Interim Results
Matchtech Group PLC
25 April 2007
Matchtech Group plc
25 April 2007
Interim results for the six months ended 31 January 2007
Matchtech Group plc ('Matchtech' or the 'Group'), one of the UK's leading
specialist technical recruitment companies, is pleased to announce its maiden
interim results for the six months ended 31 January 2007, following its
Admission to AIM in October 2006.
Financial Highlights
• Turnover up 30% to £93.4m (2006: £72.1m)*
• Net fee income up 29% to £12.5m (2006: £9.7m)*
• Operating profit up 35% to £5.0m (2006: £3.7m)*
• Operating profit margin 5.4% (2006: 5.1%)*
• Profit before tax up 34% to £4.7m (2006: £3.5m)*
• Reported profit before tax after non-recurring items up 14% to £4.1m
(£2006: 3.6m)
• Basic earnings per share (pre non-recurring items) up 38% to 15.66p
(2006: 11.33p)
• Basic reported EPS up 18% to 13.36p (2006: 11.33p)
• Maiden interim dividend of 4.4p per share
* 2006 and 2007 results exclude the sales and profits from the US business sold
on 31 August 2006 as well as the non-recurring costs of the IPO
Operating Highlights
• Strong organic growth across all sectors (Engineering, Built Environment
and Support Services)
• Results reflect continuing strong demand for permanent placements
• 27% increase in permanent placements and 15% increase in contractor
numbers in the period
• Major Master Vendor contract secured with Mouchel Parkman
• Successful Admission to AIM in October 2006
• Adrian Gunn assumed the role of Group Managing Director on 1 February
2007
Commenting on the results, George Materna, Chairman of Matchtech said:
'We are very pleased with these results, our first as an AIM-listed company,
which show that Matchtech has continued to make strong progress on all fronts.
The markets we serve are demonstrating strong demand for qualified white collar
staff and we are continuing to develop our offering though further investment in
the business.
'There is evidence of continuing salary inflation in each of the sectors in
which we operate and the market remains candidate driven. In the Engineering and
Built Environment sectors, a shortage of suitably qualified engineers continues
to be a key factor in the marketplace, favouring our superior service delivery
capabilities which derive from our systems and people.'
'The second half has started well and we believe that we will be able to build
on what has been achieved in the first half, benefiting from our ongoing
investment in staff, systems and additional office space. We look forward with
confidence to the future.'
For further information please contact:
+----------------------------------------------------------+-------------------+
|Matchtech Group plc | 01489 898989|
+----------------------------------------------------------+-------------------+
|George Materna, Chairman | |
+----------------------------------------------------------+-------------------+
|Adrian Gunn, Group Managing Director | |
+----------------------------------------------------------+-------------------+
|Tony Dyer, Group Finance Director | |
+----------------------------------------------------------+-------------------+
|Hogarth Partnership | 020 7357 9477|
+----------------------------------------------------------+-------------------+
|John Olsen / James Longfield / Fiona Noblet | |
+----------------------------------------------------------+-------------------+
Background on Matchtech
Matchtech specialises in the provision of contract and permanent staff in the
Engineering, Built Environment and Support Services sectors across the UK.
It was established in 1984 and has grown organically to become the UK's 4th
largest technical and engineering recruitment specialist and one of the UK's 20
largest recruitment companies (Source: Recruitment International Top 100 Report
- August 2006).
Operating from a single site near Southampton, Matchtech provides predominantly
professionally-qualified candidates to clients in a broad range of industries
including oil and petrochemicals, marine, aerospace, automotive, water,
electronics, civil engineering, building structures and transport
infrastructure. It structures its business across three main sectors:
Engineering, Built Environment and Support Services.
Matchtech Group plc floated on AIM in October 2006.
MATCHTECH GROUP PLC
Interim report for the period ended 31 January 2007
Chairman's statement
Operating review
The Group continued to see strong growth across all three of its sectors,
Engineering, Built Environment and Support Services, during the first half.
