TIDMGATC
RNS Number : 3901S
Gattaca PLC
06 November 2019
6 November 2019
Gattaca plc
Preliminary Results for the year ended 31 July 2019
'Establishing a strong platform for future long-term growth'
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 2019.
Financial Highlights
2019 2018
==========================
Continuing Continuing Continuing Continuing Continuing Continuing
Reported underlying(2) Reported underlying(2) Reported underlying(2)
========== ============== ========== ============== ========== ==============
GBPm GBPm GBPm GBPm % %
========== ============== ========== ============== ========== ==============
Revenue 635.8 635.8 631.3 631.3 +1% +1%
========== ============== ========== ============== ========== ==============
Net Fee Income (NFI)(1) 70.6 70.6 71.4 71.4 -1% -1%
========== ============== ========== ============== ========== ==============
Profit / (loss)
from operations 4.8 13.4 (25.3) 12.4 n/a +8%
========== ============== ========== ============== ========== ==============
Profit / (loss)
before taxation 3.1 11.4 (26.7) 10.9 n/a +5%
========== ============== ========== ============== ========== ==============
Basic earnings per
share 4.9 27.5 (85.4) 22.5 n/a +22%
========== ============== ========== ============== ========== ==============
Diluted earnings
per share 4.8 26.7 (85.4) 22.5 n/a +19%
========== ============== ========== ============== ========== ==============
Dividend per share 0 3.0
========== ============== ========== ============== ========== ==============
Net debt at end
of period 24.8 40.9 (16.1)
========== ============== ========== ============== ========== ==============
Financial Performance
-- Continuing underlying PBT GBP11.4m (2018: GBP10.9m) up 5%
-- Basic continuing underlying EPS of 27.5p (2018: 22.5p) up 22%
-- Net debt reduced to GBP24.8m, 39% reduction year on year
Operational Performance(3)
-- Group continuing underlying NFI of GBP70.6m, down 1%
year-on-year
-- UK Engineering continued to perform strongly with NFI
up 4% on prior year
-- Good growth in our Solutions business, now representing
27% of Group NFI (2018: 22%)
-- UK Technology performance remained challenging, with
NFI 20% lower than prior year. Restructuring undertaken
during the year to accelerate recovery, expected to result
in improvement in H2
-- Overall positive performance in International NFI with
1% growth
o Americas down 9%, against a very strong prior year,
offset by positive performance in other territories
(incl. South Africa, +22%). Return to growth expected
in FY20 for Americas
o Further investment in USA operations; sales offices
expanded in Dallas, Atlanta and Houston
-- Cost reduction activities in 2018 flowed through to improve
2019 operating profit conversion, up 1.6% pts to 19%
-- As previously announced, we continue our cooperation
with the US Department of Justice with respect to historical
transactions in our discontinued telecommunication infrastructure
business
Strategic Update
Improvement Plan launched and changes already underway:
-- Clear focus on core growth markets following review of
international footprint in H1
-- Group reorganisation implemented including:
o New Head of International
o New UK Heads of Technology, Sales and Delivery
-- Creation of UK new business development function
-- Creation of core delivery function, to streamline service
delivery and deepen relationships with key clients
-- Major technology platform refresh ongoing, including
rollout of single, Group-wide IT infrastructure planned
in FY20
Outlook
As with other staffing groups, we have noticed softening in our
markets in the first quarter of the new financial year. Given the
economic and political uncertainty, both in the UK and overseas, we
are cautious about how markets will develop during FY20.
Additionally, as we continue to implement our Improvement Plan
over the current financial year, and as we further reposition our
approach to certain markets, we will continue to be more selective
around the quality of business we choose to service and will invest
further in our sales resources.
The headwinds around Brexit and IR35 combined with these
necessary actions are likely to impact short-term profitability,
but we are confident they will position the business for a return
to sustainable, long-term growth.
Kevin Freeguard, CEO commented:
"In my first set of full year results with Gattaca, I am pleased
to report a positive financial performance for the Group, with
underlying PBT and EPS slightly ahead of expectations, and with our
net debt significantly down on prior year.
"We remain cautious about the development of our markets in
2020, although we believe that operationally, we have made
significant progress with our ongoing Improvement Plan, which is
now translating into tangible change in the way we operate and will
put the Group firmly on the path for sustainable, long-term
growth."
The following footnotes apply, unless where otherwise indicated,
throughout these Preliminary Results:
(1) NFI is calculated as revenue less contractor payroll
costs
(2) Continuing underlying results exclude non-underlying items
within continuing administrative expenses (2019: GBP1.4m, 2018
GBP1.7m), the NFI and (losses) / profits of discontinued operations
before taxation (2019: GBP(7.6)m, 2018 GBP1.9m), amortisation of
acquired intangibles (2019: GBP1.3m, 2018 GBP2.7m), impairment of
goodwill and acquired intangibles (2019: GBP5.8m, 2018 GBP33.3m)
and P&L exchange gains from revaluation of monetary foreign
assets and liabilities (2019: GBP0.3m, 2018 GBP0.1m)
(3) NFI commentary is on an underlying like for like constant
currency basis
For further information please contact:
Gattaca plc +44 (0) 1489 898989
Kevin Freeguard, Chief Executive Officer
Salar Farzad, Chief Financial Officer
Liberum Capital Limited (Nomad and
Broker) +44 (0) 20 3100 2000
Bidhi Bhoma
Robert Morton
Euan Brown
Citigate Dewe Rogerson +44 (0) 20 7638 9571
Nick Hayns
Louise Mason-Rutherford
Lucy Eyles
Claire Dansie
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014. Upon the
publication of this announcement via a Regulatory Information
Service, this inside information is now considered to be in the
public domain.
CHAIRMAN'S STATEMENT
This year has been a transformational year for the Company, with
the appointment of Kevin Freeguard as our new CEO in October of
2018 and the introduction and enactment of our Improvement Plan
which will fundamentally change the way we do business. During the
period, we have focused the Group on the engineering and technology
skill sectors in the UK and the Americas, keeping a presence in
China whilst making the decision to withdraw from the Telecoms
Infrastructure contract labour market and extract ourselves from a
number of international locations. Whilst there was a significant
reduction in net fee income (NFI) at a statutory level, it was
neutral at profit after tax and we are pleased with the NFI
performance from the continuing business.
We have continued to cooperate with the US Department of Justice
in respect of activities related to Networkers before our
acquisition of the business.
Overview
Having Kevin on board as CEO has brought stability, focus and
clarity on what we are trying to achieve at Gattaca. He has brought
in new systems to improve sales management and his vast sales
experience has also allowed us to address some existing sales
issues. The entire Board has been delighted with the impact Kevin
has made to date.
In order to focus on our core UK and North American business, we
previously announced we would exit the Telco Infrastructure in
Asia, Africa and Latin America; working to close down those
operations and reduce our working capital has been a key focus for
this year. The decision has undoubtedly proved to be the right one,
as it has contributed to a significant reduction in net debt, from
GBP40.9m to GBP24.8m, a result above expectations. I would like to
thank COO Keith Lewis and CFO Salar Farzad for their work in
delivering this project over the past year.
The Group has launched an Improvement Plan in order to properly
exploit the growth opportunities we see in the Americas and, more
widely, in the UK in the engineering and technology markets. This
Plan is re-energising the business.
Dividend
The Board are not recommending a final dividend given the
economic headwinds in the UK, the significant non-underlying costs
incurred this year and the continuing investment in our Primary
Business Systems.
Board
Following substantial changes in 2018, the new Board line-up has
been refocusing this year to deliver on our objectives. As
announced last year, Non-Executive Director Mark Mamone stepped
down at the 2018 AGM. We recognise that we have a diversity
imbalance on the Board and feel it is important that we address
this as we move forward.
After 26 years of service, Keith Lewis has decided to stand down
from the Board of Directors of Gattaca plc and will leave the Group
with immediate effect. As part of the Improvement Plan, the Group
does not intend to replace the role of Chief Operating Officer.
People
I would like to extend my thanks to the whole Gattaca team for
their efforts again this year. We are a people business, and we are
where we are because of our employees' enthusiasm and passion for
delivering for their clients and candidates. At Board level, we are
conducting reviews to identify where we can interact more with our
teams and ensure every individual understands the important role
they play in the Group.
Outlook
Looking ahead, we are building a strong platform for sustainable
growth over the long term. We have demonstrated that we can grow
our engineering business even during difficult periods, and have
taken action to address the issues in our technology business.
However, we cannot be complacent about external headwinds such as
trends in global trade, the potential economic impact caused by the
uncertainty of Brexit and the upcoming IR35 regulatory changes in
our UK industry.
Patrick Shanley
Non-Executive Chairman
CHIEF EXECUTIVE OFFICER'S REVIEW
I am delighted to have been appointed CEO of Gattaca at this key
stage of the Group's development. I believe that Gattaca is an
excellent business with very talented and experienced employees and
I look forward to sharing my thoughts on the Group and our plans
for the future with you in my first CEO statement.
From my first year with the business, I can see that Gattaca's
long-term success has been built on a number of key strengths:
Business model - Our business model is focused on effective delivery
of key engineering and technology skills to our clients globally
with a core focus on the contractor market. We have developed a
deep expertise and have created a well-established methodology for
identifying talent and giving our many clients confidence in our
-- long term ability to deliver successfully.
Brand and reputation - Gattaca is a leader in the provision of engineering
and technology talent and trusted partner for thousands of clients.
Our focus on these clients, many of whom we have been in partnership
with for decades, has enabled the Company to grow and develop a
leading position in the UK over the past 35 years. I am very proud
-- of our reputation for client and candidate focus, service and execution.
Client and candidate experience - I have been very impressed by
the passion demonstrated by our employees, in delivering to clients
and providing the talent that is so critical to their success. This
dedication has enabled us to build many long term client and candidate
-- relationships that is at the core of the business.
Expertise - We are a trusted specialist and dedicated focus on engineering
and technology skills and our ability identify those skills globally
is critical in providing our clients with the skills they require
-- when they are needed.
People and culture - During my first few months I have had the pleasure
of visiting many of our offices and meeting with hundreds of our
employees I've been consistently impressed by their dedication and
drive. Our experienced, long-serving staff really are our greatest
-- asset.
Improvement Plan
We are a business with tremendous strengths, and I believe we
are well positioned to build on our core capabilities. Since my
appointment, I have been working with my executive team to develop
a plan to evolve the business to deliver long- term sustainable
growth. As we reviewed the business, we have made a number of
strategic choices that will underpin how we operate. They are
to:
focus on markets that offer significant, scalable and sustainable
-- profit potential;
-- provide best client / candidate experience;
-- deliver a full range of tailored solutions;
-- focus on engineering and technology skills; and
-- operate a scalable business model.
The Improvement Plan, underpinned by our strengths and aligned
with our strategic choices, was announced in March of this year and
has been well received. To achieve its objectives, we will focus
four key areas to enable growth across our business units:
-- Segmented target markets - We have aligned around a more targeted
market approach and the services we offer will reflect the different
priorities of each segment to enable us to deepen our existing client
relationships and focus on extending our services to a wider range
of new clients.
-- Tailored solutions - We will evolve our innovative product range,
where appropriate, to ensure it continues to meet client needs,
capitalising on our unparalleled ability to identify the best candidates
in the global talent market.
-- Organisational effectiveness - We will continue to develop the expert
capability of our teams, focusing on improving how we sell to the
market and leveraging Group support functions such as marketing,
finance and HR to better support all of our operations. Underpinning
this we are currently implementing a Group-wide technology platform,
which is a critical enabler for the business.
-- Service delivery - We will enhance our delivery capability to ensure
we provide best-in-class client and candidate experiences across
the Group.
This is an exciting period for Gattaca as we evolve the business
to ensure it continues to deliver sustainable growth in the long
term. The business has committed to a specific set of workstreams
to achieve our transformation. The tangible changes to date
include:
-- We successfully delivered our international restructure programme,
withdrawing from operations and markets which were not profitable
and were less scalable than other markets. This has resulted in
a positive working capital unwind and reduced irrecoverable withholding
tax charges.
-- We have redesigned the operational leadership structure, separating
executive responsibility for UK and International operations and
enabling more focus on our growth markets with clear lines of accountability
and responsibility.
-- A comprehensive market mapping review has enabled us to have a more
structured and rigorous approach to the market. This will enable
us to support existing client relationships on a more strategic
basis and also open up new client opportunities where we have the
deepest understanding and most relevant talent pools.
-- We have reorganised our operations to form the core of a centralised
candidate delivery function, which will enable us to create scale
and further deepen our candidate relationships, which will improve
the quality of candidate flow and reduce time to hire.
-- Finally, during the summer of 2019, we created a dedicated pan-UK
business development and sales function to sell across the market
verticals identified within the Improvement Plan. This team of experienced
sales professionals bring together both staffing and market vertical
skills that we are prioritising.
Outlook
Whilst there is demand for key engineering and technology skills
generally in the market it is clear that there are increasing
levels of economic uncertainty primarily caused by Brexit,
legislative changes within the UK market (IR35) and the global
impact of ongoing changes in the macro-economic environment. We
therefore remain cautious about the development of our markets in
2020, although we believe that we are well positioned to grow in
the long term.
Kevin Freeguard
Chief Executive Officer
CHIEF FINANCIAL OFFICER'S REVIEW
Financial performance
On a continuing basis, revenue of GBP635.8m (2018: GBP631.3m)
generated NFI of GBP70.6m (2018: 71.4m). We achieved contract NFI
of GBP49.3m (2018: GBP51.0m) at a margin of 8.0% (2018: 8.4%), and
permanent recruitment fees were GBP21.3m (2018: GBP20.4m). The
change in contractor margins was driven by a higher mix of Gattaca
Solutions business, which now represents 27% of Group continuing
NFI (2018: 22%). This ongoing trend within our product mix is
positive as Gattaca Solutions business provides greater visibility
over our medium-term pipeline and whilst margins tend to be lower,
these deals allow us to increase aggregate NFI and enable us to
service clients more efficiently.
Gross margins were 11.1% (2018: 11.3%) driven by the change in
contractor margins, partly offset by the increase in permanent NFI
mix.
Whilst our UK Engineering business grew by 4% at a gross profit
level, our UK Technology business was 20% lower. Some of this was a
result of repositioning the business towards more sustainable and
profitable business but there were also performance factors. Our
new Head of Technology has now been on board for three months and
is addressing this.
Profit from continuing operations of GBP4.8m (2018: GBP(25.3)m
loss) reflects a non-cash charge of GBP7.1m in respect of
amortisation and impairment of acquired intangibles (2018:
GBP36.0m) following further refinement of our projections related
to the Networkers business acquired in 2015.
Statutory loss after tax was GBP(5.9)m (2018: GBP(27.1)m
loss).
Underlying results
Underlying results are shown beneath the Income Statement.
Underlying continuing profit before taxation at GBP11.4m (2018:
GBP10.9m) was GBP0.5m higher than last year, the reduction in NFI
having been more than compensated by lower costs.
Underlying continuing operating profit of GBP13.4m (2018:
GBP12.4m) represented a conversion ratio of 19.0% (2018: 17.4%) of
continuing NFI. In years past, the Group was industry leading in
this area and a key medium- and long-term objective is to improve
our conversion ratio.
Discontinued operations and non-underlying costs
The significant actions taken in 2019 included certain
non-underlying costs:
Profit/(Loss)
GBP'000 Before Tax
------------------------------------------------------ ---------------------------
Underlying continuing 11,360
Bromley office closure integration costs (1,441)
Bromley onerous lease provision (1,102)
Liquidation, legal, advisory fees and other fees
and working capital
impairments related to discontinued businesses (1,205)
Advisory fees primarily related to US DoJ cooperation (3,424)
Other losses from discontinued operations (1,828)
Amortisation and impairment of goodwill and acquired
intangibles (7,146)
Foreign exchange differences 302
------------------------------------------------------ ---------------------------
Reported (4,484)
------------------------------------------------------ ---------------------------
The closure of our operations in the United Arab Emirates,
Qatar, Malaysia and Singapore and withdrawal from the Telecoms
Infrastructure contractor markets in Africa, Asia and Latin America
is now operationally complete (with some further non-underlying
costs to be accounted for in 2020) as well as the closure of our
Bromley office. This has enabled us to reduce more costs than the
future expected NFI foregone, at the same time simplifying our
business and de-gearing our operational P&L. This in turn
enables us to focus our resources on building our North America
operations and to reorganise our UK activities to better capitalise
on the very substantial growth opportunities that still exist
within our chosen niches of technology and engineering skills.
