Information  X 
Enter a valid email address

Gordon Dadds Group (INCE)

  Print   

Thursday 25 July, 2019

Gordon Dadds Group

Final Results

RNS Number : 6876G
Gordon Dadds Group PLC
25 July 2019
 

Gordon Dadds Group plc

("Gordon Dadds" or the "Group")

Full year audited results for the 12 months to 31 March 2019

Record results: Strong performance; Ince acquisition on track; operational and commercial opportunities being realised

Gordon Dadds Group PLC (AIM: GOR), the London-based acquisitive legal and professional advisory business, is pleased to announce its audited results for the year ended 31 March 2019.

 

For the year ended 31 March (£m)

2019

2018

% Growth

Revenue

52.6

31.2

+69%

Operating profit

15.2

8.8

+73%

   % margin

28.9%

28.2%

+70 bps

Adjusted profit before tax

5.9

2.5

+141%

Adjusted diluted earnings per share (p)

18.8p

10.5p

+79%

Dividend per share (p)

6.0p

4.0p

+50%

Net (Debt)/Cash

(2.9)

8.4

 

* Adjusted profit before tax is calculated as the profit before tax after adding back non-recurring items (as shown in note 9 to the financial statements) and after deducting the non-controlling interests shown in statutory accounts

** Adjusted earnings per share is computed from adjusted profit before tax after deducting taxation

Financial highlights

·    Revenue £52.6m (2018: £31.2m) +69%

·    Annualised revenues at the year end of around £70m; grown to £100m of consolidated revenues post year end

·    Compound revenue growth of over 80% per annum. since 1 April 2013, from both acquired and organic growth

·    Operating profits £15.2m (2018: £8.8m) a 73% increase on 2018

·    Adjusted* profit before tax £5.9m (2018: £2.5m) +141%

·    Non-recurring acquisition costs and related material items £14.3m (2018: £2.3m)

·    Adjusted** diluted earnings per share 18.8p (2018: 10.5p) +79%

·    Dividend 4.0 pence per share (2018: 4.0p), making 6.0p for year (2018: 4.0p)

·    Net borrowings £2.9m (2018: net cash £8.4 m)

Operational highlights

·    Integration of acquired businesses on track

Acquisition of Ince & Co's ("Ince") UK and Chinese businesses from 1 January 2019 and new relationships with Ince's international offices established post year end in April 2019

Five acquisitions in 2017-8 fully integrated and planned operational gains being achieved

Partner and client retention strong across the business

·    Increased diversification and broadening opportunity for growth; the Group now operates from eight jurisdictions with cross selling opportunities continuing to be developed

·    Lateral hire of three partners and their 20 personnel team in Hong Kong, effective post year end

·    Opening of a separate London office within the Lloyds insurance market in June 2019 to strengthen the Group's services to insurance clients

Adrian Biles, Group Chief Executive, commented:

"This is a great set of results and I'm really proud of the hard work of my colleagues around the world.  A major highlight during the year was of course the acquisition of Ince in the UK and China. 

"The integration phase of Ince is now complete and I think it's noteworthy that we did not suffer any partner or client losses during and since the transaction.  The opportunity to cross sell by practice area and by geography provided by Ince is huge and has allowed us to accelerate beyond this level.

"We've always been a high growth business - having delivered compound annual revenue growth of over 80% for the last five years.  Looking forward, we are well-positioned for significant growth as we look to leverage our existing infrastructure through cross-selling, new client wins and further new hires, acquisitions and alliances."

Enquiries:

Gordon Dadds Group plc                            Email: [email protected] 

Adrian Biles, Group Chief Executive

Christopher Yates, Chief Financial Officer

Arden Partners

Nominated Adviser and broker to the Company                            +44 (0) 20 7614 5900

John Llewellyn-Lloyd
Ciaran Walsh
Fraser Marshall

Portland Communications                                                               +44 (0) 20 7554 1789

Steffan Williams                                               Email: [email protected]

Simon Hamer

Lauren Gallagher

 

 

 

About Gordon Dadds Group plc:

Gordon Dadds Group plc is an acquisitive legal and professional advisory business headquartered in London with a significant back office and technology platform based in Cardiff.

The Group targets firms of all sizes and will merge the business into the Gordon Dadds brand or allow a firm to retain their identity and culture but benefit from the back-office technology platform used by Gordon Dadds, enabling the targeting of law firms seeking an alternative solution to the regulatory and investment requirements of the UK legal market.

Gordon Dadds LLP has been operating in this way since 2013, successfully integrating firms into its cost efficient platform.

Please visit www.gordondaddsgroup.com  for more information.

 

 

 

 

Operating Review

Overview

The year has been another one of great progress for the Group, which, with the concluded new arrangements with Ince's overseas offices, now has annualised consolidated revenues of around £100 million. 

Our strategy has been and continues to be to acquire and grow revenue through organic growth and acquisition and to administer that through a single efficient administrative operation in a low cost environment. 

Our objective at admission to AIM in August 2017 was to double revenue in three years. As we approach the second anniversary, our reported revenue has already doubled and our annualised revenue is nearly four times that of two years ago. 

We have the foundation for a highly profitable and fast growing business advisory group and have the structure and team to achieve this. 

Acquisition of Ince in the UK and China

The key event of the year under review was the acquisition of the highly regarded and long established business of Ince in the UK and China on 31 December 2018. This was followed by the finalisation of new arrangements with the locally owned overseas offices which has resulted in the consolidation of the results of those offices from 1 April 2019. The consideration for the acquisition of Ince overall is estimated at £21 million of which £15 million is turnover based and payable over the next three years. 

These have together nearly doubled the size of the previous Gordon Dadds business in London and achieved an international footprint of established offices in seven countries.

Operationally, our integration team spent much of the third quarter of the financial year planning the implementation of the programme to merge the Gordon Dadds London office into the Ince offices. This was successfully achieved in the first weekend of 2019.  The teams were therefore blended from a very early stage and have since been working together well, learning the strengths of each other's teams and how to combine and cross sell those strengths. 

Leveraging the Group's administrative operation

This year has seen a further significant step in the Group's strategy of consolidating revenues through a single efficient administrative operation to generate profits for shareholders.

The five acquisitions achieved in the 2017-8 financial year have been fully integrated into the Group. We have acquired the source code for an established practice management system and are implementing this across the Group.  Advantages of the new system include a fixed payment basis rather than a per user basis and that refinements are under our control rather than by negotiation with the supplier.

The Group has a team which is experienced in negotiating, implementing and managing acquisition opportunities and considers that there will continue to be attractive opportunities to grow both the London office and the overseas offices. This can be achieved through merger and through the addition of teams and individual solicitors ("laterals") as the traditional models for legal services around the world adapt to modern ambitions. Three partners and a team of 20 staff agreed to join our Hong Kong business just before the year end.  They are now in place and generating revenue which will build the profitability of the office.

There will also be opportunities for selective expansion into new territories which complement the Group's existing businesses, as demonstrated by the acquisition on 31 March 2019 of Ramparts Corporate Advisors, a Gibraltar-based legal advisory firm with a specialism in e-gaming, financial services and fintech, distributed ledger technology and cryptocurrency matters.  This has added a valuable specialism to the group as well as establishing a presence in an important maritime location where Ince was not represented.

Branding review

In June 2019, we implemented a branding review to capitalise on the Group's established brand names.  Most of Ince Gordon Dadds LLP's affiliated entities, including the international offices, will be known as Ince. This includes offices in London, Cardiff, Hamburg, Cologne, Piraeus, Gibraltar, Dubai, Singapore, Hong Kong, Shanghai and Beijing. Bringing to life Ince's broad service offering across complex disputes, transactions and projects, the new company strapline is 'In any case'. The London-based private client and family practice is now known as "Gordon Dadds" and is moving to separate offices in the West End to better serve its client base.

Partner recruitment and retention

Our core remuneration model for partners continues to be a key factor in our ability to recruit new partners, attract acquisition targets and generate profits for shareholders.  This model focuses on professional practitioners being rewarded both for the billable work they do and for the income generated from their clients.  Our basic model for partners continues to be refined to promote the behaviours we want to see and which will drive group profitability.  Increasingly, we are focusing partners on the recovery of the full value of the work undertaken and the generation of gross margin from which to cover overheads and to generate profits for shareholders.

We aim to provide an environment for partners and staff which is open and transparent in which everyone can perform to the best of their abilities.  This has led to a very small turnover in partners over the period and the Ince acquisition has been no different in this respect. The stability of partners and staff is, we believe, vital to the continuing satisfaction of clients and we are, therefore, unsurprised by our clients being open to using the other strengths of the Group where appropriate.

 

 

 

 

Financial Review

Summary

For the year ended 31 March (£m)

2019

2018

% Growth

Revenue

52.6

31.2

+68%

Operating profit

15.2

8.8

+73%

Non-controlling interests

(9.3)

(6.2)

+50%

Net finance charge / other

-

(0.1)

 

Adjusted profit before tax

5.9

2.5

+141%

Non-recurring costs

(14.3)

(2.3)

 

Profit before tax

(8.3)

0.2

 

Income tax

(0.2)

-

 

Retained profit for equity holders

(8.6)

0.1

 

* Adjusted profit before tax is calculated as the profit before tax after adding back non-recurring items (as shown in note 9 to the financial statements) and after deducting the non-controlling interests shown in statutory accounts

** Adjusted earnings per share is computed from adjusted profit before tax after deducting taxation

 

The Group's consolidated results for the year ended 31 March 2019 show total revenue of £52.6 million (2018: £31.2 million), operating profit of £15.2 million (2018: £8.8 million) and adjusted profit before tax of £5.9 million (2018: £2.5 million). 

Alternative Performance Measures

The Group presents two Alternative Performance Measures ("APMs"). These APMs include adjustments for specific items in order to provide a balanced view of the underlying performance of the Group's operations.

Adjusted profit before tax is calculated as profit before tax after:

·    adding back non-recurring items, which in 2019 included the costs of the acquisition of Ince and the material costs associated with implementing the merger of the businesses; and

·    deducting partners' profit shares and other non-controlling interests as these are a cost of motivating the relevant business generators. It is one of the largest outgoings (and variable) costs of the business and is reported in the statutory accounts as part of the non-controlling interests. The reported profit metrics therefore do not provide a true reflection of the underlying profits generated by the operations and available to equity holders. The adjusted disclosure essentially treats all forms of remuneration as operating costs of the business (just as employees' costs).

Adjusted earnings per share is calculated by adjusting for taxation and dividing by the weighted average number of shares in issue for the period, on a diluted basis where a materially different result is produced.

