Gattaca plc (“Gattaca” or the “Group”), the specialist Engineering and Technology (IT & Telecoms) recruitment solutions business, today announced its Interim Results for the six months ended 31 January 2018.
Financial Highlights
| 2018 H1 | 2017 H1 | Change | ||||||
| Statutory | Underlying2 | Statutory | Underlying2 | Statutory | Underlying2 | |||
| £m | £m | £m | £m | % | % | |||
| Revenue | 323.3 | 323.3 | 304.2 | 329.1 | +7% | -2% | ||
| Net Fee Income (NFI)1 | 39.8 | 39.8 | 35.4 | 39.1 | +12% | +2% | ||
| (Loss)/profit from operations | (11.5) | 7.7 | 5.5 | 8.9 | -13% | |||
| (Loss)/profit before tax | (12.7) | 6.9 | 5.2 | 8.3 | -17% | |||
| Basic earnings per share | (41.3)p | 14.7p | 10.7p | 19.6p | NA | -25% | ||
| Diluted earnings per share | (40.6)p | 14.5p | 10.5p | 19.1p | NA | -24% | ||
| Interim dividend | 3.00p | 6.00p | -50% | |||||
| Net debt at end of period | £36.2m | £27.9m | -£8.3m | |||||
The following footnotes apply, unless where otherwise indicated, throughout these Interim Results:
1 NFI is calculated as revenue less contractor payroll costs
2 Underlying results include the results for RSL as if it had been a fully owned subsidiary in 2017 H1, exclude the trading results and net proceeds of divested businesses (2018: £0.4m; 2017: £nil), amortisation of acquired intangibles (2018: £1.6m; 2017: £1.4m), impairment of acquired intangibles (2018: £17.1m; 2017: £nil), non-underlying costs (2018: £0.1m; 2017: £1.1m), exchange gains and losses from revaluation of foreign assets and liabilities (2018: £0.4m loss; 2017: £0.3m gain) and is presented on a constant currency basis.
Group performance*
| · | Group NFI grew 12% on a statutory basis, with underlying growth in group NFI of 2% |
| · | UK Engineering NFI grew 3% on prior year |
| o Engineering technology +24%; Automotive +15%; RSL -13% and General Engineering -11% | |
| o Growth in both contract and permanent | |
| · | UK Technology NFI declined 4% on prior year |
| o IT +3%, including strong performance in Development (+50%) and Cloud and Leadership (+28%), offset by Public Sector and ERP (-33%) | |
| o Telecoms declined by 19% | |
| · | International NFI grew 5% on prior year, driven by strong performance in the Americas (+30%), offset by a fall in Other International of 13% |
| · | Underlying overheads 6% higher reflecting investment in UK Sales (£1.3m higher than prior year) and US (£0.7m higher) |
| o Actions in place to abate the rate of increase in the second half | |
| · | Continued underperformance of Technology has resulted in a non-cash impairment of £17.1m in the period, in respect of goodwill and other intangible assets capitalised with the Networkers acquisition |
| · | Interim dividend of 3.0 pence (2017: 6.0 pence), in line with the resetting of dividend policy announced on 7 February 2018. The dividend policy targets a pay-out of 50% of PAT through the cycle, subject to a sustained reduction in net debt from the 2019 financial year onwards |
*All performance commentary reflects underlying performance, including treating Resourcing Solutions Limited as if it had been owned throughout 2017, and on a constant currency basis
Other highlights
| · | Board focused on the following key areas to both stabilise underperforming parts of the business and ensure that the Group can better execute its strategy: |
| o Review of International footprint and net profitability of key customers | |
| o Improved integration of operations across the Group | |
| o Repositioning of the Telecoms business | |
| o Delivering the current phase of cost savings | |
| · | Following the resignation of Brian Wilkinson as CEO in February interim leadership entrusted to Keith Lewis (COO) and Salar Farzad (CFO) |
| o A full search to identify a CEO has commenced and will consider both internal and external candidates |
Outlook
Our business is going through a period of significant change, in particular in UK Technology and in some International operations outside of the Americas, where we do not have critical mass. To counteract this we have instigated a program to reduce the cost base of the business within the current financial year and beyond.
In February and March the business broadly traded in line with the Board’s expectations. However, the changes being implemented in the Technology division in the coming months, alongside the economic challenges facing some of our sectors and territories make the backdrop to our full year expectations, which have a final quarter weighting, more challenging than at the time of the trading update of 7 February 2018, with the consequence that the Board now expects underlying profit before tax for the full year to be approximately 15% below its previous expectations.
Commenting on the results, Patrick Shanley, Chairman of the Group said:
“Gattaca delivered an improvement in NFI in H1, and it is pleasing to see our core UK Engineering and IT businesses delivering growth and our International operations in the Americas continuing to perform well. However, the continued underperformance in Telecoms is disappointing and actions are being taken to address this.
“The Board is focussed on ensuring the Group can better execute its strategy, delivering sustainable and profitable growth in segments and markets which are scalable. We have undertaken a number of actions to improve our underlying performance; albeit at a time when the UK recruitment market continues to be challenging. We will continue working hard to strengthen the Group and build further on its solid foundations.”
