Gattaca Share Discussion Threads

[stemis] 17/7/2020 17:11

Possibly but I can't imagine he'd want to cash in at anything like these levels.

[value viper] 17/7/2020 11:26

Saw Materna on TV recently- horse owner (no real surprise)Looks like he's probably got to a point in his life where he might accept an offer - suspect the company has been rewarding for him over the yearsMatchtech prior of course

[stemis] 17/7/2020 11:09

There's a couple of recruitment companies that hold shares here:-

HRnet - 5.9% (Singapore based )
MMGG - 16.0% (bought Morson)

Either could take out GATC. The only block is that founder, George Materna, holds 24.4%.

Is the paid for research by Paul Hill (PMH Capital)? He has a 130p fair value.

Ed: Yes, I see it is.

[value viper] 17/7/2020 11:02

It's the ED note below

[value viper] 17/7/2020 11:00

Stem - that's good stuff and analysis- above me if I'm honest !Who was that Singapore based recruitment company that have shares here ? HR Net ?This looks like a speculative buy maybe - I have a research note here - our today with a 130 p target (if it's paid for research)

[stemis] 17/7/2020 10:31

I think GATC are being rather misleading in the presentation of their debt figures.

The Group is now in a net cash position. At 30 June 2020 we held net cash of GBP23m (31 January: net debt GBP(3)m; 31 July 2019: net debt GBP(25)m). Non-recourse invoice financing as at 30 June 2020 (not included in reported net debt) was GBP22m (31 July 2019: nil).

They are comparing net cash of £23m to net debt of £3m at 31 Jan and net debt of £25m at 31 July 2019. However they then reveal that that doesn't include £22m of non recourse financing. However the comparative net debt figures include ALL financing. So really the comparison is 30 June 2020 net cash of £1m, 31 January net debt £3m and 31 July net debt of £25m.

However 31 Jan figures are always better due to seasonality, so the meaningful comparison is 30 June £1m cash v 31 July 2019 £25m net debt. What does that tell us? Well the £10m VAT deferral is part. And working capital management (which will reverse) is -

At 31 July 2019 working capital was £54.4m (inc £96.7m debtors). Trading in 3 months up to 30 June 2020 (which will be source of working capital) was down 41%. Broad brush, working capital will be proportional to trading, so we could expect £22.3m (41% x £54.4m) working capital to have been released.

Adding these all up would suggest that there has been a £6.3m underlying adverse movement in cash. They do suggest that they've allowed a bit of an increase in debtor days to support clients so maybe somewhat less than £6.3m although the calculation is too crude for any precision. Not too disastrous though, I'd say (equates to 20p a share in valuation terms).

The question, of course, is whether GATC can fund the increase in working capital that arises from a return to normal trading. Because of their invoice discounting facility, they only need to fund 10% of their debtors from cashflow. They've net cash of £23m, less VAT payable of £10m = £13m. I'm guessing they are maybe £40m (41% x £96.7m) down on normal debtor levels at this time, which would take £4m of cash. Looks easily doable...

[edmonda] 17/7/2020 07:47

#GATC Gattaca plc updates that despite many macro challenges trading was higher than initial expectations aided by new business wins & rigorous cost control, with FY20 NFI down -25.5% to £54m. The fundamentals of STEM play to GATC’s strengths and we see a fair value of 130p/share.

[wilmdav] 11/6/2020 22:05

I have resumed coverage of GATC on my web site.



Click on the sheet tabs at bottom of screen to see bar charts.

The purpose is to provide a graphic representation of the company's historic performance.

[uncle_sam] 09/6/2020 13:36

Thank you, for that fullsome reply. I agree about their numbers; it's their client retention and competitive advantage going forward that gives me pause.Fyi, I entered these in 2017 @£2.99, took a loss on half by selling with the bad numbers in 2018, but then doubled down on "good prospects" in 2019 (ha!), so I'm quite underwater still, -80% down, too far down frankly to liquidate without a hard look or double down again, without good prospects apart from their public numbers.

[value hound] 09/6/2020 13:12

Well even at the improved price of 54.5p, the mkt cap is only £17.6m. Like all recruiters, turnover figures are massive in relation to mkt cap (so v.low psr) but bear in mind that sales have gradually grown over the last few years, but profitability has been somewhat “patchy” :-) Nevertheless, operating profit four years ago on a lesser t/o exceeds the current mkt cap - and the share price then was 340p. It even entered this year at 124p.

