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%, h3: down 7%), with NFI of
£30.3 million down 9% (H1: up 8%, h3: 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 h3 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 h3 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 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 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 undertaking 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