FY22 Trading Update: Strong performance ahead of market expectations
The Board of Gateley (AIM: GTLY), the legal and professional services group, is pleased to announce details of the Group's trading for the year ended 30 April 2022 (“FY22”), ahead of the publication of its audited results, which will be announced in September 2022, showing strong growth in revenue and adjusted profit before tax ahead of consensus market expectations1.
Trading at the start of the new financial year is in line with the Board’s expectations, with the Group continuing to meet the challenges of the well-reported and ongoing inflationary headwinds. The considerable organic and acquisitive opportunities to develop the Group’s Platforms further, combined with Gateley’s diversified and resilient business model, underpin the Board’s confidence in the prospects and the continuing growth of the business in line with current market expectations.
- Revenue increased to not less than £137m (FY21: £121.4m) - up c.13%
- Organic revenue growth of c.10% (FY21 6.5%)
- Consultancy revenue not less than £20m (FY21 £14m) - up c.43%
- Underlying adjusted profit before tax2 of not less than £21.5m (FY21 £19.3m) - up c.11%
- Profit before tax (“PBT”) of not less than £18m (FY21 £16.3m) - up c.10%
- Adjusted weighted average EPS of not less than c14.10p (FY21 13.17p) - up c.7%
- Strong operating cashflow with £16.1m of cash at bank and £10.4m of net cash (FY21 net cash £19.6m)
- Net assets of not less than c.£70m (FY21 £59.3m)
- Proposed final ordinary dividend of 5.5p (FY21: 5.0p) taking annual dividend to 8.5p (FY21: 7.5p)
- Three earnings-enhancing acquisitions, Tozer Gallagher in July 2021, Adamson Jones in January 2022 and Smithers Purslow in April 2022, enhancing the Group’s core Platforms
- New Revolving Credit Facility of £30m agreed in April 2022, providing increased funding flexibility to support the Group’s acquisition strategy
- Total headcount at 30 April 2022 of 1,368. Average number of professional staff increased by 3.8% from 770 to 799.
1 Consensus market expectations/estimates per FactSet – Revenue £133.5m; Adjusted PBT £20.9m
2 Underlying adjusted profit before tax excludes share based payment charges, amortisation and exceptional items
The Group enjoyed strong activity levels during FY22, with revenue expected to be not less than £137m. This represents growth of c.13% on the prior year. Organic revenue growth from legal service lines was c.9% alongside exceptional organic growth of c.24% from consultancy service lines, which including acquisitions made during the year are expected to represent £20m of fees in FY22. Following the three acquisitions completed during the year, which are integrating well, annualised consultancy fees now total c.£32m.
Compared to the very strong second half of FY21, activity levels remained strong across the Corporate Platform, which grew by c.18%, buoyed by the continuing strength of the UK M&A and Private Equity markets. The Property Platform grew by c.15%, enhanced by greater market share and larger transactions. The People Platform saw a return to significant growth across both its legal and consultancy service lines, where combined revenue grew by c.40%. The Business Services Platform contracted by c.10%, as some long-term litigation projects stalled alongside new instructions not yet reaching billing thresholds. This reflects the timing of ongoing and new projects and the Group remains appropriately staffed for an improved FY23.
Underlying adjusted profit before tax2 is ahead of market expectations1 and c.11% ahead of a strong prior year. This represents an underlying adjusted PBT margin of c.15.7%, broadly in line with FY21.
FY22 saw a return to more familiar recruitment levels as headcount increased by 100 during the year, together with a further 150 new colleagues joining as a result of the three completed acquisitions. After a pause in recruitment in the initial stages of the Covid 19 pandemic, the market has hardened with many factors now influencing peoples’ decisions. The Gateley offering remains differentiated and attractive across a growing range of companies within the Group. As the Group continues to expand, it is able to offer numerous career opportunities across the professional service Platforms, which are underpinned by a unique identity and strong team culture.
Announcement of FY22 Audited Results
As previously announced, the Group has delayed the audit process to accommodate the implementation of a new financial accounting system and expects to announce its audited results for FY22 in September 2022.
The Board is pleased to report that the transfer to the new financial accounting system is progressing to plan and is on track to complete later this month.
Rod Waldie, Chief Executive Officer of Gateley, said:
“We have delivered another year of strong revenue and profit growth and I am delighted with our overall performance. Our successful return to recruitment generated strong organic revenue growth of over 10%, which, allied to the completion of three exciting acquisitions, is delivering annualised consultancy revenue of over c.£32m.
“I thank our ever-expanding client base for their trust and support throughout FY22 and for giving us the opportunity to work 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 strong pipeline of work and leave our financial performance guidance unchanged, despite the inflationary challenges, as we look forward to continuing to grow the Group, both organically and via acquisition.”