TIDMGTLY
RNS Number : 4826L
Gateley (Holdings) PLC
06 September 2023
6 September 2023
Gateley (Holdings) Plc
("Gateley", the "Group" or the "Company")
AUDITED RESULTS 2023
Continuing track record of delivery
Gateley (AIM: GTLY), the professional services group, announces
its audited results for the year ended 30 April 2023 ("FY23" or the
"Period"), which continue its unbroken record of year-on-year
revenue and underlying profit growth.
The Group delivered a strong financial performance in FY23,
through its diversified and resilient business model, benefitting
from a full year's contribution from the prior year's acquisitions,
Adamson Jones Limited and Gateley Smithers Purslow Limited.
The Group achieved organic revenue growth of 6.2%, despite
macro-economic headwinds, which created challenging market
conditions in the second half of the year.
The balance sheet remains strong and the Group has significant
headroom in its banking facilities to enable investment in organic
and acquisitive growth opportunities, to further the board's
diversification strategy.
Financial highlights
We present below our financial performance for the Period both
on an underlying and statutory basis. Underlying results are before
the adjustments resulting from changes in acquisition accounting
treatment of consideration now adopted, which has no cash impact
and is explained in the Chief Financial Officer's Review.
Underlying FY23 FY22 Change
Restated
Group revenue GBP162.7m GBP137.2m 18.6%
Group underlying operating profit(1) GBP25.0m GBP22.5m 11.1%
Group underlying profit before
tax(1) GBP25.1m GBP21.6m 16.2%
Underlying adjusted fully diluted
EPS(2) 16.28p 14.54p 12.0%
Dividend per share 9.5p 8.5p 11.8%
Net assets GBP78.1m GBP75.1m 4.0%
Net cash(3) GBP4.3m GBP10.4m (58.7)%
Reported FY23 FY22 Change
Restated
Group profit before tax GBP16.2m GBP26.8m (39.6)%
Group profit after tax GBP12.2m GBP23.0m (47.0)%
Basic earnings per share ('BEPS') 9.77p 19.35p (49.5)%
For full details on the impact of the change in accounting
treatment see note 25 to this announcement
-- Strong performance as a result of diversification strategy in
action:
* Group organic revenue growth of 6.2%, comprising 4.9%
in legal services and 18.4% in consultancy services
* Consultancy services comprise GBP41.8m or 25.7% of
total Group revenue (FY22: GBP21.3m or 15.5%) - an
increase of 96.4%
-- Underlying operating profit margin held up well at 15.4% (FY22:
16.4%), despite inflationary pressures throughout the Period
-- Net assets increased by 4.0% to GBP78.1m (FY22: GBP75.1m)
-- Proposed final dividend of 6.0p (FY22: 5.5p), taking total dividends
for the Period to 9.5p per share (FY22: 8.5p)
Strategic and post-Period highlights
-- Business Services Platform expanded and further scale established
in patent and trade mark attorney services with the acquisition
of Symbiosis
-- Total headcount at 30 April 2023 of 1,455 (FY22: 1,368), with
increase in professional staff of 6.0% from 948 to 1,005
-- Internal appointment of Victoria Garrad as Chief Operating Officer
from previous position of Group HR Director
-- Wider expansion of internal share ownership with FY23 result
satisfying three-year performance criteria set out in the Group's
first LTIP awards scheme
-- Post-Period end acquisition of RJA Consultants, further expanding
the Group's chartered surveying services and bringing further
breadth to the Property Platform
-- Post-Period appointment of Colin Jones as non-executive director
who succeeds Suki Thompson as Chair of the Remuneration Committee
Current trading and outlook
-- FY24 has started in line with the board's expectations, with
a good pipeline of work
-- Integration of recently acquired businesses progressing to plan
and in line with Platform strategy
-- Encouraging pipeline of M&A opportunities
-- The Group continues to deliver against the clear strategy set
out at IPO, achieving growth and resilience through diversification,
and strong returns for its stakeholders
Rod Waldie, CEO of Gateley, said:
"I am very pleased to report another year of growth for Gateley.
This is a strong performance, set against a challenging
macro-economic backdrop throughout the second half. It is the
result of the hard work and dedication of our people allied to a
long-term commitment and adherence to the successful execution of
our growth through our diversification strategy, building in
resilience through design.
"During the year under review, both our legal services teams and
consultancy teams performed strongly and we have made further
progress in adding breadth and strength to our Group, expanding the
patent and trade mark attorney offer on our Business Services
Platform through the acquisition of Symbiosis. Post-Period end, we
have added legal services lateral hires to strategically broaden
our Business Services Platform dispute resolution teams and have
further enhanced our Property Platform with the acquisition of RJA
Consultants. Our M&A pipeline for FY24 is encouraging and we
will seek to strengthen our Platforms further as opportunities
arise.
"Looking forward, we are mindful of ongoing macro-uncertainty
and it is difficult to predict market conditions for the rest of
FY24. However, our diverse and resilient business model, combined
with our proven and consistent track record of delivering strong
growth across all economic cycles, means that we have entered FY24
with a positive mindset and cautious optimism."
(1) Underlying operating profit and underlying profit before
tax excludes remuneration for post-combination services,
gain on bargain purchase, share-based payment charges,
acquisition related amortisation and exceptional items
(2) Adjusted fully diluted EPS excludes remuneration for
post-combination services, gain on bargain purchase,
share-based payment charges, acquisition related amortisation
and exceptional items. It also adjusts for the future
weighted average number of expected unissued shares
from granted but unexercised share options in issue
based on a share price at the end of the financial year
(3) Net cash excludes IFRS 16 liabilities
Enquiries:
Gateley (Holdings) Plc
Neil Smith, Chief Financial Officer Tel: +44 (0) 121 234
0196
Nick Smith, Acquisitions Director and Tel: +44 (0) 20 7653
Head of Investor Relations 1665
Cara Zachariou, Communications Director Tel: +44 (0) 121 234
0074 Mob: +44 (0) 7703
684 946
Liberum - Nominated Adviser and Broker Tel: +44 (0) 20 3100
Richard Lindley/Ben Cryer/Cara Murphy 2000
Belvedere Communications Limited - Financial
PR
Cat Valentine (cvalentine@belvederepr.com) Mob: +44 (0) 7715 769
078
Keeley Clarke (kclarke@belvederepr.com) Mob: +44 (0) 7967 816
525
Llew Angus (langus@belvederepr.com) Mob: +44 (0) 7407 023
147
gateleypr@belvederepr.com
CHAIRMAN'S STATEMENT
Summary of the year
I am delighted to present Gateley's audited final results for
the year ended 30 April 2023, another successful year for the
business.
With revenue increasing by 18.6% to GBP162.7m and underlying
profit before tax increasing by 16.2% to GBP25.1m, Gateley has
again demonstrated the strength of its business model and the
resilience from its diversification strategy. These strong results
led to [a 4.0% increase in Group net assets to GBP78.1m (FY22:
GBP75.1m), and] an increase of 12.0% in adjusted fully diluted
earnings per share to 16.28p per share (FY22: 14.54p).
I am particularly proud that this year's strong performance was
delivered despite challenging circumstances. With the economic
recovery from COVID-19 somewhat compromised by inflationary
pressures, with uncertainty as a consequence of the terrible events
in Ukraine and the onset of higher than usual wage inflation within
the legal and indeed other sectors, Gateley has navigated the year
well and I am pleased with the resulting benefits for all of our
stakeholders.
Strategic delivery
As I enter my ninth, and last, year as Chairman of Gateley, this
feels like a good moment to reflect on the progress the Group has
made since it became the first legal services group in the UK to
undertake an IPO. There are two points that stand out to me and, I
believe, are a testament to the quality of the Group and the people
within it.
Firstly, consistency. Since IPO, Gateley has delivered an
unbroken track record of revenue and underlying profit growth.
Above and beyond the absolute progression, Gateley has also
outgrown the UK professional services market, which continues to
benefit from a number of structural growth drivers. Gateley's
growth has been accelerated by acquisitions but underpinning our
growth has been the strength of our legal services foundation.
Outperformance does not come automatically but is hard earned
through a consistency of client delivery and execution across all
levels of the Group.
Secondly, commitment. Since IPO, our strategy has been clear; to
build a professional services group of scale and breadth. From our
legal foundations, we have sought to bring in new business lines,
and business models, that complement and add to the suite of
services that we offer to our increasingly diverse clients. By
sticking to the discipline of our Platform Strategy, we have been
able to focus our organic, and inorganic, investment where it has
mattered the most. Clearly, part of the motivation behind the IPO
was to facilitate this growth strategy and that motivation remains
undimmed. In the eight years since IPO, much has happened in the
stock market and the wider world that has been out of our control.
Yet despite these challenges, Gateley's strategic commitment has
not wavered. Our Group is now more diverse and resilient than at
any point in the last nine years.
Results overview
During the year we delivered on our strategic intent to further
diversify the business, placing the Group in a stronger position to
deliver further profitable growth in the coming years. In doing so,
we also expanded the breadth and depth of our offering on the
Business Services Platform with the acquisition of patent and trade
mark attorney business, Symbiosis.
To support our acquisition strategy, we committed to a
three-year revolving credit facility of up to GBP30m to assist with
acquisitions. This combined with our strong balance sheet places us
in a good position to acquire further businesses in the future.
Within our consultancy businesses, overall headcount increased
by 23.0% to 358 (FY22: 291) and fee-earner staff by 27.4% to 279
(FY22: 219). Revenues from this part of the Group were over
GBP41.8m, demonstrating the further diversification of service
offering and the deepening of our relationships with our clients.
Our staff have also shown great adaptability to the constant
changes throughout the past few years and their dedication towards
the business, their colleagues and clients has been first class in
what was a challenging year across a wide range of fronts.
As we continue to grow and strengthen our business, the board
remains committed to providing its people with the opportunity to
own shares in the Company. We believe that employee share ownership
secures a strong alignment with the Group's external shareholders,
incentivises employees and is reflective of Gateley's
long-established culture. At least 65% of current staff are
existing share or option holders in the Company.
Responsible Business
The board has made the further development of Gateley's
Responsible Business commitment a key strategic priority this year.
We achieved this by working together with The Purpose Coalition, an
independent ESG consultancy who helped us develop our own set of
levelling up goals.
In December 2022, we published our second edition, 2022
Responsible Business report, for which we again received
significant positive feedback. We have introduced 15 new
responsible business objectives for FY24 and confirmed our
intention to reduce our CO 2 emissions by 50% by 2030 and to become
net zero by 2040.
Our Responsible Business actions focus on the wellbeing of our
employees, on being a force for good in society and within the
communities in which we operate, and by playing our part in
protecting and repairing our planet. Measuring the value and the
impact we are having in all these areas is as important as acting
because it enables us to evaluate where we are effecting change and
how we can continue to improve over time.
I am delighted with the progress we have made and how this
important initiative has been embraced across the Group. We are
committed to ensuring diversity, equality and inclusion and our
goal is to foster a positive work ethic, whilst remaining results
and client focused, and demonstrating our commitment to doing the
right thing for our people, our planet and developing potential
wherever we can.
Board changes
The UK Corporate Governance Code determines that the recommended
tenure for the chair of publicly listed companies is nine years.
There is no recommended tenure for non-executive directors, though
after nine years they are generally no longer considered to be
independent, and this tends to act as a 'de facto' ceiling on
tenure. The assessment of the independence of non-executive
directors holding office after nine years is a matter of board
judgement, thereby allowing boards some room to extend the tenure
beyond nine years, where appropriate.
Gateley was admitted to AIM in June 2015, becoming the first
commercial law firm to list on the London Stock Exchange. The
current financial year ending 30 April 2024 will therefore be the
ninth year that Gateley has been on AIM and in line with the above
best practice, the following changes to the board will be
introduced.
With regards to my own role, as the current year ending 30 April
2024 is my ninth year as Chairman, it will therefore be my last and
I will stand down at the Group's AGM in 2024. The board has already
begun a process to appoint a new Chairman and an announcement will
be made in due course.
With regard to the Chair of the Audit and Risk Committee, the
financial year ending 30 April 2024 will be Joanne Lake's ninth
year in the role and would therefore ordinarily be her last. Given,
however, the planned change to my own role and the unforeseen
retirement of Suki Thompson, should Joanne also stand down in 2024
then all of the Group's non-executives would leave within the same
financial year. I have therefore agreed with the board and with the
Group's largest five institutional shareholders that it is in the
best interests of all stakeholders for there to be a degree of
continuity on the board and that Joanne will serve one more year as
Audit and Risk Committee Chair and will stand down at the AGM in
2025.
With regard to the Chair of the Remuneration Committee, Colin
Jones, who was appointed to the board today, as non-executive
director, succeeds Joanne Lake, who has been temporarily chairing
the committee, following Suki Thompson's retirement.
With regard to executive board positions, Victoria Garrad, Group
HR Director, was appointed to the board on 1 May 2023, in line with
succession planning outlined in the Group's Half Year Results
announcement issued on 12 January 2022. Victoria replaced Peter
Davies, Chief Operating Officer, who stepped down from the board on
30 April 2023. Victoria joined Gateley in 1996 and has been the
Group HR director, a non-plc board role, since 1 May 2017. Prior to
this, she was a Partner in the legal services employment team and
has been a member of the Operations Board since 2011 and the
Strategic Board since 2017.
Upon standing down as Chief Executive on 30 April 2020, Mike
Ward agreed to stay on as an executive director of the Group for a
period to lend his experience to Rod Waldie, who took over the role
on 1 May 2020. Having now been in position for three years, Mike
will stand down from the board at the 2023 AGM. On behalf of the
board and all of the staff in the Group, I would like to extend my
thanks to Mike for his insights whilst in office.
Dividends
An interim dividend of 3.5p per share (FY22: 3.0p) was paid on
31 March 2023 to shareholders on the register at the close of
business on 24 February 2023. The board is pleased to propose a
final dividend of 6.0p per share (FY22: 5.5p), giving a total
dividend for the year of 9.5p per share (FY22: 8.5p), subject to
approval at the forthcoming Annual General Meeting, which will be
held on 17 October 2023. If approved, this final dividend will be
paid in October to shareholders on the register at the close of
business on 29 September 2023. The shares will go ex-dividend on 28
September 2023.
The board's dividend policy remains to distribute up to 70% of
specifically adjusted profit after tax to shareholders, whereby the
adjustments relate to the remuneration for post-combination
services and gains on bargain purchase. The dividend is typically
split one third following the Company's half year results and two
thirds after the full year results.
Summary and outlook
This year has been another strong one for Gateley. Our people
have excelled in client delivery, they have continued to overcome
every challenge presented to them, and have delivered further
strategic progress for the business, combining to generate an
excellent set of results.
