REG - Gattaca PLC - Interim results
30/03/2023 07:00
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RNS Number : 6906U Gattaca PLC 30 March 2023
30 March 2023
Gattaca plc
("Gattaca" or "the Group")
Interim Results for the six months ended 31 January 2023
Evolution of strategy
Gattaca plc ("Gattaca" or the "Group"), the specialist STEM staffing business,
today announces its financial results for the six months ended 31 January
2023.
Financial Highlights
2023 H1 2022 H1
Continuing reported Continuing underlying(2) Continuing reported Continuing underlying Continuing reported Continuing underlying
£m £m £m £m % %
Revenue 194.7 194.7 202.2 202.2 -4% -4%
Net Fee Income (NFI)(1) 22.7 22.7 21.6 21.6 5% 5%
EBITDA 1.4 1.7 (1.2) 0.9 n/a 91%
Profit / (Loss) before tax 0.8 0.9 (2.5) (0.3) n/a n/a
Profit / (Loss) after tax 0.6 0.7 (2.4) (0.2) n/a n/a
Discontinued operations (0.2) n/a (0.6) n/a n/a n/a
Reported profit / (loss) after tax 0.4 n/a (3.1) n/a n/a n/a
Basic earnings per share 1.7p 2.1p (7.5)p (0.8)p
Diluted earnings per share 1.7p 2.0p (7.5)p (0.8)p
Interim dividend 0p n/a 0p n/a
Net cash / (debt) 20.9 n/a (0.1) n/a
Highlights
· Group NFI of £22.7 million, up 5% year-on-year
o UK NFI up 6% at £21.4 million (2022 H1: £20.3 million)
o Energy, Defence and Infrastructure, representing 59% of Group NFI,
delivered strong growth
o Contract NFI, which grew by 2% year-on-year, represents 67% of Group NFI
(2022 H1: 70%, FY22: 71%)
o Contract vs Perm split in 2023 H1 was as expected with changing client
mix; ratio will rebalance towards Contract as contract market recovers
o Permanent NFI up 13% year-on-year, representing 33% of Group NFI (2022 H1:
30%)
· Early results from our increased external focus with two major
client account wins in 2023 H1
· Group underlying profit before tax of £0.9m (2022 H1: loss
before tax £(0.3)m), reflecting focus on productivity improvements and cost
management
· NFI productivity per sales head improved by 20%, with enhanced
performance management, total sales headcount in period down 11% versus 31
July 2022.
· Group net cash of £20.9 million (31 July 2022: £12.3 million)
· No interim dividend (2022 H1: nil pence); the Board remains
committed to reviewing dividends at the year end
Strategic update
Continued focus on developing the four identified strategic priorities:
· External focus
o Implemented client and candidate service feedback surveys, with average
NPS of 8.5 and 8.9 respectively
o Improved yield by increasing average contingent perm fee by 6%, and
average contract timesheet value by 9%
o Implemented two major client accounts in 2023 H1
o Reduced fulfilment headcount, increased sales effort, linked to major
account service changes and market dynamics
o Launched plans to simplify Brand Architecture, due to Go Live in Q4
· Culture
o Completed two quarters of our new Performance Scorecard process
o Integrated attrition reduction targets into our FY23 LTIP share option
grant
o Engagement score improved to 8.1 at 2023 H1, up from 7.6 at FY22
o Attrition at 31 January 2023 of 40% and improving into H2; many regretted
leavers returned to the business since new management appointed
· Operational performance
o Successfully implemented nine automations, positively impacting customer
experience, engagement, operational efficiency and data quality
o Exited low margin work, resulting in an increase in +0.7 pp in Contract
margin
o Increased sales productivity due to enhanced group wide management
information, growing average NFI per sales head 20%, and 14% per total head
o Appointed a Head of Business Improvement leading a team driving positive
change in how we operate
· Cost rebalancing
o Continued focus on reducing third party costs, UK footprint from six
buildings down to four, increasing collaboration and reducing cost
o Implemented new automation and sales enablement technologies
o Began the move toward a 'single pay' arrangement, with the majority of our
contractor base expected to have migrated in 2023 H2, the first step to
simplifying the corporate structure to drive down costs
o Moved almost 70% of our manual time sheeting contractors to online
timesheet submission, reducing administrative burden and increasing accuracy
Work on these strategic priorities will continue through 2023 H2 and onwards
into FY24 as we focus on building back to sustained growth.
Outlook
Looking forward there remains a high level of macro-economic uncertainty;
however, we continue to see good levels of vacancies in the STEM markets that
we support, which, when combined with talent shortages, drives demand. The
shift in demand towards contract labour is in line with our focus and
traditional strength of providing contract resource.
The development of our strategic priorities will continue to strengthen the
platform from which we grow in the future.
Matthew Wragg, Chief Executive Officer said:
"I am pleased that we have continued to progress during the first half of the
year. As we continue to build to our full potential, the improvements in
culture, staff retention and productivity are signs that we are on the right
track to be a stronger business.
We continue to remain conscious of the macro-economic environment, which will
have naturally slowed our speed of recovery, the markets that we operate in
and the skillsets that we provide demonstrate the right long-term
fundamentals."
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. NFI is calculated as revenue less contractor payroll costs
2. Continuing underlying results exclude the NFI and (losses) before
taxation of discontinued operations (2023 H1: £(0.2)m, 2022 H1: £(0.7)m),
non-underlying items within administrative expenses primarily related to
restructuring costs (2023 H1: £0.2m, 2022 H1: nil), amortisation of acquired
intangibles (2023 H1: £0.0m, 2022 H1: £0.3m), impairment of acquired
intangibles (2023 H1: nil, 2022 H1: £2.0m), and exchange gains from
revaluation of foreign assets and liabilities (2023 H1: £0.2m, 2022 H1:
£0.1m).
For further information, please contact:
Gattaca plc +44 (0) 1489 898989
Matthew Wragg, Chief Executive Officer
Oliver Whittaker, Chief Financial Officer
Liberum Capital Limited (Nomad and Broker) +44 (0) 20 3100 2000
Lauren Kettle Richard Lindley
Operational Performance
Net Fee Income (NFI) £m 2023 H1 Restated(1) Change
2022 H1
Infrastructure 7.2 6.7 7%
Defence 4.2 3.2 31%
Mobility 2.2 2.2 n/a
Energy 2.1 1.8 17%
Technology, Media & Telecoms 1.2 2.2 -45%
Gattaca Projects(1) 1.0 0.6 67%
Other(1) 3.5 3.6 -3%
Total UK 21.4 20.3 5%
International 1.3 1.3 n/a
Continuing Total Group NFI 22.7 21.6 5%
1. The Gattaca Projects operating segment meets the quantitative thresholds to
be reported separately for the first time in the 6-month period to 31 January
2023. In line with the requirements of IFRS 8, comparative periods have been
restated to present the Gattaca Projects segment separately from the "Other"
segment in which it had previously been presented.
