TIDMGATC
RNS Number : 9079U
Gattaca PLC
03 April 2019
3 April 2019
Gattaca plc
Interim Results for the six months ended 31 January 2019
Gattaca plc ("Gattaca" or the "Group"), the specialist
Engineering and Technology recruitment solutions business, today
announces its Interim Results for the six months ended 31 January
2019.
Financial Highlights
2019 H1 2018 H1 Change
Continuing Continuing Continuing Continuing Continuing Continuing
reported(2) underlying(3) reported(2) underlying(3) reported(2) underlying(3)
============= =============== ============= =============== ============= ===============
GBPm GBPm GBPm GBPm % %
============= =============== ============= =============== ============= ===============
Revenue 322.3 322.3 305.3 305.3 +6% +6%
============= =============== ============= =============== ============= ===============
Net Fee Income
(NFI)(1) 36.5 36.5 36.0 36.0 +2% +2%
============= =============== ============= =============== ============= ===============
EBITDA 7.6 8.4 6.9 7.4 +11% +14%
============= =============== ============= =============== ============= ===============
Profit/(Loss)
before tax 5.4 6.8 (13.6) 6.1 NA +12%
============= =============== ============= =============== ============= ===============
Profit/(Loss)
after tax 4.0 5.2 (13.2) 4.8 NA +8%
============= =============== ============= =============== ============= ===============
Discontinued
Operations (3.1) 0.0
============= =============== ============= =============== ============= ===============
Reported
Profit/(Loss)
after Tax 0.9 (13.2)
============= =============== ============= =============== ============= ===============
Basic earnings
per share 12.5 16.0 (42.2) 14.3 +12%
============= =============== ============= =============== ============= ===============
Diluted earnings
per share 12.4 15.8 (41.5) 14.0 +13%
============= =============== ============= =============== ============= ===============
Interim dividend 0p 3.0p NA
============= =============== ============= =============== ============= ===============
Net debt at end GBP(27.8)m GBP(36.2)m GBP8.4m
of period(4)
============= =============== ============= =============== ============= ===============
The following footnotes apply, unless where otherwise indicated,
throughout these Interim Results:
(1) NFI is calculated as revenue less contractor payroll
costs
(2) Continuing results exclude the NFI and trading (losses) /
profits before taxation of discontinued businesses (2019:
GBP(2.6)m, 2018 GBP0.9m)comprising Contract Telecoms Infrastructure
markets in Africa, Asia and Latin America (some of which was UK
sourced) plus our operations in Dubai, Kuala Lumpur and Qatar.
(3) Continuing underlying results exclude the NFI and trading
(losses) / profits before taxation of discontinued businesses
(2019: GBP(2.6)m, 2018 GBP0.9m), non-underlying items within
continuing administrative expenses primarily related to
restructuring and finance integration (2019: GBP0.8m, 2018
GBP0.5m), amortisation of acquired intangibles (2019: GBP0.6m, 2018
GBP1.6m), impairment of goodwill and acquired intangibles (2019:
GBP0.0m, 2018 GBP17.1m) and exchange gains from revaluation of
foreign assets and liabilities (2019: GBP0.0m, 2018 GBP(0.4)m
loss).
(4) Included within Net Debt are Capitalised Financing costs
(2019: GBP0.2m, 2018: GBP0.3m)
Highlights
-- Group continuing NFI grew 2%
-- Continued underlying NFI to EBIT conversion at 22%, compared to 19% in prior period
-- UK Engineering NFI up 4% on prior year
o Maritime +25%; Engineering Technology +11% and Infrastructure +7%
o Growth in both contract and permanent
-- UK Technology NFI down 13% on prior year, but restructuring and focus on profitability delivered
a higher contribution than prior period
o IT NFI down 8%,
o Telecoms NFI down 38%
-- International NFI up 15% on prior year
o Continued growth in the Americas (+6%)
o Strong year on year growth in our restructured offices China and South Africa both showing
double digit increases
-- Underlying continuing EPS up +12% at 16.0p (2018 H1 14.3p) and underlying Profit After Tax
up 8%
-- Strong cash flow performance, resulting in net debt reducing to GBP27.8m (2018 year end GBP40.9m;
2018 H1 GBP36.2m)
-- Improvement plan launched
Dividend
Interim dividend of nil pence (2018: 3.0 pence), in line with
the revised dividend policy communicated in 2018. The Board will
consider dividends at the year end, if resumed this would be at
modest levels.
Outlook
The Board notes that economic uncertainty, which can impact our
industry, has increased over the last six months. Notwithstanding
this, trading so far in the third quarter is as expected and we
remain confident in our outlook for the full year; we expect
results to be in line with the Board's expectations at this
time.
Commenting on the results, Kevin Freeguard, Chief Executive
Officer said:
"The first half of FY19 has been a period of progress for the
Group and we are pleased to be reporting NFI and PBT growth in our
continuing operations. Our core UK Engineering business delivered
continued growth and the restructuring work we undertook in our UK
Technology operations in Q1 has begun to feed through into an
improved year-on-year operating contribution. Our restructured and
refocused International operations continued to grow strongly and
we are pleased with our progress in reducing net debt.
"Building on the fundamental strengths of the business, our
improvement plan is now underway and is focussing on the levers for
growth, refining sales and market effectiveness, aligning
operations to further enhance our delivery capability and
innovating to extend our range of market solutions. I am confident
that as we continue to execute the plan it will position the
company well for the future."
For further information please contact:
Gattaca plc +44 (0) 1489 898989
Kevin Freeguard, Chief Executive
Officer
Salar Farzad, Chief Financial Officer
---------------------
Citigate Dewe Rogerson +44 (0) 20 7638 9571
---------------------
Nick Hayns / Lucy Eyles / Claire
Dansie
---------------------
Numis Securities Limited +44 (0) 20 7260 1000
---------------------
Kevin Cruickshank / Tom Ballard
---------------------
The information communicated in this announcement contains
inside information for the purposes of Article. 7 of the Market
Abuse Regulation (EU) No. 596/2014.
Operational Performance
UK Engineering
Underlying NFI 2019 H1 2018 H1 Change
GBP'm GBP'm %
Contract 19.4 18.8 +3%
Permanent 5.6 5.4 +5%
Total 25.1 24.2 +4%
-------- -------- -------
UK Engineering growth continued with NFI up 4% on 2018 H1.
Our Maritime division produced NFI growth of 25%, driven by
major defence projects such as the QEC, Dreadnought and Type 26,
alongside a significant commercial international shipbuilding
contract. Demand for engineering personnel within naval defence
remains strong.
Engineering Technology, operating in the area of convergence
between traditional engineering and IT skill sets, achieved 11%
growth due to increasing demand for niche skills across all
sectors, particularly defence and rail, alongside technological
advances bringing opportunity for greater connectivity and smart
infrastructure. We continue to expand our presence in the electric
vehicle market, whilst the move towards Connected and Autonomous
Vehicles is creating a new transportation landscape, allowing us to
maximise our technology presence within this emerging growth
sector.
Infrastructure NFI grew 7% year-on-year, despite mixed levels of
demand in each vertical. Rail site services experienced a spike in
demand during the winter months and in highways increased spend was
driven by the Routes to Market initiative and increased funding for
smart motorway schemes. The buildings sector saw delays in
investment for large private projects and in the water market
demand was more tempered as the funding cycle AMP 6 entered its
final year.
NFI in our Automotive Division declined 20% reflecting the
challenges widely reported within that sector where Original
Equipment Manufacturers have closed plants, conducted out of season
shutdowns, delayed new car platform releases and have made
redundancies. This has affected the supply chain in an already
unsettled market where new car sales are in decline and demand from
China for prestige brands has slowed.
UK Technology
Underlying NFI 2019 H1 2018 H1 Change
GBP'm GBP'm %
Contract 4.9 5.5 -10%
Permanent 1.5 1.9 -22%
Total 6.4 7.4 -13%
-------- -------- -------
The UK Technology division NFI was -13% lower than prior
year.
