Final Results

17 March 2014

HYDROGEN GROUP PLC

("Hydrogen" or the "Group")

Final results for the year ended 31 December 2013

Hydrogen, the global specialist recruitment company, is pleased to announce final results for the year ended 31 December 2013.

Financial highlights

· Revenue up 9% to record £181.6m (2012: £167.0m)

· Net Fee Income (gross profit or "NFI") up 2% to £31.9m (2012: £31.3m)

· Profit before tax of £2.4m (2012: £3.2m) primarily reflecting increased investment

· Strong operating cashflow of £3.4m (2012: £3.7m)

· Increase of 3% in proposed final dividend to 3.1p (2012 3.0p)

(ex-dividend date 30 April 2014)

Operational highlights

· First year of 2016 strategy: good progress made on strategic initiatives

· 9% increase in International NFI: international business now represents 44% of total (2012: 41%)

· 17% increase in Technical and Scientific business, generating 45% of total NFI (2012: 39%)

· Contract NFI up by 5% to £16.9m, a new record (2012: £16.1m)

· Candidates placed in more than 80 countries (2012: more than 70)

· Productivity per head of £90k at highest level since 2007 (2007: £99k)

· Investment for growth:

o New offices opened in USA and Norway

o Headcount increased to 383 at year end (2012: 368)

o Relocation into modern, single-site London HQ

o Enhanced IT and CRM systems

o Completion of rebranding exercise: all practices now unified under single Hydrogen brand

Tim Smeaton, CEO, said:

"2013 was a milestone year for Hydrogen. We embarked on a new strategy to deliver the next stage of growth to 2016 and we made significant investments in people, practices, new locations, infrastructure and systems. We recognised that the immediate impact of this increased investment could be a reduction in short term profits. We remain confident that, with our current focus on growth and our high operational gearing, we are well positioned to scale up the business."

Enquiries:

Hydrogen Group plc 020 7002 0000

Ian Temple, Chairman

Tim Smeaton, CEO

John Glover, Finance Director

Shore Capital (NOMAD and Broker) 020 7408 4090

Bidhi Bhoma

Edward Mansfield

Hudson Sandler 020 7796 4133

Alex Brennan

Charlie Barker

Notes to Editors:

Hydrogen (AIM: HYDG) is a global recruitment business with a turnover in excess of £180m, operating in niche sectors where there is high demand. We build relationships by finding specialist candidates our clients have difficulty sourcing, placing mid to senior level professionals in permanent and contract roles in more than 75 countries across the world.

Our joined-up practice teams combine international reach with local expertise and specialist market knowledge to match clients with the best talent available worldwide.

www.hydrogengroup.com

CHAIRMAN'S STATEMENT

This year has been hallmarked by investment. In 2013 we invested in new practices and locations, in people, in a modern London HQ, in expansion of our Cloud-based systems and in leadership and management skills brought into the Group. All of these are designed to equip Hydrogen for further growth in the coming years.

Following the completion in 2012 of the previous four-year plan to transform Hydrogen into a more diversified, global recruiter, we embarked in 2013 on a new strategic plan to increase gross profit (Net Fee Income, or "NFI") and profitability in the period up to 2016. The pillars of the 2016 strategy are joining up our global practices, developing the Technical and Scientific operating segment of the business which includes newer practice areas and balancing contract and permanent recruitment. We set clear targets: by 2016 at least 50% of NFI should come from Technical and Scientific practices; 65% of NFI should be generated outside the UK and NFI from permanent and contract placements should be balanced. The targets we have set have been clearly communicated internally and are being put into practice at all levels, with encouraging progress in this first year:

Headcount rose to 383 as at 31 December 2013 (2012: 368). Our investment in people was not just a matter of adding more consultants. We also took a conscious decision to attract more experienced recruiters and senior managers who understand their local markets well and can also extend global client relationships. We made targeted investments in particular sectors, such as Technology, increasing the number of consultants to address a market in which the demand for new skills and highly able candidates outstrips supply.