Infrastructure
Infrastructure NFI grew by 7% year-on-year, with robust growth in the
Transportation and Water and Utilities sub-divisions, despite significant
underperformance in the Rail site sub-division and one major permanent
recruitment program. The demand for permanent candidates seen in FY22 has
lessened slightly in 2023 H1 in line with wider market trends, and contractor
demand has started to increase towards the end of 2023 H1. Trends in skills
that are highest in-demand are for Project Managers, Highways and
Infrastructure Engineers and Transport Planners, aligning to the current phase
of public sector works ongoing in the UK. Within the water market AMP7 spend
has moved into its delivery phase, delivering an increase of on-site work and
contractor requirements; AMP8 awards are starting to be announced. The
Government commitment to infrastructure programs is welcomed and Gattaca
continues to be well-placed, delivering resource into the private sector
companies who are actively working on the large regional and national projects
such as HS2, highway schemes and the SDF framework, all of which have a
healthy demand for talent.
Defence
Defence NFI grew by 31% year-on-year, pushed up by continuing high demand for
permanent talent, with contract labour needs also robust. Resource demand in
the UK Defence sector has increased by 15% over 2023 H1, on top of the
increases seen in salaries and pay rates. Recent Budget announcements from the
UK Government show commitment to £11bn of Defence spend over the next five
years, an increase in previous levels of investment. The market is well
recognised for stability during economic fluctuations and Gattaca's access to
the major UK market is strong, serving over half of the UK MoD top 100
suppliers, across engineering, technology, manufacturing, and IT skills, with
demand specifically for systems, software, and cyber security talent.
Mobility
NFI in our Mobility market for 2023 H1 was flat against last half-year,
despite a strong 2022 H2. As the Aerospace sub-division continues to recover
and sees significantly increased build demand from the major OEMS, the demand
for quality, manufacturing and production skills remains high. We are also
seeing the need for software, power electronics and systems engineering skills
remaining high across the Automotive sub-division as clients in the sector
continue to catch up on post-pandemic production backlogs. We have been
successful with several permanent RPO programs in this market, which means our
permanent demand has outweighed that of contract. Investment into the market
remains strong, reflective of the elevated level of project work across the
market; we are confident Gattaca's presence in this sector will continue to
rebuild alongside.
Energy
Energy NFI was up 17% year-on-year, primarily driven by pressures on global
energy production creating opportunity in the UK market, sector investment
focus is increasing on green energy and the use of technology. Gattaca is well
positioned to capture market opportunities in renewables, transmission and
distribution, nuclear and oil and gas markets. In particular, demand continues
to be focused on skills in project management, controls and design engineers
driven by the investment in programs.
Technology, Media & Telecoms (TMT)
TMT NFI has decreased by 45% year-on-year, against a strong 2022 H1; this
decline was largely driven by reduced demand across a large European RPO and
MSP contract. The demand for experienced labour remains competitive; the
much-publicised news of major technology companies reducing their workforces
has not impacted this need in the UK but has brought more candidates to the
market where there were previously shortages. Contract demand has increased,
and market focus remains around skills in digital transformation, development,
cloud, and security.
Gattaca Projects
Gattaca Projects NFI has grown by 67% year-on-year, although a large portion
of this is in relation to contract accounting on a long-term project which is
nearing the end of its delivery phase. Gattaca continues to invest in the
subcontracting market as we see solid opportunity growth for us. We will
continue to commit additional resource in this team as the pipeline of work
grows, and our capability increases.
UK Other
NFI across the aggregation of our other smaller markets was down 3%
year-on-year. Barclay Meade, our professional services brand, was up 5%
year-on-year driven by continued strong permanent market conditions and
sustained increases in salaries for head office skills in STEM companies.
Demand for professional skill sets across accounting and finance, procurement,
HR, and sales continues to be high in the permanent recruitment market with
candidate shortages still a challenge. Trading in our Consumer, Manufacturing
& Retail (CMR) was behind due to sharp downturns in production at some
large blue-collar contract clients. Within the general training and education
market we have actively taken the decision to reduce focus on the low margin
skills that Alderwood has been providing, to focus more effort on our core
markets and skills.
International
International NFI was down 3% year-on-year, primarily driven by the end of a
large RPO permanent deal in the US technology sector. In the wider market,
demand in North America is outstripping that in the UK and Europe, with
Gattaca putting an increased focus on growing its contracting workforce across
STEM skills. Skill trends in technology include cyber security, technology
sales, software development and 'big data', alongside more traditional
engineering skills across energy transmission and distribution,
infrastructure, and EPC. Gattaca has now aligned the cost base in North
America to focus on business development in technology skills and the Energy
market.
Group contractor and permanent fee mix
Contract fees accounted for 67% of continuing underlying NFI in 2023 H1 (2022
H1: 70%, FY22: 71%). During the period, the contract base was flat with
approximately 5,150 contractors.
Permanent fees accounted for 33% of continuing underlying NFI in 2023 H1 (2022
H1: 30%, FY22: 29%). In 2023 H1, we saw a sustained demand for permanent hires
in our contingent and solutions business across almost all our sectors, a
trend which has continued from FY22, with an increase of 11% across our
contingent placement fee. Aligned to the wider recruitment sector, we have
observed marginal lengthening of lead times and some hesitation on offers as
clients and candidates became nervous of a potential UK recession in early
2023.
People
Gattaca's headcount at 31 January 2023 was 497, a decrease of 43, or 8%, from
31 January 2022. This decrease was partly due to the loss of two large
resource intensive clients and performance management actions undertaken in
the sales and fulfilment divisions. The ratio of sales to support staff was
69:31 at 31 January 2023, compared to a ratio of 73:27 at 31 January 2022. The
Group are committed to grow sales staff above 75%.
Financial Overview
Revenue for the period was £194.7 million (2022 H1: £202.2 million, FY22:
£403.3 million), down 4% year-on-year. NFI of £22.7 million (2022 H1: £21.6
million, FY22: £44.1 million) represented a 5% year-on-year increase.
Contract NFI margin of 8.1% (2022 H1: 7.7%, FY22: 7.8%) was up 0.4 percentage
points compared with the same period in the prior year; this was driven by a
reduction in low-margin business, strategic pricing initiatives and
achievement of certain milestones on long-term contracts within Gattaca
Projects.
Continuing underlying profit before tax for the period amounted to £0.9
million (2022 H1: loss before tax £(0.3) million, FY22: profit before tax
£0.3 million). On a continuing underlying basis, the effective tax rate was
29% (2022 H1: 5%). The Group's continuing underlying effective tax rate
reported at 31 July 2022 was 60%.
Basic underlying earnings per share from continuing operations were 2.1 pence
(2022 H1: (0.8) pence) and adjusted underlying diluted earnings per share from
continuing operations were 2.0 pence (2022 H1: (0.8) pence).
Administrative costs
Underlying administrative costs of £21.8 million (2022 H1: £21.7 million,
FY22: £43.6 million) increased by 0.3% during the period, as the 5% wages
increase implemented on 1 August 2022 was offset by other third-party cost
savings, such as reductions in property leases, insurances and advisor fees.
A breakdown of the increase in administrative costs is shown below:
£m
2022 H1 continuing underlying administrative costs 21.7
Sales staff costs 0.4
Commissions, bonuses and incentives 0.2
Group Support staff costs 0.1
Travel and entertaining 0.2
Online advertising 0.2
Trade receivables and accrued income expected credit loss allowance credit (0.5)
Sales ledger credits (0.4)
Dilapidations provisions 0.4
Depreciation charges (0.3)
Other admin costs (including Legal & Professional Fees and other (0.2)
provisions)
2023 H1 continuing underlying administrative costs 21.8
Non-underlying costs and discontinued operations
The continuing non-underlying costs in 2023 H1 of £0.3 million (2022 H1:
£2.4 million, FY22: £5.6 million), relate predominantly to employee
restructuring costs. In the comparative 6-month period to 31 January 2022,
costs of £2.0 million arose from impairment of goodwill held in relating to
the 'Infrastructure - RSL Rail' CGU (Cash Generating Unit); no impairment of
goodwill and intangible assets was recorded in 2023 H1.
