Kevin Freeguard, Chief Executive Officer said:
“The Group delivered NFI growth both in UK Engineering and our International businesses, partially offset by UK Technology where we are refocusing on profitable business. These improvements will flow through to profit before tax. In addition net debt has come in comfortably below expectations, despite the exceptional restructuring and other costs incurred in the year.
We are making good progress improving the business and I am confident that the actions we are taking will continue to position us well for the future.”
Gattaca PLC (LON:GATC), the UK’s leading specialist Engineering and Technology recruitment business, today provided the following trading update for the 12 months ended 31 July 2019.
Overview
Underlying PBT is expected to be slightly above market expectations and net debt also lower than expected levels.
Overall, NFI was flat year on year with UK Engineering having performed strongly in H2, partially offset by UK Technology and particularly Telecoms. Benefits of the planned restructuring we undertook in H1 began to feed through towards the end of the period. The Group’s International operations also grew over the period, although the strong performance in H1, particularly in the USA, was offset by a softer period of trading in H2. The core UK Engineering business, including our Solutions offering, continues to perform very strongly.
NFI and Profit Performance
· Group NFI is expected to be £71.4m, in line with prior year on an underlying basis (continuing operations)
· UK Engineering, our largest business, continued to grow with H2 up 7% on the prior year. This is an acceleration of the trend seen in H1 and brings full year growth to 5%. This was driven largely by our Solutions business, Engineering Technology and Infrastructure. The significant improvement was largely in permanent recruitment
· UK Technology declined 19% over the period, with an H2 decline of 24%, as the effects of our planned H1 restructuring began to feed through and as we focused on improving the quality of income. As such, this business continued to contribute around £5m to profits and we expect operating contribution prior to overhead allocation only to be slightly down on prior year. We expect this business to return to growth next year
· International NFI grew 3% over the year as a whole, with a strong performance in H1 offset by a softer period of trading in H2, as we focused on establishing our contract business and there was a rebalancing of customers following reduced demand at key customers. We saw a sequential improvement in trading over the second half, with quarter-on-quarter NFI growth in Q4. We expect continued growth in FY20 as we work to scale and broaden the business
· Our cooperation with the US Department of Justice (“DoJ”), previously announced in February, continues. The Company has also commissioned an independent review in relation to the DoJ’s inquiry, which predominantly covers activities by Networkers International prior to its acquisition by Gattaca in 2015. Legal fees incurred to date in relation to this matter amount to £3.6m, which will be reflected in discontinued operations as it relates to a part of our International business that has closed. Although we continue to assist the DoJ, the information requests and independent review have largely been completed and consequently, at this time, we expect a significant reduction in the level of advisory fees going forward
· FY19 underlying PBT is expected to be slightly above market expectations
Net debt
Net debt of around £25m (July 2018: £40.8m) benefitted significantly from the year end falling at the most opportune day for working capital receipts and payments. Nevertheless, allowing for this factor, net debt was below expectations. Our strong working capital performance in H1 repeated in H2, including the benefit of the unwind from discontinued operations of around £7m for the full year. This was partially offset by capital investment in our primary business systems, restructuring costs related to the previously announced changes in our international footprint and the cost of our continued cooperation with the DoJ, as detailed above.
Non-underlying costs
Our current estimates for non-underlying costs excluding amortisation or impairment of intangibles in the profit and loss account are £8.7m comprising of £3.6m advisory fees with respect to our cooperation with the DoJ, £2.1m for restructuring, £1.9m of pre-tax trading losses for discontinued businesses, and £1.1m onerous lease provision following the exit of our Bromley site.
Full year results
The Group expects to announce its full year results for the 12 months to 31 July 2019 on Wednesday 6 November 2019.
