Gattaca Regulatory News (GATC)

9 April 2015

Matchtech Group plc

Half year financial report for the six months ended 31 January 2015

Matchtech Group plc (AIM: MTEC) (the "Group"), one of the UK's leading specialist engineering and professional services recruitment companies, today announces its unaudited results for the six months ended 31 January 2015.

Financial highlights

Net Fee Income

· Net fee income (NFI) up 2% to £22.5m (2014 H1: £22.1m)

o Contract NFI up 3% to £16.3m (2014 H1: £15.9m), with contract margins improving slightly at 7.5% (2014 H1: 7.4%)

o Permanent recruitment fees of £6.2m, consistent with H1 2014

Profitability & Net Debt

· Profit from Operations of £5.3m, down £0.9m (2014 H1: £6.2m), due to non-recurring items of £0.7m of acquisition costs and £0.2m of restructuring costs

· Underlying1 Profit from Operations of £6.5m, consistent with H1 2014

· Profit before tax down £0.6m to £5.1m, (2014 H1: £5.7m)

· Underlying1 Profit before tax up 5% to £6.3m (2014 H1: £6.0m)

· Basic earnings per share of 15.1p (2014 H1: 18.1p)

· Underlying1 Basic earnings per share up 2% to19.9p (2014 H1: 19.6p)

1 Underlying results exclude acquisition costs, amortisation of acquired intangibles and non-recurring restructuring costs.

· Net debt at 31 January 2015 reduced by £6.7m to £1.9m (2014 H1: £8.6m)

Interim Dividend

· Interim dividend increased by 5% to 5.68p (2014 H1: 5.41p) to be paid on 19 June 2015 to shareholders on the register at 29 May 2015

Acquisition and new business

· Acquisition of Networkers International ("Networkers") completed on 2 April 2015. The acquisition values the entire issued and to be issued share capital of Networkers on a fully diluted basis at approximately £57.9 million.

Further Information about Networkers and the acquisition was provided in the Group's announcement on 28 January 2015.

· A number of contracts signed with new and existing clients during and since the half year, including a six-year agreement commencing 16 March 2015 to provide Southern Water with engineering, operational and head office staff. The Group has also announced today the signing of four additional contracts, including the extension of an existing contract with BAE for a further three years, to provide engineering and technology staff across the company.

Commenting on the results, Brian Wilkinson, Chief Executive Officer, said:

"The Group has delivered a steady performance in the period. We continue to sharpen the focus in our core business areas, in line with our strategy.

"We now enter the next phase in our development of the Group following the completion of the acquisition of Networkers and are very excited by the prospects of the enlarged group. We continue to see major opportunities in our core markets.

"The addition of telecoms recruitment to our portfolio creates an even stronger specialist Group. The acquisition also adds

long-standing, substantial and profitable overseas operations to the Group which enables us to accelerate the introduction of our Engineering services to our international customers, also in-line with our strategy. We are now working on the integration of Networkers to ensure the combined operations provide an enhanced client experience and a stronger platform for future growth.

"Based on opportunities won, trading in the two months since the half year and continued close cost management the Board anticipates the Group's results for the year to 31 July 2015 will be in line with expectations with an additional maiden four-months contribution from Networkers from April to July."

For further information please contact:

About Matchtech

Matchtech Group plc (LSE-AIM: MTEC), is the UK's leading specialist engineering and professional services recruitment agency, providing contract, temporary and permanent staff. Established in 1984 and AIM-listed in 2006, the Group is one of the fastest growing staffing organisations listed in the UK, with a well-balanced business model; approximately 70% contract and 30% permanent.

The Engineering division spans five specialist sectors - Infrastructure; Automotive; Maritime; Aerospace; Energy - as well as General Engineering. The Professional Services division covers technology markets through our Connectus and Provanis brands and Professional Staffing though our Alderwood and Barclay Meade brands.

In April 2015, Matchtech Group plc announced the completion of the acquisition of Networkers International, a global recruitment company specialising in the delivery of recruitment services focussing on Telecoms and Technology. The combined group is well-placed to take advantage of the convergence between Engineering, Technology and Telecoms skill sets and creates a specialist recruiter, of scale, in the UK and internationally, with:

· 18 offices in 12 countries, recruiting in over 100 countries across the world

· Over 580 sales staff

· 9,000 contractors and 4,000 permanent placements

MATCHTECH GROUP PLC

Interim report for the period ended 31 January 2015

Operating review

Introduction

The Group's underlying results may be analysed by Business Unit as follows:

Engineering (62% of Group NFI) - NFI up 5%

Engineering delivered NFI up 5% to £14.0m (2014 H1: £13.3m), with contract NFI up 3% to £11.3m (2014 H1: £11.0m) and permanent fees up 17% to £2.7m (2014 H1: £2.3m).

