Regulatory Story
Go to market news section View chart   Print
RNS
Gordon Dadds Group PLC   -  GOR   

Statement re acquisition and interim results

Released 13:31 31-Dec-2018

RNS Number : 8543L
Gordon Dadds Group PLC
31 December 2018
 

31 December 2018

Gordon Dadds Group PLC

("Gordon Dadds" or the "Company" or the "Group")

 

Completion of acquisition of Ince UK

Half year results for the six months ended 30 September 2018

Expected restoration of trading on AIM

 

Gordon Dadds Group PLC (AIM: GOR), the London-based legal and professional services group announces:

·    Completion of the acquisition of the members' interests in Ince & Co LLP ("Ince UK")

·    Unaudited results for the six months ended 30 September 2018

·   Trading in Gordon Dadds ordinary shares is expected to resume at 7:30 on Wednesday 2 January 2019

  

Ince acquisition

·   Gordon Dadds has acquired control of the assets of Ince UK, a well-known and respected London-headquartered international law firm

·    The legal practice of Ince UK is being merged with Gordon Dadds LLP to trade as Ince Gordon Dadds 

·    The assets coming under Gordon Dadds control generated fees of £30.5m in the year ended 30 April 2018

·     Total consideration is estimated at £27.3m payable in cash over four years and a grant of options over up to 3m new shares

·     £12.5m of new borrowing facilities have been arranged

·    The international offices of Ince International are not being acquired but have agreed to enter into new network arrangements and will continue to trade as Ince & Co

·    The deal is expected to be earnings enhancing in the current year before exceptional costs and significantly earnings enhancing for Gordon Dadds from 1 April 2019 as duplicated costs are eliminated

 

Financial highlights from first half results

·     Revenue up by 56% to £20.11m (H1 2017 £12.89m)

·     Operating profits increased by 23% to £4.27m (H1 2017 £3.47m)

·     Adjusted profit before tax* increased by 91% to £1.10m (H1 2017 £0.58m)

·     Interim dividend of 2p (H1 2017: nil) for payment on 10 April 2019 to shareholders on the register at 1 March 2019

·     Adjusted earnings per share* 1.91p (H1 2017 2.26p)

·     Strong balance sheet with gross assets of £50.4m (30 September 2017 £40.8 m)

 

*Adjusted profit before tax represents the profit before income tax of £3.54m after adding back exceptional items of £0.72m and deducting partners' profit shares of £3.16m.  Adjusted earnings per share represents earnings per share based on the Adjusted profit before tax less taxation and remaining non-controlling interests as shown in note 4.

 

Adrian Biles, Chief Executive of Gordon Dadds Group PLC, commented:

On the Ince deal

 "We are very pleased to have completed the Ince deal. It is a landmark in our development and I'm delighted to welcome our new colleagues. It increases our capacity hugely and we expect it to boost revenue significantly in the coming years.

"We will foster the close working relationships under the Ince Gordon Dadds International Network, ensuring that the enlarged business and the affiliate network will offer our clients breadth of service both by practice area and by geography."

 

On the results

"The deal is underpinned by the strong performance of Gordon Dadds, with first half revenues up by over a half and adjusted profit (before tax) up by over 90%. We have focussed on interoffice collaboration and cross-selling to deliver organic growth.  These activities are beginning to bear fruit and there is much more to come.

"The Group has traded to our expectations and the second half of the year should again produce the greater proportion of revenue and profits which gives us confidence that we will meet market expectations for the full year."

 

Further deals

"The quality of this deal reflects the attractiveness of our business model. We have had many approaches from other firms that are similarly interested.

"We have refined our acquisition strategy into three categories: UK firms with over £10 million of annual fee income, international acquisitions which will add to the depth of our core business and  smaller acquisitions which can be absorbed into existing offices, increasing the intellectual capital of the Group through niche specialisms and promoting cross-selling."

