TIDMGATC
RNS Number : 9810V
Gattaca PLC
09 November 2017
9 November 2017
Gattaca plc
Preliminary Results for the year ended 31 July 2017
Gattaca plc ("Gattaca" or the "Group"), the specialist
Engineering and Technology (IT & Telecoms) recruitment
solutions business, today announces its Preliminary Results for the
year ended 31 July 2017.
Financial Highlights
2017 2016 Change
================== ========================== ========================== ==========================
Statutory Underlying(2) Statutory Underlying(2) Statutory Underlying(2)
================== ========== ============== ========== ============== ========== ==============
GBPm GBPm GBPm GBPm % %
================== ========== ============== ========== ============== ========== ==============
Revenue 642.4 642.4 617.6 616.8 +4% +4%
================== ========== ============== ========== ============== ========== ==============
Net Fee Income
(NFI)(1) 74.7 74.7 73.0 72.4 +2% +3%
================== ========== ============== ========== ============== ========== ==============
Profit from
operations 12.7 17.4 15.1 21.4 -16% -19%
================== ========== ============== ========== ============== ========== ==============
Profit before
tax 11.5 16.2 15.1 20.4 -24% -21%
================== ========== ============== ========== ============== ========== ==============
Basic earnings
per share 23.4p 35.3p 32.1p 45.6p -27% -23%
================== ========== ============== ========== ============== ========== ==============
Diluted earnings
per share 22.7p 34.3p 31.0p 44.1p -27% -22%
================== ========== ============== ========== ============== ========== ==============
Final dividend 17.0p 17.0p 0%
================== ========== ============== ========== ============== ========== ==============
Total dividend 23.0p 23.0p 0%
================== ========== ============== ========== ============== ========== ==============
Net debt at GBP40.3m GBP25.0m -GBP15.3m
end of period
================== ========== ============== ========== ============== ========== ==============
The following footnotes apply, unless where otherwise indicated,
throughout these Preliminary Results:
(1) NFI is calculated as revenue less contractor payroll
costs
(2) Underlying results exclude the trading and net proceeds of
divested businesses (2017: GBPnil; 2016: GBP0.2m loss),
acquisitions costs (2017: GBP0.2m; 2016: GBPnil), amortisation of
acquired intangibles (2017: GBP3.1m; 2016: GBP3.7m) and integration
and restructuring costs (2017: GBP1.4m; 2016: GBP2.4m), exchange
gains from revaluation of foreign assets and liabilities (2017:
GBPnil; 2016: GBP1.0m).
Group Performance
Profits in line with market expectations.
* Group NFI grew 2%
* After further adjusting underlying results to treat
Resourcing Solutions Limited as if it had been owned
throughout 2016 and 2017, and on a constant currency
basis, NFI was down 4%, as indicated in our August
trading update
* UK Engineering NFI was down 3%; half of the impact of
which was recovered through a reduction in staff
costs*
* UK Technology NFI was down 6%, 20% of the impact of
which was recovered through a reduction in staff
costs offset by investments in new teams to address
market segments introduced during the year*
* Gattaca solutions business upselling to existing
clients and generating new business wins
* International NFI was 4% lower, with strong growth in
the US of 21% masked by contract reductions in South
Africa, in particular*
* Networkers operational integration now complete
* Excluding the impact of acquisitions in the year,
discontinued operations in 2016, non-recurring items
and amortisation of intangibles, administrative
expenses increased by GBP3.9m on a reported currency
basis. This was principally driven by the impact of
exchange rate movements and investment in
international sales staff
*NFI commentary is on this adjusted constant currency basis
Dividend
-- Final proposed dividend at 17.0 pence per share (2016:
17.0p), maintaining total for the year at 23.0 pence per share
(2016: 23.0p)
Outlook
* UK Engineering exit rates for FY17 indicated that the
decline in those markets was abating, with Q4 1% down
on the prior year. Post year-end, our September
year-to-date NFI has shown modest growth on prior
year on a reported currency basis
* UK Technology continued to face challenges in Q4,
especially Telecoms where gains in new markets such
as converging telecoms were not sufficient to offset
lower demand for our network infrastructure market
* Internationally, the Americas, our key international
market of focus, exited FY17 with Q4 27% higher than
prior year and Asia 14% higher. We expect both these
markets to continue to grow strongly in FY18.
Elsewhere, the Middle East is now stable and South
Africa is showing recovery from last year's contract
reductions
Commenting on the results, Brian Wilkinson, Chief Executive of
the Group said:
"Whilst the Group's headline results reflect a challenging year,
there has been significant progress in many areas of the business
and we are confident of further improvement in 2018.
"Overall we believe our UK business performed slightly better
than the market and we managed operational costs well. During the
year we rolled-out Matchtech's long-established strategy to
Networkers. This strategy of operating in specialist markets and
nurturing deep and enduring client relationships, supported by
strong centralised marketing and business development programmes,
continues to deliver high productivity by our consultants and a
leading Conversion Ratio (adjusted operating profit to net fees).
Our Gattaca Solutions offering is gaining traction with a number of
contract extensions and upgrades last year and an exciting pipeline
of opportunities for 2018. Whilst this roll-out led to increased
Group support costs during the year, these investments will deliver
returns in 2018 and beyond.
"Internationally, the diversification and growth of our client
base has progressed well. Our regional management teams have
carefully selected vertical markets in which to roll out our
Matchtech brand and through our Networkers brand have developed
higher level IT business to complement our legacy telecoms
infrastructure market business. New management has been introduced
to our Middle East and South Africa businesses, complementing the
strong management teams established in the Americas and Asia last
year. Our positive Q4 exit rates in North America and Asia lead us
to expect further significant growth in these markets over the
coming year."
For further information please contact:
Gattaca plc +44 (0) 1489 898989
Brian Wilkinson, Chief Executive
Officer
Salar Farzad, Chief Financial
Officer
Citigate Dewe Rogerson +44 (0) 20 7638 9571
Louise Mason-Rutherford
/ Nick Hayns / Ellen Wilton
Numis Securities Limited +44 (0) 20 7260 1000
Michael Meade / Kevin Cruickshank
/ Tom Ballard
Chairman's Statement
While the headline results reflect a challenging year, there has
been significant progress in many areas, and we are confident there
is further improvement to come. The Board is committed to achieving
these improvements and restoring the Group to profitable
growth.
Gattaca has a strong market position as a truly specialised
recruiter wholly focused on engineering under the Matchtech brand
and technology under Networkers. We expect to expand our position
in both sectors and service our clients, particularly in areas
where there are significant skills shortages.
At present, with around 80% of our business generated by our UK
offices, we remain heavily dependent on the UK economy. We have
achieved stronger results in the UK than many of our peer group,
but we recognise we must do even better.
Our international business, while growing in the Americas and
Asia, has faced challenges in the Middle East and South Africa. We
continue to invest internationally in sales headcount and new
offices where we see significant opportunity for growth.
The integration of Networkers into the Group is now complete,
although it took longer than we originally hoped, as we combined
the best of the two cultures, rather than impose one over the
other.
Our most important asset continues to be our people. We have a
highly engaged and productive workforce - one of the most
productive in the industry - led by an experienced and established
management team. Our aim is to attract and retain the best talent
and we are pleased we are seeing retention rates above the industry
standard.
Our dividend policy remains an important part of our investment
proposition. We set the dividend by taking into account current
levels of debt, dividend cover and future earnings expectations. As
a sign of our confidence in the Group's future performance and
despite a fall in diluted earnings per share (EPS) to 22.7 pence
(down 27%), the Board is pleased to propose (subject to shareholder
approval) a maintained total dividend for the year of 23.0 pence
(Interim paid: 6.0 pence, Final proposed: 17.0 pence).
We made two appointments to the Board in the last year. Salar
Farzad was appointed our new Chief Financial Officer and Mark
Mamone joined as a Non-Executive Director. Salar comes from a media
background and has extensive international experience, and the
benefit from having worked for a number of quality 'blue-chip'
organisations. Mark brings deep technology experience to the board
and has already established a Digital Advisory Committee to help us
in this area. On behalf of the Board, I would like to thank Tony
Dyer, our departing CFO, for the contribution he made to the
Company over the last 21 years. We also extend our best wishes to
Rudi Kindts, who retired as a Non-Executive Director in July
2017.
The medium-term strategy for Gattaca is to continue to expand
our international footprint, as well as the offices where we
already operate. While international will become a larger share of
the overall portfolio, we will also continue to grow in the UK. In
a very fragmented industry, there is room for growth and plenty of
opportunities in both our core sectors.
The Group's employees are exceptionally good at what they do and
everyone from the Board downwards is committed to delivering
sustained improved performance.
Patrick Shanley
Non-Executive Chairman
Chief Executive Officer's Review
Gattaca is a leading specialist engineering and technology
recruitment solutions company, with UK and international
operations. We operate in the specialist STEM markets (science,
technology, engineering and maths), all sectors with skills
shortages, where clients need our support to attract and retain
suitable talent.
One of Gattaca's distinguishing characteristics is our focus on
people, through which we aim to attract and retain the best talent.
This focus is working. Gattaca is now recognised as an employer of
choice in the recruitment industry, due to the unique workplace
culture we have built. An engaged, low-turnover workforce is one of
the reasons we are a high productivity business, based on net fee
income (NFI) per head. This, combined with our relatively low cost
base, produces an industry-leading conversion ratio of gross to
adjusted operating profit.
We have a simple, three-point strategy, which is to sharpen our
focus, move up the value chain and think globally - in effect, to
continue to position ourselves as specialists in our chosen sectors
and skill sets, to aim for higher value projects and relationships,
and to replicate our successful UK engineering model in the
technology sector and in fast-growing international markets.
Performance overview
In the UK, our overall lower pro-forma NFI performance of 4%,
when compared to the prior year, was slightly better than the
market. Our continued focus on recurring contract revenues (80% of
NFI on a pro-forma basis) has provided stability, compared with the
more volatile permanent fee revenue stream.
UK Engineering - 59% of Group NFI on a pro-forma basis
Results varied across contract recruitment (NFI up 1% pro-forma)
and permanent recruitment (NFI down 15% pro-forma), and in our
industry verticals as major projects and initiatives closed or came
on line.
Our aerospace division grew by 13% as manufacturers invested in
and restructured their businesses.
The automotive division was down 12% as car-makers and their
suppliers delayed non-essential investment following the EU
referendum. However, there are significant opportunities in the
electric and alternative fuel vehicle sector.
In the maritime sector, we saw a 21% drop in NFI as we rebuilt
following the completion of a number of projects. However, the
sector is now growing in the UK, and with some major naval projects
underway in Barrow and Glasgow, the outlook is more positive and we
expect a return to growth this year.
In the infrastructure sector, NFI was down 5%, partly due to
changes in tax treatment of public sector contractors (IR35).
Within the water sector, the supply of civil, mechanical and
electrical discipline specialists into the major UK capital
delivery water frameworks saw us achieve 10% year-on-year NFI
growth. This reflects a market boosted by the regulatory AMP6, a
five year capital delivery programme, where billions of pounds are
invested into the UK water industry to maintain, improve and build
on the UK's current clean and wastewater infrastructure. Our rail
business declined slightly on the prior year, mainly due to
external factors such as IR35 and market uncertainty, which saw
some projects delayed or put on hold. The buildings sector saw us
heavily affected initially by the market's response to the EU
referendum in June 2016 and, towards the end of the year, the snap
General Election in June 2017. A combination of these issues and a
lack of confidence from investors resulted in a 38% drop in NFI
year on year. The market has now stabilised with help from Middle
Eastern and Far Eastern investment, and growth in the market is
being forecast into 2018. Within the highways sector, we saw an NFI
drop of 10% year on year in the public sector where the negative
impacts of HMRC legislation changes were too big for the private
sector to recover. However, the sector has responded and activity
within our public sector clients is improving, alongside high
private sector investment.
In our general engineering division, positive contract growth of
4% was offset by a weaker performance in permanent recruitment,
down 26%, and total NFI reduced by 9%. However, demand for
manufacturing skills on a temporary basis was consistently high,
particularly within the FMCG, consumer electronics and defence
sectors. Energy was down 3%, but saw growth from transmission,
distribution and renewable energy. Despite delays at Hinkley Point
C, we expect requirements to increase this year. The converging
engineering technology market, where we supply software,
electronics and automation specialists across our engineering
sectors, was the stand-out performer, with 19% year-on-year NFI
growth. This reflects both a buoyant market and the increasing
shortage of these skills in the UK. The UK automotive technology
market, in particular, offers exciting opportunities as the hybrid
electrical, connected car and autonomous driving markets evolve.
Our strong ties with the traditional engineering base are key to
these openings.
Midway through the year, in February 2017, we acquired a
majority stake in Resourcing Solutions Limited (RSL), a leading
recruiter in the rail industry and a clear complement to our
Matchtech business. The deal positions us well to take advantage of
the increasing investments to come in rail infrastructure, both in
the UK and around the world. For example, we are working on three
major rail projects in Malaysia. RSL brings us expertise in
signalling, electrification and safety, and also coverage across
the UK in rail, to enhance our previously London-centric rail
business. The acquisition was earnings enhancing from day one.
Barclay Meade, our professional services brand, recruiting
finance, procurement, sales and HR professionals, had a
disappointing year with an NFI decline of 21%. The second half of
the financial year saw a much stronger performance from
procurement, our largest department, and we continue to see high
demand for procurement and sales professionals, particularly from
our engineering clients.
Alderwood, which places trainers and assessors with training
providers throughout the UK and the Middle East, saw a 4% NFI drop.
The implementation of the Apprenticeship Levy has, however, led to
a recent upturn in business levels.
UK Technology - 21% of Group NFI
UK Technology NFI was 8% lower than in 2016, with contract down
7% and permanent 8% lower. IT NFI was down 5% whilst telecoms
continued to be challenging, being 13% lower. However, certain
niches, while smaller at this stage, are showing strong growth, for
example converging telecoms, which was 43% higher than last
year.
During the year, we carried out a strategic review of our
technology recruitment business, largely acquired from Networkers,
as we completed its operational integration. We have repositioned
Networkers from being a generalist telecoms and IT recruiter to a
highly focused specialist business that enables our clients to find
scarce experts in growing and attractive niche markets, such as
data science and cyber security.
While our newer business areas are achieving growth, many of our
legacy businesses continue to be challenging and, as in
Engineering, results were mixed across our businesses, which are
aligned to skill sets.
Within our IT business, security doubled its NFI and cloud grew
8%, strategic accounts grew 12%, leadership grew 5% and our public
sector business grew 6%, though in the latter we saw negative
growth in H2 following the IR35 tax changes in April 2017. Since
this time we have seen a reduction of 35% in our public sector
contractor numbers. To lessen the impact in this area, we have
diversified into offering permanent resourcing in the public sector
market.