The result is adjusted profit before tax and adjusted earnings per share as shown below.

 

 

2019

£m

 

2018

£m

Profit before tax from statement of comprehensive income

0.97

 

6.38

Deduct: Non-controlling interests including partners' profit shares

(9.31)

 

(6.22)

Add: Non-recurring costs - acquisition costs and material related costs

14.26

 

2.30

Adjusted profit before tax

5.92

 

2.46

Add/(Deduct): Taxation

(0.21)

 

(0.03)

Adjusted profit after tax for adjusted earnings per share

5.71

 

2.43

 

For management purposes we regard the profit and loss account as follows:

 

2019

£m

 

2018

£m

Revenue

52.6

 

31.3

Production costs - employment costs profit shares and amortisation

(12.0)

 

(8.2)

Production costs - non-controlling interests

(9.3)

 

(5.7)

Production costs - amortisation

(1.5)

 

(2.1)

Production costs - other

(4.2)

 

(0.9)

Gross margin

25.6

 

14.3

Administrative salaries and non-productive profit shares

(6.3)

 

(2.5)

Other overheads

(13.4)

 

(8.9)

Adjusted profit before tax

5.9

 

2.9

Revenue

Our results have been pleasing, with the businesses acquired in 2017-8 delivering a full year's contribution. The businesses acquired last year have all performed satisfactorily during the year. 

·    White & Black, the fintech corporate law firm we acquired in January 2018, had a strong year with fee income of over £3m compared with £2.6m in the year before acquisition.  Its increased profits will trigger the payment of £0.5 million, the maximum deferred consideration in respect of the year's earnings. 

·    CWE, the specialist corporate tax business acquired in October 2017, achieved increased revenue of £2.8m with profitability as expected: it is actively looking to expand its team to grow further.

·    The Metcalfes' business (including Burroughs Day), the Bristol based solicitors acquired in January 2018, achieved fee income of £4.5m despite having had difficulties integrating those two businesses and retaining staff:  we have taken action to capitalise on the strong brand in the local market. 

·    The Thomas Simon business, the Cardiff based solicitors acquired in February 2018, was immediately merged with the existing Cardiff office of Gordon Dadds in new premises and its results are no longer separately identifiable but is trading in line with our expectations.

 

Turnover in the year to 31 March 2019 was generated in the following sectors:

 

2019

2018

Shipping, trade, aviation and insurance

16.7%

0.0%

Corporate & tax

21.8%

23.3%

Family & private client

9.4%

10.9%

Regulatory solutions

3.9%

5.9%

Dispute resolution

15.1%

24.3%

Real estate

13.9%

21.0%

Employment & immigration

3.6%

5.9%

Clinical negligence & PI

3.7%

3.8%

Financial services

2.0%

2.9%

Consulting

6.4%

2.0%

Other income including overseas recharges

3.5%

0.0%

 

100.0%

100.0%

Clearly the Ince contribution in a full year will be much more significant and should reduce real estate to less than 10% of group revenues.  This reduction is very welcome as the sector as a whole is highly competitive, cyclical and higher risk than most of our business.  That said, we need to be able to transact property business and we remain more attracted to commercial property and developer business. Our consultancy business and in particular the financial markets consultancy has, as expected, had a very strong year with turnover of over £3m.  From a standing start three years ago, this has been developed with major corporate clients and is planned to grow much further.

Costs

Production costs are the profit shares of the equity partners and employment costs of the other fee earners together with their direct costs such as travel and direct support costs (such as dedicated secretaries) and provision for doubtful and bad debts. 

Gross margin is the fees charged to clients less direct production costs and is expressed as a percentage of revenue.  Gross margin is in the control of the heads of each department or business unit and the controllers are rewarded with a participation in gross margin achieved in excess of our 50% target.  In the current year (and after including amortisation which will be replaced by a partners' profit share in due course) it was 48.6 per cent (2018: 45.9 per cent).

Overheads are all the other costs of running the business, such as premises, insurance, computing and telephones etc. (apart from the costs of acquisitions).  In the year, overheads as a percentage of fees charged to clients were 37.4 per cent. (2017: 34.9 per cent) while our target is 30%.  The target becomes more achievable the more fees are generated, so acquisitions will aid achievement of this as the duplicated overheads of acquired businesses are eliminated over a period.  A number of the international offices are not operating at a satisfactory level of revenue at the moment and management is seeking to add fee earners in such offices (as we have recently achieved in Hong Kong) to improve efficiency and also to enable a broader service offering to be available to clients.

Lock up is defined as the value of trade debtors and work in progress compared with fees charged to clients, in each case excluding disbursements and VAT.  This measure is under the control of the Client Care Partner for each client and they are guided and assisted in this by our revenue management team.  Our current target for this is 100 days but we will work to a lower target over time.  At the year end and allowing for a full year's turnover of acquired businesses, the 100 days target was achieved.

Tax

Corporation Tax for the year ended was negligible.  In the current year, we expect some further tax losses to be available for use, but it is likely that the rate of tax will move closer to the standard UK rate of Corporation Tax.

Balance sheet and cash flow

At the end of the year, the balance sheet had net borrowings of £2.9 million (2018: net cash of £8.4 million), reflecting principally the payment of the initial consideration for Ince, the costs of the transaction and the non-recurring costs of restructuring and integration. 

The acquisition of Ince gave rise to intangible assets which have been recognised in two ways - as goodwill and as client portfolio.  Goodwill will be reviewed as part of a cash generating unit annually for impairment.  The client portfolio value will be amortised over the three years during which the deferred consideration is being paid to the former Ince partners, a charge of some £3 million annually.

Funding for the Ince acquisition was from new banking facilities of £12.5 million, £6 million of which had been drawn as a term loan amortising from September 2019, on a five year basis, with a bullet repayment at the end of 2021. The balance of the facility is a revolving credit facility which has been drawn down since the year end and which is expected to begin reducing around the end of the financial year, subject to working capital increases arising from lateral and team hires.  

The Consolidated Statement of Cash Flow shows that the group generated £6.5 million of cash flow from operations (2018: £7.9 million) after a significant build up in lock-up from Ince as none was acquired.

The Group raised £11.5 million of further equity capital early in 2019 after completing the Ince London acquisition

Dividend

Notwithstanding the substantial non-recurring costs incurred for the acquisition of Ince and recognising the trading profitability of the group, the Directors have recommended a final dividend of 4.0p for the year compared with 4.0p in 2018, making a total of 6.0p (2018 :4.0p).

Outlook

Our revenues for the year ending 31 March 2020 will reflect a full year of all of the businesses which are now consolidated and are thus expected to be substantially greater again than those reported now.  Our ambitions and opportunities for growth are undiminished and our focus for the current year will include adding businesses or teams which will extend the group's capabilities or ensure that the established offices around the world can offer a fuller range of services while they leverage the local infrastructure we already have.

We continue to focus much attention on driving cross-selling within the Group and the acquisition of the Ince business adds to the scope for this. I am looking forward to reporting significant progress on this over the rest of the year. 

We continuously examine opportunities for expansion of the Group in existing locations both by acquisition and lateral hires which will increase the intellectual capital of the business and the quality of its client and matter base. Our preference for expanding operations continues to be by acquisitions of firms with £10m or more of annual revenues, but where circumstances make sense, we will pursue smaller acquisitions and hires of teams or individuals.  Geographically, we will continue to look to expand where there are synergies with existing practices, such as the Ramparts acquisition in Gibraltar.

The Group has started the year satisfactorily and I therefore look forward to reporting much progress during the year.

Guidance

From the above, it is clear that on approaching the gross margin target of 50% and the overheads target of 30%, and allowing for non-recurring expenses, a net margin of 15% before tax to shareholders should be achievable. Management is closely focussed on delivery of this over time through growth in fee income, continuing consolidation of Group functions and the synergies arising on acquisitions.

We expect to make further progress towards all of those targets during the current year.

 

 

Consolidated Statement of Comprehensive Income

 

 

 

Year ended

 Year ended

 

 

 

31 March

31 March

 

 

 

2019

2018

 

Note

 

£'000

£'000

Continuing operations

 

 

 

 

 

 

 

 

 

Fees and commissions 

5

 

52,576

31,238

 

 

 

 

 

Staff costs

6

 

(18,296)

(10,756)

Depreciation and amortisation

 

 

(1,665)

(2,137)

Other operating expenses

 

 

(17,406)

(9,546)

Other operating income

 

 

38

-

 

 

 

 

 

Operating profit

7

 

15,247

8,799

 

 

 

 

 

Finance income

8

 

218

159

Finance expense

8

 

(251)

(239)

Non recurring costs

9

 

(14,267)

(2,305)

Share of profit of associates

 

 

19

(37)

 

 

 

 

 

Profit before income tax

 

 

966

6,377

 

 

 

 

 

Income tax expense

10

 

(206)

(27)

 

 

 

 

 

Profit and total comprehensive income for the year

 

 

760

6,350

 

 

 

 

 

 

 

 

 

 

Attributable to:-

 

 

 

 

Equity holders of the Company

 

 

(8,552)

127

Non-controlling interests

 

 

9,312

6,223

 

 

 

 

 

Total comprehensive income for the year

 

 

760

6,350

 

 

 

 

 

Earnings per share

 

 

 

 

Basic earnings per share (pence)

11

 

(28.66)

0.55

Adjusted basic earnings per share (pence)

11

 

19.15

10.46

 

 

 

 

 

Diluted earnings per share

 

 

 

 

Diluted earnings per share (pence)

11

 

(28.10)

0.55

Adjusted diluted earnings per share (pence)

11

 

18.77

10.46

 

The profit for the year relates to continuing operations only.

There was no other comprehensive income in the year. There is no tax on any component of other comprehensive income or expense.

The attached notes are an integral part of these consolidated financial statements.

