Interim Results Statement

Hydrogen Group plc

10 September 2012

UNAUDITED CONDENSED CONSOLIDATED INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2012

The Board of Hydrogen Group plc ("Hydrogen" or the "Group") is pleased to announce its

unaudited interim results for the six months ended 30 June 2012.

Financial Highlights

·; Net fee income ("NFI") increased by 3% to £15.6m (1H 2011: £15.1m)

·; NFI from permanent placements increased by 9% to £7.6m (1H 2011: £7.0m)

·; Contract NFI broadly unchanged at £8.0m (1H 2011: £8.1m)

·; Profit before tax of £1.9m (1H 2011: £1.8m)

·; Profit conversion (the ratio of profit before tax to net fee income) unchanged at 12% (1H 2011: 12%)

·; Basic EPS increased to 6.13p (1H 2011: 6.01p)

·; Interim dividend increased by 7% to 1.5p (2011: 1.4p)

Operating Highlights

·; NFI from markets outside the UK increased to 41% of Group NFI (1H 2011: 33%), driven by the Asia Pacific region and Technical & Scientific practices

·; NFI from Technical & Scientific increased by 53% to £5.8m (1H 2011: £3.8m) - representing 37% of Group NFI (1H 2011: 25%)

·; More than 50% of sales headcount at 30 June 2012 servicing markets outside the UK (31 Dec 2011: 40%)

·; Strong cash collection maintained with trade debtors measured as days of sale outstanding (DSOs) at 23 days (1H 2011: 22 days)

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

"Strong performances from our international operations and our Technical & Scientific practices have enabled us to deliver NFI and profit growth in the first half of 2012 despite difficult market conditions.

The Group has continued to trade in line with the Board's expectations since the period end, with no adverse impact on recruitment activity in the UK from the Olympic Games, and remains on target to meet our expectations for the year as a whole.

We expect the overall economic backdrop to remain challenging but will continue to develop our practice-led strategy, investing in markets where we see potential for growth."

Enquiries:

An analyst meeting will be held at 11am Hydrogen's offices, Nicholas House, 3 Laurence Pountney Hill, London EC4R OEU on 10 September 2012.

Notes to Editors:

Hydrogen is a global specialist recruitment business with a turnover in excess of £150m. We build relationships by finding specialist candidates our clients have difficulty sourcing, placing professionals in more than 50 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/

CHAIRMAN & CEO'S STATEMENT

Overview

The Group delivered a strong performance in the first six months of the year, given the challenging macro economic conditions affecting recruitment markets globally, growing Net Fee Income ("NFI") by 3% and delivering increased profit before tax of £1.9m (1H 2011: £1.8m). This result has been driven predominantly by further progress on our strategy of internationalisation and diversification into new practices, with NFI from Technical & Scientific practices increasing impressively by 53% year on year to £5.8m (1H 2011: £3.8m) and markets outside the UK contributing 41% of Group NFI (1H 2011: 33%).

Financial Highlights

Group revenue for the period increased by 3% to £82.0m (1H 2011: £80.0m), with Group NFI growing by 3% to £15.6m (1H 2011: £15.1m). This was driven by a 9% increase in NFI from permanent placements to £7.6m (H1 2011: £7.0m), whilst contract NFI remained broadly unchanged at £8.0m (1H 2011: £8.1m).

The Group continues to keep a tight control of costs, with administration costs growing 4% to £13.7m (1H 2011: £13.2m). Adjusting for the swing in exchange on translation of receivables from a gain of £0.1m in 1H 2011 to a loss of £0.2m in the current period, the underlying increase in costs was 2%. Profit before tax increased marginally to £1.9m (1H 2011: £1.8m) as Hydrogen maintained its profit conversion (the ratio of profit before tax to NFI) at 12% (1H 2011: 12%).

Basic earnings per share increased by 2% to 6.13p (1H 2011: 6.01p).

The Group continued to exercise tight control of working capital and maintained its strong track record on cash collection with trade receivables measured as days of sales outstanding (DSOs) of 23 days (1H 2011: 22 days).

Cash flow

Net debt at the start of the period stood at £1.4m. In the first six months the Group generated cash from operations before movements in working capital of £2.1m (1H 2011: £1.8m). An investment in working capital of £2.4m (1H 2011: £0.4m) was required during the period primarily to fund increases in contractor accrued income arising from higher contractor numbers and higher activity in the final month of the period, higher permanent accrued income from permanent placements and increases in trade debtors.