H1 2007 H1 2006 Change
Engineering sector
Net fee income £6.8m £5.4m 26%
Operating profit £3.0m £2.3m 30%
Built Environment sector
Net fee income £2.8m £2.1m 33%
Operating profit £1.2m £0.9m 33%
Support Services sector
Net fee income £2.8m £2.2m 27%
Operating profit £0.8m £0.6m 33%
These results exclude any contribution from our small US business, which was
sold on 31st August 2006, as well as the non-recurring costs of the IPO, and
have been achieved through organic growth alone.
We have seen good progress in Engineering, our largest sector, where we saw a
significant increase in permanent fees, reflecting strong client demand for
candidates and continuing salary inflation. In particular demand was strong in
Oil & Gas and Pharmaceutical, where we achieved some important client wins and
contract extensions.
Built Environment saw the strongest growth and we continue to gain market share
in this sector. We have broadened our capabilities to include Architecture,
Building Services and Construction Site candidates and were delighted to enter
into a Master Vendor relationship with Mouchel Parkman towards the end of the
half, significantly expanding our involvement with this client.
Our newest sector, Support Services, continues to go from strength to strength
with a number of strategically important client wins in the period, including
British American Tobacco and the Olympic Delivery Authority. We are also
expanding our offer in the procurement sector, which is providing opportunities
for cross-selling into other parts of the Group.
We have seen strong increases in permanent placements in the half, along with an
increase in the average placement fee rates, as demand for candidates continues
to outstrip availability, and we have shown solid growth in contractor numbers
which stood at 3,900 at 31st January 2007. The Group has maintained a healthy
balance between contract and permanent placements.
H1 2007 H1 2006 Change
Permanent placements
Number of permanent placements 1,022 805 27%
Permanent fees £3.9m £2.9m 34%
Average permanent fees per placement £3,855 £3,619 7%
Contractors
Number of working contractors 3,900 3,400 15%
Contract net fee income £8.6m £6.9m 25%
Contract / Permanent Mix 69% 70%
Board Changes
On 1 February 2007 we announced that Adrian Gunn, formerly Deputy Managing
Director and Sales Director, had taken over the position of Group Managing
Director. Adrian has been fundamental to the Group's success, having joined
Matchtech as a consultant in 1988. He has been a member of the senior management
team for the past nine years and on the Board since 2004.
Adrian took over the day-to-day leadership of Matchtech from Paul Raine, who has
taken up the role of Resources Director, with responsibility for IT, operations,
marketing and compliance matters. This represents a smooth transition of
management roles, with the established core executive team of Adrian, Paul and
Tony Dyer remaining in place.
The Board thanks Paul for his past leadership and looks forward to his
continuing contribution in the revised role.
People
Our performance reflects the strength of our management team and the quality of
our staff. Their continued focus during a period of significant change as we
became a listed company, is a great testament to our strong operating culture. I
would like to thank all our staff on behalf of our new shareholders for their
contribution.
As a key feature of the Board's plans for growth, staff numbers were increased
by 23 in the period to 219. Staff attrition remained at 20%, which the Board
believes is well below the industry average.
Financial Overview
The Group achieved a strong set of results across all of its sectors in the
first half of the year, reflecting strong trading conditions in each of the
three markets we serve.
Turnover increased 30% to £93.4m (2006: £72.1m), with a similar increase of 29%
in net fee income to £12.5m (2006: £9.7m). Both years' figures are stated
excluding the results from our small US business which was sold on 31 August
2006.
Underlying operating profit (excluding profits from the US business sold in
August 2006 as well as non-recurring costs) was £5.0m, an increase of 35% (2006:
£3.7m). This reflected an increase in operating margin to 5.4% (2006: 5.1%) as
we continued to achieve greater efficiencies within the business, as a result of
the Group's single-site model. This was achieved despite continued investment in
new staff, systems and office space in the period.
Reported profit before tax was up 14% at £4.1m (2006: £3.6m) giving an increase
in basic earnings per share of 18% to 13.36p (2006: 11.33p). Underlying profit
before tax (excluding profits from the US business sold in August 2006 as well
as non-recurring items) was up 34% to £4.7m (2006: £3.5m).