2013 Performance

In 2013 we invested for growth. The decrease in profit for the year (from £3.2m in 2012 to £2.4m in 2013) reflects the investments made to support our longer term goals. Administrative costs rose by 5% to £29.4m (2012: £27.9m) with a notable increase in sales headcount in the second half. Given the inevitable time lag for new members of the team to generate fees, the increase in costs exceeded the growth in NFI, causing a reduction in the conversion to profit (from 10.8% in 2012 to 7.9% in 2013). Nonetheless, revenue rose to £181.6m, a record level. NFI from contract recruitment also reached a new record, at £16.9m (2012: £16.1m).

One of the main pillars of the 2016 strategy is a growing international presence, to reduce the reliance on UK revenues. UK NFI declined by 3% which limited the growth in overall NFI to 2%. NFI from outside the UK rose by 9% to £13.9m (2012: £12.8m), with new offices opened in Norway and the US.

As has been widely reported, the recruitment market in Australia continues to be tough and our Australian office experienced a 19% decline in NFI in 2013. With no clear signs of recovery in Australia's principal economic sectors, we took the decision at the end of 2013 to redesignate Sydney as a "spoke" office and move operational support to Singapore and London for the medium term. In market sectors such as Technology and Oil and Gas, consultants will work as one team covering the wider APAC region, opening new spoke offices to support client projects won.

We believe that being responsive to change is an important differentiator. Our diversification strategy continues to provide some protection against fluctuations in more cyclical market sectors and across different geographic regions.

The Technical and Scientific operating segment grew by 17% to £14.3m (2012: £12.2m), representing 45% of Group NFI (2012: 39%). Within this total were some excellent results, including a 14% increase in NFI from the Oil and Gas practice and a 28% increase in Life Sciences NFI. The new offices in Stavanger and Houston were opened to take advantage of Oil and Gas opportunities, in particular.

Whilst this market is expected to become even more competitive, the number and scale of projects around the world offers great potential for candidates to develop their careers in new locations and our share of the total market is currently very small.

Within the Professional Support Services operating segment, the Technology practice added 40 new clients and widened its scope to source specialists in whole business enterprise software, Cloud-based systems and data analytics as well as large-scale IT testing and development projects. Our repositioning of consultants into these areas reflects the high levels of client demand for candidates who are able not just to implement technological solutions to management problems but also to interpret the results and harness social media to increase revenues.

Sentiment in the Finance and Legal markets, the other key recruitment areas for the Professional Support Services operating segment, began to tick upwards towards the end of the year, in line with more positive views about the economy. There are some indications that recruitment in the principal financial centres, including London, may have reached the end of a downward cycle and Hydrogen is well positioned for an upturn.

High Productivity

Agility in our business means being able to adapt to changing client demands at short notice and having an operations team which can support people, financial and legal changes and increases in sales activity, whenever and wherever they arise. Productivity per head this year was at its highest since 2007 and has demonstrated the ability of people across the business to see opportunities and respond to change and challenge. On behalf of the Board, I would like to thank everyone who has worked with us during this year for their hard work and commitment to the Group.

Dividend

One year into the strategy, the Group is focused on growth and increasing value for shareholders by 2016. In line with the Board's policy of paying a progressive and sustainable dividend over the economic cycle, the Board has recommended that the final dividend be increased by 0.1p (3%) to 3.1p per share (2012: 3.0p), giving a total dividend for the year of 4.6p (2012: 4.5p). This extends our dividend record to seven years, with increases in each of the last three years. Subject to approval at the AGM, the dividend will be paid on 30 May 2014 to shareholders on the register on 2 May 2014 (ex-dividend date 30 April 2014).

Corporate Governance and the Board

The Board has continued to operate to high standards of Corporate Governance appropriate for Hydrogen's size and market capitalisation.

