Biles: Float has generated interest
Gordon Dadds expects to complete at least two acquisitions in the coming months, its chief executive said today on the back of strong financial figures, the first published results since the firm floated on AIM in August.
Revenue increased 14.5% to £12.9m for the six months to 30 September, with operating profits up 44% to £3.5m.
Adjusted profit before tax – representing profit after adding back exceptional items and deducting partners’ profit shares of £2.65m – more than doubled to £580,000.
The firm highlighted a “strong” balance sheet, with gross assets of £41m and net cash of £12.5m.
Gordon Dadds has been built to be an acquisition vehicle. In June, it acquired Alen-Buckley, a south London law firm with a turnover of £1.6m, and earlier this month corporate tax advisory business CW Energy.
Investors were told that Alen-Buckley “is already generating additional business for the group as a whole through cross referral of clients as well as continuing to generate income from its well established existing business”.
Chief executive Adrian Biles told Legal Futures that the float has generated more interest from potential targets, and he expected to complete another two deals before the end of the financial year.
Today’s report to the market said: “It is clear that there is considerable genuine interest in our model of providing for the following: acquisition of partners’ goodwill; de-risking partners from capital provision; insulation of partners from all business liabilities; retention of existing branding and culture; and access to cash and IT resources.”
It added that the current pipeline of potential acquisitions consists of firms with incomes of £1m-6m principally based in the Midlands, south of England and Wales.
The firm is also “developing plans to harness the intellectual capital of the former Work Group business and applying that to the professional services market”.
Mr Biles explained that Work Group – which Gordon Dadds reversed into – had people management expertise that the firm was looking to leverage to replicate the dispersed model of the likes of Keystone Law, which by coincidence went public yesterday.
The results recorded that the dispute resolution, regulatory solutions and taxation departments had strong six months.
“Against this, property has operated in a very competitive sector where activity has been weaker and corporate has been actively involved in our flotation which reduced their external billings.
“In the property segment we are continuing a programme of moving the work done to our Cardiff office and have been making personnel changes to enable this. We are also taking increasing care in selecting the work we undertake.”
Overall, fee income was expected to be in line with market expectations for the year as a whole.
Mr Biles said: “The considerable benefits of being able to offer multiple services to clients from each part of the group, with the associated multiple touch points and increases in revenue, are beginning to be realised and will continue to improve the group’s performance.
“The market opportunity we identified at the time of our listing, to consolidate the legal services market in England and Wales, continues to be compelling and has been subsequently emphasised by the further development and execution of our mergers and acquisitions pipeline.
“We expect that the pace of change in the legal sector will accelerate as the desire for firms to release their partners’ capital increases. Any downturn in the economy or substantive increase in bank lending rates will generate further opportunities for both corporate and lateral profitable expansion.
“The platform and strategy for growth that the board has put in place means the company is exceptionally well placed to take advantage of this ever-growing opportunity.”