As we focus on service line enhancing opportunities that meet
our clients' needs and fulfil our strategy to build a broader
professional services group, our acquisition pipeline remains
strong, trading in the current year is in line with the board's
expectations and we look forward to the immediate future with
cautious optimism.
Nigel Payne
Chairman
6 September 2023
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
I am pleased with the Group's strong performance in FY23,
delivered by the highly skilled and dedicated people across our
business. These results maintain the Group's unbroken record of
year-on-year revenue and underlying profit growth. We are proud of
this and of the consistent progress made against our key metrics
since our admission to AIM in June 2015.
Throughout the Period a combination of global and UK-specific
events created a challenging macro-economic backdrop. This was
particularly pronounced during H2 23 and macro-uncertainty remains
the dominant characteristic in the market. Despite this, the Group
once again demonstrated its resilience and ability to adapt to
shifting market conditions. These characteristics are not the
product of chance; they result from the implementation, since 2015,
of our strategy to operate and grow a diverse professional services
business with legal services as its foundation. We have been
consistent in our adherence to this proven strategy, which informs
all that we do. Since acquiring our first consultancy business in
2016, our disciplined approach to M&A has grown non-legal
revenue to GBP41.8m (FY22: GBP21.3m), being 25.7% of the Group's
revenue.
We have a highly focused market proposition and differentiate
ourselves by making selective investments in, and growing, quality
legal and consultancy services on each of our four Platforms,
focused on our core markets of Business Services, Corporate,
People, and Property. As the Group continues to expand, we have
more choice in how to deploy our investments in the legal and wider
professional services markets. In the meantime, our mix of services
remains unique and clearly enhances our resilience, as evidenced in
our FY23 results, during a more challenging period for
transactional legal services overall. Our diversification strategy
is clear and proven.
Whilst continuing to appraise new acquisition opportunities from
our encouraging pipeline, our current operational focus is firmly
on the basics in the business; from fee rate increases, cost
management and, of course, consistent delivery of excellent
service, to maximising cross-selling opportunities on and across
each Platform.
On responsible business, as reported at the end of H1 23, with
the publication of our second Responsible Business Strategy we
achieved all 15 of the initial targets set for FY23. In doing so we
reinforced our belief that an integrated Responsible Business
Strategy develops solutions that positively impact people, the
planet and profit. Our work here is ongoing in line with our
Purpose to deliver results that delight our clients, inspire our
people and support our communities. We are revising our annual
Responsible Business reporting to coincide as closely as possible
with the release of our annual results and I therefore look forward
to publication of our next report very soon.
Finally, we are delighted to propose a progressive final
dividend of 6.0p per share at the Group's AGM on 17 October 2023,
taking the total dividend for the Period to 9.5p (FY22: 8.5p), an
increase of 11.8% on the prior year.
Results overview
The Group performed well during FY23, building on the progress
reported at the half year and delivering growth in revenue and
profit. Revenue grew by 18.6% to GBP162.7m (FY22: GBP137.2m) and
underlying profit before tax increased by 16.2% to GBP25.1m (FY22:
GBP21.6m). Profit before tax decreased by 39.6% to GBP16.2m (FY22
restated: GBP26.8m) as a result of the IFRS 3 related acquisition
accounting treatments, further details of which are set out in the
Chief Financial Officer's Review. Profit after tax decreased by
47.0% to GBP12.2m (FY22 restated: GBP23.0m).
Salary cost inflation has been and continues to be a
post-pandemic characteristic across all professional services
businesses. In addition, FY23 saw the return of more discretionary
costs (e.g. travel, marketing and entertaining). Planned one-off
costs in the Period included significant investment in a new,
market-leading business management system and associated
integration costs. Despite all of this and general cost inflation,
our FY23 results delivered another year of growth.
Our outturn for the Period was underpinned by the quality and
breadth of the increasing range of legal and consultancy services
offered through our Platforms. Transactional activity was strong in
H1 23 but, as reported at the half year, we were beginning to see
transactional activity levels reduce from the previous
unprecedented highs. During H2 23 the Group started to pivot
towards greater activity in the more counter-cyclical service lines
that are deliberately designed within each Platform. Although not
immune from the effects of challenging market conditions, these
services helped our second half performance and continue to perform
strongly.
Platform performance
Business Services Platform
This Platform supports clients in dealing with their commercial
agreements, managing risks, protecting assets and resolving
disputes.
Revenue on this Platform grew by 21.1% to GBP21.8m, buoyed in H1
23 by transactional activity and in H2 23 by an increase in ongoing
work across the legal services dispute resolution teams,
underpinned by a good performance throughout the whole Period from
the Platform's consultancy businesses.
In legal services, the dispute resolution specialists saw an
increase in demand from both UK and overseas clients. This trend is
continuing. Mandates from UK clients are representative of current
economic circumstances and include an increase in instructions from
financial services clients as interest rates rise and lending
tightens, which often results in default or lays-bare fraudulent
activity. Projects from overseas clients include a return of some
activity in Central Europe.
We continue to make strategic investment in new dispute service
lines, predominantly in competition litigation, class actions and
international arbitration where, in all cases, we see huge
opportunity and have very recently recruited highly regarded senior
expertise, including from within magic circle law firms.
In consultancy services, activity in our growing patent and
trade mark attorney business was consistent throughout the Period.
It was enhanced by the acquisition of Symbiosis, specialising in
the life sciences industry and adding to Adamson Jones' expertise
in engineering, medical devices, pharmaceuticals and biotechnology.
Both businesses are working well together with related legal
services across the Group and on shared opportunities. We will
continue to build critical mass in these services where typical
projects are long-dated and our expertise is highly valued by
clients whose businesses are founded upon ideas and inventions that
need to be protected to preserve value. More UK and international
client opportunities exist here and will be realised as we progress
our strategy to grow our business in this space.
In aggregate, consultancy revenue now represents 23.4% of
Business Services Platform revenue.
Corporate Platform
This Platform is focused on the corporate, financial services
and restructuring markets in both transaction and business support
services.
Currently, this Platform is dominated by legal services, some of
which encountered more challenging conditions in H2 23. Despite
this, Platform revenue grew by 1.8% to GBP38.8m and delivered a
strong contribution margin. It is likely that the Corporate
Platform will always be legal services dominated. This is because
our transactional Corporate teams draw support from consultancy
services which are particular to each transaction, whilst in
day-to-day terms those consultancies find their more natural,
"core" home on one of our other Platforms.
Corporate transactional activity was strong in H1 23,
particularly with our private equity clients and in wider M&A.
The corporate team generated a deal book in that period comprising
an impressive list of complex, high value transactions across a
wide range of sectors, which utilised additional legal and
consultancy services across the Group. Ultimately, the team had
another strong year and the corporate unit remains our biggest
internal referrer of business, with most, if not all, other teams
benefitting in some way. H2 23 transactional activity was more
constrained and remains so. However, the pipeline is reasonable,
with anticipated further improvement in activity in H2 24. This
pattern is also reflected in our banking team, which had a strong
H1 23 but saw a drop-off in support to corporate transactions and a
reduction in bank lending during H2 23. However, the team is now
seeing an increase in loan covenant reset and refinancing work,
this being an excellent example of pro and counter-cyclical revenue
opportunities which exist in almost all of our legal service
lines.
Our restructuring and recovery teams are a natural counterweight
to transactional activity and following a sustained period of quiet
trading conditions, activity levels rose by 24% in FY23, as
government pandemic support for companies unwound and inflationary
pressures and interest rate increases impacted UK businesses.
Activity remains strong in these teams and our restructuring team
won the Institute for Turnaround's Legal Advisor of the Year Award
in 2022, one of the sector's most significant awards. Mandates have
been generated both in-market and internally, including working
alongside experts in Gateley Vinden and our legal services
construction unit in delivery of market-leading services to
insurers who have bonded construction projects that have become
distressed.
In consultancy services, the team at Gateley Global had a strong
year in continuing to help public and private sector global clients
realise their international expansion plans, inward and outward of
the UK. Revenue increased by 47.4% to GBP1.1m (FY22: GBP0.74m). In
addition, the team is a consistent cross-referrer of revenue to
other parts of the Group as clients require mixed services to
implement expansion.
People Platform
This Platform supports clients in dealing with and developing
people and in administering individuals' personal affairs.
Good activity in both legal and consultancy services grew
Platform revenue by 6.3% to GBP20.4m. In legal services, our
pensions team had a strong year and performance in our employment
team was good as clients' HR teams returned to more
business-as-usual activity post-pandemic. Our private client team
remains focused on high-net-worth clients and related
opportunities.
In consultancy services, our pension trustee business Entrust,
continues to deliver growing, recurring revenue. The team is seeing
an increase in the number of pension schemes looking to complete
full liability buy-outs, with Entrust at the helm. In addition,
more businesses are looking to out-source management of their
pension schemes, which is generating greater opportunity for
Entrust to grow both organically and via potential
acquisitions.
t-three and Kiddy & Partners, our talent assessment,
development and cultural change businesses, are now combined for
management purposes. The team won 67 new clients during FY23 and
increased, by 45%, the number of clients buying both t-three and
Kiddy services, with particular focus on scalable products to high
growth clients. Combined revenue grew to GBP6.7m (FY22: GBP6.3m).
The pipeline remains strong as most organisations are looking to
develop their people and/or transform in some way.
In aggregate, consultancy revenue now represents 32.7% of People
Platform revenue.
Property Platform
This Platform is focused on clients' activities in real estate
development and investment and in the built environment in the
widest sense.
Currently, this is our most diverse and mature Platform. It grew
revenue by 33.1% to GBP81.7m during FY23, significantly assisted by
strong activity across the Platform's consultancy businesses.
In legal services our real estate development team remains a
market-leader in the warehousing and logistics sector, delivering
cross-Platform services to complex acquisition and development
projects. Whilst activity in the wider commercial property market
eased in H2 23 (and continues to be more subdued), we saw and
continue to see an increase in non-transactional advisory and
dispute resolution services. This includes helping our wide range
of residential development clients navigate regulation under the
high-profile Building Safety Act (post-Grenfell) and advising on
related remediation projects. This is long-dated, specialist work
in which we continue to invest, including by long-term redeployment
of appropriate resource from within the Group to our construction
team, which had a record year and continues to be very busy.
Elsewhere, current economic conditions have resulted in an increase
in work helping or opposing organisations seeking to exit
commercially onerous contracts.
In our market-leading house-builder team, we continue to act for
all of the top developers, many of whom have significantly reduced
their panel of advisors in favour of larger providers who cover all
bases, which describes us both geographically and in service lines.
This should result in more work for the team. Despite the fact that
developers are currently finding the [retail] housing market slow,
we continue to handle over 50 large strategic residential-led
schemes, with over 1,000 new homes each. Our clients need to
continue to build and sell and have other areas for which they
require our services. This includes an increase in advising on
shared ownership framework agreements and in bulk sales to housing
associations and build-to-rent investors. In addition, housing-led
urban regeneration work continues to attract public and private
funding. We act for all of the leading developers in this space and
remain busy with schemes where our unique combination of legal and
consultancy services is relevant to the whole life cycle of the
project.
In consultancy services, FY23 was the first full year of Gateley
Smithers Purslow following our diversification into specialist
services to the property insurance complex claims market. Gateley
Smithers Purslow contributed revenue of GBP13.8m (FY22: GBP0.6m),
representing annualised growth for that business of 26.1%. We also
saw strong revenue growth of 25.6% from Gateley Vinden's broad
range of specialist services and growth of 19.9% from Gateley
Hamer, which is carrying a strong pipeline of work in regeneration,
energy and telecoms projects.
Our recently announced post-Period acquisition of surveyors
Richard Julian and Associates Limited ("RJA") extends our reach to
organisations that deliver affordable housing, a resilient sector
underpinned by high levels of grant to support delivery of the
Government's housing targets. The team also has specialists in
major loss property claims, which will enhance related expertise in
both Gateley Smithers Purslow and Gateley Vinden.
We maintain our view that the range of expertise now housed on
our Property Platform puts us in position to compete with
well-established, multi-disciplinary property consultancies in the
wider market given that FY23 consultancy revenue represented 35.3%
of Property Platform revenue, which will be enhanced by RJA's
contribution in FY24.
Operational review
During the year, we invested in and delivered the phase one
implementation of a new, market leading business management,
productivity and financial system, 3E. This caused some short-term
disruption to parts of the business during Q1 23, however, phased
adoption enables system adaptation based on learnt experience. We
are delighted with the system and its functionality and are now
looking forward to integrating the remainder of the Group during
the remaining phases. This investment was essential for integration
of our growing Group. The ability to drive increasing scale through
a single system should help us to improve our margin over the
longer term.
We also made sensible investments in our office facilities to
continue to improve and adapt them to agile working. This is an
ongoing exercise, in parallel with the consolidation of offices in
our network and the gradual release of vacated space. We have
identified further synergies and savings in this regard. Whilst
these will take time to realise, our objective is to reduce our
office cost in the medium term.
In line with our differentiation strategy, we have focused our
internal messaging on the power of our Platforms in delivering
commercial, joined-up solutions for our clients. In-Period, this
involved a refresh of our website, aligning all services and
insights according to the Platforms; the publication of four
Platform magazines which share perspectives on the hot topics
facing organisations such as equality, diversity and inclusion,
innovation and maximising infrastructure efficiencies; and the
sharing of case studies and client stories, which demonstrate how
the Platforms collaborate to deliver cost-effective solutions.
People and Culture
Attracting, developing and motivating talent, at all levels
across the Group, is a key objective every year. In FY23, overall
headcount in the Group increased by 6.4% to 1,455 (FY22: 1,368).
Legal services headcount growth was 1.9% to 1,097 employees (FY22:
1,077), following growth of 1.7% and 9.0% respectively in FY21 and
FY22. Consultancy headcount increased by 23.0% to 358 (FY22: 291),
primarily as a result of acquisitions.
The Gateley offering remains differentiated and our broad range
of career opportunities is attractive. We continue to evolve our
people strategies to drive a stimulating, purposeful and rewarding
environment in which our people can progress their careers. We
recently announced a total of 126 internal promotions and
celebrated these across the Group.
The ability for all of our people to participate in share
ownership is attractive and represents a recruitment
differentiator. I am pleased for all of our option holders that our
FY23 result satisfied the three-year performance criteria set in
the first LTIP awards scheme granted in FY20 and also underpins the
performance criteria applicable to our in-flight LTIP schemes.
Alongside this, our wider CSOP and SAYE schemes will mature during
FY24 resulting in the release of circa 3.4m shares to scheme
participants. All of this is in line with our strategy of creating
wider equity participation for more of our people. Currently circa
65% of our people either hold shares or participate in share
schemes.
