Member Info for erratum

@ WW - my number comes from adding up the numbers they claim on the tombstones on their website. I have added them up since the start of their financial year (1st November). Maybe your number is a calendar YTD number ? As for the outlook for capital raising environment, clearly market is challenging but there are a huge number of AIM companies that have no choice but to come to market in the next 12 months. Question becomes is the surge likely at the beginning or end of that period and do Arden pick up a share of that work.

Just by way of context. Arden's financial year runs from 1st November to 31st October so we are @2/3 of the way through. So far for this financial year they have raised, on behalf of clients, £55.8 million but nothing since March. The year is still in the balance for them, a couple of decent sized placements and they are golden but if market stays shut for the next 4 months it will be a tough year.

@APD708 Sorry, I have not been very clear. My thought process is that if Arden raise capital on behalf of its clients, of between £80 -£100 million a year this would result in IPO/placement fees of @ £3 to £4 million. This when added to the @£3 to £3.5 million of market making, brokerage, wealth management and advisory fees they should be able to to do each year. This would result in Arden making an annual revenue of between £6 million and £7.5 million per year. ( So the additional revenue to the Ince Group on top of the @£ 100 million of revenue would be @ £6 - 7.5 million)

With the various cost savings such as board/listing costs and rationalisation of real estate foot print that level of revenue should result in Arden making a profit of between £1.5 million and £ 3 million per year. I think if Arden were to achieve this consistently then I think it can be judged as a successful transaction. I am confident in a good year that type of revenue should be comfortably possible, the question I have is can this be done on a consistent basis. For example the last few months would have been pretty tough one would suspect, it is a feast of famine business.

The above assessment is on a stand alone basis, there will be cross selling but I think it is quite hard at this point to quantify the level. After 12 or 18 months of joint operations we will have a better idea as to the extent of those benefits.

For Ince specifically, I think the answer is that it is to be determined, as the mix of the business is in flux and they have been trying to tilt it towards more transactional work which also tends to be more cyclical although it still represents less than 10pct of their legal revenues. Arden adds an additional cyclical element but if it is a positive or a negative I think depends on the type of slow down we end up seeing. The optimistic scenario for Arden is that Aim is full of negative cashflow business and in this environment they will all need to go out and raise cash in pretty quick order and that Arden pick up corporate finance work. The alternative is that this does not happen. For the Arden transaction to be considered a good financial decision, Ince needs to raise a minimum @ GBP 80 - 100 million per annum for clients.

In terms of their legal business, historically Ince's areas of speciality hold up pretty well in a recessionary environment, much of the shipping work and Insurance work is not cyclical and dispute resolution work (with a lag) may even see a beneficial impact. Given the large proportion of international business the weak pound will also be a positive. My expectation is that the core business will see revenue growth of 0% to +5% in a mild downturn and -5% to -10% in a serve downturn. This would be on a like for like basis and increased headcount and fee inflation might add positively to these numbers. I note that there has been a bit of a spurt in onboard new fee earners in the last month or so. It is also worth noting that the last 6 weeks has seen them announce the closing of a number of 6 or 7 transactional deals they have been working on. It is not clear if this is an indication of increased activity in this area or a new policy to highlight this type of work.

Manolete are insolvency specialists, Begbiges have a speciality in corporate restructuring and Buford principally provides finance to law firms. So tougher economic times are likely to directly benefit them. Don't know much about Gateley so not sure about that one.

@BitterestPill - I disagree with your assessment but either-way I think we can agree that the significant bulk of the departures happened a number of years ago.

If I understand your original point correctly, I think it was how do they replace the revenue from these departed fee earners. I would contend the revenue reduction from these fee earner departures in FY2019 or FY2020 has already been lapped by subsequent full year accounts/ trading updates. In the LP you highlighted previously, we can see that membership has been stable over the last 12 months. We can also see that groups headline revenue numbers reported at 31.03.21 and 31.03.22 (from recent trading update) were (roughly) the same. So unless we are seeing a significant net decline in fee earners since 31.03.22 I cannot see the current/ go forward revenue hole that you can see.

@CaneToad. .... all the best to you. We will get the next financial snapshot from the company in September so that will give you the opportunity to get the confirmation you need to either buy back in or pat yourself on the back for dodging the bullet.

Found it, thank you for this. With you number have gone right back to the founding of the LP i 2015 to get those numbers. So for this LP as you can see the vast majority of that number left/were let go, when it went in to receivership (prior to the takeover) and a handful more during the COVID lock down period (the company announced a round of redundancies then). Part of the stated strategy during the takeover was to reduce the number of unprofitable partners and clearly this was a big part of why the "Old"Ince was not profitable and hence why it went in to receivership.

If you look over the last year it is 6 departures and 6 appointments so it is stable for this LP and appear to be expanding for others.

Not partners but these 7 new fee earners were also announced last week

"We are pleased to share that we are growing our Piraeus office with the addition of three shipping litigators, three ship finance experts, and an additional mariner to the admiralty team.

