Matchtec full year trading update.

We have had a full year trading update from Matchtec Group (MTEC) a small recruitment agency which I have written on in the past. By way of reminder they describe themselves as follows:

The UK's leading specialist Engineering, IT and Telecoms recruitment agency, providing contract, temporary and permanent staff. Established in 1984 and AIM-listed in 2006, the Group is one of the fastest growing staffing organisations listed in the UK, with a well-balanced business model; approximately 70% contract and 30% permanent. Recruiting in over 100 countries across the world from 18 offices in 12 countries, the Group has over 580 sales staff, with over 9,000 contractors on assignment and places 4,000 candidates into permanent positions each year.

In April 2015, Matchtech Group announced the completion of the acquisition of Networkers International, a global recruitment company specialising in the delivery of recruitment services focussing on Telecoms and Technology. The combined group is well-placed to take advantage of the convergence between Engineering, Technology and Telecoms skill sets and creates a specialist recruiter, of scale, in the UK and internationally.

In the update today they suggested that their profits will be in line with current market expectations (which were upgraded by about 4% since April) and this includes a 4 month contribution from Networkers International. This helped to boost the Net fee income by 22% year on year, but the underlying growth seemed pretty sluggish. The commentary was also fairly understated with them saying they hoped to return to net fee income growth by the second half of 2016 for example. I guess an understated style is maybe better than a management team who hype everything up, but does leave something of an underwhelming feeling about the update despite the fact that they have met upgraded forecasts. Hopefully they are under promising so they can then over deliver as they go forward from here perhaps?

Consequently it is not surprising, given the shares had got overbought prior to today's update, to see them off this morning as there was nothing in the announcement to get the market excited in the short term. So it looks like more of a hold up here and something of a slow burner, but they do still look reasonable value on about 12x with a 4% yield for the coming year to July 2016, assuming the management can deliver the promised cost savings and the fee income picks up as they expect or perhaps even faster if they are being overly cautious in their commentary.