Taxation
One of our key objectives arising from the changes undertaken in
late 2018 and 2019 was to eliminate a substantial portion of our
non- recoverable withholding tax, which we have achieved. Although
a tax charge, for us, this was an activity driven rather than a
profit- based cost. Total irrecoverable withholding tax has reduced
steadily to GBP0.8m in 2019 (2018: GBP1.4m, 2017: GBP2.0m). Of the
total irrecoverable withholding tax charge of GBP0.8m in 2019, only
GBP0.1m relates to continuing business, with the remaining GBP0.7m
not expected to recur going forward.
The Group's continuing underlying effective tax rate was 22.0%
(2018: 31.1%) driven by the simplification of the business. The
reported effective tax rate of 31.6% is driven by the impact of
closed operations and of non-underlying costs.
Earnings Per Share
Basic earnings per share was negative 18.3 pence (2018: negative
85.3 pence), and on a fully diluted basis was negative 17.8 pence
(2018: negative 85.3 pence). Continuing underlying basic earnings
per share grew by 22.2% to 27.5 pence (2018: 22.5 pence).
Dividends
Given the economic headwinds particularly in the UK, and the
significant non-underlying costs in 2019, the Board is not
recommending a final dividend. Our continued policy is to achieve a
through the cycle dividend payout of approximately 50% of profits
after tax, subject to a sustained reduction in net debt. The Board
will review any dividend in respect of 2020.
Tangible and intangible assets
Capital expenditure in the year including tangible assets and
software, was GBP3.5m (2018: GBP2.8m) of which GBP2.9m related to
software and software licenses representing our investment on the
Primary Business Systems project and GBP0.6m expenditure on plant
and equipment additional dilapidation provisions, leasehold
improvements and computer equipment. The PBS investment replaces
legacy systems which are over 25 years old and will provide long
term benefits and we shall be amortising this investment over ten
years.
Net assets and shares in issue
At 31 July 2019 the Group had net assets of GBP41.9m (2018:
GBP47.0m) and had 32.3m (2018: 32.3m) fully paid ordinary shares in
issue. The change in net assets is principally driven by the
impairment of goodwill and intangibles related to the Networkers
acquisition.
Cash flow and net debt
Net debt at 31 July 2019 was GBP24.8m (2018: GBP40.9m),
consisting a working capital facility of GBP29.1m (2018: GBP35.9m),
bank term loan of GBP15.0m (2018: GBP15.0m), less cash of GBP19.2m
(2018: GBP9.8m) and capitalised finance costs of GBP0.1m (2018:
GBP0.2m).
This has been and continues to be a key focus for us and we are
pleased with this reduction, notwithstanding that this year end
fell on a Wednesday which is the best day of the week for us in
terms of our intraweek cash flow cycle. The difference between the
peak and trough of this intraweek cycle can be in the order of
GBP8m.
Cash generated from operations at GBP24.1m (2018: GBP17.9m) was
GBP6.2m higher than prior year. In addition to a GBP4.7m benefit
from the unwinding of working capital in our discontinued
operations, which was another key objective, our continuing
business working capital improved by GBP13.6m with DSO (days sales
outstanding, based on a three-month average and including sales
taxes) of 45 (2018: 52) being seven better than prior year and
representing another year-on-year improvement.
Other key drivers of cash flow are summarised in the table
below:
GBP'm
-------------------------------------------------- --------
Net debt at 31 July 2018 (40.9)
Continuing underlying EBITDA (exc non cash items) 14.7
Working capital (continuing) 13.6
Continuing non underlying admin costs (1.4)
Non underlying EBIT (7.6)
Discontinued debtor balances 7.0
Other discontinued working capital unwind (2.3)
Capital expenditure (3.5)
Tax paid (2.5)
Interest paid (1.9)
Net debt at 31 July 2019 (24.8)
-------------------------------------------------- --------
Co-operation with the US Department of Justice ("DoJ")
We continue our cooperation with the DoJ and in the 2019
financial year have incurred GBP3.4m in advisory fees on this
matter. As noted in Note 29 the Group is not currently in a
position to know what the outcome of these enquires may be and
therefore we are unable to make any quantification of potential
financial impact.
Banking facilities and interest rate risk
In September 2019 we conducted a tender for our financing
facilities with strong interest from a number of mainstream
commercial banks. We are pleased to have negotiated new facilities
with HSBC with whom we have a long-standing relationship. As of
October 2019 the Group has facilities of GBP90m, consisting of a
GBP75m working capital financing facility and a GBP15m bank term
loan. These arrangements are due to expire in October 2022 and the
committed bank loan reduces to a GBP7.5m facility by 31 July 2020
and a GBP5m facility by 31 October 2020.
These facilities include three covenants: Interest Cover;
Adjusted Leverage and RCF (revolving credit facility) Leverage to
adjusted EBITDA. 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. One of our
medium-term treasury goals is to eliminate our RCF and to rely
principally on our working capital financing facility for our
funding requirements.
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.
Brexit
The Board continues to follow Brexit developments and will
follow the ultimate detailed trade negotiations. The economic
effect of these developments 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 on page
38.
IR35
The IR35 rules which were brought to the public sector in 2017
are due to be implemented in the private sector in April 2020. As
with all significant employment tax changes, there is likely to be
some disruption and we have been working closely with clients and
contractors to prepare for these changes, as well as making
resources available to the public through our IR35 web based hub
available at www. gattacaplc.com/our-solutions/IR35-hub.
Engineering and technology projects will continue to require
resource and as a leading provider of those skills, we will
continue to offer valuable and compliant services to our clients
through our contingent and Gattaca Solutions offerings.
Supporting the business
We continue to make strong progress in the professionalisation
of the support functions.
We are close to going live with our Primary Business Systems
project which is an end to end integrated system including
applicant tracking, vendor management, contractor onboarding,
timesheet management, payments, billing and collections. This
system will significantly enhance our operational effectiveness,
and the ability to drive our business and to gain valuable
insights.
The large legacy Networkers finance team which was in our
Bromley office is now disbanded and their function is fully
integrated in our Whiteley headquarters, led by a new Group
Controller who is making significant improvements in processes and
capability. Our financial planning and analysis team is now also
fully embedded providing business and commercial support to our
frontline staff. Together these teams have been instrumental in
allowing us to gain full visibility to the underlying economics of
our different business lines and they also enabled us to execute
the many changes to the business in a controlled and risk-managed
manner.
Our new General Counsel appointed during 2018 has upgraded her
team to create a dedicated compliance function and reorganised the
team to provide commercial advice and negotiation support to the
business as well as increasing the utilisation of our centralised
contractor onboarding function.
Critical accounting policies
The statement of significant accounting policies is set out in
Note 1 to the Financial Statements.
IFRS 16
Note 1 sets out our assessment of the impact of implementing
IFRS16 from 1 August 2019 onwards. If our 2019 accounts were
prepared on the basis of IFRS 16, whilst our net profits would not
be expected to be impacted materially, we would expect our EBITDA
to increase by GBP2.3m and interest costs to increase by GBP0.2m as
operating lease expenses are replaced by depreciation and interest
expenses.
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 and as
a result 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%
(2018: 4%) of total receivables balances at 31 July 2019.
During the year we increased our provision for doubtful debts by
GBP0.6m primarily in relation to our discontinued operations.
Foreign currency risk
The Group generates 14% of its annualised NFI from continuing
business in international markets. 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.
Salar Farzad
Chief Financial Officer
Consolidated Income Statement
For the year ended 31 July 2019
2019 2018
Note GBP'000 GBP'000
Continuing Operations
---- ---------- ----------
Revenue 2 635,814 631,329
---- ---------- ----------
Cost of sales (565,227) (559,930)
---- ---------- ----------
Gross profit 2 70,587 71,399
---- ---------- ----------
Administrative expenses (65,781) (96,684)
---- ---------- ----------
Profit/(loss) from continuing operations 4 4,806 (25,285)
---- ---------- ----------
Finance income 6 365 198
---- ---------- ----------
Finance cost 7 (2,096) (1,652)
---- ---------- ----------
Profit/(loss) before taxation 3,075 (26,739)
---- ---------- ----------
Taxation 10 (1,485) (375)
---- ---------- ----------
Profit/(loss) for the year after taxation
from continuing operations 1,590 (27,114)
---- ---------- ----------
Discontinued Operations
---- ---------- ----------
(Loss)/profit for the year from discontinued
operations (attributable to equity holders
of the company) 11 (7,491) 38
---- ---------- ----------
(Loss) for the year (5,901) (27,076)
---- ---------- ----------
Attributable to:
---- ---------- ----------
Equity holders of the parent (5,901) (27,351)
---- ---------- ----------
Non-controlling interests - 275
---- ---------- ----------
(5,901) (27,076)
---- ---------- ----------
The Company has elected to take the exemption under section 408
of the Companies Act 2006 from presenting the parent Company Income
Statement.
2019 2018
GBP'000 GBP'000
Profit/(Loss) from Continuing Operations 4,806 (25,285)
-------- ---------
Add
-------- ---------
Depreciation of property, plant and equipment
and amortisation of software and software
licences 2 1,207 993
-------- ---------
Non-underlying items included within administrative
expenses 2 1,441 1,676
-------- ---------
Amortisation and impairment of goodwill
and acquired intangibles 2 7,146 36,011
-------- ---------
Underlying EBITDA 14,600 13,395
-------- ---------
Less
-------- ---------
Depreciation of property, plant and equipment
and amortisation of software and software
licences (1,207) (993)
-------- ---------
Net finance costs excluding foreign exchange
differences (2,033) (1,540)
-------- ---------
Underlying profit before taxation 11,360 10,862
-------- ---------
Underlying taxation (2,501) (3,380)
-------- ---------
Underlying profit after taxation from
continuing operations 8,859 7,482
-------- ---------
2019 2018
Earnings per ordinary share Note pence pence
Basic earnings per share 12 (18.3) (85.3)
---- ------- -------
Diluted earnings per share 12 (17.8) (85.3)
---- ------- -------
Earnings Per Ordinary Share From Underlying 2019 2018
Continuing Operations pence pence
Basic earnings per share from underlying
continuing operations 12 27.5 22.5
------ ------
Diluted earnings per share from underlying
continuing operations 12 26.7 22.5
------ ------
Consolidated Statement of Comprehensive Income
For the year ended 31 July 2019
2019 2018
GBP'000 GBP'000
Loss for the year (5,901) (27,076)
-------- ---------
Other comprehensive income/(loss)
-------- ---------
Items that may be reclassified subsequently
to profit or loss:
-------- ---------
Exchange differences on translation of foreign
operations 645 (734)
-------- ---------
Other comprehensive income/(loss) for the year 645 (734)
-------- ---------
Total comprehensive loss for the year attributable
to equity holders of the parent (5,256) (27,810)
-------- ---------
Attributable to:
-------- ---------
Continuing operations 1,702 (27,784)
-------- ---------
Discontinued operations (6,958) (26)
-------- ---------
(5,256) (27,810)
-------- ---------
Attributable to:
-------- ---------
Equity holders of the parent (5,256) (28,085)
-------- ---------
Non-controlling interests - 275
-------- ---------
(5,256) (27,810)
-------- ---------
Consolidated and Company Statements of Changes in Equity
For the year ended 31 July 2019
A) Consolidated
Share
based Treasury
Share Share Merger payment Translation shares Retained Non-controlling
capital premium reserve reserve reserve reserve earnings interests Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 August 2017 318 8,704 28,750 1,415 1,033 - 42,260 2,222 84,702
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
(Loss)/profit
for
the year - - - - - - (27,351) 275 (27,076)
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
Other
comprehensive
loss - - - - (734) - - - (734)
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
Total
comprehensive
(loss)/income - - - - (734) - (27,351) 275 (27,810)
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
Dividends paid
in the year
(note
8) - - - - - - (6,441) - (6,441)
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
Deferred tax
movement
in respect of
share
options - - - - - - (211) - (211)
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
Acquisition of
non-controlling
interest - - - - - - - (3,552) (3,552)
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
Non-controlling
interest
transfer - - - - - - (1,055) 1,055 -
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
Share-based
payments
charge (note
23) - - - 324 - - - - 324
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
Share-based
payments
reserves
transfer - - - (665) - - 665 - -
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
Shares issued 5 2 - - - - - - 7
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
Transactions
with
owners 5 2 - (341) - - (7,042) (2,497) (9,873)
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
At 31 July 2018 323 8,706 28,750 1,074 299 - 7,867 - 47,019
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
At 1 August 2018 323 8,706 28,750 1,074 299 - 7,867 - 47,019
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
Loss for the
year - - - - - - (5,901) - (5,901)
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
Other
comprehensive
income - - - - 645 - - - 645
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
Total
comprehensive
income/(loss) - - - - 645 - (5,901) - (5,256)
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
Dividends paid
in the year
(note
8) - - - - - - - - -
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
Deferred tax
movement
in respect of
share
options - - - - - - 15 - 15
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
Share-based
payments
charge (note
23) - - - 269 - - - - 269
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
Share-based
payments
reserves
transfer - - - (590) - - 590 - -
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
Purchase of
treasury
shares - - - - - (140) - - (140)
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
Transactions
with
owners - - - (321) - (140) 605 - 144
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
At 31 July 2019 323 8,706 28,750 753 944 (140) 2,571 - 41,907
-------- -------- -------- -------- ----------- -------- --------- --------------- ---------
B) Company
Share
based Treasury
Share Share Merger payment shares Retained
capital premium Reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 August 2017 318 8,704 28,526 1,415 - 3,137 42,100
--------- --------- --------- -------- -------- ---------- ---------
Profit and total comprehensive
income for the year (note 9) - - - - - 4,670 4,670
--------- --------- --------- -------- -------- ---------- ---------
Dividends paid in the year (note
8) - - - - - (6,441) (6,441)
--------- --------- --------- -------- -------- ---------- ---------
Share-based payments charge
(note 23) - - - 324 - - 324
--------- --------- --------- -------- -------- ---------- ---------
Share-based payments reserves
transfer - - - (665) - 665 -
--------- --------- --------- -------- -------- ---------- ---------
Shares issued 5 2 - - - - 7
--------- --------- --------- -------- -------- ---------- ---------
Transactions with owners 5 2 - (341) - (5,776) (6,110)
--------- --------- --------- -------- -------- ---------- ---------
At 31 July 2018 323 8,706 28,526 1,074 - 2,031 40,660
--------- --------- --------- -------- -------- ---------- ---------
At 1 August 2018 323 8,706 28,526 1,074 - 2,031 40,660
--------- --------- --------- -------- -------- ---------- ---------
Loss and total comprehensive
loss for the year (note 9) - - - - - (231) (231)
--------- --------- --------- -------- -------- ---------- ---------
Dividends paid in the year (note
8) - - - - - - -
--------- --------- --------- -------- -------- ---------- ---------
Share-based payments charge
(note 23) - - - 269 - - 269
--------- --------- --------- -------- -------- ---------- ---------
Share-based payments reserves
transfer - - - (590) - 590 -
--------- --------- --------- -------- -------- ---------- ---------
Purchase of treasury shares - - - - - - -
--------- --------- --------- -------- -------- ---------- ---------
Shares issued - - - - - - -
--------- --------- --------- -------- -------- ---------- ---------
Transactions with owners - - - (321) - 590 269
--------- --------- --------- -------- -------- ---------- ---------
At 31 July 2019 323 8,706 28,526 753 - 2,390 40,698
--------- --------- --------- -------- -------- ---------- ---------
Consolidated and Company Statements of Financial Position
As at 31 July 2019
Group Company
2019 2018 2019 2018
Note GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- --------- ---------
Non-current assets
---- --------- --------- --------- ---------
Goodwill and intangible assets 13 11,751 16,349 - -
---- --------- --------- --------- ---------
Property, plant and equipment 14 3,292 3,620 - -
---- --------- --------- --------- ---------
Investments 15 - - 8,580 8,311
---- --------- --------- --------- ---------
Deferred tax assets 16 - 135 - -
---- --------- --------- --------- ---------
Total non-current assets 15,043 20,104 8,580 8,311
---- --------- --------- --------- ---------
Current assets
---- --------- --------- --------- ---------
Trade and other receivables 17 96,728 112,912 101,158 94,927
---- --------- --------- --------- ---------
Cash and cash equivalents 19,173 9,758 - -
---- --------- --------- --------- ---------
Total current assets 115,901 122,670 101,158 94,927
---- --------- --------- --------- ---------
Total assets 130,944 142,774 109,738 103,238
---- --------- --------- --------- ---------
Non-current liabilities
---- --------- --------- --------- ---------
Deferred tax liabilities 16 (396) (1,636) - -
---- --------- --------- --------- ---------
Provisions 18 (2,349) (1,390) - -
---- --------- --------- --------- ---------
Bank loans and borrowings 20 (14,957) (14,931) (14,957) (14,931)
---- --------- --------- --------- ---------
Total non-current liabilities (17,702) (17,957) (14,957) (14,931)
---- --------- --------- --------- ---------
Current liabilities
---- --------- --------- --------- ---------
Trade and other payables 19 (40,676) (40,850) (54,083) (47,647)
---- --------- --------- --------- ---------
Provisions 18 (332) - - -
---- --------- --------- --------- ---------
Current tax liabilities (1,289) (1,247) - -
---- --------- --------- --------- ---------
Bank loans and borrowings 20 (29,038) (35,701) - -
---- --------- --------- --------- ---------
Total current liabilities (71,335) (77,798) (54,083) (47,647)
---- --------- --------- --------- ---------
Total liabilities (89,037) (95,755) (69,040) (62,578)
---- --------- --------- --------- ---------
Net assets 41,907 47,019 40,698 40,660
---- --------- --------- --------- ---------
Equity
---- --------- --------- --------- ---------
Share capital 23 323 323 323 323
---- --------- --------- --------- ---------
Share premium 8,706 8,706 8,706 8,706
---- --------- --------- --------- ---------
Merger reserve 28,750 28,750 28,526 28,526
---- --------- --------- --------- ---------
Share-based payment reserve 753 1,074 753 1,074
---- --------- --------- --------- ---------
Translation reserve 944 299 - -
---- --------- --------- --------- ---------
Treasury shares reserve (140) - - -
---- --------- --------- --------- ---------
Retained earnings 2,571 7,867 2,390 2,031
---- --------- --------- --------- ---------
Total equity attributable to equity
holders of the parent 41,907 47,019 40,698 40,660
--------- --------- --------- ---------
Non-controlling interest - - - -
---- --------- --------- --------- ---------
Total equity 41,907 47,019 40,698 40,660
---- --------- --------- --------- ---------
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. The parent Company's loss of GBP231,000 (2018
profit: GBP4,670,000) for the year is shown in note 9 of these
Financial Statements.
