8 September 2023

 

The following amendment has been made to the 'Audited Results 2023' announcement released on 6 September 2023 at 07:00 under RNS No 4826L.

 

All references to the final dividend should have read as 6.2p rather than 6.0p, with references to the interim dividend reading as 3.3p rather than 3.5p. The total dividend for the year is unchanged at 9.5p.

 

All other details remain unchanged.

 

The full amended text is shown below.

 

 

Gateley (Holdings) Plc

("Gateley", the "Group" or the "Company")

 

AUDITED RESULTS 2023

Continuing track record of delivery

 

Gateley (AIM: GTLY), the professional services group, announces its audited results for the year ended 30 April 2023 ("FY23" or the "Period"), which continue its unbroken record of year-on-year revenue and underlying profit growth.

 

The Group delivered a strong financial performance in FY23, through its diversified and resilient business model, benefitting from a full year's contribution from the prior year's acquisitions, Adamson Jones Limited and Gateley Smithers Purslow Limited.

 

The Group achieved organic revenue growth of 6.2%, despite macro-economic headwinds, which created challenging market conditions in the second half of the year.

 

The balance sheet remains strong and the Group has significant headroom in its banking facilities to enable investment in organic and acquisitive growth opportunities, to further the board's diversification strategy.

 

Financial highlights

 

We present below our financial performance for the Period both on an underlying and statutory basis.  Underlying results are before the adjustments resulting from changes in acquisition accounting treatment of consideration now adopted, which has no cash impact and is explained in the Chief Financial Officer's Review.

 

Underlying	FY23	FY22 Restated	Change
Group revenue	£162.7m	£137.2m	18.6%
Group underlying operating profit1	£25.0m	£22.5m	11.1%
Group underlying profit before tax1	£25.1m	£21.6m	16.2%
Underlying adjusted fully diluted EPS2	16.28p	14.54p	12.0%
Dividend per share	9.5p	8.5p	11.8%
Net assets	£78.1m	£75.1m	4.0%
Net cash3	£4.3m	£10.4m	(58.7)%

 

Reported	FY23	FY22 Restated	Change
Group profit before tax	£16.2m	£26.8m	(39.6)%
Group profit after tax	£12.2m	£23.0m	(47.0)%
Basic earnings per share ('BEPS')	9.77p	19.35p	(49.5)%

 

For full details on the impact of the change in accounting treatment see note 25 to this announcement

 

·	Strong performance as a result of diversification strategy in action: -      Group organic revenue growth of 6.2%, comprising 4.9% in legal services and 18.4% in consultancy services -      Consultancy services comprise £41.8m or 25.7% of total Group revenue (FY22: £21.3m or 15.5%) - an increase of 96.4%
·	Underlying operating profit margin held up well at 15.4% (FY22: 16.4%), despite inflationary pressures throughout the Period
·	Net assets increased by 4.0% to £78.1m (FY22: £75.1m)
·	Proposed final dividend of 6.2p (FY22: 5.5p), taking total dividends for the Period to 9.5p per share (FY22: 8.5p)

 

Strategic and post-Period highlights

 

·	Business Services Platform expanded and further scale established in patent and trade mark attorney services with the acquisition of Symbiosis
·	Total headcount at 30 April 2023 of 1,455 (FY22: 1,368), with increase in professional staff of 6.0% from 948 to 1,005
·	Internal appointment of Victoria Garrad as Chief Operating Officer from previous position of Group HR Director
·	Wider expansion of internal share ownership with FY23 result satisfying three-year performance criteria set out in the Group's first LTIP awards scheme
·	Post-Period end acquisition of RJA Consultants, further expanding the Group's chartered surveying services and bringing further breadth to the Property Platform
·	Post-Period appointment of Colin Jones as non-executive director who succeeds Suki Thompson as Chair of the Remuneration Committee

 

Current trading and outlook

 

·	FY24 has started in line with the board's expectations, with a good pipeline of work
·	Integration of recently acquired businesses progressing to plan and in line with Platform strategy
·	Encouraging pipeline of M&A opportunities
·	The Group continues to deliver against the clear strategy set out at IPO, achieving growth and resilience through diversification, and strong returns for its stakeholders

 

Rod Waldie, CEO of Gateley, said:

 

"I am very pleased to report another year of growth for Gateley.  This is a strong performance, set against a challenging macro-economic backdrop throughout the second half. It is the result of the hard work and dedication of our people allied to a long-term commitment and adherence to the successful execution of our growth through our diversification strategy, building in resilience through design. 

 

"During the year under review, both our legal services teams and consultancy teams performed strongly and we have made further progress in adding breadth and strength to our Group, expanding the patent and trade mark attorney offer on our Business Services Platform through the acquisition of Symbiosis. Post-Period end, we have added legal services lateral hires to strategically broaden our Business Services Platform dispute resolution teams and have further enhanced our Property Platform with the acquisition of RJA Consultants. Our M&A pipeline for FY24 is encouraging and we will seek to strengthen our Platforms further as opportunities arise.

 

"Looking forward, we are mindful of ongoing macro-uncertainty and it is difficult to predict market conditions for the rest of FY24.  However, our diverse and resilient business model, combined with our proven and consistent track record of delivering strong growth across all economic cycles, means that we have entered FY24 with a positive mindset and cautious optimism."

 

1	Underlying operating profit and underlying profit before tax excludes remuneration for post-combination services, gain on bargain purchase, share-based payment charges, acquisition related amortisation and exceptional items
2	Adjusted fully diluted EPS excludes remuneration for post-combination services, gain on bargain purchase, share-based payment charges, acquisition related amortisation and exceptional items. It also adjusts for the future weighted average number of expected unissued shares from granted but unexercised share options in issue based on a share price at the end of the financial year
3	Net cash excludes IFRS 16 liabilities

 

 

Enquiries:

 

Gateley (Holdings) Plc
Neil Smith, Chief Financial Officer	Tel: +44 (0) 121 234 0196
Nick Smith, Acquisitions Director and Head of Investor Relations	Tel: +44 (0) 20 7653 1665
Cara Zachariou, Communications Director	Tel: +44 (0) 121 234 0074 Mob: +44 (0) 7703 684 946
Liberum - Nominated Adviser and Broker Richard Lindley/Ben Cryer/Cara Murphy	Tel: +44 (0) 20 3100 2000
Belvedere Communications Limited - Financial PR
Cat Valentine (cvalentine@belvederepr.com)	Mob: +44 (0) 7715 769 078
Keeley Clarke (kclarke@belvederepr.com)	Mob: +44 (0) 7967 816 525
Llew Angus (langus@belvederepr.com)	Mob: +44 (0) 7407 023 147
	gateleypr@belvederepr.com

 

CHAIRMAN'S STATEMENT

 

Summary of the year

 

I am delighted to present Gateley's audited final results for the year ended 30 April 2023, another successful year for the business.

 

With revenue increasing by 18.6% to £162.7m and underlying profit before tax increasing by 16.2% to £25.1m, Gateley has again demonstrated the strength of its business model and the resilience from its diversification strategy. These strong results led to [a 4.0% increase in Group net assets to £78.1m (FY22: £75.1m), and] an increase of 12.0% in adjusted fully diluted earnings per share to 16.28p per share (FY22: 14.54p).

 

I am particularly proud that this year's strong performance was delivered despite challenging circumstances. With the economic recovery from COVID-19 somewhat compromised by inflationary pressures, with uncertainty as a consequence of the terrible events in Ukraine and the onset of higher than usual wage inflation within the legal and indeed other sectors, Gateley has navigated the year well and I am pleased with the resulting benefits for all of our stakeholders.

 

Strategic delivery

 

As I enter my ninth, and last, year as Chairman of Gateley, this feels like a good moment to reflect on the progress the Group has made since it became the first legal services group in the UK to undertake an IPO. There are two points that stand out to me and, I believe, are a testament to the quality of the Group and the people within it.

 

Firstly, consistency. Since IPO, Gateley has delivered an unbroken track record of revenue and underlying profit growth. Above and beyond the absolute progression, Gateley has also outgrown the UK professional services market, which continues to benefit from a number of structural growth drivers. Gateley's growth has been accelerated by acquisitions but underpinning our growth has been the strength of our legal services foundation. Outperformance does not come automatically but is hard earned through a consistency of client delivery and execution across all levels of the Group.

 

Secondly, commitment. Since IPO, our strategy has been clear; to build a professional services group of scale and breadth. From our legal foundations, we have sought to bring in new business lines, and business models, that complement and add to the suite of services that we offer to our increasingly diverse clients. By sticking to the discipline of our Platform Strategy, we have been able to focus our organic, and inorganic, investment where it has mattered the most. Clearly, part of the motivation behind the IPO was to facilitate this growth strategy and that motivation remains undimmed. In the eight years since IPO, much has happened in the stock market and the wider world that has been out of our control. Yet despite these challenges, Gateley's strategic commitment has not wavered. Our Group is now more diverse and resilient than at any point in the last nine years.

 

Results overview

 

During the year we delivered on our strategic intent to further diversify the business, placing the Group in a stronger position to deliver further profitable growth in the coming years. In doing so, we also expanded the breadth and depth of our offering on the Business Services Platform with the acquisition of patent and trade mark attorney business, Symbiosis.

 

To support our acquisition strategy, we committed to a three-year revolving credit facility of up to £30m to assist with acquisitions. This combined with our strong balance sheet places us in a good position to acquire further businesses in the future. 

 

Within our consultancy businesses, overall headcount increased by 23.0% to 358 (FY22: 291) and fee-earner staff by 27.4% to 279 (FY22: 219). Revenues from this part of the Group were over £41.8m, demonstrating the further diversification of service offering and the deepening of our relationships with our clients. Our staff have also shown great adaptability to the constant changes throughout the past few years and their dedication towards the business, their colleagues and clients has been first class in what was a challenging year across a wide range of fronts.

 

As we continue to grow and strengthen our business, the board remains committed to providing its people with the opportunity to own shares in the Company. We believe that employee share ownership secures a strong alignment with the Group's external shareholders, incentivises employees and is reflective of Gateley's long-established culture.  At least 65% of current staff are existing share or option holders in the Company.

 

Responsible Business

 

The board has made the further development of Gateley's Responsible Business commitment a key strategic priority this year. We achieved this by working together with The Purpose Coalition, an independent ESG consultancy who helped us develop our own set of levelling up goals.

 

In December 2022, we published our second edition, 2022 Responsible Business report, for which we again received significant positive feedback. We have introduced 15 new responsible business objectives for FY24 and confirmed our intention to reduce our CO2 emissions by 50% by 2030 and to become net zero by 2040.

 

Our Responsible Business actions focus on the wellbeing of our employees, on being a force for good in society and within the communities in which we operate, and by playing our part in protecting and repairing our planet. Measuring the value and the impact we are having in all these areas is as important as acting because it enables us to evaluate where we are effecting change and how we can continue to improve over time.

 

I am delighted with the progress we have made and how this important initiative has been embraced across the Group. We are committed to ensuring diversity, equality and inclusion and our goal is to foster a positive work ethic, whilst remaining results and client focused, and demonstrating our commitment to doing the right thing for our people, our planet and developing potential wherever we can. 

 

Board changes

 

The UK Corporate Governance Code determines that the recommended tenure for the chair of publicly listed companies is nine years. There is no recommended tenure for non-executive directors, though after nine years they are generally no longer considered to be independent, and this tends to act as a 'de facto' ceiling on tenure. The assessment of the independence of non-executive directors holding office after nine years is a matter of board judgement, thereby allowing boards some room to extend the tenure beyond nine years, where appropriate.

 

Gateley was admitted to AIM in June 2015, becoming the first commercial law firm to list on the London Stock Exchange. The current financial year ending 30 April 2024 will therefore be the ninth year that Gateley has been on AIM and in line with the above best practice, the following changes to the board will be introduced. 

 

With regards to my own role, as the current year ending 30 April 2024 is my ninth year as Chairman, it will therefore be my last and I will stand down at the Group's AGM in 2024. The board has already begun a process to appoint a new Chairman and an announcement will be made in due course.

 

With regard to the Chair of the Audit and Risk Committee, the financial year ending 30 April 2024 will be Joanne Lake's ninth year in the role and would therefore ordinarily be her last. Given, however, the planned change to my own role and the unforeseen retirement of Suki Thompson, should Joanne also stand down in 2024 then all of the Group's non-executives would leave within the same financial year. I have therefore agreed with the board and with the Group's largest five institutional shareholders that it is in the best interests of all stakeholders for there to be a degree of continuity on the board and that Joanne will serve one more year as Audit and Risk Committee Chair and will stand down at the AGM in 2025.

 

With regard to the Chair of the Remuneration Committee, Colin Jones, who was appointed to the board today, as non-executive director, succeeds Joanne Lake, who has been temporarily chairing the committee, following Suki Thompson's retirement.

 

With regard to executive board positions, Victoria Garrad, Group HR Director, was appointed to the board on 1 May 2023, in line with succession planning outlined in the Group's Half Year Results announcement issued on 12 January 2022. Victoria replaced Peter Davies, Chief Operating Officer, who stepped down from the board on 30 April 2023. Victoria joined Gateley in 1996 and has been the Group HR director, a non-plc board role, since 1 May 2017.  Prior to this, she was a Partner in the legal services employment team and has been a member of the Operations Board since 2011 and the Strategic Board since 2017.

 

Upon standing down as Chief Executive on 30 April 2020, Mike Ward agreed to stay on as an executive director of the Group for a period to lend his experience to Rod Waldie, who took over the role on 1 May 2020. Having now been in position for three years, Mike will stand down from the board at the 2023 AGM. On behalf of the board and all of the staff in the Group, I would like to extend my thanks to Mike for his insights whilst in office.        

