Gattaca plc (LON:GATC), the specialist staffing business, has announced its audited financial results for the year ended 31 July 2024.
Financial Highlights
| 2024 £m | 2023restated3£m | |
| Continuing operations | ||
| Revenue | 389.5 | 382.1 |
| Net Fee Income (NFI)1 | 40.1 | 42.2 |
| EBITDA | 2.6 | 5.0 |
| Profit before tax – reported | 1.7 | 4.4 |
| Profit before tax – underlying2 | 2.9 | 3.7 |
| Profit after tax | 0.8 | 3.4 |
| Losses from discontinued operations after tax | (0.6) | (2.2) |
| Group reported profit after tax | 0.2 | 1.2 |
| Basic and diluted earnings per share | 0.6p | 3.8p |
| Basic underlying continuing earnings per share | 6.0p | 8.0p |
| Ordinary dividend per share | 2.5p | 2.5p |
| Special dividend per share | 0.0p | 2.5p |
| Net cash | 20.7 | 21.6 |
· Group NFI of £40.1m, down 5% year on year (“YoY”).
o Contract NFI up 3% YoY, with 8% increase in contractors over the last 6 months to 31 July 2024 (“H2”).
o Gattaca Projects Statement of Work (“SoW”) business achieved 35% YoY NFI growth.
o The Group’s two largest sectors showed positive trends, with Defence up 10% YoY on a like-for-like basis4, whilst Infrastructure grew by 14% in H2.
o Permanent NFI down 33% YoY in challenging market.
o Contract vs SoW vs Perm split 74% / 7% / 19% of Group NFI (FY23: 68% / 5% / 27%).
· Group continuing underlying profit before tax of £2.9m (FY23 restated: £3.7m), in a year of NFI decline as a result of margin enhancements and rebalancing of costs.
· Group net cash of £20.7m as at 31 July 2024 (31 July 2023: £21.6m).
· Full year dividend of 2.5 pence per share (FY23: 5.0 pence per share including a special dividend).
Operational Highlights
Continued delivery and emphasis on developing the four identified Strategic Priorities as the Group’s focus remains on achieving sustained growth:
External Focus
· Built and deployed the new Business Development team as part of the Group’s investment in front-line sales capability and doubled the Energy sales team with a focus on Renewables, increasing efforts in the core markets (Infrastructure, Defence, Mobility, Energy and TMT).
· Implemented two new Solutions accounts and 100% success rate in rebids for Solutions accounts
· Continued emphasis on client and candidate service feedback surveys, with increased survey responses and ratings of 8.8 and 9.0 (out of 10) respectively for FY24, vs 7.7 and 8.5 in FY23.
Culture
· Winner of two Business Culture awards; Best Transformation and Leading with Purpose.
· People engagement levels remain solid at 8.1 in FY24 (FY23: 8.1) and attrition has improved to 31% (FY23: 33%, and FY22: 40%).
Operational Performance
· US-based operations exited.
· 11% growth in average NFI per total headcount and 13% growth in average NFI per sales head.
· Externally focused improvements in the Group’s technology stack driving an improved candidate and contractor journey.
· Reset of operational leadership structure.
Cost Rebalancing
· Optimisation of the UK property portfolio now completed, with property footprint reduced by over 60% across two UK locations.
· Restructure of Group Board and Leadership teams resulting in a more agile, lower cost structure.
· Implementation of a single billing entity arrangement, consolidating client billing from nine to two entities in FY24.
Outlook
The Board remain mindful of the macro-economic headwinds, which continue to impact demand and candidate sentiment. It is seeing permanent recruitment remaining subdued and is continuing its focus on contractor growth, which takes longer to reflect in NFI. For FY25, it is expected that profitability will be weighted to the second half of the year and FY25 continuing underlying PBT will be in line with previous guidance of £3.0m.
Despite the current market conditions, the Board are optimistic about the future for the Group. The proactive measures that have been taken, including increased market focus, cost control initiatives and operational streamlining, have delivered results and positioned Gattaca favourably. The Group is actively pursuing growth opportunities only in sectors, services, and geographies where it believes it can be a dominant provider and the strategic investments will aim to enhance its capability in those markets.
