Connecting talent to
unleash future potential
Gattaca plc
Annual Report and Accounts 2019
Gattaca plc
We exist to connect
people and create
valuable opportunities
between them
By providing recruitment solutions and support
to clients in our chosen markets and to candidates
with engineering and technology skills, we help to
unleash potential in people, projects and companies.
Contents
Overview
1 Highlights
2 At a Glance
4 Market Overview
6 Chairman’s Statement
8
Investment Case
Strategic Report
12 Chief Executive Officer’s Review
18 Our Business Model
20 Our Business Model in Action
22 Operating Review
24 Key Performance Indicators
26 Chief Financial Officer’s Report
32 Responsible Business
36 Risk Management
38 Principal Risks and Uncertainties
Corporate Governance
44 Chairman’s Introduction to Governance
Financial Statements
78 Independent Auditors’ Report
46 Board of Directors
86 Consolidated Income Statement
48 Corporate Governance Statement
87 Consolidated Statement of Comprehensive Income
53 Directors’ Report
88 Statements of Changes in Equity
56 Audit Committee Report
90 Consolidated and Parent Company Statements of Financial Position
62 Nominations Committee Report
91 Consolidated and Parent Company Cash Flow Statements
65 Remuneration Committee Report
92 Notes Forming Part of the Financial Statements
Gattaca plc
Annual Report and Accounts 2019
Highlights
Financial highlights
REVENUE FROM
CONTINUING OPERATIONS
£635.8m
2018 (£631.3m)
NET FEE INCOME1 FROM
CONTINUING OPERATIONS
£70.6m
2018 (£71.4m)
CONTINUING UNDERLYING2
PROFIT BEFORE TAX
£11.4m
2018 (£10.9m)
PROFIT/(LOSS) BEFORE TAX
FROM CONTINUING OPERATIONS
£3.1m
2018 (Loss of £26.7m)
Operational highlights
Kevin Freeguard appointed Chief Executive Officer
and joined on 1 October 2018.
Growth of 4% in UK Engineering NFI which represents 70%
of our continuing business, underpinned by our established
position within our chosen markets.
Continued success of our Gattaca Solutions business,
growing by 16% with the scaling up of a number of major
clients in the year.
We launched the Improvement Plan and progress is
under way, with the operational reorganisation complete
and a new business development team in place.
Completion of the integration of Networkers
including our withdrawal from non-growth markets.
CONTINUING UNDERLYING
BASIC EARNINGS PER SHARE
27.5p
2018 (22.5p)
BASIC EARNINGS PER SHARE
-18.3p
2018 (-85.3p)
1 Net fee income is equivalent to gross profit, being revenue less cost of sales.
2
Underlying results are defined as total consolidated results less non-underlying items, amortisation
and impairment of goodwill and acquired intangible assets and foreign exchange differences.
Gattaca plc
Annual Report and Accounts 2019
01
Overview At a Glance
Gattaca is a leading provider
of engineering and technology
recruitment solutions
We aim to be the leading provider of
outsourced solutions and specialist
recruitment in our chosen markets.
Our Services
Traditional staffing
Packaged campaigns
Market insight reporting
With over 35 years’ experience
of finding flexible and permanent
talent, the Gattaca group of
companies consists of a number
of specialist recruitment brands
including an engineering
recruitment specialist (Matchtech)
and a technology recruitment
specialist (Networkers).
For critical recruitment drives,
our premium service combines
campaign management, regular
insight and reporting, dedicated
sourcing support and prioritisation
of our clients’ demands. This
means that we take ownership of
finding the people our clients need
whilst they focus on their core
priorities.
Our bespoke market insight
reports help our clients understand
the demographics, pay, experience,
diversity and availability of the
candidate markets they are looking
at. We offer a range of services
depending on the depth of insights
our clients need.
Our Brands
Barclay Meade
is a professional
services
recruitment
specialist.
Alderwood is
an employability
training
recruitment
specialist.
Resourcing
Solutions is a
rail recruitment
specialist.
Matchtech is
an engineering
recruitment
specialist.
Networkers is
a technology
recruitment
specialist.
02 Gattaca plc
Annual Report and Accounts 2019
GROUP CONTINUING
NFI BY LOCATION
GROUP CONTINUING
NFI BY SEGMENT
CANDIDATE
EMPLOYMENT SPLIT
OUR GEOGRAPHIC
FOOTPRINT
£70.6m
£70.6m
14,500
CANDIDATES
Americas
£6.4m
9.1%
UK Engineering £49.4m 70.0%
Permanent
33.8%
Asia
£1.5m
2.1%
UK Technology £11.6m 16.4%
Contract
66.2%
EMEA & UK
£62.7m 88.8%
International
£9.6m 13.6%
739
PEOPLE
7
COUNTRIES
14
OFFICES
Our Services
Workforce solutions
Engineering &
technology projects
Talent attraction
& employer branding
We deliver total solutions to
improve the quality, compliance
and experience of our clients’
hiring processes, for both their
flexible and permanent workforces.
Our solutions are perfectly tailored
to companies with demand from
the engineering and technology
skills sectors.
Our Brands
Gattaca Projects provides
professional and expert outcome-
based engineering and technology
support solutions; working either
from our offices or on-site with
our clients.
We help our clients attract, engage
and retain talent by unlocking
the potential of their employer
brands. We provide a full employer
branding agency service with
a unique difference; we know
candidate attraction inside out,
especially in skill short markets.
Gattaca Solutions provides flexible, permanent
and total workforce solutions. Using our own
specialist brands and an external supply chain, we
create innovative solutions to enhance our clients’
workforce strategies, covering compliance, visibility,
cost savings, quality and process efficiency.
Gattaca Projects provides professional, expert
outsourced engineering and technology support
solutions. Working from our offices or based on-site,
Gattaca Projects provides globally available bespoke
solutions, from blank paper design and reverse
engineering, to large-scale IT desktop migrations.
Gattaca plc
Annual Report and Accounts 2019
03
Overview Market Overview
Understanding the
trends and opportunities
As part of the Improvement Plan we undertook a deep analysis of a
wide range of external factors affecting our business, from macro-
economic trends to developments in the staffing industry and
changing skills requirements within engineering and technology.
Better alignment of our internal functions with these identified
market trends is one of the key focuses of our Improvement Plan.
The global staffing market
The global staffing market is worth $466bn1, and continues to grow.
Our prime geographies, the UK and US, are two of the three largest
countries for staffing revenue, and temporary staff with technology and
engineering skills in these geographical markets are worth $75bn1 of
revenue. Though most of the geographies we operate in are forecast to
have flat to moderate growth of 2-3%1, the total market size ensures we
have plenty of opportunity for growth.
Staffing solutions is a very fragmented market, with a growing number
of competitor agencies and individual recruiters in place as well as
increasing direct sourcing via internal recruitment functions, but our
brand is well known and our suite of products, experience and expertise
sets us apart for both clients and candidates. The staffing market
continues to shift towards integrated partnerships between staffing
companies and clients, rather than one-off transactions, and we have
seen that change as revenue from our Gattaca Solutions offering has
significantly increased in the past few years. All companies are eager to
attract the right talent, control their cost base and enhance their time
to hire and we are well placed to provide a comprehensive range of
services to help them improve their overall recruitment process.
Increasing legislation and compliance requirements also continue to
be factors in the industry with regular changes to employment law
to follow. Our strong knowledge and reputation for navigating these
changes and ensuring businesses are compliant remains another
key strength.
Engineering and
technology talent
Skills are evolving faster than
ever, with an insufficient
number of graduates
contributing to the shortages
across the world, creating an
imbalance between supply
and demand. These trends are
amplified for engineering and
technology skills, with clients
in constant need of talent and
candidates moving companies
more frequently.
Engineering and technology
candidates are also
increasingly internationally
mobile, with skills that are
easily transferable across
borders. Our knowledge of the
skills market and geographic
footprint position us well to
capitalise on these trends.
04 Gattaca plc
Annual Report and Accounts 2019
Our Markets
Mobility
• Aerospace
• Automotive
• Maritime & Shipping
Energy
• Renewables
• Oil & Gas
• Transmission & Distribution
• Nuclear
• Mining & Extraction
Infrastructure
• Highways, Traffic
& Planning
• Buildings & Construction
• Rail
• Water & Utilities
Defence
• Air
• Land
• Sea
• Communications
Life Sciences
• Pharmaceutical
• Medical
Consumer & Retail
• Wholesale
• Retail
Public Sector
• Central Government
• Local Government
• NHS
Technology,
Media & Telecoms
• Technology
• Media & Broadcasting
• Telecommunications
Banking &
Financial Services
• Banking
• Insurance
• Fintech
United Kingdom
International
In April 2020, the UK staffing market
will experience significant change as
IR35 is introduced to the private sector,
shifting the liability for assessment of
tax status from a contractor’s personal
service company to the client utilising
the services. This change brings the
risk of reduced demand for contractors
in favour of permanent employees or
subcontracting arrangements. This
presents opportunities through the
provision of increased permanent
recruitment services and the delivery
of subcontracted services. Beyond this,
the change is driving some companies
to consolidate their contractor use
and operate via an integrated partner
programme with companies such
as Gattaca.
In the UK, there is still significant
opportunity to grow our market share.
Commitment to long-standing public-
funded programmes will continue
to drive growth across many of our
markets, such as Defence, Infrastructure,
Mobility and Energy.
All our international locations
are experiencing rising
demand for engineering and
technology talent. The US
market for technology and
engineering skills is worth over
$40bn1 of revenue. The vast
size of our chosen international
markets means there is ample
opportunity for us to harness
them.
Additionally, continuing to
operate internationally enables
us to diversify from being based
in a single economy in the UK,
balancing our exposure to
economy-specific risks.
THE GLOBAL
STAFFING MARKET
IS WORTH
$466bn1
TECHNOLOGY AND
ENGINEERING SKILLS
ARE WORTH
$75bn1
OUR CHOSEN
GEOGRAPHIES ARE
FORECAST TO HAVE
A FLAT TO MODERATE
GROWTH OF
2–3%1
1
Staffing Industry Analysts: Global
Staffing Industry Market Estimates
and Forecast (November 2018).
Annual Report and Accounts 2019 05
05
Gattaca plc
Gattaca plc
Annual Report and Accounts 2019
Overview Chairman’s Statement
A positive year
for Gattaca
It has been a positive year for Gattaca, as we’ve
built on the consolidation work we began last
year and continued to reset the business.
“ Following substantial changes in 2018,
the new Board line-up has been refocusing
this year to deliver on our objectives.”
Patrick Shanley
Non-Executive Chairman
GROUP
CONTINUING NFI
£70.6m
2018 (£71.4m)
GROUP
CONTINUING REVENUE
£635.8m
2018 (£631.3m)
06 Gattaca plc
Annual Report and Accounts 2019
This year has been a
transformational year for the
Group, with the appointment
of Kevin Freeguard as our new
CEO in October of 2018 and the
introduction and enactment of
our Improvement Plan which will
fundamentally change the way we
do business. During the period,
we have focused the Group on
the engineering and technology
skill sectors in the UK and the
Americas, keeping a presence in
China whilst making the decision
to withdraw from the Telecoms
Infrastructure contract labour
market and extract ourselves from
a number of international locations.
Whilst there was a significant
reduction in net fee income (NFI)
at a statutory level, it was neutral
at profit after tax and we are
pleased with the NFI performance
from the continuing business.
We have continued to cooperate
with the US Department of Justice
in respect of activities related to
Networkers before our acquisition
of the business.
Overview
Having Kevin on board as CEO
has brought stability, focus and
clarity on what we are trying to
achieve at Gattaca. He has brought
in new systems to improve sales
management and his vast sales
experience has also allowed us
to address some existing sales
issues. The entire Board has been
delighted with the impact Kevin
has made to date.
In order to focus on our core UK
and North American business, we
previously announced we would
exit the Telecoms Infrastructure
contract labour market in Asia,
Africa and Latin America; working
to close down those operations
and reduce our working capital
has been a key focus for this year.
The decision has undoubtedly
proved to be the right one, as it
has contributed to a significant
reduction in net debt, from
£40.9m to £24.8m, a result above
expectations. I would like to thank
COO Keith Lewis and CFO Salar
Farzad for their work in delivering
this project over the past year.
The Group has launched an
Improvement Plan in order to
properly exploit the growth
opportunities we see in the
Americas and, more widely, in
the UK in the engineering and
technology markets. This Plan is
re-energising the business.
Dividend
The Board are not recommending
a final dividend given the
economic headwinds in the UK,
the significant non-underlying
costs incurred this year and the
continuing investment in our
Primary Business Systems.
Board
Following substantial changes in
2018, the new Board line-up has
been refocusing this year to deliver
on our objectives. As announced
last year, Non-Executive Director
Mark Mamone stepped down
at the 2018 AGM. We recognise
that we have a diversity imbalance
on the Board and feel it is
important that we address this
as we move forward.
After 26 years of service, Keith
Lewis has decided to stand down
from the Board of Directors of
Gattaca plc and will leave the
Group with immediate effect. As
part of the Improvement Plan, the
Group does not intend to replace
the role of Chief Operating Officer.
People
I would like to extend my thanks
to the whole Gattaca team for
their efforts again this year. We
are a people business, and we
are where we are because of
our employees’ enthusiasm and
passion for delivering for their
clients and candidates. At Board
level, we are conducting reviews
to identify where we can interact
more with our teams and ensure
every individual understands
the important role they play in
the Group.
Outlook
Looking ahead, we are building
a strong platform for sustainable
growth over the long term. We
have demonstrated that we can
grow our engineering business
even during difficult periods, and
have taken action to address
the issues in our technology
business. However, we cannot
be complacent about external
headwinds such as trends in global
trade, the potential economic
impact caused by the uncertainty
of Brexit and the upcoming
IR35 regulatory changes in our
UK industry.
Patrick Shanley
Non-Executive Chairman
5 November 2019
Gattaca plc
Annual Report and Accounts 2019
07
Overview Investment Case
Our objective is to be the leading
provider of specialist engineering
and technology staffing solutions
in Gattaca’s chosen markets
An established, trusted partner providing specialist engineering and technology
staffing solutions with clear opportunities to scale in chosen high-growth markets.
Defining arguments:
Market-leading solutions
with a trusted reputation
Defined, high-growth
markets
Supporting evidence:
• Science, technology,
engineering and maths
(‘STEM’) skills are in demand
across geographies and
end-markets, driven by
growing importance of the
digital economy
• Demand for STEM skills is
robust
• Well-established and scalable
UK business, however with
further significant growth and
market share opportunity
• Expertise and specialist
focus being leveraged
internationally, particularly
in the Americas where
there is significant growth
opportunity
• A leading provider of
specialised and in-
demand engineering and
technology skills
• Ability to deliver tailored
solutions and products
• Broad client base and long-
term partnerships. Average
tenure of Gattaca’s top 50
client relationships is 7.7 years
• Leading brands in provision
of both engineering and
technology talent (source:
Recruitment International):
– No. 2 UK engineering
– Matchtech
– No. 4 UK technology
– Networkers
• Known for:
– Membership of many
engineering and
technology associations
– Work alongside
academic institutions
08 Gattaca plc
Annual Report and Accounts 2019
O
v
e
r
v
e
w
i
Deep expertise with
revitalised leadership
Focused
growth strategy
Resilient
business model
• Deep skill and market-based
expertise within the business
• Now combined with a new
management team, bringing
fresh perspective and drive to
professionalise the business
• Group-wide Improvement
Plan in place and delivering
results
• Transformation under way,
professionalising market
approach, with rigour and
clear methodology being
applied to sales
• Cross-selling and focus on
• Focused on STEM skills which
growing share of client wallet
provides significant growth
opportunity
• Integrated, Group-wide
technology platform being
implemented, maximising
productivity and allowing
cross-discipline working
• Investing in organic growth
in geographies with clear
growth prospects
• Growing and investing in
Gattaca Solutions services
which embed Gattaca
within client operations and
deliver incremental margin
improvement
• A more agile, scalable
business being built
will remain in-demand
• Business has remained
profitable on an underlying
basis
• Progressively degearing
• Contract-perm NFI split of
70/30 continuing business
provides consistent revenue
opportunity - predictable and
recurring
• A growing Gattaca Solutions
business (27% of Group
continuing NFI) further
increasing quality of revenue
• Core focus of the business is
contract placements which
provides resilience but the
unexploited permanent
placement market provides
further growth opportunity
for Gattaca
Gattaca plc
Annual Report and Accounts 2019
09
Case Study: In-depth knowledge of our customers’ markets
500
ACTIVE SPONSORED
WORKERS
50%
OF OUR TOP 100
CLIENTS SUPPLY THE
RAIL MARKET
30 years
OF EXPERIENCE IN THE
RAIL MARKET
10%
OF OUR UK
SALES WORKFORCE
SUPPORT THE
RAIL ECOSYSTEM
Case Study
Embedded in
the Rail market
We are unique due to the breadth of our client relationships
and our experience across the whole of the UK Rail market.
Breadth
Experience
Knowledge share
As well as being a direct supplier
to Network Rail, we are a key
provider to 80% of their largest
suppliers. Gattaca supports bodies
such as HS2, Crossrail, Transport
for London and Network Rail, all
tiered suppliers to the Rail industry
including 16 of Network Rail’s Top
201 suppliers, down to the small
and medium enterprise (‘SME’)
supply chain.
Having worked in the UK Rail
market for 30 years, we follow
all rail programmes and have
a pivotal role in helping to
deliver major UK rail projects
such as HS2, Crossrail, London
Underground enhancement,
Transpennine Rail upgrade (‘TRu’),
Information Programme Signalling
(‘IPS’), and Network Rail’s Digital
Railway and Control Period 6
(‘CP6’) projects.
Beyond the key programmes,
we also support companies
that deliver services to the
wider rail ecosystem, such as
communications, signalling,
planning, networks, facilities
and business support services.
This experience of working in
the UK Rail market gives us a
unique position to absorb and
share insight and data with
our customers, making us a
collaborative force in the market.
We enable the elements of
the UK Rail market to work
alongside each other rather
than in competition. In addition
to supplying, we proactively
help people transition into
the industry and educate the
graduate community on the
career opportunities the Rail
market provides.
1 Network Rail Top 20 Suppliers 2018–19
10 Gattaca plc
Annual Report and Accounts 2019
Strategic Report
12 Chief Executive Officer’s Review
18 Our Business Model
20 Our Business Model in Action
22 Operating Review
24 Key Performance Indicators
26 Chief Financial Officer’s Report
32 Responsible Business
36 Risk Management
38 Principal Risks and Uncertainties
SELL TO A
MARKET
COLLABORATIVE HIGH-
PERFORMING CULTURE
Gattaca plc
Annual Report and Accounts 2019
11
Strategic Report Chief Executive Officer’s Review
Aligning the
organisation for growth
Kevin Freeguard joined Gattaca
as CEO in October 2018. In his
first year in the role, he has
focused on how the Group
can improve for clients,
candidates and employees.
“ Gattaca has strong fundamentals, and a
history of working in close partnership
with both clients and candidates.”
Kevin Freeguard
Chief Executive Officer
CONTINUING
UNDERLYING PROFIT
BEFORE TAX
£11.4m
2018 (£10.9m)
12
Gattaca plc
Annual Report and Accounts 2019
Q
What more can Gattaca do
to help candidates?
Historically, one of the real
strengths of the Company has
been building relationships with
candidates that can last many
years and even across whole
careers. However, we know that
candidates are increasingly looking
for different things in their careers
and different ways to utilise their
skills. We have to make sure that
we place the right people with the
right companies in the right way so
that both sides can really benefit.
Q
Why are you focused on
building a collaborative
culture?
As technology becomes more
sophisticated, the value we
deliver will be in the relationships
and expertise we hold. Closer
collaboration will enable us to
leverage our industry-leading
brands more effectively, to
the benefit of both our clients
and candidates, as we become
consultants that happen to recruit.
Q
Q
Having been in the business
for almost a year, what has
been your overall impression?
What are the main
areas of focus for your
Improvement Plan?
I am really encouraged: finding
the right talent is critical to the
success of all organisations and
the search for that talent is now a
major focus for companies. There
is also a growing requirement
for technology and engineering
skills across all markets. Gattaca
has strong fundamentals, and a
successful history of working in
close partnership with both clients
and candidates that is underpinned
by a very experienced and
committed team. I believe we are
well positioned for the future.
Q
What surprised you when
you joined the business?
The reach of the Company and
extent to which the Company
operates across multiple industries
and sectors, the breadth and
depth of the client relationships
we have and the level of capability
to provide the talent that the
marketplace requires. The talent
that we find and connect with our
clients is delivering critical skills in
many areas across all markets.
Q
What are Gattaca’s key
strengths, in your opinion?
Gattaca has a number of core
strengths. Our people have deep
industry skills and expertise. Our
reach in the markets we operate
in means we can work across
all of them to find and connect
the engineering and technical
talent our clients need. Our focus
on innovation and providing
tailored solutions has allowed us
to stay relevant. Finally, we have
numerous long-standing and
trusted client relationships, which
demonstrate our ability to adapt to
changing requirements.
The Improvement Plan is about
focused growth, building on
our fundamental strengths and
capitalising on the opportunities
we’ve identified. It will enable
us to further extend our market
reach and build new customer
relationships, as well as continuing
to grow the range of services
we provide to existing clients
and candidates.
Internally, we’re focusing on
operational excellence and a
continued investment in innovation.
This includes implementing a
common technology platform
across all of our operations, further
developing our capabilities, refining
our structures and streamlining
our operations to enable us to
remain agile.
Q
What do you see as the main
opportunities for Gattaca?
Our core purpose is connecting
talent with customer needs, and
finding talent in today’s market is
a real challenge. The opportunity
ahead of us is to extend the scope
of engineering and technology
skills we provide and to connect
that talent with a wider range of
customers in our chosen markets
as efficiently as possible.
Q
How can Gattaca improve its
client offering going forward?
Continued focus on innovation
to ensure that our solutions meet
evolving client requirements.
To improve our go-to-market
approach, to ensure we are
connecting clients and candidates
in the most efficient way. To
continue to build our candidate
pools, supporting our focus on
providing the right skills where
they are most needed.
Gattaca plc
Annual Report and Accounts 2019
13
Strategic Report Chief Executive Officer’s Review continued
Highlights
• NFI growth of 4% in UK
Engineering, which is 70%
of our continuing business,
is underpinned by our
established position within
our chosen markets
• Continued success of our
Gattaca Solutions business,
growing by 16% with the
scaling up of a number of
major clients in the year
• We launched the
Improvement Plan and
progress is under way,
with the operational
reorganisation complete
and a new business
development team in place
• Completion of the
integration of Networkers
including our withdrawal
from non-growth markets.
I am delighted to have been
appointed CEO of Gattaca at
this key stage of the Group’s
development. I believe that
Gattaca is an excellent business
with very talented and experienced
employees and I look forward to
sharing my thoughts on the Group
and our plans for the future with
you in my first CEO statement.
From my first year with the
business, I can see that Gattaca’s
long-term success has been built
on a number of key strengths:
• Business model – Our business
model is focused on effective
delivery of key engineering
and technology skills to our
clients globally with a core
focus on the contractor market.
We have developed a deep
expertise and have created a
well-established methodology
for identifying talent and giving
our many clients confidence in
our long term ability to deliver
successfully.
• Brand and reputation – Gattaca
is a leader in the provision of
engineering and technology
talent and trusted partner for
thousands of clients. Our focus
on these clients, many of whom
we have been in partnership
with for decades, has enabled
the Company to grow and
develop a leading position in
the UK over the past 35 years. I
am very proud of our reputation
for client and candidate focus,
service and execution.
• Client and candidate
experience – I have been
very impressed by the
passion demonstrated by
our employees, in delivering
to clients and providing the
talent that is so critical to their
success. This dedication has
enabled us to build many long
term client and candidate
relationships that is at the core
of the business
• Expertise – We are a trusted
specialist with dedicated focus
on engineering and technology
skills and our ability to identify
those skills globally is critical in
providing our clients with the
skills they require when they
are needed.
• People and culture – During
my first few months I have had
the pleasure of visiting many of
our offices and meeting with
hundreds of our employees I’ve
been consistently impressed by
their dedication and drive. Our
experienced, long-serving staff
really are our greatest asset.
14 Gattaca plc
Annual Report and Accounts 2019
Improvement Plan
• Tailored solutions – We will
We are a business with
tremendous strengths, and I
believe we are well positioned
to build on our core capabilities.
Since my appointment, I have
been working with my executive
team to develop a plan to evolve
the business to deliver long-
term sustainable growth. As we
reviewed the business, we have
made a number of strategic
choices that will underpin how we
operate. They are to:
• focus on markets that offer
significant, scalable and
sustainable profit potential;
• provide best client/candidate
experience;
• deliver a full range of tailored
solutions;
• focus on engineering and
technology skills; and
• operate a scalable business
model.
The Improvement Plan,
underpinned by our strengths and
aligned with our strategic choices,
was announced in March of this
year and has been well received.
To achieve its objectives, we will
focus on four key areas to enable
growth across our business units:
• Segmented target markets –
We have aligned around a more
targeted market approach and
the services we offer will reflect
the different priorities of each
segment to enable us to deepen
our existing client relationships
and focus on extending our
services to a wider range of new
clients.
evolve our innovative product
range, where appropriate, to
ensure it continues to meet
client needs, capitalising on our
unparalleled ability to identify
the best candidates in the global
talent market.
• Organisational effectiveness –
We will continue to develop the
expert capability of our teams,
focusing on improving how we
sell to the market and leveraging
Group support functions such
as marketing, finance and HR
to better support all of our
operations. Underpinning this
we are currently implementing
a Group-wide technology
platform, which is a critical
enabler for the business.
• Service delivery – We will
enhance our delivery capability
to ensure we provide best-
in-class client and candidate
experiences across the Group.
This is an exciting period for
Gattaca as we evolve the business
to ensure it continues to deliver
sustainable growth in the long
term. The business has committed
to a specific set of workstreams to
achieve our transformation. The
tangible changes to date include:
• We successfully delivered
our international restructure
programme, withdrawing
from operations and markets
which were not profitable and
were less scalable than other
markets. This has resulted in a
positive working capital unwind
and reduced irrecoverable
withholding tax charges.
• We have redesigned the
operational leadership
structure, separating executive
responsibility for UK and
International operations and
enabling more focus on our
growth markets with clear
lines of accountability and
responsibility.
• A comprehensive market
mapping review has enabled
us to have a more structured
and rigorous approach to
the market. This will enable
us to support existing client
relationships on a more strategic
basis and also open up new
client opportunities where we
have the deepest understanding
and most relevant talent pools.
• We have reorganised our
operations to form the core of
a centralised candidate delivery
function, which will enable us to
create scale and further deepen
our candidate relationships,
which will improve the quality of
candidate flow and reduce time
to hire.
• Finally, during the summer of
2019, we created a dedicated
pan-UK business development
and sales function to sell across
the market verticals identified
within the Improvement Plan.
This team of experienced sales
professionals bring together
both staffing and market
vertical skills that we are
prioritising.
Gattaca plc
Annual Report and Accounts 2019
15
Strategic Report Chief Executive Officer’s Review continued
Building on the strong
fundamentals of the
business, the recently
launched Improvement
Plan is focused on the
key levers to accelerate
growth for the Group.
Outlook
Whilst there is demand for key
engineering and technology skills
generally in the market it is clear
that there are increasing levels of
economic uncertainty primarily
caused by Brexit, legislative
changes within the UK market
(IR35) and the global impact of
ongoing changes in the macro-
economic environment. We
therefore remain cautious about
the development of our markets in
2020, although we believe that we
are well positioned to grow in the
long term.
Kevin Freeguard
Chief Executive Officer
5 November 2019
16 Gattaca plc
Annual Report and Accounts 2019
Our Improvement Plan
Our strategic priorities ensure we are improving sales and market effectiveness, deepening
customer relationships, enhancing our service delivery capability, improving organisational
alignment and accelerating our focus on developing and innovating solutions to meet market
needs as they change.
SELL TO
A MARKET
ADD VALUE
BY PRODUCT
Growing the customer base,
deepening customer relationships
Innovating and developing
products to meet client needs
• Aligned go-to-market plan
• Consistent execution
• Invest in sales resource
• Focus on new client conversion,
upsell and cross-sell
• Align products to sell to market
segments
• Extend outsourcing capability
• Further develop partnerships for
non-core skills
O p eratio n al excelle n ce
Productivity
& value
Growth
C
u
s
t
o
m
e
r f
o
c
u
s
S
e
r
v
i
c
e
d
e
li
v
e
r
y
Revenue
growth
Pro d u ct & in n o vatio n
EXPERT FULFILMENT
BY SKILL
Enhancing our service
delivery capability
• Enhance scalable and agile
delivery model for clients
• Improve candidate engagement
capability
• Broaden engineering and
technology skill focus
• Dedicated fulfilment expertise
COLLABORATIVE HIGH-
PERFORMING CULTURE
Fully aligned operating model
• Focus on finding, developing and
retaining great people (specialist roles)
• Implement single end-to-end
technology platform
• Build common process across Group
• Focus on productivity
Gattaca plc
Annual Report and Accounts 2019
17
Strategic Report
Our Business Model
What we do
In-depth knowledge of a market enables us to advise
our candidates on the best options for them.
Market-leading
delivery
Our fulfilment expertise and focus on engineering
and technology skills enables us to offer candidates a
breadth of opportunities. In turn this means we can offer
clients candidates from transferable STEM sectors.
C
l
i
e
n
t
s
ates
did
n
a
C
Market
presence
Vertical focus
and wide
geographical
spread enables
us to attract a
broad range
of clients and
candidates.
Expert consultancy
Our skilled consultants share
their specialist skills and
in-depth market knowledge
to benefit both clients
and candidates.
Tailored
product
offering
Our tailored
product offering
has been
developed to add
value to clients by
providing bespoke
solutions to meet
their needs.
Market s
In-depth candidate
knowledge enables us
to advise clients on
attraction approach,
location, speed,
method and cost.
In-depth knowledge of
working with start-up
businesses through to
multinational blue-chip
giants enables us to
have a complete view
on the entire market.
18 Gattaca plc
Annual Report and Accounts 2019
How we create value
for our stakeholders
For clients
For candidates
• Our market expertise helps us advise them on
dynamics in their competitive landscape
• Our ability to identify the best high-quality
candidates, quickly
• Our range of specially designed services which
enable us to solve our clients’ talent challenges,
from one-time hire through to enterprise-size
integrated solutions
• Expanding range of career opportunities across
all major markets with clients from start-ups
through to multinationals
• Market experts consultants who can help
STEM skill candidates transition across
markets and geographies
• A great candidate experience, providing the
opportunity to work with highly experienced
and skilled consultants who will support them
throughout their career
• Strong governance giving candidates
reassurance that their data is being handled well
and their employment models are compliant
70/30
14,500
CONTRACT VS PERMANENT CONTINUING NFI SPLIT
PLACEMENTS PER YEAR
For employees
For investors
• Strong brand reputation helping them to secure
• Providing market-leading solutions with a
new business or identify great talent
trusted reputation
• Early career progression
• Operating in defined, high-growth markets
• Investing in modern technological infrastructure
• Deep expertise with revitalised leadership
to help them deliver
• Market-leading benefits scheme
• Training to become a successful market expert,
surrounded by a positive and friendly culture
• Focused growth strategy
• Resilient business model
78%
27.5p
POSITIVE ENGAGEMENT SCORE
CONTINUING UNDERLYING BASIC EPS
Gattaca plc
Annual Report and Accounts 2019
19
Strategic Report Our Business Model in Action
How we connect
your world
We provide talent solutions that enable companies working in nearly
every aspect of the automotive ecosystem to thrive. Our clients include
start-ups, the world’s largest tiered providers, Formula 1 teams and
prestigious OEMs (original equipment manufacturers). They’re creating
and perfecting systems for everything from journey planning, warming
the seats of your car, to engines and fully electric vehicles, enabling all
of us to drive safer, with better performance and more environmentally
friendly vehicles than ever before.
