13 September 2022

 

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 PRELIMINARY RESULTS 2022

Strong results, further growth and demonstrable resilience

 

Gateley (AIM: GTLY), the legal and professional services group, announces its audited preliminary results for the year ended 30 April 2022 ("FY22" or the "Period"), which continued the Group's pre and post IPO unbroken record of year-on-year revenue and profit growth, and out-performed market expectations set at the start of the year.

 

The Group delivered a strong financial performance in FY22, achieving significant organic growth and strengthening the business further through diversification and investment into new complementary service lines, while maintaining control on costs in the face of market specific and macro-economic headwinds. The balance sheet remains strong and the Group has significant headroom in its banking facilities to invest in further organic and acquisitive growth opportunities.

 

Financial highlights

 

	FY22	FY21	Change
Group revenue	£137.2m	£121.4m	+13.0%
Group underlying operating profit before tax1	£22.5m	£20.5m	+9.8%
Group underlying profit before tax	£21.6m	£19.3m	+11.9%
Group profit before tax	£18.0m	£16.3m	+10.4%
Group profit after tax	£14.3m	£13.2m	+8.3%
Basic earnings per share ('EPS')	12.00p	11.18p	+7.3%
Adjusted fully diluted EPS2	14.31p	13.17p	+8.7%
Net assets	£72.9m	£59.3m	+22.9%
Net cash3	£10.4m	£19.6m	-£9.2m

 

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

 

·	Group organic revenue growth was 10.9%, comprising 8.7% in legal service lines and 26.7% in consultancy services
·	Total growth in non-legal revenues of 44.9%, as complementary consultancy services contributed £21.3m or 15.5% of total revenues (FY21: £14.7m or 11.5%)
·	Adjusted underlying operating profit margin broadly maintained at 16.4% (FY21: 16.9%)
·	Net assets increased by 22.9% to £72.9m
·	"Gateley Agile" initiative, which builds on flexible working introduced during the pandemic, continues to deliver cost savings, mitigating some inflationary pressure
·	Personnel costs declined as a percentage of Group revenue to 63.0% (FY21: 63.8%)
·	Proposed final dividend of 5.5p (FY21: 5.0p) taking total dividends for the Period to 8.5p (FY21: 7.5p)
·	Group dividend policy remains to distribute up to 70% of our after-tax profits each year

 

Strategic Highlights

 

·	Three earnings-enhancing acquisitions completed in the Period, expanding the Group's Property and Business Services Platforms
·	Total headcount at 30 April 2022 of 1,368 (FY21: 1,081). Total headcount of professional staff increased by 23.6% from 767 to 948
·	New Revolving Credit Facility of £30m agreed in April 2022, providing increased funding flexibility to support the Group's growth strategy

 

Current Trading and Outlook

 

·	Good pipeline of new work and current year activity levels are in-line with the board's expectations
·	Encouraging pipeline of acquisition growth opportunities
·	Platform strategy progressing and delivering to plan with on-going integration of all acquired businesses and consequent widening and enhancement of client engagement in FY23 and beyond positively
·	The board maintains its expectations for growth in FY23

 

Rod Waldie, CEO of Gateley, said:

 

"I am delighted with the Group's performance in FY22. We have delivered another set of strong revenue and profit growth figures whilst continuing to strengthen our balance sheet. Legal services generated solid organic revenue growth, comparing favourably with reported UK legal industry performance. Our consultancy service lines delivered impressive organic growth of 26.7% resulting in overall consolidated Group organic revenue growth of 10.9%.

 

"I am particularly pleased that we completed three exciting consultancy acquisitions in the Period and achieved annualised consultancy revenue of over c.£32m as we continue to grow our complementary services, diversifying our offering and deepening our connections with our clients.

 

"I thank our ever-expanding client base for their trust and support throughout FY22 and for giving us the opportunity to work with them on high quality mandates.  We remain committed to our purpose of delivering results that delight our clients, inspire our people and support our communities.  We have a good pipeline of work and maintain our expectations for growth in FY23, despite the well-reported inflationary pressures. We look forward to continuing to grow the Group, both organically and via acquisition."

 

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 Corporate Communications	Tel: +44 (0) 121 234 0074 Mob: +44 (0) 7703 684 946
Liberum - Nominated Adviser and Broker Richard Lindley/Ben Cryer/Cara Murphy	Tel: +44 (0) 20 3100 2000
Belvedere Communications Limited - Financial PR
Cat Valentine (cvalentine@belvederepr.com)	Mob: +44 (0) 7715 769 078
Keeley Clarke (kclarke@belvederepr.com)	Mob: +44 (0) 7967 816 525
Llew Angus (langus@belvederepr.com)	Mob: +44 (0) 7407 023 147
	gateleypr@belvederepr.com

 

 

 

CHAIRMAN'S STATEMENT

 

Summary of the year

 

I am delighted to welcome you to Gateley's audited final results for the year ended 30 April 2022, a successful year for Gateley in which the Group has continued its unbroken record of year-on-year revenue and profit growth.

 

With revenue increasing by 13.0% to £137.2m and underlying profit before tax increasing by 11.9% to £21.6m, Gateley has again demonstrated the resilience of its business model and diversification strategy. These strong results led to a 22.9% increase in Group net assets to £72.9m (FY21: £59.3m), and an increase of 8.7% in adjusted fully diluted earnings per share to 14.31p per share (FY21: 13.17p).

 

I am particularly proud that this year's strong performance has been delivered despite disrupted circumstances. With the economic recovery from COVID-19 somewhat compromised by inflationary pressures, with uncertainty as a consequence of the terrible events in Ukraine and with the onset of higher than usual wage inflation within the legal and indeed other service sectors, Gateley has navigated the year well and I could not be more pleased with the resulting benefits for all of our stakeholders.

 

Delivering our strategy

 

During the year we have delivered on our strategic intent to further diversify the business, placing the Group in a strong position to deliver further profitable growth in the coming years.

 

In doing so, we have also expanded the breadth and depth of our offering with Group representation in four new geographies as part of the newly-acquired Smithers Purslow business.

 

Our staff 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.