Matthew Wragg, Chief Executive Officer of Gattaca, commented:
“The Group has delivered underlying PBT slightly ahead of expectations in challenging markets, we have entered FY25 with momentum in our contractor base and expect the permanent market will remain tough in the next financial year. We believe that the sectors in which we operate and the STEM skillsets that we provide have the right long-term fundamentals for success. We are improving as a business week-on-week and expect to continue to grow market share as we make further progress next year. I am very excited about the direction we are going and what that means for all our stakeholders for the years to come.”
The following footnotes apply, unless where otherwise indicated, throughout these Final Results:
1. NFI is equivalent to gross profit, being revenue less direct costs.
2. Continuing underlying results exclude losses before taxation of discontinued operations (2024: £(0.6)m, 2023 restated: £(2.2)m), non-underlying items within administrative expenses relating to restructuring costs (2024: £(0.5)m, 2023 restated: £(0.2)m), gains associated with exiting properties (2024: £nil, 2023: £0.6m) and other items (2024: £(0.6)m, 2023: £(0.2)m), amortisation of acquired intangibles (2024: £(0.1)m, 2023: £(0.1)m), and net foreign exchange (losses)/gains (2024: £(0.1)m loss, 2023 restated: £0.5m gain).
3. 2023 results have been restated for the presentation of discontinued operations, principally the Group’s US based operations.
4. This excludes £1.4m NFI associated with a large permanent Recruitment Process Outsourcing (RPO) client which we decided to exit in 2023.
Chair’s Statement
A simpler, more focused business
I am pleased to report to you for the first time as Gattaca’s Chair. Having been a Non-Executive Director until 2020, it is clear how much progress the business has made since I was last on the Board. Over recent months I have met people from across the Group and carefully reflected upon our strategy and objectives. While there remains much to do, I am optimistic about the Group’s potential.
Strategy is fundamentally about making choices, such as the sectors you want to serve, and then backing those decisions wholeheartedly. This requires a deep understanding of how to scale and become the go-to player in your markets. Great people are essential for competing effectively, supported by the technology, culture and working environment to flourish. Gattaca is on this journey, the actions to date show promise.
Being able to respond to unexpected events is a key test of a group’s culture and management. As Matt Wragg discusses in his Chief Executive’s Statement, we tragically lost two of our people in the year, including a long-standing member of the senior team. The leadership and the Group responded in an exemplary way in highly emotional circumstances, which is a tribute to the values that underpin the Group.
Performance and Returns to Shareholders
As with most companies that provide workforce solutions and recruitment services, the external environment has not been helpful to us over the last 12 months. We were successful in growing market share and increasing our contractor base, which typically generates around 70% of our NFI each year. This enabled us to meet our underlying profit expectations for FY24 and propose a final dividend of 2.5 pence per share. Subject to shareholder approval, this will be paid on 13 December 2024 to shareholders on the register at 1 November 2024. Going forward, our objective is to maintain dividend payouts, targeted to be approximately 50% of profits after tax.
We also returned £0.5m to shareholders through a share buyback programme in the year, our second in two years. Our strategy prioritises organic growth, followed by bolt-on acquisitions. If we have any excess funds, we will look at further returns to shareholders.
The Board
As previously reported, several important changes to the Board took effect after the AGM on 6 December 2023. Patrick Shanley stepped down after eight years as Chair, allowing me to take up the role. George Materna, our founder and still our largest shareholder, retired after nearly 40 years, including 15 years as a Non-Executive Director. His decision reflected his confidence in the Board and leadership team and the progress with rebuilding the business. George’s retirement meant the Board had fewer non-independent directors and we therefore decided to further refine the Board’s composition, with Ros Haith also stepping down.
The Board has five members, with me as Independent Non-Executive Chair, two Independent Non-Executive Directors and two Executive Directors. The streamlined and lower-cost Board reflects our current position and approach.
