Gattaca (LSE:GATC) — Financial results for the year ended 31 July 2026

0:01 Good morning, and welcome to the GATTACA PLC four year results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, Matthew Ragg. Good morning to you.

0:27 Good morning, everyone. I hope you're well. So I'll get cracking with the update on last year's results. Quick introduction for those who've not spoken to before. Myself and Oliver, CEO, CFO, succeeded in the roles coming up to five years ago now, and I've been with the organization coming up to twenty five years joining as a trainee many moons ago. Right. So how did we do last year? So summary, it was a really solid year. It's good to good to see a return to NFI growth for the group. It's been a little while since we've in... And be able to see that. We've improved productivity and and profitability over the last few years, but to get NFI growth going is great. So 11% growth last year, which is fantastic to see on a like for like basis of 7% on on the prior year. Our biggest service line is contract, so 16% growth in our contracting business, growing our contract base nearly every single month throughout the year, which is really good to see and across our biggest sectors of infrastructure, defense, energy and digital tech.

1:36 Permanent business continued to be tough. I think that's well documented in the broader market. We saw a 4% increase over the year in part due to the acquisition of Infosec, the cybersecurity specialist. And our one service line which didn't grow last year really was our statement of work, our engineering and technology services business, which really is still due to a single major customer's delay on timings on on big programs. So stuff we're well in control of, but that's the only area not to really grow last year. So a good healthy split between service lines now and really good visibility. Having a large proportion of the business coming from contract recruitment gives us good predictability as to the road ahead.

2:26 From a underlying profit before tax, 6,100,000, so up 85% last year, combination of really good cost control, but also now growing that market share and the NFI line. So very pleased to see us overperform our initial guidance by quite some way and really continuing to build momentum in the group. Cash, which has been one of the real strong parts over the last four years, continues to stay strong, which is pleasing considering we're growing a contractor base, which obviously utilizes cash. And obviously, we had the acquisition and dividends going out last year as well. And this year, a final dividend of 4.67p, a total year dividend up to six piece, so a doubling on prior year. So in summary, a solid year, another year going in the right direction and delivering on our commitments.

3:23 The four strategic pillars that we've had for the last four years are serving us really well, and we will continue to focus on those over the years ahead. External focus is very much where we're at as an organization now. We've narrowed the geographies and the sectors that we are trying to be dominant in, and that enables us to get much closer to the marketplace, much closer to the customers, and really understand both the services and the skills they need now and what they're gonna need based on project and economic cycles. So that has continued... That will continue to to serve us well and something we're really obsessing about. In the last financial year, we consolidated nearly all of our staffing brands into MatchTech. I say nearly all because we also acquired Infosec, which as a cyber specialist, we will be maintaining that brand. But all of our brands for staffing came into Matchday, which just makes it easier for our colleagues and our customers to navigate, enables us to give a better customer experience, enables us to better help customers understand what services we can do, but also pivot between those depending on what they require at that time. We've seen some real good improvement around internal collaboration, but also customer access to different services and different skills across the organization.

4:35 So that's been a big focus for us. This new financial year, we've also invested in our chief first ever chief commercial officer. He's recently joined us as, again, another part of our growth journey to really help us become even closer to those marketplaces and to continue to win and grab market share. And we've continued to maintain really good customer feedback and NPS scores. So external focus, a big part and serving us well. Culture, for those that have heard me before, I obsess about this. I think we've got a wicket culture now. Our engagement continues to increase every single quarter, which is fantastic to see. That hasn't plateaued at all. And really lovely to get the accolade this year of The Sunday Times top 10 big businesses to work for. A really good testament to not just what we're building, but how we're building it and the engagement we've got within our workforce at the moment, which is resulting in high performance, far better. We've got excellent retention now, best levels we've had in many, many, many years, and just a really wicker place, is helping people to be successful. So culture, we will continue to obsess about and making sure it's a... We've got a great business that people enjoy being at, but with all the right tools to help them be successful too.