From repairing a pothole to the construction of new bridges,
tunnels and complete smart motorway networks, our engineers and
technologists are designing and building systems to help us all have
safer and more efficient journeys.
Whether you book via an app or tap in with a contactless card, our
candidates have had a hand in your secure payment of the ticket and
indeed your entire train journey. Our clients design and upgrade: the
systems, track, rolling stock, signalling, seats, tunnels and bridges,
and the stations your journeys begin and end at.
There are many ways our clients are involved in the air travel industry.
From disciplines as wide ranging as designing the site you visit to book
your trip, to carrying out an assessment of the environmental impact
of building a new runway, to creating the airframe, engine, seats and
landing gear of your plane, you can’t take to the skies without using
technology worked on by our clients and candidates.
You don’t need to leave your house to benefit from the work of
our customers. We work with companies ranging from major
global infrastructure and utility providers, through to innovative
start-ups looking for methods to improve every aspect of our
lives, from streaming content to paying bills.
Whether your place of work is a world-class office building such as The
Shard in London, an Olympic park, a hospital or an oil rig in the middle
of the sea, our customers have helped to create that environment; not
just the building, but the communications, IT infrastructure and the
software tools and cloud systems you use to do your jobs.
In your car
On the road
On a train
On a plane
At home
At work
20 Gattaca plc
Annual Report and Accounts 2019
We provide talent that the world relies on. With either engineering or
technology skills, the candidates that we find and connect with our
clients are inventing, designing, installing and operating products,
systems and infrastructure that improve our day-to-day lives.
In Action
We signed a multi-year framework agreement
to find data scientists, software engineers, solutions
architects and IT security candidates from around
the world to relocate to Germany and join one of
the world’s largest OEMs on a permanent basis to
build out a brand new digital platform for its next
generation of fully digital vehicles.
Skill:
Technology
Product: Permanent placement
framework
Market: Mobility
Client: Large OEM
We have signed an exclusive subcontractor
package to provide teams of site supervisors,
sub agents, quantity surveyors and commercial
managers to upgrade and install a ‘smart’
motorway system, which was successfully
delivered on time.
Skill:
Construction, technology
Product: On a subcontractor agreement
Market:
Infrastructure
Client: Major contracting body
Over the Christmas holidays, we had over 300
sponsored contractors on assignment doing
major modifications and upgrades to the UK
rail network, one of the busiest networks in
the world. This included providing a range
of candidates across signalling, telecoms,
permanent way and safety-critical engineers.
Skill:
Construction,
communications, signalling
Product: On a subcontractor agreement
Market:
Infrastructure
Client: Major contracting body
In the last year we have signed a five-year
extension with a major global air traffic control
body for a fully integrated recruitment solution.
We are the exclusive provider of hundreds of
security-cleared technical specialists to continue
to develop the most secure and robust air traffic
control systems in the world.
Skill:
Engineering and technology
Product: Contract labour solution
Market: Mobility
Client: Major contracting body for
national critical infrastructure
In the past 12 months, the Group has worked with
a wide range of SME technology companies to
find the niche talent they need to grow. We place
the skilled candidates who develop the software
that helps us monitor our health, track our
personal finances, gain customer loyalty points
and order our shopping online.
Skill:
Engineering and technology
Product: Permanent placement niche
Market: Technology, Media and
Telecoms, Life Sciences, FBI
Client: SME
Over the past 12 months we have worked on
an exclusive arrangement to hire a number of
specialist pre-sales and vice-president sales
personnel from North America for roles across
the world. Our in-depth understanding of the
client’s market enabled us to identify, engage
and successfully secure these individuals to help
drive business growth for our client.
Skill:
VP technology sales
Product: Exclusive package work
Market: Technology, Media and
Telecoms, Consumer
Client: Mid-market
Underpinning it all:
Power, National
Security & Cyber
Communications
We also work with
companies that provide
us with the energy,
communications
and security we
rely on. Through
energy production
and distribution,
communications
across all media, safe
purchasing, or even the
protection of society, our
clients and candidates
help us all.
Gattaca plc
Annual Report and Accounts 2019
21
Strategic Report
Operating Review
A positive performance
in 2019
UK Engineering
Revenue was £475.9m (2018:
£451.7m), NFI increased by 4%
to £49.4m (2018: £47.6m) and
operating contribution (before
central overheads) was £27.5m
(2018: £26.0m). UK Engineering
represents 70% of Group
continuing NFI.
This excellent year-on-year
performance in a challenging
market is underpinned by our
established position within
our chosen markets in the UK
Engineering sector. Long-term
relationships with many existing
and new blue-chip clients continue
to develop and provide stable
revenues as we partner with
them to deliver solutions for their
talent needs.
The Infrastructure division, which
makes up 39% of UK Engineering,
grew by 4% on the previous year.
Activity in the Highways, Traffic
and Planning sub-division was a
key driver of this growth where
we have continued to develop
offerings across the whole project
life cycle from planning and design
through to construction and
maintenance.
The private building sector saw
continuing delays in investment
for large projects throughout the
year, particularly in London as the
industry waits for certainty over
Brexit. Demand within the Water
market was more tempered as
the funding cycle AMP 6 entered
its final year; however, we work
to prepare ourselves to take
advantage of the AMP 7 funding
cycle due to commence in 2020.
Additionally, the UK Government
continued to prioritise spending
on transportation infrastructure
and utilities projects, which are
significant and established markets
for Gattaca.
Our Aerospace sub-division grew
by 13% in the year, primarily as a
result of large RPO (Recruitment
Process Outsourcing) wins in the
prior year generating a full year
of NFI in 2019. Our focus is on the
interior fit-out market as the trend
remains towards aircraft carriers
demanding the most modern,
innovative and efficient products.
The traditional Automotive
sector was challenging, with
NFI down 25% year on year.
Market confidence reduced due
to uncertainty over Brexit, and
concerns over diesel vehicles
and the slowdown in the
Chinese market led to the sector
changing investment decisions.
Looking forward, demand is
stabilising and we continue to
direct resources and investment
towards automotive technology
skills, specifically for vehicle
electrification and autonomous
and connected vehicles. The trend
in the market is creating a new
transportation landscape, allowing
us to maximise our technology
presence within this emerging
growth sector.
Our Engineering Technology
division grew NFI by 9% on the
prior year, continuing its growth
trajectory. It focuses across all
markets, particularly Defence,
Rail and Mobility, capitalising
on technological advances that
are providing opportunity for
greater connectivity and ‘smart’
infrastructure and transportation.
The Energy division was up 2% on
the prior year. The Renewables
Energy market continues to offer
volume growth, but as the sector
matures and reaches a critical
mass, margins are increasingly
coming under pressure. The Oil
and Gas market remains turbulent,
with investment decisions and
therefore demand driven by global
commodity prices; we are yet
to see it recover to the highs of
2013–14.
The Defence market continues to
be core to our business. National
security, maritime and defence
infrastructure programmes,
including the QEC aircraft carriers,
Dreadnought, Tempest, Type 26
and Type 31 frigates, are a key
UK Government priority with
increased spending announced. As
a result, we see opportunity in this
market across both engineering
and technology skills.
UK Technology
On a continuing basis, revenue
was £136.1m (2018: £146.8m),
NFI declined by 20% to £11.6m
(2018: £14.5m) and operating
contribution before central
overheads was £5.9m (2018:
£6.6m). UK Technology represents
16% of Group continuing NFI.
2019 was a year of significant
change for our UK Technology
business, with the disruptive
impact of our withdrawal from the
Telecommunications Infrastructure
contract labour market and the
relocation of our Bromley office
to central London. Whilst NFI
declined by £2.9m, restructuring of
our operations ensured that only
£0.7m of this contraction flowed
through to operating contribution.
A number of underperforming
staff exited the business during
this process, leaving a leaner,
more agile business. We reviewed
the talent required within our
UK Technology business and
where it should be positioned
to benefit most from the market
fundamentals. As a result, we
have recruited a new Head of
Technology to help reposition the
business for a return to growth.
The rapid development of the IT
industry and need for STEM skills
across the UK offers an excellent
opportunity for our Technology
business to return to growth. There
is high demand for technology
skills such as data science, artificial
22 Gattaca plc
Annual Report and Accounts 2019
intelligence, cyber security, Java
programming and development.
We will seek to position ourselves
to provide these skills in the market
verticals where they are most in
demand across our client portfolio.
signs that the US business was
returning to growth with a more
balanced contract/permanent
mix across a broader portfolio
of clients, which we will seek to
capitalise on and accelerate.
International
On a continuing basis, revenue
was £23.8m (2018: £32.7m),
NFI grew marginally at £9.6m
(2018: £9.4m), and operating
contribution before central
overheads was £1.8m (2018:
£2.7m). International operations
represent 14% of the Group’s
continuing NFI.
2019 was again a period of significant
change for our International
operations as we withdrew from the
Telecommunications Infrastructure
contract labour markets in Africa,
Asia and Latin America. This had
a disruptive impact on the teams
which remained, but challenges were
overcome and within South Africa
and China, we saw the businesses
which were retained as part of our
core offering grow and expand their
client base outside of the traditional
Telecommunications markets.
The Americas region, in particular
the US, underperformed against
expectations, with NFI down 9%
on the prior year. Within the US
business, we repositioned away
from a historic over-reliance on
a small number of sole supply
clients which experienced a drop in
volume during 2019. We also took
this opportunity to restructure
the US leadership team, and have
aligned this restructure with more
focused executive support from
the UK head office.
We continued to build out from
our US presence in Dallas, adding
offices in Houston and Atlanta,
providing recruitment services to
clients particularly focused across
the Energy and Infrastructure
markets for engineering skills,
and across the Financial Services
and Technology markets for
technology skills. Towards the
end of FY19 there were positive
In Canada, we saw continued
growth as the Toronto office
built towards critical mass with a
focus on the Fintech and Energy
markets.
We continue to see significant
potential within the Americas
region in the markets that we
operate in and they remain
a key pillar of our strategic
growth objectives.
Gattaca Solutions
As a cross-section of our UK
Engineering, UK Technology
and International businesses,
our Gattaca Solutions NFI grew
by 16% in the year, with existing
accounts growing by 6%. Gattaca
Solutions is a critical element of
our growth strategy as it allows us
the opportunity to solve critical
client staffing issues through deep
long-term customer relationships.
Gattaca Solutions dedicates
account management support to
these client relationships, and in
many cases puts Gattaca teams
into our clients’ businesses.
We are delighted to report a
strong year of account retention
within Gattaca Solutions, with
a 100% success rate of client
renewals in 2019. This reflects
the quality of service and value
that Gattaca Solutions brings to
our clients.
A significant RPO contract
supporting engineering
recruitment requirements of the
UK Ministry of Defence accelerated
throughout the first half of 2019,
and delivered performance beyond
our expectations during its first
full year of operation.
Buying behaviours within the
UK staffing market are shifting
towards the outsourced
recruitment model, which Gattaca
Solutions offers. This is reflected
in our current pipeline, which
continues to strengthen with
opportunities across all markets.
Kevin Freeguard
Chief Executive Officer
5 November 2019
UK ENGINEERING
CONTINUING NFI
£49.4m
(2018: £47.6M)
UK TECHNOLOGY
CONTINUING NFI
£11.6m
(2018: £14.5M)
INTERNATIONAL
CONTINUING NFI
£9.6m
(2018: £9.4M)
Gattaca plc
Annual Report and Accounts 2019
23
Strategic Report Key Performance Indicators
Measuring our progress
Financial KPIs
Due to the discontinuation of certain operations in 2019, the Group has chosen to present a number of
adjusted KPIs for continuing operations as a more representative measure of ongoing business.
2015
2016
2017
2018
2019
NFI
(£m)
£72.1m
(2018: £78.9m)
54.8
73.0
74.7
78.9
72.1
2018
2019
2015
2016
2017
2018
2019
71.4
70.6
33.6
40.3
40.9
25.0
24.8
NFI from continuing
operations
(£m)
£70.6m
(2018: £71.4m)
Net debt
(£m)
£24.8m
(2018: £40.9m)
Measurement explained
NFI, equivalent to gross profit, is revenue
less cost of sales, predominately the sum
of contract NFI and fees for the placement
of permanent candidates, less any directly
attributable adjustments or rebates.
Rationale
Indicates the volume of business
generated in the year and is a prerequisite
to any sustainable bottom line growth.
Measurement explained
NFI from continuing operations is revenue
less cost of sales from continuing business,
predominately the sum of contract NFI
and fees for the placement of permanent
candidates, less any directly attributable
adjustments or rebates.
Rationale
Indicates the volume of continuing
business generated in the year.
Measurement explained
Total Group debt, less any cash and
cash equivalents, after capitalised
financing costs.
Rationale
Net debt is a key element of the
Group’s capital structure. Gattaca is
committed to showing a sustained
reduction in Net debt.
2018
2019
22.5
27.5
2018
2019
12.4
13.4
2018
2019
10.9
11.4
2018
2019
17.4
19.0
Continuing
underlying basic EPS
(pence)
Underlying profit
from continuing
operations (£m)
Continuing underlying
profit before
taxation (£m)
Conversion ratio
(%)
27.5p
(2018: 22.5p)
£13.4m
(2018: £12.4m)
£11.4m
(2018: £10.9m)
19.0%
(2018: 17.4%)
Measurement explained
The amount of underlying
profit for the year per one
share in the Group; calculated
as the continuing underlying
profit attributable to the
Group’s equity shareholders,
divided by the average
number of shares in issue
throughout the year.
Rationale
A strong indication as to
the underlying continuing
profitability of a company for
its shareholders.
Measurement explained
Underlying profitability of
the Group for continuing
operations before interest
and taxes with adjustments
for non-recurring costs,
impairment and amortisations
of acquired intangibles.
Measurement explained
Profitability of the Group
from continuing operations
before tax with adjustments
for non-recurring costs,
impairment and amortisations
of acquired intangibles and
foreign exchange differences.
Rationale
Demonstrates the profitability
of the Group and how
efficient it is at managing its
controllable cost base.
Rationale
Demonstrates the profitability
of the Group and how efficient
it is in managing its cost base,
before taxation.
Measurement explained
Underlying continuing profit
from operations expressed as
a percentage of continuing
NFI.
Rationale
Indicates the efficiency of fee
earners in generating NFI,
the Group’s ability to control
central costs and the level of
investment in future growth.
24 Gattaca plc
Annual Report and Accounts 2019
Operational KPIs
19
20
21
19
13
81
80
79
81
87
UK
Intl
2015
2016
2017
2018
2019
International mix
(%)
87% 13%
(2018: 81%:19%)
Measurement explained
NFI generated from business operations
outside of the UK, expressed as a
percentage of total NFI.
Rationale
Geographic diversification spreads risk
and reduces reliance on any one economy.
2015
2016
2017
2018
2019
73
74
76
72
70
27
26
24
28
30
2015
2016
2017
2018
2019
143.0
138.7
124.3
126.1
135.8
NFI mix
(%)
Contract
Permanent
Average NFI per
sales head (£’000)
70% 30%
(2018: 72%:28%)
£135.8
(2018: £126.1)
Measurement explained
NFI generated through temporary
contractor placements or permanent
placements separated out and expressed
as a percentage of total NFI.
Rationale
Contract NFI provides better visibility of
income and generates long-term relationships
with our clients. Growth in permanent
recruitment NFI enables the Group to benefit
quickly from operational gearing.
Measurement explained
Total NFI divided by the average annual
number of sales heads.
Rationale
Indicator of staff productivity, with growth
demonstrating an improved efficiency in
fee earner activity or a higher percentage
of fee earners at full capacity.
2015
2016
2017
2018
2019
72
71
71
73
72
28
29
29
27
28
2015
2016
2017
2018
2019
2.03
1.97
1.80
1.69
1.68
2018
2019
77
78
Staff mix
(%)
Sales
Support
NFI per £ staff cost
(£)
Positive engagement score
(%)
72% 28%
(2018: 73%:27%)
£1.68
(2018: £1.69)
78%
(2018: 77%)
Measurement explained
The ratio of fee earning versus operational
support staff headcount taken as an
average for the year.
Rationale
Demonstrates the Group’s ability to
maintain a consistent balance of sales
and support headcount throughout other
business changes.
Measurement explained
NFI divided by the annual costs of
all staff in the Group.
Rationale
Key staff productivity metric for Gattaca,
as well as reflecting the operational
efficiency of the business as a whole.
Measurement explained
An Engagement Index based on employee
responses to seven actionable workplace
elements.
Rationale
Employee engagement has proven
linkages to performance, productivity,
customer service, quality, retention and
increased profit.
Gattaca plc
Annual Report and Accounts 2019
25
Strategic Report Chief Financial Officer’s Report
Delivering above
expectations in 2019
2019 has been a year of intense
activity and I am pleased that whilst
repositioning the business, we have
delivered or exceeded expectations
on our key metrics of underlying
profitability, earnings per share
and net debt.
Highlights
• Continuing underlying profit
before tax grew to £11.4m for
the year (2018: £10.9m).
• Working capital
management has
continued to be a major
focus throughout the year,
resulting in Days Sales
Outstanding (‘DSO’) of
45 days (2018: 52 days).
• Operational closure of
underperforming Telecoms
Infrastructure contract
business and offices in
United Arab Emirates,
Malaysia, Qatar and
Singapore.
• Consolidation of all UK
Group support functions
into our Whiteley hub, with
the Bromley office closed
in the year.
“ We are focused on rebuilding
the business for growth for
the long-term.”
Salar Farzad
Chief Financial Officer
CONTINUING UNDERLYING
BASIC EPS
27.5p 22%
(2018: 22.5p)
26
Gattaca plc
Annual Report and Accounts 2019
Financial performance
On a continuing basis, revenue of
£635.8m (2018: £631.3m) generated
NFI of £70.6m (2018: 71.4m). We
achieved contract NFI of £49.3m
(2018: £51.0m) at a margin of
8.0% (2018: 8.4%), and permanent
recruitment fees were £21.3m (2018:
£20.4m). The change in contractor
margins was driven by a higher
mix of Gattaca Solutions business,
which now represents 27% of Group
continuing NFI (2018: 22%). This
ongoing trend within our product
mix is positive as Gattaca Solutions
business provides greater visibility
over our medium-term pipeline and
whilst margins tend to be lower,
these deals allow us to increase
aggregate NFI and enable us to
service clients more efficiently.
Gross margins were 11.1% (2018:
11.3%) driven by the change in
contractor margins, partly offset by
the increase in permanent NFI mix.
Whilst our UK Engineering business
grew by 4% at a gross profit level,
our UK Technology business was
20% lower. Some of this was a
result of repositioning the business
towards more sustainable and
profitable business but there were
also performance factors. Our new
Head of Technology has now been
on board for three months and is
addressing this.
Profit from continuing operations
of £4.8m (2018: £(25.3)m loss)
reflects a non-cash charge of £7.1m
in respect of amortisation and
impairment of acquired intangibles
(2018: £36.0m) following further
refinement of our projections
related to the Networkers business
acquired in 2015.
Statutory loss after tax was
£5.9m (2018: £27.1m loss).
Underlying results
Underlying results are shown
beneath the Income Statement.
Underlying continuing profit before
taxation at £11.4m (2018: £10.9m)
was £0.5m higher than last year,
the reduction in NFI having been
more than compensated for
lower costs.
Underlying continuing operating
profit of £13.4m (2018: £12.4m)
represented a conversion ratio of
19.0% (2018: 17.4%) of continuing
NFI. In years past, the Group
was industry leading in this area
and a key medium- and long-
term objective is to improve
our conversion ratio.
Discontinued operations and non-underlying costs
The significant actions taken in 2019 included certain non-underlying costs:
£’000
Underlying continuing
Bromley office closure integration costs
Bromley onerous lease provision
Liquidation, legal, advisory fees and other fees and working capital
impairments related to discontinued businesses
Advisory fees primarily related to US DoJ cooperation
Other losses from discontinued operations
Amortisation and impairment of goodwill and acquired intangibles
Foreign exchange differences
Reported
Profit/(Loss)
Before Tax
11,360
(1,441)
(1,102)
(1,205)
(3,424)
(1,828)
(7,146)
302
(4,484)
The closure of our operations in the United Arab Emirates, Qatar, Malaysia and Singapore and withdrawal
from the Telecoms Infrastructure contractor markets in Africa, Asia and Latin America are now operationally
complete (with some further non-underlying costs to be accounted for in 2020) as well as the closure of our
Bromley office. This has enabled us to reduce more costs than the future expected NFI foregone, at the same
time simplifying our business and degearing our operational Profit and Loss (‘P&L’). This in turn enables us to
focus our resources on building our North America operations and to reorganise our UK activities to better
capitalise on the very substantial growth opportunities that still exist within our chosen niches of technology
and engineering skills.
Gattaca plc
Annual Report and Accounts 2019
27
Strategic Report Chief Financial Officer’s Report continued
Taxation
One of our key objectives arising
from the changes undertaken
in late 2018 and 2019 was to
eliminate a substantial portion of
our non-recoverable withholding
tax, which we have achieved.
Although a tax charge, for us,
this was an activity-driven rather
than a profit-based cost. Total
irrecoverable withholding tax has
reduced steadily to £0.8m in 2019
(2018: £1.4m, 2017: £2.0m). Of the
total irrecoverable withholding tax
charge of £0.8m in 2019, only £0.1m
relates to continuing business, with
the remaining £0.7m not expected
to recur going forward.
The Group’s continuing underlying
effective tax rate was 22.0% (2018:
31.1%) driven by the simplification
of the business. The reported
effective tax rate of 31.6% is driven
by the impact of closed operations
and of non-underlying costs.
Earnings per share
Basic earnings per share was
negative 18.3 pence (2018:
negative 85.3 pence), and on a
fully diluted basis was negative 17.8
pence (2018: negative 85.3 pence).
Continuing underlying basic
earnings per share grew by 22.2%
to 27.5 pence (2018: 22.5 pence).
NET DEBT
£24.8m
(2018: £40.9m)
28 Gattaca plc
Annual Report and Accounts 2019
Dividends
Given the economic headwinds
particularly in the UK, and the
significant non-underlying
costs in 2019, the Board is not
recommending a final dividend.
Our continued policy is to achieve
a through the cycle dividend
payout of approximately 50%
of profits after tax, subject to a
sustained reduction in net debt.
The Board will review any dividend
in respect of 2020.
Tangible and intangible assets
Capital expenditure in the year,
including tangible assets and
software, was £3.5m (2018: £2.8m)
of which £2.9m related to software
and software licences representing
our investment on the Primary
Business Systems project and
£0.6m expenditure on additional
dilapidation provisions, leasehold
improvements and computer
equipment. The PBS investment
replaces legacy systems which are
over 25 years old and will provide
long-term benefits and we shall
be amortising this investment over
ten years.
Net assets and shares in issue
At 31 July 2019 the Group had net
assets of £41.9m (2018: £47.0m)
and had 32.3m (2018: 32.3m) fully
paid ordinary shares in issue. The
change in net assets is principally
driven by the impairment of
goodwill and intangibles related
to the Networkers acquisition.
Cash flow and net debt
Net debt at 31 July 2019 was
£24.8m (2018: £40.9m), consisting
a working capital facility of £29.1m
(2018: £35.9m), bank term loan
of £15.0m (2018: £15.0m), less
cash of £19.2m (2018: £9.8m) and
capitalised finance costs of £0.1m
(2018: £0.2m).
Cash flow & new debt
13.6
-1.4
7.0
-2.3
14.7
-7.6
-3.5
-2.5
-1.9
-24.8
0.0
-5.0
-10.0
-15.0
-20.0
-25.0
-30.0
-35.0
-40.0
-45.0
-40.9
Net debt
at 31 July
2018
Continuing
underlying
EBIT
Working
capital
(continuing
business)
Continuing
non-
underlying
admin cost
Non-
underlying
EBIT
Discontinued
debtor
balance
collected
Other
discontinued
working
capital
unwind
Capital
expenditure
Tax
paid
Interest
paid
Net debt
at 31 July
2019
This has been and continues to
be a key focus for us and we
are pleased with this reduction,
notwithstanding that this year
end fell on a Wednesday which is
the best day of the week for us in
terms of our intraweek cash flow
cycle. The difference between the
peak and trough of this intraweek
cycle can be in the order of £8m.
Cash generated from operations
at £24.1m (2018: £17.9m) was
£6.2m higher than prior year.
In addition to a £4.7m benefit
from the unwinding of working
capital in our discontinued
operations, which was another
key objective, our continuing
business working capital improved
by £13.6m with DSO (days sales
outstanding, based on a three-
month average and including
sales taxes) of 45 (2018: 52) being
seven better than prior year and
representing another year-on-year
improvement.
Other key drivers of cash flow are
summarised in the chart above.
Cooperation with the US
Department of Justice (‘DoJ’)
We continue our cooperation
with the DoJ and in the 2019
financial year have incurred £3.4m
in advisory fees on this matter.
As noted in Note 29 the Group
is not currently in a position to
know what the outcome of these
enquiries may be and therefore
we are unable to make any type
of quantification of the potential
financial impact.
Banking facilities and interest
rate risk
In September 2019 we conducted
a tender for our financing
facilities with strong interest
from a number of mainstream
commercial banks. We are pleased
to have negotiated new facilities
with HSBC with whom we have a
long-standing relationship.
As of October 2019 the Group has
facilities of £90m, consisting of a
£75m working capital financing
facility and a £15m bank term loan.
These arrangements are due to
expire in October 2022 and the
committed bank loan reduces to a
£7.5m facility by 31 July 2020 and
a £5m facility by 31 October 2020.
These facilities include three
covenants: Interest Cover, Adjusted
Leverage and RCF (revolving credit
facility) Leverage to adjusted
EBITDA. We are comfortable with
our ability to service our debt
and meet our covenants and we
monitor projections for covenant
ratios as part of our routine
monthly reporting. One of our
medium-term treasury goals is
to eliminate our RCF and to rely
principally on our working capital
financing facility for our funding
requirements.
The Group’s exposure to market
risk for changes in interest rates
relates primarily to the Group’s
bank loan and sales financing
facility debt obligations. Bank
interest is charged on a floating
rate basis.
Gattaca plc
Annual Report and Accounts 2019
29
Strategic Report Chief Financial Officer’s Report continued
Brexit
The Board continues to follow
Brexit developments and will
follow the ultimate detailed trade
negotiations. The economic effect
of these developments on business
confidence is an important factor
for us to the extent it affects the
UK economic environment, as
noted in the Principal Risks and
Uncertainties report on page 38.
IR35
The IR35 rules, which were brought
to the public sector in 2017, are
due to be implemented in the
private sector in April 2020. As
with all significant employment
tax changes, there is likely to be
some disruption and we have
been working closely with clients
and contractors to prepare for
these changes, as well as making
resources available to the public
through our IR35 web-based hub
available at www.gattacaplc.com/
our-solutions/IR35-hub.
Engineering and technology
projects will continue to require
resource and as a leading provider
of those skills, we will continue
to offer valuable and compliant
services to our clients through
our contingent and Gattaca
Solutions offerings.
Supporting the business
We continue to make strong
progress in the professionalisation
of the support functions.
We are close to going live with our
Primary Business Systems project
which is an end-to-end integrated
system including applicant
tracking, vendor management,
contractor onboarding, timesheet
management, payments, billing
and collections. This system
will significantly enhance our
operational effectiveness, and the
ability to drive our business and
gain valuable insights.
The large legacy Networkers
finance team, which was in
our Bromley office, is now
disbanded and their function is
fully integrated in our Whiteley
headquarters, led by a new
Group Controller who is making
significant improvements
in processes and capability.
Our financial planning and
analysis team is now also fully
embedded, providing business
and commercial support to our
frontline staff. Together these
teams have been instrumental in
allowing us to gain full visibility
of the underlying economics
of our different business lines
and they also enabled us to
execute the many changes to the
business in a controlled and risk-
managed manner.
Our new General Counsel
appointed during 2018 has
upgraded her team to create a
dedicated compliance function
and reorganised the team to
provide commercial advice
and negotiation support to the
business as well as increasing
the utilisation of our centralised
contractor onboarding function.
30 Gattaca plc
Annual Report and Accounts 2019
Foreign currency risk
The Group generates 14% 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 entering into
forward exchange contracts to
minimise the gap in assets and
liabilities denominated in foreign
currencies.
Salar Farzad
Chief Financial Officer
5 November 2019
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 as a result the Board feels
the exposure to bad debt is not
significant. There are no significant
concentrations of credit risk within
the Group, with no single debtor
accounting for more than 4%
(2018: 4%) of total receivables
balances at 31 July 2019.
During the year we increased our
provision for doubtful debts by
£0.6m primarily in relation to our
discontinued operations.
Critical accounting policies
The statement of significant
accounting policies is set out in
Note 1 to the Financial Statements.
IFRS 16
Note 1 sets out our assessment of
the impact of implementing IFRS
16 from 1 August 2019 onwards. If
our 2019 accounts were prepared
on the basis of IFRS 16, whilst our
net profits would not be expected
to be impacted materially, we
would expect our EBITDA to
increase by £2.3m and interest
costs to increase by £0.2m, as
operating lease expenses are
replaced by depreciation and
interest expenses.
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
Gattaca plc
Annual Report and Accounts 2019
31
Strategic Report Responsible Business
Ensuring Gattaca is a
great company to work for
We place great emphasis on operating responsibly
and we consider the potential impact on all our stakeholder
groups when making business decisions, including them
in those decision-making processes where possible.
We centre our initiatives around
‘Evolve’, our employee value
proposition. With its three
pillars of Wellbeing, Recognition
and Develop, this fosters a high-
performing culture centred
around collaboration, support and
growth. Each pillar promotes our
core values; Love Your Job,
Take Pride and Be Inspiring.
p
u
o
r
G
s
e
u
l
a
V
P
V
E
l
r
e
d
o
h
e
k
a
t
S
s
p
u
o
r
g
Be Inspiring
Love Your Job
Take Pride
Develop
Wellbeing
Recognition
Our People
Our Communities
Our Environment
Jennie Mead
HR Director
We pride ourselves on being renowned in our industry
for placing great emphasis on building a high-
performing culture based on continued development.
Our training programme at Gattaca is one of the key differentiators that drive people towards
a career here. Right at the point of hiring our talent, we look for key behaviours that suggest
individuals want to be at the top of their field, have a strong desire to learn and be coached,
are eager to collaborate with others and demonstrate initiative. These behaviours are
fostered right through our onboarding programme, which sets the teams up for success.
“As a people business it’s fundamental that we bring in high-quality talent
and support them with development. We recognise that the reputation
they build in their specialist market is Gattaca’s reputation.”
32 Gattaca plc
Annual Report and Accounts 2019
Develop
Linked to our value to Be Inspiring
“ Without ambition, we wouldn’t achieve anything. We strive to
set an example in everything we do and aim to make a positive
difference to everyone we work with.”
Our People
Our Communities
Our strong reputation for training
and development supports us
in attracting the best talent and
developing them into market-
leading consultants.
Our approach to development
centres around using technology
to diversify learning opportunities
and increase collaboration across
the Group, and as part of this we
have invested in a new online social
learning platform called Fuse.
We’ve seen increased engagement
between the layers of the Group
through the success of our
mentoring programme, with
42 active pairings during the
year between management and
leadership grades.