Once again, we owe the success of our business to the quality
and dedication of our people at all levels. Clients come to us for
our broad specialist knowledge and experience and our determination
to deliver results for them. As we extend our range of services,
our strong client relationships enable more cross-selling
opportunities, which remains a key focus for us in generating
further organic growth.
Responsible Business
Being a responsible business is now an integral part of our
purpose and there has been good momentum in our responsible
business strategy since we published our second annual report in
December 2022. We have introduced 15 new objectives for FY24 and
confirmed our intention to reduce our CO 2 emissions by 50% by 2030
and to become net zero by 2040.
The release of our third responsible business report is imminent
and will contain a detailed review of our progress during FY23.
Current trading and outlook
Looking forward, like all companies, we are mindful of ongoing
macro-uncertainty. It seems that inflation and interest rates will
be in the economic headlines for the immediately foreseeable
future. Our expectation is that transactional activity in H1 24 is
likely to be more constrained than the comparative strong H1 23,
but with better trading conditions anticipated in H2 24. In the
meantime, non-transactional and consultancy business activity and
the pipeline across our increasingly resilient Group remains
good.
The professional services industry in the UK has demonstrated
steady growth through multiple cycles over the last twenty years.
Since our IPO, Gateley has outperformed this already strong
backdrop through a combination of organic growth and carefully
selected acquisitions. Our strategy has been to build a diversified
group of complementary and additive businesses, based on a legal
services foundation, that can continue to deliver growth through
the cycle. As the Group continues to expand, we have more choice in
how to deploy our investments in the wider legal and professional
services market. In the meantime, notwithstanding more challenging
shorter-term trading conditions for some of our business lines, we
remain confident in our vision and ability to deliver.
The Group enters FY24 with a positive mindset and cautious
optimism.
Rod Waldie
Chief Executive Officer
6 September 2023
CHIEF FINANCIAL OFFICER'S REVIEW
Financial overview
The Group has grown strongly, despite the challenging economic
backdrop of FY23, through a combination of organic and acquired
growth, with revenue up 18.6% to GBP162.7m. Organic revenue growth
from legal services was 4.9%, with exceptional organic growth of
18.4% from consultancy service lines, demonstrating our strategy to
build and diversify into a broader professional services group,
augmented by our acquisition strategy, which continues to enhance
our offering to clients and sets us apart from our listed and
unlisted peers.
We saw strong activity levels at the start and the end of the
financial year, and despite the September 2022 to December 2022
impact of the mini-budget, the Group overall delivered fee earner
utilisation levels at 89% on average across the year. This mid-year
pause also caused a delay in the completion of a number of
assignments which pushed the billing point, and revenue
recognition, into FY24.
FY23 included a full year of costs for Gateley Smithers Purslow
and Adamson Jones, and six months of costs following the
acquisition of Symbiosis in October 2022. Despite this, the Group's
strong cost control and adherence to its important cost to revenue
metrics, during a period of significant inflationary pressure, has
remained a key focus and assisted significantly in the growth in
underlying profit before tax of 16.2% to GBP25.1m. Underlying
operating profit margin remained above the 15% group-wide target at
15.4%, compared to 16.4% in FY22, whilst staff costs remained at
c.60% of fees. Whilst delivering market expectations, due to the
challenging economic back drop, our audited result was below the
threshold triggering discretionary staff bonus payments.
Our EPS performance will generate meaningful rewards post
year-end to our LTIP, CSOP and SAYE option holders and our dividend
per share remains strong, even in an environment of higher interest
rates, for all shareholders.
Our revolving credit facility has significant headroom and with
a closing net cash position of GBP4.3 million we are well-placed to
capitalise on current market conditions, as we have done
previously, to enable further expansion and growth.
Post period end, on 19 July 2023, we were pleased to announce
the acquisition of Richard Julian and Associates Limited, trading
as RJA Consultants ("RJA"), a fast-growing business that
complements the existing market leading expertise within Gateley
Legal's residential development and construction teams. Its core
market, which is affordable housing, is a buoyant sector and the
deeper reach into that market adds further resilience to the
Group's Property Platform. Total consideration is up to GBP6m
including, subject to certain revenue targets being achieved, an
incremental profitability-based earn-out, in respect of each
twelve-month period expiring 31 March 2024 and 31 March 2025. The
acquisition is expected to generate operational synergies and be
immediately earnings enhancing.
Revenue and margin by Platform
Group total revenue grew by 18.6% (FY22: 13.0%) to GBP162.7m
(FY22: GBP137.2m). Revenue from core legal service lines grew
organically by 4.9% (FY22: 8.7%). In addition, total revenue from
consultancy businesses grew by 96.4% to GBP41.8m which now
represents 25.7% of total revenues (FY22: GBP21.3m or 15.5%),
highlighting the ongoing success of our Platforms' diversification
strategy.
Despite the Group continuing its important investment in people,
it has lowered its percentage of personnel costs to revenue in FY23
to 59.5% (FY22: 63.0%) and we will continue to sensibly manage this
key metric as market conditions improve. The full effect of staff
wage inflation over the last two years has now been absorbed into
our personnel cost base causing our Group and Platform margins to
decrease from pre-pandemic levels. We do, however, expect to see an
improvement in FY24 as the lagged effect of price increases
continues to work through the assignments we work on. Price
increases in some aspects of professional services with fixed term
pricing arrangements that span multiple years typically lag behind
more immediately adjustable pricing structures elsewhere in our
Group.
Contentious work types continue to increase in nature and volume
as down-cycle trends are starting to materialise in our work
streams across all of our Platforms. The sluggish nature of the UK
economy continues to extend and pause a number of transactional
activities, especially those needing debt support.
The table below represents Platform performance over the last
two reported years along with each Platform's direct contribution
towards our one profit view of the Group's performance.
Business
Services Corporate People Property Total
GBPm GBPm GBPm GBPm GBPm
FY23
Revenue 21.8 38.8 20.4 81.7 162.7
Segmental contribution 5.3 13.9 6.0 31.1 56.3
Contribution margin 24.4% 36.0% 29.3% 38.1% 34.6%
FY22
Revenue 18.0 38.1 19.2 61.3 136.6
Segmental contribution 5.7 15.4 6.9 23.0 51.0
Contribution margin 31.7% 40.4% 35.9% 37.5% 37.3%
Revenue movement (%) 21.1% 1.8% 6.3% 33.3% 19.1%
Contribution margin change (7.3)ppts (4.4)ppts (6.6)ppts 0.6ppts (2.7)ppts
(%)
Underlying operating profit before tax
The Group has recorded strong underlying operating profit before
tax of GBP25.0m, up by 11.1% from GBP22.5m in FY22. Whilst we have
continued to invest across the business in our legal and
consultancy teams, a particular focus has been on headcount
investment in Gateley Smithers Purslow since its acquisition in
April 2022.
Continuing and robust demand for UK legal services, which led to
continued wage inflation pressure in the UK professional services
recruitment market, has alleviated in our business following our
extensive pay review processes of the last two financial years.
Whilst our underlying trading margins have decreased slightly to
15.4% (FY22: 16.4%) we expect operating overheads to level out in
FY24 and wage inflation to return to more normalised levels,
compared to double digit increases seen across each of the FY22 and
FY23 financial years.
Underlying operating profit before tax excludes amortisation of
acquisition related intangibles, all share-based charges and
exceptional acquisition related items, including the acquisition
accounting treatment of consideration payments on acquisitions
being reclassified as employment costs in the income statement, as
well as gains on bargain purchases arising from the related
restatement of acquisition accounting, as further described below.
Underlying operating profit before tax has been calculated as an
alternative performance measure in order to provide a more
meaningful measure and year-on-year comparison of the profitability
of the underlying business.
Restated
Extract of UK statement of comprehensive income 2023 2022
GBP'000 GBP'000
Revenue 162,683 137,249
Operating profit 16,122 27,723
Operating profit margin (%) 9.91 20.20
Reconciliation to alternative performance measure:
underlying operating profit before tax
------- --------
Operating profit 16,122 27,723
Non-underlying items
Amortisation of intangible assets 2,073 1,581
Share based payment charge - Gateley Plc 1,984 1,100
Share based payment charge - Gateley Smithers
Purslow Limited - 113
Contingent consideration treated as remuneration 6,190 3,509
Gain on bargain purchase (1,389) (12,380)
Acquisitions costs - 373
One off remuneration charge - Gateley Smithers
Purslow Limited - 497
Underlying operating profit before tax 24,980 22,516
Adjusted underlying operating profit margin
(%) 15.36 16.41
Personnel costs and operating expenses
Our total personnel costs increased by 11.9% (FY22: 11.7%) to
GBP96.8m, as average numbers of legal and professional staff rose
by 25.0% (FY22: 3.9%) to 1,000 (FY22: 800), whilst support staff
numbers rose by 25.4% to 439 (FY22: 350). This was due to the
impact of staff introduced to the business via acquisitions at the
end of FY23 and during the year, predominately in consultancy
services. However, as a result of the decisions and impact of
external factors referred to earlier in this note, personnel costs
as a percentage of fees decreased to 59.4% of revenue from 63.0% in
FY22, excluding share-based payment charges.
Operating expenses have increased by GBP12.5m or 53.0% to
GBP36.1m (FY22: GBP23.6m) due mainly to the investment in new
systems and the full year impact following the acquisitions of
Gateley Smithers Purslow and Adamson Jones. Like-for-like overheads
in specific areas such as travel, marketing and premises have
increased as we have seen a greater return to office usage and
client interaction during FY23 than in the previous two financial
years. On top of this we have not been immune to the effects of
current UK-wide inflation impacting ongoing running costs. Overall,
operating overheads have increased as a percentage of revenue from
17.2% in FY22 to 22.2% in FY23 but are expected to normalise at
this level during FY24 as we continue to work on operational
efficiencies across all aspects of the Group.
Restatement of acquisition accounting
During my tenure as Chief Financial Officer of the Group I have
always believed it important to keep the accounting treatment as
simple as possible and to aid understanding of the Group's
financial statements. I have avoided using alternative performance
measures where they were not necessary to improve the understanding
of the underlying trading performance of the Group. We have
accounted sensibly for the substance of all acquisitions as capital
in nature and classified them as investing activities so that cash
generated from trading is separately visible from cash used for
investment purposes. The accounting profession's view has been
constantly evolving on the application and interpretation of
various accounting standards and as a result of recent changes to
the application of IFRS 3 (Business Combinations), many companies
have been required to reassess and restate their accounts where
there are earn outs relating to acquisitions. Payments for
contingent consideration are now required, in many relevant
circumstances to be treated as remuneration for post-combination
services causing a charge to the income statement rather than
treating those payments as capital in nature whereby consideration
is recognised on a company's balance sheet as goodwill.
We have been cognisant of this judgemental area and the
interpretation of this standard which is why in assessing it in the
previous years' financial statements we disclosed fully the
rationale for continuing to class all consideration as capital in
nature. After discussions with the Financial Reporting Council, and
in the best interests of reaching a sensible conclusion to those
discussions, we have decided this year to change our accounting
treatment on past acquisitions, from FY23 with the prior year,
FY22, being restated to reflect this change. This judgement and
accounting treatment will be applied to future periods where
applicable.
Whilst not affecting the underlying performance of the Group in
any way, the Group's reported performance now reflects the above
change, bringing statutory results in line with prevailing
applicable financial reporting standards. Therefore, this year we
have restated the statement of profit and loss and other
comprehensive income, Group statement of financial position and
Group cash flow statement in respect of a change of IFRS 3
accounting treatment for consideration paid on all relevant
historical acquisitions. These changes have no impact on Group
cash, however they do now classify all previously disclosed
investing activities for applicable acquisitions as operating in
nature. A restatement of such entries has also been made.
The net impact of these changes on the statement of profit and
loss and other comprehensive income is to typically increase
reported profits after tax as a result of recognising profit from
bargain purchase gain accounting immediately upon acquisition,
followed by decreases in profit after tax in subsequent reporting
years as a result of releasing the paid and expected to be paid
total consideration as a non-underlying expense as remuneration for
post-combination services is released over the relevant period. The
impact on the balance sheet is to treat initial consideration as a
prepayment and to reduce the goodwill previously created in the
Group. Any contingent consideration is accrued over time building a
liability to be paid or not when measurement is possible.
Note 25 in this announcement discloses in full the judgements
applied resulting in this change.
Earnings Per Share (EPS)
Basic EPS decreased by 49.5% to 9.77p (restated FY22: 73.1% to
19.35p). Basic EPS before non-underlying and exceptional items
increased by 12.1% to 16.71p (FY22: 10.6% to 14.90p). Diluted EPS
decreased by 49.6% to 9.52p (restated FY22: increased by 70.2% to
18.89p). Diluted EPS before non-underlying and exceptional items
increased by 12.0% to 16.28p (FY22: 10.4% to 14.54p).
Share option schemes
Over 65% of our people are existing share or option holders in
the Group. The board remains committed to providing its people with
the opportunity to own shares in the Company, as further evidenced
by the continued issuance of restricted shares awards (RSAs) across
senior leaders within the Group during the year. Such share
ownership promotes strong alignment with the Group's external
shareholders, incentivises employees and is reflective of Gateley's
long-established culture of long-term ownership. The RSAs, which
vest on receipt, are made on a discretionary basis when an
individual is promoted to partner or an equivalent position and
also for lateral hires performing in line with their expected
business plan. Awards are subject to a five-year non-dealing
restriction and are forfeited should employment cease within that
period. 1,175,000 RSAs (FY22: 1,267,560) shares were awarded on 23
February 2023.
The board also announced in February 2023, a third vintage of
LTIP awards to certain Executive Directors and Senior Management
over up to 1,360,000 Ordinary Shares of 10 pence each in the
Company ("Ordinary Shares"). Awards under the LTIP vest at the end
of a three-year period, dependent upon the achievement of
profit-related performance conditions and continuous
employment.
Profits used to calculate underlying EPS each year are disclosed
below:
2023 2022 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Reported profit after tax 12,240 23,023 13,157 11,723
Adjustments for non-underlying
and exceptional items:
- Amortisation of acquired
intangible assets 2,073 1,581 2,073 1,375
- Share-based payment adjustments 1,984 1,213 956 1,355
- Consideration treated
as remuneration 6,190 3,509 - -
- Gain on bargain purchase (1,389) (12,380)
- Impairment of software
development costs - - - 463
- Acquisition-related costs - 870 - 107
- Tax impact of above (168) (94) - (20)
Underlying profit after
tax 20,930 17,722 16,186 15,003
Weighted average number of
ordinary shares for calculating
diluted earnings per share 128,527,341 121,893,238 118,508,833 115,599,727
Underlying adjusted fully
diluted EPS 16.28p 14.54p 13.66p 12.98p
Taxation
The Group's tax charge for the Period was GBP4.0m (FY22:
GBP3.8m) which comprised a corporation tax charge of GBP 5.0 m
(FY22: GBP4.0m) and a deferred tax credit of GBP1.0m (FY22: credit
of GBP0.2m).
