- -------- --------- -------- -------- ------------- ---------- ----------- ---------- --------- ---------
Transactions
with owners 95 - 3,140 - 253 - - - 3,488 320 3,808
---------------- --------- -------- --------- -------- -------- ------------- ---------- ----------- ---------- --------- ---------
Reduction
to share
option reserve - - - - (1,062) - - 1,062 - - -
Translation
transfer - - - - - 439 - (439) - - -
Redemption
liability - - - - - - (1,020) - (1,020) - (1,020)
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
loss - - - - - 141 - - 141 - 141
---------------- --------- -------- --------- -------- -------- ------------- ---------- ----------- ---------- --------- ---------
Total
comprehensive
loss for
the year - - - - (1,062) 189 (1,020) (609) (2,502) (108) (2,610)
At 31
December
2017 334 3,520 19,240 (1,338) 1,735 (599) (1,020) (1,871) 20,001 212 20,213
---------------- --------- -------- --------- -------- -------- ------------- ---------- ----------- ---------- --------- ---------
HYDROGEN GROUP PLC
Consolidated statement of cash flows
For the year ended 31 December 2017
2017 2016
Note GBP'000 GBP'000
---------------------------- ------- ------------- ---------
Net cash used in operating
activities 20a (2,501) (1,244)
Investing activities
Investment in associate 8 (150) -
Purchase of property,
plant and equipment 10 (46) (285)
Purchase of software
assets 9 (255) (216)
Net cash used in investing
activities (451) (501)
---------------------------- ------- --------- ---------
Financing activities
Increase in borrowings 15 2,045 633
Equity dividends paid 5 - -
Net cash generated
from financing activities 2,045 633
---------------------------- ------- --------- ---------
Net decrease in cash
and cash equivalents (907) (1,112)
Cash and cash equivalents
at beginning of year 13 3,106 3,034
Exchange gain on cash
and cash equivalents 571 1,184
---------------------------- ------- --------- ---------
Cash and cash equivalents
at end of year 13 2,770 3,106
---------------------------- ------- --------- ---------
HYDROGEN GROUP PLC
Notes to the Financial Statements
For the year ended 31 December 2017
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 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, as
set out below, have been consistently applied to all the periods
presented.
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 2019. 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 two operating segments based on the geography of the
business unit:
- EMEA (covering Europe, Middle East, Africa and the 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. Both operating segments
have similar economic characteristics and share a majority of the
aggregation criteria set out in IFRS 8:12.
2017 2016
EMEA APAC Group Total EMEA APAC Group Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- --------- --------- --------- --------- ---------
Revenue 107,953 17,900 - 125,853 104,428 11,818 - 116,246
Gross profit
(Net fee
income) 15,727 7,066 - 22,793 14,403 3,335 - 17,738
Depreciation
and
Amortisation (351) (41) (52) (444) (310) (8) - (318)
Other income 539 - - 539 553 - - 553
Operating
profit/
(loss)
before
exceptional
items 1,428 371 (1,072) 727 1,547 323 (1,120) 750
Exceptional
items (1,408) (230) (325) (1,963) - - - -
Operating
profit 20 141 (1,397) (1,236) 1,547 323 (1,120) 750
--------- --------- --------- --------- --------- --------- --------- ---------
Share of loss (100) -
in associate
Finance
costs (123) (63)
Finance
income 12 980
(Loss)/profit before
tax (1,447) 1,667
========= =========
Total Assets 17,704 6,377 17,172 41,253 17,038 1,262 14,884 33,184
Total Liabilities (16,102) (1,919) (3,019) (21,040) (11,705) (125) (2,339) (14,169)
Group costs represent central management costs that are not
allocated to operating segments.
