Will there or won’t there be a recession post BREXIT? Several economists think so, albeit we suspect there will be only a temporary dip in GDP, with normal activity levels returning once the initial shock has passed.
So what about Matchtech, the UK's leading specialist Engineering and Technology recruitment agency? Well, we would argue that the business is far less cyclical than the broader staffing sector, since most of its infrastructure, automotive, telecoms, IT/software and aerospace customers are enjoying secular growth drivers, with exporters receiving a further boost from Sterling’s 10% devaluation.
Indeed, even if we are wrong and there is a prolonged decline in output, then this is still likely to affect permanent placements far more than MTEC’s approx. 9,000 strong contractor base - many of whom are working on long term government-funded capital projects (eg Crossrail) and/or infrastructure programmes within regulated industries (eg water, rail, etc).
In fact, this downside resilience was again demonstrated this morning, following news that adjusted PBTA for the year ending July 2016 would be in line with management expectations, with LFL FY16 NFI up 1% to £72.6m - thanks to a solid second half (+3% vs -1% in H1’16) on the back of continued strong demand for skilled engineers (H1: 7%, H2: 5%) even after the EU Referendum, with Infrastructure, Professional Staffing and Technology all outperforming, offset partly by weaker Oil & Gas and Maritime demand.
Elsewhere, FY16 Technology NFI slipped 6% LFL to £29.1m, boosted by Telecoms up 9% (H1: +3%, H2: +15%), but dragged down by challenging conditions in IT (H1: -21%, H2: -12%) and stretching 1st half comparatives. That said, sequentially the division materially improved during the period (H1: -11%, H2: 0%), benefiting from the realignment of sales resource into new discreet verticals, and in turn providing encouragement for FY17.