After tax payments of £0.5m (1H 2011: £0.2m), capital expenditure of £0.5m (1H 2011: £0.8m) and dividend payments of £0.6m (1H 2011: £0.6m), the Group finished the period with net debt of £3.3m, representing an increase in net debt of £1.9m, comfortably within its £18m borrowing facility.

Dividend

The Board has declared a 7% increase to the interim dividend to 1.5p (1H 2011: 1.4p). The increase reflects the Group's strong performance in the first half as well as the Board's confidence in Hydrogen's future prospects. This will be payable on 9 November 2012 to shareholders on the register as at 12 October 2012.

Operations

The Group's continued investment in international growth was rewarded with a 26% increase in NFI from markets outside the UK to £6.3m (1H 2011: £5.0m), representing 41% (1H 2011: 33%) of Group NFI. This performance was partly driven by a strong demand in the Asia Pacific region as well as the significant growth achieved in our Technical & Scientific practices which primarily serve markets overseas. Hydrogen continues to invest in growing an increasingly global presence in its specialist markets, with a pipeline of new offices, two of which, both focused on the Oil & Gas industry, in Houston, United States and Stavanger, Norway, are in the incubator stage. As at the period end, more than 50% (1H 2011: 40%) of client facing employees were servicing markets overseas.

The Group has been vindicated in focusing its growth in the first half in its Technical & Scientific practices (Oil & Gas and Life Sciences), which delivered another outstanding performance with a 53% increase in NFI to £5.8m (1H 2011: £3.8m) accounting for 37% of Group NFI (1H 2011: 25%). The rapid growth of these recently established practices is strong evidence of Hydrogen's ability to identify attractive markets to invest in as well as its all-round ability to capitalise efficiently on the growth opportunities available. The Group currently has incubators running in two new practices, Mining and Power, with the intention that these will develop into profitable businesses over time.

Demand in Professional & Support Services, particularly within financial services, remains subdued globally. However, the Group is confident that it is well positioned with the necessary infrastructure, client and candidate relationships to take advantage of any future increase in demand.

NFI from permanent placements increased year on year by 9%, largely driven by the Group's strong international performance where markets are predominantly permanent recruitment. Against strong comparatives in the previous year, contract NFI was broadly flat at £8.0m (1H 2011: £8.1m). For the period, NFI was split 51:49 in favour of contract (H1 2011: 54:46 in favour of contract), in line with our target mix.

Ensuring that Hydrogen has the right infrastructure to support its long term growth aspirations is crucial. Over the first six months of the year the Group piloted its new cloud-based client relationship management ("CRM") system, and we currently have a practice trading on the system with promising results. Feedback from the pilot is being used to optimise the system before a scheduled roll-out in the second half of the year. The new system will provide Hydrogen with the scalable platform to support the Group's future growth plans.

The Group has also made good progress in bringing all of its individual UK practices under the single Hydrogen brand, including the launch of the new Hydrogen website which went live in June.

Employees

Group headcount has been maintained with 363 employees at the period end (31 Dec 2011: 362) and we continue to redeploy heads into markets where we see prospects for growth, particularly in international markets.

Productivity per head in the period remained in the £80k - £90k range at £86k, 9% lower than the comparative period (1H 2011: £91k), a consequence of the Group's investment in headcount during the second half of 2011.

Training and development of our staff is key to the Group's long term success, and we were delighted that in the first half of the year Hydrogen was presented with the 'Best In-House Training' award at The Global Recruiter Industry Awards. The Group was also listed in 'Best Companies to Work For' by The Sunday Times for the 8th year in a row.

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.

Board

As disclosed in a separate announcement made today, the Group announces its planned succession to the Board of Directors. Senior Independent Non-Executive Director, Ishbel Macpherson, and Non-Executive Director, Ian Fallmann have stepped down from the Board. Ishbel has served on the Board for six years, and has made an enormous contribution to the business as Hydrogen has grown from a primarily UK-focused recruiter into the global and diversified business it is today. Likewise, Ian has made a very valuable contribution over the past two years, with his experience and knowledge in particular helping drive our expansion in Asia Pacific. Aided by their experience we are on course to deliver the 2012 goals we set out in 2008, and on behalf of the rest of the Board and the Group, we would like to take this opportunity to thank Ishbel and Ian for their contribution. Martyn Phillips will remain on the Board as Senior Independent Non-Executive Director.

