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Matchtech Group plc Issues Its Pre-close Trading Update

Matchtech Group plc Issues It’s Pre-close Trading Update

Matchtech Group plc one of the UK's leading specialist recruitment agencies operating in the Engineering, Science, Technology and Professional Services sectors, provides the following Pre-close Trading Update for the year ended 31 July 2012.

Since our last update on 11 April 2012, trading in the final four months of FY2012 has been broadly as anticipated, and as a result we expect the outcome for the year to be within the current range of expectations, albeit at the lower end, primarily because of lower than expected Permanent Fees in Q4.

The Group intends to release its Preliminary Results for the year ended 31 July 2012 on 4 October 2012.

NFI Performance - Group

Performance may be summarised as follows:

Change v comparable period

NFI

FY2011

2012

2012

FY2012

2012

2012

FY2012

Year

H1

H2

Year

H1

H2

Year

&poundm

&poundm

&poundm

&poundm

%

%

%

Contract

20.4

11.6

13.1

24.7

22%

18%

21%

Permanent

9.4

5.6

5.9

11.5

37%

16%

22%

Total

29.8

17.2

19.0

36.2

26%

17%

21%

Business Mix

Contract

69%

67%

69%

68%

Permanent

31%

33%

31%

32%

Contractors on assignment at end of period

6,000

6,400

6,700

6,700

7%

5%

12%

NFI for the year was up 21% on FY2011 (H1: up 26%, H2 up 17%).

The demand for contract staff within our main sectors remains strong, fuelled by the global demand for the products and services that our clients offer, along with continuing investment in UK infrastructure programmes.

Contract NFI for the year was up 21% on FY2011. Contractor numbers have continued to increase and at 31 July 2012 were 6,700, up 12% on 31 July 2011 and up 5% on 31 January 2012, with contract margin stabilised at 6.8%.

Permanent Fees were up 22% on FY2011, with average weekly Permanent Fees essentially stable throughout each quarter of FY2012.

NFI Performance - By Sector

Change v comparable period

NFI by Sector

FY2011

2012

H1

2012

H2

FY2012

2012

H1

2012

H2

FY2012

&poundm

&poundm

&poundm

&poundm

%

%

%

Engineering

10.3

5.8

6.4

12.2

21%

16%

18%

Built Environment

5.2

2.9

2.8

5.7

16%

4%

10%

Information Systems &

Technology

6.0

3.6

3.9

7.5

29%

22%

25%

Science and Medical

1.9

0.9

1.2

2.1

0%

20%

11%

Matchtech UK

23.4

13.2

14.3

27.5

20%

15%

18%

Germany

0.6

0.4

0.5

0.9

100%

25%

50%

Professional Services

4.3

2.8

3.1

5.9

56%

24%

37%

elemense

1.5

0.8

1.1

1.9

33%

22%

27%

Group

29.8

17.2

19.0

36.2

26%

17%

21%

Matchtech UK

Engineering performed well throughout FY2012. NFI was up 18% on FY2011, with strong demand across all areas, particularly in the Civil Aerospace, Automotive and Marine sectors.

Built Environment's NFI growth of 10% came primarily from the Water and Rail Infrastructure sectors.

Information Systems & Technology grew strongly, with NFI up 25% on FY2011. The trend towards convergence of technology between Electronics Systems and Business Applications is playing to our niche service delivery capability.

On 16 January 2012 the Group purchased certain business assets of Xchanging Resourcing Services Limited ("XRS"), the contingent recruitment arm of Xchanging plc and 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. In FY2012 H2 &pound0.4m of NFI came from XRS.

Science and Medical grew steadily with NFI up 11% on FY2011.

Germany

Trading in Germany continues to gain momentum with NFI up 50% on FY2012, achieving some excellent business development wins despite contractor growth being somewhat restricted by the shortage of available candidates.

Professional Services

Barclay Meade and Alderwood Education continue to grow and the core teams are establishing good brand recognition in the permanent SME market. NFI for the year was up 37% on FY2011 (H1: 56%, H2: 24%).

elemense

elemense continues to provide Account Management support for key clients, indirectly generating revenue for the Group as well as increasing its own NFI contribution by 27% on FY2011.

Headcount & Overheads

Headcount at 31 July 2012 was 370 (31 July 2011: 350, 31 January 2012: 361).

Overheads in H2 were &pound13.8m, in line with H1.

Banking Facilities and Net Debt

In June 2012 the Group agreed an increase in its Banking Facilities with Barclays Bank from &pound35m to &pound50m, on improved terms. The Banking Facilities are committed until June 2015.

Because the Group pays its contractors before it is paid by its customers, strong growth in the number of contractors results in a working capital requirement. Net debt at 31 July 2012 was &pound14.6m (31 July 2011: &pound16.0m 31 January 2012: &pound11.0m).

Outlook

Despite tough market conditions affecting permanent recruitment in the final quarter of the year, the Group delivered an impressive 21% growth in NFI in FY2012. Our diversification strategy is continuing to bear fruit and we are seeing unprecedented demand for contract staff within our core markets with a record number of contractors on assignment.

Whilst the Board is mindful of the uncertain economic backdrop, it remains confident about the Group's prospects and that it is well-placed to take advantage of any recovery in the markets in which it operates.

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