The deferred tax charge arises due to a combination of credits
in respect of the share schemes that have vested in past years and
the release of deferred tax on brands. The total effective rate of
tax is 22.6% (FY22: 21.2%) based on reported profits before tax.
The increase in the effective rate of tax is as a result of the
change in treatment of earn-out related consideration on
acquisition now being disclosed as a remuneration charge. Such
charges are not allowable for corporation tax purposes.
The net deferred taxation liability decreased to GBP2.1m (FY22:
GBP2.5m) as a result of the increased deferred tax asset recognised
on share-based payment schemes yet to vest.
Dividend
The Group paid an interim dividend of 3.5p per share on 31 March
2023 and proposes a final dividend at the Company's Annual General
Meeting on 17 October 2023 of 6.0p (FY22: 5.5p) per share, which if
approved, will be paid in October to shareholders on the register
at the close of business on 29 September 2023. The shares will go
ex-dividend on 28 September 2023. The board's dividend policy
remains to distribute up to 70% of specifically adjusted profit
after tax to shareholders, whereby the adjustment relates to the
remuneration for post-combination services and gains on bargain
purchase, typically one third following its half year results and
two thirds after the full year results are known. Despite the
changes arising from acquisition accounting on FY23 profit after
tax, the board has decided to propose the same value of dividend as
would have resulted from paying 70% of profit after tax.
Balance sheet
The Group's net asset position has increased by GBP3.0m (FY22:
GBP22.3m) to GBP78.1m (FY22: restated GBP75.1m), due to the
following movements:
There was a GBP2.2m increase in total current assets, resulting
from GBP1.7m additional trade and other receivables through
acquired businesses and the strong organic growth of the Group.
Contract assets ("unbilled revenue") increased by GBP3.1m and cash
at bank decreased by GBP5.0m as excess cash was redeployed into
acquisitions and to support working capital required for continued
growth.
Non-current assets increased by GBP2.4m, resulting predominantly
from an increase of GBP2.5m from a change in property use and right
of use asset values as a new lease was entered into in our London
office.
The board has carefully considered the impact of macro-economic
uncertainties, on the future forecasts used in assessing the value
in use of the cash generating units to which the goodwill and
intangibles relate and determined that, despite short term
reductions, such forecasts are more than sufficient to justify the
carrying value of goodwill. Therefore, as at 30 April 2023, the
board concluded that the goodwill and intangible assets do not
require impairment.
Total liabilities decreased by GBP0.8m, due to the reduction in
accrued bonus offset by the increase in lease liabilities and draw
down of loans to fund the acquisition of Symbiosis Limited.
Cash flow
During the year, the Group increased its usage of its revolving
credit facility from GBP5.7m to GBP6.8m. The facility provides
total committed funding of GBP30m until April 2025, split equally
between Bank of Scotland and HSBC UK, that is specifically
earmarked to fund growth and expansion via acquisition. Interest is
payable on the loan at a margin of 1.95% above the SONIA reference
rate.
The Group also has in place a litigation funding facility for an
initial GBP20m of funding towards significant litigation cases,
which has the ability to increase to GBP50m if required. To date
the Group has not yet utilised this facility but has a number of
large assignments currently being assessed for consideration in
FY24.
Cash generation was once again good with net cash inflows from
operating activities of GBP9.7m (FY22: GBP5.3m) representing 79.6%
(FY22: restated 23.1%) of profit after tax. The Group ended the
year with net cash of GBP4.3m (FY22: GBP10.4m), the result of
continued strong trading and also management's sustained focus on
cost efficiencies and costs management.
Adjusted free cashflow during the year from operations (after
adjusting for IFRS 16 and IFRS 3 specific items noted in the table
below) was GBP6.0m (FY22: GBP7.4m), which represents an increase to
48.8% (FY22: 32.0%) of reported profit after taxation ("PAT").
Adjusted free cashflows therefore represent a decrease to 28.3%
(FY22: 41.4%) of underlying PAT as the Group saw a decrease in
margin this year and in continuation of its investment in capital
expenditure, mainly through its new finance system. These movements
were partially offset by an increase in interest received.
2023 2022
GBP'000 GBP'000
Net cash generated from operations 14,065 9,805
Tax paid (4,320) (4,497)
Net interest received 1,393 1
Cash outflow from IFRS 16 leases (rental payments
excluded from operating cash flows under IFRS
16) (4,579) (3,870)
Cash outflow paid on acquisitions 1,518 7,033
Purchase of property, plant and equipment (1,312) (775)
Purchase of other intangible assets (787) (319)
Free cash flow 5,978 7,378
Profit after tax 12,240 23,023
Free cash flow 48.8% 32.0%
Adjusted free cash flow 2023 2022
GBP'000 GBP'000
Profit after tax 12,240 23,023
Non-underlying operating items 8,858 (6,077)
Exceptional items - 870
------- -------
U nderlying profit after tax 21,098 17,816
Free cash flow 28.3% 41.4%
Overall, working capital levels remained in line with the
previous year, as unbilled revenue represented 53 days in line with
last year, of Pro-forma net revenue and Group debtor days have
remained at 113 days of Pro-forma net revenue which includes
revenue from acquisitions on a full year pro-forma basis. As the
Group continues to grow strongly, our volume of debtors has grown
proportionately. We have made a good start to collections in FY24.
Unbilled revenue recognised in the Group's statutory accounts, from
time recorded on non-contingent work, totalled GBP20.4m or 12.5% of
revenue recognised over the year (FY22: GBP17.2m or 12.5%).
Summary
FY23 continued our long track record of underlying profitable
growth through a blend of organic expansion and acquisition which
consistently delivers attractive returns for all stakeholders.
Results for FY23 reflect another strong year for the Group. They
include good organic growth across our legal foundations in a tough
market and strong organic growth from consultancy service lines,
aided significantly by the full year impact of prior year
acquisitions. We have maintained rigid control of costs despite
both market specific and macro-economic challenges, and we have a
strong balance sheet with significant facility headroom to further
expand the Group both organically and through acquisition. Share
ownership rewards for our staff continue to play a significant part
in our vision of wider, long-term connectivity across the Group and
will deliver a significant opportunity to all staff in FY24 and
beyond.
Neil Smith
Chief Financial Officer
6 September 2023
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER
COMPREHENSIVE INCOME
for the year ended 30 April 2023
Restated
Note 2023 2022
GBP'000 GBP'000
Revenue 3 162,683 137,249
Other operating income 49 -
Personnel costs, excluding IFRS 2 charge 5 (96,765) (86,517)
Depreciation - Property, plant and equipment 11 (936) (851)
Depreciation - Right-of-use asset 11 (3,976) (3,783)
Impairment of trade receivables and contract
assets (1,334) (866)
Other operating expenses, excluding non-underlying
and exceptional items (34,741) (22,716)
-------- --------
Operating profit before non-underlying and
exceptional items 4 24,980 22,516
Non-underlying operating items 4 (8,858) 6,077
Exceptional items 4 - (870)
-------- --------
(8,858) 5,207
------------------------------------------------------- ------ -------- --------
Operating profit 4 16,122 27,723
Financial income 7 1,735 194
Financial expense 7 (1,645) (1,141)
-------- --------
Profit before tax 16,212 26,776
Taxation 8 (3,972) (3,753)
-------- --------
Profit for the year after tax attributable
to equity holders of the parent 12,240 23,023
-------- --------
Other comprehensive income
Items that are or may be reclassified subsequently
to profit or loss
- Revaluation of other investments (26) (190)
- Exchange differences on foreign branch (49) 58
-------- --------
Profit for the financial year and total
comprehensive income all attributable to
equity holders of the parent 12,165 22,891
-------- --------
Statutory Earnings per share
Basic 9 9.77p 19.35p
Diluted 9 9.52p 18.89p
The results for the periods presented above are derived from
continuing operations.
NSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 APRIL 2023
Note Restated Restated
2023 2022 2021
GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and equipment 11 1,628 1,334 1,323
Right of use asset 11 27,098 24,627 27,007
Investment property 164 164 164
Deferred tax asset 19 830 638 138
Intangible assets & goodwill 12 12,929 14,002 5,617
Other intangible assets 14 1,090 564 282
Other investments 147 173 363
--------- -------- --------
43,886 41,502 34,894
Total non-current assets
Current assets
Contract assets 15 20,388 17,239 13,900
Trade and other receivables 16 73,272 71,587 46,587
Cash and cash equivalents 21 11,105 16,105 19,605
--------- -------- --------
Total current assets 104,765 104,931 80,092
--------- -------- --------
Total assets 148,651 146,433 114,986
--------- -------- --------
Non-current liabilities
Other interest-bearing loans
and borrowings 21 (6,813) (5,715) -
Lease liability 23 (28,716) (25,207) (27,702)
Other payables 18 - (40) (120)
Deferred tax liability 19 (2,941) (3,089) (772)
Provisions 20 (1,290) (863) (763)
--------- -------- --------
Total non-current liabilities (39,760) (34,914) (29,357)
--------- -------- --------
Current liabilities
Trade and other payables 18 (25,933) (31,719) (28,897)
Lease liability 23 (3,257) (3,719) (2,743)
Provisions 20 (107) (101) (176)
Current tax liabilities (1,482) (842) (1,066)
--------- -------- --------
Total current liabilities (30,779) (36,381) (32,882)
--------- -------- --------
Total liabilities (70,539) (71,295) (62,239)
--------- -------- --------
NET ASSETS 78,112 75,138 52,747
--------- -------- --------
EQUITY
Share capital 22 12,664 12,456 11,792
Share premium 11,846 11,342 9,421
Merger reserve (9,950) (9,950) (9,950)
Other reserve 15,413 14,465 6,815
Treasury reserve (677) (261) (312)
Translation reserve (51) (2) (60)
Retained earnings 48,867 47,088 35,041
--------- -------- --------
TOTAL EQUITY 78,112 75,138 52,747
--------- -------- --------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Merger Other Treasury Retained Foreign Total
capital premium reserve reserve reserve earnings currency Equity
translation
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 May 2021 11,792 9,421 (9,950) 6,815 (312) 41,560 (60) 59,266
Impact of restatement
(note 25) - - - - - (6,519) - (6,519)
At 1 May 2021 (restated) 11,792 9,421 (9,950) 6,815 (312) 35,041 (60) 52,747
Comprehensive income:
Profit for the year - - - - - 23,023 - 23,023
Revaluation of other
investments (190) - (190)
Exchange rate differences - - - - - - 58 58
-------- -------- -------- -------- -------- --------- ------------ --------
Total comprehensive
income - - - - - 22,833 58 22,891
Transactions with
owners
recognised directly
in equity:
Issue of share capital 664 1,921 - 7,650 - - - 10,235
Purchase of own shares
at nominal value - - - - - (132) - (132)
Sale of treasury
shares - - - - 127 - - 127
Purchase of treasury
shares - - - - (76) - - (76)
Recognition of tax
benefit on gain from
equity settled share
options - - - - - 563 - 563
Dividend paid - - - - - (12,430) - (12,430)
Share based payment
transactions - - - - - 1,213 - 1,213
Total equity at 30
April 2022 (restated) 12,456 11,342 (9,950) 14,465 (261) 47,088 (2) 75,138
-------- -------- -------- -------- -------- --------- ------------ --------
At 1 May 2022, as
previously presented 12,456 11,342 (9,950) 14,465 (261) 44,863 (2) 72,913
Impact of restatement
(note 25) - - - - - 2,225 - 2,225
At 1 May 2022 (restated) 12,456 11,342 (9,950) 14,465 (261) 47,088 (2) 75,138
Comprehensive income:
Profit for the year - - - - - 12,240 - 12,240
Revaluation of other
investments - - - - - (26) - (26)
Exchange rate differences - - - - - - (49) (49)
-------- -------- -------- -------- -------- --------- ------------ --------
Total comprehensive
income - - - - - 12,214 (49) 12,165
Transactions with
owners
recognised directly
in equity:
Issue of share capital 208 504 - 948 - - - 1,660
Purchase of own shares
at nominal value - - - - - (133) - (133)
Sale of treasury
shares - - - - 20 - - 20
Purchase of treasury
shares - - - - (436) - - (436)
Recognition of tax
benefit on gain from
equity settled share
options - - - - - (398) - (398)
Dividend paid - - - - - (11,004) - (11,004)
Share based payment
transactions - - - - - 1,100 - 1,100
Total equity at
30 April 2023 12,664 11,846 (9,950) 15,413 (677) 48,867 (51) 78,112
-------- -------- -------- -------- -------- --------- ------------ --------
The following describes the nature and purpose of each reserve
within equity:
Share premium - Amount subscribed for share capital in excess of
nominal value together with gains on the sale of own shares and the
difference between actual and nominal value of shares issued by the
Company in the acquisition of trade and assets.
Merger reserve - Represents the difference between the nominal
value of shares acquired by the Company in the share for share
exchange with the former Gateley Heritage LLP members and the
nominal value of shares issued to acquire them.
Other reserve - Represents the difference between the actual and
nominal value of shares issued by the Company in the acquisition of
subsidiaries.
Treasury reserve - Represents the repurchase of shares for
future distribution by Group's Employee Benefit Trust.
Retained earnings - All other net gains and losses and
transactions with owners not recognised anywhere else.
Foreign currency translation reserve - Represents the movement
in exchange rates back to the Group's functional currency of
profits and losses generated in foreign currencies.