These examples of growth are arising as organisations are
investing heavily in applications and software to gain a greater
insight into their markets and customer profiles. This is resulting
in increased demand for skills in areas such as data science and
data analytics. The next stage in the progression of our clients
using data and algorithms will see the increased use of artificial
intelligence (AI) and robotics to drive process and cost
efficiencies. We are therefore making early stage investments in
this area, developing candidate pools to support our clients'
growth in these newer technologies, and we are having particular
success in the autonomous vehicles sector.
There has also been a large number of start-up organisations
developing products in this area. Towards the end of 2017, we
established a new specialist business unit to support these clients
by supplying not only relevant technology skills, but also sales
professionals to help them build their businesses. The area of
technology sales is proving lucrative across our technology
landscape, and we are investing in it, to complement our technology
service offering. Although this area is nascent, we are seeing
encouraging initial results.
Our legacy IT businesses faced more headwinds, with corporate
accounts down (20)%, development down (18)% and ERP down (10)%.
With the move to more cloud-based ERP solutions, we are
experiencing fewer large implementations of products such as Oracle
and SAP, leading to reduced demand for contract staff. To counter
this, we have realigned our product offering to other areas within
the cloud market, including by focusing on senior architecture
staff as well as specialising in providing staff in application
markets such as salesforce. We have reduced staffing levels in
these business units and reinvested the savings into the growth
areas referred to above.
With the shift in strategy by a number of our telecoms clients
to diversify their business away from their roots as traditional
vendors, we are seeing increased demand in skills required to
support the growth of the Internet of Things. While our legacy
corporate accounts business saw NFI reduce by (23%), we held NFI
level in our operations and business support (OSS/BSS) business
unit and encouragingly, we grew NFI in our new converging
communications area by 43%.
International - 20% of Group NFI not including international
income generated from UK offices
Before the acquisition of Networkers (in April 2015), we were
highly UK-centric, with 98% of our sales being domestic. Through
the acquisition, we inherited a small presence in 10 countries, and
we are now growing these international operations to diversify our
geographical market and widen our client base.
Progress in these areas is taking time, and we saw 4% negative
NFI growth (in constant currency) in international operations over
the full year. However, within this division, we have seen strong
growth in our Americas business (up 27% year-on-year on a constant
currency basis in Q4) and in Asia (with 14% year-on-year constant
currency growth in Q4). We anticipate this momentum continuing in
both regions, and that the Middle East and Africa (MEA) region will
return to growth in 2018.
During the year, we established a presence in Munich to take
advantage of the opportunities we see in Germany. Bavaria is the
centre of European engineering business, particularly for
automotive and aerospace clients and their supply chains.
Networkers is now operating in Madrid, where we are focusing on
permanent and contract roles across bank technology, SAP and
supporting the Unisys account. We have also invested in developing
a communications team focusing on cloud and security, and
reinforcing our FinTech vertical, working with four of the top 10
banks in Spain.
In the Americas, the USA saw growth of 96% year on year in
Engineering. Within Technology, a shortage of software sales
executives has led to a huge drive by technology companies to
acquire the best. We have exclusive agreements with three such
clients across the Americas. The telecoms business saw a
considerable upswing in H2, driven by 4G densification efforts by
the big four operators. We expect this to continue as operators
prepare their networks for 5G deployment. FinTech continues to grow
strongly and we are ideally positioned to take advantage of this
with offices in Toronto and Mexico City, two of the three largest
financial hubs in North America. In Latin America, huge 4G
deployments and new market entrants are behind growth in the
telecoms sector, and our global relationships with large vendors
such as Huawei and Nokia have us well positioned to take advantage.
The introduction of the Matchtech brand has led to us serving a
much more diversified client base within the construction and
automotive sectors.
This success has been replicated in Asia, where we have seen
strong growth under the Matchtech brand. We are achieving this due
to the demand for specialist talent to support large infrastructure
projects, particularly in Malaysia, where we are working on several
large rail and road projects, as well as new build projects. We
launched the Matchtech brand in China during the year and, in
addition to growth in infrastructure business, we have secured key
client wins in the automotive sector.
Africa had a challenging year, with a difficult political and
economic backdrop precipitating a 24% NFI decline. Our
Infrastructure team, however, showed solid growth and the outlook
is promising with infrastructure development seen as the key to
unlocking economic growth on the continent. Our IT team saw NFI
growth of 5%, with a key focus on FinTech, an area in which we
expect to benefit from regional market growth.
In the Middle East, our largest market is construction, much of
it for Expo 2020 in Dubai. Rail will be a growth market in 2018
with the Doha Metro and Riyadh Metro to come, and further potential
opportunities in Oman and Kuwait. We are also expecting more work
in stadia and infrastructure with the lead up to the FIFA World Cup
in Qatar in 2022. In addition, more governments are planning
renewable energy projects, and we also expect growth from the large
nuclear plant being built in Abu Dhabi.
Strategic progress
Sharpen our focus
Matchtech has long been seen as a specialist in some highly
attractive engineering niches. We have now replicated this clarity
in our technology recruitment business, Networkers, through careful
market segmentation. We have identified what we believe to be
attractive, high-growth markets within IT and telecoms, and we are
building our presence and improving our performance in them.
Another exciting opportunity afforded by the Networkers
acquisition is in the convergence between engineering and
technology. This was part of our rationale behind the acquisition,
and it is now coming to fruition. Our Engineering Technology
department, created to exploit this convergence, was our
fastest-growing business unit in FY17, with NFI up 19%. We believe
our position within the 'convergence' market to be unique: no other
recruitment firm of our size and geographical spread focuses purely
on engineering and technology. This gives Gattaca a commanding
competitive position as a recruitment firm which understands its
engineering clients' traditional business models, but which can
also source the recently emerging and nascent technology skill sets
these customers now need. From factory automation to autonomous
cars, we are identifying data scientists and AI developers for our
traditional OEMs and supply chain clients. These clients often need
a recruitment intermediary, such as Gattaca, to help them attract
technology candidates who may not see such companies as
cutting-edge employers in the digital age.
Move up the value chain
Our Solutions business, relaunched during the year, is
emblematic of our move up the value chain. Gattaca is increasingly
securing agreements to provide services to clients which move
beyond a basic recruitment offering. The Gattaca brand enables us
to position ourselves not just as experts in finding niche talent,
but as HR and consulting specialists that can help our clients
improve how they conduct their business, not just how they recruit.
We offer a wide range of consulting services, outsourced workforce
solutions and - on a carefully controlled basis - delivery of
outcome-based statements of work. These are based on collaborating
with our clients to address their needs, support their success and
improve the efficiency of their resourcing models. As an example,
we have developed a respected expertise in first attracting, then
engaging and retaining our own staff internally. We are now taking
that experience and capability out to market, working with our
clients to improve their employer brand and the value proposition
they offer to potential and existing staff.
We have also made great progress in deepening our relationship
with Gattaca's key clients. During the year, we invested in
additional business development and account management resource.
This contributed to an increase in the NFI generated by our major
clients during the year, which will be annualised going forward.
Additionally, we launched a key account development programme,
working across our brands, service lines and regions. Our aim is to
build deeper and stronger relationships with our major clients.
This is showing early signs of success, with 11 targeted clients
moving into our top 50 customers by value as a result of this
initiative.
Think global
We have restructured our businesses internationally, creating
Regional Managing Director roles in the Americas and Asia which has
led to greater focus and collaboration between the offices in our
network. During the year we also installed new management in the
MEA region. Such is the importance we place on our international
expansion that both Regional Managing Directors report directly to
the Group Chief Executive. We have rolled out the Matchtech brand
in many countries and have enjoyed rapid success, in Asia in
particular. We have segmented the technology businesses in
recognition of the fact that our clients' most acute recruitment
needs are in skills-short niche markets. We have identified the
OSS/BSS and R&D functions of our long-standing telecoms clients
as an opportunity for us to form an even stronger relationship with
them.
Taking advantage of our international footprint, we are now
positioned to work on many of our global clients' major regional
recruitment projects. Last year we reported on the pan-European
managed service programme (MSP) won with Unisys under which we
supply all the company's contract staff requirements across Europe.
As part of the fulfilment of this contract we established new
operations in Spain and Germany during the year and these have now
evolved to become sales operations in their own right. Whilst these
are both at early stages of development, with low headcount and no
major long-term cost commitment, they represent a continuation of
the controlled international roll-out of our brands, further
reducing our dependence on the UK market. On the back of the
success of this agreement, Unisys awarded us additional work last
year, in two recruitment process outsourcing (RPO) contracts to
supply permanent staff.
We are diversifying and growing our international client base
through our permanent recruitment service, which grew by 7%
(constant currency) internationally year on year in 2017. Success
in permanent recruitment is a proven entry strategy, leading to
opportunities to provide contract recruitment services (and their
associated recurring revenues) in markets where the contract
opportunity is large, as in North America.
In the USA, we have now diversified from four major clients at
the time of acquiring Networkers in April 2015, to more than 50,
with plans for further substantial increases. While permanent NFI
drove our growth in 2017, our focus on quality contract business is
now also bearing fruit. We are continuing to grow our Dallas
office. This base location will support the sales resource we
recently added in the Austin area, taking advantage of its position
as a tech hub and growing our presence in the Texas market. This
arrangement mirrors the development of our UK business, where our
Whiteley head office supports other operations around the
country.
The macroeconomic trends in our international markets are
positive and we are servicing major engineering projects around the
globe.
Getting in shape
We aim to attract and retain the best consultants, working
towards replicating the high-engagement, high-productivity model
originally developed by Matchtech in the UK, which has led to our
long track record of high conversion ratios. To help achieve this
in our international offices, we have taken more space, fitted out
to a higher standard than is the norm for the recruitment industry
and with a consistent branding and look across the network. To
better support the development of our international businesses, we
have also increased our Group Support headcount to facilitate our
controlled growth overseas.
Since staff costs represent 80% of our overhead, we continue to
flex headcount in line with market opportunity, adjusting our cost
base in line with the economic situation. During 2017, we reduced
UK headcount slightly while increasing staff numbers
internationally. Notwithstanding the slight increase in our Group
Support headcount during the year, to better support this future
international growth, we continue to target improving the fee
earner to non-fee earner split from 71:29 at July 2017 to towards
75:25 by July 2018.
We are continuing to invest in front-office and back-office
systems as we equip ourselves to run a truly international
business. We are making good progress on implementing one Finance
and HR information system globally, and we have identified a new
customer relationship management (CRM) system with plans to roll it
out across the business. These are steady, considered investments
and are part of our continuing programme of upgrading our
capability.
During the year, we launched the Gattaca website, complementing
the improved Matchtech and Networkers websites introduced in 2016.
Our customers can now access the range of services we provide
across the Group, including those of Gattaca Solutions. We are now
able to advertise our internal staff requirements around the world,
leading to a more consistent candidate experience and the
development of Gattaca as an international employer brand. In
combination with our social media activity, this effort is paying
off, with Gattaca now one of the highest rated recruitment
businesses on Glassdoor (the global employer review site) and with
five star reviews of our employer brand on Facebook.
Outlook
We will continue to position the Group to maximise growth
opportunities both in the UK and internationally. We believe the
investments we have made during the year, will deliver good returns
in 2018 and beyond. We are now well placed strategically to take
advantage of the increasing convergence between the engineering, IT
and telecoms skill sets, and to grasp the opportunities presented
by infrastructure investment commitments around the world,
particularly those made by the UK and US Governments.
While we continue to monitor uncertainty in the wider economy,
we will invest selectively in strengthening the business to support
our medium and longer-term performance.
Brian Wilkinson
Chief Executive Officer
Chief Financial Officer's Report
Performance
Revenue of GBP642.4m (2016: GBP617.6m) generated NFI of
GBP74.7m
(2016: GBP73.0m). We achieved contract NFI of GBP56.4m (2016:
GBP53.9m) at a margin of 9.0% (2016: 9.0%), and permanent
recruitment fees were GBP18.3m (2016: GBP19.1m).
Gross margins were 11.6% (2016: 11.8%), the slight decline being
due to the higher mix of contract NFI compared with last year
(2017: 76%:24%, 2016: 74%:26% reported basis).
Profit from operations of GBP12.7m was down 16% (2016:
GBP15.1m). Finance income was less than GBP0.1m (2016: GBP1.0m);
the reduction was primarily due to significant Sterling exchange
rate fluctuations in 2016, immediately after the EU referendum in
June 2016, not being seen in 2017. Finance expenses were GBP1.2m
(2016: GBP1.1m) driven by the comparative level of average debt
each year. Combined, these led to a decrease in profit before tax
of 24%, to GBP11.5m (2016: GBP15.1m).
On an underlying basis, excluding both GBP1.6m (2016: GBP2.4m)
of non-recurring costs and GBP3.1m (2016: GBP3.7m) of amortisation
of acquired intangibles and excluding discontinued operations from
2016 results, profit from operations was down 19% to GBP17.4m
(2016: GBP21.4m). On the same basis, after deduction of GBP1.2m net
finance costs (2016: GBPnil), adjusted profit before tax was
GBP16.2m (2016: GBP20.4m).
Statutory profit after tax of GBP7.3m (2016 GBP9.9m) was down
26%.
Excluding amortisation of intangibles, non-recurring items and
the impact of acquisitions and discontinued businesses,
administrative expenses were GBP54.7m (2016: GBP50.8m). Of the
GBP3.9m increase, GBP1.6m was due to the impact of currency
translation on our international cost base, with weaker Sterling
exchange rates seen in FY17 compared with the prior year. The
remaining GBP2.3m of this additional spending represented a
conscious decision by the Board to invest in our people and
infrastructure, despite a difficult trading environment. Our
international sales staff costs rose by GBP1.3m, as we invested
heavily to capitalise on the opportunities we see globally. GBP0.6m
related to our new and expanded London office - increasing our
access to the London consultant and candidate pools - while we
invested the remainder in client solutions, contractor support and
HR capability.
During the year, we continued to invest in our systems, to
reduce costs and operate on a truly global platform. We launched
new accounting and HR systems and, over the next two years, we will
be addressing other major areas, especially for the front and
middle office.
Conversion ratio
The ratio of profit from operations before amortisation of
acquired intangibles and non-recurring costs to gross profit for
the year was 23% (2016: 29%). Although this ratio is already very
high compared with our peer group, over the long term, as our
international operations become more established and we return to
higher rates of UK NFI growth, we expect this ratio to improve.
