Audited Preliminary Results 2022

RNS Number : 1880Z

Gateley (Holdings) PLC

13 September 2022

 

13 September 2022

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. It forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Gateley (Holdings) Plc

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

AUDITED PRELIMINARY RESULTS 2022

Strong results, further growth and demonstrable resilience

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

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

Financial highlights

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

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

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

Strategic Highlights

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

Current Trading and Outlook

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

Rod Waldie, CEO of Gateley, said:

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

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

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

Enquiries:

Gateley (Holdings) Plc
Neil Smith, Finance Director	Tel: [phone]
Nick Smith, Acquisitions Director and Head of Investor Relations	Tel: [phone]
Cara Zachariou, Head of Corporate Communications	Tel: [phone] Mob: [phone]
Liberum - Nominated Adviser and Broker Richard Lindley/Ben Cryer/Cara Murphy	Tel: [phone]
Belvedere Communications Limited - Financial PR
Cat Valentine ([e-mail])	Mob: [phone]
Keeley Clarke ([e-mail])	Mob: [phone]
Llew Angus ([e-mail])	Mob: [phone]
	[e-mail]

CHAIRMAN'S STATEMENT

Summary of the year

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

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

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

Delivering our strategy

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

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

Our staff have shown great adaptability to the constant changes throughout the past few years and their dedication towards the business, their colleagues and clients has been first class.

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

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

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

Responsible Business

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

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

Dividends

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

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

Summary and outlook

This year has been another strong year for Gateley. Our people have excelled in client delivery, they have continued to overcome every challenge presented to them, and have delivered further strategic progress for the business, combining to generate an excellent set of results for the benefit of all of our stakeholders.

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

Nigel Payne

Chairman

13 September 2022

CHIEF EXECUTIVE OFFICER'S REVIEW

Introduction

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

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

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

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

Results overview

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

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

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

People and Culture

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

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

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

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

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

Responsible Business

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

People

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

·   Maintaining our Investors in People standard

·   Securing our Disability Confident employer status

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

Potential

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

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

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

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

Planet

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

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

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

Operational Review

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

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

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

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

Our Acquisition Strategy

After deliberately pausing acquisition activity at the start of the pandemic, we considered that market conditions had stabilised sufficiently by the beginning of FY22 for us to recommence it.  We completed three acquisitions during the Period, two onto our Property Platform and our first onto our Business Services Platform.  During the Period we committed to a three-year revolving credit facility of up to £30.0m to assist with acquisitions. To date, we have only used this for the acquisition of Gateley Smithers Purslow and only drawn down £6 .0m.

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

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

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

Our Platform Strategy

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

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

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

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

Current trading and outlook

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

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

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

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

Rod Waldie

Chief Executive Officer

13 September 2022

FINANCE DIRECTOR'S REVIEW

Financial overview

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

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

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

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

Revenue

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

Platform performance

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

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

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

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

Business Services Platform

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

Corporate Platform

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

People Platform

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

Property Platform

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

Underlying operating profit before tax

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

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

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

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

Personnel costs and operating expenses

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

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

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

Earnings Per Share (EPS)

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

Share option schemes

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

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

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

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

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

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

Taxation

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

The deferred tax charge arises due to a combination of credits in respect of the share schemes that have vested in past years and the release of deferred tax on brands.  The total effective rate of tax is 20.8% (FY21: 19.3%) based on reported profits before tax.  The increase is as a result of the decrease in the tax allowable benefit arising from the exercise of nil cost share options from levels experienced in previous years.

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

Dividend

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

Balance sheet

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

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

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

The board has carefully considered the impact of COVID-19, on the future forecasts used in assessing the value in use of the cash generating units to which the goodwill and intangibles relate and determined that, despite short term reductions, such forecasts are more than sufficient to justify the carrying value of goodwill.  Therefore, as at 30 April 2022, the board concluded that the goodwill and intangible assets do not require impairment.

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

Working capital and cash flow

During the year the Group agreed a new revolving credit facility with Bank of Scotland and HSBC UK.  The facility provides total committed funding of £30m until April 2025, split equally between Bank of Scotland and HSBC UK. It replaces the Group's existing £8m overdraft facilities with Bank of Scotland and HSBC UK, with the dual bank club providing increased flexibility to the Group to support future growth and expansion via acquisition.  Interest is payable on the loan at a margin of 1.95% above the SONIA reference rate.

The Group also has in place a litigation funding facility for an initial £20m of funding towards significant litigation cases, which has the ability to increase to £50m if required.  To date the Group has not yet utilised this facility but has a number of large assignments currently being assessed for consideration in FY23.

