REG - Gateley (Holdings) - Audited Results 2024
16/07/2024 07:00
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RNS Number : 4888W Gateley (Holdings) PLC 16 July 2024
16 July 2024
The information contained within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulations (EU) No.
596/2014. It forms part of United Kingdom domestic law by virtue of the
European Union (Withdrawal) Act 2018. Upon the publication of this
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Gateley (Holdings) Plc
("Gateley", the "Group" or the "Company")
AUDITED RESULTS 2024
Fuelling growth through continuing investment
Gateley (AIM: GTLY), the professional services group, announces its audited
results for the year ended 30 April 2024 ("FY24" or the "Period").
The Group delivered a good financial performance in FY24, increasing revenue
by 6.0% to £172.5m, extending Gateley's unbroken record of revenue growth
since IPO in 2015. The board continued to invest for growth in line with its
stated strategy and was pleased to deliver underlying profit before tax of
£23.0m (FY23: £25.1m) after reinstating the payment of employee bonuses this
year of £4.5m (FY23: £nil), in recognition of our people's contribution to a
resilient outturn and our more positive outlook as we move into FY25.
The balance sheet remains strong, maintaining a net cash position. The Group
has significant headroom in its banking facilities to enable further
investment in organic and acquisitive opportunities.
Financial highlights
We present below our financial performance for the Period both on an
underlying and statutory basis.
Underlying FY24 FY23 Change
Group revenue £172.5m £162.7m 6.0%
Group underlying operating profit(1) £20.3m £25.0m (18.9)%
Group underlying profit before tax(1) £23.0m £25.1m (8.1)%
Underlying adjusted fully diluted EPS(2) 14.20p 16.28p (12.8)%
Dividend per share 9.5p 9.5p -%
Net assets £80.3m £78.1m 2.8%
Net cash(3) £3.8m £4.3m (11.6)%
Reported FY24 FY23 Change
Group profit before tax £14.0m £16.2m (13.9)%
Group profit after tax £10.1m £12.2m (17.7)%
Basic earnings per share ('BEPS') 7.74p 9.77p (20.8)%
· Diversified business model yielding organic revenue growth of 2.8%, comprising
0.8% in Legal and 9.1% in Consultancy services
· Consultancy revenues now 28.9% of the Group (FY23: 25.7%)
· Steadily improving activity throughout Q4 (and ongoing) resulted in
utilisation of 83% for the Period, just below the Group's operational target
of 85%.
· Operating profit margin, on a pre-bonus basis, decreased 1.0% to 14.4% (FY23:
15.4%), reflecting salary and other cost inflation and ongoing organic and
acquisitive investment
· Underlying operating profit margin of 11.7% (FY23: 15.4%) reflects the
reinstatement of Group staff bonuses
· Net assets increased by 2.8% to £80.3m (FY23: £78.1m), including net cash of
£3.8m (FY23: £4.3m)
· Proposed final dividend of 6.2p (FY23: 6.2p), taking total dividends for the
Period to 9.5p per share (FY23: 9.5p)
Operational highlights
· Average headcount at 30 April 2024 increased by 6.7% to 1,536 (FY23: 1,439),
including an increase in fee earning professional staff of 6.8% from 1,000 to
1,068
· Fuelling growth through investment in diversification and strategic hires,
including:
· Continued execution of M&A strategy with the July 2023
acquisition of Richard Julian and Associates Limited ("RJA")
· Strategic hiring onto the Business Services Platform to seed
legal services class actions and international arbitration businesses and to
create an intellectual property commercialisation and valuation offering in
our patent and trademark attorney businesses
· Non-dilutive recirculation of internal share ownership facilitated in April
2024 with the Group's Employee Benefit Trust purchasing shares to fulfil
anticipated FY25 restricted share scheme awards
Current trading and outlook
· The Group continues to perform well against its strategy set out at IPO, being
to generate growth and resilience through diversification, delivering strong
returns for our stakeholders
· Ongoing investment for short-term margin stability followed by long term
improvement.
· FY25 has started in line with the board's expectations, with a good pipeline
of work, including steadily improving transactional services activity
Rod Waldie, CEO of Gateley, said:
"I am pleased with our FY24 outturn given our cautious view of market
conditions during the Period, particularly around the turn of the calendar
year in H2. Our people have worked hard to deliver another year of growth
via our increasingly diverse and resilient business model, combining
complementary legal and consultancy services.
"During the Period we continued to make organic and acquisitive investments in
both our legal and consultancy services and in related systems. RJA
Consultants was acquired onto our Property Platform in July 2023, adding
further expertise and capacity to our quantity surveying and project
management offering. It is already performing ahead of the board's
expectation.
"Our legal services class actions team, established in May 2023, launched its
first case in late February 2024. Our investment in this team is a
high-profile example of the type of investment that we are looking to make to
enhance our returns over the medium to longer-term.
"Our M&A and lateral hire pipeline remains encouraging and we are
committed to further enhancing each of our Platforms as suitable opportunities
arise, aided by our net cash position and ample headroom in our banking
facilities.
"Looking forward, we are encouraged by strengthening transactional activity
levels, which began in Q4 FY24. Our immediate outlook is best characterised
as cautiously optimistic. Our resilient and financially robust foundation,
allied to our unbroken track-record of growth, underpins our confidence to
continue our long-term strategy of investment in people and systems. This
strategy has worked well for us since IPO in 2015 and through disciplined
application of it, we ensure that the Group remains well-positioned for
further growth and enhanced returns for all stakeholders."
(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
Panmure Liberum - Nominated Adviser and Broker Tel: +44 (0) 20 3100 2000
Richard Lindley/Nikhil Varghese
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 2024, another successful year for the business and our ninth
consecutive year of revenue growth since IPO in 2015. Group revenue increased
by 6.0% to £172.5m (FY23: £162.7m) and we generated underlying profit before
tax of £23.0m (FY23: £25.1m) after reinstating the payment of employee
bonuses this year of £4.5m (FY23: £Nil). These results have been delivered
against the unwelcome backdrop of challenging trading conditions for
professional service firms allied to wage and cost inflation. The Group has
again demonstrated the strength of its business model and the resilience
created by its diversification strategy.
In FY23 we made the difficult decision not to make a provision for staff
bonuses for that year. For a business such as ours, where staff retention and
incentivisation are important considerations, this was not ideal. I am
therefore delighted that, this year, we have been able to declare a bonus
which reflects the contribution made by our people to delivering a strong
underlying trading performance and our more positive outlook as we enter FY25.
In doing so, we are moving back towards a more normalised staff bonus pool
with clear intent that this remains a key component in overall reward to our
employees whilst preserving a balanced return to all of our stakeholders. I
would like to take this opportunity, on behalf of the board, to acknowledge
and thank our staff across all levels of the Group. They have 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.
We continue our strategy to diversify the business, placing the Group in a
stronger position to deliver further profitable growth in the coming years. To
support our acquisition strategy, we retain a three-year revolving credit
facility of up to £30m. This, combined with our strong balance sheet, places
us in a good position to acquire further businesses in the future.
As we continue to grow and strengthen our business, the board remains
committed to providing our 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. We are delighted that at
least 70% of current staff are existing share or option holders in the
Company.
The board firmly believes that the use of equity as an incentive and means of
extending share ownership through all levels of the Group, is a material point
of positive differentiation for Gateley in an intensely competitive staffing
environment. It is therefore an important component for our future growth
ambitions. In particular, we have worked hard over the last 12 months to
enhance our restricted share award scheme, principally to facilitate
recirculation of internally held shares. This is our main equity incentive
scheme for senior leaders in the Group. Our enhancements present an efficient
means of maintaining significant equity at senior levels in the Group whilst
minimising external market impacts. We believe this will help secure and
enhance Gateley's position as an attractive and sought after employer.
Responsible Business
The board has made the further development of Gateley's Responsible Business
commitment a key strategic priority this year.
In September 2023, we published our third annual Responsible Business report,
for which we again received significant positive feedback. We were delighted
to achieve all 15 of our internally set responsible business targets and are
focused on reducing 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.
We will publish our next Responsible Business Report covering objectives and
activity for FY24 shortly.
Board changes
David Wilton was appointed to the board as a non-executive director and
Chairman designate on 1 February 2024. The board and David subsequently agreed
not to continue with David's appointment as Chairman and David has since stood
down from the board.
The nomination committee has begun a process to recruit a new Chairman. In the
meantime, I have been asked, and have agreed, to continue to chair the Group
until a successor is appointed.
