REG-Matchtech Group PLC Final Results

Released : 16/10/07 06:01

                                                                                                                       .
RNS Number:7592F 
Matchtech Group PLC 
16 October 2007 
 
 
 
16 October 2007 
                                
                               Matchtech Group plc 
 
              Preliminary Results for the year ended 31 July 2007 
 
 
Matchtech Group plc ("Matchtech" or the "Group"), one of the UK's leading 
specialist technical recruitment companies, is pleased to announce its maiden 
results for the year ended 31 July 2007, following its Admission to AIM in 
October 2006. 
 
 
Financial Highlights 
 
 
   - Turnover £202.8m (2006: £156.7m)* up 29% 
   - Net fee income £26.9m (2006: £20.8m)* up 29% 
   - Operating profit £11.3m (2006: £8.2m)* up 38% 
   - Profit before tax to £10.5m (2006: £7.7m)* up 36% 
   - Basic earnings per share of 36.02p (2006: 26.31p)* up 37% 
   - Reported PBT of £9.9m (£2006: 7.8m) up 27% 
   - Basic reported EPS of 33.47p (2006: 26.31p) up 27% 
   - Maiden final dividend of 9.3p per share making total of 13.7p per share 
    for the year 
 
 
* 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 
   - Results reflect continuing strong demand for permanent placements 
   - 39% increase in permanent and 23% increase in contract recruitment fees 
   - Placed over 2,100 candidates into permanent jobs and filled 6,300 
    contract/temp assignments in the year 
   - Major Master Vendor contract secured with Mouchel Parkman 
   - Successful Admission to AIM in October 2006 
 
 
 
Commenting on the results, George Materna, Chairman of Matchtech said: 
 
 
"Matchtech has continued to perform very well over the year and delivered 
another excellent set of results. These are our first full results since our 
listing on AIM in October 2006 and I am delighted that our new shareholders are 
able to share in the continuing success of the Group. 
 
 
 
"The outlook in our marketplace continues to be positive. Labour demand across 
all our sectors remains healthy and this looks set to continue for the 
foreseeable future. The shortage of good quality candidates and contractors and 
Matchtech's ability to identify and secure the right people for our clients are 
key factors in our success. This combination of confidence in UK businesses and 
shortages of qualified engineers and other white collar professionals should 
ensure continued buoyant recruitment conditions for Matchtech to capitalise on. 
 
 
"The Board anticipates another successful year for the Group." 
 
 
 
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 
                                                             
Arbuthnot Securities                                               020 7012 2000 
Andrew Fullerton / Ian Williams 
                            
 
 
 
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 2nd 
largest technical and engineering recruitment specialist and the UK's 21st 
largest recruitment company (Source: Recruitment International Top 100 Report - 
August 2007). 
 
 
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, pharmaceutical, 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 
 
              Preliminary Results for the year ended 31 July 2007 
 
 
Chairman's Statement 
 
 
Results 
 
Matchtech has continued to perform very well over the past year and delivered 
another excellent set of results. These are our first full year results since 
our listing on AIM in October 2006 and I am delighted that our new shareholders 
are able to share in the continuing success of the Group. 
 
 
There was substantial growth in turnover and profitability across every sector 
of the business all of which was organic growth. Strong trading has resulted in 
turnover of £202.8 million (up 29% over 2006) and net fee income of £26.9 
million (up 29%). 
 
 
Operating profit and profit before tax (excluding non-recurring items, mainly 
arising from the AIM listing) were £11.3m (up 38%) and £10.5m (up 36%) 
respectively. 
 
 
We continue to build on our long and consistent track record of organic growth, 
proving to be a top quality operator with a strong presence in our core industry 
sectors. We strengthened our ranking as one of the largest recruitment companies 
in the UK and our position as the UK's biggest single site agency. 
 
 
Our strategy is proving highly successful as the business base broadens and we 
develop long term relationships with major clients. 
 
 
Non-recurring items 
 
In discussing the performance of the business unless otherwise stated, all 
comparisons are made excluding the non-recurring items of the sales and profits 
of the US business sold on 31st August 2006 (which contributed £0.07m to net 
profit) as well as the £0.6m non-recurring costs of the flotation in October 
2006. 
 
 
Earnings per share and dividends 
 
Excluding the above non-recurring items, underlying basic earnings per share 
were 36.02p (up 36.9%), and fully diluted earnings per share were 35.15p (up 
39.0%). 
 
