The Lawyer UK 200 preview: Regional: North steams ahead in profit fightback
15 August 2011
Northern and Midlands outfits overtake Southern firms as they recover after slump. Caroline Butcher reports
Recovery was the theme for UK regional firms in 2010-11, with many focusing on regaining ground after practice areas such as corporate and property were hit in the recession.
In the race to rebuild, firms in the North of England and the Midlands edged ahead of their Southern counterparts, with those in Manchester, Leeds and Birmingham reasserting themselves as profitable entities more quickly.
In the North West Liverpool-based Hill Dickinson, which recently scrapped its management structure in favour of a single LLP board, continued its steady revenue growth of the past five years. Turnover rose from £87.1m in 2009-10 to £100.1m, while revenue per lawyer (RPL) also crept up, from £225,000 to £233,000.
Average profit per equity partner (PEP) climbed from £248,000 to £272,000, but the firm’s profit margin slipped back slightly for the third year running from 15 to 14 per cent.
Meanwhile, Manchester-based DWF, which recently announced expansion into Birmingham and Newcastle, boosted corporate work by 35 per cent to see turnover surge from £71.5m to £83m.
DWF’s profit margin also rose, from 12 to 14 per cent, while average PEP was up significantly from £333,000 to £388,000 - although the glowing figures masked a drop in RPL from £204,000 to £189,000.
Despite its public sector clients being squeezed by budget cuts, Liverpool firm Weightmans forged ahead with a year of significant investment, including the acquisition of Mace & Jones and Vizards Wyeth’s insurance team in March.
But the expansion hit partner profits, with a decline in PEP from £354,000 to £298,000. Turnover edged up from £56.2m to £58.2m and RPL remained static at £165,000.
Pannone emerged as one of the North West’s losers of the last financial year, blaming restructuring costs for its lacklustre figures. The Manchester firm saw turnover slump from £49.5m to £47.5m, while RPL also slipped slightly from £232,000 to £228,000. Its profit margin dropped from 16 to 14 per cent and PEP tumbled from £229,000 to £208,000.
In the mix
The North East area and Yorkshire saw mixed fortunes, with partner-poaching rife and some firms being hit by low trainee retention rates.
While Leeds-based Walker Morris dipped slightly on turnover, down from £42.6m to £40.6m, it continued to boast one of the highest levels of RPL in the region at £245,000, albeit lower than last year’s £265,000. The firm also maintained a healthy profit margin of 34 per cent.
Newcastle-based Dickinson Dees had a rockier year, posting one of the lowest autumn 2011 trainee retention rates of just 36 per cent, while seeing its profit margin slump slightly from 19 to 18 per cent. The firm’s RPL dropped from £200,000 to £190,000 and overall turnover was down from £48.8m to £45.5m.
Looking at the headline figures, Newcastle’s Ward Hadaway had a more positive year, with both turnover and average PEP remaining reasonably static, at £28.4m and £295,000 respectively.
RPL remained unchanged at £184,000. However, the firm’s profit margin was low, at 11 per cent.
The past couple of years have been particularly hard for Midlands firms, with many in the increasingly over-lawyered Birmingham marketplace reporting falls in income during 2009-10.
The region’s biggest outfit, Wragge & Co, appears to be recovering from a dip in revenue in 2009-10 - mainly down to its property work - posting an encouraging revenue of £113.1m this financial year, up significantly from last year’s £96.2m.
Wragges’ profit margin remained relatively healthy at 34 per cent, while RPL stood at £247,000 and average PEP surged from £276,000 to £325,000.
The past year was also a good one for Browne Jacobson, which has hired steadily. The firm posted a record turnover of £35.2m, up on the previous year’s £33.1m.
The firm clinched new clients in the health and retail sectors, while boosting its partner headcount to 76. Its profit margin remained reasonably static at 13 per cent, with average PEP at £300,000 against an RPL figure of just £154,000.
The South West is also rebuilding after revenues at several Bristol firms dipped or flatlined during the recession.
Burges Salmon boosted its revenue to £66.1m after a tumultuous 2009-10 in which the firm turned over just £60.7m. RPL has also risen to £258,000 from £246,000. While profit margin was relatively stable at 33 per cent, average PEP tumbled from £414,000 to £395,000.
Bristol-based litigation firm Bond Pearce’s bounce-back is happening more slowly. It posted a modest increase in turnover from £46m to £47m, but its profitability moved in the opposite direction, with profit margin slipping from 16 to 15 per cent and average PEP withering from £235,000 to £220,000.
Blake Lapthorn, which saw its profitability plummet a couple of years ago, is also making a comeback of sorts. While its revenue has continued to slide to £44.3m, compared with £50.7m in 2007-08, it has managed to up its profitability in the past couple of years, with a 2010-11 margin of 14 per cent. PEP nudged up accordingly, from £116,000 to £138,000.
But things are still looking gloomy in the South East, where Thomas Eggar’s dreams of becoming a truly national firm have been hampered by an insipid set of financials. The firm’s profit margin slid from 21 to 18 per cent and turnover remained more or less constant at £34.2m.
Click table below to view TOP 10 REGIONAL FIRMS 2010-11