the hotgroup plc announces strong interim results

Interim results for the six month period ended 30 June 2004

the hotgroup plc, the specialist recruitment company, announces its interim results for the six-month period ended 30 June 2004. The period has been one of strong growth for the company with profits up to 1.23m (from a loss of 0.40m for the 12 month period to August 2003) and a significant uplift in turnover to 17.62m from 2.63m in the same period. the hotgroup is continuing negotiations to purchase Workthing Ltd from the Guardian Media Group, which would make hotonline the UKís number one online recruitment provider in terms of numbers of monthly jobseekers and by the size of its candidate database.

Highlights:
Four successive quarters of profitable online growth.
Average monthly online revenue growth of 250% over two years.
Significant uplift in profits for the period. Profits before goodwill
amortisation, interest, exceptional items and taxation of 1.23m (compared to year to 31 August 2003, loss of 0.40m).
Significant uplift in turnover to 17.62m from 2.63m (for the year to 31
August 2003).
Dramatic growth in numbers of online job seekers, 100,000 per month in
2002, now averaging 900,000 per month across all hotonline sites.
Online division achieving organic growth at the rate of over 20% per annum
and renewal rates among existing customers exceeding 75%.
There have been six acquisitions completed between January 2004 and June
2004. This comprised four online acquisitions: The Graduate Group Ltd, Netrecruit, JobsFinancial Ltd, and Gisajob Ltd. In the traditional recruitment consultancy business there have been two acquisitions ASA Ltd and Mark Education Ltd.

Tony Reeves, Chairman and CEO of the hotgroup, said ìThe last six months have been exceptional for the group, our profitability and turnover have grown significantly. We have made a total of six acquisitions, all of which have been integrated into the group within our target 90-120 day period. Across our businesses improved technology is being deployed to drive greater efficiencies in terms of size and management of candidate databases and in terms of consolidating back office administration to maximize profits and shareholder value. We will continue to build our businesses and make strategic acquisitions to maintain our strong position in the UK recruitment market.î


Chairmanís Statement

It gives me great pleasure to report a pivotal period for the hotgroup plc. The companyís strategy of operating two distinct but complementary divisions, an online division, hotonline.com and a traditional recruitment consultancy division has continued to be successful. the hotgroup has grown both organically and through acquisitions and we will continue in our drive to become the UKís leading online recruitment group with further strategic acquisitions planned. During this reporting period there have been four online acquisitions, as well as two traditional recruitment consultancy acquisitions, consolidating the groupís position as a leading online recruitment service in the UK in terms of numbers of monthly jobseekers and size of CV database. In addition profitability of the group continues apace, with the financial benefits of the two acquisitions made in 2003 now fully reflected in this set of results.

The recruitment market has been increasingly buoyant this year and this has helped increase revenues in both the hotgroupís traditional and online businesses. We will continue to strengthen our businesses and maintain this position of leadership through organic growth and further acquisitions during the next period, continuing to build shareholder value and attract new investors.

Financial Results

The financial statements within this set of interim results cover a ten-month period from August 2003 to June 2004, however as the period August 2003 to December 2003 have already been presented, this statement will focus on the highlights for the period January 2004 to June 2004.

The results for the six months ended 30 June 2004 show a profit before goodwill amortisation, interest, exceptional items and taxation of 1.23m,
compared with a loss of 0.40m for the year ended 31 August 2003. Total
turnover increased to 17.62m, compared to 2.63m for the previous period. Furthermore our cash position remains good with 1.95m at bank. The Board does not recommend a dividend at this time.

In the Human Capital Service sector in which the hotgroup operates, underlying business value is determined by intangible elements such as the quality of customer service and retention, employee experience and the ownership of enabling technologies. The major asset of acquired businesses is therefore purchased goodwill. The Boardís policy is to write off goodwill over three years. The loss on ordinary activities after goodwill amortisation, interest and exceptional items was 3.80m, compared with 6.00m for the year ended to 31 August 2003.

Operations

Online Division

hotonline.com, the groupís online division, is now the largest network of specialist recruitment sites in the UK. The strategy continues to centre on acquiring and running the leading specialist recruitment websites that dominate their particular sector, attracting the best candidates. The online division continues to trade profitably. In the six months to 30 June 2004 it generated profits before amortisation, exceptional items, interest and taxation of 0.38m from a turnover of 2.36m. We anticipate that this strong performance will continue and will be reflected in the full year results for 2004.

