REG - Gateley (Holdings) - Audited Results 2023
06/09/2023 07:00
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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 £162.7m £137.2m 18.6%
Group underlying operating profit(1) £25.0m £22.5m 11.1%
Group underlying profit before tax(1) £25.1m £21.6m 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 £78.1m £75.1m 4.0%
Net cash(3) £4.3m £10.4m (58.7)%
Reported FY23 FY22 Change
Restated
Group profit before tax £16.2m £26.8m (39.6)%
Group profit after tax £12.2m £23.0m (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 £41.8m or 25.7% of total Group
revenue (FY22: £21.3m 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 £78.1m (FY22: £75.1m)
· 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 Head of Investor Relations Tel: +44 (0) 20 7653 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 2000
Richard Lindley/Ben Cryer/Cara Murphy
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 (mailto: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 £162.7m and underlying profit before tax
increasing by 16.2% to £25.1m, 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 £78.1m (FY22:
£75.1m), 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 £30m 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 £41.8m, 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 CO2 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 £41.8m (FY22: £21.3m), 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 £162.7m (FY22: £137.2m) and underlying profit before tax increased by
16.2% to £25.1m (FY22: £21.6m). Profit before tax decreased by 39.6% to
£16.2m (FY22 restated: £26.8m) 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 £12.2m
(FY22 restated: £23.0m).
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 £21.8m, 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 £38.8m 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 £1.1m (FY22: £0.74m). 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 £20.4m. 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 £6.7m
(FY22: £6.3m). 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 £81.7m 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 £13.8m (FY22: £0.6m), 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 CO2 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 £162.7m. 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 £25.1m. 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 £4.3 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 £6m 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 £162.7m (FY22: £137.2m).
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
£41.8m which now represents 25.7% of total revenues (FY22: £21.3m 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 Corporate People Property Total
Services £m £m £m £m
£m
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
£25.0m, up by 11.1% from £22.5m 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
£'000 £'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 £96.8m, 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 £12.5m or 53.0% to £36.1m (FY22:
£23.6m) 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
£'000 £'000 £'000 £'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 128,527,341 121,893,238 118,508,833 115,599,727
per share
16.28p
Underlying adjusted fully diluted EPS 14.54p 13.66p 12.98p
Taxation
The Group's tax charge for the Period was £4.0m (FY22: £3.8m) which
comprised a corporation tax charge of £5.0m (FY22: £4.0m) and a deferred tax
credit of £1.0m (FY22: credit of £0.2m).
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 £2.1m (FY22: £2.5m) 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 £3.0m (FY22: £22.3m) to
£78.1m (FY22: restated £75.1m), due to the following movements:
There was a £2.2m increase in total current assets, resulting from £1.7m
additional trade and other receivables through acquired businesses and the
strong organic growth of the Group. Contract assets ("unbilled revenue")
increased by £3.1m and cash at bank decreased by £5.0m as excess cash was
redeployed into acquisitions and to support working capital required for
continued growth.
Non-current assets increased by £2.4m, resulting predominantly from an
increase of £2.5m 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 £0.8m, 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 £5.7m to £6.8m. The facility provides total committed
funding of £30m 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 £20m
of funding towards significant litigation cases, which has the ability to
increase to £50m 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 £9.7m (FY22: £5.3m) representing 79.6% (FY22: restated 23.1%)
of profit after tax. The Group ended the year with net cash of £4.3m (FY22:
£10.4m), 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 £6.0m (FY22:
£7.4m), 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
£'000 £'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 (4,579) (3,870)
flows under IFRS 16)
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
£'000 £'000
Profit after tax 12,240 23,023
Non-underlying operating items 8,858 (6,077)
Exceptional items - 870
Underlying 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 £20.4m or 12.5% of revenue
recognised over the year (FY22: £17.2m 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
£'000 £'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
27,723
Operating profit 4 16,122
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 12,165 22,891
to equity holders of the parent
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
£'000 £'000 £'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 reserve Retained Foreign currency translation reserve Total
capital premium reserve reserve earnings Equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'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 YEAR ENDED 30 APRIL 2023
Note Restated
2023 2022
£'000 £'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 of subsidiary (50) -
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 £7m was drawn down at 30 April
2023, with committed funding of £30m until April 2025. As at 30 April 2023
the Group has net cash of £4.3m 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 Services
Restructuring advisory
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
£'000 £'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
£0.08m (2022: Net Group assets of £0.08m) are located in the Group's Dubai
subsidiary. Revenue generated by the Group's Dubai subsidiary to customers
in the UAE totalled £2.39m (2022: £0.92m) as disclosed above as due from the
customers in the Middle East
2023
Business Services Corporate People Property Total Other expenses Total
segments
and movement
in unbilled revenue
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Segment revenue from services 4,952 16,578 8,409 17,002 46,941 1 46,942
transferred at a point in time
Segment revenue from services 16,872 22,200 12,027 64,642 115,741 - 115,741
transferred over time
Total segmental revenue 21,824 38,778 20,436 81,644 162,682 1 162,683
Segment contribution (as reported 5,330 13,948 5,983 31,037 56,298 1 56,299
internally)
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 (6,190)
remuneration
Net financial expense 90
Profit for the financial year before taxation 16,212
2022 (restated)
Business Corporate People Property Total Other expense Total
segments
Services and movement
in unbilled revenue
£'000 £'000 £'000 £'000 £'000 £'000 £'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 5,733 15,373 6,919 22,956 50,981 643 51,624
internally)
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 (3,509)
remuneration
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. £16.4 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
£'000 £'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
£'000 £'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
£'000 £'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
£'000 £'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 £31,181.
