TIDMGTLY
RNS Number : 6547K
Gateley (Holdings) PLC
11 July 2017
For Immediate Release 11 July 2017
Gateley (Holdings) Plc
("Gateley" the "Group" or the "Company")
Preliminary Results for the year ended 30 April 2017
"Significant year of growth and investment"
Gateley (AIM:GTLY), the national commercial law and
complementary professional services group is pleased to report its
audited preliminary results for the year ended 30 April 2017, which
constitutes the Group's second annual results as a Plc following
admission of the Group to trading on AIM on 8 June 2015.
Financial Highlights
-- Revenue increased 15.7% (2016: 10.2%) to GBP77.6m (2016: GBP67.1m)
-- Adjusted EBITDA* increased 15.5% (2016: 14.8%) to GBP14.9m (2016: GBP12.9m)
-- Profit before tax increased 18.8% (2016: 12.2%) to GBP13.1m (2016: GBP11.0m)
-- Basic EPS increased 15.3% to 9.43p (2016: 8.18p)
-- Proposed final dividend of 4.4p resulting in an increased
total year dividend of 6.6p (2016: 5.639p)
-- Strong cash generation and completion of second acquisition using own cash resources
* Adjusted EBITDA excludes share based payment charges and for
the 2016 comparative, income or expenses that related to
non-underlying items
Operational Highlights
-- Successful acquisition of further complementary business
(Gateley Hamer acquired September 2016) with integration
progressing well
-- Further investment in Group service offering across all
offices with total staff numbers at 717 including most recent
Reading location now employing 19 staff (including 7 legal
partners)
-- All three originally planned share schemes now in place
(including all staff SAYE share scheme, CSOP and Stock Appreciation
Rights Schemes)
-- Strengthening balance sheet with net assets increasing to GBP17.4m (2016: GBP12.7m)
-- Expanding shareholder base following the successful sale of
former partner shares in October 2016 increasing Group free float
from 30% to 34.3%
-- Ranked first by deal volume both nationally and in the
Midlands in the 2017 Q1 Experian Corpfin M&A Advisor League
Table. Of equal importance the Group advised on a significant
number of high profile deals across all service lines
Michael Ward, CEO of Gateley, commented:
"I am delighted with the continued progress made by the Group in
the year. This represents another year of continued expansion for
us where we have both grown the business and invested further in it
to support our future expansion. This has been possible due to the
strength of our service offering, the depth of our client
relationships and the growth in our teams of skilled
professionals.
"Trading in the second half of the financial year ended 30 April
2017 was excellent and we are pleased to report that trading in the
first two months of the current financial year has continued well.
We are confident that our business is well balanced and resilient
and we remain focused on delivering another year of growth in our
core services, whilst continuing to look for complementary
acquisitions."
Enquiries:
Gateley (Holdings) Plc
Neil Smith, Finance Director Tel: +44 (0) 121 234 0196
Nick Smith, Acquisitions Director and Head of Investor Relations Tel: +44 (0) 20 7653 1665
Cara Zachariou, Head of Communications Tel: +44 (0) 121 234 0074 or
+44 7703 684 946
Cantor Fitzgerald Europe - Nominated adviser and broker
David Foreman, Marc Milmo, Michael Reynolds (Corporate Finance) Tel: +44 (0) 20 7894 7000
Mark Westcott, Alex Pollen, Caspar Shand Kydd (Sales)
Arden Partners - Broker
John Llewellyn-Lloyd, Benjamin Cryer (Corporate Finance) Tel: +44 (0) 20 7614 5900
James Reed-Daunter (Corporate Broking)
IFC Advisory - Financial PR Adviser Tel: +44 (0) 20 3053 8671
Tim Metcalfe, Graham Herring, Miles Nolan
Chairman's Statement
In my second year-end results statement to you as Chairman of
Gateley, I am pleased to report another year of strong financial
results for the Company together with continued investment in the
business, both of which translate directly to shareholder value and
position the business well for the future. I am, however, not only
delighted with the financial performance of the business this year,
but also the significant progress we have made from being an LLP to
a plc. This is evidenced in part by the equity participation we now
have within the Company where staff have continued to build upon
their equity interests in the business and by the addition of new
external shareholders to our register.
Executed by a Board and senior management team that have the
requisite leadership and experience to manage the business, our
growth strategy remains firmly based on the three key pillars we
set out at the time of our IPO. These are to: differentiate
(through our comprehensive service offering and service ethic), to
diversify (through organic growth and acquisition of additional
complementary non-legal businesses) and to incentivise (offering
wider and earlier equity participation to staff). In the year ended
30 April 2017 through strong organic growth, the acquisition of
Gateley Hamer, the development of our equity participation schemes,
strong client support and a well-balanced business model we have
continued to move the Group forward. At the same time, we continue
to invest in the future of the business by expanding our staff
compliment by record numbers and augmenting our infrastructure and
geographical presence with expansion of our new office in
Reading.
Our ability to attract quality staff who are interested in
benefitting from the opportunities provided by a plc structure
continues to strengthen. As we build further scale, breadth and
depth into our business, we will maintain our disciplined approach
to optimising growth opportunities, whilst keeping our focus on
meeting the needs of our client base.
Trading in the first two months of the current financial year
has started well and the Board remains confident that the business
is well balanced to deliver another year of growth in its core
service lines, whilst at the same time continuing to look for
complementary acquisitions. Accordingly, the Board looks to the
future with confidence and is pleased to propose an increased final
dividend, subject to shareholder approval at the Annual General
Meeting on 27 September 2017, of 4.4p per share, making a total
dividend of 6.6 pence per share for the year, and representing a
17.0% increase on the prior year.
Nigel Payne
Chairman
10 July 2017
Chief Executive Officer's Review
Introduction
I am pleased with the continued progress made by the Group in
the year. This represents another year of expansion where we have
not only grown the business but also invested further in it to
support our future expansion. This has been possible due to the
strength of our service offering, the depth of our client
relationships and the growth in our teams of skilled
professionals.
Financial Results
Our financial performance continues to demonstrate strong
long-term growth with increases against last year in both revenue
(up 15.7%) and adjusted EBITDA (up 15.5%). Our transition from LLP
to plc is in accordance with our original plan and our statement of
financial position has strengthened as a result of the
ground-breaking change in business model. We have also had another
year of strong cash generation from operations and continued to
invest for the long-term future of the business. We are pleased to
propose a dividend in line with expectations.
Operational Review
The year saw good growth across a number of business divisions
with excellent results from the Banking and Financial Services
Group; Corporate Group; Business Services Group, and our Property
Group, with three of these divisions reporting double-digit
growth.
Whilst growth in our divisions is encouraging it is also
important to highlight that the Group operates through a diverse
and resilient business structure that has the ability to perform
well in both good and challenging economic environments.
Since 1 May 2015, we have welcomed at partner level a number of
new lateral hires and promotions thereby evidencing our continued
investment in growth and the Group's ability to continue to
attract, retain and nurture talent. Since IPO, laterally hired
partners have totalled 13 in FY16, eight in FY17 with a further
five contracted to join us in FY18. We have also internally
promoted to partner two employees in FY16, three in FY17 and six in
FY18. Our overall staff numbers have also increased from 638 to 717
over the last twelve month reporting period. We now have three
employee share schemes in place. A Stock Appreciation Rights Scheme
(SARS) which is aimed at partner level. The Gateley Sharesave
Scheme which is a Save As You Earn scheme (SAYE) and is a
non-discretionary scheme open to all employees and a Company Share
Option Plan (CSOP) which is specifically targeted at associates,
senior associates, legal directors and their equivalent levels
within our support services team. Being able to offer something
different as an employer has helped us not only retain staff since
the IPO but has also attracted a wide pool of fresh talent. All
staff that were employed at the time of the IPO received a nominal
number of shares. 43% of all staff participated in our first SAYE
scheme in September 2016 whilst 137 associates, senior associates,
legal directors and the equivalent levels within our support
services team received CSOP awards in December 2016.
We announced the opening of our new office in Reading on 1
November 2015 and officially moved into new leasehold premises at
The Blade on 1 June 2016. Current staff numbers are nineteen,
including seven partners and further recruitment is progressing
well.
We continue to maintain our presence on legal panels and have
been reappointed to the national legal panels of a number of
important house builders and UK clearing banks
Acquisitions
Acquisitions are an important part of the Group's growth
strategy with a focus on acquiring businesses offering
complementary professional and other specialist services to clients
in Gateley's target markets. In April 2016, we successfully
completed our first acquisition of a non-legal services business,
Gateley Capitus Limited. Our second acquisition followed shortly
afterwards in September 2016 in the form of Gateley Hamer Limited
(formerly Hamer Associates Limited), a specialist property
consultancy of similar size to Gateley Capitus Limited and we are
pleased to report that the integration of this business is
proceeding well. Both businesses are working collaboratively within
our Property Group and across our wider client base to complement
our national service offering. We continue to explore acquisitions
of businesses providing complementary professional services to
enable us to further diversify our income streams going
forward.
