Tech and Engineering recruiter Gattaca said on Thursday that its H1 pretax profits had fallen Yoy after the sector had endured an extended period of uncertainty following last year's Brexit vote, with elongated hiring decisions and project delays.  

The Group's revenue rose 2% to £304m, with a slight currency tailwind, but net fee income fell 3% to 35.4m, profit-before-tax fell 25% to £5.2m, and earnings fell 31% to 10.7p.

Consensus forecasts had expected the company to report an EPS of around 40 for the full-year, but that looks likely to now be c.34-36. Last year, the firm reported 35p/share normalised EPS.

The Group said there were also unanticipated one-time cost overruns relating to the establishment of international entities to support a European contract win and investments in infrastructure.

"The tide is turning..."

Equity Development analyst Paul Hill said his firm believed Gattaca had now reached its bottom and said it had a "compelling" and "attractive" valuation:

"Any investor worth their salt knows it is impossible to precisely call a bottom in a particular stock. For Gattaca, though, we believe this moment has now passed given the compelling valuation (6.9x EV/EBIT vs 9.8x sector average), attractive 9.8% unlevered cashflow yield and constructive secular trends supporting its specialist markets. Sure, Net Fee Income (NFI) like-for-likes (LFL) have fallen of late, yet equally there are now early indications that organic growth may soon turn positive.  

CEO Brian Wilkinson said performance in H1 reflected tougher UK trading conditions since the EU Referendum and the subsequent near-term uncertainty."

He stated that the uncertainty had led to "elongated" hiring decisions and delayed projects, but stressed that in the medium-term, outlook in the sectors that Gattaca operates in remain positive, with a return of confidence seen in recent weeks.

Mr Wilkinson continued that the Group had invested heavily in expanding its overseas sales headcount, which it was expecting to see benefits from in H2:

"Given the opportunities we see, the Group has continued to strategically invest in overseas sales headcount, up 26 since 31 July 2016 and we expect to see a return on these investments during the second half and beyond..."

Shares in Gattaca rose 2% on Thursday, with the profit fall already priced in after its 13 April trading statement. 

Today's results follow a series of reports showed slowing UK revenues in the recruitment sector as a whole, with larger peers Hays and PageGroup reporting similar stories earlier this month.