We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register for streaming realtime charts, analysis tools, and prices.
| 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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 120.50 | 120.00 | 121.00 | 120.50 | 120.50 | 120.50 | 1 | 07:30:09 |
| 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 : 8109U
Gateley (Holdings) PLC
17 July 2018
For Immediate Release 17 July 2018
Gateley (Holdings) Plc
("Gateley" the "Group" or the "Company")
Preliminary Results for the year ended 30 April 2018
"Continuing to build momentum and resilience into our business model"
Gateley (AIM:GTLY), the law-led professional services group is pleased to report its audited preliminary results for the year ended 30 April 2018.
Financial Highlights
-- Revenue increased 11.0% to GBP86.1m (2017: GBP77.6m) -- Adjusted EBITDA* increased 10.6% to GBP16.5m (2017: GBP14.9m) -- Profit before tax increased 11.7% to GBP14.6m (2017: GBP13.1m) -- Basic EPS increased 17.0% to 11.03p (2017: 9.43p)
-- Proposed final dividend of 4.8p (2017: 4.4p) representing a full year dividend of 7.0p (2017: 6.6p)
-- Strengthening balance sheet with net assets increasing to GBP23.0m (2017: GBP17.4m) -- Strong cash generation and continued investment for future growth
* Adjusted EBITDA excludes share based payment charges and exceptional items
Operational Highlights
-- Strategic acquisition of housebuilder specialists GCL Solicitors acquired May 2018, adding 80 new staff
-- Further acquisition of complementary non-legal Human Capital consultancy business, Kiddy & Partners, acquired July 2018
-- Strong investment in fee earning staff with average fee earning staff numbers up 11.4% from 457 at 30 April 2017 to 509 at 30 April 2018. Total staff numbers up 8.8% from 696 at 30 April 2017 to 757 at 30 April 2018
-- All three established share schemes now well placed to enhance equity ownership (including all staff SAYE share scheme, CSOP and Stock Appreciation Rights Schemes)
-- Successful expansion of shareholder base with free float now up to 39.9%
Michael Ward, CEO of Gateley, commented:
"We are delighted with the performance of the business this year, a year in which we have grown our revenues, increased our profit, enhanced our returns to shareholders and invested in the future through additional staff hires and two complementary acquisitions. As the first UK commercial law-led professional services group to be admitted to AIM, we are justifiably very proud of our team who continue to support our journey and help drive the business forward with such strong momentum."
"The Board strongly believe that the time remains right for providing greater choice for our clients and investors and we therefore remain focussed on further enhancing the breadth of our offering for the benefit of all our stakeholders. At the same time we continue to build resilience into our business model and feel confident that the business we have grown profitably over many decades is now strengthened further by the blend of professionals that we continue to attract."
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 Boot (Corporate Finance) Tel: +44 (0) 20 7894 7000
Caspar Shand Kydd (Sales), Alex Pollen
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 3934 6630
Tim Metcalfe, Miles Nolan
Chairman's Statement
I am delighted with the performance of the business in the twelve months to 30 April 2018. Following on from our two previous successful years on AIM, we have seen revenues rise by 11.0% this year to GBP86.1m and earnings per share rise by 17.0% from 9.43p to 11.03p. What is particularly pleasing is that this strong growth has been achieved whilst maintaining a healthy balance of continuing to support and enhance our customer offering and seeking new opportunities for future investment. The scale, breadth and depth of our business continues to expand and our strong focus of leveraging our service offering for the benefit of our customers has been, and will continue to be, at the forefront of our strategic thinking and operational focus.
Since we became a public company, we have seen an increase in the interest that staff have in this new structure for a law firm. I'm pleased to say that our ability to attract quality staff, who are interested in benefiting from the opportunities provided by our plc structure, continues to strengthen. During the year we have increased our average employee numbers by 8.8% from 696 to 757. The next important phase of our incentivisation journey commenced shortly after our year end with the delivery of greater equity participation and rewards through our initial Stock Appreciation Rights Scheme that was awarded to partners present at the IPO. Alongside our all staff share scheme and CSOPs, employees from all parts of the Group continue to benefit as shareholders. The majority of Group employees now have some form of equity in the business.
After a period of integration following our first two acquisitions in 2016, we have been working hard this year in seeking the right next steps for our acquisition strategy that deliver both high quality output as well as complementing our existing service lines. This has resulted in the two recent strategic acquisitions of GCL Solicitors and Kiddy & Partners. These two very different businesses have excellent reputations of long term client retention, high levels of service delivery and the Board is delighted to welcome them to the Group. Without our Plc status, I do not believe that we would have appealed to either business in the same way.
The opportunity that Gateley pioneered by being the first UK commercial law firm to IPO three years ago has now ignited increased interest across our changing sector and several more law businesses have followed us onto the AIM market. As a Board, we very much welcome the creation of a broader, larger sector for stakeholders to consider. As an established investment choice, I continue to remain confident that Gateley has the right strategy for the profitable growth of the Group and to deliver enhanced value for all our stakeholders. Our management team remain steadfast in its vision to succeed with their stated aims 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).
The Board remains confident that the business is well placed to deliver another year of growth, whilst at the same time continuing to seek complementary service lines to further enhance our customer offering. 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 26 September 2018, of 4.8 pence per share, making a total dividend of 7.0 pence per share for the year, and representing a 6.1% increase on the prior year.
Finally, and certainly not least, I would like to pass on my thanks to our Chief Executive, Michael Ward, as well as to the Board, to the management team and to all of the staff at Gateley for their hard work, support and fantastic contribution this year in delivering a strong set of results and making considerable further strategic progress.
Nigel Payne
Chairman
16 July 2018
Chief Executive Officer's Review
Introduction
Our entire team have worked tirelessly this year in delivering another set of financial results in line with our original IPO strategy and current market expectations. It has been a very busy year with numerous opportunities opening up for us as a result of our different service offerings. Our steadfast dedication towards client service continues to ensure we deliver the services clients want time and again. The passion of our staff shines through in the work they perform and I'm proud to lead them through these exciting times. As we grow, we continue to deliver on our promises to clients, employees and investors.