Dividends
We have maintained dividend to investors, recognising this is a key component
of shareholder return. An interim dividend of 3.3p per share (FY23: 3.3p)
was paid on 21 March 2024 to shareholders on the register at the close of
business on 24 February 2024. The board is pleased to propose a final dividend
of 6.2p per share (FY23: 6.2p), giving a total dividend for the year of 9.5p
per share (FY23: 9.5p), subject to approval at the forthcoming Annual General
Meeting, which will be held on 23 September 2024. If approved, this final
dividend will be paid in October to shareholders on the register at the close
of business on 11 October 2024. The shares will go ex-dividend on 10 October
2024.
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 to date
has been in line with the board's expectations and we look forward to the
immediate future with cautious optimism.
Nigel Payne
Chairman
16 July 2024
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
I am pleased with the Group's performance in FY24. Our teams combined to
maintain Gateley's unbroken record of year-on-year revenue growth. As
always, I am grateful to our people for their hard work and commitment to
delivering the best possible outcomes for our clients.
During the Period we continued to invest in people and systems to progress our
strategy of building a diverse and resilient professional services business,
delivered through each of our four Platforms of Business Services, Corporate,
People and Property. This investment necessarily includes the need to match
prevailing remuneration in a market in which there has been high pay inflation
across professional services. Combined with the increase in our average
headcount to 1,536 during the Period (FY23:1,439), this resulted in a 12.1%
increase in personnel costs, including a resumption of staff bonus awards
(£4.5m). This reflects the contribution made by our people in delivering a
strong underlying trading performance and our more positive outlook as we move
into FY25. In doing so, we are moving back towards a more normalised staff
bonus pool with clear intent that this remains a key component in overall
reward to our employees whilst preserving a balanced return to all of our
stakeholders. Excluding this bonus provision, our personnel costs increased
7.4%.
Our ongoing M&A strategy saw us acquire RJA Consultants onto our Property
Platform in July 2023, contributing to growth in non-legal revenue across the
Group to £49.9m (FY23: £41.8m), or 28.9% (FY23: 25.7%) of Group revenue.
Our proposition remains unique; the ability to deliver complementary legal
and consultancy services to clients in our chosen markets. We continue to
appraise acquisition opportunities on each of our Platforms. Whilst investment
costs to some extent impact short-term margin as acquisition, integration and
system costs are absorbed, we are confident that, in progressing our strategy,
we will generate margin-enhancing returns in the long term.
As reported in April, we were pleased to support our EBT in purchasing
1,864,622 shares at £1.26, predominately from staff who were Partners at IPO.
Those shares are warehoused by the EBT to, imminently, award to certain senior
staff via our restricted share award scheme. This is a deliberate step in
our controlled, non-dilutive recirculation of internally held shares. Our
restricted share award scheme will become our sole equity incentive scheme for
our senior leaders. We will continue to make controlled use of it, in a more
meaningful way, because it is proving to be a valuable differentiator for us
in attracting and retaining quality senior talent who are aligned with
creating long-term value for the Group and its stakeholders.
On 15 September 2023, we published our third annual Responsible Business
Report. Having achieved all 15 responsible business targets set in our prior
report, our 2023/24 report, sets 15 new objectives in-line with our
purpose-led agenda. We have a clear recognition that business is a key
engine for change and our responsible business journey progresses with
conviction. Our FY24 Responsible Business Report will be published shortly.
Finally, we are pleased to propose a final dividend of 6.2p at the Group's AGM
on 23 September 2024, taking the total dividend for the Period to 9.5p (FY23:
9.5p).
Results overview
The Group performed well during FY24, building on the progress reported at the
half year and delivering growth in revenue of 6.0% to £172.5m (FY23:
£162.7m). Underlying profit before tax decreased by 8.1% to £23.0m (FY23:
£25.1m), reflecting the board's decision, unlike last year, to make a
provision of £4.5m for employee bonuses. Profit before tax decreased by
13.9% to £14.0m (FY23: £16.2m). Profit after tax decreased by 17.7% to
£10.0m (FY23: £12.2m).
As a people business, our profit metrics are necessarily influenced by our
personnel costs. Pay inflation across professional services of the type in
the Group has been a continuous characteristic since the end of the pandemic.
Our response has been a considered and deliberate attempt to balance the wider
capital allocation needs of the Group with the competitive employment market
in which our businesses operate. We take reasonable steps to match market
pay rates as we continue to invest more widely in people and systems in line
with our strategy to grow our currently unique business model. Our firm
belief is that it is continual investment which will deliver and enhance our
long-term objectives and returns.
Alongside the in-Period acquisition of RJA Consultants, strategic investments
in new work streams, such as legal services class actions and international
arbitration, are progressing well. We have also invested in AI and other new
technology products, with ongoing capital allocation to maximise its use for
margin improvement. Alongside all of this and more general cost inflation,
our FY24 results delivered another year of solid profitability.
Once again, our outturn for the Period was underpinned by the range and
quality of legal and consultancy services offered through our Platforms. Our
stated strategic plan at IPO was to create resilience by diversifying our
revenue streams. Nine years and 14 acquisitions later, the diversity of
services we can offer helped us weather the impact of reduced transactional
services activity throughout most of the Period, enabling us to maintain our
unbroken record of year-on-year revenue growth.
Looking forward, we are pleased to see a continuation of the improvement we
saw in transactional services activity in Q4 FY24. Layering that improvement
onto our broader service line activity and strategic long-term investments
made in the Period positions us well for FY25 and beyond.
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 14.0% to £24.9m, underpinned by consistently
good activity throughout the Period across the Platform's legal services
dispute resolution teams, allied to strong performance from the Platform's
patent and trademark attorney businesses.
In legal services, our regulatory and business defence team had a record year,
which is reflective of clients' needs for specialist advice in an increasingly
regulated environment across all sectors. In addition, the dispute
resolution teams saw an increase in demand from both UK and overseas clients.
Projects from overseas clients include a return of some activity in Central
Europe alongside new mandates from clients in the Middle East and Africa.
These are representative of new, strategically agile, steps to win
specialist work in new regions.
Buoyed by recent success in growing dispute resolution services, we continue
to make strategic investment in specialist service lines, predominantly in
competition litigation, class actions and international arbitration where, in
all cases, we see huge opportunity. Our recently recruited and highly
regarded senior experts in international arbitration are winning new work and
forging strong credentials for us. Alongside this, our recently formed
specialist class action team has now launched its first case.
In consultancy services, activity in our growing patent and trademark attorney
business was strong throughout the Period. Its outturn was enhanced by the
first full year contribution from 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 and 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 26.0% (FY23: 22.9%) 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 were
challenged by lower volumes of transactional activity during most of FY24. As
a result, the Platform's revenue decreased by 4.4% to £37.1m. However, it
delivered a strong contribution margin.
It is likely that the Corporate Platform will always be legal services
dominated, with the transactional teams on the Platform drawing support,
particular to each transaction, from legal and consultancy services on other
Platforms.
Whilst constrained for most of FY24, corporate transactional activity started
to return strongly in Q4, particularly with our private equity clients and in
wider M&A. The corporate team generated a pipeline 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 good year and
the corporate unit remains our biggest internal referrer of business, with
most, if not all, other teams benefitting in some way. The pipeline into
FY25 is good.
This pattern is also reflected in our banking team, which had a stronger Q4
following a subdued period due to reduced corporate transactions and bank
lending. There was some offset in the form of an increase in loan covenant
reset and refinancing work, which enabled the team to maintain revenue levels
in Period in line with FY23. This is 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
traditional transactional activity and following a sustained period of quiet
trading conditions for some years now, revenue levels rose by 20.8% in FY24,
as government pandemic support for companies unwound and inflationary
pressures and interest rate increases impacted UK businesses. Activity
remains strong in these teams. 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 closed out a significant
contract providing services to help public and private sector global clients
realise their international expansion plans, inward and outward of the UK.
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.
Revenue on this Platform contracted by 4.3% due, in part, to a reduction in
headcount and reorganisation of our legal services private client team and a
drop-off in required support to transactional teams from our legal services
employment team.
We saw strong off-set to the above from our legal services pension team and
our pension trustee business Entrust which, together, grew revenue by 30.7%.
These relatively predictable revenue streams are a further example of
deliberately designed resilience in our model. This is a sector where we are
keen to make further investment to service the increase in the number of
pension schemes looking to complete all liability buy-outs, and/or out-source
management of their pension schemes, working with Entrust.
t-three and Kiddy & Partners, our talent assessment, development and
cultural change businesses, continue to attract significantly sized clients
buying dual services, with particular focus on scalable products to high
growth clients. They were pleased to maintain revenue at £6.0m (FY23:
£6.2m) alongside a strong pipeline as organisations continue to develop their
people and/or transform in some way.
In aggregate, consultancy revenue now represents 30.8% 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.
This remains our most diverse and mature Platform and we maintain our view
that the range of expertise now housed on this Platform puts us in position to
compete with well-established, multi-disciplinary property consultancies in
the wider market. Despite a very challenging back drop for the property
sector, revenue on our Property Platform grew by 11.4% to £91.0m during FY24
(FY23: £81.6m).
