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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Gattaca Plc | LSE:GATC | London | Ordinary Share | GB00B1FMDQ43 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 93.00 | 92.00 | 94.00 | 93.00 | 93.00 | 93.00 | 12,148 | 07:40:05 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Employment Agencies | 385.17M | 1.23M | 0.0386 | 24.09 | 29.63M |
From Apr 2022 to Apr 2024
TIDMGATC
RNS Number : 1479F
Gattaca PLC
03 November 2022
3 November 2022
Gattaca plc
Preliminary Results for the year ended 31 July 2022
Ongoing focus on improvement
Gattaca plc ("Gattaca" or the "Group"), the specialist engineering and technology staffing solutions business, today announces its Preliminary Results for the year ended 31 July 2022.
Financial Highlights
Hot Features
Premium
2022 Restated 2021
==========================
Continuing Continuing Continuing Continuing Continuing Continuing
Reported underlying(2) Reported underlying(2) Reported underlying(2)
========== ============== ========== ============== ========== ==============
GBPm GBPm GBPm GBPm % %
========== ============== ========== ============== ========== ==============
Revenue 403.3 403.3 415.7 415.7 -3.0 -3.0
========== ============== ========== ============== ========== ==============
Net Fee Income (NFI)(1) 44.1 44.1 42.1 42.1 4.9 4.9
========== ============== ========== ============== ========== ==============
(Loss)/profit from
operations (5.1) 0.5 1.9 2.2 n/a -77.5
========== ============== ========== ============== ========== ==============
(Loss)/profit before
taxation (4.8) 0.3 0.8 1.8 n/a -86.0
========== ============== ========== ============== ========== ==============
Basic (loss)/earnings
per share (13.4)p 0.3p 2.4p 5.3p n/a -94.0
========== ============== ========== ============== ========== ==============
Diluted (loss)/earnings
per share (13.4)p 0.3p 2.4p 5.3p n/a -94.0
========== ============== ========== ============== ========== ==============
Dividend per share 0.0p n/a 1.5p n/a n/a n/a
========== ============== ========== ============== ========== ==============
Statutory net cash
at end of period 12.3 n/a 14.1 n/a -12.6 n/a
========== ============== ========== ============== ========== ==============
Continuing business excludes the discontinued business in South Africa and Mexico, which were closed in July 2021
Financial Performance
-- NFI GBP44.1m (2021: GBP42.1m), up 5% on the prior year
O Contract NFI represents 71% of Group NFI on a continuing
basis (2021 restated: 74%). Contract NFI was flat year on
year driven by contract losses primarily within contract
in H1.
O Benefit is expected to come in the contract market in FY23
as demand for contractors is shifting to outweigh permanent
combined with increased project demand in our core sectors
O Permanent NFI represents 29% of Group NFI (2021 restated:
26%), recording a 18% growth year on year, driven by recovery
post COVID-19 pandemic
Group continuing underlying profit before tax of GBP0.3m (2021
-- restated: GBP1.8m), reflecting investment in headcount
-- Robust balance sheet:
O Group statutory net cash position of GBP12.3m at 31 July
2022 (2021: GBP14.1m net cash)
O Movement in cash partially driven by GBP5.6m of deferred
VAT fully repaid in the year
O DSO at 31 July 2022 was 51 days (2021: 52 days), a recovery
of the DSO position from 62 days reported at 31 January
2022, and a return to the long term trend
O The Group is covenant free
-- During the year, we took a further impairment charge of GBP4.6m
(2021: GBP0.2m), writing off all remaining goodwill, intangible
assets and right-of-use leased asset values relating to the Resourcing
Solutions business acquired in 2017, due to an expected sustained
reduction in future profitability of the division
-- No final dividend (2021: 1.5 pence). The Board remains committed
to paying dividends when the Group returns to sustainable levels
of profitability
-- Continued investment in total Group sales headcount up 10% versus
FY21
Strategic Update
Continued focus on developing the four identified strategic priorities:
-- Increase external focus
O New Chief Sales Officer appointed to combine client
acquisition and growth across all sectors and geographies
O Investment in brand and enhanced social media presence
O Creation of Group-wide Performance Scorecards including
targets set for all sales colleagues focused on client
engagement and sustainable growth
-- Culture
O Alignment of leadership team with business objectives,
increased visibility, communication, and openness
O Appointed Head of Engagement, ED&I & Talent
O Enhanced staff engagement and continued focus
-- Operational performance
O Appointed new COO to focus on internal operational
performance
O Embedded our new technology systems, launched at
the end of FY21, into Group operating processes and
procedures with all colleagues now operating on a
single platform
O Deployment of enhanced candidate sourcing tool into
our technology platform
O Enhanced visibility of key management information
to enable better data-backed decision making , supporting
and informing decisions to exit inefficient and low-margin
business
-- Cost rebalancing
O Restructuring of sales leadership
O Optimisation of office space and cost
O Funded 5% cost of living increase for all staff across the
group
O Reduced DSO thus reducing our borrowing costs
Evolution and development of the four strategic priorities to continue in 2023 with further progress already underway in the new financial year.
Outlook
We are mindful of the current macro-economic conditions, but as a STEM skills focused business we do not believe they will have a significant impact on our business model as we continue to see robust demand in our key markets. There remains a shortage of candidates which plays to our key strength of deep knowledge and understanding of our sectors and niche skills.
The development of our strategic priorities will continue as planned and we are confident that the changes we have made in the last six months combined with the long-term fundamentals in our core STEM markets leave us well placed for the future. Our expectations for FY23 remain unchanged at underlying profit before tax of GBP2.5m for the year.
Matthew Wragg, CEO commented:
"Although the performance of the business during the year is not acceptable for a business with our capability, I am pleased with the progress that we have made during the second half of the year. We have worked hard to transform the business through the building of our culture and once again becoming a winning team. Today, with a new leadership structure, a more engaged workforce and early signs of more consistent and improved performance, we are on track to be a stronger business.
"Whilst we remain conscious of the uncertain macro-economic environment, we are far better set up for success than we were 12 months ago and have a roadmap for further improvements. I am excited about the journey that we are all on and the start that we have made."
The following footnotes apply, unless where otherwise indicated, throughout these Preliminary Results:
(1) NFI is calculated as revenue less contractor payroll costs
(2) Continuing underlying results exclude the NFI and profits / (losses) before taxation of discontinued businesses predominantly being operations in Mexico and South Africa (2022: GBP(0.3)m, 2021: GBP(1.2)m), non-underlying items within administrative expenses in 2022 primarily relating to employee restructuring and fees associated with exiting properties (2022: GBP0.6m, 2021: GBP(0.2)m), amortisation of acquired intangibles (2022: GBP0.4m, 2021: GBP0.5m), impairment of acquired intangibles and right of use assets (2022: GBP4.6m, 2021: GBP0.2m), and exchange (losses) / gains from revaluation of foreign assets and liabilities (2022: GBP0.6m, 2021: GBP(0.7)m)
(3) NFI commentary is on a continuing underlying like for like basis
For further information please contact:
Gattaca plc +44 (0) 1489 898989
Matthew Wragg, Chief Executive Officer
Oliver Whittaker, Chief Financial
Officer
Liberum Capital Limited (Nomad and
Broker) +44 (0) 20 3100 2000
Lauren Kettle
Richard Lindley
Citigate Dewe Rogerson +44 (0) 20 7638 9571
Ellen Wilton
Anna Clauser
Chair's Statement
The financial year certainly did not turn out as we had expected. Whilst the pandemic had a small carryover effect in the first half of the year, there was a recovery in the market, mainly in permanent placements, which represents only 29% of our business. Our expected growth within the contract placement market failed to materialise. Whilst the market demand was there, the combination of major client losses, increased focus on permanent recruitment and the business adapting to new systems and operating model meant we didn't capture the market opportunity. We have continued to invest in our technology and our sales people and we are confident we can move forward with these building blocks in place.
It also became apparent during the year that to move forward with pace, agility and confidence we needed to accelerate the planned change in leadership, given the scale of further improvement required in the business. It was therefore agreed that Kevin Freeguard would retire from the Board on 1 April 2022 and be replaced by Matt Wragg as Chief Executive Officer.
Matt brings with him a wealth of recruitment experience, knowledge of our business and has the support and commitment of both the Board and our Senior Leadership Team. Salar Farzad agreed to leave the business at the same time and stepped aside to allow Oliver Whitaker to take over as Chief Financial Officer. Oliver has been with the business since 2018 and has made a seamless transition into his new role. In December 2021, Ros Haith joined the Board as a Non-Executive Director.
Our previous Board review concluded that we would benefit from someone with a sales background; Ros has extensive experience in leading sales at several large organisations, with a strong focus in digital and technology.
Following the appointment of Matt Wragg as CEO there has been an internal reset within the business with more focus on the external environment, both the customer and the market. Equally, we have a renewed and reenergised team who have clear and aligned objectives and targets for everyone to deliver against. Our Values are being embedded: we are once again focused on our people and the initiative we undertook in 2021 on our Purpose, Vision, Mission and Values is at the bedrock of everything we do. Our priority within the business is on delivering to our clients and finding the best STEM talent to fulfil their needs. As we anticipated, we are in a 'candidate short' market where there are more talent opportunities than candidates; this is when we are at our best. We have every confidence that we have the right leadership team to encourage our people and deliver success through growth.
Overview
The market recovery in the first half of the year was in permanent placements whilst our contract markets were much slower to recover. We saw a 33% increase in permanent placements largely through contingency recruitment and also via our Recruitment Process Outsourcing (RPO) contracts. Towards the end of our financial year, we saw some improvement in our contractor sectors which bodes well for FY23. We lost a small number of Managed Service Provider (MSP) clients during the year which had some impact on NFI, less so at net profit level, and we have also seen a reversal of this trend in the early part of FY23 with several quality client wins. Our STEM markets are candidate driven and will continue to be so for the foreseeable future.
During the year, our new leadership team has been challenged with bedding in our new systems and adding a suite of packages which are now available as a result of the investment we undertook over the last five years. In the early part of our system implementation, we placed additional pressure on our sales and back-office teams which was a distraction when we should have been focused on our customers. These early teething problems are now behind us and we are starting to see the benefits of our new systems, which is starting to reflect in higher productivity from our sales consultants. As with most businesses, we have seen an increase in people turnover. Our focus on culture has already begun to show a positive impact on attrition at the end of the year; we will continue to develop this going forward.
In the second half of the year, we have focused on addressing our cost base. Firstly, by streamlining the decision-making process with the removal of a management layer across the global sales business. We have broadened sales representation in our Senior Leadership Team, to allow for a wider understanding of key issues and higher clarity on agreed actions.
To optimise our property costs, we have reduced our footprint in the UK and US; at our head office we have reduced our buildings from three to one, achieved through hybrid working and a more effective use of space. Further work remains ongoing in relation to third party costs.
Our net cash position at the end of the year was GBP12.3m, a reduction from July 2021, when it was GBP14.1m, driven by final repayments of the temporary COVID VAT deferral of GBP5.6m offset by improved working capital management. The Group's DSO at the year end of 51.2 days was also slightly ahead of last year (51.6 days) and substantially below the January 2022 reported DSO of 61.7 days. This reduction was the result of resolving a major customer dispute and new system implementation issues that had impacted billing cycles.
As at 31 July 2022, the Group had a working capital facility of GBP60million, reduced from GBP75million in the year.
Dividend
Our long-standing objective has been to achieve a through-the-cycle dividend pay-out of approximately 50% of profits after tax. Last year, the Board felt comfortable reinstating the dividend and felt that 1.5p per share was a reasonable first step towards our objective. However, as a result of the loss for the year, the Board decided not to propose a dividend. The Board remains committed to paying dividends when the Group returns to sustainable levels of profitability.
Diversity and inclusion
This year we continued to address the gender balance on the Board. With the appointment of Ros we now have nearly 30% representation. As a Group, we remain committed to becoming a more diverse organisation; as part of this, we continue to work towards our previously set targets of a 40% management gender balance by 2024 and 50% by 2026. Aligned to our focus on equity, diversity and inclusions, we are developing our strategy to support all forms of diversity.
We have promoted diversity training throughout the year, having engaged several external partners to help with fostering a wider understanding throughout the organisation. We have launched our Limitless programme aimed at tackling the gender imbalance across our business, set up communities for LGBTQ+ colleagues and are looking externally to see how we can support our clients in their endeavours in this area.
Outlook
There is no doubt that Gattaca is well positioned to reap the demand for STEM talent and, whilst there may be macroeconomic headwinds ahead, we do not believe they will have a significant impact on our business model. What is clear is that we are a people business; we will only be successful if we can harness the potential of our talented people and truly embed our Values of Trust, Professionalism, Ambition and Fun in everything we do. Whilst we have achieved many positive things over the years, we are conscious that in recent years, execution has been our Achilles heel; with our new leadership in place, we have started to tackle this.
We continue to believe that our key STEM markets will remain short of candidates which bodes well for our inch-wide, mile-deep knowledge. As the economy softens we should see a better balance between demand and skills available but do not expect to be faced with an abundance of candidates. We believe that large infrastructure and defence projects will continue under existing government policies; however, in the UK, spend is likely to be slower to materialise due to economic headwinds and therefore the next six months will remain relatively flat. We are confident that the changes we have made in the business leave us better placed for the future.
Patrick Shanley
Non-Executive Chair
Chief Executive's Statement
Key Highlights
-- We have aligned our four strategic priorities to our sales growth targets
-- We have taken steps towards a fundamental shift in our culture, with increased focus on embodying our Values, working to reduce attrition and supporting our ED&I goals
-- Substantially increased the regularity and authenticity of our internal communications
Overview
This year has been one of substantial change for Gattaca. Just over a year ago we announced our Purpose, Vision, Mission and Values as the bedrock of our identity, our future direction and the culture we wanted to create. It is the work that has taken place over the past year to create alignment with these principles that has started to transform the business. Today, with a new leadership structure, a more engaged workforce and early signs of more consistent and improved performance, we are in a much stronger position than 12 months ago.
These changes came against the backdrop of three challenging years: our operating model and infrastructure, key legislation, financial structures and systems all saw significant upheaval, combined with the macro-economic uncertainty from the COVID-19 pandemic and a fundamental change in global working models to remote and hybrid working.
One of the things that I am most aware of after my first seven months as CEO, is that it feels like a new chapter - there is a marked improvement in the atmosphere and culture of the business, and we have achieved some positive client wins. Our key challenge now will be to convert this momentum into consistent growth and deliver the performance we know we are capable of over a sustained period.
I would like to thank the Board for their belief and backing in me and my leadership team to steer the business through our new chapter, building on the work that has been done.
Performance
Whilst we saw positive signs of improvement in the second half of the year, overall performance in FY22 was below our expectations at the outset of the year.
Although we could see the scale of the external opportunity as the recruitment markets recovered strongly in the wake of COVID-19, we overestimated the operational capability of the business to capitalise on this. We also underestimated the continued impact of the necessary business and operational changes we were making to build a stronger business.
Although external demand has been high, demand for contract lagged behind permanent recruitment, and the battle for talent resulting from the shortage of candidates within our niche STEM focus areas led to far higher offer-to-reject ratios. With new technology systems embedding, we also struggled to cope with the significant increase in headcount needed to service the demand and, like most recruitment companies, suffered from higher attrition among our own people than we had traditionally seen. Over the year we saw a significant growth in our permanent recruitment business, with 18% growth year-on-year, driven to some extent by increased demand from our major Recruitment Process Outsourcing (RPO) contracts as we saw recovery out of the COVID-19 pandemic.
During the second half of the year, we delivered against our adjusted expectations for the full year results and began building positive momentum by winning our first opportunities of significant scale for a couple of years. We also began delivering consistent week-on-week growth across both permanent and contract recruitment. This was as a result of our focus on cultural transformation, system enhancement optimisation, reducing attrition and enabling our newly hired frontline sales people to be productive more quickly.
Strategy
At the outset of Q4 we announced four strategic priority areas to deliver performance:
-- External Focus
-- Culture
-- Operational Performance
-- Cost Rebalancing
I am confident that these continue to be the right strategic priorities to ensure Gattaca fulfil its fantastic potential and capitalise on its many great strengths. I am pleased to report we have made good strides in the last six months across all four areas and work continues.
External Focus
We are committed to being market driven and people-oriented.
We have fantastic insights, 'inch-wide, mile-deep' knowledge and understanding of our sectors and the niche STEM skills that they require. We appointed Grahame Carter, a long-standing member of the sales leadership team, as Chief Sales Officer, to work on driving client acquisition and growth across all our sectors and through the implementation of new performance management processes, all our sales people have targets focused on client engagement and growth. With the business refocused externally, we remain confident that these fundamental strengths will drive us forward as we return to growth.
Businesses in all sectors today are in heavy competition for talent; for us to deliver for our clients we have had to increase the quality of our candidate experience. Fortunately, this has been a fundamental ingredient to our performance for over three decades and, as such, it has come naturally to our leadership and colleagues.
We have invested in sales training, leadership development and increased marketing and business development for our brands which will begin to generate returns in the year ahead.
Culture
We have made huge strides in embedding our culture: engagement, collaboration and accountability are all up and attrition is improving. We've increased communication, visibility of leadership and focus on non-financial recognition across the business and we will see more of this over the months and years to come.
As a business that helps 'find people to work with people', diversity and inclusion is something I'm passionate about. As such, I'm really pleased that we have appointed Sally Spicer as our Head of Engagement, ED&I and Talent. Sally has been a high performer within our permanent recruitment sales business for a number of years. Among Sally's first achievements in her new role is the launch of our 'Limitless' programme aimed at tackling the gender imbalance within the Group and the set-up of LGBTQ+ communities for our people. Sally will develop our internal ED&I strategy, build external partnerships and support the business to take that expertise to market.
Operational Performance
We are continuing to refine our operational processes to improve the client and candidate journey. This will naturally see us rebalancing our cost base towards the skills, tooling and locations where we can benefit most.
We appointed Paul King, previously Head of our Solutions division, to Chief Operating Officer; his remit is to simplify our delivery and improve our productivity. In FY22, we embedded our technology systems, focusing on user training to embed behaviours and drive efficiencies. Alongside this, the integration of an enhanced candidate sourcing tool into our new technology platform has substantially increased the volume of candidates we can source through searches which is critical in a candidate-short market. Modern systems have naturally driven higher quality and more extensive data to better inform our decision-making. As an example, we took a strategic decision to exit a major but very low margin client in the year, enabling our people to be rediverted to more profitable delivery.
Cost Rebalancing
Alongside investments in technology and people, we've managed to reduce costs in other key areas of the business, including those associated to leadership, property and third-party contracts. The savings generated from this cost rationalisation have been used to invest in further technology tools, marketing and colleague engagement projects and to fund a cost-of-living pay increase for our people who are currently living through a time of extreme pressure on living costs.
Outlook
Clearly the performance of the business during the year is not acceptable for a business with our capability, however I am pleased with the progress that we have made during the second half of the year. We have worked to transform the business through the building of our culture and becoming a winning team. Today, with a new leadership structure, a more engaged workforce and early signs of more consistent and improved performance, we are in a much stronger position as a business.
We are better set up for success than we were 12 months ago but remain conscious of the uncertain macro-economic environment and that we have much to do to get ourselves to the level we are aiming for. I am excited about the journey that we are all on and we have made a solid start.
Matt Wragg
Chief Executive Officer
Chief Financial Officer's Report
Key Highlights
-- NFI growth of 5% YoY on a continuing underlying basis
-- Continuing underlying profit before tax of GBP0.3m in FY22 (2021: GBP1.8m restated)
-- Adjusted statutory net cash of GBP12.3m (2021: GBP14.1m)
-- Investment in our people adding 10% to our Group sales headcount during the year
-- New leadership team in place with revised strategic priorities launched
Financial Performance
On a continuing basis, revenue of GBP403.3m (2021: GBP415.7m) generated NFI of GBP44.1m (2021: GBP42.1m). We achieved contract and Statement of Work (SoW) NFI of GBP31.4m (2021: GBP31.3m) at a margin of 8.0% (2021: 7.6%), and permanent recruitment fees of GBP12.8m (2021: GBP10.8m). SoW NFI, included within contract NFI, of GBP1.3m (2021: GBP1.2m) is all delivered though contract labour provision on long term projects. Contract NFI was flat year-on-year due to the loss of some key MSP clients including TfL, UKPN and BMW UK, and losses associated with the collapse of NMCN plc dampening growth.
Underlying profit before tax from continuing operations was GBP0.3m (2021 restated: GBP1.8m). Statutory loss after tax for the total Group was GBP(4.7)m (2021 restated: loss of GBP(0.4)m). Within underlying trading, credits of GBP0.4m were recorded as a result of revaluation of dilapidation provisions associated with our property portfolio.
Statutory net cash at 31 July 2022 was GBP12.3m (31 July 2021: GBP14.1m); the reduction in net cash year-on-year of GBP1.8m included final repayments of GBP5.6m of temporary VAT deferral. The optimisation of the Group's working capital is a key focus and during the second half of the year the group has benefitted from a significant improvement from the half year as we have reduced DSO through improved collection performance and resolution of a substantial disputed debtor balance.