The balance sheet shows NTAV of £29.26m, and current assets less all liabilities of £17.56m. But as pointed out above, they may face liquidity problems as, like all recruiters, there’s a big chunk in trade and other receivables. I think it’s this that has been holding the price back in these unprecedented times etc., in addition to the obvious fears of hugely reduced business, but I also think this has been overdone. Also, the current situation could actually improve cashflow as pointed out by SteMis above.

So I think we have to look out at the horizon a little and think what a reasonable valuation may be a year or more from now, and on that basis, any kind of partial return to previous profitability, with a reasonable multiple (even though PERs are always low with recruiters), reinstatement of the divi (hopefully) which was consistently over 20p until last year, and the balance sheet strength means you come out at a healthy multiple of the current share price.

What’s more, the founder (and NED Deputy Chairman) holds a quarter of the stock, so hopefully has his eye on the ball.

[uncle_sam] 09/6/2020 12:39

Value hound - why?

[otemple3] 09/6/2020 11:05

Added this morning as been thinking exactly the same. Could move quite quickly from down here....

[sphere25] 09/6/2020 11:04

Stock has popped 12%. Threatening a significant break out.

[sphere25] 09/6/2020 08:44

Noted this edging up this morning so watching for a breakout. It could pop well if it does breakout as it has consolidated for a while.

[stemis] 08/6/2020 22:04

A lot of their costs are payroll (£43m out of £66m last year) so it depends how they are managing that. In terms of cash, reduction in activity will free up lots of working capital so I imagine their cashflow will be pretty decent. The question is whether they will then have the capacity to finance the eventual recovery. I suspect the biggest risk isn't insolvency but a pretty big fund raising at some point. Current market cap is £15m so raising anything decent will involve a lot of dilution at this price. However if they avoid that then the upside should be considerable.

[arthur_lame_stocks] 08/6/2020 21:13

They must be really struggling at the moment though, no one is recruiting.

[value hound] 08/6/2020 17:07

A friend asked me earlier to pick one share that was pretty good value as it stands - but which also has the potential "to go some" (his words). FWIW, GATC was my selection. I hope I'm right and that the some it goes is northwards :-)

[edmonda] 27/3/2020 09:03

And full note out from Equity Development, looking at company's good record in dealing with macro challenges and low current EV/NFI rating vs sector

Free access to note here:

[stemis] 27/3/2020 08:53

More reassuring than I feared

[brummy_git] 27/3/2020 08:14

Latest commentary here wrt GATC's interims today

[quepassa] 16/3/2020 09:15

Is this going to be the end-game of already embattled Gattaca?

Perfect storm.

Weakened position. Weak recent Trading Update. Massive generalised reduction in overall market recruitment due to COVID. Credible market forecasts of Global recession.


Good Luck ALL

ALL IMO. DYOR.
QP

[quepassa] 11/3/2020 11:12

Many, many companies across the UK are temporarily suspending recruitment for obvious reasons.

That's going to hurt.

ALL IMO. DYOR.
QP

[quepassa] 04/2/2020 22:46

What a disaster zone this share has been.

All time low under the name of Gattaca (what a daft name).

Ten year low under the Matchtech/Gattaca umbrella.

Don't know if it even got as low as this in the '08/09 crash.

They must rue the day that they changed strategy and Adrian Gunn left.

So happy to have sold out near 600p after Gunn departed and never once been tempted back in.

With the last update, cannot rule out the possibility that this will fall significantly further.

Good Luck All - but carry a hardhat and shamrock just for safety and fortune's sakes.

ALL IMO. DYOR.
QP

[daz] 29/1/2020 15:02

The trading statement highlights the IR35 change as a key risk. I would argue it's more than a risk and will certainly affect H2 and beyond.
I know several large companies, who are saying they will no longer use contractors and have plans in place to end such contracts ahead of April 2020. While some of this will be replaced by supplying people to software houses instead, this will only be a proportion of the existing business and in all likelihood at lower margins.

The board of GATC must know about this and if they don't they have their head in the sand. They may have plans in place to mitigate this but have not communicated that in the trading update.

The IR 35 change will have a big impact on all recruitment agencies and I think it will take time to readjust to a different way of working.

In my view another profit warning looks likely