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 Share Compound Annual Growth Rate (CAGR) Amount Vesting %
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 remaining contractual life Weighted Originally granted Lapsed/exercised at 30 April 2022 At 1 May Granted Lapsed during year Exercised in the year At 30 April 2023
average 2022 during
exercise the year
price
Number Number Number Number Number Number Number
SAYE
SAYE 18/19 - 21 0 years £1.27 620,432 (134,037) -
September 2018 (449,919) 170,513 - (36,476)
SAYE 19/20 - 30 0 years £1.28 822,625 604,213 (243,848) 48,559
September 2019 (218,412) - (311,806)
SAYE 20/21 - 6 0.5 years £1.02 2,337,197 2,117,371 (243,513) 1,873,858
November 2020 (219,826) - -
SAYE 21/22 - 25 1.3 years £1.70 673,077 658,152 (157,137) 501,015
August 2022 (14,925) - -
SAYE 22/23 - 22 2.4 years £1.55 - - (36,850) 1,033,304
September 2023 - 1,070,154 -
4,453,331 3,550,249 (815,385) 3,456,736
(903,082) 1,070,154 (348,282)
CSOPS
CSOPS 18/19 - 24 0 years £1.44 812,131 184,086 - (62,470) -
October 2018 (628,045) (121,616)
CSOPS 20/21 - 7 0.2 years £1.35 976,797 829,752 - (97,969) 731,783
July 2020 (147,045) -
CSOPS 22/23 - 14 December 2022 2.6 years - - - 300,000 (10,000) 290,000
£1.74 -
1,788,928 1,013,838 300,000 (170,439) 1,021,783
(775,090) (121,616)
LTIPS
LTIPS 20/21 - 22 July 2020 0.2 years 1,405,766 1,236,435 - (134,188) 1,102,247
£0.00 (169,331) -
LTIPS - 27 April 2022 2.0 years 1,115,000 1,115,000 - (90,000) - 1,025,000
£0.00 -
LTIPS 23 Feb 23 2.8years - - - 1,320,000
£0.00 - - 1,320,000
2,520,766 2,351,435 (224,188) - 3,447,247
(169,331) 1,320,000
RSA
RSA - 27 April 2022 1,422,560 1,422,560 1,422,560
4.0 years £0.00 - - - -
- 1,175,000 (50,000) 1,125,000
RSA 23 February 2023 5.0 years £0.00 - - -
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 £1.99 £1.74 £1.825 £1.825
Exercise price 1.55 1.74 £nil £nil
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 £0.55 £0.30 £1.58 £1.825
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 £1,984,000 (2022: £1,213,000).
7. Financial income and expense
Recognised in profit and loss
Restated
2023 2022
£'000 £'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
£'000 £'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
£'000 £'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 125,244,334 118,961,047
number of shares for calculating basic earnings per share
Shares deemed to be issued for no consideration in respect of share based 3,283,007 2,932,191
payments
Weighted average number of ordinary shares for calculating diluted earnings 128,527,341 121,893,238
per share
Restated
2023 2022
£'000 £'000
Profit for the year and basic earnings attributable to ordinary equity 12,240 23,023
shareholders
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 16.28 14.54
items
10. Dividends
2023 2022
£'000 £'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 and Right-of-use assets Total
improvements Fittings
£'000 £'000 £'000 £'000 £'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 lists Brands Total
£'000 £'000 £'000 £'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
£'000 £'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).
ᴏ 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.
ᴏ Increases in costs are based on current inflation rates and expected levels of
recruitment needed to generate predicted revenue growth.