Board Composition
The Board announces that following five years of service with
the Group, including two years as a director of the plc following
its admission to AIM, having reached the age of 65, Michael
Seabrook will not be offering himself for re-election at the
forthcoming Annual General Meeting and will stand down as a
Director at that point. The Board would like to thank Michael for
his valuable contribution to the Group both leading up to the IPO
and thereafter as the Group transitioned from an LLP to a plc. The
Board wishes him all the best for the future.
The Board is pleased to announce the forthcoming appointment of
Suki Thompson with effect from 27 September 2017. Shortlisted as
Influencer of the Year by Creativepool and awarded Most Renowned
Woman in Advertising and Communications in the 2016 Executive
Awards, Suki sits on the Centaur Media Plc Management Board, has
been a Trustee for Macmillan Cancer Support for the past six years
and is also the CEO and Co-founder of award-winning, marketing
management consultancy, Oystercatchers. Today, Oystercatchers works
with 80% of the FTSE 250 brands and global communications networks
including WPP, IPG, Publicis, Omnicom and Havas. A recognised
industry influencer, Suki leads debate across many platforms and
her innovative Oystercatchers Club regularly attracts over 250
senior business leaders to each event. Her views are regularly
sought by the media and event organisers. Most recently, Suki has
chaired debate at The Guardian's Changing Media Summit; Advertising
Week Europe, and at investment influencer, Platforum.
Suki holds an Honorary Doctorate from Coventry University for
International Business Development is a Freeman of the City of
London and a former Chair of the UK Marketing Society. The Board
welcomes Suki and looks forward to working with her.
Current trading and outlook
Trading in the second half of the financial year ended 30 April
2017 was excellent and we are pleased to report that trading in the
first two months of the current financial year has continued well.
As highlighted above, we are confident that our business is well
balanced and resilient and we remain focused on delivering another
year of growth in both our core services and our complementary
professional services.
Michael Ward
CEO
10 July 2017
Finance Director's Review
Financial Highlights
The Group delivered another strong performance in 2017 with
record revenue generation accompanied by increased profitability.
Total reported revenues for the year increased by 15.7% to GBP77.6m
(2016: GBP67.1m). Adjusting for revenues from acquisitions since
IPO of GBP2.0m (2016: GBPnil), organic growth of 12.7% has been
achieved from our traditional core legal services. As the Group has
delivered another year of annual revenue growth we have accelerated
our investment in further expansion of our staffing levels to
continue to meet increasing client demand and to facilitate further
the expansion of services across our national office
infrastructure. Whilst it is typical that increased recruitment
costs are incurred in advance of the delivery of revenue, both
EBITDA and PBT margins have been maintained as the Group continues
to capitalise on growth opportunities along its journey as a
leading professional services group.
Group revenue was well spread across a record number of clients
that has generated strong results and we once again advised on more
M&A transactions than other advisers in the market. Whilst
pleased with the performance of all of our UK business lines we
have seen our largest service lines continue to perform well in a
market that remains competitive, but with healthy levels of
activity for regionally focused service delivery. Our expertise in
mergers & acquisitions, corporate finance, private equity and
equity capital markets propelled our Corporate Group into
generating revenue growth of 24% (2016: 14%). Our Property Group
has performed strongly and generated revenue growth of 28% as our
mix of both litigation and transactional property development work
streams serviced client requirements well. The UK's construction,
property development and housing markets continue to need the
specialist legal support that Gateley can offer at both a regional
and national level. Our housebuilding sector expertise demonstrates
how our focus on strategically key sectors and commercially focused
client understanding helps maintain long standing client
relationships. We have recently renewed all key bank panel
appointments that have arisen during and since the year end and
continue to grow our national expertise and teams servicing clients
in the delivery of private client and regulatory legal
services.
Following the acquisition of Gateley Capitus Limited in April
2016, the Group has further expanded its professional complementary
service lines with the acquisition of Gateley Hamer Limited
(formerly Hamer Associates Limited) in September 2016 for an
anticipated total consideration of GBP2.0m. Both businesses
continue to integrate well and work collaboratively with our legal
and support teams. Gateley Capitus Limited has generated revenue of
GBP1.2m and EBITDA of GBP0.3m during its first full year of
ownership and Gateley Hamer Limited has generated revenue of
GBP0.9m and EBITDA of GBP0.2m since acquisition. Whilst UK
operations have performed well the additional investment into our
Dubai office has not yet generated expected returns. Whilst fees in
Dubai increased by 10% to GBP1.2m, the office made a loss of
GBP0.4m (2016 loss GBP0.1m). We have already taken steps to
restructure our operations in Dubai and will keep this under
constant review.
Operating expenses (excluding depreciation and non-underlying
items) rose by 14.2% to GBP63.4m (2016: GBP54.7m). This growth in
operating costs has been driven mainly by the continued expansion
of staff levels to meet client demand. Fee generating staff numbers
at the end of the year rose by 7.6% (2016: 6.2%) to 441 (2016:
410). Personnel costs rose accordingly by 17.2% from GBP38.9m to
GBP45.6m, thereby increasing this cost to 58.7% of revenue from
58.1% in 2016.
Adjusted EBITDA of GBP14.9m is up by 15.5% from GBP12.9m
reflecting an adjusted EBITDA margin of 19.2% (2016: 19.3%).
Adjusted profit before tax was up 11.7% to GBP13.4m (2016:
GBP12.0m). Adjusted numbers exclude share based payment charges and
for 2016 are stated after excluding income or expenses that related
to non-underlying items and one-off professional costs together
with the costs associated with the IPO and acquisitions.
As a result of the continued expansion of new staff numbers,
overall utilisation of staff performing chargeable work decreased
to 86% (2016: 89%) but remained within acceptable levels without
affecting achieved profit margins. We have now established all of
our different share option schemes including our all staff SAYE
scheme and CSOP scheme for associates, senior associates, legal
directors and their equivalent levels within our support services
team. The Board plans to make participation in both of these
schemes an annual event alongside our SARS' scheme directed at
those "legal partners/directors" the Board wishes to incentivise
further with greater levels of future equity share ownership.
Other operating expenses (before non-underlying items) increased
by 14.0% to GBP17.9m (2016: GBP15.7m). This increase was
predominately due to increased volumes of activity and a full year
of running costs associated with new offices in Reading and Belfast
together with increased professional indemnity insurance premiums,
bad debt and professional and consultancy services.
Earnings per share
Basic earnings per share increased to 9.43p (2016: 8.18p).
Adjusted* basic earnings per share also increased to 9.43p (2016:
8.98p). Diluted earnings per share was 9.35p (2016 8.18p).
Dividend
The Board has adopted a dividend policy which reflects the
strong long-term earning cash flow and earnings potential of the
Group, distributing up to 70% of profits after tax each year to
shareholders. Following the announcement of our interim dividend of
2.2p (2016: 1.895p) per share that was paid in March 2017, the
Board proposes to approve a full year final dividend at its Annual
General Meeting on 27 September 2017 of 4.4p (2016: 3.764p) per
share, which if approved, will be paid in early October 2017 to
shareholders on the register at the close of business on 8
September 2017. The shares will go ex-dividend on 7 September
2017.
Cash resources, borrowings and liquidity
The Group's cash generation has remained strong as we concluded
the financial transition from an LLP with the settlement of loans
from former partners of Gateley Heritage LLP. Since IPO liabilities
repaid to former partners have totalled GBP21.4m with GBP0.55m
(2016: GBP5.1m) outstanding at the year-end. Since the year end
that balance has now been paid.
Cash generated during the year from operations was GBP7.7m which
represents 76% of profit after taxation due to increased trade and
other receivables and increased tax paid of GBP1.7m. Financing
outflows totalled GBP13.1m which included a full year's dividend
payments for the first time since IPO together with GBP2.0m of
repaid bank debt and GBP4.6m of liabilities repaid to former
partners. In addition further capital expenditure was incurred
which together with the outlay of cash required for the acquisition
of Gateley Hamer Limited meant that Group cash at bank ended the
year at GBP2.7m (2016: GBP9.8m). The Group's net debt position as
at 30 April 2017 has increased to GBP4.8m (2016: GBP4.2m).
Net assets
Net assets as at 30 April 2017 were GBP17.4m (2016: GBP12.7m).
This movement reflected increases in tangible assets, the effect of
further acquisitions and the movement in receivables derived from
the Group's trading performance.
* Adjusted for non-underlying items
Neil Smith
Finance Director
10 July 2017
Consolidated statement of profit and loss and other
comprehensive income
for the year ended 30 April 2017
Note 2017 2016
GBP000 GBP000
Revenue 2 77,587 67,061
Other operating income 3 445 442
Personnel costs 5 (45,558) (38,951)
Depreciation and amortisation (1,291) (687)
Other operating expenses (17,871) (16,605)
-------- --------
Operating profit 4 13,312 11,260
Adjusted EBITDA 4 14,928 12,928
Share based payment charges (325) (125)
Depreciation and amortisation (1,291) (687)
Non-underlying items
One off professional costs 4 - (101)
Admission costs 4 - (755)
---------------------------------------- ---- -------- --------
Net financing expense 6 (199) (226)
-------- --------
Profit before tax 13,113 11,034
Taxation 7 (3,058) (2,448)
-------- --------
Profit for the year after
tax attributable to equity
holders of the parent 10,055 8,586
======== ========
Other comprehensive income
Items that are or may be reclassified
subsequently to profit or
loss
Foreign exchange translation
differences
- Exchange differences on
foreign branch 81 -
-------- --------
Profit for the financial year
and total comprehensive income
all attributable to equity
holders of the parent 10,136 8,586
======== ========
Statutory Earnings per share
Basic 89.43p 8.18p
Diluted 89.35p 8.18p
The results for the periods presented above are derived from
continuing operations. There were no other items of comprehensive
income to report.