Earnings per share
The Group continued to show strong growth in earnings per share.
Basic earnings per share increased by 18% to 13.36p (2006: 11.33p), with basic
earnings per share (pre non-recurring items) increasing by 38% to 15.66p (2006:
11.33p). Fully diluted earnings per share increased by 19% to 12.82p (2006:
10.77p), with fully diluted earnings per share (pre non-recurring items)
increasing by 40% to 15.03p (2006: 10.77p).
Cash flow
Cash inflows from operating activities in the period were £4.1m (2006: £7.1m)
representing cash conversion of 93% (2006: 121% excluding an increase in
creditors due to directors' loans and a decrease in debtors due to EBT loan
repayments.)
Capital expenditure was £0.5m (2006: £0.3m), with the increase being mainly due
to the fitting out of additional office space.
Net debt at 31 January 2007 was £11.5m (31 January 2006: £6.0m, 31 July 2006:
£9.5m). During the period the Group agreed a loan facility with Barclays Bank;
£4.6m was outstanding at 31 January 2007. In addition, the confidential invoice
discounting facility as at 31 January 2007 was £7.1m (2006: £6.6m)
Dividend
Reflecting the strong performance of the business in the first half, the Board
has declared an interim dividend of 4.4 pence per share. Despite the fact that
Matchtech has only been a listed company for three months of the reporting
period, the dividend is being paid in respect of the results for the full six
month period. The interim dividend will be paid on 22 June 2007 to those
shareholders on the register at close of business on 8 June 2007.
Growth strategy
The Board's strategy remains unchanged from that outlined at the time of our
Admission to AIM. We intend to maintain our stable low cost platform for growth
in our target recruitment markets, each of which benefit from strong macro
drivers, and to continue with our successful business model based around a
balanced contract/permanent mix. We aim to increase our market share and convert
appropriate contingency business into beneficial retained business. The success
of this strategy is demonstrated in the first half by extended relationships
with British American Tobacco, Exxon, Severn Trent Water, Transport for London
and Mouchel Parkman.
Outlook
Trading in the second half to date has remained encouraging. We are continuing
to invest in the business, including a significant expansion of our office space
and further investment in systems. Plans are underway to recruit a further 20
graduates in the second half. The Board is confident that Matchtech is in robust
shape and expects to be able to report sound progress in the second half.
George Materna
Chairman
25 April 2007
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the six months ended 31 January 2007
Note 6 months 6 months 12 months
to 31/01/07 to 31/01/06 to 31/07/06
Unaudited Unaudited Audited
TURNOVER £'000 £'000 £'000
Continuing operations 93,438 72,124 156,686
Discontinued operations 135 733 1,442
-------- --------- ---------
2 93,573 72,857 158,128
COST OF SALES
Continuing operations (80,933) (62,455) (135,893)
Discontinued operations (117) (604) (1,196)
-------- --------- ---------
(81,050) (63,059) (137,089)
GROSS PROFIT
Continuing operations 12,505 9,669 20,793
Discontinued operations 18 129 246
-------- --------- ---------
12,523 9,798 21,039
ADMINISTRATIVE EXPENSES
Continuing operations (7,475) (5,945) (12,554)
Discontinued operations (10) (51) (93)
Cost of Admission to AIM (572) 0 0
-------- --------- ---------
(8,057) (5,996) (12,647)
OPERATING PROFIT
Continuing operations 4,458 3,724 8,239
Discontinued operations 8 78 153
-------- --------- ---------
2 4,466 3,802 8,392
NON-RECURRING ITEM
Profit on sale of discontinued
operations 59 0 0
-------- --------- ---------
PROFIT AFTER NON-RECURRING ITEMS 4,525 3,802 8,392
Net Interest and other similar
charges (377) (242) (549)
-------- --------- ---------
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 4,148 3,560 7,843
Tax on profit on ordinary
