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Annual
Report
for year ended 30 April 2018
gateleyplc.com
@GateleyPlc
/company/gateley-plc
gateleyplc.com
Gateley (Holdings) Plc
Annual report and consolidated financial statements
Registered number 09310078
For the year ended 30 April 2018
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Company
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 2018
Company information
Registration number
09310078
Chief Executive Officer
Chief Operating Officer
Finance Director and Company
Secretary
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Registered office
Directors
Auditor
Nominated advisor
Joint broker
Principal bankers
Registrars
Financial PR adviser
One Eleven Edmund Street
Birmingham
B3 2HJ
MJ Ward
PG Davies
NA Smith
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JC Lake
SFA Thompson
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
Link Asset Services
6th Floor
65 Gresham Street
London
EC2V 7NQ
IFC Advisory
15 Bishopsgate
London
EC2N 3AR
Website
www.gateleyplc.com
3
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Chairman’s Statement
I am delighted with the performance of the business in the twelve months to 30 April 2018. Following on
from our two previous successful years on AIM, we have seen revenues rise by 11.0% this year to
£86.1m and earnings per share rise by 17.0% from 9.43p to 11.03p. What is particularly pleasing is that
this strong growth has been achieved whilst maintaining a healthy balance of continuing to support and
enhance our customer offering and seeking new opportunities for future investment. The scale, breadth
and depth of our business continues to expand and our insatiable focus of leveraging our service offering
for the benefit of our customers, has been and will continue to be, at the forefront of our strategic thinking
and operational focus.
Since we became a public company, we have seen an increase in the interest that staff have in this new
structure for a law firm. I’m pleased to say that our ability to attract quality staff, who are interested in
benefiting from the opportunities provided by our plc structure, continues to strengthen. During the year
we have increased our average employee numbers by 8.8% from 696 to 757. The next important phase
of our incentivisation journey commenced shortly after our year end with the delivery of greater equity
participation and rewards through our initial Stock Appreciation Rights Scheme that was awarded to
partners present at the IPO. Alongside our all staff share scheme and CSOPs, employees from all parts
of the Group continue to benefit as shareholders. The majority of Group employees now have some form
of equity in the business.
After a period of integration following our first two acquisitions in 2016, we have been working hard this
year in seeking the right next steps for our acquisition strategy that deliver both high quality output as well
as complementing our existing service lines. This has resulted in the two recent strategic acquisitions of
GCL Solicitors and Kiddy & Partners. These two very different businesses have excellent reputations of
long term client retention, high levels of service delivery and the Board is delighted to welcome them to
the Group. Without our Plc status, I do not believe that we would have appealed to either business in the
same way.
The opportunity that Gateley pioneered by being the first UK commercial law firm to IPO three years ago
has now ignited increased interest across our changing sector and several more law businesses have
followed us onto the AIM market. As a Board, we very much welcome the creation of a broader, larger
sector for stakeholders to consider. As an established investment choice, I continue to remain confident
that Gateley has the right strategy for the profitable growth of the Group and to deliver enhanced value for
all our stakeholders. Our management team remain steadfast in its vision to succeed with their stated
aims 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).
The Board remains confident that the business is well placed to deliver another year of growth, whilst at
the same time continuing to seek complementary service lines to further enhance our customer offering.
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 26 September 2018, of 4.8
pence per share, making a total dividend of 7.0 pence per share for the year, and representing a 6.1%
increase on the prior year.
Finally, and certainly not least, I would like to pass on my thanks to our Chief Executive, Michael Ward, as
well as to the Board, to the management team and to all of the staff at Gateley for their hard work,
support and fantastic contribution this year in delivering a strong set of results and making considerable
further strategic progress.
Nigel Payne
Chairman
16 July 2018
4
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Chief Executive Officer’s Review
Introduction
Our entire team have worked tirelessly this year in delivering another set of financial results in line with
our original IPO strategy and current market expectations. It has been a very busy year with numerous
opportunities opening up for us as a result of our different service offerings. Our steadfast dedication
towards client service continues to ensure we deliver the services clients want time and again. The
passion of our staff shines through in the work they perform and I’m proud to lead them through these
exciting times. As we grow, we continue to deliver on our promises to clients, employees and investors.
We have demonstrated strong cash generation, achieved record revenues and profits, whilst expanding
our network and services lines, through further strategic investment and recruitment, that I am sure will
deliver long-term, sustainable, growth.
Three years on from our IPO our vision for a professional services Group continues as we diversify
through our acquisitions strategy, and incentivise our staff. Our stated commitment to staff incentivisation
is about to materialise as our initial Stock Appreciation Rights Scheme Issue vested on 8 June 2018.
This option scheme is for the benefit of partner level employees. Their share awards will ensure they
remain aligned with the long term success of the Group.
Financial Results
Our financial performance continues to demonstrate growth in revenue and profits in line with market
expectations together with strong cash generation. Our diverse revenue streams have grown by 11.0%
whilst profit before tax has grown at a similar rate of 11.7%. Growth in EPS and dividend returns to all
investors is good news for all. Investment in new people helps us meet growing client demand and also
ensures we deliver our promises to the management teams of our acquired complementary businesses.
Gateley Hamer has branched out into London and Gateley Capitus have added new experts to deliver
additional benefit to clients in Research and Development tax credits. We continue to build our teams
with a national and strategic focus to ensure we can meet demand.
The strength in depth of our core legal business presents appealing opportunities across many business
types and sectors. Whilst transactional activity levels across Corporate, Banking and Property segments
remain significant, our long-established expertise in Business Services such as litigation and dispute
resolution work has produced significant returns once again. The strength of our connections across
national board rooms and intermediaries, and our reputation for quality teams with a focus on client
service, result in continuing instructions across many sectors, including private equity and housebuilding.
Our transition from LLP to Plc is now complete and in addition we have now repaid half of the term loans
advanced at the time of the IPO. We are pleased to once again propose a dividend to shareholders in
line with expectations. EPS, both basic and diluted, is attractive to future shareholders.
Operational Review
We remain focused on investing in the right people to join the Gateley team. This remains our largest
challenge in an ever-changing economic environment. Our Plc status provides an attractive alternative
across all generations of staff. Average total staff numbers grew by 8.8% from 696 to 757 including
11.4% growth in professional staff and 3.8% growth in business support services. The lateral hiring of
other law firm partners is typically longer-term in nature but strategically important for business
development. We are pleased to see healthy interest in traineeships of professionals across the
Group and congratulate all those staff, both professional and support that were promoted to higher roles
this year.
5
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Chief Executive Officer’s Review (continued)
Operational Review (continued)
Our three established Group share option schemes are starting to reward staff with their share awards.
This is an important element of our strategy to ensure alignment with share performance and long-term
investment in the business. The Group’s Stock Appreciation Rights Scheme (SARS), which is aimed at
partner level staff, will vest shortly after the year end with a healthy return to all option holders that have
been with the Group since IPO. A third year’s SARS award was issued in October 2017 to those partners
currently driving the Group’s performance. Also around the same time the Group issued its second issue
of its CSOP and SAYE schemes. Being able to offer something different as an employer has helped us
not only retain staff since the IPO but also attracts a wide pool of new talent. 55% of all staff below
partner level have participated in our SAYE scheme whilst all associates, senior associates, legal
directors and the equivalent levels within our support services team received further CSOP awards.
With the recent acquisition of GCL Solicitors on 23 May 2018 that helped establish our new Guildford
office we have now established a trio of southern offices from which to create a strong, coherent base to
attract the significant number of existing opportunities to the Group. Our Reading office has continued to
establish wider connections and obtain greater local recognition culminating in being named Law Firm of
the Year at the Thames Valley Business Awards this year. Our existing London base provides niche
services lines, creates opportunities for synergies, such as with Kiddy & Partners and remains a gateway
for our international connections.
Acquisitions
Our acquisition strategy, focuses on niche businesses which can supplement our core legal services
offering. Our Plc status and established reputation attracts first class professionals to enhance our core
legal services. As our wide and diverse client base benefits from the added value services provided by
Gateley Capitus and Gateley Hamer, we have this year focused on adding to one of our key strengths in
the house building sector, which resulted in the acquisition of GCL Solicitors.
I am delighted to welcome GCL to the Group. The acquisition will further strengthen our leading position
in the Residential Development sector nationally and provide us with a substantial presence in the
Southern market, which we see as critical in developing a full service offering for our clients.
There is a structural under supply of new housing in the UK and we see this as a market that will remain
strong. The South East in particular will continue to be a significant engine for housing growth for the
foreseeable future.
The acquisition allows us to offer a greater depth of specialism and expertise in all aspects of the
residential development market. We can now match our national office network to our Residential
Development clients' networks with seven Residential Development teams operating across the country.
There are also many clear opportunities across the Group from this strategic acquisition, not least for
Gateley Hamer and Gateley Capitus.
On 6 July 2018, we further expanded our suite of niche businesses with the acquisition of Kiddy &
Partners (Kiddy). Kiddy significantly broadens and strengthens our Employment and People Services
offering. There will be clear opportunities for us to collaborate and deliver integrated advice and services
to a broader set of large-scale employers across a wide range of industries. Kiddy represents our first
acquisition in the Human Capital sector, which when put alongside Global Mobility and our Entrust
pension trustee operation, moves our business further forward, offering employers a range of legal and
consultancy services. This acquisition is in line with our stated plan and follows behind similar progress
made in our Property group noted above where high-value, niche, chartered surveying services now sit-
alongside and complement our core legal offering.
All of our businesses complement each other in service delivery and enhance our go to market
proposition.
6
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Chief Executive Officer’s Review (continued)
Board Composition
At our 2017 AGM we welcomed Suzanne Thompson to the Board. Suzanne has settled in well as we look
to benefit from her marketing, advertising and communications expertise in the next stage of our
differentiation objective.
Current trading and outlook
We are pleased with our performance after three years as an AIM quoted Group and welcome the recent
activity and interest in other law related businesses joining AIM. As the first UK commercial law-led
professional services group we feel proud of our team who continue to support our journey. The Board
strongly believes the time remains right for greater choice for our clients and investors. We therefore
strive to further enhance our offering for the benefit of all stakeholders.
At the same time, we aim to continue to build resilience into our business model and feel confident that
the business we have built over many decades is now better placed to address market opportunities.
Michael Ward
Chief Executive Officer
16 July 2018
7
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Finance Director’s Review
Financial Highlights
The Group delivered another strong performance in 2018 with record revenue generation accompanied
by increased profitability. Total reported revenues for the year increased by 11.0% to £86.1m (2017:
£77.6m). Revenue from core legal services grew organically by 9.5% after adjusting for revenues from
acquisitions since IPO of £3.3m (2017: £2.0m). The Group continues to demonstrate consistent levels of
annual revenue and profit growth whilst actively seeking opportunities for the strategic expansion of our
national teams. Headcount has once again increased to meet client demand but credit for the Group’s
performance should go first and foremost to our established national teams. As our IPO structure attracts
senior (work winning) recruitment opportunities we have maintained a sensible balance of the
management of cost and future investment. The strength of our client relationships and the consistent
delivery of the highest levels of commercial professional advice serve the Group well. EBITDA margins
are performing as expected as we grow our teams within our already invested locations.
