Investor presentation jan2015 final

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  • Results for the year ended 31 December 2014March 2015

  • Page 2Results for the year ended 31 December 2014 - March 2015

    Summary

    > Year of restructuring after period of investment and diversification

    > Group now focused on core areas which will deliver profit growth

    > Exceptional charge for the full year of 2million

    > Improved profitability in 2H 2014

    > Clients and candidates unaffected by business restructuring

    > Mitigation strategy in place to take account of lower oil prices

    > Board changes announced intended to ensure Group delivers its 2015 objectives

    > Final dividend proposed of 3.1p per share - full dividend for year of 4.6p per share maintained

  • Page 3Results for the year ended 31 December 2014 - March 2015

    2014: The choice for specialist talent, no matter where they are in the world

    Joined-up practices give global capacity

    Agile to client demand: hubs and spokes will be fluid

    Development of existing clients and territories to deliver sustainable profit

    Hydrogen is a global specialist recruitment business, placing hard to find candidates in around 70 countries each year. Our joined up practices combine international reach with local expertise and specialist knowledge

    Technical & Scientific (T&S)

    > Oil and Gas > Life Sciences > Power

    Stavanger

    Dubai Hong Kong

    Edinburgh

    Houston

    London

    Singapore

    Hubs

    Spokes

    Legal entities

    Kuala Lumpur

    Countries where Hydrogen places candidates

    SwitzerlandGermany

    Netherlands

    SydneyPerth

    Professional Support Services (PSS)

    > Business Transformation > Finance > Legal > Technology

  • Financials

  • Page 5Results for the year ended 31 December 2014 - March 2015

    Financial highlights

    > Net Fee Income (NFI) declined by 11.8% (7.5% like for like) to 28.2m

    > Exceptional charge for the year of 2.0m to restructure the business

    > Impact of cost reduction programs seen in 12.8% decline in operating costs 2014 v 2013

    > Conversion ratio 9.1% (2013: 7.9%)

    > DSOs increased to 31 days (2013: 23 days)

    > Period end net debt increased to 6.7m (2013: 4.0m)

    > Temporary increase in trade receivables caused by one off delay in payment from a leading client

    > Final dividend proposed to be maintained at 3.1p; payable 29 May 2015 (ex div 30 April; record date 1 May)

  • Page 6Results for the year ended 31 December 2014 - March 2015

    Income statement

    Year ended 31 December 2014 Year ended 31 December 2013 Change

    Revenue 169.4m 181.6m (6.7%)

    Gross Profit (Net Fee Income) 28.2m 31.9m (11.6%)

    - Permanent NFI 12.9m 15.0m (14.0%)

    - Contract NFI 15.3m 16.9m (9.5%)

    Operating costs 25.3m 29.2m (13.4%)

    Operating profit 2.6m 2.5m 4%

    - Forex losses (0.3m) (0.2m) (50%)

    - Finance costs (0.2m) (0.2m) -

    - Exceptional item (2.0m) - -

    Profit for the period before tax 0.4m 2.4m (83%)

    Basic (loss)/earnings per share (0.4p) 6.8p -

    Adjusted (loss)/earnings per share 8.5p 6.8p 25%

    Proposed dividend for the year 4.6p 4.6p -

    KPIs

    Conversion ratio (NFI: Op profit before exceptional) 9.1% 7.9% 1.2%

  • Page 7Results for the year ended 31 December 2014 - March 2015

    Year ended 31 December 2014

    Redundancy costs 1,186,000

    Provision for onerous contract re leasehold property 634,000

    Tangible fixed asset write-off 69,000

    Advisors costs 66,000

    Other 33,000

    TOTAL 1,988,000

    > Restructuring resulted in reported annual cost savings of 3.8m 2014 v 2013; short payback period

    > Redundancy costs predominantly no more than contract notice period

    > Surplus capacity at Eastcheap will be sub-let early in 2015

    Exceptional items

  • Page 8Results for the year ended 31 December 2014 - March 2015

    Summary financial position

    Year ended 31 December 2014 Year ended 31 December 2013

    Non-current assets 16.7m 17.1m

    Intangible assets 14.9m 14.8m

    Tangible assets 1.5m 1.9m

    Other assets 0.3m 0.4m

    Current assets 37.1m 33.3m

    Debtors 31.1m 29.7m

    Cash and cash equivalents 6.0m 3.6m

    TOTAL ASSETS 53.8m 50.4m

    Current liabilities 28.5m 23.8m

    Non-current liabilities 0.1m -

    TOTAL LIABILITIES 28.6m 23.8m

    NET ASSETS 25.2m 26.6m

    Debtor days 31 23

    Headcount at period end 285 383

    > Continued tight control of working capital

    > Delayed payment from one significant client affected debt and trade receivables at year end. Position reversed in early January 2015

