REG - Gattaca PLC - Interim Results
31/03/2022 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220331:nRSe6764Ga&default-theme=true
RNS Number : 6764G Gattaca PLC 31 March 2022
31 March 2022
Gattaca plc
("Gattaca" or "the Group")
Interim Results for the six months ended 31 January 2022
Evolution of strategy
Gattaca plc ("Gattaca" or the "Group"), the specialist Engineering and
Technology staffing solutions business, today announces its financial results
for the six months ended 31 January 2022.
Financial Highlights
2022 H1 2021 H1 (restated)(1)
Continuing reported Continuing underlying(3) Continuing reported Continuing underlying Continuing reported Continuing underlying
£m £m £m £m % %
Revenue 202.2 202.2 204.8 204.8 -1% -1%
Net Fee Income (NFI)(2) 21.6 21.6 20.5 20.5 5% 5%
EBITDA (1.2) 0.9 1.4 1.4 n/a -36%
Loss before tax (2.5) (0.3) (0.3) (0.0) n/a n/a
Loss after tax (2.4) (0.2) (0.2) 0.0 n/a n/a
Discontinued operations (0.6) n/a (0.2) n/a n/a n/a
Reported loss after tax (3.1) n/a (0.4) n/a n/a n/a
Basic earnings per share (7.5) (0.8) (0.7) 0.0
Diluted earnings per share (7.5) (0.8) (0.7) 0.0
Interim dividend 0p n/a 0p n/a
Adjusted net cash at end of period(4) £4.8m n/a £22.7m n/a
Net (debt) / cash £(0.1)m n/a £15.8m n/a
Highlights
● Group continuing underlying NFI of £21.6 million, up 5% year-on-year
ₒ UK NFI up 9% at £20.3 million (2021 H1: £18.6 million)
ₒ International NFI down 30%, driven by a decline in international contract NFI.
Most International regions are now predominantly focused on the permanent
market
ₒ Permanent NFI up 41% year-on-year, now representing 30% of group NFI (2021 H1:
23%)
● Investment in sales headcount continued, up 12% versus 31 July 2021
● Group adjusted net cash (exc IFRS 16 lease liabilities) of £4.8 million
(31 July 2021: £19.9 million), in the period the Group repaid the final
balance of £5.6m of deferred VAT. The Group is covenant free.
● No interim dividend (2021 H1: nil pence). The Board remains committed to
paying dividends when the Group returns to sustainable levels of
profitability.
● Post period-end, Gattaca confirmed its Board succession plan
ₒ Kevin Freeguard, Chief Executive Officer, and Salar Farzad, Chief Financial
Officer, to step down from the Board at the end of March 2022
ₒ Matt Wragg appointed to succeed Kevin as Chief Executive Officer
ₒ Oliver Whittaker appointed to succeed Salar as Chief Financial Officer
Four priorities for new leadership
● Increase external focus
● Culture
● Operational performance
● Continued cost focus
Outlook
We are seeing encouraging trends across many of our sectors and believe we are
positioned to capture the opportunities that these trends provide. The Group
has now established its operating model, fully integrated a new global
technology platform, and strategically invested in its sales headcount. With
these critical internal components now complete, Gattaca has the right
infrastructure and capabilities to capture the opportunities presented across
our markets.
Gattaca's challenge now is to capitalise on the actions already taken and to
take the necessary steps to position the Group for growth in the medium to
long term. We expect continuing underlying profit before tax for its financial
year ending 31 July 2022 to be around breakeven as announced in January 2022.
Looking to 2023 and beyond, although the trajectory of the business has been
slower than previously anticipated we expect to see the benefits of our
investment in headcount and the technology platform begin to come through,
delivering a return to profitable and sustainable long-term growth. This will
continue to be supported by strong market demand for STEM talent, which we
believe will remain scarce and in high demand.
Commenting on the results, Patrick Shanley, Chairman said:
"The first half of FY 2022 has been a period of mixed performance for Gattaca.
We see encouraging trends and positive signs of growth across a number of our
core markets however, our contract business has taken longer to recover than
expected which is impacting the Group's performance.
To ensure we successfully capture the robust demand for STEM skills across our
markets, we plan to significantly increase our external focus, particularly
client acquisition and expansion, and leverage our new operating model and
technology platform to increase efficiency and performance output.
Finally, on behalf of the entire Board, I would like to take the opportunity
to thank Kevin and Salar for their contribution over the last 4/5 years and
welcome Matt and Oliver who, following careful succession planning, are
well-prepared to lead us forward."
Kevin Freeguard, Chief Executive Officer said:
"Following the significant improvement in capability made over the last
several years Gattaca is well positioned to take full advantage of the strong
demand for STEM talent. I am delighted that we have developed our internal
talent such that the Board has been able to appoint internal candidates to
succeed both myself and Salar. I wish the Gattaca team every success for the
future"
Matthew Wragg, incoming Chief Executive Officer said:
"Kevin and Salar have led us through some challenging times while
significantly reducing the Group's net debt, establishing our new operating
model, and overhauling our technology platforms. Thanks to their contribution,
we are now in a stronger position to focus our energy once again on our STEM
talent markets helping our customers with their talent challenges during a
period of particularly high demand. It is against this backdrop that I am
optimistic for the future of the Group and excited for everyone in the team."
The information contained within this announcement is deemed by the Group to
constitute inside information as stipulated
under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of
this announcement via a Regulatory Information Service, this inside
information is now considered to be in the public domain.
The following footnotes apply, unless where otherwise indicated, throughout
these Interim Results:
1. Results are restated following the April 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting in
previously capitalised software assets being expensed, and the results for the
6 months to January 2021 have been restated for the presentation of
discontinued operations
2. NFI is calculated as revenue less contractor payroll costs
3. Continuing underlying results exclude the NFI and (losses) before taxation
of discontinued businesses predominantly being operations in Mexico and South
Africa (2022 H1: £(0.7)m, 2021 H1 : £(0.2)m), non-underlying items within
administrative expenses in 2021 primarily related to reversal of restructuring
costs provided for in prior year (2022 H1: £0.1m, 2021 H1 : £(0.2)m),
amortisation of acquired intangibles (2022 H1: £0.2m, 2021 H1 : £0.2m),
impairment of acquired intangibles (2022 H1: £2.0m, 2021 H1 : £0.0m), and
exchange (losses) / gains from revaluation of foreign assets and liabilities
(2022 H1: £0.1m, 2021 H1 : £(0.2)m).
4. Adjusted net cash is calculated as net cash excluding lease liabilities,
less any capitalised finance costs.
For further information please contact:
Gattaca plc +44 (0) 1489 898989
Matthew Wragg, Chief Executive Officer designate
Oliver Whittaker, Chief Financial Officer designate
Liberum Capital Limited (Nomad and Broker) +44 (0) 20 3100 2000
Lauren Kettle
Robert Morton
Citigate Dewe Rogerson +44 (0) 20 7638 9571
Jos Bieneman
Lucy Eyles
Operational Review
The Group's trading performance in the first half of 2022 saw the Group
maintain year on year NFI growth of 5%, with the UK operations achieving
growth of 9%, driven by strong performance in the permanent recruitment
market. Group adjusted underlying loss before tax was £0.3 million, driven by
our mix of net fee income growth offset by our ongoing investment in sales and
fulfilment headcount, which will mature into 2023 and beyond.
During H1 several key priority initiatives were progressed across the Group.
Gattaca's new global technology platform is now integrated across the whole
Group and we are starting to the realise benefits of this single platform and
the opportunities that it presents. Furthermore we integrated a market leading
AI sourcing technology into our platform, enabling improved candidate
attraction and engagement. We also now have a comprehensive data and MI
platform working across the Group.
During the period, we continued to invest in our sales and fulfilment teams.
Headcount increased by 12% in sales and 29% in fulfilment between July 2021
and January 2022, and Gattaca has provided L&D investment to embed them
into the Group.
Gattaca revisited its product offering, with a particular focus on permanent
packages of work to align with current market trends and conditions.
In H1 2022 we launched the Group's refreshed Purpose, Vision, Mission and
Values to all of our staff, and have been focused on ensuring that these
values are part of our practices and processes to ensure they become truly
embedded in the organisation.
Also in the period, Gattaca established and communicated its ESG ambitions,
demonstrating the Group's commitment to sustainability. These ambitions are:
● Achieve net zero emissions by 2030
● Ensure an equal gender balance in our management positions by August 2026
● To be in the top quartile for our employee engagement score by 2026
● To positively impact 100,000 lives by 2025
Four priorities for new leadership
The new leadership team has identified four priority areas to ensure the
continued evolution of the Group's strategy. While there has undoubtedly been
important recent progress, Gattaca's challenge now is to capitalise on the
actions already taken and to take the necessary steps to position the Group
for growth in the medium to long term.
There is a real opportunity to build on Gattaca's many great strengths, the
focus on in demand STEM skills; its core strength in robust sectors; blue chip
and long-standing client base; and the strength of the balance sheet.
The priorities are:
● Increase external focus
ₒ Leverage externally focused CEO; previously Chief Customer Officer
ₒ Simplify the sales process
ₒ Invest in marketing to demonstrate key STEM skills messaging
Increase client acquisition and investment in client development
● Culture
ₒ Bring through our next generation of leadership
ₒ Increase localised accountability
ₒ Embed purpose, vision, mission and values across the business
Increase staff engagement and participation
● Operational performance
ₒ Realise operating model productivity
ₒ Increase efficiency and performance output
ₒ Leverage investment in technology to improve candidate attraction, conversion
and client experience
● Continued cost focus
ₒ Rebalance the cost base: delayering infrastructure, estate, and other
third-party costs
ₒ Improve staff retention via culture, talent acquisition, learning &
development, performance management and leadership
ₒ Technology leveraged to automate process and enhance service
Operational review by sector
Net Fee Income (NFI) £m 2022 H1 2021 H1 (restated)(1) Change
Infrastructure 6.7 6.9 -2%
Defence 3.2 2.9 10%
Mobility 2.2 1.4 63%
Technology, Media & Telecoms 2.2 1.9 18%
Energy 1.8 2.1 -15%
Other 4.1 3.5 18%
Total UK 20.3 18.6 9%
International 1.3 1.9 -30%
Continuing Total Group NFI 21.6 20.5 5%
Infrastructure
Infrastructure NFI was down 2% year on year, partly impacted by accounting
related to the bankruptcy of one of our clients, NMCN, and the loss of two
significant clients. The Infrastructure market for permanent recruitment is
particularly strong, and we are building our teams in this area to capitalise
on this opportunity.
UK Infrastructure demand has recovered to pre-Covid levels with a shortage of
skilled labour and increased requirement for international attraction.
The AMP and CP6 investment cycles in water and rail have now moved into the
build and construction phases. Furthermore, nationwide investment in fibre and
EV is driving significant demand for skilled blue-collar workers in the
utilities market.
Defence
Defence was up 10% year-on-year, due to strong demand for Technology skills
and a strong Defence market including a well performing large RPO deal.
While this sector tends to remain stable irrespective of short-term economic
fluctuations, demand for labour in the Defence sector has increased 17.5%.
Permanent recruitment has seen largest demand, with some reduction of overall
contractor workforce post IR35 and Covid. Investment in the defence sector in
both the UK and US markets, creates an ongoing sustainable scale opportunity.
Gattaca is currently working with 68% of the Ministry of Defense Top 100
suppliers, and is well placed to service both Technology and Engineering
staffing requirements, with an opportunity for growth in Manufacturing and IT.
Mobility
Strong growth in Mobility NFI, of 63% year-on-year, was achieved off a
relatively small base following significant market impact during the pandemic
period. In Q4 2022, a significant contract is due to expire which will impact
2023.
The Mobility market is attractive as industry rebuilds, with permanent
recruitment demand outstripping contract, as businesses rehire having
downsized during the pandemic and the associated market downturn. Mobility
market supply chains have been impacted by the pandemic, semi-conductor
shortages and now the conflict in Ukraine. The supply of technician skills
remains tight, and we see investment in new technology driving high demand
especially across EV and battery development
Technology, Media & Telecoms (TMT)
TMT has seen a strong return to growth in H1 2022 with NFI up 18%
year-on-year. This has been driven by increased headcount and strong demand
for technology skills.
Recruitment demand is robust with all sectors investing in technology
skills. These skillsets typically have lower barriers associated with fixed
geographical location, offering the option of remote working. There is a
strong demand for permanent hires and, notably, we increasingly see clients
buying "packages" of hires (versus one-off hires), which provide more
scalable opportunities. Demand for contract recruitment lags permanent
hiring, but it is climbing as the 'great resignation' slows. Skills
associated with the development of cloud and security, infrastructure, data,
and enterprise resource planning are particularly in-demand. The market is
candidate-driven, resulting in average salaries increasing and clients
increasingly offering fully remote working.
Energy
Energy NFI was down 15% year on year, primarily driven by the loss of a
significant client and reduced focus on high cost to serve international
markets. Project related and seasonal demand is creating solid market
opportunity for contract recruitment.
Investment is increasing across all sectors within Energy. Gattaca well
positioned to capture market opportunities in nuclear, transmission and
distribution, renewables and oil and gas markets. In particular, demand is
focused around skills in project management, controls and design engineers
driven by the investment in programmes.
UK Other
NFI was up 18% year-on-year driven by strong performance from Gattaca
Projects, our statement of work brand and Barclay Meade, our professional
services brand.
The Projects business has continued to grow in 2022 with a wider client base
that has benefited from our experience in project management and in-depth
technical expertise.
Demand for professional skill sets across accounting and finance, procurement,
HR and sales has been particularly strong in the permanent recruitment market
and our professional services brand has successfully captialised on this
market opportunity. We continue to see high levels of demand resulting in
salary and rate increases.
International
International NFI was down 30% year on year, as we have repositioned our North
American business away from Telco contract recruitment and towards Engineering
and Technology contingent and RPO permanent opportunities which are trending
positively.
In North America and Europe hiring demand is tracking similar to UK, with our
regions predominantly focused on the permanent recruitment market in three of
our eight sectors. Within North America and Europe we have an opportunity for
expansion leveraging a stabilised and maturing operating model.
Group contractor and permanent fee mix
Contract fees accounted for 70% of continuing underlying NFI in H1 2022 (2021
H1 restated: 77%). During the period, the contract base was relatively flat
with approximately 5,100 contractors.
Permanent fees accounted for 30% of continuing underlying NFI in H1 2022 (2021
H1 restated: 23%). There was increased demand for permanent hires in our
contingent and solutions business across almost all our market sectors. Our
professional services brands, Alderwood and Barclay Meade, saw particularly
high demand during the period as their market recovered strongly.
