Hits: 18

26 May 2020

Gateley  – FY Trading Update

Share Price 152p

Mkt Cap £179m

Conflict Disclosure: I Hold

 

 

  • Update After a slowdown in March and April revenue expected to grow 4% to £108m. This implies H2 revenue was 8% ahead of H1. Results delayed due to lack of clarity. Dividend uncertain. Net debt at H1 was £2.1m and the company has a £20m facility.

 

  • Estimates  Revenue to April 20 is 2% behind estimates so the 8.5% growth in 2021 may be vulnerable.

 

  • Valuation On tentative estimates currently the PE is 11.3X and yield is 4.3%.

 

  • Conclusion I imagine while furloughing staff paying lawyers bills is a lower priority so the risk is a working capital squeeze. Gateley look to have headroom to accommodate perhaps 2 moths of debtor expansion. Should be OK.

6 March 2020

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Gateley – Acquisition 

Share Price 193p

Mkt Cap £222m

Conflict Disclosure: I Hold

  • Acquisition Vinden, a corporate advisory, dispute resolution and consultancy to the built environment which employs 40 staff across the north of England with a London office is being acquired for up to £6.75m, an EV of £5.15m. 1.1X turnover and with 17% PBT margins that equates to 6.4X PBT.  Consideration is largely 50/50 cash/shares.
  • Estimates. With the PBT last year equating to 4% of Gateley’s expected £19.6m PBT the acquisition is useful. The statement says it is expected to be immediately earnings enhancing.
  • Valuation The PER is 13.8X and yield 4.4% which is 2.2X turnover.
  • Culture I sense with lawyers this is important and it is reassuring to see Gately with the highest Glassdoor score of any of the quoted lawyers
  • Conclusion Gateley’s strategy is to acquire adjacent businesses and this is in line with that strategy and it doesn’t look like a transactional business. Having peaked at 220p/share and the recent staff placing at 200p/share the shares may take until the April results to regain previous highs, which makes them good value.

14 January 2020

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Gateley – H1 Results 

Share Price 211p

Mkt Cap £242m

Conflict Disclosure: I Hold

  • Results Revenue up 11.8% to £51.8m. PBT up 10.2% to £5.5m. EPS up 10.1% to 3.92p. Net debt down from £6m to £2.1m DPS up 11.5% at the interim stage. Outlook is confident to deliver in line.
  • Estimates To April 2020 £109.8m revenue is anticipated which is 6% growth on the prior year. 11.8% revenue growth has been achieved in H1. A 17% operating margin is anticipated providing 20% PBT growth. With a further 10% increase in fee earners in H1 the 6% revenue growth looks like there is room for upgrades.
  • Culture Reassuringly dull.
  • Valuation PER 15.2X, yield 4%.
  • Conclusion With a strong pipeline of acquisitions and recent hiring combined with low estimates the company can continue to deliver in an understated way over time which could result in rating upside over time as well as strong earnings growth.  With 8% earnings growth forecast after the current year perhaps there may be 20% upside on the shares.

13 December 2020

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Gateley – Acquisition 

Share Price 174p

Mkt Cap £197m

Conflict Disclosure: I Hold

  • Acquisition The human capital consultancy T-three is acquired for £3.4m complementing the July acquisition of Kiddy & Partners. With revenues of £4.2m and EBITDA of £0.7m the valuation is 0.8X revenue and 4.9X EBITDA. Consideration is 50% cash/shares.
  • Estimates With a forecast of £19.1m PBT this add perhaps 3%.
  • Valuation PER 12.5X, yield 4.5% to April 2020. 1.8X revenues.
  • Conclusion This looks to be a conservatively run lawyer, being the first to come to market. Sensibly using the arbitrage between private company and public company valuations in the space.

