Two firms stand out in the Scottish peer group this year, but for very different reasons. Dundas & Wilson posted robust turnover growth but a static average profit per equity partner (PEP), while Brodies had an exceptional year, with revenue rising by an enviable 43 per cent coupled with a decent 13 per cent hike in PEP.
Elsewhere, McGrigors, Maclay Murray & Spens, Shepherd and Wedderburn and Burness all saw their revenues rise by at least 11 per cent, with all but the latter seeing similar growth in PEP. At Burness PEP narrowly missed out on double-digit growth with an 8.4 per cent increase, from £286,000 in 2005-06 to £310,000.
Dickson Minto and Biggart Baillie, on the other hand, saw torpid turnover growth of 7 per cent and 5.7 per cent respectively, while Tods Murray actually experienced a dip in revenue, which dropped by 4 per cent, from £23.4m to £22.5m.
Dundas retained its position as the largest firm north of the border in turnover terms, although the gap between it and secondplaced McGrigors narrowed. Their respective revenue figures were £60.5m and £60m on the back of 14.2 per cent and 16.5 per cent growth.
However, Dundas failed to grow PEP at all, with the figure remaining static at £308,000.
According to Dundas’s joint managing partner Alan Campbell, the main reason for the discrepancy between turnover and PEP was the firm’s heavy investment over the year. The firm took on a third more office space in its burgeoning London office, where lawyer numbers hit 78 at the year-end, and grew its total headcount from 530 to 600 over the 12 months.
This contributed to Dundas having one of the highest cost per lawyer (CPL) figures in the Scottish group at £141,000. Revenue per lawyer (RPL) was also high at £222,000, second only to Tods Murray, which posted £223,000. This margin between RPL and CPL translated into a minimal net profit rise of 5 per cent at Dundas.
“We did spend a bit more per pound of revenue compared with last year,” says Campbell. “This was down to internal training costs, business development and commissions for recruitment. We had about eight lateral partner hires over the year and the cost of recruiting came through as a one-off hit.”
Campbell adds that the laterals had mainly been added to the firm’s London office because it was proving difficult to grow organically with any speed. The number of lateral hires in 2006-07 was high compared with previous years, as Campbell admits. “It shows we’ve been quite successful and, compared with previous years, we’ve brought in quite high-profile partners from firms such as Herbert Smith, which we wouldn’t have been able to do before,” he says.
As all partners in the firm are equity, the laterals were hired straight into the equity partnership. This, says Campbell, clarifies the lack of growth in PEP: although profit rose marginally the pool had to be shared among a greater number of people.
The other firm that stood out over the year was Brodies. It enjoyed its seventh straight year of double-digit revenue growth. PEP grew by a more muted, although still robust, 13 per cent. The growth was not enough to earn Brodies a place in Scotland’s big four, with the firm ranking sixth overall in terms of size, but its rapid expansion and acquisitive tendencies in recent years means it has closed the gap on nearest domestic rival Shepherd and Wedderburn to only £9m.
Some £1.7m of Brodies’ revenue increase, or 19 per cent, came from opening in Glasgow last summer via the acquisition of sevenpartner Bishops Solicitors. Despite this the firm managed to keep costs low, with its CPL of £112,000 the second lowest in the group. (Biggart Baillie posted the lowest CPL overall at £107,000.)
In terms of RPL, 165-lawyer Brodies was near the bottom of the table, although its £181,000 figure, when coupled with the low CPL, was enough to give the firm a very decent profit margin of 39 per cent.
According to managing partner Bill Drummond, Brodies’ costs have been kept low via a combination of keeping marketing and property spend down along with its lack of a London presence. The fact that RPL was relatively low, he says, is down to the firm’s investment in people over the year.
“A large recruitment exercise involves bringing people up to speed,” he says. “We had a lot of lateral hires, but there has also been a lot of additional recruitment into Edinburgh and Glasgow and there’s always a lag in that converting into revenue.”
The only Scottish firm to see its revenue fall last year was Tods Murray. Turnover dropped by almost 4 per cent, from £23.4m to £22.5m. Despite this the firm still posted the highest RPL figure in the peer group at £223,000 and fared reasonably well in terms of CPL with a figure of £137,623.
Executive partner Peter Misselbrook says the dip in turnover should be viewed in the context of increases seen over the past few years (last year turnover grew by 11 per cent), with revenue rising in the region of 70 per cent over the past five years.
“We’re pleased with the turnover that’s been achieved through organic growth,” he notes. “The key is for businesses to be soundly managed while maintaining profit. Our profit increased in the period by just short of 8 per cent. We’re concentrating on working effectively and delegating appropriately while maintaining high standards of service.”
Moving the firm’s head office to Edinburgh Quay in 2005 brought greater working efficiencies.
Elsewhere, McGrigors, which has a September year-end, held on to its second place position on revenue size behind Dundas. Over the year the firm’s annualised turnover figure grew by 16.5 per cent to £60m, while PEP rose by 13.6 per cent to £310,000.
The 300-lawyer firm posted one of the lowest profit margins in the group, however, at just 26 per cent. McGrigors, which has the largest London office of any Scottish firm, with 22 partners and 95 qualified lawyers, only managed a middling RPL of £200,000 last year and posted the group’s highest CPL figure of £148,000.
McGrigors’ profit margin was significantly lower than Burness’s 42 per cent. Last year Burness overhauled its management structure, reinstating the post of managing partner for the first time in four years. Ian Wattie took on the role, with Philip Rodney remaining in the chairman’s position.
Over the year the duo has overseen a strong performance at the firm, with turnover increasing by 19 per cent and PEP up by 8 per cent.
While Burness is still one of the smallest of Scotland’s leading group, with a turnover of £21.5m, it was the thirdbest performer in RPL, raking in an average of £209,000 for each of its 103 lawyers. Its CPL was also the third lowest in the group at £121,000, hence the high profit margin.