5:50 Operational performance, again, we've seen considerable growth in NFI per head over the last four years, another 20% last year as we grew our top line but actually slightly shrunk our sales force. Part of that is due to the systems and tools and focus we've been having to enable our consultants to be able to do even more, and that's enabled them to to grow the top line but hasn't need us to require... To to hire as many new sales heads. Saying that, we have been building momentum during the last financial year and certainly in the half year two, we did grow our sales force. And going into this new year, we've continued to do that, but also pleasingly being able to get those to performing and profitable levels far quicker than we have done in historic years.

6:36 We've also gone for and passed GATCHISO twenty seven thousand and one. Clearly, the markets we serve, the customers we support, the data we hold is critical. Being able to protect that is really super important to us. And we've also launched a whole range of different tools, all aimed at helping our consultants to be supercharged or give our customers a far better and secure experience. So pleased to have seen a lot of those roll out last year as well. We continued our obsession about cost management and making sure that we're conscious of everything we're investing in. We've completed the integration of Infosec and realized the synergies on that, which is fantastic to see. We've also continued to simplify the business, just making it easier and cheaper for us to be able to operate. So some good progress on all four pillars and good focus and objectives for those going into the new year as well.

7:34 As far as the sectors and how they're deployed, I think the wider labor market is still very, very tough. We've got high levels of unemployment. We've got lack of client confidence, which is absolutely impacting the market. I think data talks about the lowest job flow for quite a while and cautiousness around perm. But we have seen an increase over the last financial year in the demand for flexible labor, which in security does drive that. And certainly, we've been really obsessive about that. But vacancies on the whole within the markets we serve have dropped a little bit throughout the year. Despite that, our obsession about being even closer to the market has enabled us to obtain more opportunities and convert more opportunities despite the size of the marketplace being slightly smaller.

8:25 We've had good positive performance, as I said, in pretty much all areas. The standout one there would look like the defense market. That isn't a market which has been going particularly gangbusters despite the global scenarios that we have at this moment in time, but the team have really expanded their service offering and performed exceedingly well last year. Infrastructure, which is our single biggest area of the business, grew by 5%, a lot of that coming from both the water and the highways market. Significant investment goes into AMP8. We continue to invest in energy, which has various subsectors for us, transmission, distribution, nuclear, oil and gas, data centers and renewables. Clearly, energy creation power to creation, but also retention distribution is absolutely critical to all nations around the world at the moment. So we will continue to invest and scale our capability there.

9:22 Digital tech, really pleased to see a 10% growth in that area despite what has been a pretty subdued marketplace. There's a fair amount of press out there at the moment talking about the ability for tech companies to be more productive with fewer heads. That absolutely has resulted in a lower level of hiring activity across those organizations, but has also meant an increase in the hiring that is happening is happening at a more senior level. So really pleased to see us focusing the right way on those and also aligning more and more of our digital tech capability to the vertical sectors that we're also obsessing about, which has really started to pay off. So good progress there and good good progress across our other areas as well. Commercial and professional skills had a solid second half year and gone into this year well.

10:10 And and equally, the InfoSec acquisition, a year and a bit old now, but certainly feels part of the organization, which is really good to see. And, clearly, over the last few weeks, cyber has been exceedingly present in all of the press and will continue to do so. As I mentioned, labor market trends continue to be challenging. Yeah. I think various reports talking about it not getting any worse, but that doesn't mean it's necessarily getting better. Unemployment, clearly high. Youth employment, low. Demand and confidence around perm are tight, but certainly in that flexible labor market has been signs of positive growth, and we certainly have been realizing that as well. Overall, our performance, the contract vacancy flow was up 7% during the year. Again, as we get closer and closer to the marketplace, closer and closer to our customers to be able to be given the opportunities to support on that and really good conversion of that, which is pleasing to see.

11:12 And and actually grew nearly every single month throughout the year on the contractor base. Clearly, by the nature of flexible labor, you get some seasonal dips. Pleased to see that our ability and our focus and obsession about the marketplace means that

11:28 we've had the odd month of going backwards rather than concentrated periods of time. So really good momentum and grew our contract base by 10% last year, which is the first time we've been able to do it by that sort of whole in a really long time. Permanent vacancy flow has been a little bit volatile, but really good to see the NFI generated for us in stable terms, slight growth due to the acquisition. And And as we go into the new year, slight increased confidence around some stability in the marketplaces, which is pleasing. I'll hand over to Oliver to give an update on the financial results. Okay. So I'll just skip on to the next slide and look at this bridge format. So NFI on a like for like basis grew from GBP 38,800,000 up to GBP 41,500,000, so like for like growth of 7% in the year. That was really driven, as Matthew talked about earlier, by the defense sector with a strong year growing by 17% and infrastructure, which grew by 5%.