Group revenue was well spread across a growing number of clients from many varied sectors. Our
strong performance in transactional led disciplines such as M&A and Real Estate is complemented by
exceptional growth in our less established service lines. With a focus on cross selling, the performance of
all of our UK business lines is to be commended as they have all demonstrated growth this year. The
well-balanced nature of our services provides a natural workflow hedge, and balancing transactional
assignments against large specialist litigation service continues to provide resilience against many
economic challenges facing clients. Our Corporate group generated revenue growth of 14% whilst our
Property group grew revenue by 18%. 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 nationally capable teams help maintain long standing client
relationships and trust. Our post year end acquisition of the business and assets of GCL Solicitors LLP,
who specialise in legal advice for land and property clients, will further enhance our presence across
Southern England out of its existing Guildford location. The Guildford office provides a good strategic fit
with our established Reading and London offices.
Revenue and profits continue to grow across our professional complementary service lines of Gateley
Capitus and Gateley Hamer. We have expanded our service lines in both businesses and created a new
London team within Gateley Hamer. Our Global Mobility consultancy continues to develop opportunities
whilst we seek other Human Capital work type acquisitions. Fees in our Dubai office reduced slightly on
the previous year as the office contracted in activity and headcount in line with locally reduced demand.
The office has broken even this year following last year’s loss.
Operating expenses rose by 10.7% to £71.6m (2017: £64.7m). This growth in operating costs has been
driven mainly by the continued expansion of staff levels to meet client demand. Average numbers of
legal and professional staff rose by 11.4% to 509 (2017: 457). Personnel costs, including increased
share based payment charges, rose as a result by 15.5% from £45.6m to £52.6m, thereby increasing this
cost to 61.1% of revenue from 58.7% in 2017.
As a result of the expansion of new staff numbers, overall utilisation of staff performing chargeable work
decreased to 85% (2017: 86%) but remained within acceptable levels without affecting profit margins.
Other operating expenses decreased by 2.2% to £17.5m (2017: £17.9m). Other operating expenses
(before exceptional items) increased by 0.9% to £18.0m from £17.9m. This increase was predominately
due to increased volumes of activity and expenditure on information technology.
8
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Finance Director’s Review (continued)
Extract of UK statement of comprehensive income
Revenue
Operating profit
Operating profit margin (%)
2018
£’000
86,090
14,825
17.22%
2017
£’000
77,587
13,312
17.16%
Reconciliation to alternative performance measure: Adjusted EBITDA
Operating profit
14,825
13,312
Depreciation
Non-underlying items
Share based payment charge
Amortisation
Exceptional items
Release of lease incentive
Release of contingent consideration
Adjusted EBITDA
Adjusted EBITDA margin (%)
970
719
547
(182)
(362)
16,517
19.19%
819
325
472
-
-
14,928
19.24%
Adjusted EBITDA of £16.5m is up by 10.6% from £14.9m reflecting an adjusted EBITDA margin of 19.2%
(2017: 19.2%). Operating profit before tax was up 11.7% to £14.6m (2017: £13.1m).
Earnings per share
Basic earnings per share increased to 11.03p (2017: 9.43p). Basic earnings per share after non-
underlying items increased to 10.62p (2017: 9.43p). Diluted earnings per share was 10.64p (2017 9.35p).
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 (2017: 2.2p) per share that was paid in March
2018, the Board proposes to approve a full year final dividend at its Annual General Meeting on 26
September 2018 of 4.8p (2017: 4.4p) per share, which if approved, will be paid in early October 2018 to
shareholders on the register at the close of business on 14 September 2018. The shares will go
ex-dividend on 13 September 2018.
Cash resources, borrowings and liquidity
Cash generated during the year from operations was £12.2m (2017: £7.7m) which represents 103.7%
(2017: 76.3%) of profit after taxation. Financing outflows totalled £9.7m (2017: £13.1m) which included
dividends paid totalling £7.0m (2017: £6.3m) and term loan repayments of £2.0m (2017: £2.0m). The
final balance of loans due to former partners of £0.55m was repaid in June 2017. Capital expenditure
decreased to £0.79m (2017: £1.49m) due to their being no significant office or IT outlays during the year
compared to 2017. Group cash at bank increased to £4.3m (2017: £2.7m) during the year. The Group’s
net debt position as at the year end therefore finished at £0.7m (2017: £4.8m).
Net assets
Net assets at the year end, before declaration of final dividend, were £23.0m (2017: £17.4m).
Neil Smith
Finance Director
16 July 2018
9
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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), specialist tax incentive advice (via Gateley Capitus
Limited) and specialist property consultancy advice (via Gateley Hamer Limited). The Group sells its
services through 19 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 geographical office location.
The Group’s services are tailored to those required by local, regional and national clients and are
provided from nine offices across the UK, including its newly acquired Guildford office, 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 provides a platform for the continued profitable growth and
future development of the business. It enables the business to differentiate itself from its 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
10
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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. Gateley will expand by:
¨ 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 11.0% (2017: 15.7%) to £86.1m (2017: £77.6m)
¨ Profit before tax up 11.7% (2017: 18.8%) to £14.6m (2017: £13.1m)
¨ Adjusted EBITDA* up 10.6% (2017: 15.5%) to £16.5m (2017: £14.9m)
¨ Basic Earnings per share (EPS) up 15.1% (2017: 15.3%) to 11.03p (2017: 9.43p)
¨ Total dividend declared of 7.0p (2017: 6.6p)
¨ Revenue per pound of salary cost £1.64 (2017: £1.70)
¨ Adjusted EBITDA margin 19.19% (2017: 19.24%) – Adjusted EBITDA as a percentage of
revenue
¨ Operating profit margin 17.2% (2017: 17.2%) – Operating profit as a percentage of revenue
¨ Revenue days 91 (2017: 93) - Year end trade receivables (excluding unbilled disbursements and
expenses) expressed as the number of preceding days' gross revenue
¨ Gearing ratio 7.9% (2017: 12.7%) – Borrowings due out within one year divided by opening total
equity plus borrowings due out within one year
11
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Strategic report (continued)
Overview for the year (continued)
¨
Interest cover – 82.8x (2017: 66.9x) Profit before financial income and expense and income tax
(“EBIT”) divided by financial expense
¨ Net debt £0.7m (2017: £4.8m)
*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 8 to 9 for a summary of key financial highlights during the year.
Earnings per share
Basic EPS was 11.03p (2017: 9.43p). Diluted EPS was 10.64p (2017: 9.35p).
Cash flows
Net cash generated from operating activities was £12.2m (2017: £7.7m). Investing cash outflows
principally comprised £0.79m (2017: £1.49m) for capital expenditure, together with £0.2m (2017:£0.5m)
cost of investment in Gateley Hamer Limited (‘GHL’). Consideration in respect of the acquisition of GHL
totalling £0.47m (2017: £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 and the continued repayment of external bank loan funding. 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 (2017: £2m) was repaid in respect of the term
loans together with £0.5m (2017: £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 £7.0m (2017: £6.3m) were also paid during the year.
Financing
The Group’s net debt position as at 30 April 2018 (including loans owed to former partners) was £0.7m
(2017: £4.8m). The decrease in net debt is due to repayments made during the year and the increased
generation of cash from operating activities.
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 £8m. All of the
Group’s overdraft facilities are 12 months in duration. The term loan facilities contain appropriate
financial covenants. The Group’s forecasts and projections show that the new facility provides adequate
headroom for its current and future anticipated cash requirements.
12
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Strategic report (continued)
Principal risks and uncertainties
Due to the nature of the business and the markets in which it operates, many of the risks it faces are
ongoing over longer than any single year. The key risks identified by the business are detailed below.
Risk category
Potential impact
Mitigation
Economic
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”
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, pre-eminent 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 provides the platform for the
continued, measured growth and development
of the business. The Group continues to look at
future service lines, such as its Global Mobility
consultancy services, which are set to benefit
from the movement of people across borders.
13
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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) and the Lexcel standards are being
developed for application across the non-legal
parts of the business.
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.
Strategic report (continued)
Principal risks and uncertainties (continued)
Reputation
Operational
risk
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 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’s practice management system
is end of life. The practice management
system forms the base of all transactions
undertaken by the Group and its
replacement presents a risk both in relation
to data and continuity of business.
A project to replace the existing practice
management system has been in progress for
over 12 months. A replacement product has
been identified and a project delivery and
implementation team established.
14
Strategic report (continued)
Principal risks and uncertainties (continued)
Professional
liability and
uninsured
risks
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.
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.
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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.
The Group seeks advice from both internal and
external experts to support it in its adherence to
applicable regulations and guidelines.
The last year has seen the introduction of
additional regulation including for example the
Criminal Finances Act and GDPR. Experts
within the business have provided advice and
appropriate policies, procedures and training
have been adopted and implemented.
In many cases the introduction of new
regulations also provides an opportunity for us
to support our clients in their adoption of these
regulations in their businesses.
15
Strategic report (continued)
Principal risks and uncertainties (continued)
Regulatory
and
Compliance
Risks
(continued)
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.
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
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.
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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.
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.
16
Strategic report (continued)
Principal risks and uncertainties (continued)
Employees
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.
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.
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Recruitment is led by senior members of the
business with all professional staff being
interviewed by partners and senior managers.
Over the last 12 months our recruitment process
has been 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 continues to be 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 sets out
the core values and behaviours expected of staff.
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 tested. The tests include IT services and
staff communications.
17
Strategic report (continued)
Principal risks and uncertainties (continued)
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.
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.
A failure to successfully integrate
acquisitions may impact on Group
profitability.
On behalf of the Board
Neil Smith
Finance Director
16 July 2018
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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 and filed annually by external
auditors. Remedial action necessary for any
breaches identified during the year or as part of the
annual audit is communicated to the business by the
Compliance Officer for Legal Practice (‘COLP’)
and/or Compliance Officer for Finance and
Administration (‘COFA’).
Due diligence appropriate to the size and nature of
targets is undertaken and appropriate warranties and
indemnities are sought from sellers wherever
possible.
Integration plans are formulated as part of the
acquisition process and executed in anticipation of
and following acquisition as appropriate.
For example:
¨ day 1 IT requirements are identified and
implemented,
¨ employment contract terms and conditions
are aligned between existing and new
employees where appropriate post
integration,
¨
formal Board and reporting structures are
introduced post acquisition and authorities
are agreed.
18
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Report on remuneration: voluntary disclosure
The board submits its directors’ remuneration report for the year ended 30 April 2018. 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 period to 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.
