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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Gateley (holdings) Plc | LSE:GTLY | London | Ordinary Share | GB00BXB07J71 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.50 | 0.41% | 121.00 | 120.00 | 121.00 | 120.50 | 120.50 | 120.50 | 40,441 | 16:35:10 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Legal Services | 162.73M | 12.24M | 0.0930 | 12.96 | 158.63M |
From Apr 2019 to Apr 2024
TIDMGTLY
RNS Number : 6547K
Gateley (Holdings) PLC
11 July 2017
For Immediate Release 11 July 2017
Gateley (Holdings) Plc
("Gateley" the "Group" or the "Company")
Preliminary Results for the year ended 30 April 2017
"Significant year of growth and investment"
Gateley (AIM:GTLY), the national commercial law and complementary professional services group is pleased to report its audited preliminary results for the year ended 30 April 2017, which constitutes the Group's second annual results as a Plc following admission of the Group to trading on AIM on 8 June 2015.
Financial Highlights
-- Revenue increased 15.7% (2016: 10.2%) to GBP77.6m (2016: GBP67.1m) -- Adjusted EBITDA* increased 15.5% (2016: 14.8%) to GBP14.9m (2016: GBP12.9m) -- Profit before tax increased 18.8% (2016: 12.2%) to GBP13.1m (2016: GBP11.0m) -- Basic EPS increased 15.3% to 9.43p (2016: 8.18p)
-- Proposed final dividend of 4.4p resulting in an increased total year dividend of 6.6p (2016: 5.639p)
-- Strong cash generation and completion of second acquisition using own cash resources
* Adjusted EBITDA excludes share based payment charges and for the 2016 comparative, income or expenses that related to non-underlying items
Operational Highlights
-- Successful acquisition of further complementary business (Gateley Hamer acquired September 2016) with integration progressing well
-- Further investment in Group service offering across all offices with total staff numbers at 717 including most recent Reading location now employing 19 staff (including 7 legal partners)
-- All three originally planned share schemes now in place (including all staff SAYE share scheme, CSOP and Stock Appreciation Rights Schemes)
-- Strengthening balance sheet with net assets increasing to GBP17.4m (2016: GBP12.7m)
-- Expanding shareholder base following the successful sale of former partner shares in October 2016 increasing Group free float from 30% to 34.3%
-- Ranked first by deal volume both nationally and in the Midlands in the 2017 Q1 Experian Corpfin M&A Advisor League Table. Of equal importance the Group advised on a significant number of high profile deals across all service lines
Michael Ward, CEO of Gateley, commented:
"I am delighted with the continued progress made by the Group in the year. This represents another year of continued expansion for us where we have both grown the business and invested further in it to support our future expansion. This has been possible due to the strength of our service offering, the depth of our client relationships and the growth in our teams of skilled professionals.
"Trading in the second half of the financial year ended 30 April 2017 was excellent and we are pleased to report that trading in the first two months of the current financial year has continued well. We are confident that our business is well balanced and resilient and we remain focused on delivering another year of growth in our core services, whilst continuing to look for complementary acquisitions."
Enquiries:
Hot Features
Premium
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 Communications Tel: +44 (0) 121 234 0074 or
+44 7703 684 946
Cantor Fitzgerald Europe - Nominated adviser and broker
David Foreman, Marc Milmo, Michael Reynolds (Corporate Finance) Tel: +44 (0) 20 7894 7000
Mark Westcott, Alex Pollen, Caspar Shand Kydd (Sales)
Arden Partners - Broker
John Llewellyn-Lloyd, Benjamin Cryer (Corporate Finance) Tel: +44 (0) 20 7614 5900
James Reed-Daunter (Corporate Broking)
IFC Advisory - Financial PR Adviser Tel: +44 (0) 20 3053 8671
Tim Metcalfe, Graham Herring, Miles Nolan
Chairman's Statement
In my second year-end results statement to you as Chairman of Gateley, I am pleased to report another year of strong financial results for the Company together with continued investment in the business, both of which translate directly to shareholder value and position the business well for the future. I am, however, not only delighted with the financial performance of the business this year, but also the significant progress we have made from being an LLP to a plc. This is evidenced in part by the equity participation we now have within the Company where staff have continued to build upon their equity interests in the business and by the addition of new external shareholders to our register.
Executed by a Board and senior management team that have the requisite leadership and experience to manage the business, our growth strategy remains firmly based on the three key pillars we set out at the time of our IPO. These are to: differentiate (through our comprehensive service offering and service ethic), to diversify (through organic growth and acquisition of additional complementary non-legal businesses) and to incentivise (offering wider and earlier equity participation to staff). In the year ended 30 April 2017 through strong organic growth, the acquisition of Gateley Hamer, the development of our equity participation schemes, strong client support and a well-balanced business model we have continued to move the Group forward. At the same time, we continue to invest in the future of the business by expanding our staff compliment by record numbers and augmenting our infrastructure and geographical presence with expansion of our new office in Reading.
Our ability to attract quality staff who are interested in benefitting from the opportunities provided by a plc structure continues to strengthen. As we build further scale, breadth and depth into our business, we will maintain our disciplined approach to optimising growth opportunities, whilst keeping our focus on meeting the needs of our client base.
Trading in the first two months of the current financial year has started well and the Board remains confident that the business is well balanced to deliver another year of growth in its core service lines, whilst at the same time continuing to look for complementary acquisitions. Accordingly, the Board looks to the future with confidence and is pleased to propose an increased final dividend, subject to shareholder approval at the Annual General Meeting on 27 September 2017, of 4.4p per share, making a total dividend of 6.6 pence per share for the year, and representing a 17.0% increase on the prior year.
Nigel Payne
Chairman
10 July 2017
Chief Executive Officer's Review
Introduction
I am pleased with the continued progress made by the Group in the year. This represents another year of expansion where we have not only grown the business but also invested further in it to support our future expansion. This has been possible due to the strength of our service offering, the depth of our client relationships and the growth in our teams of skilled professionals.
Financial Results
Our financial performance continues to demonstrate strong long-term growth with increases against last year in both revenue (up 15.7%) and adjusted EBITDA (up 15.5%). Our transition from LLP to plc is in accordance with our original plan and our statement of financial position has strengthened as a result of the ground-breaking change in business model. We have also had another year of strong cash generation from operations and continued to invest for the long-term future of the business. We are pleased to propose a dividend in line with expectations.
Operational Review
The year saw good growth across a number of business divisions with excellent results from the Banking and Financial Services Group; Corporate Group; Business Services Group, and our Property Group, with three of these divisions reporting double-digit growth.
Whilst growth in our divisions is encouraging it is also important to highlight that the Group operates through a diverse and resilient business structure that has the ability to perform well in both good and challenging economic environments.
Since 1 May 2015, we have welcomed at partner level a number of new lateral hires and promotions thereby evidencing our continued investment in growth and the Group's ability to continue to attract, retain and nurture talent. Since IPO, laterally hired partners have totalled 13 in FY16, eight in FY17 with a further five contracted to join us in FY18. We have also internally promoted to partner two employees in FY16, three in FY17 and six in FY18. Our overall staff numbers have also increased from 638 to 717 over the last twelve month reporting period. We now have three employee share schemes in place. A Stock Appreciation Rights Scheme (SARS) which is aimed at partner level. The Gateley Sharesave Scheme which is a Save As You Earn scheme (SAYE) and is a non-discretionary scheme open to all employees and a Company Share Option Plan (CSOP) which is specifically targeted at associates, senior associates, legal directors and their equivalent levels within our support services team. Being able to offer something different as an employer has helped us not only retain staff since the IPO but has also attracted a wide pool of fresh talent. All staff that were employed at the time of the IPO received a nominal number of shares. 43% of all staff participated in our first SAYE scheme in September 2016 whilst 137 associates, senior associates, legal directors and the equivalent levels within our support services team received CSOP awards in December 2016.