The majority of exceptional items included 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 (2016: 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 22% (2016: 31%)
of the entity's revenues, with revenue of GBP27.5m (2016:
GBP36.3m), and approximately 9% (2016: 16%) 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
---------- -------------------- -------------
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- ----------------- ---------
UK 94,984 90,007 11,795 10,190
Rest of
world 30,869 26,239 10,998 7,548
--------- --------- ----------------- ---------
125,853 116,246 22,793 17,738
--------- --------- --------- ----------------- ---------
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
----------- -------------------- --------------------
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
----------- --------- --------- --------- ---------
Permanent 11,626 6,122 11,549 6,105
Contract 114,227 110,124 11,244 11,633
--------- --------- --------- ---------
125,853 116,246 22,793 17,738
----------- --------- --------- --------- ---------
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
2017 2016
GBP'000 GBP'000
----------------------------------- --------- ---------
Interest on invoice discounting 123 63
------------------------------------- --------- ---------
123 63
----------------------------------- --------- ---------
3 Finance income
2017 2016
GBP'000 GBP'000
----------------- --------- ---------
Bank interest 78 -
Other interest* (66) 980
------------------- --------- ---------
12 980
----------------- --------- ---------
*Foreign exchange (losses)/gains recognised on the translation
of intercompany financing balances
4 Exceptional administrative items
Exceptional items are costs that are separately disclosed due to
their material and non-recurring nature. They arose as a result of
the strategic decision to acquire the entire share capital of
Argyll Scott and align the combined businesses going forward.
2017 2016
GBP'000 GBP'000
------------------------- --------- ---------
Restructuring costs 201 -
Impairment of software 589 -
IT integration 236 -
Onerous leases 692 -
Professional fees 245 -
Total 1,963 -
------------------------- --------- ---------
5 Dividends
No interim dividend during the year was paid in respect of the
year ended 31 December 2017 (2016: nil p per share).
A final dividend of GBP0.8p has been proposed but not yet
approved for the year ended 31 December 2017 (2016: nil p per
share).
6 Tax
(a) Analysis of tax charge
for the year: 2017 2016
GBP'000 GBP'000
The charge based on the
profit for the year comprises:
--------------------------------- --------- ---------
Corporation tax:
UK corporation tax on
profits for the year 39 139
Adjustment to tax charge
in respect of previous
periods 81 (217)
----------------------------------- --------- ---------
Foreign tax 120 (78)
Current tax 80 10
Total current tax 200 (68)
----------------------------------- --------- ---------
Deferred tax:
Origination and reversal
of temporary differences (72) 16
Adjustment to tax charge
in respect of previous
periods (235) 190
Effect of tax rate change - (3)
----------------------------------- --------- ---------
Total deferred tax (307) 203
----------------------------------- --------- ---------
Tax (credit)/charge on
profit for the year (107) 135
----------------------------------- --------- ---------
UK corporation tax is calculated at 19.25%
(2016: 20%) 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:
2017 2016
GBP'000 GBP'000
--------------------------------- --------- ---------
(Loss)/profit before tax (1,447) 1,667
Tax at the UK corporation tax
rate of 19.25% (2016: 20%) (279) 333
Effects of:
Fixed asset differences 30 9
Expenses not deductible
for tax purposes 110 219
Effect of difference in
tax rates 48 (11)
Utilisation of tax losses
and other deductions (91) (379)
Tax losses carried forward
not recognised for deferred
tax 157 4
R&D additional tax relief (17) -
Adjustment to tax charge
in respect of prior periods (155) 30
Share-based payments (20) (66)
Other short term timing
differences 110 (4)
Tax (credit)/charge for
the year (107) 135
----------------------------------- --------- ---------
There has been no deferred tax charge relating to share options
charged directly to equity (2016: nil).
In total, at the reporting date, the Group had increased
unutilised tax losses due to the acquisition of Argyll Scott of
GBP7.8m (2016: GBP3.7m) available for offset against future
profits, for which no deferred tax assets had been recognised.
