27th Oct 2006 08:00
Matchtech Group PLC27 October 2006 27 October 2006 MATCHTECH GROUP PLC ADMISSION TO TRADING ON AIM Matchtech Group plc ("Matchtech" the "Group" or the "Company"), the fast-growingtechnical recruitment group, announces that following a successful placing, itsshares have today been admitted to trading on AIM under the ticker symbol MTEC. Highlights • Based on the Placing Price of 310p per Ordinary Share and on 22,420,406 Ordinary Shares in issue, Matchtech has a market capitalisation of £69.5 million on Admission (£72.4 million including outstanding EMI options*); • The Placing raised £22.0 million before expenses for the selling shareholders; no new money was raised for the Group; • On Admission, 31.7% of the Group's issued share capital is held by institutional investors and 53.2% by the Group's Directors; Arbuthnot Securities Limited is Nominated Adviser and Broker to Matchtech. * On Admission, EMI options over 946,026 Ordinary Shares will remain unexercisedunder the Existing Share Scheme Background on Matchtech Matchtech specialises in the provision of contract and permanent staff in theEngineering, Built Environment and Support Services sectors across the UK. It was established in 1984 and has grown organically to become the UK's 4thlargest technical and engineering recruitment specialist and one of the UK's 20largest recruitment companies (Source: Recruitment International Top 100 Report- August 2006). The candidates placed by Matchtech are supplied to clients through a variety ofclient relationships, from contingency-based placements through to master vendorcontracts. The Engineering and Built Environment recruitment markets are beingdriven and are underpinned by the demand for qualified project and contractstaff needed for the design, construction, management and maintenance oflong-term capital assets and infrastructure projects funded by both the privateand public sectors. Operating from a single site near Southampton, Matchtech provides predominantlyprofessionally-qualified candidates to clients in a broad range of industriesincluding oil and petrochemicals, marine, aerospace, water, electronics, civilengineering, building structures and transport infrastructure. It structures itsbusiness across three main sectors: Engineering, Built Environment and SupportServices. Summary financial information Set out below is a summary of the Group's financial information for the threeyears ended 31 July 2006: Year ended Year ended Year ended 31 July 2004 31 July 2005 31 July 2006 £000's £000's £000's Turnover 94,828 124,149 158,128Gross profit (NFI) 13,172 16,953 21,039Operating profit 4,470 5,971 8,392Profit before tax 4,078 5,465 7,843Profit after tax 2,760 3,665 5,745 The Group's financial information for the three years ended 31 July 2006 hasbeen prepared under UK GAAP and has been adjusted to take account of FRS 20'Share-based Payment'. Net Fee Income ("NFI") in the year ended 31 July 2006 of £21.0 million was 24.1per cent. up on the previous year, and represented a gross margin of 13.3 percent. Operating profit in the year ended 31 July 2006 was 40.5 per cent. up onthe previous year, and represented a conversion rate on NFI of 39.9 per cent. Current trading and prospects Trading since the end of the last financial year has been in line with theDirectors' expectations, with the Group continuing to see strong demand for itsservices from clients as well as the presence of a number of new businessopportunities. Consequently, the Directors view the Group's future withconfidence. Placing statistics Placing Price 310p Number of Sale Shares placed on behalf of the SellingShareholders 7,103,602 Number of Ordinary Shares in issue immediately followingAdmission* 22,420,406 Percentage of the Company's issued share capital placed pursuant to the Placing 31.7 per cent. Market capitalisation of the Company at the Placing Price on Admission £69.5 million AIM symbol MTEC * On Admission, EMI options over 946,026 Ordinary Shares will remain unexercisedunder the Existing Share Scheme For further information please contact: Matchtech Group plc 01489 898989George Materna, ChairmanPaul Raine, Managing DirectorTony Dyer, Finance Director Arbuthnot Securities Limited 020 7012 2000Andrew Fullerton / Ian Williams Hogarth Partnership (for Matchtech) 020 7357 9477John Olsen / James Longfield / Fiona Noblet Further information on Matchtech attached. FURTHER INFORMATION ON MATCHTECH (The following is a summary of information contained in the Admission Document,copies of which are available from Arbuthnot Securities Limited, ArbuthnotHouse, 20 Ropemaker Street, London EC2Y 9AR) 1. The technical recruitment sector The UK recruitment