CONSOLIDATED CASH FLOW STATEMENT FOR YEARED 30 APRIL 2023
Note Restated
2023 2022
GBP'000 GBP'000
Cash flows from operating activities
Profit for the year after tax 12,240 23,023
Adjustments for:
Depreciation and amortisation 11/12/14 7,246 6,215
Financial income 7 (1,735) (194)
Financial expense 7 495 193
Interest charge on capitalised leases 7 1,150 948
Equity settled share-based payments 6 1,100 1,213
Gain on bargain purchase 4 (1,389) (12,380)
Acquisition related earn-out remuneration
charge 4 6,190 3,509
Earn-out consideration paid - acquisition (50) -
of subsidiary
Initial consideration paid on acquisitions (1,468) (7,033)
Loss on disposal of property, plant
and equipment 4 82 16
Tax expense 8 3,972 3,753
--------- ---------
27,833 19,263
Increase in trade and other receivables (6,942) (10,299)
(Decrease)/increase in trade and
other payables (7,259) 816
Increase in provisions 20 433 25
--------- ---------
Cash generated from operations 14,065 9,805
Tax paid (4,320) (4,497)
--------- ---------
Net cash flows from operating activities 9,745 5,308
--------- ---------
Investing activities
Acquisition of property, plant and
equipment 11 (1,312) (775)
Acquisition of other intangible
assets 14 (787) (319)
Cash acquired on business combinations 483 1,051
Interest received 7 1,735 194
Net cash used in investing activities 119 151
--------- ---------
Financing activities
Interest and other financial income
paid 7 (371) (193)
Lease repayments (4,550) (3,870)
Receipt of new revolving credit
facility, net of refinancing costs 21 1,000 5,715
Proceeds from sale of own shares - 90
Acquisition of own shares by Employee
Benefit Trust (416) (39)
Cash received for shares issued
on exercise of SAYE/CSOP options 477 1,768
Dividends paid 10 (11,004) (12,430)
Net cash used in financing activities (14,864) (8,959)
--------- ---------
Net increase in cash and cash equivalents (5,000) (3,500)
Cash and cash equivalents at beginning
of year 16,105 19,605
--------- ---------
Cash and cash equivalents at end
of year 21 11,105 16,105
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation and significant accounting policies
The financial information set out in this financial results
announcement does not constitute statutory accounts as defined in
section 435 of the Companies Act 2006. The consolidated statement
of comprehensive profit and loss and other comprehensive income,
consolidated statement of financial position, consolidated
statement of change in equity, consolidated statement of cashflows
and the associated notes have been extracted from the Group's
financial statements for the year ended 30 April 2023, upon which
the auditor's opinion is unqualified and does not include any
statement under section 498 of the Companies Act 2006. The
statutory accounts for the year ended 30 April 2023 will be
delivered to the Registrar of Companies following the Annual
General Meeting.
These condensed preliminary financial statements for the year
ended 30 April 2023 have been prepared on the basis of the
accounting policies as set out in the 2023 financial
statements.
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards, this announcement does not itself contain sufficient
information to comply with those standards. The Group expects to
publish full financial statements that comply with International
Financial Reporting Standards in September 2023.
1.1 Statement of Directors responsibilities
The Directors confirm that, to the best of their knowledge, this
condensed set of consolidated financial statements have been
prepared in accordance with the AIM Rules.
1.2 Cautionary statement
This document contains certain forward-looking statements with
respect of the financial condition, results, operations and
business of the Group. Whilst these statements are made in good
faith based on information available at the time of approval, these
statements and forecasts inherently involve risk and uncertainty
because they relate to events and depend on circumstances that will
occur in the future. There are a number of factors that could cause
the actual results of developments to differ materially from those
expressed or implied by these forward-looking statements and
forecasts. Nothing in this document should be construed as a profit
forecast.
2. 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 Finance Directors review, together with the
financial position of the Group, its cash flows, liquidity position
and borrowings. Financial projections have been prepared to October
2024 which show positive earnings and cash flow generation. The
COVID-19 situation during the previous two financial years created
an unprecedented and constantly changing challenge to all
businesses. Management successfully navigated the business through
the impact of the pandemic on the Group's financial performance.
The Group typically applies sensitivities (informed by the past
experiences of the Group since the onset of the pandemic, including
the Group's time recording activity, fee generation and cash
collections) to any current financial projections based on various
downside scenarios to illustrate the potential impact from a
downturn in client activity or any increases in costs.
The Group continues to work closely with its supportive banks,
utilising the three-year revolving credit facility, of which GBP7m
was drawn down at 30 April 2023, with committed funding of GBP30m
until April 2025. As at 30 April 2023 the Group has net cash of
GBP4.3m and continues to sensibly managed its cash position within
permitted covenants relating to its new facility.
This process included a reverse 'stress test' used to inform
downside testing which identified the break point in the Group's
liquidity. Whilst the sensitivities applied do show an expected
downside impact on the Group's financial performance in future
periods, in all scenarios modelled the board have identified the
appropriate mitigating actions in order for the Group to maintain a
robust balance sheet and liquidity position. In addition, the board
have also considered mitigating actions such as lower capital
expenditure, reductions in personnel and overhead expenditure and
other short-term cash management activities within the Group's
control as part of their assessment of going concern.
The Group expects to be able to operate within the Group's
existing financing facilities for the foreseeable future and
currently demonstrates significant debt capacity headroom based on
its strong financial performance. Accordingly, the Directors have a
reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable
future and they have adopted the going concern basis of accounting
in preparing the annual Group financial statements.
3. Revenue and operating segments
The Chief Operating Decision Maker ("CODM") is the Strategic
Board. The Group have the following four strategic divisions,
comprising both legal and consultancy services, which are its
reportable segments and referred to as it's Platforms.
The following summary describes the operations of each
reportable segment as reported up to 30 April 2023:
Reportable segment/Platforms Legal service lines Consultancy service
lines
Corporate Banking GEG Services
Corporate International Investment
Restructuring advisory Services
Taxation
------------------------------- --------------------------
Business services Commercial Adamson Jones
Commercial Dispute Resolution Symbiosis IP
Complex International
litigation
Regulatory
Reputation, media and
privacy law
------------------------------- --------------------------
People Employment Entrust Pension
Pension Kiddy and Partners
Private client T-three
------------------------------- --------------------------
Property Real Estate Capitus
Residential Development Hamer/Persona
Construction Smithers Purslow
Planning Vinden
Real Estate Dispute
Resolution
------------------------------- --------------------------
The revenue and operating profit are attributable to the
principal activities of the Group. A geographical analysis of
revenue is given below:
2023 2022
GBP'000 GBP'000
United Kingdom 151,489 127,386
Europe 5,459 5,336
Middle East 2,390 923
North and South America 1,675 692
Asia 1,163 1,501
Other 507 1,411
------- -------
162,683 137,249
------- -------
The Group has no individual customers that represent more than
10% of revenue in either the 2023 or 2022 financial year. The
Group's assets and costs are predominately located in the UK save
for those assets and costs located in the United Arab Emirates
(UAE) via its Dubai subsidiary. Net Group assets of GBP0.08m (2022:
Net Group assets of GBP0.08m) are located in the Group's Dubai
subsidiary. Revenue generated by the Group's Dubai subsidiary to
customers in the UAE totalled GBP2.39m (2022: GBP0.92m) as
disclosed above as due from the customers in the Middle East
2023
Other
expenses
and movement
Business Total in unbilled
Services Corporate People Property segments revenue Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment revenue from services
transferred at a point in
time 4,952 16,578 8,409 17,002 46,941 1 46,942
Segment revenue from services
transferred over time 16,872 22,200 12,027 64,642 115,741 - 115,741
--------- --------- ------- -------- --------- ------------- --------
Total segmental revenue 21,824 38,778 20,436 81,644 162,682 1 162,683
--------- --------- ------- -------- --------- ------------- --------
Segment contribution (as reported
internally) 5,330 13,948 5,983 31,037 56,298 1 56,299
Costs not allocated to segments:
Other operating income 49
Personnel costs (11,091)
Depreciation and amortisation (7,246)
Other operating expenses (15,104)
Share based payment charges (1,984)
Gain on bargain purchase 1,389
Contingent consideration treated
as
remuneration (6,190)
Net financial expense 90
Profit for the financial year
before taxation 16,212
--------
2022 (restated)
Other
expense
and movement
Business Total in unbilled
Services Corporate People Property segments revenue Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment revenue from services
transferred at a point in
time 3,467 10,175 5,901 10,994 30,537 305 30,842
Segment revenue from services
transferred over time 14,490 27,889 13,264 50,426 106,069 338 106,407
--------- --------- ------- -------- --------- ------------- --------
Total Segment revenue 17,957 38,064 19,165 61,420 136,606 643 137,249
--------- --------- ------- -------- --------- ------------- --------
Segment contribution (as reported
internally) 5,733 15,373 6,919 22,956 50,981 643 51,624
Costs not allocated to segments:
Other operating income -
Personnel costs (10,487)
Depreciation and amortisation (6,215)
Other operating expenses (13,987)
Share based payment charges (1,213)
Gain on bargain purchase 12,380
Contingent consideration treated
as
remuneration (3,509)
Exceptional costs (870)
Net financial expense (947)
--------
Profit for the financial year
before taxation 26,776
--------
Group entities may be engaged on a contingent basis; in such
cases the Group considers the satisfaction of the contingent event
as the sole performance obligation within the contract. Fees are
only billed once the contingent event has been satisfied. The
initial financing of these engagements is met by the Group. Due to
the nature and timing of the billing, such engagements influence
the contract asset balance held in the balance sheet at year end.
In the majority of cases the contingent event is expected to be
concluded within one year of the engagement date. The Group
operates standard payment terms of 30 days. GBP16.4 million of the
current period revenue is derived from services satisfied, in part,
in the previous period.
Services transferred over time
For non-contingent engagements, fee earners' hourly rates are
determined at the point of engagement with all hours attributed to
the engagement fully and accurately recorded. The recorded hours
are then translated into fees to be billed and invoiced on a
monthly basis. The Group typically operates on 30 days credit
terms, in line with IFRS 15 the performance obligations are
fulfilled over time with revenue being recognised in line with the
hours worked.
Contract assets
Under IFRS 15 the Group recognises any goods or services
transferred to the customer before the customer pays consideration,
or before payment is due, as a contract asset . These assets differ
from accounts receivables. Accounts receivable are the amounts that
have been billed to the client and the revenue recognised, whereas
these contract assets are amounts of work in progress where work
has been performed, yet the amounts have not yet been billed to the
client. Due to the nature of the services delivered by the Group
the significant component of the cost of delivery is staff costs.
As a result, there is little to no judgement exercised in
determining the costs incurred as they are driven by the time
recorded by fee earners. Contract assets are subject to impairment
under IFRS 9.
No other financial information has been disclosed as it is not
provided to the CODM on a regular basis.
Contract Liabilities
Under IFRS 15 the Group is required to recognise contract
liabilities based on those amounts recognised against contracts for
which the satisfaction of performance obligations has not yet been
met. These liabilities relate to the deferred income recognised
within Kiddy & Partners, T-three Consulting Limited and GEG
Services Limited as a result of their billing structure. The
amounts recognised reflect the agreed cost of the services to be
performed and are realised in line with the ongoing cost of
delivery. Due to the nature of the services provided, the main
component of this cost of delivery is staff costs, as a result
there is little to no judgement exercised in determining the value
of the liability held at year end.
Practical expedients under IFRS 15
Under IFRS 15 companies are required to disclose the aggregate
amount of the transaction price allocated to the performance
obligations that are unsatisfied at the end of the reporting
period. However, only a small proportion of revenue contracts in
issuance are for fixed amounts, rather the company has a right to
consideration from the customer in an amount that corresponds
directly with the value to the customer of the business'
performance completed to date. Therefore, the Group considers it
impractical to estimate the potential value of unsatisfied
performance obligations and has elected to apply the practical
expedient available under IFRS 15.
4. Expenses and auditor's remuneration
Included in operating profit are the following:
2023 2022
GBP'000 GBP'000
Depreciation on tangible assets (see note 11) 936 851
Depreciation on right-of-use asset (see notes
11 and 23) 3,976 3,783
Short term and low value lease payments (see
note 23) 82 75
Operating lease costs on property (see note 23) 166 -
Loss on sale of fixed assets 82 16
------- --------
Restated
2023 2022
GBP'000 GBP'000
Non-underlying items
Amortisation of intangible assets (see note 12) 2,073 1,581
Share based payment charges - Gateley Plc 1,984 1,100
Share based payment charges - Gateley Smithers
Purslow Limited - 113
Gain on bargain purchase (1,389) (12,380)
Consideration treated as remuneration 6,190 3,509
8,858 (6,077)
Exceptional items
Acquisition costs - 373
One off remuneration charge - Gateley Smithers
Purslow Limited - 497
Total non-underlying and exceptional items 8,858 (5,207)
------- --------
Acquisition costs in the 2022 financial year represent
professional fees in respect of the acquisition of SP 2018 Limited,
Adamson Jones Holdings Limited and the business and assets of Tozer
Gallagher LLP.
Share based payment charges in Gateley Plc represent charges in
accordance with IFRS 2 in respect of unexercised SAYE, CSOP, LTIP
and RSA schemes (See note 6).
Share based payment charges in Gateley Smithers Purslow Limited
represent shares awarded to staff following the successful
acquisition of SP 2018 Limited (See notes 5 and 6).
Auditor's remuneration
2023 2022
GBP'000 GBP'000
Fees payable to the Company's Auditor in respect
of audit services:
Audit of these financial statements 107 85
Audit of financial statements of subsidiaries
of the Company 22 20
------- -------
129 105
------- -------
Amounts receivable by the Company's auditor
and its associates in respect of:
Other assurance services 34 31
------- -------
Other assurance services relate to Solicitors Accounts Rules
review with associated reporting to legal regulators. This work is
entirely assurance focused.
5. Personnel costs
The average number of persons employed by the Group during the
year, analysed by category, was as follows:
Number of employees
2023 2022
Legal and professional staff 1,000 800
Administrative staff 439 350
---------- ----------
1,439 1,150
---------- ----------
The aggregate payroll costs of these persons were as
follows:
2023 2022
GBP'000 GBP'000
Wages and salaries 83,942 76,672
Social security costs 9,984 7,769
Pension costs 2,839 2,076
------- -------
96,765 86,517
Non-underlying items (see note 4)
Share based payment expense - Gateley Plc 1,984 1,100
Share based payment expense - Gateley Smithers
Purslow Limited - 113
------- -------
98,749 87,730
------- -------
6. Share based payments
Group
At the year end the Group has nine share based payment schemes
in existence.
Save As You Earn scheme ('SAYE')
The Group operates a HMRC approved SAYE scheme for all staff.
Options under this scheme will vest if the participant remains
employed for the agreed vesting period of three years. Upon
vesting, each option allows the holder to purchase the allocated
ordinary shares at a discount of 20% of the market price determined
at the grant date.
During the year 360,365 SAYE 18/19 options vested with 311,806
being exercised by 30 April 2023 leaving 48,559 options still to be
exercised. New shares were issued to satisfy these options being
311,806 10p shares with a nominal value of GBP31,181.
Company Share Option Plan ('CSOP')
The Group operates an HMRC approved CSOP scheme for associates,
senior associates, legal directors, equivalent positions in Gateley
Group subsidiary companies and Senior Management positions in our
support teams. Options under this scheme will vest if the
participant remains employed for the agreed vesting period of three
years. Upon vesting, each option allows the holder to purchase the
allocated ordinary shares at the price on the date of grant.