People
Gattaca's full time equivalent headcount at 31 January 2022 was 540, an
increase of 103, or 24%, from 31 January 2021. This increase was primarily due
to growth in sales headcount where we added 85 new heads. The ratio of sales
to support staff was 73:27, compared to a ratio of 71:29 at 31 January 2021.
Financial Overview
Revenue for the period was £202.2 million (2021 H1: £204.8 million), down 1%
year-on-year on a continuing basis.
NFI of £21.6 million represented a 5% year-on-year increase on a continuing
basis. The Contract NFI margin of 7.8% (2021 H1 restated: 8.0%) was down 0.2
percentage points compared with the prior year.
Continuing underlying loss before tax for the period amounted to £0.3 million
(2021 H1 restated: loss before tax £(0.0) million). On a continuing
underlying basis, the effective tax rate was 5% (2021 H1 restated: 100%). The
Group's continuing underlying effective tax rate reported at 31 July 2021 was
7%.
Basic underlying earnings per share from continuing operations were (0.8)pence
(2021 H1 restated: 0.0pence) and adjusted underlying diluted earnings per
share from continuing operations were (0.8)pence (2021 H1 restated: 0.0pence).
Administrative costs
Underlying administrative costs of £21.7 million (2021 H1 restated: £20.2
million) increased by 7.4% on the prior year period, as we invested in our
staff base through additional headcount and reward. During the period, we
received no payments from the UK Government Job Retention Scheme, having ended
the Group's participation in the UK Government Job Retention Scheme in October
2020.
A breakdown of the increase in administrative costs is shown below:
£m
H1 2021 continuing underlying administrative costs restated(1) 20.2
UK Sales staff investment 0.9
Commission, bonus & incentives 0.7
UK Group Support 0.2
Contractor cost write offs associated with client bad debt 0.3
Legal and professional fees (0.2)
Reduction in bad debt charges (0.3)
Reduction in software cost (0.3)
Other admin costs 0.2
H1 2022 continuing underlying administrative costs 21.7
Non-underlying costs and discontinued operations
The continuing non-underlying costs in H1 2022 of £2.3 million (2021 H1
restated: costs of £0.3 million), relates predominantly to the impairment of
goodwill held in relating to the 'Infrastructure - RSL Rail' CGU.
Non-underlying costs in the comparative period primarily related to
unfavourable foreign exchange movements.
In the 2021 full year accounts, Mexican and South African operations were
classified as discontinued. Loss before tax in H1 2022 for all discontinued
operations was £0.7 million (2021 H1 restated: loss £0.2 million).
Financing costs
Net financing costs of £0.1 million (2021 H1: £0.6 million) were £0.5
million lower due to a decrease in interest payable and a £0.2
million decrease in foreign exchange impacts on translation of foreign
currency balances within local entities (treated as non-underlying) compared
to prior year.
Bank interest payable was £0.3 million lower than the comparative period,
predominantly due to prior year capitalised borrowing costs being written off
on the repayment of the revolving credit facility in October 2020.
Debtors, cash flow, net debt and financing
Net (debt) / cash at 31 January 2022 was £(0.1) million (31 July 2021: £14.1
million; 31 January 2021: £15.8 million), while adjusted net cash (net cash
excluding IFRS 16 lease liabilities) was £4.8 million (31 July 2021: £19.9
million; 31 January 2021: £22.7 million) at the period end. The Group has now
repaid all deferred VAT to HMRC.
The Group's trade and other receivables balance was £63.7m at 31 January 2022
(31 July 2021: £64.1m), of which debtor and accrued income balances were
£59.7 million, a £1.2 million reduction over the 6 month period from 31 July
2021. The Group's days sales outstanding ('DSO') over this period (on a weekly
based countback method) increased by 11 days from 52 to 63 days. Approximately
5 days of this increase is attributable to payment process difficulties with
one client which is expected to be resolved in the near future. Whilst DSO
position at 31 July 21 is considered to have been near optimal levels, there
is room for improvement on the current DSO, and we remain focused on improving
our time to bill and time to collect.
Capital expenditure in the period amounted to £0.1 million (2021 H1 restated:
£0.3 million). Following the publication of the IFRS Interpretations
Committee's ('IFRIC') final agenda decision on accounting for configuration
and customisation costs in a SaaS arrangement, including for cloud-based
arrangements, the Group has updated its accounting policy. This change in
accounting policy has been applied to all relevant capitalised intangible
asset costs held on the balance sheet, see note 1.24 in the accompanying
interim financial statements.
As at 31 January 2022, the Group had a working capital facility of £75
million. This facility includes both recourse and non-recourse elements. Under
the terms of the non-recourse facility, the trade receivables are assigned to,
and owned by, HSBC and so have been derecognised from the Group's statement of
financial position. In addition, the non-recourse working capital facility
does not meet the definition of loans and borrowings under IFRS. The
utilisation of this facility at 31 January 2022 was £8.9 million recourse and
£10.4 million non-recourse.
Dividend
The Board is mindful of the importance of dividends to shareholders. A
dividend of 1.5 pence per share was paid in the period in relation to the 2021
financial year. The Board has not proposed an interim dividend for 2022. The
Board remains committed to paying dividends when the Group returns to
sustainable levels of profitability.
Risks
The Board considers strategic, financial and operational risks and identifies
actions to mitigate those risks. Key risks and their mitigations were
disclosed on pages 45 to 53 of the Annual Report for the year ended 31 July
2021.
We continue to manage a number of potential risks and uncertainties including
contingent liabilities as noted in the interim accounts - many of which are
common to other similar businesses - which could have a material impact on our
longer-term performance.
Outlook
We are seeing encouraging trends across many of our sectors and believe we are
positioned to capture the opportunities that these trends provide. The Group
has now established its operating model, fully integrated a new global
technology platform, and strategically invested in its sales headcount. With
these critical internal components now complete, Gattaca has the right
infrastructure and capabilities to capture the opportunities presented across
our markets.
Gattaca's challenge now is to capitalise on the actions already taken and to
take the necessary steps to position the Group for growth in the medium to
long term. We expect continuing underlying profit before tax for its financial
year ending 31 July 2022 to be around breakeven as announced in January 2022.
Looking to 2023 and beyond, although the trajectory of the business has been
slower than previously anticipated we expect to see the benefits of our
investment in headcount and the technology platform begin to come through,
delivering a return to profitable and sustainable long-term growth. This will
continue to be supported by strong market demand for STEM talent, which we
believe will remain scarce and in high demand.
Condensed Consolidated Income Statement
For the period ended 31 January 2022
6 months to 31/01/22 Restated 6 months ⁽¹⁾ ⁽²⁾ Restated 12 months to 31/07/21 ⁽¹⁾
unaudited to 31/01/21
unaudited
Note £'000 £'000 £'000
Continuing operations
Revenue 2 202,199 204,799 415,726
Cost of sales (180,593) (184,277) (373,646)
Gross profit 2 21,606 20,522 42,080
Administrative expenses ⁽³⁾ (24,068) (20,223) (40,188)
(Loss)/profit from continuing operations 2 (2,462) 299 1,892
Finance income 73 24 56
Finance cost (153) (633) (1,136)
(Loss)/profit before taxation (2,542) (310) 812
Taxation 5 120 93 (41)
(Loss)/profit after taxation from continuing operations (2,422) (217) 771
Discontinued operations
Loss for the period from discontinued operations (attributable to equity 12 (643) (194) (1,208)
holders of the Company)
Loss for the period (3,065) (411) (437)
⁽¹⁾ Results are restated following the April 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting in
previously capitalised software assets being expensed, as explained further in
Note 1.24.
((2)) Results for the 6 months to January 2021 have been restated for the
presentation of discontinued operations as explained in Note 12.
((3)) Administrative expenses from continuing operations includes net
impairment losses on trade receivables and accrued income of £172,000 (6
months to 31 January 2021 restated: losses of £477,000 and 12 months to 31
July 2021: losses of £420,000).
Loss for the period for 31 January 2022, 31 January 2021 and the year to 31
July 2021 are wholly attributable to equity holders of the Parent.
6 months Restated Restated
to 31/01/22 6 months ⁽¹⁾ ⁽²⁾ 12 months ⁽¹⁾
unaudited to 31/01/21 to 31/07/21
unaudited
Earnings per ordinary share Note pence pence pence
Basic earnings per share 6 (9.5) (1.3) (1.4)
Diluted earnings per share 6 (9.5) (1.3) (1.4)
Reconciliation to adjusted profit measures
Underlying profit is the Group's key adjusted profit measure; profit from
continuing operations is adjusted to exclude non-underlying income and
expenditure as defined in the Group's accounting policy, amortisation and
impairment of goodwill and acquired intangibles, impairment of leased
right-of-use assets and net foreign exchange gains or losses.
6 months Restated Restated
to 31/01/22 6 months ⁽¹⁾ ⁽²⁾ 12 months ⁽¹⁾
unaudited to 31/01/21 to 31/07/21
unaudited
£'000 £'000 £'000
(Loss)/profit from continuing operations (2,462) 299 1,892
Add
Depreciation of property, plant and equipment, depreciation of leased 995 1,089 2,185
right-of-use assets and amortisation of software and software licences
Non-underlying items included within administrative expenses 90 (197) (193)
Amortisation and impairment of goodwill and acquired intangibles and 2,264 193 548
impairment of leased right-of-use assets
Underlying EBITDA 887 1,384 4,432
Less
Depreciation and impairment of property, plant and equipment, leased (995) (1,089) (2,185)
right-of-use assets and amortisation of software and software licenses
Net finance costs excluding foreign exchange gains and losses (153) (335) (412)
Underlying (loss)/profit before taxation (261) (40) 1,835
Underlying taxation 14 40 (132)
Underlying (loss)/profit after taxation from continuing operations (247) - 1,703
⁽¹⁾ Results are restated following the April 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting in
previously capitalised software assets being expensed, as explained further in
Note 1.24.
((2)) Results for the 6 months to January 2021 have been restated for the
presentation of discontinued operations as explained in Note 12.
Condensed Consolidated Statement of Comprehensive Income
For the period ended 31 January 2022
6 months Restated Restated
to 31/01/22 6 months ⁽¹⁾ ⁽²⁾ 12 months ⁽¹⁾
unaudited to 31/01/21 to 31/07/21
unaudited
£'000 £'000 £'000
Loss for the period (3,065) (411) (437)
Other comprehensive (loss)/income
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations (85) 12 281
Other comprehensive (loss)/income for the period (85) 12 281
Total comprehensive loss for the period attributable to equity holders of the (3,150) (399) (156)
parent
6 months Restated Restated
to 31/01/22 6 months ⁽¹⁾ ⁽²⁾ 12 months ⁽¹⁾
unaudited to 31/01/21 to 31/07/21
unaudited
£'000 £'000 £'000
Attributable to:
Continuing operations (3,254) (253) 1,004
Discontinued operations 104 (146) (1,160)
(3,150) (399) (156)
⁽¹⁾ Results are restated following the April 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting in
previously capitalised software assets being expensed, as explained further in
Note 1.24.
((2)) Results for the 6 months to January 2021 have been restated for the
presentation of discontinued operations as explained in Note 12.
Condensed Consolidated Statement of Changes in Equity
For the period ended 31 January 2022
Share capital Share premium Merger reserve Share-based payment reserve Translation reserve Treasury shares reserve Retained earnings ⁽¹⁾ ⁽²⁾ Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Total equity at 1 August 2020 as reported 323 8,706 28,750 526 (147) (97) 1,711 39,772
Adjustments due to change of accounting policy, net of tax - - - - - - (4,738) (4,738)
Restated total equity at 1 August 2020 323 8,706 28,750 526 (147) (97) (3,027) 35,034
Loss for the period - - - - - - (411) (411)
Other comprehensive income - - - - 12 - - 12
Total comprehensive loss - - - - 12 - (411) (399)
Deferred tax movement in respect of share options - - - - - - - -
Share-based payments charge - - - 28 - - - 28
Share-based payments reserve transfer - - - (71) - - 71 -
Issue of treasury shares to employees - - - - - 17 - 17
Transactions with owners - - - (43) - 17 71 45
Restated total equity at 31 January 2021 323 8,706 28,750 483 (135) (80) (3,367) 34,680
Total equity at 1 August 2020 as reported 323 8,706 28,750 526 (147) (97) 1,711 39,772
Adjustments due to change of accounting policy, net of tax - - - - - - (4,738) (4,738)
Restated total equity at 1 August 2020 323 8,706 28,750 526 (147) (97) (3,027) 35,034
Loss for the period - - - - - - (437) (437)
Other comprehensive income - - - - 281 - - 281
Total comprehensive loss - - - - 281 - (437) (156)
Deferred tax movement in respect of share options - - - - - - 65 65
Share-based payments charge - - - 104 - - - 104
Share-based payments reserve transfer - - - (176) - - 176 -
Issue of treasury shares to employees - - - - - 60 - 60
Transactions with owners - - - (72) - 60 241 229
Restated total equity at 31 July 2021 323 8,706 28,750 454 134 (37) (3,223) 35,107
Restated total equity at 1 August 2021 323 8,706 28,750 454 134 (37) (3,223) 35,107
Loss for the period - - - - - - (3,065) (3,065)
Other comprehensive loss - - - - (85) - - (85)
Total comprehensive loss - - - - (85) - (3,065) (3,150)
Dividend paid in the year - - - - - - (484) (484)
Deferred tax movement in respect of share options - - - - - - (66) (66)
Share-based payments charge - - - 13 - - - 13
Share-based payments reserve transfer - - - (78) - - 78 -
Translation reserves movements due to disposal of foreign operations - - - - 881 - (881) -
Purchase of treasury shares - - - - - (68) - (68)
Transactions with owners - - - (65) 881 (68) (1,353) (605)
Total equity at 31 January 2022 323 8,706 28,750 389 930 (105) (7,641) 31,352
⁽¹⁾ Results are restated following the April 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting in
previously capitalised software assets being expensed, as explained further in
Note 1.24.
((2)) Results for the 6 months to January 2021 have been restated for the
presentation of discontinued operations as explained in Note 12.
