Interim Results Statement

 Hydrogen Group plc

9 September 2013

UNAUDITED RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2013

The Board of Hydrogen Group plc ("Hydrogen" or the "Group" (AIM: HYDG) announces its unaudited results for the half year ended 30 June 2013.

Financial Highlights

· Net fee income ("NFI") increased by 2% to £15.9m (1H 2012: £15.6m)

· Contract NFI increased by 6% to £8.5m (1H 2012: £8.0m)

· Profit before tax of £1.3m (1H 2012: £1.9m) impacted by increased investment in people and offices

· Basic EPS 4.26p (1H 2012: 6.13p)

· Cash generation from operating activities of £2.8m (1H 2012: (£0.9m)), reducing net debt at the period end to £0.7m (31 December 2012: £2.8m)

· Interim dividend maintained at 1.5p per share (2012: 1.5p)

Operating Highlights

· International NFI increased by 11% to £7.0m (1H 2012: £6.3m)

· NFI from Technical & Scientific practices increased by 21% to £7.0m (1H 2012: £5.8m) - representing 44% of Group NFI (1H 2012: 37%)

· Hydrogen's first US office opened in Houston; a new office was also established in Stavanger, Norway to take advantage of strength in the oil and gas markets

· Strong cash collection; trade receivables measured as days of sale outstanding (DSOs) maintained at year-end level of 21 days (1H 2012: 23 days)

Commenting, Ian Temple, Chairman of Hydrogen Group plc said:

"Hydrogen has increased its net fee income during a period of mixed global market conditions. We have continued to invest in our business during the period, taking the opportunity to advance a number of senior hires and opening two new offices, in Houston, USA and Stavanger, in Norway. Whilst the cost of these investments has reduced profitability in the short term, the investments have significantly increased the Group's future operational capacity and enhanced its potential for growth.

In the second half of the financial year, we will continue to focus on harnessing the growth opportunities in our markets, selectively adding headcount whilst maintaining productivity improvements and maximising the return from investments made by the Group over the last few years."

Enquiries:

Notes to Editors:

Hydrogen is a global specialist recruitment business with a turnover in excess of £160m. We build relationships by finding specialist candidates our clients have difficulty sourcing, placing professionals in more than 70 countries.

Our joined-up practice teams combine international reach with local expertise and specialist knowledge, to provide visibility of world class candidates.

http://www.hydrogengroup.com/

Overview

Group Net Fee Income ("NFI") increased by 2% year on year, reflecting a 7% increase in overall productivity against a backdrop of mixed global market conditions. The Group continued to enjoy strong growth in its Oil and Gas and Life Sciences Practices, but experienced a significant slowdown in Australia and continued weakness in its traditional markets in UK financial services.

Hydrogen is committed to a strategy of increasing internationalisation and diversification into new markets where there is demand from clients seeking hard-to-find, mid to senior level candidates. An increase of 11% in Group NFI generated outside the UK and 21% growth in NFI from the Technical and Scientific sector, both measured against the comparative period for 2012, show the success of the strategy to date.

The Group continued to invest for the medium term, taking the opportunity to hire a number of strategic, senior managers into the business to supplement the pool of internally generated talent. In line with our focus on building business in hot markets, two further offices outside the UK were opened, bringing the Group total to eight. Whilst the higher costs associated with these investments have reduced profitability in the period, the Board believes that these investments have enhanced the Group's potential for growth in the mid to long term. As we enter the second half of the year, the focus is on selectively increasing headcount whilst maintaining productivity and maximising the return on investments made in the business.

Financial Highlights and Dividend

Group revenue for the period grew by 11% to £91.0m (1H 2012: £82.0m), with Group NFI increased by 2% to £15.9m (1H 2012: £15.6m). A new Group record was set for NFI from contract, up 6% to £8.5m (H1 2012: £8.0m), representing 53% of Group NFI.

Hydrogen continued to increase its operational capability by investing in people and offices, giving rise to an increase in costs during the period of 5%, to £14.4m (1H 2012: £13.7m) which reduced profit before tax to £1.3m (1H 2012: £1.9m). Profit conversion (the ratio of operating profit to NFI) was 9% (1H 2012: 12%) and basic earnings per share decreased by 31% to 4.26p (1H 2012: 6.13p).