Succession planning is embedded
into our culture in employees’
career plans and our performance
evaluation process. This year we
have invested in leadership training
and all our management team have
regular 360-degree reviews. We
also utilise a 180-degree feedback
tool for all staff, encouraging more
rounded feedback to support
with development.
We are committed to being
an inclusive organisation and
welcome everybody. Diversity is
important to us; 46% of our global
workforce at 31 July 2019 were
women, including 20% of our
global leadership team.
The Group is committed to
achieving equal opportunities
and to complying with anti-
discrimination legislation.
It is established Group policy to
offer employees and job applicants
the opportunity to benefit from
fair employment, without regard to
their sex, sexual orientation, marital
status, race, religion or belief, age
or disability.
Fair and full consideration is given
to applications from disabled
persons having regard to their
particular aptitudes and abilities.
Efforts are made to continue
the employment of those who
become disabled. Opportunities
for training, career development
and promotion are, as far as
practicable, identical for all
employees. The Group consistently
seeks to recruit, develop and
employ suitably qualified, capable
and experienced people in an
environment of equal opportunity.
17.5%
OF STAFF PROGRESSING
THROUGH PROMOTION
OR LATERAL MOVES
23.4k
miles*
SAVED FROM OUR
NEWLY LAUNCHED CAR
SHARE SCHEME, THE
EQUIVALENT OF FOUR
TONNES OF CO2 A YEAR
* As of November 2019
We take a keen interest in
supporting younger generations
to develop skills in technology
and engineering. We are actively
involved as STEM ambassadors
and speak at colleges and
universities on the career options
in these fields.
We align ourselves with
organisations running STEM-
related programmes, and sponsor
and promote their cause. We are
passionate in supporting non-
profit organisations, such as “Girls
in Tech” in the US, to make a
positive impact in the community.
We’re keen to work with our clients
to ensure that we support them
with developing strategies for
candidate attraction, including
diversity and inclusion initiatives.
We also regularly co-host a
number of events on topics such
as skill generation and diversity in
the workplace.
Our Environment
We continually strive to make
incremental improvements to
how we impact our environment.
In the year we have introduced a
car share initiative and maintain a
Cycle To Work scheme, helping our
people make their commute more
environmentally friendly.
This year we have also achieved
phase 2 of our Energy Savings
Opportunities Scheme (ESOS).
Gattaca plc
Annual Report and Accounts 2019
33
Strategic Report
Responsible Business continued
Wellbeing
Linked to our value Love Your Job
“Workinginrecruitment,weknowhowimportantitistofindajobyou
love.Weenjoytheworkwedoandhavefunwiththepeoplewework
with, including our colleagues, our candidates and our clients.”
Our People
Our Environment
We take a holistic approach to
wellbeing driven by the employee
led Wellbeing Committee, believing
that our people being healthy,
happy and financially stable plays
a key role in the Group’s success.
The positive work of our financial
wellbeing programme was
recognised this year, resulting
in us being a finalist at the 2019
Employee Benefits awards. We
delivered new initiatives from
financial support providers
for workplace loans, financial
education, and saving plan
offerings which help our people
achieve short-term financial goals.
We also introduced increased
flexible working options, allowing
colleagues, where appropriate,
to choose a working pattern best
suited to them.
Health and safety also forms a
critical part of our wellbeing. We
encourage our people to identify
possible improvements as part
of a healthy and safe culture,
active reporting on incidents and
near misses, but also promoting
preventative measures.
We ran our second Mental Health
Awareness week this year, which
built on the campaign we ran in
2018 and we saw an increased
uptake of interaction from our staff
during the week.
We conduct an employee
engagement survey, which is
designed to capture engagement
on an ongoing basis via weekly
questions. In addition, our Senior
Management Team is visible
throughout the business, hot-
desking in all UK offices and
visiting overseas offices, providing
further opportunities for informal
feedback. The Board review this
feedback regularly.
Our Communities
Our community initiatives are
driven by our Corporate Social
Responsibility (‘CSR’) Committee,
which is also employee led.
“Healthy Community” is one of
the five core elements of our
Wellbeing EVP pillar, and we
encourage our people to engage
with their communities and
charities that they want to support.
All charities that we work with are
put forward by our employees and
we support active participation in
these causes.
This year, our employees
fundraised for and contributed
volunteers to a range of
organisations, raising over
£50,000 (2018: £40,399) for
charities including Friends of PICU,
Children with Leukaemia and
ReStart. We also held activities in
support of annual charity events
such as Macmillan Coffee Morning,
Ovarian Cancer Awareness Month
and Children in Need.
Our increased flexible working
offering is reducing the impact of
our people on our environment,
with more colleagues working from
home on either a permanent or
regular basis.
We are continuing to encourage
the use of video conferencing
to support agile working, as this
further reduces our travel impact
as well as fostering improved
collaboration. With the expected
technology advancements to our
Primary Business Systems, we have
also set ourselves a reduced paper
consumption target to achieve
by 2021.
£50,000
RAISED FOR OUR CHOSEN
CHARITIES THIS YEAR
79%
SCORED IN OUR
ENGAGEMENT
SURVEY, IN THE
THEME “MY WORK”
34 Gattaca plc
Annual Report and Accounts 2019
Recognition
Linked to our value Take Pride
“ We encourage each other to be the best we can be so we can continually
improve the service we provide. We want our staff to take pride in their
achievements and recognise the achievements of others.”
Our People
Our Environment
We continue to see strong
engagement and collaboration
from employees across the Group,
from our work on our Recognition
EVP pillar. This year our incentives
included theatre trips, private
dining experiences, holiday
vouchers and many other great
rewards.
Our peer-to-peer feedback tool
is widely used and contributes
to performance management,
allowing our people to recognise
one another.
We pride ourselves on our team-
based environment and regularly
celebrate team success. We
promote this success internally
and externally. Group recognition
is a great way to encourage team
building.
In order to showcase outstanding
performance so that our people
understand and recognise what
success looks like, our Group-wide
annual recognition awards take
place at the end of each calendar
year. These awards are all given to
employee nominated winners.
We assess employees against our
values and culture at performance
reviews as part of our competency
framework, and the discretionary
nature of our commission scheme
endorses our commitment to
upholding our Code of Professional
Conduct.
We communicate with our
employees on a constant basis,
via formal means at our end
of quarter presentations and
annual appraisals, and on an
informal basis via regular team
and department meetings, and
leadership briefings. Employees
are regularly updated on financial
and economic factors that affect
the performance of the Group
and the Group’s SIP share scheme
encourages employee engagement
in the financial performance of
the Group.
We have successfully integrated
our three UK offices from our
Resourcing Solutions acquisition
in Reading, Uxbridge and Derby
into our ISO 14001 processes and
all UK sites are now included in our
certification.
We have continued to ensure all
our refurbishments and relocation
projects reuse or recycle all
furniture items where possible. We
also ensure all materials purchased
for these projects are from
sustainable sources.
Our Communities
We engage with wide-ranging
projects to promote improved
communities.
For the second year running we
have been active with beach cleans
in the UK, involving our families
and friends to make this
a true team effort.
We maintain our long-standing
support for our chosen primary
charity, Friends of PICU, and
sponsor its annual charity ball
and golf tournament. Not only are
these great events to fundraise
for, but to also recognise the hard
work that goes into the amazing
support that the charity provides.
66
LONG SERVICE AWARDS
IN THE YEAR
40%
OF OUR STAFF
DONATED TO CHARITY
THROUGH PAYROLL
Gattaca plc
Annual Report and Accounts 2019
35
Strategic Report
Risk Management
The Group is well placed to manage
its business risks successfully
Risk and uncertainties are an inherent part of any business, and the
Board recognises that our approach to risk needs to reflect our strategic
priorities, commercial reality, and our ability to effectively manage the
potential impact in the event the risk materialises.
Ultimate responsibility for risk
management rests with the Board,
primarily via the Audit Committee,
but day-to-day management of
risk is delivered through the way
we do business and our culture.
Opportunities and threats are
assessed using a “top-down” and
“bottom-up” approach, taking into
account the views of the Board
and operational Management
Board, and those of each business
function as regards the risks
relevant to their area.
The Board, primarily via the
Audit Committee, is responsible
for establishing and maintaining
the Group’s system of internal
financial control and places
importance on maintaining a
strong control environment.
The key procedures that the
Directors have established with a
view to providing effective internal
financial control are as follows:
• Our organisational structure has
clear lines of responsibility;
• Our comprehensive annual
budget is approved by the
Board. Monthly results are
reported against the budget
and variances are closely
monitored by the Directors; and
• The Board is responsible for
identifying the major business
risks faced by the Group and
for determining the appropriate
courses of action to manage
these risks.
A u dit
m itte e
C o m
Reviews the
effectiveness of the
Group’s internal
controls and risk management
framework and policies (including
reviewing and approving the
statements to be included in the
Annual Report concerning internal
controls and risk management),
and recommends appropriate
levels of risk appetite and
changes to key policies
to the Board.
B o ard
Overall responsibility
for the management
of risk, including agreeing the
risk governance framework,
defining the Group’s risk
appetite, and approval
of key risk management
policies.
36 Gattaca plc
Annual Report and Accounts 2019
This framework of internal controls
is designed to meet the Group’s
particular needs and aims,
facilitate efficient and effective
operations, safeguard the Group’s
assets, ensure proper accounting
records are maintained, and
ensure that financial information
used within the business and
for publication is reliable. Such
a system of internal control can
only be designed to manage and
mitigate, rather than eliminate,
risk, and provide reasonable but
not absolute assurance against
material misstatement and loss.
The effectiveness of our framework
of internal financial controls is
monitored and assessed by the
operational Management Board,
the Audit Committee and the
Board, all of which recognise that
continual improvement in this area
is a key objective for the business.
O p eratio n al
M a n a g e m e nt
B o ard
Responsible for
day-to-day review
and management of risk,
including allocation of risk
to owners, funding and resource
allocation, and accountability
for risk assessment and
implementation of
risk mitigations.
Katie Selves
Group Company Secretary
and General Counsel
“We actively avoid risks that could impact the safety of our
staff, clients or contractors, our reputation, our adherence to
legal and regulatory responsibilities or where the potential
impact of the risk could endanger the future of our business.”
The Directors considered that a
three-year period is appropriate for
this assessment because it enables
a good level of confidence due to a
number of factors, including:
• the Group’s financial resources,
including the high cash
generation of its operations;
• the inherent unlikelihood of all
or even most of the identified
potential principal risks
materialising simultaneously;
• the length of major operating
contracts; and
• the Group’s diverse
geographical operations
plus its established business
relationships with many
customers and suppliers
throughout the world.
In forming their opinion, the
Directors have performed a robust
assessment of the principal risks
and uncertainties facing the
Group as set out on pages 38
to 41. In addition, Note 26 to the
Financial Statements includes the
Group’s objectives, policies and
processes for managing its capital,
its financial risk management
objectives, details of its financial
instruments and hedging activities
and its exposure to credit risk and
liquidity risk.
The Directors believe that the
Group has a strong balance
sheet and considerable financial
resources and accordingly they
remain confident of the Group’s
long-term growth prospects,
based on a diverse range of clients
and suppliers across different
geographical locations and sectors.
As a consequence, the Directors
believe that the Group is well
placed to manage its business
risks successfully.
Based upon the robust
assessment of the principal risks
and uncertainties facing the
Group and the stress testing
based assessment of the Group’s
prospects, the Directors have
no reason to believe that the
Group will not be viable over a
longer period. However, given the
inherent uncertainty involved in
looking at longer time frames, the
period over which the Directors
consider it possible to form a
reasonable expectation as to the
Group’s longer-term viability is
three years.
Going concern
The Directors consider that the
Group has adequate financial
resources to continue operating
for the next 12 months from the
date of this report, and that it is
therefore appropriate to adopt the
going concern basis in preparing
the Financial Statements.
The Directors have satisfied
themselves that the Group is in a
sound financial position and that it
has access to sufficient cash funds
and borrowing facilities and can
reasonably expect those facilities
to be available to meet the Group’s
foreseeable cash requirements.
The process followed by the Group
in the preparation of the Viability
Statement is set out below.
Viability Statement
The Board formally adopted the
QCA Code for the year ended 31
July 2018 onwards. Consistent with
previous years, Gattaca continues
to seek to comply with certain
provisions of the UK Corporate
Governance Code, where
appropriate for our business, on a
voluntary basis. In accordance with
this position, and in accordance
with the provisions of the UK
Corporate Governance Code, the
Directors have assessed the long-
term prospects of the Group based
upon business plans and cash
flow projections for the three-year
period ending 31 July 2022.
Gattaca plc
Annual Report and Accounts 2019
37
Strategic Report Principal Risks and Uncertainties
Effective Risk Management
Our Corporate Governance Statement on pages 48 to 52 describes the Group’s governance structure.
The table below details each principal risk, aspects that would be affected if the risk materialised, our
assessment of the current status of the risk, and how the Group mitigates it.
Financial
Risk
Financing
Failure to secure adequate financing, whether
to fund expansion or trading, or to finance
a bad debt, would have a material effect
on results. The level of contract margins,
NFI conversion, the terms on which we pay
and are paid, contract versus permanent
balance and the speed of growth all affect
the Group’s ability to generate cash. Poor
trading performance and/or working capital
management could lead to a breach in financial
covenants, leading to borrowings being called
due. A lower level of underlying profitability
reduces the leverage ratio headroom of
financial covenants.
Foreign exchange
Trading across international borders raises the
risk of foreign exchange differences between
trading currencies, in terms of both cash and
translated results. Since the EU referendum in
the UK in 2016, there remains high volatility in
the value of GBP against overseas currencies,
predominantly Euro and US Dollar, which we
identified by way of an increased risk in last
year’s Annual Report.
Market
Economic environment
There is a correlation between the economic
conditions of the countries we operate in, and
the level of client and candidate confidence,
affecting the level of recruitment. Too great a
concentration in one market increases this risk.
Slowing economic growth could affect our
ability to maintain and grow NFI, either through
reduced requirements for temporary staff, by
encouraging clients not to hire permanent staff,
or by encouraging clients to adopt cheaper
delivery options.
Due to the continuing uncertainty and,
specifically, the increased risk of a no-deal exit
from the EU, we have increased the risk for this
financial year.
38 Gattaca plc
Annual Report and Accounts 2019
Mitigation
Status
• We maintain serviceable levels of debt which we have been
reducing.
• At the year end. the Group had financing facilities of £90m,
comprising a £75m Invoice Financing Facility and a £15m Term
Loan Facility, both committed until October 2020. Subsequent
to the year end the Group completed a refinancing and as of
31 October 2019 the Group has facilities of £90m, consisting of
a £75m working capital financing facility and a £15m bank term
loan. These arrangements are due to expire in October 2022.
• We have a rigorous approach to forecasting both net debt and
trading results monthly, looking forward to at least the next
four covenant periods.
• We have a strong relationship with our bank, which is
supportive of our business, and we hold regular discussions
to ensure we have our bank’s backing to fund strategic plans.
Where we foresee material uncertainty we engage proactively
with our lenders to mitigate this.
• We have procedures to check the creditworthiness of new
clients with external agencies, regularly reviewing credit limits.
• The Group has a diverse mix of clients and is not financially
dependent on any single client.
• For sales denominated in foreign currency, the Group seeks to
ensure associated direct costs are denominated in the same
currency.
• The Group monitors the gap in assets and liabilities
denominated in foreign currencies required to be translated into
Sterling at the year end exchange rate.
• The Group regularly exchanges surplus foreign currency to
minimise the gap in assets and liabilities denominated in foreign
currency.
• 70% of the Group’s continuing NFI is generated from contract
business across a broad range of sectors and clients, leading to
more stable business streams.
• The Group generates 14% of its continuing NFI from its offices
in overseas territories, thereby helping reduce the risk of
reliance on the UK marketplace.
• We have a rigorous forecasting framework and a programme
of regular reviews of outcome compared to forecast, providing
us with early warning signals and enabling us to recalibrate as
necessary.
• We continue to manage the balance between temporary
and permanent business, to ensure flexibility in the face of
increasing uncertainty arising from the UK’s withdrawal from
the EU.
Key
Relative severity
Changed during the year
High
Medium
Low
Increased
Stable
Decreased
Market continued
Risk
Mitigation
Status
Dependence on key clients
Too great a dependence on one or a few
clients may have a material adverse effect on
the Group’s cash flow should clients cease to
procure or pay for services in a timely manner.
• The Group has a very broad base of clients, with no
dependency on any one client.
• The Group continues to follow its strategy to diversify its client
base and the mix of its UK and international operations.
Where a material relationship exists with clients,
contract negotiations often result in cash
rebates, or concessions on margin or payment
terms.
• The Group’s legal team review non-standard commercial
contracts and adhere to a contract playbook which defines our
risk appetite. Where appropriate, we liaise with our insurance
providers regarding onerous non-standard terms.
Due to the increased economic uncertainty
(as highlighted above) as a result of the risk of
a no-deal exit from the EU and the associated
political uncertainty, we consider there to be an
increased risk of client bankruptcies resulting in
non-payment of receivables.
• We conduct detailed and regular credit reviews of all of our
client accounts.
• We maintain credit insurance on a small subset of our clients,
and separately the Group holds appropriate levels of public
liability, employers’ liability and professional indemnity
insurance.
Competitive environment
The recruitment market is highly fragmented
and competition is intense, placing pressure on
margin and NFI. The increasing use of social
media for recruitment and a trend towards
outsourced recruitment models, with associated
margin pressures, can also have an impact.
• The Board and Executive meet regularly to discuss and define a
clear vision of the regions, sectors and skills we operate in. The
Group undertakes a regular client framework review, seeking to
ensure it minimises the risk of losing clients to competitors.
• The Group is focusing increasingly on exclusive arrangements
and new solutions.
Further, the commercialisation of disruptive
technology or innovation by either a current
or new competitor could materially alter the
recruitment sector by challenging the viability
of current models and therefore the ability to
sustain revenue and profits.
• Greater regulatory and compliance requirements in the
recruitment industry are increasing barriers to entry.
• We are well under way to implementation of end-to-end,
integrated systems covering applicant tracking and vendor
management through to billing, collections and payments.
Shortage of skilled candidates
The availability of highly skilled and quality
candidates is essential to operating in niche
or high-margin markets; where a shortage
of skilled resources exists within a market,
clients have greater need for services from
staffing solutions businesses: however, where a
shortage reaches extreme levels, it may not be
possible to fill vacancies.
• We differentiate from our competitors by focusing on niche
sectors and offering customisable solutions on a global scale.
Our consultants have a narrow and deep focus and build strong
relationships with clients and candidates alike. This specialist
offering enhances our ability to source the right candidates and
allows us to charge the right prices for quality service.
• In the event of restrictions on free movement of workers as
a result of the UK’s exit from the EU, we do not anticipate
significant impact as the majority of our UK-placed contractors
are UK nationals.
Gattaca plc
Annual Report and Accounts 2019
39
Strategic Report
Principal Risks and Uncertainties continued
Operational
Risk
Talent acquisition and retention
The Group’s performance, operating results and
future growth depend on its ability to attract,
train, develop and retain high-performing
individuals to meet its growth strategy.
Failure to attract and retain individuals with
the right skill set may adversely affect the
Group’s performance.
Management is currently steering the Group
through a period of significant change to align
our internal operating model to our markets.
Systems and security
Failure to ensure our technological
infrastructure remains up to date, functional
and secure could increase the risk of; security
breaches and attacks; an adverse effect on
the Group’s operations; and an inability of
technology systems to support the business
plan, leading to a material impact on the
Group’s financial results. A loss of confidential
or competitive information can have an adverse
impact on operations and the reputation of
the Group.
Data governance
The Group works with confidential, sensitive
and personal data daily in multiple jurisdictions
under a variety of laws and regulations.
A material data compliance failure could
expose the Group to potential legal, financial,
operational and reputational risks.
Business continuity
Our systems are key to enabling day-to-day
operations. The loss of operating technology
services from one site can lead to a loss of
business continuity.
Mitigation
Status
• The Group’s remuneration policy sets out that the overall
remuneration package should be sufficiently competitive to
attract, retain and motivate executives and senior staff with
the commercial experience to achieve the Group’s strategy.
• We run an employee engagement survey, designed to capture
engagement on an ongoing basis. For further details, please
refer to page 25.
• The Group is placing a greater focus on engaging and
developing talent, including through our induction programme,
career development, training, performance management and
succession planning.
• Our contracts contain appropriate notice periods and post-
termination restrictive covenants and we conduct exit
interviews to understand reasons for attrition.
• We continue to engage and consult with employees who are
affected by change to mitigate adverse impact.
• We are well under way to implementation of end-to-end,
integrated systems covering applicant tracking and vendor
management through to billing, collections and payments. The
implementation of any new system presents increased risk, but
we have engaged experts to manage this project, have strong
project governance, conduct regular project reviews and have
risk mitigation plans in place. We expect, in the longer term,
that these investments will reduce this risk.
• We take a comprehensive view of cyber security and, through
the use of specialist security services, have regular penetration
testing of security measures to review our resilience in light of
the changes and threats we face.
• Procedures for handling and storing sensitive, confidential
and personal data are in place across the Group as part of its
Data Protection and IT Systems Usage policies and information
security processes and procedures.
• All employees receive data protection training on joining the
Group, and regular refresher training sessions. Specialised
training is provided where required.
• The Group is GDPR compliant and maintains dedicated
resource in the compliance team to ensure continued
compliance. We monitor developments in the law and manage
our response as appropriate.
• The Group’s approach to business continuity focuses on our
critical systems and processes to ensure continuity of service,
including crucially the payment of workers engaged on our
clients’ sites. Our planned transition to cloud-hosted solutions
will enhance our ability to enable remote working and reduce
the reliance on local office hardware.
40 Gattaca plc
Annual Report and Accounts 2019
Key
Relative severity
Changed during the year
High
Medium
Low
Increased
Stable
Decreased
Regulatory and legislative environment
Risk
Mitigation
Status
Legal and fiscal compliance
The Group operates in a number of
jurisdictions, which have differing
legal, tax, regulatory and compliance
requirements. Failure to comply with any
such legal, tax, regulatory or contractual
compliance requirements could expose
the Group to potential legal, financial
and reputational risks.
• The Group continues to invest in its dedicated legal and
compliance, and tax functions which manage the Group’s
compliance with its legal and regulatory obligations and monitor
changes in legislation that affect our business, supported by
leading external advisers as appropriate.
• The Group also works closely with the Recruitment and Employment
Confederation (‘REC’) to ensure it is up to date with all industry
trends and best practice relating to current and emerging legislative
and regulatory changes in the markets we operate in.
• The Group has clearly defined standards covering our business
activities, which are outlined in our Code of Professional Conduct
with which all employees are required to comply. The Group also has
clear policies and statements setting out the Group’s zero-tolerance
approach to Bribery and Corruption, Facilitation of Tax Evasion,
and Modern Slavery. All of these core policies are referred to in
our contracts of employment, and are underpinned by training to
reinforce these policies, and the associated required behaviour from
employees.
• The Group is committed to providing for the health, safety and
welfare of all of its employees and has established an Occupational
Health and Safety Management System that complies with OHSAS
18001:2007. The Group also has procedures in place to comply with all
legal and contractual obligations relevant to the Group’s activities.
• The Group maintains an independent whistleblowing reporting
service for employees to raise any matters of concern anonymously.
Any reported incidents are investigated and reported to the Audit
Committee.
• The Group has a dedicated senior tax resource and utilises the
expertise of external advisers across the jurisdictions in which we
operate. The Audit Committee provides governance and oversight
of the Group’s tax risks.
• As a leading staffing solutions provider, we are advanced in our
understanding of, and preparations for, the forthcoming changes to
the IR35 rules in the private sector and we are working closely with
our clients, with whom the primary responsibility for determination
rests, to manage this change.
• Although there has been an increase in legal and regulatory
requirements on our business over the past few years, we are
comfortable that we are managing these external developments
appropriately and responsibly. In this regard, we consider that the
external risk environment in this area has not changed. As noted in
our trading update announcement on 6 August 2019, we continue
to cooperate with the US Department of Justice predominantly
in relation to activities by Networkers International prior to its
acquisition by Gattaca in 2015.
Strategic Report approval
The Strategic Report on pages 11 to 41 was approved by the Board of Directors on 5 November 2019 and
signed on its behalf by
Kevin Freeguard
Salar Farzad
Chief Executive Officer
Chief Financial Officer
Gattaca plc
Annual Report and Accounts 2019
41
Strategic Report
Case Study: Solving our clients' challenges
27%
27
OF GROUP CONTINUING NFI
FROM GATTACA SOLUTIONS
RELATIONSHIPS
CLIENTS
WITH BESPOKE
VALUE PLANS
35 years
INDUSTRY
EXPERIENCE
Case Study
Specific services
designed and
delivered by subject
matter experts
Our services improve our clients’ businesses by looking at the
broader challenges they face, enabling them to deliver their
projects and realise the best way to engage and utilise talent
in order to achieve their strategic objectives.
Breadth
Experience
Knowledge share
We implement new HR
technologies, pay and bill systems,
we move thousands of desktops
over weekends, we redesign
clients’ employer brands, build and
manage supply chains, we provide
processes to tackle legislative
change and we help clients tackle
key agenda items such as diversity
and inclusion.
We continuously seek to identify
opportunities for our clients to
be more successful. Having
delivered outsourced staffing
solutions for over 20 years,
we have long since left behind
the mentality of "just placing
candidates". Clients have always
benefited from the in-depth
knowledge of our specialist
recruitment consultants;
however, we now support clients
beyond just talent availability
and supply. We have experts
in engineering and technology
project delivery, business change,
technology implementation,
diversity, legislation and
employer branding.
This capability allows us to engage
with our clients earlier in the
decision cycle, moving up the
value chain, solving future client
challenges and giving them a
greater competitive advantage.
These services provide clients
with the insight to be able to
make more informed business
decisions, learning from enhanced
processes and knowledge from
outside their organisations. We
enable clients to work together in
these environments to solve their
challenges, not just by talking to
Gattaca, but through collaborative,
peer-to-peer engagement.
42 Gattaca plc
Annual Report and Accounts 2019
Case Study
Specific services
designed and
delivered by subject
matter experts
Corporate Governance
44 Chairman’s Introduction to Governance
46 Board of Directors
48 Corporate Governance Statement
53 Directors’ Report
56 Audit Committee Report
62 Nominations Committee Report
65 Remuneration Committee Report
ADD VALUE
BY PRODUCT
COLLABORATIVE HIGH-
PERFORMING CULTURE
Gattaca plc
Annual Report and Accounts 2019
43
Governance Chairman’s Introduction to Governance
Committed to a culture
of good governance
“ The Board is responsible for ensuring
strong governance throughout
the Group's operations to support
management in building sustainable
growth for all of our stakeholders.”
Patrick Shanley
Non-Executive Chairman
I am pleased to present the Board’s Annual Report on
Corporate Governance. The Board recognises that strong
governance is an essential enabler to the delivery of our
strategic objectives and long-term success, and is committed to
maintaining a meaningful governance framework that reflects
our commitment to acting transparently and with integrity. The
Board is responsible for ensuring strong governance throughout
the Group's operations to support management in building
sustainable growth for all of our stakeholders.
During 2018, the Board chose to formally adopt the QCA's
Corporate Governance Code ('the QCA Code'). In addition,
where appropriate for our business, Gattaca also seeks
to comply with certain provisions of the UK Corporate
Governance Code, on a voluntary basis. This Annual Report,
together with the information on our website, sets out how
we comply with the principles of the QCA Code and provides
insights into how our governance framework underpins our
day-to-day activities and decisions.
Patrick Shanley
Non-Executive Chairman
5 November 2019
44 Gattaca plc
Annual Report and Accounts 2019
Corporate Governance at a glance
Board
Composition
Exec – 33%
Non-Exec – 67%
Board
Tenure
0–3 years – 50%
3–6 years – 17%
6+ years – 33%
The right balance of skills and experience
Executive
Non-Executive
Appointed
Tenure (years)
December 2015
August 2011
June 2018
July 1984
October 2018
June 2017
3
7
1
35
1
2
Staffing
Solutions
Customer
service/
marketing
People
Operations
International
Technology
Regulatory
Finance
Patrick Shanley (Chair)
Richard Bradford
David Lawther
George Materna
Kevin Freeguard
Salar Farzad
Patrick Shanley (Chair)
Richard Bradford
David Lawther
George Materna
Kevin Freeguard1
Salar Farzad
1 Appointed to the Board on 1 October 2018.
42
3
INTERACTIONS
BETWEEN THE BOARD
AND SHAREHOLDERS
DURING 2018/19
ISO CERTIFICATIONS:
ISO 14001 (ENVIRONMENTAL),
ISO 45001 (HEALTH & SAFETY)
AND ISO 9001 (QUALITY)
98%
BOARD ATTENDANCE
Gattaca plc
Annual Report and Accounts 2019
45
Governance Board of Directors
The right mix of skills
and experience
Appointment
Committee membership
Skills and experience
Patrick Shanley
Kevin Freeguard
Salar Farzad
Independent Non-
Executive Chairman
Chief Executive Officer
Chief Financial Officer
December 2015
October 2018
June 2017
Patrick has extensive
boardroom experience and
is currently Chairman of
chemicals business, Accsys
Technologies. Patrick has
previously been CFO of
Courtaulds plc and Acordis bv,
CEO of Corsadi bv, Chairman
of Cordenka Investments bv
and of Finacor bv. Patrick
began his career working
for British Coal where he
qualified as a chartered
management accountant.
He has a strong operational,
restructuring, merger and
acquisition background within
a manufacturing environment.
Kevin was appointed as Chief
Executive Officer on 1 October
2018. He was previously
Managing Director for Verifone
from 2015 to 2018. He brings
extensive international and
business transformation
experience across multiple
sectors including Financial
Services, Technology and
Industrial, having held senior
leadership positions with
organisations such as De La
Rue, Siemens and Motorola.
Salar, a chartered accountant,
has a background of finance
leadership in high-paced
international businesses
experiencing significant
change. His previous roles
include Group CFO of Zodiak
Media, Global Finance Director
of Macmillan Science &
Education, CFO of 2 Entertain,
CFO of MTV Networks
International and finance
leadership roles with EMI Music
within its North American
and digital operations. His
early career was with Price
Waterhouse in Audit followed
by lead advisory M&A.
46 Gattaca plc
Annual Report and Accounts 2019
Key to Committee membership
Audit Committee
Remuneration Committee
Nomination Committee
Chairman
George Materna
Richard Bradford
David Lawther
Katie Selves1
Non-Executive
Deputy Chairman
Independent Non-
Executive Director
Independent Non-
Executive Director
Group Company
Secretary and General
Counsel
July 1984
August 2011
June 2018
December 2017
George has 40 years’
experience in the recruitment
industry and is the founder
of the Group, having founded
Matchmaker Personnel in 1984
and Matchtech Engineering
in 1990, before combining
the two businesses in 2002
to form Matchtech Group
plc. George is a fellow
of both the Institute of
Recruitment Professionals
and the Chartered Institute of
Personnel and Development.
The Board does not consider
George to be independent.
Richard is Chairman of
InHealth Group, the leading
independent UK provider
of Diagnostic Services and
investor in digital health
ventures. He is a Director and
Deputy Chair of IHPN, and
has a background in leading
service businesses, in his early
career in Logistics and then
for 11 years as Chief Executive
of Carlisle Group up to and
including the merger to create
Impellam.
David is a senior leader in the
global construction industry.
He was formerly CEO at
ISG Plc, where he grew the
company to a £1.6bn turnover,
operating internationally in
26 countries – gaining its
reputation as a world-leading
fit-out specialist focused on
commercial, retail and data
centres. Prior to that, David
was Chief Financial Officer
at ISG. David has served as
the Group Finance Director
for Wilson Connelly Holdings,
a quoted house builder
and commercial property
developer operating across
the UK.