19 September 2019

Gateley – AGM Update

Share  Price 166p

Mkt cap £184m

Conflict Disclosure: I Hold

  • Results Trading in line with expectations
  • Estimates 21% PBT growth expected to £19.4m and EPS 14p
  • Valuation PER 12.6X yield 5.2%
  • Conclusion This company rather prides itself on being dull which it is delivering on. Useful yield. I suspect the share price will follow the earnings.

13 September 2019

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Gateley – Earn Out 

Share Price 163p

Mkt Cap £181m

Conflict Disclosure: I hold

  • Earn Out – £1.25m is payable for deferred consideration on the 9 July 18 acquisition of Kiddy & Partners. This is calculated at 4.5X EBITDA. The statement says the aggregate maximum remaining payment outstanding is £365k. Which makes £850k paid at acquisition, £1.25m now and £365k outstanding, so a total of nearly £2.5m.  The consideration was capped at £3m for the period up to 2021 which I am therefore struggling to square with the commentary which says Kiddy has grown 37% ahead of original expectations.
  • Valuation PER 12.3X, Yield 5.3%
  • Conclusion The statement look a little more bullish than the numbers suggest.  The announcement also includes the wrong date of 9 July 2019 for the Kiddy acquisition which was in 2018. That’s OK but they are lawyers.  It’s cheap but not sure this is a positive announcement.

30 July 2019

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Gateley Plc – Acquisition 

Share Price 166p

Mkt Cap £184m

Conflict Disclosure: I Hold

  • Acquisition Small acquisition of a land consultancy business for £250k up front.  The acquisition is expected to be immediately earnings enhancing.
  • Estimates Not material to forecasts
  • Valuation PER 11.7X. Yield 5.2%
  • Conclusion The beauty of Gateley has always been it’s boringness. I am really unsure that property consultancy is a good thing to go charging into.

16 July 2019

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Gateley – FY Results  

Share Price 164p

Mkt Cap £181m

Conflict Disclosure: I Hold

  • Results Revenue up 20.2% to £103.5m, adjusted EBITDA up 15.7% to £19.1m and PBT up 8.9% to £15.9m. EPS up 17.8% to 13.15p and DPS for year up 14.3% to 8p. Operating margin fell from 17.22% to 15.34% as staff costs rose to 61.3% of revenue. Debtor days were 166 vs 175 last year. Net debt £3.2m. Outlook says new year has started well.
  • Estimates.  These results look to be politely ahead of consensus. Going forward 9.5% PBT growth is forecast.
  • Valuation  PER 12X, Yield 5.3%. DWF trades on 12X and yields 5.9%.
  • Conclusion The share price has barely moved over the last 12 months as more lawyers have come to market. The company is now looking like it may have outgrown its valuation on 12X. Good value.

23 May 2019

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Gateley Holdings  – Pre Close Update 

Share Price 170p

Mkt Cap £188m

Conflict Disclosure: I hold

  • Update Revenue is described as “strong”. Revenue expected to be £102m and adjusted EBITDA £19m with PAT of £13m. Results announced on 16 July.
  • Estimates While the results are described as strong they appear to be in line with expectations which is 15% EPS growth. This fades to 8% EPS growth forecast for the year just started.
  • Valuation   PER 12X  Yield 5%.
  • Conclusion I was attracted to this one as it seem safer than some in a sector where it is difficult to trust the concept of lawyers allowing shareholders to derive some benefit. With acquisitions being available at such low prices I suspect more aggressive businesses may do better in the short term.

27 November 2017

Gateley – H1 Trading Update  

Share Price 169p

Mkt Cap £180m

·         Trading is in line wiith expectations as revenue has grown 10%

·         Estimates Look for 7% revenue growth for the year. Conservative

·         Valuation PER 15.6X current year. Yield 4.3%

·         Conclusion Looks good value. Keystone Law, the second quoted firm of lawyers starts trading today after an IPO at 160p per share giving it a market cap of £50m which is 29X last year’s operating profit (year to January 2017) but this is with an average number of lawyers of 200 and by July 2017 they had 250 lawyers.