REG-Matchtech Group PLC Interim Results - Part 1

Released : 17/03/08 07:02

RNS Number:1971Q 
Matchtech Group PLC 
17 March 2008 
17 March 2008 
                              Matchtech Group plc 
            Interim results for the six months ended 31 January 2008 
Matchtech Group plc ("Matchtech" or the "Group"), one of the UK's leading 
specialist technical recruitment companies, is pleased to announce its interim 
results for the six months ended 31 January 2008. 
Financial Highlights 
- Revenue up 25% to £116.6m (2007 H1: £93.4m)* 
- Net fee income (Gross Profit) up 22% to £15.3m (2007 H1: £12.5m)* 
- Operating profit up 24% to £6.2m (2007 H1: £5.0m)* 
- Operating profit margin 5.3% (2007 H1: 5.4%)* 
- Adjusted Profit Before Tax (before non-recurring items) up 21% to 
  £5.7m (2007 H1: £4.7m) 
- Reported Profit Before Tax (after non-recurring items) up 39% to £5.7m 
  (2007 H1: £4.1m) 
- Cash flow from operating activities up 112% to £8.7m (2007 H1: £4.1m) 
- Adjusted Basic EPS (before non-recurring items) up 8% to 17.09p (2007 
  H1: 15.86p) 
- Reported Basic EPS (after non-recurring items) up 26% to 17.09p (2007 
  H1: 13.59p) 
- Interim dividend 5.0 pence per share (2007: 4.4 pence) up 14% 
*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) 
- 33% increase in permanent placements, 31% increase in permanent fees 
- 10% increase in contractor numbers, 19% increase in contract NFI 
- 39% increase in sales headcount to 189 from 136 
Commenting on the results, George Materna, Chairman of Matchtech said: 
"We are very pleased with these results confirming that Matchtech has sustained 
good progress through organic growth across all three of the Group's sectors. 
"The sectors that we serve continue to exhibit strong structural growth 
characteristics. Moreover we have a highly diversified and expanding customer 
base, which provides further opportunities for growth and adds an element of 
protection to our business. 
"Candidates and Contractors remain in short supply, with wage inflation 
continuing in each of the sectors in which we operate. This demonstrates that 
the market continues to be candidate driven, allowing Matchtech to utilise its 
superior service delivery capabilities to gain market share. 
"We believe that there are strong opportunities for continued growth, both from 
the significant investment made in our sales headcount at the start of the year, 
which we expect to show through in the second half, and from our existing 
business development pipeline. The Board remains confident in the outlook for 
the year and expects to be able to report sound progress in the second half." 
This is the first set of financial statements that the Group is required to 
prepare in accordance with accordance with IAS 34 "Interim Financial Reporting" 
and the requirements of IFRS 1 "First-time Adoption of International Financial 
Reporting Standards" relevant to interim reports, because they are part of the 
period covered by the Group's first IFRS financial statements for the year ended 
31 July 2008. They do not include all of the information required for full 
annual financial statements, and should be read in conjunction with the 
consolidated financial statements for the year ended 31 July 2007 which have 
been filed with the Registrar of Companies. The auditor's report on those 
financial statements was unqualified and did not contain a statement under 
section 237 (2) and (3) of the Companies Act 1985. The transition to IFRS is 
explained in Note 2 to these interim financial statements. All comparatives have 
been re-stated in accordance with IFRS. 
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 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 
Interim report for the period ended 31 January 2008 
Chairman's statement 
Operating review 
The Group again saw good growth across all three of its sectors, Engineering, 
Built Environment and Support Services, during the first half of the financial 
                                           2008 H1         2007 H1    Change 
                                              £m              £m             % 
Engineering sector 
Net Fee Income                               7.8             6.4            22% 
Operating Profit                             3.4             2.7            26% 
Built Environment sector 
Net Fee Income                               4.2             3.3            27% 
Operating Profit                             1.8             1.4            29% 
Support Services sector 
Net Fee Income                               3.2             2.8            14% 
Operating Profit                             0.9             0.8            13% 
The results have been achieved entirely through organic growth in the UK. 