We announced the opening of our new office in Reading on 1 November 2015 and officially moved into new leasehold premises at The Blade on 1 June 2016. Current staff numbers are nineteen, including seven partners and further recruitment is progressing well.
We continue to maintain our presence on legal panels and have been reappointed to the national legal panels of a number of important house builders and UK clearing banks
Acquisitions
Acquisitions are an important part of the Group's growth strategy with a focus on acquiring businesses offering complementary professional and other specialist services to clients in Gateley's target markets. In April 2016, we successfully completed our first acquisition of a non-legal services business, Gateley Capitus Limited. Our second acquisition followed shortly afterwards in September 2016 in the form of Gateley Hamer Limited (formerly Hamer Associates Limited), a specialist property consultancy of similar size to Gateley Capitus Limited and we are pleased to report that the integration of this business is proceeding well. Both businesses are working collaboratively within our Property Group and across our wider client base to complement our national service offering. We continue to explore acquisitions of businesses providing complementary professional services to enable us to further diversify our income streams going forward.
Board Composition
The Board announces that following five years of service with the Group, including two years as a director of the plc following its admission to AIM, having reached the age of 65, Michael Seabrook will not be offering himself for re-election at the forthcoming Annual General Meeting and will stand down as a Director at that point. The Board would like to thank Michael for his valuable contribution to the Group both leading up to the IPO and thereafter as the Group transitioned from an LLP to a plc. The Board wishes him all the best for the future.
The Board is pleased to announce the forthcoming appointment of Suki Thompson with effect from 27 September 2017. Shortlisted as Influencer of the Year by Creativepool and awarded Most Renowned Woman in Advertising and Communications in the 2016 Executive Awards, Suki sits on the Centaur Media Plc Management Board, has been a Trustee for Macmillan Cancer Support for the past six years and is also the CEO and Co-founder of award-winning, marketing management consultancy, Oystercatchers. Today, Oystercatchers works with 80% of the FTSE 250 brands and global communications networks including WPP, IPG, Publicis, Omnicom and Havas. A recognised industry influencer, Suki leads debate across many platforms and her innovative Oystercatchers Club regularly attracts over 250 senior business leaders to each event. Her views are regularly sought by the media and event organisers. Most recently, Suki has chaired debate at The Guardian's Changing Media Summit; Advertising Week Europe, and at investment influencer, Platforum.
Suki holds an Honorary Doctorate from Coventry University for International Business Development is a Freeman of the City of London and a former Chair of the UK Marketing Society. The Board welcomes Suki and looks forward to working with her.
Current trading and outlook
Trading in the second half of the financial year ended 30 April 2017 was excellent and we are pleased to report that trading in the first two months of the current financial year has continued well. As highlighted above, we are confident that our business is well balanced and resilient and we remain focused on delivering another year of growth in both our core services and our complementary professional services.
Michael Ward
CEO
10 July 2017
Finance Director's Review
Financial Highlights
The Group delivered another strong performance in 2017 with record revenue generation accompanied by increased profitability. Total reported revenues for the year increased by 15.7% to GBP77.6m (2016: GBP67.1m). Adjusting for revenues from acquisitions since IPO of GBP2.0m (2016: GBPnil), organic growth of 12.7% has been achieved from our traditional core legal services. As the Group has delivered another year of annual revenue growth we have accelerated our investment in further expansion of our staffing levels to continue to meet increasing client demand and to facilitate further the expansion of services across our national office infrastructure. Whilst it is typical that increased recruitment costs are incurred in advance of the delivery of revenue, both EBITDA and PBT margins have been maintained as the Group continues to capitalise on growth opportunities along its journey as a leading professional services group.
Group revenue was well spread across a record number of clients that has generated strong results and we once again advised on more M&A transactions than other advisers in the market. Whilst pleased with the performance of all of our UK business lines we have seen our largest service lines continue to perform well in a market that remains competitive, but with healthy levels of activity for regionally focused service delivery. Our expertise in mergers & acquisitions, corporate finance, private equity and equity capital markets propelled our Corporate Group into generating revenue growth of 24% (2016: 14%). Our Property Group has performed strongly and generated revenue growth of 28% as our mix of both litigation and transactional property development work streams serviced client requirements well. The UK's construction, property development and housing markets continue to need the specialist legal support that Gateley can offer at both a regional and national level. Our housebuilding sector expertise demonstrates how our focus on strategically key sectors and commercially focused client understanding helps maintain long standing client relationships. We have recently renewed all key bank panel appointments that have arisen during and since the year end and continue to grow our national expertise and teams servicing clients in the delivery of private client and regulatory legal services.
Following the acquisition of Gateley Capitus Limited in April 2016, the Group has further expanded its professional complementary service lines with the acquisition of Gateley Hamer Limited (formerly Hamer Associates Limited) in September 2016 for an anticipated total consideration of GBP2.0m. Both businesses continue to integrate well and work collaboratively with our legal and support teams. Gateley Capitus Limited has generated revenue of GBP1.2m and EBITDA of GBP0.3m during its first full year of ownership and Gateley Hamer Limited has generated revenue of GBP0.9m and EBITDA of GBP0.2m since acquisition. Whilst UK operations have performed well the additional investment into our Dubai office has not yet generated expected returns. Whilst fees in Dubai increased by 10% to GBP1.2m, the office made a loss of GBP0.4m (2016 loss GBP0.1m). We have already taken steps to restructure our operations in Dubai and will keep this under constant review.
Operating expenses (excluding depreciation and non-underlying items) rose by 14.2% to GBP63.4m (2016: GBP54.7m). This growth in operating costs has been driven mainly by the continued expansion of staff levels to meet client demand. Fee generating staff numbers at the end of the year rose by 7.6% (2016: 6.2%) to 441 (2016: 410). Personnel costs rose accordingly by 17.2% from GBP38.9m to GBP45.6m, thereby increasing this cost to 58.7% of revenue from 58.1% in 2016.
Adjusted EBITDA of GBP14.9m is up by 15.5% from GBP12.9m reflecting an adjusted EBITDA margin of 19.2% (2016: 19.3%). Adjusted profit before tax was up 11.7% to GBP13.4m (2016: GBP12.0m). Adjusted numbers exclude share based payment charges and for 2016 are stated after excluding income or expenses that related to non-underlying items and one-off professional costs together with the costs associated with the IPO and acquisitions.
As a result of the continued expansion of new staff numbers, overall utilisation of staff performing chargeable work decreased to 86% (2016: 89%) but remained within acceptable levels without affecting achieved profit margins. We have now established all of our different share option schemes including our all staff SAYE scheme and CSOP scheme for associates, senior associates, legal directors and their equivalent levels within our support services team. The Board plans to make participation in both of these schemes an annual event alongside our SARS' scheme directed at those "legal partners/directors" the Board wishes to incentivise further with greater levels of future equity share ownership.
Other operating expenses (before non-underlying items) increased by 14.0% to GBP17.9m (2016: GBP15.7m). This increase was predominately due to increased volumes of activity and a full year of running costs associated with new offices in Reading and Belfast together with increased professional indemnity insurance premiums, bad debt and professional and consultancy services.
Earnings per share
Basic earnings per share increased to 9.43p (2016: 8.18p). Adjusted* basic earnings per share also increased to 9.43p (2016: 8.98p). Diluted earnings per share was 9.35p (2016 8.18p).
Dividend
The Board has adopted a dividend policy which reflects the strong long-term earning cash flow and earnings potential of the Group, distributing up to 70% of profits after tax each year to shareholders. Following the announcement of our interim dividend of 2.2p (2016: 1.895p) per share that was paid in March 2017, the Board proposes to approve a full year final dividend at its Annual General Meeting on 27 September 2017 of 4.4p (2016: 3.764p) per share, which if approved, will be paid in early October 2017 to shareholders on the register at the close of business on 8 September 2017. The shares will go ex-dividend on 7 September 2017.