The Board itself has had a stable year, with no changes in Board membership. Martyn Phillips, who joined the Board in 2006, will step down as Senior Independent Director following the AGM in May, but will remain on the Board to continue to represent the client viewpoint and provide continuity in the Group's next phase of development. I am pleased that he will be succeeded as Senior Independent Director by Stephen Puckett, who has relevant experience of listed company governance, having been Group Finance Director of Page Group plc, a FTSE-250 listed recruitment company. He is also a Non-Executive Director of ITE Group plc.

Current Trading and Outlook

We are beginning to see increased activity in areas, following the investments we made in 2013; but, while there are signs of recovery in some of the traditional recruitment sectors, visibility of future business remains limited and it is too early to call how the different practices and regions will develop this year. Nonetheless, we are confident that we are well positioned to capitalise on opportunities as they arise, to grow and add more clients and candidates and to increase long term value for our shareholders.

Ian Temple

Chairman

17 March 2014

CEO REVIEW

Hydrogen is a global specialist recruitment business, placing exceptional, hard to find candidates in over 75 countries, on both a contract and permanent basis.

Our business model

Hydrogen's success depends on the ability of our consultants to source experienced, high quality, hard to find professionals, no matter where they are in the world, to satisfy the demands of our clients. We concentrate on markets where there is a shortage of supply of suitably qualified candidates and a clear demand for our specialist services.

Our model is to operate in targeted sectors and geographies and to build longstanding relationships with both clients and candidates. We place candidates at a mid to senior level of management, typically earning between £70,000 and £150,000 per year.

Hydrogen operates as a single entity, with a single brand and with one common client relationship management platform, sharing information about markets, clients and candidates. We believe this distinguishes us from other recruitment companies and gives us a real competitive advantage.

Our strategy to 2016

Our vision is to become the number one choice for specialist talent, no matter where they are in the world, matching our clients with the best talent available. We plan over the course of the next few years to capitalise on the work done to date in establishing our reputation for identifying hot markets, developing the skills of the people who work for us and responding rapidly to clients' needs. In growing the business and diversifying, both geographically and by market sector, we aim to increase our NFI and generate more consistent growth in profitability by 2016.

The business is divided into two main operating segments: Professional Support Services and Technical and Scientific. Within those main operating segments, we have eight different global practices which reflect our candidate specialisms and the areas of highest demand for resource for our clients.

The 2016 strategy develops the theme of diversification, with clear targets for growth of the international business and the Technical and Scientific operating segment. The aim is to have 65% of NFI generated outside the UK, at least 50% of NFI coming from newer practices in the Technical and Scientific operating segment and a broadly equal balance in NFI from permanent placements and from contract business, by 2016.

A foundation for growth

Our policy has been to run the business on a mid to long term return basis and we recognised that the immediate impact of increased investment could be a reduction in short term profits. Profit before tax for the year of £2.4m was 25% lower than the previous year (2012: £3.2m), reflecting the significant investments made in people, offices, systems and in the development of newer practices across a wider geographic area, all intended to increase the prospects of higher returns in the future. The focus in 2014 will be on securing returns on these investments by improving performance and growing NFI.

By the end of 2013, Hydrogen had eight offices across four continents, following the opening of new offices in Stavanger, Norway and Houston, USA, in April.

The Oil and Gas team was formed in London in 2008 and developed relationships with leading oil and gas companies in Norway. Following incubation in London, the Stavanger office was opened as a new "spoke" in 2013 to take advantage of the demand in Norway for specialists in well engineering, QHSE (quality, health, safety and environment) and sub-sea systems, in particular. Support continues to be provided by the London "Hub" and there are strong links with colleagues in Asia and the US.

The Houston office is also initially focused on Oil and Gas. The US represents a huge potential market and a multi-practice hub is expected to be developed in the US over time.

