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Is it time to sign up shares in this recruiter? Matchtech is a “specialist Engineering, IT and Telecoms recruitment agency”. The company has been quoted on AIM since October 2006. Recruitment consultants operate in a competitive and cyclical marketplace. Reliance on business confidence and economic growth leads to most recruiters living a feast or famine existence. Matchtech’s niche appears to have made the company less vulnerable than its peers. That makes some sense, as the tech demands of companies of all sizes continues to grow.

tech demands of companies of all sizes continues to grow Of all the recruitment companies that have come and gone on AIM, Matchtech is the one that I have most confidence in. As ever, this is evinced by dividend payments to shareholders. After reporting a 14% dividend hike for 2008, the payout was maintained through the financial crisis and recession. Matchtech traded each year of this period profitably and the dividend was covered throughout. The payout at Matchtech has now been increased every year since 2012. In April 2015, Matchtech acquired AIM-quoted telecoms and technology recruiter Networkers International. This deal enhanced Matchtech’s offering in the telecoms space and also enhanced group margins, thanks to Networkers’

payout was maintained through the financial crisis and recession

stronger pricing. Networkers’ existing international presence was also a considerable attraction, assisting Matchtech’s overseas ambitions. Better still, Matchtech expects to be able to remove £1.3m of duplicated costs including management, property and costs associated with maintaining two stock market listings. Matchtech expects to have extracted full synergies by the end of the 2017 year (July). Accompanying the acquisition notice, Matchtech announced the retirement of Chief Executive Adrian Gunn, replaced by Executive Chairman Brian Wilkinson. The last balance sheet was skewed by the Networkers International acquisition, which resulted in a £30m increase in debts to £33.6m. This is little over twice the adjusted EBITDA for the year, with most of those adjustments relating to the acquisition. The enlarged company reported net cash inflow of £20.8m for the year ending July 2015. Given that the Networkers acquisition only completed in April 2015, the expected financial performance of the new group suggests that the debt should

not hold back the company’s growth, dividend or valuation. Since the year ended, Matchtech has confirmed progress within its infrastructure division and a stronger position in the renewables sector. Shares in Matchtech traded near a two year low for the year before the recent results announcement. According to Stockopedia, a 30% increase in earnings per share is forecast for the full year ending July 2016, assisted by a full year contribution from Networkers International.

net cash inflow of £20.8m for the year Matchtech’s quality has previously carried the company through economic disaster. While recently reported growth from the business has been modest, the P/E discount to both the market and sector peers seems mean. Matchtech Group (LON:MTEC) FOR Modest valuation Solid track record AGAINST Vulnerable sector Acquisition needs integrating Market cap Bid:offer P/E (forecast) Yield (forecast) 52week low:high

£150m 485p:500p 10.2 4.7% 484p:588p


December 2015 AIM Prospector  
December 2015 AIM Prospector  

Featuring BrainJuicer, Crawshaw, First Derivatives, Matchtech and Northbridge Industrial Services