ᴏ 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.
ᴏ 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 carrying amount Policy alignment and fair value adjustments Total
£'000 £'000 £'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 £1,389,000 has been recognised immediately in the
statement of profit and loss.
From the date of acquisition Symbiosis IP Limited has contributed £1.3m of
revenue to the Group's Statement of Comprehensive Income together with after
tax profit of £0.2m. 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 £1.2m and £0.2m respectively.
14. Other intangible assets
IT development costs Computer
£'000 software Total
£'000
£'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 assets Trade Contract liabilities
receivables
£'000 £'000 £'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 £nil (2022: £2,661,000) were acquired in
business combinations.
An impairment loss of £542,000 has been recognised in relation to contract
assets in the year (2022: loss £108,000). 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
£'000 £'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
£'000 £'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
£'000 £'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: £'000 £'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
£'000 £'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 Not passed due Past due 0-30 days Past due 31-120 days Past due greater than 120 days Total
Expected credit loss rate 2.98% 4.93% 5.96% 17.58%
Estimated total gross carrying amount £'000 33,175 6,594 5,943 12,280 57,992
Lifetime ECL £'000 987 325 354 2,159 3,825
2022 Not passed due Past due 0-30 days Past due 31-120 days Past due greater than 120 days Total
Expected credit loss rate 3.60% 4.45% 5.11% 18.53%
Estimated total gross carrying amount £'000 31,544 4,642 5,429 12,526 54,141
Lifetime ECL £'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 £984,000 has been recognised in relation to trade
receivables in the year (2022: £1,173,000). 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
amount
amount
value value
£'000 £'000 £'000 £'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 £30m until April 2025. Interest is
payable at a margin of 1.95% above the SONIA reference rate. On 19 April 2022
£6m 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 £1m 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 months 6 to 12 months 1 - 5 Later than
years 5 years
£'000 £'000 £'000 £'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 months 6 to 12 months 1 - 5 Later than
years 5 years
£'000 £'000 £'000 £'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
£'000 £'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 £'000 £'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
£'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
£'000
At 1 May 2021 772
Arising through business combinations - Tozer Gallagher LLP, 2,482
Adamson Jones Holdings Limited and SP 2018 Limited
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
£'000 £'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
£'000 £'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
£'000 £'000
At 1 May 214 214
Provision made in the year 173 -
At 30 April 387 214
21. Net debt
2023 2022
£'000 £'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 borrowings Short term borrowings Lease liabilities Total
£'000 £'000 £'000 £'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 borrowings Short term borrowings Lease liabilities Total
£'000 £'000 £'000 £'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 £ Number £
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:
Number of leased assets* Average length of lease remaining Opening lease asset Net additions Depreciation Closing lease asset
£'000 £'000 £'000 £'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
£'000 £'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
£'000 £'000 £'000
Expenses relating to short-term leases 166 20 186
Expenses relating to leases of low-value assets, excluding short-term leases - 62 62
of low value assets
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 2022
£'000 £'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 £6,000,000. The initial consideration payable
on completion was £3,931,000, split as £2,027,000 paid in cash and
£1,904,000 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
£18.588m at April 2022 (2021: £10.148m).
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
£15.419m (2021: £3.949m), the removal of all related earn-out liabilities,
with fair values totalling £5.460mand the inclusion instead of a liability in
respect of the accrued non-underlying remuneration costs, being £0.066m as at
30 April 2022 (2021: £nil).
Group statement of financial position
2022 (as previously presented) Impact of restatement 2022 (restated) 2021 (as previously presented) Impact of restatement 2021 (restated)
£'000 £'000 £'000 £'000 £'000 £'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 £12.380m, 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
£0.008m, the inclusion of the above mentioned non-underlying remuneration
costs, totalling £3.509m, and the reversal of the previously recognised
credit of £0.135m in respect of contingent consideration that was released as
earn-out targets were not met.
Group statement of comprehensive income
2022 (as previously presented) Impact of restatement Restated
2022
£'000 £'000 £'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
18,987 8,736 27,723
Operating profit
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 14,147 8,744 22,891
to equity holders of the parent
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 £12.380m are deducted and the non-underlying remuneration charges of
£3.509m added back, to arrive at operating cash flows, as set out below. The
remaining adjustments are in respect of the £0.008m of interest and the
reversal of the previously recognised credit of £0.135m in respect of
contingent consideration that was released as earn out targets were not met.
2022 (as previously presented) Impact of restatement Restated
2022
£'000 £'000 £'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
(file:///C%3A/Users/Cat%20Valentine/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/JZ8HWI9W/www.gateleyplc.com)
.
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