Growth and resilience
through diversity
Annual Report
for the year ended 30 April 2022
Gateley (Holdings) PlcAnnual report and financial statementsWhy do we do what we doHow do we do thisWhat do we doForward thinkingStraight talkingOur purpose is to deliver results that delight our clients, inspire our people and support our communities.We do this by: being forward thinking about the services that we deliver to our clients and the working environment we provide for our people; being straight talking about what matters, inside and outside of our business; and thinking differently about what we do and how we do it.We deliver legal and professional services which enable our clients to solve the challenges that they are facing or to maximise the opportunities they are pursuing, without ever losing sight of what makes us Gateley: our Gateley Team Spirit values.11Our people and long-established culture are central to the Group’s success.” “ContentsBusiness overview Highlights for the year 3At a glance 5Our story 6Business overview 8Our Platform strategy 10Our people 12Staying connected and engaging with our teams 14Responsible Gateley 16Five key reasons to invest 19Strategic reportChairman’s statement 22Chief Executive Officer’s review 24Chief Executive Officer’s Q&A 30Finance Director’s review 32Principal objectives, strategy and outlook 38Principal risks and uncertainties 42Section 172(1) statement 46Environmental actions statement 47Social matters 49Corporate governanceBoard of Directors 54Statement on remuneration: voluntary disclosure 56Directors’ report 63Our financialsIndependent auditors’ report to the members of Gateley (Holdings) Plc. 68Consolidated statement of profit and loss and other comprehensive income 75Consolidated statement of financial position 76Consolidated statement of changes in equity 78Consolidated cash flow statement 79 Notes to the consolidated financial statements 81Parent company statement of financial position 121Parent company statement of changes in equity 122Parent company cash flow statement 123Parent company notes to the financial statements 124Notice of annual general meeting 136Company information 147 Gateley (Holdings) Plc
Annual report and financial statements
Business Overview
Strategic Report
Corporate Governance
Our Financials
Strong results, further growth and
demonstrable resilience
Gateley (AIM: GTLY), the legal and professional services group, announces its audited
preliminary results for the year ended 30 April 2022 (“FY22” or the “Period”), which
continued the Group’s pre and post IPO unbroken record of year-on-year revenue and
profit growth, and out-performed market expectations set at the start of the year.
The Group delivered a strong financial performance in FY22, achieving significant
organic growth and strengthening the business further through diversification and
investment into new complementary service lines, while maintaining control on costs in
the face of market specific and macro-economic headwinds. The balance sheet remains
strong and the Group has significant headroom in its banking facilities to invest in
further organic and acquisitive growth opportunities.
“
Rod Waldie, Chief Executive Officer
of Gateley, said:
I am delighted with the Group’s performance in FY22. We have delivered another set of
strong revenue and profit growth figures whilst continuing to strengthen our balance
sheet. Legal services generated solid organic revenue growth, comparing favourably
with reported UK legal industry performance. Our consultancy service lines delivered
impressive organic growth of 26.7% resulting in overall consolidated Group organic
revenue growth of 10.9%.
“I am particularly pleased that we completed three exciting consultancy acquisitions in
the Period and achieved annualised consultancy revenue of over c.£32m as we continue
to grow our complementary services, diversifying our offering and deepening our
connections with our clients.
“I thank our ever-expanding client base for their trust and support throughout FY22 and
for giving us the opportunity to work with them on high quality mandates. We remain
committed to our purpose of delivering results that delight our clients, inspire our
people and support our communities. We have a good pipeline of work and maintain
our expectations for growth in FY23, despite the well-reported inflationary pressures.
We look forward to continuing to grow the Group, both organically and via acquisition.”
GROUP REVENUE
Highlights for the year
13.0% 11.9% 22.9%
GROUP PROFIT BEFORE TAX
NET ASSETS
In FY22 our Group revenue was £137.2m, up by
13% compared to £121.4m in FY21
In FY22 our Group profit before tax was £21.6m,
up by 11.9% compared to £19.3m in FY21
In FY22 net assets were £72.9m, up by 22.9%
compared to £59.3m in FY21
FY22
£137.2m
£22.5m
£21.6m
£18.0m
£14.3m
12.00p
14.31p
£72.9m
£10.4m
FY21
£121.4m
£20.5m
£19.3m
£16.3m
£13.2m
11.18p
13.17p
£59.3m
£19.6m
Change
+13.0%
+9.8%
+11.9%
+10.4%
+8.3%
+7.3%
+8.7%
+22.9%
-9.2m
Strategic Highlights
•
•
•
Three earnings-enhancing acquisitions
completed in the Period, expanding
the Group’s Property and Business
Services Platforms
Total headcount at 30 April 2022
of 1,368 (FY21: 1,081). Total headcount
of professional staff increased by
23.6% from 767 to 948
New Revolving Credit Facility of £30m
agreed in April 2022, providing increased
funding flexibility to support the Group’s
growth strategy
•
•
•
Personnel costs declined as a
percentage of Group revenue
to 63.0% (FY21: 63.8%)
Proposed final dividend of 5.5p
(FY21: 5.0p) taking total dividends
for the Period to 8.5p (FY21: 7.5p)
Group dividend policy remains to
distribute up to 70% of our after-tax
profits each year
Group revenue
Group underlying operating profit before tax1
Group underlying profit before tax1
Group profit before tax
Group profit after tax
Basic earnings per share (‘EPS’)
Adjusted fully diluted EPS2
Net assets
Net cash3
Financial Highlights
•
Group organic revenue growth was
10.9%, comprising 8.7% in legal services
and 26.7% in consultancy services
•
•
•
•
Total growth in consultancy revenues of
44.9%, as complementary consultancy
services contributed £21.3m or 15.5% of
total revenues (FY21: £14.7m or 11.5%)
Adjusted underlying operating profit
margin broadly maintained at 16.4%
(FY21: 16.9%)
Net assets increased by 22.9% to £72.9m
“Gateley Agile” initiative, which builds
on the flexible working introduced
during the pandemic, continues to
deliver cost savings, mitigating some
inflationary pressure
2
3
1 Underlying operating profit before tax and underlying profit before tax excludes share based payment charges, amortisation and exceptional items
2
Adjusted fully diluted EPS excludes share based payment charges, amortisation and exceptional items. It also adjusts for the future weighted average number of expected
unissued shares from granted but unexercised share option schemes in issue based on a share price at the end of the financial year
3 Net cash excludes IFRS 16 liabilities
How we support clients
At a glance
Business Overview
Strategic Report
Corporate Governance
Our Financials
Property
Platform
People
Platform
Corporate
Platform
Business
Services Platform
V I N D E N
incorporating Tozer Gallagher
T W E E D
We like the way you always become an extended part
of our team. It’s not an easy thing to do and I admire
how you do it. You just get the work done and it’s
brilliant. I would definitely say this is your USP. I
don’t know other firms who do this as well as you do.”
You need to know that everything is on the
same page and it’s a trusted relationship piece.
I do feel that Gateley are very strong in that.”
Where you need us to be
With offices in 15 UK locations, and another in Dubai, we
have the regional network to provide our clients with the
advice they need on their doorstep. Often face to face
meetings are the quickest way to overcome difficulties
and resolve misunderstandings, and we will always travel
to get the job done.
NEWCASTLE
BELFAST
LEEDS
BOLTON
MANCHESTER
CHESTER
LLANDUDNO
NOTTINGHAM
BIRMINGHAM
RUTLAND
LEICESTER
READING
LONDON
GUILDFORD
EXETER
What makes us
forward thinking?
The first UK commercial law firm to list on the London
Stock Exchange in 2015
A legal and professional services group which
combines legal advice with consultancy expertise
through our market facing Business Services,
Corporate, People and Property Platforms.
Forward thinking about the services that we deliver,
helping our clients to solve challenges and to maximise
opportunities
A responsible business committed to levelling up the
world in which we work
Being straight talking about what matters, inside
and outside of our business: supporting diversity
and inclusion, encouraging potential and ensuring a
sustainable future
Delivering results without ever losing sight of our
Gateley Team Spirit values
Working together
Proud that 45% of colleagues participate in our Save
As You Earn share scheme vs. a 25% UK average and
at least 75% of colleagues are existing share or option
holders in the Group
Investors in People accredited
A Levelling Up Partner and member of the Levelling Up
Measurement TaskForce
Signatory to the Better Business Act
The only UK legal business to
be ranked in the Glassdoor top
25 best companies for senior
leadership
Trusted to do
FY22 key client account management programme:
67% of clients in the programme increased
their fees in FY22
c£17m of fees generated across our account
management programme last year
350 new client relationships were nurtured
Rated 5 star/excellent on independent legal review
platform, Review Solicitors.
Excellent
170 reviews on
Room to breathe
Stonewall Diversity Champions and Law Society Gold
Standard for our Diversity and Inclusion Charter
Active wellbeing programme and proud to be a
signatory to the Mindful Business Charter
Engaged staff networks to support diversity and
inclusion including Women in Leadership and Working
Parents programmes
A Halo Code workplace
Sustainable working practices including paperlite,
recycling and use of virtual technology
Disability confident employer
Ambitious for success
Double digit revenue
growth in the last 7 years.
Revenue
compound annual
growth rate
(CAGR)
12.3%
2022
£137.2m
4
5
Gateley (Holdings) PlcAnnual report and financial statements Gateley: the legal and
professional services group
Our story
Our story starts in Victorian Birmingham - the then
workshop of the world. Solicitors Stephen Gateley
& Sons was founded to help forward thinking
Victorians prosper.
Two centuries later, and our approach is still about
thinking ahead. Looking to the future to ensure the
success of our clients, our business and our people.
Business Overview
Strategic Report
Corporate Governance
Our Financials
2022
In January we acquired Patent and Trade
Mark Attorneys, Adamson Jones, adding
breadth and depth to the intellectual
property services we offer through our
Business Services Platform. In April we
added the team from Smithers Purslow to our
Property Platform. Gateley Smithers Purslow is a
multi-disciplinary practice of building and quantity
surveyors, principally in the insurance industry.
2021
In July 2021 we acquired Tozer Gallagher, a leading
practice of chartered quantity surveyors and construction
consultants. Tozer Gallagher now sits within Gateley Vinden.
Our decades of growth are recognised at the Birmingham
Post Business Awards where we are named Professional
Services Firm of the Year.
2020
We rank number 1 in the UK for M&A activity by deal volume. We
acquire brand and reputation management experts Tweed Law,
and built environment consultancy, The Vinden Partnership.
2019
We’re UK Law Firm of the Year at the British Legal Awards;
we acquire land referencing experts, Persona Associates and
leadership development specialists, t-three.
2018
We acquire three more businesses; GCL Solicitors, specialists in legal
advice on residential developments; business psychologists, Kiddy &
Partners and inward investment and international expansion experts,
International Investment Services.
2016
We acquire our first complementary businesses: tax incentive
specialists Capitus Ltd and property consultants Hamer
Associates, forming Gateley Capitus and Gateley Hamer.
2015
We enter a new chapter with a UK law firm first: we put aside
the traditional equity partnership model and go Plc.
6
7
Gateley (Holdings) PlcAnnual report and financial statements Gateley (Holdings) Plc
Annual report and financial statements
Business Overview
Strategic Report
Corporate Governance
Our Financials
Business
overview
Our advisers deliver legal and professional services to incredible
clients every day to enable them to compete in an ever-changing
and competitive business environment, helping them to face
tough challenges, to seize opportunities and to create profitable,
resilient and purpose-led businesses.
Our purpose
To deliver results that delight our clients, inspire our
people and support our communities.
Strategic ambitions
To diversify, differentiate and incentivise by being
forward thinking about the services we deliver to
our clients, the working environment we provide for
our people and by being straight talking about what
matters, inside and out of the business.
8
How we operate
Growth drivers
Delivering results for
long term success
Business Model
Our business model creates a platform
for scalable and sustainable growth. Our
strong market reputation and the culture
and Gateley Team Spirit that sits at the
heart of our business enables the delivery
of integrated legal and complementary
business services across our four market
facing Platforms.
Business Services
Combines the considerable commercial
expertise of our IP and dispute resolution
lawyers with that of the forensic and
business intelligence skills of the Gateley
Omega team and the Patent and Trade
Mark Attorneys within Adamson Jones.
Corporate
Brings together the skills of corporate and
banking and finance, tax and restructuring
lawyers in Gateley Legal with the inward
investment experience of consultants
within International Investment Services.
People
Connecting the advisory skills of our
leadership and development consultancies
t-three and Kiddy & Partners with the
expertise of our employment and pensions
lawyers within Gateley Legal and the
independent pension trustees within Entrust.
The People Platform also includes a strong
Private Client team with experts in private
wealth matters for individuals based in
England and internationally, private wealth
disputes and family issues.
Property
Within our Property Platform, Gateley Legal
lawyers advise on construction, planning,
residential development, real estate finance,
real estate development, real estate disputes
and real estate investment. The property tax
specialists within Gateley Capitus combine
with the built environment consultants
in Gateley Vinden (incorporating Tozer
Gallagher) and Gateley Hamer to offer a
one stop shop for all real estate needs. Our
Property Platform is further complemented
by Gateley Smithers Purslow, a specialist
provider of surveying services, principally to
the insurance industry.
Organically
Enhanced opportunity to grow Gateley
organically, including lateral hires of
individuals or teams.
Diversification
Making selective acquisitions including (i)
other legal firms which offer geographical
expansion or additional specialist services
(ii) professional consultancy service
businesses offering complementary
services.
Platforms
Building out the Group’s four
Platforms which comprise clusters
of complementary Group services
presenting a broader and more
compelling offering to our clients.
Incentivisation
Alignment through share participation
of the interests of shareholders
(including employee shareholders)
with those of the business, aiding
retention of staff and widening our
recruitment appeal.
Our clients
Delivering results that delight
our clients by being forward
thinking, straight talking, working in
collaboration and being ambitious for
their success.
Our colleagues
Inspiring our people, incentivising their
hard work and providing a diverse
and inclusive working environment
that gives them room to breathe and
opportunity to develop.
Our communities
Supporting the communities in which
we work and measuring our social
impact so we can provide the right
support and make progress in the
future.
Our investors
Delivering excellent returns and
demonstrating that our shareholders’
investments are in safe hands.
Our suppliers
Building mutually beneficial
relationships and long-term, sustainable
partnerships.
Our environment
Taking ownership for the things we
can do as a business and individuals to
protect and repair our planet now and
for future generations.
9
Gateley (Holdings) Plc
Annual report and financial statements
Business Overview
Business Overview
Strategic Report
Strategic Report
Corporate Governance
Corporate Governance
Our Financials
Our Financials
Our Platform strategy
A sustainable strategy for growth,
diversification and resilience
The aggregation of complementary legal and consultancy services on our four market-facing Platforms
of Corporate, Business Services, People and Property continues to differentiate Gateley, strengthen our
appeal to clients and enhance our resilience.
Our strategy remains to grow each of the four Platforms on which we have positioned legal and
consultancy services that complement each other in servicing our chosen markets.
During FY22 we made three earnings-enhancing acquisitions, quantity surveying and construction
consultants, Tozer Gallagher in July 2021, trademark and patent attorneys, Adamson Jones in
January 2022 and chartered surveying practice, Smithers Purslow in April 2022, adding further
weight to both our Property and Business Services Platforms.
Prudent management and a strong balance sheet enable us to drive incremental value
through acquisitions. As new businesses are added and integrated onto each Platform we
now see the model working exactly as we would expect, driving more revenue from existing
clients, creating routes into new clients for other parts of the business to cross sell
services and continually diversifying and strengthening revenue streams.
Gateley Hamer, our property consultancy specialising in Compulsory Purchase Orders,
easements and wayleaves, infrastructure projects, land referencing and public
inquiries produced another strong performance. The business again posted strong
organic top line growth of 41.5% but also added another core service line in the
shape of telecoms infrastructure.
Property
Platform
Gateley Legal
Gateley Capitus
Gateley Hamer
Gateley Smithers Purslow
Gateley Vinden
Persona Associates
Tozer Gallagher
People
Platform
Gateley Legal
Kiddy & Partners
t-three
Entrust
Corporate
Platform
Gateley Legal
International Investment
Services
Business
Services
Platform
Gateley Legal
Gateley Omega
Adamson Jones
Gateley Tweed
Positive momentum and a return to growth flowed through into our People
Platform consultancies, Kiddy & Partners and t-three, during FY22. This was in
part due to increased demand for services, as client HR Directors and Heads
of Talent saw development budgets, frozen during the pandemic, released
once again to them. However, also of significant benefit was the successful
integration of those two businesses into one assessment, development
and cultural change-facing offering. Our integrated proposition and
service offering went live in January driving excellent client feedback
and securing significant new mandates.
Overall, our acquired consultancy businesses performed strongly
during the Period, contributing 15.5% to total Group revenues and
supporting revenue growth in each of our four Platforms.
We are focused internally on providing our teams with all the
information they need to be able to cross-sell our services
to clients. In the last year we have run numerous Platform
sessions with our teams to showcase what each area of the
Platform does and to demonstrate examples of where this
is already working really well. Throughout the financial year
we also ran an internal marketing campaign called the
‘BIG G’ which included an office wide league table with
Big G points allocated based on the cross-selling results
across our Platforms in each office. This was a huge
success with our Manchester team being crowned
the annual winners for FY22.
10
11
Business Overview
Strategic Report
Corporate Governance
Our Financials
Our people
Inspiring with purpose
One of the cornerstones of our purpose is to
inspire our people but being purpose-led and
a responsible business only works as it should
if our people understand what that really
means for them and if it impacts behaviours
from the top down.
During the last year we have focused on
embedding our purpose right across the
business with inspiring our people being
at the heart of that.
Left: Members of our t-three and Kiddy team
Right: Chairman, Nigel Payne delivers
a keynote speech at our Inspiring with
Purpose conference in May 2022
Defining what great leadership looks
like is an important strand of our people
strategy. From our board, through to
our partners, directors and senior
managers across our legal and consulting
group businesses, we have a collective
responsibility to do our best by those we
lead, impact and influence every day. ”
Rod Waldie, Chief Executive Officer
Leading through inspiration
Being recognised for leadership
Inspiring with Purpose conferences
Working together with our business transformation specialists,
t-three who we acquired in 2019, we recently developed our
Gateley Leadership Framework, a positive set of behaviours that
all leaders in our business should display. This has been rolled out
across the Group via training and will be revisited on a regular basis.
It is built around the five elements of our Gateley Team Spirit which
are working together, being forward thinking, giving people room
to breathe, being trusted to do and ambitious for success.
In June 2022 we were the only legal business in the UK to rank
in the Glassdoor UK Top 25 Companies for Senior Leadership.
Glassdoor is the worldwide leader on insights about jobs and
companies and the list was determined solely based on feedback
provided by employees.
Tens of thousands of companies were considered for the list and
those recognised were those whose senior leaders met the challenges
of the pandemic with grit, determination and continued support of
their workforce. Strong leadership is a crucial driver of workplace
satisfaction so we are delighted to be awarded this accolade.
In May 2022 we brought together our leaders and senior managers
from across the Group in person for the first time since the start
of the pandemic. The two conferences were themed ‘Inspiring
with Purpose’ with a clear agenda focusing on what we are already
doing and what more we could be doing in the future to inspire
our people and ensure we continue to build on our unique Gateley
culture and team spirit.
12
13
Gateley (Holdings) PlcAnnual report and financial statements Gateley (Holdings) Plc
Annual report and financial statements
Business Overview
Strategic Report
Corporate Governance
Our Financials
Staying connected and
engaging with our teams
We recognise that when teams are connected to each other and to key company information it has
a positive impact on morale, culture and performance. That is why we place so much emphasis on
internal communication at Gateley. This has become especially important as we have integrated new
complementary businesses into our Platform structure post acquisition.
A key part of our people strategy revolves around employee engagement and listening. We did this
continually throughout the pandemic to ensure our Gateley Agile programme (hybrid working)
was fit for purpose as we returned to our offices and to make sure it becomes a way of working
that is flexible enough to evolve to meet our peoples’ and clients’ needs as we move past the
pandemic.
We regularly gauge sentiment across the Group to understand how engaged our people are
about the business, their roles and the teams they work with.
In our 2022 employee engagement survey we scored overall engagement levels of
83% against a private sector benchmark of 63%. We recognise there is always room
for improvement and that will only come by regularly talking to and listening to our
people, enabling us to progress, make positive change and build on the areas we
know already work well.
Shaping careers and incentivising talent
We offer our people opportunities they won’t find easily elsewhere. We are a great place to work
with stand-out people but we also provide a career path that’s rewarding and allows the individual’s
strengths and ambitions to shine.
As a listed company free from the usual constraints of a traditional professional services partnership,
we believe all of our people should have the opportunity to share in the success of our business.
We therefore reward those who help our business to grow. This includes a bonus scheme as well as
various share schemes like our Save As You Earn (SAYE) that is open to all employees and other
schemes that are tailored to the point the individual has reached in their career journey with us.
Our SAYE share scheme gives everyone the opportunity to participate in the future success of
the business. 45% of our people currently participate in the Gateley SAYE scheme, compared
to a UK average of 25% participation in similar schemes and at least 75% of employees are
existing share or option holders in the Group.
Emerging Senior Talent
In addition to our established LTIP scheme for partners and CSOP aimed at senior
managers, in April we introduced a Restricted Share Award Scheme (RSA) targeted at
those reaching partner or equivalent level within the Group. Our career structure for
partners stands out against the traditional equity partnership model offered in an LLP.
On making equity partner in a traditional LLP it is usually a requirement that the
individual will invest capital in return for an equity stake in the partnership. Those
partners then draw a share of the profits annually but there is no capital asset at
retirement.
When our people reach partner level or equivalent there is no financial obligation in
terms of capital investment like in a traditional LLP. Instead, they are gifted shares
with which to begin their partnership career and subject to them remaining with the
business for five years. In addition to their salary and benefits, this provides them
with a dividend income from day one, a healthy base on which to build their Gateley
shareholding in the future and capital value in their shareholding on retirement.
We believe this is a unique and attractive incentive for those who build a
partnership career with Gateley and to attract new talent into the business
at an earlier career stage.
We have adopted this scheme following focus groups with partners and
equivalents and those on our partnership track, to understand what being a
partner should mean in a Plc structure and how we can better incentivise and
retain our emerging senior talent.
overall engagement levels
against a private sector
benchmark of 63%
83%
124
In 2022 we promoted 124 people
across our business in both fee
earner and business support roles.
14
14
15
Gateley (Holdings) Plc
Annual report and financial statements
Business Overview
Business Overview
Strategic Report
Strategic Report
Corporate Governance
Corporate Governance
Our Financials
Our Financials
Responsible Gateley
Being a responsible business is about making the right choices and having
the greatest and most measurable impact on areas that matter most to our
stakeholders, whether a client, contact, shareholder or employee.
Our Responsible Business ethos is intrinsically linked to our purpose. It is a key strategic priority, owned at the highest
level of our business and one that threads right throughout the core of our organisation.
In October 2021 our CEO, Rod Waldie launched our responsible business strategy internally. This accompanied the
publication of our maiden Responsible Business Report. An important milestone in communicating the meaningful
strategies we have in place to meet our environmental, social and governance obligations.
Through an interactive webinar we launched the report to our entire business along with an explainer video.
The event included speakers from the Better Business Act, of which we are a signatory and the Rt Hon. Justine
Greening who heads up The Purpose Coalition, the independent ESG consultancy who helped us develop our
own set of levelling up goals last year based around People, Potential and Planet.
Our Responsible Business actions focus on the wellbeing of our employees, on being a force for good
in society and within the communities in which we operate and by playing our part in protecting and
repairing our planet. Measuring the value and the impact we are having in all of these areas is as
important for us as taking action because it enables us to evaluate where we are effecting change
and how we can improve and progress over time.
We understand that being a responsible business is not simply a tick in the box, or a job that is
eventually done and in March 2022 we appointed our first Responsible Business Manager who is
helping us deliver for today and plan for tomorrow.
Our 2021 Responsible Business Report can be found on the Responsible Gateley area of our
website and our 2022 report will be published in October 2022.
As a listed business delivering results is a must
but it’s not just about delivering financial results.
As a signatory to the Better Business Act, we believe
that we can be a force for good, benefitting our people,
clients, communities and the environment whilst
also delivering profit. By balancing these needs
we will be an employer of choice, an attractive
investment opportunity, an organisation that
clients are proud to collaborate with and a
responsible business.”
Rod Waldie, Chief Executive Officer
Delivering against our 2022 objectives
Our first Responsible Business report outlined a set of objectives
that we committed to working towards during the last year and
beyond. These objectives were set against the backdrop of our
work with The Purpose Coalition.
Established with input from businesses, universities, civil society
and MPs, The Purpose Coalition identified 14 Levelling Up Goals.
These goals use the same framework as the UN Sustainable
Development Goals and set out clear objectives for the UK’s
Levelling Up challenge in the wake of COVID-19.
This year we worked with The Purpose Coalition on an action plan
which captured our ambitions for where we wanted to get to in
respect of each Levelling Up Goal. In addition to Gateley, other
members of the Purpose Coalition include Amazon, bp, Compass
Group, the BBC, Direct Line Group, Cisco and the NHS to name a few.
Our responsible business objectives in FY22 were set against three
categories of People, Potential and Planet. Full details about
how we met our objectives will be outlined in our next Responsible
Business report, published in the Autumn. Here is a brief summary
of some of the activity from the last year:
People
Embedded the Mindful Business Charter framework including
encouraging our people to take sufficient breaks, being mindful of
non-working hours and emails sent during these times and asking
people to ‘unplug’ at Christmas and during other periods of annual
leave
Maintained our Investors in People standard
Secured Disability Confident employer status
Maintained Glassdoor ranking and were recognised as the only
UK legal business to rank in the top 25 companies for senior
leadership, voted for anonymously by employees
Launched our fifth internal diversity and inclusion network group;
Ability. This aligns with our objective of raising awareness within
our business around neurodiversity and supporting colleagues
with any disabilities. It sits alongside our four other network
groups: Pride; Thrive; Inspire and Unity
Producing a language guide to assist in encouraging employees
to have more open conversations around diversity, equality and
inclusion
Signed up to ‘Inspiring Futures’ to enable us to create more
opportunities to formally partner with schools aligned with our
office network
belong...
Our diversity, inclusion & well
being network groups provide
support for our people through a
number of initiatives & activities:
Supporting our LGBTQ+ community,
raising awareness across our business
and collaborating with related external
charities, groups and networks.
Taking care of the health and
wellbeing of all our employees
Nurturing our talent and supporting
their careers
Supporting employees with disabilities
and raising awareness around
neurodiversity
Recognising, celebrating and
supporting people from different
cultures, religions and backgrounds
16
17
Gateley (Holdings) Plc
Annual report and financial statements
Responsible Gateley
continued
Potential
Planet
Continued to support Birmingham City University STEAMHouse,
exploring other opportunities to add value to their start-ups
Maintained reductions in travel through the continued use of
Microsoft Teams
Implemented the first in our series of litter pick lunches working with
the Birmingham Improvement District team to clean up the streets and
parks close to our head office
Encouraged our people to submit their sustainability pledges and
the positive actions we will take to protect our planet around World
Environment Day
Reviewed all our links with universities, identifying opportunities
to connect with students across our network and announced our
partnership with UA92. The partnership between our Manchester
office and UA92 will see us fund students in the coming academic
year who are studying degrees and higher education courses across
business, sport, media and digital disciplines. UA92 aims to make
higher education accessible to all, through its founding principles of
accessibility, social mobility and inclusivity
Became the UK’s first Patron of ‘Make Good Grow’, a social enterprise
founded on the principles of uniting good businesses with good
causes. We are working with them on their pledge marketplace and
for volunteering opportunities. We are also using their Social Impact
Dashboard software to help capture and measure metrics around our own
social impact and the good causes we are supporting as a business and
through individual colleagues across Gateley
Continued with our SportsAid partnership; providing financial and
personal development support to ten of our country’s brightest
sporting prospects who are nominated to SportsAid by the governing
bodies of more than 60 sports based on set criteria
Delivered our annual UK Sports Law competition at the Etihad Stadium.
48 students from a number of universities competed in teams of two
and were tested on their ability to think commercially when faced with a
fictitious topical legal problem within the sports industry
18
18
Business Overview
Strategic Report
Corporate Governance
Our Financials
Five key reasons to invest
Our business model creates a platform for scalable and sustainable growth.
22.9%
growth in FY22 and
net assets to £72.9m
116.8%
cash conversion
since IPO*
12.3%
compound annual
growth since IPO
14.3p
adjusted fully diluted
EPS FY22
13.3%
growth in FY22
dividend to 8.5p
* Cash conversion is net cash flows from operating activities as a percentage of profit for the year after tax
• The market in the UK for legal and associated professional services is expected to continue to grow strongly
• Gateley’s national presence provides a strong organic growth opportunity and its platform strategy facilitates additional
growth through the acquisition of complementary businesses
• Gateley has a diversified and resilient revenue stream with a high conversion of profit into cash
• A strong balance sheet, with net cash of £10m, supports both investment into the business and acquisitions
• Gateley provides an attractive income stream with 70% of post-tax profits earmarked for dividends. Since IPO in 2015 (at
95p) it has returned 43p to shareholders
• Gateley’s experienced management team has demonstrated an unbroken track record of revenue and profit growth
• Gateley has high internal share ownership and a strong people culture with Responsible Business objectives classified under
people, planet and potential
19
19
Gateley (Holdings) PlcAnnual report and financial statements Gateley (Holdings) Plc
Annual report and financial statements
Business Overview
Business Overview
Strategic Report
Strategic Report
Corporate Governance
Corporate Governance
Our Financials
Our Financials
Strategic
report
In this section
Chairman’s statement
Chief Executive Officer’s review
Chief Executive Officer’s Q&A
Finance Director’s review
Objectives, strategy and outlook
Principal risks and uncertainties
Section 172 statement
Environmental actions statement
Social matters
22
24
30
32
38
42
46
47
49
20
21
This report has been prepared by
the Directors in accordance with
the requirements of Section 414 of
the Companies Act 2006.
Gateley (Holdings) Plc
Annual report and financial statements
Chairman’s
statement
Introduction
I am delighted to welcome you
to Gateley’s Annual Report and
Accounts for the year ended
30 April 2022, a successful year
for Gateley in which the Group
has continued its unbroken record
of year-on-year revenue and
profit growth.
Business Overview
Strategic Report
Corporate Governance
Our Financials
Summary of the year
With revenue increasing by 13.0% to £137.2m
and underlying profit before tax increasing
by 11.9% to £21.6m, Gateley has again
demonstrated the resilience of its business model
and diversification strategy. These strong results
led to a 22.9% increase in Group net assets to
£72.9m (FY21: £59.3m), and an increase of 8.7%
in adjusted fully diluted earnings per share to
14.31p per share (FY21: 13.17p).
I am particularly proud that this year’s
strong performance has been delivered
despite disrupted circumstances. With the
economic recovery from COVID-19 somewhat
compromised by inflationary pressures, with
uncertainty as a consequence of the terrible
events in Ukraine and with the onset of higher
than usual wage inflation within the legal and
indeed other service sectors, Gateley has
navigated the year well and I could not be more
pleased with the resulting benefits for all of our
stakeholders.
Delivering our strategy
During the year, we have delivered on our strategic intent to
further diversify the business, placing the Group in a strong
position to deliver further profitable growth in the coming years.
In doing so, we have also expanded the breadth and depth of our
offering with Group representation in four new geographies as
part of the newly-acquired Smithers Purslow business.
Our staff have shown great adaptability to the constant changes
throughout the past few years and their dedication towards the
business, their colleagues and clients has been first class.
Within our consultancy businesses, overall headcount increased
by 169.4% to 291 (FY21: 108) and fee-earner staff by 123.5%
to 219 (FY21: 98). Together with three consultancy businesses
acquired during the year, annualised revenues from this part
of the Group now contribute revenues of over c.£32m, further
diversifying our service offering and deepening our relationships
with our clients in so doing.
As part of our present and future acquisition strategy, we
committed to a three-year revolving credit facility of up to
£30.0m to assist with acquisitions.
As we continue to grow and strengthen our business, the board
remains committed to providing its people with the opportunity
to own shares in the Company. We believe that employee share
ownership secures a strong alignment with the Group’s external
shareholders, incentivises employees and is reflective of Gateley’s
long-established culture. At least 75% of current staff are existing
share or option holders in the Group.
Responsible business
The board has made the introduction of Gateley’s Responsible
Business commitments a key strategic priority this year. Working
together with The Purpose Coalition, an independent ESG
consultancy who helped us develop our own set of levelling up
goals, in August 2021, we published Gateley’s Responsible Business
report for which we have received significant positive feedback.
The report outlines the plans and priorities that we are working to
deliver over the coming years. They are set out under three broad
categories being: People, Potential and Planet. I am delighted with
the progress we have made in the year and how this important
initiative has been readily embraced across the Group. We are
committed to ensuring diversity, equality and inclusion across
all three of these categories: our goal is to foster a positive
work ethic, whilst remaining results and client focused, and
demonstrate our commitment to doing the right thing for our
people, our planet and developing potential wherever we can.
Dividends
An interim dividend of 3p per share (FY21: 2.5p) was paid on the
31 March 2022 to shareholders on the register at the close of
business on 18 February 2022. The board is pleased to propose a
final dividend of 5.5p per share (FY21: 5p), giving a total dividend
for the year of 8.5p per share (FY21: 7.5p), subject to approval
at the forthcoming Annual General Meeting, which will be held on
20th October 2022. If approved, this final dividend will be paid in
October to shareholders on the register at the close of business
on 23 September 2022. The shares will go ex-dividend on 22
September 2022.
The board’s dividend policy remains to distribute up to 70% of
profit after tax to shareholders, typically one third following its half
year results and two thirds after the full year results are known.
Summary and outlook
This year has been another strong year for Gateley. Our people
have excelled in client delivery, they have continued to overcome
every challenge presented to them, and have delivered further
strategic progress for the business, combining to generate a
strong set of results for the benefit of all of our stakeholders.
As we focus on service line enhancing opportunities that meet
our clients’ needs and fulfil our strategy to build a broader
professional services group, our acquisition pipeline remains
strong, trading in the current year is in line with the board’s
expectations and we look forward to the future with confidence.
Nigel Payne
Chairman
Nigel Payne
Chairman
12 September 2022
22
23
Gateley (Holdings) Plc
Annual report and financial statements
Business Overview
Strategic Report
Corporate Governance
Our Financials
Chief Executive
Officer’s review
Rod Waldie
Chief Executive Officer
24
Introduction
I am delighted by the Group’s performance in FY22; another
year in which global events created significant uncertainty,
but nonetheless another year in which the Group produced
an excellent result. We closed the Period ahead of market
expectations whilst continuing our investment strategy, further
strengthening our offering to clients and also our balance sheet.
