Legal Business

Financial results 2013/14: Charles Russell’s revenue up by 7% as Weightmans posts record numbers

Financial results 2013/14: Charles Russell’s revenue up by 7% as Weightmans posts record numbers

The first top 50 firms to unveil their 2013/14 financial results, Charles Russell and Weightmans this week each unveiled a healthy revenue increase of around 7%.

A Charles Russell spokesperson said the increase in revenue was spread across all areas of the 310-lawyer firm, which has yet to reveal its net profit for the year but expects profit per equity partner (PEP) to increase to around £350,000, constituting a 10% rise.

The revenue rise signals a marked improvement on Charles Russell’s 2012/11 turnover increase of 1% to £68.9m, although PEP for that year increased by 14% to £319,000.

The firm, which is in merger talks with Speechly Bircham, revealed in its latest limited liability partnership accounts in January that its highest paid partner took home £600,000, up from £366,000 the previous year, representing a 64% increase. It continues to pay off an £11m term loan taken in 2009 to refurbish its City offices, reducing its outstanding borrowings to £6.6m last year.

The financials are unveiled just weeks after the firm confirmed merger talks with private client firm Speechly Bircham, a proposed union that would place the combined firm in the top 30 of the LB100.

Meanwhile, national firm Weightmans has enjoyed revenue growth for 2013/14 of 6.6% across all business lines, with many practice areas exceeding annual targets. Record turnover stood at £87m for the period, an increase of £5m on the previous year. Net profit increased by 2% to £24.1m and debt was reduced from £9.6m to £3.5m, marking a reduction of 64%.

The 481-lawyer firm has seen sustained revenue growth having revealed a 6% increase in turnover last year to £82m, although its PEP figure dipped by 1% to £294,000.

Having reported a H1 revenue of £41m last November, 7% up on £38.3m at the same point the year before, Weightman’s managing partner John Schorah attributed the positive results to an around 20% increase in the firm’s corporate practice, and further highlighted a strong performance in the firm’s core insurance team, particularly in its large-loss and disease group, with commercial litigation and family also doing well.

The firm boosted also its family capability earlier this year, picking up a legacy Challinors family team in Birmingham in August.

This year also saw the firm make a capital call to salaried partners following a consultation in response to new HM Revenue & Customs (HMRC) rules, with fixed share partners contributing an average of around £30,000 to the firm, totalling £3.8m – an amount that Schorah said would be invested in the firm’s development.

On the latest results, Schorah said: ‘This year we are continuing our focus on technological innovation, making significant improvements to our processes internally, but also externally enhancing client experiences. Over the next 12 months we will continue to invest in our business, for our clients and our people, and strengthen our brand as we continue to grow.’

Sarah.downey@legalease.co.uk

Legal Business

Capital call on salaried partners at Weightmans and Addleshaws in response to impending LLP tax overhaul

Capital call on salaried partners at Weightmans and Addleshaws in response to impending LLP tax overhaul

The tally of City firms calling on salaried partners to increase their capital investment in response to new HM Revenue & Customs (HMRC) rules is growing as Weightmans and Addleshaw Goddard this week confirmed they are in the process of significantly raising contribution levels.

Partners at Addleshaws voted in favour last Thursday (20 March) of 60 fixed share partners (FSPs) making a cash investment of just over 25% of their salary, the minimum stipulated by HMRC in order to be considered a partner as opposed to an employee.

The firm called for investment of a few percentage points above the minimum to allow room for error, with the definition felt to be unclear, according to head of employment Michael Leftley, who led the top 25 firm’s response to the new legislation.

Meanwhile, at LB100 top 50 firm Weightmans, following a consultation with partners into how the firm should meet the new taxation rules, almost all the FSPs chose to put more capital into the firm with each FSP contributing on average around £30,000 to the firm, totalling £3.8m.

The amount collected – which will be invested in the firm’s development according to managing partner John Schorah – varied among partners depending on their seniority, with those who chose not to add to the pot regarded as employees under the new rules.