Cash resources, borrowings and liquidity
The Group's cash generation has remained strong as we concluded the financial transition from an LLP with the settlement of loans from former partners of Gateley Heritage LLP. Since IPO liabilities repaid to former partners have totalled GBP21.4m with GBP0.55m (2016: GBP5.1m) outstanding at the year-end. Since the year end that balance has now been paid.
Cash generated during the year from operations was GBP7.7m which represents 76% of profit after taxation due to increased trade and other receivables and increased tax paid of GBP1.7m. Financing outflows totalled GBP13.1m which included a full year's dividend payments for the first time since IPO together with GBP2.0m of repaid bank debt and GBP4.6m of liabilities repaid to former partners. In addition further capital expenditure was incurred which together with the outlay of cash required for the acquisition of Gateley Hamer Limited meant that Group cash at bank ended the year at GBP2.7m (2016: GBP9.8m). The Group's net debt position as at 30 April 2017 has increased to GBP4.8m (2016: GBP4.2m).
Net assets
Net assets as at 30 April 2017 were GBP17.4m (2016: GBP12.7m). This movement reflected increases in tangible assets, the effect of further acquisitions and the movement in receivables derived from the Group's trading performance.
* Adjusted for non-underlying items
Neil Smith
Finance Director
10 July 2017
Consolidated statement of profit and loss and other comprehensive income
for the year ended 30 April 2017
Note 2017 2016
GBP000 GBP000
Revenue 2 77,587 67,061
Other operating income 3 445 442
Personnel costs 5 (45,558) (38,951)
Depreciation and amortisation (1,291) (687)
Other operating expenses (17,871) (16,605)
-------- --------
Operating profit 4 13,312 11,260
Adjusted EBITDA 4 14,928 12,928
Share based payment charges (325) (125)
Depreciation and amortisation (1,291) (687)
Non-underlying items
One off professional costs 4 - (101)
Admission costs 4 - (755)
---------------------------------------- ---- -------- --------
Net financing expense 6 (199) (226)
-------- --------
Profit before tax 13,113 11,034
Taxation 7 (3,058) (2,448)
-------- --------
Profit for the year after
tax attributable to equity
holders of the parent 10,055 8,586
======== ========
Other comprehensive income
Items that are or may be reclassified
subsequently to profit or
loss
Foreign exchange translation
differences
- Exchange differences on
foreign branch 81 -
-------- --------
Profit for the financial year
and total comprehensive income
all attributable to equity
holders of the parent 10,136 8,586
======== ========
Statutory Earnings per share
Basic 89.43p 8.18p
Diluted 89.35p 8.18p
The results for the periods presented above are derived from continuing operations. There were no other items of comprehensive income to report.
Consolidated statement of financial position
at 30 April 2017
Note 2017 2016
GBP000 GBP000
Non-current assets
Property, plant and equipment 2,160 1,478
Investment property 164 164
Intangible assets & goodwill 10 3,842 2,515
Other investments 85 85
-------- --------
6,251 4,242
Current assets
Trade and other receivables 11 39,086 33,696
Cash and cash equivalents 2,696 9,795
-------- --------
Total current assets 41,782 43,491
-------- --------
Total assets 48,033 47,733
======== ========
Non-current liabilities
Other interest-bearing loans
and borrowings 12 (4,958) (7,438)
Other payables 13 - (154)
Deferred tax liability 14 (239) (200)
Provisions 15 (381) (339)
-------- --------
Total non-current liabilities (5,578) (8,131)
-------- --------
Current liabilities
Other interest-bearing loans
and borrowings 15 (2,531) (6,583)
Trade and other payables 13 (20,629) (18,597)
Provisions 15 (210) (257)
Current tax liabilities (1,655) (1,441)
-------- --------
Total current liabilities (25,025) (26,878)
-------- --------
Total liabilities (30,603) (35,009)
======== ========
NET ASSETS 17,430 12,724
======== ========
EQUITY
Share capital 16 10,688 10,640
Share premium 4,332 4,332
Merger reserve (9,950) (9,950)
Other reserve 1,547 1,013
Treasury reserve (132) (27)
Translation reserve 81 -
Retained earnings 10,864 6,716
-------- --------
TOTAL EQUITY 17,430 12,724
======== ========
Consolidated statement of changes in equity
Share Share Merger Other Treasury Retained Foreign Total
capital premium reserve reserve reserve earnings currency equity
translation
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 May 2015 10,000 - (9,950) - - - - 50
Comprehensive
income:
Profit for the
year - - - - - 8,586 - 8,586
Transactions
with owners
recognised directly
in equity:
Repurchase of
treasury shares - - - - (27) - - (27)
Issue of shares 640 4,482 1,013 - - - 6,135
Share issue
costs - (150) - - - - - (150)
Dividend paid - - - - - (1,995) - (1,995)
Share based
payment transactions - - - - - 125 - 125
-------- -------- -------- -------- -------- --------- ------------ -------
Total equity
at 30
April 2016 10,640 4,332 (9,950) 1,013 (27) 6,716 - 12,724
======== ======== ======== ======== ======== ========= ============ =======
At 1 May 2016 10,640 4,332 (9,950) 1,013 (27) 6,716 - 12,724
Comprehensive
income:
Profit for the
year - - - - - 10,055 - 10,055
Exchange rate
differences 81 81
-------- -------- -------- -------- -------- --------- ------------ -------
Total comprehensive
income - - - - - 10,055 81 10,136
Transactions
with owners
recognised directly
in equity:
Repurchase of
treasury shares - - - - (164) - - (164)
Cash gain into
employee benefit
trust from lock
in arrangements 110 - 110
Sale of treasury
shares - - - - 59 - - 59
Issue of shares 48 - 534 - - - 582
Dividend paid - - - - - (6,342) - (6,342)
Share based
payment transactions - - - - - 325 - 325
-------- -------- -------- -------- -------- --------- ------------ -------
Total equity
at 30
April 2017 10,688 4,332 (9,950) 1,547 (132) 10,864 81 17,430
======== ======== ======== ======== ======== ========= ============ =======
The following describes the nature and purpose of each reserve within equity:
Share premium - Amount subscribed for share capital in excess of nominal value.
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.
On 29 May 2015, the Company acquired 100% of the issued share capital of Gateley Plc which had, on the same day, acquired the business assets and liabilities of Gateley Heritage LLP, formerly the partnership of Gateley LLP. Following this Group reorganisation the financial statements for the year ended 30 April 2016 have been prepared on a merger accounting basis as though this Group structure had always been in place and a full twelve month set of results are therefore presented. The first day of trading of the Group included in this statement was therefore 1 May 2015.
Although the share for share exchange resulted in a change of legal ownership, in substance these financial statements reflect the continuation of the pre-existing group, headed by Gateley LLP.