activities 3 (1,172) (1,124) (2,098)
-------- --------- ---------
PROFIT ON ORDINARY ACTIVITIES
AFTER TAXATION 2,976 2,436 5,745
-------- --------- ---------
EARNINGS PER ORDINARY SHARE
pence pence pence
Basic 5 13.36 11.33 26.60
Diluted 5 12.82 10.77 25.56
CONSOLIDATED SUMMARISED BALANCE SHEET
as at 31st January 2007
31/01/2007 31/01/2006 31/07/2006
Unaudited Unaudited Audited
£'000 £'000 £'000
FIXED ASSETS 1,702 1,453 1,399
CURRENT ASSETS
Debtors 25,818 21,595 24,670
Cash at bank and in hand 353 626 495
--------- --------- ---------
26,171 22,221 25,165
CREDITORS
Amounts falling due within one year (18,656) (17,557) (19,313)
--------- --------- ---------
NET CURRENT ASSETS 7,515 4,664 5,852
CREDITORS
Amounts falling after one year (2,917) 0 0
--------- --------- ---------
TOTAL ASSETS LESS LIABILITIES 6,300 6,117 7,251
--------- --------- ---------
CAPITAL AND RESERVES
Called-up equity share capital 225 215 221
Share premium account 2,367 1,659 2,009
Other reserves 685 477 567
Profit and loss account 3,023 3,766 4,454
--------- --------- ---------
SHAREHOLDERS' FUNDS 6,300 6,117 7,251
--------- --------- ---------
CONSOLIDATED SUMMARISED CASH FLOW STATEMENT
for the period ended 31 January 2007
6 months 6 months 12 months
to 31/01/07 to 31/01/06 to 31/07/06
Unaudited Unaudited Audited
£'000 £'000 £'000
NET CASH INFLOW FROM OPERATING
ACTIVITIES 4,098 7,069 7,540
RETURNS ON INVESTMENTS & SERVICING
OF FINANCE (377) (243) (549)
TAXATION (1,256) (746) (2,006)
CAPITAL EXPENDITURE (528) (286) (455)
DISPOSAL OF INVESTMENT 105 0 0
EBT CAPITAL DISTRIBUTION 0 0 (1,070)
EQUITY DIVIDENDS PAID (4,414) (2,579) (4,124)
FINANCING 2,275 (3,178) 416
--------- --------- ---------
INCREASE/(DECREASE) IN CASH (97) 37 (248)
--------- --------- ---------
CONSOLIDATED SUMMARISED CASH FLOW STATEMENT
for the period ended 31 January 2007
RECONCILIATION OF OPERATING PROFIT TO
NET CASH INFLOW FROM OPERATING ACTIVITIES
6 months 6 months 12 months
Unaudited Unaudited Audited
to 31/01/07 to 31/01/06 to 31/07/06
£'000 £'000 £'000
Operating profit 4,466 3,802 8,392
Depreciation and amortisation 226 190 412
(Profit)/loss on disposal of fixed
assets 0 (4) (4)
(Increase)/decrease in debtors (1,152) 868 (2,207)
Increase in creditors 433 2,132 786
Increase in FRS20 provision 125 81 161
--------- --------- ---------
Net cash inflow from operating
activities 4,098 7,069 7,540
--------- --------- ---------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
6 months 6 months 12 months
to 31/01/07 to 31/01/06 to 31/07/06
Unaudited Unaudited Audited
£'000 £'000 £'000
Increase in cash in the period (97) 37 (248)
Net cash (inflow)/outflow from trade
debt finance (1,918) 3,223 (10)
Change in net debt (2,015) 3,260 (258)
Net debt at start of period (9,508) (9,250) (9,250)
--------- --------- ---------
Net debt at end of period (11,523) (5,990) (9,508)
--------- --------- ---------
ANALYSIS OF CHANGES IN NET DEBT
At 1 Aug 2006 Cash flows 31 Jan 2007
Audited Unaudited Unaudited
£'000 £'000 £'000
Net cash: Cash in hand and at bank 290 (97) 193
Debt: Trade debt finance (9,798) 2,665 (7,133)
Barclays Loan 0 (4,583) (4,583)
---------- --------- ---------
Net debt (9,508) (2,015) (11,523)
---------- --------- ---------
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the six months ended 31 January 2007
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
6 months 6 months 12 months
to 31/01/07 to 31/01/06 to 31/07/06
Unaudited Unaudited Audited
£'000 £'000 £'000
Profit for the period 2,976 2,436 5,745
New share capital issued 4 0 6
Premium on share capital issued 358 44 395
FRS20 reserve movement 125 81 161
Shares held by EBT 0 0 5
EBT capital distribution 0 0 (1,070)
Dividends (4,414) (2,579) (4,124)
Foreign currency translation 0 0 (2)
---------- --------- --------
Net increase/(decrease) to funds (951) (18) 1,116
Opening shareholders' funds 7,251 6,135 6,135
---------- --------- --------
Closing shareholders' equity funds 6,300 6,117 7,251
---------- --------- --------