Whilst activity in the wider commercial property market eased in FY23 (and
continued to be subdued throughout most of FY24), 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. Our construction team had a record year
and continues to be very busy. Our real estate development team - a market
leader in the warehousing and logistics sector had a slower start to the year
before returning strongly to growth. Elsewhere, prevailing market 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
Gateley both geographically and in service lines, and this should result in
more work for the team. Our clients need to continue to build and sell and
have other areas for which they require our services. This includes shared
ownership framework agreements, bulk sales to housing associations and
build-to-rent investors and housing-led urban regeneration. We act for all of
the leading developers in this space and offer a unique combination of legal
and consultancy services covering whole project life cycles.
In consultancy services, Gateley Smithers Purslow ("GSP"), who deliver
specialist services to the property insurance complex claims market,
contributed revenue of £17.6m (FY23: £13.7m), representing annualised growth
for that business of 28.5%. We also saw strong revenue growth of 14.7% from
Gateley Vinden's broad range of specialist services.
Our acquisition of surveyors Richard Julian and Associates Limited ("RJA") in
July 2023 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 enhances related expertise in both GSP and Gateley
Vinden. RJA has had an excellent start in Group, exceeding expectation.
FY24 consultancy revenue represented 40.5% (FY23: 38.1%) of Property Platform
revenue.
Operational review
Our operational focus has been aimed at current and future efficiency.
AI is at the top of our agenda and is a priority area for capital allocation,
alongside investment in acquisitions and people. We are very aware that
investment in suitably developed product will positively enhance the delivery
of some of our services and realise efficiencies which help us improve our
profitability. We have a cross-disciplinary steering group reporting directly
to the board on product assessment, procurement and integration. Our
investment in-Period included recruitment of a specialist in-house AI
development team to create bespoke applications for both service delivery and
internal uses. Our development program will provide applications for use on
each of our client-facing Platforms and for our business support functions.
The first of our internally designed applications has just been launched for
use by the residential development team on our Property Platform. It
significantly improves turnaround of the process that it is designed for and
is verificatory of the value of the ongoing investment that we will continue
to make in AI driven product.
In Period, we acquired new systems to support the on-boarding of a legal
services team to run class action claims. This is specialist, long-term,
high value work which requires a bespoke technology platform, in which we have
invested £0.5m so far for current and future benefit.
We have previously reported planned rationalisation of some of our office
space. This is an on-going exercise, including the post-Period surrender of
our lease for office space in Leicester as part of consolidation of some of
our teams in the East Midlands to our Nottingham office.
On-going integration of recently acquired businesses is proceeding as planned,
including positive enhancements to our Group integration processes. In
parallel, phase two of adoption of our new, market-leading business
management, productivity, and financial management system (3E) is proceeding
throughout FY24 and into FY25.
People and Culture
Attracting, developing and motivating talent, at all levels across the Group,
is a key objective every year. In FY24, overall average headcount in the Group
increased by 6.7% to 1,536 (FY23: 1,439). Legal services average headcount
growth was 1.2% to 1091 employees (FY23: 1,078). Average consultancy headcount
increased by 25.4% to 445 (FY23: 355), primarily as a result of acquisitions
and investment in GSP.
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 159 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. During FY24 we issued
circa 3.4m shares to participants across our various share schemes. All of
this is in line with our strategy of creating wider equity participation for
more of our people. Currently circa 70% 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 remains an integral part of our Purpose
Statement;
"Our purpose is to deliver results that delight our clients, inspire our
people and support our communities."
We were pleased to achieve all 15 of our internally-set responsible business
targets in 2022/2023 and, in-Period, we published our third annual Responsible
Business Report outlining actions taken and setting targets for 2023/2024. Our
next report will be published imminently.
Highlights from the last report include:
· A carbon reduction plan including a commitment to achieve net zero emissions
by 2040, with interim targets set by 2030;
· A new strategic partnership with Alzheimer's Research UK; and
· The launch of an internal volunteering policy which provides opportunities for
our people to volunteer with the charity, sustainability and education
partners we work with.
We are proud of the progress that we have made since publishing our
Responsible Business Strategy in October 2021. We will continue to evaluate
where we are effecting change and how we can improve and progress over time.
Our journey continues with conviction.
Current trading and outlook
Looking forward, we are encouraged by strengthening levels of activity across
our transactional services teams, which began during the Spring. This is
matched by improving pipelines for those teams. Alongside this, we continue
to see good non-transactional and consultancy business activity. Therefore,
our immediate outlook is cautiously optimistic at the beginning of a new
political dawn for the UK.
From a long-term perspective, we remain positive as our increasingly resilient
model continues to deliver for us and gives us confidence to continue our
investment strategy for enhanced returns.
The group enters FY25 with positive mindset and belief in strategy.
Rod Waldie
Chief Executive Officer
16 July 2024
CHIEF FINANCIAL OFFICER'S REVIEW
Financial overview
The Group has again grown revenue both organically and through acquisition,
despite the challenging economic backdrop of FY24 that resulted in decreasing
activity levels throughout the year until Q4.
This year's increase in costs, driven through a combination of inflation and
investment, alongside a return of bonuses, have checked our progression on
both profit and margin. Following strong activity levels in transactional
areas in Q4 alongside the reorganisation of specific areas of the Group, we
enter FY25 feeling confident of improving profitability in FY25.
Our dividend yield is 6.4% using the average share price across FY24 and, even
in an environment of higher interest rates, remains at a level which we
believe is attractive for all shareholders.
Our revolving credit facility has significant headroom and with a closing net
cash position of £3.8 million we are well-placed to capitalise on current
market conditions, as we have done previously, to enable further expansion and
growth.
Revenue and activity levels
Group total revenue grew by 6.0% (FY23: 18.6%) to £172.5m (FY23: £162.7m),
including 2.8% organically. Revenue from core legal service lines grew
organically by 0.8% (FY23: 4.9%), while organic revenue growth from
consultancy businesses was 9.1% (FY23: 15.2%). Consultancy revenues of £49.9m
(FY23: £41.8m) now represent 28.9% (FY23: 25.7%) of total revenue,
demonstrating our strategy to build and diversify into a broader professional
services group, and further enhance our unique offering to clients.
Fee earner utilisation levels during FY24 returned to FY22 levels at 83%,
after FY23's increase to 89%. Alongside a static conversion of time into
fees, this has contributed to the Group's decrease in profitability. Activity
in Q4 of FY24 was 92% compared to an average of 81% in the first three
quarters. This Q4 FY24 utilisation average was 1% higher than Q4 in FY23.
We fully expect this improvement to continue as we experience increased
instructions from new areas of investments and transactional activity
continuing to build ahead of the recent UK general elections.
During this period of reduced activity levels, a number of key areas of the
Group have been unable to pass on the recent market-driven staff cost
increases of the last few years, whilst lead generation has remained extremely
competitive. As activity levels improve and the mix of work changes towards
recent new areas of investment, we are starting to see rate increases work
through into improved recoveries.
However, activity in a number of our consultancy businesses is driven by
alternative factors. Gateley Smithers Purslow ("GSP") and Gateley RJA are
examples of two such areas of the Group that have seen activity increase
significantly as a result of the rise in adverse economic climate change and
government policy in social/affordable housing, respectively. Both
businesses have experienced impressive organic growth since joining the Group
of 28.3% and 26.0% respectively.
Costs and margins
The bridge in personnel costs from £96.8m in FY23 to £108.5m in FY24 of
£11.7m arises due to a £4.5m bonus, growth in head count and wage inflation
of £4.4m, £2.4m of new payroll costs following the July 2023 acquisition of
RJA and £0.4m of full year Symbiosis costs acquired in October 2022, both of
which were covered by revenue introduced. Average staff headcount has
increased by 6.7% from 1,439 to 1,536 total staff. Average professional
staff within this period have increased by 6.8% from 1,000 to 1,068.
Personnel costs (before bonus) to revenue in FY24 increased to 60.3% (FY23:
59.5%) which rises to 62.9%, as a result of the Group awarding £4.5m of
bonuses for exceptional performers during FY24. We continue to sensibly manage
this key metric as market conditions improve. The reinstatement of a bonus
and the increase in investment income from trade related interest have both
impacted our adjusted profit before tax margin this year, which has decreased
to 13.4% (FY23: 15.4%). The bonus reinstatement has reduced margin by 2.6%,
whilst the additional £2.7m of net interest income has increased this margin
by 1.6%.
Operating expenses have increased by £2.7m or 7.6% to £38.8m (FY23: £36.1m)
due mainly to the investment in new IT systems (£0.5m) supporting new areas
of work such as Class Actions, and the additional cost of the acquisition of
RJA (£0.6m). Overall, operating overheads have increased slightly as a
percentage of revenue from 22.2% in FY23 to 22.5% in FY24 as predicted.