Consolidated statement of financial position
at 30 April 2017
Note 2017 2016
GBP000 GBP000
Non-current assets
Property, plant and equipment 2,160 1,478
Investment property 164 164
Intangible assets & goodwill 10 3,842 2,515
Other investments 85 85
-------- --------
6,251 4,242
Current assets
Trade and other receivables 11 39,086 33,696
Cash and cash equivalents 2,696 9,795
-------- --------
Total current assets 41,782 43,491
-------- --------
Total assets 48,033 47,733
======== ========
Non-current liabilities
Other interest-bearing loans
and borrowings 12 (4,958) (7,438)
Other payables 13 - (154)
Deferred tax liability 14 (239) (200)
Provisions 15 (381) (339)
-------- --------
Total non-current liabilities (5,578) (8,131)
-------- --------
Current liabilities
Other interest-bearing loans
and borrowings 15 (2,531) (6,583)
Trade and other payables 13 (20,629) (18,597)
Provisions 15 (210) (257)
Current tax liabilities (1,655) (1,441)
-------- --------
Total current liabilities (25,025) (26,878)
-------- --------
Total liabilities (30,603) (35,009)
======== ========
NET ASSETS 17,430 12,724
======== ========
EQUITY
Share capital 16 10,688 10,640
Share premium 4,332 4,332
Merger reserve (9,950) (9,950)
Other reserve 1,547 1,013
Treasury reserve (132) (27)
Translation reserve 81 -
Retained earnings 10,864 6,716
-------- --------
TOTAL EQUITY 17,430 12,724
======== ========
Consolidated statement of changes in equity
Share Share Merger Other Treasury Retained Foreign Total
capital premium reserve reserve reserve earnings currency equity
translation
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 May 2015 10,000 - (9,950) - - - - 50
Comprehensive
income:
Profit for the
year - - - - - 8,586 - 8,586
Transactions
with owners
recognised directly
in equity:
Repurchase of
treasury shares - - - - (27) - - (27)
Issue of shares 640 4,482 1,013 - - - 6,135
Share issue
costs - (150) - - - - - (150)
Dividend paid - - - - - (1,995) - (1,995)
Share based
payment transactions - - - - - 125 - 125
-------- -------- -------- -------- -------- --------- ------------ -------
Total equity
at 30
April 2016 10,640 4,332 (9,950) 1,013 (27) 6,716 - 12,724
======== ======== ======== ======== ======== ========= ============ =======
At 1 May 2016 10,640 4,332 (9,950) 1,013 (27) 6,716 - 12,724
Comprehensive
income:
Profit for the
year - - - - - 10,055 - 10,055
Exchange rate
differences 81 81
-------- -------- -------- -------- -------- --------- ------------ -------
Total comprehensive
income - - - - - 10,055 81 10,136
Transactions
with owners
recognised directly
in equity:
Repurchase of
treasury shares - - - - (164) - - (164)
Cash gain into
employee benefit
trust from lock
in arrangements 110 - 110
Sale of treasury
shares - - - - 59 - - 59
Issue of shares 48 - 534 - - - 582
Dividend paid - - - - - (6,342) - (6,342)
Share based
payment transactions - - - - - 325 - 325
-------- -------- -------- -------- -------- --------- ------------ -------
Total equity
at 30
April 2017 10,688 4,332 (9,950) 1,547 (132) 10,864 81 17,430
======== ======== ======== ======== ======== ========= ============ =======
The following describes the nature and purpose of each reserve
within equity:
Share premium - Amount subscribed for share capital in excess of
nominal value.
Merger reserve - Represents the difference between the nominal
value of shares acquired by the Company in the share for share
exchange with the former Gateley Heritage LLP members and the
nominal value of shares issued to acquire them.
Other reserve - Represents the difference between the actual and
nominal value of shares issued by the Company in the acquisition of
subsidiaries.
Treasury reserve - Represents the repurchase of shares for
future distribution by Group's Employee Benefit Trust.
Retained earnings - All other net gains and losses and
transactions with owners not recognised anywhere else.
On 29 May 2015, the Company acquired 100% of the issued share
capital of Gateley Plc which had, on the same day, acquired the
business assets and liabilities of Gateley Heritage LLP, formerly
the partnership of Gateley LLP. Following this Group reorganisation
the financial statements for the year ended 30 April 2016 have been
prepared on a merger accounting basis as though this Group
structure had always been in place and a full twelve month set of
results are therefore presented. The first day of trading of the
Group included in this statement was therefore 1 May 2015.
Although the share for share exchange resulted in a change of
legal ownership, in substance these financial statements reflect
the continuation of the pre-existing group, headed by Gateley
LLP.
Consolidated cash flow statement
for the year ended 30 April 2017
Note 2017 2016
GBP000 GBP000
Cash flows from operating
activities
Profit for the year after
tax 10,055 8,586
Adjustments for:
Depreciation and amortisation 1,291 687
Financial income 6 (237) (265)
Financial expense 6 436 491
Equity settled share based
payments 325 125
Profit on disposal of property,
plant and equipment 2 (8)
Tax expense 7 3,058 2,448
--------- ---------
14,930 12,064
Increase in trade and other
receivables (5,041) (1,387)
Increase in trade and other
payables 636 4,605
Increase in provisions (5) 59
--------- ---------
Cash generated from operations 10,520 15,341
Tax paid (2,844) (1,007)
--------- ---------
Net cash flows from operating
activities 7,676 14,334
--------- ---------
Investing activities
Acquisition of property,
plant and equipment (1,485) (670)
Purchase of other investments - (15)
Consideration paid on acquisition
of subsidiary 20 (508) (1,592)
Cash received on acquisition
of subsidiary 20 280 350
Proceeds from sale of property,
plant and equipment - 16
--------- ---------
Net cash used in investing
activities (1,713) (1,911)
--------- ---------
Financing activities
Issue of ordinary shares,
net of issue costs 16 - 4,910
Interest and other financial
income paid 7 (183) (226)
Proceeds from new term bank
loans 12 - 9,907
Repayment of term bank loans/borrowings 12 (1,980) (989)
Repayment of loans from
former members of Gateley
Heritage LLP 12 (4,552) (10,153)
Repayment of fixed capital
from former members of Gateley
Heritage LLP 12 - (6,717)
Cash received from lock 159 -
in arrangements
Acquisition of own shares (164) (27)
Dividends paid 9 (6,342) (1,995)
Payment of finance lease
liabilities 13 - (57)
--------- ---------
Net cash used in financing
activities (13,062) (5,347)
--------- ---------
Net increase in cash and
cash equivalents (7,099) 7,076
Cash and cash equivalents
at beginning of year 9,795 2,719
--------- ---------
Cash and cash equivalents
at end of year 2,696 9,795
========= =========
Gateley (Holdings) Plc
Notes
For the year ended 30 April 2017
1 Corporate information and legal status
Gateley (Holdings) Plc ("the Company") was incorporated in
England and Wales on 13 November 2014. On 29 May 2015 the Company
acquired 100 per cent of the issued share capital of Gateley Plc
which had, on the same day, acquired the business assets and
liabilities of Gateley Heritage LLP, formerly the partnership of
Gateley LLP. Following this Group reorganisation, the financial
statements have been prepared on a merger accounting basis as
though this Group structure had always been in place and a full
twelve month set of results (for both the current and prior year)
is therefore presented. The first day of trading of the Group
included in this statement was 1 May 2015.
On 8 June 2015, Gateley (Holdings) Plc was admitted to the
Alternative Investment Market ("AIM") of London Stock Exchange
Plc.
1.1 Basis of preparation and significant accounting policies
The financial information set out in this financial results
announcement does not constitute statutory accounts as defined in
section 435 of the Companies Act 2006. The consolidated statement
of comprehensive profit and loss and other comprehensive income,
consolidated statement of financial position, consolidated
statement of change in equity, consolidated statement of cashflows
and the associated notes have been extracted from the group's
financial statements for the year ended 30 April 2017, upon which
the auditor's opinion is unqualified and does not include any
statement under section 498 of the Companies Act 2006. The
statutory accounts for the year ended 30 April 2017 will be
delivered to the Registrar of Companies following the Annual
General Meeting.
These condensed preliminary financial statements for the year
ended 30 April 2017 have been prepared on the basis of the
accounting policies adopted by the Group upon admission to AIM.
These are in accordance with the Group's accounting policies as set
out in the historical financial information included in the AIM
Admission Document.
The recognition and measurement requirements of all
International Financial Reporting Standards ('IFRSs'),
International Accounting Standards ('IAS') and interpretations
currently endorsed by the International Accounting Standards Board
('IASB') and its committees as adopted by the EU and as required to
be adopted by AIM listed companies have been applied.