 

Dividends

 

An interim dividend of 3.3p per share (FY22: 3.0p) was paid on 31 March 2023 to shareholders on the register at the close of business on 24 February 2023. The board is pleased to propose a final dividend of 6.2p per share (FY22: 5.5p), giving a total dividend for the year of 9.5p per share (FY22: 8.5p), subject to approval at the forthcoming Annual General Meeting, which will be held on 17 October 2023. If approved, this final dividend will be paid in October to shareholders on the register at the close of business on 29 September 2023.  The shares will go ex-dividend on 28 September 2023.

 

The board's dividend policy remains to distribute up to 70% of specifically adjusted profit after tax to shareholders, whereby the adjustments relate to the remuneration for post-combination services and gains on bargain purchase. The dividend is typically split one third following the Company's half year results and two thirds after the full year results. 

 

Summary and outlook

 

This year has been another strong one for Gateley. Our people have excelled in client delivery, they have continued to overcome every challenge presented to them, and have delivered further strategic progress for the business, combining to generate an excellent set of results.

 

As we focus on service line enhancing opportunities that meet our clients' needs and fulfil our strategy to build a broader professional services group, our acquisition pipeline remains strong, trading in the current year is in line with the board's expectations and we look forward to the immediate future with cautious optimism.

 

 

Nigel Payne

Chairman

6 September 2023

 

CHIEF EXECUTIVE OFFICER'S REVIEW

 

Introduction

I am pleased with the Group's strong performance in FY23, delivered by the highly skilled and dedicated people across our business.  These results maintain the Group's unbroken record of year-on-year revenue and underlying profit growth.   We are proud of this and of the consistent progress made against our key metrics since our admission to AIM in June 2015.

 

Throughout the Period a combination of global and UK-specific events created a challenging macro-economic backdrop.  This was particularly pronounced during H2 23 and macro-uncertainty remains the dominant characteristic in the market. Despite this, the Group once again demonstrated its resilience and ability to adapt to shifting market conditions. These characteristics are not the product of chance; they result from the implementation, since 2015, of our strategy to operate and grow a diverse professional services business with legal services as its foundation. We have been consistent in our adherence to this proven strategy, which informs all that we do.  Since acquiring our first consultancy business in 2016, our disciplined approach to M&A has grown non-legal revenue to £41.8m (FY22: £21.3m), being 25.7% of the Group's revenue.

 

We have a highly focused market proposition and differentiate ourselves by making selective investments in, and growing, quality legal and consultancy services on each of our four Platforms, focused on our core markets of Business Services, Corporate, People, and Property.  As the Group continues to expand, we have more choice in how to deploy our investments in the legal and wider professional services markets.  In the meantime, our mix of services remains unique and clearly enhances our resilience, as evidenced in our FY23 results, during a more challenging period for transactional legal services overall.  Our diversification strategy is clear and proven. 

 

Whilst continuing to appraise new acquisition opportunities from our encouraging pipeline, our current operational focus is firmly on the basics in the business; from fee rate increases, cost management and, of course, consistent delivery of excellent service, to maximising cross-selling opportunities on and across each Platform.

 

On responsible business, as reported at the end of H1 23, with the publication of our second Responsible Business Strategy we achieved all 15 of the initial targets set for FY23.  In doing so we reinforced our belief that an integrated Responsible Business Strategy develops solutions that positively impact people, the planet and profit.  Our work here is ongoing in line with our Purpose to deliver results that delight our clients, inspire our people and support our communities.  We are revising our annual Responsible Business reporting to coincide as closely as possible with the release of our annual results and I therefore look forward to publication of our next report very soon.

 

Finally, we are delighted to propose a progressive final dividend of 6.2p per share at the Group's AGM on 17 October 2023, taking the total dividend for the Period to 9.5p (FY22: 8.5p), an increase of 11.8% on the prior year.

 

Results overview

 

The Group performed well during FY23, building on the progress reported at the half year and delivering growth in revenue and profit. Revenue grew by 18.6% to £162.7m (FY22: £137.2m) and underlying profit before tax increased by 16.2% to £25.1m (FY22: £21.6m). Profit before tax decreased by 39.6% to £16.2m (FY22 restated: £26.8m) as a result of the IFRS 3 related acquisition accounting treatments, further details of which are set out in the Chief Financial Officer's Review.  Profit after tax decreased by 47.0% to £12.2m (FY22 restated: £23.0m).

 

Salary cost inflation has been and continues to be a post-pandemic characteristic across all professional services businesses.  In addition, FY23 saw the return of more discretionary costs (e.g. travel, marketing and entertaining).  Planned one-off costs in the Period included significant investment in a new, market-leading business management system and associated integration costs.  Despite all of this and general cost inflation, our FY23 results delivered another year of growth.

 

Our outturn for the Period was underpinned by the quality and breadth of the increasing range of legal and consultancy services offered through our Platforms.  Transactional activity was strong in H1 23 but, as reported at the half year, we were beginning to see transactional activity levels reduce from the previous unprecedented highs. During H2 23 the Group started to pivot towards greater activity in the more counter-cyclical service lines that are deliberately designed within each Platform.  Although not immune from the effects of challenging market conditions, these services helped our second half performance and continue to perform strongly.

 

Platform performance

 

Business Services Platform

 

This Platform supports clients in dealing with their commercial agreements, managing risks, protecting assets and resolving disputes.

 

Revenue on this Platform grew by 21.1% to £21.8m, buoyed in H1 23 by transactional activity and in H2 23 by an increase in ongoing work across the legal services dispute resolution teams, underpinned by a good performance throughout the whole Period from the Platform's consultancy businesses.

 

In legal services, the dispute resolution specialists saw an increase in demand from both UK and overseas clients.  This trend is continuing.  Mandates from UK clients are representative of current economic circumstances and include an increase in instructions from financial services clients as interest rates rise and lending tightens, which often results in default or lays-bare fraudulent activity.  Projects from overseas clients include a return of some activity in Central Europe. 

 

We continue to make strategic investment in new dispute service lines, predominantly in competition litigation, class actions and international arbitration where, in all cases, we see huge opportunity and have very recently recruited highly regarded senior expertise, including from within magic circle law firms.

 

In consultancy services, activity in our growing patent and trade mark attorney business was consistent throughout the Period. It was enhanced by the acquisition of Symbiosis, specialising in the life sciences industry and adding to Adamson Jones' expertise in engineering, medical devices, pharmaceuticals and biotechnology.  Both businesses are working well together with related legal services across the Group and on shared opportunities.  We will continue to build critical mass in these services where typical projects are long-dated and our expertise is highly valued by clients whose businesses are founded upon ideas and inventions that need to be protected to preserve value.  More UK and international client opportunities exist here and will be realised as we progress our strategy to grow our business in this space.

 

In aggregate, consultancy revenue now represents 23.4% of Business Services Platform revenue.

 

Corporate Platform

 

This Platform is focused on the corporate, financial services and restructuring markets in both transaction and business support services. 

 

Currently, this Platform is dominated by legal services, some of which encountered more challenging conditions in H2 23. Despite this, Platform revenue grew by 1.8% to £38.8m and delivered a strong contribution margin.  It is likely that the Corporate Platform will always be legal services dominated.  This is because our transactional Corporate teams draw support from consultancy services which are particular to each transaction, whilst in day-to-day terms those consultancies find their more natural, "core" home on one of our other Platforms.

 

Corporate transactional activity was strong in H1 23, particularly with our private equity clients and in wider M&A.  The corporate team generated a deal book in that period comprising an impressive list of complex, high value transactions across a wide range of sectors, which utilised additional legal and consultancy services across the Group.  Ultimately, the team had another strong year and the corporate unit remains our biggest internal referrer of business, with most, if not all, other teams benefitting in some way.  H2 23 transactional activity was more constrained and remains so. However, the pipeline is reasonable, with anticipated further improvement in activity in H2 24.  This pattern is also reflected in our banking team, which had a strong H1 23 but saw a drop-off in support to corporate transactions and a reduction in bank lending during H2 23. However, the team is now seeing an increase in loan covenant reset and refinancing work, this being an excellent example of pro and counter-cyclical revenue opportunities which exist in almost all of our legal service lines.

 

Our restructuring and recovery teams are a natural counterweight to transactional activity and following a sustained period of quiet trading conditions, activity levels rose by 24% in FY23, as government pandemic support for companies unwound and inflationary pressures and interest rate increases impacted UK businesses.  Activity remains strong in these teams and our restructuring team won the Institute for Turnaround's Legal Advisor of the Year Award in 2022, one of the sector's most significant awards.   Mandates have been generated both in-market and internally, including working alongside experts in Gateley Vinden and our legal services construction unit in delivery of market-leading services to insurers who have bonded construction projects that have become distressed.

 

In consultancy services, the team at Gateley Global had a strong year in continuing to help public and private sector global clients realise their international expansion plans, inward and outward of the UK.  Revenue increased by 47.4% to £1.1m (FY22: £0.74m).  In addition, the team is a consistent cross-referrer of revenue to other parts of the Group as clients require mixed services to implement expansion.

 

People Platform

 

This Platform supports clients in dealing with and developing people and in administering individuals' personal affairs. 

 

Good activity in both legal and consultancy services grew Platform revenue by 6.3% to £20.4m.  In legal services, our pensions team had a strong year and performance in our employment team was good as clients' HR teams returned to more business-as-usual activity post-pandemic. Our private client team remains focused on high-net-worth clients and related opportunities.   

 

In consultancy services, our pension trustee business Entrust, continues to deliver growing, recurring revenue.  The team is seeing an increase in the number of pension schemes looking to complete full liability buy-outs, with Entrust at the helm.  In addition, more businesses are looking to out-source management of their pension schemes, which is generating greater opportunity for Entrust to grow both organically and via potential acquisitions. 

 

t-three and Kiddy & Partners, our talent assessment, development and cultural change businesses, are now combined for management purposes.  The team won 67 new clients during FY23 and increased, by 45%, the number of clients buying both t-three and Kiddy services, with particular focus on scalable products to high growth clients.  Combined revenue grew to £6.7m (FY22: £6.3m).  The pipeline remains strong as most organisations are looking to develop their people and/or transform in some way.

 

In aggregate, consultancy revenue now represents 32.7% of People Platform revenue.

 

Property Platform

 

This Platform is focused on clients' activities in real estate development and investment and in the built environment in the widest sense.

 

Currently, this is our most diverse and mature Platform.  It grew revenue by 33.1% to £81.7m during FY23, significantly assisted by strong activity across the Platform's consultancy businesses. 

 

In legal services our real estate development team remains a market-leader in the warehousing and logistics sector, delivering cross-Platform services to complex acquisition and development projects.  Whilst activity in the wider commercial property market eased in H2 23 (and continues to be more subdued), we saw and continue to see an increase in non-transactional advisory and dispute resolution services.  This includes helping our wide range of residential development clients navigate regulation under the high-profile Building Safety Act (post-Grenfell) and advising on related remediation projects.  This is long-dated, specialist work in which we continue to invest, including by long-term redeployment of appropriate resource from within the Group to our construction team, which had a record year and continues to be very busy.  Elsewhere, current economic conditions have resulted in an increase in work helping or opposing organisations seeking to exit commercially onerous contracts.

 

In our market-leading house-builder team, we continue to act for all of the top developers, many of whom have significantly reduced their panel of advisors in favour of larger providers who cover all bases, which describes us both geographically and in service lines.  This should result in more work for the team.  Despite the fact that developers are currently finding the [retail] housing market slow, we continue to handle over 50 large strategic residential-led schemes, with over 1,000 new homes each.  Our clients need to continue to build and sell and have other areas for which they require our services.  This includes an increase in advising on shared ownership framework agreements and in bulk sales to housing associations and build-to-rent investors.  In addition, housing-led urban regeneration work continues to attract public and private funding. We act for all of the leading developers in this space and remain busy with schemes where our unique combination of legal and consultancy services is relevant to the whole life cycle of the project.

 

In consultancy services, FY23 was the first full year of Gateley Smithers Purslow following our diversification into specialist services to the property insurance complex claims market.  Gateley Smithers Purslow contributed revenue of £13.8m (FY22: £0.6m), representing annualised growth for that business of 26.1%.  We also saw strong revenue growth of 25.6% from Gateley Vinden's broad range of specialist services and growth of 19.9% from Gateley Hamer, which is carrying a strong pipeline of work in regeneration, energy and telecoms projects. 

 

Our recently announced post-Period acquisition of surveyors Richard Julian and Associates Limited ("RJA") extends our reach to organisations that deliver affordable housing, a resilient sector underpinned by high levels of grant to support delivery of the Government's housing targets.  The team also has specialists in major loss property claims, which will enhance related expertise in both Gateley Smithers Purslow and Gateley Vinden.

 

We maintain our view that the range of expertise now housed on our Property Platform puts us in position to compete with well-established, multi-disciplinary property consultancies in the wider market given that FY23 consultancy revenue represented 35.3% of Property Platform revenue, which will be enhanced by RJA's contribution in FY24.

 

Operational review

During the year, we invested in and delivered the phase one implementation of a new, market leading business management, productivity and financial system, 3E.  This caused some short-term disruption to parts of the business during Q1 23, however, phased adoption enables system adaptation based on learnt experience. We are delighted with the system and its functionality and are now looking forward to integrating the remainder of the Group during the remaining phases.  This investment was essential for integration of our growing Group.  The ability to drive increasing scale through a single system should help us to improve our margin over the longer term.

 

We also made sensible investments in our office facilities to continue to improve and adapt them to agile working.  This is an ongoing exercise, in parallel with the consolidation of offices in our network and the gradual release of vacated space.  We have identified further synergies and savings in this regard.  Whilst these will take time to realise, our objective is to reduce our office cost in the medium term. 

 

In line with our differentiation strategy, we have focused our internal messaging on the power of our Platforms in delivering commercial, joined-up solutions for our clients. In-Period, this involved a refresh of our website, aligning all services and insights according to the Platforms; the publication of four Platform magazines which share perspectives on the hot topics facing organisations such as equality, diversity and inclusion, innovation and maximising infrastructure efficiencies; and the sharing of case studies and client stories, which demonstrate how the Platforms collaborate to deliver cost-effective solutions.