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

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

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

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

Concert Party update

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

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

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

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

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

Summary

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

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

Neil Smith

Finance Director

13 September 2022

CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME

for the year ended 30 April 2022

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

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

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 APRIL 2022              

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Share capital	Share premium	Merger reserve	Other reserve	Treasury reserve	Retained earnings	Foreign currency translation reserve	Total Equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 May 2020	11,761	9,153	(9,950)	6,815	(417)	27,447	27	44,836
Comprehensive income:
Profit for the year	-	-	-	-	-	13,157	-	13,157
Exchange rate differences	-	-	-	-	-	-	(87)	(87)
Total comprehensive income	-	-	-	-	-	13,157	(87)	13,070
Transactions with owners recognised directly in equity:
Issue of share capital	31	550	-	-	-	-	-	581
Sale of treasury shares	-	(282)	-	-	400	-	-	118
Purchase of treasury shares	-	-	-	-	(295)	-	-	(295)
Share based payment transactions	-	-	-	-	-	956	-	956
Total equity at 30 April 2021	11,792	9,421	(9,950)	6,815	(312)	41,560	(60)	59,266
At 1 May 2021	11,792	9,421	(9,950)	6,815	(312)	41,560	(60)	59,266
Comprehensive income:
Profit for the year	-	-	-	-	-	14,279	-	14,279
Revaluation of other investments	-	-	-	-	-	(190)	-	(190)
Exchange rate differences	-	-	-	-	-	-	58	58
Total comprehensive income	-	-	-	-	-	14,089	58	14,147
Transactions with owners recognised directly in equity:
Issue of share capital	664	1,921	-	7,650	-	-	-	10,235
Purchase of own shares at nominal value	-	-	-	-	-	(132)	-	(132)
Sale of treasury shares	-	-	-	-	127	-	-	127
Purchase of treasury shares	-	-	-	-	(76)	-	-	(76)
Recognition of tax benefit on gain from equity settled share options	-	-	-	-	-	563	-	563
Dividend paid	-	-	-	-	-	(12,430)	-	(12,430)
Share based payment transactions	-	-	-	-	-	1,213	-	1,213
Total equity at 30 April 2022	12,456	11,342	(9,950)	14,465	(261)	44,863	(2)	72,913

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

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

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

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

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

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

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

CONSOLIDATED CASH FLOW STATEMENT FOR YEAR ENDED 30 APRIL 2022

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

NOTES TO THE FINANCIAL STATEMENTS

1           Basis of preparation and significant accounting policies

The financial information set out in this financial results announcement does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The consolidated statement of comprehensive profit and loss and other comprehensive income, consolidated statement of financial position, consolidated statement of change in equity, consolidated statement of cashflows and the associated notes have been extracted from the Group's financial statements for the year ended 30 April 2022, upon which the auditor's opinion is unqualified and does not include any statement under section 498 of the Companies Act 2006. The statutory accounts for the year ended 30 April 2022 will be delivered to the Registrar of Companies following the Annual General Meeting.

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

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

1.1          Statement of Directors responsibilities

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

1.2          Cautionary statement

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

2          Going concern

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

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

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

3           Revenue and operating segments

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

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

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

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

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

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

2022

	Corporate	Business Services	People	Property	Total segments	Other expense and movement in unbilled revenue	Total
	£'000	£'000	£'000	£'000	£'000	'000	£'000
Segment revenue from services transferred at a point in time	10,175	3,467	5,901	10,994	30,537	305	30,842
Segment revenue from services transferred over time	27,889	14,490	13,264	50,426	106,069	338	106,407
Total Segment revenue	38,064	17,957	19,165	61,420	136,606	643	137,249
Segment contribution (as reported internally)	15,373	5,733	6,919	22,956	50,981	643	51,624
Costs not allocated to segments:
Other operating income							-
Personnel costs							(10,487)
Depreciation and amortisation							(6,215)
Other operating expenses							(13,852)
Share based payment charges							(1,213)
Exceptional costs							(870)
Net financial expense							(955)
Profit for the financial year before taxation							18,032

2021

	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	3,239	7,437	1,357	3,780	13,289	29,102	1,361	30,463
Segment revenue from services transferred over time	12,774	14,450	11,996	10,472	39,654	89,346	1,566	90,912
Total segmental revenue	16,013	21,887	13,353	14,252	52,943	118,448	2,927	121,375
Segment contribution (as reported internally)	5,291	7,100	5,688	4,597	24,406	47,082	2,927	50,009
Costs not allocated to segments:
Other operating income								2,448
Personnel costs								(8,240)
Depreciation and amortisation								(6,869)
Other operating expenses								(18,887)
Share based payment charge									(956)
Exceptional costs								-
Net financial expense								(1,197)
Profit for the financial year before taxation									16,308

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 engagement 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. £9.2 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, T-three Consulting Limited and GEG Services 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           Expenses and auditor's remuneration

Included in operating profit are the following:

	2022	2021
	£'000	£'000
Depreciation on tangible assets (see note 11)	851	1,045
Depreciation on right-of-use asset (see notes 11 and 24)	3,783	3,751
Short term and low value lease payments (see note 24)	75	40
Operating lease costs on property (see note 24)	-	26
Other operating income - rent received	-	(2)
Foreign exchange (gains)/losses	(58)	87
Loss/(profit) on sale of fixed assets	16	(3)
	2022	2021
	£'000	£'000
Non-underlying items
Amortisation of intangible assets (see notes 12 and 14)	1,581	2,073
Share based payment charges - Gateley Plc	1,100	956
Share based payment charges - Gateley Smithers Purslow Limited	113	-
Release of contingent consideration - International Investment Services Limited	(135)	-
	2,659	3,029
Exceptional items
Acquisition costs	373	-
One off remuneration charge - Gateley Smithers Purslow Limited	497	-
Total non-underlying and exceptional items	3,529	3,029

Acquisition costs in the 2022 financial year represent professional fees in respect of the acquisition of SP 2018 Limited, Adamson Jones Holdings Limited and the business and assets of Tozer Gallagher LLP.

