Hill Dickinson has issued a £2.8m cash call to its partners to stabilise its balance sheet after a year of heavy investment.
Fixed-share partners and full equity partners will be asked to contribute a further £1,000 per equity point, while the one-off contribution of £1,000 by salaried partners will remain the same.
The additional capital will be used to balance the books after a year of heavy investment including a Monaco launch in March to boost the firm’s yacht and shipping practices (5 February 2013). Overheads also increased when a five-year rent incentive expired on the firm’s Liverpool office.
Hill Dickinson recently invested in new premises in London’s Broadgate Tower and spent in excess of £2m on a new practice management system.
The firm operates a modified lockstep, which ranges between 28 and 70 points. There is currently no-one at the top of equity because the top of the ladder was recently adjusted from 60 to 70 points. Managing partner Peter Jackson said the change was intended to give partners “headroom” to reach the top.
Movement up the lockstep is merit-based and performance reviews take place annually. Partners can move a maximum of six points up the equity in a given year and there are no pre-defined gates on the way up the lockstep.
Currently, a partner on 60 points would have £300,000 invested in the firm which Jackson said he believed was lower than the average partner investment at rival firms.
Jackson said: “The plan was raised with partners in a meeting in April and they have been consulted two or three times since then. Nobody likes paying more money but we’ve explained the reasons and everybody understands that it is necessary.”
The firm’s latest financial results revealed a 15 per cent drop in average profit per equity partner (PEP) from £312,000 to £264,000 and an 11 per cent drop in net profit from £19m to £16.9m, despite a slight increase in turnover for 2012/2013 (15 July 2013).
The top of equity was down by 25 per cent in the last financial year from £402,000 in 2011/12 to around £300,000 and there is currently no bonus pool.
Hill Dickinson recently announced the loss of 14 partners and 69 staff as a result of a firmwide restructuring (30 July 2013). The firm also sold its Chester office to private-equity backed Knights Solicitors, with four partners and 20 staff moving firms (29 July 2013).