Analysts upgrade forecasts for Matchtech (MTEC:AIM) after the recruitment consultant says full-year results will be better than expected, triggering a 2.2% hike in the share price to 617.5p. It is reaping the benefits of a recovery in the permanent jobs market and the ability to charge higher fees thanks to a skills shortage in engineers. A big increase in headcount is now planned to capitalise on the strong market conditions.


We picked the stock as one of our favourite recruiters in last month's sector report on the staffing industry. Matchtech has a much lower equity rating than its mainstream peers but is still enjoying rapid earnings growth, helped by serving an industry that is crying out for workers. With no signs that demand will wane in the near-term, it is easy to see why analysts are universally bullish.


Equity Development notes that Matchtech has one of the highest like-for-like growth levels in net fee income in the sector. It notes that nearly all areas of engineering, from drilling and mechanical to software and electrical, has an acute shortage of skilled staff in Britain. 'Worse still, as the country kick starts its £billion investment program in nuclear power, transport and gas fracking, this deficit is set to widen,' says the research group.




Numis analyst Steve Woolf rasies his earnings per share forecast for 2014 to 35.5p from 33.7p. That puts the shares on a price to earnings (PE) ratio of 17.4 for the financial year ending 31 July. This falls to 15.9 for 2015, based on Woolf's upgraded EPS forecast of 38.8p (previously 36.1p). The analyst says Matchtech has consistently delivered positive earnings momentum and he believes 'there is further to go in the equity story'.


Matchtech had 413 staff at the end of the first-half period and presently has 423 consultants. It will increase this figure to 450 by the end of the year with new staff concentrating on filling positions in infrastructure-related jobs. It calls this sector segment 'very hot' and therefore hopes new consultants will start to generate fees for Matchtech within six months of joining the company, rather than nine to 12 months when sector conditions are merely 'lukewarm'.


The recruiter says employers' intentions to hire permanent staff are much firmer than in late 2013. It also reports greater candidate confidence to move jobs – a positive trend for the industry which we highlighted in our recent study of the recruitment sector.


Shore Capital analyst David O'Brien doesn't change his earnings forecasts because they are already at the top of the current consensus range. Yet he says he may run through upgrades if the second-half continues the positive trend seen at the interim stage.

Issue Date: 08 Apr 2014