Regional firms are reporting patchy performances overall but the arrival of new entrants to the LB100 shows firms outside the capital are holding their own
National and regional firms are historically outperformed by their London equivalents in the bottom 50, but this year these firms are holding their own. There are 30 non-City firms in the 51-100 bracket, compared to 20 London firms, with a combined revenue of £1.14bn, down on the £1.2bn shared between 32 firms last year. Average revenue for this peer group is unchanged at £38m – the same as for the London-based firms. Profit per equity partner (PEP) has increased 9% to £329,000, compared to the City firms, which managed 7% growth to £435,000.
With some rejigging for firms in the top half of the LB100 and some merger activity consolidating firms in the second half from last year, the bottom few places of the 100 have seen the arrival of a handful of new entrants from the regions: Hampshire-based Moore Blatch, a 40-partner firm with revenues of £22.1m; Bath’s Withy King, which posted 2015/16 revenues of £24.4m and is likely to grow to in excess of £30m during the current financial year following its merger with Royds; Grimsby’s Wilkin Chapman with total revenues of £21.4m; as well as Yorkshire-based Langleys with revenues of £21.3m.
Northern exposure
Despite the static overall performance, the average figures hide some impressive performances within the regions. Scottish independents have continued to perform well, with Brodies announcing a revenue increase of 12% from £57.9m to £65.1m, while PEP was also up 12% from £532,000 to £597,000. Meanwhile, the acquisition of Tods Murray in October 2014 continues to pay off for Shepherd and Wedderburn, which also saw a double-digit increase in turnover and PEP, with revenue up 10% from £48m to £53m and PEP up 12% from £335,000 to £375,000.
Commenting on the keys to Brodies’ recent success – the firm had revenues of £35.8m in 2010 and so has grown 82% since then – managing partner Bill Drummond argues that market relevance will overcome most headwinds: ‘We have managed to find plenty of room to grow and be ever-more relevant to the marketplace. That is the key question to ask – how relevant are you to the market?’
‘The outcome of the EU referendum inevitably impacted adversely on the last couple of months’ trading and is reflected in our results.’
Philip Rodney, Burness Paull
Last year’s Scottish entrant, Harper Macleod, followed up with another strong performance, with turnover growth of 16% from £22.1m to £25.7m, but Maclay Murray & Spens bucked the trend, with its PEP falling 14% to £244,000. Although revenue was up 3% from £43.5m to £44.8m, it is still down 8% over the last five years, from £48.6m.
And Burness Paull, which alongside Brodies has been one of the most storied Scots firms of the last five years, has a later accounting year than most firms (end of July) and already reported adverse effects of the EU referendum in its last month of trading. As such, revenues climbed just 4% to £53.3m, compared with double-digit growth in each of the previous two years. Profits have fallen, with PEP down from £480,000 to £449,000 – a 6% drop.
‘The changed circumstances brought about by the outcome of the EU referendum inevitably impacted adversely on the last couple of months’ trading and is reflected in our results,’ says chair Philip Rodney. ‘There’s no doubt that continued uncertainty will remain as we enter this new financial year.’
The year was also tougher for the northern England market generally, with Leeds-based Gordons exiting the LB100 altogether after its revenues fell 13% to £19.5m, while neighbour Walker Morris experienced an 8% drop in PEP to £400,000 against a marginal increase in revenue of 1% to £42.4m after investing around £4m in IT over the last two years. Liverpool’s Brabners saw PEP drop significantly, down 29% to £167,000, against flat turnover.
‘We have rebooted the business – effectively three years ago we closed down personal injury – we anticipated the market would go in one direction with the reforms and we decided it wasn’t a market we wanted to play in,’ says Walker Morris managing partner Ian Gilbert. ‘We have been replacing that turnover over that period without mergers, so it’s all organic. We have also been focusing on improving the client base and working for larger corporates.’
In contrast, North-East stalwart Ward Hadaway made a comeback after a stuttering last year, with PEP soaring 49%, the largest increase in this section of the top 100 firms, from £225,000 to £336,000. Revenue was up a more modest 8%, from £33.3m to £35.8m.
Double or nothing
In the Midlands, while the 2015 IPO of top-50 firm Gateley has taken most of the headlines, Shakespeare Martineau completed one year’s trading as a merged entity, announcing revenues of £71m for 2015/16 – down 6% on both firms’ combined revenues for last year of £75.6m. PEP stands at £236,000.