Condensed Consolidated Statement of Financial Position
As at 31 January 2022
⁽¹⁾ ⁽²⁾ ⁽¹⁾
21 21
6 months Restated Restated
to 31/01/22 6 months ⁽¹⁾ 12 months ⁽¹⁾
unaudited to 31/01/21 to 31/07/21
unaudited
Note £'000 £'000 £'000
Non-current assets
Goodwill and intangible assets 7 3,980 6,984 6,343
Property, plant and equipment 1,465 1,332 1,578
Right-of-use assets 10 5,069 6,683 5,674
Investments - 19 -
Deferred tax assets 470 1,107 971
Total non-current assets 10,984 16,125 14,566
Current assets
Trade and other receivables (As at 31 January 2022: £134,000 is falling due 8 63,652 45,605 64,135
after one year, £nil for 31 January 2021 and 31 July 2021)
Corporation tax receivables 1,226 64 818
Cash and cash equivalents 13 13,731 27,082 29,238
Assets classified as held-for-sale - - 346
Total current assets 78,609 72,751 94,537
Total assets 89,593 88,876 109,103
Non-current liabilities
Deferred tax liabilities (21) (30) (14)
Provisions (1,248) (1,522) (1,269)
Lease liabilities 10 (3,421) (5,056) (4,281)
Total non-current liabilities (4,690) (6,608) (5,564)
Current liabilities
Trade and other payables (42,115) (40,136) (56,121)
Provisions (900) (751) (464)
Current tax liabilities (169) (454) (796)
Lease liabilities 10 (1,477) (1,909) (1,480)
Bank loans and borrowings 9 (8,890) (4,338) (9,348)
Liabilities directly associated with assets classified as held-for-sale - - (223)
Total current liabilities (53,551) (47,588) (68,432)
Total liabilities (58,241) (54,196) (73,996)
Net assets 31,352 34,680 35,107
Equity
Share capital 11 323 323 323
Share premium 8,706 8,706 8,706
Merger reserve 28,750 28,750 28,750
Share-based payment reserve 389 483 454
Translation reserve 930 (135) 134
Treasury shares reserve (105) (80) (37)
Retained earnings (7,641) (3,367) (3,223)
Total equity 31,352 34,680 35,107
The accompanying notes are an integral part of these interim Financial
Statements.
⁽¹⁾ Results are restated following the April 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting in
previously capitalised software assets being expensed, as explained further in
Note 1.24.
Condensed Consolidated Cash Flow Statement
For the period ended 31 January 2022
6 months Restated Restated
to 31/01/22 6 months ⁽¹⁾ ⁽²⁾ 12 months ⁽¹⁾
unaudited to 31/01/21 to 31/07/21
unaudited
6 months Restated Restated
to 31/01/22 6 months ⁽¹⁾ ⁽²⁾ 12 months ⁽¹⁾
unaudited to 31/01/21 to 31/07/21
unaudited
Total Total Total
£'000 £'000 £'000
Cash flows from operating activities
Loss after taxation (3,065) (411) (437)
Adjustments for:
Depreciation of property, plant and equipment and amortisation of goodwill, 563 387 901
intangible assets and software and software licences
Depreciation of leased right-of-use assets 728 953 1,875
Loss from sale of subsidiary, associate or investment 55 - -
Loss on disposal of property, plant and equipment 12 27 8
Impairment of goodwill and acquired intangibles 2,000 - -
Impairment of right-of-use assets - - 183
Impairment of property, plant and equipment - - 18
Interest income (132) (88) (65)
Interest costs 160 650 1,218
Taxation (credit)/expense recognised in Income Statement (153) (71) 26
Decrease/(increase) in trade and other receivables 617 2,912 (15,498)
(Decrease)/increase in trade and other payables (14,005) (6,009) 10,098
Increase/(decrease) in provisions 408 (547) (1,064)
Share-based payment charge 13 86 271
Cash used in operations (12,799) (2,111) (2,466)
Interest paid (96) (83) (320)
Interest on lease liabilities (64) (82) (156)
Interest received - 32 65
Income taxes paid (493) (1,048) (1,322)
Cash used in operating activities (13,452) (3,292) (4,199)
Cash flows from investing activities
Purchase of plant and equipment (102) - (332)
Purchase of intangible assets - (293) (83)
Cash used in investing activities (102) (293) (415)
Cash flows from financing activities
Lease liability principal repayment (970) (1,046) (2,355)
(Purchase)/sale of treasury shares (68) 17 60
Working capital facility (repaid)/withdrawn (458) 4,572 9,197
Dividend paid (484) - -
Repayment of term loan - (7,500) (7,500)
Cash used in financing activities (1,980) (3,957) (598)
Effects of exchange rates on cash and cash equivalents 27 (172) (346)
Decrease in cash and cash equivalents (15,507) (7,714) (5,558)
Cash and cash equivalents at beginning of period 29,238 34,796 34,796
Cash and cash equivalents at end of period ((³)) 13,731 27,082 29,238
Net decrease in cash and cash equivalents for discontinued operations was
£1,156,000 (6 months to 31 January 2021 restated: decrease of £1,447,000 and
year to 31 July 2021: decrease of £1,534,000).
⁽¹⁾ Results are restated following the April 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting in
previously capitalised software assets being expensed, as explained further in
Note 1.24.
((2)) Results for the 6 months to January 2021 have been restated for the
presentation of discontinued operations as explained in Note 12.
⁽³⁾ Included in Cash and cash equivalents is £902,000 of restricted cash
(6 months to 31 January 2021: £1,588,000 year to 31 July 2021: £7,115,000)
which meets the definition of cash and cash equivalents but is not available
for use by the Group. This balance arises from the Group's non-recourse
working capital arrangements.
NOTES
Forming part of the financial statements
1 The Group and Company Significant Accounting Policies
The accounting policies applied in these condensed interim Financial
Statements are consistent with those used in the preparation of the Group's
consolidated Financial Statements for the year ended 31 July 2021, as
described in those annual Financial Statements, with the exception of
policies, amendments and interpretations effective as of 1 August 2021 and
other changes detailed below.
1.1 The Business of the Group
Gattaca plc ('the Company') and its subsidiaries (together 'the Group') is a
human capital resources business providing contract and permanent recruitment
services in the private and public sectors. The Company is a public limited
company, which is listed on the Alternative Investment Market (AIM) and is
incorporated and domiciled in England, United Kingdom. The Company's address
is: 1450 Parkway, Solent Business Park, Whiteley, Fareham, Hampshire, PO15
7AF. The registration number is 04426322.
1.2 Basis of preparation of the interim Financial Statements
These condensed consolidated interim Financial Statements are for the six
months ended 31 January 2022. They have been prepared in accordance with IAS
34 "Interim Financial Reporting". They do not include all of the information
required for full annual Financial Statements, and should be read in
conjunction with the consolidated Financial Statements for the year ended 31
July 2021 which have been filed with the Registrar of Companies. The auditor's
report on those Financial Statements was unqualified and did not contain a
statement under section 498 of the Companies Act 2006.
These condensed consolidated interim Financial Statements (the interim
Financial Statements) have been prepared in accordance with the accounting
policies set out below which are based on the recognition and measurement
principles of IFRS in issue as adopted by the European Union (EU) and are
effective at 1 August 2021 or are expected to be adopted and effective at 1
August 2021.
These financial statements have been prepared in accordance with international
accounting standards in conformity with the requirements of the Companies Act
2006 and in accordance with international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European
Union.
1.3 Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position are set out in the Strategic
Report of the Group's 2021 Annual Report. The financial position of the Group,
its cash flows and liquidity position mirror those of the ultimate parent
company and can be found in the Chief Financial Officer's Report of the 2021
Annual Report for Gattaca plc.
The majority of our staff have now adopted a hybrid working style between our
offices and remote working and there has not been any significant impact to
our ability to operate effectively. The initial reduction in contractor
numbers in April 2020, whilst impacting profitability, has resulted in reduced
working capital requirements and has created further liquidity. The Group has
also undertaken other actions, including an increase to the payment terms of
certain contractors and these actions have created a permanent working capital
benefit, and reduce our working capital requirements during growth. We have
seen signs of extensions in debtor days as a result of the ongoing pandemic
recovery impact on trading at our clients and we continue to be alert for any
sudden changes. There is sufficient headroom on our working capital facilities
to absorb a level of extensions, but we would also manage supply to the
customer if payment within an appropriate period was not being made. A
significant deterioration in payment terms would significantly impact the
Group's liquidity.
The Directors have prepared detailed cash flow forecasts to July 2025,
covering a period of 40 months from the date of approval of these financial
statements. This base case is drawn up with appropriate regard for the current
macroeconomic environment and the particular circumstances in which the Group
operates. This conservative base case assumes a steady growth in the Group's
contract and permanent NFI year on year.
The output of the base case forecasting process has been used to perform
sensitivity analysis on the Group's cash flow to model the potential effects
should principal risks actually occur either individually or in unison. The
sensitivity analysis modelled scenarios with significantly lower NFI growth
rates and extended DSO considered. The Group has modelled the impact of a
severe but plausible scenario including growth of 0%-0.6% in contract NFI
across FY23 to FY25, with customer receivables DSO extended to 60 days.
After making appropriate enquiries and considering the uncertainties described
above, the Directors have a reasonable expectation at the time of approving
these interim financial statements that the Group and the Company has adequate
resources to continue in operational existence for the foreseeable future.
Following careful consideration the Directors do not consider there to be a
material uncertainty with regards to going concern and consider it is
appropriate to adopt the going concern basis in preparing the interim
financial statements.
1.4 New standards and interpretations
The following are new standards or improvements to existing standards that are
mandatory for the first time in the Group's accounting period beginning on 1
August 2021 and no new standards have been early adopted. The Group's January
2022 interim Financial Statements have adopted these amendments to IFRS:
● Amendment to IFRS 16, ' Leases' - Covid-19 related rent concessions (effective
1 June 2020).
● Amendment to IFRS 9, IAS39 and IFRS 7 - interest rate benchmark reform
(effective 1 January 2020)
Following the IFRS Interpretations Committee's agenda decision published in
April 2021, during the 6 months to 31 January 2022, the Group voluntarily
changed its accounting policy relating to the capitalisation of certain
software costs, specifically relating to the capitalisation of implementation
costs such as configuration and customisation costs for cloud-based software
under SaaS arrangements. This is further described, along with the financial
impact, in Note 1.24.
New standards in issue, not yet adopted
The Group has not yet adopted certain new standards, amendments and
interpretations to existing standards, which have been published but which are
only effective for the Group accounting periods beginning on or after 1 August
2021. These new pronouncements are listed as follows:
● Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate
Benchmark Reform - Phase 2 (effective 1 January 2021)
The Directors are currently evaluating the impact of the adoption of all other
standards, amendments and interpretations but do not expect them to have a
material impact on the Group's operations or results.
Forthcoming requirements
The following amendments are required for application for the Group's periods
beginning after 1 August 2021 or later:
Standard Effective date (annual period beginning on or after)
IAS 1 amendments Classification of liabilities as current or non-current 1 January 2022
IAS 16 amendments Property, plant and equipment proceeds before intended use 1 January 2022
IAS 37 amendments Onerous contracts-cost of fulfilling a contract 1 January 2022
IFRS 3 amendments Reference to the conceptual framework 1 January 2022
1.5 Basis of consolidation
Subsidiaries are all entities over which the Group has control. The Group
controls an entity when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect
those returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They
are deconsolidated from the date on which that control ceases.
The Group applies the acquisition method to account for business combinations.
The consideration transferred for the acquisition of a subsidiary is the fair
value of the assets transferred, the liabilities incurred to the former owners
of the acquiree, and the equity interests issued by the Group. The
consideration transferred includes the fair value of any asset or liability
resulting from a contingent consideration arrangements. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair value at the acquisition
date. The Group recognises any non-controlling interest in the acquiree on an
acquisition-by-acquisition basis, either at fair value or at the
non-controlling interest's proportionate share of the recognised amounts of
the acquiree's identifiable net assets.
Acquisition-related costs are expensed as incurred.
Intercompany transactions, balances and unrealised gains on transactions
between Group companies are eliminated. Unrealised losses are also eliminated.
Where necessary, amounts reported by subsidiaries have been adjusted to
conform to the Group's accounting policies.
1.6 Revenue
Revenue is measured by reference to the fair value of consideration received
or receivable by the Group for services provided, excluding VAT and trade
discounts.
Temporary placements
Revenue from temporary, or contract, placements is recognised at the point in
time when the candidate provides services, upon receipt of a client-approved
timesheet or equivalent proof of time worked. Timing differences between the
receipt of a client-approved timesheet and the raising of an invoice are
recognised as accrued income. The Group has assessed its use of third party
providers to supply candidates for temporary placements under the agent or
principal criteria and has determined that it is the principal on the grounds
that it retains primary responsibility for provision of the services.
A number of contractual rebate arrangements are in place in respect of volume
and value of sales; these are accounted for as variable consideration reducing
revenue and estimated in line with IFRS 15.
Any consideration payable at the start of contracts to customers is recognised
as a prepayment and released to profit or loss over the terms of the contract
it relates to, as a reduction to revenue.
Permanent placements
Revenue from permanent placements, which is based on a percentage of the
candidate's remuneration package, is recognised when candidates commence
employment which is the point at which the performance obligation of the
contract is considered met. Some permanent placements are subject to a
'claw-back' period whereby if a candidate leaves within a set period of
starting employment, the customer is entitled to a rebate subject to the
Group's terms and conditions. Provisions as a reduction to revenue are
recognised for such arrangements if material. In addition, a number of
contractual rebate arrangements are in place in respect of volume and value of
sales; these are accounted for as variable consideration reducing revenue and
estimated in line with IFRS 15.
Other
Other revenue streams are generated from provision of engineering services and
other fees. Revenue from the provision of engineering services is recognised
either over a period of time when the performance obligations are satisfied
over the course of project milestones or at a point in time upon receipt of
client-approved timesheets. Other fees mainly relate to relate to account
management fees for providing recruitment services. Revenue from other fees is
recognised on confirmation from the client committing to the agreement and
either at a point in time or over time in accordance with terms of each
individual agreement as performance obligations are met.
1.7 Government grants
Government grants are assistance by government in the form of transfers of
resources to an entity in return for past or future compliance with certain
conditions relating to operating activities.
Government grants are recognised when there is a reasonable assurance that the
Group will comply with the conditions attached to it and that the grant will
be received. They are recognised in the consolidated Income Statement on a
systematic basis over the periods in which the related costs that they
compensate are recognised as expenses.
Grants are either presented as grant income or deducted in reporting the
related expense they compensate in the Income Statement.
1.8 Non-underlying items
Non-underlying items are income or expenditure that are considered unusual and
separate to underlying trading results because of their size, nature or
incidence and are presented within the consolidated Income Statement but
highlighted through separate disclosure. The Group's Directors consider that
these items should be separately identified within the income statement to
enable a proper understanding of the Group's business performance.
