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Hydrogen group plc investor presentation April 2020
1. Investor Presentation
Results year ended 31 December 2019
Ian Temple, Chief Executive Officer
John Hunter, Chief Financial Officer / Chief Operating Officer
2. 2019 Results Covid-19
Portfolio management
Financial and operating highlights
Mergers and acquisitions
Appendices
Current trading & outlook
2
3. • To date disruption primarily manifested itself in candidate start dates being delayed within APAC
• Situation has now escalated, impacting our EMEA and US businesses.
• It is not yet clear how long the pandemic will last or its financial impact.
• Current evidence suggests:
• Client demand will be the biggest issue rather than our operational capability to transact work
• Permanent recruitment activity will be more impacted than contract recruitment
• Some sectors and markets will be affected more than others (e.g: consumer markets)
• Group’s balance sheet is strong.
• We have significant, largely unutilised, banking facilities in place.
• Government support should help mitigate the downturn.
• Stress testing shows the Group can withstand both a material and prolonged decline in revenue.
• Dividend suspended. Board will review whether it is appropriate to pay a “catch up” dividend in due course.
3
COVID-19 update
4. • NFI 4% lower at £29.4m (2018: £30.5m) driven by:
• Impact of political uncertainty and IR35 in the UK
• Slowdown in some Asian markets, exacerbated by political protests in Hong Kong
• Proforma NFI growth/(decline):
• EMEA (9%)
• APAC (12%) (13% CC)
• USA 82% (81% CC)
• As a result underlying PBT decreased by £0.3m to £2.9m (2018: £3.2m*)
• Profit conversion ratio fell to 9.9% (2018: 10.5%*);
• Net cash generated from operations of £3.4m (2018: £7.8m*)
• Net cash £4.5m (2018: £4.9m)
• Underlying EPS at 7.5p (2018: 8.9p*)
* Restatement following the application of IFRS 16. 4
Financial and operational highlights
5. 5
55%
12%
33%
EMEA USA APAC
Permanent/Contract Regionals Sector
NFI analysis
Technology
24%
Business
Transformation
19%
Legal
14%
Life Sciences
13%
Sales &
Marketing
9%
Finance
9%
Other
7%
Energy
5%
60%
40%
Permanent Contract
7. 7
Trading summary
2019 2018 (as restated)
Revenue £121.3m £135.7m
Gross profit (Net fee income) £29.4m £30.5m
- Permanent NFI £17.6m £17.8m
- Contract NFI £11.8m £12.7m
Operating costs (£27.3m) (£27.9m)
Other income £0.5m £0.5m
Operating profit before exceptional items £2.6m £3.1m
Exceptional items (£0.9m) -
Operating profit after exceptional items £1.7m £3.1m
Underlying profit before tax* £2.9m £3.2m
* Underlying PBT excludes amounts in respect of NCI profit or loss, foreign exchange gains/(losses), amortisation of acquired intangibles, share based
payments and exceptional items.
8. 8
Balance sheet
2019 2018 (as restated)
Non-current assets £16.6m £16.9m
- Intangible assets £12.9m £13.0m
- Tangible assets £0.9m £0.9m
- Right of use assets £1.9m £2.3m
- Other assets £0.9m £0.7m
Current assets £21.8m £24.9m
- Debtors £17.2m £19.7m
- Cash and cash equivalents £4.6m £5.2m
Total assets £38.4m £41.8m
- Current liabilities £12.1m £15.3m
- Non-current liabilities £2.8m £4.5m
Total liabilities £14.9m £20.1m
Net assets £23.5m £21.7m
Net assets have increased in the year by £1.8m
Net cash at year end of £4.5m
Current ratio of 1.8 (2018: 1.6)
9. 9
Cashflow statement
2019 2018 (as restated)
Cash generated from operating activities £3.4m £7.8m
Cash used in investing activities (£0.3m) (£0.4m)
Cash used in financing activities (£2.9m) (£5.0m)
Exchange (loss)/gain on cash (£0.8m) -
Cash at year end £4.6m £5.2m
Borrowings at year end (£0.1m) (£0.3m)
Net cash £4.5m £4.9m
Average available funds £10.5m £8.4m
Equity dividends paid £0.5m £0.4m
10. 10
M&A strategy
STAGE 1 - OBJECTIVE FIT
• > £5m NFI
• > £1m EBITDA
• Contract led
• Complementary service lines
• Developed markets/ economies
STAGE 2 – HOW WE ADD VALUE
• Market & proposition
• People
• Platform
• Finance
• Funding
11. • Challenging and highly uncertain trading conditions – Covid-19
• IR35 legislation delayed but impact still remains
• Focus on
• Cash preservation
• Maintaining critical mass in key markets
11
Outlook and current trading
13. Purpose, mission & vision – Hydrogen Group
Powering Customer Intimacy
Enabling people to achieve their goals.
A world where more people
love their work and achieve
their goals.
Group Purpose
Using technology, expertise and
insight to help our businesses deliver
deep and effortless customer intimacy
in disrupted markets.
Group Mission Group Vision
14. 14
Operating model
By being closer to niche
disrupted markets we will take
advantage of job creation
Adopting a growth mindset, we
develop our people so they can
over-deliver and reap the rewards
Powering us to become
leaders in machine-enabled
customer intimacy
Deeper understanding of data
informs decisions and ensures
we achieve our goals
Proposition
Performance Platform
People
Core current
principles
15. 15
Team Journey
Incubator
Up to £100k NFI over
two quarters
Fast Growth
£100k minimum NFI
per quarter
Market Leader
£200k minimum NFI
per quarter
What’s next?
What’s next?
Focus:
- Proving there is a
market that we can
get to Market
Leader
- Grow NFI
Financial:
- 10% - 20% EBIT
conversion
Focus:
- Grow profit
- Leverage position
Financial:
- Breakeven
Focus:
- Growing NFI & what
needs to happen to
get you to Market
Leader
Financial:
- 30% to 50% EBIT
conversion
16. Building Market Leading businesses
Case study – Technology Texas
£
Q4 17 Q1 18 Q2 18 Q3 18
INCUBATOR FAST GROWTH MARKET LEADER
NFI £81k
PPH £9k
EBIT 0%
NFI £120k
PPH £10k
EBIT 11%
NFI £362k
PPH £18k
EBIT 41%