Discontinued operations and non-underlying costs
The below table reconciles continuing underlying profit before tax to reported statutory loss before tax for the total Group:
Profit/(loss)
before
GBP'000 tax
-------------------------------------------------------------- -------------
Continuing underlying profit before tax 256
-------------------------------------------------------------- -------------
Restructuring costs (405)
-------------------------------------------------------------- -------------
Other continuing non-underlying costs (153)
-------------------------------------------------------------- -------------
Operating loss related to discontinued operations (476)
-------------------------------------------------------------- -------------
Restructuring and closure costs relating to discontinued
operations (95)
-------------------------------------------------------------- -------------
Amortisation and Impairment of goodwill, acquired intangibles
and ROU leased assets (5,051) -------------------------------------------------------------- ------------- Foreign exchange differences 784 -------------------------------------------------------------- ------------- Loss before tax for the total Group (5,140) -------------------------------------------------------------- -------------
Restructuring costs in the year related to the continued activities are primarily notice payments for previous Executive management and senior leadership. Costs associated with discontinued operations related to ongoing closure costs of those operations treated as discontinued in prior periods, primarily Mexico, South Africa and Malaysia. We will continue to incur costs associated with discontinuing legacy operations as the legal wind down of those operations is concluded over the coming years.
During the year, we took a further impairment charge of GBP4.6m (2021: GBP0.2), writing off all remaining goodwill, intangible assets and right-of-use leased asset values relating to the Resourcing Solutions business acquired in 2017, due to a downgrade in forecasts for future profitability of the division. Amortisation of acquired intangible assets was GBP0.4m.
We continue to co-operate with the US Department of Justice and there have been no significant new matters in this regard during the year. Legal fees on this matter were GBP33,000 in the year (2021: GBP29,000). As shown in Note 28 to the financial statements, the Group is not currently in a position to know what the outcome of these enquiries may be and we are therefore unable to quantify the potential financial impact, if any.
Taxation
The Group's reported effective tax rate was -9.1% (2021 restated: -6.3%), driven down by non-deductible expenses such as goodwill impairment and overseas losses not recognised as deferred tax assets, reducing taxable losses. Further detail is set out in Note 10 of the consolidated financial statements. The continuing underlying effective tax rate was 60.2% (2021 restated: 7.2%).
Earnings per share
Basic (loss) per share was (14.5) pence (2021 restated: (1.4) pence), and on a fully diluted basis was (14.5) pence (2021 restated: (1.4) pence). Continuing underlying basic earnings per share was 0.3 pence (2021 restated: 5.3 pence).
Dividends
Our long-standing objective has been to achieve a through-the-cycle dividend payout of approximately 50% of profits after tax. Last year, the Board felt comfortable reinstating the dividend and felt that 1.5p per share was a reasonable first step towards our objective. However, this year the Board decided not to recommend a dividend. The Board remains committed to paying dividends when the Group returns to sustainable levels of profitability.
Capital expenditure
The Group incurred capital expenditure in the period of GBP0.4m (2021 restated: GBP0.4m). Following the publication of the IFRS Interpretations Committee's ('IFRIC') final agenda decision on accounting for configuration and customisation costs in a SaaS arrangement, including for cloud-based arrangements, the Group has updated its accounting policy for this area. This change in accounting policy has been applied to all relevant capitalised intangible asset costs held on the balance sheet, see Note 1.25 of the consolidated financial statements.
Net assets, equity and shares In Issue at 31 July 2022
The Group had net assets of GBP30.0m (2021 restated: GBP35.1m) and had 32.3m (2021: 32.3m) fully paid ordinary shares in issue. During the year, the merger reserve in Gattaca plc relating to the Networkers 2015 acquisition of GBP28.5m was transferred to retained earnings in order to present all distributable reserves in one place. This merger reserve had become fully realised in prior periods, as detailed in Note 23.
Cash flow and net cash position
Group statutory net cash at 31 July 2022 was GBP12.3m (31 July 2021: GBP14.1m). The reduction in net cash year-on-year of GBP1.8m included GBP5.6m of repayments of temporary VAT deferral, which is now repaid to HMRC in full. The Group's trade and other receivables balance was GBP54.8m at 31 July 2022 (31 July 2021: GBP64.1m), of which debtor and accrued income balances were GBP51.7m (31 July 2021: GBP60.9m), a GBP9.2m reduction over the 12 month period.
The Group's days sales outstanding ('DSO') at 31 July 2022 of 51.2 days is a reduction of 0.4 days since 31 July 2021, however a reduction of 10.5 days on DSO reported at 31 January 2022. The challenges that the Group was encountering at 31 January 2022 in relation to a key customer dispute and system implementation issues are now resolved, which has resulted in the substantial reduction to normalised levels of DSO. In addition to this, the loss of a highly working capital intensive MSP client has resulted in an unwind of working capital.
As at 31 July 2022, the Group had a working capital facility of GBP60m, reduced from GBP75m in the year as the higher limit was not required; this facility includes both recourse and non-recourse elements. Under the terms of the non-recourse facility, the trade receivables are assigned to, and owned by, HSBC and so have been derecognised from the Group's statement of financial position. In addition, the non-recourse working capital facility does not meet the definition of loans and borrowings under IFRS. The utilisation of this facility at 31 July 2022 was GBP(1.8)m recourse and GBP(9.6)m non-recourse, with unutilised facility headroom of GBP33.1m.
Critical accounting policies
The statement of significant accounting policies is set out in Note 1.24 to the consolidated financial statements.
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 borrowings, cash and various items, such as trade receivables and trade payables that arise from its operations. 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 seeks to trade only with recognised, creditworthy third parties. We monitor receivable and unbilled balances on an ongoing basis and in 2022 have continued to take a conservative approach to receivables and unbilled risk in light of the challenges in the UK and overseas economies, tempered by an overall reduction in trade receivables and accrued income balances and the write-off of certain irrecoverable receivables (such as balances with NMCN plc), resulting in a decrease to our loss allowance by GBP(1.8)m to GBP2.8m.
There are no significant concentrations of credit risk within the Group, with no single debtor accounting for more than 8% (2021: 7%) of total receivables balances at 31 July 2022.
In October 2021 NMCN Plc entered into administration. Our total client exposure at this point was GBP1.4m, of which GBP0.8m exposure at the prior year end was covered by existing credit loss provisions. In the current year we also utilised existing credit loss provisions against the total exposure suffered.
Foreign currency risk
The Group generates 6% 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 where appropriate entering into forward exchange contracts to effect the same where sales and costs are not in the same currency.
Oliver Whittaker
Chief Financial Officer
Consolidated Income Statement
For the year ended 31 July 2022
Restated(1)
2022 2021
Note GBP'000 GBP'000
------------------------------------------------------------- ---- --------- -----------
Continuing operations
------------------------------------------------------------- ---- --------- -----------
Revenue 2 403,346 415,726
------------------------------------------------------------- ---- --------- -----------
Cost of sales (359,206) (373,646)
------------------------------------------------------------- ---- --------- -----------
Gross profit 2 44,140 42,080
------------------------------------------------------------- ---- --------- -----------
Administrative expenses(2) (49,244) (40,188)
------------------------------------------------------------- ---- --------- -----------
(Loss)/profit from continuing operations 4 (5,104) 1,892
------------------------------------------------------------- ---- --------- -----------
Finance income 6 570 56
------------------------------------------------------------- ---- --------- -----------
Finance cost 7 (253) (1,136)
------------------------------------------------------------- ---- --------- -----------
(Loss)/profit before taxation (4,787) 812
------------------------------------------------------------- ---- --------- -----------
Taxation 10 460 (41)
------------------------------------------------------------- ---- --------- ----------- (Loss)/profit for the year after taxation from continuing operations (4,327) 771 ------------------------------------------------------------- ---- --------- ----------- Discontinued operations ------------------------------------------------------------- ---- --------- ----------- Loss for the year from discontinued operations (attributable to equity holders of the Company) 11 (346) (1,208) ------------------------------------------------------------- ---- --------- ----------- Loss for the year (4,673) (437) ------------------------------------------------------------- ---- --------- -----------
Loss for the year for 2022 and 2021 are wholly attributable to equity holders of the Company. The Company has elected to take the exemption under section 408 of the Companies Act 2006 from presenting the parent company income statement.
Restated(1)
2022 2021
Total earnings per ordinary share Note pence pence
---------------------------------- ---- ------ -----------
Basic loss per share 12 (14.5) (1.4)
---------------------------------- ---- ------ -----------
Diluted loss per share 12 (14.5) (1.4)
---------------------------------- ---- ------ -----------
Restated(1)
2022 2021
Earnings from continuing operations per ordinary
share Note pence pence
------------------------------------------------- ---- ------ -----------
Basic (loss)/earnings per share 12 (13.4) 2.4
------------------------------------------------- ---- ------ -----------
Diluted (loss)/earnings per share 12 (13.4) 2.4
------------------------------------------------- ---- ------ -----------
Reconciliation to adjusted profit measure
Underlying profit is the Group's key adjusted profit measure; profit from continuing operations is adjusted to exclude non-underlying income and expenditure as defined in the Group's accounting policy, amortisation and impairment of goodwill and acquired intangibles, impairment of leased right-of-use assets and net foreign exchange gains or losses.
Restated(1)
2022 2021
GBP'000 GBP'000
------------------------------------------------------------- -------- -----------
(Loss)/profit from continuing operations (5,104) 1,892
------------------------------------------------------------- -------- -----------
Add:
------------------------------------------------------------- -------- -----------
Depreciation of property, plant and equipment, leased
right-of-use assets and amortisation of software and
software licences 2,210 2,185
------------------------------------------------------------- -------- -----------
Non-underlying items included within administrative expenses 558 (193)
------------------------------------------------------------- -------- -----------
Amortisation and impairment of goodwill and acquired
intangibles and impairment of leased right-of-use assets 5,051 548
------------------------------------------------------------- -------- -----------
Underlying EBITDA 2,715 4,432
------------------------------------------------------------- -------- -----------
Less:
------------------------------------------------------------- -------- -----------
Depreciation of property, plant and equipment, leased
right-of-use assets and amortisation of software and
software licences (2,210) (2,185)
------------------------------------------------------------- -------- -----------
Net finance costs excluding foreign exchange gains and
losses (249) (412)
------------------------------------------------------------- -------- -----------
Underlying profit before taxation 256 1,835
------------------------------------------------------------- -------- -----------
Underlying taxation (154) (132)
------------------------------------------------------------- -------- -----------
Underlying profit after taxation from continuing operations 102 1,703
------------------------------------------------------------- -------- -----------
1. Results are restated following the March 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting
in previously capitalised software assets being expensed, as explained
further in Note 1.25.
2. Administrative expenses from continuing operations includes net impairment
release on trade receivables and accrued income of GBP295,000 (2021:
losses of GBP420,000).
Consolidated Statement of Comprehensive Income
For the year ended 31 July 2022
Restated(1)
2022 2021
Note GBP'000 GBP'000
---------------------------------------------------------- ----- -------- -----------
Loss for the year (4,673) (437)
----------------------------------------------------------------- -------- -----------
Other comprehensive income
---------------------------------------------------------- ----- -------- -----------
Items that may be reclassified subsequently to profit
or loss:
---------------------------------------------------------- ----- -------- -----------
Exchange differences on translation of foreign operations 72 281
----------------------------------------------------------------- -------- -----------
Other comprehensive income for the year 72 281
----------------------------------------------------------------- -------- -----------
Total comprehensive loss for the year attributable
to equity holders of the parent (4,601) (156)
----------------------------------------------------------------- -------- -----------
Restated(1)
2022 2021
GBP'000 GBP'000
------------------------ -------- -----------
Attributable to:
------------------------ -------- -----------
Continuing operations (4,024) 1,004
---------------------------- -------- -----------
Discontinued operations (577) (1,160)
---------------------------- -------- -----------
(4,601) (156)
--------------------------- -------- -----------
1. Results are restated following the March 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting
in previously capitalised software assets being expensed, as explained
further in Note 1.25.
Consolidated and Company Statements of Changes in Equity
For the year ended 31 July 2022
A) Consolidated
Share-based Treasury Restated(1)
Share Share Merger payment Translation shares Retained
capital premium reserve reserve reserve reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- --------
At 1 August 2020 as per
originally presented 323 8,706 28,750 526 (147) (97) 1,711 39,772
---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- --------
Adjustments due to change
of accounting policy,
net of tax (Note 1.25) - - - - - - (4,738) (4,738)
---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- --------
Restated total equity
at 1 August 2020 323 8,706 28,750 526 (147) (97) (3,027) 35,034
---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- --------
Loss for the year - - - - - - (437) (437)
---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- --------
Other comprehensive income - - - - 281 - - 281
---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- --------
Total comprehensive loss - - - - 281 - (437) (156) ---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- -------- Deferred tax movement in respect of share options - - - - - - 65 65 ---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- -------- Share-based payments charge (Note 23) - - - 104 - - - 104 ---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- -------- Share-based payments reserves transfer - - - (176) - - 176 - ---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- -------- Issue of treasury shares to employees - - - - - 60 - 60 ---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- -------- Transactions with owners - - - (72) - 60 241 229 ---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- -------- At 31 July 2021 323 8,706 28,750 454 134 (37) (3,223) 35,107 ---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- -------- At 1 August 2021 323 8,706 28,750 454 134 (37) (3,223) 35,107 ---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- -------- Loss for the year - - - - - - (4,673) (4,673) ---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- -------- Other comprehensive income - - - - 72 - - 72 ---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- -------- Total comprehensive loss - - - - 72 - (4,673) (4,601) ---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- -------- Deferred tax movement in respect of share options - - - - - - (60) (60) ---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- -------- Share-based payments charge (Note 23) - - - 145 - - - 145 ---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- -------- Share-based payments reserves transfer - - - (249) - - 249 - ---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- -------- Purchase of treasury shares - - - - - (110) - (110) ---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- -------- Translation reserve movements on disposal of foreign operations(2) - - - - 931 - (931) - ---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- -------- Dividends paid in the year (Note 29) - - - - - - (484) (484) ---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- -------- Transfer of merger reserve (Note 23) - - (28,526) - - - 28,526 - ---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- -------- Transactions with owners - - (28,526) (104) 931 (110) 27,300 (509) ---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- -------- At 31 July 2022 323 8,706 224 350 1,137 (147) 19,404 29,997 ---------------------------- -------- -------- -------- ----------- ----------- --------- ----------- --------
B) Company
Treasury
Share Share Merger Share-based shares Retained
capital premium reserve payment reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- -------- ----------- --------- --------- --------
At 1 August 2020 323 8,706 28,526 526 - 1,446 39,527
------------------------------- -------- -------- -------- ----------- --------- --------- --------
Loss and total comprehensive
expense for the year
(Note 9) - - - - - (866) (866)
------------------------------- -------- -------- -------- ----------- --------- --------- --------
Share-based payments
charge (Note 23) - - - 104 - - 104
------------------------------- -------- -------- -------- ----------- --------- --------- --------
Share-based payments
reserves transfer - - - (176) - 176 -
------------------------------- -------- -------- -------- ----------- --------- --------- --------
Purchase of treasury
shares - - - - (16) - (16)
------------------------------- -------- -------- -------- ----------- --------- --------- --------
Transactions with owners - - - (72) (16) 176 88
------------------------------- -------- -------- -------- ----------- --------- --------- --------
At 31 July 2021 323 8,706 28,526 454 (16) 756 38,749
------------------------------- -------- -------- -------- ----------- --------- --------- --------
At 1 August 2021 323 8,706 28,526 454 (16) 756 38,749
------------------------------- -------- -------- -------- ----------- --------- --------- --------
Profit and total comprehensive
income for the year (Note
9) - - - - - 296 296
------------------------------- -------- -------- -------- ----------- --------- --------- --------
Share-based payments
charge (Note 23) - - - 145 - - 145
------------------------------- -------- -------- -------- ----------- --------- --------- --------
Share-based payments
reserves transfer - - - (249) - 249 -
------------------------------- -------- -------- -------- ----------- --------- --------- --------
Purchase of treasury
shares - - - - (91) - (91)
------------------------------- -------- -------- -------- ----------- --------- --------- --------
Dividends paid - - - - - (484) (484)
------------------------------- -------- -------- -------- ----------- --------- --------- --------
Transfer of merger reserve
(Note 23) - - (28,526) - - 28,526 -
------------------------------- -------- -------- -------- ----------- --------- --------- --------
Transactions with owners - - (28,526) (104) (91) 28,291 (430)
------------------------------- -------- -------- -------- ----------- --------- --------- --------
At 31 July 2022 323 8,706 - 350 (107) 29,343 38,615
------------------------------- -------- -------- -------- ----------- --------- --------- --------
1. Results are restated following the March 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting
in previously capitalised software assets being expensed, as explained
further in Note 1.25.
2. The movement through the translation reserve in the year ended 31
July 2022 is in respect of disposal of foreign operations relates
to the sale of the South African recruitment operations in December
2021 and the realisation of previously unrealised foreign exchange
losses.
Consolidated and Company Statements of Financial Position
As at 31 July 2022
Group Company
-------------------------------- ---- -------------------------------------- --------------------
Restated(1) Restated(1)
31-Jul-22 31-Jul-21 01-Aug-20(2) 31-Jul-22 31-Jul-21
Note GBP'000 GBP'000 GBP'000 GBP'002 GBP'000
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Non-current assets
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Goodwill and intangible assets 13 2,072 6,343 6,948 11 13
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Property, plant and equipment 14 1,359 1,578 1,492 - -
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Right-of-use assets 22 3,065 5,674 7,338 - -
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Investments 15 - - 19 38,608 38,463
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Deferred tax assets 16 604 971 859 - -
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Total non-current assets 7,100 14,566 16,656 38,619 38,476
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Current assets
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Trade and other receivables 17 54,767 64,135 48,946 2,757 3,046
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Corporation tax receivables 1,263 818 26 238 195
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Cash and cash equivalents 17,768 29,238 34,796 7 4
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Assets classified as held for
sale 11 - 346 - - -
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Total current assets 73,798 94,537 83,768 3,002 3,245
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Total assets 80,898 109,103 100,424 41,621 41,721
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Non-current liabilities
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Deferred tax liabilities 16 (25) (14) (29) - -
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Provisions 18 (517) (1,269) (1,587) - -
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Lease liabilities 22 (2,490) (4,281) (5,746) - -
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Bank loans and borrowings 20 - - (7,304) - -
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Total non-current liabilities (3,032) (5,564) (14,666) - -
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Current liabilities
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Trade and other payables 19 (43,406) (56,121) (46,129) (3,006) (2,972)
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Provisions 18 (1,187) (464) (1,207) - -
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Current tax liabilities (340) (796) (1,247) - -
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Lease liabilities 22 (1,135) (1,480) (1,990) - -
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Bank loans and borrowings 20 (1,801) (9,348) (151) - -
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Liabilities directly associated
with assets classified as held
for sale 11 - (223) - - -
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Total current liabilities (47,869) (68,432) (50,724) (3,006) (2,972)
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Total liabilities (50,901) (73,996) (65,390) (3,006) (2,972)
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Net assets 29,997 35,107 35,034 38,615 38,749
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Equity
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Share capital 23 323 323 323 323 323
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Share premium 8,706 8,706 8,706 8,706 8,706
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Merger reserve 23 224 28,750 28,750 - 28,526
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Share-based payment reserve 350 454 526 350 454
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Translation reserve 1,137 134 (147) - -
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Treasury shares reserve (147) (37) (97) (107) (16)
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Retained earnings 19,404 (3,223) (3,027) 29,343 756
-------------------------------- ---- --------- ----------- -------------- --------- ---------
Total equity 29,997 35,107 35,034 38,615 38,749
-------------------------------- ---- --------- ----------- -------------- --------- ---------
1. Results are restated following the March 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting
in previously capitalised software assets being expensed, as explained
further in Note 1.25.
2. Following the material restatement of the comparative information
in relation to cloud computing arrangements, as explained further
in Note 1.25, a third balance sheet has been presented as at 1 August
2020, in line with the requirements of IAS 1.
The amount of profit generated by the parent Company was GBP296,000 for the year ended 31 July 2022 (2021: loss of GBP866,000).
