Gattaca (LSE:GATC) — Interim results for the six months to 31 January 2026

0:01 Good morning, ladies and gentlemen, and welcome to the GATTACA PLC Interim Results Investor Presentation. Questions are encouraged. They can be submitted at any time via the Q and A tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today, and we'll publish those responses where it's appropriate to do so on the Investor Meet company platform. Before we begin, we would just like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I'd now

0:32 like to hand you over to CEO, Matthew Ragg. Matthew, good morning, sir. Good morning. How are doing, Jake? Hope you are. Very well. Thank you. And morning, everyone. So here we are again, eighth update. So I'm pleased to be sharing some more positive news of delivering on what we said we're gonna do. Quick introductions for those that haven't joined one of these, myself and Oliver. Into roles four years ago now. I've been with the organization over twenty four years now, and Oliver for the last seven or eight years as well. So a a team that know the business well, know the markets well. What I really love, I think, is what we have demonstrated in what are some tough market conditions is the resilience of the organization. So our focus on skills that are really required and gonna be continued to be required on projects that have to happen and service lines, which offer greater visibility into the future as well. So we're up to now 77 of our Edifier coming from our contract focus, which has been a really major focus for us over the last two, three years of really building that momentum, growing our contractor book, which we're really pleased to see that growing month on month now, which is fantastic.

1:56 We've expanded our service offerings. We've reduced our brands, reduced our geographical diversification, reduced the number of sectors that we're trying to be famous in, and really focus on those sectors, and then building out additional service lines in those so that we can help more of our customers in more ways, which is we're really starting to see the benefit from that. I think our tech stack's been tested. We upgraded that about five years ago globally, and we continue to invest in that heavily around how do we improve the customer experience, and most importantly, how do we really supercharge every consultant that we put in the business. And that's been a really big focus for us. We've got a great great business, great reputation. We've in the first half of this year, we've consolidated further brands and really in the staffing world.

2:42 We have MatchTech now as our major go to market, which is a multi service, multi skill, multi sector staffing organization, and we've acquired Infosec. So we've gone from lots of different brands with different services with different skills and really making sure Matchtech is super famous. We've welcomed the Infosec team in August, and they are now fully integrated from technology point of view and starting to go out to those match tech customer base to offer that increased capability. Big bit, all of our focus is around really engineering and technology major in infrastructure programs as well. So projects that will happen have to happen either that for for national CRISPR infrastructure programs or simply for driving economic growth. Nice to see that we've been winning awards.

3:30 I think we're really, really focused internally on making sure it's the best place to be, and and that's has come through now in our retention, our record engagement, but also really nice that what we're doing is also being recognized by the external market as well. We've got a great leadership team. We're we're an exceedingly passionate bunch. There's a lot of us here who have ridden through a long time within that. There were some tough years, and we've learned lessons from those tough years and really now have a huge amount of pride coming back into the business about the direction we're on in very tough market conditions. So great to be seeing that. We've made some really specific investments over the last sort of three years, really scaling in fewer markets. And certainly, we're seeing the fruits of that starting to come through in the likes of energy, defense, and infrastructure as well as our acquisition, and equally continue to to be cost effective and manage our cost base.

4:27 It is a people business. We talk about we're a people business that helps people to work with people. And if you're gonna be focused on that, then you've got to have a great organization. And our number one focus four years ago was rebuilding that culture, rebuilding that belief. We still obsess about it, but nicely, it can now be number four as we continue to focus on the things that take us forward, that is now our foundation. And it's what's making us a really good home for people, be that through hiring or through acquisition. So we certainly feel that's a good one for us. Summary of the first half of the year. I think the one metric over the last sort of three and a half, four years that I've been in place, we haven't grown the top line NFI. So it's really pleasing to be doing that organically as well as the acquisition going on, but 13% year on year NFI growth, which is which is great to see. And so infrastructure has performed well. That's our biggest area of business, 6% up. Defense had a a pretty tough half year last year, so it's really good to see that that has recovered from that position, has been has good momentum.

5:29 And water market is a huge amount of investment in UK. AMP8 is the single biggest economic investment, we're very well positioned in that to capitalize. Energy, we took from a relatively small business area four years ago, and we've really invested in that. And we're seeing solid 13% year on year growth with much more to come within that. Energy provision, energy resilience upgrading of the the the national grid frankly to cope with the increased demand and also requirements of storage. We're well positioned and seeing the benefits from that. As I from our service line, like every staffer out there, perm has been tough. We're we're pretty flat, so it's good that we're not going backwards, pretty flat. The statement of work business has gone back this year, primarily due to one major customer in the defense marketplace, which was about 75% of our business a couple of years ago. That has now been paused once the government works out which projects it's committing to and our contracts revenue. So we've had really good contractor growth, pretty much now for about eighteen months consistent growth, which is good to see. So like for like contract up 15% year on year, which is good. Permanent down 4%.