Taxation
The Group's effective tax rate increased from 34.2% to 36.1%,
chiefly owing to overseas withholding taxes. These taxes are
usually charged based on revenue (billings) rather than gross
margin (billings less contractor costs). Consequently the local
country tax charge may not be sufficient to allow an offset.
We recover withholding taxes which cannot be offset against
local corporation tax, through higher gross margins charged to
clients, to ensure the underlying overall transactions are
commercially positive. While we are implementing certain structural
changes to improve our offset ability, under our current operating
model, the effective tax rate is likely to remain high due to
withholding taxes.
Withholding tax which we were not able to offset against other
taxes amounted to GBP2.0m in the year (2016: GBP1.1m).
The adjustments to the tax charge for previous periods, of
GBP0.1m (2016: GBPnil), includes the impact of changing our
accounting method for withholding tax from a cash to an accruals
basis, which provides better matching of inflows and outflows.
The changes in UK tax rates of GBP(0.4)m (2016: GBPnil),
reducing the tax charge, are a result of applying the reduced UK
corporation tax rates from 1 April 2017 to our differed tax
liabilities in the balance sheet.
The effective tax rate excluding adjustments in respect of prior
periods is 39% (2016: 34.2%).
While we are implementing certain structural changes to improve
our offset ability, under our current operating model, the
effective tax rate is likely to remain high due to withholding
taxes.
Synergies
Of the GBP3.1m synergies from the Networkers International
acquisition (made in April 2015) previously identified, GBP2.9m has
now been crystallised, with a further GBP0.2m to be crystallised in
2018. In addition, we will be looking at further opportunities to
improve efficiency, some of which will depend on the systems
improvements noted above.
We have started the integration of the back-office functions of
RSL, which we expect to complete in Q3 2018, yielding overall
annual savings of around GBP0.5m.
Segmental reporting
We have updated our segmental reporting to reflect the way we
manage the business: UK Engineering; UK Technology; and
International. Our Engineering and Technology business heads
contribute to our international growth and management through a
matrix structure.
Acquisition of RSL
In February 2017, we announced that our wholly-owned subsidiary
Matchtech Group (Holdings) Limited acquired 70% of RSL's issued
share capital for GBP7.4m. The remaining 30% is subject to a put
and call option, exercisable from 12 months after completion, for
5.0x trailing EBITA at that time. The maximum total consideration
payable is GBP15.0m. All consideration is payable in cash, funded
from the Group's existing resources.
This acquisition has increased our skill base in rail and
broadened our client base in this area, especially in the UK
regions.
Earnings per share
Basic earnings per share was 23.4 pence (2016: 32.1 pence), and
on a fully diluted basis, was 22.7 pence (2016: 31.0 pence). This
was primarily due to lower profits after tax.
Dividends paid / proposed
The Board is recommending, subject to shareholder approval, a
final dividend for the year ended July 2017 of 17.0 pence per
share, to be paid on 19 January 2018. The total dividend for the
year is maintained at 23.0 pence per share.
Tangible and intangible assets
Capital expenditure in the year, including tangible assets and
software, was GBP1.5m (2016: GBP0.9m). Tangible assets at 31 July
2017 of GBP2.5m (2016: GBP1.1m), consist of the Group's motor
fleet, office equipment, leasehold improvements and computer
equipment. Of this amount, GBP1.0m relates to revised building
dilapidation provisions (which increases both fixed assets and
provisions within the balance sheet). Intangible assets (largely
goodwill arising on acquisition) at 31 July 2017 were GBP51.8m
(2016: GBP48.4m).
Net assets and shares in issue
At 31 July 2017, the Group had net assets of GBP84.7m (2016:
GBP81.6m) and had 31.8m fully paid ordinary shares in issue (2016:
31.2m).
Cash flow
Cash generated from operations at GBP12.4m was GBP7.4m lower
than the prior year (2016: GBP19.8m). Profit after tax adjusted for
non-cash items was GBP4.0m lower than prior year.
Trade receivables increased by GBP3.8m. Debtor days of the
combined Group at the year end were 55 days (31 July 2016: 50
days). Reasons for the increase include timing issues with a major
client, which caused a half day increase in DSO. This is now
resolved and not expected to recur. In addition, RSL has
historically operated with a higher DSO than the rest of the
business. The Gattaca payment terms will be the standard for new
RSL clients and the integration of the Finance function will also
aid improvement in that proportion of collections. We are also
seeking improvements in our US business. DSO has improved since
July 2017 and this area remains a key focus for the business.
Trade and other payables decreased by GBP1.2m as a result of
lower accruals for commissions and bonuses and for contractor
payments.
Uses of cash included the GBP11.2m acquisition (2016: GBP0.4m)
of RSL (GBP7.4m initial consideration plus GBP3.8m of debt
assumed), and GBP1.0m of capital expenditure (2016: GBP0.5m)
relating to investment in systems and offices.
Net debt, banking facilities and interest rate risk
Net debt at 31 July 2017 was GBP40.3m (2016: GBP25.0m),
consisting a working capital facility of GBP25.7m (2016: GBP18.8m),
bank term loan GBP20.4m (2016: GBP13.6m), less cash GBP5.8m (2016:
GBP7.4m).
Our financing facilities include two covenants: Interest Cover
and Adjusted Leverage. We are comfortable with our ability to
service our debt and meet our covenants and we monitor projections
for covenant ratios as part of our routine monthly reporting.
The Group has facilities with HSBC of GBP105m, consisting of a
GBP75m working capital financing facility and a GBP30m bank term
loan, both committed until October 2020.
The Group's exposure to market risk for changes in interest
rates relates primarily to the Group's bank loan and sales
financing facility debt obligations. Bank interest is charged on a
floating rate basis.
Support services
To support the operational changes being made, we have begun a
process to improve rigour and focus in our approach to project
management, business reviews and management information, to provide
better clarity and accountability. We are demanding more of
ourselves in quality, relevance and timeliness of deliverables to
central management and the business units, and we are focused on
doing fewer things to a higher standard to improve execution of
core initiatives.
During 2018, we intend to place more emphasis on forward-looking
information and business support, as well as identifying
opportunities for further streamlining, standardisation and
consolidation of transactional support functions.
We will achieve some of the areas for improvement through better
alignment of roles and responsibilities as well as culture, while
other areas will require systems enhancements over the medium
term.
Brexit
The Board continues to follow developments on Brexit with
interest. To a certain extent, a reduction in free movement of
skilled labour would probably lead to an increase in the demand for
Gattaca's services, as UK employers would find it more difficult to
find the skill sets they require. However, where the skillsets are
in extremely short supply, restrictions on free movement of skilled
labour could affect our ability to source candidates. The effect of
Brexit on business confidence is an important factor for us to the
extent it affects the UK economic environment, as noted in the
Principal Risks and Uncertainties report in the Annual Report.
Critical accounting policies
The statement of significant accounting policies is set out in
Note 1 to the Financial Statements.
Group financial risk management
The Board reviews and agrees policies for managing financial
risks. The Group's finance function is responsible for managing
investment and funding requirements including banking and cash flow
monitoring. It seeks to ensure that adequate liquidity exists at
all times, to meet its cash requirements.
The Group's financial instruments comprise borrowings, cash and
various items, such as trade receivables and trade payables that
arise from its operations, and some matching forward foreign
exchange contracts. The Group does not trade in financial
instruments. The main risks arising from the Group's financial
instruments are described below.
Credit risk
The Group trades only with recognised, creditworthy third
parties. We monitor receivable balances on an ongoing basis, with
the result that the Board feels the exposure to bad debt is not
significant. There are no significant concentrations of credit risk
within the Group, with no single debtor accounting for more than 4%
(2016: 4%) of total receivables balances at 31 July 2017.
Foreign currency risk
The Group generates around 30% of its annualised NFI in overseas
markets including overseas revenue generated from the UK. The Group
does face risks to both its reported performance and cash position
arising from the effects of exchange rate fluctuations.
The Group manages these risks by matching sales and direct costs
in the same currency, entering into forward exchange contracts to
minimise the gap in assets and liabilities denominated in foreign
currencies, and regularly exchanging surplus foreign currency to
minimise the gap in assets and liabilities denominated in foreign
currency.
Salar Farzad
Chief Financial Officer
Consolidated Income Statement
For the year ended 31 July 2017
2017 2016
Note GBP'000 GBP'000
-------------------------------------------- ---- --------- ---------
Revenue 642,365 617,604
Cost of sales (567,657) (544,608)
-------------------------------------------- ---- --------- ---------
GROSS PROFIT 2 74,708 72,996
Administrative expenses (62,004) (57,934)
-------------------------------------------- ---- --------- ---------
PROFIT FROM OPERATIONS 3 12,704 15,062
-------------------------------------------- ---- --------- ---------
Profit from operations before amortisation
of acquired intangibles and non-recurring
costs 17,388 21,089
Non-recurring costs included within
administrative expenses 3 (1,610) (2,371)
Amortisation of acquired intangibles 3 (3,074) (3,656)
-------------------------------------------- ---- --------- ---------
Profit on disposal of subsidiary - 58
Finance income 5 44 1,025
Finance cost 6 (1,240) (1,076)
-------------------------------------------- ---- --------- ---------
PROFIT BEFORE TAX 11,508 15,069
Taxation 9 (4,160) (5,152)
-------------------------------------------- ---- --------- ---------
PROFIT FOR THE YEAR 7,348 9,917
-------------------------------------------- ---- --------- ---------
Attributable to:
Equity holders of the parent 7,176 9,917
Non-controlling interests 172 -
-------------------------------------------- ---- --------- ---------
7,348 9,917
-------------------------------------------- ---- --------- ---------
All of the activities of the Group are classed as
continuing.
EARNINGS PER ORDINARY SHARE
2017 2016
Note pence pence
---------------------------- ---- ------ ------
Basic 10 23.4 32.1
Diluted 10 22.7 31.0
---------------------------- ---- ------ ------
Statement of Comprehensive Income
For the year ended 31 July 2017
2017 2016
GBP'000 GBP'000
------------------------------------------------------------- -------- --------
PROFIT FOR THE YEAR 7,348 9,917
OTHER COMPREHENSIVE INCOME
Items that may be classified to profit or loss:
Exchange differences on retranslation of foreign operations 218 835
------------------------------------------------------------- -------- --------
OTHER COMPREHENSIVE INCOME FOR THE YEAR 218 835
------------------------------------------------------------- -------- --------
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 7,566 10,752
------------------------------------------------------------- -------- --------
Attributable to:
Equity holders of the parent 7,394 10,752
Non-controlling interests 172 -
------------------------------------------------------------- -------- --------
7,566 10,752
------------------------------------------------------------- -------- --------
The accompanying notes form part of these financial
statements.