The loss from discontinued operations for the period arises from ongoing
closure costs in connection with the Group's recruitment operations in South
Africa, Mexico and Asia which were either sold or closed in prior periods.
Loss before tax in 2023 H1 for all discontinued operations was £0.2 million
(2022 H1: loss of £0.7 million, FY22: loss of £0.4 million).
Financing costs
Net finance income of £0.2 million (2022 H1: net finance costs of £0.1
million, FY22: net finance income of £0.3 million) reflected lower
utilisation of the working capital facility and favourable foreign exchange
gains (treated as non-underlying) compared to prior period.
Debtors, cash flow, net cash / (debt) and financing
Net cash at 31 January 2023 was £20.9 million (31 July 2022: £12.3 million;
31 January 2022: net debt of £(0.1) million).
The Group's trade and other receivables balance was £47.7 million at 31
January 2023 (31 July 2022: £54.8 million), of which debtor and accrued
income balances were £44.0 million, a £7.7 million reduction over the
6-month period from 31 July 2022. The Group's days sales outstanding ('DSO')
over this period (on a weekly based countback method) increased by 7 days from
51 to 58 days at 31 January 2023, although still 4 days lower than the DSO
position at 31 January 2022. The DSO position at 31 July 22 is considered to
have been near optimal levels; there is consistently a seasonal increase in
DSO following the Christmas and New Year period.
Capital expenditure in the period amounted to £0.1 million (2022 H1: £0.1
million, FY22: £0.4 million).
As at 31 January 2023, the Group had a working capital facility of £60
million (31 July 2022: £60m, 31 January 2022: £75m). 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 2023 was £0.3 million in credit on recourse and
£(7.0) million borrowing on non-recourse.
Dividend
The Board is mindful of the importance of dividends to shareholders. The Board
has not proposed an interim dividend for 2023. The Board remains committed to
reviewing dividends at the year end.
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 51 to 54 of the Annual Report for the year ended 31 July
2022.
We continue to manage several 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
Looking forward there remains a high level of macro-economic uncertainty,
however we continue to see talent shortages and good levels of vacancies in
the STEM markets that we support. The shift in demand towards contract labour
is in line with our traditional strength of providing contract resource.
The development of our strategic priorities will continue to strengthen the
platform from which we grow in the future.
Condensed Consolidated Income Statement
For the period ended 31 January 2023
6 months to 31/01/2023 6 months 12 months to 31/07/2022
unaudited to 31/01/2022
unaudited
Note £'000 £'000 £'000
Continuing operations
Revenue 2 194,742 202,199 403,346
Cost of sales (172,009) (180,593) (359,206)
Gross profit 2 22,733 21,606 44,140
Administrative expenses (22,122) (24,068) (49,244)
Profit/(loss) from continuing operations 2 611 (2,462) (5,104)
Finance income 242 73 570
Finance cost (61) (153) (253)
Profit/(loss) before taxation 792 (2,542) (4,787)
Taxation 5 (242) 120 460
Profit/(loss) after taxation from continuing operations 550 (2,422) (4,327)
Discontinued operations
Loss for the period from discontinued operations (attributable to equity 6 (199) (643) (346)
holders of the Company)
Profit/(loss) for the period 351 (3,065) (4,673)
( )
Profits/(losses) for the periods to 31 January 2023, 31 January 2022 and the
year for 31 July 2022 are wholly attributable to equity holders of the parent.
6 months
to 31/01/2023 6 months 12 months
unaudited to 31/01/2022 to 31/07/2022
unaudited
Total earnings per ordinary share Note pence pence pence
Basic earnings/(loss) per share 7 1.1 (9.5) (14.5)
Diluted earnings/(loss) per share 7 1.1 (9.5) (14.5)
Reconciliation to adjusted profit measure
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
to 31/01/2023 6 months 12 months
unaudited to 31/01/2022 to 31/07/2022
unaudited
Note £'000 £'000 £'000
Profit/(loss) from continuing operations 611 (2,462) (5,104)
Add
Depreciation of property, plant and equipment, depreciation of leased 4 734 995 2,210
right-of-use assets and amortisation of software and software licences
Non-underlying items included within administrative expenses 4 300 90 558
Amortisation and impairment of goodwill and acquired intangibles and 4 35 2,264 5,051
impairment of leased right-of-use assets
Underlying EBITDA 1,680 887 2,715
Less
Depreciation of property, plant and equipment, leased right-of-use assets and (734) (995) (2,210)
amortisation of software and software licenses
Net finance costs excluding foreign exchange gains and losses (10) (153) (249)
Underlying profit/(loss) before taxation 936 (261) 256
Underlying taxation (271) 14 (154)
Underlying profit/(loss) after taxation from continuing operations 665 (247) 102
Condensed Consolidated Statement of Comprehensive Income
For the period ended 31 January 2023
6 months 6 months 12 months
to 31/01/2023 to 31/01/2022 to 31/07/2022
unaudited unaudited
£'000 £'000 £'000
Profit/(loss) for the period 351 (3,065) (4,673)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations (285) (85) 72
Other comprehensive (loss)/income for the period (285) (85) 72
Total comprehensive income/(loss) for the period attributable to equity 66 (3,150) (4,601)
holders of the parent
6 months 6 months
to 31/01/23 to 31/01/22 12 months
unaudited unaudited to 31/07/22
£'000 £'000 £'000
Attributable to:
Continuing operations 250 (2,391) (4,024)
Discontinued operations (184) (759) (577)
Total comprehensive income/(loss) for the period attributable to equity 66 (3,150) (4,601)
holders of the parent
Condensed Consolidated Statement of Financial Position
As at 31 January 2023
31/01/2023 31/01/2022
unaudited unaudited 31/07/2022
Note £'000 £'000 £'000
Non-current assets
Goodwill and intangible assets 2,007 3,980 2,072
Property, plant and equipment 1,243 1,465 1,359
Right-of-use assets 2,391 5,069 3,065
Investments - - -
Deferred tax assets 474 470 604
Total non-current assets 6,115 10,984 7,100
Current assets
Trade and other receivables 8 47,721 63,652 54,767
Corporation tax receivables 1,133 1,226 1,263
Cash and cash equivalents 24,304 13,731 17,768
Total current assets 73,158 78,609 73,798
Total assets 79,273 89,593 80,898
Non-current liabilities
Deferred tax liabilities (9) (21) (25)
Provisions 9 (661) (1,248) (517)
Lease liabilities (1,886) (3,421) (2,490)
Total non-current liabilities (2,556) (4,690) (3,032)
Current liabilities
Trade and other payables (43,843) (42,115) (43,406)
Provisions 9 (951) (900) (1,187)
Current tax liabilities (336) (169) (340)
Lease liabilities (1,175) (1,477) (1,135)
Bank loans and borrowings (342) (8,890) (1,801)
Total current liabilities (46,647) (53,551) (47,869)
Total liabilities (49,203) (58,241) (50,901)
Net assets 30,070 31,352 29,997
Equity
Share capital 10 323 323 323
Share premium 8,706 8,706 8,706
Merger reserve 224 28,750 224
Share-based payment reserve 348 389 350
Translation reserve 852 930 1,137
Treasury shares reserve (214) (105) (147)
Retained earnings 19,831 (7,641) 19,404
Total equity 30,070 31,352 29,997
The accompanying notes form part of these interim financial statements.