Looking Ahead
With much of the transformation plan now complete, the Board’s priority is to see this reflected in our numbers. We have a simpler, more focused Group with a reduced cost base, which will allow more of the benefits of growth to drop through to the bottom line. In the absence of improving markets, we have the opportunity to continue to drive our productivity, grow market share and move our key performance ratios in the right direction. Leveraging our digital technology will be central to this. We also recognise the benefits of our ESG commitments, which can drive the top line through growth in green jobs, help us attract and retain talented people and further improve our efficiency.
In conclusion, the Group is well placed to outperform its markets and I look forward to reporting to you on our progress.
Richard Bradford
Independent Non-Executive Chair
Chief Executive’s Statement
Highlights
• Delivered underlying profit before tax of £2.9m, as a result of executing our planned strategic initiatives for FY24
• Maintained target levels for our people engagement score and retention
• Successfully retained all Solutions accounts we rebid for and added two new Solutions accounts
Excited about the momentum we’re building
Gattaca is now in its 40th year and in many respects, we have entered a new era. This reflects both the Board changes in FY24 and the vast amount of work we have done to set the business up for success. We now have a great environment, clear focus on market sectors where we are or can become the dominant player, and we are hugely excited by our digital capabilities. The early stages of our rebuild demanded maximum effort for few immediate gains. However, we are now realising the results of our early efforts. We are leveraging our digital investments to continually improve the way we work, delivering returns that far outweigh the effort required.
Since the start of the calendar year, our new Chair has challenged and validated our strategic focus and our operational targets. With the right plan in place and an energised and motivated team, we are confident of delivering our objectives over the coming years.
Performance
Our progress has enabled us to deliver a robust performance in FY24, in the face of very difficult markets. We outperformed many of our peers, are now winning back market share, growing contract momentum and delivered underlying profit before tax of £2.9m (2023 restated: £3.7m), ahead of our expectations.
Although the number of contractors across the market was flat, our focus delivered market share gains that grew our contractor base organically for the first time in eight years. This was our top priority for FY24, so it is pleasing to have delivered, with the contractor base growing by 8% in the second half of the financial year and representing 74% of our NFI (2023: 68%).
Our Gattaca Projects business outperformed targets in FY24, growing NFI by 35% year on year and diversifying into new client offerings and building a trusted specialist brand. We also successfully retained all major Solutions account retention tenders we underwent in FY24, a testament to our valued customer service and deep relationship with those clients over the years.
The permanent market has been hit by the UK economic recession across all markets, skills and sectors that we serve. The technology sector was hit earliest and has stayed tough the longest. Our Barclay Meade business, which provides professional skills for STEM companies, has also been affected. The slow market has largely been down to candidates lacking confidence to move, with customer demand to fill roles remaining stronger than our performance suggests. Crucially, we achieved our profit target for the year without cutting our sales capacity, so we will be ready to take advantage as soon as markets turn.
Strategy
We continued to make good progress with all aspects of our strategy in FY24, as we built positive momentum in the business.
External Focus
Gattaca is a much simpler business than two years ago. We have consciously focused on fewer sectors and territories and doubled down on STEM skill focus. Our aim is to be the top player in all our marketplaces, with a multi-service offering that ranges from supporting customers with a single hire through to designing and running a complete talent programme or delivering outcome-based subcontracted services. While organic growth is our first choice, we will consider bolt-on acquisitions that strengthen our market position and deliver faster growth.
Our organic growth investments in FY24 included a dedicated business development team, which helped us achieve our contractor number and is now building a multi-year pipeline. We have also recruited a seasoned professional to lead our marketing team. While market conditions meant we controlled our investment in sales headcount, we have doubled our Energy sales team. We have focused on renewable energy generation and the opportunity associated with upgrading the UK transmission and distribution network in the coming years. We have also invested in our rapidly growing Statement of Work business, Gattaca Projects.
Client and candidate service feedback has continued to improve, with average ratings of 8.8 and 9.0 out of ten respectively (2023: 7.7 and 8.5). High service levels helped us to renew two major accounts that retendered and we also successfully implemented two new major Solutions accounts.
Culture
Culture is an obsession for us. Our Purpose, Vision, Mission and Values are well embedded, our engagement levels remain stable at 8.1 (2023: 8.1) and attrition has improved to 31% (2023: 33%). We were pleased to win two Business Culture awards in the year, for Best Transformation and Leading with Purpose.