Katie was appointed as
General Counsel in October
2018. With over 11 years'
experience in private practice
in the City of London, Katie
joined the Group in 2016 as
Head of Employment and
was promoted to Group
Company Secretary and Head
of Legal and Compliance
in December 2017. Prior to
qualifying as a solicitor, Katie
worked as an HR specialist
and is a chartered member
of the Chartered Institute of
Personnel and Development. In
her role as Company Secretary,
Katie advises the Board on all
governance matters.
1 Katie Selves is not a member of the Board
Note: Mark Mamone was an Independent Non-Executive Director of the Board until he resigned on 5 December 2018.
Keith Lewis was an Executive Director of the Board and Chief Operating Officer until he resigned on 5 November 2019.
Gattaca plc
Annual Report and Accounts 2019
47
Governance
Corporate Governance Statement
QCA Code compliance
The Board has adopted the Quoted Companies Alliance (QCA) Corporate Governance Code. Set out below is
our Statement of Compliance with the key principles of the QCA Code.
Governance Principle
Compliant
Explanation
Further reading
Establish a strategy and business
model which promotes long-term
value for shareholders
Seek to understand and
meet shareholder needs and
expectations
Take into account wider
stakeholder and social
responsibilities and their
implications for long-term
success
Embed effective risk
management, considering both
opportunities and threats,
throughout the organisation
Maintain the Board as a well-
functioning, balanced team led
by the Chair
Ensure that between them the
Directors have the necessary
up-to-date experience, skills and
capabilities
Evaluate Board performance based
on clear and relevant objectives,
seeking continuous improvement
By providing recruitment solutions and
support to both clients and candidates with
engineering and technology skills, we help
to unleash potential in people, projects and
companies.
See pages
12 to 21
The CEO and CFO communicate regularly
with shareholders, investors and analysts,
including at our half-yearly results
roadshows. The full Board is available at
the Annual General Meeting ('AGM') to
communicate with shareholders.
Aside from our shareholders, our clients,
candidates and contractors, suppliers,
and employees are our most important
stakeholders. We engage with these
communities via regular communications
in our day-to-day activities, and via formal
feedback requests.
www.
gattacaplc.
com/investors/
corporate-
governance
See pages
19 and 32 to 35
Ultimate responsibility for risk management
rests with the Board but day-to-day
management of risk is delivered through the
way we do business and our culture.
See pages
36 to 41
The Board has three established Committees
for Audit, Nominations and Remuneration.
The composition and experience of the
Board is reviewed regularly, primarily by the
Nominations Committee.
The Board is satisfied that its current
composition includes an appropriate
balance of skills, experience and capabilities,
including experience of the recruitment,
technology and international markets.
The Board regularly considers the
effectiveness and relevance of its
contributions, any learning and development
needs and the level of scrutiny of the Senior
Management Team. An independent Board
Effectiveness Review was commissioned
during 2019, the results of which will be
reviewed and implemented, as appropriate,
during the current financial year.
See pages
62 to 64
(Nominations
Committee
Report)
See pages
45 and 47
See page 52
48 Gattaca plc
Annual Report and Accounts 2019
Governance Principle
Compliant
Explanation
Further reading
Promote a corporate culture that
is based on ethical values and
behaviours
Maintain governance structures
and processes that are fit for
purpose and support good
decision-making by the Board
Communicate how the Company
is governed and is performing
by maintaining a dialogue with
shareholders and other relevant
stakeholders
Our Code of Professional Conduct sets out
our corporate values and behaviours, which
are reinforced via training and performance
management.
See pages
32 to 35
The Board is responsible for the Group’s
overall strategic direction and management,
and for the establishment and maintenance
of a framework of delegated authorities and
controls to ensure the efficient and effective
management of the Group’s operations. The
Board maintains a list of matters reserved for
the Board.
See pages 36
and 37 and www.
gattacaplc.
com/investors/
corporate-
governance/role-
of-the-board
The Investors section of our website
includes our results, presentations and
communications to shareholders. We release
the results of general meetings through a
regulatory news service and also on the
Regulatory News section of our website.
https://www.
gattacaplc.com/
investors
Board composition
The Board, via the Nominations Committee, regularly
reviews the composition of the Board. At the date
of this report, the Board has four Non-Executive
Directors, including the Chairman. The Board
considers the independence of the Board annually to
determine independence from management on the
basis that the Directors have no business or other
relationship that could interfere materially with the
exercise of their judgement. Due to George Materna's
long-standing relationship with the Group and his
material shareholding, the Board does not consider
George Materna to be independent. The composition
of the Board as at the date of this report therefore
comprises three Independent Directors and three
Non-Independent Directors (including Executive
Directors).
The Board is cognisant of the current mix of
Independent and Non-Independent Directors and will
continue to monitor and consider this in the current
financial year.
Under the Company’s Articles of Association, all
Directors must retire at the first AGM following their
appointment and may offer themselves for election
or re-election by shareholders. In accordance with
best practice, all Directors will retire at the AGM and,
being eligible, will offer themselves for election or
re-election.
Gattaca plc
Annual Report and Accounts 2019
49
Governance
Corporate Governance Statement continued
Governance structure
The Board has three established Committees for
Audit, Nominations and Remuneration which each
have Terms of Reference that are reviewed at least
bi-annually by the Board, and revised as deemed
necessary and appropriate. Copies of the Terms of
Reference are available on the Group’s website or on
request from the Company Secretary.
The Board may, on occasion, delegate authority to
a sub-committee consisting of any two Directors
to facilitate final sign-off for an agreed course of
action within strict parameters. The responsibilities
and operation of the Audit, Nominations and
Remuneration Committees are summarised below:
Audit
Committee
Nominations
Committee
Remuneration
Committee
The Committee monitors the
integrity of the interim and
annual Financial Statements
and formal announcements
relating to the Group’s
financial performance. It
reviews significant financial
reporting issues, accounting
policies and disclosures,
reviews the effectiveness
of internal controls, as
well as overseeing the
engagement and scope
of the annual audit.
The Audit Committee
report on pages 56 to 61
contains further information
on the Committee’s role
and activities.
The Committee reviews
the structure, size and
composition of the Board
and its Committees, and
makes recommendations to
the Board with regard to any
changes required to ensure
an appropriate balance of
skills, expertise, knowledge
and independence.
The Nominations Committee
report on pages 62 to 64
contains further information
on the Committee’s role
and activities.
The Committee
reviews and makes
recommendations as to the
Directors’ remuneration,
including benefits, terms
of appointment and
share schemes.
The Remuneration
Committee report on
pages 65 to 75 contains
further information on
the Committee’s role
and activities.
50 Gattaca plc
Annual Report and Accounts 2019
Board Responsibilities
Patrick Shanley (Chair)
Richard Bradford
David Lawther
Mark Mamone1
George Materna
Kevin Freeguard2
Salar Farzad
Keith Lewis3
1 Resigned from the Board on 5 December 2018.
2 Appointed to the Board on 1 October 2018.
3 Resigned on 5 November 2019.
Maximum meetings
Meetings attended
13
13
13
5
13
10
13
13
13
12
13
5
13
9
13
13
The Board recognises its employment,
environmental and health and safety responsibilities
and devotes appropriate resources towards
monitoring and improving compliance with
existing standards. The Executive Directors have
responsibility for these areas at Board level, ensuring
that the Group’s policies are upheld and providing
the necessary resources.
• Consideration of proposals from the Audit
Committee on recommendations for appointment
or removal of independent auditors and their
remuneration.
• Approval of the Group’s commercial strategy and
annual operating and capital expenditure budget.
• Changes relating to the Group’s capital structure
or its status as a plc.
The Board approves a business plan and annual
budgets for individual business units and the Group.
All Directors receive regular and timely information
on the Group’s operational and financial performance,
including detailed Executive and Operational
Board reports which are provided in advance of all
Board meetings and which report on performance
(actual and forecasted) against the agreed budget
and any significant variances. We report to our
shareholders on a half-yearly basis. Members of the
Senior Management Team regularly present at Board
meetings to provide detailed information on their
business units and central functions and to allow
an opportunity for Directors to review and assess
matters requiring decision or insight.
• Appointments to the plc Board and the Boards of
subsidiaries including the appointment or removal
of the Company Secretary.
• Consideration of proposals from the Remuneration
Committee on the terms and conditions of
Board members, Executive Directors and senior
management.
• Changes to the Group’s management and control
structure, including membership of Executive
Committees.
• Consideration of material contracts of the Group in
the ordinary course of business that would affect
current banking arrangements.
• Formulation of policy regarding charitable and
The following matters are reserved for the Board:
political donations.
• Approval of significant prosecution, defence or
• Approval of interim, preliminary and final financial
settlement of litigation.
statements, including approval of the interim
dividend and recommendation of the final
dividend.
• Approval of investor presentations, all circulars
to shareholders and press releases concerning
matters decided by the Board.
• Approval of any significant change in accounting
policies or practices.
• Oversight of internal control arrangements.
• Ensuring the Group has an adequate business
continuity policy.
• Oversight of the Group’s health and safety policy.
Gattaca plc
Annual Report and Accounts 2019
51
Governance Corporate Governance Statement continued
Conflicts of interest
Each Director is required, in accordance with
Companies Act 2006, to declare on appointment any
interests that may give rise to a conflict of interest
with the Company and its subsidiaries subsequently
as they arise. Where such a conflict or potential
conflict arises, the Board is empowered under the
Company's Articles of Association to consider and
authorise such conflicts, as appropriate.
The Group receives advice from a number of external
advisers. Specific advisers to the Board committees
are set out in the Committee reports at pages 56
to 75. During the year, the Board received specific
advice on the structuring of its finance arrangements
and the Group’s continued cooperation with the
US Department of Justice, and the Remuneration
Committee received advice on the Directors’
Remuneration Policy.
The Chairman and Non-Executive Directors do not
participate in any meeting at which discussions in
respect of matters relating to their own position
takes place.
There are effective procedures in place to monitor
and deal with conflict of interest. The Board is
aware of the other commitments and interests of
its Directors, and Directors are required to report
any changes to these commitments and interests
to the Board for discussion and, where appropriate,
agreement. There were no notified conflicts of
interest during the 2019 financial year.
Information and support
Directors are regularly briefed on regulations which
affect the business through presentations arranged
by our advisers and our leadership team. During the
year we specifically covered anti-facilitation of tax
evasion, the non-financial reporting requirements
and AIM rules. Directors are also encouraged to
remain up to date through independent seminars and
continuous professional development courses.
The Board also receives regular updates on matters
of corporate culture via the Executive Report,
compliance updates to the Audit Committee
(including details of matters raised via the Speak
Up reporting service, as appropriate) and regular
presentations from the Group HR Director and
General Counsel. We rotate Board meetings
throughout our two main UK offices, providing
the opportunity for Non-Executive Directors to
experience the working culture and to gain greater
understanding of all areas of the Group’s business.
The Company Secretary advises the Board, through
the Chairman, on all governance matters. All
Directors have access to the services of the Company
Secretary and may take independent professional
advice at the Group’s expense in conducting their
duties. In accordance with the Articles of Association
and the Group Delegation of Authorities Policy, the
appointment and removal of the Company Secretary
is a matter for the whole Board.
Board evaluation
During the year, the Board commissioned an
independent Board Evaluation, which included face-
to-face interviews with all Directors and members of
the operational Management Board. The Evaluation
was designed to measure the effectiveness of Board
performance. The outcomes and suggested matters
for further consideration will be addressed during
the current financial year.
The Chairman conducts an annual performance
appraisal of the CEO, and undertakes Board
effectiveness discussions with all Non-Executive
Directors on a regular basis, considering the
effectiveness and relevance of their contributions,
any learning and development needs and the level
of scrutiny of the Senior Management Team.
Stakeholder engagement
The Board regards effective communication with
shareholders as crucial and operates an ongoing
investor relations programme, which includes
presentations and the opportunity for shareholders
to meet with the Chairman, Chief Executive Officer
and Chief Financial Officer following announcement
of our interim and preliminary results. The full Board
receives reports on feedback from investors.
We release the results of general meetings through a
regulatory news service and also on the Regulatory
News section of our website. The Investor section of
our website includes our historical Annual Reports, as
well as other governance-related material, including
notices of our Annual General Meetings for the last
five years.
52
Gattaca plc
Annual Report and Accounts 2019
Directors’ Report
Directors' Report
Directors
The Directors have the benefit of an indemnity
covered by insurance which is a qualifying third party
indemnity provision as defined by Section 234 of the
Companies Act 2006. The Company has granted this
indemnity in favour of the Directors of the Company
as is permitted by Section 232-235 of the Companies
Act 2006. The indemnity was in force during the
full financial year up to the date of approval of the
financial statements. Neither the insurance nor the
indemnities provide cover where the relevant Director
or officer has acted fraudulently or dishonestly.
The Board may exercise all the powers of the
Company, subject to the provisions of relevant
legislation, the Company’s Articles of Association
and any directions given by a special resolution of
the shareholders. Specific powers are detailed in
the Company’s Articles of Association, including the
power to issue and buy back shares, along with the
rules for the appointment and removal of Directors.
Substantial shareholders
In addition to the Directors’ interests shown in the
Remuneration Report, and in accordance with Part 22
of the Companies Act 2006, the Company has been
notified that the following shareholders’ interests
exceeded 3% of the Company’s ordinary share capital
in issue at 31 July 2019:
Shareholder
George Materna
MMGG Acquisition Ltd
Chelverton Asset Management
HRNetGroup
Paul Raine
Winterflood Securities
%
24.40
14.99
6.10
5.87
5.52
3.54
Subsequent to the year end, the Company has
not been notified of any changes to significant
shareholdings. As at 31 July 2019, approximately 28%
of the Company’s share capital was held by Directors,
senior management and other employees.
The Group made no donations for political
purposes either in the UK or overseas during
the year (2018: £nil).
Policy on the payment of creditors
The Group’s policy is to agree terms and conditions
for its business transactions with suppliers and to
endeavour to abide by these terms and conditions,
subject to the supplier meeting its obligations. No
single supplier arrangement is considered essential
to the business of the Group.
Statement of Directors' responsibilities
in respect of the Annual Report and the
Financial Statements
The Directors are responsible for preparing the
Annual Report and the Financial Statements in
accordance with applicable law and regulation.
Company law requires the Directors to prepare
Financial Statements for each financial year. Under
that law the Directors have prepared the Group
Financial Statements in accordance with International
Financial Reporting Standards ('IFRSs') as adopted
by the European Union, and Company Financial
Statements in accordance with IFRSs as adopted
by the European Union.
Under company law the Directors must not approve
the Financial Statements unless they are satisfied that
they give a true and fair view of the state of affairs of
the Group and Company and of the profit or loss of
the Group and Company for that period. In preparing
the Financial Statements, the Directors are required to:
• select suitable accounting policies and then apply
them consistently;
• state whether applicable IFRSs as adopted by the
European Union have been followed for the Group
Financial Statements and IFRSs as adopted by
the European Union have been followed for the
Company Financial Statements, subject to any
material departures disclosed and explained in
the financial statements;
• make judgements and accounting estimates that
are reasonable and prudent; and
• prepare the Financial Statements on the going
concern basis unless it is inappropriate to presume
that the Group and Company will continue
in business.
Annual Report and Accounts 2019 53
Gattaca plc
Governance Directors’ Report continued
The Directors are also responsible for safeguarding
the assets of the Group and Company and hence
for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
• Matchtech Engineering Limited
• Matchtech Group (Holdings) Limited
• Matchtech Group Management Company Limited
• Matchtech Group (UK) Limited
• Matchtech Limited
• MSB Consulting Services Limited
• Networkers International Limited
• Networkers International Trustees Limited
• Provanis Limited
• Networkers International (UK) Limited
• Networkers Recruitment Services Limited
• Resourcing Solutions Limited
• The Comms Group Limited
This guarantee is dated 5 November 2019 and all the
above entities have 31 July year ends.
Auditor
In December 2018, the Board proposed, and
shareholders approved at the AGM, the appointment
of PwC LLP as the Company’s registered independent
public accounting firm for the financial year ended
31 July 2019, with John Minards as the senior
statutory auditor. The Board has decided to propose
the reappointment of PwC LLP and a resolution
concerning its reappointment will be proposed at the
forthcoming AGM.
Company registered office
1450 Parkway, Solent Business Park, Whiteley,
Fareham, Hampshire, PO15 7AF.
Company registered number
04426322
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Group and Company’s transactions and
disclose with reasonable accuracy at any time the
financial position of the Group and Company and
enable them to ensure that the Financial Statements
comply with the Companies Act 2006.
The Directors are responsible for the maintenance
and integrity of the Company’s website. Legislation in
the UK governing the preparation and dissemination
of financial statements may differ from legislation in
other jurisdictions.
Disclosure of audit information
Each Director confirms that, as at the date this report
was approved, and so far as each Director is aware,
there is no relevant audit information of which the
Company’s auditor is unaware and that he has taken
all the steps that he ought to have taken as a Director
in order to make himself aware of any relevant audit
information and to establish that the Company’s
auditor is aware of that information.
Audit exemption
For the year ended 31 July 2019, Gattaca plc has
provided a legal guarantee under s479A of the
Companies Act 2006 to the following companies:
• Alderwood Education Ltd
• Application Services Limited
• Barclay Meade Ltd
• Cappo Group Limited
• Cappo International Limited
• Comms Software Limited
• CommsResources Limited
• Connectus Technology Limited
• Elite Computer Staff Ltd.
• Gattaca Recruitment Limited
• Gattaca Solutions Limited
54 Gattaca plc
Annual Report and Accounts 2019
Further information on the following areas (which are incorporated into this Report by reference) can be
found as follows:
A full description of the Group’s principal activities, business performance,
likely future developments, principal risks and uncertainties
See pages 1–41
Anti-Bribery and Corruption Statement
Company’s Articles of Association
Corporate culture
Corporate responsibility (including environmental responsibilities
and charitable donations)
List of Directors serving at the date of this Report
List of principal subsidiary undertakings
Main Committees of the Board and their activities
Stakeholder engagement (including employee engagement and
our commitment to equal opportunities)
Statement of Going Concern
www.gattacaplc.com/investors/
corporate-governance/statements
www.gattacaplc.com/investors/
shareholder-information/AIM-Rule-26
See pages 32–35
See pages 32–35
See page 45
See pages 115–117
See pages 56–75
See pages 32–35
See page 37
Use of financial instruments and financial risk management
See pages 30–31, 38, 128–129
Viability Statement
See page 37
Cautionary statement
Under the Companies Act 2006, a company’s
Directors’ Report is required, among other matters,
to contain a fair review by the Directors of
the Group’s business through a balanced and
comprehensive analysis of the development and
performance of the business of the Group and the
position of the Group at the year end, consistent
with the size and complexity of the business.
The Directors’ Report contains indications of likely
future developments and other forward-looking
statements that are subject to risk factors associated
with, among other things, the economic and business
circumstances occurring from time to time in the
countries, sectors and business segments in which
the Group operates. These factors include, but are
not limited to, those discussed under principal risks
and uncertainties.
The Directors’ Report set out above, including the
Chairman’s Statement, the Chief Executive Officer’s
Review and the Chief Financial Officer’s Report
incorporated into it by reference, has been prepared
only for the shareholders of the Company as a whole,
and its sole purpose and use is to assist shareholders
to exercise their governance rights. In particular,
the Directors’ Report has not been audited or
otherwise independently verified. The Company and
its Directors and employees are not responsible for
any other purpose or use or to any other person in
relation to the Directors’ Report.
Approved by the Board and signed by order of the
Board by:
Katie Selves
Group Company Secretary and General Counsel
5 November 2019
Gattaca plc
Annual Report and Accounts 2019
55
Governance Audit Committee Report
Providing oversight
and guidance
“ The Audit Committee provides
oversight and guidance to contribute
to strengthening Gattaca's financial
and control environment. Regulatory
compliance continues to be embedded
in the culture of the Company.”
David Lawther
Independent Non-Executive Director
Committee activities in 2019
• Reviewing accounting policies and financial reports
including key judgemental matters of accounting and
disclosure
• Reviewing the Group's tax strategy
• Monitoring the Group's internal financial control
environment including appointing new internal audit
advisers in the year
• Meeting with and assessing the effectiveness of
the Company's external auditors
Committee experience
Management – 30%
Industry – 30%
Finance – 20%
Recruitment – 20%
Committee members
David Lawther (Chair)
George Materna
Richard Bradford
5
MEETINGS
94%
ATTENDANCE
56 Gattaca plc
Annual Report and Accounts 2019
I am pleased to present the Audit Committee’s (‘the
Committee’) Annual Report on its activities for the
period up to the review of 2019 Financial Statements.
Meetings and attendance
The Committee met five times during the year.
NED
Maximum meetings Meetings attended
David Lawther (Chair)
Richard Bradford
Mark Mamone1
George Materna
5
5
1
5
1 Resigned from the Board on 5 December 2018.
5
5
1
4
The Executive Directors are routinely invited to
Committee meetings, with the Chairman of the Board
attending the meetings at which the Interim and
Annual results are reviewed.
During the period from the last report to the date
of this report, the Committee met privately with the
independent auditor. The Committee Chairman also
met privately with the senior statutory auditor, John
Minards, outside of the Committee meetings.
Operation of the Committee
The Committee reviews and updates the Terms of
Reference regularly, to conform to best practice,
which are subject to approval by the Board. The
Terms of Reference are available on the Group’s
website (www.gattacaplc.com), as well as in hard
copy format from the Company Secretary.
Each year, the Committee works to a planned
programme of activities, which are focused on key
events in the annual financial reporting cycle and
other matters that are considered in accordance with
its Terms of Reference.
It provides oversight and guidance to contribute to the
ongoing good governance of the business, particularly
by providing assurance that shareholders’ interests
are being properly protected by appropriate financial
management, reporting and internal controls.
This report is intended to explain how the Committee
has met its responsibilities throughout the year and
what it has done to address continued regulatory
change. From a “business as usual” perspective, there
is nothing to bring to your specific attention.
As Chairman of the Committee, I will be available at
the AGM to respond to any questions shareholders
may raise on any of the Committee’s activities.
Aims and objectives
The Committee monitors the integrity of the
interim and annual Financial Statements and formal
announcements relating to the Group’s financial
performance, including advising the Board that the
Annual Report taken as a whole is fair, balanced and
understandable.
It reviews significant financial reporting issues and
accounting policies and disclosures in financial
reports, reviews the effectiveness of the Group’s
internal control procedures and risk management
systems and considers how the Group’s internal
audit requirements shall be satisfied, making
recommendations to the Board.
It reviews the independent auditor’s audit strategy
and implementation plan and its findings in relation to
the Annual Report and Interim Financial Statements.
Membership of the Committee
During the year to 31 July 2019, the Committee
comprised David Lawther (Chairman), George
Materna and Richard Bradford, who joined the
Committee in August 2018. Mark Mamone was
previously a member, before he resigned from
the Board on 5 December 2018.
On 1 August 2018, David Lawther was appointed
Chairman of the Audit Committee. David Lawther
qualified as a chartered accountant in 1983. The
Board considers him to have recent and relevant
financial experience.
The Board considers that the Committee as a whole
has competence relevant to the sector in which the
Group operates.
Gattaca plc
Annual Report and Accounts 2019
57
Governance Audit Committee Report continued
The main activities of the Committee during the period since the last Report were as follows:
• Financial Statements: the Committee reviewed
the Interim and Annual Reports. Management
and the auditor gave presentations about the key
technical and judgemental matters relevant to the
Financial Statements.
• Going concern, including the Viability Statement:
the Group continues to prepare its Financial
Statements on a going concern basis, as set out
in Note 1 to the Financial Statements on page 92.
Management produces working capital forecasts
on a regular basis, together with yearly covenant
forecasts. The Board reviews those forecasts,
particularly ahead of the publication of Interim
and Annual results. Having reviewed the forecasts
as at the date of this Report, the Committee
concluded that it was appropriate for the Group
to continue to prepare its Financial Statements on
a going concern basis and to publish the Viability
Statement on page 37.
• Taxation: the Group operates under multiple
and varied tax regimes. The completeness and
valuation of provisions to cover the range of
potential final determinations by the tax authorities
of the Group’s tax positions are the subject of
judgement and estimation uncertainty. Further
information is set out in Notes 10 and 16 to the
Financial Statements. The provisions held by
the Group as at 31 July 2019 were reviewed
by management. The Committee agreed with
management’s assessment of the Group’s tax
provisions. The Committee reviewed the Group’s
Tax Strategy which was approved by the Board in
June 2019.
• Fair, balanced and understandable: the content
and disclosures made in the Annual Report are
subject to a verification exercise by management
to ensure that no statement is misleading in
the form and context in which it is included, no
material facts are omitted which may make any
statement of fact or opinion misleading, and
implications which might be reasonably drawn
from the statement are true. The Committee
was satisfied that it was appropriate for the
Board to approve the Financial Statements and
that the Annual Report taken as a whole is fair,
balanced and understandable such that it allows
shareholders to assess the Group’s performance
against the Group’s strategy and business model.
• Internal financial control systems: the Committee
reviewed the recommendations made by the
independent auditor and management’s responses
and actions. The Committee was satisfied that
it was appropriate for the Board to make the
statements regarding internal controls included in
the Corporate Governance Statement.
• Internal audit: as part of the Committee’s policy,
certain specialist internal audit work is undertaken
by external organisations. During the year, the
Group appointed KPMG as internal auditors, to
undertake a 12-month programme of testing
focusing on the financial and non-financial
processes and controls at the head office function
in the UK. In addition, the Group undertook a
number of internal audit and compliance reviews,
both of financial and operational activities,
including as part of its International Organization
for Standardization (‘ISO’) accreditations (see
page 45). The Group will continue to use specialist
external organisations as necessary, including for
the Group’s international operations.
The Chairman of the Committee reported to the
Board on the Committee’s activities after each
meeting, identifying relevant matters requiring
communication to the Board and recommendations
on the steps to be taken.
58 Gattaca plc
Annual Report and Accounts 2019
Significant issues
The Committee reviewed the key judgements applied to a number of significant issues in the preparation
of the Financial Statements. The review included consideration of the following:
Issue
How the Committee addresses
Revenue recognition
and recoverability of
accounts receivables
The Group has well-developed accounting policies for revenue recognition as
shown in Note 1 to the Financial Statements. The Committee receives reports from
management and from the independent auditors to ensure that the policies are
complied with across the Group.
The Board receives regular reports on the collectability of aged accounts
receivables and accrued income.
On the basis of these reports, the Committee concluded that it was content with
the judgements that had been made.
Goodwill and intangibles:
assessment for
impairment
As set out in Notes 1 (parts ix and x) and 13 to the Financial Statements, following
the acquisition of Networkers in 2015, the Group recognised significant goodwill
and finite life intangible assets.
The acquisition of Resourcing Solutions Limited in February 2017 further increased
the Group’s goodwill and finite life intangible assets; information is set out in Note
13 to the Financial Statements.
Goodwill and intangible asset impairment calculations (including assumptions
about future performance of the Group) and sensitivities are undertaken at least
annually by management and reviewed by the Board and the Committee.
Based on the calculations as at 31 July 2019 and reflecting on the decisions arising
from management’s detailed review of operations, the Committee agreed with
management’s recommendation that an impairment charge of £5.9m should be
made in connection with the goodwill and finite life intangible assets in Networkers.
As previously announced and further discussed on page 29, the Group is
cooperating with the United States Department of Justice regarding certain factual
enquiries. The Group is not currently in a position to know what the outcome of
these enquiries may be and whether this line of enquiry will lead to any liabilities for
the Company or its subsidiaries. The Committee has received regular reports from
management in respect of the ongoing enquiries and, on that basis, has agreed with
the conclusion management has reached in respect of contingent liabilities.
Contingent liabilities
Accounting for and
disclosure of non-
underlying items
The Committee considered the accounting for and disclosure of non-underlying
items (see Note 4 to the Financial Statements). The Committee reviewed with
management and discussed the accounting and disclosure with the Company's
auditors. The Committee concluded it was content with the accounting for and
disclosure of non-underlying items.
Shareholders’ attention is drawn to the section titled “Responsibilities for the financial statements and the
audit” in the Report from the independent auditor on pages 78 to 85, about specific areas as reported by the
independent auditor in order to provide its opinion on the Financial Statements as a whole.
Gattaca plc
Annual Report and Accounts 2019
59
Governance Audit Committee Report continued
Independent auditor: reappointment
The appointment of the independent external
auditor is approved by shareholders annually.
The independent auditor’s audit of the Financial
Statements is conducted in accordance with
International Standards on Auditing (UK) (‘ISAs’),
issued by the Auditing Practices Board.
There are no contractual obligations that act to
restrict the Committee’s choice of external auditor.
In December 2018, the Board proposed and
shareholders approved at the AGM, the appointment
of PwC LLP as the Company’s registered independent
public accounting firm for the financial year ended
31 July 2019.
This year, having considered the effectiveness and
performance of the independent auditor (including
reviewing the Financial Reporting Council’s Audit
Quality Inspection report on PwC LLP issued in July
2019), the Committee has recommended to the
Board the reappointment of PwC LLP as independent
auditor of the Company for the next financial year.
The Committee monitors the cost-effectiveness of
audit and any non-audit work performed by the
independent auditor and also considers the potential
impact, if any, of this work on independence.
It recognises that certain work of a non-audit nature
may be best undertaken by the independent
auditor as a result of its unique position and
knowledge of key areas of the Company.
Approval is required prior to the independent
auditor commencing any material non-audit work
in accordance with a Group policy approved by
the Committee. Certain work, such as providing
bookkeeping services and taxation planning advice,
is prohibited.
Further, the Committee seeks positive evidence of the
independence of the independent auditor through its
challenge to management.
The Committee regularly reviews all fees for non-
audit work paid to the independent auditor. Details
of these fees can be found in Note 4 to the Financial
Statements. Non-audit fees were £nil in both 2019
and 2018.
Independent auditor: services,
independence and fees
The independent auditor provides the following
services:
• A report to the Committee giving an overview of
the results, significant contracts and judgements
and observations on the control environment.
• An opinion on whether the Group and Company
Financial Statements are true and fair.
• An internal control report, following its audit,
highlighting to management any areas of
weakness or concern.
60 Gattaca plc
Annual Report and Accounts 2019
The Committee concluded that the level of non-audit
fees, which represent 0% (2018: 0%) of the audit fees
for the Group, did not have a negative impact on
PwC’s independence.
The Committee will continue to keep the area of
non-audit work under close review, particularly in
the context of developing best practice on auditors’
independence.
The Committee regulates the appointment of former
employees of the independent auditor to positions
in the Group. The independent external auditor
also operates procedures designed to safeguard its
objectivity and independence. These include the
periodic rotation of the senior statutory auditor,
use of independent concurring partners, use of a
technical review panel (where appropriate) and
annual independence confirmations by all staff.
The independent external auditor reports to the
Committee on matters including independence
and non-audit work on an annual basis.
Approval
This report was approved by the Committee, on
behalf of the Board, on the date shown below and
signed on its behalf by:
David Lawther
Chairman of the Audit Committee
5 November 2019
Gattaca plc
Annual Report and Accounts 2019
61
Governance Nominations Committee Report
Ensuring the structure and
experience of the Board
“ The Committee’s focus for the year has
again been to ensure the structure and
experience of the Board are suited to
meet the opportunities and challenges
facing the Group going forward.”
