Audited Preliminary Results 2021

20 July 2021

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. It forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Gateley (Holdings) Plc

("Gateley", the "Group" or the "Company")

AUDITED PRELIMINARY RESULTS 2021

Strong performance and growth demonstrating resilience through diversity

Gateley (AIM: GTLY), the legal and professional services group, announces its audited preliminary results for the year ended 30 April 2021 ("FY21" or the "Year").

The results demonstrate resilient double-digit revenue and profit growth, delivered through an increasingly diverse and successful business model, yielding strong and sustained cash generation, which enabled the reinstatement of dividend payments in the Year, with a total dividend of 7.5p (FY20: nil).

The Board is pleased to report that the high levels of activity, strong trading momentum, overall sense of optimism and confidence, which defined the Group's performance in H2 FY21, have continued into the new financial year ("FY22") and the Board is confident in the outlook for FY22.

Financial Highlights

Operational Highlights

Current Trading and Outlook

Rod Waldie, CEO of Gateley, said:

"I am delighted with the excellent FY21 outcome, a year in which we exceeded our own pandemic-adjusted performance expectations set in the first month of the Year.  We have, once again, delivered year-on-year revenue growth.  It is testament to the Group's long-established and resilient business model, which is enhanced by an increasing range of connected services offered to clients via our Platforms - market-facing structures on which we aggregate complementary legal and consultancy services.  This, alongside our embedded 'one-team' culture and the outstanding collective contribution of our people, has been the driving force behind a strong financial performance especially in the context of an extremely disruptive year of uncertainty caused by the pandemic. 

"I thank our fantastic people for their exceptionally hard work, commitment and can-do attitude.  This includes the leadership team, whose priority has been the safety of our people throughout the Year and the smooth-running of our operational contingency plan, which resulted in the delivery of excellent service to our clients.  The leadership team was calm and pragmatic throughout and demonstrated good judgment in planning for the worst whilst managing for better.

"I also thank our clients for their support throughout the Year and for giving us the opportunity to work with them on high quality mandates in both legal and consultancy services, which we are increasingly providing in tandem to our clients.

"As we continue our strategy to build a broader professional services business, focusing on both new and existing clients, the demand for these services is strong and we are carrying a robust pipeline of work into FY22.  We remain excited by a wide range of opportunities and are looking forward to continuing to grow the Group, both organically and via acquisition, in line with our strategy."

Enquiries:

Chairman's Statement

Summary of the year

I am pleased with all aspects of the Group's performance in the year under review, a period during which we successfully navigated the disruption and uncertainty caused by the COVID-19 pandemic. Gateley has demonstrated the resilience of its operating model and diversification strategy, delivering excellent financial results under exceptional circumstances and emerging stronger out of the pandemic.  The services we offer to clients are critical to their operations, emphasising just how important our legal and complementary professional services are to our broad, multi-sectoral, client-base.

The second half of FY21 was extremely strong with high levels of activity, which more than compensated for the impact of the first National Lockdown and justified our decision to retain all fee earning staff during the early stages of the pandemic.  Our business adjusted exceptionally well to working from home and servicing clients in a very different way.  It was clear to the Board that the effect of the pandemic would be dramatic, so we took immediate steps to preserve the Group's liquidity by reducing costs and postponing cash outgoings, until the uncertainty lifted and we could support a return to more normal activity.  The turning point arose just before the half year-end, when activity levels returned and our pipeline strengthened significantly.

Rod Waldie took the reins from Michael Ward on 1 May 2020.  In his first year as CEO, Rod has had to make some tough decisions as a result of the pandemic, whilst at the same time leading the business and executing our strategy.  Under his leadership, Gateley is emerging from the pandemic in an excellent position, with a strong pipeline of work, a host of growth opportunities and generally buoyed by the opportunities which we believe the exit from lockdown will present.

People and commitment to diversity

Our people and long-established 'one-team' culture are central to the Group's success.  The team has risen ably to the challenges presented by the pandemic, showing immense dedication to the business, to their colleagues and to our clients.