    > Balance sheet remains strong

  • Page 9Results for the year ended 31 December 2014 - March 2015

    Summary funds flow and net funds/(debt) position

    Year ended 31 December 2014 Year ended 31 December 2013

    Cash from operations 2.6m 3.4m

    Working capital movement (1.9m) (0.4m)

    Finance costs (0.2m) (0.1m)

    Tax paid (0.3m) (0.8m)

    Net cash invested (0.3m) (1.9m)

    Equity dividends paid (1.0m) (1.0m)

    Forex movement (0.1m) (0.4m)

    Exceptional costs (1.5m) -

    DECREASE IN FUNDS (2.7m) (1.2m)

    Net debt at beginning of period (4.0m) (2.8m)

    Net debt at end of period (6.7m) (4.0m)

    > Underlying business continues to be cash generative

    > Delayed remittance of 5.0m led to 2.0m increase in working capital

    > Strong cash collection in early 2015 resulted in net cash position in both January and February 2015

  • Page 10Results for the year ended 31 December 2014 - March 2015

    Core KPIs: productivity per head

    2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

    0

    20

    40

    60

    80

    100

    120

    89

    828586

    90

    70

    87

    99

    107

    90

    > Investment in headcount at end 2013 impacted productivity; projects did not come through

    > Restructuring in 1H 2014 led to significant headcount reduction

    > Improvement in PPH in 2H 2014 following removal of underperformers

    > PPH for 2H 2014 89k. Average for the year 82k

  • Page 11Results for the year ended 31 December 2014 - March 2015

    Core KPIs: split of sales headcount at period end

    > Significant reduction in headcount following restructuring

    > Ratio of international to UK broadly unchanged at 63%

    > Ratio of sales to support heads 2.9 (2013: 3.3)

    International

    International focus, UK based

    UK sales

    2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

    191209

    247

    197 193

    237

    269 274

    0

    50

    100

    150

    200

    250

    300294

    210

  • Page 12Results for the year ended 31 December 2014 - March 2015

    Core KPIs: UK and international

    > NFI from outside the UK decreased by 26.2%. Main causes: Oil & Gas, Australia and strength of Sterling

    > NFI from outside the UK represented 37% of NFI (2013: 44%)

    > NFI up 5% in Singapore, over 300% growth in Houston up to the end of 2014

    > Further development of client opportunities in Malaysia - agreement reached with experienced local JV partner

    > NFI from the UK broadly unchanged at 17.9m (2013: 18.0m)

    2007 NFI 2008 NFI 2009 NFI 2010 NFI 2011 NFI 2012 NFI 2013 NFI 2014 NFI

    International

    UK

    0

    10

    20

    30

    40

    50

    60

    70

    80

    90

    100

    % NFI

  • Page 13Results for the year ended 31 December 2014 - March 2015

    Core KPIs: operating segment analysis

    pre 2008 NFI 2008 NFI 2009 NFI 2010 NFI 2011 NFI 2012 NFI 2013 NFI 2014 NFI

    Technical & Scientific (T&S)

    Professional Support Services (PSS)

    0

    10

    20

    30

    40

    50

    60

    70

    80

    90

    100

    > PSS boosted by strong performance of Legal practice

    > New strategic client wins in Business Transformation

    > Technology NFI increased by 33%

    > NFI from T&S held back by declining activity in Oil and Gas sector

    > Mitigation plans in place for Oil and Gas - will focus on contract activity and support client relationships for the long term

    > Continuing skills shortages in Life Sciences and Engineering

    > T&S represented 42% of Group NFI (2013: 45%)

    % NFI

  • Page 14Results for the year ended 31 December 2014 - March 2015

    Dividend history

    > Focus is on profit

    > Track record of dividend payments has been maintained

    > Proposed final dividend of 3.1p per share; total 4.6p for the year

    > Market valuation now less than net assets

    > Agile, balanced business

    > Strategy for 2015 is clear: aims are to increase EBITDA and cash generation and deliver a consistent level of NFI

    Dividends paidpence per share

    2009 2010 2011 2012 2013 2014

    0

    1

    2

    3

    4

    54.64.5 4.6

    4.34.14.1

  • Our strategy

  • Page 16Results for the year ended 31 December 2014 - March 2015

    2014 Strategy: growing a balanced business

    UK

    International

    Professional Support Services

    Technical & Scientific

    Contract

    Permanent

    PUBLISHEDRESULTS

    2008

    2009

    2010

    2011

    2012

    2013

    2014

    2015

    2016

    56%

    44%

    0%

    20%

    40%

    60%

    80%

    100%

    54%

    46%

    PUBLISHEDRESULTS

    PUBL