 
The Board has proposed a final dividend for the year of 9.3 pence per share, 
which when added to the interim dividend of 4.4 pence per share, makes a total 
dividend for the year of 13.7 pence per share. The final dividend, if approved 
by shareholders at the Annual General Meeting to be held on 23 November 2007, 
will be payable on 30 November 2007 to shareholders on the register on 7 
November 2007. 
 
 
Staff 
 
Our staff have shown a commitment to clients, candidates and contractors - a 
commitment which the Board believes differentiates us from many of our 
competitors. This team performance provides the ultimate competitive advantage. 
Sustained organic growth has come from recruiting and training the most talented 
people and providing them with our distinctive culture of personal challenge and 
team support which makes Matchtech such a vibrant and enjoyable place to be. 
 
 
I would again like to record the Board's appreciation for the dedication and 
commitment of all our staff. 
 
 
Board 
 
Adrian Gunn, formerly Deputy Managing Director and Sales Director, took over as 
Group Managing Director on 1 February 2007, with Paul Raine reverting to a Group 
Resources Director role. The Board thanks Paul for his leadership during his 
tenure as Group Managing Director and looks forward to his continued 
contribution as part of an unchanged executive team. 
 
 
In achieving these strong results and growth in profits, the Executive Directors 
have demonstrated exceptional operational leadership in the day to day 
management of the business. The strength of our team allows rapid 
decision-making and execution of the Group's strategy and plans. 
 
 
The Executive directors have been supported by a high quality non-executive team 
of Stephen Burke, Ric Piper and Andy White. Their independent judgement has 
significantly strengthened the Board as a whole during our first year as a 
listed company. 
 
 
Outlook 
 
Businesses work in a competitive market where the battle for talent, the drive 
for efficiency and the need for flexibility have all led to greater efforts to 
reach candidates and contractors. They compete on the combined abilities of 
their employees. Finding the right people matters. 
 
 
Over the coming years, the UK workforce is set to become even more diverse, 
reflecting society trends, a longer living and working population, greater 
ethnic diversity, increased immigration and more working women. Here our 
industry plays an essential role as intermediary, helping business to understand 
and welcome these changes and encouraging people from this new talent pool to 
enter or return to the workforce. The ability to reach passive as well as active 
candidates and contractors has become and will continue to be increasingly 
important. 
 
 
The outlook in our marketplace continues to be positive. Labour demand across 
all our sectors remains healthy and this looks set to continue for the 
foreseeable future. The shortage of good quality candidates and contractors and 
Matchtech's ability to identify and secure the right people for our clients are 
key factors in our success. This combination of confidence in UK businesses and 
shortages of qualified engineers and other white collar professionals should 
ensure continued buoyant recruitment conditions for Matchtech to capitalise on. 
 
 
Matchtech's strategy continues unchanged. We intend to stay focused on our core 
competency of specialist recruitment and organically grow existing operations, 
while developing new markets. The Board anticipates another successful year for 
the Group and its shareholders. 
 
 
George Materna 
Chairman 
 
 
Review of Operations 
 
Performance 
 
Matchtech has continued to strengthen its position within the UK recruitment 
market. This was supported by our flotation, which has continued to focus staff 
and the management team to deliver excellent growth. 
 
 
We are pleased to report that our maiden set of results as an AIM-listed company 
has produced pre-tax profits (excluding non-recurring items) of £10.5m compared 
to £7.7m in 2006. This performance is even more pleasing as we have produced 
strong organic growth across all three of our operating sectors. 
 
Sector                   % of Group             NFI                Growth 
--------------          -------------      ------------        ------------- 
Engineering                        55               £14.8m                 +24% 
Built Environment                  22                £6.0m                 +33% 
Support Services                   23                £6.1m                 +30% 
 
 
The UK recruitment market is currently enjoying strong market conditions, 
especially in permanent recruitment and this is reflected in our 39% growth in 
permanent fees to £8.5m. 
 
 
The combination of high demand and the shortage of skilled permanent candidates 
is also driving the demand for contract and temporary workers. Our responsive 
service delivery teams have taken advantage of this situation and have driven 
contract recruitment fees to growth of 23% in 2007. 
 
 
Our focus for the year was still contract orientated and this is reflected in 
our net fee income mix of 69% contract recruitment and 31% permanent 
recruitment, essentially unchanged from 2006. 
 