The accompanying notes on pages 92 to 131 form part of these
Financial Statements.
The Financial Statements on pages 86 to 131 were approved by the
Board of Directors on 5 November 2019 and signed on its behalf
by
Salar Farzad
Chief Financial Officer
Consolidated and Company Cash Flow Statements
For the year ended 31 July 2019
Group Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
-------- --------- -------- ---------
Cash flows from operating activities
-------- --------- -------- ---------
(Loss)/profit after taxation (5,901) (27,076) (231) 4,670
-------- --------- -------- ---------
Adjustments for:
-------- --------- -------- ---------
Depreciation and amortisation 2,483 3,718 - -
-------- --------- -------- ---------
Profit on disposal of subsidiary (135) - - -
-------- --------- -------- ---------
Loss/(profit) on disposal of property,
plant and equipment 67 (14) - -
-------- --------- -------- ---------
Impairment of goodwill and acquired
intangibles 5,882 33,320 - -
-------- --------- -------- ---------
Interest income (437) (198) - -
-------- --------- -------- ---------
Interest costs 2,096 1,652 637 -
-------- --------- -------- ---------
Taxation expense recognised in Income
Statement 1,417 2,217 (281) -
-------- --------- -------- ---------
Decrease/(increase) in trade and other
receivables 17,225 2,326 (5,950) (8,069)
-------- --------- -------- ---------
(Decrease)/increase in trade and other
payables (174) 1,860 6,436 15,547
-------- --------- -------- ---------
Increase/(decrease) in provisions 1,291 (206) - -
-------- --------- -------- ---------
Share-based payment charge 269 324 - -
-------- --------- -------- ---------
Investment income - - (968) (5,474)
-------- --------- -------- ---------
Cash generated from/(used in) operations 24,083 17,923 (357) 6,674
-------- --------- -------- ---------
Interest paid (1,993) (1,537) (611) -
-------- --------- -------- ---------
Interest received 86 112 - -
-------- --------- -------- ---------
Income taxes paid (2,523) (3,648) - -
-------- --------- -------- ---------
Cash from/(used in) operating activities 19,653 12,850 (968) 6,674
-------- --------- -------- ---------
Cash flows from investing activities
-------- --------- -------- ---------
Purchase of plant and equipment (673) (1,853) - -
-------- --------- -------- ---------
Purchase of intangible assets (2,876) (899) - -
-------- --------- -------- ---------
Acquisition of non-controlling interest - (3,552) - -
-------- --------- -------- ---------
Proceeds from sale of subsidiary 2 - - -
-------- --------- -------- ---------
Proceeds from sale of property, plant
and equipment 26 67 - -
-------- --------- -------- ---------
Dividend received - - 968 5,474
-------- --------- -------- ---------
Cash (used in)/generated from investing
activities (3,521) (6,237) 968 5,474
-------- --------- -------- ---------
Cash flows from financing activities
-------- --------- -------- ---------
Proceeds from issue of share capital - 7 - 7
-------- --------- -------- ---------
Purchase of treasury shares (140) - - -
-------- --------- -------- ---------
Working capital facility (repaid)/utilised (6,740) 10,166 - -
-------- --------- -------- ---------
Finance costs paid - (25) - -
-------- --------- -------- ---------
Repayment of term loan - (5,714) - (5,714)
-------- --------- -------- ---------
Dividends paid - (6,441) - (6,441)
-------- --------- -------- ---------
Cash (used in) financing activities (6,880) (2,007) - (12,148)
-------- --------- -------- ---------
Effects of exchange rates on cash and
cash equivalents 163 (650) - -
-------- --------- -------- ---------
Increase in cash and cash equivalents 9,415 3,956 - -
-------- --------- -------- ---------
Cash and cash equivalents at beginning
of year 9,758 5,802 - -
-------- --------- -------- ---------
Cash and cash equivalents at end of
year 19,173 9,758 - -
-------- --------- -------- ---------
Net (decrease)/increase in cash and
cash equivalents for discontinued operations (2,743) 101 - -
-------- --------- -------- ---------
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 (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, UK. The Company's registered address is 1450
Parkway, Solent Business Park Whiteley, Fareham, Hampshire, PO15
7AF. The Company's registration number is 04426322.
ii Basis of preparation of the Financial Statements
The Financial Statements of Gattaca plc have been prepared in
accordance with IFRS and IFRS Interpretations Committee (IFRIC)
interpretations as adopted by the European Union (EU-IFRS) and with
the Companies Act 2006 applicable to companies reporting under
IFRS.
These Financial Statements have been prepared under the
historical cost convention. The accounting policies have been
applied consistently to all years 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 are set out below.
The preparation of Financial Statements in conformity with
EU-IFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in the
process of applying the Group's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas
where assumptions and estimates are significant to the consolidated
Financial Statements, are disclosed in Note 1 xxiii.
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' and IFRS 9
'Financial instruments' have been adopted by the Group from 1
August 2018. Further details of the changes have been included in
the relevant accounting policies.
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.
Adoption of IFRS 16 is expected to result in changes to the
Group's consolidated Financial Statements. Under IFRS 16, certain
lease commitments will be accounted for 'on-balance sheet', with
recognition of a lease liability and corresponding right-of-use
asset. 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, is not expected to
be materially different. Rental expenses will also be accounted for
as finance costs rather than within operating expenses.
IFRS 16 is expected to result in an increase in EBITDA and
operating profit for the Group, as rentals are reclassified as
depreciation and interest expense, but with a small decrease in
profit before taxation. Gross profit may also appear higher as a
result. IFRS 16 also requires more extensive disclosures than under
IAS 17. Note 22 summarises the current lease portfolio. 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 using the modified retrospective approach, meaning that
comparatives will not be restated.
The Group has reviewed its portfolio of leases as at 31 July
2019 has not identified any new leases. Advantage has been taken of
the practical expedients for exemptions provided for leases with
less than 12 months to run, for leases of low value, to account for
leases with similar characteristics as a portfolio with a single
discount rate and to present existing onerous lease provisions
against the carrying value of right of use assets.
The main difference between the IFRS 16 liability shown below
and the value of the total operating lease commitment shown in Note
22 is that the figure below has had discount rates applied for
future years payments which has decreased the value of the
liability. Low value leases have been removed. The following table
shows the expected transition adjustment to the balance sheet at 1
August 2019.
Reclassification
of existing
onerous
As Reported IFRS 16 lease Pro-forma
At 31 July 2019 GBP'000 GBP'000 GBP'000 GBP'000
Total non-current assets 15,043 10,678 (934) 24,787
----------- -------- ---------------- ---------
Total current assets 115,901 - - 115,901
----------- -------- ---------------- ---------
Total current liabilities (71,335) (2,093) - (73,428)
----------- -------- ---------------- ---------
Total non-current liabilities (17,702) (8,585) 934 (25,353)
----------- -------- ---------------- ---------
Net Assets 41,907 - - 41,907
----------- -------- ---------------- ---------
Forthcoming requirements
The following amendments are required for application for the
Group's periods beginning after 1 August 2020:
Effective
date
(annual
periods beginning
Standard on or after)
1 January
IAS 1 Amendments Presentation of Financial Statements 2020
------------------------------------ ------------------
1 January
IAS 8 Amendments Accounting Policies 2020
------------------------------------ ------------------
1 January
IFRS 3 Amendments Business Combination 2020
------------------------------------ ------------------
Revised Conceptual Framework for 1 January
Financial Reporting 2020
------------------------------------ ------------------
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
Standard on or after)
1 January
IFRS 9 Amendments Financial Instruments 2019
--------------------------- ------------------
1 January
IFRS 16 Leases 2019
--------------------------- ------------------
Uncertainty over Income Tax 1 January
IFRIC 23 Treatments 2019
--------------------------- ------------------
Annual Improvements to IFRS Standards 1 January
2015-2017 Cycle 2019
--------------------------- ------------------
The Group is currently evaluating the impact of the adoption of
all other standards, amendments, and interpretations but do not
expect them to have a material impact on the Group's operations or
results.
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.
vi Revenue
IFRS 15 'Revenue from contracts with customers' has been adopted
by the Group from 1 August 2018 for the Group. The new standard
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.
Revenue is measured by reference to the fair value of
consideration received or receivable by the Group for services
provided, excluding VAT and trade discounts.
Temporary placements
Revenue from temporary, or contract, placements is recognised at
the point in time when the candidate provides services, upon
receipt of a client-approved timesheet or equivalent proof of time
worked. Timing differences between the receipt of a client-approved
timesheet and the raising of an invoice are recognised as accrued
income. The Group has assessed its use of third party providers to
supply candidates for temporary placements under the agent or
principal criteria and has determined that it is the principal on
the grounds that it retains primary responsibility for provision of
the services. Under IFRS 15, the timing and amount of revenue
recognition is unchanged, with no impact on retained earnings at 1
August 2018.
A number of contractual rebate arrangements are in place in
respect of volume and value of sales; these are accounted for as
variable consideration reducing revenue and estimated in line with
IFRS 15.
Any consideration payable at the start of contracts to customers
is recognised as a prepayment and released to profit or loss over
the terms of the contract it relates to, as a reduction to
revenue.
Permanent placements
Revenue from permanent placements, which is based on a
percentage of the candidate's remuneration package, is recognised
when candidates commence employment which is the point at which the
performance obligation of the contract is considered met. Some
permanent placements are subject to a 'claw-back' period whereby if
a candidate leaves within a set period of starting employment, the
customer is entitled to a rebate subject to the Group's terms and
conditions. Provisions as a reduction to revenue are recognised for
such arrangements if material. Based on historical data, such
rebates are infrequent and immaterial. Under IFRS 15, the timing
and amount of revenue recognition is unchanged, with a no impact on
retained earnings at 1 August 2018.
Other
Other revenue streams are generated from provision of
engineering services and other fees. Revenue from the provision of
engineering services is recognised either over a period of time
when the performance obligations are satisfied over the course of
project milestones or at a point in time upon receipt of
client-approved timesheets. Other fees mainly relate to relate to
account management fees for providing recruitment services. Revenue
from other fees is recognised on confirmation from the client
committing to the agreement and either at a point in time or over
time in accordance with terms of each individual agreement as
performance obligations are met. Under IFRS 15, the timing and
amount of revenue recognition is unchanged, with a no impact on
retained earnings at 1 August 2018.
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 could include:
-- costs of acquisitions;
-- integration costs following acquisitions; and
-- significant restructuring costs.
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 33.3% Straight line
Over the period of the lease
Leasehold improvements term Straight line
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at the end of each reporting year.
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.
ix Goodwill
Goodwill arises on the acquisition of subsidiaries and
represents the excess of the fair value of the consideration
received for a business over the Company's interest in the fair
value of the net identifiable assets, liabilities and contingent
liabilities of the acquiree. Goodwill is stated at cost less
accumulated impairment.
Goodwill impairment reviews are undertaken annually or more
frequently if events or changes in circumstances indicate a
potential impairment. Goodwill is allocated to cash-generating
units, being the lowest level at which goodwill is monitored. The
carrying value of the assets of the cash-generating unit, including
goodwill, intangible and tangible assets and working capital
balances, is compared to its recoverable amount, which is the
higher of value in use and fair value less costs to sell. Any
excess in carrying value over recoverable amount is recognised
immediately as an impairment expense and is not subsequently
reversed. Gains and losses on the disposal of an entity include the
carrying amount of goodwill relating to the entity sold.
x Intangible assets
Customer relationships
Customer relationships comprise principally existing customer
relationships which may give rise to future orders (customer
relationships), and existing order books. They are recognised at
fair value at the acquisition date, and subsequently measured at
cost less accumulated amortisation and impairment. Customer
relationships are determined to have a useful life of ten years and
are amortised on a straight-line basis.
Trade names and trademarks
Trade names and trademarks have either arisen on the
consolidation of acquired businesses or have been separately
purchased and are recognised at fair value at the acquisition date.
They are subsequently measured at cost less accumulated
amortisation and impairment. Trade names and trademarks are
determined to have a useful life of 10 years and are amortised on a
straight-line basis.
Software and software licences
Acquired computer software licences are capitalised on the basis
of the costs incurred to acquire and bring into use the specific
software. These costs are amortised using the straight line method
to allocate the cost of the software licences over their useful
lives of between two and five years. Subsequent licence renewals
are expensed to profit or loss as incurred. Software licences are
stated at cost less accumulated amortisation and impairment.
Internally generated intangible assets
Development costs that are directly attributable to the design
and testing of identifiable and unique software products are
capitalised as part of internally generated software and include
employee costs and professional fees attributable to the
development of the asset. Other expenditure that does not meet
these criteria are recognised as an expense to profit or loss as
incurred. Software development costs recognised as assets are
amortised on a straight line basis over their estimated useful
lives of between two and ten years.
Expenditure on internally generated brands and other intangible
assets is expensed to profit or loss as incurred.
Other
Other intangible assets acquired by the Group have a finite
useful life between five and ten years and are measured at cost
less accumulated amortisation and accumulated losses.
Amortisation of intangible assets and impairment losses are
recognised in profit or loss within administrative expenses.
Intangible assets are tested for impairment either as part of a
goodwill-carrying cash generated unit, or when events arise that
indicate an impairment may be triggered. Provision is made against
the carrying value of an intangible asset where an impairment is
deemed to have occurred. Impairment losses on intangible assets are
recognised in the income statement under administrative
expenses.
xi 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 profit or loss at
the time of disposal.
xii 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.
xiii Taxation
The tax expense for the year comprises current and deferred tax.
