TIDMGOR
RNS Number : 8302S
Gordon Dadds Group PLC
28 June 2018
28 June 2018
Gordon Dadds Group PLC
("Gordon Dadds" or the "Company" or the "Group")
Full year audited results for the 12 months to 31 March 2018
Gordon Dadds Group PLC (AIM: GOR), the acquisitive London-based
international legal and professional services group, is pleased to
announce its audited results for the year ended 31 March 2018.
Financial highlights
-- Revenue GBP31.24m (2017: GBP24.94m) +25.3%
-- Annualised revenues at the year end of more than GBP42m
-- Operating profits GBP8.80m (2017: GBP7.39m) +19.1%
-- Adjusted* profit before tax GBP2.96m (2017: GBP2.40m) +23.3%
-- Adjusted** earnings per share 10.46p (2017: 18.53p)
-- Dividend 4.0 pence per share (2017: nil)
-- Gross assets GBP55.0m (2017: GBP24.9m)
-- Cash balances of GBP8.9m at year end
* Adjusted profit before tax represents the profit before income
tax after adding back non-recurring items and after deducting
partners' profit shares treated in statutory accounts as
non-controlling interests.
** Adjusted earnings per share is computed from adjusted profit
before tax after deducting remaining non-controlling interests and
taxation
Operational highlights
-- GBP20 million new money fund raising and admission to AIM in August 2017
-- Five acquisitions with aggregate revenues of some GBP14
million completed in the year and successfully integrated
-- Hong Kong office opened, now approved as a foreign law firm
-- Strong pipeline of potential acquisitions
-- Innovative remuneration model continues to attract lawyers
Adrian Biles, Chief Executive of Gordon Dadds, commented:
"This has been a year of great progress for the Group. We have
exceeded the expectations that we set for ourselves and for our
shareholders.
"We have rapidly built a highly profitable and fast growing
international legal and professional services group with annualised
revenues of well over GBP40 million.
"We expect to achieve significant further growth during the year
from additional acquisitions, together with organic growth arising
principally from the increasing cross-referral of clients between
the Group's businesses and as the more specialised businesses take
advantage of the Group's full service capabilities.
"We continuously examine expansion opportunities and are engaged
in discussions with firms in a number of other international
jurisdictions. In the UK, we have a good pipeline of potential
acquisitions with which we are at various stages of discussion or
negotiation."
FOR FURTHER INFORMATION, PLEASE Via Newgate
CONTACT: Gordon Dadds Group
plc
Adrian Biles, Chief Executive
Officer
Christopher Yates, Chief Financial
Officer
Arden Partners, Nominated Adviser
and broker to the Company
John Llewellyn-Lloyd
Ciaran Walsh +44 (0) 20 7614 5900
Newgate Communications +44 (0) 20 7680 6550
Adam Lloyd Email: gordondadds@newgatecomms.com
James Ash
NOTES:
Gordon Dadds Group plc is an acquisitive legal and professional
services business headquartered in London with a significant back
office and technology platform based in Cardiff.
The Group targets firms of all sizes and will merge the business
into the Gordon Dadds brand or allow a firm to retain their
identity and culture but benefit from the back-office technology
platform used by Gordon Dadds, enabling the targeting of law firms
seeking an alternative solution to the regulatory and investment
requirements of the UK legal market.
Gordon Dadds LLP has been operating in this way since 2013,
successfully integrating firms into its cost efficient
platform.
Please visit www.gordondaddsgroup.com for more information.
Chairman's statement
It is a great pleasure to present my first annual statement to
shareholders, following my appointment as chairman of Gordon Dadds
Group plc in August 2017 when the reverse takeover of Gordon Dadds
Group Limited was completed. It has been a year full of activity
and one which has produced very satisfying results that enable the
board to recommend a final dividend payable to shareholders in
September 2018.
The results for the year set out in these financial statements
show adjusted profit before taxation* of GBP2.96 million on total
revenues of GBP31.2 million. These results mask the growth which
has been made in the year through acquisition, the majority of
which occurred late in the year and therefore had little impact on
revenues and profits in the year ended 31 March 2018. In a full
year, we estimate that total revenues would have been more than
GBP42 million and profits also significantly higher.
The board's overall objective is profitably and rapidly to grow
the business in professional services by acquiring additional
revenue which can be efficiently processed through the group's
bespoke administrative systems. As the traditional partnership
model for solicitors breaks down the Group is ideally placed for
growth in the legal services sector. The Group continues to have a
significant pipeline of acquisitions under consideration and is
increasingly focusing on opportunities with fee income of GBP10
million to GBP100 million.
The Group has also established a presence in Hong Kong and is
looking to build a significant business there, servicing the
Chinese market and its ambitions outside China. We will also
examine opportunities in other overseas jurisdictions where UK law
is common or international law is the main business.
The Group has the ability to deliver this objective as it has a
management team that is experienced in acquisition and integration
and a reward structure that is more attractive to lawyers than the
traditional partnership model. These factors are complemented by
the financial strength of the balance sheet following last year's
successful AIM flotation and GBP20 million fund raising.
At the time of flotation, it was the board's target to double
fee income within three years and to grow the net margin of the
group over time to 15%. Achieving the first of these targets is
imminent and management has the second, longer term, objective
within its sights.
The board has recommended a dividend of 4.0p per share payable
on 14 September 2018 in respect of the part of the year following
flotation, which reflects the delivery of the Group's encouraging
maiden results. The board intends to pursue a progressive dividend
policy reflecting profit growth, subject to the capital
requirements of the Group. It is intended that dividends will be
paid twice a year with one payment in April representing around a
third of the total and a larger payment in September.
Anthony Edwards, Chairman
27 June 2018
* See Finance Director's report
Group Chief Executive's report
The year has been one of great progress for the Group, which now
has annualised revenues of over GBP42 million. We are building a
highly profitable and fast growing international legal and
professional services group. Our aim was to double revenues in
three years and we are well on the way to achieving that within
just one.
We expect to achieve significant further growth during the year
from additional acquisitions, together with organic growth arising
principally from the increasing cross-referral of clients between
the Group's businesses and especially as the more specialised
businesses take advantage of the group's full-service
capabilities.
Our flotation on AIM in August last year provided the group with
a strong balance sheet from which to continue its rapid
development. Almost all the staff in the Group at the time acquired
shares (and no shareholders sold). It also brought the Group and
its business model to the attention of a wide audience of investors
and potential targets and this has assisted our growth.
Traditional legal services businesses in the UK continue to be
beset by succession problems - how to release partners' capital,
how to fund the necessary investments in the business, how to cope
with increasing regulation. Our model relieves the partners of such
firms from these and many other problems.
The acquisitions we have completed during the year were:
-- Alen-Buckley: in June 2017 we acquired the business and
certain assets of this leading South London firm of solicitors
-- CW Energy: in October 2017 we acquired the business and
certain assets of this highly profitable specialist corporate tax
advisory firm
-- White & Black: in January 2018 we acquired this firm of
specialist corporate FinTech solicitors
-- Metcalfes: also in January 2018 we acquired the business and
certain assets of this well established Bristol firm of solicitors
which had just acquired with our guidance the business of a local
competitor
-- Thomas Simon: in February 2018 we acquired the share capital
of this Cardiff based firm of solicitors which has doubled the size
of our Cardiff office to become a significant firm in the Cardiff
market
These acquisitions have settled in well and the level of
interaction between the businesses continues to develop as the
partners in them develop a better awareness of and respect for the
skills elsewhere in the Group. Our innovative remuneration model
has been specifically designed to foster this behaviour.
The Gordon Dadds core business has performed solidly in the
year, showing steady growth.
The Financial Markets consultancy business had a year of slower
than budgeted growth in fee income which has accelerated since the
year end and in the last month achieved record turnover of, on an
annualised basis, GBP2.4m.
The business of the Group as a whole has produced the following
contributions to turnover:
2018 2017
Corporate & tax 23.3% 23.0%
Family & private client 10.9% 12.6%
Regulatory solutions 5.9% 4.7%
Dispute resolution 24.3% 25.1%
Real estate 21.0% 20.3%
Employment & immigration 5.9% 6.6%
PI 3.8% 3.5%
Financial services 2.9% 1.7%
Consulting 2.0% 2.4%
100.0% 100.0%
We are seeing, emphasised by White & Black joining the
Group, an increasing number of opportunities to deliver legal
services in other jurisdictions where English law prevails. We are
keen to act on this. Since the year-end we have therefore
established an office in Hong Kong and obtained regulatory
approvals to operate there, initially as a foreign law firm. We
have also, subject to regulatory approval, formed an association
with a local law firm which will enable the office to operate as a
local law firm as well. We believe that there is significant
business to be derived for the whole group from local connections
as well as from mainland China.
We continuously examine opportunities for expansion of the Group
in other geographies and are engaged in discussions with firms in a
number of other international jurisdictions.
In the UK, we have a good pipeline of potential acquisitions at
various stages of discussion or negotiation.
Since the flotation, we have concluded that firms with an annual
fee income of over GBP10 million are the most attractive although
we can be flexible depending on practice mix and other factors.
As important as the aggregation of fee income is, the increase
to the intellectual capital of the business and the increase in the
quality of its client and matter base are of greater significance.
We believe in quality over quantity.
Our core remuneration model for partners continues to be a key
factor in our ability to recruit new partners and to attract
acquisition targets. This model focuses on professional
practitioners being rewarded both for the billable work they do and
for the income generated from their clients. In addition, the very
high level of share ownership amongst partners and staff tends to
drive a behaviour of cross referring work and is helpful in
enabling the Group better to understand and service its clients'
needs.
The model also focusses the partners' efforts on what they are
well qualified to do: to advise clients. The management of the
Group's non-technical resources and control of costs is thus left
in the hands of the small group of the management team who have the
skill sets and focus required. Partners are free to run their
professional practice and serve their clients rather than worrying
about administration or finance and management moves more volume
through a fixed infrastructure cost.
The Company was the first London led law firm to float and only
the second in the UK. In recent months, the market has seen three
new entrants and more are expected. The Group is pleased to see
that there is investor interest in this newly formed sub-sector of
the professional services market. We believe that Gordon Dadds is
structurally better suited to rapid, acquisition-led expansion than
its competitors and is striving to ensure this first-mover
advantage delivers results for shareholders.
Adrian Biles
27 June 2018
Group Finance Director's report
In considering the financial extracts accompanying this
statement, you should have regard to note 13.2 to the Financial
Statements attached which explains the basis of accounting for the
acquisition of Work Group plc.
The Group's consolidated results for the year ended 31 March
2018 show total revenues of GBP31.24 million (2017: GBP24.94
million), operating profits of GBP8.80 million (2017: GBP7.40
million) and adjusted profit before tax of GBP2.96 million (2017:
GBP2.40 million).
Our favoured measure for the performance of the business is
adjusted profit before tax which is struck after adding back
non-recurring expenses (principally the cost of the re-organisation
and flotation in the current year) and by deducting the minority
interests which represent our partners' profit share during the
year as set out below.
2018 2017
GBPm GBPm
Profit before tax from statement of comprehensive
income 6.38 6.81
Deduct: Partners profit shares shown as
part of non-controlling interests (5.72) (4.95)
Add: Non-recurring expenses:
flotation costs 1.92 0.36
acquisition related expenditure 0.38 0.18
Adjusted profit before tax 2.96 2.40
Deduct: Other non-controlling interests 0.50 -
------- -------
Taxation 0.03 -
------- -------
Adjusted profit after tax for adjusted
earnings per share 2.43 2.40
------- -------
In monitoring the progress of the business and in addition to
fee income (measured net of disbursements and VAT), we focus on
three measurements (relative to fee income) which are driven by
different aspects of the business, gross margin, lock-up and
overheads.