Infrastructure - NFI £4.8m (H1 2014: £3.8m).

We are seeing very high demand for skilled engineering personnel in this sector, with NFI up 26%, driven by continued investment in both highways maintenance schemes and new build rail infrastructure, along with a recovering property market.

Energy - NFI £2.1m (2014 H1: £2.4m).

Well documented challenges in this sector, particularly the Oil & Gas market, are being partly mitigated by focussing on the Power & Nuclear and Renewables markets, where NFI was up 43%.

General Engineering - NFI £1.8m (2014 H1: £1.6m)

This sector is feeding off strong growth in the UK's high-tech manufacturing sector leading to 13% growth in NFI.

Automotive - NFI £2.1m (2014 H1: £2.2m), of which UK: £1.9m (2014 H1 £1.9m).

This is a steady performance in the UK as we help our clients to address their growth challenges and work with them on innovative and global sourcing strategies.

We have also reviewed the structure of the German operation and whilst the NFI has reduced to £0.2m from £0.3m, we have downsized the business and operationally it is now breakeven (2014 H1: £0.3m loss).

Aerospace - NFI £1.7m (2014 H1: £1.7m).

With new aircraft designs now completed, a downturn in design requirements is being offset by increasing demand for manufacturing skills, as the sector itself moves its focus into the build phase.

Maritime - NFI £1.5m (2014 H1: £1.6m).

This sector has been adversely affected by the previously announced closure of shipbuilding at Portsmouth Naval Base, but a 22% increase in performance in other areas left the sector down just 6%.

Professional Services (38% of Group NFI) - NFI down 3%

The Professional Service businesses delivered NFI that was £0.3m lower at £8.5m, (H1 2014: £8.8m), with contract NFI up 2% to £5.0m (2014 H1: £4.9m) and permanent fees down 10% to £3.5m (2014 H1: £3.9m).

Technology - NFI £5.8m (2014 H1: £5.7m)

Growth in Technology has been below our expectations considering the macro-economic recovery. Big Data, Cyber Security, Cloud Computing and Web Applications continue to dominate investment decisions from our customer base. We believe the shortage of permanent candidate availability will lead to an increase in demand for temporary labour. The Electronics market remains busy, while the fall in the price of oil has affected Controls & Automation. We have re-aligned our structure in order to capitalise on an improving market, focussing on higher value roles and offering a niche service that will better appeal to a demanding customer base in a mature market.

Barclay Meade - NFI £2.0m (2014 H1: £2.2m)

We have reviewed our position within the Professional Staffing market. We do have a strong profitable business which services the Group's Engineering and Technology client base. However, the Board believes that our London operation, which services other markets, has not, as a whole, gained enough traction to be viable over the medium term. Accordingly, since 31 January 2015 we have decided to close this part of the business and are reallocating certain experienced recruiters to other parts of the new Group.

Alderwood - NFI £0.7m (2014 H1: £0.9m)

There has been some uncertainty in the apprenticeship sector during the half year due to the well-documented reforms and potential changes in government funding towards apprenticeships. Given this environment, we have seen an impact in the volumes of staff being recruited as clients have been more cautious and this is likely to continue to beyond the General Election until there is greater clarity around the steps that will be taken to address the skills shortage. 

People

Total staff numbers at the end of the period were 420 (31 January 2013: 413, 31 July 2014: 422).

Headcount may be analysed as follows:

In both the six months and the year to 31 January 2015 we have selectively increased headcount in Engineering by 5% and 23% respectively, especially in Infrastructure, reduced it in Professional Services by 11% and 19% respectively and broadly maintained headcount in Shared Services.

Financial Overview

Underlying results exclude acquisition costs, amortisation of acquired intangibles and non-recurring restructuring costs.

Revenue for the period was similar to H1 2014 at £220.2m (2014 H1: £220.9m).

NFI was up 2% to of £22.5m (2014 H1: £22.1m).