Tax is recognised in the income statement, except to the extent
that it relates to items recognised in other comprehensive income
or directly in equity. In this case, the tax is also recognised in
other comprehensive income or directly in equity, respectively.
The current tax charge is calculated on the basis of the tax
laws enacted or substantively enacted at the reporting 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.
xiv Pension costs
The Group operates a number of country-specific defined
contribution plans for its employees. A defined contribution plan
is a pension plan under which the Group pays fixed contributions
into a separate entity. Once the contributions have been paid the
Group has no further payment obligations. The contributions are
recognised as an expense when they are due. Amounts not paid are
shown in other creditors in the Statement of Financial Position.
The assets of the plan are held separately from the Group in
independently administered funds.
xv Share-based payments
All share-based remuneration is ultimately recognised as an
expense in the income statement with a corresponding credit to the
share-based payment reserve. All goods and services received in
exchange for the grant of any share-based remuneration are measured
at their fair values. Fair values of employee services are
indirectly determined by reference to the fair value of the share
options awarded. Their value is appraised at the grant date and
excludes the impact of non-market vesting conditions (for example,
profitability and sales growth targets).
If vesting periods or other non-market vesting conditions apply,
the expense is allocated over the vesting period, based on the best
available estimate of the number of share options expected to vest.
Estimates are subsequently revised if there is any indication that
the number of share options expected to vest differs from previous
estimates. Any cumulative adjustment prior to vesting is recognised
in the current period. No adjustment is made to any expense
recognised in prior periods if share options ultimately exercised
are different to that estimated on vesting. Upon exercise of share
options, proceeds received net of attributable transaction costs
are credited to share capital and share premium.
The Company is the granting and settling entity in the Group
share-based payment arrangement where share options are granted to
employees of its subsidiary companies. The Company recognises the
share-based payment expense as an increase in the investment in
subsidiary undertakings.
The Group operates two long term incentive share option plans.
The Zero Priced Share Option Bonus covers all share options issued
with an exercise price of GBP0.01; the Long Term Incentive Plan
Options have an exercise price above GBP0.01. Grants under both
categories have been made as part of a CSOP scheme, depending on
the terms of specific grants.
The Group also operates a Share Incentive Plan (SIP), the
Gattaca plc Share Incentive Plan (the Plan), which is approved by
HMRC. The Plan is held by Gattaca plc UK Employee Benefit Trust
(the EBT), the purpose of which is to enable employees to purchase
Company shares out of pre-tax salary. For each share purchased the
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. The assets and liabilities of the EBT are
included in the Consolidated Statement of Financial Position.
xvi 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.
xvii Financial instruments
IFRS 9 'Financial instruments' was adopted by the Group from 1
August 2018. The new standard sets out requirements for recognising
and measuring financial assets and financial liabilities. The Group
has adopted this new standard retrospectively, taking advantage of
the exemption to not restate comparative information with respect
to classification and measurement changes.
Financial assets
IFRS 9 contains a new classification and measurement approach
for financial assets that reflects the business model under 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).
At initial recognition, the Group measures a financial asset at
its fair value plus, in the case of a financial asset not at FVTPL,
transaction costs that are directly attributable to the acquisition
of the financial asset. Transaction costs of financial assets
carried at FVTPL are expensed in profit or loss.
Financial assets: debt instruments
The Group classifies its debt instruments in the following
measurement categories depending on the Group's business model for
managing the asset and the cash flow characteristics of the
asset:
(i) those to be measured subsequently at fair value through other comprehensive
income (OCI): Assets that are held for collection of contractual cash
flows and for selling the financial assets, where the assets' cash
flows represent solely payments of principal and interest, are measured
at FVOCI. Movements in the carrying amount are taken through OCI,
except for the recognition of impairment gains or losses, interest
revenue and foreign exchange gains and losses which are recognised
in profit or loss. When the financial asset is derecognised, the cumulative
gain or loss previously recognised in OCI is reclassified from equity
to profit or loss and recognised in other gains/(losses). Interest
income from these financial assets is included in finance income using
the effective interest rate method. Foreign exchange gains and losses
are presented in other gains/(losses) and impairment expenses are
presented as a separate line item in the income statement.
(ii) those to be measured subsequently at FVTPL: Assets that do not meet
the criteria for amortised cost or FVOCI are measured at FVTPL. A
gain or loss on a debt investment that is subsequently measured at
FVTPL is recognised in profit or loss and presented net within other
gains/(losses) in the year in which it arises.
(iii) Those to be measured subsequently at amortised cost: Assets that are
held for collection of contractual cash flows where those cash flows
represent solely payments of principal and interest are measured at
amortised cost. Interest income from these financial assets is included
in finance income using the effective interest rate method. Any gain
or loss arising on derecognition is recognised directly in profit
or loss and presented in other gains/(losses), together with foreign
exchange gains and losses. Impairment losses are presented as separate
line item in the income statement.
The Group reclassifies debt investments when and only when its
business model for managing those assets changes.
Financial assets: equity instruments
The Group subsequently measures all equity investments at fair
value. Where the Group's management has elected to present fair
value gains and losses on equity investments in OCI, there is no
subsequent reclassification of fair value gains and losses to
profit or loss following the derecognition of the investment.
Dividends from such investments continue to be recognised in profit
or loss as other income when the Group's right to receive payments
is established.
Impairment losses (and reversal of impairment losses) on equity
investments measured at FVOCI are not reported separately from
other changes in fair value.
Impairment of financial assets
IFRS 9 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.
The Group assesses on a forward looking basis the expected
credit losses associated with its debt instruments carried at
amortised cost and FVOCI.
The Group has reviewed each category of its financial assets to
assess the level of credit risk and ECL provision to apply:
- Trade receivables: the Group has chosen to take advantage of the
practical expedient in IFRS 9 when assessing default rates over its
portfolio of trade receivables, to estimate the ECL based on historical
default rates specific to groups of customers by industry and geography
that carry similar credit risks. Separate ECL's have been modelled
for UK construction customers, rest of UK customers, and customers
in the Americas, Europe, Asia and Africa. The ECL provision of trade
receivables at 1 August 2018 under IFRS 9 was not materially different
to the IAS 39 provision for irrecoverable trade receivables held
at 31 July 2018 and therefore there was no impact on retained earnings
at 1 August 2018.
- Accrued income is in respect of temporary placements where a client-approved
timesheet has been received or permanent placements where a candidate
has commenced employment, but no invoice has been raised. Default
rates have been determined by reference to historical data.
- Cash and cash equivalents are held with established financial institutions.
The Group has determined that based on the external credit ratings
of counterparties, this financial asset has a very low credit risk
and that the estimated expected credit loss provision is not material.
At each reporting date, the ECL provision will be reviewed to
reflect changes in credit risk and historical default rates and
other economic factors. Changes in the ECL provision are recognised
in profit or loss.
Financial liabilities
IFRS 9 largely retains the existing requirements for
classification of financial liabilities from IAS 39. The Group's
adoption of IFRS 9 did not trigger any changes to classification
and measurement of financial liabilities at 1 August 2018.
Financial liabilities are obligations to pay cash or other
financial assets and are recognised when the Group becomes a party
to the contractual provisions of the instrument and comprise trade
and other payables and bank loans. Financial liabilities are
recorded initially at fair value, net of direct issue costs and are
subsequently measured at amortised cost using the effective
interest rate method.
A financial liability is derecognised only when the obligation
is extinguished, that is, when the obligation is discharged,
cancelled or expires.
xviii Cash and cash equivalents
In the Consolidated Cash Flow Statement, cash and cash
equivalents include cash in hand, deposits held at call with banks,
other short-term highly liquid investments with original maturities
of three months or less and bank overdrafts. In the Statement of
Financial Position and Cash Flow Statement, bank overdrafts are
netted against cash and cash equivalents where the offsetting
criteria are met.
Cash in transit inbound from, or outbound to, a third party is
recognised when the transaction is no longer reversible by the
party making the payment. This is determined to be in respect of
all electronic payments and receipt transactions that commence
before or on the reporting date and complete within one business
day after the reporting date.
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. Provisions
are recognised in respect of asset retirement obligations for
leased properties at the start of the lease, with a corresponding
tangible asset recognised which is subsequently depreciated to
profit or loss over the lease term. Where onerous contract
arrangements are identified, such as ongoing leases for properties
that are no longer in use, provisions are recognised for the costs
expected to fulfil the Group's future obligations under the
contract. 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.
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. Income and expenses
are translated at the actual rate.
Any exchange differences arising on the settlement of monetary
items or on translating monetary items at rates different from
those at which they were initially recorded are recognised in the
Income Statement in the year in which they arise.
The assets and liabilities in the Financial Statements of
foreign subsidiaries are translated at the rate of exchange ruling
at the Statement of Financial Position date.
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 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.
- 'Merger reserve' represents the equity balance arising on the merger
of Matchtech Engineering and Matchmaker Personnel and to record the
excess fair value above the nominal value of the share consideration
on the acquisition of Networkers International plc.
- 'Share-based payment reserve' represents equity-settled share-based
employee remuneration until such share options are exercised or lapse
- 'Translation reserve' represents the foreign currency differences
arising on translating foreign operations into the presentational
currency of the Group.
- 'Treasury shares reserve' represents Company shares purchased directly
by the Group to satisfy obligations under employee share plan.
- 'Retained earnings' represents retained profits.
xxiii Critical accounting judgements and key sources of
estimation uncertainty
Critical accounting judgements
The Directors are of the opinion that there are no critical
accounting judgements.
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources
of estimation uncertainty at the Statement of Financial Position
date that carry a risk of causing a material adjustment within the
next 12 months are discussed below:
ECL provisions in respect of trade receivables
The Group's policy for default risk over receivables is based on
the on-going evaluation of the credit risk of its trade
receivables. Estimation is used in assessing the ultimate
realisation of these receivables, including reviewing the potential
likelihood of default, the past collection history of each customer
and the current economic conditions. As a result, ECL provisions
for impairment of trade receivables have been recognised, as
discussed in Note 17.
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. These assumptions are set out in
Note 13.
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.
Non-underlying
items
and amortisation
2019 Continuing and impairment
All amounts in underlying of acquired Discontinued Group
GBP'000 UK Engineering UK Technology International operations intangibles Operations Total
Revenue 475,903 136,084 23,827 635,814 - 11,371 647,185
-------------- ------------- ------------- ----------- ---------------- ------------ ---------
Gross profit 49,442 11,575 9,570 70,587 - 1,511 72,098
-------------- ------------- ------------- ----------- ---------------- ------------ ---------
Operating
contribution 27,489 5,902 1,820 35,211 - (511) 34,700
-------------- ------------- ------------- ----------- ---------------- ------------ ---------
Depreciation,
impairment
and
amortisation (904) (258) (45) (1,207) (7,146) (12) (8,365)
-------------- ------------- ------------- ----------- ---------------- ------------ ---------
Central
overheads (14,759) (3,835) (2,017) (20,611) (1,441) (7,108) (29,160)
-------------- ------------- ------------- ----------- ---------------- ------------ ---------
Profit/(loss)
from
operations 11,826 1,809 (242) 13,393 (8,587) (7,631) (2,825)
-------------- ------------- ------------- ----------- ---------------- ------------ ---------
Finance
(cost)/income,
net (2,033) 302 72 (1,659)
-------------- ------------- ------------- ----------- ---------------- ------------ ---------
Profit/(loss)
before
taxation 11,360 (8,285) (7,559) (4,484)
-------------- ------------- ------------- ----------- ---------------- ------------ ---------
Non-underlying
items
and amortisation
2018 Continuing and impairment
All amounts in underlying of acquired Discontinued Group
GBP'000 UK Engineering UK Technology International operations intangibles Operations Total
Revenue 451,738 146,843 32,748 631,329 - 36,215 667,544
-------------- ------------- ------------- ----------- ---------------- ------------ ---------
Gross profit 47,567 14,458 9,374 71,399 - 7,464 78,863
-------------- ------------- ------------- ----------- ---------------- ------------ ---------
Operating
contribution 26,033 6,610 2,723 35,366 - 5,174 40,540
-------------- ------------- ------------- ----------- ---------------- ------------ ---------
Depreciation,
impairment
and
amortisation (694) (247) (52) (993) (36,011) (34) (37,038)
-------------- ------------- ------------- ----------- ---------------- ------------ ---------
Central
overheads (14,478) (4,865) (2,628) (21,971) (1,676) (3,260) (26,907)
-------------- ------------- ------------- ----------- ---------------- ------------ ---------
Profit/(loss)
from
operations 10,861 1,498 43 12,402 (37,687) 1,880 (23,405)
-------------- ------------- ------------- ----------- ---------------- ------------ ---------
Finance
(cost)/income,
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 used by the Board; the majority of assets
are centrally held and are not allocated across the reportable
segments.
Geographical information
Total Group Revenue Non-current Assets
All amounts in GBP'000 2019 2018 2019 2018
---------- --------- --------- ---------
UK 613,055 608,540 14,844 19,794
---------- --------- --------- ---------
Rest of Europe 4,313 2,824 1 2
---------- --------- --------- ---------
Middle East and Africa 5,658 14,588 13 63
---------- --------- --------- ---------
Americas 21,966 25,280 172 139
---------- --------- --------- ---------
Asia Pacific 2,193 16,312 13 106
---------- --------- --------- ---------
Total 647,185 667,544 15,043 20,104
---------- --------- --------- ---------
Revenue and non-current assets are allocated to the geographical
market based on the domicile of the respective subsidiary.
3 Revenue From Contracts With Customers
Revenue from contracts with customers is disaggregated by major
service line and operating segment, as well as timing of revenue
recognition as follows:
Major service lines-continuing underlying operations
UK Engineering UK Technology International Total
2019 2018 2019 2018 2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- -------- -------- -------- -------- --------
Temporary placements 463,840 442,823 133,491 142,951 17,026 25,162 614,357 610,936
-------- -------- -------- -------- -------- -------- -------- --------
Permanent placements 11,887 8,878 2,593 3,892 6,790 7,586 21,270 20,356
-------- -------- -------- -------- -------- -------- -------- --------
Other 176 37 - - 11 - 187 37
-------- -------- -------- -------- -------- -------- -------- --------
Total 475,903 451,738 136,084 146,843 23,827 32,748 635,814 631,329
-------- -------- -------- -------- -------- -------- -------- --------
Timing of revenue recognition - continuing underlying
operations
UK Engineering UK Technology International Total
2019 2018 2019 2018 2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- -------- -------- -------- -------- --------
Point in time 475,903 451,738 136,084 146,843 23,827 32,748 635,814 631,329
-------- -------- -------- -------- -------- -------- -------- --------
Total 475,903 451,738 136,084 146,843 23,827 32,748 635,814 631,329
-------- -------- -------- -------- -------- -------- -------- --------
No single customer contributed more than 10% of the Group's
revenues (2018: none).
The Group has determined that its contract assets from contracts
with customers are trade receivables and accrued income which are
set out below:
31 July
31 July 2019 31 July 2018 2017
GBP'000 GBP'000 GBP'000
Trade receivables (note 17) 71,704 81,773 82,296
------------ ------------ ---------
Accrued income (note 17) 22,837 27,947 28,681
------------ ------------ ---------
Accrued income relates to the Group's right to consideration for
temporary and permanent placements made but not billed by the year
end. These transfer to trade receivables once billing occurs. All
accrued income at a given reporting date is billed within the
following financial year.
Accrued income at 31 July 2019 has decreased since the prior
year primarily as a result of the Group's withdrawal from the
contract Telecoms Infrastructure markets in Africa, Asia and Latin
America as well its operations in the United Arab Emirates,
Singapore, Malaysia and Qatar during the year.