 

 

Statements of Financial Position          

Gordon Dadds Group plc (Registered number: 03744673)

 

 

 

                Group

Group

Company

Company

 

 

 

31 March

31 March

31 March

31 March

 

 

 

2019

2018

2019

2018

 

Note

 

£'000

£'000

£'000

£'000

ASSETS

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

Property, plant and equipment

13

 

1,182

367

-

-

Intangible assets

14

 

53,198

27,044

-

-

Investments

15

 

379

267

47,191

47,191

 

 

 

54,759

27,678

47,191

47,191

Current assets

 

 

 

 

 

 

Trade and other receivables

16

 

35,222

18,411

30,223

11,445

Corporation tax

 

 

-

-

168

-

Cash and cash equivalents

17

 

4,759

8,948

987

52

 

 

 

39,981

27,359

31,378

11,497

Total assets

 

 

94,740

55,037

78,569

58,688

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

Capital and reserves attributable to equity holders

 

 

 

 

 

 

Share capital

18

 

370

288

370

288

Share premium

19

 

11,192

230

11,192

230

Reverse acquisition reserve

19

 

(24,724)

(24,724)

-

-

Other reserves

19

 

48

-

2,874

2,826

Distributable reserves

19

 

38,787

48,489

30,543

32,411

 

 

 

25,673

24,283

44,979

35,755

Non-controlling interest

 

 

5,807

4,512

-

-

Total equity

 

 

31,480

28,795

44,979

35,755

LIABILITIES

 

 

 

 

 

 

Non-current liabilities 

 

 

 

 

 

 

Trade and other payables

20

 

25,629

11,896

-

-

Borrowings

21

 

5,240

155

5,100

-

Provisions

22

 

1,213

-

-

-

 

 

 

32,082

12,051

5,100

-

Current liabilities

 

 

 

 

 

 

Trade and other payables

20

 

23,040

13,406

27,590

22,933

Corporation tax

 

 

245

248

-

-

Borrowings

21

 

2,370

372

900

-

Provisions

22

 

5,523

165

-

-

 

 

 

31,178

14,191

28,490

22,933

Total liabilities

 

 

63,260

26,242

33,590

22,933

Total equity and liabilities

 

 

94,740

55,037

78,569

58,688

The Company has taken advantage of the exemption contained in S408 Companies Act 2006 and has not presented a separate income statement for the Company. The Company recorded a loss of £718,000 for the 12 month period ending 31 March 2019.

The financial statements were approved and authorised for issue by the Board of Directors and were signed on its behalf on 24 July 2019 by C.J. Yates - Director.

The attached notes are an integral part of these consolidated financial statements.
 

Consolidated Statement of Cash Flows                                                                     

 

 

Group

 

Group

 

Company

 

Company

 

 

 

Year

Year

 

Year

Period

 

 

 

Ended

Ended

Ended

Ended

 

 

31 March

31 March

31 March

31 March

 

 

2019

2018

2019

2018

 

Note

£'000

£'000

£'000

£'000

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

Profit/(loss) before income tax

 

966

6,377

(886)

(1,541)

Adjustments for:

 

 

 

 

 

Finance income

 

(218)

(159)

-

-

Finance expense

 

251

239

50

-

Acquisition related costs and other material items

 

14,267

2,305

-

-

Depreciation, amortisation and impairment

 

1,665

2,137

48

-

Share of profits of associates

 

(19)

37

-

-

Changes in operating assets and liabilities (net of acquisitions):

 

 

 

 

 

Decrease/(increase ) in trade and other receivables

 

(15,589)

(1,491)

(63)

(47)

(Decrease)/increase in trade and other payables

 

(1,388)

(1,298)

99

91

(Decrease)/increase in provisions

 

6,571

(288)

-

-

Cash generated by operations

 

6,506

7,859

(752)

(1,497)

Interest and other financial costs paid

 

(92)

(184)

(50)

-

Income tax paid

 

(554)

(3)

-

-

Net cash generated by operating activities

 

5,860

7,672

(802)

(1,497)

Cash flows from investing activities

 

 

 

 

 

Cash paid on acquisitions (net of cash acquired)

15

(6,388)

(1,741)

-

(28,407)

Payment of contingent and deferred consideration on acquisitions

 

(4,762)

(4,824)

-

-

Payment of acquisition related costs

 

(7,525)

(2,305)

-

-

Purchase of PPE

 

-

(2)

-

-

Proceeds from disposal of PPE

 

-

-

-

-

Purchase of intangible assets

 

(795)

(130)

-

-

Purchase of interest in associates

 

-

-

-

-

Dividends received

 

-

-

-

-

Interest received

 

218

159

-

-

Net cash absorbed by investing activities

 

(19,252)

(8,843)

-

(28,407)

Cash flows from financing activities

 

 

 

 

 

Movement in borrowings (including finance leases)

 

6,969

(3,647)

6,000

-

Advances from/(to) subsidiaries

 

-

-

(14,157)

10,055

Proceeds from issuance of shares

 

11,504

19,789

11,504

20,232

Transactions costs relating to issue of shares

 

(460)

(862)

(460)

(862)

Dividends paid

 

(1,150)

-

(1,150)

-

Transactions with non-controlling interests

 

(7,699)

(4,725)

-

-

Net cash (absorbed)/generated from financing activities

 

9,164

10,555

1,737

29,425

Net (decrease) / increase in cash and cash equivalents

 

(4,228)

9,384

935

(479)

Cash and cash equivalents at beginning of period

 

8,948

(436)

52

531

Cash and cash equivalents at end of period

17

4,720

8,948

987

52

The attached notes are an integral part of these consolidated financial statements.

 

 

Consolidated Statement of Changes in Equity

 

      Share     capital

          Share    premium

     Reverse acquisition       reserve

 

      Other reserves

                Distributable reserves

           Non-  controlling        interest

    Total   equity

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Balance at 1 April 2017

572

8,240

(7,397)

-

1,914

3,941

7,270

Profit/(loss) and total comprehensive income/(expense) for the period

-

-

 

 

 

-

 

 

 

-

127

6,223

6,350

Shares issued in the period

279

38,737

(18,784)

-

-

-

20,232

Shares issued for acquisition

-

-

1,457

-

-

-

1,457

Share issue transactions costs

-

(862)

-

 

-

-

-

(862)

Deferred shares cancelled

(563)

-

 

-

 

-

563

-

-

Share premium cancelled

-

(45,885)

 

-

 

-

45,885

-

-

Transferred to members

-

-

-

-

-

(5,652)

(5,652)

Balance at 31 March 2018

288

230

 

(24,724)

 

-

48,489

4,512

 

28,795

 

 

 

 

 

 

 

 

Balance at 1 April 2018

288

230

 

(24,724)

 

-

48,489

4,512

 

28,795

Profit/(loss) and total comprehensive income/(expense) for the period

-

-

-

-

(8,552)

9,312

760

Interim dividend

paid

-

-

-

-

(1,150)

 

-

(1,150)

Shares issued in the period

82

11,422

-

-

-

-

11,504

Share options

acquired

-

-

-

48

-

-

48

Share issue transactions costs

-

(460)

-

-

-

-

(460)

Transferred to members

-

-

-

-

-

(8,017)

(8,017)

Balance at 31 March 2019

370

11,192

 

(24,724)

 

48

38,787

5,807

 

31,480

 

As both the capital redemption reserve and retained earnings are by nature distributable these items have been presented on a combined basis in the above.

 

 

 

 

The attached notes are an integral part of these consolidated financial statements.

 

Statement of Changes in Equity

 

 

       Share      capital

            Share premium

 

      Other   reserves

Distributable reserves

        Total       equity

 

 

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

Balance at 1 January 2017

 

572

8,240

2,826

(12,496)

(858)

Profit/(loss) and total comprehensive income/(expense) for the period

 

-

 

 

 

-

 

 

 

-

(1,541)

(1,541)

Shares issued in the period

 

279

38,737

-

-

39,016

Share issue transaction costs

 

-

(862)

-

-

(862)

Deferred shares cancelled

 

(563)

-

-

563

-

Share premium cancelled

 

-

(45,885)

-

45,885

-

Balance at 31 March 2018

 

288

 

230

 

2,826

32,411

 

35,755

 

 

 

 

 

 

 

Balance at 1 April 2018

 

288

230

2,826

32,411

35,755

Profit/(loss) and total comprehensive income/(expense) for the period

 

-

-

-

(718)

(718)

Interim dividend paid

 

-

-

-

(1,150)

(1,150)

Shares issued in the period

 

82

11,422

-

-

11,504

Share options

acquired

 

-

-

48

-

48

Share issue transactions costs

 

-

(460)

-

-

(460)

Balance at 31 March 2019

 

370

11,192

2,874

30,543

44,979

                                               

    

 The attached notes are an integral part of these consolidated financial statements. 
 

Notes to the Financial Statements

1.              General information

Gordon Dadds Group plc (the Company) and its subsidiaries (together 'Gordon Dadds Group' or 'the Group') provide legal & professional services and independent financial advisory services to businesses and high net worth individuals in the UK.

The Company is a public limited company incorporated and domiciled in the UK. The address of its registered office is Aldgate Tower, 2 Leman Street, London E1 8QN.

These consolidated financial statements have been approved for issue by the Board of Directors on 24 July 2019.

2.              Summary of significant accounting policies

2.1            Basis of preparation

These consolidated financial statements of Gordon Dadds Group plc are for the 12 month period to 31 March 2019. The financial statements have been prepared in accordance with IFRS as adopted by the European Union and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The financial statements have been prepared on the going concern basis. In deciding this, the directors have considered the detailed budgets for the current financial year and high level budgets for the succeeding year including in both cases cash flows.  They have also considered the impact of adverse changes resulting from the major risks and uncertainties they consider apply to the group.

The financial statements have been prepared in accordance with those IFRS standards and IFRIC interpretations issued and effective or issued and early adopted as at the time of preparing these statements. The policies set out below have been consistently applied to all the periods presented.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.

The Group has adopted all of the new and revised standards and interpretations issued by the International Accounting Standards Board ("IASB") that are relevant to its operations and are currently effective. The adoption of these new and revised Standards and Interpretations had no material effect on the profit or loss or financial position of the Group.

2.2            EU adopted IFRS not yet applied

The Group has not adopted any standards or interpretations in advance of the required implementation dates.

Of the standards that have been issued but are not yet effective, IFRS 16 is expected to have a material impact on the Group's financial statements in the period of initial application, as set out in note 35.

2.3            Consolidation

Subsidiaries are entities controlled by the Company. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences to the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Costs directly attributable to the acquisition are expensed in the period. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the group's share of the identifiable net assets and contingent liabilities acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.  Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.

 

 

Notes to the Financial Statements (continued)

The Company's accounting period date 31 March is in line with its subsidiaries.

2.4            Investments in subsidiaries

Investments in subsidiaries are included at cost less provision for impairment in value.

2.5            Investments in associates

Associates are those entities over which the Group has significant influence, but neither control nor joint control over the financial and operating policies. Associates are accounted for using the equity method and are initially recognised at cost. The financial statements include the Group's share of total comprehensive income and equity movements of associates from the date when significant influence commences to the date the significant influence ceases.

2.6            Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. There are two geographical segments, being the United Kingdom and Asia.

