Gattaca Regulatory News (GATC)

4 October 2012

Matchtech Group plc

Preliminary Results for the year ended 31 July 2012

Matchtech Group plc ("Matchtech" or the "Group"), one of the UK's leading specialist engineering and professional services recruitment companies, today announces its Preliminary Results for the year ended 31 July 2012.

Financial Headlines

·; Revenue £371.4m up 23% (2011: £301.8m)

·; Net Fee Income* (NFI) £36.1m up 21% (2011: £29.8m)

·; Permanent recruitment fees £11.5m up 22% (2011: £9.4m)

·; Mix between contract NFI and permanent fees continues at 68%:32% (2011: 68%:32%)

·; Profit before tax £8.0m up 25% (2011: £6.4m)

·; Basic earnings per share 24.3 pence up 20% (2011: 20.3 pence)

·; Net cash from operating activities was £6.5m (2011: outflow £7.4m) with operating cash conversion of 106% (2011: -72%)

·; Final dividend maintained at 10.6 pence giving total dividend for the year of 15.6 pence (2011: 15.6 pence) and providing increased cover of 1.6x (2011: 1.3x)

·; Net debt of £14.5m (2011: £16.0m)

* NFI is calculated as revenue less contractor payroll costs.

Operational Headlines

·; Unprecedented demand for contractors across all engineering sectors with record numbers on assignment

·; Supplying UK clients who have:

o Global demand for their services

o Multi-year engineering infrastructure projects in the UK

·; Acquisition of the internal recruitment arm of Xchanging plc

·; The Professional Services brands of Barclay Meade & Alderwood are now well established and much improved performance with losses halved to £1.4m

·; New, simpler reporting structure established for FY2012/13. The business will be managed in two distinct segments, Engineering and Professional Services.

Commenting on the results, George Materna Chairman of Matchtech said:

"The Group delivered 21% growth in NFI in the year ended 31 July 2012. Our diversification strategy is continuing to bear fruit and we are seeing unprecedented demand for contract staff within our engineering markets with a record number of contractors on assignment.

Since our Pre-close Trading Update on 2 August 2012 trading has remained in line with the Board's expectations, with contractor numbers continuing to grow well, up 2% in the two months to 30 September 2012. Permanent recruitment time-to-hire has been elongated and has started the year on a par with last year.

The changes we introduced over the past two years to the Group's structure position us well for continued growth, particularly by supplying more contractors to UK clients who have global demand for their services or are working on large, multi-year engineering infrastructure projects in the UK and overseas markets.

We look forward with confidence to the year ahead."

For further information please contact:

Background on Matchtech Group

Established in 1984, the Group specialises in the provision of contract, temporary and permanent staff and has grown organically to become one of the UK's leading Engineering and Professional Services specialists, providing niche recruitment solutions to a broad range of clients across the UK and Europe. The Group's Head Office is based in Fareham, Hampshire with strategic office locations in London, St Albans, Aberdeen and Stuttgart.

Chairman's Statement

Trading Performance

The Board is pleased to report a strong performance by the Group, with both Net Fee Income (NFI) and Profit before tax over 20% up compared with last year.

Total revenues were £371.4m, an increase of 23% on the previous year, NFI of £36.1m was up 21% and Profit before tax of £8.0m was up 25%.

We were pleased to have achieved another record year for contractors on assignment, which at 31 July 2012 stood at 6,700, a rise of 12% on the previous year. Contract recruitment across engineering and technology sectors exceeded our initial expectations. Permanent recruitment continued to be sensitive to economic conditions and consequently some clients and candidates took longer to commit to new roles, which lengthened the time-to-hire.

The Group's growth stemmed from successfully taking advantage of our established presence in growth niche markets, strong client retention based on consistently first-class service delivery and from the much improved performance by the professional services brands, which were created in the last two years.

Dividend

Reflecting the year's good performance, but mindful of prevailing economic conditions, the Board is pleased to recommend to shareholders that the final dividend is maintained at last year's level of 10.6 pence per share, which makes a total dividend for the year of 15.6 pence per share (2011: 15.6 pence) covered 1.6 times by earnings per share (2011: 1.3 times).