 
Staff 
 
Our strategy remained unchanged through the year and this clear message 
empowered our management team to make fast and effective management decisions. 
This, along with the introduction of enhanced IT tools, developed internally, 
has resulted in the achievement of greater efficiencies from the business and 
our staff. This can be seen by the NFI conversion to operating profit for each 
sector. 
 
NFI Conversion by sector                        2007                     2006 
-----------------                    -----------------        ----------------- 
Engineering                                     45.6%                    43.2% 
Built Environment                               45.7%                    45.2% 
Support Services                                29.3%                    25.9% 
-----------------                    -----------------        ----------------- 
Total                                           42.0%                    39.4% 
 
 
 
In April this year we substantially increased our graduate intake programme and 
successfully recruited 30 graduates over and above our normal recruitment 
demand. These graduate consultants have been integrated into the vertical 
industry teams and we expect them to be fee generating by the second half of 
2008. 
 
 
Staff turnover still remains low in comparison to our industry sector and this, 
together with our successful graduate recruitment campaign, has increased our 
period end head count from 194 to 245 in the year. 
 
Clients 
 
We continued to deliver a healthy mix of contract and permanent business 
supplying our clients on a contingency, preferred supplier and master vendor 
basis. This spread of business helped us to maintain our gross margins at 13.3%. 
 
 
Our top fifty clients continued to generate around 50% of our net fee income. 
Devonport Royal Dockyard Limited (DML) and VT Group continued to be our largest 
two clients, each generating c5% of our net fee income. The highlight of the 
year was winning the Mouchel Parkman UK Master Vendor contract. Mouchel Parkman 
is one of the UK's leading Consultant Engineers and our Built Environment Sector 
should see the benefits of this strategic win this year. 
 
 
The re-signing of our Master Vendor contract with Prysmian Cables and Preferred 
Supplier contract extensions for Eaton Aerospace and Severn Trent Water have 
demonstrated our ability to deliver high levels of customer service to our key 
accounts. Our direct fulfilment rate on Master Vendor contracts is over 90% and 
we have developed an effective second tier supply chain to support our service 
delivery teams, especially within non-core skill areas such as administration. 
 
 
Retaining business has been high on our agenda, led by our Managed Services 
team, and this has been achieved by offering clients continuous improvement 
through innovation and value added services. 
 
 
Contractors and Candidates 
 
Sourcing quality candidates and available contractors is the key to the success 
of any recruitment agency and we have demonstrated our ability to find the best. 
This year we have placed 2,192 candidates into permanent positions (2006: 1,518) 
and we have filled over 6,300 contract/ temporary assignments (2006: 6,518). 
 
 
Our staff are fully aware that candidate referrals continue to be the best way 
to find new talented people. This year we developed a number of new IT tools to 
help our staff improve candidate and contractor care. The IT tools have 
simplified communication and prompt our staff to pro actively manage the needs 
of the contractor. 
 
 
The number of contractors working each week for Matchtech has continued to 
increase and at the end of July 2007 we had 4,408 contractors on assignment 
throughout the UK (2006: 3,713). 
 
 
We are always looking at new ways to attract candidates to our database and our 
marketing team has continued to find innovative methods to source an ever 
increasing array of skill types. These activities have helped significantly 
increase and improve the quantity of our candidate database. 
 
 
Market Segments 
 
All three of our sectors have produced excellent results this year and we 
believe this success is down to the focus of our staff into specialist areas. We 
continue to segment each market so we can tackle them 'narrow and deep'. 
 
 
In Engineering we have seen good success in the Power and Nuclear area. We 
integrated our Skilled Trades division into the relevant vertical industry 
teams, which allowed us to increase their market share in an identified market 
segment. This generated exceptional growth for our Aerospace Team. 
 
 
In the Built Environment we have started to make an impact with architectural 
and building surveying practices and have dedicated Consultants working on 
railway planning and signaling projects. 
 
 
In Support Services we continued to expand our customer base outside of 
Engineering and Built Environment clients. This was particularly successful for 
our Procurement Division whose client base now includes major organisations in 
the banking, finance, retail and insurance sectors as well as Government 
organisations and Local Authorities. 
 
 
Investment 
 
Last year we leased an additional 10,000sq ft of office space immediately 
adjacent to our existing office. This year we moved all of our support functions 
into the new premises. This has allowed us to continue as the UK's largest 
single site recruitment centre, with each of our three operating sectors having 
a dedicated trading floor. 
 
