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Gateley (Holdings) (GTLY)

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Tuesday 12 January, 2021

Gateley (Holdings)

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: +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



finnCap - Nominated adviser and broker

Tel +44 (0) 20 7220 0575

Matt Goode / James Thompson (Corporate Finance)


Andrew Burdis (ECM)




N+1 Singer - Joint broker

Tel +44 (0) 20 7496 3000

Peter Steel (Corporate Finance)


Rachel Hayes (Corporate Broking)




Belvedere Communications Limited - Financial PR


Cat Valentine ([email protected])

Mob: +44 (0) 7715 769 078

Keeley Clarke ([email protected])

Mob: +44 (0) 7967 816 525

 

 

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




4,988

5,041

5,490

10,071

5,732

12,352

184

1,956

93

579

1,159

360

2,529

7,483

1,874

18,351

21,371

20,169




£'000

£'000

£'000




130

134

133

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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