Share based payment charges in Gateley Plc represent charges in accordance with IFRS 2 in respect of unexercised SAYE, CSOP, LTIP and RSA schemes (See note 6).

Share based payment charges in Gateley Smithers Purslow Limited represent shares awarded to staff following the successful acquisition of SP 2018 Limited (See note 5 and 6).

Auditor's remuneration

	2022	2021
	£'000	£'000
Fees payable to the Company's Auditor in respect of audit services:   Audit of these financial statements	85	73
Audit of financial statements of subsidiaries of the Company	20	15
	105	88
Amounts receivable by the Company's auditor and its associates in respect of:
Other assurance services	31	44

Other assurance services relate to Solicitors Accounts Rules review with associated reporting to legal regulators. This work is entirely assurance focused.

5              Personnel costs

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

	Number of employees
	2022	2021
Legal and professional staff	800	770
Administrative staff	350	343
	1,150	1,113

The aggregate payroll costs of these persons were as follows:

	2022	2021
	£'000	£'000
Wages and salaries	76,672	68,020
Social security costs	7,769	7,736
Pension costs	2,076	1,704
	86,517	77,460
Non-underlying items (see note 4)
Share based payment expense - Gateley Plc	1,100	956
Share based payment expense - Gateley Smithers Purslow Limited	113	-
	87,730	78,416

6           Share based payments

Group

At the year end the Group has nine share based payment schemes 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 64,549 SAYE 17/18 options were exercised and the remaining 193,063 had lapsed by 30 April 2022. The accumulated IFRS2 charge of £155,381 was recycled through retained earnings in the prior period.

During the year 407,963 SAYE 18/19 options vested with 237,450 being exercised by 30 April 2022 leaving 170,513 options still to be exercised. New shares were issued to satisfy these options being 237,450 10p shares with a nominal value of £23,745. The accumulated IFRS2 charge of £135,078 has been recycled through retained earnings.

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 401,542 CSOPS 17/18 options were exercised and the remaining 26,603 had lapsed by 30 April 2022. New shares were issued to satisfy these options being 410,632 10p shares with a nominal value of £41,063. The accrued IFRS2 charge of £95,780 was recycled through retained earnings in the prior period.

During the year 631,580 CSOPS 18/19 options vested with 447,494 being exercised by 30 April 2022 leaving 184,086 options still to be exercised. New shares were issued to satisfy these options being 447,494 10p shares with a nominal value of £44,749. The accumulated IFRS2 charge of £108,421 has been recycled through retained earnings.

Long Term Incentive Plan ('LTIP')

The Group operates 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 2023/2025	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 granted options on 27 April 2022 based on performance conditions commencing on 1 May 2022. In total, 1,115,000 options have been granted which, subject to satisfying the above performance conditions, will vest in the year ending 30 April 2025.

Restricted Share Award Plan ('RSA')

The Group has introduced during the year an RSA for the benefit of Senior Management.  Awards under the RSA entitle the option holder to participate in dividends however, the shares are restricted for a period of 5 years from issue, such that they cannot be traded.

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 2021	At 1 May 2021	Granted during the year	Lapsed during year	Exercised in the year	At 30 April 2022
			Number	Number	Number	Number	Number	Number	Number
SAYE
SAYE 17/18- 15 September 2017	0 years	£1.33	556,296	(298,684)	257,612	-	(193,063)	(64,549)	-
SAYE 18/19 - 21 September 2018	0 years	£1.27	620,432	(168,463)	451,969	-	(44,006)	(237,450)	170,513
SAYE 19/20 - 30 September 2019	0.4 years	£1.28	822,625	(125,652)	696,973	-	(92,760)	-	604,213
SAYE 20/21 - 6 November 2020	1.5 years	£1.02	2,337,197	(47,113)	2,290,084	-	(172,713)	-	2,117,371
SAYE 21/22 - 25 August 2022	2.3 years	£1.70	-	-	-	673,077	(14,925)	-	658,152
			4,336,550	(639,912)	3,696,638	673,077	(517,467)	(301,999)	3,550,249
CSOPS
CSOPS 17/18 - 3 October 2017	0 years	£1.65	581,162	(153,017)	428,145	-	(26,603)	(401,542)	-
CSOPS 18/19 - 24 October 2018	0 years	£1.44	812,131	(127,774)	684,357	-	(52,777)	(447,494)	184,086
CSOPS  20/21 - 7 July 2020	1.2 years	£1.35	976,797	(57,411)	919,386	-	(89,634)	-	829,752
			2,370,090	(338,202)	2,031,888	-	(169,014)	(849,036)	1,013,838
LTIPS
LTIPS 20/21 - 22  July 2020	1.2 years	£0.00	1,405,766	(38,339)	1,367,427	-	(130,992)	-	1,236,435
LTIPS 27 April 2022	3.0 years	£0.00	-	-	-	1,115,000	-	-	1,115,000
			1,405,766	(38,339)	1,367,427	1,115,000	(130,992)	-	2,351,435

RSARSA
RSA 27 April 2022	5.0 years	£0.00	-	-	-	1,422,560	-	-	1,422,560
			-	-	-	1,422,560	-	-	1,422,560

Fair value calculations

The award is accounted for as equity-settled under IFRS 2.  The fair value of awards which are subject to non-market based performance conditions is calculated using the Black Scholes option pricing model.  The inputs to this model for awards granted during the financial year are detailed below:

	SAYE	LTIP	RSA
Grant date	25/8/21	27/4/21	27/4/22
Share price at date of grant	£2.115	£2.175	£2.175
Exercise price	£1.70	n/a	n/a
Volatility	29%	33%	33%
Expected life (years)	3.3	3.3	5.0
Risk free rate	0.227%	1.522%	1.575%
Dividend yield	4.53%	4.53%	0%

Fair value per share
Market based performance condition	-	-	-
Non-market based performance condition/no performance condition	£0.44	£1.87	£2.175

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 on Management's expectation of the minimum and maximum exercise period of each of the options granted.