4 Profit/(Loss) From Operations
2019 2018
GBP'000 GBP'000
Profit/(loss) from total operations is stated
after charging/(crediting):
-------- --------
Depreciation (Note 14) 891 686
-------- --------
Amortisation of acquired intangibles (Note 13) 1,264 2,691
-------- --------
Amortisation of software & software licences
(Note 13) 328 341
-------- --------
Impairment of goodwill and acquired intangibles
(Note 13) 5,882 33,320
-------- --------
Loss/(profit) on disposal of property, plant
and equipment 67 (14)
-------- --------
Operating lease costs:
-------- --------
- Plant and machinery 316 369
-------- --------
- Land and buildings 2,033 2,319
-------- --------
Share-based payment charge 269 324
-------- --------
Net (gains) on foreign currency translation
(Note 6) (302) (86)
-------- --------
The aggregate auditors' remuneration was as follows:
2019 2018
GBP'000 GBP'000
Fees payable for the audit of the parent company
financial statements 10 10
-------- --------
Fees payable for the audit of the subsidiary
company financial statements 247 255
-------- --------
Total auditors' remuneration 257 265
-------- --------
Non audit services:
-------- --------
- Taxation - -
-------- --------
- Other services pursuant to legislation - -
-------- --------
Total non audit services - -
-------- --------
Non-underlying items were as follows:
2019 2018
Continuing Operations GBP'000 GBP'000
Integration costs (1) 1,441 227
-------- --------
Restructuring costs (2) - 1,449
-------- --------
Non-underlying items included in profit/(loss)
from continuing operations 1,441 1,676
-------- --------
2019 2018
Discontinued Operations GBP'000 GBP'000
Recognition of onerous lease provision (3) 1,102 -
-------- --------
Advisory fees (4) 3,424 -
-------- --------
Costs relating to discontinuation of group undertakings
(5) 1,205 -
-------- --------
Non-underlying items included in (loss)/profit
from discontinued operations 5,731 -
-------- --------
Total non-underlying items 7,172 1,676
-------- --------
1 Integration costs of GBP1,441,000 (2018: GBP227,000) were
incurred in relation to the closure of the previous Networkers
Group head office and the integration of the sales and support
functions into the wider Gattaca group, including certain employee
restructuring costs.
2 Restructuring costs of GBP1,449,000 were incurred in the prior
year in respect of employee related expenses and professional
fees.
3 An onerous lease provision of GBP1,102,000 was recognised in
the year in respect of property directly affected by the closure of
the contract Telecoms Infrastructure business.
4 Legal fees incurred in 2019 in relation to the Group's
co-operation with certain voluntary enquiries from the US
Department of Justice (2018; GBPnil).
5 Costs relating to the preparation of entities affected by the
closure of the contract Telecoms Infrastructure business for
liquidation, including professional fees and impairment of certain
working capital balances.
5 Particulars of Employees
The monthly average number of staff employed by the Group during
the financial year amounted to:
2019 2018
Total operations No. No.
Sales 531 625
---- ----
Administration 200 226
---- ----
Directors 8 9
---- ----
Total 739 860
---- ----
There are no employees employed by the parent company (2018:
nil).
The aggregate payroll costs of the above were:
2019 2018
Total operations GBP'000 GBP'000
Wages and salaries 37,189 39,865
-------- --------
Social security costs 4,484 4,929
-------- --------
Other pension costs 905 1,835
-------- --------
Share-based payments 269 324
-------- --------
Total 42,847 46,953
-------- --------
Amounts due to defined contribution pension providers at 31 July
2019 were GBP165,000 (2018: GBP153,000).
Disclosure of the remuneration of Group's key management
personnel, as required by IAS 24, is detailed below. Disclosure of
the remuneration of the statutory Directors is further detailed in
the audited part of the Remuneration Report on pages 65 to 75.
2019 2018
Total operations GBP'000 GBP'000
Short-term employee benefits 2,296 1,770
-------- --------
Contributions to defined contribution pension
schemes 163 130
-------- --------
Share-based payments (22) (86)
-------- --------
Total 2,437 1,814
-------- --------
6 Finance Income
2019 2018
Continuing Operations GBP'000 GBP'000
Interest income 63 112
-------- --------
Net gains on foreign currency translation 302 86
-------- --------
Total 365 198
-------- --------
7 Finance Costs
2019 2018
Continuing Operations GBP'000 GBP'000
Bank interest expense 1,993 1,537
-------- --------
Amortisation of capitalised finance costs 103 115
-------- --------
Total 2,096 1,652
-------- --------
8 Dividends
2019 2018
GBP'000 GBP'000
Equity dividends paid during the year at nil
pence per share (2018: 20.00 pence) - 6,441
-------- --------
Equity dividends proposed after the year end
(not recognised as a liability) at nil pence
per share (2018: nil) - -
-------- --------
9 Parent Company (Loss)/Profit
2019 2018
GBP'000 GBP'000
The amount of (loss)/profit generated by the
Parent Company is: (231) 4,670
-------- --------
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.
10 Taxation
Continuing Discontinued Continuing Discontinued
2019 2019 2018 2018
Analysis of charge in the year GBP'000 GBP'000 GBP'000 GBP'000
---------- ------------ ---------- ------------
Current Tax: UK corporation tax 2,368 (913) 1,104 167
-------------------------- ---------- ------------ ---------- ------------
Overseas corporation
tax 384 845 711 1,675
----------------------------------------------- ---------- ------------ ---------- ------------
Adjustment in respect
of prior years (178) - 409 -
----------------------------------------------- ---------- ------------ ---------- ------------
2,574 (68) 2,224 1,842
----------------------------------------------- ---------- ------------ ---------- ------------
Deferred tax
credit (note Origination and reversal
16) of temporary differences (943) - (2,505) -
-------------------------- ---------- ------------ ---------- ------------
Adjustments in respect
of prior years (146) - 656 -
----------------------------------------------- ---------- ------------ ---------- ------------
(1,089) - (1,849) -
----------------------------------------------- ---------- ------------ ---------- ------------
Income tax expense/
(credit) for
the year 1,485 (68) 375 1,842
---------- ------------ ---------- ------------
UK corporation tax has been charged at 19% (2018: 19%).
The charge for the year can be reconciled to the profit/(loss)
as per the income statement as follows:
Continuing Discontinued Continuing Discontinued
2019 2019 2018 2018
GBP'000 GBP'000 GBP'000 GBP'000
---------- ------------ ---------- ------------
Profit/(loss) before tax 3,075 (7,559) (26,739) 1,880
---------- ------------ ---------- ------------
Profit/(loss) before tax multiplied
by the standard rate of corporation
tax in the UK of 19% (2018: 19%) 584 (1,436) (5,080) 357
---------- ------------ ---------- ------------
Expenses not deductible for tax purposes
and goodwill impairment loss 1,141 42 4,220 -
---------- ------------ ---------- ------------
Effect of share-based payments 107 - (12) -
---------- ------------ ---------- ------------
Irrecoverable withholding tax 109 727 77 1,312
---------- ------------ ---------- ------------
Overseas losses not recognised as deferred
tax assets (231) 465 120 12
---------- ------------ ---------- ------------
Difference between UK and overseas
tax rates 99 134 (15) 161
---------- ------------ ---------- ------------
Adjustment to tax charge in respect
of previous years (324) - 1,065 -
---------- ------------ ---------- ------------
Total taxation charge/(credit) for
the year 1,485 (68) 375 1,842
---------- ------------ ---------- ------------
Tax (credit)/charge recognised in equity:
2019 2018
GBP'000 GBP'000
Deferred tax (credit)/charge recognised directly
in equity (15) 211
-------- --------
Total tax (credit)/charge recognised directly
in equity (15) 211
-------- --------
Future tax rate changes
The UK corporation tax rate of 19% 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 financial
position date, the impact of these reductions has been reflected in
the deferred tax liability at 31 July 2019.
Reconciliation of statutory to underlying tax charge:
2019 2018
GBP'000 GBP'000
Income tax expense 1,485 375
-------- --------
Impairment and amortisation of acquired intangibles 846 2,704
-------- --------
Non-underlying items 244 318
-------- --------
Foreign currency exchange differences (74) (17)
-------- --------
Underlying income tax expense 2,501 3,380
-------- --------
11 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 the United Arab
Emirates, Singapore, Malaysia and Qatar. As a result, all
operations associated with that business stream have been
classified as discontinued. As part of this withdrawal, on 25 June
2019 NWKI Consultancy FZ-LLC was sold for cash consideration of
GBP2,000. The entity had net liabilities on disposal of GBP48,000
resulting in a gain of GBP46,000.
As detailed in note 15, Gattaca de Colombia SAS, Comms Resources
Colombia and Gattaca France SAS have been liquidated during the
year, resulting in a gain of GBP89,000. These entities made a
trading loss of GBP68,000 during the year. The results of these
liquidated businesses are included in discontinued operations.
Financial information relating to discontinued operations is as
follows:
Financial performance and cash flow information
2019 2018
GBP'000 GBP'000
Revenue 11,371 36,215
-------- ---------
Cost of Sales (9,860) (28,751)
-------- ---------
Gross Profit 1,511 7,464
-------- ---------
Administrative expenses (1) (9,142) (5,584)
-------- ---------
(Loss)/profit from operations (7,631) 1,880
-------- ---------
Finance income 72 -
-------- ---------
(Loss)/profit before taxation (7,559) 1,880
-------- ---------
Taxation 68 (1,842)
-------- ---------
(Loss)/profit for the year after taxation from
discontinued operations (7,491) 38
-------- ---------
Exchange differences on translation of discontinued
operations 533 (64)
-------- ---------
Other comprehensive (loss) from discontinued
operations (6,958) (26)
-------- ---------
(1) Included in administrative expenses are GBP5,731,000 (2018:
GBPnil) of non-underlying items, as detailed in note 4.
2019 2018
GBP'000 GBP'000
Net cash (outflow)/ inflow from operating activities (2,810) 34
-------- --------
Net cash inflow from investing activities 14 -
-------- --------
Net cash inflow from financing activities - 19
-------- --------
Effects of exchange rates on cash and cash equivalents 53 48
-------- --------
Net (decrease)/increase in cash generated by
discontinued operations (2,743) 101
-------- --------
12 Earnings Per Share
Earnings per share (EPS) has been calculated by dividing the
consolidated profit or loss after taxation attributable to ordinary
shareholders by the weighted average number of ordinary shares in
issue during the year.
Diluted earnings per share has been calculated on the same basis
as above, except that the weighted average number of ordinary
shares that would be issued on the conversion of all the dilutive
potential ordinary shares (arising from the Group's share option
schemes) into ordinary shares has been added to the denominator.
Share incentive plans (Note 23) are treated as dilutive when, at
the reporting date, they would be issuable had the performance year
ended at that date.
The Group has dilutive potential ordinary shares, being the LTIP
and Zero-priced share options (Note 23).
The number of shares that could have been acquired at fair value
(determined as the average annual market share price of the
Company's shares) is calculated based on the monetary value of the
subscription rights attached to the outstanding share options.
The effective of potential ordinary shares are reflected in
diluted EPS only when they are dilutive. Potential ordinary shares
are considered dilutive when their inclusion in the calculation
would decrease EPS, or increase the loss per share from continuing
operations. This is regardless of whether the potential ordinary
shares are dilutive for EPS from total operations. The effect of
potential ordinary shares are considered to be dilutive for year
ended 31 July 2019 and therefore have been included in the
calculation below. The effect of potential ordinary shares in 2018
is considered to be anti-dilutive and therefore was excluded from
the calculations below.
There are no changes to the profit numerator as a result of the
dilution calculation.
2019 2018
GBP'000 GBP'000
Total loss attributable to ordinary shareholders (5,901) (27,351)
-------- ---------
2019 2018
Number of Shares 000's 000's
Basic weighted average number of ordinary shares
in issue 32,267 32,079
------- -------
Dilutive potential ordinary shares 877 -
------- -------
Diluted weighted average number of shares 33,144 32,079
------- -------
2019 2018
Total earnings per share pence pence
Earnings per ordinary share Basic (18.3) (85.3)
-------- -------- ---------
Diluted (17.8) (85.3)
--------------------------------------------- -------- ---------
Earnings from continuing operations GBP'000 GBP'000
-------- -------- ---------
Total profit /(loss) for the
year 1,590 (27,389)
-------- ---------
Total earnings per share for 2019 2018
continuing operations pence pence
Earnings per ordinary share
from continuing operations Basic 4.9 (85.4)
-------- -------- --------
Diluted 4.8 (85.4)
-------------------------------------- -------- --------
Earnings from discontinuing
operations GBP'000 GBP'000
-------- -------- --------
Total (loss)/profit for the
year (7,491) 38
-------- --------
2019 2018
Total earnings per share for discontinuing operations pence pence
Earnings per ordinary share
from discontinuing operations Basic (23.2) 0.1
--------- -------- --------
Diluted (22.6) 0.1
-------------------------------------------------------- -------- --------
Earnings from continuing underlying
operations GBP'000 GBP'000
--------- -------- --------
Total profit for the year 8,859 7,207
-------- --------
Total earnings per share for continuing underlying 2019 2018
operations pence pence
Earnings per ordinary share
from continuing underlying
operations Basic 27.5 22.5
----------- ------ ------
Diluted 26.7 22.5
----------------------------------------------------- ------ ------
13 Goodwill and Intangible Assets
Software
Customer Trade & software
Goodwill relationships names Other licences Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost At 1 August 2017 28,739 22,245 5,326 3,809 2,470 62,589
----------------- -------- -------------- -------- -------- ----------- --------
Additions - - - - 899 899
---------------------------------- -------- -------------- -------- -------- ----------- --------
At 31 July 2018 28,739 22,245 5,326 3,809 3,369 63,488
---------------------------------- -------- -------------- -------- -------- ----------- --------
Additions - - 20 - 2,856 2,876
---------------------------------- -------- -------------- -------- -------- ----------- --------
At 31 July 2019 28,739 22,245 5,346 3,809 6,225 66,364
---------------------------------- -------- -------------- -------- -------- ----------- --------
Amortisation
and Impairment At 1 August 2017 - 5,641 1,864 1,884 1,398 10,787
----------------- -------- -------------- -------- -------- ----------- --------
Amortisation for
the year - 1,814 343 534 341 3,032
---------------------------------- -------- -------------- -------- -------- ----------- --------
Impairment 21,779 9,243 1,833 465 - 33,320
---------------------------------- -------- -------------- -------- -------- ----------- --------
At 31 July 2018 21,779 16,698 4,040 2,883 1,739 47,139
---------------------------------- -------- -------------- -------- -------- ----------- --------
Amortisation for
the year - 758 167 339 328 1,592
---------------------------------- -------- -------------- -------- -------- ----------- --------
Impairment 2,603 2,468 744 67 - 5,882
---------------------------------- -------- -------------- -------- -------- ----------- --------
At 31 July 2019 24,382 19,924 4,951 3,289 2,067 54,613
---------------------------------- -------- -------------- -------- -------- ----------- --------
Net Book Value At 31 July 2018 6,960 5,547 1,286 926 1,630 16,349
----------------- -------- -------------- -------- -------- ----------- --------
At 31 July 2019 4,357 2,321 395 520 4,158 11,751
---------------------------------- -------- -------------- -------- -------- ----------- --------
Other intangibles comprises candidate databases and non-compete
agreements.
The carrying amount of goodwill allocated to Cash Generating
Unit's (CGU's) is as follows:
2019 2018
GBP'000 GBP'000
UK Engineering 1,712 1,712
-------- --------
International - 2,603
-------- --------
Resourcing Solutions Limited 2,645 2,645
-------- --------
Total 4,357 6,960
-------- --------
Impairment testing
Goodwill and intangible assets are reviewed and tested for
impairment on an annual basis or more frequently to determine if
there is an indication of impairment.
If any indication of impairment exists, then the goodwill CGU or
individual asset's recoverable amount is calculated.
The key assumptions and estimates used when calculating value in
use, are as follows:
Cash flows from operations
Cash flows from operations are based on the latest five year
profit forecasts approved by the Group's Board of Directors which
is prepared using expectations of revenue and operating cost growth
over the next five years. The Group prepares cash flow forecasts
based on the most recent forecast information approved by the
Directors, adjusted for allocations of Group overhead costs, and
extrapolates cash flows into perpetuity based on long-term growth
rates.
Discount rates
The pre-tax rates used to discount the forecast cash flows were
a range from 13.3%-15.7% (2018: 12.9% to 13.3%) reflecting the
Group's weighted average cost of capital, adjusted for specific
risks associated with the asset's estimated cash flows. The
discount rate is based on the weighted average cost of capital
(WACC). The risk-free rate, based on government bond rates, is
adjusted for equity and industry risk premiums, reflecting the
increased risk compared to an investor who is investing the market
as a whole. Net present values are calculated using pre-tax
discount rates derived from the Group's post-tax WACC of 11.2%
(2018: 11.0%) for UK CGUs and 11.8% (2018: 11.0%) for the
International CGU.
