In a trading update for the year to 31 July 2021, Gattaca (GATC ) told its shareholders that it expects continuing underlying profit and adjusted net cash to surpass market expectations for FY21.
As a result of its trading and assuming the current positive trend continues, Gattaca said it expects to recommend a modest dividend when its FY21 are announced later this year.
The UK-based engineering and technology staffing firm said continuing net fee income in 2H21 ("NFI") was 7% higher than in 1H21, with the full year NFI at £42.5m (FY20: £52.8m), which it said reflects the market impact of the pandemic over the reporting period.
Gattaca continues to add sales and delivery resources across the business, increasing front line headcount by 13% since January ‘whilst tightly managing the overall cost base,’ it said.
Consequently, subject to final adjustments and audit, the Company said it expects its continuing underlying PBT for FY21 to be in excess of £3m (market consensus £2.7m).
Meanwhile, adjusted net cash (excluding IFRS16 lease liabilities) is expected to be £20m (31 July 2020: £27m) which it said is largely driven by the repayment of £4.7m in deferred VAT.
In 4Q21, Gattaca ‘successfully transferred’ its businesses to a global technology platform, enabling it to have a consistent view of activity and performance across all operating units.
In particular, the Company told investors that it has seen increased activity from its "RPO" (Permanent Recruitment Process Outsourcing solutions) clients as the market recovery has been led by permanent recruitment both in contingent and solutions products.
Shares in Gattaca have seen a more than three-fold increase since the beginning of 2021. The stock was trading 4.86% lower during late morning trading at 235p following the news.
Gattaca told investors that it believes there is ‘further improvement to come on the contract front’ including in its core infrastructure unit, which it said will benefit from strong demand driven by major initiatives such as UK Fibre investment, HS2 and Offshore 2025.
The Group said its defence business ‘continues to perform strongly’ and that it anticipates further high demand for technology skills as the pace of digitisation continues to accelerate.
‘Our sales operations in Mexico and South Africa are sub-scale and we exited both at the end of July and these businesses will be treated as discontinued in our FY 2021 results,’ it added.
CEO of Gattaca, Kevin Freeguard, said: "Following our upgrade in May, I am pleased that our profit results will again be ahead of expectations. Whilst the pandemic continues to impact activity across our markets, it is clear that we have now entered the next phase of recovery.”
He added, “Our new global technology platform will increase our ability to collaborate and drive performance across the business. At the same time, our continued investment in sales and delivery resources will enable us to capitalise on the continuing opportunities as our markets, including Infrastructure and Defence, emerge from the pandemic."
In a research note published today, analysts at Equity Development said, “We think the group is in fine fettle and fully primed for the next stage in the economic recovery, emerging from the pandemic with a much leaner cost base after significant corporate ‘pruning’”
“The total £20m reported net cash balance provides ample room to pay a “modest” dividend. At this stage, we have conservatively held our FY22 forecasts, but nudged up our fair value to 285p/share from 280p thanks to the favourable outlook & July cash out-turn.”
The Group said it expects to announce its FY21 results on Thursday 4 November 2021.
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