6:46 Part of that is repositioning. We've gone up the value chain offering higher level, more niche positions. That has led to a couple of the lower value volume programs that we've been swapping out. So under control, final lap, it is representative of the wider lack of confidence in the wider markets at the moment. PBT, million for the half year. So a good increase on last year as we continue to build that momentum. We are very keen to be investing. We think, as I said, we're a good home for people now. So we are planning to grow our sales headcount in the second half of the year, but a good position to be at half year, up a 187%. Cash has gone down a little bit for good reasons. So one, getting back into the habit of paying out the dividends, which is certainly what we plan to be doing.

7:37 Equally, the acquisition of Infosec that we did at the beginning of the year. And clearly, as we grow our contractor base, it requires more working capital to be able to finance that. So exactly the way we want to be utilizing our strong cash position. As far as sectors, I've touched upon this a bit, but good growth really where it's it's the first time in a long time we've been able to look at pretty much all of our markets and and talk about year on year growth. And that just creates a more of a a winning environment. And a lot of that is grabbing market share. This is this is about us being first on the blocks, closest to the customers, obsessing about our markets, really understanding who's winning what and how well positioned they are, and really getting to know them to to some depth. If I look at the business four years ago, we were fighting in so many fronts and so many brands and so many geographies.

8:28 It was impossible for us to know every single customer really well, whereas we've really narrowed that focus. And frankly, over the over the next couple of years, part of my job is to make sure I know every single CEO within those markets and the rest of my business likewise. So we're really starting to see the the fruits of that focus, come through. So strong performances across the board. In mobility, the aerospace market has huge amount of demand, but a supply chain challenge in getting those airframes built and delivered. However, that does mean the extended life to a lot of our aircraft, lot more MRO. UK or European automotive market is clearly a challenging one. So we've retracted our position there somewhat. Digital tech has been tough everywhere. I think when you hear starting markets talk, it's generally about perm or it's about technology.

9:18 Both of those are very difficult, but we have seen solid contract growth. And our other sectors, which includes the acquisition of the SEC, but also the repositioning of our old Barkley Mead brand, which does the professional skills to support our engineering and technology customers. That's starting to really gain traction as the cross sell becomes a lot easier going to market as one brand rather than optical.

9:42 So, yeah, good progress. These were our four strategic pillars when we started, and we're we've just continued with with these. They're they're working well for us. I love how externally focused we are now. Now that we've got real clarity over our brand architecture, the sectors we're focused on, the types of customers we want to work with, the types of candidates that we want to be helping, we're doing more and more externally in those marketplace. So that's that's fantastic. That's now led to a really structured sales plan, which really we need to just obsess over for the next three to five years and continue to get to know those customers better and vice vice versa. We the acquisition of OM SEC is now in from a technology point of view. They're fully onto our systems, both in house and and sales platforms. Now it's about introducing that new enhanced capability to the match tech customer base, which we're at the beginning of of that journey. I'm pleased to see that all this momentum that we're building, we're doing that and increasing our customer satisfaction as well. It's it's a key part to to any business is making sure you're close and supporting your customers in the right way. Our culture is wicked. We've got really record high high levels of engagement still.

10:52 Our attention is really high still, which is fantastic. And and the the attrition that we do have is very much in the controlled area of the market and what we want to be doing. And really, our focus now is about hiring more and more frontline salespeople who are market makers and bringing in them into to what is a great great business. One of the other bits we've really been focused on this year is that peer to peer relationship. We've a more united team with more momentum. We really want every team working super close to each other to be able to give an even better experience. That's something we're really focused on. Clearly, the average NFI per sales head has been an improving stack of the organization. I think we're about 40% up since we we we took over. And that's something that we can continue to to to push. Clearly, hiring and increasing our sales heads for that, that's gonna make it difficult in the short term. But the old traditional caps of the the average NFI per head, I think the utilization of the tech stack and the real focus on where we're trying to be famous is starting to increase those those those levels that the market is used to talk about. And that's something over the years ahead of we're definitely gonna be doing.