People

The Group has spent the last two years creating its new brands around the recruitment of experienced staff. With the brands now established and management in place, resourcing in these areas will return to our traditional graduate recruitment programme.

We have a strong tradition of developing graduate employees who are mentored by senior colleagues and have clear career paths that will encourage them to develop within the Group.

As a people business, we work hard to offer our employees an enjoyable and stimulating workplace, which the Board recognises is important when having to remain flexible to a wider marketplace that demands constant innovation and the ability to respond quickly to secure opportunities.

The Board wishes to pay tribute to all our staff and to our contractors for their continued hard work and dedication.

We were especially pleased to be placed 25th in the 2012 Sunday Times Best Companies to Work For survey. This is an award which is entirely based upon the feedback of our staff and reflects the high importance we place upon employee engagement.

Board and Corporate Governance

During the year Richard Bradford and Rudi Kindts joined the Board as Non-Executive Directors. We welcome them both and the contribution they are already making.

In September I was pleased to announce the appointment of Keith Lewis to the Board with effect from 5 September 2012. Keith has been with Matchtech for 19 years. He is currently responsible for Matchtech UK, the largest business within the Group.

Keith's elevation to the Board reflects the pivotal role that he plays. He has a long and consistent track record of success in driving forward our engineering business and his executive experience and character will complement what is already a strong Board. On behalf of my colleagues, I congratulate him on his new role.

I would like to pay special thanks to David Rees, a colleague of the highest integrity, who has worked with me for 20 years and contributed a substantial amount to the success of the business over that time. David stepped down as Group HR Director and left the Group in September. I wish him the very best for the future.

Strategy

The Group's traditional strength in segmenting the market and delivering highly skilled candidates to a largely blue chip engineering and technology client base, gives us continuing competitive advantage.

From this strong platform we have identified many opportunities to continue to grow the business by finding new niches to supply and by further internationalising our sales efforts. Our strategy is to find and analyse opportunities, but only move forward where we can largely de-risk any new business propositions.

Diversifying into new sectors under the Professional Services brands of Barclay Meade and Alderwood has provided opportunities for further growth. In just two years both brands have made significant inroads into their markets and have quickly positioned themselves as experts in their fields. Professional Services' NFI was £5.7m, up 33% on the previous full year, representing 16% of the Group's NFI (2011: 14%).

Our international growth strategy is partly de-risked by supplying candidates to existing clients for their new international projects. This lowers the risks associated with opening offices in new countries and has the additional benefit of further cementing relationships with our client base by helping meet their needs.

Of course, there are still challenges in finding the right candidates, almost all of whom are specialists. To increase our talent pool we have invested considerably in our technology, brands and websites. We plan to strengthen our online presence so that our websites are one of the first places where new candidates register when looking for new roles.

Outlook

Since our Pre-close Trading Update on 2 August 2012 trading has remained in line with the Board's expectations, with contractor numbers at record levels continuing to grow well, up 2% in the two months to 30 September 2012. Permanent recruitment continues to be sensitive to global market news and has started the year on a par with last year.

The Group delivered 21% growth in NFI in the year ended 31 July 2012. Our diversification strategy is continuing to bear fruit and we are seeing unprecedented demand for contract staff within the engineering markets, with a record number of contractors on assignment.

The changes we have introduced over the past two years to the Group's structure position us well for continued growth, particularly by supplying more contractors to UK clients who have global demand for their services or are working on large, multi-year engineering infrastructure projects in the UK and overseas markets.

Whilst we remain mindful that any deterioration in the global economy has the potential to impact on our business, we look forward with confidence to the year ahead.

George Materna

Chairman

Chief Executive's Review

Performance Overview

The Group has continued to benefit from the substantial reorganisation and investment for growth made over the past two years. In particular, our contract recruitment business, which accounts for around two-thirds of Net Fee Income (NFI), performed ahead of our expectations throughout the year, with growth being driven by strong demand for contractors in our traditional niches of engineering and technology and by the understandable attractions of flexible labour during an economic downturn.