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.
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.
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
their role, responsibility and contribution to the
long-term business strategy.
19
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Report on remuneration: voluntary disclosure (continued)
Element, purpose and operation
Opportunity
Stock Appreciation Rights Scheme (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 detailed in the company’s admission
document entered into upon IPO. As disclosed on page 22, 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. 58.7%
(2017: 63.4%) of the Company's issued share capital was held by employees as at 30 April 2018.
It is the committee’s intention that senior employees’ remuneration be positioned market competitively
and at a level which reflects the roles and responsibilities of the individuals by the end of the five year
period to 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.
20
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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 2018 and
30 April 2017:
Salaries
and fees
£’000
Bonus
£’000
Share
Options
£’000
Total
2018
£’000
Salaries
and fees
£’000
Bonus
£’000
Share
Options
£’000
Total
2017
£’000
Nigel Terrence Payne
Joanne Carolyn Lake
Suzanne Francis Alison
Thompson (appointed 27
September 2017)
Michael Richard
Seabrook (resigned 27
September 2017)
Michael James Ward
Peter Gareth Davies
Neil Andrew Smith
40
36
18
2
174
163
155
588
-
-
-
-
87
81
74
242
Salary increases for the year
-
-
-
-
-
-
9
9
40
36
18
2
261
244
238
839
36
30
-
30
135
135
138
504
-
-
-
-
57
57
76
190
-
-
-
-
-
-
4
4
36
30
-
30
192
192
218
698
Salary increases awarded during the year reflect the committee’s intention for executive remuneration to
be competitively positioned by 2020, as referenced in the remuneration policy
21
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Report on remuneration: voluntary disclosure (continued)
Bonuses for the year
The following table represents the bonuses received by the Executive Directors for the year ended
30 April 2018.
Merit Pool1
£’000
Performance Pool2
£’000
Total
£’000
% salary
Michael James Ward
Peter Gareth Davies
Neil Andrew Smith
87
81
48
-
-
26
87
81
74
50%
50%
48%
1The merit pool for year ended 30 April 2018 was set at a sum equivalent to 17.5% of pre-tax profits.
2The total performance pool bonus for the year ended 30 June 2018 was £0.6m, from which NA Smith was awarded a bonus of
£26,000 based on his performance in role and contribution to the business strategy during the year. MJ Ward and PG Davies did not
participate in the performance pool.
Grant of share options
MJ Ward and PG Davies do not currently participate in the SAR Scheme because they already hold a
large number of shares in Gateley (Holdings) Plc and are therefore deemed to be sufficiently incentivised
through their existing shareholding acquired on IPO. In October 2017 NA Smith was granted 100,000
share options under the SAR Scheme based on his performance and contribution to the business. The
share options have been granted with an exercise price equal to £1.83 (representing 115.765% of the
share price on the grant date) and therefore include an inherent stretching share price condition, as the
share price would need to exceed £1.83 before any value is delivered. The share options will vest in
October 2020.
Directors’ Interests
Directors' shareholdings at 30 April 2018 were as follows:
10p ordinary shares
At 30 April 2018
10p ordinary shares
At 30 April 2017
Number of shares Percentage Holding Number of shares Percentage Holding
Nigel Terrence Payne
Joanne Carolyn Lake
Suzanne Francis Alison
Thompson
Michael James Ward
Peter Gareth Davies
Neil Andrew Smith
39,107
26,300
10,000
2,631,204
2,660,104
520,000
0.04%
0.02%
0.01%
2.46%
2.49%
0.49%
39,107
26,300
-
2,960,104
2,989,004
500,000
0.04%
0.02%
-
2.77%
2.80%
0.47%
22
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Report on remuneration: voluntary disclosure (continued)
Directors’ interests (continued)
The following directors held share options under the SAR Scheme as at 30 April 2018:
Number of options
at 30 April 2018
Date
of grant
Exercise price
in £
Earliest exercise
date
Neil Andrew Smith
150,000
8 June 2015
Neil Andrew Smith
150,000
7 October 2016
Neil Andrew Smith
100,000
3 October 2017
1.101
1.382
1.833
8 June 2018
7 October 2019
3 October 2020
1Being the share price on the date of grant of £0.95 multiplied by the hurdle rate of 115.765%.
2Being the share price on the date of grant of £1.20 multiplied by the hurdle rate of 115.765%.
3Being the share price on the date of grant of £1.58 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 Suzanne Thompson (previously Michael Seabrook until 27 September 2017) 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.
23
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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 Quoted Companies Alliance (QCA)
published a new Corporate Governance Code in 2018 which updates and revises the old QCA code. As
part of the revisions to the rules of the Alternative Investment Market (AIM) companies with their shares
traded on AIM will be required to apply and report against a recognised corporate governance code from
September 2018. The Group intends to adopt this code when required to do so in September 2018.
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 27 September 2017
each of the Directors was reappointed to the Board other than Michael Seabrook who stepped down from
the Board and was replaced by Suzanne Thompson on the same date. 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.
The Board has considered the time availability that Nigel Payne has to carry out his duties as Chairman
of Gateley (Holdings) Plc. The Board considers that Nigel’s other public company duties take on average
no more than five working days per month leaving ample spare capacity for him to carry out his duties as
Non-Executive Directors of the Group.
24
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Corporate governance: voluntary disclosure (continued)
Operation of the Board (continued)
The Board has considered the time availability that both Joanne Lake and Suzanne Thompson have to
carry out their duties as Non-Executive Directors of Gateley (Holdings) Plc. The Board considers that
Joanne’s other public company duties take on average no more than ten working days per month leaving
ample spare capacity for her to carry out her duties as Non-Executive Director of the Group. Suzanne has
a full time role as the Chief Executive Officer of Oystercatchers and member of the EXCO, Centaur Media
Plc. She has been given permission by the board of Centaur Media Plc and as such the Board considers
she has sufficient capacity to carry out her duties as a Non-Executive Director of the Group.
Remuneration Committee
The Remuneration Committee comprises Suzanne Thompson (previously 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.
Audit and Risk Committee
The Audit and Risk Committee comprises Joanne Lake (Chairman), Nigel Payne and Suzanne
Thompson (previously 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), Suzanne Thompson (previously 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). In addition to the formal channels of London Stock Exchange
communication through the regulatory news service, the Company utilises the services of DirectorsTalk
and Hardman & Co 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.
25
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Corporate governance: voluntary disclosure (continued)
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.
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 2017 and ending 30 April 2018,
can be found on its website, www.gateleyplc.com
On behalf of the Board
Nigel Payne
Chairman
16 July 2018
26
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Board of Directors
Details of the Directors, their roles and their backgrounds are as follows:
Nigel Payne, aged 58, 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 and Non-Executive Director of AIM quoted GetBusy 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 59, 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 60, 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 42, 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 businesses 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.
27
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Board of Directors (continued)
Joanne Lake, aged 54, 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.
Suzanne Thompson, aged 51, Non-Executive Director
Suzanne specialises in marketing transformation, pioneering new marketing model development
and digital capability programmes. Working with 80% of the FTSE 250 and leading global
communications networks and technology groups, she is helping to drive client business in the USA,
Europe and Asia. Suzanne is an entrepreneur and transformational business leader. Business
launches include Bunker Gin, The Haystack Group and award-winning marketing, management
consultancy, Oystercatchers.
Centaur Media acquired Oystercatchers in September 2016 and as member of The Centaur
Management Board, Suzanne is now responsible for vision and growth of Centaur’s consultancy,
capability and pitch businesses.
Suzanne is also a Board Trustee of Macmillan Cancer Support, NED at Gateley (Holdings) Plc and Addidi
Angel Investor for Small Businesses. She sits on the steering committee of The Women’s Equality Party,
is former Chair of the Marketing Society and a long standing member of WACL and MGGB. Suzanne
also holds an honorary Doctorate from Coventry University for services to Entrepreneurship and
International Business. She was awarded Small Business Entrepreneur of the Year.
28
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Directors’ report
The directors present their annual report and the audited financial statements for the year ended
30 April 2018.
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).
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 38.
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 7 and the Finance Director’s review on
pages 8 to 9. The Group’s key performance indicators (KPIs) are set out on pages 11 and 12.
The strategic report, which includes a description of the principal risks and uncertainties facing the Group,
is set out on pages 10 to 18.
Dividends
The Directors propose to recommend that a final dividend of £4,988,045 (2017: £4,702,806), being 4.8p
(2017: 4.4p) per share, be paid, giving a total dividend for the year of 7.0p (2017: 6.6p). 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
Number of
shares 2018
Percentage
Holding 2018
Number of
shares 2017
Percentage
Holding 2017
Nigel Terrence Payne
Joanne Carolyn Lake
39,107
26,300
0.04%
0.02%
39,107
26,300
0.04%
0.02%
Suzanne Francis Alison
Thompson (appointed 27
September 2017)
Michael Richard Seabrook
(resigned 27 September 2017)
10,000
0.01%
-
-
15,700
0.01%
15,700
0.01%
Michael James Ward
2,631,204
Peter Gareth Davies
2,660,104
Neil Andrew Smith
520,000
2.46%
2.49%
0.49%
2,960,104
2,989,004
500,000
2.77%
2.80%
0.47%
29
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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 7 July 2018:
Name
Number of ordinary shares
% of issued share capital
Liontrust Asset Management
11,376,861
Miton Asset Management
5,868,759
Unicorn Asset Management Limited
5,715,590
Slavery and Human trafficking statement
10.52%
5.42%
5.28%
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 22 to the financial statements.
Political donations
The Group made no political donations (2017: £nil).
Directors’ professional indemnity insurance
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.
30
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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;
¨ state whether applicable IFRSs as adopted by the European Union have been followed, subject to
any material departures disclosed and explained in the financial statements;
¨ prepare the financial statements on the going concern basis unless it is inappropriate to presume
that the company will continue in business.
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:
¨ so far as each director is aware, there is no relevant audit information of which the company’s
¨
auditor is unaware; and
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 Ward
Chief Executive Officer
16 July 2018
One Eleven Edmund Street
Birmingham
West Midlands
B3 2HJ
31
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Independent auditor’s report to the members of Gateley (Holdings) Plc
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of Gateley (Holdings) Plc (the ‘parent company’) and its subsidiaries
(the ‘group’) for the year ended 30 April 2018 which comprise the consolidated statement of profit and loss
and other comprehensive income, the consolidated and company statement of financial position, the
consolidated and company statement of changes in equity, the consolidated and company cash flow
statements and notes to the financial statements, including a summary of significant accounting policies. The
financial reporting framework that has been applied in the preparation of the group financial statements is
applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union
and, as regards the parent company financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
In our opinion:
(cid:120)
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 2018 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.