The total charge to the income statement for all schemes now in place, included within non-underlying items, is £1,213,000 (2021: £956,000).

7           Financial income and expense

Recognised in profit and loss

	2022	2021
	£'000	£'000
Financial income
Interest income	194	176
Total financial income	194	176
Financial expense
Interest expense on bank borrowings measured at amortised cost	(201)	(416)
Interest on lease liability	(948)	(957)
Total financial expense	(1,149)	(1,373)
Net financial expense	(955)	(1,197)

8           Taxation

	2022	2021
	£'000	£'000
Current tax expense
Current tax on profits for the year	3,949	3,749
Under/(over) provision of taxation in previous period	15	(43)
Total current tax	3,964	3,706
Deferred tax expense
Origination and reversal of temporary differences	(211)	(436)
Under provision on share-based payment charges	-	(119)
Total deferred tax expense	(211)	(555)
Total tax expense	3,753	3,151

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:

	2022	2021
	£'000	£'000
Profit for the year (subject to corporation tax)	18,032	16,308
Tax using the Company's domestic tax rate of 19%	3,426	3,099
Expenses not deductible for tax purposes	312	214
Under/(over) provision of taxation in previous period	15	(43)
Under provision on share-based payment charges	-	(119)
Total tax expense	3,753	3,151

The Finance Act 2021 increased the main rate of corporation tax to 25% from 1 April 2023. Closing deferred tax balances have therefore been valued at 19% or 25% (2021: 19%) depending on the date they expect to fully unwind. 

9           Earnings per share

Statutory earnings per share
	2022	2021
	Number	Number
Weighted average number of ordinary shares in issue, being weighted average number of shares for calculating basic earnings per share	118,961,047	117,685,265
Shares deemed to be issued for no consideration in respect of share based payments	2,932,191	823,568
Weighted average number of ordinary shares for calculating diluted earnings per share	121,893,238	118,508,833
	2022	2021
	£'000	£'000
Profit for the year and basic earnings attributable to ordinary equity shareholders	14,279	13,157
Non-underlying and exceptional items (see note 4)
Operating expenses	3,529	3,029
Tax on non-underlying and exceptional items	(370)	(576)
Underlying earnings before non-underlying and exceptional items	17,438	15,604
Earnings per share is calculated as follows:
	2022	2021
	Pence	Pence
Basic earnings per ordinary share	12.00	11.18
Diluted earnings per ordinary share	11.71	11.10
Basic earnings per ordinary share before non-underlying and exceptional items	14.66	13.26
Diluted earnings per ordinary share before non-underlying and exceptional items	14.31	13.17

10        Dividends

	2022	2021
	£'000	£'000
Equity shares:
Interim dividend in respect of 2021 (2.5p per share) - 28 June 2021	2,940	-
Final dividend in respect of 2021 (5p per share) - 8 October 2021	5,908	-
Interim dividend in respect of 2022 (3p per share) - 31 March 2022	3,582	-
	12,430	-

The board proposes to recommend a final dividend of 5.5p (2021: 5p) per share at the AGM. If approved, this dividend will be paid in mid October 2022 to shareholders on the register at the close of business on 23 September 2022. The shares will go ex-dividend on 22 September 2022. This dividend has not been recognised as a liability in these final statements.

11        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 2020	462	6,207	5,226	26,146	38,041
Additions	-	302	201	9,238	9,741
Disposal	(145)	(16)	(31)	(1,359)	(1,551)
As at 30 April 2021	317	6,493	5,396	34,025	46,231
Balance at 1 May 2021	317	6,493	5,396	34,025	46,231
Arising on acquisition after fair value adjustments		266	63	793	1,122
Additions	23	583	169	610	1,385
Disposal	-	(110)	-	-	(110)
As at 30 April 2022	340	7,232	5,628	35,428	48,628
Depreciation and impairment
Balance at 1 May 2020	327	5,157	4,538	3,267	13,289
Depreciation charge for the year	23	670	352	3,751	4,796
Eliminated on disposal	(141)	(13)	(30)	-	(184)
Balance at 30 April 2021	209	5,814	4,860	7,018	17,901
Balance at 1 May 2021	209	5,814	4,860	7,018	17,901
Arising on acquisition after fair value adjustments	-	173	53	-	226
Depreciation charge for the year	22	514	315	3,783	4,634
Eliminated on disposal	-	(94)	-	-	(94)
Balance at 30 April 2022	231	6,407	5,228	10,801	22,667
Net book value
At 30 April 2021	108	679	536	27,007	28,330
At 30 April 2022	109	825	400	24,627	25,961