 
We have further strengthened our business continuity strategy and have built a 
highly resilient infrastructure within Matchtech's two building environment, 
seeking to mitigate the majority of risks. We have also contracted a Disaster 
Recovery facility where our staff would relocate to in the event of a 
significant business interruption. 
 
 
Our in-house IT development team have been busy successfully developing and 
rolling out a new Client Relationship Management system. This was developed to 
improve the responsiveness and effectiveness of our service delivery teams, 
aiding our staff to find the most appropriate CVs in the quickest possible time. 
More strategically it has increased the revenue capabilities for each member of 
staff, driven head count efficiencies and improved our NFI conversion ratio. 
 
 
Group Management Team 
 
Once again our management team has produced excellent results. This experienced 
team has been with the Company for many years, demonstrating great unity and 
focus as we have moved into the public company environment. 
 
 
Their industry knowledge has ensured we are involved at the early stages of new 
business development opportunities and their ability to coach and mentor new 
staff is driving each sector's future growth plans. 
 
 
The introduction of new share schemes has provided additional focus on 
performance and the need to continue to deliver profit growth. 
 
 
Summary 
 
We have a healthy pipeline of business development targets and will be working 
hard to increase the number of Master Vendor accounts as well as increasing the 
revenue generated by them. 
 
 
The additional staff recruited this year should be fee generating in 2008 
helping us with our plans to deliver both NFI growth and improve the NFI 
conversion ratio. The additional office space allows us to continue to recruit 
at a similar level next year. 
 
 
Finally we can see long term growth drivers in each of our three sectors and are 
confident that we are well-placed to take full advantage of the existing and 
future market conditions. 
 
 
Adrian Gunn 
Managing Director 
 
 
 
Financial Review 
 
 
Continuing to build on our resilient business model Matchtech has again posted 
record results. In our first year of trading as an AIM listed company, we have 
delivered a strong performance against our Key Performance Measures. 
 
 
Group Profit & Loss Account (excluding non-recurring items) 
 
With all sectors showing growth on last year, turnover for 2007 increased by 
29.4% to £202.8m (2006: £156.7m). 
 
 
Net fee income grew by 29.3% to £26.9m (2006:£20.8m) and we have maintained our 
gross profit margin at 13.3% (2006: 13.3%). 
 
 
Notwithstanding a slight shift in mix, we continue to maintain a healthy balance 
between contract and permanent business with 69% (2006: 71%) of net fee income 
derived from recurring contract income and 31% (2006: 29%) from permanent 
placements. 
 
 
Our ability to continue to drive efficiencies from the business is highlighted 
by an increase in net fee income conversion to operating profit from 39.4% to 
42.0%. 
 
 
As a result operating profit rose by 37.8% to £11.3m (2006: £8.2m) and pre-tax 
profits by 36.4% to £10.5m (2006: £7.7m). 
 
 
The Group received tax relief from gains on share option schemes that were 
exercised during the year, giving an effective tax rate of 23.7% (2006: 26.7%). 
 
 
Profit after tax was up by 44.6% to £8.1m (2006: £5.6m) 
 
 
Group non-recurring items 
 
For comparison purposes we have excluded the non-recurring items of the sales 
and profits of the US business sold on 31st August 2006 (which contributed 
£0.07m to net profit) as well as the non-recurring costs of the flotation of 
£0.6m. 
 
 
Group Earnings Per Share 
 
Basic Earnings Per Share, of continuing operations, rose to 33.47p (2006: 
26.31p) up 27.2% and Diluted Earnings Per Share increased by 29.1% to 32.66p 
(2006: 25.29p). 
 
 
Excluding the non-recurring items, underlying Basic and Diluted Earnings Per 
Share were 36.02p (2006: 26.31p) and 35.15p (2006: 25.28p), representing 
increases of 36.9% and 39.0% respectively. 
 
 
Group Dividends 
 
The Board has proposed a final dividend for the year of 9.3 pence per share, 
payable on 30 November 2007 to those shareholders registered on 7 November 2007. 
Added to the interim dividend of 4.4 pence per share, the total dividend for the 
year is 13.7 pence per share. 
 
