REG - Gateley (Holdings) - Half Year Results
18/01/2023 07:00
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RNS Number : 0468N Gateley (Holdings) PLC 18 January 2023
18 January 2023
Gateley (Holdings) Plc
("Gateley", the "Group" or the "Company")
(AIM:GTLY)
Half Year Results for the six months ended 31 October 2022
Strong H1 in a challenging market
Gateley, the legal and professional services group, is pleased to announce its
unaudited results for the six months ended 31 October 2022 (the "Period" or
"H1 23"), which show a strong performance as the Company continues to execute
its diversification and growth strategy.
Financial Highlights
· Strong financial performance with revenue and profit before tax up 22.2% (H1
22: 23.5%) and 9.6% (H1 22: 19.5%) respectively
· Group organic revenue growth of 9.8% (H1 22: 22.7%)
· Legal services revenue grew entirely organically by 8.2% (H1 22: 21.9%)
· Revenue from consultancy services grew substantially, increasing 104.5% to
£18.2m (H1 22: £8.9m), of which organic revenue growth was 20.0%
· Adjusted underlying profit margin decreased to 12.6% (H1 22: 13.7%) as certain
operating costs, previously restricted by the pandemic, returned
· Strong activity levels across the Group with utilisation up 2% to 86% (H1 22:
84%)
· Ongoing M&A strategy reduces net cash to £1.1m (H1 22: £8.8m)
· Strong balance sheet and significant headroom in revolving credit facility
assisting our growth strategy
· Proposed interim dividend of 3.3p per share, in line with progressive dividend
policy (H1 22: 3.0p)
H1 23 H1 22 Change
Revenue £76.1m £62.3m +22.2%
Underlying operating profit before tax £10.1m £9.0m +12.2%
Underlying adjusted profit before tax(1) £9.6m £8.5m +12.9%
Profit before tax £8.0m £7.3m +9.6%
Profit after tax £6.4m £5.9m +8.5%
Basic earnings per share ("EPS") 5.11p 5.00p +2.2%
Underlying diluted EPS(2) 6.15p 5.76p +6.8%
Net assets £74.1m £58.0m +27.8%
Net cash(3) £1.1m £8.8m -87.5%
Dividend 3.3p 3.0p 10.0%
(1) Underlying adjusted profit before tax excludes share-based payment charges,
amortisation and exceptional items
(2) Underlying diluted EPS excludes share-based payment charges, amortisation and
exceptional items. It also adjusts for the future weighted average number of
expected unissued shares from granted but unexercised share option schemes in
issue based on a share price at the end of the financial period
(3) Net cash excludes IFRS 16 lease liabilities
Operational and post-Period highlights
· Ongoing investment in capacity as average fee earner headcount increased to
1,000 in H1 23 (H1 22: 794)
· Recent acquisitions integrating and performing in-line with expectations
· Acquisition of Symbiosis, a chartered patent attorney firm specialising in IP
services for the life sciences industry completed in October 2022
· Investment in and on-going adoption of new business management system to
support operational efficiencies and enhance management controls and decision
making
· Achieved 13 of the 16 first set of Responsible Business objectives and
publication of our second annual Responsible Business Report
· "One team" business culture continues to be demonstrated through 65% of staff
either owning shares or currently participating in option schemes
Current trading and outlook
· Growing, diversified and resilient business model, combined with a strong H1
23 performance, leaves the Group well-placed to navigate the more challenging
economic environment that is beginning to emerge in the second half of the
financial year
· The Group maintains a strong balance sheet to deliver future investment to
enhance returns from diverse but complementary workstreams and secure
long-term, sustainable growth and results.
· The board proposes an interim dividend of 3.3p per share, reflecting the
stated policy of paying an interim dividend that is one third of the targeted
full year dividend
Rod Waldie, Chief Executive Officer of Gateley, said:
"We are delighted to report further growth derived from the increasing
diversity of services on our Platforms, which now house over 1,000 fee
earners. Our Group revenue and profit grew strongly, increasing by 22.2% and
9.6% respectively, within which revenue from our consultancy services grew,
including by acquisition, by 104.5%.
"I thank our clients for the opportunity to work with them on a broad range of
important mandates and our people for their hard work and dedication to
deliver results.
"I'm proud of the progress that we are making against our Responsible Business
strategy. In particular, supporting our communities is an important part of
our purpose as a business and we will further connect our exceptionally
talented people with organisations who provide community support in the
regions in which we operate, recognising that business is a key engine of
change.
"During the Period, we saw political and economic instability manifesting in
uncertainty and temporary paralysis in a number of sectors. This is an
ongoing situation and the economy is approaching a fork in the road where in
all likelihood there is a wide range of possible outcomes across different
sectors. In the meantime, we continue to invest in our offering and in our
people so that our business remains fully equipped to deliver as positions
settle in our target markets. The combined legal and consultancy offering on
our Platforms, remains unique and the outlook on each of the Platforms is
positive. We look forward to 2023 with a degree of cautious confidence."
Enquiries:
Gateley (Holdings) Plc
Neil Smith, Finance Director Tel: +44 (0) 121 234 0196
Nick Smith, Acquisitions Director and Head of Investor Relations Tel +44 (0) 20 7653 1665
Cara Zachariou, Head of Corporate Communications Tel +44 (0) 121 234 0074
Mob: +44 (0) 7703 684 946
Liberum - Nominated adviser and Broker
Richard Lindley / Ben Cryer / Cara Murphy Tel: +44 (0) 20 3100 2000
Belvedere Communications Limited - Financial PR
Cat Valentine Mob: +44 (0) 7715 769 078
Keeley Clarke Mob: +44 (0) 7967 816 525
Llew Angus Mob: +44 (0) 7407 023 147
gateleypr@belvederepr.com (mailto:gateleypr@belvederepr.com)
CHIEF EXECUTIVE OFFICER'S REVIEW
Summary
I am very pleased with the Group's performance during H1 23. Throughout the
Period, global events created significant uncertainty resulting in a
challenging macro-economic back drop, which remains uncertain. Despite this,
our team worked tirelessly with clients to deliver these excellent results.
I remain grateful to all of our people for their energy and commitment. I am
delighted that the outcome of their hard work is reflected in our 22.2%
headline H1 23 revenue growth, of which 9.8% was organic, and our 9.6% growth
in profit before tax.
Also, we have delivered against our Responsible Business targets, achieving in
the first year since we published our Responsible Business strategy, 13 out of
the 16 targets set. In doing so, we have enhanced our recognition that
business is a key engine for change. We recognise that, over time, an
integrated Responsible Business strategy develops solutions that positively
impact all three bases of people, planet and profit. Our journey here
advances with conviction.
We continue to operate and invest in a differentiated, resilient and growing
business, which has been designed to perform, regardless of the economic
environment. H1 23's results extend our unbroken track record of year-on-year
revenue and profit growth.
The board proposes an interim dividend of 3.3p (H1 22: 3.0p).
Results overview
H1 23 Group revenues grew by 22.2% to £76.1m (H1 22: £62.3m). This yielded
an increase of 9.6% in reported profit before tax to £8.0m (H1 22: £7.3m)
and a 9.8% increase in underlying adjusted profit before tax to £9.6m (H1 22:
£8.5m).
Our strong revenue performance results from excellent advice provided through
the unique combination and growing range of professional services on our
well-established Platforms. We are particularly pleased to be releasing a
second consecutive set of results showing 20% or more organic revenue growth
in our consultancy services.
