Annual
Report
for year ended 30 April 2017
gateleyplc.com
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gateleyplc.com
Gateley (Holdings) Plc
Annual report and consolidated financial statements
Registered number 09310078
For the year ended 30 April 2017
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Contents
Company information
Chairman’s Statement
Chief Executive Officer’s Review
Finance Director’s Review
Strategic report
Report on remuneration: voluntary disclosure
Corporate governance: voluntary disclosure
Board of Directors
Directors’ report
Independent auditor's report to the members of Gateley (Holdings) Plc
Consolidated statement of profit and loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated cash flow statement
Notes
Parent company statement of financial position
Parent company statement of changes in equity
Parent company cash flow statement
Parent company notes to the financial statements
Notice of Annual General Meeting
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Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Company information
Registration number
09310078
Registered office
Directors
Auditor
Nominated advisor and broker
Principal bankers
Registrars
Financial PR adviser
One Eleven Edmund Street
Birmingham
B3 2HJ
MJ Ward
PG Davies
NA Smith
NT Payne
JC Lake
MR Seabrook
Grant Thornton UK LLP
The Colmore Building
20 Colmore Circus
Birmingham
B4 6AT
Cantor Fitzgerald Europe
One Churchill Place
Canary Wharf
London
E14 5RB
Arden Partners Plc
125 Old Broad Street
London
EC2N 1AR
HSBC Bank plc
6th Floor 120 Edmund Street
Birmingham
B3 2QZ
Lloyds Bank plc
125 Colmore Row
Birmingham
West Midlands
B3 3SF
Capita Asset Services
40 Dukes Place
London
EC3A 7NH
IFC Advisory
73 Watling Street
London
EC4M 9BJ
Website
www.gateleyplc.com
Chief Executive Officer
Chief Operating Officer
Finance Director and Company
Secretary
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
3
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Chairman’s Statement
In my second year-end results statement to you as Chairman of Gateley, I am pleased to report another
year of strong financial results for the Company together with continued investment in the business, both
of which translate directly to shareholder value and position the business well for the future. I am,
however, not only delighted with the financial performance of the business this year, but also the
significant progress we have made from being an LLP to a plc. This is evidenced in part by the equity
participation we now have within the Company where staff have continued to build upon their equity
interests in the business and by the addition of new external shareholders to our register.
Executed by a Board and senior management team that have the requisite leadership and experience to
manage the business, our growth strategy remains firmly based on the three key pillars we set out at the
time of our IPO. These are to: differentiate (through our comprehensive service offering and service
ethic), to diversify (through organic growth and acquisition of additional complementary non-legal
businesses) and to incentivise (offering wider and earlier equity participation to staff). In the year ended
30 April 2017 through strong organic growth, the acquisition of Gateley Hamer, the development of our
equity participation schemes, strong client support and a well-balanced business model we have
continued to move the Group forward. At the same time, we continue to invest in the future of the
business by expanding our staff compliment by record numbers and augmenting our infrastructure and
geographical presence with expansion of our new office in Reading.
Our ability to attract quality staff who are interested in benefiting from the opportunities provided by a plc
structure continues to strengthen. As we build further scale, breadth and depth into our business, we will
maintain our disciplined approach to optimising growth opportunities, whilst keeping our focus on meeting
the needs of our client base.
Trading in the first two months of the current financial year has started well and the Board remains
confident that the business is well balanced to deliver another year of growth in its core service lines,
whilst at the same time continuing to look for complementary acquisitions. Accordingly, the Board looks to
the future with confidence and is pleased to propose an increased final dividend, subject to shareholder
approval at the Annual General Meeting on 27 September 2017, of 4.4p per share, making a total
dividend of 6.6 pence per share for the year, and representing a 17.0% increase on the prior year.
Nigel Payne
Chairman
10 July 2017
4
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Chief Executive Officer’s Review
Introduction
I am pleased with the continued progress made by the Group in the year. This represents another year of
expansion where we have not only grown the business but also invested further in it to support our future
expansion. This has been possible due to the strength of our service offering, the depth of our client
relationships and the growth in our teams of skilled professionals.
Financial Results
Our financial performance continues to demonstrate strong long-term growth with increases against last
year in both revenue (up 15.7%) and adjusted EBITDA (up 15.5%). Our transition from LLP to plc is in
accordance with our original plan and our statement of financial position has strengthened as a result of
the ground-breaking change in business model. We have also had another year of strong cash
generation from operations and continued to invest for the long-term future of the business. We are
pleased to propose a dividend in line with expectations.
Operational Review
The year saw good growth across a number of business divisions with excellent results from the Banking
and Financial Services Group; Corporate Group; Business Services Group, and our Property Group, with
three of these divisions reporting double-digit growth.
Whilst growth in our divisions is encouraging it is also important to highlight that the Group operates
through a diverse and resilient business structure that has the ability to perform well in both good and
challenging economic environments.
Since 1 May 2015, we have welcomed at partner level a number of new lateral hires and promotions
thereby evidencing our continued investment in growth and the Group’s ability to continue to attract,
retain and nurture talent. Since IPO, laterally hired partners have totalled 13 in FY16, eight in FY17 with
a further five contracted to join us in FY18. We have also internally promoted to partner two employees in
FY16, three in FY17 and six in FY18. Our overall staff numbers have also increased from 638 to 717
over the last 12 month reporting period. We now have three employee share schemes in place. A Stock
Appreciation Rights Scheme (SARS) which is aimed at partner level. The Gateley Sharesave Scheme
which is a Save As You Earn scheme (SAYE) and is a non-discretionary scheme open to all employees
and a Company Share Option Plan (CSOP) which is specifically targeted at associates, senior
associates, legal directors and their equivalent levels within our support services team. Being able to
offer something different as an employer has helped us not only retain staff since the IPO but has also
attracted a wide pool of fresh talent. All staff that were employed at the time of the IPO received a
nominal number of shares. 43% of all staff participated in our first SAYE scheme in September 2016
whilst 137 associates, senior associates, legal directors and the equivalent levels within our support
services team received CSOP awards in December 2016.
We announced the opening of our new office in Reading on 1 November 2015 and officially moved into
new leasehold premises at The Blade on 1 June 2016. Current staff numbers are nineteen, including
seven partners and further recruitment is progressing well.
We continue to maintain our presence on legal panels and have been reappointed to the national legal
panels of a number of important house builders and UK clearing banks.
5
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Chief Executive Officer’s Review (continued)
Acquisitions
Acquisitions are an important part of the Group’s growth strategy with a focus on acquiring businesses
offering complementary professional and other specialist services to clients in Gateley’s target markets.
In April 2016, we successfully completed our first acquisition of a non-legal services business, Gateley
Capitus Limited. Our second acquisition followed shortly afterwards in September 2016 in the form of
Gateley Hamer Limited (formerly Hamer Associates Limited), a specialist property consultancy of similar
size to Gateley Capitus Limited and we are pleased to report that the integration of this business is
proceeding well. Both businesses are working collaboratively within our Property Group and across our
wider client base to complement our national service offering. We continue to explore acquisitions of
businesses providing complementary professional services to enable us to further diversify our income
streams going forward.
Board Composition
The Board announces that following five years of service with the Group, including two years as a director
of the plc following its admission to AIM, having reached the age of 65, Michael Seabrook will not be
offering himself for re-election at the forthcoming Annual General Meeting and will stand down as a
Director at that point. The Board would like to thank Michael for his valuable contribution to the Group
both leading up to the IPO and thereafter as the Group transitioned from an LLP to a plc. The Board
wishes him all the best for the future.
The Board is pleased to announce the appointment of Suki Thompson with effect from September 2017.
Shortlisted as Influencer of the Year by Creativepool and awarded Most Renowned Woman in Advertising
and Communications in the 2016 Executive Awards, Suki sits on the Centaur Media Plc Management
Board, has been a Trustee for Macmillan Cancer Support for the past six years and is also the CEO and
Today,
Co-Founder of award-winning, marketing management consultancy, Oystercatchers.
Oystercatchers works with 80% of the FTSE 250 brands and global communications networks including
WPP, IPG, Publicis, Omnicom and Havas. A recognised industry influencer, Suki leads debate across
many platforms and her innovative Oystercatchers Club regularly attracts over 250 senior business
leaders to each event. Her views are regularly sought by the media and event organisers. Most recently,
Suki has chaired debate at The Guardian’s Changing Media Summit; Advertising Week Europe, and at
investment influencer, Platforum.
Suki holds an Honorary Doctorate from Coventry University for International Business Development is a
Freeman of the City of London and a former Chair of the UK Marketing Society. The Board welcomes
Suki and looks forward to working with her.
Current trading and outlook
Trading in the second half of the financial year ended 30 April 2017 was excellent and we are pleased to
report that trading in the first two months of the current financial year has continued well. As highlighted
above, we are confident that our business is well balanced and resilient and we remain focused on
delivering another year of growth in both core services, and our complementary professional services.
Michael Ward
Chief Executive Officer
10 July 2017
6
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Finance Director’s Review
Financial Highlights
The Group delivered another strong performance in 2017 with record revenue generation accompanied
by increased profitability. Total reported revenues for the year increased by 15.7% to £77.6m (2016:
£67.1m). Adjusting for revenues from acquisitions since IPO of £2.0m (2016: £nil), organic growth of
12.7% has been achieved from our traditional core legal services. As the Group has delivered another
year of annual revenue growth we have accelerated our investment in further expansion of our staffing
levels to continue to meet increasing client demand and to facilitate further the expansion of services
across our national office infrastructure. Whilst it is typical that increased recruitment costs are incurred
in advance of the delivery of revenue, both EBITDA and PBT margins have been maintained as the
Group continues to capitalise on growth opportunities along its journey as a leading professional services
group.
Group revenue was well spread across a record number of clients that has generated strong results and
we once again advised on more M&A transactions than other advisers in the market. Whilst pleased with
the performance of all of our UK business lines we have seen our largest service lines continue to
perform well in a market that remains competitive, but with healthy levels of activity for regionally focused
service delivery. Our expertise in mergers & acquisitions, corporate finance, private equity and equity
capital markets propelled our Corporate Group into generating revenue growth of 24% (2016: 14%). Our
Property Group has performed strongly and generated revenue growth of 28% as our mix of both
litigation and transactional property development work streams serviced client requirements well. The
UK’s construction, property development and housing markets continue to need the specialist legal
support that Gateley can offer at both a regional and national level. Our housebuilding sector expertise
demonstrates how our focus on strategically key sectors and commercially focused client understanding
helps maintain long standing client relationships. We have recently renewed all key bank panel
appointments that have arisen during and since the year end and continue to grow our national expertise
and teams servicing clients in the delivery of private client and regulatory legal services.
Following the acquisition of Gateley Capitus Limited in April 2016, the Group has further expanded its
professional complementary service lines with the acquisition of Gateley Hamer Limited (formerly Hamer
Associates Limited) in September 2016 for an anticipated total consideration of £2.0m. Both businesses
continue to integrate well and work collaboratively with our legal and support teams. Gateley Capitus
Limited has generated revenue of £1.2m and EBITDA of £0.3m during its first full year of ownership and
Gateley Hamer Limited has generated revenue of £0.9m and EBITDA of £0.2m since acquisition. Whilst
UK operations have performed well the additional investment into our Dubai office has not yet generated
expected returns. Whilst fees in Dubai increased by 10% to £1.2m, the office made a loss of £0.4m
(2016: loss £0.1m). We have already taken steps to restructure our operations in Dubai and will keep this
under constant review.
Operating expenses (excluding depreciation and non-underlying items) rose by 14.2% to £63.4m (2016:
£54.7m). This growth in operating costs has been driven mainly by the continued expansion of staff
levels to meet client demand. Fee generating staff numbers at the end of the year rose by 7.6% (2016:
6.2%) to 441 (2016: 410). Personnel costs rose accordingly by 17.2% from £38.9m to £45.6m, thereby
increasing this cost to 58.7% of revenue from 58.1% in 2016.
Adjusted EBITDA of £14.9m is up by 15.5% from £12.9m reflecting an adjusted EBITDA margin of 19.2%
(2016: 19.3%). Adjusted profit before tax was up 11.7% to £13.4m (2016: £12.0m). Adjusted numbers
excludes share based payment charges and for 2016 are stated after excluding income or expenses that
related to non-underlying items and one-off professional costs together with the costs associated with the
IPO and acquisitions.
7
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Finance Director’s Review (continued)
As a result of the continued expansion of new staff numbers, overall utilisation of staff performing
chargeable work decreased to 86% (2016: 89%) but remained within acceptable levels without affecting
achieved profit margins. We have now established all of our different share option schemes including our
all staff SAYE scheme and CSOP scheme for associates, senior associates, legal directors and their
equivalent levels within our support services team. The Board plans to make participation in both of
these schemes an annual event alongside our SARS’ scheme directed at those “legal partners/directors”
the Board wishes to incentivise further with greater levels of future equity share ownership.
Other operating expenses (before non-underlying items) increased by 14.0% to £17.9m (2016: £15.7m).
This increase was predominately due to increased volumes of activity and a full year of running costs
associated with new offices in Reading and Belfast together with increased professional indemnity
insurance premiums, bad debt and professional and consultancy services.
Earnings per share
Basic earnings per share increased to 9.43p (2016: 8.18p). Adjusted* basic earnings per share also
increased to 9.43p (2016: 8.98p). Diluted earnings per share was 9.35p (2016 8.18p).
Dividend
The Board has adopted a dividend policy which reflects the strong long-term earning cash flow and
earnings potential of the Group, distributing up to 70% of profits after tax each year to shareholders.
Following the announcement of our interim dividend of 2.2p (2016: 1.895p) per share that was paid in
March 2017, the Board proposes to approve a full year final dividend at its Annual General Meeting on 27
September 2017 of 4.4p (2016: 3.764p) per share, which if approved, will be paid in early October 2017
to shareholders on the register at the close of business on 8 September 2017. The shares will go ex-
dividend on 7 September 2017.
Cash resources, borrowings and liquidity
The Group’s cash generation has remained strong as we concluded the financial transition from an LLP
with the settlement of loans from former partners of Gateley Heritage LLP. Since IPO liabilities repaid to
former partners have totalled £21.4m with £0.55m (2016: £5.1m) outstanding at the year-end. Since the
year end that balance has now been paid.
Cash generated during the year from operations was £7.7m which represents 76% of profit after taxation
due to increased trade and other receivables and increased tax paid of £1.7m. Financing outflows
totalled £13.1m which included a full year’s dividend payments for the first time since IPO together with
£2.0m of repaid bank debt and £4.6m of liabilities repaid to former partners. In addition further capital
expenditure was incurred which together with the outlay of cash required for the acquisition of Gateley
Hamer Limited meant that Group cash at bank ended the year at £2.7m (2016: £9.8m). The Group’s net
debt position as at 30 April 2017 has increased to £4.8m (2016: £4.2m).
Net assets
Net assets as at 30 April 2017 were £17.4m (2016: £12.7m). This movement reflected increases in
tangible assets, the effect of further acquisitions and the movement in receivables derived from the
Group’s trading performance.
* Adjusted for non-underlying items
Neil Smith
Finance Director
10 July 2017
8
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Strategic report
This report has been prepared by the directors in accordance with the requirements of Section 414 of the
Companies Act 2006.
Principal objectives, strategy and outlook
The principal activity of the Gateley Group during the year was the provision of commercial legal services
together with complementary non-legal professional services including acting as independent trustees to
pension schemes (via Entrust Pension Limited) and providing specialist tax incentive advice (via Gateley
Capitus Limited) and specialist property consultancy advice (via Gateley Hamer Limited (formerly Hamer
Associates Limited)). The Group sells its services through 18 business lines, grouped into five operating
segments. Dependent on a client’s requirements, any given mandate or assignment can involve more
than one business line with fee earning staff being provided across one or more office locations.
The Group’s services are tailored to those required by local, regional and national clients and are
provided from eight offices across the UK as well as an office in Dubai. Gateley also maintains informal,
non-exclusive, relationships with a number of law firms (30+) around the world, enabling it to provide
clients access to a global legal solution.
Gateley became an Alternative Business Structure (“ABS”) with effect from 1 January 2014. Non-lawyers
are permitted to own and invest in ABS law firms. The Board believes a combination of the new ABS
structure and admission to trading on AIM will provide a platform for the continued growth and
enhancement of the business. It will enable the business to differentiate itself from competition through
an enhanced service-offering and (currently) unique career opportunity, to diversify its revenue streams
through the acquisition of additional complementary legal and non-legal professional services businesses
and finally to incentivise its people offering wider and earlier ownership to staff of a more modern,
dynamic legal business. The Group’s current areas of focus are:
• Enhanced opportunities to grow Gateley organically – including lateral hires of individuals or
teams
• Making selective acquisitions, including (i) other legal firms which offer geographical expansion or
additional specialist services and (ii) professional service businesses offering complementary
services
• Alignment through share participation, of the interests of shareholders (including employee
shareholders) with those of the business, aiding retention of staff and enhancing Gateley’s
recruitment appeal.
Organic growth strategy
The UK legal services market continues to exhibit growth and clear opportunities exist for Gateley to
continue to differentiate its service offering and grow organically, in particular from:
• The retention of existing employees, working together to deliver 100% client satisfaction by
looking after our clients’ businesses as if they were our own
• Attracting new talent wishing to be a part of a pioneering law led professional services group
• Whilst legal services will always remain at the heart of the business, we will continue to provide
enhanced cross-selling opportunities through collaborative group wide working
• Continued strengthening of our national network, offering a quality, value-for-money legal service
to mid-market clients at home, in the markets in which they trade
• Continue to build upon our straight talking mid-market corporate service offering
• Maintaining and building upon Gateley’s bank panel representation and “own account” work for
banks
• Extending Gateley’s relationships with the UK’s leading house builders and in particular in those
divisions and regions where Gateley does not currently act
9
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Strategic report (continued)
Organic growth strategy (continued)
• Securing further instructions from Pension trustees to act as independent trustee on large
schemes with deficits
• Expansion of specialist areas such as regulatory and private client into other geographical areas
• Developing Gateley’s project litigation offering and taking advantage of the offshore work this
generates.
Acquisitive growth
Gateley believes that it can strengthen its business by broadening its service offering through the
acquisition of complementary legal and non-legal, professional service businesses. A broader set of
services create additional channels to market, increase cross-sales potential, facilitate a more flexible
sales model and enhance client retention. To owners of target complementary professional services
businesses Gateley offers a platform for their continued growth, drawing upon Gateley’s established
national office network and supporting back-office infrastructure and access, via Gateley’s existing “sales
force” of partners and other lawyers, to Gateley’s existing client-base.
• being well positioned, as a result of its more flexible corporate structure, to take advantage of
anticipated consolidation within the UK legal services industry
• acquiring legal teams or firms offering new niche services, sector specialism, or an opportunity to
enter new geographic markets deemed strategic
• acquiring complementary professional services businesses (facilitated by the Group’s alternative
business structure)
Incentivisation
In the last financial year Gateley has introduced a range of employee share schemes that ensure all staff
can acquire shares and participate in the financial success of our business.