Gross margin is the fees charged to clients less direct
production costs. Production costs are the profit shares of the
equity partners and employment costs of the other partners and fee
earners together with their direct costs such as travel and direct
support costs (such as dedicated secretaries) and provision for
doubtful and bad debts, expressed as a percentage. This measure is
in the control of the heads of each department or business unit and
we have a target for that reaching 50%. In the current year (and
after including amortisation which will be a partners' profit share
from July 2018) it was 45.9% per cent. (2017: 44.7 per cent.).
Lock up is the value of trade debtors and work in progress
compared with fees charged to clients, in each case excluding
disbursements and VAT. This measure is under the control of the
Client Care Partner for each client and they are guided and
assisted in this by our revenue management team. Our target for
this is immediately 100 days but we will work to a lower target
over time. At the year end and allowing for a full year's turnover
of acquired businesses the target was achieved.
Overheads are all the other costs of running the business,
premises, insurance, computing and telephones etc. apart from the
costs of acquisitions. In the year, overheads as a percentage of
fees charged to clients were 36.0 per cent. (2017: 34.9 per cent)
and our target is 30%. The 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 which did not occur in the year because of the
acquisitions being late in the year.
From the above, it is clear that on achievement of the gross
margin target and the overheads target, a net margin of 15% after
paying one -off costs such as acquisition related costs is
achievable and management is closely focussed in delivery of this
over time through continuing consolidation of group functions and
synergies arising on acquisitions.
We expect to make progress towards all of those targets during
the current year.
At the end of the year, the balance sheet had net cash of
GBP8.42 million (2017: net borrowings of GBP4.13 million). The
Consolidated Statement of Cash Flow shows that the group generated
GBP7.86 million of free cash flow from operations (2017:
GBP5.24m).
It should be noted that in the year we have accrued a small
amount for Corporation tax for the year just ended. In future years
it is likely that the rate of tax will be close to the standard
rate of Corporation Tax.
The other significant balance sheet item which has changed
during the year is goodwill, reflecting the acquisitions made
during the year and which, as described in the notes to the
accounts, has been reviewed for impairment and none was
required.
The Group has a strong balance sheet and as management delivers
on target achievement shareholder value will be significantly
increased.
Christopher Yates
27 June 2018
Strategic Report
The Directors present their strategic report and the audited
financial statements of Gordon Dadds Group plc and the group it
heads for the year ended 31 March 2018 in accordance with Section
414 of the Companies Act 2006.
OBJECTIVES AND STRATEGIES
The principal strategy of the group is to aggregate income
profitably and more importantly to increase the quality of the
intellectual capital of the business and the quality of its client
and matter base: we want quality rather than just quantity. The
strategy for doing so includes recruiting high quality personnel,
streamlining systems and forging strategic alliances where
appropriate together with developing new business streams.
BUSINESS REVIEW
Acquisitions
On 4 August following a takeover offer, the company acquired
control of Gordon Dadds Group Limited and subsequently achieved
ownership of the whole of the share capital. Gordon Dadds Group
Limited was the parent company of Gordon Dadds LLP one of the top
100 firms of solicitors in the UK and a number of other
professional services businesses. As the former shareholders of
Gordon Dadds Group Limited were the substantial majority of the
shareholders of the company before the shares issued for the GBP20
million fund raising, the acquisition is classed as a Reverse
Acquisition under International Accounting Standards. Accordingly
the accounts attached are, in fact, a continuation of the accounts
of Gordon Dadds Group Limited with certain adjustments explained in
the notes.
During the year the Group also made other notable acquisitions
including:
-- the business and certain assets of Alen-Buckley in June 2017,
a leading South London firm of solicitors
-- the business and certain assets of CW Energy LLP, a highly
profitable specialist corporate tax advisory firm
-- the ordinary share capital of White & Black Limited: in
January 2018, a firm of FinTech specialist solicitors
-- also in January 2018, the business and certain assets of
Metcalfes, a well-established Bristol firm of solicitors which had
just acquired (with our guidance) the business of a local
competitor
-- in February 2018, the share capital of Thomas Simon Limited,
a Cardiff based firm of solicitors which has doubled the size of
our Cardiff office to become a significant firm in the Cardiff
market
Results and dividends
The results of the business and the proposed dividend are
covered in the other statements accompanying this report, as is a
summary of the activities in the year. The dividend of 4.0p per
share will be paid on 14 September 2018 to holders on the register
on 3 August 2018.
Key Performance Indicators
The Group has, since the flotation, being reassessing the KPIs
on which it focuses particularly and these are described and
quantified in the Group Finance Director's report.
Principal risks and uncertainties
Acquisition pipeline
The Group has been built to accommodate and integrate acquired
businesses. The Directors believe that the legal services market
continues to be in a consolidation phase where firms are looking
for capital or for the partners to de-risk their commitments. As a
result, the directors believe that there will be a continuing
pipeline of businesses available for acquisition, which will
improve the Group's intellectual capital and financial results.
There is however a risk that the market will change or that other
well-capitalised acquirers will complete with the Group.
Execution risk
Acquisitions made may not produce the results anticipated for a
number of reasons. The Group seeks to mitigate this risk by linking
the consideration for an acquisition to future performance and by
aligning the interests of the vendors who are generally required to
remain with the Group for a period with those of shareholders.
Reputational risk
The Group strives to maintain a reputation for delivering high
quality service to its clients on a timely and cost effective
basis. Failure to achieve this to a significant extent might damage
the reputation of the businesses and lead to a loss of client
confidence. The Group seeks to maintain those high standards by
regular training, communication and internal review processes.
In addition and potentially creating reputational risk, there is
a continuous risk that a mistake will be made or bad advice given.
The Group has substantial insurance protection against such
eventualities but there can be no certainty that this will be
adequate for a particular claim and any such claim will also give
rise to reputation damage.
Partners and employees
The business of the Group is dependent on the continuing efforts
of the partners and employees and the loss of a number of staff
could have a significant impact on the Group's ability to maintain
client confidence and also to grow. The Directors believe that the
Group's remuneration model encourages key revenue generators to
remain with the Group and rewards them for doing so.
The Group is dependent on a number of key management staff and
business generators and the loss of one or more of them could be
damaging to the business. In addition to the Group's remuneration
structure, the directors strive to have succession plans in place
for key individuals.
Regulatory risk
The Group is highly regulated with a number of entities
regulated by the Solicitors Regulatory Authority (SRA), a business
regulated by the Financial Conduct Authority (FCA) and certain
activities regulated by the Institute of Chartered Accountants in
England and Wales. The Group seeks to maintain an open relationship
with those regulators and to abide by the rules and regulations
they publish as failure to do so has the potential to force the
closure of a relevant business.
It should be noted by all shareholders and potential
shareholders that, under the Rules of the SRA, if a non-solicitor
comes to hold more than 10% of the voting share capital of the
Company without prior approval, the SRA are entitled to withdraw
the Group's authorisation to practice as solicitors. In addition,
under law and the rules of the FCA, it is an offence by an investor
to acquire 10% or more of the Company without prior approval. The
directors maintain a close an eye on shareholder concentration and
seeks to ensure that no breech of these limits occurs.
Market risk
In common with all businesses, an economic downturn could have a
detrimental impact on the Group and its results. The Group does,
however, benefit from having a widely spread client list and a wide
spread of business sectors served and these will react at different
times to market conditions which should limit any damage to the
Group's performance.
By order of the Board
C J Yates
Director
6 Agar Street, London, WC2N 4HN
Date: 27 June 2018
Directors' Remuneration Report
THE COMMITTEE
The remuneration committee is responsible for implementing the
Board's policy relating to the remuneration and emoluments of the
executive directors and also reviews the remuneration of the senior
management. The remuneration of the non-executive directors is
determined by the board.
The Remuneration Committee was chaired by Keith Cameron until 3
August 2017 and since then has been chaired by Anthony Edwards with
Simon Howard and David Furst as members.
The Board considers the composition of the remuneration
committee to be appropriate for the size of the Group.
GENERAL POLICY
The Group's policy is to provide remuneration packages to
attract, retain and motivate directors and senior managers with a
view to encouraging commitment to the development of the Group for
the long term enhancement of value to shareholders.
The remuneration of partners in the business is generally
through the sharing of revenues on a basis which should ensure a
contribution to the Group's overheads. Remuneration packages for
employees comprise competitive basic salaries and benefits and may
include performance related bonuses. The board has the facility to
provide long term incentives in the form of share options to align
personal reward with enhanced shareholder value. Salaries are
reviewed annually with effect from 1 April. Performance targets,
upon which bonuses are based, are established annually as part of
the planning process and are linked to the annual budget approved
by the Board, again aligning personal reward with enhanced
shareholder value.
PENSIONS
The Group contributes to group personal pension plans. Pension
contributions payable by the Group are based upon basic
salaries.
SERVICE CONTRACTS
It is the Group's policy that directors' contracts should
normally be for a period of not more than 12 months and not entitle
the director to any payment on termination to which he would not
have been entitled at that time had he remained with the Group. AJ
Biles and CJ Yates each have a service contract with the Company
which became effective on 4 August 2017 and are terminable on
twelve months' notice by either party. The salaries were
respectively GBP250,000 and GBP135,000. AJ Biles waived his salary
down to GBP35,000 per annum with effect from 1 November 2017. SJ
Howard had a service contract with the Company at a salary of
GBP105,000 per annum which was terminated without compensation on 3
August 2017. AJ Edwards, SJ Howard and DA Furst each received a
letter of appointment from the Company which took effect on 4
August 2018 at salaries of GBP50,000, GBP35,000 and GBP30,000
respectively. Each of those appointments was terminable on three
months' notice by either party
During the year Brook Street Holdings LLP, the holding entity
for the Group's legal services interests, resolved, with the
approval of the Remuneration Committee, to allow Adrian Biles to
participate in its profits.
DIRECTORS' REMUNERATION
The remuneration of the directors by members of the Group during
the year to 31 March was:
Basic Employer pension
Salary Profit contributions
and/or share
Director'sfees and fees Benefits Total Total
2018 2018 2018 2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ ---------------- ---------- --------- -------- -------- --------- --------
AJ Edwards 33 - - 33 - - -
AJ Biles 75 169 1 245 200 - -
CJ Yates 89 26 3 118 75
SJ Howard 68 - 3 71 136
DA Furst 28 - - 28 10 - -
KG Cameron 7 7 20
------------ ---------------- ---------- --------- -------- -------- --------- --------
300 195 7 502 441 - -
------------ ---------------- ---------- --------- -------- -------- --------- --------
All the directors are remunerated by the Group. The directors'
fees and salaries disclosed above were paid in the period. Benefits
in kind include private medical insurance and a contribution to a
pension plan.
Prior to 4 August 2017, the services provided by A J Biles were
supplied by ACR Professional Services LLP, of which he is a
designated member and those provided by CJ Yates were supplied by
CMY Services LLP of which he is a designated member.
The Group was charged rent for office accommodation of
GBP101,000 (2017: GBP101,000) by Juratone Limited, a company of
which A J Biles is a director.
On 2 December 2016, the company's subsidiary Culver Limited was
sold to CMY Services LLP of which C J Yates is a member for GBP1.
On 31 December 2017, the Company agreed to acquire Culver Limited
from CMY Services LLP for GBP1 and subsequently completed the
acquisition.
During the period, apart from the above, no director has had any
material interest in any contract with the Company or its
subsidiaries requiring disclosure under the provisions of the
Companies Act 2006.