 

FOR FURTHER INFORMATION, PLEASE CONTACT:

Gordon Dadds Group plc

Adrian Biles, Chief Executive Officer

Christopher Yates, Chief Financial Officer

 

Via Portland

Arden Partners, Nominated Adviser and broker to the Company

John Llewellyn-Lloyd

Ciaran Walsh

Alex Penney

 

+44 (0) 20 7614 5900

Portland Communications

Steffan Williams

Simon Hamer

Lauren Gallagher

+44 (0) 20 7554 1789

Email: gordondadds@portland-communications.com

 

 

 

Ince acquisition

On 29 October 2018, Gordon Dadds announced that it had agreed terms in principle to acquire all of the equity partners' interests in Ince and Co LLP and Ince & Co International LLP, its affiliated entities ("Ince International") and all of their respective business and assets or, where legal or regulatory considerations required it in respect of overseas affiliates, to enter into alternative network sharing or governance arrangements.  It was also announced that it was the intention of the parties to complete the transaction by 31 December 2018.

Since that date, following a detailed due diligence it has been concluded that it would not be possible to agree arrangements with the affiliated network entities and obtain local regulatory approvals (which is a time-consuming process)  by 31 December 2018.    Accordingly, the parties agreed to change the transaction to exclude the acquisition of the affiliated network entities other than Ince's Shanghai and Beijing practices, which are branches of the London firm.  These mainland China practices and the Ince UK business will be merged with the UK legal services business of Gordon Dadds and will now trade as Ince Gordon Dadds. Gordon Dadds have agreed to enter into new network sharing arrangements with the practices which are not now being acquired and these will continue to trade as Ince & Co. We will be looking to deepen those arrangements in the coming months.

Plans for integration of the operations of Ince UK and Gordon Dadds' UK legal services business are in place and will be implemented as soon as possible, with Gordon Dadds' London office moving into Ince UK's London office from next weekend.

Due to the change to the merger terms previously announced, the acquisition of Ince UK is no longer classified as a reverse takeover pursuant to Rule 14 of the AIM Rules for Companies and will not require the production of an admission document. As such, it is expected that trading in the Company's shares will resume at 7:30 a.m. on 2 January 2019.

Summary of the business of Ince UK

Ince UK is an established and highly regarded London-based legal services business with branches in Beijing and Shanghai, specialising  in the shipping, insurance and transport sectors.  The 24 equity partners of Ince UK will join Ince Gordon Dadds and have committed to Ince Gordon Dadds LLP for a minimum of eighteen months. The fee income attributable to the assets coming under the Group's control generated fees of £30.5m  in the year ended 30 April 2018.

Summary of the acquisition terms

Gordon Dadds has acquired control of the assets of Ince UK for a consideration equal to the capital and current account balances of those members (which will be established through completion accounts to be prepared as at 31 December 2018) together with a goodwill payment. Gordon Dadds will also repay the capital account balances of the members of Ince International and certain former members of Ince as many of them were funded by borrowings effectively guaranteed by Ince UK. It is estimated that the payments in respect of capital and current account balances will aggregate £12.3 million. The goodwill payment will be equivalent to a percentage of the turnover generated in the first three years by the members joining Gordon Dadds and, based on the fee income generated by those members in the last financial year, it is estimated that the goodwill payment will amount to £15.0 million.  In addition, Ince fee earners will be granted options to acquire a total of up to 3,000,000 ordinary shares at 140p. 

The capital account balances will mainly be settled in cash on or shortly after completion and will discharge the partner capital loans with the balance paid over a period of up to 2 years.  The goodwill consideration will be paid in cash over  approximately the next four years.

The total consideration for the acquisition (excluding the options) is estimated at £27.3 million.

To finance the consideration payments, the Company has arranged, with advice from Rothschild & Co, a new three year term loan of £6 million which is being drawn down at completion and a three year revolving credit facility of £6.5 million.

