LG sees PEP tumble as firm blames ‘increased property costs’

Lawrence Graham (LG) has posted its financial results for the 2010-11 financial year, revealing that turnover at the firm has fallen by 5 per cent and profit per equity partner (PEP) has plummeted by 26 per cent.

Hugh Maule
Hugh Maule

In a difficult year for the firm, overall turnover fell from £59m in 2010-11 to £56m this year, with net profit down from £15.2m to £8.3m. This left profit margin down from 26 percent last year to 14 per cent for 2011-12.

Managing partner Hugh Maule put the blame on “increased property costs” in London as PEP slipped from £412,000 in 2010-11 to £303,000 in 2011-12. The drops comes despite the number of equity partners being cut by 10 from 37 to 27 in the past twelve months.

UK revenue fell by 5.4 per cent, down from £57.3m in 2010-11 to £54.2m for 2011-12.

Maule admitted a “slight drop” in UK revenue, but pointed towards the strength of its international client base, accounting for around 40 per cent of turnover.

In a statement, Maule said: “Whilst disappointing, the fall in PEP is principally due to increased property costs in London. These are now being addressed and we expect to conclude the letting of our surplus space shortly.

“The last financial year was also one of transition for the firm, with the realignment and expansion of our finance team in particular. We have also further strengthened our real estate team with the recent recruitment of three market-leading partners.”

The finance team contributed just £3.9m (7 per cent) of turnover, whereas property totalled £17.4m (31 per cent).

Maule said: “Overseas revenue therefore remains strong, with our Dubai office posting the largest percentage increase in revenue growth, at 40 per cent.

“We are maintaining our strategy of investing in our chosen jurisdictions, including in our newest office in Singapore. We have also formalised an association with the leading corporate Brazilian firm, Motta Fernandes Rocha – Advogados, which presents new opportunities for us in the Brazilian market.

“Our revenue per lawyer has remained strong at £300,000 and reflects the productivity and success of our fee earners who have maintained their focus in providing outstanding client service in a competitive market.”

Last year’s revenue per lawyer figure for the firm was £317,000, while the firm’s equity spread has narrowed from £206,000-£693,000 in 2010-11 to £150,000-£420,000 in 2011-12.

The financial results come in the wake of the failure of merger talks with Field Fisher Waterhouse (FFW) (28 June 2012).

A potential £150m tie-up disintegrated in acrimony, with sources close to the FFW side claiming “property issues” around LG’s expensive More London offices made a deal “unattractive” to FFW partners (9 July 2012). However, sources at LG flatly denied that financials were behind the collapsed talks, claiming it was internal struggles at FFW that halted any potential merger.

For more on LG, see feature