1.2 Going concern
The Group financial statements are prepared on a going concern
basis as the Directors have a reasonable expectation that the Group
has adequate resources to continue in operational existence for the
foreseeable future. The Group remains cash generative, with a
strong ongoing trading performance. The Group is funded through two
unsecured term loans for GBP5m each repayable quarterly over five
years commencing in December 2015 together with unsecured overdraft
facilities of up to GBP5m. All of the Group's overdraft facilities
are 12 months in duration. The term loan facilities contain
financial covenants which have been met throughout both periods.
The Group's forecasts and projections show that the new facility
provides adequate headroom for its current and future anticipated
cash requirements.
1.3 Statement of Directors' responsibilities
The Directors confirm that, to the best of their knowledge, this
condensed set of consolidated financial statements have been
prepared in accordance with the AIM Rules.
1.4 Cautionary statement
This document contains certain forward-looking statements with
respect of the financial condition, results, operations and
business of the Group. Whilst these statements are made in good
faith based on information available at the time of approval, these
statements and forecasts inherently involve risk and uncertainty
because they relate to events and depend on circumstances that will
occur in the future. There are a number of factors that could cause
the actual results of developments to differ materially from those
expressed or implied by these forward-looking statements and
forecasts. Nothing in this document should be construed as a profit
forecast.
1.5 Financial Assets
The Group's financial assets include cash and cash equivalents
and trade and other receivables. All financial assets are
recognised when the Group becomes party to the contractual
provisions of the instrument.
i) Investments
Other investments such as debt securities and equity securities
held by the Group are classified as being available-for-sale and
are stated at fair value, with any resultant gain or loss being
recognised directly in equity (in the fair value reserve), except
for any dividend income, impairment losses and, in the case of
monetary items such a debt securities, foreign exchange gains and
losses which are recognised in the profit and loss account. When
these investments are derecognised, the cumulative gain or loss
previously recognised directly in equity is recognised in profit or
loss. Where these investments are interest-bearing, interest
calculated using the effective interest method is recognised in
profit or loss.
ii) Trade and other receivables
Trade and other receivables (except unbilled amounts for client
work) are recognised and carried at original invoice amount less
provision for impairment.
A provision for impairment of trade receivables is established
when there is objective evidence that the Group may not be able to
collect all amounts due according to the original terms of
receivables. The amount of the provision is determined as the
difference between the asset's carrying amount and the present
value of estimated future cash flows, and is recognised in the
statement of profit and loss in other operating expenses.
iii) Unbilled amounts for client work (unbilled revenue)
Services provided to clients, which at the year-end date have
not been billed, are recognised as unbilled revenue and included in
trade and other receivables.
Unbilled revenue is valued at selling price less provision for
any foreseeable under recovery when the outcome of the matter can
be assessed with reasonable certainty. In respect of conditional or
contingent fee engagements unbilled revenue is only recognised once
the conditional or contingent event occurs.
iv) Cash and cash equivalents
Cash and cash equivalents includes cash in hand and deposits
held at call with banks. For the purpose of the consolidated cash
flow statement, cash and cash equivalents includes bank overdrafts
in addition to the definition above.
v) Treasury shares
The Group operates an Employee Benefit Trust ("EBT") under which
ordinary shares have been issued and are held by the EBT. These are
treated as treasury shares and are added to the Treasury Share
Reserve.
1.6 Financial Liabilities
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the Group after deducting all of
its liabilities.
The Group's financial liabilities comprise trade and other
payables, borrowings, members' capital and amounts due to members.
All financial liabilities are recognised initially at their fair
value and subsequently measured at amortised cost using the
effective interest method.
i) Bank borrowings
All loans and borrowings are initially recognised at the fair
value of the consideration received net of issue costs associated
with the borrowing. Borrowings are subsequently stated at amortised
cost; any difference between the proceeds (net of transaction
costs) and the redemption value is recognised in the statement of
profit and loss over the period of the borrowings using the
effective interest method
Financial expenses comprise interest expense on borrowings.
ii) Trade and other payables
Trade payables are initially measured at fair value, and are
subsequently measured at amortised cost, using the effective
interest rate method.
iii) Loans from former members
Loans from former members, measured at amortised cost, comprise
of undrawn surplus profits and tax provisions owed to former
members of Gateley Heritage LLP which were converted into unsecured
loans upon admission to the AIM market. Interest is chargeable at
0.5% over Bank of England base rate. The business has full
discretion over the timing of repayment of such loans.
1.7 Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and accumulated impairment losses.
Where parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate items of
property, plant and equipment.
Leases in which the Group assumes substantially all the risks
and rewards of ownership of the leased asset are classified as
finance leases. Where land and buildings are held under leases, the
accounting treatment of the land is considered separately from that
of the buildings. Leased assets acquired by way of finance lease
are stated at an amount equal to the lower of their fair value and
the present value of the minimum lease payments at inception of the
lease, less accumulated depreciation and less accumulated
impairment losses.
Depreciation is charged to the consolidated statement of profit
and loss on a straight-line basis over the estimated useful lives
of each part of an item of property, plant and equipment. The
estimated useful lives are as follows:
Leasehold improvements over the term of the lease
Equipment 33.3% straight line
Fixtures and fittings 20% straight line
Depreciation methods, useful lives and residual values are
reviewed at each statement of financial position date.
1.8 Business combinations
Subject to the transitional relief in IFRS 1, all business
combinations are accounted for by applying the acquisition method.
Business combinations are accounted for using the acquisition
method as at the acquisition date, which is the date on which
control is transferred to the Group.
Acquisitions on or after 1 January 2010
-- For acquisitions on or after 1 January 2010, the Group
measures goodwill at the acquisition date as:
-- the fair value of the consideration transferred; plus
-- the recognised amount of any non-controlling interests in the acquiree; plus
-- the fair value of the existing equity interest in the acquiree; less
-- the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is
recognised immediately in profit or loss.
Costs related to the acquisition, other than those associated
with the issue of debt or equity securities, are expensed as
incurred.
Any contingent consideration payable is recognised at fair value
at the acquisition date. If the contingent consideration is
classified as equity, it is not remeasured and settlement is
accounted for within equity. Otherwise, subsequent changes to the
fair value of the contingent consideration are recognised in profit
or loss.
On a transaction-by-transaction basis, the Group elects to
measure non-controlling interests, which have both present
ownership interests and are entitled to a proportionate share of
net assets of the acquiree in the event of liquidation, either at
its fair value or at its proportionate interest in the recognised
amount of the identifiable net assets of the acquiree at the
acquisition date. All other non-controlling interests are measured
at their fair value at the acquisition date.
1.9 Intangible assets and goodwill
Goodwill
Goodwill is stated at cost less any accumulated impairment
losses. Goodwill is allocated to cash-generating units and is not
amortised but is tested annually for impairment. In respect of
equity accounted investees, the carrying amount of goodwill is
included in the carrying amount of the investment in the
investee.
Other intangible assets
Expenditure on internally generated goodwill and brands is
recognised in the income statement as an expense as incurred.
Other intangible assets that are acquired by the Group are
stated at cost less accumulated amortisation and accumulated
impairment losses.
Customer lists that are acquired by the Group as part of a
business combination are stated at cost less accumulated
amortisation and impairment losses (see accounting policy
'Impairment of assets'). Cost reflects management's judgement of
the fair value of the individual intangible asset calculated by
reference to the net present value of future benefits accruing to
the Group from the utilisation of the asset, discounted at an
appropriate discount rate.
Amortisation
Amortisation is charged to the income statement on a
straight-line basis over the estimated useful lives of intangible
assets unless such lives are indefinite. Intangible assets with an
indefinite useful life and goodwill are systematically tested for
impairment at each statement of financial position date. Other
intangible assets are amortised from the date they are available
for use. The estimated useful lives are as follows:
Customer lists 10 years
1.10 Investment property
Investment properties are properties which are held either to
earn rental income or for capital appreciation or for both.
Investment properties are stated at fair value. Any gain or loss
arising from a change in fair value is recognised in profit or
loss.
1.11 Impairment excluding investment properties
Financial assets (including receivables)
A financial asset not carried at fair value through profit or
loss is assessed at each reporting date to determine whether there
is objective evidence that it is impaired. A financial asset is
impaired if objective evidence indicates that a loss event has
occurred after the initial recognition of the asset, and that the
loss event has a negative effect on the estimated future cash flows
of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at
amortised cost is calculated as the difference between its carrying
amount and the present value of the estimated future cash flows
discounted at the asset's original effective interest rate.
Interest on the impaired asset continues to be recognised through
the unwinding of the discount. When a subsequent event causes the
amount of impairment loss to decrease, the decrease in impairment
loss is reversed through profit or loss.
Intangibles and property, plant and equipment
The carrying amount of the Group's assets including property,
plant and equipment and intangibles other than goodwill is reviewed
at each year end date to determine whether there is any indication
of impairment. If any such indication exists, the asset's
recoverable amount is estimated.
An impairment loss is recognised whenever the carrying amount of
an asset or its cash-generating unit exceeds its recoverable
amount. Impairment losses are recognised in profit or loss. Where
an impairment loss subsequently reverses, the carrying amount of
the asset (or cash-generating unit) is increased to the revised
estimate of its recoverable amount, but so that the increased
carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised for the
asset (or cash-generating unit) in prior years. A reversal of an
impairment loss is recognised in profit or loss where it relates to
an amount charged to profit or loss.