 

Ongoing relationship with Ince International

Gordon Dadds will maintain close working relationships with the other member firms of the Ince Gordon Dadds International network following termination of the previous network arrangements.  The independent Network firms operate in Germany, Greece, Dubai, Singapore and Hong Kong.  Gordon Dadds has entered into a new service agreement with member firms in the network to provide common services.  Gordon Dadds will continue to seek to develop deeper arrangements with the network of affiliates which would be regulatorily appropriate.  Until any such agreement, the results of those entities will not be consolidated into the results of the Company and they remain separate businesses. 

Results for the six months ended 30 September 2018

Review of the period

After a period of rapid expansion through acquisitions in the later months of 2017 and the early months of 2018, the Group entered a period of consolidation to begin to derive the benefits of the acquisitions through operating efficiencies and organic growth from cross-selling. Although we made no acquisitions during the period we opened our Hong Kong office which is now registered to be able to deliver UK and local legal services.  Then in the summer we started discussions with Ince & Co International LLP and its international network.  These discussions have now led to the acquisition of control of the assets of Ince UK and its integration with Gordon Dadds LLP, the Group's London and international legal services business. 

We continue to look for attractive opportunities for further acquisitions and have broadened our horizons to look for international firms which will complement our business while increasing the scale of businesses we are looking to acquire. 

It continues to be clear that there is considerable genuine interest in the UK market for legal services businesses to achieve the following:

•         Realisation of partners' goodwill

•         De-risking partners from capital provision

•         Insulation of partners from all business liabilities

•         Access to cash and IT resources

It is also becoming clear that there is equal interest in this model overseas where local regulations permit.  We continue to believe that we can design structures which will achieve this while meeting regulatory requirements.

In assessing acquisitions, we expect any which we pursue will increase the intellectual capital of the Group and/or the scale of the clients and matters the Group has.

Finance and results

During the first six months of the year, we saw good progress in our legal services businesses from the dispute resolution, corporate, fintech, taxation and regulatory segments of the business.  Property continued to be in a competitive sector where activity slowed and the family and private client segment not continuing the progress of last year.  In our other business lines, financial services generally performed satisfactorily and the significant progress reported in previous announcements by our consultancy businesses has continued.

Of the acquisitions made during the second half of the last year, CW Energy, our corporate tax consultancy business, and White & Black, our fintech corporate specialists, have both made continuing progress ahead of our expectations.  The Thomas Simon business was merged in with the Gordon Dadds LLP's Cardiff office and this integration is working increasingly well.  The Bristol businesses of Metcalfes and Burroughs Day have proved harder to integrate satisfactorily with each other, in part because of infrastructure issues, but are now responding to the measures implemented including the appointment of a regional director to oversee the Bristol and Cardiff legal services businesses.  We continue to believe that all of these acquisitions will contribute well to the Group in the future.

During the first half, we have made further progress on our gross margin but are still a couple of percentage points short of our target of 50% (after charging productive partners' profit shares) and in a higher revenue second half, we would expect further progress on this measure. 

The Group's lock-up has been steady during the first half, with the absolute lock-up increasing slightly as the lock-up of the businesses acquired late in the last financial year have reached a mature level.  There is still room for improvement in this KPI which our revenue management team work hard to deliver.

Our target of the overheads of running the business being contained to 30% of revenues has not been met.  A significant reason for this is that we have not slimmed the overhead as fast as we would have done in the absence of negotiations for the acquisition of Ince. Our immediate focus is on achieving the successful integration of Ince UK with Gordon Dadds so that the significant benefits of the merger can be delivered and we will re-focus on this KPI after the integration is completed. We would expect such improvement in this KPI to begin to be reflected in the next financial year.

Outlook

Trading since the period end continues to progress broadly in line with our expectations. It is normal in the Group's business for trading to be weighted towards the second half of the year and this year is no exception, particularly as the revenue of Ince UK is included. 

