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RNS Number : 4314A
Matchtech Group PLC
08 October 2009
8 October 2009
Matchtech Group plc
Preliminary Results for the year ended 31 July 2009
Matchtech Group plc ("Matchtech" or the "Group"), one of the UK's leading
specialist technical recruitment companies, today announces its Preliminary
Results for the year ended 31 July 2009.
Financial Headlines
* Revenue up 4% to £269.6m (2008: £258.8m)
* Net Fee Income (NFI) down 9% to £30.3m (2008: £33.2m), with H1 up 8%, H2 down
23%
* Operating profit of £11.6m (2008: £13.8m)
* Gross profit margin of 11.2% (2008: 12.8%)
* Profit before tax of £11.3m (2008: £12.8m)
* Basic EPS of 34.4p (2008: 39.3p)
* Final dividend maintained at 10.6p per share, giving an unchanged total
dividend of 15.6p per share
* Net debt reduced to £1.2m (2008: £3.1m)
* Group continues to generate positive cash flow at an operating level
Operational Headlines
* Pressure on contractor pay rates and margins across all sectors, particularly
in H2.
* Business mix has shifted towards contract recruitment which now represents
73% of the Group's NFI (2008: 67%).
* Cost base proactively managed; staff headcount reduced by 20% and annualised
savings of approximately £1.7m expected to be realised in the year ending July
2010.
* Recent launch of long-term growth projects:Launch in July of "elemense", a
new brand that will enable us to deliver Recruitment Process Outsourcing (RPO)
services to a broader client base.Matchtech GmbH set up in Stuttgart in June to
focus on developing business within the German engineering markets.
Commenting on the results, George Materna, Chairman of Matchtech said:
"Current trading is in line with the Board's expectations with average weekly
permanent placement fees in August and September the same as the average
throughout 2009 Q4, although there is still little visibility. The contract
business has, as expected, been more resilient and is showing signs of growth
with contractor numbers at the end of September 4,630 compared with 4,500 at the
end of July, although we continue to experience margin pressure.
"The early actions we have taken to reduce costs have demonstrated our ability
to endure the demanding economic conditions and still deliver good levels of
profitability and cash flow performance.
"It is difficult to predict how and when demand for recruitment services will
progress from the current subdued level. However, our balance sheet remains
strong, with low levels of net debt, the cost base remains tightly managed and
our mix of Contract and Permanent business provides resilience and the necessary
scope for accelerated growth in any economic upturn. Add to this the selected
growth initiatives we are planning to undertake in the current financial year,
and I believe that Matchtech is well placed to deal with short term market
conditions and to capitalise on opportunities in the medium term."
For further information please contact:
Matchtech Group plc 01489 898989
George Materna, Chairman
Adrian Gunn, Chief Executive Officer
Tony Dyer, Chief Financial Officer
Hogarth Partnership 020 7357 9477
John Olsen / Ian Payne / Jenny Fisher
Arbuthnot Securities
James Steel 020 7012 2000
Background on Matchtech
Established in 1984, Matchtech specialises in the provision of contract and
permanent staff and has grown organically to become one of the UK's leading
technical and professional recruitment specialists.
Operating from a single site near Southampton, Matchtech provides predominantly
professionally-qualified candidates to a broad range of clients across the UK in
the Engineering, Built Environment and Professional Services sectors.
Chairman's Overview
1 August 2009 saw Matchtech mark its 25th anniversary. Over the last ten years
we had become used to a sustained upward trend resulting in compound annual
growth of 20% in both Net Fee Income ("NFI") and operating profit.
The significantly and progressively weaker trading environment in 2009 has meant
that we have been unable to maintain that positive record. Nonetheless, our
resilient business model has allowed us to endure the demanding economic
conditions and still deliver acceptable levels of profitability and cash flow.
Trading Performance
Revenue was £269.6 million, up 4% on 2008 (H1: up 18%, H2: down 7%), with NFI of
£30.3 million down 9% (H1: up 8%, H2: down 23%). Operating profit and Profit
before tax were down 15% and 12% to £11.6 million and £11.3 million
respectively, with Profit before tax in H1 up 7% and in H2 down 27%. Basic
earnings per share fell from 39.34 pence to 34.37 pence, down 13%.