Our telecoms business has undergone a significant restructure,
redefining its product offering and client base. A focus on the
networks market has already seen traction being gained in the area
of Fibre Networks, whilst further focus working at the forefront of
future technology within the area of research & innovation also
represents scalable and profitable growth opportunities moving
forwards.
Within IT the structure has now been aligned to capitalise on
growth opportunities, with resource allocated to IT Security, AI
& Big Data, Cloud Infrastructure and Software Development
roles, with a particular focus on the fintech, digital
transformation and defence markets, as well as leveraging off our
engineering markets' customer base. The government is investing
heavily in the fintech market, looking for the UK to be a
post-Brexit market leading provider of disruptive technologies, as
well as continuing to invest in the IT Security market to protect
our national security and make the UK a leading technology hub.
Additionally, the demand for developers and AI specialists
continues to outstrip supply and we are partnering with companies
via our Alderwood brand to train and develop technology staff to
resolve such challenges.
Notwithstanding the reduced NFI, the half year operating
contribution from our Technology business has increased from prior
half year and the repositioning of these groups of businesses now
gives us a good base for future growth.
International
Underlying NFI 2018 H1 2017 H1 Change Change CC
GBP'm GBP'm % %
Contract 1.3 1.7 -23% -23%
Permanent 3.7 2.7 +37% +37%
Total 5.0 4.4 +14% +15%
-------- -------- ------- ----------
Following the previously announced restructuring of our
international business, our main international operations are now
in the Americas, South Africa and China and in the case of the
latter two as well as Mexico a greater emphasis on permanent
recruitment.
The Americas achieved growth of 6% driven by our Permanent
business.
Whilst the overall America's operation has grown, the growth in
the US has been lower than planned. Action has been taken to
address this and, we continue to invest to accelerate growth as our
chosen markets represent significant opportunities across
engineering (energy and infrastructure) and technology
(development, security, AI, technology sales and fintech). Such
opportunities have seen us strengthen our sales capability in both
Texas and Georgia in order to capitalise on them.
Our withdrawal from the telecoms infrastructure contractor
markets in Latin America has seen us adapt the structure of, and
focus in our Mexico office where we are now targeting the energy
and engineering marketplace, whilst in Canada we saw continued
growth driven across both contract and permanent recruitment,
particularly within development and technology sales skillsets as
well as within the fintech and power & transmission markets in
particular.
In China and South Africa (as well as for other markets) where
we also withdrew from the telecoms infrastructure markets those
businesses have repositioned successfully and are both showing
double digit growth in their continuing operations. China has
focussed on high value permanent business within technology sales,
the semiconductor market, automotive and infrastructure, whilst
South Africa has grown across contract and permanent within the
engineering (energy, mining and infrastructure) and technology
(development and leadership) markets.
Global Contractor and Permanent mix
Our sales mix has shifted further towards Permanent Fees, which
accounted for 30% of NFI in 2019 H1 (2018 H1: 28%). This is driven
primarily by internal factors, the repositioning of our businesses
in South Africa and China towards permanent recruitment, as well as
successful wins of a number of significant Recruitment Process
Outsourcing (Permanent recruitment) agreements within the Maritime
and UK Defence markets.
People
Gattaca's permanent FTE headcount at 31 January 2019 was 736, a
reduction of 134 from 31 January 2018. Of this reduction in
headcount, 74 were due to the cost reduction and operational
efficiency initiatives undertaken over the last 12 months, and 60
due to the exit of the international Telco market and office
closures. The ratio of sales to support staff was 73:27, an
improvement of 2 pts from July 2018 year end.
Improvement Plan
Gattaca is now well positioned in its core markets with its
continued focus of providing a full range of solutions for the
expanding market requirements for STEM skills. Building on the
strong fundamentals of the business, the recently-launched
Improvement Plan is focussed on the key levers to accelerate growth
for the Group, improving sales and market effectiveness, deepening
customer relationships, enhancing our service delivery capability,
improving organisational alignment and accelerating our focus on
developing and innovating solutions to meet market needs as they
change.
The principal elements of the Improvement Plan include:
-- Improved client focus, deepening customer relationships
o Aligned go-to-market plan
o Selling the full range of our products to our existing customer base and having a more structured
approach to new client acquisition
-- Innovating and developing products to meet clients' needs.
o Delivering a consistent product methodology
o Broader offering to meet evolving requirements
-- Enhancing our service delivery capability
o Expert fulfilment by skill
o Scaling our unique delivery capability
o Extending our external talent pools within Engineering and Technology
-- Improving organisational alignment and performance
o Building sales leadership and capability
o Focus on attracting, developing and retaining our talent
o Aligning the organisation and upskilling where required to enable the business to scale
o Further investment in technology and process to improve Group performance through common methodologies
As we continue to execute the Improvement Plan, we are confident
it will position the Group well for future growth.
Financial Overview
Revenue for the period was 6% above 2018 H1 at GBP322.3m (2018
H1: GBP305.3m).
NFI of GBP36.5m represented a 2% year on year increase on a
continuing reported basis.
Underlying EBITA for the period at GBP8.4m was 14% higher than
2018 H1 on a continuing reported basis. This reflects the growth in
NFI from UK Engineering and International and a lower
administrative cost base following headcount actions taken in 2018
H2. The Group conversion ratio (underlying profit from operations
as a percentage of NFI) was 22% compared to 19% for 2018 H1 and 18%
as reported for the year ended July 2018, a very strong performance
reflecting the recent focus on right sizing the cost base of the
business. Over time we are confident that the conversion ratio will
return to market leading levels.
On an underlying continuing reported basis the effective tax
rate was 24.3% (2018 H1 21.9%). The Group's underlying effective
tax rate reported at 31 July 2018 was 41%. This reduction in the
effective tax rate for the continuing business is a direct result
of the withdrawal from Telecoms Infrastructure Contract markets in
Africa, Asia and Latin America and the consequent reduction in
irrecoverable withholding tax in these markets.
Basic underlying earnings per share from continuing operations
were 16.0p (2018 H1 14.3p) and adjusted underlying diluted earnings
per share from continuing operations were 15.8p (2018 H1
14.0p).
Administrative Expenses
As the benefits of the cost reduction initiatives implemented in
2018 are realised, underlying administrative expenses in continuing
operations were down 2%, or GBP0.4m, on 2018 H1.
Non-underlying costs
The principle elements of continuing non-underlying costs are as
follows:
GBP'm
Finance function integration 0.6
Staff redundancies 0.2
------
Total 0.8
------
Financing Costs
Net financing costs of GBP1.0m (2018 H1 GBP1.2m) were GBP0.2m
lower primarily due to a GBP0.4m reduction in foreign exchange
impacts on translation of foreign currency balances within local
entities compared to prior year. Bank interest payable was GBP0.3m
higher due to the increased borrowing costs of Group debt following
the debt facility refinancing completed in November 2018.
Debtors, cashflow, net debt and financing
The improvement in debtor collections, together with routine
seasonal benefits resulted in a reduction of net debt to GBP27.8m
as at 31 January 2019 (2018 H1: GBP36.2m, 2018 FY: GBP40.9m).
Capital expenditure in the period of GBP1.1m (2018 H1: GBP1.4m)
was driven primarily by our investment in software related to our
Primary Business Systems initiative where we are replacing our
in-house built legacy systems with standardised industry leading
third party systems which will enable improvements in productivity,
agility and effectiveness.
Our Days Sales Outstanding ('DSO'), stands at 46 days, an
improvement from 31 July 2018 (52 days). This development
represents an improvement of approximately GBP14.0m in working
capital. However, this is partly offset by a decline in contractor
payroll liabilities resulting in a net continuing underlying
working capital improvement of GBP6.5m (2018 H1: GBP5.8m). In
addition to this, the discontinued business contributed a positive
cashflow of GBP3.5m as the costs of closure were offset by the
positive impact unwinding working capital. The reduction of net
debt remains a key priority and we continue to seek changes in our
business practice and effectiveness to improve working capital.