We have demonstrated strong cash generation, achieved record revenues and profits, whilst expanding our network and service lines, through further strategic investment and recruitment, that I am sure will deliver long term, sustainable, growth.
Three years on from our IPO our vision for a professional services Group continues as we diversify through our acquisitions strategy, and incentivise our staff. Our stated commitment to staff incentivisation is about to materialise as our initial Stock Appreciation Rights Scheme issue vested on 8 June 2018. This option scheme is for the benefit of partner level employees. Their share awards will ensure they remain aligned with the long-term success of the Group.
Financial Results
Our financial performance continues to demonstrate growth in revenue and profits in line with market expectations together with strong cash generation. Our diverse revenue streams have grown by 11.0% whilst profit before tax has grown at a similar rate of 11.7%. Growth in EPS and dividend returns to all investors is good news for all. Investment in new people helps us meet growing client demand and also ensures we deliver our promises to the management teams of our acquired complementary businesses. Gateley Hamer has branched out into London and Gateley Capitus has added new experts to deliver additional benefit to clients in Research and Development tax credits. We continue to build our teams with a national and strategic focus to ensure we can meet demand.
The strength in depth of our core legal business presents appealing opportunities across many business types and sectors. Whilst transactional activity levels across Corporate, Banking and Property segments remain significant, our long-established expertise in Business Services such as litigation and dispute resolution work has produced significant returns once again. The strength of our connections across national board rooms, and our reputation for quality teams with a focus on client service, result in continuing instructions across many sectors, including private equity and housebuilding.
Our transition from LLP to Plc is now complete and in addition we have now repaid half of the term loans advanced at the time of the IPO. We are pleased to once again propose a dividend to shareholders in line with expectations. EPS, both basic and diluted, is attractive to future shareholders.
Operational Review
We remain focused on investing in the right people to join the Gateley team. This remains our largest challenge in an ever-changing economic environment. Our Plc status provides an attractive alternative across all generations of staff. Average total staff numbers grew by 8.8% from 696 to 757 including 11.4% growth in professional staff and 3.8% growth in business support services. The lateral hiring of other law firm partners is typically longer-term in nature but strategically important for business development. We are pleased to see healthy interest in traineeships of professionals across the Group and congratulate all those staff, both professional and support that were promoted to higher roles this year.
Operational Review (continued)
Our three established Group share option schemes are starting to reward staff with their share awards. This is an important element of our strategy to ensure alignment with share performance and long-term investment in the business. The Group's Stock Appreciation Rights Scheme (SARS), which is aimed at partner level staff, will vest shortly after the year end with a healthy return to all option holders that have been with the Group since IPO. A third year's SARS award was issued in October 2017 to those partners currently driving the Group's performance. Also, around the same time the Group issued its second issue of its CSOP and SAYE schemes. Being able to offer something different as an employer has helped us not only retain staff since the IPO but also attract a wide pool of new talent. 55% of all staff below partner level have participated in our SAYE schemes whilst all associates, senior associates, legal directors and the equivalent levels within our support services team received further CSOP awards.
With the recent acquisition of GCL Solicitors on 23 May 2018 that helped establish our new Guildford office, we have now established a trio of southern offices from which to create a strong, coherent base to attract the significant number of existing opportunities to the Group. Our Reading office has continued to establish wider connections and obtain greater local recognition culminating in being named Law Firm of the Year at the Thames Valley Business Awards this year. Our existing London base provides niche services lines, creates opportunities for synergies, such as with Kiddy & Partners and remains a gateway for our international connections.
Acquisitions
Our acquisition strategy focuses on niche businesses which can supplement our core legal services offering. Our Plc status and established reputation attracts first class professionals to enhance our core legal services. As our wide and diverse client base benefits from the added value services provided by Gateley Capitus and Gateley Hamer, we have this year focused on adding to one of our key strengths in the house building sector which resulted in the acquisition of GCL Solicitors.
I am delighted to welcome GCL to the Group. The acquisition will further strengthen our leading position in the Residential Development sector nationally and provide us with a substantial presence in the Southern market, which we see as critical in developing a full service offering for our clients.
There is a structural under supply of new housing in the UK and we see this as a market that will remain strong. The South East in particular will continue to be a significant engine for housing growth for the foreseeable future.
The acquisition allows us to offer a greater depth of specialism and expertise in all aspects of the residential development market. We can now match our national office network to our Residential Development clients' networks with seven Residential Development teams operating across the country. There are also many opportunities across the Group from this strategic acquisition, not least for Gateley Hamer and Gateley Capitus.
On 6 July 2018, we further expanded our suite of niche businesses with the acquisition of Kiddy & Partners. Kiddy significantly broadens and strengthens our Employment and People Services offering. There will be clear opportunities for us to collaborate and deliver integrated advice and services to a broader set of large-scale employers across a wide range of industries. Kiddy represents our first acquisition in the Human Capital sector, which when put alongside Global Mobility and our Entrust pension trustee operation, moves our business further forward, offering employers a range of legal and consultancy services. This acquisition is in line with our stated plan and follows behind similar progress made in our Property group noted above where high-value, niche, chartered surveying services now sit-alongside and complement our core legal offering.
All of our businesses complement each other in service delivery and enhance our go to market proposition.
Board Composition
At our 2017 AGM we welcomed Suzanne Thompson to the Board. Suzanne has settled in well as we look to benefit from her marketing, advertising and communications expertise in the next stage of our differentiation objective.
Current trading and outlook
We are pleased with our performance after three years as an AIM quoted Group and welcome the recent activity and interest in other law related businesses joining AIM. As the first UK commercial law-led professional services group we feel proud of our team who continue to support our journey. The Board strongly believes the time remains right for greater choice for our clients and investors. We therefore strive to further enhance our offering for the benefit of all stakeholders.
At the same time, we aim to continue to build resilience into our business model and feel confident that the business we have built over many decades is now better placed to address market opportunities.