On behalf of the Board
C J Yates
Director
6 Agar Street, London, WC2N 4HN
Date :27 June 2018
Consolidated Statement of Comprehensive Income
Year ended Year ended
31 March 31 March
2018 2017
Note GBP'000 GBP'000
------------------------------------- ----- ----------- ------------
Continuing operations
Fees and commissions 31,238 24,936
------------------------------------- ----- ----------- ------------
Staff costs 5 (10,756) (7,681)
Depreciation and amortisation (2,137) (1,902)
Other operating expenses (9,546) (7,961)
------------------------------------- ----- ----------- ------------
Operating profit 6 8,799 7,392
------------------------------------- ----- ----------- ------------
Finance income 7 159 201
Finance expense 7 (239) (352)
Non recurring costs 8 (2,305) (539)
Share of profit of associates (37) 107
------------------------------------- ----- ----------- ------------
Profit before income tax 6,377 6,809
------------------------------------- ----- ----------- ------------
Income tax expense 9 (27) -
------------------------------------- ----- ----------- ------------
Profit and total comprehensive
income for the year 6,350 6,809
------------------------------------- ----- ----------- ------------
Attributable to:-
Equity holders of the Company 127 1,861
Non-controlling interests 6,223 4,948
------------------------------------- ----- ----------- ------------
Total comprehensive income for
the year 6,350 6,809
------------------------------------- ----- ----------- ------------
Earnings per share
Basic and diluted earnings per
share (pence) 10 0.55 14.37
Adjusted basic and diluted earnings
per share (pence) 10 10.46 18.53
------------------------------------- ----- ----------- ------------
The profit for the year relates to continuing operations
only.
There was no other comprehensive income in the year. There is no
tax on any component of other comprehensive income or expense.
The attached notes are an integral part of these consolidated
financial statements.
Statements of Financial Position
Gordon Dadds Group plc (Registered number: 03744673)
Group Group Company Company
31 March 31 March 31 March 31 December
2018 2017 2018 2016
Note GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- ----- --------------------- --------- --------- ------------
ASSETS
Non-current assets
Property, plant and equipment 11 367 38 - -
Intangible assets 12 27,044 11,639 - -
Investments 13 267 200 47,191 -
-------------------------------------------------- ----- --------------------- --------- --------- ------------
27,678 11,877 47,191 -
-------------------------------------------------- ----- --------------------- --------- --------- ------------
Current assets
Trade and other receivables 14 18,411 12,922 11,445 167
Cash and cash equivalents 15 8,948 130 52 531
-------------------------------------------------- ----- --------------------- --------- --------- ------------
27,359 13,052 11,497 698
-------------------------------------------------- ----- --------------------- --------- --------- ------------
Total assets 55,037 24,929 58,688 698
-------------------------------------------------- ----- --------------------- --------- --------- ------------
EQUITY
Capital and reserves attributable to equity
holders
Share capital 16 288 572 288 572
Share premium 17 230 8,240 230 8,240
Capital redemption reserve 17 46,448 - 46,448 -
Reverse acquisition reserve 17 (24,724) (7,397) - -
Other reserves 17 - - 2,826 2,826
Retained earnings 2,041 1,914 (14,307) (12,496)
-------------------------------------------------- ----- --------------------- --------- --------- ------------
24,283 3,329 35,755 (858)
Non-controlling interest 4,512 3,941 - -
-------------------------------------------------- ----- --------------------- --------- --------- ------------
Total equity 28,795 7,270 35,755 (858)
-------------------------------------------------- ----- --------------------- --------- --------- ------------
LIABILITIES
Non-current liabilities
Trade and other payables 18 11,896 4,137 - -
Borrowings 19 155 224 - -
Provisions 20 - - - -
-------------------------------------------------- ----- --------------------- --------- --------- ------------
12,051 4,361 - -
-------------------------------------------------- ----- --------------------- --------- --------- ------------
Current liabilities
Trade and other payables 18 13,654 8,841 22,933 1,556
Borrowings 19 372 4,034 - -
Provisions 20 165 423 - -
-------------------------------------------------- ----- --------------------- --------- --------- ------------
14,191 13,928 22,933 1,556
-------------------------------------------------- ----- --------------------- --------- --------- ------------
Total liabilities 26,242 17,659 22,933 1,556
-------------------------------------------------- ----- --------------------- --------- --------- ------------
Total equity and liabilities 55,037 24,929 58,688 698
-------------------------------------------------- ----- --------------------- --------- --------- ------------
The Company has taken advantage of the exemption contained in
S408 Companies Act 2006 and has not presented a separate income
statement for the Company. The Company recorded a loss of
GBP1,541,000 for the 15 month period ending 31 March 2018.
The financial statements were approved and authorised for issue
by the Board of Directors and were signed on its behalf on 27 June
2018 by C.J. Yates - Director.
The attached notes are an integral part of these consolidated
financial statements.
Consolidated Statement of Cash Flows
Group Group Company Company
Year Year Period Year
Ended Ended Ended Ended
31 March 31 March 31 March 31 December
2018 2017 2018 2016
Note GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- ----- --------- --------- --------- --------------------
Cash flows from operating
activities
Profit/(loss) before income
tax 6,377 6,809 (1,541) (607)
Adjustments for:
Finance income (159) (201) - (2)
Finance expense 239 352 - -
Acquisition related costs 2,305 - - -
Depreciation, amortisation
and impairment 2,137 1,902 - 3
Share of profits of associates 37 (107) - -
Changes in operating assets
and liabilities (net of acquisitions):
Decrease/(increase ) in trade
and other receivables (1,491) 4,980 (47) 436
(Decrease)/increase in trade
and other payables (1,298) (8,472) 91 (1,009)
(Decrease)/increase in provisions (288) 199 - -
----------------------------------------- ----- --------- --------- --------- --------------------
Cash generated by operations 7,859 5,462 (1,497) (1,179)
Interest and other financial
costs paid (184) (227) - 3
Income tax paid (3) - - -
----------------------------------------- ----- --------- --------- --------- --------------------
Net cash generated by operating
activities 7,672 5,235 (1,497) (1,176)
----------------------------------------- ----- --------- --------- --------- --------------------
Cash flows from investing
activities
Cash paid on acquisitions
(net of cash acquired) 13 (1,741) (78) (28,407) -
Payment of contingent and
deferred consideration on
acquisitions (4,824) (1,667) - -
Payment of acquisition related
costs (2,305) - - -
Purchase of PPE (2) - - (3)
Proceeds from disposal of
PPE - - - 8
Purchase of intangible assets (130) (103) - -
Purchase of interest in associates - (193) - -
Dividends received - 100 - -
Interest received 159 201 - -
Net cash absorbed by investing
activities (8,843) (1,740) (28,407) 5
----------------------------------------- ----- --------- --------- --------- --------------------
Cash flows from financing
activities
Movement in borrowings (including
finance leases) (3,647) 1,107 - -
Advances from/(to) subsidiaries - - 10,055 -
Proceeds from issuance of
shares 19,789 - 20,232 -
Transactions costs relating
to issue of shares (862) (200) (862) -
Transactions with non-controlling
interests (4,725) (4,380) - -
----------------------------------------- ----- --------- --------- --------- --------------------
Net cash (absorbed)/generated
from financing activities 10,555 (3,473) 29,425 -
----------------------------------------- ----- --------- --------- --------- --------------------
Net (decrease) / increase
in cash and cash equivalents 9,384 22 (479) (1,171)
Cash and cash equivalents
at beginning of period (436) (458) 531 1,702
----------------------------------------- ----- --------- --------- --------- --------------------
Cash and cash equivalents
at end of period 15 8,948 (436) 52 531
----------------------------------------- ----- --------- --------- --------- --------------------
The attached notes are an integral part of these consolidated
financial statements.
Consolidated Statement of Changes in Equity
Capital Reverse Non-
Share Share Redemption acquisition Other Retained controlling Total
capital premium reserve reserve reserves earnings interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ --------- ------------ ----------- --------------- ---------- ------------------------ ---------------------- ----------
Balance at 1
April 2016 572 8,240 - (8,812) - 20 1,943 1,963
------------------ --------- ------------ ----------- --------------- ---------- ------------------------ ---------------------- ----------
Profit/(loss) and
total
comprehensive
income/(expense)
for the period - - - - - 1,861 4,948 6,809
Shares issued for
acquisition - - - 1,615 - - - 1,615
Share issue
transactions
costs - - - (200) - - - (200)
Transferred to
members - - - - - 33 (2,950) (2,917)
------------------ --------- ------------ ----------- --------------- ---------- ------------------------ ---------------------- ----------
Balance at 31
March 2017 572 8,240 - (7,397) - 1,914 3,941 7,270
------------------ --------- ------------ ----------- --------------- ---------- ------------------------ ---------------------- ----------
Balance at 1
April 2017 572 8,240 - (7,397) - 1,914 3,941 7,270
================== ========= ============ =========== =============== ========== ======================== ====================== ==========
Profit/(loss) and
total
comprehensive
income/(expense)
for the period - - - - - 127 6,223 6,350
Shares issued in
the period 279 38,737 - (18,784) - - - 20,232
Shares issued for
acquisition - - - 1,457 - - - 1,457
Share issue
transactions
costs - (862) - - - - - (862)
Deferred shares
cancelled (563) - 563 - - - - -
Share premium
cancelled - (45,885) 45,885 - - - - -
Transferred to
members - - - - - - (5,652) (5,652)
Balance at 31
March 2018 288 230 46,448 (24,724) - 2,041 4,512 28,795
------------------ --------- ------------ ----------- --------------- ---------- ------------------------ ---------------------- ----------
The attached notes are an integral part of these consolidated
financial statements.
Statement of Changes in Equity
Capital Other
Share Share redemption reserves Retained Total
capital premium reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ -------------- -------------- ------------------- -------------- ------------- --------------
Balance at 1
January 2016 572 8,240 - 2,826 (11,898) (260)
------------------ -------------- -------------- ------------------- -------------- ------------- --------------
Profit/(loss) and
total
comprehensive
income/(expense)
for the period - - - - (598) (598)
Balance at 31
December 2016 572 8,240 - 2,826 (12,496) (858)
------------------ -------------- -------------- ------------------- -------------- ------------- --------------
Balance at 1
January 2017 572 8,240 - 2,826 (12,496) (858)
================== ============== ============== =================== ============== ============= ==============
Profit/(loss) and
total
comprehensive
income/(expense)
for the period - - - - (1,541) (1,541)
Shares issued in
the period 279 38,737 - - - 39,016
Share issue
transaction
costs - (862) - - - (862)
Deferred shares
cancelled (563) - 563 - - -
Share premium
cancelled - (45,885) 45,885 - - -
Balance at 31
March 2018 288 230 46,448 2,826 (14,037) 35,755
------------------ -------------- -------------- ------------------- -------------- ------------- --------------
The attached notes are an integral part of these consolidated
financial statements.
Notes to the Financial Statements
1. General information
Gordon Dadds Group plc (the Company) and its subsidiaries
(together 'Gordon Dadds Group' or 'the Group') provide legal &
professional services and independent financial advisory services
to businesses and high net worth individuals in the UK.
The Company is a public limited company incorporated and
domiciled in the UK. The address of its registered office is 6 Agar
Street, London, WC2N 4HN.
These consolidated financial statements have been approved for
issue by the Board of Directors on 27 June 2018.
2. Summary of significant accounting policies
2.1. Basis of preparation
These consolidated financial statements of Gordon Dadds Group
plc are for the 12 month period to 31 March 2018. The financial
statements have been prepared in accordance with IFRS as adopted by
the European Union and those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
The financial statements have been prepared on the going concern
basis. In deciding this, the directors have considered the detailed
budgets for the current financial year and high level budgets for
the succeeding year including in both cases cash flows. They have
also considered the impact of adverse changes resulting from the
major risks and uncertainties they consider apply to the group.
The financial statements have been prepared in accordance with
those IFRS standards and IFRIC interpretations issued and effective
or issued and early adopted as at the time of preparing these
statements. The policies set out below have been consistently
applied to all the periods presented.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of
applying the group's accounting policies. The areas involving a
higher degree of judgment or complexity, or areas where assumptions
and estimates are significant to the consolidated financial
statements are disclosed in Note 4.