The group's two business segments are described in the strategic report, being legal & professional services and independent financial advisory services.  No segment reporting disclosures are required for these due to the fact that the smaller segment, financial services advisory, falls beneath the quantitative thresholds set out by IFRS 8 paragraph 13.

2.7            Business combinations

The Group applies the acquisition method of accounting to account for business combinations in accordance with IFRS 3 (R), 'Business Combinations'. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the consideration transferred over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. All transaction related costs are expensed in the period they are incurred as operating expenses. If the consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in the income statement.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IFRS 9 in the income statement.

2.8            Intangible assets

Intangible assets include the cost of acquiring client portfolios. Client portfolios are carried at cost less accumulated amortisation losses and impairment losses. Amortisation of the cost is being provided for in line with the fees billed and cash collections being generated by the client portfolio acquired.

Intangible assets also include internally generated software and intellectual property, which are held at cost less subsequent amortisation and impairment. These intangible assets are amortised at rates in order to write off the assets on a straight line basis over their estimated useful lives.

The remaining amortisation period of these assets varies from 0.4 years to 7.5 years.

 

 

Notes to the Financial Statements (continued)

2.9            Goodwill

Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is initially measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer's previously held equity interest (if any) in the entity over the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed.

The company tests annually whether goodwill has suffered any impairment. The carrying value of the goodwill is dependent on the future income stream from that asset.

Goodwill recognised in a business combination does not generate cash flows independently of other assets or groups of assets. As a result, the recoverable amount, being the value in use, is determined at a cash generating unit (CGU) level.

The determination of a CGU is judgemental. The identification of CGU's involves an assessment of whether the asset or group of assets generate independent cash flows.

For impairment purposes goodwill is tested annually at the CGU level.  This was carried out at 31 March 2019. The carrying value of goodwill and the key assumptions used in performing the annual impairment assessment are disclosed in note 14.

2.10          Impairment of assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment and whenever events or changes in circumstance indicate that the carrying amount may not be recoverable.

Assets that are subject to amortisation are tested for impairment whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. An impairment loss is recognised where the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and the value in use.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

Critical estimates and assumptions made

In assessing the value in use of each CGU, our calculations required estimates in relation to uncertain items, including management's expectations of future growth, operating costs, profit margins, operating cash flow and the discount rate for each CGU.

Future cash flows used in the value in use calculations, are based on the latest approved financial plans extrapolated for future periods expected to benefit from the goodwill for each CGU. The future cash flows are discounted using a post-tax discount that reflects current market assessments of the time value of money.

2.11          Financial instruments

The group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial instruments are recognised on trade date when the group becomes a party to the contractual provisions of the instrument. Financial instruments are recognised initially at fair value plus, in the case of a financial instrument not at fair value through profit and loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument. Financial instruments are derecognised on trade date when the group is no longer a party to the contractual provisions of the instrument.

Financial assets are included on the balance sheet as trade and other receivables and cash and cash equivalents.

Financial liabilities are included on the balance sheet as trade and other payables and borrowings.

(a)            Trade receivables

Trade receivables are stated at their original invoiced value, as the interest that would be recognised from discounting future cash receipts over the short credit period is not considered to be material. Trade receivables are reduced by appropriate allowances for estimated irrecoverable amounts.

 

 

Notes to the Financial Statements (continued)

(b)            Trade payables

Trade payables are stated at their original invoiced value, as the interest that would be recognised from discounting future cash payments over the short payment period is not considered to be material.

(c)             Interest-bearing borrowings

Interest-bearing borrowings are stated at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability.

2.12          Foreign currency translation

(i)      Functional and presentation currency

The consolidated financial statements are presented in pounds sterling, which is the Company's functional and presentation currency.

(ii)     Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.

2.13          Property, plant and equipment

Property, plant and equipment ("PPE") is shown at cost less subsequent depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred.

Depreciation on assets is calculated using the straight-line method to allocate the cost of each asset less its residual value over its estimated useful life, as follows:

 

Computers, plant and machinery

3-10 years

 

Equipment

3-5 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. Write downs and gains and losses on disposals are included in the statement of comprehensive income.

2.14          Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

2.15          Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

 

 

Notes to the Financial Statements (continued)

2.16          Deferred income tax

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated and company financial statements. The deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit/loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, joint ventures and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future employee benefits.

2.17          Pension obligations

The Group operates a pension scheme which is a defined contribution plan. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity.

The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

The Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

2.18          Profit-sharing and bonus plans

The Group recognises a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the profit attributable to that part of the Group for which the employee is profit responsible. The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.

2.19          Provisions

Provisions for clawback of indemnity commission, pensions review, unpaid salaries and other claims are recognised when the Group has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at management's best estimate of the expenditure required to settle the obligation at the balance sheet date.

 

 

Notes to the Financial Statements (continued)

2.20          Revenue recognition

Revenue comprises the fair value of the sale of services, net of value-added tax, rebates and discounts and after eliminating sales within the Group.

Revenue from the sale of professional services is recognised as follows:

(a)            Legal & professional services

Revenue from the provision of legal and professional services is recognised over time in the accounting period in which services are rendered.

Contracts for the provision of legal and professional services may include fixed fee arrangements, variable fee arrangements based on time and materials or contingent fee arrangements.

For fixed fee arrangements, revenue is recognised based on the actual services provided to the end of the reporting period as a proportion of the total services to be provided.

For variable fee contracts based on time and materials, revenue is recognised at the amount of fees that the Group has a right to invoice for services provided, based on the fee rates agreed with the client.

For conditional fee arrangements, fees are billed on completion depending on the outcome of the matter (e.g. Personal Injury or Clinical Negligence cases on a 'no win, no fee' basis). Revenue in respect of contingent fee assignments, over and above any agreed minimum fee, is included in revenue only to the extent that it is highly probable that the amount will not be subject to significant reversal when the uncertainty is resolved. This is generally when the matter is resolved and the outcome is known.

A receivable is recognised when a bill has been invoiced as this is the point in time that the consideration is considered unconditional because only the passage of time is required before payment is due. Where income as not been billed at the reporting date, it is included in Accrued Income.

No element of financing is deemed to exist as payment is typically due within one year of the service being performed.

(b)            Employee benefits and financial advisory

Revenue relating to the employee benefits and financial advisory business represents fees and life and pension commission and is recognised at a point in time. Fees are recognised when invoiced and commissions are recognised when confirmation is received from the underwriters that payment is being made to the Group. A provision is made for clawback of commission which is deducted from turnover.

(c)             Interest income

Interest income is recognised on a time-proportion basis using the effective interest method.

2.21          Leases

Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease's inception at the lower of the fair value of the leased asset and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other borrowings. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the asset's useful life and the lease term.

Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases.

Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of comprehensive income on a straight-line basis over the period of the lease.

2.22          Dividend distribution

Dividend distribution to the Company's shareholders is recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders.  Interim dividends are recognised when paid.

 

 

Notes to the Financial Statements (continued)

3.              Financial risk management

3.1            Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk and price risk), credit risk, liquidity risk, cash flow risk and fair value interest-rate risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

Risk management is carried out by the Board of Directors. The Board identifies, evaluates and hedges financial risks in close co-operation with the Group's operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest-rate risk, credit risk, use of Convertible loan stock and non-Convertible loan stock, and investing excess liquidity.

(d)            Credit risk

Because the Group has a wide range of clients, in different market sectors, it has no significant concentrations of credit risk. It has policies in place to ensure that if customers do not settle their accounts within the agreed terms then the transaction is cancelled minimising the credit exposure.

(e)            Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, and the availability of funding through an adequate amount of committed credit facilities. The Group aims to maintain flexibility in funding by keeping committed credit lines available.

(f)             Cash flow and fair value interest rate risk

The Group's income and operating cash flows are substantially independent of changes in market interest rates. The interest rates of finance leases to which the Group is lessee are fixed at inception of the lease. These leases expose the Group to fair value interest rate risk.

The Group's cash flow interest rate risk arises from borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. Group policy is to maintain approximately 33 per cent of its borrowings in fixed rate instruments. At March 2019, 100 per cent of borrowings were at fixed rates.

4.              Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(g)            Estimated impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash generating unit and a suitable discount rate.

(h)            Other receivables

Other receivables represent unbilled amounts for client work and are measured initially at fair value and held at amortised cost less provisions for foreseeable losses based upon current observable data and historical trend.

(i)             Impairment of receivables

Receivables are held at cost less provisions for impairment. Provisions for impairment represent an allowance for doubtful debts that is estimated, based upon current observable data and historical trend.

 

 

Notes to the Financial Statements (continued)

5.              REVENUE

Group

In the following table, revenue from contracts with customers is disaggregated by primary geographical market and major service offering:

 

 Legal & professional services

Other

Total

 

£'000

£'000

£'000

Year ended 31 March 2019

 

 

 

UK

46,879

4,900

51,779

Asia

797

-

797

Total revenue

47,676

4,900

52,576

Year ended 31 March 2018

 

 

 

UK

30,840

397

31,238

Asia

-

-

-

Total revenue

30,840

397

31,238

 

6.              Staff costs

Group

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

 

Number of employees

 

2019

2018

Fee earners

194

107

Direct support staff

69

54

Support staff

133

68

Total

396

229

The aggregate employment costs of these persons were as follows:

 

 2019

2018

 

£'000

£'000

Wages and salaries

15,473

9,198

Social security costs

1,740

911

Employee benefits costs

569

399

Pension costs

514

248

Total staff costs

18,296

10,756

Company             

The Company has no employees (excluding directors) (2018: none); all personnel are employed by subsidiary entities.

Details of the remuneration of and transactions with directors are included in the Directors' Remuneration Report which will be set out in the full financial statements. The directors are considered to be key management personnel.

 

 

 

Notes to the Financial Statements (continued)

7.              Operating profit

Operating profit is stated after charging:

 

     Group

      Group

 

2019

2018

 

£'000

£'000

Fees payable to the company's auditor for the audit of the company's annual accounts

54

49

Fees payable to the company's auditor and its associates for other services:

 

 

-     audit of the accounts of subsidiaries

190

111

-     audit-related assurance services

69

44

-     other assurance services

73

32

-     corporate finance services

141

213

Depreciation of tangible fixed assets

 

 

-     owned assets

81

8

-     hire purchase

17

21

Amortisation / impairment of intangible assets:

 

 

-       turnover related

362

441

-       other

1,205

1,668

Bad debt expense

1,764

858

Hire of plant and equipment

336

149

Other operating leases

1,666

1,310

 

 

 

Notes to the Financial Statements (continued)

8.              Finance income and expense

 

           Group

Group

 

2019

2018

 

£'000

£'000

Finance income

 

 

Bank interest receivable

213

116

Other income

5

43

 

218

159

 

 

 

Finance expense

 

 

Bank interest payable

(95)

(2)

Hire purchase

(5)

(7)

Other loans

(84)

(183)

Other interest

(3)

8

Financial assets at fair value through profit or loss

(64)

(55)

 

(251)

(239)

 

 

 

Net finance income/(expense)

(33)

(80)

 

9.              Non recurring costs

Non recurring costs include acquisition related costs of £5,823,000 (2018: £382,000) and other material items related to the acquisition which will not recur of £8,444,000 (2018: £1,923,000).