Condensed Consolidated Statement of Changes in Equity
For the period ended 31 January 2023
Share capital Share premium Merger reserve Share-based payment reserve Translation reserve Treasury shares reserve Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
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)
Dividends paid in the period - - - - - - (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 on 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 unaudited 323 8,706 28,750 389 930 (105) (7,641) 31,352
Total equity at 1 August 2021 323 8,706 28,750 454 134 (37) (3,223) 35,107
Loss for the year - - - - - - (4,673) (4,673)
Other comprehensive income - - - - 72 - - 72
Total comprehensive loss - - - - 72 - (4,673) (4,601)
Dividends paid in the year - - - - - - (484) (484)
Deferred tax movement in respect of share options - - - - - - (60) (60)
Share-based payments charge - - - 145 - - - 145
Share-based payments reserve transfer - - - (249) - - 249 -
Purchase of treasury shares - - - - - (110) - (110)
Translation reserve movements on disposal of foreign operations - - - - 931 - (931) -
Transfer of merger reserve(1) - - (28,526) - - - 28,526 -
Transactions with owners - - (28,526) (104) 931 (110) 27,300 (509)
Total equity at 31 July 2022 323 8,706 224 350 1,137 (147) 19,404 29,997
Total equity at 1 August 2022 323 8,706 224 350 1,137 (147) 19,404 29,997
Profit for the period - - - - - - 351 351
Other comprehensive income - - - - (285) - - (285)
Total comprehensive income - - - - (285) - 351 66
Deferred tax movement in respect of share options - - - - - - (1) (1)
Share-based payments charge - - - 75 - - - 75
Share-based payments reserve transfer - - - (77) - - 77 -
Purchase of treasury shares - - - - - (67) - (67)
Transactions with owners - - - (2) - (67) 76 7
Total equity at 31 January 2023 unaudited 323 8,706 224 348 852 (214) 19,831 30,070
(1)A merger reserve was created in 2015 in Gattaca plc under section 612 of
the Companies Act 2006, relating to the acquisition of Networkers
International plc. Gattaca plc's investment in Networkers International plc
was subsequently transferred to a subsidiary undertaking in exchange for
consideration of an intercompany receivable. The asset to which the merger
reserve relates, being the goodwill and acquired intangible assets recognised
on consolidation as part of the acquisition, was impaired in 2018, 2019 and
2021. Additionally, the intercompany receivable was settled in 2020 in
exchange for qualifying consideration of offset with an intercompany payable.
As a result, the full merger reserve of £28,526,000 became realised across
these years. A choice has now been made to transfer the realised merger
reserve to retained earnings in the year ended 31 July 2022 to present all
distributable reserves in one place.
Condensed Consolidated Cash Flow Statement
For the period ended 31 January 2023
6 months Restated Restated
to 31/01/23 6 months ⁽¹⁾ ⁽²⁾ 12 months ⁽¹⁾
unaudited to 31/01/22 to 31/07/22
unaudited
6 months
to 31/01/2023 6 months 12 months
unaudited to 31/01/2022 to 31/07/2022
unaudited
£'000 £'000 £'000
Note
Cash flows from operating activities
Profit/(loss) after taxation 351 (3,065) (4,673)
Adjustments for:
Depreciation of property, plant and equipment and amortisation of 284 563 1,078
intangible assets
Depreciation of leased right-of-use assets 485 728 1,552
Loss from sale of subsidiary, associate or investment - 55 82
Loss on disposal of property, plant and equipment 14 12 33
Loss on disposal of software and software licences 8 - 12
Impairment of goodwill and acquired intangibles - 2,000 3,780
Impairment of right-of-use assets - - 852
Profit on reassessment of lease term - - (27)
Interest income (52) (132) (4)
Interest costs 61 160 253
Taxation expense/(credit) recognised in the income statement 237 (153) (467)
Decrease in trade and other receivables 7,268 617 9,368
Increase/(decrease) in trade and other payables 434 (14,005) (12,715)
(Decrease)/increase in provisions (88) 408 (54)
Share-based payment charge 75 13 145
Foreign exchange (losses)/gains (200) - 31
Cash generated by/(used in) operations 8,877 (12,799) (754)
Interest paid (23) (96) (138)
Interest on lease liabilities (38) (64) (115)
Interest received 52 - 4
Income taxes repaid/(paid) 5 (493) (200)
Cash generated by/(used in) operating activities 8,873 (13,452) (1,203)
Cash flows from investing activities
Purchase of property, plant and equipment (129) (102) (370)
Purchase of intangible assets - - (29)
Cash used in investing activities (129) (102) (399)
Cash flows from financing activities
Lease liability principal repayment (614) (970) (1,924)
Purchase of treasury shares (67) (68) (110)
Working capital facility repaid (1,459) (458) (7,547)
Dividends paid - (484) (484)
Cash used in financing activities (2,140) (1,980) (10,065)
Effects of exchange rates on cash and cash equivalents (68) 27 197
Increase/(decrease) in cash and cash equivalents 6,536 (15,507) (11,470)
Cash and cash equivalents at beginning of period 17,768 29,238 29,238
Cash and cash equivalents at end of 24,304 13,731 17,768
period
11
Net decrease in cash and cash equivalents for discontinued operations was
£253,000 (6 months to 31 January 2022: decrease of £1,156,000, year to 31
July 2022: decrease of £742,000).
NOTES
Forming part of the condensed consolidated interim financial statements
1 Basis of preparation and significant accounting policies
1.1 General information
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
These unaudited condensed consolidated interim financial statements are for
the six months ended 31 January 2023 and do not constitute statutory accounts
as defined by section 435 of the Companies Act 2006. The interim financial
statements have been prepared in accordance with the AIM rules and IAS 34,
'Interim Financial Reporting'. Whilst the financial information included in
the interim financial statements has been prepared in accordance with
UK-adopted International Accounting Standards, the interim financial
statements 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 2022 which have been filed
with the Registrar of Companies. The statutory financial statements for the
year ended 31 July 2022 received an unqualified report from the auditors and
did not contain a statement under section 498 of the Companies Act 2006.
The accounting policies applied in the interim financial statements are
consistent with those used in the preparation of the Group's consolidated
financial statements for the year ended 31 July 2022, as described in the
latest Annual Report and Accounts. No alterations have been made to the
Group's accounting policies as a result of adopting new standards, amendments
and interpretations which became effective in the period, as these were either
not material or not relevant to the Group.
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 Annual Report and Accounts for the year ended 31 July
2022. The financial position of the Group, its cash flows and liquidity
position mirror those of our ultimate parent company and can be found in the
Chief Financial Officer's Report of the 2022 Annual Report for Gattaca plc.