 

Within our consultancy businesses, overall headcount increased by 169.4% to 291 (FY21: 108) and fee-earner staff by 123.5% to 219 (FY21: 98). Together with three consultancy businesses acquired during the year, annualised revenues from this part of the Group now contribute revenues of over £32m, further diversifying our service offering and deepening our relationships with our clients in so doing.

 

As part of our present and future acquisition strategy, we committed to a three-year revolving credit facility of up to £30.0m to assist with acquisitions. This combined with our ever strengthening balance sheet places us in a good position to continue with acquisitions.

 

As we continue to grow and strengthen our business, the board remains committed to providing its people with the opportunity to own shares in the Company. We believe that employee share ownership secures a  strong alignment with the Group's external shareholders, incentivises employees and is reflective of Gateley's long-established culture.  At least 75% of current staff are existing share or option holders in the Company.

 

Responsible Business

 

The board has made the introduction of Gateley's Responsible Business commitments a key strategic priority this year. Working together with The Purpose Coalition, an independent ESG consultancy who helped us develop our own set of levelling up goals, in August 2021 we published Gateley's Responsible Business report, for which we have received significant positive feedback. 

 

The report outlines the plans and priorities which we are working to deliver over the coming years.  They are set out under three broad categories being: People, Potential and Planet.  I am delighted with the progress we have made in the year and also with how this important initiative has been readily embraced across the Group. We are committed to ensuring diversity, equality and inclusion across all three of these categories: our goal is to foster a positive work ethic, whilst remaining results and client focused, and demonstrate our commitment to doing the right thing for our people, our planet and developing potential wherever we can. 

 

Dividends

 

An interim dividend of 3p per share (FY21: 2.5p) was paid on the 31 March 2022 to shareholders on the register at the close of business on 18 February 2022. The board is pleased to propose a final dividend of 5.5p per share (FY21: 5.0p), giving a total dividend for the year of 8.5p per share (FY21: 7.5p), subject to approval at the forthcoming Annual General Meeting, which will be held on 20^th October 2022. If approved, this final dividend will be paid in October to shareholders on the register at the close of business on 23 September 2022.  The shares will go ex-dividend on 22 September 2022.

 

The board's dividend policy remains to distribute up to 70% of profit after tax to shareholders, typically one third following its half year results and two thirds after the full year results are known. 

 

Summary and outlook

 

This year has been another strong year 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 for the benefit of all of our stakeholders.

 

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

 

Nigel Payne

Chairman

13 September 2022

 

 

 

CHIEF EXECUTIVE OFFICER'S REVIEW

 

Introduction

 

I am delighted by the Group's performance in FY22; another year in which global events created significant uncertainty, but nonetheless another year in which the Group produced an excellent result.  We closed the Period ahead of market expectations whilst continuing our investment strategy, further strengthening our offering to clients and also our balance sheet.

 

We continue to operate and invest in a differentiated, resilient and growing business, which has been deliberately designed to perform, regardless of the economic environment, and FY22's results continue Gateley's unbroken record of year-on-year revenue and profit growth.

 

Since IPO in 2015 we have acquired ten complementary consultancy businesses which have broadened and diversified our offering and, as planned, enhanced our financial strength.  We focus our Group on four strategic markets (our "Platforms"): Business Services, Corporate, People and Property, each of which now comprises a complementary mixture of legal and consulting businesses.  Approximately 20% of annualised Group revenues are now consulting revenues, with significant additional diversification opportunities.  Our balance sheet was further strengthened during the Period with year-end net assets and net cash of £72.9m (FY21: £59.3m) and £10.4m (FY21: £19.6m) respectively.  As a result, we remain well-placed to weather any further storms, but also to continue our acquisition strategy.

 

The ongoing enhancement and strengthening of our business is why, in the seven years since flotation, we have been able to deliver compound annual revenue growth of 12.3%, compound profit before tax growth of 9.0% and, including the proposed final dividend proposed today, income to shareholders of 43.24 pence per share in aggregate.

 

Results overview

 

FY22 Group revenues grew by 13.0% to £137.2m (FY21: £121.4m).  Agile working, a necessity during the pandemic, is now a key element of our operating model, enabling us to continue to deliver cost efficiencies.  As pandemic restrictions were lifted we were able to finalise the integration of the acquisitions that completed shortly before the pandemic impacted.  Although our acquisition strategy is focused on driving additional revenue, cost efficiencies are a welcome by-product.  The results yielded an increase of 10.4% in profit before tax to £18.0m (FY21: £16.3m).  Underlying adjusted profit before tax increased by 9.8% to £22.5m (FY21: £20.5m) and profit after tax increased by 8.3% to £14.3m (FY21: £13.2m).

 

Our strong revenue performance is undoubtedly a result of the quality, depth and breadth of our professional services offering. 

 

Following on from the very strong second half performance in FY21, activity levels remained strong across the Corporate Platform, which grew by 12.7%, buoyed by the continuing strength of the UK M&A and Private Equity markets. The Property Platform grew by 15.7%, enhanced by greater market share and a widening range of mandates in our increasingly diverse property consultancy businesses, which generated 21.0% of Property Platform revenue. The People Platform saw a return to significant growth across both its legal and consultancy service lines, in which combined revenue grew by 20.8%. The Business Services Platform grew by 14.6% as we expanded our market share in existing workstreams and through the addition of Adamson Jones IP Limited, Patent and Trademark Attorneys.

 

People and Culture

 

FY22 saw a return to more familiar recruitment levels as headcount increased by 287 during the Period. This includes 145 new colleagues who joined the Group as a result of the three acquisitions completed in the Period, Tozer Gallagher in July 2021, Adamson Jones in January 2022 and Smithers Purslow in April 2022. After a pause in recruitment in the initial stages of the Covid 19 pandemic, the market has hardened with many factors now influencing peoples' career decisions. The Gateley offering remains differentiated and attractive with a growing range of businesses across the Group. As the Group continues to expand, we are able to offer a broad range of career opportunities across our Platforms, which are underpinned by a unique identity and strong team culture.

 

We owe the success of our business to the quality and dedication of our teams. FY22 saw significant ongoing disruption caused by the pandemic, but our teams, supported by our earlier investments in technology and our "one-team" culture, met demand to deliver excellent client service and excellent results for the Group.