Contract NFI was up 3% to £16.3m (2014 H1: £15.9m). Contract margins improved slightly to 7.5% (2014 H1: 7.4%).

Permanent recruitment fees were the same as prior year at £6.2m (2014 H1: £6.2m).

Profit from operations was £5.3m (2014 H1: £6.2m), which included £0.9m (2014: £Nil) of non-recurring costs, being £0.7m of acquisition costs and £0.2m of restructuring costs.

Underlying profit from operations was £6.5m (2014 H1: £6.5m).

NFI conversion was 24% (2014 H1: 28%), with underlying NFI conversion 29% (2014 H1: 30%).

Interest costs remain relatively low at £0.2m (2014 H1: £0.5m). H1 2014 included a loss of on the revaluation of foreign assets of £0.2m.

Profit before tax was down 11% to £5.1m (2014 H1: £5.7m) with underlying Profit before tax up 5% to £6.3m (2014 H1: £6.0m).

The effective rate of tax for the period was 26% (2014 H1: 22%); the increase is mainly due to non-deductible acquisition costs of £0.7m partly offset by the reduction of the UK standard rate of corporation tax to 20.7% (2014: 22.3%).

Basic earnings per share were down 17% to 15.1p (2014 H1: 18.1p) with underlying Basic earnings per share up 2% to 19.9p (2014 H1: 19.6p).

Fully diluted earnings per share were down 17% to 14.1p (2014 H1: 17.0p) with underlying diluted earnings per share up 2% to 18.7p (2014 H1: 18.4p).

Debtors, Cashflow and Net Debt

Debtor days at the end of the period were 46 (31 January 2014: 42; 31 July 2014: 46), with no material unimpaired debtors over 90 days overdue (31 January 2014: £nil; 31 July 2014: £nil).

Capital expenditure for the period was £0.4m (2014 H1: £0.1m), with expenditure mainly on leasehold improvements.

As at 31 January 2015 the Group had a committed Confidential Invoice Discounting ("CID") facility with HSBC Bank until July 2018. The facility allows the Group to borrow up to 90% of its qualifying UK invoiced debtors capped at £60.0m, with a single debtor cap of 20% of total debtor book. Interest is charged on borrowings at HSBC Bank Base Rate plus 1.1%.

Since 31 January 2015, and as part of the Group's financing of the acquisition of Networkers, the Group has entered into a £30m, three year, term loan facility with HSBC.

Cash inflows from operations of £7.0m (2014 H1: £7.1m) represented cash conversion of 132% (2014 H1: 115%). The Group ended the period with net debt of £1.9m (31 January 2014: £8.6m; 31 July 2014: £3.1m). When combined with Networkers net debt at 31 December 2014 of £10.7m, plus acquisition consideration and fees of c£32m implies pro-forma net debt of c£45m.

Dividend

The Board has today declared a 5% increase in the interim dividend of 5.68 pence per share (2014: 5.41 pence) to be paid on 19 June 2015 to shareholders on the register at 29 May 2015.

Risks

The Board considers strategic, financial and operational risks and identifies actions to mitigate those risks. Key risks and their mitigation were disclosed on pages 20 and 21 of the Annual Report for the year ended 31 July 2014.

Notwithstanding that no new key risks have been identified in the period, we continue to manage a number of potential risks and uncertainties - many of which are common to other companies - which could have a material impact on our longer term performance.

In particular the Board is focussed on the integration of Networkers International and the additional risks associated with the acquisition, given its size and international operations which it brings to an essentially UK centric business. These will be identified and reported in the 2015 Annual Report.

Outlook

We now enter the next phase in our development of the Group following the completion of the acquisition of Networkers and are very excited by the prospects of the enlarged group. We continue to see major opportunities in our core markets.

The addition of telecoms recruitment to our portfolio creates an even stronger specialist Group. The acquisition also adds

long-standing, substantial and profitable overseas operations to the Group which enables us to accelerate the introduction of our Engineering services to our international customers, also in-line with our strategy. We are now working on the integration of Networkers to ensure the combined operations provide an enhanced client experience and a stronger platform for future growth.

Based on opportunities won, trading in the two months since the half year and continued close cost management the Board anticipates the Group's results for the year to 31 July 2015 will be in line with expectations with an additional maiden four-months contribution from Networkers from April to July.

