Matchtech and Networkers are a natural fit, two businesses with similar cultures and values operating in complementary markets each with a healthy balance between contract and permanent net fee income.
The acquisition of Networkers International plc, completed in April 2015, brings the Group not only a well-regarded presence in the Telecoms market, but also a new competence in multi-site, multi-jusridiction management.
The combination of Networkers' international candidate database with Matchtech's largely UK contractor resource will allow the enlarged Group to address the global skills shortage issues reported by our fast-developing UK client-base, enabling us to better service more of their recruitment needs.
By enhancing our global capability, we are increasingly attractive to UK-qualified engineers, who are highly valued throughout the world and are increasingly seeking to gain experience on the largest and most prestigious international projects.
Overall, the acquisition creates a significantly more geographically balanced business with scale in fast growing international markets and the increased client base opens up many cross-selling opportunities across the Group.
1 2015 Results include 4 months trading of Networkers International plc
2 Net fee income is calculated as revenue less contractor payroll costs
3 Adjusted results excluding acquisition costs of £1.7m, non-recurring costs of £1.0m and amortisation of acquired intangibles of £1.7m (2014:£0.7m)
Looking back at the 2015 financial year, the Board recognises that it was a watershed year for Matchtech, with the acquisition in April 2015 of Networkers International plc.
In Networkers, we found the excellent international network and telecoms expertise we sought. Equally important, it is culturally well aligned with Matchtech.
Under Brian Wilkinson’s leadership as our CEO, we also made significant progress in strengthening the Group to position it for future challenges and opportunities.
I am also very pleased to welcome Patrick Shanley as Non-Executive Chairman.
“As I step down from my period as Interim Non-Executive Chairman, I have never felt more positive about the potential of Matchtech Group, its performance and that of the industries it serves. I know the business will strive to capitalise on all of the opportunities in front of it.”
This year the Group has delivered NFI of £54.8m, with both Matchtech and Networkers delivering broadly at the same level as the same period last year. Our ability to effectively manage our costs base has led to a 16% growth in adjusted profit before taxation from the existing businesses to £13.8m, before the beneficial impact of Networkers' four month contribution of £1.9m in the period.
The acquisition of Networkers International plc was a key strategic move as we respond to and anticipate the development of client and candidate needs.
As the UK’s leading provider of white collar engineering professionals, we believe that the evolution to advanced electronic software-based systems from traditional mechanical and older electrical technologies and the increasing globalisation of many of our leading clients are equally significant to our future.
The acquisition addressed both these important trends more rapidly, more cost-effectively and with less risk than the alternative of organic growth to achieve the same result.
“We continue to see major opportunities in our core markets of white-collar engineering and technology recruitment. Both digitisation and converging technology are creating further opportunities in these areas and the addition of telecoms recruitment to our portfolio creates an even stronger specialist Group.”
The Networkers acquisition has transformed the Group’s future, accelerating our “go global” (now "think global") strategy more rapidly and with less associated risk than an alternative organic approach.
Following the acquisition of Networkers, we continue to be in a stable and strong financial position. With net debt at 31 July 2015 of £33.6m, our £95m facility with HSBC ensures that we have the headroom to make any necessary investments in the strength, reach and quality of our national and international networks.
“We have seen an immediate positive impact from the coming together of two highly cash-generative and culturally aligned businesses, with a particularly strong second-half performance driving the generation of £20.8m in cash from operations.”
We know from our external market research that our clients and candidates want to work with a specialist recruiter and the key to achieving this is to ensure our consultants have a narrow and deep focus in their core area of specialism.
In contract recruitment this year we have further defined every consultant's product offering, into niche skillsets and locations that match our clients' current and future requirements.
This enables our consultants to maintain sharp focus, build long-term relationships and become 'thought leaders' in their market.
Whilst our average contract margin has only marginally increased due to the large proportion of agreed framework contracts, we have seen an increase in the margin generated from new contingent business.
During the year Matchtech appointed a head of permanent business and extended the roll out of our talent pool model.
The aim is to sharpen the consultant's focus onto identifying and sourcing highly sought after, niche candidates and matching them to ideal vacancies.
Moving the focus from a vacancy-led strategy to a candidate- led strategy in a skills shortage marketplace is helping us to move up the value chain and achieve higher margins.
This gives the consultants greater focus in their niche. As well as enhancing the candidate and client experience, it has the added benefits of reducing the cost of candidate attraction and ensures we follow a candidate throughout their career.
This is self evident in the Networkers' business where they already operate this model and have higher margins than Matchtech. This year the average salary of permanent placements and the average fee charged have increased.
The acquisition of Networkers has accelerated the Group's strategy and ambition to globalise the business. What would have taken many years to create organically, we now have in a network of 10 profitable international offices.
We see many opportunities from which we will be able to export Matchtech services, benefiting from the experience of Networkers local management and the ability to be closer to international clients.
This has also opened up the chance for staff who have ambition to move overseas to continue to build their careers within the Group, employees previously we may have lost to other organisations.
We have identified the markets we can capitalise on. We have created over 20 specific vacancies and are already in the process of relocating a number of experienced employees, the first being a senior manager to head up the Americas business.
We are encouraging staff to think global when considering the opportunities the Group now has.
Net Fee Income (NFI) £m2
NFI conversion %
Adjusted EBITA3 £m
Adjusted Profit Before Tax3 £m
Adjusted Diluted EPS3 £m
Operating Cash Conversion %
Net Debt £m4
Dividend Per Share (pence)
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