The aim of encouraging earlier and widespread equity ownership in the business is to attract, retain and
motivate talent and to ensure all employees can benefit from the Group's longer term success.
Overview for the year
Management use the following key performance indicators (KPIs) to assess the performance of the
Group:
• Revenue up 15.7% to £77.6m (2016: £67.1m)
• Profit before tax up 18.8% to £13.1m (2016: £11.0m)
• Adjusted EBITDA* up 15.5% to £14.9m (2016: £12.9m)
• Basic Earnings per share (EPS) up 15.3% to 9.43p (2016: 8.18p)
• Total dividend declared of 6.6p (2016: 5.7p)
• Revenue per Pound of salary cost £1.70 (2016: £1.72)
• Adjusted EBITDA margin 19.24% (2016: 19.28%) – Adjusted EBITDA as a percentage of
revenue
• Operating profit margin 17.29% (2016: 16.80%) – Operating profit as a percentage of revenue
• Revenue days 93 (2016: 85) - Year end trade receivables expressed as the number of preceding
days' gross revenue
• Gearing ratio 12.7% (2016: 34.1%) – Borrowings due out within one year divided by opening total
equity plus borrowings due out within one year
10
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Strategic report (continued)
Overview for the year (continued)
•
Interest cover – 66.9x (2016: 49.8x) Profit before financial income and expense and income tax
(“EBIT”) divided by financial expense
• Net debt £4.8m (2016: £4.2m)
*Adjusted underlying EBITDA excludes income or expenses that relate to depreciation, amortisation
share based payment charges and non-underlying items
See Finance Director’s report on pages 7 to 8 for a summary of key financial highlights during the year.
Earnings per share
Basic EPS was 9.43p (2016: 8.18p). Diluted EPS was 9.35p (2016: 8.18p).
Cash flows
Net cash generated from operating activities was £7.7m (2016: £14.3m). Investing cash outflows
principally comprised £1.49m (2016: £0.67m) for capital expenditure, together with £0.5m investment in
Gateley Hamer Limited (formerly Hamer Associates Limited) (‘GHL’). Consideration in respect of the
acquisition of GHL totalling £1.083m remained unpaid at the year end.
Financing cash outflows reflect the key aspects of the Group's transition from Limited Liability Partnership
(LLP) to the PLC. Upon admission to AIM in June 2015, the Group received term loans totalling £10m
(before charges) together with £5m of new money from the issue of new shares. During the year £2m
(2016: £1m) was repaid in respect of the term loans together with £4.6m in respect of the settlement of
liabilities converted into loans to the Plc upon admission. These sums were owed to former members of
Gateley Heritage LLP. Equity dividends totalling £6.3m were also paid during the year.
Financing
The Group’s net debt position as at 30 April 2017 (including loans owed to former partners) was £4.8m
(2016: £4.2m). The decrease in net debt is due to repayments made during the year.
Going concern
The Group financial statements are prepared on a going concern basis as the Directors have a
reasonable expectation that the Group has adequate resources to continue in operational existence for
the foreseeable future. The Group remains cash generative, with a strong ongoing trading performance.
The Group is funded through two unsecured term loans for £5m each repayable quarterly over five years
commencing in December 2015 together with unsecured overdraft facilities of up to £5m. All of the
Group’s overdraft facilities are 12 months in duration. The term loan facilities contain financial covenants
which have been met throughout both periods. The Group’s forecasts and projections show that the new
facility provides adequate headroom for its current and future anticipated cash requirements.
11
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Strategic report (continued)
Principal risks and uncertainties
Risk
category
Economic
Potential impact
Mitigation
The economic situation or conditions
deteriorate with a consequent reduction in
confidence.
Competitive pressure resulting in reduced
revenue growth and profitability.
The Group continuously reviews its business
and growth opportunities both in terms of the
specialist services it offers and the markets it
operates in. Business requirements are
regularly discussed with clients and prospective
clients to support the development of the
services provided by the Group.
Potential impact of the UK’s exit from the
European Union “Brexit”
Reputation
The success of the Group’s business
depends on the maintenance of good client
relationships and its reputation for providing
high-quality professional services. If a
client’s expectations are not met, or if the
business is involved in litigation or claims
relating to its performance in a particular
matter, the reputation of the Group could be
significantly damaged. The Group’s
reputation could also be damaged through
Gateley’s involvement (as an adviser or as
a litigant) in high-profile or unpopular legal
proceedings. The Group may be required to
incur legal expenses in defending itself
against any litigation arising in, or out of,
such cases and may also incur significant
reputational and financial harm if such
litigation is successful or if there is negative
press coverage.
The Group considers that it is positioned well to
withstand an economic down-turn which might
result from Brexit. This assessment is made by
virtue of the broad-based nature of the Group’s
activities; comprising legal and non-legal
services delivered to a diversified client-base.
The Group’s trade is not reliant upon any single
client, sector, region or public sector activity, nor
is it reliant upon the capital markets activity of its
clients. Group cash-flows are largely unaffected
by currency fluctuations. The Group also
believes that, regardless of Brexit, English law
will remain one of, if not the, preeminent legal
code, protecting demand for UK legal services
even in challenging economic times. The Group
believes that potential economic uncertainty
justifies the Group’s decision to move to a Plc
structure, which structure provides the platform
for the continued, measured growth and
development of the business.
The Group constantly endeavours to maintain
its reputation as a provider of client focussed
commercial advice and has adopted internal
management processes and training
programmes to support this. Its legal services
are Lexcel accredited (the SRA’s quality
standard).
12
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
While the Group will use all reasonable
endeavours to protect its intellectual property
rights should this be required, it may not be able
to prevent any unauthorised use or disclosure of
its intellectual property having an adverse effect
on the operating, marketing and financial
performance of the Group.
Gateley has operational risk management
practices in place to assess and manage these
risks which include regular reports to the boards
of the trading companies and to the Directors.
The advice of both internal and external experts
is sought when appropriate.
The Group is advised by market leading
insurance brokers and the Directors believe that
it holds comprehensive professional liability
insurance. Any claims are defended strongly
with senior members of the business involved at
all stages and external advice is sought where
appropriate. The Group works hard to ensure
its employees provide excellent advice and
service to its clients underpinned by quality
processes and bespoke training programmes.
In the opinion of the Directors the Group has a
good claims history.
Strategic report (continued)
Principal risks and uncertainties (continued)
Reputation
(continued)
Operational
risk
Professional
liability and
uninsured
risks
The Group regards its brand names,
trademarks, domain names, trade secrets
and similar intellectual property as important
to its success. Its businesses have been
developed with a strong emphasis on
branding. Should the brand name of
Gateley be damaged in any way or lose
market appeal, the Group’s businesses
could be adversely impacted.
The Group’s profitability is subject to a
variety of operational risks including
strategic and business decisions (including
acquisitions), client choice in relation to the
ability to appoint alternative advisers at any
time, technology risk (including business
systems failure), reputation risk, fraud,
compliance with legal and regulatory
obligations, counterparty performance under
outsourcing arrangements, business
continuity planning, legal risk, data integrity
risk, client default risk, key person risk and
external events.
The Group provides professional services,
predominantly legal advice. Like all
providers of professional services, it is
susceptible to potential liability from
negligence, breach of client contract and
other claims by clients. As well as the risk of
financial damage, such claims also carry a
risk of damage to the Group’s reputation.
The professional indemnity insurance held
by the Group may not cover all potential
claims or may not be adequate to indemnify
the Group for all liability that may be
incurred (or loss which may be suffered).
Any liability or legal defence expenses that
are not covered by insurance or are in
excess of the insurance coverage could
have a material adverse effect on the
Group’s business and financial condition.
13
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Strategic report (continued)
Principal risks and uncertainties (continued)
Regulatory
and
Compliance
Risks
The Group, like all businesses is subject to
a range of regulations. Failure to comply
with these could have significant
implications for the business ranging from
reputational damage to criminal prosecution
and sentencing.
The Group seeks advice from both internal
and external experts to support it in its
adherence to applicable regulations and
guidelines.
The Directors are in dialogue with the SRA
to minimise such risk and as far as they are
able, ensure that this particular regulation is
made known to shareholders.
In addition, the businesses of the Group
operate in regulated markets which impose
additional regulation, for example:
Restrictions on holdings of 10 % or more
Under the Legal Services Act 2007, there
are restrictions on the holding of “restricted
interests” in the Licensed Body law firms. A
restricted interest for the purpose of these
restrictions is an interest of 10 per cent. or
more in the issued share capital of the
Licensed Body and includes an interest in
the ultimate parent company of the
Licensed Body. Gateley Plc is currently a
Licensed Body. The effect of the
restrictions is that the consent of the
Solicitors Regulation Authority (“SRA”) is
required should any person who is a non-
deemed approved lawyer seek to acquire a
shareholding of 10 per cent or more in the
Company. It is a criminal offence for any
non-deemed approved lawyer to acquire a
restricted interest without first notifying the
SRA or to acquire a restricted interest
having notified the SRA but before obtaining
its consent. Any consent from the SRA may
have conditions attached.
14
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Strategic report (continued)
Principal risks and uncertainties (continued)
Regulatory
and
Compliance
Risks
(continued)
The SRA also has power to force the
divestment of any shareholding which
breaches this rule via the courts and/or
to suspend or revoke the Licensed Body
status of Gateley Plc, which would have
a serious effect on the Group; and
Staff are trained and reminded of these
duties and file management processes are
in place to mitigate this risk but it cannot be
removed in full.
Employees
Duty of confidentiality and non-
disclosure: The SRA regulates the use
and disclosure of client information. The
Group is exposed to the risk of
employees engaging in misconduct,
including the improper use or disclosure
of confidential client information.
Employee misconduct could result in
considerable harm to the Group’s
reputation, as well as regulatory
sanctions and financial damage.
Well trained and experienced
employees are essential for the delivery
of excellent professional services. The
market for such employees remains
competitive and the loss of or failure to
recruit and retain such employees could
impact on the Group’s ability to deliver
professional services and financial
performance.
A failure to implement effective
succession planning throughout the
business could also adversely affect
financial performance.
The geographical spread of
management and the development of
new offices and operations could
compromise effective communication
and responsiveness impacting the
Group's strategic goals.
Recruitment is led by senior members of
the business with all professional staff
being interviewed by partners and senior
managers.
The recruitment process is being
developed to include a strong value
proposition for candidates.
Remuneration arrangements include a
range of benefits and are considered to be
highly competitive.
Employee contracts include appropriate
provisions to protect the business where
possible.
A comprehensive training programme is in
place for all staff providing management,
leadership, technical and skills training.
The Board and the Boards of the subsidiary
companies are responsible for the
implementation of succession plans for
each of the businesses and investment has
been made in the recruitment of
appropriate staff where required.
Use of internal communications systems
are continuously reviewed and developed
to meet staff needs.
The Group has a vision statement which
has recently been reviewed and sets out
the core values and behaviours expected
of staff.
15
Strategic report (continued)
Principal risks and uncertainties (continued)
Information
systems and
other
facilities
Loss of its IT provision or other material
facilities would have a serious impact on the
Group’s operations. The Group can give no
assurance that all such risks will be
adequately covered by its existing systems
or its insurance policies to prevent an
adverse effect on the Group’s financial
performance.
Financial
Inaccurate financial information may result
in inappropriate decisions being taken by
management and staff.
Inadequate internal controls may fail to
prevent the Group suffering a financial loss.
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
The Group monitors the resilience of its
information systems and other facilities
on an ongoing basis introducing
updates and upgrades as appropriate.
The Group works with external partners
to support for example the delivery of
its internal and client facing IT
provision. External advice is sought as
appropriate.
The Group has a business continuity
plan which is being reviewed,
particularly in the light of recent national
events.
The systems of internal control
deployed within the Group are designed
to comply with the applicable regulatory
requirements (for example to protect
client monies) and also to prevent
financial loss.
Gateley Plc’s compliance with the
Solicitors Accounts Regulations is
audited annually by external auditors.
Acquisition
risk
The Group will consider complementary and
earnings enhancing acquisitions as part of
its overall growth strategy. Acquisitions
may not always realise the benefits
expected at the time of completion.
Due diligence appropriate to the size
and nature of targets is undertaken and
appropriate warranties and indemnities
are sought from sellers wherever
possible.
A failure to successfully integrate
acquisitions may impact on Group
profitability.
Integration plans are formulated as part
of the due diligence process and
executed on acquisition.
Employment contract terms and
conditions are aligned between Group
employees and new employees where
appropriate post integration, to facilitate
smooth integration.
Formal Board and reporting structures
are introduced post acquisition and
authorities are agreed.
On behalf of the Board
Neil Smith
Finance Director
10 July 2017
16
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Report on remuneration: voluntary disclosure
The board submits its directors’ remuneration report for the year ended 30 April 2017. Although not
subject to the reporting regulations of fully listed companies in the UK, the committee has taken account
of these regulations in the preparation of this report. This report sets out:
• a summary of the directors’ remuneration policy – setting out the parameters within which the
remuneration arrangements for directors operate;
• details of the remuneration paid to the directors for the year under review; and
• a description of how the remuneration committee operates;
Remuneration policy
The remuneration policy is designed to provide an appropriate level of remuneration for the executive
directors so that they are incentivised and rewarded for their performance, responsibilities and
experience, without paying more than is necessary.
The remuneration policy reflects the initial structure implemented by the board to position its cost base
correctly on its transition from a Limited Liability Partnership to a Public Limited Company. At present, the
committee considers that the balance of all forms of remuneration received by executive directors through
a combination of basic annual salary, bonuses, dividend income and share growth, is sufficiently
motivating for each executive.
In the long term however the committee recognises that its executive remuneration structures need to
attract, motivate and retain directors of the calibre necessary to maintain the Company’s position as a
market leader and to reward them for enhancing shareholder value and return. It is the committee’s
intention that executive directors’ remuneration be positioned market competitively and at a level which
reflects the roles and responsibilities of the directors by the end of the five year lock-in period which is
June 2020.
The table below summarises the key elements of the executive directors’ remuneration package.
Element, purpose and operation
Opportunity
Base salary
Reviewed on an annual basis with any
increases normally becoming effective from
the start of the financial year.
It is proposed that appropriate salary increases will be
awarded to provide alignment with the market over
time and so that levels reflect the responsibilities of the
role and the skills and experience of the individual.
Bonus
Merit pool
Designed to align executive directors’
interests with shareholders and to
incentivise executive directors to perform at
the highest levels.
Each year, a pre-agreed percentage of pre-tax profits
is allocated to the merit pool. The merit pool is
distributed to participants based on their individual
performance during the year.
The bonus comprises a merit pool and a
performance pool.
All executive directors participate in the
merit pool. NA Smith also participates in
the performance pool.
Performance pool
A fixed sum is allocated to the performance pool based
on the Group achieving budgeted performance. To the
extent that budgeted performance is not achieved, the
size of the pool is scaled back. The pool is capped at
a predetermined amount at the start of each year. The
pool is distributed to participants based on a point
system, with the allocation of points reflecting a
participant’s role, responsibility and contribution to the
long-term business strategy.
17
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Report on remuneration: voluntary disclosure (continued)
Element, purpose and operation
Opportunity
Stock Appreciation Rights (SARs)
On Admission, the Company introduced the
SAR Scheme to assist in the recruitment,
incentivisation and retention of senior
employees and executive directors.
Under the rules of the SAR Scheme, share
options may be granted to participants
which normally become capable of exercise
from the third anniversary of the date of
grant until six months thereafter subject to
continued employment.
Of the executive directors, only NA Smith
participates in the SAR Scheme.
Pension and benefits
On exercise, participants will receive the growth in
value of the share options between the date of grant
and the date of exercise in excess of the hurdle rate.
The hurdle rate is currently set at 115.765% of the
market value of the underlying shares on the date of
grant.
The executive directors have chosen not to participate
in a company funded pension scheme nor receive a
cash allowance in lieu thereof.
The executive directors do not receive any form of
taxable benefits.
Shareholding guideline
There is no minimum shareholding guideline save for those set out in the lock-in arrangements entered
into upon IPO. As disclosed on page 20, all of the executive directors have significant shareholdings.
Policy for the remuneration of employees more generally
The key principles of the remuneration policy for executive directors also applies to employees more
generally. In particular, senior employees may participate in the merit bonus pool and performance
bonus pool depending on their role and responsibilities and contribution to the business. The Company
also supports and encourages share ownership for all employees through the use of three share
schemes; the SAR Scheme, the all employee Save As You Earn (SAYE) scheme and the Company
Share Option Plan (CSOP). In owning shares, employees are directly aligned with the interests of
shareholders and are able to participate in the dividend income that share ownership provides. 63.4% of
the Company's issued share capital was held by employees as at 30 April 2017.
It is also the committee’s intention that senior employees’ remuneration will be reviewed in the context of
market positioning and the end of the five year lock-in period ceasing in June 2020.
Non-executive directors’ fees
The chairman of the board and the other non-executive directors receive an annual fee for their services,
reflective of their level of responsibility, relevant experience and specialist knowledge. Non-executive
directors are also reimbursed for appropriate travel expenses to and from board meetings.
18
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Report on remuneration: voluntary disclosure (continued)
Executive directors’ service agreements and non-executive directors’ letters of appointment
The executive directors signed new service agreements on 1 June 2015. The service agreements
provide that their employment with the Company is on a rolling basis, subject to written notice being
served by either party of not less than six months. The service agreements contain provisions for early
termination in the event of a breach of a material term of the service agreement by the executive director
or where the executive director ceases to be a director of the Company for any reason. The service
agreements also contain restrictive covenants for a period of 12 months following termination of
employment. No bonus is payable to the executive director if their employment terminates for any reason
or they are under notice of termination (whether given by the Company or the executive director) at or
prior to the date when the bonus is paid. All bonuses are payable within six months of the financial year
end.
The non-executive directors serve under letters of appointment (dated 1 June 2015). The appointments
are for an initial fixed term of three years unless terminated by either party serving at least three months’
written notice on the other during or after such initial fixed term. The agreement contains provisions for
early termination in the event of a serious or repeated breach of the agreement by the non-executive
director or where the non-executive director ceases to be a director of the Company for any reason.
Summary of directors’ remuneration for the year
The following table represents the directors’ remuneration for the years ended 30 April 2017 and 30 April
2016:
Salaries
and fees
Bonus
£’000
£’000
Share
Options
£’000
Total
2017
£’000
Salaries
and fees
Bonus
£’000
£’000
Share
Options
£’000
Total
2016
£’000
Nigel Terrence Payne
Joanne Carolyn Lake
Michael Richard Seabrook
Michael James Ward
Peter Gareth Davies
Neil Andrew Smith
Bonuses for the year
36
30
30
135
135
138
504
-
-
-
57
57
76
190
-
-
-
-
-
4
4
36
30
30
192
192
218
698
32
27
27
132
132
132
482
-
-
-
44
44
44
132
-
-
-
-
-
3
3
32*
27*
27*
176
176
179
617
The Company's performance for the year ended 30 April 2017 resulted in bonuses paid under the merit
pool bonus for MJ Ward, PG Davies and NA Smith together with amounts paid under the performance
pool bonus for NA Smith.
