LONDON (Alliance News) - Recruitment services business Hydrogen Group PLC Tuesday said it swung to a loss in the first half, as it was hurt by restructuring costs and delays converting vacancies and interviews to placements.
The company posted a pretax loss of GBP1.1 million for the six months ended June 30, compared with a GBP1.3 million profit a year earlier, as revenue fell to GBP87.3 million from GBP91.0 million.
The group invested heavily in headcount towards the end of 2013 on the basis of a strong client pipeline and improving activity.
Unfortunately for differing reasons, Hydrogen said the improvement failed to materialise within the time frame anticipated, and the group faced increased costs during a period when net fee income growth was constrained. In response, management looked to simplify the business, focusing on specific areas for investment and reducing costs.
A number of new business lines, which had been incubated in the previous 18 months, but had not achieved their development key performance indicators, were closed and overall headcount was reduced by around 10% to 344 at June 30 from 383 at the end of December.
Hydrogen said the restructuring of the business will lead to an estimated exceptional charge of GBP1.8 million for the full year, of which GBP1.5 million was incurred in the first half.
The company said underlying levels of activity in terms of the number of vacancies and interviews were high throughout the period. However, the group experienced delays in the conversion of this activity to placements and net fee income.
In addition, the strength of sterling had an adverse impact on reported net fee income compared with the first half of 2013. As a result, the group reported a decline of 8% for net fee income to GBP14.6 million from GBP15.9 million a year earlier.
One region the company did make gains was in Singapore with net fee income rising 16%. However, Hydrogen lamented conditions in Australia, where net fee income fell 33%.
The company said despite the decline in profitability during the period, the business continued to be cash generative.
Hydrogen said it is confident in its ability to increase profit and cash generation in the second half, and as a result has maintained its interim dividend at 1.5 pence.
Looking ahead, the company said its focus in the second half is to improve net fee income conversion to an "acceptable level of sustainable profitability".
From this base, the group will seek to invest selectively in headcount, where it sees opportunities for net fee income growth without diluting rates of conversion to profit.
The stock was untraded Tuesday morning at 84.50 pence.
By Anthony Tshibangu; anthonytshibangu@alliancenews.com; @AnthonyAllNews
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