Long Term Incentive Plan ('LTIP')
The Group operates an LTIP for the benefit of Executive
Directors and Senior Management. Awards under the LTIP may be in
the form of an option granted to the participant to receive
ordinary shares on exercise dependent upon the achievement of
profit related performance conditions.
Performance conditions
Options granted under the LTIP are only exercisable subject to
the satisfaction of the following performance conditions which will
determine the proportion of the option that will vest at the end of
the three-year performance period. The awards will be subject to an
adjusted fully diluted earnings per share performance measure as
described in the table below:
Adjusted, fully diluted earnings per Amount Vesting %
Share Compound Annual Growth Rate (CAGR)
over the three year period ending 30
April 2023/2025/26
Below 5% 0%
----------------------
5% 25%
----------------------
Between 5% and 10% Straight line vesting
----------------------
Above 10% 100%
----------------------
The options will generally be exercisable after approval of the
financial statements during the year of exercise. The performance
period for any future awards under the LTIP will be a three-year
period from the date of grant. Vested and unvested LTIP awards are
subject to a formal malus and clawback mechanism.
Grant of equity share options under the LTIP
Certain senior employees and Executive Directors were granted
options on 23 February 2023 based on performance conditions
commencing on 1 May 2023. In total, 1,320,000 options have been
granted which, subject to satisfying the above performance
conditions, will vest in the period following the year ending 30
April 2026
Restricted Share Award Plan ('RSA')
The Group operates an RSA for the benefit of Senior Management.
Awards under the RSA entitle the option holder to participate in
dividends however, the shares are restricted for a period of 5
years from issue, such that they cannot be traded.
The annual awards granted under all schemes are summarised
below:
Weighted
average Weighted
remaining average Granted Lapsed
contractual exercise Originally Lapsed/exercised At 1 May during during Exercised At 30
life price granted at 30 April 2022 2022 the year year in the year April 2023
Number Number Number Number Number Number Number
SAYE
SAYE 18/19
- 21
September
2018 0 years GBP1.27 620,432 (449,919) 170,513 - (134,037) (36,476) -
SAYE 19/20
- 30
September
2019 0 years GBP1.28 822,625 (218,412) 604,213 - (243,848) (311,806) 48,559
SAYE 20/21
- 6
November
2020 0.5 years GBP1.02 2,337,197 (219,826) 2,117,371 - (243,513) - 1,873,858
SAYE 21/22
- 25
August
2022 1.3 years GBP1.70 673,077 (14,925) 658,152 - (157,137) - 501,015
SAYE 22/23
- 22
September
2023 2.4 years GBP1.55 - - - 1,070,154 (36,850) - 1,033,304
---------- ---------------- ---------- ----------- ---------- ----------- ----------
4,453,331 (903,082) 3,550,249 1,070,154 (815,385) (348,282) 3,456,736
---------- ---------------- ---------- ----------- ---------- ----------- ----------
CSOPS
CSOPS
18/19 -
24
October
2018 0 years GBP1.44 812,131 (628,045) 184,086 - (62,470) (121,616) -
CSOPS
20/21 - 7
July 2020 0.2 years GBP1.35 976,797 (147,045) 829,752 - (97,969) - 731,783
CSOPS
22/23 -
14
December
2022 2.6 years GBP1.74 - - - 300,000 (10,000) - 290,000
---------- ---------------- ---------- ----------- ---------- ----------- ----------
1,788,928 (775,090) 1,013,838 300,000 (170,439) (121,616) 1,021,783
---------- ---------------- ---------- ----------- ---------- ----------- ----------
LTIPS
LTIPS
20/21 -
22 July
2020 0.2 years GBP0.00 1,405,766 (169,331) 1,236,435 - (134,188) - 1,102,247
LTIPS - 27
April
2022 2.0 years GBP0.00 1,115,000 - 1,115,000 - (90,000) - 1,025,000
LTIPS 23
Feb 23 2.8years GBP0.00 - - - 1,320,000 - - 1,320,000
---------- ---------------- ---------- ----------- ---------- ----------- ----------
2,520,766 (169,331) 2,351,435 1,320,000 (224,188) - 3,447,247
---------- ---------------- ---------- ----------- ---------- ----------- ----------
RSA
RSA - 27
April
2022 4.0 years GBP0.00 1,422,560 - 1,422,560 - - - 1,422,560
RSA 23
February
2023 5.0 years GBP0.00 - - - 1,175,000 (50,000) - 1,125,000
---------- ---------------- ---------- ----------- ---------- ----------- ----------
1,422,560 - 1,422,560 1,175,000 (50,000) - 2,547,560
---------- ---------------- ---------- ----------- ---------- ----------- ----------
Fair value calculations
The award is accounted for as equity-settled under IFRS 2. The
fair value of awards which are subject to non-market based
performance conditions is calculated using the Black Scholes option
pricing model. The inputs to this model for awards granted during
the financial year are detailed below:
SAYE CSOP LTIP RSA
Grant date 22/09/2022 14/12/2022 23/02/2023 23/02/2023
Share price at date of grant GBP1.99 GBP1.74 GBP1.825 GBP1.825
Exercise price 1.55 1.74 GBPnil GBPnil
Volatility 31% 30% 27% 27%
Expected life (years) 3.3 3.3 3.3 5.0
Risk free rate 3.473% 3.277% 3.523% 3.569%
Dividend yield 4.29% 4.22% 4.38% 0.00%
Fair value per share
Market based performance condition - - -
Non-market based performance GBP0.55 GBP0.30 GBP1.58 GBP1.825
condition/no performance condition
---------- ---------- ---------- ----------
Expected volatility was determined by using historical share
price data of the Company since it listed on 8 June 2015. The
expected life used in the model has been based on Management's
expectation of the minimum and maximum exercise period of each of
the options granted.
The total charge to the income statement for all schemes now in
place, included within non-underlying items, is GBP1,984,000 (2022:
GBP1,213,000).
7. Financial income and expense
Recognised in profit and loss
Restated
2023 2022
GBP'000 GBP'000
Financial income
Interest income 1,735 194
------- --------
Total financial income 1,735 194
------- --------
Financial expense
Interest expense on bank borrowings measured
at amortised cost (495) (193)
Interest on lease liability (1,150) (948)
------- --------
Total financial expense (1,645) (1,141)
------- --------
Net financial income/(expense) 90 (947)
8. Taxation
2023 2022
GBP'000 GBP'000
Current tax expense
Current tax on profits for the year 4,974 3,949
Under provision of taxation in previous period 58 15
------- -------
Total current tax 5,032 3,964
------- -------
Deferred tax expense
Origination and reversal of temporary differences (472) (211)
Under provision on share-based payment charges (588) -
------- -------
Total deferred tax expense (1,060) (211)
------- -------
Total tax expense 3,972 3,753
------- -------
The reasons for the difference between the actual tax charge for
the year and the standard rate of corporation tax in the United
Kingdom applied to profits for the year are as follows:
Restated
2023 2022
GBP'000 GBP'000
Profit for the year (subject to corporation
tax) 16,212 26,776
------- --------
Tax using the Company's domestic tax rate
of 19% 3,080 5,087
Expenses not deductible/(deductible) for
tax purposes 1,422 (1,349)
Under provision of taxation in previous period 58 15
Under provision on share-based payment charges (588) -
------- --------
Total tax expense 3,972 3,753
------- --------
The Finance Act 2021 increased the main rate of corporation tax
to 25% from 1 April 2023. Closing deferred tax balances have
therefore been valued at 25% (2022: 19% or 25% depending on the
date they expect to fully unwind).
9. Earnings per share
Statutory earnings per share
2023 2022
Number Number
Weighted average number of ordinary shares in
issue, being weighted average number of shares
for calculating basic earnings per share 125,244,334 118,961,047
Shares deemed to be issued for no consideration
in respect of share based payments 3,283,007 2,932,191
Weighted average number of ordinary shares for
calculating diluted earnings per share 128,527,341 121,893,238
----------- -----------
Restated
2023 2022
GBP'000 GBP'000
Profit for the year and basic earnings attributable
to ordinary equity shareholders 12,240 23,023
Non-underlying and exceptional items (see note
4)
Operating expenses 8,858 (5,207)
Tax on non-underlying and exceptional items (168) (94)
----------- -----------
Underlying earnings before non-underlying and
exceptional items 20,930 17,722
Earnings per share is calculated as follows:
Restated
2023 2022
Pence Pence
Basic earnings per ordinary share 9.77 19.35
Diluted earnings per ordinary share 9.52 18.89
Basic earnings per ordinary share before non-underlying
and exceptional items 16.71 14.90
Diluted earnings per ordinary share before non-underlying
and exceptional items 16.28 14.54
10. Dividends
2023 2022
GBP'000 GBP'000
Equity shares:
Interim dividend in respect of 2023 (3.3p per
share) - 24 March 2023 4,169 -
Final dividend in respect of 2022 (5.5p per share)
- 22 October 2022 6,835 -
Interim dividend in respect of 2021 (2.5p per
share) - 28 June 2021 - 2,940
Final dividend in respect of 2021 (5p per share)
- 8 October 2021 - 5,908
Interim dividend in respect of 2022 (3p per share)
- 31 March 2022 - 3,582
------- -------
11,004 12,430
------- -------
The board proposes to recommend a final dividend of 6.0p (2022:
5.5p) per share at the AGM. If approved, this dividend will be paid
in October 2023 to shareholders on the register at the close of
business on 29 September 2023. The shares will go ex-dividend on 28
September 2023. This dividend has not been recognised as a
liability in these final statements.
11. Property, plant and equipment
Leasehold Equipment Fixtures Right-of-use Total
improvements and assets
Fittings
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
Balance at 1 May 2021 317 6,493 5,396 34,025 46,231
Arising on acquisition
after fair value adjustments - 266 63 793 1,122
Additions 23 583 169 610 1,385
Disposal - (110) - - (110)
------------- --------- --------- ------------ -------
As at 30 April 2022 340 7,232 5,628 35,428 48,628
Balance at 1 May 2022 340 7,232 5,628 35,428 48,628
Additions - 827 485 6,447 7,759
Disposal (27) (323) (88) (1,722) (2,160)
------------- --------- --------- ------------ -------
As at 30 April 2023 313 7,736 6,025 40,153 54,227
------------- --------- --------- ------------ -------
Depreciation and impairment
Balance at 1 May 2021 209 5,814 4,860 7,018 17,901
Arising on acquisition
after fair value adjustments - 173 53 - 226
Depreciation charge for
the year 22 514 315 3,783 4,634
Eliminated on disposal - (94) - - (94)
------------- --------- --------- ------------ -------
Balance at 30 April 2022 231 6,407 5,228 10,801 22,667
------------- --------- --------- ------------ -------
Balance at 1 May 2022 231 6,407 5,228 10,801 22,667
Depreciation charge for
the year 16 562 358 3,976 4,912
Eliminated on disposal (27) (247) (82) (1,722) (2,078)
Balance at 30 April 2023 220 6,722 5,504 13,055 25,501
------------- --------- --------- ------------ -------
Net book value
------------- --------- --------- ------------ -------
At 30 April 2022 109 825 400 24,627 25,961
------------- --------- --------- ------------ -------
At 30 April 2023 93 1,014 521 27,098 28,726
------------- --------- --------- ------------ -------
12. Intangible assets and goodwill
Goodwill Customer Brands Total
lists
GBP'000 GBP'000 GBP'000 GBP'000
Deemed cost
At 1 May 2021 (restated) 1,550 9,850 - 11,400
Arising through business combinations - 6,411 3,518 9,929
At 30 April 2022 1,550 16,261 3,518 21,329
Arising through business combinations - 1,000 - 1,000
At 30 April 2023 1,550 17,261 3,518 22,329
Amortisation
At 1 May 2021 - 5,783 - 5,783
Charge for the year - 1,534 10 1,544
-------- -------- ------- -------
At 30 April 2022 - 7,317 10 7,327
Charge for the year - 1,838 235 2,073
-------- -------- ------- -------
At 30 April 2023 - 9,155 245 9,400
-------- -------- ------- -------
Carrying amounts
At 30 April 2022 1,550 8,944 3,508 14,002
-------- -------- ------- -------
At 30 April 2023 1,550 8,106 3,273 12,929
-------- -------- ------- -------
Goodwill is allocated to the following cash generating
units:
2023 2022
GBP'000 GBP'000
Property Group
Gateley Capitus Limited - -
Gateley Hamer Limited - -
GCL Solicitors (acquisition of trade and assets) - -
Persona Associates Limited 40 40
Gateley Vinden Limited 934 934
Tozer Gallagher (acquisition of trade and assets) - -
Gateley Smithers Purslow Limited - -
------- -------
974 974
Employment , Pensions and Benefits Group
Kiddy & Partners Limited - -
International Investment Services Limited - -
T-three Consulting Limited - -
------- -------
- -
Business services Group
Gateley Tweed (acquisition of goodwill) 576 576
Adamson Jones IP Limited - -
Symbiosis IP Limited - -
576 576
------- -------
1,550 1,550
------- -------
Impairment testing
The Group tests goodwill annually for impairment. The impairment
test involves determining the recoverable amount of the cash
generating unit (CGU) to which the goodwill has been allocated. The
Directors believe that each operating segment represents a cash
generating unit for the business and as a result, impairment is
tested for each segment, and all the assets of each segment are
considered.
The recoverable amount is based on the present value of expected
future cash flows (value in use) which was determined to be higher
than the carrying amount of goodwill so no impairment loss was
recognised.
Value in use was determined by discounting the future cash flows
generated from the continuing operation of the Group and was based
on the following key assumptions:
-- A pre-tax discount rate of between 12 and 21% (2022: 12-21%)
was applied in determining the recoverable amount. The discount
rate is based on the Group's average weighted cost of capital
of 10.18% and adjusted according to the risks attributable
to each CGU.
-- The values assigned to the key assumptions represent Management's
estimate of expected future trends and are based on both external
(industry experience, historic market performance and current
estimates of risks associated with trading conditions) and
internal sources (existing Management knowledge, track record
and an in-depth understanding of the work types being performed).
Growth rates of between 2% to 10% (2022: 2-10%) are based
on Management's understanding of the market opportunities
for services provided pertaining to the industry in which
each CGU is aligned.
Increases in costs are based on current inflation rates
and expected levels of recruitment needed to generate predicted
revenue growth.
Attrition rates are based on the historic experience and
trends of client activity over a two to three year period
and applied to future fee forecasts.