Brian Wilkinson

Chief Executive Officer

09 April 2015

Cautionary Statement

This announcement has been prepared for the shareholders of the Company, as a whole and its sole purpose and use is to assist shareholders to exercise their governance rights. The Company and its directors and employees are not responsible for any other purpose or use or to any other person in relation to this announcement and their responsibility to shareholders shall be limited to that which is imposed by statute.

This announcement contains indications of likely future developments and other forward-looking statements that are subject to risk factors associated with, among other things, the economic and business circumstances occurring from time to time in the countries, sectors and business segments in which the Group operates. These and other factors could adversely affect the Group's results, strategy and prospects. Forward-looking statements involve risks, uncertainties and assumptions. They relate to events and/or depend on circumstances in the future which could cause actual results and outcomes to differ from those currently expected. No obligation is assumed to update any forward-looking statements, whether as a result of new information, future events or otherwise.

CONDENSED CONSOLIDATED INCOME STATEMENT

for the period ended 31 January 2015

All of the activities of the Group are classed as continuing.

EARNINGS PER ORDINARY SHARE

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 31 January 2015

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

for the period ended 31 January 2015

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the period ended 31 January 2015

NOTES

The Notes form an integral part of this condensed consolidated interim financial information.

1 THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

i The business of the Group

Matchtech Group plc is a human capital resources business dealing with contract and permanent recruitment in the Private and Public sectors. 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 interim financial information

These interim condensed consolidated financial statements are for the six months ended 31 January 2015. They have been prepared in accordance with IAS 34 "Interim Financial Reporting". They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements for the year ended 31 July 2014. The comparative figures for the financial year ended 31 July 2014 are not the company's statutory accounts for that financial year. Those accounts have been reported on by the company's auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

These condensed consolidated interim financial statements ('the interim financial statements') have been prepared in accordance with the accounting policies set out below which are based on the recognition and measurement principles of IFRS in issue as adopted by the European Union (EU) and are effective at 31 July 2015 or are expected to be adopted and effective at 31 July 2015.

These financial statements have been prepared under the historical cost convention. The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these condensed interim financial statements. A summary of the principal accounting policies of the group are set out below.

iii Going concern

The 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.

Since 31 January 2015, and as part of the Group's financing of the acquisition of Networkers International plc, the Group has entered into a £30million, three year, term loan facility with HSBC.

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its available facilities.

The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. As with all business forecasts, the Directors' statement cannot guarantee that the going concern basis will remain appropriate given the inherent uncertainty about future events.

iv New standards and interpretations

There following standards and amendments to existing standards applicable for the period ending 31 January 2015 are:

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

New standards in issue, not yet effective

Based on the Group's current business model and accounting policies, the Directors do not expect material impacts on the figures in the Group's financial statements when the interpretations become effective.

The Group does not expect to apply any of these pronouncements early.

v Basis of consolidation

The Group Financial Statements consolidate those of the Company and all of its subsidiary undertakings drawn up to the balance sheet 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 balance sheet 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 Revenue

Revenue 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. Fees for the provision of engineering services are recognised on completion of work performed in accordance with customer contracts. Other fees are recognised on confirmation from the client committing to the agreement.

vii Property, plant and equipment

Property, plant and equipment is stated at cost or valuation, 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 in terms of annual depreciation as follows:

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

viii Intangible assets

Goodwill

Goodwill arises on the acquisition of subsidiaries and represents the excess of the fair value of the consideration given for a business over the Company's interest in the fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree. Goodwill is stated at cost less accumulated impairment.

Goodwill is allocated to cash-generating units and is not amortised, but is tested at least annually for impairment. For the purpose of impairment testing, goodwill acquired in a business acquisition is allocated to each of the cash generating units (CGUs), or groups of CGUs that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Software licences

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. These costs are amortised using the straight line method to allocate the cost of the software licences over their useful lives of between two and five years. Software licences are stated at cost less accumulated amortisation.

Other Intangibles

Acquired customer relationships

Acquired customer relationships comprise principally of existing customer relationships which may give rise to future orders (customer relationships), and existing order books (backlog orders). Acquired customer relationships are recognised at fair value at the acquisition date and have a finite useful life. Amortisation of customer relationships is amortised in line with the expected cashflows. Acquired customer relationships are stated at cost less accumulated amortisation and impairment. Backlog orders are recognised at fair value at the acquisition date and amortised in line with the expected cash flows. Backlog orders are stated at cost less accumulated amortisation and impairment.

