UK recruitment firm Hydrogen Group (HYDG: AIM) reported revenue yesterday for the full year ending 31 December 2017 of £125.9 million, an increase of 8.3% compared to the same period last year.

Hydrogen Group’s growth in NFI was primarily due to last year’s acquisition of London-based recruitment firm Argyll Scott Limited. NFI reported this year included seven months trading from Argyll Scott.

Excluding Argyll Scott, NFI declined by £0.5 million predominately due to the performance from the EMEA Life Sciences practice which saw a decline in NFI of £1.2 million. According to the group, 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.

The group added that exceptional items in 2017 of £2.0 million occurred predominantly from the integration of Argyll Scott into the Group. The Board stated that it expects a payback of less than two years on these exceptional costs. Underlying profit before tax for the year stood at £0.8 million (2016: £0.8 million).

"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,” Stephen Puckett, Chairman, said.

In 2017 the group also 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. The group stated that Tempting Ventures’ founders have strong track records in this field and “their model complements both Hydrogen and Argyll Scott's entrepreneurial roots.” The group added that Tempting Ventures is operating ahead of its business plan with a loss of £0.1 million in 2017 and a profit anticipated in 2018.

Revenue by region was broken down as follows.

In the EMEA region, NFI increased by £1.3 million during the year principally as a result of the inclusion of Argyll Scott, and of increased trading in the group’s US business. Trading in many of the core markets remains buoyant; however, the performance from Life Sciences weakened the group’s overall EMEA performance.

The APAC region is where the bulk of Argyll Scott's operations are based. NFI grew to £7.1 million (2016: £3.3 million). The Board stated that it 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,” the group stated.     

Revenue by recruitment classification was broken down as follows.

The proportion of the group's NFI from permanent placements grew from 35% to 51% mainly as a result of Argyll Scott's predominately permanent business base. Meanwhile, Contract NFI declined slightly by 4% mainly due to the challenges in the EMEA Life Sciences practice where contract NFI dropped by 57%.

For 2018, the group expects further growth in contractor NFI due to an increasing number of contractors within the group.

“Trading in 2018 has started well and is significantly ahead of 2017,” Puckett said. “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,” Puckett said.

As of last trade Hydrogen Group traded at £36.50, up 12.31% on the day. Based on its current share price the company has a market value of £12.21 million.