12:36 If those two as our two biggest sectors are growing, then we're in a good position as a group for overall growth. Both of those areas were growing driven by strong contract performance during the year.

12:51 The one weak point NFI declined during the year following a previously strong period was in GATTACA projects in our engineering and technology statement of work business, which was down by 900,000. The other areas of our group was... That was... That that growth there was really driven by our commercial and professional skills, so where we're hiring for a lot of our clients, procurement, HR, professional, professional roles, procurement, HR, finance roles. Also on the perm side of things, that was an area that we start... Started to see strengthening during, f y twenty six and during the second half, which contributes to performance. And then finally, the acquisition of Infosec added GBP 1,700,000 of NFI and helped us to achieve that 11% increase on the year.

13:49 PBT was was really driven by the NFI growth as we've as we've just talked about. We managed the admin costs tightly during the year. We saw some some decreases in in headcount costs offset by really the addition of the Infosec headcount and team in there and also some incremental variable pay on on the admin cost side, which I'll come to in more detail. So

14:19 overall, we went from 3,300,000 to £6,100,000 across the year driven by driven by the NFI growth, which is always always key for us and a good a good fall through of NFI to profit there, resulting in us increasing our margins to almost 14% on an operating basis. The management of admin costs on a like for like basis, we increased admin costs from 36,000,000 to £36,300,000 so marginal marginal increase. Headcount reduction of point 8,000,000 was split 500,000 in in the sales side of things and then about 300,000 in the group support side of things. On that sales headcount side, we are now... We we are aiming to grow our sales headcount through f y... Through f y twenty seven.

15:05 We were we were working towards doing that for f y twenty six, but but the the growth in headcount really started coming through a little bit later in the year. We saw growth in headcount... In sales headcount as we exited q four. So through q four, we saw some growth in sales headcount. That's continued into q one as we're looking to hire experienced high quality salespeople into the business to help us push forward NFI further. Bonus and incentives really driven by the NFI growth results in in more variable pay being paid out to our to our sales team members. So it is a function of of the growth in NFI and and and profit that some of that flows through to variable pay.

15:52 Full year impact of the ENAIC legislation, obviously, a huge part of our cost base is is people, so that ENAIC legislation had a full year impact of of about 500,000.3 was was felt in f y f y twenty six. We've, as we use our our database and our internal quality of of of candidates, our internal, sources of of of candidates more in our own marketing, we need to use job boards less. So we've we've really realized some savings there year on year, which gets us down to that 36,300,000. And then the acquisition of Infosec, about that million pounds of cost delivering the the 1,700,000 of of NFI that they contributed to the group.

16:38 And then finally, on to the net cash bridge. So, again, net cash, very, very stable year on year, 15.7 to 15.4 on a group basis. That included the the acquisition of Infosec, which net of cash acquired was was £1,200,000 cash outflow, dividends dividends paid of of 1,000,000,800,000 of of working capital that we utilized as we grew the contractor base. So those underlying trading trading cash flows really supported supported those cash flows and allowed us to keep cash pretty stable. Also, improving... Stable and improving was DSO, which was forty point five days down to forty two point five in the previous year.

17:27 Again, that was similar to similar to last year. Think that level is pretty average of of of what we would expect from a good a good DSO performance for the group and and where we would expect to see it. I'll now hand back to Matthew for outlook in closing. Oliver? Yeah. I think it's odd, actually. It'd be the first one of these in about four, five years, but we're not doing it the week after some government changes, very controversial budgets or presidential changes. So stability might be a bit interesting, but we have great momentum, which is really good to see. We... As I said, we've been having nearly all service lines growing last year, headcount growing towards the back end of last year and into the start of this year within sales, which is which is good. And we've got a really clear focus on the markets we're trying to dominate and the service offerings we're we're building capability in.

18:24 So we go into full year '27 with a really well engaged, well tooled, well motivated business, but in a really volatile world. And with the last four years, despite that volatility, we've proven that we can grow. So if we can have a little bit more stability, that would be fantastic, but we will grow regardless of that.

