Gattaca’s (GATC) share price took its second heavy hit of the year following release of half year results that detailed a 15 per cent downward reduction in guidance for underlying pre-tax profits for FY2018. The revelation came on top of February's profit warning and the unexpected departure of the specialist recruiter's chief executive. At the time, management said it had taken "a more prudent assessment of the economic outlook", but, if anything, conditions in the core technology and engineering markets appear to have deteriorated – according to the company, at any rate.
The group has been investing in sales and support staff over the past three years in anticipation of increasing demand and, by extension, a jump in net fee income, but this has failed to materialise. Underlying pre-tax profits, down 17 per cent to £6.9m, were broadly in line with the February update, but the investment-fuelled rise in admin costs constrained profitability, while £18.7m in amortisation and impairments on intangible assets sent earnings into the red.
Management made the usual noises about cutting costs and integration savings, but that didn't stop analysts taking an axe to estimates. Numis now expects adjusted pre-tax profits of £13m for the year to July 2018, giving EPS of 17.5p (2017: £16.2m, 34.3p).
| GATTACA (GATC) | ||||
| ORD PRICE: | 148p | MARKET VALUE: | £ 47.1m | |
| TOUCH: | 142-150p | 12-MONTH HIGH: | 339p | LOW: 140p |
| DIVIDEND YIELD: | 13.5% | PE RATIO: | NA | |
| NET ASSET VALUE: | 197p* | NET DEBT: | 56% | |
| Half-year to 31 Jan | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 304 | 5.2 | 10.7 | 6.0 |
| 2018 | 323 | -12.7 | -41.3 | 3.0 |
| % change | +6 | - | - | -50 |
| Ex-div: | 24 May | |||
| Payment: | 22 Jun | |||
| *Includes intangible assets of £33.1m, or 104p a share | ||||
