Audited Preliminary Results 2020

RNS Number : 3687A

Gateley (Holdings) PLC

29 September 2020

 

29 September 2020

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon publication of this announcement, this information is now considered to be in the public domain.

Gateley (Holdings) Plc

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

AUDITED PRELIMINARY RESULTS 2020

Strong performance, demonstrating resilience through diversity

Gateley (AIM: GTLY), the legal and professional services group, is pleased to announce its audited preliminary results for the year ended 30 April 2020 ("FY20" or the "Year"), which show a strong and resilient performance in a year of macro-economic uncertainty, caused by Brexit negotiations, a General Election and the COVID-19 pandemic.

Rod Waldie, CEO of Gateley, said:

"We are delighted with the performance of the Group for the Year and that the business has continued to trade profitably and remain cash positive throughout the new financial year. This would not have been possible without the commitment, dedication and understanding of all of our colleagues, whose wellbeing remains our highest priority.

"In FY20 we continued to invest in the growth of the Group through strategic headcount increases and four diversification acquisitions. The Group performed well and in line with market expectations until COVID-19 impacted at the end of February 2020. When country-wide restrictions were introduced in early March, many of the Group's mandates were put on hold and, like most businesses, we experienced an unexpected and sudden reduction in revenue.

"As a people business with a cost structure aligned to forecast revenue, and with little time before the end of the year for cost mitigation measures to take effect, this reduction in revenue, during our critical Q4, immediately impacted our profitability. We took swift action to mitigate this, whilst taking great care to protect the long-term growth prospects of the Group, which are of utmost importance to all our stakeholders. We believe that it is crucial to the sustainability and future success of our business that we maintain capability and capacity, even if this impacts our profitability in the short term.

"The Group is benefitting from cost savings resulting from new ways of working introduced during lockdown, and we will capitalise on these and other operational gearing potential to improve margins in the longer term, and to strengthen further the resilience of our business.

"On a gradually improved trajectory, year to date activity levels are circa 7% down on the previous year. The Group has traded profitably and cash positive throughout the new financial year."

Financial Highlights

	FY20	FY19	Change
Revenue	£109.8m	£103.5m	+6.1%
Underlying operating profit before tax*	£18.7m	£18.0m	+3.9%
Underlying profit before tax*	£18.1m	£18.1m	-%
Profit before tax	£14.8m	£15.9m	-6.9%
Profit after tax	£11.7m	£13.0m	-10.0%
Underlying basic earnings per share ('EPS')	10.34p	11.83p	-12.6%
Adjusted fully diluted EPS**	12.45p	13.15p	-5.3%
Net assets	£44.8m	£30.6m	+46.4%
Net debt***	£0.9m	£3.2m	-71.9%

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

COVID-19 Impact Update

●	Swift action taken to enable the Group to continue trading profitably through the pandemic with ample financial liquidity
●	Group benefitting from cost savings, as a result of new ways of working

Operational Highlights

●	Further strategic diversification of the Group's service offering, through acquisitions of Persona Associates, t-three, Gateley Tweed and Gateley Vinden
●	Successful and seamless move to home-working, testament to ongoing investment in technology and systems to support the Group's growth ambitions
●	New five-year Orderly Market Agreement in place and new Long-Term Incentive Plan introduced

Current Trading and Outlook

●	Group trading profitably and cash positive in Q1 of the new financial year ending 30 April 2021 ("FY21")
●	Q1 FY21 activity levels down approximately 9% year-on-year
●	FY21 activity levels down 7% at the end of August 2020 year-on-year
●	Operational gearing opportunities, resulting from new ways of working, being explored further
●	Strong balance sheet, disciplined working capital management and conservative levels of debt
●	Diversified and resilient business model supporting the Board's confidence in the future performance of the business
●	The current macro-economic outlook remains, however, too uncertain for the Board to be prescriptive on FY21 outlook at this stage

Rod Waldie, continued: "Gateley is a resilient, diversified business that has a demonstrable track record of growth, delivered through numerous economic cycles. The business has a strong management team, a collegiate culture and a clear strategy to expand the breadth and depth of its service lines, via our "Platforms", which are sector focused and bring together our increasing range of complementary legal and consultancy services.

"The Board is confident that the Group has more than sufficient resources to withstand the pandemic, to return to prior levels of profitability and to grow from there. We fully expect Gateley to emerge from this crisis in a strong position, well placed to capitalise on both organic and acquisition opportunities, as we continue to focus on long term growth that rewards our people and delivers attractive returns to our investors.

"We embrace the future with confidence."

Enquiries:

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

About us

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

We have over 700 professional advisers and employ over 1,100 people across offices located in Belfast, Birmingham, Bolton, Cambridge, Guildford, Leeds, Leicester, London, Manchester, Newcastle, Nottingham, Reading and Dubai.

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

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

CHAIRMAN'S STATEMENT

I am delighted with the performance of the business during the past financial year, a year in which we successfully navigated the disruption and uncertainty caused by the lengthy debate on Brexit, and the unprecedented disruption caused by COVID-19. Gateley has demonstrated the resilience of its operating model and diversification strategy, delivered solid financial results under exceptionally challenging circumstances, expanded its staff complement and completed four strategic acquisitions. Everyone in the business, from top to bottom, should be proud of their achievements.

The businesses we added to the Group during the year, have integrated well, enhancing our market offering and further strengthening our now well-diversified Group. The scale, breadth and depth of our service offering has been, and will continue to be, at the forefront of our strategic thinking and operational focus. Our acquisition pipeline remains strong, as we focus on earnings and service line enhancing opportunities that fulfil our clients' needs. The professional services industry is immensely talented in this country, including our own highly skilled staff, and remains extremely adaptable. The services we offer to clients are critical to their operations, emphasising just how robust our legal and complementary services are with our wide, multi-sectoral, client-base.

Our people have ably risen to the challenges encountered throughout the Year and, importantly, since the onset of the pandemic. Their dedication to the business, to their colleagues and to our clients has been first class. Their efforts, combined with the strength of the business, have enabled us to continue to invest for the future. Average employee numbers rose by 15.4% from 907 to 1,047 during the Year, with 1,138 employees in the business at the Year end. The majority of our team now have some form of equity stake in the business. We successfully established a new long-term incentive plan and a new orderly market agreement across key internal shareholders. The latter sets the blueprint for internal investment over the next five years prudently and manages any potential divestitures that internal shareholders may wish to make.

It was clear to the Board in early March 2020 that as a consequence of COVID-19 the economic environment in the UK would remain uncertain for some time. With poor visibility on economic outcomes, the Board took the sensible step to preserve the Group's financial liquidity by reducing salaries and cancelling all bonus and dividend payments. We also suspended financial performance guidance, to give ourselves time to digest and understand how COVID-19 changes were affecting our clients and our own business. It is the Board's intention to reinstate guidance as soon as we are able to forecast with a reasonable degree of accuracy. However, uncertainty prevails and we therefore consider it would be unwise, in the current rapidly moving economic environment, to extrapolate current performance figures to suggest an outcome for the full year ending 30 April 2021.

It is nearly 18 months since we announced that Michael Ward, our long-standing Chief Executive, would stand down at the end of the 2020 financial year, and that he would be succeeded by Rod Waldie. This was well planned to deliver a smooth transition. We could not, however, have foreseen the challenging circumstances under which the transition would take place. With this in mind, it is entirely appropriate to record how well Rod has risen to the challenge. His calm approach and his steady handling of such a difficult situation has been welcomed across the Group, particularly the way in which he has communicated with our people in the face of such adversity.  Rod's existing long-established knowledge of the business, and understanding of its collaborative culture, entirely ratifies our decision to appoint a trusted and respected internal successor to Mike.

Finally, I would like to thank Mike, for his first-class leadership of the business throughout his tenure, and our first five years as a public company, as well as my colleagues on the Board, the management team and all of the staff at Gateley for their unremitting hard work, support and fantastic contribution to the business. In what has been a uniquely challenging year, Gateley's people have excelled in client delivery, have conquered every challenge presented, and have delivered further strategic progress for the business, all of which have served to deliver a solid set of results.

We look forward to the future with confidence.

Nigel Payne

Chairman

29 September 2020

CHIEF EXECUTIVE OFFICER'S REVIEW

Introduction

The beginning of my tenure as Group CEO has thrown-up unexpected challenges. However, I would not be as confident as I am today in the robustness and resilience of the Group, and the continuation of the Gateley story, without the talent and commitment of all of our people. I must, therefore, start my first report as CEO by thanking all our people for their support and dedication to the ongoing success of the Gateley Group.  The whole team has performed exceptionally well throughout the adversity caused by the global pandemic, which began just before our FY20 year end. I am immensely proud and excited to lead such a talented team of people. Whilst some difficult decisions have had to be taken as a result of COVID-19, we have a well-balanced, resilient Group with a strong and loyal client base, and I believe that the next few years will highlight Gateley's strength, as it rises to the challenges ahead.

Since the Group joined the AIM Market over five years ago it has almost doubled in size, both in headcount and revenue, as we have delivered on our strategy to differentiate, diversify, incentivise and grow.  We are now an even more resilient, diversified business, with a demonstrably collegiate "one team" culture focused on delivering our strategic goals.  That quality, depth and breadth enables us to deliver on our promises to all stakeholders in a sensible, well-managed way.  The challenges we face today, as a result of the current economic climate, do not affect our confidence in the Group's ability to withstand all modelled scenarios for the year ahead, and we will continue to expand our Platforms for growth and focus on the delivery of a strong performance in FY21 and beyond.

Results overview

During the Year, we completed four earnings enhancing acquisitions, further strengthening and diversifying the Group's services, and continuing to build-out our strategic Platforms offering. Following a solid first half trading performance, however, COVID-19 disruption impacted trading in the crucial final two months of the year, as transactions due for completion across a number of key work streams were placed on hold.  Despite this, we are pleased to report that revenue increased by 6.1% during FY20 to £109.8m (FY19: £103.5m).

Our solid revenue performance reflects the strength in the breadth and balance of the Group's legal and consulting service lines. For example, despite a general decline in activity in the UK property sector, our legal and consulting teams, working together on our Property Platform, are currently trading ahead of prior year. In addition, many of the Group's counter-cyclical service lines, including Dispute Resolution, are extremely busy. 

Cash generation during the Year remained strong, as net cashflows from operating activities of £11.7m (FY19: £12.1m) represented 98.5% (FY19: 92.7%) of profit after tax.  The Group spent £4.5m (FY19: £4.0m) on investing activities, including the net cash spend of £2.7m (FY19: £2.5m) on the four acquisitions. The Group's net debt at the year-end was a healthy £0.9m (FY19: £3.2m).

We made a number of key infrastructure investment decisions during the Year, including flexing use of our office space and IT investment, which complement and enhance our new ways of working, aid the Group's operational gearing and enhance our ability to manage our costs. 

COVID-19 actions taken

Immediately after the onset of the pandemic the Board reviewed the Group's cash position and its operating expenses and took swift and decisive action to minimise the anticipated financial impact.

Our immediate concern was the wellbeing of our staff, clients and suppliers and, on 17 March, we closed our offices to all but a skeleton staff.

