RNS Number : 4888W
Gateley (Holdings) PLC
16 July 2024
 

16 July 2024

 

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. It forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

 

Gateley (Holdings) Plc

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

 

AUDITED RESULTS 2024

Fuelling growth through continuing investment

 

Gateley (AIM: GTLY), the professional services group, announces its audited results for the year ended 30 April 2024 ("FY24" or the "Period").

 

The Group delivered a good financial performance in FY24, increasing revenue by 6.0% to £172.5m, extending Gateley's unbroken record of revenue growth since IPO in 2015.  The board continued to invest for growth in line with its stated strategy and was pleased to deliver underlying profit before tax of £23.0m (FY23: £25.1m) after reinstating the payment of employee bonuses this year of £4.5m (FY23: £nil), in recognition of our people's contribution to a resilient outturn and our more positive outlook as we move into FY25.

 

The balance sheet remains strong, maintaining a net cash position. The Group has significant headroom in its banking facilities to enable further investment in organic and acquisitive opportunities.

 

Financial highlights

 

We present below our financial performance for the Period both on an underlying and statutory basis. 

 

Underlying

FY24

FY23

Change


 


 

Group revenue

£172.5m

£162.7m

6.0%

Group underlying operating profit1

£20.3m

£25.0m

(18.9)%

Group underlying profit before tax1

£23.0m

£25.1m

(8.1)%

Underlying adjusted fully diluted EPS2

14.20p

16.28p

(12.8)%

Dividend per share

9.5p

9.5p

-%

Net assets

£80.3m

£78.1m

2.8%

Net cash3

£3.8m

£4.3m

(11.6)%

 

 

Reported

FY24

FY23

Change


 


 

Group profit before tax

£14.0m

£16.2m

(13.9)%

Group profit after tax

£10.1m

£12.2m

(17.7)%

Basic earnings per share ('BEPS')

7.74p

9.77p

(20.8)%

 

·

Diversified business model yielding organic revenue growth of 2.8%, comprising 0.8% in Legal and 9.1% in Consultancy services

·

Consultancy revenues now 28.9% of the Group (FY23: 25.7%)

·

Steadily improving activity throughout Q4 (and ongoing) resulted in utilisation of 83% for the Period, just below the Group's operational target of 85%. 

·

Operating profit margin, on a pre-bonus basis, decreased 1.0% to 14.4% (FY23: 15.4%), reflecting salary and other cost inflation and ongoing organic and acquisitive investment

·

Underlying operating profit margin of 11.7% (FY23: 15.4%) reflects the reinstatement of Group staff bonuses

·

Net assets increased by 2.8% to £80.3m (FY23: £78.1m), including net cash of £3.8m (FY23: £4.3m)

·

Proposed final dividend of 6.2p (FY23: 6.2p), taking total dividends for the Period to 9.5p per share (FY23: 9.5p)

 

Operational highlights

 

·

Average headcount at 30 April 2024 increased by 6.7% to 1,536 (FY23: 1,439), including an increase in fee earning professional staff of 6.8% from 1,000 to 1,068

·

Fuelling growth through investment in diversification and strategic hires, including:

·          Continued execution of M&A strategy with the July 2023 acquisition of Richard Julian and Associates Limited ("RJA")

·          Strategic hiring onto the Business Services Platform to seed legal services class actions and international arbitration businesses and to create an intellectual property commercialisation and valuation offering in our patent and trademark attorney businesses

·

Non-dilutive recirculation of internal share ownership facilitated in April 2024 with the Group's Employee Benefit Trust purchasing shares to fulfil anticipated FY25 restricted share scheme awards

 

Current trading and outlook

 

·

The Group continues to perform well against its strategy set out at IPO, being to generate growth and resilience through diversification, delivering strong returns for our stakeholders

·

Ongoing investment for short-term margin stability followed by long term improvement.

·

FY25 has started in line with the board's expectations, with a good pipeline of work, including steadily improving transactional services activity

 

Rod Waldie, CEO of Gateley, said:

 

"I am pleased with our FY24 outturn given our cautious view of market conditions during the Period, particularly around the turn of the calendar year in H2.  Our people have worked hard to deliver another year of growth via our increasingly diverse and resilient business model, combining complementary legal and consultancy services.

 

"During the Period we continued to make organic and acquisitive investments in both our legal and consultancy services and in related systems.  RJA Consultants was acquired onto our Property Platform in July 2023, adding further expertise and capacity to our quantity surveying and project management offering. It is already performing ahead of the board's expectation. 

 

"Our legal services class actions team, established in May 2023, launched its first case in late February 2024.  Our investment in this team is a high-profile example of the type of investment that we are looking to make to enhance our returns over the medium to longer-term.

 

"Our M&A and lateral hire pipeline remains encouraging and we are committed to further enhancing each of our Platforms as suitable opportunities arise, aided by our net cash position and ample headroom in our banking facilities.

 

"Looking forward, we are encouraged by strengthening transactional activity levels, which began in Q4 FY24.  Our immediate outlook is best characterised as cautiously optimistic. Our resilient and financially robust foundation, allied to our unbroken track-record of growth, underpins our confidence to continue our long-term strategy of investment in people and systems.  This strategy has worked well for us since IPO in 2015 and through disciplined application of it, we ensure that the Group remains well-positioned for further growth and enhanced returns for all stakeholders."

 

1

Underlying operating profit and underlying profit before tax excludes remuneration for post-combination services, gain on bargain purchase, share-based payment charges, acquisition related amortisation and exceptional items

2

 

Adjusted fully diluted EPS excludes remuneration for post-combination services, gain on bargain purchase, share-based payment charges, acquisition related amortisation and exceptional items. It also adjusts for the future weighted average number of expected unissued shares from granted but unexercised share options in issue based on a share price at the end of the financial year

3

Net cash excludes IFRS 16 liabilities

 

Enquiries:

 

Gateley (Holdings) Plc


Neil Smith, Chief Financial Officer

Tel: +44 (0) 121 234 0196

Nick Smith, Acquisitions Director and Head of Investor Relations

Tel: +44 (0) 20 7653 1665

Cara Zachariou, Communications Director

 

Tel: +44 (0) 121 234 0074 Mob: +44 (0) 7703 684 946



Panmure Liberum - Nominated Adviser and Broker

Richard Lindley/Nikhil Varghese

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 2024, another successful year for the business and our ninth consecutive year of revenue growth since IPO in 2015. Group revenue increased by 6.0% to £172.5m (FY23: £162.7m) and we generated underlying profit before tax of £23.0m (FY23: £25.1m) after reinstating the payment of employee bonuses this year of £4.5m (FY23: £Nil). These results have been delivered against the unwelcome backdrop of challenging trading conditions for professional service firms allied to wage and cost inflation. The Group has again demonstrated the strength of its business model and the resilience created by its diversification strategy. 

 

In FY23 we made the difficult decision not to make a provision for staff bonuses for that year. For a business such as ours, where staff retention and incentivisation are important considerations, this was not ideal.  I am therefore delighted that, this year, we have been able to declare a bonus which reflects the contribution made by our people to delivering a strong underlying trading performance and our more positive outlook as we enter FY25. In doing so, we are moving back towards a more normalised staff bonus pool with clear intent that this remains a key component in overall reward to our employees whilst preserving a balanced return to all of our stakeholders.  I would like to take this opportunity, on behalf of the board, to acknowledge and thank our staff across all levels of the Group. They have shown great adaptability to the constant changes throughout the past few years and their dedication towards the business, their colleagues and clients has been first class in what was a challenging year.

 

We continue our strategy to diversify the business, placing the Group in a stronger position to deliver further profitable growth in the coming years. To support our acquisition strategy, we retain a three-year revolving credit facility of up to £30m. This, combined with our strong balance sheet, places us in a good position to acquire further businesses in the future.

 

As we continue to grow and strengthen our business, the board remains committed to providing our people with the opportunity to own shares in the Company. We believe that employee share ownership secures a strong alignment with the Group's external shareholders, incentivises employees and is reflective of Gateley's long-established culture.  We are delighted that at least 70% of current staff are existing share or option holders in the Company.

 

The board firmly believes that the use of equity as an incentive and means of extending share ownership through all levels of the Group, is a material point of positive differentiation for Gateley in an intensely competitive staffing environment. It is therefore an important component for our future growth ambitions. In particular, we have worked hard over the last 12 months to enhance our restricted share award scheme, principally to facilitate recirculation of internally held shares. This is our main equity incentive scheme for senior leaders in the Group. Our enhancements present an efficient means of maintaining significant equity at senior levels in the Group whilst minimising external market impacts. We believe this will help secure and enhance Gateley's position as an attractive and sought after employer.


Responsible Business

 

The board has made the further development of Gateley's Responsible Business commitment a key strategic priority this year.

 

In September 2023, we published our third annual Responsible Business report, for which we again received significant positive feedback. We were delighted to achieve all 15 of our internally set responsible business targets and are focused on reducing our CO2 emissions by 50% by 2030 and to become net zero by 2040.

 

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

 

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

 

We will publish our next Responsible Business Report covering objectives and activity for FY24 shortly.

 

Board changes

 

David Wilton was appointed to the board as a non-executive director and Chairman designate on 1 February 2024. The board and David subsequently agreed not to continue with David's appointment as Chairman and David has since stood down from the board.

 

The nomination committee has begun a process to recruit a new Chairman. In the meantime, I have been asked, and have agreed, to continue to chair the Group until a successor is appointed.

 

Dividends

 

We have maintained dividend to investors, recognising this is a key component of shareholder return.  An interim dividend of 3.3p per share (FY23: 3.3p) was paid on 21 March 2024 to shareholders on the register at the close of business on 24 February 2024. The board is pleased to propose a final dividend of 6.2p per share (FY23: 6.2p), giving a total dividend for the year of 9.5p per share (FY23: 9.5p), subject to approval at the forthcoming Annual General Meeting, which will be held on 23 September 2024. If approved, this final dividend will be paid in October to shareholders on the register at the close of business on 11 October 2024.  The shares will go ex-dividend on 10 October 2024.

 

Summary and outlook

 

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

 

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

 

Nigel Payne

Chairman

16 July 2024


 

CHIEF EXECUTIVE OFFICER'S REVIEW

 

Introduction

 

I am pleased with the Group's performance in FY24.  Our teams combined to maintain Gateley's unbroken record of year-on-year revenue growth.  As always, I am grateful to our people for their hard work and commitment to delivering the best possible outcomes for our clients. 

