Equity share boost gives Dentons reason to cheer
24 May 2010 | By Luke McLeod-Roberts
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NEWS that Denton Wilde Sapte equity partners will take home equity shares that are around 22 per cent higher than last year will be met by its partners with cautious optimism.
On the plus side, the growth rate to £360,000 is considerable when the nature of the firm’s international exposure is considered. Its foreign operations are in the Middle East and the CIS. Both these regions have had a tough year, with the knock-on effect of instability in Russian capital markets and Dubai’s near collapse in December 2009.
Nevertheless, income from the Middle East managed to grow by about 11 per cent - in a move that was related to Dubai’s woes, given the firm’s advice to Dubai World creditors. Meanwhile, CIS hit budget, something chief executive Howard Morris said meant the region recorded marginal growth on the previous financial year.
The firm’s overseas network now accounts for 31 per cent of a total income of £167.5m, and Dentons has marked this by investing in an association with Tumi Law Firm in Libya and by opening its own office in Bahrain. The cost of such arrangements are mitigated by the fact that the firm already has a broad presence across the Middle East and North Africa, meaning that offices can be easily resourced.
The hike in average profit per equity partner (PEP) will bring a sigh of relief, if only for the fact that it is in stark contrast to the 36 per cent decrease12 months ago. Dentons’ profitability has historically been poor when compared with much of its peer group. In the 2008-09 financial year it posted PEP of £300,000.
CMS Cameron McKenna, Norton Rose and Simmons & Simmons all posted PEP that was at least £200,000 higher in each case over the same accounting period. Wragge & Co partners made slightly less, but the Birmingham-headquartered firm is full equity whereas only half of Dentons’ partnership are equitised.
To compare performance on profit margins, Dentons’ 2008-09 performance is not much better. At 15 per cent it was about half that of the average margin for this group. Over the past financial year, however, this has also improved slightly - to 19 per cent.
Morris says he is “pleased with [the firm’s] progress”, but he is certainly not complacent. He is acutely aware not only that the eurozone crisis could destabilise the UK, but also that the firm is regarded as less robust financially than some of its major competitors.
“The major reason for the lack of profit [historically] is that our lawyers weren’t as productive as their peers,” he comments. This is something that Morris claims has started to change. Revenue per lawyer was up eight per cent year on year. “There isn’t a part of the firm that we haven’t tried to make more efficient,” he adds.
The recession has obviously focused minds - the Dentons management has let 103 people go since March 2008. But this does not have much explanatory power in terms of the profit increase as only a minority - 27 - were let go last year.
But the real achievements Morris highlights have been securing income - total revenues were just slightly down on last year - and maintaining rates, “which is hard, because clients are under intense pressure and obviously we want to do what we can to help them. But I’m very proud of this,” he says.