Final Results

9th March 2016

InterQuest Group plc

("InterQuest" or "Group")

The InterQuest Group is a specialist technology recruitment business operating in high growth areas in the 'new digital economy' and today releases audited results for the year ended 31 December 2015.

Financial highlights

· Revenue up 5% to £158.6m (2014: £150.6m )

· Net fee income (NFI) up 3% to £23.8m (2014: £23.2m )

· Adjusted EBITA* up 12% to £5.5m (2014: £4.9m)

· Adjusted PBT* up 11% to £5.0m (2014: £4.5m)

· Statutory profit after tax up 35% to £3.1m (2014:£2.3m)

· Basic earnings per share up 44% to 8.5 pence (2014: 5.9 pence)

· Diluted adjusted earnings per share up 12% to 10.1 pence (2014: 9.0 pence)

· Net cash generated from operating activities £5.8m (2014: £5.4m)

· Year-end net debt down 28% to £6.0m (2014: £8.3m)

· Second interim dividend of 2 pence per share**, making 3 pence for the year (2014: 2.5 pence)

Improved margins

· Adjusted net operating margin (adjusted EBITA/NFI) improved by 180-bps from 21.1% to 22.9%

Operational highlights

· A strengthening of our position as a supplier of niche technology practitioners and leaders in the digital economy

· Increasing number of clients by 6% on 2014

· 16 % increase in revenue in our recruitment process outsourcing service with an increase in the number of customers from two to five

· Permanent recruitment fees up 9% at £7.9m (2014: £7.3m)

· The Group continues to strengthen its business mix and market position in important niche segments servicing the growing demand for skills in the new digital economy. Segmental EBIT from our niche businesses now accounts for 69% of the total EBIT for the Group (2014: 64%)

Chris Eldridge, CEO of InterQuest said:

"The 2015 results show that the Group's focus on specialist skill areas and the development of our solutions business to meet our clients' needs is working. I am delighted to have joined the business at such an exciting time and look forward to delivering our strategic plan and further expanding our organic growth in the fast-paced technology practices in which we specialise and which our clients require.

We continue to work closely with our clients to help them shape their business and implement operating model changes by finding the 'rare skill sets candidates' they require to meet the needs of the new digital economy.

Following on from a record 2015 the new financial year has started positively.

Our 2015 performance is a direct result of the hard work and commitment that all my colleagues across the Group have shown and I would like to thank them all on behalf of the Board for their contribution to our success."

 "Above all, our results, market position and success are made possible by the tremendous people that make up the InterQuest Group; to them, on behalf of the Board we say a heartfelt 'thank you'".

For further information please contact:

The InterQuest business model

The InterQuest Group is a specialist technology recruitment business. The Group focuses on both permanent and contract recruitment across a range of sectors, specifically in high growth functions including digital, information security, analytics, telecommunications, change management and other high value niche markets. This is underpinned by an expanding capability in recruitment process outsourcing, helping our clients procure resources in a highly effective manner.

The Group's strategy is to continue to focus on those markets that are experiencing structural growth where there is high demand for transformational technologies. We are witnessing acute skill shortages for technologies that will enable our clients to either augment or transform their operating model to capitalise on the new digital economy. This demand is having an upward impact on salaries as well as permanent and contract recruitment margins.

InterQuest continues to be well positioned to assist our clients on this journey and focus on developing relationships with these highly sought after candidates and communities to ensure that we are our clients' first choice resourcing partner. Through our specialist brands, the Group seeks to both expand the volume of clients that we support while increasing our penetration and maintaining an attractive margin.

Our markets

There is an ongoing trend for companies across the majority of sectors to outsource infrastructure technology skills and focus on the technologies that will significantly affect their operating model, drive growth and increase market share.

This has led to established brands seeking to identify talent that will develop disruptive solutions from within as well as an increasing number of technology start ups developing solutions and tools to support them.

