4 November 2020
Gattaca plc
Preliminary Results for the year ended 31 July 2020
Strategic progress and a resilient trading performance against a challenging backdrop
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 2020.
Financial Highlights
|
|
2020 |
Restated 2019 |
|
|||
|
|
Continuing Reported |
Continuing underlying2 |
Continuing Reported |
Continuing underlying2 |
Continuing Reported |
Continuing underlying2 |
|
|
£m |
£m |
£m |
£m |
% |
% |
|
Revenue |
538.7 |
538.7 |
634.3 |
634.3 |
-15% |
-15% |
|
Net Fee Income (NFI)1 |
54.3 |
54.3 |
69.1 |
69.1 |
-21% |
-21% |
|
Profit from operations |
3.4 |
6.0 |
5.1 |
13.7 |
-34% |
-56% |
|
Profit before taxation |
1.4 |
4.6 |
3.4 |
11.7 |
-57% |
-61% |
|
|
|
|
|
|
|
|
|
Basic earnings per share |
1.8 |
10.3 |
5.8 |
28.4 |
-70% |
-64% |
|
Diluted earnings per share |
1.8 |
10.3 |
5.7 |
27.6 |
-69% |
-63% |
|
Dividend per share |
|
0 |
|
0 |
|
|
|
Adjusted Net cash / (debt) at end of period (excluding IFRS 16 lease liabilities) |
|
27.3 |
|
(24.8) |
|
52.1 |
Financial Performance
|
● |
Continuing underlying PBT of |
|
● |
Basic continuing underlying EPS of 10.3p (2019 restated: 28.4p), 64% lower year-on-year |
|
● |
Robust balance sheet with Group having adjusted net cash position of |
|
● |
Revolving Credit Facility repaid early in October 2020; Group now covenant free |
COVID-19 response
|
● |
Business was fully operational through remote working within first week of |
|
● |
Immediate actions taken on costs and liquidity improvement, including no bonuses and 20% temporary pay cuts for all directors and staff |
|
● |
Gattaca's weighing towards Contract (73%, 27% Perm), combined with resilience of core markets, including Infrastructure and Defence, provided comparatively stable platform for Group performance |
Operational Performance3
|
● |
Group continuing underlying NFI of |
|
● |
|
|
● |
|
|
● |
International NFI on a continuing basis declined 19% against 2019 (as restated), reflecting the global nature of the pandemic. |
|
● |
Contract NFI now represents 73% of Group NFI (2019 restated: 71%) on a continuing basis |
|
● |
Significant cost actions taken across all areas of the business, whilst ensuring focused investment in technology to enhance remote working productivity. |
|
● |
Cooperation with the US Department of Justice continues with respect to historical transactions in our discontinued telecommunication infrastructure business |
Strategic Update
Implementation of the Group-wide Improvement Plan accelerated during the year, with changes focused on improving sales impact and cost reduction. Key milestones included:
|
● |
Introduced a new, targeted approach to client acquisition, delineated by industry sector |
|
● |
Completed restructuring of our Technology business unit |
|
● |
Scaled-up our fulfilment operation, with the business reorganised to form a core dedicated delivery capability across all of our locations, enabling a more agile response to client and market needs |
|
● |
Investment in major technology platform maintained, first subsidiary was 'live' in October |
Alongside the Improvement Plan, a restructuring was carried out which is expected to deliver
Outlook
In the first few months of the current financial year there have been some encouraging indications of increased activity within the Group's core markets, however, as the economy remains fragile, including the potential impact of an extended second lockdown in
Kevin Freeguard, CEO commented:
"Whilst the past 12 months have been overshadowed by the onset of the COVID-19 pandemic, I am pleased with the resilience that the business has demonstrated during this time and the strategic progress we have made. Our staff have been our number one priority during this time, and I would like to thank them for their hard work and the commitment they have shown throughout this challenging period.
"During the year, we accelerated the implementation of our Group-wide Improvement Plan and the changes made throughout the business have improved both our agility and ability to react quickly and cost-effectively to changes in demand. Prior to the pandemic the demand for STEM skills, our core focus, was growing significantly and, whilst we remain cautious as to the timeframe for economic recovery and the potential impact of an extended second lockdown in
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 (2020:
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 |
|
Lauren Kettle Robert Morton Euan Brown |
|
|
|
|
|
Citigate Dewe Rogerson |
+44 (0) 20 7638 9571 |
|
Nick Hayns Louise Mason-Rutherford Elizabeth Kittle 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
Maintaining focus whilst demonstrating resilience in unprecedented times
This year has been very challenging, not just for Gattaca but for the
Overview
We have maintained focus on the continuation of the Group-wide Improvement Plan that we discussed last year, and indeed have accelerated its implementation over the past 12 months. We are determined to make sure the business has the foundations to operate well in the coming years, with improved sales management and the reinforcement of a performance culture. Whilst to some extent the progress we have made in the business has been masked by the impact of the pandemic, the improvements we have implemented leave us well placed to exploit the upside when the economy improves.
A consequence of both the acceleration of the Improvement Plan and the impact of the pandemic on many of our clients has regrettably been the loss of a number of jobs across the Group. At this stage, we are clear that, so long as the pandemic is around, we will need to keep a clear focus on costs and to that end we have reduced annualised costs by a further
Our focus to reduce net debt has been hugely successful. We ended the year with adjusted net cash (excluding lease liabilities) of
Dividend
We are conscious that this will be the second year where the Board have not recommended a dividend. We feel that given the economic headwinds the
Board
We would like to thank Richard Bradford who is stepping down as a Non-Executive Director at this year's AGM after nine years' service for his contribution to the Group. His wise counsel and knowledge of our industry will be sorely missed. We are proactively seeking his replacement which we are hopeful will start to address the diversity imbalance on the Board.
Outlook
Gattaca's focus on in-demand STEM skills, in addition to the measures we have taken to strengthen the business, positions us well for the eventual, and inevitable, recovery in our core markets. Whilst we remain cautious as to the timeframe for the recovery, and the nascent second wave of the COVID-19 pandemic and the potential for an extended second lockdown in
We have brought more staff back from furlough in anticipation of economic recovery and we will cautiously monitor activity over the coming months particularly given the recently announced second national lockdown. Whilst we expect the first six months to remain challenging, we are hopeful that the second half will see further improvement. We are confident that the changes we have made in the business leave us better placed to deal with whatever economic conditions we may face in the short term and to better benefit from the upside of the eventual recovery.
Patrick Shanley
Non-Executive Chairman
CHIEF EXECUTIVE OFFICER'S REVIEW
Continued progress throughout the year; we are positioned well to support our clients with the critical STEM skills needed for recovery.
Introduction
Gattaca continues to play a key role partnering with our clients across multiple sectors and geographies to deliver the engineering and technology talent they need as they work through the economic and business recovery. I am proud of the way our staff have responded to support clients, contractors and candidates without any interruption to operations. Our business is resilient and we continue to make good progress with the Improvement Plan.
As with most businesses across the globe our results for the year have been impacted by the COVID-19 pandemic, Net Fee Income at
Overall market
During the first half of FY20,
As one would expect, the outbreak of COVID-19 resulted in an immediate and major decline in client requirements in the second half of the year. Whilst companies continued to recruit during this period, volumes were significantly reduced in a relatively short time frame. Towards the end of the financial year we saw numbers stabilise and subsequently there have been early indications that activity and client confidence levels are increasing, prompting us to take the decision to bring staff back from furlough.
Many of the market sectors we support remained active during the initial lockdown period, in particular Infrastructure, Defence, Energy and Technology. Whilst we were impacted with reduced activity, our core focus on STEM skills and the contract market helped us deliver a resilient performance.
Operational response to the COVID-19 situation
As the potential impact of the pandemic became apparent, our immediate priorities were to ensure our staff were able to work in a safe and stable environment; and to support our clients, contractors and candidates.
We commenced detailed planning and volume testing of our systems and processes in February and the entire Group was fully operational on a remote working basis by the end of the first week of the
The lockdown necessitated the acceleration of many of our digitisation plans, achieving in weeks what may have otherwise taken months and we will retain the benefits of this in the years to come.
With no service interruptions, we ensured operational capability, and were able to fully deliver our part of the supply chain. We maintained existing contractor support where clients required this; delivered new skills to existing clients and began servicing new clients. We were able to tailor our business model to support our individual clients.
We took a number of actions to ensure the ongoing financial stability of the business, both in terms of cost mitigation and liquidity maximisation. The furlough scheme introduced by the
Accelerating the Improvement Plan and cost reduction
Following my appointment we launched the Group-wide Improvement Plan in order to build on the fundamental strengths of the business to deliver long term sustainable growth.
The business was organised and united around delivering the Plan, focusing on our four strategic priorities:
|
● |
Customer Focus - growing our customer base and deepening relationships |
|
● |
Product and Innovation - innovating and developing products to meet customer needs |
|
● |
Service Delivery - enriching the customer experience and enhancing our service delivery capability |
|
● |
Operational Excellence - improving organisational alignment and performance |
I am pleased to report good progress this year. Not only did we maintain the pace of change during the pandemic, we accelerated certain elements including client service and efficiency, leading to cost reduction and focused sales improvement. This was recognised externally after the year end as our Gattaca Solutions business was included in HRO Today's 'Bakers Dozen' for being one of the top RPO (Recruitment Process Outsourcing) providers, for the first time. This is significant to us as companies are placed on the list based solely on customer feedback, making it a highly credible accolade.
We have implemented a focused approach to how we target industry sectors and are aligning our talent more closely to our operating model across the Group which will enable us to improve our sales effectiveness. This has seen the Group working more closely with existing clients and accelerating new client relationships to better support them with solutions for their talent needs as well as achieving cost efficiencies across the Group.
Internally the restructuring of the Technology business unit was completed during the year, and it has now started rebuilding for a recovery. Prior to COVID-19, the first green shoots of recovery were emerging in the business unit, with NFI run rates flattening out after the decline of the last three years, providing evidence that the strategy is working.
Our centralised Fulfilment operation was scaled during the year, and the business was reorganised to form a core dedicated fulfilment capability across all our locations. This is enabling a more agile response to client and market needs.
The Gattaca Solutions business, which is fully aligned with our fulfilment operation under the same senior management, continued to perform strongly, out-performing our traditional staffing business in difficult markets.
Internationally, our size relative to the overall market for engineering and technology skills highlights the importance of defining and focusing on our specific niches. During the year, we worked to closer align our International operations with the rest of the business. This has enabled increased collaborative business development activities, resulting in quicker client acquisition as well as greater niche skill delivery capability across borders. As the business matures and it continues to leverage the experience we have within the Group, we have started to develop more meaningful long-term relationships with some of our international customers by moving to delivering RPO solutions and exclusive recruitment projects, where we have considerable experience to draw upon from our
Notwithstanding the challenging economic environment, we maintained our planned systems investment. Our Primary Business System project maintained pace during the lockdown period and we have our first
We also implemented a number of other technology applications during the year to improve our client, candidate and staff experience. We integrated a new digital platform for our Gattaca Solutions accounts that brings greater automation, increased flexibility and enables us to implement new solutions quicker. We continue to invest in tools to support our operations introducing new applications to support real time communication, collaboration, digital coaching and training and development to create an efficient and engaging digital workplace.
In combination with the above actions aimed at driving agility and promoting growth throughout the Group, we also undertook measures to reduce costs in the business. Post period end we completed a restructuring which will achieve
People
During the year I was delighted to appoint Claire Cross as our new HR Director. Claire brings with her extensive industry experience and knowledge of our Group. Beyond her HR expertise, her background includes operational sales experience and she will be instrumental to our plans as we continue to grow and develop the organisation.
The pandemic has been unparalleled in terms of its impact on people both in their business and personal lives. I have been truly humbled by the way our Gattaca team has and continues to rise to the challenges we and our clients are navigating and I want to take this opportunity to thank them for their dedication, resilience and hard work.
Looking forward
Notwithstanding the obvious uncertainty in global markets, in the longer term there are significant opportunities in our chosen sectors. Prior to the COVID-19 pandemic the demand for STEM skills, our core focus, was growing significantly and, whilst we remain cautious as to the timeframe for economic recovery and the potential impact of an extended second lockdown in
Kevin Freeguard
Chief Executive Officer
CHIEF FINANCIAL OFFICER'S REVIEW
2020 has been another year of intense activity. We continued our work on repositioning the business, including a much strengthened balance sheet, and of course managing the impact of the global pandemic. We delivered
Financial performance
On a continuing basis, revenue of
Profit before tax from continuing operations was
Statutory loss after tax was
Net cash at 31 July 2020 (excluding lease liabilities) improved considerably to
Underlying results
Underlying results are shown beneath the Income Statement. Underlying continuing profit before tax at
Discontinued operations and non-underlying costs
The Group-wide Improvement Plan continued at pace during 2020 and drove some of the non-underlying costs below:
|
£'000 |
Profit/(Loss) Before Tax |
|
Underlying continuing |
4,588 |
|
Restructuring costs |
(1,552) |
|
Advisory fees primarily related to DoJ cooperation |
(1,395) |
|
Discontinued operations losses and related restructuring costs primarily with respect to |
(1,225) |
|
Amortisation and impairment of acquired intangibles |
(950) |
|
Impairment of right-of-use leased assets (one building on our Whiteley campus) |
(432) |
|
Gain on sale of investment in Concilium Search Limited |
304 |
|
Foreign exchange differences |
(521) |
|
Reported statutory for the total Group |
(1,183) |
The acceleration of certain elements of the Improvement Plan enabled restructuring both during FY20 and in the early part of FY21 and our financial statements include both the actual costs incurred in FY20 and a provision for known redundancy costs for the initiatives that have been implemented in early FY21.
