Two of the most important qualities of any corporate are resilience & adaptability. Being able to rapidly respond to tougher macro-economic conditions in real time without damaging long term objectives: and Gattaca, a specialist STEM recruiter, fits the bill.
Yesterday it reported encouraging progress, despite experiencing a -1.2% (H1 +5.2% vs H2 -7.4%) fall in FY’23 NFI to £43.6m (£44.1m LY) due to the industry’s well publicised slowdown & the conscious unwind from low margin business. Adjusted PBT nonetheless came in 38% above our £1.8m target at £2.5m (H2 £1.6m & H1 £0.9m), reflecting tight cost control, interest income and a rephasing of planned headcount additions.
Furthermore, the exit from lower margin work alongside improved debt collection reduced working capital and helped push July yearend statutory net cash (ex IFRS16 leases) to £23m (or 72p/share) vs £12m LY. Not only improving ROCE, but also enabling management to reinstate the dividend (2.5p), announce a further £0.5m of buybacks and pay a special 2.5p/share distribution.
We now anticipate adjusted PBT to climb to £2.8m and £4.7m respectively between FY24-25, on LFL NFI up to £45.6m (+4.7%) and £49.1m (+7.6%), as new sales staff (+30) are added & become increasingly more productive. Improving margins boost our FY’24 adjusted EPS to 6.6p, putting the shares on an attractive forward EV/EBIT multiple of 5.4x, whilst paying a 3.2% yield (re 2x cover).
Our revised conservative valuation is 125p/share vs 130p previously.