The Group has adopted all of the new and revised standards and
interpretations issued by the International Accounting Standards
Board ("IASB") that are relevant to its operations and are
currently effective. The adoption of these new and revised
Standards and Interpretations had no material effect on the profit
or loss or financial position of the Group.
2.2. Consolidation
Subsidiaries are entities controlled by the Company. The Group
controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control
commences to the date that control ceases.
The purchase method of accounting is used to account for the
acquisition of subsidiaries by the group. The cost of an
acquisition is measured as the fair value of the assets given,
equity instruments issued and liabilities incurred or assumed at
the date of exchange. Costs directly attributable to the
acquisition are expensed in the period. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values at
the acquisition date, irrespective of the extent of any
non-controlling interest. The excess of the cost of acquisition
over the fair value of the group's share of the identifiable net
assets and contingent liabilities acquired is recorded as goodwill.
If the cost of acquisition is less than the fair value of the net
assets of the subsidiary acquired, the difference is recognised
directly in the income statement. Inter-company transactions,
balances and unrealised gains on transactions between group
companies are eliminated. Unrealised losses are also eliminated but
considered an impairment indicator of the asset transferred.
Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the
group.
The Company's accounting period date 31 March is in line with
its subsidiaries.
2.3 Investments in subsidiaries
Investments in subsidiaries are included at cost less provision
for impairment in value.
2.4 Investments in associates
Associates are those entities over which the Group has
significant influence, but neither control nor joint control over
the financial and operating policies. Associates are accounted for
using the equity method and are initially recognised at cost. The
financial statements include the Group's share of total
comprehensive income and equity movements of associates from the
date when significant influence commences to the date the
significant influence ceases.
2.5 Segment reporting
A business segment is a group of assets and operations engaged
in providing products or services that are subject to risks and
returns that are different from those of other business segments.
There is only one geographical segment, being the United
Kingdom.
The group's two business segments are described in the strategic
report, being legal & professional services and independent
financial advisory services. No segment reporting disclosures are
required for these due to the fact that the smaller segment,
financial services advisory, falls beneath the quantitative
thresholds set out by IFRS 8 paragraph 13.
2.6 Business combinations
The Group applies the acquisition method of accounting to
account for business combinations in accordance with IFRS 3 (R),
'Business Combinations'. The consideration transferred for the
acquisition of a subsidiary is the fair values of the assets
transferred, the liabilities incurred and the equity interests
issued by the Group. The consideration transferred includes the
fair value of any asset or liability resulting from a contingent
consideration arrangement. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the
acquisition date. The excess of the consideration transferred over
the fair value of the Group's share of the identifiable net assets
acquired is recorded as goodwill. All transaction related costs are
expensed in the period they are incurred as operating expenses. If
the consideration is lower than the fair value of the net assets of
the subsidiary acquired, the difference is recognised in the income
statement.
Any contingent consideration to be transferred by the Group is
recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is
deemed to be an asset or liability is recognised in accordance with
IAS 39 in the income statement.
2.7 Intangible assets
Intangible assets include the cost of acquiring client
portfolios. Client portfolios are carried at cost less accumulated
amortisation losses and impairment losses. Amortisation of the cost
is being provided for in line with the fees billed and cash
collections being generated by the client portfolio acquired.
Intangible assets also include internally generated software and
intellectual property, which are valued at cost less subsequent
amortisation and impairment. These intangible assets are amortised
at rates in order to write off the assets on a straight line basis
over their estimated useful lives.
2.8 Goodwill
Goodwill arising in a business combination is recognised as an
asset at the date that control is acquired (the acquisition date).
Goodwill is initially measured as the excess of the sum of the
consideration transferred, the amount of any non-controlling
interest in the acquiree and the fair value of the acquirer's
previously held equity interest (if any) in the entity over the net
of the acquisition date amounts of the identifiable assets acquired
and the liabilities assumed.
The company tests annually whether goodwill has suffered any
impairment. The carrying value of the goodwill is dependent on the
future income stream from that asset.
Goodwill recognised in a business combination does not generate
cash flows independently of other assets or groups of assets. As a
result, the recoverable amount, being the value in use, is
determined at a cash generating unit (CGU) level.
The determination of a CGU is judgemental. The identification of
CGU's involves an assessment of whether the asset or group of
assets generate independent cash flows.
For impairment purposes goodwill is tested annually at the CGU
level. This was carried out at 31 March 2018. The carrying value of
goodwill and the key assumptions used in performing the annual
impairment assessment are disclosed in note 12.
2.9 Impairment of assets
Assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment and whenever
events or changes in circumstance indicate that the carrying amount
may not be recoverable.
Assets that are subject to amortisation are tested for
impairment whenever events or changes in circumstance indicate that
the carrying amount may not be recoverable. An impairment loss is
recognised where the amount by which the asset's carrying amount
exceeds its recoverable amount. The recoverable amount is the
higher of an asset's fair value less costs to sell and the value in
use.
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows (cash-generating units).
Critical estimates and assumptions made
In assessing the value in use of each CGU, our calculations
required estimates in relation to uncertain items, including
management's expectations of future growth, operating costs, profit
margins, operating cash flow and the discount rate for each
CGU.
Future cash flows used in the value in use calculations, are
based on the latest approved financial plans extrapolated for
future periods expected to benefit from the goodwill for each CGU.
The future cash flows are discounted using a post-tax discount that
reflects current market assessments of the time value of money.
2.10 Financial instruments
The group classifies financial instruments, or their component
parts, on initial recognition as a financial asset, a financial
liability or an equity instrument in accordance with the substance
of the contractual arrangement. Financial instruments are
recognised on trade date when the group becomes a party to the
contractual provisions of the instrument. Financial instruments are
recognised initially at fair value plus, in the case of a financial
instrument not at fair value through profit and loss, transaction
costs that are directly attributable to the acquisition or issue of
the financial instrument. Financial instruments are derecognised on
trade date when the group is no longer a party to the contractual
provisions of the instrument.
Financial assets are included on the balance sheet as trade and
other receivables and cash and cash equivalents.
Financial liabilities are included on the balance sheet as trade
and other payables and borrowings.
(a) Trade receivables
Trade receivables are stated at their original invoiced value,
as the interest that would be recognised from discounting future
cash receipts over the short credit period is not considered to be
material. Trade receivables are reduced by appropriate allowances
for estimated irrecoverable amounts.
(b) Trade payables
Trade payables are stated at their original invoiced value, as
the interest that would be recognised from discounting future cash
payments over the short payment period is not considered to be
material.
(c) Interest-bearing borrowings
Interest-bearing borrowings are stated at amortised cost using
the effective interest method. The effective interest method is a
method of calculating the amortised cost of a financial liability
and of allocating interest expense over the relevant period. The
effective interest rate is the rate that exactly discounts
estimated future cash payments through the expected life of the
financial liability.
2.11 Foreign currency translation
(i) Functional and presentation currency
The consolidated financial statements are presented in pounds
sterling, which is the Company's functional and presentation
currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
period-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the statement
of comprehensive income.
2.12 Property, plant and equipment
Property, plant and equipment ("PPE") is shown at cost less
subsequent depreciation and impairment. Cost includes expenditure
that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to the
statement of comprehensive income during the financial period in
which they are incurred.
Depreciation on assets is calculated using the straight-line
method to allocate the cost of each asset less its residual value
over its estimated useful life, as follows:
Computers, plant and 3-10 years
machinery
Equipment 3-5 years
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at each balance sheet date.
An asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount.
Gains and losses on disposals are determined by comparing
proceeds with carrying amount. Write downs and gains and losses on
disposals are included in the statement of comprehensive
income.
2.13 Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held
at call with banks, other short-term highly liquid investments with
original maturities of three months or less, and bank overdrafts.
Bank overdrafts are shown within borrowings in current liabilities
on the balance sheet.
2.14 Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently stated at
amortised cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in the
income statement over the period of the borrowings using the
effective interest method.
Borrowings are classified as current liabilities unless the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the balance sheet date.
2.15 Deferred income tax
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the
consolidated and company financial statements. The deferred income
tax is not accounted for if it arises from initial recognition of
an asset or liability in a transaction, other than a business
combination, that at the time of the transaction affects neither
accounting nor taxable profit/loss. Deferred income tax is
determined using tax rates (and laws) that have been enacted or
substantially enacted by the balance sheet date and are expected to
apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it
is probable that future taxable profit will be available against
which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising
on investments in subsidiaries, joint ventures and associates,
except where the timing of the reversal of the temporary difference
is controlled by the Group and it is probable that the temporary
difference will not reverse in the foreseeable future employee
benefits
2.16 Pension obligations
The Group operates a pension scheme which is a defined
contribution plan. A defined contribution plan is a pension plan
under which the Group pays fixed contributions into a separate
entity.
The Group has no legal or constructive obligations to pay
further contributions if the fund does not hold sufficient assets
to pay all employees the benefits relating to employee service in
the current and prior periods.
The Group pays contributions to publicly or privately
administered pension insurance plans on a mandatory, contractual or
voluntary basis. The Group has no further payment obligations once
the contributions have been paid. The contributions are recognised
as employee benefit expense when they are due. Prepaid
contributions are recognised as an asset to the extent that a cash
refund or a reduction in the future payments is available.
2.17 Profit-sharing and bonus plans
The Group recognises a liability and an expense for bonuses and
profit-sharing, based on a formula that takes into consideration
the profit attributable to that part of the Group for which the
employee is profit responsible. The Group recognises a provision
where contractually obliged or where there is a past practice that
has created a constructive obligation.
2.18 Provisions
Provisions for clawback of indemnity commission, pensions
review, unpaid salaries and other claims are recognised when the
Group has a present legal or constructive obligation as a result of
past events; it is more likely than not that an outflow of
resources will be required to settle the obligation; and the amount
has been reliably estimated.
Where there are a number of similar obligations, the likelihood
that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to any
one item included in the same class of obligations may be
small.
Provisions are measured at management's best estimate of the
expenditure required to settle the obligation at the balance sheet
date.
2.19 Revenue recognition
Revenue comprises the fair value of the sale of services, net of
value-added tax, rebates and discounts and after eliminating sales
within the Group.
Revenue from the sale of professional services is recognised as
follows:
(a) Legal & professional services
Revenue relating to the legal services business represents
amounts chargeable to clients during the year. Income is recognised
when the company has performed services in accordance with the
agreement with the relevant client and has obtained a right to
consideration for those services. Where such income has not been
billed at the balance sheet date, it is included as accrued income.
Revenue in respect of contingent fee assignments, over and above
any agreed minimum fee, is recognised when the contingent event
occurs. Where such contingent event has not accrued at the balance
sheet date, it is included as accrued income.
(b) Employee benefits and financial advisory
Revenue relating to the employee benefits and financial advisory
business represents fees and life and pension commission and is
recognised when confirmation has been received from the
underwriters that payment is being made to the Group. A provision
is made for clawback of commission which is deducted from
turnover.
(c) Interest income
Interest income is recognised on a time-proportion basis using
the effective interest method.
2.20 Leases
Leases of property, plant and equipment where the Group has
substantially all the risks and rewards of ownership are classified
as finance leases. Finance leases are capitalised at the lease's
inception at the lower of the fair value of the leased asset and
the present value of the minimum lease payments. Each lease payment
is allocated between the liability and finance charges so as to
achieve a constant rate on the finance balance outstanding. The
corresponding rental obligations, net of finance charges, are
included in other borrowings. The interest element of the finance
cost is charged to the income statement over the lease period so as
to produce a constant periodic rate of interest on the remaining
balance of the liability for each period. The property, plant and
equipment acquired under finance leases is depreciated over the
shorter of the asset's useful life and the lease term.
