The 2013/14 financial reporting season is now well underway. Who is outperforming the market and who is lagging behind?
Predictions of market revenue growth for the 2013/14 year-end have been borne out by the first 25 UK200 firms to publish figures for the financial year (see table 1).
All but Hill Dickinson have pushed up turnover over the last 12 months, though it has hardly been a disastrous year at the Liverpool-headquartered firm. Revenue was down just 0.8 per cent from £112.8m to £111.9m (21 May 2014). Average profit per equity partner (PEP) was up 3 per cent from £264,000 to £272,000.
That said Hill Dickinson restructured in 2013/14 (29 April 2013 ). There were two redundancy rounds resulting in 60 voluntary redundancies in June (28 June 2013 ) and 83 in July (30 July 2013). There was also a £2.8m cash call (5 February 2013 ) aimed at stabilising its balance sheet after it spent £2m on a new practice management system and saw property overheads rise (7 August 2013 ).
The key indicator of whether it has been a successful year will come when Hill Dickinson reveals its net profit figure, which will establish what pressure has been applied to the profit margin.
Like Hill Dickinson, Nabarro had relatively flat revenue figures up 0.3 per cent from £116.3m to £116.7m while PEP showed double-digit growth up 10.5 per cent from £430,000 to £475,000 (1 July 2014 ).
In fact this is indicative of a wider trend, with PEP growth outstripping revenue growth across 12 of the 13 firms that have published the figure.
At Clyde & Co revenue rises are nothing new and 2012/13 saw turnover increase by 8.5 per cent from £336.6m to £365.1m. However, the firm appears to be a fan of conservative PEP growth. Chief executive Peter Hasson predicted PEP growth of 3.45 per cent from £580,000 to £600,000 (5 June 2014). This is just shy of the £605,000 posted in 2008/09 and 2009/10. In fact in the ten years between 2004/05 and 2013/14, the figure has grown by 30.4 per cent from £460,000 in 2004/05 to £600,000.
It isn’t the only firm to take a conservative stance in recent years. Allen & Overy PEP stood at £1.12m, a 7 per cent increase on the previous year’s figure of £1.05m (2 July 2014). While A&O’s net profit has indeed grown every year since 2010, from £429m to £532.1m, average PEP has been all but flat every year since 2010 until the most recent fiscal period.
For the past two years A&O’s PEP, as reported in The Lawyer UK 200, has stalled at £1.1m.
This year A&O has provided PEP figures to two decimal points, or £1.12m. The firm concedes that when this approach is taken previous years PEP in fact shows a dip from £1.06m to £1.05m between 2011/12 and 2012/13.
This conservative stance appears to have been triggered by the economic collapse of 2008. In 2006/07 PEP climbed a massive 30.1 per cent from £788,000 to £1.025m.
At the other end of the scale Osborne Clarke is surging ahead in terms of both PEP and turnover. It has produced the biggest growth of the year so far with turnover up 25.9 per cent from £112.8m to £142m, while PEP has rocketed by 46.6 per cent from £350,000 to £513,000 (12 May 2014). Partnership headcount is also up by more than a fifth, growing by 21.6 per cent, from 148 to 180.
It has been a decade of staggering growth for Osborne Clarke, with revenues sprouting from £64.6m in 2003/04 to £142m – 120 per cent (see table 2). Partnership headcount has seen a similar transformation, up by 95.7 per cent, from 92 to 180.
In terms of PEP the only firm that comes close to Osborne Clarke this year is Berwin Leighton Paisner (BLP), which saw the number bounce back from dropping to a 10-year low in 2012/13 (see table 3).
The firm increased revenue by 5.6 per cent from £233m to £246m, while PEP jumped 35.2 per cent from £401,000 to £542,000 (20 May 2014 ). At the 2012/13 year end BLP saw PEP fall 39 per cent from £660,000 to £401,000 (30 September 2013 ), net profit dropped 38 per cent £63.6m to £39.4m.
At the time a spokesperson for BLP said it saw the results as “a blip”. If this year’s about turn is anything is an indicator of future growth, then indeed it was a “blip”.
With dozens more firms preparing to unveil their figures for the last financial year, early signs are that the UK200 market is back in growth mode.
Table 1 – 2013/14 revenue table
|Firm||2013/14 turnover (£m)||Difference (%)||2012/13 turnover (£m)||Difference (%)||2011/12 turnover||2013/14 PEP (£k)||Difference (%)||2012/13 PEP (£k)||Difference (%)||2011/12 PEP (£)|
|Allen & Overy||1,230||2||1210||0.5||1183||1120||7||1050||-0.94||1060|
|Herbert Smith Freehills||800||5||764||39.8||480*||741||12||662*||-21.2||840*|
|Clyde & Co||365.1||8.5||336.6||17.3||287||600*||3.45||580||-4.1||605|
|Bird & Bird||259||4||249||6||235||TBC||TBC||470||-8.7||515|
|Berwin Leighton Paisner||246||5.58||233||-5.28||246||542||35.2||401||-39.2||660|
|Watson Farley & Williams||117||14.6||102.1||2.2||99.9||TBC||TBC||388||-13.0||446|
|Shepherd & Wedderburn||38.3||6.7||35.9||-3||37||278||9.8||253||-3.8||263|
Table 2 – Osborne Clarke, a decade in figures
|Osborne Clarke||Turnover (£m)||Percentage difference||Partnership headcount||Percentage difference|
Table 3 – Berwin Leighton Paisner, a decade in figures
|Year||Turnover (£m)||Change (%)||PEP (£k)||Change (%)|