12           Intangible assets and goodwill

	Goodwill	Customer lists and brands	Total
	£'000	£'000	£'000
Deemed cost
At 1 May 2020	12,329	9,850	22,179
Adjustment	(631)	-	(631)
At 30 April 2021	11,698	9,850	21,548
Arising through business combinations	8,440	9,929	18,369
At 30 April 2022	20,138	19,779	39,917
Amortisation
At 1 May 2020	-	3,741	3,741
Charge for the year	-	2,042	2,042
At 30 April 2021	-	5,783	5,783
Charge for the year	-	1,544	1,544
At 30 April 2022	-	7,327	7,327
Carrying amounts
At 30 April 2021	11,698	4,067	15,765
At 30 April 2022	20,138	12,452	32,590

Goodwill is allocated to the following cash generating units:

	2022	2021
	£'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	40
Gateley Vinden Limited	2,259	2,259
Tozer Gallagher (acquisition of trade and assets)	405	-
Gateley Smithers Purslow Limited	6,605	-
	14,885	7,875
Employment , Pensions and Benefits Group
Kiddy & Partners Limited	1,600	1,600
International Investment Services Limited	338	338
T-three Consulting Limited	309	309
	2,247	2,247
Business services Group
Gateley Tweed (acquisition of goodwill)	1,576	1,576
Adamson Jones IP Limited	1,430	-
	3,006	1,576
	20,138	11,698

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.

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% (2021: 12-21%) 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 2% to 10% (2021: -25-10%) 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 2%.  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.

13           Acquisitions

During the year ended 30 April 2022 the Group completed three acquisitions, the table below summarises the consideration paid:

	Total £'000
Total fair value of identifiable assets and liabilities acquired	12,380
Goodwill	8,440
Total consideration	20,820
Satisfied by:
Cash	7,033
Equity instruments	8,335
Contingent cash consideration payable	2,776
Contingent shares consideration payable	2,676
Total consideration	20,820
Net cash outflows arising on acquisition
Cash consideration	(7,033)
Acquisition costs	(373)
Net cash acquired	1,051
Net cash outflow arising on acquisition	(6,355)

Details of individual acquisitions are included below:

Acquisition of Tozer Gallagher LLP

On 22 July 2021 Gateley Vinden Limited acquired the business and assets of Tozer Gallagher LLP, a leading practice of chartered quantity surveyors and construction consultants. Tozer Gallagher was founded over 30 years ago and is a nationally recognised and highly respected practice of chartered quantity surveyors and construction consultants based in Manchester and London. The business specialises in built environment consultancy, fund monitoring services, and surety advisory.

The amounts recognised in respect of identifiable assets acquired and liabilities assumed are as set out in the table below:

	Pre-acquisition carrying amount £'000	Policy alignment and fair value adjustments £'000	Total £'000
Property, plant and equipment	7	36	43
Intangible asset relating to customer list and brand	-	393	393
Prepayments	14	-	14
Accrued income	101	-	101
Total assets	122	429	551
Accruals and other payables	(4)	-	(4)
Lease liability	-	(36)	(36)
Deferred tax	-	(98)	(98)
Total liabilities	(4)	(134)	(138)
Total identifiable net assets at fair value	118	295	413
Goodwill arising on acquisition			405
Total consideration			818

Satisfied by:
Initial cash consideration paid			418
Issue of 142,179 new 10p ordinary shares in Gateley (Holdings) Plc			300
Contingent cash consideration payable			100
Total consideration			818
Net cash outflow arising on acquisition
Cash consideration			(418)
Net cash acquired			-
Net cash outflow arising on acquisition			(418)

The goodwill of £405,000 arising from the acquisition represents the assembled workforce.  None of the goodwill is expected to be deductible for income tax purposes.

A contingent consideration arrangement was entered into as part of the acquisition.  This is contingent on Tozer Gallagher achieving revenue in excess of £850k in the 12 month period ending 21 July 2022. The sellers will receive £1 of contingent consideration for every £1 they exceed £850k up to a maximum consideration of £0.1m. The contingent consideration totalling £100,000 was settled during August 2022.

From the date of acquisition Tozer Gallagher has contributed £0.7m of revenue to the Group's Statement of Comprehensive Income. If the acquisition had been completed on the first day of the financial year, Group revenue would have been higher by £0.2m. The profit contributed is not separately identifiable due to its trade and assets being incorporated into Gateley Vinden Limited upon acquisition.

Acquisition of the Adamson Jones Holdings Limited ("Adamson Jones")

On 7 January 2022 the Company acquired the entire issued share capital of Adamson Jones via the acquisition of the entire issued share capital of Adamson Jones Holdings Limited that owns 100% of the entire issued share capital of Adamson Jones IP Limited.  Adamson Jones provides intellectual property (IP) services encompassing patent, design and trademark protection advice in the UK, Europe and around the world.

The amounts recognised in respect of identifiable assets acquired and liabilities assumed are as set out in the table below:

	Pre-acquisition carrying amount £'000	Policy alignment and fair value adjustments £'000	Total £'000
Property, plant and equipment	38	-	38
Cash	48	-	48
Intangible asset relating to customer list and brand	-	1,067	1,067
Trade receivables	564	-	564
Total assets	650	1,067	1,717
Trade payables	(257)	-	(257)
Deferred income	(11)	-	(11)
Accruals and other payables	(30)	-	(30)
Other tax and social security	(82)	-	(82)
Deferred tax	-	(267)	(267)
Total liabilities	(380)	(267)	(647)
Total identifiable net assets at fair value	270	800	1,070
Goodwill arising on acquisition			1,430
Total consideration			2,500
Satisfied by:
Initial cash consideration paid			1,255
Issue of 543,668 new 10p ordinary shares in Gateley (Holdings) Plc			1,245
Total consideration			2,500
Net cash outflow arising on acquisition
Cash paid			(1,255)
Acquisition costs			(36)
Net cash acquired			48
Net cash outflow arising on acquisition			(1,243)

The goodwill of £1,430,000 arising from the acquisition represents the assembled workforce.  None of the goodwill is expected to be deductible for income tax purposes.