Despite changes in local staffing and strategy, our
We continue to cooperate with the US Department of Justice ("DoJ") and there have been no significant new matters in this regard during the year. Legal fees on this matter were
During the year, we took an additional impairment charge of
Following the closure of our
Cost actions and
Job Retention Scheme
We took significant cost actions during the year to mitigate as much of the impact of reduced NFI as possible, and welcomed the
The
During the year we claimed
All staff and Directors who remained working in the business during this time also made a sacrifice through a 20% reduction in salary for a period of time, reducing 2020 costs by
Taxation
The Group's reported effective tax rate of 50.5% (2019: 31.6%) was driven up by the impact of overseas losses not recognised as deferred tax assets. The continuing underlying effective tax rate was 27.7% (2019 restated: 21.3%), similarly impacted by the same overseas losses.
Earnings per share
Basic earnings per share was negative
Continuing underlying basic earnings per share was
Dividends
We are very much cognisant that our shareholders have shown great patience as we have worked to strengthen our balance sheet and reposition the business. Given the economic headwinds the
Capital expenditure
Capital expenditure in the year was
Sale of holding in Concilium
On 27 November 2019 we sold our 10% holding in Concilium Search Limited realising a gain of
Net assets and shares in issue
At 31 July 2020 the Group had net assets of
Cash flow and net debt
Net cash at 31 July 2020 was
A further element of the improvement is driven by reduced trading activity which enabled an unwinding of working capital. We expect a very substantial element of the overall working capital improvement to be permanent as described below.
We have changed the payment terms for contractors earning above a certain level from seven to 28 days which is in alignment with normal payment cycles for businesses and most company employees. This change reduces significantly the gap between payments to contractors and payments from our customers. As well as the immediate benefit at the point of change, the new terms should mean a lower requirement for additional working capital as our business grows through the inevitable economic recovery and thereafter. We have so far effectively reduced the period of funding business from 20 days to 16 days and as this change initiative was still in the process of implementation at year end, we expect further improvement as this initiative is further embedded.
We have also continued to improve further our cash collections capability with DSO (days sales outstanding, based on a three-month average and including sales taxes) of 41 (2019: 45) representing a further four day advancement on the substantial improvement achieved last year. Our DSO calculation includes trade receivables transferred to HSBC but on whose behalf we perform collection services.
As a result of the current economic climate we have noticed increased pressure from customers for longer payment terms, and any increased mix of trading with infrastructure clients may also lead to longer average terms, as this sector tends to pay less promptly than other sectors. However, we remain resolute in maintaining our strong working capital performance and this will continue to be a key focus for the Group.
Following our refinancing in October 2019, in January 2020 we transferred a portion of our recourse working capital facility to a non-recourse working capital facility whereby the trade receivables assigned to the facility are owned by HSBC, thereby reducing receivables and our indebtedness.
Our liquidity, being our cash resources and the unused headroom in our invoice financing facilities which could be drawn against existing invoices at 31 July 2020 was very strong at
Cash generated from operations at
Banking facilities and interest rate risk
As of 31 July 2020 the Group had a working capital facility of
Given our strong liquidity position, the Board decided to repay the remaining
Brexit
The Board continues to follow Brexit developments closely. The economic effect of these developments on business confidence is an important factor for us to the extent it affects the
Critical accounting policies
The statement of significant accounting policies is set out in Note 1 to the Financial Statements.
IFRS 16
IFRS 16 was adopted by the Group from 1 August 2019, choosing to adopt the transition approach which did not require comparatives to be restated. At 31 July 2020, the Group held Right-of-Use lease assets of
There was no impact of adopting IFRS 16 in 2020 on continuing underlying PBT.
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 in 2020 have taken a prudent approach to receivables risk and have increased our loss allowance by
There are no significant concentrations of credit risk within the Group, with no single debtor accounting for more than 8% (2019: 4%) of total receivables balances at 31 July 2020.
Foreign currency risk
The Group generates 12% 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 and where appropriate entering into forward exchange contracts to minimise the gap in assets and liabilities denominated in foreign currencies.
Salar Farzad
Chief Financial Officer
FINANCIAL STATEMENTS
Consolidated Income Statement
For the year ended 31 July 2020
|
|
Note |
2020 |
Restated1 |
|
Continuing Operations |
|
|
|
|
Revenue |
2 |
538,651 |
634,281 |
|
Cost of sales |
|
(484,375) |
(565,226) |
|
Gross profit |
2 |
54,276 |
69,055 |
|
Administrative expenses2 |
|
(50,914) |
(63,956) |
|
Profit from continuing operations |
4 |
3,362 |
5,099 |
|
Finance income |
6 |
91 |
364 |
|
Finance cost |
7 |
(2,016) |
(2,095) |
|
Profit before taxation |
|
1,437 |
3,368 |
|
Taxation |
10 |
(866) |
(1,485) |
|
Profit for the year after taxation from continuing operations |
|
571 |
1,883 |
|
Discontinued operations |
|
|
|
|
Loss for the year from discontinued operations |
11 |
(2,352) |
(7,784) |
|
Loss for the year |
|
(1,781) |
(5,901) |
Losses for the year for 2020 and 2019 are wholly attributable to equity holders of the Company. The Company has elected to take the exemption under section 408 of the Companies Act 2006 from presenting the Parent Company Income Statement.
|
Earnings per ordinary share |
Note |
2020 |
2019 |
|
Basic earnings per share |
12 |
(5.5) |
(18.3) |
|
Diluted earnings per share |
12 |
(5.5) |
(17.8) |
Reconciliation to adjusted profit measure
Underlying profit is the Group's key adjusted profit measure; profit from continuing operations is adjusted to exclude non-underlying income and expenditure as defined in the Group's accounting policy, amortisation and impairment of goodwill and acquired intangibles, impairment of leased right-of-use assets and net foreign exchange gains or losses.
|
|
Note |
2020 |
Restated1 |
|
Profit from continuing operations |
|
3,362 |
5,099 |
|
Add |
|
|
|
|
|
2 |
3,245 |
1,202 |
|
Non-underlying items included within administrative expenses |
2,4 |
1,248 |
1,441 |
|
|
2 |
1,382 |
7,146 |
|
Underlying EBITDA |
|
9,237 |
14,888 |
|
Less |
|
|
|
|
|
|
(3,245) |
(1,202) |
|
Net finance costs excluding foreign exchange gains and losses |
6,7 |
(1,404) |
(2,032) |
|
Underlying profit before taxation |
|
4,558 |
11,654 |
|
Underlying taxation |
10 |
(1,271) |
(2,501) |
|
Underlying profit after taxation from continuing operations |
|
3,317 |
9,153 |
|
1 |
2019 figures have been restated for the presentation of discontinued operations as explained in Note 11. |
|
2 |
Administrative expenses from continuing operations includes net impairment losses on trade receivables and accrued income of |
Consolidated Statement of Comprehensive Income
For the year ended 31 July 2020
|
|
2020 |
2019 |
|
Loss for the year |
(1,781) |
(5,901) |
|
|
|
|
|
Other comprehensive (loss)/income |
|
|
|
Items that may be reclassified subsequently to profit or loss: |
|
|
|
Exchange differences on translation of foreign operations |
(1,091) |
645 |
|
Other comprehensive (loss)/income for the year |
(1,091) |
645 |
|
|
|
|
|
Total comprehensive loss for the year attributable to equity holders of the parent |
(2,872) |
(5,256) |
|
|
2020 |
Restated1 |
|
Attributable to: |
|
|
|
Continuing operations |
(172) |
1,531 |
|
Discontinued operations |
(2,700) |
(6,787) |
|
|
(2,872) |
(5,256) |
|
1 |
2019 figures have been restated for the presentation of discontinued operations as explained in Note 11. |
Consolidated and Company Statements of Changes in Equity
For the year ended 31 July 2020
A) Consolidated
|
|
Share |
Share premium |
Merger |
Share-based |
Translation reserve |
Treasury |
Retained |
Total |
|
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 |
- |
- |
- |
- |
645 |
- |
(5,901) |
(5,256) |
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
At 1 August 2019 as per originally presented |
323 |
8,706 |
28,750 |
753 |
944 |
(140) |
2,571 |
41,907 |
|
|
|
|
|
|
|
|
|
|
|
Adjustment on initial application of IFRS 16, net of tax |
- |
- |
- |
- |
- |
- |
770 |
770 |
|
|
|
|
|
|
|
|
|
|
|
Restated total equity |
323 |
8,706 |
28,750 |
753 |
944 |
(140) |
3,341 |
42,677 |
|
|
|
|
|
|
|
|
|
|
|
Loss for the year |
- |
- |
- |
- |
- |
- |
(1,781) |
(1,781) |
|
Other comprehensive loss |
- |
- |
- |
- |
(1,091) |
- |
- |
(1,091) |
|
Total comprehensive loss |
- |
- |
- |
- |
(1,091) |
- |
(1,781) |
(2,872) |
|
|
|
|
|
|
|
|
|
|
|
Deferred tax movement in respect of share options |
- |
- |
- |
- |
- |
- |
(16) |
(16) |
|
Reversal of share-based payments charge (Note 23) |
- |
- |
- |
(60) |
- |
- |
- |
(60) |
|
Share-based payments reserves transfer |
- |
- |
- |
(167) |
- |
- |
167 |
- |
|
Issue of treasury shares to employees |
- |
- |
- |
- |
- |
43 |
- |
43 |
|
Transactions with owners |
- |
- |
- |
(227) |
- |
43 |
151 |
(33) |
|
|
|
|
|
|
|
|
|
|
|
At 31 July 2020 |
323 |
8,706 |
28,750 |
526 |
(147) |
(97) |
1,711 |
39,772 |
B) Company
|
|
Share |
Share |
Merger |
Share- |
Treasury |
Retained |
Total |
|
At 1 August 2018 |
323 |
8,706 |
28,526 |
1,074 |
- |
2,031 |
40,660 |
|
|
|
|
|
|
|
|
|
|
Loss and total comprehensive expense |
- |
- |
- |
- |
- |
(231) |
(231) |
|
Share-based payments charge (Note 23) |
- |
- |
- |
269 |
- |
- |
269 |
|
Share-based payments reserves transfer |
- |
- |
- |
(590) |
- |
590 |
- |
|
Transactions with owners |
- |
- |
- |
(321) |
- |
590 |
269 |
|
|
|
|
|
|
|
|
|
|
At 31 July 2019 |
323 |
8,706 |
28,526 |
753 |
- |
2,390 |
40,698 |
|
|
|
|
|
|
|
|
|
|
At 1 August 2019 |
323 |
8,706 |
28,526 |
753 |
- |
2,390 |
40,698 |
|
|
|
|
|
|
|
|
|
|
Loss and total comprehensive expense |
- |
- |
- |
- |
- |
(1,111) |
(1,111) |
|
Reversal of share-based payments charge |
- |
- |
- |
(60) |
- |
- |
(60) |
|
Share-based payments reserves transfer |
- |
- |
- |
(167) |
- |
167 |
- |
|
Transactions with owners |
- |
- |
- |
(227) |
- |
167 |
(60) |
|
|
|
|
|
|
|
|
|
|
At 31 July 2020 |
323 |
8,706 |
28,526 |
526 |
- |
1,446 |
39,527 |
Consolidated and Company Statements of Financial Position
As at 31 July 2020
|
|
|
Group |
Company |
||
|
|
Note |
2020 |
2019 |
2020 |
2019 |
|
Non-current assets |
|
|
|
|
|
|
Goodwill and intangible assets |
13 |
12,877 |
11,751 |
16 |
- |
|
Property, plant and equipment |
14 |
1,492 |
3,292 |
- |
- |
|
Right-of-use assets |
22 |
7,338 |
- |
- |
- |
|
Investments |
15 |
19 |
- |
8,520 |
8,580 |
|
Deferred tax assets |
16 |
- |
- |
- |
- |
|
Total non-current assets |
|
21,726 |
15,043 |
8,536 |
8,580 |
|
Current assets |
|
|
|
|
|
|
Trade and other receivables |
17 |
48,888 |
96,728 |
101,885 |
101,158 |
|
Cash and cash equivalents |
|
34,796 |
19,173 |
- |
- |
|
Total current assets |
|
83,684 |
115,901 |
101,885 |
101,158 |
|
Total assets |
|
105,410 |
130,944 |
110,421 |
109,738 |
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
Deferred tax liabilities |
16 |
(277) |
(396) |
- |
- |
|
Provisions |
18 |
(2,558) |
(2,349) |
- |
- |
|
Lease liabilities |
22 |
(5,746) |
- |
- |
- |
|
Bank loans and borrowings |
20 |
(7,304) |
(14,957) |
(7,304) |
(14,957) |
|
Total non-current liabilities |
|
(15,885) |
(17,702) |
(7,304) |
(14,957) |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Trade and other payables |
19 |
(46,129) |
(40,676) |
(63,590) |
(54,083) |
|
Provisions |
18 |
(236) |
(332) |
- |
- |
|
Current tax liabilities |
|
(1,247) |
(1,289) |
- |
- |
|
Lease liabilities |
22 |
(1,990) |
- |
- |
- |
|
Bank loans and borrowings |
20 |
(151) |
(29,038) |
- |
- |
|
Total current liabilities |
|
(49,753) |
(71,335) |
(63,590) |
(54,083) |
|
|
|
|
|
|
|
|
Total liabilities |
|
(65,638) |
(89,037) |
(70,894) |
(69,040) |
|
|
|
|
|
|
|
|
Net assets |
|
39,772 |
41,907 |
39,527 |
40,698 |
|
|
|
|
|
|
|
|
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 |
|
526 |
753 |
526 |
753 |
|
Translation reserve |
|
(147) |
944 |
- |
- |
|
Treasury shares reserve |
|
(97) |
(140) |
- |
- |
|
Retained earnings |
|
1,711 |
2,571 |
1,446 |
2,390 |
|
Total equity |
|
39,772 |
41,907 |
39,527 |
40,698 |
The accompanying notes on pages 98 to 137 form part of these Financial Statements.