Growth rates
The medium-term growth rates are based on management forecasts,
reflecting past experience and economic environment. Long-term
growth rates are based on external sources of an average estimated
growth rate of 2.0% (2018: 2.7%), using a weighted average of
operating country real GDP growth expectations.
As a result of these forecasts, total impairment losses of
GBP5,882,000 (2018: GBP33,320,000) have been recorded in respect of
goodwill and acquired intangibles within the International CGU
(2018: UK Technology, International and Professional Services
CGU's), as follows:
Intangible Intangible
Goodwill assets Total Goodwill assets Total
2019 2019 2019 2018 2018 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
UK Technology - - - 11,611 9,126 20,737
-------- ---------- -------- -------- ---------- --------
International 2,603 3,279 5,882 8,525 1,961 10,486
-------- ---------- -------- -------- ---------- --------
Professional Services - - - 1,643 454 2,097
-------- ---------- -------- -------- ---------- --------
Total 2,603 3,279 5,882 21,779 11,541 33,320
-------- ---------- -------- -------- ---------- --------
In the prior year, goodwill and intangibles within the
Professional Services CGU, which wholly related to the Provanis
acquisition, were fully impaired as the business was de-branded and
fully integrated into the Group's existing Technology business. The
recoverable amount of the Professional Services CGU at 31 July 2018
was GBPnil.
Goodwill and acquired intangibles within the UK Technology, UK
Engineering and International CGU's relate to the Networkers
acquisition and have been impaired due to lower forecasts of
trading performance against original expectations at the time of
acquisition. At 31 July 2019, the recoverable amounts of the UK
Technology CGU was GBP9,984,000 (2018: GBP11,737,000) and
GBP5,349,000 (2018: GBP5,753,000) for the UK Engineering CGU.
Reasonable changes in key assumptions, such as a 20 basis point
increase in the UK post-tax discount rate to 11.4%, a 20 basis
point reduction in the long term growth rate to 1.8%, or a 2.0%
reduction in forecast profit from operations between 2020 to 2022,
do not result in impairment of any the remaining CGU carrying
values.
14 Property, Plant and Equipment
Fixtures,
Motor Leasehold fittings
vehicles improvements & equipment Total
Group GBP'000 GBP'000 GBP'000 GBP'000
Cost At 1 August 2017 348 2,885 4,150 7,383
------------------------ --------- ------------- ------------ --------
Additions - 1,431 422 1,853
-------------------------------------------------- --------- ------------- ------------ --------
Disposals (296) - (19) (315)
-------------------------------------------------- --------- ------------- ------------ --------
Effects of movements in
exchange rates - - 2 2
-------------------------------------------------- --------- ------------- ------------ --------
At 31 July 2018 52 4,316 4,555 8,923
-------------------------------------------------- --------- ------------- ------------ --------
Additions 6 414 253 673
-------------------------------------------------- --------- ------------- ------------ --------
Disposals (37) - (159) (196)
-------------------------------------------------- --------- ------------- ------------ --------
Effects of movements in
exchange rates - - (17) (17)
-------------------------------------------------- --------- ------------- ------------ --------
At 31 July 2019 21 4,730 4,632 9,383
-------------------------------------------------- --------- ------------- ------------ --------
At 1 August 2017 275 1,070 3,534 4,879
-------------------------------------------------- --------- ------------- ------------ --------
Accumulated Depreciation Charge for the year 12 313 361 686
------------------------ --------- ------------- ------------ --------
Released on disposal (243) - (19) (262)
-------------------------------------------------- --------- ------------- ------------ --------
At 31 July 2018 44 1,383 3,876 5,303
-------------------------------------------------- --------- ------------- ------------ --------
Charge for the year 3 514 374 891
-------------------------------------------------- --------- ------------- ------------ --------
Released on disposal (30) - (73) (103)
-------------------------------------------------- --------- ------------- ------------ --------
At 31 July 2019 17 1,897 4,177 6,091
-------------------------------------------------- --------- ------------- ------------ --------
Net Book Value At 31 July 2018 8 2,933 679 3,620
------------------------ --------- ------------- ------------ --------
At 31 July 2019 4 2,833 455 3,292
-------------------------------------------------- --------- ------------- ------------ --------
Included within Leasehold Improvements is a cost of GBP1,747,000
(2018: GBP1,390,000) relating to dilapidations provisions (see note
18).
There were no capital commitments as at 31 July 2019 or 31 July
2018.
15 Investments in Subsidiary Undertakings
Company
2019 2018
Cost and carrying value: GBP'000 GBP'000
-------- --------
Balance at 1 August 2018 8,311 7,987
-------- --------
Capital contributions to subsidiaries 269 324
-------- --------
Balance at 31 July 2019 8,580 8,311
-------- --------
The movement in investment in Group companies represents a
capital contribution made in Matchtech Group (UK) Limited relating
to share-based payments.
The subsidiary undertakings at the year end are as follows:
Registered
Office Country of Share % held % held
Company Note Incorporation Class 2019 2018 Main Activities
Matchtech Group (Holdings)
Limited (1) 1 United Kingdom Ordinary 99.7% 99.7% Holding
---------- -------------- -------- ------- ------- ------------------------
Matchtech Group Management
Company Limited (2) 1 United Kingdom Ordinary 100% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
Matchtech Group (UK) Provision of recruitment
Limited (1) 1 United Kingdom Ordinary 99.998% 99.998% consultancy
---------- -------------- -------- ------- ------- ------------------------
Matchtech Engineering
Limited (2) 1 United Kingdom Ordinary 100% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
Matchtech Limited
(2) 1 United Kingdom Ordinary 100% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
Barclay Meade Ltd Provision of recruitment
(1) 1 United Kingdom Ordinary 100% 100% consultancy
---------- -------------- -------- ------- ------- ------------------------
Alderwood Education Provision of recruitment
Ltd (1) 1 United Kingdom Ordinary 100% 100% consultancy
---------- -------------- -------- ------- ------- ------------------------
Gattaca Solutions Provision of recruitment
Limited (1) 1 United Kingdom Ordinary 100% 100% consultancy
---------- -------------- -------- ------- ------- ------------------------
Connectus Technology Provision of recruitment
Limited (1) 1 United Kingdom Ordinary 100% 100% consultancy
---------- -------------- -------- ------- ------- ------------------------
Gattaca Recruitment
Limited (2) 1 United Kingdom Ordinary 100% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
Application Services Provision of recruitment
Limited (1) 1 United Kingdom Ordinary 100% 100% consultancy
---------- -------------- -------- ------- ------- ------------------------
Provanis Limited (2) 1 United Kingdom Ordinary 100% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
Networkers International
Limited (1) 1 United Kingdom Ordinary 100% 100% Holding
---------- -------------- -------- ------- ------- ------------------------
Networkers International Provision of recruitment
(UK) Limited (1) 1 United Kingdom Ordinary 100% 100% consultancy
---------- -------------- -------- ------- ------- ------------------------
Networkers International
Trustees Limited (2) 1 United Kingdom Ordinary 100% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
The Comms Group Limited
(1) 1 United Kingdom Ordinary 100% 100% Holding
---------- -------------- -------- ------- ------- ------------------------
CommsResources Limited Provision of recruitment
(1) 1 United Kingdom Ordinary 100% 100% consultancy
---------- -------------- -------- ------- ------- ------------------------
Comms Software Limited
(2) 1 United Kingdom Ordinary 100% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
Elite Computer Staff
Ltd. (2) 1 United Kingdom Ordinary 100% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
Networkers Recruitment
Services Limited (2) 1 United Kingdom Ordinary 100% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
Cappo Group Limited
(1) 1 United Kingdom Ordinary 100% 100% Holding
---------- -------------- -------- ------- ------- ------------------------
Cappo International Provision of recruitment
Limited (1) 1 United Kingdom Ordinary 100% 100% consultancy
---------- -------------- -------- ------- ------- ------------------------
Resourcing Solutions Provision of recruitment
Limited (1) 1 United Kingdom Ordinary 100% 100% consultancy
---------- -------------- -------- ------- ------- ------------------------
MSB Consulting Services
Limited (2) 1 United Kingdom Ordinary 100% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
Provision of recruitment
Gattaca GmbH 2 Germany Ordinary 100% 100% consultancy
---------- -------------- -------- ------- ------- ------------------------
MSB International
GMBH 14 Germany Ordinary 100% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
Provision of recruitment
Gattaca BV 3 Netherlands Ordinary 100% 100% consultancy
---------- -------------- -------- ------- ------- ------------------------
Matchtech Engineering
Inc 4 United States Ordinary 100% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
Networkers International
LLC 5 United States Ordinary 100% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
Provision of recruitment
Networkers Inc 5 United States Ordinary 100% 100% consultancy
---------- -------------- -------- ------- ------- ------------------------
Provision of recruitment
Cappo Inc 5 United States Ordinary 100% 100% consultancy
---------- -------------- -------- ------- ------- ------------------------
Networkers International Provision of recruitment
(Canada) Inc 11 Canada Ordinary 100% 100% consultancy
---------- -------------- -------- ------- ------- ------------------------
NWI Mexico, S. de Provision of recruitment
R.L. de C.V. 6 Mexico Ordinary 100% 100% consultancy
---------- -------------- -------- ------- ------- ------------------------
Gattaca Mexico Services, Provision of recruitment
S.A. de C.V (5) 6 Mexico Ordinary 100% N/A consultancy
---------- -------------- -------- ------- ------- ------------------------
Networkers International
South Africa Proprietary Provision of recruitment
Limited 7 South Africa Ordinary 100% 100% consultancy
---------- -------------- -------- ------- ------- ------------------------
Networkers International Provision of recruitment
Proprietary Limited 7 South Africa Ordinary 100% 100% consultancy
---------- -------------- -------- ------- ------- ------------------------
Kithara Investments
Proprietary Limited 8 South Africa Ordinary 100% 100% Holding
---------- -------------- -------- ------- ------- ------------------------
Kula Nathi Investments
Proprietary Limited 7 South Africa Ordinary 100% 100% Holding
---------- -------------- -------- ------- ------- ------------------------
Networkers International Provision of recruitment
(China) Co. Limited 9 China Ordinary 100% 100% consultancy
---------- -------------- -------- ------- ------- ------------------------
Networkers International
(Malaysia) Sdn Bhd 10 Malaysia Ordinary 100% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
Comms Resource SDN.
BHD 10 Malaysia Ordinary 100% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
Gattaca de Colombia
SAS (3) 12 Colombia Ordinary 0% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
Comms Resources SAS
(Colombia) (3) 12 Colombia Ordinary 0% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
NWKI Consultancy FZ United Arab
LLC 13 Emirates Ordinary 100% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
NWKI Communications United Arab
LLC (3) 13 Emirates Ordinary 0% 49% Non trading
---------- -------------- -------- ------- ------- ------------------------
Cappo Qatar LLC (4) 16 Qatar Ordinary 49% 49% Non trading
---------- -------------- -------- ------- ------- ------------------------
Networkers Consultancy
(Singapore) PTE. Limited 15 Singapore Ordinary 100% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
Gattaca SAS (3) 17 France Ordinary 0% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
Gattaca Recruitment
ETT, SLU 18 Spain Ordinary 100% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
Gattaca Information
Technology Services Provision of recruitment
SLU 18 Spain Ordinary 100% 100% consultancy
---------- -------------- -------- ------- ------- ------------------------
Networkers International
(India) PTE 19 India Ordinary 100% 100% Non trading
---------- -------------- -------- ------- ------- ------------------------
All holdings by Gattaca plc are indirect except Matchtech Group
(Holdings) Limited, Gattaca GmbH and Matchtech Group Management
Company Limited.
Networkers International (UK) Limited has a branch in Russia
which is consolidated in the Group's result.
Kula Nathi Investments Proprietary Limited formed a partnership
with Ingenious Equity Proprietary Limited in 2018 to set up Sakha
Sonke Private Equity Fund. Kula Nathi has control over the private
equity fund in line with the criteria of IFRS 10 and therefore
Sakha Sonke Private Equity Fund has been consolidated in the
Group's result.
The Group's Share Incentive Plan (SIP) is held by Gattaca plc UK
Employee Benefit Trust (the EBT). The Group has control over the
EBT and therefore it has been consolidated in the Group's
results.
1 For the year ended 31 July 2019, Gattaca plc has provided a
legal guarantee dated 5 November 2019 under s479C of the Companies
Act 2006 to these subsidiaries for audit exemption.
2 These dormant companies are exempt from preparing individual
Financial Statements by virtue of s394A of Companies Act 2006.
3 These companies were disposed of or liquidated in the year,
with the shareholding remaining the same as per year ended 31 July
2018 up to the date of disposal or liquidation. They were
considered non-trading during the year ended 31 July 2019.
4 Gattaca plc has 100% of the beneficial interest in these
entities, and consolidates them as wholly owned subsidiaries in
line with IFRS 10.
5 Gattaca Mexico Services, S.A. de C.V was incorporated in
October 2018 and wholly consolidated from that date.
Registered office addresses
1 1450 Parkway, Solent Business Park, Whiteley, Fareham, Hampshire, PO15 7AF, United Kingdom
2 c/o Grant Thornton, Jahnstrasse 6, 70597 Stuttgart, Germany
3 Herengracht 124-128, 1015 BT Amsterdam, Netherlands
4 33 SW Flager Avenue, Stuart, Florida, USA
5 6400 International Parkway, Suite 1510, Plano TX 75093, USA
6 Avenida Paseo de la Reforma No. 296 Piso 15 Oficina A, Colonia Juárez, Delegación Cuauhtémoc, Código Postal 06600. Ciudad de México, Mexico
7 201 Heritage House, 20 Dreyer Street, Claremont, 7735, South Africa
8 6th Floor, 119 Hertzog Boulevard, Foreshre, Cape Town, 8001, South Africa
9 B-2701, Di San Zhi Ye Building, No. A1 Shuguang Xili, Chao Yang District, Beijing, China
10 Level 8, Symphony House, Block D13, Pusat Dagangan Dana 1,
Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor, Malaysia
11 1 Richmond Street West, Suite 902, Toronto, Ontario, M5H 3W4, Canada
12 Av 9 A Norte, 14 N 73 OF 202, Valle del Caua, Cali, Colombia
13 Office 3022, Shatha Tower, Dubai Media City, Dubai, United Arab Emirates
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 1 Rue Favart, 75002, Paris, France
18 Calle General, Moscardo 6. Espaco Office, Madrid 28020, Spain
19 3rd Floor, 301 DLF City Court Sikandarpur, Gurgaon-122002 Harayana, India
16 Deferred Tax
(Charged)/
credited Credited Foreign
Asset Liability Net to profit to equity exchange
2019 2019 2019 2019 2019 2019
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Share-based payments 105 - 105 (2) 15 -
-------- --------- -------- ---------- ---------- ---------
Depreciation in excess of
capital allowances 8 - 8 (35) - -
-------- --------- -------- ---------- ---------- ---------
Accelerated capital allowances - (556) (556) 842 - -
-------- --------- -------- ---------- ---------- ---------
Other temporary and deductible
differences 47 - 47 284 - 1
-------- --------- -------- ---------- ---------- ---------
Amounts available for offset (160) 160 - - - -
-------- --------- -------- ---------- ---------- ---------
Net deferred tax assets/(liabilities) - (396) (396) 1,089 15 1
-------- --------- -------- ---------- ---------- ---------
(Charged)/
credited (Charged) Foreign
Asset Liability Net to profit to equity exchange
2018 2018 2018 2018 2018 2018
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Share-based payments 92 - 92 (142) (211) -
-------- --------- -------- ---------- ----------- ---------
Depreciation in excess of
capital allowances 43 - 43 (74) - -
-------- --------- -------- ---------- ----------- ---------
Accelerated capital allowances - (1,398) (1,398) 2,516 - -
-------- --------- -------- ---------- ----------- ---------
Other temporary and deductible
differences - (238) (238) (451) - 2
-------- --------- -------- ---------- ----------- ---------
Net deferred tax assets/(liabilities) 135 (1,636) (1,501) 1,849 (211) 2
-------- --------- -------- ---------- ----------- ---------
The movement on the net deferred tax is as shown below:
Group
2019 2018
GBP'000 GBP'000
-------- --------
At 1 August (1,501) (3,141)
-------- --------
Acquired intangibles - -
-------- --------
Recognised in income (Note 10) 1,089 1,849
-------- --------
Recognised in equity 15 (211)
-------- --------
Foreign exchange 1 2
-------- --------
At end of year (396) (1,501)
-------- --------
2019 2018
GBP'000 GBP'000
Deferred tax assets reversing within 1 year 29 20
-------- --------
Deferred tax liabilities reversing within 1
year (114) (469)
-------- --------
At end of year (85) (449)
-------- --------
2019 2018
GBP'000 GBP'000
Deferred tax assets reversing after 1 year 131 115
-------- --------
Deferred tax liabilities reversing after 1 year (442) (1,167)
-------- --------
At end of year (311) (1,052)
-------- --------
Unrecognised deferred tax assets
Group
2019 2018
GBP'000 GBP'000
-------- --------
Tax losses carried forward against profits of
future years 755 537
-------- --------
Depreciation in excess of capital allowances - 45
-------- --------
Other temporary and deductible differences 88 645
-------- --------
Net deferred tax assets 843 1,227
-------- --------
Of the unused tax losses GBP1,646,000 (2018: GBP1,730,000) can
be carried forward indefinitely and GBP261,000 (2018: GBP99,000)
expires within 20 years. No deferred tax is recognised on
unremitted earnings of overseas subsidiaries as the Group is in a
position to control the timing of the reversal of temporary
differences and it is probable that such differences will not
reverse in the foreseeable future. The temporary differences
associated with the investments in subsidiaries for which a
deferred tax liability has not been recognised aggregate to
GBP9,002,000 (2018: GBP10,617,000). If the earnings were remitted,
tax of GBP164,000 (2018: GBP191,000) would be payable.