Leases where the lessor retains substantially all the risks and
rewards of ownership are classified as operating leases.
Payments made under operating leases (net of any incentives
received from the lessor) are charged to the statement of
comprehensive income on a straight-line basis over the period of
the lease.
2.21 Dividend distribution
Dividend distribution to the Company's shareholders is
recognised as a liability in the Group's financial statements in
the period in which the dividends are approved by the Company's
shareholders. Interim dividends are recognised when paid.
3. Financial risk management
3.3 Financial risk factors
The Group's activities expose it to a variety of financial
risks: market risk (including foreign exchange risk and price
risk), credit risk, liquidity risk, cash flow risk and fair value
interest-rate risk. The Group's overall risk management programme
focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the Group's financial
performance.
Risk management is carried out by the Board of Directors. The
Board identifies, evaluates and hedges financial risks in close
co-operation with the Group's operating units. The Board provides
written principles for overall risk management, as well as written
policies covering specific areas, such as foreign exchange risk,
interest-rate risk, credit risk, use of Convertible loan stock and
non-Convertible loan stock, and investing excess liquidity.
(d) Credit risk
Because the Group has a wide range of clients, in different
market sectors, it has no significant concentrations of credit
risk. It has policies in place to ensure that if customers do not
settle their accounts within the agreed terms then the transaction
is cancelled minimising the credit exposure.
(e) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient
cash and marketable securities, and the availability of funding
through an adequate amount of committed credit facilities. The
Group aims to maintain flexibility in funding by keeping committed
credit lines available.
(f) Cash flow and fair value interest rate risk
The Group's income and operating cash flows are substantially
independent of changes in market interest rates. The interest rates
of finance leases to which the Group is lessee are fixed at
inception of the lease. These leases expose the Group to fair value
interest rate risk.
The Group's cash flow interest rate risk arises from borrowings.
Borrowings issued at variable rates expose the Group to cash flow
interest rate risk. Borrowings issued at fixed rates expose the
Group to fair value interest rate risk. Group policy is to maintain
approximately 33 per cent of its borrowings in fixed rate
instruments. At March 2018, 100 per cent of borrowings were at
fixed rates.
4. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year are discussed below.
(g) Estimated impairment of goodwill
Determining whether goodwill is impaired requires an estimation
of the value in use of the cash generating units to which goodwill
has been allocated. The value in use calculation requires the
entity to estimate the future cash flows expected to arise from the
cash generating unit and a suitable discount rate.
(h) Other receivables
Other receivables represent unbilled amounts for client work and
are measured initially at fair value and held at amortised cost
less provisions for foreseeable losses based upon current
observable data and historical trend.
(i) Impairment of receivables
Receivables are held at cost less provisions for impairment.
Provisions for impairment represent an allowance for doubtful debts
that is estimated, based upon current observable data and
historical trend.
5. Staff costs
Group
The average number of persons employed by the Group (excluding
directors) during the period, analysed by category, was as
follows:
Number of employees
2018 2017
--------------- ---------- ----------
Fee earners 107 85
Support staff 122 92
--------------- ---------- ----------
Total 229 177
--------------- ---------- ----------
The aggregate employment costs of these persons were as
follows:
2018 2017
GBP'000 GBP'000
------------------------- -------- --------
Wages and salaries 9,198 6,615
Social security costs 911 606
Employee benefits costs 399 299
Pension costs 248 161
------------------------- -------- --------
Total staff costs 10,756 7,681
------------------------- -------- --------
Company
The Company has no employees (excluding directors); all
personnel are employed by subsidiary entities.
Details of the remuneration of and transactions with directors
are included in the Directors' Remuneration Report on pages 15 to
16. The directors are considered to be key management
personnel.
6. Operating profit
Operating profit/(loss) is stated after charging:
Group Group
2018 2017
GBP'000 GBP'000
----------------------------------------------- ---------- -----------
Fees payable to the company's
auditors
* audit fees 154 81
* other services pursuant to legislation 50 27
Depreciation of tangible
fixed assets
* owned assets 8 12
* hire purchase 21 21
Amortisation/impairment of
intangible assets 2,109 1,869
Impairment of investments - -
Bad debt expense 858 558
Hire of plant and equipment 149 156
Other operating leases 1,310 1,327
----------------------------------------------- ---------- -----------
7. Finance income and expense
Group Group
2018 2017
GBP'000 GBP'000
------------------------------ ---------------- --------
Finance income
Bank interest receivable 116 134
Other income 43 67
------------------------------ ---------------- --------
159 201
------------------------------ ---------------- --------
Finance expense
Bank interest payable (2) (1)
Hire purchase (7) (9)
Other loans (183) (166)
Other interest 8 (50)
Financial assets at fair
value through profit
or loss (55) (126)
------------------------------ ---------------- --------
(239) (352)
------------------------------ ---------------- --------
Net finance income/(expense) (80) (151)
------------------------------ ---------------- --------
8. Non recurring costs
Non recurring costs include acquisition related costs of
GBP382,000 (2017: GBP183,000) and exceptional costs of GBP1,923,000
(2017: GBP356,000).
Acquisition related cost represent professional fees and other
costs incurred in respect of acquisitions completed or under
negotiation during the year.
Exceptional costs represent group restructuring, including the
reverse acquisitions of Brook Street Holdings LLP and Gordon Dadds
Group Limited, placing of new ordinary shares and re-admission to
the AIM market of the London Stock Exchange.
Non recurring costs include non-audit fees payable to the
Company's auditors of GBP233,000 (2017: GBPNil).
9. Taxation
Analysis of charge in the period
Group Group
2018 2017
GBP'000 GBP'000
------------------------- -------- ---------
The charge for taxation
comprises:
Taxation charge for the 24 -
current period
Adjustment in respect of 3 -
prior periods
------------------------- -------- ---------
27 -
------------------------- -------- ---------
(i) Factors affecting the tax charge for the period:
The tax assessed for the year is lower than the standard rate of
corporation tax in the UK of 19.0 per cent (2017:20.0 per cent).
The differences are explained below:
Group Group
2018 2017
GBP'000 GBP'000
------------------------------- --------- ---------
Profit on ordinary activities
before taxation 6,377 6,809
Less profit arising in
partnerships, on which
tax is payable by the
members personally (6,216) (4,962)
------------------------------- --------- ---------
Profit on ordinary activities
of corporate entities
before taxation 161 1,846
------------------------------- --------- ---------
Profit on ordinary activities
multiplied by the standard
rate of corporation tax
of 19 per cent (2017:20.0
per cent) 31 369
Effects of:
Impact of tax exempt items 37 15
Losses (utilised) / carried
forward (44) (384)
------------------------------- --------- ---------
Current taxation charge 24 -
Adjustment in respect
of prior periods 3
Deferred tax charge - -
------------------------------- --------- ---------
Total taxation charge
for the period 27 -
------------------------------- --------- ---------
(ii) Factors that may affect future tax charges
At 31 March 2018 the Group had unrelieved tax losses of
approximately GBP19,000 (2017: GBP2.4m). The directors have not
recognised a deferred tax asset in respect of these losses as it is
not certain that the Group will make sufficient profits in the
short term to absorb these amounts.
10. Earnings per share
Earnings per share are based on the weighted average number of
shares of the Company in issue or issued as consideration for the
entities whose results are reported in the period. The number of
shares and periods are as follows:
1 April 2016 12,732,188 being the shares issued by the Company
in consideration of the acquisition of
the shares in Culver Holdings LLP issued
as consideration for the acquisition of
Brook Street Holdings LLP
2 December 13,403,110 Being the shares issued by the Company
2016 for the acquisition of the shares in issue
by Culver Holdings Limited immediately
following the acquisition of Brook Street
Holdings LLP
31 March 12,509,623 Being the shares issued by the Company
2017 for the acquisition of the shares in issue
by Culver Holdings Limited immediately
following the acquisition of Brook Street
Holdings LLP allowing for the cancelation
of shares in Culver Holdings Limited
15 June 2017 13,417,143 Being the shares issued by the Company
as consideration for the acquisition of
all of the shares in issue by Culver Holdings
Limited at the date of the reverse acquisition
4 August 28,597,310 Being the Company's issued shares on re-admission
2017 to the AIM market of the London Stock Exchange
19 January 28,759,711 Being the Company's current issued shares
2018 following new shares issued to Culver Ventures
Limited loan stock holders
Basic earnings per share, shown on the consolidated income
statement, is based on profit after tax GBP127,000 divided by
23,229,943, being the weighted average total number of ordinary
shares in issue during the period.
Adjusted basic earnings per share, shown on the consolidated
income statement, is based on adjusted profit before tax
GBP2,962,000 after deducting other non-controlling interests of
GBP504,000 and tax of GBP27,000 divided by 23,229,943, being the
weighted average total number of ordinary shares in issue during
the period.
Adjusted profit before tax is calculated as follows:
Group Group
2018 2017
GBP'000 GBP'000
--------------------------------------------- -------- ---------
Profit before tax from statement
of comprehensive income 6,377 6,809
Deduct: Partners profit shares shown
as non-controlling interests (5,720) (4,948)
Add: Non-recurring expenses:
* Flotation costs 1,923 356
* Acquisition related expenditure 382 183
Adjusted profit before tax 2,962 2,400
--------------------------------------------- -------- ---------
11. Property, plant and equipment ("PPE")
Group
Furniture,
Land and fittings
and
buildings equipment Total
GBP'000 GBP'000 GBP'000
--------------------------------- ---------- -------------- --------
Cost
Balance at 1 April 2017 - 95 95
Acquisition of subsidiary (note
13) 230 126 356
Additions - 2 2
Balance at 31 March 2018 230 223 453
--------------------------------- ---------- -------------- --------
Depreciation
Balance at 1 April 2017 - 57 57
Charge for the period - 29 29
Balance at 31 March 2018 - 86 86
--------------------------------- ---------- -------------- --------
Carrying value
At 31 March 2017 - 38 38
--------------------------------- ---------- -------------- --------
At 31 March 2018 230 137 367
--------------------------------- ---------- -------------- --------
Included in the carrying value of PPE is GBP17,000 (2017:
GBP38,000) of assets held by the Group under hire purchase or
finance leases. The depreciation charge for the period for these
assets was GBP21,000 (2017: GBP33,000).
The figures for the previous period are as follows:-
Furniture,
fittings
and
equipment
GBP'000
-------------------------- --------------
Cost
Balance at 1 April 2016 95
-------------------------- --------------
Balance at 31 March 2017 95
-------------------------- --------------
Depreciation
Balance at 1 April 2016 24
Charge for the period 33
Balance at 31 March 2017 57
-------------------------- --------------
Carrying value
At 31 March 2016 71
-------------------------- --------------
At 31 March 2017 38
-------------------------- --------------
Company
There are no PPE assets held by the Company (2017: None).
12. Intangible assets
Group
Internally
Client generated Intellectual
Goodwill portfolio software property Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ---------- ------------ ----------- ------------- ------------
Cost
Balance at 1 April
2017 6,734 8,014 323 189 15,260
Acquisition of subsidiary 17,334 - - - 17,334
Additions - - 130 - 130
Reassessment of fair
value 82 - - - 82
Eliminated on disposal - (295) - - (295)
Balance at 31 March
2018 24,150 7,719 453 189 32,511
----------------------------- ---------- ------------ ----------- ------------- ------------
Amortisation and impairment
Balance at 1 April
2017 - 3,583 38 - 3,621
Charge for the period - 2,016 65 28 2,109
Eliminated on disposal - (263) - - (263)
----------------------------- ---------- ------------ ----------- ------------- ------------
Balance at 31 March
2018 - 5,336 103 28 5,467
----------------------------- ---------- ------------ ----------- ------------- ------------
Carrying value
At 31 March 2017 6,734 4,431 285 189 11,639
----------------------------- ---------- ------------ ----------- ------------- ------------
At 31 March 2018 24,150 2,383 350 161 27,044
----------------------------- ---------- ------------ ----------- ------------- ------------
Client portfolio represents the acquisition of the business and
certain assets from other professional services firms. The client
portfolio intangible asset is carried at cost less accumulated
amortisation. Amortisation is provided for in line with the fees
billed and cash collections generated by the client portfolio
acquired.