Consolidated cash flow statement
for the year ended 30 April 2017
Note 2017 2016
GBP000 GBP000
Cash flows from operating
activities
Profit for the year after
tax 10,055 8,586
Adjustments for:
Depreciation and amortisation 1,291 687
Financial income 6 (237) (265)
Financial expense 6 436 491
Equity settled share based
payments 325 125
Profit on disposal of property,
plant and equipment 2 (8)
Tax expense 7 3,058 2,448
--------- ---------
14,930 12,064
Increase in trade and other
receivables (5,041) (1,387)
Increase in trade and other
payables 636 4,605
Increase in provisions (5) 59
--------- ---------
Cash generated from operations 10,520 15,341
Tax paid (2,844) (1,007)
--------- ---------
Net cash flows from operating
activities 7,676 14,334
--------- ---------
Investing activities
Acquisition of property,
plant and equipment (1,485) (670)
Purchase of other investments - (15)
Consideration paid on acquisition
of subsidiary 20 (508) (1,592)
Cash received on acquisition
of subsidiary 20 280 350
Proceeds from sale of property,
plant and equipment - 16
--------- ---------
Net cash used in investing
activities (1,713) (1,911)
--------- ---------
Financing activities
Issue of ordinary shares,
net of issue costs 16 - 4,910
Interest and other financial
income paid 7 (183) (226)
Proceeds from new term bank
loans 12 - 9,907
Repayment of term bank loans/borrowings 12 (1,980) (989)
Repayment of loans from
former members of Gateley
Heritage LLP 12 (4,552) (10,153)
Repayment of fixed capital
from former members of Gateley
Heritage LLP 12 - (6,717)
Cash received from lock 159 -
in arrangements
Acquisition of own shares (164) (27)
Dividends paid 9 (6,342) (1,995)
Payment of finance lease
liabilities 13 - (57)
--------- ---------
Net cash used in financing
activities (13,062) (5,347)
--------- ---------
Net increase in cash and
cash equivalents (7,099) 7,076
Cash and cash equivalents
at beginning of year 9,795 2,719
--------- ---------
Cash and cash equivalents
at end of year 2,696 9,795
========= =========
Gateley (Holdings) Plc
Notes
For the year ended 30 April 2017
1 Corporate information and legal status
Gateley (Holdings) Plc ("the Company") was incorporated in England and Wales on 13 November 2014. On 29 May 2015 the Company acquired 100 per cent of the issued share capital of Gateley Plc which had, on the same day, acquired the business assets and liabilities of Gateley Heritage LLP, formerly the partnership of Gateley LLP. Following this Group reorganisation, the financial statements have been prepared on a merger accounting basis as though this Group structure had always been in place and a full twelve month set of results (for both the current and prior year) is therefore presented. The first day of trading of the Group included in this statement was 1 May 2015.
On 8 June 2015, Gateley (Holdings) Plc was admitted to the Alternative Investment Market ("AIM") of London Stock Exchange Plc.
1.1 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 2017, 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 2017 will be delivered to the Registrar of Companies following the Annual General Meeting.
These condensed preliminary financial statements for the year ended 30 April 2017 have been prepared on the basis of the accounting policies adopted by the Group upon admission to AIM. These are in accordance with the Group's accounting policies as set out in the historical financial information included in the AIM Admission Document.
The recognition and measurement requirements of all International Financial Reporting Standards ('IFRSs'), International Accounting Standards ('IAS') and interpretations currently endorsed by the International Accounting Standards Board ('IASB') and its committees as adopted by the EU and as required to be adopted by AIM listed companies have been applied.
1.2 Going concern
The Group financial statements 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 ongoing trading performance. The Group is funded through two unsecured term loans for GBP5m each repayable quarterly over five years commencing in December 2015 together with unsecured overdraft facilities of up to GBP5m. All of the Group's overdraft facilities are 12 months in duration. The term loan facilities contain financial covenants which have been met throughout both periods. The Group's forecasts and projections show that the new facility provides adequate headroom for its current and future anticipated cash requirements.
1.3 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.
1.4 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.
1.5 Financial Assets
The Group's financial assets include cash and cash equivalents and trade and other receivables. All financial assets are recognised when the Group becomes party to the contractual provisions of the instrument.
i) Investments
Other investments such as debt securities and equity securities held by the Group are classified as being available-for-sale and are stated at fair value, with any resultant gain or loss being recognised directly in equity (in the fair value reserve), except for any dividend income, impairment losses and, in the case of monetary items such a debt securities, foreign exchange gains and losses which are recognised in the profit and loss account. When these investments are derecognised, the cumulative gain or loss previously recognised directly in equity is recognised in profit or loss. Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in profit or loss.
ii) Trade and other receivables
Trade and other receivables (except unbilled amounts for client work) are recognised and carried at original invoice amount less provision for impairment.
A provision for impairment of trade receivables is established when there is objective evidence that the Group may not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows, and is recognised in the statement of profit and loss in other operating expenses.
iii) Unbilled amounts for client work (unbilled revenue)
Services provided to clients, which at the year-end date have not been billed, are recognised as unbilled revenue and included in trade and other receivables.
Unbilled revenue is valued at selling price less provision for any foreseeable under recovery when the outcome of the matter can be assessed with reasonable certainty. In respect of conditional or contingent fee engagements unbilled revenue is only recognised once the conditional or contingent event occurs.
iv) Cash and cash equivalents
Cash and cash equivalents includes cash in hand and deposits held at call with banks. For the purpose of the consolidated cash flow statement, cash and cash equivalents includes bank overdrafts in addition to the definition above.
v) Treasury shares
The Group operates an Employee Benefit Trust ("EBT") under which ordinary shares have been issued and are held by the EBT. These are treated as treasury shares and are added to the Treasury Share Reserve.
1.6 Financial Liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
The Group's financial liabilities comprise trade and other payables, borrowings, members' capital and amounts due to members. All financial liabilities are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
i) Bank borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received net of issue costs associated with the borrowing. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statement of profit and loss over the period of the borrowings using the effective interest method
Financial expenses comprise interest expense on borrowings.
ii) Trade and other payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.
iii) Loans from former members
Loans from former members, measured at amortised cost, comprise of undrawn surplus profits and tax provisions owed to former members of Gateley Heritage LLP which were converted into unsecured loans upon admission to the AIM market. Interest is chargeable at 0.5% over Bank of England base rate. The business has full discretion over the timing of repayment of such loans.
1.7 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.
Leases in which the Group assumes substantially all the risks and rewards of ownership of the leased asset are classified as finance leases. Where land and buildings are held under leases, the accounting treatment of the land is considered separately from that of the buildings. Leased assets acquired by way of finance lease are stated at an amount equal to the lower of their fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and less accumulated impairment losses.
Depreciation is charged to the consolidated statement of profit and loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows:
Leasehold improvements over the term of the lease Equipment 33.3% straight line Fixtures and fittings 20% straight line
Depreciation methods, useful lives and residual values are reviewed at each statement of financial position date.
1.8 Business combinations
Subject to the transitional relief in IFRS 1, all business combinations are accounted for by applying the acquisition method. Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group.
Acquisitions on or after 1 January 2010
-- For acquisitions on or after 1 January 2010, the Group measures goodwill at the acquisition date as:
-- the fair value of the consideration transferred; plus -- the recognised amount of any non-controlling interests in the acquiree; plus -- the fair value of the existing equity interest in the acquiree; less
-- the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.
On a transaction-by-transaction basis, the Group elects to measure non-controlling interests, which have both present ownership interests and are entitled to a proportionate share of net assets of the acquiree in the event of liquidation, either at its fair value or at its proportionate interest in the recognised amount of the identifiable net assets of the acquiree at the acquisition date. All other non-controlling interests are measured at their fair value at the acquisition date.
1.9 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
Expenditure on internally generated goodwill and brands is recognised in the income statement as an expense as incurred.
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and accumulated impairment losses.
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.
Amortisation
Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each statement of financial position date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows:
Customer lists 10 years 1.10 Investment property
Investment properties are properties which are held either to earn rental income or for capital appreciation or for both. Investment properties are stated at fair value. Any gain or loss arising from a change in fair value is recognised in profit or loss.
1.11 Impairment excluding investment properties
Financial assets (including receivables)
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event has a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
Intangibles and property, plant and equipment
The carrying amount of the Group's assets including property, plant and equipment and intangibles other than goodwill is reviewed at each year end date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss where it relates to an amount charged to profit or loss.