The division is achieving good organic growth with renewal rates amongst our agency customers exceeding 75%. We now operate over 17 recruitment websites attracting 900,000 job seeker visits a month. Our database now has 1.3 million registered users. PlanetRecruit, hotrecruit and JobSearch continue to be hotonlineís star performers.

Our online operational platform allows us to quickly and easily integrate new businesses as they are acquired, which builds scale, while costs remain flat. Our target timetable for full integration of acquired businesses is 90 to 120 days, with revenue streams contributing to the hotgroupís profitability within this period. The increased number of online sites has driven greater traffic to the hotonline network, which in turn has lead to enhanced customer acquisition, and renewals from existing customers, increasing our selling power.

Our intention is to continue to grow our online business organically and through acquisition in order to maintain our strong position, growing scale and profitability, whilst contributing to the groupís earnings.

Traditional Division

the hotgroupís traditional recruitment business has had a good six months. The division recorded a turnover of 15.28m and profits before goodwill, amortisation, interest, exceptional items and taxation of 1.12m.

Our traditional recruitment business now comprises five businesses, Mark Education, ASA Group, Parkside Recruitment, The Buzz and ITN Teachers. the hotgroup has now built a strong presence in the educational recruitment sector .The acquisitions of ASA Group and Mark Education added to ITN, means the group has good nationwide coverage and a significant share of the London educational recruitment market. Across the traditional businesses improved technology is being deployed to drive greater efficiencies in terms of size and management of candidate databases and in terms of consolidating back office administration to maximize profits from these businesses.

Acquisitions

As I mentioned earlier we have completed six acquisitions during the first six months of this year. Comprising four online businesses, The Graduate Group Ltd, Netrecruit, JobsFinancial.com, and Gisajob.com, as well as traditional agencies ASA Ltd and Mark Education. These acquisitions have significantly strengthened the hotgroupís portfolio and sector expertise, and have taken us to a very strong position in online recruitment.

In January we completed the acquisition of The Graduate Group Limited for 400,000 in cash and shares. The site targets elite students, and took the hotgroup into a new area of the recruitment market. The acquisition of Netrecruit, a specialist online recruitment network targeting the 18-28 year old market, was completed in February for 450,000 in cash and shares. This ensured hotonline.com became the UKís leading online recruitment service for young people. The acquisitions of ASA Ltd and Mark Education Ltd were completed in May for a total of 9.7m in separate cash and share deals. ASA Ltd is a traditional recruitment consultancy that specialises in the education, legal and pharmaceutical sectors. Mark Education specialises in the recruitment of nursery nurses, classroom assistants and special educational needs teachers. The acquisition of Gisajob.com and Jobsfinancial.com were also completed in May for a total of 1,230,000 in cash and shares. Jobsfinancial.com is the UKís second largest recruitment website specialising in the finance and accountancy sectors. Gisajob.com, one of the UKís top 10 online recruitment providers, covers a range of sectors but is mainly focused on IT and technology.

Current Trading

Results of the first six months of the year are very encouraging and we remain confident that all businesses across the group will strengthen
further in the final six months to 31st December 2004. Although the summer
marks a period of no activity for our education businesses, we have
experienced a very good start to the September term. Our traditional
commercial businesses are experiencing improved new market conditions, and we also expect to see accelerating revenues and profit in our online division as acquisitions completed in May are now fully integrated.

The Future

The recruitment industry looks set to continue to be buoyant, and the hotgroup is well positioned to benefit from this growth across most recruitment sectors.

We remain committed to our growth strategy both organically and by acquisition and to successful and quick business integration of these acquired companies. We will continue to maintain and build upon our strong position in online recruitment, and pursue our strategy of building a new breed of technology-led recruitment agencies.

The shape of the mass recruitment market in the UK is changing very rapidly with customers and job seekers increasingly using online recruitment sites, just like the USA. With strongly branded sites, and a powerful complementary traditional recruitment consultancy business, the hotgroup is expanding fast, with strong revenues and earnings growth. We look forward with considerable optimism to an exponential increase in business activity in the remainder of 2004 through to 2005.