The UK corporation tax rate will reduce from 19% to 17% from 1
April 2020. Deferred tax has been valued based on the substantively
enacted rates at each balance sheet date at which the deferred tax
is expected to reverse.
17 Trade and Other Receivables
Group Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Trade receivables from contracts with
customers, net of loss allowance 71,704 81,773 - -
-------- -------- -------- --------
Amounts owed by Group companies - - 100,877 94,925
-------- -------- -------- --------
Corporation tax receivables 329 241 281 -
-------- -------- -------- --------
Other receivables 660 1,351 - 2
-------- -------- -------- --------
Prepayments 1,198 1,600 - -
-------- -------- -------- --------
Accrued income 22,837 27,947 - -
-------- -------- -------- --------
Total 96,728 112,912 101,158 94,927
-------- -------- -------- --------
The amounts owed by Group undertakings in the Company Statement
of Financial Position are considered to approximate to fair value.
Amounts owed by Group companies are unsecured, repayable on demand
and accrue no interest.
Accrued income relates to the Group's right to consideration for
temporary and permanent placements made but not billed at the year
end. These transfer to trade receivables once billing occurs.
The Directors consider that the carrying amount of trade and
other receivables approximates to the fair value.
No expected credit loss allowance under IFRS 9 has been
recognised for accrued income as the credit risk over accrued
income is not considered to be material to the Group.
Impairment of trade receivables from contracts with
customers
Group
2019 2018
GBP'000 GBP'000
-------- --------
Trade receivables from contracts with customers, gross
amounts 73,893 83,320
-------- --------
Loss allowance (2,189) (1,547)
-------- --------
Trade receivables from contracts with customers, net
of loss allowance 71,704 81,773
-------- --------
Trade receivables are amounts due from customers for services
performed in the ordinary course of business. They are generally
settled within 30-60 days and are therefore all classified as
current.
The Group uses a third party credit scoring system to assess the
creditworthiness of potential new customers before accepting them.
Credit limits are defined by customer based on this information.
All customer accounts are subject to review on a regular basis by
senior management and actions are taken to address debt aging
issues.
Trade receivables are subject to the expected credit loss model.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade receivables.
To measure the expected credit losses, trade receivables have
been grouped based on shared credit risk characteristics by
geographical region or industry.
The expected loss rates are based on the payment profiles of
sales over a period of 36 months before the relevant year end and
the corresponding historical credit losses experienced within this
period. The historic loss rates are adjusted to reflect any
relevant current and forward-looking information expected to affect
the ability of customers to settle the receivables.
The loss allowance for trade receivables was determined as
follows:
More More More
than than than
30 days 60 days 90 days
past past past
2019 Current due due due Total
Weighted expected loss rate 1.4% 2.0% 4.1% 53.4%
-------- --------- --------- --------- -------
Gross carrying amount-trade
receivables 69,944 1,130 665 2,154 73,893
-------- --------- --------- --------- -------
Loss allowance 987 23 28 1,151 2,189
-------- --------- --------- --------- -------
More More More
than than than
30 days 60 days 90 days
past past past
2018 Current due due due Total
Weighted expected loss rate 1.3% 5.0% 5.5% 14.3%
-------- --------- --------- --------- -------
Gross carrying amount-trade
receivables 76,482 3,027 1,628 2,183 83,320
-------- --------- --------- --------- -------
Loss allowance 993 152 90 312 1,547
-------- --------- --------- --------- -------
The increase in the loss allowance rate for trade receivables
more than 90 days past due is as a result of expecting a 100% loss
rate on remaining aged receivables relating to discontinued
business of GBP1,126,000 at 31 July 2019 (31 July 2018:
GBP595,000).
The loss allowance for trade receivables at year end reconciles
to the opening loss allowance as per below:
Group
2019 2018
GBP'000 GBP'000
-------- --------
Opening loss allowance at 1 August 1,547 1,028
-------- --------
Increase in loss allowance recognised in profit
and loss during the year 994 1,184
-------- --------
Receivable written off during the year as uncollectible (352) (665)
-------- --------
Closing loss allowance at 31 July 2,189 1,547
-------- --------
18 Provisions
2019 2018
Onerous Onerous
Dilapidation lease Dilapidation lease
provisions provisions Total provisions provisions Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ ----------- -------- ------------ ----------- --------
Balance at 1 August 1,390 - 1,390 1,596 - 1,596
------------ ----------- -------- ------------ ----------- --------
Provisions made in the
year 402 1,102 1,504 43 - 43
------------ ----------- -------- ------------ ----------- --------
Provisions utilised (45) (167) (212) (249) - (249)
------------ ----------- -------- ------------ ----------- --------
Unwinding of discount - (1) (1) - - -
------------ ----------- -------- ------------ ----------- --------
Balance at 31 July 1,747 934 2,681 1,390 - 1,390
------------ ----------- -------- ------------ ----------- --------
2019 2018
Onerous Onerous
Dilapidation lease Dilapidation lease
provisions provisions Total provisions provisions Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ ----------- -------- ------------ ----------- --------
Non-Current 1,747 602 2,349 1,390 - 1,390
------------ ----------- -------- ------------ ----------- --------
Current - 332 332 - - -
------------ ----------- -------- ------------ ----------- --------
Total 1,747 934 2,681 1,390 - 1,390
------------ ----------- -------- ------------ ----------- --------
Onerous lease provisions of GBP1,102,000 were recorded in the
year in relation to the remaining lease term of property that is no
longer in use by the Group as a result of the closure of the
contract Telecoms Infrastructure business. These costs are
presented as non-underlying as shown in note 4.
No provisions are held by the parent company (2018: nil).
19 Trade and Other Payables
Group Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Trade payables 285 2 - -
-------- -------- -------- --------
Amounts owed to Group undertakings - - 54,083 47,647
-------- -------- -------- --------
Taxation and social security 8,013 10,144 - -
-------- -------- -------- --------
Contractor wages payable 24,270 16,560 - -
-------- -------- -------- --------
Accruals and deferred income 7,024 11,980 - -
-------- -------- -------- --------
Other payables 1,084 2,164 - -
-------- -------- -------- --------
Total 40,676 40,850 54,083 47,647
-------- -------- -------- --------
Amounts owed to Group undertakings are unsecured, repayable on
demand and accrue no interest.
20 Loans and Borrowings
Group Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Working capital facility 29,119 35,859 - -
-------- -------- -------- --------
Finance costs capitalised (81) (158) - -
-------- -------- -------- --------
Bank loans and borrowings due in less
than one year 29,038 35,701 - -
-------- -------- -------- --------
Term loan 15,000 15,000 15,000 15,000
-------- -------- -------- --------
Finance costs capitalised (43) (69) (43) (69)
-------- -------- -------- --------
Bank loans and borrowings due in more
than one year 14,957 14,931 14,957 14,931
-------- -------- -------- --------
Total bank loans and borrowings 43,995 50,632 14,957 14,931
-------- -------- -------- --------
At 31 July 2019 (31 July 2018) the Group had agreed banking
facilities with HSBC totalling GBP90m comprising a GBP75m Invoice
Financing working capital facility and a GBP15m (2018: GBP20m) Term
Loan Facility committed until October 2020.
The Group's working capital facilities are secured by way of an
all assets debenture, which contains fixed and floating charges
over the assets of the Group. This facility allows certain
companies within the Group to borrow up to 90% of invoiced trade
receivables up to a maximum of GBP75m. Interest is charged on
borrowings at a rate of 2.30% (2018: 1.6%) over HSBC Bank base
rate.
The Group's GBP15m (2018: GBP20m) Term Loan Facility is secured
by way of a fixed and floating charge over assets of the Group.
Interest is charged on borrowings at a rate of 3.25% (2018: 3.25%)
over HSBC LIBOR rate. The Group is required to complying with
certain financial covenants in the Term Loan facility and all
covenant requirements were satisfied in the year.
21 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 years under review may also be categorised as
follows:
Financial assets are included in the Statement of Financial
Position within the following headings:
Group Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Trade and other receivables (note 17)
-------- -------- -------- --------
- Financial assets recorded at amortised
cost 95,201 111,071 100,877 94,927
-------- -------- -------- --------
Cash and cash equivalents
-------- -------- -------- --------
- Financial assets recorded at amortised
cost 19,173 9,758 - -
-------- -------- -------- --------
Total 114,374 120,829 100,877 94,927
-------- -------- -------- --------
Financial liabilities are included in the Statement of Financial
Position within the following headings:
Group Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Borrowings (note 20)
-------- -------- -------- --------
- Financial liabilities recorded at
amortised cost 43,995 50,632 14,957 14,931
-------- -------- -------- --------
Trade and other payables (note 19)
-------- -------- -------- --------
- Financial liabilities recorded at
amortised cost 32,663 30,706 54,083 47,647
-------- -------- -------- --------
Total 76,658 81,338 69,040 62,578
-------- -------- -------- --------
The amounts at which the assets and liabilities above are
recorded are considered to approximate to fair value.
22 Commitments Under Operating Leases
The Group's commitments under non-cancellable operating leases
are as follows:
Group
2019 2018
GBP'000 GBP'000
-------- --------
Payments falling
Land/buildings due: within 1 year 2,210 2,067
----------------- --------------------- -------- --------
between 1 to 5 years 6,418 6,894
------------------------------------------------------- -------- --------
after 5 years 2,516 4,670
------------------------------------------------------- -------- --------
11,144 13,631
------------------------------------------------------- -------- --------
Payments falling
Other due: within 1 year 210 183
----------------- --------------------- -------- --------
between 1 to 5 years 188 176
------------------------------------------------------- -------- --------
after 5 years 1 -
------------------------------------------------------- -------- --------
399 359
------------------------------------------------------- -------- --------
The Company has no commitments under non-cancellable operating
leases. (2018: nil).
23 Share Capital
Authorised share capital
Company
2019 2018
GBP'000 GBP'000
-------- --------
40,000,000 (2018: 40,000,000) Ordinary shares
of GBP0.01 each 400 400
-------- --------
Allotted, called up and fully paid:
Company
2019 2018
GBP'000 GBP'000
-------- --------
32,285,000 (2018: 32,256,000) Ordinary shares
of GBP0.01 each 323 323
-------- --------
The number of shares in issue in the Company is shown below:
Company
2019 2018
'000 '000
------- -------
In issue at 1 August 32,256 31,801
------- -------
Exercise of share options 29 455
------- -------
In issue at 31 July 32,285 32,256
------- -------
Share Options
The following options arrangements exist over the Company's
shares:
Exercise period
Exercise
2019 2018 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 03/02/2013 04/02/2021
------ ------ ---------- -------- ---------- ----------
Zero Priced Share Option
Bonus 1 1 04/02/2011 1 03/02/2014 04/02/2021
------ ------ ---------- -------- ---------- ----------
Zero Priced Share Option
Bonus 1 1 31/01/2012 1 30/01/2014 31/01/2022
------ ------ ---------- -------- ---------- ----------
Zero Priced Share Option
Bonus 1 1 31/01/2012 1 30/01/2015 31/01/2022
------ ------ ---------- -------- ---------- ----------
Zero Priced Share Option
Bonus 2 2 31/01/2013 1 30/01/2015 31/01/2023
------ ------ ---------- -------- ---------- ----------
Zero Priced Share Option
Bonus 2 4 31/01/2013 1 30/01/2016 31/01/2023
------ ------ ---------- -------- ---------- ----------
Zero Priced Share Option
Bonus 5 6 01/01/2014 1 01/01/2016 01/01/2024
------ ------ ---------- -------- ---------- ----------
Zero Priced Share Option
Bonus 34 41 01/01/2014 1 01/01/2017 01/01/2024
------ ------ ---------- -------- ---------- ----------
Zero Priced Share Option
Bonus 3 5 28/01/2015 1 28/01/2017 28/01/2025
------ ------ ---------- -------- ---------- ----------
Zero Priced Share Option
Bonus 27 35 28/01/2015 1 28/01/2018 28/01/2025
------ ------ ---------- -------- ---------- ----------
Zero Priced Share Option
Bonus - 10 16/10/2015 1 16/10/2018 16/10/2025
------ ------ ---------- -------- ---------- ----------
Long Term Incentive
Plan Options - 13 11/02/2016 1 11/02/2019 11/02/2026
------ ------ ---------- -------- ---------- ----------
Zero Priced Share Option
Bonus - 60 11/02/2016 1 11/02/2019 11/02/2026
------ ------ ---------- -------- ---------- ----------
Long Term Incentive
Plan Options - 15 11/02/2016 225 11/02/2019 11/02/2026
------ ------ ---------- -------- ---------- ----------
Zero Priced Share Option
Bonus 62 62 03/02/2017 1 03/02/2020 03/02/2027
------ ------ ---------- -------- ---------- ----------
Zero Priced Share Option
Bonus 107 122 31/01/2017 1 31/01/2020 31/01/2027
------ ------ ---------- -------- ---------- ----------
Long Term Incentive
Plan Options - 83 31/01/2017 72 31/01/2019 31/01/2027
------ ------ ---------- -------- ---------- ----------
Long Term Incentive
Plan Options 72 83 31/01/2017 72 31/01/2020 31/01/2027
------ ------ ---------- -------- ---------- ----------
Long Term Incentive
Plan Options - 55 31/01/2017 145 31/01/2019 31/01/2027
------ ------ ---------- -------- ---------- ----------
Long Term Incentive
Plan Options 38 55 31/01/2017 145 31/01/2020 31/01/2027
------ ------ ---------- -------- ---------- ----------
Zero Priced Share Option
Bonus 324 - 19/12/2018 1 19/12/2021 19/12/2028
------ ------ ---------- -------- ---------- ----------
Zero Priced Share Option
Bonus 201 - 19/12/2018 1 19/12/2021 19/12/2028
------ ------ ---------- -------- ---------- ----------
Total 883 657
------ ------ ---------- -------- ---------- ----------
During the year, the Group granted share options under a Zero
Priced Share Option Bonus for Executive Directors and Senior
Management. The zero priced share options were granted on 19
December 2018 to members of staff subject to a three-year holding
period, a release price of 1 pence per share and are subject to
either Total Shareholder Return (TSR) or Earnings per Share (EPS)
performance conditions. All share options have a life of 10 years
and are equity settled on exercise.