The effect on the technology labour market has been two fold: stalling salaries in commoditised technology roles and upwards pressure on contract rates and salaries in transformative technologies such as digital, information security, analytics, IOT1 and M2M2.

We recognise this as a continuing trend and one that will lead to significant skill shortages in the future:

· The UK digital economy is projected to have a shortage of around 300,000 professionals by 2020.3

· By 2018, digital business will require 50% fewer business process workers and 500% more key digital jobs, compared with traditional models.4

· It is estimated that the UK will require 100,000 STEM graduates year on year up to 2020.5

· The demand for cyber-security positions has risen by over 100% year on year.6

· As large corporations look to develop in house solutions they will compete with high paced start-ups leading to significant demand for experienced technologists.

_______________________

Looking forward, the demand for transformative technologies continues both at the leadership and technical levels. InterQuest is very well positioned to benefit from the changing technology landscape be it on a one off basis recruiting a CIO or CTO for our clients or implementing a recruitment process outsourcing solution managing all of their budgeted recruitment.

Move to higher margins

The Group continues to see the quality and profile of the business improve as a result of the focus on specialist brands that fill some of the most difficult roles with the best candidates available in the market.

As a result of this strategy:

· Contract recruitment margin on professional recruitment deals (those at margins over 12%) increased from 16.5% in 2014 to 17.2% in 2015;

· The average margin derived from contract recruitment activities (excluding payroll services) has increased to 12.8% in 2015 from 12.6% in 2014;

· The percentage contract NFI derived from what we term "professional" roles (those with a gross margin greater than 12%) has increased slightly from 64% in 2014 to 65% in 2015.

Differentiating through our Specialisation

Utilising our multi brand strategy we are able to offer a unique set of solutions to our customers from a one off placement through to large scale recruitment campaigns and managing all of our client's recruitment needs through our Solutions Recruitment Process Outsourcing offering.

This ability to scale up a niche solution encompassing the highly specialist skills of digital, cyber security, data analytics, mobility solutions and business change is enabled by our expert recruiters all of whom are wholly focused on their area of specialisation.

The Group is able to capitalise on our existing client relationships and cross sell solutions to meet their expanding demand for niche and hard to identify talent.

As a result of focusing the Group's assets in this fashion (a set of tightly aligned specialist recruitment offerings) we are able to increase our penetration in a client and obtain higher than average margins.

The Group addresses the high growth markets through the following segments:

1. Niche - providing access to talent in some of the most critical areas of demand in the modern economy and comprising the following specialist brands:

· IQ Analytics - Data Science, Risk, Customer Insight, Web Analytics, SAS, Statistical Modeling and Big Data.

· IQ InfoSec - Internal Risk and Audit, Cyber Security Penetration Testing, Data Protection, Ethical Hacking, Forensics and IT Security.

· IQ Technology - ERP, Infrastructure, Support, Software Development, Project Management, Business Analysis, Architecture, Business Intelligence, Sales, Assurance & Testing and ESM.

· IQ Telecom - Voice, Data, Unified Comms, IoT, M2M, RAN, Core, IN/VAS, IP, 2g, 3g, 4g, OSS and BSS.

2. ECOM - the UK's leading recruiter in the digital market space which the Group acquired in November 2013 and recruiting talent with UX, Creative, Technology, Project Management, Digital Marketing, eCommerce, Content and Strategy skills.

3. Enterprise - comprising

· IQ Solutions - our Recruitment Process Outsourcing services together with,

· IQ Financial Markets - our legacy client relationships with significant customers in the financial services and retail sectors;

4. Public sector - comprising

· IQ Public Sector - focused on recruitment for the NHS, higher education, housing associations, central and local government

· IQ Not for Profit - specialising in the charity sector.

5. Business Change (formerly Mint) - a candidate centric "spot" business focused on change management and providing the Group with an alternative route to market; and

6. Other - including central costs.

We continue to invest in these specialist brands and sectors and work to identify additional niche technologies to meet the demands of our clients.