Goodwill
Goodwill is capitalised as an intangible asset and is not
amortised but tested for impairment annually and when there are any
indications that its carrying value is not recoverable. As such,
goodwill is stated at cost less any provision for impairment in
value. For impairment testing purposes, goodwill is allocated to
cash-generating units. If a subsidiary undertaking is subsequently
sold, goodwill arising on acquisition is taken into account in
determining the profit or loss on sale.
1.12 Employee benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan
under which the Company pays fixed contributions into a separate
entity and will have no legal or constructive obligation to pay
further amounts. Obligations for contributions to defined
contribution pension plans are recognised as an expense in the
statement of profit and loss in the periods during which services
are rendered by employees.
Short-term benefits
Short-term employee benefit obligations are measured on an
undiscounted basis and are expensed as the related service is
provided. A liability is recognised for the amount expected to be
paid under short-term cash bonus or profit-sharing plans if the
Group has a present legal or constructive obligation to pay this
amount as a result of past service provided by the employee and the
obligation can be estimated reliably.
Share-based payment transactions
The Group operates an equity settled share based compensation
plan.
The grant date fair value of share-based payment awards made to
employees is recognised as an employee expense, with a
corresponding increase in equity, over the period that the
employees become unconditionally entitled to the awards. The fair
value of the options granted is measured using an option valuation
model, taking into account the terms and conditions upon which the
options were granted.
Share-based payment transactions (continued)
The amount recognised as an expense is adjusted to reflect the
actual number of awards for which the related service and
non-market vesting conditions are expected to be met, such that the
amount ultimately recognised as an expense is based on the number
of awards that meet the related service and non-market performance
conditions at the vesting date, measured at the grant date fair
value of the award.
At each reporting date, the group revises its estimates of the
number of share incentives which are expected to vest. The impact
of the revision of original estimates is recognised in the income
statement with a corresponding adjustment to equity.
1.13 Own shares held by EBT trust (treasury reserve)
Transactions of the group-sponsored EBT trust are included in
the group financial statements. In particular, the trust's
purchases and sales of shares in the Company are debited and
credited directly to equity.
1.14 Professional indemnity provisions
A provision is recognised in the statement of financial position
when the Group has a present legal or constructive obligation as a
result of a past event, that can be reliably measured and it is
probable that an outflow of economic benefits will be required to
settle the obligation. Where material, the impact of the time value
of money is taken into account by discounting the expected future
cash flow at a pre-tax rate, which reflects risks specific to the
liability.
Insurance cover is maintained in respect of professional
negligence claims. This cover is principally written through
insurance companies with a coverage of up to GBP150 million for
each claim. Premiums are expensed as they fall due with prepayments
or accruals being recognised accordingly.
In the event the insurance companies cannot settle the full
liability, the liability will revert to the Group.
1.15 Revenue recognition
Revenue
Revenue represents the fair value of the consideration
receivable in respect of professional services provided during the
year,
inclusive of recoverable expenses incurred on client assignments
but excluding value added tax. Where the outcome of a
transaction can be estimated reliably, revenue associated with
the transaction is recognised in the income statement by reference
to the stage of completion at the year end, provided that a right
to consideration has been obtained
through performance. Consideration accrues as contract activity
progresses by reference to the value of work performed.
Where the outcome of a transaction cannot be estimated reliably,
revenue is recognised only to the extent that the costs
of providing the service are recoverable. No revenue is
recognised where there are significant uncertainties regarding
recovery of the consideration due or where the right to receive
payment is contingent on events outside the control of
the group. Amounts deemed to be recoverable on the engagement
(on the basis above) are recognised in unbilled
revenue and form part of Trade and other receivables.
Recoverable expenses and disbursements represent charges from
other professional service firms, sub-contractors and out of pocket
expenses incurred in respect of assignments and expected to be
recovered from clients.
Rental income is recognised on a straight line basis over the
lease term.
1.16 Operating lease payments
Payments made under operating leases are recognised in the
statement of profit and loss on a straight-line basis over the term
of the lease. Lease incentives received are recognised in the
statement of profit and loss over the term of the lease as an
integral part of the total lease expense.
1.17 Financial income and expenses
Financial expenses comprise interest payable and exchange losses
that are recognised in the statement of profit and loss. Financial
income comprises interest receivable on funds invested and exchange
gains.
Interest income and interest payable is recognised in profit or
loss as it accrues, using the effective interest method.
1.18 Taxation
Tax on the profit or loss for the year comprises current and
deferred tax. Tax is recognised in the income statement except to
the extent that it relates to items recognised directly in equity,
in which case it is recognised in equity.
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates and laws
enacted or substantively enacted at the statement of financial
position date, and any adjustment to tax payable in respect of
previous years.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition
of goodwill; the initial recognition of assets or liabilities that
affect neither accounting nor taxable profit other than in a
business combination, and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax provided is
based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates and laws
enacted or substantively enacted at the statement of financial
position date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the temporary difference can be utilised.
1.19 Non-underlying items
Non-underlying items are non-trading items disclosed separately
in the Consolidated Income Statement where the quantum, nature or
volatility of such items would otherwise distort the underlying
trading performance of the Group. The following are included by the
Group in its assessment of non-underlying items:
-- Gains or losses arising on disposal, closure, restructuring
or reorganisation of businesses that do not meet the definition of
discontinued operations.
-- Expenses associated with acquisitions.
-- Impairment charges in respect of tangible or intangible fixed assets.
-- Costs incurred as part of significant refinancing activities.
-- Significant costs in relation to the IPO.
The tax effect of the above is also included if considered
significant.
Details in respect of the non-underlying items recognised in the
current and prior year are set out in note 5 to the Financial
Statements.
1.20 Ordinary dividends
Dividends are recognised as a liability in the period in which
they are approved by the Company's shareholders.
1.21 Adopted IFRS not yet applied
The following Adopted IFRSs have been issued and endorsed by the
EU but have not been applied by the Group in these financial
statements. Their adoption is not expected to have a material
effect on the financial statements (other than IFRS 15 and IFRS
16):
Endorsed:
-- IFRS 15 - Revenue from contracts with customer (effective
from 1 January 2018)
-- IFRS 9 - Financial instruments
Not yet endorsed by EU and included as may be relevant:
-- IFRS 16 - Leases
-- Amendments to IAS 12 - Recognition of Deferred Tax Assets for
Unrealised losses
-- Amendments to IFRS 2 - Classification and measurement of
share-based payment transactions
-- Amendments to IAS 40 - Transfer of investment property
-- IFRIC Interpretation 22 - Foreign currency transactions and
advance considerations
There are other standards in issue which are not considered
applicable and are not expected to have an impact on the Company
and have therefore not been included in the list above. Both IFRS
15 and IFRS 16 are expected to require amendments for operating
revenue and operating leases however management are undertaking an
exercise to determine the impact on results and have not yet
quantified this.
The directors have not yet calculated the impact that the
adoption of the other Standards and Interpretations noted in future
periods will have.
2 Operating segments
The Chief Operating Decision Maker ("CODM") is the Strategic
Board. The Group have the following five strategic divisions, which
are its reportable segments. These divisions offer different
products and services and are managed separately because they
report different specialisms from the legal teams in those
divisions.
The following summary describes the operations of each
reportable segment:
Reportable segment Operations
Banking and Financial Services Provision of legal advice in
respect of asset finance, banking and
restructuring services
Corporate Provision of legal advice in respect of corporate,
family, private client and
taxation services
Business Services Provision of legal advice in respect of
commercial, commercial dispute resolution, litigation, regulatory,
shipping, transport and insurance services
Employees, Pensions and Benefits Provision of legal advice in
respect of employment and pension services, including Entrust
Pension Limited's trustee services.
Property Provision of legal advice in respect of construction,
planning, real estate and residential development services. Also
includes Gateley Capitus Limited's property related tax incentive
services together with Gateley Hamer Limited's easement and
wayleave and compulsory purchase order services.
The revenue and operating profit are attributable to the
principal activities of the Group. A geographical analysis of
revenue is given below:
2017 2016
GBP000 GBP000
United Kingdom 73,711 63,180
Europe 1,870 2,288
Middle East 712 443
North and South America 372 275
Asia 416 346
Other 506 529
------ ------
77,587 67,061
====== ======
The Group's assets and costs are predominately located in the UK
save for those assets and costs located in the United Arab Emirates
(UAE) via its Dubai branch. Net assets of GBP0.4m (2016: GBP0.2)
together with costs of GBP1.6m (2016: GBP1.2m) are located in the
Group's Dubai branch. Revenue generated by the Group's Dubai branch
to customers in the UAE totalled GBP712,000 (2016: GBP443,000) as
disclosed above as due to the customers in the Middle East.
The Group has no individual customers that represent more than
10% of revenue in either the 2017 or 2016 financial year.