The Financial Statements on pages 92 to 137 were approved by the Board of Directors on 3 November 2020 and signed on its behalf by
Salar Farzad
Chief Financial Officer
Consolidated and Company Cash Flow Statements
For the year ended 31 July 2020
|
|
Group |
Company |
||
|
2020 |
2019 |
2020 |
2019 |
|
|
Cash flows from operating activities |
|
|
|
|
|
Loss after taxation |
(1,781) |
(5,901) |
(1,111) |
(231) |
|
|
|
|
|
|
|
Adjustments for: |
|
|
|
|
|
Depreciation of property, plant and equipment and amortisation |
1,831 |
2,483 |
4 |
- |
|
Depreciation of leased right-of-use assets |
2,041 |
- |
- |
- |
|
Profits from sale of subsidiary, associate or investment |
(304) |
(135) |
- |
- |
|
Loss on disposal of property, plant and equipment |
52 |
67 |
- |
- |
|
Impairment of goodwill and acquired intangibles and right-of-use assets |
766 |
5,882 |
- |
- |
|
Interest income |
(91) |
(437) |
- |
- |
|
Interest costs |
1,936 |
2,096 |
593 |
637 |
|
Taxation expense recognised in Income Statement |
598 |
1,417 |
(339) |
(281) |
|
Decrease/(increase) in trade and other receivables |
47,537 |
17,225 |
- |
(5,950) |
|
Increase/(decrease) in trade and other payables |
5,453 |
(174) |
9,120 |
6,436 |
|
Increase in provisions |
1,085 |
1,291 |
- |
- |
|
Share-based payment charge |
77 |
269 |
- |
- |
|
Investment income |
- |
- |
- |
(968) |
|
Cash generated from/(used in) operations |
59,200 |
24,083 |
8,267 |
(357) |
|
|
|
|
|
|
|
Interest paid |
(1,052) |
(1,993) |
(524) |
(611) |
|
Interest on lease liabilities |
(214) |
- |
- |
- |
|
Interest received |
91 |
86 |
- |
- |
|
Income taxes paid |
(387) |
(2,523) |
- |
- |
|
Cash generated from/(used in) operating activities |
57,638 |
19,653 |
7,743 |
(968) |
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
Purchase of plant and equipment |
(191) |
(673) |
- |
- |
|
Purchase of intangible assets |
(2,348) |
(2,876) |
(20) |
- |
|
Purchase of investments |
(19) |
- |
- |
- |
|
Proceeds from sale of subsidiary, associate or investment |
304 |
2 |
- |
- |
|
Proceeds from sale of property, plant and equipment |
- |
26 |
- |
- |
|
Dividend received |
- |
- |
- |
968 |
|
Cash (used in)/generated from investing activities |
(2,254) |
(3,521) |
(20) |
968 |
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
Lease liability principal repayment |
(1,987) |
- |
- |
- |
|
Purchase of treasury shares |
(67) |
(140) |
- |
- |
|
Working capital facility (repaid) |
(28,968) |
(6,740) |
- |
- |
|
Finance costs paid |
(223) |
- |
(223) |
- |
|
Repayment of term loan |
(7,500) |
- |
(7,500) |
- |
|
Cash used in financing activities |
(38,745) |
(6,880) |
(7,723) |
- |
|
|
|
|
|
|
|
Effects of exchange rates on cash and cash equivalents |
(1,016) |
163 |
- |
- |
|
|
|
|
|
|
|
Increase in cash and cash equivalents |
15,623 |
9,415 |
- |
- |
|
Cash and cash equivalents at the beginning of year |
19,173 |
9,758 |
- |
- |
|
Cash and cash equivalents at end of year1 |
34,796 |
19,173 |
- |
- |
Net decrease in cash and cash equivalents for discontinued operations was
|
1 |
Included in cash and cash equivalents is |
Notes Forming Part of the Financial Statements
|
1 |
The Group and Company Significant Accounting Policies |
|
1.1 |
The Business 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
|
1.2 |
Basis of preparation of the Financial Statements |
The Financial Statements of Gattaca plc have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS. The financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB).
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, apart from the adoption of IFRS 16 from 1 August 2019 using the modified retrospective approach to transition, under which comparative information in 2019 has remained as presented under IAS 17. A summary of the principal accounting policies of the Group are set out below.
The preparation of Financial Statements 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 1.23.
|
1.3 |
Going concern |
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report. The financial position of the Group, its cash flows and liquidity position are described in the Chief Financial Officer's Report.
There continues to be significant uncertainty regarding the ongoing potential future impact of the COVID-19 outbreak on our clients and resultant trading activity. We continue to monitor any changes and have regular management and monthly Board meetings to assess the situation. We have a wide spread of customers across multiple sectors but recognise that COVID-19 continues to impact many of our customers and contractors across many industries.
The majority of our staff have now been working remotely for over seven months and there has not been any significant impact to our ability to operate effectively. The initial reduction in contractor numbers in April 2020, whilst impacting profitability, has resulted in reduced working capital requirements and has created further liquidity. The Group has also undertaken other actions, including an increase to the payment terms of certain contractors and these actions have created a permanent working capital benefit, and will reduce our working capital requirements during growth. We have seen early signs of minor extensions in debtor days as a result of the pandemic impact on trading at our clients and we continue to be alert for any sudden changes. There is sufficient headroom on our working capital facilities to absorb a level of extensions but we would also manage supply to the customer if payment within an appropriate period was not being made. A significant deterioration in payment terms would significantly impact the Group's liquidity. Our future cost base has also been significantly reduced following both a number of redundancies in 2020 as well as a larger scale
Having repaid and cancelled the Revolving Credit Facility on 27 October 2020, the Group is now covenant free.
The Directors have prepared detailed cash flow forecasts to July 2023, covering a period of 33 months from the date of approval of these financial statements. This base case is drawn up with appropriate regard for the current macroeconomic environment and the particular circumstances in which the Group operates. This conservative base case assumes a recovery of the
The output of the base case forecasting process has been used to perform sensitivity analysis on the Group's cash flow to model the potential effects should principal risks actually occur either individually or in unison. The sensitivity analysis modelled scenarios in which the Group incurred a sustained loss of business arising from a prolonged global downturn as a result of the COVID-19 pandemic, with a range of slower recovery scenarios considered. The Group has modelled the impact of a number of severe but plausible scenarios including the sustained loss of over 55% of our permanent NFI until July 2022 compared to March 2020 pre-COVID run rates, and a 29% sustained reduction in contractor NFI over the same period, again compared to March 2020 pre-COVID run rates, and slow recovery after that point. This is in conjunction with the
After making appropriate enquiries and considering the uncertainties described above, the Directors have a reasonable expectation at the time of approving these financial statements that the Group and the Company has adequate resources to continue in operational existence for the foreseeable future. Following careful consideration the Directors do not consider there to be a material uncertainty with regards to going concern and consider it is appropriate to adopt the going concern basis in preparing the financial statements.
|
1.4 |
New standards and interpretations |
The following are new standards or improvements to existing standards that are mandatory for the first time in the Group's accounting period beginning on 1 August 2019 and no new standards have been early adopted. The Group's July 2020 consolidated financial statements have adopted these amendments to IFRS. Apart from IFRS 16 Leases, none of these have had any material impact on the Group's results or financial position:
|
● |
IFRS 9 (amendments) Financial Instruments (effective 1 January 2019) |
|
● |
IFRS 16 Leases (effective 1 January 2019) |
|
● |
IFRIC 23 Uncertainty over Income Tax Treatments (effective 1 January 2019) |
|
● |
Annual Improvements to IFRSs 2017 (effective 1 January 2019) |
|
● |
IFRS 16 (amendments) COVID-19 related rent concessions (effective 1 June 2020) |
Under IFRS 16 Leases, for all applicable leases, the Group has recognised within the Consolidated Statement of Financial Position a right-of-use asset and a lease liability, and within the Consolidated Income Statement, operating lease rental charges have been replaced with depreciation and interest expense. The accounting policy under this standard is shown in Note 1.13 and the impact of this change has been disclosed in Note 22 to these financial statements.
IFRIC 23 Uncertainty over Income Tax Treatments clarifies how to measure current and deferred tax assets and liabilities where there is uncertainty that affects the application of IAS 12 Income Taxes. The Group has undertaken a review of the current tax position and assessed that the adoption of IFRIC 23 does not have a material impact on the Group's results.
Apart from IFRS 16 Leases there have been no alterations made to the accounting policies as a result of considering all of the other amendments above that became effective in the year, as these were either not material or were not relevant to the Group or Company.
New standards in issue, not yet adopted
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 2020. These new pronouncements are listed as follows:
|
● |
Amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors - Definition of material (effective 1 January 2020) |
|
● |
IFRS 3 (amendments) Business Combinations - Definition of a business (effective 1 January 2020) |
The Directors are 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 or Company's operations
or results.
Forthcoming requirements
The following amendments are required for application for the Group's year beginning after 1 August 2020 or later:
|
Standard |
|
Effective date (annual periods beginning on or after) |
|
IAS 1 Amendments |
Classification of liabilities as current or non-current |
1 January 2022 |
|
IAS 16 Amendments |
Property, plant and equipment: proceeds before intended use |
1 January 2022 |
|
IAS 37 Amendments |
Onerous contracts-cost of fulfilling a contract |
1 January 2022 |
|
IFRS 3 Amendments |
Reference to the conceptual framework |
1 January 2022 |
|
1.5 |
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.
|
1.6 |
Revenue |
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.
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. In addition, 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.
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.
|
1.7 |
Government grants |
Government grants are assistance by government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to operating activities.
Government grants are recognised when there is a reasonable assurance that the Group will comply with the conditions attached to it and that the grant will be received. They are recognised in the Income Statement on a systematic basis over the periods in which the related costs that they compensate are recognised as expenses.
Grants are either presented as grant income or deducted in reporting the related expense they compensate in the Income Statement.
|
1.8 |
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 proper understanding of the Group's business performance.
Items which are included within this category include but are not limited to:
|
● |
costs of acquisitions; |
|
● |
integration costs following acquisitions; and |
|
● |
material restructuring costs including related professional fees and staff costs |
In addition, the Group also excludes from underlying results amortisation and impairment of goodwill and acquired intangibles, impairment of leased right-of-use assets and net foreign exchange gains or losses.
Specific adjusting items are included as non-underlying based on the following rationale:
|
Item |
Distorting due to irregular nature year on year |
Distorting due to fluctuating nature (size) |
Does not reflect in-year operational performance of continuing business |
|
Costs of acquisitions |
• |
• |
• |
|
Integration costs following acquisitions |
• |
|
• |
|
Material restructuring costs |
|
• |
• |
|
Amortisation and impairment of goodwill and acquired intangibles |
• |
• |
• |
|
Impairment of leased right-of-use assets |
• |
• |
• |
|
Net foreign exchange gains and losses |
|
• |
• |
|
Tax impact of the above |
• |
• |
• |
|
1.9 |
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 |
12.5% to 33.3% |
Straight line |
|
Leasehold improvements |
Over the period of the lease term |
Straight line |
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
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.
When revalued assets are sold, the amounts included in other reserves in respect of those assets are transferred to retained earnings.
1.10 Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the fair value of the consideration given 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.
1.11 Intangible assets
Customer relationships
Customer relationships comprise principally of 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 ten 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 is 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.
1.12 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 the income statement at the time of disposal.
1.13 Leases
The Group has applied IFRS 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under IAS17 and IFRIC 14.
The Group leases office property, motor vehicles and equipment. Rental contracts range from monthly to
eight years.
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Contracts may contain both lease and non-lease components, and consideration is allocated in the contract to the lease and non-lease components based on their relative stand-alone prices.
Assets and liabilities arising from a lease are initially measured on a present value basis at the lease commencement date. Lease liabilities include the net present value of the fixed payments less any lease incentives receivable, variable lease payments that are based on an index or a rate, amounts expected to be payable by the group under residual value guarantees, the exercise price of any purchase option if the Group is reasonably certain to exercise that option, and payments of penalties for terminating the lease if that option is expected to be taken.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
Lease payments are discounted at either the interest rate implicit in the lease or when this interest rate cannot be readily determined, the Group's incremental borrowing rate associated with a similar asset. When calculating lease liabilities, the Group uses its incremental borrowing rate, being the rate it would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic climate with similar terms, security and conditions. This is estimated using publicly available data adjusted for changes specific to the lease in financing conditions, lease term, country and currency.
The Group does not have leases with variable lease payments based on an index or rate.
Extension or termination options are included in a number of the Group's leases. In determining the lease term, the Group considers all facts and circumstances that create an economic incentive to exercise, or not to exercise, an option. Extension options are only included in the lease term if the lease is reasonably certain to be extended. The lease term is reassessed if an option is actually exercised or the Group becomes obliged to exercise (or not to exercise) it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs that is within the control of the Group.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
|
● |
the amount of the initial measurement of lease liability, |
|
● |
any lease payments made at or before the commencement date less any lease incentives received, |
|
● |
any initial direct costs, and |
|
● |
restoration costs |
Right-of-use assets are depreciated on a straight-line basis over the term of the lease with depreciation expense recognised in the income statement.
