Gateley Holdings was added to the portfolio in the first quarter of this year, and has produced an encouraging set of returns for the portfolio since its addition. Over the quarter, the stock is up 25.8% while continuing to offer significant growth opportunities alongside adding an important diversification element to the portfolio.

Company Profile

Though the name may be new to you, Gateley Holdings became the UK’s first commercial law firm to float on the London Stock Exchange in June 2015. The company provides both legal and non-legal commercial services within several business segments including: Banking and Financial Services, Corporate, Business Services, Employees -Pensions and Benefits, and Property. Since listing on the AIM market in 2015 the company has gone from strength to strength in terms of both financial stability and growth.

Competitive Advantage

As a leading national commercial law and complementary professional services group, Gateley prides itself on being a ‘stable, broad based and resilient business’. Two years on from admission, Gateley remains the only full-service listed commercial law firm on the UK stock exchange. The company acts for 17 of the top 20 house builders and is the 7th most active adviser in Europe.

Gateley stands out from competitors by offering a holistic service with all the services that mid-market clients are likely to need. Its services are low cost compared to leading city and international firms, and it is the only law firm with a positive balance sheet, which continues to strengthen over time. Gateley’s business offering is relatively resilient to economic shocks, with no client, sector or governmental dependency alongside countercyclical work-streams allowing the company an extra level of diversification.

Quality of Earnings

Gateley’s full year results for the period ended 30th April 2017 were very promising, featuring revenue growth of 15.7%, profit (PBIT) growth of 18.8% and a growth in earnings per share of 15.3%. In addition to this, the company increased its final year dividend based on the results, representing a strong commitment to returning cash to investors while maintaining high growth levels.

Looking closely at the company’s financials reveals a strong balance sheet and strong cash flow, both key factors we look for in our AIM constituent companies. The company continues to strengthen its financial position through acquisitions, and continues to improve profitability despite having to also increase costs to meet higher demand. The company continues to invest in the business, and continues to look for further acquisition opportunities as part of its strategy.

Growth Potential

Gateley continues to demonstrate strong levels of cash generation, which allows it to pursue a strategy of growth through acquisition using cash resources. Within the last year, acquisition ‘Gateley Hamer’ was successfully integrated into the business as part of its strategy of acquiring complementary businesses to increase its client offering. Gateley now has 16 business lines alongside 3 complementary professional services: Gateley Capitus, Gateley Hamer and Entrust. Alongside this strategy, the business has also grown organically as demand for its services continue to increase within the industry.

Key Risks

    A number of political and economic uncertainties across the globe present a challenging economic backdrop for UK companies. A potential risk to the business may be the increased risk of economic shocks within the UK and Europe. According to Gateley, this instead presents an opportunity as economic volatility promotes a need for legal advice and promotes litigation. This may involve services such as asset disposals, contract redrafting or business restructuring.
    As a UK Based company, Gateley is potentially exposed to the impact of Brexit on the economy alongside expected changes to UK regulations. This could present Gateley with challenges to operations and demand. The company issued a statement in its most recent financial statements that it had experienced no immediate impact from Brexit and would continue to pursue its growth strategy despite the challenging environment.


Overall, it is clear that Gateley fits our criteria in terms of growth opportunities and financial stability, however what sets this business apart from other opportunities is its diverse and resilient business structure. It is our view that due to the structure and nature of the business, it is likely to prove resilient to market shocks. We see the business continuing to improve its profitability and increasing demand for its services over the long term despite a challenging economic backdrop.


The information contained in this document is provided for information purposes only and must not be communicated to any other person. It does not constitute a research recommendation or investment advice and must not be treated as a recommendation or an offer or solicitation for investment. Investors should form their own view in relation to the above mentioned investment. If you’re unsure of the suitability of any investment please contact us for advice. AIM investments can be illiquid in nature and carry a higher degree of risk than other securities and are not, therefore suitable for some investors. Past performance is not a reliable indicator of future results and forecasts are not a reliable indicator of future performance. The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your initial investment. Where an investment involves exposure to a foreign currency, changes in rates of exchange may cause the value of the investment, and the income from it, to go up or down.

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