From the date of acquisition Adamson Jones has contributed £1.2m of revenue to the Group's Statement of Comprehensive Income together with after tax profit of £0.1m. If the acquisition had been completed on the first day of the financial year, Group revenue and profit after tax would have been higher by £2.4m and £0.3m respectively.

Acquisition of Gateley Smithers Purslow Limited (formerly Smithers Purslow Limited) ('Smithers Purslow')

On 19 April 2022 Gateley (Holdings) Plc acquired the entire issued share capital of Gateley Smithers Purslow Limited (formerly Smithers Purslow Limited) via the acquisition of the entire issued share capital of SP 2018 Limited. Smithers Purslow is a specialist business offering corporate advisory, dispute and consultancy to the built environment in the property and construction markets.

	Pre-acquisition carrying amount £'000	Policy alignment and fair value adjustments £'000	Total £'000
Property, plant and equipment	69	757	826
Intangible asset relating to customer list and brand	-	8,469	8,469
Work in progress	2,560	-	2,560
Cash	1,003	-	1,003
Trade receivables	2,531	-	2,531
Prepayments and accrued income	411	-	411
Total assets	6,574	9,226	15,800
Trade payables	(417)	-	(417)
Accruals and other payables	(559)	-	(559)
Current tax	(406)	-	(406)
Lease liability	-	(757)	(757)
Contingent liability		(50)	(50)
Other tax and social security	(585)	-	(585)
Deferred tax	(12)	(2,117)	(2,129)
Total liabilities	(1,979)	(2,924)	(4,903)
	`
Total identifiable net liabilities at fair value	4,595	6,302	10,897
Goodwill arising on acquisition			6,605
Total consideration			17,502
Satisfied by:
Initial cash consideration paid			5,360
Issue of 3,312,322 new 10p ordinary shares in Gateley (Holdings) Plc			6,790
Contingent cash consideration payable			2,676
Contingent share consideration payable			2,676
Total consideration			17,502
Net cash outflow arising on acquisition
Cash paid			(5,360)
Acquisition costs			(192)
Net cash acquired			1,003
Net cash outflow arising on acquisition			(4,549)

The goodwill of £6,605,000 arising from the acquisition represents the assembled workforce.  None of the goodwill is expected to be deductible for income tax purposes. All the effects of this acquisition on the Group's assets and liabilities are disclosed as provisional due to the proximity of the acquisition

to the balance sheet date.

A contingent consideration arrangement was entered into as part of the acquisition.  A further £7.85 million could be payable with any payment subject to Smithers Purslow achieving at least £4.5 million of EBITDA over the 24 months to 30 September 2023. Such payment is to be split in shares and cash as agreed between the Sellers and the Company, providing no Seller is entitled to receive more than 50% of their total consideration in cash.

From the date of acquisition Smithers Purslow has contributed £0.6m of revenue to the Group's Statement of Comprehensive Income together with after tax profit (before exceptional items) of £0.2m. If the acquisition had been completed on the first day of the financial year, Group revenue and profit after tax would have been higher by £11.4m and £1.2m respectively.

14           Other intangible assets

	IT development  costs £'000	Computer software £'000	Total £'000
Cost
Balance at 1 May 2020	258	111	369
Additions	-	10	10
	-	-	-
At 30 April 2021	258	121	379
Additions	-	319	319
At 30 April 2022	258	440	698
Amortisation
Balance at 1 May 2020	-	66	66
Charge for the year	-	31	31
At 30 April 2021	-	97	97
Charge for the year	-	37	37
At 30 April 2022	-	134	134
Net book amount at 30 April 2021	258	24	282
Net book amount at 30 April 2022	258	306	564

The Group's amortisation policy, is to amortise other intangible assets from the date they are made available for use. As at 30 April 2022 the software relating to the IT development costs was not available for use, therefore no amortisation has been recognised. The software came into use following the period end.

15        Contract assets and liabilities

	Contract assets	Trade receivables	Contract liabilities
	£'000	£'000	£'000
As at 30 April 2022	17,239	50,201	(569)
As at 30 April 2021	13,900	36,680	(1,243)

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 recognised 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 recognised 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 £2,661,000 (2021: £nil) were acquired in business combinations.

An impairment loss of £108,000 has been recognised in relation to contract assets in the year (2021: gain £89,000). 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% (2021: gain 0.6%) of the balance.

Contract assets recognised under IFRS 15

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

	2022	2021
	£'000	£'000
Contract asset value at 1 May 2021	13,900	11,684
Contract assets arising on acquisition	2,661	-
Contract asset value added in the year	19,237	17,452
Contract asset value realised in the year	(18,559)	(15,236)
Contract asset value at 30 April 2022	17,239	13,900

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.