We continue to operate and invest in a
differentiated, resilient and growing business,
which has been deliberately designed to perform,
regardless of the economic environment, and FY22’s
results continue Gateley’s unbroken record of year-
on-year revenue and profit growth.
Since IPO in 2015, we have acquired ten
complementary businesses which have broadened
and diversified our offering and as planned,
enhanced our financial strength. We focus our
Group on four strategic markets (our “Platforms”):
Business Services, Corporate, People and Property,
each of which now comprise a complementary
mixture of legal and consulting businesses.
Approximately 20% of annualised Group revenues
are now consulting revenues, with significant
additional diversification opportunities. Our balance
sheet was further strengthened during the Period
with year-end net assets and net cash of £72.9m
(FY21: £59.3m) and £10.4m (FY21: £19.6m)
respectively. As a result, we remain well-placed to
weather any further storms, but also to continue
our acquisition strategy.
The ongoing enhancement and strengthening of our
business is why, in the seven years since floatation, we
have been able to deliver compound annual revenue
growth of 12.3%, compound profit before tax growth
of 9.0% and, including the proposed final dividend
proposed today, income to shareholders of 43.24
pence per share in aggregate.
Results overview
FY22 Group revenues grew by 13.0% to £137.2m
(FY21: £121.4m). Agile working, a necessity
during the pandemic, is now a key element of our
operating model, enabling us to continue to deliver
cost efficiencies. As pandemic restrictions were
lifted, we were able to finalise the integration of
the acquisitions that completed shortly before
the pandemic impacted. Although our acquisition
strategy is focused on driving additional revenue,
cost efficiencies are a welcome by-product. The
results yielded an increase of 10.4% in profit before
tax to £18.0m (FY21: £16.3m). Underlying adjusted
profit before tax increased by 9.8% to £22.5m
(FY21: £20.5m) and profit after tax by 8.3% to
£14.3m (FY21: £13.2m).
Our strong revenue performance is undoubtedly a
result of the depth and breadth of our professional
services offering.
Following on from the very strong second half
performance in FY21, activity levels remained strong
across the Corporate Platform, which grew by 12.7%,
buoyed by the continuing strength of the UK M&A and
Private Equity markets. The Property Platform grew
by 15.7%, enhanced by greater market share and a
widening range of mandates in our increasingly diverse
property consultancy businesses, which generated
21.0% of Property Platform revenue.
25
Chief Executive Officer’s review
continued
The People Platform saw a return to significant growth across both its
legal and consultancy service lines, in which combined revenue grew by
20.8%. The Business Services Platform grew by 14.6% as we expanded
our market share in existing workstreams and through the addition of
Adamson Jones IP Limited, Patent and Trademark Attorneys.
People and culture
FY22 saw a return to more familiar recruitment levels as
headcount increased by 287 during the Period. This includes
145 new colleagues who joined the Group as a result of the three
acquisitions completed in the Period, Tozer Gallagher in July
2021, Adamson Jones in January 2022 and Smithers Purslow in
April 2022. After a pause in recruitment in the initial stages of the
COVID-19 pandemic, the market has hardened with many factors
now influencing peoples’ career decisions. The Gateley offering
remains differentiated and attractive with a growing range of
businesses across the Group. As the Group continues to expand,
we are able to offer a broad range of career opportunities across
our Platforms, which are underpinned by a unique identity and
strong team culture.
We owe the success of our business to the quality and dedication
of our teams. FY22 saw significant ongoing disruption caused by
the pandemic, but our teams, supported by our earlier investments
in technology and our “one-team” culture, met demand to deliver
excellent client service and excellent results for the Group.
The Period also saw the beginnings of wage cost inflation across
the UK legal industry, as strong client demand continued across the
sector. Although this first impacted international firms in the City
and whilst the highest, headline-grabbing salaries remain in that
part of the market, gradually the trend spread across all UK legal
markets. The result has and continues to be those legal businesses
struggling to grow and/or who’s financial and remuneration models
are not sufficiently strong or flexible have lost people where
they cannot meet salary expectations. We believe that economic
headwinds are likely to temper future rates of wage cost increase
and in any event within Gateley our differentiated model and our
ability to offer share ownership to all of our people continues to
stand us in good stead.
Our continuing programme of service line diversification not
only drives additional sales but also creates skill set/talent pool
diversification, adding operational and financial resilience for
the Group and diluting the impact of trends affecting specific
professional disciplines. Wage cost inflation seen in the legal sector
in FY22 was less visible within our consultancy businesses and with
approximately 23% of our professional staff qualified in disciplines
other than law that too provided a degree of resilience and
sheltering for the Group.
After external consultation, the Group has introduced a new
Restricted Share Award Plan (“RSA”) and also awarded a second
vintage of awards under the existing Long Term Incentive Plan
(“LTIP”). The RSA forms part of the Group’s retention and
incentivisation policy for emerging senior talent. It supports long-
term share ownership for people who are promoted to Partner or
Partner-equivalent roles. It is a continuation of the board’s strategy
to differentiate the position of a Partner or equivalent at Gateley
from that of a Partner in traditionally structured professional
services businesses.
Responsible businesses
Our Responsible Business commitment is a key strategic priority,
which runs through the core of our organisation. Our first
Responsible Business report, published in September 2021,
outlined the objectives we committed to working towards during
FY22 and beyond. These objectives flowed out of our work
with The Purpose Coalition, the independent ESG consultancy
who helped us develop our own set of levelling up goals. Other
members of the Purpose Coalition include Amazon, bp, Compass
Group, the BBC, Direct Line Group, Cisco and the NHS. In FY22 our
objectives fell under three categories: People, Potential and Planet.
I am delighted with the progress we made in the Period, with just a
few of the highlights including:
People
•
Maintaining our Glassdoor ranking, recognised as the only
UK legal business to rank in the top 25 companies for senior
leadership
•
•
•
Maintaining our Investors in People standard
Securing our Disability Confident employer status
Launching our fifth internal diversity and inclusion network
group; Ability, which raises awareness around neurodiversity
and supporting colleagues with any disabilities
Potential
•
Continued support of Birmingham City University
STEAMHouse, exploring other opportunities to add value to
their start-ups
•
•
•
Announcing our partnership with UA92 in Manchester, which
aims to make higher education accessible to all, through
its founding principles of accessibility, social mobility and
inclusivity
Becoming the UK’s first Patron of ‘Make Good Grow’, a
social enterprise founded on the principles of uniting good
businesses with good causes
Continuing our SportsAid partnership; providing financial
and personal development support to ten of our country’s
brightest young sporting prospects
Business Overview
Strategic Report
Corporate Governance
Our Financials
Planet
•
Maintaining reductions in travel through the continued use of
virtual meetings where appropriate
•
•
Continued adherence to Group-wide “paper light” strategy
Encouraging our people to submit their sustainability pledges
and the positive actions we will take to protect our planet
Operational review
By the start of the Period our teams had already demonstrated
their ability to deliver via a more flexible, agile model. They
had also, like so many other sectors of UK and international
markets, confirmed their wish to maintain that flexibility even
after the pandemic has passed. Those factors combined to
create a management focus for driving ongoing efficiency. Under
the “Gateley Agile” initiative we made a number of changes to
premises, including the move to a smaller footprint in Reading,
vacating our Leicester office as part of conflation of a number of
services into one East Midlands offering located in our existing
Nottingham office, and combining Gateley Tweed, Gateley Capitus
and Gateley Legal into one Belfast office.
As pandemic restrictions were gradually lifted throughout the
course of the Period, we were able to increase our efforts
towards fully integrating recently acquired businesses. Whilst we
had of course done the best we could to continue integration
programmes during the pandemic, our efforts in the early part of
the Period were limited broadly to matters capable of being dealt
with virtually. That created certain limitations, not just in physical
terms where opportunities which existed to merge offices and
reduce duplicated costs could not be implemented until the latter
half of the Period, but also in people and cultural integration
terms. By the end of the Period, we were back on track with our
integration programme.
Throughout the Period, we continued to invest across the Group
in growing and strengthening our teams. Overall headcount in the
Group increased by 26.5% to 1,368 (FY21: 1,081). Legal services
professional headcount growth was 9.0% to 729 employees
(FY21: 669). The growth of our consultancy businesses’
contribution in the Period was matched by continued investment
and diversification into consultancy operations, with overall
consultancy headcount increasing by 169.4% to 291 (FY21: 108)
and fee-earner consultancy staff up by 123.5% to 219 (FY21: 98).
In H2 FY22, work commenced on the Phase 1 implementation of
our new core IT “practice management” system. We identified over
three years ago that our core systems needed replacing with new
technology. That new technology was needed to provide improved
management information within one financial system, to better
support acquisitive growth and seamless integration in a more
stable and robust IT system which can grow with us; and to create
new processes to enable us to work as efficiently as possible for
our clients. Phase 1 implementation, which resulted in over 80%
of staff adopting the new system on 22 June 2022, is progressing
well. We inevitably encountered some system interruptions in
the days post-launch but these were all well-within anticipated
tolerances and, as such, represented no significant overall business
interruption or disruption. The balance of all staff are expected to
come onto the new system in one final phase during FY23.
Our Acquisition Strategy
After deliberately pausing acquisition activity at the start of the
pandemic, we considered that the Group had stabilised sufficiently by
the beginning of FY22 for us to recommence it. We completed three
acquisitions during the Period, two onto our Property Platform and
our first onto our Business Services Platform. During the Period we
committed to a three-year revolving credit facility of up to £30.0m
to assist with acquisitions. To date, we have only used this for the
acquisition of Gateley Smithers Purslow and only drawn down £6.0m.
In July 2021 we acquired Tozer Gallagher, a leading practice
of chartered quantity surveyors and construction consultants
based in Manchester and London. The business specialises in
built environment consultancy, fund monitoring services and
surety advisory, and dovetails with the operations of Gateley
Vinden, which was acquired in March 2020. The surety advisory
expertise within Tozer Gallagher adds further strength to Gateley
Vinden’s business but also complements the specialist surety
work undertaken by Gateley Legal’s surety practice team. The
internationally recognised experts within Gateley Legal’s surety
team have a proven track record in advising on contentious and
non-contentious issues relating to any surety. Since acquisition
and despite the pandemic to some extent frustrating immediate
integration efforts, Tozer Gallagher has traded strongly.
In January 2022 we completed the acquisition of Patent and
Trademark Attorneys, Adamson Jones; the first acquisition onto
our Business Services Platform. The business has a broad range
of technical expertise including biotechnology, engineering,
pharmaceuticals and software and acts for clients from large
multinational and national organisations, to universities and
SMEs. The Adamson Jones team has 25 staff in offices in
Nottingham and Leicester. The acquisition sets a solid foundation
for the development, on the Business Services Platform, of
complementary businesses with an IP and brands focus, working
alongside the existing team within Gateley Legal, and enabling
the Group to widen its scope in an area where it already has a
well-established and continually growing client base. The business
has traded well since acquisition and Adamson Jones staff have
relocated into existing Gateley offices in the Midlands.
26
27
Gateley (Holdings) PlcAnnual report and financial statements Current trading and outlook
The solid foundations on which our business is built have enabled
the Group to deliver strong results in a period which was impacted
widely by macro events. One of the key objectives of our IPO in
2015 was to move the business into a structure that would enable
it to build a strong balance sheet and deliver the future investment
needed to drive the business forward. We are delivering on this
objective and will continue in this vein.
The business is continuing to demonstrate its resilience in the
current financial year, with Q1 FY23 utilisation across the Group
and against our historic averages supporting the board’s positive
outlook, and with current trading in-line with the
board’s expectations.
Our financial position is such that we will continue with our
acquisitions programme. The pipeline is strong and opportunities
are under consideration on each of our four Platforms.
We have confidence in our ability to perform well, even accepting
current indicators for the wider economic environment, and
continue to view the Group’s prospects for year ahead and
beyond positively.
Rod Waldie
Chief Executive Officer
12 September 2022
Chief Executive Officer’s review
continued
In April 2022 we completed the acquisition of Smithers
Purslow, our largest acquisition to date and our seventh onto
our Property Platform, currently our largest and most mature
Platform. Smithers Purslow is a rapidly growing multi-disciplinary
chartered surveying practice, comprising building and quantity
surveyors and civil and structural engineers. Specialising in services
to the property insurance claims market, it resolves high value
claims for insurers, policy holders and their advisers. The business
operates from ten regional offices across the UK and employs
130 staff. Its blue-chip client base includes insurance and utility
companies, property managers and high net worth individuals.
It complements existing expertise at Gateley Vinden and Tozer
Gallagher, further enhancing the Group’s already strong and
growing Property Platform.
Our Platform Strategy
Prudent management and a strong balance sheet enable us to drive
incremental value through acquisitions. As new businesses are
added and integrated onto each Platform, we now see the model
working exactly as we would expect, driving more revenue from
existing clients, creating routes into new clients for other parts of
the business to cross sell services and continually diversifying and
strengthening revenue streams.
Gateley Hamer, our property consultancy specialising in
Compulsory Purchase Orders, easements and wayleaves,
infrastructure projects, land referencing and public inquiries
produced another strong performance. The business again posted
strong organic top line growth of 41.5% but also added another
core service line in the shape of telecoms infrastructure.
Pleasingly, positive momentum and a return to growth flowed
through into our People Platform consultancies, Kiddy & Partners
and t-three, during the Period. This was in part due to increased
demand for services, as client HR Directors and Heads of Talent
saw development budgets, frozen during the pandemic, released
once again to them. However, also of significant benefit was the
successful integration of those two businesses into one assessment,
development and cultural change-facing offering. Our integrated
proposition and service offering went live in January and excellent
client feedback and securing significant new mandates.
Overall, our acquired consultancies performed strongly during the
Period, contributing 15.5% to total Group revenues and supporting
revenue growth in each of our four Platforms.
28
28
Business Overview
Strategic Report
Corporate Governance
Our Financials
We continue to operate and
invest in a differentiated,
resilient and growing business,
which has been deliberately
designed to perform, regardless
of the economic environment, and
FY22’s results continue Gateley’s
unbroken record of year-on-year
revenue and profit growth.”
Rod Waldie, Chief Executive Officer
29
29
Gateley (Holdings) PlcAnnual report and financial statements Gateley (Holdings) Plc
Annual report and financial statements
Business Overview
Strategic Report
Corporate Governance
Our Financials
Chief Executive Officer’s Q&A
Chief Executive Officer, Rod Waldie, talks here about how the year has gone and priorities
for the future.
How are you finding activity within
the business and in the market as
we emerge from the pandemic?
The pandemic highlighted the collective strength and
adaptability of our people. That was no surprise to me
given the long-established one team culture in Gateley.
Although there have been many changes, our
commitment to excellence in service delivery remains
absolute across our Platforms, all of which have
been, and remain, busy. Our strong activity levels are
reflective of high demand from clients in our chosen
markets throughout the year. That demand has driven
impressive growth in both our legal and consultancy
service revenues, which underpins our ability to
report yet another year of profit and dividend growth.
However, as business leaders begin to view economic
uncertainty as a constraint, we are closely monitoring
our clients’ activities and their needs so as to align
our increasingly diverse range of professional services
to where opportunities lie now and in the future.
This is an inherent characteristic in our deliberately
designed resilient business model which, for many
years, has successfully rotated to deliver strong
results in all economic conditions. We will continue to
evolve this model and our enthusiasm for innovation
whilst maintaining an unwavering focus on cost
management.
How has the Gateley Agile
strategy been adopted by your
people and clients and how is it
working in practice?
The pandemic certainly tested professional services
businesses. The forced implementation of remote
working was the first operational impact of scale. Agile
working will be the long-lasting legacy.
Our Gateley Agile strategy continues to evolve. We
absolutely recognise that flexibility has become one of
the most desired attributes of any business considered
to be a great place to work and therefore a key
component of a strong workplace culture, which we
have always been absolutely committed to.
Everything that we do at Gateley is underpinned by
“the Gateley Team Spirit”. Two of its pillars are:
•
“ Working together” – our people want to
be part of a team and we work inclusively
and collaboratively with each other and
our clients ; and
• “ Trusted to do” – when we say that we will do
something, we do it, maintaining a clear focus
on the doing. In return, we are trusted to get
on with things.
Our success in embracing the flexibility in our Gateley
Agile strategy boils down to trust; with leaders trusting
team members to work together to meet expectations
and goals and team members feeling assured that they
are worthy of that trust.
Gateley Agile is working well and, in many respects,
is a mirror of what many of our clients are doing in
their organisations. Resultant operational and
premises cost savings are a bonus for them and for
us in offsetting some of the inflationary pressure that
we are all seeing.
Gateley Agile will continue to evolve and we will
continue to find creative ways to ensure engagement,
collaboration and performance feedback and review.
How are your most recent
acquisitions bedding in and how is
the Platform strategy progressing?
It has been great to report three acquisitions during
the Period. The sixth and seventh consultancy business
additions to our Property Platform and the first onto our
Business Services Platform.
•
•
•
Tozer Gallagher (quantity surveyors and construction
consultants) specialise in built environment
consultancy, fund monitoring services and surety
advisory. These services dovetail with those provided
by Gateley Vinden and by Gateley Legal in the context
of surety expertise. Since acquisition in July 2021, the
Tozer Gallagher team has relocated to our existing
offices in London and Manchester and has traded
strongly.
Smithers Purslow (a multi-disciplinary chartered
surveying practice) specialise in services to the
property insurance claims market, resolving high value
claims for insurers and policy holders. This is our
largest acquisition to date. The 128 professional staff
in Smithers Purslow complement existing expertise in
Gateley Vinden and Tozer Gallagher and significantly
enhance our strong and growing Property Platform.
The Smithers Purslow team have settled in very well
since acquisition in April 2022 and are trading strongly
in a very active sector.
Adamson Jones (patent and trademark attorneys)
represent the first consultancy services acquisition
onto our Business Services Platform. The team have
a broad range of technical expertise and act for
national and multi-national organisations. Most of the
25 Adamson Jones staff are now based in our existing
Nottingham office. The business has traded well since
acquisition in January 2022. We are focused upon
adding similar businesses to this Platform to maximise
opportunities for us to help our clients protect and
monetise their ideas, inventions and brands.
Our Platform strategy is progressing well. The Platforms
remain our growth vectors and our key differentiator. All
businesses are well integrated and working as we would
expect in driving more (and more diverse) revenue from
existing clients whilst creating opportunities with new
clients. We have an encouraging pipeline of acquisition
opportunities and a committed funding line to add yet
more resilience to our business model.
How has your first responsible
business report been received and
what are your plans to build on
your ESG strategy?
We launched our maiden responsible business report
last September and alongside that held an internal launch
to our business supported by keynote speakers from The
Purpose Coalition, the independent ESG consultancy
who helped us develop our own set of levelling up goals
last year, and the Better Business Act of which we are a
signatory. The virtual webinar was very well received by
our colleagues right across the Group with around 870
of them joining us on the day. This was an important
milestone in communicating the meaningful strategies
we have put in place to meet our environmental, social
and governance obligations.
We’ve had lots of positive internal and external
feedback during the year on our commitment and
approach to being a responsible business but I don’t
view this as a job that will eventually be completed.
It will evolve over time so it’s important that we keep
progressing in this area. With that in mind, in March this
year, we appointed our first responsible business manager
who is focused on helping us deliver the objectives we
have already outlined as well as planning for the future.
In addition, we want to ensure that we can measure the
value and impact we are having so we can clearly evaluate
where we are effecting change and what more we need
to do to progress and improve.
Our responsible business objectives in FY22 were set
against three categories of People, Potential and Planet.
You can find a summary of what has been delivered so
far in the Responsible Gateley section of this annual
report but more detail about how we met our objectives
will be outlined in our next Responsible Business report,
published in the Autumn. This will also include an
overview on what the next steps in our ESG journey
will be. You can expect those to be actions that focus
on the wellbeing of our employees, being a force for
good in society and within the communities where we
do business and by playing our part in protecting and
repairing our planet.
30
31
Gateley (Holdings) Plc
Annual report and financial statements
Business Overview
Strategic Report
Corporate Governance
Our Financials
Finance Director’s review
“
Results for FY22 reflect another strong year for
the Group. They include significant organic
growth and a return to our acquisitions
plan with the addition of some excellent new
complementary service lines that further
enhance Group revenue diversification.
We have maintained control of costs
despite both market specific and macro-
economic conditions suggesting further
headwinds are to come, and we have
produced a strengthened balance
sheet with significant facility
headroom to further expand the
Group both organically and
through acquisition.”
Financial overview
In FY22 the Group demonstrated strong growth in revenue
and adjusted profit before tax ahead of consensus market
expectations set at the start of the year, with revenue up 13.0%
to £137.2m including organic revenue growth from legal service
lines of 8.7% alongside exceptional organic growth of 26.7% from
consultancy service lines.
The measures taken by the Group to embrace changes in
working practices driven by the pandemic resulted in another
year of lower costs as a percentage of revenue. We continue to
explore further cost reduction initiatives, such as our ongoing
premises strategy, as part of our “Gateley Agile” initiative,
designed to help mitigate the widely reported upward increase on
staff costs in the sector, and broader inflationary pressures.
We completed three acquisitions during the Period, which
are integrating well. We have established a new revolving credit
facility which was part used for our largest acquisition since
listing, Gateley Smithers Purslow, and we remain well-placed with
a strong balance sheet.
FY22 continues our long track record of delivering profitable annual
results and attractive investment returns, which once again enable
strong dividend growth through the proposed final dividend of 5.5p,
taking total dividends to 8.5p in respect of the Period.
Revenue
Group total revenue grew by 13.0% (FY21: 10.5%) to £137.2m
(FY21: £121.4m). Revenue from core legal service lines grew
organically by 8.7% (FY21: 5.5%). In addition, total revenue from
complementary consultancy businesses grew by 44.9% to £21.3m
or 15.5% of total revenues (FY21: £14.7m or 11.5%), highlighting
the on-going success of our Platforms diversification strategy.
Neil Smith
Finance Director
Platform performance
At the start of FY22 the Group presented segmental reporting on our Group Platform structure.
As the Group has continued its headcount investment across each Platform, margin performance has fluctuated dependent upon the stage
of Platform investment. We have increased staff numbers within our Business Services and Property Platforms during FY22 to meet expected
increases in demand in FY23. These investments have predominately driven decreases in their FY22 margins. However, despite our strategy of
continual investment and the unique wage cost inflation seen in the legal sector, the Group has lowered its percentage of personnel costs to
revenue in FY22 to 63.0% (FY21: 63.9%) and will continue to sensibly manage this key metric as market conditions evolve.
Retention of staff remains key to the success of the Group which we believe is well served by our unique culture, business structure and
the vast number of career opportunities in a growing, resilient Group which continues to deliver quality advice to a quality client base.
The table below represents this performance over the last two reported years along with each Platform’s direct contribution towards
our one profit view of the Group’s performance.
FY22
Revenue
Segmental contribution
Contribution margin
FY21
Revenue
Segmental contributions
Contribution margin
Revenue movement
Contribution margin change
Business
Services
£m
18.0
5.7
31.7%
15.7
6.4
40.8%
14.6%
(9.1%)
Corporate
£m
38.1
15.4
40.4%
33.8
11.4
33.7%
12.7%
6.7%
People
£m
19.2
6.9
35.9%
15.9
4.9
30.8%
20.8%
5.1%
Property
£m
61.3
23.0
37.5%
53.0
24.4
46.0%
15.7%
(8.5%)
Total
£m
136.6
51.0
37.3%
118.4
47.1
39.8%
15.4%
(2.5%)
Business Services Platform
Our Business Services Platform revenues grew by 14.6%. Our Business Services Platform offers a broad balance of services across many clients and
industries as well as continuing to support our transactional work streams. Its mix of services in both complex litigation and in more transactional-
led commercial services are now being widened further through the acquisition of Patent and Trademark attorneys, Adamson Jones. The addition
of these IP and brands focused services, working alongside the existing team within Gateley Legal, will enable the Group to widen its scope in an
area where it already has a well-established and continually growing client-base. This Platform was held back during the year on commercial and
international-led litigation assignments of a contingent nature that have not achieved the fee levels we had hoped for due to Russia’s invasion of
Ukraine, where in both jurisdictions we held litigation mandates. We have maintained these international teams but shifted our geographical focus
to new jurisdictions which have already generated an attractive pipeline of complex international litigation assignments.
Corporate Platform
Our Corporate Platform produced another strong performance generating revenue growth of 12.7% and a significantly stronger
contribution margin. Our continued strength of relationships with Private Equity and M&A clients continues to serve the Group well as
activity in this area remains strong in FY23. Our banking team within this Platform also posted another strong year of growth alongside
our growing tax team. Recruitment to service demand across the Platform remains a challenge, however staff numbers have increased and
we take a highly skilled team into FY23 with confidence. Whilst corporate transactional activity within our client base shows no signs of
relenting, traditional restructuring and recovery activities remained subdued during the Period, with upticks in activity shown post year-end
as wider economic conditions impose challenges for UK businesses.
People Platform
This Platform grew by 20.8% due to the significant return of demand for services across our consultancy businesses, t-three and Kiddy &
Partners (“Kiddy”), after the pandemic and also after the launch of their integrated service delivery model to corporate clients. Their focus
on talent assessment and development and cultural change has proven to represent a strong sales proposition to a client-base inevitably
needing to adjust and change as a result of the pandemic. Our national private client team performed well alongside our more traditional, but
established, employment legal and pension trustee led services. Contribution margins increased as a result of a return to greater activity using
these established existing teams at a higher level of activity during FY22.
32
33
Finance Director’s review
continued
Business Overview
Strategic Report
Corporate Governance
Our Financials
Property Platform
Our Property Platform reporting segment grew revenue strongly by 15.7% as we took advantage of opportunities generated by our most
mature Platform. It operates at regional and national levels in the UK’s commercial property, development and housing markets, which rely
upon long-term specialist multi-disciplinary legal and consulting support. There was growth across both contentious and non-contentious
service lines in areas such as construction disputes, plus we also saw strong growth in our specialist Gateley Hamer consultancy business
which increased revenue by 42% during the year. We have recruited to meet FY23 demand in both existing and new service lines within
Gateley Hamer, which is primarily why direct contribution has declined. Tozer Gallagher and Smithers Purslow have both enjoyed a strong
first part year within the Group. Post year-end Tozer Gallagher has exceeded revenue expectations which will lead to achievement of its
earn-out and a further £0.1m of consideration being payable.
Underlying operating profit before tax
The Group has recorded strong underlying operating profit before tax of £22.5m which has increased by 9.8% from £20.5m in FY21. Our
strategy to maintain fee earner headcount in order to service increased client activity has been supported by our recruitment activity this
year. Continuing robust demand in the UK’s legal services industry has led to continued pressure in the legal recruitment market and as
previously highlighted our underlying trading margins have decreased slightly to 16.4% (FY21: 16.9%).
We are not yet seeing this pressure relent as we move into FY23 and we have undertaken another comprehensive salary review in a
continually changing professional services industry in order to remain competitive in the legal recruitment market. We have always operated
an all-staff bonus scheme which typically amounts to c10% of our annual salary costs. We see such a scheme, where performance is directly
linked to the Group’s performance, as a key management strategy whereby staff are incentivised accordingly to drive Group performance
but management is also able to retain a significant element of discretion in matching remuneration with Group “one profit” performance.
We have not changed our strategy on this incentivisation tool which sits alongside extremely attractive staff share plans and ensures the
whole business is culturally aligned.
Underlying operating profit before tax excludes amortisation of acquired intangibles, all share-based charges and exceptional acquisition
related items. Underlying operating profit before tax has been calculated as an alternative performance measure in order to provide a more
meaningful measure and year-on-year comparison of the profitability of the underlying business.
Extract of UK statement of comprehensive income
Revenue
Operating profit
Operating profit margin (%)
2022
£’000
137,249
18,987
13.83%
2021
£’000
121,375
17,505
14.42%
Personnel costs and operating expenses
Our total personnel costs increased by 11.7% (FY21: 21.9%) to £86.5m due to the full-year cost of staff introduced to the business
through acquisitions made during the year together with a return to recruitment in order to expand capacity to meet client demands.
In total, seven (FY21: six) new legal Partners joined the business and we made eight (FY21: nine) internal promotions to legal Partner.
Average numbers of legal and professional staff rose by 3.9% (FY21: 9.1%) to 800 (FY21: 770), whilst support staff numbers increase
marginally to 350 (FY21: 343). Personnel costs as a percentage of fees decreased to 63.0% of revenue from 63.8% in FY21, excluding
share-based payment charges.
Operating expenses have increased in line with top line growth of the Group, including in specific areas such as travel, marketing and
premises related spending following a partial return to office working, and due to the effects of current UK-wide inflation impacting running
costs. Whilst other operating expenses increased by £2.6m or 12.4% to £23.6m (FY21: £21.0m) overheads remain well-managed as a
percentage of revenue, as demonstrated by their decrease as a percentage of revenue from 17.3% in FY21 to 17.2% in FY22.
Earnings Per Share (EPS)
Basic EPS increased by 7.3% to 12.00p (FY21: 8.1% to 11.18p). Basic EPS before non-underlying and exceptional items increased by 10.6%
to 14.66p (FY21: 4.5% to 13.26p). Diluted EPS increased by 5.5% to 11.71p (FY21: 9.5% to 11.10p). Diluted EPS before non-underlying
and exceptional items increased by 8.7% to 14.31p (FY21: 5.8% to 13.17p).
Share option schemes
The board remains committed to providing its people with the opportunity to own shares in the Company, as further evidenced by the introduction
of the new RSA during the year. Such share ownership promotes strong alignment with the Group’s external shareholders, incentivises employees
and is reflective of Gateley’s long-established culture. At least 75% of current staff are existing share or option holders in the Group.
The awards, which vest on receipt, are made when an individual is promoted to Partner or an equivalent position. Awards are subject to a
five-year non-dealing restriction and are forfeited should employment be terminated within that period. 1,267,560 shares were awarded on
27 April 2022 as part of one-off awards to people who were non-equity Partners at the date of Gateley’s IPO in June 2015, with a further
100,000 shares being awarded shortly after the FY22 financial year-end to newly promoted Partner or Partner-equivalents since then.
The board also announced at the end of FY22, a second vintage of LTIP awards to certain Executive Directors and Senior Management over
up to 1,115,000 Ordinary Shares of 10 pence each in the Company (“Ordinary Shares”). Awards under the LTIP vest at the end of a three-
year period, dependent upon the achievement of profit related performance conditions and continuous employment.
Profits used to calculate underlying EPS each year are disclosed below:
Reconciliation to alternative performance measure: underlying operating profit before tax
Operating profit
18,987
17,505
Reported profit after tax
Non-underlying items
Amortisation of intangible assets
Share based payment charge – Gateley Plc
Share based payment charge – Gateley Smithers Purslow Limited
Release of contingent consideration – International Investment Services Limited
Exceptional items
Acquisitions costs
One off remuneration charge – Gateley Smithers Purslow Limited
Underlying operating profit before tax
Adjusted underlying operating profit margin (%)
1,581
1,100
113
(135)
373
497
22,516
16.41%
2,073
956
-
-
-
-
20,534
16.92%
Adjustments for non-underlying and exceptional items:
- Anticipated impact of IFRS 16 if it had been adopted in earlier years
- Amortisation of intangible assets
- Share-based payment adjustments
- Release of contingent consideration – International Investment
Services Limited
- Impairment of software development costs
- Acquisition-related costs
Underlying profit after tax
2022
£’000
14,279
-
1,581
1,213
(135)
-
870
17,808
2021
£’000
13,157
-
2,073
956
-
-
-
16,186
2020
£’000
11,723
-
1,375
1,355
-
463
107
15,023
2019
£’000
13,041
(313)
1,406
655
-
-
61
14,850
Weighted average number of ordinary shares for calculating
diluted earnings per share
121,893,238
118,508,833
115,599,727
112,280,569
Underlying adjusted fully diluted EPS
14.61p
13.66p
13.00p
13.23p
34
35
Gateley (Holdings) PlcAnnual report and financial statements Finance Director’s review
continued
Taxation
The Group’s tax charge for the Period was £3.8m (FY21: £3.2m) which comprised a corporation tax charge of £4.0m (FY21: £3.7m) and a
deferred tax credit of £0.2m (FY21: credit of £0.5m).
The deferred tax charge arises due to a combination of credits in respect of the share schemes that have vested in past years and the release of
deferred tax on brands. The total effective rate of tax is 20.8% (FY21: 19.3%) based on reported profits before tax. The increase is as a result
of the decrease in the tax allowable benefit arising from the exercise of nil cost share options from levels experienced in previous years.
The net deferred taxation liability increased to £2.5m (FY21: £0.6m) as a result of the deferred tax charge arising from business
combinations during the year.
Dividend
The Group paid an interim dividend of 3.0p per share on 31 March 2022 and proposes a final dividend at the Company’s Annual General
Meeting on 20 October 2022 of 5.5p (FY21: 5.0p) per share, which if approved, will be paid in late-October 2022 to shareholders on the
register at the close of business on 23 September 2022. The shares will go ex-dividend on 22 September 2022. Our dividend policy remains
to distribute up to 70% of our after-tax profits each year.
Balance sheet
The Group’s net asset position has increased by £13.6m (FY21: £14.5m) to £72.9m (FY21: £59.3m), due to the following movements:
There was a £13.4m increase in total current assets, resulting from £13.1m additional trade and other receivables through acquired
businesses and the strong organic growth of the Group. Contract assets (“unbilled revenue”) increased by £3.3m and cash at bank
decreased by £3.5m as excess cash was redeployed into acquisitions and to support working capital required for continued growth.
Non-current assets increased by £14.5m, resulting from a decrease of £2.4m from a change in property use and right of use asset values
and an increase of £16.8m in intangible assets and goodwill following the three acquisitions made during the year.
The board has carefully considered the impact of COVID-19 on the future forecasts used in assessing the value in use of the cash generating
units to which the goodwill and intangibles relate and determined that despite short term reductions such forecasts are more than sufficient
to justify the carrying value of goodwill. Therefore, as at 30 April 2022, the board concluded that the goodwill and intangible assets do not
require impairment.
Total liabilities increased by £14.3m, due mainly to the drawdown of the RCF and creation of £5.7m of debt in connection with the acquisitions
of Gateley Smithers Purslow together with the recognition of £5.4m of deferred consideration and £2.1m of deferred taxation on acquired
intangibles, also in connection with the same acquisition.
Working capital and cash flow
During the year the Group agreed a new revolving credit facility with Bank of Scotland and HSBC UK.
