Gattaca PLC Preliminary Results for the year ended 31 July 2017

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Gattaca PLC (LON:GATC), the specialist Engineering and Technology (IT & Telecoms) recruitment solutions business, today announces its Preliminary Results for the year ended 31 July 2017.

Financial Highlights

	2017		2016		Change
	Statutory	Underlying²	Statutory	Underlying²	Statutory	Underlying²
	£m	£m	£m	£m	%	%
Revenue	642.4	642.4	617.6	616.8	+4%	+4%
Net Fee Income (NFI)¹	74.7	74.7	73.0	72.4	+2%	+3%
Profit from operations	12.7	17.4	15.1	21.4	-16%	-19%
Profit before tax	11.5	16.2	15.1	20.4	-24%	-21%

Basic earnings per share	23.4p	35.3p	32.1p	45.6p	-27%	-23%
Diluted earnings per share	22.7p	34.3p	31.0p	44.1p	-27%	-22%
Final dividend	17.0p		17.0p		0%
Total dividend	23.0p		23.0p		0%
Net debt at end of period	£40.3m		£25.0m		-£15.3m

The following footnotes apply, unless where otherwise indicated, throughout these Preliminary Results:

¹NFI is calculated as revenue less contractor payroll costs

² Underlying results exclude the trading and net proceeds of divested businesses (2017: £nil; 2016: £0.2m loss), acquisitions costs (2017: £0.2m; 2016: £nil), amortisation of acquired intangibles (2017: £3.1m; 2016: £3.7m) and integration and restructuring costs (2017: £1.4m; 2016: £2.4m), exchange gains from revaluation of foreign assets and liabilities (2017: £nil; 2016: £1.0m).

Group Performance

Profits in line with market expectations.

· Group NFI grew 2%

· After further adjusting underlying results to treat Resourcing Solutions Limited as if it had been owned throughout 2016 and 2017, and on a constant currency basis, NFI was down 4%, as indicated in our August trading update

· UK Engineering NFI was down 3%; half of the impact of which was recovered through a reduction in staff costs*

· UK Technology NFI was down 6%, 20% of the impact of which was recovered through a reduction in staff costs offset by investments in new teams to address market segments introduced during the year*

· Gattaca solutions business upselling to existing clients and generating new business wins

· International NFI was 4% lower, with strong growth in the US of 21% masked by contract reductions in South Africa, in particular*

· Networkers operational integration now complete

· Excluding the impact of acquisitions in the year, discontinued operations in 2016, non-recurring items and amortisation of intangibles, administrative expenses increased by £3.9m on a reported currency basis. This was principally driven by the impact of exchange rate movements and investment in international sales staff

*NFI commentary is on this adjusted constant currency basis

Dividend

· Final proposed dividend at 17.0 pence per share (2016: 17.0p), maintaining total for the year at 23.0 pence per share (2016: 23.0p)

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Outlook

· UK Engineering exit rates for FY17 indicated that the decline in those markets was abating, with Q4 1% down on the prior year. Post year-end, our September year-to-date NFI has shown modest growth on prior year on a reported currency basis

· UK Technology continued to face challenges in Q4, especially Telecoms where gains in new markets such as converging telecoms were not sufficient to offset lower demand for our network infrastructure market

· Internationally, the Americas, our key international market of focus, exited FY17 with Q4 27% higher than prior year and Asia 14% higher. We expect both these markets to continue to grow strongly in FY18. Elsewhere, the Middle East is now stable and South Africa is showing recovery from last year’s contract reductions

Commenting on the results, Brian Wilkinson, Chief Executive of the Group said:

“Whilst the Group’s headline results reflect a challenging year, there has been significant progress in many areas of the business and we are confident of further improvement in 2018.

“Overall we believe our UK business performed slightly better than the market and we managed operational costs well. During the year we rolled-out Matchtech’s long-established strategy to Networkers. This strategy of operating in specialist markets and nurturing deep and enduring client relationships, supported by strong centralised marketing and business development programmes, continues to deliver high productivity by our consultants and a leading Conversion Ratio (adjusted operating profit to net fees). Our Gattaca Solutions offering is gaining traction with a number of contract extensions and upgrades last year and an exciting pipeline of opportunities for 2018. Whilst this roll-out led to increased Group support costs during the year, these investments will deliver returns in 2018 and beyond.

“Internationally, the diversification and growth of our client base has progressed well. Our regional management teams have carefully selected vertical markets in which to roll out our Matchtech brand and through our Networkers brand have developed higher level IT business to complement our legacy telecoms infrastructure market business. New management has been introduced to our Middle East and South Africa businesses, complementing the strong management teams established in the Americas and Asia last year. Our positive Q4 exit rates in North America and Asia lead us to expect further significant growth in these markets over the coming year.”