18:45 Clearly, it is an odd world out there, but the demand for the skill sets and really over the last few years, what we've been doing by getting closer and closer to fewer markets, it's been about looking at the skills and services they need, and that's seen us increase the amount of activity we're doing, not just in our historic heritage strengths of white collar professional and technical, but really expanding out our capability in engineering, construction, manufacturing, skill sets, which are in high demand, and labor is required for critical programs and have a higher level of AI proofness, if there was such a phrase. But we continue to see that positive demand being required. We see that need for flexibility around the workforce being ever essential, whether that is contracting business or statement of work business. All the other service lines we offer is about how our customers deliver in their programs. I think we're really well set up now with a a great range of service offerings to help those customers navigate those those challenges.

19:45 And, clearly, from from a board point of view, our market expectations out there of 6,500,000 for the financial year we're in now. And we know we've started the end of q one in a solid position, which is good to see. So that's outlook for us. Happily go to any questions. That's great. Thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would like to remind you the recording of this presentation, along with a copy of the slides and the published Q and A, can be accessed via investor dashboard. And Matt, Oliver, at this point, if I may hand over to you to take us through the Q and A, and I'll pick up from you at the end. Thank you.

20:35 Yes. Thank you very much. So first question, full year 2027 profit is guided to be weighted for the second half, always is in our world. Do you expect first half year of full year 2027 profit before tax to be at or below the $3,000,000 you made in the first half of full year twenty six. We're at the end of Q1, I think, is absolutely fine. We're not expecting to be below, and we'd like to see a small amount of half year one growth on last year, albeit we are positively hiring and increasing our cost base as we build the momentum on that. But certainly, our expectations are to be at or marginally above. Second question, Oliver? I need to put it on up. So that is your broker forecast net cash falling from GBP 15,400,000 to GBP 1,900,000 in FY 2027.

21:29 How much working capital does each 10% of contract to growth tie up? And how much of your cash is surplus to what the business needs to run? So if I take the second bit first and surplus, how much of the cash is surplus to run, the nature of our our business is very much one of weekly inflows and outflows as made that weekly contractor payment, which is significant through the quarter, which is how the cash cycles. We probably vary between 2 to 3,000,000 and 16 to 17,000,000, 18,000,000. And we average through the year. We've averaged about 11,000,000 through last year. So the cash will vary through the quarter, but, we've always got positive cash balance in the group. We also have a invoice discounting facility that we aren't utilizing at the moment, but we can, that allows us to draw up to £40,000,000 against the invoice book we've... We we have got.

22:30 So, the the first bit of your question was about contractor growth and utilization of working capital. So our contractor base, I I think of it in probably million pounds of NFI. So 10% growth in our contractor base would be would be £3,000,000 of NFI. I think net through the through the cash flow would be probably around $6.06 to £7,000,000 of of working capital at the peak for growing that, but fairly quickly, that would then, the profits from that from that contractor base would would support it. So even for for quite significant contractor growth, we wouldn't see a full utilization of all the all the net cash that we have.

23:21 Next question here. The next one is, since April 26, recruits are held liable for unpaid PAYE on contractors paid through umbrella companies. What share of your contracts are paid through umbrellas, and what liability or cost does that expose you to? So

23:38 we we run our own contract PAY payroll. We also pay workers through limited companies, and we'll also have some through umbrella. It's about a third, third, third is our is our mix. So a third of our contractor base is paid through through umbrellas. But we were... We... As part... In advance of that legislation, we reviewed our approved umbrella supply list and tightened that tightened that up. So it's a smaller umbrella supply list, and we're putting in more oversight. We put in more oversight and audit of those two to work to manage the risk. So we will be looking at our umbrellas, processes, and controls on a on a monthly basis to manage the risk that we're exposed to there.

24:25 There's a question here about sales headcount. It ended last year 4% down even though more line was planned. What's headcount growth target for this year? And what's different this time? Yeah. I think it's...