 

During the Period we continued to invest in people and systems to progress our strategy of building a diverse and resilient professional services business, delivered through each of our four Platforms of Business Services, Corporate, People and Property.  This investment necessarily includes the need to match prevailing remuneration in a market in which there has been high pay inflation across professional services.  Combined with the increase in our average headcount to 1,536 during the Period (FY23:1,439), this resulted in a 12.1% increase in personnel costs, including a resumption of staff bonus awards (£4.5m). This reflects the contribution made by our people in delivering a strong underlying trading performance and our more positive outlook as we move into FY25. In doing so, we are moving back towards a more normalised staff bonus pool with clear intent that this remains a key component in overall reward to our employees whilst preserving a balanced return to all of our stakeholders. Excluding this bonus provision, our personnel costs increased 7.4%.

 

Our ongoing M&A strategy saw us acquire RJA Consultants onto our Property Platform in July 2023, contributing to growth in non-legal revenue across the Group to £49.9m (FY23: £41.8m), or 28.9% (FY23: 25.7%) of Group revenue.  Our proposition remains unique; the ability to deliver complementary legal and consultancy services to clients in our chosen markets.  We continue to appraise acquisition opportunities on each of our Platforms. Whilst investment costs to some extent impact short-term margin as acquisition, integration and system costs are absorbed, we are confident that, in progressing our strategy, we will generate margin-enhancing returns in the long term.

 

As reported in April, we were pleased to support our EBT in purchasing 1,864,622 shares at £1.26, predominately from staff who were Partners at IPO. Those shares are warehoused by the EBT to, imminently, award to certain senior staff via our restricted share award scheme.  This is a deliberate step in our controlled, non-dilutive recirculation of internally held shares. Our restricted share award scheme will become our sole equity incentive scheme for our senior leaders. We will continue to make controlled use of it, in a more meaningful way, because it is proving to be a valuable differentiator for us in attracting and retaining quality senior talent who are aligned with creating long-term value for the Group and its stakeholders. 

 

On 15 September 2023, we published our third annual Responsible Business Report.  Having achieved all 15 responsible business targets set in our prior report, our 2023/24 report, sets 15 new objectives in-line with our purpose-led agenda.  We have a clear recognition that business is a key engine for change and our responsible business journey progresses with conviction. Our FY24 Responsible Business Report will be published shortly.

 

Finally, we are pleased to propose a final dividend of 6.2p at the Group's AGM on 23 September 2024, taking the total dividend for the Period to 9.5p (FY23: 9.5p).



 

Results overview

 

The Group performed well during FY24, building on the progress reported at the half year and delivering growth in revenue of 6.0% to £172.5m (FY23: £162.7m).  Underlying profit before tax decreased by 8.1% to £23.0m (FY23: £25.1m), reflecting the board's decision, unlike last year, to make a provision of £4.5m for employee bonuses.  Profit before tax decreased by 13.9% to £14.0m (FY23: £16.2m).  Profit after tax decreased by 17.7% to £10.0m (FY23: £12.2m).

 

As a people business, our profit metrics are necessarily influenced by our personnel costs.  Pay inflation across professional services of the type in the Group has been a continuous characteristic since the end of the pandemic. Our response has been a considered and deliberate attempt to balance the wider capital allocation needs of the Group with the competitive employment market in which our businesses operate.  We take reasonable steps to match market pay rates as we continue to invest more widely in people and systems in line with our strategy to grow our currently unique business model.  Our firm belief is that it is continual investment which will deliver and enhance our long-term objectives and returns. 

 

Alongside the in-Period acquisition of RJA Consultants, strategic investments in new work streams, such as legal services class actions and international arbitration, are progressing well.  We have also invested in AI and other new technology products, with ongoing capital allocation to maximise its use for margin improvement.  Alongside all of this and more general cost inflation, our FY24 results delivered another year of solid profitability.

 

Once again, our outturn for the Period was underpinned by the range and quality of legal and consultancy services offered through our Platforms.  Our stated strategic plan at IPO was to create resilience by diversifying our revenue streams.  Nine years and 14 acquisitions later, the diversity of services we can offer helped us weather the impact of reduced transactional services activity throughout most of the Period, enabling us to maintain our unbroken record of year-on-year revenue growth. 

 

Looking forward, we are pleased to see a continuation of the improvement we saw in transactional services activity in Q4 FY24.  Layering that improvement onto our broader service line activity and strategic long-term investments made in the Period positions us well for FY25 and beyond. 

 

Platform performance

 

Business Services Platform

 

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

 

Revenue on this Platform grew by 14.0% to £24.9m, underpinned by consistently good activity throughout the Period across the Platform's legal services dispute resolution teams, allied to strong performance from the Platform's patent and trademark attorney businesses. 

 

In legal services, our regulatory and business defence team had a record year, which is reflective of clients' needs for specialist advice in an increasingly regulated environment across all sectors.  In addition, the dispute resolution teams saw an increase in demand from both UK and overseas clients.  Projects from overseas clients include a return of some activity in Central Europe alongside new mandates from clients in the Middle East and Africa.  These are representative of new, strategically agile, steps to win specialist work in new regions. 

 

Buoyed by recent success in growing dispute resolution services, we continue to make strategic investment in specialist service lines, predominantly in competition litigation, class actions and international arbitration where, in all cases, we see huge opportunity.   Our recently recruited and highly regarded senior experts in international arbitration are winning new work and forging strong credentials for us.  Alongside this, our recently formed specialist class action team has now launched its first case. 

 

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

 

In aggregate, consultancy revenue now represents 26.0% (FY23: 22.9%) of Business Services Platform revenue.

 

Corporate Platform

 

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

 

Currently, this Platform is dominated by legal services, some of which were challenged by lower volumes of transactional activity during most of FY24. As a result, the Platform's revenue decreased by 4.4% to £37.1m.  However, it delivered a strong contribution margin. 

 

It is likely that the Corporate Platform will always be legal services dominated, with the transactional teams on the Platform drawing support, particular to each transaction, from legal and consultancy services on other Platforms.

 

Whilst constrained for most of FY24, corporate transactional activity started to return strongly in Q4, particularly with our private equity clients and in wider M&A.  The corporate team generated a pipeline in that period comprising an impressive list of complex, high-value transactions across a wide range of sectors, which utilised additional legal and consultancy services across the Group.  Ultimately, the team had another good year and the corporate unit remains our biggest internal referrer of business, with most, if not all, other teams benefitting in some way.  The pipeline into FY25 is good. 

 

This pattern is also reflected in our banking team, which had a stronger Q4 following a subdued period due to reduced corporate transactions and bank lending. There was some offset in the form of an increase in loan covenant reset and refinancing work, which enabled the team to maintain revenue levels in Period in line with FY23.  This is an excellent example of pro and counter-cyclical revenue opportunities which exist in almost all of our legal service lines.

 

Our restructuring and recovery teams are a natural counterweight to traditional transactional activity and following a sustained period of quiet trading conditions for some years now, revenue levels rose by 20.8% in FY24, as government pandemic support for companies unwound and inflationary pressures and interest rate increases impacted UK businesses.  Activity remains strong in these teams.  Mandates have been generated both in-market and internally, including working alongside experts in Gateley Vinden and our legal services construction unit in delivery of market-leading services to insurers who have bonded construction projects that have become distressed.

 

In consultancy services, the team at Gateley Global closed out a significant contract providing services to help public and private sector global clients realise their international expansion plans, inward and outward of the UK.  In addition, the team is a consistent cross-referrer of revenue to other parts of the Group as clients require mixed services to implement expansion.

 

People Platform

 

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

 

Revenue on this Platform contracted by 4.3% due, in part, to a reduction in headcount and reorganisation of our legal services private client team and a drop-off in required support to transactional teams from our legal services employment team.

 

We saw strong off-set to the above from our legal services pension team and our pension trustee business Entrust which, together, grew revenue by 30.7%.  These relatively predictable revenue streams are a further example of deliberately designed resilience in our model.  This is a sector where we are keen to make further investment to service the increase in the number of pension schemes looking to complete all liability buy-outs, and/or out-source management of their pension schemes, working with Entrust.

 

t-three and Kiddy & Partners, our talent assessment, development and cultural change businesses, continue to attract significantly sized clients buying dual services, with particular focus on scalable products to high growth clients.  They were pleased to maintain revenue at £6.0m (FY23: £6.2m) alongside a strong pipeline as organisations continue to develop their people and/or transform in some way.

 

In aggregate, consultancy revenue now represents 30.8% of People Platform revenue.

 

Property Platform

 

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

 

This remains our most diverse and mature Platform and we maintain our view that the range of expertise now housed on this Platform puts us in position to compete with well-established, multi-disciplinary property consultancies in the wider market.  Despite a very challenging back drop for the property sector, revenue on our Property Platform grew by 11.4% to £91.0m during FY24 (FY23: £81.6m). 

 

Whilst activity in the wider commercial property market eased in FY23 (and continued to be subdued throughout most of FY24), we saw and continue to see an increase in non-transactional advisory and dispute resolution services.  This includes helping our wide range of residential development clients navigate regulation under the high-profile Building Safety Act (post-Grenfell) and advising on related remediation projects.  This is long-dated, specialist work in which we continue to invest. Our construction team had a record year and continues to be very busy. Our real estate development team - a market leader in the warehousing and logistics sector had a slower start to the year before returning strongly to growth.  Elsewhere, prevailing market conditions have resulted in an increase in work helping or opposing organisations seeking to exit commercially onerous contracts.

 

In our market-leading house-builder team, we continue to act for all of the top developers, many of whom have significantly reduced their panel of advisors in favour of larger providers who cover all bases, which describes Gateley both geographically and in service lines, and this should result in more work for the team.  Our clients need to continue to build and sell and have other areas for which they require our services.  This includes shared ownership framework agreements, bulk sales to housing associations and build-to-rent investors and housing-led urban regeneration. We act for all of the leading developers in this space and offer a unique combination of legal and consultancy services covering whole project life cycles.

 

In consultancy services, Gateley Smithers Purslow ("GSP"), who deliver specialist services to the property insurance complex claims market, contributed revenue of £17.6m (FY23: £13.7m), representing annualised growth for that business of 28.5%.  We also saw strong revenue growth of 14.7% from Gateley Vinden's broad range of specialist services. 

 

Our acquisition of surveyors Richard Julian and Associates Limited ("RJA") in July 2023 extends our reach to organisations that deliver affordable housing, a resilient sector underpinned by high levels of grant to support delivery of the Government's housing targets.  The team also has specialists in major loss property claims, which enhances related expertise in both GSP and Gateley Vinden.  RJA has had an excellent start in Group, exceeding expectation.

 

FY24 consultancy revenue represented 40.5% (FY23: 38.1%) of Property Platform revenue.

 

Operational review

 

Our operational focus has been aimed at current and future efficiency. 