Similar to our approach during the Global Financial Crisis in 2008/9 ("GFC"), in an environment in which the outlook is constantly changing and traditional near-term forecasting is compromised, we focused on financial liquidity and cash management and evaluated our actions against an ongoing COVID-19 liquidity model. Overarching this, we adopted the same principle as that adopted during the GFC; maintaining robust staffing levels to ensure we could continue to provide comprehensive, high quality, timely professional advice in circumstances where our clients need it more than ever.  Our already well-managed and conservative financing structure is designed to maintain staffing flexibility, and to position the Group to outperform, as the UK economy normalises during the pandemic recovery phase.  The swift decisions taken by the Board have enabled the Group to trade profitably and with ample liquidity.  Examples of specific actions taken include:

●	Bonus cancellation and Board and staff salary cuts for the first six months of FY21 of between 15% and 20% across the Group;
●	Reductions in discretionary expenditure aided by new working practices;
●	Cancellation of FY20 interim and final dividend;
●	Limited acceptance of Government Support Schemes, aimed at those parts of the business which were either non-operational, or had restricted operations as a result of significantly reduced activity levels during COVID-19; and
●	Maximisation of cash flows including a no cost deferral of UK VAT payments totalling £5m and PAYE and national insurance payments totalling £7m between March and June 2020.

We did not pursue government loans, as we already have significant debt capacity and are well supported by our banking partners at HSBC, Lloyds and Santander, who continue to provide flexible working capital facilities that we can adapt to suit the needs of the Group.

During FY21, we anticipate receiving material furlough income and other staff savings, predominantly via H1 salary cuts, which were implemented to align overall costs with the changing level of revenue, but without reducing the Group's capacity to deliver services to clients. I am pleased, however, to report that we will return to full salaries from 1 November 2020.

Operational Review

During the Year we saw further significant growth in our fee earning staff and created new service offerings. We established a private wealth team based in our London office, which operates nationally and internationally, and we expanded our regional housebuilding practice. Our corporate team in London was expanded and strategic real estate expertise was added in key regions. The reach of our litigation and restructuring teams was also extended during the Year, with work predominately sourced from overseas, where our clients are seeking expertise in the UK legal system. We also created a bespoke real estate dispute resolution team, resourced internally, with wide-ranging expertise in commercial landlord and tenant, easement disputes, nuisance, restrictive covenants, boundary and title issues, trespass and beneficial interest claims.

Our international dispute resolution practice gained significant traction in FY20.  Key new work in the Year (which will carry on throughout FY21) includes acting for an executive agency of an overseas government in recovery of property from a former owner of a mainstream bank. This complex, top-tier multi-disciplinary, international work runs alongside mainstream insolvency and liquidator appointments, and tax avoidance recovery work.  This is highly specialist work, delivered through the expertise of a team already within the Group who have long-established credentials in complex recovery cases in the UK and overseas.  This is a prime example of the returns we are able to generate through our strategy to invest in niche, highly specialised services, and our ability to leverage counter-cyclical opportunities with established expertise.

We remain successful in winning work across all our Platforms, including appointment and/or reappointment to bank and housebuilding panels for our legal services teams, as well as in securing new multi-disciplinary (that is, legal and consultancy) appointments involving multiple Gateley service lines.  Examples of the latter include:

●	Legal (property) and surveying (utilities compensation - Gateley Hamer) services sold to a housebuilder;
●	Legal (property) and fiscal incentives consultancy (Capital Allowances - Gateley Capitus) services sold to a UK logistics provider;
●	Human Capital consulting (t-three) and legal (cyber security) services sold to a global pharmaceutical company; and
●	Legal (employment) and Human Capital consulting (t-three) services sold to a national transportation systems business.

We are delighted with how well our legal and consulting services are combining to win these types of appointments, evidencing that broadening and strengthening these Platforms will secure further profitable growth.

We conducted our Group-wide tri-annual client survey during the Year, scoring extremely well (net promoter score +68). Gateley remains the UK's most active M&A legal advisor by deal volume, as we reported in H1 2020 when the Group was ranked first in London and the North West and second in the Midlands and Yorkshire. In difficult times this is a resounding testament to our referral network, staff and service delivery capabilities.

As announced on 17 October 2019 the Group introduced a new five-year Orderly Market Agreement, which commenced on 8 June 2020.  This replaced a similar agreement which was put in place at the time of the Company's admission to the AIM Market in 2015. The new agreement makes all the partners in the Group subject to a minimum capital investment, above which there is an annual sales cap. The overwhelming internal support for this showcases our collegiate culture and demonstrates our partners' long-term commitment to the Group's strategy.

We remain focused on investing in the right people to join the Gateley team, and incentivising them through plc share ownership, providing an attractive alternative to traditional law firm ownership models. Exercised SAYE, CSOP and SARS option schemes required the creation of 3,187,446 new shares during the Year, which represented 2.7% of the entire issued share capital of the Group.  These schemes were granted three years ago, with the resultant shares increasing staff share ownership.

A new Long-Term Incentive Plan ("LTIP") has also been introduced to replace our existing SARS, creating greater alignment to the profit performance of the Group and greater clarity over the impact of dilution going forward. Shortly after the year end we issued our FY21 CSOP and new LTIP award schemes that were granted over 976,797 and 1,405,766 shares respectively.

We have spent many years building-up our physical footprint across the UK, matching our office locations with commercial opportunities available to the Group. As a result, we currently provide our services from most of the major commercial centres in the UK. Our office network remains an important asset and, during FY20, we secured targeted long-term positions, on favourable terms, in relation to parts of our office portfolio. Our strategy is to maximise the use of our existing offices. We believe that the agile working regime, which we have recently adopted, will enable us to on-board opportunities that become available to us, in or beyond our existing centres, without the need to extend the overall size of our office portfolio. This will further improve operational gearing and broaden and strengthen our business.

In 2019, we committed to a new ten-year lease on our second largest office, Manchester, and successfully relocated our 90+ Guildford team to new offices, also on a ten-year lease, to facilitate further expansion of services across the south of England and enable the complete relocation of the Persona Associates team from Horsham to the new Guildford office. We also took back office space from a long-standing sub-tenant in Paternoster Square, London. This was necessitated by the growth of our London based teams, including Kiddy & Partners, Gateley Hamer, Gateley Capitus and Gateley Legal.  Our London base continues to act as a gateway for national and international clients.  Finally, we have, recently, expanded our network by the opening of an initially serviced office in Newcastle, to support our housebuilding client needs.  All of our office locations are multi-floored, and we have the ability in our leases to sublet attractively sized floor plates should we need to do so.

We were very pleased and proud to be awarded 'UK Law Firm of the Year' at the British Legal Awards in November 2019, whilst more recently winning Corporate Law Firm of the Year at the Thames Valley Deal Awards and the Greater Birmingham Chamber of Commerce 2020 Awards: Excellence in Contribution to the Community Award; and Excellence in Sales and Marketing Award.  We believe these industry peer awards bear testament to the hard work and dedication of all our people, and an acknowledgment of the strength and quality of our business.

Our Platforms

In implementation of our strategy to differentiate ourselves by our ability to offer our clients complementary legal and consultancy professional services, we have continued to invest in our Platforms.  These Platforms comprise clusters of complementary Group services, presenting a broader and more compelling offering to clients in specific markets, or sectors.  This broader, connected services approach enhances cross-selling opportunities to our existing clients, and represents a compelling go-to-market strategy for new ones.

To this point we have successfully established our "Property Platform" and our "Human Capital Platform", with our plan being to replicate that approach in other areas as demand and opportunity dictate.

Our Property Platform currently comprises the expertise and services of our property lawyers, Gateley Capitus, Gateley Hamer, Persona Associates (now forming part of Gateley Hamer) and recently acquired Gateley Vinden.  Though we may add to the breadth of services offered by this Platform in the future, it already offers a broad range of professional services, including legal, surveying, compulsory purchase and planning, land referencing, tax incentives and reliefs, dispute resolution and debt finance; all as they relate specifically to property, and all delivered by professionals and businesses expert in and dedicated to property.

Our "Human Capital Platform" currently comprises our employment, pensions and benefits lawyers, as well as Entrust, Kiddy & Partners and t-three.  Again, we may add to this Platform in future, but already it offers employers an array of Human Capital services, including legal, pension trustee and advisory services, occupational and behavioural sciences services including c-suite and board-level assessment, leadership development and individual/organisational cultural/behavioural consulting and change programmes.

The Board's strategy is to continue to grow these Platforms, and add new ones, both organically and through acquisition. 

Acquisitions

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

FY20 was another busy year in the expansion of the Group, and I am pleased that we completed all planned deals prior to the onset of COVID-19 and the UK lockdown.  Those new businesses to join the Group during FY20 are as follows:

Persona Associates (July 2019) - one of the UK's longest-established and leading land referencing consultancies, advising on some of the UK's largest infrastructure and regeneration projects. This business is now fully integrated into Gateley Hamer;

t-three (December 2019) - offers services and products to businesses that enable them to develop their senior people and effect cultural change within the business itself. Together with Kiddy & Partners, we now offer one of the largest specialist Human Capital consultancy businesses in the UK;

Gateley Tweed (March 2020) - offers specialist legal services in reputation management and media law, with offices in Belfast and a presence Dublin and London.  The acquisition expands our offering in media law, reputation management, privacy and brand protection and presents cross-selling opportunities into Tweed's existing and future client base. In addition, the acquisition has strengthened our position in the Irish professional services market providing a base in Northern Ireland and the Republic of Ireland from which we can offer broader legal services and allowing for growth and expansion in Belfast, where Gateley Capitus are already established, as well as a number of Gateley Legal Construction lawyers; and

Gateley Vinden (March 2020) - a specialist business offering corporate advisory, dispute resolution and consultancy to the built environment, property and construction markets. The acquisition has strengthened our Construction team and added weight to our corporate advisory, dispute management and resolution expertise.

Target acquisitions will allow us to create new Platforms, building on our existing legal services lines around which we can aggregate complementary consultancy services. Ultimately, our business will offer a balanced range of legal and related professional services, which will make us indispensable to our clients, create more opportunity for our people, differentiate us from our competitors and make us more attractive to our investors.

Succession and Board Changes

Michael Ward, who stepped down from the role of Chief Executive Officer on 30 April 2020, now oversees our consultancy services businesses and remains as an executive director on our Board.

Current trading and outlook

FY21 started better than we initially expected, given the worldwide economic crisis. The Group has been profitable and cash positive throughout the current year to date, albeit Q1 FY21 activity levels were down 9% year-on-year, improving to just 7% down at the end of August 2020.

Although there has been a positive trend in activity levels within the Group since April, the macro-economic outlook remains too uncertain for the Board to sensibly guide on the outcome for FY21. The fundamentals of our business, and the opportunities that exist for capitalising on our broader professional services through our Platforms, however, remain strong.

Gateley is a resilient, balanced and financially transparent business with a demonstrable history of growth across numerous economic cycles. Given our proven ability to perform in counter-cyclical markets and our low geared balance sheet, we fully expect to emerge from this crisis in a strong position, able to capitalise on both organic and acquisition opportunities to grow the business further. Opportunities undoubtedly exist to broaden our client offering and Platforms further and deliver strong returns to investors. We remain confident in our business and people and embrace the future.

