Gattaca plc, the specialist Engineering and Technology (IT & Telecoms) recruitment solutions business, announces an update on the review of its international footprint.
As stated in our trading update on 2nd August 2018, the Company has been reviewing our international footprint with a view to focussing on those markets where we believe we can make significant, scalable and sustainable profits in the short to medium term and reduce our exposure to businesses and territories which are characterised as lacking critical mass, declining market share, low profitability or with a high administrative burden (including unattractive payment terms).
As a result of this review, the Company is now putting in place a number of steps to withdraw from these territories and markets, including the Contract Telecoms Infrastructure markets in Africa, Asia and Latin America (some of which is UK sourced) as well as our operations in Dubai, Kuala Lumpur and Qatar. As part of this process, we are also consolidating our London and Bromley offices to a single location at our London Cotton Centre premises.
We are currently notifying all staff and customers that will be affected by this process.
Gattaca remains fully committed to growing our international footprint in those areas and territories which offer the opportunity to achieve significant, sustainable and scalable profits. The Americas, where we have been experiencing excellent growth, is a clear example of this. We are pleased therefore to announce today the opening of a new hub in the USA, based in Atlanta, Georgia; this will operate alongside our existing hub in Dallas, Texas. In China we aim to replicate the success of our America model as we see a shift towards Engineering & IT permanent recruitment and a reduction in the legacy Telco market.
We also remain fully committed to Technology and will continue to invest in our Networkers brand, including in the subsectors within Telecoms which meet our strategic criteria.
The business impacted represents approximately £7m of FY18 NFI, the significant majority of our non-recoverable Withholding Tax and made a small contribution to our FY18 underlying profit after tax. This business has been in decline and we had not forecast it delivering a significant contribution towards our FY19 underlying profit after tax. As a result our forward expectations remaining broadly unchanged.
The cessation of the activities detailed above will allow a significant release of working capital (in the order of £7m before exit costs) and result in a reduction in Net Debt, which at the end of July 2018 was £41m (being better than our previous estimate of £46m). One-time restructuring costs to be incurred during FY19 are expected to be of the order of £3m.
We will update the market further at the time of our Full Year results announcement on 8th November.
Patrick Shanley, Chairman said: “The steps we are announcing today will place Gattaca on a firm footing for future growth. The withdrawal from these territories and Telco Infrastructure operations remove some very low margin business, which was tying up significant working capital and diluting the strength of our core operations. Following this review, Gattaca can now focus on our strong core and growing businesses, in particular within UK Engineering, UK IT, and North America as well China and our recently acquired RSL Rail business.”