 

The Period also saw the beginnings of wage cost inflation across the UK legal industry, as strong client demand continued across the sector. Although this first impacted international firms in the City and whilst the highest, headline-grabbing salaries remain in that part of the market, gradually the trend spread across all UK legal markets. The result has and continues to be that legal businesses struggling to grow and/or whose financial and remuneration models are not sufficiently strong or flexible have lost people where they cannot meet salary expectations. We believe that economic headwinds are likely to temper future rates of wage cost increase, and in any event within Gateley our differentiated model and our ability to offer share ownership to all of our people continues to stand us in good stead.

 

Our continuing programme of service line diversification not only drives additional sales, but also creates skill set/talent pool diversification, adding operational and financial resilience for the Group and diluting the impact of trends affecting specific professional disciplines. Wage cost inflation seen in the legal sector in FY22 was less visible within our consultancy businesses and with approximately 23% of our professional staff qualified in disciplines other than law that too provided a degree of resilience and sheltering for the Group.

 

After external consultation, the Group has introduced a new Restricted Share Award Plan ("RSA") and also awarded a second vintage of awards under the existing Long Term Incentive Plan ("LTIP"). The RSA forms part of the Group's retention and incentivisation policy for emerging senior talent. It supports long-term share ownership for people who are promoted to Partner or Partner-equivalent roles.  It is a continuation of the board's strategy to differentiate the position of a Partner or equivalent at Gateley from that of a Partner in traditionally structured professional services businesses.

 

Responsible Business

 

Our Responsible Business commitment is a key strategic priority, which runs through the core of our organisation.  Our first Responsible Business report, published in August 2021, outlined the objectives we committed to working towards during FY22 and beyond. These objectives flowed out of our work with The Purpose Coalition, the independent ESG consultancy who helped us develop our own set of levelling up goals.  Other members of the Purpose Coalition include Amazon, bp, Compass Group, the BBC, Direct Line Group, Cisco and the NHS.  In FY22 our objectives fell under three categories: People, Potential and Planet.  I am delighted with the progress we made in the Period, with just a few of the highlights including:

 

People

 

·    Maintaining our Glassdoor ranking, recognised as the only UK legal business to rank in the top 25 companies for senior leadership

·    Maintaining our Investors in People standard

·    Securing our Disability Confident employer status

·    Launching our fifth internal diversity and inclusion network group; Ability, which raises awareness around neurodiversity and supporting colleagues with any disabilities

 

Potential

·    Continued support of Birmingham City University STEAMHouse, exploring other opportunities to add value to their start-ups

·    Announcing our partnership with UA92 in Manchester, which aims to make higher education accessible to all, through its founding principles of accessibility, social mobility and inclusivity

·    Becoming the UK's first Patron of 'Make Good Grow', a social enterprise founded on the principles of uniting good businesses with good causes

·    Continuing our SportsAid partnership; providing financial and personal development support to ten of our country's brightest young sporting prospects

 

Planet

·    Maintaining reductions in travel through the continued use of virtual meetings where appropriate

·    Continued adherence to Group-wide "paper light" strategy

·    Encouraging our people to submit their sustainability pledges and the positive actions we will take to protect our planet

 

Operational Review

 

By the start of the Period our teams had already demonstrated their ability to deliver via a more flexible, agile model. They had also, like so many other sectors of UK and international markets, confirmed their wish to maintain that flexibility even after the pandemic has passed. Those factors combined to create a management focus for driving ongoing efficiency.  Under the "Gateley Agile" initiative we made a number of changes to premises, including the move to a smaller footprint in Reading, vacating our Leicester office as part of conflation of a number of services into one East Midlands offering located in our existing Nottingham office, and combining Gateley Tweed, Gateley Capitus and Gateley Legal into one Belfast office.

 

As pandemic restrictions were gradually lifted throughout the course of the Period we were able to increase our efforts towards fully integrating recently acquired businesses. Whilst we had of course done the best we could to continue integration programmes during the pandemic, our efforts in the early part of the Period were limited broadly to matters capable of being dealt with virtually. That created certain limitations, not just in physical terms where opportunities which existed to merge offices and reduce duplicated costs could not be implemented until the latter half of the Period, but also in people and cultural integration terms.  By the end of the Period we were back on track with  our integration programme.

 

Throughout the Period we continued to invest across the Group in growing and strengthening our teams. Overall headcount in the Group increased by 26.5% to 1,368 (FY21: 1,081). Legal services professional headcount growth was 9.0% to 729 employees (FY21: 669). The growth of our consultancy businesses' contribution in the Period was matched by continued investment and diversification into consultancy operations, with overall consultancy headcount increasing by 169.4% to 291 (FY21: 108) and fee-earner consultancy staff up by 123.5% to 219 (FY21: 98).

 

In H2 FY22 work commenced on the Phase 1 implementation of our new core IT "practice management" system. We identified over three years ago that our core systems needed replacing with new technology.  That new technology was needed to provide improved management information within one financial system, to better support acquisitive growth and seamless integration in a more stable and robust IT system which can grow with us; and to create new processes to enable us to work as efficiently as possible for our clients.  Phase 1 implementation, which resulted in over 80% of staff adopting the new system on 22 June 2022, is progressing well.  We inevitably encountered some system interruptions in the days post-launch but these were all well-within expectations and, as such, represented no significant overall business interruption or disruption.  The balance of all staff are expected to come onto the new system in one final phase during FY23.

 

Our Acquisition Strategy

 

After deliberately pausing acquisition activity at the start of the pandemic, we considered that market conditions had stabilised sufficiently by the beginning of FY22 for us to recommence it.  We completed three acquisitions during the Period, two onto our Property Platform and our first onto our Business Services Platform.  During the Period we committed to a three-year revolving credit facility of up to £30.0m to assist with acquisitions. To date, we have only used this for the acquisition of Gateley Smithers Purslow and only drawn down £6.0m.

 

In July 2021 we acquired Tozer Gallagher, a leading practice of chartered quantity surveyors and construction consultants based in Manchester and London.  The business specialises in built environment consultancy, fund monitoring services and surety advisory, and dovetails with the operations of Gateley Vinden, which was acquired in March 2020.  The surety advisory expertise within Tozer Gallagher adds further strength to Gateley Vinden's business but also complements the specialist surety work undertaken by Gateley Legal's surety practice team. The internationally recognised experts within Gateley Legal's surety team have a proven track record in advising on contentious and non-contentious issues relating to any surety.  Since acquisition and despite the pandemic to some extent frustrating immediate integration efforts, Tozer Gallagher has traded strongly.