 

People and Culture

 

Attracting, developing and motivating talent, at all levels across the Group, is a key objective every year. In FY23, overall headcount in the Group increased by 6.4% to 1,455 (FY22: 1,368).  Legal services headcount growth was 1.9% to 1,097 employees (FY22: 1,077), following growth of 1.7% and 9.0% respectively in FY21 and FY22. Consultancy headcount increased by 23.0% to 358 (FY22: 291), primarily as a result of acquisitions.

 

The Gateley offering remains differentiated and our broad range of career opportunities is attractive.  We continue to evolve our people strategies to drive a stimulating, purposeful and rewarding environment in which our people can progress their careers. We recently announced a total of 126 internal promotions and celebrated these across the Group. 

 

The ability for all of our people to participate in share ownership is attractive and represents a recruitment differentiator. I am pleased for all of our option holders that our FY23 result satisfied the three-year performance criteria set in the first LTIP awards scheme granted in FY20 and also underpins the performance criteria applicable to our in-flight LTIP schemes. Alongside this, our wider CSOP and SAYE schemes will mature during FY24 resulting in the release of circa 3.4m shares to scheme participants. All of this is in line with our strategy of creating wider equity participation for more of our people.  Currently circa 65% of our people either hold shares or participate in share schemes.

 

Once again, we owe the success of our business to the quality and dedication of our people at all levels.  Clients come to us for our broad specialist knowledge and experience and our determination to deliver results for them. As we extend our range of services, our strong client relationships enable more cross-selling opportunities, which remains a key focus for us in generating further organic growth.

 

Responsible Business

 

Being a responsible business is now an integral part of our purpose and there has been good momentum in our responsible business strategy since we published our second annual report in December 2022.  We have introduced 15 new objectives for FY24 and confirmed our intention to reduce our CO2 emissions by 50% by 2030 and to become net zero by 2040.

 

The release of our third responsible business report is imminent and will contain a detailed review of our progress during FY23.

 

Current trading and outlook

 

Looking forward, like all companies, we are mindful of ongoing macro-uncertainty.  It seems that inflation and interest rates will be in the economic headlines for the immediately foreseeable future.   Our expectation is that transactional activity in H1 24 is likely to be more constrained than the comparative strong H1 23, but with better trading conditions anticipated in H2 24.  In the meantime, non-transactional and consultancy business activity and the pipeline across our increasingly resilient Group remains good.

 

The professional services industry in the UK has demonstrated steady growth through multiple cycles over the last twenty years. Since our IPO, Gateley has outperformed this already strong backdrop through a combination of organic growth and carefully selected acquisitions. Our strategy has been to build a diversified group of complementary and additive businesses, based on a legal services foundation, that can continue to deliver growth through the cycle. As the Group continues to expand, we have more choice in how to deploy our investments in the wider legal and professional services market.  In the meantime, notwithstanding more challenging shorter-term trading conditions for some of our business lines, we remain confident in our vision and ability to deliver.

 

 

The Group enters FY24 with a positive mindset and cautious optimism. 

 

 

Rod Waldie

Chief Executive Officer

6 September 2023

 

CHIEF FINANCIAL OFFICER'S REVIEW

 

Financial overview

 

The Group has grown strongly, despite the challenging economic backdrop of FY23, through a combination of organic and acquired growth, with revenue up 18.6% to £162.7m.  Organic revenue growth from legal services was 4.9%, with exceptional organic growth of 18.4% from consultancy service lines, demonstrating our strategy to build and diversify into a broader professional services group, augmented by our acquisition strategy, which continues to enhance our offering to clients and sets us apart from our listed and unlisted peers.

 

We saw strong activity levels at the start and the end of the financial year, and despite the September 2022 to December 2022 impact of the mini-budget, the Group overall delivered fee earner utilisation levels at 89% on average across the year.  This mid-year pause also caused a delay in the completion of a number of assignments which pushed the billing point, and revenue recognition, into FY24.

 

FY23 included a full year of costs for Gateley Smithers Purslow and Adamson Jones, and six months of costs following the acquisition of Symbiosis in October 2022.  Despite this, the Group's strong cost control and adherence to its important cost to revenue metrics, during a period of significant inflationary pressure, has remained a key focus and assisted significantly in the growth in underlying profit before tax of 16.2% to £25.1m. Underlying operating profit margin remained above the 15% group-wide target at 15.4%, compared to 16.4% in FY22, whilst staff costs remained at c.60% of fees.  Whilst delivering market expectations, due to the challenging economic back drop, our audited result was below the threshold triggering discretionary staff bonus payments.

 

Our EPS performance will generate meaningful rewards post year-end to our LTIP, CSOP and SAYE option holders and our dividend per share remains strong, even in an environment of higher interest rates, for all shareholders.

 

Our revolving credit facility has significant headroom and with a closing net cash position of £4.3 million we are well-placed to capitalise on current market conditions, as we have done previously, to enable further expansion and growth.

 

Post period end, on 19 July 2023, we were pleased to announce the acquisition of Richard Julian and Associates Limited, trading as RJA Consultants ("RJA"), a fast-growing business that complements the existing market leading expertise within Gateley Legal's residential development and construction teams. Its core market, which is affordable housing, is a buoyant sector and the deeper reach into that market adds further resilience to the Group's Property Platform.  Total consideration is up to £6m including, subject to certain revenue targets being achieved, an incremental profitability-based earn-out, in respect of each twelve-month period expiring 31 March 2024 and 31 March 2025. The acquisition is expected to generate operational synergies and be immediately earnings enhancing.

 

Revenue and margin by Platform

 

Group total revenue grew by 18.6% (FY22: 13.0%) to £162.7m (FY22: £137.2m).  Revenue from core legal service lines grew organically by 4.9% (FY22: 8.7%).  In addition, total revenue from consultancy businesses grew by 96.4% to £41.8m which now represents 25.7% of total revenues (FY22: £21.3m or 15.5%), highlighting the ongoing success of our Platforms' diversification strategy.

 

Despite the Group continuing its important investment in people, it has lowered its percentage of personnel costs to revenue in FY23 to 59.5% (FY22: 63.0%) and we will continue to sensibly manage this key metric as market conditions improve.  The full effect of staff wage inflation over the last two years has now been absorbed into our personnel cost base causing our Group and Platform margins to decrease from pre-pandemic levels.  We do, however, expect to see an improvement in FY24 as the lagged effect of price increases continues to work through the assignments we work on.  Price increases in some aspects of professional services with fixed term pricing arrangements that span multiple years typically lag behind more immediately adjustable pricing structures elsewhere in our Group.

 

Contentious work types continue to increase in nature and volume as down-cycle trends are starting to materialise in our work streams across all of our Platforms.  The sluggish nature of the UK economy continues to extend and pause a number of transactional activities, especially those needing debt support.

 

The table below represents Platform performance over the last two reported years along with each Platform's direct contribution towards our one profit view of the Group's performance.

 

	Business Services £m	Corporate £m	People £m	Property £m	Total £m
FY23
Revenue	21.8	38.8	20.4	81.7	162.7
Segmental contribution	5.3	13.9	6.0	31.1	56.3
Contribution margin	24.4%	36.0%	29.3%	38.1%	34.6%
FY22
Revenue	18.0	38.1	19.2	61.3	136.6
Segmental contribution	5.7	15.4	6.9	23.0	51.0
Contribution margin	31.7%	40.4%	35.9%	37.5%	37.3%
Revenue movement (%)	21.1%	1.8%	6.3%	33.3%	19.1%
Contribution margin change (%)	(7.3)ppts	(4.4)ppts	(6.6)ppts	0.6ppts	(2.7)ppts

 

Underlying operating profit before tax

 

The Group has recorded strong underlying operating profit before tax of £25.0m, up by 11.1% from £22.5m in FY22.  Whilst we have continued to invest across the business in our legal and consultancy teams, a particular focus has been on headcount investment in Gateley Smithers Purslow since its acquisition in April 2022.  

 

Continuing and robust demand for UK legal services, which led to continued wage inflation pressure in the UK professional services recruitment market, has alleviated in our business following our extensive pay review processes of the last two financial years. Whilst our underlying trading margins have decreased slightly to 15.4% (FY22: 16.4%) we expect operating overheads to level out in FY24 and wage inflation to return to more normalised levels, compared to double digit increases seen across each of the FY22 and FY23 financial years.

 

Underlying operating profit before tax excludes amortisation of acquisition related intangibles, all share-based charges and exceptional acquisition related items, including the acquisition accounting treatment of consideration payments on acquisitions being reclassified as employment costs in the income statement, as well as gains on bargain purchases arising from the related restatement of acquisition accounting, as further described below.  Underlying operating profit before tax has been calculated as an alternative performance measure in order to provide a more meaningful measure and year-on-year comparison of the profitability of the underlying business.

 

		Restated
Extract of UK statement of comprehensive income	2023	2022
	£'000	£'000
Revenue	162,683	137,249
Operating profit	16,122	27,723
Operating profit margin (%)	9.91	20.20
Reconciliation to alternative performance measure: underlying operating profit before tax
Operating profit	16,122	27,723
Non-underlying items
Amortisation of intangible assets	2,073	1,581
Share based payment charge - Gateley Plc	1,984	1,100
Share based payment charge - Gateley Smithers Purslow Limited	-	113
Contingent consideration treated as remuneration	6,190	3,509
Gain on bargain purchase	(1,389)	(12,380)
Acquisitions costs	-	373
One off remuneration charge - Gateley Smithers Purslow Limited	-	497
Underlying operating profit before tax	24,980	22,516
Adjusted underlying operating profit margin (%)	15.36	16.41

 

Personnel costs and operating expenses

 

Our total personnel costs increased by 11.9% (FY22: 11.7%) to £96.8m, as average numbers of legal and professional staff rose by 25.0% (FY22: 3.9%) to 1,000 (FY22: 800), whilst support staff numbers rose by 25.4% to 439 (FY22: 350).  This was due to the impact of staff introduced to the business via acquisitions at the end of FY23 and during the year, predominately in consultancy services. However, as a result of the decisions and impact of external factors referred to earlier in this note, personnel costs as a percentage of fees decreased to 59.4% of revenue from 63.0% in FY22, excluding share-based payment charges.

 

Operating expenses have increased by £12.5m or 53.0% to £36.1m (FY22: £23.6m) due mainly to the investment in new systems and the full year impact following the acquisitions of Gateley Smithers Purslow and Adamson Jones. Like-for-like overheads in specific areas such as travel, marketing and premises have increased as we have seen a greater return to office usage and client interaction during FY23 than in the previous two financial years.  On top of this we have not been immune to the effects of current UK-wide inflation impacting ongoing running costs. Overall, operating overheads have increased as a percentage of revenue from 17.2% in FY22 to 22.2% in FY23 but are expected to normalise at this level during FY24 as we continue to work on operational efficiencies across all aspects of the Group.

 

Restatement of acquisition accounting

 

During my tenure as Chief Financial Officer of the Group I have always believed it important to keep the accounting treatment as simple as possible and to aid understanding of the Group's financial statements. I have avoided using alternative performance measures where they were not necessary to improve the understanding of the underlying trading performance of the Group.  We have accounted sensibly for the substance of all acquisitions as capital in nature and classified them as investing activities so that cash generated from trading is separately visible from cash used for investment purposes.  The accounting profession's view has been constantly evolving on the application and interpretation of various accounting standards and as a result of recent changes to the application of IFRS 3 (Business Combinations), many companies have been required to reassess and restate their accounts where there are earn outs relating to acquisitions. Payments for contingent consideration are now required, in many relevant circumstances to be treated as remuneration for post-combination services causing a charge to the income statement rather than treating those payments as capital in nature whereby consideration is recognised on a company's balance sheet as goodwill.

 

We have been cognisant of this judgemental area and the interpretation of this standard which is why in assessing it in the previous years' financial statements we disclosed fully the rationale for continuing to class all consideration as capital in nature.  After discussions with the Financial Reporting Council, and in the best interests of reaching a sensible conclusion to those discussions, we have decided this year to change our accounting treatment on past acquisitions, from FY23 with the prior year, FY22, being restated to reflect this change. This judgement and accounting treatment will be applied to future periods where applicable.

 

Whilst not affecting the underlying performance of the Group in any way, the Group's reported performance now reflects the above change, bringing statutory results in line with prevailing applicable financial reporting standards.  Therefore, this year we have restated the statement of profit and loss and other comprehensive income, Group statement of financial position and Group cash flow statement in respect of a change of IFRS 3 accounting treatment for consideration paid on all relevant historical acquisitions. These changes have no impact on Group cash, however they do now classify all previously disclosed investing activities for applicable acquisitions as operating in nature.  A restatement of such entries has also been made.

 

The net impact of these changes on the statement of profit and loss and other comprehensive income is to typically increase reported profits after tax as a result of recognising profit from bargain purchase gain accounting immediately upon acquisition, followed by decreases in profit after tax in subsequent reporting years as a result of releasing the paid and expected to be paid total consideration as a non-underlying expense as remuneration for post-combination services is released over the relevant period.  The impact on the balance sheet is to treat initial consideration as a prepayment and to reduce the goodwill previously created in the Group.  Any contingent consideration is accrued over time building a liability to be paid or not when measurement is possible.

 

Note 25 in this announcement discloses in full the judgements applied resulting in this change.

 

Earnings Per Share (EPS)

 

Basic EPS decreased by 49.5% to 9.77p (restated FY22: 73.1% to 19.35p).  Basic EPS before non-underlying and exceptional items increased by 12.1% to 16.71p (FY22: 10.6% to 14.90p). Diluted EPS decreased by 49.6% to 9.52p (restated FY22: increased by 70.2% to 18.89p).  Diluted EPS before non-underlying and exceptional items increased by 12.0% to 16.28p (FY22: 10.4% to 14.54p).

 

Share option schemes

 

Over 65% of our people are existing share or option holders in the Group.  The board remains committed to providing its people with the opportunity to own shares in the Company, as further evidenced by the continued issuance of restricted shares awards (RSAs) across senior leaders within the Group during the year. Such share ownership promotes strong alignment with the Group's external shareholders, incentivises employees and is reflective of Gateley's long-established culture of long-term ownership.  The RSAs, which vest on receipt, are made on a discretionary basis when an individual is promoted to partner or an equivalent position and also for lateral hires performing in line with their expected business plan. Awards are subject to a five-year non-dealing restriction and are forfeited should employment cease within that period.  1,175,000 RSAs (FY22: 1,267,560) shares were awarded on 23 February 2023.

 

The board also announced in February 2023, a third vintage of LTIP awards to certain Executive Directors and Senior Management over up to 1,360,000 Ordinary Shares of 10 pence each in the Company ("Ordinary Shares").  Awards under the LTIP vest at the end of a three-year period, dependent upon the achievement of profit-related performance conditions and continuous employment.

 

Profits used to calculate underlying EPS each year are disclosed below:

 

	2023	2022	2021	2020
	£'000	£'000	£'000	£'000
Reported profit after tax	12,240	23,023	13,157	11,723
Adjustments for non-underlying and exceptional items:
- Amortisation of acquired intangible assets	2,073	1,581	2,073	1,375
- Share-based payment adjustments	1,984	1,213	956	1,355
- Consideration treated as remuneration	6,190	3,509	-	-
- Gain on bargain purchase	(1,389)	(12,380)
- Impairment of software development costs	-	-	-	463
- Acquisition-related costs	-	870	-	107
- Tax impact of above	(168)	(94)	-	(20)
Underlying profit after tax	20,930	17,722	16,186	15,003

 

Weighted average number of ordinary shares for calculating diluted earnings per share	128,527,341	121,893,238	118,508,833	115,599,727
Underlying adjusted fully diluted EPS	16.28p	14.54p	13.66p	12.98p

 

Taxation

 

The Group's tax charge for the Period was £4.0m (FY22: £3.8m) which comprised a corporation tax charge of £5.0m (FY22: £4.0m) and a deferred tax credit of £1.0m (FY22: credit of £0.2m).

 

The deferred tax charge arises due to a combination of credits in respect of the share schemes that have vested in past years and the release of deferred tax on brands.  The total effective rate of tax is 22.6% (FY22: 21.2%) based on reported profits before tax.  The increase in the effective rate of tax is as a result of the change in treatment of earn-out related consideration on acquisition now being disclosed as a remuneration charge.  Such charges are not allowable for corporation tax purposes.

 

The net deferred taxation liability decreased to £2.1m (FY22: £2.5m) as a result of the increased deferred tax asset recognised on share-based payment schemes yet to vest.

 

Dividend

 

The Group paid an interim dividend of 3.3p per share on 31 March 2023 and proposes a final dividend at the Company's Annual General Meeting on 17 October 2023 of 6.2p (FY22: 5.5p) per share, which if approved, will be paid in October to shareholders on the register at the close of business on 29 September 2023.  The shares will go ex-dividend on 28 September 2023.  The board's dividend policy remains to distribute up to 70% of specifically adjusted profit after tax to shareholders, whereby the adjustment relates to the remuneration for post-combination services and gains on bargain purchase, typically one third following its half year results and two thirds after the full year results are known.  Despite the changes arising from acquisition accounting on FY23 profit after tax, the board has decided to propose the same value of dividend as would have resulted from paying 70% of profit after tax.

 

Balance sheet

 

The Group's net asset position has increased by £3.0m (FY22: £22.3m) to £78.1m (FY22: restated £75.1m), due to the following movements:

 

There was a £2.2m increase in total current assets, resulting from £1.7m additional trade and other receivables through acquired businesses and the strong organic growth of the Group. Contract assets ("unbilled revenue") increased by £3.1m and cash at bank decreased by £5.0m as excess cash was redeployed into acquisitions and to support working capital required for continued growth.

 

Non-current assets increased by £2.4m, resulting predominantly from an increase of £2.5m from a change in property use and right of use asset values as a new lease was entered into in our London office.

 

The board has carefully considered the impact of macro-economic uncertainties, on the future forecasts used in assessing the value in use of the cash generating units to which the goodwill and intangibles relate and determined that, despite short term reductions, such forecasts are more than sufficient to justify the carrying value of goodwill.  Therefore, as at 30 April 2023, the board concluded that the goodwill and intangible assets do not require impairment.

 

Total liabilities decreased by £0.8m, due to the reduction in accrued bonus offset by the increase in lease liabilities and draw down of loans to fund the acquisition of Symbiosis Limited.

 

Cash flow

 

During the year, the Group increased its usage of its revolving credit facility from £5.7m to £6.8m.  The facility provides total committed funding of £30m until April 2025, split equally between Bank of Scotland and HSBC UK, that is specifically earmarked to fund growth and expansion via acquisition. Interest is payable on the loan at a margin of 1.95% above the SONIA reference rate.

 

The Group also has in place a litigation funding facility for an initial £20m of funding towards significant litigation cases, which has the ability to increase to £50m if required.  To date the Group has not yet utilised this facility but has a number of large assignments currently being assessed for consideration in FY24.

 

Cash generation was once again good with net cash inflows from operating activities of £9.7m (FY22: £5.3m) representing 79.6% (FY22: restated 23.1%) of profit after tax.  The Group ended the year with net cash of £4.3m (FY22: £10.4m), the result of continued strong trading and also management's sustained focus on cost efficiencies and costs management.

 

Adjusted free cashflow during the year from operations (after adjusting for IFRS 16 and IFRS 3 specific items noted in the table below) was £6.0m (FY22: £7.4m), which represents an increase to 48.8% (FY22: 32.0%) of reported profit after taxation ("PAT").  Adjusted free cashflows therefore represent a decrease to 28.3% (FY22: 41.4%) of underlying PAT as the Group saw a decrease in margin this year and in continuation of its investment in capital expenditure, mainly through its new finance system.  These movements were partially offset by an increase in interest received.

 

	2023	2022
	£'000	£'000
Net cash generated from operations	14,065	9,805
Tax paid	(4,320)	(4,497)
Net interest received	1,393	1
Cash outflow from IFRS 16 leases (rental payments excluded from operating cash flows under IFRS 16)	(4,579)	(3,870)
Cash outflow paid on acquisitions	1,518	7,033
Purchase of property, plant and equipment	(1,312)	(775)
Purchase of other intangible assets	(787)	(319)
Free cash flow	5,978	7,378
Profit after tax	12,240	23,023
Free cash flow	48.8%	32.0%

 

Adjusted free cash flow	2023	2022
	£'000	£'000
Profit after tax	12,240	23,023
Non-underlying operating items	8,858	(6,077)
Exceptional items	-	870
Underlying profit after tax	21,098	17,816
Free cash flow	28.3%	41.4%

 

Overall, working capital levels remained in line with the previous year, as unbilled revenue represented 53 days in line with last year, of Pro-forma net revenue and Group debtor days have remained at 113 days of Pro-forma net revenue which includes revenue from acquisitions on a full year pro-forma basis.  As the Group continues to grow strongly, our volume of debtors has grown proportionately.  We have made a good start to collections in FY24.  Unbilled revenue recognised in the Group's statutory accounts, from time recorded on non-contingent work, totalled £20.4m or 12.5% of revenue recognised over the year (FY22: £17.2m or 12.5%).

 

Summary

 

FY23 continued our long track record of underlying profitable growth through a blend of organic expansion and acquisition which consistently delivers attractive returns for all stakeholders.  Results for FY23 reflect another strong year for the Group. They include good organic growth across our legal foundations in a tough market and strong organic growth from consultancy service lines, aided significantly by the full year impact of prior year acquisitions.  We have maintained rigid control of costs despite both market specific and macro-economic challenges, and we have a strong balance sheet with significant facility headroom to further expand the Group both organically and through acquisition.  Share ownership rewards for our staff continue to play a significant part in our vision of wider, long-term connectivity across the Group and will deliver a significant opportunity to all staff in FY24 and beyond.

 

Neil Smith

Chief Financial Officer

6 September 2023

 

CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME

for the year ended 30 April 2023

 

	Note	2023	Restated 2022
		£'000	£'000
Revenue	3	162,683	137,249
Other operating income		49	-
Personnel costs, excluding IFRS 2 charge	5	(96,765)	(86,517)
Depreciation - Property, plant and equipment	11	(936)	(851)
Depreciation - Right-of-use asset	11	(3,976)	(3,783)
Impairment of trade receivables and contract assets		(1,334)	(866)
Other operating expenses, excluding non-underlying and exceptional items		(34,741)	(22,716)
Operating profit before non-underlying and exceptional items	4	24,980	22,516
Non-underlying operating items	4	(8,858)	6,077
Exceptional items	4	-	(870)
		(8,858)	5,207
Operating profit	4	16,122	27,723
Financial income	7	1,735	194
Financial expense	7	(1,645)	(1,141)
Profit before tax		16,212	26,776
Taxation	8	(3,972)	(3,753)
Profit for the year after tax attributable to equity holders of the parent		12,240	23,023
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss
- Revaluation of other investments		(26)	(190)
- Exchange differences on foreign branch		(49)	58
Profit for the financial year and total comprehensive income all attributable to equity holders of the parent		12,165	22,891
Statutory Earnings per share
Basic	9	9.77p	19.35p
Diluted	9	9.52p	18.89p

 

The results for the periods presented above are derived from continuing operations.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 APRIL 2023

 

	Note	2023   £'000	Restated 2022   £'000	Restated 2021   £'000
Non-current assets
Property, plant and equipment	11	1,628	1,334	1,323
Right of use asset	11	27,098	24,627	27,007
Investment property		164	164	164
Deferred tax asset	19	830	638	138
Intangible assets & goodwill	12	12,929	14,002	5,617
Other intangible assets	14	1,090	564	282
Other investments		147	173	363
		43,886	41,502	34,894
Total non-current assets
Current assets
Contract assets	15	20,388	17,239	13,900
Trade and other receivables	16	73,272	71,587	46,587
Cash and cash equivalents	21	11,105	16,105	19,605
Total current assets		104,765	104,931	80,092
Total assets		148,651	146,433	114,986
Non-current liabilities
Other interest-bearing loans and borrowings	21	(6,813)	(5,715)	-
Lease liability	23	(28,716)	(25,207)	(27,702)
Other payables	18	-	(40)	(120)
Deferred tax liability	19	(2,941)	(3,089)	(772)
Provisions	20	(1,290)	(863)	(763)
Total non-current liabilities		(39,760)	(34,914)	(29,357)
Current liabilities
Trade and other payables	18	(25,933)	(31,719)	(28,897)
Lease liability	23	(3,257)	(3,719)	(2,743)
Provisions	20	(107)	(101)	(176)
Current tax liabilities		(1,482)	(842)	(1,066)
Total current liabilities		(30,779)	(36,381)	(32,882)
Total liabilities		(70,539)	(71,295)	(62,239)
NET ASSETS		78,112	75,138	52,747
EQUITY
Share capital	22	12,664	12,456	11,792
Share premium		11,846	11,342	9,421
Merger reserve		(9,950)	(9,950)	(9,950)
Other reserve		15,413	14,465	6,815
Treasury reserve		(677)	(261)	(312)
Translation reserve		(51)	(2)	(60)
Retained earnings		48,867	47,088	35,041
TOTAL EQUITY		78,112	75,138	52,747

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

 

	Share capital	Share premium	Merger reserve	Other reserve	Treasury reserve	Retained earnings	Foreign currency translation reserve	Total Equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 May 2021	11,792	9,421	(9,950)	6,815	(312)	41,560	(60)	59,266
Impact of restatement (note 25)	-	-	-	-	-	(6,519)	-	(6,519)
At 1 May 2021 (restated)	11,792	9,421	(9,950)	6,815	(312)	35,041	(60)	52,747
Comprehensive income:
Profit for the year	-	-	-	-	-	23,023	-	23,023
Revaluation of other investments						(190)	-	(190)
Exchange rate differences	-	-	-	-	-	-	58	58
Total comprehensive income	-	-	-	-	-	22,833	58	22,891
Transactions with owners recognised directly in equity:
Issue of share capital	664	1,921	-	7,650	-	-	-	10,235
Purchase of own shares at nominal value	-	-	-	-	-	(132)	-	(132)
Sale of treasury shares	-	-	-	-	127	-	-	127
Purchase of treasury shares	-	-	-	-	(76)	-	-	(76)
Recognition of tax benefit on gain from equity settled share options	-	-	-	-	-	563	-	563
Dividend paid	-	-	-	-	-	(12,430)	-	(12,430)
Share based payment transactions	-	-	-	-	-	1,213	-	1,213
Total equity at 30 April 2022 (restated)	12,456	11,342	(9,950)	14,465	(261)	47,088	(2)	75,138
At 1 May 2022, as previously presented	12,456	11,342	(9,950)	14,465	(261)	44,863	(2)	72,913
Impact of restatement (note 25)	-	-	-	-	-	2,225	-	2,225
At 1 May 2022 (restated)	12,456	11,342	(9,950)	14,465	(261)	47,088	(2)	75,138
Comprehensive income:
Profit for the year	-	-	-	-	-	12,240	-	12,240
Revaluation of other investments	-	-	-	-	-	(26)	-	(26)
Exchange rate differences	-	-	-	-	-	-	(49)	(49)
Total comprehensive income	-	-	-	-	-	12,214	(49)	12,165
Transactions with owners recognised directly in equity:
Issue of share capital	208	504	-	948	-	-	-	1,660
Purchase of own shares at nominal value	-	-	-	-	-	(133)	-	(133)
Sale of treasury shares	-	-	-	-	20	-	-	20
Purchase of treasury shares	-	-	-	-	(436)	-	-	(436)
Recognition of tax benefit on gain from equity settled share options	-	-	-	-	-	(398)	-	(398)
Dividend paid	-	-	-	-	-	(11,004)	-	(11,004)
Share based payment transactions	-	-	-	-	-	1,100	-	1,100
Total equity at 30 April 2023	12,664	11,846	(9,950)	15,413	(677)	48,867	(51)	78,112

 

The following describes the nature and purpose of each reserve within equity:

 

Share premium - Amount subscribed for share capital in excess of nominal value together with gains on the sale of own shares and the difference between actual and nominal value of shares issued by the Company in the acquisition of trade and assets.