sector is a large, diverse market which is highly fragmentedand competitive. According to Recruitment and Employers Confederation's AnnualRecruitment Industry Survey 2004/5 ("REC Survey 2004/5"), the UK recruitmentmarket was worth £23.5 billion in 2004/5 in terms of sales (including temporaryworkers' and contractors' salaries). Within the UK recruitment market, the technical and engineering recruitmentmarket is estimated to be worth approximately £3.2 billion1, representing some13.7 per cent. of the overall market. According to the REC Report on Jobs (the"REC Report")2, over the past eighteen months demand for temporary/contractstaff within the Engineering/Construction sector (the sector within the RECReport most closely aligned with the Group's activities) has grown each monthand, each month, has registered the highest increase of all of the eight sectorswhich the REC Report covers. The Group is predominantly exposed to technical and engineering recruitmentmarkets. A key underlying driver of the performance and growth of the technicalmarket relates to long-term capital asset and infrastructure projects withinboth the private and public sectors. The Directors believe that the Group iswell-placed to benefit from these long-term projects, and is able to address thechanging nature of staffing requirements across specific projects' life cycles(including planning, design, build, commissioning, operation and maintenance). 1 Source: REC Survey 2004/5 2 Source: Based on REC Report on Jobs monthly reports between October 2005 andSeptember 2006. The sectors covered by the REC Report on Jobs are: Secretarial &Clerical; Accounting & Finance; Executive & Professional; Computing & IT; BlueCollar; Engineering/Construction; Hotel & Catering; and Nursing/Medical/Care. 2. Business Overview Matchtech operates through three main sectors: Engineering, Built Environment,and Support Services. Engineering The Engineering sector is the largest of the three sectors within the Group andin the year ended 31 July 2006 generated 56 per cent. of the Group's NFI. TheEngineering sector addresses the demand for qualified and skilled engineers towork on projects across six divisions: Offshore and Marine, Aerospace &Automotive, Process & Scientific, Electronics & Software Systems, Water, andProduction & Skilled Trades. Clients include Devonport Royal Dockyard, VT Group, GKN, Meggitt, suppliers tothe Formula One industry, a number of luxury car manufacturers, JCB, ExxonMobil,Cardinal Health and Severn Trent Water. The Engineering sector has demonstrated strong growth, having increased its NFIfrom £7.6 million in the year ended 31 July 2004 to £11.9 million in the yearended 31 July 2006 and operating profit from £2.9 million to £5.2 million in thesame period. The growth has been largely driven by the demand for engineers inlong-term capital asset and infrastructure projects in both the private andpublic sectors. The Directors believe that Matchtech has gained market share asa result of being able to meet the recruitment requirements of its clients,providing good candidates ahead of its competitors, broadening clientrelationships and successful marketing to new clients. The requirements for engineers from Matchtech's clients often stretch across aspecific project's life cycle (including planning, design, build, commissioning,operation and maintenance), with the type of placements required changingthroughout the project's life. As a result, the majority of placements withinthe sector are contract based, with 78 per cent. of the sector's NFI in the yearended 31 July 2006 being generated through the placement of contract personnel. Built Environment The Built Environment sector specialises in the provision of white collarengineers to the construction, civil engineering and building design industries.Clients include Transport for London, Atkins, Buro Happold, Mouchel Parkman andBovis Lend Lease. The sector's NFI has grown from £3.2 million in the year ended 31 July 2004 to£4.5 million for the year ended 31 July 2006 and operating profit has increasedfrom £1.1 million to £2.1 million in the same period. This growth has been theresult of close relationships with leading engineering consultancies in thedesign arena, the number of construction projects being undertaken throughoutthe UK and Matchtech's access to skilled candidates in a sector withacknowledged skills shortages. Demand for engineers within the building and construction sectors has beendriven by growth in the commercial market and the expansion of public sectorinvestment in large infrastructure projects. The Group has benefited from thisgrowth through a broad range of relationships with a number of key