 

In January 2022 we completed the acquisition of Patent and Trademark Attorneys, Adamson Jones; the first acquisition onto our Business Services Platform.  The business has a broad range of technical expertise including biotechnology, engineering, pharmaceuticals and software and acts for clients from large multinational and national organisations, to universities and SMEs. The Adamson Jones team has 25 staff in offices in Nottingham and Leicester.  The acquisition sets a solid foundation for the development, on the Business Services Platform, of complementary businesses with an IP and brands focus, working alongside the existing team within Gateley Legal, and enabling the Group to widen its scope in an area where it already has a well-established and continually growing client base.  The business has traded well since acquisition and Adamson Jones staff have relocated into existing Gateley Group offices in the Midlands.

 

In April 2022 we completed the acquisition of Smithers Purslow, our largest acquisition to date and our seventh onto our Property Platform, currently our largest and most mature Platform.  Smithers Purslow is a rapidly growing multi-disciplinary chartered surveying practice, comprising building and quantity surveyors and civil and structural engineers. Specialising in services to the property insurance claims market, it resolves high value claims for insurers, policy holders and their advisers. The business operates from ten regional offices across the UK and employs 130 staff.  Its blue-chip client base includes insurance and utility companies, property managers and high net worth individuals.  It complements existing expertise at Gateley Vinden and Tozer Gallagher, further enhancing the Group's already strong and growing Property Platform.

 

Our Platform Strategy

 

Prudent management and a strong balance sheet enable us to drive incremental value through acquisitions.  As new businesses are added and integrated onto each Platform, we now see the model working exactly as we would expect, driving more revenue from existing clients, creating routes into new clients for other parts of the business to cross sell services and continually diversifying and strengthening revenue streams.

 

Gateley Hamer, our property consultancy specialising in Compulsory Purchase Orders, easements and wayleaves, infrastructure projects, land referencing and public inquiries produced another strong performance.  The business again posted strong organic top line growth of 41.5% but also added another core service line in the shape of telecoms infrastructure.

 

Pleasingly, positive momentum and a return to growth flowed through into our People Platform consultancies, Kiddy & Partners and t-three, during the Period.  This was in part due to increased demand for services as client HR Directors and Heads of Talent saw development budgets, frozen during the pandemic, released once again to them.  However, also of significant benefit was the successful integration of those two businesses into one assessment, development and cultural change-facing offering.  Our integrated proposition and service offering went live in January driving excellent client feedback and securing significant new mandates.

 

Overall, our acquired consultancies performed strongly during the Period, contributing 15.5% to total Group revenues and supporting revenue growth in each of our four Platforms.

 

Current trading and outlook

 

The solid foundations on which our business is built have enabled the Group to deliver strong results in a period which was impacted widely by macro events.  One of the key objectives of our IPO in 2015 was to move the business into a structure that would enable it to build a strong balance sheet and deliver the future investment needed to drive the business forward. We are delivering on this objective and will continue in this vein.

 

The business is continuing to demonstrate its resilience in the current financial year, with Q1 FY23 utilisation across the Group and against our historic averages supporting the board's positive outlook, and with current trading in-line with the board's expectations.

 

Our financial position is such that we will continue with our acquisitions programme. The pipeline is strong and opportunities are under consideration on each of our four Platforms.

 

We have confidence in our ability to perform well, even accepting current indicators for the wider economic environment, and continue to view the Group's prospects for year ahead and beyond positively.

 

Rod Waldie

Chief Executive Officer

13 September 2022

 

 

FINANCE DIRECTOR'S REVIEW

 

Financial overview

 

In FY22, the Group demonstrated strong growth in revenue and adjusted profit before tax ahead of consensus market expectations set at the start of the year, with revenue up 13.0% to £137.2m including organic revenue growth from legal service lines of 8.7% alongside exceptional organic growth of 26.7% from consultancy service lines.

 

The measures taken by the Group to embrace changes in working practices driven by the pandemic resulted in another year of lower costs as a percentage of revenue.  We continue to explore further cost reduction initiatives, such as our ongoing premises strategy, as part of our "Gateley Agile" initiative, designed to help mitigate the widely reported upward increase in staff costs in the sector, and broader inflationary pressures.

 

We completed three acquisitions during the Period, which are integrating well. We have established a new revolving credit facility which was part used for our largest acquisition since listing, Gateley Smithers Purslow, and we remain well-placed with a strong balance sheet.

 

FY22 continues our long track record of delivering profitable annual results and attractive investment returns, which once again enable strong dividend growth through the proposed final dividend of 5.5p, taking total dividends to 8.5p in respect of the Period.

Revenue

 

Group total revenue grew by 13.0% (FY21: 10.5%) to £137.2m (FY21: £121.4m).  Revenue from core legal service lines grew organically by 8.7% (FY21: 5.5%).  In addition, total revenue from complementary consultancy businesses grew by 44.9% to £21.3m or 15.5% of total revenues (FY21: £14.7m or 11.5%), highlighting the on-going success of our Platforms diversification strategy.

 

Platform performance

 

At the start of FY22 the Group presented segmental reporting on our Group Platform structure.

 

As the Group has continued its headcount investment across each Platform, margin performance has fluctuated dependent upon the stage of Platform investment.  We have increased staff numbers within our Business Services and Property platforms during FY22 to meet expected increases in demand in FY23.  These investments have predominately driven decreases in their FY22 margins.  However, despite our strategy of continual investment and the unique wage cost inflation seen in the legal sector, the Group has lowered its percentage of personnel costs to revenue in FY22 to 63.0% (FY21: 63.9%) and will continue to sensibly manage this key metric as market conditions evolve.  Retention of staff remains key to the success of the Group which we believe is well served by our unique culture, business structure and the vast number of career opportunities in a growing, resilient Group which continues to deliver quality advice to a quality client base.

