Gordon Dadds hits post-listing turnover target a year early

Biles: No client or partner losses from Ince

Gordon Dadds’ share price rose today on the back of positive results that show it has met its goal to double revenue in the three years after listing 12 months early.

After five smaller deals in 2017/18, the big driver of growth in the year to 31 March 2019 was its acquisition of City firm Ince & Co at the end of 2018.

The first three months of Ince revenues helped boost the firm’s turnover for the year by 69% to £52.6m, with operating profit rising 73% to £15.2m.

The acquisitive group told investors that, with the new arrangements with Ince’s overseas offices that were announced just after the year-end, its annual revenues were now around £100m. When it listed in August 2017, turnover was £25m.

It offered an alternative performance measure of adjusted profit before tax, reached after adding back non-recurring items, such as the costs of the Ince acquisition, and deducting partners’ profit shares and other non-controlling interests “as these are a cost of motivating the relevant business generators”.

This led to a figure of £5.9m, compared to £2.5m in 2017/18.

In a statement to the stock market, Gordon Dadds – which trades as Ince – said: “Our strategy has been and continues to be to acquire and grow revenue through organic growth and acquisition and to administer that through a single efficient administrative operation in a low cost environment.

“Our objective at admission to AIM in August 2017 was to double revenue in three years. As we approach the second anniversary, our reported revenue has already doubled and our annualised revenue is nearly four times that of two years ago.

“We have the foundation for a highly profitable and fast-growing business advisory group and have the structure and team to achieve this.”

The Gordon Dadds share price has fluctuated sharply in recent months. Having climbed to a high of 189p in January, an unexpected share placing raised £11.5m but sent the share price crashing, hitting a low of 120p at the end of March. It then recovered to 160p in May but fell again, and opened today at 140p. At the time of writing, the shares were up 8% following the results announcement.

The introduction of Ince’s shipping, trade, aviation and insurance practices has changed the shape of Gordon Dadds’ business.

The results showed that corporate and tax was the biggest practice area in the year, accounting for nearly 22% of turnover, followed by shipping, trade, aviation and insurance (17%), dispute resolution (15%) and real estate (14%) – the latter two accounting for significantly less than in the previous year.

The announcement said: “Clearly the Ince contribution in a full year will be much more significant and should reduce real estate to less than 10% of group revenues. This reduction is very welcome as the sector as a whole is highly competitive, cyclical and higher risk than most of our business.”

Gross margin was up from 45.9% to 48.6%, nearing the firm’s 50% target, although overheads as a percentage of fees charged to clients rose from 34.9% to 37.4%, against a target of 30%.

“The [overheads] target becomes more achievable the more fees are generated, so acquisitions will aid achievement of this as the duplicated overheads of acquired businesses are eliminated over a period,” the announcement said.

“A number of the international offices are not operating at a satisfactory level of revenue at the moment and management is seeking to add fee-earners in such offices (as we have recently achieved in Hong Kong) to improve efficiency and also to enable a broader service offering to be available to clients.”

Group chief executive Adrian Biles said he was proud of a “great set of results”. He continued: “The integration phase of Ince is now complete and I think it’s noteworthy that we did not suffer any partner or client losses during and since the transaction.

“The opportunity to cross sell by practice area and by geography provided by Ince is huge and has allowed us to accelerate beyond this level.

“We’ve always been a high growth business – having delivered compound annual revenue growth of over 80% for the last five years. Looking forward, we are well positioned for significant growth as we look to leverage our existing infrastructure through cross-selling, new client wins and further new hires, acquisitions and alliances.”

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