(cid:120)
(cid:120)
(cid:120)
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities
for the audit of the financial statements section of our report. We are independent of the group and the parent
company in accordance with the ethical requirements that are relevant to our audit of the financial statements in
the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Who we are reporting to
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.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to
report to you where:
(cid:120)
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is
not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the group’s or the parent company’s ability to continue to adopt the going concern
basis of accounting for a period of at least twelve months from the date when the financial statements are
authorised for issue.
(cid:120)
32
32
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Independent auditor’s report to the members of Gateley (Holdings) Plc (continued)
Overview of our audit approach
(cid:120) Overall materiality: £732,000, which represents 5% of the group's profit
before taxation
(cid:120) Key audit matters were identified as revenue recognition and unbilled
revenue for the Group.
(cid:120) We performed full-scope procedures on all operations due to all trading
components being United Kingdom based and therefore requiring a
statutory audit by law.
Key audit matters
The graph below depicts the audit risks identified and their relative significance based on the extent of the
financial statement impact and the extent of management judgement.
High
Key audit matter
Significant risk
Other risk
Unbilled
revenue
Revenue
recognition
Employee
remuneration
Share based
payment
Potential
financial
statement
impact
Low
Impairment of investments
Trade
receivables
Management
override of controls
Debt
covenant
complian
ce
Allowance
for doubtful
accounts not
adequate
Disclosure of impact of IFRS 15
Low Extent of management judgement
High
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters included those that had the greatest
effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
33
33
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Independent auditor’s report to the members of Gateley (Holdings) Plc (continued)
Key Audit Matter – Group
Revenue recognition
Revenue is recognised to the extent that
economic benefits will flow to the Group
and the revenue can be reliably measured.
How the matter was addressed in the audit – Group
Our audit work included, but was not restricted to:
(cid:120) walkthroughs of each significant class of
revenue
transactions and assessing the design effectiveness of key
controls;
Revenue is a key driver of the business and
is also a significant amount in the financial
statements. There is significant management
judgement involved in assessing that the
right to consideration has been earned and
the stage of completion of work performed.
We therefore identified revenue recognition
(focussing on occurrence) as one of the most
significant assessed
risks of material
misstatement (whether or not due to fraud).
Unbilled revenue
Due to the nature of the business there is a
significant year end unbilled revenue
balance. Determining the amount of
revenue to be recognised requires
management to make significant
judgements and estimates including
assumptions about future events, and the
identification of, any other costs that might
arise, the impact of any changes in scope of
work and the recoverability of work-in-
progress (WIP) and receivables balances.
We therefore identified unbilled revenue as
one of the most significant assessed risks of
material misstatement.
(cid:120) evaluating the Group’s accounting policies for recognition of
revenue for appropriateness in accordance with requirements
of International Accounting Standard (IAS) 18 ‘Revenue’;
(cid:120) analytically comparing revenue on a month-by-month basis
across business units;
(cid:120) determining whether a service has been provided or a sale
had occurred in the financial year for revenue recorded
through review of individual matters in accordance with
engagement letters, challenging the stage of completion and
revenue recognised against unbilled amounts through
checking to proof of service and corroborative inquiry with
matter managers and management on a sample basis.
The Group's accounting policy on revenue recognition is shown
in note 1.15 and related disclosures are included in note 2.
found
Key observations
Based on our audit work, we
the Group’s
revenue recognition policy was consistently applied. There
are no findings in relation to revenue recognition.
Our audit work included, but was not restricted to:
(cid:120) agreeing, on a sample basis, engagement terms to ensure
matters are classified correctly between contingent and non-
contingent;
(cid:120) testing non-contingent matters, on a sample basis, to
understand the nature of the matter through review of
engagement letter;
(cid:120) agreeing the recoverability of the balance of unbilled revenue
to post year end billing and cash receipts, and where billing
has not yet occurred we challenged matter managers on the
expected recovery, confirming unbilled revenue is recorded
in the correct period and at the correct amount and is
supported by time costs incurred;
(cid:120) Performing analytical review procedures to assess whether
recovery rates applied in the assessment of WIP balances are
consistent and reasonable.
The Group's accounting policy on unbilled revenue is shown
in note 1.6 and related disclosures are included in note 15.
Key observations
Based on the procedures performed, we did not identify any
material misstatement of unbilled revenue.
We did not identify any Key Audit Matters in relation to the parent company.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that
the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use
materiality in determining the nature, timing and extent of our audit work and in evaluating the results of that
work.
34
34
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Independent auditor’s report to the members of Gateley (Holdings) Plc (continued)
Materiality was determined as follows:
Materiality Measure Group
Financial statements as a
whole
£732,000 which is 5% of Group
profit before tax. This benchmark
is considered the most appropriate
because this is a key performance
measure used by the Board of
directors to report to investors on
the financial performance of the
Group.
Materiality for the current year is
higher than the level that we
determined for the year ended 30
April 2017 as a result of the
increased profit before tax in the
current year.
Based on our risk assessment,
including
the Group’s overall
control environment, we determ-
ined a performance materiality of
75% of
statement
financial
materiality. In the previous year
our performance materiality was
70% to reflect it being our first
year of involvement.
We determined a lower level of
materiality for certain specific
areas such as directors’ remun-
eration
party
transactions.
£36,600 and misstatements below
that threshold that, in our view,
warrant reporting on qualitative
grounds.
related
and
Performance materiality
used to drive the extent of
our testing
Specific materiality
Communication of
misstatements to the audit
committee
Parent
£240,000 which is 1% of parent company
total assets. This benchmark is considered
the most appropriate because this is a key
performance measure used by the Board of
directors to report to investors on the
financial performance of the Company
is that of an
whose principal activity
investment holding company.
Materiality for the current year is higher than
the level that we determined for the year
ended 30 April 2017 as a result of the
increase in total assets.
Based on our risk assessment, including the
Company’s overall control environment, we
determined a performance materiality of
75% of financial statement materiality. In the
previous year our performance materiality
was 70% to reflect it being our first year of
involvement.
We determined a lower level of materiality
for certain specific areas such as directors’
remuneration and related party transactions.
£12,000 and misstatements below that
in our view, warrant
threshold
reporting on qualitative grounds.
that,
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance
for potential uncorrected misstatements.
Overall materiality - group
Overall materiality - parent
25%
75%
Tolerance for
potential uncorrected
mistatements
Performance
materiality
25%
75%
35
35
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Independent auditor’s report to the members of Gateley (Holdings) Plc (continued)
An overview of the scope of our audit
Our audit approach was a risk-based approach founded on a thorough understanding of the group's business, its
environment and risk profile and in particular included:
The components of the Group were evaluated by the audit team based on a measure of materiality considering
each as a percentage of total Group assets, liabilities, revenues and profit before taxes, to assess the significance
of the component and to determine the planned audit response. An interim visit was conducted before the year
end at all significant components of the Group to complete advance substantive audit procedures and evaluate
the Group’s internal controls environment. All trading components are based in the United Kingdom and
therefore to meet statutory requirements we performed a full-scope audit approach for each trading entity,
performed to lower materiality where applicable.
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report set out on pages 4 to 31, other than the financial statements and our auditor’s report
thereon. Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
(cid:120)
the information given in the strategic report and the directors’ report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal
requirements.
(cid:120)
Matters on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the group and the parent company and its environment
obtained in the course of the audit, we have not identified material misstatements in the strategic report or the
directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
(cid:120)
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
(cid:120)
the parent company financial statements are not in agreement with the accounting records and returns; or
(cid:120)
certain disclosures of directors’ remuneration specified by law are not made; or
(cid:120) we have not received all the information and explanations we require for our audit.
36
36
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Independent auditor’s report to the members of Gateley (Holdings) Plc (continued)
Responsibilities of directors for the financial statements
As explained more fully in the directors’ responsibilities statement set out on page 31, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent
company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent
company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
David White
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Birmingham
16 July 2018
37
37
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Consolidated statement of profit and loss and other comprehensive
income for the year ended 30 April 2018
Revenue
Other operating income
Personnel costs
Depreciation and amortisation
Other operating expenses
Operating profit
Adjusted EBITDA
Depreciation
Non-underlying items
Share-based payment charges
Amortisation
Exceptional items
Release of lease incentive
Release of contingent consideration
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
Statutory Earnings per share
Basic
Diluted
Note
2018
£’000
2017
£’000
2
3
5
4
4
4
86,090
77,587
357
(52,621)
(1,517)
(17,484)
445
(45,558)
(1,291)
(17,871)
14,825
13,312
16,517
14,928
10/13
(970)
(819)
5
12
4
4
6
7
(719)
(547)
182
362
(325)
(472)
-
-
(179)
(199)
14,646
13,113
(2,853)
(3,058)
11,793
10,055
(58)
81
11,735
10,136
8
8
11.03p
10.64p
9.43p
9.35p
The results for the periods presented above are derived from continuing operations.
The accompanying notes on pages 42 to 73 for an integral part of these financial statements.
38
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Consolidated statement of financial position at 30 April 2018
Non-current assets
Property, plant and equipment
Investment property
Intangible assets & goodwill
Other intangible assets
Other investments
Total non-current assets
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
Note
10
11
12
13
14
15
16
17
18
19
16
17
19
21
2018
£’000
1,935
164
3,295
39
85
5,518
41,417
4,301
45,718
51,236
(2,982)
(121)
(128)
(405)
2017
£’000
2,160
164
3,842
-
85
6,251
39,086
2,696
41,782
48,033
(4,958)
-
(239)
(381)
(3,636)
(5,578)
(1,977)
(20,978)
(200)
(1,457)
(2,531)
(20,619)
(210)
(1,665)
(24,612)
(25,025)
(28,248)
(30,603)
22,988
17,430
10,688
4,576
(9,950)
1,547
(15)
23
16,119
22,988
10,688
4,332
(9,950)
1,547
(132)
81
10,864
17,430
These financial statements were approved by the directors on 16 July 2018 and were signed and authorised for issue
on their behalf by:
Michael J Ward
Chief Executive Officer
Neil Smith
Finance Director
Company registered number: 09310078
The accompanying notes on pages 42 to 73 for an integral part of these financial statements.
