Gattaca Regulatory News (GATC)

1 February 2011

Matchtech Group plc

Trading Update

Matchtech Group plc ("Matchtech" or the "Group"), one of the UK's leading specialist recruitment agencies operating in the Engineering, Science, Technology and Professional Services sectors, provides the following Trading Update for the six months ending 31 January 2011 and the Board's revised outlook for the year to 31 July 2011.

Net Fee Income ('NFI') for the period was £13.5 million, up 8% against the same period last year.

NFI performance during the period may be analysed as follows:

There was a strong performance fromInformation Systems & Technology, up 33%. There were encouraging performances from Professional Services, up 35%, where the Group has invested significantly, and from Germany, up 360%, which commenced trading in August 2009.

Adjusting for the lower number of working weeks in H1 than in H2, Total NFI's average weekly fees of £0.57m were up 4% compared with H2 FY2010, with Contract NFI down 6% and Permanent Fees up 36%.

Contractor numbers on assignment at the end of the period were a record 5,200, up 9% since 31 January 2010 and up 2% since 31 July 2010. However, as previously indicated, Contract NFI was down 3% compared with the same period last year, mainly due to client margin pressure during 2010 including the renegotiation and extension in the second half of 2010 of our two largest contracts with BAE Systems (via Xchanging) until December 2012 and Transport for London until June 2013.

Permanent Fees were up 43% compared with the same period last year.

Matchtech UK grew by 53%, including a 117% increase in Information Systems & Technology. In Professional Services the Barclay Meade and Alderwood Education brands, which both commenced trading on 1 August 2010, contributed to a 50% rise in that sector's permanent fees to £1.1m.

Sales Force Headcount and Overheads

As previously reported, during the second half of FY2010 and the first half of the current financial year the Group has invested significantly in sales force headcount, business development and marketing, both in Professional Services with the development of the new brands of Barclay Meade and Alderwood Education, and in other growth initiatives within Matchtech. Our aim is threefold: to exploit the start of the economic recovery, to diversify the business both by specialism and geography, and to build market share.

Sales force headcount, which is now higher than pre-recessionary levels, may be analysed as follows:

As previously reported, in FY2010 the Group invested £0.9 million in new sales force headcount in Professional Services. In FY2011 the Board anticipates investing an additional £3.0 million. The opening of new offices will increase accommodation costs by £0.5 million. Other growth initiatives, and cost increases, within Matchtech are expected to add approximately £2.5 million to overheads in FY2011 (including a £0.6 million movement in share scheme costs).

This is a very significant investment. The quality of our new staff is high, and we are already seeing an uplift in NFI growth rates and pipeline opportunities within Professional Services. However, the recruitment phase and the establishment of the new staff within the Professional Services market place is taking longer than expected.

Net Debt

Net debt at 31 January 2011 is expected to be modestly higher than the £4.5 million net debt at 31 July 2010.

Outlook

Whilst the UK economic outlook remains uncertain, Matchtech UK's trading environment remains steady, with good NFI growth anticipated in the second half of the current financial year compared with both prior half years.

The Board continues to expect that profits for the current financial year will be significantly weighted towards H2 driven by a step change in NFI in H2 and into 2012. In the short-term, however, the increased investment and lower than expected contribution from Professional Services have been such that the Group's full year profits are now expected to be approximately 20 per cent. below current consensus expectations. Nevertheless, Group profits in H2 FY2011 are expected to be slightly above those of the corresponding period in the previous financial year.

The Board remains confident of the future returns from the Professional Services investment and the medium term prospects of the Group and is fully committed to its strategy of sector and geographic diversification, which will complement continued growth in Matchtech UK. The Board remains committed to maintaining its current dividend policy.

Matchtech intends to release its Interim Results for the six months ended 31 January 2011 on 7 April 2011, at which point it will provide a further update on trading.

For further information please contact:

Matchtech Group plc 01489 898 989

Adrian Gunn, Chief Executive Officer

Tony Dyer, Chief Financial Officer

MHP Communications 020 3128 8100

John Olsen / Ian Payne / Giles Robinson

Arbuthnot Securities

James Steel / Ben Wells 020 7012 2000

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 technical, professional and recruitment outsourcing specialists.

The Group's specialist recruitment solutions are provided to a broad range of clients across the UK and Europe through the technical brand Matchtech with operations in both UK and Germany, the Professional Services brands of Barclay Meade and Alderwood Education and the RPO brand elemense.

The Group's Head Office is based in Fareham Hampshire and has strategic office locations in London, St Albans, Aberdeen and Stuttgart.