Matchtech Group plc Trading Update

Matchtech Group plc Trading Update

Matchtech Group plc ("Matchtech" or the "Group"), one of the UK's leading specialist recruitment agencies operating in the Engineering, Science, Technology and Professional Services sectors, provides the following Trading Update for the six months ending 31 January 2012 and the Board's current outlook for the year to 31 July 2012.

Since our last update on 18 November 2011, the Group has continued to trade in line with the Board's expectations.

Net Fee Income ("NFI")

There was a strong NFI performance across the whole Group during the period, with a total of £17.0 million, up 26% against the same period last year.

NFI performance is analysed as follows:

Adjusting for the lower number of working weeks in H1 than in H2, average weekly fees of £0.69m were up 8% compared with H2 FY2011.

The Group's business mix remained stable, with Contract NFI accounting for 67% and

Permanent Fees 33% of total NFI in the period (2011 H1: 68%; 32%).

There was strong contract growth across the Group, with a record number of contractors on assignment at the end of the period of 6,400, up 23% since 31 January 2011 and up 7% since 31 July 2011.

Permanent Fees were up 33% compared with the same period last year with Matchtech UK fees up 17% and in Professional Services the Barclay Meade and Alderwood Education brands achieved an 82% rise to £2.0m.

Sales Force Headcount and Overheads

During FY2011 the Group invested significantly in sales force headcount, leading to a 4% increase over the first half, with the benefits being realised in the growth in NFI in H1 FY2012. Essentially all the headcount required for FY2012 was recruited during the final quarter of FY2011 and in place at the start of the year.

The Board continues to invest in market development in line with its growth strategy whilst remaining watchful of overhead expenditure in the present market circumstances.

Overheads in H1 are expected to be around 22% higher than the same period last year and 18% higher than H2, with around two-thirds of the increase relating to staff costs.

Net Debt

Net debt was as follows:

As previously reported, the significant increase in contractor numbers in H2FY2011 increased the Group's working capital requirements. Whilst the increase in contractor numbers has continued in H1 FY2012, it was at a slightly slower rate, and allowing for the seasonal impact of lower billing in the Christmas / New Year period, net debt at 31 January 2012 was £11.0m.

Acquisition

The Group is pleased to announce that on 16 January 2012 it completed the purchase of certain business assets of Xchanging Resourcing Services Limited ("XRS"), the contingent recruitment arm of Xchanging plc, for a total cash consideration of £0.4 million paid at completion.

The Group secured an exclusive two year contract to 16 January 2014 to supply contractors to Xchanging businesses in the UK and the novation of existing XRS client contracts. On completion, 4 staff transferred to the Group, together with around 80 contractors. No other assets or liabilities will be transferred to the Group.

Outlook

Whilst our trading environment currently remains steady, the Board remains mindful of the impact of uncertainty in the macro-economic environment on business confidence and the effect this may have on Permanent Fees, which were 33% of the Group's NFI in H1 2012.

The Board now expects that the Group's full year performance will be within the range of expectations, albeit towards the lower end of that range, with profits for the financial year again significantly weighted towards H2.

The acquisition of XRS creates an excellent base from which to expand the Group's services into new markets, whilst forging closer links with one of our largest clients, Xchanging. Alongside this the Group is exploring new overseas opportunities.

The Board remains committed to its strategy and to maintaining its current dividend policy. Our robust business model, ambitious sector diversification and developing international network all continue to give the Board confidence in the medium term prospects for the Group.

The Group will release its Interim Results for the six months ended 31 January 2011 on Wednesday 11 April 2012, at which point it will provide a further update on trading.