7 Goodwill
2017 2016
GBP'000 GBP'000
------------------------------------ ---------- ----------
Cost
At 1 January 19,228 19,228
Additions 2,073 -
------------------------------------ ---------- ----------
At 31 December 21,301 19,228
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 12,214 10,141
------------------------------------ ---------- ----------
Allocation of goodwill to
cash generating units (CGU):
EMEA (including USA) Professional
Support Services 10,141 10,141
Argyll Scott Group 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 2017 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 further impairment in the
carrying value of goodwill in 2017.
The key assumptions for revenue growth rates and discount rates
used in the impairment review are stated below:
Growth rates
Discount
Net fee income growth rate rate
on actuals 2018 2019-2022 %
% %
EMEA (including USA) Professional
Support Services 2.5% 2.5% 5.0%
Argyll Scott Group 2.5% 2.5% 4.4%
----------------------------------- --------- -------------- ----------
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 2018 through to 2022. The revenue growth rates for
2018-2022 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:
GBP'000
Investment acquired 150
Share of associate's loss (100)
--------------------------- --------
Total 50
--------------------------- --------
Principle Investment Principal Country of % Equity
associate held by activity incorporation interest
-------------- ------------ ----------- ---------------- ----------
Hydrogen Advisory
CBFG Limited Group Plc services UK 45.0
CBFG Limited consolidated results
as at 31 December 2017
Net Assets: GBP0.1m
Revenue: GBP2.6m
Loss before GBP0.4m
tax
9 Other intangible assets
Computer
software Database Brand Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ---------- ----------- ---------- ----------
Cost
At 1 January 2016 2,101 - - 2,101
Additions 216 - - 216
At 31 December 2016 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
------------------------ ---------- ----------- ---------- ----------
Amortisation and
impairment
At 1 January 2016 (1,323) - - (1,323)
Charge for the year (202) - - (202)
At 31 December 2016 (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)
------------------------ ---------- ----------- ---------- ----------
Net book value at
31 December 2017 216 458 115 789
------------------------ ---------- ----------- ---------- ----------
Net book value at
31 December 2016 792 - - 792
------------------------ ---------- ----------- ---------- ----------
Amortisation of intangible assets is charged to administration
expenses in the Consolidated Statement of Comprehensive Income.
Database and Brand intangibles were acquired as part of the
acquisition of Argyll Scott.
Impairment of GBP0.6m noted 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 2016 768 1,702 2,470
Additions 69 216 285
Exchange differences 22 - 22
At 31 December 2016 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
-------------------------- ------------ -------------- ----------
Accumulated depreciation
and impairment
At 1 January 2016 (706) (1,077) (1,783)
Charge for year (66) (50) (116)
Exchange differences (20) - (20)
At 31 December 2016 (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)
-------------------------- ------------ -------------- ----------
Net book value at 31
December 2017 124 758 882
-------------------------- ------------ -------------- ----------
Net book value at 31
December 2016 67 791 858
-------------------------- ------------ -------------- ----------
11 Deferred tax
Short Share
term Accelerated based
timing depreciation payments Total
Deferred tax asset differences GBP'000 GBP'000 GBP'000
GBP'000
--------------------- ------------- -------------- ---------- ---------
At 1 January 2016 19 - 119 138
Charged to profit
or loss (10) - (24) (34)
At 31 December 2016 9 - 95 104
Credited/(Charged)
to profit or loss 143 29 (95) 77
At 31 December 2017 152 29 - 181
--------------------- ------------- -------------- ---------- ---------
Accelerated
capital Intangible
allowances Assets Total
Deferred tax (liability) GBP'000 GBP'000 GBP'000
--------------------------- -------------------------- ------------- ------------------------------
At 1 January 2017 (280) - (280)
Additions acquired - (125) (125)
Credited to profit
or loss 259 10 269
At 31 December 2017 (21) (115) (136)
---------------------------- -------------------------- ------------- ------------------------------
No reversal of deferred tax is expected within the next twelve
months (2016: nil).
