The struggle continues. While the North peer group maintains its position and outperforms other regions, average revenue has grown marginally with the departure of DWF and Hill Dickinson, which have joined the Major UK firms group (see page 94). In last year’s review, these firms were £15m and £21m respectively ahead of the rest of the pack, and this year sees the gulf between the haves and the have-nots widen even further.
Weightmans is now the largest firm in the North group by revenue, and this lead will increase in 2012 when its recent acquisitive spree is taken into account. This year the firm added 200 staff through the acquisition of Vizards Wyeth’s London insurance team and its 1 May merger with Liverpool firm Mace & Jones.
Judging Weightmans purely on its own financial performance, revenue is up marginally to £58m. This represents four years of consecutive revenue growth, thanks largely to the success of the firm’s nationally recognised healthcare and insurance practice – 63% of its turnover comes from groups outside of the four classic practice areas of corporate, finance, disputes and real estate. Major contributors to the top line include healthcare, local government and commercial insurance. However, PEP has fallen 30% to £246,000, which is explained by a 38% rise in equity partners between the beginning and end of the financial year. In fact, last year’s PEP of £352,000 is close to this year’s top of equity figure of £354,000. Despite this, 13 partners sit at the top of the equity, a sign that the firm is more equitable with its profit sharing than most.
Managing partner Patrick Gaul says the firm’s performance has been unspectacular but this has partly been attributable to the focus the firm put on securing a sustainable long-term future through expansion. Revenue growth wasn’t what the firm had anticipated – it had budgeted for a turnover of around £59.4m, with its commercial practice principally failing to hit target.
‘We’re obviously very much hoping the merger investments will kick-start the business,’ says Gaul. ‘We went through quite
a lot of rapid growth between 2005 and 2008 and things started to slow down somewhat in 2009. In a lot of the areas we’re in, fee rates have tightened and there are more fixed fees. Insurance has grown, but the margins have narrowed.’
Taking the merger with Mace & Jones into account, combined revenues at Weightmans next year should come in close to the £75m mark, putting the firm comfortably ahead of the second-placed firm in the group, Pannone, already more than £10m behind Weightmans this year on turnover. Pannone’s revenue fell 3% to £47.5m in 2010/11 following a 6% drop the year before. Net income dipped 9%, which new managing partner Emma Holt attributes to a major overhaul of the firm since she took over last summer (for more details, see ‘Brought to a Holt’, page 26). ‘It was necessary to modernise the firm and take a number of difficult decisions, including redundancies,’ she says. ‘The restructure, which has been fully supported by the equity partners, has resulted in considerable one-off costs and impacted profits.’ Holt is already budgeting for a 25% leap in profits for 2011/12.
Pannone’s Manchester rival Cobbetts saw a marginal increase in revenue and net income this year. The increase is a welcome respite from two years of turnover decline, which has hampered the firm’s progress. Another North-West firm, Brabners Chaffe Street, has reported a slight decline in revenues in 2011.
Meanwhile, Walker Morris – the most profitable firm in this group for some years – has compounded a 4% dip in revenues last year with yet another small drop in 2011. All this is a far cry from the halcyon days of 2008 when turnover was £7m higher and PEP was around £200,000 greater. However, the firm has continued to increase equity partner numbers and is budgeting for a 7% increase in turnover and a 6% lift in net income for next year, a sign that perhaps things are turning around at last for firms in the north of the country.
The one bright spot amid all the grey is the performance of North-East firm Ward Hadaway this year, which has nudged turnover up by 3% to £28.4m to register two years of consecutive growth. This is no mean achievement given the difficulty firms in the region have experienced. As a result, Ward Hadaway, alongside rivals Dickinson Dees and Watson Burton, have expanded into Yorkshire and Lancashire in a bid to draw in work from outside their heartland.
Jamie Martin, managing partner at Ward Hadaway, says: ‘While it is still too early to say that the economy has turned the corner, we are very encouraged by the excellent results of the last financial year and look forward to the future with confidence.’
One conclusion is undeniable: beyond the major national heavyweights, there remain slim pickings for even strong regional firms – perhaps a clear indication that with ‘northshoring’ and a cut-throat market, clients can certainly get more bang for their buck. LB