Dividend
We remain committed to reducing net debt to less than 2x EBITDA
on an annualised basis and therefore the Board is not declaring an
interim dividend (2018: 3.0 pence). The Board will consider
dividends at the year end. If resumed this would be at modest
levels.
Risks
The Board considers strategic, financial and operational risks
and identifies actions to mitigate those risks. Key risks and their
mitigations were disclosed on pages 21, 22 and 23 of the Annual
Report for the year ended 31 July 2018.
We continue to manage a number of potential risks and
uncertainties including contingent liabilities as noted in the
interim accounts - many of which are common to other similar
businesses - which could have a material impact on our longer-term
performance.
Outlook
The Board notes that economic uncertainty, which can impact our
industry, has increased over the last six months. Notwithstanding
this, trading so far in the third quarter is as expected and we
remain confident in our outlook for the full year; we expect
results to be in line with the Board's expectations at this
time.
CONDENSED CONSOLIDATED INCOME STATEMENT
for the period ended 31 January
2019
Note 6 months 6 months 12 months
to 31/01/19 to 31/01/18 to 31/07/18
unaudited unaudited
CONTINUING OPERATIONS Total Total Total
GBP'000 GBP'000 GBP'000
Revenue 2 322,339 305,284 631,329
Cost of Sales (285,796) (269,297) (559,930)
---------------------------------------- ----- ------------------------ ----------------- -------------
GROSS PROFIT 2 36,543 35,987 71,399
Administrative expenses (30,073) (48,347) (96,684)
---------------------------------------- ----- ------------------------ ----------------- -------------
PROFIT/(LOSS) FROM OPERATIONS 2 6,470 (12,360) (25,285)
Finance income 57 25 198
Finance costs (1,082) (1,221) (1,652)
---------------------------------------- ----- ------------------------ ----------------- -------------
PROFIT/(LOSS) BEFORE TAXATION 5,445 (13,556) (26,739)
Taxation 3 (1,401) 346 (375)
---------------------------------------- ----- ------------------------ ----------------- -------------
PROFIT/(LOSS) AFTER TAXATION FROM
CONTINUING OPERATIONS 4,044 (13,210) (27,114)
---------------------------------------- ----- ------------------------ ----------------- -------------
DISCONTINUED OPERATIONS
(Loss)/profit for the period from
discontinued operations (attributable
to equity holders of the company) (3,116) 48 38
PROFIT/(LOSS) FOR THE PERIOD 928 (13,162) (27,076)
Attributable to:
Equity holders of the parent 928 (13,381) (27,351)
Non-controlling interests - 219 275
---------------------------------------- ----- ------------------------ ----------------- -------------
928 (13,162) (27,076)
---------------------------------------- ----- ------------------------ ----------------- -------------
EARNINGS PER ORDINARY SHARE
pence pence pence
Basic earnings per share 5 2.9 (42.0) (85.3)
Diluted earnings per share 5 2.8 (41.3) (85.3)
6 months 6 months 12 months
to 31/01/19 to 31/01/18 to 31/07/18
unaudited unaudited
Total Total Total
GBP'000 GBP'000 GBP'000
PROFIT/(LOSS) FROM CONTINUING OPERATIONS 6,470 (12,360) (25,285)
Add
Depreciation of property, plant and equipment
and amortisation of software and software
licences 522 507 993
Non-underlying items included within administrative
expenses 758 476 1,676
Amortisation and impairment of acquired
intangibles 632 18,737 36,011
----------------------------------------------------- ------------------- ---------------- -------------
Underlying EBITDA 8,382 7,360 13,395
Less
Depreciation of property, plant and equipment
and amortisation of software and software
licences (522) (507) (993)
Net finance costs excluding foreign exchange
differences (1,043) (753) (1,540)
----------------------------------------------------- ------------------- ---------------- -------------
Underlying profit before taxation 6,817 6,100 10,862
Underlying taxation (1,662) (1,335) (3,380)
----------------------------------------------------- ------------------- ---------------- -------------
Underlying profit after taxation from
continuing operations 5,155 4,765 7,482
----------------------------------------------------- ------------------- ---------------- -------------
Underlying (loss)/profit after taxation
for the period from discontinued operations (3,116) 48 38
----------------------------------------------------- ------------------- ---------------- -------------
Underlying profit after taxation for the
period 2,039 4,813 7,520
----------------------------------------------------- ------------------- ---------------- -------------
EARNINGS PER ORDINARY SHARE Pence Pence Pence
Basic earnings per share from underlying
continuing operations 16.0 14.3 22.5
Diluted earnings per share from underlying
continuing operations 15.8 14.0 22.5
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the period ended 31 January 2019 6 months 6 months 12 months
to 31/01/19 to 31/01/18 to 31/07/18
unaudited unaudited
GBP'000 GBP'000 GBP'000
PROFIT/(LOSS) FOR THE PERIOD 928 (13,162) (27,076)
OTHER COMPREHENSIVE INCOME
Items that will not be reclassified to
profit or loss
Exchange differences on translating foreign
operations (1,600) (1,008) (734)
--------------------------------------------- ------------- ------------- -------------
OTHER COMPREHENSIVE (LOSS) FOR THE PERIOD (1,600) (1,008) (734)
--------------------------------------------- ------------- ------------- -------------
TOTAL COMPREHENSIVE (LOSS) FOR THE PERIOD (672) (14,170) (27,810)
--------------------------------------------- ------------- ------------- -------------
Attributable to:
Continuing operations 2,444 (14,218) (27,848)
Discontinuing operations (3,116) 48 38
-------------------------------- -------- --------- ---------
(672) (14,170) (27,810)
------------------------------ -------- --------- ---------
Attributable to:
Equity holders of the parent (672) (14,389) (28,085)
Non-controlling interests - 219 275
-------------------------------- -------- --------- ---------
(672) (14,170) (27,810)
------------------------------ -------- --------- ---------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 January 2019
Note 31/01/2019 31/01/2018 31/07/2018
unaudited unaudited
ASSETS GBP'000 GBP'000 GBP'000
Non-Current Assets
Intangible assets 6 16,504 33,059 16,349
Property, plant and equipment 3,409 3,420 3,620
Deferred tax assets 178 773 135
------------------------------------- ----- ------------ ----------- -----------
20,091 37,252 20,104
Current Assets
Trade and other receivables 7 90,039 103,523 112,912
Cash and cash equivalents 13,479 10,418 9,758
------------------------------------- ----- ------------ ----------- -----------
103,518 113,941 122,670
TOTAL ASSETS 123,609 151,193 142,774
------------------------------------- ----- ------------ ----------- -----------
LIABILITIES
Non-Current Liabilities
Deferred tax liability (1,519) (2,565) (1,636)
Provisions (2,535) (1,603) (1,390)
Bank loans and borrowings (14,825) (20,399) (14,931)
------------------------------------- ----- ------------ ----------- -----------
(18,879) (24,567) (17,957)
Current Liabilities
Trade and other payables (30,295) (35,141) (40,850)
Current tax liability (1,460) (255) (1,247)
Bank loans and borrowings (26,409) (26,199) (35,701)
------------------------------------- ----- ------------ ----------- -----------
(58,164) (61,595) (77,798)
TOTAL LIABILITIES (77,043) (86,162) (95,755)
NET ASSETS 46,566 65,031 47,019
------------------------------------- ----- ------------ ----------- -----------
EQUITY
Share capital 8 323 322 323
Share premium 8,706 8,706 8,706
Merger reserve 28,750 28,750 28,750
Share-based payment reserve 1,135 1,051 1,074
Translation reserve (1,301) 25 299
Retained earnings 8,953 23,736 7,867
TOTAL EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS OF PARENT 46,566 62,590 47,019
------------------------------------- ----- ------------ ----------- -----------
Non-controlling interests - 2,441 -
------------------------------------- ----- ------------ ----------- -----------
TOTAL EQUITY 46,566 65,031 47,019
------------------------------------- ----- ------------ ----------- -----------
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the period ended 31 January 2019
6 months 6 months 12 months
to 31/01/19 to 31/01/18 to 31/07/18
unaudited unaudited
GBP'000 GBP'000 GBP'000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(Loss) after taxation 928 (13,162) (27,076)
Adjustments for:
Depreciation amortisation 1,166 2,137 3,718
Loss/(profit) on disposal of property,
plant and equipment 67 (7) (14)
