Law PLC has its worst year as all listed firms’ share prices fall

Stock exchange: Only a litigation funder saw its share price rise

Not a single listed law firm saw its share price end 2022 higher than a year earlier, with some very big falls, the annual Legal Futures analysis of ‘Law PLC’ has revealed.

It is the first time this has happened since Gateley became the first law firm to list in 2015 – even during the Covid-hit year of 2020, at least one firm, Knights, saw its share price rise.

In 2021, four of them saw their share prices increase by at least 40%.

Our analysis of all listed businesses with a strong legal services connection showed that just one – a litigation funder – recorded an increase, and that was of just 1%.

It comes against the background of a stable year on the main FTSE – the 100 index ended the year much as it began, while the All-share index was down 4.7% over the year.

DWF became the first and so far only legal business to list on the main market in March 2019 and ended that year with its share price barely changed at 123p. It closed 2020 down at 81.5p, 2021 at 114p but fell back to 80.4p in 2022, down 29%.

DWF has continued to its acquisition strategy, most recently spending £28m on a leading Canadian law firm.

All of the others are on AIM, which suffered much more in 2022 – both the 100 and All-share indices were down more than 30% on the year.

After years of strong growth, Knights’ share price saw a spectacular decline – from ending 2021 at 410p, it was just 107p last month, 74% lower.

Last March, Knights’ share price crashed on the back of a profits warning and has not recovered, despite respectable annual results and a positive trading update in November. The firm has made 18 acquisitions since listing in June 2018 but none since May’s £11.5m deal for south-coast firm Coffin Mew.

RBG Holdings – which owns London law firms Rosenblatt and Memery Crystal – was the best performer in 2021 but its share price dived 45% last year from 116.5p to 64p. It was badly hit last month after a £4m write-off from of its litigation funding arm.

Keystone Law has been a strong performer for some years, closing 2021 at 830p, a little below the all-time high figure of 865p reached a few months earlier. But a year later the price had nearly halved to 440p.

There seems no particular reason for this – indeed, last April Keystone announced a special dividend to shareholders on the back of a successful year which saw profit jump by 52% – and could simply represent profit taking by shareholders.

Gateley ended 2021 at 231.5p, having hit an all-time high of 258p a few months before, but closed 2022 on 175p. Again, there has been no bad news to cause this – a trading update published in November showed turnover and profits up 22% and 11% respectively.

The Ince Group’s well-documented struggles continue, and in fact trading in its shares was suspended at the start of this year because it has still to publish its 2021/22 and first-half 2022/23 results.

An announcement just before Christmas said: “The audit for FY22 is still in progress and the group’s new auditors, BDO LLP, have now informed the company that because of the complexity of historic and legacy accounting issues they require more time to conclude their outstanding audit work.

“In addition, ongoing delays in China as a result of Covid-19 restrictions continue to impact the audit process… The board is not aware of any material issues arising from the audit.”

It expects to publish them by end of this month, at which time the suspension will be lifted.

Ince’s share price started 2022 at 35p and ended it at 5.15p, an 85% fall.

The group has been going through a significant change in strategy in recent months to focus on its legal practice, supported by a £9.3m fund-raise in August and another £4.7m in November.

We revealed that Alan Sellers and Samantha Bond, the married lawyers who run Anexo Group PLC, have between them become the largest shareholder in Ince as a result of the latter.

In September, Ince also disposed of the first business it acquired after listing, a corporate tax consultancy, while the solicitor who took the firm public and expanded its operations left the business. It has just received regulatory approval to sell the corporate adviser and stockbroker it only bought in April, for a £7m loss.

Anexo Group combines a credit hire business and personal injury law firm Bond Turner. Its shares went from 134p to 105.5p over the year, a 21% fall.

In its results for the first half of 2022, Anexo reported revenue of £69m and profit of £14m, both big increases, but that it would not pay an interim dividend so as to invest in attracting more car emissions cases as it expands the type of legal work it handles.

MJ Hudson went public just over three years ago. The multi-disciplinary business – based on a City law firm – markets itself as an asset management consultancy and its shares continued to fall in 2022, down 68% from 40.5p to 13.13p.

Its shares were also last month suspended after the company announced “significant” issues with the 2022 accounts that meant the results would be below previous guidance. Chief finance officer Peter Connell, who stood down as a director on 31 October, was also suspended.

Redde Northgate was created in February 2020 through the merger of accident management firm Redde, which owned two alternative business structures – NewLaw and Principia Law – with light commercial vehicle hire business Northgate.

Its share price soared by 86% in 2021 to 436.5p and fell back 5.6% last year to 412p.

Marlowe PLC is a recent addition to the companies we watch because of its major incursion into the legal market since 2019. Its share price more than halved from 1020p to 470p.

Marlowe describes itself as the UK leader in business-critical services and software which assure safety and regulatory compliance, whilst managing risk for businesses.

It has bought various regulated and unregulated employment law businesses, as well as risk management and compliance company VinciWorks. Last year, it added Compliance Office – a business that advises law firms on compliance with Solicitors Regulation Authority rules – to its portfolio.

Marlowe’s first-half results, published in November, described “good organic revenue growth in our employment law and HR businesses, reflecting new customer growth and the successful implementation of price increases with existing customers”.

NAHL – the legal marketing company that owns National Accident Helpline as well as its ABS, National Accident Law, and stakes in two other ABSs – saw its shares price fall a third from 52.8p to 35p.

This was despite unveiling positive results for the first half of 2022, with revenue up 6% to £21m, two-thirds from its consumer legal services division and the rest from its critical care division. While operating profit fell 8% to £2.3m, the company said this reflected planned investment in scaling National Accident Law.

Away from law firms, the world’s biggest litigation funder, Burford Capital, ended 2022 down 13% at 667p, having reached 925p in the summer. The share price of fellow funder Litigation Capital Management dropped more, proportionately, from 100p to 69p

Insolvency funder Manolete Partners was the only legal share not to fall, ending up 2.5p at 252.5p, having been 330p earlier in the year. It reached an all-time high of 585p in May 2020.

The share price of ULS Technology – which provides electronic conveyancing services to law firms and lenders and also owns regulation and compliance business Legal Eye – more than halved from 80p to 36p.

This was despite a 13% increase in both revenues and profit in its 2022 financial year – to £19m and £7.8m respectively – “reflecting strong growth in broker channel, progress in developing core business and exposure to a buoyant housing market”. It also announced a share buyback.

Finally, we have now begun tracking Frenkel Topping, whose stated strategy is to build a full-service offering to personal injury and clinical negligence claimants short of actual legal advice.

The company has bought several different businesses in recent years, including three costs law firms, and in July raised £10m to fund further acquisitions.

It made two in September: expert witness business Somek and Associates for up to £7m, and N-Able Service, which provides case management and care expert reports, for up to £1.1m.

Its share price ended 2022 5p lower than it started, at 73.5p.

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