Half Year Results

RNS Number : 3176L

Gateley (Holdings) PLC

12 January 2021

 

12 January 2021

The information contained within this announcement is deemed by the Company to constitute inside information. Upon the publication of this announcement via Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

Gateley (Holdings) Plc

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

Half Year Results for the six months ended 31 October 2020

Resilient business model delivering strong first half performance

Gateley (AIM:GTLY), the legal and professional services group, is pleased to announce its unaudited results for the six months ended 31 October 2020 (the "Period" or "H1 21"), which show strong growth in profitability demonstrating the resilience of Gateley's business model, and the success of our acquisition strategy.

Financial Results

	H1 21	H1 20	Change
Revenue	£50.5m	£51.8m	-2.6%
Underlying operating profit before tax	£8.1m	£6.9m	+16.4%
Underlying adjusted profit before tax*	£7.5m	£6.6m	+13.2%
Profit before tax	£6.1m	£5.5m	+9.8%
Profit after tax	£4.8m	£4.4m	+8.6%
Basic earnings per share ("EPS")	4.04p	3.93p	+2.8%
Underlying diluted EPS**	4.92p	4.60p	+7.0%
Net assets	£49.7m	£31.0m	+60.4%
Net cash/(debt)***	£9.3m	£(2.1)m	+£11.4m

*	Underlying adjusted profit before tax excludes share based payment charges, amortisation and exceptional items - See note 1.2
**	Underlying 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 period
***	Net cash/(debt) excludes IFRS 16 lease liabilities

Period highlights

· Diversified and resilient business model coupled with a strong pipeline of work support the board's confidence in the future performance of the business

· Sharp reduction in activity levels during the early months of the Period mitigated by a continuing upward trend.  H1 21 activity levels were within 2% of the prior year

· Significant benefits now being realised from agile working, leveraging off investment in technology and operational gearing from new ways of working.  The Group has traded profitably and was cash positive throughout H1 21  

· The Group has a strong balance sheet with disciplined working capital management and substantial liquidity that underpins FY 21 outturn

· Clustering of complementary legal and consultancy services ("Platform Strategy") has further enhanced the Group's market appeal

· Fee earning headcount of 785 (FY 20: 706) enhanced by FY 20 acquisitions and strategic legal hires

· Record internal take-up of Group wide SAYE option scheme in November 2020

Current trading and outlook

Following a strong first half performance, the business has entered the second half of the financial year with a sense of optimism and confidence. Trading in the second half has maintained momentum despite macro-economic uncertainty resulting from the ongoing pandemic.

Whilst remaining cautious, the Group's well-diversified and resilient business model gives the board confidence for the future. So long as trading remains robust for the remainder of the financial year, the board will be in a position to, and intends to, award bonus payments to staff and make dividend payments to shareholders for the current financial year.

Rod Waldie, Chief Executive Officer of Gateley, said:

"I am delighted with the Group's excellent operational and financial performance during H1 21. The wellbeing of all our people remains our priority. In the meantime, despite the personal challenges of working through the pandemic, our loyal and dedicated teams continue to serve our clients to the highest standard. This affirms the strength of Gateley's "one team" culture and the adaptation of our systems to ensure the delivery of an excellent service to our clients.

"Gateley's business model and its mix of service lines, which has been supplemented by our successful M&A strategy, was deliberately designed to provide resilience, the value of which is demonstrated in the Group's H1 21 performance.

"Our Platform Strategy is developing across the Group. Legal and consultancy businesses are working closely together to attract new work, in a manner that differentiates Gateley and which is becoming increasingly attractive to clients. The acquisition pipeline is positive. Our strategy remains to continue to acquire complementary legal and consultancy services, to expand our diversified business and to reach deeper into our chosen markets, further enhancing the Group's resilience.

"The FY 21 revenue pipeline is robust and this, combined with the many operational efficiencies that we have so far realised in the current year, means I am confident that, despite general uncertainty arising from the pandemic, the Group is positioned well to deliver a strong performance for the remainder of the financial year. "

Enquiries:

Gateley (Holdings) Plc
Neil Smith, Finance Director	Tel: [phone]
Nick Smith, Acquisitions Director and Head of Investor Relations	Tel [phone]
Cara Zachariou, Head of Corporate Communications	Tel [phone] Mob: [phone]
finnCap - Nominated adviser and broker	Tel [phone]
Matt Goode / James Thompson (Corporate Finance)
Andrew Burdis (ECM)
N+1 Singer - Joint broker	Tel [phone]
Peter Steel (Corporate Finance)
Rachel Hayes (Corporate Broking)
Belvedere Communications Limited - Financial PR
Cat Valentine ([e-mail])	Mob: [phone]
Keeley Clarke ([e-mail])	Mob: [phone]

About us

Gateley is a legal and professional services group. Founded in Birmingham in 1808, we have provided commercial legal services to individuals and businesses for over 200 years.

We have over 750 professional advisers and employ over 1,100 people across offices located in Belfast, Birmingham, Bolton, Guildford, Leeds, Leicester, London, Manchester, Nottingham, Reading and Dubai.

In 2015, we were the first commercial UK law firm to list on the London Stock Exchange's AIM Market. Our strategy is to differentiate ourselves in a crowded marketplace, incentivise our people to retain and attract the best talent in the industry and diversify our income streams by acquiring complementary business services.

 For further details on Gateley Plc please visit www.gateleyplc.com or follow us on Twitter   www.twitter.com/@GateleyGroup

Chief Executive Officer's Review

Resilient performance

I am delighted with the Group's response to the pandemic and our achievements during H1 21. 

Throughout a significant period of disruption to the economy and our traditional ways of working, the professionalism of our staff in helping clients has been exceptional. The effects of the pandemic have necessitated some difficult decisions by the board but due to the commitment and dedication of all of the people across our diverse and resilient business, we are confident about trading during H2 21.

The expanding depth and breadth of our offer is becoming increasingly attractive to existing and new clients and is enabling us to deliver multiple legal and consultancy services to projects in a coordinated and well-managed way. I am excited about the Group's ability to further expand its Platforms for growth in FY 22 and beyond.

Our H1 21 revenue performance, combined with swiftly implemented cost-management initiatives put in place during the early stages of the pandemic, have yielded an increase of 9.8% in profit before tax to £6.1m, compared with £5.5m for the prior Period, whilst underlying adjusted profit before tax increased by 13.2% to £7.5m, compared with £6.6m for the prior Period. The Group also has increased profit after tax by 8.6% to £4.6m and generated significant liquidity, with net cash of £9.3m at the Period end (H1 20: Net debt excluding leases £2.1m).

