Engineering a lasting turnaround
There are many challenges facing the UK economy, but a company that we think is ahead of the recovery curve is STEM recruiter Gattaca - having already ‘cut its cloth’ over the past 2 years. Plus, the UK job market still remains the tightest it’s been for years, with 1 vacancy for every unemployed person – particularly across their sweet spot of ‘difficult-to-find’ engineers and technologists, where widespread shortages exist.At today’s FY’22 results, the group posted in-line numbers, with adjusted PBT coming in at £0.3m on NFI up +5% to £44.1m. It also added that “demand is robust” which - alongside further self-help measures, favourable mix & an industry shift towards using more contractors vs permanent placements (re austerity) - is expected to lift FY’23 underlying PBT to £2.5m with profits being H2 weighted. The dividend has been prudently suspended, whilst the balance sheet remains rock solid, sporting net funds of £16m (or 49p/share) as at Jul’22, after generating strong H2’22 cashflow.
It was tempting to upgrade our modest FY23 forecasts & 160p/share fair value, but we prefer to conservatively retain both pending December’s AGM trading update. Nonetheless, we note the stock at 80p trades below NTAV (86.5p/share) and on a 0.4x EV/NFI multiple vs peers at >1.0x
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.
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