Matchtech Group

HOLD

07/10/2011 Ben Jaglom

Technical recruiter Matchtech Group (MTEC) reported a 14 per cent increase in net fee income to £29.8m as its core markets showed signs of a recovery.

The AIM-quoted group reported a net fee income of £29.8m (2010: £26.2m) on sales of £301.8m (2010: £264.4m) for the year to July. Earnings per share fell from 26.4p to 20.3p while its net debt position rose from £4.5m to £16m. The final dividend stayed flat at 10.6p a share.

The impetus behind the results was the increase in permanent recruitment fees which rose from £6.1m to £9.4m. Meanwhile net fee income from contract-based work stayed flat at £17.4m (2010: £17.3m). The group noted that there had been a shift in its revenue mix away from contract to permanent fees, which represented 32% (2010: 23%) of Matchtech's turnover.

Chairman George Materna insisted the results represented 'progress made' in broadening the remit of the company, noting that they came amidst what he said were 'challenging economic conditions'. Looking ahead he remarked that while the 'client sentiment can change rapidly' the group is 'cautiously optimistic' of a strong performance.

Analysts at house broker Arbuthnot are forecasting pre-tax profits of £9.5m (EPS: 28.5p) on turnover of £339m for the year to July 2012. A dividend of 15.6p is forecast for 2012 and 2013, respectively

Last rated as a hold by Growth Company Investor in August 2012, at 195p the shares have since climbed to 220p. One of the key appeals of Matchtech is its hefty yield, which at the current price stands at 7.1 per cent. Having produced a solid set of results and with the dividend maintained we retain our hold rating.