Waldie: Diversity of services provides resilience
Listed law firm Gateley said yesterday that it expected “pricing and efficiencies” to mitigate the extra £1.8m that the National Insurance increase is set to cost it.
It came in the wake of another listed firm, Knights, saying the rise would cost it £2m.
A trading update ahead of publishing Gateley’s first half results (for the six months to 31 October) said revenue and underlying profit before tax both grew by around 5% and were expected to be not less than £86m and £10.5m respectively.
The group has strengthened its balance sheet further, including net cash at the period end of £1.2m, compared to net debt of £2.2m in the same period last year.
Investors were told: “Activity levels increased throughout H1, particularly in transactional services in Q2. Fee-earner utilisation remains ahead of the prior year as we head into H2. Taken alongside the benefits now being seen from our organic investments, the outlook for the remainder of the year is encouraging and the group expects to perform in-line with market expectations.”
Current market consensus for the year ending 30 April 2025 was revenue of £184m and underlying profit before tax of £24m, Gateley estimated.
The increase in National Insurance contributions announced in the autumn budget would be around £1.8m in the 2026 financial year. “The group is well positioned to mitigate these costs through pricing and efficiencies in its ongoing drive for longer term margin enhancement,” it said.
Chief executive Rod Waldie said: “The group continues to benefit from the resilience created by our strategy of investing in a diverse and complementary range of professional services.
“We are pleased that our more recent organic investments are beginning to generate positive returns alongside the strong performance from our recently acquired businesses.
“Our balance sheet provides a strong foundation from which to take a long-term view of potential opportunities to further invest in both legal and consultancy services.”
Shares in Gateley, which in 2015 became the UK’s first listed law firm, were virtually unmoved at 131.5p yesterday. The price has fluctuated between 111p and 160p during the year.
In its trading update last week, Knights said the National Insurance change was expected to cost an extra £2m in the 2026 financial year but said it too was “well positioned” to weather this through “ongoing focus on growth, efficiency and pricing”.
It expected to report 5.4% revenue growth for the six months to 31 October to just shy of £80m, with underlying profit before tax set to jump 26% to £14.6m. This would be three percentage point increase in profit margin to 18.4%.
The £12.5m acquisition of West Midlands firm Thursfields Legal completed in September and, as ever, Knights is on the look-out for more.
The group said it has agreed with HSBC UK, AIB (GB) and NatWest to extend its revolving credit facility to provide total committed funding of £100m – an increase from the existing £70m – until November 2027 (extended by a year).
“The extended facility provides the group with significant headroom to execute its value-accretive acquisition strategy as suitable opportunities arise.”
Net debt was £50m, £15m higher than a year before, after paying £8.9m initial and deferred consideration in respect of acquisitions.
Chief executive David Beech said: “The continued improvement in margin reflects the increasing quality of our revenue, team and our continued focus on the cost base.
“We are encouraged by our strong momentum in recruitment which continues to build as Knights’ national scale and strong reputation are increasingly recognised.
“These factors, together with our ongoing focus on operational excellence, and early signs of a recovery in corporate and residential housing work, position us well for a strong performance in the second half in line with market expectations.”
However, Knights’ share price, 104p yesterday, is at its lowest this year.
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