Statement of Changes in Equity
For the year ended 31 July 2017
A) Group
Share- Translation
based of Non-
Share Share Merger payment foreign Retained controlling
capital premium reserve reserve operations earnings interests Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ -------- -------- -------- -------- ----------- --------- ------------ --------
At 1 August 2015 309 8,694 28,750 2,140 (20) 36,648 16 76,537
------------------------------ -------- -------- -------- -------- ----------- --------- ------------ --------
Profit for the year - - - - - 9,917 - 9,917
Other comprehensive
income - - - - 835 - - 835
------------------------------ -------- -------- -------- -------- ----------- --------- ------------ --------
Total comprehensive
income - - - - 835 9,917 - 10,752
------------------------------ -------- -------- -------- -------- ----------- --------- ------------ --------
Dividends paid in
the year - - - - - (6,892) - (6,892)
Deferred tax movement
re share options - - - - - (185) - (185)
Acquisition of non-controlling
interest - - - - - (124) (16) (140)
IFRS 2 charge - - - 1,537 - - - 1,537
IFRS 2 reserves
transfer - - - (1,140) - 1,140 - -
Shares issued 3 2 - - - - - 5
------------------------------ -------- -------- -------- -------- ----------- --------- ------------ --------
Transactions with
owners 3 2 - 397 - (6,061) (16) (5,675)
------------------------------ -------- -------- -------- -------- ----------- --------- ------------ --------
At 31 July 2016 312 8,696 28,750 2,537 815 40,504 - 81,614
------------------------------ -------- -------- -------- -------- ----------- --------- ------------ --------
At 1 August 2016 312 8,696 28,750 2,537 815 40,504 - 81,614
------------------------------ -------- -------- -------- -------- ----------- --------- ------------ --------
Profit for the year - - - - - 7,176 172 7,348
Other comprehensive
income - - - - 218 - - 218
------------------------------ -------- -------- -------- -------- ----------- --------- ------------ --------
Total comprehensive
income - - - - 218 7,176 172 7,566
------------------------------ -------- -------- -------- -------- ----------- --------- ------------ --------
Dividends paid in
the year - - - - - (7,195) - (7,195)
Deferred tax movement
re share options - - - - - (121) - (121)
Deferred consideration - - - - - - 2,050 2,050
IFRS 2 charge - - - 774 - - - 774
IFRS 2 reserves
transfer - - - (1,896) - 1,896 - -
Shares issued 6 8 - - - - - 14
------------------------------ -------- -------- -------- -------- ----------- --------- ------------ --------
Transactions with
owners 6 8 - (1,122) - (5,420) 2,050 (4,478)
------------------------------ -------- -------- -------- -------- ----------- --------- ------------ --------
At 31 July 2017 318 8,704 28,750 1,415 1,033 42,260 2,222 84,702
------------------------------ -------- -------- -------- -------- ----------- --------- ------------ --------
B) Company
Share-
based
Share Share Merger reserve payment Retained
capital premium GBP'000 reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- ---------------- -------- ---------- ---------
At 1 August 2015 309 8,694 28,526 2,140 612 40,281
------------------------------- -------- -------- ---------------- -------- ---------- ---------
Profit and total comprehensive
income for the year - - - - 7,298 7,298
------------------------------- -------- -------- ---------------- -------- ---------- ---------
Dividends paid in the
year - - - - (6,892) (6,892)
IFRS 2 charge - - - 1,537 - 1,537
IFRS 2 reserves transfer - - - (1,140) 1,140 -
Shares issued 3 2 - - - 5
------------------------------- -------- -------- ---------------- -------- ---------- ---------
Transactions with owners 3 2 - 397 (5,752) (5,350)
------------------------------- -------- -------- ---------------- -------- ---------- ---------
At 31 July 2016 312 8,696 28,526 2,537 2,158 42,229
------------------------------- -------- -------- ---------------- -------- ---------- ---------
At 1 August 2016 312 8,696 28,526 2,537 2,158 42,229
------------------------------- -------- -------- ---------------- -------- ---------- ---------
Profit and total comprehensive
income for the year - - - - 6,278 6,278
------------------------------- -------- -------- ---------------- -------- ---------- ---------
Dividends paid in the
year - - - - (7,195) (7,195)
IFRS 2 charge - - - 774 - 774
IFRS 2 reserves transfer - - - (1,896) 1,896 -
Shares issued 6 8 - - - 14
------------------------------- -------- -------- ---------------- -------- ---------- ---------
Transactions with owners 6 8 - (1,122) (5,299) (6,407)
------------------------------- -------- -------- ---------------- -------- ---------- ---------
At 31 July 2017 318 8,704 28,526 1,415 3,137 42,100
------------------------------- -------- -------- ---------------- -------- ---------- ---------
Statements of Financial Position
For the year ended 31 July
2017 Group Company
-------------------- --------------------
2017 2016 2017 2016
Note GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ---- --------- --------- --------- ---------
NON-CURRENT ASSETS
Intangible assets 12 51,802 48,371 - -
Property, plant and equipment 13 2,504 1,125 - -
Investments 14 - - 7,987 7,213
Deferred tax asset 15 773 969 - -
----------------------------------- ---- --------- --------- --------- ---------
Total Non-Current Assets 55,079 50,465 7,987 7,213
----------------------------------- ---- --------- --------- --------- ---------
CURRENT ASSETS
Trade and other receivables 16 114,997 100,811 86,608 80,335
Cash and cash equivalents 5,802 7,442 - -
----------------------------------- ---- --------- --------- --------- ---------
Total Current Assets 120,799 108,253 86,608 80,335
----------------------------------- ---- --------- --------- --------- ---------
TOTAL ASSETS 175,878 158,718 94,595 87,548
----------------------------------- ---- --------- --------- --------- ---------
NON-CURRENT LIABILITIES
Deferred tax liability 15 (3,914) (4,286) - -
Provisions 17 (1.596) (278) - -
Bank loans and overdrafts 23 (20,464) (13,608) (20,464) (13,608)
----------------------------------- ---- --------- --------- --------- ---------
Total Non-Current Liabilities (25,974) (18,172) (20,464) (13,608)
----------------------------------- ---- --------- --------- --------- ---------
CURRENT LIABILITIES
Trade and other payables 18 (38,990) (37,861) (32,031) (31,711)
Current tax liability (586) (2,224) - -
Bank loans and overdrafts 23 (25,626) (18,847) - -
----------------------------------- ---- --------- --------- --------- ---------
Total Current Liabilities (65,202) (58,932) (32,031) (31,711)
----------------------------------- ---- --------- --------- --------- ---------
TOTAL LIABILITIES (91,176) (77,104) (52,495) (45,319)
----------------------------------- ---- --------- --------- --------- ---------
NET ASSETS 84,702 81,614 42,100 42,229
----------------------------------- ---- --------- --------- --------- ---------
EQUITY
Called-up equity share capital 21 318 312 318 312
Share premium account 8,704 8,696 8,704 8,696
Merger reserve 28,750 28,750 28,526 28,526
Share based payment reserve 1,415 2,537 1,415 2,537
Translation of foreign operations 1,033 815 - -
Retained earnings 42,260 40,504 3,137 2,158
----------------------------------- ---- --------- --------- --------- ---------
TOTAL EQUITY ATTRIBUTABLE
TO EQUITY HOLDERS OF THE PARENT 82,480 81,614 42,100 42,229
----------------------------------- ---- --------- --------- --------- ---------
Non-controlling interests 2,222 - - -
----------------------------------- ---- --------- --------- --------- ---------
TOTAL EQUITY 84,702 81,614 42,100 42,229
----------------------------------- ---- --------- --------- --------- ---------
These financial statements were approved by the Board of
Directors on 9 November 2017, and signed on their behalf by:
Salar Farzad
Chief Financial Officer
Consolidated Cash flow Statement
For the year ended 31 July 2017 Group Company
-------------------- -------------------
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------- --------- --------- -------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Profit after taxation 7,348 9,917 6,278 7,298
Adjustments for:
Depreciation and amortisation 3,970 4,776 - -
Profit on disposal of property, plant and equipment (9) (7) - -
Interest income (44) (1,025) - -
Interest expense 1,240 1,076 - -
Taxation expense recognised in profit and loss 4,160 5,152 - -
Increase in trade and other receivables (3,774) (1,914) (6,273) (8,200)
(Decrease)/increase in trade and other payables (1,221) 299 320 22,789
Share-based payment charge 774 1,537 - -
Investment income - - (7,200) (8,200)
------------------------------------------------------- --------- --------- -------- ---------
Cash generated from operations 12,444 19,811 (6,875) 13,687
Interest paid (1,145) (1,186) - -
Income taxes paid (6,034) (4,067) - -
------------------------------------------------------- --------- --------- -------- ---------
NET CASH FROM OPERATING ACTIVITIES 5,265 14,558 (6,875) 13,687
------------------------------------------------------- --------- --------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (1,027) (471) - -
Purchase of intangible assets (512) (462) - -
Acquisitions net of cash received (11,162) (390) - -
Proceeds from sale of subsidiary - 420 - -
Proceeds from sale of property, plant and equipment 76 53 - -
Dividends received - - 7,200 8,200
------------------------------------------------------- --------- --------- -------- ---------
NET CASH USED IN INVESTING ACTIVITIES (12,625) (850) 7,200 8,200
------------------------------------------------------- --------- --------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital 14 5 14 5
Drawdown of term loan 7,106 - 7,106 -
Finance costs paid (250) (250) -
Repayment of term loan - (15,000) - (15,000)
Dividends paid (7,195) (6,892) (7,195) (6,892)
------------------------------------------------------- --------- --------- -------- ---------
NET CASH USED IN FINANCING (325) (21,887) (325) (21,887)
------------------------------------------------------- --------- --------- -------- ---------
Effects of exchange rates on cash and cash equivalents (695) 1,908 - -
NET DECREASE IN CASH AND CASH EQUIVALENTS (8,380) (6,271) - -
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (11,511) (5,240) - -
------------------------------------------------------- --------- --------- -------- ---------
CASH AND CASH EQUIVALENTS AT OF YEAR (19,891) (11,511) - -
------------------------------------------------------- --------- --------- -------- ---------
CASH AND CASH EQUIVALENTS
Cash 5,802 7,442 - -
Bank overdrafts - (14) - -
Working capital facility used (25,693) (18,939) - -
CASH AND CASH EQUIVALENTS IN CASH FLOW STATEMENTS (19,891) (11,511) - -
------------------------------------------------------- --------- --------- -------- ---------
Notes forming part of the financial statements
1 The Group and Company Significant Accounting Policies
i The Business and Address of the Group
Gattaca plc is a human capital resources business dealing with
contract and permanent recruitment in the private and public
sectors. The Company is incorporated in the United Kingdom. The
Group's address is: Gattaca plc, 1450 Parkway, Whiteley, Fareham,
Hampshire PO15 7AF.
ii Basis of Preparation of the Financial Statements
The Financial Statements have been prepared in accordance with
applicable International Financial Reporting Standards as adopted
by the European Union (EU) and which are effective at 31 July
2017.
These Financial Statements have been prepared under the
historical cost convention. The accounting policies have been
applied consistently throughout both the Group and the Company for
the purposes of preparation of these Financial Statements. A
summary of the principal accounting policies of the Group is set
out below.
iii Going Concern
The Directors have reviewed forecasts and budgets for the coming
year, which have been drawn up with appropriate regard for the
current macroeconomic environment and the particular circumstances
in which the Group operates. These were prepared with reference to
historical and current industry knowledge, taking future strategy
of the Group into account.
As a result, at the time of approving the Financial Statements,
the Directors consider that the Company and the Group have
sufficient resources to continue in operational existence for the
foreseeable future, and accordingly, that it is appropriate to
adopt the going concern basis in the preparation of the Financial
Statements. As with all business forecasts, the Directors cannot
guarantee that the going concern basis will remain appropriate
given the inherent uncertainty about future events.
iv New Standards and Interpretations
These following amendments to existing standards is applicable
for the period ending 31 July 2017:
Effective date
(Annual periods
beginning on or
Standard after)
-------- ---------------------------- ----------------
IFRS 11 Joint Arrangements 1 January 2016
IFRS 14 Regulatory Deferral Accounts 1 January 2016
IAS 27 Equity method in Separate 1 January 2016
Financial Statements
-------- ---------------------------- ----------------
The adoption of the above standards has had no material impact
on the financial statements.
New Standards in Issue, Not Yet Effective
The following relevant standards and interpretations, which are
new and yet to become mandatory, have not been applied in the Group
financial statements:
Effective date
(Annual periods beginning
Standard on or after)
----------------- -------------------------------- --------------------------
IAS 12 Deferred Tax 1 January 2017
IFRS 9 Fair Values 1 January 2018
IFRS 15 Revenue 1 January 2018
IFRS 2 Share-based Payment Transactions 1 January 2018
IFRS 16 Leases 1 January 2019
IFRS improvements Various Various
----------------- -------------------------------- --------------------------
The Board needs to assess the impact of the above new standards,
however, based on the Group's current business model and accounting
policies.
The Group does not intend to apply any of these pronouncements
early.
v Basis of Consolidation
The Group financial statements consolidate those of the Company
and all of its subsidiary undertakings drawn up to the Statement of
Financial Position date. Subsidiaries are entities over which the
Group has power to control the financial and operating policies so
as to obtain benefits from their activities. The Group obtains and
exercises control through voting rights.
Acquisitions of subsidiaries are dealt with by the purchase
method. The purchase method involves the recognition at fair value
of all identifiable assets and liabilities, including contingent
liabilities of the subsidiary, at the acquisition date, regardless
of whether or not they were recorded in the financial statements of
the subsidiary prior to acquisition. On initial recognition, the
assets and liabilities of the subsidiary are included in the Group
Statement of Financial Position at their fair values, which are
also used as the bases for subsequent measurement in accordance
with Group accounting policies.
Transactions between Group companies are eliminated on
consolidation.
vi 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. Revenue on temporary
placements is recognised upon receipt of a client approved
timesheet or equivalent. Revenue from permanent placements, which
is based on a percentage of the candidate's remuneration package,
is recognised when candidates commence employment, at which point
it is probable that the economic benefits associated with the
transaction will be transferred. Fees for the provision of
engineering services are recognised on completion of work performed
in accordance with customer contracts. Other fees are recognised on
confirmation from the client committing to the agreement.
vii Non-recurring Items
Non-recurring items are items that are unusual 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 true and fair
understanding of the Group's results.
Items which are included within this category include:
- costs of acquisitions;
- integration costs following acquisitions;
- significant restructuring costs;
- other particularly significant or unusual items.
viii 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 33.0% Straight line
Over the period
Leasehold Improvements of the lease term Straight line
---------------------- ------------------ ----------------
ix Intangible Assets
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 is allocated to cash-generating units (CGUs) and is not
amortised, but is tested at least annually for impairment. For the
purpose of impairment testing, goodwill acquired in a business
acquisition is allocated to each of the cash generating units, or
groups of CGUs that is expected to benefit from the synergies of
the combination. Each unit or group of units to which the goodwill
is allocated represents the lowest level within the entity at which
the goodwill is monitored for internal management purposes.
Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more
frequently if events or changes in circumstances indicate a
potential impairment. The carrying value of goodwill is compared to
the recoverable amount, which is the higher of value in use and
fair value less costs to sell. Any impairment is recognised
immediately as an 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.
Expenditure on internally generated goodwill, brands and
intangibles is expensed in the Income Statement when incurred.
Customer relationships
Acquired customer relationships comprise principally of existing
customer relationships which may give rise to future orders
(customer relationships), and existing order books (backlog
orders). Acquired customer relationships are recognised at fair
value at the acquisition date and have a finite useful life.
Amortisation of customer relationships is amortised in line with
the expected cashflows. Acquired customer relationships are stated
at cost less accumulated amortisation and impairment. Backlog
orders are recognised at fair value at the acquisition date and
amortised in line with the expected cash flows. Backlog orders are
stated at cost less accumulated amortisation and impairment.
Trade names and trademarks
Trade names and trademarks have arisen on the consolidation of
acquired businesses and are recognised at fair value at the
acquisition date. Where trade names and trademarks are considered
to have a finite useful life, amortisation is calculated using the
straight line method to allocate the cost of trade names and
trademarks over their estimated useful lives. Where trade names and
trademarks are considered to have an indefinite useful life, they
are not subject to amortisation; they are tested annually for
impairment and when there are indications that the carrying value
may not be recoverable, detailed within the impairment of
non-financial assets section below. Trade names and trademarks are
stated at cost less accumulated amortisation and impairment.
Other
Other intangible assets acquired by the Group that have a finite
life useful life are measured at cost less accumulated amortisation
and accumulated losses.
Amortisation of intangible assets is recognised in the income
statement under administrative expenses. Provision is made against
the carrying value of intangible assets where an impairment in
value is deemed to have occurred. Impairment losses are recognised
in the Income Statement under administrative expenses.
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. Software licences are stated
at cost less accumulated amortisation.
x 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.
xi Operating Lease Agreements
Rentals applicable to operating leases are charged against
profits on a straight line basis over the lease term. Lease
incentives are spread over the term of the lease.
xii Taxation
Current tax is the tax currently payable based on taxable profit
for the year.
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 if these temporary differences can be
controlled by the Group and it is probable that reversal will not
occur in the foreseeable future.
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.
xiii Pension Costs
The Company operates defined contribution pension schemes for
employees. The assets of these schemes are held separately from
those of the Company. The annual contributions payable are charged
to the Income Statement as they accrue.
xiv Share-based Payments
The transitional arrangements of IFRS 1 have been applied to all
grants of equity instruments after 7 November 2002 that were
unvested at 1 August 2006. All share-based remuneration is
ultimately recognised as an expense in the Income Statement with a
corresponding credit to "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 a Share Incentive Plan (SIP) which is HMRC
approved, and enables employees to purchase Company shares out of
pre-tax salary. For each share purchased the Company 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.
xv Business Combinations Completed Prior to Date of Transition
to IFRS
The Group has elected not to apply IFRS 3 Business Combinations
retrospectively to business combinations prior to 1 August 2006.
Accordingly the classification of the combination (merger) remains
unchanged from that used under UK GAAP. Assets and liabilities are
recognised as at the date of transition if they would be recognised
under IFRS, and are measured using their UK GAAP carrying amount
immediately post-acquisition as deemed cost under IFRS, unless IFRS
requires fair value measurement. Deferred tax is adjusted for the
impact of any consequential adjustments after taking advantage of
the transitional provisions.
xvi Financial Assets
All financial assets are recognised when the Group becomes a
party to the contractual provisions of the instrument. Financial
assets are recognised at fair value plus transaction costs.