The Group is committed to ensuring diversity, equity and inclusion.  Our goal is to foster a positive work ethic, while remaining results and client focused, and demonstrate our commitment to doing the right thing.  Promoting our diverse backgrounds, skill sets, and experiences, delivers better results for everyone.  Our actions and ambitions in the journey to deliver this goal are set out within the Environmental, Social and Governance ("ESG") section of our Annual Report and accompanying Responsible Business statement, that we have recently adopted using a framework established to align with the Government-led initiative "Levelling Up".

Our listing on AIM allows us to share the value created by the Group and recognise the efforts of our teams.  We have issued further SAYE, CSOP and our first Long Term Incentive Plan during the Year supporting further our belief that Group-wide share ownership creates strong alignment across all shareholders and colleagues connected with the business.

Dividends

Due to our strong performance in FY21 and our confidence in prospects for the business, the Board has reinstated its dividend policy during the year.  An interim dividend of 2.5p per share was paid on 28 June 2021 to shareholders on the register at the close of business on 3 June 2021.  Subject to approval at the forthcoming Annual General Meeting, the Board is pleased to propose a final dividend of 5.0p per share, giving a total dividend for the year of 7.5p per share (FY20: nil).  The final dividend will be paid in mid-October 2021 to shareholders on the register at the close of business on 27 August 2021.  The shares will go ex-dividend on 26 August 2021.

The Board's dividend policy remains to distribute up to 70% of profit after tax (PAT) to shareholders, typically one third following its half year results and two thirds after the full year results are known.  The Board intends to return to more normal payment timings during FY22.

Summary and outlook

In what has been a uniquely challenging Year, our people have excelled in client delivery, have conquered every challenge presented to them, and have delivered further strategic progress for the business, all of which has combined to generate a solid set of results.

Our acquisition pipeline presents many interesting opportunities to enhance our service lines, with our clients' needs always in mind, and fulfil our strategy to build a broader professional services group.

We look forward to the future with confidence.

Nigel Payne

Chairman

20 July 2021

Chief Executive Officer's Review

Introduction

I am delighted with the Group's resilience and achievements during FY21.  We exceeded our own adjusted performance expectations that we set at the start of the Year by taking timely and sensible steps to plot a steady and conservative course through the pandemic.  Our key priorities were to maintain excellent service delivery to our clients, whilst ensuring the safety and wellbeing of our people; and I believe that we succeeded in achieving this.  

By the beginning of H2 FY21 it was clear that demand for our services was strengthening significantly, and this remains the case with a good pipeline of work carrying into FY22.  

The expanding depth and breadth of our offering through our Platforms is becoming increasingly attractive to existing and new clients due to our ability to deliver multiple legal and consultancy services on projects in a coordinated and well-managed way.  Our Platforms are market-facing structures on which we aggregate complementary legal and consultancy services.  I am excited about our opportunity to further expand these both organically and via acquisition in FY22 and beyond.

Owing to our excellent performance and disciplined working capital management in FY21, coupled with our confidence in the business, we are pleased to confirm the resumption of our stated dividend policy subject to approval at the forthcoming AGM.

Results overview

Our FY21 revenue increased by 10.5% to £121.4m (FY20: £109.8m) which, alongside our swiftly implemented cost-management initiatives, predominantly arising from agile working arrangements, have yielded an increase of 10.5% in profit before tax to £16.3m compared with £14.8m for the prior year.

Underlying adjusted profit before tax increased by 7.1% to £19.3m (FY20: £18.1m) and the Group has also increased profit after tax by 12.2% to £13.2m.

Our resilient revenue performance is a product of the breadth and balance of the Group's legal and consultancy service lines.  After a significant reduction during H1 FY21, Corporate transactional activity returned in H2 FY21, and has since been relentless, as business owners and Private Equity reassessed the impact of the pandemic and their appetite for deal-making. In property, our legal and consulting teams, working together on our Property Platform, traded strongly throughout the Year.  In addition, many of the Group's counter-cyclical service lines, including Dispute Resolution, also performed extremely well.