Lease modifications are a change in scope of a lease that was not part of the original lease. Any change that is triggered by a clause already part of the original lease contract is a re-assessment and not a modification. Changes to lease cash flows as part of a re-assessment result in a re-measurement of the lease liability using an updated discount rate and a corresponding adjustment to the carrying value of the right-of-use asset.
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. Payments associated with short-term leases and leases of low value are recognised on a straight-line basis as an expense in profit or loss.
1.14 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 statement of financial position 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.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to the offset and there is an intention to settle balances on a net basis.
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.
1.15 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.
1.16 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
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
1.17 Financial instruments
Financial assets
IFRS 9 contains a classification and measurement approach for financial assets that reflects the business model in which assets are managed and their cash flow characteristics. Under IFRS 9, all financial assets are measured at either amortised cost, fair value through profit and loss ('FVTPL') or fair value through other comprehensive income ('FVOCI').
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 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 a 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 require the application of the '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 |
|
● |
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 expected credit loss 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
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.
Non-recourse receivables factoring is not recognised as a financial liability as there is no contractual obligation to deliver cash; subsequently, the receivables are de-recognised and any difference between the receivable value and amount received through non-recourse factoring is recognised as a finance cost.
1.18 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.
Restricted cash and cash equivalent balances are those which meet the definition of cash and cash equivalents but are not available for wider use by the Group. These balances arise from the Group's non-recourse working capital arrangements.
1.19 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 not recognised for future operating losses.
1.20 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.
1.21 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.
The individual financial statements of each Group company are presented in its functional currency. On consolidation, the assets and liabilities of overseas subsidiaries, including any related goodwill, are translated to Sterling at the rate of exchange at the balance sheet date. The results and cashflows of overseas subsidiaries are translated to Sterling using the average rates of exchange during the period. Exchange adjustments arising from the re-translations of the opening net investment and the results for the period to the period end rate are accounted for in the translation reserve in the statement of comprehensive income. On divestment, these exchange differences are reclassified from the translation reserve to the Income Statement.
1.22 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 the employee share plan |
|
● |
'Retained earnings' represents retained profits |
1.23 Critical accounting judgements and key sources of estimation uncertainty
Critical accounting judgements
The Directors are of the opinion 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, any insurance coverage in place and the current economic conditions. As a result, expected credit loss provisions for impairment of trade receivables have been recognised, as discussed in Note 18. The impact of COVID-19 has been incorporated into these estimates.
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. The impact of COVID-19 has been reflected in the forecast future cashflows. Further details on the sensitivity of the carrying value of goodwill and intangible assets to changes in the key 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,
|
2020 All amounts in £'000 |
|
|
International |
Continuing underlying operations |
Non-underlying items1 |
Discontinued operations |
Group |
|
Revenue |
416,515 |
104,306 |
17,830 |
538,651 |
- |
339 |
538,990 |
|
Gross profit |
39,808 |
7,971 |
6,497 |
54,276 |
- |
391 |
54,667 |
|
Operating contribution |
24,538 |
3,436 |
1,300 |
29,274 |
- |
(740) |
28,534 |
|
Depreciation, impairment and amortisation |
(2,509) |
(628) |
(108) |
(3,245) |
(1,382) |
(11) |
(4,638) |
|
Central overheads |
(15,106) |
(2,732) |
(2,199) |
(20,037) |
(1,248) |
(1,949) |
(23,234) |
|
Profit/(loss) from operations |
6,923 |
76 |
(1,007) |
5,992 |
(2,630) |
(2,700) |
662 |
|
Finance (cost)/income, net |
|
|
|
(1,404) |
(521) |
80 |
(1,845) |
|
Profit/(loss) before taxation |
|
|
|
4,588 |
(3,151) |
(2,620) |
(1,183) |
|
1 |
Non-underlying items includes non-underlying income and expenses, amortisation and impairment of goodwill and acquired intangibles, impairment of right-of-use assets and net foreign exchange gains or losses. |
|
2019 Restated1 All amounts in £'000 |
|
|
International |
Continuing underlying operations |
Non-underlying items2 |
Discontinued operations |
Group |
|
Revenue |
475,903 |
136,084 |
22,294 |
634,281 |
- |
12,904 |
647,185 |
|
Gross profit |
49,442 |
11,575 |
8,038 |
69,055 |
- |
3,043 |
72,098 |
|
Operating contribution |
27,489 |
5,902 |
1,860 |
35,251 |
- |
(551) |
34,700 |
|
Depreciation, impairment and amortisation |
(904) |
(258) |
(40) |
(1,202) |
(7,146) |
(17) |
(8,365) |
|
Central overheads |
(14,759) |
(3,835) |
(1,769) |
(20,363) |
(1,441) |
(7,356) |
(29,160) |
|
Profit/(loss) from operations |
11,826 |
1,809 |
51 |
13,686 |
(8,587) |
(7,924) |
(2,825) |
|
Finance (cost)/income, net |
|
|
|
(2,032) |
301 |
72 |
(1,659) |
|
Profit/(loss) before taxation |
|
|
|
11,654 |
(8,286) |
(7,852) |
(4,484) |
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
|
All amounts in £'000 |
Total Group revenue |
Non-current assets |
||
|
2020 |
2019 |
2020 |
2019 |
|
|
|
515,869 |
613,055 |
21,051 |
14,844 |
|
Rest of |
3,469 |
4,313 |
1 |
1 |
|
|
1,786 |
5,658 |
286 |
13 |
|
|
17,534 |
21,966 |
388 |
172 |
|
|
332 |
2,193 |
- |
13 |
|
Total |
538,990 |
647,185 |
21,726 |
15,043 |
Revenue and non-current assets are allocated to the geographical market based on the domicile of the respective subsidiary.
|
1 |
2019 figures have been restated for the presentation of discontinued operations as explained in Note 11. |
|
2 |
Non-underlying items includes non-underlying income and expenses, amortisation and impairment of goodwill and acquired intangibles, impairment of right-of-use assets and net foreign exchange gains or losses. |
|
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
|
|
|
|
International |
Total |
||||
|
2020 |
2019 |
2020 |
2019 |
2020 |
Restated1 |
2020 |
Restated1 |
|
|
Temporary placements |
407,494 |
463,840 |
102,660 |
133,491 |
13,678 |
17,022 |
523,832 |
614,353 |
|
Permanent placements |
8,734 |
11,887 |
1,654 |
2,593 |
4,152 |
5,261 |
14,540 |
19,741 |
|
Other |
287 |
176 |
(8) |
- |
- |
11 |
279 |
187 |
|
Total |
416,515 |
475,903 |
104,306 |
136,084 |
17,830 |
22,294 |
538,651 |
634,281 |
Timing of revenue recognition - continuing underlying operations
|
|
|
|
International |
Total |
||||
|
2020 |
2019 |
2020 |
2019 |
2020 |
Restated1 |
2020 |
Restated1 |
|
|
Point in time |
416,228 |
475,903 |
104,306 |
136,084 |
17,830 |
22,294 |
538,364 |
634,281 |
|
Over time |
287 |
- |
- |
- |
- |
- |
287 |
- |
|
Total |
416,515 |
475,903 |
104,306 |
136,084 |
17,830 |
22,294 |
538,651 |
634,281 |
No single customer contributed more than 10% of the Group's revenues (2019: none). Revenue is wholly recognised in relation to performance obligations satisfied in the period.
The Group has determined that its contract assets from contracts with customers are trade receivables and accrued income, and its contract liabilities are deferred income, which are set out below:
|
|
31 July 2020 |
31 July 2019 |
|
Trade receivables (Note 17) |
27,703 |
71,704 |
|
Accrued income (Note 17) |
15,900 |
22,837 |
|
Deferred income (Note 19) |
(1,090) |
(566) |
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 and is classified in current assets. Deferred income at a given reporting date is recognised as revenue in the following financial year once performance obligations are satisfied and is classified in current liabilities.
|
1 |
2019 figures have been restated for the presentation of discontinued operations as explained in Note 11. |
|
4 |
Profit/(Loss) From Total Operations
|
||
|
|
2020 |
2019 |
|
|
Profit/(loss) from total operations is stated after charging/(crediting): |
|
|
|
|
Depreciation of plant, property and equipment (Note 14) |
943 |
891 |
|
|
Depreciation of right-of-use leased assets (Note 22) |
2,041 |
- |
|
|
Amortisation of acquired intangibles (Note 13) |
616 |
1,264 |
|
|
Amortisation of software & software licences (Note 13) |
272 |
328 |
|
|
Impairment of goodwill and acquired intangibles (Note 13) |
334 |
5,882 |
|
|
Impairment of right-of-use leased assets (Note 22) |
432 |
- |
|
|
Loss on disposal of property, plant and equipment |
52 |
67 |
|
|
Operating lease costs: |
|
|
|
|
- Plant and machinery |
47 |
316 |
|
|
- Land and buildings |
192 |
2,033 |
|
|
Non-recourse working capital facility bank charges |
241 |
- |
|
|
Share-based payment charges |
77 |
269 |
|
|
Net losses/(gains) on foreign currency translation |
521 |
(302) |
|
The aggregate auditors' remuneration was as follows:
|
|
2020 |
2019 |
|
Fees payable for the audit of the Parent Company financial statements |
10 |
10 |
|
Fees payable for the audit of the subsidiary company financial statements |
294 |
247 |
|
Total auditors' remuneration |
304 |
257 |
|
Non-audit services: |
|
|
|
- Taxation |
- |
- |
|
- Other services pursuant to legislation |
- |
- |
|
Total non-audit services |
- |
- |
Non-underlying items included within Administrative Expenses were as follows:
|
Continuing operations |
2020 |
2019 |
|
Integration costs1 |
- |
1,441 |
|
Restructuring costs2 |
1,552 |
- |
|
Gain on sale of investment3 |
(304) |
- |
|
Non-underlying items included in profit from continuing operations |
1,248 |
1,441 |
|
Discontinued operations |
2020 |
2019 |
|
Recognition of onerous lease provision4 |
- |
1,102 |
|
Advisory fees5 |
1,395 |
3,424 |
|
Costs relating to discontinuation of group undertakings6 |
554 |
1,205 |
|
Non-underlying items included in loss from discontinued operations |
1,949 |
5,731 |
|
|
|
|
|
Total non-underlying items |
3,197 |
7,172 |
|
1 |
Integration costs of |
|
2 |
Restructuring costs of |
|
3 |
In November 2019, the Group concluded the sale of its 10% minority interest investment in Concillium Search Limited for consideration in cash of |
|
4 |
Prior to the adoption of IFRS 16, an onerous lease provision of |
|
5 |
Legal fees incurred in 2020 and 2019 in relation to the Group's co-operation with certain voluntary enquiries from the US Department of Justice. |
|
6 |
Ongoing 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. In addition for 2020, closure costs relating to the Group's operations in |
|
5 |
Particulars of Employees
|
The monthly average number of staff employed by the Group, including Executive Directors, during the financial year amounted to:
|
Total operations |
2020 |
2019 |
|
Sales |
482 |
531 |
|
Administration |
176 |
200 |
|
Directors |
7 |
8 |
|
Total |
665 |
739 |
There are no employees employed by the Parent Company (2019: nil).