The table below represents Platform performance over the last two reported
years along with each Platform's direct contribution towards our Group's
performance.
Business Corporate People Property Total
Services £m £m £m £m
£m
FY24
Revenue 24.9 37.0 19.6 91.0 172.5
Segmental contribution 7.5 14.0 5.8 33.2 60.5
Contribution margin 30.2% 37.7% 29.5% 36.5% 35.1%
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%
Revenue movement (%) 14.0% (4.4%) (4.3%) 11.4% 6.0%
Contribution margin change (%) 23.8% 4.7% 0.1% (4.2%) 1.4%
Underlying operating profit before tax
The Group has recorded £20.3m of underlying operating profit before tax
(FY23: £25.0m). Whilst we have continued to strategically invest across the
business in our legal and consultancy teams, a particular focus has been on
headcount investment in GSP to meet significant demand. The reinstatement of a
Group bonus (£4.5m) is the key difference between the two years.
Our underlying trading margins have decreased to 11.7% (FY23: 15.4%) as a
factor of continued investment for growth and ongoing inflationary pressure in
our people costs despite decreased levels of activity in certain parts of the
Group due to macro-economic factors. Nevertheless, we are confident that our
strategy of ongoing investment made by us will result in short term margin
stability followed by long term improvement.
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
acquisition accounting. 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.
Extract of UK statement of comprehensive income 2024 2023
£'000 £'000
Revenue 172,492 162,683
Operating profit 11,177 16,122
Operating profit margin (%) 6.48 9.91
Reconciliation to alternative performance measure: underlying operating profit
before tax
Operating profit 11,177 16,122
Non-underlying items
Amortisation of acquisition related intangible assets 2,483 2,073
Share based payment charge - Gateley Plc 1,625 1,984
Share based payment charge - Gateley RJA Limited 61 -
Contingent consideration treated as remuneration 6,956 6,190
Gain on bargain purchase (3,609) (1,389)
Acquisitions costs 37 -
One off remuneration charge - Gateley RJA Limited 367 -
Reorganisation costs 1,159
Underlying operating profit before tax 20,256 24,980
Adjusted underlying operating profit margin (%) 11.74 15.36
Earnings Per Share (EPS)
Basic EPS decreased by 20.8% to 7.74p (FY23: 49.5% to 9.77p). Basic EPS
before non-underlying and exceptional items decreased by 13.7% to 14.42p
(FY23: increased by 12.1% to 16.71p). Diluted EPS decreased by 19.9% to 7.63p
(FY23: increased by 49.6% to 9.52p). Diluted EPS before non-underlying and
exceptional items decreased by 12.8% to 14.20p (FY23: increased by 12.0% to
16.28p).
Share option schemes
Over 70% 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 primarily through the continued issuance of
restricted shares awards (RSAs) across senior leaders within the Group and our
Save As You Earn ("SAYE") all staff share scheme. Such share ownership
promotes strong alignment with the Group's external shareholders, improves our
attraction to like-minded recruits and is reflective of Gateley's culture of
long-term ownership. The RSAs, which vest on receipt, are subject to a
five-year non-dealing restriction and are forfeited should employment cease
within that period.
On 14 September 2023, Long-Term Incentive Plan awards ("LTIP") over 727,790
Ordinary Shares vested and were exercised on 21 September 2023 by 77 partners
and PDMR's following the conclusion of LTIP awards vested at the end of a
three-year period, with vesting and exercise dependent upon the achievement of
profit related performance conditions and continuous employment. Profit
performance during the conditional period resulted in 68% of the total award
being made.
Profits used to calculate underlying EPS each year are disclosed below:
2024 2023 2022 2021
£'000 £'000 £'000 £'000
Reported profit after tax 10,074 12,240 23,023 13,157
Adjustments for non-underlying and exceptional items:
- Amortisation of acquired intangible assets 2,483 2,073 1,581 2,073
- Share-based payment adjustments 1,686 1,984 1,213 956
- Consideration treated as remuneration 6,956 6,190 3,509 -
- Gain on bargain purchase (3,609) (1,389) (12,380)
- Reorganisation costs 1,159 - - -
-One off remuneration costs 367
- Acquisition-related costs 37 - 870 -
- Tax impact of above (391) (168) (94) -
Underlying profit after tax 18,762 20,930 17,722 16,186
Weighted average number of ordinary shares for calculating diluted earnings 132,107,953 128,527,341 121,893,238 118,508,833
per share
14.20p 16.28p
Underlying adjusted fully diluted EPS 14.54p 13.66p
Taxation
The Group's tax charge for the Period was £3.9m (FY23: £4.0m) which
comprised a corporation tax charge of £4.4m (FY23: £5.0m) and a deferred tax
credit of £0.5m (FY23: credit of £1.0m).
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 27.8% (FY23: 24.5%) based
on reported profits before tax. The increase in the effective rate of tax is
as a result of the increase in UK corporation tax rates and change in earn-out
related consideration remuneration charges and gains on bargain purchase from
FY23 to FY24, the net effect of which is not allowable for corporation tax
purposes.
The net deferred taxation liability has increased to £2.6m (FY23: £2.1m) as
a result of the decreased deferred tax asset recognised on share-based payment
schemes yet to vest driven by a decrease in the Group's share price.
Dividend
The Group paid an interim dividend of 3.3p share on 21 March 2024 and proposes
a final dividend at the Company's Annual General Meeting on 23 September 2024
of 6.2p (FY23: 6.2p) per share, which if approved, will be paid in October to
shareholders on the register at the close of business on 11 October 2024.
The shares will go ex-dividend on 10 October 2024.
Balance sheet
The Group's net asset position has increased by £2.2m (FY23: £3.0m) to
£80.3m (FY23: £78.1m), due to the following movements:
There was a £17.9m increase in total current assets, resulting from £4.7m
additional trade and other receivables through acquired businesses and the
strong organic growth of the Group. Contract assets ("unbilled revenue")
increased by £3.2m and cash at bank increased by £5.6m as improvements were
made in the collection of cash during this year.
Non-current assets decreased by £3.5m, resulting predominantly from a
decrease of £3.5m from a change in property use and right of use asset values
as no new leases were entered into during FY24 as amortisation of right of use
assets were the only key movements.
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 2024,
the board concluded that the goodwill and intangible assets do not require
impairment.
Total liabilities increased by £12.3m, due to the reintroduction of accrued
bonuses together with increased lending from the Group's Revolving Credit
Facility following the acquisition of RJA and the payment of earn out
consideration to the vendors of GSP, offset by a reduction of £3.4m in lease
liabilities.
Cash flow
During the year, the Group increased its usage of its Revolving Credit
Facility from £6.8m to £12.9m. The facility provides total committed
funding of £30m until April 2025 (supported by a letter of comfort for its
extension to Oct 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 FY25.
Cash generation remained strong with net cash inflows from operating
activities increasing to £14.0m (from £9.7m in FY23) representing 138.8%
(FY23: 79.6%) of profit after tax. The Group ended the year with net cash of
£3.8m (FY23: £4.3m), as less cash was consumed during the financial year on
creditors together with management's sustained focus on debt collection
resulting in an improvement in debtor days.
Adjusted free cashflow during the year from operations (after adjusting for
IFRS 16 and IFRS 3 specific items noted in the table below) was £17.7m (FY23:
£6.0m), which represents an increase to 175.9% (FY23: 48.6%) of profit after
taxation ("PAT") and an increase to 92.5% (FY23: 28.2%) of underlying PAT due
to improved operational cash collection, significant increases in interest
income and the adjustments from acquisition related activity this year being
more significant.
2024 2023
£'000 £'000
Net cash generated from operations 18,887 14,065
Tax paid (4,902) (4,320)
Net interest received 4,043 1,364
Cash outflow from IFRS 16 leases (rental payments excluded from operating cash (5,091) (4,579)
flows under IFRS 16)
Add back: Cash outflow paid on acquisitions treated as operating activity 5,825 1,518
Purchase of property, plant and equipment (1,045) (1,312)
Purchase of other intangible assets - (787)
Free cash flow 17,717 5,949
Profit after tax 10,074 12,240
Free cash flow 175.9% 48.6%
Adjusted free cash flow 2024 2023
£'000 £'000
Profit after tax 10,074 12,240
Non-underlying operating items 7,516 8,858
Exceptional items 1,563 -
Underlying profit after tax 19,153 21,098
Free cash flow 92.5% 28.2%
Overall, working capital levels have increased on the previous year, as
unbilled revenue represented 61 days of pro-forma net revenue compared to 53
days last year, and Group debtor days have decreased to 111 days of pro-forma
net revenue from 113 days last year, which includes revenue from acquisitions
on a full year pro-forma basis. I am pleased we have made good progress in
debt collection with a strong finish to the year that resulted in a pleasing
net cash position. We have made a good start to collections in FY25.