We concluded the Year with a significant pipeline of activity across most of our units, further evidencing our wider reach across our client-base via our Platforms.

Cash generation during the Year remained strong, as net cashflows from operating activities of £25.4m (FY20: £13.3m) represented 193.2% (FY20: 113.5%) of profit after tax.  The Group ended the Year with net cash of £19.6m compared to net debt of £0.9m in the prior period as a result of our strategy to conserve cash at the outset of the pandemic.

People and Culture

We have great talent across our teams.  Our 'one-team' culture and focus on excellence are enormous sources of comfort and strength as we successfully navigate the pandemic.  We maintained excellent client service throughout the Year which is testament to the collective contribution of everyone working at Gateley.  The way the team works together, supporting each other and our clients, has been inspiring.  Never before has the power of the Gateley team spirit been more evident.

At Gateley we have an environment in which everyone is welcome and valued.  This allows people to play to their strengths in a business which has an infrastructure for opportunity and fair career progression.  We have internal networking groups that promote awareness and understanding and can drive positive change, including further advances in our diversity and inclusion efforts. 

Our culture is a product of the way we integrate our people. Traditionally we are an office-based organisation and we are looking to return to our offices as soon as we sensibly can in a safe and efficient way in order to optimise induction, training and the day-to-day management of the delivery of our services.  However, we will be doing this alongside further, and likely permanent, agile working in order to capture some of the positive working practices realised during the pandemic. 

We are guided by our purpose - we exist to deliver results that delight our clients, inspire our people and improve our communities. 

We are now committed to implementing our purpose-led ESG framework in a way that contributes to the wider levelling up agenda in the UK.  Therefore, we were delighted to recently announce that we are partnering in the development of a set of fourteen Levelling Up Goals, as established earlier this year by former Education Secretary, Justine Greening.  The Goals are the first major piece of work by the Purpose Coalition, which includes some of the UK's most purpose-led businesses, universities and public sector organisations.  Gateley's contribution will be aimed at driving change in those areas in which we can legitimately make an impact including in diversity and inclusion and fair career progression, good health and wellbeing and other goals closely linked to our people and business model. 

Operational Review

Our operational contingency plan did not include a reduction in fee earner headcount.  Our strategy throughout the pandemic was to maintain our fee earner capacity so that we had sufficient resources to service projects as the market recovered.  This proved to be a good strategy, in addition to which it did not constrain us from continuing with our strategic investment in people.  During the Year, we made key new appointments across the Group including six senior lateral hire recruits to niche areas of our service offering.  Our average fee earner headcount was 770 which is an increase from 706 at the end of FY20, mainly as a result of a full year of staff additions from acquisitions made at the end of FY20. 

We have a strong balance sheet and we remain focused on investing in the right businesses and people to join our team.  At Gateley, there is an opportunity to pursue a career in a dynamic professional services group whose development and growth is underpinned by the investment opportunities which our plc status affords us.  Our ability to incentivise people through plc share ownership provides an attractive alternative to traditional professional services ownership models.  During the year staff exercised SAYE and CSOP options to further widen our staff shareholder base.

We have spent many years building and growing our physical footprint across the UK, matching our office locations with opportunities that we see available to the Group.  As a result, we currently provide our services from most of the major commercial centres in the UK.  Our office network remains an important asset to us but a key decision made during the Year was to flex the use of our office space, maximising the benefits of agile working practices developed during the pandemic.  This will enable us to grow and strengthen our business from existing locations, realising operational gearing opportunities. 

During FY21 we continued to develop our market-facing Platforms on which we aggregate complementary legal and consultancy services.  We have spent a considerable amount of time promoting the Platforms internally and externally.  I am delighted with how well our legal and consulting businesses are combining to win multi-disciplinary work from existing and new clients.  This gives us increased confidence to continue to invest in broadening and strengthening our Platforms as part of our strategy for profitable growth.

Our segmental performance is dealt with in our Finance Director's review.  In particular, our Property teams traded well throughout the Year and our Corporate and Business Services Teams were extremely busy during H2 FY21, and remain so.