The strength of both existing operations and our balance sheet provide the
foundation for further investment in Platform growth. Our pipeline of
acquisition opportunities remains good across the Group.
Property Platform
Whilst all of our Platforms showed good momentum, the Property Platform grew
strongly by 36.7% (H1 22: 20.0%) and remains our most mature, diversified
Platform. The range of expertise on this Platform was expanded by the
acquisition of Gateley Smithers Purslow ("GSP") late in H2 22. It is the
latest of the six consulting business acquisitions made onto the Platform. GSP
specialises in providing technical advice and support to the UK insurance
industry in handling complex property claims. It integrated well during H1
23 and is delivering results in line with pre-acquisition expectations.
Consultancy businesses now generate 32.6% (H1 22: 19.4%) of Property Platform
revenue and are performing excellently alongside our established legal
property service lines in both contentious and non-contentious work streams.
In our view, the range and depth of expertise now housed on our Property
Platform puts it in direct competition with well-established
multi-disciplinary property consultancies in the market.
People Platform
Our People Platform delivered results which were, overall, similar to H1 22.
We saw healthy performance in our pensions, legal and consultancy
businesses. Employment legal services revenue decreased as clients' HR
teams returned to business-as-usual activities post the pandemic hiatus.
However, this was offset by growth in our people consultancy service line
revenue as, post-pandemic, clients re-focus on leadership identification and
development and cultural change projects. Consultancy revenues have matured
to represent 32.9% of H1 23 People Platform revenue (H1 22: 31.3%) and the
consultancy pipeline remains good.
Business Services Platform
The Business Services Platform contracted marginally in H1 23. A significant
factor here is much reduced activity in our legal services' complex
international recoveries litigation team, which continues to adjust to global
events, particularly the war in Ukraine, where it holds a number of paused
mandates. The team has established a new pipeline of business. However, by
nature, these are long-term projects and FY 23 revenue for the team will be
dictated by litigation timetables. A return to significant growth is
expected in FY 24 and beyond. Other components of the Platform performed well,
including new additions to the Group. In particular, whilst currently
modest, our Patent and Trademark Attorney business, established in the Group
in FY 22, was expanded by the in-Period acquisition of Symbiosis, which is a
patent attorney consultancy servicing exclusively the life sciences
industry. Symbiosis is performing well and represents a strategically
important step for us in expanding the consultancy expertise that we are able
to offer to clients from the patent and trademark attorney component of this
Platform. We will endeavour to make further acquisitions to continue to add
new industry coverage to our patent and trademark business as part of our
strategy to broaden our IP/intangible assets offering in both legal and
consultancy services.
Corporate Platform
Activity levels remained strong across our legal services dominated Corporate
Platform, which grew by 26.0%, buoyed by strong UK M&A and Private Equity
markets throughout most of H1 23. Activity levels on this Platform reduced
towards the end of H1 23 in line with shifting market dynamics. However, our
immediate pipeline remains healthy.
Operational review
The significant investment in, and phase one adoption of, our new
market-leading business management, productivity, and financial system ("3E")
was a major project during H1 23. This followed relatively soon after the
adoption of newly-integrated client onboarding and time recording systems.
Together these systems are important upgrades for our growing and increasingly
sophisticated group of professional services businesses. They deliberately
include significant capacity to expand in line with headcount as we expand and
grow the Group. They also materially assist in the integration of our
businesses and, generation of operational efficiencies, as well as enhancing
internal controls and risk management processes. This ability to drive
further scale through our internal systems will help sustain and improve our
margins over the medium to longer term. We saw some inevitable disruption in
those parts of the Group that were involved in moving to 3E, despite which we
delivered a strong H1 outturn. I would like to thank the excellent team of
people who are managing the new system implementation and all of my colleagues
for their engagement and patience with this important project. Despite the
expenditure on these essential and forward-looking investments we maintained a
like-for-like increase in profitability and a net cash position.
The integration of our recent acquisitions was also an important operational
focus for us during H1 23 (and is ongoing). GSP, acquired late in H2 22, is
our largest acquisition to date and like each of our acquired businesses, GSP
has an entrepreneurial management team which is supported by our operational
integration team. The ongoing integration exercise is proceeding as planned.
The process has resulted in positive enhancements to our now well-developed
Group integration methodology. In parallel, GSP has performed as we expected,
added to its headcount during the Period and has identified opportunities for
further growth.
We have spent many years building and growing our physical footprint across
the UK, matching our office locations with opportunities that we see available
to the Group. As a result, we currently provide our services from most of
the major commercial centres in the UK. Our office network remains an
important asset to us but, as a result of the success of agile working,
integration of acquired businesses has included realisation of some
operational efficiencies through rationalisation of some of our office
space. For example, during H1 23, we relocated Nottingham and
Leicester-based Adamson Jones colleagues to our existing Nottingham office and
Manchester-based GSP colleagues to our existing Manchester office. Not only
does this generate office cost savings but, importantly, the aggregation of
locally-based Group colleagues assists with integration, familiarisation with
the wider Group and, ultimately, realisation of mutual opportunities. There
are firm plans to save future costs in this way with the relocation of GSP
colleagues in Reading and Leeds to our existing offices in those cities.
Our office premises strategy in H1 23 (and ongoing) includes enhancement of
workspace attractiveness with innovative floor layouts and upgrades in
technology.
H1 23 saw a return to more familiar levels of recruitment, with significant
further additions via acquisitions resulting in overall average headcount
climbing to 1,431 in the Period (H1 22: 1,132). Average fee earner headcount
increased by 206 from H1 22, whilst administrative staff headcount increased
by 93 to 431 (H1 22: 338). The Gateley offering, underpinned by our unique
identity and long-established one-team culture, remains differentiated and
attractive.
Wage cost inflation experienced across the global legal industry over the last
two years, resulting from strong client demand, looks like it is beginning to
settle. Businesses in the professional services sector are still adjusting
through FY 23 to the higher salary levels but it will take time for the full
impact of the personnel cost increases of the last two years to be fully
absorbed. In the meantime, it remains important to offer our people
stimulating, purposeful and rewarding career opportunities . As we grow and
diversify our range of businesses, we are able to offer an increasingly broad
spectrum of career opportunities to our people. In addition, the ability for
our colleagues to participate in share ownership remains an attractive
proposition and recruitment differentiator.
Responsible Business
We published our Responsible Business Strategy in October 2021. The launch
was supported by leaders from the Better Business Act and the Purpose
Coalition, who helped us frame our objectives against the backdrop of the UK's
levelling-up goals, particularly those that relate to our people and the
communities in which we operate.
Being a Responsible Business is now an integral part of our Purpose Statement:
"Our purpose is to deliver results that delight our clients, inspire our
people and support our communities"
During the first year of our Responsible Business journey, we have recognised
that business is a key engine of change and that being a Responsible Business
builds greater trust and strengthens relationships with clients, employees,
investors and the communities in which we operate, all of which, in time, will
generate greater value. Over the last 12 months, our strategy has gained
real momentum, generating enthusiasm and engagement right across the Group.
I'm very pleased with the progress that we're making as set out in our second
annual Responsible Business report, released in December 2022 and available on
the investors page of our Group external website.
