Firms are not necessarily billing as much as in 2009, but the majority are more profitable than they were a year ago, according to an overview of the results from the first practices to report their figures for the 2009-10 financial year.
As this article went to press, 10 UK firms had announced their revenues, all posting figures of £50m or above for the current financial year. But they presented a mixed picture compared with last year, with some having experienced jumps in income of up to a third, while others remained static or saw total revenue fall.
However, seven of the companies that have posted provisional profits have seen the bottom line increase. The greatest jump was at Olswang, which saw profit per equity partner (PEP) grow by 38 per cent, from £360,000 to £420,000. Denton Wilde Sapte, Eversheds and Speechly Bircham all saw PEP grow by at least a fifth.
Eversheds posted the highest absolute PEP figure of any single firm, at £517,000. This was helped in part by widespread job cuts in 2008-09 and outsourcing secretarial staff to Exigent in South Africa.
Those with knowledge of the latter deal estimate that it is likely to have saved the firm around £2m, although this is not corroborated by chief executive Bryan Hughes. He contended that profitability had improved as a result of a number of steps - “some were large, some were small”.
For Olswang chief executive David Stewart the key to his firm’s improved profitability was not so much about cutting staff - although the firm did have its share of redundancies - more about a “draconian” approach to spending. Potentially unpopular moves such as eliminating bonuses for all staff and cancelling team away-days proved to be crucial.
“We haven’t achieved this result by de-equitisations or restructuring the equity, but by all our people working extremely hard,” said Stewart. “There’s been some staff reduction, but we did our redundancies at an early stage and booked the cost in the prior year. We’ve also taken a draconian line on discretionary spend.”
Mark Jones, leader of the professional services practice consultancy at Addleshaw Goddard, said the trend that appears to be emerging of improved profitability together with a mixed performance on turnover was “broadly what I would expect”.
He highlighted that firms that “are running themselves properly” will have absorbed the cost of redundancy programmes in the 2008-09 financial year, depressing profit figures last year but allowing them to boost rates for 2009-10. But Jones believed that the coming year would continue to be challenging.
“Most firms I’m speaking to are planning on the basis that things will be pretty flat in 2010-11. The winners and losers will be around market share rather than everybody growing,” he said, in what could be an allusion to the impact of the tide towards consolidation. Jones added that the coalition Government’s pledge to cut public spending will inevitably have an impact on firms active in this sector.
At the start of the recession lawyers at Eversheds told The Lawyer that the firm’s public sector client base would help hedge against the rapid fall-off in private sector investment.
But as the public sector braces itself for the emergency budget, Hughes said: “With public sector cuts we don’t anticipate growth in the economy [over the coming year]. We’re watching developments closely but we’re confident that we’ve got a good business.”