Our customers' demands for niche skills will evolve over time and through retaining our client relationships and fostering open and supporting relationships with our candidate communities, InterQuest will be able to remain agile and focused on emerging technologies and trends.

In 2015 our niche brands of IQ Analytics, IQ InfoSec, IQ Telecom and IQ Technology together with the sector focused businesses of IQ Solutions, IQ Not for Profit and IQ Public Sector delivered strong growth contributing an increase of 10% in NFI to £15.5m (2014: £14.1m). These results were partly mitigated in 2015 by a challenging year for IQ ECOM, IQ Financial Markets and IQ Business Change with a combined NFI of £8.4m (2014: £9.1m)

Our Primary services

InterQuest's primary two services are contract and permanent recruitment. When looking at the full year, the mix between the two services was one third permanent recruitment, two thirds contract recruitment. This is aligned to the business plan and provides a healthy mix of fee income.

It is increasingly hard to identify a specialist resource, be they contract or permanent, who is either immediately available or actively seeking a new role.

It is more likely that the ideal candidate is currently engaged on an assignment or focused on the permanent role that they already have. At InterQuest we invest in building long standing relationships with prospective candidates, building trust and a clear picture of what their ideal next move would be in order for us to accurately match them to their next role.

This form of soft headhunting is an effective and proven recruitment technique at InterQuest and we are only able to do this through our focus on specialist skills.

The service that InterQuest delivers is highly valued by candidates with over 90% rating the service received as Good or Excellent.

Contracts

InterQuest provides both Contractors and Interim Managers to our clients normally providing their services through a limited company and being paid on an hourly or daily basis. The Group has focused on reducing the volume of generalist contractors as this market can be seen to be increasingly commoditised in favour of increased effort and focus on specialist, niche or mid to senior management.

Total Contract net fee income was £15.9m (2014: £16.0m). This was due to a reduction in the number of volume contractors (sub 12% margin). Higher value Professional contractors however remained stable across the year and is one of the focus areas for growth over 2016.

Permanent

InterQuest predominantly provides permanent solutions, meaning that our fees are paid directly as a result of a successful placement from across our specialist business areas. InterQuest's continued focus on specialist skillsets and developing strong relationships with our clients means that we receive an increasing amount of repeat business.

Total Permanent net fee income increased by 9% to £7.9m (2014: £7.3m) as a result of increased activity across the course of the year. This is due to clients seeking to invest in permanent resources that they can both train and retain in their businesses. Revenues are primarily made up of contingent fees at the technologist and manager level where the demand has been most consistent across the year.

Solutions

IQ Solutions primarily offers Recruitment Process Outsourcing solutions to five customers based in the UK. Net fee income from these services increased by 16% during 2015 to £1.04m (2014: £0.90m) and the business was able to introduce all of the Group's specialist brands to provide niche resources.

Candidate identification through Digital Channels

InterQuest continues to invest in our digital presence with the objective of developing and deepening our relationship with niche, hard to find specialist candidates.

Content

The increasing trend of accessing the internet through mobile devices along with candidates from the digital economy being potentially attracted to roles through social media (as opposed to a more traditional route) has led to InterQuest producing an increased level of content.

To drive interaction InterQuest has been producing more market commentary, white papers, technology trend surveys and insight to attract and retain the interest of specialist candidates.

Website

The InterQuest website is designed to work across all devices and is mobile enabled allowing candidates to access all of the roles the Group has on offer. There is a rich and diverse mix of content on the website informing our candidates and clients and helping them with their job search.

Social Media

Through 2015 we have significantly increased the volume of candidate interaction through social media, developing 15 niche social media communities and instigating 6 industry specific blogs. An increasing number of candidates favour social media as their preferred method of communicating with the Group.

InterQuest has grown its social media audience to over 60,000.

Focus Points for the future

Progress was made in 2015 to support InterQuest's growth strategy and there are a number of focus points for the coming year.