 

AI is at the top of our agenda and is a priority area for capital allocation, alongside investment in acquisitions and people. We are very aware that investment in suitably developed product will positively enhance the delivery of some of our services and realise efficiencies which help us improve our profitability. We have a cross-disciplinary steering group reporting directly to the board on product assessment, procurement and integration. Our investment in-Period included recruitment of a specialist in-house AI development team to create bespoke applications for both service delivery and internal uses. Our development program will provide applications for use on each of our client-facing Platforms and for our business support functions. The first of our internally designed applications has just been launched for use by the residential development team on our Property Platform. It significantly improves turnaround of the process that it is designed for and is verificatory of the value of the ongoing investment that we will continue to make in AI driven product. 

 

In Period, we acquired new systems to support the on-boarding of a legal services team to run class action claims.  This is specialist, long-term, high value work which requires a bespoke technology platform, in which we have invested £0.5m so far for current and future benefit.

 

We have previously reported planned rationalisation of some of our office space.  This is an on-going exercise, including the post-Period surrender of our lease for office space in Leicester as part of consolidation of some of our teams in the East Midlands to our Nottingham office. 

 

On-going integration of recently acquired businesses is proceeding as planned, including positive enhancements to our Group integration processes.  In parallel, phase two of adoption of our new, market-leading business management, productivity, and financial management system (3E) is proceeding throughout FY24 and into FY25.

 

People and Culture

 

Attracting, developing and motivating talent, at all levels across the Group, is a key objective every year. In FY24, overall average headcount in the Group increased by 6.7% to 1,536 (FY23: 1,439). Legal services average headcount growth was 1.2% to 1091 employees (FY23: 1,078). Average consultancy headcount increased by 25.4% to 445 (FY23: 355), primarily as a result of acquisitions and investment in GSP.

 

The Gateley offering remains differentiated and our broad range of career opportunities is attractive.  We continue to evolve our people strategies to drive a stimulating, purposeful and rewarding environment in which our people can progress their careers. We recently announced a total of 159 internal promotions and celebrated these across the Group. 

 

The ability for all of our people to participate in share ownership is attractive and represents a recruitment differentiator. During FY24 we issued circa 3.4m shares to participants across our various share schemes. All of this is in line with our strategy of creating wider equity participation for more of our people.  Currently circa 70% of our people either hold shares or participate in share schemes.

 

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

 

Responsible Business

 

Being a Responsible Business remains an integral part of our Purpose Statement;

 

"Our purpose is to deliver results that delight our clients, inspire our people and support our communities." 

 

We were pleased to achieve all 15 of our internally-set responsible business targets in 2022/2023 and, in-Period, we published our third annual Responsible Business Report outlining actions taken and setting targets for 2023/2024. Our next report will be published imminently.

 

Highlights from the last report include:

 

·

A carbon reduction plan including a commitment to achieve net zero emissions by 2040, with interim targets set by 2030;

·

A new strategic partnership with Alzheimer's Research UK; and

·

The launch of an internal volunteering policy which provides opportunities for our people to volunteer with the charity, sustainability and education partners we work with.

 

We are proud of the progress that we have made since publishing our Responsible Business Strategy in October 2021.  We will continue to evaluate where we are effecting change and how we can improve and progress over time.  Our journey continues with conviction.

 

Current trading and outlook

 

Looking forward, we are encouraged by strengthening levels of activity across our transactional services teams, which began during the Spring.  This is matched by improving pipelines for those teams.  Alongside this, we continue to see good non-transactional and consultancy business activity. Therefore, our immediate outlook is cautiously optimistic at the beginning of a new political dawn for the UK. 

 

From a long-term perspective, we remain positive as our increasingly resilient model continues to deliver for us and gives us confidence to continue our investment strategy for enhanced returns. 

 

The group enters FY25 with positive mindset and belief in strategy. 

 

Rod Waldie

Chief Executive Officer

16 July 2024


 

CHIEF FINANCIAL OFFICER'S REVIEW

 

Financial overview

 

The Group has again grown revenue both organically and through acquisition, despite the challenging economic backdrop of FY24 that resulted in decreasing activity levels throughout the year until Q4.

 

This year's increase in costs, driven through a combination of inflation and investment, alongside a return of bonuses, have checked our progression on both profit and margin.  Following strong activity levels in transactional areas in Q4 alongside the reorganisation of specific areas of the Group, we enter FY25 feeling confident of improving profitability in FY25.

 

Our dividend yield is 6.4% using the average share price across FY24 and, even in an environment of higher interest rates, remains at a level which we believe is attractive for all shareholders.

 

Our revolving credit facility has significant headroom and with a closing net cash position of £3.8 million we are well-placed to capitalise on current market conditions, as we have done previously, to enable further expansion and growth.

 

Revenue and activity levels

 

Group total revenue grew by 6.0% (FY23: 18.6%) to £172.5m (FY23: £162.7m), including 2.8% organically.  Revenue from core legal service lines grew organically by 0.8% (FY23: 4.9%), while organic revenue growth from consultancy businesses was 9.1% (FY23: 15.2%). Consultancy revenues of £49.9m (FY23: £41.8m) now represent 28.9% (FY23: 25.7%) of total revenue, demonstrating our strategy to build and diversify into a broader professional services group, and further enhance our unique offering to clients.

 

Fee earner utilisation levels during FY24 returned to FY22 levels at 83%, after FY23's increase to 89%.  Alongside a static conversion of time into fees, this has contributed to the Group's decrease in profitability. Activity in Q4 of FY24 was 92% compared to an average of 81% in the first three quarters.  This Q4 FY24 utilisation average was 1% higher than Q4 in FY23.  We fully expect this improvement to continue as we experience increased instructions from new areas of investments and transactional activity continuing to build ahead of the recent UK general elections.

 

During this period of reduced activity levels, a number of key areas of the Group have been unable to pass on the recent market-driven staff cost increases of the last few years, whilst lead generation has remained extremely competitive.  As activity levels improve and the mix of work changes towards recent new areas of investment, we are starting to see rate increases work through into improved recoveries. 

 

However, activity in a number of our consultancy businesses is driven by alternative factors. Gateley Smithers Purslow ("GSP") and Gateley RJA are examples of two such areas of the Group that have seen activity increase significantly as a result of the rise in adverse economic climate change and government policy in social/affordable housing, respectively.  Both businesses have experienced impressive organic growth since joining the Group of 28.3% and 26.0% respectively.

 

Costs and margins

 

The bridge in personnel costs from £96.8m in FY23 to £108.5m in FY24 of £11.7m arises due to a £4.5m bonus, growth in head count and wage inflation of £4.4m, £2.4m of new payroll costs following the July 2023 acquisition of RJA and £0.4m of full year Symbiosis costs acquired in October 2022, both of which were covered by revenue introduced.  Average staff headcount has increased by 6.7% from 1,439 to 1,536 total staff.  Average professional staff within this period have increased by 6.8% from 1,000 to 1,068.

 

Personnel costs (before bonus) to revenue in FY24 increased to 60.3% (FY23: 59.5%) which rises to 62.9%, as a result of the Group awarding £4.5m of bonuses for exceptional performers during FY24. We continue to sensibly manage this key metric as market conditions improve.  The reinstatement of a bonus and the increase in investment income from trade related interest have both impacted our adjusted profit before tax margin this year, which has decreased to 13.4% (FY23: 15.4%).  The bonus reinstatement has reduced margin by 2.6%, whilst the additional £2.7m of net interest income has increased this margin by 1.6%.

 

Operating expenses have increased by £2.7m or 7.6% to £38.8m (FY23: £36.1m) due mainly to the investment in new IT systems (£0.5m) supporting new areas of work such as Class Actions, and the additional cost of the acquisition of RJA (£0.6m).  Overall, operating overheads have increased slightly as a percentage of revenue from 22.2% in FY23 to 22.5% in FY24 as predicted.

 

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

 


Business

Services

£m

Corporate

£m

People

£m

Property

£m

Total

£m

FY24






Revenue

24.9

37.0

19.6

91.0

172.5

Segmental contribution

7.5

14.0

5.8

33.2

60.5

Contribution margin

30.2%

37.7%

29.5%

36.5%

35.1%







FY23






Revenue

21.8

38.8

20.4

81.7

162.7

Segmental contribution

5.3

13.9

6.0

31.1

56.3

Contribution margin

24.4%

36.0%

29.3%

38.1%

34.6%







Revenue movement (%)

14.0%

(4.4%)

(4.3%)

11.4%

6.0%

Contribution margin change (%)

23.8%

4.7%

0.1%

(4.2%)

1.4%

 

Underlying operating profit before tax

 

The Group has recorded £20.3m of underlying operating profit before tax (FY23: £25.0m).  Whilst we have continued to strategically invest across the business in our legal and consultancy teams, a particular focus has been on headcount investment in GSP to meet significant demand. The reinstatement of a Group bonus (£4.5m) is the key difference between the two years.  

 

Our underlying trading margins have decreased to 11.7% (FY23: 15.4%) as a factor of continued investment for growth and ongoing inflationary pressure in our people costs despite decreased levels of activity in certain parts of the Group due to macro-economic factors. Nevertheless, we are confident that our strategy of ongoing investment made by us will result in short term margin stability followed by long term improvement.

 

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

 


 


Extract of UK statement of comprehensive income

2024

2023


£'000

£'000


 


Revenue

172,492

162,683

Operating profit

11,177

16,122

Operating profit margin (%)

6.48

9.91


 


Reconciliation to alternative performance measure: underlying operating profit before tax

 

 


Operating profit

11,177

16,122


 


Non-underlying items

 


Amortisation of acquisition related intangible assets

2,483

2,073

Share based payment charge - Gateley Plc

1,625

1,984

Share based payment charge - Gateley RJA Limited

61

-

Contingent consideration treated as remuneration

6,956

6,190

Gain on bargain purchase

(3,609)

(1,389)


 


Acquisitions costs

37

-

One off remuneration charge - Gateley RJA Limited

367

-

Reorganisation costs

1,159



 


Underlying operating profit before tax

20,256

24,980


 


Adjusted underlying operating profit margin (%)

11.74

15.36

 

Earnings Per Share (EPS)

 

Basic EPS decreased by 20.8% to 7.74p (FY23: 49.5% to 9.77p).  Basic EPS before non-underlying and exceptional items decreased by 13.7% to 14.42p (FY23: increased by 12.1% to 16.71p). Diluted EPS decreased by 19.9% to 7.63p (FY23: increased by 49.6% to 9.52p).  Diluted EPS before non-underlying and exceptional items decreased by 12.8% to 14.20p (FY23: increased by 12.0% to 16.28p).

 

Share option schemes

 

Over 70% of our people are existing share or option holders in the Group.  The board remains committed to providing its people with the opportunity to own shares in the Company primarily through the continued issuance of restricted shares awards (RSAs) across senior leaders within the Group and our Save As You Earn ("SAYE") all staff share scheme. Such share ownership promotes strong alignment with the Group's external shareholders, improves our attraction to like-minded recruits and is reflective of Gateley's culture of long-term ownership.  The RSAs, which vest on receipt, are subject to a five-year non-dealing restriction and are forfeited should employment cease within that period. 