The facility provides total committed funding of £30m until April 2025, split equally between Bank of Scotland and HSBC UK. It replaces the
Group’s existing £8m overdraft facilities with Bank of Scotland and HSBC UK, with the dual bank club providing increased flexibility to the Group
to support future growth and expansion via acquisition. Interest is payable on the loan at a margin of 1.95% above the SONIA reference rate.
The Group also has in place a litigation funding facility for an initial £20m of funding towards significant litigation cases, which has the ability
to increase to £50m if required. To date the Group has not yet utilised this facility but has a number of large assignments currently being
assessed for consideration in FY23.
Cash generation was once again good with net cash inflows from operating activities of £12.3m(FY21: 25.4m) representing 86.5%(FY21:
193.2%) of profit after tax. The Group ended the year with net cash of £10.4m (FY21: 19.6m) the result of continued strong trading and
also management’s sustained focus on cost efficiencies and costs management.
Free cashflow during the year from operations (post cashflow from IFRS 16 leases) was £7.4m (FY21: £20.8m) which represents 51.7%
(FY21: 158.2%) of profit after taxation. After conserving excess cash in FY21 as a result of decisions taken at the outset of the pandemic,
FY22 has experienced the adverse effects caused by the timing of increases in cash movements from trade receivables as the business
returned to growth and normal levels of trading related outgoings.
36
Business Overview
Strategic Report
Corporate Governance
Our Financials
Net cash generated from operations
Tax paid
Net interest (paid)/received
Cash outflow from IFRS 16 leases (rental payments excluded from operating cash flows under IFRS 16)
Purchase of property, plant and equipment
Purchase of other intangible assets
Free cash flow
Underlying profit after tax
Free cash flow
2022
£’000
16,846
(4,497)
(7)
(3,870)
(775)
(319)
7,246
14,279
51.7%
2021
£’000
29,457
(4,039)
(240)
(3,847)
(503)
(10)
20,818
13,157
158.2%
At the year-end unbilled revenue recognised in the Group’s statutory accounts, from time recorded on non-contingent work, totalled £17.2m
or 12.5% of revenue recognised over the year (FY21: £13.9m or 11.5%). Unbilled revenue represented 49 days in line with last year, of Pro-
forma net revenue. Group debtor days have increased to 113 days compared to 104 days in FY21 of Pro-forma net revenue. Pro-forma net
revenue includes revenue from acquisitions on a full year pro-forma basis. As the Group grows so has our volume of unpaid debts. This year
especially the heightened activity levels of year billing and the growth of the Group through acquisition, alongside the position of the easter
holidays, have all combined towards the increase in debtor days. We had a higher number of litigation and recovery assignments in particular
at the year-end that have since been settled or are close to resolution that will generate settlement of certain outstanding debts. We have also
made a good start to collections in FY23, despite the impact of the significant change in financial systems in June 2022.
Concert party update
Following consultation with The Takeover Panel (“the Panel”), it has been agreed that the concert party will be amended.
At the time of the IPO, it was agreed with the Panel that the Directors, Existing Shareholders and the Company’s Employee Benefit Trust
(once established), each as defined in Gateley’s admission document published on 1 June 2015, were acting in concert in respect of Gateley.
The Company has now agreed with the Panel that the Gateley EBT along with the following individuals and their respective connected persons
form the concert party in relation to Gateley pursuant to The Takeover Code:
Rod Waldie
Michael Ward
Neil Smith
Peter Davies
Callum Nuttall
Paul Hayward
Brendan McGeever
Chief Executive Officer
Executive Director
Finance Director
Chief Operating Officer and member of the Strategic Board
Member of the Strategic Board
Former member of the Strategic Board
Former member of the Strategic Board
Summary
Results for FY22 reflect another strong year for the Group. They include significant organic growth and a return to our acquisitions plan with
the addition of some excellent new complementary service lines that further enhance Group revenue diversification. We have maintained
control of costs despite both market specific and macro-economic conditions suggesting further headwinds are to come, and we have
produced a strengthened balance sheet with significant facility headroom to further expand the Group both organically and through acquisition.
The Group is actively pursuing a strong pipeline of M&A opportunities.
Post year-end, we have enhanced our financial systems platform in order to drive greater efficiencies in the future and we continue to look at
initiatives to balance off further increased cost pressures from wage and inflationary pressures.
Neil Smith
Finance Director
12 September 2022
3737
Gateley (Holdings) PlcAnnual report and financial statements Gateley (Holdings) Plc
Annual report and financial statements
Business Overview
Strategic Report
Corporate Governance
Our Financials
Principal objectives,
strategy and outlook
The principal activity of the Group during the year was the provision of
commercial legal services together with complementary professional consultancy
services. The Group sells its services through 26 business lines, grouped into four
operating segments. Dependent on a client’s requirements, any given instruction
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 21 offices
across the UK, as well as an office in Dubai. Gateley also maintains
informal, non-exclusive, relationships with a number of law firms
(30+) around the world, enabling it to provide clients access to a
global legal solution.
Gateley became an Alternative Business Structure (“ABS”) with
effect from 1 January 2014. Non-lawyers are permitted to own
and invest in ABS law firms. The Board believes a combination
of the ABS structure and admission to trading on AIM provides
a platform for the continued profitable growth and future
diversified development of the business. It enables the business
to differentiate itself from its competition through an enhanced
service-offering and unique career opportunity, to diversify
its revenue streams through the acquisition of additional
complementary legal and professional consultancy service
businesses and finally to incentivise its people offering wider and
earlier ownership to staff of a more modern, dynamic 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 consultancy service businesses
offering complementary services
Building out the Group’s Platforms which
comprise clusters of complementary group
services presenting a broader and more
compelling offering
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:
Incentivisation
Gateley operates a range of employee share schemes that ensure
all staff can acquire shares and participate in the financial success
of our business.
The retention of existing employees, working together to
deliver 100% client satisfaction by looking after our clients’
businesses as if they were our own
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.
•
•
•
•
•
•
•
Attracting new talent wishing to be a part of a pioneering law
led professional services group
We will continue to provide enhanced cross-selling
opportunities through collaborative working via our group wide
Platforms
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
Acquisitive growth
Gateley believes that it can strengthen its business by broadening
its service offering through the acquisition of complementary
legal and consultancy 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)
Overview for the year
See Finance Director’s report on pages 32 to 37 for a summary of
key financial highlights during the year.
Management uses a number of financial and Non-GAAP alternative
performance measures to assess the performance of the Group
which are detailed below.
Financial Measures
•
Revenue up 13.0% (2021: 10.5%) to £137.2m (2021: £121.4m)
•
•
•
•
Profit before tax up 10.4% (2021: 10.5%) to £18.0m
(2021: £16.3m)
Profit after tax up 8.3% (2021: 12.2%) to £14.3m
(2021: £13.2m)
Operating profit margin 13.8% (2021: 14.4%) – Operating profit
as a percentage of revenue
Basic Earnings per share (EPS) up 7.3% (2021: 8.1%) to 12.00p
(2021: 11.18p)
• Total dividend declared up 13.3% to 8.5p (2021: 7.5p)
Alternative Performance Measures (APMs)
•
Operating profit before non-underlying charges up 9.8%
to £22.5m (2021: £20.5m). Operating profit before non-
underlying charges excludes income or expenses that relate to
amortisation, share based payment charges and non-underlying
and exceptional items, see reconciliation on page 34. This
measure is used as it removes the impact of non-cash items
charged to the income statement, giving a more representative
view of the Group’s performance for the year.
•
•
Operating profit margin before non-underlying and exceptional
charges 16.4% (2021: 16.9%) – Operating profit before non-
underlying and exceptional charges as a percentage of revenue
Revenue per pound of salary cost £1.59 (2021: £1.57):
Employees are the driving force behind revenue earned and
also the largest operating expense within the Group. Therefore,
this measure is vital in monitoring the ratio between the two.
38
39
Business Overview
Strategic Report
Corporate Governance
Our Financials
Principal objectives, strategy and outlook
continued
•
•
•
•
Revenue days 113 (2021: 104): This measure expresses year
end trade receivables (excluding unbilled disbursements and
expenses) as the number of preceding days’ gross revenue.
The measure is used to monitor the cash generation and
working capital cycles of the business with the view to minimise
the average days taken to collect revenue once it is billed.
Utilisation 83% (2021: 88%): Utilisation represents an average
of the total hours billed as a percentage of total available hours
for each employee. The measure is used by Management
to ensure efficient people management across the various
segments and an early indication of Group activity levels.
Gearing ratio 7.8% (2021: 0.0%): This ratio shows the
proportion of total debt to total equity within the business.
The business monitors this ratio to ensure that the liquidity and
funding of the business continues to fall in line with its overall
strategy to maintain a low level of gearing.
Net cash £10.4m (2021: £19.6m): Net cash is calculated
by subtracting the cash balance from the amount of other
interest-bearing loans and borrowings. The measure is used to
monitor the level cash and debt within the Group and ensure
that this remains in line with the adopted business strategy.
Earnings per share (EPS)
Basic EPS was 12.00p (2021: 11.18p). Diluted EPS was 11.71p
(2021: 11.10p). Adjusted, fully diluted EPS was 14.31p
(2021: 13.17p).
Cash flow generated and net debt position
Net cash generated from operating activities was £12.3m
(2021: £25.4m).
The Group’s net cash position as at 30 April 2022 was £10.4m
(2021: £19.6m).
Going concern
The Group’s business activities, together with the factors
likely to affect its future development, performance and position,
are set out in the Finance Directors review, together with the
financial position of the Group, its cash flows, liquidity position
and borrowings. Financial projections have been prepared to
October 2023 which show positive earnings and cash flow
generation. The COVID-19 situation during the previous financial
year created an unprecedented and constantly changing challenge
to all businesses. Management successfully navigated the business
through the impact of the pandemic on the Group’s financial
performance. The Group typically applies sensitivities (informed by
the past experiences of the Group since the onset of the pandemic,
including the Group’s time recording activity, fee generation and
cash collections) to any current financial projections based on
various downside scenarios to illustrate the potential impact
from a downturn in client activity or any increases in costs.
The Group’s liquidity position has been enhanced during the year
as the board has worked closely with its supportive banks in order
to switch its funding line from an uncommitted overdraft facility
to a three-year revolving credit facility, of which £6m was drawn
down at 30 April 2022, with committed funding of £30m until
April 2025. As at 30 April 2022 the Group has net cash of £10.4m
and continues to sensibly manage cash position within permitted
covenants relating to its new facility.
This process included a reverse ‘stress test’ used to inform
downside testing which identified the break point in the Group’s
liquidity. Whilst the sensitivities applied do show an expected
downside impact on the Group’s financial performance in future
periods, in all scenarios modelled the board have identified the
appropriate mitigating actions in order for the Group to maintain a
robust balance sheet and liquidity position. In addition, the board
have also considered mitigating actions such as lower capital
expenditure, reductions in personnel and overhead expenditure
and other short-term cash management activities within the
Group’s control as part of their assessment of going concern.
The Group expects to be able to operate within the Group’s
existing financing facilities for the foreseeable future and
currently demonstrates significant debt capacity headroom
based on its strong financial performance. Accordingly,
the Directors have a reasonable expectation that the
Company and the Group have adequate resources to
continue in operational existence for the foreseeable
future and they have adopted the going concern
basis of accounting in preparing the annual
Group financial statements.
40
41
Gateley (Holdings) PlcAnnual report and financial statements Principal risks and uncertainties
The board monitors both existing and emerging risks. The operational Risk Committee identifies risks facing the business, recording these in
the risk register and regularly assesses the status of these risks. Many of the risks faced by the Group are similar to those risks faced by any
business but those considered to be key risks for the Group are detailed below. Due to the nature of the business and the markets in which
it operates, many of the risks it faces are ongoing, proving relevant to more than one single year.
Details of Risk
Mitigating Factors
Ongoing Economic impact of COVID-19 pandemic and economic downturn
The Group has proven that it is well positioned to withstand the effects
of the COVID-19 pandemic and any resultant downturn. This is due to
the broad-based nature of the Group’s activities; comprising legal and
non-legal services delivered to a diverse and well spread client base. The
balance between transactional services and litigation services effectively
hedges the position of the business. Whilst lockdown restrictions initially
impacted clients, the ability of clients and the Group to adapt to the home
working environment has reduced the impact over time.
The Group has demonstrated that it is prepared to take steps to
preserve the liquidity of the business including cancelling dividends,
cancelling bonuses, freezing pay and reducing non-essential expenditure.
The Company remains confident that other mitigating actions are available
alongside alternative sources of funding should further action be needed.
In the last financial year, the reduction on efficiency was minimal and
staff have adapted exceptionally well to home working. Our Learning and
Development and IT teams have been extremely active in ensuring staff
are supported in the use of IT and the new ways of working whilst our
Business Development team have expanded the use of social media and
webinar platforms to reach out to existing and new clients in order to
protect against any decline in client activity.
Whilst the COVID-19 pandemic has created an unprecedented and
constantly changing challenge to all businesses since its onset in the
UK around March 2020, Gateley has established over that period that
COVID-19 carries a relatively low risk impact due to the nature of
the Group’s business model, its work streams and its ability to adapt
to homeworking. We believe the risks to the Group posed by the
COVID-19 pandemic are as follows:
Liquidity risk
•
Elements of any potential future disruption could impact the
Group’s ability to convert unbilled time into fees as client activity
is affected by the pandemic which could slow down collection
of cash as forecast.
•
Slow-down in business development activity may reduce future
forecast fees and cash flow, however it is likely that this would be
mitigated by a slow-down in recruitment activity.
Risk of loss of efficiency
•
Disruption impacting clients causing delays in concluding ongoing
work due to change in their working practices
Risk of loss of projected capacity
•
Team members being incapacitated or having to care for other
family members
•
•
•
•
The slow-down in recruitment which is likely to be partially offset
by lower attrition
Risk in winning and mobilising new projects
Some clients and sectors slowing down due to further social
distancing and government restrictions
Practical challenges in planning and starting projects that have
historically used physical presence in areas such as Human Capital
consultancy or land and building inspections.
Risk in IT & security
•
A possible breach of IT security through remote working,
although significant activity has been undertaken by the
business over a number of years to mitigate this risk
M Chance: Medium
L Impact: Low
= Change in risk: No change
Business Overview
Strategic Report
Corporate Governance
Our Financials
Details of Risk
Reputation
Mitigating Factors
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 Group’s reputation
could be significantly damaged.
The Group constantly endeavours to maintain its reputation as
a provider of client focused 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). These
standards are applied across the non-legal parts of the business where
applicable.
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 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.
New clients and matters go through an internal acceptance process
that includes a comprehensive risk assessment. This includes
consideration of potential impact of each engagement on the
Group’s integrity and reputation.
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 operating, marketing and
financial performance of the Group.
M Chance: Medium
H Impact: High
= Change in risk: No change
Operational & IT risk
The Group places significant reliance on its IT systems, any loss of these
facilities or provisions would have a serious impact on the Group’s
operations. Due to the nature of this risk no assurances can be given
that all such risks will be adequately covered by its existing systems.
The Group is in the process of transitioning to a new practice
management system (“PMS”). With any transition of this nature there
is a risk to data retention and integrity as well as business continuity.
M Chance: Medium
H Impact: High
= Change in risk: No change
Cyber risk
The Group monitors the resilience of its information systems and other
facilities on an ongoing basis, working with external partners to support
the delivery of its internal and client facing IT provision.
The Group has in place a business continuity plan and an IT disaster
recovery plan that are reviewed as appropriate.
The Group, and external partners assisting in the development and
implementation of the new system have undertaken risk assessments and
have concluded that adequate safeguards are in place to minimise the risk
of loss or disruption to the business.
Due to the nature of the Group’s business and its reliance on IT
platforms, the Group is at risk of cyber-attack. The risk of cyber-
attack continues to increase not just within the legal and other
professional services sectors but for all businesses operating via the
internet across the world. The risk to the Group relates primarily to
the risk of malicious hacking of the Group’s systems with consequent
risk to client data or of ransom attacks.
H Chance: High
H Impact: High
= Change in risk: No change
The Group and the Risk Committee are aware of the increasing cyber
risk. The risk cannot be avoided as IT systems are fundamental to the
delivery of the Group’s services. Accordingly, the Group has an ongoing
programme based on the adoption and continual improvement of IT
security controls and business procedures to mitigate this risk.
The Group regularly reviews and tests its security arrangements, for example
implementing regular third-party penetration tests, in order to identify and
subsequently address possible weaknesses within the current systems.
In June 2021 the Group experienced a cyber-attack. Fortunately, the
attack was identified quickly, and significant disruption was avoided. A full
review of the incident was carried out and enhancements to the Group’s
IT security arrangements are being and will continue to be implemented as
part of the Group’s ongoing programme to mitigate this risk.
42
43
Gateley (Holdings) PlcAnnual report and financial statements Principal risks and uncertainties
continued
Details of Risk
Mitigating Factors
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. The professional indemnity insurance held
by the Group 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 materially
adverse effect on the Group’s business and financial condition.
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 by senior members of the
business at all stages and external advice is sought where appropriate.
The Group works hard to ensure its employees provide excellent advice
and services to its clients, underpinned by quality processes and bespoke
training programmes. In the opinion of the Directors the Group has a
good claims history.
L Chance: Low
M Impact: Medium
= Change in risk: No change
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.
Recruitment is led by senior members of the business with all professional
staff being interviewed by partners and senior managers.
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 Group 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.
L Chance: Medium
M Impact: High
= Change in risk: No change
Use of internal communications systems is 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.
Business Overview
Strategic Report
Corporate Governance
Our Financials
Details of Risk
Regulatory Compliance
Mitigating Factors
The Directors are in a 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.
The Group, like all businesses, is subject to a range of regulations, for
example, AIM Rules and the Solicitors Regulation Authority’s (“SRA”)
Code of Conduct for Firms. Failure to comply with these could have
significant implications for the business ranging from reputational
damage to criminal prosecution and sentencing. The Group operates
in a regulated market which imposes additional regulation, including
restrictions on holdings of 10% or more under the Legal Services
Act 2007. This Act dictates that the acquisition by any non-deemed
approved lawyer of a restricted interest (a shareholding of 10% or
more) in Gateley Plc, (which is an SRA Licenced Body) without the
prior consent of the SRA would be treated as a criminal offence. The
SRA also has the power to force the divestment of any shareholding
that breaches the rule or revoke the Licenced Body status of Gateley
Plc which would have a serious effect on the Group.
The SRA also 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.
L Chance: Low
M Impact: Medium
= Change in risk: No change
Acquisition risk
The Group‘s strategy is for growth, both organically and by
acquisition. Acquisitions may not always realise the benefits
expected at the time of completion.
A failure to successfully integrate acquisitions may impact on Group
profitability.
The availability of viable acquisition opportunities may decrease.
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.
Integration plans are formulated as part of the acquisition process and
executed in anticipation of and following acquisition as appropriate.
The board considers that the recent consolidation within the
professional services market will continue and that as a result there will
be continuing availability of businesses for acquisition.
L Chance: Low
M Impact: Medium
= Change in risk: No change
Management have considered the principal risks and uncertainties faced by the Group for the year and not felt the need to add any risks to
those disclosed last year. Management have removed the risk associated with the impact of ‘Brexit’ due to the broad-based nature of the
Group’s activities; comprising legal and non-legal services delivered to a diverse and well spread client base.
44
45
Pictured:
Gateley’s Risk &
Compliance team
Gateley (Holdings) PlcAnnual report and financial statements Section 172(1) statement
Environmental actions statement
Business Overview
Strategic Report
Corporate Governance
Our Financials
The Directors consider that they have acted in the way most likely
to promote the success of the Group for the benefit of its members.
In doing so the Directors have paid regards to key stakeholders and
other matters set out in s172(1) of the Act when making decisions
in the year, including:
•
•
•
•
•
likely consequences of any decisions in the long term;
interests of the Group’s employees;
need to foster the Group’s business relationships with clients,
suppliers, and others;
impact of the Group’s operations on the community
and environment;
Group’s reputation for high standards of business
conduct; and
•
need to act fairly as between members of the Group.
Board decision made in the year
Application of s.172
The disclosures set out below are some examples of how the
Directors have had regard to the matters set out in Section 172(1)
(a) to (f) when discharging their section 172 duties and the effect
of that on certain decisions taken by them. More detail on how our
board operates can be found in the Corporate Governance Report
at www.gateleyplc.com/investors/investor-relations/aim-rule-26/.
Illustrations of how section 172 factors have been applied by the
Board can be found throughout the Strategic Report. For example,
details of how we have considered the impact of the Company’s
operations on the environment are set out below.
Strategy:
Acquisition of businesses
during the year
Strategy:
Dividend
Governance:
Board effectiveness
Finance:
Approval of 2022/23 budget
The Group has made several acquisitions in the year. During the board’s consideration of each acquisition
management presented its due diligence findings. The board considered how each acquisition would fit in
with the culture of the business and the long-term value creation strategy of the wider Group. In each case
the acquired business demonstrated its alignment with the Gateley ethos and strong potential for growth.
The board has declared an interim dividend of 3.0p per share and proposes a final dividend of 5.5p
per share. In reaching this decision the board considered all key stakeholders including shareholders,
employees and creditors. The board determined closing cash reserves to be sufficient to ensure the
continued ability to meet future employee and creditor liabilities based on the results of FY22.
The Group evaluates the performance and effectiveness of the board, its Directors and Chair each year
to ensure the right balance of skills, experience and knowledge is maintained in order for each to perform
their duties effectively and deliver strong continued growth.
The Group’s business plan is to drive sustainable growth in the long term, which is in the interest of all
stakeholders. The board has paid close consideration to this objective in establishing and approving the
FY23 year -end budget. In the current economic climate this has involved close monitoring of the impact
of economic headwinds on each sector in which the Group operates, ensuring no over reliance on a single
market or client; ensuring the Group is well placed to continue to deliver a high standard of client service
through new ways of working; and increasing focus on minimising our environmental impact.
46
The board believes good environmental practices, such as the recycling of paper
waste and conservation of energy usage, will support its strategy by enhancing
the reputation of the Group.
The Group is committed to minimising its impact on the
environment. During the year the Group has worked to identify
and implement a number of initiatives to help reduce future waste
and emissions. As part of these initiatives the Group has begun the
process of appointing an Energy Manager to assist the business in the
creation of an energy-saving action plan and improve the breadth of
the Groups reporting.
UK energy consumption and Greenhouse
Gas disclosure
The Companies Act 2006 (Strategic Report and Directors’ Report)
Regulation 2018 requires Gateley (Holdings) Plc to disclose annual
UK energy consumption and Greenhouse Gas (GHG) emissions
from SECR regulated sources. Energy and GHG emissions have been
calculated using previously set guidance from an independent third-
party consultancy.
The data reported is for Gateley Plc. The parent company consumes
less than 40MWh of energy per year and is, therefore, exempt from
providing full disclosure in this report.
Reported energy and GHG emissions data is compliant with SECR
requirements and has been calculated in accordance with the GHG
Protocol and SECR guidelines. Energy and GHG emissions are
reported from buildings and transport where operational control
is held – this includes electricity, natural gas, and business travel
in company-owned or grey-fleet vehicles. The table below details
the regulated SECR energy and GHG emission sources for the
current reporting period 1 May 2021 to 30 April 2022 and shows a
comparison against last year 1 May 2020 to 30 April 2021.
Gateley (Holdings) Plc is committed to reducing its environmental
impact and contribution to climate change and has identified an
Energy Manager to review environmental initiatives as appropriate,
beginning with the creation of an energy-saving action plan to
identify areas of the business where energy can be saved. During the
year the Group has implemented changes including the introduction
of an extensive paper light initiative contributing to a decrease in
printing and paper waste; the provision of further recycling bins in
our offices and a change to energy saving LED lights.
Energy (thousand kWh)
Natural Gas
Electricity
Transport
Total energy (thousand kWh)
Emissions (tCO2e)
Natural Gas
Electricity
Transport
Total SECR emissions
Intensity metrics
£m turnover
tCO2e per £m of turnover
Average headcount
tCO2e per employee
Square footage (thousand sq.ft)
tCO2e per square foot
2022
1,290
2,555
149
3,994
301
596
35
932
137.2
6.8
1,150
0.8
125
7.5
2021
1,131
2,300
122
3,553
263
536
29
828
121.4
6.4
1,113
0.7
125
6.2
Change
14%
11%
22%
12%
14%
11%
22%
13%
13%
6%
3%
14%
0%
22%
47
Gateley (Holdings) PlcAnnual report and financial statements Gateley (Holdings) Plc
Annual report and financial statements
Business Overview
Strategic Report
Corporate Governance
Our Financials
Environmental actions statement
continued
Social matters
COVID-19 Pandemic
The Group’s ‘normal’ business operations were significantly
impacted by the COVID - 19 pandemic with the majority of
employees working from home for the majority of the financial year
ending 30 April 2021. The Group has recognised the efficiencies
and benefits of a hybrid working model, allowing employees to
spread their working week between home and the office. Whilst
the Group has seen an increase in its energy consumption and
emissions as a result of the workforce returning to the office in
the year, the implementation of hybrid working has meant that
whilst emissions have seen an increase compared to prior year,
they have not reached pre COVID amounts. This policy has resulted
in a significant decrease in the Group’s actual emissions, however
as this does not provide a true comparison of the year-on-year
changes, the Group have undertaken an analysis of the 2021
financial year consumption to determine an illustration of the
emissions should the Group have continued to operate as normal.
The Group intends to continue its approach to hybrid working
meaning that future scope 2 emissions are not expected to increase
with headcount. The finalisation and application of the energy
saving plan is expected to assist the Group in achieving a further
reduction in overall scope 2 emissions.
Data records and methodology
Metered kWh consumption taken from supplier or landlord
invoices is reported where possible.
Scope 1,2 and 3 consumption and CO2e emission data has been
calculated in line with the 2019 UK Government environmental
reporting guidance. The following Emission Factor Databases
consistent with the 2019 UK Government environmental reporting
guidance have been used, utilising the current published kWh gross
calorific value (CV) and kgCO2e emissions factors relevant for
reporting years ending 30 April 2021 and 30 April:
•
Database 2020, Version 1.0
Transport emissions have been calculated based on mileage
expense claim records, applying the average UK split between
petrol and diesel vehicles to estimate relative fuel usage. Mileage
per fuel type was converted into equivalent GHGemissions using
the most recent emissions factors published by BEIS in 2020,
and then divided by the gross Calorific Value to deduce kWh
consumption.
48
We believe that running a profitable and growing business, which creates
jobs and contributes to the economic success of the areas in which it
operates, is a platform for good corporate social responsibility.
We have a long-standing commitment to support our staff in
engaging with their local communities and charities. This social
awareness is present throughout the business, from our employees
to our clients, our professional connections and the suppliers we
work with. Our ongoing contribution through the commitment of
our people to their local community continues to improve lives and
build these communities.
Diversity and inclusion
We are an equal opportunities employer and it is our policy to
ensure that all job applicants and employees are treated fairly and
on merit regardless of race, sex, marital/civil partnership status,
age, disability, religious belief, pregnancy, maternity, paternity,
gender identity or sexual orientation. We have five staff groups
providing support to staff.
Sustainability
To deliver strong, sustainable shareholder returns over the
long-term the operation of a profitable business is a priority
and that means investing for growth. To achieve this, the Group
recognises that it needs to operate in a sustainable manner and
therefore has adopted core principles to its business operations
which provide a framework for both managing risk and
maintaining its position as a good ‘corporate citizen’.
Charities and communities
We have a high level of engagement within our local communities.
Each year, we sponsor business, sports and community awards.
Our business has benefited greatly from winning numerous awards
and we feel it’s right to help other businesses reap the rewards of
such accolades. In addition, we sponsor a variety of local clubs,
business and sports related events across the country. We believe
this brings many benefits to the local community and beyond. Our
staff vote annually to choose a national and local office charity to
support throughout the year with fund raising activities engaging
staff, clients and communities in a number of enjoyable events.
Developing our people
The Group continues to create opportunities for staff at all levels of
the Group. We have a strong track record as an employer of choice
in the provision of legal graduate traineeships and apprenticeship
schemes highlighting our motivation to ‘grow our own’. Trainees
work alongside qualified professionals in completing a period of
recognised training (often known as a training contract) giving
individuals supervised experience in legal practice. This is the final
stage of the process of qualification as a solicitor where they refine
and develop their professional skills.
For our non-lawyer employees we offer both internal and external
routes to qualifications and accreditations within their chosen
sector and area of expertise.
In order to oversee our people development we have a dedicated
internal training team on hand with soft skills and professional
course guidance to enhance staff careers and upskill our staff at all
levels throughout the year.
Unity – Unity recognises, celebrates and supports employees
from all different cultures, religions, backgrounds and those
with disabilities. Our Unity network Group highlights and
celebrates events across all our offices to ensure we have an
environment where all employees have room to breathe and
feel comfortable bringing their full selves to work.
Thrive – Our Thrive network group supports the health
and wellbeing of all employees to promote high levels of
performance both physically and mentally across the Group.
The Thrive committee runs a series of events and training
programmes throughout the year to raise awareness and
to inspire our people to take care of themselves and those
around them.
Inspire – Our Inspire network group has been set up to
nurture, develop and provide support to all of our talent
with a particular focus on career milestones and enabling
our people to carve the careers they want successfully.
Pride – The Gateley Pride network group provides a
welcoming, supportive, safe and confidential space for staff
affected by sexual orientation and gender identity issues to
share experiences, ideas or concern.
Ability – Ability is our most recent network set up to provide
a focus on, and raise awareness of, disabilities to ensure that
we are providing a welcoming, supportive and confidential
space for colleagues across the Group to discuss issues of
disability and to ensure enhanced awareness is reflected in a
positive, inclusive and fulfilling working environment.
Modern slavery
We are committed to preventing acts of modern slavery and
human trafficking from occurring within our business and supply
chain and expect our 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.
49
Business Overview
Business Overview
Strategic Report
Strategic Report
Corporate Governance
Corporate Governance
Our Financials
Our Financials
Gateley (Holdings) Plc
Annual report and financial statements
Social matters
continued
Our slavery and human trafficking statement, made in accordance
with section 54(1) of the Modern Slavery Act 2015 can be found
on our website, www.gateleyplc.com.
Anti-bribery policy
We value our reputation for ethical behaviour and upholding
the utmost integrity and we comply with the FCA’s clients’ best
interests rule. We recognise that in addition to the criminality of
bribery and corruption, any such crime would also have an adverse
effect on our reputation and integrity and we do not tolerate
bribery and corruption in our business. We limit our exposure to
bribery and corruption, we ensure all our employees are adequately
trained and our suppliers are aware of our position, by:
•
•
•
•
Setting out clear anti-bribery and corruption policies;
Providing mandatory training to all employees;
Encouraging our employees to be vigilant and report any
suspected cases of bribery in accordance with the specified
procedures; and
Escalating and investigating instances of suspected bribery
and assisting the police or other appropriate authorities in
their investigations.
Gender pay reporting
The Equality Act 2010 (Gender Pay Gap Information) Regulations
2017 requires all employers with 250 or more employees in the
UK to publish details of their gender pay gap. Its aim is to achieve
greater transparency about gender pay difference. The analysis is
based on data as of 5 April of each year and shows the differences
in the average pay between men and women. The Group has
submitted its data on gender pay to the Government and published
these details on our website.
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 and
support provided. It is the policy of the Group that the training,
career development and promotion of disabled persons should, as
far as possible, be identical to that of other employees.
Employee consultation
The Group places considerable value on the involvement of its
employees and has continued to keep them informed regularly on
matters directly affecting them and Group wide developments. This
is achieved through informal discussions between Management
and other employees at a local level after board meetings which
are held across our office network, in annual briefing presentations
to each office location and through the formation of committees
and boards at different levels across the Group together with
an active social events calendar. The Group further encourages
employee involvement in the performance of the business through
participation in share schemes, including the SAYE and CSOPs
schemes. Our internal digital communication platform, refreshed
in 2020, is now a hub of activity and communication across the
Group and used extensively for social interaction as well as internal
training, policy updates, cross selling activity and recognition of
recent successes from around the Group.
Political donations
The Group made no political donations in the year (2021: £nil).
Approval
The strategic report contains certain forward-looking statements,
which are made by the Directors in good faith based on the
information available to them at the time of their approval of
this annual report. Statements contained within the strategic
report should be treated with some caution due to the inherent
uncertainties (including but not limited to those arising from
economic, regulatory and business risk factors) underlying any
such forward-looking statements. The strategic report has been
prepared by Gateley (Holdings) Plc to provide information to its
shareholders and should not be relied upon for any other purpose.
Pages 20 to 51 constitute the strategic report, which has been
approved by the Board of Directors and signed on its behalf by:
Neil Smith
Finance Director
12 September 2022
50
51
Gateley (Holdings) PlcAnnual report and financial statements Gateley (Holdings) Plc
Annual report and financial statements
Business Overview
Strategic Report
Corporate Governance
Our Financials
Corporate
governance
In this section
Board of Directors
Report on remuneration: voluntary disclosure
Directors’ report
54
56
63
52
53
Board of Directors
Details of the Directors’, their roles and their backgrounds are as follows:
Business Overview
Strategic Report
Corporate Governance
Our Financials
Peter Davies
Chief Operating Officer
(resigned 30 April 2022)
aged 64
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 Group’s
house-builder clients. He is a
member of the Law Society and
a CEDR accredited mediator. He
was involved in the management
of Gateley LLP for over 20 years.
He sits on the Strategic Board and
Chairs the Operations Board.
Nigel Payne
Non-Executive Chairman
Rod Waldie
Chief Executive Officer
aged 62
aged 54
Nigel has extensive experience of
listing companies, fund raising on
the public markets and acting as
either the Non-Executive Chairman
or Non-Executive Director of public
companies and as a Director of private
companies. In addition to his Gateley
responsibilities as Chairman, Nigel is
also the Non-Executive Chairman of
Green Man Gaming (Holdings) plc and
Main Market listed Braemar Shipping
Services Plc. and a Non- Executive
Director of JSE listed Sun International
Limited, AIM listed GetBusy plc, Ascot
Racecourse Betting and Gaming
Limited and Kwalee Limited.
Previously Nigel was the CEO of
Sportingbet plc, one of the world’s
largest internet gaming companies.
Nigel has also previously been the
Non-Executive Chairman of AIM
quoted EG Solutions plc, the Non-
Executive Chairman of AIM quoted
Stride Gaming Plc, the Non-Executive
Chairman of AIM quoted Hangar8
Plc, the Non-Executive Chairman of
AIM quoted ECSC plc and a Non-
Executive Director of AIM quoted
Gama Aviation Plc.