The launch of the new offices in Stavanger and Houston was enabled by experienced Hydrogen consultants and managers being willing to relocate to develop their own careers and by having a single infrastructure, brand and IT system which meant they could be productive straight away. The Oil and Gas practice has seen growth of 14% in NFI this year, facilitated by the ability of both sales and operational teams to work together, regardless of location.

Working in changing international markets

We believe that agility is an important differentiator in the recruitment sector. We are able to move quickly to adapt to changes across our global markets, as and when they arise. As well as concentrating on specific markets and territories, market selection for us is also about identifying efficiencies and moving consultants with strong recruitment skills into different practices where there are high levels of demand. Building an efficient operations team means that we can support an increase in sales activity whenever and wherever it occurs.

In 2013, the Singapore office reacted quickly to client demand and won a major project for a large number of new roles in Malaysia, working with colleagues in the Finance practice and the operations team in London to develop a resourcing solution for the client and set up the infrastructure needed to deliver the service.

Strong performance in Singapore during 2013 was offset by continuing difficult trading in Australia and Hong Kong. With NFI from Australia declining by 19%, changes were made within the business towards the end of the year with the aim of rebuilding from a smaller base in 2014. Sydney will operate as a "spoke" office, with Singapore forming the second "hub" for Hydrogen alongside London. Joining up practices will continue, with more sales activity being co-ordinated across the wider APAC region.

Despite the disappointing market in Australia, we continued to make progress in increasing the proportion of NFI generated from outside the UK. International NFI increased by 9% to £13.9m (2012: £12.8m), representing 44% of the Group total (2012: 41%). This year, we placed candidates in more than 80 countries across six continents.

Operating segments

The two operating segments, Professional Support Services and Technical and Scientific, address different market sectors. Balancing the two segments in terms of their share of NFI is part of our strategy to mitigate against the risk of overexposure to one particular section of the economy.

Within the Professional Support Services operating segment, the Finance and Legal practices responded to some improvement in economic sentiment in 2013. Our office in Singapore had a very successful year in recruiting experienced nationals who wished to return to working closer to home. The Legal practice in Singapore recorded an increase of 87% in NFI in 2013. There were also beginning to be some signs of recovery in confidence in the London market at the end of the year.

The Technology practice, which also sits within the Professional Support Services segment, saw investment in sales heads to enable it to cover a wider range of specialisms. A noticeable increase in demand for experts in Cloud technology and whole business enterprise management software applications, such as SAP, prompted expansion of this practice. Technology had a good year in terms of high levels of activity, demonstrating the increasing global demand for high quality candidates in this area.

The Technical and Scientific operating segment includes newer areas of business development, including contract placements for Power and Mining projects and the Oil and Gas and Life Sciences teams, which both made considerable progress in 2013. This operating segment as a whole saw growth of 17% in 2013 and now represents 45% of total NFI.

The Life Sciences practice has established a strong reputation for identifying and supplying key professionals in various branches of the pharmaceutical industry worldwide - notably in biometrics, clinical research and operations, medical, quality and production and regulatory affairs disciplines. The team has been able to work closely with full-service global research organisations to provide solutions to recruitment challenges, as well as filling permanent and contract roles in smaller pharmaceutical and medical device companies.

The demand for specific scientific skills continues to outstrip supply, reflected in a 28% increase in Life Sciences NFI year on year. Permanent and Contract

There are niche opportunities in both operating segments, and we are continuing to build our contract business across practices and regions in response to the demand for technical expertise to deliver major projects. Contract NFI reached a record high in 2013 of £16.9m, up 5% from 2012. 53% of NFI was generated from contract placements in 2013 and 47% from permanent recruitment fees.

Investment in Infrastructure and Capability

Investment in infrastructure continued in 2013 with the move of our London teams into a single, more modern office capable of accommodating the people needed to deliver the Group's longer term ambitions. The opening of two new international offices within one month and the move of the London Head Office over one weekend without loss of productivity was made possible by 24 hour access to resilient, Cloud-based information systems installed and developed over the past two years.

