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Matchtech's shares take off

RESULTS: Engineering recruiter Matchtech is making solid progress - yet the shares remain undemandingly rated despite a recent re-rating

Strong demand for engineers in the aerospace and automotive industries helped recruitment group Matchtech (MTEC) deliver a decent first-half performance. Management increased the half-year dividend for the first time in five years, too, and underlying operating profit jumped 41 per cent year on year to £4.8m.

IC TIP: Buy at 350p

Moreover, group net fee income (NFI) rose 8 per cent to £18.5m and the rate of NFI conversion into underlying profit improved from 19.8 per cent to 25.9 per cent. Chief executive Adrian Gunn reckons that can be improved to 30 per cent in the medium term. Mr Gunn says investment in sales staff over the last two years has helped this progress - although demand for staff on the back of the success of the UK's aerospace-focused lightweight composite materials sector is certainly a big factor. Strong demand for luxury UK car marques also helped. Accordingly, contractor numbers rose by 300 on last year to 6,700, with contract-based NFI having jumped 14 per cent to £13.2m. However, a lack of client confidence about longer-term prospects meant that NFI from more profitable permanent placements rose just 2 per cent to £5.3m.

Broker Numis Securities expects full-year pre-tax profit of £9.6m, giving EPS of 29.9p (from £8m and 24.3p in 2012).

MATCHTECH (MTEC)

ORD PRICE:350pMARKET VALUE:£81.9m
TOUCH:346-353p12-MONTH HIGH:355pLOW: 194p
DIVIDEND YIELD:4.5%PE RATIO:13
NET ASSET VALUE:122pNET DEBT:28%

Half-year to 31 JanTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20121773.169.535.00
20131973.9612.75.15
% change+11+25+33+3

Ex-div: 29 May

Payment: 21 Jun