Gateley Holdings plc (LON: GTLY), the law-led professional services group, has today announced its unaudited results for the six months ended 31 October 2018.
Financial Highlights
• Revenue up 20.1% to £46.4m (H1 18: £38.6m), 10.2% from organic growth
• Adjusted EBITDA* up 24.8% to £6.6m (H1 18: £5.3m)
• Profit before tax up 18.6% to £5.0m (H1 18: £4.2m)
• Robust balance sheet with net assets up 40.8% to £23.1m (H1 18: £16.4m), with net debt increased to £8.2m (H1 18: £7.1m)
• Strong cash generation** as cash conversion up 2.5ppts to 87.4% (H1 18: 85.3%)
• Basic EPS up 13.5% to 3.52p (H1 18: 3.10p)
• Profit after tax up 18.0%, supporting increase in interim dividend of 18.2% to 2.6p per ordinary share (H1 18: 2.2p)
Operational Highlights
• Strong performance across the business demonstrating the success of our strategy, the strength and sustainability of our business model and further enhancing Gateley’s reputation for delivering growth from its established, resilient and progressive business
• Double-digit growth across all financial indicators driven by the Group’s on-going investment in people and delivered across its expanded client base, its broader service offering and its wider geographical base
• Successful acquisition and integration of GCL Solicitors and Kiddy & Partners expands the Group to sixteen legal and five non-legal business lines
• Total headcount up by 17.3% from 30 April 2018 to 928 (FY 18: 791), including eight new lateral legal partner hires and seven internal promotions to partner, proving the appeal of the Group’s offering to internal and external candidates
* Adjusted EBITDA excludes income or expenses that relate to non-underlying items and non-cash charges relating to share-based payments
** Cash conversion (Operating cash flow / Adjusted EBITDA)
Michael Ward, CEO of Gateley Holdings plc, said:
“I am delighted with the performance of the business in the first half of the financial year. Our proven strong and resilient business model and our focused diversification strategy has continued to drive growth across our business: our core legal business has grown strongly; our acquired complementary businesses are all fully integrated and are performing very well; our acquisition pipeline is strong with regular approaches from companies who view Gateley as an ideal choice to help them grow their businesses successfully.
The Group now operates from ten offices with a team now comprising over 900 people, who support the mid-market with all of its legal and other professional service requirements. Since our admission to AIM three and a half years ago, our core legal team has grown by 47% from 384 to 565. We have also expanded our non-legal service lines such that our legal team now works alongside 38 other professionals including chartered surveyors, tax consultants, clinical psychologists and chartered accountants. We remain committed to our strategy of investing in the business and its people and expanding the Group’s offering, whilst maintaining our focus on sustainable improving performance.
In the first three years post Admission to AIM, the Group has delivered turnover growth of 37%, adjusted EBITDA growth of 46% and, including the dividend from this set of results, has provided shareholders with dividend income of 21.84 pence per share. The Group is on track to deliver full year earnings in line with market forecasts, which were raised following the positive Trading Update announced on 23 November 2018, with revenues of not less than £102m and EBITDA margins in H2 19 not less than those achieved previously.
With our strong trading and investment for the future both continuing, the Board looks forward to the second half of the financial year with confidence.”
CEO OPERATIONAL REVIEW
Introduction
I am delighted with the performance of the business in the first half of the financial year and feel confident that our proven track record and focused diversification strategy will continue to enable us to deliver on our promises. The Group has undertaken an intense but highly productive journey, since the decision was made to IPO in 2015. During this time, we have navigated our way successfully through cultural change, whilst, at the same time delivering transformational revenue and profit growth, significantly increasing headcount, acquiring and integrating many new businesses and establishing new complementary service lines. Our people, our strategy and the solid platform of our established and well-invested business, together with our loyal client base, have enabled the Group to deliver another set of excellent results for the Period. As we enter the second half of the financial year, the Group’s activity levels remain robust and we are generating greater opportunities to attract talent or act for clients, new and old, than ever before.