24:40 We certainly had a plan to increase sales headcount by 10% if we could last year. What actually transpired was better level of productivity per head for the investment of training and tooling that we had done, which actually meant we weren't needing to hire as many delivery type salespeople. So actually, we did grow on our market making sales account. People were going out there, approaching the market and creating opportunities, but then also able to converting. So actually, our percentage of that did increase last year, but the overall sales headcount shrunk slightly, but for positive reasons. Second half year has seen us grow that. We will continue to do that, but I'm more obsessive about the quality rather than the quantum.

25:28 We do not have to. I think the world of recruitment has changed. It used to be if you wanted to grow, you had to sit by 10%. You had to grow your sales headcount. We have got further growth that we can achieve, significant further growth that we can achieve by continuing to help the current workforce become even better and better, and we're obsessing about that. But we will expect to see probably about 5% sales headcount growth during this year If we can find the right quality people to come and join the team, we're a great place to be now. It's a great environment. We're able to help people be super successful, but we wanna make sure we keep those standards really high as to what it takes to get into the group. There's a question around contracts and numbers growth. Just to summarize, we we are continuing to grow into new financial year at the rate we're budgeting for. So I think that's a fair answer to say on on that one.

26:25 If AI does cause white collar job losses or at least slows the pace so far, and do you expect to benefit from your growth switching to your sectors? I I think there's so many unknowns in that. What we're making sure we're doing on that is being very close to our customers as to what's their real demands. We are not exposed really at all to the most impacted area in the white collar space, which is the early careers junior hiring. Most times, companies would come to us just because they need an experienced pro to help them out, so that actually plays to our strengths. And really, like we have done for the whole twenty five years that I've been here, we continue to pivot to what are the skills demands, and that has certainly over the last few years seen us increase our capability and and delivery upon skill sets within the skilled and semi skilled workforce as well. Clearly, the sectors we're obsessed about, there is gonna be long term demands and essential requirements for those, and we are well positioned, and we want to continue to build our market position on that one.

27:31 Let's have a look. Yeah. Right. I think... Would you consider larger acquisitions, or are you remaining focused on smaller complementary bolt ons? Yeah. Certainly, it depends on one's version of what larger means, but I think the group has a history of one major acquisition which doubled us in size. We're certainly not looking at anything of that sort of nature. We are really clear on the sectors that we want to obsess about and the service lines that we want to be dominant in, and we continue to look progressively at a whole range of options of companies in that space. And if we feel there'll be a fantastic culture fit, the capability will absolutely make us better, and the economic stack up, then we would pursue.

28:27 But on the whole, I would say they are small to medium sized options rather than anything on the larger scale. What are your thoughts on the apparent volatility of the share price? How much is a reflection of geopolitics markets versus GATTACA specific factors? How you guys might know better than me on that one. But, yeah, it is... All we can do is continue to build really good positive momentum, really obsess about our marketplace, make sure our staff are really well set up, and to continue to deliver on our commitments to the market. And we've done that every six months for four and a half years now, and we will continue to do that. Clearly, if some factors in the market, they they do tend to hit our share price. And I think compared to our listed peers at the moment, you would look at us and and say, I'm undervalued.

29:16 And I'm sure the geopolitical and sentiment is... It's a far greater sector. A factor of that, I'm pretty sure maybe six months ago or three months ago when we did an update of it, what, 50% over. Our initial guidance, we didn't really get the increase that one might expect, but that's fine. We will continue to build a really sustainable business and keep delivering on our commitments to our shareholders. Will we be at Mello later this month? My short answer, yes, we will. Don't know which day we're at. Tuesday. We're on the first day of around... Yeah. What happened to statement of work? Do you see the delayed projects coming back or is this a new level of training? Yeah. It's... There's been positives within that. We we had seen over the last prior three years really significant growth within that space, which is actually was the darlings of our service lines doing exceedingly well.

30:10 A lot of that was within one or two major customers. One significant customer certainly has gone on pause. That will come back. It's just when. So we... And we've managed the business well and effectively. The positives out of that actually is it's really increased the intensity to go broaden the customer base, and I'm really pleased to see the number of new customers we're now trading with. And that prior big customer probably took us five years to get it to a level of scale, and now we're actually into kind of year two with a whole range of other customers and expect to see that come back over the years to come. Commentary on the opportunity pipeline. I think we... Actually, the investment around opportunity pipeline has been positive over the last couple of years.