Acquisition related cost represent professional fees and other costs incurred in acquisitions completed or under negotiation during the year and the equity fund raising.

Other material items represent costs incurred specifically as a result of the integration activities associated with the Ince & Co acquisition. These costs include restructuring and merging of administrative functions (such as redundancy costs, the necessary hardware and software costs to enable the merging of systems and re-branding costs.  In addition, the group had certain onerous contractual costs including the costs of premises no longer being used and had to make a number of non-contractual payments to former suppliers of the Ince entities in respect of the liabilities of those entities to ensure access to continuing services.

Non recurring costs include non-audit fees payable to the Company's auditors of £336,000 (2018: £233,000).

 

   Notes to the Financial Statements (continued)

10.            Taxation

Analysis of charge in the period

 

Group

    Group

 

2019

2018

 

£'000

£'000

The charge for taxation comprises:

 

 

Taxation charge for the current period

206

24

Adjustment in respect of prior periods

-

3

 

206

27

(i)        Factors affecting the tax charge for the period:

The tax assessed for the year is lower than the standard rate of corporation tax in the UK of 19.0 per cent (2018:19.0 per cent). The differences are explained below:

 

    Group

    Group

 

2019

2018

 

£'000

£'000

Profit on ordinary activities before taxation

966

6,377

Less profit arising in partnerships, on which tax is payable by the members personally

(1,009)

(6,216)

Profit on ordinary activities of corporate entities before taxation

(43)

161

Profit on ordinary activities multiplied by the standard rate of corporation tax of 19 per cent (2018 19.0 per cent)

(8)

31

Effects of:

 

 

Impact of tax exempt items

237

37

Losses (utilised) / carried forward

(23)

(44)

Current taxation charge

206

24

Adjustment in respect of prior periods

-

3

Deferred tax charge

-

-

Total taxation charge for the period

206

27

 

(i)        Factors that may affect future tax charges

At 31 March 2019 the Group had unrelieved tax losses of approximately £nil (2018: £19,000). The directors have not recognised a deferred tax asset in respect of these losses as it is not certain that the Group will make sufficient profits in the short term to absorb these amounts.
 

Notes to the Financial Statements (continued)

11.            Earnings per share

Earnings per share are based on the weighted average number of shares of the Company in issue or issued as consideration for the entities whose results are reported in the period. The number of shares and periods are as follows:

1 April 2017

12,509,623

 

15 June 2017

13,417,143

Being the shares issued by the Company as consideration for the acquisition of all of the shares in issue by Culver Holdings Limited at the date of the reverse acquisition

4 August 2017

28,597,310

Being the Company's issued shares on re-admission to the AIM market of the London Stock Exchange

19 January 2018

28,759,711

Being the Company's current issued shares following new shares issued to Culver Ventures Limited loan stock holders

12 February 2019

36,976,730

Being the Company's current issued shares following new shares issued as part of an equity placing exercise

Basic earnings per share, shown on the consolidated income statement, is based on loss after tax £8,552,000 divided by 29,840,305 being the weighted average total number of ordinary shares in issue during the period.

Adjusted basic earnings per share, shown on the consolidated income statement, is based on adjusted profit before tax £5,919,000 after deducting tax of £206,000 divided by 29,840,305, being the weighted average total number of ordinary shares in issue during the period.

If the 2,392,846 share options issued on 31 December (described in note 12) were included the weighted average total number of shares for the period would be 30,436,878 which is applied in the calculation of diluted earnings per share, also shown on the consolidated income statement.

Adjusted profit before tax is calculated as follows:

 

Group

    Group

 

2019

2018

 

£'000

£'000

Profit before tax from statement of comprehensive income

966

6,377

Deduct: Partners profit shares shown as non-controlling interests

(9,312)

(6,223)

Add: Non-recurring expenses:

 

 

-       Acquisition related expenditure

5,823

382

-       Material-related costs

8,444

-

-       Flotation costs

-

1,923

Adjusted profit before tax

5,921

2,457

Deduct: Income tax

(206)

(27)

Adjusted profit after tax

5,715

2,430

 

  

Notes to the Financial Statements (continued)

12.            share-BASED PAYMENT ARRANGEMENTS

The Group has established the Gordon Dadds Group Share Option Plan 2017 ("Plan") for the grant of share options to certain eligible employees to acquire shares in the capital of the Company in order to reward such eligible employees for their contribution to the Company's success and to provide an incentive going forward.

As part of the consideration for the acquisition of the members' interests of Ince & Co LLP, the members of Ince & Co LLP were collectively granted 2,392,846 ordinary shares of 1p each in the Group as part of the Plan on 31 December 2018. The options have a vesting period of 3 years from issue and a contractual life of 10 years.

The fair value of the employee share options has been measured using the Black-Scholes formula. Service and non-market conditions attached to the arrangements were not taken in to account measuring fair value.

The inputs used in measurement of the fair values at grant date of the shares were as follows:

Fair value

 

£0.24

Share price

 

£1.79

Exercise price

 

£1.40

Risk-free interest rate (based on government bonds)

 

0.59%

Expected volatility (weighted-average)

 

1.14%

Dividend yield

 

3.35%

Expected life (weighted-average)

 

3 years

 

  

Notes to the Financial Statements (continued)

13.            Property, plant and equipment ("PPE")

Group

 

 

    Furniture,

 

 

Land and

  fittings and

 

 

buildings

   equipment

Total

 

£'000

£'000

£'000

Cost

 

 

 

Balance at 1 April 2018

230

223

453

Acquisition of subsidiary (note 15)

-

914

914

Additions

-

-

-

Balance at 31 March 2019

230

1,137

1,367

Depreciation

 

 

 

Balance at 1 April 2018

-

86

86

Charge for the period

-

99

99

Balance at 31 March 2019

-

185

185

Carrying value

 

 

 

At 31 March 2018

230

137

367

At 31 March 2019

230

952

1,182

Included in the carrying value of PPE is £nil (2018: £17,000) of assets held by the Group under hire purchase or finance leases. The depreciation charge for the period for these assets was £17,000 (2018: £21,000).

The figures for the previous period are as follows:-

 

 

    Furniture,

 

 

 

  fittings and

 

 

Land and buildings

   equipment

Total

 

£'000

£'000

£'000

Cost

 

 

 

Balance at 1 April 2017

-

95

95

Acquisition of subsidiary

230

126

356

Additions

-

2

2

Balance at 31 March 2018

230

223

453

Depreciation

 

 

 

Balance at 1 April 2017

-

57

57

Charge for the period

-

29

29

Balance at 31 March 2018

-

86

86

Carrying value

 

 

 

At 31 March 2017

-

38

38

At 31 March 2018

230

137

367

Company

There are no PPE assets held by the Company (2018: None).

 

 

Notes to the Financial Statements (continued)

14.            Intangible assets

Group

 

 

 

  Internally

 

 

 

 

     Client

  generated

Intellectual

 

 

Goodwill

portfolio

    software

    property

       Total

 

£'000

£'000

£'000

£'000

£'000

Cost

 

 

 

 

 

Balance at 1 April 2018

24,150

7,719

453

189

32,511

Acquisition of subsidiary

17,642

9,000

-

-

26,642

Additions

279

-

795

-

10,074

Reassessment of fair value

4

-

-

-

4

Eliminated on disposal

-

-

-

-

-

Balance at 31 March 2019

42,075

16,719

1,248

189

60,231

Amortisation and impairment

 

 

 

 

 

Balance at 1 April 2018

-

5,336

103

28

5,467

Charge for the period

-

1,482

65

19

1,566

Eliminated on disposal

-

-

-

-

-

Balance at 31 March 2019

-

6,818

168

47

7,033

Carrying value

 

 

 

 

 

At 31 March 2018

24,150

2,383

350

161

27,044

At 31 March 2019

42,075

9,901

1,080

142

53,198

Client portfolio represents the acquisition of the business and certain assets from other professional services firms. The client portfolio intangible asset is carried at cost less accumulated amortisation. Amortisation is provided for in line with the fees billed and cash collections generated by the client portfolio acquired.

Internally generated software includes £1,248,000 (2018: £453,000) of development costs relating to development of software applications. The directors have considered the carrying value of internally generated software of £1,080,000 (2018: £350,000) as appropriate as it is expected to create future economic benefit.

Intellectual property includes £142,000 (2018:£161,000) of intellectual property acquired on the acquisition of certain assets and liabilities of Prolegal Limited from its administrator.

 

 

Notes to the Financial Statements (continued)

The Intangible assets of the group for the prior year were as follows:-

 

 

 

  Internally

 

 

 

 

     Client

  generated

Intellectual

 

 

Goodwill

portfolio

    software

    property

       Total

 

£'000

£'000

£'000

£'000

£'000

Cost

 

 

 

 

 

Balance at 1 April 2017

6,734

8,014

323

189

15,260

Acquisition of subsidiary

17,334

-

-

-

17,334

Additions

-

-

130

-

130

Reassessment of fair value

82

-

-

-

82

Eliminated on disposal

-

(295)

-

-

(295)

Balance at 31 March 2018

24,150

7,719

453

189

32,511

Amortisation and impairment

 

 

 

 

 

Balance at 1 April 2017

-

3,583

38

-

3,621

Charge for the period

-

2,016

65

28

2,109

Eliminated on disposal

-

(263)

-

-

(263)

Balance at 31 March 2018

-

5,336

103

28

5,467

Carrying value

 

 

 

 

 

At 31 March 2017

6,734

4,431

285

189

11,639

At 31 March 2018

24,150

2,383

350

161

27,044

 

 

Notes to the Financial Statements (continued)

Goodwill

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs), or group of units that are expected to benefit from that business combination and is analysed below.