Our Dispute Resolution teams have also been busy.  In particular, our International Dispute Resolution practice gained further momentum in FY21 in winning new mandates for complex, top-tier multi-disciplinary international work alongside mainstream insolvency and liquidator appointments and tax avoidance recovery work.  This is highly specialist work, delivered through the expertise of a team who have long-established credentials in complex recovery cases in the UK and overseas.  This is a good example of the returns we can generate through our strategy to invest in niche, highly specialised services and our ability to leverage counter-cyclical opportunities with established expertise.  To assist in winning more of this type of work, we have very recently committed to a new litigation funding facility for long term complex projects.

Client and Industry Recognition

We conducted our Group-wide tri-annual client survey during the Year, scoring extremely highly (net promoter score +68).  We were delighted with this result, which is in excess of the industry average.  

Gateley remains the UK's most active M&A legal advisor by deal volume according to the latest Experian MarketIQ UK M&A league table. We are currently ranked first in the Midlands and the North West.  In difficult times, this is a resounding testament to our referral network, staff and service delivery capabilities.

We were proud to be awarded 'Professional Services Firm of the Year' at the 2021 Birmingham Post Business Awards in June.  We have also picked up a number of other awards during the Year including 'Excellence in Sales and Marketing' and 'Contribution to the Community' at the Greater Birmingham Chamber of Commerce Awards; 'Law Firm of the Year' at the Thames Valley Business Awards and in 'The Times Best Law Firms 2021' league table, where we featured across a number of categories. We await the outcome of a number of shortlists including 'Law Firm of the Year' and 'Corporate Team of the Year' at the 2021 Legal Business Awards.

Our Acquisitions and Platform strategy

A core part of our strategy remains growth and diversification via acquisitions which enhance quality and expertise in our chosen locations and expand the market-facing Platforms on which we aggregate and offer leading legal and consultancy services. 

We believe that our strategy differentiates our business from "single discipline" competition, whilst at the same time offering a higher-value, more relevant service as we seamlessly deliver "Platform focused" legal and consultancy services to our clients.  It also makes us more indispensable to our existing clients and more attractive to potential new clients.  This is because we can help clients with a wider range of complex stand-alone or inter-related issues that need to be navigated to deliver desired outcomes.  Our service lines continue to evolve based, in part, on what our clients tell us they need.  Our plc status and established reputation help us to attract and retain first class professionals who are the backbone of our Platforms.

To this point we have successfully established our "Property Platform" and our "People Platform", on which we have previously reported.  During FY21 we won a significant mandate to our "Corporate Platform" via our International Investment Services (IIS) business.  After a competitive tender process IIS were appointed Project Manager and Inward Investment advisor for Cambridge & Peterborough Combined Authority's (CPCA) "new economic growth programme", a programme designed to identify and attract 1,000 innovative and high-growth SME's and 125 new inward investors to the CPCA region.  We have also undertaken significant research across our "Business Services" Platform in preparation for its expansion in FY22.

We took a conscious decision not to make any acquisitions during FY21, having completed four earnings-enhancing acquisitions during FY20, we focused on integrating the businesses acquired during FY20.  However, our strong performance during FY21 and our confidence in our strategy to build a broader professional services group means that we now intend to resume acquisition activity to further strengthen and diversify our services.  I am pleased to report that the acquisition pipeline is strong and we remain committed to and excited by acquisition opportunities that may present in FY22 and beyond.

Current trading and outlook

The Group was profitable and cash positive throughout FY21 and we are seeing strong activity levels carry through into FY22 and a good pipeline of new work in most of our units.  We are also seeing an increasing trend in larger and longer-term mandates in both legal and consultancy services, including new roles in longer-term programmes delivered via our People Platform to businesses that are now implementing post-pandemic operational reviews.  Our recent investment in this Platform, and the related opportunities that are now available, encourage us to continue to invest in new capabilities across our Platforms in a way that complements our core legal services.