Cash flows have been typically assessed over a five-year
period which Management extrapolates cash using a terminal
value calculation based on an estimated growth rate of
2%. The expected current UK economic growth forecasts for
the legal services market is 2%.
-- The Group has conducted a sensitivity analysis on the impairment
test of the CGU carrying value. The Directors believe that
any reasonably possible change in the key assumptions on which
the recoverable amount of goodwill is based would not cause
the aggregate carrying amount to exceed the aggregate recoverable
amount of the CGU.
13. Acquisitions
During the year ended 30 April 2023 the Group completed one
acquisition:
Acquisition of Symbiosis IP Limited
On 3 October 2022 Adamson Jones IP Limited acquired the entire
issued share capital of Symbiosis IP Limited, a leading practice of
chartered quantity surveyors and construction consultants.
Symbiosis IP is a patent attorney firm serving exclusively the life
science industry. They have a wealth of experience in working
closely with academic institutions and early stage start-up
companies.
The amounts recognised in respect of identifiable assets
acquired and liabilities assumed are as set out in the table
below:
Pre-acquisition Policy alignment
carrying and fair
amount value adjustments Total
GBP'000 GBP'000 GBP'000
Intangible asset relating to customer
list - 1,000 1,000
Cash 483 - 483
Trade receivables 330 - 330
Prepayments 33 - 33
Total assets 846 1,000 1,846
---------------- ------------------- ---------
Trade payables (119) - (119)
Accruals and other payables (88) - (88)
Deferred tax - (250) (250)
---------------- ------------------- ---------
Total liabilities (207) (250) (457)
---------------- ------------------- ---------
Total identifiable net assets at
fair value 639 750 1,389
Negative goodwill arising on acquisition (1,389)
---------
Total consideration -
---------
Satisfied by:
Initial cash consideration paid 1,468
Issue of 523,012 new 10p ordinary
shares in Gateley (Holdings) Plc 1,000
Less: amounts subject to continuing
employment conditions (2,468)
Total consideration -
-----------
Net cash outflow arising on acquisition
Cash paid (1,468)
Net cash acquired 483
-----------
Net cash outflow arising on acquisition (985)
-----------
The negative goodwill of GBP1,389,000 has been recognised
immediately in the statement of profit and loss.
From the date of acquisition Symbiosis IP Limited has
contributed GBP1.3m of revenue to the Group's Statement of
Comprehensive Income together with after tax profit of GBP0.2m. If
the acquisition had been completed on the first day of the
financial year, Group revenue and profit after tax would have been
higher by GBP1.2m and GBP0.2m respectively.
14. Other intangible assets
IT development Computer
costs software Total
GBP'000 GBP'000 GBP'000
Cost
Balance at 1 May 2021 258 121 379
Additions - 319 319
At 30 April 2022 258 440 698
Additions 24 763 787
At 30 April 2023 282 1,203 1,485
-------------- --------- ---------
Amortisation
Balance at 1 May 2021 - 97 97
Charge for the year - 37 37
-------------- --------- ---------
At 30 April 2022 - 134 134
Charge for the year 40 221 261
-------------- --------- ---------
At 30 April 2023 40 355 395
-------------- --------- ---------
Net book amount at 30 April 2022 258 306 564
-------------- --------- ---------
Net book amount at 30 April 2023 242 848 1,090
-------------- --------- ---------
The Group's amortisation policy is to amortise other intangible
assets from the date they are made available for use.
15. Contract assets and liabilities
Contract Trade Contract
assets receivables liabilities
GBP'000 GBP'000 GBP'000
As at 30 April 2023 20,388 54,167 (499)
-------- ------------ ------------
As at 30 April 2022 17,239 50,201 (569)
-------- ------------ ------------
Contract assets
Contract assets consist of unbilled revenue in respect of
professional services performed to date.
Contract assets in relation to non-contingent work are
recognised at appropriate intervals, normally on a monthly basis in
arrears, in line with the performance of the services and
engagement obligations. Where such matters remain unbilled at the
period end the asset is valued on a contract-by-contract basis at
its expected recoverable amount.
Contract assets in relation to contingent work are recognised at
a point in time once the uncertainty over the contingent event has
been satisfied and all performance obligations satisfied, such that
it is no longer contingent, these matters are valued based on the
expected recoverable amount. Due to the complex nature of these
matters, they can take a considerable time to be finalised
therefore performance obligations may be settled in one period but
the matter not billed until a later financial period. Until the
performance obligations have been performed the Group does not
recognise any contract asset value at the year end.
During the year, contract assets of GBPnil (2022: GBP2,661,000)
were acquired in business combinations.
An impairment loss of GBP542,000 has been recognised in relation
to contract assets in the year (2022: loss GBP108,000). This is
based on the expected credit loss under IFRS 9 of these types of
assets. The contract asset loss is estimated at 2.7% (2022: loss
0.6%) of the balance.
Contract assets recognised under IFRS 15
Under IFRS 15 the Group is required to recognise contract
assets.
2023 2022
GBP'000 GBP'000
Contract asset value at 1 May 2022 17,239 13,900
Contract assets arising on acquisition - 2,661
Contract asset value added in the year 22,333 19,237
Contract asset value realised in the year (19,184) (18,559)
--------- ---------
Contract asset value at 30 April 2023 20,388 17,239
--------- ---------
The Group have applied ECLs to unbilled revenue in order to
account for the potential default on amounts not yet billed to the
client. The ECLs have been calculated on the same basis as those
applied to trade receivables.
Contract liabilities
When matters are billed in advance or on a basis of a monthly
retainer, this is recognised in contract liabilities and released
over time when the services are performed.
Contract liabilities recognised under IFRS 15
Under IFRS 15 the Group is required to recognise contract
liabilities.
2023 2022
GBP'000 GBP'000
Contract liabilities at 1 May 2022 569 1,243
Contract liabilities gained in the year 469 533
Contract liabilities credited to P&L in year (539) (1,207)
-------- --------
Contract liabilities at 30 April 2023 499 569
-------- --------
16. Trade and other receivables
Restated
2023 2022
GBP'000 GBP'000
Trade receivables 54,167 50,201
Prepaid consideration subject to earn-out service
conditions 6,015 5,712
Prepayments 5,777 5,626
Other receivables including insurance receivables 233 341
66,192 61,880
------- --------
Amounts falling due after one year: GBP'000 GBP'000
Prepaid consideration subject to earn-out service
conditions 7,080 9,707
------- --------
Trade receivables
Trade receivables are recognised when a bill has been issued to
the client, as this is the point in time that the consideration is
unconditional because only the passage of time is required before
the payment is due. Trade receivables also includes
disbursements.
Bills are payable within thirty days unless otherwise agreed
with the client.
All trade receivables are repayable within one year.
Movement in loss allowance
2023 2022
GBP'000 GBP'000
Brought forward provision (3,941) (4,171)
Recognition of provisions for businesses acquired - (173)
Provision utilised 908 1,161
Charged to statement of profit and loss (984) (1,173)
Provisions released 192 415
(3,825) (3,941)
------- -------
The Group applies the simplified approach to providing for the
expected credit losses under IFRS 9. Management have also elected
to apply an uplift to the IFRS 9 provision in the current year to
account for the specific risks in the subsidiary entities where the
application of IFRS 9 alone is not considered appropriate. The
provision uplift is based on Management's assessment of specific
clients and related debts, this is presented separately to the ECL
provision detailed below:
2023 Past due
greater
Not passed Past due Past due than 120
due 0-30 days 31-120 days days Total
Expected credit
loss rate 2.98% 4.93% 5.96% 17.58%
Estimated total
gross carrying
amount GBP'000 33,175 6,594 5,943 12,280 57,992
----------- ----------- ------------- ---------- -------
Lifetime ECL GBP'000 987 325 354 2,159 3,825
2022 Past due
greater
Not passed Past due Past due than 120
due 0-30 days 31-120 days days Total
Expected credit
loss rate 3.60% 4.45% 5.11% 18.53%
Estimated total
gross carrying
amount GBP'000 31,544 4,642 5,429 12,526 54,141
----------- ----------- ------------- ---------- -------
Lifetime ECL GBP'000 1,136 207 277 2,321 3,941
The carrying amount of financial assets (including contract
assets but not including equity investments) recorded in the
financial statements, which is net of any impairment losses,
represents the Group's maximum expected exposure to credit risk.
Financial assets include client and other receivables and cash. The
Group does not hold collateral over these balances.
All the Group's trade and other receivables have been reviewed
for indicators of impairment. The specifically impaired trade
receivables are mostly due to customers experiencing financial
difficulties.
An impairment loss of GBP984,000 has been recognised in relation
to trade receivables in the year (2022: GBP1,173,000). This is
based on the expected credit loss under IFRS 9 of these types of
assets. The trade receivables loss is estimated at 1.7% (2022:
2.3%) of the balance.
17. Other interest-bearing loans and borrowings
The contractual terms of the Group's interest-bearing loans and
borrowings, which are measured at amortised cost, with the
exception of loans to members that are held at fair value, are
described below.
2023 2022
Fair Carrying Fair Carrying
value amount value amount
GBP'000 GBP'000 GBP'000 GBP'000
Non-Current liabilities
Bank borrowings 6,813 6,813 5,715 5,715-
------- -------- ------- --------
On 18 April 2022, the Company entered into a revolving credit
facility which provides total committed funding of GBP30m until
April 2025. Interest is payable at a margin of 1.95% above the
SONIA reference rate. On 19 April 2022 GBP6m was drawdown against
the facility in order to fund the initial cash consideration in the
acquisition of SP 2018 Limited. On 3 October 2022 a further GBP1m
was drawdown against the facility in order to fund the cash
consideration in the acquisition of Symbiosis IP Limited.
As at 30 April 2023, the Group's non-derivative financial
liabilities have contractual maturities (including interest
payments where applicable) as summarised below:
30 April 2023 Current Non-current
Within 6 to 1 - 5 Later than
6 months 12 months years 5 years
GBP'000 GBP'000 GBP'000 GBP'000
Bank borrowings - - 7,997 -
Trade and other payables 9,665 1,364 - -
--------- ---------- ------- ----------
Total 9,665 1,364 7,997 -
--------- ---------- ------- ----------
This compares to the maturity of the Group's non-derivative
financial liabilities in the previous reporting period as
follows:
30 April 2022 Current Non-current
Within 6 to 1 - 5 Later than
6 months 12 months years 5 years
GBP'000 GBP'000 GBP'000 GBP'000
Bank borrowings - - 6,485 -
Trade and other payables 8,335 - 40 -
--------- ---------- ------- ----------
Total 8,335 - 6,525 -
--------- ---------- ------- ----------
The above amounts reflect the contractual undiscounted cash
flows, which may differ to the carrying values of the liabilities
at the reporting date.
18. Trade and other payables
Restated
2023 2022
GBP'000 GBP'000
Current
Trade payables 9,370 7,935
Other taxation and social security payable 9,913 10,122
Other payables 295 374
Contingent consideration treated as remuneration 1,364 26
Accruals 4,492 12,693
Deferred income 499 569
------- --------
25,933 31,719
------- --------
Non-current GBP'000 GBP'000
Contingent consideration treated as remuneration - 40
-------- -------
19. Deferred tax
Deferred tax assets and liabilities are summarised below:
Deferred tax asset
The deferred tax asset recognised in the consolidated statement
of financial position represents the future tax impact of issued
share based payments schemes that are yet to vest.
Share-based
payments
GBP'000
At 1 May 2022 638
Credited during the year in the consolidated income
statement 590
Debited during the year to retained earnings (398)
------------
At 30 April 2023 830
------------
Deferred tax liability
The deferred tax liability recognised in the Consolidated
Statement of Financial Position represents the future tax impact of
the Group's benefit from customer lists obtained through
acquisitions.
Customer
lists
GBP'000
At 1 May 2021 772
Arising through business combinations - Tozer Gallagher LLP,
Adamson Jones Holdings Limited and SP 2018 Limited 2,482
Credited during the year in the Consolidated income statement (165)
--------
At 30 April 2022 3,089
Arising through business combinations - Symbiosis IP Limited 250
Credited during the year in the Consolidated income statement (398)
At 30 April 2023 2,941
--------
20. Provisions
2023 2022
GBP'000 GBP'000
Current provision
Professional indemnity provision 107 101
-------- --------
Total current provision 107 101
-------- --------
Non-current provision
Professional indemnity provision 903 649
Dilapidations provision 387 214
-------- --------
Total non-current provision 1,290 863
-------- --------
Total provisions 1,397 964
-------- --------
Professional indemnity estimated claim cost
2023 2022
GBP'000 GBP'000
Brought forward 750 725
Provisions made during the year 350 35
Provisions reversed during the year (90) (10)
-------- ----------
At end of year 1,010 750
-------- ----------
Non-current 903 649
Current 107 101
-------- ----------
1,010 750
-------- ----------
The Group from time to time receives claims in respect of
alleged professional negligence which it defends where appropriate
but makes provision for the best estimate of probable amounts
considered likely to be payable as set out above. Inevitably, these
estimates depend on the outcome and timing of future events and may
need to be revised as circumstances change. A different assessment
of the likely outcome in each case or of the probable cost involved
may result in a different level of provision recognised.
Professional indemnity Insurance cover is maintained in respect of
professional negligence claims.
Dilapidations provision
The Group has leases for a number of offices, some of which
include dilapidation clauses. The Group maintains the office
buildings throughout each lease term with regular maintenance,
however a cost is likely to arise at the end of the lease term in
order to return the space to its original condition. Management
have therefore elected to introduce a dilapidations provision to
account for the future cost. The provision is based on Management's
estimate of the total costs across all applicable lease to be
recognised on a straight line basis over the total lease terms.
