Final Results

5 March 2014

Embargoed until 7am.

InterQuest Group plc

("InterQuest" or "Group")

InterQuest Group plc (AIM: ITQ), the specialist IT recruitment group, is pleased to announce its audited results for the year ended 31 December 2013.

Financial highlights

· Revenue increased by 2.0% to £114.9m (2012: £112.7m)

· Net fee income* (NFI) increased by 6.1% to £17.4m (2012: £16.4m)

· Gross profit margin % up 60 basis points at 15.1% (2012: 14.5%)

· Gross profit margin % on contractor recruitment business (excluding payroll deals) up 80 basis points to 12.3% from 11.5% in 2012 and from 10.9% in 2011

· EBITA before non-recurring items and IFRS 2 charges** increased by 39% to £2.5m (2012: £1.8m)

· Reported profit before tax for the year £1.43m (2012: £0.4m loss)

· Basic adjusted earnings per share 4.8 pence (2012: 3.5 pence) up 37%

· Basic earnings per share 2.9 pence (2012: loss per share of 0.4 pence)

· Net cash from operating activities £1.3m (2012: £0.9m)

· Net debt £9.0m (2012: £4.4m) post acquisition of ECOM Recruitment Limited

· Second interim dividend of 2.0 pence per share is proposed and will be paid on 17th April 2014 (2012: 2.0 pence per share) bringing the total dividend for the year to 2.5 pence per share (2012: 2.5 pence per share)

EBITA = Earnings before interest, tax and amortisation

* Net fee income represents gross profit

**a reconciliation of EBITA before non-recurring items and IFRS 2 charges to IFRS operating profit is provided in note 1 to this announcement

Operational highlights

§ Improved profitability as we continue to build our business in line with the strategy that was implemented in 2012;

§ Continued improvement for the fifth reporting period in a row in contract recruitment gross margins as we focus on niche specialist recruitment;

§ Net operating margin (adjusted EBITA/NFI) improved by 340 basis points from 11.0% to 14.4%;

§ Mint branded business returned to profitability;

§ Disposal of non-core umbrella business, PayQuest Group Limited, which was started in 2010 for £314k;

§ Acquisition of the UK's leading digital technology recruitment business, ECOM Recruitment Limited ("ECOM") on 26th November 2013 complements our portfolio to provide market leading digital capability

Mark Braund, Chief Executive Officer, commented: "I am delighted with the progress we have made during 2013; we delivered a solid financial performance in the year with robust growth in net fee income, gross profit margins and EBITA. Our strategy of focusing on specialist disciplines in key niche markets has underpinned this success and we anticipate this will deliver further growth in 2014. In addition, our focus has been on leveraging our client relationships by offering them our specialist capability across multiple disciplines and cross-selling our niche offerings into each and every client. This opportunity is further enhanced by the acquisition of the UK's leading digital recruitment specialist ECOM Recruitment Limited ("ECOM"), in November 2013 providing incremental opportunities in areas such as analytics, ERP, technology sales and telecoms.We have already seen the benefits of making their unique talent pool available to our clients. We have started 2014 with a contract book that is organically 10% higher than a year ago (excluding the impact of the ECOM acquisition) and with foundations in place to capitalise upon the market opportunity in 2014. Overall our results and market position 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'".

Gary Ashworth, Executive Chairman, commented: "The transformation of our business that we undertook in 2012 has delivered improved financial and operational results in 2013, which we look forward to building upon significantly in the coming year. In addition, the acquisition of ECOM has accelerated the Group's capability in the digital sector to a market leading level. Trading in January and February has been encouraging, especially in respect of recurring contract revenue and we look forward to the year unfolding with confidence."

For further information please contact:

InterQuest Group plc Charles Stanley Securities

020 7025 0100 020 7149 6764

Gary Ashworth, Executive Chairman Marc Milmo

Mark Braund, Chief Executive Officer Karri Vuor

Michael Joyce, Chief Financial Officer

The business model

The InterQuest Group is a group of specialist recruitment businesses providing contract and permanent recruitment services within the analytics, financial and technology market sectors.

We operate a portfolio of recruitment businesses with an increasing focus on markets where there is both growth in demand and a shortage of key skills. Our businesses operate from ten locations across the United Kingdom.

The Group focuses upon specialisation to deliver value and outperform competition in key niche disciplines. As a result, our interests are aligned to customers where quality is much more valued than quantity and we increasingly target markets where our services derive higher than industry average margins.