The stability resulting from decisions we took in H1 FY21, together with significantly improved trading conditions in H2 FY21, have laid the foundations for a good start to the current year.  Our in-built resilience through our balanced business model, allied to our strong culture, means that we have started FY22 with confidence.

Our historic performance and our clear and meaningful strategy for the long-term development of our business demonstrate to our people, our clients and investors that their careers, instructions and investments are in safe hands, irrespective of macro-economic conditions.

Looking forward, opportunities exist to grow the business and continue to broaden our range of professional services both organically and through acquisitions that enhance our client offering and deliver strong returns.  We look forward to the future with confidence.

Rod Waldie

Chief Executive Officer

20 July 2021

Finance Director's Review

Financial overview

Activity levels have recovered well from the pandemic-affected start to the Year.  As client confidence quickly returned to the UK economy the Group's activity levels recovered at the half year from 2% down against the prior half year, to positively conclude the Year 8% ahead of FY20.  This extremely strong second half of the Year enabled the Group to repair, in full, cuts in pay made in H1 FY21 and to award staff an annual bonus in recognition of their hard work, dedication and contribution to the overall performance of the Group.

The measures taken by the Group to embrace changes in working practices driven by the pandemic resulted in a lower cost-base to carry forward into FY22, and demonstrate how agile we can continue to be as a professional services business.

Our strategy to conserve cash throughout the Year and wait until the FY21 outcome was known before declaring internal and external stakeholder rewards, from a robust financial position, has proven to be the right decision, and enables us to plan for future growth with confidence in our established, resilient and well-balanced business model.

Our track record of delivering profitable annual results, supported by strong cash generation and attractive investment returns, is based on being a responsible business with a strong focus on social and governance objectives.

Revenue

Group total revenue grew by 10.5% (FY20: 6.1%) to £121.4m (FY20: £109.8m).  Revenue from core legal service lines grew organically by 5.5% (FY20: 3.5%) and rose by a further 1.0% through increased year-on-year revenue from the acquisition of Tweed.  In addition, revenue from complementary consultancy businesses grew by 27.3% to £14.0m or 11.5% of total revenues (FY20: £11.0m or 10.0%), highlighting the on-going success of our Platforms diversification strategy.

With legal and consultancy service lines working increasingly closer together we finished the Year in a stronger position than we started it, with a significantly enhanced pipeline of activity and unbilled work-in-progress.

Our Property reporting segment performed consistently well throughout the Year, while our Corporate segment navigated unprecedented H2 FY21 increases in transactional activity that did not abate when the UK's anticipated Capital Gains Tax changes did not materialise.  Our legal Corporate reporting segment generated revenue growth of 10.5% (FY20 17.1%) as we remain at the top of deal-volume league tables, as a result of our expertly delivered services to our Private Equity and M&A clients.  Our Property reporting segment grew strongly by 17.0% (FY20: 3.8%) as we took advantage of opportunities generated by our most mature Platform operating at regional and national levels in the UK's construction, property development and housing markets, which rely upon long-term specialist legal support.

In contrast, whilst litigation activity lines grew within our Banking and Financial Services segment and Business Services segment, the extension of UK-wide Government stimulus and support continues to dampen the need for traditional restructuring and recovery activities.  The broad balance of services the entire Group provides, however, supports our confidence that we remain well-placed in FY22 to advise clients if difficulties emerge as Government support is gradually withdrawn.

Our Employment, Pensions and Benefits segment grew by 4.6% (FY20: 22.8%) as our People Platform consultancy businesses t-three and Kiddy & Partners ("Kiddy") in particular needed time to adjust as people interactions were severely impacted by the pandemic.  Both of t-three and Kiddy & Partners have now successfully introduced virtual delivery products and services, to complement their traditional delivery models.  Although the immediate effects of the pandemic challenged these businesses, their focus on talent assessment and development and cultural change, represents strong future sales propositions to a client-base inevitably needing to adjust and change as a result of the pandemic.  Both businesses are confident of a return to growth in FY22. Employment legal services advice at the end of FY20 was also boosted by furlough advice to clients at the end of that year which was not repeated again in FY21.