We have continued to build our support function to be ready to take on the work of the larger group we now have.  The integration of the businesses of the Ince UK business will produce a large one-off cost in the current year with a rationalisation programme (including office moves and staff changes), system expansion and professional and other fees incurred.  Given the timing of completion of the transaction and the distraction to both managements of the prolonged negotiations, it is likely that the benefit of the acquisition will only be markedly evident in the trading results of the next financial year.  That benefit should, however, then be significant to each of revenue, profits and earnings per share.

We therefore look forward to reporting further progress in the rest of the year to 31 March 2019 and thereafter.

 

 

Unaudited Consolidated Statement of Comprehensive Income

 

 

6 months to

6 months to

12 months to

 

 

30 September

30 September

                31 March

 

 

2018

2017

2018

 

Note

£'000

£'000

£'000

Continuing operations

 

 

 

 

Fees and commissions

 

20,114

12,894

31,238

 

 

 

 

 

Staff costs

2

(8,116)

(4,845)

(10,756)

Depreciation and amortisation

 

(690)

(977)

(2,137)

Other operating expenses

 

(7,038)

(3,601)

(9,546)

 

 

 

 

 

Operating profit

 

4,270

3,471

8,799

 

 

 

 

 

Finance income

 

132

24

159

Finance expense

 

(20)

(200)

(239)

Flotation and acquisition related costs

3

(90)

(1,916)

(2,305)

Costs re potential acquisition

3

(626)

-

-

Share of profit of associates

 

(118)

(63)

(37)

 

 

 

 

 

Profit before income tax

 

3,548

1,316

6,377

 

 

 

 

 

Income tax expense

 

(159)

(3)

(27)

 

 

 

 

 

Profit and total comprehensive income for the period

 

3,389

1,313

6,350

 

 

 

 

 

Attributable to:-

 

 

 

 

Equity holders of the Company

 

(168)

(1,513)

127

Non-controlling interests - partners profit shares

 

3,160

2,653

5,720

Non-controlling interests - other

 

397

173

503

Total comprehensive income for the period

 

3,389

1,313

6,350

 

 

 

 

 

Earnings per share

 

 

 

 

Basic and diluted earnings per share (pence)

4

                  (0.58)

(8.47)

0.55

Adjusted basic and diluted earnings per share (pence)

4

                    1.91

 

2.26

10.46

The profit for the period relates to continuing operations only.

The attached notes are an integral part of these consolidated financial statements.

 

 

 

Unaudited Consolidated Statement of Financial Position              

 

 

30 September

30 September

31 March

 

 

2018

2017

2018

 

Note

£'000

£'000

£'000

ASSETS

 

 

 

 

Non-current assets

 

 

 

 

Property, plant and equipment

 

337

28

367

Intangible assets

5

26,393

13,544

27,044

Investments

 

200

172

267

 

 

26,930

13,744

27,678

 

 

 

 

 

Current assets

 

 

 

 

Trade and other receivables

6

19,254

12,940

18,411

Cash and cash equivalents

7

4,257

14,113

8,948

 

 

23,511

27,053

27,359

Total assets

 

50,441

40,797

55,037

 

 

 

 

 

EQUITY

 

 

 

 

Capital and reserves attributable to equity holders

 

 

 

 

Share capital

8

288

850

288

Share premium

9

230

45,884

230

Capital redemption reserve

9

46,448

-

46,448

Reverse acquisition reserve

9

(24,724)

(24,723)

(24,724)

Other reserves

 

-

-

-

Retained earnings

9

723

401

2,041

 

 

22,965

22,412

24,283

Non-controlling interest

 

4,898

4,086

4,512

Total equity

 

27,863

26,498

28,795

 

 

 

 

 

LIABILITIES

 

 

 

 

Non-current liabilities 

 

 

 

 

Trade and other payables

10

10,391

3,126

11,896

Borrowings

11

148

161

155

Provisions

 

-

-

-

 

 

10,539

3,287

12,051

Current liabilities

 

 

 

 

Trade and other payables

10

10,730

9,020

13,654

Borrowings

11

1,006

1,419

372

Provisions

 

303

573

165

 

 

12,039

11,012

14,191

Total liabilities

 

22,578

14,299

26,242

Total equity and liabilities

 

50,441

40,797

55,037

 

The attached notes are an integral part of these consolidated financial statements.