Unbilled revenue recognised in the Group's statutory accounts, from time
recorded on non-contingent work, remains low as a percentage of revenue and
totalled just £23.5m or 13.6% of revenue recognised over the year (FY23:
£20.4m or 12.5%).
Summary
FY24 continued our unbroken record of revenue growth since IPO in 2015. Our
recent acquisitions have settled into the Group well and activity levels that
were subdued at the start of the Period, recovered strongly in Q4 and into
FY25. There is no doubt that reduced activity at a time of continued
inflation has remained a challenge to our trading margin but I am pleased to
return a bonus to staff for exceptional performance this year alongside
£23.0m of underlying profit before tax and a 9.5p dividend to shareholders.
We remain confident that the investments we have made, alongside an improving
market, will support our medium to longer-term growth strategy and a margin
improvement. We have maintained rigid control of costs and improved our
working capital position that supports the Group's growth ambitions and its
healthy net cash position within a strong balance sheet with significant bank
facility headroom.
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 FY25 and beyond.
Neil Smith
Chief Financial Officer
16 July 2024
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
for the year ended 30 April 2024
Note 2024 2023
£'000 £'000
Revenue 3 172,492 162,683
Other operating income 153 49
Personnel costs, excluding IFRS 2 charge 5 (108,490) (96,765)
Depreciation - Property, plant and equipment 11 (1,140) (936)
Depreciation - Right-of-use asset 11 (3,949) (3,976)
Impairment of trade receivables and contract assets (591) (1,334)
Other operating expenses, excluding non-underlying and exceptional items (38,219) (34,741)
Operating profit before non-underlying and exceptional items 4 20,256 24,980
Non-underlying operating items 4 (7,516) (8,858)
Exceptional items 4 (1,563) -
(9,079) (8,858)
11,177
Operating profit 4 16,122
Financial income 7 4,999 1,735
Financial expense 7 (2,221) (1,645)
Profit before tax 13,955 16,212
Taxation 8 (3,881) (3,972)
Profit for the year after tax attributable to equity holders of the parent 10,074 12,240
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss
- Revaluation of other investments 129 (26)
- Exchange differences on translation of a foreign branch (20) (49)
Profit for the financial year and total comprehensive income all attributable 10,183 12,165
to equity holders of the parent
Statutory Earnings per share
Basic 9 7.74p 9.77p
Diluted 9 7.63p 9.52p
The results for the periods presented above are derived from continuing
operations.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 APRIL 2024
Note
2024 2023
£'000 £'000
Non-current assets
Property, plant and equipment 11 1,583 1,628
Right of use asset 11 23,621 27,098
Investment property 164 164
Deferred tax asset 19 373 830
Intangible assets & goodwill 12 13,768 12,929
Other intangible assets 14 647 1,090
Other investments 275 147
40,431 43,886
Total non-current assets
Current assets
Contract assets 15 23,543 20,388
Trade and other receivables 16 82,473 73,272
Cash and cash equivalents 21 16,674 11,105
Total current assets 122,690 104,765
Total assets 163,121 148,651
Non-current liabilities
Other interest-bearing loans and borrowings 17 - (6,813)
Lease liability 23 (24,178) (28,716)
Other payables 18 - -
Deferred tax liability 19 (2,968) (2,941)
Provisions 20 (3,725) (1,290)
Total non-current liabilities (30,871) (39,760)
Current liabilities
Other interest-bearing loans and borrowings 17 (12,908) -
Trade and other payables 18 (33,112) (25,933)
Lease liability 23 (4,346) (3,257)
Provisions 20 (175) (107)
Current tax liabilities (1,378) (1,482)
Total current liabilities (51,919) (30,779)
Total liabilities (82,790) (70,539)
NET ASSETS 80,331 78,112
EQUITY
Share capital 22 13,304 12,664
Share premium 35 11,846
Merger reserve (9,950) (9,950)
Other reserve 19,383 15,413
Treasury reserve (4,012) (677)
Translation reserve (71) (51)
Retained earnings 61,642 48,867
TOTAL EQUITY 80,331 78,112
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 2022 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
At 1 May 2023 12,664 11,846 (9,950) 15,413 (677) 48,867 (51) 78,112
Comprehensive income:
Profit for the year - - - - - 10,074 - 10,074
Revaluation of other investments - - - - - 129 - 129
Exchange rate differences - - - - - (20) (20)
Total comprehensive income - - - - - 10,203 (20) 10,183
Transactions with owners
recognised directly in equity:
Issue of share capital 640 1,919 - 3,970 - - 6,529
Cancellation of share premium account - (13,730) - - - 13,730 - -
Purchase of own shares at nominal value (166) - (166)
Sale of treasury shares - - - - 4 - - 4
Purchase of treasury shares - - - - (3,339) - - (3,339)
Recognition of tax benefit on gain from equity settled share options - - - - - (343) - (343)
Dividend paid - - - - - (12,335) - (12,335)
Share based payment transactions - - - - - 1,686 - 1,686
Total equity at 30 April 2024 13,304 35 (9,950) 19,383 (4,012) 61,642 (71) 80,331
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 2024
Note
2024 2023
£'000 £'000
Cash flows from operating activities
Profit for the year after tax 10,074 12,240
Adjustments for:
Depreciation and amortisation 11/12/14 8,015 7,246
Financial income 7 (4,999) (1,735)
Financial expense 7 1,051 495
Interest charge on capitalised leases 7 1,170 1,150
Equity settled share-based payments 6 1,686 1,100
Gain on bargain purchase 4 (3,609) (1,389)
Acquisition related earn-out remuneration charge 4 6,956 6,190
Earn-out consideration paid - acquisition of subsidiary (3,790) (50)
Initial consideration paid on acquisitions (2,035) (1,468)
Loss on disposal of property, plant and equipment 4 - 82
Tax expense 8 3,881 3,972
18,400 27,833
Increase in trade and other receivables (10,658) (6,942)
Increase/(decrease) in trade and other payables 8,642 (7,259)
Increase in provisions 20 2,503 433
Cash generated from operations 18,887 14,065
Tax paid (4,902) (4,320)
Net cash flows from operating activities 13,985 9,745
Investing activities
Acquisition of property, plant and equipment 11 (1,045) (1,312)
Acquisition of other intangible assets 14 - (787)
Cash acquired on business combinations 1,239 483
Interest received 7 4,999 1,735
Net cash generated from investing activities 5,193 119
Financing activities
Interest and other financial income paid 7 (956) (371)
Lease repayments (5,091) (4,550)
Receipt of new revolving credit facility 21 6,000 1,000
Proceeds from sale of own shares 4 -
Acquisition of own shares by Employee Benefit Trust (3,339) (416)
Cash received for shares issued on exercise of SAYE/CSOP options 2,108 477
Dividends paid 10 (12,335) (11,004)
Net cash used in financing activities (13,609) (14,864)
Net increase/(decrease) in cash and cash equivalents 5,569 (5,000)
Cash and cash equivalents at beginning of year 11,105 16,105
Cash and cash equivalents at end of year 21 16,674 11,105
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 2024, 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 2024 will be delivered to the Registrar of Companies following
the Annual General Meeting.
These condensed preliminary financial statements for the year ended 30 April
2024 have been prepared on the basis of the accounting policies as set out in
the 2024 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 2024.
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
Having reviewed the Group's forecasts, which includes an analysis of both
short term cash flow forecasts and longer term cash flow forecasts, the risk
and uncertainties surrounding the current and future demand for legal
services, and other reasonably possible variations in trading performance,
mitigating actions available to management the Group expects to be able to
operate within the Group's financing facilities.
The Group's revolving credit facility expires in April 2025 however,
discussions are underway with the Group's banks to provide a new facility,
with terms anticipated to be agreed well ahead of expiry of the current
facility. Furthermore, the Group's supportive banks have provided a comfort
letter that expresses their willingness to extend the current facility to
October 2025, should it be required.
Sensitivity analysis has been performed in respect of specific scenarios which
could negatively impact our future performance such as lower levels of revenue
growth, lower than forecast receipts of cash, and reduced levels of gross
margin expansion. In addition, the Directors have also considered further
mitigating actions such as lower capital expenditure and other short-term cash
management activities within the Group's control. On this basis, the Directors
have a reasonable basis to conclude that the Group is forecast to continue to
trade in line with existing financing facilities for the foreseeable future
and at least 12 months from the approval of these financial statements.