Underlying operating profit before tax

The Group has recorded strong underlying operating profit before tax of £20.5m which has increased by 10.0% from £18.7m in FY20.  This resulted in the Group maintaining consistent trading margin performance of 16.9% (FY20: 17.0%).  Despite disruption throughout the Year I am pleased with the Group's ability to turn improved activity levels across the business into fees, and sensibly manage costs at both personnel and operating expense levels.  Our strategy to maintain fee earner headcount in order to service the now visible increase in client activity, as capacity in H2 FY21 reached 98%, and to maximise any cost savings resulting from our agile working strategy, have proven to be the correct strategies to deploy.  The table below highlights the significant change we experienced in the second half of the year.

Underlying operating profit before tax excludes amortisation of acquired intangibles, impairment of intangibles and all share-based charges.  Underlying operating profit before tax has been calculated as an alternative performance measure, in order to provide a more meaningful measure and year-on-year comparison of the profitability of the underlying business.

Personnel costs and operating expenses

Our total personnel costs increased by 21.9% to £77.5m (FY20: £63.5m) due to the full-year cost of staff introduced to the business through acquisitions made at the end of FY20, and the reinstatement of Group-wide bonuses to all staff following cancellation of all bonuses in FY20 caused by the uncertainty of the COVID-19 pandemic.

Prior to the pandemic our headcount was increased organically to meet client demand and as a result of making four acquisitions, and notwithstanding the pandemic we took the decision to continue to strengthen our legal and consultancy teams with key hires throughout the Year.  In total six (FY20: 11) new legal partners joined the business and we made nine (FY20: six) internal promotions to legal partner.

Average numbers of legal and professional staff rose by 9.1% (FY20: 15.7%) to 770 (FY20: 706), whilst support staff numbers remained static at 343 (FY20: 341).  Personnel costs as a percentage of fees increased to 63.8% of revenue from 57.8% in FY20, excluding share-based payment charges, due to the Board's decision to retain fee earning staff at the start of the pandemic, together with the reinstatement of Group-wide bonuses in FY21. COVID-19 Job Retention Scheme income totalling £1.9m (FY20: £0.4m) was received during the Year and disclosed within other income.  Furlough income has been repaid to HMR&C in respect of those roles that we did not retain in the business beyond 1 November 2020.

Other operating expenses reduced by £2.7m or 11.5% (FY20: increased 8.5%) to £21.0m (FY20: £23.8m) as the cost of travel, marketing and premises reduced following a full year of remote working in line with UK Government policy.  Operating expenses as a percentage of revenue decreased by 4.3% to 17.3% (FY20: 21.6%).

Earnings Per Share (EPS)

Basic EPS increased by 8.1% to 11.18p (FY20: 10.34p).  Basic EPS before non-underlying and exceptional items increased by 4.5% to 13.26p (FY20: 12.69p). Diluted EPS increased by 9.5% to 11.10p (FY20: 10.14p).  Diluted EPS before non-underlying and exceptional items decreased by 5.8% to 13.17p (FY20: 12.45p).

Long-Term Incentive Plan ('LTIP')

The Group introduced a new LTIP share scheme at the start of the Year that aligns share option rewards with compound annual growth in EPS over a three-year vesting period based on underlying trading profit after tax rather than share price.  The LTIP scheme uses EPS growth based on underlying profit after tax, as the most appropriately aligned profit measure that staff participating within the scheme can be held accountable for and is referred to as underlying fully-diluted EPS starting with the closing performance of FY19. Profits used to calculate underlying EPS each year are disclosed below:

Taxation

The Group's tax charge for the Year was £3.2m (FY20: £3.0m) which comprised a corporation tax charge of £3.8m (FY20: £3.4m) and a deferred tax credit of £0.6m (FY20: credit of £0.4m).

The deferred tax charge arises due to a combination of credits in respect of the share schemes that have vested in past years and the release of deferred tax on brands.  The total effective rate of tax is 19.3% (FY20: 20.6%) based on reported profits before tax.  The decrease is partially as a result of the decrease in marketing and entertaining costs incurred during the year that are typically not tax deductible.