The financial statements were approved by the board of directors on 2 November 2022 and signed on its behalf by
Oliver Whittaker
Chief Financial Officer
Consolidated and Company Cash Flow Statements
For the year ended 31 July 2022
Group Company
------------------------------------------- ---- --------------------- ------------------
Restated(1)
2022 2021 2022 2021
Note GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- ---- -------- ----------- -------- --------
Cash flow from operating activities
------------------------------------------- ---- -------- ----------- -------- --------
(Loss)/profit after taxation (4,673) (437) 296 (866)
------------------------------------------- ---- -------- ----------- -------- --------
Adjustments for:
------------------------------------------- ---- -------- ----------- -------- --------
Depreciation of property, plant
and equipment and amortisation of
goodwill and intangible assets,
software and software licences 4 1,078 901 2 3
------------------------------------------- ---- -------- ----------- -------- --------
Depreciation of leased right-of-use
assets 4 1,552 1,875 - -
------------------------------------------- ---- -------- ----------- -------- --------
Loss from sale of subsidiary, associate
or investment 82 - - -
------------------------------------------- ---- -------- ----------- -------- --------
Loss on disposal of property, plant
and equipment 33 8 - -
------------------------------------------- ---- -------- ----------- -------- --------
Loss on disposal of software and
software licences 12 - - -
------------------------------------------- ---- -------- ----------- -------- --------
Impairment of goodwill and acquired
intangibles 4 3,780 - - -
------------------------------------------- ---- -------- ----------- -------- --------
Impairment of right-of-use assets 4 852 183 - -
------------------------------------------- ---- -------- ----------- -------- --------
Profit on reassessment of lease
term (27) - - -
------------------------------------------- ---- -------- ----------- -------- --------
Impairment of property, plant and
equipment - 18 - -
------------------------------------------- ---- -------- ----------- -------- --------
Interest income 6 (4) (65) (1) -
------------------------------------------- ---- -------- ----------- -------- --------
Interest costs 7 253 1,218 - 260
------------------------------------------- ---- -------- ----------- -------- --------
Taxation (credit)/expense recognised
in income statement 10 (467) 26 (235) (189)
------------------------------------------- ---- -------- ----------- -------- --------
Decrease/(increase) in trade and
other receivables 9,368 (15,499) 582 68,992
------------------------------------------- ---- -------- ----------- -------- --------
(Decrease)/increase in trade and
other payables (12,715) 10,098 (67) (60,617)
------------------------------------------- ---- -------- ----------- -------- --------
Increase in provisions (54) (1,064) - -
------------------------------------------- ---- -------- ----------- -------- --------
Share-based payment charge 23 145 271 - -
------------------------------------------- ---- -------- ----------- -------- --------
Investment income - - (1,350) -
------------------------------------------- ---- -------- ----------- -------- --------
Foreign exchange gains 31 - - -
------------------------------------------- ---- -------- ----------- -------- --------
Cash (used in)/generated from operations (754) (2,467) (773) 7,583
------------------------------------------- ---- -------- ----------- -------- --------
Interest paid 7 (138) (320) - (63)
------------------------------------------- ---- -------- ----------- -------- --------
Interest on lease liabilities 7 (115) (156) - -
------------------------------------------- ---- -------- ----------- -------- --------
Interest received 6 4 65 1 -
------------------------------------------- ---- -------- ----------- -------- --------
Income taxes paid (200) (1,322) - -
------------------------------------------- ---- -------- ----------- -------- --------
Cash (used in)/generated from operating
activities (1,203) (4,200) (772) 7,520
------------------------------------------- ---- -------- ----------- -------- --------
Cash flows from investing activities
------------------------------------------- ---- -------- ----------- -------- --------
Purchase of property, plant and
equipment 14 (370) (332) - -
------------------------------------------- ---- -------- ----------- -------- --------
Purchase of intangible assets 13 (29) (83) - -
------------------------------------------- ---- -------- ----------- -------- --------
Dividends received - - 1,350 -
------------------------------------------- ---- -------- ----------- -------- --------
Cash (used in)/generated from investing
activities (399) (415) 1,350 -
------------------------------------------- ---- -------- ----------- -------- --------
Cash flows from financing activities
------------------------------------------- ---- -------- ----------- -------- --------
Lease liability principal repayment (1,924) (2,355) - -
------------------------------------------- ---- -------- ----------- -------- --------
(Purchase)/issue of treasury shares (110) 60 (91) (16)
------------------------------------------- ---- -------- ----------- -------- --------
Working capital facility (repaid)/utilised (7,547) 9,197 - -
------------------------------------------- ---- -------- ----------- -------- --------
Repayment of term loan - (7,500) - (7,500)
------------------------------------------- ---- -------- ----------- -------- --------
Dividends paid 29 (484) - (484) -
------------------------------------------- ---- -------- ----------- -------- --------
Cash used in financing activities (10,065) (598) (575) (7,516)
------------------------------------------- ---- -------- ----------- -------- --------
Effects of exchange rates on cash
and cash equivalents 197 (345) - -
------------------------------------------- ---- -------- ----------- -------- --------
(Decrease)/increase in cash and
cash equivalents (11,470) (5,558) 3 4
------------------------------------------- ---- -------- ----------- -------- --------
Cash and cash equivalents at the
beginning of the year 29,238 34,796 4 -
------------------------------------------- ---- -------- ----------- -------- --------
Cash and cash equivalents at end
of year(2) 17,768 29,238 7 4
------------------------------------------- ---- -------- ----------- -------- --------
1 Results are restated following the March 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting
in previously capitalised software assets being expensed, as explained
further in Note 1.25.
2 Included in cash and cash equivalents is the following restricted
cash which meets the definition of cash and cash equivalents but is
not available for use by the Group: GBP615,000 of restricted cash
(2021: GBP7,115,000) arising from the Group's non-recourse working
capital arrangements, as discussed further in Note 20; and GBP1,662,000
of restricted cash (2021: GBP1,240,000) on deposit in accounts controlled
by the Group but not available to be immediately be drawn down.
Net decrease in cash and cash equivalents for discontinued operations was GBP742,000 (year to 31 July 2021: decrease of GBP1,534,000).
Notes Forming Part of the Financial Statements
1. The Group and Company Significant Accounting Policies
1.1 The Business 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, United Kingdom. The Company's address is: 1450 Parkway, Solent Business Park Whiteley, Fareham, Hampshire, PO15 7AF. The registration number is 04426322.
1.2 Basis of preparation of the financial statements
The financial statements of Gattaca plc have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.
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 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 1.24.
1.3 Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report. The financial position of the Group, its cash flows and liquidity are described in the Chief Financial Officer's Report.
Post-pandemic, the Group has maintained mitigating actions to enhance working capital availability, including increases to the payment terms of certain types of contractors and these actions have created a permanent working capital benefit, and reduce our working capital requirements during growth. There is sufficient headroom on our working capital facilities to absorb a level of customer payment term extensions, but we would also manage supply to the customer if payment within an appropriate period was not being made. Whilst there is no evidence that it would occur, a significant deterioration in average payment terms has the potential to impact the Group's liquidity. The hybrid working style adopted by the majority of our staff is now fully integrated with our core business processes and there continues to be no significant impact to our ability to operate effectively.
The Group anticipates macroeconomic challenges over the next financial year, significantly in the UK where increases in energy prices continue to drive rising inflation and real potential for a UK recession. The UK Government's Mini-Budget on 23 September 2022 resulted in increased short-term economic uncertainty and fluctuations in currency markets. The Bank of England's response has seen interest rates rise by 100 basis points since the year end.
The Directors have prepared detailed cash flow forecasts to July 2025, covering a period of 33 months from the date of approval of these financial statements. This base case is drawn up with appropriate regard for the current macroeconomic environment and the particular circumstances in which the Group operates. This base case assumes a return to pre-pandemic NFI in 2026. Trading has been broadly in line with the forecast since the year end.
A key assumption in preparing the cash flow forecasts is the continued availability of Group's invoice financing facility to provide liquidity throughout the forecast period. The current GBP60m facility has no contractual renewal date and the Directors remain confident that the facility will remain available.
The output of the base case forecasting process has been used to perform sensitivity analysis on the Group's cash flow to model the potential effects should principal risks actually occur either individually or in unison. The sensitivity analysis modelled scenarios with significantly lower NFI growth rates, significantly increased operating cost inflation and increased finance costs associated with variable rate borrowings considered. The Group has modelled the impact of a severe but plausible scenario including nil growth in contract and permanent NFI across FY23 to FY25, operating cost inflation of 5.00%-10.00% and further increases in the Bank of England's base rate to 5.00%.
After making appropriate enquiries and considering the uncertainties described above, the Directors have a reasonable expectation at the time of approving these financial statements that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future. Following careful consideration the Directors do not consider there to be a material uncertainty with regards to going concern and consider it is appropriate to adopt the going concern basis in preparing these financial statements.
1.4 New standards and interpretations
The following are new standards or improvements to existing standards that are mandatory for the first time in the Group's accounting period beginning on 1 August 2021 and no new standards have been early adopted. The Group's July 2022 consolidated financial statements have adopted these amendments to IFRS:
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest
-- Rate Benchmark Reform - Phase 2 (effective 1 January 2021)
-- Following the IFRS Interpretations Committee's agenda decision
published in March 2021, during the year to 31 July 2022, the Group
voluntarily changed its accounting policy relating to the capitalisation
of certain software costs, specifically relating to the capitalisation
of implementation costs such as configuration and customisation
costs for cloud-based software under SaaS arrangements. This is
further described, along with the financial impact, in Note 1.25.
With the exception of the accounting policy change described above, there have been no further alterations made to the accounting policies as a result of considering all of the other amendments above that became effective in the year, as these were either not material or were not relevant to the Group or Company.
New standards in issue, not yet adopted
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 2022. These new pronouncements are listed as follows:
Amendments to IAS 1 - Classification of liabilities as current
-- or non-current (effective 1 January 2022)
-- Amendments to IAS 16 - Property, plant and equipment: proceeds
before intended use (effective 1 January 2022)
-- Amendments to IAS 37 - Onerous contracts - cost of fulfilling a
contract (effective 1 January 2022)
-- Amendments to IFRS 3 - Reference to the conceptual framework (effective
1 January 2022)
-- Amendments to IFRS Standards 2018-2022 - Annual improvements on
IFRS 9, IFRS 16 and IFRS 1 (effective 1 January 2022)
The Directors are currently evaluating the impact of the adoption of all other standards, amendments and interpretations but do not expect them to have a material impact on the Group's operations or results.
Forthcoming requirements
The following amendments are required for application for the Group's periods beginning after 1 August 2022 or later:
Standard Effective date (annual period beginning on or after)
----------------------- ---------------------------------------------------------
IAS 1 and IFRS Practice Improve accounting policy disclosures 1 January
Statement 2 2023
----------------------- ---------------------------------------------- ---------
IAS 8 Clarify distinction between accounting 1 January
policies and accounting estimates 2023
----------------------- ---------------------------------------------- ---------
IAS 12 Deferred tax related to assets and liabilities 1 January
arising from a single transaction 2023
----------------------- ---------------------------------------------- ---------
1.5 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 a 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.
1.6 Revenue
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.
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 'claw-back' 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 considered probable. In addition, 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.
Other
Other revenue streams are generated from the provision of engineering management services and other fees. Revenue from the provision of engineering management services is recognised either over a period of time (where the customer benefits from the services provided as the group performs those services) or at a point in time upon receipt of client-approved timesheets. Where the group determines revenue should be recognised over time an estimate is made of progress using an input method, by reference to the proportion of costs incurred to date compared to total expected costs for the contract. Other fees mainly relate to account management fees for providing recruitment services. Revenue from other fees is recognised following client commitment to the agreement at either a point in time or over time in accordance with terms of each individual agreement.
1.7 Government Grants
Government grants are assistance by government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to operating activities.
Government grants are recognised when there is a reasonable assurance that the Group will comply with the conditions attached to it and that the grant will be received. They are recognised in the consolidated Income Statement on a systematic basis over the periods in which the related costs that they compensate are recognised as expenses.
Grants are either presented as grant income or deducted in reporting the related expense they compensate in the Income Statement.
1.8 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 proper understanding of the Group's business performance.
Items which are included within this category include but are not limited to:
-- material restructuring costs, including related professional
fees and staff costs, and costs relating to disposal of discontinued
business;
-- costs of acquisitions;
-- lease exit costs; and
-- integration costs of acquisitions.
In addition, the Group also excludes from underlying results amortisation and impairment of goodwill and acquired intangibles, impairment of leased right-of-use assets and net foreign exchange gains or losses.
Specific adjusting items are included as non-underlying based on the following rationale:
Does not
Distorting reflect
due to Distorting in-year
irregular due to operational
nature fluctuating performance
year nature of continuing
Item on year (size) business
---------------------------------------------------- ---------- ------------ --------------
Material restructuring costs X X X
---------------------------------------------------- ---------- ------------ --------------
Lease exit costs X X X
---------------------------------------------------- ---------- ------------ --------------
Amortisation and impairment of goodwill and acquired
intangibles X X X
---------------------------------------------------- ---------- ------------ --------------
Impairment of leased right-of-use assets X X X
---------------------------------------------------- ---------- ------------ --------------
Net foreign exchange gains and losses X X
---------------------------------------------------- ---------- ------------ --------------
Tax impact of the above X X X
---------------------------------------------------- ---------- ------------ --------------
1.9 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:
Fixtures, fittings
and equipment 12.5% to 33.3% Straight line
---------------------- ---------------------- -------------
Over the period of the
Leasehold improvements lease term Straight line
---------------------- ---------------------- -------------
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
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.
1.10 Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the fair value of the consideration given 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.
1.11 Intangible assets
Customer relationships
Customer relationships comprise principally of 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.
Costs incurred for the development of software code that enhances or modifies, or creates additional capability to existing on premise systems and meets the definition of and recognition criteria for an intangible asset are recognised as intangible software assets and depreciated over a useful life of between two and ten years.
Implementation costs for cloud-based software under Software-as-a-Service (SaaS) arrangements
SaaS arrangements are service contracts providing the Group with the right to access the cloud provider's application software over the contract period. In most cases, this will not meet the definition of an intangible asset under IAS 38. The following outlines the accounting treatment of implementation costs incurred in relation to SaaS arrangements:
Implementation costs relating to cloud-based software under SaaS arrangements are assessed as they are incurred. These would include implementation support, consultancy, configuration costs, customisation costs and testing services. If the services are provided by the cloud supplier or a third party and are considered to be distinct from the access to the software, then they are either recognised as an intangible asset under IAS 38 if they meet the relevant capitalisation criteria or, more likely, they are expensed to the income statement as incurred. If the implementation services are provided by the cloud provider but are not considered to be distinct from access to the software, which generally is the case for customisation costs for cloud-based software, then they are recognised as an expense over the period of the service contract, resulting in a prepayment asset if the services are paid for in advance.
Internally generated intangible assets
Internal development costs that are directly attributable to the design and testing of identifiable and unique non-cloud based 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 internal expenditure that does not meet these criteria is recognised as an expense to profit or loss as incurred. Software development internal 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.
1.12 Investments
Investments in subsidiary undertakings are initially recognised at cost and subsequently carried at cost less accumulated impairment.
Investments are tested for impairment at the reporting date if events arise that indicate an impairment may be triggered. Provision is made against the carrying value of an investment where an impairment is deemed to have occurred. Impairment losses on investments are recognised in the income statement under administrative expenses.
1.13 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 the income statement at the time of disposal.
1.14 Leases
The Group has applied IFRS 16 using the modified retrospective approach, effective from 1 August 2019. The comparative information prior to this date has not been restated and continues to be reported under IAS17 and IFRIC 14.
The Group leases office property, motor vehicles and equipment. Rental contracts range from monthly to six years.
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Contracts may contain both lease and non-lease components, and consideration is allocated in the contract to the lease and non-lease components based on their relative stand-alone prices.
Assets and liabilities arising from a lease are initially measured on a present value basis at the lease commencement date. Lease liabilities include the net present value of the fixed payments less any lease incentives receivable, variable lease payments that are based on an index or a rate, amounts expected to be payable by the group under residual value guarantees, the exercise price of any purchase option if the Group is reasonably certain to exercise that option, and payments of penalties for terminating the lease if that option is expected to be taken.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
Lease payments are discounted at either the interest rate implicit in the lease or when this interest rate cannot be readily determined, the Group's incremental borrowing rate associated with a similar asset. When calculating lease liabilities, the Group uses its incremental borrowing rate, being the rate it would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic climate with similar terms, security and conditions. This is estimated using publicly available data adjusted for changes specific to the lease in financing conditions, lease term, country and currency.
The Group does not have leases with variable lease payments based on an index or rate.
Extension or termination options are included in a number of the Group's leases. In determining the lease term, the Group considers all facts and circumstances that create an economic incentive to exercise, or not to exercise, an option. Extension options are only included in the lease term if the lease is reasonably certain to be extended. The lease term is reassessed if an option is actually exercised or the Group becomes obliged to exercise (or not to exercise) it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs that is within the control of the Group.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
-- the amount of the initial measurement of lease liability,
any lease payments made at or before the commencement date less
-- any lease incentives received,
-- any initial direct costs, and
-- restoration costs.
Right-of-use assets are depreciated on a straight-line basis over the term of the lease with depreciation expense recognised in the income statement.
Right-of-use assets no longer utilised by the Group but for which lease liabilities still exist, for example a property exited before the end of the lease term or break clause, are fully impaired with the expense recognised in the income statement.
Lease modifications are a change in scope of a lease that was not part of the original lease. Any change that is triggered by a clause already part of the original lease contract is a re-assessment and not a modification. Changes to lease cash flows as part of a re-assessment result in a re-measurement of the lease liability using an updated discount rate and a corresponding adjustment to the carrying value of the right-of-use asset.
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. Payments associated with short-term leases and leases of low value are recognised on a straight-line basis as an expense in profit or loss.
1.15 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 statement of financial position 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.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to the offset and there is an intention to settle balances on a net basis.
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.
1.16 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.
1.17 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 Long-Term Incentive Plan Options which have exercise prices above GBP0.01. Grants 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 Group 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 Gattaca Plc Consolidated Statement of Financial Position.
1.18 Financial instruments
Financial assets
IFRS 9 contains a classification and measurement approach for financial assets that reflects the business model in which assets are managed and their cash flow characteristics. Under IFRS 9, all financial assets are measured at either amortised cost, fair value through profit and loss ('FVTPL') or fair value through other comprehensive income ('FVOCI').
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 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 a 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.
Impairment of financial assets
IFRS 9 require the application of the '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
ECL's have been modelled for UK customers in different industries,
and customers in the Americas, Europe, Asia and Africa.
-- 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 expected credit loss
provision is not material.
At each reporting date, the expected credit loss 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
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.
Non-recourse receivables factoring is not recognised as a financial liability as there is no contractual obligation to deliver cash; subsequently, the receivables are de-recognised and any difference between the receivable value and amount received through non-recourse factoring is recognised as a finance cost.
1.19 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.
Restricted cash and cash equivalent balances are those which meet the definition of cash and cash equivalents but are not available for wider use by the Group. These balances arise from the Group's non-recourse working capital arrangements as well as from trapped cash. Trapped cash are balances for which the Group can no longer access the accounts and hence cannot withdraw or control funds but is still the legal owner.
1.20 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 not recognised for future operating losses.
1.21 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.
1.22 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.
The individual financial statements of each Group company are presented in its functional currency. On consolidation, the assets and liabilities of overseas subsidiaries, including any related goodwill, are translated to Sterling at the rate of exchange at the balance sheet date. The results and cash flows of overseas subsidiaries are translated to Sterling using the average rates of exchange during the period. Exchange adjustments arising from the re-translations of the opening net investment and the results for the period to the period end rate are accounted for in the translation reserve in the statement of Comprehensive Income. On divestment, these exchange differences are reclassified from the translation reserve to the Income Statement.
1.23 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, less any amounts
realised and reclassified to distributable reserves. Unrealised profits
held in the merger reserve become realised when a realised loss is
recognised on the associated asset, or the asset is disposed of in
return for qualifying consideration as defined by the Companies Act
2006. On realisation, the merger reserve can be transferred to retained
earnings
-- 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
1.24 Critical accounting judgements and key sources of estimation uncertainty
Critical accounting judgement
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 on-going 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, any insurance coverage in place and the current economic conditions. As a result, expected credit loss provisions for impairment of trade receivables have been recognised, as discussed in Note 17. The impact of the ongoing economic recovery from COVID-19 and other macro-economic factors have been incorporated into these estimates.
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. The impact of the ongoing economic recovery from COVID-19 and other macroeconomic factors have been reflected in the forecast future cash flows. More detail of the assumptions used can be found in Note 13.
Valuation of investments
The parent company's investments in subsidiary undertakings are tested for impairment at the reporting date if events arise that indicate an impairment may be required. This requires an estimate to be made of the recoverable amount of the investments, including forecasting future cash flows of the asset and forming assumptions over the discount rate and long term growth rate applied. The impact of the ongoing economic recovery from COVID-19 and other macroeconomic factors have been reflected in the forecast cash flows. More detail of the assumptions used can be found in Note 15.
1.25 Change in accounting policy - Software-as-a-service ('SaaS') arrangements
In the year to 31 July 2022, following the IFRS Interpretation Committee's agenda decision published in March 2021, the Group changed its accounting policy relating to the capitalisation of certain software costs, specifically relating to the capitalisation of implementation costs such as configuration and customisation costs for cloud-based software under SaaS arrangements.
