UK200: On track at TLT
19 July 2013 | By Matt Byrne
6 June 2013
21 October 2013
21 October 2013
7 June 2013
25 February 2014
A national expansion drive has driven revenues up at TLT.
It’s all about executing on strategy over at TLT these days. Translation: the firm invested heavily during the 2012/13 financial year and now management is looking for a bit of ROI (that’s return on investment, in case you need that translating too).
TLT’s revenue rose slightly more than previously reported, up by 11.5 per cent from £44.5m in 2011/12 to £49.6m in 2012/13 following a spate of expansion that included its merger with Scotland’s Anderson Fyfe, a deal that contributed £2.4m over 10 months, and a launch in Belfast (9 May 2012).
Other key metrics have also improved, with average profit per equity partner rising 7.5 per cent to £274,000 and net profit up a whopping 32 per cent to £7.4m. That figure, however is largely a reflection of the fact that TLT has expanded its equity pool by five from 22 to 27. The equity partnership is still relatively tightly held however, with the 27 full equity partners sitting alongside another 51 that haven’t yet acquired full ownership rights.
Total remuneration for all classes of partner last year was £12.4m, giving TLT an earnings per partner (ie, the average of the full partnership) of £159,000. Meanwhile the average for those 51 partners that weren’t full equity last year was £98,000 (£12.4m minus £7.4m divided by 51, for those who like to see the workings).
One of the interesting statistics revealed in TLT’s UK200 response to The Lawyer is its debt levels. At the close of the 2012/13 total borrowings stood at £7.8m, £4.5m of which was made up of long-term loans. During the last 12 months the firm increased its short term finance by £800,000 as a consequence of the growth of it’s offices nationally.
“These are five-year term loans that we reduce year on year ,” says the firm’s managing partner David Pester. “The rest is asset finance related to our investments, things like the fit-outs of our offices. Our total headcount has grown from 690 to 750 over the past year and we’ve taken an extra floor in Glasgow.”
Pester, one of the more engaging managing partners across the top 100, has clear thoughts on how are banks (Barclays in TLT’s case) responding to requests for borrowings from firms, a topical issue when it is known that at least 30 large firms are in financial difficulties (14 June 2013).
“Regular communication with your bank is important ,” he insists. “If a firm’s management can show that it understands the metrics, has a clear strategy and has systems for regular reporting in place they will have no problem lending you funds. But you have to demonstrate you understand your business and you have to have a regular dialogue. Invest time in the relationship. Our bank knew 12 months ahead of time that we were going to open in Manchester. There should be no surprises.”
The financial services sector, notably acting for banks on litigious matters, continues to be a driving force behind TLT’s game plan while other core areas include leisure, retail, technology and energy. Financial services-related clients generate the largest proportion of income however at around 38 per cent. Indeed, servicing that client base was the primary reason for the Anderson Fyfe deal.
“Banks wanted us to litigate cross-jurisdictionally,” says Pester.
Similarly the Manchester launch was driven by client need coupled to a regional requirement.
“I’m always asked why we’re not in Birmingham,” says Pester. “The answer is we don’t see the need from clients at this stage . You can service Birmingham from Bristol and London. But there was a massive geographic gap between Bristol and Glasgow, as well as client demand hence Manchester. There is definitely buying behaviour in certain circumstances linked to geography.”
The firm’s lockup target last year was 130 days, which TLT missed by some way. Average lockup in 2012/13 consisted of 43 days average WIP and 110 days of debtors, a total that includes an element of CFA work, primarily professional negligence for bankers. The firm also took a little longer to to pay out its profits last year, with the final distributions being made during the current fiscal year.
“Typically it takes 12 months but last year wasn’t typical because there was so much investment,” adds Pester, “so we thought it prudent to phase distributions differently for that year .”
TLT is still looking at acquisitions and further growth, however if the market or competitor base were to change radically you cannot rule out becoming part of something bigger, adds the firm’s managing partner.
“But size doesn’t necessarily mean success,” he warns, “but the trend to scale and capacity is something you can’t ignore. For now, we see ourselves as a supplier of legal services in the UK around day-to-day support and strategic projects, with a best friend’s approach to international coverage.”