 

 

 

Personal

 

 

 

   Consulting

Culver

Injury

GDLLP

 

 

                 and

Financial

       Legal

          Legal

Alen

 

  Technology

Services

  Services

     Services

  Buckley

 

£'000

£'000

£'000

£'000

£'000

Cost

 

 

 

 

At 1 April 2018

1,751

4,185

5,313

3,103

1,329

Acquisitions

-

-

-

-

-

Additions

279

-

-

-

-

Reassessment of fair value

-

-

4

-

-

At 31 March 2019

2,030

4,185

5,317

3,103

1,329

Impairment

 

 

 

 

At 1 April 2018 and 31 March 2019

-

-

-

-

-

Carrying value

 

 

 

 

At 31 March 2018

1,751

4,185

5,313

3,103

1,329

At 31 March 2019

2,030

4,185

5,317

3,103

1,329

 

 

 

 

 

 

 

CW

White &

Ince &

 

Total

 

Energy

Black

Co LLP

RCAL

Goodwill

 

£'000

£'000

£'000

£'000

£'000

Cost

 

 

 

 

At 1 April 2018

6,464

2,005

-

-

24,150

Acquisitions

-

-

16,544

1,098

17,642

Additions

-

-

-

-

279

Reassessment of fair value

-

-

-

-

4

At 31 March 2019

6,464

2,005

16,544

1,098

42,075

Impairment

 

 

 

 

At 1 April 2018 and 31 March 2019

-

-

-

-

-

Carrying value

 

 

 

 

At 31 March 2018

6,464

2,005

-

-

24,150

At 31 March 2019

6,464

2,005

16,544

1,098

42,075

An annual goodwill impairment review was performed. The CGU's represent the smallest identifiable groups of assets that generate cash flows, and to which goodwill is allocated.

The value in use of each CGU is determined using cash flow projections derived from financial plans. This reflects management's expectations of future revenue growth, operating costs and cost reductions due to synergies, profit margins, operating cash flows based on past performance and future expectations of business performance. The cash flows have then been extended for a minimum of five years (held flat for years three, four, five and to a maximum of ten years). Estimated taxation has been deducted calculated at the estimated applicable corporation tax rate, of 19% for the next two years and 17% for the years thereafter, in line with current HMRC guidance.

In respect of the above, income budgets are based on historic results adjusted for experience and capacity level of fee earning staff and known changes in circumstances. These are reviewed with the heads of department for each fee earning area. Average annual growth rate of 5.04% is based on past performance and management expectations.

Costs are largely fixed staff and establishment costs and are forecast based on the current structure of the business, adjusting for inflationary increases but not reflecting any future restructurings or cost saving measures.

The future cash flows have been discounted using a post-tax discount rate of 5%.

 

 

Notes to the Financial Statements (continued)

The two year financial plans include growth rates for each CGU based on the individual market assessment for each CGU. Other than for the Consulting and Technology CGU for which includes an estimated growth rate of 10%, the other CGU's do not include any estimated any growth rates beyond the two years.

Company

There are no intangible assets held by the company (2018: None).

15.            Investments

The carrying value of investments held by the group and company were as follows:

 

 

Group

Group

 Company

Company

 

 

2019

2018

2019

2018

 

 

£'000

£'000

£'000

£'000

Shares in group undertakings

 

-

-

47,191

47,191

Interest in associates

 

379

267

-

-

 

 

379

267

47,191

47,191

15.1          Shares in group undertakings

Company

 

 

 

          Shares in

 

 

 

              Group

 

 

 

Undertakings

 

 

 

£'000

Cost

 

 

 

Balance at 1 April 2018

 

 

50,709

Additions

 

 

-

Balance at 31 March 2019

 

 

50,709

Impairment and provisions

 

 

 

Balance at 1 April 2018

 

 

3,518

Impairment

 

 

-

Balance at 31 March 2019

 

 

3,518

Carrying value

 

 

 

At 31 March 2018

 

 

47,191

At 31 March 2019

 

 

47,191

On 31 March 2019, Gordon Dadds Group plc held a significant interest in or has significant influence over the following subsidiary undertakings which are incorporated and operate in England and Wales and are included in the consolidated financial statements.

UK Companies

 

Principal activity

% of holding

Class of capital

Culver Holdings  Limited

 

Intermediate holding company

100%

Ordinary shares

Gordon Dadds Corporate Finance Limited

 

Intermediate holding company

100%

Ordinary shares

Culver Financial Management Limited

 

Independent financial advisor

100%

Ordinary shares

Hanover Financial  Management Limited

 

Independent financial advisor

100%

Ordinary shares

GD Employee Benefits Limited

 

Independent financial advisor

100%

Ordinary shares

Ince Gordon Dadds Services Limited

 

Management services

100%

Ordinary shares

Hanover Pensions Limited

 

Professional services

100%

Ordinary shares

Gordon Dadds Group Solicitors Limited

 

Legal services

100%

Ordinary shares

GDGS (Alen-Buckley) Limited

 

Legal services

100%

Ordinary shares

GDGS (Metcalfes) Limited

 

Legal services

100%

Ordinary shares

Allium Law Limited

 

Legal services

100%

Ordinary shares

White & Black Limited

 

Legal services

100%

Ordinary shares

e.Legal Technology Solutions Limited

 

IT services

60%

Ordinary shares

Gordon Dadds Professional Services Limited

 

Professional services

100%

Ordinary shares

Gordon Dadds Corporate Services Limited

 

Corporate services

100%

Ordinary shares

Gordon Dadds Talent Services Limited

 

Professional services

100%

Ordinary shares

Ince Process Agents Limited

 

Legal services

100%

Ordinary shares

 

UK Limited Liability Partnerships

Principal activity

Interest held

Ince Gordon Dadds Holdings LLP

Intermediate holding LLP

100% interest as a designated member

Ince Gordon Dadds LLP

Legal services

100% interest as a designated member

Gordon Dadds GP LLP

Legal services

Effective control due to significant influence

Metcalfes Solicitors LLP

Legal services

100% interest as a designated member

White & Black Legal LLP

Legal services

100% interest as a designated member

Ince Gordon Dadds AP LLP

Professional services

Effective control due to significant influence

Gordon Dadds CP LLP

Professional services

Effective control due to significant influence

CW Energy LLP

Professional services

100% interest as a designated member

IGD International LLP

Professional services

100% interest as a designated member

GD Financial Markets LLP

Professional services

Effective control due to significant influence

Ince Consulting Germany LLP

Professional services

Effective control due to significant influence

Overseas Companies

Principal activity

 

Location

% of holding

Class of capital

Ramparts Corporate Advisors Limited

Legal services

Gibraltar

100%

Ordinary shares

Penlee Legal Investments Limited

Professional services

Guernsey

100%

Ordinary shares

 

 

 

 

 

             

15.2          Business combinations and acquisitions

The details set out below provide the information required under IFRS 3 'Business Combinations' for the acquisitions that occurred during the year ended 31 March 2019.

The total amount of revenue and associated profit derived from acquired entities in the year was £7,892,000 and £3,811,000. An estimate of the annualised revenue and associated profit (based on pro-rated figures) had the acquisitions occurred at the start of the year is £33,002,000 and £6,343,000.

Ince & Co LLP

On 31st December 2018, the Group acquired the members' interests in Ince & Co LLP (now renamed) and then the files and matters of that firm and its service company Ince & Co. Services Limited (also renamed) for those entities' administrators. Ince & Co LLP was a global specialist in shipping and commercial law, focussed on shipping, insurance, energy and aviation.

Initial consideration of £6,350,000 was paid in cash to repay partners' capital loans. Contingent consideration based on turnover achieved during the years 2019, 2020 and 2021of £15,002,000 is estimated to be payable in cash over this period. Goodwill of £16,544,000 was recognised in accounting for the acquisition. This goodwill essentially represents the on-going commitment of the selling members to the enlarged group and the well established reputation of the Ince entities in their specialist markets. 

Ramparts Corporate Advisors Limited

On 29th March 2019, the Group acquired 100% of the issued share capital of Ramparts Corporate Advisors Limited, a Gibraltar-based international finance and technology practice with a particular specialism in the online gaming and electronic payments industries.

Initial consideration was £342,000 and goodwill of £1,098,000 was recognised in accounting for the acquisition.

 

 

 

 

 

Notes to the Financial Statements (continued)

15.2.1      Identifiable assets acquired and liabilities assumed

The fair values of the identifiable assets and liabilities at the date of acquisition were as follows:

 

 

 

                      

 

                     

 

 

 

 

 

                   

 

Ince & Co

Ramparts Corporate Advisors

             Total

 

 

 

 

LLP

Limited

Acquisitions

 

 

 

 

£'000

£'000

£'000

Property, plant and equipment

 

 

 

877

38

915

Intangible asset

 

 

 

9,000

-

9,000

Trade and other receivables

 

 

 

1,064

255

1,319

Cash and cash equivalents

 

 

 

177

127

304

Trade and other payables

 

 

 

(4,023)

(238)

(4,261)

Provisions

 

 

 

(2,287)

-

(2,287)

Net identifiable assets and liabilities

 

 

 

4,808

182

 

4,990

 

 

 

 

 

 

 

Goodwill

 

 

 

16,544

1,098

17,642

Non-controlling interest in the recognised amounts of identifiable assets and liabilities

 

 

 

-

-

-

 

 

 

 

 

 

 

Total consideration

 

 

 

21,352

1,280

22,632

 

 

 

 

 

 

 

Satisfied by:

 

 

 

 

 

 

Cash

 

 

 

6,350

342

6,692

Equity instruments

 

 

 

-

-

-

Contingent consideration

 

 

 

15,002

938

15,940

Total consideration transferred

 

 

 

21,352

1,280

22,632

 

 

 

 

 

 

 

Net cash outflow arising on acquisition:

 

 

 

 

 

 

Cash consideration

 

 

 

6,350

342

6,692

Less: cash and cash equivalent balances acquired

 

 

 

(177)

(127)

(304)

 

 

 

 

6,173

215

6,388

 

 

Notes to the Financial Statements (continued)

15.3          Interests in associates

Group

 

 

2019

2018

 

 

£'000

£'000

Cost of investment in associates

 

390

297

Share of post-acquisition profit net of dividends received

 

(11)

(30)

Carrying value of interests in associates

 

379

267

The Group holds 100% of the New Series C Shares, representing 30% of the total share capital of James Stocks & Co Limited, a professional services firm who specialise in corporate finance and strategic advice. James Stock & Co Limited was incorporated and operates in England and Wales.

Summarised financial information in respect of James Stocks & Co Limited is set out below:

 

2019

2018

 

£'000

£'000

Net profit/(loss)

77

(104)

Net assets

148

8

16.            Trade and other receivables

 

Group

Group

 Company

Company

 

2019

2018

2019

2018

 

£'000

£'000

£'000

£'000

Trade receivables

17,229

10,605

-

13

Accrued income

5,591

3,514

-

-

Other receivables

8,570

2,043

153

46

Amounts due from subsidiaries

-

-

30,045

11,330

Prepayments

3,832

2,249

25

56

 

35,222

18,411

30,223

11,445

Trade receivables are stated including £2,868,000 of VAT and £1,998,000 of disbursements.