The Group has maintained mitigating actions to enhance working capital
availability, including increases to the payment terms of certain types of
contractors. These actions have created a permanent working capital benefit
and reduce our working capital requirements during growth. There is sufficient
headroom on our working capital facilities to absorb a level of customer
payment term extensions, but we would also manage supply to the customer if
payment within an appropriate period was not being made. Whilst there is no
evidence that it would occur, a significant deterioration in average payment
terms has the potential to impact the Group's liquidity.
The Directors have prepared detailed cash flow forecasts to July 2025,
covering a period of 29 months from the date of approval of these interim
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.
A key assumption in preparing the cash flow forecasts is the continued
availability of Group's invoice financing facility throughout the forecast
period. The current £60m facility has no contractual renewal date; the
Directors remain confident that the facility will remain available.
The output of the base case forecasting process has been used to perform
sensitivity analysis on the Group's cash flows 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 significantly increased operating cost inflation. The Group has
modelled the impact of a severe but plausible scenario including nil growth in
contract and permanent NFI across FY23 to FY25 and operating cost inflation of
5%-10%.
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 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 regard to going concern and consider it is appropriate to
adopt the going concern basis in preparing these interim financial statements.
1.4 Accounting estimates and judgements
Preparation of the interim financial statements requires the Directors to make
assumptions and estimates that affect the application of accounting
policies. The key assumptions and sources of estimation uncertainty
identified by the Directors were consistent with those identified in the
Group's Annual Report and Accounts for the year ended 31 July 2022. The
Directors are of the opinion that there are no critical accounting judgements.
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.
6 months to 31 January 2023 unaudited
All amounts in £'000 Mobility Energy Defence Technology, Media & Telecoms Infra- structure Gattaca Inter- national(1) Other Continuing underlying operations
Projects
Revenue (Note 3) 21,295 20,978 38,921 13,983 74,668 2,564 3,839 18,494 194,742
Gross profit 2,230 2,123 4,186 1,249 7,205 1,029 1,290 3,421 22,733
Operating contribution 1,077 1,440 2,372 189 2,906 648 (473) 937 9,096
Depreciation, impairment and amortisation (80) (79) (147) (53) (281) (10) (14) (70) (734)
Central overheads (768) (355) (1,097) (629) (2,350) (185) (744) (1,288) (7,416)
Profit/(loss) from operations 229 1,006 1,128 (493) 275 453 (1,231) (421) 946
Finance (cost)/income, net (10)
Profit/(loss) before tax 936
All amounts in £'000 Continuing underlying operations Non-recurring items and amortisation of acquired intangibles Discontinued Total Group
Revenue (Note 3) 194,742 - - 194,742
Gross profit 22,733 - - 22,733
Operating contribution 9,096 - - 9,096
Depreciation, impairment and amortisation (734) (35) - (769)
Central overheads (7,416) (300) (208) (7,924)
Profit/(loss) from operations 946 (335) (208) 403
Finance (cost)/income, net (10) 191 4 185
Profit/(loss) before tax 936 (144) (204) 588
6 months to 31 January 2022 unaudited
All amounts in £'000 Mobility Energy Defence Technology, Media & Telecoms Infra- structure Restated(2) Inter- national(1) Restated(2) Continuing underlying operations
Gattaca Other
Projects
Revenue (Note 3) 24,095 19,152 32,325 21,951 72,011 1,972 3,896 26,797 202,199
Gross profit 2,231 1,777 3,179 2,211 6,743 622 1,335 3,508 21,606
Operating contribution 1,163 953 1,478 1,290 1,974 174 (246) 1,429 8,215
Depreciation, impairment and amortisation (118) (94) (159) (108) (355) (10) (19) (132) (995)
Central overheads (600) (410) (1,349) (490) (2,361) (169) (803) (1,146) (7,328)
Profit/(loss) from operations 445 449 (30) 692 (742) (5) (1,068) 151 (108)
Finance (cost)/income, net (153)
Loss before tax (261)
All amounts in £'000 Continuing underlying operations Non-recurring items and amortisation of acquired intangibles Restated(3) Total Group
Discontinued
Revenue (Note 3) 202,199 - 763 202,962
Gross profit 21,606 - 238 21,844
Operating contribution 8,215 - (569) 7,646
Depreciation, impairment and amortisation (995) (2,264) (32) (3,291)
Central overheads (7,328) (90) (127) (7,545)
Profit/(loss) from operations (108) (2,354) (728) (3,190)
Finance (cost)/income, net (153) 73 52 (28)
Loss before tax (261) (2,281) (676) (3,218)
12 months to 31 July 2022
All amounts in £'000 Mobility Energy Defence Technology, Media & Telecoms Infra- structure Restated(2) Inter- national(1) Restated(2) Continuing underlying operations
Gattaca Other
Projects
Revenue (Note 3) 47,766 40,779 69,811 41,660 140,422 5,317 7,969 49,622 403,346
Gross profit 4,571 3,884 6,720 4,246 13,561 1,313 2,779 7,066 44,140
Operating contribution restated(4) 2,151 2,175 3,278 1,838 5,634 725 (581) 1,828 17,048
Depreciation, impairment and amortisation restated(4) (262) (223) (383) (228) (769) (29) (44) (272) (2,210)
Central overheads (1,128) (774) (2,753) (992) (4,418) (329) (1,609) (2,330) (14,333)
Profit/(loss) from operations 761 1,178 142 618 447 367 (2,234) (774) 505
Finance (cost)/income, net (249)
Profit/(loss) before tax 256
All amounts in £'000 Continuing underlying operations Non-recurring items and amortisation of acquired intangibles Discontinued Total Group
Revenue (Note 3) 403,346 - 781 404,127
Gross profit 44,140 - 238 44,378
Operating contribution restated(4) 17,048 - (440) 16,608
Depreciation, impairment and amortisation restated(4) (2,210) (5,051) (31) (7,292)
Central overheads (14,333) (558) (100) (14,991)
Profit/(loss) from operations 505 (5,609) (571) (5,675)
Finance (cost)/income, net (249) 566 218 535
Profit/(loss) before tax 256 (5,043) (353) (5,140)
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.
(1)International revenue and gross profit is generated from the location of
the commission earning sales consultant, opposed to the domicile of the
respective subsidiary by which they are employed.
(2)The Gattaca Projects operating segment meets the quantitative thresholds to
be reported separately for the first time in the 6-month period to 31 January
2023. In line with the requirements of IFRS 8, comparative periods have been
restated to present the Gattaca Projects segment separately from the "Other"
segment in which it had previously been presented.
(3)Discontinued operations for the 6 months ended 31 January 2022 have been
restated to include the results of the Group's South African recruitment
operations, sold on 14 December 2021 as part of the management buy-out
agreement announced in July 2021.
(4)Operating contribution and depreciation, impairment and amortisation has
been restated for the year ended 31 July 2022 to present depreciation on
right-of-use assets in the depreciation line.
Geographical information
Total Group revenue Non-current assets
All amounts in £'000 6 months to 31/01/2023 Restated(5) 12 months to 31/07/2022 6 months to 31/01/2023 6 months to 31/01/2022
unaudited 6 months to 31/01/2022 unaudited unaudited 12 months to 31/07/2022
unaudited
UK 189,401 196,434 390,861 5,856 10,592 6,726
Rest of Europe 404 274 662 1 1 1
Middle East and Africa - 763 781 34 16 59
Americas 4,937 5,491 11,823 224 375 314
Total 194,742 202,962 404,127 6,115 10,984 7,100
Revenue and non-current assets are allocated to the geographic market based on
the domicile of the respective subsidiary.