George Materna
Chairman of the Nominations Committee
Committee activities in 2019
• Appointment of Kevin Freeguard as Chief Executive Officer,
commencing on 1 October 2018
• Review of the structure, size and composition of the Board
and its Committees
• Consideration of succession plans for the Board and
operational Management Board.
Committee experience
Management – 27%
Industry – 27%
Finance – 19%
Recruitment – 27%
Committee members
George Materna (Chair)
Patrick Shanley
Richard Bradford
2
MEETINGS
100%
ATTENDANCE
62 Gattaca plc
Annual Report and Accounts 2019
I am pleased to present to the shareholders
the report of the Nominations Committee ('the
Committee') for the year.
The Committee’s focus for the year has again been
to ensure the structure and experience of the Board
are suited to meet the opportunities and challenges
facing the Group going forward.
An announcement was made on 19 September 2018
that Kevin Freeguard would become the new CEO
commencing on 1 October 2018.
As announced on 8 November 2018, Mark Mamone
stepped down from his non-executive role on
5 December 2018 to concentrate on his new executive
position. On behalf of the Board, I would like to thank
Mark for his intelligent contribution to the business
and wish him every success in the future.
After 26 years of service, Keith Lewis has decided to
stand down from the Board of Directors of Gattaca
plc and will leave the Group with immediate effect.
As part of the Improvement Plan, the Group does not
intend to replace the role of Chief Operating Officer.
The Committee continues to review succession
planning and Board composition.
Aims and objectives
The aims and objectives of the Nominations
Committee are set out in the Nominations
Committee’s full Terms of Reference, which can be
found in the Corporate Governance section on the
Company’s website, www.gattacaplc.com.
In summary, the role of the Committee is to:
The Nominations Committee, assisted by an external
executive search agency, primarily manages
appointments to the Board but all Board members
have the opportunity to meet shortlisted candidates,
thus ensuring a wide range of feedback in the
appointment process.
All Executive Directors are engaged on a full-time
basis. Non-Executive Directors have letters of
appointment stating their annual fee, their re-election
at forthcoming AGMs, the minimum required time
commitment and that their appointment is subject to
satisfactory performance. Their appointment may be
terminated with a maximum of three months’ written
notice at any time. Copies of letters of appointment
are available at the Group’s registered office during
normal business hours, and will also be available for
inspection prior to and during the AGM.
The remuneration of the Chairman and Non-
Executive Directors is determined by the Board
following proposals from the Nominations
Committee, within the limits set out in the Articles of
Association, including reviewing the level of fees paid
by comparator companies.
Membership of the Committee
The Committee comprised its Chair, George Materna,
and Patrick Shanley and Richard Bradford, both
Independent Non-Executive Directors, who have
been members of the Committee since 2006, 2017
and 2013 respectively.
Meetings and attendance
The Committee met twice during the year.
• review the structure, size and composition of the
Board, and make recommendations to the Board
with regard to any changes required to ensure an
appropriate balance of skills, expertise, knowledge
and independence;
NED
George Materna (Chair)
Patrick Shanley
Richard Bradford
Max
meetings
Meetings
attended
2
2
2
2
2
2
• review the succession plan for Executive Directors
and the operational Management Board, as
appropriate;
• identify and nominate, for Board approval,
candidates to fill Board and operational
Management Board vacancies as and when
they arise;
• review annually the time commitment required of
Non-Executive Directors; and
• make recommendations to the Board with regard
to membership of the Audit and Remuneration
Committees in consultation with the Chair of
each Committee.
Gattaca plc
Annual Report and Accounts 2019
63
Governance Nominations Committee Report continued
Nominations Committee activities
Information and training
The key activities during the year have been in
reviewing the structure, size and composition of the
Board and its Committees. The Board is satisfied
that its current composition includes an appropriate
balance of skills, experience and capabilities,
including experience of the Recruitment, Technology
and International markets.
All Directors have access to the advice and services
of Katie Selves, the Group General Counsel and
Company Secretary, who is responsible for ensuring
that Board procedures and applicable rules and
regulations are observed. There is an agreed
procedure for Directors to obtain independent
professional advice, paid for by the Group.
George Materna
Chairman of the Nominations Committee
5 November 2019
Priorities for the coming year
In the coming year, the Committee will:
• continue to monitor the composition and
effectiveness of the Board and its Committees,
specifically in relation to the balance of
Independent and Non-Independent Directors;
• continue to review succession plans for the Board
and operational Management Board; and
• keep abreast of developments in corporate
governance to ensure that we act in the spirit of
good governance practice.
Diversity policy
The Board recognises the importance of a diverse
and inclusive culture as an essential element in
maintaining Board effectiveness, our ability to
respond to our diverse customer and stakeholder
needs, and the long-term success of the Group.
The Board appreciates the range of perspectives,
insights and challenge needed to support good
decision making that a diverse culture brings. All
appointments to the Board and its Committees will
be made on merit, taking into account suitability for
the role, composition, independence and balance of
the Board, diversity of skills, background, knowledge,
international and industry experience, tenure, age,
gender, ethnicity, disability and sexual orientation.
64 Gattaca plc
Annual Report and Accounts 2019
Remuneration Committee Report
Remuneration to support
the Group's strategic goals
“ Our approach to setting the
remuneration targets in 2019 set out to
focus the senior team on delivery of the
Improvement Plan.”
Richard Bradford
Chairman of the Remuneration Committee
Committee activities in 2019
• Undertook a review of the Remuneration Policy, to
ensure that the Policy remains relevant and aligns to
driving performance against our short- and longer-term
strategy
• Ongoing cycle of activities, including review of salary
levels, setting and assessment of bonus objectives, Long-
Term Incentive Plan (‘LTIP’) grant and measurement
setting, along with LTIP vesting determination
• Monitoring corporate governance changes, market
practice and investor expectations.
Committee experience
Committee members
Richard Bradford (Chair)
Patrick Shanley
David Lawther
3
MEETINGS
80%
ATTENDANCE
Management – 27%
Industry – 27%
Finance – 27%
Recruitment – 19%
Gattaca plc
Annual Report and Accounts 2019
65
Governance Remuneration Committee Report continued
On behalf of the Board, I am pleased to present the
Remuneration Committee’s (‘the Committee’) report
for the year ended 31 July 2019.
Following the announcement of the Group’s
Improvement Plan during the year, a detailed
review of the Directors' Remuneration Policy was
undertaken. The aim of this evaluation was to
ensure that the Policy remains fit for purpose, in
line with best practice and regulatory requirements
and to incentivise the Executives to deliver a high
performance against the Improvement Plan.
The Committee’s review took into account that
the stated aim of the Policy is to:
• attract, motivate and retain Executives in order
to deliver the Group’s strategic goals and business
outputs;
• encourage and support a high-performance
sales and service culture;
• adhere to the principles of good corporate
governance and appropriate risk management; and
• align Executives with the interests of shareholders
and other key stakeholders.
The Committee sought opinion from major
shareholders during the Policy review, and overall
the review concluded that the current Policy
remains fit for purpose and the changes in the new
Policy are minor in nature. The Committee believes
that our remuneration arrangements have been
constructed such that the Executive Directors will
be appropriately rewarded if value is delivered for
shareholders and pay-outs will be limited if Group
performance is below expectations. These changes
made are to ensure that our reward structures
complement the growth strategy and long-term
sustainability of the Group. The revised Remuneration
Policy can be found below.
This report, along with the revised Remuneration
Policy, will be put forward to shareholders on an
advisory basis at our AGM on 10 December 2019.
Business context and remuneration
outcomes for 2019
2019 was a positive year in terms of financial
performance. The 2019 full year results for the Group
show continuing underlying profit before tax ('PBT')
of £11.4m was 4.6% higher than the prior year, with
growth in continuing underlying basic EPS of 22.2%
to 27.5 pence. Progress was also made in a number
of strategic areas which we believe will position the
Group well for longer-term financial success. The
decisions the Committee made on remuneration were
taken in this context.
Annual Bonus awards reflected performance and
progress made towards leading our substantial
change programme. Financial performance made
up a minimum of 50% of the overall performance
measures. Awards were 78.9% of the maximum for
the CEO and CFO, the maximum for 2019 being 100%
of base salary.
The awards granted under the LTIP, made on 19
December 2018, reflected 50% of base salary. The
grant value was set lower than the Policy in view
of the dilution levels and maximum award limits,
as previously advised. In line with the Policy, these
will vest subject to dual performance criteria of
EPS Cumulative Average Growth Rate (‘CAGR’)
and Total Share Return (‘TSR’) over three years
through to December 2021. There were no LTIP
awards that vested during 2019 as the awards made
in 2016 lapsed as the performance conditions were
not achieved.
Implementation of Policy in 2019/2020
For the FY 2020, a salary adjustment of 3% will
apply for Salar Farzad (CFO). This is in line with the
level of increases applicable to employees generally.
The salary for Keith Lewis (COO) will remain the
same. Kevin Freeguard was appointed as CEO in
October 2018 with a salary intentionally set with a
commitment to be increased once solid performance
in the role has been demonstrated. Following a
successful review of the Company’s strategy and
initial implementation of our Improvement Plan,
the Committee is satisfied that such performance
has been demonstrated and it is appropriate to
increase the salary level by c.9%. The Committee is
now confident that the salary level is at a market-
competitive level and it is anticipated that any future
increases will be in line with those for the employee
population as a whole.
66 Gattaca plc
Annual Report and Accounts 2019
With the Improvement Plan under way, new bonus
targets have been set by the Committee to drive
results. The performance metrics are strongly geared
towards the growth strategy and necessary strategic
objectives to achieve this. The bonus opportunity
remains as it was for 2019, with maximum opportunity
at 100% of salary, and with not less than 60% of the
bonus measures on financial performance.
We are committed to hearing, and taking active
interest in, your views as shareholders. If you want
to discuss any further aspect of our remuneration
strategy I would welcome your views, at
executive.office@gattacaplc.com.
On behalf of the Committee and Board,
In line with the Policy, for FY20 we intend to
grant 120% of base salary in shares under the
LTIP. The vesting of these will be subject to an
EPS performance measure over a three-year
performance period.
Richard Bradford
Chairman of the Remuneration Committee
5 November 2019
Directors’ Remuneration Policy
The Group’s remuneration strategy is to provide a remuneration framework based on the following five principles:
1.
2.
3.
Attract, motivate and retain Executives in order to deliver the Group’s strategic goals and business outputs.
Encourage and support a high-performance sales and service culture.
Recognise and reward delivery of the Group’s business plan and key strategic goals.
4.
Adhere to the principles of good corporate governance and appropriate risk management.
5.
Align Executives with the interests of shareholders and other key stakeholders.
The Committee believes that the remuneration structure in place will support and motivate our Executive
Directors in furthering the Group’s long-term strategic objectives including the creation of sustainable
shareholder returns. Furthermore, the Committee is satisfied that the composition and structure of the
remuneration package is appropriate and does not incentivise undue risk-taking or reward underperformance.
The table below sets out the key elements of the Policy for Executive Directors.
Executive Directors’ Remuneration Policy table
Element, purpose
& link to strategy
Operation
Maximum opportunity
Base Salary
To provide
competitive fixed
remuneration
that will attract
and retain key
employees and
reflect their
experience and
position in the
Group.
Salaries are reviewed annually, and any changes
normally take effect from 1 August.
When determining the salary of the Executives the
Committee takes into consideration:
• the levels of base salary for similar positions with
comparable status, responsibility and skills, in
organisations of broadly similar size and complexity;
• the performance of the Group in the financial year
just ended;
• the performance of the individual Executive Director;
• the individual Executive Director’s experience and
responsibilities;
• any pay conditions (such as pay hold) made at
the start of the financial year just ended; and
• pay and conditions throughout the Group, including
the level of salary increases awarded to other
employees.
Annual percentage increases are
generally consistent with the range
awarded across the Group.
Percentage increases in salary
above this level may be made
in certain circumstances, such
as (but not limited to) a change
in responsibility or a significant
increase in the role’s scale or the
Group’s size and complexity.
Individuals who are recruited or
promoted to the Board may, on
occasion, have their salaries set
below the targeted policy level
until they become established in
their role. In such cases subsequent
increases in salary may be higher
than the average until the target
positioning is achieved.
Performance
measures and
assessment
A broad
assessment
of individual
and business
performance
is used as
part of the
salary review.
No recovery
provisions
apply.
Gattaca plc
Annual Report and Accounts 2019
67
Governance Remuneration Committee Report continued
Executive Directors’ Remuneration Policy table continued
Element, purpose
& link to strategy
Benefits
To provide
competitive benefits
and to attract and
retain high-calibre
employees.
Pension
To provide a
competitive company
contribution that
enables effective
retirement planning
Annual Bonus
Incentivises
achievement of
annual objectives
which support the
Group’s short-term
performance goals.
Operation
Maximum opportunity
Performance measures and assessment
No performance or recovery
provisions applicable.
Reviewed periodically
to ensure benefits
remain market
competitive.
Benefit values vary year on year
depending on premiums and the
maximum potential value is the cost
of the provision of these benefits.
Benefits currently
include:
• proactive health plan;
The Group conducts regular
brokering exercises to ensure
premiums remain competitive.
• car benefit; and
• insured benefit
schemes.
Pension is provided by
way of a contribution
to a personal pension
scheme or cash
allowance in lieu of
pension benefits.
The maximum contribution to a
personal pension scheme or cash in
lieu is equal to 10% of salary.
Gattaca provides a Group Personal
Pension scheme, which is open to the
Executives to participate.
No performance or recovery
provisions applicable.
Maximum potential under the Annual
Bonus is up to 120% of salary.
Any bonus payable above 100% of
salary will be deferred into shares
with a two-year vesting period.
Bonus awards are
granted annually
following the signing
of the Report and
Accounts, usually in
November.
Performance period is
one financial year with
pay-out determined
by the Committee
following the year end,
based on achievement
against a range of
performance measures.
Performance targets will be set by the
Committee annually based on a range
of financial and operational measures.
Financial targets will form the
majority of the bonus opportunity and
typically include PBT and NFI.
The Committee has the discretion
to adjust targets or performance
measures for any exceptional events
that may occur during the year.
The Committee has the discretion
to make downward or upward
movements to the amount of bonus
earned resulting from the application
of the performance measures, if
the RemCo believes that the bonus
outcomes are not a fair and accurate
reflection of business performance.
As well as determining the measures
and targets, the Committee will
also determine the weighting of the
various measures to ensure that they
support the business strategy and
objectives for the relevant year.
68 Gattaca plc
Annual Report and Accounts 2019
Element, purpose
& link to strategy
LTIP
The LTIP incentivises
Executives to achieve
superior returns to
shareholders over
a three-year period
and to retain key
individuals and align
their interests with
shareholders.
Operation
Maximum opportunity
Performance measures and assessment
Under the LTIP, the
Committee may award
annual grants of
performance share awards in
the form of nil-cost options
or conditional shares (LTIP
Awards) on an annual basis.
LTIP Awards under the plan
will vest after a three-year
performance period subject
to the achievement of the
performance measures.
There will be a two-year
holding period applicable
after the three-year
performance period.
Exclusions will apply to
shares sold for the purpose
of paying tax.
Malus and clawback
provisions apply at the
discretion of the Committee
in exceptional circumstances.
Maximum LTIP
Awards are equal to
150% of base salary.
Targets are reviewed annually ahead of the LTIP
Award to ensure that they are aligned to the
Group’s long-term strategy and vest based on
performance against challenging targets.
Targets will be set on the Group’s financial
performance with the majority based on
shareholder value-based outcomes.
Targets are typically structured as a challenging
sliding scale, with no more than 25% of the
maximum award vesting for achieving the
threshold performance level through to full
vesting for substantial outperformance of the
threshold.
The Committee has the discretion to adjust
targets or performance measures for any
exceptional events that may occur during the
vesting period.
The Committee has the discretion to make
downward or upward movements in the vesting
of the LTIP resulting from the application of
the performance measures if the Committee
believes that the outcomes are not a fair and
accurate reflection of business performance.
The Committee will review performance
measures annually, in terms of the range
of targets, the measures themselves and
weightings applied to each element of the LTIP.
Any revisions to the metrics and/or weightings
will only take place if it is necessary because of
developments in the Group’s strategy.
Shareholding ownership guidelines
To ensure that
Executive Directors’
interests are aligned
with those of
shareholders over a
longer time horizon.
The Executive Directors
are encouraged to build
or maintain (as relevant) a
minimum shareholding in the
Company.
Shares included in this
calculation are those held
beneficially by the Executive
Director and their spouse/life
partner.
Not applicable.
The shareholding
ownership guideline
is 200% of salary for
Executive Directors.
Gattaca plc
Annual Report and Accounts 2019
69
Governance Remuneration Committee Report continued
1. Executive Director remuneration
Single figure remuneration table (Audited information)
The remuneration of Executive Directors, showing the breakdown between components with comparative
figures for the prior financial year, is shown below:
Base salary
Higher duties
allowances2
£’000
£’000
Taxable
benefits3
£’000
Bonus
£’000
Long-term
incentives4
£’000
Pension
£’000
Total
£’000
Kevin Freeguard1
(Chief Executive Officer)
Salar Farzad2
(Chief Financial Officer)
Keith Lewis2, 6
(Chief Operating Officer)
Brian Wilkinson5
(Chief Executive Officer)
2019
2018
2019
2018
2019
2018
2019
2018
229
N/A
220
220
200
200
6
300
–
N/A
33
33
30
30
N/A
–
9
N/A
13
11
13
13
N/A
20
181
N/A
174
–
–
–
N/A
–
–
N/A
–
–
–
–
N/A
–
23
N/A
41
26
36
22
N/A
31
442
N/A
481
290
279
265
6
351
Notes
1 Kevin Freeguard was appointed as CEO on 1 October 2018.
2
Higher duties allowance was paid in respect of additional responsibilities taken on during the period from Brian Wilkinson's resignation to the
appointment of Kevin Freeguard.
3 Taxable benefits comprise car benefits and private medical insurance.
4 Long-term incentives vesting relate to the performance in the financial year. See details on long-term incentive values on page 71.
5 Brian Wilkinson resigned on 7 February 2018. Base salary included a payment of £6,000 (2018: 75,000) in lieu of notice.
6 Keith Lewis resigned on 5 November 2019.
Fixed remuneration
There were no salary increases applied in 2019.
Annual bonus outcomes for the financial year ending 31 July 2019 (Audited information)
For 2019, the Executive Directors’ maximum bonus opportunity was 100% of salary. The table below provides
information on the targets for each measure, actual performance and resulting bonus payment for each
Executive Director.
Based on this performance the CEO earned a bonus of £181,000 and the CFO earned a bonus of £174,000,
equivalent to 78.9% and 78.9% of maximum opportunity, respectively. The COO earned a bonus of £nil.
Performance measure
Continuing underlying
profit before tax
Personal objectives
Weighting (% of
maximum bonus
opportunity)
Threshold
performance (0%
of bonus payable)
Target performance
(67% of bonus
payable)
Maximum performance
(100% of bonus
payable)
Actual
performance
% of maximum
bonus payable
50%
50%
£10.7m
£11.6m
£12.4m
£11.4m
28.9%
Following the year end, the Committee assessed performance
against the individual objectives for each Executive Director
for 2019, with the following conclusions:
CEO, CFO: Met
Total
50.0% (CEO
& CFO)
78.9% (CEO
& CFO)
Personal objectives were heavily focused on two key areas: short-term objectives that needed to be
achieved in the year to set the business for sustainable growth. This included withdrawal from the Telecoms
Infrastructure market and some of our international locations, as well as completing the integration for
Resourcing Solutions Limited, delivering budgeted profit and additionally, to develop the strategic plan for
growth. These withdrawals were completed with minimal impact to the business and in particular Group profit
before tax, and the Improvement Plan was announced in April 2019.
70 Gattaca plc
Annual Report and Accounts 2019
Long–term incentives vesting for performance related to financial year ending 31 July 2019
LTIP Awards were granted on 11 February 2016 and were released on 10 February 2019. These Awards were
granted subject to the achievement of certain EPS growth targets which were measured over three financial
years ending 31 July 2018. The table below summarises these awards:
Performance
outcome
Number
of awards
vesting
Value of
awards shown
in the single
figure table
0%
0
Nil
Number of nil cost
options granted
Performance measures
Performance targets per annum
Keith Lewis2 12,632
Cumulative
compound growth
in adjusted
diluted EPS
Below 7%+RPI growth: 0%
vesting
7%+RPI growth: 33.33% vesting
Between 7% – 14%+RPI growth:
straight line vesting between
33.33% – 100%
Above 14%+RPI growth: 100%
vesting
Long–term incentive awards made during the year
LTIP awards granted during 2019 are summarised in the table below:
Number of nil cost
options granted
Performance measures and targets
Vesting date
Exercise
price
Kevin Freeguard1
128,205
Salar Farzad
102,564
Keith Lewis2
93,240
50% of the awards vest based on achieving cumulative
compound growth in adjusted diluted EPS
19 December 2021 Nil
Targets: Below 6% growth per annum: 0% vesting
Between 6% - 12% growth per annum:
straight-line vesting between 25% - 100%
Above 12% growth per annum: 100% vesting
50% of the awards vest based on achieving TSR
Targets: Median TSR, 25% vesting. Median TSR +9%,
100% vesting, and straight-lines vesting between points.
Awards were made on 19 December 2018 at a share price of £1.07 and were equivalent to a face value of 50%
of salary for each Executive Director.
SIP awards granted in 2018 (Audited information)
During the year, the Group operated a share incentive plan (‘SIP’) for Executive Directors and all staff. Under
the scheme, staff are entitled to buy shares in the Company out of pre-tax salary. Staff can invest up to a
maximum of £1,800 per annum, which will be used to purchase shares. The Group will award one free share
for every share that is purchased.
Staff will receive matching shares at the end of a three-year holding period, subject to remaining employed
within the Group and the shares they bought remaining in the plan throughout the holding period. The table
below details the shares bought and matching shares awarded to the Executive Directors during the year.
Director
Kevin Freeguard1
Keith Lewis2
Salar Farzad
Note
1 Appointed 1 October 2018.
2 Resigned on 5 November 2019.
Purchased
Matching shares
awarded
–
–
–
–
–
–
Gattaca plc
Annual Report and Accounts 2019
71
Governance
Remuneration Committee Report continued
1. Executive Director remuneration continued
Payments to past Directors or for loss of office
A final payment of £6,000 in lieu of notice was paid to Brian Wilkinson, comprising base salary. No payment
was made in respect of any bonus. There were no other payments made during the year in respect of past
Directors or for loss of office.
Implementation of Policy in 2019/2020
Fixed remuneration
Salary increases apply from 1 August 2019 for the Executive Directors, and are summarised below:
Executive
Kevin Freeguard1
Salar Farzad
Keith Lewis2
Prior salary
(£’000)
275
220
200
New salary
(£’000)
300
226.6
200
Salary increase
9%1
3%
0%
1
Kevin Freeguard was appointed as CEO in October 2018 with a salary intentionally set with commitment to be increased once solid performance in
the role has been demonstrated. The Committee is now confident that the salary level is at a market-competitive level and it is anticipated that any
future increases will be in line with those for the employee population as a whole.
2 Resigned on 5 November 2019.
Bonus
The maximum bonus opportunity for FY20 is 100% of base salary, with 60% based on Group financial
performance and 40% on personal targets. The financial performance elements of the bonus will be based
on achievement of PBT targets (75%) and NFI growth targets (25%). The specific targets are considered
commercially sensitive but will be disclosed in full in next year’s Directors’ Remuneration Report.
The personal targets will be based on implementation of the Improvement Plan; in particular, there is a
strong focus on new customer relationships, growing our range of services in our chosen markets, refining
our structures and streamlining operations aided with new technology platforms. Again, the details of these
strategic objectives and performance against them will be disclosed in detail in next year’s Report.
LTIP
The Committee intends to make a grant to Executive Directors of face value of up to 120% of base salary in
the year. The vesting will be subject to EPS CAGR growth over a three-year period. At 10% growth per annum,
50% of the award will vest. At 25% growth per annum 100% of the award will vest.
The Committee has determined to select EPS as a single LTIP measure for this year’s awards (rather
than combining with relative TSR as for previous awards) due to a desire for simplicity in the long-term
arrangements and to focus Executives on a measure which they have the ability to drive the performance of
during the period of the Improvement Plan. The Committee believes that this is the most relevant measure
of long-term performance over this period and that it will be closely aligned to the creation of value for
shareholders. In setting the target against this measure, the Committee has taken steps to ensure that these
have been calibrated to represent a stretch target at vesting threshold and exceptional stretch at maximum
opportunity.
Benefits and pension
There will be no changes to benefits or pension provision. Although it doesn’t apply directly to Gattaca as
an AIM company, the Committee was mindful of the UK Corporate Governance Code requirements and
investor sentiments relating to executive pension levels and post-employment shareholding requirements. At
the present time, the Committee has concluded that our arrangements in these regards are appropriate and
has not proposed a change in the Remuneration Policy. However, we will continue to monitor best and market
practice on these points and consider again in future.
72 Gattaca plc
Annual Report and Accounts 2019
2. Non-Executive Director Remuneration Policy and letters of appointment
Remuneration Policy table
The Board as a whole is responsible for setting the remuneration of the Non-Executive Directors, other than
the Chairman whose remuneration is determined by the Committee and recommended to the Board.
The Non-Executive Director Remuneration Policy remains the same as reported in the 2018 Annual Report.
3. Non-Executive Director remuneration (Audited information)
Single figure remuneration table
The remuneration of Non–Executive Directors showing the breakdown between components, with
comparative figures for the prior year, is shown below:
Director
Patrick Shanley
George Materna
Ric Piper1
Richard Bradford
Roger Goodman1
Mark Mamone2
David Lawther
Notes
1 Resigned 31 July 2018.
2 Resigned 5 December 2018.
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Fees
£’000
Other benefits
£’000
100
100
51
51
–
56
51
51
–
46
17
50
51
8
–
–
–
–
–
2
–
–
–
–
–
–
–
–
Total
£’000
100
100
51
51
–
58
51
51
–
46
17
50
51
8
Fees to be provided in 2020 to the Non-Executive Directors
The Board has determined that no increase will be applied to the current Non-Executive fee in 2020.
Fee component per role
Chairman fee
Non-Executive Director base fee
Senior Independent Director fee
Committee Chairman fee (Audit and Remuneration Committees)
Committee member fee (Audit and Remuneration Committees)
2019
£’000
100
46
–
5
–
2018
£’000
%
change
100
46
5
5
–
–
–
–
–
–
Gattaca plc
Annual Report and Accounts 2019
73
Governance Remuneration Committee Report continued
4. Directors’ shareholding and share interests
Shareholding and other interests at 31 July 2019 (Audited information)
Directors’ share interests are set out below. In order that their interests are aligned with those of shareholders,
Executive Directors are encouraged to build and maintain a personal shareholding in the Company equal to
200% of their base salary.
Shareholding at
31 July 2019
Interests in shares under the LTIP
(nil cost options)
SIP awards
(matching
shares)
Total interests
at 31 July 2019
Director
owned shares3
salary held4
Number of
beneficially
% of
Total interests
subject to
conditions
Total vested
interests
unexercised
Total interests
subject to
conditions
Kevin Freeguard1
Salar Farzad
Keith Lewis5
Patrick Shanley
George Materna
Richard Bradford
Mark Mamone2
David Lawther
Total
Notes
1 Appointed 1 October 2018
2 Resigned 5 December 2018.
–
–
338,224
15,000
7,877,405
–
–
–
–
–
128,205
102,564
202%
154,928
–
–
–
–
–
–
–
–
–
–
8,230,629
385,697
–
–
–
–
–
–
–
–
–
–
–
128,205
102,564
4,581
497,733
–
–
–
–
–
15,000
7,877,405
–
–
–
4,581
8,620,907
3
Beneficial interests include shares held directly or indirectly by connected persons. These also include partnership and vested match shares held
under the SIP.
4 % of salary held calculated using the share price on 31 July 2019, being 125.5 pence.
5 Keith Lewis resigned on 5 November 2019 and all interests in shares under the LTIP and SIP schemes subject to conditions have therefore lapsed.
There have been no changes between 31 July 2019 and the date that this Report was signed.
5. Considerations by the Committee of matters relating to Directors’ remuneration in 2019
The Committee determines and agrees with the Board the Policy for the Chairman of the Board, the
Executive Directors and other management team members, and approves the structure of, and targets for,
their annual performance-related pay schemes. It reviews the design of share incentive plans for approval by
the Board and shareholders, and determines the annual award policy to Executive Directors and Management
Board members under existing plans.
Within the terms of the agreed Policy, the Committee determines the remainder of the remuneration
packages (principally comprising salary and pension) for each Executive Director and senior leadership
member. It also reviews and notes the remuneration trends across the Group. The Committee’s full Terms of
Reference are available on the Company’s website, www.gattacaplc.com.
Members of the Committee during 2019
Richard Bradford (Chairman)
David Lawther
Mark Mamone1
Patrick Shanley
1 Resigned from the Board on 5 December 2018.
74 Gattaca plc
Annual Report and Accounts 2019
Independent
meetings held Meetings attended
Number of
Yes
Yes
Yes
Yes
3
3
1
3
3
3
0
2
During the year, there were three Committee meetings. The matters covered at each meeting included the
2019 bonus scheme, LTIP scheme, 2019 salary review budget proposal, Remuneration Committee advisers
and senior management remuneration plans for 2020.
None of the Committee members has any personal financial interest (other than as a shareholder) in the
decisions made by the Committee, conflicts of interests arising from cross-directorships or day-to-day
involvement in running the business.
The Chairman, Chief Executive Officer, Chief Financial Officer and HR Director may attend meetings at
the invitation of the Committee, but are not present when their own remuneration is being discussed. The
Committee is supported by the HR Director, finance and company secretariat functions.
The Committee received external advice in 2019 from Willis Towers Watson ('WTW'). WTW is considered by
the Committee to be objective and independent. WTW is a member of the Remuneration Consultants Group
and, as such, voluntarily operates under the code of conduct in relation to executive remuneration consulting
in the UK.
The total fee paid to WTW in respect of services to the Committee during the year was £29,000. The fee was
determined based on the scope and nature of the projects undertaken for the Committee.
6. Statement of voting
The 2019 Directors’ Remuneration Report will be put forward to shareholders on an advisory basis at the
next AGM.
This report was approved by the Committee, on behalf of the Board, on the date shown below and signed on
its behalf by:
Richard Bradford
Chairman of the Remuneration Committee
5 November 2019
Gattaca plc
Annual Report and Accounts 2019
75
Governance Case Study: Expert delivery through in-depth knowledge
531
CONSULTANTS
GLOBALLY
1,000+
43,500
MICRO NICHE TALENT
POOLS
CANDIDATE
INTERVIEWS PER YEAR
Case Study
Micro specialism
on skills
Our specialist consultants have an “inch wide, mile deep”
view on the types of candidates they supply to our clients.
Breadth
Experience
Knowledge share
Delivering on our clients’ specific
talent requirements is what sets
us apart. We do this across a
whole range of STEM skills by
truly understanding the niche in
which our candidates operate,
as shown below (data correct at
October 2019).
We have hundreds of specialist
consultants with a complete
and deep understanding of the
candidate market. Consultants
focus on a specific skill set, drilling
right down to build out talent pools
of candidates within these micro
specialisms. They focus their time on
identifying, engaging and coaching
talent pools of candidates. An
example of which would be:
A client asks for talent with over ten years of Amazon Web Services,
cloud infrastructure, EC2 Compute/S3 storage and consultancy
experience based in Hampshire, UK
The total IT infrastructure market in the UK has
959,177 candidates
39,936 of those candidates
have Amazon Web Services (‘AWS’) experience
…of those, 4,695 candidates
also have cloud infrastructure and platforms experience
…of those, 2,138 candidates
also have EC2 Compute/S3 storage experience
…of those, 1,103 candidates
also have consultancy/solutions provider experience
…of those, 994 candidates
also have over ten years’ experience
…and only 102 candidates
are based in Hampshire. We focus on those 102.