NOTES
forming part of the financial statements
1 BASIS OF PREPARATION OF INTERIM FINANCIAL INFORMATION
The interim financial information does not constitute statutory accounts for the
purpose of Section 240 of the Companies Act 1985. The financial statements for
the year ended 31 July 2006 have been delivered to the Registrar of Companies
and include an auditor report which was unqualified and did not contain a
statement under section 237 (2) and (3) of the Companies Act 1985
The interim financial information has been prepared using the same accounting
policies and estimation techniques as set out in the group accounts for the year
ended 31 July 2006.
2 SEGMENTAL & GEOGRAPHIC INFORMATION
The turnover and profit before tax are attributable to the one principal
activity of the company.
(i) Segmental
6 months 6 months 12 months
to 31/01/07 to 31/01/06 to 31/07/06
Unaudited Unaudited Audited
£'000 £'000 £'000
A segmental analysis of turnover is given below:
Engineering 59,990 47,108 101,989
Built Environment 18,629 14,632 31,617
Support Services 14,819 10,384 23,080
Discontinued Operations 135 733 1,442
--------- --------- ---------
Total 93,573 72,857 158,128
--------- --------- ---------
A segmental analysis of net fee income is given below:
Engineering 6,844 5,378 11,679
Built Environment 2,824 2,103 4,544
Support Services 2,837 2,188 4,570
Discontinued Operations 18 129 246
--------- --------- ---------
Total 12,523 9,798 21,039
--------- --------- ---------
A segmental analysis of operating profit is given below:
Engineering 2,992 2,263 5,332
Built Environment 1,230 909 1,679
Support Services 808 552 1,228
Discontinued Operations 8 78 153
IPO Costs (572) 0 0
--------- --------- ---------
Total 4,466 3,802 8,392
--------- --------- ---------
(i) Geographic
6 months 6 months 12 months
to 31/01/07 to 31/01/06 to 31/07/06
Unaudited Unaudited Audited
£'000 £'000 £'000
A geographic analysis of turnover is given below:
United Kingdom 93,438 72,124 156,686
Overseas 135 733 1,442
--------- --------- ---------
Total 93,573 72,857 158,128
--------- --------- ---------
A geographic analysis of net fee income is given below:
United Kingdom 12,505 9,669 20,793
Overseas 18 129 246
--------- --------- ---------
Total 12,523 9,798 21,039
--------- --------- ---------
A geographic analysis of operating profit is given below:
United Kingdom 4,458 3,724 8,239
Overseas 8 78 153
--------- --------- ---------
Total 4,466 3,802 8,392
--------- --------- ---------
3 TAX ON PROFIT ON ORDINARY ACTIVITIES
Analysis of charge in the year 6 months 6 months 12 months
to 31/01/07 to 31/01/06 to 31/07/06
Unaudited Unaudited Audited
£'000 £'000 £'000
Current Tax: UK corporation tax 1,207 1,108 2,058
Foreign Tax 3 40 89
--------- --------- ---------
1,210 1,148 2,147
Deferred tax on timing
differences (38) (24) (49)
--------- --------- ---------
Tax on profit on
ordinary activities 1,172 1,124 2,098
--------- --------- ---------
The current tax charge is lower than the standard rate of corporation tax. The
differences are detailed below:
Profit on ordinary activities before taxation 4,148 3,560 7,843
Corporation Tax at current rate 30% 1,244 1,068 2,353
Disallowable flotation costs 172 0 0
Profit on Sale of US business (18) 0 0
Disallowable expenses 117 97 194
Capital Allowances (60) (57) (109)
Cost of share options granted in the period (251) 0 (340)
Other 3 0 (40)
--------- --------- ---------
Current UK Tax Charge 1,207 1,108 2,058
--------- --------- ---------
4 DIVIDENDS
Dividends on shares classed as equity: 6 months 6 months 12 months
to 31/01/07 to 31/01/06 to 31/07/06
Unaudited Unaudited Audited
£'000 £'000 £'000
Paid during the period
Equity dividends on ordinary shares 4,414 2,579 4,124
--------- --------- ---------
5 EARNINGS PER SHARE
Earnings per share has been calculated by dividing the consolidated profit after
taxation attributable to ordinary shareholders by the weighted average number of
ordinary shares in issue during the period.
