Gattaca Regulatory News (GATC)

5 August 2010

Matchtech Group plc

Trading Update

Matchtech Group plc ("Matchtech" or the "Group"), one of the UK's leading specialist recruitment agency operating in the Engineering, Science, Technology and Professional Services sectors, provides the following Trading Update for the year ended 31 July 2010.

Since our last update on 8 April 2010, trading in the final 4 months of FY2010 has continued in line with the Board's expectations.

Performance may be summarised as follows:

Trading conditions improved during the second half of the year, with NFI in the second half at similar levels for both Contract and Permanent as in the same period in FY2009. Encouragingly, the second half of FY2010 saw increases of 12% in Contract NFI and 10% in Permanent Fees compared with the first half.

Contractor numbers have increased by 8% at 31 July 2010 compared with the previous year end and now stand at over 5,100, a record level. The second half of the year to 31 July saw an easing of the pressure on margins and contractor pay rates and a stabilisation of the Group's average timesheet value.

Fees from Permanent recruitment increased month on month, albeit slowly.

NFI performance by sector may be summarised as follows:

The Group's Germany operation, established in August 2009, continues to progress. Included in the Engineering Sector figures above, Germany's NFI was H1: £60,000, H2: £90,000.

We have strengthened the management team in Elemense, which is progressing well and will become a dedicated profit centre from August 2010.

Whilst the Board remains mindful of costs, the Group has increased total headcount to 315 at 31 July 2010 (31 July 2009: 263, 31 January 2010: 271) to take advantage of selected opportunities to strengthen the business for the future. Most significantly, headcount in Professional Services has increased to 56 at 31 July 2010 (31 July 2009: 33, 31 January 2010: 31) and we expect to increase headcount by a further c20 in the first half of FY 2011.

The Group has launched two new brands in the year in Professional Services, both of which commenced trading on 1 August 2010, seeking to significantly accelerate the development of the existing business. Barclay Meade will focus on Procurement, Accounting, Financial Services, Sales & Marketing, HR and Executive Search. Alderwood Education will develop the existing work based leaning and welfare to work business and expand into further education. In order to support the two new brands we have opened three office locations in London, St Albans and Aberdeen and taken additional floor space adjacent to our head office in Fareham, Hampshire. The significant investment is planned to deliver a step change in NFI in H2 of FY2011 and be profitable in FY2012.

The Group continues to benefit from low net debt which at 31 July 2010 was £4.5m (31 July 2009: net debt £1.2m; 31 January 2009: net cash £0.8m).

Cash flow in the second half of FY 2010 was impacted by a change in payment terms by a major client from payment by corporate credit card to standard invoicing terms. Whilst the effect has been to increase debtors by c. £6 million, the resultant increase in interest costs is more than compensated by the savings on credit card charges.

Extension of major contracts

In the six months to 31 July 2010 the Group extended contracts with two of its largest clients.

On 28 April 2010 the Group signed a new three year contract with Transport for London for contract recruitment services. The contract expands the scope of services to now cover a wider range of Engineering and Technology roles.

On 30 July 2010 the Group signed an extension to our contract until the end of December 2012 with our biggest client, business process outsourcer Xchanging Procurement Services Ltd and their client BAE Systems plc. As announced on 2 August this new agreement extends the current scope, giving us access through Xchanging to BAE Systems technical and non-technical requirements across the UK. 

Outlook

Around 50% of the Group's NFI comes directly and indirectly from across many parts of the Public Sector, much on long term contracts. The Board is mindful of the potential impact on the Group of changes to public expenditure after the Government's forthcoming Comprehensive Spending Review.

With our Private Sector markets proving relatively stable and some signs of a gradual recovery in the second half, the Board remains confident about the Group's prospects over the medium term.

Matchtech intends to release its Preliminary Results for the year ended 31 July 2010 on 7 October 2010, at which point it will provide a further update on trading.

For further information please contact:

Matchtech Group plc 01489 898989

Adrian Gunn, CEO / Tony Dyer CFO

Hogarth 020 7357 9477

John Olsen / Ian Payne

Arbuthnot Securities 020 7012 2000

James Steel / Ben Wells

Background on Matchtech (AIM: MTEC.L)

Established in 1984, Matchtech specialises in the provision of contract and permanent staff and has grown organically to become one of the UK's leading technical and professional recruitment specialists.

Matchtech Group is one of the UK's leading specialist recruitment agency operating in the Engineering, Science, Technology and Professional Services sectors. The Group has been providing contract, temporary and permanent recruitment activities for the last 25 years and recently moved into the recruitment process outsourcing sector.

Website: www.matchtechgroupplc.com

Cautionary Statement

This announcement is prepared for and addressed only to the Group's shareholders as a whole and to no other person. The Group, its directors, employees, agents or advisers do not accept or assume responsibility to any other person to whom this announcement is shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed. Statements contained in this announcement are based on the knowledge and information available to the Group's Directors at the date it was prepared and therefore the facts stated and views expressed may change after that date. By their nature, any statements concerning the risks and uncertainties facing the Group involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. To the extent that this announcement contains any statement dealing with any time after the date of its preparation such statement is merely predictive and speculative as it relates to events and circumstances which are yet to occur. The Group undertakes no obligation to update these forward-looking statements.