Our single site model enabled us to react quickly to the weakening market
conditions. We froze all capital expenditure in H2 resulting in the total for
the year being 57% down on 2008, and we reduced headcount by 20% to 263 at the
year end, resulting in an even leaner business than we had before.
The Group has a high degree of variable staff remuneration which results in the
Group's operating costs moving in response to changing market conditions. NFI
conversion rate, while down to 38.6% compared to 41.6% in 2008, still stands at
a very respectable rate when compared with our peers.
Net Debt
In difficult trading conditions we have continued to focus on billing and cash
collection. Cash generation has again been strong and our net debt has reduced
by £1.9 million to £1.2 million at 31 July 2009 (31 July 2008: £3.1 million).
Dividends
The Board's dividend policy aims to provide an annual dividend level which we
believe can be sustained through the economic cycles. I am pleased to confirm a
proposed final dividend for the year of 10.6 pence per share, which when added
to the interim dividend of 5.0 pence, makes a total dividend for the year of
15.6 pence per share, the same as last year, providing dividend cover of 2.2
times (2008: 2.5 times). The final dividend, if approved by shareholders at the
Annual General Meeting to be held on Friday 20 November 2009, will be payable on
Friday 4 December 2009 to shareholders on the register on 6 November 2009.
People
The Group's performance is a testament to the spirit and determination of our
high quality staff, at all levels and in all areas. There is a sustained high
performance culture across the group created by the enthusiasm, the dedication,
the professionalism and the desire to succeed from all of our experienced
management and staff.
The Board would like to congratulate David Rees and Keith Lewis, who both
started with us 18 years ago, on their promotion to the Group's executive
management team on 1 August 2009, and would like to thank former Resources
Director Paul Raine, who left us in February 2009, for his contribution to the
development of Matchtech over the past 19 years.
We continue to show a commitment to clients, candidates and contractors that
gives us a significant competitive advantage. On behalf of the Board, I would
like to thank the whole of the Matchtech team for their continued commitment and
hard work.
The Board would also like to thank our loyal and hard working contractors who
have provided our clients with an exemplary service.
Strategy and Outlook
We have continued our strategy of working in our well established industry
sectors and cross-selling within our highly diversified client base. This has
resulted in a degree of resilience in the contract business although activity in
the permanent business has been harder hit.
It is difficult to predict how and when demand for recruitment services will
progress from the current subdued level, particularly given the likely
reductions in UK Public Expenditure after the General Election in 2010.
Permanent placements in 2010 Q1 continue to weaken, albeit at a slower pace, and
provide little or no visibility. The contract business has, as expected, been
more resilient and is showing some signs of growth in numbers, although we
continue to experience margin pressure.
We remain committed to the long term growth strategy set out at the time of our
admission to AIM in 2006. In pursuit of this, we are undertaking a number of new
strategic growth initiatives in the current year, which will develop our service
offering and start to expand our geographic footprint. These are covered in some
detail in the Chief Executive Officer's Review.
We have an experienced long serving management team, who have driven us to our
strong market positions, maintaining the right balance for the revenue being
generated between fee earners, the engine of the business for today and for the
future, and the support staff required to deliver the quality of service. The
balance sheet is strong, with low levels of net debt, and the early actions we
have taken to reduce costs have demonstrated our ability to endure the demanding
economic conditions and still deliver good levels of profitability and cash flow
performance.
The Board believes our mix of Contract and Permanent business provides
resilience and the necessary scope for accelerated growth in any economic
upturn. Add to this the selective initiatives we are undertakeing in the current
financial year, and we believe that Matchtech is well-placed to deal with short
term market conditions and to capitalise on opportunities in the medium term.
George Materna FIRP FCIPD
Chairman
Chief Executive Officer's Review
This has truly been a year of two halves. After a strong H1 when we delivered
Net Fee Income ("NFI") growth of 8%, the slowdown in the economy had a
significant effect on our second half performance, with H2 NFI falling 23%. In
the face of these conditions, we took proactive action on our cost base, as a
result of which we have posted solid results for the year as a whole.