Recognising the short term impact on profitability of the investments made, the Board is confident in Hydrogen's ability to increase NFI and generate cash in the future and has maintained the level of interim dividend for the period at 1.5p per share (1H 2012: 1.5p). The interim dividend will be payable on 7 November 2013 to shareholders on the register as at 11 October 2013 (ex-dividend date 9 October 2013).

Cash flow

The business continued to be cash positive, generating £1.8m (1H 2012: £2.1m) from operating activities in the first six months of the year. We continue to exercise tight control of working capital, with a reduction in the period of £1.5m (1H 2012: (£2.4m)). We have maintained our strong track record on cash collection; trade receivables measured as days of sale outstanding (DSOs) were maintained at the 31 December 2012 position of 21 days (1H 2012: 23 days).

After tax payments of £0.4m (1H 2012: £0.5m) and dividend payments of £0.7m (1H 2012: £0.6m), the Group finished the period with net debt of £0.7m, a significant reduction from £2.8m at 31 December 2012. The Group retains a £18m invoice finance facility, committed to February 2014, and a £3m revolving credit facility committed to July 2015.

Operations

The Group's commitment to diversifying its revenue streams was further rewarded by an increase of 11% in NFI from outside the UK, against a backdrop of mixed global market conditions. Performance from Asian operations during the period was particularly strong, contrasting with the position in Australia, where the slowdown in the natural resources sector has been well documented. As at the period end, 59% of client facing employees were serving markets outside the UK (1H 2012: 50%) and 44% of Group NFI came from these markets (2012: 41%).

The Group's strategy of market diversification continued to yield success with an increase of 21% in NFI generated from the Technical and Scientific sector (Oil and Gas, Life Sciences, Power and Mining practices), which now represents 44% of Group NFI (1H 2012: 37%). The new offices in Houston and Stavanger will focus initially on further development of the Oil and Gas practice, with Houston likely to expand into a multi-practice hub when appropriate.

It continues to be one of Hydrogen's strategic aims to maintain a balance of NFI from permanent and contract placements. In this period, NFI was split 53:47 in favour of contract (H1 2012: 51:49). Whilst the number of contract runners was broadly unchanged from 31 December 2012, the favourable starting position compared with 1 January 2012 resulted in a 6% increase in NFI to a new Group record. Fees from permanent recruitment remained broadly unchanged at £7.4m (1H 2012: £7.6m).

The Group's focus on productivity during the period yielded immediate results, with a 7% increase compared with the same period last year, reaching its highest level since 2007. On behalf of the Board we would like to take this opportunity to thank all employees for their hard work and commitment during the period. Through careful market selection, and the continued investment in training and development of Hydrogen people, the business is well placed to grow its headcount whilst maintaining current levels of productivity.

The Group continues to build operational excellence in support of its sales activity. The first half of the year saw completion of the move to a single Hydrogen brand. Cloud-based infrastructure and systems provide the resilience, robustness, and agility required to support a growing business. The successful move of all London-based staff into a new head office building in early September represents a further significant £1.7m capital investment by the Group in support of its longer term growth plans.

Current Trading and Outlook

Looking forward, the focus for the Group is to maximise the return from the investments made in the last few years. In line with this, the priority for the second half of 2013 is to deploy heads into those markets that demonstrate the required characteristics for net fee income growth, while maintaining current levels of productivity.

With global market conditions and activity relatively unchanged from that experienced in the first half, trading for the second half of the year has started satisfactorily and the Group is on target to meet its expectations for the year.

Ian Temple, Chairman Tim Smeaton, CEO

9 September 2013

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2013

The notes on pages 9 to 15 form an integral part of this unaudited condensed consolidated interim report.

As at 30 June 2013

The notes on pages 9 to 15 form an integral part of this unaudited condensed consolidated interim report.

For the six months ended 30 June 2013

The notes on pages 9 to 15 form an integral part of this unaudited condensed consolidated interim report.