Highlights from 2022 include:
· Recruitment of Gateley's first Responsible Business Manager. A real
statement of intent. She is dedicated to delivering the Group's Responsible
Business strategy
· Launch of our partnership with the University Academy 92 ("UA92") in
Manchester, connecting UA92 with colleagues, clients, and contacts to raise
awareness of what that organisation is doing in the region to support students
from diverse backgrounds through higher education
· Launch of our partnership with the NSPCC to raise awareness and support
fundraising
· Continuation of our partnership with SportsAid, providing financial and
development support to 12 of the UK's brightest young sporting prospects
I'm delighted that we achieved 13 out of our 16 objectives set in year one and
that we're making good progress with the other three, whilst maintaining
momentum by setting a further 15 new objectives. Our journey advances with
conviction.
Current trading and outlook
The solid foundations on which our business is built have enabled the Group to
deliver strong H1 23 results, in a period which was widely impacted by
macroeconomic events. One of the key objectives of our IPO in 2015 was to
transition the business into a structure that would enable it to build a
strong balance sheet and deliver the investment needed to drive the business
forward. We are delivering on this objective and will continue in this vein.
Our growth strategy is to deliver enhanced returns from an increasingly
diversified but complementary set of workstreams. By deliberately
building-out each of our Platforms with a mix of services some of which fare
best in a growing economy and some when times are more difficult, we are
investing to strengthen overall, and secure long-term, sustainable growth and
results. Hence, whilst in recent weeks we have begun to see transactional
activity levels reduce slightly from the unprecedented highs of FY 22 and H1
23, we are also seeing revenues beginning to pivot towards some of our more
counter-cyclical lines. As such the Group is operating as it is designed to
do, which gives us confidence that, notwithstanding prevailing economic winds,
the Group will extend its decades-long track record of uninterrupted growth.
We are confident of our ability to expand and perform well and, with a degree
of caution, view the Group's prospects for the year ahead and beyond
positively.
Rod Waldie
CEO
18 January 2023
FINANCE DIRECTOR'S REVIEW
Financial overview
As a result of strong H1 23 trading, the board is pleased with an underlying
adjusted profit margin of 12.6%, even after significant cost inflationary
pressure and material strategic investment in our IT infrastructure. The
unprecedented demand for professional staff in the UK has led to double-digit
increases in payroll costs during H1 23. However, whilst operating overheads
grew, they remain below pre-pandemic levels, and the Group has invested in
staff activities and encouraged a partial return of both marketing and
travelling costs in order to increase ongoing face-to-face client interaction.
Our track record of delivering profit, supported by strong cash generation and
attractive investment returns, is based on a responsible business model with a
strong focus on social and governance objectives and making sustainable
decisions for the long term.
A strategic focus and effort in June 2022 was the successful migration onto
our new business management system. I'm extremely pleased with how
successfully the business handled such a significant and disruptive exercise,
and I would like to thank all staff involved in the project for their
dedication and hard work in making this transition a tremendous success.
Revenue
Group revenue grew by 22.2% to £76.1m for the first half of the year, from
£62.3m in H1 22. Revenue growth in the Group's core legal services was
entirely organic at 8.2%, growing to £57.9m (H1 22 £53.5m), whilst revenue
from consultancy non-legal services grew by 104.5% overall to £18.2m (H1 22
£8.9m). Acquired consultancy revenue totalled £8.2m (H1 22: £0.4m) during
the period, with organic consultancy revenue growth of 20.0% to £10.0m (H1
22: £8.4m).
The Group has grown three of its four Platforms during the Period and
continues to further diversify its client base and revenue mix, thereby
increasing its sales reach and share of the professional services market.
Transactional activity has remained strong during the first half of H1 23 as
the Corporate Platform once again delivered high deal volumes, resulting in
Platform revenue growth of 26.0% (H1 22: 47.4%). Likewise, the Property
Platform also delivered strong growth overall, including the significant
revenue contribution of GSP. Organic Property Platform revenue growth was
16.3% as a result of strong growth in construction legal services of 21% and
consultancy service revenue growth of 40.0% from the Gateley Vinden team.
Commercial property legal services grew revenues by 6.0%. Although
transactional housebuilder revenues decreased by 1.0%, comparing very
favourably against market-wide trends, instructions from housebuilders extend
to other teams, including contributing to growth in Construction legal
services as housebuilder clients increasingly required specialist advice on
the high profile Building Safety Act.
The Business Services Platform is working well with its newly formed joint
legal and consultancy intellectual property service lines including Adamson
Jones, purchased in January 2022 and the more recently acquired Symbiosis,
purchased in October 2022. As a result of the exceptional events in Eastern
Europe, our complex international dispute resolution team has seen a decrease
in H1 23 activity which is offsetting the growth across other areas of the
Platform. However, we expect a significant increase in litigation activity
during H2 23. Our complex international dispute resolution offering represents
only part of our group-wide contentious services offering and as markets turn
across all of our Platforms demand for counter-cyclical service line support
is increasing.
More generally in a challenging economic environment the Business Services
Platform is well positioned to capitalise on opportunities that arise.
The People Platform grew by 0.4% with strong demand for services and 6.0%
growth across our consultancy businesses, t-three and Kiddy & Partners,
off-set by a decrease in employment legal service activity that benefitted
from pandemic-led advice in the prior year. The launch of our fully
integrated t-three and Kiddy & Partners service delivery model, which
focuses on both talent assessment and development, and cultural change
programmes, has proven to represent a strong sales proposition to a corporate
client base inevitably needing to adjust and change as a result of the
pandemic and even more recent challenges to traditional operating models.
Revenue Corporate Platform Business Services Platform People Platform Property Platform Total
H1 23 19,046 9,728 9,745 37,624 76,143
Revenue growth H1 23 26.0% (2.3)% 0.4% 36.7% 22.2%
H1 22 15,118 9,960 9,706 27,525 62,309
Total expenses
Personnel costs (excluding IFRS 2 charge) have decreased as a percentage of
revenue to 61.7% (H1 22: 64.1%) as strong H1 23 revenue growth covered the
effect of H1 23 pay and headcount increases. Average numbers of legal and
professional staff rose by 25.9% to 1,000 as a result principally of
acquisitions (H1 22: 794). Support staff numbers also increased by 27.5% to
431 (H1 22: 338) also principally as a result of acquisitions.
Other operating expenses, excluding non-underlying items, increased to £16.0m
(H1 22: £10.6m) as £2.8m of additional costs are now included from acquired
entities. In addition, certain necessary appropriate post-pandemic increases
in operating costs, restricted by the pandemic, returned such as travel,
marketing and the re-introduction of strategic senior leaders' conferences and
all staff events. The majority of such costs are first half weighted,
alongside consultancy costs incurred as part of the installation of our new
business management system in June 2022. Overall ongoing like-for-like
operating costs, as a percentage of revenue, remain in line with management's
expectations. Our use of agile working, the new business management system
and extensive review of premises usage will generate medium-term cost savings,
where appropriate, without damaging the resources available to clients and
staff. In particular, our new business management system will enhance
centralised control, support operational efficiencies and drive a level of
consistency across the processing of all client and Group data.
Profit before tax and earnings per share
Underlying adjusted profit before tax of £9.6m has increased by 12.9% from
£8.5m in H1 22. The board is pleased with profit and trading margin
performance despite the H1 distractions brought about by the change in
business management systems, the uncertainty of the economic climate and the
demand for talent across the industry creating continuing pressure on salary
levels. We enter the second half of the financial year having maintained fee
earner headcount in counter cyclical work types in order to match the changing
client activity patterns and in the knowledge that we have a resilient and
diverse spectrum of service lines from which to increase market share.