Impairment of acquired intangibles - 17,122 33,320
Interest income (57) (25) (198)
Interest expense 1,082 1,222 1,652
Taxation expense recognised in profit
and loss 1,909 480 2,217
Decrease in trade and other receivables 22,632 11,474 2,326
(Decrease)/increase in trade and other
payables (10,555) (3,856) 1,860
Increase/(decrease) in provisions 1,145 - (206)
Share based payment charge 216 73 324
-------------------------------------------- ------------- -------- ------------- -------------
Cash generated from operations 18,533 15,458 17,923
Interest paid (1,082) (710) (1,537)
Interest received 41 25 112
Taxation paid (1,615) (2,280) (3,648)
-------------------------------------------- ------------- -------- ------------- -------------
NET CASH FROM OPERATING ACTIVITES 15,877 12,493 12,850
-------------------------------------------- ------------- -------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment (161) (1,280) (1,853)
Purchase of intangibles (950) (153) (899)
Acquisitions of non-controlling interest - - (3,552)
Proceeds from sale of plant and equipment - 35 67
NET CASH (USED IN) INVESTING ACTIVITIES (1,111) (1,398) (6,237)
-------------------------------------------- ------------- -------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital - 6 7
Repayment of term loan - - (5,714)
Working capital facility (repaid)/utilised (9,275) 441 10,166
Finance costs paid (106) - (25)
Dividends paid - (5,474) (6,441)
-------------------------------------------- ------------- -------- ------------- -------------
NET CASH (USED IN) FINANCING ACTIVITIES (9,381) (5,027) (2,007)
-------------------------------------------- ------------- -------- ------------- -------------
Effects of exchange rates on cash and cash
equivalents (1,664) (1,452) (650)
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,721 4,616 3,956
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 9,758 5,802 5,802
-------------------------------------------- ------------- -------- ------------- -------------
CASH AND CASH EQUIVALENTS AT OF PERIOD 13,479 10,418 9,758
-------------------------------------------- ------------- -------- ------------- -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS
FOR DISCONTINUED OPERATIONS 9 3,508 (115) 101
-------------------------------------------- ------------- -------- ------------- ---------------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period ended 31 January 2019
Share-based Translation
payment reserve Non-controlling
Share Share Merger reserve GBP'000 Retained interests
capital premium reserve GBP'000 earnings GBP'000 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- --------- ---------------- --------- ------------ ------------ ------------- ----------------- --------------------
Balance at 1
August
2017 318 8,704 28,750 1,415 1,033 42,260 2,222 84,702
----------------- --------- ---------------- --------- ------------ ------------ ------------- ----------------- --------------------
(Loss)/profit
for
the period - - - - - (13,381) 219 (13,162)
Other
comprehensive
expenses - - - - (1,008) - - (1,008)
----------------- --------- ---------------- --------- ------------ ------------ ------------- ----------------- --------------------
Total
comprehensive
expenses - - - - (1,008) (13,381) 219 (14,170)
----------------- --------- ---------------- --------- ------------ ------------ ------------- ----------------- --------------------
Dividends in the
period - - - - - (5,474) - (5,474)
Deferred tax
movement
re share
options - - - - - (106) - (106)
IFRS 2 charge - - - 73 - - - 73
IFRS 2 reserves
transfer - - - (437) - 437 - -
Shares issued 4 2 - - - - - 6
Transactions
with
owners 4 2 - (364) - (5,143) - (5,501)
Balance at 31
January
2018 322 8,706 28,750 1,051 25 23,736 2,441 65,031
----------------- --------- ---------------- --------- ------------ ------------ ------------- ----------------- --------------------
Balance at 1
August
2017 318 8,704 28,750 1,415 1,033 42,260 2,222 84,702
----------------- --------- ------- ------------------ ------------ ------------ ------------- ----------------- ------------------
(Loss)/Profit
for
the period - - - - - (27,351) 275 (27,076)
Other
comprehensive
expenses - - - - (734) - - (734)
----------------- --------- ------- ------------------ ------------ ------------ ------------- ----------------- ------------------
Total
comprehensive
expenses - - - - (734) (27,351) 275 (27,810)
----------------- --------- ------- ------------------ ------------ ------------ ------------- ----------------- ------------------
Dividends paid
in the period - - - - - (6,441) - (6,441)
Deferred tax
movement
re share
options - - - - - (211) - (211)
Acquisition of
non-controlling
interest - - - - - - (3,552) (3,552)
Non-controlling
interest
transfer - - - - - (1,055) 1,055 -
IFRS 2 charge - - - 324 - - - 324
IFRS 2 reserves
transfer - - - (665) - 665 - -
Shares issued 5 2 - - - - - 7
Transactions
with
owners 5 2 - (341) - (7,042) (2,497) (9,873)
Balance at 31
July
2018 323 8,706 28,750 1,074 299 7,867 - 47,019
----------------- --------- ------- ------------------ ------------ ------------ ------------- ----------------- ------------------
Balance at 1
August
2018 323 8,706 28,750 1,074 299 7,867 - 47,019
----------------- --------- ------- ------------------ ------------ ------------ ------------- ----------------- ------------------
Profit for the
period - - - - - 928 - 928
Other
comprehensive
expenses - - - - (1,600) - - (1,600)
----------------- --------- ------- ------------------ ------------ ------------ ------------- ----------------- ------------------
Total
comprehensive
expenses - - - - (1,600) 928 - (672)
----------------- --------- ------- ------------------ ------------ ------------ ------------- ----------------- ------------------
Deferred tax
movement
re share
options - - - - - 3 - 3
IFRS 2 charge - - - 216 - - - 216
IFRS 2 reserves
transfer - - - (155) - 155 - -
Transactions
with
owners - - - 61 - 158 - 219
Balance at 31
January
2019 323 8,706 28,750 1,135 (1,301) 8,953 - 46,566
----------------- --------- ------- ------------------ ------------ ------------ ------------- ----------------- ------------------
Notes forming part of the financial statements
1 THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
i The Business of the Group
Gattaca plc (the Company) and its subsidiaries (together the
Group) is a human capital resources business providing contract and
permanent recruitment services in the Private and Public Sectors.
The Company is a public limited company, which is listed on the
Alternative Investment Market (AIM) and is incorporated and
domiciled in England, United Kingdom. The Company's address is:
1450 Parkway, Solent Business Park Whiteley, Fareham, Hampshire,
PO15 7AF. The registration number is 04426322.
ii Basis of preparation of interim financial information
These condensed consolidated interim financial statements are
for the six months ended 31 January 2019. They have been prepared
in accordance with IAS 34 "Interim Financial Reporting". They do
not include all of the information required for full annual
financial statements and should be read in conjunction with the
consolidated financial statements for the year ended 31 July 2018
which have been filed with the Registrar of Companies. The
auditor's report on those financial statements was unqualified and
did not contain a statement under section 498 of the Companies Act
2006.
These condensed consolidated interim financial statements (the
interim financial statements) have been prepared in accordance with
the accounting policies set out below which are based on the
recognition and measurement principles of IFRS in issue as adopted
by the European Union (EU) and are effective at 31 July 2018 or are
expected to be adopted and effective at 31 July 2018.
These financial statements have been prepared under the
historical cost convention. The accounting policies have been
applied consistently throughout the Group for the purposes of
preparation of these condensed interim financial statements. A
summary of the principal accounting policies of the Group are 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
historic 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 in compliance with key
financial covenants, 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
IFRS 15 'Revenue from contracts with customers'
During 2014 the International Accounting Standards Board (IASB)
issued IFRS 15 'Revenue from contracts with customers', which has
become effective from 1 August 2018 for the Group.