To learn more, click here: https://fal.cn/3p66G

Welcome Ioanna Gavriiloglou, Henry Stockley, Christos Palimeris, Anthi Kekatou, Io - Georgia Papadimitriou, Domniki Symeonoglou and Michel Farach to the team! "

As I say partners come and go, below is the announcement of one arriving 5 days ago (posted on their linkedin page)

"We are pleased to announce that Stephen Chan, a seasoned commercial litigator, has joined Ince as a new Partner in our Hong Kong office.

Stephen's appointment highlights our commitment to further expand our dispute resolution practice across the region."

@bitterstPill ...... I think you mean directors not partners ? Companies House only records directors and there have been a number of changes to the board over the last 6 months. That said Partners come and go, it is a normal part of running a legal practice.

@HumpyDumpy - Yes, it is very tedious I know and I thank you for your patience. As you stay time will tell !

@Canetoad you said "Kindly point out a single comment that I have made about Ince, which is not 100% fact, reported on the public record, either by Ince or by reliable sources." Here is a few just from your posts today that strike me as opinion.

Payment of the dividend was probably illegal - its not
Arden has never been profitable - look at its last set of accounts
Trying to be 'right' is lethal in investing - my experience is it beats being wrong

@CaneToad. I am keenly aware there are many people on the board that know the company very well, but as you demonstrate with almost every post, you are not one of them.

As you have concluded yourself this is not a stock for "old-fashioned" investors. Best of luck to you and thanks for your shares, I will sell them back to you when you decide to get back in.

@ canetoad. ... Yes you are right Gordon Dadds bought Ince out of receivership. This was 3 years ago and a significant amount of equity was injected in to the business at the time.

As has been explained to you numerous times already the business cash flows are highly weighted to the second half of the year, the last snapshot we had was at the end of the first half (September 2021). Secondly, on an operating basis the business has been strongly cash flow positive both in 2020 and in the first half of 2021. The cash flow pressure has been due to the lumpiness of the payments of (contingent) deferred compensation to the "old" Ince partners, this pressure has now peaked and from September of this year becomes de minimus. Finally, If there had been any breach of debt covenants this would need to be RNSed and we there has been no RNS to this effect. All of this is before the net cash received from the Arden deal.

Anyway not clear to me how you will recoup your losses on this one as you have sold.

@CaneToad, Why would the business be headed for insolvency ?

1) in FY21 (and on similar revenue they have reported for FY22) on operating basis, they made a profit and were cashflow positive, given they have further reduced overheads during that period why would they now be loss making to the point of insolvency ? As a reminder for FY2021 Gross Profit was + 44.3 million, Ebitda was +18.2 million, net Income was +6.1 million

2) Also based on the first half figures we have for FY22 we also know on an operating basis they were profitable and cash flow positive . Gross Profit was +21 million, Ebitda was 7.5 million and Net Income was 1.6 million. We also know because of the seasonality in the business that the second half of the financial year is better than the first half.

3) Since the end of the financial year we have added @5 million of net cash from the Arden acquisition

So based on the above it is easy to see that the business on an operating basis is profitable, cash flow generative. As for the the non operating cashflows and accounting treatment which have had such a distorting effect and primarily relate to the deferred compensation due to the Ince partners at the time of acquisition, that impact has now peaked and will drop off a cliff from September of this year. From that point onwards operating and reported numbers will much more close align.

@retiredbanker - I think it is almost impossible to see Biles et al take it private at least at a knock down rate. Firstly, the concert party only holds about 20% so there is a pretty big gap to close even if you were to go for the lower threshold of a scheme of arrangement. Secondly, it is almost impossible to imagine if they declared an interest in doing so that the board would not seek to run a process and I would imagine that there would be significant interest from the other listed peers at a minimum.

I am with APD708 once the clouds lift on both the market and some of the recent Ince specific overhang this will bounce and bounce hard and I will keep adding in small clips to my exposure. There is clearly plenty of frustrated small holders about, probably a few Arden holders who want some liquidity and it is clear that River & Mercantile have looking to take down their exposure for sometime. Lots of sellers, few buyers a decent underlying business with some hairs, not going to be for everyone but plenty of money to be made in time.

In view of the relentless negativity that dominates some sections of this BB, I thought it was worth reminding everyone what the only independent analysts that covers us forecasts for FY 2022 (the year for which we have just had the profit warning) and FY2023 (the financial year we are now in). These numbers have been updated by them to incorporate the trading update.

2022 Revenue - GBP 97 million
2023 Revenue - GBP 110 million

2022 Pre tax profit - GBP 3.7 million
2023 Pre tax profit - GBP 9.8 million

2022 Net Debt - GBP 13.2 million
2023 Net Debt - GBP 5.23 million

2022 Div - 4.10%
2023 Div - 9.23%

2022 P/E - 4.88 x
2023 P/E - 2.14 x

@contarian123 - It appears you may have a case of hippopotomonstrosesquippedaliophobia. Not in the legal profession and not English but awe know already that facts will not get in the way of your suppositions.