Further improvements were also made this year to our Client Relationship Management ("CRM") system, which went live at the end of 2012. The system is designed to turn information to competitive advantage. The intelligent business analytics which can be generated will drive the best use of contractors, capture client feedback, increase productivity and facilitate stronger performance management, to help us achieve our 2016 goals.

This year, we recruited externally at senior level to bring in additional experience and a wider market view. The mix is working well. The Executive Board, which is made up of the heads of sales and operations, is working together on Group wide projects to drive activity and further strengthen client relationships. Alongside the sales teams, high quality operations professionals support pre and post-sales activity, with centres of excellence in HR, Marketing, Finance and IT all focused on supporting growth of the business.

An entrepreneurial sales culture and common values across the business are now brought together under the single Hydrogen brand, following completion of the rebranding exercise in 2013.

The Board believes that investment in people, modern office facilities, resilient IT and communications systems and further development of our CRM will increase the prospects of higher returns over the longer term.

Clients and Candidates

Hydrogen recruitment consultants work with many of the world's leading organisations. There is a shortage of skills in many markets, particularly as project work increases and technology develops at an ever faster rate. Many mid-level roles simply cannot be filled from the local candidate pool. Skilled professionals in high demand, who are well regarded by their current employer, may not have considered a career move until they are approached. Despite the growth in social media and direct in-house recruitment there is still a need for expert recruitment advice.

We continue to build our client base, both in new practice areas and with large multi-nationals who need resource quickly to fulfil a major contract or develop a new area of business. Our business is built on long term relationships with global clients who recognise the value of our expertise in finding exceptional candidates. We would like to thank all our clients for their support over the last year.

We would also wish to pay tribute to the candidates and contractors who work with us, many of whom establish a connection with us that lasts through several years and stages of career development. Their performance in the roles which we have been entrusted to fill is important in cementing our reputation with clients as a specialist recruiter able to find, foster and channel talent.

Outlook

Our focus in the coming year will be on monitoring performance, increasing profits and NFI and helping the teams to develop their global relationships with clients and candidates.

The investments made in people, practices, new locations, infrastructure and systems this year are designed to deliver growth in the period to 2016. We are making progress towards our aims and remain confident that, with our current focus on growth and our high operational gearing, we are well positioned to scale up the business, deliver for our clients globally and capitalise on the growth opportunities ahead.

Tim Smeaton

CEO

17 March 2014

FINANCIAL REVIEW

RevenueThe Group achieved a 9% increase in revenue to a record £181.6m (2012: £167.0m).

Net fee income (NFI)

NFI (shown as gross profit in the income statement) comprises the total placement fees of permanent candidates and the margin earned on placement of contract candidates. Overall, the Group delivered a 2% increase in total NFI to £31.9m (2012: £31.3m). NFI from contract recruitment increased by 5% to a new record of £16.9m (2012: £16.1m). Fees from permanent recruitment were marginally lower at £15.0m (2012: £15.2m). 

In international markets the difficult trading conditions for recruiters that persisted in Australia during 2013 resulted in a decline in NFI of 19%. Notwithstanding the downturn in Australia, the Group continued to deliver on its strategy of increasing geographical diversification, reporting a 9% increase in NFI from international placements in 2013 to £13.9m (2012: £12.8m), representing 44% of total NFI (2012: 41%).

The Group also continued to make progress in the strategic objective of diversification of industry sectors. NFI from the Technical and Scientific operating segment grew by 17% to £14.3m (2012: £12.2m), and contributed 45% (2012: 39%) of NFI.

An 8% decline in the Professional Support Services operating segment to £17.6m (2012: £19.1m) reflected continuing subdued levels of activity in financial services markets for most of 2013. At the end of 2013 there were signs of improved sentiment in these markets. Hydrogen is well positioned to take advantage of improved market conditions as the downward cycle in this segment reverses.