Michael Ward
CEO
16 July 2018
Finance Director's Review
Financial Highlights
The Group delivered another strong performance in 2018 with record revenue generation accompanied by increased profitability. Total reported revenues for the year increased by 11.0% to GBP86.1m (2017: GBP77.6m). Revenue from core legal services grew organically by 9.5% after adjusting for revenues from acquisitions since IPO of GBP3.3m (2017: GBP2.0m). The Group continues to demonstrate consistent levels of annual revenue and profit growth whilst actively seeking opportunities for the strategic expansion of our national teams. Headcount has once again increased to meet client demand but credit for the Group's performance should go first and foremost to our established national teams. As our post IPO structure attracts senior (work winning) recruitment opportunities we have maintained a sensible balance of the management of cost and future investment. The strength of our client relationships and the consistent delivery of the highest levels of commercial professional advice serve the Group well. EBITDA margins are performing as expected as we grow our teams within our already invested locations.
Group revenue was well spread across a growing number of clients from many varied sectors. Our strong performance in transactional led disciplines such as M&A and Real Estate is complemented by exceptional growth in our less established service lines. With a focus on cross selling, the performance of all of our UK business lines is to be commended as they have all demonstrated growth this year. The well-balanced nature of our services provides a natural workflow hedge, and balancing transactional assignments against large specialist litigation service continues to provide resilience against many economic challenges facing clients. Our Corporate group generated revenue growth of 14% whilst our Property Group grew revenue by 18%. 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 nationally capable teams help maintain long standing client relationships and trust. Our post year end acquisition of the business and assets of GCL Solicitors LLP, who specialise in legal advice for land and property clients, will further enhance our presence across Southern England out of its existing Guildford location. The Guildford office provides a good strategic fit with our established Reading and London offices.
Revenue and profits continue to grow across our professional complementary service lines of Gateley Capitus and Gateley Hamer. We have expanded our service lines in both businesses and created a new London team within Gateley Hamer. Our Global Mobility consultancy continues to develop opportunities whilst we seek other Human Capital work type acquisitions. Fees in our Dubai office reduced slightly on the previous year as the office contracted in activity and headcount in line with locally reduced demand. The office has broken even this year following last year's loss.
Operating expenses rose by 10.7% to GBP71.6m (2017: GBP64.7m). This growth in operating costs has been driven mainly by the continued expansion of staff levels to meet client demand. Average numbers of legal and professional staff rose by 11.4% to 509 (2017: 457). Personnel costs, including increased share based payment charges, rose as a result by 15.5% from GBP45.6m to GBP52.6m, thereby increasing this cost to 61.1% of revenue from 58.7% in 2017.
As a result of the expansion of new staff numbers, overall utilisation of staff performing chargeable work decreased to 85% (2017: 86%) but remained within acceptable levels without affecting profit margins.
Other operating expenses decreased by 2.2% to GBP17.5m (2017: GBP17.9m). Other operating expenses (before exceptional items) increased by 0.9% to GBP18.0m from GBP17.9m. This increase was predominately due to increased volumes of activity and expenditure on information technology.
Finance Director's Review (continued)
Extract of UK statement of comprehensive income 2018 2017
GBP'000 GBP'000
Revenue 86,090 77,587
Operating profit 14,825 13,312
Operating profit margin (%) 17.22% 17.16%
Reconciliation to alternative performance
measure: Adjusted EBITDA:
Operating profit 14,825 13,312
Depreciation 970 819
Non-underlying items
Share based payment charge 719 325
Amortisation 547 472
Exceptional items
Release of lease incentive (182) -
Release of contingent consideration (362) -
Adjusted EBITDA 16,517 14,928
======= =======
Adjusted EBITDA margin (%) 19.19% 19.24%
Adjusted EBITDA of GBP16.5m is up by 10.6% from GBP14.9m reflecting an adjusted EBITDA margin of 19.2% (2017: 19.2%). Operating profit before tax was up 11.7% to GBP14.6m (2017: GBP13.1m).
Earnings per share
Basic earnings per share increased to 11.03p (2017: 9.43p). Basic earnings per share after non-underlying items increased to 10.62p (2017: 9.43p). Diluted earnings per share was 10.64p (2017 9.35p).
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 (2017: 2.2p) per share that was paid in March 2018, the Board proposes to approve a full year final dividend at its Annual General Meeting on 26 September 2018 of 4.8p (2017: 4.4p) per share, which if approved, will be paid in early October 2018 to shareholders on the register at the close of business on 14 September 2018. The shares will go ex-dividend on 13 September 2018.
Cash resources, borrowings and liquidity
Cash generated during the year from operations was GBP12.2m (2017: GBP7.7m) which represents 103.7% (2017: 76.3%) of profit after taxation. Financing outflows totalled GBP9.7m (2017: GBP13.1m) which included dividends paid totalling GBP7.0m (2017: GBP6.3m) and term loan repayments of GBP2.0m (2017: GBP2.0m). The final balance of loans due to former partners of GBP0.55m was repaid in June 2017. Capital expenditure decreased to GBP0.79m (2017: GBP1.49m) due to their being no significant office or IT outlays during the year compared to 2017. Group cash at bank increased to GBP4.3m (2017: GBP2.7m) during the year. The Group's net debt position as at the year end therefore finished at GBP0.7m (2017: GBP4.8m).
Net assets
Net assets at the year end, before declaration of final dividend, were GBP23.0m (2017: GBP17.4m).
Neil Smith
Finance Director
16 July 2018
Consolidated statement of profit and loss and other comprehensive income
for the year ended 30 April 2018
Note 2018 2017
GBP'000 GBP'000
Revenue 2 86,090 77,587
Other operating income 3 357 445
Personnel costs 5 (52,621) (45,558)
Depreciation and amortisation (1,517) (1,291)
Other operating expenses (17,484) (17,871)
-------- --------
Operating profit 4 14,825 13,312
Adjusted EBITDA 4 16,517 14,928
Depreciation 4 (970) (819)
Non-underlying items
Share-based payment charges 5 (719) (325)
Amortisation 4 (547) (472)
Exceptional items
Release of lease incentive 4 182 -
Release of contingent consideration 4 362 -
--------------------------------------------- ---- -------- --------
Net financing expense 6 (179) (199)
-------- --------
Profit before tax 14,646 13,113
Taxation 7 (2,853) (3,058)
-------- --------
Profit for the year after tax attributable
to equity holders of the parent 11,793 10,055
======== ========
Other comprehensive income
Items that are or may be reclassified
subsequently to profit or loss
Foreign exchange translation differences
- Exchange differences on foreign branch (58) 81
-------- --------
Profit for the financial year and total
comprehensive income all attributable
to equity holders of the parent 11,735 10,136
======== ========
Statutory Earnings per share
Basic 811.03p 9.43p
Diluted 810.64p 9.35p
The results for the periods presented above are derived from continuing operations.
Consolidated statement of financial position
at 30 April 2018
Note 2018 2017
GBP'000 GBP'000
Non-current assets
Property, plant and equipment 10 1,935 2,160
Investment property 164 164
Intangible assets & goodwill 11 3,295 3,842
Other intangible assets 12 39 -
Other investments 85 85
-------- --------
5,518 6,251
Current assets
Trade and other receivables 13 41,417 39,086
Cash and cash equivalents 4,301 2,696
-------- --------
Total current assets 45,718 41,782
-------- --------
Total assets 51,236 48,033
======== ========
Non-current liabilities
Other interest-bearing loans and
borrowings 14 (2,982) (4,958)
Other payables 15 (121) -
Deferred tax liability 16 (128) (239)
Provisions 17 (405) (381)
-------- --------
Total non-current liabilities (3,636) (5,578)
-------- --------
Current liabilities
Other interest-bearing loans and
borrowings 14 (1,977) (2,531)
Trade and other payables 15 (20,978) (20,619)
Provisions 17 (200) (210)
Current tax liabilities (1,457) (1,665)
-------- --------
Total current liabilities (24,612) (25,025)
-------- --------
Total liabilities (28,248) (30,603)
======== ========
NET ASSETS 22,988 17,430
======== ========
EQUITY
Share capital 19 10,688 10,688
Share premium 4,576 4,332
Merger reserve (9,950) (9,950)
Other reserve 1,547 1,547
Treasury reserve (15) (132)
Translation reserve 23 81
Retained earnings 16,119 10,864
-------- --------
TOTAL EQUITY 22,988 17,430
======== ========
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 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 difference - - - - - - 81 81
-------- -------- -------- -------- -------- --------- ------------ -------
Total comprehensive
income 10,640 4,332 (9,950) 1,013 (27) 10,055 81 10,136
Transactions with
owners
recognised directly
in equity:
Purchase 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
======== ======== ======== ======== ======== ========= ============ =======
At 1 May 2017 10,688 4,332 (9,950) 1,547 (132) 10,864 81 17,430
Comprehensive income:
Profit for the year - - - - - 11,793 - 11,793
Exchange rate differences - - - - - - (58) (58)
-------- -------- -------- -------- -------- --------- ------------ -------
Total comprehensive
income - - - - - 11,793 (58) 11,735
Transactions with
owners
recognised directly
in equity:
Purchase of treasury
shares - - - - (38) - - (38)
EBT reserves adjustment - - - - - 29 - 29
Reclassification of
gain on own shares - 244 - - - (244) - -
Sale of treasury shares - - - - 155 - - 155
Dividend paid - - - - - (7,042) - (7,042)
Share based payment
transactions - - - - - 719 - 719
-------- -------- -------- -------- -------- --------- ------------ -------
Total equity at 30
April 2018 10,688 4,576 (9,950) 1,547 (15) 16,119 23 22,988
======== ======== ======== ======== ======== ========= ============ =======
The following describes the nature and purpose of each reserve within equity:
Share premium - Amount subscribed for share capital in excess of nominal value together with gains on the sale of own shares.
Merger reserve - Represents the difference between the nominal value of shares acquired by the Company in the share for share exchange with the former Gateley Heritage LLP members and the nominal value of shares issued to acquire them.
Other reserve - Represents the difference between the actual and nominal value of shares issued by the Company in the acquisition of subsidiaries.
Treasury reserve - Represents the repurchase of shares for future distribution by Group's Employee Benefit Trust.
Retained earnings - All other net gains and losses and transactions with owners not recognised anywhere else.
Foreign currency translation reserve - Represents the movement in exchange rates back to the Group's functional currency of profits and losses generated in foreign currencies.
.
Consolidated cash flow statement
for the year ended 30 April 2018
Note 2018 2017
GBP'000 GBP'000
Cash flows from operating activities
Profit for the year after tax 11,793 10,055
Adjustments for:
Depreciation and amortisation 10/13 1,517 1,291
Financial income 6 (233) (237)
Financial expense 6 412 436
Release of contingent consideration (362) -
Equity settled share based payments 719 325
Profit on disposal of property,
plant and equipment - 2
Tax expense 7 2,853 3,058
-------- ---------
16,699 14,930
Increase in trade and other receivables (2,330) (5,041)
Increase in trade and other payables 851 636
Decrease/(increase) in provisions 14 (5)
-------- ---------
Cash generated from operations 15,234 10,520
Tax paid (3,051) (2,844)
-------- ---------
Net cash flows from operating activities 12,183 7,676
-------- ---------
Investing activities
Acquisition of property, plant and
equipment 10 (745) (1,485)
Acquisition of other intangible
assets 13 (46) -
Deferred consideration paid - acquisition
of subsidiary 15 (179) (508)
Cash received on acquisition of
subsidiary - 280
Net cash used in investing activities (970) (1,713)
-------- ---------
Financing activities
Interest receivable 6 233 237
Interest and other financial income
paid 6 (412) (420)
Repayment of term bank loans 14 (1,980) (1,980)
Repayment of loans from former members
of Gateley Heritage LLP 14 (551) (4,552)
Cash received from lock in arrangements - 159
Proceeds from sale of own shares 361 -
Acquisition of own shares (217) (164)
Dividends paid 9 (7,042) (6,342)
Net cash used in financing activities (9,608) (13,062)
-------- ---------
Net increase in cash and cash equivalents 1,605 (7,099)
Cash and cash equivalents at beginning
of year 2,696 9,795
-------- ---------
Cash and cash equivalents at end
of year 18 4,301 2,696
======== =========
Gateley (Holdings) Plc
Notes
For the year ended 30 April 2018
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 2018, 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 2018 will be delivered to the Registrar of Companies following the Annual General Meeting.
These condensed preliminary financial statements for the year ended 30 April 2018 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 positive 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 GBP8m (2017: GBP5m). All of the Group's overdraft facilities are 12 months in duration. 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 as 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
Other intangible assets, including software licences, expenditure on internally generated goodwill and brands, 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 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 3 years Computer software 3 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 and exceptional items
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. -- Amortisation and Impairment charges in respect of intangible fixed assets.
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.
-- Expenses associated with acquisitions. -- Impairment charges in respect of tangible or intangible fixed assets. -- Costs incurred as part of significant refinancing activities.
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 4 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
-- IFRS 16 - Leases
-- Amendments to IFRS2 - 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
New standards and interpretations not yet applied
IFRS 15 'Revenue from Contracts with Customers'
On 1 January 2018, IFRS 15 replaces the existing revenue recognition accounting standards - IAS 18 Revenue' and IAS 11 'Construction Contracts'. This standard introduces a new revenue recognition model that recognises revenue either at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognised; this includes the matching of stand-alone prices for services provided to the satisfaction of performance obligations. The model is not expected to change the timing of revenue recognition for the activities of the Group as management currently recognise and assess the key aspects of the new standard in their existing assessment of revenue recognition, however management continue to monitor its application and impact carefully as part of their ongoing assessment which will be completed by 31 October 2018. Under IFRS 15, revenue must be accounted for at the individual contract level. Therefore, the contracts will be disaggregated and the assessment of revenue will depend on the performance obligations within the contract.
The Group considers that there are typically two revenue contract types used in performing professional services advice, being non-contingent and contingent contract types. Non-contingent work is typically recognised at a fixed value or based upon the value of time incurred to complete the work. It is recognised over the duration of the contract. Contingent work is typically recognised once pre agreed stages of the contracts performance are reached or concluded as a result of an event linked to each work type performance. Contingent work can contain a profit premium mark up as a result of the risks associated with offering this type of contractual arrangement to clients. Management believe that the performance of the Group's legal and complementary services can be categorised within these two category types.
Under IAS 18 and IAS 11, revenue was recognised in respect of contracts where there was also a probable recovery of cash in order to settle the value of advice provided. This assessment has always been part of management's assessment of whether to recognise revenue and will continue to be the case under the new standard.
IFRS 15 includes a choice on the transitional adjustments on initial application. Management believe should they discover an adjustment to be made through application of the new standard they will choose 'modified retrospective adoption', which is to retrospectively apply the standard with the cumulative effect of applying IFRS 15 to the opening balance of retained earnings on 1 May 2018. Implementation will therefore not result in restatement of comparative period results using this approach.
IFRS 16 'Leases'
IFRS 16 replaces the existing leasing accounting guidance, which includes IAS 17 'Leases' and IFRIC 4 'Determining Whether an Arrangement Contains a Lease'. The standard is effective for periods beginning on or after 1 January 2019.
The standard requires lessees to account for most contracts using an on-balance sheet model, with the distinction between operating and finance leases being removed. There is no change to the revenue recognition methodology for lessor operating leases.
The standard provides certain exemptions from recognising leases on the balance sheet, including where the asset is of low value or the lease term is twelve months or less. In addition, the standard makes changes to the definition of a lease to focus on, amongst other things, which party has the right to direct the use of the asset.
Under the new standard, the Group will be required to recognise right of use lease assets and lease liabilities on the balance sheet. The right of use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions) less accumulated depreciation and impairment losses, adjusted for any re-measurement of the lease liability. Liabilities are measured based on the present value of future lease payments over the lease term. Subsequently, the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications, amongst others.
The recognition of the depreciation of right of use lease assets and interest on lease liabilities over the lease term will have no overall impact on profit before tax over the life of the lease; however, the result in any individual year will be impacted and the change in presentation of costs will likely be material to the Group's key financial metrics. Under IAS 17, the charge is booked in full to operating profit. Metrics which will therefore be affected will include operating profit and operating margin, interest and interest cover, EBITDA and operating cash flow.
Furthermore, the principal amount of cash paid and interest in the cash flow statement will be presented separately as a financing activity. Operating lease payments under IAS 17 would have been presented as operating cash flows. There will be no overall net cash flow impact.
The Group has commenced work to understand the impact of the new standard and the project will complete during 2018. Work will include a detailed review of all lease contracts to establish lease classification, assessment of transition options, the quantification of financial impacts, design of future processes and the related systems changes, the assessment of the related impacts on the Group's regulatory and commercial reporting requirements, and the impact on the Group's long-term incentive schemes. The review is currently ongoing and will be disclosed in full in next year's financial statements.
Information on the undiscounted amount of the Group's operating lease commitments under IAS 17 'Leases', the current leasing standard, is disclosed in the Group's annual financial statements. The leases substantially relate to property leases used to perform professional activities as an operating lease lessor.
Other new standards and amendments
IFRS 9 'Financial Instruments' specifies how an entity should classify and measure financial assets, including some hybrid contracts. The Group is expected to apply this standard for the Group's 30 April 2019 financial statements and work is ongoing to assess its impact which will be disclosed in full in next year's Group financial statements.
A number of other standards have been modified. These include Disclosure Initiative (Amendments to IAS 7), Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12) and Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2). None of these amendments are expected to have a material effect on the Group's financial statements.
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 and global mobility consultancy.
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:
2018 2017
GBP'000 GBP'000
United Kingdom 80,515 73,711
Europe 3,149 1,870
Middle East 670 712
North and South America 1,258 372
Asia 138 416
Other 360 506
------- -------
86,090 77,587
======= =======
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 GBP0.46m (2017: GBP0.40m) together with costs of GBP0.8m (2017: GBP1.6m) are located in the Group's Dubai branch. Revenue generated by the Group's Dubai branch to customers in the UAE totalled GBP0.9m (2017: GBP0.7m) 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 2018 or 2017 financial year.