(5)Geographical information for the 6-month period to 31 January 2022 is
restated to report total group revenue, where previously revenue from
continuing operations was presented.
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 31 January 2023 unaudited Mobility Energy Defence Technology, Media & Telecoms Infra- structure Inter- national Other Continuing underlying operations
£'000 £'000 £'000 £'000 £'000 Gattaca £'000 £'000 £'000
Projects
£'000
Temporary placements 20,349 20,764 37,241 13,571 73,248 1,125 3,004 16,582 185,884
Permanent placements 813 182 1,537 428 1,203 - 672 1,881 6,716
Other 133 32 143 (16) 217 1,439 163 31 2,142
Total 21,295 20,978 38,921 13,983 74,668 2,564 3,839 18,494 194,742
6 months to 31 January 2022 unaudited Mobility Energy Defence Technology, Media & Telecoms Infra- structure Restated(1) Inter- national Restated(1) ( )Other Continuing underlying operations
£'000 £'000 £'000 £'000 £'000 Gattaca £'000 £'000 £'000
Projects
£'000
Temporary placements 23,423 19,034 31,236 21,475 70,848 819 2,797 24,859 194,491
Permanent placements 672 118 1,089 476 1,163 - 1,099 1,938 6,555
Other - - - - - 1,153 - - 1,153
Total 24,095 19,152 32,325 21,951 72,011 1,972 3,896 26,797 202,199
12 months to 31 July 2022 Mobility Energy Defence Technology, Media & Telecoms Infra- structure Restated(1) Gattaca Inter- national Restated(1) Continuing underlying operations
£'000 £'000 £'000 £'000 £'000 Projects £'000 Other £'000
£'000 £'000
Temporary placements 46,249 40,612 67,652 40,493 138,027 2,814 5,863 45,914 387,624
Permanent placements 1,483 158 1,909 1,115 2,363 - 2,106 3,652 12,786
Other 34 9 250 52 32 2,503 - 56 2,936
Total 47,766 40,779 69,811 41,660 140,422 5,317 7,969 49,622 403,346
Timing of revenue recognition - continuing underlying operations
6 months to 31 January 2023 unaudited Mobility Energy Defence Technology, Media & Telecoms Infra- structure Gattaca Inter- national Other Continuing underlying operations
£'000 £'000 £'000 £'000 £'000 Projects £'000 £'000 £'000
£'000
Point in time 21,295 20,978 38,921 13,983 74,668 1,125 3,839 18,494 193,303
Over time - - - - - 1,439 - - 1,439
Total 21,295 20,978 38,921 13,983 74,668 2,564 3,839 18,494 194,742
6 months to 31 January 2022 unaudited Mobility Energy Defence Technology, Media & Telecoms Infra- structure Restated(1) Inter- national Restated(1) Other Continuing underlying operations
£'000 £'000 £'000 £'000 £'000 Gattaca £'000 £'000 £'000
Projects
£'000
Point in time 24,095 19,152 32,325 21,951 72,011 819 3,896 26,797 201,046
Over time - - - - - 1,153 - - 1,153
Total 24,095 19,152 32,325 21,951 72,011 1,972 3,896 26,797 202,199
12 months to 31 July 2022 Mobility Energy Defence Technology, Media & Telecoms Infra- structure Restated(1) Inter- national Restated(1) Continuing underlying operations
£'000 £'000 £'000 £'000 £'000 Gattaca £'000 Other £'000
Projects £'000
£'000
Point in time 47,766 40,779 69,811 41,660 140,422 2,814 7,969 49,622 400,843
Over time - - - - - 2,503 - - 2,503
Total 47,766 40,779 69,811 41,660 140,422 5,317 7,969 49,622 403,346
No single customer contributed more than 10% of the Group's revenues (6 months
to 31 January 2022 and year ended 31 July 2022: none).
(1)The Gattaca Projects operating segment meets the quantitative thresholds to
be reported separately for the first time in the 6-month period to 31 January
2023. In line with the requirements of IFRS 8, comparative periods have been
restated to present the Gattaca Projects segment separately from the "Other"
segment in which it had previously been presented.
4 Profit from Total Operations
6 months to 31/01/2023 6 months to 31/01/2022 12 months to 31/07/2022
unaudited unaudited
£'000 £'000 £'000
Profit from total operations is stated after charging/(crediting):
Depreciation of property, plant and equipment 228 209 570
Depreciation of leased right-of-use assets 485 692 1,552
Amortisation of acquired intangibles 35 264 420
Amortisation of software and software licences 21 94 88
Impairment of goodwill and acquired intangibles - 2,000 3,780
Impairment of leased right-of-use assets - - 852
Net impairment (release)/loss on trade receivables and accrued income (228) 172 (295)
Non-recourse working capital bank facility charges 243 149 323
Release of sales ledger credits(1) (396) - -
Share-based payment charges 75 (17) 114
(1)The Group holds unclaimed sales ledger credits on the balance sheet that
arise in the course of normal trading operations due to the high volume of
timesheet invoices and customer receipts. Following a review of credit control
procedures, the Group has reinstated its policy of releasing any unclaimed
sales ledger credits to the income statement after all reasonable steps have
been taken to return funds to the customer and two years have elapsed since
receipt of the funds.
Non-underlying items included within administrative expenses were as follows:
6 months to 31/01/2023 6 months to 31/01/2022 12 months to 31/07/2022
unaudited unaudited
Continuing operations £'000 £'000 £'000
Restructuring costs(2) 172 - 405
Costs associated with exiting properties(3) 128 90 153
Impairment of goodwill, acquired intangibles and right-of-use leased assets - 2,000 4,632
Non-underlying items included in profit from continuing operations 300 2,090 5,190
Discontinuing operations £'000 £'000 £'000
Advisory fees(4) 1 27 33
Costs relating to discontinuation of group undertakings(5) 207 100 5
Costs associated with properties previously exited - - 57
Non-underlying items included in loss from discontinued operations 208 127 95
Total non-underlying items 508 2,217 5,285
(2)Restructuring costs of £154,000 (6 months to 31 January 2022: £nil and
year ended 31 July 2022: £nil) were recognised as a result of personnel
re-organisations throughout the business. Restructuring costs of £18,000 (6
months to 31 January 2022: £nil and year ended 31 July 2022: £405,000) were
recognised as a result of changes in the
Board.
(3)Costs have been recognised in relation to the exit of a number of UK office
buildings that are no longer in use by the business.
(4)Legal fees incurred in each period relating to the Group's co-operation
with certain voluntary enquiries from the US Department of Justice, as
discussed in further detail in Note 13.
(5)Ongoing costs relating to closure of entities affected by the closure of
the contract Telecoms Infrastructure business in 2018 as well as the closure
of the Group's operations in Mexico and South Africa, including staff
termination costs and impairment of certain working capital balances in prior
periods.
