Gateley is a well-managed professional services Group with an excellent reputation for client service and an unbroken track record of revenue growth. Recent results reaffirmed expectations for FY27 alongside news of a rebased dividend and CEO change.
Persistent share price weakness leaves the Group trading on depressed multiples (P/E <5x, yield >9%), which we consider a steep over-reaction to recent margin softness and the emergence of AI. In our view, management has a clear and credible strategy to drive a recovery in operating margins.
After good news in respect of the Group’s first class action, we see scope for further potential positive catalysts for a rerating (including ongoing margin initiatives; progress on working capital; gains from the adoption of the Jylo AI platform; recovery in Corporate and/or Property sectors).
Gateley has a P/E rating of just 4.9x (4.5x EV/EBITDA): a 60% discount to its 10-year average and a 50% discount to peers. We initiate coverage with a 150p Fair Value / share estimate vs a 60p last closing price.