Accordingly, the Directors continue to adopt the going concern basis of
accounting in preparing the 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 2024:
Reportable segment/Platforms Legal service lines Consultancy service lines
Corporate Banking GEG Services
Commercial International Investment Services
Corporate
Restructuring advisory
Taxation
Business services Austen Hays Adamson Jones
Commercial Dispute Resolution Symbiosis IP
Complex International litigation
IP
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 RJA
The revenue and operating profit are attributable to the principal activities
of the Group. A geographical analysis of revenue is given below:
2024 2023
£'000 £'000
United Kingdom 156,760 151,489
Europe 9,016 5,459
Middle East 1,797 2,390
North and South America 2,478 1,675
Asia 1,878 1,163
Other 563 507
172,492 162,683
The Group has no individual customers that represent more than 10% of revenue
in either the 2024 or 2023 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
£0.09m (2023: 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 £1.80m (2023: £2.39m) as disclosed above as due from the
customers in the Middle East
2024
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 5,648 15,845 7,918 18,936 48,347 - 48,347
transferred at a point in time
Segment revenue from services 19,241 21,219 11,636 72,049 124,145 - 124,145
transferred over time
Total segmental revenue 24,889 37,064 19,554 90,985 172,492 - 172,492
Segment contribution (as reported 7,523 13,975 5,772 33,240 60,510 - 60,510
internally)
Costs not allocated to segments:
Other operating income 153
Personnel costs (18,087)
Depreciation and amortisation (8,015)
Other operating expenses (16,788)
Share based payment charges (1,686)
Gain on bargain purchase 3,609
Contingent consideration treated as (6,956)
remuneration
Exceptional items (1,563)
Net financial expense 2,778
Profit for the financial year before taxation 13,955
2023
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 4,952 16,578 8,409 17,002 46,941 1 46,942
Segment revenue from services transferred over time 16,872 22,200 12,027 64,642 115,741 - 115,741
Total Segment 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
Exceptional costs
Net financial expense 90
Profit for the financial year before taxation 16,212
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. £11.4 million (2023: £16.4m) 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:
2024 2023
£'000 £'000
Depreciation on tangible assets (see note 11) 1,140 936
Depreciation on right-of-use asset (see notes 11 and 23) 3,949 3,976
Short term and low value lease payments (see note 23) 76 82
Operating lease costs on property (see note 23) 116 166
Loss on sale of fixed assets - 82
2024 2023
£'000 £'000
Non-underlying items
Amortisation of acquisition related intangible assets (see note 12) 2,483 2,073
Share based payment charges - Gateley Plc 1,625 1,984
Share based payment charges - Gateley RJA Limited 61 -
Gain on bargain purchase (3,609) (1,389)
Consideration treated as remuneration 6,956 6,190
7,516 8,858
Exceptional items
Acquisition costs 37 -
One off remuneration charge - Gateley RJA Limited 367 -
Reorganisation costs 1,159 -
Total non-underlying and exceptional items 9,079 8,858
Acquisition costs relate to third-party professional fees in connection with
prospecting and completing acquisitions during the period.
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 RJA Limited represent shares awarded to
staff following the successful acquisition of the Company (See notes 5 and 6).
Reorganisation costs relate to restructuring and integration projects around
the group.
Auditor's remuneration
2024 2023
£'000 £'000
Fees payable to the Company's Auditor in respect of audit services:
Audit of these financial statements 115 107
Audit of financial statements of subsidiaries of the Company 23 22
138 129
Amounts receivable by the Company's auditor and its associates in respect of:
Other assurance services 37 34
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
2024 2023
Legal and professional staff 1,068 1,000
Administrative staff 468 439
1,536 1,439
The aggregate payroll costs of these persons were as follows:
2024 2023
£'000 £'000
Wages and salaries 94,402 83,942
Social security costs 10,928 9,984
Pension costs 3,160 2,839
108,490 96,765
Non-underlying items (see note 4)
Share based payment expense - Gateley Plc 1,625 1,984
Share based payment expense - Gateley RJA Limited 61 -
110,176 98,749
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 1,766,571 SAYE 19/20 options vested with 1,395,589 being
exercised by 30 April 2024 leaving 370,982 options still to be exercised. New
shares were issued to satisfy these options being 1,395,589 10p shares with a
nominal value of £139,559.
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 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.
During the year 742,998 LTIP 2020 options vested with 727,790 being exercised
by 30 April 2024. New shares were issued to satisfy these options being
727,790 10p shares with a nominal value of £72,779.
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 2023 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 19/20 - 30 0 years £1.28 822,625
September 2019
(774,066) 48,559 - - (48,559) -
SAYE 20/21 - 6 0 years £1.02 2,337,197 1,873,858 (107,287)
November 2020 (463,339) - (1,395,589) 370,982
-SAYE 21/22 - 25 0.3 years £1.70 673,077 501,015 (219,751) 281,264
August 2022 (172,062) - -
SAYE 22/23 - 22 1.4 years £1.55 1,070,154 (426,326) 604,849
September 2023 (36,850) 1,033,304 - (2,129)
SAYE 23/24 - 3 2.5 years £1.14 - - (95,668) 1,705,640
November 2023 - 1,801,308 -
4,903,053 3,456,736 (849,032) 2,962,735
(1,446,317) 1,801,308 (1,446,277)
CSOPS
CSOPS 20/21 - 7 0 years £1.35 976,797 731,783 - (58,818)
July 2020 (245,014) (438,263) 234,702
CSOPS 22/23 - 14 December 2022 1.6 years (40,000) 250,000
£1.74 300,000 (10,000) 290,000 - -
1,276,797 1,021,783 -
(255,014) (98,818) (438,263) 484,702
LTIPS
LTIPS 20/21 - 22 July 2020 0 years 1,405,766 1,102,247 - (374,457) -
£0.00 (303,519) (727,790)
LTIPS - 27 April 2022 1.0 years 1,115,000 1,025,000 - (135,000) - 890,000
£0.00 (90,000)
LTIPS 23 Feb 2023 1.8years 1,130,000
£0.00 1,320,000 - 1,320,000 - (190,000) -
3,840,766 3,447,247 (699,457) 2,020,000
(393,519) - (727,790)
RSA
RSA - 27 April 2022 1,422,560 1,422,560 1,185,060
3.0 years £0.00 - - (237,500) -
RSA 23 February 2023 3.8 years £0.00 1,175,000 (50,000) 1,125,000 - (187,500) - 937,500
RSA 21 September 2023
4.4 years £0.00 - - - 790,131 - - 790,131
2,597,560 (50,000) 2,547,560 790,131 (425,000) - 2,912,691
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 RSA
Grant date 03/11/2023 21/09/2023
Share price at date of grant £1.31 £1.54
Exercise price £1.14 £nil
Volatility 18.9% 18.9%
Expected life (years) 3.3 5.0
Risk free rate 4.36% 4.43%
Dividend yield 4.50% 0.00%
Fair value per share
Market based performance condition - -
Non-market based performance £0.23 £1.535
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 £1,686,000 (2023: £1,984,000).
7. Financial income and expense
Recognised in profit and loss
2024 2023
£'000 £'000
Financial income
Interest income 4,999 1,735
Total financial income 4,999 1,735
Financial expense
Interest expense on bank borrowings measured at amortised cost (1,051) (495)
Interest on lease liability (1,170) (1,150)
Total financial expense (2,221) (1,645)
Net financial income 2,778 90
8. Taxation
2024 2023
£'000 £'000
Current tax expense
Current tax on profits for the year 4,341 4,974
Under provision of taxation in previous period 73 58
Total current tax 4,414 5,032
Deferred tax expense
Origination and reversal of temporary differences (646) (472)
Under provision on share-based payment charges 113 (588)
Total deferred tax expense (533) (1,060)
Total tax expense 3,881 3,972
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:
2024 2023
£'000 £'000
Profit for the year (subject to corporation tax) 13,955 16,212
Tax using the Company's domestic tax rate of 25% (2023: 19%) 3,489 3,080
Expenses not deductible/(deductible) for tax purposes 206 1,422
Under provision of taxation in previous period 73 58
Over/(under) provision on share-based payment charges 113 (588)
Total tax expense 3,881 3,972
The Finance Act 2021 increased the main rate of corporation tax to 25% from 1
April 2024.
