Matchtech Group plc - Preliminary Results for the year ended 31 July 2015
The results include a maiden four months’ contribution from Networkers International plc (“Networkers”), which was acquired on 2 April 2015.
For the full year Matchtech had revenues of £445.0 million and Networkers £57.3 giving a group total of £502.3 million up 11%. Net fee income was £45.3 million for Matchtech and £9.5 million for Networkers, total £54.8 million up 22%. Adjusted PBTA was £15.7 million up 25%.
Chief Executive’s Report
A key strategic move in meeting client and candidate needs
The year under review was highly significant for the Group as we acquired and began to integrate into our business Networkers International plc, the highly respected international recruitment firm specialising in Telecommunications, IT and Engineering.
The acquisition was a key strategic move as we respond to and anticipate the development of client and candidate needs. As the UK’s leading provider of white collar engineering professionals, we believe that the evolution to advanced electronic software-based systems from traditional mechanical and older electrical technologies and the increasing globalisation of many of our leading clients are equally significant to our future.
The acquisition of Networkers addressed both these important trends more rapidly, more cost-effectively and with less risk than the alternative of organic growth to achieve the same result.
New market entry
Networkers' presence in the telecoms and connectivity arena brings us immediate access to an important new market, as the Internet of Things (IoT) becomes a reality.
One high-profile example is the growing emphasis that automotive manufacturers are placing on the so-called connected car. In the 10 years that Matchtech has focused on automotive technology, we have seen software development building on engine-control and safety systems to enable connectivity. This further increases the value of advanced software and electronics expertise to the automotive industry, and similar trends are now being seen in some of our other markets, including avionics and maritime. The expanded Matchtech Group can now meet substantially more of the R&D recruitment needs of the biggest players in all these markets.
Acquiring Networkers has given us a physical presence in nine countries – all regional hubs – to add to Matchtech's strong position in the UK. As noted above, the acquisition has substantially reduced the costs and risk involved in international expansion, giving us instantaneous access to the key markets of the Middle East, North America and South-East Asia that we had already identified as strategically vital to our future.
Further, the international presence and new competencies in multi-site management that the acquisition brings us correlates to the changing needs and expectations of our clients as they expand their businesses across the world.
We are well positioned to deliver the global staffing solutions that such clients need, enabling us to attract and retain much more of their recruitment business.
The world’s best projects
Additional factors also persuaded us that Networkers was the right acquisition target. It has a great brand, with the quality, reputation and status as a leading player in telecoms recruitment that we were looking for. It was already profitable in all its national markets, including its most recently opened operations. It was in the right places across the world to serve all global Anglo-Saxon and Anglo-American recruitment markets. And the acquisition formed what we believe can be the world’s leading tech-focused recruiter in our shared specialist markets.
Critically, it also means that we can now demonstrate to the best candidates that we are their route to the world’s best engineering, telecoms and technology projects, no matter where these are to be found.
In short, the acquisition of Networkers has accelerated the achievement of the company vision for 2017 that we set out last year: to be the market-leading specialist recruiter the employer of choice in our sectors the best partner for clients and candidates alike to have a fast-developing international business and to be the premium recruitment stock for investors.
The most engaged consultants
At the core of achieving this vision is the additional power we now have to engage with the industry’s best and most productive recruitment consultants, based on the enhanced career opportunities our larger, more diverse and international business can now offer our people. This is fundamental to achieving significantly faster organic growth over the coming years and our research confirms to us that individuals are critical if we are to build, evolve and maintain all-important long-term relationships with clients and candidates alike.
We believe, therefore, that the recruitment business with the most engaged consultants will perform at the highest levels. Developing and retaining our staff is a key priority. The Board and senior management team continually review staff attraction and development and seek to reduce attrition to levels below the industry average.
Enhancing strategic delivery
The acquisition has confirmed the validity of our three pillared strategy.
First, we have sharpened our focus on our three core vertical markets of Engineering, IT and Telecommunications by reorganising the reporting structure of our various Group companies to reflect where our vertical-market expertise is strongest.
Networkers’ energy and engineering business has been integrated into Matchtech Engineering and teams combined from the established IT businesses of Networkers, Connectus and Provanis teams. Barclay Meade and Alderwood continue to provide the professional staffing and training recruitment services which are so vital to our key client base and we intend to continue the development of both businesses from our Whiteley, Hampshire campus.
Secondly, we are already seeing positive movement up the value chain. For example, average time-sheet value has grown by 5%, while the average fee charged in our permanent business is up by 12%. The introduction of Networkers' historically higher margin and higher fee business can only accelerate this progression.