12:00 Really pleased, first time of asking to have achieved the ISO 27,001. Just a really good stamp of approval of a well run business, doing what it can to protect our sales and our customer base. So good nod to the team on that one. And we've been integrating various different automations and AI probably for about two and a half years now, But we're really now into a full suite of it, not just on the back office side and not just on candidate attraction, but throughout all the customer journeys to improve the customer experience, but really to supercharge everybody in our business. I'm really keen. I love people. We are a people business. So none of this is trying to replace individuals in our business, but more so really make it so that they can be the very best they can be and also give our customers the very best of customer experience. So, yeah, good progress being made on that. We've continued to maintain and have good cost control.

12:58 Our split between sales and support is about right. We'd still like to be growing our sales headcount, and that's a big focus for us in half year two. We won't need to grow our support headcount

13:10 and ratio with that. But we're we're in good control over that and continue to make sure we're investing in the future capability of the organization. Market trends, we don't have to move far to see that the market trends and hear negative noises. It is tough out there. Hiring is a confidence game. And if volatility and the market placing businesses consider whether they should be investing in growth. I think certainly in The UK market, the increased cost of employment has absolutely hit a certain level of worker and that's that will will and it's it's hurting the market. Equally, from a candidate point of view, if there's volatility out there, it it does create a a lack of confidence to move. We like everyone else have seen that in our permanent recruitment, but in the flip of it, uncertainty does create a challenge around where we have to get projects done and therefore the use of flexible labor, especially as people on project related side. We've certainly seen us grabbing market share within that. But the markets continue to be challenging out there, but pleasing that we seem to be navigating it very well.

14:20 This is just demonstrating our kind of flow. The box on the left is vacancy trends. We have, again, seen volatility within that ourselves. Probably the most pleasing part on this slide for me is the boxes on the bottom of that left hand chart. The green ones

14:34 are the months where we grown our contractor base versus stayed flat. Really pleasing if as a business, we we've significantly grown our membership base. We like to talk about it in that way over the last few years, and we wanna make sure we continue to do that. And this year, the last few years, we've gone back to these, I would have talked about at Christmas time, we tend to see a really big drop off at year end, and it takes us until about March in order to recover from that. Actually, we saw no drop over at Christmas, in fact, grow straight away in January, which, again, is a good sign of the momentum that we've got. Perm vacancies flow is down a little bit, again, linked to what we'd expect in the wider market. Over to Oliver. Cool. Alright. Thank you, Matt.

15:20 So looking at the looking at our NFI bisector, I'll just skip on to the next slide, which does it in a more pictorial format. So we've grown overall NFI year on year by 13%, 8% on a like for like basis, including infosec, which added a million pounds to our our group NFI number. Within that 8% like for like growth, the largest area is is defense as as Matthew talked about earlier. We, that that bounced back strongly from a a weak comparative h one and and and grew grew contractors in in the defense sector. Energy was up 13%, again, reflecting the investment we've made over the last two two years into the energy team, adding consultants and capability across the energy space.

16:17 So really pleased to see that coming through in in net fee income growth and contract growth. And finally, infrastructure, which at 34% of our of our group NFI really represents a a large portion. So with that growing growing 6%, it always provides us a really solid base. And I said that the water sector was a real real driver of that where the current AMP cycles AMP8 is, completion of AMP7 and start of AMP8 is driving demand for contractors across the water sector, and and the team are doing doing well to to to fulfill roles there. On PBT, so we had a strong h one. We moved year on year. We've grown from 1,000,000 in h one last year to 3,000,000 this year. The key driver of that was net fee income growth, as I as I spoke about on the previous slide, growth in contract NFI both from organic and, the acquisition of Infosec, slightly offset by the negative, movement in in in statements of work net fee income.

17:31 Admin costs were up naught point 4,000,000. So within that, we absorbed the cost of the team, the acquisition costs. We've seen increase as a result of that. The growth in NFI results in us incurring additional bonus and incentive costs where NF where bonus incentive are typically a function of net fee income that our sales teams generate, so we saw 400,000 increase in that. And that was really offset by decline in in staff cost in salary to the staff cost, particularly for for sales staff, where that headcount dropped during the period. Our sales our overall headcount dropped 26. That's really our our key focus as we go one of our key focuses as we go through into page two and into FY '27 that we start to grow that that sales base headcount and increase our sales sales capacity both from a from a people point of view to allow us to con continue growing.

18:38 So that gets us through to to to 3,000,000 for for h one, which was a which was a strong result. I think in in terms of admin costs, we had very, very few negatives going against us. And as we look forward into h two this year, we are more h one weighted in our profit expectation. We have got that investment in people that we wanna make

19:00 through h two and into f y twenty seven, which we expect will increase our our sales staff cost as as we go through that investment. And, we're also just cautious for our h two NFI given the wider macro instability and uncertainty that we've we've got at the moment, both in the global and in the in The UK recruitment market. Onto the net cash bridge. So net cash from the year end of July 31 was 15.7. We've we've had a 2,700,000 net cash outflow through that h one period. The real the two real key drivers of that were the acquisition of Intersect. So net cash outflow associated with the acquisition was was 1,200,000 on on acquisition.

