Gattaca to end number of activities after review

4th Sep 2018 12:57

(Sharecast News) - Specialist engineering and technology recruitment solutions company Gattaca updated the market on its review of its international footprint on Tuesday, having started the review at the beginning of August with a view to focussing on markets where it believed it could make "significant, scalable and sustainable" profits in the short to medium term.The AIM-traded firm said it also wanted to reduce its exposure to businesses and territories which were characterised as lacking critical mass, declining market share, low profitability or with a high administrative burden, including unattractive payment terms.As a result of that review, the company said on Tuesday that it was now putting in place a number of steps to withdraw from those territories and markets, including the contract telecoms infrastructure markets in Africa, Asia and Latin America - some of which was UK sourced - as well as its operations in Dubai, Kuala Lumpur and Qatar.Gattaca said that as part of that process, it was also consolidating its London and Bromley offices to a single location at its London Cotton Centre premises.It said it was currently notifying all staff and customers that would be affected by the process.Gattaca said it remained "fully committed" to growing its international footprint in those areas and territories which offered the opportunity to achieve those "significant, sustainable and scalable" profits.The Americas, where the firm had reportedly been experiencing "excellent" growth, was described as a clear example of that."We are pleased therefore to announce today the opening of a new hub in the USA, based in Atlanta, Georgia; this will operate alongside our existing hub in Dallas, Texas," the board said in its statement."In China we aim to replicate the success of our America model as we see a shift towards engineering and IT permanent recruitment and a reduction in the legacy telco market."The board said it also remained "fully committed" to technology, and would continue to invest in its 'Networkers' brand, including in the sub sectors within telecoms which met its strategic criteria.Gattaca said the business impacted represented around £7m of FY18 NFI, the significant majority of its non-recoverable withholding tax, and made a small contribution toits FY18 underlying profit after tax.That business had been in decline, the board claimed, and the board had not forecast it delivering a "significant" contribution towards its FY19 underlying profit after tax.As a result, its forward expectations remained broadly unchanged. The cessation of the detailed activities would allow a "significant" release of working capital, in the order of £7m before exit costs, and result in a reduction in net debt, which at the end of July 2018 was £41m - being better than the board's previous estimate of £46m.One-time restructuring costs to be incurred during FY19 were expected to be of the order of £3m.Gattaca said it would update the market further at the time of its full-year results announcement on 8 November."The steps we are announcing today will place Gattaca on a firm footing for future growth," said Gattaca chairman Patrick Shanley."The withdrawal from these territories and telco infrastructure operations remove some very low margin business, which was tying up significant working capital and diluting the strength of our core operations."Following this review, Gattaca can now focus on our strong core and growing businesses, in particular within UK engineering, UK IT, and North America as well China and our recently acquired RSL Rail business."