One customer in the Professional Support Services segment represented approximately 13% of total NFI for 2013 (2012:10%). Other than fluctuations in client demand arising in the normal course of business, and the Group's ability to win new clients, there is no expectation of significant change in this position in the foreseeable future. No other customer represents more than 5% of NFI.

The objective of maintaining a broad balance of NFI from permanent and contract placements was achieved with fees from contract placements representing 53% of NFI, and permanent fees 47% of NFI (2012: 51%:49%).

Administration costs

Administration costs for the year increased by 5% to £29.4m (2012: £27.9m). The increase primarily related to costs associated with the recruitment of a number of senior managers to the Group, and additional property, IT and infrastructure costs relating to the opening of offices in Houston, USA and Stavanger, Norway and the new London headquarters. The increase in costs exceeded the growth in NFI, resulting in a decrease in the conversion ratio to 7.9% (2012: 10.8%).

HeadcountWhile the headcount of 383 at 31 December 2013 was 4% up compared with 2012 (2012: 368), average total headcount for the year was 356, 4% down on the previous year (2012: 370). During the first half of 2013 the priority was driving increases in productivity, leading to a small decline in headcount. As productivity targets were achieved, hiring restarted and sales headcount increased by 7% during the second half of the year. Productivity for the year based on average total employees increased by 6% from £85,000 to £90,000. 

Finance costs 

Finance costs were unchanged from the previous year at £0.2m (2012: £0.2m). 

Profit before taxationProfit before taxation for the year declined by 25% to £2.4m (2012: £3.2m) as the Group continued to invest for the mid-term in headcount, offices and infrastructure. 

Taxation

The tax charge for the year was £0.9m (2012: £1.0m), giving an effective tax rate of 36% (2012: 30%). This is above the UK statutory rate of 23.5%, due to: 

· a one-off derecognition of previously recognised losses in Australia, where difficult market conditions have increased the uncertainty of when the business will return to profitability, increasing the tax charge by £0.3m and the effective rate by 12%; and 

· unutilised tax losses arising in 2013 in the Group and non-deductible expenses, including charges for share option costs.

In total, at the reporting date, the Group had unutilised tax losses of £1.8m available for offset against future profits, for which no deferred tax assets had been recognised. With a further reduction in UK Corporation Tax rates for 2014, going forward we would expect the effective tax rate for the Group to be in the range 25%-30%, depending on geographical profit mix. 

Dividend

It is the Board's intention to adopt a progressive dividend policy, targeting dividend cover of 2.0-2.5x over the economic cycle. In September 2013, the Board declared an interim dividend of 1.5p per share (2012: 1.5p) which was paid to shareholders in November 2013. A final dividend of 3.1p per share (2012: 3.0p) is proposed, increasing the total dividend for the year to 4.6p per share (2012: 4.5p). The proposed dividend will be paid on 30 May 2014 to shareholders on the register on 2 May 2014, subject to approval at the AGM. 

Earnings per share

Basic earnings per share was 6.8p (2012:10.28p) and diluted earnings per share, taking into account existing share options, was 6.5p (2012: 9.73p).

Balance SheetNet assets at 31 December 2013 increased by £0.3m to £26.6m (2012: £26.3m).

Tight control of working capital was maintained and a 9% increase in revenue gave rise to just a 3% increase in trade receivables to £13.3m (2012: £12.9m). Expressed in days of sales outstanding (DSO's) this was an increase of 2 days to 23 days (2012: 21 days).

The Group saw a 6% increase in prepayments and accrued income to £16.5m (2012: £15.6m), due to a higher level of accruals to be billed for contract time worked in December 2013 compared with the prior year. There was a corresponding 8% increase in the amounts accrued payable to contractors for December 2013, included within current liabilities. 