 

Merger reserve - Represents the difference between the nominal value of shares acquired by the Company in the share for share exchange with the former Gateley Heritage LLP members and the nominal value of shares issued to acquire them.

 

Other reserve - Represents the difference between the actual and nominal value of shares issued by the Company in the acquisition of subsidiaries.

 

Treasury reserve - Represents the repurchase of shares for future distribution by Group's Employee Benefit Trust.

 

Retained earnings - All other net gains and losses and transactions with owners not recognised anywhere else.

 

Foreign currency translation reserve - Represents the movement in exchange rates back to the Group's functional currency of profits and losses generated in foreign currencies.

 

CONSOLIDATED CASH FLOW STATEMENT FOR YEAR ENDED 30 APRIL 2023

 

	Note	2023	Restated 2022
		£'000	£'000
Cash flows from operating activities
Profit for the year after tax		12,240	23,023
Adjustments for:
Depreciation and amortisation	11/12/14	7,246	6,215
Financial income	7	(1,735)	(194)
Financial expense	7	495	193
Interest charge on capitalised leases	7	1,150	948
Equity settled share-based payments	6	1,100	1,213
Gain on bargain purchase	4	(1,389)	(12,380)
Acquisition related earn-out remuneration charge	4	6,190	3,509
Earn-out consideration paid - acquisition of subsidiary		(50)	-
Initial consideration paid on acquisitions		(1,468)	(7,033)
Loss on disposal of property, plant and equipment	4	82	16
Tax expense	8	3,972	3,753
		27,833	19,263
Increase in trade and other receivables		(6,942)	(10,299)
(Decrease)/increase in trade and other payables		(7,259)	816
Increase in provisions	20	433	25
Cash generated from operations		14,065	9,805
Tax paid		(4,320)	(4,497)
Net cash flows from operating activities		9,745	5,308
Investing activities
Acquisition of property, plant and equipment	11	(1,312)	(775)
Acquisition of other intangible assets	14	(787)	(319)
Cash acquired on business combinations		483	1,051
Interest received	7	1,735	194
Net cash used in investing activities		119	151
Financing activities
Interest and other financial income paid	7	(371)	(193)
Lease repayments		(4,550)	(3,870)
Receipt of new revolving credit facility, net of refinancing costs	21	1,000	5,715
Proceeds from sale of own shares		-	90
Acquisition of own shares by Employee Benefit Trust		(416)	(39)
Cash received for shares issued on exercise of SAYE/CSOP options		477	1,768
Dividends paid	10	(11,004)	(12,430)
Net cash used in financing activities		(14,864)	(8,959)
Net increase in cash and cash equivalents		(5,000)	(3,500)
Cash and cash equivalents at beginning of year		16,105	19,605
Cash and cash equivalents at end of year	21	11,105	16,105

 

NOTES TO THE FINANCIAL STATEMENTS

 

1. Basis of preparation and significant accounting policies

 

The financial information set out in this financial results announcement does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The consolidated statement of comprehensive profit and loss and other comprehensive income, consolidated statement of financial position, consolidated statement of change in equity, consolidated statement of cashflows and the associated notes have been extracted from the Group's financial statements for the year ended 30 April 2023, upon which the auditor's opinion is unqualified and does not include any statement under section 498 of the Companies Act 2006. The statutory accounts for the year ended 30 April 2023 will be delivered to the Registrar of Companies following the Annual General Meeting.

 

These condensed preliminary financial statements for the year ended 30 April 2023 have been prepared on the basis of the accounting policies as set out in the 2023 financial statements.

 

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards, this announcement does not itself contain sufficient information to comply with those standards. The Group expects to publish full financial statements that comply with International Financial Reporting Standards in September 2023.

 

1.1 Statement of Directors responsibilities

The Directors confirm that, to the best of their knowledge, this condensed set of consolidated financial statements have been prepared in accordance with the AIM Rules.

 

1.2 Cautionary statement

This document contains certain forward-looking statements with respect of the financial condition, results, operations and business of the Group.  Whilst these statements are made in good faith based on information available at the time of approval, these statements and forecasts inherently involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future.  There are a number of factors that could cause the actual results of developments to differ materially from those expressed or implied by these forward-looking statements and forecasts.  Nothing in this document should be construed as a profit forecast.

 

2. Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Finance Directors review, together with the financial position of the Group, its cash flows, liquidity position and borrowings. Financial projections have been prepared to October 2024 which show positive earnings and cash flow generation.  The COVID-19 situation during the previous two financial years created an unprecedented and constantly changing challenge to all businesses. Management successfully navigated the business through the impact of the pandemic on the Group's financial performance. The Group typically applies sensitivities (informed by the past experiences of the Group since the onset of the pandemic, including the Group's time recording activity, fee generation and cash collections) to any current financial projections based on various downside scenarios to illustrate the potential impact from a downturn in client activity or any increases in costs.

 

The Group continues to work closely with its supportive banks, utilising the three-year revolving credit facility, of which £7m was drawn down at 30 April 2023, with committed funding of £30m until April 2025. As at 30 April 2023 the Group has net cash of £4.3m and continues to sensibly managed its cash position within permitted covenants relating to its new facility.

 

This process included a reverse 'stress test' used to inform downside testing which identified the break point in the Group's liquidity. Whilst the sensitivities applied do show an expected downside impact on the Group's financial performance in future periods, in all scenarios modelled the board have identified the appropriate mitigating actions in order for the Group to maintain a robust balance sheet and liquidity position.  In addition, the board have also considered mitigating actions such as lower capital expenditure, reductions in personnel and overhead expenditure and other short-term cash management activities within the Group's control as part of their assessment of going concern.

 

The Group expects to be able to operate within the Group's existing financing facilities for the foreseeable future and currently demonstrates significant debt capacity headroom based on its strong financial performance.  Accordingly, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future and they have adopted the going concern basis of accounting in preparing the annual Group financial statements.

 

3. Revenue and operating segments

The Chief Operating Decision Maker ("CODM") is the Strategic Board. The Group have the following four strategic divisions, comprising both legal and consultancy services, which are its reportable segments and referred to as it's Platforms.

 

The following summary describes the operations of each reportable segment as reported up to 30 April 2023:

 

Reportable segment/Platforms	Legal service lines	Consultancy service lines
Corporate	Banking Corporate Restructuring advisory Taxation	GEG Services International Investment Services
Business services	Commercial Commercial Dispute Resolution Complex International litigation Regulatory Reputation, media and privacy law	Adamson Jones Symbiosis IP
People	Employment Pension Private client	Entrust Pension Kiddy and Partners T-three
Property	Real Estate Residential Development Construction Planning Real Estate Dispute Resolution	Capitus Hamer/Persona Smithers Purslow Vinden

The revenue and operating profit are attributable to the principal activities of the Group.  A geographical analysis of revenue is given below:

 

	2023	2022
	£'000	£'000
United Kingdom	151,489	127,386
Europe	5,459	5,336
Middle East	2,390	923
North and South America	1,675	692
Asia	1,163	1,501
Other	507	1,411
	162,683	137,249

 

The Group has no individual customers that represent more than 10% of revenue in either the 2023 or 2022 financial year. The Group's assets and costs are predominately located in the UK save for those assets and costs located in the United Arab Emirates (UAE) via its Dubai subsidiary.  Net Group assets of £0.08m (2022: Net Group assets of £0.08m) are located in the Group's Dubai subsidiary.  Revenue generated by the Group's Dubai subsidiary to customers in the UAE totalled £2.39m (2022: £0.92m) as disclosed above as due from the customers in the Middle East

 

2023

	Business Services	Corporate	People	Property	Total segments	Other expenses  and movement  in unbilled revenue	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Segment revenue from services transferred at a point in time	4,952	16,578	8,409	17,002	46,941	1	46,942
Segment revenue from services transferred over time	16,872	22,200	12,027	64,642	115,741	-	115,741
Total segmental revenue	21,824	38,778	20,436	81,644	162,682	1	162,683
Segment contribution (as reported internally)	5,330	13,948	5,983	31,037	56,298	1	56,299
Costs not allocated to segments:
Other operating income							49
Personnel costs							(11,091)
Depreciation and amortisation							(7,246)
Other operating expenses							(15,104)
Share based payment charges							(1,984)
Gain on bargain purchase							1,389
Contingent consideration treated as remuneration							(6,190)
Net financial expense							90
Profit for the financial year before taxation							16,212

2022 (restated)

	Business Services	Corporate	People	Property	Total segments	Other expense and movement in unbilled revenue	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Segment revenue from services transferred at a point in time	3,467	10,175	5,901	10,994	30,537	305	30,842
Segment revenue from services transferred over time	14,490	27,889	13,264	50,426	106,069	338	106,407
Total Segment revenue	17,957	38,064	19,165	61,420	136,606	643	137,249
Segment contribution (as reported internally)	5,733	15,373	6,919	22,956	50,981	643	51,624
Costs not allocated to segments:
Other operating income							-
Personnel costs							(10,487)
Depreciation and amortisation							(6,215)
Other operating expenses							(13,987)
Share based payment charges							(1,213)
Gain on bargain purchase							12,380
Contingent consideration treated as remuneration							(3,509)
Exceptional costs							(870)
Net financial expense							(947)
Profit for the financial year before taxation							26,776

 

Group entities may be engaged on a contingent basis; in such cases the Group considers the satisfaction of the contingent event as the sole performance obligation within the contract. Fees are only billed once the contingent event has been satisfied. The initial financing of these engagements is met by the Group. Due to the nature and timing of the billing, such engagements influence the contract asset balance held in the balance sheet at year end. In the majority of cases the contingent event is expected to be concluded within one year of the engagement date. The Group operates standard payment terms of 30 days. £16.4 million of the current period revenue is derived from services satisfied, in part, in the previous period.

 

Services transferred over time

For non-contingent engagements, fee earners' hourly rates are determined at the point of engagement with all hours attributed to the engagement fully and accurately recorded. The recorded hours are then translated into fees to be billed and invoiced on a monthly basis. The Group typically operates on 30 days credit terms, in line with IFRS 15 the performance obligations are fulfilled over time with revenue being recognised in line with the hours worked.

 

Contract assets

Under IFRS 15 the Group recognises any goods or services transferred to the customer before the customer pays consideration, or before payment is due, as a contract asset . These assets differ from accounts receivables. Accounts receivable are the amounts that have been billed to the client and the revenue recognised, whereas these contract assets are amounts of work in progress where work has been performed, yet the amounts have not yet been billed to the client. Due to the nature of the services delivered by the Group the significant component of the cost of delivery is staff costs. As a result, there is little to no judgement exercised in determining the costs incurred as they are driven by the time recorded by fee earners.  Contract assets are subject to impairment under IFRS 9.

 

No other financial information has been disclosed as it is not provided to the CODM on a regular basis.

 

Contract Liabilities

Under IFRS 15 the Group is required to recognise contract liabilities based on those amounts recognised against contracts for which the satisfaction of performance obligations has not yet been met. These liabilities relate to the deferred income recognised within Kiddy & Partners, T-three Consulting Limited and GEG Services Limited as a result of their billing structure. The amounts recognised reflect the agreed cost of the services to be performed and are realised in line with the ongoing cost of delivery. Due to the nature of the services provided, the main component of this cost of delivery is staff costs, as a result there is little to no judgement exercised in determining the value of the liability held at year end.

 

Practical expedients under IFRS 15

Under IFRS 15 companies are required to disclose the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied at the end of the reporting period. However, only a small proportion of revenue contracts in issuance are for fixed amounts, rather the company has a right to consideration from the customer in an amount that corresponds directly with the value to the customer of the business' performance completed to date. Therefore, the Group considers it impractical to estimate the potential value of unsatisfied performance obligations and has elected to apply the practical expedient available under IFRS 15.

 

4. Expenses and auditor's remuneration

Included in operating profit are the following:

	2023	2022
	£'000	£'000
Depreciation on tangible assets (see note 11)	936	851
Depreciation on right-of-use asset (see notes 11 and 23)	3,976	3,783
Short term and low value lease payments (see note 23)	82	75
Operating lease costs on property (see note 23)	166	-
Loss on sale of fixed assets	82	16
		Restated
	2023	2022
	£'000	£'000
Non-underlying items
Amortisation of intangible assets (see note 12)	2,073	1,581
Share based payment charges - Gateley Plc	1,984	1,100
Share based payment charges - Gateley Smithers Purslow Limited	-	113
Gain on bargain purchase	(1,389)	(12,380)
Consideration treated as remuneration	6,190	3,509
	8,858	(6,077)
Exceptional items
Acquisition costs	-	373
One off remuneration charge - Gateley Smithers Purslow Limited	-	497
Total non-underlying and exceptional items	8,858	(5,207)

 

Acquisition costs in the 2022 financial year represent professional fees in respect of the acquisition of SP 2018 Limited, Adamson Jones Holdings Limited and the business and assets of Tozer Gallagher LLP.

 

Share based payment charges in Gateley Plc represent charges in accordance with IFRS 2 in respect of unexercised SAYE, CSOP, LTIP and RSA schemes (See note 6).

 

Share based payment charges in Gateley Smithers Purslow Limited represent shares awarded to staff following the successful acquisition of SP 2018 Limited (See notes 5 and 6).

 

Auditor's remuneration

	2023	2022
	£'000	£'000
Fees payable to the Company's Auditor in respect of audit services:   Audit of these financial statements	107	85
Audit of financial statements of subsidiaries of the Company	22	20
	129	105
Amounts receivable by the Company's auditor and its associates in respect of:
Other assurance services	34	31

 

Other assurance services relate to Solicitors Accounts Rules review with associated reporting to legal regulators. This work is entirely assurance focused.

