Gateley posts double-digit revenue and profit increases in second post-listing results

Gateley has announced double-digit increases in revenue and profit to the London Stock Exchange, in its second set of annual results since its landmark 2015 listing.

The Birmingham-headquartered firm’s revenue has jumped 15.7% to £77.6m, up from £67.1m last year, while profit before tax increased 18.8% to £13.1m, up from £11m in 2016.

CEO Michael Ward (pictured above) said: “This represents another year of continued expansion for us, where we have both grown the business and invested further in it to support our future expansion. This has been possible due to the strength of our service offering, the depth of our client relationships and the growth in our teams of skilled professionals.

“We are confident that our business is well balanced and resilient, and we remain focused on delivering another year of growth in our core services, whilst continuing to look for complementary acquisitions.”

The results come after Gateley acquired property consultancy company Hamer Associates in September last year, in a deal valued at around £2m. The business, now trading as Gateley Hamer, contributed £870,000 to revenue and £160,000 to profit during the course of the year.

By practice, the firm’s corporate group was a strong performer, with revenue growth of 24%, while the property group posted revenue growth of 28%.

However, the firm’s Dubai office had a more difficult year, losing £400,000 after making a loss of £100,000 last year. Finance director Neil Smith said: “We have already taken steps to restructure our operations in Dubai and will keep this under constant review.”

During the year Gateley split from its Scottish arm, HBJ, which has since merged with Addleshaw Goddard. Gateley is currently on the lookout for a new Scots tie-up, and has spoken to a number of firms about a deal. Ward said: ”We are looking at which firm is right for us – and whether we are the right fit for them – and we are still in that process.”

The number of employees at the firm increased from 622 in 2016 to 696 this year, while legal staff increased from 392 to 457. As a result, staff costs also grew, rising 17% from £38.9m last year to £45.5m in 2017.

At the end of the year, the firm’s cash reserves stood at £2.7m, down from £9.8m last year. The firm attributed this fall to its investment in Gateley Hamer, £2m of repaid bank debt and £4.6m of liabilities repaid to former partners.

The firm listed on the AIM market of the London Stock Exchange in June 2015, becoming the first UK firm to do so. Alongside the Hamer deal, the firm also acquired tax advisory business Capitus in April 2016 for £2.72m.

Ward confirmed that the firm expects such deals to continue. ”When we did the IPO, we said the management would like to do one acquisition a year for three years; to give investors the idea of the sort of number to look out for,” he said. “We have done two in the first two years and we would expect to complete another one this year.”

In October last year, partners at the firm sold £6.4m in shares. According to the firm’s release to the stock exchange, this meant that the firm’s free float of shares increased from 30% to 34.3%.

The firm now has three employee share schemes: a stock appreciation rights scheme (SARS) for partners; the Gateley sharesave scheme, a ‘save as you earn’ scheme which is open to all employees; and a company share option plan, which is targeted at associates and senior support services staff.

The SARS scheme aims to incentivise legal directors and partners with greater levels of future equity share ownership, and allows the firm’s remuneration committee to grant conditional share awards or nil cost options to partners, which vest after three years.

Chairman Nigel Payne said: “I am not only delighted with the financial performance of the business this year, but also the significant progress we have made from being an LLP to a plc. This is evidenced in part by the equity participation we now have within the company, where staff have continued to build upon their equity interests in the business and by the addition of new external shareholders to our register.”

Payne added that the firm’s board was proposing an increased final dividend of 4.4p per share, making a total dividend of 6.6p per share for the year, representing a 17% increase on last year.