39
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Consolidated statement of changes in equity
Share
capital
Share
premium
Merger
reserve
Other
reserve
Treasury
reserve
Retained
earnings
£’000
£’000
£’000
£’000
£’000
£’000
Foreign
currency
translation
reserve
£’000
Total
equity
£’000
At 1 May 2016
10,640
4,332
(9,950)
1,013
(27)
6,716
-
12,724
Comprehensive income:
Profit for the year
Exchange rate difference
Total comprehensive income
-
-
10,640
-
-
4,332
-
-
(9,950)
-
-
1,013
-
-
(27)
10,055
-
10,055
Transactions with owners
recognised directly in equity:
Purchase 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
-
-
-
48
-
-
10,688
-
-
-
-
-
-
4,332
-
-
-
-
-
-
(9,950)
-
-
-
534
-
-
1,547
(164)
-
59
-
-
-
(132)
-
110
-
-
(6,342)
325
10,864
-
81
81
-
-
-
-
-
-
81
10,055
81
10,136
(164)
110
59
582
(6,342)
325
17,430
At 1 May 2017
10,688
4,332
(9,950)
1,547
(132)
10,864
81
17,430
Comprehensive income:
Profit for the year
Exchange rate differences
Total comprehensive income
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,793
-
11,793
-
(58)
(58)
11,793
(58)
11,735
Transactions with owners
recognised directly in equity:
Purchase of treasury shares
EBT reserves adjustment
Reclassification of gain on own shares
Sale of treasury shares
Dividend paid
Share based payment transactions
Total equity at 30 April 2018
-
-
-
-
-
-
10,688
-
-
244
-
-
-
4,576
-
-
-
-
-
-
(9,950)
-
-
-
-
-
-
1,547
(38)
-
-
155
-
-
(15)
-
29
(244)
-
(7,042)
719
16,119
-
-
-
-
-
-
23
(38)
29
-
155
(7,042)
719
22,988
The following describes the nature and purpose of each reserve within equity:
Share premium – Amount subscribed for share capital in excess of nominal value together with gains on the sale of own shares.
Merger reserve – Represents the difference between the nominal value of shares acquired by the Company in the share for share
exchange with the former Gateley Heritage LLP members and the nominal value of shares issued to acquire them.
Other reserve – Represents the difference between the actual and nominal value of shares issued by the Company in the
acquisition of subsidiaries.
Treasury reserve – Represents the repurchase of shares for future distribution by Group’s Employee Benefit Trust.
Retained earnings – All other net gains and losses and transactions with owners not recognised anywhere else.
Foreign currency translation reserve – Represents the movement in exchange rates back to the Group’s functional currency of
profits and losses generated in foreign currencies.
The accompanying notes on pages 42 to 73 for an integral part of these financial statements.
40
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Consolidated cash flow statement for year ended 30 April 2018
Cash flows from operating activities
Profit for the year after tax
Adjustments for:
Depreciation and amortisation
Financial income
Financial expense
Release of contingent consideration
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
Decrease/(increase) in provisions
Cash generated from operations
Tax paid
Net cash flows from operating activities
Investing activities
Acquisition of property, plant and equipment
Acquisition of other intangible assets
Deferred consideration paid - acquisition of subsidiary
Cash received on acquisition of subsidiary
Net cash used in investing activities
Financing activities
Interest receivable
Interest and other financial income paid
Repayment of term bank loans
Repayment of loans from former members of Gateley Heritage
LLP
Cash received from lock in arrangements
Proceeds from sale of own shares
Acquisition of own shares
Dividends paid
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
2018
£’000
2017
£’000
11,793
10,055
10/12/13
6
6
7
10
13
17
17
6
6
16
16
9
20
1,517
(233)
412
(362)
719
-
2,853
16,699
(2,330)
851
14
15,234
(3,051)
12,183
(745)
(46)
(179)
-
1,291
(237)
436
-
325
2
3,058
14,930
(5,041)
636
(5)
10,520
(2,844)
7,676
(1,485)
-
(508)
280
(970)
(1,713)
233
(412)
(1,980)
(551)
-
361
(217)
(7,042)
237
(420)
(1,980)
(4,552)
159
-
(164)
(6,342)
(9,608)
(13,062)
1,605
2,696
4,301
(7,099)
9,795
2,696
The accompanying notes on pages 42 to 73 for an integral part of these financial statements.
41
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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 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 26.
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 positive 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 £8m (2017: £5m). All
of the Group’s overdraft facilities are 12 months in duration. 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.
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.
42
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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.
43
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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 as 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.
44
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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.
45
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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 re-measured 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
Other intangible assets, including software licences, expenditure on internally generated goodwill and
brands, customer contracts and relationships are capitalised at cost and amortised on a straight-line basis
over their estimated useful economic lives through operating expenses.
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation
and accumulated impairment losses.
Customer lists 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.
46
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Notes (continued)
1
Basis of preparation and significant accounting policies (continued)
1.9
Intangible assets and goodwill (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
Computer software
1.10
Investment property
3 years
3 years
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.
47
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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.
48
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Notes (continued)
1
Basis of preparation and significant accounting policies (continued)
1.15 Revenue recognition
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.
49
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Notes (continued)
1
Basis of preparation and significant accounting policies (continued)
1.19 Non-underlying and exceptional items
Non-underlying items
Non-underlying items are non-trading and or non-cash items disclosed separately in the Consolidated
Income Statement where the quantum, nature or volatility of such items would otherwise distort the
underlying trading performance of the Group. The following are included by the Group in its assessment
of non-underlying items:
¨ Share based payment charges.
¨ Amortisation and Impairment charges in respect of intangible fixed assets.
The tax effect of the above is also included if considered significant.
Exceptional items
Exceptional items are one off transactions, unrelated to the underlying trading performance of the Group
disclosed separately in the Consolidated Income Statement where the quantum, nature or volatility of
such items would otherwise distort the underlying trading performance of the Group.
The following are included by the Group in its assessment of exceptional items:
¨ Gains or losses arising on disposal, closure, restructuring or reorganisation of businesses that do
not meet the definition of discontinued operations.
¨ Expenses associated with acquisitions.
¨ Costs incurred as part of significant refinancing activities.
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
¨ IFRS 16 – Leases
¨ 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
50
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Notes (continued)
1
Basis of preparation and significant accounting policies (continued)
1.21 Adopted IFRS not yet applied (continued)
New standards and interpretations not yet applied
IFRS 15 ‘Revenue from Contracts with Customers’
On 1 January 2018, IFRS 15 replaces the existing revenue recognition accounting standards – IAS 18
Revenue’ and IAS 11 ‘Construction Contracts’. This standard introduces a new revenue recognition
model that recognises revenue either at a point in time or over time. The model features a contract-
based five-step analysis of transactions to determine whether, how much and when revenue is
recognised; this includes the matching of stand-alone prices for services provided to the satisfaction of
performance obligations. The model is not expected to change the timing of revenue recognition for the
activities of the Group as management currently recognise and assess the key aspects of the new
standard in their existing assessment of revenue recognition, however management continue to monitor
its application and impact carefully as part of their ongoing assessment which will be completed by 31
October 2018. Under IFRS 15, revenue must be accounted for at the individual contract level. Therefore,
the contracts will be disaggregated and the assessment of revenue will depend on the performance
obligations under the contract.
The Group considers that there are typically two revenue contract types used in performing professional
services advice, being non-contingent and contingent contract types. Non-contingent work is typically
recognised at a fixed value or based upon the value of time incurred to complete the work. It is
recognised over the duration of the contract. Contingent work is typically recognised once pre agreed
stages of the contracts performance are reached or concluded as a result of an event linked to each work
type performance. Contingent work can contain a profit premium mark up as a result of the risks
associated with offering this type of contractual arrangement to clients. Management believe that the
performance of the Group’s legal and complementary services can be categorised within these two
category types.
Under IAS 18 and IAS 11, revenue was recognised in respect of contracts where there was also a
probable recovery of cash in order to settle the value of advice provided. This assessment has always
been part of management’s assessment of whether to recognise revenue and will continue to be the case
under the new standard.
IFRS 15 includes a choice on the transitional adjustments on initial application. Management believe that
should they discover an adjustment to be made through the application of the new standard they will
choose ‘modified retrospective adoption’, which is to retrospectively apply the standard with the
cumulative effect of applying IFRS 15 to the opening balance of retained earnings on 1 May 2018.
Implementation will therefore not result in restatement of comparative period results using this approach.
IFRS 16 ‘Leases’
IFRS 16 replaces the existing leasing accounting guidance, which includes IAS 17 ‘Leases’ and IFRIC 4
‘Determining Whether an Arrangement Contains a Lease’. The standard is effective for periods beginning
on or after 1 January 2019.
The standard requires lessees to account for most contracts using an on-balance sheet model, with the
distinction between operating and finance leases being removed. There is no change to the revenue
recognition methodology for lessor operating leases.
51
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Notes (continued)
1
Basis of preparation and significant accounting policies (continued)
1.21 Adopted IFRS not yet applied (continued)
IFRS 16 ‘Leases (continued)
The standard provides certain exemptions from recognising leases on the balance sheet, including where
the asset is of low value or the lease term is twelve months or less. In addition, the standard makes
changes to the definition of a lease to focus on, amongst other things, which party has the right to direct
the use of the asset.
Under the new standard, the Group will be required to recognise right of use lease assets and lease
liabilities on the balance sheet. The right of use asset is initially measured at cost and subsequently
measured at cost (subject to certain exceptions) less accumulated depreciation and impairment losses,
adjusted for any re-measurement of the lease liability. Liabilities are measured based on the present
value of future lease payments over the lease term. Subsequently, the lease liability is adjusted for
interest and lease payments, as well as the impact of lease modifications, amongst others.
The recognition of the depreciation of right of use lease assets and interest on lease liabilities over the
lease term will have no overall impact on profit before tax over the life of the lease; however, the result in
any individual year will be impacted and the change in presentation of costs will likely be material to the
Group’s key financial metrics. Under IAS 17, the charge is booked in full to operating profit. Metrics which
will therefore be affected will include operating profit and operating margin, interest and interest cover,
EBITDA and operating cash flow.
Furthermore, the principal amount of cash paid and interest in the cash flow statement will be presented
separately as a financing activity. Operating lease payments under IAS 17 would have been presented
as operating cash flows. There will be no overall net cash flow impact.
The Group has commenced work to understand the impact of the new standard and the project will
complete during 2018. Work will include a detailed review of all lease contracts to establish lease
classification, assessment of transition options, the quantification of financial impacts, design of future
processes and the related systems changes, the assessment of the related impacts on the Group’s
regulatory and commercial reporting requirements, and the impact on the Group’s long-term incentive
schemes. The review is currently ongoing and will be disclosed in full in next year’s financial statements.
Information on the undiscounted amount of the Group’s operating lease commitments under IAS 17
‘Leases’, the current leasing standard, is disclosed in the Group’s annual financial statements. The leases
substantially relate to property leases used to perform professional activities as an operating lease lessor.
Other new standards and amendments
IFRS 9 ‘Financial Instruments’ specifies how an entity should classify and measure financial assets,
including some hybrid contracts. The Group is expected to apply this standard for the Group’s 30 April
2019 financial statements and work is ongoing to assess its impact which will be disclosed in full in next
year’s Group financial statements.
A number of other standards have been modified. These include Disclosure Initiative (Amendments to
IAS 7), Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12) and
Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2). None
of these amendments are expected to have a material effect on the Group’s financial statements.
52
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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
and global mobility consultancy.
