Strong cashflow coupled with solid top line growth

The UK recruitment industry is being buffeted by a number of macro crosswinds, but for the right skills, there is still robust demand. Particularly across Gattaca’s core verticals (65% of NFI) of Infrastructure (eg Lower Thames Barrier, HS2, etc), Defence, Energy (off shore wind & nuclear) and Mobility (aero, auto & marine).

Indeed, the company reiterated today that it was well on track to achieve its medium & long term goals after posting solid H1’23 LFL NFI growth of 5.1% to £22.7m (£21.6m LY). And encouragingly cashflow was strong too with statutory net funds climbing £8.7m to £21.0m (65p/share) as at the end of Jan’23 vs £12.3m in Jul’22 - reflecting lower debtor days and tight working capital management. 

Consequently, we think the turn-around plan is making real headway, despite being slightly slower out the blocks than we’d previously modelled due to the tougher macro environment.

Given the ‘blustery’ economic conditions, we’ve prudently trimmed our FY’23 and FY’24 PBT forecasts to £1.8m (£256k LY) and £4.25m respectively on NFI up 5.3% & 8.9%, alongside adjusting the valuation to 130p/share vs 160p before.