In total, at the reporting date, the Group had increased
unutilised tax losses due to the acquisition of Argyll Scott of
GBP7.8m (2016: GBP3.7m) available for offset against future
profits, for which no deferred tax assets had been recognised.
12 Trade and other receivables
Trade and other receivables 2017 2016
are as follows: GBP'000 GBP'000
--------------------------------- --------- ---------
Trade receivables 14,003 9,687
Allowance for doubtful debts (135) (142)
Accrued income 8,329 7,532
Prepayments 792 561
Other receivables:
- due within 12 months 776 214
- due after more than 12 months 312 99
Total 24,077 17,951
---------------------------------- --------- ---------
Current 23,765 17,852
Non- current 312 99
---------------------------------- --------- ---------
As at 31 December 2017, the average credit period taken by
clients was 40 days (2016: 30 days) from the date of invoicing, and
the receivables are predominantly non-interest bearing. An
allowance of GBP135,000 (2016: GBP142,000) 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.
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 FTSE
100 and other major companies and major professional
partnerships.
Included in the Group's trade receivable balances are
receivables with a carrying amount of GBP5.4m (2016: GBP2.1m) 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 2017 2016
not impaired trade receivables: GBP'000 GBP'000
(Number of days overdue)
---------------------------------------- --------- ---------
0-30 days 2,579 210
30-60 days 1,544 498
60-90 days 408 453
90+ days 899 952
----------------------------------------- --------- ---------
31 December 5,430 2,113
----------------------------------------- --------- ---------
Movement in allowance 2017 2016
for doubtful debts: GBP'000 GBP'000
----------------------------------- --- --------- -----------
1 January (142) (319)
Impairment losses recognised
on receivables (139) (100)
Previous impairment
losses reversed 146 277
31 December (135) (142)
----------------------------------- --- --------- -----------
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 the
allowance for doubtful debts (2016: nil).
2017 2016
Ageing of impaired trade GBP'000 GBP'000
receivables:
---------------------------- --------- ---------
90+ days 135 142
31 December 135 142
------------------------------ --------- ---------
As at 31 December trade receivables to a value of GBP6.8m were
subject to an invoice financing facility (2016: GBP4.6m).
13 Cash and cash equivalents
Cash and cash equivalents 2017 2016
are as follows: GBP'000 GBP'000
--------------------------- --------- ---------
Short-term bank deposits 2,770 3,106
2,770 3,106
--------------------------- --------- ---------
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: 2017 2016
GBP'000 GBP'000
-------------------------- ---------- ----------
Trade payables 2,490 1,505
Other taxes and social
security costs 1,315 701
Other payables 1,496 947
Accruals 10,346 9,340
15,647 12,493
-------------------------- ---------- ----------
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 38 days (2016: 35 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
2017 2016
GBP'000 GBP'000
-------------------------------- --------- ---------
Invoice discounting (repayable
on demand) 3,132 1,087
3,132 1,087
-------------------------------- --------- ---------
The Group has two invoice discounting facilities in operation.
The HSBC facility has a maximum drawdown of GBP18.0m with a
year-end balance outstanding of GBP2.5m. Interest on the facility
is charged at 1.7% over UK Base Rate on actual amounts drawn down,
and the margin is fixed to May 2019.
The Barclays facility is for GBP1.0m with a year-end balance
outstanding of GBP0.6m. Interest on the facility is charged at 2.3%
over UK Base Rate on actual amounts drawn down, and the margin is
fixed to January 2019.
16 Provisions
Leasehold Onerous System Onerous
dilapidations Leaseholds Integration contracts Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ --------------- ------------ ------------- ----------- ----------
At 1 January
2016 68 - - - 68
New provision 241 - - - 241
At 31 December
2016 309 - - - 309
New provision 138 692 217 62 1,109
Utilised - (313) - - (313)
------------------ --------------- ------------ ------------- ----------- ----------
At 31 December
2017 447 379 217 62 1,105
------------------ --------------- ------------ ------------- ----------- ----------
Current - 323 217 62 602
Non-current 447 56 - - 503
------------------ --------------- ------------ ------------- ----------- ----------
The dilapidations provisions relate to the Group's current
leased offices in London and Singapore. This provision will unwind
over the course of the leases agreements. Leaseholds in the Group
range from 2-10 years.