In the Company financial statements, investment in the
subsidiary Company is measured at cost, and provision made where an
impairment value is deemed to have occurred.
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. Trade receivables are classified as loans and receivables.
Loans and receivables are measured subsequent to initial
recognition at amortised cost using effective interest method, less
provision for impairment. Any change in their value through
impairment or reversal of impairment is recognised in the Income
Statement.
Provision against trade receivables is made when there is
objective evidence that the Group will not be able to collect all
amounts due to it in accordance with the original terms of those
receivables. The amount of the write-down is determined as the
difference between the asset's carrying amount and the present
value of estimated future cash flows.
A financial asset is derecognised only where the contractual
rights to cash flows from the asset expire or the financial asset
is transferred and that transfer qualifies for derecognition. A
financial asset is transferred if the contractual rights to receive
the cash flows of the asset have been transferred or the Group
retains the contractual rights to receive the cash flows of the
asset but assumes a contractual obligation to pay the cash flows to
one or more recipients. A financial asset that is transferred
qualifies for derecognition if the Group transfers substantially
all the risks and rewards of ownership of the asset, or if the
Group neither retains nor transfers substantially all the risks and
rewards of ownership but does transfer control of that asset.
Trade receivables subject to the invoice discounting facility
are recognised in the Statement of Financial Position until they
are settled by the customer.
xvii 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 or
cancelled or expires.
xviii Financial instruments
Financial instruments often consist of a combination of debt and
equity and the Group has to decide how to attribute values to each.
They are treated as equity only to the extent that they meet the
following two conditions:
(i) they include no contractual obligations upon the Group to
deliver cash or other financial assets or to exchange financial
assets or financial liabilities with another party under conditions
that are potentially unfavourable to the Group; and
(ii) where the instrument will or may be settled in the Group's
own equity instruments, it is either a non-derivative that includes
no obligation to deliver a variable number of the Group's own
equity instruments or is a derivative that will be settled by the
Group exchanging a fixed amount of cash or other financial assets
for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of
issue are classified as a financial liability, and where such an
instrument takes the legal form of the Company's own shares, the
amounts presented in these financial statements for called up share
capital and share premium account exclude amounts in relation to
those shares.
Finance payments associated with financial liabilities are dealt
with as part of finance costs. Finance payments associated with
financial instruments that are classified in equity are dividends
and are recorded directly in equity
The Group uses financial instruments, in particular forward
currency contracts to manage the financial risks associated with
the Group's underlying business activities. The forward exchange
contracts are used to hedge foreign currency exposures arising on
forecast receipts and payments in foreign currencies. These forward
contracts are revalued to the rates of exchange at the Statement of
Financial Position date and any aggregate unrealised gains and
losses arising on revaluation are included in other debtors or
creditors. At maturity, or when the contract ceases to be a hedge,
gains and losses are taken to the Income Statement. The Group does
not undertake any trading activity in financial instruments.
Fair value hierarchy
The Group analyses financial instruments carried at a fair value
by valuation method. The different levels have been defined as
follows:
-Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities;
-Level 2: inputs other than quoted prices included within Level
1 that are observable for assets or liabilities, either directly
(i.e. as prices) or indirectly (i.e. directly from prices); and
-Level 3: inputs for assets or liabilities that are not based on
observable market data (unobservable inputs).
xix Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand, on demand
deposits, and bank overdrafts.
xx Dividends
Dividend distributions payable to equity shareholders are
included in "other short term financial liabilities" when the
dividends are approved in the annual general meeting prior to the
balance sheet date.
xxi Foreign Currencies
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.
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
profit or loss in the period 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. Income and expenses
are translated at the actual rate. The exchange differences arising
from the retranslation of the opening net investment in
subsidiaries are taken directly to "Translation of foreign
operations" in equity. On disposal of a foreign operation the
cumulative translation differences are transferred to the Income
Statement as part of the gain or loss on disposal.
As permitted by IFRS 1, the balance on the cumulative
translation adjustment on retranslation of subsidiaries' net assets
has been set to zero at the date of transition to IFRS.
xxii 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.
"Share based payment reserve" represents equity-settled
share-based employee remuneration until such share options are
exercised.
"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
consideration on the acquisition of Networkers International
plc
"Translation of foreign operations" represents the foreign
currency differences arising on translating foreign operations into
the presentational currency of the Group.
"Retained earnings" represents retained profits.
xxiii Alternative Performance Measures
Alternative performance measures used within the Group's Annual
Report are explained within Note 25 to the Financial
Statements.
xxiv Significant Accounting Estimates and Judgments
Estimates and assumptions concerning the future and judgments
are made in the preparation of the financial statements. They
affect the application of the Group's accounting policies, reported
amounts of assets, liabilities, income and expenses, and
disclosures made. They are assessed on an on-going basis and are
based on experience and relevant factors, including expectations of
future events that are believed to be reasonable under the
circumstances.
Critical Judgments
The judgments made which, in the opinion of the Directors, are
critical in drawing up the financial statements are as follows:
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 are discussed below. These are included for completeness,
although it is the Directors' view that none of these have
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial
year.
Impairment Loss of Trade and Other Receivables
The Group's policy for doubtful receivables is based on the
on-going evaluation of the collectability and ageing analysis of
the trade and other receivables and on management's judgments.
Considerable judgment is required in assessing the ultimate
realisation of these receivables, including the current
creditworthiness and the past collection history of each debtor. If
the financial conditions of the Group's receivables were to
deteriorate, resulting in an impairment of their ability to make
payments, additional impairment loss of trade and other receivables
may be required. The carrying amounts of these assets are shown in
note 16.
Intangibles
The Group determines whether goodwill and other intangible
assets (including acquired intangibles) are impaired on an annual
basis or otherwise when changes in events or situations indicate
that the carrying value may not be recoverable. This is requires an
estimation of the recoverable amount of the cash generating unit to
which the assets are allocated. Consideration is given to the
future cash flows of each cash generating unit and the discount
rate applied to calculate the present value of those cash
flows.
2 Segmental information
The chief operating decision maker, as defined in IFRS 8, has
been identified as the Board of Directors of Gattaca plc. The
information reported below is consistent with the reports regularly
provided to the Board of Directors.
Reportable segments
For the year to 31 July 2016, the Group was reported in two main
segments: Engineering and Technology. From 1 August 2016 the
reporting structure of the Group was changed to three main
reporting segments, Engineering, Technology and International.
The International reporting segment includes all overseas
offices which were previously reported within the Engineering and
Technology segments. A reconciliation between the new and previous
segmental reporting is included below.
2017
Non-
recurring
items
and amortisation
of acquired Group
All amounts in GBP'000 UK Engineering UK Technology International Underlying intangibles Total
----------------------- -------------- ------------- ------------- ---------- ----------------- ---------
Revenue 420,782 158,374 63,209 642,365 - 642,365
Gross profit 43,080 16,178 15,450 74,708 - 74,708
Operating contribution 23,758 7,061 5,619 36,438 - 36,438
Central overheads (10,579) (4,525) (3,946) (19,050) (4,684) (23,734)
----------------------- -------------- ------------- ------------- ---------- ----------------- ---------
Profit/(loss) from
operations 13,179 2,536 1,673 17,388 (4,684) 12,704
Finance cost, net (1,196)
----------------------- -------------- ------------- ------------- ---------- ----------------- ---------
Profit before tax 11,508
----------------------- -------------- ------------- ------------- ---------- ----------------- ---------
Depreciation and
amortisation 588 220 88 896 3,074 3,970
Segment net assets 72,696 27,361 10,920 110,977 110,977
Unallocated net
liabilities (26,275)
----------------------- -------------- ------------- ------------- ---------- ----------------- ---------
Total net assets 84,702
----------------------- -------------- ------------- ------------- ---------- ----------------- ---------
2016
Non-
recurring
items
and amortisation
All amounts Divested of acquired Group
in GBP'000 UK Engineering UK Technology International Underlying businesses intangibles Total
---------------- -------------- ------------- ------------- ---------- ----------- ---------------- ---------
Revenue 389,584 169,104 58,144 616,832 772 - 617,604
Gross profit 40,865 17,413 14,109 72,387 609 - 72,996
Operating
contribution 23,126 8,229 6,868 38,223 (46) - 38,177
Central
overheads (8,145) (4,242) (4,339) (16,726) (362) (6,027) (23,115)
---------------- -------------- ------------- ------------- ---------- ----------- ---------------- ---------
Profit/(loss)
from operations 14,981 3,987 2,529 21,497 (408) (6,027) 15,062
Profit on
disposal
of subsidiary 58 58
Finance cost,
net (51)
---------------- -------------- ------------- ------------- ---------- ----------- ---------------- ---------
Profit before
tax 15,069
---------------- -------------- ------------- ------------- ---------- ----------- ---------------- ---------
Depreciation
and
amortisation 632 270 218 1,120 3,656 4,776
Segment net
assets 55,412 23,612 19,132 98,156 98,156
Unallocated
net liabilities (16,542)
---------------- -------------- ------------- ------------- ---------- ----------- ---------------- ---------
Total net assets 81,614
---------------- -------------- ------------- ------------- ---------- ----------- ---------------- ---------
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. Only trade receivables are reported by segment
and as such they are included as segment assets above. Unallocated
net liabilities include non-current assets, other receivables, cash
and cash equivalents and current liabilities.
Changes to segment reporting from 2016 audited Financial
Statements
For the year to 31 July 2016, the segment reporting was
presented in two segments: Engineering and Technology. The analysis
below reconciles the change in reporting.
Engineering Technology
All amounts Total
in GBP'000 UK International Total UK International Total International
--------------- ------- ------------- -------- -------- ------------- --------- --------------
Revenue 389,584 8,153 397,737 169,104 49,991 219,095 58,144
Gross profit 40,865 2,643 43,508 17,413 11,466 28,879 14,109
Operating
Contribution 23,126 730 23,856 8,229 6,138 14,367 6,868
Central
overheads (8,145) (1,742) (9,887) (4,242) (2,597) (6,839) (4,339)
Profit/(loss)
from
operations 14,981 (1,012) 13,969 3,987 3,541 7,528 2,529
--------------- ------- ------------- -------- -------- ------------- --------- --------------
Geographical Information
Revenue Non-current assets
------------------ --------------------
All amounts in GBP'000 2017 2016 2017 2016
----------------------- -------- -------- --------- ---------
UK 579,156 558,688 54,659 49,940
Rest of Europe 773 1,241 - -
Middle East and Africa 22,378 21,352 204 227
Americas 21,150 21,126 194 138
Asia Pacific 18,908 15,197 22 160
----------------------- -------- -------- --------- ---------
642,365 617,604 55,079 50,465
----------------------- -------- -------- --------- ---------
Revenue and non-current assets are allocated to the geographic
market based on the domicile of the respective subsidiary.
Largest Customers
No single client contributed more than 10% of the Group's
revenues (2016: none).
3 Profit from Operations
2017 2016
GBP'000 GBP'000
---------------------------------------------------------------- -------- --------
Profit from operations is stated after charging/(crediting):
Depreciation 609 835
Amortisation of acquired intangibles 3,074 3,656
Amortisation of software licences 287 285
Profit on disposal of property, plant and equipment (9) (7)
- fees payable for the
audit of the Parent
Auditors' remuneration Company Financial Statements 10 10
- fees payable for the
audit of the Subsidiary
Company Financial Statements 263 238
Total 273 248
Non-audit services:
- taxation 159 45
- Other services pursuant
to legislation 6 -
--------------------------- ----------------------------------- -------- --------
Total 165 45
Operating lease
costs: - Plant and machinery 424 312
- Land and buildings 2,297 1,610
Share based payment charge 774 1,537
Net gain on foreign currency translation (36) (1,025)
Acquisition costs 174 -
Restructuring costs 1,436 2,371
---------------------------------------------------------------- -------- --------
4 Particulars of Employees
The average number of staff employed (including Directors) by
the Group during the financial year amounted to:
2017 2016
No. No.
--------------- ---- ----
Sales 628 558
Administration 238 171
Directors 10 11
--------------- ---- ----
Total 876 740
--------------- ---- ----
The aggregate payroll costs of the above were:
2017 2016
GBP'000 GBP'000
---------------------- -------- --------
Wages and salaries 35,975 32,578
Social security costs 3,957 3,262
Other pension costs 1,484 1,255
---------------------- -------- --------
Total 41,416 37,095
---------------------- -------- --------
Disclosure of the remuneration of key management personnel, as
required by IAS 24, is detailed below. Disclosure of the
remuneration of the statutory Directors is further detailed in the
Directors' Remuneration Report contained in the Annual Report and
Accounts.
2017 2016
GBP'000 GBP'000
----------------------------- -------- --------
Short-term employee benefits 2,016 2,319
Post employment benefits 128 113
Share based payments 287 600
----------------------------- -------- --------
Total 2,431 3,032
----------------------------- -------- --------
5 Finance Income
2017 2016
GBP'000 GBP'000
Interest receivable 8 -
Foreign currency exchange differences 36 1,025
-------------------------------------- -------- --------
Total 44 1,025
-------------------------------------- -------- --------
6 Finance Cost
2017 2016
GBP'000 GBP'000
------------------------------------------ -------- --------
Bank interest payable 1,154 977
Amortisation of capitalised finance costs 86 99
Total 1,240 1,076
------------------------------------------ -------- --------
7 Dividends
2017 2016
GBP'000 GBP'000
---------------------------------------------------------------- -------- --------
Equity dividends paid during the year at 23.00 pence per share
(2016: 20.32 pence) 7,195 6,892
---------------------------------------------------------------- -------- --------
Equity dividends proposed after the year end (not recognised as
a liability) at 17.00 pence per share (2016: 17.00 pence) 5,406 5,298
---------------------------------------------------------------- -------- --------
A dividend will be declared from Matchtech Group (Holdings)
Limited prior to the payment of the proposed dividend above.
8 Parent Company Profit
2017 2016
GBP'000 GBP'000
----------------------------------------------------------------- -------- --------
The amount of profit dealt within the accounts of the Company is 6,278 7,298
----------------------------------------------------------------- -------- --------
The Company has taken advantage of the exemption in section 408
of the Companies Act 2006 not to present the parent Company's
Income Statement.
9 Taxation
2017 2016
GBP'000 GBP'000
-------------------------------------------- -------- --------
Current tax: UK corporation tax 1,808 3,606
Overseas corporation tax 3,063 2,153
Prior year over provision 236 (9)
-------------------------------------------- -------- --------
5,107 5,750
Deferred tax (note 15) (947) (598)
-------------------------------------------- -------- --------
Income tax expense 4,160 5,152
-------------------------------------------- -------- --------
UK corporation tax has been charged at 19.7% (2016: 20.0%).
