Number crunching: Nabarro

A few UK200 firms – such as DWF – have managed to grow in the downturn. A few, such as Berwin Leighton Paisner, have come back stronger than ever after a wobble. Nabarro fits into neither category.

But while it may not be fair to lump Nabarro in with the squeezed middle (Charles Russell, Clarke Willmott, Cobbetts and Lawrence Graham, for example), analysed by The Lawyer on 5 March, it does share some of the same problems.

The trouble is that Nabarro does not have the international coverage to offset the dampened UK market, nor is it geared up for ‘pile ‘em high, sell ‘em cheap’ work. On top of this, its biggest earner is real estate – far from ideal in the present market.

On the plus side, the latest financial year was a stabilising one for Nabarro: the firm’s unaudited turnover figure was £113.4m, just below 1 per cent up on the previous year. A comparison with the fee income zenith of 2007-08 (£142.58m) shows a near-21 per cent drop, however, while profit fell by 55.2 per cent between 2007-08 tand 2011-12, from £62.655m to £28.1m (the latter is the unaudited figure).

The firm, which earlier this year said it had been managing its partnership, has done its bit to manage costs, but these have not fallen at the same rate as fees and profit. Staff costs fell by 9.38 per cent between 2007-08 and 2010-11, from £51.13m to £46.332m, while average staff numbers fell from 390 to 364 in the same period (these figures are not yet available for the 2011-12 financial year).

Nabarro fee income/profit, 2007-12

Number Crunch graph

Nabarro PEP and highest paid, 2007-11

Number Crunch Chart 2

Average profit per equity partner (PEP) has also taken a hit. The high-point was again 2007-08, when PEP was £600,000, but that had dropped by 44.7 per cent to £322,000 by 2011-12. It was even lower in 2010-11, but the firm managed to inch average PEP up after it got rid of 14 equity partners as part of a profit boosting plan. Similarly, the firm’s highest paid partner got £960,000 in 2008-09, but only £484,000 in 2010-11 (although this figure can also include retirement payments).
Unsurprisingly, Nabarro’s cash reserves have fallen, from £15.578m in 2006-07 to £6.852m in 2010-11. Likewise, while the firm finished the 2006-07 financial year with £10.92m net funds, it finished 2010-11 with only £5.8m.
That said, it is not overly reliant on bank loans, with lending hovering around £1m for the past few years – a sum generally used by the firm to spread its annual PI insurance payments.
This low debt may have something to do with a keenness to avoid a repeat of 1996, when average PEP slumped to £77,000 and the firm had a £20m overdraft.
That made management decide to focus on the UK after the firm withdrew from Dubai and Warsaw. These days, Nabarro has offices in Brussels and Singapore, but it may need to think about expanding its international footprint – or linking up with a firm that has one – if it wants to bounce back from this slump like it did the last.

Beyond real estate?

Nabarro has been keen to spread its wings and become known as more than just a real estate firm, with a strategy of expanding in corporate, dispute resolution and the public sector.
However, statistically little seems to have changed since 2004-05 in terms of the dominance of property within
the firm’s portfolio.
In that year Nabarro’s real estate group pulled in £32.7m- that’s 33.4 per cent of total revenue.
Fast-forward to 2010-11 and the department brought in £34.9m – a not madly different 31 per cent of total turnover.

Prominent instructions

In June 2011 Nabarro advised Sportingbet on its £118.5m equity issue, then its takeover of Australia’s Centrebet.
In September 2011 the firm advised Great Portland Estates on its £120m purchase of Royal Mail’s Rathbone Place sorting office. Ashurst advised Royal Mail.
In December 2011 it advised Bank of Ireland on the E690m (£440m) sale of London lending division Burdale Financial Holdings to Wells Fargo & Co. Wells Fargo instructed Ashurst.
In June 2012? the firm advised former Farepak MD Nicholas Gilodi-Johnson on his High Court battle against the Insolvency Service, which collapsed after the Insolvency Service backed down.