Following Dundas & Wilson’s announcement last week that its revenues and profits had tumbled dramatically for the second year running, the latest figures from Scotland’s two other elite firms shows it is not alone in suffering from poor financial performance.
Maclay Murray & Spens (MMS) has managed to outdo the beleaguered Dundas in terms of underperformance, with revenues down 13% to £40.9m from £46.9m last year, while profits have dropped by 24% to £9.7m, equating to a fall in PEP of £59,000 to £211,000 – down 22%. These figures are marginally worse than Dundas, which saw revenues dip 11% and profits fall 21%.
Although the decrease in revenues reflects the disposal of its Law at Work subsidiary last year, which accounted for £1.7m of turnover in 2011/2012, chief executive Chris Smylie said that the latest results had come at the ‘end of a year which saw the firm carry out a root and branch strategic review’. Lawyer headcount at the firm is down 4%, while partner numbers are down 5%.
‘We remain of the view that adding scale without regard to long-term profitability is the wrong thing to do,’ said Smylie. ‘Whilst we want our business to grow, we need that growth to be both aligned with our strategic ambitions and solidly founded and that has required us to scale back to ensure that our future growth is sustainable. I am very much more comfortable with that situation than I would be with increased turnover obtained at the expense of long term profitability.
‘The recent promotions of two of our associates to partner, coupled with the announcement of three partner-level lateral hires represent one aspect of implementation of our review and follow on the recruitment of the seven former Semple Fraser partners towards the end of the financial year. We remain cash positive and are confident that we are now much better positioned to take advantage of the opportunities in this new marketplace than we were prior to the review.’
Of the four largest Scottish independents (now three after McGrigors was acquired by Pinsent Masons last year), Shepherd and Wedderburn is perceived to have suffered the least since Edinburgh’s status as a financial centre declined rapidly from 2008. This has proved the case again in 2012/2013 with Shepherd posting a less dramatic 3% fall in turnover from £37m to £35.9m, while profits fell 2% to £10.3m. PEP stands at £251,000 down 4% on the previous year. This is against a 7% increase in total lawyer headcount, while partner numbers have increased by 2 – up 3% on last year.
Despite a relatively better performance from Shepherd, collectively these three firms have been left scarred by a hard recession in Scotland and an overdependence on transactional work. In 2007/2008, the combined revenue of these firms was £178.5m. This year, it is £125.5m, a fall of 30%.
The fortunes of Scotland’s big three reflects a tough domestic market that has seen firms such as Semple Fraser collapse and others being taken over by UK rivals south of the border. However, this contrasts sharply with two firms – Brodies and Burness- that have focused exclusively in offering a premier Scotland-only service which has rewarded both firms financially over the past five years. While Burness has yet to announce its 2012/2013 results, Brodies saw revenues increase by 8% to £46m – now putting it ahead of MMS to become Scotland’s second largest firm by revenue (not counting McGrigors as part of Pinsent Masons).
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