Rod Waldie

Chief Executive Officer

29 September 2020

FINANCE DIRECTOR'S REVIEW

Revenue

Group total revenue grew by 6.1% (FY19: 20.2%) to £109.8m (FY19: £103.5m).  Revenue from core legal service lines grew organically by 3.5% (FY19: 9.5%) and rose by a further 2.6% through acquisitions made during the Year (FY19: 10.7%).  Revenue from complementary consultancy businesses represented £11.0m or 10% of total revenue (FY19: £7.0m or 6.7%), highlighting the continued diversification of the business, as set out in the Group's strategy.

The Group benefitted from another strong year of organic growth in its legal Corporate reporting segment, which generated 17.1% growth in revenue.  We continue to top deal-volume league tables, as a result of our expertly delivered services to our Private Equity and M&A clients.  Our Property reporting segment grew by 3.8% as we took advantage of opportunities, generated by our diversified offering and overall Platform strength, at both regional and national level in the UK's construction, property development and housing markets, which rely upon long-term specialist legal support.  We have enhanced the Property Platform in adding a suite of additional services as a result of the acquisition of Persona Associates in July 2019 and Gateley Vinden in March 2020.  The acquisition of t-three in December 2019 contributed almost half of the 22.9% annual growth in our Employment, Pensions and Benefits reporting segment. Gateley Tweed, a new legal service line, slotted in well to our Business Services Platform towards the end of the year.

The FY20 outcome was not as initially expected, due to the unforeseen impact of COVID-19 on revenue.  Transactions paused, which meant it was impossible for clients in the majority of our transactional-led work types to complete expected deals.  However, new opportunities arose in other areas of our well-balanced business portfolio from the same clients, and the strength of our relationships held strong to ensure we achieved another year of growth.

Personnel costs and operating expenses

Our total personnel costs increased by £0.8m million to £63.5m (FY19: £62.8m). This comprised a mixture of headcount increases through a combination of organic and acquisitive growth, 1 May 2019 pay awards, minus the decrease in total staff financial rewards, which resulted from the Board's decision to cancel FY20 bonuses in order to conserve cash following the onset of the COVID-19 pandemic.

The impact of COVID-19 on the top line in the final six weeks of the financial year was sudden.  No cost base within our business could flex quickly enough to counter such an impact. However, we took swift action to mitigate this loss of revenue and to plan for all possible scenarios.  Commencing use of the Government's Job Retention Scheme ("JRS") was a key aspect of our plan as the uncertainty set in across the world. As COVID-19 took hold, we immediately ceased all non-essential recruitment and decided to use the JRS with immediate effect.  Income during the Year arising from the use of the JRS totalled £0.4m, as we placed 285 staff on furlough in April. Furlough scheme usage increased during May to July, followed by a subsequent reduction due to flexible working, a gradual return to restricted office working across certain locations and as a result of increases in activity.

Prior to the pandemic, our headcount was increased organically to meet client demand and as a result of making four acquisitions.  Once again, we strengthened our legal and consultancy teams with key hires throughout the year. Eleven new legal partners joined the business in FY20 and we made six successful promotions to legal partner. 

Average numbers of legal and professional staff rose by 15.7% to 706 (FY19: 610), whilst support staff numbers rose 14.8% to 341 (FY19: 297).  Personnel costs as a percentage of fees reduced to 57.8% of revenue from 60.7% in FY19 excluding share-based payment charges.

Other operating expenses increased by 8.5% or £1.9m to £23.8m (FY19: 21.9m).  £1.1m of this increase was as a result of the expansion of the Group following the four acquisitions made during the Year.  The remainder was due to investment in our information technology infrastructure and professional service fee increases, following a number of significant growth years.  Operating expenses as a percentage of revenue increased by 0.4% to 21.6% (FY19: 21.2%).

Prior to lockdown the Group's cost base was growing proportionately with the level of organic growth generated, and as a result of the earnings enhancing acquisitions made mainly during the latter half of FY20.  Following lockdown certain overheads ceased abruptly, as the business switched successfully to homeworking.  Whilst not planned, some of the savings resulting from our new way of working will continue to benefit the business going forward and overheads will rebase.  These costs are predominately property, travel and office supply related, and present a significant opportunity to navigate towards a lower total cost base in the future under new normal working practices. We remain fully focused on sensible cost management and control and we are confident that all actions taken in H1 FY21 currently enable us to anticipate that total costs for FY21 could be at a similar level to FY20.

Operationally, there remains a significant focus on IT, and our current and future infrastructure.  We have invested sensibly over recent years and further enhance both our internal and client facing experiences of IT usage.  I wish to thank Nick Capell, our IT Director, along with his team for the dedication they have shown in moving us all to home working with such care and professionalism.  We have taken steps both pre and post pandemic to continue to refine existing processes, including moving to Microsoft Teams during 2019, investing in a new client opening technology and streamlining service delivery services.

Our response to COVID-19

As COVID-19 swept across the UK in mid-March, we prioritised the wellbeing of all staff across the Group.  This involved the immediate closure of all of our offices and resultant changes in working practices, to ensure continuity of service to our clients as staff continued to support them and the business remotely.  I am extremely pleased with the calm response of our staff and the Gateley team spirit shown across the Group in the face of such difficult circumstances.  Whilst the statements in this report contain the strategic steps taken by the Group and our Board in handling the new challenges presented, the thoughts of each segmental reporting group head are detailed below to provide a context on trading sentiment and activity across the Group into and emerging from the UK wide lockdown.

(a)  Since the initial impact in April and May the Banking and Restructuring Group has seen an increasing volume of new work as the business attempts to understand the impact of COVID-19. To date, the work has mainly been business and financial advisory, centred around the Government's various support schemes. However, we expect a significant uptick in transactional restructuring and refinancing as the longer-term economic effects of COVID-19 take hold - Brendan McGeever (Group head of the Banking and Restructuring Group)

(b)  The initial impact of lockdown on the Corporate Group caused an abrupt slowdown in transactional work with many corporate deals either aborting or being postponed. The Corporate Group did, however, manage to maintain a reasonable degree of activity not only within its Private Client Unit, but also within its Corporate & Tax Units. As a testament to the Corporate Unit's large and diverse client base, there was deal activity through a number of well financed clients who saw opportunities in the market. Such activity levels have been steadily increasing, as the pipeline of work improves and confidence returns within the corporate community - Charles Glaskie (Group head of the Corporate Group)

(c)  Our Business Services Group has so far weathered the COVID-19 storm. We are not yet back to pre-coronavirus activity levels, but after an initial dip, instructions have picked up, albeit not all of the projects we are advising on are of a comparable magnitude to pre-lockdown days. - Simon Pigden (Group head of the Business Services Group)

(d)  For our Employment, Pensions and Benefits Group the announcement of lockdown and the Job Retention Scheme meant a very busy period in advising clients on furlough across all sectors.  There was, however, an adverse impact on trading due to the general suspension of the Employment Tribunal system, the decline in transactional work and a drop off in day to day advisory work whilst workforces were furloughed.  Work levels increased steadily during June and July, by which time the Employment Tribunal system was operating with some degree of normality, and there was a marked increase in transactional support work including numerous restructuring/insolvency matters.  Business as usual employee relations advice work has also returned to more usual levels. - Andrew MacMillan (Group head of the Employment, Pensions and Benefits Group)

(e)  The Property Group transitioned smoothly to home working on lockdown with the help of recent investment in IT. Work levels have been unusually strong in the specialist Logistics, Construction and Real Estate Disputes teams. Client activity has rebounded strongly in the Housebuilder team due to our diversified client base, while a relatively light Retail exposure has helped reduce the impact of lower activity levels in that sector. On the volume side, Plot sale rates initially fell sharply but have recovered strongly to be consistently above pre COVID-19 levels across the country. - Callum Nuttall (Group head of the Property Group)

Underlying operating profit before tax

Underlying operating profit before tax (PBT) of £18.7m increased by 3.9% from £18.0m enabling a steady PBT margin of 16.99% (FY19: 17.39%).

Underlying operating profit before tax excludes amortisation of acquired intangibles, impairment of intangibles and all share-based charges. Underlying profit before tax has been calculated as an alternative performance measure, in order to provide a more meaningful measure and year on year comparison of the profitability of the underlying business.

Extract of UK statement of comprehensive income	2020	2019
	£'000	£'000
Revenue	109,838	103,471
Operating profit	15,361	15,870
Operating profit margin (%)	13.99%	15.34%
Reconciliation to alternative performance measure: underlying operating profit before tax
Operating profit	15,361	15,870
Non-underlying items
Share based payment charge - Gateley Plc	821	655
Share based payment charge - Kiddy & Partners	534	-
Amortisation of intangible assets	1,375	1,406
Exceptional items
Acquisitions costs	107	61
Impairment of software development costs	463	-
Underlying operating profit before tax	18,661	17,992
Adjusted underlying operating profit margin (%)	16.99%	17.39%

Earnings Per Share (EPS)

Basic EPS decreased by 12.6% to 10.34p (FY19: 11.83p).  Basic EPS before non-underlying and exceptional items decreased by 5.3% to 12.69p (FY19: 13.39p). Diluted EPS decreased by 12.7% to 10.14p (FY19: 11.61p).  Diluted EPS before non-underlying and exceptional items decreased by 5.3% to 12.45p (FY19: 13.15p).

Long-Term Incentive Plan ('LTIP')

The Group has introduced a new LTIP share scheme that aligns share option reward distribution with compound annual growth in EPS over a three-year vesting period based on underlying trading profit after tax rather than share price.  The LTIP scheme uses EPS growth based on underlying profit after tax, as the most appropriately aligned profit measure that staff participating within the scheme can be held accountable against and is referred to as underlying fully diluted EPS. Profits used to calculate underlying EPS are disclosed below:

		2020	2019
		£'000	£'000
Reported profit after tax		11,723	13,041
Adjustments for non-underlying and exceptional items:
- Anticipated impact of IFRS 16 if it had been adopted in earlier years		-	(313)
- Amortisation of acquired intangible assets		1,375	1,406
- Share-based payment adjustments - Impairment of software development costs		1,355 463	655 -
- Acquisition-related costs		107	61
Underlying profit after tax		15,023	14,850
	Weighted average number of ordinary shares for calculating diluted earnings per share	115,599,727	112,280,569
	Underlying adjusted fully diluted EPS	13.00p	13.23p

Taxation

The Group's tax charge for the year was £3.0m (FY19: £2.9m), which comprised a corporation tax charge of £3.4m (FY19: £3.4m) and a deferred tax credit of £0.4m (FY19: credit of £0.5m).

The deferred tax credit arises due to a combination of credits in respect of the share schemes that have vested in the Year and the release of deferred tax on brands. The total effective rate of tax is 20.6% (FY19: 18.2%) based on reported profits before tax. The increase is as a result of the increase in non-underlying and exceptional items (largely amortisation of acquired intangible assets and share based payment charges) that are not tax deductible.

The net deferred taxation liability was £1.2m (FY19: asset £0.1m).

Dividend

The Board's intention is to re-instate dividend payments at the earliest sensible opportunity and will review its position once the outturn for FY21 is known.