Business Review
The year started strongly and despite the market softening in Q2, we delivered
solid contract NFI growth in H1 of 12% and permanent fee growth of 2%, resulting
in growth in NFI and Profit before tax of 8% and 7% respectively.
In line with the overall UK recruitment sector, H2 became increasingly
challenging.
Demand for our permanent recruitment services was particularly hard hit, with H2
NFI of £3.1m compared to £5.2m in H1. Our contract business was more resilient
to the downturn as we would expect, and here we saw the number of contractors on
assignment falling by 5% from 4,765 at the start of the year to end the year at
4,500. All sectors have seen pressure on margins and reductions to contractor
pay rates, reducing our average timesheet value by 8% in July 2009 compared with
July 2008.
Due to the decline in permanent revenue, our business mix has shifted towards
contract recruitment in the period which now represents 73% of the Group's NFI
(2008: 67%).
During the period our top 50 clients accounted for 42% of the Group's NFI
compared to 54% last year. VT Group (including its joint ventures Flagship
Training and bVT Surface Fleet) (6%), Mouchel Group (3%) and Transport for
London (including Metronet) (4%) were our three largest clients. Our Master
Vendor contract with Mouchel Group was extended for a further three years and
our largest contract win was a Master Vendor agreement with a new client,
Invensys Process Systems.
We have been efficient in managing our cost base with the changing environment.
The Group's remuneration strategy from sales consultants through to management
remained strongly biased towards variable over fixed remuneration. Our IT
technology continued to deliver operational efficiencies and our proven single
site strategy ensured our costs remained under effective control.
At the start of H2 we were proactive in reducing our headcount in response to a
difficult trading environment. Staff numbers have been reduced by 20% from a
peak of 330 in December to 263 at the year end with reductions in both sales and
support staff. Whilst we will continue to manage our headcount closely, we are
committed to ensuring we do not cut into the muscle of the business thereby
hampering our ability to bounce back strongly as and when markets recover.
Engineering Sector
Engineering, our largest and most established sector, has been the most
resilient in the second half of the year. Contract NFI was up 6% in H1 but fell
12% in H2. Permanent fees were up 19% in H1 but down 38% in H2 and, overall, the
sector was down 11% for the year.
Automotive saw the sharpest slowdown in recruitment activity with an 18% fall in
NFI for the year, contract NFI being down 16% and permanent fees down 25%. The
remaining engineering markets remained fairly resilient particularly in the
Defence, Oil & Gas and Marine areas which were essentially unchanged with slight
growth in contract NFI balancing out a small fall in permanent fees.
The Oil & Gas team focuses on the Offshore, Subsea and Petrochemical markets.
This marketplace has been affected by the huge fall in the price of crude oil
which impacted on pay rates, margins and ultimately temporary and permanent
requirements.
The signs are that the marketplace may pick up again in 2010 and we believe that
we have positioned ourselves to capitalise on such a change due to our wide
client base across the Operators, Contractors, Consultants, Equipment
Manufacturers and Subsea specialists. We won major contracts at Honeywell and
Invensys, from both of which we expect to see high demand for both UK and
overseas based contractors.
The Power & Nuclear team have been focussing on client development work and we
anticipate seeing growth in the areas of renewable energy and "new build" in the
coming year. The Government's recent announcement of major investment in the UK
nuclear infrastructure marketplace (including four new EPR reactors) should
provide a solid platform for the coming year.
The Automotive market saw major pressures this year as a result of the economic
climate and our contractor numbers reduced by some 60%, in line with the decline
in new car sales. Our main clients are anticipating recruiting again in the
second quarter of our current year. We are in a mature position within this
marketplace, having first tier access to the main Original Equipment
Manufacturers (OEM's), allowing for strong growth in contractor numbers and
permanent placements when the market turns.