Trade names and trademarks

Trade names and trademarks have arisen on the consolidation of recently acquired businesses and are recognised at fair value at the acquisition date. Where trade names and trademarks are considered to have a finite useful life, amortisation is calculated using the straight line method to allocate the cost of trade names and trademarks over their estimated useful lives. Where trade names and trademarks are considered to have an indefinite useful life, they are not subject to amortisation; they are tested annually for impairment and when there are indications that the carrying value may not be recoverable, as detailed within the impairment of non-financial assets section below. Trade names and trademarks are stated at cost less accumulated amortisation and impairment.

Other

Other intangible assets acquired by the Group and have a finite life useful lives are measured at cost less accumulated amortisation and accumulated losses.

Amortisation of intangible assets is recognised in the income statement under administrative expenses.

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

ix Disposal of assets

The 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 agreements

Rentals 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 Taxation

Current 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 balance sheet 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 the revaluation of land) in which case the related deferred tax is also charged or credited directly to equity.

xii Pension costs

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

xiii Share based payments

The 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". 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 IFRS

The 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 assets

All 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 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 balance sheet until they are settled by the customer.

xvi Financial liabilities

Financial 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 equivalents

Cash and cash equivalents comprise cash on hand, on demand deposits and bank overdrafts.

xviii Dividends

Dividend distributions payable to equity shareholders are included in "other short term financial liabilities" when the dividends are approved in general meeting prior to the balance sheet date.

xix Foreign currencies

Transactions 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 balance sheet 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 profit or loss 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 balance sheet 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 Equity

Equity 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 Judgements

Estimates and assumptions concerning the future and judgments are made in the preparation of 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 Judgements

The judgements made which, in the opinion of the Directors, are critical in drawing up the financial statements are as follows:

Invoice Discounting Facility

The terms of this arrangement are judged to be such that the risks 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.

Factoring arrangements

In the event of sale of receivables and factoring, the Group derecognises receivables when the Group has given up control or continuing involvement.

The Group derecognises receivables in case of sale and factoring when the Group has transferred its rights to receive cash flows from the receivables; and either the Group has transferred substantially all of the risks and rewards of the ownership of the receivables, or the Group has neither transferred nor retained substantially all of the risks and rewards, but has transferred control of the assets.

Key Sources of Estimation Uncertainty

The 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 Director's 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 Equipment

The 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 and 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 Receivables

The Group's policy for doubtful receivables is based on the on-going evaluation of the collectability and ageing 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 customers 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 7.

Intangibles

The Group determines whether goodwill and other intangible assets (including acquired intangibles) are impaired on an annual basis or otherwise when changes in events or situations indicate that the carrying value may not be recoverable. This is requires an estimation of the recoverable amount of the cash generating unit to which the assets are allocated. Consideration is given to the future cash flows of each cash generating unit and the discount rate applied to calculate the present value of those cash flows.

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 for the current period is consistent with the reports regularly provided to the Board of Directors.

Reportable segments

Non-recurring items of £930,000 included acquisition costs of £710,000 and restructuring costs of £220,000. There were no non-recurring items in year ended 31 July 2014.

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

Geographical information

1 Profit before amortisation of acquired intangibles

Revenue and non-current assets are allocated to the geographic market based on the domicile of the respective subsidiary.

Included within UK revenues are cross-border revenues of £6,095,000 (31 January 2014: £3,374,000, year to 31 July 2014: £13,667,000).

Largest customers

During the period ended 31 January 2015 revenues of £13,389,000 (31 January 2014: £18,880,000, year to 31 July 2014 £35,287,000) were generated from sales to the Group's largest client and its business process outsourcer. The majority of this revenue is included within the Engineering segment.

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

3 INCOME TAX EXPENSE

Analysis of charge in the period:

The total tax charge is higher (31 January 2104: lower; 31 July 2014: higher) than the standard rate of corporation tax. The differences are detailed below:

4 DIVIDENDS

5 EARNINGS PER SHARE

Earnings per share has been calculated by dividing the consolidated profit after taxation attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period.

Diluted earnings per share has been calculated, on the same basis as above, except that the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares (arising from the Group's share option schemes) into ordinary shares has been added to the denominator. There are no changes to the profit (numerator) as a result of the dilutive calculation.

The earnings per share information has been calculated as follows: