The wind blowing up from the south region has the familiar whiff of stagnant revenues again this year. As was the case in 2010, more than half the firms in this peer group have posted negative or flat turnover growth, a sure sign that market conditions are taking their toll in this fiercely competitive market. These firms are perhaps suffering more than most, largely because competitive pricing pressure on London-based firms means that those south of the capital can no longer merely compete on price – they have to match London rivals for quality as well.
The averages for this peer group remain among the lowest of any peer group in the LB100. However, these figures look less concerning now that some of the larger grossing law firms in other peer groups have moved out to the Major UK group. That said, not one of the South firms has revenues anywhere close to £60m, which is what the top regional firms have traditionally been pulling in.
This peer group has always had its fair share of anomalies – last year’s 78% leap in PEP for Blake Lapthorn being one standout example. This year, the firm’s headline figures were rather more sustainable. However, a couple of firms are again able to increase net income – and by extension PEP – despite posting falls in turnover.
Bevan Brittan, for example, has posted two consecutive years of PEP growth, despite turnover falling by 15% during the same period. Having taken the decision in recent years to refocus some practice areas in order to concentrate on its most successful service line, the public sector, it was inevitable that revenues would take a hit. This was largely thanks to moves to reduce the budget deficit through the Comprehensive Spending Review, leading to policy decisions that affected core areas of work – the changes to the Building Schools for the Future programme being a prime example.
However, chief executive Andrew Manning says that ‘through prudent management of costs’ the firm was able to keep profits increasing.
‘Through careful management of our cash flow we have reduced debt and not used our short-term borrowing facilities – thereby maintaining the strong balance sheet we have developed over the past couple of years,’ he says. ‘We are now achieving
profit margins and PEP figures that, at last, compare very favourably to those achieved by the vast majority of our competitors in
our markets.’
Another Bristol-based firm has continued on its impressive path of revenue growth. TLT Solicitors was shortlisted for National Firm of the Year at the 2011 Legal Business Awards thanks to it finally delivering a 45% leap in net income in 2010 after years of prudent investment. This year’s results are perhaps less eye-catching but nonetheless a sign of continued growth: revenue is up 6% – the largest revenue growth in the peer group – to £43.3m. Net income has nudged up by just 1% to £6.05m.
Managing partner David Pester and senior partner Robert Bourns were re-elected to serve new three-year terms this summer and little wonder – since their appointments in 2002, when TLT was formed by the merger of Lawrence Tuckett and Trumps, TLT has climbed 40 places in the LB100 rankings to number 63; more than tripled turnover and headcount; and has more than doubled the number of partners from 29 to 68.
Pester says that one key factor to the recent success has been the firm’s strategy of focusing on a small number of sectors (financial services, leisure, retail, technology and media, housing, renewables and public sector). ‘I’ve heard some people say standing still is a good result in this market. Well, we’ve done more than that,’ he says.
‘I think there is increasing pricing pressure in the market and you have to work out what it is you want to be famous for,’ he adds. ‘This is absolutely critical in this market. To be a generalist firm in such a big fragmented market, particularly below the top 50, can be quite a challenge if you don’t have something that positions you as quite specialised.’
Elsewhere, Clarke Willmott’s woes continue. Revenue is down 11% to £36.5m from £40.8m, following last year’s double-digit drop in turnover and this means that revenues at the firm have fallen 32% since its 2008 high
of £53.3m.
While the firm managed to nudge PEP up slightly by 4% to £168,000, its net income CAGR is -3%, while PEP has fallen 47% since 2008. The firm also switched banks from The Royal Bank of Scotland to HSBC last year, in a deal that included a £2m overdraft, a £2m loan over four years and a £1.8m loan over two years. On top of all that, the firm also made a £1.89m cash-call during the 2009/10 financial year. LB