                                                                                                                        

 

 

Unaudited Consolidated Statement of Cash Flows                                             

 

 

6 months to

6 months to

        12 months to

 

 

30 September

30 September

               31 March

 

Note

2018

2017

2018

 

 

£'000

£'000

£'000

Cash flows from operating activities

 

 

 

 

Profit before income tax

 

3,548

1,316

6,377

Adjustments for:

 

 

 

 

Finance income

 

(132)

(24)

(159)

Finance expense

 

20

200

239

Acquisition related costs

 

716

1,916

2,305

Depreciation, amortisation and impairment

 

690

977

2,137

Share of profits of associates

 

118

63

37

Changes in operating assets and liabilities (net of acquisitions):

 

 

 

 

Decrease/(Increase) in trade and other receivables

 

(894)

302

(1,491)

(Decrease)/Increase in trade and other payables

 

(2,260)

(1,322)

(1,298)

(Decrease)/Increase in provisions

 

138

150

(288)

Cash generated by operations

 

1,944

3,578

7,859

Interest and other financial costs paid

 

(20)

(173)

(184)

Tax paid

 

(134)

(3)

(3)

Net cash generated by operating activities

 

1,790

3,402

7,672

Cash flows from investing activities

 

 

 

 

Cash paid on acquisitions  (net of cash acquired)

 

-

(131)

(1,741)

Payment of contingent and deferred consideration on acquisitions

 

(2,276)

(1,517)

(4,824)

Payment of acquisition related costs

 

(716)

(1,916)

(2,305)

Purchase of PPE

 

(6)

-

(2)

Purchase of intangible assets

 

-

(20)

(130)

Purchase of interest in associates

 

-

(35)

-

Dividends received

 

-

-

-

Interest received

 

112

24

159

Net cash absorbed by investing activities

 

(2,886)

(3,595)

(8,843)

Cash flows from financing activities

 

 

 

 

Movement in borrowings (including finance leases)

 

144

(2,112)

(3,647)

Proceeds from issuance of shares

-

19,558

19,789

Transactions costs relating to issue of shares

-

(862)

(862)

Dividends paid

(1,150)

-

-

Transactions with non-controlling interests

 

(3,072)

(1,842)

(4,725)

Net cash (absorbed)/generated from financing activities

 

(4,078)

14,742

10,555

Net (decrease) / increase in cash and cash equivalents

 

(5,174)

14,549

9,384

Cash and cash equivalents at beginning of period

 

8,948

(436)

(436)

Cash and cash equivalents at end of period

7

3,774

14,113

8,948

 

 

 

Unaudited Consolidated Statement of Changes in Equity

 

  Share capital

     Share premium

Capital redemption reserve

    Reverse acquisition      reserve

                Retained earnings

           Non-  controlling       interest

    Total   equity

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

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

-

-

-

-

(1,513)

2,826

1,313

Shares issued for acquisition

278

38,506

-

(17,326)

-

-

21,458

Share issue transactions costs

-

(862)

-

-

-

-

(862)

Transferred to members

-

-

 

-

-

(2,681)

(2,681)

Balance at 30 September 2017

850

45,884

-

(24,723)

401

4,086

26,498

Balance at 1 October 2017

850

45,884

-

(24,723)

401

4,086

26,498

Profit/(loss) and total comprehensive income/(expense) for the period

-

-

-

-

1,640

3,397

5,037

Shares issued in period

2

230

-

-

-

-

232

Share issue transactions costs

-

-

-

-

-

-

-

Deferred shares cancelled

(564)