IFRS 15, 'Revenue from contracts with customers', deals with
revenue recognition and establishes principles for reporting useful
information to users of Financial Statements about the nature,
amount, timing and uncertainty of revenue and cash flows arising
from an entity's contracts with customers. The standard replaces
IAS 18 'Revenue', IAS 11 'Construction contracts', IFRIC 13
'Customer loyalty programmes', SIC 31 'Revenue - Barter
transactions involving advertising services' and related
interpretations.
The following revenue streams are accounted for as follows:
Temporary placements
Revenue from temporary placements is recognised at the point in
time when the candidate provides services. The Group has assessed
its use of third party providers to supply candidates under the
agent or principal criteria and has determined that it is the
principal on the grounds that it retains primary responsibility for
provision of the services. Under IFRS 15, the timing and amount of
revenue recognition is expected to be materially unchanged.
A number of rebate arrangements are in place in respect of
volume and value of sales; these are accounted for as variable
consideration and estimated in line with IFRS 15. In addition,
consideration payable to customers has been capitalised and
amortised over the term of the contracts it relates to; this is
accounted for as a reduction to the transaction price.
Notes forming part of the financial statements (continued)
Permanent placements
Revenue from permanent placements is recognised at the point in
time when the candidate commences employment, with 'claw-back'
provisions provided for. Under IFRS 15, the timing and amount of
revenue recognition is expected to be materially unchanged.
Provision of engineering services
Revenue from provision of engineering services is recognised
over the period of the contract, on completion of work in line with
milestones per contracts or approved timesheets.
IFRS 9 'Financial Instruments'
IFRS 9 'Financial instruments' is effective for the Group from 1
August 2018. The new standard sets out requirements for recognising
and measuring financial assets and financial liabilities.
Further details of each aspect of the standard have been
included below:
Classification and measurement
IFRS 9 contains a new classification and measurement approach
for financial assets that reflects the business model in which
assets are managed and their cash flow characteristics. Under IFRS
9, the number of classification categories has reduced, resulting
in all financial assets being measured at amortised cost, fair
value through profit and loss (FVTPL) or fair value through other
comprehensive income (FVOCI).
IFRS largely retains the existing requirements for
classification of financial liabilities in IAS 39. The Group's
assessment did not identify any changes to classification and
measurement of financial liabilities or financial assets as at 1
August 2018.
Impairment
IFRS 9 replaces the incurred loss model of IAS 39 with an
'Expected Credit Loss' model (ECL). This applies to all financial
assets measured at amortised cost or FVOCI, except equity
investments. Depending on certain criteria, it measures all default
events that are expected to occur in 12 months from the reporting
date, or over the lifetime of the financial assets.
The Group has reviewed each category of financial assets to
assess the level of credit risk and ECL to apply:
The Group has chosen to take advantage of the practical
expedient in IFRS when assessing default rates over its portfolio
of trade receivables, to estimate the ECL based on historical
default rates specific to groups of customers by industry and
geography. Separate ECL's have been modelled for UK construction
customers, rest of UK customers, and customers in Americas, Europe,
Asia and Africa.
Cash and cash equivalents are held with financial institutions.
The Group has determined that based on the external credit ratings
of counterparties, it has very low credit risk and that the
estimated ECL is not material.
At each reporting date, the ECL is reviewed to reflect changes
in credit risk and adjustments made where necessary.
New Standards in issue, not yet effective
IFRS 16 'Leases'
IFRS 16 'Leases' addresses the definition of a lease,
recognition and measurement of leases, and it establishes
principles for reporting useful information to users of financial
statements about the leasing activities of both lessees and
lessors. A key change arising from IFRS 16 is that most operating
leases will be accounted for on the Statement of Financial Position
for lessees. The standard replaces IAS 17, 'Leases', and related
interpretations. The standard is effective for annual periods
commencing on or after 1 January 2019, and so will be adopted by
the Group from 1 August 2019.
Adoption of IFRS 16 is expected to result in changes to the
Group's Consolidated Financial Statements. Under IFRS 16, certain
lease commitments could be accounted for 'on-balance sheet', with
recognition of a lease liability and corresponding right-of-use
assets. Under IFRS 16, the operating lease charge would be replaced
by a depreciation charge that, whilst lower over the life of the
lease than the current operating lease charge. Rental expenses will
also be accounted for as finance costs rather than within operating
expenses.
The Group is currently performing an impact assessment of the
application of the new standard.
Notes forming part of the financial statements (continued)
Forthcoming requirements
The following are new standards or improvements to existing
standards that are mandatory for the first time in the Group's
accounting period beginning on 1 August 2018 and no new standards
have been early adopted. The Group's 31 January 2019 interim
financial statements have adopted these amendments to IFRS, none of
which had any material impact on the Group's results or financial
position:
Effective date (Annual
periods beginning on
Standard or after)
IFRS 2 Share-based payments 1 January 2018
IFRS 9 Financial Instruments 1 January 2018
Revenue from Contracts
IFRS 15 with Customers 1 January 2018
Revenue from Contracts
IFRS 15 Amendments with Customers 1 January 2018
Annual Improvements to
IFRSs 2016 1 January 2018
Foreign Currency Transactions
IFRIC 22 and Advance Consideration 1 January 2018
The Group has not yet adopted certain new standards, amendments
and interpretations to existing standards, which have been
published but which are only effective for the Group accounting
periods beginning on or after 1 August 2019. These new
pronouncements are listed as follows:
Effective date (Annual
periods beginning on or
Standard after)
IFRS 9 Amendments Financial Instruments 1 January 2019
IFRS 16 Leases 1 January 2019
Uncertainty over Income
IFRIC 23 Tax Treatments 1 January 2019
Annual Improvements to IFRSs
2017 1 January 2019
v Basis of consolidation
Subsidiaries are all entities over which the Group has control.
The Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power over
the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group. They are deconsolidated
from the date on which that control ceases.
The Group applies the acquisition method to account for business
combinations. The consideration transferred for the acquisition of
a subsidiary is the fair value of the assets transferred, the
liabilities incurred to the former owners of the acquiree, and the
equity interests issued by the Group. The consideration transferred
includes the fair value of any asset or liability resulting from a
contingent consideration arrangements. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair value at the
acquisition date. The Group recognises any non-controlling interest
in the acquiree on an acquisition-by-acquisition basis, either at
fair value or at the non-controlling interest's proportionate share
of the recognised amounts of the acquiree's identifiable net
assets.
Acquisition-related costs are expensed as incurred.
Intercompany transactions, balances and unrealised gains on
transactions between Group companies are eliminated. Unrealised
losses are also eliminated. Where necessary, amounts reported by
subsidiaries have been adjusted to conform to the Group's
accounting policies.
Notes forming part of the financial statements (continued)
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 when the worker
provides services, with invoices raised upon receipt of a client
approved timesheet or equivalent proof of time worked. Timing
differences between when the work is performed and the receipt of a
client approved timesheet are recognised as accrued income when it
is considered that performance obligations have been met. In
specific parts of the Group where work cycles are monthly, accrued
income for timesheet timing differences is based on contractual
terms and invoice rates, together with expected utilisation based
on historical working patterns.
For contract labour rebates, the Group recognise the rebates at
the same time as revenue, in line with the terms of temporary
placements. For cash and volume rebates, the Group estimates how
much variable consideration is expected to be received either by
expected value based on probability weighted averages or most
likely amount.
The Group capitalises consideration payable to customers as
prepayments and amortises these over the terms of the contract they
relate to as a reduction to revenue.
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. Permanent placements made are subject to a 'claw-back'
period whereby if a candidate leaves within a set period of
starting employment, the client may be entitled to a rebate subject
to the Group's terms and conditions. Based on historical experience
and data, claw-backs are infrequent but where material, a provision
for potential refunds is made.
Revenue from provision of engineering services is recognised
depending on the nature of the contracts, either over the period of
the contract or on completion of work in line with milestones per
contracts or approved timesheets. Other fees are recognised on
confirmation from the client committing to the agreement. Other
fees mainly relate to contractual services provided that are
neither temporary contract services nor permanent placement fees.