The net deferred taxation liability was £0.8m (FY20: £1.2m).

Dividend

The Board reinstated dividends following the successful outcome of the Year and paid an interim dividend of 2.5p on the 28 June 2021, and proposes a full year final dividend at the Company's Annual General Meeting on 29 September 2021 of 5.0p (FY20: nil) per share, which if approved, will be paid in mid-October 2021 to shareholders on the register at the close of business on 27 August 2021.  The shares will go ex-dividend on 26 August 2021.

Balance sheet

The Group's net asset position has increased by £14.5m (FY20: £14.3m) to £59.3m (FY20: £44.8m), due to the following movements:

There was a £22.1m increase in total current assets, resulting from £3.1m additional trade and other receivables available for collection, a £2.2m increase in contract assets ("unbilled revenue") and a £16.7m increase in cash at bank.  The strong end of year cash position is as a result of conservation of cash at the outset of the pandemic which included the cancellation of all bonuses and dividends payable on the FY20 outturn.  This cash policy enabled the Group to repay all outstanding term debt and finish the Year with net cash of £19.6m (FY20: Net debt £0.9m).  Debt at the Year-end comprised unsecured term loans of £nil (FY20: £3.1m), whilst loans to former partners of acquired businesses totalled £nil (FY20: £0.7m).

Non-current assets increased by £1.0m mainly as a result of an increase of £4.1m from new right of use assets less a £2.7m decrease in intangible assets and goodwill as a result of the reassessment of earn-out payments due to Kiddy and t-three that were deemed no longer due and payable at the end of FY21 due to the effect COVID-19 has had on their ability to meet earn-out conditions previously set.

The Board has carefully considered the impact of COVID-19 on the future forecasts used in assessing the value in use of the cash generating units to which the goodwill and intangibles relate and determined that despite short term reductions such forecasts are more than sufficient to justify the carrying value of goodwill.  Therefore, as at 30 April 2021, the Board concluded that the goodwill and intangible assets do not require impairment.

Total liabilities increased by £8.7m, as the Group reinstated bonuses, that were accrued at the year-end, but also repaid all deferred Government taxes from FY20 and term bank loans in full towards the end of the FY21 year.

Working capital and cash flow

After increasing overdraft facilities at the start of the Year to £20m as a precautionary measure at the outset of the pandemic, they reduced back down to pre-pandemic levels of £10m by the end of the Year.

The Group is confident its strong cash generation supports the day-to-day working capital needs of the Group and is seeking to provide longer-term committed facilities for acquisitions and expansion in FY22.  The Group has also agreed terms for a litigation funding facility that will commence in early FY22.

At the Year-end, unbilled revenue recognised in the Group's statutory accounts, from time recorded on non-contingent work, totalled £13.9m or 11.5% of revenue recognised over the Year (FY20: £11.7m or 10.6%) unbilled revenue represented 49 days compared to 48 days of Pro-forma net revenue.  Group debtor days remained consistent at 104 days compared to 103 days in FY20 of Pro-forma net revenue and are typically at their peak on the last day of the financial year due to billing activity towards the end of the financial year.  Pro-forma net revenue includes revenue from acquisitions on a full year pro-forma basis.

Free cashflow during the Year from operations (post cashflow from IFRS 16 leases) was £20.8m (FY20: £10.6m) which represents 158.2% (FY20: 90.2%) of profit after taxation.

Summary

After laying sensible foundations at the start of the Year to minimise spending and conserve cash, the Group has successfully navigated through the financial effects of COVID-19 on the business.  We have seamlessly adapted to agile working and as activity levels strengthened, we have returned pay cuts to staff and benefitted from the cost-savings opportunities that have arisen.  We conclude another Year of growth with significant net cash, a strong pipeline of activity and renewed confidence in our strategy to diversify further and become a wider professional services group.

Neil Smith

Finance Director

20 July 2021

Consolidated statement of profit and loss and other comprehensive income

for the year ended 30 April 2021

The results for the periods presented above are derived from continuing operations.