The Board's dividend policy remains to distribute up to 70% of profit after tax (PAT) to shareholders, typically one third following its half year results and two thirds after the full year results are known.  During FY20, the Board proposed an interim dividend of 2.9p (FY19: 2.6p) per share, which was subsequently cancelled on 24 March 2020 to conserve cash within the business, as a result of the uncertainty arising from the impact of COVID-19.

Acquisitions

During the Year we completed four acquisitions.  The table below summarises the split of consideration between cash and shares, the net impact on cash during the Year together with expected future cash payments from unpaid contingent consideration on all past acquisitions.  Cash consideration is shown net of any cash in the acquired business.

Acquisition - consideration summary	Cash	Share value
	£m	£m
Initial consideration
Persona Associates	-	0.1
t-three Consulting	0.6	1.6
Gateley Tweed	0.9	1.0
Gateley Vinden	1.2	3.0
	2.7	5.7
Contingent consideration - FY21
Persona Associates	0.1	-
Kiddy and Partners	0.1	0.1
	0.2	0.1
Contingent consideration - FY22
t-three Consulting	0.3	0.4
International Investment Services	0.1	-
	0.4	0.4

Balance sheet

The Group has adopted IFRS 16 Leases during the Year, applying the modified retrospective approach, and therefore has not restated comparatives for previous reporting period.  Details of the impact on the income statement and balance sheet as a result of the adoption of IFRS 16.

The Group net asset position has increased by £14.1m (FY19: £7.5m) to £44.8m (FY19: 30.6m), due to the following movements:

There was an £8.0m increase in intangible assets and goodwill to 18.4m (FY19: £10.4m), following the acquisitions made during the Year.  Intangible assets of £6.1m (FY19: 2.0m) have been created from current and prior acquisitions, such as client relationships, brand and computer software. The balance relates to goodwill of £12.3m (FY19: 8.4m) arising from acquisitions.

The Board has considered carefully the impact of COVID-19 on the future forecasts used in assessing the value in use of the cash generating units to which the goodwill and intangibles relate and determined that despite short term reductions such forecasts are more than sufficient to justify the carrying value of goodwill. Therefore, as at 30 April 2020, the Board concluded that the goodwill and intangible assets do not require impairment.

There was an £4.1m increase in total current assets, resulting from £3.5m additional trade and other receivables available for collection (including £2.2m from acquired businesses during FY20), a £1.0m increase in contract assets (unbilled revenue including £0.3m from acquired businesses during FY20), a £0.4m decrease in deferred tax assets and a £0.1m increase in cash at the bank.

Total liabilities increased by £0.1m, before IFRS 16 lease liabilities, as the planned repayment of total debt was offset by an increase in contingent consideration and the deferral of employment taxes of £3.6m and VAT of £1.2m prior to the year end. Conserving cash resources, following the impact of COVID-19 on the UK economy, became a priority as the Year end approached.

Total net debt, excluding IFRS 16 debt, decreased to £0.9m from £3.2m due to strong cash generation and the holding back of payroll taxes and VAT referred to above.

Debt at the year-end comprised unsecured term loans of £3.1m (FY19: £5.7m), whilst loans to former partners of acquired businesses totalled £0.6m (FY19: £0.5m) and are repayable within the next 12 months.  In April 2020 the Group agreed with its lending banks to restructure its term loan repayments from £1.5m repayable within the next 12 months, followed by a further £1.6m quarterly to September 2023, to the revised profile of £0.7m within the next 12 months, followed by £1.0m during FY22 and FY23 and finally £0.4m in FY24.

Working capital and cashflow

In December 2019 the Group increased its overdraft facilities from £8m to £12m.  Following the impact of COVID-19 the Group moved swiftly to review its short-term borrowing facilities, which it increased from £12m to £20m.  Subsequently, the Group has agreed to gradually reduce its total overdraft facilities with effect from 1 September 2020 from £20m down to £10m, together with its term loan facility of £3.1m which remains in place. Total overdraft facilities available will reduce to more historical levels of £16m on 28 February 2021, and to £10m at 30 April 2021 and remain at that level until 30 September 2021. The Group is seeking to provide longer-term certainty by increasing its term loan facilities from £3.1m at 30 April 2020 up to £10m, which it aims to have in place by 31 October 2020.

At the Year end, unbilled revenue recognised in the Group's statutory accounts from time recorded on non-contingent work totalled £11.7m or 10.6% of revenue recognised over the last 12 months, compared to 10.3% at the end of FY19, where the billing cycle is annually most active ahead of the Group's April year end.

The Group was on track to show a significant improvement in debtor days prior to the end of FY20. However, as COVID-19 caused a slowdown in our clients' ability to keep up debt repayments, cash collections slowed, resulting in Group debtor days rising to 102 days compared to 100 days in FY19.

Cash generated from operations (post cashflow from IFRS 16 leases) was £11.7m (FY19: £12.1m), which represents 98.5% (FY19: 92.7%) of profit after taxation.

	2020	2019
	£'000	£'000
Net cash generated from underlying operating activities	15,229	15,166
Tax paid	(2,767)	(3,075)
Cash outflow from IFRS 16 leases (rental payments excluded from operating cash flows under IFRS 16)	(801)	-
Free cash flow	11,661	12,091
Underlying profit after tax	11,723	13,041
Cash conversion	99.5%	92.7%

Capital expenditure increased to £4.4m (FY19: £4.0m).  Cash outflow from financing activities of £8.0m was similar to outflows of £9.5m during FY19, as cash from dividend payments reduced. The Group continues to operate with a low level of gearing and fixed term debt.

Summary

The end of our fifth year as an AIM listed public company was not what we expected, due to COVID-19.  However, our balanced and resilient business, strong people culture and the strengthening strategy through Platform enhancements makes Gateley an exciting place in which to work. Our business is carefully managed and financially transparent, and we have delivered growth through numerous economic cycles.  Since the Year end, we have laid the foundations to navigate the impact of COVID-19 on the business, using Government schemes where appropriate.  As we adjust to how our cost base has changed, through new ways of working, we will capitalise on new opportunities to make the business even more resilient. There is an obvious opportunity to maximise operational gearing. We are determined to embrace this and to improve our margin performance further.  Our gradually improving performance since the end of FY20 is pleasing and gives us confidence for FY21 and beyond.

Neil Smith

Finance Director

29 September 2020

Consolidated statement of profit and loss and other comprehensive income

for the year ended 30 April 2020

	Note	2020	2019
		£'000	£'000
Revenue	3	109,838	103,471
Other operating income	4	665	313
Personnel costs, excluding IFRS 2 charge	7	(63,531)	(62,757)
Depreciation - Property, plant and equipment	13	(1,083)	(1,122)
Depreciation - Right-of-use asset*	13	(3,455)	-
Impairment of trade receivables and contract assets	16/17	(631)	(1,304)
Other operating expenses*, excluding non-underlying and exceptional items		(23,142)	(20,609)
Operating profit before non underlying and exceptional items	6	18,661	17,992
Total non-underlying operating and exceptional items	6	(3,300)	(2,122)
Operating profit	6	15,361	15,870
Investment income received	5	138	-
Financing income	9	523	523
Financing expense*	9	(1,266)	(448)
Profit before tax		14,756	15,945
Taxation	10	(3,033)	(2,904)
Profit for the year after tax attributable to equity holders of the parent		11,723	13,041
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss
Foreign exchange translation differences
- Exchange differences on foreign branch		29	(25)
Profit for the financial year and total comprehensive income all attributable to equity holders of the parent		11,752	13,016

Statutory Earnings per share
Basic	11	10.34p	11.83p
Diluted	11	10.14p	11.61p

* The adoption of IFRS 16 in the 12 months to  30 April 2020 resulted in an increase in depreciation of £3.455m and finance costs of £0.84m.  Other operating expenses reduced by £4.070m. 

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

Consolidated statement of financial position

at 30 April 2020

	Note	2020  £'000	2019  £'000
Non-current assets
Property, plant and equipment	13	1,873	2,017
Right of use asset	13	22,879	-
Investment property		164	164
Intangible assets & goodwill	14	18,438	10,430
Other intangible assets	15	303	289
Other investments		229	85
		43,886	12,985
Total non-current assets
Current assets
Contract assets	16	11,684	10,671
Trade and other receivables	17	39,997	36,535
Deferred tax asset	20	19	428
Cash and cash equivalents	22	2,923	2,887
Total current assets		54,623	50,521
Total assets		98,509	63,506
Non-current liabilities
Other interest-bearing loans and borrowings	18	(2,369)	(3,076)
Lease liability	24	(22,109)	-
Other payables	19	(922)	(983)
Deferred tax liability	20	(1,208)	(388)
Provisions	21	(461)	(339)
Total non-current liabilities		(27,069)	(4,786)
Current liabilities
Other interest-bearing loans and borrowings	18	(1,437)	(3,044)
Trade and other payables	19	(20,169)	(23,727)
Lease liability	24	(3,347)	-
Provisions	21	(252)	(291)
Current tax liabilities		(1,399)	(1,074)
Total current liabilities		(26,604)	(28,136)
Total liabilities		(53,673)	(32,922)
NET ASSETS		44,836	30,584
EQUITY
Share capital	23	11,761	11,086
Share premium		9,153	6,775
Merger reserve		(9,950)	(9,950)
Other reserve		6,815	1,770
Treasury reserve		(417)	(1,057)
Translation reserve		27	(2)
Retained earnings		27,447	21,982
TOTAL EQUITY		44,836	30,584

Consolidated statement of changes in equity

	Share capital	Share premium	Merger reserve	Other reserve	Treasury reserve	Retained earnings	Foreign currency translation reserve	Total Equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 May 2018, as previously reported	10,688	4,576	(9,950)	1,547	(15)	16,119	23	22,988
Adjustment from adoption of IFRS 9 (net of tax)	-	-	-	-	-	(353)	-	(353)
Restated balance at 1 May 2018	10,688	4,576	(9,950)	1,547	(15)	15,766	23	22,635
Comprehensive income:
Profit for the year	-	-	-	-	-	13,041	-	13,041
Exchange rate differences	-	-	-	-	-		(25)	(25)
Total comprehensive income	-	-	-	-	-	13,041	(25)	13,016
Transactions with owners recognised directly in equity:
Issue of share capital	398	2,151	-	223	-	-	-	2,772
Recognition of tax benefit on gain from equity settled share options	-	-	-	-	-	726	-	726
Purchase of own shares at nominal value	-	-	-	-	-	(242)	-	(242)
Reclassification of gain on own shares	-	28	-	-	-	(28)	-	-
Sale of treasury shares	-	-	-	-	791	-	-	791
Purchase of treasury shares	-	-	-	-	(1,833)	-	-	(1,833)
Dividend paid	-	-	-	-	-	(8,118)	-	(8,118)
Share based payment transactions	-	-	-		-	655	-	655
Deferred tax on equity settled element of share based payment charge	-	-	-	-	-	182	-	182
Total equity at 30 April 2019	11,086	6,755	(9,950)	1,770	(1,057)	21,982	(2)	30,584
At 1 May 2019, as previously reported	11,086	6,755	(9,950)	1,770	(1,057)	21,982	(2)	30,584
Adjustment from adoption of IFRS 16 (net of tax)	-	-	-	-	-	(725)	-	(725)
Restated balance at 1 May 2019	11,086	6,755	(9,950)	1,770	(1,057)	21,257	(2)	29,859
Comprehensive income:
Profit for the year	-	-	-	-	-	11,723	-	11,723
Exchange rate differences	-	-	-	-	-	-	29	29
Total comprehensive income	-	-	-	-	-	11,723	29	11,752
Transactions with owners recognised directly in equity:
Issue of share capital	675	2,398		5,045	-	-	-	8,118
Recognition of tax benefit on gain from equity settled share options	-	-	-	-	-	374	-	374
Purchase of own shares at nominal value	-	-	-	-	-	(163)	-	(163)
Sale of treasury shares	-	-	-	-	1,915	-	-	1,915
Purchase of treasury shares	-	-	-	-	(1,275)	-	-	(1,275)
Dividend paid	-	-	-	-	-	(6,007)	-	(6,007)
Share based payment transactions	-	-	-	-	-	821	-	821
Deferred tax on equity settled element of share based payment charge	-	-	-	-	-	(558)	-	(558)
Total equity at 30 April 2020	11,761	9,153	(9,950)	6,815	(417)	27,447	27	44,836

The following describes the nature and purpose of each reserve within equity:

Share premium - Amount subscribed for share capital in excess of nominal value together with gains on the sale of own shares and the difference between actual and nominal value of shares issued by the Company in the acquisition of trade and assets.