The Group's accounting policy was previously to capitalise costs directly attributable to the development of intangible software assets, including configuration and customisation costs, irrespective of whether the services were performed by the SaaS supplier or a third party. Following the adoption of the IFRIC agenda guidance, all software intangible assets were identified and assessed to determine if they related to cloud-based software under SaaS arrangements. The Group then assessed whether they had control over the software and any associated capitalised implementation costs. For those arrangements where the Group did not have control of the developed cloud-based software under the updated IFRIC agenda guidance, to the extent that the implementation services were performed by a third party, the Group determined if the service was separate from the underlying software service contract and if so, derecognised the intangible asset previously capitalised. Amounts paid to a supplier for customisation costs that were not separate from the underlying software service contract, were treated as a prepayment over the period of the service contract.
Accordingly, in line with the treatment prescribed in IAS 8 and IAS 1 in respect of changes in accounting policies, this change has been applied retrospectively, restating the prior period balance sheet at 1 August 2020 and 31 July 2021.
The full impact of the change in accounting policy is detailed below.
Condensed Consolidated Income Statement
For the year ended 31 July 2021
As previously
reported Adjustment As restated
GBP'000 GBP'000 GBP'000
---------------------------- ------------------------------------------------ ------------- ---------- -----------
Continuing operations
---------------------------- ------------------------------------------------ ------------- ---------- -----------
Gross profit 42,080 - 42,080
------------------------------------------------------------------------------ ------------- ---------- -----------
Other
administrative
Administrative expenses -- expenses (38,374) - (38,374)
---------------------------- --------------- ------------------------------- ------------- ---------- -----------
expense of
implementation
Administrative expenses -- costs - (1,544) (1,544)
---------------------------- --------------- ------------------------------- ------------- ---------- -----------
reversal of
amortisation
of software
implementation
Administrative expenses -- costs (422) 283 (139)
---------------------------- --------------- ------------------------------- ------------- ---------- -----------
unwinding of the
prepaid
software
implementation
Administrative expenses -- costs - (131) (131)
---------------------------- --------------- ------------------------------- ------------- ---------- -----------
Profit before taxation 3,284 (1,392) 1,892
------------------------------------------------------------------------------ ------------- ---------- -----------
Net finance costs (1,080) - (1,080)
------------------------------------------------------------------------------ ------------- ---------- -----------
Taxation (415) 374 (41)
------------------------------------------------------------------------------ ------------- ---------- -----------
Profit after taxation
from continuing operations 1,789 (1,018) 771
------------------------------------------------------------------------------ ------------- ---------- -----------
Profit/(loss) for
the year 581 (1,018) (437)
------------------------------------------------------------------------------ ------------- ---------- -----------
Condensed Consolidated Statement of Changes in Equity
As previously
reported Adjustment As restated
GBP'000 GBP'000 GBP'000
------------------------------ ------------- ---------- -----------
Total equity at 1 August 2020 39,772 (4,738) 35,034
------------------------------ ------------- ---------- -----------
Profit/(loss) for the period 581 (1,018) (437)
------------------------------ ------------- ---------- -----------
Balance at 31 July 2021 40,863 (5,756) 35,107
------------------------------ ------------- ---------- -----------
Condensed Consolidated Statement of Financial Position
As previously
reported Adjustment As restated
as at as at as at
1 August 1 August 1 August
2020 2020 2020
GBP'000 GBP'000 GBP'000
------------------------------- ------------- ---------- -----------
Non-current assets
------------------------------- ------------- ---------- -----------
Goodwill and intangible assets 12,877 (5,929) 6,948
------------------------------- ------------- ---------- -----------
Deferred tax assets - 859 859
------------------------------- ------------- ---------- -----------
Total non-current assets 21,726 (5,070) 16,656
------------------------------- ------------- ---------- -----------
Current assets
------------------------------- ------------- ---------- -----------
Trade and other receivables 48,862 84 48,946
------------------------------- ------------- ---------- -----------
Total current assets 83,684 84 83,768
------------------------------- ------------- ---------- -----------
Total assets 105,410 (4,986) 100,424
------------------------------- ------------- ---------- -----------
Non-current liabilities
------------------------------- ------------- ---------- -----------
Deferred tax liabilities (277) 248 (29)
------------------------------- ------------- ---------- -----------
Total non-current liabilities (14,914) 248 (14,666)
------------------------------- ------------- ---------- -----------
Total liabilities (65,638) 248 (65,390)
------------------------------- ------------- ---------- -----------
Net assets 39,772 (4,738) 35,034
------------------------------- ------------- ---------- -----------
Equity
------------------------------- ------------- ---------- -----------
Retained earnings 1,711 (4,738) (3,027)
------------------------------- ------------- ---------- -----------
Total equity 39,772 (4,738) 35,034
------------------------------- ------------- ---------- -----------
As previously
reported Adjustment As restated
as at as at as at
31 July 31 July 31 July
21 21 21
GBP'000 GBP'000 GBP'000
------------------------------- ------------- ---------- -----------
Non-current assets
------------------------------- ------------- ---------- -----------
Goodwill and intangible assets 13,778 (7,435) 6,343
------------------------------- ------------- ---------- -----------
Deferred tax assets - 971 971
------------------------------- ------------- ---------- -----------
Total non-current assets 21,030 (6,464) 14,566
------------------------------- ------------- ---------- -----------
Current assets
------------------------------- ------------- ---------- -----------
Trade and other receivables 63,937 198 64,135
------------------------------- ------------- ---------- -----------
Total current assets 94,339 198 94,537 ------------------------------- ------------- ---------- ----------- Total assets 115,369 (6,266) 109,103 ------------------------------- ------------- ---------- ----------- Non-current liabilities ------------------------------- ------------- ---------- ----------- Deferred tax liabilities (524) 510 (14) ------------------------------- ------------- ---------- ----------- Total non-current liabilities (6,074) 510 (5,564) ------------------------------- ------------- ---------- ----------- Total liabilities (74,506) 510 (73,996) ------------------------------- ------------- ---------- ----------- Net assets 40,863 (5,756) 35,107 ------------------------------- ------------- ---------- ----------- Equity ------------------------------- ------------- ---------- ----------- Retained earnings 2,533 (5,756) (3,223) ------------------------------- ------------- ---------- ----------- Total equity 40,863 (5,756) 35,107 ------------------------------- ------------- ---------- -----------
Condensed Consolidated Cash Flow Statement
For period ended 31 July 2021
As previously
reported Adjustment As restated
GBP'000 GBP'000 GBP'000
----------------------------------------- ------------- ---------- -----------
Cash flows from operating activities
----------------------------------------- ------------- ---------- -----------
Profit/(loss) after taxation 581 (1,018) (437)
----------------------------------------- ------------- ---------- -----------
Cash used in operating activities (2,411) (1,789) (4,200)
----------------------------------------- ------------- ---------- -----------
Cash flows from investing activities
----------------------------------------- ------------- ---------- -----------
Purchase of intangible assets (1,872) 1,789 (83)
----------------------------------------- ------------- ---------- -----------
Cash used in investing activities (2,204) 1,789 (415)
----------------------------------------- ------------- ---------- -----------
Cash and cash equivalents at end of year 29,238 - 29,238
----------------------------------------- ------------- ---------- -----------
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 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. Previously, the Group was managed through its three reporting segments, UK Engineering, UK Technology and International. From August 2021 the Group aligned its operating model to the markets in which its clients operate. From December 2021 financial information provided to the Board was based on this new reporting and operating structure. As a result of this change, the segmental information for the year to 31 July 2022 has been presented based on the new structure in line with the requirements of IFRS 8 'Operating Segments' and the information for the year to 31 July 2021 has been restated accordingly.
Year ended 31 July 2022
Non-recurring
items
Technology, and
Media Continuing amortisation
All amounts and underlying of acquired Total
in GBP'000 Mobility Energy Defence Telecoms Infrastructure International(3) Other operations intangibles Discontinued Group
---------------- -------- ------ ------- ----------- -------------- ---------------- ------- ---------- ------------- ------------ --------
Revenue 47,766 40,779 69,811 41,660 140,422 7,969 54,939 403,346 - 781 404,127
---------------- -------- ------ ------- ----------- -------------- ---------------- ------- ---------- ------------- ------------ --------
Gross profit 4,571 3,884 6,720 4,246 13,561 2,779 8,379 44,140 - 238 44,378
---------------- -------- ------ ------- ----------- -------------- ---------------- ------- ---------- ------------- ------------ --------
Operating
contribution 1,963 2,015 3,003 1,674 5,082 (613) 2,338 15,462 - (440) 15,022
---------------- -------- ------ ------- ----------- -------------- ---------------- ------- ---------- ------------- ------------ --------
Depreciation,
impairment,
and
amortisation (74) (63) (108) (64) (217) (12) (86) (624) (5,051) (31) (5,706)
---------------- -------- ------ ------- ----------- -------------- ---------------- ------- ---------- ------------- ------------ --------
Central
overheads (1,128) (774) (2,753) (992) (4,418) (1,609) (2,659) (14,333) (558) (100) (14,991)
---------------- -------- ------ ------- ----------- -------------- ---------------- ------- ---------- ------------- ------------ --------
Profit/(loss)
from operations 761 1,178 142 618 447 (2,234) (407) 505 (5,609) (571) (5,675)
---------------- -------- ------ ------- ----------- -------------- ---------------- ------- ---------- ------------- ------------ --------
Finance
(costs)/income,
net (249) 566 218 535
---------------- -------- ------ ------- ----------- -------------- ---------------- ------- ---------- ------------- ------------ --------
Profit/(loss)
before tax 256 (5,043) (353) (5,140)
---------------- -------- ------ ------- ----------- -------------- ---------------- ------- ---------- ------------- ------------ --------
Year ended 31 July 2021 Restated(1)(,2)
Non-recurring
items
Technology, and
Media Continuing amortisation
All amounts and underlying of acquired Total
in GBP'000 Mobility Energy Defence Telecoms Infrastructure International(3) Other operations intangibles Discontinued Group
-------------- -------- ------ ------- ----------- -------------- ---------------- ------- ---------- ------------- ------------ --------
Revenue 43,251 48,854 67,680 42,319 146,286 9,816 57,520 415,726 - 3,432 419,158
-------------- -------- ------ ------- ----------- -------------- ---------------- ------- ---------- ------------- ------------ --------
Gross profit 3,141 3,916 5,858 3,735 14,182 3,528 7,720 42,080 - 1,047 43,127
-------------- -------- ------ ------- ----------- -------------- ---------------- ------- ---------- ------------- ------------ --------
Operating
contribution 1,263 2,231 3,227 1,368 7,707 (483) 3,164 18,477 - (213) 18,264
-------------- -------- ------ ------- ----------- -------------- ---------------- ------- ---------- ------------- ------------ --------
Depreciation,
impairment,
and
amortisation (388) (438) (607) (380) (1,311) (88) (516) (3,728) (548) (244) (4,520)
-------------- -------- ------ ------- ----------- -------------- ---------------- ------- ---------- ------------- ------------ --------
Central
overheads (1,021) (707) (2,301) (835) (4,041) (1,352) (2,245) (12,502) 193 (693) (13,002)
-------------- -------- ------ ------- ----------- -------------- ---------------- ------- ---------- ------------- ------------ --------
Profit/(loss)
from
operations (146) 1,086 319 153 2,355 (1,923) 403 2,247 (355) (1,150) 742
-------------- -------- ------ ------- ----------- -------------- ---------------- ------- ---------- ------------- ------------ --------
Finance
costs (412) (668) (73) (1,153)
-------------- -------- ------ ------- ----------- -------------- ---------------- ------- ---------- ------------- ------------ --------
Profit/(loss)
before tax 1,835 (1,023) (1,223) (411)
-------------- -------- ------ ------- ----------- -------------- ---------------- ------- ---------- ------------- ------------ --------
1 Segmental disclosures for the year to 31 July 2021 have been restated
as a result of the change in operating model structure.
2 Comparatives are restated following the March 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting
in previously capitalised software assets being expensed, as explained
further in Note 1.25.
3 International revenue and gross profit is generated from the location
of the commission earning sales consultant, as opposed to the domicile
of the respective subsidiary by which they are employed.
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.
Geographical information
Total Group revenue Non-current assets
----------------------- --------------------- --------------------
Restated1
All amounts in GBP'000 2022 2021 2022 2021
----------------------- ---------- --------- ------- -----------
UK 390,861 402,254 6,726 13,740
----------------------- ---------- --------- ------- -----------
Rest of Europe 662 2,316 1 -
----------------------- ---------- --------- ------- -----------
Middle East and Africa 781 1,685 59 551
----------------------- ---------- --------- ------- -----------
Americas 11,823 12,903 314 275
----------------------- ---------- --------- ------- -----------
Total 404,127 419,158 7,100 14,566
----------------------- ---------- --------- ------- -----------
1. Comparatives are restated following the March 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting
in previously capitalised software assets being expensed, as explained
further in Note 1.25.
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
Technology, Continuing
Media underlying
Mobility Energy Defence and Telecoms Infrastructure International Other operations
2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- -------- -------- -------- ------------- -------------- ------------- -------- -----------
Temporary
placements 46,249 40,612 67,652 40,493 138,027 5,863 48,728 387,624
------------------- -------- -------- -------- ------------- -------------- ------------- -------- -----------
Permanent
placements 1,483 158 1,909 1,115 2,363 2,106 3,652 12,786
------------------- -------- -------- -------- ------------- -------------- ------------- -------- -----------
Other 34 9 250 52 32 - 2,559 2,936
------------------- -------- -------- -------- ------------- -------------- ------------- -------- -----------
Total 47,766 40,779 69,811 41,660 140,422 7,969 54,939 403,346
------------------- -------- -------- -------- ------------- -------------- ------------- -------- -----------
Technology, Continuing
Media underlying
Mobility Energy Defence and Telecoms Infrastructure International Other operations
2021 Restated(1) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- -------- -------- -------- ------------- -------------- ------------- -------- -----------
Temporary
placements 42,326 48,559 65,581 41,376 144,298 7,575 52,430 402,145
------------------- -------- -------- -------- ------------- -------------- ------------- -------- -----------
Permanent
placements 903 259 2,050 922 1,883 2,240 2,557 10,814
------------------- -------- -------- -------- ------------- -------------- ------------- -------- -----------
Other 22 36 49 21 105 1 2,533 2,767
------------------- -------- -------- -------- ------------- -------------- ------------- -------- -----------
Total 43,251 48,854 67,680 42,319 146,286 9,816 57,520 415,726
------------------- -------- -------- -------- ------------- -------------- ------------- -------- -----------
1 As explained in Note 2, reported operating segments have changed at
31 July 2022 as a result of a change in internal operating structure;
consequently, all prior period information has been restated on the
new basis.
Timing of revenue recognition - continuing operations
Technology, Continuing
Media underlying
Mobility Energy Defence and Telecoms Infrastructure International Other operations
2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- -------- -------- -------- ------------- -------------- ------------- -------- -----------
Point in time 47,766 40,779 69,811 41,660 140,422 7,969 52,436 400,843
-------------- -------- -------- -------- ------------- -------------- ------------- -------- -----------
Over time - - - - - - 2,503 2,503
-------------- -------- -------- -------- ------------- -------------- ------------- -------- -----------
Total 47,766 40,779 69,811 41,660 140,422 7,969 54,939 403,346
-------------- -------- -------- -------- ------------- -------------- ------------- -------- -----------
Technology, Continuing
Media underlying
Mobility Energy Defence and Telecoms Infrastructure International Other operations
2021 Restated(1) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------- -------- -------- ------------- -------------- ------------- -------- -----------
Point in time 43,251 48,854 67,680 42,319 146,286 9,816 55,022 413,228
----------------- -------- -------- -------- ------------- -------------- ------------- -------- -----------
Over time - - - - - - 2,498 2,498
----------------- -------- -------- -------- ------------- -------------- ------------- -------- -----------
Total 43,251 48,854 67,680 42,319 146,286 9,816 57,520 415,726
----------------- -------- -------- -------- ------------- -------------- ------------- -------- -----------
1 As explained in Note 2, reported operating segments have changed at
31 July 2022 as a result of a change in internal operating structure;
consequently, all prior period information has been restated on the
new basis.
No single customer contributed more than 10% of the Group's revenues (2021: none). Revenue recognised over time is recognised based on costs incurred to date as a proportion of total forecast costs.
The Group has determined that its contract assets from contracts with customers are trade receivables and accrued income, and its contract liabilities are deferred income, which are set out below:
31 July 31 July
2022 2021
GBP'000 GBP'000
---------------------------- -------- --------
Trade receivables (Note 17) 36,367 34,187
---------------------------- -------- --------
Accrued income (Note 17) 15,327 26,742
---------------------------- -------- --------
Deferred income (330) (880)
---------------------------- -------- --------
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 and is classified in current assets. Deferred income at a given reporting date is recognised as revenue in the following financial year once performance obligations are satisfied and is classified in current liabilities.
4 Profit from Total Operations
2022 2021
GBP'000 GBP'000
-------------------------------------------------------- -------- --------
Profit from total operations is stated after charging:
-------------------------------------------------------- -------- --------
Depreciation of property, plant and equipment (Note 14) 570 213
-------------------------------------------------------- -------- --------
Depreciation of right-of-use leased assets (Note 22) 1,552 1,875
-------------------------------------------------------- -------- --------
Amortisation of acquired intangibles (Note 13) 420 548
-------------------------------------------------------- -------- --------
Amortisation of software and software licences (Note
13) 88 139
-------------------------------------------------------- -------- --------
Impairment of property, plant and equipment (Note 14) - 18
-------------------------------------------------------- -------- --------
Impairment of goodwill and acquired intangibles (Note
13) 3,780 -
-------------------------------------------------------- -------- --------
Impairment of right-of-use leased assets (Note 22) 852 183
-------------------------------------------------------- -------- --------
Loss on disposal of property, plant and equipment 33 8
-------------------------------------------------------- -------- --------
Loss on disposal of software and software licences 12 -
-------------------------------------------------------- -------- --------
Plant and machinery costs for leases out-of-scope of
IFRS 16 17 14
-------------------------------------------------------- -------- --------
Non-recourse working capital facility bank charges 323 287
-------------------------------------------------------- -------- --------
Share-based payment charges 114 271
-------------------------------------------------------- -------- --------
1 Results are restated following the March 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting
in previously capitalised software assets being expensed, as explained
further in Note 1.25.
The aggregate auditors remuneration was as follows:
2022 2021
GBP'000 GBP'000
-------------------------------------------------------------------- -------- --------
Fees payable for the audit of the parent company financial
statements 11 10
-------------------------------------------------------------------- -------- --------
Fees payable for the audit of the subsidiary company
financial statements 345 344
-------------------------------------------------------------------- -------- --------
Total auditors remuneration 356 354
-------------------------------------------------------------------- -------- --------
Non-audit services:
-------------------------------------------------------------------- -------- --------
-- Taxation - -
-------- --------
-- Other services pursuant to legislation - -
--------------- --------------------------------------------------- -------- --------
Total non-audit services - -
-------------------------------------------------------------------- -------- --------
Non-underlying items included within administrative expenses were as follows:
2022 2021
GBP'000 GBP'000
-------------------------------------------------------------- -------- --------
Continuing operations
-------------------------------------------------------------- -------- --------
Restructuring costs(1) 405 (284)
-------------------------------------------------------------- -------- --------
Costs associated with exiting properties(2) 153 91
-------------------------------------------------------------- -------- --------
Impairment of goodwill, acquired intangibles and right-of-use
leased assets(3) 4,632 -
-------------------------------------------------------------- -------- --------
Non-underlying items included in profit from continuing
operations 5,190 (193)
-------------------------------------------------------------- -------- --------
Discontinuing operations
-------------------------------------------------------------- -------- --------
Advisory fees(4) 33 29
-------------------------------------------------------------- -------- --------
Cost relating to discontinuation of group undertakings(5) 5 664
-------------------------------------------------------------- -------- --------
Costs associated with properties previously exited(6) 57 -
-------------------------------------------------------------- -------- --------
Non-underlying items included in profit from discontinued
operations 95 693
-------------------------------------------------------------- -------- --------
Total non-underlying items 5,285 500
-------------------------------------------------------------- -------- --------
1 Restructuring cost of GBP405,000 (2021: GBPnil) were recognised in
2022 as a result of changes in the Board and Senior Leadership Team.
A gain of GBPnil (2021: GBP284,000) was recognised in 2022 as a result
of releasing unutilised provision for employee related expenses and
professional fees.
2 Costs of GBP153,000 (2021: GBP91,000) have been recognised in relation
to the exit of a number of UK office buildings that are no longer
in use by the business.
3 Impairment losses have been recognised in 2022 with respect to the
"Infrastructure - RSL Rail" CGU, as discussed in further detail in
Note 13.
4 Legal fees incurred in 2022 and 2021 relate to the Group's co-operation
with certain voluntary enquiries from the US Department of Justice,
as discussed in further detail in Note 28.
5 Ongoing costs relating to closure of entities affected by the closure
of the contract Telecoms Infrastructure business as well as the Group's
operations in Mexico and South Africa in 2021, including staff termination
costs and impairment of certain working capital balances.