Goodwill
Goodwill is capitalised as an intangible asset and is not amortised but tested for impairment annually and when there are any indications that its carrying value is not recoverable. As such, goodwill is stated at cost less any provision for impairment in value. For impairment testing purposes, goodwill is allocated to cash-generating units. If a subsidiary undertaking is subsequently sold, goodwill arising on acquisition is taken into account in determining the profit or loss on sale.
1.12 Employee benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the Company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense in the statement of profit and loss in the periods during which services are rendered by employees.
Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Share-based payment transactions
The Group operates an equity settled share based compensation plan.
The grant date fair value of share-based payment awards made to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The fair value of the options granted is measured using an option valuation model, taking into account the terms and conditions upon which the options were granted.
Share-based payment transactions (continued)
The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date, measured at the grant date fair value of the award.
At each reporting date, the group revises its estimates of the number of share incentives which are expected to vest. The impact of the revision of original estimates is recognised in the income statement with a corresponding adjustment to equity.
1.13 Own shares held by EBT trust (treasury reserve)
Transactions of the group-sponsored EBT trust are included in the group financial statements. In particular, the trust's purchases and sales of shares in the Company are debited and credited directly to equity.
1.14 Professional indemnity provisions
A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. Where material, the impact of the time value of money is taken into account by discounting the expected future cash flow at a pre-tax rate, which reflects risks specific to the liability.
Insurance cover is maintained in respect of professional negligence claims. This cover is principally written through insurance companies with a coverage of up to GBP150 million for each claim. Premiums are expensed as they fall due with prepayments or accruals being recognised accordingly.
In the event the insurance companies cannot settle the full liability, the liability will revert to the Group.
1.15 Revenue recognition
Revenue
Revenue represents the fair value of the consideration receivable in respect of professional services provided during the year,
inclusive of recoverable expenses incurred on client assignments but excluding value added tax. Where the outcome of a
transaction can be estimated reliably, revenue associated with the transaction is recognised in the income statement by reference to the stage of completion at the year end, provided that a right to consideration has been obtained
through performance. Consideration accrues as contract activity progresses by reference to the value of work performed.
Where the outcome of a transaction cannot be estimated reliably, revenue is recognised only to the extent that the costs
of providing the service are recoverable. No revenue is recognised where there are significant uncertainties regarding
recovery of the consideration due or where the right to receive payment is contingent on events outside the control of
the group. Amounts deemed to be recoverable on the engagement (on the basis above) are recognised in unbilled
revenue and form part of Trade and other receivables.
Recoverable expenses and disbursements represent charges from other professional service firms, sub-contractors and out of pocket expenses incurred in respect of assignments and expected to be recovered from clients.
Rental income is recognised on a straight line basis over the lease term.
1.16 Operating lease payments
Payments made under operating leases are recognised in the statement of profit and loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in the statement of profit and loss over the term of the lease as an integral part of the total lease expense.
1.17 Financial income and expenses
Financial expenses comprise interest payable and exchange losses that are recognised in the statement of profit and loss. Financial income comprises interest receivable on funds invested and exchange gains.
Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method.
1.18 Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates and laws enacted or substantively enacted at the statement of financial position date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates and laws enacted or substantively enacted at the statement of financial position date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised.
1.19 Non-underlying items
Non-underlying items are non-trading 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:
-- Gains or losses arising on disposal, closure, restructuring or reorganisation of businesses that do not meet the definition of discontinued operations.
-- Expenses associated with acquisitions. -- Impairment charges in respect of tangible or intangible fixed assets. -- Costs incurred as part of significant refinancing activities. -- Significant costs in relation to the IPO.
The tax effect of the above is also included if considered significant.
Details in respect of the non-underlying items recognised in the current and prior year are set out in note 5 to the Financial Statements.
1.20 Ordinary dividends
Dividends are recognised as a liability in the period in which they are approved by the Company's shareholders.
1.21 Adopted IFRS not yet applied
The following Adopted IFRSs have been issued and endorsed by the EU but have not been applied by the Group in these financial statements. Their adoption is not expected to have a material effect on the financial statements (other than IFRS 15 and IFRS 16):
Endorsed:
-- IFRS 15 - Revenue from contracts with customer (effective from 1 January 2018)
-- IFRS 9 - Financial instruments
Not yet endorsed by EU and included as may be relevant:
-- IFRS 16 - Leases
-- Amendments to IAS 12 - Recognition of Deferred Tax Assets for Unrealised losses
-- Amendments to IFRS 2 - Classification and measurement of share-based payment transactions
-- Amendments to IAS 40 - Transfer of investment property
-- IFRIC Interpretation 22 - Foreign currency transactions and advance considerations
There are other standards in issue which are not considered applicable and are not expected to have an impact on the Company and have therefore not been included in the list above. Both IFRS 15 and IFRS 16 are expected to require amendments for operating revenue and operating leases however management are undertaking an exercise to determine the impact on results and have not yet quantified this.
The directors have not yet calculated the impact that the adoption of the other Standards and Interpretations noted in future periods will have.
2 Operating segments
The Chief Operating Decision Maker ("CODM") is the Strategic Board. The Group have the following five strategic divisions, which are its reportable segments. These divisions offer different products and services and are managed separately because they report different specialisms from the legal teams in those divisions.
The following summary describes the operations of each reportable segment:
Reportable segment Operations
Banking and Financial Services Provision of legal advice in respect of asset finance, banking and
restructuring services
Corporate Provision of legal advice in respect of corporate, family, private client and
taxation services
Business Services Provision of legal advice in respect of commercial, commercial dispute resolution, litigation, regulatory, shipping, transport and insurance services
Employees, Pensions and Benefits Provision of legal advice in respect of employment and pension services, including Entrust Pension Limited's trustee services.
Property Provision of legal advice in respect of construction, planning, real estate and residential development services. Also includes Gateley Capitus Limited's property related tax incentive services together with Gateley Hamer Limited's easement and wayleave and compulsory purchase order services.
The revenue and operating profit are attributable to the principal activities of the Group. A geographical analysis of revenue is given below:
2017 2016
GBP000 GBP000
United Kingdom 73,711 63,180
Europe 1,870 2,288
Middle East 712 443
North and South America 372 275
Asia 416 346
Other 506 529
------ ------
77,587 67,061
====== ======
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 branch. Net assets of GBP0.4m (2016: GBP0.2) together with costs of GBP1.6m (2016: GBP1.2m) are located in the Group's Dubai branch. Revenue generated by the Group's Dubai branch to customers in the UAE totalled GBP712,000 (2016: GBP443,000) as disclosed above as due to the customers in the Middle East.
The Group has no individual customers that represent more than 10% of revenue in either the 2017 or 2016 financial year.
2017
Banking and Corporate Business Employee Property Total Other Total
Financial Services Pensions segments expense
Services and and movement
Benefits in unbilled
revenue
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Segment revenue 15,146 14,074 10,946 7,130 28,562 75,858 1,729 77,587
----------- --------- --------- --------- -------- --------- ------------- --------
Segment contribution
(as reported
internally) 6,306 4,082 4,542 2,645 12,978 30,553 1,729 32,282
Costs not
allocated
to segments:
Other operating
income 445
Personnel
costs (5,391)
Depreciation
and
amortisation (1,282)
Other operating
expenses (12,742)
Net financial
expense (199)
--------
Profit for
the financial
year before
taxation
and non-underlying
items 13,113
========
2016
Banking and Corporate Business Employee Property Total Other Total
Financial Services Pensions segments expenses
Services and And movement
Benefits in unbilled
revenue
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Segment revenue 13,550 11,345 10,295 7,273 22,349 64,812 2,249 67,061
----------- --------- --------- --------- -------- --------- ------------- --------
Segment contribution
(as reported
internally) 6,304 3,157 4,037 2,456 10,132 26,086 2,249 28,335
Costs not
allocated
to segments
Other operating
income 442
Personnel
costs (3,882)
Depreciation
and
amortisation (687)
Other operating
expenses (12,092)
Net financial
expense (226)
--------
Profit for
the financial
year before
taxation
and non-underlying
items 11,890
========
No other financial information has been disclosed as it is not provided to the CODM on a regular basis.
