Gattaca Share Discussion Threads

[edmonda] 08/11/2018 08:01

Indeed no unpleasant surprises in prelims out this morning with reassuring evidence of cost savings, plus focused investment in growth segments.

ED forecasts change little and fair value price retained. Full research note freely accessible here:

[quepassa] 08/11/2018 07:38

No Final Dividend for second half. Total dividend for year of 3p (first half) versus a total of 23p last year.

Dire results.

A massive Loss of £25 million with EPS at a whopping minus 83.5pence.

Not a confident sounding outlook, beset with Brexit concerns.




Debt. Read and assimilate.

They have negotiated a "more generous" covenant package. They obviously once thought that the original covenant package was generous enough. But no longer. Caveat:

"Given the headwinds around Brexit and its potential impact on the economy, we have renegotiated our facilities with HSBC, removing excess facilities and agreeing a more generous covenant profile."


A share price of 50p on the cards??


This is looking very uncomfortable in my view.

1. Massive loss
2. Final divi stopped
3. Significant increase in admin costs
4. Renegotiating banking covenants.


Good Luck All.

But watch out below. These are worrying results in my view


ALL IMO. DYOR.
QP

[arthur_lame_stocks] 08/11/2018 07:25

Well results are out. No real surprises I can see. Underlying pbt £12.7m offset by large goodwill write off. No dividend which seems prudent until debt is reduced.

I still think these are ludicrously cheap as long as business is stabilising.

[stemis] 01/11/2018 10:36

They confirmed in early August that they expect to meet market expectations for underlying PBT. I can't believe that there is much accounting uncertainty in recruitment businesses (it's just billing out costs). I don't see why debt should be a problem. It is confirmed at £46m. At the interim they had £101m of trade receivables. Even on 65% coverage that's a headroom of £20m.

I think a lot will depend on the outlook statement. NFI was up 1% on an underlying basis in 2017/18 (6% in total) and H2 was very slightly better, so the business seems to be stable. They are obviously focussing on costs so the market expectation of a small rise in 2018/19 EPS doesn't look stretching. This will have the intangible write off and restructuring costs. It's about presenting the numbers clearly.

I think the market concerns are Brexit and IR35 (and, of course, credibility of management bearing in mind what's happened to the company).

[arthur_lame_stocks] 01/11/2018 07:02

I agree, the shares seem ludicrously cheap, the headline figures are not going to be great largely due to the large goodwill write off and debt is a bit high but the balance sheet is not bad with NCA less all liabilities of around £30m (from memory).

Recruiters seem out of fashion at the moment, Hays has fallen quite a long way. It seems a bit strange to me with low unemployment.

[stemis] 31/10/2018 18:36

Current forecast EPS for Y/E (which I presume is underlying) is 24.45p, meaning current rating is a P/E of 4.9. So hopefully a return towards a more sensible level (which would be more like 200p).

[arthur_lame_stocks] 31/10/2018 14:59

Quite a large rise from below £1, I wonder if it precedes news or if it's just the shares starting to return to a more sensible level.

[pugugly] 29/10/2018 18:22

Bad news imo in the Budget but expected - Could it be in the price?
"Government sustained its attack on the self-employed by announcing plans to extend the draconian ‘Off-Payroll’ rules into the private sector in April 2020"
OK was expected next fiscal so has been posponed a year but I am advised that many major users jitttery and avoiding direct contractors as of nwo. Comments/knowldge/thoughts?


.

[quepassa] 26/10/2018 12:45

Oh dear.

4th September 2018 Update Note - Gattaca market price 143p. Equity Development INCREASE their Valuation from 175p to 180p.

Market price today (less than two months since ED Update) 100p - and falling.



Something tells me that the 8th. November prelims will not make happy reading.


In my opinion only, Gattaca is a dog. But what concerns me more is that ED appear to be continually barking up the wrong tree.

ALL IMO. DYOR.
QP

[value hound] 19/10/2018 16:42

Hi PUGUGLY - I'm also concerned re the prospect of the kitchen sink as previously stated, but if profits were < the prev statement, wouldn't the have had to update by now? What are the rules on this? Also - what are the expectations?

[pugugly] 19/10/2018 16:27

value hound - Could it be worries about the debt ?
"Net Debt, which at the end of July 2018 was GBP41m (being better than our previous estimate of GBP46m). One-time restructuring costs to be incurred during FY19 are expected to be of the order of GBP3m. "
or the recoverability of the receivable
and or fear of significant further write down of intangibles.