-

564

-

-

-

-

Share premium cancelled

-

(45,884)

45,884

-

-

-

-

Transferred to members

-

-

-

(1)

-

(2,971)

(2,972)

 

Balance at 31 March 2018

288

230

46,448

(24,724)

2,041

4,512

28,795

 

 

 

 

 

 

 

 

Balance at 1 April 2018

288

230

46,448

(24,724)

2,041

4,512

28,795

Profit/(loss) and total comprehensive income/(expense) for the period

-

-

-

 

 

 

-

(168)

3,557

3,389

Dividends paid

-

-

-

-

(1,150)

-

(1,150)

Transferred to members

-

-

-

-

-

(3,171)

(3,171)

Balance at 30 September 2018

288

230

46,448

 

(24,724)

723

4,898

 

27,863

 

The attached notes are an integral part of these consolidated financial statements.

 

 

Notes to the Financial Statements

These interim consolidated financial statements have been approved for issue by the Board of Directors on 23 December 2018.

1.              Summary of significant accounting policies

1.1            Basis of preparation and significant accounting policies

1. Accounting policies

The financial information for the year ended 31 March 2018 set out in this half yearly report does not constitute statutory financial statements as defined in section 434 of the Companies Act 2006. The figures for the year ended 31 March 2018 have been extracted from the Group financial statements for that year. Those financial statements have been delivered to the Registrar of Companies and included an independent auditor's report, which was unqualified and did not contain a statement under section 493 of the Companies Act 2006.

The half yearly financial information has been prepared using the same accounting policies and estimation techniques as will be adopted in the Group financial statements for the year ending 31 March 2019. The Group financial statements for the year ended 31 March 2018 were prepared under International Financial Reporting Standards as adopted by the European Union. These half yearly financial statements have been prepared on a consistent basis and format with the Group financial statements for the year ended 31 March 2018. The interim condensed consolidated financial statements for the six months ended 30 September 2018 have been prepared in accordance with IAS 34 Interim Financial Reporting. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 March 2018.

None of the standards, interpretations and amendments effective for the first time from 1 April 2018 have had a material effect on the Interim Report. The following standards and interpretations, relevant to the Group's operations have been applied in the Interim Report for the first time: IFRS9 Financial Instruments; and, IFRS 15 Revenue from contracts with customers.

1.2            Business combinations

The Group applies the acquisition method of accounting to account for business combinations in accordance with IFRS 3 '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.

1.3           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.

1.4            Going concern

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.

2.              STAFF costs

The average number of persons employed by the Group (excluding Directors) during the period, analysed by category, was as follows:

 

Number of employees

 

6 months  to 30 September 2018

6 months to 30 September 2017

12 months to 31 March 2018

Fee earners

179

92

107

Direct production support

56

47

55

Administration

109

61

77

Total

344

200

229

The aggregate employment costs of these persons were as follows:                                                   

 

6 months to

30 September  2018

6 months to 30 September 2017

12 months to 31 March 2018

 

£'000

£'000

£'000

Wages and salaries

6,986

4,163

9,198

Social security costs

690

402

911

Employee benefits costs

232

171

399

Pension costs

208

109

248

Total staff costs

8,116

4,845

10,756

3.              Non Recurring Costs

Acquisition related cost in the current financial year represent professional fees and other costs incurred in respect of acquisitions completed in the previous year.  Exceptional costs in the period to 30 September 2018 represent costs incurred in pursuing the acquisition of Ince &Co.

Non recurring costs in the year ended 31 March 2018 include acquisition related costs of £382,000 and exceptional costs relating to the Group's 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 of £1,923,000.

Non recurring costs include non-audit fees payable to the Company's auditors of £21,000 (2018: £233,000).
 