participants,contractors and sub-contractors in the sector. Support Services The Support Services sector provides complementary recruitment services to theGroup's technical client base and is developing new markets for the Group invarious related specialisms. The services provided by the Support Services sector include the provision ofrecruitment services across five divisions: Information Technology, Procurement& Supply Chain, Sales & Marketing, Human Resources & Training and a ManagedServices Division focused on the outsourcing of vacancies not covered byMatchtech to second tier agencies under master vendor contracts. The Support Services sector has experienced rapid growth, having increased NFIfrom £2.5 million in the year ended 31 July 2004 to £4.6 million in the yearended 31 July 2006 and more than doubling its operating profit from £0.5 millionto £1.2 million in the same period. The growth has been driven by increasedpenetration in cross selling complementary services to clients in theEngineering and Built Environment sectors and through the development of a newclient base outside the Group's traditional technical areas. The Support Services sector has also managed to win significant new businessoutside the traditional technical recruitment market, including with FriendsProvident, Skandia Life Assurance, Bovis Lend Lease and BAT. In contrast to the other two sectors within the Group, the split betweencontract and permanent placements within the Support Services sector is broadlyeven. This is largely as a result of the nature of candidate roles being filled,and also reflects the Group's strategy of fulfilling permanent placements as ameans of establishing and developing contract client relationships. Client relationships Matchtech provides contract and/or permanent recruitment services to its clientsthrough three main types of relationships: contingency; preferred supplier; andmaster vendor contracts. The Directors view the balance between the three typesof relationships achieved in the year ended 31 July 2006 as attractive and planto maintain an appropriate balance in future years. Matchtech has a broad and balanced mix of clients from SMEs to largemultinational companies across its three operating sectors and the Directorsbelieve it is not overly dependent on any one client. In the year ended 31 July2006, the Group's two largest clients each represented approximately 6 per cent.of the Group's NFI and have been clients of the Group since 1996 and 2000respectively. Candidates Matchtech has an extensive candidate database of over 370,000 candidates, whichprincipally comprises white collar engineers with specific skills andqualifications. Candidates are typically sourced through the internet, alongsideother more traditional routes, including the press, sector journals andpublications and referrals. The Company also places an importance on graduaterecruitment of candidates and has a graduate recruitment team which attractsengineering and built environment graduates direct from universities on behalfof clients. Group infrastructure Single site Matchtech operates from a single site between Southampton and Portsmouth. Thiscomprises an 18,500 square foot office building together with immediatelyadjacent 11,500 square foot office space that the Group has recently secured toaccommodate the increasing scale of the business. In addition, the Group alsohas on-site representation at certain client locations as part of its mastervendor contracts. The Directors believe that the single-site model is a key differentiator of theGroup's business model, providing it with a number of significant advantagesover many of its multi-site competitors in the technical recruitment market,including: • an increased opportunity for cross-selling additional services to clients; • improved speed of decision making, enabling staff to provide an improved service to clients and candidates; • enhanced management of staff, training and career development; • greater control of processes, resulting in productivity benefits; and • operational efficiencies in support and infrastructure functions. The Directors believe that, as a result of the contract-based nature of thetechnical recruitment market in the UK and the increasing role of informationtechnology in delivering services to both candidates and clients, Matchtech isable to provide effective recruitment services throughout the UK from itssingle-site location. IT systems and support As part of Matchtech's continuing focus on delivering effective and efficientservices, the Group has developed, in-house, an IT system to address thespecific requirements of its business, integrated to payroll and accountssoftware. The