5 Taxation
22
6 months 6 months 12 months
to 31/01/2023 to 31/01/2022 to 31/07/2022
unaudited unaudited
Analysis of charge in the period for continuing operations £'000 £'000 £'000
Profit/(loss) before tax for continuing operations 792 (2,542) (4,787)
Profit before tax multiplied by the standard rate of corporate tax in the UK 166 (483) (909)
of
21.0% (31 January 2022: 19.0%, 31 July 2022: 19.0%)
Expenses not deductible for tax purposes 26 - 15
Income not taxable (28) (10) -
Effect of goodwill impairment loss - 360 502
Effect of share-based payments (1) 12 60
Irrecoverable withholding tax 1 2 3
Changes in tax rate 13 (25) (84)
Overseas losses not recognised as deferred tax assets 97 21 156
Difference between UK and overseas tax rates 2 3 (9)
Adjustment to tax charge in respect of previous periods (34) - (194)
Total taxation charge/(credit) for the period for continuing 242 (120) (460)
operations
Total taxation credit for the period for discontinued operations (5) (33) (7)
The forecast average annual tax rate for continuing operations for the year to
31 July 2023 used to estimate the tax charge for the period to 31 January 2023
is 30.8% (period to 31 January 2022: forecast average annual tax rate of 4.7%,
year to 31 July 2022: actual tax rate of 9.6%). The increase in the effective
tax rate for the period to 31 January 2023 is primarily driven by an increase
in overseas losses not recognised as deferred tax assets. A lower tax recovery
was recognised in the period to 31 January 2022 due to the effect of the
goodwill impairment in the period.
6 Discontinued Operations
The loss from discontinued operations for the period arises from ongoing
closure costs in connection with the Group's recruitment operations in South
Africa, Mexico and Asia which were either sold or closed in prior periods.
Financial performance
Restated(2)
6 months 6 months 12 months to 31/07/22
to 31/01/2023 to 31/01/2022
unaudited unaudited
£'000 £'000 £'000
Revenue - 763 781
Cost of sales - (525) (543)
Gross profit - 238 238
Administrative expenses(1) (208) (966) (809)
Loss from operations (208) (728) (571)
Finance income - 59 -
Finance costs - (7) -
Exchange gain 4 - 218
Loss before taxation (204) (676) (353)
Taxation 5 33 7
Loss for the period after taxation from discontinued operations (199) (643) (346)
Exchange differences on translation of discontinued operations 15 (116) (231)
Other comprehensive loss from discontinued operations (184) (759) (577)
(1)Included in administrative expenses are £208,000 (6 months to 31 January
2022: £127,000, year ended 31 July 2022: £95,000) of non-underlying items,
as detailed in Note 4.
(2)The financial performance of discontinued operations for the 6 months to 31
January 2022 is restated to correctly present results of the Group's South
African recruitment operations, sold on 14 December 2021 as part of the
management buy-out agreement announced in July 2021.
Cash flows from discontinued operations
6 months 6 months 12 months
to 31/01/2023 to 31/01/2022 to 31/07/22
unaudited unaudited
£'000 £'000 £'000
Net cash outflow from operating activities (116) (990) (650)
Net cash outflow from investing activities - (45) -
Net cash outflow from financing activities - (68) (92)
Effect of exchange rates on cash and cash equivalents (137) (53) -
Net decrease in cash generated by discontinued operations (253) (1,156) (742)
7 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 into
ordinary shares has been added to the denominator. The Group's potential
ordinary shares, being the Long Term Plan Options, are deemed outstanding and
included in the dilution assessment when, at the reporting date, they would be
issuable had the performance period ended at that date.
The effect of potential ordinary shares are reflected in diluted EPS only when
they are dilutive. Potential ordinary shares are considered to be dilutive
when the monetary value of the subscription rights attached to the outstanding
share options is less than the average market share price of the Company's
shares during the period. Furthermore, potential ordinary shares are only
considered dilutive when their inclusion in the calculation would decrease
earnings per share, or increase loss per share, in accordance with IAS 33.
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 31/01/2023
unaudited 6 months to 31/01/2022 12 months to 31/07/2022
unaudited
Total earnings £'000 £'000 £'000
Total profit/(loss) attributable to ordinary share holders 351 (3,065) (4,673)
Number of shares 000's 000's 000's
Basic weighted average number of ordinary shares in issue 32,294 32,290 32,290
Dilutive potential ordinary shares 348 - 210
Diluted weighted average number of shares 32,642 32,290 32,500
Total earnings per share pence Pence pence
Earnings/(loss) per ordinary share - Basic 1.1 (9.5) (14.5)
- Diluted 1.1 (9.5) (14.5)
Earnings for continuing operations £'000 £'000
£'000
Total profit/(loss) for period 550 (2,422) (4,327)
Total earnings per share for continuing operations pence pence pence
Earnings/(loss) per ordinary share from continuing operations - Basic 1.7 (7.5) (13.4)
- Diluted 1.7 (7.5) (13.4)
Earnings for discontinuing operations £'000 £'000 £'000
Total loss for the period (199) (643) (346)
Total earnings per share for discontinuing operations pence pence pence
Loss per ordinary share from discontinuing operations - Basic (0.6) (2.0) (1.1)
- Diluted (0.6) (2.0) (1.1)
Earnings from continuing underlying operations £'000 £'000 £'000
Total profit/(loss) for the period 665 (247) 102
Total earnings per share for continuing underlying operations pence pence pence
Earnings/(loss) per ordinary share for continuing underlying operations - Basic 2.1 (0.8) 0.3
- Diluted 2.0 (0.8) 0.3
8 Trade and Other Receivables
23 31/01/22
31/01/2022 31/07/2022
31/01/2023 unaudited
unaudited
£'000 £'000 £'000
Trade receivables from contracts with customers, net of loss allowance 28,589 39,933 36,367
Other receivables 2,195 2,292 1,701
Finance lease receivables 160 - -
Prepayments 1,376 1,648 1,372
Accrued income 15,401 19,779 15,327
Total 47,721 63,652 54,767
The Directors consider that the carrying amount of trade and other receivables
approximates to the fair value.
Other receivables at 31 January 2023 includes £130,000 (31 January 2022:
£134,000) of deferred consideration which is due within one year (31 January
2022: due after more than one year).
Finance lease receivables are recognised in connection with the sublease of UK
office space to a third party entered into during the period. At 31 January
2023, £28,000 was 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.
Impairment of trade receivables from contracts with
customers
31/01/2023 31/01/2022 31/07/2022
unaudited unaudited
£'000 £'000 £'000
Trade receivables from contracts with customers, gross amounts 30,247 42,591 38,444
Loss allowance (1,658) (2,658) (2,077)
Trade receivables from contracts with customers, net of loss allowance 28,589 39,933 36,367
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 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, external economic forecasts and scenario analysis
has been taken into account along with other macro-economic factors when
assessing the credit risk profiles for specific industries and geographies.