Further delayering the leadership has enabled us to move at even greater speed and created opportunities for the new generation of leadership that we have developed through. We have now had a full year of our performance scorecards, which allow us to reward the right people and manage underperformance. This links to the continued reduction in people leaving us within 12 months, through our focus on hiring well and providing an environment where people can be more successful.
In what has been a very emotional year, the hardest year of my career, our resilience has been truly tested and the strength of our culture fully felt. We lost two fantastic cultural characters and key team members this year.
Shanaz Tambe was our first hire in our successful Workforce Solutions support function in Cape Town. She was an incredible human being, never allowing me to get in the office before her on my visits, always a gift in hand for my daughter on my departure and was an incredible team leader for so many. Sadly, Shanaz lost her long, stoic battle with cancer in March.
Grahame Carter was a key member of my senior leadership team, as well as my best man and friend. His tragic accident in February was a devasting loss for the Group and wider industry. The outpouring of love was testament to the quality of the man. It is devasting that Grahame, our greatest cheerleader, won’t be alongside us as we continue our progressive journey. However, he would be chuffed in how he continues to be remembered and an inspiration across the business.
I am sure that his “can do, will do”, winning mentality has rubbed off on many of us across the business and his legacy is woven into the fabric of the Company and will continue to be a motivation and inspiration to myself, and I am sure many others.
Personally, I cannot thank the business and our wider network enough for the support they afforded me and each other during this tough year. I am incredibly proud of how they have all responded to these very challenging times.
Operational Performance
Our digital platforms are at the heart of our ongoing operational improvements. Developments in the year have enhanced contractor onboarding, increased the stability of our contractor book, improved our customer platforms and added automations to streamline our processes.
This helped us to grow average NFI per sales head by 13% year on year. Our sales productivity target for FY24 was £92k per total heads and we achieved £90k, up 11% on FY23. Continuing to leverage our technology stack, including more external-facing automations, will support further productivity improvements.
Towards the end of FY24, we exited our US-based operations, due to persistent loss-making results. We continue to support our route to market in the US from our UK-based sales force, primarily in our Energy sector.
Cost Rebalancing
Our work to streamline the business in FY24 included rationalising the UK payroll and billing entities, completing our review of the UK property portfolio, simplifying the Group’s corporate structure further and slimming down the Board, all helping to reduce our cost base. Our sales to support staff mix was 68:32, as we move towards our 80:20 target.
Environmental, Social and Governance
FY24 has seen us continuing to integrate sustainability into the way we work, day to day. Our approach has now become integrated and authentic to us, as our business sees the advantages of taking the lead. We have a good understanding of where we can make the most difference, whether that is our Gender Equity Programme, inclusive recruitment practices, workplace ED&I and wellbeing awareness or making progress on our journey to Net Zero. This in turn helps us to win and retain business, with customers giving us top scores on ESG criteria and valuing our ED&I insights, and being a catalyst for change in the sectors we serve. Our digital investments also enhance our internal controls, underpinning our strong governance.
Outlook
We have entered FY25 with momentum in our contractor base and while we expect the permanent market will remain tough in the next financial year, we are confident that we will capitalise when the market does turn. We are improving as a business week on week and we expect to continue to take market share as we make further progress next year. I am very excited about the direction we are now going and what that means for all our stakeholders for the years to come.
Matt Wragg
Chief Executive Officer
Chief Financial Officer’s Report
Highlights
• Delivered continuing underlying profit before tax ahead of market expectation
• Net cash of £20.7m (2023: £21.6m)
• Ordinary dividend of 2.5 pence per share proposed
• Share buyback of £0.5m completed in the year
• Improved operational productivity, average NFI per head grew +11% year on year
Financial Performance
On a continuing basis, revenue of £389.5m (2023 restated: £382.1m) generated NFI of £40.1m (2023 restated: £42.2m). We achieved contract NFI of £29.6m (2023 restated: £28.7m) at a margin of 8.0% (2023 restated: 7.9%), permanent recruitment fees and other NFI of £7.7m (2023: £11.4m) and Statement of Work (SoW) gross profit of £2.8m (2023: £2.1m). SoW services are all delivered though contract labour provision on long term projects where the Group takes responsibility for assignment deliverables. In the year contract NFI represented 74% (2023: 68%) of Group NFI as we consciously shifted our focus to contract.
