Cobbetts coy over profit as figures fall
Cobbetts has declined to comment on its profit and mounting speculation that its margin has plummeted to unprecedented levels.
Michael Shaw
The firm reported a turnover figure of £59.4m for the 2007-08 financial year, while costs during the same period totalled £51m.
During the most recent 2008-09 financial year the firm’s turnover was down by 18 per cent to £48.5m, although unlike the previous year’s figure this has not been adjusted for work in progress.
Assuming that costs remained unchanged on the previous year’s, this turnover figure would result in the firm being £2.5m in the red.
It is unclear whether costs at Cobbetts increased or decreased between 2007-08 and 2008-09. However, the firm made 69 redundancies during 2008-09 and will have had to balance payroll savings against the cost of making redundancy payouts.
It should be noted that Cobbetts had set aside £2m in partner drawings from 2007-08, although it is unclear how or when this sum was used.
Managing partner Michael Shaw refused to confirm the profit figure, with an external spokesperson saying the refusal was “a business decision”.
“LLPs need to be careful because their accounts will be a matter of public record and partner earnings and other figures will be scrutinised,” said Addleshaw Goddard professional risks head Richard Linsell.
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Readers' comments (22)
Anonymous | 10-Aug-2009 1:09 pm
How the bubble has burst! They believed that they could create a top law firm, yet under the leadership of Mr. Shaw and his inner circle the firm has taken on massive overheads in terms of new buildings and staff and has lost many able partners and associates. Time for a change at the top?
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Leeds Lawyer | 10-Aug-2009 3:16 pm
No surprise news here. Many firms that decided to give it large have come a cropper. Better to be modest and discreet rather than shout just how great you are when there is no substance to it. Was there ever any substance to what Cobbetts actually did?
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Anonymous | 10-Aug-2009 5:08 pm
Well if you think back to all the mergers over the past 5 years or so - mixing so many cultures and personalities in such a short space of time (Lee Crowder - remember that!) - honestly, is anyone really surprised. When will these regionals learn the basics: that if you look after your business, and concentrate on getting the basic stuff right - as in quality NOT quantity, use a degree of caution and focus on careful investment (ie. affordability) - the business will look after everyone!
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purple goat | 10-Aug-2009 5:24 pm
Can an expert in law firm economics explain to me what happens when a firm's costs exceed its revenue.
What do the equity partners get?
Or do they take home nothing?
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Anonymous | 10-Aug-2009 5:29 pm
Mr Shaw only likes good news - the silence says they must have fallen way behind their peer group.
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Anonymous | 10-Aug-2009 6:08 pm
To answer purple goat's questions, if a firm's expenditure exceeds its income, then
(a) it could be technically insolvent;and
(b) the partners have nothing to take home;unless
(c) the firm borrows to pay partner drawings (in which case the debt goes up quite dramatically)
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Fulci | 11-Aug-2009 8:40 am
On the very same day Cobbetts sent a mailshot to its trainee applicants saying they had been rejected, possibly trying to hide the fact that they've made a hasty decision to cancel recruitment?
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Anonymous | 11-Aug-2009 10:43 am
Re question by Purple goat and answer by Anonymous.
- the partner's are required to make good the shortfall - they share in the profits or losses of the firm.
- there are no drawings (on account of profit) because there is no profit - the firm doesn't need to borrow money to pay drawings. The firm may need to borrow to ensure that working capital is maintained in order to pay on-going costs such are salaries, rent etc.
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Anonymous | 11-Aug-2009 2:39 pm
A propos the last comment
1."Partners" in an LLP are not personally liable for the losses (subject to the claw back rules)
2. If partners have had drawings on account of profits that have not been made then
(a) the usual practice is to require the partners to repay them; and
(b) unless a firm has large reserves of capital and cash, it would have to increase its borrowings, as sure as night follows day.
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Anonymous | 11-Aug-2009 5:36 pm
So if the partners aren't liable for the losses then who is? They might not be in a formal insolvency but if a firm (or LLP) wants to contiunue to trade then the partners will have to share the losses.
Which means repaying drawings and re-capitalising the business - as presumably the losses will reduced members interests.
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