Principal risks and uncertainties

Hydrogen's business model and strategy are designed to allow the business to grow without increasing risk beyond an acceptable limit. The profile of risks fluctuates from time to time and the actions being taken to manage and control risks are intended to mitigate the effects on the business, but cannot eliminate risks absolutely. The Board has undertaken a review of the processes for identification and reporting of risks during 2013 and further details of the process, and changes in risks during the year, will be included in the Annual Report.  

There is a clear framework of authorities within the business, up to and including a schedule of matters which can be agreed only by the Board. Hydrogen does not have any contractual arrangements with any single significant individual or company which are essential to the continuation of the business.

The Board has not delegated its responsibility for financial risk management, including the management of treasury activities. Treasury management and currency risk

Approximately 80% of the Group's revenue in 2013 was denominated in Sterling. For contract revenue, the Group aims to pay and bill in the same currency to provide a natural hedge for the majority of its revenues. The Group periodically utilises foreign currency options to manage the foreign exchange risk on its non-Sterling fees.

The Group has an invoice discounting facility of £18m, which was renewed in February 2014 for a further two year period, with a commitment to February 2016. The Group's maximum utilisation in 2013 was 80%. 

The Group also has a revolving credit facility of £3m for a three year term to September 2015. 

Cash flow and cash positionAt the start of the year the Group had net debt of £2.8m. Before investment in working capital and payment of taxes and interest costs, the Group generated cash from trading activities of £3.4m (2012: £3.7m). After an investment of £0.4m (2012: £2.0m) in additional working capital, payment of taxes of £0.8m (2012: £1.2m) and interest payments of £0.1m (2012: £0.1m), cash generated from operations was £2.0m (2012: £0.3m).

During the second half of the year the Group spent £1.8m on the fit-out of its new London headquarters, and £0.2m on its CRM and management information systems. 

A final dividend for 2012 of £0.7m was paid in May 2013 and an interim dividend for 2013 of £0.3m was paid in November 2013. 

At 31 December 2013 the Group had net debt of £4.0m (2012: £2.8m), an increase of £1.2m during the year. 

The Group has prepared financial forecasts for the period to 31 March 2015, and has shared these with its bankers. The Directors have no reason to believe that its bankers will not continue to support its plans. Consequently the Directors have a reasonable expectation that the Group will have adequate 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.

John Glover

Finance Director

17 March 2014

The Board of Directors announces the following audited results for the year ended 31 December 2013 which were approved by the Board on 14 March 2014.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2013

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2013

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

As at 31 December 2013

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2013

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2013

1 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.

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 consolidated financial statements have been prepared under the historical cost convention. 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 judgment 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. On these grounds the Board considers it reasonable to continue to adopt the going concern basis for the preparation of the financial statements.

The consolidated financial statements for the year ended 31 December 2013 (including comparatives) are presented in GBP '000, and were approved and authorised for issue by the Board of Directors on 14 March 2014. The full Annual Report and Accounts will be presented at the Annual General Meeting on 22 May 2014 and filed with the Registrar of Companies.

2 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 CEO 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:

- Professional Support Services (the operating segment includes legal, finance and technology recruitment); and

- Technical and Scientific (the operating segment includes oil and gas, mining, power and life sciences recruitment).

The operating segments noted reflect the information that is regularly reviewed by the Group's Chief Operating Decision Maker (CODM) which is the Board of Hydrogen Group plc. Both of these operating segments have similar economic characteristics.  

Non-allocated costs represent central management costs that are not allocated to operating segments.

Revenue reported above represents revenue generated from external customers. There were no sales between segments in the year (2012: 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 central administration costs, finance costs and finance income.

There is one external customer that represented 36% of the entity's revenues, with revenue of £65,449,000, and approximately 13% of the Group's NFI, included in the Professional Support Services segment (2012: one customer, revenue £54,786,000, Professional Support Services segment).