6 Costs of GBP57,000 (2021: GBPnil) have been recognised in relation
to final closure costs for UK property previously exited and no longer
used by the business.
5 Particulars of Employees
The monthly average number of staff employed by the Group, including executive directors, during the financial year amounted to:
2022 2021
Total operations No. No.
----------------- ---- ----
Sales 381 345
----------------- ---- ----
Administration 146 131
----------------- ---- ----
Directors 7 7
----------------- ---- ----
Total 534 483
----------------- ---- ----
UK employees are directly contracted with the ultimate parent company, Gattaca plc, and staff costs are paid by the Matchtech Group (UK) Limited, then recharged to fellow UK subsidiaries.
The aggregate payroll costs of the above were:
2022 2021
Total operations GBP'000 GBP'000
---------------------- -------- --------
Wages and salaries 26,215 24,269
---------------------- -------- --------
Social security costs 3,166 2,830
---------------------- -------- --------
Other pension costs 911 791
---------------------- -------- --------
Share-based payments 114 271
---------------------- -------- --------
Total 30,406 28,161
---------------------- -------- --------
Amounts due to defined contribution pension providers at 31 July 2022 were GBP149,000 (2021: GBP138,000).
Disclosure of the remuneration of Group's key management personnel, as required by IAS 24, is detailed below:
2022 2021
Total operations GBP'000 GBP'000
------------------------------------------------------ -------- --------
Short-term employee benefits 2,009 1,738
------------------------------------------------------ -------- --------
Contributions to defined contribution pension schemes 133 123
------------------------------------------------------ -------- --------
Share-based payments 34 106
------------------------------------------------------ -------- --------
Total 2,176 1,967
------------------------------------------------------ -------- --------
6 Finance Income
2022 2021
Continuing operations GBP'000 GBP'000
------------------------------------------ -------- --------
Interest income 4 56
------------------------------------------ -------- --------
Net gains on foreign currency translation 566 -
------------------------------------------ -------- --------
Total 570 56
------------------------------------------ -------- --------
7 Finance Costs
2022 2021
Total operations GBP'000 GBP'000
------------------------------------------- -------- --------
Bank interest expense 138 124
------------------------------------------- -------- --------
Interest expense on lease liabilities 115 148
------------------------------------------- -------- --------
Amortisation of capitalised finance costs - 196
------------------------------------------- -------- --------
Net losses on foreign currency translation - 668
------------------------------------------- -------- --------
Total 253 1,136
------------------------------------------- -------- --------
8 Government Grants
Grant income recognised from government grants recognised in cost of sales and administrative expenses are as follows:
2022 2021
Continuing operations GBP'000 GBP'000
------------------------------------------------------------ -------- --------
UK Government Coronavirus Job Retention Scheme grant
income recognised in cost of sales for temporary workers - 43
------------------------------------------------------------ -------- --------
UK Government Coronavirus Job Retention Scheme grant
income recognised in administrative expenses for employees - 458
------------------------------------------------------------ -------- --------
Total - 501
------------------------------------------------------------ -------- --------
In the previous year, as a response to the COVID-19 global pandemic, the Group made use of the UK Government's Coronavirus Job Retention Scheme (for the year to 31 July 2021: claim period is from August 2020 to November 2020). Under this scheme, Her Majesty's Revenue & Customs (HMRC) provided UK companies with a non-refundable grant equivalent to a portion of wages, National Insurance contributions and pension contributions for employees and temporary workers who were retained in employment but placed on furlough. From 1 August 2021 National Insurance contributions and pension contributions were no longer eligible for claims. When considering temporary workers, the contractors employed by Gattaca's clients that Gattaca provides payroll services to and whose costs are recognised as Cost of Sales by Gattaca, are also considered eligible.
As the scheme was conditional upon the Group retaining its employees in employment, or the temporary contract workers being retained by their employers, whilst they are furloughed during the COVID-19 pandemic, it was designed to compensate companies for staff or temporary worker costs incurred. As all claims submitted for all periods have been received, the Group considers the scheme meets the definition of a government grant as set out in IAS 20 and has accounted for it as such. For grants received for Gattaca's employees on furlough, the Group has presented the grant income as a deduction to staff costs presented in Administrative Expenses in the Income Statement; for grants received for temporary contract workers of Gattaca's clients on furlough, the Group has presented the grant income as a deduction to Cost of Sales.
9 Parent Company Profit/(Loss)
2022 2021
GBP'000 GBP'000
------------------------------------------------------------ -------- --------
The amount of profit/(loss) generated by the parent company
was: 296 (866)
------------------------------------------------------------ -------- --------
10 Taxation
Restated(1)
Continuing Discontinued Continuing Discontinued
2022 2022 2021 2021
Analysis of charge in the year GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- ---------- ------------ ----------- ------------
Current tax:
-------------------------------------------------- ---------- ------------ ----------- ------------
UK corporation tax (654) (33) 748 (48)
-------------------------------------------------- ---------- ------------ ----------- ------------
Overseas corporation tax 26 26 (134) 40
-------------------------------------------------- ---------- ------------ ----------- ------------
Adjustments in respect of prior years (138) - (511) -
-------------------------------------------------- ---------- ------------ ----------- ------------
Current tax (credit)/charge (766) (7) 103 (8)
-------------------------------------------------- ---------- ------------ ----------- ------------
Deferred tax (Note 16):
-------------------------------------------------- ---------- ------------ ----------- ------------
Origination and reversal of temporary differences 446 - (323) (5)
-------------------------------------------------- ---------- ------------ ----------- ------------
Adjustments in respect of prior years (56) - 290 (2)
-------------------------------------------------- ---------- ------------ ----------- ------------
Changes in tax rate (84) - (29) -
-------------------------------------------------- ---------- ------------ ----------- ------------
Deferred tax charge/(credit) 306 - (62) (7)
-------------------------------------------------- ---------- ------------ ----------- ------------
Income tax charge/(credit) for the year (460) (7) 41 (15)
-------------------------------------------------- ---------- ------------ ----------- ------------
UK corporation tax has been charged at 19% (2021: 19%).
The (credit)/charge for the year can be reconciled to the (loss)/profit as per the income statement as follows:
Restated(1)
Continuing Discontinued Continuing Discontinued
2022 2022 2021 2021
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- ---------- ------------ ----------- ------------
(Loss)/profit before tax (4,787) (353) 812 (1,223)
------------------------------------------- ---------- ------------ ----------- ------------
(Loss)/profit before tax multiplied by
the standard rate of corporation tax in
the UK of 19% (2021: 19%) (909) (67) 154 (232)
------------------------------------------- ---------- ------------ ----------- ------------
Expenses not deductible for tax purposes 15 (11) 139 172
------------------------------------------- ---------- ------------ ----------- ------------
Effect of goodwill impairment loss 502 - - -
------------------------------------------- ---------- ------------ ----------- ------------
Effect of share-based payments 60 - (19) -
------------------------------------------- ---------- ------------ ----------- ------------
Irrecoverable withholding tax 3 - 56 -
------------------------------------------- ---------- ------------ ----------- ------------
Overseas losses not recognised as deferred
tax assets 156 47 46 163
------------------------------------------- ---------- ------------ ----------- ------------
Difference between UK and overseas tax
rates (9) 24 (85) (116)
------------------------------------------- ---------- ------------ ----------- ------------
Adjustment to tax charge in respect of
prior years (194) - (221) (2)
------------------------------------------- ---------- ------------ ----------- ------------
Changes in tax rate (84) - (29) -
------------------------------------------- ---------- ------------ ----------- ------------
Total taxation (credit)/charge for the
year (460) (7) 41 (15)
------------------------------------------- ---------- ------------ ----------- ------------
1 Results are restated following the March 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting
in previously capitalised software assets being expensed, as explained
further in Note 1.25.
Tax charge/(credit) recognised in equity:
2022 2021
GBP'000 GBP'000
----------------------------------------------------------- -------- --------
Deferred tax charge/(credit) recognised directly in equity 60 (65)
----------------------------------------------------------- -------- --------
Total tax charge/(credit) recognised directly in equity 60 (65)
----------------------------------------------------------- -------- --------
Reconciliation of statutory continuing tax charge to continuing underlying tax charge:
Restated(1)
2022 2021
GBP'000 GBP'000
---------------------------------------------------- --------- -----------
Income tax expense (460) 41
---------------------------------------------------- --------- -----------
Impairment and amortisation of acquired intangibles 517 43
---------------------------------------------------- --------- -----------
Non-underlying items 106 (37)
---------------------------------------------------- --------- -----------
Foreign currency exchanges differences (9) 85
---------------------------------------------------- --------- -----------
Underlying income tax expense 154 132
---------------------------------------------------- --------- -----------
1 Results are restated following the March 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting
in previously capitalised software assets being expensed, as explained
further in Note 1.25.
Future tax rate changes
At the balance sheet date, the main UK corporation tax rate of 19% was anticipated to increase to 25% from 1 April 2023. 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.
Recent announcements by the UK government have called into question whether the main rate of corporation tax will increase to 25% or will remain at 19%. If UK deferred tax assets and liabilities had been measured at 19% at 31 July 2022, the impact would have been to reduce the deferred tax asset by GBP75,000.
11 Discontinued Operations
2022
On 14 December 2021, the Group completed the sale of its South African recruitment operations as part of the management buy-out agreement announced in July 2021. The net loss of GBP82,000 arising on the disposal of the South African recruitment operations has been recognised in non-underlying costs as part of costs relating to discontinuation of group undertakings. Deferred consideration of GBP134,000 receivable under the sale agreement was due at the reporting date and is included in other receivables at 31 July 2022.
Losses from discontinued operations during the year include ongoing closure costs in connection with the Group's Asian and Mexican operations, in addition to trading results from the Group's South African recruitment business up until date of disposal.
2021
On 30 July 2021, the Group announced the decision to close its Mexico operations. In addition, the Group also announced a management buy-out agreement of the South Africa recruitment operations which was expected to complete within one year of 31 July 2021. The Fulfilment, Solutions and Group Support functions of the South African operations was retained and transferred to a new South African entity. As a result, the Group reclassified its entire Mexican and South African recruitment operations as discontinued in the consolidated financial statements for the year ended 31 July 2021.
Financial performance and cash flow information
2022 2021
GBP'000 GBP'000
--------------------------------------------------------------- -------- --------
Revenue 781 3,432
--------------------------------------------------------------- -------- --------
Cost of sales (543) (2,385)
--------------------------------------------------------------- -------- --------
Gross profit 238 1,047
--------------------------------------------------------------- -------- --------
Administrative expenses(1) (809) (2,197)
--------------------------------------------------------------- -------- --------
Loss from operations (571) (1,150)
--------------------------------------------------------------- -------- --------
Finance income - 39
--------------------------------------------------------------- -------- --------
Finance costs - (112)
--------------------------------------------------------------- -------- --------
Exchange gain 218 -
--------------------------------------------------------------- -------- --------
Loss before taxation (353) (1,223)
--------------------------------------------------------------- -------- --------
Taxation 7 15
--------------------------------------------------------------- -------- --------
Loss for the year after taxation from discontinued operations (346) (1,208)
--------------------------------------------------------------- -------- --------
Exchange differences on translation of discontinued operations (231) 48
--------------------------------------------------------------- -------- --------
Other comprehensive loss from discontinued operations (577) (1,160)
--------------------------------------------------------------- -------- --------
1 Included in administrative expenses are GBP95,000 (2021: GBP693,000)
of non-underlying items, as detailed in Note 4. In addition, it includes
net impairment costs on trade receivables from discontinued operations
of GBPnil (2021: release of GBP80,000).
The following assets and liabilities were reclassified as held for sale in relation to the discontinued South African recruitment operations as at 31 July 2021:
2021
Assets classified as held for sale GBP'000
--------------------------------------------- --------
Software licenses 1
--------------------------------------------- --------
Property, plant and equipment 7
--------------------------------------------- --------
Right-of-use assets 29
--------------------------------------------- --------
Investments 19
--------------------------------------------- --------
Deferred tax assets 9
--------------------------------------------- --------
Trade and other receivables 171
--------------------------------------------- --------
Cash and cash equivalents 110
--------------------------------------------- --------
Total assets of disposal group held for sale 346
--------------------------------------------- --------
Liabilities directly associated with assets classified as held 2021
for sale GBP'000
--------------------------------------------------------------- --------
Trade and other payables (136)
--------------------------------------------------------------- --------
Provisions (46)
--------------------------------------------------------------- --------
Current tax liabilities (27)
--------------------------------------------------------------- --------
Lease liabilities (14)
--------------------------------------------------------------- --------
Total liabilities of disposal group held for sale (223)
--------------------------------------------------------------- --------
2022 2021
GBP'000 GBP'000
---------------------------------------------------------- -------- --------
Net cash outflow from operating activities (650) (1,348)
---------------------------------------------------------- -------- --------
Net cash outflow from investing activities - (32)
---------------------------------------------------------- -------- --------
Net cash outflow from financing activities (92) (139)
---------------------------------------------------------- -------- --------
Effect of exchange rates on cash and cash equivalents - (15)
---------------------------------------------------------- -------- --------
Net decrease in cash generated by discontinued operations (742) (1,534)
---------------------------------------------------------- -------- --------
No balances were classified as held for sale as at 31 July 2022.
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 period.
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 options 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 Long Term Incentive Plan Options. 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 in accordance with IAS 33. This is regardless of whether the potential ordinary shares are dilutive for EPS from total operations. Where the effect of potential ordinary shares are considered to be dilutive they have been included in the calculation below.
There are no changes to the profit numerator as a result of the dilution calculation.
The earnings per share information has been calculated as follows:
Restated(1)
2022 2021
GBP'000 GBP'000
------------------------------------------------- -------- -----------
Total loss attributable to ordinary shareholders (4,673) (437)
------------------------------------------------- -------- -----------
2022 2021
Number of shares '000 '000
---------------------------------------------------------- ------ ------
Basic weighted average number of ordinary shares in issue 32,290 32,290
---------------------------------------------------------- ------ ------
Dilutive potential ordinary shares 210 68
---------------------------------------------------------- ------ ------
Diluted weighted average number of shares 32,500 32,358
---------------------------------------------------------- ------ ------
Restated(1)
2022 2021
Total earnings per share pence pence
------------------------- -------- ------ -----------
Loss per ordinary share Basic (14.5) (1.4)
------------------------- -------- ------ -----------
Diluted (14.5) (1.4)
---------------------------------- ------ -----------
Restated(1)
2022 2021
Earnings from continuing operations GBP'000 GBP'000
------------------------------------ -------- -----------
Total (loss)/profit for the year (4,237) 771
------------------------------------ -------- -----------
Restated(1)
2022 2021
Total earnings per share for continuing operations pence pence
--------------------------------------------------- -------- ------ -----------
(Loss)/earnings per ordinary share from continuing
operations Basic (13.4) 2.4
--------------------------------------------------- -------- ------ -----------
Diluted (13.4) 2.4
------------------------------------------------------------ ------ -----------
2022 2021
Earnings from discontinuing operations '000 '000
--------------------------------------- ----- -------
Total loss for the year (346) (1,208)
--------------------------------------- ----- -------
2022 2021
Total earnings per share for discontinuing operations pence pence
---------------------------------------------------------------- ------ ------
Loss per ordinary share from discontinuing operations Basic (1.1) (3.7)
------------------------------------------------------ -------- ------ ------
Diluted (1.1) (3.7)
--------------------------------------------------------------- ------ ------
Restated(1)
2022 2021
Earnings from continuing underlying operations GBP'000 GBP'000
----------------------------------------------- -------- -----------
Total profit for the year 102 1,703
----------------------------------------------- -------- -----------
Restated(1)
2022 2021
Total earnings per share pence pence
------------------------------------------------------- -------- ------ -----------
Earnings per ordinary share from continuing underlying
operations Basic 0.3 5.3
------------------------------------------------------- -------- ------ -----------
Diluted 0.3 5.3
---------------------------------------------------------------- ------ -----------
1 Results are restated following the March 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting
in previously capitalised software assets being expensed, as explained
further in Note 1.25.
13 Goodwill and Intangible Assets
In the 12 months to 31 July 2022, following the IFRS Interpretation Committee's agenda decision published in March 2021, the Group changed its accounting policy relating to the capitalisation of certain software costs, specifically relating to the capitalisation of implementation costs such as configuration and customisation costs for cloud-based software under Software-as-a-service (SaaS) arrangements. Please refer to Note 1.25 for more details. The change of the accounting policy has resulted in either a reclassification of certain cloud-based software intangible assets to a prepaid asset in the Statement of Financial Position or recognition of the expenditure as an expense in the Income Statement, impacting both the current and prior periods presented.
Software
Customer Trade and software
Goodwill relationships names Other licences Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------------------------- -------- -------------- -------- -------- ------------- --------
Cost At 1 August 2020 28,739 22,245 5,346 3,809 8,573 68,712
---------------- ------------------------- -------- -------------- -------- -------- ------------- --------
Effect of change
in accounting policy - - - - (6,052) (6,052)
------------------------------------------ -------- -------------- -------- -------- ------------- --------
At 1 August 2020
(restated) 28,739 22,245 5,346 3,809 2,521 62,660
------------------------------------------ -------- -------------- -------- -------- ------------- --------
Additions - - - - 1,872 1,872
------------------------------------------ -------- -------------- -------- -------- ------------- --------
Reclassification
to assets held for
sale - - - - (2) (2)
------------------------------------------ -------- -------------- -------- -------- ------------- --------
Reclassification
to prepayments as
a result of change
of accounting policy - - - - (245) (245)
------------------------------------------ -------- -------------- -------- -------- ------------- --------
Written off to Income
Statement as a result
of change of accounting
policy - - - - (1,544) (1,544)
------------------------------------------ -------- -------------- -------- -------- ------------- --------
At 31 July 2021 28,739 22,245 5,346 3,809 2,602 62,741
------------------------------------------ -------- -------------- -------- -------- ------------- --------
Additions - - - - 29 29
------------------------------------------ -------- -------------- -------- -------- ------------- --------
Disposals - - - - (70) (70)
------------------------------------------ -------- -------------- -------- -------- ------------- --------
At 31 July 2022 28,739 22,245 5,346 3,809 2,561 62,700
------------------------------------------ -------- -------------- -------- -------- ------------- --------
Amortisation
and impairment At 1 August 2020 24,382 20,530 5,057 3,527 2,339 55,835
---------------- ------------------------- -------- -------------- -------- -------- ------------- --------
Effect of change
in accounting policy - - - - (123) (123)
------------------------------------------ -------- -------------- -------- -------- ------------- --------
At 1 August 2020
(restated) 24,382 20,530 5,057 3,527 2,216 55,712
------------------------------------------ -------- -------------- -------- -------- ------------- --------
Amortisation for
the period - 332 45 171 422 970
------------------------------------------ -------- -------------- -------- -------- ------------- --------
Reclassification
to assets held for
sale - - - - (1) (1)
------------------------------------------ -------- -------------- -------- -------- ------------- --------
Reclassification
to prepayments as
a result of change
of accounting policy - - - - (19) (19)
------------------------------------------ -------- -------------- -------- -------- ------------- --------
Written off to Income
Statement as a result
of change of accounting
policy - - - - (264) (264)
------------------------------------------ -------- -------------- -------- -------- ------------- --------
At 31 July 2021 24,382 20,862 5,102 3,698 2,354 56,398
------------------------------------------ -------- -------------- -------- -------- ------------- --------
Amortisation for
the period - 269 43 108 88 508
------------------------------------------ -------- -------------- -------- -------- ------------- --------
Impairment 2,645 946 189 - - 3,780
------------------------------------------ -------- -------------- -------- -------- ------------- --------
Released on disposal - - - - (58) (58)
------------------------------------------ -------- -------------- -------- -------- ------------- --------
At 31 July 2022 27,027 22,077 5,334 3,806 2,384 60,628
------------------------------------------ -------- -------------- -------- -------- ------------- --------
Net book
value At 31 July 2021 4,357 1,383 244 111 248 6,343
---------------- ------------------------- -------- -------------- -------- -------- ------------- --------
At 31 July 2022 1,712 168 12 3 177 2,072
------------------------------------------ -------- -------------- -------- -------- ------------- --------
The carrying amount of goodwill allocated to Cash Generating Unit's (CGUs) is as follows:
2022 2021
GBP'000 GBP'000
----------------------------------------------------------- -------- --------
Energy (previously UK Engineering) 1,712 1,712
----------------------------------------------------------- -------- --------
Infrastructure - RSL Rail (previously Resourcing Solutions
Limited) - 2,645
----------------------------------------------------------- -------- --------
Total 1,712 4,357
----------------------------------------------------------- -------- --------
As part of the operational restructure disclosed in Note 2, the Cash Generating Units (CGUs) to which goodwill and intangible assets have previously been allocated to have been amended as follows: UK Engineering to Energy which is a reportable segment, and Resourcing Solutions to Infrastructure - RSL Rail, a sub-division of the reportable operating segment Infrastructure for which distinct financial information is available but not used by the Chief Operating Decision Maker (CODM). These changes best represent the original business units that the assets were allocated to, ensuring that the cashflows that form the FY22 VIU valuations of the CGUs are aligned to previous year's impairment assessments.
