Gattaca (LON:GATC), the specialist Engineering and Technology (IT & Telecoms) recruitment solutions business, has announced its Preliminary Results for the year ended 31 July 2019.
Financial Performance
· Continuing underlying PBT £11.4m (2018: £10.9m) up 5%
· Basic continuing underlying EPS of 27.5p (2018: 22.5p) up 22%
· Net debt reduced to £24.8m, 39% reduction year on year
Operational Performance3
· Group continuing underlying NFI of £70.6m, down 1% year-on-year
· UK Engineering continued to perform strongly with NFI up 4% on prior year
· Good growth in our Solutions business, now representing 27% of Group NFI (2018: 22%)
· UK Technology performance remained challenging, with NFI 20% lower than prior year. Restructuring undertaken during the year to accelerate recovery, expected to result in improvement in H2
· Overall positive performance in International NFI with 1% growth
o Americas down 9%, against a very strong prior year, offset by positive performance in other territories (incl. South Africa, +22%). Return to growth expected in FY20 for Americas
o Further investment in USA operations; sales offices expanded in Dallas, Atlanta and Houston
· Cost reduction activities in 2018 flowed through to improve 2019 operating profit conversion, up 1.6% pts to 19%
· As previously announced, we continue our cooperation with the US Department of Justice with respect to historical transactions in our discontinued telecommunication infrastructure business
Strategic Update
Improvement Plan launched and changes already underway:
· Clear focus on core growth markets following review of international footprint in H1
· Group reorganisation implemented including:
o New Head of International
o New UK Heads of Technology, Sales and Delivery
· Creation of UK new business development function
· Creation of core delivery function, to streamline service delivery and deepen relationships with key clients
· Major technology platform refresh ongoing, including rollout of single, Group-wide IT infrastructure planned in FY20
Outlook
As with other staffing groups, we have noticed softening in our markets in the first quarter of the new financial year. Given the economic and political uncertainty, both in the UK and overseas, we are cautious about how markets will develop during FY20.
Additionally, as we continue to implement our Improvement Plan over the current financial year, and as we further reposition our approach to certain markets, we will continue to be more selective around the quality of business we choose to service and will invest further in our sales resources.
The headwinds around Brexit and IR35 combined with these necessary actions are likely to impact short-term profitability, but we are confident they will position the business for a return to sustainable, long-term growth.
Kevin Freeguard, CEO commented:
“In my first set of full year results with Gattaca, I am pleased to report a positive financial performance for the Group, with underlying PBT and EPS slightly ahead of expectations, and with our net debt significantly down on prior year.
“We remain cautious about the development of our markets in 2020, although we believe that operationally, we have made significant progress with our ongoing Improvement Plan, which is now translating into tangible change in the way we operate and will put the Group firmly on the path for sustainable, long-term growth.”
The following footnotes apply, unless where otherwise indicated, throughout these Preliminary Results:
1 NFI is calculated as revenue less contractor payroll costs
2 Continuing underlying results exclude non-underlying items within continuing administrative expenses (2019: £1.4m, 2018 £1.7m), the NFI and (losses) / profits of discontinued operations before taxation (2019: £(7.6)m, 2018 £1.9m), amortisation of acquired intangibles (2019: £1.3m, 2018 £2.7m), impairment of goodwill and acquired intangibles (2019: £5.8m, 2018 £33.3m) and P&L exchange gains from revaluation of monetary foreign assets and liabilities (2019: £0.3m, 2018 £0.1m)
3 NFI commentary is on an underlying like for like constant currency basis