	2022	2021
	£'000	£'000
Contract liabilities at 1 May 2021	1,243	70
Contract liabilities gained in the year	533	1,207
Contract liabilities credited to P&L in year	(1,207)	(34)
Contract liabilities at 30 April 2022	569	1,243

16           Trade and other receivables

	2022	2021
	£'000	£'000
Trade receivables	50,201	36,680
Prepayments	5,626	5,699
Other receivables including insurance receivables	341	714
	56,168	43,093

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 loss allowance

	2022	2021
	£'000	£'000
Brought forward provision	(4,171)	(2,967)
Recognition of provisions for businesses acquired	(173)	-
Provision utilised	1,161	719
Charged to statement of profit and loss	(1,173)	(2,391)
Provisions released	415	468
	(3,941)	(4,171)

The Group applies the simplified approach to providing for the expected credit losses under IFRS 9. Management have also elected to apply an uplift to the IFRS 9 provision in the current year to account for the specific risks in the subsidiary entities where the application of IFRS 9 alone is not considered appropriate. The provision uplift is based on Management's assessment of specific clients and related debts, this is presented separately to the ECL provision detailed below:

	Not passed due	Past due 0-30 days	Past due 31-120 days	Past due greater than 120 days	Total
Expected credit loss rate	3.60%	4.45%	5.11%	18.53%
Estimated total gross carrying amount £'000	31,544	4,642	5,429	12,526	54,141
Lifetime ECL £'000	1,136	207	277	2,321	3,941

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 £1,173,000 has been recognised in relation to trade receivables in the year (2021: £1,525,000). This is based on the expected credit loss under IFRS 9 of these types of assets. The trade receivables loss is estimated at 2.3% (2021: 3.7%) of the balance.

17           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.

	2022		2021
	Fair value	Carrying amount	Fair value	Carrying amount
	£'000	£'000	£'000	£'000
Non-Current liabilities
Bank borrowings	5,715	5,715	-	-

On 18 April 2022, the Company entered into a revolving credit facility which provides total committed funding of £30m until April 2025. Interest is payable at a margin of 1.95% above the SONIA reference rate. On 19 April 2022 £6m was drawdown against the facility in order to fund the initial cash consideration in the acquisition of SP 2018 Limited.

As at 30 April 2022, the Group's non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarised below:

30 April 2022	Current		Non-current
	Within 6 months	6 to 12 months	1 - 5 years	Later than 5 years
	£'000	£'000	£'000	£'000
Bank borrowings	-	-	6,000	-
Trade and other payables	8,309	-	-	-
Total	8,309	-	6,000	-

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

30 April 2021	Current		Non-current
	Within 6 months	6 to 12 months	1 - 5 years	Later than 5 years
	£'000	£'000	£'000	£'000
Trade and other payables	8,130	-	120	-
Total	8,130	-	120	-

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

18           Trade and other payables

	2022	2021
	£'000	£'000
Current
Trade payables	7,935	6,086
Other taxation and social security payable	10,122	9,641
Other payables	374	582
Contingent consideration	100	135
Accruals	12,693	11,345
Deferred income	569	1,243
	31,793	29,032

Non-current	£'000	£'000
Other payables	-	120
Contingent consideration	5,360	-
	5,360	120

£100,000 of current contingent consideration represents the earn-out sums payable to the sellers of Tozer Gallagher LLP.

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 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.  The discount rate applied in determining the present value of contingent consideration is 4.75%.

19           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 2021	138
Credited during the year to retained earnings	563
Debited during the year in the Consolidated income statement	(63)
At 30 April 2022	638

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 2020	1,208
Credited during the year in the Consolidated income statement	(436)
At 30 April 2021	772
Arising through business combinations - Tozer Gallagher LLP, Adamson Jones Holdings Limited and SP 2018 Limited	2,482
Credited during the year in the Consolidated income statement	(165)
At 30 April 2022	3,089

20           Provisions

	2022	2021
	£'000	£'000
Current provision
Professional indemnity provision	101	176
Total current provision	101	176
Non-current provision
Professional indemnity provision	649	549
Dilapidations provision	214	214
Total non-current provision	863	763
Total provisions	964	939
Professional indemnity estimated claim cost
	2022		2021
	£'000		£'000
Brought forward	725		713
Provisions made during the year	35		385
Provisions reversed during the year	(10)		(373)
At end of year	750		725
Non-current	649		549
Current	101		176
	750		725

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. 

Dilapidations provision

The Group has leases for a number of offices, some of which include dilapidation clauses. The Group maintains the office buildings throughout each lease term with regular maintenance, however a cost is likely to arise at the end of the lease term in order to return the space to its original condition. Management have therefore elected to introduce a dilapidations provision to account for the future cost. The provision is based on Management's estimate of the total costs across all applicable lease to be recognised on a straight line basis over the total lease terms.

