LONDON (ShareCast) - (Sharecast News) - Specialist staffing company Gattaca said in a trading update on Thursday that it expected net fee income to have fallen to £18.9m in the first half, making for a 16% year-on-year decrease from £22.5m.
The AIM-traded firm said there had been a notable shift in net fee income (NFI) composition, with contract placements accounting for 76% and permanent placements for 24%, compared to 68% and 32% a year earlier, respectively.

That shift underscored the company's heightened focus on the contract market, with contractor volumes remaining steady compared to the previous year.

Permanent NFI saw a significant decline of 38% year-on-year in the six months ended 31 January, attributed to market weakness.

Placements had shown continued fragility since the beginning of the year, compounded by the departure of a major permanent recruitment process outsourcing (RPO) client from the prior year.

Despite market challenges, Gattaca said it had made substantial strides in business development.

The company said it had secured two large client extensions and won contracts with two additional managed service providers.

It said the defence sector had emerged as its strongest performer, boasting 9% year-on-year growth excluding the impact of the RPO account exit.

During the half-year, Gattaca saw a marginal reduction in sales headcount, decreasing from 315 to 312 since the prior year-end.

The group said it had directed its UK headcount investment towards sectors demonstrating growth potential, particularly energy, defence, and Gattaca Projects.

As of 31 January, the group anticipated reporting a statutory net cash position of £22.1m, a slight increase from £21.6m on 31 July.

"Despite the tough market conditions, I am pleased to report the group is trading in line with current market expectations," said chief executive officer Matthew Wragg.

"I am also pleased to see our strategy to invest in business development is starting to bear fruit, with two large client extensions and two more managed service provider (MSP) wins for the group in the first half, and a growing pipeline.

"We continue to see high engagement, staff attrition below long-term targets and productivity levels beginning to improve."

Wragg said that in the first half, the company had continued to focus the business more on specific markets and geographies, and reduced its workforce in North America.

"However, the economic conditions have led to a challenging market in the half-year, and we have not been immune to this.

"Permanent fee income is down 38% due to much lower than anticipated volumes at the back end of 2023 and compounded by reduced NFI from the exiting of a major programme last year.

"We anticipate that permanent fees will pick up gradually as we go through 2024."

Matthew Wragg said contract income had remained stable, as the company started to see growth from its investment and focus into the area.

"Recognising that trading conditions are expected to remain challenging, we plan to keep tight control on operating costs including headcount during the second-half, whilst we are mindful to ensure we are well placed to build market share in our chosen sectors as the economy recovers."

Gattaca said it would announce its results for the six months ended 31 January on 16 April.

At 1400 GMT, shares in Gattaca were down 12.8% at 109p.

Reporting by Josh White for Sharecast.com.

Email this article to a friend

or share it with one of these popular networks:

• DIGG
• FACEBOOK
• STUMBLEUPON
• MIXX
• YAHOO BUZZ
• DELICIOUS
• REDDIT
• NEWSVINE