 

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

 

	Business Services £m	Corporate £m	People £m	Property £m	Total £m
FY22
Revenue	18.0	38.1	19.2	61.3	136.6
Segmental contribution	5.7	15.4	6.9	23.0	51.0
Contribution margin	31.7%	40.4%	35.9%	37.5%	37.3%
FY21
Revenue	15.7	33.8	15.9	53.0	118.4
Segmental contributions	6.4	11.4	4.9	24.4	47.1
Contribution margin	40.8%	33.7%	30.8%	46.0%	39.8%
Revenue movement (%)	14.6%	12.7%	20.8%	15.7%	15.4%
Contribution margin change (%)	(9.1)%	6.7%	5.1%	(8.5)%	(2.5)%

 

Business Services Platform

Our Business Services Platform revenues grew by 14.6%. It offers a broad balance of services across many clients and industries as well as continuing to support our transactional works streams.  Its mix of services in both complex litigation and in more transactional-led commercial services are now being widened further through the acquisition of Patent and Trade Mark Attorneys, Adamson Jones.  The addition of these IP and brands focused services, working alongside the existing team within Gateley Legal, will enable the Group to widen its scope in an area where it already has a well-established and continually growing client-base.  This Platform was held back during the year on commercial and international-led litigation assignments of a contingent nature that have not achieved the fee levels we had hoped for due to Russia's invasion of Ukraine, where in both jurisdictions we held litigation mandates. We have maintained these international teams but shifted our geographical focus to new jurisdictions which have already generated an attractive pipeline of complex international litigation assignments.

 

Corporate Platform

Our Corporate Platform produced another strong performance generating revenue growth of 12.7% and a significantly stronger contribution margin.  Our continued strength of relationships with Private Equity and M&A clients continues to serve the Group well as activity in this area remains strong in FY23.  Our banking team within this Platform also posted another strong year of growth alongside our growing tax team.  Recruitment to service demand across the Platform remains a challenge, however staff numbers have increased and we take a highly-skilled team into FY23 with confidence.  Whilst corporate transactional activity within our client base currently shows no signs of relenting, traditional restructuring and recovery activities remained subdued during the Period, with upticks in activity post year-end as wider economic conditions impose challenges for UK businesses. 

 

People Platform

This Platform grew by 20.8% due to the significant return of demand for services across our consultancy businesses, t-three and Kiddy & Partners ("Kiddy"), after the pandemic and also after the launch of their integrated service delivery model to corporate clients.  Their focus on talent assessment and development and cultural change has proven to represent a strong sales proposition to a client base inevitably needing to adjust and change as a result of the pandemic.  Our national private client team performed well alongside our more traditional, but established, employment legal and pension trustee led services.  Contribution margins increased as a result of a return to greater activity using these established existing teams at a higher level of activity during FY22.

 

Property Platform

Our Property Platform reporting segment grew revenue strongly by 15.7% as we took advantage of opportunities generated by our most mature Platform.  It operates at regional and national levels in the UK's commercial property, development and housing markets, which rely upon long-term specialist multi-disciplinary legal and consulting support.  There was growth across both contentious and non-contentious service lines in areas such as construction disputes, plus we also saw strong growth in our specialist Gateley Hamer consultancy business which increased revenue by 42% during the year.  We have recruited to meet FY23 demand in both existing and new service lines within Gateley Hamer, which is primarily why direct contribution has declined. Tozer Gallagher and Smithers Purslow have both enjoyed a strong first part year within the Group.  Post year-end, Tozer Gallagher has exceeded revenue expectations which will lead to achievement of its earn-out and a further £0.1m of consideration being payable.

 

Underlying operating profit before tax

 

The Group has recorded strong underlying operating profit before tax of £22.5m which has increased by 9.8% from £20.5m in FY21.  Our strategy to maintain fee earner headcount in order to service increased client activity has been supported by our recruitment activity this year. Continuing robust demand in the UK's legal services industry has led to continued pressure in the legal recruitment market and, as previously highlighted, our underlying trading margins have decreased slightly to 16.4% (FY21: 16.9%).

 

We are not yet seeing this pressure relent as we move into FY23 and we have undertaken another comprehensive salary review in a continually changing professional services industry in order to remain competitive in the legal recruitment market.  We have always operated an all-staff bonus scheme which typically amounts to c10% of our annual salary costs.  We see such a scheme, in which performance is directly linked to the Group's performance, as a key management strategy, whereby staff are incentivised accordingly to drive Group performance but management is also able to retain a significant element of discretion in matching remuneration with Group "one profit" performance.  We have not changed our strategy on this incentivisation tool, which sits alongside extremely attractive staff share plans and ensures the whole business is culturally aligned.

 

Underlying operating profit before tax excludes amortisation of intangibles, all share-based charges and exceptional acquisition related items.  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	2022	2021
	£'000	£'000
Revenue	137,249	121,375
Operating profit	18,987	17,505
Operating profit margin (%)	13.83	14.42
Reconciliation to alternative performance measure: underlying operating profit before tax
Operating profit	18,987	17,505
Non-underlying items
Amortisation of intangible assets	1,581	2,073
Share based payment charge - Gateley Plc	1,100	956
Share based payment charge - Gateley Smithers Purslow Limited	113	-
Release of contingent consideration - International Investment Services Limited	(135)	-
Exceptional items
Acquisitions costs	373	-
One off remuneration charge - Gateley Smithers Purslow Limited	497	-
Underlying operating profit before tax	22,516	20,534
Adjusted underlying operating profit margin (%)	16.41	16.92

 

Personnel costs and operating expenses

 

Our total personnel costs increased by 11.7% (FY21: 21.9%) to £86.5m, due to the full-year cost of staff introduced to the business through acquisitions made during the year together with a return to recruitment in order to expand capacity to meet client demands.  In total, seven (FY21: six) new legal Partners joined the business and we made eight (FY21: nine) internal promotions to legal Partner.

 

Average numbers of legal and professional staff rose by 3.9% (FY21: 9.1%) to 800 (FY21: 770), whilst support staff numbers increase marginally to 350 (FY21: 343).  Personnel costs as a percentage of fees decreased to 63.0% of revenue from 63.8% in FY21, excluding share-based payment charges.