In response to the overhaul, which was confirmed in Chancellor George Osborne’s budget as going ahead as planned in April 2014, despite protests from the industry, firms including Herbert Smith Freehills, Ashurst, TLT, DWF and Trowers & Hamlins have all confirmed to Legal Business that they are reviewing their partner remuneration arrangements.

The new rules will mean partners with under 25% of their salary attached to profits will be regarded as having a ‘disguised salary’ and treated as employees by tax authorities in a move expected to add thousands of pounds onto firms’ tax bills.

Of the firms that have announced substantive changes so far, TLT has requested that each of its 60 fixed-share partners contribute £20,000, a move that will boost its funds by a minimum of £1.2m. ‘We will put in place external funding for fixed-share partners if needed, to support any capital contribution,’ a spokesperson for the firm said.

francesca.fanshawe@legalease.co.uk

Legal Business

LB100 firms review partnership model as HMRC’s LLP changes loom

LB100 firms review partnership model as HMRC’s LLP changes loom

The impact of HM Revenue & Customs’ decision to overhaul the way salaried partners are taxed is being felt across the City as a number of leading firms confirm they are reviewing their arrangements, although some of the largest Legal Business 100 firms have come out to categorically deny the changes will have any effect at all.

Firms including Herbert Smith Freehills, Ashurst, TLT, DWF, Weightmans, and Trowers & Hamlins have all confirmed to Legal Business that they are reviewing their partner remuneration arrangements in anticipation of the new rules, which will mean partners with under 25% of their salary attached to profits will be regarded as having a ‘disguised salary’ and treated as employees by tax authorities in a move expected to add thousands of pounds onto firms’ tax bills.

In response to the overhaul, which HMRC stated at the end of February will come into effect in April 2014 despite protests from the industry, Hogan Lovells is understood to be currently considering the changes but no final decisions had been made at the time of going to press, while Herbert Smith Freehills said it is ‘looking into how [the changes] will impact us’.

While top 15 LB100 firm Ashurst says it will ‘not ask for any additional capital’ it is ‘reviewing the structure of remuneration packages’, according to a spokesperson, and at Simmons & Simmons, which has 85 non-equity partners, a spokesperson added: ‘[The firm] eagerly awaits further guidance that was due to be issued, which will assist in assessing whether changes to the remuneration or capital structure are required.’

Of the Magic Circle firms, Linklaters and Slaughter and May have very few non-equity partners – 28 and four respectively according to figures provided for the Global 100 – and both firms said they expect no real impact from the latest measures.

Allen & Overy, which has 85 non-equity partners, told Legal Business that it expects the proposals to have ‘no significant impact on us as all our partners share in the profits of the firm’.

Partners with under 25% of their salary attached to profits will be regarded as having a ‘disguised salary’.

Magic Circle rival Freshfields Bruckhaus Deringer, which had only 29 non-equity partners at the last tally, stated that none will be affected by the changes, although it declined to say why.

With 166, Clifford Chance has by far the most non-equity partners of the Magic Circle firms, but was the only one to decline to comment on its plans.

Of the firms that have announced substantive changes so far, TLT has requested that each of its 60 fixed-share partners contribute £20,000, a move that will boost its funds by a minimum of £1.2m. ‘We will put in place external funding for fixed-share partners if needed, to support any capital contribution,’ a spokesperson for the firm said.

National firms Trowers & Hamlins and Weightmans are both expected to require fixed-share partners to inject capital following a consultation.

Norton Rose Fulbright, CMS Cameron McKenna, Dentons and Macfarlanes all refused to comment.

sarah.downey@legalease.co.uk

Legal Business

LB100 firms review partnership model as HMRC’s LLP changes loom

The impact of HM Revenue & Customs’ decision to overhaul the way salaried partners are taxed is being felt across the City as a number of leading firms confirm they are reviewing their arrangements, although some of the largest Legal Business 100 firms have come out to categorically deny the changes will have any effect at all.

