Clydes took £23m loan to fund post-merger office move
Clyde & Co took a loan of £23.6m in the 2011/12 financial year to help fund the firm’s move to new offices in London.
According to Clydes’ LLP accounts the firm increased its banking facility from £15.4m in 2010/11 to £39m a year later. The firm’s overdraft facility also increased, from £4m to £7.2m, over the same period.
According to finance director Ian McAndrew part of the loan was agreed to fund the firm’s move to the St Botolph Building in the City in August 2011. The firm has agreed to repay the debt by April 2014 and plans to use the money it saves through a rent-free period to settle the debt.
The loan also includes a revolving debt agreement that is spread over three years to fund the growth of the firm. McAndrew said approximately half the credit agreement had been set aside as a property loan.
The accounts also show that the firm’s highest-earning partner for the year took home £1.27m, up 39 per cent from £913,616. It is more than double the firm’s average profit per equity partner (PEP), which, according to The Lawyer UK200, stood at £550,000 in 2011/12.
The firm’s move into Canada has proven successful following the merger with Nicholl Paskell-Mede, first revealed by The Lawyer in March 2011 (7 March 2011). For the period between 1 September 2011 and 30 April 2012 the Canada office generated a profit of £2.16m.
Clydes’ subsequent merger with BLG (6 June 2011) gave it a capital boost of £10m, with the amount of capital introduced to the firm increasing to £18m from £8.2m a year earlier.
The firm posted turnover of £285.8m at the last year-end, up 35 per cent from £211.4m a year earlier.
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Readers' comments (17)
Sharp | 21-Jan-2013 5:24 pm
Muhammad has some interesting points to debate but probably the wrong platform to get the party going whether the statuettes were in support or not. Whether the business legal industry truly adds to wealth creation within our society is an unlikely feature to make it to the pages of the Lawyer I would imagine.On the plus side, Clydes represent for many what isn't right in the sector so that's a good choice.
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Captain Pugwash | 22-Jan-2013 10:57 am
Our friend does indeed make some interesting points, and it seems to me the central one is decadence. Decline is always prefaced by decadence. Cultural decay, structural weakness and reliance on finance are the usual warning signs. And, by any standards, £46m of bank debt and £125m of creditors in all on turnover of £285m is 'reliance on finance'. At some stage though, the music will stop and this cheap debt will have to be repaid. Given their near 100% focus on the insurance sector and, therefore, a declining profit margin, this won't be easy.
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Master Mate | 22-Jan-2013 1:30 pm
Not all decline is precede by a period in which the incumbent rulers fiddle in the face of looming threats but increasingly it does seem that many law firm management teams are doing just that. Whether Clydes have got the gloves on this is hard to say from a straight read of the accounts and no doubt they will be adjusting the antenna and applying the hand brake to any financial issues. It's important to beat the stick on this point more broadly and encourage firms to clean their rifles, hold their own and complete their financial handiwork before overstretching themselves. Looking after the cash is not just the province of smaller firms and one man bands - every firm should think carefully before painting the ceiling with new office openings and extravagent hires.
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In the hand | 22-Jan-2013 1:42 pm
Muhammad makes no mention of Onan's will but firms will need to wrestle the eel of rising interest costs on borrowings set against declining rates in the insurance market. This will involve sharpening their pencils and polishing their swords to look for alternative business models. Clydes are exposed on this front
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Roger | 22-Jan-2013 5:10 pm
Growth must not be an end in itself, and nor swelling partners' coffers. Law firms are staring a new, naked model in the eye and they just have to accept it. Flogging the dead horse is pointless and will just generate needless friction. Time for a change of hand on the tiller.
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Cabin Fever | 23-Jan-2013 8:59 am
Roger's right - not a time for splashing out and seeding vanity growth. A tighter hand on the model and more financial muscle control is needed to avoid spilling talent and shooting backwards. Restraint is the order of the day.
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Anonymous | 27-Feb-2013 11:20 am
I read Clydes Guildford, Manchester & Oxford accounted for only 3.7% of turnover totalling £10.8m. Would it not be a saving to merge these offices into one base? As a lot of the claims dealt with in Manc' and Oxon' are more routine, it may also be worth exploring outsourcing of this work to a lower salary cost/overhead base.
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