The onerous lease contracts relate to surplus accommodation
within the existing Argyll Scott offices in London and Singapore.
Following discussions with advisors, the Group has taken an
exceptional charge in London for 9 months' costs, starting from 1
June 2017, relating to this space to cover the marketing void and
rent free incentive that is assumed would be required to sublet
this space. No rent shortfall/surplus was assumed for the duration
of any sub-lease eventually granted. The Group has also taken an
exceptional charge in Singapore for 17 months' costs, starting from
1 November 2017 on the same basis as above.
System integration costs relate to the process of incorporating
both Hydrogen and Argyll Scott onto the same IT and CRM platform
enabling not only business synergies but providing business
continuity and creating cost savings for the Group.
Onerous contracts relate to pre-agreed deals that are no longer
viable for the Group following the merger with Argyll Scott.
17 Share capital
The share capital at 31 December 2017 was as follows:
2017 2016
------------------------ ----------------------- -----------------------
Ordinary shares of Number Number
1p each of shares GBP'000 of shares GBP'000
------------------------ ----------- ---------- ----------- ----------
Issued and fully paid:
At 1 January 23,903,713 239 23,891,713 239
Issuance of new shares 9,522,110 95 12,000 -
31 December 33,425,823 334 23,903,713 239
----------- ---------- ----------- ----------
During 2017, 450,000 options were exercised (2016: 12,000), all
of which were satisfied by the issuance of new shares.
At 31 December 2017, 1,162,051 (2016: 1,162,051) shares were
held in the EBT.
At 31 December 2017, 211,414 (2016: 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 2017, the total number of ordinary shares held in
the EBT and their values were as follows:
Shares held for share 2017 2016
option schemes
----------------------- ---------- ----------
Number of shares 1,162,051 1,162,051
GBP'000 GBP'000
Nominal value 12 12
Carrying value 1,338 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 2017 2016
GBP'000 GBP'000
---------------------------- ---------- ---------
Earnings
(Loss)/profit attributable
to equity holders of
the parent (1,232) 1,532
------------------------------ ---------- ---------
Adjusted earnings
---------------------------- ---------- ---------
(Loss)/profit for the
year (1,232) 1,532
Add back: exceptional 1,963 -
costs
---------------------------- ---------- ---------
731 1,532
---------------------------- ---------- ---------
2017 2016
Number of shares
Weighted average number of shares
used for basic and adjusted earnings
per share 28,176,049 22,529,360
Dilutive effect of share
plans* 2,597,754 1,212,308
Diluted weighted average
number of shares used
to calculate diluted
and adjusted diluted
earnings per share 30,773,803 23,741,668
----------------------------------------- ----------- -----------
Basic (loss)/profit per
share (pence) (4.37p) 6.80p
Diluted (loss)/profit
per share (pence) (4.37p) 6.45p
Adjusted basic profit
earnings per share (pence) 2.59p 6.80p
Adjusted diluted profit
earnings per share (pence) 2.38p 6.45p
*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
2017 2016
GBP'000 GBP'000
--------------------------------------- --------- ---------
(Loss)/profit before taxation (1,447) 1,667
Add back loss from associate 100 -
Add back exceptional items 1,963 -
--------------------------------------- --------- ---------
Adjusted profit 616 1,667
Adjusted for:
Depreciation and amortisation 431 318
Increase/ (decrease) in
non-exceptional provisions (7) 241
FX unrealised gains (6) (315)
Share-based payments 199 331
Net finance income 111 (917)
----------------------------------------- --------- ---------
Operating cash flows before movements
in working capital 1,344 1,325
Increase in receivables (6,126) (3,502)
Increase in payables 3,154 1,235
Income tax credit/(expense) 107 (135)
----------------------------------------- --------- ---------
Cash used in operating activities (1,521) (1,077)
Income taxes paid (354) (104)
Finance costs (123) (63)
Finance income 78 -
--------------------------------------- --------- ---------
Net cash outflow from operating
activities before exceptional
items (1,920) (1,244)
Cash flows arising from exceptional (581) -
costs
----------------------------------------- --------- ---------
Net cash outflow from operating
activities (2,501) (1,244)
----------------------------------------- --------- ---------
b. Reconciliation of borrowings:
2017 2016
GBP'000 GBP'000
------------------------- --------- ---------
Borrowings at the start
of the year (1,087) (454)
Increase in borrowings (2,045) (633)
Borrowings at the end
of the year (3,132) (1,087)
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.