The aggregate payroll costs of the above were:
|
Total operations |
2020 |
2019 |
|
Wages and salaries |
27,918 |
37,189 |
|
Social security costs |
3,394 |
4,484 |
|
Other pension costs |
806 |
905 |
|
Share-based payments |
77 |
269 |
|
Total |
32,195 |
42,847 |
Amounts due to defined contribution pension providers at 31 July 2020 were
Disclosure of the remuneration of the statutory Directors is further detailed in the audited part of the Remuneration Report on pages 76 to 83. Disclosure of the remuneration of Group's key management personnel, as required by IAS 24, is detailed below:
|
Total operations |
2020 |
2019 |
|
Short-term employee benefits |
1,687 |
2,296 |
|
Contributions to defined contribution pension schemes |
119 |
163 |
|
Share-based payments |
(62) |
(22) |
|
Total |
1,744 |
2,437 |
|
6 |
Finance Income
|
||
|
Continuing operations |
2020 |
Restated1 |
|
|
Interest income |
91 |
63 |
|
|
Net gains on foreign currency translation |
- |
301 |
|
|
Total |
91 |
364 |
|
|
1 |
2019 figures have been restated for the presentation of discontinued operations as explained in Note 11. |
|
7 |
Finance Costs
|
||
|
Continuing operations |
2020 |
Restated1 |
|
|
Bank interest expense |
1,130 |
1,992 |
|
|
Interest expense on lease liabilities |
214 |
- |
|
|
Amortisation of capitalised finance costs |
151 |
103 |
|
|
Net losses on foreign currency translation |
521 |
- |
|
|
Total |
2,016 |
2,095 |
|
|
8 |
Government Grants
|
Grant income recognised from government grants recognised in Cost of sales and Administrative expenses are as follows:
|
Continuing operations |
2020 |
2019 |
|
|
2,335 |
- |
|
|
1,471 |
- |
|
Total |
3,806 |
- |
As a response to the COVID-19 global pandemic, the Group made use of the
As the scheme is conditional upon the Group retaining its employees in employment, or the temporary contract workers being retained by their employers, whilst they are furloughed during the COVID-19 pandemic, it is designed to compensate companies for staff or temporary worker costs incurred. As all claims submitted for the period have either been received or are expected to be receivable, the Group considers the scheme meets the definition of a government grant as set out in IAS 20 and has accounted for it as such. For grants received or receivable for Gattaca's employees on furlough, the Group has presented the grant income as a deduction to staff costs presented in Administrative expenses in the Income Statement; for grants received or receivable for temporary contract workers of Gattaca's clients on furlough, the Group has presented the grant income as a deduction to Cost of sales.
|
9 |
Parent Company Loss
|
||
|
|
2020 |
2019 |
|
|
The amount of loss generated by the Parent Company was: |
(1,111) |
(231) |
|
|
1 |
2019 figures have been restated for the presentation of discontinued operations as explained in Note 11. |
|
10 |
Taxation |
|
Analysis of charge in the year |
Continuing |
Discontinued |
Continuing |
Discontinued |
|
|
2020 |
2020 |
Restated1 |
Restated1 |
||
|
Current tax: |
|
790 |
(269) |
2,368 |
(913) |
|
|
Overseas corporation tax |
215 |
1 |
384 |
845 |
|
|
Adjustment in respect of prior years |
(117) |
- |
(178) |
- |
|
|
|
888 |
(268) |
2,574 |
(68) |
|
|
|
|
|
|
|
|
Deferred tax credit (Note 16) |
Origination and reversal |
(132) |
- |
(943) |
- |
|
|
Adjustments in respect of prior years |
110 |
- |
(146) |
- |
|
|
|
(22) |
- |
(1,089) |
- |
|
Income tax expense/(credit) for the year |
866 |
(268) |
1,485 |
(68) |
|
The charge for the year can be reconciled to the profit/(loss) as per the Income Statement as follows:
|
|
Continuing |
Discontinued |
Continuing |
Discontinued |
|
2020 |
2020 |
Restated1 |
Restated1 |
|
|
Profit/(loss) before tax |
1,437 |
(2,620) |
3,368 |
(7,852) |
|
|
|
|
|
|
|
Profit/(loss) before tax multiplied by the standard |
273 |
(498) |
640 |
(1,492) |
|
|
|
|
|
|
|
Expenses not deductible for tax purposes and goodwill impairment loss |
21 |
11 |
1,140 |
43 |
|
Effect of share-based payments |
70 |
- |
107 |
- |
|
Irrecoverable withholding tax |
42 |
- |
109 |
727 |
|
Overseas losses not recognised as deferred tax assets |
610 |
290 |
(304) |
538 |
|
Difference between |
(143) |
(71) |
117 |
116 |
|
Adjustment to tax charge in respect of previous years |
(7) |
- |
(324) |
- |
|
Total taxation charge /(credit) for the year |
866 |
(268) |
1,485 |
(68) |
Tax charge/(credit) recognised in equity:
|
|
2020 |
2019 |
|
Deferred tax charge/(credit) recognised directly in equity |
16 |
(15) |
|
Total tax charge/(credit) recognised directly in equity |
16 |
(15) |
1 2019 figures have been restated for the presentation of discontinued operations as explained in Note 11.
Reconciliation of statutory continuing tax charge to continuing underlying tax charge:
|
|
2020 |
Restated |
|
Income tax expense |
866 |
1,485 |
|
Impairment and amortisation of acquired intangibles |
143 |
846 |
|
Non-underlying items |
280 |
244 |
|
Foreign currency exchange differences |
(18) |
(74) |
|
Underlying income tax expense |
1,271 |
2,501 |
Future tax rate changes
On 17 March 2020, the
As these changes of rates have been enacted at the balance sheet date, the impact of these reductions has been reflected in the deferred tax liability at 31 July 2020.
|
11 |
Discontinued Operations |
2020
On 9 March 2020, the Group commenced communications with the management and employees of its Chinese subsidiary, announcing its intention to cease its remaining operations in
2019
On 4 September 2018 the Group announced that it was withdrawing from the contract Telecoms Infrastructure markets in
As detailed in Note 15, Gattaca de Colombia SAS, Comms Resources Colombia and Gattaca France SAS were liquidated during the financial year ended 31 July 2019, resulting in a gain of £89,000. These entities made a trading loss of £68,000 during financial year ended 31 July 2019. The results of these liquidated businesses are included in discontinued operations in 2019.
|
1 |
2019 figures have been restated for the presentation of discontinued operations as explained in Note 11. |
Financial performance and cash flow information
|
|
2020 |
Restated1 |
|
Revenue |
339 |
12,904 |
|
Cost of Sales |
52 |
(9,861) |
|
Gross profit |
391 |
3,043 |
|
|
|
|
|
Administrative expenses2 |
(3,091) |
(10,967) |
|
Loss from operations |
(2,700) |
(7,924) |
|
|
|
|
|
Finance income |
3 |
73 |
|
Income from fixed asset investments |
77 |
(1) |
|
Loss before taxation |
(2,620) |
(7,852) |
|
|
|
|
|
Taxation |
268 |
68 |
|
Loss for the year after taxation from discontinued operations |
(2,352) |
(7,784) |
|
|
|
|
|
Exchange differences on translation of discontinued operations |
(348) |
997 |
|
Other comprehensive loss from discontinued operations |
(2,700) |
(6,787) |
|
|
2020 |
Restated1 |
|
Net cash outflow from operating activities |
(1,109) |
(2,056) |
|
Net cash inflow from investing activities |
77 |
14 |
|
Net cash outflow from financing activities |
(76) |
- |
|
Effects of exchange rates on cash and cash equivalents |
(56) |
(4) |
|
Net decrease in cash generated by discontinued operations |
(1,164) |
(2,046) |
|
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 options (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 effect 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 in accordance with IAS 33. 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 2020 and 31 July 2019 and therefore have been included in the calculation below. The diluted loss per share is lower than basic loss per share because of the effect of losses from discontinued operations.
There are no changes to the profit numerator as a result of the dilution calculation.
|
1 |
2019 figures have been restated for the presentation of discontinued operations as explained in Note 11. |
|
2 |
Included in administrative expenses are £1,949,000 (2019: £5,731,000) of non-underlying items, as detailed in Note 4. In addition, it includes net impairment release on trade receivables from discontinued operations of £166,000 (2019 loss: £689,000). |
|
|
2020 |
2019 |
|
Total loss attributable to ordinary shareholders |
(1,781) |
(5,901) |
|
Number of shares |
2020 |
2019 |
|
Basic weighted average number of ordinary shares in issue |
32,285 |
32,267 |
|
Dilutive potential ordinary shares |
68 |
877 |
|
Diluted weighted average number of shares |
32,353 |
33,144 |
|
Total earnings per share |
|
2020 |
2019 |
|
Earnings per ordinary share |
Basic |
(5.5) |
(18.3) |
|
Diluted |
(5.5) |
(17.8) |
|
Earnings from continuing operations |
|
2020 |
Restated1 |
|
Total profit for the year |
|
571 |
1,883 |
|
Total earnings per share for continuing operations |
2020 |
Restated1 |
|
|
Earnings per ordinary share |
Basic |
1.8 |
5.8 |
|
Diluted |
1.8 |
5.7 |
|
|
Earnings from discontinuing operations |
|
2020 |
Restated1 |
|
Total loss for the year |
|
(2,352) |
(7,784) |
|
Total earnings per share for discontinuing operations |
2020 |
Restated1 |
|
|
Earnings per ordinary share |
Basic |
(7.3) |
(24.1) |
|
Diluted |
(7.3) |
(23.5) |
|
|
Earnings from continuing underlying operations |
|
2020 |
Restated1 |
|
Total profit for the year |
|
3,317 |
9,153 |
|
Total earnings per share for continuing underlying operations |
2020 |
Restated1 |
|
|
Earnings per ordinary share from continuing underlying operations |
Basic |
10.3 |
28.4 |
|
Diluted |
10.3 |
27.6 |
|
|
1 |
2019 figures have been restated for the presentation of discontinued operations as explained in Note 11. |
|
13 |
Goodwill And Intangible Assets |
|
Group |
|
Goodwill |
Customer |
Trade |
Other |
Software |
Total |
|
Cost |
At 1 August 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 |
|
|
Additions |
- |
- |
- |
- |
2,348 |
2,348 |
|
|
At 31 July 2020 |
28,739 |
22,245 |
5,346 |
3,809 |
8,573 |
68,712 |
|
|
|
|
|
|
|
|
|
|
Amortisation |
At 1 August 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 |
|
|
Amortisation for the year |
- |
325 |
53 |
238 |
272 |
888 |
|
|
Impairment |
- |
281 |
53 |
- |
- |
334 |
|
|
At 31 July 2020 |
24,382 |
20,530 |
5,057 |
3,527 |
2,339 |
55,835 |
|
|
|
|
|
|
|
|
|
|
Net book value |
At 31 July 2019 |
4,357 |
2,321 |
395 |
520 |
4,158 |
11,751 |
|
|
At 31 July 2020 |
4,357 |
1,715 |
289 |
282 |
6,234 |
12,877 |
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:
|
|
2020 |
2019 |
|
|
1,712 |
1,712 |
|
Resourcing Solutions Limited |
2,645 |
2,645 |
|
Total |
4,357 |
4,357 |
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 recoverable amounts of the CGU's are determined from value-in-use calculations.
The key assumptions and estimates used when calculating a CGU's value in use, are as follows:
Cash flows from operations
Cash flows from operations are based on the Group's 2021 budget as approved by the Group's Board of Directors plus four years of forecasts at a CGU level updated for any key changes, which are prepared using expectations of revenue and operating cost growth over the next five years. The Group prepares cash flow forecasts adjusted for allocations of Group overhead costs, and extrapolates cash flows into perpetuity based on long-term growth rates. The impact of COVID-19 has been incorporated into these forecasts, based on the time expected for trading to return to pre-pandemic levels.
Discount rates
The pre-tax rates used to discount the forecast cash flows were a range from 13.9% to 14.9% (2019: 13.5% to 15.7%) 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 11.7% (2019: 11.2%) for
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% (2019: 2.0%), using a weighted average of operating country real GDP growth expectations.
As a result of these forecasts, total impairment losses of £334,000 (2019: £5,882,000) have been recorded in respect of goodwill and acquired intangible assets within the
|
|
Goodwill |
Intangible assets |
Total |
Goodwill |
Intangible assets |
Total |
|
|
- |
334 |
334 |
- |
- |
- |
|
International |
- |
- |
- |
2,603 |
3,279 |
5,882 |
|
Total |
- |
334 |
334 |
2,603 |
3,279 |
5,882 |
Goodwill and acquired intangibles within the
Sensitivity analysis has been performed to show the impact of reasonable or possible changes in key assumptions, in particular with reference to the economic uncertainty surrounding the impact of, and future recovery from, the COVID-19 pandemic. An increase in the discount rate by a factor of 0.2% to 11.9%, or a reduction in the long-term growth rate to 1.8%, would not trigger a material impairment for any of the CGU's.
For the RSL CGU, a two year delay to management's forecast recovery trajectory to return to pre-COVID trading levels would not trigger an impairment. For the
|
Company |
|
Trade names £'000 |
|
Cost |
At 1 August 2018 |
- |
|
|
Additions |
- |
|
|
At 31 July 2019 |
- |
|
|
Additions |
20 |
|
|
At 31 July 2020 |
20 |
|
|
|
|
|
Amortisation |
At 1 August 2018 |
- |
|
Amortisation for the year |
- |
|
|
|
Impairment |
- |
|
|
At 31 July 2019 |
- |
|
|
Amortisation for the year |
4 |
|
|
Impairment |
- |
|
|
At 31 July 2020 |
4 |
|
|
|
|
|
Net book value |
At 31 July 2019 |
- |
|
|
At 31 July 2020 |
16 |
|
14 |
Property, Plant And Equipment |
|
Group |
|
Motor |
Leasehold |
Fixtures, |
Total |
|
Cost |
At 1 August 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 |
|
|
Reclassification of dilapidation assets |
- |
(1,535) |
- |
(1,535) |
|
|
Additions |
- |
101 |
90 |
191 |
|
|
Disposals |
(37) |
(204) |
(1) |
(242) |
|
|
Effects of movements in exchange rates |
- |
(37) |
- |
(37) |
|
|
At 31 July 2020 |
(16) |
3,055 |
4,721 |
7,760 |
|
|
|
|
|
|
|
|
Accumulated depreciation |
At 1 August 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 |
|
|
Reclassification of dilapidation assets |
- |
(576) |
- |
(576) |
|
|
Charge for the year |
5 |
564 |
374 |
943 |
|
|
Released on disposal |
(38) |
(18) |
(134) |
(190) |
|
|
At 31 July 2020 |
(16) |
1,867 |
4,417 |
6,268 |
|
|
|
|
|
|
|
|
Net book value |
At 31 July 2019 |
4 |
2,833 |
455 |
3,292 |
|
|
At 31 July 2020 |
- |
1,188 |
304 |
1,492 |
Included within Leasehold improvements at 31 July 2019 was a cost of £1,535,000 and a net book value of £959,000 relating to dilapidations provisions (see Note 18). These assets have been reclassified to be presented against right-of-use assets from 1 August 2019 on adoption of IFRS 16.