The merit pool for the year ended 30 April 2017 was set at 15% of pre-tax profits and resulted in awards
of up to £57,000 being made to executive directors.
The Company delivered performance for the year ended 30 April 2017 resulting in a performance pool for
the year equal to £0.44m. An award of £19,000 was made to NA Smith based on his points allocation.
Grant of share options
In October 2016 NA Smith was granted 150,000 share options under the SAR Scheme. No other share
options were granted to executive directors during the year ended 30 April 2017.
19
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Report on remuneration: voluntary disclosure (continued)
Directors’ Interests
Directors' shareholdings at 30 April 2017 were as follows:
Nigel Terrence Payne
Joanne Carolyn Lake
Michael Richard Seabrook
Michael James Ward
Peter Gareth Davies
Neil Andrew Smith
10p ordinary shares
10p ordinary shares
Number of shares Percentage Holding
Number of shares
Percentage Holding
At 30 April 2017
At 30 April 2016
39,107
26,300
15,700
2,960,104
2,989,004
500,000
0.04%
0.02%
0.01%
2.77%
2.80%
0.47%
39,107
26,300
15,700
3,289,004
3,289,004
474,702
0.04%
0.02%
0.01%
3.09%
3.09%
0.45%
The following directors held share options under the SAR Scheme as at 30 April 2017:
Number of options at 30
April 2017
Date of grant
Exercise price in £ Earliest exercise date
Neil Andrew Smith
Neil Andrew Smith
150,000
8 June 2015
150,000
7 October 2016
1.101
1.382
8 June 2018
7 October 2019
1. Being the share price on the date of grant of £0.95 multiplied by the hurdle rate of 115.765%.
2. Being the share price on the date of grant of £1.20 multiplied by the hurdle rate of 115.765%.
Under the SAR Scheme, the participant is entitled to shares equivalent to the growth in value above the
exercise price.
Remuneration committee
The committee is appointed by the board and is formed entirely of non-executive directors. The
committee is chaired by Michael Seabrook and the other members are Nigel Payne and Joanne Lake.
The committee meets formally at least twice a year and has responsibility for setting the Company’s
general policy on remuneration and also specific packages for individual directors including the directors
that comprise the strategic board. The committee is also responsible for structuring non-executive
director pay, which is subject to approval of all independent directors. The committee receives internal
advice from executive directors and external advice from remuneration consultants where necessary.
The committee also makes recommendations to the board concerning the allocation of share options to
employees under the SAR Scheme. The committee's terms of reference are available for public
inspection on request.
Other members of the board of directors are invited to attend meetings when appropriate, but no director
is present when his or her remuneration is discussed.
Deloitte LLP were engaged as advisors to the committee in June 2017. Deloitte LLP is a founding
member of the Remuneration Consultants Group and voluntarily operates under the Code of Conduct in
relation to executive remuneration consulting in the UK.
20
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Corporate governance: voluntary disclosure
Corporate Governance Codes
Gateley (Holdings) Plc is quoted on AIM and is not subject to the requirements of the UK Corporate
Governance Code (formerly the Combined Code) issued by the Financial Reporting Council in September
2014 (“the Code”), nor is it required to disclose its specific policies in relation to corporate governance.
However, whilst the Group does not comply with the UK Governance Code the Board of Directors is
committed to delivering high standards of corporate governance, integrity and business ethics and,
having considered the Guidance for Smaller Quoted Companies on the Code (produced by the Quoted
Companies Alliance), has taken steps to apply the principles of the Code insofar as it can be applied
practically given the size of the Group and the nature of its operations. The Board of Directors operates
within the framework set out below.
The guidance issued by the BEIS Committee in March 2017 has been considered by the Board. The
Board has resolved to keep the recommendations under review and to adopt recommendations as
appropriate in view of the development of the business.
The Board and its committees
Board composition and independence
The Board consists of three Executive Directors (the Chief Executive Officer, the Chief Operating Officer
and the Finance Director), the independent Non-executive Chairman and two further independent Non-
executive Directors. The Non-executive Directors are considered by the Board to be independent of
management and are free from any relationship which may materially interfere with the exercise of
independent judgement. At the Annual General Meeting of the Company held on 21 September 2016
each of the Directors was reappointed to the Board. At future annual general meetings, a third of the
Directors will submit themselves for re-election every year.
Operation of the Board
The Board meets regularly throughout the year, as well as on an ad hoc basis as required, to consider all
aspects of the Group's activities. A formal schedule of matters reserved for the Board includes overall
Group strategy, acquisition progress, operational review, committee updates, governance and risk and
approval of major expenditure. The agenda and relevant briefing papers (which include reports from the
Executive Directors and minutes of subsidiary board meetings) are distributed on a timely basis in
advance of each board meeting.
All Directors have access to the advice and services of the Company Secretary who is responsible for
ensuring that Board procedures and applicable rules and regulations are observed.
Remuneration Committee
The Remuneration Committee comprises Michael Seabrook (Chairman), Nigel Payne and Joanne Lake.
The Remuneration Committee is responsible for all elements of the remuneration of the Executive
Directors and the members of the Strategic Board. The Committee also oversees the operation of the
Company's share option schemes. The Chief Executive Officer is invited to meetings of the Remuneration
Committee to discuss the performance of other Executive Directors but is not involved in the decisions.
The Remuneration Committee may invite any person it thinks appropriate to join the members of the
Remuneration Committee at its meetings. Further details of the Committee are included in the
Remuneration Report.
21
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Corporate governance: voluntary disclosure (continued)
Audit and Risk Committee
The Audit and Risk Committee comprises Joanne Lake (Chairman), Nigel Payne and Michael Seabrook.
Joanne Lake and Nigel Payne are Chartered Accountants and the Board believes the Committee is
independent with all members being Non-executive Directors. The Committee meets, together with the
Finance Director, Neil Smith, at least twice a year. It is responsible for ensuring the financial performance
of the Group is properly reported on and monitored. The Committee reviews the interim and annual
accounts, reviews reports from the auditor, monitors the Group’s risk register and the adequacy and
effectiveness of the systems of internal control, and reviews annually the effectiveness of the auditor.
The auditor, Grant Thornton UK LLP, attends meetings at the request of the Chairman and the
Committee meets with the auditor without Executive Directors being in attendance for part of the meeting.
Nomination Committee
The Nomination Committee comprises Nigel Payne (Chairman), Michael Seabrook and Joanne Lake. The
Committee is responsible for monitoring the size and composition of the Board and the other Board
committees. It is also responsible for identifying suitable candidates for board membership and will
monitor the performance and suitability of the current Board on an on-going basis.
Communications with shareholders
Communications with shareholders are given a high priority by the Directors who take responsibility for
ensuring that a satisfactory dialogue takes place. The principal methods of communication with private
shareholders remain the annual report and financial statements, the interim report, the AGM and the
group’s website (www.gateleyplc.com). During the last financial year, the Company has contributed to
DirectorsTalk to support its engagement with private shareholders. It is intended that all directors will
attend each AGM and shareholders will be given the opportunity to ask questions. In addition, the Chief
Executive Officer, Finance Director and Head of Investor Relations meet with institutional shareholders
following the announcement of interim and final results and at other appropriate times. The Chief
Executive Officer and Finance Director are also in regular contact with analysts who publish reports on
the Group’s performance.
Internal control
The Board is responsible for the Group's systems of internal control and for reviewing their effectiveness.
The Board regularly reviews the process for identifying, evaluating and managing any significant risks
faced by the Group. The Audit & Risk Committee discusses the effectiveness of the systems of internal
control with the auditor. The implementation of an Internal Audit function to support the work of the Audit
& Risk Committee is continuing.
Systems of internal control continue to develop as the Group's activity expands. The internal controls in
the businesses acquired by the Company during 2016 (Gateley Capitus Limited and Gateley Hamer
Limited) are, where appropriate, the same as those in Gateley Plc.
The operational functions (professional practice, finance, IT, HR, training, business development, support
services and compliance) operate within an established management structure. The managers within the
trading businesses have specific responsibilities and authority to manage risk effectively and report
monthly either directly to the Operations Board or via their respective committees. Decisions made by the
Operations Board are reviewed monthly by the Strategic Board and the Board.
The operational Risk Committee meets regularly to review financial, operational and compliance risks for
the businesses and reports to the Audit & Risk Committee. Processes to embed risk management
throughout the Group will continue to be reviewed and implemented as appropriate, as will reviews of
social, environmental and ethical matters to ensure that all significant risks to the business of the Group
arising from these matters are adequately addressed.
22
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Corporate governance: voluntary disclosure (continued)
It must be recognised that any system of internal control is designed to manage rather than eliminate the
risk of failure to achieve business objectives. Any such system of internal control can at best provide
reasonable but not absolute assurance against material misstatement or loss. The Board is committed to
operating in accordance with the Code as far as it is appropriate to do so in view of the current stage of
development of the Group.
Slavery and Human trafficking statement
Gateley (Holdings) Plc is committed to preventing acts of modern slavery and human trafficking from
occurring within its business and supply chain, and expects its suppliers to adopt the same high
standards. As part of our commitment to combating modern slavery, we have a specific modern slavery
policy and we expect all of our suppliers to operate a zero tolerance approach to modern slavery and
human trafficking.
Gateley (Holdings) Plc’s slavery and human trafficking statement, made in accordance with section 54(1)
of the Modern Slavery Act 2015 for the financial year commencing 1 May 2016 and ending 30 April 2017,
can be found on its website, www.gateleyplc.com
On behalf of the Board
Nigel Payne
Chairman
10 July 2017
23
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Board of Directors
Details of the Directors', their roles and their backgrounds are as follows:
Nigel Payne, aged 57, Non-Executive Chairman
Nigel has over 30 years’ experience as a director of both publicly listed and private companies. He has extensive
experience of listing companies, fund raising on the public markets acting as either Chairman on Non-Executive
Director of public companies. Nigel is presently Non-Executive Chairman of AIM quoted Stride Gaming Plc, AIM
quoted EG Solutions Plc and AIM quoted ECSC Plc. Previously Nigel was the CEO of Sportingbet Plc, one of the
world’s largest internet gambling companies where Nigel made a number of acquisitions whilst listed on the London
Stock Exchange (both FTSE listed and AIM quoted). Nigel holds an Executive MBA from the IMD Business School
(Lausanne, Switzerland) and a degree in Economics and Accounting from Bristol University.
Michael Ward, aged 58, Chief Executive Officer
Mike has over 30 years’ experience as a corporate lawyer, advising private and public companies,
management teams and private investors. He joined Gateley in 1987 and has been instrumental in the
development of Gateley. He was elected as Senior Partner in 2001 and sits on the Strategic Board. Mike
is a former President and Treasurer of the Birmingham Law Society and a former President of the Greater
Birmingham Chamber of Commerce.
Peter Davies, aged 59, Chief Operating Officer
Peter has over 30 years’ experience as a dispute resolution lawyer. He has considerable experience in
construction disputes, acting for developers, contractors, sub-contractors and construction professionals.
More recently, he has concentrated on providing advice to the firm’s house-builder clients. He is a member of the
Law Society, TeCSA, and is also a CEDR accredited mediator. He has been involved in the management of Gateley
LLP for over 20 years. He sits on the Strategic Board and Chairs the Operations Board.
Neil Smith, aged 41, Finance Director and Company Secretary
Neil has more than 20 years’ experience working in the accountancy profession where he specialised in the
professional services industry. Initially Neil spent 14 years at a major accounting practice where he gained
considerable experience of auditing and advising a wide range of privately owned and publicly listed business across
many sectors. He joined Gateley LLP in 2008, was appointed as Finance Director in 2011 and became the first none
lawyer to be appointed as Partner within Gateley LLP following its successful application to become an Alternative
Business Structure in January 2014. Neil was a member of the management team on Gateley LLP’s acquisition of
the commercial law business from Halliwells LLP in 2010 and, following his involvement in Gateley (Holdings) Plc’s
admission to AIM, was appointed to the Plc Board in 2015. As well as Company Secretary for the Gateley Group he
is also the Group’s compliance officer for finance and administration (“COFA”) and a fellow of the Association of
Certified Chartered Accountants.
Joanne Lake, aged 53, Non-Executive Director
Joanne has over 30 years’ experience in financial and professional services; in investment banking with firms
including Panmure Gordon, Evolution Securities and Williams de Broe and in audit and business advisory services
with Price Waterhouse. Joanne is Non-executive Chairman of AIM quoted wealth management group, Mattioli
Woods plc and Non-executive Deputy Chairman of main market listed land management and construction group,
Henry Boot PLC. She is a non-executive director of AIM quoted non-standard finance provider, Morses Club PLC
and tissue converter, Accrol Group Holdings plc and is a trustee of The Hepworth Wakefield gallery. Joanne is a
Fellow of the Chartered Institute for Securities & Investment and of the ICAEW, and is a member of the ICAEW’s
corporate finance faculty.
Michael Seabrook, aged 65, Non-Executive Director
Michael has over 30 years’ experience as a solicitor, nearly 25 of which were served as a partner in
Eversheds LLP, where he performed a number of senior roles before retiring in 2011. Since then he has
held non-executive director roles at Springboard Corporate Finance Limited, West Midlands Enterprise Limited and
other businesses, and acts as a trustee of the Queen Elizabeth Hospital Birmingham Charity.
24
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Directors’ report
The directors present their annual report and the audited financial statements for the year ended 30 April
2017.
Principal activities
The principal activities of the Gateley Group during the year were the provision of commercial legal
services together with complementary non-legal services including acting as independent trustees to
pension schemes (via Entrust Pension Limited), the provision of specialist tax incentive advice (via
Gateley Capitus Limited) and the supply of specialist property consultancy services (via Gateley Hamer
Limited (formerly Hamer Associates Limited)).
Business review
The results of Gateley (Holdings) Plc for the year are set out in the consolidated statement of profit and
loss and other comprehensive income on page 30.
A review of the business, results and dividends, and likely future developments of the company are
contained in the Chief Executive Officer’s review on pages 5 to 6 and the Finance Director’s review on
pages 7 to 8. The strategic report, which includes a description of the principal risks and uncertainties
facing the Group, is set out on pages 9 to 16.
Dividends
The Directors propose to recommend that a final dividend of £4,702,806 (2016: £4,019,385), being 4.4p
per share, be paid, giving a total dividend for the year of 6.6p (2016: 5.641p). The final dividend has not
been included within creditors as it was not approved before the year end.
The directors and their interests in the shares of the parent company
10p ordinary shares
10p ordinary shares
Nigel Terrence Payne
Joanne Carolyn Lake
Michael Richard Seabrook
Michael James Ward
Peter Gareth Davies
Neil Andrew Smith
Number of
shares
Percentage
Holding
2017 2017
0.04%
0.02%
0.01%
2.77%
2.80%
0.47%
39,107
26,300
15,700
2,960,104
2,989,004
500,000
Number of
shares
Percentage
Holding
2016 2016
0.04%
0.02%
0.01%
3.09%
3.09%
0.45%
39,107
26,300
15,700
3,289,004
3,289,004
474,702
25
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Directors’ report (continued)
Substantial shareholdings
The Company was notified that the following were interested in 3% or more of the issued share capital of
the company as at 26 June 2017:
Name
Number of ordinary
shares
% of issued share
capital
Liontrust Asset Management
Miton Asset Management
Premier Fund Management
10,143,287
7,710,579
6,103,780
9.49%
7.21%
5.71%
Slavery and Human trafficking statement
Gateley (Holdings) Plc is committed to preventing acts of modern slavery and human trafficking from
occurring within its business and supply chain, and expects its suppliers to adopt the same high
standards. As part of our commitment to combating modern slavery, the directors have approved the
adoption and implementation of a specific modern slavery policy. We expect all of our suppliers to adhere
to our Anti-Slavery Policy and will not tolerate slavery and human trafficking within our supply chains.
Gateley (Holdings) Plc’s slavery and human trafficking statement, made in accordance with section 54(1)
of the Modern Slavery Act 2015 can be found on its website, www.gateleyplc.com.
Disabled employees
Applications for employment by disabled persons are always fully considered, bearing in mind the
aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort is
made to ensure that their employment within the Group continues and that appropriate training is
arranged. It is the policy of the Group that the training, career development and promotion of disabled
persons should, as far as possible, be identical with that of other employees.
Employee consultation
The Group places considerable value on the involvement of its employees and has continued to keep
them informed on matters affecting them as employees and on various factors affecting the performance
of the Group. This is achieved through informal discussions between management and other employees
at a local level.
Financial instruments
It is the Group's policy not to enter into complex financial instruments. More detail on financial instruments
is given in note 20 to the financial statements.
Political donations
The Group made no political donations (2016: £nil).
Directors’ indemnity
All Directors and officers of the Company have the benefit of the indemnity provision contained in the
Company’s Articles of Association. The provision, which is a qualifying third party indemnity provision,
was in force throughout the last two financial years and is currently still in force. The Group also
purchased and maintained throughout the financial period Directors’ and Officers’ liability insurance in
respect of itself and its Directors and Officers, although no cover exists in the event Directors or officers
are found to have acted fraudulently or dishonestly.
26
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Directors’ report (continued)
Directors’ responsibilities statement
The directors are responsible for preparing the Strategic Report and Directors’ Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law
the directors have to prepare the financial statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. Under company law the directors must
not approve the financial statements unless they are satisfied that they give a true and fair view of the
state of affairs and profit or loss of the company and group for that period. In preparing these financial
statements, the directors are required to:
•
•
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
•
to any material departures disclosed and explained in the financial statements;
state whether applicable IFRSs as adopted by the European Union have been followed, subject
•
that the company will continue in business.
prepare the financial statements on the going concern basis unless it is inappropriate to presume
The directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the company’s transactions and disclose with reasonable accuracy at any time the financial
position of the company and enable them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence
for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Disclosure of information to auditor
The directors confirm that:
•
auditor is unaware; and
so far as each director is aware, there is no relevant audit information of which the company’s
•
the directors have taken all the steps that they ought to have taken as directors in order to make
themselves aware of any relevant audit information and to establish that the company’s auditor is aware
of that information.
The directors are responsible for the maintenance and integrity of the corporate and financial information
included on the company’s website. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other jurisdictions.
Auditor
In accordance with section 489 of the Companies Act 2006, a resolution for the re-appointment of Grant
Thornton UK LLP as auditor of the company is to be proposed at the forthcoming Annual General
Meeting.