Improving our margins

The demand for specialist talent is maturing and as such so are the candidates that we will support over the coming years. With this comes wage inflation and it is our aim to increase the salary level and day rate that the Group achieves, thus increasing our margin.

Leveraging our client base

With an increasing client base, up 6% on 2014, the opportunity to cross sell the Group's individual specialist brands across our existing clients is significant. To support our ongoing activities, a central function will be created focusing on supporting our clients' specialist skill needs.

International Markets

With 2.8% of the Group's revenue being derived from outside the UK in 2015 (2014: 2.9%), there is a significant opportunity to identify and acquire high value business in the Group's specialist markets internationally. Currently all recruitment activity is directly managed through the subsidiaries incorporated in the UK.

IQ Solutions

Further developing our Solutions business to support our clients and assist them in procuring technology resources (and other head office functions) in an effective and efficient manner. InterQuest is uniquely positioned to offer value-add recruitment outsourcing solutions in the specialist skillsets that are driving the digital economy.

Learning & Development

The quality of our service and our staff is directly linked to client retention and cross selling.

During 2016 our consultants will be supported by an updated learning and development function aimed at providing all of our staff with a high degree of expertise in their specific area of specialisation.

All of our consulting staff and leadership will be supported by a redesigned, industry leading training programme that will aim to develop their skills and knowledge and result in more effective client management, improved productivity per head and increased tenure.

Key Performance Indicators

The directors use a range of performance indicators to measure the delivery of the Group's strategic objectives. The most important of these are considered Key Performance Indicators ("KPI's") and their targets are determined annually. The KPI's are set out below:

* EBITA = Earnings before interest, tax and amortisation (see note 1)

Net fee income increased by £0.6m, or 3%, to £23.8m (2014: £23.2m).

Contract recruitment activities (excluding payroll) net fee income percentage increased from 12.6% in 2014 to 12.8% in 2015. This reflects continued gains in contractor recruitment % margin as a result of the strategy of focusing on specialist and difficult to fill roles that command higher margins. However, the effect of the increase in payroller net fee income, at lower margins, reduced the net fee income (gross margin) percentage from 15.4% to 15.0%,

The split of NFI between contract (including payrolling services) and permanent recruitment activities remained at around 67:33 in favour of contract (see note 1).

EBITA before non-recurring items and IFRS 2 share charge (reconciliation provided in note 1) increased by 12% to £5.5m (2014: £4.9m).

Net finance costs were £0.44m (2014: £0.41m).

Profit before tax increased to £4.1m (2014: £2.9m).

Tax on profits was £1.1m before non-recurring items (2014: £0.7m); a detailed analysis is included at note 3.

Non-recurring items

In 2015 the Group incurred non-recurring costs in three areas:

i) £21k with respect to the acquisition of the non-controlling interest (NCI) in IQ Telecoms and Korus Group;

ii) £118k restructuring costs across the Group; and

iii) £219k with relation to redundancies during the year.

See note 2 for further details.

Earnings per share and dividend

Basic earnings per share were 8.5 pence (2014: 5.9 pence per share). When non-recurring items, the IFRS 2 share-based payment charge, amortisation of intangibles and the tax in respect of these items are removed, the basic adjusted earnings per share is 10.5 pence representing an increase of 8% from 9.6 pence in 2014. See note 5 for details of the calculation.

We are declaring a second interim dividend of 2 pence per share in line with the Group's dividend policy and this will be paid on 13 May 2016 to shareholders on the register on 15 April 2016. The ex-dividend date is 14 April 2016.

Balance sheet, cash flow and financing

The Group's net assets increased by £0.65 m to £23.42m at 31 December 2015 (2014: £22.77m).

Strong growth in operating profit before non-recurring items and tight control of working capital delivered £5.8m of operating cash flow (2014: £5.4m). The Group paid £0.44m (2014: £0.41m) of interest during the year. Net capital expenditure was £0.14m (2014: £0.47m) and dividends of £1.09m (2014: £0.86m) were paid.