Profit before tax of £8.0m increased by 9.6% due to strong H1 revenue growth
absorbing the current key inflationary effects and a H1 weighting on
discretionary spend on specific operating costs such as the installation of
the new business management system. Profit after tax of £6.4m increased by
8.5% from £5.9m and basic earnings per share increased by 2.2% to 5.11p (H1
22: 5.00p) after a full period impact from new shares issued for acquisitions
and after awards made under the Group's share option reward schemes.
Underlying diluted earnings per share increased by 6.8% to 6.15p (H1 22:
5.76p).
Dividend
The board proposes an interim dividend of 3.3p (H1 22: 3.0p) per share. This
dividend will be paid on 31 March 2023 to shareholders on the register at the
close of business on 24 February 2023. The shares will go ex-dividend on 23
February 2023. This dividend has not been recognised as a liability in the
interim accounts.
Net assets
The Group's net asset position has increased by £16.1m to £74.1m (H1 22:
£58.0m) principally as a result of the acquisition of three complementary
consultancy services businesses since H1 22.
Working capital and cash generation
Total lock-up increased from 143 to 159 days as a result of strong organic and
acquisitive growth, with WIP days increasing from 46 to 59 days and debtor
days increasing slightly (in part due to adopting the new business management
system integration processes) from 97 to 100 days. Group-wide activity
remained strong in H1 23 despite political and economic uncertainty delaying
completion of certain assignments and recoveries, and we remain focused on
lock-up management.
Cash generated from operations during the Period was £1.6m (H1 22: £(0.6)m)
which represents 25.5% (H1 22: (9.9)%) of profit after taxation. Working
capital movements typically reduce H1 free cash flows before they reverse in
H2 as revenue and profit weighting is greater and outflows are much lower.
Free cash flow improved from £(2.4)m in H1 22 to £(1.4)m in H1 23. The
Group has utilised £6.8m (H1 22: £nil) of its £30m revolving credit
facility, which is in place to support the Group's expansion through
acquisition.
Conclusion
The Group has delivered a strong performance in H1 23 against the backdrop of
an uncertain macro environment, with activity levels, revenue and
profitability advancing once again. The Group looks to expand its strong
organic growth trajectory across all of its Platforms and retains significant
facility headroom in order to further expand sales resilience through
acquisition.
Neil Smith
Finance Director
18 January 2023
Gateley (Holdings) Plc
Consolidated income statement and other comprehensive income
For the 6 months ended 31 October 2022
Note Unaudited Unaudited Audited
6 months to 6 months to 12 months to
31 October 2022 31 October 2021 30 April 2022
£'000 £'000 £'000
Revenue 2 76,143 62,309 137,249
Other operating income - - -
Personnel costs, excluding IFRS 2 charge 3 (46,981) (39,935) (86,517)
Depreciation - Property, plant and equipment 4 (503) (421) (851)
Depreciation - Right-to-use asset 4 (1,979) (1,942) (3,783)
Impairment of trade receivables and contract assets (633) (475) (866)
Other operating expenses (15,966) (10,585) (22,716)
Operating profit before non-underlying operating and exceptional items 10,081 8,951 22,516
Non-underlying operating items 4 (1,535) (1,236) (2,659)
Exceptional items 4 - - (870)
(1,535) (1,236) (3,529)
Operating profit 8,546 7,715 18,987
Financing income 890 70 194
Financing expense (1,407) (509) (1,149)
Profit before tax 8,029 7,276 18,032
Taxation (1,662) (1,353) (3,753)
Profit for the period after tax attributable to equity holders of the parent 6,367 5,923
14,279
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss
Foreign exchange translation differences
- Revaluation of other investments - - (190)
- Exchange differences on foreign branch 95 (5) 58
Profit for the financial period and total comprehensive income all 6,462 5,918 14,147
attributable to equity holders of the parent
Statutory earnings per share (pence)
Basic earnings per share 5 5.11p 5.00p 12.00p
Diluted earnings per share 5 5.01p 4.94p 11.71p
The results for the periods presented above are derived from continuing
operations. There were no other items of comprehensive income to report.
Gateley (Holdings) Plc
Consolidated statement of financial position
at 31 October 2022
Note Unaudited at Unaudited at Audited at
31 October 31 October 30 April
2022 2021 2022
£'000
£'000
£'000
Non-current assets
Property, plant and equipment 1,450 1,343 1,334
Right-of-use asset 28,486 25,268 24,627
Investment property 164 164 164
Intangible assets & goodwill 7 33,655 15,763 32,590
Other intangible assets 716 245 564
Other investments 173 367 173
Deferred tax asset 638 2 638
Total non-current assets 65,282 43,152 60,090
Current assets
Contract assets 8 22,255 14,723 17,239
Trade and other receivables 9 52,822 41,390 56,168
Cash and cash equivalents 7,887 8,842 16,105
Total current assets 82,964 64,955 89,512
Total assets 148,246 108,107 149,602
Non-current liabilities
Other interest-bearing loans and borrowings 10 (6,765) - (5,715)
Lease liability (30,015) (26,465) (25,207)
Other payables 11 (5,740) (120) (5,360)
Deferred tax liability (3,103) (591) (3,089)
Provisions (863) (724) (863)
Total non-current liabilities (46,486) (27,900) (40,234)
Current liabilities
Lease liability (3,234) (3,197) (3,719)
Trade and other payables 11 (23,519) (19,303) (31,793)
Provisions (101) (176) (101)
Current tax liabilities (843) 420 (842)
Total current liabilities (27,697) (22,256) (36,455)
Total liabilities (74,183) (50,156) (76,689)
NET ASSETS 74,063 57,951 72,913
EQUITY
Share capital 12,514 11,899 12,456
Share premium 12,378 10,430 11,342
Merger reserve (9,950) (9,950) (9,950)
Other reserves 14,465 7,097 14,465
Treasury reserve (240) (629) (261)
Translation reserve 93 (65) (2)
Retained earnings 44,803 39,169 44,863
TOTAL EQUITY 74,063 57,951 72,913
Gateley (Holdings) Plc
Consolidated cash flow Statement
for the 6 months ended 31 October 2022
Note Unaudited Unaudited Audited
6 months to 6 months to 12 months to
31 October 31 October 30 April
2022 2021 2021
£'000 £'000 £'000
Cash flows from operating activities
Profit for the period after tax 6,367 5,923 14,279
Adjustments for:
Depreciation and amortisation 3,594 3,102 6,215
Financial income (890) (70) (194)
Financial expense 871 7 201
Release of contingent consideration - - (135)
Interest charge on capitalised leases 536 502 948
Equity settled share-based payments 423 534 1,213
Loss on disposal of property, plant and equipment 122 - 16
Tax expense 1,662 1,353 3,753
12,685 11,351 26,296
(Increase)/decrease in trade and other receivables (1,308) 930 (10,233)
(Decrease)/increase in trade and other payables (7,817) (9,870) 758
(Decrease)/increase in provisions - (39) 25
Cash generated from operations 3,560 2,372 16,846
Tax paid (1,937) (2,960) (4,497)
Net cash flows from operating activities 1,623 (588) 12,349
Investing activities
Acquisition of property, plant and equipment (739) (434) (775)
Acquisition of other intangible assets (216) - (319)
Contingent consideration paid - acquisition of subsidiary (100) - -
Consideration paid on acquisitions, net of cash acquired (1,019) (617) (5,982)
Interest received 890 70 194
Net cash outflow from investing activities (1,184) (981) (6,882)
Financing activities
Interest and other financial income paid (871) (7) (201)
Lease payments (2,051) (1,488) (3,870)
Receipt of new revolving credit facility, net of refinancing costs 1,000 - 5,715
Acquisition of own shares (18) (60) (39)
Proceeds of sale of own shares 39 330 90
Cash received for shares issued on exercise of share options 79 879 1,768
Dividends paid 6 (6,835) (8,848) (12,430)
Net cash outflow from financing activities (8,657) (9,194) (8,967)
Net decrease in cash and cash equivalents (8,218) (10,763) (3,500)
Cash and cash equivalents at beginning of period 16,105 19,605 19,605
Cash and cash equivalents at end of period 7,887 8,842 16,105