 

5. Personnel costs

The average number of persons employed by the Group during the year, analysed by category, was as follows:

 

	Number of employees
	2023	2022
Legal and professional staff	1,000	800
Administrative staff	439	350
	1,439	1,150

The aggregate payroll costs of these persons were as follows:

	2023	2022
	£'000	£'000
Wages and salaries	83,942	76,672
Social security costs	9,984	7,769
Pension costs	2,839	2,076
	96,765	86,517
Non-underlying items (see note 4)
Share based payment expense - Gateley Plc	1,984	1,100
Share based payment expense - Gateley Smithers Purslow Limited	-	113
	98,749	87,730

 

6. Share based payments

 

Group

At the year end the Group has nine share based payment schemes in existence.

 

Save As You Earn scheme ('SAYE')

The Group operates a HMRC approved SAYE scheme for all staff.  Options under this scheme will vest if the participant remains employed for the agreed vesting period of three years.  Upon vesting, each option allows the holder to purchase the allocated ordinary shares at a discount of 20% of the market price determined at the grant date.

 

During the year 360,365 SAYE 18/19 options vested with 311,806 being exercised by 30 April 2023 leaving 48,559 options still to be exercised. New shares were issued to satisfy these options being 311,806 10p shares with a nominal value of £31,181.

 

Company Share Option Plan ('CSOP')

The Group operates an HMRC approved CSOP scheme for associates, senior associates, legal directors, equivalent positions in Gateley Group subsidiary companies and Senior Management positions in our support teams.  Options under this scheme will vest if the participant remains employed for the agreed vesting period of three years.  Upon vesting, each option allows the holder to purchase the allocated ordinary shares at the price on the date of grant.

 

Long Term Incentive Plan ('LTIP')

The Group operates an LTIP for the benefit of Executive Directors and Senior Management.  Awards under the LTIP may be in the form of an option granted to the participant to receive ordinary shares on exercise dependent upon the achievement of profit related performance conditions.

 

Performance conditions

Options granted under the LTIP are only exercisable subject to the satisfaction of the following performance conditions which will determine the proportion of the option that will vest at the end of the three-year performance period.  The awards will be subject to an adjusted fully diluted earnings per share performance measure as described in the table below:

Adjusted, fully diluted earnings per Share Compound Annual Growth Rate (CAGR) over the three year period ending 30 April 2023/2025/26	Amount Vesting %
Below 5%	0%
5%	25%
Between 5% and 10%	Straight line vesting
Above 10%	100%

 

The options will generally be exercisable after approval of the financial statements during the year of exercise. The performance period for any future awards under the LTIP will be a three-year period from the date of grant.  Vested and unvested LTIP awards are subject to a formal malus and clawback mechanism.

 

Grant of equity share options under the LTIP

Certain senior employees and Executive Directors were granted options on 23 February 2023 based on performance conditions commencing on 1 May 2023. In total, 1,320,000 options have been granted which, subject to satisfying the above performance conditions, will vest in the period following the year ending 30 April 2026

 

Restricted Share Award Plan ('RSA')

The Group operates  an RSA for the benefit of Senior Management. Awards under the RSA entitle the option holder to participate in dividends however, the shares are restricted for a period of 5 years from issue, such that they cannot be traded.

 

The annual awards granted under all schemes are summarised below:

	Weighted average remaining contractual life	Weighted average exercise price	Originally granted	Lapsed/exercised at 30 April 2022	At 1 May 2022	Granted during the year	Lapsed during year	Exercised in the year	At 30 April 2023
			Number	Number	Number	Number	Number	Number	Number
SAYE
SAYE 18/19 - 21 September 2018	0 years	£1.27	620,432	(449,919)	170,513	-	(134,037)	(36,476)	-
SAYE 19/20 - 30 September 2019	0 years	£1.28	822,625	(218,412)	604,213	-	(243,848)	(311,806)	48,559
SAYE 20/21 - 6 November 2020	0.5 years	£1.02	2,337,197	(219,826)	2,117,371	-	(243,513)	-	1,873,858
SAYE 21/22 - 25 August 2022	1.3 years	£1.70	673,077	(14,925)	658,152	-	(157,137)	-	501,015
SAYE 22/23 - 22 September 2023	2.4 years	£1.55	-	-	-	1,070,154	(36,850)	-	1,033,304
			4,453,331	(903,082)	3,550,249	1,070,154	(815,385)	(348,282)	3,456,736
CSOPS
CSOPS 18/19 - 24 October 2018	0 years	£1.44	812,131	(628,045)	184,086	-	(62,470)	(121,616)	-
CSOPS  20/21 - 7 July 2020	0.2 years	£1.35	976,797	(147,045)	829,752	-	(97,969)	-	731,783
CSOPS 22/23 - 14 December 2022	2.6 years	£1.74	-	-	-	300,000	(10,000)	-	290,000
			1,788,928	(775,090)	1,013,838	300,000	(170,439)	(121,616)	1,021,783
LTIPS
LTIPS 20/21 - 22 July 2020	0.2 years	£0.00	1,405,766	(169,331)	1,236,435	-	(134,188)	-	1,102,247
LTIPS - 27 April 2022	2.0 years	£0.00	1,115,000	-	1,115,000	-	(90,000)	-	1,025,000
LTIPS 23 Feb 23	2.8years	£0.00	-	-	-	1,320,000	-	-	1,320,000
			2,520,766	(169,331)	2,351,435	1,320,000	(224,188)	-	3,447,247
RSA
RSA - 27 April 2022	4.0 years	£0.00	1,422,560	-	1,422,560	-	-	-	1,422,560
RSA  23 February 2023	5.0 years	£0.00	-	-	-	1,175,000	(50,000)	-	1,125,000
			1,422,560	-	1,422,560	1,175,000	(50,000)	-	2,547,560

 

Fair value calculations

 

The award is accounted for as equity-settled under IFRS 2.  The fair value of awards which are subject to non-market based performance conditions is calculated using the Black Scholes option pricing model. The inputs to this model for awards granted during the financial year are detailed below:

 

	SAYE	CSOP	LTIP	RSA
Grant date	22/09/2022	14/12/2022	23/02/2023	23/02/2023
Share price at date of grant	£1.99	£1.74	£1.825	£1.825
Exercise price	1.55	1.74	£nil	£nil
Volatility	31%	30%	27%	27%
Expected life (years)	3.3	3.3	3.3	5.0
Risk free rate	3.473%	3.277%	3.523%	3.569%
Dividend yield	4.29%	4.22%	4.38%	0.00%
Fair value per share
Market based performance condition	-		-		-
Non-market based performance condition/no performance condition	£0.55	£0.30	£1.58		£1.825

 

Expected volatility was determined by using historical share price data of the Company since it listed on 8 June 2015.  The expected life used in the model has been based on Management's expectation of the minimum and maximum exercise period of each of the options granted.

 

The total charge to the income statement for all schemes now in place, included within non-underlying items, is £1,984,000 (2022: £1,213,000).

 

7. Financial income and expense

Recognised in profit and loss

	2023	Restated 2022
	£'000	£'000
Financial income
Interest income	1,735	194
Total financial income	1,735	194
Financial expense
Interest expense on bank borrowings measured at amortised cost	(495)	(193)
Interest on lease liability	(1,150)	(948)
Total financial expense	(1,645)	(1,141)
Net financial income/(expense)	90	(947)

 

 

8. Taxation

	2023	2022
	£'000	£'000
Current tax expense
Current tax on profits for the year	4,974	3,949
Under provision of taxation in previous period	58	15
Total current tax	5,032	3,964
Deferred tax expense
Origination and reversal of temporary differences	(472)	(211)
Under provision on share-based payment charges	(588)	-
Total deferred tax expense	(1,060)	(211)
Total tax expense	3,972	3,753

 

The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to profits for the year are as follows:

 

	2023	Restated 2022
	£'000	£'000
Profit for the year (subject to corporation tax)	16,212	26,776
Tax using the Company's domestic tax rate of 19%	3,080	5,087
Expenses not deductible/(deductible) for tax purposes	1,422	(1,349)
Under provision of taxation in previous period	58	15
Under provision on share-based payment charges	(588)	-
Total tax expense	3,972	3,753

 

The Finance Act 2021 increased the main rate of corporation tax to 25% from 1 April 2023. Closing deferred tax balances have therefore been valued at 25% (2022: 19% or 25% depending on the date they expect to fully unwind). 

 

 

9. Earnings per share

Statutory earnings per share
	2023	2022
	Number	Number
Weighted average number of ordinary shares in issue, being weighted average number of shares for calculating basic earnings per share	125,244,334	118,961,047
Shares deemed to be issued for no consideration in respect of share based payments	3,283,007	2,932,191
Weighted average number of ordinary shares for calculating diluted earnings per share	128,527,341	121,893,238
	2023	Restated 2022
	£'000	£'000
Profit for the year and basic earnings attributable to ordinary equity shareholders	12,240	23,023
Non-underlying and exceptional items (see note 4)
Operating expenses	8,858	(5,207)
Tax on non-underlying and exceptional items	(168)	(94)
Underlying earnings before non-underlying and exceptional items	20,930	17,722
Earnings per share is calculated as follows:
	2023	Restated 2022
	Pence	Pence
Basic earnings per ordinary share	9.77	19.35
Diluted earnings per ordinary share	9.52	18.89
Basic earnings per ordinary share before non-underlying and exceptional items	16.71	14.90
Diluted earnings per ordinary share before non-underlying and exceptional items	16.28	14.54

 

10. Dividends

	2023	2022
	£'000	£'000
Equity shares:
Interim dividend in respect of 2023 (3.3p per share) - 24 March 2023	4,169	-
Final dividend in respect of 2022 (5.5p per share) - 22 October 2022	6,835	-
Interim dividend in respect of 2021 (2.5p per share) - 28 June 2021	-	2,940
Final dividend in respect of 2021 (5p per share) - 8 October 2021	-	5,908
Interim dividend in respect of 2022 (3p per share) - 31 March 2022	-	3,582
	11,004	12,430

 

The board proposes to recommend a final dividend of 6.2p (2022: 5.5p) per share at the AGM. If approved, this dividend will be paid in October 2023 to shareholders on the register at the close of business on 29 September 2023. The shares will go ex-dividend on 28 September 2023. This dividend has not been recognised as a liability in these final statements.

 

 

11. Property, plant and equipment

 

	Leasehold improvements	Equipment	Fixtures and Fittings	Right-of-use assets	Total
	£'000	£'000	£'000	£'000	£'000
Cost
Balance at 1 May 2021	317	6,493	5,396	34,025	46,231
Arising on acquisition after fair value adjustments	-	266	63	793	1,122
Additions	23	583	169	610	1,385
Disposal	-	(110)	-	-	(110)
As at 30 April 2022	340	7,232	5,628	35,428	48,628
Balance at 1 May 2022	340	7,232	5,628	35,428	48,628
Additions	-	827	485	6,447	7,759
Disposal	(27)	(323)	(88)	(1,722)	(2,160)
As at 30 April 2023	313	7,736	6,025	40,153	54,227
Depreciation and impairment
Balance at 1 May 2021	209	5,814	4,860	7,018	17,901
Arising on acquisition after fair value adjustments	-	173	53	-	226
Depreciation charge for the year	22	514	315	3,783	4,634
Eliminated on disposal	-	(94)	-	-	(94)
Balance at 30 April 2022	231	6,407	5,228	10,801	22,667
Balance at 1 May 2022	231	6,407	5,228	10,801	22,667
Depreciation charge for the year	16	562	358	3,976	4,912
Eliminated on disposal	(27)	(247)	(82)	(1,722)	(2,078)
Balance at 30 April 2023	220	6,722	5,504	13,055	25,501
Net book value
At 30 April 2022	109	825	400	24,627	25,961
At 30 April 2023	93	1,014	521	27,098	28,726

 

12. Intangible assets and goodwill

 

	Goodwill	Customer lists	Brands	Total
	£'000	£'000	£'000	£'000
Deemed cost
At 1 May 2021 (restated)	1,550	9,850	-	11,400
Arising through business combinations	-	6,411	3,518	9,929
At 30 April 2022	1,550	16,261	3,518	21,329
Arising through business combinations	-	1,000	-	1,000
At 30 April 2023	1,550	17,261	3,518	22,329
Amortisation
At 1 May 2021	-	5,783	-	5,783
Charge for the year	-	1,534	10	1,544
At 30 April 2022	-	7,317	10	7,327
Charge for the year	-	1,838	235	2,073
At 30 April 2023	-	9,155	245	9,400
Carrying amounts
At 30 April 2022	1,550	8,944	3,508	14,002
At 30 April 2023	1,550	8,106	3,273	12,929

 

Goodwill is allocated to the following cash generating units:

	2023	2022
	£'000	£'000
Property Group
Gateley Capitus Limited	-	-
Gateley Hamer Limited	-	-
GCL Solicitors (acquisition of trade and assets)	-	-
Persona Associates Limited	40	40
Gateley Vinden Limited	934	934
Tozer Gallagher (acquisition of trade and assets)	-	-
Gateley Smithers Purslow Limited	-	-
	974	974
Employment , Pensions and Benefits Group
Kiddy & Partners Limited	-	-
International Investment Services Limited	-	-
T-three Consulting Limited	-	-
	-	-
Business services Group
Gateley Tweed (acquisition of goodwill)	576	576
Adamson Jones IP Limited	-	-
Symbiosis IP Limited	-	-
	576	576
	1,550	1,550

Impairment testing

 

The Group tests goodwill annually for impairment. The impairment test involves determining the recoverable amount of the cash generating unit (CGU) to which the goodwill has been allocated.  The Directors believe that each operating segment represents a cash generating unit for the business and as a result, impairment is tested for each segment, and all the assets of each segment are considered.

 

The recoverable amount is based on the present value of expected future cash flows (value in use) which was determined to be higher than the carrying amount of goodwill so no impairment loss was recognised.

