Waldie: Diversification is key differentiator
Listed law firm Gateley’s diversification strategy is paying off, with complementary non-legal services responsible for most of the 7.6% growth in revenue, its half-year results have shown.
However, its admission that the second half of the financial year would not be as positive as previously hoped saw its share price fall by almost 10% yesterday.
Gateley has made 14 acquisitions since becoming the first law firm to list in London, back in 2015, 11 of which have been non-legal businesses, most recently East Midlands chartered surveyors practice RJA Consultants, at a cost of £6m.
In the six months to 31 October 2023, group revenue grew by 7.6% from £76m to £82m. This was made up of £59m in legal services (up 2.4%) and £23m in consultancy services (up 24% given acquisitions, 14% in organic growth).
This yielded an increase of 17% in reported profit before tax to £7.4m and a 4.6% increase in underlying profit before tax to £10m.
Chief executive Rod Waldie said “our disciplined diversification strategy in both legal and consultancy services… remains our key differentiator and continues to enhance our resilience”.
Fee-earner headcount increased slightly to 1,035, while the firm has been hiring to “seed” class action and international arbitration teams and to create intellectual property commercialisation and valuation in patent and trade mark attorney services.
Some 70% of staff either own shares or currently participate in option schemes.
Gateley operates off four ‘platforms’ – property, business services, people and corporate. It said the first two recorded growth in the six months, with the third broadly flat. Property is by far the biggest, accounting for 52% of the first-half revenue.
The corporate platform – the second biggest (providing 22% of overall revenue) – saw its turnover fall by 5.9% due to “a subdued corporate transactional performance”, which would have been worse but for restructuring and banking activity.
Investors were told that “challenging” market conditions “look likely to continue for longer than anticipated” – last September, Gateley had said it expected improvements in the second half of the financial year.
“The combination of ongoing macro-uncertainty, varying activity levels across the group and the natural weighting towards the final months of the financial year makes the group’s full year outturn more difficult than usual to forecast,” the stock exchange announcement said.
“However, with the solid results delivered at the half year point, tempered by a cautious short-term outlook, the board expects results for the full year to be broadly in line with market consensus.”
Gateley’s share price dropped 9.5% yesterday to 143.5p. Our annual review of listed legal businesses’ performance, published at the start of this month, noted how Gateley’s shares have been slipping over the past two years, down another 12% in 2023 to 154.5p, but there’s been no obvious reason for this.
Mr Waldie added: “Given macro-economic conditions during the period, I am pleased with the group’s resilient H1 24 performance.
“This is testament to, firstly, our strong client relationships, sustained by the excellent service delivered by our people and, secondly, our strategy working in practice as we continue to differentiate Gateley and enhance resilience via the aggregation of, and continued investment in, complementary legal and consultancy services on each of our platforms.”
Meanwhile, the group has named financial professional David Wilton as its chair designate and Non-Executive Director on 1 February 2024.
He is currently a non-executive director and chair of the audit committee at veterinary group CVS Group. He was chief financial officer of AIM-listed video game developer Sumo Group from IPO in 2017 to its successful sale in January 2022. More recently, he was, until November 2023, chair of another AIM-listed video games business, Frontier Developments.
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