9. Earnings per share
Statutory earnings per share
2024 2023
Number Number
Weighted average number of ordinary shares in issue, being weighted average 130,127,316 125,244,334
number of shares for calculating basic earnings per share
Shares deemed to be issued for no consideration in respect of share based 1,980,638 3,283,007
payments
Weighted average number of ordinary shares for calculating diluted earnings 132,107,953 128,527,341
per share
2024 2023
£'000 £'000
Profit for the year and basic earnings attributable to ordinary equity 10,074 12,240
shareholders
Non-underlying and exceptional items (see note 4)
Operating expenses 9,079 8,858
Tax on non-underlying and exceptional items (391) (168)
Underlying earnings before non-underlying and exceptional items 18,762 20,930
Earnings per share is calculated as follows:
2024 2023
Pence Pence
Basic earnings per ordinary share 7.74 9.77
Diluted earnings per ordinary share 7.63 9.52
Basic earnings per ordinary share before non-underlying and exceptional items 14.42 16.71
Diluted earnings per ordinary share before non-underlying and exceptional 14.20 16.28
items
2024
2023
£'000
£'000
Profit for the year and basic earnings attributable to ordinary equity
shareholders
10,074
12,240
Non-underlying and exceptional items (see note 4)
Operating expenses
9,079
8,858
Tax on non-underlying and exceptional items
(391)
(168)
Underlying earnings before non-underlying and exceptional items
18,762
20,930
Earnings per share is calculated as follows:
2024
2023
Pence
Pence
Basic earnings per ordinary share
7.74
9.77
Diluted earnings per ordinary share
7.63
9.52
Basic earnings per ordinary share before non-underlying and exceptional items
14.42
16.71
Diluted earnings per ordinary share before non-underlying and exceptional
items
14.20
16.28
10. Dividends
2024 2023
£'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 2024 (3.3p per share) - 21 March 2024 4,338 -
Final dividend in respect of 2023 (6.2p per share) - 23 October 2023 7,997 -
12,335 11,004
The board proposes to recommend a final dividend of 6.2p (2023: 6.2p) per
share at the AGM. If approved, this dividend will be paid in October 2024 to
shareholders on the register at the close of business on 11 October 2024. The
shares will go ex-dividend on 10 October 2024. 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 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
Balance at 1 May 2023 313 7,736 6,025 40,153 54,227
Additions - 699 346 472 1,517
Arising through business combinations 34 90 - - 124
Disposal - (22) - (630) (653)
As at 30 April 2024 347 8,503 6,371 39,994 55,215
Depreciation and impairment
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
Balance at 1 May 2023 220 6,722 5,504 13,055 25,501
Depreciation charge for the year 29 823 287 3,949 5,089
Arising through business combinations 15 59 - - 74
Eliminated on disposal - (22) - (630) (652)
Balance at 30 April 2024 264 7,582 5,791 16,374 30,011
Net book value
At 30 April 2023 93 1,014 521 27,098 28,726
At 30 April 2024 83 921 580 23,621 25,204
12. Intangible assets and goodwill
Goodwill Customer lists Brands Total
£'000 £'000 £'000 £'000
Deemed cost
At 1 May 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
Arising through business combinations - 3,322 - 3,322
At 30 April 2024 1,550 20,583 3,518 25,651
Amortisation
At 1 May 2022 - 7,317 10 7,327
Charge for the year - 1,838 235 2,073
At 30 April 2023 - 9,155 245 9,400
Charge for the year - 2,248 235 2,483
At 30 April 2024 - 11,403 480 11,883
Carrying amounts
At 30 April 2023 1,550 8,106 3,273 12,929
At 30 April 2024 1,550 9,180 3,038 13,768
Within intangible assets includes a Gateley Smithers Purslow customer list
asset of £4m (2023: £4.5m) which has a remaining life of 9 years, and a
Gateley RJA customer list asset of £3m (2023: £nil) which has a remaining
useful life of 4 years and 3 months. The entirety of the brand intangible
relates to Gateley Smithers Purslow and has a remaining life of 13 years.
Goodwill is allocated to the following cash generating units:
2024 2023
£'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 - -
Gateley RJA 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% (2023: 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% (2023: 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 2024 the Group completed one acquisition:
Acquisition of Gateley RJA Limited
On 19 July 2023 Gateley (Holdings) Plc acquired the entire issued share
capital of Richard Julian and Associates Limited ('RJA'). RJA specialises in
the provision of quantity surveying and project management services to
organisations in the affordable housing sector.
The primary reason for the business combination is discussed within the CEO's
review.
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 - 3,322 3,322
Property, plant and equipment 82 - 82
Cash 1,239 - 1,239
Trade receivables 583 - 583
Prepayments 89 - 89
Total assets 1,993 3,322 5,315
Trade payables (7) - (7)
Accruals and other payables (399) - (399)
Corporation tax (227) - (227)
Other taxes and social security (242) - (242)
Deferred tax - (831) (831)
Total liabilities (875) (831) (1,706)
Total identifiable net assets at fair value 1,118 2,491 3,609
Negative goodwill arising on acquisition (3,609)
Total consideration -
Satisfied by:
Initial cash consideration paid 2,035
Issue of 1,192,163 new 10p ordinary shares in Gateley (Holdings) Plc 1,896
Contingent cash consideration payable 1,034
Contingent share consideration payable 1,035
Less: amounts subject to continuing employment conditions (6,000)
Total consideration -
Net cash outflow arising on acquisition
Cash paid (2,035)
Net cash acquired 1,239
Net cash outflow arising on acquisition (796)
A contingent consideration arrangement was entered into as part of the
acquisition. A further £2.1 million could be payable with any payment
subject to RJA achieving at least £4 million of revenue over the first 12
months post-acquisition, and not less than £5 million of revenue for the
following 12 months. Such payment is to be split in shares and cash as agreed
between the Sellers and the Company, providing no Seller is entitled to
receive more than 50% of their total consideration in cash.
The negative goodwill of £3,609,000 has been recognised immediately in the
statement of profit and loss and included within non-underlying expenses.
From the date of acquisition Gateley RJA Limited has contributed £4.2m of
revenue to the Group's Statement of Comprehensive Income together with after
tax profit of £0.7m. 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 £1.1m and £0.2m respectively.
14. Other intangible assets
IT development costs Computer
£'000 software Total
£'000
£'000
Cost
Balance at 1 May 2022 258 440 698
Additions 24 763 787
At 30 April 2023 282 1,203 1,485
Additions - - -
At 30 April 2024 282 1,203 1,485
Amortisation
Balance at 1 May 2022 - 134 134
Charge for the year 40 221 261
At 30 April 2023 40 355 395
Charge for the year 80 363 443
At 30 April 2024 120 718 838
Net book value at 30 April 2023 242 848 1,090
Net book value at 30 April 2024 162 485 647
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 2024 23,543 58,056 (409)
As at 30 April 2023 20,388 54,167 (499)
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 (2023: £nil) were acquired in
business combinations.
An impairment loss of £656,000 has been recognised in relation to contract
assets in the year (2023: loss £542,000). This is based on the expected
credit loss under IFRS 9 of these types of assets. The contract asset loss is
estimated at 2.8% (2023: loss 2.7%) of the balance.
Contract assets recognised under IFRS 15
Under IFRS 15 the Group is required to recognise contract assets.
2024 2023
£'000 £'000
Contract asset value at 1 May 2023 20,388 17,239
Contract assets arising on acquisition - -
Contract asset value added in the year 24,759 22,333
Contract asset value realised in the year (21,604) (19,184)
Contract asset value at 30 April 2024 23,543 20,388
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.
2024 2023
£'000 £'000
Contract liabilities at 1 May 2023 499 569
Contract liabilities gained in the year 879 469
Contract liabilities credited to P&L in year (969) (539)
Contract liabilities at 30 April 2024 409 499
16. Trade and other receivables
2024 2023
£'000 £'000
Trade receivables 58,056 54,167
Prepaid consideration subject to earn-out service conditions 6,717 6,015
Prepayments 7,249 5,777
Other receivables including insurance receivables 2,083 233
74,105 66,192
Amounts falling due after one year: £'000 £'000
Prepaid consideration subject to earn-out service conditions 8,368 7,080
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 include 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
2024 2023
£'000 £'000
Brought forward provision (3,825) (3,941)
Recognition of provisions for businesses acquired - -
Provision utilised 1,187 908
Charged to statement of profit and loss (1,062) (984)
Provisions released 443 192
(3,257) (3,825)
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:
2024 Not passed due Past due 0-30 days Past due 31-120 days Past due greater than 120 days Total
Expected credit loss rate 2.32% 2.53% 2.69% 14.86%
Estimated total gross carrying amount £'000 35,813 6,777 4,343 14,380 61,313
Lifetime ECL £'000 831 172 117 2,137 3,257
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
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 £1,062,000 has been recognised in relation to trade
receivables in the year (2023: £984,000). 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% (2023: 1.7%) 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.
2024 2023
Fair Carrying Fair Carrying
amount
amount
value value
£'000 £'000 £'000 £'000
Non-Current liabilities
Bank borrowings 12,908 12,908 6,813 6,813
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. A commitment fee
of one third of the applicable margin is payable on the undrawn amounts.