We are committed to resuming bonus payments to our staff and dividends to our investors and will look to reintroduce our existing dividend policy following completion of FY 21.

Drivers for growth

The strength of Gateley's diversified Platform offering creates opportunities for us across many business types and sectors in all market conditions. Whilst transactional activity levels across Corporate, Banking and Financial Services were initially subdued in H1 21 due to the pandemic, our Property work streams have performed well throughout the Period due to the long-term nature of client projects and buoyant demand in our most active sectors, such as logistics and housebuilding. Given our market leading positions, we see further opportunities in these sectors.

Post the half year end the Group saw a significant increase in Corporate transactions and, as the leading UK M&A legal advisor by volume, we continue to benefit as instructions have increased ahead of anticipated government changes to the Capital Gains Tax regime in the UK prior to the end of FY 21.

Our International Dispute Resolution team has a strong pipeline of work with particular focus on acting for overseas banks in cross-border asset recoveries. This complex, top-tier multi-disciplinary, international work runs alongside mainstream insolvency and liquidator appointments and tax avoidance recovery work. This is highly specialist work, delivered through the expertise of a team within the Group who have long-established credentials in complex recovery cases in the UK and overseas. The formation and progression of this team to become a market leader proves our strategy to invest in niche, highly specialised services which give us the ability to leverage counter-cyclical opportunities with established expertise.

The strength of Gateley's connections nationally, across boardrooms and with intermediaries coupled with our reputation for quality and a genuine focus on client service, result (and will continue to result) in us holding a number of market-leading positions, long-term profitable client relationships and numerous opportunities for growth as we expand our offering and make strategic moves into new markets.

Operational Review

The health, safety and wellbeing of all of our colleagues, clients and suppliers remains our key priority.

Since the onset of the pandemic, we have operated in line with government guidelines. My colleagues have adapted seamlessly to remote working during each lockdown and previous investment in our IT infrastructure has proven to be invaluable in this regard.

Recognising the significant changes that have been forced upon us all as a result of the pandemic, we continue to develop and refine our agile working regime in preparation for as long a period of remote working as may be required, but also embracing what we believe is likely to be a permanent shift in working patterns.

We recently completed our annual all staff engagement roadshow to each of our office locations, held virtually for the first time in the Group's history. We are committed to regularly gauging the views of all staff through on-line surveys focusing on a number of themes to ensure staff needs are being fully considered when shaping our operational thinking.

Our all-staff annual SAYE option scheme attained record subscriptions during its November launch. I was delighted by this because it followed a six-month period during which all-staff pay cuts were in place. It is a clear demonstration of our peoples' belief in and commitment to our business.

We have agreed to consolidate and reduce space within a number of our office locations and have successfully reconfigured all of our offices with agile hot-desking facilities in anticipation of a more flexible return to office working in the longer term.  We anticipate that this has increased headcount capacity by 33% and is a clear and valuable example of an operational gearing opportunity being realised with scope for further gains. In parallel, we have undertaken a review of our support teams across the Group which resulted in a small reduction in headcount, although overall the numbers are still higher than at the end of the comparable period. Our strategy throughout the pandemic has been (and remains) to maintain our fee earner headcount so that we have sufficient resource to service projects as the market recovers. Our average fee earner headcount is 785 which has increased from 706 at the end of FY 20 mainly due to the full period impact of acquisitions but also including specific strategic legal partner recruits during the Period.

Acquisitions and Platform strategy

Our acquisition strategy is primarily focused on specialist consultancy services business targets which fit seamlessly into our market-focused Platforms of complementary service lines. These Platforms supplement our core legal services offering and differentiate our business.  Our plc status and established reputation help us to attract and incentivise first class professionals to help us develop these Platforms from which we sell multiple services collaboratively.

We had a busy year of acquisitions in FY 20 (with four businesses acquired). Whilst no acquisitions have been made in the Period and are unlikely during FY 21, significant opportunities continue to arise. In the meantime, we continue to be focused on integration of recently acquired businesses and development of our Platforms. We remain committed to and excited by acquisition opportunities that may present in FY 22 and beyond.

Current trading and outlook

The Group has been profitable and cash positive throughout the pandemic impacted Period and we are seeing strengthening activity levels carry through into H2 21 and a strong pipeline of work. The robust revenue performance in the first half of the year, together with a clear strategy and a Group much better equipped to deal with further lockdowns, means the board is optimistic for the second half of the financial year and confident of meeting current market expectations for the full year.

Our historical resilience shown through numerous economic cycles and our clear and meaningful strategy for the long-term development of our business, demonstrate to staff, clients and investors alike that their careers, instructions and investments are in safe hands despite macro-economic uncertainty. Looking forward, opportunities undoubtedly exist to broaden our range of professional services through acquisitions that enhance our client offering and deliver strong returns to our people and to investors.

Rod Waldie

CEO

12 January 2021

Finance Director's Review

Financial overview

Activity levels have recovered well from the pandemic affected start to the Period, whilst the move to fully agile working and the board decisions made at the start of the year have led to significant cost savings, which have enabled the Group to improve profit during the Period.

Our strategy to conserve cash throughout FY 21 and wait until the full year outcome is known before declaring internal and external stakeholder rewards, from a robust financial position, remains the right decision for the Group as we approach the second half of the year with confidence in our resilient, well balanced business model.

Our track record of delivering profitable annual results, supported by strong cash generation and attractive investment returns, is based on running our business model to strict, Group financial metrics, such as maintaining personnel costs at around 60% of revenue.

Group activity

We are pleased to report that the Group's activity levels continue to follow an improving trend with monthly activity during September and October being in excess of the prior year comparable periods.  Activity, measured as utilisation of professional staff hours against budgeted hours, has recovered from a low of 62% in May to a cumulative six-month performance of 79% for the Period as a whole.  This compares to 81% for the same Period in H1 20.  September and October were very strong with utilisation at 83% and 92% respectively.  This trend has continued as we progress further into H2 21.