Contract recruitment

Contract recruitment is divided into 'generic' and 'specialist' markets. InterQuest is increasingly focused on the 'specialist' market. The 'generic' market is maturing rapidly, resulting in margin erosion as large service providers compete more often than not on price. InterQuest's strategy of targeting in-demand, specialist markets has helped us change the mix of our contract business in favour of 'specialist' rather than 'generic' contract business and as such supported the improvement in our margins, even in challenging market conditions.

As market conditions improve, demand will also improve for good quality candidates across a number of more generic roles, where we suspect margins will stabilise. As we focused our niche specialists in their respective markets, we also chose to retain and better define an efficient and effective recruitment centre model to support the more generic, easier to fill roles. This centre is based in the UK and is manned by professional recruiters skilled in connecting opportunities with talent across a broader base of skills than can be covered by our specialist niche businesses. As such the InterQuest recruitment centre provides our clients with a trusted source of quality talent across a broad range of technical, analytical and change management requirements, without distracting the attention of our specialists from the in-demand 'difficult to fill' vacancies.

Permanent recruitment

The permanent recruitment market is becoming more refined as employers seek to leverage low cost sourcing models, including further development of their own direct sourcing capability. As a result the recruitment industry's share of this market will continue to come under pressure, especially during a period of economic uncertainty.

The focus of InterQuest is to continue to specialise, developing unique networks and talent pools of passive candidates. This moves us towards a position of strength; targeting critical roles that are difficult to fill and thereby strengthening our value proposition in this market.

Strategy and objectives

The central elements of our strategy remain:

· Further fine tune our investment in key niche and specialist disciplines to improve service value and margins;

· Leverage the opportunity to cross-sell into existing customers delighted with our service the capability of our other complimentary niche recruitment businesses including newly acquired ECOM; and

· Develop greater brand recognition and value through aligning each of our recruitment businesses under the banner of a single InterQuest brand.

Review of the business in 2013

During 2013, we have delivered improved results and continued to build our business in line with the strategy and reorganisation that were completed in the second half of 2012.

In 2012 we successfully reorganised ourselves from a group of affiliated IT recruitment businesses into one with clearly defined specialist businesses utilising a common methodology, a single operating platform and new IQ branding. We also reorganised our management team and Mint branded business.

These initiatives have given us a platform for scalability, organic growth and improved profitability which has delivered improved financial results in 2013.

Operations

Operational mix remains weighted towards contract recruitment

The operational mix of our business between contract and permanent recruitment activities remained constant at one third permanent recruitment; two thirds contract recruitment.

Move to higher margins

We continue to see the quality and profile of our business improve as a result of our specialist brands focusing on driving value and filling the most difficult roles with the best talent available in the market. Modest gains in NFI somewhat mask the significance of the changes that helped to bring about this result.

As a result of this strategy:

- the average margin derived from contract recruitment activities (excluding payroll services) has increased to 12.3% in 2013 from 11.5% in 2012 and from 10.9% in 2011;

- the percentage of our contract NFI derived from what we term "professional" roles has increased during the period from 54% in January and February to 60% in the final quarter of the year. We define "professional" roles as those with gross margin % greater than 12%; and

- the average fee for permanent recruitment services increased by 13% to £7,407 in 2013 from £6,533 in 2012.

An improving customer experience

No part of our organisation has remained untouched by the effort we have made to add value to our candidates and customers at the same time as outperforming our traditional competitors.

Stronger account management and expert delivery teams have succeeded in delivering recruitment services with greater efficiency and effectiveness improving customer retention and profitability.

The unified branding of the IQ family of specialist businesses is gaining recognition as a trusted source of specialist knowledge for our candidates and clients and the consolidation of our recruitment processes and systems (completed last year) is improving service to both.

Increased and improved training programmes for staff at all levels of our organisation continues to underpin our ethos of striving to offer the best experience possible to customers and candidates.

Greater efficiency and improved profitability

We are pleased to report a significant increase in profitability in this reporting period.

- Adjusted EBITA* increased by 39% to £2.5m (2012: £1.8m);

- Adjusted PBT* increased by 53% to £2.3m (2012: £1.5m);

- Net operating margin (adjusted EBITA/NFI) improved from 11.0% to 14.4%;

- Statutory profit before tax increased from a loss of £0.4m in 2012 to a profit of £1.4m;

*Adjusted for share-based payment charge, exceptional items and one off profit on sale of PayQuest Group Limited.

