Ride the Tide | Analysing Listed Law Firms' Performance

Unlike almost every other profession, the legal industry is the only one owned and regulated by its practitioners i.e., lawyers, themselves. However, a few manage to go public and list themselves. Going public has its own pros and cons. Pros include reputation and cash flow, while cons include regulatory burden – no lawyer hires a lawyer to defend himself.

In our August 2022 article, “Legal Sector Financial Performance | APAC Analysis”, we presented the financial analysis of Asia-Pacific law firms. Through this article, we want to put some light on the performance of a few prominent publicly listed law firms in Australia and the UK.

Australia

Australia is the birthplace of listed law firms with Slater & Gordon making global news in 2007 for being the first law firm in the world to list on a stock exchange.

• Slater & Gordon Ltd.: The first Australian law firm to go public, announced its financial results for FY22 and indicated how they curved performance in the second half of 2022. While the prolonged covid lockdowns impacted its core practice area of personal injury law (‘PIL’), its strong growth in FY22 reflects an improving PIL market and the progression of several firm-funded class actions.

• Shine Justice Ltd.: In its FY22 Annual Report states “performed strongly through Covid-19 headwinds”. It also announced a track record of paying increasing dividends – 6.0 cents per share. On the operational side, they opened new offices in Darwin, Adelaide, Canberra and Wollongong, and the team’s grown to more than 1000 members. Further, the FY23 outlook includes launching case trackers and expanding location networks.

• AFL Legal: The firm announced 63% growth and total revenue of $18.5m. In 2021, they acquired Watts McCray and Kordos Lawyers, while in 2022 launched a new “owner-operator” model with the acquisition of 51% controlling interest in Withnalls Lawyers. It also signed a $10m acquisition facility to support future acquisition growth. AFL expanded to 18 offices, with new offices in Alice Springs, Wollongong.

• IPH Ltd.: The firm announced a net profit of $52.6m compared to $53.6m in FY21. In December 2021, with the integration of Spruson & Ferguson Australia and Shelston IP, IPH catapulted into one of the leading IP firms in Australia. Further, the acquisition of Smart & Biggar (Canada’s leading IP firm) will play a crucial role to bolster its international footprint. Additionally, IPH announces 31 promotions and 14 Principal appointments.

• QANTM Intellectual Property Limited: They operate across Asia-Pacific in Australia, New Zealand, Singapore, Malaysia and Hong Kong, under the brand names Davies Collison Cave (‘DCC’), FPA Patent Attorneys, Advanz Fidelis IP and Sortify.tm, including Sortify’s brands. QANTM’s published its FY22 financial results on a buoyant note announcing that it delivered “solid revenue growth across its patent, and in particular trademark businesses”. The firm reported a 6.9% revenue growth (including 13.9% from Asian service fees). QANTM’s recent acquisition of Sortify’s automated trademark filing platforms gained it inroads into Singapore and Malaysia, while DCC is slated to open an office in Hong Kong.

United Kingdom

In 2020, many UK-listed law firms adopted cost-cutting measures to fend off COVID’s impact. The measures included salary cuts, cancelled dividends, office closures, etc. But, come FY21 and 22, most of the UK’s listed law firms were able to brush off the pains of the pandemic and reap a bumper harvest.

• DWF Group Plc: In April 2022, DWF announced its “strongest profits since IPO”, achieving a record set of results with net revenue growth of £350m, adjusted profit before tax up by 21%. Its net revenue per partner increased by 6%. The firm established its Asia presence through association with Eldan Law (Singapore), Hauzen LLP (Hong Kong), Mindcrest (India) and Rousand Costas Duran(Portugal and Latin America).

• Keystone Law Group plc: In FY22, the firm’s revenues increased by 26.5% to £69.6m and adjusted PBT increased 52.3% to £9.1m. While it cancelled dividends in 2020, it offered both ordinary and special dividends in FY22. Additionally, an increase in the number of Principals to 394 was also indicated.

• The Ince Group plc: Ince comprises Gordon Dadds, eLegal Technology Solutions and Ince, its international shipping law firm with offices across Europe, Asia and the Middle East. While Ince’s revenue for FY21 was £100.2m, for FY22, it announced that its pre-tax profits are likely to be “short of market expectations and that its annual global revenue is expected to fall by 3% to £97m.” Ince said that “the resurgence of Covid-19 in the UK, the continuing impact of the pandemic in Hong Kong and China, and the effect of the Ukraine conflict on its key global shipping market were all factors behind the sluggish results”. Further, a cyber attack in March 2022 cost it around £5m and devalued its share price by half. Ince recently raised £9.5m from an open share offer to stave off “financial difficulties”.

• Knights Group Holdings plc: Knights posted total revenue growth of £125.6m for FY22, post-tax profit of £2.5m, underlying PBT of £18.1m and net debt of £28.9m. Knights’ recent acquisitions include Langleys Solicitors and Lincoln-based town planning and development specialist Globe Consultants. Knights recently announced that it would acquire Coffin Mew LLP, a Southern England law firm.

• RBG Holdings plc: Rosenblatt’s parent company, RBG Holdings plc (‘RBG’), will publish its interim results for FY22 in September. For FY21, Rosenblatt reported that its pre-tax profits rose by 24.6% to £9.2m. The average revenue per fee earner was £347,000, down from £425,800 in 2020. RBG’s revenue accruing from legal services alone increased 56% to £32.6m and was evenly split among the practice areas of dispute resolution, corporate and real estate. In 2021, RBG acquired London corporate law firm Memery Crystal for £30m.

Turbulence Dilemma

In a December 2021 survey of over 200 law firm partners, UK-based litigation funder Harbour, found that:

• 31% disclosed that their firm is actively considering a stock market listing in the next 12-18 months
• 44% said that an IPO was under consideration

But while much debate and discourse swirl on the pros and cons of listing on the stock exchange, market conditions threw a monkey wrench into law firms’ plans to go public. In January, London law firm Mishcon de Reya temporarily postponed its mega-IPO due to “volatile” market conditions.

In Australia, some of the law firms looking to list on the stock exchange include Hamilton Locke. HWL Ebsworth, the largest law firm by the number of partners, called off its plans to list in 2020.

The UK may soon outpace Australia in terms of listed law firms as firms indicate a keen interest in the stock exchange listing.

Also read top viewed Ai Legal article: The Role of AI in Legal Research.