Revenue

The Group has demonstrated considerable resilience throughout the Period as a result of our well-diversified service offering, generating revenue of £50.5m (H1 20 £51.8m). Despite representing an overall decrease of 2.6%, including an organic growth decrease of 9.5% due to decreases predominately in transactional activity, revenue from our newly acquired Consultancy service lines has almost bridged the shortfall, and further enhanced Group-wide opportunities for new work with existing clients in addition to attracting new clients. We are delighted with this outcome, not only because it demonstrates the quality of the businesses which have joined the Group, but also because it bears testament to our strategy since IPO, being to build sector, discipline and cyclical resilience into our Group via diversification into complementary non-legal consultancy. Revenue from the Group's core legal services was £44.3m (H1 20 £48.6m) and from non-legal services was £6.2m (H1 20 £3.2m). Consultancy revenues are anticipated to generate not less than 15% of annual revenue for the full year, compared to 10% of FY20 revenue.

Total expenses

Despite the unknown impact of the pandemic on revenue at the start of the Period, we are pleased to report that H1 21 total expenses have not exceeded our key Group cost to revenue metrics. Total expenses decreased by 0.9% to £45.6m (H1 20: £46.1m) as personnel and overhead cost savings mitigated the full year impact of investments in people growth and further expansion during FY20, including the increased overheads arising from the four acquisitions completed in the previous year.

Personnel costs, a key Group metric, have decreased as a percentage of revenue to 60.9% (H1 20: 61.8%). Other operating expenses, excluding non-underlying items, increased by 7.0% to £11.1m (H1 20: £10.4m) whilst other operating income increased to £1.9m (H1 20: £0.1m) as a result of income from the Government's job retention scheme which was utilised to retain jobs across the business through the difficult lock down period.

Average numbers of legal and professional staff rose by 16.6% to 785 (H1 20: 673) whilst support staff numbers rose by 6.8% to 347 (H1 20: 325) mainly as a result of acquisitions made during FY 20.

Profit before tax and earnings per share

The Group has recorded strong underlying adjusted profit before tax of £7.5m which has increased by 13.2% from £6.6m in H1 20. This has resulted in an excellent trading margin performance of 14.8% (H1 20: 12.7%) reflecting the improving activity levels in the business and the control of costs at both personnel and operating expense levels during the pandemic affected period. We enter the second half of the financial year having maintained fee earner headcount in order to service the now visible increases in client activity, and whilst government guidance remains to be to work from home, we now expect certain overhead savings to be maintained during H2, without affecting the now visibly improved activity levels that will lead to higher revenue generation in H2.  Whilst the disruption of the first lockdown subdued the start to the year all data now supports the Group's ability to achieve FY21 market expectations.

Profit before tax of £6.1m increased by 9.8% from £5.5m with profit after tax of £4.8m increasing by 8.6% from £4.4m.

Basic earnings per share increased by 2.8% to 4.04p (H1 20: 3.93p) which is slower than profit growth due to the issue of equity for FY 20 acquisitions and exercised share option schemes. Underlying diluted earnings per share increased by 7.0% to 4.92p (HY 20: 4.60p).

Dividend

As previously indicated the board intends to reinstate dividends, in line with its policy to distribute up to 70% of profit after tax ("PAT"), once the outcome of FY 21 is known.

Net assets and cash

The Group net asset position has increased by £18.7m to £49.7m (H1 20: 31.0m) as a result of continuing to operate the Group in accordance with its key performance metrics, in particular staff costs targeted at around 60% of revenue, and due to the fact that no payment of dividends for FY20 were made.

The main asset and liability movements were as follows:

- £7.6m increase in non-current assets as intangible assets increase following FY 20 acquisitions

- £11.9m increase in total current assets resulting from £1.2m more trade and other receivables available for collection and £10.7m of cash at the bank

The Group's net cash position increased significantly to £9.3m from a previous net debt position, excluding leases, position of £2.1m at H1 20 due to the Group's COVID-19 strategy to conserve cash and deferred payroll and VAT taxes using relevant government schemes. Deferred taxes of £4.6m at the end of H1 21 will be repaid by March 2021.

Working capital and cash generation

Total lock-up increased marginally from 148 to 149 days as the effects of the pandemic paused transactional activity and delayed legal court processes causing increases in unbilled revenue. WIP days increased from 49 to 55 days whilst debtor days decreased from 99 to 94 days as a result of further centralisation of systems. Contract assets (unbilled revenue) increased to £14.2m (H1 20: £12.2m) whilst trade receivables, including unbilled disbursements, decreased to £31.1m (H1 20: £32.2m).

Cash generated from operations during the Period was £12.9m (H1 20: £8.3m) which represents 271.1% (H1 20: 190.0%) of profit after taxation.  Free cash flow increased by 97.1% to £10.6m (£5.4m) as we conserved cash through improvements in debt collection, tax deferrals and sensible controls on all trading cash outgoings such as Capital expenditure that decreased to £0.1m (H1 20: £0.9m) during the Period. Cash outflow from financing activities of £2.1m was reduced on outflows of £6.2m in H1 20 due to the absence of dividend payments. The Group continues to operate with a low level of fixed term debt. This position is reviewed regularly to ensure appropriate funding levels are in place to support the Group's expansion.

Conclusion

The Group's culture is focused on achieving profitable growth for all stakeholders and we are on course to deliver another profitable year despite the continued backdrop of an uncertain macro environment and demonstrate a successful recovery by the year end from the early year impact. Activity levels are encouraging and whilst revenue performance lags slightly behind those activity levels, the board expects profitability and cash generation to remain strong, enabling the Group to achieve market expectations and reward internal and external stakeholders for their support.

Neil Smith

Finance Director

12 January 2021

Gateley (Holdings) Plc

Consolidated income statement and other comprehensive income

For the 6 months ended 31 October 2020

	Note	Unaudited 6 months to 31 October 2020	Unaudited 6 months to 31 October 2019	Audited 12 months to 30 April 2020
		£'000	£'000	£'000
Revenue	2	50,460	51,826	109,838
Other operating income		1,871	127	665
Personnel costs	3	(30,743)	(32,033)	(63,531)
Depreciation - Property, plant and equipment	4	(599)	(575)	(1,083)
Depreciation - Right-to-use asset	4	(1,801)	(1,655)	(3,455)
Impairment of trade receivables and contract assets		(17)	(378)	(631)
Other operating expenses		(12,462)	(11,416)	(26,442)
Operating profit before non-underlying operating and exceptional items		8,076	6,940	18,661
Total non-underlying operating and exceptional items	4	(1,367)	(1,044)	(3,300)
Operating profit		6,709	5,896	15,361
Investing income received		-	-	138
Financing income		4	-	523
Financing expense		(623)	(350)	(1,266)
Profit before tax		6,090	5,546	14,756
Taxation		(1,339)	(1,172)	(3,033)
Profit for the period after tax attributable to equity holders of the parent		4,751	4,374	11,723
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss
Foreign exchange translation differences
- Exchange differences on foreign branch		41	-	29
Profit for the financial period and total comprehensive income all attributable to equity holders of the parent		4,792	4,374	11,752

Statutory earnings per share (pence)

Basic earnings per share	5	4.04	3.93	10.34
Diluted earnings per share	5	3.99	3.91	10.14

The results for the periods presented above are derived from continuing operations. There were no other items of comprehensive income to report.

