Ticker: GATC Exchange: AIM

Gattaca, formerly listed as Matchtech Group, has over 30 years' experience providing niche recruitment services to the engineering, technology, professional staffing and the employability & skills markets.  The Group is recognised as the UK's leading specialist recruitment agency providing contract, professional contract and permanent staff.

Sailing masterclass amid stormy seas

The company has posted better than expected FY20 results, with net cash closing July at a robust £27.3m (pre IFRS16 lease liabilities & including the benefit of £13.8m non-recourse off balance sheet financing) compared to -£24.8m LY (ED Est £20m). Driven by £10.3m of deferred VAT payments (payable Apr’22), improved contractor terms (£8.5m - permanent), a working capital unwind (£16.3m) & lower debtor days (41 vs 45 LY).

This leaves the business ‘covenant free’ & ideally placed to increase profits as the recovery gains traction. With a high proportion of incremental NFI falling straight to the bottom line, due to continued tight cost control (£4m annualised savings), more efficient processes (Improvement Plan) and positive operating leverage.

FY20 NFI & adjusted PBT both declined -21.4% and -60.7% respectively to £54.3m (£69.1m LY) and £4.6m (£11.6m). Reflecting uncertainties created by the General Election, Brexit, proposed new IRS35 rules and latterly the pandemic (including a prudent £2.3m bad debt provision). Partly offset by a 13% contraction in overheads, thanks to restructuring (£1.7m), lower headcount (665 vs 739), furlough assistance (£1.5m) and a temporary group-wide 20% salary cut (£1.1m).

We have held our FY21 numbers - corresponding to trough adjusted EBIT and EPS estimates of £1.25m and 1.1p. With most of the heavy lifting already completed, and assuming things go to plan, we raise our valuation from 130p to 140p/share.


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