Report
David O'Brien

On track for FY and quietly confident

Gattaca’s results for the six months to January were encouraging on several levels: productivity improved, costs fell, and the conversion ratio rose. The investment in strategic growth sectors was rewarded, with improving NFI within energy and infrastructure. Despite challenging markets, NFI declined just 3%, outperforming much of the staffing sector as the Group benefitted from the change in strategy and a 71% exposure to contract fees.

Growth in adj. EBIT and the conversion rate reflected a strong focus on costs, with headcount declining in low-double digits yoy and notwithstanding the investment in core growth areas. Sales now accounts for 71% of headcount, up from 69% a year ago. The medium-term target is a three-to-one ratio, favouring sales versus support staff. The lower cost base augurs well for the remainder of the year, with the guidance of adj. PBT of £3m unchanged for the full year.

In view of the continuation of the challenging staffing markets, with low candidate and client confidence, we have reduced next year’s growth expectations. Nevertheless, we still expect profitability to improve by a third on NFI rising 5%, emphasising the operationally geared model and a return of perm volumes at some point during FY26.

The lower FY26 estimates leads us to reduce our fair value/share estimation to 120p, still well above current levels. Gattaca continues to be backed by a robust balance sheet with cash equivalent to 52p/share, suggesting an unreasonably modest value and rating for the operating business.
Underlying
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.

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
David O'Brien

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