  Gateley (Holdings) Plc

Consolidated statement of financial position

at 31 October 2020	Note	Unaudited at 31 October 2020 £'000	Unaudited at 31 October 2019 £'000	Audited at 30 April 2020 £'000
Non-current assets
Property, plant and equipment		1,373	2,358	1,873
Right-of-use asset		28,161	22,421	22,879
Investment property		164	164	164
Intangible assets & goodwill	7	17,696	10,088	18,438
Other intangible assets		303	592	303
Other investments		363	55	229
Total non-current assets		48,060	35,678	43,886
Current assets
Contract assets	8	14,154	12,153	11,684
Trade and other receivables	9	33,114	33,784	39,997
Deferred tax asset		-	49	19
Cash and cash equivalents		13,072	2,420	2,923
Total current assets		60,340	48,406	54,623
Total assets		108,400	84,084	98,509
Non-current liabilities
Other interest-bearing loans and borrowings	10	(1,895)	(1,785)	(2,369)
Lease liability		(28,077)	(21,536)	(22,109)
Other payables	11	(942)	(695)	(922)
Deferred tax liability		(965)	(578)	(1,208)
Provisions		(339)	(339)	(461)
Total non-current liabilities		(32,218)	(24,933)	(27,069)
Current liabilities
Other interest-bearing loans and borrowings	10	(1,878)	(2,766)	(1,437)
Lease liability		(3,304)	(3,611)	(3,347)
Trade and other payables	11	(18,086)	(21,371)	(20,169)
Provisions		(359)	(130)	(252)
Current tax liabilities		(2,840)	(275)	(1,399)
Total current liabilities		(26,467)	(28,153)	(26,604)
Total liabilities		(58,685)	(53,086)	(53,673)
NET ASSETS		49,715	30,998	44,836
EQUITY
Share capital		11,761	11,377	11,761
Share premium		9,153	7,244	9,153
Merger reserve		(9,950)	(9,950)	(9,950)
Other reserves		6,815	2,501	6,815
Treasury reserve		(670)	(99)	(417)
Translation reserve		68	9	27
Retained earnings		32,538	19,916	27,447
TOTAL EQUITY		49,715	30,998	44,836

Gateley (Holdings) Plc

Consolidated cash flow Statement

for the 6 months ended 31 October 2020

	Note	Unaudited 6 months to 31 October 2020	Unaudited 6 months to 31 October 2019	Audited 12 months to 30 April 2020
		£'000	£'000	£'000
Cash flows from operating activities
Profit for the period after tax		4,751	4,374	11,723
Adjustments for:
Depreciation and amortisation		3,424	2,764	5,913
Financial income		(4)	(248)	(523)
Financial expense		623	598	1,266
Impairment of Goodwill		-		619
Equity settled share-based payments		343	510	821
Loss on disposal of other intangible assets		-	-	282
Loss/(profit) on sale of investment		-	30	(138)
Tax expense		1,339	1,172	3,033
		10,476	9,200	22,996
Decrease/(increase) in trade and other receivables		4,413	1,318	(1,730)
Decrease in trade and other payables		(1,994)	(2,048)	(6,120)
(Decrease)/increase in provisions		(15)	(161)	83
Cash generated from operations		12,880	8,309	15,229
Tax paid		(373)	(1,663)	(2,767)
Net cash flows from operating activities		12,507	6,646	12,462
Investing activities
Acquisition of property, plant and equipment		(99)	(598)	(857)
Acquisition of other intangible assets		-	(303)	(329)
Cash received on sale of investment		-	-	208
Acquisition of other investments		(134)	-	(214)
Contingent consideration paid - acquisition of subsidiary		(62)	-	(625)
Consideration paid on acquisitions, net of cash acquired		-	(3)	(2,657)
Net cash outflow from investing activities		(295)	(904)	(4,474)
Financing activities
Interest and other financial income received		4	248	523
Interest and other financial income paid		(623)	(213)	(426)
Lease payments		(1,158)	(385)	(801)
Short term bank loan proceeds		1,697	-	-
Repayment of short-term bank loans		(1,032)	-	-
Repayment of term bank loans		(235)	(1,283)	(2,573)
Repayment of loans from former members of GCL Solicitors  & Directors of International Investment Services		(68)	(286)	(402)
Funds (to)/from former members of Gateley Tweed		(395)	-	30
Acquisition of own shares		(253)	(486)	-
Proceeds of sale of own shares		-	-	642
Other transactions with Gateley EBT Limited		-	729	-
Cash received for shares issued on exercise of share options		-	1,474	1,062
Dividends paid	6	-	(6,007)	(6,007)
Net cash outflow from f inancing activities		(2,063)	(6,209)	(7,952)
Net increase/(decrease) in cash and cash equivalents		10,149	(467)	36
Cash and cash equivalents at beginning of period		2,923	2,887	2,887
Cash and cash equivalents at end of period		13,072	2,420	2,923