Gateley (Holdings) Plc
Consolidated statement of changes in equity
for the 6 months ended 31 October 2022
Share Share Merger Other Treasury Retained Foreign currency translation reserve Total
capital premium reserve reserve reserve earnings equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 May 2021 11,792 9,421 (9,950) 6,815 (312) 41,560 (60) 59,266
Comprehensive income:
Profit for the year - - - - - 14,279 - 14,279
Revaluation of other investments - - - - - (190)
Exchange rate differences - - - - - - 58 58
Total comprehensive income - - - - - 14,089 58 14,147
Transaction with owners recognised directly in equity
Issue of share capital 664 1,921 - 7,650 - - - 10,235
Purchase of own shares at nominal value - - - - - (132) - (132)
Sale of treasury shares - - - - 127 - - 127
Purchase of treasury shares - - - - (76) - - (76)
Recognition of tax benefit on gain from equity settled share options - - - - - 563 - 563
Dividend paid - - - - - (12,430) - (12,430)
Share based payment transactions - - - - - 1,213 - 1,213
Total equity at 30 April 2022 12,456 11,342 (9,950) 14,465 (261) 44,863 (2) 72,913
At 1 May 2021 (unaudited) 11,792 9,421 (9,950) 6,815 (312) 41,560 (60) 59,266
Comprehensive income:
Profit for the period - - - - - 5,923 5,923
Exchange rate differences - - - - - - (5) (5)
Total comprehensive income - - - - - 5,923 (5) 5,918
Transaction with owners recognised directly in equity
Share issue 107 1,009 - 282 - - - 1,398
Sale of treasury shares - - - - 33 - - 33
Purchase of treasury shares - - - - (350) - - (350)
Dividend paid - - - - - (8,848) - (8,848)
Share based payment transactions - - - - - 534 - 534
Total equity at 31 October 2021 11,899 10,430 (9,950) 7,097 (629) 39,169 65 57,951
Gateley (Holdings) Plc
Consolidated statement of changes in equity
for the 6 months ended 31 October 2022
Share Share Merger Other Treasury Retained Foreign currency translation reserve Total
capital premium reserve reserve reserve earnings equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 May 2022 (unaudited) 12,456 11,342 (9,950) 14,465 (261) 44,863 (2) 72,913
Comprehensive income:
Profit for the year - - - - - 6,367 - 6,367
Exchange rate differences - - - - - - 95 95
Total comprehensive income - - - - - 6,367 95 6,462
Transaction with owners recognised directly in equity
Share issue 58 1,036 - - - - - 1,094
Sale of treasury shares - - - - 39 - - 39
Purchase of own shares at nominal value (15) - (15)
Purchase of treasury shares - - - - (18) - - (18)
Dividend paid - - - - - (6,835) - (6,835)
Share based payment transactions - - - - - 423 - 423
Total equity at 31 October 2022 12,514 12,378 (9,950) 14,465 (240) 44,803 93 74,063
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 and losses on sale of own shares.
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 the 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.
Gateley (Holdings) Plc
Notes
for the period ended 31 October 2022
1. Basis of preparation
These interim unaudited financial statements for the six months ended 31
October 2022 have been prepared in accordance with the accounting policies set
out in the Annual Report and Financial statements of the Group for the year
ended 30 April 2022 using the recognition and measurement principles of IFRS
as applied under the Companies Act 2006 and the AIM rules.
The comparative figures for the financial year ended 30 April 2022 are not the
company's statutory accounts for that financial year. Those accounts have been
reported on by the company's auditor and delivered to the registrar of
companies. The report of the auditor was unqualified, did not include a
reference to any matters to which the auditor drew attention by way of
emphasis without qualifying their report, and did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006.
1.1 Accounting policies
Accounting policies remain unchanged from those accompanying the 30 April 2022
financial statements.
Non-underlying items
Non-underlying items are non-trading and or non-cash items disclosed
separately in the Consolidated Income Statement where the quantum, nature or
volatility of such items would otherwise distort the underlying trading
performance of the Group. The following are included by the Group in its
assessment of non-underlying items:
· Share based payment charges: such charges are treated as
non-underlying as the gain realised on the options granted is settled in
shares not cash and therefore does not impact the income statement. The IFRS 2
charge is taken to the income statement, these expenses are treated as
non-underlying items as they are either non-cash or non-recurring in nature.
· Amortisation in respect of intangible fixed assets: these costs are
treated as non-underlying as they are non-cash items.
The tax effect of the above is also included if considered significant.
Exceptional items
Exceptional items are one off transactions, unrelated to the underlying
trading performance of the Group disclosed separately in the Consolidated
Income Statement where the quantum, nature or volatility of such items would
otherwise distort the underlying trading performance of the Group.
The following are included by the Group in its assessment of exceptional
items:
· Gains or losses arising on disposal, closure, restructuring or
reorganisation of businesses that do not meet the definition of discontinued
operations.
· Impairment charges in respect of intangible fixed assets: these costs
are treated as exceptional due to their one-off nature.
· Non-typical expenses associated with acquisitions.
· Costs incurred as part of significant refinancing activities.
The tax effect of the above is also included if considered significant.
Intangible assets and goodwill
Goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is
allocated to cash-generating units and is not amortised but is tested annually
for impairment. In respect of equity accounted investees, the carrying amount
of goodwill is included in the carrying amount of the investment in the
investee.
Other intangible assets
Other intangible assets, including software licences, expenditure on
internally generated goodwill, brands and software, customer contracts and
relationships are capitalised at cost and amortised on a straight-line basis
over their estimated useful economic lives through operating expenses.
Other intangible assets that are acquired by the Group are stated at cost less
accumulated amortisation and accumulated impairment losses.
Customer lists
Customer lists that are acquired by the Group as part of a business
combination are stated at cost less accumulated amortisation and impairment
losses (see accounting policy 'Impairment of assets'). Cost reflects
management's judgement of the fair value of the individual intangible asset
calculated by reference to the net present value of future benefits accruing
to the Group from the utilisation of the asset, discounted at an appropriate
discount rate.
Brand value
Certain acquisitions have retained their trading name due to the value of the
brand in their specific marketplace.
Brand value is amortised over a period of three or five years based on the
Directors' assessment of the future life of the brand, supported by trading
history.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of consolidated financial statements under IFRS requires
management to make estimates and assumptions which affect the reported amount
of revenues, expenses, assets and liabilities and the disclosure of contingent
liabilities. If in the future such estimates and assumptions, which are
based on Management's best judgement at the date of preparation of the
financial statements, deviate from actual circumstances, the original
estimates and assumptions will be modified as appropriate in the period in
which the circumstances change. The key areas where a higher degree of
judgement or complexity arises, or where estimates and assumptions are
significant to the consolidated financial statements are discussed below.
