Report

Leading indicators all point towards major rebound

We are all as individuals aware of pent-up consumer demand as households emerge from lockdown with £150bn of extra savings squirreled away over the last 12 months. Such optimism is feeding through into house prices, bank stocks, equities... and the jobs market.

Specialist STEM recruiter Gattaca is seeing similar trends too. Today reporting sequential LFL NFI growth over the past 2 quarters, alongside “improving activity rates”. Particularly in relation to hiring talent in renewable energy (eg offshore wind), defence & all things tech related.

Furthermore, infrastructure projects (eg HS2, fibre-to-the-home, Lower Thames Crossing, EVs, etc) are starting to gain traction, augmented by buoyant demand for cloud, m-commerce, cybersecurity and AI expertise. All positive tailwinds in light of Gattaca’s rich STEM, contractor (75% of H1’21 NFI - flexible working) and UK heritage.

Q2’21 NFI climbed 2% sequentially vs Q1, which itself was 9% higher than Q4’20. All told H1’21 NFI came in at £21.1m (-34% vs £31.8m LY) with Solutions accounting for 25% (28% LY) - delivering adjusted PBT of £442k. Consistent with our FY21 forecasts of £750k, reflecting tight cost control & £4m of annualised savings thanks to the ‘Improvement Plan’.

On valuation, even after the recent price appreciation to 152p, GATC shares still trade on modest FY22 multiples of 7.6x EV/EBIT & 11.5x PER vs 12.9x & 19.5x for peers.

We upgrade our valuation from 140p to 225p per share – factoring in a lower risk premium, greater clarity and a UK government that is committed to driving employment & infrastructure investment.
Underlyings
Adecco Group AG

Adecco Group provides human resource services, including temporary staffing, permanent placement, outsourcing, consulting and outplacement. Co. has more than 5,500 branches in over 60 countries and territories. Co.'s Office and Industrial businesses offer a range of general staffing services, including temporary staffing, permanent placement, assessment, training and integrated human resources applications. In addition, Co. operates professional business lines, which include Adecco Finance & Legal, Adecco Engineering & Technical, Adecco Information Technology, Adecco Medical & Science, Adecco Sales, Marketing & Events and Adecco Human Capital Solutions.

Gattaca

Gattaca is an engineering and technology recruitment solutions company. Co. operates in the STEM markets (science, technology, engineering and maths), all sectors with skills shortages. Co. has three reporting segments, Engineering, Technology and International. Co.'s brands are Matchtech, an engineering recruitment specialist; Networkers, a technology recruitment specialist; Cappo, Provanis, Barclay Meade, a professional services brand, recruiting finance, procurement, sales and HR professionals., and Alderwood, which is involved in placing trainers and assessors with training providers throughout the U.K. and the Middle East.

MANPOWERGROUP

ManpowerGroup provides a range of workforce solutions and services, which include recruitment and assessment, training and development, career management, outsourcing, and workforce consulting. The company's family of brands and offerings includes Manpower, Experis, Right Management, and ManpowerGroup Solutions. The company's portfolio of recruitment services includes permanent, temporary and contract recruitment of professionals, as well as administrative and industrial positions. All of these services are provided under its Manpower and Experis brands. The company provides services under its Experis brand, particularly in the areas of Information Technology, Engineering, and Finance.

Randstad NV

Randstad is a global staffing and recruitment company, providing various solutions in the human resources (HR) services space. Co.'s services include regular temporary staffing and permanent placement of candidates. In addition, Co. provides several other HR solutions, such as Recruitment Process Outsourcing (RPO), Managed Services Programs (MSP), payroll services, and outplacement. Co. provides four distinct service concepts: Staffing, Inhouse Services, Professionals and HR Solutions.

Staffline Group

Staffline Group is a holding company. Through its subsidiaries, Co. is engaged in the provision of recruitment and outsourced human resource services to industry and services in the welfare to work arena. Co. has two operating segments: Staffing Services and PeoplePlus. The Staffing Services segment provides labour solutions in agriculture, food processing, manufacturing, e-retail, driving and the logistics sectors in the U.K., Eire and Poland. The PeoplePlus segment is a provider to both Central and Local Government, providing a range of services to help and support in the Employability (Welfare to Work), Communities and Skills arenas.

Provider
Equity Development
Equity Development

​Equity Development enables companies to become better understood and supported by investors. Since our launch in 1996 we have consistently focused on helping our clients improve their communication and relationships with both existing and potential shareholders. Our clients have come from a wide variety of sectors and domiciles, are both private and quoted and range in size from micro-cap to $multi-billions. We offer free access to company research notes written by experienced analysts. These notes include detailed forecasts, financial models and a fair value. We host regular Private Investor Forums at which investors have the opportunity to hear company directors present, and to ask questions. These are free to attend. We broadcast live Webinars with company management that include active Q&A. We also make the recordings available online. We arrange face to face meetings between private investors and company management. We are active users of Twitter, commenting daily on company news, share price moves, Directors’ Dealings, Equity Development Research Notes & Events.

Analysts
Paul Hill

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