Decisive action being taken
As indicated at the August pre-close trading update, the Board are wasting no time to turnaround the less profitable and/or loss making parts of the group. First on the list are those activities/territories that possess insufficient critical mass, deteriorating fundamentals and/or unattractive cash generation.Consequently this morning the company announced it was exiting from its Contract Telecoms Infrastructure interests in Africa, Asia and Latin America as well as Dubai, Kuala Lumpur and Qatar. Furthermore, in line with the lower associated NFI (contributing c. £7m in FY18) GATC’s London and Bromley offices are to be consolidated into the London Cotton Centre site to trim central overheads.
We think today’s news makes perfect sense, since it not only provides a substantial working capital boost (c.£7m), but also reduces the effective tax rate from c.35% FY18 to c.25% thanks to the reduction in non-recoverable withholding tax. Which, on top of a better than expected July’18 closing net debt position of £41m (vs £46m before), means that £4m of positive cashflow is forecast to be generated in FY19 alone - despite absorbing £3m of one-off restructuring costs.
Elsewhere, we have reduced our FY19 NFI and adjusted PBT expectations by £7.5m to £72.1m and £1.7m to £10.9m respectively, but held diluted EPS broadly flat at 25.0p (vs 25.1p before). With our valuation nudging up slightly from 175p to 180p per share.
We look forward to hearing greater detail at the prelims on 8th November, along with an update on the new CEO appointment. In the meantime, we note that the shares are attractively priced - trading on FY19 multiples of 6.9x EV/EBIT and 5.7x PE vs sector averages of 9.6x and 12.1x
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.
Harvey Nash Group is involved in recruitment business. Co.'s portfolio of services, ranged from executive search and professional recruitment to offshore solutions. Co.'s portfolio of services comprised of: leadership services, which include Executive Search, Interim Management, and Leadership Consulting; professional recruitment, which include Technology and Specialist Recruitment, and Recruitment Solutions; and IT outsourcing & offshore services, which include Projects and Software Development Services and Business Process Services. Co.'s segments are: U.K. & Ireland; Mainland Europe; and Rest of World, all of which provides permanent recruitment, contracting and outsourcing.
RTC Group is a holding company. Through its subsidiaries, Co. is a recruitment business that focuses on white and blue-collar recruitment, providing temporary, permanent and contingent staff to a range of industries and clients in both domestic and international markets. Co.'s principal trading subsidiaries include: ATA Recruitment Limited, which supplies recruitment solutions to the engineering and technical sectors; Ganymede Solutions Limited, which is a provider of blue and white-collar skilled and semi-skilled labor, safety critical personnel and technical staff on call-off and temporary term contracts; and ATA Global Staffing Solutions Limited, which is a staffing solutions provider.
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.
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