There were no capital commitments as at 31 July 2020 or 31 July 2019.
|
15 |
Investments In Subsidiary Undertakings |
|
Cost and carrying value: |
Group |
Company |
||
|
2020 |
2019 |
2020 |
2019 |
|
|
Balance at 1 August 2019 |
- |
- |
8,580 |
8,311 |
|
Purchase of investments |
19 |
- |
- |
- |
|
(Reversal of capital contributions)/capital contributions to subsidiaries |
- |
- |
(60) |
269 |
|
Balance at 31 July 2020 |
19 |
- |
8,520 |
8,580 |
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.
During the year, Sakha Sonke Private Equity Fund invested a total of £19,000 in external minority investments in accordance with the partnership agreement between Kula Nathi Investments Proprietary Limited and Ingenious Equity Proprietary Limited. At 31 July 2020, the fair value of the equity investment is considered equivalent to its carrying value at cost.
The movement in investment in Group undertakings represents capital contributions made in Matchtech Group (
The subsidiary undertakings at the year end are as follows:
|
|
Registered Office Note |
Country of Incorporation |
Share |
% held |
% held |
Main Activities |
|
Alderwood Education Ltd1 |
1 |
|
Ordinary |
100% |
100% |
Provision of recruitment consultancy |
|
Application Services Limited1 |
1 |
|
Ordinary |
100% |
100% |
Provision of recruitment consultancy |
|
Barclay Meade Ltd1 |
1 |
|
Ordinary |
100% |
100% |
Provision of recruitment consultancy |
|
Cappo Group Limited1 |
1 |
|
Ordinary |
100% |
100% |
Holding |
|
Cappo International Limited1 |
1 |
|
Ordinary |
100% |
100% |
Provision of recruitment consultancy |
|
Comms Software Limited2 |
1 |
|
Ordinary |
100% |
100% |
Non trading |
|
CommsResources Limited1 |
1 |
|
Ordinary |
100% |
100% |
Provision of recruitment consultancy |
|
Connectus Technology Limited1 |
1 |
|
Ordinary |
100% |
100% |
Provision of recruitment consultancy |
|
Elite Computer Staff Ltd.2 |
1 |
|
Ordinary |
100% |
100% |
Non trading |
|
Gattaca Recruitment Limited2 |
1 |
|
Ordinary |
100% |
100% |
Non trading |
|
Gattaca Solutions Limited1 |
1 |
|
Ordinary |
100% |
100% |
Provision of recruitment consultancy |
|
Matchtech Engineering Limited2 |
1 |
|
Ordinary |
100% |
100% |
Non trading |
|
Matchtech Group (Holdings) Limited1 |
1 |
|
Ordinary |
99.7% |
99.7% |
Holding |
|
Matchtech Group ( |
1 |
|
Ordinary |
99.998% |
99.998% |
Provision of recruitment consultancy |
|
Matchtech Group Management Company Limited2 |
1 |
|
Ordinary |
100% |
100% |
Non trading |
|
Matchtech Limited2 |
1 |
|
Ordinary |
100% |
100% |
Non trading |
|
MSB Consulting Services Limited2 |
1 |
|
Ordinary |
100% |
100% |
Non trading |
|
Networkers International ( |
1 |
|
Ordinary |
100% |
100% |
Provision of recruitment consultancy |
|
Networkers International Limited1 |
1 |
|
Ordinary |
100% |
100% |
Holding |
|
Networkers International Trustees Limited2 |
1 |
|
Ordinary |
100% |
100% |
Non trading |
|
Networkers Recruitment Services Limited2 |
1 |
|
Ordinary |
100% |
100% |
Non trading |
|
Provanis Limited2 |
1 |
|
Ordinary |
100% |
100% |
Non trading |
|
Resourcing Solutions Limited1 |
1 |
|
Ordinary |
100% |
100% |
Provision of recruitment consultancy |
|
The Comms Group Limited1 |
1 |
|
Ordinary |
100% |
100% |
Holding |
|
Gattaca GmbH |
2 |
|
Ordinary |
100% |
100% |
Provision of recruitment consultancy |
|
MSB International GMBH |
13 |
|
Ordinary |
100% |
100% |
Non trading |
|
Gattaca BV |
3 |
|
Ordinary |
100% |
100% |
Provision of recruitment consultancy |
|
Cappo Inc. |
5 |
|
Ordinary |
100% |
100% |
Provision of recruitment consultancy |
|
Matchtech Engineering Inc. |
4 |
|
Ordinary |
100% |
100% |
Non trading |
|
Networkers Inc. |
5 |
|
Ordinary |
100% |
100% |
Provision of recruitment consultancy |
|
Networkers International LLC |
5 |
|
Ordinary |
100% |
100% |
Non trading |
|
Networkers International ( |
11 |
|
Ordinary |
100% |
100% |
Provision of recruitment consultancy |
|
Gattaca Mexico Services, S.A. de C.V4 |
6 |
|
Ordinary |
100% |
100% |
Provision of recruitment consultancy |
|
NWI Mexico, S. de R.L. de C.V. |
6 |
|
Ordinary |
100% |
100% |
Provision of recruitment consultancy |
|
Kithara Investments Proprietary Limited |
8 |
|
Ordinary |
100% |
100% |
Holding |
|
Kula Nathi Investments Proprietary Limited |
7 |
|
Ordinary |
100% |
100% |
Holding |
|
Networkers International Proprietary Limited |
7 |
|
Ordinary |
100% |
100% |
Provision of recruitment consultancy |
|
Networkers International South |
7 |
|
Ordinary |
100% |
100% |
Provision of recruitment consultancy |
|
Networkers International ( |
9 |
|
Ordinary |
100% |
100% |
Provision of recruitment consultancy |
|
Comms Resource SDN. BHD |
10 |
|
Ordinary |
100% |
100% |
Non trading |
|
Networkers International ( |
10 |
|
Ordinary |
100% |
100% |
Non trading |
|
NWKI Consultancy FZ LLC |
12 |
|
Ordinary |
100% |
100% |
Non trading |
|
Cappo Qatar LLC3 |
15 |
|
Ordinary |
49% |
49% |
Non trading |
|
Networkers Consultancy ( |
14 |
|
Ordinary |
100% |
100% |
Non trading |
|
Gattaca Information Technology Services SLU |
16 |
|
Ordinary |
100% |
100% |
Provision of recruitment consultancy |
|
Gattaca Recruitment ETT, SLU |
16 |
|
Ordinary |
100% |
100% |
Non trading |
|
Networkers International ( |
17 |
|
Ordinary |
100% |
100% |
Non trading |
|
1 |
For the year ended 31 July 2020, Gattaca plc has provided a legal guarantee dated 3 November 2020 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 |
Gattaca plc has 100% of the beneficial interest in these entities, and consolidates them as wholly owned subsidiaries in line with IFRS 10.
|
|
4 |
Gattaca Mexico Services, S.A. de C.V was incorporated in October 2018 and wholly consolidated from that date. |
All holdings by Gattaca plc are indirect except for Matchtech Group (Holdings) Limited, Gattaca GmbH and Matchtech Group Management Company Limited.
Networkers International (
The Group's Share Incentive Plan (SIP) is held by Gattaca plc
|
Registered office addresses |
|
|
1 |
1450 Parkway, Solent Business Park, Whiteley, Fareham, |
|
2 |
c/o Grant Thornton, Jahnstrasse 6, 70597, |
|
3 |
Herengracht 124-128, 1015 BT |
|
4 |
33 SW Flager Avenue, |
|
5 |
6400 International Parkway, Suite 1510, |
|
6 |
Avenida Paseo de la Reforma No. 296 Piso 15 Oficina A, Colonia Juárez, Delegación Cuauhtémoc, |
|
7 |
201 Heritage House, 20 Dreyer Street, |
|
8 |
6th Floor, 119 Hertzog Boulevard, Foreshre, |
|
9 |
B-2701, Di San Zhi Ye Building, No. A1 Shuguang Xili, Chao Yang District, |
|
10 |
Level 8, Symphony House, Block D13, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, |
|
11 |
1 Richmond Street West, Suite 902, |
|
12 |
Office 3022, Shatha Tower, Dubai Media City, |
|
13 |
Franlinstr. 48, 60456, |
|
14 |
371 Beach Road, #15-09 Keypoint, |
|
15 |
Suite #204, Office #40 Al Rawabi Street, Muntazah, |
|
16 |
Calle General, Moscardo 6. Espaco Office, |
|
17 |
3rd Floor, 301 DLF City Court Sikandarpur, Gurgaon-122002 Harayana, |
|
16 |
Deferred Tax |
|
Group |
Asset |
Liability |
Net |
(Charged)/credited |
Credited |
Foreign exchange |
Impact of transition to IFRS 16 |
|
Share-based payments |
21 |
- |
21 |
(68) |
(16) |
- |
- |
|
Accelerated capital allowances |
- |
(106) |
(106) |
(114) |
- |
- |
- |
|
Acquired intangibles |
- |
(414) |
(414) |
142 |
- |
- |
- |
|
Other temporary and deductible differences |
222 |
- |
222 |
62 |
- |
(6) |
119 |
|
Gross deferred tax assets/(liabilities) |
243 |
(520) |
(277) |
22 |
(16) |
(6) |
119 |
|
Amounts available for offset |
(243) |
243 |
- |
|
|
|
|
|
Net deferred tax assets/(liabilities) |
- |
(277) |
(277) |
|
|
|
|
|
Group |
Asset |
Liability |
Net |
(Charged)/credited |
Credited |
Foreign exchange |
Impact of transition to IFRS 16 |
|
Share-based payments |
105 |
- |
105 |
(2) |
15 |
- |
- |
|
Accelerated capital allowances |
8 |
- |
8 |
(35) |
- |
- |
- |
|
Acquired intangibles |
- |
(556) |
(556) |
842 |
- |
- |
- |
|
Other temporary and deductible differences |
47 |
- |
47 |
284 |
- |
1 |
- |
|
Gross deferred tax assets/(liabilities) |
160 |
(556) |
(396) |
1,089 |
15 |
1 |
- |
|
Amounts available for offset |
(160) |
160 |
- |
|
|
|
|
|
Net deferred tax assets/(liabilities) |
- |
(396) |
(396) |
|
|
|
|
The movement on the net deferred tax is as shown below:
|
|
Group |
|
|
2020 |
2019 |
|
|
At 1 August |
(396) |
(1,501) |
|
Impact of transition to IFRS 16 |
119 |
- |
|
Recognised in income (Note 10) |
22 |
1,089 |
|
Recognised in equity |
(16) |
15 |
|
Foreign exchange |
(6) |
1 |
|
At end of year |
(277) |
(396) |
|
|
2020 |
2019 |
|
Deferred tax assets reversing within 1 year |
179 |
29 |
|
Deferred tax liabilities reversing within 1 year |
(232) |
(114) |
|
At end of year |
(53) |
(85) |
|
|
2020 |
2019 |
|
Deferred tax assets reversing after 1 year |
64 |
131 |
|
Deferred tax liabilities reversing after 1 year |
(288) |
(442) |
|
At end of year |
(224) |
(311) |
Unrecognised deferred tax assets
|
|
Group |
|
|
2020 |
2019 |
|
|
Tax losses carried forward against profits of future years |
1,640 |
755 |
|
Other temporary and deductible differences |
- |
88 |
|
Net deferred tax assets |
1,640 |
843 |
Of the unused tax losses £3,234,000 (2019: £1,646,000) can be carried forward indefinitely, £340,000 (2019: £nil) expires within 10 years and £142,000 (2018: £164,000) 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 £5,345,000 (2019: £9,002,000). If the earnings were remitted, tax of £120,000 (2019: £164,000) would be payable. On 17 March 2020, the
|
17 |
Trade and Other Receivables |
|
|
Group |
Company |
||
|
2020 |
2019 |
2020 |
2019 |
|
|
Trade receivables from contracts with customers, net of loss allowance |
27,703 |
71,704 |
- |
- |
|
Amounts owed by Group companies |
- |
- |
101,610 |
100,877 |
|
Corporation tax receivables |
26 |
329 |
275 |
281 |
|
Other receivables |
3,554 |
660 |
- |
- |
|
Prepayments |
1,705 |
1,198 |
- |
- |
|
Accrued income |
15,900 |
22,837 |
- |
- |
|
Total |
48,888 |
96,728 |
101,885 |
101,158 |
The amounts owed by Group companies 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.
The Directors consider that the carrying amount of trade and other receivables approximates to the fair value.
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. An expected credit loss allowance of £269,000 (2019: £nil) has been recognised at 31 July 2020, in respect of accrued income for unbilled temporary placements older than 6 months.
Impairment of trade receivables from contracts with customers
|
|
Group |
|
|
2020 |
2019 |
|
|
Trade receivables from contracts with customers, gross amounts |
31,690 |
73,893 |
|
Loss allowance |
(3,987) |
(2,189) |
|
Trade receivables from contracts with customers, net of loss allowance |
27,703 |
71,704 |
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. Trade receivables have reduced year on year due to the impact of COVID-19 on trading, as well as the impact of de-recognition of any trade receivables held under the Group's non-recourse invoice financing arrangements entered into in 2020.
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 customer 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 then adjusted to reflect any relevant current and forward-looking information expected to affect the ability of customers to settle the receivables. In addition for 2020, the impact of COVID-19 on specific industries and geographies has also been taken into account, using forecast economic downturn levels to assess elevated levels of credit risk in certain markets.