By order of the board
Michael J Ward
Chief Executive Officer
One Eleven Edmund Street
Birmingham
West Midlands
B3 2HJ
10 July 2017
27
Independent auditor's report to the members of Gateley (Holdings) Plc
We have audited the financial statements of Gateley (Holdings) Plc for the year ended 30 April 2017
which comprise the consolidated statement of profit and loss and other comprehensive income, the
consolidated and parent company statements of financial position, the group and parent company
statements of changes in equity, the consolidated and parent company cash flow statements and the
related notes. The financial reporting framework that has been applied in their preparation is applicable
law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's
members those matters we are required to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than
the company and the company's members as a body, for our audit work, for this report, or for the opinions
we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors' Responsibilities Statement set out on page 27, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and
fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance
with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us
to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting
Council's website at www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
•
the financial statements give a true and fair view of the state of the group's and of the parent
company's affairs as at 30 April 2017 and of the group's profit for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as
adopted by the European Union;
the parent company financial statements have been properly prepared in accordance with IFRSs
as adopted by the European Union and as applied in accordance with the provisions of the
Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the Strategic Report and Directors' Report for the financial year for which
the financial statements are prepared is consistent with the financial statements.
the Strategic Report and Directors' Report has been prepared in accordance with applicable legal
requirements.
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the group and parent company and its environment
obtained in the course of the audit, we have not identified any material misstatements in the Strategic
Report and Directors' Report.
28
•
•
•
•
Chartered Accountants
Grant Thornton UK LLP is a limited liability partnership registered in England and Wales: No.OC307742. Registered office: Grant Thornton House, Melton Street, Euston Square, London NW1 2EP.
A list of members is available from our registered office. Grant Thornton UK LLP is authorised and regulated by the Financial Conduct Authority.
Grant Thornton UK LLP is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. Services are delivered by the member firms. GTIL
and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s acts or omissions. Please see grantthornton.co.uk for further details.
Independent auditor’s report to the members of Gateley (Holdings) Plc (continued)
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us
to report to you if, in our opinion:
•
adequate accounting records have not been kept by the parent company, or returns adequate for
our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and
returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
•
•
•
David White (Senior Statutory Auditor)
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Birmingham
10 July 2017
29
Consolidated statement of profit and loss and other comprehensive income
for the year ended 30 April 2017
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Revenue
Other operating income
Personnel costs
Depreciation and amortisation
Other operating expenses
Operating profit
Adjusted EBITDA
Share based payment charges
Depreciation and amortisation
Non-underlying items
One off professional costs
Admission costs
Net financing expense
Profit before tax
Taxation
Profit for the year after tax attributable to equity
holders of the parent
Other comprehensive income
Items that are or may be reclassified subsequently to
profit or loss
Foreign exchange translation differences
- Exchange differences on foreign branch
Profit for the financial year and total comprehensive
income all attributable to equity holders of the
parent
Note
2017
£’000
2016
£’000
2
3
5
4
4
4
4
6
7
77,587
67,061
445
(45,558)
(1,291)
(17,871)
442
(38,951)
(687)
(16,605)
13,312
11,260
14,928
12,928
(325)
(1,291)
-
-
(199)
(125)
(687)
(101)
(755)
(226)
13,113
11,034
(3,058)
(2,448)
10,055
8,586
81
-
10,136
8,586
Statutory Earnings per share
Basic
Diluted
8
8
9.43p
9.35p
8.18p
8.18p
The results for the periods presented above are derived from continuing operations. There were no other items of
comprehensive income to report.
The accompanying notes on pages 34 to 66 for an integral part of these financial statements.
30
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Consolidated statement of financial position
at 30 April 2017
Note
Non-current assets
Property, plant and equipment
Investment property
Intangible assets & goodwill
Other investments
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Non-current liabilities
Other interest-bearing loans and borrowings
Other payables
Deferred tax liability
Provisions
Total non-current liabilities
Current liabilities
Other interest-bearing loans and borrowings
Trade and other payables
Provisions
Current tax liabilities
Total current liabilities
Total liabilities
NET ASSETS
EQUITY
Share capital
Share premium
Merger reserve
Other reserve
Treasury reserve
Translation reserve
Retained earnings
TOTAL EQUITY
10
11
12
13
14
15
16
17
18
15
16
18
19
2017
£’000
2,160
164
3,842
85
6,251
2016
£’000
1,478
164
2,515
85
4,242
39,086
2,696
33,696
9,795
41,782
43,491
48,033
47,733
(4,958)
-
(239)
(381)
(7,438)
(154)
(200)
(339)
(5,578)
(8,131)
(2,531)
(20,629)
(210)
(1,655)
(6,583)
(18,597)
(257)
(1,441)
(25,025)
(26,878)
(30,603)
(35,009)
17,430
12,724
10,688
4,332
(9,950)
1,547
(132)
81
10,864
17,430
10,640
4,332
(9,950)
1,013
(27)
-
6,716
12,724
These financial statements were approved by the directors on 10 July 2017 and were signed and
authorised for issue on their behalf by:
Michael J Ward
Chief Executive Officer
Neil A Smith
Finance Director
Company registered number: 09310078
The accompanying notes on pages 34 to 66 for an integral part of these financial statements.
31
Consolidated statement of changes in equity
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Share
capital
Share
premium
Merger
reserve
Other
reserve
Treasury
reserve
Retained
earnings
£’000
£’000
£’000
£’000
£’000
£’000
10,000
-
-
640
-
-
-
-
-
-
4,482
(150)
-
-
(9,950)
-
-
-
-
-
-
-
-
1,013
-
-
-
-
-
-
8,586
(27)
-
-
-
-
-
-
-
(1,995)
125
10,640
4,332
(9,950)
1,013
(27)
6,716
10,640
4,332
(9,950)
1,013
(27)
6,716
-
-
-
-
-
-
-
-
-
48
-
-
10,688
-
-
-
-
4,332
-
-
-
-
-
-
-
(9,950)
-
-
-
-
-
534
-
-
1,547
-
-
-
(164)
59
-
-
-
(132)
10,055
-
10,055
-
110
-
-
(6,342)
325
10,864
Foreign
currency
translation
reserve
£’000
-
-
-
-
-
-
-
-
-
-
81
81
-
-
-
-
-
-
81
Total
equity
£’000
50
8,586
(27)
6,135
(150)
(1,995)
125
12,724
12,724
10,055
81
10,136
(164)
110
59
582
(6,342)
325
17,430
owners
with
At 1 May 2015
Comprehensive income:
Profit for the year
Transactions
recognised directly in equity:
Repurchase of
treasury shares
Issue of shares
Share issue costs
Dividend paid
Share based
payment transactions
Total equity at 30
April 2016
with
owners
At 1 May 2016
Comprehensive income:
Profit for the year
Exchange rate differences
Total comprehensive income
Transactions
recognised directly in equity:
Repurchase of
treasury shares
Cash gain into employee benefit
trust from lock in arrangements
Sale of treasury shares
Issue of shares
Dividend paid
Share based payment transactions
Total equity at 30
April 2017
The following describes the nature and purpose of each reserve within equity:
Share premium – Amount subscribed for share capital in excess of nominal value.
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.
On 29 May 2015, the Company acquired 100% of the issued share capital of Gateley Plc which had, on the same day, acquired the
business assets and liabilities of Gateley Heritage LLP, formerly the partnership of Gateley LLP. Following this Group
reorganisation the financial statements for the year ended 30 April 2016 have been prepared on a merger accounting basis as
though this Group structure had always been in place and a full twelve month set of results are therefore presented. The first day of
trading of the Group included in this statement was therefore 1 May 2015.
Although the share for share exchange resulted in a change of legal ownership, in substance these financial statements reflect the
continuation of the pre-existing group, headed by Gateley LLP
The accompanying notes on pages 34 to 66 for an integral part of these financial statements.
.
32
Consolidated cash flow statement
for year ended 30 April 2017
Cash flows from operating activities
Profit for the year after tax
Adjustments for:
Depreciation and amortisation
Financial income
Financial expense
Equity settled share based payments
Profit on disposal of property, plant and equipment
Tax expense
Increase in trade and other receivables
Increase in trade and other payables
Increase in provisions
Cash generated from operations
Tax paid
Net cash flows from operating activities
Investing activities
Acquisition of property, plant and equipment
Purchase of other investments
Consideration paid on acquisition of subsidiary
Cash received on acquisition of subsidiary
Proceeds from sale of property, plant and equipment
Net cash used in investing activities
Financing activities
loans
Issue of ordinary shares, net of issue costs
Interest and other financial income paid
Proceeds from new term bank loans
Repayment of term bank loans/borrowings
Repayment of
Heritage LLP
Repayment of fixed capital from former members of Gateley
Heritage LLP
Cash received from lock in arrangements
Acquisition of own shares
Dividends paid
Payment of finance lease liabilities
former members of Gateley
from
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Note
10/12
6
6
7
10
13
26
26
19
6
15
15
15
15
9
15
2017
£’000
10,055
1,291
(237)
436
325
2
3,058
14,930
(5,041)
636
(5)
10,520
(2,844)
7,676
(1,485)
-
(508)
280
-
2016
£’000
8,586
687
(265)
491
125
(8)
2,448
12,064
(1,387)
4,605
59
15,341
(1,007)
14,334
(670)
(15)
(1,592)
350
16
(1,713)
(1,911)
-
(183)
-
(1,980)
(4,552)
-
159
(164)
(6,342)
-
4,910
(226)
9,907
(989)
(10,153)
(6,717)
-
(27)
(1,995)
(57)
Net cash used in financing activities
(13,062)
(5,347)
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(7,099)
9,795
2,696
7,076
2,719
9,795
The accompanying notes on pages 34 to 66 for an integral part of these financial statements.
33
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes
(forming part of the financial statements)
1
Basis of preparation and significant accounting policies
Gateley (Holdings) Plc is a Company incorporated and domiciled in the United Kingdom. The Company
was incorporated on 13 November 2014.
The Group financial statements consolidate those of the Company and its subsidiaries (together referred
to as the “Group”). The parent company financial statements present information about the Company as
a separate entity and not about its group.
The Group and Company financial statements have been prepared and approved by the directors in
accordance with the Companies Act 2006 and International Financial Reporting Standards as adopted by
the EU (“Adopted IFRSs”).
The accounting policies set out below have, unless otherwise stated, been applied consistently to all
periods presented in these Group financial statements
Judgements made by the Directors, in the application of these accounting policies that have significant
effect on the financial statements and estimates with a significant risk of material adjustment in the next
year are discussed in note 24.
1.1
Measurement convention
The financial statements are prepared on the historical cost basis except where Adopted IFRSs require
an alternative treatment. The principal variations relate to investment properties and financial instruments
which are carried at fair value.
1.2
Going concern
The Group financial statements are prepared on a going concern basis as the Directors have a
reasonable expectation that the Group has adequate resources to continue in operational existence for
the foreseeable future. The Group remains cash generative, with a strong ongoing trading performance.
The Group is funded through two unsecured term loans for £5m each repayable quarterly over five years
commencing in December 2015 together with unsecured overdraft facilities of up to £5m. All of the
Group’s overdraft facilities are 12 months in duration. The term loan facilities contain financial covenants
which have been met throughout both periods. The Group’s forecasts and projections show that the new
facility provides adequate headroom for its current and future anticipated cash requirements.
1.3
Basis of consolidation
On 29 May 2015, the Company acquired 100 per cent of the issued share capital of Gateley Plc which
had, on the same day, acquired the business assets and liabilities of Gateley Heritage LLP, formerly the
partnership of Gateley LLP. Following this Group reorganisation the financial statements for the year
ended 30 April 2016 were prepared on a merger accounting basis as though this Group structure had
always been in place and a full 12 month set of results are therefore presented. The first day of trading of
the Group included in the comparatives was therefore 1 May 2015.
Although the share for share exchange resulted in a change of legal ownership, in substance these
financial statements reflect the continuation of the pre-existing group, headed by Gateley LLP.
34
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
1
Basis of preparation and significant accounting policies (continued)
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or
has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. In assessing control, the Group takes into consideration potential voting
rights that are currently exercisable. The acquisition date is the date on which control is transferred to the
acquirer. The financial statements of subsidiaries are included in the consolidated financial statements
from the date that control commences until the date that control ceases. Losses applicable to the non-
controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes
the non-controlling interests to have a deficit balance.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group
transactions, are eliminated. Unrealised gains arising from transactions with equity-accounted investees
are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised
losses are eliminated in the same way as unrealised gains, but only to the extent that there is no
evidence of impairment.
1.4
Foreign currency
Transactions in foreign currencies are translated to the functional currency of the Group at the foreign
exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign
currencies at the statement of financial position date are retranslated to the functional currency at the
foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are
recognised in the consolidated statement of profit and loss. Non-monetary assets and liabilities that are
measured in terms of historical cost in a foreign currency are translated using the exchange rate at the
date of the transaction.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on
consolidation, are translated to the Group’s presentational currency, sterling, at foreign exchange rates
ruling at the statement of financial position date. The revenues and expenses of foreign operations are
translated at an average rate for the year where this rate approximates to the foreign exchange rates
ruling at the dates of the transactions.
Exchange differences arising from the translation of foreign operations are reported as an item of other
comprehensive income and accumulated in the translation reserve.
1.5
Classification of financial instruments issued by the Group
Financial instruments issued by the Group are treated as equity only to the extent that they meet the
following two conditions:
(a)
they include no contractual obligations upon the Group to deliver cash or other financial assets or
to exchange financial assets or financial liabilities with another party under conditions that are
potentially unfavourable to the Group; and
(b) where the instrument will or may be settled in the company’s own equity instruments, it is either a
non-derivative that includes no obligation to deliver a variable number of the company’s own equity
instruments or is a derivative that will be settled by the company’s exchanging a fixed amount of
cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the financial instruments (including members’ capital) are
classified as a financial liability. Profit distributions relating to equity instruments are debited direct to
equity.
35
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
1
Basis of preparation and significant accounting policies (continued)
1.6
Non derivative financial instruments
Financial Assets
The Group's financial assets include cash and cash equivalents and trade and other receivables. All
financial assets are recognised when the Group becomes party to the contractual provisions of the
instrument.
i)
Investments
Other investments in debt and equity securities held by the Group are classified as being available-for-
sale and are stated at fair value, with any resultant gain or loss being recognised directly in equity (in the
fair value reserve), except for any dividend income, impairment losses and, in the case of monetary items
such a debt securities, foreign exchange gains and losses which are recognised in the profit and loss
account. When these investments are derecognised, the cumulative gain or loss previously recognised
directly in equity is recognised in profit or loss. Where these investments are interest-bearing, interest
calculated using the effective interest method is recognised in profit or loss.
ii)
Trade and other receivables
Trade and other receivables (except unbilled amounts for client work) are recognised and carried at
original invoice amount less provision for impairment.
A provision for impairment of trade receivables is established when there is objective evidence that the
Group may not be able to collect all amounts due according to the original terms of receivables. The
amount of the provision is determined as the difference between the asset's carrying amount and the
present value of estimated future cash flows, and is recognised in the statement of profit and loss in other
operating expenses.
iii) Unbilled amounts for client work (unbilled revenue)
Services provided to clients, which at the year-end date have not been billed, are recognised as unbilled
revenue and included in trade and other receivables.
Unbilled revenue is valued at selling price less provision for any foreseeable under recovery when the
outcome of the matter can be assessed with reasonable certainty. In respect of conditional or contingent
fee engagements unbilled revenue is only recognised once the conditional or contingent event occurs.
iv) Cash and cash equivalents
Cash and cash equivalents includes cash in hand and deposits held at call with banks. For the purpose of
the consolidated cash flow statement, cash and cash equivalents includes bank overdrafts in addition to
the definition above.
v)
Treasury shares
The Group operates an Employee Benefit Trust (“EBT”) under which ordinary shares have been issued
and are held by the EBT. These are treated as treasury shares and are added to the Treasury Share
Reserve.
36
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
1
Basis of preparation and significant accounting policies (continued)
Financial Liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual
arrangements entered into. An equity instrument is any contract that evidences a residual interest in the
assets of the Group after deducting all of its liabilities.
The Group's financial liabilities comprise trade and other payables, borrowings, members’ capital and
amounts due to members. All financial liabilities are recognised initially at their fair value and
subsequently measured at amortised cost using the effective interest method.
i)
Bank borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received net of issue
costs associated with the borrowing. Borrowings are subsequently stated at amortised cost; any
difference between the proceeds (net of transaction costs) and the redemption value is recognised in the
statement of profit and loss over the period of the borrowings using the effective interest method
Financial expenses comprise interest expense on borrowings.
ii)
Trade and other payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost,
using the effective interest rate method.
iii)
Loans from former members
Loans from former members, measured at amortised cost, comprise of undrawn surplus profits and tax
provisions owed to former members of Gateley Heritage LLP which were converted into unsecured loans
upon admission to the AIM market. Interest is chargeable at 0.5% over Bank of England base rate. The
business has full discretion over the timing of repayment of such loans.
1.7
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated
impairment losses.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted
for as separate items of property, plant and equipment.
Leases in which the Group assumes substantially all the risks and rewards of ownership of the leased
asset are classified as finance leases. Where land and buildings are held under leases, the accounting
treatment of the land is considered separately from that of the buildings. Leased assets acquired by way
of finance lease are stated at an amount equal to the lower of their fair value and the present value of the
minimum lease payments at inception of the lease, less accumulated depreciation and less accumulated
impairment losses.
Depreciation is charged to the consolidated statement of profit and loss on a straight-line basis over the
estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives
are as follows:
Leasehold improvements
Equipment
Fixtures and fittings
over the term of the lease
33.3% straight line
20% straight line
Depreciation methods, useful lives and residual values are reviewed at each statement of financial
position date.
37
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
1
Basis of preparation and significant accounting policies (continued)
1.8
Business combinations
Subject to the transitional relief in IFRS 1, all business combinations are accounted for by applying the
acquisition method. Business combinations are accounted for using the acquisition method as at the
acquisition date, which is the date on which control is transferred to the Group.
Acquisitions on or after 1 January 2010
• For acquisitions on or after 1 January 2010, the Group measures goodwill at the acquisition date
as:
•
•
•
•
the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in the acquiree; plus
the fair value of the existing equity interest in the acquiree; less
the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities
assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities,
are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent
consideration is classified as equity, it is not remeasured and settlement is accounted for within equity.
Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit
or loss.
On a transaction-by-transaction basis, the Group elects to measure non-controlling interests, which have
both present ownership interests and are entitled to a proportionate share of net assets of the acquiree in
the event of liquidation, either at its fair value or at its proportionate interest in the recognised amount of
the identifiable net assets of the acquiree at the acquisition date. All other non-controlling interests are
measured at their fair value at the acquisition date.
1.9
Intangible assets and goodwill
Goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-
generating units and is not amortised but is tested annually for impairment. In respect of equity accounted
investees, the carrying amount of goodwill is included in the carrying amount of the investment in the
investee.
Other intangible assets
Expenditure on internally generated goodwill and brands is recognised in the income statement as an
expense as incurred.