The acquisition has most clearly acted as a catalyst for our third strategic priority – to “go global” already, we are generating a combined 30% on our net fee income from outside the UK, up from just 2% before the acquisition. We have subsequently amended this priority to “think global” which is encouraging our people to maximise cross-selling opportunities around the world to support and drive growth in all our local and regional markets.
Integrating our organisations
The process of integrating the two organisations has started well. As the two management teams have come together, we have found a great deal in common both culturally and professionally. Following a series of visits to all our offices across the world, during which I have met almost every member of staff, I have been extremely impressed by the attitude, enthusiasm and energy of everybody in the business.
We now have the rare opportunity to learn from one another and pick the best aspects of each organisation to apply to the integrated “whole”, ensuring that the resulting Group will be considerably stronger than its composite parts. We are applying this “best of both” approach to our brands, our structure and roles – allocating key roles to the most appropriate and experienced people, regardless of which company they come from. Already, we have been able to identify a number of talented individuals and relocate them from the UK to other countries to drive growth. We are increasingly recognising the value to our business of having people with local cultural understanding and languages across the world, based alongside the English-speaking core of the organisation.
Operational aspects of the integration programme are continuing. In areas like Finance, HR, IT and management, we are already achieving cost synergies and best practice. Areas for rationalisation remain. For example, we still have two CRMs, two back offices and two sets of associated systems. This duplication will be addressed.
We have already identified synergies in Stock Exchange listing costs, the Board, management overhead and the rationalisation of property. These synergies should realise in the region of £1.3m in FY2016 on a fully annualised basis. We expect more cost synergies to follow as we progress the integration and we combine some back office functions.
We have chosen to re-invest some of these cost synergies to improve the business and accelerate future growth. We are investing to improve connectivity in some regional offices to support long term growth, as well as strengthening functional management in some areas. We are building on our existing strong business development capability and we expect to see sales synergies come through in FY2016, although early-stage progress, such as on joint bids, is already highly encouraging.
In addition, we are currently undertaking in-depth research to better understand the positioning and value that our brands currently have in their individual markets. This will ultimately enable us to reduce costs and maximise growth by taking our strongest brands forward.
Culture and values
In my view, the most important work currently underway is our initiative to link culture and values across and through every level of the organisation. Cultural integration is vital to our long-term success, so we are taking this process extremely seriously, carrying out a worldwide series of workshops and “get-to-know-you” sessions as important precursors to, and catalysts for, seamless integration.
This year the Group has delivered NFI of £54.8m, with both Matchtech and Networkers delivering broadly at the same level as the same period last year. Our ability to effectively manage our costs base has led to a 10% growth in adjusted profit before taxation from the existing businesses to £13.8m, before the beneficial impact of Networkers’ four months’ contribution of £1.9m in the period.
The acquisition now gives us a platform to push on and continue to grow into a global marketplace. On behalf of the Board I would like to thank all our dedicated staff, contractors and candidates for their contribution to the business this year.
The 2016 financial year has started well, in-line with management’s expectations, with many buoyant markets across the Group’s core sectors.
In engineering, particularly encouraging is the continued progress in the Infrastructure division where relationships with key multi-national clients will be expanded internationally, as well as in the Automotive, Aerospace and Maritime markets. In Energy, the Group now enjoys a strong position in the growing European renewables arena. The Telecoms sector is also performing well, fueled by clients investing in 4G and converged service offerings. The newly combined IT team is well placed to take advantage of strong demand.
We are delivering cost synergies in areas including listing costs, the Board, management and property, with the remainder of the envisaged synergies on track for FY2017. A portion of the savings will be used to make investments in sales and marketing, regional management and connectivity for some international offices, to increase the focus on large major accounts and to optimize operational efficiency.
The Group has a good new business pipeline and signs of sales synergies are coming through, with early joint bids progressing well. We are now in a position to pursue more larger-scale relationships and have identified opportunities across multiple geographies and disciplines in our three verticals. A number of staff have already been selected to relocate to international offices to accelerate the growth opportunities.
Looking ahead, we regard all international locations to be a huge opportunity to advance our activities in local and regional markets across the world and are planning for substantial growth over the next few years.
We believe the high engagement levels of our exceptional people will continue to underpin the lasting loyalty of clients and candidates alike, delivering enhanced shareholder value and improved returns.
I am optimistic about the future prospects for the Group and look forward to strong growth in all our markets based on the truly global scale and the greater brand awareness that comes with leadership status.
Chief Executive Officer