Aerospace is traditionally better protected against the immediate effects of
such recent downturns due to the relatively low volume and long lead times of
aircraft purchases, and the need for ongoing maintenance and repair work to
ensure airworthiness. This year has seen us maintain our contractor base and
currently see continued activity within our major Military clients, who are
still fully financed, but anticipate continued pressure within the Commercial
sector.
The Marine team have experienced another successful year, predominantly based
upon their 97% fulfilment rate on our Master Vendor accounts across both blue
and white collar recruitment. Major projects include the CVF (aircraft carrier),
OPV export projects and the Astute Class submarines and this coming year we are
also anticipating work on the FSC (Future Surface Combatant) and the Successor
submarine, subject to government funding.
The Pharmaceutical marketplace stayed fairly resilient during the year, whereas
the Food and Medical areas were affected by the slowdown. However with our
specialist focus and relatively small marketshare, we are looking forward to
growth in the coming year.
Built Environment Sector
It has been a tough year for the Built Environment Sector. The Construction
Industry is traditionally one of the first to be affected by a recession and is
often the hardest hit.
The economic slowdown has significantly affected demand for recruitment services
from our customers, particularly in the buildings arena. Contract NFI was up 13%
in H1 but down 22% in H2, ending down 6% for the year. Worst affected were
permanent fees which saw the earliest sign of the slowdown, down 33% and 67% in
H1 and H2 respectively, and down 50% overall for the year.
There appear to be some recent early signs private investment in large
commercial building projects. Existing investment commitments are in place for
the completion of the London 2012 Olympics infrastructure, and improvements
across the rail network, although we will have to wait until 2010 for any
increase in activity in the water industry.
As in the Engineering Sector, we have taken the opportunity during this slowdown
to reassess our priorities, carrying out some changes to our structure to ensure
we are in as strong a position as possible for when the market turns. New
industry-focused departments have been created to ensure greater clarity for the
clients' and a more focused approach to major projects.
Highways maintenance projects and improvements to traffic and transportation
links remain important, particularly across London in the run up to the 2012
Olympics and we should continue our success in this field despite downward
pressure on margins from neutral vendor organisations preferred by local
authorities. Private sector clients are involved in the 'area maintenance'
contracts across the country and we are also exploring opportunities on the M25
widening project, which should gather pace this year.
Significant investment in London Underground improvements and Crossrail, have
presented an excellent opportunity for growth in the Rail industry. We have
worked hard to position ourselves to supply TfL (including Metronet) and
Tubelines, as well as the consultants and contractors involved with these
projects.
The water area has entered a 'lull' as the AMP4 cycle of investment ends and
AMP5 starts in April 2010. We are well positioned to benefit from any early
investment and ramp-up in work as we have secured valuable PSL agreements with
the main clients across the industry.
The buildings marketplace has been the worst hit area of the industry and yet
also poses the greatest opportunity for recovery. Due to the number of
redundancies in this sector, clients will certainly need to recruit to deal with
any upturn in workload and we are closely monitoring investment programmes such
as Building Schools for the Future (BSF), BAA, MoD and the Olympics.
Professional Services Sector
2009 has seen further evolution of our Professional Services sector which has
experienced the lowest fall in NFI across all three sectors of only 4% for the
year, up 19% in H1 and down 22% in H2. Contract NFI was up 18% for the year, 36%
up in H1 and 5% in H2. However, permanent fees fell 47% in H2 following 2%
growth in H1, finishing 24% down for the year.
Our diligent attention to high quality service delivery and a structured
approach to client development have given us a clear focus on developing long
term relationships. By prioritising business development within our established
clients, the Matchtech client base and the NHS, we have managed to strengthen
our client experience even while recruitment levels have fallen.
With a broad client base we have moved with the rise and fall in demand from
different markets and over 70% of our current contractors are now working within
the Public Sector or on publicly funded projects.
Supporting Matchtech Engineering and Built Environment clients is key and we
have placed significant numbers at our major clients and across the NHS where we
are now the number one provider to five of the eleven Strategic Health
Authorities.
Whilst it has been a challenging twelve months for the Procurement and Supply
Chain team we have developed a number of new and existing client relationships
through a strong focus on achieving Preferred Supplier status ahead of the
upturn in the market.