The charge for the year can be reconciled to the profit as per
the income statement as follows:
2017 2016
GBP'000 GBP'000
------------------------------------------------------------------- -------- --------
Profit before tax 11,508 15,069
------------------------------------------------------------------- -------- --------
Profit before tax multiplied by the standard rate of corporation
tax in the UK of 19.7% (2016: 20.0%) 2,267 3,014
Expenses not deductible for tax purposes 103 610
Effect of share-based payments (190) -
Irrecoverable withholding tax 1,976 1,137
Overseas losses not provided for 57 -
Difference between UK and overseas tax rates 271 400
------------------------------------------------------------------- -------- --------
Total tax charge excluding adjustments in respect of prior periods 4,484 5,161
Adjustments in respect of previous periods 100 (9)
Changes in UK tax rates (424) -
------------------------------------------------------------------- -------- --------
Total tax charge for period 4,160 5,152
------------------------------------------------------------------- -------- --------
Tax charge recognised directly in equity:
2017 2016
GBP'000 GBP'000
------------------------------------------- -------- --------
Deferred tax recognised directly in equity (121) (185)
------------------------------------------- -------- --------
Total tax recognised directly in equity (121) (185)
------------------------------------------- -------- --------
Future tax rate changes
The UK corporation tax rate of 20% reduced to 19% from 1 April
2017, and will reduce to 17% from 1 April 2020 and this has been
reflected in the Consolidated Financial Statements.
As these changes of rates have been enacted at the balance sheet
date, the impact of these reductions has been reflected in the
deferred tax liability at 31 July 2017.
10 Earnings Per Share
Earnings per share has been calculated by dividing the
consolidated profit 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.
There are no changes to the profit (numerator) as a result of the
dilutive calculation.
2017 2016
GBP'000 GBP'000
------------------------------------------------------- -------- --------
Profit after tax attributable to ordinary shareholders 7,348 9,917
------------------------------------------------------- -------- --------
2017 2016
'000s '000s
---------------------------------------------------- ------- -------
Weighted average number of ordinary shares in issue 31,453 30,887
Effect of dilutive potential ordinary shares 939 1,153
---------------------------------------------------- ------- -------
Total 32,392 32,040
---------------------------------------------------- ------- -------
2017 2016
pence pence
-------------------- ------ ------
Earnings per share:
Basic 23.4 32.1
Diluted 22.7 31.0
-------------------- ------ ------
11 Acquisition
The Group completed the acquisition of 70% of the ordinary share
capital of Resourcing Solutions Limited on 2 February 2017.
Consideration of GBP7.4m was paid in cash. The remaining 30% of the
ordinary share capital is subject to a put and call option
exercisable from 12 months after the date of acquisition.
Consideration for the remaining ordinary share capital is
calculated as 5x EBITA for the preceding 12-month period.
Resourcing Solutions Limited is a recruitment business which
supplies skilled staff on a permanent or temporary basis, primarily
in the rail sector.
The acquisition had the following effect on the Group's assets
and liabilities:
Acquiree's net
assets at acquisition Fair value
date adjustments Fair Value
GBP'000 GBP'000 GBP'000
------------------------------ ---------------------- ------------ ----------
Net tangible assets acquired:
Intangible assets - 3,635 3,635
Fixed assets 93 93
Trade and other receivables 10,442 10,442
Corporation tax (274) (274)
Deferred tax liability - (655) (655)
Cash 17 17
Borrowings (3,784) (3,784)
Trade and other payables (2,674) (2,674)
Total 3,820 2,980 6,800
------------------------------- ---------------------- ------------ ----------
Goodwill 2,645
------------------------------- ---------------------- ------------ ----------
Total consideration 9,445
------------------------------- ---------------------- ------------ ----------
Analysis of consideration:
Cash Paid 7,395
Non-controlling interest 2,050
------------------------------- ---------------------- ------------ ----------
9,445
------------------------------ ---------------------- ------------ ----------
Analysis of net cash flows:
Cash consideration paid 7,395
Cash and cash equivalents
acquired (17)
Bank loans and overdrafts
acquired 3,784
Net cash outflow 11,162
------------------------------- ---------------------- ------------ ----------
Intangible assets have been identified relating to the candidate
database, customer relationships and trademarks; all intangible
assets have been recognised at fair value. Goodwill represents
expected synergies from combining operations of the acquiree and
acquirer, the employees of Resourcing Solutions Limited and
intangibles that do not qualify for separate recognition.
Fair value adjustments have been made to reflect the identified
intangible assets arising on acquisition and the deferred tax
liability on those assets.
Amortisation of intangible assets is on a straight line basis
over their useful economic lives, determined as follows:
Customer relationships 10 years
Trade Names 10 years
Candidate databases 5 years
The Group incurred acquisition costs of GBP174,000 for external
legal fees, stamp duty and due diligence. These costs have been
recognised in administrative expenses in the Group's Consolidated
Income Statement.
In the period between the acquisition and 31 July 2017 the Group
benefited from GBP21,968,000 of revenue from Resourcing Solutions
Limited, gross profit of GBP3,378,000 and profit after amortisation
of intangibles of GBP478,000. If the acquisition had occurred on 1
August 2016 the combined Group results would have been: revenue
GBP667,237,000, gross profit GBP78,548,000 and profit from
operations after amortisation GBP13,341,000. The amortisation of
intangibles would have been GBP3,312,000.
12 Intangible Assets
Customer Trade Software
Goodwill relationships names Other licences Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ------------- -------- -------------- --------- -------- --------- --------
At 1 August
COST 2015 26,451 20,152 4,907 2,436 1,769 55,715
Additions 23 - - 250 189 462
Disposals (380) - - - - (380)
----------------------------- -------- -------------- --------- -------- --------- --------
At 1 August
2016 26,094 20,152 4,907 2,686 1,958 55,797
Additions - - - - 512 512
Disposals - - - - - -
Acquisitions 2,645 2,093 419 1,123 - 6,280
----------------------------- -------- -------------- --------- -------- --------- --------
At 31 July
2017 28,739 22,245 5,326 3,809 2,470 62,589
----------------------------- -------- -------------- --------- -------- --------- --------
At 1 August
AMORTISATION 2015 - 1,399 526 734 826 3,485
Charge for
the year - 2,097 915 644 285 3,941
----------------------------- -------- -------------- --------- -------- --------- --------
At 31 July
2016 - 3,496 1,441 1,378 1,111 7,426
Charge for
the year - 2,145 423 506 287 3,361
----------------------------- -------- -------------- --------- -------- --------- --------
At 31 July
2017 - 5,641 1,864 1,884 1,398 10,787
----------------------------- -------- -------------- --------- -------- --------- --------
At 31 July
NET BOOK VALUE 2016 26,094 16,656 3,466 1,308 847 48,371
--------------- ------------- -------- -------------- --------- -------- --------- --------
At 31 July
2017 28,739 16,604 3,462 1,925 1,072 51,802
----------------------------- -------- -------------- --------- -------- --------- --------
Goodwill arising on business combinations is reviewed and tested
on an annual basis or more frequently if there is indication that
goodwill might be impaired. Goodwill has been tested for impairment
by comparing the carrying amount of each cash-generating unit
(CGU), including goodwill, with the recoverable amount.
Goodwill is allocated to CGUs, which are determined as the reportable 2017 2016
segments, as follows: GBP'000 GBP'000
---------------------------------------------------------------------- -------- --------
Professional Services 1,643 1,643
Engineering 4,379 4,379
Technology 20,072 20,072
Resourcing Solutions Limited 2,645 -
28,739 26,094
---------------------------------------------------------------------- -------- --------
The recoverable amounts of the CGUs are determined from
value-in-use calculations, the key assumptions for the value-in-use
calculations are as follows:
Profit from Profit from operations is based on the
operations latest annual forecast approved by the
Group's Board of Directors which was
prepared using expectations of revenue
and operating cost growth
Discount rates The pre-tax rate used to discount the
forecast cash flows was 15.4% (2016:
15.4%) reflecting the Group's weighted
average cost of capital.
Growth rates The long-term growth rates are based
on management forecasts which are consistent
with external sources at an average
growth rate of 2.5% (2016: 2.5%)
Impairment reviews are performed at the year end by comparing
the carrying value of goodwill with the recoverable amount of the
CGUs to which goodwill has been allocated.
The impairment review determined that there has been no
impairment to any of the CGUs. Sensitivity analysis has been
performed in assessing recoverable amounts of goodwill by changing
key assumptions in growth and discount rates. The sensitivity
analysis shows no impairment would arise under each scenario for
any of the CGUs.
Amortisation is charged through administrative expenses in the
Income Statement.
13 Property, Plant and Equipment
Fixtures
fittings
Motor Leasehold &
vehicles improvements equipment Total
Group GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------------------- --------- ------------- ---------- ---------
COST At 1 August 2015 940 1,268 3,490 5,698
Additions - 58 413 471
Disposals (211) - (248) (459)
------------------------------------- --------- ------------- ---------- ---------
At 1 August 2016 729 1,326 3,655 5,710
Additions - 1,559 422 1,981
Acquisitions - - 93 93
Disposals (381) - (20) (401)
------------------------------------- --------- ------------- ---------- ---------
At 31 July 2017 348 2,885 4,150 7,383
------------------------------------- --------- ------------- ---------- ---------
DEPRECIATION At 1 August 2015 666 532 2,965 4,163
Charge for the year 67 340 428 835
Released on disposal (182) - (231) (413)
------------------------------------- --------- ------------- ---------- ---------
At 31 July 2016 551 872 3,162 4,585
Charge for the year 39 198 372 609
Released on disposal (315) - - (315)
------------------------------------- --------- ------------- ---------- ---------
At 31 July 2017 275 1,070 3,534 4,879
------------------------------------- --------- ------------- ---------- ---------
NET BOOK VALUE At 31 July 2016 178 454 493 1,125
--------------- --------------------- --------- ------------- ---------- ---------
At 31 July 2017 73 1,815 616 2,504
------------------------------------- --------- ------------- ---------- ---------
Included within Leasehold Improvements is a cost of GBP1,168,000
(2016: GBP215,000) relating to the dilapidations provision (see
note 17).
There were no capital commitments as at 31 July 2017 or 31 July
2016.
14 Investments
Company
------------------
2017 2016
GBP'000 GBP'000
------------------------------------------- -------- --------
Investments in Group Companies at 1 August 7,213 5,676
Movement in investment in group companies 774 1,537
------------------------------------------- -------- --------
Investments in Group Companies at 31 July 7,987 7,213
------------------------------------------- -------- --------
The movement in investments in Group companies represents a
capital contribution made in Matchtech Group (UK) Limited relating
to share-based payments.
Subsidiary Undertakings
Registered Country
Company Office of Incorporation Share Class % held Main Activities
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Matchtech Group (Holdings) United
Limited 1 Kingdom Ordinary 100% Holding
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Matchtech Group Management United
Company Limited 1 Kingdom Ordinary 100% Non trading
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United Provision of
Matchtech Group (UK) Limited 1 Kingdom Ordinary 99.998% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United
Matchtech Engineering Limited 1 Kingdom Ordinary 100% Non trading
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United
Matchtech Limited 1 Kingdom Ordinary 100% Non trading
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United Provision of
Barclay Meade Limited 1 Kingdom Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United Provision of
Alderwood Education Limited 1 Kingdom Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United Provision of
Gattaca Solutions Limited 1 Kingdom Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United Provision of
Connectus Technology Limited 1 Kingdom Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United
Gattaca Recruitment Limited 1 Kingdom Ordinary 100% Non trading
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Provision of
Gattaca GmbH 2 Germany Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Gattaca BV 3 Netherlands Ordinary 100% Non trading
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Matchtech Engineering Inc 4 USA Ordinary 100% Non trading
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United Provision of
Application Services Limited 1 Kingdom Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United
Provanis Limited 1 Kingdom Ordinary 100% Non trading
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United
Networkers International Limited 5 Kingdom Ordinary 100% Holding
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Networkers International (UK) United Provision of
Limited 5 Kingdom Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United
Networkers International LLC 6 States Ordinary 100% Non trading
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United Provision of
Networkers Inc. 6 States Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
NWI de Mexico S. de R.L. de Provision of
C.V. 7 Mexico Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Networkers International South Provision of
Africa Proprietary Limited 8 South Africa Ordinary 87% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Networkers International Proprietary Provision of
Limited 8 South Africa Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Kithara Limited 8 South Africa Ordinary 100% Holding
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Networkers International Provision of
(China) Co. Limited 9 China Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Networkers International Provision of
(Malaysia) Sdn Bhd 10 Malaysia Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Networkers International Provision of
(Canada) Inc 11 Canada Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Networkers International United
Trustees Limited 5 Kingdom Ordinary 100% Non trading
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United
The Comms Group Limited 5 Kingdom Ordinary 100% Holding
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United Provision of
CommsResources Limited 5 Kingdom Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Provision of
Gattaca Malaysia Sdn Bhd 10 Malaysia Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United
Comms Software Limited 5 Kingdom Ordinary 100% Non trading
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Provision of
Gattaca de Colombia SAS 12 Colombia Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United
Elite Computer Staff Limited 5 Kingdom Ordinary 100% Non trading
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Provision of
NWKI Consultancy FZ LLC 13 Dubai Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Networkers Recruitment United
Services Limited 5 Kingdom Ordinary 100% Non trading
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
MSB International GmbH 14 Germany Ordinary 100% Non trading
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Provision of
NWKI Communications LLC 13 Dubai Ordinary 49% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Networkers Consultancy Provision of
(Singapore) PTE Limited 15 Singapore Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United
Cappo Group Limited 5 Kingdom Ordinary 100% Holding
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United Provision of
Cappo Inc 6 States Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United Provision of
Cappo International Limited 5 Kingdom Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Provision of
Cappo Qatar LLC 16 Qatar Ordinary 49% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Networkers Consultoria Em
Technologia Da Informacao
Limiteda 17 Brazil Ordinary 100% Non trading
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United Provision of
Resourcing Solutions Limited 18 Kingdom Ordinary 70% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
United
MSB Consulting Services Limited 5 Kingdom Ordinary 100% Non trading
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Provision of
Gattaca SAS 19 France Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Provision of
Gattaca Recruitment ETT, SLU 20 Spain Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
Gattaca Information Technology Provision of
Services SLU 20 Spain Ordinary 100% recruitment consultancy
------------------------------------- ---------- ----------------- ----------- ------- ------------------------
1 1450 Parkway, Solent Business Park, Whiteley, Fareham,
Hampshire, PO15 7AF
2 Karlstrasse 35, 80333 Munich, Germany
3 Herengracht 124-128, 1015 BT Amsterdam, Netherlands
4 33 SW Flager Avenue, Stuart, Florida, USA
5 Hanover Place, 8 Ravensbourne Road, Bromley, Kent, BR1 1HP
6 2701 Dallas Parkway, Suite 440, Plano TX 75093, USA
7 Torre Reforma Latino, Paseo de la Reforma 296, Piso 15 A.
Del.Cuauhtemoc, C.P. 06600, Mexico
8 6th Floor Grant Thornton House, 119 Hertzog Boulevard,
Foreshore, Cape Town, 8001, South Africa
9 B2701 Di San Zhi Ye Building, Shu Guang Xi Li, Chaoyang
District, Beijing, China
10 Level 8, Symphony House, Block D13, Pusat Dagangan Dana 1,
Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor, Malaysia
11 181 Bay Street, Suite 4400, Brookfield Place, Toronto,
Ontario, Canada M5J 2T3
12 Av 9 A Norte, 14 N 73 OF 202, Valle del Caua, Cali,
Colombia
13 Office 3022, Shatha Tower, Dubai Media City, Dubai, UAE
14 Franlinstr. 48, 60456, Frankfurt, Germany
15 371 Beach Road, #15-09 Keypoint, Singapore 199597
16 Suite #204, Office #40 Al Rawabi Street, Muntazah, Doha,
State of Qatar. PO Box 8306
17 Avenida Engenheiro Luiz Carlos Berrini, ndeg 1461, 12deg
andar, Cidade Moncoes, cidade de Sao Paulo,Estado Sao Paulo, CEP
04571-011
18 Ruscombe Park, Reading,RG10 9JW
19 1 Rue Favart, 75002, Paris, France
20 Calle General, Moscardo n.6, Espaco Office, Madrid 28202,
Spain
All holdings are indirect except Matchtech Group (Holdings)
Limited, Matchtech GmbH and Matchtech Group Management Company
Limited.