The loss allowance for trade receivables was determined as follows:
|
31 July 2020 |
Current |
More than |
More than |
More than |
Total |
|
Weighted expected loss rate (%) |
6.9% |
8.8% |
10.2% |
91.1% |
|
|
Gross carrying amount - trade receivables (£'000) |
19,079 |
8,941 |
1,788 |
1,882 |
31,690 |
|
Loss allowance (£'000) |
1,307 |
783 |
183 |
1,714 |
3,987 |
|
31 July 2019 |
Current |
More than |
More than |
More than |
Total |
|
Weighted expected loss rate (%) |
1.4% |
2.0% |
4.1% |
53.4% |
|
|
Gross carrying amount - trade receivables (£'000) |
69,944 |
1,130 |
665 |
2,154 |
73,893 |
|
Loss allowance (£'000) |
987 |
23 |
28 |
1,151 |
2,189 |
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 businesses of £989,000 at 31 July 2020 (31 July 2019: £1,126,000).
The loss allowance for trade receivables at year end reconciles to the opening loss allowance as per below:
|
|
Group |
|
|
2020 |
2019 |
|
|
Opening loss allowance at 1 August |
2,189 |
1,547 |
|
Increase in loss allowance recognised in profit and loss during the year |
2,281 |
994 |
|
Receivable written off during the year as uncollectible |
(483) |
(352) |
|
Closing loss allowance at 31 July |
3,987 |
2,189 |
|
18 |
Provisions |
|
Group |
2020 |
2019 |
||||||
|
Dilapidation provisions |
Onerous lease provisions |
Other provisions |
Total |
Dilapidation provisions |
Onerous lease provisions |
Other provisions |
Total |
|
|
Balance at 1 August |
1,747 |
934 |
- |
2,681 |
1,390 |
- |
- |
1,390 |
|
Adjustment on initial |
- |
(934) |
- |
(934) |
- |
- |
- |
- |
|
Restated balance at 1 August |
1,747 |
- |
- |
1,747 |
1,390 |
- |
- |
1,390 |
|
Effects of movements |
(38) |
- |
- |
(38) |
- |
- |
- |
- |
|
Provisions made in the year |
1 |
- |
1,084 |
1,085 |
402 |
1,102 |
- |
1,504 |
|
Provisions utilised |
- |
- |
- |
- |
(45) |
(167) |
- |
(212) |
|
Unwinding of discount |
- |
- |
- |
- |
- |
(1) |
- |
(1) |
|
Balance at 31 July |
1,710 |
- |
1,084 |
2,794 |
1,747 |
934 |
- |
2,681 |
|
Group |
2020 |
2019 |
||||||
|
Dilapidation provisions |
Onerous lease provisions |
Other provisions |
Total |
Dilapidation provisions |
Onerous lease provisions |
Other provisions |
Total |
|
|
Non-Current |
1,587 |
- |
971 |
2,558 |
1,747 |
602 |
- |
2,349 |
|
Current |
123 |
- |
113 |
236 |
- |
332 |
- |
332 |
|
Total |
1,710 |
- |
1,084 |
2,794 |
1,747 |
934 |
- |
2,681 |
Dilapidation provisions are held in respect of the Group's office properties where lease obligations include contractual obligations to return the property to its original condition at the end of the lease term, ranging between one and eight years.
Onerous lease provisions of £1,102,000 were recorded in 2019 in relation to the remaining lease term of property that was no longer in use by the Group as a result of the closure of the contract Telecoms Infrastructure business. These costs were presented as non-underlying as shown in Note 4. On adoption of IFRS 16, the Group made use of the practical expedient of presenting existing onerous lease provisions against the carrying value of the relevant right-of-use asset; as a result, the full onerous lease provision was reclassified on 1 August 2019.
Other provisions have been recognised for primarily for restructuring activities, with the remainder in respect of claims for certain legal matters. In July 2020, the Group publicly announced plans for a significant restructuring of its
No provisions are held by the parent Company (2019: nil).
|
19 |
Trade and Other Payables |
|
|
Group |
Company |
||
|
2020 |
2019 |
2020 |
2019 |
|
|
Trade payables |
1,750 |
285 |
- |
- |
|
Amounts owed to Group undertakings |
- |
- |
63,590 |
54,083 |
|
Taxation and social security |
15,859 |
8,013 |
- |
- |
|
Contractor wages payable |
20,519 |
24,270 |
- |
- |
|
Accruals and deferred income |
4,348 |
7,024 |
- |
- |
|
Other payables |
3,653 |
1,084 |
- |
- |
|
Total |
46,129 |
40,676 |
63,590 |
54,083 |
Amounts owed to Group undertakings are unsecured, repayable on demand and accrue no interest.
|
20 |
Loans and Borrowings |
|
|
Group |
Company |
||
|
2020 |
2019 |
2020 |
2019 |
|
|
Working capital facility |
151 |
29,119 |
- |
- |
|
Finance costs capitalised |
- |
(81) |
- |
- |
|
Bank loans and borrowings due in less than one year |
151 |
29,038 |
- |
- |
|
|
|
|
|
|
|
Revolving Credit Facility |
7,500 |
15,000 |
7,500 |
15,000 |
|
Finance costs capitalised |
(196) |
(43) |
(196) |
(43) |
|
Bank loans and borrowings due in more than one year |
7,304 |
14,957 |
7,304 |
14,957 |
|
|
|
|
|
|
|
Total bank loans and borrowings |
7,455 |
43,995 |
7,304 |
14,957 |
On 31 October 2019, the Group renewed its Revolving Credit Facility (RCF) with HSBC, extending the term out from October 2020 to October 2022, capitalising additional costs of £223,000 which are being amortised over the remaining term of the facility. In January 2020, the Group then transferred a portion of its recourse working capital facility to a non-recourse working capital facility. Under the terms of the non-recourse facility, the trade receivables assigned to the facility are owned by HSBC and so have been de-recognised from the Group's Statement of Financial Position; in addition, the non-recourse working capital facility does not meet the definition of loans and borrowings under IFRS. The Group continues to collect cash from trade receivables assigned to the non-recourse facility on behalf of HSBC which is then transferred to them periodically each month. Any cash collected from trade receivables under the non-recourse facility at 31 July 2020 that had not been transferred to HSBC, is presented as restricted cash included within the Group's cash balance. At 31 July 2020, the Group had agreed banking facilities with HSBC totalling £82.5m comprising a £75m Invoice Financing working capital facility (recourse and non-recourse) and a £7.5m (31 July 2019: £15m) Revolving Credit Facility committed until October 2022.
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 or uninvoiced trade receivables up to a maximum of £75m. Interest is charged on the recourse borrowings at a rate of 1.75% (2019: 2.30%) over HSBC Bank base rate.
The Group's £7.5m Revolving Credit 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% (2019: 3.25%) over HSBC LIBOR rate. The Group is required to comply with certain financial covenants over the Revolving Credit Facility and all covenant requirements were satisfied in the period.
|
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 |
||
|
2020 |
2019 |
2020 |
2019 |
|
|
Trade and other receivables (Note 17) |
|
|
|
|
|
- Financial assets recorded at amortised cost |
47,157 |
95,201 |
101,610 |
100,877 |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
- Financial assets recorded at amortised cost |
34,796 |
19,173 |
- |
- |
|
Total |
81,953 |
114,374 |
101,610 |
100,877 |
Financial liabilities are included in the Statement of Financial Position within the following headings:
|
|
Group |
Company |
||
|
2020 |
2019 |
2020 |
2019 |
|
|
Borrowings (Note 20) |
|
|
|
|
|
- Financial liabilities recorded at amortised cost |
7,455 |
43,995 |
7,304 |
14,957 |
|
|
|
|
|
|
|
Leases (Note 22) |
|
|
|
|
|
- Financial liabilities recorded at amortised cost |
7,736 |
- |
- |
- |
|
|
|
|
|
|
|
Trade and other payables (Note 19) |
|
|
|
|
|
- Financial liabilities recorded at amortised cost |
30,270 |
32,663 |
63,590 |
54,083 |
|
Total |
45,461 |
76,658 |
70,894 |
69,040 |
The amounts at which the assets and liabilities above are recorded are considered to approximate to fair value.
|
22 |
Leases |
On 1 August 2019, the Group adopted IFRS 16 Leases, applying a modified retrospective approach to transition. As a result, comparatives have not been restated. The Consolidated Statement of Financial Position shows the following amounts related to leases where the Group is a lessee.
Right-of-use-assets
|
|
|
Properties |
Vehicles |
Other |
Total |
|
Cost |
At 1 August 2019 |
9,335 |
336 |
17 |
9,688 |
|
|
Reclassification of dilapidation assets |
1,535 |
- |
- |
1,535 |
|
|
Additions |
42 |
12 |
- |
54 |
|
|
Effect of reassessment of lease term |
(862) |
- |
- |
(862) |
|
|
Effect of movement in exchange rates |
(46) |
- |
(1) |
(47) |
|
|
At 31 July 2020 |
10,004 |
348 |
16 |
10,368 |
|
|
|
|
|
|
|
|
Accumulated depreciation |
At 1 August 2019 |
- |
- |
- |
- |
|
Reclassification of dilapidation assets |
576 |
- |
- |
576 |
|
|
Depreciation charge |
1,858 |
176 |
7 |
2,041 |
|
|
|
Impairment |
432 |
- |
- |
432 |
|
|
Effect of movement in exchange rates |
(19) |
- |
- |
(19) |
|
|
At 31 July 2020 |
2,847 |
176 |
7 |
3,030 |
|
|
|
|
|
|
|
|
Net book value |
At 1 August 2019 |
9,335 |
336 |
17 |
9,688 |
|
|
At 31 July 2020 |
7,157 |
172 |
9 |
7,338 |
At 1 August 2019, onerous lease provisions of £934,000 previously presented in non-current liabilities, were reclassified against the cost of Property right-of-use assets, in line with the practical expedient available on adoption of IFRS 16. At 31 July 2020, included within Property right-of-use assets is cost of £1,577,000 and net book value of £802,000 relating to dilapidation assets.
Lease liabilities
|
|
31 July 2020 |
1 August 2019 |
||||||
|
|
Properties |
Vehicles |
Other |
Total |
Properties |
Vehicles |
Other |
Total |
|
Current |
1,855 |
132 |
3 |
1,990 |
1,825 |
171 |
9 |
2,005 |
|
Non-current |
5,696 |
44 |
6 |
5,746 |
8,435 |
176 |
8 |
8,619 |
|
|
7,551 |
176 |
9 |
7,736 |
10,260 |
347 |
17 |
10,624 |
Lease liabilities for properties have lease terms of between one and eight years.
The discount rates used to measure the lease liabilities at 31 July 2020 range between 2.0% to 10.1% for Properties, 4.7% for Vehicles and 10.1% for Other leases.
Reconciliation of lease liabilities movement in the year
|
|
Properties |
Vehicles |
Other |
Total |
|
At 1 August 2019 |
10,260 |
347 |
17 |
10,624 |
|
Lease payments |
(2,011) |
(183) |
(7) |
(2,201) |
|
Interest expense on lease liabilities |
201 |
12 |
1 |
214 |
|
Effect of reassessment of lease term |
(862) |
- |
- |
(862) |
|
Effect of movement in exchange rates |
(37) |
- |
(2) |
(39) |
|
At 31 July 2020 |
7,551 |
176 |
9 |
7,736 |
Amounts in respect of leases recognised in the Income Statement
|
|
2020 |
2019 |
|
Depreciation expense of right-of-use assets |
2,041 |
- |
|
Impairment of right-of-use assets |
432 |
- |
|
Interest expense on lease liabilities (included in Finance cost) |
214 |
- |
|
Expense relating to leases of low-value assets and short-term leases |
239 |
2,349 |
Transition to IFRS 16: Reconciliation between operating lease commitments at 31 July 2019 and lease liabilities at 1 August 2019
|
|
Properties |
Vehicles |
Other |
Total |
|
Operating lease commitments at 31 July 2019 |
11,144 |
351 |
48 |
11,543 |
|
Less: Leases considered to be short-term (less than 12 months duration) |
(79) |
(19) |
(37) |
(135) |
|
Add: Rentals associated with extension options reasonably certain |
32 |
- |
8 |
40 |
|
Operating lease commitment in scope for IFRS 16 |
11,097 |
332 |
19 |
11,448 |
|
Impact of discounting future lease payments |
(789) |
3 |
(2) |
(788) |
|
Commitments for leases not yet commenced at 31 July 2019 |
- |
12 |
- |
12 |
|
Rental increases since 1 August 2019 |
48 |
- |
- |
48 |
|
Impact of rent-free periods |
(96) |
- |
- |
(96) |
|
Total lease liabilities recognised at 1 August 2019 |
10,260 |
347 |
17 |
10,624 |
|
23 |
Share Capital |
Authorised share capital
|
|
Company |
|
|
|
2020 |
2019 |
|
40,000,000 (2019: 40,000,000) Ordinary shares of £0.01 each |
400 |
400 |
Allotted, called up and fully paid:
|
|
Company |
|
|
2020 |
2019 |
|
|
32,290,400 (2019: 32,285,000) Ordinary shares of £0.01 each |
323 |
323 |
The number of shares in issue in the Company is shown below:
|
|
Company |
|
|
|
2020 |
2019 |
|
In issue at 1 August |
32,285 |
32,256 |
|
Exercise of share options |
5 |
29 |
|
In issue at 31 July |
32,290 |
32,285 |
Share Options
The following options arrangements exist over the Company's shares:
|
|
|
|
|
|
Exercise period |
|
|
|
2020 |
2019 |
Date of grant |
Exercise price |
From |
To |
|
Zero Priced Share Option Bonus |
- |
1 |
18/01/2010 |
1 |
18/01/2012 |
18/01/2020 |
|
Zero Priced Share Option Bonus |
- |
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 |
1 |
2 |
31/01/2013 |
1 |
30/01/2015 |
31/01/2023 |
|
Zero Priced Share Option Bonus |
2 |
2 |
31/01/2013 |
1 |
30/01/2016 |
31/01/2023 |
|
Zero Priced Share Option Bonus |
4 |
5 |
01/01/2014 |
1 |
01/01/2016 |
01/01/2024 |
|
Zero Priced Share Option Bonus |
32 |
34 |
01/01/2014 |
1 |
01/01/2017 |
01/01/2024 |
|
Zero Priced Share Option Bonus |
3 |
3 |
28/01/2015 |
1 |
28/01/2017 |
28/01/2025 |
|
Zero Priced Share Option Bonus |
24 |
27 |
28/01/2015 |
1 |
28/01/2018 |
28/01/2025 |
|
Zero Priced Share Option Bonus |
- |
62 |
03/02/2017 |
1 |
03/02/2020 |
03/02/2027 |
|
Zero Priced Share Option Bonus |
- |
107 |
31/01/2017 |
1 |
31/01/2020 |
31/01/2027 |
|
Long-Term Incentive Plan Options |
- |
72 |
31/01/2017 |
72 |
31/01/2020 |
31/01/2027 |
|
Long-Term Incentive Plan Options |
- |
38 |
31/01/2017 |
145 |
31/01/2020 |
31/01/2027 |
|
Zero Priced Share Option Bonus |
231 |
324 |
19/12/2018 |
1 |
19/12/2021 |
19/12/2028 |
|
Zero Priced Share Option Bonus |
171 |
201 |
19/12/2018 |
1 |
19/12/2021 |
19/12/2028 |
|
Long-Term Incentive Plan Options |
510 |
- |
20/01/2020 |
1 |
20/01/2023 |
20/01/2030 |
|
Long-Term Incentive Plan Options |
194 |
- |
20/01/2020 |
1 |
20/01/2023 |
20/01/2030 |
|
Total |
1,176 |
883 |
|
|
|
|
During the year, the Group granted share options under the Long-Term Incentive Plan for Executive Directors and Senior Management. The share options were granted on 20 January 2020 to members of staff to be held over a three-year vesting period and are subject to an Earnings per Share (EPS) performance condition. All share options have a life of 10 years from grant date and are equity settled on exercise.