For the six months ended 30 June 2013

UNAUDITED RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBTFor the six months ended 30 June 2013

The notes on pages 9 to 15 form an integral part of this unaudited condensed consolidated interim report.

For the six months ended 30 June 2013

1 General information

Hydrogen Group plc ("the Company") and its subsidiaries' (together "the Group") principal activity is the provision of recruitment services for mid to senior level professional staff. The Group is organised into nine practices offering both permanent and contract specialist recruitment consultancy for large and medium sized organisations. The Group operates primarily in the technology, finance, professional, and engineering sectors. The Group is becoming increasingly international, with operations in Australia, Singapore, Hong Kong, Norway and USA, and a number of internationally focused teams based in the UK.

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 address of Hydrogen Group plc's registered office and its principal place of business is 30-40 Eastcheap, London EC3M 1HD, England. Hydrogen Group plc's shares are listed on the AIM Market.

This unaudited condensed consolidated interim report for the six months ended 30 June 2013 (including comparatives) are presented in GBP '000, and were approved and authorised for issue by the board of directors on 6 September 2013.

Copies of the interim report are available at the Company's registered office -30-40 Eastcheap, London EC3M 1HD, England, and on the Company's website - www.hydrogengroup.com.

This unaudited condensed consolidated interim report does not constitute statutory accounts of the Group within the meaning of section 434 of the Companies Act 2006. The financial information for the year ended 31 December 2012 has been extracted from the statutory accounts for that year, which have been filed with the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain a statement under section 498 of the Companies Act 2006.

2 Basis of preparation

The unaudited condensed consolidated interim report for the six months ended 30 June 2013 has been prepared using accounting policies consistent with International Financial Reporting Standards ("IFRSs") and in accordance with IAS 34, 'Interim financial reporting' as adopted by the European Union. The condensed consolidated interim report should be read in conjunction with the annual financial statements for the year ended 31 December 2012, which were prepared in accordance with IFRSs as adopted by the European Union.

These financial statements have been prepared under the historical cost convention.

To finance its working capital requirements the Group has an £18m invoice discounting facility, committed to Feb 2014 and a £3m revolving credit facility, committed to July 2015. The maximum amount of the invoice discount facility utilised during the period was 58%. The Group's forecasts and projections demonstrate that this facility should be adequate to meet the Group's obligations as they fall due in the foreseeable future. Accordingly, the directors have adopted the going concern basis in preparing the interim report.

This unaudited condensed consolidated interim report has been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year ended 31 December 2012.

The accounting policies have been applied consistently throughout the Group for the purposes of preparation of the condensed consolidated interim report.

3 Segment reporting(a) Revenue, gross profit and operating profit by disciplineFor management purposes, the Group is organised into two operating segments, Professional Support Services and Technical and Scientific, based on the discipline of the candidate being placed. Both of the operating segments have similar economic characteristics and share a majority of the aggregation criteria set out in IFRS 8.12.

3 Segment reporting (continued)Revenue reported above represents revenue generated from external customers. There were no sales between segments in the six months (30 June 2012: Nil; 31 December 2012: Nil).

The accounting policies of the reportable 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.

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.

There is one external customer that represented more than 36% of the entity's revenues with revenue of £33,003,000, and approximately 14% of the Group's net fee income, included in the Professional Support Services segment (30 June 2012: one customer, revenue £22,149,000, Professional Support Services segment; 31 December 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

4 Income tax expense

The charge for taxation on profits for the interim six months amounted to £404,000 (30 June 2012: £523,000; 31 December 2012: £958,000) an effective rate of 30% (30 June 2012: 28%; 31 December 2012: 30%) on profit before tax.

5  Dividends

The interim dividend for 2013 was declared by the board on 6 September 2013, and was not recognised as a liability in the period to 30 June 2013. The final dividend for 2012 was approved by shareholders on 21 May 2013, and was not recognised as a liability in the year ended 31 December 2012.

6 Earnings per share

Earnings per share is calculated by dividing the profit or loss 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.

7 Cash flow from operating activities

8  Trade and other receivables

9  Trade and other payables