The loss allowance for trade receivables was determined as follows:
31 January 2023 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% 5.5% 5.5% 61.2%
Gross carrying amount - trade receivables (£'000) 28,283 659 457 848 30,247
Loss allowance (£'000) 1,078 36 25 519 1,658
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 July 2022 Current More than 30 days past due More than 60 days past due More than 90 days due Total
Weighted expected loss rate (%) 4.0% 7.9% 15.9% 48.0%
Gross carrying amount - trade receivables (£'000) 35,817 1,241 327 1,059 38,444
Loss allowance (£'000) 1,418 99 52 508 2,077
The loss allowance for trade receivables at the period end reconciles to the
opening loss allowance as follows:
6 months 6 months
to 31/01/2023 to 31/01/2022 12 months to 31/07/2022
unaudited unaudited
£'000 £'000 £'000
Opening loss allowance 2,077 3,449 3,449
(Decrease)/increase in loss allowance recognised in profit and loss during the (290) 5 136
period
Receivable written off during the period as uncollectable (129) (796) (1,508)
Closing loss allowance 1,658 2,658 2,077
Impairment of accrued income
31/01/2023 31/01/2022 31/07/2022
unaudited unaudited
£'000 £'000 £'000
Gross accrued income 15,980 20,621 16,009
Loss allowance (579) (842) (682)
Accrued income, net of loss allowance 15,401 19,779 15,327
The loss allowance for accrued income was determined as follows:
31 January 2023 unaudited Current More than 30 days past due More than 60 days past due More than 90 days due Total
Weighted expected loss rate (%) 2.6% 2.5% 2.5% 33.1%
Gross carrying amount - accrued income (£'000) 14,318 867 239 556 15,980
Loss allowance (£'000) 367 22 6 184 579
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 - accrued income (£'000) 17,932 903 690 1,096 20,621
Loss allowance (£'000) 450 23 17 352 842
31 July 2022 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% 30.6%
Gross carrying amount - accrued income (£'000) 13,269 1,090 649 1,001 16,009
Loss allowance (£'000) 333 27 16 306 682
The loss allowance for accrued income at the period end reconciles to the
opening loss allowance as follows:
6 months 6 months 12 months
to 31/01/2023 to 31/01/2022 to 31/07/2022
unaudited unaudited
£'000 £'000 £'000
Opening loss allowance 682 1,065 1,065
Amounts utilised in the period - (350) -
(Decrease)/increase in loss allowance recognised in profit and loss during the (103) 127 (383)
period
Closing loss allowance 579 842 682
9 Provisions
Dilapidations Other Provisions Total
6 months to 31 January 2023 unaudited £'000 £'000 £'000
Balance at 1 August 880 824 1,704
Provisions made 154 141 295
Provisions utilised (353) (30) (383)
Provisions released (1) - (1)
Effect of movements in exchange rates (1) (2) (3)
Balance at period end 679 933 1,612
Dilapidations Other Provisions Total
31 January 2023 unaudited £'000 £'000 £'000
Non-current 661 - 661
Current 18 933 951
Total 679 933 1,612
Dilapidations Other Provisions Total
6 months to 31 January 2022 unaudited £'000 £'000 £'000
Balance at 1 August 1,680 53 1,733
Provisions made 7 681 688
Provisions utilised - (40) (40)
Provisions released (223) (13) (236)
Effect of movements in exchange rates 3 - 3
Balance at period end 1,467 681 2,148
Dilapidations Other Provisions Total
31 January 2022 unaudited £'000 £'000 £'000
Non-current 1,024 224 1,248
Current 443 457 900
Total 1,467 681 2,148
Dilapidations Other Provisions Total
12 months to 31 July 2022 £'000 £'000 £'000
Balance at 1 August 1,680 53 1,733
Provisions made 18 824 842
Provisions utilised (145) (40) (185)
Provisions released (698) (13) (711)
Effect of movements in exchange rates 25 - 25
Balance at period end 880 824 1,704
Dilapidations Other Provisions Total
31 July 2022 £'000 £'000 £'000
Non-current 517 - 517
Current 363 824 1,187
Total 880 824 1,704
Dilapidation provisions are held in respect of the Group's office properties
where lease obligations include contractual obligations to return the property
to its original condition at the end of the lease term, ranging between one
and six years. During the period the Group agreed dilapidations settlements
over two of its UK office properties which were exited in the previous period.
Other provisions have been recognised in respect of restructuring activities
relating to discontinuation of overseas operations and claims for certain
legal matters. Other provisions held as at 31 January 2023, 31 January 2022
and 31 July 2022 are primarily in respect of claims for certain legal matters.
10 Share capital
31/01/2023 31/07/2022
unaudited 31/01/2022
unaudited
Authorised share capital £'000 £'000 £'000
40,000,000 ordinary shares of £0.01 each 400 400 400
31/01/2023 31/01/2022 31/07/2022
unaudited unaudited
Allotted, called up, and fully paid £'000 £'000 £'000
32,303,612 Ordinary shares of £0.01 each (31 January 2022 and 31 July 2022: 323 323 323
32,290,400)
The movement in the number of shares in issue is shown below:
'000
In issue at 1 August 2022 32,290
Exercise of LTIP share options 14
In issue at 31 January 2023 32,304
The Company has one class of ordinary shares. Each share is entitled to one
vote in the event of a poll at a general meeting of the Company. Each share is
entitled to participate in dividend distributions.
Share options
During the period, the Group granted share options under the Long-Term
Incentive Plan ("LTIP") for Executive Directors and senior management. 864,130
share options with an exercise price of £0.01 each were granted on 6 December
2022 to members of staff to be held over a three-year vesting period and are
subject to various performance conditions. All share options have a life of 10
years from grant date and are equity settled on exercise.
11 Net Cash/(Debt)
Net cash/(debt) is the total amount of cash and cash equivalents less
interest-bearing loans and borrowings, including lease liabilities.
Net cash flows include the net drawdown of loans and borrowings and cash
interest paid relating to loans and
borrowings.
01/08/2022 Net cash flows Non-cash movements 31/01/2023
31 January 2023 unaudited £'000 £'000 £'000 £'000
Cash and cash equivalents 17,768 6,604 (68) 24,304
Working capital facilities (1,801) 1,459 - (342)
Lease liabilities (3,625) 614 (50) (3,061)
Total net cash 12,342 8,677 (118) 20,901
01/08/2021 Net cash flows Non-cash movements 31/01/2022
31 January 2022 unaudited £'000 £'000 £'000 £'000
Cash and cash equivalents 29,238 (15,507) - 13,731
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)
.
01/08/2021 Net cash flows Non-cash movements 31/07/2022
31 July 2022 £'000 £'000 £'000 £'000
Cash and cash equivalents 29,238 (11,667) 197 17,768
Working capital facilities (9,348) 7,547 - (1,801)
Lease liabilities (5,761) 2,038 98 (3,625)
Total net cash 14,129 (2,082) 295 12,342
Restricted cash
Included in cash and cash equivalents is the following restricted cash which
meets the definition of cash and cash equivalents but is not available for use
by the Group:
31/01/2022 31/07/2022
31/01/2023 unaudited
unaudited
£'000 £'000 £'000
Balances arising from the Group's non-recourse working capital arrangements 1,173 902 615
Cash on deposit in accounts controlled by the Group but not available for 1,370 1,271 1,662
immediate drawdown
Total restricted cash 2,543 2,173 2,277
12 Transactions with Related Parties
There were no related party transactions during the period with entities
outside of the Group (6 months to 31 January 2022: none, year ended 31 July
2022: none) and no related party balances at 31 January 2023 (31 January 2022:
none, 31 July 2022: none).
13 Contingent Liabilities
We continue our cooperation with the United States Department of Justice and
in the 6 month period to 31 January 2023 have incurred £1,000 (6 months to 31
January 2022: £27,000, and year to 31 July 2022: £33,000) 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.
14 Statement of Directors' Responsibilities
The Directors' confirm that these condensed interim financial statements have
been prepared in accordance with UK-adopted International Accounting Standard
34, 'Interim Financial Reporting' 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.
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