76 Gattaca plc
Annual Report and Accounts 2019
We have spent years building
out candidate attraction and
engagement tools to find both
active and passive candidates in
this micro niche.
We have set up skill-specific
content pages on our website
that receive thousands of hits per
week. We host global coding days,
‘hackathons’ and weekend coding
events. Our consultants’ in-depth
knowledge of specific talent pools
enables them to offer the candidate
a variety of options and become a
go-to consultant. We also support
red brick universities in educating
graduates on the various micro
specialist paths they could take and
the types of roles available to them.
Using our in-depth knowledge
of where talent is and how it
is developed, we promote this
to clients globally. We truly
consult our clients to help them
successfully build new teams
of these specialists, as well as
provide market reports to our
communities, looking at how
skill availability, development,
location, price, training tools and
technology development can
impact their businesses.
Financial Statements
78
Independent auditors’ Report
86 Consolidated Income Statement
87
Consolidated Statement of
Comprehensive Income
88 Statements of Changes in Equity
90
91
92
Consolidated and Parent Company
Statements of Financial Position
Consolidated and Parent Company
Cash Flow Statements
Notes Forming Part of the Financial
Statements
EXPERT FULFILMENT
BY SKILL
COLLABORATIVE HIGH-
PERFORMING CULTURE
Gattaca plc
Annual Report and Accounts 2019
77
Financial Statements Independent auditors’ report
to the members of Gattaca plc
Report on the audit of the financial statements
Opinion
In our opinion, Gattaca plc’s Group financial statements and Company financial statements (the “financial
statements”):
• give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 July 2019 and of
the Group’s loss and the Group’s and the Company’s cash flows for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union and, as regards the Company’s financial statements, as applied in
accordance with the provisions of the Companies Act 2006; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Accounts (the “Annual
Report”), which comprise: the Consolidated and Company Statements of Financial Position as at 31 July
2019; the Consolidated Income Statement and Consolidated Statement of Comprehensive Income, the
Consolidated and Company Cash Flow Statements, and the Consolidated and Company Statements of
Changes in Equity for the year then ended; and the notes to the financial statements, which include a
description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and
applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities
for the audit of the financial statements section of our report. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Our audit approach
Overview
Materiality
Audit
Scope
Key audit
matters
• Overall Group materiality: £570,000 (2018: £660,000), based on 5% of underlying
profit before tax from continuing operations.
• Overall Company materiality: £1,094,000 (2018: £1,030,000), based on 1% of total assets.
• 91% of the Group’s revenue is accounted for by operating units where we performed
audits of their complete financial information. 98% of the Group’s underlying profit
before taxation is accounted for by the 5 operating units where we performed audits
of their complete financial information. In combination with the other work referred
to above, together with additional procedures performed at Group level, including
testing of significant journals posted within the Group consolidation and significant
adjustments made to the Financial Statements, this gave us the evidence we needed
for our opinion on the Financial Statements as a whole.
• Risk of fraud in revenue recognition - permanent and contract (Group).
• Recoverability of trade receivables and accrued income (Group).
• Goodwill and acquired intangible asset impairment assessments (Group).
• Non-underlying costs and discontinued operations (Group)
78 Gattaca plc
Annual Report and Accounts 2019
Financial Statements The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement
in the financial statements. In particular, we looked at where the directors made subjective judgements, for
example in respect of significant accounting estimates that involved making assumptions and considering
future events that are inherently uncertain. As in all of our audits we also addressed the risk of management
override of internal controls, including evaluating whether there was evidence of bias by the directors that
represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance
in the audit of the financial statements of the current period and include the most significant assessed risks
of material misstatement (whether or not due to fraud) identified by the auditors, including those which had
the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the
efforts of the engagement team. These matters, and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all
risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Risk of fraud in revenue
recognition – permanent and
contract (Group)
Refer to page 56 (Audit Committee
Report) and Note 1 vi (Summary
of significant accounting policies),
Note 2 (Segmental information)
and Note 3 (Revenue From
Contracts With Customers) on to
the financial statements for the
directors’ disclosures of the related
accounting policies, judgements
and estimates.
There is a degree of judgement
involved in revenue recognition,
specifically around year-end
cut-off and accruing for income,
particularly in respect of the time
worked by contractors that has
not been processed in the Group’s
financial systems.
There also may be an incentive
for consultants to record more
placements or not remove
unplaced contractors in order to
receive commissions or to meet
bonus targets.
The audit risk includes both of the
above aspects. We determined
that this specifically impacts the
occurrence and pre-year end cut-
off assertions.
We performed the following procedures to address the risk that revenue had
been recorded fraudulently:
• We assessed the design and implementation of key controls around all
streams of revenue recognised. Testing of key controls was performed
for the contractor revenue stream;
• For contractor revenue we tested the occurrence of revenue journals
posted throughout the year using a combination of data auditing
techniques and corroborating transactions to third party documentation;
• Revenue generated via Gattaca Projects was tested in conjunction with our
contractor revenue testing and was included in our populations for data
auditing and transactional testing. We also considered the balance sheet
impact of any ‘fixed price’ contracts around the year end;
• We tested the permanent revenue stream through agreement to third party
documentation and review of contracts;
• We tested the accrued income associated with work performed by
contractors before the year end by agreeing the amounts to timesheets
submitted after year end but relating to work completed prior to the
year end;
• We tested a sample of credit notes post year end to identify where revenue
recognised during the year has been subsequently reversed;
• We considered the appropriateness and accuracy of any cut-off
adjustments processed by considering the start date of permanent
placements and the term of a temporary placement with reference to the
year-end date, as well as any central adjustments recorded to align weekly
country reporting with the Group’s year-end date; and
• We evaluated whether the Group’s revenue recognition accounting policy
complies with the requirements of IFRS 15 ‘Revenue from contracts
with customers’. We have agreed that revenue has been recognised in
accordance with Gattaca’s accounting policy by reviewing the details of
the Group’s revenue recognition policy, the application of this, and any
significant new contracts.
There were no material issues identified by our testing of revenue recognition
during the period.
Gattaca plc
Annual Report and Accounts 2019
79
Financial Statements Independent auditors’ report continued
to the members of Gattaca plc
Key audit matters continued
Key audit matter
How our audit addressed the key audit matter
Recoverability of trade
receivables and accrued
income (Group)
Refer to page 56 (Audit
Committee Report) and
Note 1 xvii (Summary of significant
accounting policies) and Note 17
(Trade and Other Receivables) to
the financial statements for the
Directors’ disclosures of the related
accounting policies, judgements
and estimates.
At 31 July 2019, the Group had
trade receivables and accrued
income balances of £96,730,000
(2018: £111,267,000) and provisions
of £2,189,000 (2018: £1,547,000)
included in Note 17.
The recoverability of trade
receivables, accrued income and
the level of provisions for expected
credit losses are considered to
be a key risk due to the pervasive
nature of these balances to
the financial statements, the
judgements required in making
these provisions and the
importance of cash collection with
reference to the working capital
management of the business.
In order to test the recoverability of trade receivables and accrued income,
we performed the following procedures:
• We have agreed a sample of trade receivables balances to post
year-end cash receipts;
• Where cash has not been received post year-end, we performed alternative
procedures by agreeing amounts recorded to supporting timesheets
approved by the customer and agreed rate cards;
• We also discussed and assessed the reasons the amounts that were not yet
paid with Gattaca’s local management teams to determine if there were
indicators of impairment;
• We evaluated the Group’s credit control procedures and assessed and
validated the ageing profile of trade receivables;
• We considered the appropriateness of judgements regarding the level
of expected credit loss for trade receivables and assessed whether
the associated provisions were calculated in accordance with the
Group’s expected credit loss policies and whether there was evidence
of management bias in provisioning, obtaining supporting evidence as
necessary;
• We challenged management as to the recoverability of specific aged,
unprovided debtors, corroborating management’s explanations with
underlying documentation and correspondence with the customer. We
agreed that management appropriately considered the heightened risk of
collectability of debtors held by discontinued operations noting that these
are provided for in full; and
• We agreed a sample of accrued income back to approved timesheets, rate
cards and post year-end invoices to agree that revenue had been accrued
for time that had been worked pre year-end. Where payment has been
received to date we also agreed cash receipts agree to the invoices raised.
We did not encounter any issues through these audit procedures that
indicated further material provisioning against accrued income and trade
receivables was required.
80 Gattaca plc
Annual Report and Accounts 2019
Financial Statements Key audit matter
How our audit addressed the key audit matter
Goodwill and acquired
intangible asset impairment
assessments (Group)
Refer to page 56 (Audit
Committee Report) and Note
1 ix (Summary of significant
accounting policies), Note
1 x (Summary of significant
accounting policies) and Note 13
(Goodwill and Intangible Assets).
Management conduct an annual
impairment assessment to test
whether the carrying value of
goodwill and acquired intangible
assets exceeds the present value
of the cash flows of the Cash
Generating Units (CGUs) to which
they relate.
We focused our assessment
on all four CGU’s, which have
a goodwill and indefinite lived
intangible assets carrying value of
£7,593,000 (2018: £14,719,000).
An impairment charge of
£5,882,000 has been recognised
against the International CGU.
The Directors considered that
reasonably possible changes in
forecast profit from operations,
long term growth rates or
discount rates would not be
expected to give rise to an
impairment charge in future.
These reasonably possible
changes have been disclosed
in Note 13.
We assessed management’s impairment testing relating to the four CGUs by
obtaining and testing the supporting models and assessing the methodology
used and key assumptions made:
• Tested the mathematical accuracy of the underlying models;
• Future cash flow forecasts: we evaluated the reasonableness of future cash
flow forecasts based on management’s historical accuracy of forecasting,
performance in FY20 year to date and our wider knowledge of the
businesses;
• Discount rates: to assess the discount rates used in the model, we used an
internally developed range of acceptable discount rates for valuing CGUs,
which is based on our view of economic indicators. The discount rate used
fell within the range expected for all territories; and
• Long term growth rates: the rates applied in the model are consistent with
our own internally developed rates.
No issues were noted in assessment of the underlying assumptions.
To assess the impairment charges, we recalculated the charge and confirmed
that this had been accounted for appropriately, and considered any contrary
evidence.
For all CGUs, we performed sensitivity analyses around the key assumptions,
both individually and in aggregate, in order to ascertain the extent of change
in those assumptions required individually or collectively to result in a further
material impairment of goodwill or acquired intangible assets.
For those CGUs which were most sensitive, we discussed the basis for these
cash flows with senior management, obtaining corroboratory evidence
where necessary. We concluded that these are appropriate with no material
impairment required.
We reviewed disclosures in the accounts and considered these appropriate
based on the results of the assessment and the requirements of accounting
standards.
Gattaca plc
Annual Report and Accounts 2019
81
Financial Statements Independent auditors’ report continued
to the members of Gattaca plc
Key audit matters continued
Key audit matter
Non-underlying costs and discontinued operations (Group)
Refer to page 56 (Audit Committee Report), Note 1 vii
(Summary of significant accounting policies), Note 4
(Profit/(Loss) From Operations) and Note 11 (Discontinued
operations).
We focused on non-underlying costs because IFRS does not
define which items may be excluded from operating (loss)/
profit to determine underlying operating profit and it therefore
requires judgement around the justification for such exclusion.
Consistency in identifying and disclosing items to be excluded
from underlying operating profit is important to maintain
comparability of the results year on year.
We have also focussed on discontinued operations given
the level of judgement that is required in determining what
meets the definition of a discontinued operation as per IFRS
5 - “Non-current Assets Held for Sale and Discontinued
Operations”. Discontinued operations presented in the
year relate to the Group’s withdrawal from Telecoms
Infrastructure markets in Africa, Asia and Latin America
as well as its operations in UAE, Malaysia, Qatar and
Singapore.
How our audit addressed the key audit matter
We have assessed amounts that have been
included as both non-underlying and discontinued
operations by performing the following procedures:
• Agreed the accuracy and classification of
amounts disclosed in both discontinued
operations and non-underlying to supporting
evidence, on a sample basis;
• Compared the non-underlying costs recognised
in the current year to those recognised in 2018
and challenged where the costs are either
inconsistently treated year-on-year, or appear
underlying in nature;
• Reviewed the disclosures made in respect of non-
underlying costs and discontinued operations.
• Agreed that the classification of discontinued
operations is in line with the requirements of
IFRS 5 - “Non-current Assets Held for Sale and
Discontinued Operations”.
We found the accounting, in all material respects,
to be in accordance with Group policies.
We determined that there were no key audit matters applicable to the Company to communicate in our
report.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion
on the financial statements as a whole, taking into account the structure of the Group and the Company, the
accounting processes and controls, and the industry in which they operate.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion
on the financial statements as a whole, taking into account the structure of the Group and the Company, the
accounting processes and controls, and the industry in which they operate.
The Group has 25 operating units which fall into three reporting segments, namely UK Engineering, UK
Technology and International.
Of the Group’s 25 operating units, we performed audits of complete financial information at 4 operating units
in the UK and 1 reporting unit in the US due to their financial significance to the Group.
In addition, we performed analytical procedures on the remaining 20 operating units to understand key
balances and transactions in the year and performed additional procedures on any unusual balances identified.
All testing was performed by the group engagement team with no component teams utilised.
82 Gattaca plc
Annual Report and Accounts 2019
Financial Statements
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds
for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit
and the nature, timing and extent of our audit procedures on the individual financial statement line items and
disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole
as follows:
Overall materiality
£570,000 (2018: £660,000).
£1,094,000 (2018: £1,030,000).
Group financial statements
Company financial statements
How we
determined it
5% of underlying profit before tax from continuing
operations.
1% of total assets.
Rationale for
benchmark applied
Underlying profit before tax from continuing
operations is disclosed on page 86. We believe
that underlying profit before taxes from continuing
operations is the primary measure used by
shareholders and other users of the financial
statements in assessing the performance of
the Group, and that by excluding items such as
goodwill impairment charges and non-underlying
costs, to the extent that they are significant, it
provides a clearer view on the performance of the
underlying business.
We believe that total assets are an
appropriate metric for assessing
the Company as it holds the
investment instruments of the Group
and intercompany positions with
subsidiaries. We applied a lower
materiality of £540,000 to certain
line items, account balances and
disclosures that were in scope for
the audit of the Group Financial
Statements.
For each component in the scope of our group audit, we allocated a materiality that is less than our
overall group materiality. The range of materiality allocated across components was between £260,000
and £540,000.
We agreed with the Audit Committee that we would report to them misstatements identified during our
audit above £28,000 (Group audit) (2018: £33,000) and £28,000 (Company audit) (2018: £33,000) as
well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
ISAs (UK) require us to report to you when:
• the directors’ use of the going concern basis of accounting in the preparation of the financial statements is
not appropriate; or
• the directors have not disclosed in the financial statements any identified material uncertainties that may
cast significant doubt about the Group’s and Company’s ability to continue to adopt the going concern
basis of accounting for a period of at least twelve months from the date when the financial statements are
authorised for issue.
We have nothing to report in respect of the above matters.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as
to the Group’s and Company’s ability to continue as a going concern. For example, the terms on which the
United Kingdom may withdraw from the European Union are not clear, and it is difficult to evaluate all of the
potential implications on the Group’s trade, customers, suppliers and the wider economy.
Gattaca plc
Annual Report and Accounts 2019
83
Financial Statements
Independent auditors’ report continued
to the members of Gattaca plc
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements
and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the
financial statements does not cover the other information and, accordingly, we do not express an audit opinion
or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we
identify an apparent material inconsistency or material misstatement, we are required to perform procedures
to conclude whether there is a material misstatement of the financial statements or a material misstatement
of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report based
on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures
required by the UK Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK)
require us also to report certain opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic
Report and Directors’ Report for the year ended 31 July 2019 is consistent with the financial statements and
has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the Group and Company and their environment obtained
in the course of the audit, we did not identify any material misstatements in the Strategic Report and
Directors’ Report.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ responsibilities in respect of the Annual Report and
the Financial Statements set out on page 53, the directors are responsible for the preparation of the financial
statements in accordance with the applicable framework and for being satisfied that they give a true and fair
view. The directors are also responsible for such internal control as they determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the
Company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern
and using the going concern basis of accounting unless the directors either intend to liquidate the Group or
the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
84 Gattaca plc
Annual Report and Accounts 2019
Financial Statements Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body
in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not,
in giving these opinions, accept or assume responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come save where expressly agreed by our prior
consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Company, or returns adequate for our audit
have not been received from branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the Company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Other voluntary reporting
Directors’ remuneration
The Company voluntarily prepares a Directors’ Remuneration Report in accordance with the provisions of the
Companies Act 2006. The directors requested that we audit the part of the Directors’ Remuneration Report
specified by the Companies Act 2006 to be audited as if the Company were a quoted Company.
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
John Minards (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Southampton
5 November 2019
Gattaca plc
Annual Report and Accounts 2019
85
Financial Statements
Consolidated Income Statement
For the year ended 31 July 2019
Continuing Operations
Revenue
Cost of sales
Gross profit
Administrative expenses
Profit/(loss) from continuing operations
Finance income
Finance cost
Profit/(loss) before taxation
Taxation
Profit/(loss) for the year after taxation from continuing operations
Discontinued operations
(Loss)/profit for the year from discontinued operations
(attributable to equity holders of the Company)
(Loss) for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Note
2019
£’000
2018
£’000
2
2
4
6
7
10
11
635,814
631,329
(565,227)
(559,930)
70,587
(65,781)
4,806
365
(2,096)
3,075
(1,485)
1,590
(7,491)
(5,901)
(5,901)
–
71,399
(96,684)
(25,285)
198
(1,652)
(26,739)
(375)
(27,114)
38
(27,076)
(27,351)
275
(5,901)
(27,076)
The Company has elected to take the exemption under section 408 of the Companies Act 2006 from
presenting the parent Company Income Statement.
Profit/(loss) from continuing operations
Add
Depreciation of property, plant and equipment and
amortisation of software and software licences
Non-underlying items included within administrative expenses
Amortisation and impairment of goodwill and acquired intangibles
2
2
2
Underlying EBITDA
Less
Depreciation of property, plant and equipment and
amortisation of software and software licences
Net finance costs excluding foreign exchange differences
Underlying profit before taxation
Underlying taxation
Underlying profit after taxation from continuing operations
Earnings per ordinary share
Basic earnings per share
Diluted earnings per share
Earnings per ordinary share from underlying continuing operations
Basic earnings per share from underlying continuing operations
Diluted earnings per share from underlying continuing operations
Note
12
12
12
12
2019
£’000
2018
£’000
4,806
(25,285)
1,207
1,441
7,146
14,600
(1,207)
(2,033)
11,360
(2,501)
8,859
2019
pence
(18.3)
(17.8)
2019
pence
27.5
26.7
993
1,676
36,011
13,395
(993)
(1,540)
10,862
(3,380)
7,482
2018
pence
(85.3)
(85.3)
2018
pence
22.5
22.5
86 Gattaca plc
Annual Report and Accounts 2019
Financial Statements Consolidated Statement of Comprehensive Income
For the year ended 31 July 2019
Loss for the year
Other comprehensive income/(loss)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Other comprehensive income/(loss) for the year
Total comprehensive loss for the year attributable
to equity holders of the parent
Attributable to:
Continuing operations
Discontinued operations
Attributable to:
Equity holders of the parent
Non-controlling interests
2019
£’000
2018
£’000
(5,901)
(27,076)
645
645
(734)
(734)
(5,256)
(27,810)
1,702
(6,958)
(5,256)
(27,784)
(26)
(27,810)
(5,256)
(28,085)
–
275
(5,256)
(27,810)
Gattaca plc
Annual Report and Accounts 2019
87
Financial Statements Consolidated and Company Statements of Changes in Equity
For the year ended 31 July 2019
A) Consolidated
Share
capital
£’000
Share
premium
£’000
Merger
reserve
£’000
Share-
based
payment
reserve
£’000
Translation
reserve
£’000
Treasury
shares
reserve
£’000
Retained
earnings
£’000
Non-
controlling
interests
£’000
Total
£’000
At 1 August 2017
318
8,704
28,750
1,415
1,033
–
42,260
2,222
84,702
(Loss)/profit for the year
Other comprehensive loss
Total comprehensive
(loss)/income
Dividends paid in the year
(Note 8)
Deferred tax movement in
respect of share options
Acquisition of non-
controlling interest
Non-controlling interest
transfer
Share-based payments
charge (Note 23)
Share-based payments
reserves transfer
Shares issued
Transactions with owners
–
–
–
–
–
–
–
–
–
5
5
–
–
–
–
–
–
–
–
–
2
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
324
(665)
–
(341)
–
–
(27,351)
275 (27,076)
(734)
–
–
–
(734)
(734)
–
(27,351)
275
(27,810)
–
–
–
–
–
–
–
–
–
(6,441)
–
(6,441)
–
(211)
–
(211)
–
–
(3,552) (3,552)
–
(1,055)
1,055
–
–
–
–
–
–
324
665
–
–
–
–
7
–
(7,042)
(2,497) (9,873)
At 31 July 2018
323
8,706
28,750
1,074
299
–
7,867
–
47,019
At 1 August 2018
323
8,706
28,750
1,074
299
–
7,867
–
47,019
Loss for the year
Other comprehensive
income
Total comprehensive
income/(loss)
Dividends paid in the year
(Note 8)
Deferred tax movement in
respect of share options
Share-based payments
charge (Note 23)
Share-based payments
reserves transfer
Purchase of treasury shares
Transactions with owners
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
269
(590)
–
(321)
–
–
(5,901)
–
(5,901)
645
–
–
–
645
645
–
(5,901)
–
(5,256)
–
–
–
–
–
–
–
–
–
–
15
–
–
590
(140)
–
(140)
605
–
–
–
15
–
269
–
–
–
–
(140)
144
At 31 July 2019
323
8,706
28,750
753
944
(140)
2,571
–
41,907
88 Gattaca plc
Annual Report and Accounts 2019
Financial Statements
B) Company
Share
capital
£’000
Share
premium
£’000
Merger
reserve
£’000
Share-
based
payment
reserve
£’000
Treasury
shares
reserve
£’000
Retained
earnings
£’000
Total
£’000
At 1 August 2017
318
8,704
28,526
1,415
–
3,137
42,100
Profit and total comprehensive income
for the year (Note 9)
Dividends paid in the year (Note 8)
Share-based payments charge (Note 23)
Share-based payments reserves transfer
Shares issued
Transactions with owners
At 31 July 2018
At 1 August 2018
Loss and total comprehensive loss for the year
(Note 9)
Dividends paid in the year (Note 8)
Share-based payments charge (Note 23)
Share-based payments reserves transfer
Purchase of treasury shares
Shares issued
Transactions with owners
–
–
–
–
5
5
–
–
–
–
2
2
–
–
–
–
–
–
–
–
324
(665)
–
–
–
–
–
–
4,670
4,670
(6,441) (6,441)
–
324
665
–
–
7
(341)
–
(5,776)
(6,110)
323
8,706
28,526
1,074
–
2,031
40,660
323
8,706
28,526
1,074
–
2,031
40,660
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
269
(590)
–
–
(321)
–
–
–
–
–
–
–
(231)
(231)
–
–
–
269
590
–
–
–
–
–
590
269
At 31 July 2019
323
8,706
28,526
753
–
2,390
40,698
Gattaca plc
Annual Report and Accounts 2019
89
Financial Statements
Consolidated and Company Statements of Financial Position
As at 31 July 2019
Non-current assets
Goodwill and intangible assets
Property, plant and equipment
Investments
Deferred tax assets
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Non-current liabilities
Deferred tax liabilities
Provisions
Bank loans and borrowings
Total non-current liabilities
Current liabilities
Trade and other payables
Provisions
Current tax liabilities
Bank loans and borrowings
Total current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Merger reserve
Share-based payment reserve
Translation reserve
Treasury shares reserve
Retained earnings
Group
Company
Note
2019
£’000
2018
£’000
2019
£’000
13
14
15
16
11,751
3,292
16,349
3,620
–
–
–
–
–
135
8,580
–
15,043
20,104
8,580
2018
£’000
–
–
8,311
–
8,311
17
96,728
112,912
101,158
94,927
19,173
9,758
–
–
115,901
122,670
101,158
94,927
130,944
142,774
109,738
103,238
16
18
20
19
18
(396)
(2,349)
(1,636)
(1,390)
–
–
–
–
(14,957)
(14,931)
(14,957)
(17,702)
(17,957)
(14,957)
(14,931)
(14,931)
(40,676)
(40,850)
(54,083)
(47,647)
(332)
–
(1,289)
(1,247)
20
(29,038)
(35,701)
–
–
–
–
–
–
(71,335)
(77,798)
(54,083)
(47,647)
(89,037)
(95,755)
(69,040)
(62,578)
41,907
47,019
40,698
40,660
23
323
323
323
8,706
8,706
8,706
323
8,706
28,750
28,750
28,526
28,526
753
944
(140)
2,571
1,074
299
–
753
1,074
–
–
–
–
7,867
2,390
2,031
Total equity attributable to equity holders of the parent
41,907
47,019
40,698
40,660
Non-controlling interest
Total equity
–
–
–
–
41,907
47,019
40,698
40,660
The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to
present the parent Company’s income statement. The parent Company’s loss of £231,000 (2018 profit:
£4,670,000) for the year is shown in Note 9 of these Financial Statements.
The accompanying notes on pages 92 to 131 form part of these Financial Statements.
The Financial Statements on pages 86 to 131 were approved by the Board of Directors on 5 November 2019
and signed on its behalf by
Salar Farzad
Chief Financial Officer
90 Gattaca plc
Annual Report and Accounts 2019
Financial Statements Consolidated and Company Cash Flow Statements
For the year ended 31 July 2019
Cash flows from operating activities
(Loss)/profit after taxation
Adjustments for:
Depreciation and amortisation
Profit on disposal of subsidiary
Loss/(profit) on disposal of property,
plant and equipment
Impairment of goodwill and acquired intangibles
Interest income
Interest costs
Taxation expense recognised in Income Statement
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Increase/(decrease) in provisions
Share-based payment charge
Investment income
Group
Company
2019
£’000
2018
£’000
2019
£’000
2018
£’000
(5,901)
(27,076)
(231)
4,670
2,483
(135)
3,718
–
67
(14)
5,882
33,320
(437)
2,096
1,417
17,225
(174)
1,291
269
–
(198)
1,652
2,217
2,326
1,860
(206)
324
–
–
–
–
–
–
637
(281)
–
–
–
–
–
–
–
(5,950)
(8,069)
6,436
15,547
–
–
–
–
(968)
(357)
(5,474)
6,674
Cash generated from/(used in) operations
24,083
17,923
Interest paid
Interest received
Income taxes paid
(1,993)
(1,537)
(611)
86
112
(2,523)
(3,648)
–
–
–
–
–
Cash from/(used in) operating activities
19,653
12,850
(968)
6,674
Cash flows from investing activities
Purchase of plant and equipment
Purchase of intangible assets
Acquisition of non-controlling interest
Proceeds from sale of subsidiary
Proceeds from sale of property, plant and equipment
Dividend received
(673)
(1,853)
(2,876)
–
2
26
–
(899)
(3,552)
–
67
–
Cash (used in)/generated from investing activities
(3,521)
(6,237)
Cash flows from financing activities
Proceeds from issue of share capital
Purchase of treasury shares
Working capital facility (repaid)/utilised
Finance costs paid
Repayment of term loan
Dividends paid
–
(140)
7
–
(6,740)
10,166
–
–
–
(25)
(5,714)
(6,441)
Cash (used in) financing activities
(6,880)
(2,007)
Effects of exchange rates on cash and cash equivalents
163
(650)
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Net (decrease)/increase in cash and cash
equivalents for discontinued operations
9,415
9,758
19,173
3,956
5,802
9,758
(2,743)
101
–
–
–
–
–
–
–
–
–
–
968
968
5,474
5,474
–
–
–
–
–
–
–
–
–
–
–
–
7
–
–
–
(5,714)
(6,441)
(12,148)
–
–
–
–
–
Gattaca plc
Annual Report and Accounts 2019
91
Financial Statements Notes Forming Part of the Financial Statements
1 The Group and Company Significant Accounting Policies
i
The business and address 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 England, UK. The Company’s registered address is 1450 Parkway, Solent Business Park Whiteley,
Fareham, Hampshire, PO15 7AF. The Company’s registration number is 04426322.
ii
Basis of preparation of the Financial Statements
The Financial Statements of Gattaca plc have been prepared in accordance with IFRS and IFRS
Interpretations Committee (‘IFRIC’) interpretations as adopted by the European Union (‘EU-IFRS’) and with
the Companies Act 2006 applicable to companies reporting under IFRS.
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. A summary of the principal accounting policies of the Group are
set out below.
The preparation of Financial Statements in conformity with EU-IFRS 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 xxiii.
iii Going concern
The Directors have reviewed forecasts and budgets for the coming year, which have been drawn up with
appropriate regard for the current macroeconomic environment and the particular circumstances in which
the Group operates. These were prepared with reference to historic and current industry knowledge, taking
future strategy of the Group into account. As a result, at the time of approving the Financial Statements,
the Directors consider that the Company and the Group have sufficient resources to continue in operational
existence for the foreseeable future and in compliance with key financial covenants, and accordingly, that it
is appropriate to adopt the going concern basis in the preparation of the Financial Statements. As with all
business forecasts, the Directors cannot guarantee that the going concern basis will remain appropriate given
the inherent uncertainty about future events.
iv New standards and interpretations
IFRS 15 ‘Revenue from contracts with customers’ and IFRS 9 ‘Financial instruments’ have been adopted
by the Group from 1 August 2018. Further details of the changes have been included in the relevant
accounting policies.
New standards in issue, not yet effective
IFRS 16 ‘Leases’
IFRS 16 ‘Leases’ addresses the definition of a lease, recognition and measurement of leases, and it establishes
principles for reporting useful information to users of financial statements about the leasing activities of
both lessees and lessors. A key change arising from IFRS 16 is that most operating leases will be accounted
for on the Statement of Financial Position for lessees. The standard replaces IAS 17 ‘Leases’, and related
interpretations.
Adoption of IFRS 16 is expected to result in changes to the Group’s consolidated Financial Statements. Under
IFRS 16, certain lease commitments will be accounted for ‘on-balance sheet’, with recognition of a lease
liability and corresponding right-of-use asset. Under IFRS 16, the operating lease charge would be replaced
by a depreciation charge that, whilst lower over the life of the lease than the current operating lease charge,
is not expected to be materially different. Rental expenses will also be accounted for as finance costs rather
than within operating expenses.
92 Gattaca plc
Annual Report and Accounts 2019
Financial Statements IFRS 16 is expected to result in an increase in EBITDA and operating profit for the Group, as rentals are
reclassified as depreciation and interest expense, but with a small decrease in profit before taxation. Gross
profit may also appear higher as a result. IFRS 16 also requires more extensive disclosures than under IAS 17.
Note 22 summarises the current lease portfolio. The standard is effective for annual periods commencing
on or after 1 January 2019, and so will be adopted by the Group from 1 August 2019 using the modified
retrospective approach, meaning that comparatives will not be restated.
The Group has reviewed its portfolio of leases as at 31 July 2019 has not identified any new leases. 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.