 

On 14 September 2023, Long-Term Incentive Plan awards ("LTIP") over 727,790 Ordinary Shares vested and were exercised on 21 September 2023 by 77 partners and PDMR's following the conclusion of LTIP awards vested at the end of a three-year period, with vesting and exercise dependent upon the achievement of profit related performance conditions and continuous employment.  Profit performance during the conditional period resulted in 68% of the total award being made.

 

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

 

 

2024

2023

2022

2021

 

£'000

£'000

£'000

£'000

Reported profit after tax

10,074

12,240

23,023

13,157

Adjustments for non-underlying and exceptional items:

 




- Amortisation of acquired intangible assets

2,483

2,073

1,581

2,073

- Share-based payment adjustments

1,686

1,984

1,213

956

- Consideration treated as remuneration

6,956

6,190

3,509

-

- Gain on bargain purchase

(3,609)

(1,389)

(12,380)


- Reorganisation costs

1,159

-

-

-

-One off remuneration costs

367




- Acquisition-related costs

37

-

870

-

- Tax impact of above

(391)

(168)

(94)

-

Underlying profit after tax

18,762

20,930

17,722

16,186


 




 

Weighted average number of ordinary shares for calculating diluted earnings per share

132,107,953

128,527,341

121,893,238

118,508,833

 

Underlying adjusted fully diluted EPS

14.20p

16.28p

 

14.54p

 

13.66p

 

Taxation

 

The Group's tax charge for the Period was £3.9m (FY23: £4.0m) which comprised a corporation tax charge of £4.4m (FY23: £5.0m) and a deferred tax credit of £0.5m (FY23: credit of £1.0m).

 

The deferred tax charge arises due to a combination of credits in respect of the share schemes that have vested in past years and the release of deferred tax on brands.  The total effective rate of tax is 27.8% (FY23: 24.5%) based on reported profits before tax.  The increase in the effective rate of tax is as a result of the increase in UK corporation tax rates and change in earn-out related consideration remuneration charges and gains on bargain purchase from FY23 to FY24, the net effect of which is not allowable for corporation tax purposes.

 

The net deferred taxation liability has increased to £2.6m (FY23: £2.1m) as a result of the decreased deferred tax asset recognised on share-based payment schemes yet to vest driven by a decrease in the Group's share price.

 

Dividend

 

The Group paid an interim dividend of 3.3p share on 21 March 2024 and proposes a final dividend at the Company's Annual General Meeting on 23 September 2024 of 6.2p (FY23: 6.2p) per share, which if approved, will be paid in October to shareholders on the register at the close of business on 11 October 2024.  The shares will go ex-dividend on 10 October 2024. 

 

Balance sheet

 

The Group's net asset position has increased by £2.2m (FY23: £3.0m) to £80.3m (FY23: £78.1m), due to the following movements:

 

There was a £17.9m increase in total current assets, resulting from £4.7m additional trade and other receivables through acquired businesses and the strong organic growth of the Group. Contract assets ("unbilled revenue") increased by £3.2m and cash at bank increased by £5.6m as improvements were made in the collection of cash during this year. 

 

Non-current assets decreased by £3.5m, resulting predominantly from a decrease of £3.5m from a change in property use and right of use asset values as no new leases were entered into during FY24 as amortisation of right of use assets were the only key movements.

 

The board has carefully considered the impact of macro-economic uncertainties, on the future forecasts used in assessing the value in use of the cash generating units to which the goodwill and intangibles relate and determined that, despite short term reductions, such forecasts are more than sufficient to justify the carrying value of goodwill.  Therefore, as at 30 April 2024, the board concluded that the goodwill and intangible assets do not require impairment.

 

Total liabilities increased by £12.3m, due to the reintroduction of accrued bonuses together with increased lending from the Group's Revolving Credit Facility following the acquisition of RJA and the payment of earn out consideration to the vendors of GSP, offset by a reduction of £3.4m in lease liabilities.

 

Cash flow

 

During the year, the Group increased its usage of its Revolving Credit Facility from £6.8m to £12.9m.  The facility provides total committed funding of £30m until April 2025 (supported by a letter of comfort for its extension to Oct 2025), split equally between Bank of Scotland and HSBC UK, that is specifically earmarked to fund growth and expansion via acquisition. Interest is payable on the loan at a margin of 1.95% above the SONIA reference rate.

 

The Group also has in place a litigation funding facility for an initial £20m of funding towards significant litigation cases, which has the ability to increase to £50m if required.  To date the Group has not yet utilised this facility but has a number of large assignments currently being assessed for consideration in FY25.

 

Cash generation remained strong with net cash inflows from operating activities increasing to £14.0m (from £9.7m in FY23) representing 138.8% (FY23: 79.6%) of profit after tax.  The Group ended the year with net cash of £3.8m (FY23: £4.3m), as less cash was consumed during the financial year on creditors together with management's sustained focus on debt collection resulting in an improvement in debtor days.

 

Adjusted free cashflow during the year from operations (after adjusting for IFRS 16 and IFRS 3 specific items noted in the table below) was £17.7m (FY23: £6.0m), which represents an increase to 175.9% (FY23: 48.6%) of profit after taxation ("PAT") and an increase to 92.5% (FY23: 28.2%) of underlying PAT due to improved operational cash collection, significant increases in interest income and the adjustments from acquisition related activity this year being more significant.

 

 

2024

2023

 

£'000

£'000

 

 


Net cash generated from operations

18,887

14,065


 


Tax paid

(4,902)

(4,320)

Net interest received

4,043

1,364

Cash outflow from IFRS 16 leases (rental payments excluded from operating cash flows under IFRS 16)

(5,091)

(4,579)

Add back: Cash outflow paid on acquisitions treated as operating activity

5,825

1,518

Purchase of property, plant and equipment

(1,045)

(1,312)

Purchase of other intangible assets

-

(787)

Free cash flow

17,717

5,949


 


Profit after tax

10,074

12,240

 

 


Free cash flow

175.9%

48.6%

 

 

Adjusted free cash flow

2024

2023

 

£'000

£'000

 

 


Profit after tax

10,074

12,240

Non-underlying operating items

7,516

8,858

Exceptional items

1,563

-

Underlying profit after tax

19,153

21,098

 

 


Free cash flow

92.5%

28.2%

 

Overall, working capital levels have increased on the previous year, as unbilled revenue represented 61 days of pro-forma net revenue compared to 53 days last year, and Group debtor days have decreased to 111 days of pro-forma net revenue from 113 days last year, which includes revenue from acquisitions on a full year pro-forma basis.  I am pleased we have made good progress in debt collection with a strong finish to the year that resulted in a pleasing net cash position.  We have made a good start to collections in FY25.  Unbilled revenue recognised in the Group's statutory accounts, from time recorded on non-contingent work, remains low as a percentage of revenue and totalled just £23.5m or 13.6% of revenue recognised over the year (FY23: £20.4m or 12.5%).

 

Summary

 

FY24 continued our unbroken record of revenue growth since IPO in 2015.  Our recent acquisitions have settled into the Group well and activity levels that were subdued at the start of the Period, recovered strongly in Q4 and into FY25.  There is no doubt that reduced activity at a time of continued inflation has remained a challenge to our trading margin but I am pleased to return a bonus to staff for exceptional performance this year alongside £23.0m of underlying profit before tax and a 9.5p dividend to shareholders. 

 

We remain confident that the investments we have made, alongside an improving market, will support our medium to longer-term growth strategy and a margin improvement.  We have maintained rigid control of costs and improved our working capital position that supports the Group's growth ambitions and its healthy net cash position within a strong balance sheet with significant bank facility headroom. 

 

Share ownership rewards for our staff continue to play a significant part in our vision of wider, long-term connectivity across the Group and will deliver a significant opportunity to all staff in FY25 and beyond.

 

Neil Smith

Chief Financial Officer

16 July 2024


 

CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME

for the year ended 30 April 2024

 


 

Note

 

2024

 

2023


 

 £'000

    £'000


 

 


Revenue

3

172,492

162,683



 


Other operating income


153

49

Personnel costs, excluding IFRS 2 charge

5

(108,490)

(96,765)

Depreciation - Property, plant and equipment

11

(1,140)

(936)

Depreciation - Right-of-use asset

11

(3,949)

(3,976)

Impairment of trade receivables and contract assets


(591)

(1,334)

Other operating expenses, excluding non-underlying and exceptional items


(38,219)

(34,741)



 


Operating profit before non-underlying and exceptional items

4

20,256

24,980



 


Non-underlying operating items

4

(7,516)

(8,858)

Exceptional items

4

(1,563)

-



(9,079)

(8,858)

 

Operating profit

 

4

11,177

 

16,122



 


Financial income

7

4,999

1,735

Financial expense

7

(2,221)

(1,645)

 


 


Profit before tax


13,955

16,212



 


Taxation

8

(3,881)

(3,972)

 


 


Profit for the year after tax attributable to equity holders of the parent


10,074

12,240

 


 


Other comprehensive income


 


Items that are or may be reclassified subsequently to profit or loss


 


   - Revaluation of other investments


129

(26)

- Exchange differences on translation of a foreign branch


(20)

(49)

Profit for the financial year and total comprehensive income all attributable to equity holders of the parent


10,183

12,165

Statutory Earnings per share

 


 


Basic

9

7.74p

9.77p

Diluted

9

7.63p

9.52p

 

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



CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 APRIL 2024

 

 

Note

 

 

2024  

£'000

 

2023  

£'000

Non-current assets


 



Property, plant and equipment

11

 

1,583

1,628

Right of use asset

11

 

23,621

27,098

Investment property


 

164

164

Deferred tax asset

19

 

373

830

Intangible assets & goodwill

12

 

13,768

12,929

Other intangible assets

14

 

647

1,090

Other investments


 

275

147



 

40,431

43,886

Total non-current assets


 



Current assets


 



Contract assets

15

 

23,543

20,388

Trade and other receivables

16

 

82,473

73,272

Cash and cash equivalents

21

 

16,674

11,105



 



Total current assets


 

122,690

104,765

 


 



Total assets


 

163,121

148,651



 



Non-current liabilities


 



Other interest-bearing loans and borrowings

17

 

-

(6,813)

Lease liability

23

 

(24,178)

(28,716)

Other payables

18

 

-

-

Deferred tax liability

19

 

(2,968)

(2,941)

Provisions

20

 

(3,725)

(1,290)

 


 



Total non-current liabilities


 

(30,871)

(39,760)

 


 



Current liabilities


 



Other interest-bearing loans and borrowings

17

 

(12,908)

-

Trade and other payables

18

 

(33,112)

(25,933)

Lease liability

23

 

(4,346)

(3,257)

Provisions

20

 

(175)

(107)

Current tax liabilities


 

(1,378)

(1,482)

 


 



Total current liabilities


 

