Trowers & Hamlins’ total borrowings grew by 32 per cent during 2016/17, with the firm’s year-end net debt rising by £1.89m from £5.9m to £7.8m.
The firm’s lock-up, the combination of the value of work-in-progress and year-end debtor days, also grew, with the latter now the longest of all the firms analysed by The Lawyer for this year’s UK 200: Financial Management report, which is published today.
The total number of debtor days stood at 154 days, the same as in 2015/16. Year-end WIP rose by two days from 19 days to 21, which means Trowers’ year-end total lock-up stood at 175 days last year.
Trowers & Hamlins’ senior partner Jennie Gubbins said there were a number of reasons for the firm’s lengthy lock-up and increase in debt, including its significant international practice, growth in the UK regions and an increased focus on litigation that has seen turnover from this group rise by 33 per cent.
“The nature of the work we’re doing, particularly in our regional offices, which includes more CFA-type matters than it previously did, has a direct impact on lock-up,” said Gubbins.
She added that while some 45 per cent of Trowers’ total turnover is derived from real estate, which in theory should reduce lock-up, it depends when the completion on a particular transaction takes place and also on the nature of the client.
“Our real estate lock-up has actually stretched out a bit as the profile of our clients has changed, from primarily those in the public sector that tend to pay periodically to an increase in private sector clients who’ll pay you but generally only when you finish the deal,” said Gubbins.
Trowers’ regional expansion in recent months has included bringing in a litigation team in Birmingham from DWF last year while two years ago the firm merged with Devon firm Stones Solicitors, which had 90 staff and 14 partners across two offices in Exeter and Devon.
Gubbins said the firm’s lock-up data also highlighted the extent to which the legal market remains conservative when it comes to getting its clients to pay.
“It’s undoubtedly true, lawyers are inherently cautious about upsetting their clients and can be reluctant to risk a client relationship by chasing down a bills,” confirmed Gubbins. “The key is to educate lawyers to understand the business model.”
Gubbins said Trowers now runs a process of rolling training for partners and lawyers covering key finance and business issues.
“And we cover that training for all new joiners too,” added Gubbins. “It includes lock-up management because this is fundamental, although it’s probably fair to say that it’s only over the last two-to-three years that we’ve focused on it as strongly as we do now have it. We also try the stick and carrot like everyone else. We exhort, encourage, bully and train.”