Rod was appointed to the position
of Chief Executive Officer on 1 May
2020. He has been a key member
of the Group’s Strategic Board
since joining the business via the
acquisition of the Manchester office
of Halliwells LLP in 2010. Prior to
his appointment as Chief Executive
Officer, Rod was the Senior Office
Partner of the Manchester office
and led the Group’s national
property services team. He has
been involved in the successful
integration of a number of Gateley’s
post IPO acquisitions.
Rod has over 25 years’ experience
as a real estate lawyer. He has
considerable experience in real
estate investment acquisitions,
and disposals, estate management,
development and landlord and
tenant. Clients include off-shore
investors, on-shore real estate
companies and developers,
real estate asset management
companies, high net-worth
individuals, retail and leisure
operators and specialist providers of
supported living accommodation.
Neil Smith
Finance Director and Company Secretary
aged 46
Neil has more than 25 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 non-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 Group he
is also the Group’s Compliance Officer
for Finance and Administration
(“COFA”) and a fellow of the
Association of Certified Chartered
Accountants.
Victoria Garrad
Chief Operating Officer Elect
(appointed 1 May 2022)
aged 48
Victoria was appointed to the
board as COO elect on 1 May
2022. She is an award winning
employment lawyer with over 24
years’ experience undertaking a
mix of contentious and non-
contentious work.
Having joined the business in 1996
as a trainee solicitor, Victoria was
promoted to partner in the legal
services employment team in
2005. She has been a member of
the Operations Board since 2011
and was appointed to the Strategic
Board on 1 May 2017 to undertake
the Group HRD role.
Suzanne Thompson Michael Ward
Non-Executive Director
Executive Director
Joanne Lake
Non-Executive Director
aged 54
aged 63
aged 58
Mike (Michael) 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
Senior Partner from 2001 to 2015
when he became CEO. Mike is a
former President and Treasurer of the
Birmingham Law Society and a former
President of the Greater Birmingham
Chamber of Commerce.
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 Senior Independent
Director of Main Market-listed land
promotion, property development
and construction group, Henry
Boot Plc and is Non-Executive
Chair of Aim-quoted Made Tech
plc, a provider of digital, data and
technology services to the UK public
sector; Honeycomb Investment
Trust Plc and Braemar Shipping
Services plc. Joanne is also a
Fellow of the Chartered Institute
for Securities & Investment and of
the ICAEW, and is a member of the
ICAEW’s corporate finance faculty.
Suki (Suzanne) is an entrepreneur
and transformational business
leader. Founder and Chief Executive
Officer of Let’s Reset, she specialises
in cultural change and marketing
transformation, pioneering new
performance based wellbeing
programmes linked to commercial
outcomes and new ways of working,
post COVID-19. Suki has advised
80% of the FTSE 250, leading global
communications networks and
technology groups. Centaur Media
acquired her previous marketing
consultancy, Oystercatchers in
September 2016 and she remains
Chair of the business and Exec Director
of the Xeim Group. Suki is also Non-
Executive Director of AIM-quoted retail
group, Unbound Group Plc. Suki was
a Board Trustee of Macmillan Cancer
Support and is an Addidi Angel Investor
for Small Businesses. She is a long
standing member of WACL, MGGB and
AllBright. Suki also holds an honorary
Doctorate from Coventry University
for services to Entrepreneurship
and International Business. She was
awarded Small Business Entrepreneur
of the Year and is the Author of Let’s
Reset and Creative Influence.
Committees & Boards: N R
A H
Committees & Boards: N
H
S
Committees & Boards: H
S
O
Committees & Boards: H
S
O
Committees & Boards: R A
N H
Committees & Boards:
H
Committees & Boards: A
N R H
Committees & Boards: H
S
O
Committee Key: N
Nomination R
Remuneration A
Audit & Risk Board Key: H
Gateley (Plc) Holdings S
Strategic O
Operations
54
55
Gateley (Holdings) PlcAnnual report and financial statements
Business Overview
Strategic Report
Corporate Governance
Our Financials
Introduction of a Restricted Share Award Plan
Following the uncertainty and difficult trading conditions created
by the COVID-19 pandemic during FY21, the Group refocused on
growth and the attraction, incentivisation and retention of talent
during FY22.
As part of this, a Restricted Share Award Plan (“RSA”) has been
introduced, to support long-term share ownership for employees
who are promoted to partner or partner-equivalent roles and to
foster stewardship amongst this cohort.
Executive Directors currently participate in the Group’s
performance based LTIP and are not eligible to participate in the
RSA. N Smith was granted an LTIP award on 27 April 2022 and
details are set out on page 61.
More generally, the board is committed to providing its people with
the opportunity to own shares in the Company and continues to
grant awards under the Save As You Earn scheme and the Company
Share Option Plan. At least 75% of current staff are existing share
or option holders in the Group.
Review of Executive Director remuneration for
Executive Directors and Senior Management
Since IPO, the committee has been implementing a strategy of
gradually aligning the remuneration for the Group’s Executive
Directors to market rates. Whilst progress has been made, it is
acknowledged that the remuneration for the Executive Directors
remains broadly below market rate for similar roles in similar
sized AIM listed businesses. With this in mind, and in light of
recent succession Plc Board changes (as announced on 3 May
2022), during FY23 the committee will comprehensively review
the remuneration levels for Executive Directors, as well as the
incentive arrangements in place for Executive Directors and the
broader senior management population undertake a remuneration
benchmarking exercise. With a view to ensuring that the Executive
Directors remuneration with effect from FY24 is aligned with
market rates and the incentive arrangements in place continue to
support our core reward principles, in order to retain the right
skill set and experience within our leadership team to deliver the
Group’s strategic objectives.
I hope that you find the remainder of this report helpful and
informative and I look forward to receiving feedback from you on
the information presented.
Suki Thompson
Remuneration Committee Chair
Statement on remuneration:
voluntary disclosure
Dear shareholders,
I am pleased to introduce the Directors’ Remuneration Report for the financial
year ended 30 April 2022. This letter introduces the report, outlines the major
decisions on Directors’ remuneration during the year and importantly explains
the context in which these decisions have been taken.
Gateley (Holdings) Plc is committed to high standards of
corporate governance and our policy and disclosures on Directors’
remuneration are intended to reflect this approach. We welcome
shareholder feedback on these matters and this Directors’
Remuneration report will be put to an advisory vote at the
forthcoming 2022 AGM.
Key reward principles
Remuneration at Gateley for executives and the wider workforce
is guided by the following principles:
•
•
•
Support an effective pay for performance culture which
enables the Group to attract, retain and motivate the very
best talent, without paying excessively
Support the delivery of the business strategy and promote
long term sustainable performance, whilst ensuring that
performance related pay does not encourage individuals
to operate outside of the Group’s risk appetite
Reward outcomes should fairly reflect Group and
personal performance and take into account the
experience of shareholders
Bonus outcome for FY22
The Group continued to perform well throughout FY22, delivering
strong growth in revenue and adjusted PBT ahead of consensus
market expectations.
The continued hard work, dedication and loyalty from employees
during the year has been paramount to the Group’s performance.
The committee therefore considered it appropriate to award
bonuses to employees in respect of FY22. This included awarding
bonuses under the merit pool, in which the Executive Directors
participate. The amounts paid are set out on page 61.
Suki Thompson
Remuneration Committee Chair
56
57
Gateley (Holdings) PlcAnnual report and financial statements Business Overview
Strategic Report
Corporate Governance
Our Financials
Report on remuneration:
voluntary disclosure
This report is for the year ended 30 April 2022. It sets out the detailed
remuneration for the Executive and Non-Executive Directors of the Company.
As an AIM-quoted company, the information is disclosed to fulfil the
requirements of AIM Rule 19.
Remuneration policy
The remuneration policy is designed to support an effective pay-for-performance culture which enables the Group to attract, retain and motivate
Executive Directors and senior management with the necessary experience and expertise to deliver the Group’s objectives and strategy.
The table below summarises the key elements of the Executive Directors’ remuneration package.
Element, purpose and operation
Opportunity and performance measures
Activities during the year
The main activities undertaken by the committee during
the year included: -
•
•
•
•
Determining incentive outcomes for the Executive Directors
for FY22;
Determining salary increases for the Executive Directors
for FY23;
Granting awards under the Long Term Incentive Plan to
certain Executive Directors and senior management;
Implementation of the RSA and granting awards under the
RSA to certain senior management.
Gateley (Holdings) Plc is not required to comply with the Large
and Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013, however the board believes this
disclosure is key to the readers understanding of the business. The
information is unaudited except where stated.
This report sets out:
•
•
•
a description of how the committee operates.
a summary of the Directors’ remuneration policy – setting out
the parameters within which the remuneration arrangements
for Directors operate; and
details of the remuneration paid to the Directors for the year
under review.
The committee
The committee is appointed by the board and is formed entirely
of Non-Executive Directors. The committee is chaired by Suzanne
(Suki) Thompson. Other members of the committee are Nigel
Payne and Joanne Lake.
The committee meets formally at least twice a year and
has responsibility for setting the Group’s general policy on
remuneration and also specific packages for individual Directors
including those 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 and
oversight from the Plc Board including the Executive 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 long-term incentive awards
to senior management. 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 continues to act as advisors to the committee.
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.
Base salary
Reviewed on an annual basis with any increases normally becoming
effective from the start of the financial year.
Bonus
Designed to align participants’ interests with shareholders and
to incentivise participants 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.
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.
Merit 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 in circumstances
where the Group exceeds budgeted performance. If the pool
operates the pool is distributed to participants based on their role,
responsibility and contribution to the long-term business strategy.
Long Term Incentive Plan (LTIP)
Designed to incentivise participants to perform at the highest levels,
and to deliver genuine performance related pay, with clear line of sight
and direct alignment with shareholder interests.
Awards will normally be granted annually to participants. Each year,
the committee will agree the number of shares under option for
each participant.
Executive Directors and selected senior employees will participate in
the LTIP as determined by the Strategic Board and approved by the
committee.
Awards will be granted in the form of nil-cost or nominal-cost
share options. Vesting of awards is dependent on the achievement
of performance measures set by the committee, normally over a
three-year performance period.
Awards will vest following the end of the performance period once
the committee has ratified the outcome of the performance measures
and will be exercisable for six months following the vesting date.
The committee has the right to apply malus provisions to reduce,
cancel or impose further conditions on unvested awards in
specified circumstances.
Pension and benefits
Pension and benefits
Performance measures are selected that reflect underlying
business performance as outlined on page 61.
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
other than private health scheme benefits.
58
59
Gateley (Holdings) PlcAnnual report and financial statements Report on remuneration: voluntary disclosure
continued
Orderly market agreement
The Group operates a five-year orderly market agreement (the
“Agreement”) with its Partners (the “Locked-in Shareholders”)
which, inter alia, places certain restrictions on the sale of ordinary
shares in the Company (“Ordinary Shares”).
The Agreement became effective on 8 June 2021 following the
expiry of the previous lock-in arrangements, which were put in
place at the time of the Company’s admission to AIM in June 2015
(the “Admission”).
Pursuant to the Agreement, each Locked-in Shareholder and his/
her associates, which include their spouse and children under the
age of 18 to whom any Ordinary Shares have been transferred
(“Associates”), that held Ordinary Shares as at Admission are
restricted to selling a maximum of 10% per annum of the aggregate
number of the Ordinary Shares that they held on Admission for a
period of five years from 8 June 2021.
Policy for the remuneration of employees
more generally
The key principles of the remuneration policy for Executive
Directors also apply to employees more generally. In particular,
senior employees may participate in the merit bonus pool,
performance bonus pool, RSA and LTIP, depending on their role
and responsibilities and contribution to the business.
The Company also supports and encourages share ownership
for all employees through 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. 48.3% (2021: 46.5%) of the Group’s
issued share capital was held by employees as at 30 April 2022.
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.
Together with the Executive, the committee also examines the time
that the Non-Executive Directors commit to the business ensuring
that each Non-Executive has sufficient time to carry out their
duties in light of their other business commitments. This exercise
concluded that all of the Non-Executives have available and apply
sufficient time to discharge their duties.
Executive Directors’ service agreements and
Non-Executive Directors’ letters of appointment
The Executive Directors entered into 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.
Nigel Payne and Joanne Lake were originally appointed on 8 June
2015 and both were re-appointed for a third three-year term which
commenced on 1 October 2021. Suzanne (Suki) Thompson was
originally appointed on 27 September 2017 and was re-appointed on
30 October 2020 for a second three-year term. The notice period
required in the letters of appointment for either party to terminate
the appointment is at least three months. Each agreement also
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.
60
Business Overview
Strategic Report
Corporate Governance
Our Financials
Summary of Directors’ remuneration for the year
The following table represents the Directors’ remuneration for the years ended 30 April 2022 and 30 April 2021:
Nigel Terrence Payne
Joanne Carolyn Lake
Suzanne Francis Alison Thompson
Roderick Richard Waldie
Michael James Ward**
Peter Gareth Davies***
Neil Andrew Smith
Salaries
and fees
£’000
56
42
42
300
144
180
225
989
Bonus
£’000
-
-
-
212
45
112
112
481
Share
options
£’000
-
-
-
-
-
-
-
-
Total
2022
£’000
56
42
42
512
189
292
337
1,470
Salaries
and fees
£’000
40
36
36
260*
162
225
190
949
Bonus
£’000
-
-
-
139
116
113
112
480
Share
options**
£’000
-
-
-
-
-
-
-
-
Total
2021
£’000
40
36
36
399
278
338
302
1,429
1. As disclosed in the FY21 report on remuneration, the committee agreed to increase RR Waldie’s salary from £180,000 to £260,000 on his appointment as CEO (1 May 2020).
RR Waldie waived his contractual entitlement to the increase for FY21 and remained on a salary of £180,000. This was consistent with the “one team approach” of a pay freeze
implemented across the business as part of a series of prudent cost and cash management measures in response to the COVID-19 pandemic. Had he not waived his contractual
entitlement to the increase, RR Waldie’s total remuneration for FY21 would have been £399,000. In real terms RR Waldie received £319,000.
2. MJ Ward’s salary was reduced from a full time equivalent of £260,000 to £180,000 with effect from 1 May 2021 following him stepping down as CEO. MJ Ward was contracted
to work 4 days per week with effect from 1 November 2021 and has continued throughout FY22 to work 4 days per week.
3. PG Davies was contracted to work 4 days per week with effect from 1 May 2022. With effect from 1 May 2022 PG Davies was contracted to work 5 days per week.
Salary and fee increases for FY23
Details of FY22 salary and fee increases are set out in the FY21
report on remuneration.
Long term incentives granted during the year
Awards were granted to certain Executive Directors and selected
senior employees under the LTIP on 27 April 2022.
The committee agreed to increase RR Waldie’s salary by 7.5% with
effect from 1 May 2022 to £322,500. NA Smith’s and PG Davies
salaries increased by 6.6% with effect from 1 May 2022 to £240,000.
MJ Ward’s salary increased by 5.6%, to a full time equivalent of
£190,000. The committee took into consideration salary increases
for the wider workforce when determining the Executive Directors’
salary increases; the average increase for the wider workforce
exceeded 7.5%.
With regard to Non-Executive Directors, NT Payne’s annual fee
increased to £72,000 with effect from 1 May 2022 and both JC
Lake and SFA Thompson’s annual fees increased to £48,000. These
fee increases were considered appropriate reflecting the time
commitment required in order for the Non-Executives to effectively
carry out their duties.
Bonus outcome for the year
The Group continued to perform well throughout FY22, delivering
strong growth in revenue and adjusted PBT ahead of consensus
market expectations. Key performance highlights are set out on
page 4.
The continued hard work, dedication and loyalty from employees
during the year has been paramount to the Group’s performance.
The committee therefore considered it appropriate to award
bonuses to employees in respect of FY22. This included awarding
bonuses under the merit pool, in which the Executive Directors
participate. No bonuses were awarded under the performance pool.
The awards are subject to an adjusted fully diluted earnings per
share performance measure as described in the table below. The
targets are considered appropriately stretching taking into account
internal forecasts and the current economic environment.
Adjusted, fully diluted earnings per Share Compound Annual Growth
Rate (CAGR) over the three-year period ending 30 April 2025
Below 5%
5%
Between 5% and 10%
Above 10%
Amount Vesting %
0%
25%
Straight line vesting
100%
Adjusted fully diluted earnings per share is calculated based on Profit
of the Group for the relevant financial year before interest and tax
adjusted to exclude the effect of:
•
•
cost of amortisation and any impairment review of intangible
assets and goodwill
cost of IFRS 2 share-based payment charges relating to all
share schemes
• cost and/or income from exceptional items
•
the tax impact of adjustments above
LTIP awards granted on 27 April 2022 to NA Smith totalled 25,000 (with
a face value at grant equal to £55,000 or circa 25% of salary, based on
the mid-market closing share on the dealing day prior to grant (£2.20)).
No awards were granted to MJ Ward, PG Davies or RR Waldie as they are
deemed to be sufficiently incentivised by their existing shareholding.
61
Gateley (Holdings) PlcAnnual report and financial statements Report on remuneration: voluntary disclosure
continued
Directors’ report
Business Overview
Strategic Report
Corporate Governance
Our Financials
Directors’ Interests
Directors’ shareholdings at the year end were as follows:
Nigel Terrence Payne
Joanne Carolyn Lake
Suzanne Francis Allison Thompson
Roderick Richard Waldie
Michael James Ward
Peter Gareth Davies
Neil Andrew Smith
At 30 April 2022
10p ordinary shares
At 30 April 2021
10p ordinary shares
Number of shares Percentage Holding
Number of shares Percentage Holding
70,942
26,300
10,000
1,275,670
1,990,000
1,983,357
362,537
0.06%
0.02%
0.01%
1.02%
1.60%
1.59%
0.29%
70,918
26,300
10,000
1,380,670
2,216,754
2,215,739
383,313
0.06%
0.02%
0.01%
1.17%
1.88%
1.88%
0.33%
The following Directors held share options under the LTIP Scheme as at 30 April 2022:
Number of shares at
30 April 2022
Date of grant
Exercise price
Earliest exercise date
Neil Andrew Smith
Neil Andrew Smith
15,974
25,000
22 July 2020
27 April 2022
£nil
£nil
22 July 2023
22 April 2025
The Directors present their annual report and the audited financial
statements for the year ended 30 April 2022.
Principal activities
The principal activities of the Group during the year were the
provision of commercial legal services together with complementary
consultancy services including acting as independent trustees to
pension schemes, the provision of specialist tax incentive advice, the
supply of specialist property consultancy services and the supply of
specialist human capital management.
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 75.
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 24 to 29 and the Finance Director’s
review on pages 32 to 37. The Group’s key performance indicators
(KPIs) are set out on page 39. The strategic report, which includes
a description of the principal risks and uncertainties facing the
Group, is set out on pages 20 to 51.
Employee share trust
The Gateley Employee Benefit Trust (EBT) was established to
facilitate the issue of the equity shares of Gateley (Holdings) Plc to
Group employees under share-based payment arrangements.
During the year ended 30 April 2022 the EBT purchased 187,033
shares in the company (2021: 222,724) at a cost of £75,854
(2021: £288,003).
Dividends
The Directors propose to recommend a final dividend of
£6,850,800 (2021: £5,896,051), being 5.5p (2021: 5.0p) per
share, be paid, giving a total dividend for the year of 8.5p (2021:
7.5p). The final dividend has not been included within creditors as
it was not approved before the year end.
During the period the board became aware of a technical issue in
respect of a number of historic dividends paid by the Company.
Details are included in Note 12 to the consolidated financial
statements. A circular will be sent to shareholders shortly and will
be available on the Company’s website at www.gateleyplc.com/
investors/investor-relations
The Directors and their interests in the shares of the parent company
Nigel Terrence Payne
Joanne Carolyn Lake
Suzanne Francis Alison Thompson
Roderick Richard Waldie
Michael James Ward
Peter Gareth Davies
Neil Andrew Smith
10p ordinary shares
10p ordinary shares
Number of
shares
2022
Percentage
Holding
2022
Number of
shares
2021
Percentage
Holding
2021
70,942
26,300
10,000
1,275,670
1,990,000
1,983,357
362,537
0.06%
0.02%
0.01%
1.02%
1.60%
1.59%
0.29%
70,918
26,300
10,000
1,380,670
2,216,754
2,215,739
383,313
0.06%
0.02%
0.01%
1.17%
1.88%
1.88%
0.33%
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 31 July 2022:
Name
Liontrust Asset Management
BMO Global Asset Management (UK)
Premier Miton Investors
Unicorn Asset Management
Number of
ordinary shares
% of issued
share capital
14,040,039
6,443,461
5,251,662
4,931,194
11.27%
5.17%
4.22%
3.96%
62
63
Gateley (Holdings) PlcAnnual report and financial statements Business Overview
Strategic Report
Corporate Governance
Our Financials
Directors’ report
continued
Financial risk management objectives and policies
The Group uses various financial instruments including cash, trade
debtors and trade creditors. It is the Group’s policy not to enter
into complex financial instruments. Such instruments give rise to
liquidity risk, interest rate risk, credit risk and foreign exchange
risk. More detail on financial instruments is given in note 27 to the
financial statements.
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.
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 UK-
adopted international accounting standards. 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 UK-adopted international accounting
standards 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.
•
•
•
•
64
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.
Employees
Details of how the Group’s policy and approaches to employee
engagement, diversity and inclusion and disabled employees can
be found in the strategic report.
Engaging with stakeholders
The Directors have identified the key stakeholders of the business
and documented their engagement with these groups throughout
the year along with how they have been considered in the making
of key decisions within the year.
The Group conducts regular client surveys to better understand
and improve the clients’ experience and service received.
We seek to build strong, long-term relationships with our suppliers
working alongside them as business partners for the benefit of all.
The Group works closely with its advisors to ensure it operates in
accordance with the market regulations.
The CEO and FD, have regular meetings with the Group’s
Relationship Manager at the Solicitors Regulatory Authority
(SRA), the organisation that oversees the regulation of the
legal services sector.
Streamlined Energy & Carbon Reporting
Under The Companies Act 2006 (Strategic Report and Director’s
Report) Regulation 2018, Gateley (Holdings) Plc have disclosed
their annual UK energy consumption within the Strategic Report.
Corporate Governance Statement
Since September 2018 all AIM companies have been required to
set out details of a recognised corporate governance code that the
Board of Directors has chosen to apply, how they comply with that
code, and where it departs from its chosen corporate governance
code an explanation for doing so.
The board adopted the Quoted Companies Alliance (‘QCA’) Code.
The Group’s application of this code is detailed in the Corporate
Governance Statement as detailed on the Group’s website at
www.gateleyplc.com/investors/investor-relations/aim-rule-26/. As
required under AIM Rule 26, the information in this statement is
updated annually.
Future developments
The board plans to continue to drive growth within the existing
business and through acquisitions within both the legal and
non-legal sectors, supporting this with further investment in
technology and recruitment of quality personnel.
Subsequent events
There were no subsequent events to report.
Auditor
In accordance with section 489 of the Companies Act 2006,
a resolution In accordance with section 489 of the Companies
Act 2006, a resolution for the re-appointment of MHA MacIntyre
Hudson as auditor of the Company is to be proposed at the
forthcoming Annual General Meeting.
By order of the board.
Rod Waldie
Chief Executive Officer
12 September 2022
One Eleven Edmund Street
Birmingham
West Midlands
B3 2HJ
65
65
Gateley (Holdings) PlcAnnual report and financial statements Gateley (Holdings) Plc
Gateley (Holdings) Plc
Annual report and financial statements
Annual report and financial statements
Business Overview
Strategic Report
Corporate Governance
Our Financials
Financial
statements
In this section
Independent auditors’ 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 to the consolidated financial statements
Parent company statement of financial position
Parent company statement of changes in equity
Parent company cash flow statement
Parent Company notes to the financial statement
Notice of Annual General Meeting
Company information
68
75
76
78
79
81
121
122
123
124
136
147
66
67
Gateley (Holdings) PlcAnnual report and financial statements Independent auditors’ report
to the members of Gateley (Holdings) plc
For the purpose of this report, the terms “we” and “our” denote MHA MacIntyre Hudson in relation to UK legal, professional and regulatory
responsibilities and reporting obligations to the members of Gateley (Holdings) plc. For the purposes of the table on pages 54 to 55
that sets out the key audit matters and how our audit addressed the key audit matters, the terms “we” and “our” refer to MHA MacIntyre
Hudson. The Group financial statements, as defined below, consolidate the accounts of Gateley (Holdings) plc and its subsidiaries (the
“Group”). The “Parent Company” is defined as Gateley (Holdings) plc. The relevant legislation governing the Parent Company is the United
Kingdom Companies Act 2006 (“Companies Act 2006”).
Opinion
We have audited the financial statements of Gateley (Holdings) plc for the year ended 30 April 2022.
The financial statements that we have audited comprise:
•
•
•
•
•
•
•
•
•
the consolidated statement of profit and loss and other comprehensive income for the year ended 30 April 2022;
the consolidated statement of financial position for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated cash flow statement for the year then ended;
Notes 1 to 31 of the consolidated financial statements, including the accounting policies.
the Parent Company statement of financial position for the year ended 30 April 2022;
the Parent Company statement of changes in equity;
the Parent Company cash flow statement;
Notes 1 to 14 of the Parent Company financial statements, including the accounting policies.
The financial reporting framework that has been applied in their preparation is applicable law and UK adopted International Accounting
Standards.
In our opinion the financial statements:
•
•
•
give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 30 April 2022 and the Group’s profit
for the year then ended;
have been properly prepared in accordance with UK adopted International Accounting Standards; and
have been prepared in accordance with the requirements of the Companies Act 2006.
Our opinion is consistent with our reporting to the Audit Committee.
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 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 ethical responsibilities in accordance with
those requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the entity’s ability to continue to adopt the going concern basis of accounting included:
The consideration of inherent risks to the company’s operations and specifically its business model.
The evaluation of how those risks might impact on the company’s available financial resources.
An examination of budgets and forecasts and their basis of preparation.
•
•
•
68
Business Overview
Strategic Report
Corporate Governance
Our Financials
•
Liquidity considerations including examination of cash flow projections, considering sensitivities to the underlying assumptions on
profitability and cash lock up, which drives the cash flow projections.
•
Consideration of the funding facilities available to the Group and the market attitude to lending in the legal sector.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Group’s ability to continue as a going concern for a period of at least twelve months from
when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this
report.
Overview of our audit approach
Materiality
Group
Parent
2022
£950k
£460k
Key audit matters
2021
£800k
£380k
Group
Scope
5% (2021: 5%) of underlying profit before tax and exceptional items
1% (2021: 1%) of gross assets
•
Accuracy and valuation of unbilled
revenue
•
Existence/cut off of billed revenue
Our audit was scoped by obtaining an understanding of the Group and its environment,
including the Group’s system of internal control, and assessing the risks of material
misstatement in the financial statements. We also addressed the risk of management
override of internal controls, including assessing whether there was evidence of bias by the
directors that may have represented a risk of material misstatement.
We undertook full scope audits on the complete financial information of 2 components.
For the remaining 17 components we performed a mixture of specified audit procedures
and analytical procedures.
69
Gateley (Holdings) PlcAnnual report and financial statements Independent auditors’ report
continued
Key Audit Matters
Key Audit Matters are those matters that, in our professional judgement, 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 matters which 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.
Key audit matter description
How the scope of our audit responded to the key audit matter
Risk of fraud in revenue recognition – valuation of unbilled revenue
Revenue (in respect of client matters) is recognised in
accordance with IFRS 15 ‘Revenue from Contracts with
Customers’.
Under ISA (UK) 240, there is a rebuttable presumed risk that
revenue may be misstated due to fraud arising from the improper
recognition of revenue.
There is judgement in the calculation of accrued income in
terms of the recoverability of the time recorded. In addition, the
uncertainties in the economy as a result of the war in Ukraine,
high inflation and the increased cost of living may mean that the
existing recovery rate used for the purposes of valuing unbilled
revenue may no longer be appropriate.
Contingent work in progress may be included in the year-end
valuation of accrued revenue, when the contingent event has
not occurred and therefore the revenue has not been earned in
accordance with the requirements of IFRS 15.
We evaluated the Group’s accounting policies for recognition of
revenue for appropriateness in accordance with requirements
of the financial reporting framework, including IFRS 15 ‘Revenue
from Contracts with Customers’, and checked this has been
appropriately applied.
We agreed, on a sample basis, client engagement terms to ensure
client matters are classified correctly between contingent and
non-contingent and also to support the existence of revenue
recognised in the period.
We evaluated management’s assessment, in accordance with the
requirements of IFRS 15, that it is not probable that client matters
classified as contingent at the year end, and valued at nil, will result
in revenue being incorrectly recognised, including, but not limited
to, testing billings post year end.
For unbilled revenue recognised in the year we tested on a
sample basis that entitlement to revenue had been obtained
through proof of service being carried out and that time had been
recorded pre year end confirming that the matter is live, and that
unbilled revenue is recoverable.
We reviewed the application of departmental recovery rates used
to value unbilled revenue, assessing their appropriateness and
challenging management on whether the effect of macroeconomic
factors such as inflation on the expected recovery of unbilled
revenue had been taken into account. We also reviewed post year-
end actual recovery rates against the year-end recovery rates to
review any significant movements.
We tested the completeness and cut-off of unbilled revenue by
a review of time sheets posted after the year end to identify any
material unposted time.
We assessed the adequacy of provisions against irrecoverable
unbilled revenue by review of aged work in progress reports.
Key observations
We concluded that there was no material misstatement in the
valuation of unbilled revenue, in accordance with IFRS15.
Business Overview
Strategic Report
Corporate Governance
Our Financials
Key audit matter description
How the scope of our audit responded to the key audit matter
Risk of fraud in revenue recognition – existence/cut off of billed revenue
Bills raised in the year may be fictitious/erroneous or raised before
time has been worked by the fee earners and the business may
therefore not be entitled to the income. Bills may also be raised
when work in progress should be written off as irrecoverable.
We reviewed a sample of sales invoices issued during the year
to ensure that the service had been provided pre year end,
confirming that entitlement to record the invoice as revenue had
been reached. The evidence of services being provided included,
but was not limited to, time records maintained by fee earners and
client contracts.
We reviewed the level of post year end credit notes being raised to
identify significant credit notes being raised indicating erroneous
recognition of revenue in the current year.
For unbilled revenue recognised in the year, we tested on a sample
basis that entitlement to revenue had been reached through proof
of the relevant service being carried out pre year end.
Key observations
We concluded that revenue had been recorded appropriately. We
did not identify any material errors in relation to cut-off.
Our application of materiality
Our definition of materiality considers the value of error or omission on the financial statements that, individually or in aggregate, would
change or influence the economic decision of a reasonably knowledgeable user of those financial statements. Misstatements below these
levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. Materiality is used in planning the
scope of our work, executing that work and evaluating the results.
Materiality in respect of the Group was set at £950k (2021: £800k) which was determined on the basis of 5% of the underlying profit before
tax and exceptional items, as the primary measure on which the performance of the business is judged by its stakeholders.
Performance materiality is the application of materiality at the individual account or balance level, set at an amount to reduce to an
appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial
statements as a whole.
Performance materiality for the Group was set at £665k (2021: £560k) which represents 70% (2021 – 70%) of the above materiality levels.
The determination of performance materiality reflects our assessment of the risk of undetected errors existing, the nature of the systems
and controls, the impact of there being a number of non-significant components and the level of misstatements arising in previous audits
Materiality in respect of the Parent was set at £460k (2021: £380k) which was determined on the basis of 1% of gross assets. Gross assets
was considered to be the most appropriate materiality metric on the basis that the Parent is not a trading entity and its primary purpose is
to the hold investments.
Performance materiality for the Parent was set at £322k (2021: £265k) which represents 70% (2021 – 70%) of the above materiality levels.
Our audit work on the significant component of the Group, and for determining and evaluating the specific targeted procedures on other
components, was executed at levels of materiality applicable to the individual entity which were lower than Group materiality.
We agreed to report any corrected or uncorrected adjustments exceeding £47.5k (2021: £40k) to the audit committee as well as
differences below this threshold that in our view warranted reporting on qualitative grounds.
70
71
Gateley (Holdings) PlcAnnual report and financial statements Independent auditors’ report
continued
The scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal
control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override
of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material
misstatement.
The Group comprises one main trading component, a Parent Company, which does not trade, and several smaller subsidiary entities. The
Group engagement team carried out audits of the complete financial information of the following significant components of the Group:
•
•
The Parent Company, Gateley (Holdings) plc
Gateley plc
A desktop analytical review was performed on the other components that were not considered to be individually financially significant, and
specific targeted procedures performed on material subsidiaries based on an assessment of the risk to the Group audit results.
The coverage achieved by our audit procedures was:
Full scope audit
Analytical review and specific targeted procedures
Total
Number of
components
2
17
19
Revenue
83%
17%
100%
Net assets/
(liabilities)
Profit
before tax
124%
(24%)
100%
94%
6%
100%
Reporting on other information
The other information comprises the information included in the Annual Report and Accounts, other than the financial statements and
our auditor’s report thereon. Our opinion of 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. 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.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and 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.
Matters on which we are required to report by exception
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.
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:
adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received
from branches not visited by us; or
the Parent Company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
•
•
•
•
72
Business Overview
Strategic Report
Corporate Governance
Our Financials
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement,
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 aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in
respect of irregularities, including fraud.
Because of the inherent limitations of an audit, there is a risk
that we will not detect all irregularities, including those leading
to a material misstatement in the financial statements or non-
compliance with regulation. This risk increases the more that
compliance with a law or regulation is removed from the events
and transactions reflected in the financial statements, as we will
be less likely to become aware of instances of non-compliance.
The risk is also greater regarding irregularities occurring due to
fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
The specific procedures for this engagement and the extent to
which these are capable of detecting irregularities, including fraud
is detailed below:
•
•
•
•
•
•
•
•
•
•
•
•
Obtaining an understanding of the legal and regulatory
frameworks that the group operates in, focusing on those
laws and regulations that had a direct effect on the financial
statements. The key laws and regulations we considered in
this context included, the Companies Act 2006, the Financial
Services and Markets Act 2000 and applicable tax legislation.
In addition, we considered compliance with employee
legislation, as fundamental to the group’s operations;
Reviewing press releases, and performing an online search of
articles about the group in the financial press;
Enquiry of management to identify any instances of
non-compliance with laws and regulations;
Reviewing financial statement disclosures and testing to
supporting documentation to assess compliance with
applicable laws and regulations;
Enquiry of management around actual and potential litigation
and claims;
Enquiry of the audit and finance committee concerning actual
and potential litigation and claims;
Enquiry of management to identify any instances of known or
suspected instances of fraud;
Discussing among the engagement team regarding how and
where fraud might occur in the financial statements and any
potential indicators of fraud,
Reviewing minutes of meetings of those charged with
governance;
Reviewing the control systems in place and testing the
effectiveness of the controls;
Performing audit work over the risk of management override
of controls, including testing of journal entries and other
adjustments for appropriateness, evaluating the business
rationale of significant transactions outside the normal course
of business, and reviewing accounting estimates for bias; and
Challenging assumptions and judgements made by
management in their significant accounting estimates, in
particular with respect to provisions for claims incurred but
not reported.