3 Other operating income
2017 2016
GBP000 GBP000
Rental income 396 326
Other investment income 49 116
------ ------
445 442
====== ======
4 Expenses and auditor's remuneration
Included in profit are the following:
2017 2016
GBP000 GBP000
Depreciation on tangible assets 819 687
Amortisation of intangible assets 473 -
Operating lease costs 230 220
Operating lease costs on property 3,094 2,722
Other operating income - rent received (275) (326)
Foreign exchange (gains)/losses (43) 4
Loss/(profit) on sale of fixed assets 2 (8)
====== ======
Non-underlying items and IFRS transition adjustments
2017 2016
GBP000
Listing costs - 755
One-off professional costs - 101
---- ------
- 856
==== ======
Non-underlying items in the prior year relate to one-off professional costs in respect of the Group's future strategy, on-going lease restructuring costs of certain offices together with additional costs resulting from the release of operating lease incentives in accordance with IFRS, whereby lease incentives are now recognised over the full term of the lease.
Non-underlying items in the current year relate to expenses incurred in respect of the Company's admission to the AIM market of the London Stock Exchange.
4 Expenses and auditor's remuneration (continued)
Auditor's remuneration
2017 2016
GBP000 GBP000
Audit of these financial statements 55 92
Amounts receivable by the Company's
auditor and its associates in respect
of:
Audit of financial statements of
subsidiaries of the Company 19 15
Other assurance services 26 92
Corporate finance services - 300
Tax compliance services 11 33
====== ======
5 Employees
The average number of persons employed by the Group during the year, analysed by category, was as follows:
Number of employees
2017 2016
Legal staff 457 392
Administrative staff 239 230
--------------- --------------
696 622
=============== ==============
The aggregate payroll costs of these persons were as follows:
2017 2016
GBP000 GBP000
Wages and salaries 40,458 34,733
Share based payments expenses 325 125
Social security costs 4,075 3,491
Pension costs 700 602
------ ------
45,558 38,951
====== ======
6 Financial income and expense
Recognised in profit and loss
2017 2016
GBP000 GBP000
Financial income
Interest income 237 265
------ ------
Total finance income 237 265
====== ======
Financial expense
Interest expense on bank borrowings
measured at amortised cost (436) (491)
------ ------
Total financial expense (436) (491)
====== ======
Net financial expense (199) (226)
====== ======
7 Taxation
2017 2016
GBP000 GBP000
Current tax expense
Current tax on profits for the year 3,069 2,448
Under provision of taxation in previous
period 84 -
------ ------
Total current tax 3,153 2,448
====== ======
Deferred tax expense
Origination and reversal of temporary
differences (95) -
------ ------
Total tax expense 3,058 2,448
====== ======
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:
2017 2016
GBP000 GBP000
Profit for the year (subject to
corporation tax) 13,428 11,034
------ ------
Tax using the Company's domestic
tax rate of 20% (2016 - 20%) 2,686 2,207
Expenses not deductible for tax
purposes 288 241
Under provision of taxation in previous
period 84 -
------ ------
Total tax expense 3,058 2,448
====== ======
Reductions in the UK corporation tax rate to 20% (effective from 1 April 2015) were substantively enacted on 2 July 2013. Further reductions to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on 26 October 2015. The deferred tax liability at 30 April 2016 has been calculated based on these rates. An additional reduction to 17% (effective from 1 April 2020) was announced in the Budget on 16 March 2016. This will reduce the Company's future current tax charge accordingly
8 Earnings per share
Statutory earnings per share
2017 2016
Number Number
Weighted average number of ordinary
shares in issue, being weighted
average number of shares for calculating
basic earnings per share 106,663,150 104,928,209
Shares deemed to be issued for no
consideration in respect of share
based payments 759,599 -
Weighted average number of ordinary
shares for calculating diluted earnings
per share 106,422,749 104,928,209
=========== ===========
2017 2016
GBP000 GBP000
Profit for the year and basic earnings
attributable to ordinary equity
shareholders 10,055 8,586
Non-underlying items (see note 4)
Operating expenses and finance costs - 856
Tax on non-underlying items - (20)
----------- -----------
Underlying earnings before non-underlying
items 10,055 9,422
Earnings per share is calculated
as follows:
2017 2016
pence pence
Basic earnings per ordinary share 9.43 8.18
Diluted earnings per ordinary share 9.35 8.18
Basic earnings per ordinary share
after non-underlying items 9.43 8.98
Diluted earnings per ordinary share
after non-underlying items 9.35 8.98
Underlying earnings per share have been shown because the Directors consider that this provides valuable additional information about the underlying performance of the Group.
9 Dividends
2017 2016
GBP'000 GBP'000
Equity shares:
Interim dividend in respect of 2016
(1.895p per share) - 22 January
2016 - 1,995
Final dividend in respect of 2016
(3.746p per share) - 28 September
2016 3,996 -
Interim dividend in respect of 2017
(2.2p per share) - 3 March 2017 2,344 -
------- -------
6,340 1,995
======= =======
The Board proposes to recommend a final dividend of 4.4p (2016: 3.746p) per share at the AGM. If approved, this dividend will be paid in early October 2017 to shareholders on the register at the close of business on 8 September 2017. The shares will go ex-dividend on 7 September 2017. This dividend has not been recognised as a liability in these final statements.
10 Intangible assets and goodwill
Goodwill Customer Total
lists
GBP'000 GBP'000 GBP'000
Deemed cost
At 1 May 2015 - - -
Acquisitions through business combinations 1,515 1,000 2,515
-------- -------- -------
At 30 April 2016 1,515 1,000 2,515
Acquisitions through business combinations 1,161 638 1,799
-------- -------- -------
At 30 April 2017 2,676 1,638 4,314
======== ======== =======
Amortisation
At 1 May 2015 at 30 April 2016 - - -
Charge for the year - 472 472
-------- -------- -------
At 30 April 2017 - 472 472
======== ======== =======
Carrying amounts
At 30 April 2016 1,515 1,000 2,515
======== ======== =======
At 30 April 2017 2,676 1,166 3,842
======== ======== =======
Impairment testing
The Group tests goodwill annually for impairment. The impairment test involves determining the recoverable amount of the cash generating unit 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. All of the goodwill is allocated to the property cash generating unit. 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 15% was applied in determining the recoverable amount. The discount rate is based on the average weighted cost of capital
-- 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 internal sources (existing management knowledge, track record and an in-depth understanding of the work types being performed).
-- Growth rates of between 10-20% are based on management's understanding of the market opportunities for services provided pertaining to the industry concerned.
-- Increases in costs are based on current inflation rates and expected levels of recruitment needed to generate predicted turnover growth.
-- Attrition rates are based on the expected level of fees from existing clients as a percentage of total forecast fees
-- Cashfows have been assessed over a five year period which management consider to be the correct average life of clients relationships
-- The review demonstrated significant headroom such that the estimated carrying value is not sensitive to changes in assumptions. Having reviewed the key assumptions used, the Directors do not believe that there is a reasonably possible change in any of the key assumptions that require further disclosure
11 Trade and other receivables
2017 2016
GBP000 GBP000
Trade receivables 26,132 20,759
Unbilled revenue 10,487 9,881
Prepayments 2,467 3,056
39,086 33,696
====== ======
All trade receivables are repayable within one year.