(b) Revenue and gross profit by geography

(c) Revenue and gross profit by recruitment classification

The information reviewed by the Chief Operating Decision Maker, or otherwise regularly provided to the Chief Operating Decision Maker, does not include information on net assets. The cost to develop this information would be excessive in comparison to the value that would be derived.

3 Dividends

An interim dividend of 1.5p (2012: 1.5p) per share was paid on 7 November 2013 to shareholders on the register at the close of business on 11 October 2013. The interim dividend was approved by the Board on 6 September 2013.

The final dividend in relation to 2012 was recommended on 11 March 2013, and was not recognised as a liability in the year ended 31 December 2012.

The Board proposes a final dividend of 3.1p per ordinary share for the year ended 31 December 2013 (2012: 3.0p per share), to be paid on 30 May 2014 to shareholders on the register as at 2 May 2014, subject to approval at the AGM. The proposed final dividend has not been approved by shareholders at 31 December 2013. No income tax consequences are expected to arise at the Hydrogen Group plc level as a result of this transaction.

4 Tax

There has been a deferred tax credit of £49,000 relating to share options charged directly to equity (2012: credit of £18,000) (see note 8).

Due to the difficult economic conditions that persist in Australia and their impact on recruitment activity in that market in 2013 the Group has reversed the decision made in the previous period to recognise a deferred tax asset of £277,000 for unutilised tax losses of £923,000.

In addition, the Group has not recognised a deferred tax asset for unutilised international tax losses of £829,000 incurred during 2013.

In total, at the reporting date, the Group had unutilised tax losses of £1,752,000 available for offset against future profits, for which no deferred tax assets had been recognised.

5 Earnings per share

Earnings per share is calculated by dividing the profit attributable to equity holders of the Group by the weighted average number of ordinary shares in issue.

Fully diluted earnings 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.

6 Other intangible assets

Amortisation on intangible assets is charged to Administration expenses in the Consolidated Statement of Comprehensive Income.

7 Property, plant and equipment

Depreciation on property, plant and equipment is charged to Administration expenses in the Consolidated Statement of Comprehensive Income.

The Group has pledged all of its assets to secure banking facilities granted to the Group.

8 Deferred tax

No reversal of deferred tax is expected within the next twelve months (2012: Nil).

10 Cash and cash equivalents

11 Trade and other payables

12 Borrowings

The invoice discounting facility was renewed post the year end, to February 2016.

13 Provisions

The dilapidations provisions relate to the Group's leased offices in London, Singapore and Sydney.

14 Share capital

The share capital at 31 December 2013 and 2012 was as follows:

During 2013, 163,852 options were exercised (2012: 37,564), all of which were satisfied by the issuance of new shares (2012: 35,964). 

15 Notes to the cash flow statement

a. Reconciliation of profit before tax to net cash inflow from operating activities

b. Reconciliation of net cash flow to movement in net debt:

16 Financial information

The financial information in this announcement which comprises the Condensed Consolidated Statement of Comprehensive Income, Condensed Consolidated Statement of Financial Position, Condensed Consolidated Statement of Changes In Equity, Condensed Consolidated Statement of Cash Flows and related notes is derived from the full Group financial statements for the year ended 31 December 2013 and does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. Group statutory accounts for 31 December 2012 have been delivered to the Registrar of Companies and those for 31 December 2013 will be delivered in due course. The auditors have reported on each set of Group statutory accounts and their reports (i) were unqualified; (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report; and (iii) did not contain a statement under Section 237(2) or Section 237(3) of the Companies Act 1985 or Section 498(2) or Section 498(3) of the Companies Act 2006.

Copies of the full audited Annual Report and Accounts for 2013 and documents relating to the Company's Annual General Meeting will be available to be downloaded from the Company's website from early April at http://www.hydrogengroup.com/Company_reports.

The Annual General Meeting will take place on Thursday 22 May 2014 at 12 noon at the Company's London offices, 30 Eastcheap, London EC3M 1HD.