73
Gateley (Holdings) PlcAnnual report and financial statements Independent auditors’ report
continued
A further description of our responsibilities for the financial
statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part
of our auditor’s report.
Use of our report
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.
Andrew Moyser FCA FCCA
(Senior Statutory Auditor)
for and on behalf of MHA MacIntyre Hudson,
Statutory Auditor
Birmingham
12 September 2022
Business Overview
Strategic Report
Corporate Governance
Our Financials
Consolidated statement of profit and loss
and other comprehensive income
for the year ended 30 April 2022
Revenue
Other operating income
Personnel costs, excluding IFRS 2 charge
Depreciation – Property, plant and equipment
Depreciation – Right-of-use asset
Impairment of trade receivables and contract assets
Other operating expenses, excluding non-underlying and exceptional items
Operating profit before non-underlying and exceptional items
Non-underlying operating items
Exceptional items
Operating profit
Financial income
Financial 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
- Revaluation of other investments
- 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
4
5
7
13
13
19/20
6
6
6
6
9
9
10
2022
£’000
137,249
-
(86,517)
(851)
(3,783)
(866)
(22,716)
22,516
(2,659)
(870)
(3,529)
18,987
194
(1,149)
18,032
(3,753)
14,279
2021
£’000
121,375
2,451
(77,460)
(1,045)
(3,751)
(1,834)
(19,202)
20,534
(3,029)
-
(3,029)
17,505
176
(1,373)
16,308
(3,151)
13,157
(190)
58
-
(87)
14,147
13,070
11
11
12.00p
11.71p
11.18p
11.10p
The results for the periods presented above are derived from continuing operations.
The accompanying notes on pages 65 to 118 form an integral part of these financial statements.
74
75
Gateley (Holdings) PlcAnnual report and financial statements Business Overview
Strategic Report
Corporate Governance
Our Financials
EQUITY
Share capital
Share premium
Merger reserve
Other reserve
Treasury reserve
Translation reserve
Retained earnings
TOTAL EQUITY
Note
26
2022
£’000
12,456
11,342
(9,950)
14,465
(261)
(2)
44,863
72,913
2021
£’000
11,792
9,421
(9,950)
6,815
(312)
(60)
41,560
59,266
These financial statements were approved by the directors on 12 September 2022 and were signed and authorised for issue on their behalf by:
Rodrick R Waldie
Chief Executive Officer
Neil A Smith
Finance Director
Company registered number: 09310078
The accompanying notes on pages 65 to 118 form an integral part of these financial statements.
Consolidated statement of financial position
at 30 April 2022
Non-current assets
Property, plant and equipment
Right of use asset
Investment property
Intangible assets & goodwill
Other intangible assets
Other investments
Total non-current assets
Current assets
Contract assets
Trade and other receivables
Deferred tax asset
Cash and cash equivalents
Total current assets
Total assets
Non-current liabilities
Other interest-bearing loans and borrowings
Lease liability
Other payables
Deferred tax liability
Provisions
Total non-current liabilities
Current liabilities
Trade and other payables
Lease liability
Provisions
Current tax liabilities
Total current liabilities
Total liabilities
NET ASSETS
Note
13
13
14
15
17
18
19
20
23
25
21
29
22
23
24
22
29
24
2022
£’000
1,334
24,627
164
32,590
564
173
59,452
17,239
56,168
638
16,105
90,150
2021
£’000
1,323
27,007
164
15,765
282
363
44,904
13,900
43,093
138
19,605
76,736
149,602
121,640
(5,715)
(25,207)
(5,360)
(3,089)
(863)
(40,234)
(31,793)
(3,719)
(101)
(842)
(36,455)
(76,689)
72,913
-
(27,702)
(120)
(772)
(763)
(29,357)
(29,032)
(2,743)
(176)
(1,066)
(33,017)
(62,374)
59,266
76
77
Gateley (Holdings) PlcAnnual report and financial statements
Consolidated statement of changes in equity
Consolidated cash flow statement
for year ended 30 April 2022
Business Overview
Strategic Report
Corporate Governance
Our Financials
At 1 May 2020
Comprehensive income:
Profit for the year
Exchange rate differences
Total comprehensive income
Transactions with owners recognised directly in
equity:
Issue of share capital
Sale of treasury shares
Purchase of treasury shares
Share based payment transactions
Total equity at 30 April 2021
At 1 May 2021
Comprehensive income:
Profit for the year
Revaluation of other investments
Exchange rate differences
Total comprehensive income
Transactions with owners recognised directly in
equity:
Issue of share capital
Purchase of own shares at nominal value
Sale of treasury shares
Purchase of treasury shares
Recognition of tax benefit on gain from equity settled
share options
Dividend paid
Share based payment transactions
Total equity at 30 April 2022
Share
premium
£’000
Merger
reserve
£’000
Other
reserve
£’000
Treasury
reserve
£’000
Retained
earnings
£’000
Foreign
currency
translation
reserve
£’000
9,153
(9,950)
6,815
(417)
27,447
27
Share
capital
£’000
11,761
Total
Equity
£’000
44,836
-
-
-
-
-
-
31
-
-
-
11,792
11,792
-
-
-
-
664
-
-
-
-
-
-
12,456
550
(282)
-
-
9,421
9,421
-
-
-
-
1,921
-
-
-
-
-
-
11,342
-
-
-
-
-
-
-
(9,950)
(9,950)
-
-
-
-
-
-
-
-
-
-
-
(9,950)
-
-
-
-
-
-
-
6,815
6,815
-
-
-
-
7,650
-
-
-
-
-
-
14,465
-
-
-
13,157
-
13,157
-
(87)
(87)
13,157
(87)
13,070
-
400
(295)
-
(312)
(312)
-
-
-
956
41,560
41,560
-
-
-
-
14,279
(190)
-
14,089
-
-
127
(76)
-
-
(132)
-
-
563
-
-
(261)
(12,430)
1,213
44,863
-
-
-
-
(60)
(60)
-
-
58
58
-
-
-
-
-
581
118
(295)
956
59,266
59,266
14,279
(190)
58
14,147
10,235
(132)
127
(76)
563
-
-
(2)
(12,430)
1,213
72,913
The following describes the nature and purpose of each reserve within equity:
Share premium – Amount subscribed for share capital in excess of nominal value together with gains on the sale of own shares and the
difference between actual and nominal value of shares issued by the Company in the acquisition of trade and assets.
Merger reserve – Represents the difference between the nominal value of shares acquired by the Company in the share for share exchange
with the former Gateley Heritage LLP members and the nominal value of shares issued to acquire them.
Other reserve – Represents the difference between the actual and nominal value of shares issued by the Company in the acquisition of
subsidiaries.
Treasury reserve – Represents the repurchase of shares for future distribution by Group’s Employee Benefit Trust.
Retained earnings – All other net gains and losses and transactions with owners not recognised anywhere else.
Foreign currency translation reserve – Represents the movement in exchange rates back to the Group’s functional currency of profits and
losses generated in foreign currencies.
The accompanying notes on pages 65 to 118 form an integral part of these financial statements.
78
Cash flows from operating activities
Profit for the year after tax
Adjustments for:
Depreciation and amortisation
Financial income
Financial expense
Release of contingent consideration
Interest charge on capitalised leases
Equity settled share-based payments
Loss/(profit) on disposal of property, plant and equipment
Tax expense
Increase in trade and other receivables
Increase in trade and other payables
Increase in provisions
Cash generated from operations
Tax paid
Net cash flows from operating activities
Investing activities
Acquisition of property, plant and equipment
Acquisition of other intangible assets
Cash received on disposal of property, plant and equipment
Acquisition of other investments
Contingent consideration paid - acquisition of subsidiary
Consideration paid on acquisitions, net of cash acquired
Interest received
Net cash used in investing activities
Note
2022
£’000
2021
£’000
14,279
13,157
13/15/17
9
9
6
9
7
6
10
24
13
17
18
9
6,215
(194)
201
(135)
948
1,213
16
3,753
26,296
(10,233)
758
25
16,846
(4,497)
12,349
(775)
(319)
-
-
-
(5,982)
194
(6,882)
6,869
(176)
416
-
957
956
(3)
3,151
25,327
(5,312)
9,216
226
29,457
(4,039)
25,418
(503)
(10)
11
(134)
(363)
-
176
(823)
79
Gateley (Holdings) PlcAnnual report and financial statements Gateley (Holdings) Plc
Annual report and financial statements
Consolidated cash flow statement
continued
Financing activities
Interest and other financial income paid
Lease repayments
Receipt of new revolving credit facility, net of refinancing costs
Repayment of term bank loans
Repayment of loans from former members of GCL Solicitors & Directors of IIS
Proceeds from sale of own shares
Acquisition of own shares
Cash received for shares issued on exercise of SAYE/CSOP options
Dividends paid
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
9
21
21
21
12
25
2022
£’000
(201)
(3,870)
5,715
-
-
90
(39)
1,768
(12,430)
(8,967)
(3,500)
19,605
16,105
2021
£’000
(416)
(3,847)
-
(3,077)
(729)
145
(288)
299
-
(7,913)
16,682
2,923
19,605
The accompanying notes on pages 65 to 118 form an integral part of these financial statements.
80
81Business OverviewStrategic ReportCorporate GovernanceOur FinancialsNotes to the consolidated financial statements(forming part of the financial statements)1. Basis of preparation and significant accounting policiesGateley (Holdings) Plc is a Company incorporated and domiciled in the United Kingdom. The Parent Company’s acquisition of Gateley Plc and its acquisition of Gateley LLP have been assessed as being business combinations under common control which are scoped out of IFRS 3 ‘Business Combinations’. In accordance with the requirements of IAS 8 the Directors have selected an appropriate accounting policy to reflect the substance of this transaction. The Directors have chosen to apply merger accounting as outlined in UKGAAP (FRS102). This requires the Group to be consolidated at the date of the business combinations as though the Group structure has always been in place. No Goodwill has been recognised on this transaction.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 financial statements of Gateley (Holdings) Plc have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. 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 3.The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purposes of the consolidated financial statements, the results and financial position of each Group company are expressed in GBP, which is the functional currency of the Company, and the presentational currency for the Group.1.1 Measurement conventionThe 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 concernSee full explanation on page 24 of the Strategic Report.Having reviewed the Group’s forecasts, which includes an analysis of both short term cash flow forecasts and longer term cash flow forecasts, the risk and uncertainties surrounding the current and future demand for legal services, and other reasonably possible variations in trading performance, mitigating actions available to management and the possible continued impact of Covid-19 the Group expects to be able to operate within the Group’s financing facilities.Sensitivity analysis has been performed in respect of specific scenarios which could negatively impact our future performance such as lower levels of revenue growth, lower than forecast receipts of cash, and reduced levels of gross margin expansion. In addition, the Directors have also considered further mitigating actions such as lower capital expenditure and other short-term cash management activities within the Group’s control. On this basis, the Directors have a reasonable basis to conclude that the Group is forecast to continue to trade in line with existing financing facilities for the foreseeable future.Accordingly, the Directors continue to adopt the going concern basis of accounting in preparing the financial statements.1.3 Basis of consolidationOn 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.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.SubsidiariesSubsidiaries 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’s primary consideration is 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.Transactions eliminated on consolidationIntra-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.Where necessary, adjustments are made to the financial information of subsidiaries to bring the accounting policies used into line with those used by the Group. Notes to the consolidated financial statements
continued
Audit exemption of subsidiaries
The following subsidiaries are exempt from the requirements of the
UK Companies Act 2006 relating to the audit of individual accounts
by virtue of s479A of the Act.
Name
Gateley UK LLP
Gateley EBT Limited
Gateley Capitus Limited
Gateley Hamer Limited
Gateley Omega Limited
Kiddy & Partners Limited
International Investment Services Limited
T-Three Consulting Limited
T-Three Group Limited
T-Three Holdings Limited
Gateley Vinden Limited
Matsa Holdings Limited
Thomas Alexander Holdings Limited
TVP Holdings Limited
SP 2018 Limited
Byrom Clark Roberts Limited
Smithers Purslow Limited
Smithers Purslow Group Limited
Ainsley Stokes Limited
Adamson Jones Holdings Limited
Adamson Jones IP Limited
GEG Services Limited
Registered number
OC315778
09576648
03324995
03948095
13367322
11379755
08597472
03959623
06495180
04579021
03830233
08293396
02280956
06548795
11344448
02390547
01402539
05508205
03219786
10698979
07188937
12374579
The outstanding liabilities at 30 April 2022 of the above named
subsidiaries have been guaranteed by the Company pursuant to
s479A to s479C of the Act. In the opinion of the directors, the
possibility of the guarantee being called upon is remote.
1.4 Foreign currency
Transactions in foreign currencies are translated to the functional
currency at the foreign exchange rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign
currencies at the reporting 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 reporting 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 foreign currency reserve.
1.5 Classification of financial instruments issued
by the Group
IFRS 9 ‘Financial Instruments’ specifies how an entity should classify
and measure financial assets including some hybrid contracts.
Financial assets are to be classified on principle-based requirements
dependent on the assets contractual cash flow characteristics and
the Group business model for managing those assets.
The standard also introduced an impairment model that is to
be applied to debt instruments measured at amortised cost or
fair value through other comprehensive income, as well as trade
receivables and contract assets. Under the model, expected credit
losses are to be recognised against financial assets. Expected
credit losses have been calculated in relation to debt securities
and over the lifetime of trade and other receivables in line with the
approach provided within the standard. The Group have based the
assessment of the expected credit losses on a number of factors
including the credit risk of the asset upon initial recognition as well
as observed actual losses against classes of financial assets and
specific client and industry knowledge held by fee earners.
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 of subsidiary LLP’s) are
classified as a financial liability. Profit distributions relating to equity
instruments are debited direct to equity.
Business Overview
Strategic Report
Corporate Governance
Our Financials
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 equity securities held by the Group that were
previously classified as being available-for-sale and are stated at fair
value, have been classified as equity investments measured at fair
value through other comprehensive income under IFRS 9.
ii) Trade and other receivables
Trade and other receivables (except unbilled amounts for client
work) are initially recognised at their transaction price and carried at
amortised cost under IFRS 9.
In line with IFRS 9, the Group recognises as disclosed in note 19 and
20 any expected credit loss against trade receivables in order to
recognise the inherent risk that the Group may not be able to collect
all amounts due according to the original terms of the receivable.
The amount of the provision recorded is based on a broad range of
information including past events, current conditions and forecasts
of the future cash flows of the asset and is recognised in the
statement of profit and loss in other operating expenses.
iii) Cash and cash equivalents
Cash and cash equivalents include 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.
iv) 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 under IAS 32 and are added to
the Treasury Share Reserve.
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 its liabilities.
The Group’s financial liabilities comprise trade and other payables,
borrowings, contingent consideration, 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 with the exception of contingent
consideration that is measured at fair value through profit or loss.
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) Contingent consideration
Contingent consideration is initially recognised and carried at the
fair value. Following the end of the measurement period contingent
consideration is continually remeasured to fair value with changes
in fair value being reflected in profit or loss. Any interest payable on
the balance is reflected in the value of the liability and charged to
Profit and Loss as it arises.
1.7 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated
depreciation and impairment charges.
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.
Depreciation is calculated to write off the cost of property, plant
and equipment less the estimated residual value on a straight-line
basis over the expected useful economic life of the assets
concerned. Estimated residual values are revised annually.
The useful lives over which these assets are depreciated are:
Leasehold improvements
over the term of the lease
Equipment
33.3% straight line
Fixtures and fittings
20% straight line
Right-of-use assets
term of the lease
(between 1 and 10 years)
1.8 Leases
The Group leases offices, equipment and vehicles. Rental contracts
are for periods of between 1 and 10 years. Lease terms are
negotiated on a lease by lease basis and contain a variety of terms
and conditions.
The Group assesses whether a contract is or contains a lease at
inception of the contract. The Group recognises a right-of-use
asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short term leases
(defined as leases with a lease term of 12 months or less) and
leases of low value assets (being those assets with a value less
than £5,000 when new). For short term and low value leases, the
Group recognises the lease payments as an operating expense on a
straight line basis over the term of the lease.
82
83
Gateley (Holdings) PlcAnnual report and financial statements
Notes to the consolidated financial statements
continued
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease liabilities include the net present value of
the following lease payments:
•
•
•
•
•
•
fixed payments (including in-substance fixed payments), less
any lease incentives receivable;
variable lease payments that are based on an index or a rate;
amounts expected to be payable by the Group under residual
value guarantees;
the exercise price of a purchase option if the Group is
reasonably certain to exercise that option; and
payments of penalties for terminating the lease, if the lease
term assumed reflects the Group exercising that option.
The lease payments are discounted using the interest rate implicit
in the lease. If that rate cannot be determined, the Group’s
incremental borrowing rate is used, being the rate that the Group
would have to pay to borrow the funds necessary to obtain an
asset of similar value in a similar economic environment with similar
terms and conditions.
The lease liability is presented as a separate line in the consolidated
statement of financial position.
Right-of-use assets are recognised at commencement of the lease
and initially measured at the amount of the lease liability, plus any
incremental costs of obtaining the lease and any lease payments
made at or before the leased asset is available for use by the Group.
Subsequent to initial recognition, the lease liability is reduced
for payments made and increased to reflect interest on the
lease liability (using the effective interest method). The related
right-of-use asset is depreciated over the term of the lease or,
if shorter, the useful economic life of the leased asset. The lease
term shall include the period of an extension option where it is
reasonably certain that the option will be exercised. Interest on
the lease liability is recognised in the Statement of Comprehensive
Income.
The Group remeasures the lease liability (and makes a
corresponding adjustment to the related right-of-use asset)
whenever:
the lease term has changed or there is a significant change
in the assessment of exercise of a purchase option, in which
case the lease liability is remeasured by discounting the
revised lease payments using a revised discount rate;
The lease payments change due to changes in an index or
rate or a change in expected payment under a guaranteed
residual value, in which cases the lease liability is remeasured
by discounting the revised lease payments using the initial
discount rate (unless the lease payments change is due to
a change in a floating interest rate, in which case a revised
discount rate is used);
•
•
84
a lease contract is modified and the lease modification is
not accounted for as a separate lease, in which case the
lease liability is remeasured by discounting the revised lease
payments using a revised discount rate.
The Group did not make any such adjustments during the periods
presented.
In May 2020 the International Accounting Standards Board issued
COVID-19-Related Rent Concessions (the 2020 amendments)
which amended IFRS 16 Leases. These amendments introduced
an optional practical expedient providing lessees with an
exemption from assessing whether a COVID-19 related rent
concession is a lease modification. The Group has applied this
practical expedient where applicable, the impact of this election
and any COVID-19 related rent concession have not had a
material impact on the closing value of the right-of-use asset or
lease liability at 30 April 2022.
1.9 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.
Any interest payable on the balance is reflected in the value of the
liability and charged monthly to the Statement of Profit and Loss as
it arises. Further detail on contingent consideration is disclosed in
note 16.
Business Overview
Strategic Report
Corporate Governance
Our Financials
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.
1.10 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, brands and software, 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
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.
Brand value
Certain acquisitions have retained their trading name due to the
value of the brand in their specific market place.
Brand value is amortised over a period of three or five years
based on the Directors assessment of the future life of the brand,
supported by trading history.
Internally generated computer software
Costs associated with maintaining computer software programs are
recognised as an expense when incurred. Development costs that
are directly attributable to the design and testing of identifiable and
unique software products controlled by the Group are recognised
as intangible assets where the following criteria are met:
–
–
it is technically feasible to complete the software product so
that it will be available for use;
Management intends to complete the software product and
use or sell it;
–
–
–
–
there is an ability to sell or use the software product;
it can be demonstrated how the software product will
generate probable future economic benefits;
adequate technical, financial and other resources to complete
the development and to use or sell software product are
available; and
the expenditure attributable to the software product during
its development can be reliably measured.
Other development expenditures that do not meet these criteria
are recognised as an expense as incurred. Development costs
previously recognised as an expense are not recognised as an asset
in a subsequent period.
Computer software development costs recognised as assets
are amortised over their estimated useful lives, which does
not exceed five years. Computer software under development
is not amortised. Amortisation starts from the date on which
the software is available for use. If a decision is made to halt
development then the cost is immediately expensed.
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 and brands
Computer software
3 to 15 years
3 years
1.11 Investment property
Investment properties are properties which are held either to earn
rental income or for capital appreciation or for both. Investment
properties are stated at fair value. Any gain or loss arising from a
change in fair value is recognised in profit or loss.
1.12 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 it is
impaired. Management assess impairment of financial assets based
on a broad range of information, including past events, current
conditions and forecasts of the future cash flows of the asset that
can be estimated reliably.
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.
Under IFRS 9 the Group recognises expected credit losses (ECL’s)
on receivables through application of the simplified method. The
85
Gateley (Holdings) PlcAnnual report and financial statements
Notes to the consolidated financial statements
continued
ECL’s are determined using historic credit loss experience adjusted
for forward-looking factors and specific provisions based on
Management knowledge and expertise.
Intangibles and property, plant and equipment (non-financial
assets)
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 (non-financial asset)
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.
1.13 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 several equity settled share based
compensation plans.
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.
1.14 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 recognised directly within equity.
1.15 Provisions
Professional indemnity provision
A provision is recognised 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 coverage of up to £150 million for each claim.
Premiums are expensed as they fall due with prepayments or
accruals being recognised accordingly. Expected reimbursements
are recognised once they become receivable. The liability and
the associated reimbursement asset are shown separately in the
financial statements. Where outflow of resources is considered
probable and reliable estimates can be made, provision is made
for the cost (including related legal costs) of settling professional
negligence claims brought against the Group by third parties
and disciplinary proceedings brought by regulatory authorities.
Amounts provided for are based on Management’s assessment of
the specific circumstances in each case. No separate disclosure
is made of the detail of such claims and proceedings, as to do so
could seriously prejudice the position of the Group. In the event
the insurance companies cannot settle the full liability, the liability
will revert to the Group.
Business Overview
Strategic Report
Corporate Governance
Our Financials
Dilapidations provision
The Group recognise a provision for the future costs of
dilapidations on leased office space. The provision is an estimate
of the total cost to return applicable office space to its original
condition at the end of the lease term, spread over the term of the
lease. The estimated total cost is based on previous dilapidation
expense per square foot of office space.
1.16 Revenue recognition
IFRS 15 Revenue from contracts with customers
Under IFRS 15 Revenue from contracts with customers, revenue is
recognised either over time or at a point in time. The model uses a
contract based five-step analysis of transactions to determine when,
and how much, revenue is recognised; this includes the matching
of stand-alone process for services provided to the satisfaction of
performance obligations.
The Group considers that there are two contract types in issue
in the performance of the Group’s professional services, being
non-contingent and contingent contracts.
Non-contingent contracts
Non-contingent work is typically recognised over the duration of the
contract in line with the number of hours charged to the engagement
at a pre-established rate. Under IFRS 15 the hours worked on these
engagements are considered to be the satisfaction of the performance
obligation, therefore where collection of revenue is considered
probable, it is recognised in line with the hours performed.
Contingent contracts
Contingent work is typically recognised at a point in time, once
the pre-agreed stages of the contract performance are reached
or concluded as a result of an event linked to each work type
performance. In line with IFRS 15 the Group recognises revenue
on these contracts at a point in time once the uncertainty over the
contingent event has been satisfied as this is the point at which the
performance obligation is considered to have been met.
Recognition of accrued revenue
The standard requires both contract assets and liabilities being
recognised. Whilst IFRS 15 requires that when an entity has an
unconditional right to consideration then at this point the contract
asset would become a trade receivable regardless of whether a bill has
been issued. However, the Group does not consider the right to be
unconditional until the point of billing at which point the fee amount
has been agreed and confirmed with the customer. Therefore, these
unbilled amounts are recognised as contract assets as opposed to
trade receivables. The Group have also recognised a contract liability
under the standard that represents the amount of income that has
been invoiced in advance of the service being performed.
Recoverable expenses
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.
Other income
Rental income, generated through the subletting of office space,
is recognised in line with IFRS 16, on a straight line basis over the lease
term.
Other income includes the recognition of amounts received in
relation to the termination of a software development contract and
government supported income from its Coronavirus Job Retention
scheme. Income is recognised in the same period as the corresponding
employee costs.
Government grant income
The Group applies the performance model to government
grant income, grants are recognised as income once all of the
performance conditions have been met.
In the year ended 30 April 2021, the Group utilised the Coronavirus
Job Retention Scheme (CJRS) which meets the criteria of a
government grant under IAS 20. CJRS allowed the Group to place
staff on temporary leave (furlough) and claim the cost of 80%
of employee’s payroll costs from the government. Under the
performance model the Group has recognised the income on a
straight line basis over the period of the furlough. This income has
been recognised in other income within the statement of profit and
loss. The Group has not utilised the CJRS during the year ended
30 April 2022.
1.17 Short term and low value lease payments
Payments made on short term and low value leases are recognised
in the statement of profit and loss on a straight-line basis over the
term of the lease in prior year comparatives and where current year
leases meet the short-term lease criteria under IFRS 16.
1.18 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.
1.19 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
86
87
Gateley (Holdings) PlcAnnual report and financial statements Notes to the consolidated financial statements
continued
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.
1.20 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: such charges are treated as
non-underlying as the gain realised on the options granted is
settled in shares not cash and therefore does not impact the
income statement. The IFRS 2 charge is taken to the income
statement, these expenses are treated as non-underlying
items as they are either non-cash or non-recurring in nature.
•
Amortisation in respect of intangible fixed assets: these costs
are treated and non-underlying as they are non-cash items.
The tax effect of the above is also included if considered significant.
1.21 Exceptional items
Exceptional items are one off transactions, unrelated to the
underlying trading performance of the Group disclosed separately
in the Consolidated Statement of Profit and Loss 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.
Impairment charges in respect of intangible fixed assets: these
costs are treated as exceptional due to their one off nature.
Non-typical 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 6 to the Financial
Statements.
1.22 Ordinary dividends
Dividends are recognised as a liability in the period in which they
are approved by the Company’s shareholders.
2. Accounting developments
New and revised IFRS in issue but not yet effective
At the date of authorisation of these financial statements, certain
new standards, amendments and interpretations to existing
standards have been published by the IASB but are not yet effective
and have not been applied early to the Group:
Revised IFRS
Property, Plant and Equipment: Proceeds
before intended use – Amendments to IAS 16
Reference to the Conceptual Framework –
Amendments to IFRS 3
Onerous Contracts – Cost of Fulfilling a
Contract – Amendments to IAS 37
Annual Improvements to IFRS Standards
2018–2020
Reference to the Conceptual Framework –
Amendments to IFRS 3
Disclosure of Accounting Policies –
Amendments to IAS 1 and IFRS Practice
Statement 2
Definition of Accounting Estimates -
Amendments to IAS 8
Deferred Tax related to Assets and
Liabilities arising from a Single Transaction –
Amendments to IAS 12
Effective date
1 January 2022
1 January 2022
1 January 2022
1 January 2022
1 January 2023
1 January 2023
1 January 2023
1 January 2023
The Directors do not expect that the adoption of the Standards
listed above will have a material impact on the financial statements
of the Group in future periods.
3. Critical accounting judgements and
key sources of estimation uncertainty
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.
Business Overview
Strategic Report
Corporate Governance
Our Financials
Estimates
Impairment assessment of trade receivables (note 20) and
unbilled revenue (note 19)
The carrying amount of trade receivables on client assignment is
held at selling price less lifetime estimated credit losses (ECLs).
The inclusions of the ECLs contributes to reducing the risk relating
to the amounts of debts that are recoverable or not recoverable.
ECLs have been estimated based on historic credit losses within
each operating segment for each ageing bracket. These credit
losses calculated have then been adjusted where appropriate for
the inclusion of Management and legal professional judgement to
account for any forward looking information on specific clients.
Management have performed sensitivity analysis over the ECL
applied to trade receivables:
+1% increase in ECL
-1% decrease in ECL
(Decrease)/
increase in
value of trade
receivables
£’000
(502)
502
Management have also applied the same expectation of credit
losses for trade receivables to contract assets to assess the
recoverability of unbilled revenue recognised in the consolidated
accounts
Management have performed sensitivity analysis on the expectation
of recoverability applied to the contract assets balance:
(Decrease)/
increase
in value of
contract assets
£’000
(172)
172
+1% increase in ECL rate
-1% decrease in ECL rate
Management believe that the provision in place is sufficiently
prudent and therefore any increase in the rate applied is unlikely.
Unbilled revenue on client assignments (note 19)
The valuation of unbilled revenue involves detailed understanding
of contractual terms with clients, 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.
The principal uncertainty over this estimation is a result of the
amounts not yet being billed to, or recognised by the client. The
extent of such uncertainty is increased on contingent engagements
as there is no certainty that the amount will be recoverable at
all until the contingent event is satisfied. Management look to
reduce this level of uncertainty by conducting comprehensive risk
assessments over each engagement undertaken to minimise the
overall risk held by the Group. 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 estimates in determining the
point at which the contingency is resolved and when the fair value
of consideration can be measured reliably.
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.
Valuation of intangibles (note 15)
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 made relate to the valuation of the brand,
where the acquired brand is retained by the entity, and the customer
list. The value of such intangibles has been estimated based on the
amount of revenue expected to be generated by them. The revenue
estimations rely on annual growth rates. Management have selected
the appropriate rates based on a combination of observed historical
growth, industry norms and forecasted influencing factors. The rates
applied reflect previous growth rates, with sensitivities indicating that
variations in the actual rate achieved are unlikely to materially impact
the valuation of the intangible assets.
Judgements
Application of IFRS 3 Business Combinations – contingent
consideration, remuneration vs consideration (note 15)
Accounting for contingent consideration under IFRS 3 requires
significant judgement to be exercised where selling shareholders
remain in employment, post-acquisition. A detailed understanding of
key acquisition agreements is required in order to assess the substance
of the transaction against the requirements included within Appendix B
of IFRS 3, in order to substantiate whether contingent consideration
should be included within the initial acquisition accounting or charged
to profit or loss as a remuneration expense over the period of the
earn out.
In the current year two acquisitions included contingent consideration
arrangements with selling shareholders who have remained in
continuing employment within the Group. Management has
performed a detailed review of the acquisition agreements and
concluded that whilst judgement is required, the employment clauses
are not substantive and thus, the arrangements are deemed to be
additional consideration. The effect on these financial statements if the
arrangements were to be accounted for as remuneration rather than
additional consideration would be a reduction in profit of £123k.
88
89
Gateley (Holdings) PlcAnnual report and financial statements Business Overview
Strategic Report
Corporate Governance
Our Financials
4. Revenue and operating segments
2022
The Chief Operating Decision Maker (“CODM”) is the Strategic Board. The Group have the following four strategic divisions, which are its
reportable segments. These divisions offer a mixture of legal and consultancy services to clients. With effect from 1 May 2021 all service
lines are managed through two separately reporting lines renamed Gateley Legal and Gateley Consultancy.
The following summary describes the operations of each reportable segment as reported up to 30 April 2022 and also the new service lines:
Reportable segment
Legal service lines
(Gateley Legal)
Consultancy service lines
(Gateley Consultancy)
Corporate
Business services
People
Property
Banking
Corporate
Restructuring advisory
Taxation
GEG Services
International Investment Services
Commercial
Adamson Jones
Commercial Dispute Resolution/Litigation
Tweed (reputation, media and privacy law)
Employment
Pension
Private client
Real Estate
Real Estate Dispute Resolution
Construction
Planning
Entrust Pension
Kiddy and Partners
T-three
Capitus
Hamer/Persona
Smithers Purslow
Vinden/Tozer Gallagher
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
2022
£’000
127,386
5,336
923
692
1,501
1,411
2021
£’000
109,934
6,231
937
1,045
802
2,426
137,249
121,375
The Group has no individual customers that represent more than 10% of revenue in either the 2022 or 2021 financial year. The Group’s assets
and costs are predominately located in the UK save for those assets and costs located in the United Arab Emirates (UAE) via its Dubai subsidiary.
Net Group assets of £0.08m (2021: Net Group assets of £0.07m) are located in the Group’s Dubai subsidiary. Revenue generated by the Group’s
Dubai subsidiary to customers in the UAE totalled £0.92m (2021: £0.94m) as disclosed above as due from the customers in the Middle East.
Corporate
£’000
Business
Services
£’000
People
£’000
Property
£’000
Total
segments
£’000
Other
expense
and
movement
in unbilled
revenue
£’000
Total
£’000
Segment revenue from services transferred at a
point in time
Segment revenue from services transferred over
time
Total Segment revenue
10,175
3,467
5,901
10,994
30,537
305
30,842
27,889
38,064
14,490
17,957
13,264
19,165
50,426
61,420
106,069
136,606
338
643
106,407
137,249
Segment contribution (as reported internally)
15,373
5,733
6,919
22,956
50,981
643
51,624
Costs not allocated to segments:
Other operating income
Personnel costs
Depreciation and amortisation
Other operating expenses
Share based payment charges
Exceptional costs
Net financial expense
Profit for the financial year before taxation
-
(10,487)
(6,215)
(13,852)
(1,213)
(870)
(955)
18,032
90
91
Gateley (Holdings) PlcAnnual report and financial statementsNotes to the consolidated financial statementscontinued Business Overview
Strategic Report
Corporate Governance
Our Financials
Contract assets
Under IFRS 15 the Group recognises any goods or services transferred to the customer before the customer pays consideration, or before
payment is due, as a contract asset . These assets differ from accounts receivables. Accounts receivable are the amounts that have been
billed to the client and the revenue recognised, whereas these contract assets are amounts of work in progress where work has been
performed, yet the amounts have not yet been billed to the client. Due to the nature of the services delivered by the Group the significant
component of the cost of delivery is staff costs. As a result, there is little to no judgement exercised in determining the costs incurred as
they are driven by the time recorded by fee earners. Contract assets are subject to impairment under IFRS 9.
No other financial information has been disclosed as it is not provided to the CODM on a regular basis.
Contract Liabilities
Under IFRS 15 the Group is required to recognise contract liabilities based on those amounts recognised against contracts for which the
satisfaction of performance obligations has not yet been met. These liabilities relate to the deferred income recognised within Kiddy &
Partners, T-three Consulting Limited and GEG Services Limited as a result of their billing structure. The amounts recognised reflect the
agreed cost of the services to be performed and are realised in line with the ongoing cost of delivery. Due to the nature of the services
provided, the main component of this cost of delivery is staff costs, as a result there is little to no judgement exercised in determining the
value of the liability held at year end.