The movement in share options is shown below:
2019 2018
Weighted
Weighted Weighted average Weighted
average exercise average exercise average
Number price share price Number price share price
'000s (pence) (pence) '000s (pence) (pence)
------ ----------------- ------------ ------ --------- ------------
Outstanding at 1
August 657 48.2 - 1,477 30.4 -
------ ----------------- ------------ ------ --------- ------------
Granted 525 1.0 - - 22.6 -
------ ----------------- ------------ ------ --------- ------------
Forfeited/ lapsed (270) 76.8 - (365) 40.5 -
------ ----------------- ------------ ------ --------- ------------
Exercised (29) 1.0 129.8 (455) 1.7 276.6
------ ----------------- ------------ ------ --------- ------------
Outstanding at 31
July 883 13.1 657 48.2
------ ----------------- ------------ ------ --------- ------------
Exercisable at 31
July 78 1.0 109 1.0
------ ----------------- ------------ ------ --------- ------------
The numbers and weighted average exercise prices of share
options vesting in the future are shown below.
2019 2018
Weighted
average Weighted
remaining Weighted average remaining Weighted
contract average exercise contract average exercise
life Number price life Number price
Exercise Date (months) '000s (pence) (months) '000s (pence)
---------- ------ ----------------- ------------------ ------ -----------------
31/01/2019 - - - 6 138 101.8
---------- ------ ----------------- ------------------ ------ -----------------
11/02/2019 - - - 7 88 41.1
---------- ------ ----------------- ------------------ ------ -----------------
31/01/2020 6 217 49.9 18 260 53.8
---------- ------ ----------------- ------------------ ------ -----------------
03/02/2020 6 62 1.0 18 62 1.0
---------- ------ ----------------- ------------------ ------ -----------------
18/12/2021 29 525 1.0 - - -
---------- ------ ----------------- ------------------ ------ -----------------
Total 804 548
---------- ------ ----------------- ------------------ ------ -----------------
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. During the year the Company purchased
92,247 shares (2018: 83,740) under this scheme, incurring a charge
of GBP23,564 (2018: GBP26,723) recognised in the share-based
payment reserve.
The Group's Share Incentive Plan is held by an Employee Benefit
Trust (EBT) for tax purposes. The EBT buys shares with funds from
the Group and any shares held by the EBT are distributed to
employees once vesting conditions are satisfied. The Group has
control over the EBT and therefore it has been consolidated at 31
July 2019. As at 31 July 19, excess funds of GBP140,000 was held by
the EBT, which has been included in cash and cash equivalents.
The following expenses in relation to share-based payment
transactions were incurred:
2019 2018
Group GBP'000 GBP'000
Zero Priced Share Option Bonus 19 82
-------- --------
Long Term Incentive Plan Options 77 88
-------- --------
Share Incentive Plan 173 154
-------- --------
Total 269 324
-------- --------
The key assumptions used in the calculation of fair value per
awards are as follows:
Share
price Risk
on the free
date of Exercise Vesting Dividend rate Fair
Date of grant price Volatility period yield of interest value
grant (GBP) (GBP) (%) (yrs) (%) (%) (GBP)
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 Priced Share Option
31/01/2017 Bonus 2.92 0.01 31.6% 3.00 7.9% 0.3% 1.27
------------------------- -------- -------- ---------- ------- -------- ------------ ------
Zero Priced Share Option
31/01/2017 Bonus 2.92 0.01 31.6% 3.00 7.9% 0.3% 1.51
------------------------- -------- -------- ---------- ------- -------- ------------ ------
Zero Priced Share Option
31/01/2017 Bonus 2.90 0.01 31.6% 3.00 7.9% 0.3% 1.23
------------------------- -------- -------- ---------- ------- -------- ------------ ------
Zero Priced Share Option
31/01/2017 Bonus 2.90 0.01 31.6% 3.00 7.9% 0.3% 1.49
------------------------- -------- -------- ---------- ------- -------- ------------ ------
Long Term Incentive
31/01/2017 Plan Options 2.90 0.72 31.6% 3.00 7.9% 0.3% 0.86
------------------------- -------- -------- ---------- ------- -------- ------------ ------
Long Term Incentive
03/02/2017 Plan Options 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
------------------------- -------- -------- ---------- ------- -------- ------------ ------
08/09/2017 SIP 2.99 0.01 N/A 3.00 N/A N/A 2.99
------------------------- -------- -------- ---------- ------- -------- ------------ ------
09/10/2017 SIP 3.10 0.01 N/A 3.00 N/A N/A 3.10
------------------------- -------- -------- ---------- ------- -------- ------------ ------
08/11/2017 SIP 3.12 0.01 N/A 3.00 N/A N/A 3.12
------------------------- -------- -------- ---------- ------- -------- ------------ ------
08/12/2017 SIP 3.05 0.01 N/A 3.00 N/A N/A 3.05
------------------------- -------- -------- ---------- ------- -------- ------------ ------
09/01/2018 SIP 3.00 0.01 N/A 3.00 N/A N/A 3.00
------------------------- -------- -------- ---------- ------- -------- ------------ ------
08/02/2018 SIP 2.63 0.01 N/A 3.00 N/A N/A 2.63
------------------------- -------- -------- ---------- ------- -------- ------------ ------
08/03/2018 SIP 2.31 0.01 N/A 3.00 N/A N/A 2.31
------------------------- -------- -------- ---------- ------- -------- ------------ ------
12/04/2018 SIP 1.84 0.01 N/A 3.00 N/A N/A 1.84
------------------------- -------- -------- ---------- ------- -------- ------------ ------
09/05/2018 SIP 1.40 0.01 N/A 3.00 N/A N/A 1.40
------------------------- -------- -------- ---------- ------- -------- ------------ ------
08/06/2018 SIP 1.58 0.01 N/A 3.00 N/A N/A 1.58
------------------------- -------- -------- ---------- ------- -------- ------------ ------
09/07/2018 SIP 1.25 0.01 N/A 3.00 N/A N/A 1.25
------------------------- -------- -------- ---------- ------- -------- ------------ ------
08/08/2018 SIP 1.50 0.01 N/A 3.00 N/A N/A 1.50
------------------------- -------- -------- ---------- ------- -------- ------------ ------
10/09/2018 SIP 1.40 0.01 N/A 3.00 N/A N/A 1.40
------------------------- -------- -------- ---------- ------- -------- ------------ ------
08/10/2018 SIP 1.30 0.01 N/A 3.00 N/A N/A 1.30
------------------------- -------- -------- ---------- ------- -------- ------------ ------
08/11/2018 SIP 1.41 0.01 N/A 3.00 N/A N/A 1.41
------------------------- -------- -------- ---------- ------- -------- ------------ ------
10/12/2018 SIP 1.14 0.01 N/A 3.00 N/A N/A 1.14
------------------------- -------- -------- ---------- ------- -------- ------------ ------
Zero Priced Share Option
19/12/2018 Bonus 1.07 0.01 N/A 3.00 0.0% N/A 1.08
------------------------- -------- -------- ---------- ------- -------- ------------ ------
Zero Priced Share Option
19/12/2018 Bonus 1.07 0.01 44.9% 3.00 0.0% 0.7% 0.73
------------------------- -------- -------- ---------- ------- -------- ------------ ------
09/01/2019 SIP 1.13 0.01 N/A 3.00 N/A N/A 1.13
------------------------- -------- -------- ---------- ------- -------- ------------ ------
08/02/2019 SIP 1.17 0.01 N/A 3.00 N/A N/A 1.17
------------------------- -------- -------- ---------- ------- -------- ------------ ------
11/03/2019 SIP 1.18 0.01 N/A 3.00 N/A N/A 1.18
------------------------- -------- -------- ---------- ------- -------- ------------ ------
08/04/2019 SIP 1.39 0.01 N/A 3.00 N/A N/A 1.39
------------------------- -------- -------- ---------- ------- -------- ------------ ------
09/05/2019 SIP 1.58 0.01 N/A 3.00 N/A N/A 1.58
------------------------- -------- -------- ---------- ------- -------- ------------ ------
10/06/2019 SIP 1.53 0.01 N/A 3.00 N/A N/A 1.53
------------------------- -------- -------- ---------- ------- -------- ------------ ------
08/07/2019 SIP 1.43 0.01 N/A 3.00 N/A N/A 1.43
------------------------- -------- -------- ---------- ------- -------- ------------ ------
For Zero Priced Share Option Bonus grants in 2019 that are
subject to a Total Shareholder Return (TSR) vesting condition, a
Monte Carlo simulation model was used for valuation. For Zero
Priced Share Option Bonus grants in 2019 that are subject to an
Earnings per Share (EPS) growth vesting condition, a Binomial model
was used for valuation.
Prior to the 2018 award, 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. 2018 onwards, the
volatility of the Company's share price on date of grant was
calculated using the historical daily share price of the Company
over a term commensurate with the expected life of the award. For
all awards 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.
24 Transactions with Directors and Related Parties
During the year the Group made sales of GBP89,000 (2018:
GBP152,000) to InHealth Group Ltd and purchases of GBP11,000 (2018:
GBP7,000) from Preventicum UK Limited which are related parties by
virtue of common directorship of Richard Bradford. During the year,
the Group made sales of GBP201,000 (2018: GBP350,000) to Tricoya
Technologies Limited, a subsidiary of Accsys Technologies Plc,
which is considered as a related party transaction by virtue of
common directorship of Patrick Shanley. As at the year end, there
was no balance outstanding for any transactions for InHealth Group
Ltd, Preventicum UK Limited or Tricoya Technologies Limited (2018:
GBP5,000 outstanding balance with InHealth Group Ltd, GBPnil for
Preventicum UK Limited, GBPnil for Tricoya Technologies Limited).
Group policy is for all transactions with related parties to be
made on an arm's length basis and no guarantees have been given to,
or received from, related parties.
There were no other related party transactions with entities
outside of the Group.
During the year Matchtech Group (UK) Limited charged Gattaca plc
GBP715,000 (2018: GBP803,000) for provision of management services.
Further details of transactions with Directors are included in the
Director's Remuneration Report on pages 65 to 75.
The remuneration of key management is disclosed in note 5.
25 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'.
Maturity of financial liabilities
The following table sets out the contractual maturities of
financial liabilities, including interest payments. This analysis
assumes that interest rates prevailing at the reporting date remain
constant:
0 to <1 1 to <2 2 to <5 5 years Contractual
years years years and over cash flows
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2019
-------- -------- -------- --------- -----------
Term loan 531 15,129 - - 15,660
-------- -------- -------- --------- -----------
Invoice financing working capital
facility 29,228 - - - 29,228
-------- -------- -------- --------- -----------
Trade payables 25,639 - - - 25,639
-------- -------- -------- --------- -----------
Total 55,398 15,129 - - 70,527
-------- -------- -------- --------- -----------
2018
-------- -------- -------- --------- -----------
Term loan 556 500 15,121 - 16,177
-------- -------- -------- --------- -----------
Invoice financing working capital
facility 35,907 - - - 35,907
-------- -------- -------- --------- -----------
Trade payables 18,725 - - - 18,725
-------- -------- -------- --------- -----------
Total 55,188 500 15,121 - 70,809
-------- -------- -------- --------- -----------
0 to <1 1 to <2 2 to <5 5 years Contractual
years years years and over cash flows
Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2019
-------- -------- -------- --------- -----------
Term loan 531 15,129 - - 15,660
-------- -------- -------- --------- -----------
Total 531 15,129 - - 15,660
-------- -------- -------- --------- -----------
2018
-------- -------- -------- --------- -----------
Term loan 556 500 15,121 - 16,177
-------- -------- -------- --------- -----------
Total 556 500 15,121 - 16,177
-------- -------- -------- --------- -----------
Borrowing facilities
The Group makes use of working capital facilities and a term
loan, details of which can be found in note 20. The undrawn
facility available at year end in respect of which all conditions
precedent had been met was as follows:
Group Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Expiring in one to five years 24,880 19,506 - 5,000
-------- -------- -------- --------
The Directors have calculated that the effect on profit of a 100
basis point increase in interest rates would be an expense of
GBP634,000 (2018: expense of GBP756,000).
The Directors believe that the carrying value of borrowings
approximates to their fair value.
Liquidity Risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset. The Group has a robust approach to forecasting
both net debt and trading results on a monthly basis, looking
forward to at least the next four covenant periods. As at 31 July
2019 the Group has financing facilities of GBP90m comprising a
GBP75m Invoice Financing Facility and a GBP15m Term Loan Facility
until October 2020. The available financing facilities in place are
sufficient to meet the Group's forecast cash flows.
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 also
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
2019 2018
GBP'000 GBP'000
-------- --------
US Dollar 11,324 8,371
-------- --------
Euro 4,561 5,541
-------- --------
The effect of a 25 cent strengthening of the Euro and US Dollar
against Sterling at the financial position date on the Euro and US
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 GBP4,279,000 (2018: GBP3,567,000). A 25
cent weakening in the exchange rates would, on the same basis, have
decreased pre-tax profit and reduced net assets by GBP2,778,000
(2018: GBP2,353,000).
The Company only holds balances denominated in its functional
currency and so is not exposed to foreign currency risk.
26 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
- by 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 on the face of 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
year under review is summarised as follows:
Group
2019 2018
GBP'000 GBP'000
--------- --------
Total equity 41,907 47,019
--------- --------
Cash and cash equivalents (19,173) (9,758)
--------- --------
Capital 22,734 37,261
--------- --------
Total equity 41,907 47,019
--------- --------
Borrowings 43,995 50,632
--------- --------
Overall financing 85,902 97,651
--------- --------
Capital to overall financing ratio 26% 38%
--------- --------
27 Net Debt
Net debt is the total amount of cash and cash equivalents less
interest-bearing loans and borrowings.
The table below also provides the required reconciliation
evaluating the changes in liabilities arising from financing
activities.
Net cash flows include the net drawdown of loans and borrowings
and cash interest paid relating to loans and borrowings.
Amortisation
1 August Net cash of financing
2018 flows costs 31 July 2019
2019 GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents 9,758 9,415 - 19,173
--------- -------- ------------- ------------
Interest-bearing term loan (15,000) - - (15,000)
--------- -------- ------------- ------------
Working capital facilities (35,859) 6,740 - (29,119)
--------- -------- ------------- ------------
Total net debt (41,101) 16,155 - (24,946)
--------- -------- ------------- ------------
Capitalised finance costs 227 - (103) 124
--------- -------- ------------- ------------
Total net debt after capitalised
finance costs (40,874) 16,155 (103) (24,822)
--------- -------- ------------- ------------
Amortisation
1 August Net cash of financing
2017 flows costs 31 July 2018
2018 GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents 5,802 3,956 - 9,758
--------- --------- ------------- ------------
Interest-bearing term loan (20,714) 5,714 - (15,000)
--------- --------- ------------- ------------
Working capital facilities (25,693) (10,166) - (35,859)
--------- --------- ------------- ------------
Total net debt (40,605) (496) - (41,101)
--------- --------- ------------- ------------
Capitalised finance costs 317 25 (115) 227
--------- --------- ------------- ------------
Total net debt after capitalised
finance costs (40,288) (471) (115) (40,874)
--------- --------- ------------- ------------
28 Non-controlling Interests
The non-controlling interest transferred in 2018 related to a
30% minority stake in Resourcing Solutions Limited which the Group
acquired for consideration of GBP3,552,000. From that date, it was
consolidated as a wholly owned subsidiary with no non-controlling
interest.
29 Contingent Liabilities
The Group is subject to corporate and other tax rules in the
jurisdictions where it conducts its business operations. Changes in
tax rates, tax reliefs and tax laws, changes in practice or
interpretation of the law by the relevant tax authorities,
increasing challenges by relevant tax authorities on transfer
pricing and other matters, or any failure to manage tax risks
adequately could result in increased charges, financial loss,
penalties and reputational damage, which may materially adversely
affect the Group's financial condition and results of
operations.
We continue our cooperation with the United States Department of
Justice and in 2019 have incurred GBP3.4m in advisory fees
on this matter. The Group is not currently in a position to know
what the outcome of these enquiries may be and therefore we are
unable to quantify the likely outcome for the Group.
30 Events after the Reporting Date
On 31 October 2019, the Group renewed its financing facilities
with HSBC, extending the term out to October 2022. The new facility
allows the Group to mitigate the impact of the leverage covenant on
the business, minimise the risk of an interruption to liquidation
and improve the cost effectiveness of the overall financing
arrangements. The three year facility agreement includes a GBP75m
Invoice Financing Facility and a GBP15m Revolving Credit Facility
(RCF).
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
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