Gateley’s (GTLY) top line benefited from 10.5 per cent organic growth in the six months to 31 October 2019 as the legal and professional services group continued to invest in headcount. The average number of fee-earning staff rose by over a fifth to 673, including the addition of five new partners. While this was largely behind an 11 per cent increase in total expenses to £46m, personnel costs as a proportion of fees dropped by 0.7 percentage points to 62.8 per cent.
Accounting for 94 per cent of revenue, legal services remains the mainstay of Gateley’s business. But continuing its push into complementary non-legal service areas, the group aims for these activities to eventually account for a fifth of sales. The timing remains unclear and chief executive Michael Ward says the focus is on securing the right deals rather than a strict timeline. With the December acquisition of human capital consultancy T-three, the group is guiding that non-legal revenue will increase from £3.2m in the first half to at least £14m for the full year.
Net debt at the end of the period (excluding £25m in lease liabilities) fell to £2.1m, its lowest level since Gateley listed on Aim in 2015. N+1 Singer forecasts a £0.9m net cash position at the year-end.
The house broker expects adjusted pre-tax profit of £20.3m and EPS of 14.2p for the full year, rising to £22.2m and 15.4p in 2021.
| GATELEY (GTLY) | ||||
| ORD PRICE: | 201p | MARKET VALUE: | £ 230m | |
| TOUCH: | 198-204p | 12-MONTH HIGH: | 211p | LOW: 147 |
| DIVIDEND YIELD: | 4.1% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 27p* | NET DEBT: | 7%** | |
| Half-year to 31 Oct | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 46.4 | 5.0 | 3.6 | 2.6 |
| 2019 | 51.8 | 5.5 | 3.9 | 2.9 |
| % change | +12 | +10 | +10 | +12 |
| Ex-div: | 20 Feb | |||
| Payment: | 31 Mar | |||
| *Includes intangible assets of £10.1m or 9p a share, **Excludes £25.1m in lease liabilities | ||||