Items which are included within this category include but are not limited to:
● costs of acquisitions;
● integration costs following acquisitions; and
● material restructuring costs including related professional fees and staff
costs.
In addition, the Group also excludes from underlying results amortisation and
impairment of goodwill and acquired intangibles, impairment of leased
right-of-use assets and net foreign exchange gains or losses.
Specific adjusting items are included as non-underlying based on the following
rationale:
Item Distorting due to irregular nature year on year Distorting due to fluctuating nature (size) Does not reflect in-year operational performance of continuing business
Costs of acquisitions ü ü ü
Integration costs following acquisitions ü ü
Material restructuring costs ü ü
Amortisation and impairment of goodwill and acquired intangibles ü ü ü
Impairment of leased right-of-use assets ü ü ü
Net foreign exchange gains and losses ü ü
Tax impact of the above ü ü ü
1.9 Property, plant and equipment
Property, plant and equipment is stated at cost, net of depreciation and any
provision for impairment.
Depreciation is calculated so as to write off the cost of an asset, less its
estimated residual value, over the useful economic life of that asset in terms
of annual depreciation as follows:
Motor vehicles 25.0% Reducing balance
Fixtures, fittings and equipment 12.5% to 33.3% Straight line
Leasehold improvements Over the period of the lease term Straight line
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at the end of each reporting period.
An asset's carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its estimated
recoverable amount.
When revalued assets are sold, the amounts included in other reserves in
respect of those assets are transferred to retained earnings.
1.10 Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess
of the fair value of the consideration given for a business over the Company's
interest in the fair value of the net identifiable assets, liabilities and
contingent liabilities of the acquiree. Goodwill is stated at cost less
accumulated impairment.
Goodwill impairment reviews are undertaken annually, or more frequently if
events or changes in circumstances indicate a potential impairment. Goodwill
is allocated to cash-generating units, being the lowest level at which
goodwill is monitored. The carrying value of the assets of the cash-generating
unit, including goodwill, intangible and tangible assets and working capital
balances, is compared to its recoverable amount, which is the higher of value
in use and fair value less costs to sell. Any excess in carrying value over
recoverable amount is recognised immediately as an impairment expense and is
not subsequently reversed. Gains and losses on the disposal of an entity
include the carrying amount of goodwill relating to the entity sold.
1.11 Intangible assets
Customer relationships
Customer relationships comprise principally of existing customer relationships
which may give rise to future orders (customer relationships), and existing
order books. They are recognised at fair value at the acquisition date, and
subsequently measured at cost less accumulated amortisation and impairment.
Customer relationships are determined to have a useful life of ten years and
are amortised on a straight-line basis.
Trade names and trademarks
Trade names and trademarks have either arisen on the consolidation of acquired
businesses or have been separately purchased and are recognised at fair value
at the acquisition date. They are subsequently measured at cost less
accumulated amortisation and impairment. Trade names and trademarks are
determined to have a useful life of ten years and are amortised on a
straight-line basis.
Software and software licences
Acquired computer software licences are capitalised on the basis of the costs
incurred to acquire and bring into use the specific software. These costs are
amortised using the straight-line method to allocate the cost of the software
licences over their useful lives of between two and five years. Subsequent
licence renewals are expensed to profit or loss as incurred. Software
licences are stated at cost less accumulated amortisation and impairment.
Costs incurred for the development of software code that enhances or modifies,
or creates additional capability to existing on premise systems and meets the
definition of and recognition criteria for an intangible asset are recognised
as intangible software assets and depreciated over a useful life of between
two and ten years.
Implementation costs for cloud-based software under Software-as-a-Service
(SaaS) arrangements
SaaS arrangements are service contracts providing the Group with the right to
access the cloud provider's application software over the contract period. In
most cases, this will not meet the definition of an intangible asset under IAS
38. The following outlines the accounting treatment of implementation costs
incurred in relation to SaaS arrangements:
● Implementation costs relating to cloud-based software under SaaS arrangements
are assessed as they are incurred. These would include implementation support,
consultancy, configuration costs, customisation costs and testing services.
If the services are provided by the cloud supplier or a third party and are
considered to be separate from the access to the software, then they are
either recognised as an intangible asset under IAS 38 if they meet the
relevant capitalisation criteria or, more likely, they are expensed to the
income statement as incurred. If the implementation services are provided by
the cloud provider but are not considered to be separate from access to the
software, which generally is the case for customisation costs for cloud-based
software, then they are recognised as an expense over the period of the
service contract, resulting in a prepayment asset if the services are paid for
in advance.
Internally generated intangible assets
Internal development costs that are directly attributable to the design and
testing of identifiable and unique non-cloud based software products are
capitalised as part of internally generated software and include employee
costs and professional fees attributable to the development of the asset.
Other internal expenditure that does not meet these criteria is recognised as
an expense to profit or loss as incurred. Software development internal costs
recognised as assets are amortised on a straight-line basis over their
estimated useful lives of between two and ten years.
Expenditure on internally generated brands and other intangible assets is
expensed to profit or loss as incurred.
Other
Other intangible assets acquired by the Group have a finite useful life
between five and ten years and are measured at cost less accumulated
amortisation and accumulated losses.
Amortisation of intangible assets and impairment losses are recognised in
profit or loss within administrative expenses.
Intangible assets are tested for impairment either as part of a
goodwill-carrying cash-generated unit, or when events arise that indicate an
impairment may be triggered. Provision is made against the carrying value of
an intangible asset where an impairment is deemed to have occurred. Impairment
losses on intangible assets are recognised in the income statement under
administrative expenses.
1.12 Disposal of assets
The gain or loss arising on the disposal of an asset is determined as the
difference between the disposal proceeds and the carrying amount of the asset
and is recognised in the income statement at the time of disposal.
1.13 Leases
The Group has applied IFRS 16 using the modified retrospective approach and
therefore the comparative information has not been restated and continues to
be reported under IAS17 and IFRIC 14.
The Group leases office property, motor vehicles and equipment. Rental
contracts range from monthly to eight years.
At inception of a contract, the Group assesses whether a contract is, or
contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in
exchange for consideration. Contracts may contain both lease and non-lease
components, and consideration is allocated in the contract to the lease and
non-lease components based on their relative stand-alone prices.
Assets and liabilities arising from a lease are initially measured on a
present value basis at the lease commencement date. Lease liabilities include
the net present value of the fixed payments less any lease incentives
receivable, variable lease payments that are based on an index or a rate,
amounts expected to be payable by the group under residual value guarantees,
the exercise price of any purchase option if the Group is reasonably certain
to exercise that option, and payments of penalties for terminating the lease
if that option is expected to be taken.
Lease payments to be made under reasonably certain extension options are also
included in the measurement of the liability.
Lease payments are discounted at either the interest rate implicit in the
lease or when this interest rate cannot be readily determined, the Group's
incremental borrowing rate associated with a similar asset. When calculating
lease liabilities, the Group uses its incremental borrowing rate, being the
rate it would have to pay to borrow the funds necessary to obtain an asset of
similar value in a similar economic climate with similar terms, security and
conditions. This is estimated using publicly available data adjusted for
changes specific to the lease in financing conditions, lease term, country and
currency.
The Group does not have leases with variable lease payments based on an index
or rate.
Extension or termination options are included in a number of the Group's
leases. In determining the lease term, the Group considers all facts and
circumstances that create an economic incentive to exercise, or not to
exercise, an option. Extension options are only included in the lease term if
the lease is reasonably certain to be extended. The lease term is reassessed
if an option is actually exercised or the Group becomes obliged to exercise
(or not to exercise) it. The assessment of reasonable certainty is only
revised if a significant event or a significant change in circumstances occurs
that is within the control of the Group.
Lease payments are allocated between principal and finance cost. The finance
cost is charged to profit or loss over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability
for each period.
Right-of-use assets are measured at cost comprising the following:
● the amount of the initial measurement of lease liability,
● any lease payments made at or before the commencement date less any lease
incentives received,
● any initial direct costs, and
● restoration costs.
Right-of-use assets are depreciated on a straight-line basis over the term of
the lease with depreciation expense recognised in the income statement.
Lease modifications are a change in scope of a lease that was not part of the
original lease. Any change that is triggered by a clause already part of the
original lease contract is a re-assessment and not a modification. Changes to
lease cash flows as part of a re-assessment result in a re-measurement of the
lease liability using an updated discount rate and a corresponding adjustment
to the carrying value of the right-of-use asset.
Advantage has been taken of the practical expedients for exemptions provided
for leases with less than 12 months to run, for leases of low value, to
account for leases with similar characteristics as a portfolio with a single
discount rate and to present existing onerous lease provisions against the
carrying value of right-of-use assets. Payments associated with short-term
leases and leases of low value are recognised on a straight-line basis as an
expense in profit or loss.
1.14 Taxation
The tax expense for the year comprises current and deferred tax. Tax is
recognised in the Income Statement, except to the extent that it relates to
items recognised in other comprehensive income or directly in equity. In this
case, the tax is also recognised in other comprehensive income or directly in
equity, respectively.
The current tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the statement of financial position date in the
countries where the Company and its subsidiaries operate and generate taxable
income. Management periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions, where appropriate, on the basis of
amounts expected to be paid to the tax authorities.
Deferred income taxes are calculated using the liability method on temporary
differences. Deferred tax is generally provided on the difference between the
carrying amounts of assets and liabilities and their tax bases. However,
deferred tax is not provided on the initial recognition of goodwill, nor on
the initial recognition of an asset or liability unless the related
transaction is a business combination or affects tax or accounting profit.
Deferred tax liabilities are provided in full, with no discounting. Deferred
tax assets are recognised to the extent that it is probable that the
underlying deductible temporary differences will be able to be offset against
future taxable income. Current and deferred tax assets and liabilities are
calculated at tax rates that are expected to apply to their respective period
of realisation, provided they are enacted or substantively enacted at the
Statement of Financial Position date.
Deferred tax on temporary differences associated with shares in subsidiaries
is not provided for if these temporary differences can be controlled by the
Group and it is probable that reversal will not occur in the foreseeable
future.
Deferred tax assets and liabilities are offset only where there is a legally
enforceable right to the offset and there is an intention to settle balances
on a net basis.
Changes in deferred tax assets or liabilities are recognised as a component of
tax expense in the Income Statement, except where they relate to items that
are charged or credited directly to equity (such as share-based payments) in
which case the related deferred tax is also charged or credited directly to
equity.
1.15 Pension costs
The Group operates a number of country-specific defined contribution plans for
its employees. A defined contribution plan is a pension plan under which the
Group pays fixed contributions into a separate entity. Once the contributions
have been paid the Group has no further payment obligations. The contributions
are recognised as an expense when they are due. Amounts not paid are shown in
other creditors in the Statement of Financial Position. The assets of the plan
are held separately from the Group in independently administered funds.
1.16 Share-based payments
All share-based remuneration is ultimately recognised as an expense in the
Income Statement with a corresponding credit to the share-based payment
reserve. All goods and services received in exchange for the grant of any
share-based remuneration are measured at their fair values. Fair values of
employee services are indirectly determined by reference to the fair value of
the share options awarded. Their value is appraised at the grant date and
excludes the impact of non-market vesting conditions (for example,
profitability and sales growth targets).
If vesting periods or other non-market vesting conditions apply, the expense
is allocated over the vesting period, based on the best available estimate of
the number of share options expected to vest. Estimates are subsequently
revised if there is any indication that the number of share options expected
to vest differs from previous estimates. Any cumulative adjustment prior to
vesting is recognised in the current period. No adjustment is made to any
expense recognised in prior periods if share options ultimately exercised are
different to that estimated on vesting. Upon exercise of share options,
proceeds received net of attributable transaction costs are credited to share
capital and share premium.
The Company is the granting and settling entity in the Group share-based
payment arrangement where share options are granted to employees of its
subsidiary companies. The Company recognises the share-based payment expense
as an increase in the investment in subsidiary undertakings.
The Group operates two long-term incentive share option plans. The Zero Priced
Share Option Bonus covers all share options issued with an exercise price of
£0.01; the Long-Term Incentive Plan Options have an exercise price above
£0.01. Grants under both categories have been made as part of a CSOP scheme,
depending on the terms of specific grants.
The Group also operates a Share Incentive Plan ('SIP'), the Gattaca plc Share
Incentive Plan ('The Plan'), which is approved by HMRC. The Plan is held by
Gattaca plc UK Employee Benefit Trust ('the EBT'), the purpose of which is to
enable employees to purchase Company shares out of pre-tax salary. For each
share purchased the Group grants an additional share at no cost to the
employee. The expense in relation to these 'free' shares is recorded as
employee remuneration and measured at fair value of the shares issued as at
the date of grant. The assets and liabilities of the EBT are included in the
Gattaca Plc Consolidated Statement of Financial Position.
1.17 Financial instruments
Financial assets
IFRS 9 contains a classification and measurement approach for financial assets
that reflects the business model in which assets are managed and their cash
flow characteristics. Under IFRS 9, all financial assets are measured at
either amortised cost, fair value through profit and loss ('FVTPL') or fair
value through other comprehensive income ('FVOCI').
Financial assets: debt instruments
The Group classifies its debt instruments in the following measurement
categories depending on the Group's business model for managing the asset and
the cash flow characteristics of the asset:
(i) those to be measured subsequently at fair value through other
comprehensive income (OCI): Assets that are held for collection of contractual
cash flows and for selling the financial assets, where the assets' cash flows
represent solely payments of principal and interest, are measured at FVOCI.
Movements in the carrying amount are taken through OCI, except for the
recognition of impairment gains or losses, interest revenue and foreign
exchange gains and losses which are recognised in profit or loss. When the
financial asset is derecognised, the cumulative gain or loss previously
recognised in OCI is reclassified from equity to profit or loss and recognised
in other gains/(losses). Interest income from these financial assets is
included in finance income using the effective interest rate method. Foreign
exchange gains and losses are presented in other gains/(losses) and impairment
expenses are presented as separate line item in the Income Statement.
(ii) those to be measured subsequently at FVTPL: Assets that do not meet the
criteria for amortised cost or FVOCI are measured at FVTPL. A gain or loss on
a debt investment that is subsequently measured at FVTPL is recognised in
profit or loss and presented net within other gains/(losses) in the year in
which it arises.
(iii) those to be measured subsequently at amortised cost: Assets that are
held for collection of contractual cash flows where those cash flows represent
solely payments of principal and interest are measured at amortised cost.
Interest income from these financial assets is included in finance income
using the effective interest rate method. Any gain or loss arising on
derecognition is recognised directly in profit or loss and presented in other
gains/ (losses), together with foreign exchange gains and losses. Impairment
losses are presented as a separate line item in the Income Statement.