systems allow staff quickly and effectively to search the Group'scandidate database, enabling them to respond promptly and accurately to aclient's requirements. Matchtech's single-site location allows the business to operate with arelatively small IT support and maintenance team and the Directors believe thatthe Group's IT strategy gives Matchtech an ongoing competitive advantage over anumber of competitors, as well as a secure and efficient platform from which thebusiness can operate. Staff Alongside the Group's significant focus on its recruitment processes, a furtherkey element of Matchtech's success has been its ability to retain key staffmembers. In the year ended 31 July 2006, total staff turnover was under 20 percent. Furthermore, among Executive Directors and the Senior Management, therehave been no departures in the last three years, and their average length ofservice with the Group (and its predecessor businesses, Matchmaker Personnel andMatchtech Engineering) is 11 years. The Directors believe that the high staff retention rate arises from a clearlylaid out career path, which the Directors believe is improved by the single-sitelocation and the broader promotion opportunities this affords staff. The Groupalso has in place an incentivisation programme utilising both bonus schemes andshare-awards to align employees' remuneration to their contribution to theoverall performance of the Group. Following Admission, the employees (excluding Directors) will own 9.7 per cent.of the issued share capital of the Company, will have EMI options over a further856,020 Ordinary Shares and LTIP awards over 203,386 Ordinary Shares. 3. Board of Directors The Board of Matchtech has extensive knowledge of the recruitment market withover 115 years' experience of the industry. The Board comprises a Chairman,three Executive Directors and three non-executive Directors as follows: George Materna, aged 53, Chairman, has 30 years' experience of the recruitmentindustry, and is the founder of Matchtech, having founded Matchmaker Personnelin 1984 and Matchtech Engineering in 1990 before combining the two businesses in2002 to form Matchtech. He is a fellow of the Chartered Institute of Personneland Development. Paul Raine, aged 46, Managing Director, joined Matchtech in 1990 and wasinstrumental in establishing Matchtech Engineering, having had eight years'sales experience in the construction industry after graduating from SouthamptonUniversity. Paul was appointed Managing Director of Matchtech Engineering in1998, and played a key role in helping to combine the two businesses. He wassubsequently appointed Managing Director of the Group in 2002 to oversee theday-to-day management of the business and the implementation of new initiativesand strategies across the Group. Adrian Gunn, aged 41, Sales Director and Deputy Managing Director, joinedMatchtech in 1988 as a recruitment consultant and was appointed a divisionaldirector in 1998. He was appointed to the Board in 2004 as Business DevelopmentDirector and took on his current role as Group Sales Director in 2005. Adrianoversees the major client relationships of the Group and plays a key role inensuring the divisional heads develop and win new clients. Tony Dyer, aged 37, Finance Director, is a Fellow of the Chartered Institute ofManagement Accountants. Tony qualified as a Chartered Management Accountant in1995 before joining Matchtech in 1996 as a management accountant. Following aperiod as financial controller, he was appointed to the Board as FinanceDirector in 2004. Andy White, aged 50, Non-executive Deputy Chairman, is a chartered engineer, afellow of the Royal Institute of Naval Architects and a member of the RoyalAeronautical Society. Andy formed Matchtech Engineering with George Materna in1990, having previously had a number of years experience in the marine sector. Ric Piper, aged 54, Non-executive Director, qualified as a Chartered Accountantin 1977 and has held a number of senior finance roles within leading UKcompanies including ICI, Citicorp and Logica, becoming Finance Director ofLogica (UK) in 1990. He was Group Finance Director of WS Atkins plc from 1993 to2002, being closely involved in its successful London Stock Exchange flotation.He was Senior Independent Director of Synstar from 1999 to 2004. Since 2003 hehas been involved at board level advising on the growth and development ofseveral companies, including various listings on AIM. He is currently Chairmanof Granby Oil & Gas plc and HLBBshaw Group plc. Stephen Burke, aged 46, Non-executive Director, has over 25 years' experience inthe recruitment industry having joined Michael Page in 1981 after graduatingfrom Durham University. He was appointed as a Director of Michael PageInternational in 1988 with responsibility for development of overseas businessesin the Netherlands and Germany. He returned to the UK in 1996 and held twodivisional Managing Director roles before being appointed Managing Director ofMichael Page in the UK and a Director of Michael Page International plc in 2001until 2005. 