Contemporaneously, the Board is delighted to announce the appointments of Stephen Puckett, Barbara Anderson and Anne Baldock as Non-Executive Directors. Stephen Puckett brings significant knowledge and experience of the global recruitment industry having recently retired from the Board of Michael Page International after more than 11 years as Group Finance Director. Barbara Anderson has a background in strategy consulting and brings international Board-level experience to Hydrogen having held a number of Non-Executive positions focused on the development and implementation of global growth strategies. Anne has recently retired from the global law firm Allen & Overy where she had a distinguished career as a Partner and member of the Global Board, focusing on large infrastructure projects. 

These changes to the composition of Hydrogen's Board represent the next stage in our journey as the Group plans its strategy and goals for the period to 2015.

Current Trading and Outlook

The Group has continued to trade in line with the Board's expectations since the period end, and we did not experience the negative impact on recruitment activity in the UK from the Olympic Games that had been feared.

Hydrogen continues to invest in growing a balanced business and we are currently employing our low risk incubator model to new, robust geographies and practices which we have identified as offering significant long term growth opportunities.

Whilst the uncertain macro-economic outlook means that visibility across global recruitment markets remains limited, the Group remains on target to meet its expectations for the year as a whole, and is well positioned for the long term.

Ian Temple Tim Smeaton

Executive Chairman Chief Executive

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2012

The notes on pages 6 to 12 form an integral part of this unaudited condensed consolidated interim report.

UNAUDITED CONDENSED CONSOLIDATED INTERM STATEMENT OF FINANCIAL POSITION

As at 30 June 2012

The notes on pages 6 to 12 form an integral part of this unaudited condensed consolidated interim report.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2012

The notes on pages 6 to 12 form an integral part of this unaudited condensed consolidated interim report.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOW

For the six months ended 30 June 2012

UNAUDITED RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET (DEBT)/FUNDSFor the six months ended 30 June 2012

The notes on pages 6 to 12 form an integral part of this unaudited condensed consolidated interim report.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM REPORT

For the six months ended 30 June 2012

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 ten 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, 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's registered office and its principal place of business is 6 Laurence Pountney Hill, London, EC4R 0BL, England. Hydrogen Group's shares are listed on the AIM Market.

These unaudited condensed consolidated interim report for the six months ended 30 June 2012 (including comparatives) are presented in GBP '000, and were approved and authorised for issue by the board of directors on 6 September 2012.

Copies of interim results are available at the Company's registered office - Pountney Hill House, 6 Laurence Pountney Hill, London EC4R 0BL, 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 2011 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 2012 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 2011, which were prepared in accordance with IFRSs as adopted by the European Union.

These financial statements have been prepared under the historical cost convention, except for revaluation of financial instruments.

To finance its working capital requirements, the Group has an £18m invoice discounting facility, committed to Feb 2014. The maximum amount of this facility utilised during the period was 65%. 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 2011, except for the adoption of 'Improvement in IFRSs 2010 (2010 Improvements)' as of 1 January 2011.

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 based on the practice areas operated by the Group. Both of the operating segments have similar economic characteristics and share a majority of the aggregation criteria set out in IFRS 8.12. The Group's reportable segments are as follows:- Professional Support Services, which includes Legal, Finance, Trading and Advisory, HR and Transformational Technology practices, and- Technical and Scientific, which includes Oil and Gas, Natural Resources, Power and Life Science practices.

Practice areas are based on the discipline of the candidate being placed.

3 Segment reporting (continued)Revenue reported above represents revenue generated from external customers. There are no sales between segments in the six months (30 June 2011: Nil, 31 December 2011: 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 27% of the entity's revenues with revenue of £22,149,000, and approximately 8% of the Group's net fee income, included in the Professional Support Services segment (30 June 2011: one customer, revenue £28,205,000, Professional Support Services segment; 31 December 2011: one customer, revenue £54,724,000, 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 £523,000 (30 June 2011: £502,000, 31 December 2011: £1,296,000) an effective rate of 28% (30 June 2011: 28%; 31 December 2011: 35%) on profit before tax.

5  Dividends

The proposed interim dividend for 2011 was approved by the board on 5 September 2011, and was not recognised as a liability in the period to 30 June 2011. The final dividend for 2011 was proposed on 2 March 2012, and was not recognised as a liability in the year ended 31 December 2011.

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