Ultimately it really begs the question of whether a PI law firm should be listed.
Yes there is money in law, but as we can see it’s cyclical with rich and lean years. This doesn’t give consistent results which the market doesn’t like. One of the claims in the MW article is that they’ve tried to hide this by revenue shaping: hiding the profits in “provisioning” (something which another poster has often complained about) so that in times of lean cashflow they can tap into the magic fund, make up the shortfall and appear to be a steadily growing business. Which maybe they are, but not necessarily in the way their presented accounts suggest.
The other massive problem is WIP. If you’re a contingency firm and there’s pressure to get cases on the books to build the WIP (and thus displayable profit), the big risk is that you sign up bad clients just to get the numbers. It’s double whammy bad- you take on a bad client with bad prospects, and you devote resources to dealing with them. Then, as it becomes obvious that it won’t be a favourable result, you simply delay the matter, building up even more magical profit but actually just adding to the eventual burden when everything comes to light.
I had really hoped their business model was changed to stop this creeping rot. But growing voices suggest it hasn’t. I really hope it doesn’t become a case of fool me twice because if it does I fail to see how they can continue to build any trust in the stock market at least.
As well as financial auditing, I think this business would be a lot more credible if there was case quality auditing as well. Because that’s a really big hinge.
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