 

Operating expenses have increased in line with top line growth of the Group, including in specific areas such as travel, marketing and premises related spending following a partial return to office working, and due to the effects of current UK-wide inflation impacting running costs.  Whilst other operating expenses increased by £2.6m or 12.4% to £23.6m (FY21: £21.0m), overheads remain well-managed as a percentage of revenue, as demonstrated by their decrease as a percentage of revenue from 17.3% in FY21 to 17.2% in FY22.  

 

Earnings Per Share (EPS)

 

Basic EPS increased by 7.3% to 12.00p (FY21: 8.1% to 11.18p).  Basic EPS before non-underlying and exceptional items increased by 10.6% to 14.66p (FY21: 4.5% to 13.26p). Diluted EPS increased by 5.50% to 11.71p (FY21: 9.5% to 11.10p).  Diluted EPS before non-underlying and exceptional items increased by 8.7% to 14.31p (FY21: 5.8% to 13.17p).

 

Share option schemes

 

The board remains committed to providing its people with the opportunity to own shares in the Company, as further evidenced by the introduction of the new RSA during the year. Such share ownership promotes strong alignment with the Group's external shareholders, incentivises employees and is reflective of Gateley's long-established culture.  At least 75% of current staff are existing share or option holders in the Group.

The awards, which vest on receipt, are made when an individual is promoted to Partner or an equivalent position. Awards are subject to a five-year non-dealing restriction and are forfeited should employment cease within that period.  1,267,560 shares were awarded on 27 April 2022 as part of one-off awards to people who were non-equity Partners at the date of Gateley's IPO in June 2015, with a further 100,000 shares being awarded shortly after the FY22 financial year-end to newly promoted Partner or Partner-equivalent since then.

 

The board also announced at the end of FY22, a second vintage of LTIP awards to certain Executive Directors and Senior Management over up to 1,115,000 Ordinary Shares of 10 pence each in the Company ("Ordinary Shares").  Awards under the LTIP vest at the end of a three-year period, dependent upon the achievement of profit related performance conditions and continuous employment.

 

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

 

	2022	2021	2020	2019
	£'000	£'000	£'000	£'000
Reported profit after tax	14,279	13,157	11,723	13,041
Adjustments for non-underlying and exceptional items:
- Anticipated impact of IFRS 16 if it had been adopted in earlier years	-	-	-	(313)
- Amortisation of acquired intangible assets	1,581	2,073	1,375	1,406
- Share-based payment adjustments	1,213	956	1,355	655
- Release of contingent consideration - International Investment Services Limited	(135)	-	-	-
- Impairment of software development costs	-	-	463	-
- Acquisition-related costs	870	-	107	61
Underlying profit after tax	17,808	16,186	15,023	14,850

 

Weighted average number of ordinary shares for calculating diluted earnings per share	121,893,238	118,508,833	115,599,727	112,280,569
Underlying adjusted fully diluted EPS	14.61p	13.66p	13.00p	13.23p

 

Taxation

 

The Group's tax charge for the Period was £3.8m (FY21: £3.2m) which comprised a corporation tax charge of £4.0m (FY21: £3.7m) and a deferred tax credit of £0.2m (FY21: credit of £0.5m).

 

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 20.8% (FY21: 19.3%) based on reported profits before tax.  The increase is as a result of the decrease in the tax allowable benefit arising from the exercise of nil cost share options from levels experienced in previous years.

 

The net deferred taxation liability increased to £2.5m (FY21: £0.6m) as a result of the deferred tax charge arising from business combinations during the year.

Dividend

 

The Group paid an interim dividend of 3.0p per share on 31 March 2022 and proposes a final dividend at the Company's Annual General Meeting on 20 October 2022 of 5.5p (FY21: 5.0p) per share, which if approved, will be paid in late-October 2022 to shareholders on the register at the close of business on 23 September 2022.  The shares will go ex-dividend on 22 September 2022.  Our dividend policy remains to distribute up to 70% of our after-tax profits each year.

 

Balance sheet

 

The Group's net asset position has increased by £13.6m (FY21: £14.5m) to £72.9m (FY21: £59.3m), due to the following movements:

 

There was a £13.4m increase in total current assets, resulting from £13.1m additional trade and other receivables through acquired businesses and the strong organic growth of the Group. Contract assets ("unbilled revenue") increased by £3.3m and cash at bank decreased by £3.5m as excess cash was redeployed into acquisitions and to support working capital required for continued growth.

 

Non-current assets increased by £14.5m, resulting from a decrease of £2.4m from a change in property use and right of use asset values and an increase of £16.8m in intangible assets and goodwill following the three acquisitions made during the year.

 

The board has carefully considered the impact of COVID-19, 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 2022, the board concluded that the goodwill and intangible assets do not require impairment.

 

Total liabilities increased by £14.3m, due mainly to the drawdown of the RCF and creation of £5.7m of debt in connection with the acquisitions of Gateley Smithers Purslow together with the recognition of £5.4m of deferred consideration and £2.1m of deferred taxation on acquired intangibles, also in connection with the same acquisition.

 

Working capital and cash flow

 

During the year the Group agreed a new revolving credit facility with Bank of Scotland and HSBC UK.  The facility provides total committed funding of £30m until April 2025, split equally between Bank of Scotland and HSBC UK. It replaces the Group's existing £8m overdraft facilities with Bank of Scotland and HSBC UK, with the dual bank club providing increased flexibility to the Group to support future 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 FY23.

 

Cash generation was once again good with net cash inflows from operating activities of £12.3m (FY21: £25.4m) representing 86.5% (FY21: 193.2%) of profit after tax.  The Group ended the year with net cash of £10.4m (FY21: £19.6m), the result of continued strong trading and also management's sustained focus on cost efficiencies and costs management.

 

Free cashflow during the year from operations (post cashflow from IFRS 16 leases) was £7.4m (FY21: £20.8m), which represents 51.7% (FY21: 158.2%) of profit after taxation.  After conserving excess cash in FY21 as a result of decisions taken at the outset of the pandemic, FY22 has experienced the adverse effects caused by the timing of increases in cash movements from trade receivables as the business returned to growth and normal levels of trading related outgoings.