19:54 And the second element was that that bar in the middle around a noncash item of lease liabilities where we've extended a couple of our property leases in in h one, which would have resulted in the in the lease liability under IFRS 16 increase, and we've got another property extension on our on our main head office lease here in Whiteley to conclude in h two, which will, again, through h two, increase lease liabilities further by by around £2,000,000. But outside of those two items, trade in cash flow or the other cash flows are pretty pretty neutral with the the profits generated through h one really being been offset by the tax cost there on the far right bar. Primarily, that was tax of $1.1400000 outflow there and the net working capital requirement associated with growing our contractor base. So as we do grow our contractor base, that that requires working capital and that that outflow associated with that in h one was was a million pounds.

21:00 And finally, the the dividend payment. So we paid the the full year dividend or the final dividend from f y twenty five and h one twenty six of of point six, which all combined gets us down to that that 13,000,000 net cash number at the end of the year, which we expect to be pretty pretty consistent and through h two. So I'll now hand back to Matthew for outlook and final comments. Cheers, Oliver. Yeah. So I think in summary, we we see good growth potential in the markets that we've chosen to to really focus on. And I think that's yeah. Headwinds in the wider market will slow that down, but that doesn't slow growth potential at all. I think perm is the one which will have to market sentiment, but there are major programs to be delivered, a lot of work to be done, and we're well positioned for that. We're going to continue our focus on that. It's very much about getting to the point of being the most famous and dominant provider in those marketplaces, We continue to expand our offering into those sectors and then continue to expand our headcount to help support our customers even more so.

22:10 So plenty of potential in that. And as a Board, we are optimistic about our prospects. Clearly, we had the upgrade last month, which would take us to four point five for this full year. So thank you very much for listening. I'll hand back to Jake while I take some questions. Perfect. Matthew, Oliver, that's great. And thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab that's situated on the right hand corner of your screen. But just while the team take a few moments to review those questions that have been submitted already, just like to remind you that a recording of this presentation, along with a copy of the slides and the published q and a, can all be accessed via your investor dashboards. Guys, we have received a number of questions, throughout your presentation this morning, and thank you to all of those on the call for taking the time to submit their questions.

23:01 But, Matthew, you want to know at this point, if I may just hand back to you to read out those questions and give your responses where it's appropriate to do so. And if I pick up from you at the end, that'd be great. Thank you. Yeah. Lovely. Thanks very much, Jake. Yes, a couple of questions here from Mark. So the company has been a half two weighted for profitability historically, clearing around two thirds of EPS in half two. However, market forecasts are for just 9.3 p for the full year with 6.9 p delivered to half year one. This would be just 24% h two weighting. Why is full year for full year '26 forecast to be different to historic trends. Yeah. I think the the two major factors really on this, Mark. One, we have now got good momentum in the hiring of our sales workforce.

23:47 That was the plan for the start of the year. Like any momentum, it takes time to build, and we really want to make sure in the second half of year we are increasing our investment on that. So we will be spent on that. As Oliver said, we also had a little bit of tailwind or fortune in the first half of year as far as most of our admin lines were just slightly down than than anticipated, which we expect that to come back through. And then the second part really is that the unknown of that permanent market. We haven't made any commitments to the market in the last four years and then not delivered on them, and we're very keen to make sure we don't. So there's a level of cautiousness to what could happen. Clearly, Contractor gives us great stability and rides through some of that volatility and and hence the stability of the whole business. But perm can be very, very sentimental, and you can see a a quick and rapid drop off if markets are are difficult. So we're we're being cautious on our expectations on perm and ambitious on our expectations around hiring.

24:49 And your second question is about Mello. Yeah. That was our first run at Mello in London a few months ago now. November. November. I don't know if we're going to Birmingham, but we are purposely trying to engage the investor community more than we have historically done. I think job one for Oliver and I was to absolutely fix a business which wasn't performing anywhere near the levels that we should be. We've still got a long way to go until we're at the conversion rate that we know that is appropriate for our business, but we are at least on that trajectory. So our plan is to be out more in the market. Both were planning on being at Birmingham at the moment, but we were planning on being at the London one again next next November. From Ben, GATCA reports a 15% increase in contract NFI while permanent recruitment rate remains subdued.