Impairment testing
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 recoverable amount of the CGU, including goodwill, intangible assets and right-of-use assets, is determined using value-in-use calculations.
As a result of management's trading forecasts now being lower that those at time of acquisition, impairment losses of GBP2,645,000 and GBP1,135,000 (year to 31 July 2021: GBPnil) have been recorded in respect of goodwill, acquired intangible assets respectively within the Infrastructure - RSL Rail CGU, fully impairing all remaining goodwill and intangible assets to a carrying value of GBPnil. Impairment losses of GBP852,000 (year to 31 July 2021: GBPnil) have also been recorded in respect of the right-of-use asset associated with the lease of the UK property occupied by the RSL sales team and several motor vehicles, which is included in the assets of the CGU. Please refer to Note 22 for more details.
After suffering the same widespread downturn in trading activity as the majority of the UK economy during the 2020 COVID-19 pandemic, management had aligned the FY21 internal forecasts of the Infrastructure - RSL Rail CGU to the externally projected post-COVID economic trajectory of the UK construction and transportation sectors and whilst the models indicated sensitvity, factors pointed towards slow but steady post-pandemic recovery. However, throughout FY22, as a result of the ongoing challenges of the UK rail industry combined with the sustained post-pandemic loss of a substantial number of legacy temporary workers with some of the UK rail industry's core customers, management undertook a substantial review of the long-term expectations of the sector and reduced the long-term growth forecasts further in FY22 resulting in a material reduction to the VIU terminal value which could not sustain the CGU's asset base.
Goodwill and acquired intangibles within the Energy CGU relate to the Networkers acquisition. At 31 July 2022, the recoverable amount of the infrastructure - RSL Rail CGU was GBPnil.
The key assumptions and estimates used when calculating a CGU's value-in-use, are as follows:
Cash flows from operations
Cash flows from operations are based on the Group's 3 year business plan, starting with the FY2023 budget and applying the over-arching Group NFI and cost growth rates in FY2026 and FY2027 for the Energy and Infrastructure - RSL Rail sectors. The Group prepares cash flow forecasts 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 ranged from 13.9% to 14.4% (year to 31 July 2021: 15.0% to 16.0%) reflecting the Group's weighted average cost of capital, adjusted for specific risks associated with the asset's estimated cash flows. The nominal 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 13.8% (year to 31 July 2021: 12.5%) for CGUs assessed.
Growth rates
The medium-term growth rates are based on management forecasts, reflecting past experience and economic environment. Long-term growth rates are based on external sources of an average estimated growth rate of 2.0% (year to 31 July 2021: 2.0%), using a weighted average of operating country real growth expectations.
Intangible Intangible
Goodwill assets Total Goodwill assets Total
2022 2022 2022 2021 2021 2021
Impairment expenses GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- -------- ---------- -------- -------- ---------- --------
Energy (previously UK Engineering) - - - - - -
----------------------------------- -------- ---------- -------- -------- ---------- --------
Infrastructure - RSL Rail
(previously Resourcing Solutions
Limited) 2,645 1,135 3,780 - - -
----------------------------------- -------- ---------- -------- -------- ---------- --------
Total 2,645 1,135 3,780 - - -
----------------------------------- -------- ---------- -------- -------- ---------- --------
Sensitivity analysis has been performed to show the impact of reasonable or possible changes in key assumptions. An increase in the post-tax discount rate by a factor of 5% to 14.5%, or a reduction in the long-term growth rate to 1.8%, would not trigger a further material impairment for the Energy CGU. A reduction of 25% in management's mid-term gross profit forecasts for FY24-FY27 would not trigger any material impairment.
Company
Trade
names
GBP'000
---------------------------- -------------------------- --------
Cost At 1 August 2020 20
---------------------------- -------------------------- --------
Additions -
---------------------------- -------------------------- --------
At 31 July 2021 20
------------------------------------------------------- --------
Additions -
---------------------------- -------------------------- --------
At 31 July 2022 20
------------------------------------------------------- --------
Amortisation and impairment At 1 August 2020 4
---------------------------- -------------------------- --------
Amortisation for the year 3
------------------------------------------------------- --------
Impairment -
---------------------------- -------------------------- --------
At 31 July 2021 7
------------------------------------------------------- --------
Amortisation for the year 2
------------------------------------------------------- --------
Impairment -
---------------------------- -------------------------- --------
At 31 July 2022 9
------------------------------------------------------- --------
Net book value At 31 July 2021 13
---------------------------- -------------------------- --------
At 31 July 2022 11
------------------------------------------------------- --------
14 Property, Plant and Equipment
Fixtures,
Motor Leasehold fittings
vehicles improvements & equipment Total
Group GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------------------------------- --------- ------------- ------------ --------
Cost At 1 August 2020 (16) 3,055 4,721 7,760
---------------------------- --------------------------------- --------- ------------- ------------ --------
Additions - - 332 332
-------------------------------------------------------------- --------- ------------- ------------ --------
Disposals 16 (25) - (9)
-------------------------------------------------------------- --------- ------------- ------------ --------
Impairment - (29) (92) (121)
-------------------------------------------------------------- --------- ------------- ------------ --------
Reclassification to assets
held for sale - - (13) (13)
-------------------------------------------------------------- --------- ------------- ------------ --------
At 31 July 2021 - 3,001 4,948 7,949
-------------------------------------------------------------- --------- ------------- ------------ --------
Additions - - 370 370
-------------------------------------------------------------- --------- ------------- ------------ --------
Disposals - (41) (586) (627)
-------------------------------------------------------------- --------- ------------- ------------ --------
Effects of movements in exchange
rates - 26 10 36
-------------------------------------------------------------- --------- ------------- ------------ --------
At 31 July 2022 - 2,986 4,742 7,728
-------------------------------------------------------------- --------- ------------- ------------ --------
Depreciation and impairment At 1 August 2020 (16) 1,867 4,417 6,268
---------------------------- --------------------------------- --------- ------------- ------------ --------
Charge for the year - 58 155 213
-------------------------------------------------------------- --------- ------------- ------------ --------
Released on disposal 16 (17) - (1)
-------------------------------------------------------------- --------- ------------- ------------ --------
Impairment - (29) (74) (103) -------------------------------------------------------------- --------- ------------- ------------ -------- Reclassification to assets held for sale - - (6) (6) -------------------------------------------------------------- --------- ------------- ------------ -------- At 31 July 2021 - 1,879 4,492 6,371 -------------------------------------------------------------- --------- ------------- ------------ -------- Charge for the year - - 570 570 -------------------------------------------------------------- --------- ------------- ------------ -------- Released on disposal - (41) (553) (594) -------------------------------------------------------------- --------- ------------- ------------ -------- Effects of movements in exchange rates - 18 4 22 -------------------------------------------------------------- --------- ------------- ------------ -------- At 31 July 2022 - 1,856 4,513 6,369 -------------------------------------------------------------- --------- ------------- ------------ -------- Net book value At 31 July 2021 - 1,122 456 1,578 ---------------------------- --------------------------------- --------- ------------- ------------ -------- At 31 July 2022 - 1,130 229 1,359 -------------------------------------------------------------- --------- ------------- ------------ --------
Impairment charges during the prior year relate to the closure of the Mexican operations as disclosed in Note 11.
There were no capital commitments as at 31 July 2022 or 31 July 2021.
15 Investments in Subsidiary Undertakings
Group Company
------------------------------------------ ------------------ ------------------
2022 2021 2022 2021
Cost and carrying value: GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ -------- -------- -------- --------
Balance at 1 August - 19 38,463 8,520
------------------------------------------ -------- -------- -------- --------
Capital contributions to subsidiaries - - 145 29,943
------------------------------------------ -------- -------- -------- --------
Reclassifications to assets held for sale - (19) - -
------------------------------------------ -------- -------- -------- --------
Balance at 31 July - - 38,608 38,463
------------------------------------------ -------- -------- -------- --------
The movement in investments in the parent Company in the prior year represents capitalisation of intercompany receivables due from Matchtech Group (Holdings) Limited in return for an issue of shares in Matchtech Group (Holdings) Limited as well as capital contributions made in Matchtech Group (UK) Limited relating to share-based payments.
The movement in investments held by the Group in the prior year related to the reclassification of the Sakha Sonke Private Equity Fund and its associated investment asset to held-for-sale following the announcement of the expected sale of the South African recruitment operations on 30 July 2021. As noted below, the sale of the South African operations was completed in the 2022 year.
Impairment testing
The Directors have assessed that the reduction in the Group's market capitalisation during the year is an indicator of impairment of the Parent Company's investments in subsidiary undertakings and as a result have performed a year end impairment review in accordance with IAS 36.
The recoverable amount of investments in subsidiaries has been determined based on value-in-use calculations, which require the use of estimates. Discounted cash flows from operations have been prepared based on the Group's board approved 3 year business plan, starting with the FY2023 budget and applying over-arching NFI and cost growth rates in FY2026 and FY2027. A pre-tax discount rate of 13.8% has been used, reflecting the Group's post-tax weighted average cost of capital, adjusted for specific risks associated with the asset's estimated cash flows. Medium-term growth rates modelled are based on management forecasts, reflecting past experience and the economic environment. Long-term growth rates, based on external sources of information, are an average estimated growth rate of 2.0%.
The calculated value-in-use results in a material excess of the recoverable amount above the asset's carrying amount. The Directors consider that there is no combination of reasonably plausible changes in key assumptions which would result in a material change to the outcome of the impairment assessment and have concluded that the Parent Company's investments in subsidiaries is not impaired.
The subsidiary undertakings at the year end are as follows:
Registered
Office Country of % Held % Held
Note Incorporation Share Class 2022 2021 Main Activities
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Provision of
Alderwood Education recruitment
Ltd1 1 United Kingdom Ordinary 100% 100% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Provision of
recruitment
Barclay Meade Ltd1 1 United Kingdom Ordinary 100% 100% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Cappo Group Limited1 1 United Kingdom Ordinary 100% 100% Holding
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Provision of
Cappo International recruitment
Limited1 1 United Kingdom Ordinary 100% 100% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Comms Software Limited4 1 United Kingdom Ordinary 0% 100% Non-trading
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Provision of
recruitment
Comms Resources Limited1 1 United Kingdom Ordinary 100% 100% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Provision of
Connectus Technology recruitment
Limited1 1 United Kingdom Ordinary 100% 100% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Elite Computer Staff
Ltd 1 United Kingdom Ordinary 100% 100% Non-trading
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Gattaca Projects Limited Provision of
(formerly Application recruitment
Services Limited)1 1 United Kingdom Ordinary 100% 100% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Gattaca Recruitment
Limited 1 United Kingdom Ordinary 100% 100% Non-trading
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Provision of
Gattaca Solutions recruitment
Limited1 1 United Kingdom Ordinary 100% 100% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Matchtech Engineering
Limited 1 United Kingdom Ordinary 100% 100% Non-trading
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Matchtech Group (Holdings)
Limited1 1 United Kingdom Ordinary 99.7% 99.7% Holding
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Provision of
Matchtech Group (UK) recruitment
Limited1 1 United Kingdom Ordinary 99.998% 99.998% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Matchtech Group Management
Company Limited2 1 United Kingdom Ordinary 100% 100% Non-trading
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Matchtech Limited4 1 United Kingdom Ordinary 0% 100% Non-trading
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
MSB Consulting Services
Limited4 1 United Kingdom Ordinary 0% 100% Non-trading
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Provision of
Networkers International recruitment
(UK) Limited1 1 United Kingdom Ordinary 100% 100% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Networkers International
Limited1 1 United Kingdom Ordinary 100% 100% Holding
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Networkers International
Trustees2 1 United Kingdom Ordinary 100% 100% Non-trading
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Networkers Recruitment
Services Limited2 1 United Kingdom Ordinary 100% 100% Non-trading
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Provanis Limited4 1 United Kingdom Ordinary 0% 100% Non-trading
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Provision of
Resourcing Solutions recruitment
Limited1 1 United Kingdom Ordinary 100% 100% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
The Comms Group Limited1 1 United Kingdom Ordinary 100% 100% Holding
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Provision of
recruitment
Gattaca GMBH 2 Germany Ordinary 100% 100% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
MSB International
GMBH 12 Germany Ordinary 100% 100% Non-trading
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Provision of
recruitment
Gattaca BV 3 Netherlands Ordinary 100% 100% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Provision of
recruitment
Cappo Inc. 5 United States Ordinary 100% 100% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Provision of
recruitment
Networkers Inc. 5 United States Ordinary 100% 100% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Networkers International
LLC 5 United States Ordinary 100% 100% Non-trading
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Provision of
Networkers International recruitment
(Canada) Inc. 11 Canada Ordinary 100% 100% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Provision of
Gattaca Mexico Services, recruitment
S.A. de C.V 6 Mexico Ordinary 100% 100% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Provision of
NWI Mexico, S. de recruitment
R.L. de C.V. 6 Mexico Ordinary 100% 100% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Kithara Investments
Proprietary Limited4 8 South Africa Ordinary 0% 100% Holding
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Kula Nathi Investments
Proprietary Limited4 7 South Africa Ordinary 0% 100% Holding
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Provision of
Networkers International recruitment
Proprietary Limited4 7 South Africa Ordinary 0% 100% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Networkers International Provision of
South Africa Proprietary recruitment
Limited4 7 South Africa Ordinary 0% 100% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Provision of
Gattaca Services South recruitment
Africa 7 South Africa Ordinary 100% 0% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Provision of
Networkers International recruitment
(China) Co. Limited 9 China Ordinary 100% 100% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Comms Resources SDN.
BHD 10 Malaysia Ordinary 100% 100% Non-trading
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Networkers International
(Malaysia) Sdn Bhd 10 Malaysia Ordinary 100% 100% Non-trading
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Cappo Qatar LLC 14 Qatar Ordinary 49% 49% Non-trading
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Networkers Consultancy
(Singapore) PTE. Limited 13 Singapore Ordinary 100% 100% Non-trading
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Gattaca Information Provision of
Technology Services recruitment
SLU 15 Spain Ordinary 100% 100% consultancy
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Gattaca Recruitment
ETT, SLU 15 Spain Ordinary 100% 100% Non-trading
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
Networkers International
(India) PTE(4) 16 India Ordinary 0% 100% Non-trading
--------------------------- ---------- -------------- ----------- ------- ------- ---------------
1 For the year ended 31 July 2022, Gattaca plc has provided a legal
guarantee dated 2 November 2022 under s479a-s479c of the Companies
Act 2006 to these subsidiaries for audit exemption.
2 These dormant companies are exempt from preparing individual financial
statements by virtue of s394A of Companies Act 2006.
3 Gattaca plc has 100% of the beneficial interest in these entities,
and consolidates them as wholly owned subsidiaries in line with IFRS
10.
4 These companies were disposed of, or liquidated in the year, with
the shareholding remaining the same as per the year ended 31 July
2021 up to the date of disposal or liquidation.
All holdings by Gattaca plc are indirect except for Matchtech Group (Holdings) Limited, Gattaca GMBH and Matchtech Group Management Company Limited.
Networkers International (UK) Limited has a branch in Russia which is consolidated into the Group's results.
The Group's Share Incentive Plan (SIP) is held by Gattaca plc UK EBT. The Group has control over the EBT and therefore it has been consolidated in the Group's results.
During the 2021 year, Gattaca plc set up a branch for a new Employee Benefit Trust ('the EBT') and appointed Apex Financial Services Limited as the Trustee and the administrator to this new EBT. The Company and Group has control over the new EBT and therefore it has been consolidated in the Group and Company's results.
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, USA
---------------------------------------------------------------------------
5 6400 International Parkway, Suite 1510, Plano TX 75093, USA
---------------------------------------------------------------------------
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, Foreshre, 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 Franlinstr. 48, 60456, Frankfurt, Germany
---------------------------------------------------------------------------
13 371 Beach Road, #15-09 Keypoint, Singapore 199597
---------------------------------------------------------------------------
14 Suite #204, Office #40 Al Rawabi Street, Muntazah, Doha, State of
Qatar. PO Box 8306
---------------------------------------------------------------------------
15 Calle General, Moscardo 6. Espaco Office, Madrid 28020, Spain
---------------------------------------------------------------------------
16 3rd Floor, 301 DLF City Court Sikandarpur, Gurgaon-122002 Harayana,
India
---------------------------------------------------------------------------
16 Deferred Tax
Credited/
(charged) Credited Disposal Foreign
2022 Asset Liability Net to profit to equity of subsidiaries exchange
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- --------- -------- ---------- ---------- ---------------- ---------
Share-based payments 43 - 43 (41) (60) - -
---------------------------------- -------- --------- -------- ---------- ---------- ---------------- ---------
Accelerated capital
allowances 22 (4) 18 53 - - -
---------------------------------- -------- --------- -------- ---------- ---------- ---------------- ---------
Internally generated
intangibles - - - (1,050) - - -
---------------------------------- -------- --------- -------- ---------- ---------- ---------------- ---------
Acquired intangibles - (18) (18) 351 - - -
---------------------------------- -------- --------- -------- ---------- ---------- ---------------- ---------
Tax losses 427 - 427 427 - - -
---------------------------------- -------- --------- -------- ---------- ---------- ---------------- ---------
Other temporary and
deductible differences 109 - 109 (46) - (16) (3)
---------------------------------- -------- --------- -------- ---------- ---------- ---------------- ---------
Gross deferred tax
assets/(liabilities) 601 (22) 579 (306) (60) (16) (3)
---------------------------------- -------- --------- -------- ---------- ---------- ---------------- ---------
Amounts available for
offset 3 (3) -
---------------------------------- -------- --------- -------- ---------- ---------- ---------------- ---------
Net deferred tax
assets/(liabilities) 604 (25) 579
---------------------------------- -------- --------- -------- ---------- ---------- ---------------- ---------
Credited/
(charged) Credited Foreign Impact
2021 Restated1 Asset Liabilit Net to profit to equity exchange of restatement(1)
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------- -------- -------- ---------- ---------- --------- ------------------
Share-based payments 146 - 146 60 65 - -
--------------------------------- -------- -------- -------- ---------- ---------- --------- ------------------
Accelerated capital
allowances - (35) (35) (265) - - 336
--------------------------------- -------- -------- -------- ---------- ---------- --------- ------------------
Internally generated
intangibles 1,050 - 1,050 279 - - 771
--------------------------------- -------- -------- -------- ---------- ---------- --------- ------------------
Acquired intangibles - (369) (369) 45 - - -
--------------------------------- -------- -------- -------- ---------- ---------- --------- ------------------
Other temporary and
deductible differences 174 - 174 (50) - 2 -
--------------------------------- -------- -------- -------- ---------- ---------- --------- ------------------
Gross deferred tax
assets/(liabilities) 1,370 (404) 966 69 65 2 1,107
--------------------------------- -------- -------- -------- ---------- ---------- --------- ------------------
Amounts available for
offset (390) 390 -
--------------------------------- -------- -------- -------- ---------- ---------- --------- ------------------
Reclassification to
assets held for sale (9) - (9)
--------------------------------- -------- -------- -------- ---------- ---------- --------- ------------------
Net deferred tax
assets/(liabilities) 971 (14) 957
--------------------------------- -------- -------- -------- ---------- ---------- --------- ------------------
1 Results are restated following the March 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting
in previously capitalised software assets being expensed, as explained
further in Note 1.25.
The movement on the net deferred tax is shown below:
Group
----------------------------------------- ------------------
Restated
2022 20211
GBP'000 GBP'000
----------------------------------------- -------- --------
At 1 August (524) (277)
----------------------------------------- -------- --------
Impact of restatement(1) 1,481 1,107
----------------------------------------- -------- --------
At 1 August, as restated 957 830
----------------------------------------- -------- --------
Recognised in income (Note 10) (306) (69)
----------------------------------------- -------- --------
Recognised in equity (60) 65
----------------------------------------- -------- --------
Disposal of subsidiaries (16) -
----------------------------------------- -------- --------
Foreign exchange (5) 2
----------------------------------------- -------- --------
Reclassification to assets held for sale 9 (9)
----------------------------------------- -------- --------
At end of year 579 957
----------------------------------------- -------- --------
Restated
2022 20211
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
Deferred tax assets reversing within 1 year 469 1,298
--------------------------------------------------------- -------- --------
Deferred tax liabilities reversing within 1 year (15) (107)
--------------------------------------------------------- -------- --------
Reclassification of deferred tax assets reversing within
1 year to assets held for sale - (9)
--------------------------------------------------------- -------- --------
At end of year 454 1,182
--------------------------------------------------------- -------- --------
Restated
2022 20211
GBP'000 GBP'000
------------------------------------------------ -------- --------
Deferred tax assets reversing after 1 year 132 72
------------------------------------------------ -------- --------
Deferred tax liabilities reversing after 1 year (7) (297)
------------------------------------------------ -------- --------
At end of year 125 (225)
------------------------------------------------ -------- --------
1 Results are restated following the March 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting
in previously capitalised software assets being expensed, as explained
further in Note 1.25.