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
2018
£’000
80,515
3,149
670
1,258
138
360
86,090
2017
£’000
73,711
1,870
712
372
416
506
77,587
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 £0.46m (2017: £0.40m)
together with costs of £0.8m (2017: £1.6m) are located in the Group's Dubai branch. Revenue generated
by the Group's Dubai branch to customers in the UAE totalled £0.9m (2017: £0.7m) 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 2018 or
2017 financial year.
53
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Notes (continued)
2
Operating segments (continued)
2018
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
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
Banking and
Financial
Services
Corporate Business
Services
£’000
15,489
5,755
£’000
16,019
4,338
£’000
12,225
5,062
Employee
Pensions
and
Benefits
£’000
7,516
2,819
Property
Total
segments
£’000
33,694
15,769
£’000
84,943
33,743
Other expense
and movement
in unbilled
revenue
£’000
1,147
1,147
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 expenses
and movement
in unbilled
revenue
£’000
1,729
1,729
No other financial information has been disclosed as it is not provided to the CODM on a regular basis.
Total
£’000
86,090
34,890
719
(5,209)
(1,517)
(14,058)
(179)
14,646
Total
£’000
77,587
32,282
445
(5,391)
(1,282)
(12,742)
(199)
13,113
54
Notes (continued)
3
Other operating income
Rental and service charge 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 losses/(gains)
Loss on sale of fixed assets
Exceptional items
Release of lease incentive
Release of contingent consideration
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
2018
£’000
357
-
357
2018
£’000
970
547
132
2,981
(295)
66
-
2018
£’000
182
362
544
2017
£’000
396
49
445
2017
£’000
819
472
230
3,094
(275)
(43)
2
2017
£’000
-
-
-
Exceptional items represent the release of over accrued contingent consideration calculated within the
earn-out clause of the acquisition of Gateley Hamer Limited and the release of an incentive as a result of
termination a property lease.
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
Tax compliance services
2018
£’000
52
19
27
11
2017
£’000
55
19
26
11
55
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Notes (continued)
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 payment expense
Social security costs
Pension costs
Number of employees
2017
2018
509
248
757
457
239
696
2018
£’000
45,825
719
5,283
794
52,621
2017
£’000
40,458
325
4,075
700
45,558
Details of the Directors’ remuneration and share interests are given in the Directors’ Remuneration Report
on pages 19 to 23.
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
2018
£’000
233
233
2017
£’000
237
237
(412)
(412)
(436)
(436)
(179)
(199)
56
Notes (continued)
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
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
2018
£’000
2,926
38
2,964
(111)
2,853
2017
£’000
3,069
84
3,153
(95)
3,058
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:
2018
£’000
2017
£’000
Profit for the year (subject to corporation tax)
14,646
13,113
Tax using the Company’s domestic tax rate of 19% (2017 – 20%)
Expenses not deductible for tax purposes
Under provision of taxation in previous period
Total tax expense
2,783
32
38
2,853
2,623
351
84
3,058
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 2018 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.
57
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Notes (continued)
8
Earnings per share
Statutory earnings per share
2018
Number
2017
Number
Weighted average number of ordinary shares in issue, being weighted
average number of shares for calculating basic earnings per share
Shares deemed to be issued for no consideration in respect of share
based payments
106,881,953
106,663,150
3,948,441
759,599
Weighted average number of ordinary shares for calculating diluted
earnings per share
110,830,394
107,422,749
Profit for the year and basic earnings attributable to ordinary equity
shareholders
Exceptional 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
9
Dividends
Equity shares:
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
Final dividend in respect of 2017 (4.4p per share) – 4 October 2017
Interim dividend in respect of 2018 (2.2p per share) – 16 March 2018
2018
£’000
2017
£’000
11,793
10,055
(544)
103
11,352
-
-
10,055
2018
Pence
11.03
10.64
10.62
10.24
2018
£’000
-
-
4,691
2,351
7,042
2017
Pence
9.43
9.35
9.43
9.35
2017
£’000
3,996
2,346
-
-
6,342
The Board proposes to recommend a final dividend of 4.8p (2017: 4.4p) per share at the AGM. If
approved, this dividend will be paid in early October 2018 to shareholders on the register at the close of
business on 14 September 2018. The shares will go ex-dividend on 13 September 2018. This dividend
has not been recognised as a liability in these final statements.
58
Notes (continued)
10
Property, plant and equipment
Leasehold
improvements
£’000
Equipment
£’000
Fixtures and
fittings
£’000
Cost
Balance at 1 May 2016
Arising on acquisition
Additions
Disposals and write offs
Balance at 30 April 2017
Balance at 1 May 2017
Additions
Balance at 30 April 2018
Depreciation and impairment
Balance at 1 May 2016
Arising on acquisition
Depreciation charge for the year
Disposals
Balance at 30 April 2017
Balance at 1 May 2017
Depreciation charge for the year
Balance at 30 April 2018
Net book value
At 30 April 2017
At 30 April 2018
151
-
75
-
226
226
-
226
37
-
22
-
59
59
23
82
167
144
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Total
£’000
6,690
39
1,485
(4)
8,210
8,210
745
8,955
2,956
3,583
39
807
(4)
-
603
-
3,798
4,186
3,798
634
4,432
4,186
111
4,297
2,359
2,816
5,212
21
464
(2)
-
333
-
21
819
(2)
2,842
3,149
6,050
2,842
596
3,438
956
994
3,149
351
3,500
6,050
970
7,020
1,037
2,160
797
1,935
59
Notes (continued)
11
Investment property
Fair value
Balance at 1 May 2016 and 30 April 2017
Balance at 1 May 2017 and 30 April 2018
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
£’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 2018 at £164,000 (2017: £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 2016
Acquisitions through business combinations
At 30 April 2017 and at 30 April 2018
Amortisation
At 1 May 2016
Charge for the year
At 30 April 2017
Charge for the year
At 30 April 2018
Carrying amounts
At 30 April 2017
At 30 April 2018
Goodwill
£’000
1,515
1,161
2,676
-
-
-
-
-
2,676
2,676
Customer
lists
£’000
1,000
638
1,638
-
472
472
547
1,019
1,166
619
Total
£’000
2,515
1,799
4,314
-
472
472
547
1,019
3,842
3,295
60
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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).
– Growth rates of between 10-20% are based on management’s understanding of the
market opportunities for services provided pertaining to the industry concerned.
–
Increases in costs are based on current inflation rates and expected levels of recruitment
needed to generate predicted turnover growth.
– Attrition rates are based on the expected level of fees from existing clients as a
percentage of total forecast fees
– Cash flows 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 intangible assets
Cost
Balance at 1 May 2016 and 30 April 2017
Additions
At 30 April 2018
Amortisation
Balance at 1 May 2016 and 30 April 2017
Charge for the year
At 30 April 2018
Net book amount at 30 April 2017
Net book amount at 30 April 2018
Computer
software
£’000
-
46
46
-
7
7
-
39
61
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Notes (continued)
14 Other investments
The Group holds other investment interests in the following third party investments:
Fair value
Balance at 1 May 2016
Additions
Balance at 30 April 2017
Additions
Balance at 30 April 2018
£’000
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 Manchester
Biotech Limited (formerly 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.
Investments in subsidiaries
The Group has effective control of the following:
Country of
incorporation
Ordinary share
proportion held
Nature of business
Gateley Plc
Entrust Pension Limited
Gateley Capitus Limited
Gateley Hamer Limited
England and Wales
England and Wales
England and Wales
England and Wales
Gateley EBT Limited
Gateley Investments Limited
England and Wales
England and Wales
Ensco Trustee Company Limited
Gateley Secretaries Limited
Gateley Incorporations Limited
Gateley Custodian and Nominee
Services Limited
Gateley Custodian and Nominee
Services No.2 Limited
England and Wales
England and Wales
England and Wales
England and Wales
100%
100%
100%
100%
100%
100%*
100%*
100%*
100%*
100%*
Legal services
Pension trustee services
Tax incentive services
Specialist property
consultancy
Employee benefit trust
Corporate investment
company
Corporate trustee company
Non-trading
Non-trading
Non-trading
England and Wales
100%*
Non-trading
Gateley Heritage LLP
Gateley UK LLP
Country of
incorporation
England and Wales
England and Wales
Controlling
interest held
100%*
100%**
Gateley (Manchester) LLP
England and Wales
51%*
Nature of business
Non-trading
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
62
Notes (continued)
15
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 2018
2018
£’000
28,512
10,672
2,233
2017
£’000
26,132
10,487
2,467
41,417
39,086
2018
£’000
(2,011)
264
(1,296)
831
2017
£’000
(1,792)
302
(815)
294
(2,212)
(2,011)
2018
£’000
18,220
3,246
4,363
4,895
2017
£’000
18,464
1,864
3,212
4,603
30,724
28,143
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.
63
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Notes (continued)
16 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 20.
Non-Current liabilities
Unsecured bank loan
Current liabilities
Unsecured bank loan
Loans from former members
2018
Fair
value
£’000
Carrying
amount
£’000
2017
Fair
value
£’000
Carrying
amount
£’000
2,982
2,982
4,958
4,958
1,977
-
1,977
1,977
-
1,977
1,980
551
2,531
1,980
551
2,531
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 was chargeable at 0.5% over
Bank of England base rate.
17
Trade and other payables
Current
Trade payables
Other taxation and social security payable
Other payables
Accruals
Non-current
Other payables
2018
£’000
5,204
6,355
658
8,761
2017
£’000
5,204
4,671
1,385
9,359
20,978
20,619
121
-
Current other payables include £0.47m (2017: £1.012m) in respect of contingent consideration due to
vendors of Gateley Capitus Limited and Gateley Hamer Limited. During the year £0.055m was paid to
Gateley Capitus Limited and £0.125m to Gateley Hamer Limited in accordance with the terms of those
acquisitions. A further £362k of contingent consideration was released as no longer due and payable to
Gateley Hamer Limited.
Post year end £0.47m of contingent consideration that was paid on 18 June 2018 in respect of the
acquisition of Gateley Hamer Limited. £0.235m of the £0.47m was settled by way of 10p ordinary shares
with the balance payable in cash. Contingent consideration is calculated in line with the Business and
Asset purchase agreement based on the value of revenue earned by Gateley Hamer Limited over the two
year period to 31 March 2018.
64
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Notes (continued)
18
Deferred tax liability
At 1 May 2016
Acquisitions through business combinations – Gateley Hamer
Limited
Credited during the year in the Consolidated income statement
At 30 April 2017
Credited during the year in the Consolidated income statement
At 30 April 2018
19
Provisions
Professional indemnity
Brought forward
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
134
(95)
239
(111)
128
2018
£’000
591
210
4
(200)
605
405
200
605
200
134
(95)
239
(111)
128
2017
£’000
596
270
(91)
(184)
591
381
210
591
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.