Management does not consider there to have been and critical accounting
judgements made in the financial period.
Unbilled revenue on client assignments
The valuation of unbilled revenue (on non-contingent matters) involves
detailed understanding of contractual terms with clients. The valuation is
based on an estimate of the amount expected to be recoverable from clients on
unbilled items based on such factors as time spent, the expertise and skills
provided and the stage of completion of the assignment. The principal
uncertainty over this estimation is a result of the amounts not yet being
billed to, or recognised by the client. Provision is made for such factors
as historical recoverability rates, agreements with clients, external expert's
opinion and the potential credit risks, following interactions between legal
staff, finance and clients. Where entitlement to revenue is certain it is
recognised as recoverable selling price. Where a matter is contingent at the
statement of financial position date, no revenue is recognised.
Valuation of intangibles
Measurement of intangible assets relating to acquisitions: In attributing
value to intangible assets arising on acquisition, management has made certain
assumptions in terms of cash flows attributable to intellectual property and
customer relationships. The key assumptions made relate to the valuation of
the brand, where the acquired brand is retained by the entity, and the
customer list. The value of such intangibles has been estimated based on the
amount of revenue expected to be generated by them. The revenue estimations
rely on annual growth rates. Management have selected the appropriate rates
based on a combination of observed historical growth, industry norms and
forecasted influencing factors. Management have also performed sensitivity
analysis to assess the impact of any variation to the growth rate used. The
rates applied reflect previous growth rates, with sensitivities indicating
that variations in the actual rate achieved are unlikely to materially impact
the valuation of the intangible assets.
1.2 Alternative performance measures
Underlying adjusted 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 adjusted' 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'.
6 months to 6 months to 12 Months
31 October 2022 31 October 2021 30 April 2022
£'000 £'000 £'000
Reported profit before tax 8,029 7,276 18,032
Adjustments for non-underlying and exceptional items:
- Amortisation of intangible assets 1,112 702 1,581
- Share-based payment adjustment 423 534 1,213
Underlying adjusted profit before tax 9,564 8,512 20,826
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.
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 are 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.
Cash generated from operations
a) Free cash flows
6 months to 6 months to 12 Months
31 October 2022 31 October 2021 30 April 2022
£'000 £'000 £'000
Operating cash flows before movements in working capital 12,685 11,351 26,296
Net working capital movement (9,125) (8,979) (9,450)
Cash generated from operations 3,560 2,372 16,846
Repayment of lease liabilities (2,051) (1,488) (3,870)
Net interest paid (19) 63 7
Tax paid (1,937) (2,960) (4,497)
Purchase of property, plant and equipment (739) (434) (775)
Purchase of other intangible assets (216) - (319)
Free cash flows (1,402) (2,447) 7,392
b) Working capital measures
6 months to 6 months to 12 Months
31 October 2022 31 October 2021 30 April 2022
£'000 £'000 £'000
WIP days
Amounts recoverable from clients in respect of contract assets (unbilled 22,255 14,723 17,239
revenue)
Unbilled disbursements 4,255 2,240 3,088
Total WIP 26,510 16,963 20,328
Annualised revenue 164,100 135,266 151,662
WIP days 59 46 49
6 months to 6 months to 12 Months
31 October 2022 31 October 2021 30 April 2022
£'000 £'000 £'000
Debtor days
Trade receivables 49,102 38,059 50,201
Less unbilled disbursements (4,255) (2,240) (3,088)
Total debtors 44,847 35,819 47,113
Annualised revenue 164,100 135,266 151,662
Debtor days 100 97 113
6 months to 6 months to 12 Months
31 October 2022 31 October 2021 30 April 2022
£'000 £'000 £'000
Gross lock-up days
Total WIP 26,510 16,963 20,328
Total debtors 44,847 35,819 47,113
Total gross lock-up 71,357 52,782 67,441
Annualised revenue 164,100 135,266 164,100
Gross lock-up days 159 143 162
Annualised revenue reflects the total revenue for the previous 12-month period
inclusive of pro-forma adjustments for acquisitions.
1.3 Going concern
These interim accounts are prepared on a going concern basis as the Directors
have a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future. The Group
remains cash generative, with a strong on-going trading performance.
1.4 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.
1.5 Cautionary statement
This document contains certain forward-looking statements in 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. Operating segments
The Chief Operating Decision Maker ("CODM") is the Strategic Board. The Group
has the following strategic Platforms, which are its reportable segments.
These divisions offer a mixture of legal and consultancy services to
clients. With effect from 1 May 2022 all service lines are managed through
four Platforms.
The Group has restated the segmental reporting for the comparative periods to
reflect the current operating segments in place
The following summary describes the operations of each reportable segment as
reported up to 31 October 2022:
Reportable segment Legal service lines Consultancy service lines
(Gateley Legal inc. Dubai Branch) (Gateley Consultancy)
Corporate Banking Gateley Global (formerly International Investment Services)
Corporate GEG Services
Commercial, Technology & Data
Restructuring Advisory
Taxation
Business Services Complex and International Recovery Adamson Jones
Commercial Dispute Resolution/Litigation Gateley Omega
Intellectual Property Symbiosis IP
Regulatory and Business Defence
Tweed (reputation, media and privacy law)
People Employment Entrust Pension
Pensions Kiddy & Partners
Private Client t-three
Property Construction Gateley Capitus
Planning Gateley Hamer (inc. Persona Associates)
Real Estate Gateley Smithers Purslow
Real Estate Dispute Resolution Gateley Vinden (inc. Tozer Gallagher)
Residential Development Unit
6 months to 31 October 2022
Corporate Business Services People Property Total
£'000 £'000 £'000 £'000 £'000
Segment revenue 19,046 9,728 9,745 37,624 76,143
Segment contribution 8,347 2,437 3,196 13,565 27,545
(as reported internally)
Costs not allocated to segments:
Personnel costs (6,770)
Share based payment costs (423)
Depreciation and amortisation (3,594)
Other operating expenses (8,212)
Net financial expense (517)
8,029
6 months to 31 October 2021
Corporate Business People Property Total
Services
£'000 £'000 £'000 £'000 £'000
Segment revenue 15,118 9,960 9,706 27,526 62,309
Segment contribution 5,893 3,651 3,810 11,215 24,569
(as reported internally)
Costs not allocated to segments:
Other operating income -
Personnel costs (5,824)
Share based payment charge (534)
Depreciation and amortisation (3,065)
Other operating expenses (7,431)
Net financial expense (439)
7,276
12 months to 30 April 2022
Corporate Business People Property Total
Services
£'000 £'000 £'000 £'000 £'000
Segment revenue 38,123 18,035 19,172 61,919 137,249
Segment contribution 15,432 5,811 6,926 23,456 51,624
(as reported internally)
Costs not allocated to segments:
Other operating income -
Personnel costs (10,487)
Share based payment charge (1,213)
Depreciation and amortisation (6,215)
Other operating expenses (13,852)
Exceptional items (870)
Net financial expense (955)
18,032
Management has updated its segmental reporting in the current and previous
periods to display revenue and contribution values previously disclosed as
"Other" into the relevant Platforms to which they belong. "Other" includes
expense income and movement in unbilled revenue. Prior to this change in
disclosure £643,000 and £1,118,000 was disclosed as "Other" in the 12 months
to 30 April 2022 and the 6 months to 31 October 2021, respectively.