(51,919)

(30,779)

 


 



Total liabilities


 

(82,790)

(70,539)

 


 



NET ASSETS


 

80,331

78,112

 


 



EQUITY


 





 



 Share capital

22

 

13,304

12,664

 Share premium


 

35

11,846

 Merger reserve


 

(9,950)

(9,950)

 Other reserve


 

19,383

15,413

 Treasury reserve

 

 

(4,012)

(677)

 Translation reserve

 

 

(71)

(51)

 Retained earnings


 

61,642

48,867

TOTAL EQUITY


 

80,331

78,112


 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

 


Share

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 2022

12,456

11,342

(9,950)

14,465

(261)

47,088

(2)

75,138

 

Comprehensive income:









Profit for the year

-

-

-

-

-

12,240

-

12,240

Revaluation of other investments

-

-

-

-

-

(26)

-

(26)

Exchange rate differences

-

-

-

-

-

-

(49)

(49)

Total comprehensive income

-

-

-

-

-

12,214

(49)

12,165

 

Transactions with owners

recognised directly in equity:









Issue of share capital

208

504

-

948

-

-

-

1,660

Purchase of own shares at nominal value

-

-

-

-

-

(133)

-

(133)

Sale of treasury shares

-

-

-

-

20

-

-

20

Purchase of treasury shares

-

-

-

-

(436)

-

-

(436)

Recognition of tax benefit on gain from equity settled share options

-

-

-

-

-

(398)

-

(398)

Dividend paid

-

-

-

-

-

(11,004)

-

(11,004)

Share based payment transactions

-

-

-

-

-

1,100

-

1,100

Total equity at 30 April 2023

12,664

11,846

(9,950)

15,413

(677)

48,867

(51)

78,112

At 1 May 2023

12,664

11,846

(9,950)

15,413

(677)

48,867

(51)

78,112

 

Comprehensive income:









Profit for the year

-

-

-

-

-

10,074

-

10,074

Revaluation of other investments

-

-

-

-

-

129

-

129

Exchange rate differences

-

-

-

-

-


(20)

(20)

Total comprehensive income

-

-

-

-

-

10,203

(20)

10,183

 

Transactions with owners

recognised directly in equity:









Issue of share capital

640

1,919

-

3,970

-

-


6,529

Cancellation of share premium account

-

(13,730)

-

-

-

13,730

-

-

Purchase of own shares at nominal value






(166)

-

(166)

Sale of treasury shares

-

-

-

-

4

-

-

4

Purchase of treasury shares

-

-

-

-

(3,339)

-

-

(3,339)

Recognition of tax benefit on gain from equity settled share options

-

-

-

-

-

(343)

-

(343)

Dividend paid

-

-

-

-

-

(12,335)

-

(12,335)

Share based payment transactions

-

-

-

-

-

1,686

-

1,686










Total equity at 30 April 2024

13,304

35

(9,950)

19,383

(4,012)

61,642

(71)

80,331

 

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

 

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

 

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

 

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

 

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

 

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

 

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


 

CONSOLIDATED CASH FLOW STATEMENT FOR YEAR ENDED 30 APRIL 2024

 


Note

 

2024

 

2023


 

£'000

£'000

Cash flows from operating activities


 


Profit for the year after tax


10,074

12,240

Adjustments for:


 


Depreciation and amortisation

11/12/14

8,015

7,246

Financial income

7

(4,999)

(1,735)

Financial expense

7

1,051

495

Interest charge on capitalised leases

7

1,170

1,150

Equity settled share-based payments

6

1,686

1,100

Gain on bargain purchase

4

(3,609)

(1,389)

Acquisition related earn-out remuneration charge

4

6,956

6,190

Earn-out consideration paid - acquisition of subsidiary


(3,790)

(50)

Initial consideration paid on acquisitions


(2,035)

(1,468)

Loss on disposal of property, plant and equipment

4

-

82

Tax expense

8

3,881

3,972



18,400

27,833

Increase in trade and other receivables


(10,658)

(6,942)

Increase/(decrease) in trade and other payables


8,642

(7,259)

Increase in provisions

20

2,503

433

Cash generated from operations


18,887

14,065

Tax paid


(4,902)

(4,320)

Net cash flows from operating activities


13,985

9,745

Investing activities


 


Acquisition of property, plant and equipment

11

(1,045)

(1,312)

Acquisition of other intangible assets

14

-

(787)

Cash acquired on business combinations


1,239

483

Interest received

7

4,999

1,735



 


Net cash generated from investing activities


5,193

119

Financing activities


 


 


 


Interest and other financial income paid

7

(956)

(371)

Lease repayments


(5,091)

(4,550)

Receipt of new revolving credit facility

21

6,000

1,000

Proceeds from sale of own shares


4

-

Acquisition of own shares by Employee Benefit Trust


(3,339)

(416)

Cash received for shares issued on exercise of SAYE/CSOP options


2,108

477

Dividends paid

10

(12,335)

(11,004)



 


Net cash used in financing activities


(13,609)

(14,864)

Net increase/(decrease) in cash and cash equivalents


5,569

(5,000)

Cash and cash equivalents at beginning of year


11,105

16,105

    Cash and cash equivalents at end of year

21

16,674

11,105


 

NOTES TO THE FINANCIAL STATEMENTS

 

1. Basis of preparation and significant accounting policies

 

The financial information set out in this financial results announcement does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The consolidated statement of comprehensive profit and loss and other comprehensive income, consolidated statement of financial position, consolidated statement of change in equity, consolidated statement of cashflows and the associated notes have been extracted from the Group's financial statements for the year ended 30 April 2024, upon which the auditor's opinion is unqualified and does not include any statement under section 498 of the Companies Act 2006. The statutory accounts for the year ended 30 April 2024 will be delivered to the Registrar of Companies following the Annual General Meeting.

 

These condensed preliminary financial statements for the year ended 30 April 2024 have been prepared on the basis of the accounting policies as set out in the 2024 financial statements.

 

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards, this announcement does not itself contain sufficient information to comply with those standards. The Group expects to publish full financial statements that comply with International Financial Reporting Standards in September 2024.

 

1.1 Statement of Directors responsibilities

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

 

1.2 Cautionary statement

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

 

2. Going concern

Having reviewed the Group's forecasts, which includes an analysis of both short term cash flow forecasts and longer term cash flow forecasts, the risk and uncertainties surrounding the current and future demand for legal services, and other reasonably possible variations in trading performance, mitigating actions available to management the Group expects to be able to operate within the Group's financing facilities.

 

The Group's revolving credit facility expires in April 2025 however, discussions are underway with the Group's banks to provide a new facility, with terms anticipated to be agreed well ahead of expiry of the current facility. Furthermore, the Group's supportive banks have provided a comfort letter that expresses their willingness to extend the current facility to October 2025, should it be required.

 

Sensitivity analysis has been performed in respect of specific scenarios which could negatively impact our future performance such as lower levels of revenue growth, lower than forecast receipts of cash, and reduced levels of gross margin expansion. In addition, the Directors have also considered further mitigating actions such as lower capital expenditure and other short-term cash management activities within the Group's control. On this basis, the Directors have a reasonable basis to conclude that the Group is forecast to continue to trade in line with existing financing facilities for the foreseeable future and at least 12 months from the approval of these financial statements.

 

Accordingly, the Directors continue to adopt the going concern basis of accounting in preparing the financial statements.

 

3. Revenue and operating segments

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

 

The following summary describes the operations of each reportable segment as reported up to 30 April 2024:

 

Reportable segment/Platforms

Legal service lines

 

Consultancy service lines

 




Corporate

Banking

Commercial

Corporate

Restructuring advisory

Taxation

GEG Services

International Investment Services

 

Business services

Austen Hays

Commercial Dispute Resolution

Complex International litigation

IP

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

RJA

 

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



 


2024

2023


£'000

£'000


 


United Kingdom

156,760

151,489

Europe

9,016

5,459

Middle East

1,797

2,390

North and South America

2,478

1,675

Asia

1,878

1,163

Other

563

507


172,492

162,683

 

The Group has no individual customers that represent more than 10% of revenue in either the 2024 or 2023 financial year. The Group's assets and costs are predominately located in the UK save for those assets and costs located in the United Arab Emirates (UAE) via its Dubai subsidiary.  Net Group assets of £0.09m (2023: Net Group assets of £0.08m) are located in the Group's Dubai subsidiary.  Revenue generated by the Group's Dubai subsidiary to customers in the UAE totalled £1.80m (2023: £2.39m) as disclosed above as due from the customers in the Middle East

 

2024


Business Services

Corporate

People

Property

Total
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

5,648

15,845

7,918

18,936

48,347

-

48,347

Segment revenue from services

transferred over time

19,241

21,219

11,636

72,049

124,145

-

124,145

Total segmental revenue

24,889

37,064

19,554

90,985

172,492

-

172,492








 

Segment contribution (as reported

internally)

7,523

13,975

5,772

33,240

60,510

-

60,510

Costs not allocated to segments:







 

  Other operating income







153

  Personnel costs







(18,087)

  Depreciation and amortisation







(8,015)

Other operating expenses







(16,788)

Share based payment charges







(1,686)

Gain on bargain purchase







3,609

Contingent consideration treated as

remuneration







(6,956)

Exceptional items







(1,563)

Net financial expense







2,778

Profit for the financial year before taxation







13,955



 

2023


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

4,952

16,578

8,409

17,002

46,941

1

46,942

Segment revenue from services transferred over time

16,872

22,200

12,027

64,642

115,741

-

115,741

Total Segment revenue

21,824

38,778

20,436

81,644

162,682

1

162,683









Segment contribution (as reported

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)

Exceptional costs








Net financial expense







90

Profit for the financial year before taxation







16,212

 

Group entities may be engaged on a contingent basis; in such cases the Group considers the satisfaction of the contingent event as the sole performance obligation within the contract. Fees are only billed once the contingent event has been satisfied. The initial financing of these engagements is met by the Group. Due to the nature and timing of the billing, such engagements influence the contract asset balance held in the balance sheet at year end. In the majority of cases the contingent event is expected to be concluded within one year of the engagement date. The Group operates standard payment terms of 30 days. £11.4 million (2023: £16.4m) of the current period revenue is derived from services satisfied, in part, in the previous period.