Movement in the allowance for doubtful receivables
2017 2016
GBP000 GBP000
Brought forward provision (1,792) (1,828)
Provision utilised 302 555
Charged to income (815) (913)
Provisions released 294 394
------- -------
(2,011) (1,792)
======= =======
Receivables not impaired past due
2017 2016
GBP000 GBP000
Not past due 18,464 13,074
Past due 0-30 days 1,864 1,480
Past due 31-120 days 3,212 3,303
Past due greater than 120 days 4,603 4,694
------ ------
28,143 22,551
====== ======
The carrying amount of financial assets recorded in the financial statements, which is net of any impairment losses, represents the Group's maximum exposure to credit risk. Financial assets include client and other receivables and cash. The Group does not hold collateral over these balances.
All of the group's trade and other receivables have been reviewed for indicators of impairment. The impaired trade receivables are mostly due from customers experiencing financial difficulties.
12 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. For more information about the Group's exposure to interest rate and foreign currency risk, see note 21.
2017 2016
Fair Carrying Fair Carrying
value amount value amount
GBP000 GBP000 GBP000 GBP000
Non-Current liabilities
Unsecured bank loan 4,958 4,958 6,938 6,938
Loans from former members - - 500 500
4,958 4,958 7,438 7,438
====== ======== ====== ========
Current liabilities
Unsecured bank loan 1,980 1,980 1,980 1,980
Loans from former members 551 551 4,603 4,603
2,531 2,531 6,583 6,583
====== ======== ====== ========
The unsecured overdraft facilities totalling GBP5m are repayable on demand.
On 8 June 2015, Gateley Plc entered into two new loan agreements of GBP5m each. The total GBP10m of term loans are repayable quarterly over five years commencing on 8 November 2015. Interest is chargeable at 2.25% over LIBOR.
On the 8 June 2015 all amounts relating to individual members capital classified as a liability together with amounts due to members were converted into Loans from former members. Loans were repayable quarterly over a period of not less than two years subject to adequate working capital facilities, in the opinion of the board of directors, within the Group being available to accommodate such payments. Repayment of the remaining liabilities are forecast to be made quarterly from May 2016 with the final payment arising in quarter one of the year ended 30 April 2018. Interest is chargeable at 0.5% over Bank of England base rate.
13 Trade and other payables
2017 2016
GBP000 GBP000
Current
Trade payables 5,204 5,844
Other taxation and social security
payable 4,671 4,153
Other payables 1,395 653
Accruals 9,359 7,947
20,629 18,597
====== ======
Non-current
Other payables - 154
====== ======
Current other payables include GBP0.05m (2016: GBP0.22m) in respect of deferred consideration being a final payment due for the acquisition of Gateley Capitus Limited together with GBP0.96m in respect of deferred consideration scheduled for payment after 31 March 2018 following the acquisition of Gateley Hamer Limited (formerly Hamer Associates Limited). GBP0.42m of Gateley Hamer Limited deferred consideration is to be settled by way of 10p ordinary shares with the balance payable in cash.
14 Deferred tax liability
Customer lists Total
GBP'000 GBP'000
At 1 May 2015 - -
Acquisitions through business combinations - Gateley Capitus
Limited 200 200
-------------- -------
At 30 April 2016 200 200
Acquisitions through business combinations - Gateley Hamer
Limited (formerly Hamer Associates Limited) 134 134
Credited during the year in the Consolidated income statement (95) (95)
-------------- -------
At 30 April 2017 239 239
============== =======
15 Provisions
Professional indemnity
2017 2016
GBP000 GBP000
Brought forward 596 -
On incorporation - 537
Provisions made during the year 270 325
Provisions used during the year (91) (178)
Provisions reversed during the year (184) (88)
------ ------
At end of year 591 596
====== ======
Non-current 381 339
Current 210 257
------ ------
591 596
====== ======
The professional indemnity provision represents amounts equal to the insurance excesses payable on outstanding claims against the Group which are covered by the Company's professional indemnity insurance policy. The amount or timing of amounts payable in these cases are uncertain as the resolution of the cases are unknown at the year end.
16 Share capital
Authorised, issued and fully paid
2017 2017 2016 2016
Number GBP Number GBP
Ordinary shares of
10p each
Brought forward 106,396,912 10,639,691 - -
On incorporation -
13 November 2014 10 1
Issued on acquisition
of business - - 100,000,001 10,000,000
Issued on initial
public offering - - 5,274,148 527,415
Issued on acquisition
of Gateley Capitus
Limited - - 1,122,753 112,275
Issued on acquisition
of Gateley Hamer Limited
(formerly Hamer Associates
Limited) 388,029 38,803 - -
Issued as part of
deferred consideration
of Gateley Hamer Limited
(formerly Hamer Associates
Limited) 97,012 9,701 - -
----------- ---------- ----------- ----------
At 30 April 2017 106,881,953 10,688,195 106,396,912 10,639,691
=========== ========== =========== ==========
The share capital reflects the shares issued to acquire Gateley Plc on 29 May 2015. In line with the requirements of merger accounting, the structure and share capital issued has been recorded as though it had always been in place.
On the Group's admission to the AIM market of London Stock Exchange Plc on 8 June 2015, a further 5,274,148 10p ordinary shares were issued and fully paid up.
On 8 April 2016 the Group acquired the entire issued share capital of Gateley Capitus Limited (formerly Capitus Limited) in part for the issue of 1,122,753 10p ordinary shares.
On 15 September 2016 the Group acquired the entire issued share capital of Gateley Hamer Limited (formerly Hamer Associates Limited) in part for the issue of 388,029 10p ordinary shares. This was followed by a further issue in respect of 97,012 10p ordinary shares in line with deferred consideration conditions of the acquisition.
17 Share based payments
Group
At year end the Group has three share based payment scheme in operation.
Scheme 1 - Stock Appreciation Rights Scheme ('SARS')
This SARS is a discretionary executive reward plan which allows the Group to grant conditional share awards or nil cost options to selected executives at the discretion of the Remuneration Committee.
The awards vest after a three year performance period. On exercise, participants will receive the growth in value of the share options between the date of grant and the date of exercise in excess of the hurdle rate. The hurdle rate is currently set at 115.765% of the market value of the underlying shares on the date of grant.
Awards granted under the scheme are summarised below:
Weighted average exercise price Number of options
8 June 2015
Granted on admission GBP1.0997 7,200,000
Forfeited during previous year GBP1.0997 (150,000)
Forfeited during the year GBP1.0997 (100,000)
-------------------------------- -----------------
Outstanding at end of year GBP1.0997 6,950,000
-------------------------------- -----------------
Weighted average remaining contractual life 1.2 years
Weighted average exercise price Number of options
7 October 2016
Granted on admission GBP1.3880 10,850,000
Forfeited during the year - -
-------------------------------- -----------------
Outstanding at end of year GBP1.3880 10,850,000
-------------------------------- -----------------
Weighted average remaining contractual life 2.4 years
Scheme 2 - 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. Share options and weighted average exercise prices are as follows for the reporting periods presented:
Weighted average exercise price Number of options
20 December 2016
Granted on admission 1.305p 946,433
Forfeited during the year 1.305p (13,411)
------------------------------- -----------------
Outstanding at end of year 1.305p 933,022
------------------------------- -----------------
Weighted average remaining contractual life 2.7 years
Scheme 3 - Save As You Earn scheme ('SAYE')
The Group operates an 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. Share options and weighted average exercise prices are as follows for the reporting periods presented:
Weighted average exercise price Number of options
1 October 2016
Granted on admission 0.95p 1,166,646
Forfeited during the year 0.95p (45,848)
------------------------------- -----------------
Outstanding at end of year 0.95p 1,120,798
------------------------------- -----------------
Weighted average remaining contractual life 2.4 years
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:
CSOP SAYE SARS SARS
Grant date 20 December 2016 1 October 2016 7 October 8 June
2016 2015
Share price at date of grant 1.305p 0.95p GBP1.20p GBP0.95p
Exercise price 1.305p 0.95p GBP1.39p GBP1.10p
Volatility 24% 24% 24% 24%
Expected life 3.3 years 3.3 years 3.3 years 3.3 years
Risk free rate 1% 1% 1% 1%
Dividend yield 4% 4% 4% 6%
Fair value per share
Market based performance condition GBP0.15p GBP0.25p GBP0.06p GBP0.05p
Non-market based performance - - - -
condition/no performance condition
---------------- -------------- --------- ---------
As the Group had only limited share price history at the date of grant, expected volatility was based on a proxy volatility determined from the median volatility of a group of appropriate comparator companies. For the same reason, a similar approach was followed to derive the dividend yield. Expected life has been taken to be between the minimum and maximum exercise period of three and three and a half years, respectively.