 
Group Balance Sheet 
 
At 31st July 2007 group net assets stood at £10.6m (2006: £7.3m). Net debt 
increased slightly by £0.3m to £9.8m (2006: £9.5m) and debtor days were 
essentially unchanged at 44.0 (2006: 43.4). 
 
 
The Group operates a Confidential Invoice Discounting facility with Barclays 
Bank plc. The facility ceiling currently stands at the lower of £20m or 90 per 
cent. of qualifying invoiced debtors. 
 
 
On 11 October 2006, the Group entered into a £5m, three year loan facility with 
Barclays Bank plc. At 31 July 2007 the balance on this facility stood at £3.8m. 
 
 
At 31 July 2007 the utilisation of all the available financing facilities stood 
at 44%, with £13.3m available. 
 
 
Group Cash flow 
 
The Group continues to be cash generative at an operating level and this year 
showed good level of operating cash conversion, as defined by net cash inflow 
from operating activities as a percentage of operating profit, of 75% (2006: 
90%. Cash conversion in 2006 was enhanced by non-operating cash received, with 
underlying operating cash conversion of 77%). 
 
 
International Reporting Standards ("IFRS") 
 
The Group has commenced the process of preparing for the conversion to IFRS for 
the year ending 31 July 2008 and has reviewed the expected impact on the 
financial statements. The Directors believe that the principal impact of the 
conversion will be in relation to IAS12 Income Taxes, where provision for the 
full potential future tax deduction in respect of share options could result in 
an increase in the deferred tax asset recognised of approximately £400,000. 
Other areas are IAS 17-Leases and IAS 19-Employee Benefits, which are unlikely 
to have a material impact on the Group's financial results. 
 
 
Tony Dyer 
Finance Director 
 
 
 
CONSOLIDATED PROFIT AND LOSS ACCOUNT 
 
for the year ended 31st July 2007 
 
                                                            2007          2006 
                                                  Note     £'000         £'000 
TURNOVER 
Continuing operations                                    202,779       156,686 
Discontinued operations                                      135         1,442 
-------------------------                        ------  ---------   ----------- 
                                                    2    202,914       158,128 
 
COST OF SALES 
Continuing operations                                    175,902       137,089 
Discontinued operations                                      117         1,196 
-------------------------                        ------  ---------   ----------- 
                                                         176,019       135,893 
 
GROSS PROFIT 
Continuing operations                                     26,877        20,793 
Discontinued operations                                       18           246 
-------------------------                        ------  ---------   ----------- 
                                                          26,895        21,039 
 
ADMINISTRATIVE EXPENSES 
Continuing operations                                     15,617        12,554 
Discontinued operations                                       10            93 
Cost of Admission to AIM                                     572             0 
-------------------------                        ------  ---------   ----------- 
                                                          16,199        12,647 
 
OPERATING PROFIT 
Continuing operations                                     10,688         8,239 
Discontinued operations                                        8           153 
-------------------------                        ------  ---------   ----------- 
                                                          10,696         8,392 
 
EXCEPTIONAL ITEM 
Profit on sale of discontinued operations                     59             0 
-------------------------                        ------  ---------   ----------- 
PROFIT AFTER EXCEPTIONAL ITEMS                            10,755         8,392 
 
Interest receivable                                           20            66 
Interest payable and similar charges                        (831)         (615) 
-------------------------                        ------  ---------   ----------- 
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION              9,944         7,843 
 
Tax on profit on ordinary activities                4     (2,359)       (2,098) 
-------------------------                        ------  ---------   ----------- 
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION               7,585         5,745 
-------------------------                        ------  ---------   ----------- 
 
EARNINGS PER ORDINARY SHARE 
                                                          2007            2006 
                                           Note           pence           pence 
 
Basic            Continuing operations         5         33.47           26.31 
                 Discontinued operations       5          0.29            0.29 
-----------      ------------------         ------     ---------     ----------- 
                                 Total                   33.76           26.60 
-----------      ------------------         ------     ---------     ----------- 
 
Diluted          Continuing operations         5         32.66           25.29 
                 Discontinued operations       5          0.28            0.27 
-----------      ------------------         ------     ---------     ----------- 
                                 Total                   32.94           25.56 
-----------      ------------------         ------     ---------     ----------- 
 
 
 
 
 
 
 
 
 
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 
                                                                    2007         2006 
                                                                   £'000        £'000 
 