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. Recent announcements by the UK government have called into question whether the main rate of corporation tax will increase to 25% or will remain at 19% from 1 April 2023. Since these changes were not substantively enacted as at the balance sheet date, deferred tax has been valued based on the original tax rate rises, based on when the deferred tax is expected to reverse.
Unrecognised deferred tax assets
Group
----------------------------------------------------- ------------------
2022 2021
GBP'000 GBP'000
----------------------------------------------------- -------- --------
Tax losses carried forward against profits of future
years 2,400 1,865
----------------------------------------------------- -------- --------
Net deferred tax assets 2,400 1,865
----------------------------------------------------- -------- --------
Of the unused tax losses GBP5,612,000 (2021: GBP2,071,000) can be carried forward indefinitely, GBP1,257,000 (2021: GBP817,000) expires within 10 years and GBP3,649,000 (2021: GBP3,053,000) expires within 20 years. GBP133,000 of the unused tax losses carried forward indefinitely relate to unrecognised capital losses which may be offset against future chargeable (capital) gains only.
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 GBP2,345,000 (2021: GBP3,675,000). If the earnings were remitted, tax of GBP2,000 (2021: GBP45,000) would be payable.
17 Trade and Other Receivables
Group Company
------------------------------------------------- ------------------ ------------------
Restated
2022 20211 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------- -------- -------- -------- --------
Trade receivables from contracts with customers,
net of loss allowance 36,367 34,187 - -
------------------------------------------------- -------- -------- -------- --------
Amounts owed by Group companies - - 2,757 3,046
------------------------------------------------- -------- -------- -------- --------
Other receivables 1,701 1,619 - -
------------------------------------------------- -------- -------- -------- --------
Prepayments 1,372 1,587 - -
------------------------------------------------- -------- -------- -------- --------
Accrued income 15,327 26,742 - -
------------------------------------------------- -------- -------- -------- --------
Total 54,767 64,135 2,757 3,046
------------------------------------------------- -------- -------- -------- --------
1 Prepayments as at 31 July 2021 have been restated as a result of change
of accounting policy in light of the International Financial Reporting
Standards Interpretations Committee (IFRIC) latest guidance on SaaS
arrangements, as explained further in Note 1.25.
The amounts owed by Group companies in the Company Statement of Financial Position are considered to approximate fair value. Amounts owed by Group companies are unsecured, repayable on demand and accrue no interest.
The Directors consider that the carrying amount of trade and other receivables approximates to the fair value.
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.
Impairment of trade receivables from contracts with customers
Group
------------------------------------------------------- ------------------
2022 2021
GBP'000 GBP'000
------------------------------------------------------- -------- --------
Trade receivables from contracts with customers, gross
amounts 38,444 37,636
------------------------------------------------------- -------- --------
Loss allowance (2,077) (3,449)
------------------------------------------------------- -------- --------
Trade receivables from contracts with customers, net
of loss allowance 36,367 34,187
------------------------------------------------------- -------- --------
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 aging 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 customer industry.
The expected loss rates are based on the payment profiles of sales over a period of 36 months before the relevant period 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. Additionally, the projected post-COVID economic recovery based on external reports, forecast data and scenario analysis, has been taken into account along with other macro-economic factors when assessing the credit risk profiles for specific industries and geographies.
The loss allowance for trade receivables was determined as follows:
More than More than More than
30 days 60 days 90 days
31 July 2022 Current past past past Total
------------------------------------------ ------- --------- --------- --------- ------
Weighted expected loss rate (%) 4.0% 7.9% 15.9% 48.0%
------------------------------------------ ------- --------- --------- --------- ------
Gross carrying amount - trade receivables
(GBP'000) 35,817 1,241 327 1,059 38,444
------------------------------------------ ------- --------- --------- --------- ------
Loss allowance (GBP'000) 1,418 99 52 508 2,077
------------------------------------------ ------- --------- --------- --------- ------
More than More than More than
30 days 60 days 90 days
31 July 2021 Current past past past Total
------------------------------------------ ------- --------- --------- --------- ------
Weighted expected loss rate (%) 5.2% 5.0% 18.6% 60.9%
------------------------------------------ ------- --------- --------- --------- ------
Gross carrying amount - trade receivables
(GBP'000) 33,741 654 743 2,498 37,636
------------------------------------------ ------- --------- --------- --------- ------
Loss allowance (GBP'000) 1,756 33 138 1,522 3,449
------------------------------------------ ------- --------- --------- --------- ------
The loss allowance for trade receivables at year end reconciles to the opening loss allowance as per below:
Group
--------------------------------------------------------- ------------------
2022 2021
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
Opening loss allowance at 1 August 3,449 3,987
--------------------------------------------------------- -------- --------
Increase/(decrease) in loss allowance recognised in the
year 136 (296)
--------------------------------------------------------- -------- --------
Receivables written off during the year as uncollectable (1,508) (242)
--------------------------------------------------------- -------- --------
Closing loss allowance at 31 July 2,077 3,449
--------------------------------------------------------- -------- --------
Impairment of accrued income
Group
-------------------------------------- ------------------
2022 2021
GBP'000 GBP'000
-------------------------------------- -------- --------
Gross accrued income 16,009 27,807
-------------------------------------- -------- --------
Loss allowance (682) (1,065)
-------------------------------------- -------- --------
Accrued income, net of loss allowance 15,327 26,742
-------------------------------------- -------- --------
The loss allowance for accrued income was determined as follows:
More than More than More than
30 days 60 days 90 days
31 July 2022 Current past past past Total
-------------------------------- ------- --------- --------- --------- ------
Weighted expected loss rate (%) 2.5% 2.5% 2.5% 30.6%
-------------------------------- ------- --------- --------- --------- ------
Gross carrying amount - accrued
income (GBP'000) 13,269 1,090 649 1,001 16,009
-------------------------------- ------- --------- --------- --------- ------
Loss allowance (GBP'000) 333 27 16 306 682
-------------------------------- ------- --------- --------- --------- ------
More than More than More than
30 days 60 days 90 days
31 July 2021 Current past past past Total
-------------------------------- ------- --------- --------- --------- ------
Weighted expected loss rate (%) 2.9% 2.7% 2.6% 23.7%
-------------------------------- ------- --------- --------- --------- ------
Gross carrying amount - accrued
income (GBP'000) 21,455 3,546 1,519 1,287 27,807
-------------------------------- ------- --------- --------- --------- ------
Loss allowance (GBP'000) 624 96 40 305 1,065
-------------------------------- ------- --------- --------- --------- ------
The loss allowance for accrued income at year reconciles to the opening loss allowance as per below:
Group
----------------------------------------------------------- ------------------
2022 2021
GBP'000 GBP'000
----------------------------------------------------------- -------- --------
Opening loss allowance at 1 August 1,065 269
----------------------------------------------------------- -------- --------
(Decrease)/increase in loss allowance recognised in profit
and loss during the year (383) 796
----------------------------------------------------------- -------- --------
Closing loss allowance at 31 July 682 1,065
----------------------------------------------------------- -------- --------
18 Provisions
2022 2021
-------------------------------- ------------------------------------ ------------------------------------
Other Other
Dilapidations provisions Total Dilapidations provisions Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------------- ----------- -------- ------------- ----------- --------
Balance at 1 August 1,680 53 1,733 1,710 1,084 2,794
-------------------------------- ------------- ----------- -------- ------------- ----------- --------
Provisions made in the year 18 824 842 74 40 114
-------------------------------- ------------- ----------- -------- ------------- ----------- --------
Provisions utilised (145) (40) (185) - (679) (679)
-------------------------------- ------------- ----------- -------- ------------- ----------- --------
Provisions released (698) (13) (711) (58) (392) (450)
-------------------------------- ------------- ----------- -------- ------------- ----------- --------
Effect of movements in exchange
rates 25 - 25 (46) - (46)
-------------------------------- ------------- ----------- -------- ------------- ----------- --------
Balance at 31 July 880 824 1,704 1,680 53 1,733
-------------------------------- ------------- ----------- -------- ------------- ----------- --------
2022 2021
------------ ------------------------------------ ------------------------------------
Other Other
Dilapidations provisions Total Dilapidations provisions Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------- ----------- -------- ------------- ----------- --------
Non-current 517 - 517 1,269 - 1,269
------------ ------------- ----------- -------- ------------- ----------- -------- Current 363 824 1,187 411 53 464 ------------ ------------- ----------- -------- ------------- ----------- -------- Total 880 824 1,704 1,680 53 1,733 ------------ ------------- ----------- -------- ------------- ----------- --------
Dilapidation provisions are held in respect of the Group's office properties where lease obligations include contractual obligations to return the property to its original condition at the end of the lease term, ranging between one and six years.
Other provisions have been recognised in respect of restructuring activities relating to discontinuation of overseas operations and claims for certain legal matters. Other provisions held as at 31 July 2021 are primarily in respect of claims for certain legal matters.
No provisions are held by the parent Company (2021: GBPnil).
19 Trade and Other Payables
Group Company
----------------------------------- ------------------ ------------------
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- -------- -------- -------- --------
Trade payables 3,753 4,530 - -
----------------------------------- -------- -------- -------- --------
Amounts owed to group undertakings - - 3,006 2,972
----------------------------------- -------- -------- -------- --------
Taxation and social security 6,672 10,473 - -
----------------------------------- -------- -------- -------- --------
Contractor wages payable 25,841 27,209 - -
----------------------------------- -------- -------- -------- --------
Accruals and deferred income 3,828 5,158 - -
----------------------------------- -------- -------- -------- --------
Other payables 3,312 8,751 - -
----------------------------------- -------- -------- -------- --------
Total 43,406 56,121 3,006 2,972
----------------------------------- -------- -------- -------- --------
Amounts owed to Group undertaking are unsecured, repayable on demand and accrue no interest.
20 Loans and Borrowings
Group Company
------------------------------------------- ------------------ ------------------
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- -------- -------- -------- --------
Recourse working capital facility 1,801 9,348 - -
------------------------------------------- -------- -------- -------- --------
Bank loans and borrowings due in less than
one year 1,801 9,348 - -
------------------------------------------- -------- -------- -------- --------
Total bank loans and borrowings 1,801 9,348 - -
------------------------------------------- -------- -------- -------- --------
The Group holds both recourse and non-recourse working capital facilities. Under the terms of the non-recourse facility, the trade receivables assigned to the facility are owned by HSBC and so have been de-recognised from the Group's statement of financial position; in addition, the non-recourse working capital facility does not meet the definition of loans and borrowings under IFRS. The Group continues to collect cash from trade receivables assigned to the non-recourse facility on behalf of HSBC which is then transferred to them periodically each month. Any cash collected from trade receivables under the non-recourse facility at the end of reporting period that had not been transferred to HSBC, is presented as restricted cash included within the Group's cash balance. At 31 July 2022, the Group had agreed banking facilities with HSBC totalling GBP60m (31 July 2021: GBP75m) invoice financing working capital facility (recourse and non-recourse).
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 or accrued income up to a maximum of GBP60m (31 July 2021: GBP75m). Interest is charged on the recourse borrowings at a rate of 1.90% (31 July 2021: 1.75%) over the HSBC Bank base rate of 1.25% (2021: 0.1%).
21 Financial Assets and Liabilities Statement of Financial Position Clarification
The carrying amount of the Group's financial assets and liabilities as recognised at the Statement of Financial Position date of the reporting 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
--------------------------------------------------------- ------------------ ------------------
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------------- -------- -------- -------- --------
Trade and other receivables (Note 17)
--------------------------------------------------------- -------- -------- -------- --------
* Financial assets recorded at amortised cost 53,395 62,548 2,757 3,046
--------------------------------------------------------- -------- -------- -------- --------
Cash and cash equivalents
--------------------------------------------------------- -------- -------- -------- --------
* Financial assets recorded at amortised cost 17,768 29,238 7 4
--------------------------------------------------------- -------- -------- -------- --------
Total 71,163 91,786 2,764 3,050
--------------------------------------------------------- -------- -------- -------- --------
Financial liabilities are included in the statement of financial position within the following headings:
Group Company
--------------------------------------------------------------- ------------------ ------------------
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------------------- -------- -------- -------- --------
Borrowings (Note 20)
--------------------------------------------------------------- -------- -------- -------- --------
* Financial liabilities recorded at amortised costs 1,801 9,348 - -
--------------------------------------------------------------- -------- -------- -------- --------
Leases (Note 22)
--------------------------------------------------------------- -------- -------- -------- --------
* Financial liabilities recorded at amortised costs 3,625 5,761 - -
--------------------------------------------------------------- -------- -------- -------- --------
Trade and other payables (Note 19)
--------------------------------------------------------------- -------- -------- -------- --------
* Financial liabilities recorded at amortised costs 36,734 45,648 3,006 2,972
--------------------------------------------------------------- -------- -------- -------- --------
Total 42,160 60,757 3,006 2,972
--------------------------------------------------------------- -------- -------- -------- --------
22 Leases
The balance sheet shows the following amounts related to leases where the Group is a lessee.
Right-of-use Buildings Vehicles Other Total assets GBP'000 GBP'000 GBP'000 GBP'000 ---------------- ----------------------------------------- --------- -------- -------- -------- Cost At 1 August 2020 10,004 348 16 10,368 ---------------- ----------------------------------------- --------- -------- -------- -------- Effect of reassessment of lease terms 416 - 5 421 ---------------------------------------------------------- --------- -------- -------- -------- Effect of movement in exchange rates 41 - 1 42 ---------------------------------------------------------- --------- -------- -------- -------- Reclassification to assets held for sale (216) - (14) (230) ---------------------------------------------------------- --------- -------- -------- -------- At 31 July 2021 10,245 348 8 10,601 ---------------------------------------------------------- --------- -------- -------- --------
At 1 August 2021 10,245 348 8 10,601 ---------------------------------------------------------- --------- -------- -------- -------- Additions 183 44 - 227 ---------------------------------------------------------- --------- -------- -------- -------- Effect of reassessment of dilapidation assets (412) - - (412) ---------------------------------------------------------- --------- -------- -------- -------- Effect of reassessment of lease terms (965) - - (965) ---------------------------------------------------------- --------- -------- -------- -------- Effect of change in lease consideration 440 - - 440 ---------------------------------------------------------- --------- -------- -------- -------- Effect of movement in exchange rates 64 - - 64 ---------------------------------------------------------- --------- -------- -------- -------- At 31 July 2022 9,555 392 8 9,955 ---------------------------------------------------------- --------- -------- -------- -------- Accumulated depreciation and impairment At 1 August 2020 2,847 176 7 3,030 ---------------- ----------------------------------------- --------- -------- -------- -------- Depreciation charge 1,749 119 7 1,875 ---------------------------------------------------------- --------- -------- -------- -------- Impairment 183 - - 183 ---------------------------------------------------------- --------- -------- -------- -------- Effect of movement in exchange rates 40 - - 40 ---------------------------------------------------------- --------- -------- -------- -------- Reclassification to assets held for sale (190) - (11) (201) ---------------------------------------------------------- --------- -------- -------- -------- At 31 July 2021 4,629 295 3 4,927 ---------------------------------------------------------- --------- -------- -------- -------- At 1 August 2021 4,629 295 3 4,927 ---------------------------------------------------------- --------- -------- -------- -------- Depreciation charge 1,491 59 2 1,552 ---------------------------------------------------------- --------- -------- -------- -------- Impairment 827 25 - 852 ---------------------------------------------------------- --------- -------- -------- -------- Effect of reassessment of dilapidation assets (481) - - (481) ---------------------------------------------------------- --------- -------- -------- -------- Effect of movement in exchange rates 40 - - 40 ---------------------------------------------------------- --------- -------- -------- -------- At 31 July 2022 6,506 379 5 6,890 ---------------------------------------------------------- --------- -------- -------- -------- Net book value At 1 August 2021 5,616 53 5 5,674 ---------------- ----------------------------------------- --------- -------- -------- -------- At 31 July 2022 3,049 13 3 3,065 ---------------------------------------------------------- --------- -------- -------- --------
At 31 July 2022, included within property right-of-use assets is costs of GBP854,000 (2021: GBP1,491,000) and net book value of GBP248,000 (2021: GBP526,000) relating to dilapidation assets.
During the year, the Group recognised an impairment of GBP852,000 in relation the right-of-use assets belonging to the Infrastructure - RSL Rail CGU, as discussed in more detail in Note 13. In the prior year, an impairment of GBP114,000 was recognised in respect of a UK property that was no longer in use by the business, with the remaining GBP69,000 impairment relating to the closure of the Mexican operations.
2022 2021
------------------ --------------------------------------- ---------------------------------------
Buildings Vehicles Other Total Buildings Vehicles Other Total
Lease liabilities GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ --------- -------- -------- -------- --------- -------- -------- --------
Current 1,112 21 2 1,135 1,423 55 2 1,480
------------------ --------- -------- -------- -------- --------- -------- -------- --------
Non-current 2,470 17 3 2,490 4,268 9 4 4,281
------------------ --------- -------- -------- -------- --------- -------- -------- --------
Total 3,582 38 5 3,625 5,691 64 6 5,761
------------------ --------- -------- -------- -------- --------- -------- -------- --------
Lease liabilities for properties have lease terms of between one and six years.
The discount rates used to measure the lease liabilities at 31 July 2022 range between 2.0% to 7.5% for properties (2021: 1.6% - 10.1%), 4.7% for vehicles (2021: 4.7%) and 10.1% for other leases (2021: 10.1%).
Reconciliation of lease liabilities movement in the year
Buildings Vehicles Other Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------- --------- -------- -------- --------
At 1 August 2020 7,551 176 9 7,736
-------------------------------------------- --------- -------- -------- --------
Lease payments (2,387) (116) (8) (2,511)
-------------------------------------------- --------- -------- -------- --------
Interest expense of lease liabilities 151 4 1 156
-------------------------------------------- --------- -------- -------- --------
Effect of reassessment of lease terms 268 - 5 273
-------------------------------------------- --------- -------- -------- --------
Effect of movement in exchange rates 120 - 1 121
-------------------------------------------- --------- -------- -------- --------
Liabilities directly associated with assets
held for sale (12) - (2) (14)
-------------------------------------------- --------- -------- -------- --------
At 31 July 2021 5,691 64 6 5,761
-------------------------------------------- --------- -------- -------- --------
At 1 August 2021 5,691 64 6 5,761
-------------------------------------------- --------- -------- -------- --------
Additions 165 40 - 205
-------------------------------------------- --------- -------- -------- --------
Lease payments (1,968) (68) (2) (2,038)
-------------------------------------------- --------- -------- -------- --------
Interest expense of lease liabilities 112 2 1 115
-------------------------------------------- --------- -------- -------- --------
Effect of changes in lease consideration 440 - - 440
-------------------------------------------- --------- -------- -------- --------
Effect of reassessment of lease terms (892) - - (892)
-------------------------------------------- --------- -------- -------- --------
Effect of movement in exchange rates 34 - - 34
-------------------------------------------- --------- -------- -------- --------
At 31 July 2022 3,582 38 5 3,625
-------------------------------------------- --------- -------- -------- --------
Amounts in respect of leases recognised in the income statement
2022 2021
GBP'000 GBP'000
-------------------------------------------------------------- -------- --------
Depreciation expense of right-of-use assets 1,555 1,875
-------------------------------------------------------------- -------- --------
Impairment of right-of-use assets 852 183
-------------------------------------------------------------- -------- --------
Interest expense on lease liabilities 115 156
-------------------------------------------------------------- -------- --------
Expense relating to leases of low-value assets and short-term
leases (included in administrative expenses) 17 14
-------------------------------------------------------------- -------- --------
On the 5th October 2022, a sublease agreement was signed between Gattaca plc and a third party to sublet a portion of the office space within the London office. The annual rent has been agreed at GBP134,000. The sublease runs for the duration of the underlying lease of the building.
23 Share Capital
Authorised share capital:
Company
--------------------------------------------------------- ------------------
2022 2021
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
40,000,000 (2021: 40,000,000) Ordinary shares of GBP0.01
each 400 400
--------------------------------------------------------- -------- --------
Allotted, called up and fully paid:
Company
--------------------------------------------------------- ------------------
2022 2021
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
32,290,400 (2021: 32,290,400) Ordinary shares of GBP0.01
each 323 323
--------------------------------------------------------- -------- --------
The number of shares in issue in the Company is shown below:
Company
-------------------------- ------------------
2022 2021
GBP'000 GBP'000
-------------------------- -------- --------
In issue at 1 August 32,290 32,290
-------------------------- -------- --------
Exercise of share options - -
-------------------------- -------- --------
In issue at 31 July 32,290 32,290
-------------------------- -------- --------
The Company has one class of ordinary shares. Each share is entitled to one vote in the event of a poll at a general meeting of the Company. Each share is entitled to participate in dividend distributions.