	2022 £'000	2021 £'000
At 1 May	214	-
Provision made in the year	-	214
At 30 April	214	214

21           Net debt

	2022	2021
	£'000	£'000
Cash and cash equivalents	16,105	19,605
Debt
Total loans brought forward	(30,445)	(29,262)
Revolving credit facility - due in more than one year	(5,715)	-
New lease liability in the year	(2,351)	(9,385)
Repayment of loans from former members	-	729
Repayment of term loans	-	3,077
Termination of lease	-	1,359
Repayment of lease liability	3,870	3,037
Total loan carried forward	(34,641)	(30,445)
Brought forward from previous year	(10,840)	(26,339)
Movement during year	(7,696)	15,499
Net debt at the year end	(18,536)	(10,840)

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 2021	-	-	30,445	30,445
Cashflows:
Repayments	-	-	(3,870)	(3,870)
Receipt of revolving credit facility	5,715	-	-	5,715
Non-cash
Fair value on acquisition	-	-	793	793
New lease liability in the year	-	-	1,558	1,558
30 April 2022	5,715	-	28,926	34,641

	Long term borrowings	Short term borrowings	Lease liabilities	Total
	£'000	£'000	£'000	£'000
1 May 2020	3,077	729	25,456	29,262
Cashflows:
Repayments	(3,077)	(729)	(3,037)	(6,843)
Non-cash
New lease liability in the year	-	-	8,026	8,026
30 April 2021	-	-	30,445	30,445

22        Share capital

Authorised, issued and fully paid

	2022	2022	2021	2021
	Number	£	Number	£
Ordinary shares of 10p each
Brought forward	117,914,205	11,791,420	117,609,094	11,760,909
Issued on acquisition of Tozer Gallagher LLP	142,179	14,218	-	-
Issued on acquisition of Adamson Jones IP Limited	543,668	54,367	-	-
Issued on acquisition of Gateley Smithers Purslow Limited	3,312,322	331,232	-	-
Issued as part of contingent consideration of Gateley Vinden Limited	-	-	197,368	19,737
Issued on vesting of RSA	1,477,560	147,756	-	-
Issued on vesting of SAYE	308,819	30,882	107,743	10,774
Issued on vesting of CSOPS	858,126	85,813	-	-
At 30 April 2022	124,556,879	12,455,688	117,914,205	11,791,420

The Company has one class of Ordinary shares which carry no right to fixed income.

On 22 July 2021 the Group acquired the trade and assets of Tozer Gallagher LLP in part for the issue of 142,179 10p ordinary shares.

On 9 January 2022 the Company acquired Adamson Jones IP Limited and dormant group companies in part for the issue of 543,668 10p ordinary shares.

On 19 April 2022 the Company acquired Gateley Smithers Purslow Limited (Formerly Smithers Purslow Limited) and other group companies in part for the issue of 3,312,322 10p ordinary shares.

Between 1 May 2021 and 19 April 2022 308,819 10p ordinary shares were issued upon vesting of the 2018 SAYE schemes to participants.

Between 3 August 2021 and 1 November 2021 858,126 10p ordinary shares were issued upon vesting of the 2018 CSOP schemes to participants.

On 27 April 2022 1,477,560 10p ordinary shares were issued upon vesting of the 2022 RSA scheme to participants.

23        Capital commitments

In 2021 the Group entered a contract with a provider of legal technology for the development of a new practice management system, with Thomson Reuters for the installation of their market leading practice management system.  The cost of the contractual capital commitment was £1.1million and was incurred across calendar years 2021 and 2022. The outstanding obligation at year end is £nil.

24        Leases liabilities - IFRS 16

The Group has leases for offices, vehicles and some IT equipment, with the exception of short-term leases and leases of low-value assets each lease is held on the balance sheet as a right-of-use asset and corresponding lease liability. Property leases have a remaining term of one to ten years. Leases of vehicles and IT equipment have a term of three to five years. Lease payments on all those recognised on the balance sheet are fixed. Unless there is a contractual right for the Group to sublet the asset to a third party, the right of use asset can only be used by the Group.

The table below provides additional information on the right-of-use assets by class of assets:

	Number of leased assets*	Average length of lease remaining	Opening lease asset £'000	Net additions £'000	Depreciation £'000	Closing lease asset £'000
Office buildings	17	5.9 years	26,986	1,397	(3,767)	24,616
IT equipment	2	2years	21	6	(16)	11

* Where properties within the same building are leased on a floor by floor basis on the same contractual terms, the Group has elected to treat these as a portfolio and are counted as a single leased asset within the table

Lease liabilities are presented in the statement of financial position as follows:

	2022 £'000	2021 £'000
Current lease liability	3,719	2,743
Non-current lease liability	25,207	27,702

A number of property leases held by the Group include break or termination options. The lease liability has been calculated based on the likelihood of such option being exercised. An option would only be exercised when in line with the Groups wider strategy.

In line with IFRS 16 Leases the Group has elected not to recognise a lease liability for leases with a term of 12 months or less, or for leases of low value assets. The payments made under such leases are expensed to the profit and loss on a straight-line basis. Any variable lease payments incurred are expensed as incurred.

The table below shows amounts recognised in the Statement of Comprehensive Income for short term and low value leases as at 30 April 2022:

	Property	Equipment	Total
	£'000	£'000	£'000
Expenses relating to short-term leases	26	23	49
Expenses relating to leases of low-value assets, excluding short-term leases of low value assets	-	17	17
	26	40	66

  The total minimum undiscounted lease payments at 30 April 2022 under non-cancellable operating lease rentals were:

	30 April 2022 £'000	30 April 2021 £'000
Within one year	4,645	3,024
In the second to fifth year inclusive	22,435	15,921
After five years	16,606	13,822
	43,686	32,767

The Annual report and financial statements will be posted to shareholders in due course. Further copies will be available from the Company's website: www.gateleyplc.com.

 

END

 

 

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