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation
and accumulated impairment losses.
Customer lists that are acquired by the Group as part of a business combination are stated at cost less
accumulated amortisation and impairment losses (see accounting policy ‘Impairment of assets’). Cost
reflects management’s judgement of the fair value of the individual intangible asset calculated by
reference to the net present value of future benefits accruing to the Group from the utilisation of the asset,
discounted at an appropriate discount rate.
38
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
1
Basis of preparation and significant accounting policies (continued)
Amortisation
Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of
intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life and
goodwill are systematically tested for impairment at each statement of financial position date. Other
intangible assets are amortised from the date they are available for use. The estimated useful lives are as
follows:
Customer lists
10 years
1.10
Investment property
Investment properties are properties which are held either to earn rental income or for capital appreciation
or for both. Investment properties are stated at fair value. Any gain or loss arising from a change in fair
value is recognised in profit or loss.
1.11
Impairment excluding investment properties
Financial assets (including receivables)
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to
determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective
evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the
loss event has a negative effect on the estimated future cash flows of that asset that can be estimated
reliably.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the
difference between its carrying amount and the present value of the estimated future cash flows
discounted at the asset’s original effective interest rate. Interest on the impaired asset continues to be
recognised through the unwinding of the discount. When a subsequent event causes the amount of
impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
Intangibles and property, plant and equipment
The carrying amount of the Group’s assets including property, plant and equipment and intangibles other
than goodwill is reviewed at each year end date to determine whether there is any indication of
impairment. If any such indication exists, the asset’s recoverable amount is estimated.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit
exceeds its recoverable amount. Impairment losses are recognised in profit or loss. Where an
impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount
does not exceed the carrying amount that would have been determined had no impairment loss been
recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is
recognised in profit or loss where it relates to an amount charged to profit or loss.
Goodwill
Goodwill is capitalised as an intangible asset and is not amortised but tested for impairment annually and
when there are any indications that its carrying value is not recoverable. As such, goodwill is stated at
cost less any provision for impairment in value. For impairment testing purposes, goodwill is allocated to
cash-generating units. If a subsidiary undertaking is subsequently sold, goodwill arising on acquisition is
taken into account in determining the profit or loss on sale.
39
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
1
Basis of preparation and significant accounting policies (continued)
1.12
Employee benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which the company pays fixed
contributions into a separate entity and will have no legal or constructive obligation to pay further
amounts. Obligations for contributions to defined contribution pension plans are recognised as an
expense in the statement of profit and loss in the periods during which services are rendered by
employees.
Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as
the related service is provided. A liability is recognised for the amount expected to be paid under short-
term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay
this amount as a result of past service provided by the employee and the obligation can be estimated
reliably.
Share-based payment transactions
The Group operates an equity settled share based compensation plan.
The grant date fair value of share-based payment awards made to employees is recognised as an
employee expense, with a corresponding increase in equity, over the period that the employees become
unconditionally entitled to the awards. The fair value of the options granted is measured using an option
valuation model, taking into account the terms and conditions upon which the options were granted.
The amount recognised as an expense is adjusted to reflect the actual number of awards for which the
related service and non-market vesting conditions are expected to be met, such that the amount
ultimately recognised as an expense is based on the number of awards that meet the related service and
non market performance conditions at the vesting date, measured at the grant date fair value of the
award.
At each reporting date, the group revises its estimates of the number of share incentives which are
expected to vest. The impact of the revision of original estimates is recognised in the income statement
with a corresponding adjustment to equity.
1.13 Own shares held by EBT trust (treasury reserve)
Transactions of the group-sponsored EBT trust are included in the group financial statements. In
particular, the trust’s purchases and sales of shares in the Company are debited and credited directly to
equity.
1.14
Professional indemnity provisions
A provision is recognised in the statement of financial position when the Group has a present legal or
constructive obligation as a result of a past event, that can be reliably measured and it is probable that an
outflow of economic benefits will be required to settle the obligation. Where material, the impact of the
time value of money is taken into account by discounting the expected future cash flow at a pre-tax rate,
which reflects risks specific to the liability.
Insurance cover is maintained in respect of professional negligence claims. This cover is principally
written through insurance companies with a coverage of up to £150 million for each claim. Premiums are
expensed as they fall due with prepayments or accruals being recognised accordingly.
In the event the insurance companies cannot settle the full liability, the liability will revert to the Group.
40
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
1
Basis of preparation and significant accounting policies (continued)
1.15 Revenue recognition
Revenue
Revenue represents the fair value of the consideration receivable in respect of professional services provided
during the year, inclusive of recoverable expenses incurred on client assignments but excluding value added
tax. Where the outcome of a transaction can be estimated reliably, revenue associated with the transaction is
recognised in the income statement by reference to the stage of completion at the year end, provided that
a right to consideration has been obtained through performance. Consideration accrues as contract
activity progresses by reference to the value of work performed.
Where the outcome of a transaction cannot be estimated reliably, revenue is recognised only to the extent
that the costs of providing the service are recoverable. No revenue is recognised where there are significant
uncertainties regarding recovery of the consideration due or where the right to receive payment is contingent on
events outside the control of the group. Amounts deemed to be recoverable on the engagement (on the
basis above) are recognised in unbilled revenue and form part of Trade and other receivables.
Recoverable expenses and disbursements represent charges from other professional service firms,
sub-contractors and out of pocket expenses incurred in respect of assignments and expected to be
recovered from clients.
Rental income is recognised on a straight line basis over the lease term.
1.16 Operating lease payments
Payments made under operating leases are recognised in the statement of profit and loss on a straight-
line basis over the term of the lease. Lease incentives received are recognised in the statement of profit
and loss over the term of the lease as an integral part of the total lease expense.
1.17
Financial income and expenses
Financial expenses comprise interest payable and exchange losses that are recognised in the statement
of profit and loss. Financial income comprises interest receivable on funds invested and exchange gains.
Interest income and interest payable is recognised in profit or loss as it accrues, using the effective
interest method.
1.18
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income
statement except to the extent that it relates to items recognised directly in equity, in which case it is
recognised in equity.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax
rates and laws enacted or substantively enacted at the statement of financial position date, and any
adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. The following temporary
differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities
that affect neither accounting nor taxable profit other than in a business combination, and differences
relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable
future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of
the carrying amount of assets and liabilities, using tax rates and laws enacted or substantively enacted at
the statement of financial position date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be
available against which the temporary difference can be utilised.
41
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
1
Basis of preparation and significant accounting policies (continued)
1.19 Non-underlying items
Non-underlying items are non-trading items disclosed separately in the Consolidated Income Statement
where the quantum, nature or volatility of such items would otherwise distort the underlying trading
performance of the Group. The following are included by the Group in its assessment of non-underlying
items:
• Gains or losses arising on disposal, closure, restructuring or reorganisation of businesses that do
not meet the definition of discontinued operations.
Impairment charges in respect of tangible or intangible fixed assets.
• Expenses associated with acquisitions.
•
• Costs incurred as part of significant refinancing activities.
• Significant costs in relation to the IPO.
The tax effect of the above is also included if considered significant.
Details in respect of the non-underlying items recognised in the current and prior year are set out in note
4 to the Financial Statements.
1.20 Ordinary dividends
Dividends are recognised as a liability in the period in which they are approved by the Company’s
shareholders.
1.21 Adopted IFRS not yet applied
The following Adopted IFRSs have been issued and endorsed by the EU but have not been applied by
the Group in these financial statements. Their adoption is not expected to have a material effect on the
financial statements (other than IFRS 15 and IFRS 16):
Endorsed:
● IFRS 15 – Revenue from contracts with customer (effective from 1 January 2018)
● IFRS 9 - Financial instruments
Not yet endorsed by EU and included as may be relevant:
● IFRS 16 – Leases
● Amendments to IAS 12 – Recognition of Deferred Tax Assets for Unrealised losses
● Amendments to IFRS 2 – Classification and measurement of share-based payment transactions
● Amendments to IAS 40 – Transfer of investment property
● IFRIC Interpretation 22 - Foreign currency transactions and advance considerations
There are other standards in issue which are not considered applicable and are not expected to have an
impact on the Company and have therefore not been included in the list above. Both IFRS 15 and IFRS
16 are expected to require amendments for operating revenue and operating leases however
management are undertaking an exercise to determine the impact on results and have not yet quantified
this.
The directors have not yet calculated the impact that the adoption of the other Standards and
Interpretations noted in future periods will have.
42
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
2
Operating segments
The Chief Operating Decision Maker (“CODM”) is the Strategic Board. The Group have the following five
strategic divisions, which are its reportable segments. These divisions offer different products and
services and are managed separately because they report different specialisms from the legal teams in
those divisions.
The following summary describes the operations of each reportable segment:
Reportable segment
Operations
Banking and Financial Services
Corporate
Business Services
Employees, Pensions and Benefits
Property
Provision of legal advice in respect of asset finance, banking
and restructuring services
Provision of legal advice in respect of corporate, family, private
client and taxation services
Provision of legal advice in respect of commercial, commercial
dispute resolution, litigation, regulatory, shipping, transport and
insurance services
Provision of legal advice in respect of employment and pension
services, including Entrust Pension Limited’s trustee services.
Provision of legal advice in respect of construction, planning,
real estate and residential development services. Also includes
Gateley Capitus Limited’s property related tax incentive
services together with Gateley Hamer Limited’s easement and
wayleave and compulsory purchase order services.
The revenue and operating profit are attributable to the principal activities of the Group. A geographical
analysis of revenue is given below:
United Kingdom
Europe
Middle East
North and South America
Asia
Other
2017
£’000
73,711
1,870
712
372
416
506
77,587
2016
£’000
63,180
2,288
443
275
346
529
67,061
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 branch. Net assets of £0.4m (2016: £0.2m)
together with costs of £1.6m (2016: £1.2m) are located in the Group's Dubai branch. Revenue generated
by the Group's Dubai branch to customers in the UAE totalled £712,000 (2016: £443,000) as disclosed
above as due to the customers in the Middle East.
The Group has no individual customers that represent more than 10% of revenue in either the 2017 or
2016 financial year.
43
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
2
Operating segments (continued)
2017
Segment revenue
Segment contribution (as reported internally)
Costs not allocated to segments:
Other operating income
Personnel costs
Depreciation and amortisation
Other operating expenses
Net financial expense
Profit for the financial year before taxation and
non-underlying items
2016
Segment revenue
Segment contribution (as reported internally)
Costs not allocated to segments
Other operating income
Personnel costs
Depreciation and amortisation
Other operating expenses
Net financial expense
Profit for the financial year before taxation and
non-underlying items
Banking and
Financial
Services
Corporate Business
Services
£’000
15,146
6,306
£’000
14,074
4,082
£’000
10,946
4,542
Employee
Pensions
and
Benefits
£’000
7,130
2,645
Property
Total
segments
£’000
28,562
12,978
£’000
75,858
30,553
Other expense
and movement
in unbilled
revenue
£’000
1,729
1,729
Banking and
Financial
Services
Corporate Business
Services
£’000
13,550
6,304
£’000
11,345
3,157
£’000
10,295
4,037
Employee
Pensions
and
Benefits
£’000
7,273
2,456
Property
Total
segments
£’000
22,349
10,132
£’000
64,812
26,086
Other expenses
and movement
in unbilled
revenue
£’000
2,249
2,249
No other financial information has been disclosed as it is not provided to the CODM on a regular basis.
Total
£’000
77,587
32,282
445
(5,391)
(1,282)
(12,742)
(199)
13,113
Total
£’000
67,061
28,335
442
(3,882)
(687)
(12,092)
(226)
11,890
44
Notes (continued)
3
Other operating income
Rental income
Other investment income
4
Expenses and auditor’s remuneration
Included in profit are the following:
Depreciation on tangible assets
Amortisation of intangible assets
Operating lease costs
Operating lease costs on property
Other operating income – rent received
Foreign exchange (gains)/losses
Loss/(profit) on sale of fixed assets
Non-underlying items and IFRS transition adjustments
Listing costs
One-off professional costs
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
2017
£’000
396
49
445
2017
£’000
819
472
230
3,094
(275)
(43)
2
2017
£’000
-
-
-
2016
£’000
326
116
442
2016
£’000
687
-
220
2,722
(326)
4
(8)
2016
£’000
755
101
856
Non-underlying items in the prior year relate to one-off professional costs in respect of the Group’s future
strategy, on-going lease restructuring costs of certain offices together with additional costs resulting from
the release of operating lease incentives in accordance with IFRS, whereby lease incentives are now
recognised over the full term of the lease.
Non-underlying items in the current year relate to expenses incurred in respect of the Company's
admission to the AIM market of the London Stock Exchange.
45
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
4
Expenses and auditor’s remuneration (continued)
Auditor’s remuneration
Audit of these financial statements
Amounts receivable by the Company’s auditor and its associates in
respect of:
Audit of financial statements of subsidiaries of the Company
Other assurance services
Corporate finance services
Tax compliance services
2017
£’000
55
19
26
-
11
2016
£’000
92
15
92
300
33
5
Employees
The average number of persons employed by the Group during the year, analysed by category, was as
follows:
Legal and professional staff
Administrative staff
The aggregate payroll costs of these persons were as follows:
Wages and salaries
Share based payments expenses
Social security costs
Pension costs
Number of employees
2016
2017
457
239
696
392
230
622
2017
£’000
40,458
325
4,075
700
45,558
2016
£’000
34,733
125
3,491
602
38,951
Details of the Directors’ remuneration and share interests are given in the Directors’ Remuneration Report
on pages 17 to 20.
46
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
6
Financial income and expense
Recognised in profit and loss
Financial income
Interest income
Total finance income
Financial expense
Interest expense on bank borrowings measured at amortised cost
Total financial expense
Net financial expense
7
Taxation
Current tax expense
Current tax on profits for the year
Under provision of taxation in previous period
Total current tax
Deferred tax expense
Origination and reversal of temporary differences
Total tax expense
2017
£’000
237
237
2016
£’000
265
265
(436)
(436)
(491)
(491)
(199)
(226)
2017
£’000
3,069
84
3,153
(95)
3,058
2016
£’000
2,448
-
2,448
-
2,448
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:
2017
£’000
2016
£’000
Profit for the year (subject to corporation tax)
13,428
11,034
Tax using the Company’s domestic tax rate of 20% (2016 – 20%)
Expenses not deductible for tax purposes
Under provision of taxation in previous period
Total tax expense
2,686
288
84
3,058
2,207
241
-
2,448
Reductions in the UK corporation tax rate to 20% (effective from 1 April 2015) were substantively enacted
on 2 July 2013. Further reductions to 19% (effective from 1 April 2017) and to 18% (effective 1 April
2020) were substantively enacted on 26 October 2015. The deferred tax liability at 30 April 2016 has
been calculated based on these rates. An additional reduction to 17% (effective from 1 April 2020) was
announced in the Budget on 16 March 2016. This will reduce the Company's future current tax charge
accordingly
47
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
8
Earnings per share
Statutory earnings per share
2017
Number
2016
Number
Weighted average number of ordinary shares in issue, being weighted
106,663,150
104,928,209
average number of shares for calculating basic earnings per share
Shares deemed to be issued for no consideration in respect of share
759,599
-
based payments
Weighted average number of ordinary shares for calculating diluted
106,422,749
104,928,209
earnings per share
Profit for the year and basic earnings attributable to ordinary equity
10,055
shareholders
2017
£’000
Non-underlying items (see note 4)
Operating expenses and finance costs
Tax on non-underlying items
Underlying earnings before non-underlying items
Earnings per share is calculated as follows:
Basic earnings per ordinary share
Diluted earnings per ordinary share
Basic earnings per ordinary share after non-underlying items
Diluted earnings per ordinary share after non-underlying items
-
-
10,055
2017
pence
9.43
9.35
9.43
9.35
2016
£’000
8,586
856
(20)
9,422
2016
pence
8.18
8.18
8.98
8.98
Underlying earnings per share have been shown because the Directors consider that this provides
valuable additional information about the underlying performance of the Group.
9
Dividends
Equity shares:
Interim dividend in respect of 2016 (1.895p per share) – 22 January 2016
Final dividend in respect of 2016 (3.746p per share) – 28 September 2016
Interim dividend in respect of 2017 (2.2p per share) – 3 March 2017
2017
£’000
-
3,996
2,346
6,342
2016
£’000
1,995
-
-
1,995
The Board proposes to recommend a final dividend of 4.4p (2016: 3.746p) per share at the AGM. If
approved, this dividend will be paid in early October 2017 to shareholders on the register at the close of
business on 8 September 2017. The shares will go ex-dividend on 7 September 2017. This dividend has
not been recognised as a liability in these final statements.
48
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
10
Property, plant and equipment
Cost
Balance at 1 May 2015
Arising on acquisition
Additions
Disposals and write offs
Balance at 30 April 2016
Balance at 1 May 2016
Arising on acquisition
Additions
Disposals
Balance at 30 April 2017
Depreciation and impairment
Balance at 1 May 2015
Arising on acquisition
Depreciation charge for the year
Disposals
Balance at 30 April 2016
Balance at 1 May 2016
Arising on acquisition
Depreciation charge for the year
Disposals
Balance at 30 April 2017
Net book value
At 30 April 2016
At 30 April 2017
Leasehold
improvements
£’000
Equipment
£’000
Fixtures and
fittings
£’000
Total
£’000
151
4,668
4,634
9,453
-
-
-
151
151
-
75
-
226
28
-
9
-
37
37
-
22
-
59
114
167
6
433
(2,151)
2,956
-
237
(1,288)
3,583
2,956
3,583
39
807
(4)
-
603
-
3,798
4,186
6
670
(3,439)
6,690
6,690
39
1,485
(4)
8,210
4,176
3,750
7,954
2
322
(2,141)
2,359
-
356
(1,290)
2,816
2
687
(3,431)
5,212
2,359
2,816
5,212
21
464
(2)
-
333
-
21
819
(2)
2,842
3,149
6,050
597
956
767
1,478
1,037
2,160
49
Notes (continued)
11
Investment property
Fair value
Balance at 1 May 2015 and 30 April 2016
Balance at 1 May 2016 and 30 April 2017
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
£’000
164
164
The Group’s interest in its freehold property at 216 Capella House, Celestia Falcon Drive, Cardiff Bay,
Cardiff, CF10 4RE was valued as at 30 April 2017 at £164,000 (2016: £164,000) by the Directors based
on current open market values for existing use. However, it was noted that a valuation by a qualified
individual with relevant experience has not been performed during the year on the basis that it is not
expected by the Directors to have materially changed.