Several factors have contributed to this improvement:

- Modest growth in NFI and revenue in a market that was still fragile at first yet improved towards the end of the year;

- Stronger and more efficient account management and delivery to customers;

- Consolidation and improvement of our business process and support systems including back office; and

- The restructuring of our Mint branded business at the start of the year has seen it return to sustainable profitability in 2013.

Disposal of umbrella business on 1st May 2013

PayQuest Group Limited ("PayQuest") was established in 2010 as a new business within the Group. PayQuest provides payroll services to information technology consultants working on contract assignments. This is not a core activity for the Group as we seek to focus our efforts more narrowly on high value niche recruitment.

Consequently, we disposed of the business to a specialist payroll service provider on 1st May 2013 for £314k comprising £300k for the business and £14k for the net assets in the completion balance sheet. After associated fees and bonuses the Group has recorded a one-off profit of £249k in this reporting period.

Acquisition of ECOM Recruitment Limited on 26th November 2013

On 26th November, the Group acquired 100% of the share capital of ECOM Recruitment Limited ("ECOM"), the UK's leading digital technology recruitment business for a total consideration of up to £7.04 million.

Founded in 1999, ECOM has built a leading brand within the digital space and recruits for many of the Top 100 (New Media Age) list of digital agencies. They also work with a number of recognisable brands in the UK including Retailers, DotCom businesses, Media, Publishing and FMCG businesses. ECOM's core strengths are Creative, Content, Technology, User Experience, Client Services, Digital PR & Social Media, Project Management, Web Analytics & Digital Marketing.

With a team of digital recruitment specialists operating from offices in Marylebone ECOM accelerates the Group's capability in the digital sector to a market leading level. In addition ECOM has a customer base which provides InterQuest's specialist businesses with incremental opportunities in areas such as analytics, ERP, technology sales and telecoms.

The Group has paid an initial consideration of £3.54m comprising £3.04m in cash and £0.50m by the issue of 558,659 new InterQuest shares on completion. A further deferred consideration of £2.16m is payable by way of a loan note with a 3% coupon of which £0.50m is payable in May 2014 and £1.66m in December 2014.

In addition, up to a further £1.34m subject to an earn-out could become due in December 2014 if the business achieves £1.34m of EBIT in the year to 31st October 2014.

In the year ended 31st March 2013, ECOM reported adjusted EBIT of £0.85m and had net assets of £0.8m.

The acquisition has been financed from the Group's existing bank resources.

Looking forward

Our markets and the wider UK economy improved during the later stages of 2013 and this continued in early 2014.

In our view, margin is a measure of value; as such the Group continues to demonstrate increased value since reshaping the business by reporting improved margins for the fifth reporting period in a row.

Our business model is a 'value-play', firmly placing InterQuest at the heart of specialist niche recruitment in the UK. Challenges remain however; not least margin compression in key accounts with large clients, which to some extent mask the gains we have made elsewhere as we move our business more and more towards niche segments and higher margins.

We have resisted the temptations of the pack to chase volume business, where margins have eroded and the ability to service the 'difficult to fill vacancies' has all but disappeared.

Contract NFI, which represents 68% of total NFI is showing positive signs of sustainable growth as confidence builds in the economic recovery and employers reignite projects aimed at improving their own competitive advantage. Our results through the tail end of 2013 into January and February 2014 are evidence of this. Improving permanent recruitment activity is now beginning to show the early signs of following this pattern.

InterQuest is well positioned to capitalise on improving market conditions; our continuous focus on developing networks of talent in the most competitive areas of talent acquisition means InterQuest is an increasingly attractive source for competitive organisations to fill their 'most difficult to fill' vacancies.

As market conditions improve demand will also improve for good quality candidates across a number of more generic roles. A key component of our strategic plan is to retain and better define an efficient and effective recruitment centre model to support the more generic, easier to fill roles. This centre is based in the UK and is manned by professional recruiters skilled in connecting opportunities with talent across a broader base of skills than can be covered by our specialist niche businesses. As such the InterQuest recruitment centre provides our clients with a trusted source of quality talent across a broad range of technical, analytical and change management requirements, without distracting the attention of our specialists from the in-demand 'difficult to fill' vacancies.

