Travers Smith has suffered one of its biggest financial setbacks due to the coronavirus pandemic, recording an 11% slump in net profit and a 20% fall in profit per equity partner (PEP), its provisional results revealed.
The provisional figures, announced on Thursday (30 July) show a 1% revenue drop to £160.9m from £162.5m last year, stymying a decade-long run of uninterrupted turnover growth. PEP fell to £1m, with the results being adversely affected by a reporting period that ran to the end of June, rather than April, giving the firm greater exposure to the pandemic downturn.
The numbers are a far cry from last year, when Travers celebrated its tenth consecutive year of revenue growth with an 11% increase in turnover as PEP grew by 4% to £1.25m. In 2018/19, revenue had seen a 70% increase over five years.
Speaking to Legal Business this morning (Friday 31 July), managing partner David Patient (pictured) noted the drawback of the entire last quarter of the financial year taking place during the crisis, but was characteristically upbeat in the face of adversity.
‘You’ve got to put things in context. Wind back to the dark days of lockdown, it was surreal watching the pandemic sweep across the world, and it hit us very quickly. Back then, I had three questions: “Will we be able to work? Will the clients need us? Will we get paid?” And the answers, thankfully, were: “Yes we can, yes they did, and yes we did,” said Patient, adding that he was proud of how the firm’s people were able to make a success of lockdown.
‘One should not simply assume that law firms will have uninterrupted growth. Every so often, something serious comes along, like the global financial crisis 0f 2008/9. We had been bracing for turbulence in this current year as we left Europe and expected growth to be flat or decline. We mustn’t forget Brexit, but this crisis has overshadowed everything.’
Upsides for the year included investment in technology that enabled staff to adapt to enforced working from home, as well as advising on a raft of matters. This included advising Hewlett Packard on fraud claims amounting to $5bn and criminal proceedings in the US arising from the $11bn acquisition of Autonomy in late 2011.
Deal highlights included advising Rothesay Life on its £3.8bn buy-in of the Asda Group Pension Scheme, Willis Pension Scheme on a longevity swap transaction with Munich Re to manage risk on around £1bn of pension liabilities and EQT on the sale of its Credit business segment to Bridgepoint.
Travers introduced what Patient called ‘prudent financial measures… to protect our business’. In April, the firm reduced monthly drawings for all partners and deferred partner profit distributions until the longer-term trading position becomes clear.
The firm has not accessed the government’s Job Retention Scheme all and members of staff have been kept on full pay throughout the lockdown. Travers has deferred its annual salary review until later in the year, but it has awarded firm-wide bonuses, albeit at a reduced rate.
It made up five new partners on 1 July across the corporate and equity capital markets, derivatives & structured products, dispute resolution, employment, and finance teams, and also posting a 90% retention rate for its autumn 2020 newly qualified lawyers.
Patient refused to be downcast: ‘We are not out of the woods yet and I wonder how far we are even into them. The situation is challenging and will continue to be challenging, but I’m a glass–half–full man. There are significant clouds on the horizon, but the outlook is good.’