Gateley (Holdings) Plc

Consolidated statement of changes in equity

for the 6 months ended 31 October 2020

	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 2019	11,086	6,755	(9,950)	1,770	(1,057)	21,982	(2)	30,584
Adjustment from adoption of IFRS 16 (net of tax)	-	-	-	-	-	(725)	-	(725)
Restated balance at 1 May 2019	11,086	6,755	(9,950)	1,770	(1,057)	21,257	(2)	29,859
Comprehensive income:
Profit for the year	-	-	-	-	-	11,723	-	11,723
Exchange rate differences	-	-	-	-	-	-	29	29
Total comprehensive income	-	-	-	-	-	11,723	29	11,752
Transaction with owners recognised directly in equity
Issue of share capital	675	2,398	-	5,045	-	-	-	8,118
Recognition of tax benefit on gain from equity settled share options	-	-	-	-	-	374	-	374
Purchase of own shares at nominal value	-	-	-	-	-	(163)	-	(163)
Sale of treasury shares	-	-	-	-	1,915	-	-	1,915
Purchase of treasury shares	-	-	-	-	(1,275)	-	-	(1,275)
Dividend paid	-	-	-	-	-	(6,007)	-	(6,007)
Share based payment transactions	-	-	-	-	-	821	-	821
Deferred tax on equity settled element of share-based payment charge	-	-	-	-	-	(558)	-	(558)
Total equity at 30 April 2020	11,761	9,153	(9,950)	6,815	(417)	27,447	27	44,836
At 1 May 2019 (unaudited)	11,086	6,755	(9,950)	1,770	(1,057)	21,982	(2)	30,584
Adjustment from adoption of IFRS 16 (net of tax)	-	-	-	-	-	(702)	-	(702)
Restated balance at 1 May 2019	11,086	6,755	(9,950)	1,770	(1,057)	21,280	(2)	29,882
Comprehensive income:
Profit for the period	-	-	-	-	-	4,374	-	4,374
Exchange rate differences	-	-	-	-	-	-	11	11
Total comprehensive income	-	-	-	-	-	4,374	11	4,385
Transaction with owners recognised directly in equity
Issue of share capital	291	489	-	731	-	-	-	1,511
Recognition of tax benefit on gain from equity settled share options	-	-	-	-	-	228	-	228
Release of deferred tax	-	-	-	-	-	(469)	-	(469)
Sale of treasury shares	-	-	-	-	1,517	-	-	1,517
Purchase of treasury shares	-	-	-	-	(559)	-	-	(559)
Dividend paid	-	-	-	-	-	(6,007)	-	(6,007)
Share based payment transactions	-	-	-	-	-	510	-	510
Total equity at 31 October 2019	11,377	7,244	(9,950)	2,501	(99)	19,916	9	30,998

Gateley (Holdings) Plc

Consolidated statement of changes in equity

for the 6 months ended 31 October 2020

	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 (unaudited)	11,761	9,153	(9,950)	6,815	(417)	27,447	27	44,836
Comprehensive income:
Profit for the year	-	-	-	-	-	4,751		4,751
Exchange rate differences	-	-	-	-	-		41	41
Total comprehensive income	-	-	-	-	-	4,751	68	4,792
Transaction with owners recognised directly in equity
Purchase of treasury shares	-	-	-	-	(253)	-	-	(253)
Dividend paid	-	-	-	-	-	-	-	-
Share based payment transactions	-	-	-	-	-	340	-	340
Total equity at 31 October 2020	11,761	9,153	(9,950)	6,815	(670)	32,538	68	49,715

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 and losses on sale of own shares.

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

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

Treasury reserve - Represents the repurchase of shares for future distribution by the 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.

Gateley (Holdings) Plc

Notes

for the period ended 31 October 2020

1.  Basis of preparation

These interim unaudited financial statements for the six months ended 31 October 2020 have been prepared in accordance with the accounting policies set out in the Annual Report and Financial statements of the Group for the year ended 30 April 2020 using the recognition and measurement principles of IFRS as applied under the Companies Act 2006 and the AIM rules.

The comparative figures for the financial year ended 30 April 2020 are not the company's statutory accounts for that financial year. Those accounts have been reported on by the company's auditor and delivered to the registrar of companies. The report of the auditor was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

1.1  Accounting policies

Accounting policies remain unchanged from those accompanying the 30 April 2020 financial statements. 

Non-underlying items

Non-underlying items are non-trading and or non-cash items disclosed separately in the Consolidated Income Statement where the quantum, nature or volatility of such items would otherwise distort the underlying trading performance of the Group. The following are included by the Group in its assessment of non-underlying items:

· Share based payment charges: such charges are treated as non-underlying as the gain realised on the options granted is settled in shares not cash and therefore does not impact the income statement. The IFRS 2 charge is taken to the income statement, these expenses are treated as non-underlying items as they are either non-cash or non-recurring in nature.

· Amortisation in respect of intangible fixed assets: these costs are treated as non-underlying as they are non-cash items.

The tax effect of the above is also included if considered significant.

Exceptional items

Exceptional items are one off transactions, unrelated to the underlying trading performance of the Group disclosed separately in the Consolidated Income Statement where the quantum, nature or volatility of such items would otherwise distort the underlying trading performance of the Group.

The following are included by the Group in its assessment of exceptional items:

· Gains or losses arising on disposal, closure, restructuring or reorganisation of businesses that do not meet the definition of discontinued operations.

· Impairment charges in respect of intangible fixed assets: these costs are treated as exceptional due to their one-off nature.

· Non-typical expenses associated with acquisitions.

· Costs incurred as part of significant refinancing activities.

The tax effect of the above is also included if considered significant.

Intangible assets and goodwill

Goodwill

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but is tested annually for impairment. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment in the investee.

Other intangible assets

Other intangible assets, including software licences, expenditure on internally generated goodwill, brands and software, customer contracts and relationships are capitalised at cost and amortised on a straight-line basis over their estimated useful economic lives through operating expenses.

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and accumulated impairment losses.

Customer lists

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.

Brand value

Certain acquisitions have retained their trading name due to the value of the brand in their specific market place.

Brand value is amortised over a period of three or five years based on the Directors assessment of the future life of the brand, supported by trading history.

Critical accounting judgements and key sources of estimation uncertainty

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. 

Management does not consider there to have been and critical accounting judgements made in the financial period.

Unbilled revenue on client assignments

The valuation of unbilled revenue (on non-contingent matters) involves detailed understanding of contractual terms with clients.  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. The principal uncertainty over this estimation is a result of the amounts not yet being billed to, or recognised by the client.  Provision is made for such factors as historical recoverability rates, agreements with clients, external expert's opinion and the potential credit risks, following interactions between legal staff, finance and clients.  Where entitlement to revenue is certain it is recognised as recoverable selling price.  Where a matter is contingent at the statement of financial position date, no revenue is recognised.

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 made relate to the valuation of the brand, where the acquired brand is retained by the entity, and the customer list. The value of such intangibles has been estimated based on the amount of revenue expected to be generated by them. The revenue estimations rely on annual growth rates. Management have selected the appropriate rates based on a combination of observed historical growth, industry norms and forecasted influencing factors. Management have also performed sensitivity analysis to assess the impact of any variation to the growth rate used. The rates applied reflect previous growth rates, with sensitivities indicating that variations in the actual rate achieved are unlikely to materially impact the valuation of the intangible assets.