Firms including Herbert Smith Freehills, Ashurst, TLT, DWF, Weightmans, and Trowers & Hamlins have all confirmed to Legal Business that they are reviewing their partner remuneration arrangements in anticipation of the new rules, which will mean partners with under 25% of their salary attached to profits will be regarded as having a ‘disguised salary’ and treated as employees by tax authorities in a move expected to add thousands of pounds onto firms’ tax bills.

Legal Business

H1 2013/14: Clyde & Co, Weightmans, Trowers and Gateley reveal figures

H1 2013/14: Clyde & Co, Weightmans, Trowers and Gateley reveal figures

As the first of the top 100 firms reveal their 2013/14 half-year (H1) results the early story is positive, with Gateley and Trowers & Hamlins seeing revenue growth of 4%, while Weightmans reports a 7% uplift and Clyde & Co sets a high bar for the top 20 with a turnover increase of 16.5% on figures this time last year.

The top 15 insurance firm confirmed that its H1 turnover for 2013/14 is £169m, which it said in a statement ‘has been achieved through a combination of underlying growth and improvements in our working capital management.’

Senior partner James Burns added: ‘It’s pleasing to see that we’ve maintained the rate of growth that we achieved in the second half of the last financial year, particularly after a tough first half of 2012/3.’

At Weightmans, meanwhile, which reported a H1 revenue of £41m, 7% up on £38.3m at the same point last year, managing partner John Schorah attributed the positive results so far to an around 20% increase in the firm’s corporate practice like-for-like on last year.

Schorah also highlighted a strong performance in the firm’s core insurance team, particularly in its large-loss and disease group, with commercial litigation and family also doing well.

The firm boosted its family capability earlier this year, picking up a legacy Challinors’ family team in Birmingham in August.

Elsewhere at Gateley, where activity levels have reportedly risen over the last two months, the 432-lawyer firm’s 4% rise in turnover is in part explained by a rise in property work, which now accounts for 30% of its total revenue.

Also enjoying a 4% rise in both turnover and profit is Trowers, where senior partner Jennie Gubbins similarly attributes the lift in revenue in part to an uptick in real estate work. ‘It’s an area that we’re putting a real focus on, and when I was appointed senior partner earlier this year we recognized it was a really big area for us and I don’t think the market realized what a big area it is for us, particularly some of the really high-end and interesting deals,’ Gubbins said.

‘Our litigators also had a good first half and our international division is pushing on better after a publicly torrid time last year,’ added Gubbins, after the top 50 firm saw its 2012/13 profit per equity partner drop by 37% to £304,000.

francesca.fanshawe@legalease.co.uk

Legal Business

Weightmans – Feet on the ground

Weightmans – Feet on the ground

After four years of consecutive revenue growth and two transformative mergers in 2011, Weightmans is our National/Regional Firm of the Year. However, there’s no chance of any of it going to the managing partner’s head.

Weightmans’ Patrick Gaul (pictured) is as laid back and straightforward as managing partners come. In an unmistakable scouse accent reminiscent of Ringo Starr, his answers are economical and precise. He doesn’t take himself too seriously and, in a trait quite rare among managing partners, is very low on hyperbole.

Legal Business

North – Northern Echo

North – Northern Echo

The struggle continues. While the North peer group maintains its position and outperforms other regions, average revenue has grown marginally with the departure of DWF and Hill Dickinson, which have joined the Major UK firms group (see page 94). In last year’s review, these firms were £15m and £21m respectively ahead of the rest of the pack, and this year sees the gulf between the haves and the have-nots widen even further.

Weightmans is now the largest firm in the North group by revenue, and this lead will increase in 2012 when its recent acquisitive spree is taken into account. This year the firm added 200 staff through the acquisition of Vizards Wyeth’s London insurance team and its 1 May merger with Liverpool firm Mace & Jones.