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

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

Treasury reserve - Represents the repurchase of shares for future distribution by Group's Employee Benefit Trust.

Retained earnings - All other net gains and losses and transactions with owners not recognised anywhere else.

Foreign currency translation reserve - Represents the movement in exchange rates back to the Group's functional currency of profits and losses generated in foreign currencies.

Consolidated cash flow statement

for year ended 30 April 2020

	Note	2020	2019
		£'000	£'000
Cash flows from operating activities
Profit for the year after tax		11,723	13,041
Adjustments for:
Depreciation and amortisation	13/13/15	5,913	2,528
Financial income	9	(523)	(523)
Financial expense	9	1,266	448
Impairment of Goodwill	14	619	-
Equity settled share-based payments	7	821	655
Profit on disposal of property, plant and equipment	6	-	(3)
Loss on disposal of other intangible assets	15	282	-
Profit on sale of investment		(138)	-
Tax expense	10	3,033	2,904
		22,996	19,050
Increase in trade and other receivables		(1,730)	(3,946)
(Decrease)/Increase in trade and other payables		(6,120)	37
Increase in provisions		83	25
Cash generated from operations		15,229	15,166
Tax paid		(2,767)	(3,075)
Net cash flows from operating activities		12,462	12,091
Investing activities
Acquisition of property, plant and equipment	13	(857)	(1,010)
Acquisition of other intangible assets	15	(329)	(276)
Cash received on disposal of  property, plant and equipment		-	3
Cash received on sale of investments		208	-
Acquisition of other investments		(214)	-
Contingent consideration paid - acquisition of subsidiary		(625)	(236)
Consideration paid on acquisitions, net of cash acquired		(2,657)	(2,526)
Net cash used in investing activities		(4,474)	(4,045)
Financing activities
Interest receivable	9	523	523
Interest and other financial income paid	9	(426)	(448)
Lease repayments		(801)	-
Receipt of new bank loan		-	2,970
Repayment of term bank loans	18	(2,573)	(2,278)
Repayment of loans from former members of GCL Solicitors & Directors of IIS	18	(402)	(904)
Funds from former members of Gateley Tweed	18	30	-
Funding by EBT of SARS shares		-	(1,863)
Proceeds from sale of own shares		642	767
Acquisition of own shares		-	(109)
Cash received for shares issued on exercise of SAYE/CSOP/SARS options		1,062	-
Dividends paid	12	(6,007)	(8,118)
Net cash used in f inancing activities		(7,952)	(9,460)
Net increase/(decrease) in cash and cash equivalents		36	(1,414)
Cash and cash equivalents at beginning of year		2,887	4,301
Cash and cash equivalents at end of year	22	2,923	2,887

Notes to the financial statements

1  Basis of preparation and significant accounting policies

The financial information set out in this financial results announcement does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The consolidated statement of comprehensive profit and loss and other comprehensive income, consolidated statement of financial position, consolidated statement of change in equity, consolidated statement of cashflows and the associated notes have been extracted from the Group's financial statements for the year ended 30 April 2020, upon which the auditor's opinion is unqualified and does not include any statement under section 498 of the Companies Act 2006. The statutory accounts for the year ended 30 April 2020 will be delivered to the Registrar of Companies following the Annual General Meeting.

These condensed preliminary financial statements for the year ended 30 April 2020 have been prepared on the basis of the accounting policies as set out in the 2019 financial statements, other than the adoption of IFRS 16 as set out in note 24. 

The recognition and measurement requirements of all International Financial Reporting Standards ('IFRSs'), International Accounting Standards ('IAS') and interpretations currently endorsed by the International Accounting Standards Board ('IASB') and its committees as adopted by the EU and as required to be adopted by AIM listed companies have been applied.

1.1  Statement of Directors responsibilities

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

1.2  Cautionary statement

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

2  Going concern

Having reviewed the Group's forecasts, which includes an analysis of both short-term cash flow forecasts and longer-term cash flow forecasts, the risk and uncertainties surrounding the current and future demand for legal services, and other reasonably possible variations in trading performance, mitigating actions available to management and the possible impact of Covid-19 the Group expects to be able to operate within the Group's financing facilities and in accordance with the covenants set out in those facility agreements.

Sensitivity analysis has been performed in respect of specific scenarios which could negatively impact our future performance such as lower levels of revenue growth, lower than forecast receipts of cash, and reduced levels of gross margin expansion. In addition, the Directors have also considered further mitigating actions such as lower capital expenditure and other short-term cash management activities within the Group's control. On this basis, the Directors have a reasonable basis to conclude that the Group is forecast to continue to trade in line with existing financing facilities for the foreseeable future.

Accordingly, the Directors continue to adopt the going concern basis of accounting in preparing the financial statements.

3  Revenue and operating segments

The Chief Operating Decision Maker ("CODM") is the Strategic Board. The Group have the following five strategic divisions, which are its reportable segments.  These divisions offer a mixture of legal and consultancy services to clients.  With effect from 1 May 2020 all service lines are managed through two separately reporting lines renamed Gateley Legal and Gateley Consultancy.

The following summary describes the operations of each reportable segment as reported up to 30 April 2020 and also the new service lines:

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

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

	2020	2019
	£'000	£'000
United Kingdom	104,911	95,319
Europe	2,748	3,351
Middle East	454	547
North and South America	533	3,457
Asia	289	206
Other	903	591
	109,838	103,471

The Group has no individual customers that represent more than 10% of revenue in either the 2020 or 2019 financial year. The Group's assets and costs are predominately located in the UK save for those assets and costs located in the United Arab Emirates (UAE) via its Dubai subsidiary.  Net liabilities of £0.04m (2019: Net assets of £0.2m) are located in the Group's Dubai subsidiary.  Revenue generated by the Group's Dubai subsidiary to customers in the UAE totalled £0.5m (2019: £0.7m) as disclosed above as due from the customers in the Middle East.

2020

	Banking and Financial  Services	Corporate	Business Services	Employee Pensions and Benefits	Property	Total segments	Other expense and movement in unbilled revenue	Total
	£'000	£'000	£'000	£'000	£'000	£'000	'000	£'000
Segment revenue from services transferred at a point in time	6,495	6,956	3,628	1,611	15,699	34,389	579	34,968
Segment revenue from services transferred over time	10,206	12,845	8,927	12,020	29,372	73,370	1,500	74,870
Total Segment revenue	16,701	19,801	12,555	13,631	45,071	107,759	2,079	109,838
Segment contribution (as reported internally)	6,538	7,616	4,992	4,876	21,317	45,339	2,079	47,418
Costs not allocated to segments:
Other operating income								665
Investment income								138
Personnel costs								(7,523)
Depreciation and amortisation								(5,913)
Other operating expenses								(17,361)
Share based payment charges								(821)
Exceptional costs								(1,104)
Net financial expense								(743)
Profit for the financial year before taxation								14,756

2019

	Banking and Financial  Services	Corporate	Business Services	Employee Pensions and Benefits	Property	Total segments	Other expenses  and movement  in unbilled revenue	Total
	£'000	£'000	£'000	£'000	£'000	£'000	'000	£'000
Segment revenue from services transferred at a point in time	7,704	5,638	4,461	498	12,946	31,247	1,079	32,326
Segment revenue from services transferred over time	9,275	11,274	8,975	10,594	30,479	70,597	548	71,145
Total segmental revenue	16,979	16,912	13,436	11,092	43,425	101,844	1,627	103,471
Segment contribution (as reported internally)	6,447	4,994	5,987	3,994	19,810	41,232	1,627	42,859
Costs not allocated to segments :
Other operating income								313
Personnel costs								(7,006)
Depreciation and amortisation								(2,528)
Other operating expenses								(17,052)
Share based payment charge								(655)
Exceptional costs								(61)
Net financial expense								75
Profit for the financial year before taxation								15,945

Group entities may be engaged on a contingent basis; in such cases the Group consider the satisfaction of the contingent event as the sole performance obligation within the contract. Fees are only billed once the contingent event has been satisfied. The initial financing of these engagements types is met by the Group. Due to the nature and timing of the billing, such engagements influence the contract asset balance held in the balance sheet at year end. In the majority of cases the contingent event is expected to be concluded within one year of the engagement date. The Group operates standard payment terms of 30 days. £12.7 million of the current period revenue is derived from services satisfied, in part, in the previous period.

Services transferred over time

For non-contingent engagements, fee earners hourly rates are determined at the point of engagement with all hours attributed to the engagement fully and accurately recorded. The recorded hours are then translated into fees to be billed and invoiced on a monthly basis. The Group typically operates on 30 days credit terms, in line with IFRS 15 the performance obligations are fulfilled over time with revenue being recognised in line with the hours worked.

Contract assets

Under IFRS 15 the Group recognises any goods or services transferred to the customer before the customer pays consideration, or before payment is due, as a contract asset. These assets differ from accounts receivables. Accounts receivable are the amounts that have been billed to the client and the revenue recognised, whereas these contract assets are amounts of work in progress where work has been performed, yet the amounts have not yet been billed to the client. Due to the nature of the services delivered by the Group the significant component of the cost of delivery is staff costs. As a result, there is little to no judgement exercised in determining the costs incurred as they are driven by the time recorded by fee earners.  Contract assets are subject to impairment under IFRS 9.

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

Contract Liabilities

Under IFRS 15 the Group is required to recognise contract liabilities based on those amounts recognised against contracts for which the satisfaction of performance obligations has not yet been met. These liabilities relate to the deferred income recognised within Kiddy & Partners and t-three Consulting Limited as a result of their billing structure. The amounts recognised reflect the agreed cost of the services to be performed and are realised in line with the ongoing cost of delivery. Due to the nature of the services provided, the main component of this cost of delivery is staff costs, as a result there is little to no judgement exercised in determining the value of the liability held at year end.