These typically relate to account management fees for providing
recruitment services. These fees are recognised in accordance with
terms of each individual agreement, such as a monthly service
fee.
vii Non-underlying items
Non-underlying items are income or expenditure that are
considered unusual and separate to underlying trading results
because of their size, nature or incidence and are presented within
the consolidated income statement but highlighted through separate
disclosure. The Group's Directors consider that these items should
be separately identified within the income statement to enable a
better understanding of the Group's results.
Items which are included within this category include:
-- costs of acquisitions;
-- integration costs following acquisitions; and
-- significant restructuring costs including related professional fees and staff costs.
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 33.0% Straight line
Over the period of the
Leasehold Improvements lease term Straight line
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at the end of each reporting period.
An asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount.
When revalued assets are sold, the amounts included in other
reserves in respect of those assets are transferred to retained
earnings.
Notes forming part of the financial statements (continued)
viii 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 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 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. Acquired
customer relationships are recognised at fair value at the
acquisition date and have a finite useful life of 10 years.
Customer relationships are 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
recently acquired businesses and are recognised at fair value at
the acquisition date. Trade names and trademarks are considered to
have a finite useful life and amortisation is calculated using the
straight line method to allocate the cost of trade names and
trademarks over their estimated useful lives of 10 years. Trade
names and trademarks are stated at cost less accumulated
amortisation and impairment.
Software and software licences
Acquired computer software licences are capitalised on the basis
of the costs incurred to acquire and bring into use the specific
software. These costs are amortised using the straight line method
to allocate the cost of the software licences over their useful
lives of between two and five years. Software licences are stated
at cost less accumulated amortisation.
Directly attributable costs that are capitalised as part of
internally generated software include the software development
employee costs and an appropriate portion of relevant overheads.
Other development expenditures that do not meet these criteria are
recognised as an expense as incurred. Computer software development
costs recognised as assets are amortised over their estimated
useful lives of between two and five years.
Other
Other intangible assets acquired by the Group and have a finite
useful life between five and ten years and are measured at cost
less accumulated amortisation and accumulated losses.
Amortisation of intangible assets 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.
ix 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.
x Operating lease agreements
Rentals applicable to operating leases are expensed to profit
and loss on a straight line basis over the lease term. Lease
incentives are spread over the term of the lease.
Notes forming part of the financial statements (continued)
xi Taxation
The tax expense for the period comprises current and deferred
tax. Tax is recognised in the income statement, except to the
extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also
recognised in other comprehensive income or directly in equity,
respectively.
The current tax charge is calculated on the basis of the tax
laws enacted or substantively enacted at the statement of financial
position date in the countries where the company and its
subsidiaries operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions, where appropriate, on
the basis of amounts expected to be paid to the tax
authorities.
Deferred income taxes are calculated using the liability method
on temporary differences. Deferred tax is generally provided on the
difference between the carrying amounts of assets and liabilities
and their tax bases. However, deferred tax is not provided on the
initial recognition of goodwill, nor on the initial recognition of
an asset or liability unless the related transaction is a business
combination or affects tax or accounting profit.
Deferred tax liabilities are provided in full, with no
discounting. Deferred tax assets are recognised to the extent that
it is probable that the underlying deductible temporary differences
will be able to be offset against future taxable income. Current
and deferred tax assets and liabilities are calculated at tax rates
that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted at
the Statement of Financial Position date.
Deferred tax on temporary differences associated with shares in
subsidiaries is not provided for if these temporary differences can
be controlled by the Group and it is probable that reversal will
not occur in the foreseeable future.
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.
xii Pension costs
The Company operates a defined contribution pension scheme for
employees. The assets of the scheme are held separately from those
of the Company. The annual contributions payable are charged to the
income statement as they accrue.
xiii Share-based payments
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.
Notes forming part of the financial statements (continued)
xiv 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 at 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.
xv 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.
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.
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 de-recognition. 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 de-recognition 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.
xvi 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.
xvii Financial instruments
Classification
From 1 August 2018, the Group classifies its financial assets in
the following measurement categories:
(i) those to be measured subsequently at fair value (either
through OCI, or through profit or loss), and
(ii) those to be measured at amortised cost
For assets measured at fair value, gains and losses will either
be recorded in profit or loss or OCI. For investments in equity
instruments that are not held for trading, this will depend on
whether the Group has made an irrevocable election at the time of
initial recognition to account for the equity investment at fair
value through other comprehensive income
(FVOCI).The Group reclassifies debt investments when and only
when its business model for managing those assets changes.
Measurement
At initial recognition, the Group measures a financial asset at
its fair value plus, in the case of a financial asset not at fair
value through profit or loss (FVPL), transaction costs that are
directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at FVPL are expensed
in profit or loss.
Debt Instruments
Subsequent measurement of debt instruments depends on the
Group's business model for managing the asset and the cash flow
characteristics of the asset. There are three measurement
categories into which the Group classifies its debt
instruments:
Notes forming part of the financial statements (continued)
Amortised cost: Assets that are held for collection of
contractual cash flows where those cash flows represent solely
payments of principal and interest are measured at amortised cost.
Interest income from these financial assets is included in finance
income using the effective interest rate method. Any gain or loss
arising on derecognition is recognised directly in profit or loss
and presented in other gains/(losses), together with foreign
exchange gains and losses. Impairment losses are presented as
separate line item in the statement of profit or loss.
FVOCI: Assets that are held for collection of contractual cash
flows and for selling the financial assets, where the assets' cash
flows represent solely payments of principal and interest, are
measured at FVOCI. Movements in the carrying amount are taken
through OCI, except for the recognition of impairment gains or
losses, interest revenue and foreign exchange gains and losses
which are recognised in profit or loss. When the financial asset is
derecognised, the cumulative gain or loss previously recognised in
OCI is reclassified from equity to profit or loss and recognised in
other gains/(losses). Interest income from these financial assets
is included in finance income using the effective interest rate
method. Foreign exchange gains and losses are presented in other
gains/(losses) and impairment expenses are presented as separate
line item in the statement of profit or loss.
FVPL: Assets that do not meet the criteria for amortised cost or
FVOCI are measured at FVPL. A gain or loss on a debt investment
that is subsequently measured at FVPL is recognised in profit or
loss and presented net within other gains/(losses) in the period in
which it arises.
Equity Instruments
The Group subsequently measures all equity investments at fair
value. Where the Group's management has elected to present fair
value gains and losses on equity investments in OCI, there is no
subsequent reclassification of fair value gains and losses to
profit or loss following the derecognition of the investment.
Dividends from such investments continue to be recognised in profit
or loss as other income when the Group's right to receive payments
is established.
Changes in the fair value of financial assets at FVPL are
recognised in other gains/(losses) in the statement of profit or
loss as applicable. Impairment losses (and reversal of impairment
losses) on equity investments measured at FVOCI are not reported
separately from other changes in fair value.
Impairment
From 1 August 2018, the Group assesses on a forward looking
basis the expected credit losses associated with its debt
instruments carried at amortised cost and FVOCI. For trade
receivables, the Group has chosen to take advantage of the
practical expedient to assess its trade receivables as a portfolio,
segregating the total into groups that carry similar risks, and
then applying a credit risk based on historical default rates in
that portfolio.
xviii Cash and cash equivalents
In the consolidated statement of cash flows, cash and cash
equivalents include cash in hand, deposits held at call with banks,
other short-term highly liquid investments with original maturities
of three months or less and bank overdrafts. In the consolidated
statement of financial positions, bank overdrafts are netted
against cash and cash equivalent in the statement of cash flows
where the offsetting criteria are met.
xix Provisions
Provisions are recognised where: the Group has a present legal
or constructive obligation as a result of past events; it is
probable that an outflow of resources will be required to settle
the obligation; and the amount has been reliably estimated.
Restructuring provisions comprise lease termination penalties,
onerous lease arrangements and employee termination payments.