This year we have enhanced the performance of the business through further investment in our professional services brands, additional sales personnel and faster and more efficient IT systems. Our improvements make us well-placed to handle significantly higher volumes of business.

The Group has once again delivered a creditable performance with NFI growth of 21% on the previous year, contributing to a 25% increase in Profit before tax. The mix between contract NFI and permanent fees remained the same as the previous year at 68%:32%.

Contractor numbers continue to increase. At 31 July 2012 there were 6,700 contractors, an increase of 12% on the previous year and up 3% on 31 January 2012. Contract margins stabilised at 6.6% for the full year 2012.

The increased number of contractors reflected continuing strong demand for contract staff in our main sectors, driven mostly by existing clients working on global, multi-year programmes. Growth also stemmed from supplying contractors to major UK infrastructure projects in the marine, rail and water sectors.

Greatly assisted by the brands in professional services, permanent fees rose by 22% compared with the previous year, with average placement fees essentially stable throughout each quarter of 2012.However, we have seen clients extending the typical time-to-hire.

Business Plan

The Group's success has been built on a core strategy of attracting the best candidates. We believe that by finding strong candidates and making their interests central to our success, we will ensure that our clients are supplied with the right people, at the right time, for the right roles. By understanding the requirements of our clients and by knowing our candidates thoroughly, we deliver by being able to scan, screen, shortlist and present our candidates more effectively and quicker than our competitors.

We have now completed the first year of our 5 year business plan and have made encouraging progress against our 7 Key Aims, set out below, which are absolutely integral to the business and which provide the framework for delivering growth.

1. Expanding our sector diversification and geographical reach by building on our early successes and looking at opportunities to grow into new sectors and additional strategic locations within the UK.

2. Increasing the NFI we generate per employee by focusing on developing existing client relationships and winning new business outside the engineering sector.

3. Building our conversion ratio of NFI to profit from operations as our investments mature, continuing the Group's ability to generate high levels of return from NFI.

4. Enhancing internal systems performance and controls to deliver an even faster, more efficient and robust service to our clients and candidates.

5. Improving our staff retention levels by continuing to look at staff engagement and providing career opportunities. This is a key factor in determining how fast the Group can grow.

6. Maximising cross-selling opportunities across the Group by utilising the increasingly varied client base being created with our expanding brands.

7. Extending our international reach by developing a structured rollout of international opportunities.

Strategic Developments

In January 2012, the Group acquired certain assets of Xchanging Resources Services Limited (XRS), the contingency recruitment arm of Xchanging plc. The assets have quickly been integrated into the Group giving us greater access to the client base. This will increase our scope to expand into new Technology markets and helps us forge even closer links with one of our largest clients.

In June 2012, Matchtech met an important Group goal by signing its first framework agreement with a strategic partner in China. This contract is for design engineers for the rapidly expanding Chinese aerospace industry.

Management and Staff

I wish to thank staff and management for another year in which they have applied hard work, resourcefulness and creativity to produce a strong financial performance. It is a privilege to lead a business that is full of intelligent and talented individuals whom I believe serve our clients and candidates so well.

Our financial success is built on both the service ethos we cultivate and guard closely and from our culture which allies entrepreneurial flair to strong relationship management.

All of the Group's staff work towards one common set of values: Teamwork, Integrity, Enthusiasm, Innovation, and Fun. We are also united behind our 7 Key Aims, which provide an excellent framework for delivering further growth.

As a people business we also understand the importance of personal development. This is why we have continued to invest in developing our staff, including supporting them with considerably improved IT systems and shared services functions.

I would like to add my congratulations to those of the Chairman to Keith Lewis on his promotion to the Board.

Divisional Performance

Matchtech UK operates in four key sectors: Engineering, Built Environment, Information Systems & Technology and Science & Medical. This was a record year for Matchtech UK with unprecedented demand for contract staff in its markets, and a record number of contractors on assignment. Matchtech UK contractor numbers grew from 5,250 at the start of the year to 5,850 at the year end.