The main difference between the IFRS 16 liability shown below and the value of the total operating lease
commitment shown in Note 22 is that the figure below has had discount rates applied for future years
payments which has decreased the value of the liability. Low-value leases have been removed. The following
table shows the expected transition adjustment to the balance sheet at 1 August 2019.
At 31 July 2019
Total non-current assets
Total current assets
Total current liabilities
Total non-current liabilities
Net assets
Forthcoming requirements
As reported
£’000
15,043
115,901
(71,335)
(17,702)
41,907
Reclassification
of existing
onerous lease
£’000
(934)
–
–
934
–
IFRS 16
£’000
10,678
–
(2,093)
(8,585)
–
Pro forma
£’000
24,787
115,901
(73,428)
(25,353)
41,907
The following amendments are required for application for the Group’s periods beginning after 1 August 2020:
Standard
IAS 1 Amendments
IAS 8 Amendments
IFRS 3 Amendments
Revised Conceptual Framework for Financial Reporting
Effective date
(annual periods
beginning on
or after)
Presentation of Financial Statements
1 January 2020
Accounting Policies
Business Combination
1 January 2020
1 January 2020
1 January 2020
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 2019. These new pronouncements are listed as follows:
Standard
IFRS 9 Amendments
IFRS 16
IFRIC 23
Financial Instruments
Leases
Effective date
(annual periods
beginning on
or after)
1 January 2019
1 January 2019
Uncertainty over Income Tax Treatments 1 January 2019
Annual Improvements to IFRS Standards 2015–2017 Cycle
1 January 2019
The Group is currently evaluating the impact of the adoption of all other standards, amendments and
interpretations but does not expect them to have a material impact on the Group’s operations or results.
Gattaca plc
Annual Report and Accounts 2019
93
Financial Statements 1
The Group and Company Significant Accounting Policies continued
v 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 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.
vi Revenue
IFRS 15 ‘Revenue from contracts with customers’ has been adopted by the Group from 1 August 2018 for
the Group. The new standard deals with revenue recognition and establishes principles for reporting useful
information to users of financial statements about the nature, amount, timing and uncertainty of revenue and
cash flows arising from an entity’s contracts with customers. The standard replaces IAS 18 ‘Revenue’, IAS
11 ‘Construction contracts’, IFRIC 13 ‘Customer loyalty programmes’, SIC 31 ‘Revenue - Barter transactions
involving advertising services’ and related interpretations.
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. Under IFRS 15, the timing and amount of
revenue recognition is unchanged, with no impact on retained earnings at 1 August 2018.
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
‘clawback’ 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. Based on historical data, such rebates are infrequent and
immaterial. Under IFRS 15, the timing and amount of revenue recognition is unchanged, with a no impact on
retained earnings at 1 August 2018.
94 Gattaca plc
Annual Report and Accounts 2019
Notes Forming Part of the Financial Statements continuedFinancial Statements 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 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. Under IFRS 15, the timing and amount of revenue recognition is unchanged,
with no impact on retained earnings at 1 August 2018.
vii 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 better understanding of the
Group’s results.
Items which are included within this category could include:
• costs of acquisitions;
• integration costs following acquisitions; and
• significant restructuring costs.
viii 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%
Fixtures, fittings and equipment
33.3%
Reducing balance
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 year.
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.
ix Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the fair value of the
consideration received 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.
Gattaca plc
Annual Report and Accounts 2019
95
Financial Statements
1
x
The Group and Company Significant Accounting Policies continued
Intangible assets
Customer relationships
Customer relationships comprise principally 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 are
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.
xi 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 profit or loss at the time of disposal.
96 Gattaca plc
Annual Report and Accounts 2019
Notes Forming Part of the Financial Statements continuedFinancial Statements xii Operating lease agreements
Rentals applicable to operating leases are expensed to profit and loss on a straight-line basis over the lease
term. Lease incentives are spread over the term of the lease.
xiii 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
reporting 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.
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.
xiv 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.
Gattaca plc
Annual Report and Accounts 2019
97
Financial Statements 1
The Group and Company Significant Accounting Policies continued
xv 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 £0.01; the Long-Term Incentive Plan Options have an exercise
price above £0.01. Grants under both categories have been made as part of a CSOP scheme, depending on
the terms of specific grants.
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 UK Employee Benefit Trust (‘the EBT’), the purpose of
which is to enable employees to purchase Company shares out of pre-tax salary. For each share purchased
the Company grants an additional share at no cost to the employee. The expense in relation to these ‘free’
shares is recorded as employee remuneration and measured at fair value of the shares issued as at the date of
grant. The assets and liabilities of the EBT are included in the Consolidated Statement of Financial Position.
xvi Business combinations completed prior to Date of transition to IFRS
The Group has elected not to apply IFRS 3 ‘Business combinations’ retrospectively to business combinations
prior to 1 August 2006. Accordingly, the classification of the combination (merger) remains unchanged
from that used under UK GAAP. Assets and liabilities are recognised at date of transition if they would
be recognised under IFRS, and are measured using their UK GAAP carrying amount immediately post-
acquisition as deemed cost under IFRS, unless IFRS requires fair value measurement. Deferred tax is adjusted
for the impact of any consequential adjustments after taking advantage of the transitional provisions.
xvii Financial instruments
IFRS 9 ‘Financial instruments’ was adopted by the Group from 1 August 2018. The new standard sets out
requirements for recognising and measuring financial assets and financial liabilities. The Group has adopted
this new standard retrospectively, taking advantage of the exemption to not restate comparative information
with respect to classification and measurement changes.
98 Gattaca plc
Annual Report and Accounts 2019
Notes Forming Part of the Financial Statements continuedFinancial Statements Financial assets
IFRS 9 contains a new classification and measurement approach for financial assets that reflects the business
model under which assets are managed and their cash flow characteristics. Under IFRS 9, the number of
classification categories has reduced, resulting in all financial assets being measured at amortised cost, fair
value through profit and loss (‘FVTPL’) or fair value through other comprehensive income (‘FVOCI’).
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial
asset not at FVTPL, transaction costs that are directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at FVTPL are expensed in profit or loss.
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 a 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 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.
Gattaca plc
Annual Report and Accounts 2019
99
Financial Statements
1
The Group and Company Significant Accounting Policies continued
xvii Financial instruments continued
Impairment of financial assets
IFRS 9 replaces the incurred loss model of IAS 39 with an ‘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 ECLs have been modelled for UK construction customers, rest of UK customers, and
customers in the Americas, Europe, Asia and Africa. The ECL provision of trade receivables at
1 August 2018 under IFRS 9 was not materially different to the IAS 39 provision for irrecoverable
trade receivables held at 31 July 2018 and therefore there was no impact on retained earnings at
1 August 2018.
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 ECL provision is not material.
At each reporting date, the ECL 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
IFRS 9 largely retains the existing requirements for classification of financial liabilities from IAS 39. The
Group’s adoption of IFRS 9 did not trigger any changes to classification and measurement of financial
liabilities at 1 August 2018.
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.
100 Gattaca plc
Annual Report and Accounts 2019
Notes Forming Part of the Financial Statements continuedFinancial Statements xviii 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.
xix 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 recognised in respect of asset retirement obligations for leased
properties at the start of the lease, with a corresponding tangible asset recognised which is subsequently
depreciated to profit or loss over the lease term. Where onerous contract arrangements are identified,
such as ongoing leases for properties that are no longer in use, provisions are recognised for the costs
expected to fulfil the Group’s future obligations under the contract. Provisions are not recognised for future
operating losses.
xx 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.
xxi 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.
For consolidation purposes, the assets and liabilities of foreign operations are translated at closing
exchange rates. Income Statements of such undertakings are consolidated at average rates of exchange
as an approximation for actual rates during the year. Exchange differences arising on these translations are
accounted for in the translation reserve in OCI. On divestment, these exchange differences are reclassified
from the translation reserve to the income statement.
Gattaca plc
Annual Report and Accounts 2019
101
Financial Statements
1
The Group and Company Significant Accounting Policies continued
xxii 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.
xxiii Critical accounting judgements and key sources of estimation uncertainty
Critical accounting judgements
The Directors are of the opinion that 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 ongoing 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 and the current
economic conditions. As a result, ECL provisions for impairment of trade receivables have been recognised,
as discussed in Note 17.
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. These assumptions are set out
in Note 13.
102 Gattaca plc
Annual Report and Accounts 2019
Notes Forming Part of the Financial Statements continuedFinancial Statements 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, UK Engineering, UK Technology and International, which form the operating
segments on which the information below is prepared. The Group determines and presents operating
segments based on the information that is provided internally to the chief operating decision maker, which
has been identified as the Board of Directors of Gattaca plc.
2019
All amounts in £’000
Revenue
Gross profit
UK
Engineering
UK
Technology
International
Continuing
underlying
operations
475,903
136,084
23,827
635,814
49,442
11,575
9,570
70,587
Operating contribution
27,489
5,902
1,820
35,211
Non-
underlying
items and
amortisation
and
impairment
of acquired
intangibles
Discontinued
operations
Group
total
–
–
–
11,371
647,185
1,511
72,098
(511)
34,700
Depreciation, impairment
and amortisation
(904)
(258)
(45)
(1,207)
(7,146)
(12)
(8,365)
Central overheads
(14,759)
(3,835)
(2,017)
(20,611)
(1,441)
(7,108)
(29,160)
Profit/(loss) from operations
11,826
1,809
(242)
13,393
(8,587)
(7,631)
(2,825)
Finance (cost)/income, net
Profit/(loss) before taxation
(2,033)
302
72
(1,659)
11,360
(8,285)
(7,559)
(4,484)
2018
All amounts in £’000
Revenue
Gross profit
UK
Engineering
UK
Technology
International
Continuing
underlying
operations
451,738
146,843
32,748
631,329
47,567
14,458
9,374
71,399
Operating contribution
26,033
6,610
2,723
35,366
Non-
underlying
items and
amortisation
and
impairment
of acquired
intangibles
Discontinued
operations
Group
total
–
–
–
36,215
667,544
7,464
78,863
5,174
40,540
Depreciation, impairment
and amortisation
(694)
(247)
(52)
(993)
(36,011)
(34)
(37,038)
Central overheads
(14,478)
(4,865)
(2,628)
(21,971)
(1,676)
(3,260)
(26,907)
Profit/(loss) from operations
10,861
1,498
43
12,402
(37,687)
1,880
(23,405)
Finance (cost)/income, net
Profit/(loss) before taxation
(1,540)
86
–
(1,454)
10,862
(37,601)
1,880
(24,859)
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.
Gattaca plc
Annual Report and Accounts 2019
103
Financial Statements 2 Segmental Information continued
Geographical information
All amounts in £’000
UK
Rest of Europe
Middle East and Africa
Americas
Asia Pacific
Total
Total Group revenue
Non-current assets
2019
2018
2019
2018
613,055
608,540
14,844
19,794
4,313
2,824
5,658
14,588
21,966
25,280
2,193
16,312
1
13
172
13
2
63
139
106
647,185
667,544
15,043
20,104
Revenue and non-current assets are allocated to the geographical market based on the domicile of the
respective subsidiary.
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
UK Engineering
UK Technology
International
Total
2019
£’000
2018
£’000
2019
£’000
2018
£’000
2019
£’000
2018
£’000
2019
£’000
2018
£’000
Temporary placements
463,840
442,823
133,491
142,951
17,026
25,162
614,357
610,936
Permanent placements
11,887
8,878
2,593
3,892
6,790
7,586
21,270
20,356
Other
Total
176
37
–
–
11
–
187
37
475,903
451,738
136,084
146,843
23,827
32,748
635,814
631,329
Timing of revenue recognition – continuing underlying operations
UK Engineering
UK Technology
International
Total
2019
£’000
2018
£’000
2019
£’000
2018
£’000
2019
£’000
2018
£’000
2019
£’000
2018
£’000
Point in time
475,903
451,738
136,084
146,843
23,827
32,748
635,814
631,329
Total
475,903
451,738
136,084
146,843
23,827
32,748
635,814
631,329
No single customer contributed more than 10% of the Group’s revenues (2018: none).
The Group has determined that its contract assets from contracts with customers are trade receivables and
accrued income which are set out below:
Trade receivables (Note 17)
Accrued income (Note 17)
31 July 2019
£’000
31 July 2018
£’000
31 July 2017
£’000
71,704
22,837
81,773
27,947
82,296
28,681
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.
Accrued income at 31 July 2019 has decreased since the prior year primarily as a result of the Group’s
withdrawal from the contract Telecoms Infrastructure markets in Africa, Asia and Latin America as well its
operations in the United Arab Emirates, Singapore, Malaysia and Qatar during the year.
104 Gattaca plc
Annual Report and Accounts 2019
Notes Forming Part of the Financial Statements continuedFinancial Statements 4 Profit/(Loss) From Operations
Profit/(loss) from total operations is stated after charging/(crediting):
Depreciation (Note 14)
Amortisation of acquired intangibles (Note 13)
Amortisation of software and software licences (Note 13)
Impairment of goodwill and acquired intangibles (Note 13)
Loss/(profit) on disposal of property, plant and equipment
Operating lease costs:
– Plant and machinery
– Land and buildings
Share-based payment charge
Net (gains) on foreign currency translation (Note 6)
The aggregate auditor’s remuneration was as follows:
Fees payable for the audit of the parent Company Financial Statements
Fees payable for the audit of the subsidiary Company Financial Statements
Total auditor’s remuneration
Non-audit services:
– Taxation
– Other services pursuant to legislation
Total non-audit services
Non-underlying items were as follows:
Continuing operations
Integration costs1
Restructuring costs2
Non-underlying items included in profit/(loss) from continuing operations
Discontinued operations
Recognition of onerous lease provision 3
Advisory fees 4
Costs relating to discontinuation of Group undertakings5
Non-underlying items included in (loss)/profit from discontinued operations
2019
£’000
891
1,264
328
5,882
67
316
2,033
269
(302)
2019
£’000
10
247
257
–
–
–
2019
£’000
1,441
–
1,441
2019
£’000
1,102
3,424
1,205
5,731
2018
£’000
686
2,691
341
33,320
(14)
369
2,319
324
(86)
2018
£’000
10
255
265
–
–
–
2018
£’000
227
1,449
1,676
2018
£’000
–
–
–
–
Total non-underlying items
7,172
1,676
1
Integration costs of £1,441,000 (2018: £227,000) were incurred in relation to the closure of the previous Networkers Group head office and the
integration of the sales and support functions into the wider Gattaca group, including employee restructuring costs and the impairment of certain
working capital balances.
2
Restructuring costs of £1,449,000 were incurred in the prior year in respect of employee-related expenses and professional fees.
3
An onerous lease provision of £1,102,000 was recognised in the year in respect of property directly affected by the closure of the contract Telecoms
Infrastructure business.
4
Legal fees incurred in 2019 in relation to the Group’s cooperation with certain voluntary enquiries from the US Department of Justice (2018: £nil).
5
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.
Gattaca plc
Annual Report and Accounts 2019
105
Financial Statements
5 Particulars of Employees
The monthly average number of staff employed by the Group during the financial year amounted to:
Total operations
Sales
Administration
Directors
Total
There are no employees employed by the parent Company (2018: nil).
The aggregate payroll costs of the above were:
Total operations
Wages and salaries
Social security costs
Other pension costs
Share-based payments
Total
2019
No.
531
200
8
739
2019
£’000
37,189
4,484
905
269
2018
No.
625
226
9
860
2018
£’000
39,865
4,929
1,835
324
42,847
46,953
Amounts due to defined contribution pension providers at 31 July 2019 were £165,000 (2018: £153,000).
Disclosure of the remuneration of Group’s key management personnel, as required by IAS 24, is detailed
below. Disclosure of the remuneration of the statutory Directors is further detailed in the audited part of the
Remuneration Report on pages 65 to 75.
Total operations
Short-term employee benefits
Contributions to defined contribution pension schemes
Share-based payments
Total
6 Finance Income
Continuing operations
Interest income
Net gains on foreign currency translation
Total
7 Finance Costs
Continuing operations
Bank interest expense
Amortisation of capitalised finance costs
Total
106 Gattaca plc
Annual Report and Accounts 2019
2019
£’000
2,296
163
(22)
2,437
2019
£’000
63
302
365
2019
£’000
1,993
103
2,096
2018
£’000
1,770
130
(86)
1,814
2018
£’000
112
86
198
2018
£’000
1,537
115
1,652
Notes Forming Part of the Financial Statements continuedFinancial Statements 8 Dividends
Equity dividends paid during the year at nil pence per share (2018: 20.00 pence)
Equity dividends proposed after the year end
(not recognised as a liability) at nil pence per share (2018: nil)
9 Parent Company (Loss)/Profit
The amount of (loss)/profit generated by the Parent Company is:
2019
£’000
–
–
2019
£’000
(231)
2018
£’000
6,441
–
2018
£’000
4,670
The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to
present the parent Company’s income statement.
10 Taxation
Analysis of charge in the year
Current tax:
UK corporation tax
Overseas corporation tax
Adjustment in respect of prior years
Deferred tax credit
(note 16)
Origination and reversal of temporary
differences
Adjustments in respect of prior years
Income tax expense/
(credit) for the year
Continuing Discontinued
Continuing Discontinued
2019
£’000
2,368
384
(178)
2019
£’000
(913)
845
–
2018
£’000
1,104
711
409
2018
£’000
167
1,675
–
2,574
(68)
2,224
1,842
(943)
(146)
(1,089)
–
–
–
(2,505)
656
(1,849)
–
–
–
1,485
(68)
375
1,842
UK corporation tax has been charged at 19% (2018: 19%).
The charge for the year can be reconciled to the profit/(loss) as per the income statement as follows:
Profit/(loss) before tax
Profit/(loss) before tax multiplied by the standard rate of
corporation tax in the UK of 19% (2018: 19%)
Expenses not deductible for tax purposes and goodwill
impairment loss
Effect of share-based payments
Irrecoverable withholding tax
Overseas losses not recognised as deferred tax assets
Difference between UK and overseas tax rates
Adjustment to tax charge in respect of previous years
Total taxation charge/(credit) for the year
Continuing Discontinued
Continuing Discontinued
2019
£’000
2019
£’000
2018
£’000
2018
£’000
3,075
(7,559)
(26,739)
1,880
584
(1,436)
(5,080)
357
1,141
107
109
(231)
99
(324)
1,485
42
–
727
465
134
4,220
(12)
77
120
(15)
–
1,065
–
–
1,312
12
161
–
(68)
375
1,842
Gattaca plc
Annual Report and Accounts 2019
107
Financial Statements 10 Taxation continued
Tax (credit)/charge recognised in equity:
Deferred tax (credit)/charge recognised directly in equity
Total tax (credit)/charge recognised directly in equity
2019
£’000
(15)
(15)
2018
£’000
211
211
Future tax rate changes
The UK corporation tax rate of 19% will reduce to 17% from 1 April 2020 and this has been reflected in the
Consolidated Financial Statements.
As these changes of rates have been enacted at the financial position date, the impact of these reductions
has been reflected in the deferred tax liability at 31 July 2019.
Reconciliation of statutory to underlying tax charge:
Income tax expense
Impairment and amortisation of acquired intangibles
Non-underlying items
Foreign currency exchange differences
Underlying income tax expense
2019
£’000
1,485
846
244
(74)
2018
£’000
375
2,704
318
(17)
2,501
3,380
108 Gattaca plc
Annual Report and Accounts 2019
Notes Forming Part of the Financial Statements continuedFinancial Statements 11 Discontinued Operations
On 4 September 2018 the Group announced that it was withdrawing from the contract Telecoms
Infrastructure markets in Africa, Asia and Latin America as well as its operations in the United Arab Emirates,
Singapore, Malaysia and Qatar. As a result, all operations associated with that business stream have been
classified as discontinued. As part of this withdrawal, on 25 June 2019 NWKI Consultancy FZ-LLC was sold
for cash consideration of £2,000. The entity had net liabilities on disposal of £48,000 resulting in a gain
of £46,000.
As detailed in Note 15, Gattaca de Colombia SAS, Comms Resources Colombia and Gattaca France SAS have
been liquidated during the year, resulting in a gain of £89,000. These entities made a trading loss of £68,000
during the year. The results of these liquidated businesses are included in discontinued operations.
Financial information relating to discontinued operations is as follows:
Financial performance and cash flow information
Revenue
Cost of Sales
Gross profit
Administrative expenses 1
(Loss)/profit from operations
Finance income
(Loss)/profit before taxation
Taxation
2019
£’000
11,371
(9,860)
1,511
(9,142)
(7,631)
2018
£’000
36,215
(28,751)
7,464
(5,584)
1,880
72
–
(7,559)
1,880
68
(1,842)
(Loss)/profit for the year after taxation from discontinued operations
Exchange differences on translation of discontinued operations
Other comprehensive (loss) from discontinued operations
1
Included in administrative expenses are £5,731,000 (2018: £nil) of non-underlying items, as detailed in Note 4.
Net cash (outflow)/inflow from operating activities
Net cash inflow from investing activities
Net cash inflow from financing activities
Effects of exchange rates on cash and cash equivalents
(7,491)
533
(6,958)
2019
£’000
(2,810)
14
–
53
Net (decrease)/increase in cash generated by discontinued operations
(2,743)
38
(64)
(26)
2018
£’000
34
–
19
48
101
Gattaca plc
Annual Report and Accounts 2019
109
Financial Statements 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 incentive plans (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. 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 the year ended 31 July 2019 and therefore have been included in the calculation below. The effect
of potential ordinary shares in 2018 is considered to be anti-dilutive and therefore was excluded from the
calculations below.
There are no changes to the profit numerator as a result of the dilution calculation.
Total loss attributable to ordinary shareholders
Number of shares
Basic weighted average number of ordinary shares in issue
Dilutive potential ordinary shares
Diluted weighted average number of shares
Total earnings per share
Earnings per ordinary share
Basic
Diluted
Earnings from continuing operations
Total profit/(loss) for the year
2019
£’000
2018
£’000
(5,901)
(27,351)
2019
000’s
2018
000’s
32,267
32,079
877
–
33,144
32,079
2019
pence
(18.3)
(17.8)
2018
pence
(85.3)
(85.3)
£’000
1,590
£’000
(27,389)
110 Gattaca plc
Annual Report and Accounts 2019
Notes Forming Part of the Financial Statements continuedFinancial Statements Total earnings per share from continuing operations
Earnings per ordinary share from
continuing operations
Basic
Diluted
Earnings from discontinuing operations
Total (loss)/profit for the year
Total earnings per share from discontinuing operations
Earnings per ordinary share from
discontinuing operations
Basic
Diluted
Earnings from continuing underlying operations
Total profit for the year
Total earnings per share for continuing underlying operations
Earnings per ordinary share from
continuing underlying operations
Basic
Diluted
2019
pence
4.9
4.8
£’000
(7,491)
2019
pence
(23.2)
(22.6)
£’000
8,859
2019
pence
27.5
26.7
2018
pence
(85.4)
(85.4)
£’000
38
2018
pence
0.1
0.1
£’000
7,207
2018
pence
22.5
22.5
Gattaca plc
Annual Report and Accounts 2019
111
Financial Statements 13 Goodwill and Intangible Assets
Group
Cost
Goodwill
£’000
Customer
relationships
£’000
Trade
names
£’000
Other
£’000
Software
and software
licences
£’000
Total
£’000
At 1 August 2017
28,739
22,245
5,326
3,809
2,470
62,589
Additions
–
–
–
–
899
899
At 31 July 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
Amortisation
and impairment
At 1 August 2017
Amortisation for the year
–
–
Impairment
At 31 July 2018
5,641
1,864
1,884
1,398
10,787
1,814
343
21,779
9,243
1,833
534
465
341
3,032
–
33,320
21,779
16,698
4,040
2,883
1,739
47,139
Amortisation for the year
–
758
Impairment
2,603
2,468
167
744
339
67
328
1,592
–
5,882
At 31 July 2019
24,382
19,924
4,951
3,289
2,067
54,613
Net book value
At 31 July 2018
At 31 July 2019
6,960
4,357
5,547
1,286
2,321
395
926
520
1,630
16,349
4,158
11,751
Other intangibles comprises candidate databases and non-compete agreements.
The carrying amount of goodwill allocated to CGUs is as follows:
UK Engineering
International
Resourcing Solutions Limited
Total
Impairment testing
2019
£’000
1,712
–
2,645
4,357
2018
£’000
1,712
2,603
2,645
6,960
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.
112 Gattaca plc
Annual Report and Accounts 2019
Notes Forming Part of the Financial Statements continuedFinancial Statements The key assumptions and estimates used when calculating value in use are as follows:
Cash flows from operations
Cash flows from operations are based on the latest five-year profit forecasts approved by the Group’s Board
of Directors which is prepared using expectations of revenue and operating cost growth over the next five
years. The Group prepares cash flow forecasts based on the most recent forecast information approved by
the Directors, adjusted for allocations of Group overhead costs, and extrapolates cash flows into perpetuity
based on long-term growth rates.
Discount rates
The pre-tax rates used to discount the forecast cash flows were a range from 13.3%-15.7% (2018: 12.9% to
13.3%) 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 11.2% (2018:
11.0%) for UK CGUs and 11.8% (2018: 11.0%) for the International CGU.
Growth rates
The medium-term growth rates are based on management forecasts, reflecting past experience and the
economic environment. Long-term growth rates are based on external sources of an average estimated growth
rate of 2.0% (2018: 2.7%), using a weighted average of operating country real GDP growth expectations.
As a result of these forecasts, total impairment losses of £5,882,000 (2018: £33,320,000) have been
recorded in respect of goodwill and acquired intangibles within the International CGU (2018: UK Technology,
International and Professional Services CGUs), as follows:
UK Technology
International
Goodwill
2019
£’000
Intangible
assets
2019
£’000
–
–
Total
2019
£’000
–
2,603
3,279
5,882
Professional Services
–
–
–
Goodwill
2018
£’000
11,611
8,525
1,643
Intangible
assets
2018
£’000
Total
2018
£’000
9,126
20,737
1,961
10,486
454
2,097
Total
2,603
3,279
5,882
21,779
11,541
33,320
In the prior year, goodwill and intangibles within the Professional Services CGU, which wholly related to
the Provanis acquisition, were fully impaired as the business was de-branded and fully integrated into the
Group’s existing Technology business. The recoverable amount of the Professional Services CGU at 31 July
2018 was £nil.
Goodwill and acquired intangibles within the UK Technology, UK Engineering and International CGUs relate
to the Networkers acquisition and have been impaired due to lower forecasts of trading performance
against original expectations at the time of acquisition. At 31 July 2019, the recoverable amounts of the
UK Technology CGU was £9,984,000 (2018: £11,737,000) and £5,349,000 (2018: £5,753,000) for the UK
Engineering CGU.
Reasonable changes in key assumptions, such as a 20-basis point increase in the UK post-tax discount rate to
11.4%, a 20-basis point reduction in the long-term growth rate to 1.8%, or a 2.0% reduction in forecast profit
from operations between 2020 and 2022, do not result in impairment of any of the remaining CGU carrying
values.
Gattaca plc
Annual Report and Accounts 2019
113
Financial Statements 14 Property, Plant and Equipment
Group
Cost
Accumulated
depreciation
At 1 August 2017
Additions
Disposals
Effects of movements in exchange rates
At 31 July 2018
Additions
Disposals
Effects of movements in exchange rates
At 31 July 2019
At 1 August 2017
Charge for the year
Released on disposal
At 31 July 2018
Charge for the year
Released on disposal
At 31 July 2019
Net book value
At 31 July 2018
At 31 July 2019
Motor
vehicles
£’000
Leasehold
improvements
£’000
Fixtures,
fittings and
equipment
£’000
2,885
4,150
1,431
–
–
422
(19)
2
Total
£’000
7,383
1,853
(315)
2
4,316
4,555
8,923
414
–
–
253
(159)
(17)
673
(196)
(17)
4,730
4,632
9,383
1,070
3,534
4,879
313
–
361
(19)
686
(262)
1,383
3,876
5,303
514
–
374
(73)
891
(103)
1,897
4,177
6,091
2,933
2,833
679
455
3,620
3,292
348
–
(296)
–
52
6
(37)
–
21
275
12
(243)
44
3
(30)
17
8
4
Included within Leasehold Improvements is a cost of £1,747,000 (2018: £1,390,000) relating to dilapidations
provisions (see Note 18).
There were no capital commitments as at 31 July 2019 or 31 July 2018.
114 Gattaca plc
Annual Report and Accounts 2019
Notes Forming Part of the Financial Statements continuedFinancial Statements 15
Investments in Subsidiary Undertakings
Cost and carrying value:
Balance at 1 August 2018
Capital contributions to subsidiaries
Balance at 31 July 2019
Company
2019
£’000
8,311
269
8,580
2018
£’000
7,987
324
8,311
The movement in investment in Group companies represents a capital contribution made in Matchtech Group
(UK) Limited relating to share-based payments.
The subsidiary undertakings at the year end are as follows:
Company
Matchtech Group (Holdings) Limited1
Matchtech Group Management
Company Limited 2
Matchtech Group (UK) Limited 1
Matchtech Engineering Limited2
Matchtech Limited 2
Barclay Meade Ltd1
Alderwood Education Ltd1
Gattaca Solutions Limited1
Connectus Technology Limited1
Gattaca Recruitment Limited2
Application Services Limited1
Provanis Limited2
Networkers International Limited1
Networkers International (UK) Limited1
Networkers International Trustees Limited2
The Comms Group Limited1
CommsResources Limited1
Comms Software Limited2
Elite Computer Staff Ltd.2
Networkers Recruitment Services Limited 2
Cappo Group Limited1
Cappo International Limited1
Resourcing Solutions Limited1
MSB Consulting Services Limited2
Gattaca GmbH
MSB International GmbH
Gattaca BV
Matchtech Engineering Inc
Networkers International LLC
Networkers Inc
Cappo Inc
Networkers International (Canada) Inc
NWI Mexico, S. de R.L. de C.V.
Gattaca Mexico Services, S.A. de C.V5
Registered
office note
Country of
incorporation
Share class
% held
2019
% held
2018
Main activities
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
14
3
4
5
5
5
11
6
6
United Kingdom Ordinary
99.7%
99.7%
Holding
United Kingdom Ordinary
100%
100%
Non-trading
United Kingdom Ordinary
99.998% 99.998% Provision of recruitment consultancy
United Kingdom Ordinary
United Kingdom Ordinary
United Kingdom Ordinary
United Kingdom Ordinary
United Kingdom Ordinary
United Kingdom Ordinary
United Kingdom Ordinary
United Kingdom Ordinary
United Kingdom Ordinary
United Kingdom Ordinary
United Kingdom Ordinary
United Kingdom Ordinary
United Kingdom Ordinary
United Kingdom Ordinary
United Kingdom Ordinary
United Kingdom Ordinary
United Kingdom Ordinary
United Kingdom Ordinary
United Kingdom Ordinary
United Kingdom Ordinary
United Kingdom Ordinary
Germany
Germany
Ordinary
Ordinary
Netherlands
Ordinary
United States
Ordinary
United States
Ordinary
United States
Ordinary
United States
Ordinary
Canada
Mexico
Mexico
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
N/A
Non-trading
Non-trading
Provision of recruitment consultancy
Provision of recruitment consultancy
Provision of recruitment consultancy
Provision of recruitment consultancy
Non-trading
Provision of recruitment consultancy
Non-trading
Holding
Provision of recruitment consultancy
Non-trading
Holding
Provision of recruitment consultancy
Non-trading
Non-trading
Non-trading
Holding
Provision of recruitment consultancy
Provision of recruitment consultancy
Non-trading
Provision of recruitment consultancy
Non-trading
Provision of recruitment consultancy
Non-trading
Non-trading
Provision of recruitment consultancy
Provision of recruitment consultancy
Provision of recruitment consultancy
Provision of recruitment consultancy
Provision of recruitment consultancy
Gattaca plc
Annual Report and Accounts 2019
115
Financial Statements 15
Investments in Subsidiary Undertakings continued
Company
Registered
office note
Country of
incorporation
Share class
% held
2019
% held
2018
Main activities
Networkers International South Africa
7
South Africa
Ordinary
100%
100%
Provision of recruitment consultancy
Proprietary Limited
Networkers International Proprietary Limited 7
South Africa
Ordinary
100%
100%
Provision of recruitment consultancy
Kithara Investments Proprietary Limited
Kula Nathi Investments Proprietary Limited
8
7
Networkers International (China) Co. Limited 9
Networkers International (Malaysia) Sdn Bhd
10
Comms Resource SDN. BHD
Gattaca de Colombia SAS3
Comms Resources SAS (Colombia)3
NWKI Consultancy FZ LLC
NWKI Communications LLC3
Cappo Qatar LLC4
Networkers Consultancy (Singapore) PTE.