The movement in share options is shown below:
|
|
2020 |
2019 |
||||
|
|
Number |
Weighted average exercise price |
Weighted average share price (pence) |
Number |
Weighted average exercise price |
Weighted average share price (pence) |
|
Outstanding at 1 August |
883 |
13.1 |
- |
657 |
48.2 |
- |
|
|
|
|
|
|
|
|
|
Granted |
704 |
1.0 |
- |
525 |
1.0 |
- |
|
Forfeited/lapsed |
(406) |
27.3 |
- |
(270) |
76.8 |
- |
|
Exercised |
(5) |
1.0 |
116.7 |
(29) |
1.0 |
129.8 |
|
Outstanding at 31 July |
1,176 |
74.6 |
|
883 |
13.1 |
|
|
|
|
|
|
|
|
|
|
Exercisable at 31 July |
69 |
1.0 |
|
78 |
1.0 |
|
The numbers and weighted average exercise prices of share options vesting in the future are shown below:
|
|
2020 |
2019 |
||||
|
Exercise Date |
Weighted average remaining contract life (months) |
Number |
Weighted average exercise price (pence) |
Weighted average remaining contract life (months) |
Number |
Weighted average exercise price (pence) |
|
31/01/2020 |
- |
- |
- |
6 |
217 |
49.9 |
|
03/02/2020 |
- |
- |
- |
6 |
62 |
1.0 |
|
18/12/2021 |
17 |
402 |
1.0 |
29 |
525 |
1.0 |
|
20/01/2023 |
30 |
704 |
1.0 |
- |
- |
- |
|
Total |
|
1,106 |
|
|
804 |
|
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 124,912 shares (2019: 92,247) under this scheme.
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 2020 and 31 July 2019. As at 31 July 2020, excess funds of £70,000 (2019: £140,000) was held by the EBT, which has been included in cash and cash equivalents.
The following expenses or credits were recognised in the Income Statement in relation to share-based payment transactions:
|
Group |
2020 |
2019 |
|
Zero Priced Share Option Bonus |
(62) |
19 |
|
Long-Term Incentive Plan Options |
2 |
77 |
|
Share Incentive Plan |
137 |
173 |
|
Total |
77 |
269 |
The key assumptions used in the calculation of fair value per awards are as follows:
|
Date of grant |
|
Share price on the date of grant |
Exercise price |
Volatility |
Vesting period |
Dividend yield |
Risk free rate of interest |
Fair |
|
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 |
|
31/01/2017 |
Zero Priced Share Option Bonus |
2.92 |
0.01 |
31.6% |
3.00 |
7.9% |
0.3% |
1.27 |
|
31/01/2017 |
Zero Priced Share Option Bonus |
2.92 |
0.01 |
31.6% |
3.00 |
7.9% |
0.3% |
1.51 |
|
31/01/2017 |
Zero Priced Share Option Bonus |
2.90 |
0.01 |
31.6% |
3.00 |
7.9% |
0.3% |
1.23 |
|
31/01/2017 |
Zero Priced Share Option Bonus |
2.90 |
0.01 |
31.6% |
3.00 |
7.9% |
0.3% |
1.49 |
|
31/01/2017 |
Long-Term Incentive Plan Options |
2.90 |
0.72 |
31.6% |
3.00 |
7.9% |
0.3% |
0.86 |
|
03/02/2017 |
Long-Term Incentive 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 |
|
19/12/2018 |
Zero Priced Share Option Bonus |
1.07 |
0.01 |
N/A |
3.00 |
0.0% |
N/A |
1.08 |
|
19/12/2018 |
Zero Priced Share Option 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 |
|
|
|
|
|
|
|
|
|
|
|
Date of grant |
|
Share price on the date of grant |
Exercise price |
Volatility |
Vesting period |
Dividend yield |
Risk free rate of interest |
Fair |
|
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 |
|
07/08/2019 |
SIP |
1.44 |
0.01 |
N/A |
3.00 |
N/A |
N/A |
1.44 |
|
09/09/2019 |
SIP |
1.28 |
0.01 |
N/A |
3.00 |
N/A |
N/A |
1.28 |
|
08/10/2019 |
SIP |
1.32 |
0.01 |
N/A |
3.00 |
N/A |
N/A |
1.32 |
|
08/11/2019 |
SIP |
1.18 |
0.01 |
N/A |
3.00 |
N/A |
N/A |
1.18 |
|
09/12/2019 |
SIP |
1.10 |
0.01 |
N/A |
3.00 |
N/A |
N/A |
1.10 |
|
10/01/2020 |
SIP |
1.29 |
0.01 |
N/A |
3.00 |
N/A |
N/A |
1.29 |
|
10/02/2020 |
SIP |
0.82 |
0.01 |
N/A |
3.00 |
N/A |
N/A |
0.82 |
|
09/03/2020 |
SIP |
0.76 |
0.01 |
N/A |
3.00 |
N/A |
N/A |
0.76 |
|
09/04/2020 |
SIP |
0.39 |
0.01 |
N/A |
3.00 |
N/A |
N/A |
0.39 |
|
11/05/2020 |
SIP |
0.44 |
0.01 |
N/A |
3.00 |
N/A |
N/A |
0.44 |
|
08/06/2020 |
SIP |
0.45 |
0.01 |
N/A |
3.00 |
N/A |
N/A |
0.45 |
|
10/07/2020 |
SIP |
0.45 |
0.01 |
N/A |
3.00 |
N/A |
N/A |
0.45 |
|
20/01/2020 |
Long-Term Incentive Plan Options |
1.24 |
0.01 |
N/A |
3.00 |
N/A |
N/A |
1.13 |
|
20/01/2020 |
Long-Term Incentive Plan Options |
1.24 |
0.01 |
N/A |
3.00 |
N/A |
N/A |
1.13 |
For Zero Priced Share Option Bonus grants in 2020 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. For 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
|
24 |
Transactions with Directors and Related Parties |
During the year the Group made sales of £16,000 (2019: £89,000) to InHealth Group Ltd and purchases of £7,400 (2019: £11,000) from Preventicum
There were no other related party transactions with entities outside of the Group.
During the year Matchtech Group (
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:
|
Group |
0 to <1 years |
1 to <2 years |
2 to <5 years |
5 years |
Contractual cash flows |
|
2020 |
|
|
|
|
|
|
Revolving Credit Facility |
5,117 |
88 |
2,515 |
- |
7,720 |
|
Invoice Financing working capital facility |
170 |
- |
- |
- |
170 |
|
Lease liabilities1 |
1,990 |
5,746 |
- |
- |
7,736 |
|
Trade payables |
25,922 |
- |
- |
- |
25,922 |
|
Total |
33,199 |
5,834 |
2,515 |
- |
41,548 |
|
|
|
|
|
|
|
|
2019 |
|
|
|
|
|
|
Revolving Credit Facility |
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 |
|
Company |
0 to <1 years |
1 to <2 years |
2 to <5 years |
5 years |
Contractual cash flows |
|
2020 |
|
|
|
|
|
|
Revolving Credit Facility |
5,117 |
88 |
2,515 |
- |
7,720 |
|
Total |
5,117 |
88 |
2,515 |
- |
7,720 |
|
|
|
|
|
|
|
|
2019 |
|
|
|
|
|
|
Revolving Credit Facility |
531 |
15,129 |
- |
- |
15,660 |
|
Total |
531 |
15,129 |
- |
- |
15,660 |
Borrowing facilities
The Group makes use of working capital facilities and a Revolving Credit Facility, details of which can be found in Note 20. The Revolving Credit Facility is fully drawn but the undrawn working capital facilities available at year end in respect of which all conditions precedent had been met was as follows:
|
|
Group |
Company |
||
|
2020 |
2019 |
2020 |
2019 |
|
|
Expiring in one to five years |
23,715 |
24,880 |
- |
- |
The Directors have calculated that the effect on profit of a 100 basis point increase in interest rates would be an expense of £402,000 (2019: expense of £634,000).
The Directors believe that the carrying value of borrowings approximates to their fair value.
|
1 |
As a result of adoption of IFRS 16 from 1 August 2019, lease liabilities are presented within financial liabilities for 2020; comparatives were not required to be restated under the transition approach adopted. |
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 12 months. At 31 July 2020, the Group had agreed banking facilities with HSBC totalling £82.5m comprising a £75m Invoice Financing working capital facility and a £7.5m (31 July 2019: £15m) Revolving Credit Facility committed until October 2022. 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
Net foreign currency monetary assets are shown below:
|
|
Group |
|
|
2020 |
2019 |
|
|
US Dollar |
6,155 |
11,324 |
|
Euro |
4,070 |
4,561 |
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 £2,635,000 (2019: £4,279,000). A 25 cent weakening in the exchange rates would, on the same basis, have decreased pre-tax profit and reduced net assets by £1,734,000 (2019: £2,778,000).
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 |
|
|
2020 |
2019 |
|
|
Total equity |
39,772 |
41,907 |
|
Cash and cash equivalents |
(34,796) |
(19,173) |
|
Capital |
4,976 |
22,734 |
|
|
|
|
|
Total equity |
39,772 |
41,907 |
|
Borrowings |
7,455 |
43,995 |
|
Lease liabilities |
7,736 |
- |
|
Overall financing |
54,963 |
85,902 |
|
|
|
|
|
Capital to overall financing ratio |
9% |
26% |
|
27 |
Net Debt and Adjusted Net Debt |
Net debt is the total amount of cash and cash equivalents less interest-bearing loans and borrowings, including finance lease liabilities. 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.
A reconciliation to Adjusted Net Debt, which excludes lease liabilities and is the Group's preferred net debt measure is also shown below.
|
2020 |
1 August 2019 |
Net cash flows |
Non cash movements |
31 July 2020 |
|
Cash and cash equivalents |
19,173 |
15,623 |
- |
34,796 |
|
Interest-bearing term loan |
(15,000) |
7,500 |
- |
(7,500) |
|
Working capital facilities |
(29,119) |
28,968 |
- |
(151) |
|
Lease liabilities |
(10,624) |
2,201 |
687 |
(7,736) |
|
Total net (debt)/cash |
(35,570) |
54,292 |
687 |
19,409 |
|
Capitalised finance costs |
124 |
223 |
(151) |
196 |
|
Total net debt after capitalised finance costs |
(35,446) |
54,515 |
536 |
19,605 |
|
|
|
|
|
|
|
Excluding lease liabilities |
10,624 |
(2,201) |
(687) |
7,736 |
|
Adjusted total net (debt)/cash excluding lease liabilities |
(24,822) |
52,314 |
(151) |
27,341 |
|
2019 |
1 August 2018 £'000 |
Net cash flows |
Non cash movement |
31 July 2019 |
|
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) |
|
|
|
|
|
|
|
Excluding lease liabilities |
- |
- |
- |
- |
|
Adjusted total net (debt)/cash excluding lease liabilities |
(40,874) |
16,155 |
(103) |
(24,822) |
|
28 |
Contingent Liabilities |
We continue our cooperation with the United States Department of Justice and in 2020 have incurred £1.4m (2019: £3.4m) 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.
|
29 |
Events After The Reporting Date |
On 27 October 2020, the Group repaid its Revolving Credit Facility in full and cancelled the facility.
Subsequent to the year end, NWKI Consultancy FZ LLC was placed into liquidation.
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