This strategy and the steps we took in 2012 to unify our brands in one IQ family and to consolidate and streamline our processes and systems should continue to deliver improved profitability in future reporting periods.

The vast majority of our business (over 90%) is in the United Kingdom therefore a continued improvement in UK market conditions - should that happen - would be a further catalyst.

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 measures are considered Key Performance Indicators ("KPI's") and their targets are determined annually. Our KPI's are set out below:

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

Revenue

Revenue (all from continuing operations) increased by 2.0% during 2013 to £114.9m (2012: £112.7m).

Net fee income ("NFI")

Net fee income increased by £1.0m, or 6.1%, to £17.4 m (2012: £16.4m).

Our net fee income (gross margin) percentage increased from 14.5% to 15.1% reflecting continued gains in our contractor recruitment % margin from our strategy of focusing on specialist and difficult to fill roles which command higher margins.

The split of NFI between contract and permanent recruitment activities remained constant at 68:32 in favour of contract (see note 1).

Our contract recruitment gross margin % improved 80 basis points to 12.3% from 11.5% in 2012 and from 10.9% in 2011 (stripping out PayQuest umbrella service transactions and 'payroll' deals that we process at low margin because we are providing no recruitment services).

EBITA

EBITA before non-recurring items and IFRS 2 share charge (reconciliations provided in note 1) increased by 39% to £2.5m (2012: £1.8m).

Net finance costs were £0.25m (2012: £0.26m).

Profit before tax increased to £1.4m (2012: loss of £0.4m).

Tax on profits was £0.5m before non-recurring items (2012: £0.3m) a detailed analysis is included at note 3.

Non-recurring items

The following table summarises non-recurring items in the 2013 financial statements:

1. Restructuring costs

In 2012, the Group reorganised from affiliated IT businesses into clearly defined specialist businesses utilising a common methodology, a single operating platform and new IQ branding. The final piece of this reorganisation was to restructure our finance department in the first half of 2013 which included upgrading our general ledger system and exiting several long serving members of the finance team. The one-off costs associated with this were £225k.

In December 2013, we restructured and downsized our operations in Singapore, at a cost of £396k. The business was established in late 2011 and has consistently failed to meet expectations.

2. Profit from sale of PayQuest Group Limited

PayQuest Group Limited ("PayQuest") was established in 2010 as a new business within the Group. PayQuest provides payroll services to information technology consultants working on contract assignments. This is not a core activity for the Group as we seek to focus our efforts more narrowly on high value niche recruitment.

Consequently, we disposed of the business to a specialist payroll services provider on 1st May 2013 for £314k comprising £300k for the business and £14k for the net assets in the completion balance sheet. After associated fees and bonuses the Group has recorded a one-off profit of £249k in this reporting period.

3. Acquisition of ECOM Recruitment Limited

On 26th November the Group acquired 100% of the ordinary share capital of ECOM Recruitment Limited. The Group incurred one-off legal and consultancy fees of £103k in relation to this acquisition. Full details of the acquisition are included in note 7.

Earnings per share and dividend

Basic earnings per share were 2.9 pence (2012: loss per share of 0.4 pence). 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 4.8 pence representing an increase of 37% from 3.5 pence in 2012. See note 5 for details of the calculation.

We are declaring an interim dividend of 2.0 pence in line with our dividend policy and this will be paid on 17th April 2014 to shareholders on the register on 21st March 2014. The ex-dividend date is 19th March 2014.

Balance sheet, cash flow and financing

The Group's net assets increased by £1.23m to £20.38m at 31 December 2013 (2012: £19.15m).

Operating profit before non-recurring items and tight control of working capital delivered £1.3m of operating cash flow (2012: £0.9m). The Group paid £0.25m (2012: £0.26m) of interest during the year. Net capital expenditure was £0.32m (2012: £0.22m) and dividends of £0.85m (2012: £0.82m) were paid.

Net debt increased from £4.4m at the start of the year to £9.0m at the end of 2013 (2012: decreased from £5.5m at the start of the year to £4.4m 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 £15.0m and the facility has a six month rolling notice period. The main reason for the increase in debt during the year was the acquisition of ECOM Recruitment Limited on 26th November 2013.

Consolidated statement of comprehensive income

For the year ended 31 December 2013

Consolidated statement of comprehensive income

For the year ended 31 December 2013

Profit / (loss) 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.