1.2  Alternative performance measures

Underlying adjusted profit before tax

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

	6 months to 31 October 2020	6 months to 31 October 2019	12 Months 30 April 2020
	£'000	£'000	£'000
Reported profit before tax	6,090	5,546	14,756
Adjustments for non-underlying and exceptional items:
- Amortisation of acquired intangible assets	1,024	534	1,375
- Share-based payment adjustment	343	510	1,355
- Exceptional items (see note 4)	-	-	570
Underlying adjusted profit before tax	7,457	6,590	18,056

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

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

Cash generated from operations

a)  Free cash flows

	6 months to 31 October 2020	6 months to 31 October 2019	12 Months 30 April 2020
	£'000	£'000	£'000
Operating cash flows before movements in working capital	10,476	9,200	22,996
Net working capital movement	2,404	(891)	(7,767)
Cash generated from operations	12,880	8,309	15,229
Repayment of lease liabilities	(1,158)	(385)	(801)
Net interest paid	(619)	35	97
Tax paid	(373)	(1,663)	(2,767)
Purchase of property, plant and equipment	(99)	(598)	(857)
Purchase of other intangible assets	-	(303)	(329)
Free cash flows	10,631	5,395	10,572

b)  Working capital measures

	6 months to 31 October 2020	6 months to 31 October 2019	12 Months 30 April 2020
	£'000	£'000	£'000
WIP days
Amounts recoverable from clients in respect of contract assets (unbilled revenue)	14,154	12,153	11,684
Unbilled disbursements	2,391	2,529	3,708
Total WIP	17,545	14,682	15,392
Annualised revenue	110,797	109,222	117,524
WIP days	55	49	48

	6 months to 31 October 2020	6 months to 31 October 2019	12 Months 30 April 2020
	£'000	£'000	£'000
Debtor days
Amounts recoverable from clients in respect of contract assets (unbilled revenue)	31,065	32,238	36,874
Less unbilled disbursements	(2,391)	(2,529)	(3,708)
Total debtors	28,674	29,709	33,166
Annualised revenue	110,797	109,222	117,524
Debtor days	94	99	103

	6 months to 31 October 2020	6 months to 31 October 2019	12 Months 30 April 2020
	£'000	£'000	£'000
Gross lock-up days
Total WIP	16,545	14,682	15,392
Total debtors	28,674	29,709	33,166
Total gross lock-up	45,219	44,391	48,556
Annualised revenue	110,797	109,222	117,524
Gross lock-up days	149	148	151

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

1.3  Going concern

These interim accounts 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 on-going trading performance.  On 1 June 2015 the Group acquired two unsecured term loans for £5m each repayable quarterly over five years. The facilities were extended by a total of £3m in October 2018.  Alongside long-term loans the Group acquired a short term loan in May which is repayable over 10 months. The long-term loan facilities contain financial covenants which the Group is forecast to comply with for the foreseeable future.  Additional overdraft facilities of up to £20m (2019: £8m) in total are also available to the Group.  These reduce to £16m on 28 February 2021 and £10m on 30 April 2021.

1.4  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.

1.5  Cautionary statement

This document contains certain forward-looking statements in 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.  Operating segments

The Chief Operating Decision Maker ("CODM") is the strategic board. The Group has the following five strategic divisions, which are its reportable segments.  These divisions offer a mixture of legal and consultancy services to clients.  With effect from 1 May 2020 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 31 October 2020 and also the new service lines:

Reportable segment	Legal service lines (Gateley Legal)	Consultancy service lines (Gateley Consultancy)
Banking and financial services	Finance Dispute Resolution Banking Restructuring	Vinden
Corporate	Corporate Private client/Family Taxation	International Investment Services
Business services	Commercial Commercial Dispute Resolution/Litigation Shipping Regulatory Tweed (reputation, media and privacy law)	Vinden
Employment, Pensions and Benefits	Employment Pensions	Entrust Kiddy and Partners International Investment Services T-three
Property	Real Estate Residential Development Construction Planning Real Estate Dispute Resolution	Capitus Hamer/Persona Vinden

6 months to 31 October 2020

	Banking and Financial  Services	Corporate	Business Services	Employee Pensions and Benefits	Property	Total segments	Other expense and movement in unbilled  revenue	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Segment revenue	6,072	7,353	5,920	6,701	21,715	47,761	2,699	50,460
Segment contribution  (as reported internally)	1,826	1,565	2,831	1,419	6,672	14,313	2,699	17,012
Costs not allocated to segments:
Other operating income								1,871
Personnel costs								(3,654)
Share based payment costs								(343)
Depreciation and amortisation								(3,424)
Other operating expenses								(4,753)
Net financial income								(619)
Profit for the financial period before taxation								6,090

6 months to 31 October 2019

	Banking and Financial  Services	Corporate	Business Services	Employee Pensions and Benefits	Property	Total segments	Other expenses  and movement  in unbilled  revenue	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Segment revenue	8,091	10,485	6,492	6,150	19,828	51,046	780	51,826
Segment contribution  (as reported internally)	2,750	4,249	2,319	1,807	6,437	17,562	780	18,342
Costs not allocated to segments:
Other operating income								127
Personnel costs								(3,401)
Share based payment charge								(510)
Depreciation and amortisation								(2,764)
Other operating expenses								(5,898)
Net financial expense								(350)
Profit for the financial period before taxation								5,546

12 months to 30 April 2020

	Banking and Financial  Services	Corporate	Business Services	Employee Pensions and Benefits	Property	Total segments	Other expenses and movement  in unbilled  revenue	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Segment revenue	16,701	19,801	12,555	13,631	45,071	107,759	2,079	109,838
Segment contribution  (as reported internally)	6,538	7,616	4,992	4,876	21,317	45,339	2,079	47,418
Costs not allocated to segments:
Other operating income								665
Investment income								138
Personnel costs								(7,523)
Share based payment charge								(821)
Depreciation and amortisation								(5,913)
Other operating expenses								(17,361)
Net financial expense								(743)
Exceptional costs								(1,104)
Profit for the financial year before taxation								14,756

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

3.  Employees

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

		Number of employees
		6 months to 31 October 2020	6 months to 31 October 2019	12 months to 30 April 2020
Legal and professional staff		785	673	706
Administrative staff		347	325	341
		1,132	998	1,047
The aggregate payroll costs of these persons were as follows:	6 months to 31 October 2020		6 months to 31 October 2019	12 months to 30 April 2020
	£'000		£'000	£'000
Wages and salaries	27,763		28,055	55,696
Social security costs	2,330		3,250	6,280
Pension costs	650		728	1,555
	30,743		32,033	63,531

4.  Expenses

Included in operating profit are the following:

	6 months to 31 October 2020	6 months to 31 October 2019	12 months to 30 April 2020
	£'000	£'000	£'000
Depreciation on tangible assets	599	575	1,083
Depreciation on right-of-use assets	1,801	1,655	3,455
Other operating income - rent income	-	(127)	(216)
Short term and low value leases	54	54	84
Foreign exchange	(45)	-	(29)

Non-underlying items

	6 months to 31 October 2020	6 months to 31 October 2019	12 months to 30 April 2020
Amortisation of intangible assets	1,024	534	1,375
Share based payment charges	343	510	1,355
	1,367	1,044	2,730

Exceptional items

	6 months to 31 October 2020	6 months to 31 October 2019	12 months to 30 April 2020
Acquisition costs	-	-	107
Impairment of software development costs	-	-	463
Total non-underlying and exceptional items	-	-	570

Total non-underlying and exceptional items

1,367

1,044

3,300

5.  Earnings per share

		6 months to 31 October 2020	6 months to 31 October 2019	12 months to 30 April 2020
		Number	Number	Number
Weighted average number of ordinary shares in issue, being weighted average number of shares for calculating basic earnings per share		117,609,094	111,577,259	113,404,283
Shares deemed to be issued for no consideration in respect of share based payments		1,508,903	1,871,872	2,195,444
Weighted average number of ordinary shares for calculating diluted earnings per share		119,117,997	113,449,131	115,599,727
		£'000	£'000	£'000
Profit for the period after taxation and basic earnings attributable to ordinary equity shareholders		4,751	4,374	11,723
Non-underlying items		1,367	1,044	3,300
Tax on non-underlying items		(260)	(198)	(627)
Underlying earnings before non-underlying items		5,858	5,220	14,396
Earnings per share is calculated as follows:	Pence		Pence	Pence
Basic earnings per ordinary share	4.04		3.93	10.34
Diluted earnings per ordinary share	3.99		3.91	10.14
Underlying basic earnings per ordinary share	4.98		4.68	12.69
Underlying diluted earnings per ordinary share	4.92		4.60	12.45

Underlying earnings per share have been shown because the Directors consider that this provides valuable additional information about the underlying performance of the Group.

6.  Dividends

	6 months to 31 October 2020	6 months to 31 October 2019	12 Months 30 April 2020
	£'000	£'000	£'000
Equity shares
Final dividend in respect of 2019 (5.4p per share) - Paid 15 October 2019	-	6,007	6,007
Dividends paid	-	6,007	6,007

No dividends were proposed by the board in respect of the six month period ended 31 October 2020.  During the previous six month period to the 31 October 2019 the board approved an interim dividend of 2.9p which was subsequently cancelled on 24 March 2020.

7.  Intangible assets

		Goodwill	Customer list and brand names	Total
		£'000	£'000	£'000
Deemed cost
At 1 May 2019		8,405	4,424	12,829
Acquired through business combination		192	-	193
At 31 October 2019		8,597	4,424	13,022
At 1 May 2019		8,405	4,424	12,829
Acquired through business combination		4,543	5,426	9,969
Adjustment - Kiddy & Partners		(619)	-	(619)
At 30 April 2020		12,329	9,850	22,179
At 1 May 2020		12,329	9,850	22,179
Acquired through business combination		-	-	-
Adjustment to expected contingent consideration - Gateley Vinden Limited		282	-	282
At 31 October 2020		12,611	9,850	22,461
Accumulated amortisation
At 1 May 2019		-	2,399	2,399
Charge for the period		-	534	534
At 31 October 2019		-	2,933	2,933
At 1 May 2019		-	2,399	2,399
Charge for the year		-	1,342	1,342
At 30 April 2020		-	3,741	3,741
At 1 May 2020		-	3,741	3,741
Charge for the period		-	1,024	1,024
At 31 October 2020		-	4,765	4,765
Net Book Value
At 31 October 2019		8,597	1,491	10,088
At 30 April 2020		12,329	6,109	18,438
At 31 October 2020		12,611	5,085	17,696

Goodwill

Goodwill is allocated to the following cash generating units

	31 October 2020	31 October 2019	30 April 2020
	£'000	£'000	£'000
Gateley Capitus Limited	1,515	1,515	1,515
Gateley Hamer Limited	1,161	1,161	1,161
Kiddy & Partners Limited	1,872	2,491	1,872
GCL Solicitors LLP (acquisition of trade and assets)	2,900	2,900	2,900
International Investment Services Limited	338	338	338
Persona Associates Limited	40	192	40
t-three Consulting Limited	955	-	955
Gateley Vinden Limited	2,254	-	1,972
Gateley Tweed (acquisition of goodwill)	1,576	-	1,576
	12,611	8,597	12,329

8.  Contract Assets and liabilities

	Contract assets	Contract liabilities
	£'000	£'000
As at 31 October 2020	14,154	(160)
As at 31 October 2019	12,153	(44)
As at 30 April 2020	11,684	(70)

Contract assets

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

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

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

Contract liabilities

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

9.  Trade and other receivables

	31 October 2020	31 October 2019	30 April 2020
	£'000	£'000	£'000
Trade receivables	31,065	32,238	36,874
Prepayments	1,916	1,546	2,941
Other receivables	133	-	182
	33,114	33,784	39,997

10.  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.

	31 October 2020		31 October 2019		30 April 2020
	Fair value	Carrying amount	Fair value	Carrying amount	Fair value	Carrying amount
	£'000	£'000	£'000	£'000	£'000	£'000
Non-Current liabilities
Unsecured long-term bank loan	1,895	1,895	1,785	1,785	2,369	2,369
	1,895	1,895	1,785	1,785	2,369	2,369
Current liabilities
Unsecured long-term bank loan	947	947	2,582	2,582	708	708
Unsecured short-term bank loan	665	665	-	-	-	-
Loans from former members of GCL			156	156	68	68
Loans from Director of IIS	-	-	28	28	-	-
Loans due to former partners of Gateley Tweed LLP	266	266	-	-	661	661
	1,878	1,878	2,766	2,766	1,437	1,437

The unsecured overdraft facilities totalling £20m (31 October 2019 £8m, 30 April 2020 £8m) are repayable on demand.  Overdraft facilities will reduce down to more historic levels of £16m on 28 February 2021 and then finally to £10m on 30 April 2021 and remain at that level until 30 September 2021.