The Group reclassifies debt investments when and only when its business model
for managing those assets changes.
Financial assets: equity instruments
The Group subsequently measures all equity investments at fair value. Where
the Group's management has elected to present fair value gains and losses on
equity investments in OCI, there is no subsequent reclassification of fair
value gains and losses to profit or loss following the derecognition of the
investment. Dividends from such investments continue to be recognised in
profit or loss as other income when the Group's right to receive payments is
established.
Impairment losses (and reversal of impairment losses) on equity investments
measured at FVOCI are not reported separately from other changes in fair
value.
Impairment of financial assets
IFRS 9 require the application of the 'Expected Credit Loss' model ('ECL').
This applies to all financial assets measured at amortised cost or FVOCI,
except equity investments.
The Group assesses on a forward looking basis the expected credit losses
associated with its debt instruments carried at amortised cost and FVOCI.
The Group has reviewed each category of its financial assets to assess the
level of credit risk and ECL provision to apply:
● Trade receivables: the Group has chosen to take advantage of the practical
expedient in IFRS 9 when assessing default rates over its portfolio of trade
receivables, to estimate the ECL based on historical default rates specific to
groups of customers by industry and geography that carry similar credit risks.
Separate ECL's have been modelled for UK customers in different industries,
and customers in the Americas, Europe, Asia and Africa.
● Accrued income is in respect of temporary placements where a client-approved
timesheet has been received or permanent placements where a candidate has
commenced employment, but no invoice has been raised. Default rates have been
determined by reference to historical data.
● Cash and cash equivalents are held with established financial institutions.
The Group has determined that based on the external credit ratings of
counterparties, this financial asset has a very low credit risk and that the
estimated expected credit loss provision is not material.
At each reporting date, the expected credit loss provision will be reviewed to
reflect changes in credit risk and historical default rates and other economic
factors. Changes in the ECL provision are recognised in profit or loss.
Financial liabilities
Financial liabilities are obligations to pay cash or other financial assets
and are recognised when the Group becomes a party to the contractual
provisions of the instrument and comprise trade and other payables and bank
loans. Financial liabilities are recorded initially at fair value, net of
direct issue costs and are subsequently measured at amortised cost using the
effective interest rate method.
A financial liability is derecognised only when the obligation is
extinguished, that is, when the obligation is discharged, cancelled or
expires.
Non-recourse receivables factoring is not recognised as a financial liability
as there is no contractual obligation to deliver cash; subsequently, the
receivables are de-recognised and any difference between the receivable value
and amount received through non-recourse factoring is recognised as a finance
cost.
1.18 Cash and cash equivalents
In the Consolidated Cash Flow Statement, cash and cash equivalents include
cash in hand, deposits held at call with banks, other short-term highly liquid
investments with original maturities of three months or less and bank
overdrafts. In the Statement of Financial Position and Cash Flow Statement,
bank overdrafts are netted against cash and cash equivalents where the
offsetting criteria are met.
Cash in transit inbound from, or outbound to, a third party is recognised when
the transaction is no longer reversible by the party making the payment. This
is determined to be in respect of all electronic payments and receipt
transactions that commence before or on the reporting date and complete within
one business day after the reporting date.
Restricted cash and cash equivalent balances are those which meet the
definition of cash and cash equivalents but are not available for wider use by
the Group. These balances arise from the Group's non-recourse working capital
arrangements.
1.19 Provisions
Provisions are recognised where the Group has a present legal or constructive
obligation as a result of past events; it is probable that an outflow of
resources will be required to settle the obligation; and the amount has been
reliably estimated. Provisions are not recognised for future operating losses.
1.20 Dividends
Dividend distributions payable to equity shareholders are included in 'other
short term financial liabilities' when the dividends are approved in general
meeting prior to the financial position date.
1.21 Foreign currencies
Items included in the Financial Statements of each of the Group's entities are
measured using the currency of the primary economic environment in which each
entity operates ('the functional currency'). The consolidated Financial
Statements are presented in 'currency' (GBP), which is the Group's
presentation currency.
Transactions in foreign currencies are translated at the exchange rate ruling
at the date of the transaction. Monetary assets and liabilities in foreign
currencies are translated at the rates of exchange ruling at the Statement of
Financial Position date. Non-monetary items that are measured at historical
cost in a foreign currency are translated at the exchange rate at the date of
the transaction. Non-monetary items that are measured at fair value in a
foreign currency are translated using the exchange rates at the date when the
fair value was determined. Income and expenses are translated at the actual
rate.
Any exchange differences arising on the settlement of monetary items or on
translating monetary items at rates different from those at which they were
initially recorded are recognised in the Income Statement in the year in which
they arise.
The assets and liabilities in the Financial Statements of foreign subsidiaries
are translated at the rate of exchange ruling at the Statement of Financial
Position date.
The individual Financial Statements of each Group company are presented in its
functional currency. On consolidation, the assets and liabilities of overseas
subsidiaries, including any related goodwill, are translated to Sterling at
the rate of exchange at the balance sheet date. The results and cash flows of
overseas subsidiaries are translated to Sterling using the average rates of
exchange during the period. Exchange adjustments arising from the
re-translations of the opening net investment and the results for the period
to the period end rate are accounted for in the translation reserve in the
statement of Comprehensive Income. On divestment, these exchange differences
are reclassified from the translation reserve to the Income Statement.
1.22 Equity
Equity comprises the following:
● 'Share capital' represents the nominal value of equity shares;
● 'Share premium' represents the excess over nominal value of the fair value of
consideration received for equity shares, net of expenses of the share issue;
● 'Merger reserve' represents the equity balance arising on the merger of
Matchtech Engineering and Matchmaker Personnel and to record the excess fair
value above the nominal value of the share consideration on the acquisition of
Networkers International plc;
● 'Share-based payment reserve' represents equity-settled share-based employee
remuneration until such share options are exercised or lapse;
● 'Translation reserve' represents the foreign currency differences arising on
translating foreign operations into the presentational currency of the Group;
● 'Treasury shares reserve' represents Company shares purchased directly by the
Group to satisfy obligations under the employee share plan;
● 'Retained earnings' represents retained profits.
1.23 Critical accounting judgements and key sources of estimation uncertainty
Critical accounting judgements
Note 1.24 describes the Group's change in accounting policy in respect of
configuration and customisation costs incurred in implementing
Software-as-a-service (SaaS) arrangements. In applying the entity's accounting
policy, the directors made the following key judgements that may have the most
significant effect on the amounts recognised in financial statements.
Determination of whether configuration and customisation implementation
services are separate from the cloud-based SaaS software access
● Under the new accounting policy application guidance, implementation costs
including costs to configure or customise the cloud-based provider's software
are recognised as operating expenses when the services are received, if they
are separate from the provision of the SaaS contract.
● Where the SaaS arrangement supplier provides both configuration and
customisation services, judgement has been applied to determine whether these
services are separate from the underlying use of the SaaS software. Separate
configuration and customisation costs are expensed as incurred as the software
is configured or customised (i.e. upfront). Non-separate configuration and
customisation costs are expensed over the SaaS contract term.
Capitalisation of configuration and customisation implementation costs in SaaS
arrangements
● In implementing SaaS arrangements, suppliers have developed software code that
either enhances, modifies or creates additional capability to the existing
owned software or to software held under SaaS arrangements. Where
modifications have been made to owned software, this is used to connect with
the SaaS arrangement cloud-based applications.
● Judgement has been applied in determining whether the changes to the owned
software or software held under a SaaS arrangement meets the definition of and
recognition criteria for an intangible asset in accordance with IAS 38
Intangible Assets.
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation
uncertainty at the Statement of Financial Position date that carry a risk of
causing a material adjustment within the next 12 months are discussed below:
ECL provisions in respect of trade receivables
The Group's policy for default risk over receivables is based on the on-going
evaluation of the credit risk of its trade receivables. Estimation is used in
assessing the ultimate realisation of these receivables, including reviewing
the potential likelihood of default, the past collection history of each
customer, any insurance coverage in place and the current economic conditions.
As a result, expected credit loss provisions for impairment of trade
receivables have been recognised, as discussed in Note 8. The impact of the
ongoing economic recovery from COVID-19 has been incorporated into these
estimates.
Valuation of goodwill and intangible assets
Goodwill and intangible assets (including acquired intangibles) are tested for
impairment on an annual basis or otherwise when changes in events or
situations indicate that the carrying value may not be recoverable. This
requires an estimate to be made of the recoverable amount of the
cash-generating unit to which the assets are allocated, including forecasting
future cash flows of each cash-generating unit and forming assumptions over
the discount rate and long-term growth rate applied. The impact of the ongoing
economic recovery from COVID-19 has been reflected in the forecast future cash
flows.
1.24 Changes in accounting policy - Software-as-a-service (SaaS) arrangements
In the 6 months to 31 January 2022, following the IFRS Interpretation
Committee's agenda decision published in April 2021, the Group changed its
accounting policy relating to the capitalisation of certain software costs,
specifically relating to the capitalisation of implementation costs such as
configuration and customisation costs for cloud-based software under SaaS
arrangements.
The Group's accounting policy was previously to capitalise costs directly
attributable to the development of intangible software assets, including
configuration and customisation costs, irrespective of whether the services
were performed by the SaaS supplier or a third party. Following the adoption
of the IFRIC agenda guidance, all software intangible assets were identified
and assessed to determine if they related to cloud-based software under SaaS
arrangements. The Group then assessed whether they had control over the
software and any associated capitalised implementation costs. For those
arrangements where the Group did not have control of the developed cloud-based
software under the updated IFRIC agenda guidance, to the extent that the
implementation services were performed by a third party, the Group determined
if the service was separate from the underlying software service contract and
if so, derecognised the intangible asset previously capitalised. Amounts
paid to a supplier for customisation costs that were not separate from the
underlying software service contract, were treated as a prepayment over the
period of the service contract.
Accordingly, in line with the treatment prescribed in IAS 8 and IAS 1 in
respect of changes in accounting policies, this change has been applied
retrospectively, restating the prior period balance sheet at 1 August 2020 and
31 July 2021. The full impact of the change in accounting policy is detailed
below.
Condensed Consolidated Income Statement
For the 6 month period ended 31 January 2021 As previously Adjustment As restated
reported/restated ⁽¹⁾
£'000 £'000 £'000
Continuing operations
Gross profit 20,522 - 20,522
Administrative expenses - other administrative expenses (19,561) - (19,561)
Administrative expenses - expense of implementation costs - (546) (546)
Administrative expenses - reversal of amortisation of software implementation (109) 45 (64)
costs
Administrative expenses - unwinding of the prepaid software implementation - (52) (52)
costs
Profit before taxation 852 (553) 299
Net finance costs (609) - (609)
Taxation (12) 105 93
Profit/(loss) after taxation from continuing operations 231 (448) (217)
Profit/(loss) for the period 38 (449) (411)
⁽¹⁾ Figure for the 6 months to January 2021 has been restated for the
presentation of discontinued operations as explained in Note 12.
For the year ended 31 July 2021 As previously reported Adjustment As restated
£'000 £'000 £'000
Continuing operations
Gross profit 42,080 - 42,080
Administrative expenses - other administrative expenses (38,374) - (38,374)
Administrative expenses - expense of implementation costs - (1,544) (1,544)
Administrative expenses - reversal of amortisation of software implementation (422) 283 (139)
costs
Administrative expenses - unwinding of the prepaid software implementation - (131) (131)
costs
Profit before taxation 3,284 (1,392) 1,892
Net finance costs (1,080) - (1,080)
Taxation (415) 374 (41)
Profit after taxation from continuing operations 1,789 (1,018) 771
Profit/(loss) for the year 581 (1,018) (437)
Condensed Consolidated Statement of Changes in Equity
As previously Adjustment As restated
reported
£'000 £'000 £'000
Total equity at 1 August 2020 39,772 (4,738) 35,034
Profit/(loss) for the period 38 (449) (411)
Balance at 31 January 2021 39,867 (5,187) 34,680
As previously Adjustment As restated
reported
£'000 £'000 £'000
Total equity at 1 August 2020 39,772 (4,738) 35,034
Profit/(loss) for the period 581 (1,018) (437)
Balance at 31 July 2021 40,863 (5,756) 35,107
Condensed Consolidated Statement of Financial Position
As previously Adjustment As restated as at 1 August 2020
reported as at as at 1 August 2020
1 August 2020
£'000 £'000 £'000
Non-current assets
Goodwill and intangible assets 12,877 (5,929) 6,948
Deferred tax assets - 859 859
Total non-current assets 21,726 (5,070) 16,656
Current assets
Trade and other receivables 48,862 84 48,946
Total current assets 83,684 84 83,768
Total assets 105,410 (4,986) 100,424
Non-current liabilities
Deferred tax liabilities (277) 248 (29)
Total non-current liabilities (14,914) 248 (14,666)
Total liabilities (65,638) 248 (65,390)
Net assets 39,772 (4,738) 35,034
Equity
Retained earnings 1,711 (4,738) (3,027)
Total equity 39,772 (4,738) 35,034
As previously Adjustment As restated as at 31 January 2021
reported as at as at 31 January 2021
31 January 2021
£'000 £'000 £'000
Non-current assets
Goodwill and intangible assets 13,512 (6,528) 6,984
Deferred tax assets - 1,107 1,107
Total non-current assets 21,546 (5,421) 16,125
Current assets
Trade and other receivables 45,475 130 45,605
Total current assets 72,621 130 72,751
Total assets 94,167 (5,291) 88,876
Non-current liabilities
Deferred tax liabilities (134) 104 (30)
Total non-current liabilities (6,712) 104 (6,608)
Total liabilities (54,300) 104 (54,196)
Net assets 39,867 (5,187) 34,680
Equity
Retained earnings 1,820 (5,187) (3,367)
Total equity 39,867 (5,187) 34,680
As previously Adjustment As restated as at 31 July 2021
reported as at as at 31 July 2021
31 July 2021
£'000 £'000 £'000
Non-current assets
Goodwill and intangible assets 13,778 (7,435) 6,343
Deferred tax assets - 971 971
Total non-current assets 21,030 (6,464) 14,566
Current assets
Trade and other receivables 63,937 198 64,135
Total current assets 94,339 198 94,537
Total assets 115,369 (6,266) 109,103
Non-current liabilities
Deferred tax liabilities (524) 510 (14)
Total non-current liabilities (6,074) 510 (5,564)
Total liabilities (74,506) 510 (73,996)
Net assets 40,863 (5,756) 35,107
Equity
Retained earnings 2,533 (5,756) (3,223)
Total equity 40,863 (5,756) 35,107
Condensed Consolidated Cash Flow Statement
For period ended 31 January 2021 As previously Adjustment As restated
reported
£'000 £'000 £'000
Cash flows from operating activities
Profit/(loss) after taxation 38 (449) (411)
Cash used in operating activities (2,648) (644) (3,292)
Cash flows from investing activities
Purchase of intangible assets (937) 644 (293)
Cash used in investing activities (937) 644 (293)
Cash and cash equivalents at end of period 27,082 - 27,082
For year ended 31 July 2021 As previously Adjustment As restated
reported
£'000 £'000 £'000
Cash flows from operating activities
Profit/(loss) after taxation 581 (1,018) (437)
Cash used in operating activities (2,411) (1,789) (4,200)
Cash flows from investing activities
Purchase of intangible assets (1,872) 1,789 (83)
Cash used in investing activities (2,204) 1,789 (415)
Cash and cash equivalents at end of year 29,238 - 29,238
2 Segmental Information
An operating segment, as defined by IFRS 8 'Operating segments', is a
component of the Group that engages in business activities from which it may
earn revenues and incur expenses. The Group determines and presents operating
segments based on the information that is provided internally to the chief
operating decision maker, which has been identified as the Board of Directors
of Gattaca plc. Previously, the Group was managed through its three reporting
segments, UK Engineering, UK Technology and International. From August 2021
the Group aligned its operating model to the markets in which its clients
operate. From December 2021 financial information provided to the Board was
based on this new reporting and operating structure. As a result of this
change, the segmental information for 6 months to 31 January 2022 has been
presented based on the new structure in line with the requirements of IFRS 8:
Operating Segments and the information for 6 months to 31 January 2021 and 12
months to 31 July 2021 have been restated accordingly.