12
Intangible assets and goodwill
Deemed cost
At 1 May 2015
Acquisitions through business combinations
At 30 April 2016
Acquisitions through business combinations
At 30 April 2017
Amortisation
At 1 May 2015 at 30 April 2016
Charge for the year
At 30 April 2017
Carrying amounts
At 30 April 2016
At 30 April 2017
Goodwill
£’000
-
1,515
1,515
1,161
2,676
-
-
-
1,515
2,676
Customer
lists
£’000
-
1,000
1,000
638
1,638
-
472
472
1,000
1,166
Total
£’000
-
2,515
2,515
1,799
4,314
-
472
472
2,515
3,842
50
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
12
Intangible assets and goodwill (continued)
Impairment testing
The Group tests goodwill annually for impairment. The impairment test involves determining the
recoverable amount of the cash generating unit 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. All of the
goodwill is allocated to the property cash generating unit. 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 15% was applied in determining the recoverable amount. The discount
rate is based on the average weighted cost of capital
• 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 internal sources (existing management knowledge, track record and an in-depth
understanding of the work types being performed).
o Growth rates of between 10-20% are based on management’s understanding of the
market opportunities for services provided pertaining to the industry concerned.
o
Increases in costs are based on current inflation rates and expected levels of recruitment
needed to generate predicted turnover growth.
o Attrition rates are based on the expected level of fees from existing clients as a
percentage of total forecast fees
o Cashfows have been assessed over a five year period which management consider to be
the correct average life of clients relationships
• The review demonstrated significant headroom such that the estimated carrying value is not
sensitive to changes in assumptions. Having reviewed the key assumptions used, the Directors
do not believe that there is a reasonably possible change in any of the key assumptions that
require further disclosure
13 Other investments
The Group holds other investment interests in the following third party investments:
Fair value
Balance at 1 May 2015
Additions
Balance at 30 April 2016
Balance at 1 May 2016
Additions
Balance at 30 April 2017
£’000
70
15
85
85
-
85
£30,000 - Gateley Investments Limited holds a 5% investment interest in the ordinary shares of Mantua
Capital Limited.
£40,000 - Gateley Plc holds a 1% investment in the ordinary shares of Business Collaborator Limited.
£15,000 – Gateley Investments Limited holds a 1.9% investment in the ordinary shares of PeptigelDesign
Ltd.
Management believe the fair value of all investments remains in line with costs paid for such investments.
As other investments are holdings in unquoted companies the directors consider that the fair value of investments
cannot be reliably measured. As such other investments are carried at cost.
51
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
13
Other investments (continued)
Investments in subsidiaries
The Group has effective control of the following:
Gateley Plc
Entrust Pension Limited
Gateley Capitus Limited
Gateley Hamer Limited (formerly Hamer
Associates Limited)
Gateley EBT Limited
Gateley Investments Limited
Ensco Trustee Company Limited
Gateley Secretaries Limited
Gateley Incorporations Limited
Gateley Custodian and Nominee Services
Limited
Gateley Custodian and Nominee Services
No.2 Limited
Gateley Heritage LLP
Gateley UK LLP
Gateley (Manchester) LLP
Country of
incorporation
England and
Wales
England and
Wales
England and
Wales
England and
Wales
England and
Wales
England and
Wales
England and
Wales
England and
Wales
England and
Wales
England and
Wales
England and
Wales
Country of
incorporation
England and
Wales
England and
Wales
England and
Wales
Nature of business
Ordinary share
proportion held
during year to
30 April 2017
100%
Legal services
100%
Pension trustee services
100%
Tax incentive services
100%
Specialist property consultancy
100%
Employee benefit trust
100%*
Corporate investment company
100%*
Corporate trustee company
100%*
Non-trading
100%*
Non-trading
100%*
Non-trading
100%*
Non-trading
Nature of business
Controlling
interest held
during year to
30 April 2017
100%*
Non-trading
100%**
51%*
Legal services via a branch in
Dubai
Non-trading
*
**
these investments are indirectly held at the year end
certain Group directors of Gateley (Holdings) Plc as individuals are members of this entity,
although effective control is held by Gateley Holdings Plc via a trust holding arrangement
On 15 September 2016, the Company acquired 100% of the share capital of Gateley Hamer Limited
(formerly Hamer Associates Limited). Details of consideration paid can be found at note 26.
During the year, Gateley (Manchester) LLP became dormant.
52
Notes (continued)
14
Trade and other receivables
Trade receivables
Unbilled revenue
Prepayments
All trade receivables are repayable within one year.
Movement in the allowance for doubtful receivables
Brought forward provision
Provision utilised
Charged to income
Provisions released
Receivables not impaired past due
Not past due
Past due 0-30 days
Past due 31-120 days
Past due greater than 120 days
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
2017
£’000
26,132
10,487
2,467
2016
£’000
20,759
9,881
3,056
39,086
33,696
2017
£’000
(1,792)
302
(815)
294
2016
£’000
(1,828)
555
(913)
394
(2,011)
(1,792)
2017
£’000
18,464
1,864
3,212
4,603
2016
£’000
13,074
1,480
3,303
4,694
28,143
22,551
The carrying amount of financial assets recorded in the financial statements, which is net of any
impairment losses, represents the Group’s maximum exposure to credit risk. Financial assets include
client and other receivables and cash. The Group does not hold collateral over these balances.
All of the group’s trade and other receivables have been reviewed for indicators of impairment. The
impaired trade receivables are mostly due from customers experiencing financial difficulties.
53
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
15 Other interest-bearing loans and borrowings
The contractual terms of the Group’s interest-bearing loans and borrowings, which are measured at
amortised cost are described below. For more information about the Group’s exposure to interest rate
and foreign currency risk, see note 21.
Non-Current liabilities
Unsecured bank loan
Loans from former members
Current liabilities
Unsecured bank loan
Loans from former members
2017
Fair
value
£’000
4,958
-
4,958
1,980
551
2,531
Carrying
amount
£’000
4,958
-
4,958
1,980
551
2,531
2016
Fair
value
£’000
6,938
500
7,438
1,980
4,603
6,583
Carrying
amount
£’000
6,938
500
7,438
1,980
4,603
6,583
The unsecured overdraft facilities totalling £5m are repayable on demand.
On 8 June 2015, Gateley Plc entered into two new loan agreements of £5m each. The total £10m of term
loans are repayable quarterly over five years commencing on 8 November 2015. Interest is chargeable
at 2.25% over LIBOR.
On the 8 June 2015 all amounts relating to individual members capital classified as a liability together with
amounts due to members were converted into Loans from former members. Loans were repayable
quarterly over a period of not less than two years subject to adequate working capital facilities, in the
opinion of the board of directors, within the Group being available to accommodate such payments.
Repayment of the remaining liabilities are forecast to be made quarterly from May 2016 with the final
payment arising in quarter one of the year ended 30 April 2018. Interest is chargeable at 0.5% over Bank
of England base rate.
16
Trade and other payables
Current
Trade payables
Other taxation and social security payable
Other payables
Accruals
Non-current
Other payables
2017
£’000
5,204
4,671
1,395
9,359
2016
£’000
5,844
4,153
653
7,947
20,629
18,597
-
154
Current other payables include £0.05m (2016: £0.22m) in respect of deferred consideration being a final
payment due for the acquisition of Gateley Capitus Limited together with £0.96m in respect of deferred
consideration scheduled for payment after 31 March 2018 following the acquisition of Gateley Hamer
Limited (formerly Hamer Associates Limited). £0.42m of the Gateley Hamer Limited deferred consideration
is to be settled by way of 10p ordinary shares with the balance payable in cash.
54
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
17
Deferred tax liability
At 1 May 2015
Acquisitions through business combinations – Gateley Capitus
Limited
At 30 April 2016
Acquisitions through business combinations – Gateley Hamer
Limited (formerly Hamer Associates Limited)
Credited during the year in the Consolidated income statement
At 30 April 2017
18
Provisions
Professional indemnity
Brought forward
On incorporation
Provisions made during the year
Provisions used during the year
Provisions reversed during the year
At end of year
Non-current
Current
Customer
lists
Total
£’000
£’000
-
200
200
134
(95)
239
2017
£’000
596
-
270
(91)
(184)
591
381
210
591
-
200
200
134
(95)
239
2016
£’000
-
537
325
(178)
(88)
596
339
257
596
The professional indemnity provision represents amounts equal to the insurance excesses payable on
outstanding claims against the Group which are covered by the Company’s professional indemnity
insurance policy. The amount or timing of amounts payable in these cases are uncertain as the
resolution of the cases are unknown at the year end.
55
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
19
Share capital
Authorised, issued and fully paid
Ordinary shares of 10p each
Brought forward
On incorporation – 13 November 2014
Issued on acquisition of business
Issued on initial public offering
Issued on acquisition of Gateley Capitus
Limited
Issued on acquisition of Gateley Hamer
Limited
(formerly Hamer Associates
Limited)
Issued as part of deferred consideration
of Gateley Hamer Limited (formerly
Hamer Associates Limited)
At 30 April 2017
2017
Number
2017
£
2016
Number
2016
£
106,396,912
10,639,691
-
-
-
-
-
-
388,029
38,803
97,012
9,701
-
10
100,000,001
5,274,148
1,122,753
-
1
10,000,000
527,415
112,275
-
-
-
-
106,881,953
10,688,195
106,396,912
10,639,691
The share capital reflects the shares issued to acquire Gateley Plc on 29 May 2015. In line with the
requirements of merger accounting, the structure and share capital issued has been recorded as though it
had always been in place.
On the Group’s admission to the AIM market of London Stock Exchange Plc on 8 June 2015, a further
5,274,148 10p ordinary shares were issued and fully paid up.
On 8 April 2016 the Group acquired the entire issued share capital of Gateley Capitus Limited in part for
the issue of 1,122,753 10p ordinary shares.
On 15 September 2016 the Group acquired the entire issued share capital of Gateley Hamer Limited
(formerly Hamer Associates Limited) in part for the issue of 388,029 10p ordinary shares. This was
followed by a further issue in respect of 97,012 10p ordinary shares in line with deferred consideration
conditions of the acquisition.
56
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
20
Financial instruments and related disclosures
Financial risk management
The Group has overall responsibility for the oversight of the Group’s risk management framework. A
formal process for reviewing and managing risk in the business has been developed. A register of
strategic and operational risk is maintained and reviewed by the Board, who also monitor the status of
agreed actions to mitigate key risks.
Management’s objective in managing financial risks is to ensure the long-term sustainability of the Group.
As the Group’s principal financial instruments comprise cash, client receivables and unbilled revenue, the
main risks are those that relate to credit in regard to receivables.
Credit risk
Credit risk is the risk of financial loss to the Group if a counterparty to a financial instrument fails to meet
its contractual obligation. The Group has a policy of performing credit checks and the large spread of
reputable clients ensures there are no unacceptable concentrations of credit risk.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The
Group ensures that it has sufficient cash or loan facilities to meet all its commitments when they fall due
by ensuring that there is sufficient cash or working capital facilities to meet the cash requirements of the
Group.
Gateley Plc is financed through a combination of unsecured bank loans together with unsecured loans
from former members. The Board reviews the projected financing requirements annually when agreeing the
Group’s budget and, based on this review, sets the value of the future capital requirements of the
business. The cash flow forecast for the entire Group is updated regularly and compared to the budget with
any significant variance being reported to the Board.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates,
will affect the Group’s income. The Group’s exposure to market risk predominantly relates to interest and
currency risk. Management does not consider this to be a significant risk to the Group.
Interest rate risk
The Group’s bank borrowings incur variable interest rate charges linked to LIBOR plus a margin.
Management do not consider this to be a significant risk to the Group.
Foreign currency risk
The Group has one overseas operation based in Dubai which, therefore, exposes the Group to changes
in Sterling/Dirhams exchange rates. Management does not consider this to be a significant risk to the
Group.
57
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
20
Financial instruments and related disclosures (continued)
Fair value disclosures
The fair value of each class of financial assets and liabilities is the carrying amount, based on the
following assumptions:
Trade receivables, trade payables,
short term deposits and borrowings
The fair value approximates to the carrying value because of the
short maturity of these instruments.
Long-term borrowings
Fair value hierarchy
The fair value of bank loans and other loans approximates to
the carrying value reported in the statement of financial position.
Financial instruments carried at fair value should be measured with reference to the following levels:
● Level 1: quoted prices in active markets for identical assets or liabilities
● Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
● Level 3: inputs for the asset or liability that are not based on observable market data (unobservable
inputs)
There are no financial instruments carried at fair value within this financial information.
The fair value of financial assets and liabilities are as follows (there is no difference between the carrying
value of the financial assets and liabilities and their fair value):
Cash and cash equivalents
Trade receivables
Total financial assets
Trade and other payables (excluding intercompany)
Short-term borrowings
Current financial liabilities
Long-term borrowings
Total financial liabilities
2017
£’000
2,696
36,619
39,315
(15,994)
(2,531)
(18,525)
2016
£’000
9,795
30,640
40,435
(14,444)
(6,583)
(21,027)
(4,958)
(7,438)
(23,483)
(28,465)
58
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
20
Financial instruments and related disclosures (continued)
Financial instruments sensitivity analysis
In managing interest rate and currency risks, the Group aims to reduce the impact of short term
fluctuations on its earnings. At the end of each reporting period, the effect of hypothetical changes in
interest and currency rates are as follows:
Interest rate sensitivity analysis
The table below shows the Group’s sensitivity to interest rates on floating rate borrowings (i.e. cash and
cash equivalents and bank borrowings which attract interest at floating rates) if interest rates were to
change by +/- 1%. The impact on the results in the statement of profit and loss and other comprehensive
income and equity would be:
+1 % movement in interest rates
-1 % movement in interest rates
2017
Increase/
(decrease)
in equity
£’000
2016
Increase/
(decrease)
in equity
£’000
59
(59)
95
(95)
The borrowing facilities arranged typically include overdraft facility and short term borrowing facilities. All
borrowings are repayable within one year.
Foreign exchange rate sensitivity analysis
The Group had the following net currency denominated financial instruments at year end:
Net currency
2017
£’000
182
2016
£’000
146
The effect of foreign currency fluctuations on the financial statements is immaterial.
21 Operating leases
Future minimum lease payments regarding non-cancellable operating lease rentals are payable as
follows:
Less than one year
Between one and five years
More than five years
Land and
buildings
2017
£’000
2,967
10,954
13,950
27,871
Other
2017
£’000
132
456
-
588
Land and
buildings
2016
£’000
3,020
11,593
15,056
29,669
Other
2016
£’000
194
131
-
325
59
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
22
Related parties
Gateley Plc entered into a lease agreement for the Leicester office, in which some of the directors have a
beneficial interest. The annual rent charge under the lease is £95,000 (2016: £95,000) and the amounts
outstanding at the year-end are £Nil (2016: £Nil).
Mattiolli Woods Plc
The Company’s Non-Executive Director, Joanne Lake, is a Non-Executive Director and Chairman of
Mattiolli Woods Plc. Mattiolli Woods Plc and its subsidiaries are a provider of wealth management and
employee benefit services. During the year, the Group paid Mattiolli Woods Plc a total of £6,400 in
respect of employee benefits services provided by Mattiolli Woods Plc. In addition, the Group received
revenues of £95,061 in respect of corporate legal services provided to the Mattiolli Woods Plc and its
subsidiaries.
Compensation paid to key management personnel
At the year end, Directors of Gateley (Holdings) Plc control 6.11% (2016: 6.70%) of the voting shares of
the Company.
The key management personnel comprise the strategic board who make any final key decisions.
Short term compensation paid to key management personnel during the year totalled 2017: £1.695m
(2016: £1.465m).
Short term remuneration is included in personnel costs and analysed as follows:
Wages and salaries
Social security
Pension costs
Share based payment charges
2017
£’000
1,486
205
-
4
1,695
2016
£’000
1,287
178
-
-
1,465
60
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
23
Share based payments
Group
At year end the Group has three share based payment scheme in operation.
Scheme 1 - Stock Appreciation Rights Scheme (‘SARS’)
This SARS is a discretionary executive reward plan which allows the Group to grant conditional share
awards or nil cost options to selected executives at the discretion of the Remuneration Committee.
The awards vest after a three year performance period. On exercise, participants will receive the growth
in value of the share options between the date of grant and the date of exercise in excess of the hurdle
rate. The hurdle rate is currently set at 115.765% of the market value of the underlying shares on the
date of grant.
Awards granted under the scheme are summarised below:
8 June 2015
Granted on admission
Forfeited during previous year
Forfeited during the year
Outstanding at end of year
Weighted average remaining contractual life
7 October 2016
Granted on admission
Forfeited during the year
Outstanding at end of year
Weighted average remaining contractual life
Weighted average
exercise price
Number of
options
£1.0997
£1.0997
£1.0997
£1.0997
7,200,000
(150,000)
(100,000)
6,950,000
1.2 years
Weighted average
exercise price
Number of
options
£1.3880
-
£1.3880
10,850,000
-
10,850,000
2.4 years
61
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
23
Share based payments (continued)
Scheme 2 – 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. Share options and weighted average exercise prices
are as follows for the reporting periods presented:
20 December 2016
Granted on admission
Forfeited during the year
Outstanding at end of year
Weighted average remaining contractual life
Scheme 3 – Save As You Earn scheme (‘SAYE')
Weighted average
exercise price
Number of
options
1.305p
1.305p
1.305p
946,433
(13,411)
933,022
2.7 years
The Group operates an 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. Share options and weighted average exercise prices are as follows
for the reporting periods presented:
1 October 2016
Granted on admission
Forfeited during the year
Outstanding at end of year
Weighted average remaining contractual life
Fair value calculations
Weighted average
exercise price
Number of
options
0.95p
0.95p
0.95p
1,166,646
(45,848)
1,120,798
2.4 years
The award is accounted for as equity-settled under IFRS 2. The fair value of awards which are subject to
non-market based performance conditions is calculated using the Black Scholes option pricing model.
The inputs to this model for awards granted during the financial year are detailed below:
CSOP
SAYE
SARS
SARS
Grant date
Share price at date of grant
Exercise price
Volatility
Expected life
Risk free rate
Dividend yield
Fair value per share
Market based performance condition
Non-market based performance
condition/no performance condition
20 December
2016
1.305p
1.305p
24%
3.3 years
1%
4%
1 October
2016
0.95p
0.95p
24%
7 October
2016
£1.20p
£1.39p
24%
8 June
2015
£0.95p
£1.10p
24%
3.3 years 3.3 years 3.3 years
1%
6%
1%
4%
1%
4%
£0.15p
-
£0.25p
-
£0.06p
-
£0.05p
-
62
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
23
Share based payments (continued)
As the Group had only limited share price history at the date of grant, expected volatility was based on a
proxy volatility determined from the median volatility of a group of appropriate comparator companies. For
the same reason, a similar approach was followed to derive the dividend yield. Expected life has been
taken to be between the minimum and maximum exercise period of three and three and a half years,
respectively.
The total charge to the income statement for all schemes now in place, included within personnel costs, is
£325,000 (2016: £125,000).