Engineering, the largest sector in Matchtech UK representing 44% of NFI, performed well again in 2012. NFI increased by 19% on the previous year, with strong demand across all areas, particularly in the Civil Aerospace, Automotive and Marine sectors.

Built Environment grew contractor numbers by 8% to 1,400, and produced NFI growth of 9%, which came primarily from Water and Rail infrastructure projects.

Information Systems & Technology saw NFI grow by 26% on the previous full year. Growth was aided by the convergence of technology in Electronic Systems and Business Applications, which play to our strengths in niche service delivery.

Science & Medical grew steadily with NFI up 11% on 2011.

elemense, our Managed Services business, provides account management support for key clients, which indirectly generates revenue for the Group.

elemense plays an important role in client retention by ensuring key contracts are constantly monitored and Service Level Agreements are delivered. The client handling skills are essential in fostering strong client relationships and have provided many new business leads in permanent recruitment across the Group.

Matchtech Germany, a business which we first opened in 2009, targets the Aerospace, Automotive and Energy sectors. Trading in Germany continues to gain momentum with NFI up 50% to £0.9, achieving some excellent business development wins, despite growth being restricted by the shortage of available candidates. The Loss before tax increased to £0.4m (2011: £0.1m).

A key challenge, therefore, is to attract more qualified engineers for the German market, which is where our focus lies in the year ahead. As part of this effort we re-launched our German website to have the 'look and feel' of an engineering consultancy, which is a much better fit with the German labour leasing business model.

The Professional Services brands, Barclay Meade and Alderwood continue to make progress.

Barclay Meade focuses on Finance & Accountancy, Marketing, Procurement & Supply Chain, HR and Sales. Alderwood focuses on the Skills and Employability markets. Setting up these two new professional services brands and establishing them firmly in their marketplace has been an important step in diversifying the business.

Barclay Meade continues to develop well and has established good brand recognition in the permanent SME market, working with approximately 300, mainly medium sized, client companies. We intend to scale up the business by recruiting more graduate consultants, who will be guided and mentored by more experienced colleagues, which will enable Barclay Meade to continue to grow market share, while improving its operating margins.

For its size and relative youth of the brand, Alderwood has exceeded expectations in the Welfare to Work market, working for 8 of the 12 main providers. It has also made good headway in the Work-Based Learning market, providing assessors for National Vocational Qualifications (NVQs). Looking forward, we expect to increase placements in both markets.

New reporting structure

In order to improve stakeholders' understanding of the Group as it continues to diversify we will be introducing a simplified reporting structure for the financial year to 31 July 2013. The business will be managed in two distinct segments, Engineering and Professional Services.

The Engineering segment will operate under the Matchtech brand and will be led by Keith Lewis. It will include Matchtech Germany and also elemense, the Managed Services business, which supports Matchtech's large framework agreements.

The Professional Services segment will comprise of the existing Barclay Meade and Alderwood brands, along with the Information Systems and Technology sector, which was previously within Matchtech. This latter sector is more aligned with the Professional Services businesses where its profile bears a closer fit and opportunities for cross-selling will be greater.

An indicative representation of the financial performance of this new structure can be found in Note 2 of the Financial Statements.

The clarity that this new structure provides will allow us to maximise opportunities across the Group and I look forward to giving shareholders an initial update on progress with the interim results in April 2013.

Adrian Gunn 

Chief Executive Officer

Chief Financial Officer's Report

Revenue and Net Fee Income (NFI)

The Group generated revenue of £371.4m, a rise of 23% on the previous year (2011: £301.8m), with NFI for the year of £36.1m, up 21% (2011: £29.8m).

Contractor numbers on assignment continued to grow, finishing the year on 6,700, up 12% on the starting position of 6,000. This growth in numbers contributed to an increase of 21% in contract NFI to £24.6m (2011: £20.4m).

Permanent Recruitment Fees of £11.5m were up 22% (2011: £9.4m). However, the average weekly fees billed each quarter essentially remained flat throughout the year. Information on the performance of Group businesses is provided in the Chief Executive Officer's Review.

Overheads and NFI Conversion

Overheads in the year increased by 20%, resulting in a slight increase in the NFI conversion rate to 24% (2011: 23%). We are in a position to start improving the NFI conversion rate going forwards.