Practical expedients under IFRS 15

Under IFRS 15 companies are required to disclose the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied at the end of the reporting period. However, only a small proportion of revenue contracts in issuance are for fixed amounts, rather the company has a right to consideration from the customer in an amount that corresponds directly with the value to the customer of the business' performance completed to date. Therefore, the Group considers it impractical to estimate the potential value of unsatisfied performance obligations and has elected to apply the practical expedient available under IFRS 15.

4  Other operating income

	2020	2019
	£'000	£'000
Rental and service charge income	216	313
COVID 19 Job retention scheme income	416	-
Exchange gain	17	-
Cash incentives - Bank account switching income	16	-
	665	313

5  Investment income

	2020	2019
	£'000	£'000
Income from sale of investment - Business Collaborator Limited	138	-

6  Expenses and auditor's remuneration

Included in operating profit are the following:

	2020	2019
	£'000	£'000
Depreciation on tangible assets	1,083	1,122
Depreciation on right-of-use asset	3,455	-
Short term and low value lease payments	84	116
Operating lease costs on property	-	3,313
Other operating income - rent received	(216)	(258)
Foreign exchange losses	(29)	25
Profit on sale of fixed assets	-	(3)
	2020	2019
	£'000	£'000
Non-underlying items
Amortisation of intangible assets	1,375	1,406
Share based payment charges - Gateley Plc	821	655
Share based payment charges - Kiddy & Partners	534	-
	2,730	2,061
Exceptional items
Acquisition costs	107	61
Impairment of software development costs	463	-
	570	61
Total non-underlying and exceptional items	3,300	2,122

Acquisition costs represent professional fees in respect of the acquisition of t-three Consulting Limited and The Vinden Partnership Limited (2019: GCL Solicitors LLP). Share based payment charges in Gateley Plc represent charges in accordance with IFRS 2 in respect of unexercised SAYE, CSOP, SARS and LTIP schemes.

Share based payment charges in Kiddy & Partners represent bonuses awarded to staff based on profit related performance conditions settled 50% in cash and 50% in shares are the prevailing market value at the time of issue

Impairment of software development costs relates to internally generated costs capitalised in previous years, released due to the cessation of the related IT project to install a new practice management system.

7  Personnel costs

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

	Number of employees
	2020	2019
Legal and professional staff	706	610
Administrative staff	341	297
	1,047	907

The aggregate payroll costs of these persons were as follows:

	2020	2019
	£'000	£'000
Wages and salaries	55,696	54,341
Social security costs	6,280	7,289
Pension costs	1,555	1,127
	63,531	62,757
Non-underlying items
Share based payment expense - Gateley Plc	821	655
Share based payment expense - Kiddy and Partners	534	-
	64,886	63,412

8  Share based payments

Group

At the year end the Group has four share based payment scheme in existence.

Save As You Earn scheme ('SAYE')

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

During the year 844,695 SAYE 16/17 options vested out of a potential 853,598 new shares issued via a block listing in order to fully satisfy all possible options. 853,598 new 10p shares with a nominal value of £85,360 where issued on 1 October 2019.  The accrued IFRS2 charge of £243,984 has been released against other reserves.

Company Share Option Plan ('CSOP')

The Group operates an HMRC approved CSOP scheme for associates, senior associates, legal directors, equivalent positions in Gateley Group subsidiary companies and senior management positions in our support teams.  Options under this scheme will vest if the participant remains employed for the agreed vesting period of three years.  Upon vesting, each option allows the holder to purchase the allocated ordinary shares at the price on the date of grant.

During the year 711,163 CSOP 16/17 options became exercisable.  588,504 options were exercised by 30/4/2020 leaving 122,659 options still to exercised. New shares were created in order to fully satisfy all exercisable options. 711,163 new 10p shares with a nominal value of £71,116 where issued on 6 February 2020.  The accrued IFRS2 charge of £122,095 has been released against other reserves.

Long Term Incentive Plan ('LTIP')

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

Performance conditions

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

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

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

Grant of equity share options under the LTIP

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

Stock Appreciation Rights Scheme ('SARS')

The SARS is a discretionary executive reward plan which allows the Group to grant conditional share awards or nil cost options to selected executives at the discretion of the Remuneration Committee.

The awards vest after a three-year performance period. On exercise, participants will receive an award of shares equal to the growth in value of the option between the date of grant and the date of exercise in excess of the hurdle rate calculated by reference to the number of reference options granted to each option holder.  The hurdle rate is currently set at 115.765% of the market value of the underlying shares on the date of the grant.

No awards were granted under the SAR Scheme during the year ended 30 April 2020 or 30 April 2019.

During the year 10,225,000 SARS 16/17 options (2019: 6,650,000 SARS 15/16 options) vested resulting in the issue of 1,623,648 (2019: 2,425,024) new 10p shares with a nominal value of £162,365 (2019: £242,502) issued on 8 October 2019 (2019: 17 July 2018).  The accrued IFRS2 charge of £847,770 (2019: 325,000) has been released against other reserves.

The resultant number of shares granted from the exercise of SARS are detailed below:

	Reference shares in issue at exercise date Number	Price at grant date including hurdle £	Price at exercise date £	Growth £	Growth value £'000	Number of shares at exercise price Number
Year ended 30 April 2019
SARS 15/16	6,650,000	1.100	1.731	0.631	4,198	2,425,024
Year ended 30 April 2020
SARS 16/17	10,225,000	1.390	1.630	0.240	2,454	1,512,883

The below table shows the estimated number of shares to be issued under the remaining SARS scheme in issue based on the Company's share price at the balance sheet date of £1.565:

	Reference shares in issue at 30 April 2020 Number	Share price at 30 April 2020 £	Price at 30 April 2020 £	Estimated growth £	Estimated growth value £'000	Number of shares at exercise price Number
SARS 17/18	6,750,000	£1.83	£1.57	(£0.26)	-	-

The annual awards granted under all schemes are summarised below:

	Weighted average remaining contractual life	Weighted average exercise price	Originally granted	Lapsed at 30 April 2019	At 1 May 2020	Granted during the year	Lapsed during year	At 30 April 2020
			Number	Number	Number	Number		Number
SARS
SARS 17/18 - 3 October 2017	0.4 years	£1.83	7,050,000	(300,000)	6,750,000	-	-	6,750,000
SAYE
SAYE 17/18- 15 September 2017	0.4 years	£1.33	556,296	(60,632)	495,664	-	(80,246)	415,418
SAYE 18/19 - 21 September 2018	1.4 years	£1.27	620,335	(19,874)	600,461	-	(53,537)	546,924
SAYE 19/20 - 30 September 2019	2.4 years	£1.28	-	-	-	819,626	(48,839)	770,787
			1,176,631	(80,506)	1,096,125	819,626	(182,622)	1,733,129
CSOPS
CSOPS 17/18 - 3 October 2017	0.4 years	£1.65	581,162	(92,114)	489,048	-	(33,330)	455,718
CSOPS 18/19 - 24 October 2018	1.5 years	£1.44	812,131	(22,916)	789,215	-	(45,832)	743,383
			1,393,293	(115,030)	1,278,263	-	(79,162)	1,199,101

Fair value calculations

The award is accounted for as equity-settled under IFRS 2.  The fair value of awards which are subject to non-market-based performance conditions is calculated using the Black Scholes option pricing model.  This model has been used as an approximation of the binomial model for valuing the SARS granted, the Directors consider the difference to be immaterial. The inputs to this model for awards granted during the financial year are detailed below:

		CSOP	CSOP	SAYE	SAYE	SAYE	SARS
Grant date		24/10/18	15/9/17	30/9/19	21/12/18	3/10/17	3/10/17
Share price at date of grant		£1.44p	£1.65p	£1.64	£1.585p	£1.66p	£1.58p
Exercise price		£1.44p	£1.65p	£1.27p	£1.27p	£1.33p	£1.83p
Volatility		24%	24%	35%	24%	24%	24%
Expected life (years)		3.3	3.3	3.3	3.3	3.3	3.3
Risk free rate		1%	1%	1%	1%	1%	1%
Dividend yield		4.5%	4%	4%	4.5%	4%	4%
Fair value per share
Market based performance condition		£0.16p	£0.19p	£0.37p	£0.27p	£0.33p	£0.12p
Non-market-based performance condition/no performance condition		-	-		-	-	-

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

The total charge to the income statement for all schemes now in place, included within non-underlying items, is £821,000 (2019: £655,000).

During the year an expense disclosable under IFRS 2 in relation to a cash and share settled bonus award was made to certain employees based on performance of Kiddy and Partners Limited for the year ended 30 April 2019 totalling £534,000.  76,636 shares were issued in satisfaction of 50% of the gross value of the awarded bonus.

9  Financial income and expense

Recognised in profit and loss

	2020	2019
	£'000	£'000
Financial income
Interest income	523	523
Total finance income	523	523
Financial expense
Interest expense on bank borrowings measured at amortised cost	(426)	(448)
Interest on lease liability	(840)	-
Total financial expense	(1,266)	(448)
Net financial (expense)/income	(743)	75

10  Taxation

	2020	2019
	£'000	£'000
Current tax expense
Current tax on profits for the year	3,121	3,297
Under provision of taxation in previous period	295	121
Total current tax	3,416	3,418
Deferred tax expense
Origination and reversal of temporary differences	(234)	(268)
Under provision on share-based payment charges	(149)	(246)
Total deferred tax expense	(383)	(514)
Total tax expense	3,033	2,904

The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to profits for the year are as follows:

	2020	2019
	£'000	£'000
Profit for the year (subject to corporation tax)	14,756	15,945
Tax using the Company's domestic tax rate of 19%	2,804	3,030
Expenses not deductible for tax purposes	83	(1)
Under provision of taxation in previous period	295	121
Under provision on share-based payment charges	(149)	(246)
Total tax expense	3,033	2,904

On 26 October 2015 the UK corporation tax rate was reduced to 19% (effective from 1 April 2017). As a result of the March 2020 Budget the UK corporation tax rate remains at 19% for the years beginning 1 April 2020 and 1 April 2021.  The deferred tax liability at 30 April 2020 has been calculated based on these rates. 

11  Earnings per share

Statutory earnings per share
	2020	2019
	Number	Number
Weighted average number of ordinary shares in issue, being weighted average number of shares for calculating basic earnings per share	113,404,283	110,207,707
Shares deemed to be issued for no consideration in respect of share based payments	2,195,444	2,072,862
Weighted average number of ordinary shares for calculating diluted earnings per share	115,599,727	112,280,569
	2020	2019
	£'000	£'000
Profit for the year and basic earnings attributable to ordinary equity shareholders	11,723	13,041
Non-underlying and exceptional items
Operating expenses	3,300	2,122
Tax on non-underlying and exceptional items	(627)	(403)
Underlying earnings before non-underlying and exceptional items	14,396	14,760
Earnings per share is calculated as follows:
	2020	2019
	Pence	Pence
Basic earnings per ordinary share	10.34	11.83
Diluted earnings per ordinary share	10.14	11.61
Basic earnings per ordinary share before non-underlying and exceptional items	12.69	13.39
Diluted earnings per ordinary share before non-underlying and exceptional items	12.45	13.15

12  Dividends

	2020	2019
	£'000	£'000
Equity shares:
Final dividend in respect of 2018 (4.8p per share) - 3 October 2018	-	5,264
Interim dividend in respect of 2019 (2.6p per share) - 15 March 2019	-	2,854
Final dividend in respect of 2019 (5.4p per share) - 15 October 2019	6,007	-
	6,007	8,118

The Board has not proposed a final dividend be paid in respect of the year ended 30 April 2020 (2019: 5.4p).