2023 2022
GBP'000 GBP'000
At 1 May 214 214
Provision made in the year 173 -
--------- ---------
At 30 April 387 214
--------- ---------
21. Net debt
2023 2022
GBP'000 GBP'000
Cash and cash equivalents 11,105 16,105
Debt
Total loans brought forward (34,641) (30,445)
Revolving credit facility - due in more than
one year (1,098) (5,715)
New lease liability in the year (7,597) (2,351)
Repayment of lease liability 4,550 3,870
-------- --------
Total loan carried forward (38,786) (34,641)
Brought forward from previous year (18,536) (10,840)
Movement during year (9,145) (7,696)
-------- --------
Net debt at the year end (27,681) (18,536)
-------- --------
The changes in the Group's liabilities arising from financing
activities can be classified as follows:
Long term Short Lease Total
borrowings term borrowings liabilities
GBP'000 GBP'000 GBP'000 GBP'000
1 May 2022 5,715 - 28,926 34,641
Cashflows:
Repayments (2,000) - (4,550) (6,550)
Receipt of revolving credit facility 3,000 - - 3,000
Non-cash
Loan arrangement fee unwind 98 - - 98
New lease liability in the year - - 7,597 7,597
30 April 2023 6,813 - 31,973 38,786
----------- ---------------- ------------ -------
Long term Short Lease Total
borrowings term borrowings liabilities
GBP'000 GBP'000 GBP'000 GBP'000
1 May 2021 - - 30,445 30,445
Cashflows:
Repayments - - (3,870) (3,870)
Receipt of revolving credit facility 5,715 - - 5,715
Non-cash
Fair value of acquisition - - 793 793
New lease liability in the year - - 1,558 1,558
----------- ---------------- ------------ -------
30 April 2022 5,715 - 28,926 34,641
----------- ---------------- ------------ -------
22. Share capital
Authorised, issued and fully paid
2023 2023 2022 2022
Number GBP Number GBP
Ordinary shares of 10p each
Brought forward 124,556,879 12,455,687 117,914,205 11,791,420
Issued on acquisition of Tozer
Gallagher LLP - - 142,179 14,218
Issued on acquisition of Adamson
Jones IP Limited - - 543,668 54,367
Issued on acquisition of Gateley
Smithers Purslow Limited - - 3,312,322 331,232
Issued on acquisition of Symbiosis
IP Limited 523,012 52,301 - -
Issued as part of contingent consideration
of Tozer Gallagher LLP 25,071 2,507 - -
Issued on vesting of RSA 1,175,000 117,500 1,477,560 147,756
Issued on vesting of SAYE 356,195 35,620 308,819 30,882
Issued on vesting of CSOPS - - 858,126 85,813
----------- ---------- ----------- ----------
At 30 April 2023 126,636,157 12,663,615 124,556,879 12,455,688
----------- ---------- ----------- ----------
The Company has one class of Ordinary shares which carry no
right to fixed income.
On 3 October 2022 the Company acquired the entire issued share
capital of Symbiosis IP Limited in part for the issue of 523,012
10p ordinary shares.
Between 1 May 2022 and 30 April 2023 356,195 10p ordinary shares
were issued upon vesting of the 2018/2019 SAYE schemes to
participants.
On 23 February 2023 1,175,000 10p ordinary shares were issued
upon issue of the 2023 RSA scheme to participants.
23. Leases liabilities - IFRS 16
The Group has leases for offices, vehicles and some IT
equipment, with the exception of short-term leases and leases of
low-value assets each lease is held on the balance sheet as a
right-of-use asset and corresponding lease liability. Property
leases have a remaining term of one to ten years. Leases of
vehicles and IT equipment have a term of three to five years. Lease
payments on all those recognised on the balance sheet are fixed.
Unless there is a contractual right for the Group to sublet the
asset to a third party, the right of use asset can only be used by
the Group.
The table below provides additional information on the
right-of-use assets by class of assets:
Closing
Number Average Opening lease
of leased length of lease asset Net additions Depreciation asset
assets* lease remaining GBP'000 GBP'000 GBP'000 GBP'000
Office buildings 15 4.5 years 24,616 4,725 (2,253) 27,088
IT equipment 1 2.5 years 11 0 (2) 9
* Where properties within the same building are leased on a
floor by floor basis on the same contractual terms, the Group has
elected to treat these as a portfolio and are counted as a single
leased asset within the table
Lease liabilities are presented in the statement of financial
position as follows:
2023 2021
GBP'000 GBP'000
Current lease liability 3,257 3,719
Non-current lease liability 28,716 25,207
A number of property leases held by the Group include break or
termination options. The lease liability has been calculated based
on the likelihood of such option being exercised. An option would
only be exercised when in line with the Groups wider strategy.
In line with IFRS 16 Leases the Group has elected not to
recognise a lease liability for leases with a term of 12 months or
less, or for leases of low value assets. The payments made under
such leases are expensed to the profit and loss on a straight-line
basis. Any variable lease payments incurred are expensed as
incurred.
The table below shows amounts recognised in the Statement of
Comprehensive Income for short term and low value leases as at 30
April 2023:
Property Equipment Total
GBP'000 GBP'000 GBP'000
Expenses relating to short-term
leases 166 20 186
Expenses relating to leases of low-value
assets, excluding short-term leases
of low value assets - 62 62
-------- --------- -------
166 82 248
-------- --------- -------
The total minimum undiscounted lease payments at 30 April 2023
under non-cancellable operating lease rentals were:
30 April 2023 30 April
GBP'000 2022
GBP'000
Within one year 4,088 4,645
In the second to fifth year inclusive 19,219 22,435
After five years 11,437 16,606
34,744 43,686
------------- --------
24. Subsequent events
On 19 July 2023, Gateley (Holdings) Plc completed the
acquisition of the entire issued share capital of Richard Julian
and Associates Limited ('RJA') for a maximum consideration of
GBP6,000,000. The initial consideration payable on completion was
GBP3,931,000, split as GBP2,027,000 paid in cash and GBP1,904,000
through the issuance of 1,192,163 new ordinary shares of 10 pence
each in Gateley ("Ordinary Shares". The cash consideration is being
funded by the existing revolving credit facility. RJA is a
chartered surveying practice, providing quantity surveying and
project management services across a variety of construction
sectors. It specialises in the provision of these services to
organisations that deliver affordable housing, a resilient sector
which is underpinned by high levels of grants to support delivery
of the Government's housing targets.
At the time when the financial statements were authorised for
issue, the determination of the fair values of the assets and
liabilities acquired had not been finalised because the individual
valuations had not been concluded. It was not possible to provide
detailed information about each class of acquired receivables and
any contingent liabilities of the acquired entity.
25. Restatement of acquisition accounting
Impact on group income statement and financial position
Following a review of the prior period annual report by the
Financial Reporting Council's ('FRC') Corporate Reporting Review
('CRR') team, we have identified a number of previous acquisitions
whereby there is deemed to be a substantive service condition
attached to the consideration transferred. Whilst forfeiture of
contingent payments by a 'bad leaver' is at the discretion of the
remuneration committee, and not automatic, as outlined in IFRS 3
and the January 2013 IFRIC update, this discretion is in the gift
of the group and not the leaver and as such, payments should be
treated as remuneration for post-combination services, rather than
treating them in the initial assessment of consideration
transferred at the point of acquisition.
This change of accounting has no impact on the underlying
results, cash flow or tax position of the group.
The historical acquisitions that have been impacted by this
restatement are as follows:
-- Gateley Capitus Limited - acquired April 2016
-- Gateley Hamer Limited - acquired September 2016
-- GCL Solicitors - acquired May 2018
-- Kiddy & Partners Limited - acquired July 2018
-- Gateley Global Limited (formerly International Investment
Services Limited) - acquired November 2018
-- t-three Group Limited - acquired December 2019
-- Gateley Legal NI and Gateley Legal Ireland (formerly trading
as Gateley Tweed) - acquired February 2020
-- Gateley Vinden Limited - acquired March 2020
-- Tozer Gallagher - acquired July 2021
-- Adamson Jones Holdings Limited - acquired January 2022
-- Gateley Smithers Purslow Limited - acquired April 2022
Consequently, the FY22 results, including the April 2021 opening
group statement of financial position, have been restated in these
financial statements to reflect a decrease in goodwill
corresponding to the fair value initially recognised for the
relevant earn-outs on these acquisitions, being GBP18.588m at April
2022 (2021: GBP10.148m).
For the acquisitions where the relevant earn-out periods had
been fully paid by 30 April 2022, the restated FY22 statement of
financial position includes the removal of all related earn-out
liabilities, with fair values totalling GBP15.419m (2021:
GBP3.949m), the removal of all related earn-out liabilities, with
fair values totalling GBP5.460mand the inclusion instead of a
liability in respect of the accrued non-underlying remuneration
costs, being GBP0.066m as at 30 April 2022 (2021: GBPnil).
Group statement of financial position
2022 Impact 2022 2021 (as Impact 2021
(as previously of restatement (restated) previously of restatement (restated)
presented) presented)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Intangible assets
& goodwill 32,590 (18,588) 14,002 15,765 (10,148) 5,617
Other non-current
assets 27,500 - 27,500 29,277 - 29,277
---------------- ---------------- ------------ ------------ ---------------- ------------
Total non-current
assets 60,090 (18,588) 41,502 45,042 (10,148) 34,894
---------------- ---------------- ------------ ------------ ---------------- ------------
Current assets 89,512 15,419 104,931 76,598 3,494 80,092
Other payables (5,360) 5,320 (40) (120) - (120)
Other non-current
liabilities (34,874) - (34,874) (29,237) - (29,237)
---------------- ---------------- ------------ ------------ ---------------- ------------
Total non-current
liabilities (40,234) 5,320 (34,914) (29,357) - (29,357)
Trade and other
payables (31,793) 74 (31,719) (29,032) 135 (28,897)
Other current
liabilities (4,662) - (4,662) (3,985) - (3,985)
---------------- ---------------- ------------ ------------ ---------------- ------------
Total current
liabilities (36,455) 74 (36,381) (33,017) 135 (32,882)
---------------- ---------------- ------------ ------------ ---------------- ------------
Net assets 72,913 2,225 75,138 59,266 (6,519) 52,747
---------------- ---------------- ------------ ------------ ---------------- ------------
Retained earnings 44,863 2,225 47,088 41,560 (6,519) 35,041
Other equity 28,050 - 28,050 17,706 - 17,706
---------------- ---------------- ------------ ------------ ---------------- ------------
Total equity 72,913 2,225 75,138 59,266 (6,519) 52,747
---------------- ---------------- ------------ ------------ ---------------- ------------
The impact on the FY22 income statement is the recognition of a
gain on bargain purchase, totalling GBP12.380m, the removal of a
net financial cost representing the fair value adjustments to the
previously recognised earn-out liabilities, including the unwinding
of present value discounting, totalling GBP0.008m, the inclusion of
the above mentioned non-underlying remuneration costs, totalling
GBP3.509m, and the reversal of the previously recognised credit of
GBP0.135m in respect of contingent consideration that was released
as earn-out targets were not met.
Group statement of comprehensive income
2022 (as Impact of Restated
previously restatement 2022
presented)
GBP'000 GBP'000 GBP'000
Revenue 137,249 137,249
Other operating income - -
Personnel costs, excluding IFRS 2 charge (86,517) (86,517)
Depreciation - Property, plant and equipment (851) (851)
Depreciation - Right-of-use asset (3,783) (3,783)
Impairment of trade receivables and contract
assets (866) (866)
Other operating expenses, excluding non-underlying
and exceptional items (22,716) (22,716)
----------- ------------ --------
Operating profit before non-underlying and
exceptional items 22,516 22,516
Non-underlying operating items (2,659) 8,736 6,077
Exceptional items (870) (870)
----------- ------------ --------
(3,529) 8,736 5,207
------------------------------------------------------- ----------- ------------ --------
Operating profit 18,987 8,736 27,723
Financial income 194 194
Financial expense (1,149) 8 (1,141)
----------- ------------ --------
Profit before tax 18,032 8,744 26,776
Taxation (3,753) (3,753)
----------- ------------ --------
Profit for the year after tax attributable
to equity holders of the parent 14,279 8,744 23,023
----------- ------------ --------
Other comprehensive income
Items that are or may be reclassified subsequently
to profit or loss
- Revaluation of other investments (190) (190)
- Exchange differences on foreign branch 58 58
----------- ------------ --------
Profit for the financial year and total
comprehensive income all attributable to
equity holders of the parent 14,147 8,744 22,891
----------- ------------ --------
Statutory Earnings per share
Basic 12.00 7.35 19.35p
Diluted 11.71 7.18 18.89p
Group cash flow statement
The resulting impact on the group cash flow statement is to
recognise all payments made in acquiring businesses where the
vendors are subject to a continuing employment clause as operating
activities, rather than investing activities, as previously
presented. The associated gains on bargain purchase of GBP12.380m
are deducted and the non-underlying remuneration charges of
GBP3.509m added back, to arrive at operating cash flows, as set out
below. The remaining adjustments are in respect of the GBP0.008m of
interest and the reversal of the previously recognised credit of
GBP0.135m in respect of contingent consideration that was released
as earn out targets were not met.
2022 (as Impact of Restated
previously restatement 2022
presented)
GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Profit for the year after tax 14,279 8,744 23,023
Adjustments for:
Depreciation and amortisation 6,215 - 6,215
Financial income (194) - (194)
Financial expense 201 (8) 193
Release of contingent consideration (135) 135 -
Interest charge on capitalised leases 948 - 948
Equity settled share-based payments 1,213 - 1,213
Gain on bargain purchase - (12,380) (12,380)
Acquisition related earn-out remuneration
charge - 3,509 3,509
Initial consideration paid on acquisitions - (7,033) (7,033)
Loss on disposal of property, plant
and equipment 16 - 16
Tax expense 3,753 - 3,753
------------ ------------- ---------
26,296 (7,033) 19,263
Increase in trade and other receivables (10,233) (66) (10,299)
Increase in trade and other payables 758 58 816
Increase in provisions 25 - 25
------------ ------------- ---------
Cash generated from operations 16,846 (7,041) 9,805
Tax paid (4,497) - (4,497)
------------ ------------- ---------
Net cash flows from operating activities 12,349 (7,041) 5,308
------------ ------------- ---------
Investing activities
Acquisition of property, plant and
equipment (775) - (775)
Acquisition of other intangible assets (319) - (319)
Cash acquired on business combinations (5,982) 7,033 1,051
Interest received 194 - 194
Net cash flows from investing activities (6,882) 7,033 151
------------ ------------- ---------
Financing activities
Interest and other financial income
paid (201) 8 (193)
Lease repayments (3,870) - (3,870)
Receipt of new revolving credit facility,
net of refinancing costs 5,715 - 5,715
Proceeds from sale of own shares 90 - 90
Acquisition of own shares by Employee
Benefit Trust (39) - (39)
Cash received for shares issued on
exercise of SAYE/CSOP options 1,768 - 1,768
Dividends paid (12,430) - (12,430)
Net cash used in financing activities (8,967) 8 (8,959)
------------ ------------- ---------
Net decrease in cash and cash equivalents (3,500) - (3,500)
Cash and cash equivalents at beginning
of year 19,605 - 19,605
------------ ------------- ---------
Cash and cash equivalents at end
of year 16,105 - 16,105
The Annual report and financial statements will be posted to
shareholders in due course. Further copies will be available from
the Company's website: www.gateleyplc.com .
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END
FR UPUCGBUPWGBA
(END) Dow Jones Newswires
September 06, 2023 02:00 ET (06:00 GMT)
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