17.            Cash and cash equivalents

 

 

Group

Group

Company

Company

 

 

2019

2018

2019

2018

 

 

£'000

£'000

£'000

£'000

Cash in hand and at banks

 

4,759

8,948

987

52

Total

 

4,759

8,948

987

52

 

Cash and cash equivalents include the following:-

Cash as above

 

4,759

8,948

987

52

Bank overdrafts

 

(39)

-

-

-

Total

 

4,720

8,948

987

52

 

 

 

Notes to the Financial Statements (continued)

18.            Share capital

 

 

2019

2019

2018

 

%

Number

£'000

£'000

Authorised

 

 

 

 

Ordinary shares of 1p each

100.0%

36,976,730

370

288

 

 

 

370

288

 

          

 

 

 

 

 

2019

2019

2018

 

        %

Number

£'000

£'000

Allotted, called up and fully paid

 

 

 

 

Ordinary shares of 1p each

100.0%

36,976,730

370

288

 

          

 

370

288

Ordinary shares rank equally as regards to dividends, other distributions and return on capital. Each ordinary share carries the right to one vote.

On 12th February 2019, 8,217,019 ordinary shares were issued at 140p per share, with a nominal value of 1p per share:

 

 

 

2019

2018

 

 

 

Number

£'000

Ordinary shares of 1p each

 

 

 

 

At 1 April

 

 

28,759,711

288

Shares issued during the year

 

 

8,217,019

82

At 31 March

 

 

36,976,730

370

Details of share options issued in the year are set out in note 12.

19.            Reserves

Share premium represents the difference between the amount received and the par value of shares issued less transaction costs.

On 17th January 2018, the share premium account of Gordon Dadds Group plc was cancelled and credited to a capital redemption reserve. As this capital redemption reserve represents a distributable reserve it has been combined with retained earnings, which represents the cumulative profits or losses net of dividends paid and other adjustments.

The reverse acquisition reserve has arisen under IFRS3 'Business Combinations' following the acquisition of the Gordon Dadds Group.

Other reserves represents the impact of the valuation of share options issued in the year, details of which are set out in note 12.

 

 

 Notes to the Financial Statements (continued)

20.            Trade and other payables

 

 

        Group

         Group

Company

    Company

 

 

2019

2018

2019

2018

 

 

£'000

£'000

£'000

£'000

Current:

 

 

 

 

 

Trade payables

 

7,666

3,377

289

133

Amounts due to subsidiaries

 

-

-

27,187

22,629

Other taxes and social security

 

2,436

1,854

12

31

Other payables

 

1,344

1,493

1

24

Deferred consideration

 

7,436

5,407

-

-

Accruals

 

4,158

1,275

101

116

 

 

23,040

13,406

27,590

22,933

 

 

 

 

 

 

Non-current:

 

 

 

 

 

Deferred consideration

 

21,607

11,896

-

-

Accruals

 

4,022

-

-

-

 

 

25,629

11,896

 

 

 

 

 

 

 

 

Total

 

48,669

25,302

27,590

22,933

Deferred consideration relates to business combinations and the purchase of client lists and relationships.

 

 

 

Notes to the Financial Statements (continued)

21.            Borrowings

 

Group

Group

Company

Company

 

2019

2018

2019

2018

 

£'000

£'000

£'000

£'000

Bank overdrafts

39

-

-

-

Bank loans

6,000

66

6,000

-

Loan stock

-

-

-

-

Other loans

1,542

420

-

-

Obligations under hire purchase and lease contracts

29

41

 

-

 

-

Total borrowings

7,610

527

6,000

-

 

 

 

 

 

Current

2,370

372

900

-

Non-current

5,240

155

5,100

-

Total

7,610

527

6,000

-

The Group has a secured bank loan with Barclays Bank Plc with a carrying value of £6,000,000 at 31 March 2019 (2018: £nil). The loan was entered into on 31 December 2018, has a term of three years (to be repaid in quarterly installments commencing in September 2019) and carries interest at LIBOR + 2.25% per annum. A £6.5m revolving credit facility was also entered into with Barclays Bank plc at 31 December 2018, but was not drawn at 31 March 2019. The loan and the revolving credit facility are both secured against certain entities within the Group and are subject to covenants which are assessed each quarter (no current or forecast breaches have been identified).

Other loans of £1,542,000 (2018: £420,000) are unsecured and carry interest at between 3.0 per cent and 10 per cent per annum. Other loans are repayable within 12 months, except non-current other loans of £126,000 which has a maturity of 1-3 years.

Minimum lease payments under hire purchase and lease contract fall due as follows:

 

Group

Group

Company

Company

 

2019

2018

2019

2018

 

£'000

£'000

£'000

£'000

 

 

 

 

 

Gross obligations repayable:

 

 

 

 

Within one year

17

17

-

-

Between 2-5 years

15

32

-

-

 

32

49

-

-

 

 

 

 

 

Finance charges repayable:

 

 

 

 

Within one year

2

5

-

-

Between 2-5 years

1

3

-

-

 

3

8

-

-

 

 

 

 

 

Net obligations repayable:

 

 

 

 

Within one year

15

12

-

-

Between 2-5 years

14

29

-

-

 

29

41

-

-

 

 

Notes to the Financial Statements (continued)

22.            Provisions

Group

 

 

 

                   

 

 

 

Provisions for onerous property leases and employment contracts

Other provisions

Total

 

 

£'000

£'000

£'000

Balance at 1 April  2017

 

-

423

423

Provisions made

 

-

116

116

Utilised during the year

 

-

(119)

(119)

Amounts released

 

-

(255)

(255)

Balance at 31 March 2018

 

-

165

165

Provisions made

 

2,649

4,303

6,952

Utilised during the year

 

(369)

(12)

(381)

Amounts released

 

-

-

-

Balance at 31 March 2019

 

2,280

4,456

6,736

 

 

 

 

 

Current

 

1,083

4,440

5,523

Non-current

 

1,197

16

1,213

Provisions categorised as current liabilities represent provisions for liabilities which have the possibility of being settled within one year.

Provisions for onerous property leases and employment contracts relate to rental costs for the Group's prior head office and agreed contractual employment arrangements for a former Ince & Co employee.

Other provisions include legacy liabilities inherited with the Ince & Co acquisition of £2,287,000 (2018: £Nil), refurbishment costs for the Group's head office of £1,357,000 (2018: £Nil), and uninsured excess on potential claims of £675,000 (2018: £145,000).

23.            Commitments

At 31 March 2019 the Group's total commitments under non-cancellable operating leases, together with the obligations by maturity, were as follows:

 

2019

2019

2018

2018

 

Land and

      Other

  Land and

       Other

 

Buildings

      assets

  Buildings

       assets

 

£'000

£'000

£'000

£'000

Within one year

2,228

106

1,543

123

Between 2-5 years

4,204

228

1,639

254

More than five years

603

33

430

-

Total

7,035

367

3,612

377

At 31 March 2019 the Group had capital commitments of £Nil (2018: £Nil) contracted but not provided for in these financial statements.

24.            Pensions

The Group participates in a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in a fund administered by Carey Pensions UK. Contributions from employers and employees totalling £226,000 (2018: £39,000) were payable to the fund at the year end and are included in payables.

25.            Ultimate controlling party

Gordon Dadds Group plc is owned by its shareholders and there is no ultimate controlling party.

 

 

Notes to the Financial Statements (continued)

26.            Related party transactions

Group

In addition to the transactions disclosed in the Directors' Remuneration Report the Group has entered into the following transactions with related parties:-

The Group occupies office accommodation at Llanmaes, St Fagans, Cardiff under arrangements with Juratone Limited, a company of which A J Biles is a director. Rent and service charges of £202,000 (2018: £180,000) were charged during the year under these arrangements and the Group charged Juratone amounts of £13,000 (2018: £Nil). At the balance sheet date an amount due to Juratone Limited of £Nil (2018:£nil) is included in payables and an amount due from Juratone Limited of £78,000 (2018:£44,000) is included in receivables.

A J Biles is a designated LLP member of ACR Professional Services LLP. Professional services of £131,940 (2018: £212,500) were charged from ACR Professional Services LLP to the Group during the year. At the balance sheet date the Group was owed £163,000 (2018: £64,000) from ACR Professional Services LLP.

The Group charged fees and reimbursed expenses of £724,000 (2018: £724,000) to e.Legal Technology Solutions Limited during the year. The Group were charged fees and reimbursed expenses of £1,353,000 (2018: £1,353,000) by e.Legal Technology Solutions Limited during the year. At the balance sheet date the Group was owed £27,000 (2018: £259,000) from e.Legal Technology Solutions Limited.

The Group charged Stann Marine Limited, a company in which a Designated member of Ince Gordon Dadds AP LLP is a Director, fees under a management agreement totalling £127,000 (2018: £Nil).

The Group charged fees to associate company James Stocks & Co Limited of £37,000 (2018: £71,000) and were charged fees of £Nil (2018: £1,500) during the year. At the balance sheet date the Group was owed £Nil (2018:£12,000) from James Stocks & Co Limited.

Company

In addition to the transactions disclosed in the Directors' Remuneration Report the Company has entered into the following transactions with related parties:-

The Company charged reimbursed expenses of £177,000 (2018:£13,000) to subsidiary undertakings during the year. At the balance sheet date an amount due from subsidiary undertakings of £Nil (2018:£13,000) is included in trade receivables.

The Company was charged fees and reimbursed expenses of £76,000 (2018:£89,000) by subsidiary undertakings during the year. At the balance sheet date an amount due to subsidiary undertakings of £Nil (2018:£44,000) is included in trade payables.

 

Notes to the Financial Statements (continued)

27.            Financial risk management

The company's operations expose it to a number of financial risks. A risk management programme has been established to protect the Group and the Company against the potential adverse effects of these financial risks. There has been no significant change in these financial risks since the prior year.

Fair value of financial instruments

Financial instruments comprise cash and cash equivalents, trade and other receivables, including sums due from subsidiaries and Loan Stock, bank and other loans, obligations under hire purchase and lease contracts and trade and other payables. In the directors' opinion the carrying value of the financial instruments approximates their fair value.

