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Gattaca PLC Trading Update

Gattaca PLC (LON:GATC), the specialist Engineering and Technology (IT & Telecoms) recruitment solutions business, today provided the following pre-close Trading Update for the six months to 31 January 2018.

 

Overview

The Group delivered an improvement in NFI over the period. UK Engineering performed positively, returning to growth in H1, although this was tempered by continued challenges seen in UK Technology, particularly in telecoms.

Our International business continues to grow strongly, with the US delivering double digit growth in H1 following our investment there.

 

2018

 

2017

 

Change

 

Statutory

Underlying2

Statutory

Underlying2

Statutory

Underlying2

£m

£m

£m

£m

%

 %

Net Fee Income (NFI)1

39.8

39.8

35.4

39.1

+12%

+2%

Engineering

24.1

23.5

+3%

Technology

8.4

8.8

-5%

UK

 

32.5

 

32.3

 

+1%

International

7.3

6.8

+7%

Total

 

39.8

 

39.1

 

+2%

Contract

28.7

29.6

-3%

Permanent

11.1

9.5

+17%

Total

39.8

 

39.1

 

+2%

 

1   NFI is calculated as revenue less contractor payroll costs

2 Underlying results includes RSL as if it had been a fully owned subsidiary throughout 2017 and is presented on a constant currency basis.

 

 Performance

 

·     

Group underlying NFI up 2% year-on-year at £39.8m

·     

UK Engineering has returned to modest growth, up 3% on H117

·     

UK Technology continues to be a challenge, with H1 down 5% on H117, primarily driven by Telco.  Excluding Telco, UK Technology NFI was 4% higher than H117

·     

International performed strongly, with NFI up 7% on H117, driven by continued strong performance in the Americas where NFI has grown 31% year-on-year

·     

We have seen a shift towards perm in our NFI mix, with perm representing 28% of H1 NFI compared to 24% in H117             

 

 

NFI has grown both in UK Engineering and International, tempered by continued challenges in UK Technology. PBT however, as expected, will be lower than in H1 of last year as a result of our investments in staff and support costs to deliver the increased NFI and to allow for further growth in H218.

 

Taking a more prudent assessment of the economic outlook, we have tempered our expectations for growth in H2 and consequently we are undertaking a review of our cost base, so as to identify savings, some of which will be achieved in H2. Notwithstanding these savings, profits before tax excluding non-recurring costs are now expected to be in the order of 15% below the Board’s previous expectations.

 

Net debt

We estimate our net debt position at the end of January at £37m (end July 2017 £40.3m).

 

Dividend

In light of the revised full year expectations the Board has decided to reset the rate of dividend in order to restore a more sustainable dividend cover ratio, to enable the pay down of debt, and to reflect a more normalised yield. The Board intends to set the dividend cover at approximately 2x (2017 1x).

 

Interim Results

The Group will announce its interim results for the 6 months to 31 January 2018 on Thursday 19 April 2018.

 

Patrick Shanley, Chairman, said:

“We delivered an improvement in NFI in the first half of the year, with our core UK Engineering business returning to growth, albeit somewhat tempered by continued challenges seen in UK Technology. Our International business is growing strongly, and it is pleasing to see our investments in the US delivering double digit growth. However, our cost base and expenditures for the full year now need to be reconsidered.

 “The Board is also taking the pre-emptive step of addressing the dividend which has become burdensome and which prudence dictates should be brought into alignment with the financial position and future prospects of the business.

 “Notwithstanding, we are clear that we have a robust core business with a good strategy. Together with a strong and deep management team and excellent staff we are well positioned to reset the business for profitable growth.”

 

Salar Farzad, Chief Financial Officer, said:

“Given our assessment of the economic outlook, we are not complacent and are working hard to strengthen the Group. We will be identifying significant savings in our cost base, some of which will be realised in H2. We will update the market on progress when we announce our interims in April.”