Engineering, our largest sector, continues to deliver good growth. In particular 
demand was strong in Oil & Gas where the current level of oil price has led to 
increased capital investment. We have a strong established brand in the 
Engineering sector and the business pipeline looks favourable. 
Built Environment continues to see the strongest growth, with clients providing 
generally good visibility of projects for several years ahead. Public sector 
investment contributes as a major driver in this market. Clients seem a little 
more flexible on choice of candidate as skill shortages continue to tighten. 
Contract lengths are extending and contract rates are as high as they have ever 
Foundations continue to be laid in our newest sector Support Services, by 
investment in new staff to ensure the best possible platform for sustainable 
future growth. Cross selling opportunities, into other parts of the Group will, 
over time, convert into a strong revenue stream. 
The Group has maintained a healthy balance between contract and permanent 
placements coupled with a highly diversified client and sector base providing 
added protection to any market volatility. 
                                               2008 H1       2007 H1      Change 
Permanent placements 
Number of permanent placements                 1,356         1,022         + 33% 
Permanent fees                                  £5.1m         £3.9m        + 31% 
Average permanent fees per placement          £3,753        £3,855         - 3% 
Number of working contractors                  4,541         4,122         + 10% 
Contract Net Fee Income                        £10.2m         £8.6m        + 19% 
Net Fee Income 
Contract                                          67%           69% 
Permanent                                         33%           31% 
Our performance reflects the strength and stability of our management team and 
the quality of our staff. Expansion is being led by experienced and home grown 
Matchtech managers and directors. The Matchtech team has shown great unity of 
purpose, amplified by our strong internal communication and technology systems 
that enable the flow of strategic information throughout the company. 
Sales staff numbers increased by 39% over the year to 189 (January 2007: 136, 
July 2007: 170). We added 9 Support staff in the first half bringing the total 
to 90 (January 2007: 75, July 2007: 81), partly reflecting the increased levels 
of compliance required from regulators and clients. 
I would like to thank all our staff on behalf of our shareholders for their 
consistent contribution. 
Financial Overview 
The Group delivered good results across all three of its sectors. 
Revenue increased 25% to £116.6m (2007 H1: £93.4m, excluding £0.2m Revenue 
discontinued business), with Net Fee Income up 22% to £15.3m (2007 H1: £12.5m). 
Underlying operating profit (excluding non-recurring items) was £6.2m, an 
increase of 24% (2007 H1: £5.0m). This reflected a slight decrease in operating 
margin to 5.3% (2007 H1: 5.4%). 
The non-recurring items in 2007 were £0.5m. 2008: £Nil. 
Reported profit before tax was up 39% at £5.7m (2007 H1: £4.1m) and underlying 
profit before tax (excluding profits from the US business sold in August 2006 as 
well as non-recurring items) was up 21% to £5.7m (2007 H1: £4.7m). 
Effective Rate of Tax 
The effective rate of tax for the period is 30.5% (2007 H1: 24.9% pre 
non-recurring items). Under IFRS 12 deferred tax is recognised to take into 
account the fact that gains made on qualifying share options exercised during 
the period attract tax relief. The effective tax rate will be impacted by the 
actual timing of exercise of the options and the magnitude of the tax benefit 
Earnings per share 
Notwithstanding the higher Effective Tax Rate, the Group continued to produce 
good growth in earnings per share. 
Basic earnings per share increased by 26% to 17.09p (2007 H1: 13.59p), with 
adjusted earnings per share (excluding non-recurring items) increasing by 8% to 
17.09p (2007 H1: 15.86p). 
Fully diluted earnings per share increased by 30% to 16.53p (2007 H1: 12.75p), 
with adjusted fully diluted earnings per share (excluding non-recurring items) 
increasing by 9% to 16.53p (2007 H1: 15.23p). 
Cash flow 
Cash inflows from operating activities in the period were £8.7m (2007 H1: £4.1m) 
representing cash conversion of 140% (2007 H1: 93%) 
Capital expenditure was £0.7m (2007 H1: £0.5m). 
Net debt at 31 January 2008 was £5.4m (31 January 2007: £11.5m, 31 July 2007: 
More to follow, for following part double-click [nRN1Q1971Q]