20
Net debt
Current assets
Cash and cash equivalents
Current liabilities
Unsecured bank loan
Loans from former members
Non-current liabilities
Unsecured bank loan
Net borrowings
Net debt
2018
£’000
4,301
(1,977)
-
(2,982)
(4,959)
2017
£’000
2,696
(1,980)
(551)
(4,958)
(7,489)
(658)
(4,793)
65
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
2018
Number
2018
£
2017
Number
2017
£
106,881,953
-
10,688,195 106,396,912 10,639,691
38,803
388,029
-
-
-
97,012
9,701
106,881,953
10,688,195 106,881,953 10,688,195
Notes (continued)
21
Share capital
Authorised, issued and fully paid
Ordinary shares of 10p each
Brought forward
Issued on acquisition of Gateley Hamer
Limited
Issued as part of deferred consideration of
Gateley Hamer Limited
At 30 April 2018
On 15 September 2016 the Group acquired the entire issued share capital of Gateley Hamer 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.
22
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.
66
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Notes (continued)
22
Financial instruments and related disclosures (continued)
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.
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
Short-term borrowings
Current financial liabilities
Long-term borrowings
Other payables due after more than one year
Total financial liabilities
2018
£’000
4,301
39,184
43,485
(14,623)
(1,977)
(16,600)
(2,982)
(121)
(19,703)
2017
£’000
2,696
36,619
39,315
(15,948)
(2,531)
(18,479)
(4,958)
-
(23,437)
Financial assets contain trade receivables and unbilled revenue whereas financial liabilities contain trade
payables, other payables and accruals.
67
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Notes (continued)
22
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
2018
Increase/
(decrease)
in equity
£’000
2017
Increase/
(decrease)
in equity
£’000
44
(44)
59
(59)
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
2018
£’000
128
2017
£’000
182
The effect of foreign currency fluctuations on the financial statements is immaterial.
23 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
2018
£’000
3,290
11,541
13,637
28,468
Other
2018
£’000
127
329
-
456
Land and
buildings
2017
£’000
2,967
10,954
13,950
27,871
Other
2017
£’000
132
456
-
588
68
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Notes (continued)
24
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 (2017: £95,000) and the amounts
outstanding at the year-end are £Nil (2017: £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 £28,432 (2017:
£6,400) in respect of employee benefits services provided by Mattiolli Woods Plc. In addition, the Group
received revenues of £197,443 (2017: £95,061) in respect of legal services provided to Mattiolli Woods
Plc and its subsidiaries.
Compensation paid to key management personnel
At the year end, Directors of Gateley (Holdings) Plc control 5.52% (2017: 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 2018: £2.211m
(2017: £1.695m).
Short term remuneration to key management personnel is included in personnel costs and analysed as
follows:
Wages and salaries
Social security
Pension costs
Share based payment charges
Dividends paid to directors during the year are shown on page 29.
2018
£’000
1,920
268
-
23
2,211
2017
£’000
1,486
205
-
4
1,695
69
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Notes (continued)
25
Share based payments
Group
At the year end the Group has three share based payment scheme in operation.
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.
Save As You Earn scheme (‘SAYE')
The Group operates a HMRC approved SAYE scheme for all staff. Options under this scheme will vest if
the participant remains employed for the agreed vesting period of three years. Upon vesting, each option
allows the holder to purchase the allocated ordinary shares at a discount of 20% of the market price
determined at the grant date.
Company Share Option Plan (‘CSOP')
The Group operates 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.
The annual awards granted under the scheme are summarised below:
Weighted
average
remaining
contractual
life
Weighted
average
exercise
price
Originally
granted
Lapsed at
30 April
2017
At 1 May
2017
Granted
during
the year
Lapsed
during
year
At 30 April
2018
Number
Number
Number
Number
Number
0.6 years
1.9 years
2.9 years
£1.10
£1.39
£1.83
7,200,000
10,850,000
-
(250,000)
6,950,000
- 10,850,000
-
-
-
-
7,050,000
(250,000)
(425,000)
(175,000)
6,700,000
10,425,000
6,875,000
18,050,000
(250,000) 17,800,000
7,050,000
(850,000)
24,000,000
1.9 years
2.9 years
£0.95
£1.33
1,166,779
-
(45,848)
-
1,120,931
-
-
556,296
(171,099)
(24,361)
949,832
531,935
1,166,779
(45,848)
1,120,931
556,296
(195,460)
1,481,767
1.5 years
£1.31
940,685
(13,411)
927,274
-
(138,326)
788,948
2.9 years
£1.65
-
-
-
940,685
(13,411)
927,274
581,162
581,162
(39,390)
541,772
(177,716)
1,330,720
SARS
SARS 15/16 - 8 June 2015
SARS 16/17 - 7 October 2016
SARS 17/18 - 3 October 2017
SAYE
SAYE 16/17- 1 September 2016
SAYE 17/18- 15 September
2017
CSOPS
CSOPS 16/17 – 20 December
2016
CSOPS 17/18 – 3 October 2017
70
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Notes (continued)
25
Share based payments (continued)
Fair value calculations
The award is accounted for as equity-settled under IFRS 2. The fair value of awards which are subject to
non-market based performance conditions is calculated using the Black Scholes option pricing model.
This model has been used as an approximation of the binomial model for valuing the SARS granted, the
directors consider the difference to be immaterial. The inputs to this model for awards granted during the
financial year are detailed below:
CSOP
CSOP SAYE SAYE SARS
SARS SARS
Grant date
Share price at date of grant
Exercise price
Volatility
Expected life (years)
Risk free rate
Dividend yield
15/9/17 20/12/16 3/10/17
£1.65p
£1.65p
24%
3.3
1%
4%
1/9/16 3/10/17 7/10/16 8/6/15
£1.305p £1.66p £0.95p £1.58p £1.20p £0.95p
£1.305p £1.33p £0.95p £1.83p £1.39p £1.10p
24%
3.3
1%
6%
24%
3.3
1%
4%
24%
3.3
1%
4%
24%
3.3
1%
4%
24%
3.3
1%
4%
24%
3.3
1%
4%
Fair value per share
Market based performance condition
Non-market based performance
condition/no performance condition
£0.19p
-
£0.15p £0.33p £0.25p £0.12p £0.06p £0.05p
-
-
-
-
-
-
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
£719,000 (2017: £325,000).
26
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 of goodwill (note 12)
The value of goodwill is calculated on the acquisition of any new businesses. The value of goodwill is
assessed at each year end to ensure that the carrying value is still reflective of the underlying values
calculated on day one.
71
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Notes (continued)
26
Accounting estimates and judgements (continued)
Impairment assessment of trade receivables (note 15)
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 (note 15)
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 (note 19)
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 (note 12)
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.
Share based payment (note 25)
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.
72
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Notes (continued)
27
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 £793,869 (2017: £699,512) and the outstanding balance at the
yearend was £20,284 (2017: £126,180).
28
Subsequent events
Since the year end the Group has acquired two complementary businesses:
On 23 May 2018, Gateley Plc completed the acquisition of the business and assets of GCL Solicitors LLP
for a total consideration of £4,150,000. The total consideration was split £2,282,500 paid in cash and
£1,867,500 through the issuance of 1,164,276 new ordinary shares of 10 pence each in Gateley
('Ordinary Shares') at an average price over the past 5 days of £1.604. The cash consideration is being
funded by the extension of existing Group bank facilities repayable over the three years from completion.
In addition, £1,320,000 of liabilities owed to the former members of GCL will be converted into loans of
the same amount, repayable by Gateley over the next two years following completion. GCL specialises in
legal advice for land and property clients.
On 6 July 2018, Gateley (Holdings) Plc acquired the business and assets of Kiddy & Partners LLP into a
new 100% owned subsidiary of the Company, Kiddy & Partners Limited (formerly Ensco 1289 Limited).
The initial consideration payable on completion was £851,844 settled 50% in cash and 50% by the
issuance of 251,207 Ordinary Shares of 10 pence each in Gateley (‘Ordinary Shares’). Contingent
consideration of up to approximately £2.15m may be payable in annual instalments over the
post-completion period up to and including 30 April 2021. Contingent consideration will also be settled
50% in cash and 50% in Ordinary Shares. The maximum consideration payable cannot exceed £3m.
The acquisition was made on a net working capital neutral basis.
73
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Parent company statement of financial position
at 30 April 2018
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
Other payables
Note
5
6
2018
£’000
2017
£’000
16,180
15,437
16,180
15,437
7,856
1
7,857
7,725
2
7,727
24,037
23,164
(470)
(1,013)
Total current liabilities
7
(470)
(1,013)
Total liabilities
Net assets
Equity
Share capital
Share premium
Other reserves
Shares to be issued
Retained earnings
Total equity
(470)
(1,013)
23,567
22,151
10,688
4,332
1,548
1,169
5,830
23,567
10,688
4,332
1,548
450
5,133
22,151
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 2018 was £7,739,000 (2017:
£11,476,000).
These financial statements were approved by the directors on 16 July 2018 and were signed and
authorised on their behalf by:
Michael J Ward
Chief Executive Officer
Neil Smith
Finance Director
Company registered number: 09310078
The accompanying notes on pages 77 to 84 for an integral part of these financial statements.
74
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Parent company statement of changes in equity
Share
capital
Share
premium
Other
reserves
Retained
earnings
At May 2016
Comprehensive income:
Profit for the year
Share based payment transactions
Total comprehensive income
Transactions with owners recognised
directly in equity
Issue of shares – Acquisition of Gateley
Hamer Limited
Issue of deferred income shares Acquisition
of Gateley Hamer Limited
Dividend paid
Total equity at 30 April 2017
At May 2017
Comprehensive income:
Profit for the year
Share based payment transactions
Total comprehensive income
Transactions with owners recognised
directly in equity
Dividend paid
Total equity at 30 April 2018
£’000
10,640
£’000
4,332
-
-
-
38
10
-
10,688
10,688
-
-
-
-
10,688
-
-
-
-
-
-
4,332
4,332
-
-
-
-
4,332
Share
based
payment
reserve
£’000
Total
Equity
£’000
-
15,985
-
450
450
-
-
-
450
450
-
719
719
11,476
450
11,926
458
125
(6,343)
22,151
22,151
7,739
719
8,458
£’000
1,013
-
-
-
420
115
-
1,548
1,548
-
-
-
£’000
-
11,476
-
11,476
-
-
(6,343)
5,133
5,133
7,739
-
7,739
-
1,548
(7,042)
5,830
-
1,169
(7,042)
23,567
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 spread across the vesting period
based on the fair value at the grant date.
The accompanying notes on pages 77 to 84 for an integral part of these financial statements.