Practical expedients under IFRS 15
Under IFRS 15 companies are required to disclose the aggregate amount of the transaction price allocated to the performance obligations
that are unsatisfied at the end of the reporting period. However, only a small proportion of revenue contracts in issuance are for fixed
amounts, rather the company has a right to consideration from the customer in an amount that corresponds directly with the value to the
customer of the business’ performance completed to date. Therefore, the Group considers it impractical to estimate the potential value of
unsatisfied performance obligations and has elected to apply the practical expedient available under IFRS 15.
5. Other operating income
Rental and service charge income
COVID-19 Job retention scheme income
Cash incentives – Bank account switching income
Profit on sale of fixed assets
Amounts received against terminated contract
2022
£’000
-
-
-
-
-
-
2021
£’000
2
1,945
1
3
500
2,451
2021
Segment revenue from services
transferred at a point in time
Segment revenue from services
transferred over time
Total segmental revenue
Segment contribution
(as reported internally)
Costs not allocated to segments:
Other operating income
Personnel costs
Depreciation and amortisation
Other operating expenses
Share based payment charge
Exceptional costs
Net financial expense
Profit for the financial year before
taxation
Banking
and
Financial
Services
£’000
Corporate
£’000
Business
Services
£’000
Employee
Pensions
and
Benefits
£’000
Property
£’000
Total
segments
£’000
Other
expenses
and
movement
in unbilled
revenue
£’000
Total
£’000
3,239
7,437
1,357
3,780
13,289
29,102
1,361
30,463
12,774
16,013
14,450
21,887
11,996
13,353
10,472
14,252
39,654
52,943
89,346
118,448
1,566
90,912
2,927
121,375
5,291
7,100
5,688
4,597
24,406
47,082
2,927
50,009
2,448
(8,240)
(6,869)
(18,887)
(956)
-
(1,197)
16,308
Group entities may be engaged on a contingent basis; in such cases the Group considers the satisfaction of the contingent event as the
sole performance obligation within the contract. Fees are only billed once the contingent event has been satisfied. The initial financing
of these engagements is met by the Group. Due to the nature and timing of the billing, such engagements influence the contract asset
balance held in the balance sheet at year end. In the majority of cases the contingent event is expected to be concluded within one year of
the engagement date. The Group operates standard payment terms of 30 days. £9.2 million of the current period revenue is derived from
services satisfied, in part, in the previous period.
Services transferred over time
For non-contingent engagements, fee earners’ hourly rates are determined at the point of engagement with all hours attributed to the
engagement fully and accurately recorded. The recorded hours are then translated into fees to be billed and invoiced on a monthly basis.
The Group typically operates on 30 days credit terms, in line with IFRS 15 the performance obligations are fulfilled over time with revenue
being recognised in line with the hours worked.
92
93
Gateley (Holdings) PlcAnnual report and financial statementsNotes to the consolidated financial statementscontinued Business Overview
Strategic Report
Corporate Governance
Our Financials
7. Personnel costs
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
Social security costs
Pension costs
Non-underlying items (see note 6)
Share based payment expense – Gateley Plc
Share based payment expense – Gateley Smithers Purslow Limited
Number of employees
2021
2022
800
350
1,150
2022
£’000
76,672
7,769
2,076
86,517
1,100
113
87,730
770
343
1,113
2021
£’000
68,020
7,736
1,704
77,460
956
-
78,416
Details of the Directors’ remuneration and share interests are given in the Summary of Directors’ remuneration for the year within the
Directors’ Remuneration Report on page 43.
8. Share based payments
Group
At the year end the Group has nine share based payment schemes in existence.
Save As You Earn scheme (‘SAYE’)
The Group operates a HMRC approved SAYE scheme for all staff. Options under this scheme will vest if the participant remains employed
for the agreed vesting period of three years. Upon vesting, each option allows the holder to purchase the allocated ordinary shares at a
discount of 20% of the market price determined at the grant date.
During the year 64,549 SAYE 17/18 options were exercised and the remaining 193,063 had lapsed by 30 April 2022. The accumulated IFRS2
charge of £155,381 was recycled through retained earnings in the prior period.
During the year 407,963 SAYE 18/19 options vested with 237,450 being exercised by 30 April 2022 leaving 170,513 options still to be
exercised. New shares were issued to satisfy these options being 237,450 10p shares with a nominal value of £23,745. The accumulated
IFRS2 charge of £135,078 has been recycled through retained earnings.
6. Expenses and auditor’s remuneration
Included in operating profit are the following:
Depreciation on tangible assets (see note 13)
Depreciation on right-of-use asset (see notes 13 and 29)
Short term and low value lease payments (see note 29)
Operating lease costs on property (see note 29)
Other operating income – rent received
Foreign exchange (gains)/losses
Loss/(profit) on sale of fixed assets
Non-underlying items
Amortisation of intangible assets (see notes 15 and 17)
Share based payment charges – Gateley Plc
Share based payment charges – Gateley Smithers Purslow Limited
Release of contingent consideration – International Investment Services Limited
Exceptional items
Acquisition costs
One off remuneration charge – Gateley Smithers Purslow Limited
Total non-underlying and exceptional items
2022
£’000
851
3,783
75
-
-
(58)
16
2022
£’000
1,581
1,100
113
(135)
2,659
373
497
3,529
2021
£’000
1,045
3,751
40
26
(2)
87
(3)
2021
£’000
2,073
956
-
-
3,029
-
-
3,029
Acquisition costs in the 2022 financial year represent professional fees in respect of the acquisition of SP 2018 Limited, Adamson Jones
Holdings Limited and the business and assets of Tozer Gallagher LLP.
Share based payment charges in Gateley Plc represent charges in accordance with IFRS 2 in respect of unexercised SAYE, CSOP, LTIP and
RSA schemes (See note 8).
Share based payment charges in Gateley Smithers Purslow Limited represent shares awarded to staff following the successful acquisition of
SP 2018 Limited (See note 7 and 8).
Auditor’s remuneration
Fees payable to the Company’s Auditor in respect of audit services:
Audit of these financial statements
Audit of financial statements of subsidiaries of the Company
Amounts receivable by the Company’s auditor and its associates in respect of:
Other assurance services
2022
£’000
2021
£’000
85
20
105
31
73
15
88
44
Other assurance services relate to Solicitors Accounts Rules review with associated reporting to legal regulators. This work is entirely
assurance focused.
94
95
Gateley (Holdings) PlcAnnual report and financial statementsNotes to the consolidated financial statementscontinued
Company Share Option Plan (‘CSOP’)
The Group operates an HMRC approved CSOP scheme for associates, senior associates, legal directors, equivalent positions in Gateley
Group subsidiary companies and Senior Management positions in our support teams. Options under this scheme will vest if the participant
remains employed for the agreed vesting period of three years. Upon vesting, each option allows the holder to purchase the allocated
ordinary shares at the price on the date of grant.
During the year 401,542 CSOPS 17/18 options were exercised and the remaining 26,603 had lapsed by 30 April 2022. New shares were
issued to satisfy these options being 410,632 10p shares with a nominal value of £41,063. The accrued IFRS2 charge of £95,780 was
recycled through retained earnings in the prior period.
During the year 631,580 CSOPS 18/19 options vested with 447,494 being exercised by 30 April 2022 leaving 184,086 options still to be
exercised. New shares were issued to satisfy these options being 447,494 10p shares with a nominal value of £44,749. The accumulated
IFRS2 charge of £108,421 has been recycled through retained earnings.
Long Term Incentive Plan (‘LTIP’)
The Group operates an LTIP for the benefit of Executive Directors and Senior Management. Awards under the LTIP may be in the form of
an option granted to the participant to receive ordinary shares on exercise dependent upon the achievement of profit related performance
conditions.
Performance conditions
Options granted under the LTIP are only exercisable subject to the satisfaction of the following performance conditions which will
determine the proportion of the option that will vest at the end of the three-year performance period. The awards will be subject to an
adjusted fully diluted earnings per share performance measure as described in the table below:
Adjusted, fully diluted earnings per Share Compound Annual Growth Rate (CAGR) over the three year
period ending 30 April 2023/2025
Amount Vesting %
Below 5%
5%
Between 5% and 10%
Above 10%
0%
25%
Straight line vesting
100%
The options will generally be exercisable after approval of the financial statements during the year of exercise. The performance period for
any future awards under the LTIP will be a three-year period from the date of grant. Vested and unvested LTIP awards are subject to a formal
malus and clawback mechanism.
Grant of equity share options under the LTIP
Certain senior employees and Executive Directors were granted options on 27 April 2022 based on performance conditions commencing
on 1 May 2022. In total, 1,115,000 options have been granted which, subject to satisfying the above performance conditions, will vest in the
year ending 30 April 2025.
Restricted Share Award Plan (‘RSA’)
The Group has introduced during the year an RSA for the benefit of Senior Management. Awards under the RSA entitle the option holder to
participate in dividends however, the shares are restricted for a period of 5 years from issue, such that they cannot be traded.
Business Overview
Strategic Report
Corporate Governance
Our Financials
The annual awards granted under all schemes are summarised below:
Weighted
average
remaining
contractual
life
Weighted
average
exercise
price
Originally
granted
Number
Lapsed at
30 April
2021
Number
At 1 May
2021
Number
Granted
during
the year
Number
Lapsed
during
year
Number
Exercised
in the
year
Number
At
30 April
2022
Number
SAYE
SAYE 17/18-
15 September 2017
SAYE 18/19 –
21 September 2018
SAYE 19/20 –
30 September 2019
SAYE 20/21 –
6 November 2020
SAYE 21/22 –
25 August 2022
CSOPS
CSOPS 17/18 –
3 October 2017
CSOPS 18/19 –
24 October 2018
CSOPS 20/21 –
7 July 2020
0 years
£1.33
556,296
(298,684)
257,612
0 years
£1.27
620,432
(168,463)
451,969
0.4 years
£1.28
822,625
(125,652)
696,973
1.5 years
£1.02
2,337,197
(47,113) 2,290,084
-
-
-
-
(92,760)
(172,713)
(193,063)
(64,549)
-
(44,006) (237,450)
170,513
2.3 years
£1.70
-
-
-
673,077
(14,925)
4,336,550
(639,912) 3,696,638
673,077
(517,467) (301,999) 3,550,249
-
-
-
604,213
2,117,371
658,152
0 years
£1.65
581,162
(153,017)
428,145
0 years
£1.44
812,131
(127,774)
684,357
1.2 years
£1.35
976,797
(57,411)
919,386
2,370,090
(338,202) 2,031,888
(26,603) (401,542)
-
(52,777) (447,494)
184,086
(89,634)
-
829,752
(169,014) (849,036) 1,013,838
LTIPS
LTIPS 20/21 –
22 July 2020
LTIPS 27 April 2022
1.2 years
3.0 years
£0.00
1,405,766
(38,339) 1,367,427
(130,992)
£0.00
-
-
-
1,115,000
-
1,405,766
(38,339) 1,367,427
1,115,000
(130,992)
RSA
RSA 27 April 2022
5.0 years
£0.00
-
-
-
-
-
-
1,422,560
1,422,560
-
-
-
-
-
-
-
1,236,435
1,115,000
2,351,435
1,422,560
1,422,560
-
-
-
-
-
96
97
Gateley (Holdings) PlcAnnual report and financial statementsNotes to the consolidated financial statementscontinued Business Overview
Strategic Report
Corporate Governance
Our Financials
Fair value calculations
The award is accounted for as equity-settled under IFRS 2. The fair value of awards which are subject to non-market based performance
conditions is calculated using the Black Scholes option pricing model. The inputs to this model for awards granted during the financial year
are detailed below:
10. Taxation
Grant date
Share price at date of grant
Exercise price
Volatility
Expected life (years)
Risk free rate
Dividend yield
Fair value per share
Market based performance condition
Non-market based performance condition/no performance condition
SAYE
LTIP
RSA
25/8/21
27/4/22
27/4/22
£2.115
£2.175
£2.175
£1.70
29%
3.3
n/a
33%
3.3
n/a
33%
5.0
0.227%
1.522%
1.575%
4.53%
4.53%
0%
-
-
-
£0.44
£1.87
£2.175
Expected volatility was determined by using historical share price data of the Company since it listed on 8 June 2015. The expected life used in
the model has been based on Management’s expectation of the minimum and maximum exercise period of each of the options granted.
The total charge to the income statement for all schemes now in place, included within non-underlying items, is £1,213,000 (2021: £956,000).
9. Financial income and expense
Recognised in profit and loss
Financial income
Interest income
Total financial income
Financial expense
Interest expense on bank borrowings measured at amortised cost
Interest on lease liability
Total financial expense
Net financial expense
2022
£’000
194
194
(201)
(948)
(1,149)
(955)
2021
£’000
176
176
(416)
(957)
(1,373)
(1,197)
98
Current tax expense
Current tax on profits for the year
Under/(over) provision of taxation in previous period
Total current tax
Deferred tax expense
Origination and reversal of temporary differences
Under provision on share-based payment charges
Total deferred tax expense
Total tax expense
2022
£’000
3,949
15
3,964
(211)
-
(211)
3,753
2021
£’000
3,749
(43)
3,706
(436)
(119)
(555)
3,151
The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom
applied to profits for the year are as follows:
Profit for the year (subject to corporation tax)
Tax using the Company’s domestic tax rate of 19%
Expenses not deductible for tax purposes
Under/(over) provision of taxation in previous period
Under provision on share-based payment charges
Total tax expense
2022
£’000
18,032
3,426
312
15
-
3,753
2021
£’000
16,308
3,099
214
(43)
(119)
3,151
The Finance Act 2021 increased the main rate of corporation tax to 25% from 1 April 2023. Closing deferred tax balances have therefore
been valued at 19% or 25% (2021: 19%) depending on the date they expect to fully unwind.
11. Earnings per share
Statutory earnings per share
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
Weighted average number of ordinary shares for calculating diluted earnings
per share
Profit for the year and basic earnings attributable to ordinary equity shareholders
Non-underlying and exceptional items (see note 6)
Operating expenses
Tax on non-underlying and exceptional items
Underlying earnings before non-underlying and exceptional items
2022
Number
2021
Number
118,961,047
2,932,191
121,893,238
117,685,265
823,568
118,508,833
2022
£’000
14,279
3,529
(370)
17,438
2021
£’000
13,157
3,029
(576)
15,604
99
Gateley (Holdings) PlcAnnual report and financial statementsNotes to the consolidated financial statementscontinued Business Overview
Strategic Report
Corporate Governance
Our Financials
Earnings per share is calculated as follows:
13. Property, plant and equipment
Basic earnings per ordinary share
Diluted earnings per ordinary share
Basic earnings per ordinary share before non-underlying and exceptional items
Diluted earnings per ordinary share before non-underlying and exceptional items
12. Dividends
Equity shares:
Interim dividend in respect of 2021 (2.5p per share) - 28 June 2021
Final dividend in respect of 2021 (5p per share) - 8 October 2021
Interim dividend in respect of 2022 (3p per share) - 31 March 2022
2022
Pence
12.00
11.71
14.66
14.31
2022
£’000
2,940
5,908
3,582
12,430
2021
Pence
11.18
11.10
13.26
13.17
2021
£’000
-
-
-
-
The board proposes to recommend a final dividend of 5.5p (2021: 5p) per share at the AGM. If approved, this dividend will be paid
in mid October 2022 to shareholders on the register at the close of business on 23 September 2022. The shares will go ex-dividend
on 22 September 2022. This dividend has not been recognised as a liability in these final statements.
Breach of Companies Acts requirements in respect of historic dividend payments - circular to
shareholders
The board has become aware of a technical issue in respect of the payment of a number of historic dividends paid by the Company.
The Company has always filed its statutory annual accounts on time in accordance with the requirements of the Companies Act 2006
(the “Act”), and at all times had sufficient profits and other distributable reserves to justify the payment of dividends.
However, the Company has not satisfied certain procedural requirements of the Act before paying certain of the dividends in the years
since the Company’s IPO (the “Relevant Distributions”). These procedural requirements relate to the failure to file interim accounts at
Companies House which justified the payment of interim dividends or the payment of final dividends before the circulation to members of
the audited accounts of the Company in respect of the relevant financial year.
The Company has been advised that, as a consequence of the above distributions being made otherwise than in accordance with the Act,
it may have claims against past and present shareholders who were recipients of the Relevant Distributions and against those persons who
were directors of the Company at the time of the Relevant Distributions.
The Company wishes to put all potentially affected parties so far as possible in the position in which they were always intended to be had
the Relevant Distributions been made in accordance with the procedural requirements of the Act.
Accordingly, a resolution will be proposed at the upcoming annual general meeting, which will, if passed, give the board authority to enter
into deeds of release to discharge these parties from any obligation to repay any amount to the Company in connection with the Relevant
Distributions.
The proposed ratification of the Relevant Distributions, and the entry by the Company into the Shareholders’ Deed of Release and Directors’
Deed of Release will not have any effect on the Company’s financial position.
A circular to shareholders to convene the annual general meeting and giving more information about the Relevant Distributions will be sent
to shareholders shortly.
Leasehold
improvements
£’000
Equipment
£’000
Fixtures and
fittings
£’000
Right-of-use
assets
£’000
462
-
(145)
317
317
23
-
340
327
23
(141)
209
209
-
22
-
231
108
109
6,207
302
(16)
6,493
6,493
266
583
(110)
7,232
5,157
670
(13)
5,814
5,814
173
514
(94)
6,407
679
825
5,226
201
(31)
5,396
5,396
63
169
-
5,628
4,538
352
(30)
4,860
4,860
53
315
-
5,228
536
400
26,146
9,238
(1,359)
34,025
34,025
793
610
-
35,428
3,267
3,751
-
7,018
7,018
-
3,783
-
10,801
27,007
24,627
Cost
Balance at 1 May 2020
Additions
Disposal
As at 30 April 2021
Balance at 1 May 2021
Arising on acquisition after fair value
adjustments
Additions
Disposal
As at 30 April 2022
Depreciation and impairment
Balance at 1 May 2020
Depreciation charge for the year
Eliminated on disposal
Balance at 30 April 2021
Balance at 1 May 2021
Arising on acquisition after fair value
adjustments
Depreciation charge for the year
Eliminated on disposal
Balance at 30 April 2022
Net book value
At 30 April 2021
At 30 April 2022
14. Investment property
Fair value
Balance at 1 May 2020 and 30 April 2021
Balance at 1 May 2021 and 30 April 2022
Total
£’000
38,041
9,741
(1,551)
46,231
46,231
1,122
1,385
(110)
48,628
13,289
4,796
(184)
17,901
17,901
226
4,634
(94)
22,667
28,330
25,961
£’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 2022 at £164,000 (2021: £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. Rental income of £nil (2021: £nil) was received during the year. Services charges of £3,089
(2021: £3,089) were incurred during the year.
100
101
Gateley (Holdings) PlcAnnual report and financial statementsNotes to the consolidated financial statementscontinued Business Overview
Strategic Report
Corporate Governance
Our Financials
15. Intangible assets and goodwill
Deemed cost
At 1 May 2020
Adjustment
At 30 April 2021
Arising through business combinations
At 30 April 2022
Amortisation
At 1 May 2020
Charge for the year
At 30 April 2021
Charge for the year
At 30 April 2022
Carrying amounts
At 30 April 2021
At 30 April 2022
Goodwill is allocated to the following cash generating units:
Property Group
Gateley Capitus Limited
Gateley Hamer Limited
GCL Solicitors (acquisition of trade and assets)
Persona Associates Limited
Gateley Vinden Limited
Tozer Gallagher (acquisition of trade and assets)
Gateley Smithers Purslow Limited
Employment, Pensions and Benefits Group
Kiddy & Partners Limited
International Investment Services Limited
T-three Consulting Limited
Business services Group
Gateley Tweed (acquisition of goodwill)
Adamson Jones IP Limited
102
Goodwill
£’000
12,329
(631)
11,698
8,440
20,138
-
-
-
-
-
11,698
20,138
Customer
lists and
brands
£’000
9,850
-
9,850
9,929
19,779
3,741
2,042
5,783
1,544
7,327
4,067
12,452
2022
£’000
1,515
1,161
2,900
40
2,259
405
6,605
14,885
1,600
338
309
2,247
1,576
1,430
3,006
Total
£’000
22,179
(631)
21,548
18,369
39,917
3,741
2,042
5,783
1,544
7,327
15,765
32,590
2021
£’000
1,515
1,161
2,900
40
2,259
-
-
7,875
1,600
338
309
2,247
1,576
-
1,576
20,138
11,698
Impairment testing
The Group tests goodwill annually for impairment. The impairment test involves determining the recoverable amount of the cash generating
unit (CGU) to which the goodwill has been allocated. The Directors believe that each operating segment represents a cash generating unit
for the business and as a result, impairment is tested for each segment, and all the assets of each segment are considered.
The recoverable amount is based on the present value of expected future cash flows (value in use) which was determined to be higher than
the carrying amount of goodwill so no impairment loss was recognised.
Value in use was determined by discounting the future cash flows generated from the continuing operation of the Group and was based on
the following key assumptions:
•
•
A pre-tax discount rate of between 12 and 21% (2021: 12-21%) was applied in determining the recoverable amount. The discount
rate is based on the Group’s average weighted cost of capital of 10.18% and adjusted according to the risks attributable to each CGU.
The values assigned to the key assumptions represent Management’s estimate of expected future trends and are based on both
external (industry experience, historic market performance and current estimates of risks associated with trading conditions) and
internal sources (existing Management knowledge, track record and an in-depth understanding of the work types being performed).
o
o
o
o
Growth rates of between 2% to 10% (2021: -25-10%) are based on Management’s understanding of the market opportunities for
services provided pertaining to the industry in which each CGU is aligned.
Increases in costs are based on current inflation rates and expected levels of recruitment needed to generate predicted revenue growth.
Attrition rates are based on the historic experience and trends of client activity over a two to three year period and applied to
future fee forecasts.
Cash flows have been typically assessed over a five-year period which Management extrapolates cash using a terminal value calculation
based on an estimated growth rate of 2%. The expected current UK economic growth forecasts for the legal services market is 2%.
•
The Group has conducted a sensitivity analysis on the impairment test of the CGU carrying value. The Directors believe that any
reasonably possible change in the key assumptions on which the recoverable amount of goodwill is based would not cause the
aggregate carrying amount to exceed the aggregate recoverable amount of the CGU.
16. Acquisitions
During the year ended 30 April 2022 the Group completed three acquisitions, the table below summarises the consideration paid:
Total fair value of identifiable assets and liabilities acquired
Goodwill
Total consideration
Satisfied by:
Cash
Equity instruments
Contingent cash consideration payable
Contingent shares consideration payable
Total consideration
Net cash outflows arising on acquisition
Cash consideration
Acquisition costs
Net cash acquired
Net cash outflow arising on acquisition
Total
£’000
12,380
8,440
20,820
7,033
8,335
2,776
2,676
20,820
(7,033)
(373)
1,051
(6,355)
103
Gateley (Holdings) PlcAnnual report and financial statementsNotes to the consolidated financial statementscontinued
Business Overview
Strategic Report
Corporate Governance
Our Financials
Details of individual acquisitions are included below:
Acquisition of Tozer Gallagher LLP
On 22 July 2021 Gateley Vinden Limited acquired the business and assets of Tozer Gallagher LLP, a leading practice of chartered quantity
surveyors and construction consultants. Tozer Gallagher was founded over 30 years ago and is a nationally recognised and highly respected
practice of chartered quantity surveyors and construction consultants based in Manchester and London. The business specialises in built
environment consultancy, fund monitoring services, and surety advisory.
The amounts recognised in respect of identifiable assets acquired and liabilities assumed are as set out in the table below:
Property, plant and equipment
Intangible asset relating to customer list and brand
Prepayments
Accrued income
Total assets
Accruals and other payables
Lease liability
Deferred tax
Total liabilities
Total identifiable net assets at fair value
Goodwill arising on acquisition
Total consideration
Satisfied by:
Initial cash consideration paid
Issue of 142,179 new 10p ordinary shares in Gateley (Holdings) Plc
Contingent cash consideration payable
Total consideration
Net cash outflow arising on acquisition
Cash consideration
Net cash acquired
Net cash outflow arising on acquisition
Pre-acquisition
carrying amount
£’000
Policy alignment
and fair value
adjustments
£’000
7
-
14
101
122
(4)
-
-
(4)
118
36
393
-
-
429
-
(36)
(98)
(134)
295
Total
£’000
43
393
14
101
551
(4)
(36)
(98)
(138)
413
405
818
418
300
100
818
(418)
-
(418)
Acquisition of the Adamson Jones Holdings Limited (“Adamson Jones”)
On 7 January 2022 the Company acquired the entire issued share capital of Adamson Jones via the acquisition of the entire issued share
capital of Adamson Jones Holdings Limited that owns 100% of the entire issued share capital of Adamson Jones IP Limited. Adamson Jones
provides intellectual property (IP) services encompassing patent, design and trademark protection advice in the UK, Europe and around
the world.
The amounts recognised in respect of identifiable assets acquired and liabilities assumed are as set out in the table below:
Property, plant and equipment
Cash
Intangible asset relating to customer list and brand
Trade receivables
Total assets
Trade payables
Deferred income
Accruals and other payables
Other tax and social security
Deferred tax
Total liabilities
Total identifiable net assets at fair value
Goodwill arising on acquisition
Total consideration
Satisfied by:
Initial cash consideration paid
Issue of 543,668 new 10p ordinary shares in Gateley (Holdings) Plc
Total consideration
Net cash outflow arising on acquisition
Cash paid
Acquisition costs
Net cash acquired
Net cash outflow arising on acquisition
Pre-acquisition
carrying amount
£’000
Policy alignment
and fair value
adjustments
£’000
38
48
-
564
650
(257)
(11)
(30)
(82)
-
(380)
270
-
-
1,067
-
1,067
-
-
-
-
(267)
(267)
800
Total
£’000
38
48
1,067
564
1,717
(257)
(11)
(30)
(82)
(267)
(647)
1,070
1,430
2,500
1,255
1,245
2,500
(1,255)
(36)
48
(1,243)
The goodwill of £405,000 arising from the acquisition represents the assembled workforce. None of the goodwill is expected to be
deductible for income tax purposes.
A contingent consideration arrangement was entered into as part of the acquisition. This is contingent on Tozer Gallagher achieving revenue
in excess of £850k in the 12 month period ending 21 July 2022. The sellers will receive £1 of contingent consideration for every £1 they
exceed £850k up to a maximum consideration of £0.1m. The contingent consideration totalling £100,000 will be settled during
September 2022.
From the date of acquisition Tozer Gallagher has contributed £0.7m of revenue to the Group’s Statement of Comprehensive Income.
If the acquisition had been completed on the first day of the financial year, Group revenue would have been higher by £0.2m. The profit
contributed is not separately identifiable due to its trade and assets being incorporated into Gateley Vinden Limited upon acquisition.
The goodwill of £1,430,000 arising from the acquisition represents the assembled workforce. None of the goodwill is expected to be
deductible for income tax purposes.
From the date of acquisition Adamson Jones has contributed £1.2m of revenue to the Group’s Statement of Comprehensive Income
together with after tax profit of £0.1m. If the acquisition had been completed on the first day of the financial year, Group revenue and profit
after tax would have been higher by £2.4m and £0.3m respectively.
104
105
Gateley (Holdings) PlcAnnual report and financial statementsNotes to the consolidated financial statementscontinued Acquisition of Gateley Smithers Purslow Limited (formerly Smithers Purslow Limited)
(‘Smithers Purslow’)
On 19 April 2022 Gateley (Holdings) Plc acquired the entire issued share capital of Gateley Smithers Purslow Limited (formerly Smithers
Purslow Limited) via the acquisition of the entire issued share capital of SP 2018 Limited. Smithers Purslow is a specialist business offering
corporate advisory, dispute and consultancy to the built environment in the property and construction markets.
Pre-acquisition
carrying amount
£’000
Policy alignment
and fair value
adjustments
£’000
69
-
2,560
1,003
2,531
411
6,574
(417)
(559)
(406)
-
(585)
(12)
(1,979)
4,595
Property, plant and equipment
Intangible asset relating to customer list and brand
Work in progress
Cash
Trade receivables
Prepayments and accrued income
Total assets
Trade payables
Accruals and other payables
Current tax
Lease liability
Contingent liability
Other tax and social security
Deferred tax
Total liabilities
Total identifiable net liabilities at fair value
Goodwill arising on acquisition
Total consideration
Satisfied by:
Initial cash consideration paid
Issue of 3,312,322 new 10p ordinary shares in Gateley (Holdings) Plc
Contingent cash consideration payable
Contingent share consideration payable
Total consideration
Net cash outflow arising on acquisition
Cash paid
Acquisition costs
Net cash acquired
Net cash outflow arising on acquisition
Total
£’000
826
8,469
2,560
1,003
2,531
411
757
8,469
-
-
-
-
9,226
15,800
-
-
-
(757)
(50)
-
(2,117)
(2,924)
6,302
(417)
(559)
(406)
(757)
(50)
(585)
(2,129)
(4,903)
10,897
6,605
17,502
5,360
6,790
2,676
2,676
17,502
(5,360)
(192)
1,003
(4,549)
Business Overview
Strategic Report
Corporate Governance
Our Financials
A contingent consideration arrangement was entered into as part of the acquisition. A further £7.85 million could be payable with any
payment subject to Smithers Purslow achieving at least £4.5 million of EBITDA over the 24 months to 30 September 2023. Such payment
is to be split in shares and cash as agreed between the Sellers and the Company, providing no Seller is entitled to receive more than 50% of
their total consideration in cash.
From the date of acquisition Smithers Purslow has contributed £0.6m of revenue to the Group’s Statement of Comprehensive Income
together with after tax profit (before exceptional items) of £0.2m. If the acquisition had been completed on the first day of the financial
year, Group revenue and profit after tax would have been higher by £11.4m and £1.2m respectively.
17. Other intangible assets
Cost
Balance at 1 May 2020
Additions
At 30 April 2021
Additions
At 30 April 2022
Amortisation
Balance at 1 May 2020
Charge for the year
At 30 April 2021
Charge for the year
At 30 April 2022
Net book amount at 30 April 2021
Net book amount at 30 April 2022
IT development
costs
£’000
Computer
software
£’000
258
-
-
258
-
258
-
-
-
-
-
258
258
111
10
-
121
319
440
66
31
97
37
134
24
306
Total
£’000
369
10
-
379
319
698
66
31
97
37
134
282
564
The Group’s amortisation policy, as disclosed in note 1.10, is to amortise other intangible assets from the date they are made available for
use. As at 30 April 2022 the software relating to the IT development costs was not available for use, therefore no amortisation has been
recognised. The software came into use following the period end.
18. Other investments
The Group holds other investment interests in the following third party investments:
Fair value
Balance at 1 May 2020
Additions
Balance at 30 April 2021
Loss on revaluation - FVOCI
Balance at 30 April 2022
£’000
229
134
363
(190)
173
The goodwill of £6,605,000 arising from the acquisition represents the assembled workforce. None of the goodwill is expected to be
deductible for income tax purposes. All the effects of this acquisition on the Group’s assets and liabilities are disclosed as provisional due to
the proximity of the acquisition to the balance sheet date.
£15,000 (2021: £15,000) – Gateley Investments Limited holds a 1.9% investment in the ordinary shares of Manchester Biotech Limited
(formerly PeptiGelDesign Ltd).
£157,998 (2021: £347,734) – Gateley Plc holds a 3.0% investment in the ordinary shares in Incanthera Plc, acquired on 26 February 2021.
106
107
Gateley (Holdings) PlcAnnual report and financial statementsNotes to the consolidated financial statementscontinued Business Overview
Strategic Report
Corporate Governance
Our Financials
19. Contract assets and liabilities
20. Trade and other receivables
As at 30 April 2022
As at 30 April 2021
Contract
assets
£’000
17,239
13,900
Trade
receivables
£’000
50,201
36,680
Contract
liabilities
£’000
(569)
(1,243)
Trade receivables
Prepayments
Other receivables including insurance receivables
2022
£’000
50,201
5,626
341
56,168
2021
£’000
36,680
5,699
714
43,093
Contract assets
Contract assets consist of unbilled revenue in respect of professional services performed to date.
Contract assets in relation to non-contingent work are recognised at appropriate intervals, normally on a monthly basis in arrears, in line
with the performance of the services and engagement obligations. Where such matters remain unbilled at the period end the asset is valued
on a contract-by-contract basis at its expected recoverable amount.
Contract assets in relation to contingent work are recognised at a point in time once the uncertainty over the contingent event has been
satisfied and all performance obligations satisfied, such that it is no longer contingent, these matters are valued based on the expected
recoverable amount. Due to the complex nature of these matters, they can take a considerable time to be finalised therefore performance
obligations may be settled in one period but the matter not billed until a later financial period. Until the performance obligations have been
performed the Group does not recognise any contract asset value at the year end.
During the year, contract assets of £2,661,000 (2021: £nil) were acquired in business combinations.
An impairment loss of £108,000 has been recognised in relation to contract assets in the year (2021: gain £89,000). This is based on the
expected credit loss under IFRS 9 of these types of assets. The contract asset loss is estimated at 0.6% (2021: gain 0.6%) of the balance.
Contract assets recognised under IFRS 15
Under IFRS 15 the Group is required to recognise contract assets, as detailed in note 1.16.
Contract asset value at 1 May 2021
Contract assets arising on acquisition
Contract asset value added in the year
Contract asset value realised in the year
Contract asset value at 30 April 2022
2022
£’000
13,900
2,661
19,237
(18,559)
17,239
2021
£’000
11,684
-
17,452
(15,236)
13,900
The Group have applied ECLs to unbilled revenue in order to account for the potential default on amounts not yet billed to the client. The
ECLs have been calculated on the same basis as those applied to trade receivables.
Contract liabilities
When matters are billed in advance or on a basis of a monthly retainer, this is recognised in contract liabilities and released over time when
the services are performed.
Contract liabilities recognised under IFRS 15
Under IFRS 15 the Group is required to recognise contract liabilities.
Contract liabilities at 1 May 2021
Contract liabilities gained in the year
Contract liabilities credited to P&L in year
Contract liabilities at 30 April 2022
108
2022
£’000
1,243
533
(1,207)
569
2021
£’000
70
1,207
(34)
1,243
Trade receivables
Trade receivables are recognised when a bill has been issued to the client, as this is the point in time that the consideration is unconditional
because only the passage of time is required before the payment is due. Trade receivables also includes disbursements.
Bills are payable within thirty days unless otherwise agreed with the client.
All trade receivables are repayable within one year.