As at 30 April 2024, the Group's non-derivative financial liabilities have
contractual maturities (including interest payments where applicable) as
summarised below:
30 April 2024 Current Non-current
Within 6 months 6 to 12 months 1 - 5 Later than
years 5 years
£'000 £'000 £'000 £'000
Bank borrowings - 14,133 - -
Leases 2,721 2,720 19,855 7,926
Trade and other payables 12,839 - - -
Total 15,560 16,853 19,855 7,926
This compares to the maturity of the Group's non-derivative financial
liabilities in the previous reporting period as follows:
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 -
Leases 2,044 2,044 19,219 11,437
Trade and other payables 9,665 1,364 - -
Total 11,709 3,408 27,216 11,437
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
2024 2023
£'000 £'000
Current
Trade payables 12,839 9,370
Other taxation and social security payable 8,143 9,913
Other payables - 295
Contingent consideration treated as remuneration 324 1,364
Accruals 11,397 4,492
Deferred income 409 499
33,112 25,933
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 1 May 2023 830
Debited during the year in the consolidated income statement (114)
Debited during the year to retained earnings (343)
At 30 April 2024 373
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 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
Arising through business combinations - Gateley RJA Limited 831
Credited during the year in the Consolidated income statement (804)
At 30 April 2024 2,968
20. Provisions
2024 2023
£'000 £'000
Current provision
Professional indemnity provision 175 107
Total current provision 175 107
Non-current provision
Professional indemnity provision 3,088 903
Dilapidations provision 637 387
Total non-current provision 3,725 1,290
Total provisions 3,900 1,397
Professional indemnity estimated claim cost
2024 2023
£'000 £'000
Brought forward 1,010 750
Provisions made during the year 2,253 350
Provisions reversed during the year - (90)
At end of year 3,263 1,010
Non-current 3,088 903
Current 175 107
3,263 1,010
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.
2024 2023
£'000 £'000
At 1 May 387 214
Provision made in the year 250 173
At 30 April 637 387
21. Net debt
2024 2023
£'000 £'000
Cash and cash equivalents 16,674 11,105
Debt
Total loans brought forward (38,786) (34,641)
Revolving credit facility - due in more than one year (6,095) (1,098)
New lease liability in the year (1,642) (7,597)
Repayment of lease liability 5,091 4,550
Total loan carried forward (41,432) (38,786)
Brought forward from previous year (27,681) (18,536)
Movement during year 2,923 (9,145)
Net debt at the year end (24,758) (27,681)
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 2023 6,813 - 31,973 38,786
Cashflows:
Repayments (5,000) - (5,091) (10,091)
Receipt of revolving credit facility 11,000 - - 11,000
Non-cash
Loan arrangement fee unwind 95 - - 95
New lease liability in the year - - 1,642 1,642
Reclassification to short term borrowings (12,908) 12,908 - -
30 April 2024 - 12,908 28,524 41,432
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
Fair value of acquisition 98 - - 98
New lease liability in the year - - 7,597 7,597
30 April 2023 6,813 - 31,973 38,786
22. Share capital
Authorised, issued and fully paid
2024 2024 2023 2023
Number £ Number £
Ordinary shares of 10p each
Brought forward 126,636,157 12,663,615 124,556,879 12,455,687
Issued on acquisition of Richard Julian and Associates Limited 1,192,163 119,216 - -
Issued as part of contingent consideration of Gateley Smithers Purslow Limited 1,661,790 166,179 - -
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 790,131 79,013 1,175,000 117,500
Issued on vesting of SAYE 1,591,555 159,166 356,195 35,620
Issued on vesting of LTIP 727,790 72,779 - -
Issued on vesting of CSOPS 438,263 43,826 - -
At 30 April 2024 133,037,849 13,303,784 126,636,157 12,663,615
The Company has one class of Ordinary shares which carry no right to fixed
income. Each share has full rights in respect to voting.
On 19 July 2023 the Company acquired the entire issued share capital of
Richard Julian and Associates Limited in part for the issue of 1,192,163 10p
ordinary shares.
On 2 November 2023 the Company issued 1,661,790 10p ordinary shares to satisfy
the contingent consideration on the acquisition of Gateley Smithers Purslow
Limited.
Between 1 May 2023 and 30 April 2024 1,591,555 10p ordinary shares were issued
upon vesting of the 2019/2020 SAYE schemes to participants.
On 27 September 2023 727,790 10p ordinary shares were issued upon vesting of
the 2020 LTIP scheme to participants.
On 21 September 2023 790,131 10p ordinary shares were issued upon issue of the
FY24 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 12 4.5 years 27,088 - (3,849) 23,239
Electric Vehicles 13 2.4 years - 472 (90) 382
IT equipment 1 0 years 9 - (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:
2024 2023
£'000 £'000
Current lease liability 4,346 3,257
Non-current lease liability 24,178 28,716
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 116 16 132
Expenses relating to leases of low-value assets, excluding short-term leases - 60 60
of low value assets
116 76 192
The total minimum undiscounted lease payments at 30 April 2024 under
non-cancellable operating lease rentals were:
30 April 2024 30 April 2023
£'000 £'000
Within one year 5,441 4,088
In the second to fifth year inclusive 19,855 19,219
After five years 7,926 11,437
33,222 34,744
24. Subsequent events
The Directors are not aware of any material post balance sheet events.
25. Alternative performance measures
Underlying profit before tax
The Directors seek to present a measure of underlying profit performance which
is not impacted by exceptional items or items considered non-operational in
nature. These include non-trading, non-cash and one-off items disclosed
separately in the consolidated income statement where the quantum, nature or
volatility of such items are considered by management to otherwise distort the
underlying performance of the Group. This measure is described as
'underlying' and is used by management to assess and monitor profit
performance only at the before and after tax level. In line with the board's
wish to simplify reporting of profits, the board have moved away from
reporting adjusted Earnings Before Interest Tax Depreciation and Amortisation
("EBITDA"), following the introduction of IFRS 16 'Leases'.
2024 2023
£'000 £'000
Reported profit before tax 13,955 16,212
Adjustments for non-underlying and exceptional items:
- Amortisation of intangible assets 2,483 2,073
- Share-based payment adjustment 1,686 1,984
- Gain on bargain purchase (3,609) (1,389)
- Consideration treated as remuneration 6,956 6,190
- Exceptional items 1,563 -
Underlying profit before tax 23,034 25,070
Amortisation of acquired intangible assets is identified as a non-cash item
released to the income statement therefore such cost is removed when
considering the underlying trading performance of the Group by adding to
profit the annual amortisation charge.
Consideration treated as remuneration: such charges are treated as
non-underlying in order to reflect the commercial substance of the
transaction. All former vendors who remain employed by the Group are paid at
market rates and the earnout remuneration is a function of the interpretation
of IFRS, and related emerging guidance only.
The adjustment for share-based payments relates to the impact of the
accounting standard for share-based compensation. The cost of all share-based
schemes is settled entirely by the issue of shares where the proportions can
vary from one year to another based on events outside of the businesses
control e.g., share price. Under IFRS the anticipated future share cost is
expensed to the income statement over the vesting period. The adjustment above
addresses this by adding to profit the IFRS 2 charge in relation to
outstanding share awards. This adjustment is made so that non-cash expenses
are removed from profit.
Underlying operating profit
2024 2023
£'000 £'000
Reported operating profit 11,177 16,122
Adjustments for non-underlying and exceptional items:
- Amortisation of intangible assets 2,483 2,073
- Share-based payment adjustment 1,686 1,984
- Gain on bargain purchase (3,609) (1,389)
- Consideration treated as remuneration 6,956 6,190
- Exceptional items 1,563 -
Underlying operating profit 20,256 24,980
Cash generated from operations
a) Free cash flows
2024 2023
£'000 £'000
Net cash generated from operations 18,887 14,065
Repayment of lease liabilities (5,091) (4,579)
Net interest received 4,043 1,364
Tax paid (4,902) (4,320)
Cash outflow paid on acquisitions 5,825 1,518
Purchase of property, plant and equipment (1,045) (1,312)
Purchase of other intangible assets - (787)
Free cash flows 17,717 5,949
b) Working capital measures
2024 2023
£'000 £'000
WIP days
Amounts recoverable from clients in respect of contract assets (unbilled 23,543 20,388
revenue)
Unbilled disbursements 5,389 3,368
Total WIP 28,932 23,756
Annualised revenue 173,312 163,583
WIP days 61 53
2024 2023
£'000 £'000
Debtor days
Trade receivables 58,056 54,167
Less unbilled disbursements (5,389) (3,368)
Total debtors 52,667 50,799
Annualised revenue 173,312 163,583
Debtor days 111 113
2024 2023
£'000 £'000
Gross lock-up days
Total WIP 28,932 23,756
Total debtors 52,667 50,799
Total gross lock-up 81,599 74,555
Annualised revenue 173,312 163,583
Gross lock-up days 172 166
Annualised revenue reflects the total revenue for the previous 12-month period
inclusive of pro-forma adjustments for acquisitions.
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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