The total charge to the income statement for all schemes now in place, included within personnel costs, is GBP325,000 (2016: GBP125,000).
18 Accounting estimates and judgements
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.
Impairment assessment of trade receivables
The total carrying amount of trade receivables on client assignment is held net of impairment losses after consideration is given to the clients' willingness to pay those amounts accrued. The valuation of amounts recoverable and not recoverable on trade receivables involves significant judgement. The estimation of provisions is established based on interactions between finance, the legal staff member and clients, mindful of the specific circumstances of clients and individual matters and invoices. Historic performance of client's ability to settle past debts and their current financial position play a significant part in management's assessment of whether a provision in full or in part may be necessary.
Unbilled revenue on client assignments
The valuation of unbilled revenue involves significant judgement, and affects the amount of revenue recognised. 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. Provision is made for such factors as historical recoverability rates, contingencies, agreements with clients, external expert's opinion and the potential credit risks, following interactions between legal staff, finance and clients. In assessing whether unbilled time is recognised as unbilled revenue, management are required to make judgements in determining the point at which the contingency is resolved and when the fair value of consideration can be measured reliability. Where a case is contingent at the statement of financial position date, no revenue is recognised. Where entitlement to income is certain it is recognised at selling price.
Professional indemnity provisions
The Group occasionally receives claims in respect of professional service matters. The possibility of future exposure to the Group of any such claims involves significant judgement by Management and the Group's insurance providers. The Group defends such claims where appropriate but makes a provision for possible amounts considered likely to be payable, up to the deductible amount under the Group's related insurance arrangements. These provisions are estimates, capped at the negotiated excess in place during the year each claim is reported. The actual amount settled upon, if at all, of future claims are dependent on future events. Management reviews these provisions at each reporting date with its insurers.
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 relate to the trading performance of the acquired business and discount rates applied to calculate the present value of future cash flows. The directors consider the resulting valuations to be reasonable approximations as to the value of the intangibles acquired.
Share based payment
The fair value of services received in return for share options granted is measured by reference to the fair value of share options granted. The estimate of fair value is measured using the Black-Scholes model. The use of a valuation model such as this involves making certain assumptions around the inputs into the model. There is also uncertainty around the number of shares likely to vest and the model therefore takes into account management's best estimate of this.
19 Pensions
The Group participates in a defined contribution scheme operated by Aegon UK plc, the assets of which are held separately from the Group. The amounts charged to the profit and loss account in respect of this scheme represent contributions payable in respect of the accounting year. The total annual pension cost for the defined contribution scheme was GBP699,512 (2016: GBP602,000) and the outstanding balance at the year- end was GBP126,180 (2016: GBP114,000).
20 Business combinations
On 19 May 2015, the Company acquired 100% of the share capital of Gateley EBT Limited for GBP1.
On 29 May 2015, the Company acquired 100% of the share capital of Gateley Plc via a share for share exchange.
On 29 May 2015, the Company acquired 100% of the share capital of Entrust Pension Limited for GBP1.
On 29 May 2015, the Company acquired the membership interest of Gateley UK LLP for GBP1.
On 8 April 2016 the Company acquired 100% of the voting equity interest of Gateley Capitus Limited, a UK specialist tax incentives advisory business. The acquisition has been accounted for using the acquisition method.
Acquisition of Gateley Hamer Limited ("GHL") (Formerly Hamer Associates Limited).
On 15 September 2016 the Company acquired 100% of the voting equity interest of GHL, a specialist property consultancy business. The acquisition has been accounted for using the acquisition method. The fair value of the identifiable assets and liabilities of GHL as at the date of the acquisition was:
Pre-acquisition Policy alignment and fair value adjustments Total
carrying amount
GBP'000 GBP'000 GBP000
Property, plant and equipment 16 - 16
Intangible asset relating to brand - 638 638
Cash and short term deposits 280 - 280
Trade receivables 335 - 335
Prepayments and accrued income 14 - 14
Total assets 645 638 1,283
---------------- ------------------------------------------- ------
Trade payables - - -
Other taxation and social security payable (206) - (206)
Accruals (54) - (54)
Deferred tax - (134) (134)
---------------- ------------------------------------------- ------
Total liabilities (260) (134) (394)
---------------- ------------------------------------------- ------
Total identifiable net assets at fair value 385 504 889
Goodwill arising on acquisition 1,161
------
Total acquisition cost 2,050
------
Analysed as follows:
Initial cash consideration paid 508
Issue of new 10p ordinary shares in Gateley
(Holdings) Plc 459
Deferred share consideration payable * 542
Deferred cash consideration payable 541
------
2,050
------
Cash outflow on acquisition
Cash paid (508)
Acquisition costs -
Net cash acquired with subsidiary (Included in
cash flows from investing activities) 280
------
Net cash outflow (228)
------
* On the 3 February 2017 GBP125,000 of deferred consideration was subsequently settled by way of issue of ordinary shares of 10p each.
From the date of acquisition, GHL has contributed GBP0.87m to revenue and GBP0.16m to Group profit for the year. If the combination had taken place at the beginning of the year, GHL would have contributed revenue of GBP1.35m and profit for the year of GBP0.15m.
The acquisition of GHL is consistent with the Group's growth strategy to acquire businesses offering complementary professional and other specialist services to clients in the Group's target markets. GHL has developed a specialist property consultancy offering in the fields of Easement and Wayleaves and Compulsory Purchase and Compensation. The GHL Easements and Wayleaves team advises property developers on negotiations in relation to the removal of utility infrastructure (pylons, cables, pipes etc.) from development sites, and negotiates compensation for loss of development value where that infrastructure remains in-situ. The Compulsory Purchase and Compensation team advises project promoters on all aspects of compulsory purchase, from initial consultation through to settlement of claims; facilitating housing, regeneration, infrastructure and energy projects. The team also represents landowners and businesses affected by compulsory purchase. The acquisition will further enhance Gateley's ability to support its property clients, offering them not only a first-rate legal service, but also a suite of specialist commercial property services. The business will sit alongside Gateley's national property business, which itself acts for an array of developers, including seventeen of the UK's top twenty house builders.
GHL will operate as a wholly owned subsidiary of Gateley (Holdings) Plc with its own existing dedicated management team and employees. An operating board, made up of senior management from both the Group and GHL will oversee the ongoing delivery and development of the business.
Customer lists and brands have been recognised as specific intangible assets as a result of the acquisition. The residual goodwill arising primarily represents the assembled workforce, market share and geographical advantages afforded to the Group. Policy alignment and fair value adjustments principally relate to harmonisation with Group IFRS accounting policies, including the provisional application of fair values on acquisition.
None of the recognised goodwill is expected to be deductible for income tax purposes. The fair value of the customer lists and brand has been based upon management's assessment of its ability to generate future profitability for the acquired assets over the next three years after taking into account a 10% present value discount factor. The customer lists and brand value will be amortised on a straight-line basis over an estimated useful life of three years.
There were no transaction costs incurred during the course of the acquisition.
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR MMGMNMGGGNZZ
(END) Dow Jones Newswires
July 11, 2017 02:00 ET (06:00 GMT)
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