Movement in loss allowance
Brought forward provision
Recognition of provisions for businesses acquired
Provision utilised
Charged to statement of profit and loss
Provisions released
2022
£’000
(4,171)
(173)
1,161
(1,173)
415
(3,941)
2021
£’000
(2,967)
-
719
(2,391)
468
(4,171)
The Group applies the simplified approach to providing for the expected credit losses under IFRS 9. Management have also elected to apply
an uplift to the IFRS 9 provision in the current year to account for the specific risks in the subsidiary entities where the application of IFRS 9
alone is not considered appropriate. The provision uplift is based on Management’s assessment of specific clients and related debts, this is
presented separately to the ECL provision detailed below:
Expected credit loss rate
Estimated total gross carrying amount £’000
Lifetime ECL £’000
Not passed
due
Past due
0-30 days
Past due
31-120 days
3.60%
31,544
1,136
4.45%
4,642
207
5.11%
5,429
277
Past due
greater than
120 days
18.53%
12,526
2,321
Total
54,141
3,941
The carrying amount of financial assets (including contract assets but not including equity investments) recorded in the financial
statements, which is net of any impairment losses, represents the Group’s maximum expected exposure to credit risk. Financial assets
include client and other receivables and cash. The Group does not hold collateral over these balances.
All the Group’s trade and other receivables have been reviewed for indicators of impairment. The specifically impaired trade receivables are
mostly due to customers experiencing financial difficulties.
An impairment loss of £1,173,000 has been recognised in relation to trade receivables in the year (2021: £1,525,000). This is based on the
expected credit loss under IFRS 9 of these types of assets. The trade receivables loss is estimated at 2.3% (2021: 3.7%) of the balance.
109
Gateley (Holdings) PlcAnnual report and financial statementsNotes to the consolidated financial statementscontinued Business Overview
Strategic Report
Corporate Governance
Our Financials
21. Other interest-bearing loans and borrowings
22. Trade and other payables
The contractual terms of the Group’s interest-bearing loans and borrowings, which are measured at amortised cost, with the exception of
loans to members that are held at fair value, are described below. For more information about the Group’s exposure to interest rate and
foreign currency risk, see note 27.
Non-Current liabilities
Bank borrowings
2022
Fair
value
£’000
5,715
Carrying
amount
£’000
5,715
2021
Fair
value
£’000
-
Carrying
amount
£’000
-
On 18 April 2022, the Company entered into a revolving credit facility which provides total committed funding of £30m until April 2025.
Interest is payable at a margin of 1.95% above the SONIA reference rate. On 19 April 2022 £6m was drawdown against the facility in order
to fund the initial cash consideration in the acquisition of SP 2018 Limited.
As at 30 April 2022, the Group’s non-derivative financial liabilities have contractual maturities (including interest payments where
applicable) as summarised below:
30 April 2022
Bank borrowings
Trade and other payables
Total
Current
Within
6 months
£’000
-
8,309
8,309
6 to
12 months
£’000
-
-
-
Non-current
1 – 5
years
£’000
Later than
5 years
£’000
6,000
-
6,000
-
-
-
This compares to the maturity of the Group’s non-derivative financial liabilities in the previous reporting period as follows:
30 April 2021
Trade and other payables
Total
Current
Within
6 months
£’000
8,130
8,130
6 to
12 months
£’000
-
-
Non-current
1 – 5
years
£’000
Later than
5 years
£’000
120
120
-
-
The above amounts reflect the contractual undiscounted cash flows, which may differ to the carrying values of the liabilities at the reporting
date.
110
Current
Trade payables
Other taxation and social security payable
Other payables
Contingent consideration
Accruals
Deferred income
Non-current
Other payables
Contingent consideration
2022
£’000
7,935
10,122
374
100
12,693
569
31,793
£’000
-
5,360
5,360
2021
£’000
6,086
9,641
582
135
11,345
1,243
29,032
£’000
120
-
120
£100,000 of current contingent consideration represents the earn-out sums payable to the sellers of Tozer Gallagher LLP.
All contingent consideration is Level Three in the fair value hierarchy as there are no observable inputs. Amounts have been calculated
based on the Group’s expectation of what it will pay in relation to the earn-out clause of the relevant sale and purchase agreement
discounted to present value. The earn-out targets are based on the annual results of the acquired business. The fair value of the earn-out
consideration is calculated based on the forecasted results, using EBIT growth rate ranges from 2-10%, to give an estimate of the final
obligation capped at the maximum earn-out amount stated in the purchase agreement. Where contingent consideration is due over a
period of more than one year the value of the consideration is discounted and recorded at the present value. The discount rate applied in
determining the present value of contingent consideration is 4.75%.
23. Deferred tax
Deferred tax assets and liabilities are summarised below:
Deferred tax asset
The deferred tax asset recognised in the consolidated statement of financial position represents the future tax impact of issued share based
payments schemes that are yet to vest.
At 1 May 2021
Credited during the year to retained earnings
Debited during the year in the Consolidated income statement
At 30 April 2022
Share-based payments
£’000
138
563
(63)
638
111
Gateley (Holdings) PlcAnnual report and financial statementsNotes to the consolidated financial statementscontinued Deferred tax liability
The deferred tax liability recognised in the Consolidated Statement of Financial Position represents the future tax impact of the Group’s
benefit from customer lists obtained through acquisitions.
At 1 May 2020
Credited during the year in the Consolidated income statement
At 30 April 2021
Arising through business combinations – Tozer Gallagher LLP,
Adamson Jones Holdings Limited and SP 2018 Limited
Credited during the year in the Consolidated income statement
At 30 April 2022
24. Provisions
Current provision
Professional indemnity provision
Total current provision
Non-current provision
Professional indemnity provision
Dilapidations provision
Total non-current provision
Total provisions
Professional indemnity estimated claim cost
Brought forward
Provisions made during the year
Provisions reversed during the year
At end of year
Non-current
Current
Customer lists
£’000
1,208
(436)
772
2,482
(165)
3,089
2022
£’000
2021
£’000
101
101
649
214
863
964
2022
£’000
725
35
(10)
750
649
101
750
176
176
549
214
763
939
2021
£’000
713
385
(373)
725
549
176
725
The Group from time to time receives claims in respect of alleged professional negligence which it defends where appropriate but makes
provision for the best estimate of probable amounts considered likely to be payable as set out above. Inevitably, these estimates depend on
the outcome and timing of future events and may need to be revised as circumstances change. A different assessment of the likely outcome
in each case or of the probable cost involved may result in a different level of provision recognised. Professional indemnity Insurance cover
is maintained in respect of professional negligence claims.
112
Business Overview
Strategic Report
Corporate Governance
Our Financials
Dilapidations provision
The Group has leases for a number of offices, some of which include dilapidation clauses. The Group maintains the office buildings
throughout each lease term with regular maintenance, however a cost is likely to arise at the end of the lease term in order to return the
space to its original condition. Management have therefore elected to introduce a dilapidations provision to account for the future cost.
The provision is based on Management’s estimate of the total costs across all applicable lease to be recognised on a straight line basis over
the total lease terms.
At 1 May
Provision made in the year
At 30 April
25. Net debt
Cash and cash equivalents
Debt
Total loans brought forward
Revolving credit facility – due in more than one year
New lease liability in the year
Repayment of loans from former members
Repayment of term loans
Termination of lease
Repayment of lease liability
Total loan carried forward
Brought forward from previous year
Movement during year
Net debt at the year end
2022
£’000
214
-
214
2022
£’000
16,105
(30,445)
(5,715)
(2,351)
-
-
-
3,870
(34,641)
(10,840)
(7,696)
(18,536)
2021
£’000
-
214
214
2021
£’000
19,605
(29,262)
-
(9,385)
729
3,077
1,359
3,037
(30,445)
(26,339)
15,499
(10,840)
113
Gateley (Holdings) PlcAnnual report and financial statementsNotes to the consolidated financial statementscontinued Business Overview
Strategic Report
Corporate Governance
Our Financials
The changes in the Group’s liabilities arising from financing activities can be classified as follows:
The Company has one class of Ordinary shares which carry no right to fixed income.
Long term
borrowings
£’000
Short term
borrowings
£’000
-
-
5,715
-
-
5,715
-
-
-
-
-
-
Long term
borrowings
£’000
3,077
Short term
borrowings
£’000
729
Lease
liabilities
£’000
30,445
(3,870)
-
793
1,558
28,926
Lease
liabilities
£’000
25,456
Total
£’000
30,445
(3,870)
5,715
793
1,558
34,641
Total
£’000
29,262
(3,077)
(729)
(3,037)
(6,843)
-
-
-
-
8,026
30,445
8,026
30,445
1 May 2021
Cashflows:
Repayments
Receipt of revolving credit facility
Non-cash
Fair value on acquisition
New lease liability in the year
30 April 2022
1 May 2020
Cashflows:
Repayments
Non-cash
New lease liability in the year
30 April 2021
26. Share capital
Authorised, issued and fully paid
Ordinary shares of 10p each
Brought forward
Issued on acquisition of Tozer Gallagher LLP
Issued on acquisition of Adamson Jones IP Limited
Issued on acquisition of Gateley Smithers Purslow Limited
Issued as part of contingent consideration of Gateley
Vinden Limited
Issued on vesting of RSA
Issued on vesting of SAYE
Issued on vesting of CSOPS
At 30 April 2022
2022
Number
2022
£
2021
Number
2021
£
117,914,205
11,791,420
117,609,094
11,760,909
142,179
543,668
3,312,322
-
1,477,560
308,819
858,126
14,218
54,367
331,232
-
147,756
30,882
85,813
-
-
-
197,368
-
107,743
-
-
-
-
19,737
-
10,774
-
124,556,879
12,455,688
117,914,205
11,791,420
On 22 July 2021 the Group acquired the trade and assets of Tozer Gallagher LLP in part for the issue of 142,179 10p ordinary shares.
On 9 January 2022 the Company acquired Adamson Jones IP Limited and dormant group companies in part for the issue of 543,668 10p
ordinary shares.
On 19 April 2022 the Company acquired Gateley Smithers Purslow Limited (Formerly Smithers Purslow Limited) and other group companies in
part for the issue of 3,312,322 10p ordinary shares.
Between 1 May 2021 and 19 April 2022 308,819 10p ordinary shares were issued upon vesting of the 2018 SAYE schemes to participants.
Between 3 August 2021 and 1 November 2021 858,126 10p ordinary shares were issued upon vesting of the 2018 CSOP schemes to participants.
On 27 April 2022 1,477,560 10p ordinary shares were issued upon vesting of the 2022 RSA scheme to participants.
27. Financial instruments and related disclosures
Financial risk management
The board 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 refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Group. The
Group’s credit risk is primarily attributable to its trade receivables.
The Group continuously monitors the credit quality of customers and risk attributable to specific debts. The Group’s policy is to deal only
with credit worthy counterparties, with standard credit terms being 30 days. The credit terms as negotiated with customers are subject to
close monitoring and internal approval. The ongoing credit risk is managed through regular review of ageing analysis.
Trade receivables across the Group have been assessed with regard to credit risk characteristics which vary across segmental reporting lines
according to the nature of the industry, size and financial position of the counterparty. The Group also considers days past due in making
this assessment as well as historical credit losses experienced within over a period of 12 months before 30 April 2022.
The expected loss rates derived from this assessment are adjusted to reflect current and forward-looking information affecting the ability
of the customers to settle the receivables. 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.
Historic cash collection rates and the Group write-off of financial instruments do not show an increased likelihood of default once the
payments are more than 30 days past due. The Group hold long standing relationships with most clients therefore there is no increased risk
perceived based on the age of the contractual payment alone.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all
trade receivables and contract assets.
The board considers financial instruments where contractual payments are significantly past due on a monthly basis to determine the risk of
default. As part of this process and financial instruments that have had a significant increase in credit risk are identified. For these purposes
default is considered to be where the counterparty to the financial instrument fails to fulfil part or all of their financial obligation. The Group
will consider a financial asset to be credit impaired based on both the age of the item and specific knowledge held by the fee earner in
relation to the client’s ability and intention to meet their obligations.
In circumstances where fee earners and the board find sufficient indicators that there is no longer reasonable expectation of recovery, the
amounts are written off.
114
115
Gateley (Holdings) PlcAnnual report and financial statementsNotes to the consolidated financial statementscontinued 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 cash generated from operations. 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 SONIA plus a margin. Management do not consider this to be a
significant risk to the Group.
Foreign currency risk
The Group has an overseas operation based in Dubai and another in the Republic of Ireland which, therefore, exposes the Group to changes
in Sterling/Dirhams and Sterling/Euro exchange rates. Management does not consider this to be a significant risk to the Group due to the
total value of transactions conducted in Dubai and the Republic of Ireland.
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
The fair value of bank loans and other loans approximates to the carrying value reported
in the statement of financial position.
Fair value hierarchy
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)
116
Business Overview
Strategic Report
Corporate Governance
Our Financials
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
Contract assets
Trade receivables at amortised cost
Total financial assets
Trade and other payables
Contingent consideration at FVTPL
Short-term borrowings
Current financial liabilities
Long-term borrowings
Other payables due after more than one year
Contingent consideration at FVTPL
Total financial liabilities
2022
£’000
16,105
17,239
50,201
83,545
(21,002)
(100)
-
2021
£’000
19,605
13,900
36,680
70,185
(18,013)
(135)
-
(21,102)
(18,148)
(5,715)
-
(5,360)
(32,177)
-
(120)
-
(18,268)
Financial assets contain trade receivables and unbilled revenue whereas financial liabilities contain trade payables, other payables and
accruals.
Measurement of fair value of financial instruments
The Group performs valuations of financial items for financial reporting purposes, including Level 3 fair values, in consultation with third
party valuation specialists for complex valuations. Valuation techniques are selected based on the characteristics of each instrument, with
the overall objective of maximising the use of market-based information.
Fair value measurement of contingent consideration
All contingent consideration relating to business combinations is Level 3 in the fair value hierarchy as there are no observable inputs. The
fair value of contingent consideration is estimated using the present value technique, based on estimated future cash outflows discounted
at 4.75% being the applicable weighted average cost of debt. Where the contingent consideration is due less in less than 12 months, no
discount factor is applied. The estimated cash outflows before discounting reflect Management’s estimate of the earnout due based on
the forecasted results, using EBIT growth rates ranging from 2-10%, capped at the maximum earn-out amount as stated in the purchase
agreement. The earn-out targets are based on the annual results of the acquired business. An increase in the forecasted EBITDA of 1%
would result in an increase of £46,000 in contingent consideration, a decrease in the forecasted EBITDA of 1% would result in a decrease of
£46,000 in contingent consideration due.
The reconciliation of the carrying amounts of financial instruments classified within Level 3 is as follows:
Balance at 1 May
Arising on business combination
Amount of earn-out paid
Amount recognised in profit or loss
Balance at 30 April
2022
£’000
135
5,452
-
(127)
5,460
Contingent
consideration
2021
£’000
1,149
-
(368)
(646)
135
117
Gateley (Holdings) PlcAnnual report and financial statementsNotes to the consolidated financial statementscontinued Business Overview
Strategic Report
Corporate Governance
Our Financials
Lease liabilities are presented in the statement of financial position as follows:
Current lease liability
Non-current lease liability
2022
£’000
3,719
25,207
2021
£’000
2,743
27,702
A number of property leases held by the Group include break or termination options. The lease liability has been calculated based on the
likelihood of such option being exercised. An option would only be exercised when in line with the Groups wider strategy.
In line with IFRS 16 Leases the Group has elected not to recognise a lease liability for leases with a term of 12 months or less, or for leases
of low value assets. The payments made under such leases are expensed to the profit and loss on a straight-line basis. Any variable lease
payments incurred are expensed as incurred.
The table below shows amounts recognised in the Statement of Comprehensive Income for short term and low value leases as at 30 April
2022:
Expenses relating to short-term leases
Expenses relating to leases of low-value assets, excluding short-term leases of
low value assets
Property
£’000
Equipment
£’000
26
-
26
23
17
40
Total
£’000
49
17
66
The total minimum undiscounted lease payments at 30 April 2022 under non-cancellable operating lease rentals were:
Within one year
In the second to fifth year inclusive
After five years
30. Related parties
30 April 2022
£’000
30 April 2021
£’000
4,645
22,435
16,606
43,686
3,024
15,921
13,822
32,767
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 £120,000 (2021: £120,000) and the amounts outstanding at the year-end are £nil (2021: £80,000).
Mattiolli Woods Plc
The Company’s Non-Executive Director, Joanne Lake, was Non-Executive Director and Chairman of Mattiolli Woods Plc during the year
(resigned 8 April 2022). 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 £52,009 (2021: £49,046) in respect of employee benefits services provided
by Mattiolli Woods Plc. The Group received revenues of £900 (2021: £nil) in respect of legal services provided to Mattiolli Woods Plc and
its subsidiaries. No amounts were outstanding at the year-end (2021: £nil).
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
2022
Increase/
(decrease)
in profit
and loss
£’000
1
(1)
2021
Increase/
(decrease)
in profit
and loss
£’000
-
-
The borrowing facilities arranged 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
The effect of foreign currency fluctuations on the financial statements is immaterial.
28. Capital commitments
2022
£’000
183
2021
£’000
345
In 2021 the Group entered a contract with a provider of legal technology for the development of a new practice management system, with
Thomson Reuters for the installation of their market leading practice management system. The cost of the contractual capital commitment
was £1.1million and was incurred across calendar years 2021 and 2022. The outstanding obligation at year end is £nil.
29. Leases liabilities – IFRS 16
The Group has leases for offices, vehicles and some IT equipment, with the exception of short-term leases and leases of low-value assets
each lease is held on the balance sheet as a right-of-use asset and corresponding lease liability. Property leases have a remaining term of one
to ten years. Leases of vehicles and IT equipment have a term of three to five years. Lease payments on all those recognised on the balance
sheet are fixed. Unless there is a contractual right for the Group to sublet the asset to a third party, the right of use asset can only be used
by the Group.
The table below provides additional information on the right-of-use assets by class of assets:
Number of
leased assets*
Average
length of lease
remaining
Opening lease
asset
£’000
Net additions
£’000
Depreciation
£’000
Closing lease
asset
£’000
Office buildings
IT equipment
17
2
5.9 years
2years
26,986
21
1,397
6
(3,767)
(16)
24,616
11
* Where properties within the same building are leased on a floor by floor basis on the same contractual terms, the Group has elected to treat these as a portfolio and are counted
as a single leased asset within the table
118
119
Gateley (Holdings) PlcAnnual report and financial statementsNotes to the consolidated financial statementscontinued Gateley (Holdings) Plc
Annual report and financial statements
Notes to the consolidated financial statements
continued
Compensation paid to key management personnel
At the year end, Directors of Gateley (Holdings) Plc control 4.60% (2021: 5.35%) of the voting shares of the Company.
The key management personnel comprise the Strategic Board on the basis that they make any final key decisions.
Short term compensation paid to key management personnel during the year totalled £4.101m (2021: £3.088m).
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
31. Pensions
2022
£’000
3,553
512
-
36
4,101
2021
£’000
2,713
374
-
1
3,088
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 £2,076,081 (2021: £1,704,636) and the outstanding balance
at the year end was £40,609 (2021: £30,417).
120
121Business OverviewStrategic ReportCorporate GovernanceOur FinancialsNote2022£’0002021£’000Non-current assetsInvestments554,24233,027Total non-current assets54,24233,027Current assetsTrade and other receivables65,9136,769Cash and cash equivalents439107Total current assets6,3526,854Total assets60,59439,903Non-current liabilities Other interest-bearing loans and borrowings8(5,715)-Other payables 7(5,360)-Total non-current liabilities (11,075)-Current liabilitiesOther payables7(27)(152)Total current liabilities(27)(152)Total liabilities(11,102)(152)Net assets49,49239,751EquityShare capital912,45611,792Share premium11,3429,421Other reserves14,4656,815Retained earnings11,22911,723Total equity 49,49239,751Under 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 2022 was £10,723,499 (2021: £5,131,791). These financial statements were approved by the directors on 12 September 2022 and were signed and authorised on their behalf by:Rodrick Neil A Smith Chief Executive Officer Finance DirectorCompany registered number: 09310078The accompanying notes on pages 122 to 134 form an integral part of these financial statements.Parent company statement of financial positionat 30 April 2022 Parent company statement of changes in equity
for the year ended 30 April 2022
Parent company cash flow statement
for the year ended 30 April 2022
Business Overview
Strategic Report
Corporate Governance
Our Financials
At May 2020
Comprehensive income:
Profit for the year
Total comprehensive income
Transactions with owners:
Dividend paid
Issue of share capital
Share based payment transactions
Total equity at 30 April 2021
At May 2021
Comprehensive income:
Profit for the year
Total comprehensive income
Transactions with owners:
Dividend paid
Issue of share capital
Share based payment transactions
Total equity at 30 April 2022
Share capital
£’000
Share premium
£’000
Other reserves
£’000
11,761
8,938
6,812
Retained
earnings
£’000
5,635
Total Equity
£’000
33,146
-
-
-
31
-
11,792
11,792
-
-
-
664
-
12,456
-
-
-
483
-
9,421
9,421
-
-
-
1,921
-
11,342
-
-
-
3
-
6,815
6,815
-
-
-
7,650
-
14,465
5,132
5,132
-
-
956
11,723
11,723
10,723
10,723
5,132
5,132
-
517
956
39,751
39,751
10,723
10,723
(12,430)
(12,430)
-
1,213
11,229
10,235
1,213
49,492
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.
The accompanying notes on pages 122 to 134 form an integral part of these financial statements.
Cash flows from operating activities
Profit for the year
Interest expense
Release of contingent consideration
Increase/(decrease) in liabilities
Decrease/(increase) in trade and other receivables
Net cash flows from operating activities
Investing activities
Consideration paid on acquisitions
Contingent consideration paid
Net cash used in investing activities
Financing activities
Receipt of funds for issue of SAYE/CSOP/RSA shares
Receipt of revolving credit facility, net of refinancing costs
Receipt of funds for issue of shares on acquisition of Tozer Gallagher
Dividends paid
Net cash (used in)/generated from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of year
The accompanying notes on pages 122 to 134 form an integral part of these financial statements.
2022
£’000
10,723
8
(135)
10
856
11,462
(6,615)
-
(6,615)
1,900
5,715
300
(12,430)
(4,515)
332
107
439
2021
£’000
5,132
-
-
(595)
(4,541)
(4)
-
(363)
(363)
299
-
-
-
299
(68)
175
107
122
123
Gateley (Holdings) PlcAnnual report and financial statements Parent company notes to the financial statements
For the period ended 30 April 2022
(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 in accordance with UK-adopted International Accounting standards and with the requirements
of the Companies Act 2006 as applicable to companies reporting under those standards. 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 13 below.
The individual financial statements of the Company are presented in the currency of the primary economic environment in which it operates
(its functional currency). For the purposes of the financial statements, the results and financial position of the company are expressed in
GBP, which is the functional and presentational currency of the Company.
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
See full explanation on page 24 of the Strategic Report.
Having reviewed the Company’s forecasts, which includes an analysis of both short term cash flow forecasts and longer term cash flow
forecasts, the risk and uncertainties surrounding the current and future demand for legal services, and other reasonably possible variations
in trading performance, and the possible impact of Covid-19 the Company expects to be able to operate within the Company’s financing
facilities and in accordance with the covenants set out in those facility agreements.
Sensitivity analysis has been performed in respect of specific scenarios which could negatively impact our future performance such as lower
levels of revenue growth, lower than forecast receipts of cash, and reduced levels of gross margin expansion. In addition, the directors have
also considered mitigating actions such as lower capital expenditure and other short-term cash management activities within the Company’s
control. On this basis, the directors have a reasonable basis to conclude that the Company is forecast to continue to trade in line with
existing financing facilities for the foreseeable future.
Accordingly the Directors continue to adopt the going concern basis of accounting in preparing the financial statements.
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.
Business Overview
Strategic Report
Corporate Governance
Our Financials
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.
i) Investments
Fixed asset investments are stated at cost less provision for any impairment in value.
Investments in subsidiary undertakings are stated as fixed asset investments, at cost less amounts written off for impairment with any
subsequent year adjustments stated directly into the profit and loss account. Investments are reviewed for impairment where events
or circumstances indicate that their carrying amount may not be recoverable. In some instances investments are subject to contingent
consideration, this is included in the cost of investment. The amount of contingent consideration due is assessed regularly by Management
based on actual and forecast performance. Any changes to contingent consideration due are recognised within the profit and loss account.
Cost of investment also includes share-based payment charges of equity settled share based payment schemes to be settled on behalf of
subsidiary companies.
ii) Trade and other receivables
Trade and other receivables (except unbilled amounts for client work) are initially recognised at their transaction value and carried at
amortised cost under IFRS 9.
In line with IFRS 9, the Company recognises any expected credit loss against trade receivables in order to recognise the inherent risk that the
Group may not be able to collect all amounts due according to the original terms of the receivable. The amount of the provision recorded
is based on a broad range of information including past events, current conditions and forecasts of the future cash flows of the asset and is
recognised in the statement of profit and loss in other operating expenses.
iii) Cash and cash equivalents
Cash and cash equivalents include 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.
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 its liabilities.
The Company’s financial liabilities comprise trade and other payables, borrowings, contingent consideration, 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 with the exception of contingent consideration that is measured at fair value through profit or loss.
1.4 Impairment
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 scenario is likely to occur 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.
Under IFRS 9 the Group recognises expected credit losses (ECL’s) on receivables through application of the simplified method. The amount
of the provision recorded is based on a broad range of information including past events, current conditions and forecasts of the future
cash flows of the asset . Whilst the longevity and impact of the COVID 19 pandemic is unknown, Management have considered the potential
defaults on receivables as a result and reflected these in the ECL’s calculated.
124
125
Gateley (Holdings) PlcAnnual report and financial statements Parent company notes to the financial statements
continued
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.
A deferred tax asset is recognised on deductible temporary differences only to the extent that it is probable that future taxable profits will
be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it
is no longer probable that the related tax benefit will be realised.
1.6 Ordinary dividends
Dividends are recognised as a liability in the period in which they are approved by the Company’s shareholders.
1.7 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 recognised directly within equity.
1.8 New and revised IFRS in issue but not yet effective
At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards
have been published by the IASB but are not yet effective and have not been applied early to the Group:
Revised IFRS
Property, Plant and Equipment: Proceeds before intended use – Amendments to IAS 16
Reference to the Conceptual Framework – Amendments to IFRS 3
Onerous Contracts – Cost of Fulfilling a Contract – Amendments to IAS 37
Annual Improvements to IFRS Standards 2018–2020
Reference to the Conceptual Framework – Amendments to IFRS 3
Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2
Definition of Accounting Estimates - Amendments to IAS 8
Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12
Effective date
1 January 2022
1 January 2022
1 January 2022
1 January 2022
1 January 2023
1 January 2023
1 January 2023
1 January 2023
The directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the
Group in future periods.
2. Expenses
Audit fees in relation to the audit of these accounts of £10,000 (2021: £10,000) have been borne by Gateley Plc. The company does not
have any employees (2021: Nil)
126
Business Overview
Strategic Report
Corporate Governance
Our Financials
3. Investment income
Intercompany dividends to the Company have been received from other Group entities as detailed below:
Dividend received from Gateley Plc – 29 October 2021
Dividend received from Gateley Plc – 29 April 2022
Dividend received from T-Three Consulting Limited – 29 April 2022
Dividend received from Gateley Hamer Limited – 29 April 2022
Dividend received from Gateley Vinden Limited – 29 April 2022
Dividend received from Gateley Plc – 28 April 2021
Dividend received from T-Three Consulting Limited – 28 April 2021
Dividend received from Gateley Capitus Limited – 28 April 2021
Dividend received from Gateley Hamer Limited – 28 April 2021
4. Taxation
2022
£’000
3,570
5,053
800
628
949
-
-
-
-
11,000
2021
£’000
-
-
-
-
2,950
1,000
825
357
5,132
The Company’s profit for the year arises from the receipt of intercompany dividends and the issuance of new shares to Gateley EBT Limited,
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 2020
Share based payment charge
Adjustment to Kiddy & Partners Limited acquisition cost
Adjustment to T-three Consulting Limited
Adjustment to Gateley Vinden Limited (formerly The Vinden Partnership Limited)
Balance at 30 April 2021
At 1 May 2021
Share based payment charge
Acquisition of Gateley Smithers Purslow Limited
Acquisition of Adamson Jones IP Limited
Balance at 30 April 2022
£’000
32,720
956
(279)
(652)
282
33,027
33,027
1,213
17,502
2,500
54,242
127
Gateley (Holdings) PlcAnnual report and financial statements Parent company notes to the financial statements
continued
Business Overview
Strategic Report
Corporate Governance
Our Financials
Investments in subsidiaries
The Company has effective control of the following:
Gateley Plc
Entrust Pension Limited
Gateley Capitus Limited
Gateley Hamer Limited
Kiddy & Partners Limited
International Investments Services Limited
Persona Associates Limited
T-Three Consulting Limited*
T-Three Group Limited
T-Three Holdings Limited*
Gateley Vinden Limited
GEG Services Limited
Matsa Holdings Limited
Thomas Alexander Holdings Limited*
TVP Holdings Limited*
SP 2018 Limited
Smithers Purslow Group Limited*
Gateley Smithers Purslow Limited*
Registered office
One Eleven, Edmund Street,
Birmingham, B3 2HJ
Ship Canal House 98, King Street,
Manchester, M2 4WU
One Eleven, Edmund Street,
Birmingham, B3 2HJ
One Eleven, Edmund Street,
Birmingham, B3 2HJ
One Eleven, Edmund Street,
Birmingham, B3 2HJ
One Eleven, Edmund Street,
Birmingham, B3 2HJ
One Eleven, Edmund Street,
Birmingham, B3 2HJ
One Eleven, Edmund Street,
Birmingham, B3 2HJ
One Eleven, Edmund Street,
Birmingham, B3 2HJ
One Eleven, Edmund Street,
Birmingham, B3 2HJ
One Eleven, Edmund Street,
Birmingham, B3 2HJ
One Eleven, Edmund Street,
Birmingham, B3 2HJ
One Eleven, Edmund Street,
Birmingham, B3 2HJ
One Eleven, Edmund Street,
Birmingham, B3 2HJ
One Eleven, Edmund Street,
Birmingham, B3 2HJ
One Eleven, Edmund Street,
Birmingham, B3 2HJ
One Eleven, Edmund Street,
Birmingham, B3 2HJ
One Eleven, Edmund Street,
Birmingham, B3 2HJ
Ordinary share
proportion held
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Intermediate holding company
Intermediate holding company
Corporate advisory, dispute
resolution and consultancy to
the built environment in the
property and construction
markets
UK Investment services
provider
Intermediate holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Intermediate holding company
Architecture, building
surveyance and civil &
structural engineering
Nature of business
Legal services
Pension trustee services
Tax incentive services
Specialist property
consultancy
Human capital consultancy
UK Investment consultancy
Dormant
Byrom Clark Roberts Limited*
Ainsley Stokes Limited*
Adamson Jones Holdings Limited
Adamson Jones IP Limited*
Gateley EBT Limited
Gateley Investments Limited*
Human capital consultancy
Ensco Trustee Company Limited*
Registered office
One Eleven, Edmund Street,
Birmingham, B3 2HJ
One Eleven, Edmund Street,
Birmingham, B3 2HJ
One Eleven, Edmund Street,
Birmingham, West Midlands,
B3 2HJ
One Eleven, Edmund Street,
Birmingham, West Midlands,
B3 2HJ
One Eleven, Edmund Street,
Birmingham, West Midlands,
B3 2HJ
One Eleven, Edmund Street,
Birmingham, West Midlands,
B3 2HJ
One Eleven, Edmund Street,
Birmingham, West Midlands,
B3 2HJ
One Eleven, Edmund Street,
Birmingham, West Midlands,
B3 2HJ
One Eleven, Edmund Street,
Birmingham, West Midlands,
B3 2HJ
One Eleven, Edmund Street,
Birmingham, West Midlands,
B3 2HJ
One Eleven, Edmund Street,
Birmingham, West Midlands,
B3 2HJ
One Eleven, Edmund Street,
Birmingham, West Midlands,
B3 2HJ
One Eleven, Edmund Street,
Birmingham, West Midlands,
B3 2HJ
Imperial House, 4-10 Donegall
Square East, Belfast, Northern
Ireland, BT1 5HD
Ordinary share
proportion held
100%
100%
Nature of business
Dormant
Architecture, building
surveyance and civil &
structural engineering
100%
Intermediate holding company
100%
Patent attorney
100%
Employee benefit trust
100%
Corporate investment
company
100%
Corporate trustee company
100%
Non-trading
100%
Non-trading
100%
Non-trading
100%
Non-trading
100%
Non-trading
100%
n/a
n/a
Legal services via a branch in
Dubai
Legal services in Northern
Ireland
Legal Services in Ireland
Gateley Secretaries Limited*
Gateley Incorporations Limited*
Gateley Custodian and Nominee Services
Limited*
Gateley Custodian and Nominee Services
No.2 Limited*
Gateley Omega Limited (formerly Ensco
1413 Limited)
Gateley UK LLP**
Gateley Tweed LLP***
Victoria Louise Garrad, Callum Laing Nuttall,
Thomas Oliver Durrant and Richard Julian
Healey trading as Gateley Tweed***
One Eleven, Edmund Street,
Birmingham, West Midlands,
B3 2HJ
128
129
Gateley (Holdings) PlcAnnual report and financial statements Parent company notes to the financial statements
continued
Gateley Heritage LLP*
Gateley (Manchester) LLP*
Registered office
One Eleven, Edmund Street,
Birmingham, West Midlands,
B3 2HJ
Ship Canal House 98, King Street,
Manchester, M2 4WU
Ordinary share
proportion held
Nature of business
100%
Non-trading
51%
Non-trading
*
**
***
these investments are indirectly held at the year end.
certain Directors of Gateley (Holdings) Plc and Gateley Plc as individuals are members of this entity, although effective control is held by Gateley (Holdings) Plc via a trust
holding arrangement.
These entities are related entities of Gateley Plc since the majority of its Members are also board members of Gateley Plc. In substance they are controlled by Gateley Plc and
so their results are included in the consolidated results of Gateley (Holdings) Plc. In accordance with local governance regulations, direct ownership in Gateley Tweed LLP
and Gateley Tweed (a partnership in Ireland) is not permitted however both entities will be recognised as subsidiary undertakings of Gateley Plc under section 1162(4) of
the Companies Act 2006 and thus subsidiary undertakings of the Group by virtue of section 1162(5) of the Companies Act 2006.
