As with any walk of life, the occasional setback is inevitable when tackling complex new challenges. The key is recognising when difficulties arise, responding quickly, learning from the experience and ultimately reaching one’s goals - perhaps via a different route. It’s no different in the corporate world.
Indeed, Gattaca is the first to admit that in April 2015 it bit off more than it could chew with the £66.8m transformational acquisition of Networkers International (NI). Attempting in one fell swoop to expand outside of its UK engineering heartland. Only then to discover a catalogue of deep-rooted issues. Namely, NI’s problematic Telco Infrastructure arm (eg Africa, Asia and Latin America), sub-scale operations (eg Singapore, Malaysia, Dubai & Qatar), extended customer payment terms and overseas withholding tax (WHT).
The Board fought tooth & nail to fix the problems, but after nearly 3 years of trying, decided enough was enough. And in early Feb’18 kicked-off a radical restructuring plan in order to right-size the ship. So 9 months’ on, how are things progressing?
From this morning’s FY18 prelims, the good news is that the self-help measures are starting to bear fruit. Sure there’s still plenty to do, and most of the benefits (eg £3m of annualised savings) will be only fully realised in future periods.
However, overheads have been cut, headcount reduced (870 Jan vs 810 in July), underlying cashflow improved (y/e debtor days 52 vs 55 LY) and LFL NFI growth stabilised at +1% (see below). Moreover, apart from a temporary air-pocket in demand at Network Rail which hurt RSL (HS2, CP5, Crossrail winding down & Carillion), we understand UK Engineering’s FY18 NFI would have actually been up 3.5%, rather than the 1.4% reported.