 

	2022	2021
	£'000	£'000
Net cash generated from operations	16,846	29,457
Tax paid	(4,497)	(4,039)
Net interest paid	(7)	(240)
Cash outflow from IFRS 16 leases (rental payments excluded from operating cash flows under IFRS 16)	(3,870)	(3,847)
Purchase of property, plant and equipment	(775)	(503)
Purchase of other intangible assets	(319)	(10)
Free cash flow	7,378	20,818
Underlying profit after tax	14,279	13,157
Free cash flow (%)	51.7%	158.2%

 

At the year-end, unbilled revenue recognised in the Group's statutory accounts, from time recorded on non-contingent work, totalled £17.2m or 12.5% of revenue recognised over the year (FY21: £13.9m or 11.5%). Unbilled revenue represented 49 days in line with last year, of Pro-forma net revenue.  Group debtor days have increased to 113 days compared to 104 days in FY21 of Pro-forma net revenue. Pro-forma net revenue includes revenue from acquisitions on a full year pro-forma basis.  As the Group grows so has our volume of unpaid debts.  This year especially the heightened activity levels of year billing and the growth of the Group through acquisition, alongside the position of the easter holidays, have all combined towards the increase in debtor days.  We had a higher number of litigation and recovery assignments in particular at the year-end that have since been settled or are close to resolution that will generate settlement of certain outstanding debts.  We have also made a good start to collections in FY23, despite the impact of the significant change in financial systems in June 2022.

 

Concert Party update

 

Following consultation with The Takeover Panel ("the Panel"), it has agreed that the concert party will be amended.

 

At the time of the IPO it was agreed with the Panel that the Directors, Existing Shareholders and the Company's Employee Benefit Trust (once established), each as defined in Gateley's admission document published on 1 June 2015, were acting in concert in respect of Gateley.

 

Gateley has now agreed with the Panel that the Gateley EBT along with the following individuals and their respective connected persons form the concert party in relation to Gateley pursuant to The Takeover Code:

 

Rod Waldie	Chief Executive Officer
Michael Ward	Executive Director
Neil Smith	Finance Director
Peter Davies	Chief Operating Officer and member of the Strategic Board
Callum Nuttall	Member of the Strategic Board
Paul Hayward	Former member of the Strategic Board
Brendan McGeever	Former member of the Strategic Board

 

As at the date of this announcement, the concert party members, including the EBT, hold, in aggregate, 9.29 per cent. of the Company's voting share capital.

 

Summary

 

Results for FY22 reflect another strong year for the Group. They include significant organic growth and a return to our acquisitions plan with the addition of some excellent new complementary service lines that further enhance Group revenue diversification.  We have maintained control of costs despite both market specific and macro-economic conditions, and we have produced a strengthened balance sheet with significant facility headroom to further expand the Group both organically and through acquisition. The Group is actively pursuing a strong pipeline of M&A opportunities.

 

Post year-end, we have enhanced our financial systems platform in order to drive greater efficiencies in the future and we continue to look at initiatives to balance off further increased cost pressures from wage and inflationary pressures.

 

Neil Smith

Finance Director

13 September 2022

 

 

CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME

for the year ended 30 April 2022

 

	Note	2022	2021
		£'000	£'000
Revenue	3	137,249	121,375
Other operating income		-	2,451
Personnel costs, excluding IFRS 2 charge	5	(86,517)	(77,460)
Depreciation - Property, plant and equipment	11	(851)	(1,045)
Depreciation - Right-of-use asset	11	(3,783)	(3,751)
Impairment of trade receivables and contract assets	15/16	(866)	(1,834)
Other operating expenses, excluding non-underlying and exceptional items		(22,716)	(19,202)
Operating profit before non-underlying and exceptional items	4	22,516	20,534
Non-underlying operating items	4	(2,659)	(3,029)
Exceptional items	4	(870)	-
		(3,529)	(3,029)
Operating profit	4	18,987	17,505
Financial income	7	194	176
Financial expense	7	(1,149)	(1,373)
Profit before tax		18,032	16,308
Taxation	8	(3,753)	(3,151)
Profit for the year after tax attributable to equity holders of the parent		14,279	13,157
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss
- Revaluation of other investments		(190)	-
- Exchange differences on foreign branch		58	(87)
Profit for the financial year and total comprehensive income all attributable to equity holders of the parent		14,147	13,070

 

Statutory Earnings per share
Basic	9	12.00p	11.18p
Diluted	9	11.71p	11.10p

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

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 APRIL 2022               

	Note	2022	2021
		£'000	£'000
Non-current assets
Property, plant and equipment	11	1,334	1,323
Right of use asset	11	24,627	27,007
Investment property		164	164
Intangible assets & goodwill	12	32,590	15,765
Other intangible assets	14	564	282
Other investments		173	363
		59,452	44,904
Total non-current assets
Current assets
Contract assets	15	17,239	13,900
Trade and other receivables	16	56,168	43,093
Deferred tax asset	19	638	138
Cash and cash equivalents	21	16,105	19,605
Total current assets		90,150	76,736
Total assets		149,602	121,640
Non-current liabilities
Other interest-bearing loans and borrowings	17	(5,715)	-
Lease liability	24	(25,207)	(27,702)
Other payables	18	(5,360)	(120)
Deferred tax liability	2193	(3,089)	(772)
Provisions	20	(863)	(763)
Total non-current liabilities		(40,234)	(29,357)
Current liabilities
Trade and other payables	18	(31,793)	(29,032)
Lease liability	24	(3,719)	(2,743)
Provisions	20	(101)	(176)
Current tax liabilities		(842)	(1,066)
Total current liabilities		(36,455)	(33,017)
Total liabilities		(76,689)	(62,374)
NET ASSETS		72,913	59,266
EQUITY
Share capital	22	12,456	11,792
Share premium		11,342	9,421
Merger reserve		(9,950)	(9,950)
Other reserve		14,465	6,815
Treasury reserve		(261)	(312)
Translation reserve		(2)	(60)
Retained earnings		44,863	41,560
TOTAL EQUITY		72,913	59,266

 