24
Accounting estimates and judgements
The preparation of consolidated financial statements under IFRS requires management to make
estimates and assumptions which affect the reported amount of revenues, expenses, assets and liabilities
and the disclosure of contingent liabilities. If in the future such estimates and assumptions, which are
based on management’s best judgement at the date of preparation of the financial statements, deviate
from actual circumstances, the original estimates and assumptions will be modified as appropriate in the
period in which the circumstances change. The key areas where a higher degree of judgement or
complexity arises, or where estimates and assumptions are significant to the consolidated financial
statements are discussed below.
Impairment assessment of trade receivables
The total carrying amount of trade receivables on client assignment is held net of impairment losses after
consideration is given to the clients’ willingness to pay those amounts accrued. The valuation of amounts
recoverable and not recoverable on trade receivables involves significant judgement. The estimation of
provisions is established based on interactions between finance, the legal staff member and clients,
mindful of the specific circumstances of clients and individual matters and invoices. Historic performance
of client’s ability to settle past debts and their current financial position play a significant part in
management’s assessment of whether a provision in full or in part may be necessary.
Unbilled revenue on client assignments
The valuation of unbilled revenue involves significant judgement, and affects the amount of revenue
recognised. The valuation is based on an estimate of the amount expected to be recoverable from clients
on unbilled items based on such factors as time spent, the expertise and skills provided and the stage of
completion of the assignment. Provision is made for such factors as historical recoverability rates,
contingencies, agreements with clients, external expert’s opinion and the potential credit risks, following
interactions between legal staff, finance and clients. In assessing whether unbilled time is recognised as
unbilled revenue, management are required to make judgements in determining the point at which the
contingency is resolved and when the fair value of consideration can be measured reliability. Where a
case is contingent at the statement of financial position date, no revenue is recognised. Where
entitlement to income is certain it is recognised at selling price.
Professional indemnity provisions
The Group occasionally receives claims in respect of professional service matters. The possibility of
future exposure to the Group of any such claims involves significant judgement by Management and the
Group’s insurance providers. The Group defends such claims where appropriate but makes a provision
for possible amounts considered likely to be payable, up to the deductible amount under the Group’s
related insurance arrangements. These provisions are estimates, capped at the negotiated excess in
place during the year each claim is reported. The actual amount settled upon, if at all, of future claims are
dependent on future events. Management reviews these provisions at each reporting date with its
insurers.
Valuation of intangibles
Measurement of intangible assets relating to acquisitions: In attributing value to intangible assets arising
on acquisition, management has made certain assumptions in terms of cash flows attributable to
intellectual property and customer relationships. The key assumptions relate to the trading performance
of the acquired business and discount rates applied to calculate the present value of future cash flows.
The directors consider the resulting valuations to be reasonable approximations as to the value of the
intangibles acquired.
63
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
24
Accounting estimates and judgements (continued)
Share based payment
The fair value of services received in return for share options granted is measured by reference to the fair
value of share options granted. The estimate of fair value is measured using the Black-Scholes model.
The use of a valuation model such as this involves making certain assumptions around the inputs into the
model. There is also uncertainty around the number of shares likely to vest and the model therefore
takes into account management’s best estimate of this.
25
Pensions
The Group participates in a defined contribution scheme operated by Aegon UK plc, the assets of which
are held separately from the Group. The amounts charged to the profit and loss account in respect of this
scheme represent contributions payable in respect of the accounting year. The total annual pension cost
for the defined contribution scheme was £699,512 (2016: £602,000) and the outstanding balance at the
year- end was £126,180 (2016: £114,000).
26
Business combinations
On 19 May 2015, the Company acquired 100% of the share capital of Gateley EBT Limited for £1.
On 29 May 2015, the Company acquired 100% of the share capital of Gateley Plc via a share for share
exchange.
On 29 May 2015, the Company acquired 100% of the share capital of Entrust Pension Limited for £1.
On 29 May 2015, the Company acquired the membership interest of Gateley UK LLP for £1.
On 8 April 2016 the Company acquired 100% of the voting equity interest of Gateley Capitus Limited, a
UK specialist tax incentives advisory business. The acquisition has been accounted for using the
acquisition method.
64
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
26
Business combinations (continued)
Acquisition of Gateley Hamer Limited (“GHL”) (Formerly Hamer Associates Limited).
On 15 September 2016 the Company acquired 100% of the voting equity interest of GHL, a specialist
property consultancy business. The acquisition has been accounted for using the acquisition method.
The fair value of the identifiable assets and liabilities of GHL as at the date of the acquisition was:
Property, plant and equipment
Intangible asset relating to brand
Cash and short term deposits
Trade receivables
Prepayments and accrued income
Total assets
Trade payables
Other taxation and social security payable
Accruals
Deferred tax
Total liabilities
Total identifiable net assets at fair value
Goodwill arising on acquisition
Total acquisition cost
Analysed as follows:
Initial cash consideration paid
Issue of new 10p ordinary shares in Gateley (Holdings) Plc
Deferred share consideration payable *
Deferred cash consideration payable
Cash outflow on acquisition
Cash paid
Acquisition costs
Net cash acquired with subsidiary (Included in cash flows from
investing activities)
Net cash outflow
Pre-
acquisition
carrying
amount
£’000
Policy
alignment
and fair
value
adjustments
£’000
18
-
280
333
14
645
-
(206)
(54)
-
(260)
385
-
638
-
-
-
638
-
-
-
(134)
(134)
504
Total
£’000
18
638
280
333
14
1,283
-
(206)
(54)
(134)
(394)
889
1,161
2,050
508
459
542
541
2,050
(508)
-
280
(228)
* On the 3 February 2017 £125,000 of deferred consideration was subsequently settled by way of issue of
ordinary shares of 10p each.
From the date of acquisition, GHL has contributed £0.87m to revenue and £0.16m to Group profit for the
year. If the combination had taken place at the beginning of the year, GHL would have contributed
revenue of £1.35m and profit for the year of £0.15m.
65
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Notes (continued)
26
Business combinations (continued)
The acquisition of GHL is consistent with the Group's growth strategy to acquire businesses offering
complementary professional and other specialist services to clients in the Group's target markets. GHL
has developed a specialist property consultancy offering in the fields of Easement and Wayleaves and
Compulsory Purchase and Compensation. The GHL Easements and Wayleaves team advises property
developers on negotiations in relation to the removal of utility infrastructure (pylons, cables, pipes etc.)
from development sites, and negotiates compensation for loss of development value where that
infrastructure remains in-situ. The Compulsory Purchase and Compensation team advises project
promoters on all aspects of compulsory purchase, from initial consultation through to settlement of claims;
facilitating housing, regeneration, infrastructure and energy projects. The team also represents
landowners and businesses affected by compulsory purchase. The acquisition will further enhance
Gateley's ability to support its property clients, offering them not only a first rate legal service, but also a
suite of specialist commercial property services. The business will sit alongside Gateley's national
property business, which itself acts for an array of developers, including seventeen of the UK's top twenty
house builders.
GHL will operate as a wholly owned subsidiary of Gateley (Holdings) Plc with its own existing dedicated
management team and employees. An operating board, made up of senior management from both the
Group and GHL will oversee the ongoing delivery and development of the business.
Customer lists and brands have been recognised as specific intangible assets as a result of the
acquisition. The residual goodwill arising primarily represents the assembled workforce, market share and
geographical advantages afforded to the Group. Policy alignment and fair value adjustments principally
relate to harmonisation with Group IFRS accounting policies, including the provisional application of fair
values on acquisition.
None of the recognised goodwill is expected to be deductible for income tax purposes. The fair value of
the customer lists and brand has been based upon management’s assessment of its ability to generate
future profitability for the acquired assets over the next three years after taking into account a 10%
present value discount factor. The customer lists and brand value will be amortised on a straight-line
basis over an estimated useful life of three years.
There were no transaction costs incurred during the course of the acquisition.
27
Subsequent events
There are no subsequent events to disclose in these financial statements.
66
Parent company statement of financial position
at 30 April 2017
Non-current assets
Investments
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Total current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Other reserves
Shares to be issued
Retained earnings
Total equity
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Note
5
6
2017
£’000
2016
£’000
15,437
12,937
15,437
12,937
7,725
2
7,727
3,268
-
3,268
23,164
16,205
7
(1,013)
(220)
(1,013)
(220)
22,151
15,985
10,688
4,332
1,548
450
5,133
22,151
10,640
4,332
1,013
-
-
15,985
Under section s408 of the Companies Act 2006 the company is exempt from the requirement to present
its own profit and loss account. The profit for the year to 30 April 2017 was £11,476,000 (2016:
£1,995,000).
These financial statements were approved by the directors on 10 July 2017 and were signed and
authorised on their behalf by:
Michael J Ward
Chief Executive Officer
Neil A Smith
Finance Director
Company registered number: 09310078
The accompanying notes on pages 70 to 77 for an integral part of these financial statements.
67
Parent company statement of changes in equity
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Share
capital
Share
premium
Other
reserves
Retained
earnings
£’000
£’000
£’000
£’000
Shares
based
payment
reserve
£’000
On incorporation
Comprehensive income:
Profit for the year
Total comprehensive income
Transactions with owners recognised
directly in equity
Share for share exchange with subsidiary
Issue of shares – On admission to AIM
Issue of shares – Acquisition of Gateley
Capitus Limited
Share issue costs
Dividend paid
Total equity at 30 April 2016
-
-
-
10,000
528
112
-
-
10,640
-
-
-
-
4,482
-
(150)
-
4,332
-
-
-
-
-
1,013
1,013
-
1,995
1,995
-
-
-
(1,995)
-
Share
capital
Share
premium
Other
reserves
Retained
earnings
£’000
10,640
£’000
4,332
-
-
-
-
-
-
-
38
10
£’000
1,013
-
-
-
420
115
£’000
-
11,476
-
11,476
-
-
At May 2016
Comprehensive income:
Profit for the year
Share based payment expenses
Total comprehensive income
Transactions with owners recognised
directly in equity
Issue of shares – Acquisition of Gateley
Hamer Limited (formerly Hamer Associates
Limited)
Issue of deferred
income shares –
Acquisition of Gateley Hamer Limited
(formerly Hamer Associates Limited)
Dividend paid
Total equity at 30 April 2017
-
10,688
-
4,332
1,548
(6,343)
5,133
-
450
(6,343)
22,151
Total
equity
£’000
-
1,995
1,995
10,000
5,010
1,125
(150)
(1,995)
15,985
Total
Equity
£’000
-
-
-
-
-
-
-
-
-
Share
based
payment
reserve
£’000
-
15,985
-
450
450
11,476
450
27,911
-
-
458
125
The following describes the nature and purpose of each reserve within equity:
Share premium – Amount subscribed for share capital in excess of nominal value.
Other reserves – Represents the difference between the actual and nominal value of shares issued by
the company in the acquisition of subsidiaries.
Retained earnings – All other net gains and losses and transactions with owners not recognised
anywhere else.
Share based payment reserve – Annual cost of share options issued
The accompanying notes on pages 70 to 77 for an integral part of these financial statements.
68
Parent company cash flow statement
for year ended 30 April 2017
Cash flows from operating activities
Profit for the year
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
2017
£’000
11,475
2016
£’000
1,995
Increase in trade and other receivables
(4,459)
(3,268)
Net cash flows from operating activities
7,016
(1,273)
Investing activities
Consideration paid on acquisition of subsidiary
Net cash used in investing activities
Financing activities
Proceeds from the issue of share capital
Share issue costs
Dividends paid
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of year
(672)
(672)
-
-
(6,342)
(6,342)
2
-
2
(1,592)
(1,592)
5,010
(150)
(1,995)
2,865
-
-
-
The accompanying notes on pages 70 to 77 for an integral part of these financial statements.
69
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Parent company notes to the financial statements
For the period ended 30 April 2017
(forming part of the financial statements)
1
Basis of preparation and significant accounting policies
Gateley (Holdings) Plc (the “Company”) is a company incorporated and domiciled in the UK under the
Companies Act. The nature of the Group’s operations and its principal activities are set out in the
strategic report. Gateley (Holdings) Plc was incorporated on 13 November 2014. On 29 May 2015, the
Company invested in Gateley Plc via a share for share exchange. On 8 June 2015, the Company listed
on the AIM Market of the London Stock Exchange.
The financial statements have been prepared and approved by the directors in accordance with the
Companies Act 2006 and International Financial Reporting Standards as adopted by the European Union
(adopted IFRSs).
The accounting policies set out below have, unless otherwise stated, been applied consistently to all
periods presented in these financial statements
Judgements made by the Directors, in the application of these accounting policies that have significant
effect on the financial statements and estimates with a significant risk of material adjustment in the next
year are discussed in note 1.7 below.
Measurement convention
The financial statements are prepared on the historical cost basis except where Adopted IFRSs require
an alternative treatment. The principal variations relate to financial instruments which are carried at fair
value.
1.1 Going concern
The Company and Group financial statements are prepared on a going concern basis as the Directors
have a reasonable expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future. The Group remains cash generative, with a strong ongoing trading
performance. The Group is funded through two unsecured term loans for £5m each repayable quarterly
over five years commencing in December 2015 together with unsecured overdraft facilities of up to £5m.
All of the Group’s overdraft facilities are 12 months in duration. The term loan facilities contain financial
covenants which have been met throughout both periods. The Group’s forecasts and projections show
that the new facility provides adequate headroom for its current and future anticipated cash requirements.
1.2 Classification of financial instruments issued by the Company
Financial instruments issued by the Company are treated as equity only to the extent that they meet the
following two conditions:
(c)
they include no contractual obligations upon the Company to deliver cash or other financial assets
or to exchange financial assets or financial liabilities with another party under conditions that are
potentially unfavourable to the Company; and
(d) where the instrument will or may be settled in the company’s own equity instruments, it is either a
non-derivative that includes no obligation to deliver a variable number of the company’s own equity
instruments or is a derivative that will be settled by the company’s exchanging a fixed amount of
cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the financial instruments are classified as a financial liability.
1.3 Non derivative financial instruments
Financial Assets
The Company's financial assets include cash and cash equivalents and trade and other receivables. All
financial assets are recognised when the Company becomes party to the contractual provisions of the
instrument.
70
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Parent company notes to the financial statements (continued)
1
Basis of preparation and significant accounting policies (continued)
Non derivative financial instruments (continued)
vi)
Investments
Fixed asset investments are stated at cost less provision for any impairment in value.
Investments in subsidiary undertakings are stated at cost less amounts written off for impairment.
Investments are reviewed for impairment where events or circumstances indicate that their carrying
amount may not be recoverable. Cost of investment also includes share-based payment charges of
equity settled share based payment schemes to be settled on behalf of subsidiary companies.
vii) Trade and other receivables
Trade and other receivables are recognised and carried at original amount less provision for impairment.
A provision for impairment of amounts owed from related parties is established when there is objective
evidence that the Company may not be able to collect all amounts due according to the original terms of
the engagement. The amount of the provision is determined as the difference between the asset's
carrying amount and the present value of estimated future cash flows, and is recognised in the statement
of profit and loss in other operating expenses.
viii) Cash and cash equivalents
Cash and cash equivalents includes cash in hand and deposits held at call with banks. For the purpose of
the cash flow statement, cash and cash equivalents includes bank overdrafts in addition to the definition
above.
Impairment
1.4
Financial assets (including receivables)
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to
determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective
evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the
loss event has a negative effect on the estimated future cash flows of that asset that can be estimated
reliably.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the
difference between its carrying amount and the present value of the estimated future cash flows
discounted at the asset’s original effective interest rate. Interest on the impaired asset continues to be
recognised through the unwinding of the discount. When a subsequent event causes the amount of
impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
1.5 Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income
statement except to the extent that it relates to a business combination, or items recognised directly in
equity or other comprehensive income. Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted or substantively enacted at the statement of
financial position date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes. The following temporary
differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or
liabilities in a transaction that is not a business combination and that affects neither accounting nor
taxable profit or loss, and differences relating to investments in subsidiaries to the extent that they will
probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax
rates enacted or substantively enacted at the statement of financial position date.
71
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Parent company notes to the financial statements (continued)
1
Basis of preparation and significant accounting policies (continued)
1.5
Taxation (continued)
A deferred tax asset is recognised on deductible temporary differences only to the extent that it is
probable that future taxable profits will be available against which they can be utilised. Deferred tax
assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that
the related tax benefit will be realised.
1.6
Ordinary dividends
Dividends are recognised as a liability in the period in which they are approved by the Company’s
shareholders.
1.7
Adopted IFRS not yet applied
The following Adopted IFRSs have been issued and endorsed by the EU but have not been applied by
the Group in these financial statements. Their adoption is not expected to have a material effect on the
financial statements:
Endorsed:
● IFRS 15 – Revenue from contracts with customer (effective from 1 January 2018)
● IFRS 9 - Financial instruments
Not yet endorsed by EU and included as may be relevant:
● IFRS 16 – Leases
● Amendments to IAS 12 – Recognition of Deferred Tax Assets for Unrealised losses
● Amendments to IFRS2 – Classification and measurement of share-based payment transactions
● Amendments to IAS 40 – Transfer of investment property
● IFRIC Interpretation 22 - Foreign currency transactions and advance considerations
There are other standards in issue which are not considered applicable and are not expected to have an
impact on the Company and have therefore not been included in the list above. Both IFRS 15 and IFRS
16 are expected to require amendments for operating leases and revenue however management are
undertaking an exercise to determine the impact on results and have not yet quantified this.
The directors have not yet calculated the impact that the adoption of the other Standards and
Interpretations noted in future periods will have.
2
Expenses
Audit fees in relation to the audit of these accounts of £10,000 (2016: £10,000) have been borne by
Gateley Plc. The company does not have any employees (2016: Nil)
72
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Parent company notes to the financial statements (continued)
3
Investment income
On 10 December 2015, Gateley Plc, paid an intercompany dividend of £1,995,000 to its parent company
Gateley (Holdings) Plc.
On 19 September 2016, Gateley Plc, paid an intercompany dividend of £6,500,000 to its parent company
Gateley (Holdings) Plc.
On 28 April 2017, Gateley Plc, paid an intercompany dividend of £5,000,000 to its parent company
Gateley (Holdings) Plc.
4
Taxation
The Company’s profit for the period arises solely from the receipt of intercompany dividends, which are
not chargeable to corporation tax. As a result, no provision for corporation tax is needed in these financial
statements.
