REG-Matchtech Group PLC Final Results - Part 1

Released : 08/10/09 06:00

http://pdf.reuters.com/Regnews/regnews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20091008:RnsH4314A
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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         
  
  
More to follow, for following part double-click [nRn2H4314A]