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Hammonds has seen a dramatic turnaround in fortune with average profit per equity partner (PEP) up 61 per cent to £328,000 after a year of tough management.
The firm’s results, announced this morning (29 June) saw turnover rise by four per cent to £132.7m. Hammonds is now running with a profit margin of 23 per cent, a considerable improvement from 2005’s 16 per cent margin.
Hammonds has also reduced its borrowings by 38 per cent and plans to continue to cut its overdraft, which in the past has been as high as £30m.
Finance director Laurence Campbell said: “There’s a sense of planning and delivery which is very confidence-boosting. It’s a turnaround year.”
Managing partner Peter Crossley told The Lawyer: “This is a staging post; we’re not saying we’ve reached the promised land.” He said monthly partner drawings had increased “significantly” since 1 May this year.
Crossley added that the UK had seen the greatest improvement during the year, with the firm’s dispute resolution and employment practices performing particularly strongly.
The results follow the cost-cutting measures implemented in February 2005 by Crossley as part of a radical management shakeup. The firm shed a total of 60 staff and fee-earners during the last financial year, with the workforce in the UK dropping below 1,000.
A 14-month lock-in of equity partners, which ends tomorrow (30 June) meant that none left Hammonds during the past year. However total partner numbers are down to 183, a net loss of 19. Hammonds has lost 31 partners in the UK, with nine of those quitting the London office.
Crossley declined to comment on whether any equity partners would resign following the end of the lock-in, but said that Hammonds was in the process of talking to potential new lateral hires.
Hammonds is now in the process of implementing the strategic review that has been carried out by Crossley and new strategy director Bernhard Gilbey. Crossley said the strategy, which will see changes including merit-based remuneration for partners and narrowing Hammonds’ practice groups, had been embraced by the entire firm.
Crossley and Campbell also revealed that Hammonds is seriously examining whether to convert to LLP status in May next year.