Net debt decreased from £8.3m at the start of the year to £6.0m at the end of 2015 (2014: decreased from £9.0m at the start of the year to £8.3m at the end of the year). The Group continues to finance its activities through the utilisation of a confidential trade receivables finance facility. The facility limit is £20.0m and the facility has a six month rolling notice period. The Group cannot utilise invoices if they remain unpaid 90 days from the end of the month in which they were issued.

Consolidated income statement

For the year ended 31 December 2015

Statement of comprehensive income

For the year ended 31 December 2014

Profit per share from both total and continuing operations:

All results for the Group are derived from continuing operations in both the current and prior year.

Consolidated balance sheet

As at 31 December 2015

The financial statements of InterQuest Group plc, registered number 04298109 were approved by the Board of Directors on 8th March 2015.

Signed on behalf of the Board of Directors

C E Eldridge

Director

Consolidated statement of changes in equity

For the year ended 31 December 2015

Consolidated cash flow statement

For the year ended 31 December 2015

Notes to the consolidated financial statements for the year ended 31 December 2015

1. Revenue and segmental reporting

For management reporting purposes the Group is organised into the following six divisions:

1. Niche - comprising specialist recruitment practices focused on Analytics, Business Intelligence, Cyber Security, Internet of Things, Telecommunications, Risk and Compliance which provide access to talent in some of the most critical areas of demand in the modern economy;

2. ECOM Recruitment Limited - the UK's leading recruiter in the digital market space which the Group acquired in November 2013;

3. Enterprise - comprising our Recruitment Process Outsourcing services together with legacy client relationships with significant customers in the financial services and retail sectors;

4. Public sector;

5. Business Change - a candidate centric "spot" business focused on change management and providing the Group with an alternative route to market; and

6. Other - including central costs.

All business units provide contract and permanent recruitment services and have similar economic characteristics and are considered to meet the aggregation criteria of IFRS.

Information regarding segment assets is not provided to the Group's chief operating decision maker. This is because the Group considers net fee income (gross profit) and profitability for the purpose of making decisions about allocation of resources.

Reconciling items to amounts reported in the statement of comprehensive income:

Notes to the consolidated financial statements for the year ended

31 December 2015 (continued)

1. Revenue and segmental reporting (continued)

Reconciling items to amounts reported in the statement of comprehensive income:

The Group does not report items below EBITA by segment in its internal management reporting.

There are no external customers who individually represent more than 10% of the entity's external revenues during the year (2014: no client represented more than 10%).

Notes to the consolidated financial statements for the year ended

31 December 2015 (continued)

2. Non-recurring items

In 2015 the Group incurred non-recurring costs in four areas:

i) £21k with respect to the acquisition of the NCI in IQ Telecoms Ltd and Korus Group;

ii) £118k restructuring costs across the Group; and

iii) £219k with relation to redundancies during the year.

3. Income tax expense

Notes to the consolidated financial statements for the year ended

31 December 2015 (continued)

Finance Act 2014 reduced the main rate of UK corporation tax to 21.0% effective from 1 April 2014 and 20.0% effective from 1 April 2015. These changes have been substantively enacted at the balance sheet date and are therefore reflected in these financial statements.

4. Cash and cash equivalents

The carrying value of cash and cash equivalents is considered to be a reasonable approximation of fair value.

Notes to the consolidated financial statements for the year ended

31 December 2015 (continued)

5. Earnings per share

The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year.

The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares and the post-tax effect of dividends and/or interest, on the assumed conversion of all dilutive options and other dilutive potential ordinary shares.

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.

5. Earnings per share (continued)

6. Financial information - statement under s435

The financial information set out in this preliminary announcement does not constitute statutory accounts for the years ended 31 December 2015 or 2014, for the purpose of the Companies Act 2006, but is derived from those accounts. The statutory accounts for 2014 have been delivered to the Registrar of Companies and those for 2015 will be delivered following the Company's Annual General Meeting. The Group's Auditor has reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.