4.              EARNINGS PER SHARE

Earnings per share for the year ended 31 March 2018 and the periods ended 30 September 2018 and 30 September 2017 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 2017

12,509,623

Being the shares issued by the Company 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 2017

28,597,310

Being the Company's issued shares on re-admission to the AIM market of the London Stock Exchange

19 January 2018

28,759,711

Being the Company's current issued shares following new shares issued to Culver Ventures Limited loan stock holders

Basic earnings per share, shown on the consolidated income statement, is based on loss after tax for the period ended 30 September 2018 of (£168,000) (31 March 2018: profit of £127,000) attributable to equity holders, divided by 28,759,711 (31 March 2018: 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 for the period ended 30 September 2018 of £1,104,000 after deducting other non-controlling interests of £397,000 and tax of £159,000 divided by 28,759,711 (31 March 2018: 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:

 

6 months to

6 months to

12 months to

 

30 September

30 September

31 March

 

2018

2017

2018

 

£'000

£'000

£'000

Profit before tax from statement of comprehensive income

3,548

1,316

6,377

Deduct: Partners profit shares shown as non-controlling interests

(3,160)

(2,653)

(5,720)

Add:     Non-recurring expenses:

 

 

 

-    Flotation costs

-

1,848

1,923

-    Costs connected to acquisition of Ince & Co

626

-

-

-    Acquisition related expenditure

90

68

382

Adjusted profit before tax

1,104

579

2,962

Deduct:

 

 

 

Taxation

(159)

(3)

(27)

Other non-controlling interests

(397)

(173)

(504)

Adjusted profit after tax

548

403

2,431

 

 

 

 

 

5.              Intangible assets

 

 

 

Internally

 

 

 

 

      Client

generated

Intellectual

 

 

  Goodwill

portfolio

   software

   property

       Total

 

£'000

£'000

£'000

£'000

£'000

Cost

 

 

 

 

 

Balance at 1 April 2018

24,150

7,719

453

189

32,511

Acquisition of subsidiary

-

-

-

-

-

Additions

-

-

-

-

-

Reassessment of fair value

4

-

-

-

4

Balance at 30 September 2018

24,154

7,719

453

189

32,515

Amortisation and impairment

 

 

 

 

 

Balance at 1 April 2018

-

5,336

103

28

5,467

Charge for the period

-

614

32

9

655

Balance at 30 September 2018

-

5,950

135

37

6,122

Carrying value

 

 

 

 

 

At 31 March 2018

24,150

2,383

350

161

27,044

At 30 September 2018

24,154

1,769

318

152

26,393

The total amortisation and depreciation charge on the face of the statement of comprehensive income includes £45,000 of depreciation of tangible fixed assets.

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.

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 £453,000 (2018: £453,000) of development costs relating to development of software applications. The directors have considered the carrying value of internally generated software of £318,000 (2018: £350,000) as appropriate as it is expected to create future economic benefit.

Intellectual property includes £152,000 (2018: £161,000) 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

 

£'000

£'000

£'000

£'000

    £'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

 

 

 

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.

The goodwill of the Group is analysed as follows:

 

 

 

 

Personal

 

 

 

    Consulting

Culver

Injury

GDLLP

 

 

                 and

Financial

Legal

         Legal

            Alen

 

  Technology

Services

Services

    Services

      Buckley

 

£'000

£'000

£'000

£'000

£'000

Cost

 

 

 

 

 

At 1 April 2018

1,751

4,185

5,313

3,103

1,329

Acquisitions

-

-

-

-

-

Reassessment of fair value

-

-

4

-

-

At 30 September 2018

1,751

4,185

5,317

3,103

1,329

Impairment

 

 

 

 

 

At 1 April 2018

-

-

-

-

-

Impairment

-

-

-

-

-

At 30 September 2018

-

-

-

-

-

Carrying value

 

 

 

 

 

At 31 March 2018

1,751

4,185

5,313

3,103

1,329

At 30 September 2018

1,751

4,185

5,317

3,103

1,329

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CW

White &

Total

 