The greatest impact of the market conditions on NFI was seen in permanent recruitment, which was down -33% on the prior year, partly as a result of us exiting a large RPO client in 2023, and also driven by continuing industry-wide client and candidate challenges. We strived to control our administration costs and achieved a year on year saving of £1.0m, particularly pleasing in an inflationary UK environment. Control of staff costs was a key driver of this as headcount was reduced in the year.
Underlying profit before tax from continuing operations was £2.9m (2023 restated: £3.7m). Statutory profit after tax for the total Group was £0.2m (2023: £1.2m).
Net cash at 31 July 2024 was £20.7m (31 July 2023: £21.6m), a decrease of £0.9m in net cash year on year after dividends of £1.6m and share buybacks and treasury share purchases of £0.8m. The optimisation of the working capital remains a key focus and throughout the year the Group maintained its improved DSO seen last year through strong collection performance and renegotiated trading terms.
FY23 results have been restated for the presentation of discontinued operations as explained in Note 10 of the consolidated Financial Statements.
Discontinued operations and non-underlying costs
During the year the Group withdrew from its operations in the USA. Despite investment in the US business since our acquisition of Networkers International in 2015, US trading losses became unsustainable due to market conditions, particularly in permanent recruitment, and we remained a small player in an extremely large and competitive market.
The loss from discontinued operations includes trading losses of £0.7m, £0.3m of non-underlying restructuring costs relating to the closure of US operations and £0.4m of impairments.
FY23 results have been restated throughout the Annual Report and Accounts to present results from the US operation comparably, in accordance with IFRS.
Non-underlying costs from continuing business are presented in line with the Group’s accounting policy.
Reconciliation of profit before tax for the total Group
The table below reconciles continuing underlying profit before tax to reported statutory profit before tax for the total Group:
| £’000 | Profit before tax |
| Continuing underlying profit before tax | 2,918 |
| Restructuring costs in continuing business1 | (467) |
| Cost relating to ongoing closure of group undertakings2 | (609) |
| Cost associated with exiting properties | (16) |
| Reversal of impairment of right-of-use leased assets | 42 |
| Operating loss relating to discontinued operations | (725) |
| Closure of US operations | (278) |
| Impairment of cash and cash equivalents3 | (408) |
| Amortisation of acquired intangibles | (69) |
| Net foreign exchange gains | 678 |
| Profit before tax for the total Group | 1,066 |
1 Restructuring costs arose primarily from employee rationalisation programmes in the UK.
2 Costs associated with the ongoing closure of subsidiaries whose operations were discontinued in prior periods, primarily Mexico, Malaysia, Singapore, Qatar and Russia, are classified as continuing operations in the current year and are reported within non-underlying items in line with the Group’s accounting policy. We will continue to incur costs associated with discontinued legacy operations as the legal wind down of those entities is concluded.
3 Cash on deposit in Russia was impaired due to the increased credit risk associated with the financial and regulatory sanctions imposed on and by Russia.
Taxation
The Group’s reported effective tax rate was 82.6% (2023: 45.0%), driven by overseas losses not recognised as deferred tax assets, and non-deductible expenses arising from the corporate restructuring fees and streamlining of the Group. Further detail is set out in Note 9 of the Financial Statements. The continuing underlying effective tax rate was 35.2% (2023 restated: 29.9%).
Earnings per share
Basic earnings per share was 0.6 pence (2023: 3.8 pence), and on a fully diluted basis was 0.6 pence (2023: 3.8 pence). Continuing underlying basic earnings per share was 6.0 pence (2023 restated: 8.0 pence).
Dividends and share buyback
Our long-standing objective has been to achieve a through-the-cycle dividend payout of approximately 50% of profits after tax. The Board has proposed to pay a final ordinary dividend of 2.5 pence per share (2023: 2.5 pence). The final dividend, which amounts to approximately £0.8m, will be subject to shareholder approval at the 2024 Annual General Meeting. It will be paid on 13 December 2024 to shareholders on the register on 1 November 2024.