13  Property, plant and equipment

	Leasehold improvements	Equipment	Fixtures and Fittings	Right-of-use assets	Total
	£'000	£'000	£'000	£'000	£'000
Cost
Balance at 1 May 2018	226	4,432	4,297	-	8,955
Additions	5	643	362	-	1,010
Arising on acquisition after fair value adjustments	-	208	325	-	533
Disposal	-	(8)	-	-	(8)
As at 30 April 2019	231	5,275	4,984	-	10,490
IFRS 16 Right-of-use asset	-	-	-	24,360	24,360
Balance at 1 May 2019	231	5,275	4,984	24,360	34,850
Additions	-	745	112	4,831	5,688
Arising on acquisition after fair value adjustments	231	187	130	-	548
Disposal	-	-	-	(3,045)	(3,045)
As at 30 April 2020	462	6,207	5,226	26,146	38,041
Depreciation and impairment
Balance at 1 May 2018	82	3,438	3,500	-	7,020
Depreciation charge for the year	22	728	372	-	1,122
Arising on acquisition after fair value adjustments	-	273	166	-	339
Eliminated on disposal	-	(8)	-	-	(8)
Balance at 30 April 2019	104	4,331	4,038	-	8,473
Balance at 1 May 2019	104	4,331	4,038	-	8,473
Depreciation charge for the year	10	687	386	3,455	4,538
Arising on acquisition after fair value adjustments	213	139	114	-	466
Eliminated on disposal	-	-	-	(188)	(188)
Balance at 30 April 2020	327	5,157	4,538	3,267	13,289
Net book value
At 30 April 2019	127	944	946	-	2,017
At 30 April 2020	135	1,050	688	22,879	24,752

14  Intangible assets and goodwill

	Goodwill	Customer Lists and brands	Total
	£'000	£'000	£'000
Deemed cost
At 1 May 2018 and 30 April 2019	8,405	4,424	12,829
Ar ising through business combinations	4,543	5,426	9,969
Adjustment - Kiddy and Partners	(619)	-	(619)
At 30 April 2020	12,329	9,850	22,179
Amortisation
At 1 May 2018	-	1,019	1,019
Charge for the year	-	1,380	1,380
At 30 April 2019	-	2,399	2,399
Charge for the year	-	1,342	1,342
At 30 April 2020	-	3,741	3,741
Carrying amounts
At 30 April 2019	8,405	2,025	10,430
At 30 April 2020	12,329	6,109	18,438

Goodwill is allocated to the following cash generating units:

	2020	2019
	£'000	£'000
Property Group
Gateley Capitus Limited	1,515	1,515
Gateley Hamer Limited	1,161	1,161
GCL Solicitors (acquisition of trade and assets)	2,900	2,900
Persona Associates Limited	40	-
Gateley Vinden Limited	1,972	-
	7,588	5,576
Employment, Pensions and Benefits Group
Kiddy & Partners Limited	1,872	2,491
International Investment Services Limited	338	338
t-three Consulting Limited	955	-
	3,165	2,829
Business services Group
Gateley Tweed (acquisition of goodwill)	1,576	-
	12,329	8,405

Impairment testing

The Group tests goodwill annually for impairment. The impairment test involves determining the recoverable amount of the cash generating unit (CGU) to which the goodwill has been allocated.  The Directors believe that each operating segment represents a cash generating unit for the business and as a result, impairment is tested for each segment, and all the assets of each segment are considered.

The recoverable amount is based on the present value of expected future cash flows (value in use) which was determined to be higher than the carrying amount of goodwill so no impairment loss was recognised. Management have considered the likely impact of the COVID 19 pandemic on future cashflows in their assessment of impairment. 

Value in use was determined by discounting the future cash flows generated from the continuing operation of the Group and was based on the following key assumptions:

· A pre-tax discount rate of between 12 and 21% (2019: 10%) was applied in determining the recoverable amount. The discount rate is based on the Group's average weighted cost of capital of 10.18% and adjusted according to the risks attributable to each CGU.

· The values assigned to the key assumptions represent management's estimate of expected future trends and are based on both external (industry experience, historic market performance and current estimates of risks associated with trading conditions) and internal sources (existing management knowledge, track record and an in-depth understanding of the work types being performed). 

o  Growth rates of between 5-18% (2019: 10-20%) are based on management's understanding of the market opportunities for services provided pertaining to the industry in which each CGU is aligned. 

o  Increases in costs are based on current inflation rates and expected levels of recruitment needed to generate predicted revenue growth.

o  Attrition rates are based on the historic experience and trends of client activity over a two to three year period and applied to future fee forecasts.

o  Cash flows have been typically assessed over a five-year period which management extrapolates cash using a terminal value calculation based on an estimated growth rate of nil%.  The expected current UK economic growth forecasts for the legal services market is 2%.

· The Group has conducted a sensitivity analysis on the impairment test of the CGU carrying value.  The Directors believe that any reasonably possible change in the key assumptions on which the recoverable amount of goodwill is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the CGU.

Sensitivities

The Group attributes a monetary value to the acquired goodwill based primarily on the anticipated future cash flows generated by the customers. Whilst the Group accounts for customer attrition and direct costs the main driver of this value is the estimated revenue resulting from the customers on the list. Management have estimated a year on year growth rate which has been applied to the model. The below table shows the Group's sensitivity to growth rates on the customer list valuation:

	Increase/(decrease) in value of goodwill
	£'000
+1 % increase in growth rates	657
-1 % decrease in growth rates	(643)

15  Other intangible assets

	IT development  costs £'000	Computer software £'000	Total £'000
Cost
Balance at 1 May 2018	-	46	46
Additions	237	39	276
At 30 April 2019	237	85	322
Additions	303	26	329
Disposals and write-offs	(282)	-	(282)
At 30 April 2020	258	111	369
Amortisation
Balance at 1 May 2018	-	7	7
Charge for the year	-	26	26
At 30 April 2019	-	33	33
Charge for the year	-	33	33
At 30 April 2020	-	66	66
Net book amount at 30 April 2019	237	39	289
Net book amount at 30 April 2020	258	45	303

IT development costs incurred in the installation of the Group's replacement practice management system have been written off during the year as a result of the cessation of this project prior to full installation.

16  Contract assets and liabilities

	Contract assets	Trade receivables	Contract liabilities
	£'000	£'000	£'000
As at 30 April 2020	11,684	36,848	(70)
As at 30 April 2019	10,671	33,909	(147)

Contract assets

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

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

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

During the year, contract assets of £212,000 (2019: £152,000) were acquired in business combinations.

An impairment loss of £69,000 has been recognised in relation to contract assets in the year (2019: £295,000). This is based on the expected credit loss under IFRS 9 of these types of assets. The contract asset loss is estimated at 0.6% (2019: 2.7%) of the balance.

Contract assets recognised under IFRS 15

Under IFRS 15 the Group is required to recognise contract assets, as detailed in note 1.16.

	2020	2019
	£'000	£'000
Contract asset value at 1 May 2019	10,671	10,672
Contract assets arising on acquisition	212	152
Contract asset value added in the year	13,528	32,185
Contract asset value realised in the year	(12,727)	(32,338)
Contract asset value at 30 April 2020	11,684	10,671

The Group have applied ECLs to unbilled revenue in order to account for the potential default on amounts not yet billed to the client. The ECLs have been calculated on the same basis as those applied to trade receivables.

Contract liabilities

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

Contract liabilities recognised under IFRS 15

Under IFRS 15 the Group is required to recognise contract liabilities.

	2020	2019
	£'000	£'000
Contract liabilities at 1 May 2019	147	-
Contract liabilities arising on acquisition	-	294
Contract liabilities gained in the year	447	2,757
Contract liabilities credited to P&L in year	(524)	(2,904)
Contract liabilities at 30 April 2020	70	147

17  Trade and other receivables

	2020	2019
	£'000	£'000
Trade receivables	36,874	33,909
Prepayments	2,941	2,584
Other receivables including insurance receivables	182	42
	39,997	36,535

Trade receivables

Trade receivables are recognised when a bill has been issued to the client, as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due. Trade receivables also includes disbursements.

Bills are payable within thirty days unless otherwise agreed with the client.

All trade receivables are repayable within one year.

Movement in the allowance for doubtful receivables

	2020	2019
	£'000	£'000
Brought forward provision	(2,785)	(2,212)
Brought forward on acquisition	(94)	(14)
Provision utilised	474	450
Charged to statement of profit and loss	(961)	(1,205)
Provisions released	399	196
	(2,967)	(2,785)

The Group applies the simplified approach to providing for the expected credit losses under IFRS 9.

	Not passed due	Past due 0-30 days	Past due 31-120 days	Past due greater than 120 days	Total
Expected credit loss rate	0.04%	0.98%	3.76%	33.44%
Estimated total gross carrying amount £'000	20,557	3,567	5,637	8,114	37,875
Lifetime ECL £'000	8	33	212	2,714	2,967

The carrying amount of financial assets (including contract assets but not including equity investments) recorded in the financial statements, which is net of any impairment losses, represents the Group's maximum expected exposure to credit risk.  Financial assets include client and other receivables and cash.  The Group does not hold collateral over these balances.

All the Group's trade and other receivables have been reviewed for indicators of impairment.  The specifically impaired trade receivables are mostly due to customers experiencing financial difficulties.

An impairment loss of £562,000 has been recognised in relation to trade receivables in the year (2019: £1,009,000). This is based on the expected credit loss under IFRS 9 of these types of assets. The trade receivables loss is estimated at 1.2% (2019: 1.9%) of the balance.

18  Other interest-bearing loans and borrowings

The contractual terms of the Group's interest-bearing loans and borrowings, which are measured at amortised cost, with the exception of loans to members that are held at fair value, are described below. For more information about the Group's exposure to interest rate and foreign currency risk.

	2020		2019
	Fair value	Carrying amount	Fair value	Carrying amount
	£'000	£'000	£'000	£'000
Non-Current liabilities
Unsecured bank loan	2,369	2,369	3,076	3,076
Current liabilities
Unsecured bank loan	708	708	2,574	2,574
Loans from former members of GCL Solicitors LLP	68	68	425	425
Loans from director of IIS	-	-	45	45
Loans due to former partners of Gateley Tweed LLP (formerly Paul Tweed LLP)	661	661	-	-
	1,437	1,437	3,044	3,044

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

As at 30 April 2020, the Group's non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarised below:

30 April 2020	Current		Non-current
	Within 6 months	6 to 12 months	1 - 5 years	Later than 5 years
	£'000	£'000	£'000	£'000
Unsecured bank loans	234	474	2,369	-
Loans from former owners of acquired businesses	699	-	-	-
Trade and other payables	5,583	-	-	133
Total	6,516	474	2,369	133

This compares to the maturity of the Group's non-derivative financial liabilities in the previous reporting period as follows:

30 April 2019	Current		Non-current
	Within 6 months	6 to 12 months	1 - 5 years	Later than 5 years
	£'000	£'000	£'000	£'000
Unsecured bank loans	1,287	1,287	3,076	-
Loans from former owners of acquired businesses	235	167	68	-
Trade and other payables	4,936	-	-	128
Total	6,458	1,454	3,144	128

The above amounts reflect the contractual undiscounted cash flows, which may differ to the carrying values of the liabilities at the reporting date.

