These promising small-caps could boost your retirement fund

In today’s world, the provision of legal services strikes me as a growth sector, and full-year results from Gately Holdings (LSE: GTLY) this morning lend some weight to that idea.

Trading well

The firm delivers commercial law and complementary professional services and arrived on the stock market on 8 June 2015. That’s a positive for me because newly listed firms tend to be well financed and are often run by keen directors out to make their mark. The fact that Gately was the first UK law firm ever to list on the stock market enhances the argument, I reckon.

The figures are good for the year’s trading to 30 April. Revenue pushed up 15.7% compared to the year before, basic earnings per share (EPS) lifted 15.3%, and the directors crowned the year’s achievements with a 17% hike in the total annual dividend.

Organic and acquisitive growth

Strong cash generation helped the firm execute its second acquisition during September 2016 and the integration is going well. Organic and acquisitive growth seems prominent on the agenda, supported by a business that is well balanced and resilient,” said chief executive Michael Ward.

Following an “excellent” second half of trading, the operational momentum continued in the first two months of the current trading year. Mr Gately put such progress down to the strength of the service offering, the depth of client relationships and growth in the firm’s teams of skilled professionals.

At today’s share price around 184p, you can pick the shares up on a forward price-to-earnings (P/E) rating of just over 17 for the year to April 2018, and the forward dividend yield runs at 3.9%. City analysts expect earnings to grow 13% that year and to cover the dividend payout almost 1.5 times. Although the valuation is quite full, I reckon the firm may have a bright future.

Defensive qualities

It’s hard for me to imagine conditions when legal services will not be in strong demand. so, I reckon Gately’s business has a potentially robust defensive element to it. Meanwhile, Swallowfield (LSE: SWL) is another firm that strikes me as having defensive, evergreen cash-generating qualities.

The company develops, formulates, and supplies personal care and beauty products on a contract basis to major brand owners and also produces its own portfolio of brands. We last heard from the firm on 6 July when it told us how the trading year to June had turned out. Trading has been brisk and the directors expect to report revenues up 30% on a constant currency basis with the full-year results in September. Excluding acquisitions, the organic element of that growth should come in around 7%.

Emerging branded consumer goods business

Within the set-up, the firm’s own brands are performing well and driving some of that growth. In June 2016, the company enhanced its own-brand offering with the acquisition of The Brand Architekts Limited, which joins the stable to sit alongside organically developed brands such as Bagsy and MR. and the 2015 acquisition of The Real Shaving Company.

At a share price around 362p, the shares change hands on a forward P/E rating of 15 for the year to June 2018, and earnings are predicted to lift 16% that year, which seems like a fair valuation given what is known.

Under-researched stocks

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Kevin Godbold has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.