On 21 August 2023 the Board announced a share buyback which concluded on 29 November 2023 and returned £0.5m to shareholders.
Given the Group’s sustained liquidity and recognising shareholder returns in the previous year, the Board remain committed to returning capital to shareholders.
Net assets and shares in issue at 31 July 2024
The Group had net assets of £28.3m (2023: £30.8m) and had 31.5m (2023: 31.9m) fully paid ordinary shares in issue.
Group net cash at 31 July 2024 was £20.7m (31 July 2023: £21.6m), a decrease of £0.9m in a year where the Group returned cash to shareholders of £1.6m via dividends, £0.5m via share buyback and used £0.3m for the purchase of shares for its Employee Benefit Trusts.
We saw a strong performance in the Group’s days sales outstanding (DSO) at 31 July 2024 of 43.0 days, consistent with the prior year (31 July 2023: 43.2 days). This was driven by maintaining high levels of cash collection and improved payment terms mix. Trade receivables and accrued income balances, net of expected credit loss allowances, have increased to £51.1m (31 July 2023: £47.2m) due to the growth of our contractor book during FY24.
Net bank interest received was £0.7m (2023: £0.3m) as a result of the positive net cash balance maintained throughout the year.
As at 31 July 2024, the Group had an invoice financing working capital facility of £50m. Under the terms of the non-recourse facility, the trade receivables are assigned to, and owned by, HSBC and so have been derecognised from the Group’s Statement of Financial Position. In addition, the non-recourse working capital facility does not meet the definition of loans and borrowings under IFRS.
At 31 July 2024, utilisation of the recourse facility was nil and utilisation of the non-recourse facility was £2.3m, with unutilised facility headroom after restrictions of £29.9m.
Parent Company investments
Gattaca plc, the Company, held investments in subsidiary undertakings of £31.7m at 31 July 2024 (2023: £38.6m), following a £7.1m impairment charge recorded in the Parent Company as a result of the year-end impairment review.
The valuation of the investment, calculated based upon a value-in-use discounted cash flow, is sensitive to changes in key assumptions, largely due to current economic headwinds. Accounting Standards permit for a subsequent reversal of the impairment in the future if the value of the underlying asset increases.
Critical accounting policies
The statement of significant accounting policies is set out in Note 1 to the Financial Statements.
Group financial risk management
The Board reviews and agrees policies for managing financial risks. The Group’s finance function is responsible for managing investment and funding requirements including banking and cash flow monitoring. It seeks to ensure that adequate liquidity exists at all times, to meet its cash requirements. The Group’s financial instruments comprise cash, borrowings and various items, such as trade receivables and trade payables that arise from its operations. The Group does not trade in financial instruments. The main risks arising from the Group’s financial instruments are described below.
Credit risk
The Group seeks to trade only with recognised, creditworthy third parties. During the period we reviewed our expected credit loss allowance for trade receivables and accrued income and removed industry specific provisions which we have held since 2020 against certain industries we considered high risk. As a result of the changes to loss allowance rates, and combined with the increase in trade receivables and accrued income, our loss allowance decreased by £0.5m to £1.6m.
There are no significant concentrations of credit risk within the Group, with no single debtor accounting for more than 9% (2023: 8%) of total receivables balances at 31 July 2024.
Foreign currency risk
The Group generates 2% of its annualised NFI from continuing business in international markets. The Group does face risks to both its reported performance and cash position arising from the effects of exchange rate fluctuations. The Group manages these risks by matching sales and direct costs in the same currency and where appropriate entering into forward exchange contracts to effect the same where sales and costs are not in the same currency.
Outlook
Gattaca’s performance during FY24 was resilient in the face of challenging market conditions. It was pleasing to see the contractor base in growth, and this sets the Group up to grow NFI into 2025. We will continue to invest where we see opportunity for growth whilst maintaining a keen focus on our cost base and operational efficiency.
Oliver Whittaker
Chief Financial Officer