2017
Banking and Corporate Business Employee Property Total Other Total
Financial Services Pensions segments expense
Services and and movement
Benefits in unbilled
revenue
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Segment revenue 15,146 14,074 10,946 7,130 28,562 75,858 1,729 77,587
----------- --------- --------- --------- -------- --------- ------------- --------
Segment contribution
(as reported
internally) 6,306 4,082 4,542 2,645 12,978 30,553 1,729 32,282
Costs not
allocated
to segments:
Other operating
income 445
Personnel
costs (5,391)
Depreciation
and
amortisation (1,282)
Other operating
expenses (12,742)
Net financial
expense (199)
--------
Profit for
the financial
year before
taxation
and non-underlying
items 13,113
========
2016
Banking and Corporate Business Employee Property Total Other Total
Financial Services Pensions segments expenses
Services and And movement
Benefits in unbilled
revenue
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Segment revenue 13,550 11,345 10,295 7,273 22,349 64,812 2,249 67,061
----------- --------- --------- --------- -------- --------- ------------- --------
Segment contribution
(as reported
internally) 6,304 3,157 4,037 2,456 10,132 26,086 2,249 28,335
Costs not
allocated
to segments
Other operating
income 442
Personnel
costs (3,882)
Depreciation
and
amortisation (687)
Other operating
expenses (12,092)
Net financial
expense (226)
--------
Profit for
the financial
year before
taxation
and non-underlying
items 11,890
========
No other financial information has been disclosed as it is not
provided to the CODM on a regular basis.
3 Other operating income
2017 2016
GBP000 GBP000
Rental income 396 326
Other investment income 49 116
------ ------
445 442
====== ======
4 Expenses and auditor's remuneration
Included in profit are the following:
2017 2016
GBP000 GBP000
Depreciation on tangible assets 819 687
Amortisation of intangible assets 473 -
Operating lease costs 230 220
Operating lease costs on property 3,094 2,722
Other operating income - rent received (275) (326)
Foreign exchange (gains)/losses (43) 4
Loss/(profit) on sale of fixed assets 2 (8)
====== ======
Non-underlying items and IFRS transition adjustments
2017 2016
GBP000
Listing costs - 755
One-off professional costs - 101
---- ------
- 856
==== ======
Non-underlying items in the prior year relate to one-off
professional costs in respect of the Group's future strategy,
on-going lease restructuring costs of certain offices together with
additional costs resulting from the release of operating lease
incentives in accordance with IFRS, whereby lease incentives are
now recognised over the full term of the lease.
Non-underlying items in the current year relate to expenses
incurred in respect of the Company's admission to the AIM market of
the London Stock Exchange.
4 Expenses and auditor's remuneration (continued)
Auditor's remuneration
2017 2016
GBP000 GBP000
Audit of these financial statements 55 92
Amounts receivable by the Company's
auditor and its associates in respect
of:
Audit of financial statements of
subsidiaries of the Company 19 15
Other assurance services 26 92
Corporate finance services - 300
Tax compliance services 11 33
====== ======
5 Employees
The average number of persons employed by the Group during the
year, analysed by category, was as follows:
Number of employees
2017 2016
Legal staff 457 392
Administrative staff 239 230
--------------- --------------
696 622
=============== ==============
The aggregate payroll costs of these persons were as
follows:
2017 2016
GBP000 GBP000
Wages and salaries 40,458 34,733
Share based payments expenses 325 125
Social security costs 4,075 3,491
Pension costs 700 602
------ ------
45,558 38,951
====== ======
6 Financial income and expense
Recognised in profit and loss
2017 2016
GBP000 GBP000
Financial income
Interest income 237 265
------ ------
Total finance income 237 265
====== ======
Financial expense
Interest expense on bank borrowings
measured at amortised cost (436) (491)
------ ------
Total financial expense (436) (491)
====== ======
Net financial expense (199) (226)
====== ======
7 Taxation
2017 2016
GBP000 GBP000
Current tax expense
Current tax on profits for the year 3,069 2,448
Under provision of taxation in previous
period 84 -
------ ------
Total current tax 3,153 2,448
====== ======
Deferred tax expense
Origination and reversal of temporary
differences (95) -
------ ------
Total tax expense 3,058 2,448
====== ======
The reasons for the difference between the actual tax charge for
the year and the standard rate of corporation tax in the United
Kingdom applied to profits for the year are as follows:
2017 2016
GBP000 GBP000
Profit for the year (subject to
corporation tax) 13,428 11,034
------ ------
Tax using the Company's domestic
tax rate of 20% (2016 - 20%) 2,686 2,207
Expenses not deductible for tax
purposes 288 241
Under provision of taxation in previous
period 84 -
------ ------
Total tax expense 3,058 2,448
====== ======
Reductions in the UK corporation tax rate to 20% (effective from
1 April 2015) were substantively enacted on 2 July 2013. Further
reductions to 19% (effective from 1 April 2017) and to 18%
(effective 1 April 2020) were substantively enacted on 26 October
2015. The deferred tax liability at 30 April 2016 has been
calculated based on these rates. An additional reduction to 17%
(effective from 1 April 2020) was announced in the Budget on 16
March 2016. This will reduce the Company's future current tax
charge accordingly
8 Earnings per share
Statutory earnings per share
2017 2016
Number Number
Weighted average number of ordinary
shares in issue, being weighted
average number of shares for calculating
basic earnings per share 106,663,150 104,928,209
Shares deemed to be issued for no
consideration in respect of share
based payments 759,599 -
Weighted average number of ordinary
shares for calculating diluted earnings
per share 106,422,749 104,928,209
=========== ===========
2017 2016
GBP000 GBP000
Profit for the year and basic earnings
attributable to ordinary equity
shareholders 10,055 8,586
Non-underlying items (see note 4)
Operating expenses and finance costs - 856
Tax on non-underlying items - (20)
----------- -----------
Underlying earnings before non-underlying
items 10,055 9,422
Earnings per share is calculated
as follows:
2017 2016
pence pence
Basic earnings per ordinary share 9.43 8.18
Diluted earnings per ordinary share 9.35 8.18
Basic earnings per ordinary share
after non-underlying items 9.43 8.98
Diluted earnings per ordinary share
after non-underlying items 9.35 8.98
Underlying earnings per share have been shown because the
Directors consider that this provides valuable additional
information about the underlying performance of the Group.
9 Dividends
2017 2016
GBP'000 GBP'000
Equity shares:
Interim dividend in respect of 2016
(1.895p per share) - 22 January
2016 - 1,995
Final dividend in respect of 2016
(3.746p per share) - 28 September
2016 3,996 -
Interim dividend in respect of 2017
(2.2p per share) - 3 March 2017 2,344 -
------- -------
6,340 1,995
======= =======
The Board proposes to recommend a final dividend of 4.4p (2016:
3.746p) per share at the AGM. If approved, this dividend will be
paid in early October 2017 to shareholders on the register at the
close of business on 8 September 2017. The shares will go
ex-dividend on 7 September 2017. This dividend has not been
recognised as a liability in these final statements.
10 Intangible assets and goodwill
Goodwill Customer Total
lists
GBP'000 GBP'000 GBP'000
Deemed cost
At 1 May 2015 - - -
Acquisitions through business combinations 1,515 1,000 2,515
-------- -------- -------
At 30 April 2016 1,515 1,000 2,515
Acquisitions through business combinations 1,161 638 1,799
-------- -------- -------
At 30 April 2017 2,676 1,638 4,314
======== ======== =======
Amortisation
At 1 May 2015 at 30 April 2016 - - -
Charge for the year - 472 472
-------- -------- -------
At 30 April 2017 - 472 472
======== ======== =======
Carrying amounts
At 30 April 2016 1,515 1,000 2,515
======== ======== =======
At 30 April 2017 2,676 1,166 3,842
======== ======== =======
Impairment testing
The Group tests goodwill annually for impairment. The impairment
test involves determining the recoverable amount of the cash
generating unit to which the goodwill has been allocated. The
directors believe that each operating segment represents a cash
generating unit for the business and as a result, impairment is
tested for each segment, and all the assets of each segment are
considered. All of the goodwill is allocated to the property cash
generating unit. The recoverable amount is based on the present
value of expected future cash flows (value in use) which was
determined to be higher than the carrying amount of goodwill so no
impairment loss was recognised. Value in use was determined by
discounting the future cash flows generated from the continuing
operation of the Group and was based on the following key
assumptions:
-- A pre-tax discount rate of 15% was applied in determining the
recoverable amount. The discount rate is based on the average
weighted cost of capital
-- The values assigned to the key assumptions represent
management's estimate of expected future trends and are based on
both external (industry experience, historic market performance)
and internal sources (existing management knowledge, track record
and an in-depth understanding of the work types being
performed).
-- Growth rates of between 10-20% are based on management's
understanding of the market opportunities for services provided
pertaining to the industry concerned.
-- Increases in costs are based on current inflation rates and
expected levels of recruitment needed to generate predicted
turnover growth.
-- Attrition rates are based on the expected level of fees from
existing clients as a percentage of total forecast fees
-- Cashfows have been assessed over a five year period which
management consider to be the correct average life of clients
relationships
-- The review demonstrated significant headroom such that the
estimated carrying value is not sensitive to changes in
assumptions. Having reviewed the key assumptions used, the
Directors do not believe that there is a reasonably possible change
in any of the key assumptions that require further disclosure
11 Trade and other receivables
2017 2016
GBP000 GBP000
Trade receivables 26,132 20,759
Unbilled revenue 10,487 9,881
Prepayments 2,467 3,056
39,086 33,696
====== ======
All trade receivables are repayable within one year.