Diluted earnings per share has been calculated, on the same basis as above,
except that the weighted average number of ordinary shares that would be issued
on the conversion of all the dilutive potential ordinary shares (arising from
the Group's share option schemes) into ordinary shares has been added to the
denominator. There are no changes to the profit (numerator) as a result of the
dilutive calculation.
The earnings per share information has been calculated as follows:
6 months 6 months 12 months
to 31/01/07 to 31/01/06 to 31/07/06
(restated) (restated)
Unaudited Unaudited Audited
Profits £'000 £'000 £'000
Profit on ordinary
activities after taxation
attributable to ordinary
shareholders 2,976 2,436 5,745
Non-recurring items 513 0 0
---------- --------- ---------
Profit on ordinary
activities after taxation
(pre non-recurring) 3,489 2,436 5,745
---------- --------- ---------
Number of Shares 000's 000's 000's
Weighted average number of
ordinary shares in issue 22,277 21,499 21,600
Effect of dilutive
potential ordinary shares
under option 939 1,125 883
---------- --------- ---------
23,216 22,624 22,483
---------- --------- ---------
Earnings per Share pence pence pence
Earnings per ordinary share - Basic 13.36 11.33 26.60
- Diluted 12.82 10.77 25.56
Earnings per ordinary share
(pre non-recurring) - Basic 15.66 11.33 26.60
- Diluted 15.03 10.77 25.56
AUDITORS REPORT
We have been instructed by the company to review the financial information for
the six months ended 31 January 2007 which comprise the summary profit and loss
account, balance sheet, cash flow statement and the related notes on pages 2 to
8. We have read the other information contained in the interim report which
comprises only the Chairman's Statement and considered whether it contains any
apparent misstatements or material inconsistencies with the financial
information. Our responsibilities do not extend to any other information.
This report is made solely to the company's members as a body in accordance with
guidance contained in APB Bulletin 1999/4 'Review of Interim Financial
Information'. Our review work has been undertaken so that we might state to the
company's members those matters we are required to state them in a review report
and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company and the
company's members as a body, for our review work, for this report, or for the
conclusion we have formed.
Directors' Responsibilities
The interim report including the financial information contained therein is the
responsibility of, and has been approved by, the directors. The Listing Rules of
the Financial Services Authority require that the accounting policies and
presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where any changes, and
the reasons for them, are disclosed.
Review Work Performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of Interim Financial Information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists primarily of making enquiries
of management and applying analytical procedures to the financial information
and underlying financial data and based thereon, assessing whether the
accounting policies and presentation have been consistently applied unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with United
Kingdom auditing standards and therefore provides a lower level of assurance
than an audit. Accordingly we do not express an audit opinion on the financial
information.
Review Conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 January 2007.
GRANT THORNTON UK LLP
Chartered Accountants & Registered Auditors
Manor Court
Barnes Wallis Road
Fareham
PO15 5GT
12 April 2007
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