Member Info for Hellas8278

Very impressive? Which bit? This was the first year of the new Ince group and comparing the increase in income and profits has come about mainly through the acquisition of other firms and the old ince international network.

I accept that they came close to the 100m target. Closer that I thought and would have made it if Covid hadn't banged into the Far East early in the year. Don't forget when the take over first happened they anticipated 110m. Its what the results say about what is happening now which is more concerning. Q1 is down 10% on "budget" (although we don't know whether that is an increase on last year - it may well not be because they would be looking at Covid) and that was when most firms were flat out productive because everyone was sitting at their desks at home. So Q2 is a challenge not least because a lot of people will be on holiday etc. Further some sectors are going to be hit hard although the breakdown across sectors suggest that commercial property for example is only a small proportion of the business but it still impacts on the top line. So assume that the budget for this year is the same as last at 100m (organic growth is 5% so you would expect a target to be at least that amount). Ironically shipping is key and yet it was the downturn in shipping work that got the old Ince into trouble in the first place. Further they have lost three heads of sectors in the last month or so which has gone under the radar and they are not getting like for like replacements. Those leaving must be doing so in part because of earnings.

So Q2 will see a bigger decline so lets assume 10% down on budget. Thats still about a drop of 4-5m in H1. Realistically then H1 is looking at income of around 38-39m. They have reduced salaries it seems and stopped all discretionary spend and will work to get the costs down as a proportion of the fee which they say is about increasing fees by getting new people in particularly in overseas offices. Then yo have to consider the provision for bad debt. 43% of receivables are now over 90 days. 37% are over 180 days and the results suggest that a chunk of that bad debt is in China. The autumn is going to be challenging I think.

Poker chips: Shipping will have been busy but only for those left. They have recently lost a number of partners on the shipping side plus Stann Marine and the team associated with that. Against that they gained Bentley Stokes but they are mainly ballast rather than substance and they have been trying to boost the Admiralty side presumably to try and avoid losing income on the shipping side which as you say is still critical. They still need to reinforce the international offices to get that cross selling back to previous levels but Singapore was decimated as was Hamburg and despite the results referring to them having taken over Monaco that still doesn't seem to be listed as a location. I don't think they have anyone in Monaco. They lost the whole Monaco office to another law firm and they were all shipping lawyers.

Bad debt provision is significant and overdue invoices over 90 days (against a policy of 30 day payment terms) is now at over 40% of total receivables due. That is a lot. They highlight China as a country where bad debt has built up and also commercial property as a risk place to be.

Does anyone understand the S 408 point and what it means by the £9.4m loss in the year that Saseefeldt also makes reference to.

Its really difficult to work out what is happening as the year on year comparisons are pretty meaningless because this is the first year as the new Ince group with all legacy international offices now on board. There is a suggestion that the organic growth is only estimated at 5%.

I see that they got close to the 100m figure and in fairness that is more than I thought they would generate. But also that Q1 for this year is about 10% down on budget. What would be interesting to know is what "budget" is. Usually you would expect an ambitious target but even assuming the same income figure, then Q1 would be around £25-30m and that is during a period when productivity should have been really good. You wouldn't expect Q2 to be so productive as people take time off etc. So that would mean a shortfall of about £2.5 - £3m in Q1. I also note that the bad debt provision has been increased to a fairly hefty £15.9m which is also the figure for all invoices over 6 months. That is a big jump and perhaps signals a struggle to get bills paid in this climate. They identify October as the month where liquidity is at its skinniest.

Stann Marine has been decoupled and that will be a loss of income as they are direct rivals to Ince on the shipping side. Against that is Julian Clark desperately getting in more mariners to beef up the holes left by Stann/Peermohammed leaving.

Results 3rd August.

Those partners that stayed were locked into sweet heart deals which did not relate to earnings. More significant in my view than the fact that directors (who are not lawyers) bought shares at the placing in January (which they had to do to show some faith in the firm), is the fact that at the first opportunity three heads of major legacy Ince sectors left including: William Marshall, Faz Peermohammed and more recently Kiran Soar:

https://www.law.com/international-edition/2020/02/14/ince-hit-by-eight-partner-walkout-four-sector-heads-to-exit/

These are heavy hitters. They did not leave until June and so their leaving may not have a significant impact on the year end results. But they havent left because they believe this is the place to maximise their earning potential.

