LISTED law firm Integrated Legal Holdings has suffered a fall in first-half profit, despite a 53 per cent surge in revenue, because in part of a major increase in lawyer salaries.

ILH, one of just two law firms listed on the Australian Securities Exchange, has reported a drop in net profit for the half years ending 31 December in 2008 and 2009, from $896,703 to $711,069. The change came despite a jump in revenue in the corresponding periods from $7.59 million to $11.59m.

The firm’s managing director Graeme Fowler has signalled that the profit drop was due in part to renegotiated salary packages for key partners.

Salaries and employee benefits expenses for the half year ended 31 December 2009 came to $7.79m, compared to just $4.18m for the same period the year before.

Professional fees revenue, however, came to $11.56m for the half year ended 31 December 2009, compared to $7.20m for the corresponding period in 2008.

Fowler told shareholders the initial base pay of $100,000 was "artificially low" and "non-competitive".

Fowler told The Australian that the renegotiated contracts were in the best interests of shareholders. He said the changes would provide cost certainty for upcoming years.

The new contracts will secure the eight law firm partners, or directors, for four years, with a six-month notice period.

John Dawkins, a non-executive chairman at the firm, said yesterday that the initial agreements for the eight Perth lawyers had been negotiated before his time, The Australian reports.

"We're now back in the business of being able to pay dividends," he said.

Fowler said that last year’s acquisitions are performing well. The firm announced in March last year that it would acquire the legal business of mda lawyers, under tuck-in arrangements with existing member firm Argyle Lawyers.

The firm now says these are proving to be good businesses. Growth in Argyle has been solid, it said, including a number of high quality new staff appointments in the first half. This includes the return of former Argyle Lawyers partner and insolvency and corporate recovery lawyer Mark Petrucco.

The firm has experienced some improved performance in its internet-based customised legal document publishing and information Law Central business, following the significant drop in demand for services in the 2008/09 financial year as a result of the global financial crisis, it said.

“The effects of the GFC did however continue for the company during the period. Conditions remained challenging in parts of the business and some services were behind expectations for the first half, and this has continued into the early months of the second half,” it announced.

The Perth businesses in particular underperformed expectations in some service lines, it said.

On top of this, the firm is continuing to experience some bad debts from client bankruptcies, and said it expects this may continue for a while longer.