It has been a successful year for the Education & Training team with our
permanent billing having more than doubled as we broaden our client base and
increase our market presence.
Q4 has seen a greater challenge as cuts in public funding have affected the
training market. Simultaneously, however, the government has released additional
funding to re-train the unemployed and assist them in returning to the
workplace. Our focus for the next year is on developing relationships with the
organisations that have been awarded these contracts, as well as increasing our
presence amongst FE Colleges.
After an excellent start to the year Sales & Marketing have had a challenging
time with key clients approaching recruitment with increased caution. We remain
focussed on working within technical markets, mirroring the markets covered by
Matchtech's Engineering Sector.
Our key clients in the Human Resources, Accountancy & Finance and Admin teams
continue to be Matchtech Master Vendor clients. We will continue to seek to grow
our market presence by focusing further on Matchtech's existing clients.
Long-term Strategy for Growth
When Matchtech floated on AIM in 2006 our strategy for long-term growth was
focused on the UK market and building on our successful business model; trade in
a diverse range of technical and professional industry sectors; keeping a
healthy balance of Contingency, Preferred Supplier and Master Vendor
relationships; maintaining a contract focus that delivers strong net fee income
conversion; and retaining a low cost base through our single site and IT
strategies.
There continue to be good prospects for growth in our core technical sectors
which currently account for approximately 90% of Group NFI. Additionally, this
year we have started to implement selective initiatives to further develop this
strategy.
elemense - RPO (Recruitment Process Outsourcing) Solution Provider
Recruitment is becoming ever more sophisticated. Customers are looking to
outsource more of their HR activities and are expecting their recruitment
partner to deliver continuous improvement, value added services and creative
recruitment solutions.
Over the last six years we have been enhancing our Master Vendor solutions. Our
Managed Service Division has provided account management support and value added
services to clients whilst our service delivery teams focused on candidate
attraction. Whilst this model has been very successful, as demonstrated by our
high direct fulfilment rates, it
does have inherent limitations.
Accordingly we have launched elemense as a new brand for our Managed Service
Division to enable us to better respond to the needs of the marketplace.
Elemense enables us to deliver RPO services to a broader and more diverse client
base. elemense's remit is unique within the Group, providing clients with a
totally bespoke recruitment outsourcing service. The creation of elemense will
allow us to develop our recruitment outsourcing service to encompass managed
agency, neutral vendor and fully integrated RPO solutions as well as refining
our current Master Vendor offering. Whatever the nature of the outsourcing
solution, elemense will seek to provide the concept, design and delivery of
these processes.
Inform (Recruitment Management System)
Inform is a recruitment management system that has been developed in-house as a
tool to support our Master Vendor solutions and manage our 2nd tier supply
chain. A streamlined version of Inform has been re-engineered and is now
available to all contingency and preferred supplier clients, enhancing our
recruitment processes through people and technology working efficiently
together.
Inform is a web based portal which facilitates the flow of information ensuring
shared knowledge throughout the recruitment process. It allows clients to track
the status of their vacancies on a 24/7 basis. It enables the client to view and
modify their vacancy, view candidate CVs, arrange interviews and provide
candidate feedback.
We see the advantage of offering this IT platform to all clients as a free value
added service, helping to differentiate us from our competitors and protecting
our margins through quality of service.
elemense
The development of our services under the elemense brand to encompass managed
agency, neutral vendor and fully integrated RPO will ensure we provide bespoke
recruitment solutions four our clients.
International Recruitment
The Group has taken a positive step into mainland Europe, selecting Germany as
its first target country. Matchtech GmbH will focus on developing business
within the German engineering markets, particularly within the Aerospace,
Energy, Pharmaceutical and Automotive sectors.
Based in Stuttgart, our team will target new business as well as leveraging
existing relationships with Matchtech's UK client base to accelerate growth.
The business will target both permanent placements and "labour leasing"
operations (the equivalent of contract recruitment) and will use the existing
database of UK candidates where possible while we develop a robust and high
quality database of German engineers.