Provisions are not recognised for future operating losses.
xx Dividends
Dividend distributions payable to equity shareholders are
included in "other short term financial liabilities" when the
dividends are approved in general meeting prior to the financial
position date.
Notes forming part of the financial statements (continued)
xxi Foreign currencies
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which each entity operates ('the functional
currency'). The consolidated financial statements are presented in
'currency' (GBP), which is the Group's presentation currency.
Transactions in foreign currencies are translated at the
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities in foreign currencies are translated at the
rates of exchange ruling at the Statement of Financial Position
date. Non-monetary items that are measured at historical cost in a
foreign currency are translated at the exchange rate at the date of
the transaction. Non-monetary items that are measured at fair value
in a foreign currency are translated using the exchange rates at
the date when the fair value was determined."
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. Transactions in currencies other
than the functional currency are translated at the exchange rate
ruling at the date of the transaction. Monetary assets and
liabilities denominated in non-functional currencies are
retranslated at the exchange rate ruling at the balance sheet date
and any exchange differences arising are taken to the Income
Statement.
For consolidation purposes, the assets and liabilities of
foreign operations are translated at closing exchange rates. Income
statements of such undertakings are consolidated at average rates
of exchange as an approximation for actual rates during the year.
Exchange differences arising on these translations are accounted
for in the translation reserve in Other Comprehensive Income (OCI).
On divestment, these exchange differences are reclassified from the
translation reserve to the Income Statement.
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 Critical accounting judgements and key sources of estimation uncertainty
Critical accounting judgements
The directors are of the opinion there are no critical
accounting judgments.
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources
of estimation uncertainty at the Statement of Financial
Position date that carry a risk of causing a material adjustment
within the next 12 months are discussed below:
Provisions in respect of recoverability of trade receivables
The Group's policy for default risk over receivables is based on
the on-going evaluation of the collectability and ageing
analysis of trade and other receivables. Considerable judgment
is required in assessing the ultimate realisation of these
receivables, including reviewing the potential likelihood of
default, the past collection history of each customer and the
current economic conditions.
Valuation of goodwill and intangible assets
Goodwill and intangible assets (including acquired intangibles)
are tested for impairment on an annual basis or otherwise when
changes in events or situations indicate that the carrying value
may not be recoverable. This requires an estimate to be made of the
recoverable amount of the cash-generating unit to which the assets
are allocated, including forecasting future cash flows of each
cash-generating unit and forming assumptions over the discount rate
and long-term growth rate applied.
2 SEGMENTAL INFORMATION
An operating segment, as defined by IFRS 8 'Operating segments',
is a component of the Group that engages in business activities
from which it may earn revenues and incur expenses. The Group is
managed through its three reporting segments, UK Engineering, UK
Technology and International, which form the operating segments on
which the information below is prepared. The Group determines and
presents operating segments based on the information that is
provided internally to the chief operating decision maker, which
has been identified as the Board of Directors of Gattaca plc.
6 months to 31 January 2019
Non-underlying
items
unaudited and amortisation
and impairment
All amounts UK UK International Underlying of acquired Discontinued Group
in GBP'000 Engineering Technology continuing intangibles Operations Total
---------------- --- ------------ ----------- --------------- ---------------- -------------------- -------------- ---------
Revenue 248,167 61,538 12,634 322,339 - 12,139 334,478
Gross profit 25,061 6,400 5,082 36,543 - 1,639 38,182
Operating
contribution 13,524 2,719 1,117 17,360 - 685 18,045
Depreciation and
amortisation (401) (101) (20) (522) (632) (12) (1,166)
Central overheads (7,058) (1,249) (671) (8,978) (758) (3,280) (13,016)
------------------ ---------------- ----------- --------------- ---------------- -------------------- -------------- ---------
Profit from
operations 6,065 1,369 426 7,860 (1,390) (2,607) 3,863
Finance cost,
net (1,043) 18 (1) (1,026)
---------------- --- ------------ ----------- --------------- ---------------- -------------------- -------------- ---------
Profit/(loss)
before taxation 6,817 (1,372) (2,608) 2,837
----------------- --- ------------ ----------- --------------- ---------------- -------------------- -------------- ---------
6 months to 31 January 2018
Non-underlying
items
unaudited and amortisation
and impairment
All amounts UK UK International Underlying of acquired Discontinued Group
in GBP'000 Engineering Technology continuing intangibles Operations Total
---------------- --- ------------ ----------- --------------- ---------------- -------------------- -------------- ---------
Revenue 229,647 59,121 16,516 305,284 - 18,014 323,298
Gross profit 24,179 7,390 4,418 35,987 - 3,779 39,766
Operating
contribution 12,484 2,369 1,063 15,916 - 2,842 18,758
Depreciation and
amortisation (378) (101) (28) (507) (18,737) (15) (19,259)
Central overheads (5,914) (1,991) (651) (8,556) (476) (1,952) (10,984)
------------------ ---------------- ----------- --------------- ---------------- -------------------- -------------- ---------
Profit from
operations 6,192 277 384 6,853 (19,213) 875 (11,485)
Finance cost,
net (753) (443) (1) (1,197)
---------------- --- ------------ ----------- --------------- ---------------- -------------------- -------------- ---------
Profit/(loss)
before taxation 6,100 (19,656) 874 (12,682)
----------------- --- ------------ ----------- --------------- ---------------- -------------------- -------------- ---------
2 SEGMENTAL INFORMATION (CONTINUED)
Year to 31 July 2018
Non-underlying
items
and amortisation
and impairment
All amounts UK UK International Underlying of acquired Discontinued Group
in GBP'000 Engineering Technology continuing intangibles Operations Total
---------------- --- ------------ ----------- --------------- ---------------- -------------------- -------------- ---------
Revenue 493,001 105,580 32,748 631,329 - 36,215 667,544
Gross profit 49,144 12,881 9,374 71,399 - 7,464 78,863
Operating
contribution 25,467 5,100 2,723 33,290 - 5,174 38,464
Depreciation and
amortisation (771) (170) (52) (993) (36,011) (34) (37,038)
Central overheads (12,068) (5,199) (2,628) (19,895) (1,676) (3,260) (24,831)
------------------ ---------------- ----------- --------------- ---------------- -------------------- -------------- ---------
Profit from
operations 12,628 (269) 43 12,402 (37,687) 1,880 (23,405)
Finance cost,
net (1,540) 86 (1,454)
---------------- --- ------------ ----------- --------------- ---------------- -------------------- -------------- ---------
Profit /(loss)
before taxation 10,862 (37,601) 1,880 (24,859)
----------------- --- ------------ ----------- --------------- ---------------- -------------------- -------------- ---------
A segmental analysis of total assets has not been included as
this information is not available to the Board; the majority of
assets are centrally held and are not allocated across the
reportable segments.
Geographical information
Revenue Non-current assets
All amounts 6 months 6 months 12 months 6 months 6 months 12 months
in GBP'000 to to 31/01/18 to 31/07/18 to 31/01/19 to 31/01/18 to 31/07/18
31/01/19
---------------- --------------- --------------- ------------ ---------------- ---------------- ----------------
UK 320,587 294,990 608,540 19,898 36,630 19,794
Rest of
Europe 1,257 334 2,824 2 2 2
Middle East
and Africa 1,321 7,408 14,588 11 212 63
Americas 10,503 11,878 25,280 165 172 139
Asia Pacific 810 8,688 16,312 15 236 106
---------------- --------------- --------------- ------------ ---------------- ---------------- ----------------
Total 334,478 323,298 667,544 20,091 37,252 20,104
---------------- --------------- --------------- ------------ ---------------- ---------------- ----------------
Revenue and non-current assets are allocated to the geographic
market based on the domicile of the respective subsidiary.