‘The difference in turnover is always going to be what happens in a merger where there are things you can’t do simply because of conflicts and you effectively exclude yourself from the marketplace,’ says chief executive Andy Raynor. ‘However, in comparison with most mergers it’s a really small amount. When you are trying to do a merger you look for where you [are] going to have a clash; where there are going to be conflicts. And they were really rare.’
Raynor is open about wanting more acquisitions for the merged outfit in the next 12-18 months, following a long run of mergers embarked on by both legacy firms over the last five years. Shortly after the union in June last year, the combined firm acquired London-based commercial law practice, Macrae & Co, in December 2015.
Adds Raynor: ‘In this area you really have got to decide what direction you are travelling in, because you are never going to sit still. From our point of view we want to continue to grow both organically and by looking at mergers. There are very few opportunities for people to say: “We’re comfortable where we are.” That is frankly a dangerous opinion for people to have.’
While Freeths, another sizeable Midlands firm that has been active in the merger market in recent years, announced a revenue increase of 14% from £55.9m to £63.9m and a substantial 18% jump in PEP from £307,000 to £363,000, Browne Jacobson – typically the top organic-growth performer in the second half of the LB100 – continued its strong form with a 9% increase in revenue to £64m, underlining some impressive performances as a whole among the Midlands firms.
‘We’ve had seven years of growth,’ says chief operating officer Sarah Walker-Smith. ‘We’re one of the fastest-growing law firms in the top 100. Without a merger, we’ve continued to keep pushing forward.’
The picture is more robust the further south you travel. After six months of talks, Sussex-based Thomas Eggar was acquired by national firm Irwin Mitchell last November to create a £220m firm and is no longer part of the LB100.
‘The size we were was really difficult to maintain and investment had to be targeted in different areas,’ says Thomas Eggar managing partner Vicky Brackett – now regional managing partner at Irwin Mitchell. ‘There are lots of service lines we didn’t offer before and now we can do that. It’s given us that strength, depth and that cross-practice working across a national footprint.’
Elsewhere in the Home Counties, fellow Sussex firm DMH Stallard had a strong year, with revenue up 16% from £21m to £24.3m and PEP up 10% from £264,000 to £292,000, while in Kent, Cripps’ revenue was up 9% from £26m to £28.3m while PEP was up 8% from £273,000 to £295,000.
‘The economy is going to flatline for the next couple of years, but a lot of legal businesses are already in a strong place having lived through the downturn in 2008.’
John Westwell, Foot Anstey
The South West continues to be home to some of the best-performing regional law firms, even beyond top-50 firms TLT, Osborne Clarke and Burges Salmon. Clarke Willmott, which has had difficulties in recent years, saw revenue increase 10%, from £39.8m to £43.9m while PEP was up 14% to £228,000. Stephen Rosser, the firm’s chief executive, says that real estate and private client have contributed to the growth and ensured the firm has remained profitable.
‘We’ve increased service lines into the likes of our newer offices in Manchester and Cardiff, but we are doing it in a fairly cautious way,’ he comments.
Another South West firm with a patchy recent performance, Bevan Brittan saw revenues grow 8%, from £34.9m to £37.7m, while revenues jumped 19% from £24.1m to £28.7m at Veale Wasbrough Vizards, fuelled in part by its acquisition of a team of 30 lawyers from Watford firm Matthew Arnold & Baldwin at the end of January. Shortlisted for National/Regional Firm of the Year for two years’ running at the Legal Business Awards, South West firm Foot Anstey has continued its impressive upward trajectory, posting a year-on-year turnover increase of 12% from £32m to £35.9m, while PEP has grown 4% to £312,000.
With a solid overall performance during the last financial year, even against a backdrop of tougher market conditions, the outlook for regional firms remains positive. There is a resilience among the regional players in the LB100 that should help them ride out any turbulence that may arise as Brexit becomes a reality.
As John Westwell, managing partner at Foot Anstey, concludes: ‘The economy is going to at best flatline for the next couple of years, but a lot of legal businesses are already in quite a strong place having lived through the downturn in 2008. There’s fresh experience within legal businesses to be able to deal with a challenging economy.’ LB
kathryn.mccann@legalease.co.uk
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