FINANCIALS: Technology and legal issues keep Gattaca’s overall profits flat

Net fee income for engineering and technology recruiter Gattaca has been flat year-on-year, according to a trading update for the year to 31 July 2019.

The update reveals group NFI was £71.4m, unchanged from the previous year.

The group’s engineering division saw NFI grow 5% from £47.5m to £50m, offset by a 19% decline in NFI for its technology division, with NFI falling from £14.5m to £11.8m.

While NFI was flat in the UK – down slightly from £62m to £61.8m – international NFI rose 3% from £9.4m to £9.6m.

The group posted net debt of around £25m, down from £40.8m as of July 2018, adding its strong working capital performance in H1 continued into H2 2018. 

The group also issued an update in relation to February 2019 reports from Reuters about a probe by banking giant HSBC, which helped lead to US charges being brought against Chinese multinational Huawei CFO Meng Wanzhou.

Wanzhou was accused of conspiring to defraud HSBC and other banks by misrepresenting Huawei’s relationship with suspected front company, Skycom Tech Co Ltd.

Gattaca subsidiary Networkers International is referenced in the article due to its supply of contractors to support telecommunications projects from 2010 to 2016 to Skycom in Iran.

At the time, the group issued a statement in response to the article, which made reference to a request for information from the US Department of Justice.

In today’s update, the group revealed its co-operation with US Department of Justice continues, while it has also commissioned an independent review in relation to the DOJ’s inquiry, which predominantly relates to activities by Networkers International before its 2015 acquisition by Gattaca.

The firm revealed legal fees incurred related to the matter amount to £3.6m, which will be reflected in discontinued operations, as it relates to a part of the group’s international business, which has now closed.

Gattaca adds that while it continues to help the DOJ, information requests and its independent review have largely been completed, and it expects a significant reduction in the level of advisory fees moving forward.

Commenting on the group’s performance, CEO Kevin Freeguard said: “The group delivered NFI growth both in UK engineering and our international businesses, partially offset by UK technology where we are refocusing on profitable business. These improvements will flow through to profit before tax. In addition, net debt has come in comfortably below expectations, despite the exceptional restructuring and other costs incurred in the year.

“We are making good progress improving the business and I am confident that the actions we are taking will continue to position us well for the future.”

Gattaca adds it expects to announce its full year results for the 12 months to 31 July 2019 on Wednesday 6 November 2019.

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