3 TAXATION
Analysis of charge in the period for continuing operations
6 months 6 months 12 months
to 31/01/19 to 31/01/18 to 31/07/18
unaudited unaudited
GBP'000 GBP'000 GBP'000
Profit/(loss) before tax for continuing
operations 5,445 (13,556) (26,739)
Profit/(loss) before tax multiplied by
the standard rate of corporation tax in
the UK of 19% (2018: 19%) 1,035 (2,576) (5,080)
Expenses not deductible for tax purposes
and goodwill impairment loss 77 2,035 4,219
Effect of share-based payments 78 - (12)
Irrecoverable withholding tax 55 3 77
Overseas losses not recognised as deferred
tax assets 195 88 119
Difference between UK and overseas tax
rates (39) 59 (14)
Adjustment to tax charge in respect of
previous periods - 45 1,066
-------------------------------------------- ------------- ------------- -------------
Total taxation charge for the period for
continuing operations 1,401 (346) 375
-------------------------------------------- ------------- ------------- -------------
Total taxation charge for the period for discontinued operations 508
826 1,841
4 DIVIDS
Dividends on shares classed as equity:
6 months 6 months 12 months
to 31/01/19 to 31/01/18 to 31/07/18
unaudited unaudited
GBP'000 GBP'000 GBP'000
Paid during the period - 5,474 6,441
-------------- ------------- ---------------
5 EARNINGS PER SHARE
Earnings per share has been calculated by dividing the
consolidated profit/(loss) after taxation attributable to equity
shareholders of the parent company 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. The earnings per share information has been
calculated as follows:
6 months 6 months 12 months
to 31/01/19 to 31/01/18 to 31/07/18
unaudited unaudited
Total Earnings GBP'000 GBP'000 GBP'000
Total profit /(loss) for the period 928 (13,381) (27,351)
Number of Shares GBP'000 GBP'000 GBP'000
Weighted average number of ordinary
shares in issue 32,257 31,857 32,079
Effect of dilutive potential ordinary
shares under option 327 522 -
--------- --------- ---------
32,584 32,379 32,079
--------- --------- -----------
Total Earnings per Share Pence Pence Pence
Earnings per ordinary share -Basic 2.9 (42.0) (85.3)
-Diluted 2.8 (41.3) (85.3)
Earnings for Continuing Operations GBP'000 GBP'000 GBP'000
Total profit /(loss) for the period 4,044 (13,429) (27,389)
Total Earnings per Share for continuing
operations Pence Pence Pence
Earnings per ordinary share from
continuing operations -Basic 12.5 (42.2) (85.4)
-Diluted 12.4 (41.5) (85.4)
Earnings for Discontinuing Operations GBP'000 GBP'000 GBP'000
Total (loss)/profit for the period (3,116) 48 38
Total Earnings per Share for discontinuing
operations Pence Pence Pence
Earnings per ordinary share from
discontinuing operations -Basic (9.7) 0.2 0.1
-Diluted (9.6) 0.1 0.1
6 INTANGIBLES
Acquired Software
Goodwill intangibles and Software
licences Total
GBP'000 GBP'000 GBP'000 GBP'000
COST At 1 August 2017 28,739 31,380 2,470 62,589
Additions - - 165 165
At 31 January 2018 28,739 31,380 2,635 62,754
----------- ------------- -------------- --------
At 1 August 2017 28,739 31,380 2,470 62,589
Additions - - 899 899
At 1 August 2018 28,739 31,380 3,369 63,488
----------- ------------- -------------- --------
Additions - 20 930 950
At 31 January 2019 28,739 31,400 4,299 64,438
----------- ------------- -------------- --------
AMORTISATION
At 1 August 2017 - 9,389 1,398 10,787
Amortisation charge
for the period - 1,615 171 1,786
Impairment loss 10,824 6,298 - 17,122
----------- ------------- -------------- --------
At 31 January 2018 10,824 17,302 1,569 29,695
----------- ------------- -------------- --------
At 1 August 2017 - 9,389 1,398 10,787
Amortisation charge
for the period - 2,691 341 3,032
Impairment 21,779 11,541 - 33,320
----------- ------------- -------------- --------
At 1 August 2018 21,779 23,621 1,739 47,139
----------- ------------- -------------- --------
Amortisation charge
for the period - 632 163 795
----------- ------------- -------------- --------
At 31 January 2019 21,779 24,253 1,902 47,934
----------- ------------- -------------- --------
NET BOOK VALUE At 31 January 2018 17,915 14,078 1,066 33,059
At 31 July 2018 6,960 7,759 1,630 16,349
----------- ------------- -------------- --------
At 31 January 2019 6,960 7,147 2,397 16,504
----------- ------------- -------------- --------
7 TRADE AND OTHER RECEIVABLES
31/01/2019 31/01/2018 31/07/2018
unaudited unaudited
GBP'000 GBP'000 GBP'000
Trade receivables 74,836 82,104 81,773
Other receivables 1,750 635 1,351
Corporation taxation receivable - - 241
Accrued income 11,674 18,824 27,947
Prepayments 1,779 1,960 1,600
90,039 103,523 112,912
------------ ------------ ------------
Included in the Group's trade receivable balance are debtors
with a carrying amount of GBP15,259,000 (31 January 2018:
GBP15,772,000, 31 July 2018: GBP14,162,000) which are past due at
the reporting date, for which the Group has not provided for, 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
Directors consider all trade receivables not past due to be fully
recoverable.
Ageing of overdue but not impaired trade receivables:
31/01/2019 31/01/2018 31/07/2018
unaudited unaudited
GBP'000 GBP'000 GBP'000
0-30-30 days 8,838 9,384 8,243
30-30-60 days 3,119 2,648 3,027
60-60-90 days 2,010 1,618 1,628
90+ days 1,292 2,122 1,264
15,259 15,772 14,162
------------- ------------- -------------
8 SHARE CAPITAL
Authorised share capital 31/01/2019 31/01/2018 31/07/2018
unaudited unaudited
GBP'000 GBP'000 GBP'000
40,000,000 Ordinary shares of GBP0.01
each 400 400 400
------------ ------------ ------------
Allotted, called up and fully paid 31/01/2019 31/01/2018 31/07/2018
unaudited unaudited
GBP'000 GBP'000 GBP'000
Ordinary shares of GBP0.01 each 323 322 323
------------ ------------ ------------
8 SHARE CAPITAL (CONTINUED)
The movement in the number of shares in issue is shown
below:
'000
In issue at 1 August 2017 31,801
Exercise of share options 397
In issue at 31 January 2018 32,198
--------
In issue at 1 August 2017 31,801
Exercise of share options 455
In issue at 31 July 2018 32,256
--------
In issue at 1 August 2018 32,256
Exercise of share options 16
In issue at 31 January 2019 32,272
--------
9 Discontinued operations
On 4 September 2018 the Group announced that it was withdrawing
from the contract Telecoms Infrastructure markets in Africa, Asia
and Latin America as well as its operations in Dubai, Malaysia and
Qatar. As a result, discontinued operations are disclosed
separately on the Condensed Consolidated Income Statement and
related notes.
Other disclosure for discontinued operations are presented
below:
Cashflow from discontinued operations
31/01/2019 31/01/2018 31/07/2018
unaudited unaudited
GBP'000 GBP'000 GBP'000
Net cash flow from operating activities 3,597 199 34
Net cash (used in) investing activities (57) - -
Net cash (used in)/generated from financing activities - (280) 19
Effects of exchange rates on cash and cash equivalents (32) (34) 48
Net change in cash and cash equivalents from discontinued operations 3,508 (115) 101
----------- ----------- -----------
10 Contingent liabilities
As previously announced, the Group is cooperating with the
United States Department of Justice regarding certain factual
enquiries. The Group is not currently in a position to ascertain
whether this line of enquiry could lead to any liabilities for the
Company or its subsidiaries.
11 Statement of Directors' Responsibilities
The Directors' confirm that these condensed interim financial
statements have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and that the interim management report
includes a fair view of the information required by DTR 4.2.7 and
DTR 4.2.8, namely:
-an indication of important events that have occurred during the
first six months and their impact on the condensed set of financial
statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-material related-party transactions in the first six months and
any material changes in the related-party transactions described in
the last annual report.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BLGDSBUGBGCD
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