2018
Banking Corporate Business Employee Property Total Other expenses Total
and Services Pensions segments And movement
Financial and in unbilled
Services Benefits revenue
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Segment revenue 15,489 16,019 12,225 7,516 33,694 84,943 1,147 86,090
---------- --------- --------- --------- -------- --------- -------------- --------
Segment contribution
(as reported
internally) 5,755 4,338 5,062 2,819 15,769 33,743 1,147 34,890
Costs not allocated
to segments
Other operating income 357
Personnel costs (5,209)
Depreciation and amortisation (1,517)
Other operating expenses (13,696)
Net financial
expense (179)
--------
Profit for the financial year before taxation 14,646
========
2017
Banking Corporate Business Employee Property Total Other expense Total
and Services Pensions segments and movement
Financial and in unbilled
Services Benefits 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 o 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 13,113
========
No other financial information has been disclosed as it is not provided to the CODM on a regular basis.
3 Other operating income
2018 2017
GBP'000 GBP'000
Rental and service charge income 357 396
Other investment income - 49
------- -------
357 445
======= =======
4 Expenses and auditor's remuneration
Included in profit are the following:
2018 2017
GBP'000 GBP'000
Depreciation on tangible assets 970 819
Amortisation of intangible assets 547 472
Operating lease costs 132 230
Operating lease costs on property 2,981 3,094
Other operating income - rent received (295) (275)
Foreign exchange losses/(gains) 66 (43)
Loss on sale of fixed assets - 2
======= =======
Exceptional items
2018 2017
GBP'000 GBP'000
Release of lease incentive 182 -
Release of contingent consideration 362 -
------- -------
544 -
------- -------
Exceptional items represent the release of over accrued contingent consideration calculated within the earn-out clause of the acquisition of Gateley Hamer Limited and the release of an incentive as a result of terminating a property lease
Auditor's remuneration
2018 2017
GBP'000 GBP'000
Audit of these financial statements 52 55
Amounts receivable by the Company's auditor
and its associates in respect of:
Audit of financial statements of subsidiaries
of the Company 19 19
Other assurance services 27 26
Tax compliance services 11 11
======= =======
5 Employees
The average number of persons employed by the Group during the year, analysed by category, was as follows:
Number of employees
2018 2017
Legal and professional staff 509 457
Administrative staff 248 239
--------------- --------------
757 696
=============== ==============
The aggregate payroll costs of these persons were as follows:
2018 2017
GBP'000 GBP'000
Wages and salaries 45,825 40,458
Share based payment expense 719 325
Social security costs 5,283 4,075
Pension costs 794 700
------- -------
52,621 45,558
======= =======
6 Financial income and expense
Recognised in profit and loss
2018 2017
GBP'000 GBP'000
Financial income
Interest income 233 237
------- -------
Total finance income 233 237
======= =======
Financial expense
Interest expense on bank borrowings measured
at amortised cost (412) (436)
------- -------
Total financial expense (412) (436)
======= =======
Net financial expense (179) (199)
======= =======
7 Taxation
2018 2017
GBP'000 GBP'000
Current tax expense
Current tax on profits for the year 2,926 3,069
Under provision of taxation in previous period 38 84
------- -------
Total current tax 2,964 3,153
======= =======
Deferred tax expense
Origination and reversal of temporary differences (111) (95)
------- -------
Total tax expense 2,853 3,058
======= =======
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:
2018 2017
GBP'000 GBP'000
Profit for the year (subject to corporation
tax) 14,646 13,113
------- -------
Tax using the Company's domestic tax rate
of 19% (2017 - 20%) 2,783 2,623
Expenses not deductible for tax purposes 32 351
Under provision of taxation in previous period 38 84
------- -------
Total tax expense 2,853 3,058
======= =======
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 2018 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
2018 2017
Number Number
Weighted average number of ordinary shares
in issue, being weighted average number of
shares for calculating basic earnings per
share 106,881,953 106,663,150
Shares deemed to be issued for no consideration
in respect of share based payments 3,948,441 759,599
Weighted average number of ordinary shares
for calculating diluted earnings per share 110,830,394 107,422,749
=========== ===========
2018 2017
GBP'000 GBP'000
Profit for the year and basic earnings attributable
to ordinary equity shareholders 11,793 10,055
Exceptional items (see note 4)
Operating expenses and finance costs (544) -
Tax on non-underlying items 103 -
----------- -----------
Underlying earnings before non-underlying
items 11,352 10,055
Earnings per share is calculated as follows:
2018 2017
Pence Pence
Basic earnings per ordinary share 11.03 9.43
Diluted earnings per ordinary share 10.64 9.35
Basic earnings per ordinary share after non-underlying
items 10.62 9.43
Diluted earnings per ordinary share after
non-underlying items 10.24 9.35
9 Dividends
2018 2017
GBP'000 GBP'000
Equity shares:
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 - 2,346
Final dividend in respect of 2017 (4.4p per
share) - 4 October 2017 4,691 -
Interim dividend in respect of 2018 (2.2p
per share) - 16 March 2017 2,351 -
------- -------
7,042 6,342
======= =======
The Board proposes to recommend a final dividend of 4.8p (2017: 4.4p) per share at the AGM. If approved, this dividend will be paid in early October 2018 to shareholders on the register at the close of business on 14 September 2018. The shares will go ex-dividend on 13 September 2018. This dividend has not been recognised as a liability in these final statements.