Profit for the financial year attributable to the shareholders     7,585        5,745 
Currency translation differences on foreign currency net 
investments                                                            3           (2) 
----------------------------                                     ---------  ----------- 
                                                                   7,588        5,743 
Prior year adjustment                                                  0          (96) 
----------------------------                                     ---------  ----------- 
Total gains and losses recognised since the last annual report     7,588        5,647 
----------------------------                                     ---------  ----------- 
 
 
 
 
 
 
BALANCE SHEETS 
 
As at 31st July 2007 
 
                                         GROUP                   COMPANY 
                                  2007      2006           2007           2006 
                                 £'000     £'000          £'000          £'000 
FIXED ASSETS 
Intangible assets                  133       128              0              0 
Tangible assets                  1,699     1,271              0              0 
Investments                          0         0            250            250 
---------------------            ------    ------         ------         ------ 
                                 1,832     1,399            250            250 
 
CURRENT ASSETS 
Debtors                         32,108    24,670          2,203          1,209 
Cash at bank and in hand           836       495            656            136 
---------------------            ------    ------         ------         ------ 
                                32,944    25,165          2,859          1,345 
 
CREDITORS 
Amounts falling due within one (22,132)  (19,313)            (2)          (654) 
year                        
---------------------            ------    ------         ------         ------ 
NET CURRENT ASSETS              10,812     5,852          2,857            691 
---------------------            ------    ------         ------         ------ 
 
TOTAL ASSETS LESS CURRENT 
LIABILITIES                     12,644     7,251          3,107            941 
 
CREDITORS 
Amounts falling due after one   (2,083)        0              0              0 
year                        
---------------------            ------    ------         ------         ------ 
 
NET ASSETS                      10,561     7,251          3,107            941 
---------------------            ------    ------         ------         ------ 
 
CAPITAL AND RESERVES 
Called-up equity share capital     230       221            230            221 
Share premium account            2,829     2,009          2,829          2,009 
Other reserve                      224       229              0              0 
Share based payment reserve        386       338              0              0 
Profit and loss account          6,892     4,454             48         (1,289) 
---------------------            ------    ------         ------         ------ 
 
SHAREHOLDERS' FUNDS             10,561     7,251          3,107            941 
---------------------            ------    ------         ------         ------ 
 
 
 
CONSOLIDATED CASH FLOW STATEMENT 
for the year ended 31st July 2007 
 
                                                              2007        2006 
                                                             £'000       £'000 
 
NET CASH INFLOW FROM OPERATING ACTIVITIES                    8,112       7,540 
RETURNS ON INVESTMENTS & SERVICING OF FINANCE 
Interest received                                               20          66 
Interest paid                                                 (831)       (615) 
------------------------------------                         -------     ------- 
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS & SERVICING 
OF FINANCE                                                    (811)       (549) 
 
TAXATION                                                    (2,205)     (2,006) 
 
CAPITAL EXPENDITURE                                            (37)        (95) 
Payments to acquire intangible fixed assets                   (923)       (408) 
Receipts from sale of fixed assets                              28          48 
------------------------------------                         -------     ------- 
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE                     (932)       (455) 
 
ACQUISITIONS AND DISPOSALS 
Receipts from sale of Matchtech Inc                            105           0 
 
EQUITY DIVIDENDS PAID                                       (5,428)     (4,124) 
EBT CAPITAL DISTRIBUTION                                         0      (1,070) 
------------------------------------                         -------     ------- 
CASH OUTFLOW BEFORE FINANCING                               (1,159)       (664) 
------------------------------------                         -------     ------- 
 
FINANCING 
Issue of ordinary share capital                                  9           6 
Premium on issue of ordinary share capital                     820         395 
Costs incurred in respect of share issue                         0           0 
Resale of own shares                                             0           5 
Bank loan                                                    5,000           0 
Repayments of bank loan                                     (1,250)          0 
Cash received from trade debt financing                    226,909     180,156 
Payments to trade debt financing                          (229,960)    180,146 
------------------------------------                         -------     ------- 
NET CASH INFLOW FROM FINANCING                               1,528         416 
------------------------------------                         -------     ------- 
INCREASE/(DECREASE) IN CASH                                    369        (248) 
------------------------------------                         -------     ------- 
 
 
 
 
 
 
 
 
 
RECONCILIATION OF OPERATING PROFIT TO 
NET CASH INFLOW FROM OPERATING ACTIVITIES 
                                                              2007        2006 
                                                             £'000       £'000 
 