4. Summary: Key strengths Matchtech has developed into a leading UK technical recruitment company. TheDirectors believe the key strengths of the Group are: • strong track record of organic growth - the Group has achieved organic growth in NFI of 21.6 per cent. compound between the years ended 31 July 1997 and 31 July 2006. NFI and operating profit compound annual growth of 26.1 per cent. and 37.0 per cent. respectively have been achieved during the period between the years ended 31 July 2004 and 31 July 2006; • experienced management team and high staff retention - key to the success of the business and its organic growth record has been the experience of the management and an ability to attract and retain high quality staff. The Group has developed and implemented incentive schemes for its employees which will continue to align their interests with those of shareholders; • resilient, contractor-driven business with effective permanent recruitment strategy targeting sectors with long-term investment horizons - the Group is focused on the technical recruitment market, with growth being driven and underpinned by investment in long-term capital asset and infrastructure projects funded by both the private and public sectors; • broad spread of clients and sectors, with many long-standing relationships - the Group has developed long-term relationships with a broad mix of large and small clients involved in private and public sector work through a variety of contracts. The Directors further believe that the Group has no over-reliance on any single client, with the Group's top two and top 20 clients generating only 12 per cent. and 35 per cent. of NFI in the year ended 31 July 2006 respectively; • effective systems and processes, covering the UK from a single site with considerable growth potential - the Group addresses the UK technical recruitment market from a single site enabling it to offer the full range of client services from an efficient base and better career opportunities and environment for its employees; and • business balance providing stability, growth and cash generation for shareholders - the Group has delivered considerable organic growth and cash generation for its shareholders. DEFINITIONS "Admission" the admission of the Ordinary Shares to trading on AIM becoming effective in accordance with the AIM Rules "AIM" the market of that name operated by London Stock Exchange "AIM Rules" the rules of AIM governing admission to and the operation of AIM for AIM companies and their nominated advisers as published by London Stock Exchange from time to time in relation to AIM traded securities "Board" or "Directors" directors of the Company "Company" or "Matchtech" Matchtech Group plc and where the context requires, all or any of its subsidiaries "EMI" Enterprise Management Incentive "EMI options" options granted by the Company to employees under the Existing Share Scheme, with applicable tax and national insurance benefits "Existing Share Scheme" the share incentive arrangements adopted by the Company on 2 December 2002, including the EMI option scheme "Group" the Company and all or any subsidiaries "Ordinary Shares" the ordinary shares of £0.01 each in the capital of the Company to be admitted to trading on AIM (and "Ordinary Share" shall be construed accordingly) "Placing" the conditional placing by Arbuthnot on behalf of the Selling Shareholders of the Sale Shares pursuant to the Placing Agreement and the Selling Shareholder Placing Deeds "Placing Agreement" the conditional agreement dated 23 October 2006 between the Company, the Directors and Arbuthnot, relating to the Placing "Placing Price" 310p per Sale Share "Sale Shares" the 7,103,602 Ordinary Shares to be sold to Placees under the Placing pursuant to the Placing Agreement and the Selling Shareholder Placing Deeds "Selling Shareholders" the Shareholders who are selling Ordinary Shares in the Placing pursuant to the Placing Agreement and the Selling Shareholder Placing Deeds, "Selling Shareholder Placing the conditional agreements dated 23 October Deeds" 2006 between the Selling Shareholders (other than the Directors) and Arbuthnot, relating to the Placing of such Selling Shareholders' Sale Shares This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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