Limited
Gattaca SAS3
Gattaca Recruitment ETT, SLU
10
12
12
13
13
16
15
17
18
Gattaca Information Technology Services SLU 18
Networkers International (India) PTE
19
South Africa
Ordinary
100%
100%
Holding
South Africa
Ordinary
100%
100%
Holding
China
Malaysia
Malaysia
Ordinary
100%
100%
Provision of recruitment consultancy
Ordinary
100%
100%
Non-trading
Ordinary
100%
100%
Non-trading
Colombia
Ordinary
Colombia
Ordinary
0%
0%
100%
Non-trading
100%
Non-trading
United Arab
Ordinary
100%
100%
Non-trading
Emirates
United Arab
Ordinary
0%
49%
Non-trading
Emirates
Qatar
Ordinary
49%
49%
Non-trading
Singapore
Ordinary
100%
100%
Non-trading
France
Ordinary
0%
100%
Non-trading
Spain
Spain
India
Ordinary
100%
100%
Non-trading
Ordinary
100%
100%
Provision of recruitment consultancy
Ordinary
100%
100%
Non-trading
All holdings by Gattaca plc are indirect except Matchtech Group (Holdings) Limited, Gattaca GmbH and
Matchtech Group Management Company Limited.
Networkers International (UK) Limited has a branch in Russia which is consolidated in the Group’s result.
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.
The Group’s SIP is held by Gattaca plc UK Employee Benefit Trust (‘the EBT’). The Group has control over the
EBT and therefore it has been consolidated in the Group’s results.
1
2
3
For the year ended 31 July 2019, Gattaca plc has provided a legal guarantee dated 5 November 2019 under s479C of the Companies Act 2006 to
these subsidiaries for audit exemption.
These dormant companies are exempt from preparing individual Financial Statements by virtue of s394A of the Companies Act 2006.
These companies were disposed of or liquidated in the year, with the shareholding remaining the same as per the year ended 31 July 2018 up to
the date of disposal or liquidation. They were considered non-trading during the year ended 31 July 2019.
4
Gattaca plc has 100% of the beneficial interest in these entities, and consolidates them as wholly owned subsidiaries in line with IFRS 10.
5
Gattaca Mexico Services, S.A. de C.V was incorporated in October 2018 and wholly consolidated from that date.
116 Gattaca plc
Annual Report and Accounts 2019
Notes Forming Part of the Financial Statements continuedFinancial Statements
Registered office addresses
1
1450 Parkway, Solent Business Park, Whiteley, Fareham, Hampshire, PO15 7AF, United Kingdom
2 c/o Grant Thornton, Jahnstrasse 6, 70597 Stuttgart, Germany
3 Herengracht 124–128, 1015 BT Amsterdam, Netherlands
4 33 SW Flager Avenue, Stuart, Florida, US
5 6400 International Parkway, Suite 1510, Plano TX 75093, US
6
Avenida Paseo de la Reforma No. 296 Piso 15 Oficina A, Colonia Juárez, Delegación Cuauhtémoc, Código Postal 06600. Ciudad de México, Mexico
7 201 Heritage House, 20 Dreyer Street, Claremont, 7735, South Africa
8 6th Floor, 119 Hertzog Boulevard, Foreshore, Cape Town, 8001, South Africa
9 B-2701, Di San Zhi Ye Building, No. A1 Shuguang Xili, Chao Yang District, Beijing, China
10 Level 8, Symphony House, Block D13, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor, Malaysia
11
1 Richmond Street West, Suite 902, Toronto, Ontario, M5H 3W4, Canada
12 Av 9 A Norte, 14 N 73 OF 202, Valle del Caua, Cali, Colombia
13 Office 3022, Shatha Tower, Dubai Media City, Dubai, United Arab Emirates
14 Franlinstr. 48, 60456, Frankfurt, Germany
15 371 Beach Road, #15-09 Keypoint, Singapore 199597
16 Suite #204, Office #40 Al Rawabi Street, Muntazah, Doha, State of Qatar. PO Box 8306
17 1 Rue Favart, 75002, Paris, France
18 Calle General, Moscardo 6. Espaco Office, Madrid 28020, Spain
19 3rd Floor, 301 DLF City Court Sikandarpur, Gurgaon-122002 Harayana, India
16 Deferred Tax
Group
Share-based payments
Depreciation in excess of capital allowances
Accelerated capital allowances
Other temporary and deductible differences
Asset
2019
£’000
105
8
–
47
(Charged)/
credited
to profit
2019
£’000
Credited
to equity
2019
£’000
Foreign
exchange
2019
£’000
Liability
2019
£’000
–
–
Net
2019
£’000
105
8
(556)
(556)
–
47
–
(2)
(35)
842
284
–
15
–
–
–
–
Amounts available for offset
(160)
160
Net deferred tax assets/(liabilities)
–
(396)
(396)
1,089
15
Group
Share-based payments
Depreciation in excess of capital allowances
Accelerated capital allowances
Other temporary and deductible differences
(Charged)/
credited
to profit
2018
£’000
(142)
(74)
Net
2018
£’000
92
43
(Charged)
to equity
2018
£’000
Foreign
exchange
2018
£’000
(211)
–
–
–
(1,398)
(1,398)
2,516
(238)
(238)
(451)
Asset
2018
£’000
Liability
2018
£’000
–
–
92
43
–
–
Net deferred tax assets/(liabilities)
135
(1,636)
(1,501)
1,849
(211)
–
–
–
1
–
1
–
–
–
2
2
Gattaca plc
Annual Report and Accounts 2019
117
Financial Statements
16 Deferred Tax continued
The movement on the net deferred tax is as shown below:
At 1 August
Acquired intangibles
Recognised in income (Note 10)
Recognised in equity
Foreign exchange
At end of year
Deferred tax assets reversing within 1 year
Deferred tax liabilities reversing within 1 year
At end of year
Deferred tax assets reversing after 1 year
Deferred tax liabilities reversing after 1 year
At end of year
Unrecognised deferred tax assets
Tax losses carried forward against profits of future years
Depreciation in excess of capital allowances
Other temporary and deductible differences
Net deferred tax assets
Group
2019
£’000
(1,501)
–
1,089
15
1
2018
£’000
(3,141)
–
1,849
(211)
2
(396)
(1,501)
2019
£’000
29
(114)
(85)
2019
£’000
131
(442)
(311)
Group
2019
£’000
755
–
88
843
2018
£’000
20
(469)
(449)
2018
£’000
115
(1,167)
(1,052)
2018
£’000
537
45
645
1,227
Of the unused tax losses £1,646,000 (2018: £1,730,000) can be carried forward indefinitely and £261,000
(2018: £99,000) 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 £9,002,000 (2018: £10,617,000). If the earnings were remitted, tax of £164,000 (2018: £191,000)
would be payable.
The UK corporation tax rate will reduce from 19% to 17% from 1 April 2020. Deferred tax has been valued
based on the substantively enacted rates at each balance sheet date at which the deferred tax is expected
to reverse.
118 Gattaca plc
Annual Report and Accounts 2019
Notes Forming Part of the Financial Statements continuedFinancial Statements 17 Trade and Other Receivables
Trade receivables from contracts with customers, net of loss allowance
71,704
81,773
2019
£’000
2018
£’000
2019
£’000
–
2018
£’000
–
Group
Company
Amounts owed by Group companies
Corporation tax receivables
Other receivables
Prepayments
Accrued income
Total
–
329
660
241
1,351
1,198
1,600
22,837
27,947
–
100,877
94,925
281
–
–
–
–
2
–
–
96,728
112,912
101,158
94,927
The amounts owed by Group undertakings 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.
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.
The Directors consider that the carrying amount of trade and other receivables approximates to the fair value.
No expected credit loss allowance under IFRS 9 has been recognised for accrued income as the credit risk
over accrued income is not considered to be material to the Group.
Impairment of trade receivables from contracts with customers
Trade receivables from contracts with customers, gross amounts
Loss allowance
Trade receivables from contracts with customers, net of loss allowance
Group
2019
£’000
2018
£’000
73,893
83,320
(2,189)
(1,547)
71,704
81,773
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.
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 ageing 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 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 adjusted to reflect any relevant current and forward-looking information expected to affect the
ability of customers to settle the receivables.
Gattaca plc
Annual Report and Accounts 2019
119
Financial Statements 17 Trade and Other Receivables continued
The loss allowance for trade receivables was determined as follows:
2019
Weighted expected loss rate
Gross carrying amount-trade receivables
Loss allowance
2018
Current
1.4%
69,944
987
More than
30 days
past due
More than
60 days
past due
More than
90 days
past due
Total
2.0%
1,130
23
4.1%
665
28
53.4%
2,154
73,893
1,151
2,189
More than
30 days
past due
More than
60 days
past due
More than
90 days
past due
Current
Total
Weighted expected loss rate
1.3%
5.0%
Gross carrying amount-trade receivables
76,482
3,027
Loss allowance
993
152
5.5%
1,628
90
14.3%
2,183
83,320
312
1,547
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 business of £1,126,000
at 31 July 2019 (31 July 2018: £595,000).
The loss allowance for trade receivables at year end reconciles to the opening loss allowance as per below:
Opening loss allowance at 1 August
Increase in loss allowance recognised in profit and loss during the year
Receivable written off during the year as uncollectible
Closing loss allowance at 31 July
Group
2019
£’000
1,547
994
(352)
2,189
2019
2018
Dilapidation
provisions
£’000
Onerous lease
provisions
£’000
Dilapidation
provisions
£’000
Onerous lease
provisions
£’000
1,390
402
(45)
–
–
1,102
(167)
(1)
Total
£’000
1,390
1,504
1,596
43
(212)
(249)
(1)
–
1,747
934
2,681
1,390
–
–
–
–
–
18 Provisions
Group
Balance at 1 August
Provisions made in the year
Provisions utilised
Unwinding of discount
Balance at 31 July
120 Gattaca plc
Annual Report and Accounts 2019
2018
£’000
1,028
1,184
(665)
1,547
Total
£’000
1,596
43
(249)
–
1,390
Notes Forming Part of the Financial Statements continuedFinancial Statements Group
Non-current
Current
Total
2019
2018
Dilapidation
provisions
£’000
Onerous lease
provisions
£’000
Total
£’000
Dilapidation
provisions
£’000
Onerous lease
provisions
£’000
1,747
–
1,747
602
332
934
2,349
1,390
332
–
2,681
1,390
–
–
–
Total
£’000
1,390
–
1,390
Onerous lease provisions of £1,102,000 were recorded in the year in relation to the remaining lease term
of property that is no longer in use by the Group as a result of the closure of the contract Telecoms
Infrastructure business. These costs are presented as non-underlying as shown in Note 4.
No provisions are held by the parent Company (2018: nil).
19 Trade and Other Payables
Trade payables
Amounts owed to Group undertakings
Taxation and social security
Contractor wages payable
Accruals and deferred income
Other payables
Total
Group
Company
2019
£’000
285
–
2018
£’000
2
–
2019
£’000
–
2018
£’000
–
54,083
47,647
8,013
10,144
24,270
16,560
7,024
1,084
11,980
2,164
–
–
–
–
–
–
–
–
40,676
40,850
54,083
47,647
Amounts owed to Group undertakings are unsecured, repayable on demand and accrue no interest.
Gattaca plc
Annual Report and Accounts 2019
121
Financial Statements 20 Loans and Borrowings
Group
Company
2019
£’000
2018
£’000
2019
£’000
2018
£’000
Working capital facility
Finance costs capitalised
29,119
35,859
(81)
(158)
Bank loans and borrowings due in less than one year
29,038
35,701
–
–
–
–
–
–
Term loan
Finance costs capitalised
15,000
15,000
15,000
15,000
(43)
(69)
(43)
(69)
Bank loans and borrowings due in more than one year
14,957
14,931
14,957
14,931
Total bank loans and borrowings
43,995
50,632
14,957
14,931
At 31 July 2019 (31 July 2018) the Group had agreed banking facilities with HSBC totalling £90m comprising
a £75m Invoice Financing working capital facility and a £15m (2018: £20m) Term Loan Facility committed
until October 2020.
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 trade receivables up to a maximum of £75m. Interest is charged on borrowings
at a rate of 2.30% (2018: 1.6%) over HSBC Bank base rate.
The Group’s £15m (2018: £20m) Term Loan 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% (2018: 3.25%) over HSBC LIBOR rate.
The Group is required to comply with certain financial covenants in the Term Loan Facility and all covenant
requirements were satisfied in the year.
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
2019
£’000
2018
£’000
2019
£’000
2018
£’000
Trade and other receivables (Note 17)
- Financial assets recorded at amortised cost
95,201
111,071
100,877
94,927
Cash and cash equivalents
- Financial assets recorded at amortised cost
19,173
9,758
–
–
Total
114,374
120,829
100,877
94,927
122 Gattaca plc
Annual Report and Accounts 2019
Notes Forming Part of the Financial Statements continuedFinancial Statements Financial liabilities are included in the Statement of Financial Position within the following headings:
Group
Company
2019
£’000
2018
£’000
2019
£’000
2018
£’000
Borrowings (Note 20)
– Financial liabilities recorded at amortised cost
43,995
50,632
14,957
14,931
Trade and other payables (Note 19)
– Financial liabilities recorded at amortised cost
32,663
30,706
54,083
47,647
Total
76,658
81,338
69,040
62,578
The amounts at which the assets and liabilities above are recorded are considered to approximate to fair value.
22 Commitments Under Operating Leases
The Group’s commitments under non-cancellable operating leases are as follows:
Land/buildings
Payments falling due: within 1 year
between 1 and 5 years
after 5 years
Other
Payments falling due: within 1 year
between 1 and 5 years
after 5 years
The Company has no commitments under non-cancellable operating leases (2018: nil).
Group
2019
£’000
2,210
6,418
2,516
11,144
210
188
1
399
2018
£’000
2,067
6,894
4,670
13,631
183
176
–
359
Gattaca plc
Annual Report and Accounts 2019
123
Financial Statements 23 Share Capital
Authorised share capital
40,000,000 (2018: 40,000,000) ordinary shares of £0.01 each
Allotted, called up and fully paid:
32,285,000 (2018: 32,256,000) ordinary shares of £0.01 each
The number of shares in issue in the Company is shown below:
In issue at 1 August
Exercise of share options
In issue at 31 July
Share options
Company
2019
£’000
400
Company
2019
£’000
323
2018
£’000
400
2018
£’000
323
Company
2019
’000
32,256
29
32,285
2018
’000
31,801
455
32,256
The following options arrangements exist over the Company’s shares:
2019
’000s
2018
’000s
Date of
grant
Exercise
price pence
Exercise period
From
To
Zero-Priced Share Option Bonus
Zero-Priced Share Option Bonus
Zero-Priced Share Option Bonus
Zero-Priced Share Option Bonus
Zero-Priced Share Option Bonus
Zero-Priced Share Option Bonus
Zero-Priced Share Option Bonus
Zero-Priced Share Option Bonus
Zero-Priced Share Option Bonus
1
1
1
1
1
1
2
2
5
Zero-Priced Share Option Bonus
34
Zero-Priced Share Option Bonus
3
Zero-Priced Share Option Bonus
27
Zero-Priced Share Option Bonus
Long-Term Incentive Plan Options
Zero-Priced Share Option Bonus
Long-Term Incentive Plan Options
–
–
–
–
Zero-Priced Share Option Bonus
62
1
1
1
1
1
1
2
4
6
41
5
35
10
13
60
15
62
18/01/2010
18/01/2010
04/02/2011
04/02/2011
31/01/2012
31/01/2012
31/01/2013
31/01/2013
01/01/2014
01/01/2014
28/01/2015
28/01/2015
16/10/2015
11/02/2016
11/02/2016
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
18/01/2012
18/01/2020
18/01/2013
18/01/2020
03/02/2013
04/02/2021
03/02/2014
04/02/2021
30/01/2014
31/01/2022
30/01/2015
31/01/2022
30/01/2015
31/01/2023
30/01/2016
31/01/2023
01/01/2016
01/01/2024
01/01/2017
01/01/2024
28/01/2017
28/01/2025
28/01/2018
28/01/2025
16/10/2018
16/10/2025
11/02/2019
11/02/2026
11/02/2019
11/02/2026
11/02/2016
225
11/02/2019
11/02/2026
03/02/2017
1
1
03/02/2020
03/02/2027
31/01/2020
31/01/2027
Zero-Priced Share Option Bonus
107
122
31/01/2017
Long-Term Incentive Plan Options
–
83
31/01/2017
72
31/01/2019
31/01/2027
124 Gattaca plc
Annual Report and Accounts 2019
Notes Forming Part of the Financial Statements continuedFinancial Statements 2019
’000s
2018
’000s
Date of
grant
Exercise price
pence
Exercise period
From
To
Long-Term Incentive Plan Options
72
Long-Term Incentive Plan Options
–
Long-Term Incentive Plan Options
38
Zero-Priced Share Option Bonus
Zero-Priced Share Option Bonus
Total
324
201
883
83
55
55
–
–
657
31/01/2017
31/01/2017
31/01/2017
19/12/2018
19/12/2018
72
145
145
1
1
31/01/2020
31/01/2027
31/01/2019
31/01/2027
31/01/2020
31/01/2027
19/12/2021
19/12/2028
19/12/2021
19/12/2028
During the year, the Group granted share options under a Zero-Priced Share Option Bonus for Executive Directors
and Senior Management. The zero-priced share options were granted on 19 December 2018 to members of staff
subject to a three-year holding period, a release price of 1 pence per share and are subject to either TSR or EPS
performance conditions. All share options have a life of ten years and are equity settled on exercise.
The movement in share options is shown below:
Outstanding at 1 August
Granted
Forfeited/lapsed
Exercised
Outstanding at 31 July
Exercisable at 31 July
2019
Weighted
average
exercise price
(pence)
48.2
1.0
76.8
1.0
13.1
1.0
Number
’000s
657
525
(270)
(29)
883
78
Weighted
average
share price
(pence)
–
–
–
129.8
2018
Weighted
average
exercise price
(pence)
30.4
22.6
40.5
1.7
48.2
1.0
Number
’000s
1,477
–
(365)
(455)
657
109
Weighted
average
share price
(pence)
–
–
–
276.6
The numbers and weighted average exercise prices of share options vesting in the future are shown below.
Exercise date
31/01/2019
11/02/2019
31/01/2020
03/02/2020
18/12/2021
Total
2019
2018
Weighted
average
remaining
contract life
(months)
Weighted
average
exercise price
(pence)
Number
’000s
Weighted
average
remaining
contract life
(months)
Weighted
average
exercise price
(pence)
Number
’000s
–
–
6
6
29
–
–
217
62
525
804
–
–
49.9
1.0
1.0
6
7
18
18
–
138
88
260
62
–
548
101.8
41.1
53.8
1.0
–
In addition to the share option schemes the Group operated a 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 92,247 shares (2018:
83,740) under this scheme, incurring a charge of £23,564 (2018: £26,723) recognised in the share-based
payment reserve.
The Group’s Share Incentive Plan is held by an 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 2019. As at 31 July 2019, an excess fund of
£140,000 was held by the EBT, which has been included in cash and cash equivalents.
Gattaca plc
Annual Report and Accounts 2019
125
Financial Statements 23 Share Capital continued
The following expenses in relation to share-based payment transactions were incurred:
Group
Zero-Priced Share Option Bonus
Long-Term Incentive Plan Options
Share Incentive Plan
Total
2019
£’000
19
77
173
269
2018
£’000
82
88
154
324
The key assumptions used in the calculation of fair value per awards are as follows:
Share price
on the date
of grant
(£)
Exercise
price
(£)
Volatility
(%)
Vesting
period
(yrs)
Dividend
yield
(%)
Risk-free
rate of
interest
(%)
Fair
value
(£)
Date of grant
05/08/2016
09/09/2016
07/10/2016
08/11/2016
07/12/2016
16/01/2017
SIP
SIP
SIP
SIP
SIP
SIP
31/01/2017
Zero-Priced Share Option Bonus
31/01/2017
Zero-Priced Share Option Bonus
31/01/2017
Zero-Priced Share Option Bonus
31/01/2017
Zero-Priced Share Option Bonus
3.54
3.87
3.57
3.16
2.95
2.98
2.92
2.92
2.90
2.90
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
N/A
N/A
N/A
N/A
N/A
N/A
31.6%
31.6%
31.6%
31.6%
31/01/2017
Long-Term Incentive Plan Options
2.90
0.72
31.6%
03/02/2017
Long-Term Incentive Plan Options
07/02/2017
07/03/2017
07/04/2017
09/05/2017
07/06/2017
07/07/2017
07/08/2017
08/09/2017
09/10/2017
08/11/2017
08/12/2017
09/01/2018
08/02/2018
08/03/2018
12/04/2018
09/05/2018
SIP
SIP
SIP
SIP
SIP
SIP
SIP
SIP
SIP
SIP
SIP
SIP
SIP
SIP
SIP
SIP
126 Gattaca plc
Annual Report and Accounts 2019
2.90
2.94
2.94
3.10
3.18
3.28
3.09
2.87
2.99
3.10
3.12
3.05
3.00
2.63
2.31
1.84
1.40
1.45
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
31.6%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
N/A
N/A
N/A
N/A
N/A
N/A
7.9%
7.9%
7.9%
7.9%
7.9%
7.9%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A 3.54
N/A 3.87
N/A 3.57
N/A 3.16
N/A 2.95
N/A 2.98
0.3% 1.27
0.3% 1.51
0.3% 1.23
0.3% 1.49
0.3% 0.86
0.3% 0.66
N/A 2.94
N/A 2.94
N/A 3.10
N/A 3.18
N/A 3.28
N/A 3.09
N/A 2.87
N/A 2.99
N/A 3.10
N/A 3.12
N/A 3.05
N/A 3.00
N/A 2.63
N/A 2.31
N/A 1.84
N/A 1.40
Notes Forming Part of the Financial Statements continuedFinancial Statements Date of grant
08/06/2018
09/07/2018
08/08/2018
10/09/2018
08/10/2018
08/11/2018
10/12/2018
SIP
SIP
SIP
SIP
SIP
SIP
SIP
19/12/2018
Zero-Priced Share Option Bonus
19/12/2018
Zero-Priced Share Option Bonus
09/01/2019
08/02/2019
11/03/2019
08/04/2019
09/05/2019
10/06/2019
08/07/2019
SIP
SIP
SIP
SIP
SIP
SIP
SIP
Share price
on the date
of grant
(£)
Exercise
price
(£)
Volatility
(%)
Vesting
period
(yrs)
Dividend
yield
(%)
Risk-free
rate of
interest
(%)
Fair
value
(£)
1.58
1.25
1.50
1.40
1.30
1.41
1.14
1.07
1.07
1.13
1.17
1.18
1.39
1.58
1.53
1.43
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0.01
44.9%
0.01
0.01
0.01
0.01
0.01
0.01
0.01
N/A
N/A
N/A
N/A
N/A
N/A
N/A
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0.0%
0.0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A 1.58
N/A 1.25
N/A 1.50
N/A 1.40
N/A 1.30
N/A
N/A
1.41
1.14
N/A 1.08
0.7% 0.73
N/A
N/A
N/A
1.13
1.17
1.18
N/A 1.39
N/A 1.58
N/A 1.53
N/A 1.43
For Zero-Priced Share Option Bonus grants in 2019 that are subject to a TSR vesting condition, a Monte
Carlo simulation model was used for valuation. For Zero-Priced Share Option Bonus grants in 2019 that are
subject to an 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. From 2018
onwards, the volatility of the Company’s share price on the 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 UK Gilt Strip, with term to maturity
equal to the life of the option.
24 Transactions with Directors and Related Parties
During the year the Group made sales of £89,000 (2018: £152,000) to InHealth Group Ltd and purchases
of £11,000 (2018: £7,000) from Preventicum UK Limited which are related parties by virtue of common
directorship of Richard Bradford. During the year, the Group made sales of £201,000 (2018: £350,000) to
Tricoya Technologies Limited, a subsidiary of Accsys Technologies Plc, which is considered as a related party
transaction by virtue of common directorship of Patrick Shanley. As at the year end, there was no balance
outstanding for any transactions for InHealth Group Ltd, Preventicum UK Limited or Tricoya Technologies
Limited (2018: £5,000 outstanding balance with InHealth Group Ltd, £nil for Preventicum UK Limited, £nil for
Tricoya Technologies Limited). Group policy is for all transactions with related parties to be made on an arm’s
length basis and no guarantees have been given to, or received from, related parties.
There were no other related party transactions with entities outside of the Group.
During the year Matchtech Group (UK) Limited charged Gattaca plc £715,000 (2018: £803,000) for provision
of management services. Further details of transactions with Directors are included in the Director’s
Remuneration Report on pages 65 to 75.
The remuneration of key management is disclosed in Note 5.
Gattaca plc
Annual Report and Accounts 2019
127
Financial Statements
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
2019
Term loan
Invoice financing working capital facility
Trade payables
Total
2018
Term loan
Invoice financing working capital facility
Trade payables
Total
Company
2019
Term loan
Total
2018
Term loan
Total
Borrowing facilities
0 to <1 years
£’000
1 to <2 years
£’000
2 to <5 years
£’000
5 years
and over
£’000
Contractual
cash flows
£’000
531
15,129
29,228
25,639
–
–
55,398
15,129
–
–
–
–
556
500
15,121
35,907
18,725
55,188
–
–
–
–
500
15,121
–
–
–
–
–
–
–
–
0 to <1 years
£’000
1 to <2 years
£’000
2 to <5 years
£’000
5 years and
over £’000
15,660
29,228
25,639
70,527
16,177
35,907
18,725
70,809
Contractual
cash flows
£’000
531
531
15,129
15,129
–
–
556
556
500
500
15,121
15,121
–
–
–
–
15,660
15,660
16,177
16,177
The Group makes use of working capital facilities and a term loan, details of which can be found in Note 20. The
undrawn facility available at year end in respect of which all conditions precedent had been met was as follows:
Group
Company
2019
£’000
2018
£’000
2019
£’000
2018
£’000
Expiring in one to five years
24,880
19,506
–
5,000
The Directors have calculated that the effect on profit of a 100-basis point increase in interest rates would be
an expense of £634,000 (2018: expense of £756,000).
The Directors believe that the carrying value of borrowings approximates to their fair value.
128 Gattaca plc
Annual Report and Accounts 2019
Notes Forming Part of the Financial Statements continuedFinancial Statements 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 four covenant periods. As at 31 July 2019 the Group has financing facilities of £90m, comprising a £75m
Invoice Financing Facility and a £15m Term Loan Facility until October 2020. 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 UK operations whose functional currency is Sterling. The risk arises
on the difference between exchange rates at the time the invoice is raised to when the invoice is settled by
the client. For sales denominated in foreign currency, the Group ensures that direct costs associated with the
sale are also denominated in the same currency. Further foreign exchange risk arises where there is a gap in
the amount of assets and liabilities of the Group denominated in foreign currencies that are required to be
translated into Sterling at the year-end rates of exchange. Where the risk to the Group is considered to be
significant, the Group will enter into a matching forward foreign exchange contract with a reputable bank.
Net foreign currency monetary assets are shown below:
US Dollar
Euro
Group
2019
£’000
11,324
4,561
2018
£’000
8,371
5,541
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 £4,279,000 (2018: £3,567,000). A 25-cent weakening in the exchange rates would, on the same
basis, have decreased pre-tax profit and reduced net assets by £2,778,000 (2018: £2,353,000).
The Company only holds balances denominated in its functional currency and so is not exposed to foreign
currency risk.
Gattaca plc
Annual Report and Accounts 2019
129
Financial Statements 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
to price 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:
Total equity
Cash and cash equivalents
Capital
Total equity
Borrowings
Overall financing
Group
2019
£’000
41,907
(19,173)
22,734
41,907
43,995
85,902
2018
£’000
47,019
(9,758)
37,261
47,019
50,632
97,651
Capital to overall financing ratio
26%
38%
27 Net Debt
Net debt is the total amount of cash and cash equivalents less interest-bearing loans and borrowings.
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.
2019
Cash and cash equivalents
Interest-bearing term loan
Working capital facilities
Total net debt
Capitalised finance costs
1 August 2018
£’000
Net cash flows
£’000
Amortisation of
financing costs
£’000
9,758
(15,000)
(35,859)
(41,101)
227
9,415
–
6,740
16,155
–
31 July 2019
£’000
19,173
(15,000)
(29,119)
(24,946)
124
(24,822)
–
–
–
–
(103)
(103)
Total net debt after capitalised finance costs
(40,874)
16,155
130 Gattaca plc
Annual Report and Accounts 2019
Notes Forming Part of the Financial Statements continuedFinancial Statements i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
31 July 2018
£’000
9,758
(15,000)
(35,859)
(41,101)
227
(40,874)
2018
Cash and cash equivalents
Interest-bearing term loan
Working capital facilities
Total net debt
Capitalised finance costs
1 August 2017
£’000
Net cash flows
£’000
Amortisation of
financing costs
£’000
5,802
(20,714)
3,956
5,714
(25,693)
(10,166)
(40,605)
317
(496)
25
(471)
–
–
–
–
(115)
(115)
Total net debt after capitalised finance costs
(40,288)
28 Non-controlling Interests
The non-controlling interest transferred in 2018 related to a 30% minority stake in Resourcing Solutions
Limited which the Group acquired for consideration of £3,552,000. From that date, it was consolidated as a
wholly owned subsidiary with no non-controlling interest.
29 Contingent Liabilities
The Group is subject to corporate and other tax rules in the jurisdictions where it conducts its business
operations. Changes in tax rates, tax reliefs and tax laws, changes in practice or interpretation of the law
by the relevant tax authorities, increasing challenges by relevant tax authorities on transfer pricing and
other matters, or any failure to manage tax risks adequately could result in increased charges, financial loss,
penalties and reputational damage, which may materially adversely affect the Group’s financial condition
and results of operations.
We continue our cooperation with the United States Department of Justice and in 2019 have incurred £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.
30 Events after the Reporting Date
On 31 October 2019, the Group renewed its financing facilities with HSBC, extending the term loan out to
October 2022. The new facility allows the Group to mitigate the impact of the leverage covenant on the
business, minimise the risk of an interruption to liquidation and improve the cost-effectiveness of the overall
financing arrangements. The three-year facility agreement includes a £15m Revolving Credit Facility (RCF);
the Group’s £75m Invoice Financing Facility continues as before.
Gattaca plc
Annual Report and Accounts 2019
131
Financial Statements
Gattaca plc
1450 Parkway
Solent Business Park
Whiteley
Fareham
Hampshire
PO15 7AF
T: 01489 898989
E: info@gattacaplc.com
www.gattacaplc.com