 

 

Energy

Black

Goodwill

 

 

 

£'000

£'000

£'000

Cost

 

 

 

 

 

At 1 April 2018

 

 

6,464

2,005

24,150

Acquisitions

 

 

-

-

-

Reassessment of fair value

 

 

-

-

4

At 30 September 2018

 

 

6,464

2,005

24,154

Impairment

 

 

 

 

 

At 1 April 2018

 

 

-

-

-

Impairment

 

 

-

-

-

At 30 September 2018

 

 

-

-

-

Carrying value

 

 

 

 

 

At 31 March 2018

 

 

6,464

2,005

24,150

At 30 September 2018

 

 

6,464

2,005

24,154

5.1            Business combinations and acquisitions

There were no business combinations or acquisitions during the period to 30 September 2018.

.

5.2            Disposals

There were no disposals from the Group during the period to 30 September 2018.

 

 

6.              Trade and other receivables

 

30 September

30 September

31 March

 

2018

2017

2018

 

£'000

£'000

£'000

Trade receivables

11,057

6,599

10,605

Accrued income

4,123

2,873

3,514

Other receivables

2,092

1,830

2,043

Prepayments

1,982

1,638

2,249

 

19,254

12,940

18,411

7.              Cash and cash equivalents

 

30 September

30 September

31 March

 

2018

2017

2018

 

£'000

£'000

£'000

Cash in hand and at banks

4,257

14,113

8,948

 

Cash and cash equivalents include the following:-

Cash as above

4,257

14,113

8,948

Bank overdrafts

(483)

-

-

Total

3,774

14,113

8,948

8.              SHARE CAPITAL

 

30 September

30 September

30 September

31 March

 

2018

2018

2017

2018

 

Number

£'000

£'000

£'000

Allotted, called up and fully paid

 

 

 

 

Ordinary shares of 1p each

28,759,711

288

286

288

Deferred shares of 63p each

-

-

564

-

 

 

288

850

288

Ordinary shares rank equally as regards to dividends, other distributions and return on capital. Each ordinary share carries the right to one vote.

9.              Reserves

Share premium represents the difference between the amount received and the par value of shares issued less transaction costs.

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.

 

 

10.            Trade and other payables

 

30 September 2018

30 September 2017

 31 March 2018

 

£'000

£'000

£'000

Current:

 

 

 

Trade payables

2,632

2,638

3,377

Corporation tax payable

272

-

248

Other taxes and social security

987

1,221

1,854

Other payables

731

570

1,493

Deferred consideration

4,617

3,265

5,407

Accruals

1,491

1,326

1,275

 

10,730

9,020

13,654

 

 

 

 

Non-current:

 

 

 

Deferred consideration

10,391

3,126

11,896

 

 

 

 

Total

21,121

12,146

25,550

 

11.            Borrowings

 

30 September 2018

30 September 2017

31 March 2018

 

£'000

£'000

£'000

Bank overdrafts

483

-

-

Bank loans

-

826

66

Other loans

636

707

420

Obligations under hire purchase and lease contracts

35

47

 

41

Total borrowings

1,154

1,580

527

 

 

 

 

Current

1,006

1,419

372

Non-current

148

161

155

Total

1,154

1,580

527

Bank loans of £Nil (2018: £66,000) and other loans of £636,000 (2018: £420,000) 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 £148,000 (2018: £155,000) which has a maturity of 1-3 years.

 

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014


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
 
 
IR FDSFDFFASEFE
Close


London Stock Exchange plc is not responsible for and does not check content on this Website. Website users are responsible for checking content. Any news item (including any prospectus) which is addressed solely to the persons and countries specified therein should not be relied upon other than by such persons and/or outside the specified countries. Terms and conditions, including restrictions on use and distribution apply.

 


Statement re acquisition and interim results - RNS