Whilst we will face challenges in the competitive German market, we believe the
country's technical strength and capabilities present a real opportunity in the
medium term.
By incorporating the best elements of our UK business model and adapting them to
the German market we believe this can develop into a growing profit centre for
Matchtech over the coming years.
Business development
To improve the quality of our business development activities we have made a
strategic investment in additional headcount and capability, especially within
our bids team. Recruitment partnering and collaboration is dominating our bid
and tender activity and we have taken a strategic view to submit a number of
joint bids with both clients and partners.
I would like to thank all contractors and consultancies that have worked with
Matchtech this year. With the quality service they deliver we are able to foster
and maintain strong relationships with our clients.
We are a young and vibrant organisation. Although we have a seasoned management
team, many of our young graduate consultants have not encountered trading
conditions similar to those we are experiencing at present. These challenging
times have tested our staff and I am pleased to report that they have exceeded
our expectations. Energy, enthusiasm, honesty and integrity along with team
working and fun are Matchtech's values and this culture has been the fundamental
reason why we continue to develop strong client relationships and candidate
loyalty.
We have a resilient and flexible business model, a focused and talented team of
people, and we are putting in place important elements of our longer term growth
strategy. I am therefore confident that as the economic conditions improve
Matchtech will come out of these challenging times a better equipped and more
diverse organisation with stronger foundations for rapid growth.
Adrian Gunn FIRP
Chief Executive Officer
Chief Financial Officer's Report
In a year of tough trading conditions Matchtech has posted solid profits, and
generated enough cash to maintain its dividend and reduce debt.
Consolidated Income Statement
Matchtech's resilient business model has enabled us to adapt and change quickly
with the economic slowdown, managing our cost base efficiently so as to minimise
the impact of lower Net Fee Income ('NFI').
Headcount and costs have been reduced to levels commensurate with the prevailing
market conditions and remain under regular review.
Revenue for the year increased to £269.6m, up 4% (2008: £258.8m) with H1 up 18%
and H2 down 7%.
We experienced NFI growth in H1 of 8%, but the effects of the recession filtered
through in H2 with NFI down by 23%.
NFI fell to £30.3m, down 9% (2008: £33.2m), mainly due to the fall in the volume
of permanent fees but also reflecting the pressure from margin reductions
demanded by clients.
Gross profit margin fell to 11.2% (2008: 12.8%). Gross profit margin on contract
income fell from 2008: 9.0% to 2009 8.4%. In H1 gross profit margin on contract
income was 8.6% and in H2 8.2%.
There was a significant fall in demand in the permanent marketplace in both Q3
and in Q4; further information is provided in the Business Review within the
Chief Executive's Review, which forms part of the Directors' Report.
This has caused a change in our business mix with 73% (2008: 67%) of NFI derived
from recurring contract income and 27% (2008: 33%) from permanent placements. We
continue to be a contract led business but still maintain a healthy balance
between contract and permanent business.
Despite the slowdown, the management of our cost base has allowed us to maintain
high net fee income conversion to operating profit. Our low cost single site
operating model has allowed us to flexibly manage our overheads.
A reduction in staff numbers, the ability to transfer good staff within the
single site to busier sectors and the high variable proportion of staff
remuneration has mitigated some of the loss of net fee income. The one-time
costs of the staff reductions were less than £0.1m and are not considered
exceptional. The savings in the year were c£0.4m with full year expected savings
in 2010 of c£1.7m. In July 2009 the Board took the difficult decision, based
upon the current economic conditions and the staff reductions made, not to award
annual pay increases effective from 1 August 2009, apart from promotions.
Advertising and marketing costs have fallen as the number of available
candidates has increased. Costs in H2 of £0.4m were one third lower than 2008
H2, with expected full year savings in 2010 of c£0.4m.
There was also a write back of previous years' IFRS2 share based payment charges
of £0.6m in respect of the 2006 and 2007 Long Term Incentive Plan ('LTIP') share
option grants to staff, with the 2006 LTIP grant having lapsed due to both the
EPS target and Total Shareholder Return target not being met and the 2007 LTIP
grant now considered highly unlikely to vest. The current year charge is a
further £0.5m lower than it would have been had the options remained likely to
vest in full.