6 months to 31 January 2022 unaudited
All amounts in £'000 Mobility Energy Defence Technology, Media & Telecoms Infra- structure Inter- national Other Continuing underlying operations Non-recurring items and amortisation of acquired intangibles Dis-continued Total Group
Revenue 24,095 19,152 32,325 21,951 72,011 3,896 28,769 202,199 - - 202,199
Gross profit 2,231 1,777 3,179 2,211 6,743 1,335 4,130 21,606 - (10) 21,596
Operating contribution 1,163 953 1,478 1,290 1,974 (246) 1,603 8,215 - (569) 7,646
Depreciation, impairment and amortisation (118) (94) (159) (108) (355) (19) (142) (995) (2,264) (32) (3,291)
Profit/(loss) from reportable segments 1,045 859 1,319 1,182 1,619 (265) 1,461 7,220 (2,264) (601) 4,355
Central overheads (7,328) (90) (127) (7,545)
Loss from operations (108) (2,354) (728) (3,190)
Finance (cost)/ (153) 73 52 (28)
income, net
Loss before tax (261) (2,281) (676) (3,218)
6 months to 31 January 2021 unaudited/
restated⁽¹⁾ ⁽²⁾
All amounts in £'000 Mobility Energy Defence Technology, Media & Telecoms Infra- structure Inter- national Other Continuing underlying operations Non-recurring items and amortisation of acquired intangibles Dis-continued Total Group
Revenue 19,947 25,911 34,457 21,935 71,485 5,141 25,923 204,799 - 1,682 206,481
Gross profit 1,366 2,101 2,888 1,873 6,896 1,902 3,496 20,522 - 534 21,056
Operating contribution 405 1,111 1,544 595 3,556 (581) 1,164 7,794 - (29) 7,765
Depreciation, impairment and amortisation (106) (137) (183) (117) (380) (27) (139) (1,089) (193) (58) (1,340)
Profit/(loss) from reportable segments 299 974 1,361 478 3,176 (608) 1,025 6,705 (193) (87) 6,425
Central overheads (6,410) 197 (132) (6,345)
Profit/(loss) from operations 295 4 (219) 80
Finance (cost)/ (335) (274) 47 (562)
income, net
Loss before tax (40) (270) (172) (482)
12 months to 31 July 2021 unaudited/
restated⁽¹⁾
All amounts in £'000 Mobility Energy Defence Technology, Media & Telecoms Infra- structure Inter- national Other Continuing underlying operations Non-recurring items and amortisation of acquired intangibles Dis-continued Total Group
Revenue 43,251 48,854 67,680 42,319 146,286 9,816 57,520 415,726 - 3,432 419,158
Gross profit 3,141 3,916 5,858 3,735 14,182 3,528 7,720 42,080 - 1,047 43,127
Operating contribution 1,102 2,049 2,976 1,211 7,164 (520) 2,952 16,934 - (213) 16,721
Depreciation, impairment and amortisation (227) (257) (356) (222) (769) (52) (302) (2,185) (548) (244) (2,977)
Profit/(loss) from reportable segments 875 1,792 2,620 989 6,395 (572) 2,650 14,749 (548) (457) 13,744
Central overheads (12,502) 193 (693) (13,002)
Profit/(loss) from operations 2,247 (355) (1,150) 742
Finance (cost)/ (412) (668) (73) (1,153)
income, net
Loss before tax 1,835 (1,023) (1,223) (411)
A segmental analysis of total assets has not been included as this information
is not available to the Board; the majority of assets are centrally held and
are not allocated across the reportable
segments.
Geographical information
Total Group revenue Non-current assets
All amounts in £'000 6 months to 31/01/22 6 months to 31/01/21 12 months to 31/07/21 6 months to 31/01/22 Restated ⁽³⁾ Restated ⁽³⁾
6 months to 31/01/21 12 months to 31/07/21
UK 196,434 197,038 402,254 10,592 15,343 13,740
Rest of Europe 274 1,621 2,316 1 1 -
Middle East and Africa - 729 1,685 16 344 551
Americas 5,491 7,093 12,903 375 437 275
Total 202,199 206,481 419,158 10,984 16,125 14,566
Revenue and non-current assets are allocated to the geographic market based on
the domicile of the respective subsidiary.
⁽¹⁾ Segmental disclosures for the 6 months to 31 January 2021 and year to
31 July 2021 have been restated as a result of the change in operating model
structure.
⁽²⁾ Figure for the 6 months to January 2021 have been restated for the
presentation of discontinued operations as explained in Note 12.
⁽³⁾ Results are restated following the April 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting in
previously capitalised software assets being expensed, as explained further in
Note 1.24.
3 Revenue from Contracts with Customers
Revenue from contracts with customers is disaggregated by major service line
and operating segment, as well as timing of revenue recognition as follows:
Major service lines - continuing underlying operations
6 months to January 2022 Mobility Energy Defence Technology, Media & Telecoms Infra- structure Inter- national Other Continuing underlying operations
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Temporary placements 23,423 19,034 31,236 21,475 70,848 2,797 23,845 192,658
Permanent placements 672 118 1,089 476 1,163 1,099 1,938 6,555
Other - - - - - - 2,986 2,986
Total 24,095 19,152 32,325 21,951 72,011 3,896 28,769 202,199
Major service lines - continuing underlying operations
Restated 6 months to January 2021⁽¹⁾ Mobility Energy Defence Technology, Media & Telecoms Infra- structure Inter- national Other Continuing underlying operations
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Temporary placements 19,594 25,761 33,543 21,547 70,802 3,986 23,669 198,902
Permanent placements 344 133 892 380 637 1,151 1,126 4,663
Other 9 17 22 8 46 4 1,128 1,234
Total 19,947 25,911 34,457 21,935 71,485 5,141 25,923 204,799
Major service lines - continuing underlying operations
Restated 12 months to July 2021⁽¹⁾ Mobility Energy Defence Technology, Media & Telecoms Infra- structure Inter- national Other Continuing underlying operations
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Temporary placements 42,326 48,559 65,581 41,376 144,298 7,575 52,430 402,145
Permanent placements 903 259 2,050 922 1,883 2,240 2,557 10,814
Other 22 36 49 21 105 1 2,533 2,767
Total 43,251 48,854 67,680 42,319 146,286 9,816 57,520 415,726
Timing of revenue recognition - continuing operations
'000 '000 '000 '000 '000 '000 '000 '000
6 months to January 2022 Mobility Energy Defence Technology, Media & Telecoms Infra- structure Inter- national Other Continuing underlying operations
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Point in time 24,095 19,152 32,325 21,951 72,011 3,896 25,783 199,213
Over time - - - - - - 2,986 2,986
Total 24,095 19,152 32,325 21,951 72,011 3,896 28,769 202,199
'000 '000 '000 '000 '000 '000 '000 '000
Restated 6 months to January 2021⁽¹⁾ Mobility Energy Defence Technology, Media & Telecoms Infra- structure Inter- national Other Continuing underlying operations
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Point in time 19,947 25,911 34,457 21,935 71,485 5,141 24,810 203,686
Over time - - - - - - 1,113 1,113
Total 19,947 25,911 34,457 21,935 71,485 5,141 25,923 204,799
'000 '000 '000 '000 '000 '000 '000 '000
Restated 12 months to July 2021⁽¹⁾ Mobility Energy Defence Technology, Media & Telecoms Infra- structure Inter- national Other Continuing underlying operations
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Point in time 43,251 48,854 67,680 42,319 146,286 9,816 55,022 413,228
Over time - - - - - - 2,498 2,498
Total 43,251 48,854 67,680 42,319 146,286 9,816 57,520 415,726
No single customer contributed more than 10% of the Group's revenues (6 months
to 31 January 2021 and 12 months to 31 July 2021: none). Revenue is recognised
for each performance obligation over time based on the proportion of cost
incurred to total forecast costs.
The Group has determined that its contract assets from contracts with
customers are trade receivables and accrued income, and its contract
liabilities are deferred income, which are set out below:
6 months to 31/01/22 6 months to 31/01/21 12 months to 31/07/21
unaudited unaudited
Total Total Total
£'000 £'000 £'000
Trade receivables (Note 8) 39,993 29,488 34,187
Accrued income (Note 8) 19,779 12,518 26,742
Deferred income (576) (803) (880)
Accrued income relates to the Group's right to consideration for temporary and
permanent placements made but not billed by the year end. These transfer to
trade receivables once billing occurs. All accrued income at a given reporting
date is billed within the following financial year and is classified in
current assets. Deferred income at a given reporting date is recognised as
revenue in the following financial year once performance obligations are
satisfied and is classified in current liabilities.
⁽¹⁾ As explained in Note 1.24, reported operating segments have changed
at 31 January 2022 as a result of a change in internal operating structure;
consequently, all prior period information has been restated on the new basis.
In addition, South African and Mexican operations have been restated from the
International segment to Discontinued in the 6-month period to 31 January
2021, as explained in Note 12.
4 Government Grants
Grant income recognised from government grants recognised in Cost of Sales and
Administrative Expenses are as follows:
6 months to 31/01/22 6 months to 31/01/21 12 months to 31/07/21
Continuing operations £'000 £'000 £'000
UK Government Coronavirus Job Retention Scheme grant income recognised in Cost - 43 43
of Sales for temporary workers
UK Government Coronavirus Job Retention Scheme grant income recognised in - 458 458
Administrative Expenses for employees
Total - 501 501
As a response to the COVID-19 global pandemic, the Group made use of the UK
Government's Coronavirus Job Retention Scheme (6 months to 31 January 2021:
claim period is from August 2020 to November 2020, 12 months to 31 July 2021:
claim period is from August 2020 to November 2020). Under this scheme, Her
Majesty's Revenue & Customs (HMRC) provides UK companies with a
non-refundable grant equivalent to a portion of wages, National Insurance
contributions and pension contributions for employees and temporary workers
who were retained in employment but placed on furlough. From 1 August 2021
National Insurance contributions and pension contributions were no longer
eligible for claims. When considering temporary workers, the contractors
employed by Gattaca's clients that Gattaca provides payroll services to and
whose costs are recognised as Cost of Sales by Gattaca, are also considered
eligible.
As the scheme was conditional upon the Group retaining its employees in
employment, or the temporary contract workers being retained by their
employers, whilst they are furloughed during the COVID-19 pandemic, it is
designed to compensate companies for staff or temporary worker costs incurred.
As all claims submitted for all periods have been received, the Group
considers the scheme meets the definition of a government grant as set out in
IAS 20 and has accounted for it as such. For grants received for Gattaca's
employees on furlough, the Group has presented the grant income as a deduction
to staff costs presented in Administrative Expenses in the Income Statement;
for grants received for temporary contract workers of Gattaca's clients on
furlough, the Group has presented the grant income as a deduction to Cost of
Sales.
5 Taxation
21
6 months to 31/01/22 Restated 6 months ⁽¹⁾ ⁽²⁾ Restated 12 months ⁽¹⁾ to 31/07/21
unaudited to 31/01/21
unaudited
Total Total Total
Analysis of (credit)/charge in the period for continuing operations £'000 £'000 £'000
(Loss)/profit before tax for continuing operations (2,542) (310) 812
(Loss)/profit before tax multiplied by the standard rate of corporate tax in (483) (59) 154
the UK of 19% (31 January 2021: 19.0%, 31 July 2021: 19.0%)
Expenses not deductible for tax purposes and goodwill impairment loss 360 3 139
Income not taxable (10) - -
Effect of share-based payments 12 (4) (19)
Irrecoverable withholding tax 2 1 56
Changes in tax rate (25) - (29)
Overseas losses not recognised as deferred tax assets 21 (49) 46
Difference between UK and overseas tax rates 3 17 (85)
Adjustment to tax charge in respect of previous periods - (2) (221)
Total taxation (credit)/charge for the period for continuing operations (120) (93) 41
Total taxation (credit)/charge for the period for discontinued operations (33) 22 (15)
Deferred tax assets of £470,000, after offset against deferred tax
liabilities, have been recognised at 31 January 2022 in respect of trading
losses in the UK, on the basis that future taxable profits are expected to be
available for the losses to be utilised against.
(¹) The prior period comparative figures have been restated, following the
adoption of the IFRS Interpretations Committee's decision on configuration or
customisation costs in a cloud computing arrangement. The pre-tax restatements
result in restated deferred tax assets in these prior periods, which unwind in
the year ending 31 July 2022 when current year tax deductions are available.
(²) 6 months to January 2021 figures have been restated for the presentation
of discontinued operations following announcements relating to the full
closure of our Mexico operations and sale of our South African recruitment
operations on 30 July 2021.
6 Earnings Per Share
Earnings per share (EPS) has been calculated by dividing the consolidated
profit or loss after taxation attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue during the period.