19  Trade and other payables

	2020	2019
	£'000	£'000
Current
Trade payables	5,490	4,769
Other taxation and social security payable	12,352	6,437
Other payables	93	167
Contingent consideration	360	1,428
Accruals	1,804	10,779
Deferred income	70	147
	20,169	23,727

Non-current	£'000	£'000
Other payables	133	128
Contingent consideration	789	855
	922	983

£359,500 of current contingent consideration represents the earn-out sums payable to the sellers of Kiddy & Partners Limited (£279,000), Gateley Vinden Limited (£18,000) and Persona Associates Limited (£62,500).

£789,000 of non-current contingent consideration represents the earn-out sums payable to the sellers of International Investment Services (£135,000) and t-three Consultancy Limited (£654,000).

All contingent consideration is Level Three in the fair value hierarchy as there are no observable inputs. Amounts have been calculated based on the Group's expectation of what it will pay in relation to the earn-out clause of the relevant sale and purchase agreement discounted to present value. The earn-out targets are based on the annual results, or in the case of Persona a relocation of staff, of the acquired business. The fair value of the earn-out consideration is calculated based on the forecasted results, using EBIT growth rate ranges from 2-10%, to give an estimate of the final obligation capped at the maximum earn-out amount stated in the purchase agreement.  Where contingent consideration is due over a period of more than one year the value of the consideration is discounted and recorded at the present value.  Discount rate applied in determining the present value of contingent consideration 17.3%

20  Deferred tax

Deferred tax assets and liabilities are summarised below:

Deferred tax asset

The deferred tax asset recognised in the consolidated statement of financial position represents the future tax impact of issued share-based payments schemes that are yet to vest.

	Share-based payments
	£'000
At 1 May 2019	428
Debited during the year to retained earnings	(558)
Credited during the year in the Consolidated income statement	149
At 30 April 2020	19

Deferred tax liability

The deferred tax liability recognised in the consolidated statement of financial position represents the future tax impact of the Group's benefit from customer lists obtained through acquisitions .

	Customer lists
	£'000
At 1 May 2018	128
Arising through business combinations - Kiddy & Partners and GCL Solicitors	529
Credited during the year in the Consolidated income statement	(269)
At 30 April 2019	388
Arising through business combinations - t-three Consultancy Limited and Gateley Vinden Limited (formerly The Vinden Partnership Limited)	1,031
Credited during the year in the Consolidated income statement	(211)
At 30 April 2020	1,208

21  Provisions

Professional indemnity estimated claim cost
	2020	2019
	£'000	£'000
Brought forward	630	605
Provisions made during the year	542	100
Provisions reversed during the year	(459)	(75)
At end of year	713	630
Non-current	461	339
Current	252	291
	713	630

The Group from time to time receives claims in respect of alleged professional negligence which it defends where appropriate but makes provision for the best estimate of probable amounts considered likely to be payable as set out above.  Inevitably, these estimates depend on the outcome and timing of future events and may need to be revised as circumstances change.  A different assessment of the likely outcome in each case or of the probable cost involved may result in a different level of provision recognised.  Professional indemnity Insurance cover is maintained in respect of professional negligence claims. The professional indemnity estimated claim cost provision in 2019 represented amounts equal to the insurance excesses payable on outstanding claims against the Group.  In 2020 the Group has grossed up its provision to represent the probable cost of claims made against the Group under its professional indemnity insurance cover, in line with IAS 37.  A reimbursement asset (being the insurance receivable) is also recognised in note 17 above in respect of the anticipated amount recoverable from Group insurers minus the excess deductible under the terms of the Group insurance policy. The impact of this change to gross up provisions and assets was not material as at 30 April 2019 and hence a restatement was not deemed to be necessary.

22  Net debt

	2020	2019
	£'000	£'000
Cash and cash equivalents	2,923	2,887
Debt
Total loans brought forward	(6,120)	(4,959)
Loans from former members	(661)	(469)
Extension to term loans in the year	0	(2,970)
Lease liability	(25,456)	-
Repayment of loans from former members	402	171
Repayment of term loans	2,506	2,107
Total loan carried forward	(29,329)	(6,120)
Brought forward from previous year	(3,233)	(658)
Movement during year	(23,173)	(2,575)
Net debt at the year end	(26,406)	(3,233)

The changes in the Group's liabilities arising from financing activities can be classified as follows:

	Long term borrowings	Short term borrowings	Lease liabilities	Total
	£'000	£'000	£'000	£'000
1 May 2019	5,650	470	326	6,446
Adoption of IFRS 16	-	-	27,210	27,210
Revised 1 May 2019	5,650	470	27,536	33,656
Cashflows:
Repayments	(2,573)	(402)	(3,615)	(6,591)
Non-cash
Fair value on acquisition	-	661		662
Termination of lease	-	-	(3,046)	(3,046)
New lease liability in the year	-	-	4,581	4,581
30 April 2020	3,077	729	25,456	29,262

	Long term borrowings	Short term borrowings	Lease liabilities	Total
	£'000	£'000	£'000	£'000
1 May 2018	4,959	-	456	5,415
Cashflows:
Repayments	(2,279)	(904)	(130)	(3,313)
Proceeds	2,970	-	-	2,970
Non-cash
Fair value on acquisition		1,374	-	1,374
30 April 2019	5,650	470	326	6,446

23  Share capital

Authorised, issued and fully paid

	2020	2020	2019	2019
	Number	£	Number	£
Ordinary shares of 10p each
Brought forward	110,860,789	11,086,079	106,881,953	10,688,195
Issued on acquisition of GCL solicitors LLP	-	-	1,164,276	116,428
Issued on acquisition of Kiddy & Partners Limited	-	-	251,207	25,121
Issued as part of contingent consideration of Gateley Hamer Limited	-	-	138,329	13,833
Issued on acquisition of Persona Associates Limited	94,312	9,431	-	-
Issues on acquisition of t-three Consulting Limited	944,855	94,486	-	-
Issued as part of contingent consideration of Kiddy & Partners Limited	389,608	38,961	-	-
Issued on acquisition of Gateley Tweed LLP (Formerly Paul Tweed LLP)	529,520	52,952	-	-
Issued on acquisition of Gateley Vinden Limited (Formerly The Vinden Partnership Limited)	1,602,564	160,256	-	-
Issued on vesting of SARS	1,631,588	163,159	2,425,024	242,502
Issued on vesting of SAYE	844,695	84,470	-	-
Issued on vesting of CSOPS	711,163	71,116	-	-
At 30 April 2020	117,609,094	11,760,909	110,860,789	11,086,079

On 29 July 2019 the Group acquired the entire issued share capital of Persona Associates Limited in part for the issue of 94,312 10p ordinary shares.

On 1 October 2019 844,695 10p ordinary shares were issued upon vesting of the 2019 SAYE schemes to participants.

On 8 October 2019 1,631,588 10p ordinary shares were issued upon vesting of the 2019 SARS scheme to participants.

On 13 December 2019 the Group acquired t-three Consulting and dormant Group companies in part for the issue of 944,855 10p ordinary shares.

On 6 February 2020 711,163 10p ordinary shares were issued upon vesting of the 2016 CSOP scheme.

On 28 February 2020 the Group acquired the goodwill of Gateley Tweed (Formerly Paul Tweed LLP) in part for the issue of 529,520 10p ordinary shares.

On 6 March 2020 the Group acquired the entire issued share capital of Gateley Vinden Limited (formerly The Vinden Partnership Limited) and dormant group companies in part for the issue of 1,602,564 10 ordinary shares.

24  Leases liabilities - IFRS 16

The weighted average incremental borrowing rate applied to lease liabilities recognised at 1 May 2019 is 3.56%. Incremental borrowing rates applied to individual leases ranged between 2.87% and 3.72%.

During transition prepayments of £103,000 and accruals of £2,228,000 were released against the right-of-use asset. £725,000 was adjusted against opening reserves as a result of applying the modified retrospective approach under IFRS 16. The table below sets out the impact on the Consolidated Statement of Financial Position as at 30 April 2020 and 1 May 2019:

	30 April 2020	30 April 2019
	£'000	£'000
Right-of-use asset
Property	22,879	24,360
Lease Liability
Greater than 1year	22,109	23,481
Less than 1 year	3,347	3,729
	25,456	27,210

The table below shows the impact on the Consolidated Statement of Comprehensive Income for 12 months to 30 April 2020 compared to reporting under IAS 17:

	12 months ended 30 April 2020
	£'000
Profit before tax under IFRS 16	14,756
Depreciation on right-of-use assets	3,455
Finance costs	840
	19,051
Rental cost under IAS 17	(4,070)
	14,981

Whilst the cash flows of the Group have not been affected by the adoption of IFRS 16 the headings under which cash impacts relating to leases have altered. During the period ended 30 April 2020 cash outflows from financing activities presented in the Consolidated Statement of Cash Flows increased by £3,625,000 for cash payments of the principal portion and £840,000 for cash payments of the interest portion of leases recognised within lease liabilities under IFRS 16. Cash generated from operations reflects the corresponding reduction of £4,465,000 of payments for leases previously classified as operating leases under IAS 17.

Differences between the operating lease commitments disclosed at 30 April 2019 under IAS 17 discounted at the incremental borrowing rate at 1 May 2019 and lease liabilities recognised at 1 May 2019 are shown below:

	£'000
Operating lease commitments at 30 April 2019	26,089
Impact of discounting	(1,943)
Leases not yet commenced	-
Short-term leases recognised as an expense	-
Long-term leases recognised as an expense	(326)
Impact of rent increases	-
Additional lease components recognised	3,390
Lease liability opening balance 1 May 2019	27,210

The table below shows lease liabilities maturity analysis - contractual undiscounted cash flows at 30 April 2020.

	£'000
Less than one year	3,812
One to five years	15,530
More than five years	9,433
	28,775

The table below shows amounts recognised in the Statement of Comprehensive Income for short term and low value leases as at 30 April 2020:

	Property	Equipment	Total
	£'000	£'000	£'000
Expenses relating to short-term leases	14	63	77
Expenses relating to leases of low-value assets, excluding short-term leases of low value assets	7	-	7
	21	63	84

The total minimum lease payments at 30 April 2019 under non-cancellable operating lease rentals were:

	30 April 2019 £'000
Within one year	3,409
In the second to fifth year inclusive	10,799
After five years	11,881
	26,089

Operating lease payments represent rentals payable by the Group for office properties, motor vehicles and office equipment.

On 30 June 20 Gateley signed a reversionary lease on the London property. The cash flow effects of this are a £200k capital contribution and a rent saving in the first year of £250,000.

 

END

 

 

FR LPMBTMTMTTIM