The Group consolidates NWKI Communications LLC and Cappo Qatar
LLC as subsidiaries in the consolidation due to contractual
arrangements in place giving the Group effective control of the
entities.
15 Deferred Tax
(Charged)/
Credited Charged
Asset Liability Net to profit to equity
2017 2017 2017 2017 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------- -------- --------- -------- ---------- ----------
Share based payments 445 - 445 (109) (121)
Depreciation in excess of capital allowances 117 - 117 9 -
Acquired intangibles - (3,914) (3,914) 1,027 -
Other temporary and deductible differences 211 - 211 20 -
--------------------------------------------- -------- --------- -------- ---------- ----------
Net deferred tax assets/(liabilities) 773 (3,914) (3,141) 947 (121)
--------------------------------------------- -------- --------- -------- ---------- ----------
Credited/ Credited/
(charged) (charged)
Asset Liability Net to profit to equity
2016 2016 2016 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------- -------- --------- -------- ---------- ----------
Share based payments 675 - 675 (143) (185)
Depreciation in excess of capital allowances 108 - 108 32 -
Acquired intangibles - (4,286) (4,286) 681 -
Other temporary and deductible differences 186 - 186 28 -
--------------------------------------------- -------- --------- -------- ---------- ----------
Net deferred tax assets/(liabilities) 969 (4,286) (3,317) 598 (185)
--------------------------------------------- -------- --------- -------- ---------- ----------
The movement on the net deferred tax asset is as shown
below:
Group
------------------
2017 2016
GBP'000 GBP'000
--------------------- -------- --------
At 1 August (3,317) (3,730)
Acquired intangibles (655) -
Recognised in income 947 598
Recognised in equity (121) (185)
Foreign exchange 5 -
--------------------- -------- --------
At end of year (3,141) (3,317)
--------------------- -------- --------
The UK corporation tax rate of 20% reduced to 19% from 1 April
2017, and will reduce to 17% from 1 April 2020 and this has been
reflected in the Consolidated Financial Statements.
As these changes of rates have been enacted at the balance sheet
date, the impact of these reductions has been reflected in the
deferred tax liability at a rate of 17% (2016: 18%).
16 Trade and Other Receivables
Group Company
------------------ ------------------
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- -------- -------- --------
Trade receivables 110,977 98,156 - -
Amounts owed by Group companies - - 86,606 80,335
Other receivables 1,729 887 2 -
Prepayments 2,291 1,768 - -
-------------------------------- -------- -------- -------- --------
Total 114,997 100,811 86,608 80,335
-------------------------------- -------- -------- -------- --------
The amounts due from Group undertakings in the Company Statement
of Financial Position are considered to approximate to fair
value.
Days sales outstanding at the year end based upon the preceding
three months' revenue were 55.0 days (2016: 50.2 days). The
allowance for doubtful debts has been determined by reference to
previous experience and management assessment of debts.
The Directors consider that the carrying amount of trade and
other receivables approximates to the fair value.
Included in the Group's trade receivable balance are debtors
with a carrying amount of GBP15,661,000 (2016: GBP10,407,000) which
are past due at the reporting date for which the Group has not
provided as the Directors do not believe there has been a
significant change in credit quality and consider the amounts to be
recoverable in full. The Group does not hold any collateral over
these balances.
The Group uses a third party credit scoring system to assess the
credit worthiness 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 ageing
issues.
The Directors believe that there is no requirement for further
provision over and above the allowance for doubtful debts.
Ageing of past due but not impaired trade receivables:
Group
------------------
2017 2016
GBP'000 GBP'000
----------- -------- --------
0-30 days 9,007 7,427
31-60 days 3,223 2,046
61-90 days 1,463 744
91+ days 1,958 190
----------- -------- --------
Total 15,661 10,407
----------- -------- --------
Movement in the allowance for doubtful debts:
Group
------------------
2017 2016
GBP'000 GBP'000
---------------------------------------- -------- --------
At 1 August 915 1,235
Acquisitions 42 -
Impairment losses recognised/(reversed) 71 (320)
---------------------------------------- -------- --------
At 31 July 1,028 915
---------------------------------------- -------- --------
Ageing of impaired trade receivables:
Group
------------------
2017 2016
GBP'000 GBP'000
------------------------------- -------- --------
Not past due at reporting date - -
0-30 days - -
30-60 days - 1
60-90 days - -
90+ days 1,028 914
------------------------------- -------- --------
Total 1,028 915
------------------------------- -------- --------
17 Provisions
Group
------------------
2017 2016
GBP'000 GBP'000
------------------------------------ -------- --------
At 1 August 602 626
Increase in year 994 -
Provisions released during the year - (24)
------------------------------------ -------- --------
At 31 July 1,596 602
------------------------------------ -------- --------
Non-current 1,596 278
Current - 324
------------------------------------ -------- --------
Total 1,596 602
------------------------------------ -------- --------
The above provision relates to a dilapidations provision based
on the requirement to return leased buildings to their original
condition at the end of the lease term. The provision relates to
offices held under lease arrangements that expire between June 2017
and March 2027.
18 Trade and Other Payables
Group Company
------------------ ------------------
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- -------- -------- --------
Trade payables 159 456 - -
Amounts owed to Group companies - - 32,031 31,711
Taxation and Social Security 8,627 5,134 - -
Contractor wages creditor 19,015 19,087 - -
Accruals and deferred income 9,882 10,885 - -
Provisions - 324 - -
Other payables 1,307 1,975 - -
-------------------------------- -------- -------- -------- --------
Total 38,990 37,861 32,031 31,711
-------------------------------- -------- -------- -------- --------
19 Financial Assets and Liabilities Statement of Financial
Position Classification
The carrying amount of the Group's financial assets and
liabilities as recognised at the Statement of Financial Position
date of the reporting periods under review may also be categorised
as follows:
Financial assets are included in the Statement of Financial
Position within the following headings:
Group Company
------------------ ------------------
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- --------
Trade and other receivables
- Loan and receivables 112,706 99,043 86,608 80,335
Cash and cash equivalents
- Loan and receivables 5,802 7,442 - -
---------------------------- -------- -------- -------- --------
Total 118,508 106,485 86,608 80,335
---------------------------- -------- -------- -------- --------
Financial liabilities are included in the Statement of Financial
Position within the following headings:
Group
------------------
2017 2016
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Current liabilities
Borrowings
- Financial liabilities recorded at amortised cost 46,090 32,455
Trade and other payables
- Financial liabilities recorded at amortised cost 30,363 32,403
--------------------------------------------------- -------- --------
Total 76,453 64,858
--------------------------------------------------- -------- --------
The amounts at which the assets and liabilities above are
recorded are considered to approximate to fair value.
The Group has agreed banking facilities with HSBC until October
2020 totalling GBP105m comprising a GBP75m Invoice Financing
Facility and a GBP30m Revolving Credit Facility.
The Group's working capital facilities with HSBC are secured by
way of an all assets debenture, which contains fixed and floating
charges over the assets of the Group. This facility allows the
Company to borrow up to 90% of its invoiced debtors up to a maximum
of GBP75m. Interest is charged on borrowings at a rate of 1.1% over
HSBC base rate.
The Group has a GBP30m Term Loan Facility agreement with HSBC
which is secured by way of a fixed and floating charge over assets
of the Group. Interest is charged on borrowings at a rate of 3%
over HSBC LIBOR rate.
20 Commitments under Operating Leases
At 31 July 2017 the Group had commitments to pay the following
amounts under non-cancellable operating leases as set out
below:
Group
------------------
2017 2016
GBP'000 GBP'000
--------------- ---------------------- -------------------- -------- --------
Land/buildings Payments falling due: within 1 year 2,454 1,340
within 1 to 5 years 7,950 5,221
after 5 years 6,419 5,307
----------------------------------------------------------- -------- --------
Other Payments falling due: within 1 year 364 300
within 1 to 5 years 510 316
----------------------------------------------------------- -------- --------
21 Share Capital
Authorised Share Capital Company
------------------
2017 2016
GBP'000 GBP'000
------------------------------------------- -------- --------
40,000,000 Ordinary shares of GBP0.01 each 400 400
------------------------------------------- -------- --------
Allotted, called up and fully paid:
Company
------------------
2017 2016
GBP'000 GBP'000
-------------------------------------------------------------- -------- --------
31,801,000 (2016: 31,167,000) Ordinary shares of GBP0.01 each 318 312
-------------------------------------------------------------- -------- --------
The number of shares in issue in the Company is shown below:
Company
----------------
2017 2016
'000 '000
-------------------------- ------- -------
In issue at 1 August 31,167 30,922
Exercise of share options 634 245
In issue at 31 July 31,801 31,167
-------------------------- ------- -------
Share Options
The following options arrangements exist over the Company's
shares:
Exercise period
-------------------- ------ ------ ---------- -------- ----------------------
Exercise
2017 2016 Date of price
'000s '000s grant pence From To
-------------------- ------ ------ ---------- -------- ---------- ----------
Zero Priced Share
Option Bonus 1 1 18/01/2010 1 18/01/2012 18/01/2020
Zero Priced Share
Option Bonus 1 1 18/01/2010 1 18/01/2013 18/01/2020
Zero Priced Share
Option Bonus 1 1 04/02/2011 1 25/01/2013 04/02/2021
Zero Priced Share
Option Bonus 1 1 04/02/2011 1 03/02/2014 04/02/2021
Long Term Incentive
Plan Options - 9 31/01/2012 1 30/01/2015 31/01/2022
Zero Priced Share
Option Bonus 1 1 31/01/2012 1 30/01/2014 31/01/2022
Zero Priced Share
Option Bonus 2 2 31/01/2012 1 30/01/2015 31/01/2022
Long Term Incentive
Plan Options - 31 31/01/2013 1 30/01/2016 31/01/2023
Zero Priced Share
Option Bonus 3 4 31/01/2013 1 30/01/2015 31/01/2023
Zero Priced Share
Option Bonus 7 11 31/01/2013 1 30/01/2016 31/01/2023
Long Term Incentive
Plan Options - 104 24/01/2014 1 24/01/2017 24/01/2024
Deferred Share
Bonus - 10 24/01/2014 1 24/01/2015 24/01/2024
Deferred Share
Bonus - 10 24/01/2014 1 24/01/2016 24/01/2024
Zero Priced Share
Option Bonus 6 11 01/01/2014 1 01/01/2016 01/01/2024
Zero Priced Share
Option Bonus 53 233 01/01/2014 1 01/01/2017 01/01/2024
Zero Priced Share
Option Bonus 7 15 28/01/2015 1 28/01/2017 28/01/2025
Zero Priced Share
Option Bonus 92 108 28/01/2015 1 28/01/2018 28/01/2025
Zero Priced Share
Option Bonus 31 44 30/01/2015 1 30/01/2018 30/01/2025
Zero Priced Share
Option Bonus 5 16 26/06/2015 1 26/06/2018 26/06/2025
Value Creation
Plan - 389 02/07/2015 1 18/11/2016 18/11/2021
Value Creation
Plan 380 389 02/07/2015 1 18/11/2017 18/11/2021
Long Term Incentive
Plan Options 33 45 11/02/2016 1 11/02/2019 11/02/2026
Zero priced share
option bonus 65 76 11/02/2016 1 11/02/2018 11/02/2026
Zero priced share
option bonus 65 76 11/02/2016 1 11/02/2019 11/02/2026
Long Term Incentive
Plan Options 23 31 11/02/2016 225 11/02/2018 11/02/2026
Long Term Incentive
Plan Options 23 31 11/02/2016 225 11/02/2019 11/02/2026
Long Term Incentive
Plan Options 159 - 03/02/2017 1 03/02/2020 03/02/2027
Long Term Incentive
Plan Options 176 - 31/01/2017 1 31/01/2020 31/01/2027
Long Term Incentive
Plan Options 92 - 31/01/2017 72 31/01/2019 31/01/2027
Long Term Incentive
Plan Options 92 - 31/01/2017 72 31/01/2020 31/01/2027
Long Term Incentive
Plan Options 79 - 31/01/2017 145 31/01/2019 31/01/2027
Long Term Incentive
Plan Options 79 - 31/01/2017 145 31/01/2020 31/01/2027
-------------------- ------ ------ ---------- -------- ---------- ----------
Total 1,477 1,650
-------------------- ------ ------ ---------- -------- ---------- ----------
During the year the Group granted share options under a zero
priced share option for Executive Directors and Senior Management,
and long-term incentive plan (LTIP) options for key staff. The zero
priced share options were granted on 31 January and 3 February 2017
to members of staff subject to a three-year holding period and are
subject to TSR, EPS and Share Price performance targets. The
long-term incentive plan options were granted to staff on 31
January 2017 and are subject to two and three-year holding periods
with a release price of 290 pence per share. All share options have
a life of 10 years and are equity settled on exercise.