Diluted earnings per share has been calculated on the same basis as above,
except that the weighted average number of ordinary shares that would be
issued on the conversion of all the dilutive potential ordinary shares
(arising from the Group's share option schemes) into ordinary shares has been
added to the denominator. Share options are treated as dilutive when, at the
reporting date, they would be issuable had the performance year ended at that
date.
The Group has dilutive potential ordinary shares, being the LTIP and
Zero-priced share options. The number of shares that could have been acquired
at fair value (determined as the average annual market share price of the
Company's shares) is calculated based on the monetary value of the
subscription rights attached to the outstanding share options.
The effect of potential ordinary shares are reflected in diluted EPS only when
they are dilutive. Potential ordinary shares are considered dilutive when
their inclusion in the calculation would decrease EPS, or increase the loss
per share from continuing operations in accordance with IAS 33. This is
regardless of whether the potential ordinary shares are dilutive for EPS from
total operations. The effect of potential ordinary shares are considered
dilutive for the year ended 31 July 2021 and therefore have been included in
the calculations below. The effect of potential ordinary shares are not
considered dilutive for the 6 months to 31 January 2022 or the 6 months to 31
January 2021 and therefore have not been included in the calculations below.
There are no changes to the profit numerator as a result of the dilution
calculation.
The earnings per share information has been calculated as follows:
6 months to 31/01/22 Restated ⁽¹⁾ Restated ⁽¹⁾
unaudited 6 months to 31/01/21 12 months to 31/07/21
unaudited
Total earnings £'000 £'000 £'000
Total loss attributable to ordinary share holders (3,065) (411) (437)
Number of shares 000's 000's 000's
Basic weighted average number of ordinary shares in issue 32,290 32,290 32,290
Dilutive potential ordinary shares - - 68
Diluted weighted average number of shares 32,290 32,290 32,358
Total earnings per share pence Restated ⁽²⁾ Restated ⁽²⁾
pence pence
Earnings per ordinary share - Basic (9.5) (1.3) (1.4)
- Diluted (9.5) (1.3) (1.4)
Earnings for continuing operations £'000 Restated ⁽¹⁾ Restated ⁽¹⁾
£'000 £'000
Total (loss)/profit for period (2,422) (217) 771
Total earnings per share for continuing operations pence Restated ⁽²⁾ Restated ⁽²⁾
pence pence
Earnings per ordinary share from continuing operations - Basic (7.5) (0.7) 2.4
- Diluted (7.5) (0.7) 2.4
Earnings for discontinuing operations £'000 Restated ⁽¹⁾ Restated ⁽¹⁾
£'000 £'000
Total loss for the period (643) (194) (1,208)
Total earnings per share for discontinuing operations pence Restated ⁽²⁾ Restated ⁽²⁾
pence pence
Earnings per ordinary share from discontinuing operations - Basic (2.0) (0.6) (3.7)
- Diluted (2.0) (0.6) (3.7)
Earnings from continuing underlying operations £'000 Restated ⁽¹⁾ Restated ⁽¹⁾
£'000 £'000
Total (loss)/profit for the period (247) - 1,703
Total earnings per share for continuing underlying operations pence Restated ⁽²⁾ Restated ⁽²⁾
pence pence
Earnings per ordinary share for continuing underlying operations - Basic (0.8) - 5.3
- Diluted (0.8) - 5.3
⁽¹⁾ Historical financial information has been restated to account for the
impact of the change in accounting policy in relation to SaaS arrangements as
explained in Note 1.24. In addition, 6 months to January 2021 figures have
been restated for the presentation of discontinued operations as explained in
Note 12.
⁽²⁾ As explained above, EPS for year ended 31 July 2021 has been restated
due to the restated results for the year. For the 6 months to 31 January 2021
the effect of potential ordinary shares is no longer considered to be
dilutive, as such, EPS has been restated as a result of a change in result, as
well as a change in the number of shares included in the calculations.
7 Intangibles
In the 6 months to 31 January 2022, following the IFRS Interpretation
Committee's agenda decision published in April 2021, the Group changed its
accounting policy relating to the capitalisation of certain software costs,
specifically relating to the capitalisation of implementation costs such as
configuration and customisation costs for cloud-based software under
Software-as-a-service (SaaS) arrangements. Please refer to Note 1.24 for more
details. The change of the accounting policy has resulted in a
reclassification of certain cloud-based software intangible assets to either a
prepaid asset in the Statement of Financial Position or to an expense in the
Income Statement, impacting both the current and prior periods presented.
Goodwill Customer Relationships Trade Names Other Software and software licenses Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost At 1 August 2020 28,739 22,245 5,346 3,809 2,521 62,660
Additions - - - - 937 937
Reclassification to prepayments as a result of change of accounting policy - - - - (98) (98)
Reclassification to Income Statement as a result of change of accounting - - - - (546) (546)
policy
At 31 January 2021 28,739 22,245 5,346 3,809 2,814 62,953
At 1 August 2020 28,739 22,245 5,346 3,809 2,521 62,660
Additions - - - - 1,872 1,872
Reclassification to assets held for sale - - - - (2) (2)
Reclassification to prepayments as a result of change of accounting policy - - - - (245) (245)
Reclassification to Income Statement as a result of change of accounting - - - - (1,544) (1,544)
policy
At 31 July 2021 28,739 22,245 5,346 3,809 2,602 62,741
Disposals - - - - (70) (70)
At 31 January 2022 28,739 22,245 5,346 3,809 2,532 62,671
Amortisation and impairment At 1 August 2020 24,382 20,530 5,057 3,527 2,216 55,712
Amortisation for the period - 119 19 55 109 302
Reclassification to prepayments as a result of change of accounting policy - - - - (4) (4)
Reclassification to Income Statement as a result of change of accounting - - - - (41) (41)
policy
At 31 January 2021 24,382 20,649 5,076 3,582 2,280 55,969
At 1 August 2020 24,382 20,530 5,057 3,527 2,216 55,712
Amortisation for the period - 332 45 171 422 970
Reclassification to assets held for sale - - - - (1) (1)
Reclassification to prepayments as a result of change of accounting policy - - - - (19) (19)
Reclassification to Income Statement as a result of change of accounting - - - - (264) (264)
policy
At 31 July 2021 24,382 20,862 5,102 3,698 2,354 56,398
Amortisation for the period - 134 22 108 87 351
Impairment 2,000 - - - - 2,000
Released on disposal - - - - (58) (58)
At 31 January 2022 26,382 20,996 5,124 3,806 2,383 58,691
Net book value At 31 January 2021 4,357 1,596 270 227 534 6,984
At 31 July 2021 4,357 1,383 244 111 248 6,343
At 31 January 2022 2,357 1,249 222 3 149 3,980
The costs and carrying amount of goodwill allocated to Cash Generating Unit's
(CGU's) before impairment is as follows:
22 31/01/21
6 months 6 months 31/01/21 12 months 31/07/21
31/01/22 unaudited
unaudited
£'000 £'000 £'000
Energy (previously UK Engineering) 1,712 1,712 1,712
Infrastructure - RSL Rail (previously Resourcing Solutions Limited) 2,645 2,645 2,645
Total 4,357 4,357 4,357
As part of the operational restructure discussed further in Note 2, the Cash
Generating Unit's (CGU's) to which goodwill and intangible assets have been
allocated to previously have been amended as follows: UK Engineering to Energy
which is a reportable segment, and Resourcing Solutions to Infrastructure -
RSL Rail, a sub-division of the reportable operating segment Infrastructure
for which distinct financial information is available but not used by the
Chief Operating Decision Maker (CODM). These changes best represent the
original business units that the assets were allocated to.
Impairment testing
Goodwill and intangible assets are reviewed and tested for impairment on an
annual basis or more frequently to determine if there is an indication of
impairment.
If any indication of impairment exists, then the recoverable amount of a CGU's
goodwill and intangible asset's recoverable amount is determined using
value-in-use calculations.
As a result of management's trading forecasts now being lower that those at
time of acquisition, total impairment losses of £2,000,000 (6 months to 31
January 2021: £nil, year to 31 July 2021: £nil) have been recorded in
respect of goodwill and acquired intangible assets within the Infrastructure -
RSL Rail CGU.
The key assumptions and estimates used when calculating a CGU's value-in-use,
are as follows:
Cash flows from operations
Cash flows from operations are based on the Group's 3 year business plan and
applying the over-arching Group NFI and cost growth rates for the 3 year
period on top of the FY22 full year forecast for the Energy and Infrastructure
- RSL Rail sectors.
Discount rates
The pre-tax rates used to discount the forecast cash flows ranged from 18.4%
to 18.9% (6 months to 31 January 2021: 14.4% to 14.9%, year to 31 July 2021:
15.0% to 16.0%) reflecting the Group's weighted average cost of capital,
adjusted for specific risks associated with the asset's estimated cash flows.
The discount rate is based on the weighted average cost of capital (WACC). The
risk-free rate, based on government bond rates, is adjusted for equity and
industry risk premiums, reflecting the increased risk compared to an investor
who is investing the market as a whole. Net present values are calculated
using pre-tax discount rates derived from the Group's post-tax WACC of 13.3%
(6 months to 31 January 2021: 12.9%, year to 31 July 2021: 12.5%) for CGUs
assessed.
Growth rates
The medium-term growth rates are based on management forecasts, reflecting
past experience and economic environment. Long-term growth rates are based on
external sources of an average estimated growth rate of 2.0% (6 months to 31
January 2021: 2.0%, year to July 2021: 2.0%), using a weighted average of
operating country real growth expectations.
As a result of these forecasts, total impairment losses of £2,000,000 (6
months to 31 January 2021: £nil, year to 31 July 2021: £nil,) have been
recorded in respect of goodwill within the Infrastructure - RSL Rail CGU.
6 months 6 months 6 months 6 months 12 months 31/07/21 12 months 31/07/21
31/01/22 31/01/22 31/01/22 31/01/22
unaudited unaudited unaudited unaudited
Goodwill Intangible assets Goodwill Intangible assets Goodwill Intangible assets
Impairment expenses £'000 £'000 £'000 £'000 £'000 £'000
Energy (previously UK Engineering) - - - - - -
Infrastructure - RSL Rail (previously Resourcing Solutions Limited) 2,000 - - - - -
Total 2,000 - - - - -
Sensitivity analysis has been performed to show the impact of reasonable or
possible changes in key assumptions, in particular with reference to the
economic uncertainty surrounding the ongoing recovery from the COVID-19
pandemic. An increase in the post-tax discount rate by a factor of 0.2% to
13.5%, or a reduction in the long-term growth rate to 1.8%, would not trigger
a further material impairment for any of the CGU's. For both the
Infrastructure - RSL Rail CGU and the Energy CGU, a reduction of 33% in
management's mid-term forecasts for FY23-FY27 would not trigger any material
further impairment.
8 Trade and Other Receivables
6 months Restated Restated
31/01/22 6 months 31/01/21 12 months 31/07/21
unaudited unaudited
£'000 £'000 £'000
Trade receivables from contracts with customers, net of loss allowance 39,933 29,488 34,187
Other receivables 2,292 1,857 1,817
Prepayments 1,648 1,742 1,389
Accrued income 19,779 12,518 26,742
Total 63,652 45,605 64,135
Prepayments as at 31 January 2021 and 31 July 2021 have been restated as a
result of change of accounting policy in light of the International Financial
Reporting Standards Interpretations Committee (IFRIC) latest guidance on SaaS
arrangements. Please refer to Note 1.24 for more details.
Included in other receivables as at 31 January 2022 is £134,000 in respect of
deferred consideration from the South African entities' disposal which is due
after more than one year.
Accrued income relates to the Group's right to consideration for temporary and
permanent placement made but not billed at the year end. These transfer to
trade receivables once billing occurs.
The Directors consider that the carrying amount of trade and other receivables
approximates to the fair value.
Impairment of trade receivables from contracts with customers
6 months 6 months 12 months
31/01/22 31/01/21 31/07/21
unaudited unaudited
£'000 £'000 £'000
Trade receivables from contracts with customers, gross amounts 42,591 33,693 37,636
Loss allowance (2,658) (4,205) (3,449)
Trade receivables from contracts with customers, net of loss allowance 39,933 29,488 34,187
Trade receivables are amounts due from customers for services performed in the
ordinary course of business. They are generally settled within 30-60 days and
are therefore all classified as current.
The Group uses a third party credit scoring system to assess the
creditworthiness of potential new customers before accepting them. Credit
limits are defined by customer based on this information. All customer
accounts are subject to review on a regular basis by senior management and
actions are taken to address debt aging issues.
Trade receivables are subject to the expected credit loss model. The Group
applies the IFRS 9 simplified approach to measuring expected credit losses
which uses a lifetime expected loss allowance for all trade receivables.
To measure the expected credit losses, trade receivables have been grouped
based on shared credit risk characteristics by geographical region or customer
industry.
The expected loss rates are based on the payment profiles of sales over a
period of 36 months before the relevant period end and the corresponding
historical credit losses experienced within this period. The historic loss
rates are adjusted to reflect any relevant current and forward-looking
information expected to affect the ability of customers to settle the
receivables. Additionally, the projected post-COVID economic recovery based on
external reports, forecast data and scenario analysis has been taken into
account when assessing the credit risk profiles for specific industries and
geographies.
