Royds Withy King has held back on a distribution of partner profits some 15 months after the merger of legacy firms Royds and Withy King on 1 September 2016, a deal that propelled the merged business as high as number 85 in the UK top 100 ranking for the first time.
Delayed profits distributions can be interpreted as a sign that a business is struggling or short of cash and consequently holds back paying equity partners their profit share.
However Royds Withy King managing partner Graham Street insisted the firm was now in what he called a “heavy investment phase” and that it would be relying on retained profits rather than debt to fund future growth.
“This is a young, ambitious business with a strong profile for growth, both organic and through acquisition,” said Street. “Law firms funding themselves through retained profits rather than by bank borrowing is one of the key themes impacting the legal profession. We’ve been doing this, investing from our own capital, frequently over past four to five years.”
Street said the firm had no set times or dates for partner distributions, adding “we’re in a significant investment phase so we’re rolling over expectations of a dividend into an investment programme”.
This year’s UK 200 report confirmed that Royds Withy King had a turnover of £31.3m at the end of the 2016/17 financial year, comprising four pre-merger and eight post-merger months of trading. Average profit per equity partner fell during the year from £259,000 to £220,000.
Street told The Lawyer in an interview for the report that it was targeting a turnover of around £36m for the current year, adding that 2017/18 would be “a year of consolidation” for the firm.
Recent investments include a new 13,000 sq ft office at Carter Lane in the City, technology spend on the firm’s cloud platform and practice management system, and lateral hires including into its healthcare team in Bristol and family team in London.
“Part of the investment also involves recruiting a new BD team in the new year,” added Street. “We see that as another important step in our development as a practice.”