Operating profit                                            10,696       8,392 
Depreciation and amortisation                                  499         412 
Loss/(profit) on disposal of fixed assets                        0          (4) 
Increase in debtors                                         (7,516)     (2,207) 
Increase in creditors                                        4,112         786 
FRS20 Charge                                                   321         161 
------------------------------                               -------     ------- 
Net cash inflow from operating activities                    8,112       7,540 
------------------------------                               -------     ------- 
 
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT 
                                                              2007        2006 
                                                             £'000       £'000 
 
Increase in cash in the period                                 369        (248) 
Cash outflow from bank loan                                  1,250           0 
Cash (inflow) from bank loan                                (5,000)          0 
Cash outflow from trade debt finance                       229,960     180,146 
Cash (inflow) from trade debt finance                     (226,909)   (180,156) 
------------------------------                               -------     ------- 
Change in net debt                                            (330)       (258) 
 
Net debt brought forward                                    (9,508)     (9,250) 
------------------------------                               -------     ------- 
Net debt carried forward                                    (9,838)     (9,508) 
------------------------------                               -------     ------- 
 
 
 
 
 
ANALYSIS OF CHANGES IN NET DEBT 
                                  At 1 Aug 2006    Cash flows     At 31 Jul 2007 
                                        £'000         £'000              £'000 
 
Net cash: Cash in hand and at 
bank                                      290           369                659 
 
Debt: Trade debt finance               (9,798)        3,051             (6,747) 
Bank Loan                                   0        (3,750)            (3,750) 
------------------------------           ------       -------            ------- 
Net debt                               (9,508)         (330)            (9,838) 
------------------------------           ------       -------            ------- 
 
 
 
NOTES 
 
 
1. BASIS OF PREPARATION 
 
 
The financial information in this preliminary announcement has been prepared in 
accordance with applicable accounting standards and under the historical cost 
convention, and on the basis of the accounting policies as stated in the Annual 
Report and Accounts for the year ended 31 July 2006. 
 
 
This preliminary statement was approved by the Board on Monday 15 October 2007. 
 
 
 
2. TURNOVER 
 
 
The turnover and profit before tax are attributable to the one principal 
activity of the company. 
 
                                                             2007             2006 
A geographic analysis of turnover is given below:           £'000            £'000 
 
United Kingdom                                            202,779          156,686 
Overseas                                                      135            1,442 
----------------------------------                        -------         -------- 
Total                                                     202,914          158,128 
----------------------------------                        -------         -------- 
 
                                                             2007             2006 
A segmental analysis of turnover is given below:            £'000            £'000 
 
Engineering                                               129,434          103,431 
Built Environment                                          40,046           31,617 
Support Services                                           33,434           23,080 
----------------------------------                       --------        --------- 
Total                                                     202,914          158,128 
----------------------------------                       --------        --------- 
 
Further analysis is not presented as in the opinion of the directors it would be 
seriously prejudicial to the interests of the group. 
 
 
 
 
3. DIVIDENDS 
 
                                                                2007      2006 
                                                               £'000     £'000 
 
Equity dividends paid during the year                          5,427     4,124 
----------------------------------                             ------   ------- 
 
Equity dividends proposed after the year-end (not recognised 
as a liability)                                                2,142     4,414 
----------------------------------                             ------   ------- 
 
 
 
 
 
 
 
4. TAX ON PROFIT ON ORDINARY ACTIVITIES 
 
                                                              2007          2006 
                                                             £'000         £'000 
 
Current Tax: UK corporation tax                              2,371         2,058 
Prior year under provision                                       1             0 
----------------------------------                        --------       ------- 
                                                             2,372         2,058 
Foreign tax 
Total current tax                                                3            89 
----------------------------------                        --------       ------- 
                                                             2,375         2,147 
 
Deferred tax on timing differences (note 14)                   (16)          (49) 
----------------------------------                        --------       ------- 
Tax on profit on ordinary activities                         2,359         2,098 
----------------------------------                        --------       ------- 
 
UK corporation tax has been charged at 30% (2006 - 30%) and tax imposed overseas 
at the appropriate rate for the country. 
 