Profit and Earnings per Share

Profit from operations was £8.7m, up 28% (2011: £6.8m). The increase of £1.9m from 2011 was mainly due to successfully taking advantage of our established presence in growth niche markets, strong client retention based on consistently first-class service delivery, and from the encouraging improved performance by the Professional Services brands, which we have created in the last two years.

The structure of the business and our July year end mean that there is a strong second half weighting to our profits, with the half year splits similar to last year, H1 39%;H2 61% (2011: H1 34%;H2 66%).

The Group generated profit before tax of £8.0m, up 25% (2011: £6.4m) and profit after tax of £5.7m (2011: £4.7m).

The effective tax rate has increased to 28.5% (2011: 25.9%) due to higher non tax deductible professional fees and increased losses incurred by Matchtech Germany.

Basic earnings per share rose by 20% to 24.34 pence (2011: 20.26 pence) and diluted earnings per share of 23.49 pence by 19% (2011: 19.74 pence).

Dividends

The Board proposes an unchanged 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 16 November 2012, will be payable on 7 December 2012 to those shareholders registered on 9 November 2012.

When added to the interim dividend of 5 pence per share this makes an unchanged total dividend for the year of 15.6 pence per share, giving dividend cover of 1.6 times (2011: 1.3 times).

Dividends Paid

Group Consolidated Statement of Financial Position

At the 31 July 2012 the Group had net assets of £27.6m (2011: £25.1m) and had 23.4m fully paid ordinary shares in issue (2011: 23.4m).

Capital Expenditure and Tangible and Intangible Assets

Capital expenditure in the year was £1.4m (2011: £0.5m), of which £0.4m was for the acquisition of XRS in January 2012

Tangible assets at 31 July 2012 of £1.8m (2011: £1.5m) consist of the Group's motor fleet, office equipment, leasehold improvements and computer equipment.

Intangible items at 31 July 2012 of £0.5m (2011: £0.1m) consist of £0.3m being the amortised acquisition cost of XRS, which will be amortised over a two year period, and external software licences of £0.2m which are amortised over the expected life of the licence.

Working Capital, Cashflow and Net Debt

Current debtor days at the year-end were improved to 50 (31 July 2011: 53).

Net cash from operating activities was £6.5m (2011: outflow of £7.4m) with an operating cash conversion of 106% (2011: -72%).

Net debt at 31 July 2012 was £14.5m (31 January 2012: £11.5m, 31 July 2011: £16.0m).

Banking Facilities

The Group operates a working capital Confidential Invoice Discounting facility with Barclays Bank plc.

In June 2012 the Group agreed an increase in its facilities with Barclays from £35m to £50m, on improved terms, committed until June 2015.

The facility ceiling currently stands at the lower of £50m or 90% of qualifying invoiced debtors and interest on borrowing is at Barclays Bank Base Rate plus 2.00%. At 31 July 2012 the balance on the Confidential Invoice Discounting Facility was £15.1m.

Critical Accounting Policies

The Statement of Significant Accounting Policies is set out in Note 1 to the Financial Statements.

The Group's Revenue Recognition policy may be summarised as:

·; Contract revenue, and hence contract net fee income, is only recognised upon receipt of a client signed timesheet

·; Permanent fees are only recognised following confirmation by the client that the candidate has started work

·; Other fees are recognised on confirmation from the client committing to the agreement

The Group makes estimates and assumptions regarding the future. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.

The Board considers that the estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are the measurement of tangible assets (where the Group estimates useful lives for the purposes of depreciation).

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 working capital finance.

 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 £14.5m at the year end, comprising £15.1m debt less £0.6m 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. Receivable balances are monitored on an on-going 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 13% (2011: 14%) of total receivables balances at 31 July 2012.