The accompanying principal accounting policies and notes form part of these consolidated financial statements.

Consolidated balance sheet

As at 31 December 2013

The financial statements of InterQuest Group plc, registered number 04298109 were approved by the Board of Directors on 5th March 2014.

Signed on behalf of the Board of Directors

M R S Joyce

Director

Consolidated statement of changes in equity

For the year ended 31 December 2013

Consolidated cash flow statement

For the year ended 31 December 2013

Notes to the consolidated financial statements for the year ended 31 December 2013

1. Revenue and segmental reporting

For management reporting purposes the Group is organised by individual specialist business units. All business units, with the exception of PayQuest Group Limited (which was disposed of on 1st May 2013), provide contract and permanent recruitment services. Our UK recruitment businesses have similar economic characteristics and are considered to meet the aggregation criteria of IFRS. They are analysed below with respect to the market segments where they focus their activities - Private Sector Financial Services, Private Sector Non-Financial Services (described as 'Other') and Public Sector focused. PayQuest Group Limited is shown as a separate reportable segment because it does not provide recruitment services it provides payroll services to contractors.

The information provided below is consistent with the information provided to the Groups chief operating decision maker.

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

1 Our International segment comprises our Singapore office opened in late 2011 and restructured in 2013.

2 PayQuest Group Limited, our payroll services business, is shown separately because it does not provide recruitment services. This subsidiary was disposed of on 1st May 2013.

PayQuest Group Limited is not material to the Group and as such has not been disclosed as discontinued operations.

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) for the purpose of making decisions about allocation of resources.

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

¹ Our International segment comprises our Singapore office opened in late 2011 and an International desk based in London which was opened and closed in 2012.

2PayQuest Group Limited, our payroll services business, is shown separately because it does not provide recruitment services.

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 (2012: no client represented more than 10%).

2. Non-recurring items

The following table summarises non-recurring items in the 2013 financial statements:

Restructuring costs

In 2012, the Group reorganised from affiliated IT businesses into clearly defined specialist businesses utilising a common methodology, a single operating platform and new IQ branding. The final piece of this reorganisation was to restructure our finance department in the first half of 2013 which included upgrading our general ledger system and exiting several long serving members of the finance team. The one-off costs associated with this were £225k.

In December 2013, we restructured and downsized our operations in Singapore, at a cost of £396k. The business was established in late 2011 and has consistently failed to meet expectations.

Profit from sale of PayQuest Group Limited

PayQuest Group Limited ("PayQuest") was established in 2010 as a new business within the Group. PayQuest provides payroll services to information technology consultants working on contract assignments. This is not a core activity for the Group as we seek to focus our efforts more narrowly on high value niche recruitment.

Consequently, we disposed of the business to a specialist payroll services provider on 1st May 2013 for £314k comprising £300k for the business and £14k for the net assets in the completion balance sheet. After associated fees and bonuses the Group has recorded a one-off profit of £249k in this reporting period.

Acquisition of ECOM Recruitment Limited

On 26th November the Group acquired 100% of the ordinary share capital of ECOM Recruitment Limited. The Group incurred one-off legal and consultancy fees of £103k in relation to this acquisition.

3. Income tax expense

Finance Act 2013 reduced the main rate of UK corporation tax to 21.0% effective from 1st April 2014 and 20.0% effective from 1st 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 are considered to be a reasonable approximation of fair value.

5. Earnings / (loss) per share

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

6. Disposal of subsidiary

On 1st May 2013 the group disposed of its interest in PayQuest Group Limited.The net assets of PayQuest Group Limited at the date of disposal were as follows:

Reconciliation of profit on disposal:

Gain on disposal 300

Less costs incurred (51)

There were no disposals of subsidiaries made in 2012.

7. Acquisition of subsidiary

On 26th November 2013 the Group acquired the entire share capital of ECOM Recruitment Limited for a total consideration of £3.0m in cash, £0.5m in new InterQuest Group shares issued at 89.5 pence each and a maximum of £3.5m in deferred consideration. No further fair value adjustments are deemed to be required. Post acquisition operating profits of £63k have been recognised in the consolidated statement of comprehensive income in the year.

8. 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 2013 or 2012, for the purpose of the Companies Act 2006, but is derived from those accounts. The statutory accounts for 2012 have been delivered to the Registrar of Companies and those for 2013 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.