No other financial information has been disclosed as it is not provided to the
CODM on a regular basis.
3. Employees
The average number of persons employed by the Group during the period,
analysed by category, was as follows:
Number of employees
6 months to 6 months to 12 months to
31 October 2022 31 October 2021 30 April 2022
Legal and professional staff 1,000 794 800
Administrative staff 431 338 350
1,431 1,132 1,150
The aggregate payroll costs of these persons were as follows:
6 months to 6 months to 12 months to
31 October 2022 31 October 2021 30 April 2022
£'000 £'000 £'000
Wages and salaries 40,520 35,369 76,672
Social security costs 5,071 3,664 7,769
Pension costs 1,390 902 2,076
46,981 39,935 86,517
4. Expenses
Included in operating profit are the following:
6 months to 6 months to 12 months to 30
31 October 2022 31 October 2021 April 2022
£'000 £'000 £'000
Depreciation on tangible assets 503 421 851
Depreciation on right-of-use assets 1,979 1,942 3,783
Other operating income - rent income - - -
Short term and low value leases 37 117 75
Operating lease costs on property - - -
Foreign exchange (95) 5 (58)
Loss on disposal of fixed assets 122 - 16
Non-underlying items
6 months to 6 months to 12 months to 30 April 2022
31 October 2022 31 October 2021
Amortisation of intangible assets 1,112 702 1,581
Share based payment charges 423 534 1,213
Release of contingent consideration - International Investment Services - -
Limited
(135)
Total non-underlying items 1,535 1,236 2,659
Exceptional items
Acquisition costs - - 373
One off remuneration charge - Gateley Smithers Purslow Limited - -
497
Total non-underlying and exceptional items 1,535 1,236 3,529
5. Earnings per share
6 months to 6 months to 12 months
31 October 31 October 2021 to 30 April 2022
2022
Number Number Number
Weighted average number of ordinary shares in issue, being weighted 124,613,926 118,253,989 118,961,047
average number of shares for calculating basic earnings per share
Shares deemed to be issued for no consideration in respect of share 2,515,736 1,754,023 2,932,191
based payments
Weighted average number of ordinary shares for calculating diluted 127,129,662 120,008,012 121,893,238
earnings per share
£'000 £'000 £'000
Profit for the period after taxation and basic earnings attributable to 6,367 5,923 14,279
ordinary equity shareholders
Non-underlying and exceptional items (see note 4) 1,535 1,236 3,529
Tax on non-underlying items (80) (247) (370)
Underlying earnings before non-underlying items 7,822 6,912 17,438
Earnings per share is calculated as follows: Pence Pence Pence
Basic earnings per ordinary share 5.11 5.00 12.00
Diluted earnings per ordinary share 5.01 4.94 11.71
Underlying basic earnings per ordinary share 6.28 5.85 14.66
Underlying diluted earnings per ordinary share 6.15 5.76 14.31
Underlying earnings per share have been shown because the Directors consider
that this provides valuable additional information about the underlying
performance of the Group.
6. Dividends
6 months to 6 months to 12 Months
31 October 2022 31 October 2021 30 April 2022
£'000 £'000 £'000
Equity shares
Final dividend in respect of 2022 (5.5p per share) - paid 21 October 2022 6,835 - -
Interim dividend in respect of 2022 (3.0p per share) - paid 31 March 2022 - - 3,582
Interim dividend in respect of 2021 (2.5p per share) - paid 28 June 2021 - 2,940 2,940
Final dividend in respect of 2021 (5.0p per share) - paid 8 October 2021 - 5,908 5,908
Dividends paid 6,835 8,848 12,430
The board intends to approve an interim dividend of 3.30p (H1 22: 3.0p) per
share. This dividend will be paid on 31 March 2023 to shareholders on the
register at the close of business on 24 February 2023. The shares will go
ex-dividend on 23 February 2023. This dividend has not been recognised as a
liability in these final statements.
7 Intangible assets
Goodwill Customer list Brand names Total
£'000 £'000 £'000 £'000
Deemed cost
At 1 May 2021 11,698 9,850 - 21,548
Acquired through business combination 307 393 - 700
At 31 October 2021 12,005 10,243 - 22,248
At 1 May 2021 11,698 9,850 - 21,548
Acquired through business combination 8,440 6,411 3,518 18,369
At 30 April 2022 20,138 16,261 3,518 39,917
At 1 May 2022 20,138 16,261 3,518 39,917
Acquired through business combination 1,113 1,000 - 2,113
At 31 October 2022 21,251 17,261 3,518 42,030
Accumulated amortisation
At 1 May 2021 - 5,783 - 5,783
Charge for the period - 702 - 702
At 31 October 2021 - 6,485 - 6,485
At 1 May 2021 - 5,783 - 5,783
Charge for the year - 1,534 10 1,544
At 30 April 2022 - 7,317 10 7,327
At 1 May 2022 - 7,327 10 7,327
Charge for the period - 1,048 115 1,048
At 31 October 2022 - 8,250 125 8,375
Net Book Value
At 31 October 2021 12,005 3,758 - 15,763
At 30 April 2022 20,138 8,944 3,508 32,590
At 31 October 2022 21,251 9,011 3,393 33,655
Goodwill
Goodwill is allocated to the following cash generating units
31 October 31 October 30 April
2022 2021 2022
£'000 £'000 £'000
Property Platform
Gateley Capitus Limited 1,515 1,515 1,515
Gateley Hamer Limited 1,161 1,161 1,161
GCL Solicitors LLP (acquisition of trade and assets) 2,900 2,900 2,900
Persona Associates Limited 40 40 40
Gateley Vinden Limited 2,259 2,259 2,259
Tozer Gallagher LLP (acquisition of trade and assets) 405 307 405
Gateley Smithers Purslow Limited 6,605 - 6,605
14,885 8,182 14,885
People Platform
Kiddy & Partners Limited 1,600 1,600 1,600
Gateley Global Limited (formerly International Investment Services Limited) 338 338 338
t-three Consulting Limited 309 309 309
2,247 2,247 2,247
Business Services Platform
Gateley Tweed (acquisition of goodwill) 1,576 1,576 1,576
Adamson Jones IP Limited 1,430 - 1,430
Symbiosis IP Limited 1,113 - -
4,119 1,576 3,006
21,251 12,005 20,138
Acquisition of Symbiosis IP Limited (Symbiosis IP)
On 3 October 2022 Adamson Jones IP Limited acquired the entire issued share
capital of Symbiosis IP Limited. Symbiosis provides intellectual property (IP)
services encompassing patent, design and trademark protection advice in the
UK, Europe and around the world.
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
Property, plant and equipment 2 23 25
Intangible asset relating to customer list - 1,000 1,000
Cash 480 - 480
Trade debtors 327 - 327
Prepayments and accrued income 35 - 35
Total assets 844 1,023 1,867
Trade payables (119) - (119)
Accruals and other payables (3) - (3)
Corporation tax (40) - (40)
Other taxes and social security (46) - (46)
Lease liability - (23) (23)
Deferred tax - (250) (250)
Total liabilities (208) (273) (481)
Total identifiable net assets at fair value 636 750 1,386
Goodwill arising on acquisition 1,113
Total consideration 2,499
Satisfied by:
Initial cash consideration paid 1,499
Issue of 523,012 new 10p ordinary shares in Gateley (Holdings) Plc 1,000
Total consideration 2,499
Net cash outflow arising on acquisition
Cash paid (1,499)
Net cash acquired 480
Net cash outflow arising on acquisition (1,019)
The goodwill of £1,113,000 arising from the acquisition represents the
assembled workforce. None of the goodwill is expected to be deductible for
income tax purposes.