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

Chief Financial Officer

4 October 2012

CONSOLIDATED INCOME STATEMENT

for the year ended 31 July 2012

EARNINGS PER ORDINARY SHARE

STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 July 2012

STATEMENT OF CHANGES IN EQUITY

for the year ended 31 July 2012

A) GROUP

B) COMPANY

STATEMENTS OF FINANCIAL POSITION

for the year ended 31 July 2012

These financial statements were approved by the Board of Directors on 4 October 2012, and signed on their behalf by:

Tony Dyer

Chief Financial Officer

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 31 July 2012

NOTES

forming part of the financial statements

1. SIGNIFICANT ACCOUNTING POLICIES

i. The business and address of the GroupMatchtech Group plc is a human capital resources business dealing with contract and permanent recruitment in the Private and Public Sector. The Company is incorporated in the United Kingdom. The Group's address is: Matchtech Group plc, 1450 Parkway, Whiteley, Fareham PO15 7AF.

ii. Basis of preparation of the financial statementsThe financial statements have been prepared in accordance with applicable International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and which are effective at 31 July 2012.These financial statements have been prepared under the historical cost convention. The accounting policies have been applied consistently throughout both the Group and the Company for the purposes of preparation of these financial statements. A summary of the principal accounting policies of the Group are set out below.

iii. Going concernThe Directors have reviewed forecasts and budgets for the coming year, which have been drawn up with appropriate regard for the current macroeconomic environment and the particular circumstances in which the Group operates. These were prepared with reference to historic and current industry knowledge, taking future strategy of the Group into account. As a result, at the time of approving the financial statements, the Directors consider that the Company and the Group have sufficient resources to continue in operational existence for the foreseeable future, and accordingly, that it is appropriate to adopt the going concern basis in the preparation of the financial statements. As with all business forecasts, the directors cannot guarantee that the going concern basis will remain appropriate given the inherent uncertainty about future events.

iv. New standards and interpretationsNew standards and amendments to existing standards applicable for the period ending 31 July 2012 are:

- IAS 24 'Related Party Disclosures'

The adoption of the above standards has had no impact on the financial statements.

New standards in issue, not yet effectiveThe following relevant Standards and Interpretations, which are new and yet to become mandatory, have not been applied in the Group financial statements:

v. Basis of consolidationThe Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to the statement of financial position date. Subsidiaries are entities over which the Group has power to control the financial and operating policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights.Acquisitions of subsidiaries are dealt with by the purchase method. The purchase method involves the recognition at fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated statement of financial position at their fair values, which are also used as the bases for subsequent measurement in accordance with Group accounting policies.Transactions between Group companies are eliminated on consolidation.

vi. RevenueRevenue is measured by reference to the fair value of consideration received or receivable by the Group for services provided, excluding VAT and trade discounts. Revenue on temporary placements is recognised upon receipt of a client approved timesheet or equivalent. Revenue from permanent placements, which is based on a percentage of the candidate's remuneration package, is recognised when candidates commence employment at which point it is probable that the economic benefits associated with the transaction will be transferred. Other fees are recognised on confirmation from the client committing to the agreement.

vii. Property, plant and equipmentProperty, plant and equipment is stated at cost, net of depreciation and any provision for impairment.Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset. Depreciation is charged per annum as follows:Motor vehicles 25.0% Reducing balanceComputer equipment 25.0% Straight lineOffice equipment 12.5% Straight lineLeasehold improvements Over the period of the lease term

Residual value estimates are updated as required, but at least annually, whether or not the asset is revalued.

viii. Intangible assetsSeparately acquired software licences are included at cost and amortised on a straight-line basis over the useful economic life of that asset at 20%-50% per annum.

Other intangible assets are included at cost and amortised on a straight-line basis over the useful economic life of that asset.