 

Value in use was determined by discounting the future cash flows generated from the continuing operation of the Group and was based on the following key assumptions:

 

·	A pre-tax discount rate of between 12 and 21% (2022: 12-21%) was applied in determining the recoverable amount. The discount rate is based on the Group's average weighted cost of capital of 10.18% and adjusted according to the risks attributable to each CGU.
·	The values assigned to the key assumptions represent Management's estimate of expected future trends and are based on both external (industry experience, historic market performance and current estimates of risks associated with trading conditions) and internal sources (existing Management knowledge, track record and an in-depth understanding of the work types being performed).
	ᴏ	Growth rates of between 2% to 10% (2022: 2-10%) are based on Management's understanding of the market opportunities for services provided pertaining to the industry in which each CGU is aligned.
	ᴏ	Increases in costs are based on current inflation rates and expected levels of recruitment needed to generate predicted revenue growth.
	ᴏ	Attrition rates are based on the historic experience and trends of client activity over a two to three year period and applied to future fee forecasts.
	ᴏ	Cash flows have been typically assessed over a five-year period which Management extrapolates cash using a terminal value calculation based on an estimated growth rate of 2%.  The expected current UK economic growth forecasts for the legal services market is 2%.
·	The Group has conducted a sensitivity analysis on the impairment test of the CGU carrying value.  The Directors believe that any reasonably possible change in the key assumptions on which the recoverable amount of goodwill is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the CGU.

 

13. Acquisitions

 

During the year ended 30 April 2023 the Group completed one acquisition:

 

Acquisition of Symbiosis IP Limited

 

On 3 October 2022 Adamson Jones IP Limited acquired the entire issued share capital of Symbiosis IP Limited, a leading practice of chartered quantity surveyors and construction consultants. Symbiosis IP is a patent attorney firm serving exclusively the life science industry. They have a wealth of experience in working closely with academic institutions and early stage start-up companies.

 

The amounts recognised in respect of identifiable assets acquired and liabilities assumed are as set out in the table below:

	Pre-acquisition carrying amount £'000	Policy alignment and fair value adjustments £'000	Total £'000
Intangible asset relating to customer list	-	1,000	1,000
Cash	483	-	483
Trade receivables	330	-	330
Prepayments	33	-	33
Total assets	846	1,000	1,846
Trade payables	(119)	-	(119)
Accruals and other payables	(88)	-	(88)
Deferred tax	-	(250)	(250)
Total liabilities	(207)	(250)	(457)
Total identifiable net assets at fair value	639	750	1,389
Negative goodwill arising on acquisition			(1,389)
Total consideration			-
Satisfied by:
Initial cash consideration paid			1,468
Issue of 523,012 new 10p ordinary shares in Gateley (Holdings) Plc			1,000
Less: amounts subject to continuing employment conditions			(2,468)
Total consideration			-
Net cash outflow arising on acquisition
Cash paid			(1,468)
Net cash acquired			483
Net cash outflow arising on acquisition			(985)

 

The negative goodwill of £1,389,000 has been recognised immediately in the statement of profit and loss.

 

From the date of acquisition Symbiosis IP Limited has contributed £1.3m of revenue to the Group's Statement of Comprehensive Income together with after tax profit of £0.2m. If the acquisition had been completed on the first day of the financial year, Group revenue and profit after tax would have been higher by £1.2m and £0.2m respectively.

 

14. Other intangible assets

 

	IT development  costs £'000	Computer software £'000	Total £'000
Cost
Balance at 1 May 2021	258	121	379
Additions	-	319	319
At 30 April 2022	258	440	698
Additions	24	763	787
At 30 April 2023	282	1,203	1,485
Amortisation
Balance at 1 May 2021	-	97	97
Charge for the year	-	37	37
At 30 April 2022	-	134	134
Charge for the year	40	221	261
At 30 April 2023	40	355	395
Net book amount at 30 April 2022	258	306	564
Net book amount at 30 April 2023	242	848	1,090

 

The Group's amortisation policy is to amortise other intangible assets from the date they are made available for use.

 

15. Contract assets and liabilities

 

	Contract assets	Trade receivables	Contract liabilities
	£'000	£'000	£'000
As at 30 April 2023	20,388	54,167	(499)
As at 30 April 2022	17,239	50,201	(569)

 

Contract assets

 

Contract assets consist of unbilled revenue in respect of professional services performed to date.

 

Contract assets in relation to non-contingent work are recognised at appropriate intervals, normally on a monthly basis in arrears, in line with the performance of the services and engagement obligations. Where such matters remain unbilled at the period end the asset is valued on a contract-by-contract basis at its expected recoverable amount.

 

Contract assets in relation to contingent work are recognised at a point in time once the uncertainty over the contingent event has been satisfied and all performance obligations satisfied, such that it is no longer contingent, these matters are valued based on the expected recoverable amount. Due to the complex nature of these matters, they can take a considerable time to be finalised therefore performance obligations may be settled in one period but the matter not billed until a later financial period.   Until the performance obligations have been performed the Group does not recognise any contract asset value at the year end.

 

During the year, contract assets of £nil (2022: £2,661,000) were acquired in business combinations.

 

An impairment loss of £542,000 has been recognised in relation to contract assets in the year (2022: loss £108,000). This is based on the expected credit loss under IFRS 9 of these types of assets. The contract asset loss is estimated at 2.7% (2022: loss 0.6%) of the balance.

Contract assets recognised under IFRS 15

 

Under IFRS 15 the Group is required to recognise contract assets.

	2023	2022
	£'000	£'000
Contract asset value at 1 May 2022	17,239	13,900
Contract assets arising on acquisition	-	2,661
Contract asset value added in the year	22,333	19,237
Contract asset value realised in the year	(19,184)	(18,559)
Contract asset value at 30 April 2023	20,388	17,239

 

The Group have applied ECLs to unbilled revenue in order to account for the potential default on amounts not yet billed to the client. The ECLs have been calculated on the same basis as those applied to trade receivables.

 

Contract liabilities

 

When matters are billed in advance or on a basis of a monthly retainer, this is recognised in contract liabilities and released over time when the services are performed.

 

Contract liabilities recognised under IFRS 15

Under IFRS 15 the Group is required to recognise contract liabilities.

	2023	2022
	£'000	£'000
Contract liabilities at 1 May 2022	569	1,243
Contract liabilities gained in the year	469	533
Contract liabilities credited to P&L in year	(539)	(1,207)
Contract liabilities at 30 April 2023	499	569

 

16. Trade and other receivables

	2023	Restated 2022
	£'000	£'000
Trade receivables	54,167	50,201
Prepaid consideration subject to earn-out service conditions	6,015	5,712
Prepayments	5,777	5,626
Other receivables including insurance receivables	233	341
	66,192	61,880
Amounts falling due after one year:	£'000	£'000
Prepaid consideration subject to earn-out service conditions	7,080	9,707

 

Trade receivables

 

Trade receivables are recognised when a bill has been issued to the client, as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due. Trade receivables also includes disbursements.

 

Bills are payable within thirty days unless otherwise agreed with the client.

 

All trade receivables are repayable within one year.

 

Movement in loss allowance

	2023	2022
	£'000	£'000
Brought forward provision	(3,941)	(4,171)
Recognition of provisions for businesses acquired	-	(173)
Provision utilised	908	1,161
Charged to statement of profit and loss	(984)	(1,173)
Provisions released	192	415
	(3,825)	(3,941)

 

The Group applies the simplified approach to providing for the expected credit losses under IFRS 9. Management have also elected to apply an uplift to the IFRS 9 provision in the current year to account for the specific risks in the subsidiary entities where the application of IFRS 9 alone is not considered appropriate. The provision uplift is based on Management's assessment of specific clients and related debts, this is presented separately to the ECL provision detailed below:

 

2023	Not passed due	Past due 0-30 days	Past due 31-120 days	Past due greater than 120 days	Total
Expected credit loss rate	2.98%	4.93%	5.96%	17.58%
Estimated total gross carrying amount £'000	33,175	6,594	5,943	12,280	57,992
Lifetime ECL £'000	987	325	354	2,159	3,825

 

2022	Not passed due	Past due 0-30 days	Past due 31-120 days	Past due greater than 120 days	Total
Expected credit loss rate	3.60%	4.45%	5.11%	18.53%
Estimated total gross carrying amount £'000	31,544	4,642	5,429	12,526	54,141
Lifetime ECL £'000	1,136	207	277	2,321	3,941

 

 

The carrying amount of financial assets (including contract assets but not including equity investments) recorded in the financial statements, which is net of any impairment losses, represents the Group's maximum expected exposure to credit risk.  Financial assets include client and other receivables and cash.  The Group does not hold collateral over these balances.

 

All the Group's trade and other receivables have been reviewed for indicators of impairment.  The specifically impaired trade receivables are mostly due to customers experiencing financial difficulties.

 

An impairment loss of £984,000 has been recognised in relation to trade receivables in the year (2022: £1,173,000). This is based on the expected credit loss under IFRS 9 of these types of assets. The trade receivables loss is estimated at 1.7% (2022: 2.3%) of the balance.

 

17. Other interest-bearing loans and borrowings

 

The contractual terms of the Group's interest-bearing loans and borrowings, which are measured at amortised cost, with the exception of loans to members that are held at fair value, are described below.

	2023		2022
	Fair value	Carrying amount	Fair value	Carrying amount
	£'000	£'000	£'000	£'000
Non-Current liabilities
Bank borrowings	6,813	6,813	5,715	5,715-

On 18 April 2022, the Company entered into a revolving credit facility which provides total committed funding of £30m until April 2025. Interest is payable at a margin of 1.95% above the SONIA reference rate. On 19 April 2022 £6m was drawdown against the facility in order to fund the initial cash consideration in the acquisition of SP 2018 Limited. On 3 October 2022 a further £1m was drawdown against the facility in order to fund the cash consideration in the acquisition of Symbiosis IP Limited.

 

As at 30 April 2023, the Group's non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarised below:

 

30 April 2023	Current		Non-current
	Within 6 months	6 to 12 months	1 - 5 years	Later than 5 years
	£'000	£'000	£'000	£'000
Bank borrowings	-	-	7,997	-
Trade and other payables	9,665	1,364	-	-
Total	9,665	1,364	7,997	-

 

This compares to the maturity of the Group's non-derivative financial liabilities in the previous reporting period as follows:

 

30 April 2022	Current		Non-current
	Within 6 months	6 to 12 months	1 - 5 years	Later than 5 years
	£'000	£'000	£'000	£'000
Bank borrowings	-	-	6,485	-
Trade and other payables	8,335	-	40	-
Total	8,335	-	6,525	-

 

The above amounts reflect the contractual undiscounted cash flows, which may differ to the carrying values of the liabilities at the reporting date.

 

18. Trade and other payables

	2023	Restated 2022
	£'000	£'000
Current
Trade payables	9,370	7,935
Other taxation and social security payable	9,913	10,122
Other payables	295	374
Contingent consideration treated as remuneration	1,364	26
Accruals	4,492	12,693
Deferred income	499	569
	25,933	31,719

 

 

Non-current	£'000	£'000
Contingent consideration treated as remuneration	-	40

 

19. Deferred tax

Deferred tax assets and liabilities are summarised below:

 

Deferred tax asset

The deferred tax asset recognised in the consolidated statement of financial position represents the future tax impact of issued share based payments schemes that are yet to vest.

	Share-based payments
	£'000
At 1 May 2022	638
Credited during the year in the consolidated income statement	590
Debited during the year to retained earnings	(398)
At 30 April 2023	830

 

Deferred tax liability

The deferred tax liability recognised in the Consolidated Statement of Financial Position represents the future tax impact of the Group's benefit from customer lists obtained through acquisitions.

 

	Customer lists
	£'000
At 1 May 2021	772
Arising through business combinations - Tozer Gallagher LLP, Adamson Jones Holdings Limited and SP 2018 Limited	2,482
Credited during the year in the Consolidated income statement	(165)
At 30 April 2022	3,089
Arising through business combinations - Symbiosis IP Limited	250
Credited during the year in the Consolidated income statement	(398)
At 30 April 2023	2,941

 

20. Provisions

	2023	2022
	£'000	£'000
Current provision
Professional indemnity provision	107	101
Total current provision	107	101
Non-current provision
Professional indemnity provision	903	649
Dilapidations provision	387	214
Total non-current provision	1,290	863
Total provisions	1,397	964
Professional indemnity estimated claim cost
	2023		2022
	£'000		£'000
Brought forward	750		725
Provisions made during the year	350		35
Provisions reversed during the year	(90)		(10)
At end of year	1,010		750
Non-current	903		649
Current	107		101
	1,010		750

 

The Group from time to time receives claims in respect of alleged professional negligence which it defends where appropriate but makes provision for the best estimate of probable amounts considered likely to be payable as set out above.  Inevitably, these estimates depend on the outcome and timing of future events and may need to be revised as circumstances change.  A different assessment of the likely outcome in each case or of the probable cost involved may result in a different level of provision recognised.  Professional indemnity Insurance cover is maintained in respect of professional negligence claims.

 

Dilapidations provision

The Group has leases for a number of offices, some of which include dilapidation clauses. The Group maintains the office buildings throughout each lease term with regular maintenance, however a cost is likely to arise at the end of the lease term in order to return the space to its original condition. Management have therefore elected to introduce a dilapidations provision to account for the future cost. The provision is based on Management's estimate of the total costs across all applicable lease to be recognised on a straight line basis over the total lease terms.