30:56 We... There are a business which is, excuse me, on the front foot, which is really clear on who and what it is and is really clear on its service lines. It means you build the right pipeline, and that's certainly what I'm looking at at the moment is some really good customer opportunities for us to convert over the years ahead. There's more than enough market share in the sectors and services skills we're obsessing about for us to go and get considerable growth irrelevant of market dynamics, and that's what we need to really focus on. Next question kind of answers that. Sustainable growth. Yeah. We know what services, skills, and sectors we want to be dominant in, and it's just about doing that year after year after year until everyone in the market really knows our full capability.

31:45 And we're working with more and more customers and doing more and more of our services with the customers we have in place. Is it fair to say full year 2017 assumes a slowing contractor growth and continued improvement of perm? 6,500,000 looks understandably prudent. Do the Q4 hires contribute to 2017 growth? Yeah, I think it is prudent. I think the 6,500,000 is based on the fact that we are investing in headcount. Really, we were a little bit late in that investment last year. The ability to have higher productivity per head, have slightly a different shape within our sales force, meant our cost base was slightly lower last year than we had anticipated. But for the right reasons, this year, we have good momentum. We're a great place to be. We've got great tool sets. We can prove them to ourselves and others that actually people can come in and have great careers with us.

32:37 So we want to capitalize on that opportunity by increasing heads. But, yes, people are now getting to both performing and also profitable far quicker than they have done in historic years. So we do expect to see them contribute in the second half of the year. And half year two is always a bigger half year for us on an NFI basis, purely due to just working days, seasonal weather conditions, etcetera. A certain amount of construction and energy work just more of that happens in that time of year. But equally, we have been adding headcount at the end of last year and the beginning of this year, which should flow through to an increased performance in the second half of the year, we'll see how we're performing. What supports appetite for further acquisitions and in what sectors? Well, all of the sectors and services and skills we're in, if we see good opportunities within any of those, we will consider it. We do have appetite to do it, but it's appetite to do it rather than an...

33:36 A desperation to do it. If we find the right businesses, which we really feel we can bring into the group and they will make us better, and we will be able to make them better. And there's a really good cultural fit we will seriously consider. And we have investigated a huge amount of companies that we have acquired and integrated upon. So we're not rushing and panicking to do it, but where there's good opportunity, we absolutely are pursuing it. Is there room for productivity to grow further following a positive uplift? Yeah. I I I fully believe there is. I think the focus and obsession around the right service offerings, the tooling that we've put in place over the last few years for our consultants.

34:22 Last year, we saw a record number of people hitting sales target. We saw really good significant growth, not just in new people coming through, but in established consultants who have been with us ten, fifteen, twenty, thirty years even, who were all able to grow quite significant volumes

34:39 as well last year. And I think that is the shift within our marketplace. The ability that things like our match tech automation AI platform gives is enables our consultants to do more and more of what they love doing, which is being that absolute expert in the marketplace and build great relationships and have to spend less time on some of more of the transactional tactical activities, which should result in them being able to continue to to improve that productivity. And and certainly, NFI per head growth per sales consultant is something that we are really obsessed about because it's great for our people. It means they are being more successful. It means they are earning more, which adds to momentum, motivation, engagement, retention. So certainly, we we feel there is more productivity gains to be had there.

35:28 That's more coming through. Yeah. I think that was a lot. Thank you very for all your questions. You very much, Matt and Oliver, for addressing those questions for investors today. But Matt, before we direct investors to provide you with a feedback, which in this particular important to yourself and your company, could I please just ask you for a few closing comments? Yeah. Hey. Thank you very much for taking the time to listen to us today and for the really good questions as well. Our job is to continue to build positive momentum and to keep delivering our promises, and that's exactly what we will continue to do. So, yeah, thank you. If you are an investor, thank you for your support. If you're not, I hope we're of an interest to you, but we will see you again in six months' time to update you on how we have absolutely delivered on what we said we were gonna do.

36:17 Fantastic. Thank you once again for updating investors today. Could I please ask investors not to close this session? As you now will be automatically redirected to provide your feedback, which will help the company better understand your views and expectations. On behalf of the management team, we would like to thank you for attending today's presentation, and good morning to you all.