5
Investments
On incorporation
Share for share exchange
Acquisition of Gateley Capitus Limited
Balance at 30 April 2016
At 1 May 2016
Share based payment charge
Acquisition of Gateley Hamer Limited (formerly Hamer Associates Limited)
Balance at 30 April 2017
Investments in subsidiaries
The Company has effective control of the following:
£’000
-
10,000
2,937
12,937
12,937
450
2,050
15,437
Gateley Plc
Entrust Pension Limited
Gateley Capitus Limited
Gateley Hamer Limited (formerly Hamer
Associates Limited)
Gateley EBT Limited
Gateley Investments Limited
Ensco Trustee Company Limited
Gateley Secretaries Limited
Gateley Incorporations Limited
Country of
incorporation
England and
Wales
England and
Wales
England and
Wales
England and
Wales
England and
Wales
England and
Wales
England and
Wales
England and
Wales
England and
Wales
Nature of business
Ordinary share
proportion held
during year to 30
April 2017
100%
Legal services
100%
Pension trustee services
100%
Tax incentive services
100%
Specialist property consultancy
100%
Employee benefit trust
100%*
Corporate investment company
100%*
Corporate trustee company
100%*
Non-trading
100%*
Non-trading
73
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Parent company notes to the financial statements (continued)
5
Investments (continued)
Investments in subsidiaries (continued)
Country of
incorporation
Gateley Custodian and Nominee Services
Limited
Gateley Custodian and Nominee Services
No.2 Limited
England and
Wales
England and
Wales
Gateley Heritage LLP
Gateley UK LLP
Gateley (Manchester) LLP
Country of
incorporation
England and
Wales
England and
Wales
England and
Wales
Ordinary share
proportion held
during year to 30
April 2017
100%*
Nature of business
Non-trading
100%*
Non-trading
Controlling interest
held during year to
30 April 2017
100%*
Nature of business
Non-trading
100%**
51%*
Legal services via a branch in
Dubai
Collection of residual assets
*
**
these investments are indirectly held at the year end
certain Group directors of Gateley Holdings Plc as individuals are members of Gateley UK LLP
and, as such, hold Gateley (Holdings) Plc’s 100% membership interest on trust. Effective control
is held by directors of Gateley Plc
On 19 May 2015, the Company acquired 100% of the share capital of Gateley EBT Limited for £1.
On 29 May 2015, the Company acquired 100% of the share capital of Gateley Plc via a share for share
exchange.
On 29 May 2015, the Company acquired 100% of the share capital of Entrust Pension Limited for £1.
On 29 May 2015, the Company acquired the membership interest of Gateley UK LLP for £1.
On 8 April 2016, the Company acquired 100% of the share capital of Gateley Capitus Limited.
On 15 September 2016, the Company acquired 100% of the share capital of Gateley Hamer Limited
(formerly Hamer Associates Limited). Details of consideration paid can be found at note 26 of the
consolidated financial statements.
6
Trade and other receivables
Amounts owed from Gateley Plc
2017
£’000
2016
£’000
7,725
3,268
All trade receivables are anticipated to be due within one year. £5m is due in September 2017 with the
balance expected to be settled by 30 April 2018.
The carrying amount of financial assets recorded in these accounts, which is net of any impairment
losses, represents the Company’s maximum exposure to credit risk. Financial assets include amounts
due from Gateley Plc. The Company does not hold collateral over these balances.
74
Parent company notes to the financial statements (continued)
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
7
Other payables
Deferred consideration
8
Capital and reserves
Share capital
Ordinary shares of 10p each
Brought forward as at 1 May 2016
On incorporation – 13 November 2014
Issued on acquisition of business
Issued on initial public offering
Issued on acquisition of Gateley Capitus Limited
Issued on acquisition of Gateley Hamer Limited
(formerly Hamer Associates Limited)
Issued as per of deferred consideration of Gateley
Hamer Limited (formerly Hamer Associates Limited)
At 30 April 2017
2017
£’000
1,013
2016
£’000
220
2017
Number
2017
£
2016
Number
2016
£
10
-
100,000,001
5,274,148
1,122,753
388,029
1
-
-
10
-
1
10,000,000 100,000,001 10,000,000
527,415
112,275
-
5,274,148
1,122,753
-
527,415
112,275
38,803
97,012
9,701
-
-
106,881,953
10,688,195 106,396,912 10,639,691
9
Financial instruments and related disclosures
Financial risk management
The Company has overall responsibility for the oversight of the Company’s risk management framework.
A formal process for reviewing and managing risk in the business has been developed. A register of
strategic and operational risk is maintained and reviewed by the Board, who also monitor the status of
agreed actions to mitigate key risks.
Management’s objective in managing financial risks is to ensure the long-term sustainability of the
Company and Group.
As the Company’s principal financial instruments comprise cash and inter-group receivables. The main
risks are those noted below:
Credit risk
Credit risk is the risk of financial loss to the Company if a subsidiary to a financial instrument fails to meet
its contractual obligation. The Company has a policy of monitoring subsidiaries who perform credit
checks which together with the spread of reputable clients ensures there are no unacceptable
concentrations of credit risk.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.
The Company ensures that the Group has sufficient cash or loan facilities to meet all its commitments
when they fall due by ensuring that there is sufficient cash or working capital facilities to meet the cash
requirements of the Company.
Gateley Plc is financed through a combination of unsecured bank loans together with unsecured loans
from former members. The Board reviews the projected financing requirements annually when agreeing the
Group’s budget and, based on this review, sets the value of the future capital requirements of the
business. The cash flow forecast for the entire Group is updated regularly and compared to the budget with
any significant variance being reported to the Board.
75
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Parent company notes to the financial statements (continued)
9
Financial instruments and related disclosures (continued)
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates,
will affect the Company’s income. The Company’s exposure to market risk predominantly relates to
interest and currency risk. Management does not consider this to be a significant risk to the Company.
Interest rate risk
The Group’s bank borrowings incur variable interest rate charges linked to LIBOR plus a margin.
Management do not consider this to be a significant risk to the Company or Group.
Foreign currency risk
The Group has one overseas operation based in Dubai which, therefore, exposes the Group to changes
in Sterling/ Dirhams exchange rates. Management does not consider this to be a significant risk to the
Company or Group.
Fair value disclosures
The fair value of each class of financial assets and liabilities is the carrying amount, based on the
following assumptions:
Inter Group receivables
Fair value hierarchy
The fair value approximates to the carrying value because of the
short maturity of these instruments.
Financial instruments carried at fair value should be measured with reference to the following levels:
● Level 1: quoted prices in active markets for identical assets or liabilities
● Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
● Level 3: inputs for the asset or liability that are not based on observable market data (unobservable
inputs)
There are no financial instruments carried at fair value within this financial information.
The fair value of financial assets and liabilities are as follows (there is no difference between the carrying
value of the financial assets and liabilities and their fair value):
Cash and cash equivalents
Group receivables
Total financial assets
Deferred consideration
Current and Total financial liabilities
2017
£’000
2
7,725
7,727
(1,013)
(1,013)
The company itself does not have any exposure to interest or foreign exchange rates. The Group’s
expose is detailed in note
2016
£’000
-
3,268
3,268
(220)
(220)
76
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2017
Parent company notes to the financial statements (continued)
10
Share premium
The share premium arose on 8 June 2015 when the Company was floated on the AIM market of the
London Stock Exchange. 5,274,148 £0.10 ordinary shares were issued at £0.85 above their nominal
value, therefore creating share premium of £4,483,026. Share issue costs of £150,000 have been
deducted from share premium in accordance with Accounting Standards.
11
Other reserves
Other reserves arose on 8 April 2016 during the acquisition of Gateley Capitus Limited when the
Company issued 1,122,753 £0.10p ordinary shares for £1,125,000, therefore creating other reserves at
30 April 2016 of £1,012,725.
Further other reserves arose on 15 September 2016 during the acquisition of Gateley Hamer Limited
(formerly Hamer Associates Limited) when the Company issued 485,041 £0.10p ordinary shares for
£583,262, therefore creating other reserves of £534,758. At 30 April 2017 total other reserves were
£1,547,483.
12
Related parties
None of the executive directors received any remuneration from the Company during the year, other than
dividend income, as they are remunerated by Gateley Plc.
13
Accounting estimates and judgements
The preparation of these financial statements under IFRS requires management to make estimates and
assumptions which affect these financial statements. The key estimates and assumptions relate to the
impairment assessment of investments.
Impairment of investments
The total carrying amount of investments is held net of impairment losses. In determining whether
investments are impaired requires an estimation of the future value arising from a subsidiary or the trade
and assets acquired with it. The value is use calculation requires an estimate of the future cash flows
expected to arise from a subsidiary or cash generating unit and the use of a suitable discount rate in
order to calculate present value. Any change in estimates could result in an adjustment to recorded
amounts. Due to the market capitalisation position of the business at the year end and time of signing
these financial statements management do not believe any impairment is necessary against the carrying
value of its investments.
14
Subsequent events
There are no subsequent events to disclose in these financial statements.
77
Company number: 09310078
GATELEY (HOLDINGS) PLC
Notice of Annual General Meeting
NOTICE IS GIVEN that the annual general meeting of the above named Company will be held at One
Eleven Edmund Street, Birmingham B3 2HJ on 27 September 2017 at 12.30pm. Shareholders will be
asked to consider and, if thought fit, to pass the following resolutions of which resolutions 1 to 8
(inclusive) will be proposed as ordinary resolutions and resolutions 9 and 10 will be proposed as special
resolutions.
1.
2.
3.
4.
5.
6.
7.
8.
9.
9.1
ORDINARY RESOLUTIONS
To receive the Company's annual accounts for the financial year ended 30 April 2017 together
with the directors' report and the auditors' report on those accounts.
To approve the directors’ remuneration report for the financial year ended 30 April 2017, which
is set out in the Company's annual report for the financial year ended 30 April 2017.
To declare a final dividend for the year ended 30 April 2017 of 4.4p per share payable on 4
October 2017 to shareholders on the register of members at the close of business on 8
September 2017.
To reappoint Michael James Ward (who retires in accordance with article 23.4.2 of the
Company's articles of association and, being eligible, offers himself for re-election) as a director
of the Company.
To appoint Suki Thompson (in accordance with article 23.1 of the Company's articles of
association) as a director of the Company with effect from 27 September 2017.
To appoint Grant Thornton UK LLP as auditors of the Company to hold office until the
conclusion of the next annual general meeting of the Company.
To authorise the directors to fix the remuneration of the auditors of the Company.
THAT, in substitution for all existing and unexercised authorities and powers, the directors of the
Company be generally and unconditionally authorised for the purpose of section 551
Companies Act 2006 (the Act) to exercise all or any of the powers of the Company to allot
shares of the Company or to grant rights to subscribe for, or to convert any security into, shares
of the Company (such shares and rights being together referred to as Relevant Securities) up
to an aggregate nominal value of £3,562,731 to such persons at such times and generally on
such terms and conditions as the directors may determine (subject always to the articles of
association of the Company), such authority, unless previously renewed, varied or revoked by
the Company in general meeting, to expire at the conclusion of the next annual general meeting
of the Company (or, if earlier, at the close of business on 26 December 2018) save that the
directors of the Company may, before the expiry of such period, make an offer or agreement
which would or might require relevant securities or equity securities (as the case may be) to be
allotted after the expiry of such period and the directors of the Company may allot relevant
securities or equity securities (as the case may be) in pursuance of such offer or agreement as
if the authority conferred by this resolution had not expired.
SPECIAL RESOLUTION
THAT, if resolution 8 above is passed, and in substitution for all existing and unexercised
authorities and powers, the directors of the Company be and are hereby generally and
unconditionally empowered pursuant to section 570 of the Act to allot equity securities (as
defined in section 560 of the Act) (Equity Securities) for cash under the authority given by that
resolution 8 and/or to sell ordinary shares held by the Company as treasury shares for cash as if
section 561 of the Act did not apply to any such allotment or sale, such authority to be limited to:
the allotment of Equity Securities or sale of treasury shares in connection with a rights issue or
similar offer in favour of ordinary shareholders where the Equity Securities respectively
attributable to the interests of all ordinary shareholders are proportionate (as nearly as may be)
to the respective numbers of ordinary shares held by them on that date provided that the
directors of the Company may make such exclusions or other arrangements to deal with any
legal or practical problems under the laws of any territory or the requirement of any regulatory
body or any stock exchange or with fractional entitlements as they consider necessary or
expedient; and
78
9.2
the allotment of Equity Securities or sale of treasury shares (otherwise than under paragraph
9.1 above) up to an aggregate nominal amount of £534,410 representing approximately 5% of
the current share capital of the Company,
10.
10.1
10.2
such authority, unless previously renewed, varied or revoked by the Company in general
meeting, to expire at the end of the next annual general meeting of the Company (or, if earlier,
at the close of business on 26 December 2018) save that the directors of the Company may,
before the expiry of such period, make an offer or agreement which would or might require
Equity Securities to be allotted (and treasury shares to be sold) after the expiry of such period
and the directors of the Company may allot Equity Securities (and sell treasury shares) in
pursuance of such offer or agreement as if the authority conferred by this resolution had not
expired.
THAT, if resolution 8 above is passed, and in addition to any authority granted under resolution
9 above, the directors of the Company be and are hereby generally and unconditionally
empowered pursuant to section 570 of the Act to allot Equity Securities for cash under the
authority given by that resolution 8 and/or to sell ordinary shares held by the Company as
treasury shares for cash as if section 561 of the Act did not apply to any such allotment of
Equity Securities, such authority to be:
limited to the allotment of Equity Securities or sale of treasury shares pursuant to the authority
granted under resolution 8 up to an aggregate nominal amount of £534,410 representing
approximately 5% of the current share capital of the Company; and
used only for the purposes of financing (or refinancing, if the authority is to be used within six
months after the original transaction) a transaction which the directors of the Company
determine to be an acquisition or other capital investment of a kind contemplated by the
Statement of Principles on Disapplying Pre-Emption Rights most recently published by the Pre-
Emption Group prior to the date of this notice of annual general meeting of the Company,
such authority, unless previously renewed, varied or revoked by the Company in general
meeting, to expire at the end of the next annual general meeting of the Company (or, if earlier,
at the close of business on 26 December 2018) save that the directors of the Company may,
before the expiry of such period, make an offer or agreement which would or might require
Equity Securities to be allotted (and treasury shares to be sold) after the expiry of such period
and the directors of the Company may allot Equity Securities (and sell treasury shares) in
pursuance of such offer or agreement as if the authority conferred by this resolution had not
expired.
BY ORDER OF THE BOARD
…………………………………..
Neil Andrew Smith
Secretary
Date: 1 September 2017
Registered office:
One Eleven Edmund Street
Birmingham
B3 2HJ
79
NOTES:
1.
2.
3.
4.
5.
6.
7.
8.
8.1
8.2
A member of the Company entitled to attend and vote at the meeting convened by this notice is entitled to appoint one
or more proxies to exercise any of his rights to attend, speak and vote at that meeting on his behalf. A proxy need not
be a member of the Company.
You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares.
You may not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy
please contact the Company's Registrars, Capita Asset Services in writing at Capita Asset Services, PXS, 34
Beckenham Road, Beckenham, Kent BR3 4TU by 12.30pm on 25 September 2017.
A proxy may only be appointed using the procedures set out in these notes and the notes to the proxy form. To appoint
a proxy, a member may complete, sign and date the enclosed proxy form and deposit it at the office of the Company's
Registrars, Capita Asset Services, at PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU by 12:30pm on 25
September 2017. Any power of attorney or any other authority under which the proxy form is signed (or a duly certified
copy of such power or authority) must be enclosed with the proxy form.
In order to revoke a proxy appointment, a member must sign and date a notice clearly stating his intention to revoke his
proxy appointment and deposit it at the office of the Company's Registrars, Capita Asset Services, at PXS, 34
Beckenham Road, Beckenham, Kent BR3 4TU by 3.00pm on 26 September 2017.
Any corporation which is a member of the Company may authorise one or more persons (who need not be a member of
the Company) to attend, speak and vote at the meeting as the representative of that corporation. A certified copy of the
board resolution of the corporation appointing the relevant person as the representative of that corporation in connection
with the meeting must be deposited at the office of the Company's Registrars at the address set out in note 3 above
prior to the commencement of the meeting.
The right to vote at the meeting shall be determined by reference to the register of members of the Company. Pursuant
to Regulation 41 of the Uncertificated Securities Regulations 2001, only those persons whose names are entered on the
register of members of the Company at close of business on 25 September 2017 shall be entitled to attend and vote in
respect of the number of shares registered in their names at that time. Changes to entries on the register of members
after that time shall be disregarded in determining the rights of any person to attend and/or vote at the meeting.
Copies of the service contracts and letters of appointment (as appropriate) of the directors with the Company or any of
its subsidiaries will be available for inspection at the Company’s Registered Office from the date of this notice until the
time of the annual general meeting and will be available for inspection at the annual general meeting.
Members who have general queries about the annual general meeting should contact the Company's Registrars, Capita
Asset Services on 0871 664 0300 (calls cost 12p per minute plus your phone company's access charge. From overseas
+44 371 664 0300. Calls outside the United Kingdom will be charged at the applicable international rate. Capita Asset
Services are open between 9.00am - 5.30pm, Monday to Friday excluding public holidays in England and Wales). No
other methods of communication will be accepted. You may not use any electronic address provided either:
in this notice; or
any related documents (including the proxy form),
to communicate with the Company for any purposes other than those expressly stated.
EXPLANATORY NOTES ON CERTAIN BUSINESS OF THE ANNUAL GENERAL MEETING
Resolution 5 – Appointment of Suki Thompson
As announced in the Company’s preliminary results announcement released on 11 July 2017, having reached the age of 65, Michael Richard
Seabrook will not be offering himself for re-election at the annual general meeting and will stand down as a director at that point. It is proposed
that Suki Thompson fills this vacancy on the board of directors of the Company with effect from 27 September 2017.
Resolution 8 – Directors' power to allot relevant securities
Under section 551 of the Act, relevant securities may only be issued with the consent of the shareholders, unless the shareholders pass a
resolution generally authorising the directors to issue shares without further reference to the shareholders. This resolution authorises the general
issue of shares up to an aggregate nominal value of £3,562,731, which is equal to 33% of the nominal value of the current ordinary share capital
of the Company. Unless previously revoked or varied, the authority will expire on the conclusion of the next annual general meeting of the
Company or on the date which is 15 months after the resolution being passed (whichever is the earlier).
Resolutions 9 and 10 – Disapplication of pre-emption rights on equity issues for cash
Section 561 of the Act requires that a company issuing shares for cash must first offer them to existing shareholders following a statutory
procedure which, in the case of a rights issue, may prove to be both costly and cumbersome. These resolutions exclude that statutory procedure as
far as rights issues are concerned.
These special resolutions are drawn up in accordance with the Pre-Emption Group’s Statement of Principles, and enable the directors to allot
shares up to:
(a)
(b)
an aggregate nominal value of £534,410, which is equal to 5% of the nominal value of the current ordinary
share capital of the Company, which could be used for any purpose; and
an additional aggregate nominal value of £534,410, which is equal to 5% of the nominal value of the current
ordinary share capital of the Company, which could only be used for an acquisition or specified capital
investment,
subject in each case to resolution 8 being passed. The directors believe that the limited powers provided by these resolutions will maintain a
desirable degree of flexibility. Unless previously revoked or varied, the disapplications will expire on the conclusion of the next annual general
meeting of the Company or on the date which is 15 months after the relevant resolution being passed (whichever is the earlier).
80
Annual
Report
for year ended 30 April 2017
gateleyplc.com
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