On 8 June 2015, Gateley Plc entered into two new loan agreements of £5m each, £10m in total.  On 28 October 2018 these existing loans were re-negotiated and additional loans totalling £3 million were entered into.  Post 30 April 2020 year-end total term loan repayments were renegotiated, the June 2020 repayment was cancelled, with the remaining balance payable in quarterly repayments of £0.24m payable between September 2020 and September 2023.  Interest is chargeable at 2.25% over LIBOR.

On the 12 May 2020, Gateley Plc entered into a short-term bank loan for £1.7m repayable over 10 equal monthly instalments.  Interest is chargeable at a fixed rate of 1.72%.

11.  Trade and other payables

	31 October 2020	31 October 2019	30 April 2020
	£'000	£'000	£'000
Current
Trade payables	4,988	5,041	5,490
Other taxation and social security payable	10,071	5,732	12,352
Other payables	184	1,956	93
Contingent consideration	579	1,159	360
Accruals and deferred income	2,529	7,483	1,874
	18,351	21,371	20,169
	£'000	£'000	£'000
Non-current
Other payables	130	134	133
Contingent consideration	812	561	789
	942	695	922

Contingent consideration

£0.579m of current contingent consideration represents the earn-out sums payable to the sellers of Kiddy & Partners Limited (£0.279m) and Gateley Vinden Limited (£0.30m).

£0.812m of non-current contingent consideration represents the earn-out sums payable to the sellers of International Investment Services Limited (£0.134m) and T-Three Consultancy Limited (£0.678m).

All contingent consideration amounts have been calculated based on the Groups expectation of what it will pay in relation to the earn-out clause of the relevant sale and purchase agreement. The earn-out targets are based on the annual results, of the acquired business. The fair value of the earn-out consideration is calculated based on the forecasted results to give an estimate of the final obligation capped at the maximum earn-out amount stated in the purchase agreement.

12.  Share based payments

Group

At the period end the Group has three share-based payment schemes in operation and approved a new Long-Term Incentive Plan (LTIP) to replace our existing SARS's scheme in January 2020.

Long Term Incentive Plan ('LTIP')

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

Performance conditions

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

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

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

Grant of equity share options under the LTIP

Certain senior employees and executive directors were initially granted options on 24 February 2020 based on performance conditions commencing on 1 May 2019.  These options were cancelled on 17 July 2020 as a result of the impact of Covid-19 on the achievement of those performance conditions.  The fair value of the cancelled options is deemed to be nil as a result of the impact of Covid-19 on the Group.  The Committee has subsequently reassessed the use of this incentive scheme and granted new options on the 22 July 2020 based on performance conditions commencing a year on 1 May 2020.  The number of options granted were allocated to the same employees in the same proportions as the February issue however approximately 28% more awards were issued to those employees so as to enhance the incentivisation of these awards during the difficult and challenging economic conditions encountered due to the impact of Covid-19.

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.

The SARS awards and resultant number of shares granted is detailed below:

	Reference shares in issue at exercise date Number	Price at grant date £	Price at exercise date £	Growth £	Growth value £'000	Number of shares at exercise price Number
SARS 15/16	6,650,000	1.10	1.72	0.62	4,123	2,397,093
SARS 16/17	10,225,000	1.39	1.65	0.26	2,658	1,623,648
SARS 17/18	6,750,000	1.83	1.17	(0.66)	-	-

Save As You Earn Scheme (SAYE)

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

Company Share Option Plan (CSOP)

The group operates a 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 share at the price on the date of the grant.

The annual awards granted under the schemes are summarised below:

	Weighted average remaining contractual life	Weighted average exercise price	Originally granted	Lapsed at 30 April 2020	At 1 May 2020	Granted during the period	Lapsed during period	At 31 October 2020
	Years	£	Number	Number	Number	Number	Number	Number
LTIPS
LTIPS 20/21 - 22 July 2020	2.5	£1.44	-	-	-	1,405,766	(22,365)	1,383,401
SAYE
SAYE 18/19 - 21 September 2018	0.9	£1.27	620,335	(73,411)	546,924	-	(43,432)	503,492
SAYE 19/20 - 1 October 2019	1.9	£1.28	819,626	(48,839)	770,787	-	(37,832)	732,955
			1,439,961	(122,250)	1,317,711	-	(81,264)	1,236,447
CSOPS
CSOPS 18/19 - 24 October 2018	0.9	£1.44	812,131	(68,748)	743,383	-	(26,040)	717,343
CSOPS 20/21 - 7 July 2020	2.7	£1.35	-	-	-	976,797	(17,594)	959,203
			812,131	(68,748)	743,383	976,797	(43,634)	1,676,546

During the period the SARS 17/18 options did not vest as the exercise price was below the £1.83 hurdle price.  The total accrued IFRS2 charge was £724,742.

During the period 451,173 CSOP options became eligible to exercise once the share price exceeds £1.65.  At 31 October 2020 no CSOP options had been exercised. The total accrued IFRS2 charge was £95,780.

During the period 358,865 SAYE 16/17 options became eligible to exercise once the share price exceeded £1.33.  At the 31 October 2020 no SAYE options had been exercised of a potential 358,865 new shares issued via a block listing in order to fully satisfy all possible options. 358,865 new 10p shares with a nominal value of £35,865 where issued on 6 January 2021.  The total accrued IFRS2 charge was £155,381.

On 6 November 2020 a total of 2,291,370 options were granted under the 20/21 SAYE scheme using an exercise price of £1.02.

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	CSOP	CSOP	SAYE	SAYE	SAYE	LTIP
Grant date	7/7/20	24/10/18	15/9/17	6/11/20	30/9/19	21/12/18	22/7/20
Share price at date of grant	£1.42p	£1.44p	£1.65p	£1.27p	£1.64p	£1.585p	£1.44
Exercise price	£1.42p	£1.44p	£1.65p	£1.02p	£1.27p	£1.27p	£1.44
Volatility	35%	24%	24%	35%	35%	24%	35%
Expected life (years)	3.3	3.3	3.3	3.3	3.3	3.3	3.3
Risk free rate	1%	1%	1%	1%	1%	1%	1%
Dividend yield	4%	4.5%	4%	4%	4%	4.5%	4%
Fair value per share
Market based performance condition	£0.24p	£0.16p	£0.19p	£0.33p	£0.37p	£0.27p	£1.19p
Non-market based performance condition/no performance condition		-	-			-	100%

Expected volatility was determined by using historical share price data of the Company since it listed on 8 June 2015.  The expected life used in the model has been based of managements expectation of the minimum and maximum exercise period of three and three and a half years, respectively.

 

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