8 Contract Assets and liabilities
Contract assets Contract liabilities
£'000 £'000
As at 31 October 2022 22,255 (668)
As at 31 October 2021 14,723 (282)
As at 30 April 2022 17,239 (569)
Contract assets
Contract assets consist of unbilled revenue in respect of professional
services performed to date.
Contract assets in relation to non-contingent work are billed 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 billed 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.
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.
9 Trade and other receivables
31 October 31 October 30 April
2022 2021 2022
£'000 £'000 £'000
Trade receivables 49,102 38,059 50,201
Prepayments 3,500 3,121 5,626
Other receivables 220 210 341
52,822 41,390 56,168
10 Other interest-bearing loans and borrowings
The contractual terms of the Group's interest-bearing loans and borrowings,
which are measured at amortised cost, are described below.
31 October 2022 31 October 2021 30 April 2022
Fair Carrying Fair Carrying Fair Carrying
amount
amount
amount
value value value
£'000 £'000 £'000 £'000 £'000 £'000
Non-Current liabilities
Bank borrowings 6,765 6,765 - - 5,715 5,715
Contingent consideration 5,740 5,740 - - 5,360 5,360
12,505 12,505 - - 11,075 11,075
Current liabilities
Unsecured long-term bank loan - - - - - -
Unsecured short-term bank loan - - - - - -
Loans due to former partners of Gateley Tweed LLP - - - - - -
- - - - - -
On 18 April 2022, the Company entered into a revolving credit facility which
provides total committed funding of £30m until April 2025. Interest is
payable at a margin of 1.95% above the SONIA reference rate. On 19 April 2022
£6m was drawdown against the facility in order to fund the initial cash
consideration in the acquisition of SP 2018 Limited. A further £1m was drawn
down on 3 October 2022 in order to fund the initial cash consideration in the
acquisition of Symbiosis IP Limited.
11 Trade and other payables
31 October 31 October 30 April
2022 2021 2022
£'000 £'000 £'000
Current
Trade payables 8,806 5,878 7,935
Other taxation and social security payable 9,802 8,667 10,122
Other payables - 889 374
Contingent consideration - 235 100
Accruals and deferred income 4,911 3,634 13,262
23,519 19,303 31,793
£'000 £'000 £'000
Non-current
Other payables - 120 -
Contingent consideration 5,740 - 5,360
5,740 120 5,360
Contingent consideration
£0.1m of current contingent consideration represents the earn-out sums due to
the sellers of Tozer Gallagher LLP.
All contingent consideration amounts have been calculated based on the Groups
expectation of what it will pay in relation to the earn-out clause of the
relevant sale and purchase agreement. The earn-out targets are based on the
annual results, of the acquired business. The fair value of the earn-out
consideration is calculated based on the forecasted results to give an
estimate of the final obligation capped at the maximum earn-out amount stated
in the purchase agreement.
12 Share based payments
Group
At the period end the Group has four share-based payment schemes in operation.
Long Term Incentive Plan ('LTIP')
The Group operates an LTIP for the benefit of Executive Directors and Senior
Management. Awards under the LTIP may be in the form of an option granted to
the participant to receive ordinary shares on exercise dependent upon the
achievement of profit related performance conditions.
Performance conditions
Options granted under the LTIP are only exercisable subject to the
satisfaction of the following performance conditions which will determine the
proportion of the option that will vest at the end of the three-year
performance period. The awards will be subject to an adjusted fully diluted
earnings per share performance measure as described in the table below:
Adjusted, fully diluted earnings per Share Compound Annual Growth Rate (CAGR) Amount Vesting %
over the three year period ending 30 April 2023/25
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.
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.
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.
Company Share Option Plan (CSOP)
The Group operates a 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 share at the price on the date of the grant.
The annual awards granted under the schemes are summarised below:
Weighted average remaining contractual life Weighted Originally granted Lapsed at Exercised at 30 April 2022 At 1 Granted Lapsed during Exercised during period At 31 October 2022
average 30 April 2022 May during period
exercise 2022 the period
price
Years £ Number Number Number Number Number Number Number Number
RSA
RSA 21/22 - 27 April 2022 4.5 £0.00 1,422,560 - - 1,422,560 - - 1,422,560
RSA 22/23 - 19 July 2022 4.8 £0.00 - - - - 100,000 - -- 100,000
1,422,560 - - 1,422,560 100,000 - - 1,522,560
LTIPS
LTIPS 20/21 - 22 July 2020 0.6 £0.00 1,405,766 (169,331) - 1,236,435 - (70,289) 1,166,146
LTIPS 21/22 - 27 April 2022 2.4 £0.00 1,115,000 - - 1,115,000 - (12,500) - 1,102,500
2,520,766 (169,331) 2,351,435 - (82,789) - 2,268,646
SAYE
SAYE 18/19 - 21 September 2018 0 £1.27 620,432 (212,469) (237,450) 170,513 - (131,092) (39,421) -
SAYE 19/20 - 1 October 2019 0 £1.28 822,625 (218,412) - 604,213 - (228,462) - 375,751
SAYE 20/21 - 6 November 2020 1.0 £1.02 2,337,197 (219,826) - 2,117,371 - (148,579) - 1,968,792
SAYE 21/22 - 25 August 2021 1.8 £1.70 673,077 (17,042) - 656,035 - (62,776) - 593,259
SAYE 22/23 - 22 September 2022 2.9 £1.55 - - - - 1,070,154 - - 1,070,154
4,453,331 (667,749) (237,450) 3,548,132 1,070,154 (570,909) (39,421) 4,007,956
CSOPS
CSOPS 18/19 - 24 October 2018 0 £1.44 812,131 (180,551) (447,494) 184,086 - (62,470) (121,616) -
CSOPS 20/21 - 7 July 2020 0.8 £1.35 976,797 (147,045) - 829,752 - (58,707) - 771,045
1,788,928 (327,596) (447,494) 1,013,838 - (121,177) (121,616) 771,045
During the period to 30 April 2022, 631,580 CSOP options became eligible to
exercise, with 447,494 being exercised by 30 April 2022. Of the remaining
184,086 options, 121,616 were exercised during the period to 31 October 2022
with 64,470 having lapsed during the period. The total accrued IFRS2 charge
was £108,421.
During the period 375,751 SAYE 18/19 options became eligible to exercise. At
the 31 October 2022 no SAYE options had been exercised of a potential 375,751
new shares issued via a block listing in order to fully satisfy all possible
options. The total accrued IFRS2 charge was £168,000.
On 22 September 2022 a total of 1,070,154 options were granted under the 22/22
SAYE scheme using an exercise price of £1.55.
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:
RSA SAYE
Grant date 19/7/22 22/9/22
Share price at date of grant 190.5p 199p
Exercise price £nil 155p
Volatility 32% 31%
Expected life (years) 5 3.3
Risk free rate 1.905% 3.473%
Dividend yield - 4.29%
Fair value per share
Market based performance condition - -
Non-market-based performance 190.5p 55p
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.
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