10 Property, plant and equipment
Leasehold Equipment Fixtures Total
improvements and
fittings
GBP'000 GBP'000 GBP'000 GBP'000
Cost
Balance at 1 May 2016 151 2,956 3,583 6,690
Arising on acquisition - 39 - 39
Additions 75 807 603 1,485
Disposals and write offs - (4) - (4)
------------- --------- --------- -------
Balance at 30 April 2017 226 3,798 4,186 8,210
------------- --------- --------- -------
Balance at 1 May 2017 226 3,798 4,186 8,210
Additions - 634 111 745
Balance at 30 April 2018 226 4,432 4,297 8,955
------------- --------- --------- -------
Depreciation and impairment
Balance at 1 May 2016 37 2,359 2,816 5,212
Arising on acquisition - 21 - 21
Depreciation charge for
the year 22 464 333 819
Disposals - (2) - (2)
------------- --------- --------- -------
Balance at 30 April 2017 59 2,842 3,149 6,050
------------- --------- --------- -------
Balance at 1 May 2017 59 2,842 3,149 6,050
Depreciation charge for
the year 23 596 351 970
Balance at 30 April 2018 82 3,438 3,500 7,020
------------- --------- --------- -------
Net book value
At 30 April 2017 167 956 1,037 2,160
------------- --------- --------- -------
At 30 April 2018 144 994 797 1,935
------------- --------- --------- -------
11 Intangible assets and goodwill
Goodwill Customer Total
lists
GBP'000 GBP'000 GBP'000
Deemed cost
At 1 May 2016 1,515 1,000 2,515
Acquisitions through business combinations 1,161 638 1,799
-------- -------- -------
At 30 April 2017 and at 30 April 2018 2,676 1,638 4,314
Amortisation
At 1 May 2016 - - -
Charge for the year - 472 472
-------- -------- -------
At 30 April 2017 - 472 472
Charge for the year - 547 547
-------- -------- -------
At 30 April 2018 - 1,019 1,019
======== ======== =======
Carrying amounts
At 30 April 2017 2,676 1,166 3,842
======== ======== =======
At 30 April 2018 2,676 619 3,295
======== ======== =======
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).
o Growth rates of between 10-20% are based on management's understanding of the market opportunities for services provided pertaining to the industry concerned.
o Increases in costs are based on current inflation rates and expected levels of recruitment needed to generate predicted turnover growth.
o Attrition rates are based on the expected level of fees from existing clients as a percentage of total forecast fees
o Cash flows 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
12 Other intangible assets
Computer
software
GBP'000
Cost
Balance at 1 May 2016 and 30 April 2017 -
Additions 46
---------
At 30 April 2018 46
=========
Amortisation
Balance at 1 May 2016 and 30 April 2017 -
Charge for the year 7
---------
At 30 April 2018 7
---------
Net book amount at 30 April 2017 -
---------
Net book amount at 30 April 2018 39
=========
13 Trade and other receivables
2018 2017
GBP'000 GBP'000
Trade receivables 28,512 26,132
Unbilled revenue 10,672 10,487
Prepayments 2,233 2,467
41,417 39,086
======= =======
All trade receivables are repayable within one year.
Movement in the allowance for doubtful receivables
2018 2017
GBP'000 GBP'000
Brought forward provision (2,011) (1,792)
Provision utilised 264 302
Charged to income (1,296) (815)
Provisions released 831 294
------- -------
(2,212) (2,011)
======= =======
Receivables not impaired, past due
2018 2017
GBP'000 GBP'000
Not past due 18,220 18,464
Past due 0-30 days 3,246 1,864
Past due 31-120 days 4,363 3,212
Past due greater than 120 days 4,895 4,603
------- -------
30,724 28,143
======= =======
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.
14 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 20.
2018 2017
Fair Carrying Fair Carrying
value amount value amount
GBP'000 GBP'000 GBP'000 GBP'000
Non-Current liabilities
Unsecured bank loan 2,982 2,982 4,958 4,958
======= ======== ======= ========
Current liabilities
Unsecured bank loan 1,977 1,977 1,980 1,980
Loans from former members - - 551 551
1,977 1,977 2,531 2,531
======= ======== ======= ========
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 was chargeable at 0.5% over Bank of England base rate.
15 Trade and other payables
2018 2017
GBP'000 GBP'000
Current
Trade payables 5,204 5,204
Other taxation and social security payable 6,355 4,671
Other payables 658 1,395
Accruals 8,761 9,359
20,978 20,629
======= =======
Non-current
Other payables 121 -
======= =======
Current other payables include GBP0.47m (2017: GBP1.012m) in respect of contingent consideration due to vendors of Gateley Capitus Limited and Gateley Hamer Limited. During the year GBP0.055m was paid to Gateley Capitus Limited and GBP0.125m to Gateley Hamer Limited in accordance with the terms of those acquisitions. A further GBP362k of contingent consideration was released as no longer due and payable to Gateley Hamer Limited.
Post year end contingent consideration that was paid on 18 June 2018 in respect of the acquisition of Gateley Hamer Limited. GBP0.235m of the GBP0.47m was settled by way of 10p ordinary shares with the balance payable in cash. Contingent consideration is calculated in line with the Business and Asset purchase agreement based on the value of revenue earned by Gateley Hamer Limited over the two years period to 31 March 2018.
16 Deferred tax liability
Customer lists Total
GBP'000 GBP'000
At 1 May 2016 200 200
Acquisitions through business combinations - Gateley Hamer
Limited 134 134
Credited during the year in the Consolidated income statement (95) (95)
-------------- -------
At 30 April 2017 239 239
Credited during the year in the Consolidated income statement (111) (111)
-------------- -------
At 30 April 2018 128 128
============== =======
17 Provisions
Professional indemnity
2018 2017
GBP'000 GBP'000
Brought forward 591 596
Provisions made during the year 210 270
Provisions used during the year 4 (91)
Provisions reversed during the year (200) (184)
------- -------
At end of year 605 591
======= =======
Non-current 405 381
Current 200 210
------- -------
605 591
======= =======
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.