Provision is made against the carrying value of intangible assets where an impairment in value is deemed to have occurred. Amortisation is recognised in the income statement under administrative expenses.

ix. Disposal of assetsThe gain or loss arising on the disposal of an asset is determined as the difference between the disposal proceeds and the carrying amount of the asset and is recognised in the income statement.

x. Operating lease agreementsRentals applicable to operating leases are charged against profits on a straight line basis over the lease term. Lease incentives are spread over the term of the lease.

xi. TaxationCurrent tax is the tax currently payable based on taxable profit for the year.Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit.Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the statement of financial position date.Deferred tax on temporary differences associated with shares in subsidiaries is not provided if these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future.Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity (such as share-based payments) in which case the related deferred tax is also charged or credited directly to equity.

xii. Pension costsThe Company operates a defined contribution pension scheme for employees. The assets of the scheme are held separately from those of the Company. The annual contributions payable are charged to the income statement as they accrue.

xiii. Share-based paymentThe transitional arrangements of IFRS 1 have been applied to all grants of equity instruments after 7 November 2002 that were unvested at 1 August 2006. All share-based remuneration is ultimately recognised as an expense in the income statement with a corresponding credit to "share-based payment reserve", a component of equity. All goods and services received in exchange for the grant of any share-based remuneration are measured at their fair values. Fair values of employee services are indirectly determined by reference to the fair value of the share options awarded. Their value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example, profitability and sales growth targets).If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting. Upon exercise of share options, proceeds received net of attributable transaction costs are credited to share capital and share premium.

The Company is the granting and settling entity in the group share-based payment arrangement where share options are granted to employees of its subsidiary companies. The Company recognises the share-based payment expense as an increase in the investment in subsidiary undertakings.The Group operates a Share Incentive Plan (SIP) which is HMRC approved, and enables employees to purchase Company shares out of pre-tax salary. For each share purchased the Company grants an additional share at no cost to the employee. The expense in relation to these 'free' shares is recorded as employee remuneration and measured at fair value of the shares issued as at the date of grant.

xiv. Business combinations completed prior to date of transition to IFRSThe Group has elected not to apply IFRS 3 Business Combinations retrospectively to business combinations prior to 1 August 2006.Accordingly the classification of the combination (merger) remains unchanged from that used under UK GAAP. Assets and liabilities are recognised at date of transition if they would be recognised under IFRS, and are measured using their UK GAAP carrying amount immediately post-acquisition as deemed cost under IFRS, unless IFRS requires fair value measurement. Deferred tax is adjusted for the impact of any consequential adjustments after taking advantage of the transitional provisions.

xv. Financial assetsAll financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets are recognised at fair value plus transaction costs.In the Company financial statements, investment in the subsidiary company is measured at cost, and provision made where an impairment value is deemed to have occurred.Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Trade receivables are classified as loans and receivables. Loans and receivables are measured subsequent to initial recognition at amortised cost using the effective interest method, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognised in the income statement.Provision against trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows.A financial asset is derecognised only where the contractual rights to cash flows from the asset expire or the financial asset is transferred and that transfer qualifies for derecognition. A financial asset is transferred if the contractual rights to receive the cash flows of the asset have been transferred or the Group retains the contractual rights to receive the cash flows of the asset but assumes a contractual obligation to pay the cash flows to one or more recipients. A financial asset that is transferred qualifies for derecognition if the Group transfers substantially all the risks and rewards of ownership of the asset, or if the Group neither retains nor transfers substantially all the risks and rewards of ownership but does transfer control of that asset.Trade receivables subject to the invoice discounting facility are recognised in the statement of financial position until they are settled by the customer. The Group is responsible for collection of trade receivables and undertakes the risk and rewards until they are settled by the customer.

xvi. Financial liabilitiesFinancial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument and comprise trade and other payables and bank loans. Financial liabilities are recorded initially at fair value, net of direct issue costs and are subsequently measured at amortised cost using the effective interest rate method.A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires.

xvii. Cash and cash equivalentsCash and cash equivalents comprise cash on hand and on demand deposits.

xviii. DividendsDividend distributions payable to equity shareholders are included in "other short term financial liabilities" when the dividends are approved in general meeting prior to the statement of financial position date.

xix. Foreign currenciesTransactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the statement of financial position date. Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognised in the income statement in the period in which they arise.The assets and liabilities in the financial statements of foreign subsidiaries are translated at the rate of exchange ruling at the statement of financial position date. Income and expenses are translated at the actual rate. The exchange differences arising from the retranslation of the opening net investment in subsidiaries are taken directly to "Translation of foreign operations" in equity. On disposal of a foreign operation the cumulative translation differences are transferred to the income statement as part of the gain or loss on disposal.As permitted by IFRS 1, the balance on the cumulative translation adjustment on retranslation of subsidiaries' net assets has been set to zero at the date of transition to IFRS.

xx. EquityEquity comprises the following:

- "Share capital" represents the nominal value of equity shares.