Internally generated software includes GBP453,000 (2017:
GBP323,000) of development costs relating to development of
software applications. The directors have considered the carrying
value of internally generated software of GBP350,000 (2017:
GBP285,000) as appropriate as it is expected to create future
economic benefit.
Intellectual property includes GBP161,000 (2017:GBP189,000) of
intellectual property acquired on the acquisition of certain assets
and liabilities of Prolegal Limited (in administration).
The Intangible assets of the group for the prior year were as
follows:-
Internally
Client generated Intellectual
Goodwill portfolio software property Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ---------- ------------ ----------- ------------- ------------
Cost
Balance at 1 April
2016 500 4,500 220 - 5,220
Acquisition of subsidiary 6,234 3,701 - 189 10,124
Additions - - 103 - 103
Eliminated on disposal - (187) - - (187)
Balance at 31 March
2017 6,734 8,014 323 189 15,260
----------------------------- ---------- ------------ ----------- ------------- ------------
Amortisation and impairment
Balance at 1 April
2016 - 1,846 - - 1,846
Charge for the period - 1,831 38 - 1,869
Eliminated on disposal - (94) - - (94)
----------------------------- ---------- ------------ ----------- ------------- ------------
Balance at 31 March
2017 - 3,583 38 - 3,621
----------------------------- ---------- ------------ ----------- ------------- ------------
Carrying value
At 31 March 2016 500 2,654 220 - 3,374
----------------------------- ---------- ------------ ----------- ------------- ------------
At 31 March 2017 6,734 4,431 285 189 11,639
----------------------------- ---------- ------------ ----------- ------------- ------------
Goodwill
Goodwill acquired in a business combination is allocated, at
acquisition, to the cash generating units (CGUs), or group of units
that are expected to benefit from that business combination and is
analysed below.
Personal
Consulting Culver Injury GDLLP
and Financial Legal Legal Alen
Technology Services Services Services Buckley
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- -------------------- ---------- ----------- -------------- ---------
Cost
At 1 April 2017 500 4,002 1,432 800 -
Acquisitions 1,251 101 3,881 2,303 1,329
Reassessment of -
fair value - 82 - -
At 31 March 2018 1,751 4,185 5,313 3,103 1,329
-------------------- -------------------- ---------- ----------- -------------- ---------
Impairment
At 1 April 2017
and 31 March 2018 - - - - -
-------------------- -------------------- ---------- ----------- -------------- ---------
Carrying value
At 31 March 2017 500 4,002 1,432 800 -
-------------------- -------------------- ---------- ----------- -------------- ---------
At 31 March 2018 1,751 4,185 5,313 3,103 1,329
-------------------- -------------------- ---------- ----------- -------------- ---------
White Total
CW &
Energy Black Goodwill
GBP'000 GBP'000 GBP'000
-------------------- -------------------- ---------- ----------- -------------- ---------
Cost
At 1 April 2017 - - 6,734
Acquisitions 6,464 2,005 17,334
Reassessment of
fair value - - 82
At 31 March 2018 6,464 2,005 24,150
-------------------- -------------------- ---------- ----------- -------------- ---------
Impairment
At 1 April 2017
and 31 March 2018 - - -
-------------------- -------------------- ---------- ----------- -------------- ---------
Carrying value
At 31 March 2017 - - 6,734
-------------------- -------------------- ---------- ----------- -------------- ---------
At 31 March 2018 6,464 2,005 24,150
-------------------- -------------------- ---------- ----------- -------------- ---------
An annual goodwill impairment review was performed. The CGU's
represent the smallest identifiable groups of assets that generate
cash flows, and to which goodwill is allocated.
The value in use of each CGU is determined using cash flow
projections derived from financial plans. This reflects
management's expectations of future revenue growth, operating costs
and cost reductions due to synergies, profit margins, operating
cash flows based on past performance and future expectations of
business performance. The cash flows have then been extended for a
minimum of five years (held flat for years three, four, five and to
a maximum of ten years). Estimated taxation has been deducted
calculated at the estimated applicable corporation tax rate, of 19%
for the next two years and 17% for the years thereafter, in line
with current HMRC guidance.
The future cash flows have been discounted using a post-tax
discount rate of 5%.
The two year financial plans include growth rates for each CGU
based on the individual market assessment for each CGU. Other than
for the Consulting and Technology CGU for which includes an
estimated growth rate of 10%, the other CGU's do not include any
estimated any growth rates beyond the two years.
Company
There are no intangible assets held by the company (2017:
None).
13. Investments
The carrying value of investments held by the group and company
were as follows:
Group Group Company Company
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ -------- -------- --------- --------
Shares in group undertakings - - 47,191 -
Interest in associates 267 200 - -
------------------------------- -------- -------- --------- --------
267 200 47,191 -
------------------------------ -------- -------- --------- --------
13.3 Shares in group undertakings
Company
Shares in
Group
Undertakings
GBP'000
--------------------------- -------------------
Cost
Balance at 1 April
2017 3,518
Additions 47,191
Balance at 31 March
2018 50,709
----------------------------- -------------------
Impairment and provisions
Balance at 1 April
2017 3,518
Impairment -
--------------------------- -------------------
Balance at 31 March
2018 3,518
----------------------------- -------------------
Carrying value
At 31 March 2017 -
--------------------------- -------------------
At 31 March 2018 47,191
----------------------------- -------------------
On 31 March 2018, Gordon Dadds Group plc held a significant
interest in the following subsidiary undertakings which are
incorporated and operate in England and Wales and are included in
the consolidated financial statements.
% of Class of
UK Companies Principal activity holding capital
-------------------------------- ---------------------- --------- ---------
Culver Holdings Limited Intermediate holding 100% Ordinary
company shares
Gordon Dadds Corporate Finance Intermediate holding 100% Ordinary
Limited company shares
Culver Financial Management Independent financial 100% Ordinary
Limited advisor shares
Culver Ventures Limited Business ventures 100% Ordinary
shares
Hanover Financial Management Independent financial 100% Ordinary
Limited advisor shares
GD Employee Benefits Limited Independent financial 100% Ordinary
advisor shares
Brook Street Support Services Management services 100% Ordinary
Limited shares
Hanover Pensions Limited Professional services 100% Ordinary
shares
Prolegal Solicitors Limited Legal services 100% Ordinary
shares
Prolegal (Alen-Buckley) Legal services 100% Ordinary
Limited shares
Thomas Simon Limited Legal services 100% Ordinary
shares
White & Black Limited Legal services 100% Ordinary
shares
e.Legal Technology Solutions IT services 60% Ordinary
Limited shares
Gordon Dadds Professional Professional services 100% Ordinary
Services Limited shares
Gordon Dadds Corporate Services Corporate services 100% Ordinary
Limited shares
Penlee Legal Investments Professional services 100% Ordinary
Limited shares
Gordon Dadds Talent Services Professional services 100% Ordinary
Limited shares
UK Limited Liability
Partnerships Principal activity Interest held
------------------------ ---------------------- ------------------------------
Brook Street Holdings Intermediate holding 100% interest as a designated
LLP LLP member
Gordon Dadds LLP Legal services 100% interest as a designated
member
Gordon Dadds GP LLP Legal services Effective control due to
significant influence
Metcalfes Solicitors Legal services 100% interest as a designated
LLP member
White & Black Legal Legal services 100% interest as a designated
LLP member
Gordon Dadds AP LLP Professional services Effective control due to
significant influence
Gordon Dadds ADR Professional services Effective control due to
LLP significant influence
Gordon Dadds CP LLP Professional services Effective control due to
significant influence
100% interest as a designated
CW Energy LLP Professional services member
Gordon Dadds Consulting 80% interest as a designated
LLP Professional services member
GD Financial Markets Effective control due to
LLP Professional services significant influence
13.4 Business combinations and acquisitions
The details set out below provide the information required under
IFRS 3 'Business Combinations' for the acquisitions that occurred
during the year ended 31 March 2018.
The total amount of revenue and associated profit derived from
acquired entities in the year was GBP4,673,000 and GBP1,458,000. An
estimate of the annualised revenue and associated profit (based on
pro-rated figures) had the acquisitions occurred at the start of
the year is GBP14,083,000 and GBP3,565,000.
Alen-Buckley LLP
On 30(th) June 2017 the Group acquired the business, as a going
concern, of Alen-Buckley LLP, a legal services business with focus
on property and private client sectors, for consideration of
GBP1.5m. The fair value of the net assets and liabilities acquired
by the group was GBP180,000. Goodwill of GBP1.3m was recognised in
accounting for the acquisition.
Following the acquisition, Alen-Buckley LLP ceased trading and
its business (comprising its property, rights and assets) was
transferred to Prolegal Solicitors Limited.
Acquisition-related costs of GBP27,000 relating to the
acquisition of Alen-Buckley LLP are included in non recurring costs
in profit or loss and in operating cash flows in the statement of
cash flows.
Penlee Legal Investments Limited
On 5(th) July 2017, the Group acquired 100% of the issued share
capital of Penlee Legal Investments Limited, a consultancy services
firm incorporated in the Commonwealth of the Bahamas, for
consideration of GBP160,000. The fair value of the net assets and
liabilities acquired by the group was (GBP67,000). Goodwill of
GBP227,000 was recognised in accounting for the acquisition.
Work Group plc
On 4(th) August 2017, the Group acquired 100% of the issued
share capital of Gordon Dadds Group plc (formerly Work Group plc).
This acquisition has been accounted for as a reverse acquisition
under IFRS 3 'Business Combinations'. The fair value of the
consideration transferred was GBP1.25m. The fair value of the net
assets and liabilities acquired by the Group was GBP0.01m. Goodwill
of GBP1.25m was recognised in accounting for the acquisition.
On 2 December 2016, the Group acquired the entire economic
interest in Brook Street Holdings LLP, the holding entity for,
inter alia, Gordon Dadds LLP. As in the financial statements of
Culver Holdings Limited for the year ended 31 March 2017, this was
treated as a reverse acquisition of Culver Holdings Limited by
Brook Street Holdings LLP
CW Energy LLP
On 31(st) October 2017, the Group acquired the business and
certain assets of CW Energy LLP, a corporate tax advisory firm
based in the City of London, for consideration of GBP7.1m. The fair
value of the net assets and liabilities acquired by the group was
GBP642,000. Goodwill of GBP6.5m was recognised in accounting for
the acquisition.
Acquisition-related costs of GBP118,000 relating to the
acquisition of CW Energy LLP are included in non recurring costs in
profit or loss and in operating cash flows in the statement of cash
flows.
The acquisition of CW Energy LLP has furthered the Group's
intention to expand its tax advisory business.
Culver Limited
On 31(st) December 2017, the Group acquired 100% of the issued
share capital of Culver Limited, an independent financial advisory
business based in England & Wales, for consideration of
GBP200,000. The fair value of the net assets and liabilities
acquired by the group was GBP99,000. Goodwill of GBP101,000 was
recognised in accounting for the acquisition.
White & Black Limited
On 27(th) December 2017, the Group acquired the business and
certain assets of White & Black Limited, a specialist
technology solicitors firm based in Oxford and London, for
consideration of GBP3.5m. The fair value of the net assets and
liabilities acquired by the group was GBP1.5m. Goodwill of GBP2.0m
was recognised in accounting for the acquisition.
Acquisition-related costs of GBP72,000 relating to the
acquisition of White & Black Limited are included in non
recurring costs in profit or loss and in operating cash flows in
the statement of cash flows.
