There was a full year trading update from Matchtec (MTEC) the international staffing company which specialises in Engineering, Telecoms & IT staff globally. This was of the in line variety which I have to say was a pleasant surprise as given the price action (see chart above) and the general consensus that staffing companies would be the first to be hit by any downturn post the BREXIT vote I assumed we would see a profits warning. On the EU referendum they said that "demand for skilled engineers remains strong in the UK and, notably, we have yet to see any impact on vacancy flow in the six weeks since the EU Referendum."
So that is encouraging in the short term and suggests that forecasts for the current year which has just finished and will be reported in November should as they suggest be around current forecasts of around 46p of earnings with a 22.8p dividend. At this mornings price of 352p (+4.3%) this would put them on 7.7x with a 6.5% yield which seems like good value as they continue to integrate last years acquisition of Networkers and see strong demand for engineers. I note however that demand for IT personnel was weaker and they are having to restructure this area, but at least the deal last year has brought them more overseas exposure which they are also building on which should help to offset some of the likely domestic downturn when the expected domestic slowdown hits.
Thus the most important thing will be the outlook for next year which we should get an update on from them when they report in November. At this stage forecasts are still for a rise in earnings and dividend to around 47p and 24p respectively as further benefits from the deal accrue. Thus it will be worth watching earnings forecast ahead of November as I suspect it is quite likely that next years outcome could well end up being lower if the forecast economic slow down comes to pass. So if you were to conservatively (?) slice say 20 to 30% off the earnings this would put them on more like 10 to 11x with a 6 to 7% yield with a lowish level of cover. I also note that they have paid down some of the debt taken on when they made the acquisition as net debt at 31 July 2016 was £27.5 million, down £6.1 million on 31 July 2015, which compares to a market cap. of just £105m - so worth bearing in mind too as there are not many tangible assets here.
In conclusion a pleasantly surprising update but I suspect it will not fly away from here as concerns will now probably switch to worrying about next year, but it does leave them looking cheap if you are prepared to give them the benefit of the doubt. Mind you they have looked cheap when I have covered them in the past and that has not stopped them sliding all the way down here so apologies if you have bought them and are sharing my pain too. Finally note that subject to shareholder approval they will be changing their name to Gattaca plc.