Operating profit fell by 15% to £11.6m (2008: £13.8m). H1 was up by 3% and H2
down by 30%. NFI conversion to operating profit remained very respectable at
38.6% down from 41.6% in 2008.
Finance costs have fallen to £0.4m (2008: £1.0m) due to lower interest rates
and, as we continue to generate cash, reduced net debt.
Profit before tax fell by 12.0 % to £11.3m (2008: £12.8m).
The effective tax rate for the year was 29% (2008: 29.0%) giving profit after
tax of £8.0m, down 12% (2008: £9.1m).
Basic Earnings Per Share fell by 13% to 34.37p (2008: 39.34p) and Diluted
Earnings Per Share by 10% to 34.35p (2008: 38.25p).
Dividends
The Board has proposed a final dividend for the year of 10.6 pence per share
which, if approved by shareholders at the Annual General Meeting to be held on
Friday 20 November 2009, will be payable on 4 December 2009 to those
shareholders registered on 6 November 2009. This makes a total dividend for the
year of 15.6 pence per share (2008: 15.6 pence) when added to the interim
dividend of 5.0 pence per share, giving a dividend cover of 2.2 times (2008: 2.5
times).
Between 1 December 2003 and 30 June 2009, the Company paid dividends amounting
to £20.2m. Although the company had sufficient distributable reserves to make
each dividend payment, the relevant interim accounts reflecting these profits
were not prepared and filed at the appropriate time with the Registrar of
Companies as required by the Companies Acts 1985 and 2006. Consequently payment
of £15.7m of those dividends, including the £3.626m paid in the year to 31 July
2009, did not comply with the technical requirements of the Companies Acts 1985
and 2006. Since 31 July 2009, as a matter of good governance and to reflect the
adequacy of distributable reserves, interim accounts have been filed with the
Registrar of Companies, and the Company will put a resolution to the
shareholders at the forthcoming AGM for their approval to take the necessary
steps to remedy the situation. Further information will be provided in the
notice of the AGM. These accounts have been drawn up on the basis that the
infringement referred to above is regularised by the actions to be proposed to
shareholders at the forthcoming AGM. The proposals do not affect the results of
the Group for the year to 31 July 2009, its net assets at 31 July 2009, nor its
ability to pay future dividends.
Group Balance Sheet
Group net assets stood at £21.2m (2008: £17.1m).
The Company had 23.3m fully paid ordinary shares in issue at 31 July 2009 (2008:
23.2m).
Current debtor days at the year end, based upon the preceeding three months
revenue, were 41.7 days (31 July 2008: 40.1 days; 31 January 2009: 41.8 days).
At 31 July 2009 £0.2m (2008: £0.3m) of the £33.0m debtor book were greater than
60 days overdue, less than 0.5%.
Capital Expenditure
The Board took swift action in November, with the first signs of the recession
affecting Matchtech, to significantly reduce capital expenditure. Since
September no new cars and only essential office and computer equipment have been
purchased resulting in capital expenditure in the year of £0.4m (£0.4m in H1 and
£0.0m in H2) 50% down on 2008.
Net Debt
Net debt fell by £1.9m to £1.2m (2008: £3.1m).
The Group operates a Confidential Invoice Discounting facility with Barclays
Bank plc, committed until March 2011. The facility ceiling currently stands at
the lower of £20m or 90% of qualifying invoiced debtors. The Group also has a
£7.5m Revolving Credit facility with Barclays Bank plc, committed until May
2011.
At 31 July 2009 the balance on the Confidential Invoice Discounting Facility was
£1.5m and the borrowings from the Revolver Credit facility were zero. The
utilisation of all borrowing facilities as at 31 July 2009 was less than 6%.
Group Cashflow
The Group continues to be cash generative at an operating level. Operating cash
conversion in 2009, defined by net cash inflow from operating activities as a
percentage of operating profit, was 83% (2008: 108%).