Merger reserves
A merger reserve was created in 2015 in Gattaca plc under section 612 of the Companies Act 2006, relating to the acquisition of Networkers International plc. Gattaca plc's investment in Networkers International plc was subsequently transferred to a subsidiary undertaking in exchange for consideration of an intercompany receivable. The asset to which the merger reserve relates, being the goodwill and acquired intangible assets recognised on consolidation as part of the acquisition, was impaired in 2018, 2019 and 2021. Additionally, the intercompany receivable was settled in 2020 in exchange for qualifying consideration of offset with an intercompany payable. As a result, the full merger reserve of GBP28,526,000 became realised across these years. A choice has now been made to transfer the realised merger reserve to retained earnings in the year ended 31 July 2022 to present all distributable reserves in one place.
Share Options
The following options arrangements exist over the Company's shares:
Exercise period
------------------------- ------ ------ ---------- -------- ----------------------
Exercise
2022 2021 Date of price
'000s '000s grant pence From To
------------------------- ------ ------ ---------- -------- ---------- ----------
Long-term Incentive Plan
Options - 1 31/01/2012 1 31/01/2014 31/01/2022
------------------------- ------ ------ ---------- -------- ---------- ----------
Long-term Incentive Plan
Options - 1 31/01/2012 1 31/01/2015 31/01/2022
------------------------- ------ ------ ---------- -------- ---------- ----------
Long-term Incentive Plan
Options 2 1 31/01/2013 1 31/01/2015 31/01/2023
------------------------- ------ ------ ---------- -------- ---------- ----------
Long-term Incentive Plan
Options 5 2 31/01/2013 1 31/01/2016 31/01/2023
------------------------- ------ ------ ---------- -------- ---------- ----------
Long-term Incentive Plan
Options 5 4 01/01/2014 1 01/01/2016 01/01/2024
------------------------- ------ ------ ---------- -------- ---------- ----------
Long-term Incentive Plan
Options 38 32 01/01/2014 1 01/01/2017 01/01/2024
------------------------- ------ ------ ---------- -------- ---------- ----------
Long-term Incentive Plan
Options 5 3 28/01/2015 1 28/01/2017 28/01/2025
------------------------- ------ ------ ---------- -------- ---------- ----------
Long-term Incentive Plan
Options 27 24 28/01/2015 1 28/01/2018 28/01/2025
------------------------- ------ ------ ---------- -------- ---------- ----------
Long-term Incentive Plan
Options 5 - 25/06/2015 1 25/06/2018 25/06/2025
------------------------- ------ ------ ---------- -------- ---------- ----------
Long-term Incentive Plan
Options 13 - 11/02/2016 1 11/02/2019 11/02/2026
------------------------- ------ ------ ---------- -------- ---------- ----------
Long-term Incentive Plan
Options 71 402 19/12/2018 1 19/12/2021 19/12/2028
------------------------- ------ ------ ---------- -------- ---------- ----------
Long-term Incentive Plan
Options 162 704 20/01/2020 1 20/01/2023 20/01/2030
------------------------- ------ ------ ---------- -------- ---------- ----------
Long-term Incentive Plan
Options 160 282 01/12/2020 1 01/12/2023 01/12/2030
------------------------- ------ ------ ---------- -------- ---------- ----------
Long-term Incentive Plan
Options 410 - 16/12/2021 1 16/12/2024 16/12/2031
------------------------- ------ ------ ---------- -------- ---------- ----------
Long-term Incentive Plan
Options 70 - 09/05/2022 1 16/12/2024 09/05/2032
------------------------- ------ ------ ---------- -------- ---------- ----------
Long-term Incentive Plan
Options 130 - 09/05/2022 1 09/05/2025 09/05/2032
------------------------- ------ ------ ---------- -------- ---------- ----------
Total 1,103 1,456
------------------------- ------ ------ ---------- -------- ---------- ----------
During the year, the Group granted share options under the Long-Term Incentive Plan for Executive Directors and senior management. The share options were granted on 16 December 2021 and 9 May 2022 to members of staff to be held over a three-year vesting period and are subject to various performance conditions. All share options have a life of 10 years from grant date and are equity settled on exercise.
The movement in share options is shown below:
2022 2021
------------------------ ---------------------------- ---------------------------
Weighted Weighted Weighted Weighted
average average average average
exercise share exercise share
Number price price Number price price
'000 (pence) (pence) '000 (pence) (pence)
------------------------ ------- --------- -------- ------ --------- --------
Outstanding at 1 August 1,456 1.2 - 1,176 74.6 -
------------------------ ------- --------- -------- ------ --------- --------
Granted 1,026 1.0 - 1,106 1.0 -
------------------------ ------- --------- -------- ------ --------- --------
Forfeited/lapsed (1,379) 1.3 - (826) 1.3 -
------------------------ ------- --------- -------- ------ --------- --------
Exercised - - - - - -
------------------------ ------- --------- -------- ------ --------- --------
Outstanding at 31 July 1,103 1.0 1,456 1.2 - ------------------------ ------- --------- -------- ------ --------- -------- Exercisable at 31 July 171 1.0 69 1.0 - ------------------------ ------- --------- -------- ------ --------- --------
The numbers and weighted average exercise prices of share options vesting in the future are shown below.
2022 2021
----------------------- ----------------------------- ---------------------------------
Weighted
average Weighted Weighted Weighted
remaining average average average
contract exercise remaining exercise
life Number price contract Number price
Exercise date (months) '000 (pence) life (months) '000 (pence)
----------------------- ---------- ------ --------- -------------- ------ ---------
19/12/2021 - - - 5 402 1.0
----------------------- ---------- ------ --------- -------------- ------ ---------
20/01/2023 6 162 1.0 18 703 1.0
----------------------- ---------- ------ --------- -------------- ------ ---------
01/12/2023 16 160 1.0 28 219 2.4
----------------------- ---------- ------ --------- -------------- ------ ---------
31/01/2024 - - - 30 60 -
----------------------- ---------- ------ --------- -------------- ------ ---------
16/12/2024 29 410 1.0 - - -
----------------------- ---------- ------ --------- -------------- ------ ---------
16/12/2024 29 70 1.0 - - -
----------------------- ---------- ------ --------- -------------- ------ ---------
09/05/2025 33 130 1.0 - - -
----------------------- ---------- ------ --------- -------------- ------ ---------
Outstanding at 31 July 932 1,384
----------------------- ---------- ------ --------- -------------- ------ ---------
In addition to the share option schemes the Group operated a Share Incentive Plan (SIP), which is a 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 25,711 shares (2021: 73,190) under this scheme.
The Group's Share Incentive Plan is held by an Employee Benefit Trust (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 2022 and 31 July 2021. During the year ended 31 July 2021, a new EBT was set up as the branch of Gattaca plc and Apex Financial Services Limited was appointed as the Trustee and the administrator to this new EBT.
As at 31 July 2022, excess funds of GBP27,000 (2021: GBP28,000) were held by the EBTs, which has been included in cash and cash equivalents.
The following expenses or credits were recognised in the income statement in relation to share-based payment transactions:
2022 2021
GBP'000 GBP'000
--------------------------------- -------- --------
Long-term incentive plan options 106 133
--------------------------------- -------- --------
Share incentive plan 39 138
--------------------------------- -------- --------
Total 145 271
--------------------------------- -------- --------
The key assumptions used in the calculation of fair value per awards are as follows:
Share
price Risk
on the free
date Exercise Vesting Dividend rate Fair
Date of of grant price Volatility period yield of interest value
grant (GBP) (GBP) (%) (yrs) (%) (%) (GBP)
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
Long Term Incentive Plan
31/01/2012 Options 2.12 0.01 20.4% 2.00 7.4% 0.5% 2.12
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
Long Term Incentive Plan
31/01/2012 Options 2.12 0.01 20.4% 3.00 7.4% 0.5% 2.12
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
Long Term Incentive Plan
31/01/2013 Options 2.69 0.01 14.0% 2.00 5.8% 0.6% 2.67
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
Long Term Incentive Plan
31/01/2013 Options 2.69 0.01 14.0% 3.00 5.8% 0.6% 2.67
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
Long Term Incentive Plan
01/01/2014 Options 5.75 0.01 16.8% 2.00 3.1% 1.2% 5.75
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
Long Term Incentive Plan
01/01/2014 Options 5.75 0.01 16.8% 3.00 3.1% 1.2% 5.75
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
Long Term Incentive Plan
28/01/2015 Options 5.08 0.01 16.4% 2.00 3.9% 0.7% 5.08
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
Long Term Incentive Plan
28/01/2015 Options 5.08 0.01 16.4% 3.00 3.9% 0.6% 5.08
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
Long Term Incentive Plan
25/06/2015 Options 5.49 0.01 16.4% 3.00 3.9% 1.1% 5.49
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
Long Term Incentive Plan
11/02/2016 Options 4.35 0.01 20.9% 3.00 4.9% 0.5% 4.50
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
Long Term Incentive Plan
19/12/2018 Options 1.08 0.01 44.9% 3.00 0.0% 0.7% 1.07
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
07/08/2019 SIP 1.44 0.01 n/a 3.00 n/a n/a 1.44
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
09/09/2019 SIP 1.28 0.01 n/a 3.00 n/a n/a 1.28
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
08/10/2019 SIP 1.32 0.01 n/a 3.00 n/a n/a 1.32
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
08/11/2019 SIP 1.18 0.01 n/a 3.00 n/a n/a 1.18
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
09/12/2019 SIP 1.10 0.01 n/a 3.00 n/a n/a 1.10
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
10/01/2020 SIP 1.29 0.01 n/a 3.00 n/a n/a 1.29
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
Long Term Incentive Plan
20/01/2020 Options 1.13 0.01 n/a 3.00 0.0% n/a 1.24
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
10/02/2020 SIP 0.82 0.01 n/a 3.00 n/a n/a 0.82
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
09/03/2020 SIP 0.76 0.01 n/a 3.00 n/a n/a 0.76
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
09/04/2020 SIP 0.39 0.01 n/a 3.00 n/a n/a 0.39
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
11/05/2020 SIP 0.44 0.01 n/a 3.00 n/a n/a 0.44
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
08/06/2020 SIP 0.45 0.01 n/a 3.00 n/a n/a 0.45
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
10/07/2020 SIP 0.45 0.01 n/a 3.00 n/a n/a 0.45
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
14/08/2020 SIP 0.54 0.01 n/a 3.00 n/a n/a 0.54
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
08/09/2020 SIP 0.58 0.01 n/a 3.00 n/a n/a 0.58
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
08/10/2020 SIP 0.54 0.01 n/a 3.00 n/a n/a 0.54
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
10/11/2020 SIP 0.60 0.01 n/a 3.00 n/a n/a 0.60
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
Long Term Incentive Plan
01/12/2020 Options 0.84 0.01 n/a 3.00 n/a n/a 0.84
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
08/12/2020 SIP 0.82 0.01 n/a 3.00 n/a n/a 0.82
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
11/01/2021 SIP 0.82 0.01 n/a 3.00 n/a n/a 0.82
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
12/02/2021 SIP 0.86 0.01 n/a 3.00 n/a n/a 0.86
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
08/03/2021 SIP 1.15 0.01 n/a 3.00 n/a n/a 1.15
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
12/04/2021 SIP 1.50 0.01 n/a 3.00 n/a n/a 1.50
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
11/05/2021 SIP 1.49 0.01 n/a 3.00 n/a n/a 1.49
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
08/06/2021 SIP 2.24 0.01 n/a 3.00 n/a n/a 2.24
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
07/07/2021 SIP 2.64 0.01 n/a 3.00 n/a n/a 2.64
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
06/08/2021 SIP 2.46 0.01 n/a 3.00 n/a n/a 2.46
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
07/09/2021 SIP 2.01 0.01 n/a 3.00 n/a n/a 2.01
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
07/10/2021 SIP 2.00 0.01 n/a 3.00 n/a n/a 2.00
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
05/11/2021 SIP 1.67 0.01 n/a 3.00 n/a n/a 1.67
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
07/12/2021 SIP 1.39 0.01 n/a 3.00 n/a n/a 1.39
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
Long Term Incentive Plan
16/12/2021 Options 1.29 0.01 59.2% 3.00 3.0% 0.5% 2.05
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
10/01/2021 SIP 1.49 0.01 n/a 3.00 n/a n/a 1.49
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
07/02/2022 SIP 0.83 0.01 n/a 3.00 n/a n/a 0.83
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
07/03/2022 SIP 0.79 0.01 n/a 3.00 n/a n/a 0.79
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
07/04/2022 SIP 0.71 0.01 n/a 3.00 n/a n/a 0.71
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
09/05/2022 SIP 0.66 0.01 n/a 3.00 n/a n/a 0.66
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
Long Term Incentive Plan
09/05/2022 Options 0.66 0.01 66.9% 2.50 2.8% 1.4% 0.60
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
Long Term Incentive Plan
09/05/2022 Options 0.66 0.01 67.6% 3.00 2.8% 1.4% 0.37
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
09/06/2022 SIP 0.64 0.01 n/a 3.00 n/a n/a 0.64
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
07/07/2022 SIP 0.69 0.01 n/a 3.00 n/a n/a 0.69
----------- ------------------------------- --------- -------- ---------- ------- -------- ------------ ------
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. For 2018 onwards, the volatility of the Company's share price on 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
There were no related party transactions with entities outside of the Group.
During the year Matchtech Group (UK) Limited charged Gattaca plc GBP1,028,000 (2021: GBP525,000) for provision of management services.
The remuneration of key management personnel is disclosed in Note 5.
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:
0 to < 1 to < 2 to < 5 years Contractual
1 years 2 years 5 years and over cash flows
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- -------- --------- -----------
2022
---------------------------------- -------- -------- -------- --------- -----------
Invoice financing working capital
facility 1,801 - - - 1,801
---------------------------------- -------- -------- -------- --------- -----------
Lease liabilities 1,271 1,093 1,616 48 4,028
---------------------------------- -------- -------- -------- --------- -----------
Trade and other payables 32,713 - - - 32,713
---------------------------------- -------- -------- -------- --------- -----------
Total 35,785 1,093 1,616 48 38,542
---------------------------------- -------- -------- -------- --------- -----------
2021
---------------------------------- -------- -------- -------- --------- -----------
Invoice financing working capital
facility 9,382 - - - 9,382
---------------------------------- -------- -------- -------- --------- -----------
Lease liabilities 1,494 1,192 2,438 651 5,775
---------------------------------- -------- -------- -------- --------- -----------
Trade and other payables 40,490 - - - 40,490
---------------------------------- -------- -------- -------- --------- -----------
Total 51,366 1,192 2,438 651 55,647
---------------------------------- -------- -------- -------- --------- -----------
Company
The Company had no financial liabilities at the reporting date (2021: GBPnil).
Interest rate sensitivity
The Group's exposure to fluctuations in interest rates on borrowing is limited to its recourse working capital facility, as explained in Note 20. The Directors have considered the potential increase in finance costs and reduction in pre-tax profits due to increases in the Bank of England's base rate over a range of possible scenarios. The information for the year ended 31 July 2022 and the comparative information for the year ended 31 July 2021 are both based upon actual utilisation of the facility during that year.
Projected increase in finance costs arising from increases in the Bank of England's base rate of 1.25% as at 31 July 2022 (31 July 2021: 0.10%):
Group
------------------------- --------------------
2022 2021
GBP000's GBP000's
------------------------- --------- ---------
100 basis point increase 68 62
------------------------- --------- ---------
200 basis point increase 136 123
------------------------- --------- ---------
500 basis point increase 339 308
------------------------- --------- ---------
Borrowing facilities
The Group makes use of working capital facilities, details of which can be found in Note 20. The undrawn working capital facilities available at year end in respect of which all conditions precedent had been met was as follows:
Group
--------------------------------- ------------------
2022 2021
GBP'000 GBP'000
--------------------------------- -------- --------
Undrawn working capital facility 33,051 24,163
--------------------------------- -------- --------
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 12 months. At 31 July 2022, the Group had agreed banking facilities with HSBC totalling GBP60m (2021: GBP75m) comprised solely of a GBP60m invoice financing working capital facility (2021: GBP75m invoice financing working capital facility). 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 receivables 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:
Group
---------- ------------------
2022 2021
GBP'000 GBP'000
---------- -------- --------
US dollar 5,696 6,436
---------- -------- --------
Euro 2,119 5,224
---------- -------- --------
The Directors have considered the effect of a change in the Sterling exchange rate with the US Dollar and Euro on the balances of cash, aged receivables and aged payables held at the reporting date, assuming no other variables have changed. The effect of a 10% (2021: 25%) strengthening and weakening of Sterling against the US Dollar and Euro is set out below. The Group's exposure to other foreign exchange movements is not material.
Group
--------------------------------------------------- ------------------
2022 2021
GBP'000 GBP'000
--------------------------------------------------- -------- --------
USD / EUR exchange rate - increase 10% (2021: 25%) 704 3,397
--------------------------------------------------- -------- --------
USD / EUR exchange rate - decrease 10% (2021: 25%) (596) (2,352)
--------------------------------------------------- -------- --------
The Company only holds balances denominated in its functional currency and so is not exposed to foreign currency risk.
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
by pricing 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:
Group
----------------------------------- -------------------
Restated1
2022 2021
GBP'000 GBP'000
----------------------------------- -------- ---------
Total equity 29,997 35,107
----------------------------------- -------- ---------
Cash and cash equivalents (17,768) (29,238)
----------------------------------- -------- ---------
Capital 12,229 5,869
----------------------------------- -------- ---------
Total equity 29,997 35,107
----------------------------------- -------- ---------
Borrowings 1,801 9,348
----------------------------------- -------- ---------
Lease liabilities 3,625 5,761
----------------------------------- -------- ---------
Overall financing 35,423 50,216
----------------------------------- -------- ---------
Capital to overall financing ratio 35% 12%
----------------------------------- -------- ---------
1 Results are restated following the March 2021 IFRS Interpretations
Committee agenda decision on cloud computing arrangements, resulting
in previously capitalised software assets being expensed, as explained
further in Note 1.25.
27 Net Cash/(Debt)
Net cash/(debt) is the total amount of cash and cash equivalents less interest-bearing loans and borrowings, including finance lease liabilities.
Net cash flows include the net drawdown of loans and borrowings and cash interest paid relating to loans and borrowings.
1 August Net cash Non-cash 31 July
2021 flows movements 2022
2022 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- -------- ---------- --------
Cash and cash equivalents 29,238 (11,667) 197 17,768
--------------------------- -------- -------- ---------- --------
Working capital facilities (9,348) 7,547 - (1,801)
--------------------------- -------- -------- ---------- --------
Lease liabilities (5,761) 2,038 98 (3,625)
--------------------------- -------- -------- ---------- --------
Total net cash 14,129 (2,082) 295 12,342
--------------------------- -------- -------- ---------- --------
Net cash Non-cash
1 August flows movements 31 July
2020 restated1 restated1 2021
2021 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- -------- ---------- ---------- --------
Cash and cash equivalents 34,796 (5,213) (345) 29,238
---------------------------------------- -------- ---------- ---------- --------
Interest-bearing term loan (7,500) 7,500 - -
---------------------------------------- -------- ---------- ---------- --------
Working capital facilities (151) (9,197) - (9,348)
---------------------------------------- -------- ---------- ---------- --------
Lease liabilities (7,736) 2,511 (536) (5,761)
---------------------------------------- -------- ---------- ---------- --------
Total net cash/(debt) 19,409 (4,399) (881) 14,129
---------------------------------------- -------- ---------- ---------- --------
Capitalised finance costs 196 - (196) -
---------------------------------------- -------- ---------- ---------- --------
Total net cash/(debt) after capitalised
finance costs 19,605 (4,399) (1,077) 14,129
---------------------------------------- -------- ---------- ---------- --------
1 The reconciliation to adjusted net debt is restated for non-cash movements
relating to the effect of foreign exchange rates on cash and cash
equivalents as presented in the Consolidated Cash Flow Statement.
28 Contingent Liabilities
We continue our cooperation with the United States Department of Justice and in 2022 have incurred GBP33,000 (2021: GBP29,000) 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.
The Directors are aware of other potential claims against the Group at the date of approval of these financial statements which may result in a future liability. The Group considers that the likelihood of a material economic outflow is remote, and therefore no provision is being made.
29 Dividends
2022 2021
GBP'000 GBP'000
------------------------------------------------------------- -------- --------
Equity dividends proposed after the year end (not recognised
as
a liability) at nil pence per share (2021: 1.5 pence
per share) - 484
------------------------------------------------------------- -------- --------
The Group declared a dividend of 1.5 pence per share on 4 November 2021.
30 Events After the Reporting Date
The Group has not identified any subsequent events other than the sublease that has been disclosed in Note 22.
31 Availability of Annual Report and Accounts and Notice of AGM
It is expected that the Company's Annual Report and Accounts for the year ended 31 July 2022 (the "Accounts") will be published before the end of 3 November 2022 and that copies will be posted to shareholders and available to download from the Company's website at www.gattacaplc.com shortly. Accompanying the Accounts will be notice of Gattaca's 2022 Annual General Meeting, to be held at 9.30am on Tuesday 6 December 2022 at The Solent Hotel & Spa, Rookery Avenue, Whiteley, Hampshire.
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