The movement in share options is shown below:
2017 2016
------------------------------- -------------------------------
Weighted Weighted
average Weighted average Weighted
exercise average exercise average
Number price share price Number price share price
'000s (pence) (pence) '000s (pence) (pence)
------------------------ ------ --------- ------------ ------ --------- ------------
Outstanding at 1 August 1,650 9.3 - 1,766 1.7 -
Granted 758 51.1 - 277 56.0 -
Forfeited/lapsed (182) 31.1 - (145) 11.0 -
Exercised (749) 1.0 293.3 (248) 4.6 431.0
------------------------ ------ --------- ------------ ------ --------- ------------
Outstanding at 31 July 1,477 30.4 1,650 9.3
Exercisable at 31 July 83 1.0 94 1.0
------------------------ ------ --------- ------------ ------ --------- ------------
The number of share options granted includes the deferred share
bonus options.
The numbers and weighted average exercise prices of share
options vesting in the future are shown below.
2017 2016
----------------------------- ------------------------------
Weighted Weighted
average Weighted average Weighted
remaining average remaining average
contract exercise contract exercise
life Number price life Number price
Exercise Date (months) '000s (pence) (months) '000s (pence)
-------------- ---------- ------ --------- ----------- ------ ---------
18/11/2016 - - - 4 389 1.0
01/01/2017 - - - 5 233 1.0
24/01/2017 - - - 6 104 1.0
28/01/2017 - - - 6 15 1.0
18/11/2017 4 380 1.0 16 389 1.0
28/01/2018 6 92 1.0 18 108 1.0
30/01/2018 6 31 1.0 18 44 1.0
11/02/2018 7 88 60.0 19 107 46.3
26/06/2018 11 5 1.0 23 16 1.0
31/01/2019 18 171 105.6 - - -
11/02/2019 19 121 44.5 31 151 65.2
31/01/2020 30 347 52.5 - - -
03/02/2020 30 159 1.0 - - -
-------------- ---------- ------ --------- ----------- ------ ---------
Total 1,394 1,556
-------------- ---------- ------ --------- ----------- ------ ---------
In addition to the share option schemes, the Group operated a
share incentive plan (SIP), which is an HMRC-approved plan
available to all employees enabling them to purchase shares out of
pre-tax salary. For each share purchased, the Company grants an
additional share at no cost.
The fair values of the LTIP options were calculated using the
Monte Carlo simulation method along with the assumptions detailed
below. The values of the zero price options granted in the year
were calculated using the Black Scholes method along with the
assumptions as detailed below. The fair values of the SIPs were
calculated as the market values on the date of the grant adjusted
for the assumptions as detailed below.
Share
Price
on Risk
the Free
date Rate
of Exercise Vesting Dividend of Fair
grant Price Volatility Period Yield interest Value
Date of grant (GBP) (GBP) (%) (yrs) (%) (%) (GBP)
-------------- ----------- ------ -------- ---------- ------- -------- --------- ------
28/01/2015 LTIP 5.08 0.01 16.4% 3.00 3.9% 0.7% 4.51
Zero price
30/01/2015 bonus 5.08 0.01 16.4% 3.00 3.9% 0.6% 4.51
26/06/2015 LTIP 5.49 0.01 16.4% 3.00 3.9% 1.1% 4.90
06/07/2015 SIP 5.58 0.01 N/A 3.00 N/A N/A 5.58
05/08/2015 SIP 5.81 0.01 N/A 3.00 N/A N/A 5.81
04/09/2015 SIP 5.64 0.01 N/A 3.00 N/A N/A 5.64
05/10/2015 SIP 5.18 0.01 N/A 3.00 N/A N/A 5.18
03/11/2015 SIP 5.45 0.01 N/A 3.00 N/A N/A 5.45
08/12/2015 SIP 5.43 0.01 N/A 3.00 N/A N/A 5.43
05/01/2016 SIP 5.35 0.01 N/A 3.00 N/A N/A 5.35
05/02/2016 SIP 5.08 0.01 N/A 3.00 N/A N/A 5.08
11/02/2016 LTIP 4.35 0.01 21.4% 2.00 5.1% 0.4% 1.45
11/02/2016 LTIP 4.35 0.01 21.4% 3.00 5.1% 0.4% 1.45
11/02/2016 LTIP 4.35 2.25 21.4% 2.00 5.1% 0.4% 0.84
11/02/2016 LTIP 4.35 2.25 21.4% 3.00 5.1% 0.4% 0.88
Zero price
11/02/2016 bonus 4.50 0.01 20.9% 3.00 4.9% 0.5% 3.88
07/03/2016 SIP 4.29 0.01 N/A 3.00 N/A N/A 4.29
14/04/2016 SIP 4.74 0.01 N/A 3.00 N/A N/A 4.74
10/05/2016 SIP 4.65 0.01 N/A 3.00 N/A N/A 4.65
06/06/2016 SIP 4.25 0.01 N/A 3.00 N/A N/A 4.25
05/07/2016 SIP 3.19 0.01 N/A 3.00 N/A N/A 3.19
05/08/2016 SIP 3.54 0.01 N/A 3.00 N/A N/A 3.54
09/09/2016 SIP 3.87 0.01 N/A 3.00 N/A N/A 3.87
07/10/2016 SIP 3.57 0.01 N/A 3.00 N/A N/A 3.57
08/11/2016 SIP 3.16 0.01 N/A 3.00 N/A N/A 3.16
07/12/2016 SIP 2.95 0.01 N/A 3.00 N/A N/A 2.95
16/01/2017 SIP 2.98 0.01 N/A 3.00 N/A N/A 2.98
Zero price
31/01/2017 bonus 2.92 0.01 31.6% 3.00 7.9% 0.3% 1.27
Zero price
31/01/2017 bonus 2.92 0.01 31.6% 3.00 7.9% 0.3% 1.51
Zero price
31/01/2017 bonus 2.90 0.01 31.6% 3.00 7.9% 0.3% 1.23
Zero price
31/01/2017 bonus 2.90 0.01 31.6% 3.00 7.9% 0.3% 1.49
31/01/2017 LTIP 2.90 0.72 37.9% 2.00 7.9% 0.2% 0.99
31/01/2017 LTIP 2.90 0.72 31.6% 3.00 7.9% 0.3% 0.86
31/01/2017 LTIP 2.90 1.45 37.9% 2.00 7.9% 0.2% 0.80
03/02/2017 LTIP 2.90 1.45 31.6% 3.00 7.9% 0.3% 0.66
07/02/2017 SIP 2.94 0.01 N/A 3.00 N/A N/A 2.94
07/03/2017 SIP 2.94 0.01 N/A 3.00 N/A N/A 2.94
07/04/2017 SIP 3.10 0.01 N/A 3.00 N/A N/A 3.10
09/05/2017 SIP 3.18 0.01 N/A 3.00 N/A N/A 3.18
07/06/2017 SIP 3.28 0.01 N/A 3.00 N/A N/A 3.28
07/07/2017 SIP 3.09 0.01 N/A 3.00 N/A N/A 3.09
07/08/2017 SIP 2.87 0.01 N/A 3.00 N/A N/A 2.87
-------------- ----------- ------ -------- ---------- ------- -------- --------- ------
The volatility of the Company's share price on each date of
grant was calculated as the average of the annualised standard
deviations of daily continuously compounded returns on the
Company's stock, calculated over five years back from the date of
grant, where applicable. The risk-free rate is the yield to
maturity on the date of grant of a UK gilt strip, with term to
maturity equal to the life of the option.
22 Transactions with Directors and Related Parties
During the year, the Group made sales of GBP381,000 (2016:
GBP370,000) to InHealth Group which is a related party by virtue of
the common directorship of Richard Bradford, and sales of
GBP863,000 (2016: GBP915,000) to the Waterman Group by virtue of
common directorship of Ric Piper. As at the year end, Waterman
Group has a balance outstanding of GBP126,000 (2016: GBP85,000) and
InHealth Group has a balance outstanding of GBP26,000 (2016:
GBP98,000). All transactions were undertaken at an arm's length
price.
There were no other related party transactions with entities
outside of the Group.
During the year, Matchtech Group (UK) Limited charged Gattaca
plc GBP921,000 (2016: GBP901,000) for provision of management
services. Further details of transactions with directors are
included in the Director's Remuneration Report within the Group
Annual Report.
23 Financial Instruments
The financial risk management policies and objectives including
those related to financial instruments and the qualitative risk
exposure details, comprising credit and other applicable risks, are
included within the Chief Financial Officer's report under the
heading Group financial risk management within the Group Annual
Report.
Maturity of Financial Liabilities
The Group financial liabilities analysis at 31 July 2017 was as
follows:
Group Company
------------------ ------------------
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- --------
In less than one year or on
demand:
Bank overdrafts - 14 - -
Working capital facility 25,693 18,939 - -
Finance costs capitalised (67) (106) - -
---------------------------- -------- -------- -------- --------
Bank loans and overdrafts 25,626 18,847 - -
Trade and other payables 30,363 32,403 - -
---------------------------- -------- -------- -------- --------
Total 55,989 51,250 - -
---------------------------- -------- -------- -------- --------
More than one year but less
than three years:
Term loan 20,714 13,608 20,714 13,608
Finance costs capitalised (250) - (250) -
---------------------------- -------- -------- -------- --------
Total 20,464 13,608 20,464 13,608
---------------------------- -------- -------- -------- --------
Borrowing Facilities
The Group makes use of working capital facilities and a term
loan, details of which can be found in note 19. The undrawn
facility available at 31 July 2017 in respect of which all
conditions precedent had been met was as follows:
Group Company
------------------ ------------------
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ -------- -------- -------- --------
Expiring in one to five years 58,593 76,061 9,286 16,392
------------------------------ -------- -------- -------- --------
The Directors have calculated that the effect on profit of a 1%
movement in interest rates would be GBP526,000 (2016:
GBP450,000).
The Directors believe that the carrying value of borrowings
approximates to their fair value.
Foreign Currency Risk
The Group's main foreign currency risk is the short-term risk
associated with the trade debtors denominated in US Dollars and
Euros relating to the UK operations whose functional currency is
Sterling. The risk arises on the difference between exchange rates
at the time the invoice is raised to when the invoice is settled by
the client. For sales denominated in foreign currency, the Group
ensures that direct costs associated with the sale are denominated
in the same currency. Further foreign exchange risk arises where
there is a gap in the amount of assets and liabilities of the Group
denominated in foreign currencies that are required to be
translated into Sterling at the year end rates of exchange. Where
the risk to the Group is considered to be significant, the Group
will enter into a matching forward foreign exchange contract with a
reputable bank.
Net foreign currency monetary assets are shown below:
Group
------------------
2017 2016
GBP'000 GBP'000
---------- -------- --------
US Dollar 8,097 10,120
Euro 3,503 4,802
---------- -------- --------
The effect of a 25c strengthening of the Euro and Dollar against
Sterling at the balance sheet date on the Euro/Dollar denominated
trade and other receivables and payables carried at that date
would, all other variables held constant, have resulted in a net
increase in pre-tax profit for the year and increase of net assets
of GBP2,898,000. A 25c weakening in the exchange rates would, on
the same basis, have decreased pre-tax profit and reduced net
assets by GBP1,928,000.
Company
The Company holds no material balances of this nature other than
intercompany balances, which are not subject to a fair value
adjustment.
24 Capital Management Policies and Procedures
Gattaca plc's capital management objectives are:
- to ensure the Group's ability to continue as a going concern;
- to provide an adequate return to shareholders; and
- pricing products and services commensurately with the level of risk.
The Group monitors capital on the basis of the carrying amount
of equity as presented in the Statement of Financial Position.
The Group sets the amount of capital in proportion to its
overall financing structure, i.e. equity and financial liabilities.
The Group manages the capital structure and makes adjustments in
the light of changes in economic conditions and risk
characteristics of the underlying assets. Capital for the reporting
period under review is summarised as follows:
Group
------------------
2017 2016
GBP'000 GBP'000
----------------------------------- -------- --------
Total equity 84,702 81,614
Cash and cash equivalents (5,802) (7,442)
----------------------------------- -------- --------
Capital 78,900 74,172
----------------------------------- -------- --------
Total equity 84,702 81,614
Borrowings 46,157 32,561
----------------------------------- -------- --------
Overall financing 130,859 114,175
----------------------------------- -------- --------
Capital to overall financing ratio 60% 65%
----------------------------------- -------- --------
25 Alternative Performance Measures
Alternative performance measures are disclosed below to show the
adjusted and underlying trading performance of the Group.
The adjusted basis is reported excluding non-recurring items,
amortisation of acquired intangibles and results from divested
businesses.
2017
Amortisation
Statutory Non-recurring of acquired Divested Adjusted
All amounts in GBP'000 basis costs intangibles businesses basis
----------------------- --------- ------------- ------------ ----------- ----------
Revenue 642,365 - - - 642,365
Gross profit 74,708 - - - 74,708
Profit from operations 12,704 1,610 3,074 - 17,388
----------------------- --------- ------------- ------------ ----------- ----------
2016
Amortisation
All amounts in Statutory Non-recurring of acquired Divested Adjusted
GBP'000 basis costs intangibles businesses basis
----------------------- --------- ------------- ------------ ----------- ----------
Revenue 617,604 - - (772) 616,832
Gross profit 72,996 - - (609) 72,387
Profit from operations 15,062 2,371 3,656 408 21,497
----------------------- --------- ------------- ------------ ----------- ----------
Net Debt
Net debt is calculated as follows: Group
-----------------------
2017 2016
GBP'000 GBP'000
------------------------------------ --------- ------------
Cash and cash equivalents 5,802 7,442
Bank loans and overdrafts (46,090) (32,455)
Net debt (40,288) (25,013)
------------------------------------ --------- ------------
26 Non-controlling Interests
The non-controlling interests relate to a 30% minority interest
in Resourcing Solutions Limited. The total non-controlling interest
as at 31 July 2017 was GBP2,222,000 (2016: GBPnil) which included
profit in the year of GBP172,000 and deferred consideration of
GBP2,050,000.
The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 July 2017 or
2016 but is derived from those accounts. Statutory accounts for
2016 have been delivered to the registrar of companies, and those
for 2017 will be delivered in due course. The auditor has reported
on those accounts; their reports were (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
The financial information presented on this web site does not
comprise the statutory accounts of Gattaca plc for the financial
years ended 31 July 2017 and 31 July 2016 but represents extracts
from them. These extracts do not provide as full an understanding
of the financial performance and position, or financial and
investing activities, of the company as the complete Annual
Report.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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