Group financial risk management
The Board reviews and agrees policies for managing financial risks. The Group's
finance function is responsible for managing investment and funding requirements
including banking and cash flow monitoring. It seeks to ensure that adequate
liquidity exists at all times in order to meet its cash requirements.
The Group's strategy is to finance its operations through a mixture of cash
generated from operations and, where necessary, equity finance and borrowings by
way of bank facilities and confidential sales ledger financing.
The Group's financial instruments comprise borrowings, cash and various items,
such as trade receivables and trade payables, that arise from its operations.
The main purpose of these financial instruments is to finance the Group's
operations. The Group does not trade in financial instruments. The main risks
arising from the Group's financial instruments are described below.
* Liquidity and interest rate risk
The Group had net debt of £1.2m at the year end, comprising £1.5m of debt less
£0.3m of cash.
The Group's exposure to market risk for changes in interest rates relates
primarily to the Group's bank loan and sales financing facility debt
obligations. Bank interest is charged on a floating rate basis.
* Credit risk
The Group trades only with recognised, creditworthy third parties. Receivables
balances are monitored on an ongoing basis with the result that the Group's
exposure to bad debts is not significant. There are no significant
concentrations of credit risk within the Group, with no single debtor accounting
for more than 3% of total receivables balances at 31 July
2009.
* Foreign currency risk
The Board considers that the Group does not have any material risks arising from
the effects of exchange rate fluctuations.
Tony Dyer FCMA
Chief Financial Officer
CONSOLIDATED INCOME STATEMENT
for the year ended 31 July 2009
2009 2008
Note £'000 £'000
Revenue 269,581 258,830
Cost of Sales (239,314) (225,596)
GROSS PROFIT 2 30,267 33,234
Administrative expenses (18,622) (19,442)
OPERATING PROFIT 3 11,645 13,792
Finance income 9 79
Finance cost 5 (376) (1,074)
PROFIT BEFORE TAX 11,278 12,797
Income tax expense 8 (3,288) (3,705)
PROFIT FOR THE PERIOD 7,990 9,092
EARNINGS PER ORDINARY SHARE
2009 2008
Note pence pence
Basic 9 34.37 39.34
Diluted 9 34.35 38.25
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 July 2009
A) GROUP
Share Capital Share premium Other reserve Share based payment reserve Retained Earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
At 1 August 2007 230 2,829 224 386 7,154 10,823
Profit for the year 0 0 0 0 9,092 9,092
Total recognised income/expense for the year 0 0 0 0 9,092 9,092
Dividends in the year 0 0 0 0 (3,310) (3,310)
Deferred tax movement re share options 0 0 0 0 (296) (296)
IFRS2 credit 0 0 0 539 0 539
IFRS2 reserves transfer 0 0 0 (131) 131 0
New share capital 2 216 0 0 0 218
2 216 0 408 (3,475) (2,849)
At 31 July 2008 232 3,045 224 794 12,771 17,066
At 1 August 2008 232 3,045 224 794 12,771 17,066
Profit for the year 0 0 0 0 7,990 7,990
Total recognised income/expense for the year 0 0 0 0 7,990 7,990
Dividends in the year 0 0 0 0 (3,626) (3,626)
Deferred tax movement re share options 0 0 0 0 (39) (39)
IFRS2 credit 0 0 0 (156) 0 (156)
IFRS2 reserves transfer 0 0 0 (88) 88 0
0 0 0 (244) (3,577) (3,821)
At 31 July 2009 232 3,045 224 550 17,184 21,235
B) COMPANY
Share Capital Share premium Retained Earnings Total
£'000 £'000 £'000 £'000
At 1 August 2007 230 2,829 48 3,107
Profit for the year 0 0 3,321 3,321
Total recognised income/expense for the year 0 0 3,321 3,321
New share capital 2 216 0 218
Dividends paid in the year 0 0 (3,310) (3,310)
At 31 July 2008 232 3,045 59 3,336
At 1 August 2008 232 3,045 59 3,336
Profit for the year 0 0 3,632 3,632
Total recognised income/expense for the year 0 0 3,632 3,632
New share capital 0 0 0 0
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