6. Trade and other receivables
Amounts owed from Gateley Plc
Amounts owed from Gateley EBT Limited
Amounts owed from T-Three Consulting Limited
2022
£’000
5,010
903
-
5,913
2021
£’000
4,450
1,319
1,000
6,769
All receivables are anticipated to be due within one year and repayable on demand.
The carrying amount of financial assets (excluding investments) 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 due in one year
Other payables
2022
£’000
-
27
27
2021
£’000
135
17
152
Contingent consideration of £0.135m relating to estimated earn out payments are due to the vendor of IIS have been released in the year as
a result of performance against earnout criteria.
Contingent consideration due in more than one year
2022
£’000
5,360
2021
£’000
-
Business Overview
Strategic Report
Corporate Governance
Our Financials
8. Other interest-bearing loans and borrowings
The contractual terms of the Company’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 27.
Non-Current liabilities
Bank borrowings
2022
Fair
value
£’000
5,715
2022
Carrying
amount
£’000
5,715
2021
Fair
value
£’000
-
2021
Carrying
amount
£’000
-
On 18 April 2022, the Company entered into a revolving credit facility which provides total committed funding of £30m until April 2025.
Interest is payable at a margin of 1.95% above the SONIA reference rate. On 19 April 2022 £6m was drawdown against the facility in order
to fund the initial cash consideration in the acquisition of SP 2018 Limited.
As at 30 April 2022, the Company’s non-derivative financial liabilities have contractual maturities (including interest payments where
applicable) as summarised below:
30 April 2022
Bank borrowings
Total
Current
Within 6
months
£’000
-
-
6 to 12
months
£’000
-
-
Non-current
1 – 5
years
£’000
Later than
5 years
£’000
6,000
6,000
-
-
This compares to the maturity of the Company’s non-derivative financial liabilities in the previous reporting period as follows:
30 April 2021
Bank borrowings
Total
Current
Within
6 months
£’000
6 to
12 months
£’000
-
-
-
-
Non-current
1 – 5
years
£’000
Later than
5 years
£’000
-
-
-
-
The above amounts reflect the contractual undiscounted cash flows, which may differ to the carrying values of the liabilities at the reporting
date.
130
131
Gateley (Holdings) PlcAnnual report and financial statements Parent company notes to the financial statements
continued
9. Capital and reserves
Authorised, issued and fully paid
Ordinary shares of 10p each
Brought forward
Issued on acquisition of Tozer Gallagher LLP
Issued on acquisition of Adamson Jones IP Limited
Issued on acquisition of Gateley Smithers Purslow Limited
Issued as part of contingent consideration of Gateley
Vinden Limited
Issued on vesting of RSA
Issued on vesting of CSOPS
Issued on vesting of SAYE
2022
Number
2022
£
2021
Number
2021
£
117,914,205
11,791,420
117,609,094
11,760,909
142,179
543,668
3,312,322
-
1,477,560
858,126
308,819
14,218
54,367
331,232
-
-
-
-
-
-
-
197,368
19,737
147,756
85,813
30,882
-
-
-
-
107,743
10,774
124,556,879
12,455,688
117,914,205
11,791,420
The Company has one class of Ordinary shares which carry no right to fixed income.
On 22 July 2021 the Group acquired the trade and assets of Tozer Gallagher LLP in part for the issue of 142,179 10p ordinary shares.
On 9 January 2022 the Company acquired Adamson Jones IP Limited and dormant group companies in part for the issue of 543,668
10p ordinary shares.
On 19 April 2022 the Company acquired Gateley Smithers Purslow Limited (Formerly Smithers Purslow Limited) and other group
companies in part for the issue of 3,312,322 10p ordinary shares.
Between 1 May 2021 and 19 April 2022 308,819 10p ordinary shares were issued upon vesting of the 2018 SAYE schemes to participants.
Between 3 August 2021 and 1 November 2021 858,126 10p ordinary shares were issued upon vesting of the 2018 CSOP schemes to
participants.
On 27 April 2022 1,477,560 10p ordinary shares were issued upon vesting of the 2022 RSA scheme to participants.
10. Financial instruments and related disclosures
Financial risk management
The board 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.
Business Overview
Strategic Report
Corporate Governance
Our Financials
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 cash generated from operations. 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 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 Company’s bank borrowings incur variable interest rate charges linked to SONIA 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
The fair value approximates to the carrying value because of the short maturity of these
instruments.
Fair value hierarchy
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.
132
133
Gateley (Holdings) PlcAnnual report and financial statements Parent company notes to the financial statements
continued
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 - FVTPL
Other payables
Group payables
Current financial liabilities
Long-term borrowings
Contingent consideration at FVTPL
Total non-current liabilities
Total financial liabilities
2022
£’000
439
5,913
6,352
-
(27)
-
(27)
(5,715)
(5,360)
(11,075)
(11,102)
2021
£’000
107
6,769
6,876
(135)
-
(17)
(152)
-
-
-
(152)
The company itself does not have any exposure to foreign exchange rates. The Group’s exposure is detailed in note 27.
Measurement of fair value of financial instruments
The Group performs valuations of financial items for financial reporting purposes, including Level 3 fair values, in consultation with third
party valuation specialists for complex valuations. Valuation techniques are selected based on the characteristics of each instrument, with
the overall objective of maximising the use of market-based information.
Fair value measurement of contingent consideration
All contingent consideration relating to business combinations is Level 3 in the fair value hierarchy as there are no observable inputs. The
fair value of contingent consideration is estimated using the present value technique, based on estimated future cash outflows discounted
at 4.75% being the applicable weighted average cost of debt. Where the contingent consideration is due less in less than 12 months, no
discount factor is applied. The estimated cash outflows before discounting reflect Management’s estimate of the earnout due based on
the forecasted results, using EBITDA growth rates ranging from 2-10%, capped at the maximum earn-out amount as stated in the purchase
agreement. The earn-out targets are based on the annual results of the acquired business. An increase in the forecasted EBITDA of 1%
would result in an increase of £46,000 in contingent consideration, a decrease in the forecasted EBITDA of 1% would result in a decrease of
£46,000 in contingent consideration due.
The reconciliation of the carrying amounts of financial instruments classified within Level 3 is as follows:
Balance at 1 May
Arising on business combination
Amount of earn-out paid
Amount recognised in profit or loss
Balance at 30 April
Contingent
consideration
2021
£’000
1,149
-
(368)
(646)
135
2022
£’000
135
5,352
-
(127)
5,360
Business Overview
Strategic Report
Corporate Governance
Our Financials
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 Company’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
2022
Increase/
(decrease)
in profit
and loss
£’000
1
(1)
2021
Increase/
(decrease)
in profit
and loss
£’000
-
-
The borrowing facilities arranged include overdraft facility and short term borrowing facilities. All borrowings are repayable within one year.
11. Share based payments
Details of the Group’s share based payment schemes in operation are shown in note 8 of the Group financial statements. All shares are
issued by Gateley (Holdings) Plc.
12. 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 30.
13. Accounting estimates and judgements
The preparation of these financial statements under IFRS requires Management to make estimates and assumptions which affect these
financial statements. The key estimates and assumptions relate to the impairment assessment of investments.
Impairment of investments (note 5)
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 in 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. Management do not believe any
impairment is necessary against the carrying value of its investments.
14. Contingent liability
A cross guarantee between the company and Gateley Plc exists in respect of all loans and overdrafts. The value of the contingent liability at
30 April 2022 is £5,715,000 (2021: £nil).
134
135
Gateley (Holdings) PlcAnnual report and financial statements 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 20 October 2022 at 12:30 p.m. Shareholders will be asked to consider and, if thought fit, to pass the following resolutions of
which resolutions 1 to 9 (inclusive) will be proposed as ordinary resolutions and resolutions 10 to 13 (inclusive) will be proposed as special
resolutions.
ORDINARY RESOLUTIONS
1.
To receive the Company’s annual accounts for the financial year ended 30 April 2022 together with the Directors’ Report and the
auditors’ report on those accounts.
2.
3.
4.
5.
6.
7.
8.
9.
To approve the Directors’ Remuneration Report for the financial year ended 30 April 2022, which is set out in the Company’s annual
report for the financial year ended 30 April 2022.
To declare a final dividend for the year ended 30 April 2022 of 5.5p per share. If approved, this final dividend will be paid in October to
shareholders on the register at the close of business on 23 September 2022. The shares will go ex-dividend on
22 September 2022.
To reappoint Joanne Carolyn Lake (who retires in accordance with article 23.4.2 of the Company’s articles of association and, being
eligible, offers herself for re-election) as a Director of the Company.
To reappoint Neil Andrew Smith (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 Victoria Louise Garrad (in accordance with article 23.1 of the Company’s articles of association) as a director of the
Company.
To appoint MacIntyre Hudson 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 £4,152,917 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 20 January
2024) 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
10.
THAT, if resolution 9 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 9 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:
10.1 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
Business Overview
Strategic Report
Corporate Governance
Our Financials
10.2 the allotment of Equity Securities or sale of treasury shares (otherwise than under paragraph 10.1 above) up to an aggregate
nominal amount of £622,937 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 20 January 2024) 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.
11.
THAT, if resolution 9 above is passed, and in addition to any authority granted under resolution 10 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 9 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:
11.1 limited to the allotment of Equity Securities or sale of treasury shares pursuant to the authority granted under resolution 9 up to
an aggregate nominal amount of £622,937 representing approximately 5% of the current share capital of the Company; and
11.2 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 20 January 2024) 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.
12.
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:
12.1 the maximum number of Ordinary Shares which may be purchased is 12,458,753 (representing 10% of the Company’s issued
share capital);
12.2 the minimum price which may be paid for each Ordinary Share is £0.10;
12.3 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 five business
days immediately preceding the day on which the Ordinary Share in question is purchased;
12.4 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 20 January 2024); and
12.5 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.
13.
That, conditional on: (a) the audited annual accounts and reports for the year ended 30 April 2022 being laid before shareholders;
(b) delivery of the completed accounts for the year ended 30 April 2022 to the Registrar of Companies; and (c) the audited annual
accounts for the year ended 30 April 2022 showing sufficient distributable profits to enable the releases being entered into:
136
137
Gateley (Holdings) PlcAnnual report and financial statements
Notice of annual general meeting
continued
13.1 the appropriation of distributable profits of the Company (as shown in the annual accounts of the Company made up to 30 April
2022 received in resolution 1 above) to the payment of the unlawful element of each of the dividends set out below (each a
Relevant Dividend and together the Relevant Dividends), the unlawful elements of those Relevant Dividends together having
a total aggregate sum not exceeding £3,283,881.93, be and are authorised, each by reference to the same record date as the
original accounting entries for the Relevant Dividends:
Date of dividend payment
16 March 2018 interim dividend
15 March 2019 interim dividend
31 March 2022 interim dividend
Total aggregate value
Amount per ordinary
share
Total aggregate amount of
dividend paid
Total unlawful element of
dividend paid
2.2p
2.6p
3p
–
£2,351,024.57
£2,853,261.84
£3,582,071.34
–
£1,458,919.83
£1,118,470.48
£706,491.62
£3,283,881.93
13.2 any and all claims which the Company has, or may have, arising out of or in connection with the approval, declaration and/or
payment of the Relevant Dividends against its current or former shareholders who appeared on the register of members on the
relevant record date for each respective Relevant Dividend (or the personal representatives and their successors in title (as
appropriate) of a shareholder’s estate if that shareholder is deceased and/or the successors in title or assignees for corporate
members) be waived and released, and a deed of release in favour of those shareholders (or the personal representatives and
their successors in title (as appropriate) of a shareholder’s estate if that shareholder is deceased and/or successors in title or
assignees for corporate members) be entered into by the Company and any Director in the presence of a witness, any two
Directors or any Director and the Company Secretary be authorised to execute that deed of release as a deed for and on behalf
of the Company; and
13.3 any and all claims which the Company has, or may have, arising out of or in connection with the approval, declaration and/or
payment of the Relevant Dividends against all Directors (present and former) of the Company at the time of declaration and
payment of each respective Relevant Dividend (or the personal representatives and their successors in title (as appropriate) of
any Director’s estate if that Director is deceased), including any breach of fiduciary duties, be waived and released, and a deed of
release in favour of those Directors who acted as Directors of the Company at the time of the declaration and payment of each
Relevant Dividend (or the personal representatives and their successors in title (as appropriate) of any Director’s estate if that
Director is deceased) be entered into by the Company and any Director in the presence of a witness, any two Directors or any
Director and the Company Secretary be authorised to execute that deed of release as a deed for and on behalf of the Company.
BY ORDER OF THE BOARD
Neil Andrew Smith
Secretary
Date:
26 September 2022
Registered office:
One Eleven
Edmund Street
Birmingham
B3 2HJ
138
Business Overview
Strategic Report
Corporate Governance
Our Financials
NOTES:
Entitlement to Attend and Vote
1.
To be entitled vote at the Meeting (and for the purposes of the determination by the Company of the votes that may be cast in
accordance with Regulation 41 of the Uncertified Securities Regulations 2001), only those members registered in the Company’s
register of members at close of business on 18 October 2022 (or, if the Meeting is adjourned, close of business on the date which is
two business days before the adjourned Meeting) shall be entitled to vote at the Meeting. Changes to the register of members of the
Company after the relevant deadline shall be disregarded in determining the rights of any person to vote at the Meeting.
Voting on a poll
2.
In line with best practice, voting at the meeting will be on a poll, rather than a show of hands. Each shareholder present at the meeting
will be entitled to one vote for every Ordinary Share registered in his or her name and each corporate representative or proxy will be
entitled to one vote for each Ordinary Share which he or she represents.
Website Giving Information Regarding the Meeting
3.
Information regarding the Meeting, including the information required by Section 311A of the Act, is available from www.gateleyplc.
com/investors.
Appointment of Proxies
4.
If you are a member of the Company at the time set out in note 1 above, you are entitled to appoint a proxy to exercise all or any of
your rights to attend, speak and vote at the Meeting. You can appoint a proxy only using the procedures set out in these notes and the
notes to the proxy form.
5.
6.
7.
A proxy does not need to be a member of the Company but must attend the Meeting to represent you. If you wish your proxy to
speak on your behalf at the Meeting you will need to appoint your own choice of proxy (not the Chairman) and give your instructions
directly to them.
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 indicate on your
proxy submission how many shares it relates to.
A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the
resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote
(or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the Meeting.
Appointment of Proxy Using Hard Copy Proxy Form
8.
A hard copy form of proxy has not been sent to you but you can request one directly from the registrars, Link Group’s general helpline
team on Tel: 0371 664 0300. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United
Kingdom will be charged at the applicable international rate. Lines are open between 09:00 – 17:30, Monday to Friday excluding public
holidays in England and Wales. Or via email at shareholderenquiries@linkgroup.co.uk or via postal address at Link Group, 10th Floor,
Central Square, 29 Wellington Street, Leeds, LS1 4DL. In the case of a member which is a company, the proxy form must be executed
under its common seal or signed on its behalf by an officer of the company or an attorney for the company. 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 included with
the proxy form. For the purposes of determining the time for delivery of proxies, no account has been taken of any part of a day that is
not a working day.
Appointment of a Proxy Online
9.
You may submit your proxy electronically using the Share Portal service at www.signalshares.com. Shareholders can use this service
to vote or appoint a proxy online. The same voting deadline of 48 hours (excluding non-working days) before the time of the meeting
applies. Shareholders will need to use the unique personal identification Investor Code (“IVC”) printed on your share certificate. If
you need help with voting online, please contact our Registrar, Link Group’s portal team on 0371 664 0391. Calls are charged at the
standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international
rate. Lines are open between 09:00 – 17:30, Monday to Friday excluding public holidays in England and Wales. Or via email at
shareholderenquiries@linkgroup.co.uk.
139
Gateley (Holdings) PlcAnnual report and financial statements
Business Overview
Strategic Report
Corporate Governance
Our Financials
Corporate Representatives
15.
A corporation which is a member can appoint one or more corporate representatives who may exercise, on its behalf, all its powers as
a member provided that no more than one corporate representative exercises powers over the same share.
Issued Shares and Total Voting Rights
16.
As at 26 September 2022, the Company’s issued share capital comprised 124,618,605 Ordinary Shares of £0.10 each. Each Ordinary
Share carries the right to one vote at a General Meeting of the Company and, therefore, the total number of voting rights in the
Company on 26 September 2022 is 124,618,605. The website referred to in note 3 will include information on the number of shares
and voting rights.
Questions at the Meeting
17.
Under Section 319A of the Act, the Company must answer any question you ask relating to the business being dealt with at the
Meeting unless:
•
•
•
answering the question would interfere unduly with the preparation for the Meeting or involve the disclosure of confidential
information;
the answer has already been given on a website in the form of an answer to a question; or
it is undesirable in the interests of the Company or the good order of the Meeting that the question be answered.
Website Publication of Audit Concerns
18.
Under Section 527 of the Act, shareholders meeting the threshold requirements set out in that section have the right to require the
Company to publish on a website a statement setting out any matter relating to: (i) the audit of the Company’s financial statements
(including the Auditor’s Report and the conduct of the audit) that are to be laid before the Meeting; or (ii) any circumstances
connected with an auditor of the Company ceasing to hold office since the previous meeting at which annual financial statements
and reports were laid in accordance with Section 437 of the Act (in each case) that the shareholders propose to raise at the relevant
meeting. The Company may not require the shareholders requesting any such website publication to pay its expenses in complying
with Sections 527 or 528 of the Act . Where the Company is required to place a statement on a website under Section 527 of the Act,
it must forward the statement to the Company’s auditor not later than the time when it makes the statement available on the website.
The business which may be dealt with at the Meeting for the relevant financial year includes any statement that the Company has been
required under Section 527 of the Act to publish on a website.
Documents on Display
19.
Copies of the letters of appointment of the Directors of the Company and a copy of the Articles of Association of the Company will be
available for inspection at the registered office of the Company from the date of this notice until the end of the Meeting.
Notice of annual general meeting
continued
Appointment of Proxies Through Crest
10.
CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so for
the Meeting and any adjournment(s) of it by using the procedures described in the CREST Manual (available from https://www.
euroclear.com/site/public/EUI). CREST Personal Members or other CREST sponsored members, and those CREST members who have
appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take
the appropriate action on their behalf. In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST
message (a CREST Proxy Instruction) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s (EUI)
specifications and must contain the information required for such instructions, as described in the CREST Manual. The message must
be transmitted so as to be received by the issuer’s agent (ID: RA10) by 12:30 p.m. on 18 October 2022. For this purpose, the time of
receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from
which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST.
CREST members and, where applicable, their CREST sponsors or voting service providers should note that EUI does not make available
special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to
the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a
CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or
voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST
system by any particular time.
In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in
particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company
may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5) (a) of the Uncertificated Securities
Regulations 2001.
Proxy appointment via Proxymity
11.
If you are an institutional investor you may be able to appoint a proxy electronically via the Proxymity platform. For further information
regarding Proxymity, please go to www.proxymity.io. Your proxy must be lodged 48 hours prior to the time appointed for the Meeting
in order to be considered valid. Before you can appoint a proxy via this process you will need to have agreed to Proxymity’s associated
terms and conditions. It is important that you read these carefully as you will be bound by them and they will govern the electronic
appointment of your proxy.
Appointment of Proxy by Joint Members
12.
In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted
by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the
Company’s register of members in respect of the joint holding, the first-named being the most senior.
Changing Proxy Instructions
13.
To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the cut-off
times for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy appointment
received after the relevant cut-off time will be disregarded. Where you have appointed a proxy using the hard-copy proxy form and
would like to change the instructions using another hard-copy proxy form, please contact Link Group as per the communication
methods shown in note 8. If you submit more than one valid proxy appointment, the appointment received last before the latest time
for the receipt of proxies will take precedence.
Termination of Proxy Appointments
14.
In order to revoke a proxy instruction you will need to inform the Company by sending a signed hard copy notice clearly stating
your intention to revoke your proxy appointment to Link Group, at the address shown in note 8. In the case of a member which is
a company, the revocation notice must be executed under its common seal or signed on its behalf by an officer of the company or
an attorney for the company. Any power of attorney or any other authority under which the revocation notice is signed, or a duly
certified copy of such power or authority, must be included with the revocation notice. The revocation notice must be received by
Link Group no later than 48 hours before the Meeting. If you attempt to revoke your proxy appointment but the revocation is received
after the time specified then, subject to the paragraph directly below, your proxy appointment will remain valid. Appointment of a
proxy does not preclude you from attending the Meeting and voting in person. If you have appointed a proxy and attend the Meeting in
person, your proxy appointment will automatically be terminated.
140
141
Gateley (Holdings) PlcAnnual report and financial statements
Business Overview
Strategic Report
Corporate Governance
Our Financials
The consequence of those dividends being paid otherwise than in accordance with the Act is that the Company may have a claim against all
shareholders who received those dividends as well as a claim against all Directors (former or present) who approved the declaration and
payment of those dividends. It is therefore proposed that the Company enter into the Shareholders’ Deed of Release and the Directors’
Deed of Release (as those terms are defined in the Annex to this Notice). Copies of the deeds are available to be viewed on the Company’s
website at https://gateleyplc.com/investors/investor-relations. The consequence of the entry into those deeds by the Company is that the
Company will be unable to make any claims against: (a) the Recipient Shareholders; and (b) the Relevant Directors, in each case in respect
of the payment of the Relevant Dividends otherwise than in accordance with the Act. However, it should be made clear that the Company’s
clear intention is that no party should be put in a worse position as a result of these procedural breaches. The breaches were technical
in nature and in substance the Company could afford to pay the unlawful dividends. The Directors consider it appropriate that no claims
should be made and are trying to provide legal effect to the commercial transaction intended at the time the unlawful dividends were paid.
As such, the purpose of resolution 13 is to:
(i)
authorise the Company to appropriate distributable profits equal to the amount of the dividends paid otherwise than in accordance
with the Act; and
(ii)
authorise the Company to enter into deeds of release having the effect of releasing all relevant shareholders and directors from any
liability that may exist in respect of those dividends, including any breach of fiduciary duties.
Further details of the background to and impact of resolution 13 are set out in the Annex to this Notice.
Notice of annual general meeting
continued
EXPLANATORY NOTES ON CERTAIN BUSINESS OF THE ANNUAL GENERAL MEETING
Resolution 9 – 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 £4,152,917, 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 10 and 11 – 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) an aggregate nominal value of £622,937, 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
(b) an additional aggregate nominal value of £622,937, 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 9 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).
Resolution 12 – 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 12,461,860 Ordinary Shares, representing approximately 10 per cent of the Company’s issued ordinary share capital as at
26 September 2022, 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 five 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).
Resolution 13 – Dividend rectification
The Board has become aware of certain procedural issues in relation to the declaration and payment of three historical dividend payments,
further details of which are set out in the text of the resolution.
In brief, the Act sets out certain requirements which must be satisfied in order for a company to declare and pay dividends (interim
or otherwise). In respect of certain dividends previously paid by the Company it has become apparent that, in contravention of the
requirements of the Act, the Company did not properly prepare and file interim accounts to justify the relevant dividends at Companies
House before declaring those dividends.
142
143
Gateley (Holdings) PlcAnnual report and financial statements Notice of annual general meeting
continued
ANNEX
Rectification of Relevant Dividends
1. Background to and reasons for resolution 13
1.1
The Act requires that a public limited company must satisfy certain criteria in order to be able to declare and pay a dividend. Not
only must a public limited company have distributable profits but the Act also provides that a public limited company may only
pay a dividend:
1.1.1 if, at the time of the dividend, the amount of its net assets are not less than the aggregate of its called-up share capital and
undistributable reserves; and
1.2
1.3
1.4
1.1.2 if, and to the extent that, the dividend does not reduce the amount of those net assets to less than the aggregate amount
of its called-up share capital and undistributable reserves.
Before paying the Relevant Dividends (as defined below), the Company should have ensured that it had the requisite level of
distributable profits and net assets. In order to make this determination, the Company was required to prepare and refer to
“relevant accounts” (as defined by the Act).
If the annual accounts of a company showed sufficient distributable profits to declare a dividend, then those accounts will
constitute “relevant accounts” for the purposes of the Act. Where they do not, a company may prepare “interim accounts” (as
defined in the Act) which show the requisite level of distributable profits and net assets provided that those interim accounts are
filed at Companies House before the declaration and payment of an interim dividend.
Upon further review in conjunction with the audit of the Company for the financial year ending 30 April 2022, it has come to
the Board’s attention that, in relation to the Relevant Dividends, the technical requirements of the Act as regards the preparing
and filing of relevant accounts had not been satisfied (albeit the Company would have been in a position to comply with those
requirements), which resulted in the Relevant Dividends being paid otherwise than in accordance with the requirements of the
Act.
1.5
The total amount of the unlawful element of the Relevant Dividends declared and paid is £3,283,881.93. The Relevant Dividends
were paid in accordance with the Company’s dividend policy and established practice.
2. The consequences of the Relevant Dividends having been made otherwise than in accordance with the Act
2.1
2.2
2.3
Given that the Relevant Dividends have been declared and paid otherwise than in accordance with the Act, the Company may
have claims against past and present shareholders who were recipients of the Relevant Dividends (the Recipient Shareholders)
and against persons who were directors of the Company at the time of the declaration and payment of the Relevant Dividends
(being Nigel Terrence Payne, Joanne Carolyn Lake, Suzanne Frances Allison Thompson, Roderick Richard Waldie, Michael James
Ward, Neil Andrew Smith, Victoria Louise Garrad and Peter Gareth Davies, together the Relevant Directors).
If resolution 13 is not passed, the Company would, in theory, retain the ability to bring these potential claims against both the
Recipient Shareholders and the Relevant Directors.
The Company has no intention of bringing such claims, and the Board’s intention is to instead put all potentially affected parties
in the position, so far as is possible, in which they were always intended to be had the Relevant Dividends been declared and paid
in accordance with the requirements of the Act.
Business Overview
Strategic Report
Corporate Governance
Our Financials
3. The Relevant Dividends
3.1
The issues discovered and referred to at paragraphs 1 and 2 above affect the unlawful element of the following dividends (the
Relevant Dividends) paid by the Company and result in each of the Relevant Dividends being made otherwise in accordance
with the Act:
Date of dividend payment
16 March 2018 interim dividend
15 March 2019 interim dividend
31 March 2022 interim dividend
Total aggregate value
Amount per ordinary
share
Total aggregate amount of
dividend paid
Total unlawful element of
dividend paid
2.2p
2.6p
3p
–
£2,351,024.57
£2,853,261.84
£3,582,071.34
–
£1,458,919.83
£1,118,470.48
£706,491.62
£3,283,881.93
3.2
The issues set out above only affect the Relevant Dividends and do not affect any other dividends declared or paid by the
Company.
4.
Proposed remedial action
4.1
In order to remedy the potential consequences of the Relevant Dividends having been declared and paid otherwise than in
accordance with the Act and to put all potentially affected parties in the position, so far as possible, in which they were always
intended to be had the Relevant Dividends been made in accordance with the Act, the Company is proposing resolution 13, the
full text of which is set out in the Notice.
4.2
If passed, the effect of resolution 13, will be to:
4.2.1 authorise the appropriation of, in aggregate, an amount not exceeding £3,283,881.93 of the distributable profits of the
Company to the payment of the Relevant Dividends;
4.2.2 waive any and all claims which the Company has, or may have, in respect of the payment of the Relevant Dividends against
its shareholders and former shareholders who appeared on the register of members on the relevant record date of each
respective Relevant Dividend (or the personal representatives and their successors in title of the estate of any deceased
shareholders or former shareholders), such waiver to be effected by way of the Company entering into a deed of release
in favour of those Recipient Shareholders (the Shareholders’ Deed of Release); and
4.2.3 waive any and all claims which the Company may have against all Directors (present or former) of the Company at the
time of the declaration and/or payment of each respective Relevant Dividend and the personal representatives (and their
successors in title) of the estate of any deceased Directors, such waiver to be effected by way of the Company entering
into a deed of release in favour of those Relevant Directors (the Directors’ Deed of Release).
The Company has been advised that the approach the Company is proposing way of resolution 13 is consistent with the
approach taken by other UK incorporated publicly quoted companies who have declared and paid dividends otherwise than in
compliance with the Act.
Resolution 13, the full text of which is set out in the Notice of AGM, is proposed as a special resolution and, if passed, will, in
conjunction with the relevant deeds of release, put all potentially affected parties in the position, so far as possible, in which they
were always intended to be had the Relevant Dividends been made in compliance with all of the procedural requirements of the
Act.
4.3
4.4
5. The authorisation of the appropriation of the Company’s distributable profits and the Shareholders’ Deed of Release
5.1
The Company proposes to seek authorisation to appropriate an aggregate sum of £3,285,000 of the distributable profits of
the Company (being a sum equal to the aggregate of the unlawful elements of the Relevant Dividends paid to the Recipient
Shareholders) to the payment of those dividends. As a matter of common law, it is necessary for the appropriation of
distributable profits to be approved by shareholders.
144
145
Gateley (Holdings) PlcAnnual report and financial statements
Gateley (Holdings) Plc
Annual report and financial statements
Notice of annual general meeting
continued
5.2
5.3
The proposed authorisation of the appropriation of the Company’s distributable profits to the payment of the Relevant
Dividends and by the Company entering into the Shareholders’ Deed of Release, will not have any effect on the Company’s
financial position. This is because the aggregate amount of the unlawful element of the Relevant Dividends is equal to, and offset
by, the release of each Recipient Shareholder from their liability to repay the amount already paid to them in respect of the
unlawful element of their respective Relevant Dividends, and the Company will not be required to make any further payments to
shareholders in respect of the Relevant Dividends.
The Company has not recorded or disclosed the potential right to make claims against the Recipient Shareholders as an asset or
contingent asset in its financial statements. Under the Company’s International Financial Reporting Standards (IFRS) accounting
policies, it could only record such a right as an asset when an inflow of economic benefit in favour of the Company as a result of
such claim or claims being brought was virtually certain, and the Board notes that the Company has no intention of bringing such
a claim principally as it would not be appropriate to do so and also as the likelihood of any such claim being successful is very
low. The value of any economic benefit which the Company may derive from bringing claims against the Recipient Shareholders
is uncertain (and, in any case, incapable of estimation with any certainty) on the basis that it may be possible for the Recipient
Shareholders to establish defences to any such claims and there can be no certainty as to the amounts which could be recovered
by the Company (if any).
5.4
In addition, under IFRS, a contingent asset is required to be disclosed only when an inflow of economic benefit in favour of
the Company is probable. The Board has concluded that any inflow of economic benefit as a result of such claims is less than
probable.
5.5
Accordingly, the Company’s entry into the Shareholders’ Deed of Release will not itself result in any decrease in the Company’s
net assets or level of its distributable reserves.
6. Directors’ Deed of Release
6.1
6.2
The entry by the Company into the Directors’ Deed of Release will not have any impact on the Company’s financial position as
the Company has not recorded or disclosed its right to potentially make claims against the Relevant Directors in respect of the
Relevant Dividends as an asset or contingent asset of the Company.
As set out in paragraph 5.3 above, under the Company’s IFRS accounting policies, it could only record such right as an asset or
contingent asset when an inflow of economic benefit in favour of the Company as a result of such claim or claims being brought
was virtually certain and the Board notes that the Company has no intention of bringing such a claim, primarily as it would not
be appropriate to do so and also as the likelihood of such claim being successful is very low. The value of any economic benefit
which the Company may derive from bringing claims against the Relevant Directors is uncertain (and, in any case, incapable of
estimation with any certainty) on the basis that the Relevant Directors would be entitled to seek the court’s relief against such
claims and there can be no certainty as to the amounts (if any) which could be recovered by the Company (if any).
6.3
The Company’s entry into the Directors’ Deed of Release does not involve the disposition of any recognised asset or contingent
asset in favour of the Relevant Directors.
7. Tax position of UK Shareholders
7.1
It is the Company’s expectation that the tax position of UK shareholders should not be impacted by any procedural irregularity
in relation to the Relevant Dividends. Therefore, the Company does not expect the passing of resolution 13 to have an effect on
the UK tax position of such persons.
7.2
If any UK tax resident shareholder has any doubts about their tax position, they should consult with an independent professional
adviser.
8. Tax position of non-UK Shareholders
8.1
It is also the Company’s expectation that the tax position of non-UK shareholders should not be impacted by any procedural
irregularity in relation to the Relevant Dividends. Therefore, the Company does not expect the passing of resolution 13 to have
an effect on the non-UK tax position of such persons.
8.2
If any non-UK tax resident shareholder has any doubts about their tax position, they should consult with an independent
professional adviser.
146
6Our people and long-established culture are central to the Group’s success.” “ContentsBusiness Overview: We are Gateley Highlights for the year [l]At a glance [l]The Gateley story [l]Our people are our success [l]Our Platform strategy [l]Responsible Gateley [l]Five key reasons to invest [l]Strategic ReportChairman’s statement [l]Chief Executive Officer’s review [l]Chief Executive Officer’s Q&A [l]Finance Director’s review [l]Objectives, strategy and outlook [l]Risk management [l]Section 172 statement [l]Environmental actions statement [l]Social matters [l]Corporate GovernanceBoard of Directors [l]Statement on remuneration: voluntary disclosure [l]Directors’ report [l]Our financialsIndependent auditor’s report to the members of Gateley (Holdings) Plc. [l]Consolidated statement of profit and loss and other comprehensive income [l]Consolidated statement of financial position [l]Consolidated statement of changes in equity [l]Consolidated cash flow statement [l] Notes to the consolidated financial statements [l]Parent company statement of financial position [l]Parent company statement of changes in equity [l]Parent company cash flow statement [l]Parent Company notes to the financial statement [l]Notice of Annual General Meeting [l]Company information [l]Company information Registration number 09310078 Registered office One Eleven Edmund Street Birmingham West Midlands B3 2HJ Directors RR Waldie Chief Executive Officer V L Garrad Executive Director NA Smith Finance Director and Company Secretary MJ Ward Executive Director NT Payne Non-Executive Chairman JC Lake Non-Executive Director SFA Thompson Non-Executive Director Auditor MHA MacIntyre Hudson Rutland House 148 Edmund Street Birmingham B3 2FD Nominated adviser and broker Liberum 5 Ropemaker Street London EC2Y 9LY Principal bankers HSBC Bank Plc 6th Floor 120 Edmund Street Birmingham B3 2QZ Lloyds Bank Plc 125 Colmore Row Birmingham West Midlands B3 3SFBusiness OverviewStrategic ReportCorporate GovernanceOur Financials Registrars Link Group 10th Floor Central Square 29 Wellington Street Leeds LS1 4DL Financial PR adviser Belvedere Communications 25 Finsbury Circus London EC2M 7EE Website www.gateleyplc.comDesigned and Printed by Perivan147
www.gateleyplc.com