 

Services transferred over time

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

 

Contract assets

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

 

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

 

Contract Liabilities

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

 

Practical expedients under IFRS 15

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

 

4. Expenses and auditor's remuneration

Included in operating profit are the following:


2024

2023


£'000

£'000


 


Depreciation on tangible assets (see note 11)

1,140

936

Depreciation on right-of-use asset (see notes 11 and 23)

3,949

3,976

Short term and low value lease payments (see note 23)

76

82

Operating lease costs on property (see note 23)

116

166

Loss on sale of fixed assets

-

82





 



2024

2023


£'000

£'000

Non-underlying items

 


Amortisation of acquisition related intangible assets (see note 12)

2,483

2,073

Share based payment charges - Gateley Plc

1,625

1,984

Share based payment charges - Gateley RJA Limited

61

-

Gain on bargain purchase

(3,609)

(1,389)

Consideration treated as remuneration

6,956

6,190


7,516

8,858

Exceptional items

 


Acquisition costs

37

-

One off remuneration charge - Gateley RJA Limited

367

-

Reorganisation costs

1,159

-

Total non-underlying and exceptional items

9,079

8,858

 

Acquisition costs relate to third-party professional fees in connection with prospecting and completing acquisitions during the period.

 

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

 

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

 

Reorganisation costs relate to restructuring and integration projects around the group.

 

Auditor's remuneration


2024

2023

 

£'000

£'000


 


Fees payable to the Company's Auditor in respect of audit services:

  Audit of these financial statements

 

115

 

107

  Audit of financial statements of subsidiaries of the Company

23

22


138

129


 


Amounts receivable by the Company's auditor and its associates in respect of:

 

 


Other assurance services

37

34

 

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

 

5. Personnel costs

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

 


           Number of employees


2024

2023


 


Legal and professional staff

1,068

1,000

Administrative staff

468

439


1,536

1,439

The aggregate payroll costs of these persons were as follows:


2024

2023


£'000

£'000


 


Wages and salaries

94,402

83,942

Social security costs

10,928

9,984

Pension costs

3,160

2,839


108,490

96,765

Non-underlying items (see note 4)

 


Share based payment expense - Gateley Plc

1,625

1,984

Share based payment expense - Gateley RJA Limited

61

-


110,176

98,749

 

6. Share based payments

 

Group

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

 

Save As You Earn scheme ('SAYE')

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

 

During the year 1,766,571 SAYE 19/20 options vested with 1,395,589 being exercised by 30 April 2024 leaving 370,982 options still to be exercised. New shares were issued to satisfy these options being 1,395,589 10p shares with a nominal value of £139,559.

 

Company Share Option Plan ('CSOP')

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

 

Long Term Incentive Plan ('LTIP')

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

 

Performance conditions

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

 

Adjusted, fully diluted earnings per Share Compound Annual Growth Rate (CAGR) over the three year period ending 30 April 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.

 

During the year 742,998 LTIP 2020 options vested with 727,790 being exercised by 30 April 2024. New shares were issued to satisfy these options being 727,790 10p shares with a nominal value of £72,779.

 

Restricted Share Award Plan ('RSA')

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

 

The annual awards granted under all schemes are summarised below:

 


Weighted average remaining contractual life

Weighted

average

exercise

price

Originally granted

Lapsed/exercised at 30 April 2023

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 19/20 - 30

September 2019

0 years

£1.28

822,625

       

 

(774,066)

             

 

48,559

 

 

-

            

 

-

    

  

(48,559)

 

 

-

SAYE 20/21 - 6

November 2020

0 years

£1.02

2,337,197

      

 (463,339)

          1,873,858

 

-

             (107,287)

 

(1,395,589)

 

370,982

-SAYE 21/22 - 25

August 2022

0.3 years

£1.70

673,077

          

(172,062)

              501,015

         

-

             (219,751)

                  

       -  

                                281,264

SAYE 22/23 - 22

September 2023

1.4 years

£1.55

1,070,154

 

(36,850) 

 

1,033,304

 

-

                (426,326)

                  

       (2,129)  

                            604,849

SAYE 23/24 - 3

November 2023

2.5 years

£1.14

-

 

                              -  

 

1,801,308 

                (95,668)

                  

       -  

                            1,705,640




4,903,053

 

(1,446,317)

          3,456,736

 

1,801,308 

             (849,032)

      

 (1,446,277)

                            2,962,735











CSOPS










CSOPS  20/21 - 7

July 2020

0 years

£1.35

              976,797

      

  (245,014)

              731,783

                         -  

               (58,818)

                 

    (438,263)  

 

234,702

CSOPS 22/23 - 14 December 2022

1.6 years

 

£1.74

 

300,000

 

(10,000)

 

290,000

             

-

               (40,000)

                 

    -  

                              250,000




           1,276,797

 

(255,014)

           1,021,783

-

 

(98,818)

      

  (438,263)

 

484,702

LTIPS










LTIPS 20/21 - 22 July 2020

0 years

 

£0.00

           1,405,766

        

 (303,519)

          1,102,247

                              -  

             (374,457)

                  

(727,790)  

                            -

LTIPS - 27 April 2022

1.0 years

 

£0.00

           1,115,000

 

(90,000)

          1,025,000

                              -  

                (135,000)

                         -  

                            890,000

LTIPS 23 Feb 2023

1.8years

 

£0.00

 

1,320,000

                   

   -  

 

1,320,000

 

-

 

(190,000)

 

-

                            1,130,000




           3,840,766

        

 (393,519)

          3,447,247

       

 -

             (699,457)

 

   (727,790)

                            2,020,000

RSA










RSA - 27 April 2022

 

3.0 years

 

£0.00

          1,422,560

 

-

           1,422,560

                  

      -  

 

(237,500)

              

       -  

                          1,185,060

 

RSA  23 February 2023

 

3.8 years

 

£0.00

               

1,175,000  

 

(50,000)

 

1,125,000

 

-

 

(187,500)

 

-

 

937,500

RSA 21 September 2023

 

4.4 years

 

£0.00

 

-

 

-

 

-

 

790,131

 

-

 

-

 

790,131




2,597,560

(50,000)

2,547,560

790,131

(425,000)

-

2,912,691

 

Fair value calculations

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

 


SAYE

RSA


 

 

Grant date

03/11/2023

21/09/2023

Share price at date of grant

£1.31

£1.54

Exercise price

£1.14

£nil

Volatility

18.9%

18.9%

Expected life (years)

3.3

5.0

Risk free rate

4.36%

4.43%

Dividend yield

4.50%

0.00%




Fair value per share



Market based performance condition

-

-

Non-market based performance

condition/no performance condition

£0.23

£1.535

 

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

 

The total charge to the income statement for all schemes now in place, included within non-underlying items, is £1,686,000 (2023: £1,984,000).

 

7. Financial income and expense

Recognised in profit and loss


 

2024

 

2023


£'000

£'000

Financial income

 


Interest income

4,999

1,735

Total financial income

4,999

1,735

 

Financial expense

 


Interest expense on bank borrowings measured at amortised cost

(1,051)

(495)

Interest on lease liability

(1,170)

(1,150)

Total financial expense

(2,221)

(1,645)

 



Net financial income

2,778

90

 

 


 

8. Taxation


2024

2023


£'000

£'000

Current tax expense

 


Current tax on profits for the year

4,341

4,974

Under provision of taxation in previous period

73

58

Total current tax

4,414

5,032




Deferred tax expense

 


Origination and reversal of temporary differences

(646)

(472)

Under provision on share-based payment charges

113

(588)

Total deferred tax expense

(533)

(1,060)

 

 


Total tax expense

3,881

3,972

 

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

 


 

2024

 

2023


£'000

£'000

 

 


 Profit for the year (subject to corporation tax)

13,955

16,212




 Tax using the Company's domestic tax rate of 25% (2023: 19%)

3,489

3,080

 Expenses not deductible/(deductible) for tax purposes

206

1,422

Under provision of taxation in previous period

73

58

Over/(under) provision on share-based payment charges

113

(588)

 Total tax expense

3,881

3,972

 

The Finance Act 2021 increased the main rate of corporation tax to 25% from 1 April 2024.

 

9. Earnings per share

Statutory earnings per share

 



2024

2023


Number

Number

 

 


Weighted average number of ordinary shares in issue, being weighted average number of shares for calculating basic earnings per share

130,127,316

125,244,334

Shares deemed to be issued for no consideration in respect of share based payments

1,980,638

3,283,007


 


Weighted average number of ordinary shares for calculating diluted earnings per share

132,107,953

128,527,341

 

 



 

2024

 

2023

 

£'000

£'000

 

 


Profit for the year and basic earnings attributable to ordinary equity shareholders

10,074

12,240

 

 


Non-underlying and exceptional items (see note 4)

 


Operating expenses

9,079

8,858

Tax on non-underlying and exceptional items

(391)

(168)

Underlying earnings before non-underlying and exceptional items

18,762

20,930

 

 

Earnings per share is calculated as follows:

 


 

 

2024

 

2023

 

Pence

Pence

 

 


Basic earnings per ordinary share

7.74

9.77

Diluted earnings per ordinary share

7.63

9.52


 


Basic earnings per ordinary share before non-underlying and exceptional items

14.42

16.71

Diluted earnings per ordinary share before non-underlying and exceptional items

14.20

 

16.28

 

10. Dividends

 

2024

2023

 

£'000

£'000

Equity shares:

 


Interim dividend in respect of 2023 (3.3p per share) - 24 March 2023

-

4,169

Final dividend in respect of 2022 (5.5p per share) - 22 October 2022

-

6,835

Interim dividend in respect of 2024 (3.3p per share) - 21 March 2024

4,338

-

Final dividend in respect of 2023 (6.2p per share) - 23 October 2023

7,997

-


12,335

11,004

 

The board proposes to recommend a final dividend of 6.2p (2023: 6.2p) per share at the AGM. If approved, this dividend will be paid in October 2024 to shareholders on the register at the close of business on 11 October 2024. The shares will go ex-dividend on 10 October 2024. This dividend has not been recognised as a liability in these final statements.