The loss allowance for trade receivables was determined as follows:
31 January 2022 unaudited Current More than 30 days past due More than 60 days past due More than 90 days due Total
Weighted expected loss rate (%) 3.8% 4.7% 5.7% 53.8%
Gross carrying amount - trade receivables (£'000) 37,945 2,300 351 1,995 42,591
Loss allowance (£'000) 1,456 109 20 1,073 2,658
31 January 2021 unaudited Current More than 30 days past due More than 60 days past due More than 90 days due Total
Weighted expected loss rate (%) 8.3% 6.1% 6.2% 57.6%
Gross carrying amount - trade receivables (£'000) 19,424 9,554 1,384 3,331 33,693
Loss allowance (£'000) 1,621 581 86 1,917 4,205
31 July 2021 Current More than 30 days past due More than 60 days past due More than 90 days due Total
Weighted expected loss rate (%) 5.2% 5.0% 18.6% 60.9%
Gross carrying amount - trade receivables (£'000) 33,741 654 743 2,498 37,636
Loss allowance (£'000) 1,756 33 138 1,522 3,449
The loss allowance for trade receivables at the period end reconciles to the
opening loss allowance as per below:
6 months 6 months 12 months 31/07/21
31/01/22 31/01/21
unaudited unaudited
£'000 £'000 £'000
Opening loss allowance for the period 3,449 3,987 3,987
Increase/(release) in loss allowance recognised in profit and loss during the 5 439 (296)
period
Receivable written off during the period as uncollectable (796) (221) (242)
Closing loss allowance for the period 2,658 4,205 3,449
Impairment of accrued income
6 months 6 months 12 months 31/07/21
31/01/22 31/01/21
unaudited unaudited
£'000 £'000 £'000
Gross accrued income 20,621 12,743 27,807
Loss allowance (842) (225) (1,065)
Closing loss allowance for the period 19,779 12,518 26,742
31 January 2022 unaudited Current More than 30 days past due More than 60 days past due More than 90 days due Total
Weighted expected loss rate (%) 2.5% 2.5% 2.5% 32.1%
Gross carrying amount - trade receivables (£'000) 17,932 903 690 1,096 20,621
Loss allowance (£'000) 450 23 17 352 842
31 January 2021 unaudited Current More than 30 days past due More than 60 days past due More than 90 days due Total
Weighted expected loss rate (%) 0.0% 0.0% 0.0% 14.2%
Gross carrying amount - trade receivables (£'000) 9,753 640 765 1,585 12,743
Loss allowance (£'000) - - - 225 225
31 July 2021 Current More than 30 days past due More than 60 days past due More than 90 days due Total
Weighted expected loss rate (%) 2.9% 2.7% 2.6% 23.7%
Gross carrying amount - trade receivables (£'000) 21,455 3,546 1,519 1,287 27,807
Loss allowance (£'000) 624 96 40 305 1,065
The loss allowance for accrued income at the period end reconciles to the
opening loss allowance as per below:
6 months 6 months 12 months 31/07/21
31/01/22 31/01/21
unaudited unaudited
£'000 £'000 £'000
Opening loss allowance for the period 1,065 269 269
Amount utilised in the period (350) - -
Increase/(release) in loss allowance recognised in profit and loss during the 127 (44) 796
period
Closing loss allowance for the period 842 225 1,065
9 Loans and Borrowings
6 months 6 months 12 months 31/07/21
31/01/22 31/01/21
unaudited unaudited
£'000 £'000 £'000
Working capital facility 8,890 4,338 9,348
Finance costs capitalised - - -
Bank loans and borrowings due in less than one year 8,890 4,338 9,348
Bank loans and borrowings due in more than one year - - -
Total bank loans and borrowings 8,890 4,338 9,348
The Group has a non-recourse working capital facility. Under the terms of the
non-recourse facility, the trade receivables assigned to the facility are
owned by HSBC and so have been de-recognised from the Group's Statement of
Financial Position; in addition, the non-recourse working capital facility
does not meet the definition of loans and borrowings under IFRS. The Group
continues to collect cash from trade receivables assigned to the non-recourse
facility on behalf of HSBC which is then transferred to them periodically each
month. Any cash collected from trade receivables under the non-recourse
facility at the end of reporting period that had not been transferred to HSBC,
is presented as restricted cash included within the Group's cash balance. At
all the reporting periods above, the Group had agreed banking facilities with
HSBC totalling £75m Invoice Financing working capital facility (recourse and
non-recourse).
The Group's working capital facilities are secured by way of an all assets
debenture, which contains fixed and floating charges over the assets of the
Group. This facility allows certain companies within the Group to borrow up to
90% of invoiced or uninvoiced trade receivables up to a maximum of £75m.
Interest is charged on the recourse borrowings at a rate of 1.75% (year to 31
July 2021: 1.75%) over HSBC Bank base rate of 0.5% (year to 31 July 2021:
0.1%).
In October 2020, the Group repaid the £7.5m Revolving Credit Facility in full
and no longer is required to comply with certain financial covenants over the
Revolving Credit Facility.
10 Lease
The balance sheet shows the following amounts related to leases where the
Group is a lessee.
Right-of-use assets Buildings Vehicles Other Total
£'000 £'000 £'000 £'000
Cost At 1 August 2020 10,004 348 16 10,368
Effect of reassessment of lease term 283 - 5 288
Effect of movement in exchange rates 7 - 1 8
At 31 January 2021 10,294 348 22 10,664
At 1 August 2020 10,004 348 16 10,368
Effect of reassessment of lease term 416 - 5 421
Effect of movement in exchange rates 41 - 1 42
Reclassification to assets held for sale (216) - (14) (230)
At 31 July 2021 10,245 348 8 10,601
Additions 118 30 - 148
Change of lease consideration (20) (9) - (29)
Effect of movement in exchange rates 17 - - 17
At 31 January 2022 10,360 369 8 10,737
Accumulated depreciation At 1 August 2020 2,847 176 7 3,030
Depreciation charge 866 83 4 953
Effect of movement in exchange rates (1) - (1) (2)
At 31 January 2021 3,712 259 10 3,981
At 1 August 2020 2,847 176 7 3,030
Depreciation charge 1,749 119 7 1,875
Impairment 183 - - 183
Effect of movement in exchange rates 40 - - 40
Reclassification to assets held for sale (190) - (11) (201)
At 31 July 2021 4,629 295 3 4,927
Depreciation charge 698 29 1 728
Effect of movement in exchange rates 13 - - 13
At 31 January 2022 5,340 324 4 5,668
Net book value At 31 January 2021 6,582 89 12 6,683
At 31 July 2021 5,616 53 5 5,674
At 31 January 2022 5,020 45 4 5,069
At 31 January 2022, included within property right-of-use asset is
dilapidation costs of £1,504,000 (31 January 2021: £1,627,000, 31 July 2021:
£1,491,000) and net book value of £440,000 (31 January 2021: £662,000, 31
July 2021: £526,000).
Properties Vehicles Other Total
unaudited unaudited unaudited 31 January 22
Lease liabilities £'000 £'000 £'000 £'000
Current 1,448 27 2 1,477
Non-current 3,399 19 3 3,421
4,847 46 5 4,898
Properties Vehicles Other Total
unaudited unaudited unaudited 31 January 21
Lease liabilities £'000 £'000 £'000 £'000
Current 1,833 72 4 1,909
Non-current 5,030 20 6 5,056
6,863 92 10 6,965
Total
Properties Vehicles Other 31 July 21
Lease liabilities £'000 £'000 £'000 £'000
Current 1,423 55 2 1,480
Non-current 4,268 9 4 4,281
5,691 64 6 5,761
Lease liabilities for properties have lease terms of between one and seven
years (31 January 2021: one and eight years, 31 July 2021: one and seven
years).
Reconciliation of lease liabilities movement in the period Properties Vehicles Other Total
£'000 £'000 £'000 £'000
At 1 August 2020 7,551 176 9 7,736
Lease payments (1,037) (87) (4) (1,128)
Interest expense on lease liabilities 79 3 - 82
Effect of reassessment of lease term 257 - 5 262
Effect of movement in exchange rates 13 - - 13
At 31 January 2021 6,863 92 10 6,965
At 1 August 2020 7,551 176 9 7,736
Lease payments (2,387) (116) (8) (2,511)
Interest expense on lease liabilities 151 4 1 156
Effect of reassessment of lease term 268 - 5 273
Effect of movement in exchange rates 120 - 1 121
Liabilities directly associated with assets held for sale (12) - (2) (14)
At 31 July 2021 5,691 64 6 5,761
Additions 110 30 - 140
Lease payments (1,002) (31) (1) (1,034)
Interest expense on lease liabilities 63 1 - 64
Changes of lease consideration (20) (18) - (38)
Effect of movement in exchange rates 5 - - 5
At 31 January 2022 4,847 46 5 4,898
11 Share Capital
Authorised share capital 6 months 6 months 12 months 31/07/21
31/01/22 31/01/21
unaudited unaudited
£'000 £'000 £'000
40,000,000 ordinary shares of £0.01 each 400 400 400
Allotted, called up, and fully paid 6 months 6 months 12 months 31/07/21
31/01/22 31/01/21
unaudited unaudited
£'000 £'000 £'000
Ordinary shares of £0.01 each 323 323 323
The movement in the number of shares in issue is shown below:
'000
In issue at 1 August 2020 32,290
Exercise of share options -
In issue at 31 January 2021 32,290
In issue at 1 August 2020 32,290
Exercise of share options -
In issue at 31 July 2021 32,290
In issue at 1 August 2021 32,290
Exercise of share options -
In issue at 31 January 2022 32,290
12 Discontinued Operations
2022
The assets and liabilities relating to South African recruitment operations
have been sold at the end of November 2021. The net loss of £55,000 from the
South African recruitment operation disposal has been recognised in
non-underlying costs. The deferred consideration of £134,000 has been
recognised in the other receivables. There were no further changes to
discontinued operations during the period.
2021
On 30 July 2021, the Group announced the decision to close its Mexico
operations. In addition, the Group also announced a management buy-out
agreement of the South Africa recruitment operations which is expected to
complete within one year of 31 July 2021. The Fulfilment, Solutions and Group
Support functions of the South African operations will be retained and
transferred to a new South African entity. As a result, the Group has
reclassified its entire Mexican operations and South African recruitment
operations as discontinued in the consolidated financial statements for the
year ended 31 July 2021.
6 months to 31/01/22 Restated 6 months ⁽¹⁾ 12 months to 31/07/21
unaudited to 31/01/21
unaudited
Total Total Total
£'000 £'000 £'000
Revenue - 1,682 3,432
Cost of sales (10) (1,148) (2,385)
Gross (loss)/profit (10) 534 1,047
Administrative expenses ((2)) (718) (753) (2,197)
Loss from operations (728) (219) (1,150)
Finance income 59 64 39
Finance cost (7) (17) (112)
Loss before taxation (676) (172) (1,223)
Taxation 33 (22) 15
Loss after taxation from continuing operations (643) (194) (1,208)
Exchange differences on translation of discontinued operations 747 48 48
Other comprehensive profit/(loss) from discontinued operations 104 (146) (1,160)
Cash flows from discontinued operations
22 21
6 months Restated 6 months ⁽¹⁾ 12 months 31/07/21
31/01/22 31/01/21
unaudited unaudited
£'000 £'000 £'000
Net cash used in operating activities (990) (1,396) (1,348)
Net cash used in investing activities (45) - (32)
Net cash used in financing activities (68) (67) (139)
Effects of exchange rates on cash and cash equivalents (53) 16 (15)
Net decrease in cash and cash equivalents from discontinued operations (1,156) (1,447) (1,534)
⁽¹⁾ 6 months to January 2021 figures have been rested for the
presentation of Mexican and South African discontinued operations as explained
above.
⁽²⁾ Included in administrative expenses are £127,000 (6 months to 31
January 2021: £132,000, 12 months to 31 July 2021: £693,000) of
non-underlying items relating to employee costs, professional fees and
administrative expenses relating to business closures. In addition, it
includes net impairment reversals on trade receivables from discontinued
operations of £40,000 (6 months to 31 January 2021 restated: impairment
reversals of £82,000, 12 months to 31 July 2021: impairment losses of
£80,000).
13 Net Debt
Net debt is the total amount of cash and cash equivalents less
interest-bearing loans and borrowings, including finance lease liabilities.
Net cash flows include the net drawdown of loans and borrowings and cash
interest paid relating to loans and borrowings.
1 August 2021 Net cash flows Non-cash movements 31 January 2022
31 January 2022 unaudited £'000 £'000 £'000 £'000
Cash and cash equivalents 29,238 (15,507) - 13,731
Interest-bearing term loan - - - -
Working capital facilities (9,348) 458 - (8,890)
Lease liabilities (5,761) 1,034 (171) (4,898)
Total net cash/(debt) 14,129 (14,015) (171) (57)
Capitalised finance costs - - - -
Total net cash/(debt) after capitalised finance costs 14,129 (14,015) (171) (57)
1 August 2020 Net cash flows Non-cash movements 31 January 2021
31 January 2021 unaudited £'000 £'000 £'000 £'000
Cash and cash equivalents 34,796 (7,714) - 27,082
Interest-bearing term loan (7,500) 7,500 - -
Working capital facilities (151) (4,187) - (4,338)
Lease liabilities (7,736) 1,128 (357) (6,965)
Total net cash 19,409 (3,273) (357) 15,779
Capitalised finance costs 196 - (196) -
Total net cash/(debt) after capitalised finance costs 19,605 (3,273) (553) 15,779
.
1 August 2020 Net cash flows Non-cash movements 31 July 2021
31 July 2021 £'000 £'000 £'000 £'000
Cash and cash equivalents 34,796 (5,558) - 29,238
Interest-bearing term loan (7,500) 7,500 - -
Working capital facilities (151) (9,197) - (9,348)
Lease liabilities (7,736) 2,511 (536) (5,761)
Total net cash 19,409 (4,744) (536) 14,129
Capitalised finance costs 196 - (196) -
Total net cash after capitalised finance costs 19,605 (4,744) (732) 14,129
14 Dividends
The Group declared a final dividend in respect of the year ended 31 July 2021
on 4 November 2021, which was paid on 10 December 2021.
22 21
6 months 6 months 12 months 31/07/21
31/01/22 31/01/21
unaudited unaudited
£'000 £'000 £'000
Equity dividends paid at 1.5 pence per share (6 months to 31 January 2021: nil 484 - -
pence, 12 months to 31 July 2021: nil pence)
15 Contingent Liabilities
We continue our cooperation with the United States Department of Justice and
in the 6 month period to 31 January 2022 have incurred £27,000 (6 months to
31 January 2021: £29,000, year to 31 July 2021: £29,000) in advisory fees on
this matter. The Group is not currently in a position to know what the outcome
of these enquiries may be and therefore we are unable to quantify the likely
outcome for the Group.
16 Events after the Reporting Period End
In March 2022, the Group exercised the break clause relating to one of its UK
property leases, shortening the lease term from March 2027 to September 2022.
This has been disclosed as a non-adjusting post balance sheet event.
17 Statement of Directors' Responsibilities
The Directors' confirm that these condensed interim Financial Statements have
been prepared in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and that the
interim management report includes a fair view of the information required by
DTR 4.2.7 and DTR 4.2.8, namely:
● an indication of important events that have occurred during the first six
months and their impact on the condensed set of Financial Statements, and a
description of the principal risks and uncertainties for the remaining six
months of the financial year; and
● material related-party transactions in the first six months and any material
changes in the related-party transactions described in the last annual report.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR BIGDXBUXDGDGRecent news on Gattaca
See all newsREG - Gattaca PLC - Interim Results
AnnouncementREG - Gattaca PLC - BLOCK LISTING SIX MONTHLY RETURN
AnnouncementREG - Gattaca PLC - Trading Update
AnnouncementREG - Gattaca PLC - Further re EBT Share Purchase Programme
AnnouncementREG - Gattaca PLC - Director/PDMR Shareholding
Announcement