 

	2023 £'000	2022 £'000
At 1 May	214	214
Provision made in the year	173	-
At 30 April	387	214

 

21. Net debt

	2023	2022
	£'000	£'000
Cash and cash equivalents	11,105	16,105
Debt
Total loans brought forward	(34,641)	(30,445)
Revolving credit facility - due in more than one year	(1,098)	(5,715)
New lease liability in the year	(7,597)	(2,351)
Repayment of lease liability	4,550	3,870
Total loan carried forward	(38,786)	(34,641)
Brought forward from previous year	(18,536)	(10,840)
Movement during year	(9,145)	(7,696)
Net debt at the year end	(27,681)	(18,536)

 

The changes in the Group's liabilities arising from financing activities can be classified as follows:

 

	Long term borrowings	Short term borrowings	Lease liabilities	Total
	£'000	£'000	£'000	£'000
1 May 2022	5,715	-	28,926	34,641
Cashflows:
Repayments	(2,000)	-	(4,550)	(6,550)
Receipt of revolving credit facility	3,000	-	-	3,000
Non-cash
Loan arrangement fee unwind	98	-	-	98
New lease liability in the year	-	-	7,597	7,597
30 April 2023	6,813	-	31,973	38,786

 

	Long term borrowings	Short term borrowings	Lease liabilities	Total
	£'000	£'000	£'000	£'000
1 May 2021	-	-	30,445	30,445
Cashflows:
Repayments	-	-	(3,870)	(3,870)
Receipt of revolving credit facility	5,715	-	-	5,715
Non-cash
Fair value of acquisition	-	-	793	793
New lease liability in the year	-	-	1,558	1,558
30 April 2022	5,715	-	28,926	34,641

22. Share capital

 

Authorised, issued and fully paid

	2023	2023	2022	2022
	Number	£	Number	£
Ordinary shares of 10p each
Brought forward	124,556,879	12,455,687	117,914,205	11,791,420
Issued on acquisition of Tozer Gallagher LLP	-	-	142,179	14,218
Issued on acquisition of Adamson Jones IP Limited	-	-	543,668	54,367
Issued on acquisition of Gateley Smithers Purslow Limited	-	-	3,312,322	331,232
Issued on acquisition of Symbiosis IP Limited	523,012	52,301	-	-
Issued as part of contingent consideration of Tozer Gallagher LLP	25,071	2,507	-	-
Issued on vesting of RSA	1,175,000	117,500	1,477,560	147,756
Issued on vesting of SAYE	356,195	35,620	308,819	30,882
Issued on vesting of CSOPS	-	-	858,126	85,813
At 30 April 2023	126,636,157	12,663,615	124,556,879	12,455,688

 

The Company has one class of Ordinary shares which carry no right to fixed income.

 

On 3 October 2022 the Company acquired the entire issued share capital of Symbiosis IP Limited in part for the issue of 523,012 10p ordinary shares.

 

Between 1 May 2022 and 30 April 2023 356,195 10p ordinary shares were issued upon vesting of the 2018/2019 SAYE schemes to participants.

 

On 23 February 2023 1,175,000 10p ordinary shares were issued upon issue of the 2023 RSA scheme to participants.

 

23. Leases liabilities - IFRS 16

The Group has leases for offices, vehicles and some IT equipment, with the exception of short-term leases and leases of low-value assets each lease is held on the balance sheet as a right-of-use asset and corresponding lease liability. Property leases have a remaining term of one to ten years. Leases of vehicles and IT equipment have a term of three to five years. Lease payments on all those recognised on the balance sheet are fixed. Unless there is a contractual right for the Group to sublet the asset to a third party, the right of use asset can only be used by the Group.

 

The table below provides additional information on the right-of-use assets by class of assets:

 

	Number of leased assets*	Average length of lease remaining	Opening lease asset £'000	Net additions £'000	Depreciation £'000	Closing lease asset £'000
Office buildings	15	4.5 years	24,616	4,725	(2,253)	27,088
IT equipment	1	2.5 years	11	0	(2)	9

 

* Where properties within the same building are leased on a floor by floor basis on the same contractual terms, the Group has elected to treat these as a portfolio and are counted as a single leased asset within the table

 

Lease liabilities are presented in the statement of financial position as follows:

 

	2023 £'000	2021 £'000
Current lease liability	3,257	3,719
Non-current lease liability	28,716	25,207

 

A number of property leases held by the Group include break or termination options. The lease liability has been calculated based on the likelihood of such option being exercised. An option would only be exercised when in line with the Groups wider strategy.

 

In line with IFRS 16 Leases the Group has elected not to recognise a lease liability for leases with a term of 12 months or less, or for leases of low value assets. The payments made under such leases are expensed to the profit and loss on a straight-line basis. Any variable lease payments incurred are expensed as incurred.

 

The table below shows amounts recognised in the Statement of Comprehensive Income for short term and low value leases as at 30 April 2023:

 

	Property	Equipment	Total
	£'000	£'000	£'000
Expenses relating to short-term leases	166	20	186
Expenses relating to leases of low-value assets, excluding short-term leases of low value assets	-	62	62
	166	82	248

 

The total minimum undiscounted lease payments at 30 April 2023 under non-cancellable operating lease rentals were:

 

	30 April 2023 £'000	30 April 2022 £'000
Within one year	4,088	4,645
In the second to fifth year inclusive	19,219	22,435
After five years	11,437	16,606
	34,744	43,686

 

 

24. Subsequent events

 

On 19 July 2023, Gateley (Holdings) Plc completed the acquisition of the entire issued share capital of  Richard Julian and Associates Limited ('RJA') for a maximum consideration of £6,000,000. The initial consideration payable on completion was £3,931,000, split as £2,027,000 paid in cash and £1,904,000 through the issuance of 1,192,163 new ordinary shares of 10 pence each in Gateley ("Ordinary Shares". The cash consideration is being funded by the existing revolving credit facility. RJA is a chartered surveying practice, providing quantity surveying and project management services across a variety of construction sectors. It specialises in the provision of these services to organisations that deliver affordable housing, a resilient sector which is underpinned by high levels of grants to support delivery of the Government's housing targets.

 

At the time when the financial statements were authorised for issue, the determination of the fair values of the assets and liabilities acquired had not been finalised because the individual valuations had not been concluded. It was not possible to provide detailed information about each class of acquired receivables and any contingent liabilities of the acquired entity.

 

25. Restatement of acquisition accounting

 

Impact on group income statement and financial position

 

Following a review of the prior period annual report by the Financial Reporting Council's ('FRC') Corporate Reporting Review ('CRR') team, we have identified a number of previous acquisitions whereby there is deemed to be a substantive service condition attached to the consideration transferred. Whilst forfeiture of contingent payments by a 'bad leaver' is at the discretion of the remuneration committee, and not automatic, as outlined in IFRS 3 and the January 2013 IFRIC update, this discretion is in the gift of the group and not the leaver and as such, payments should be treated as remuneration for post-combination services, rather than treating them in the initial assessment of consideration transferred at the point of acquisition.

 

This change of accounting has no impact on the underlying results, cash flow or tax position of the group.

 

The historical acquisitions that have been impacted by this restatement are as follows:

 

·	Gateley Capitus Limited - acquired April 2016
·	Gateley Hamer Limited - acquired September 2016
·	GCL Solicitors - acquired May 2018
·	Kiddy & Partners Limited - acquired July 2018
·	Gateley Global Limited (formerly International Investment Services Limited) - acquired November 2018
·	t-three Group Limited - acquired December 2019
·	Gateley Legal NI and Gateley Legal Ireland (formerly trading as Gateley Tweed) - acquired February 2020
·	Gateley Vinden Limited - acquired March 2020
·	Tozer Gallagher - acquired July 2021
·	Adamson Jones Holdings Limited - acquired January 2022
·	Gateley Smithers Purslow Limited - acquired April 2022

 

Consequently, the FY22 results, including the April 2021 opening group statement of financial position, have been restated in these financial statements to reflect a decrease in goodwill corresponding to the fair value initially recognised for the relevant earn-outs on these acquisitions, being £18.588m at April 2022 (2021: £10.148m).

 

For the acquisitions where the relevant earn-out periods had been fully paid by 30 April 2022, the restated FY22 statement of financial position includes the removal of all related earn-out liabilities, with fair values totalling £15.419m (2021: £3.949m), the removal of all related earn-out liabilities, with fair values totalling £5.460mand the inclusion instead of a liability in respect of the accrued non-underlying remuneration costs, being £0.066m as at 30 April 2022 (2021: £nil).

 

Group statement of financial position

 

	2022 (as previously presented)		Impact of restatement	2022 (restated)	2021 (as previously presented)	Impact of restatement	2021 (restated)
	£'000		£'000	£'000	£'000	£'000	£'000
Intangible assets & goodwill	32,590		(18,588)	14,002	15,765	(10,148)	5,617
Other non-current assets	27,500		-	27,500	29,277	-	29,277
Total non-current assets	60,090		(18,588)	41,502	45,042	(10,148)	34,894
Current assets	89,512		15,419	104,931	76,598	3,494	80,092
Other payables	(5,360)		5,320	(40)	(120)	-	(120)
Other non-current liabilities	(34,874)		-	(34,874)	(29,237)	-	(29,237)
Total non-current liabilities	(40,234)		5,320	(34,914)	(29,357)	-	(29,357)
Trade and other payables	(31,793)		74	(31,719)	(29,032)	135	(28,897)
Other current liabilities	(4,662)		-	(4,662)	(3,985)	-	(3,985)
Total current liabilities	(36,455)		74	(36,381)	(33,017)	135	(32,882)
Net assets	72,913		2,225	75,138	59,266	(6,519)	52,747
Retained earnings	44,863		2,225	47,088	41,560	(6,519)	35,041
Other equity	28,050		-	28,050	17,706	-	17,706
Total equity	72,913	2,225		75,138	59,266	(6,519)	52,747

 

The impact on the FY22 income statement is the recognition of a gain on bargain purchase, totalling £12.380m, the removal of a net financial cost representing the fair value adjustments to the previously recognised earn-out liabilities, including the unwinding of present value discounting, totalling £0.008m, the inclusion of the above mentioned non-underlying remuneration costs, totalling £3.509m, and the reversal of the previously recognised credit of £0.135m in respect of contingent consideration that was released as earn-out targets were not met. 

 

Group statement of comprehensive income

 

	2022 (as previously presented)	Impact of restatement	Restated 2022
	£'000	£'000	£'000
Revenue	137,249		137,249
Other operating income	-		-
Personnel costs, excluding IFRS 2 charge	(86,517)		(86,517)
Depreciation - Property, plant and equipment	(851)		(851)
Depreciation - Right-of-use asset	(3,783)		(3,783)
Impairment of trade receivables and contract assets	(866)		(866)
Other operating expenses, excluding non-underlying and exceptional items	(22,716)		(22,716)
Operating profit before non-underlying and exceptional items	22,516		22,516
Non-underlying operating items	(2,659)	8,736	6,077
Exceptional items	(870)		(870)
	(3,529)	8,736	5,207
Operating profit	18,987	8,736	27,723
Financial income	194		194
Financial expense	(1,149)	8	(1,141)
Profit before tax	18,032	8,744	26,776
Taxation	(3,753)		(3,753)
Profit for the year after tax attributable to equity holders of the parent	14,279	8,744	23,023
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss
- Revaluation of other investments	(190)		(190)
- Exchange differences on foreign branch	58		58
Profit for the financial year and total comprehensive income all attributable to equity holders of the parent	14,147	8,744	22,891
Statutory Earnings per share
Basic	12.00	7.35	19.35p
Diluted	11.71	7.18	18.89p

Group cash flow statement

 

The resulting impact on the group cash flow statement is to recognise all payments made in acquiring businesses where the vendors are subject to a continuing employment clause as operating activities, rather than investing activities, as previously presented. The associated gains on bargain purchase of £12.380m are deducted and the non-underlying remuneration charges of £3.509m added back, to arrive at operating cash flows, as set out below. The remaining adjustments are in respect of the £0.008m of interest and the reversal of the previously recognised credit of £0.135m in respect of contingent consideration that was released as earn out targets were not met. 

 

	2022 (as previously presented)	Impact of restatement	Restated 2022
	£'000	£'000	£'000
Cash flows from operating activities
Profit for the year after tax	14,279	8,744	23,023
Adjustments for:
Depreciation and amortisation	6,215	-	6,215
Financial income	(194)	-	(194)
Financial expense	201	(8)	193
Release of contingent consideration	(135)	135	-
Interest charge on capitalised leases	948	-	948
Equity settled share-based payments	1,213	-	1,213
Gain on bargain purchase	-	(12,380)	(12,380)
Acquisition related earn-out remuneration charge	-	3,509	3,509
Initial consideration paid on acquisitions	-	(7,033)	(7,033)
Loss on disposal of property, plant and equipment	16	-	16
Tax expense	3,753	-	3,753
	26,296	(7,033)	19,263
Increase in trade and other receivables	(10,233)	(66)	(10,299)
Increase in trade and other payables	758	58	816
Increase in provisions	25	-	25
Cash generated from operations	16,846	(7,041)	9,805
Tax paid	(4,497)	-	(4,497)
Net cash flows from operating activities	12,349	(7,041)	5,308
Investing activities
Acquisition of property, plant and equipment	(775)	-	(775)
Acquisition of other intangible assets	(319)	-	(319)
Cash acquired on business combinations	(5,982)	7,033	1,051
Interest received	194	-	194
Net cash flows from investing activities	(6,882)	7,033	151
Financing activities
Interest and other financial income paid	(201)	8	(193)
Lease repayments	(3,870)	-	(3,870)
Receipt of new revolving credit facility, net of refinancing costs	5,715	-	5,715
Proceeds from sale of own shares	90	-	90
Acquisition of own shares by Employee Benefit Trust	(39)	-	(39)
Cash received for shares issued on exercise of SAYE/CSOP options	1,768	-	1,768
Dividends paid	(12,430)	-	(12,430)
Net cash used in financing activities	(8,967)	8	(8,959)
Net decrease in cash and cash equivalents	(3,500)	-	(3,500)
Cash and cash equivalents at beginning of year	19,605	-	19,605
Cash and cash equivalents at end of year	16,105	-	16,105

 

 

The Annual report and financial statements will be posted to shareholders in due course. Further copies will be available from the Company's website: www.gateleyplc.com.