 
Factors affecting the tax charge 
The tax assessed for the year is higher than the standard rate of corporation tax 
in the UK. The difference is explained below: 
 
                                                              2007          2006 
                                                             £'000         £'000 
 
Profit on ordinary activities before tax                     9,944         7,843 
----------------------------------                           --------    ------- 
 
Profit on ordinary activities multiplied by the 
standard rate of corporation 
tax in the UK of 30%                                         2,983         2,353 
 
Effects of: Expenses not deductible for tax purposes           114            70 
Exceptional items not deductible for tax purposes              172             0 
Difference between depreciation and capital 
allowances for the 
period                                                           3            14 
Under provision for previous years                               1             0 
Higher rates on overseas earnings                                1            61 
Franked investment income                                       (1)          (18) 
Tax loss on EBT loss/profit                                      4             6 
Tax relief on cost of options exercised in year               (902)         (339) 
----------------------------------                           -------     ------- 
Current tax charge for period                                2,375         2,147 
----------------------------------                           -------     ------- 
 
 
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 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: 
 
                                                                                2007            2006 
                                                                                £'000           £'000 
 
Profit on ordinary activities after taxation attributable to 
ordinary shareholders 
Continuing operations                                                           7,521           5,684 
Discontinued operations                                                            64              61 
------------------------                                                      --------        ------- 
Total                                                                           7,585           5,745 
                                                                              --------        ------- 
 
Weighted average number of 
ordinary shares in issue                                                        22,470          21,600 
Effect of dilutive potential 
ordinary shares                                                                    556             883 
------------------------                                                      --------         ------- 
Total                                                                           23,026          22,483 
                                                                              --------         ------- 
 
Earnings per ordinary share                                                     pence           pence 
 
Basic                                             Continuing operations         33.47           26.31 
                                                  Discontinued                   0.29            0.29 
                                                  operations                  --------         ------- 
                                                                    
Total                                                                           33.76           26.60 
                                                                              --------         ------- 
 
Diluted                                           Continuing operations         32.66           25.29 
                                                  Discontinued                   0.28            0.27 
                                                  operations                  --------         ------- 
                                                                    
Total                                                                           32.94           25.56 
                                                                              --------         ------- 
 
Earnings Per Share for the purpose of a performance measure for the LTIPs is  
calculated excluded the non-recurring items of the sales and profits of the US  
business sold on 31st August 2006 as well as the non-recurring costs of the  
flotation as calculated below 
 
Profit on ordinary activities 
after taxation                                                                  7,585           5,745 
Cost of admission to AIM                                                          572               0 
Profit after tax of 
discontinued operations                                                            (5)            (61) 
Profit on sale of 
discontinued operations                                                           (59)              0 
------------------------                                                      --------         ------- 
Profit on ordinary activities 
after taxation but before 
non-recurring items                                                             8,093           5,684 
                                                                              --------         ------- 
 
 
                                                                                pence           pence 
 
Earnings per ordinary share  
- basic                                                                         36.02           26.31 
- diluted                                                                       35.15           25.28 
                                                                              --------         ------- 
 
 
 
 
 
 
 
 
6. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 
 
GROUP                                                        2007            2006 
                                                            £'000           £'000 
 
Profit for the financial year                               7,585           5,745 
New share capital issued                                        9               6 
Premium on share capital issued                               820             395 
FRS20 reserve movement                                        321             161 
Shares held by EBT                                              0               5 
EBT capital distribution                                        0          (1,070) 
Dividends                                                  (5,428)         (4,124) 
Foreign currency translation                                    3              (2) 
-------------------------                                  --------        ------- 
Net increase to funds                                       3,310           1,116 
 
Opening shareholders' funds 
(2005: originally £2,827,000 before prior year 
adjustments for FRS20 and FRS 21 of 
£1,642,000)                                                 7,251           6,135 
-------------------------------------                      --------       ------- 
                                                           
Closing shareholders' equity funds                         10,561           7,251  
                                                          --------        ------- 
 
 
 
 
7. PUBLICATION OF NON-STATUTORY ACCOUNTS 
 
 
The financial information set out in this preliminary announcement does not 
constitute statutory accounts as defined in section 240 of the Companies Act 
1985. 
 
 
The balance sheet at 31 July 2007 and the group profit and loss account, group 
cash flow statement and associated notes for the year/period then ended have 
been extracted from the Group's 2007 statutory financial statements upon which 
the auditors opinion is unqualified and does not include a statement under 
Section 237 of the Companies Act 1985. 
 
 
 
 
                      This information is provided by RNS 
            The company news service from the London Stock Exchange 
 
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