Argyll Scott recruits for contract, interim and permanent middle
management positions across key business functions including
accounting & finance, business transformation, marketing, sales
and technology across both APAC and EMEA. It was founded in 2009
and has since grown to operate from offices in London, Dubai, Hong
Kong, Malaysia, Singapore and Thailand. The acquisition has, in
particular, expanded the Group's presence significantly in Asia,
where many client cross fertilisation opportunities have been
identified and are now being exploited. Furthermore, the Group has
already realised significant cost synergies as a result of the
acquisition which are expected to continue into 2018. It is
therefore in the Director's opinion, that the consideration paid
over is worth in excess of the net assets of the Argyll Scott Group
and hence has given rise to the goodwill set out below.
Net assets acquired were GBP'000
as follows:
-------------------------------- ------------------------------------------------------------
Property, plant and equipment 85
Trade and other receivables 3,283
Cash and cash equivalents 476
Borrowings (608)
Trade and other payables (2,259)
-------------------------------- ------------------------------------------------------------
977
Intangible assets acquired 625
Deferred tax liability
acquired (125)
Non-controlling interest (320)
-------------------------------- ------------------------------------------------------------
Total assets acquired 1,157
Goodwill 2,073
Total consideration (satisfied
by shares) 3,230
During the period, Argyll Scott contributed GBP10.7m worth of
revenue and a statutory loss before tax of GBP0.5m. On a pro forma
basis, total Group revenue for the year would equate to GBP133.8m
with a statutory profit before tax of GBP0.4m.
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 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 to permissible
Group PE laws
with a and sufficient
floor of distributable
5 and a reserves,
cap of a dividend
7.5) multiplied of no
by average less
PAT of than
2019 and 50% of
2020 audited the statutory
accounts. PAT in
the relevant
year
will
be paid.
Argyll Scott Technology 7.5% 30 April 2018 P/E Ratio (75% of Group PE with a floor
Ltd of 5 and a cap of 7.5) multiplied by
Argyll Scott International 7.5% 30 April 2019 PAT of previous
(Hong Kong) Ltd years audited accounts.
Argyll Scott Hong 7.5% 30 April 2020
Kong Ltd
Argyll Scott International 7.5% 30 April 2021
(Singapore) Ltd
Argyll Scott Singapore
Ltd
Argyll Scott Recruitment
(Thailand) Ltd
Argyll Scott Malaysia
Sdn Bhd
22 Statutory report classification
The financial information for the year ended 31 December 2017
and the year ended 31 December 2016 does not constitute the
company's statutory accounts for those years.
Statutory accounts for the year ended 31 December 2016 have been
delivered to the Registrar of Companies. The statutory accounts for
the year ended 31 December 2017 will be delivered to the Registrar
of Companies following the Company's Annual General Meeting.
The auditors' reports on the accounts for 31 December 2017 and
31 December 2016 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 company news service from the London Stock Exchange
END
FR UKVNRWRASRAR
(END) Dow Jones Newswires
April 10, 2018 02:00 ET (06:00 GMT)
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