Movement in the allowance for doubtful receivables
2017 2016
GBP000 GBP000
Brought forward provision (1,792) (1,828)
Provision utilised 302 555
Charged to income (815) (913)
Provisions released 294 394
------- -------
(2,011) (1,792)
======= =======
Receivables not impaired past due
2017 2016
GBP000 GBP000
Not past due 18,464 13,074
Past due 0-30 days 1,864 1,480
Past due 31-120 days 3,212 3,303
Past due greater than 120 days 4,603 4,694
------ ------
28,143 22,551
====== ======
The carrying amount of financial assets recorded in the
financial statements, which is net of any impairment losses,
represents the Group's maximum exposure to credit risk. Financial
assets include client and other receivables and cash. The Group
does not hold collateral over these balances.
All of the group's trade and other receivables have been
reviewed for indicators of impairment. The impaired trade
receivables are mostly due from customers experiencing financial
difficulties.
12 Other interest-bearing loans and borrowings
The contractual terms of the Group's interest-bearing loans and
borrowings, which are measured at amortised cost are described
below. For more information about the Group's exposure to interest
rate and foreign currency risk, see note 21.
2017 2016
Fair Carrying Fair Carrying
value amount value amount
GBP000 GBP000 GBP000 GBP000
Non-Current liabilities
Unsecured bank loan 4,958 4,958 6,938 6,938
Loans from former members - - 500 500
4,958 4,958 7,438 7,438
====== ======== ====== ========
Current liabilities
Unsecured bank loan 1,980 1,980 1,980 1,980
Loans from former members 551 551 4,603 4,603
2,531 2,531 6,583 6,583
====== ======== ====== ========
The unsecured overdraft facilities totalling GBP5m are repayable
on demand.
On 8 June 2015, Gateley Plc entered into two new loan agreements
of GBP5m each. The total GBP10m of term loans are repayable
quarterly over five years commencing on 8 November 2015. Interest
is chargeable at 2.25% over LIBOR.
On the 8 June 2015 all amounts relating to individual members
capital classified as a liability together with amounts due to
members were converted into Loans from former members. Loans were
repayable quarterly over a period of not less than two years
subject to adequate working capital facilities, in the opinion of
the board of directors, within the Group being available to
accommodate such payments. Repayment of the remaining liabilities
are forecast to be made quarterly from May 2016 with the final
payment arising in quarter one of the year ended 30 April 2018.
Interest is chargeable at 0.5% over Bank of England base rate.
13 Trade and other payables
2017 2016
GBP000 GBP000
Current
Trade payables 5,204 5,844
Other taxation and social security
payable 4,671 4,153
Other payables 1,395 653
Accruals 9,359 7,947
20,629 18,597
====== ======
Non-current
Other payables - 154
====== ======
Current other payables include GBP0.05m (2016: GBP0.22m) in
respect of deferred consideration being a final payment due for the
acquisition of Gateley Capitus Limited together with GBP0.96m in
respect of deferred consideration scheduled for payment after 31
March 2018 following the acquisition of Gateley Hamer Limited
(formerly Hamer Associates Limited). GBP0.42m of Gateley Hamer
Limited deferred consideration is to be settled by way of 10p
ordinary shares with the balance payable in cash.
14 Deferred tax liability
Customer lists Total
GBP'000 GBP'000
At 1 May 2015 - -
Acquisitions through business combinations - Gateley Capitus
Limited 200 200
-------------- -------
At 30 April 2016 200 200
Acquisitions through business combinations - Gateley Hamer
Limited (formerly Hamer Associates Limited) 134 134
Credited during the year in the Consolidated income statement (95) (95)
-------------- -------
At 30 April 2017 239 239
============== =======
15 Provisions
Professional indemnity
2017 2016
GBP000 GBP000
Brought forward 596 -
On incorporation - 537
Provisions made during the year 270 325
Provisions used during the year (91) (178)
Provisions reversed during the year (184) (88)
------ ------
At end of year 591 596
====== ======
Non-current 381 339
Current 210 257
------ ------
591 596
====== ======
The professional indemnity provision represents amounts equal to
the insurance excesses payable on outstanding claims against the
Group which are covered by the Company's professional indemnity
insurance policy. The amount or timing of amounts payable in these
cases are uncertain as the resolution of the cases are unknown at
the year end.
16 Share capital
Authorised, issued and fully paid
2017 2017 2016 2016
Number GBP Number GBP
Ordinary shares of
10p each
Brought forward 106,396,912 10,639,691 - -
On incorporation -
13 November 2014 10 1
Issued on acquisition
of business - - 100,000,001 10,000,000
Issued on initial
public offering - - 5,274,148 527,415
Issued on acquisition
of Gateley Capitus
Limited - - 1,122,753 112,275
Issued on acquisition
of Gateley Hamer Limited
(formerly Hamer Associates
Limited) 388,029 38,803 - -
Issued as part of
deferred consideration
of Gateley Hamer Limited
(formerly Hamer Associates
Limited) 97,012 9,701 - -
----------- ---------- ----------- ----------
At 30 April 2017 106,881,953 10,688,195 106,396,912 10,639,691
=========== ========== =========== ==========
The share capital reflects the shares issued to acquire Gateley
Plc on 29 May 2015. In line with the requirements of merger
accounting, the structure and share capital issued has been
recorded as though it had always been in place.
On the Group's admission to the AIM market of London Stock
Exchange Plc on 8 June 2015, a further 5,274,148 10p ordinary
shares were issued and fully paid up.
On 8 April 2016 the Group acquired the entire issued share
capital of Gateley Capitus Limited (formerly Capitus Limited) in
part for the issue of 1,122,753 10p ordinary shares.
On 15 September 2016 the Group acquired the entire issued share
capital of Gateley Hamer Limited (formerly Hamer Associates
Limited) in part for the issue of 388,029 10p ordinary shares. This
was followed by a further issue in respect of 97,012 10p ordinary
shares in line with deferred consideration conditions of the
acquisition.
17 Share based payments
Group
At year end the Group has three share based payment scheme in
operation.
Scheme 1 - Stock Appreciation Rights Scheme ('SARS')
This SARS is a discretionary executive reward plan which allows
the Group to grant conditional share awards or nil cost options to
selected executives at the discretion of the Remuneration
Committee.
The awards vest after a three year performance period. On
exercise, participants will receive the growth in value of the
share options between the date of grant and the date of exercise in
excess of the hurdle rate. The hurdle rate is currently set at
115.765% of the market value of the underlying shares on the date
of grant.
Awards granted under the scheme are summarised below:
Weighted average exercise price Number of options
8 June 2015
Granted on admission GBP1.0997 7,200,000
Forfeited during previous year GBP1.0997 (150,000)
Forfeited during the year GBP1.0997 (100,000)
-------------------------------- -----------------
Outstanding at end of year GBP1.0997 6,950,000
-------------------------------- -----------------
Weighted average remaining contractual life 1.2 years
Weighted average exercise price Number of options
7 October 2016
Granted on admission GBP1.3880 10,850,000
Forfeited during the year - -
-------------------------------- -----------------
Outstanding at end of year GBP1.3880 10,850,000
-------------------------------- -----------------
Weighted average remaining contractual life 2.4 years
Scheme 2 - Company Share Option Plan ('CSOP')
The Group operates an HMRC approved CSOP scheme for associates,
senior associates, legal directors, equivalent positions in Gateley
Group subsidiary companies and senior management positions in our
support teams. Options under this scheme will vest if the
participant remains employed for the agreed vesting period of three
years. Upon vesting, each option allows the holder to purchase the
allocated ordinary shares at the price on the date of grant. Share
options and weighted average exercise prices are as follows for the
reporting periods presented:
Weighted average exercise price Number of options
20 December 2016
Granted on admission 1.305p 946,433
Forfeited during the year 1.305p (13,411)
------------------------------- -----------------
Outstanding at end of year 1.305p 933,022
------------------------------- -----------------
Weighted average remaining contractual life 2.7 years
Scheme 3 - Save As You Earn scheme ('SAYE')
The Group operates an HMRC approved SAYE scheme for all staff.
