Unanimous verdict for Gateley shares as they soar 20%

GATELEY is the first commercial law firm to list on the London Stock Exchange, joining AIM in June 2015 at 95p a share.

Midas suggested buying the stock in August last year, when the shares were 98p. Today they are 119½p and should increase further over the next few years.

Headquartered in Birmingham, Gateley works primarily for midsized companies nationwide, in areas such as finance, employment, planning and pensions. When the group floated, chief executive Mike Ward said he wanted to expand Gateley organically and by acquisition, while paying out a generous dividend.

Interim figures last week suggest the firm is doing everything it promised.

In the six months to October 31, the firm’s revenues rose 19 per cent to £35.2million, while pre-tax profits were 45 per cent ahead at £4.2million and the interim dividend increased by 16 per cent to 2.2p.

Analysts expect full-year sales and profits of £75million and £13.4million respectively, while a total dividend of 6.6p is forecast, putting the shares on a yield of more than 5.5 per cent.

The company has also made two acquisitions, a specialist surveyor, Hamer, and tax consultancy Capitus.

Staff numbers have grown and a new office has been opened in Reading, which should help to increase the firm’s client base in the South East.

Ward is highly optimistic. The AIM flotation has increased Gateley’s visibility in the legal market and the company has won new clients and increased its business activities with existing customers. This is likely to continue.

The UK legal market is valued at £28billion a year and Gateley’s revenues are a tiny fraction of that, so there is substantial room for growth.

Midas verdict: Gateley has had a promising start on AIM, however the best is almost certainly yet to come.

Existing shareholders should hold. New investors could also be tempted to buy a few shares, particularly given the generous dividend policy.