 

11. Property, plant and equipment

 

 

Leasehold

improvements

Equipment

Fixtures and

Fittings

Right-of-use assets

Total


£'000

£'000

£'000

£'000

£'000

Cost






Balance at 1 May 2022

340

7,232

5,628

35,428

48,628

Additions

-

827

485

6,447

7,759

Disposal

(27)

(323)

(88)

(1,722)

(2,160)

As at 30 April 2023

313

7,736

6,025

40,153

54,227

Balance at 1 May 2023

313

7,736

6,025

40,153

54,227

Additions

-

699

346

472

1,517

Arising through business combinations

34

90

-

-

124

Disposal

-

(22)

-

(630)

(653)

As at 30 April 2024

347

8,503

6,371

39,994

55,215

 

 

 

 

 

 

Depreciation and impairment






Balance at 1 May 2022

231

6,407

5,228

10,801

22,667

Depreciation charge for the year

16

562

358

3,976

4,912

Eliminated on disposal

(27)

(247)

(82)

(1,722)

(2,078)

Balance at 30 April 2023

220

6,722

5,504

13,055

25,501

Balance at 1 May 2023

220

6,722

5,504

13,055

25,501

Depreciation charge for the year

29

823

287

3,949

5,089

Arising through business combinations

15

59

-

-

74

Eliminated on disposal

-

(22)

-

(630)

(652)

Balance at 30 April 2024

264

7,582

5,791

16,374

30,011

 

Net book value






At 30 April 2023

93

1,014

521

27,098

28,726

At 30 April 2024

83

921

580

23,621

25,204

 

12. Intangible assets and goodwill

 


Goodwill

Customer lists

Brands

Total


£'000

£'000

£'000

£'000

Deemed cost




 

At 1 May 2022

1,550

16,261

3,518

21,329

Arising through business combinations

-

1,000

-

1,000

At 30 April 2023

1,550

17,261

3,518

22,329

Arising through business combinations

-

3,322

-

3,322

At 30 April 2024

1,550

20,583

3,518

25,651

 




 

Amortisation




 

At 1 May 2022

-

7,317

10

7,327

Charge for the year

-

1,838

235

2,073

At 30 April 2023

-

9,155

245

9,400

Charge for the year

-

2,248

235

2,483

At 30 April 2024

-

11,403

480

11,883

 

Carrying amounts




 

At 30 April 2023

1,550

8,106

3,273

12,929

At 30 April 2024

1,550

9,180

3,038

13,768

 

Within intangible assets includes a Gateley Smithers Purslow customer list asset of £4m (2023: £4.5m) which has a remaining life of 9 years, and a Gateley RJA customer list asset of £3m (2023: £nil) which has a remaining useful life of 4 years and 3 months. The entirety of the brand intangible relates to Gateley Smithers Purslow and has a remaining life of 13 years.

 

Goodwill is allocated to the following cash generating units:


2024

2023


£'000 

£'000 

Property Group

 


Gateley Capitus Limited

-

-

Gateley Hamer Limited

-

-

GCL Solicitors (acquisition of trade and assets)

-

-

Persona Associates Limited

40

40

Gateley Vinden Limited

934

934

Tozer Gallagher (acquisition of trade and assets)

-

-

Gateley Smithers Purslow Limited

-

-

Gateley RJA Limited

-

-


974

974


 


Employment , Pensions and Benefits Group

 


Kiddy & Partners Limited

-

-

International Investment Services Limited

-

-

T-three Consulting Limited

-

-

 

 

-

-

Business services Group

 


Gateley Tweed (acquisition of goodwill)

576

576

Adamson Jones IP Limited            

-

-

Symbiosis IP Limited

-

-


576

576


1,550

1,550

 

Impairment testing

 

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

 

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

 

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

 

·

A pre-tax discount rate of between 12 and 21% (2023: 12-21%) was applied in determining the recoverable amount. The discount rate is based on the Group's average weighted cost of capital of 10.18% and adjusted according to the risks attributable to each CGU.

·

The values assigned to the key assumptions represent Management's estimate of expected future trends and are based on both external (industry experience, historic market performance and current estimates of risks associated with trading conditions) and internal sources (existing Management knowledge, track record and an in-depth understanding of the work types being performed). 


Growth rates of between 2% to 10% (2023: 2-10%) are based on Management's understanding of the market opportunities for services provided pertaining to the industry in which each CGU is aligned. 


Increases in costs are based on current inflation rates and expected levels of recruitment needed to generate predicted revenue growth.


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.


Cash flows have been typically assessed over a five-year period which Management extrapolates cash using a terminal value calculation based on an estimated growth rate of 2%.  The expected current UK economic growth forecasts for the legal services market is 2%.

·

The Group has conducted a sensitivity analysis on the impairment test of the CGU carrying value.  The Directors believe that any reasonably possible change in the key assumptions on which the recoverable amount of goodwill is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the CGU.

 

13. Acquisitions

 

During the year ended 30 April 2024 the Group completed one acquisition:

 

Acquisition of Gateley RJA Limited

 

On 19 July 2023 Gateley (Holdings) Plc acquired the entire issued share capital of Richard Julian and Associates Limited ('RJA'). RJA specialises in the provision of quantity surveying and project management services to organisations in the affordable housing sector.

 

The primary reason for the business combination is discussed within the CEO's review.

 

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

 


Pre-acquisition carrying amount

£'000

Policy alignment and fair value adjustments

£'000

Total

£'000

 

Intangible asset relating to customer list

-

3,322

3,322

 

Property, plant and equipment

82

-

82

 

Cash

1,239

-

1,239

 

Trade receivables

583

-

583

 

Prepayments

89

-

89

 

Total assets

1,993

3,322

5,315

 

 



 

 

Trade payables

(7)

-

(7)

 

Accruals and other payables

(399)

-

(399)

 

Corporation tax

(227)

-

(227)

 

Other taxes and social security

(242)

-

(242)

 

Deferred tax

-

(831)

(831)

 

Total liabilities

(875)

(831)

(1,706)

 

 

 

 

 

 

Total identifiable net assets at fair value

1,118

2,491

3,609

 

Negative goodwill arising on acquisition



(3,609)

 

Total consideration

 

 

-

 

 

 

 

 

 

Satisfied by:

 

 

 

 

Initial cash consideration paid

 

 

2,035

Issue of 1,192,163 new 10p ordinary shares in Gateley (Holdings) Plc

 

 

1,896

Contingent cash consideration payable

 

 

1,034

Contingent share consideration payable

 

 

1,035

Less: amounts subject to continuing employment conditions

 

 

(6,000)

Total consideration

 

 

-


 

 

 

Net cash outflow arising on acquisition

 

 

 

Cash paid

 

 

(2,035)

Net cash acquired

 

 

1,239

Net cash outflow arising on acquisition

 

 

(796)

 

A contingent consideration arrangement was entered into as part of the acquisition.  A further £2.1 million could be payable with any payment subject to RJA achieving at least £4 million of revenue over the first 12 months post-acquisition, and not less than £5 million of revenue for the following 12 months. Such payment is to be split in shares and cash as agreed between the Sellers and the Company, providing no Seller is entitled to receive more than 50% of their total consideration in cash.

 

The negative goodwill of £3,609,000 has been recognised immediately in the statement of profit and loss and included within non-underlying expenses.

 

From the date of acquisition Gateley RJA Limited has contributed £4.2m of revenue to the Group's Statement of Comprehensive Income together with after tax profit of £0.7m. If the acquisition had been completed on the first day of the financial year, Group revenue and profit after tax would have been higher by £1.1m and £0.2m respectively.

 

14. Other intangible assets

 


IT development costs

£'000

Computer

software

£'000

 

Total
£'000

Cost




Balance at 1 May 2022

258

440

698

Additions

24

763

787

At 30 April 2023

282

1,203

1,485

Additions

-

-

-

At 30 April 2024

282

1,203

1,485




 

Amortisation

 

 

 

Balance at 1 May 2022

-

134

134

Charge for the year

40

221

261

At 30 April 2023

40

355

395

Charge for the year

80

363

443

At 30 April 2024

120

718

838




 

Net book value at 30 April 2023

242

848

1,090

Net book value at 30 April 2024

162

485

647

 

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

 

15. Contract assets and liabilities

 


Contract assets

Trade

receivables

Contract liabilities


£'000 

£'000 

£'000









As at 30 April 2024

23,543

58,056

(409)





As at 30 April 2023

20,388

54,167

(499)

 

Contract assets

 

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

 

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

 

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

 

During the year, contract assets of £nil (2023: £nil) were acquired in business combinations.

 

An impairment loss of £656,000 has been recognised in relation to contract assets in the year (2023: loss £542,000). This is based on the expected credit loss under IFRS 9 of these types of assets. The contract asset loss is estimated at 2.8% (2023: loss 2.7%) of the balance.

 

Contract assets recognised under IFRS 15

 

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


2024

2023


£'000

£'000

Contract asset value at 1 May 2023

20,388

17,239

Contract assets arising on acquisition

-

-

Contract asset value added in the year

24,759

22,333

Contract asset value realised in the year

(21,604)

(19,184)

Contract asset value at 30 April 2024

23,543

20,388

 

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

 

Contract liabilities

 

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

 

Contract liabilities recognised under IFRS 15

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


2024

2023


£'000

£'000

 

Contract liabilities at 1 May 2023

499

569

Contract liabilities gained in the year

879

469

Contract liabilities credited to P&L in year

(969)

(539)

Contract liabilities at 30 April 2024

409

499

 

 


 

16. Trade and other receivables


 

2024

 

2023


£'000 

£'000 


 


Trade receivables

58,056

54,167

Prepaid consideration subject to earn-out service conditions

6,717

6,015

Prepayments

7,249

5,777

Other receivables including insurance receivables

2,083

233


74,105

66,192


 


Amounts falling due after one year:

£'000

£'000


 


Prepaid consideration subject to earn-out service conditions

8,368

7,080

 

Trade receivables

 

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

 

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

 

All trade receivables are repayable within one year.

 

Movement in loss allowance


2024

2023


£'000

£'000


 


Brought forward provision

(3,825)

(3,941)

Recognition of provisions for businesses acquired

-

-

Provision utilised

1,187

908

Charged to statement of profit and loss

(1,062)

(984)

Provisions released

443

192


(3,257)

(3,825)

 

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

 

2024

Not passed due

Past due 0-30 days

Past due 31-120 days

Past due greater than 120 days

Total

Expected credit loss rate

2.32%

2.53%

2.69%

14.86%


Estimated total gross carrying amount £'000

35,813

6,777

4,343

14,380

61,313

Lifetime ECL £'000

831

172

117

2,137

3,257

 

2023

Not passed due

Past due 0-30 days

Past due 31-120 days

Past due greater than 120 days

Total

Expected credit loss rate

2.98%

4.93%

5.96%

17.58%


Estimated total gross carrying amount £'000

33,175

6,594

5,943

12,280

57,992

Lifetime ECL £'000

987

325

354

2,159

3,825

 

 

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

 

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

 

An impairment loss of £1,062,000 has been recognised in relation to trade receivables in the year (2023: £984,000). This is based on the expected credit loss under IFRS 9 of these types of assets. The trade receivables loss is estimated at 1.7% (2023: 1.7%) of the balance.

 

17. Other interest-bearing loans and borrowings

 

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


2024

 

2023



Fair

value

Carrying
amount

Fair

value

Carrying
amount


£'000

£'000

£'000

£'000

Non-Current liabilities

 

 



Bank borrowings

12,908

12,908

6,813

6,813

 

 

 



On 18 April 2022, the Company entered into a revolving credit facility which provides total committed funding of £30m until April 2025. Interest is payable at a margin of 1.95% above the SONIA reference rate. A commitment fee of one third of the applicable margin is payable on the undrawn amounts.