Options under this scheme will vest if the participant remains
employed for the agreed vesting period of three years. Upon
vesting, each option allows the holder to purchase the allocated
ordinary shares at a discount of 20% of the market price determined
at the grant date. Share options and weighted average exercise
prices are as follows for the reporting periods presented:
Weighted average exercise price Number of options
1 October 2016
Granted on admission 0.95p 1,166,646
Forfeited during the year 0.95p (45,848)
------------------------------- -----------------
Outstanding at end of year 0.95p 1,120,798
------------------------------- -----------------
Weighted average remaining contractual life 2.4 years
Fair value calculations
The award is accounted for as equity-settled under IFRS 2. The
fair value of awards which are subject to non-market based
performance conditions is calculated using the Black Scholes option
pricing model. The inputs to this model for awards granted during
the financial year are detailed below:
CSOP SAYE SARS SARS
Grant date 20 December 2016 1 October 2016 7 October 8 June
2016 2015
Share price at date of grant 1.305p 0.95p GBP1.20p GBP0.95p
Exercise price 1.305p 0.95p GBP1.39p GBP1.10p
Volatility 24% 24% 24% 24%
Expected life 3.3 years 3.3 years 3.3 years 3.3 years
Risk free rate 1% 1% 1% 1%
Dividend yield 4% 4% 4% 6%
Fair value per share
Market based performance condition GBP0.15p GBP0.25p GBP0.06p GBP0.05p
Non-market based performance - - - -
condition/no performance condition
---------------- -------------- --------- ---------
As the Group had only limited share price history at the date of
grant, expected volatility was based on a proxy volatility
determined from the median volatility of a group of appropriate
comparator companies. For the same reason, a similar approach was
followed to derive the dividend yield. Expected life has been taken
to be between the minimum and maximum exercise period of three and
three and a half years, respectively.
The total charge to the income statement for all schemes now in
place, included within personnel costs, is GBP325,000 (2016:
GBP125,000).
18 Accounting estimates and judgements
The preparation of consolidated financial statements under IFRS
requires management to make estimates and assumptions which affect
the reported amount of revenues, expenses, assets and liabilities
and the disclosure of contingent liabilities. If in the future such
estimates and assumptions, which are based on management's best
judgement at the date of preparation of the financial statements,
deviate from actual circumstances, the original estimates and
assumptions will be modified as appropriate in the period in which
the circumstances change. The key areas where a higher degree of
judgement or complexity arises, or where estimates and assumptions
are significant to the consolidated financial statements are
discussed below.
Impairment assessment of trade receivables
The total carrying amount of trade receivables on client
assignment is held net of impairment losses after consideration is
given to the clients' willingness to pay those amounts accrued. The
valuation of amounts recoverable and not recoverable on trade
receivables involves significant judgement. The estimation of
provisions is established based on interactions between finance,
the legal staff member and clients, mindful of the specific
circumstances of clients and individual matters and invoices.
Historic performance of client's ability to settle past debts and
their current financial position play a significant part in
management's assessment of whether a provision in full or in part
may be necessary.
Unbilled revenue on client assignments
The valuation of unbilled revenue involves significant
judgement, and affects the amount of revenue recognised. The
valuation is based on an estimate of the amount expected to be
recoverable from clients on unbilled items based on such factors as
time spent, the expertise and skills provided and the stage of
completion of the assignment. Provision is made for such factors as
historical recoverability rates, contingencies, agreements with
clients, external expert's opinion and the potential credit risks,
following interactions between legal staff, finance and clients. In
assessing whether unbilled time is recognised as unbilled revenue,
management are required to make judgements in determining the point
at which the contingency is resolved and when the fair value of
consideration can be measured reliability. Where a case is
contingent at the statement of financial position date, no revenue
is recognised. Where entitlement to income is certain it is
recognised at selling price.
Professional indemnity provisions
The Group occasionally receives claims in respect of
professional service matters. The possibility of future exposure to
the Group of any such claims involves significant judgement by
Management and the Group's insurance providers. The Group defends
such claims where appropriate but makes a provision for possible
amounts considered likely to be payable, up to the deductible
amount under the Group's related insurance arrangements. These
provisions are estimates, capped at the negotiated excess in place
during the year each claim is reported. The actual amount settled
upon, if at all, of future claims are dependent on future events.
Management reviews these provisions at each reporting date with its
insurers.
Valuation of intangibles
Measurement of intangible assets relating to acquisitions: In
attributing value to intangible assets arising on acquisition,
management has made certain assumptions in terms of cash flows
attributable to intellectual property and customer relationships.
The key assumptions relate to the trading performance of the
acquired business and discount rates applied to calculate the
present value of future cash flows. The directors consider the
resulting valuations to be reasonable approximations as to the
value of the intangibles acquired.
Share based payment
The fair value of services received in return for share options
granted is measured by reference to the fair value of share options
granted. The estimate of fair value is measured using the
Black-Scholes model. The use of a valuation model such as this
involves making certain assumptions around the inputs into the
model. There is also uncertainty around the number of shares likely
to vest and the model therefore takes into account management's
best estimate of this.
19 Pensions
The Group participates in a defined contribution scheme operated
by Aegon UK plc, the assets of which are held separately from the
Group. The amounts charged to the profit and loss account in
respect of this scheme represent contributions payable in respect
of the accounting year. The total annual pension cost for the
defined contribution scheme was GBP699,512 (2016: GBP602,000) and
the outstanding balance at the year- end was GBP126,180 (2016:
GBP114,000).
20 Business combinations
On 19 May 2015, the Company acquired 100% of the share capital
of Gateley EBT Limited for GBP1.
On 29 May 2015, the Company acquired 100% of the share capital
of Gateley Plc via a share for share exchange.
On 29 May 2015, the Company acquired 100% of the share capital
of Entrust Pension Limited for GBP1.
On 29 May 2015, the Company acquired the membership interest of
Gateley UK LLP for GBP1.
On 8 April 2016 the Company acquired 100% of the voting equity
interest of Gateley Capitus Limited, a UK specialist tax incentives
advisory business. The acquisition has been accounted for using the
acquisition method.
Acquisition of Gateley Hamer Limited ("GHL") (Formerly Hamer
Associates Limited).
On 15 September 2016 the Company acquired 100% of the voting
equity interest of GHL, a specialist property consultancy business.
The acquisition has been accounted for using the acquisition
method. The fair value of the identifiable assets and liabilities
of GHL as at the date of the acquisition was:
Pre-acquisition Policy alignment and fair value adjustments Total
carrying amount
GBP'000 GBP'000 GBP000
Property, plant and equipment 16 - 16
Intangible asset relating to brand - 638 638
Cash and short term deposits 280 - 280
Trade receivables 335 - 335
Prepayments and accrued income 14 - 14
Total assets 645 638 1,283
---------------- ------------------------------------------- ------
Trade payables - - -
Other taxation and social security payable (206) - (206)
Accruals (54) - (54)
Deferred tax - (134) (134)
---------------- ------------------------------------------- ------
Total liabilities (260) (134) (394)
---------------- ------------------------------------------- ------
Total identifiable net assets at fair value 385 504 889
Goodwill arising on acquisition 1,161
------
Total acquisition cost 2,050
------
Analysed as follows:
Initial cash consideration paid 508
Issue of new 10p ordinary shares in Gateley
(Holdings) Plc 459
Deferred share consideration payable * 542
Deferred cash consideration payable 541
------
2,050
------
Cash outflow on acquisition
Cash paid (508)
Acquisition costs -
Net cash acquired with subsidiary (Included in
cash flows from investing activities) 280
------
Net cash outflow (228)
------
* On the 3 February 2017 GBP125,000 of deferred consideration
was subsequently settled by way of issue of ordinary shares of 10p
each.
From the date of acquisition, GHL has contributed GBP0.87m to
revenue and GBP0.16m to Group profit for the year. If the
combination had taken place at the beginning of the year, GHL would
have contributed revenue of GBP1.35m and profit for the year of
GBP0.15m.
The acquisition of GHL is consistent with the Group's growth
strategy to acquire businesses offering complementary professional
and other specialist services to clients in the Group's target
markets. GHL has developed a specialist property consultancy
offering in the fields of Easement and Wayleaves and Compulsory
Purchase and Compensation. The GHL Easements and Wayleaves team
advises property developers on negotiations in relation to the
removal of utility infrastructure (pylons, cables, pipes etc.) from
development sites, and negotiates compensation for loss of
development value where that infrastructure remains in-situ. The
Compulsory Purchase and Compensation team advises project promoters
on all aspects of compulsory purchase, from initial consultation
through to settlement of claims; facilitating housing,
regeneration, infrastructure and energy projects. The team also
represents landowners and businesses affected by compulsory
purchase. The acquisition will further enhance Gateley's ability to
support its property clients, offering them not only a first-rate
legal service, but also a suite of specialist commercial property
services. The business will sit alongside Gateley's national
property business, which itself acts for an array of developers,
including seventeen of the UK's top twenty house builders.
GHL will operate as a wholly owned subsidiary of Gateley
(Holdings) Plc with its own existing dedicated management team and
employees. An operating board, made up of senior management from
both the Group and GHL will oversee the ongoing delivery and
development of the business.
Customer lists and brands have been recognised as specific
intangible assets as a result of the acquisition. The residual
goodwill arising primarily represents the assembled workforce,
market share and geographical advantages afforded to the Group.
Policy alignment and fair value adjustments principally relate to
harmonisation with Group IFRS accounting policies, including the
provisional application of fair values on acquisition.
None of the recognised goodwill is expected to be deductible for
income tax purposes. The fair value of the customer lists and brand
has been based upon management's assessment of its ability to
generate future profitability for the acquired assets over the next
three years after taking into account a 10% present value discount
factor. The customer lists and brand value will be amortised on a
straight-line basis over an estimated useful life of three
years.
There were no transaction costs incurred during the course of
the acquisition.
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR MMGMNMGGGNZZ
(END) Dow Jones Newswires
July 11, 2017 02:00 ET (06:00 GMT)
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