THE chief executive of one of Scotland's mid-tier law firms believes further mergers are on the cards.

Duncan Murray was speaking as Morton Fraser revealed it expects a slight drop in turnover from £14.7 million to £14.5m. Profits, however, should rise 7% from £3.6m to £3.9m.

His comments on consolidation came as Dundee firm Blackadders and Edinburgh-based McKay Norwell announced they would merge on June 18.

Mr Murray said the profits rise at Morton Fraser for the year to April 30, 2012, was helped by trimming costs in all areas, including some redundancies that reduced the headcount from 231 to 214.

The firm, which has offices in Edinburgh, Glasgow and London, has spoken to several potential merger partners over the past year. Mr Murray confirmed he was still exploring consolidation options.

He said: "We have got our costs under control and are in a better shape to go forward.

"We recognise we need to build scale for growth so we can be in the right place when better times come around. We spend our lives talking to people and have a clear view that we need to be larger, whether that is in Scotland or down south.

"There has been a surprising hesitation from some firms to accept there will be more consolidation and that firms will need to be bigger."

Even with the difficult market conditions, the firm paid its staff a bonus based on a percentage of salary and performance.

Mr Murray said he was "satisfied" with the 2011/12 results, and believed Morton Fraser would have outperformed many other firms in the Scottish legal sector.

He added: "Despite a slight fall in revenue, reflecting the challenging state of the legal services market and economy, Morton Fraser has performed well."

The firm said tender wins, including those from the Ministry of Defence, Scottish Government and City of Edinburgh Council, plus maintaining a position on the panels of UK retail banks provided a steady stream of work. However, there are still few signs of an upturn in areas such as corporate finance and commercial property.

Mr Murray said: "At best we could say there has been some sign of green shoots but the uncertainty in the eurozone is acting as a suppressant on the market.

"A lot of people are waiting and watching what happens. The Scottish independence debate is another uncertainty, but I am not sure it is that big a factor at the moment."

The firm's profit per equity partner was not released as the accounts have still to be audited.

There have been several mergers within the Scottish legal sector this year, with Pinsent Masons and McGrigors the largest.