White & Black Limited's specialist technology skills and
international client base has enhanced the Group's growing
corporate and dispute resolution practices and has provided
cross-selling opportunities.
Metcalfes Solicitors LLP
On 16(th) January 2018, the Group acquired the 100% of the
members interests of Metcalfes Solicitors LLP, a firm of solicitors
based in Bristol, for consideration of GBP4.7m. The fair value of
the net assets and liabilities acquired by the group was
GBP852,000. Goodwill of GBP3.9m was recognised in accounting for
the acquisition.
Acquisition-related costs of GBP142,000 relating to the
acquisition of Metcalfes Solicitors LLP are included in non
recurring costs in profit or loss and in operating cash flows in
the statement of cash flows.
The acquisition of Metcalfes Solicitors LLP has allowed the
Group to grow its client base and has provided cross-selling
opportunities.
Thomas Simon Limited
On 17(th) February 2018, the Group acquired 100% of the issued
share capital of Thomas Simon Limited, a firm of solicitors based
in Cardiff, for consideration of GBP1.8m. The fair value of the net
assets and liabilities acquired by the group was (GBP279,000).
Goodwill of GBP2.1m was recognised in accounting for the
acquisition.
Acquisition-related costs of GBP322,000 relating to the
acquisition of Thomas Simon Limited are included in non recurring
costs in profit or loss and in operating cash flows in the
statement of cash flows.
Thomas Simon Limited's business has been merged with the Group's
existing Cardiff operation and synergies are expected from the
merging of back office support functions.
13.2.1 Identifiable assets acquired and liabilities assumed
The fair values of the identifiable assets and liabilities at
the date of acquisition were as follows:
Penlee
Alen Legal Work CW
Buckley Investments Group Energy Culver
LLP Limited plc LLP Limited
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- -------------- -------------- ------------- ------------ -------------
Property, plant and - - - - -
equipment
Trade and other receivables 180 63 137 651 150
Cash and cash equivalents - - 35 - 68
Trade and other payables - (130) (171) (9) (119)
Contingent liabilities - - - - -
----------------------------- -------------- -------------- ------------- ------------ -------------
Net identifiable
assets and liabilities 180 (67) 1 642 99
Goodwill 1,329 227 1,251 6,464 101
Non-controlling interest
in the recognised
amounts of identifiable
assets and liabilities - - - - -
Total consideration 1,509 160 1,252 7,106 200
------------------------------ -------------- -------------- ------------- ------------ -------------
Satisfied by:
Cash 9 160 - 68 200
Equity instruments - - 1,252 - -
Contingent consideration 1,500 - - 7,038 -
Total consideration
transferred 1,509 160 1,252 7,106 200
------------------------------ -------------- -------------- ------------- ------------ -------------
Net cash outflow
arising on acquisition:
Cash consideration 9 160 - 68 200
Less: cash and cash
equivalent balances
acquired - - (35) - (68)
------------------------------ -------------- -------------- ------------- ------------ -------------
9 160 (35) 68 132
----------------------------- -------------- -------------- ------------- ------------ -------------
White Metcalfes Thomas
&
Black Solicitors Simon Total
Limited LLP Limited Acquisitions
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------------------ --------------- ------------- ------------------
Property, plant and
equipment 35 254 67 356
Trade and other receivables 1,051 1,401 532 4,165
Cash and cash equivalents 921 608 (76) 1,556
Trade and other payables (527) (1,381) (802) (3,139)
Contingent liabilities - (30) - (30)
------------------------------- ------------------ --------------- ------------- ------------------
Net identifiable
assets and liabilities 1,480 852 (279) 2,908
Goodwill 2,005 3,881 2,076 17,334
Non-controlling interest
in the recognised
amounts of identifiable
assets and liabilities - - - -
Total consideration 3,485 4,733 1,797 20,242
------------------------------- ------------------ --------------- ------------- ------------------
Satisfied by:
Cash 1,735 930 196 3,298
Equity instruments - - - 1,252
Contingent consideration 1,750 3,803 1,643 15,692
Total consideration
transferred 3,485 4,733 1,839 20,224
------------------------------- ------------------ --------------- ------------- ------------------
Net cash outflow
arising on acquisition:
Cash consideration 1,735 930 196 3,298
Less: cash and cash
equivalent balances
acquired (921) (608) 76 (1,556)
------------------------------- ------------------ --------------- ------------- ------------------
814 322 272 1,742
----------------------------- ------------------ --------------- ------------- ------------------
13.5 Interests in associates
Group
2018 2017
GBP'000 GBP'000
---------------------------------- -------- --------
Cost of investment in associates 297 193
Share of post-acquisition
profit net of dividends
received (30) 7
----------------------------------- -------- --------
Carrying value of interests
in associates 267 200
----------------------------------- -------- --------
The Group holds 100% of the New Series C Shares, representing
30% of the total share capital of James Stocks & Co Limited, a
professional services firm who specialise in corporate finance and
strategic advice. James Stock & Co Limited was incorporated and
operates in England and Wales.
Summarised financial information in respect of James Stocks
& Co Limited is set out below:
2018 2017
GBP'000 GBP'000
------------------- -------- --------
Net profit/(loss) (104) 163
Net assets 8 122
------------------- -------- --------
14. Trade and other receivables
Group Group Company Company
2018 2017 2018 2016
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- --------- --------
Trade receivables 10,605 6,746 13 8
Accrued income 3,514 2,343 - -
Other receivables 2,043 1,532 46 52
Amounts due from subsidiaries - - 11,330 99
Prepayments 2,249 2,301 56 8
------------------------------- -------- -------- --------- --------
18,411 12,922 11,445 167
------------------------------- -------- -------- --------- --------
15. Cash and cash equivalents
Group Group Company Company
2018 2017 2018 2016
GBP'000 GBP'000 GBP'000 GBP'000
------------------ -------- -------- -------- --------
Cash in hand and
at banks 8,948 130 52 531
------------------- -------- -------- -------- --------
Total 8,948 130 52 531
------------------- -------- -------- -------- --------
Cash and cash equivalents include the following:-
Cash as above 8,948 130 52 531
Bank overdrafts - (566) - -
------------------ ------ ------ --- ----
Total 8,948 (436) 52 531
------------------ ------ ------ --- ----
16. Share capital
2018 2018 2016
% Number GBP'000 GBP'000
------------------------------------ --------- ----------- -------- --------
Authorised
Ordinary shares of 1p each 100.0% 28,759,711 288 572
288 572
------------------------------------ --------- ----------- -------- --------
2018 2018 2016
% Number GBP'000 GBP'000
------------------------------------ --------- ----------- -------- --------
Allotted, called up and fully paid
Ordinary shares of 1p each 100.0% 28,759,711 288 572
288 572
------------------------------------ --------- ----------- -------- --------
Ordinary shares rank equally as regards to dividends, other
distributions and return on capital. Each ordinary share carries
the right to one vote.
On 4th August 2017, the original ordinary shares were
consolidated and divided into 894,453 new ordinary shares with a
nominal value of 1p per share and 894,453 deferred shares with a
nominal value of 63p per share.
On 4th August 2017, there was the placing of 14,285,714 ordinary
shares at 140p per share, with a nominal value of 1p per share.
On 4th August 2017, 13,417,143 ordinary shares were issued at
140p per share, with a nominal value of 1p per share.
On 17th January 2018, the deferred shares which arose on the
capital reorganisation in August 2017 were cancelled and credited
to the capital redemption reserve.
On 20th February 2018, 162,401 ordinary shares were issued at
142.5p per share, with a nominal value of 1p per share.
17. Reserves
Share premium represents the difference between the amount
received and the par value of shares issued less transaction
costs.
On 17th January 2018, the share premium account of Gordon Dadds
Group plc was cancelled and credited to the capital redemption
reserve.
The capital redemption reserve represents distributable reserves
arising from the cancellation of deferred shares and share
premium.
The reverse acquisition reserve has arisen under IFRS3 'Business
Combinations' following the acquisition of the Gordon Dadds
Group.
Retained earnings represents the cumulative profits or losses
net of dividends paid and other adjustments.
18. Trade and other payables
Group Group Company Company
2018 2017 2018 2016
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------------- -------------- -------- -----------
Current:
Trade payables 3,377 2,882 133 112
Amounts due to subsidiaries - - 22,629 1,343
Corporation tax 248 - - -
payable
Other taxes and
social security 1,854 821 31 18
Other payables 1,493 1,591 24 1
Deferred consideration 5,407 2,193 - -
Accruals 1,275 1,354 116 82
------------------------------ ------------- -------------- -------- -----------
13,654 8,841 22,933 1,556
----------------------------- ------------- -------------- -------- -----------
Non-current:
Deferred consideration 11,896 4,137 - -
------------------------------ ------------- -------------- -------- -----------
Total 25,550 12,978 22,933 1,556
------------------------------ ------------- -------------- -------- -----------
Deferred consideration relates to business combinations and the
purchase of client lists and relationships.
19. Borrowings
Group Group Company Company
2018 2017 2018 2016
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- -------- --------
Bank overdrafts - 566 - -
Bank loans 66 365 - -
Loan stock - 571 - -
Other loans 420 2,704 - -
Obligations under hire
purchase and lease contracts 41 52 - -
------------------------------- -------- -------- -------- --------
Total borrowings 527 4,258 - -
------------------------------- -------- -------- -------- --------
Current 372 4,034 - -
Non-current 155 224 - -
------------------------------- -------- -------- -------- --------
Total 527 4,258 - -
------------------------------- -------- -------- -------- --------
Bank loans of GBP66,000 (2017: GBP365,000) and other loans of
GBP420,000 (2017: GBP2,704,000) are unsecured and carry interest at
between 3.0 per cent and 12.5 per cent per annum. Bank and other
loans are repayable within 12 months, except non-current other
loans of GBP155,000 which has a maturity of 1-3 years.
Minimum lease payments under hire purchase and lease contract
fall due as follows:
Group Group Company Company
2018 2017 2018 2016
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ -------- -------- -------- --------
Gross obligations repayable:
Within one year 17 17 - -
Between 2-5 years 32 49 - -
------------------------------ -------- -------- -------- --------
49 66 - -
------------------------------ -------- -------- -------- --------
Finance charges repayable:
Within one year 5 7 - -
Between 2-5 years 3 7 - -
------------------------------ -------- -------- -------- --------
8 14 - -
------------------------------ -------- -------- -------- --------
Net obligations repayable:
Within one year 12 10 - -
Between 2-5 years 29 42 - -
------------------------------ -------- -------- -------- --------
41 52 - -
------------------------------ -------- -------- -------- --------
20. Provisions
Group
Other
provisions
GBP'000
--------------------- --------------
Balance at 1 April
2016 67
Provisions made 444
Utilised during
the year (58)
Amounts released (30)
---------------------- --------------
Balance at 31 March
2017 423
---------------------- --------------
Provisions made 116
Utilised during
the year (119)
Amounts released (255)
---------------------- --------------
Balance at 31 March
2018 165
---------------------- --------------
Current 165
Non-current -
---------------------- --------------
Provisions categorised as current liabilities represent
provisions for liabilities which have the possibility of being
settled within one year.
Other provisions include uninsured excess on potential claims of
GBP145,000 (2017:GBP54,000), potential clawback of indemnity and
other commissions paid of GBP16,000 (2014:GBP4,000), and provisions
for costs relating to acquisitions of GBP4,000
(2017:GBP365,000).
21. Commitments
At 31 March 2018 the Group's total commitments under
non-cancellable operating leases, together with the obligations by
maturity, were as follows:
2018 2018 2017 2017
Land Other Land Other
and and
Buildings assets Buildings assets
GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ---------- ----------- ----------- ------------
Within one year 1,543 123 1,310 123
Between 2-5 years 1,639 254 1,709 379
More than five years 430 - - -
---------------------- ---------- ----------- ----------- ------------
Total 3,612 377 3,019 502
---------------------- ---------- ----------- ----------- ------------
At 31 March 2018 the Group had capital commitments of GBPNil
(2017:GBPNil) contracted but not provided for in these financial
statements.