Our strategy, laid out at IPO, created the opportunity and platform for both organic and acquisitive growth. We have made significant progress in the last three years and see only greater opportunity in the future (even acknowledging political and economic uncertainty) as our broad-based, national business continues to strengthen and grow. Our progress to-date can be summarised below:
• Revenue – FY 15 £60.9m = CAGR 11% or 37% increase to £83.4m FY 18
• Adjusted EBITDA – FY 15 £11.3m = CAGR of 13.4% or 46% increase to £16.5m FY 18
• Net Asset value – FY 15 £nil to £23m H1 19
• Headcount – 52% growth from FY 15 610 to 928 H1 19
• Service lines – FY 15: 15 to 21 H1 19
Financial Results
Trading in the Period has been strong with increases in activity levels across the Group generating revenue up 20.1% to £46.4m and adjusted EBITDA up 24.8% to £6.6m. Organic (Legal) sales growth (excluding acquisitions) of 10.2% was supported by a similar level of growth from acquisitions. Strong cash generation continues to be generated from profit after tax which has grown by 18.0% enabling us to propose an 18.2% increase in our interim dividend of 2.6p per share (H1 18: 2.2p). We continue to seize growth opportunities as they arise and invest in the long-term future of the business via strategic recruitment and investment in new, complementary service lines.
Operational Review
In line with our overall growth strategy, we continue to invest in strategic recruitment, in complementary service lines (both organic and via acquisition) and we maintain a strong focus on the delivery of excellent levels of client service. During the Period, we have invested in a broad range of service lines, most notably in our Residential Development practice which has grown from three to seven locations across the UK in the last six months, welcoming more than 100 additional members of staff to the team. Including the acquisition of GCL Solicitors, these appointments bring Gateley’s National Residential Development team to nearly 200 people, making it the largest Residential Development team within any legal business in the UK.
We are proud to note that, in addition to being recognised by Experian as the most active mid-market legal advisor nationally, our success has also been recognised through a number of awards including Law Firm of the Year at Thames Valley Deal Awards 2018, Midlands Corporate Law Firm of the Year 2018, together with International Deal of the Year and SME Deal of the Year 2018. The depth, strength and quality of our business has been recognised not only by our clients but also by our industry as evidenced by our recent commendation in The Times 200 Best Law Firms 2019. In a survey conducted by international market research firm Statista, more than 20,000 solicitors in England & Wales were asked to recommend the UK’s best law firms in a range of categories. Supporting our Experian No1 ranking, we were commended for ‘Company & Commercial, Mergers & Acquisitions (Business Law)’ in The Times’ 200 Best Law Firms 2019.
We continue to invest in our people through the grant, and more recently, the vesting of share options and I am delighted that participation in the equity of the business remains strong across professional and support staff alike. We believe it is this differentiated model that enables us to attract the best talent from across the industry. We remain successful in securing exceptional professionals who are looking for a strong business with a defined and distinctive strategic plan, supported by a strong balance sheet and ongoing investment. Since 1 May 2018 we have welcomed a further eight new lateral legal partner hires to the Group. In addition, we have also promoted seven legal directors/senior associates to partner. The total number of partners is now 146. Our overall staff numbers are increasing, as our measured expansion across legal and complementary non-legal business services enhances our offering to new and existing clients. Since April 2018, total staff numbers have increased by 17.3% to 928.
Acquisitions
The Board remains focused in its search to acquire complementary professional and other specialist services businesses to expand and diversify our income streams further. We are pleased with how all four acquisitions have integrated with our existing legal business. As these acquisitions continue to bed-in we are encouraged by the numerous cross-selling opportunities which are feeding through into our pipeline of new work. Our acquisition pipeline is strong with regular approaches from companies seeing Gateley as an ideal choice to help them grow their businesses successfully.
Current trading and outlook
The Group’s first half performance has been strong, with all key metrics increasing significantly, driven by broad-based organic growth, the continued enhancement of our delivery to clients through diversification, and our proven ability to attract and retain key talent.
Trading in the second half has started well with the business generating further strong growth. We are on track to deliver full year earnings in line with market forecasts, which were raised following the positive Trading Update announced on 23 November 2018 with revenues of not less than £102m and EBITDA margins in H2 19 not less than those achieved previously.
Given the quality of our people, our track record of delivery and the considerable new business opportunities the Group is creating, we are confident that Gateley is well positioned to deliver further growth and the Board looks to the future with confidence.
Michael Ward
CEO
8 January 2019
