In a double-barrelled update on New Year’s Eve, Gordon Dadds (GOR) announced the completion of its acquisition of law firm Ince UK, as well as its half-year results to September. Shares in the legal services group have now resumed trading after a brief suspension.
Gordon Dadds has bought Ince’s UK and mainland China practices, but not its other international offices, after it was deemed impossible to obtain local regulatory approvals by 31 December 2018. Still, it has entered new network-sharing arrangements with these practices. It's paying £27.3m (comprising £15m deferred consideration) for Ince UK, and options over up to 3m new shares.
Though secondary to the deal, the group’s first-half revenues and pre-tax profits rose significantly, notwithstanding slower activity in the property, and family and private client, legal services divisions. The gross margin progressed but sat slightly below the 50 per cent target. Overheads also strayed beyond 30 per cent of revenues – though chief executive Adrian Biles attributed this partly to pre-acquisition recruitment activity.
The Ince deal will give rise to a "large one-off cost" this financial year, but should be "significantly earnings-enhancing" from 1 April 2019. House broker Arden Partners forecasts adjusted pre-tax profits of £5.4m for FY2019, with EPS of 13.6p – rising to 24.3p in FY2020 (from £3m and 8.5p in FY2018).
| GORDON DADDS (GOR) | ||||
| ORD PRICE: | 192p | MARKET VALUE: | £ 55.3m | |
| TOUCH: | 190-194p | 12-MONTH HIGH: | 192p | LOW: 143p |
| DIVIDEND YIELD: | 3.1% | PE RATIO: | na | |
| NET ASSET VALUE: | 97p* | NET CASH: | £3.1m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Loss per share (p) | Dividend per share (p) |
| 2017 | 12.9 | 1.3 | -8.5 | 0.0 |
| 2018 | 20.1 | 3.5 | -0.6 | 2.0 |
| % change | +56 | +170 | - | - |
| Ex-div: | 28 Feb | |||
| Payment: | 10 Apr | |||
| *Includes intangible assets of £26.4m, or 92p a share | ||||