18 Net debt
2018 2017
GBP'000 GBP'000
Current assets
Cash and cash equivalents 4,301 2,696
Current liabilities
Unsecured bank loan (1,977) (1,980)
Loans from former members - (551)
Non-current liabilities
Unsecured bank loan (2,982) (4,958)
------- -------
Net borrowings (4,959) (7,489)
Net debt (658) (4,793)
======= =======
19 Share capital
Authorised, issued and fully paid
2018 2018 2017 2017
Number GBP Number GBP
Ordinary shares of 10p each
Brought forward 106,881,953 10,688,195 106,396,912 10,639,691
Issued on acquisition of Gateley
Hamer
Limited - - 388,029 38,803
Issued as part of deferred
consideration of
Gateley Hamer Limited - - 97,012 9,701
----------- ---------- ----------- ----------
At 30 April 2018 106,881,953 10,688,195 106,881,953 10,688,195
=========== ========== =========== ==========
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.
20 Operating leases
Future minimum lease payments regarding non-cancellable operating lease rentals are payable as follows:
Land and Other Land and Other
buildings buildings
2018 2018 2017 2017
GBP'000 GBP'000 GBP'000 GBP'000
Less than one year 3,290 127 2,967 132
Between one and five years 11,541 329 10,954 456
More than five years 13,637 - 13,950 -
---------- ------- ---------- -------
28,468 456 27,871 588
========== ======= ========== =======
21 Share based payments
Group
At year end the Group has three share based payment scheme in operation.
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.
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 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.
The annual awards granted under the scheme are summarised below:
Weighted Weighted Originally Lapsed at 30 At 1 May Granted Lapsed At 30 April
average average granted April 2017 2017 during during year 2018
remaining exercise the year
contractual price
life
Number Number Number Number Number
SARS
SARS 15/16 -
8 June 2015 0.6 years GBP1.10 7,200,000 (250,000) 6,950,000 - (250,000) 6,700,000
SARS 16/17 -
7 October
2016 1.9 years GBP1.39 10,850,000 - 10,850,000 - (425,000) 10,425,000
SARS 17/18 -
3 October
2017 2.9 years GBP1.83 - - - 7,050,000 (175,000) 6,875,000
------------ ------------ ---------- --------- ------------ ------------
18,050,000 (250,000) 17,800,000 7,050,000 (850,000) 24,000,000
------------ ------------ ---------- --------- ------------ ------------
SAYE
SAYE 16/17- 1
September
2016 1.9 years GBP0.95 1,166,779 (45,848) 1,120,931 - (171,099) 949,832
SAYE 17/18-
15 September
2017 2.9 years GBP1.33 - - - 556,296 (24,361) 531,935
------------ ------------ ---------- --------- ------------ ------------
1,166,779 (45,848) 1,120,931 556,296 (195,460) 1,481,767
------------ ------------ ---------- --------- ------------ ------------
CSOPS
CSOPS 16/17 -
20 December
2016 1.5 years GBP1.31 940,685 (13,411) 927,274 - (138,326) 788,948
CSOPS 17/18 -
3 October
2017 2.9 years GBP1.65 - - - 581,162 (39,390) 541,772
------------ ------------ ---------- --------- ------------ ------------
940,685 (13,411) 927,274 581,162 (177,716) 1,330,720
------------ ------------ ---------- --------- ------------ ------------
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. This model has been used as an approximation of the binomial model for valuing the SARS granted, the directors consider the difference to be immaterial. The inputs to this model for awards granted during the financial year are detailed below:
CSOP CSOP SAYE SAYE SARS SARS SARS
Grant date 15/9/17 20/12/16 3/10/17 1/10/16 3/10/17 7/10/16 8/6/15
Share price at date of grant GBP1.65p GBP1.305p GBP1.66p GBP0.95p GBP1.58p GBP1.20p GBP0.95p
Exercise price GBP1.65p GBP1.305p GBP.133p GBP0.95p GBP1.83p GBP1.39p GBP1.10p
Volatility 24% 24% 24% 24% 24% 24% 24%
Expected life (years) 3.3 3.3 3.3 3.3 3.3 3.3 3.3
Risk free rate 1% 1% 1% 1% 1% 1% 1%
Dividend yield 4% 4% 4% 4% 4% 4% 6%
Fair value per share
Market based performance condition GBP0.19p GBP0.15p GBP0.33p GBP0.25p GBP0.12p 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 GBP719,000 (2017: GBP325,000).
22 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 of goodwill (note 11)
The value of goodwill is calculated on the acquisition of any new businesses. The value of goodwill is assessed at each year end to ensure that the carrying value is still reflective of the underlying values calculated on day one.
Impairment assessment of trade receivables (note 13)
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 (note 13)
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 (note 17)
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 (note 11)
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 (note 21)
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.
23 Subsequent events
Since the year end the Group has acquired two complementary businesses:
On 23 May 2018, Gateley Plc completed the acquisition of the business and assets of GCL Solicitors LLP for a total consideration of GBP4,150,000. The total consideration was split GBP2,282,500 paid in cash and GBP1,867,500 through the issuance of 1,164,276 new ordinary shares of 10 pence each in Gateley ('Ordinary Shares') at an average price over the past 5 days of GBP1.604. The cash consideration is being funded by the extension of existing Group bank facilities repayable over the three years from completion. In addition, GBP1,320,000 of liabilities owed to the former members of GCL will be converted into loans of the same amount, repayable by Gateley over the next two years following completion. GCL specialises in legal advice for land and property clients.
On 6 July 2018, Gateley (Holdings) Plc acquired the business and assets of Kiddy & Partners LLP into a new 100% subsidiary of the Company Kiddy & Partners Limited (formerly Ensco 1289 Limited). The initial consideration payable on completion was GBP851,844 settled 50% in cash and 50% by the issuance of 251,207 Ordinary Shares of 10 pence each in Gateley ('Ordinary Shares'). Contingent consideration of up to approximately GBP2.15m may be payable annually in respect of the post-completion period up to and including 30 April 2021. Contingent consideration will also be settled 50% in cash and 50% in Ordinary Shares. The maximum consideration payable cannot exceed GBP3m. The acquisition was made on a net working capital neutral basis.
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 news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR GGUUAMUPRPUQ
(END) Dow Jones Newswires
July 17, 2018 02:00 ET (06:00 GMT)
1 Year Gateley (holdings) Chart |
1 Month Gateley (holdings) Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