 

 

     Group

      Group

Company

Company

 

 

2019

2018

2019

2018

 

Note

£'000

£'000

£'000

£'000

Loans and receivables:

 

 

 

 

 

Trade receivables

16

17,229

10,605

-

13

Accrued income

16

5,591

3,514

-

-

Cash and cash equivalents

17

4,759

8,948

987

52

Other receivables

16

8,570

2,043

153

46

Amounts due from subsidiaries

16

-

-

30,045

11,330

Total financial assets

 

36,149

25,110

31,185

11,441

 

 

 

 

 

 

Financial liabilities measured at amortised cost:

 

 

 

 

 

Borrowings

21

7,610

527

6,000

-

Trade payables

20

7,666

3,377

289

133

Other payables

20

1,344

1,493

1

24

Deferred consideration

20

29,043

17,303

-

 

Amounts due to subsidiaries

20

-

-

27,187

22,629

Total financial liabilities

 

45,663

22,700

33,477

22,786

 

 

 

 

 

 

Total financial instruments

 

(9,514)

2,410

(2,292)

(11,345)

 

 

Notes to the Financial Statements (continued)

28.            Credit risk

Customers are assessed for credit worthiness and credit limits are also imposed on customers and reviewed regularly. The maximum exposure to credit risk is the carrying value of its financial receivables, trade and other receivables and cash and cash equivalents as disclosed in the notes.

The Group holds no collateral or other credit enhancements. The receivables' age analysis is also evaluated on a regular basis for potential doubtful debts. It is management's opinion that no further provision for doubtful debts is required.

Cash and cash equivalents are invested with banks with a credit rating of no less than A-1.4

Analysis of trade receivables:

 

       30 days        or less

Between 31 and 60 days

Between 61 and 90 days

Between 90 and 180 days

Over 180 days

Total

gross

Bad debt provision

     Total carrying amount

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

2019

10,435

2,889

1,605

2,280

5,351

22,560

(5,351)

17,209

2018

7,496

883

633

1,593

2,666

13,271

(2,666)

10,605

The Group allows an average trade receivables payment period of 30 days after invoice date. It is the group's policy to assess receivables for recoverability on an individual basis and to make provision where it is considered necessary. In assessing recoverability the group takes into account any indicators of impairment up until the reporting date. The application of this policy generally results in debts between 31 and 180 days not being provided for unless individual circumstances indicate that a debt is impaired.  Receivables over 180 days are provided for. except in circumstances where the group has security in respect of the debt or has other arrangements which satisfy the group that the debtor is in a position to pay and is intending to pay but is stopped until an event occurs (such as the grant of probate).

The directors have considered whether there is an overall change in the economic environment which changes the expected lifetime credit loss on its trade debtors and consider that the existing policy does not need varying at this year end.

Trade receivables that are neither impaired nor past due are made up of 1,429 receivables' balances (2018: 1,468). The largest individual debtor corresponds to 0.7% (2018: 1.4%) of the total balance. Historically these receivables have always paid balances when due. The average age of these receivables is 121 days (2018: 124 days). No receivables' balances have been renegotiated during the year or in the prior year.

The group individually impaired no net balances (2018: £Nil). The group does not hold any collateral over any balances.

 

 

Notes to the Financial Statements (continued)

29.            Interest rate risk

Interest rate risk is the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to changes in market interest rates. Interest rate risk arises from interest bearing financial assets and liabilities that we use. Interest bearing assets including cash and cash equivalents are considered to be short-term liquid assets. Our interest rate liability risk arises primarily from borrowings issued at floating interest rates which exposes the group to cash flow interest rate risk. It is the group's policy to settle trade payables within the credit terms allowed and the group does therefore not incur interest on overdue balances. Borrowings are sourced from local financial markets, covering short and long-term funding. The group manages interest rate risk on borrowings by ensuring access to diverse sources of funding and reducing risks of refinancing by establishing and managing borrowings in accordance with target maturity profiles.

Interest rate exposure and sensitivity analysis:

Given the short term nature of the group and company's financial assets and liabilities no sensitivity analysis has been prepared as the impact on the financial statements would not be significant.

30.            Foreign currency risk

Foreign currency risk refers to the risk that the value of a financial commitment or recognised asset or liability will fluctuate due to changes in foreign currency rates. In previous years the group was exposed to foreign currency risk as a result of transactions denominated in US Dollars and Euros. The group maintained bank accounts in US dollars and Euros and converted these to Sterling at appropriate times minimising the exposure to exchange fluctuations.  The Chinese branches acquired as part of the Ince & Co acquisition also trade and report in Renminbi. At the balance sheet date the net monetary assets of the group denominated in foreign currencies translated into Sterling totalled £134,000 (2018: £Nil). No amounts were recognised directly in equity during the year or the prior year.

31.            Liquidity risk

The group seeks to maintain sufficient cash balances.

Management reviews cash flow forecasts on a regular basis to determine whether the group has sufficient cash reserves to meet future working capital requirements and to take advantage of business opportunities. The average creditor payment period is 160 days (2018: 129 days).

Trade and other payables and amounts due to subsidiaries are due within 12 months, the maturity of financial liabilities is set out below.

The following table sets out the Group's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay.

 

 

 

 

 

         Total

 

         Less

Between

Between

Between

contractual

 

         than

3 and 12

    1 and 2

    2 and 5

           cash

 

3 months

  months

       years

       years

        flows

 

 

        £'000

£'000

£'000

£'000

£'000

31 March 2019

 

 

 

 

 

 

 

-

900

1,200

3,900

6,000

 

516

901

63

63

1543

Finance leases

 

4

13

12

-

29

 

 

520

1,814

1,275

3,963

7,572

 

 

 

 

 

 

 

 

 

 

 

 

 

 

113

247

63

63

486

Finance leases

 

4

13

17

7

41

 

 

117

260

80

70

527

Interest bearing financial liabilities carry interest at between 3.0 per cent and 10 per cent per annum.

The group has also access to financing facilities of £6,750,000 (2018: £600,000) as described below.

Notes to the Financial Statements (continued)

Unsecured bank overdraft facility (£250,000 of which £38,000 was drawn down at 31 March 2019), reviewed annually and payable at call, and a revolving credit facility (£6,500,000), described in note 21:

 

 

     Group

      Group

Company

   Company

 

 

2019

2018

2019

2018

 

 

£'000

£'000

£'000

£'000

Amount used

 

38

-

-

-

Amount unused

 

6,712

600

6,500

-

 

 

6,750

600

6,500

-

32.            Capital management

The company's objectives when managing capital are:

-       to safeguard the company's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and

-       to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.

The company sets the amount of capital in proportion to risk. The company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.

The company monitors capital on the basis of the debt-to-adjusted capital ratio. This ratio is calculated as net debt ÷ adjusted capital. Net debt is calculated as total debt (as shown in the balance sheet) less cash and cash equivalents. Adjusted capital comprises all components of equity.

Debt-to-adjusted capital ratios

The debt adjusted capital ratios at 31 March 2019 were as follows:

 

Group

Group

Company

Company

 

2019

2018

2019

2018

 

£'000

£'000

£'000

£'000

Total debt

7,610

527

6,000

-

Less: cash and cash equivalents

(4,759)

(8,948)

(987)

(52)

Net debt

2,851

-

5,013

-

 

 

 

 

 

Total equity

31,480

28,795

44,979

35,755

Add: subordinated debt instruments

-

-

-

-

Adjusted capital

31,480

 28,795

44,979

35,755

Debt-to-adjusted capital ratio

1:11.0

n/a

1:9.0

n/a

33.            Reconciliation of liabilities arising from financing activities

 

 

                

 

Non-cash changes

 

 

 

Group

Cash

 

 

Group

 

 

2018

flows

Acquisitions

Other

2019

 

 

        £'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

Borrowings due after 1 year

 

126

5,100

-

-

5,226

Borrowings due within 1 year

 

360

1,995

-

-

2,355

Finance leases due after 1 year

 

29

-

-

(15)

14

Finance leases due within 1 year

 

12

(12)

-

15

15

 

 

527

7,083

-

-

7,610

 

 

 

Notes to the Financial Statements (continued)

34.            Subsequent events

Ince & Co international entities

With effect from 1 April 2019 the Group gained control over the following Ince overseas network entities:

-       Ince & Co (Hong Kong)

-       Ince & Co Singapore LLP

-       Ince & Co Middle East LLP

-       Herring, Parry, Khan Law Office

-       Ince & Co Germany LLP

Until 31 December 2018 these entities were subsidiaries of Ince & Co International LLP (now in administration and renamed). With effect from 1 April 2019, revised arrangements were agreed with these entities which gave the group significant influence over them without any ownership interest.

As part of the new arrangements concluded with effect from 1 April 2019, the Group has agreed to make payments to the partners of those entities depending on the levels of revenue achieved in the three year period ending 31 December 2021.  Based on revenue expectations, the group currently estimates that these payments will amount in aggregate to £12 million over the three years.

Control over these entities brings together the entities with the business of Ince & Co LLP in the UK and mainland China.

The estimated revenue for the year ended 30 April 2018 (the previous year end of those businesses) attributable to the partners who continue in the businesses was in aggregate £23 million.

Balance sheets at 31 March 2019 are being prepared for these businesses and will form the basis for the initial valuation of the fair value of assets and liabilities for the consolidation of these businesses and thus the computation of goodwill and these valuations are not yet complete so are not disclosed.

 Ramparts Corporate Services Limited

On 7 June 2019, the group completed the acquisition of the whole of the issued share capital of Ramparts Corporate Services Limited pursuant to an agreement dated 31 March 2019 upon satisfaction of the condition requiring consent by the Gibraltar Financial Services Commission.  This is not considered material for detailed disclosure.

35.            ACCOUNTING STANDARDS ISSUED BUT NOT yet effective

The Group is required to adopt IFRS 16 Leases from 1 April 2019. The Group has assessed the estimated impact that initial application of IFRS 16 will have on its consolidated financial statements, as described below. The actual impacts of adopting the standard on 1 April 2019 may change because the new accounting policies are subject to change until the Group presents its first financial statements that include the date of initial application.

IFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments.

The Group will recognise new assets and liabilities for its operating leases of property, plant and equipment. The nature of expenses related to those leases will now change because the Group will recognise a depreciation charge for right-of-use assets and interest expense on lease liabilities. Previously, the Group recognised operating lease expense on a straight-line basis over the term of the lease, and recognised assets and liabilities only to the extent that there was a timing difference between actual lease payments and the expense recognised.

Based on the information currently available, the Group estimates that it will recognise lease assets and lease liabilities of £9.2m as at 1 April 2019.

 

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
END
 
 
FR UVOVRKWABURR

a d v e r t i s e m e n t