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UK – Revenue and profits down at Hydrogen, as CEO and Finance Director depart

04 March 2015

Recruitment firm Hydrogen Group (HYDG: AIM) reported revenue for the year ending 31 December 2014 of £169.4 million, a decrease of 6.7% compared with £181.6 million during 2013. 

  FY 2014 FY 2013 Change
Revenue £169.4 million £181.6 million -6.7%
Gross Profit £28.5 million £31.9 million -11.8%
Operating Profit £0.6 million £2.5 million -77.7%

Profits suffered as well with operating profit tumbling by 77.7%.

Revenue and gross profit from both permanent and contract recruitment decreased during the year when compared with 2013. 

  Permanent Contract
(Millions) 2014 2013 Change 2014 2013 Change
Revenue £12.9 £15.0 -14.1% £156.5 £166.6 -6.0%
Gross Profit £12.9 £15.0 -14.1% £15.3 £16.9 -9.7%

Stephen Puckett, Chairman of Hydrogen, commented: "Hydrogen has been through a difficult period of restructuring and cost reductions and is now firmly focused on its core opportunities. The benefit of the cost reductions is apparent in the improved underlying profitability in the second half of 2014. Hydrogen's plan for 2015 is to concentrate on sustainable, profitable business.”

"Despite general economic uncertainties and sector-specific disruption resulting from the fall in oil prices, the Board sees opportunities for development and will continue to invest in areas where growth can be delivered at acceptable levels of profitability.”

"The Board is announcing today that Tim Smeaton, CEO and a co-founder of Hydrogen, and John Glover, Finance Director, have decided to step down from their respective Board positions with immediate effect. The changes to the Board which result from these resignations are intended to ensure that the Board delivers on its key objectives of improving profitability, increasing cash generation and growing the Group's revenue," Mr Puckett added.

It was further announced that Ian Temple, another co-founder of the business who had stepped back from executive responsibilities in 2012 to become Chairman, has now been appointed as full-time Chief Executive.

According to the company’s financial statement, following a four-year period of diversification and investment, the Board took action in 2014 to streamline the business and reduce operating costs. The process of restructuring started with senior management changes, a detailed revenue of sales and operational performance in all offices, followed by the prioritisation of further investment, scaling back, or the closure of underperforming businesses.  

The company announced savings of £3.8 million in administration costs in 2014, compared with 2013, offsetting the exceptional costs of £2.0 million associated with the non-recurring costs of the restructure. 

Hydrogen Group operates two primary business segments: Professional Support Services and Technical & Scientific.

The Professional Support Services operating segment contains the Business Transformation, Finance, Legal and Technology practices. The Technical & Scientific operating segment includes the Oil & Gas and Life Sciences practices; as well as the newer areas of business development, including contract placements for power and engineering projects.

Revenue and gross profit by business segment during 2014 was as follows:

  Professional Support Services Technical & Scientific
(Millions) 2014 2013 Change 2014 2013 Change
Revenue £116.6 £127.5 -8.6% £52.8 £54.1 -2.3%
Gross Profit £16.5 £17.6 -6.4% £11.7 £14.3 -18.3%

Revenue and gross profit by geography in 2014 was as follows:

  UK Rest of World
(Millions) 2014 2013 Change 2014 2013 Change
Revenue £136.4 £142.6 -4.4% £33.0 £39.0 -15.2%
Gross Profit £17.9 £18.0 -0.6% £10.3 £13.9 -26.2%

Looking forward, Hydrogen’s plan for 2015 is to remain focused on sustainable, profitable business. Other than continuing to develop the company’s business in Malaysia, no new office openings are planned and no investment in new practices is expected this year.

Mr Puckett continued: “The well-publicised fall in the market price of oil has already had an adverse impact on hiring activity in the Oil & Gas sector. It is not yet clear whether skill sets developed in the Oil & Gas sector will be transferable to other technical projects and the full impact in 2015 is therefore unknown.”

“However, the Board sees opportunities for development and will continue to invest in areas where growth can be delivered at acceptable levels of profitability.” 

Not surprisingly, in trading today, the company’s share price fell by 5.6% to £0.68, a decrease of 36% compared with last year. Based on its current share price, the company has a market value of £17.1 million.