I have no idea what the results will be but the share price would not in my view have fallen to 20p if they were on track to hit 100m revenue and to double the profit. I may prove to be very wrong.

I am talking about how it was portrayed internally. Don't forget the first announcements were about a "merger" and yes it was an acquisition. It became a pre-pack administration and that was not known until the very last minute when it was presented as a take it or leave it deal to the partnership and was in part why the international offices were not originally included. The fact they rebranded it as Ince shows that Ince were the larger part of the new venture with its international brand recognition. GD started life as a small west end firm and became the Trojan horse and vehicle to acquire distressed practices. So yes I understand what happened and if you go to Blue Co (which is what Ince & Co became) at Companies House you can read the liquidators report into what a mess Ince had become. I wonder how many on this thread have done that.
https://beta.companieshouse.gov.uk/company/OC361858/filing-history

To begin with the move to buy Ince was being heralded as a reverse takeover. There was no understanding that they were going to then hive off the liabilities and put Ince & Co into administration. The point is though that Ince & Co were in the middle of a run on partners. They were losing them hand over foot and had no capital. The headlines at the time were about a 110m business and it was apparent that Ince & Co income was being over estimated. But the increase in revenue for GD or the Ince Group is simply a result of adding the incomes together. Organic growth is or was 5%. The liquidators report shows that the profit figure fell to 1%. GD did not buy a robust business. Their business model depends on buying distressed firms. It is a business model that no-one else follows. Efficiencies were then gained by moving the support staff to Cardiff.
Like most law firms they were all working from home but some of the sectors they work in have had very little activity. The next issue will be bad debt.

Ian B

My caveat would be why could they only get 45p per share in January if Q3 was on track to meet a year end target of 100m. Something wasn't quite right. Partners and staff took up only 1m of their allocation of shares. I think that is more telling than the directors purchases which I think they did to reassure the market.

Q4 must have been effected by the beginning of the covid not least because the latter hit the far east earlier than Europe. Hong Kong , Shanghai and Singapore add a chunk of money to the bottom line and they were effected by the virus in January /February. That chips away at the top line revenue. Then there is the salaries of ex Ince partners who were given good deals to keep them in place and they were not tied to performance. That may yet have had an effect on profits.

Isn't the big difference here with say Gateleys is that the model is that GD buy up distressed and failing companies and try and increase profit by centralising the support function which they have done in Cardiff. People seem to overlook that Ince & Co went bust. It was making no profit. Yes they have bolted on many other partners since but in areas that were core to GD and not the legacy Ince business of shipping and insurance. I have no idea why there was the linked-in statement because that is surely also not allowed. I think that is a legacy statement. My view is that they will not have hit 100m. But what do I know.

All no doubt will be revealed soon.

Ian B - I very much doubt that you can counter every point I have made. Indeed I have acknowledged that productivity in some sectors is likely to be up which is hardly negative. Have you ever worked at a City Law firm? Some magic circle firms are now releasing results and profitability is down. I look forward to Ince bucking that trend.

For what though?

They didnt spend anything on Bentleys. Staff were offered 2m of shares and seemingly took up 1m. There are 900 staff members including 100 partners. Most partners have options at 1.40 which is not looking very attractive. So if the partners bought the 1m that would be about £5000 max on average. Not a huge endorsement.

Like many law firms with a diverse portfolio bits of the business must have been hit hard. Shipping, energy and aviation should be doing ok and that is the old Ince & Co. Indeed productivity is likely to have been up because no-one has been on business or away on holiday. The GD side with property, tourism et al must be struggling. I appreciate the announced hope of 100m revenue but why then did they need to raise cash in January and why at such a discounted price. Something is or was not quite right. I think they will fall short on the 100m and the second half of year will not have given them the boost they were hoping for and there could also be an issue over bad debt. In some sectors they will not have had any activity for a whole quarter. Law firms charge for time so it is impossible to get that time back. This current year has to have got off to a difficult start and the question is whether the second quarter can in any way make up for lost time. I don't see it as there are only so many hours in a day. They cant issue results without giving some indication about the current situation. That update may just point to "challenges" ahead. Don't forget in June they lost two big hitters and a number of other shipping/trading partners and lawyers. That will not have helped and will not have been covered by the team from Bentleys or the mariners that are being frantically recruited to fill the hole. Also people point to director purchases of shares but there does not seem to have been significant purchases by the partners themselves or none that have been published.