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 2020	11,761	9,153	(9,950)	6,815	(417)	27,447	27	44,836
Comprehensive income:
Profit for the year	-	-	-	-	-	13,157	-	13,157
Exchange rate differences	-	-	-	-	-	-	(87)	(87)
Total comprehensive income	-	-	-	-	-	13,157	(87)	13,070
Transactions with owners recognised directly in equity:
Issue of share capital	31	550	-	-	-	-	-	581
Sale of treasury shares	-	(282)	-	-	400	-	-	118
Purchase of treasury shares	-	-	-	-	(295)	-	-	(295)
Share based payment transactions	-	-	-	-	-	956	-	956
Total equity at 30 April 2021	11,792	9,421	(9,950)	6,815	(312)	41,560	(60)	59,266
At 1 May 2021	11,792	9,421	(9,950)	6,815	(312)	41,560	(60)	59,266
Comprehensive income:
Profit for the year	-	-	-	-	-	14,279	-	14,279
Revaluation of other investments	-	-	-	-	-	(190)	-	(190)
Exchange rate differences	-	-	-	-	-	-	58	58
Total comprehensive income	-	-	-	-	-	14,089	58	14,147
Transactions with owners recognised directly in equity:
Issue of share capital	664	1,921	-	7,650	-	-	-	10,235
Purchase of own shares at nominal value	-	-	-	-	-	(132)	-	(132)
Sale of treasury shares	-	-	-	-	127	-	-	127
Purchase of treasury shares	-	-	-	-	(76)	-	-	(76)
Recognition of tax benefit on gain from equity settled share options	-	-	-	-	-	563	-	563
Dividend paid	-	-	-	-	-	(12,430)	-	(12,430)
Share based payment transactions	-	-	-	-	-	1,213	-	1,213
Total equity at 30 April 2022	12,456	11,342	(9,950)	14,465	(261)	44,863	(2)	72,913

 

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 2022

 

	Note	2022	2021
		£'000	£'000
Cash flows from operating activities
Profit for the year after tax		14,279	13,157
Adjustments for:
Depreciation and amortisation	11/12/14	6,215	6,869
Financial income	7	(194)	(176)
Financial expense	7	201	416
Release of contingent consideration	4	(135)	-
Interest charge on capitalised leases	7	948	957
Equity settled share-based payments	5	1,213	956
Loss/(profit) on disposal of property, plant and equipment	4	16	(3)
Tax expense	8	3,753	3,151
		26,296	25,327
Increase in trade and other receivables		(10,233)	(5,312)
Increase in trade and other payables		758	9,216
Increase in provisions	20	25	226
Cash generated from operations		16,846	29,457
Tax paid		(4,497)	(4,039)
Net cash flows from operating activities		12,349	25,418
Investing activities
Acquisition of property, plant and equipment	11	(775)	(503)
Acquisition of other intangible assets	14	(319)	(10)
Cash received on disposal of property, plant and equipment		-	11
Acquisition of other investments		-	(134)
Contingent consideration paid - acquisition of subsidiary		-	(363)
Consideration paid on acquisitions, net of cash acquired		(5,982)	-
Interest received	7	194	176
Net cash used in investing activities		(6,882)	(823)
Financing activities
Interest and other financial income paid	7	(201)	(416)
Lease repayments		(3,870)	(3,847)
Receipt of new revolving credit facility, net of refinancing costs	17	5,715	-
Repayment of term bank loans	17	-	(3,077)
Repayment of loans from former members of GCL Solicitors & Directors of IIS	17	-	(729)
Proceeds from sale of own shares		90	145
Acquisition of own shares		(39)	(288)
Cash received for shares issued on exercise of SAYE/CSOP/SARS options		1,768	299
Dividends paid	10	(12,430)	-
Net cash used in financing activities		(8,967)	(7,913)
Net increase in cash and cash equivalents		(3,500)	16,682
Cash and cash equivalents at beginning of year		19,605	2,923
Cash and cash equivalents at end of year	21	16,105	19,605

 

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 2022, 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 2022 will be delivered to the Registrar of Companies following the Annual General Meeting.

 

These condensed preliminary financial statements for the year ended 30 April 2022 have been prepared on the basis of the accounting policies as set out in the 2022 financial statements.

 

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 UK and as required to be adopted by AIM listed companies have been applied.

 

1.1          Statement of Directors responsibilities

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

1.2          Cautionary statement

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

 

2          Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Finance Directors review, together with the financial position of the Group, its cash flows, liquidity position and borrowings. Financial projections have been prepared to October 2023 which show positive earnings and cash flow generation.  The COVID-19 situation during the previous financial year created an unprecedented and constantly changing challenge to all businesses. Management successfully navigated the business through the impact of the pandemic on the Group's financial performance. The Group typically applies sensitivities (informed by the past experiences of the Group since the onset of the pandemic, including the Group's time recording activity, fee generation and cash collections) to any current financial projections based on various downside scenarios to illustrate the potential impact from a downturn in client activity or any increases in costs.

The Group's liquidity position has been enhanced during the year as the board has worked closely with its supportive banks in order to switch its funding line from an uncommitted overdraft facility to a three-year revolving credit facility. As at 30 April 2022 the Group has net cash of £10.4m and continues to sensibly managed cash position within permitted covenants relating to its new facility.

 

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

 

3           Revenue and operating segments

The Chief Operating Decision Maker ("CODM") is the Strategic Board. The Group have the following four strategic divisions, which are its reportable segments.  These divisions offer a mixture of legal and consultancy services to clients.  With effect from 1 May 2021 all service lines are managed through two separately reporting lines renamed Gateley Legal and Gateley Consultancy.

 

The following summary describes the operations of each reportable segment as reported up to 30 April 2022 and also the new service lines:

 

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

 

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

 

	2022	2021
	£'000	£'000
United Kingdom	127,386	109,934
Europe	5,336	6,231
Middle East	923	937
North and South America	692	1,045
Asia	1,501	802
Other	1,411	2,426
	137,249	121,375

 

The Group has no individual customers that represent more than 10% of revenue in either the 2022 or 2021 financial year. The Group's assets and costs are predominately located in the UK save for those assets and costs located in the United Arab Emirates (UAE) via its Dubai subsidiary.  Net Group assets of £0.08m (2021: Net Group assets of £0.07m) are located in the Group's Dubai subsidiary.  Revenue generated by the Group's Dubai subsidiary to customers in the UAE totalled £0.92m (2021: £0.94m) as disclosed above as due from the customers in the Middle East.