22. Pensions
The Group participates in a defined contribution pension scheme.
The assets of the scheme are held separately from those of the
Group in a fund administered by Carey Pensions UK. Contributions
from employers and employees totalling GBP39,000 (2017:GBP25,000)
were payable to the fund at the year end and are included in
payables.
23. Ultimate controlling party
Gordon Dadds Group plc is owned by its shareholders and there is
no ultimate controlling party.
24. Related party transactions
Group
In addition to the transactions disclosed in the Directors'
Remuneration Report the Group has entered into the following
transactions with related parties:-
The Group occupies office accommodation at Llanmaes, St Fagans,
Cardiff under arrangements with Juratone Limited, a company of
which A J Biles is a director. Rent and service charges of
GBP180,000 (2017: GBP101,000) were charged during the year under
these arrangements. At the balance sheet date an amount due to
Juratone Limited of GBPNil (2017:GBP30,000) is included in payables
and an amount due from Juratone Limited of GBP44,000
(2017:GBP18,000) is included in receivables.
A J Biles is a designated LLP member of ACR Professional
Services LLP. Professional services of GBP212,500 (2017:
GBP220,000) were charged from ACR Professional Services LLP to the
Group during the year. At the balance sheet date the Group was owed
GBP64,000 from ACR Professional Services LLP (2017: the Group owed
GBP87,000 to ACR Professional Services LLP).
The Group charged fees and reimbursed expenses of GBP724,000
(2017:GBP133,000) to e.Legal Technology Solutions Limited during
the year. The Group were charged fees and reimbursed expenses of
GBP1,353,000 (2017: GBP253,000) by e.Legal Technology Solutions
Limited during the year. At the balance sheet date the Group was
owed GBP259,000 from e.Legal Technology Solutions Limited (2017:the
Group owed e.Legal Technology Solutions Limited GBP208,000).
The Group charged fees to associate company James Stocks &
Co Limited of GBP71,000 (2017: GBP23,000) and were charged fees of
GBP1,500 (2017: GBP1,000) during the year. At the balance sheet
date the Group was owed GBP12,000 (2017:GBP2,000) from James Stocks
& Co Limited.
Company
In addition to the transactions disclosed in the Directors'
Remuneration Report the Company has entered into the following
transactions with related parties:-
The Company charged reimbursed expenses of GBP13,000
(2017:GBPNil) to subsidiary undertakings during the year. At the
balance sheet date an amount due from subsidiary undertakings of
GBP13,000 (2017:GBPNil) is included in trade receivables.
The Company was charged fees and reimbursed expenses of
GBP89,000 (2017:GBPNil) by subsidiary undertakings during the year.
At the balance sheet date an amount due to subsidiary undertakings
of GBP44,000 (2017:GBPNil) is included in trade payables.
25. Financial risk management
The company's operations expose it to a number of financial
risks. A risk management programme has been established to protect
the Group and the Company against the potential adverse effects of
these financial risks. There has been no significant change in
these financial risks since the prior year.
Fair value of financial instruments
Financial instruments comprise cash and cash equivalents, trade
and other receivables, including sums due from subsidiaries and
Loan Stock, bank and other loans, obligations under hire purchase
and lease contracts and trade and other payables. In the directors'
opinion the carrying value of the financial instruments
approximates their fair value.
Group Group Company Company
2018 2017 2018 2016
Note GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ----- ---------- ----------- --------- --------
Loans and receivables:
Trade receivables 14 10,605 6,746 13 8
Accrued income 14 3,514 2,343 - -
Cash and cash equivalents 15 8,948 130 52 531
Other receivables 14 2,043 1,532 46 52
Amounts due from subsidiaries 14 - - 11,330 99
------------------------------- ----- ---------- ----------- --------- --------
Total financial assets 25,110 10,751 11,441 690
Financial liabilities
measured at amortised
cost:
Borrowings 19 527 4,258 - -
Trade payables 18 3,377 2,882 133 112
Other payables 18 1,493 1,591 24 1
Deferred consideration 18 17,303 6,330
Amounts due to subsidiaries 18 - - 22,629 1,343
------------------------------- ----- ---------- ----------- --------- --------
Total financial liabilities 22,700 15,601 22,786 1,456
------------------------------- ----- ---------- ----------- --------- --------
Total financial instruments 2,410 (4,850) (11,345) (766)
------------------------------- ----- ---------- ----------- --------- --------
26. Credit risk
Customers are assessed for credit worthiness and credit limits
are also imposed on customers and reviewed regularly. The maximum
exposure to credit risk is the carrying value of its financial
receivables, trade and other receivables and cash and cash
equivalents as disclosed in the notes.
The Group holds no collateral or other credit enhancements. The
receivables' age analysis is also evaluated on a regular basis for
potential doubtful debts. It is management's opinion that no
further provision for doubtful debts is required.
Cash and cash equivalents are invested with banks with a credit
rating of no less than A-1.4
Analysis of trade receivables:
30
days Between Between Between Total
or 31 and 61 and 90 and Over Total Bad debt carrying
less 60 days 90 days 180 days 180 days gross provision amount
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------ ------------ --------- --------- ---------- ---------- -------- ----------- --------------
2018 7,496 883 633 1,593 2,666 13,271 (2,666) 10,605
2017 3,673 1,553 420 1,100 1,287 8,033 (1,287) 6,746
------ ------------ --------- --------- ---------- ---------- -------- ----------- --------------
The Group allows an average trade receivables payment period of
30 days after invoice date. It is the group's policy to assess
receivables for recoverability on an individual basis and to make
provision where it is considered necessary. In assessing
recoverability the group takes into account any indicators of
impairment up until the reporting date. The application of this
policy generally results in debts between 31 and 180 days not being
provided for unless individual circumstances indicate that a debt
is impaired. Receivables over 180 days are provided for.
Trade receivables that are neither impaired nor past due are
made up of 1,468 receivables' balances (2017: 942). The largest
individual debtor corresponds to 1.4% (2017: 2.3%) of the total
balance. Historically these receivables have always paid balances
when due. The average age of these receivables is 124 days (2017:
99 days). No receivables' balances have been renegotiated during
the year or in the prior year.
The group individually impaired no net balances (2017: GBPNil).
The group does not hold any collateral over any balances.
27. Interest rate risk
Interest rate risk is the risk that the value of a financial
instrument or cash flows associated with the instrument will
fluctuate due to changes in market interest rates. Interest rate
risk arises from interest bearing financial assets and liabilities
that we use. Interest bearing assets including cash and cash
equivalents are considered to be short-term liquid assets. Our
interest rate liability risk arises primarily from borrowings
issued at floating interest rates which exposes the group to cash
flow interest rate risk. It is the group's policy to settle trade
payables within the credit terms allowed and the group does
therefore not incur interest on overdue balances. Borrowings are
sourced from local financial markets, covering short and long-term
funding. The group manages interest rate risk on borrowings by
ensuring access to diverse sources of funding and reducing risks of
refinancing by establishing and managing borrowings in accordance
with target maturity profiles.
Interest rate exposure and sensitivity analysis:
Given the short term nature of the group and company's financial
assets and liabilities no sensitivity analysis has been prepared as
the impact on the financial statements would not be
significant.
28. Foreign currency risk
Foreign currency risk refers to the risk that the value of a
financial commitment or recognised asset or liability will
fluctuate due to changes in foreign currency rates. In previous
years the group was exposed to foreign currency risk as a result of
transactions denominated in US Dollars and Euros. The group
maintained bank accounts in US dollars and converted these to
Sterling at appropriate times minimising the exposure to exchange
fluctuations. At the balance sheet date the net monetary assets of
the group denominated in foreign currencies translated into
Sterling totalled GBPNil (2017: GBPNil).
No amounts were recognised directly in equity during the year or
the prior year.
29. Liquidity risk
The group seeks to maintain sufficient cash balances.
Management reviews cash flow forecasts on a regular basis to
determine whether the group has sufficient cash reserves to meet
future working capital requirements and to take advantage of
business opportunities. The average creditor payment period is 129
days (2017: 132 days).
Trade and other payables and amounts due to subsidiaries are due
within 12 months, the maturity of financial liabilities is set out
below.
The following table sets out the Group's remaining contractual
maturity for its non-derivative financial liabilities with agreed
repayment periods. The table has been drawn up based on the
undiscounted cash flows of financial liabilities based on the
earliest date on which the Group can be required to pay.
Total
Less Between Between Between contractual
than 3 and 1 and 2 and cash
12 2 5
3 months months years years flows
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- --------------- -------- ----------- ----------- --------------
31 March 2018
Non-interest bearing - - - - -
Fixed interest rate instruments 113 247 63 63 486
Finance leases 4 13 17 7 41
---------------------------------- --------------- -------- ----------- ----------- --------------
117 260 80 70 527
--------------------------------- --------------- -------- ----------- ----------- --------------
31 March 2017
Non-interest bearing - 571 - - 571
Fixed interest rate instruments 1,276 1,604 - 189 3,069
Finance leases 4 13 17 18 52
---------------------------------- --------------- -------- ----------- ----------- --------------
1,280 2,188 17 207 3,692
--------------------------------- --------------- -------- ----------- ----------- --------------
Interest bearing financial liabilities carry interest at between
3.0 per cent and 12.5 per cent per annum.
The group has access to financing facilities of GBP600,000
(2017: GBP600,000) as described below.
Unsecured bank overdraft facility, reviewed annually and payable
at call:
Group Group Company Company
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
--------------- ---------- ----------- -------- ---------
Amount used - 566 - -
Amount unused 600 34 - -
---------------- ---------- ----------- -------- ---------
600 600 - -
--------------- ---------- ----------- -------- ---------
30. Capital management
The company's objectives when managing capital are:
- to safeguard the company's ability to continue as a going
concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders, and
- to provide an adequate return to shareholders by pricing
products and services commensurately with the level of risk.
The company sets the amount of capital in proportion to risk.
The company manages the capital structure and makes adjustments to
it in the light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or
adjust the capital structure, the company may adjust the amount of
dividends paid to shareholders, return capital to shareholders,
issue new shares, or sell assets to reduce debt.
The company monitors capital on the basis of the
debt-to-adjusted capital ratio. This ratio is calculated as net
debt ÷ adjusted capital. Net debt is calculated as total debt (as
shown in the balance sheet) less cash and cash equivalents.
Adjusted capital comprises all components of equity.
Debt-to-adjusted capital ratios
The debt adjusted capital ratios at 31 March 2018 were as
follows:
Group Group Company Company
2018 2017 2018 2016
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- -------- -------- --------
Total debt 527 4,258 - -
Less: cash and cash
equivalents (8,948) (130) (52) (356)
Net debt - 4,128 - -
Total equity 28,795 7,270 35,755 (977)
Add: subordinated debt - - - -
instruments
Adjusted capital 28,795 7,270 35,755 (977)
Debt-to-adjusted capital n/a 1:1.8 n/a n/a
ratio
-------------------------- -------- -------- -------- --------
31. Reconciliation of liabilities arising from financing activities
Non-cash changes
Group Cash Group
2017 flows Acquisitions Other 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------------- -------- ------------- -------- --------
Borrowings due after
1 year 182 - - (56) 126
Borrowings due within
1 year 3,458 (3,636) 482 56 360
Finance leases due
after 1 year 42 - - (13) 29
Finance leases due
within 1 year 10 (11) - 13 12
------------------------ --------------- -------- ------------- -------- --------
3,692 (3,647) 482 - 527
----------------------- --------------- -------- ------------- -------- --------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UBUARWAANUUR
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