25:40 How does this shift towards flexible labor reflect a broader post pandemic recruitment landscape? And is GATTACA's agility in niche sectors like infrastructure and defense allowing it to outpace large arrivals who are currently struggling with high overheads and a slowdown in global white collar hiring? Good question, Ben. Maybe. I think every business is in its own cycle. I think we were fortunate in the fact that when Oliver and I started, there was a clear job to do, and it was fixed, it was a real focus. And we had a whole business that just wanted the business to be better. And therefore, really, what we had planned to do for the first eighteen months has proven to be what we've done for the whole first four years, which is really just have really good flow focus, continue to raise standards, manage costs appropriately, and commit more to less markets. Now there are certainly other businesses, which if we're being really balanced, massively outperformed us in the post COVID pandemic environment, who were probably riding some record levels of highs, and it takes time to pivot. We just happen to have been pivoting during the post pandemic environment. So, yes, we are on a different sort of trajectory. It's nice to be leading a business where it's about growth and its positivity and its year over year growth and record engagements.

26:58 Part of that is just the starting point of the journey. I think the other aspect is the choices we've made around where we are gonna focus and there are the some of the markets out there, if I take perm as a whole or perm digital tech or life sciences, they are markets that have been hugely impacted and demand really dropped off in the last few years. Our exposure to those have just been small, whereas there is absolute need to create, generate, restore energy. There is absolute need to stimulate economic investment through construction. And unfortunately, there is absolute need to have sovereign capability and defense and security resilience. So they are marketplaces we are well positioned in, which we expect to see long term demand for. Gary, what return thresholds do you apply when evaluating acquisitions like Insect People? I think, GATT, we've looked at lots of different organizations, and it it comes down to a lot of different factors. Economics does play, but the reality is every business is a different business.

28:01 A bit like every consultant is a different human being, every candidate is a different candidate. So we just look at them all on their own merit merits as to what's the starting position, what would they be as far as a better capability, credibility, and cultural add to the organization. We don't really start it going, it has to be this economic model. We'd rather be engaged with a variety of businesses and really see their full merit. So without dodging the answer, the reality is there isn't one set approach in that. Andrew, how sensitive is defense growth to changes in UK government policy or geopolitical developments? I think it's it's a difficult market right now. The government isn't showing a lot of committed investment yet. The plan keeps on getting delayed as to who and what programs they're going to invest in. At the same time, the world has a number of major challenges.

28:57 So for sure, there is going to need to be investment, and there are a lot of companies, clients of ours in the market at moment holding tight, waiting to find out which programs, which platforms, what gets the investment, and and that has been quite a long time for it. Clearly, once commitment does happen, we are also well positioned. So right now, we're fully focused on market share growth, making sure that we are really super famous to everybody. And as some of the programs start to land, we've had confirmation around helicopter program and training comms program. So they're starting to come through, then it's about making sure we're mobilized effectively for that. And, Mark, will you be looking to take advantage of market weaknesses to acquire bolt on businesses? Mark, we certainly are looking.

29:44 I think primary focus is making sure we have good sustainable organic growth. But we are consistently looking at whether it's hiring an individual, hiring teams, or acquiring businesses. We are constantly looking. They would be bolt on. We are really clear what markets we want to be dominant in, what services we want to offer. If we find good businesses which we think are economically sensible, but most importantly, culturally and capability adds to us, we absolutely will look at it. But I've also ridden through some times when we've either acquired well or not integrated well, and they're difficult. And what I don't want to personally do is to knock the organic momentum we have off stride.

30:31 But at the same point, we are at a time where we are in a solid position. And if the right opportunities do present themselves, then we certainly are looking at them. I think that is all the questions we have for now. Absolutely, guys. If I may just jump back in there. Thank you very much indeed for addressing all of those questions that came in from investors this morning. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended. But Matthew, perhaps before really now, just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and to the company. If I could please just ask you for a few closing comments just to wrap up with, that'd be great. Hey. Yep. Not a problem. And I know a number of my colleagues and customers will will tell them and watch this. I'm just gonna say a big thank you to everyone who's in the team who has been helping build the momentum we've got.

31:23 It isn't an easy world out there at the moment, but the unity and the focus that the business has got is building that momentum. So I think we're in a good position to continue going forward. Lots more for us to do, lots more ambition, but pleasing to be taking steps in the right direction. So thank you to everyone from them, and I hope that is clearly of interest to the investor community too. That's great. Matthew, Oliver, thank you once again for updating investors this morning. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback? On behalf of the management team, we would like to thank you for attending today's presentation. That now concludes today's session. So good morning to you all.