75
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Parent company cash flow statement
for year ended 30 April 2018
Cash flows from operating activities
Profit for the year
Decrease in current liabilities
Increase in trade and other receivables
2018
£’000
7,739
(364)
(131)
2017
£’000
11,475
-
(4,459)
Net cash flows from operating activities
7,244
7,016
Investing activities
Consideration paid on acquisition of subsidiary
Net cash used in investing activities
Financing activities
Dividends paid
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of year
(203)
(203)
(7,042)
(7,042)
(1)
2
1
(672)
(672)
(6,342)
(6,342)
2
-
2
The accompanying notes on pages 77 to 84 for an integral part of these financial statements.
76
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Parent company notes to the financial statements
For the period ended 30 April 2018
(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.
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 12 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 £8m
(2017: £5m). All of the Group’s overdraft facilities are 12 months in duration. 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:
(a)
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
(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 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.
77
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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.
78
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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.
Adopted IFRS not yet applied
1.7
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 any effect on the
individual financial statements of Gateley (Holdings) Plc:
Endorsed:
¨ IFRS 9 - Financial instruments
¨ Amendments to IFRS2 – Classification and measurement of share-based payment transactions
¨ 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.
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 (2017: £10,000) have been borne by
Gateley Plc. The company does not have any employees (2017: Nil)
79
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Parent company notes to the financial statements (continued)
3
Investment income
On 13 March 2018, Gateley Plc, declared an intercompany dividend of £2,351,403 to its parent company
Gateley (Holdings) Plc.
On 30 April 2018, Gateley Plc, declared 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
At 1 May 2016
Share based payment charge
Acquisition of Gateley Hamer Limited
Balance at 30 April 2017
At 1 May 2017
Share based payment charge
Other costs
Balance at 30 April 2018
Investments in subsidiaries
£’000
12,937
450
2,050
15,437
15,437
719
24
16,180
The Company has effective control of the following:
Country of
incorporation
Ordinary share
proportion held
Nature of business
Gateley Plc
Entrust Pension Limited
Gateley Capitus Limited
Gateley Hamer Limited
Gateley EBT Limited
Gateley Investments Limited
Ensco Trustee Company Limited
Gateley Secretaries Limited
Gateley Incorporations Limited
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
100%
100%
100%
100%
100%
100%*
100%*
100%*
100%*
Legal services
Pension trustee services
Tax incentive services
Specialist property consultancy
Employee benefit trust
Corporate investment company
Corporate trustee company
Non-trading
Non-trading
80
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Parent company notes to the financial statements (continued)
5
Investments (continued)
Investments in subsidiaries (continued)
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
Country of
incorporation
England and
Wales
England and
Wales
England and
Wales
Ordinary share
proportion held
Nature of business
100%*
Non-trading
100%*
Non-trading
Controlling interest
held
Nature of business
100%*
Non-trading
100%**
Legal services via a branch in
Dubai
51%*
Non-trading
*
**
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
6
Trade and other receivables
Amounts owed from Gateley Plc
2018
£’000
2017
£’000
7,856
7,725
All trade receivables are anticipated to be due within one year and repayable on demand. £5m is due in
September 2018 with the balance expected to be settled by 30 April 2019.
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.
7
Other payables
Contingent consideration
2018
£’000
2017
£’000
470
1,013
Other payables released during the year related to a final payment of £0.055m to Gateley Capitus Limited
together with £0.125m of contingent consideration to Gateley Hamer Limited in accordance with the terms
of those acquisitions. A further £362k of contingent consideration was released as no longer due and
payable to Gateley Hamer Limited.
Contingent consideration of £0.47m was also paid post year end on 18 June 2018 in respect of the
acquisition of Gateley Hamer Limited. £0.235m of this consideration was settled by way of 10p ordinary
shares with the balance payable in cash. Contingent consideration is calculated in line with the Business
and Asset purchase agreement based on the value of revenue earned by Gateley Hamer Limited over the
two years period to 31 March 2018.
81
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Parent company notes to the financial statements (continued)
8
Capital and reserves
Share capital
Ordinary shares of 10p each
Brought forward as at 1 May 2017
Issued on acquisition of Gateley Hamer Limited
Issued as per of deferred consideration of Gateley
Hamer Limited
At 30 April 2018
2018
Number
2018
£
2017
Number
2017
£
106,881,953 10,688,195 106,396,912 10,639,691
38,803
-
388,029
-
-
-
97,012
9,701
106,881,953 10,688,195 106,881,953 10,688,195
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.
82
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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
Contingent consideration
Current and total financial liabilities
2018
£’000
1
7,856
7,857
(470)
(470)
The company itself does not have any exposure to interest or foreign exchange rates. The Group’s
exposure is detailed in note 22.
2017
£’000
2
7,725
7,727
(1,013)
(1,013)
83
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Parent company notes to the financial statements (continued)
10
Share based payments
Details of the Group's share based payment schemes in operation are shown in note 25 of the group
financial statements.
11
Related parties
None of the executive directors received any remuneration from the Company during the year, other than
dividend income. They are however remunerated by Gateley Plc, further details can be found in note 24.
12
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.
Contingent liability
A cross guarantee between the company and Gateley Plc exists in respect of all terms loans and
overdrafts.
13
Contingent liability
A cross guarantee between the company and Gateley Plc exists in respect of all terms loans and
overdrafts. The value of the contingent liability at 30 April 2018 is £nil (2017: £nil)
14
Subsequent events
Subsequent events to disclose in these financial statements relate to:
Payment of £0.47m of contingent consideration to the sellers of Gateley Hamer Limited included in note 7
above.
On 6 July 2018, Gateley (Holdings) Plc acquired the business and assets of Kiddy & Partners LLP into a
new 100% owned subsidiary of the Company, Kiddy & Partners Limited (formerly Ensco 1289 Limited).
The initial consideration payable on completion was £851,844 settled 50% in cash and 50% by the
issuance of 251,207 Ordinary Shares of 10 pence each in Gateley (‘Ordinary Shares’). Deferred
consideration of up to approximately £2.15m may be payable in annual instalments over the
post-completion period up to and including 30 April 2021. Contingent consideration will also be settled
50% in cash and 50% in Ordinary Shares. The maximum consideration payable cannot exceed £3m. The
acquisition was made on a net working capital neutral basis.
84
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
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 26 September 2018 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 to 11 (inclusive) will be proposed as special resolutions.
1.
2.
3.
4.
5.
6.
7.
8.
9.
9.1
9.2
ORDINARY RESOLUTIONS
To receive the Company's annual accounts for the financial year ended 30 April 2018 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 2018, which is set out in
the Company's annual report for the financial year ended 30 April 2018.
To declare a final dividend for the year ended 30 April 2018 of 4.8p per share payable on 5 October 2018 to
shareholders on the register of members at the close of business on 14 September 2018.
To reappoint Peter Gareth Davies (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 reappoint Nigel Terence Payne (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 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 £3,695,359 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 24 December 2019) 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 RESOLUTIONS
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
the allotment of Equity Securities or sale of treasury shares (otherwise than under paragraph 9.1 above) up
to an aggregate nominal amount of £554,303 representing approximately 5% of the current share capital 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 24 December 2019) 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.
85
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
10.
10.1
10.2
11.
11.1
11.2
11.3
11.4
11.5
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 £554,303 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 24 December 2019) 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, for the purposes of section 701 of the Act, the Company be generally and unconditionally authorised
to make market purchases (within the meaning of section 693(4) of the Act) of ordinary shares of £0.10 each
in the capital of the Company (Ordinary Shares) provided that:
the maximum number of Ordinary Shares which may be purchased is 11,086,078 (representing 10% of the
Company's issued share capital);
the minimum price which may be paid for each Ordinary Share is £0.10;
the maximum price which may be paid for each Ordinary Share is an amount equal to 105% of the average
of the middle market quotations for an Ordinary Share as derived from the Daily Official List of The London
Stock Exchange plc for the 5 business days immediately preceding the day on which the Ordinary Share in
question is purchased;
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 24 December
2019); and
the Company may make a contract or contracts to purchase Ordinary Shares under the authority conferred
by this resolution prior to the expiry of such authority which contract or contracts will or maybe executed
wholly or partly after the expiry of such authority, and may make a purchase of Ordinary Shares in pursuance
of any such contract or contracts.
BY ORDER OF THE BOARD
Neil Andrew Smith
Secretary
Date: 23 August 2018
Registered office:
One Eleven Edmund Street
Birmingham
B3 2HJ
86
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
NOTES:
1. 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.
2. 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, Link Asset Services in writing at Link Asset Services, PXS, 34 Beckenham Road,
Beckenham, Kent BR3 4TU by 12.30pm on 24 September 2018.
3. 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, Link Asset Services, at PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU by 12:30pm on 24 September
2018. 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.
4.
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, Link Asset Services, at PXS, 34 Beckenham
Road, Beckenham, Kent BR3 4TU by 12.30pm on 24 September 2018.
5. 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.
6. 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 24 September 2018 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.
7. 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.
8. Members who have general queries about the annual general meeting should contact the Company's Registrars, Link 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. Link 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:
8.1
in this notice; or
8.2 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 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 £3,695,359, 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 £554,303, 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 £554,303, 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).
87
Gateley (Holdings) Plc
Annual report and consolidated financial statements
For the year ended 30 April 2018
Resolution 11 – Company’s authority to purchase Ordinary Shares
In certain circumstances it may be advantageous for the Company to purchase its own shares and this resolution seeks the authority
from shareholders to do so. This is the first time that the Company has sought authority to make market purchases up to an aggregate
of 11,086,078 Ordinary Shares, representing approximately 10 per cent of the Company’s issued ordinary share capital as at 23
August 2018, being the latest practicable date prior to the publication of this notice.
Granting authority for the Company to purchase Ordinary Shares in the market is intended to allow your board to take advantage of
opportunities that may arise to increase shareholder value. The directors will exercise this power only when, in the light of market
conditions prevailing at the time, they believe that the effect of such purchases will be to increase earnings per share and will be likely
to promote the success of the Company for the benefit of its members as a whole. Other investment opportunities, appropriate gearing
levels and the overall position of the Company will be taken into account when exercising this authority. The price paid for shares will
not be less than the nominal value of £0.10 per share nor more than 5% above the average of the middle market quotation of the
Company’s Ordinary Shares as derived from the London Stock Exchange Daily Official List for the 5 business days immediately
preceding the day on which the shares are purchased.
The Company may hold in treasury any of its own shares that it purchases pursuant to the Act and the authority conferred by this
resolution. This gives the Company the ability to reissue treasury shares quickly and cost-effectively and provides the Company with
greater flexibility in the management of its capital base. It also gives the Company the opportunity to satisfy employee share scheme
awards with treasury shares. Once held in treasury, the Company is not entitled to exercise any rights, including the right to attend
and vote at meetings in respect of shares. Further, no dividend or other distribution of the Company’s assets may be made to the
Company in respect of the treasury shares.
The Directors have no present intention of purchasing Ordinary Shares in the market. The authority given under this resolution will
lapse, unless renewed, at 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).
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