 

As at 30 April 2024, the Group's non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarised below:

 

30 April 2024

Current

Non-current


Within 6 months

6 to 12 months

1 - 5

years

Later than

5 years


£'000

£'000

£'000

£'000






Bank borrowings

-

14,133

-

-

Leases

2,721

2,720

19,855

7,926

Trade and other payables

12,839

-

-

-

Total

15,560

16,853

19,855

7,926

 

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

 

30 April 2023

Current

Non-current


Within 6 months

6 to 12 months

1 - 5

years

Later than

5 years


£'000

£'000

£'000

£'000






Bank borrowings

-

-

7,997

-

Leases

2,044

2,044

19,219

11,437

Trade and other payables

9,665

1,364

-

-

Total

11,709

3,408

27,216

11,437

 

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

 

18. Trade and other payables


 

2024

 

2023


£'000

£'000

Current

 


Trade payables

12,839

9,370

Other taxation and social security payable

8,143

9,913

Other payables

-

295

Contingent consideration treated as remuneration

324

1,364

Accruals

11,397

4,492

Deferred income

409

499


33,112

25,933

 

19. Deferred tax

Deferred tax assets and liabilities are summarised below:

 

Deferred tax asset

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

 

Share-based payments

 

£'000

At 1 May 2022

638

Credited during the year in the Consolidated income statement

590

Debited during the year to retained earnings

(398)

At 1 May 2023

830

Debited during the year in the consolidated income statement

(114)

Debited during the year to retained earnings

(343)

At 30 April 2024

373

 

Deferred tax liability

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

 


Customer lists

 


£'000

 

 

At 1 May 2022

3,089

Arising through business combinations - Symbiosis IP Limited

250

Credited during the year in the Consolidated income statement

(398)

At 30 April 2023

2,941

Arising through business combinations - Gateley RJA Limited

831

Credited during the year in the Consolidated income statement

(804)

At 30 April 2024

2,968

 

20. Provisions


2024

2023


£'000

£'000

Current provision

 


Professional indemnity provision

175

107

Total current provision

175

107


 


Non-current provision

 


Professional indemnity provision

3,088

903

Dilapidations provision

637

387

Total non-current provision

3,725

1,290


 


Total provisions

3,900

1,397


 


 

Professional indemnity estimated claim cost

 



2024

2023


£'000

£'000


 


Brought forward

1,010

750

Provisions made during the year

2,253

350

Provisions reversed during the year

-

(90)

At end of year

3,263

1,010


 


Non-current

3,088

903

Current

175

107


3,263

1,010

 

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

 

Dilapidations provision

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

 

 

 

2024

£'000

2023

£'000

At 1 May

387

214

Provision made in the year

250

173

At 30 April

637

387

 

21. Net debt

 

2024

2023


£'000

£'000

 

 


Cash and cash equivalents

16,674

11,105

 

Debt

 


Total loans brought forward

(38,786)

(34,641)

Revolving credit facility - due in more than one year

(6,095)

(1,098)

New lease liability in the year

(1,642)

(7,597)

Repayment of lease liability

5,091

4,550

Total loan carried forward

(41,432)

(38,786)

 

 


Brought forward from previous year

(27,681)

(18,536)

Movement during year

2,923

(9,145)

Net debt at the year end

(24,758)

(27,681)

 

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

 


Long term borrowings

Short term borrowings

Lease liabilities

Total


£'000

£'000

£'000

£'000






1 May 2023

6,813

-

31,973

38,786

Cashflows:





Repayments

(5,000)

-

(5,091)

(10,091)

Receipt of revolving credit facility

11,000

-

-

11,000

Non-cash





Loan arrangement fee unwind

95

-

-

95

New lease liability in the year

-

-

1,642

1,642

Reclassification to short term borrowings

(12,908)

12,908

-

-

30 April 2024

-

12,908

28,524

41,432

 


Long term borrowings

Short term borrowings

Lease liabilities

Total


£'000

£'000

£'000

£'000






1 May 2022

5,715

-

28,926

34,641

Cashflows:





Repayments

(2,000)

-

(4,550)

(6,550)

Receipt of revolving credit facility

3,000

-

-

3,000

Non-cash





Fair value of acquisition

98

-

-

98

New lease liability in the year

-

-

7,597

7,597

30 April 2023

6,813

-

31,973

38,786

 

22. Share capital

 

Authorised, issued and fully paid


2024

2024

2023

2023


Number

£

Number

£

Ordinary shares of 10p each





Brought forward

126,636,157

12,663,615

124,556,879

12,455,687

Issued on acquisition of Richard Julian and Associates Limited

1,192,163

119,216

-

-

Issued as part of contingent consideration of Gateley Smithers Purslow Limited

1,661,790

166,179

-

-

Issued on acquisition of Symbiosis IP Limited

-

-

523,012

52,301

Issued as part of contingent consideration of Tozer Gallagher LLP

-

-

25,071

2,507

Issued on vesting of RSA

790,131

79,013

1,175,000

117,500

Issued on vesting of SAYE

1,591,555

159,166

356,195

35,620

Issued on vesting of LTIP

727,790

72,779

-

-

Issued on vesting of CSOPS

438,263

43,826

-

-

At 30 April 2024

133,037,849

13,303,784

126,636,157

12,663,615






 

The Company has one class of Ordinary shares which carry no right to fixed income. Each share has full rights in respect to voting.

 

On 19 July 2023 the Company acquired the entire issued share capital of Richard Julian and Associates Limited in part for the issue of 1,192,163 10p ordinary shares.

 

On 2 November 2023 the Company issued 1,661,790 10p ordinary shares to satisfy the contingent consideration on the acquisition of Gateley Smithers Purslow Limited.

 

Between 1 May 2023 and 30 April 2024 1,591,555 10p ordinary shares were issued upon vesting of the 2019/2020 SAYE schemes to participants.

 

On 27 September 2023 727,790 10p ordinary shares were issued upon vesting of the 2020 LTIP scheme to participants.

 

On 21 September 2023 790,131 10p ordinary shares were issued upon issue of the FY24 RSA scheme to participants.

 

23. Leases liabilities - IFRS 16

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

 

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

 

 

Number of leased assets*

Average length of lease remaining

Opening lease asset

£'000

Net additions

£'000

Depreciation

£'000

Closing lease asset

£'000

Office buildings

12

4.5 years

27,088

-

(3,849)

23,239

Electric Vehicles

13

2.4 years

-

472

(90)

382

IT equipment

1

0 years

9

-

(9)

-

 

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

 

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

 


2024

£'000

2023

£'000

Current lease liability

4,346

3,257

Non-current lease liability

24,178

28,716

 

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

 

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

 

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

 


Property

Equipment

Total


£'000

£'000

£'000

 



 

Expenses relating to short-term leases

116

16

132

Expenses relating to leases of low-value assets, excluding short-term leases of low value assets

-

60

60


116

76

192

 

The total minimum undiscounted lease payments at 30 April 2024 under non-cancellable operating lease rentals were:

 


30 April 2024

£'000

30 April 2023

£'000

 

 


Within one year

5,441

4,088

In the second to fifth year inclusive

19,855

19,219

After five years

7,926

11,437

 

33,222

34,744

 

24. Subsequent events

The Directors are not aware of any material post balance sheet events.

 

25. Alternative performance measures

 

Underlying profit before tax

The Directors seek to present a measure of underlying profit performance which is not impacted by exceptional items or items considered non-operational in nature. These include non-trading, non-cash and one-off items disclosed separately in the consolidated income statement where the quantum, nature or volatility of such items are considered by management to otherwise distort the underlying performance of the Group.  This measure is described as 'underlying' and is used by management to assess and monitor profit performance only at the before and after tax level.  In line with the board's wish to simplify reporting of profits, the board have moved away from reporting adjusted Earnings Before Interest Tax Depreciation and Amortisation ("EBITDA"), following the introduction of IFRS 16 'Leases'.

 


 

2024

 

2023


£'000

£'000


 


Reported profit before tax

13,955

16,212

Adjustments for non-underlying and exceptional items:

 


- Amortisation of intangible assets

2,483

2,073

- Share-based payment adjustment

1,686

1,984

- Gain on bargain purchase

(3,609)

(1,389)

- Consideration treated as remuneration

6,956

6,190

- Exceptional items

1,563

-

Underlying profit before tax

23,034

25,070

 

Amortisation of acquired intangible assets is identified as a non-cash item released to the income statement therefore such cost is removed when considering the underlying trading performance of the Group by adding to profit the annual amortisation charge.

 

Consideration treated as remuneration: such charges are treated as non-underlying in order to reflect the commercial substance of the transaction. All former vendors who remain employed by the Group are paid at market rates and the earnout remuneration is a function of the interpretation of IFRS, and related emerging guidance only.

 

The adjustment for share-based payments relates to the impact of the accounting standard for share-based compensation. The cost of all share-based schemes is settled entirely by the issue of shares where the proportions can vary from one year to another based on events outside of the businesses control e.g., share price. Under IFRS the anticipated future share cost is expensed to the income statement over the vesting period. The adjustment above addresses this by adding to profit the IFRS 2 charge in relation to outstanding share awards.  This adjustment is made so that non-cash expenses are removed from profit.

 

Underlying operating profit


 

2024

 

2023


£'000

£'000


 


Reported operating profit

11,177

16,122

Adjustments for non-underlying and exceptional items:

 


- Amortisation of intangible assets

2,483

2,073

- Share-based payment adjustment

1,686

1,984

- Gain on bargain purchase

(3,609)

(1,389)

- Consideration treated as remuneration

6,956

6,190

- Exceptional items

1,563

-

Underlying operating profit

20,256

24,980

 

Cash generated from operations

 

a)  Free cash flows

 


 

2024

 

2023

 

£'000

£'000


 


Net cash generated from operations

18,887

14,065

Repayment of lease liabilities

(5,091)

(4,579)

Net interest received

4,043

1,364

Tax paid

(4,902)

(4,320)

Cash outflow paid on acquisitions

5,825

1,518

Purchase of property, plant and equipment

(1,045)

(1,312)

Purchase of other intangible assets

-

(787)

Free cash flows

17,717

5,949

 

b)  Working capital measures


 

 

2024

 

 

2023

 

£'000

£'000

WIP days

 


Amounts recoverable from clients in respect of contract assets (unbilled revenue)

23,543

20,388

Unbilled disbursements

5,389

3,368

Total WIP

28,932

23,756

Annualised revenue

173,312

163,583

WIP days

61

53

 


 

 

2024

 

 

2023

 

£'000

£'000

Debtor days

 


Trade receivables

58,056

54,167

Less unbilled disbursements

(5,389)

(3,368)

Total debtors

52,667

50,799

Annualised revenue

173,312

163,583

Debtor days

111

113

 


 

 

2024

 

 

2023

 

£'000

£'000

Gross lock-up days

 


Total WIP

28,932

23,756

Total debtors

52,667

50,799

Total gross lock-up

81,599

74,555

Annualised revenue

173,312

163,583

Gross lock-up days

172

166

 

Annualised revenue reflects the total revenue for the previous 12-month period inclusive of pro-forma adjustments for acquisitions.

 

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

 

 

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