Plenty of areas for BLACK HOLES to be found - Could there possibly be another CAKE in the baking?

New CEO is bound to Kitchen Sink - -

PLUS of course in UK freeze in hirings due to Brexit uncertainty

PLUS PLUS of course further crackdown on Self Employed contractors supposed tax advantages in the Autumn Budget - might have a very significant impact on contract revenue

OK we know restructuring in hand but given the previous significant importance of conraact revenues could the business model have broken a gear?

[spooky] 18/10/2018 09:06

Your thoughts are exactly the same as mine. I'm pretty certain we could generate a lot of shareholder value if we were running it, its just a question of whether current management can.

[value hound] 18/10/2018 09:01

Well the latest we knew was: "FY18 underlying PBT expected to be broadly in line with market expectations" and we have current assets less all liabilities of £27.78m - versus a mkt cap of £39m at the bid of 121.34p (based on a dummy trade I just did).

So what are the market's expectations exactly?

Average post-tax profits over the past few years come out around £8.5m and most recruiters seem to reporting well - and founder George Materna with 25% will have his fellow shareholders' interests at heart.

But the business as a going concern is still effectively valued at not much over a year's post-tax profits - so something's not right; either trading has deteriorated or the shares are a bargain. I prefer to believe the latter but we'll know more on 8th November.

They did talk about a "a final quarter weighting" with the interims, but they also made a pre-tax underlying profit of almost £7m (and re-based the divi to a more realistic level).

All in all, I'm neither buying nor selling. You can't imagine the narrative being hugely optimistic on 8 Nov, but there wasn't a further trading update which they'd had to have done, AIUI, if trading had deteriorated further.

My best guess is that this is an absolute bargain - but it's also possible that the shares could fall early doors on the 8th.

Any views???

[quepassa] 18/10/2018 08:19

going sub £1

[kmann] 27/9/2018 12:11

Looks set to trade up again imo

[quepassa] 19/9/2018 09:00

De la Rue....... share price performance absolutely woeful in recent years.


First job for Kevin, change the corporate name from Gattaca which was/is bad kharma.

ALL IMO. DYOR.
QP

[value hound] 19/9/2018 08:54

Let's hope he's not one of the new breed of CEOs who come in and immediately kitchen sink things, then make themselves look good by getting the share price gradually back to where it was when they took the helm!

[stemis] 19/9/2018 08:31

New CEO - ex Verifone (US technology company providing point of sale of sale systems). Here is his CV - hxxps://www.linkedin.com/in/kevinfreeguard/?originalSubdomain=uk

Not massively overwhelmed by the appointment. No direct recruitment industry experience and no experience heading up a plc. No doubt he'll now be given a big salary and bonus/option package that'll make him a wealthy man just for getting the share price back to the 300p mark it was 12 months ago...

[stockdawg1000] 04/9/2018 13:28

Unlikely to move until after April 2019... Brexit (movement of people and inward investment in building projects to be affected) plus IR35 reform hitting the private sector, will have huge impacts on this business. Look at how IR35 reform in the public sector affected them last year (alot!) and when you understand that they rely on their private clients much more you would think that Q2 2019 will be a tough one!

IMHO DYOR

SD

[quepassa] 04/9/2018 12:49

yes good to refocus. but it shows that the international expansion was a total disaster and a graveyard corporate strategy.

personally, i don't think they have gone anywhere near far enough in right-sizing, refocusing and retrenching.

there'll be much more pain to come in my view before this company starts to heal and regenerate.

on a scale of one to ten, I wonder what staff morale is like.

all imo. dyor.
qp

[arthur_lame_stocks] 04/9/2018 12:24

Yes it makes sense to cut out the areas that are not really profitable, hopefully as SteMIS says this will free up working capital and get the net debt position looking better.

I actually don't think the debt position is too much of a worry, current assets less all liabilites looks pretty healthy but maybe the headline figure is putting others off. I still think these are the cheapest recruiter out there, I also have some RTC and that is hobbled by incredibly greedy management without which the price would probably be a lot higher.

[edmonda] 04/9/2018 12:16

Also agree a sensible move to focus on core targets, and a new ED research note with adjusted forecasts and raised fair value calculation is now out.

Freely available here:

[kmann] 04/9/2018 10:45

agree, less costs,effort on low margin

ps Optibiotix is a plain and simple pump and dump, remind what the revenue was again?

[stemis] 04/9/2018 09:44

Looks like a sensible move by GATC. No point tying up working capital and management resources where returns are poor. Better to concentrate on areas where you have strength.