- "Share premium" represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue.

- "Share-based payment reserve" represents equity-settled share-based employee remuneration until such share options are exercised.

- "Merger reserve" represents the equity balance arising on the merger of Matchtech Engineering and Matchmaker Personnel.

- "Translation of foreign operations" represents the foreign currency differences arising on translating foreign operations into the presentational currency of the Group.

- "Retained earnings" represents retained profits.

xxi. Significant accounting estimates and judgementsEstimates, assumptions concerning the future and judgments are made in the preparation of the financial statements. They affect the application of the Group's accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical judgementsThe judgements made which, in the opinion of the Directors, are critical in drawing up the financial statements are as follows:Invoice discounting facilityThe terms of this arrangement are judged to be such that the risk and rewards of ownership of the trade receivables do not pass to the finance provider. As such the receivables are not derecognised on draw-down of funds against this facility. This facility is recognised as a liability for the amount drawn.Key sources of estimation uncertaintyThe key assumptions concerning the future and other key sources of estimation uncertainty at the statement of financial position date are discussed below. These are included for completeness, although it is the Directors' view that none of these have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.Estimated useful lives of property, plant and equipmentThe cost of equipment is depreciated on a straight line basis and the cost of motor vehicles is depreciated on a reducing balance basis over their useful lives. Management estimates the useful lives of property, plant and equipment to be within 2 to 8 years. These are common life expectancies applied in the industry in which the Group operates. Changes in the expected level of usage and technological development could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised.Impairment loss of trade and other receivablesThe Group's policy for doubtful receivables is based on the on-going evaluation of the collectability and aging analysis of the trade and other receivables and on management's judgements. Considerable judgement is required in assessing the ultimate realisation of these receivables, including the current creditworthiness and the past collection history of each debtor. If the financial conditions of the Group's receivables were to deteriorate, resulting in an impairment of their ability to make payments, additional impairment loss of trade and other receivables may be required. The carrying amounts of these assets are shown in note 15.Share-based paymentsThe key assumptions used in estimating the fair values of options granted to employees under IFRS 2 are detailed under Note 20.

Employee benefitsThe financial liability in relation to outstanding holiday pay is recognised in the income statement and held as a provision.

2. SEGMENTAL INFORMATION

The chief operating decision maker, as defined in IFRS 8, has been identified as the Board of Directors of Matchtech Group plc. The information reported below is consistent with the reports regularly provided to the Board of Directors.

Reportable segments

Year ended 31 July 2012

Year ended 31 July 2011

Professional Services includes Barclay Meade Limited and Alderwood Education Limited.

A segmental analysis of total assets has not been included as this information is not available to the Board; trade receivables represent the majority of net assets and are included as segment net assets above. Other net assets are centrally held and are not allocated across the reportable segments. Unallocated net liabilities include non-current assets, other receivables, cash and cash equivalents and current liabilities.

Geographical information

Revenue and non-current assets are allocated to the geographic market based on the domicile of the respective subsidiary. Included within UK revenues is cross-border revenues of £4,298,000 (2011: £3,066,000).

Largest customers

During the year revenues of £45,519,000 (2011: £35,598,000) were generated from sales to the Group's largest client and its business process outsourcer. The majority of this revenue is included in the Engineering segment.

No other single client contributed more than 10% of the Group's revenues.

Indicative representation of changes to the reporting structure

From 1 August 2012 the reporting structure of the Group was changed to two main reporting segments, Engineering and Professional Services. Engineering will consist of Matchtech UK, excluding Information Systems & Technology, and elemense. Professional Services will include Information Systems & Technology.

The following disclosure is an indicative representation of the reported results as if the new structure had been implemented throughout the year 31 July 2012 and does not constitute segmental reporting as defined by IFRS 8.