Hammonds posts 9 per cent drop in PEP
Hammonds' average profit per equity partner (PEP) plummeted by £37,000 in the past financial year while global turnover saw a 3.4 per cent rise to £132m.
The firm blamed a variety of infrastructure investments, its Spanish office, a difficult market and the reorganisation of its equity structure for a 9 per cent drop in PEP to £367,000.
Managing partner Peter Crossley said: "I think our results are okay and in line with our strategy, but we accept that we still have some progress to make.
"The first point is," he explained, "that we have committed to a programme of investment in our infrastructure in the last 12 months, including installing a single financial management system."
He added that the refurbishment of the firm's Birmingham, Manchester and Madrid offices, which cost a total of around £4m, also affected PEP, in addition to the firm's conversion to limited liability partnership (LLP) status.
Crossley said he hoped that the investments made would "pay dividends", adding that he was pleased that lock-up at the firm has been reduced to just below 100 days from around 105 last year. Borrowings have also been pushed down to the lowest level ever seen within the firm, Crossley said.
Looking at the figures geographically, Crossley said the UK offices grew by between 3 and 4 per cent, with real estate and dispute resolution both dragging figures down. Several departments saw strong growth in fee-income, notably the corporate (7-8 per cent), banking (12-15 per cent) and pensions and employment teams.
In Spain turnover decreased due to of a spate of associate departures, though Crossley said hires had been made and the issues had now been "addressed".
The Far East practice, which makes up less than 5 per cent of total turnover, grew by 33 per cent and the firm hopes to continue to focus on the market.
Total partnership profits decreased by £2m (7 per cent) this year to £27.3m. Crossley said a new profit sharing arrangement is also to blame for the decrease in PEP.
The new system has been phased in over the past two years to reward high-performing partners and Crossley said that no "performing partner" will be earning less than last year.
In the 2006-07 financial year turnover increased by 3 per cent and PEP jumped from £328,000 to £404,000. The turnover figure both this year and last, excluded the Italian associate office of Hammonds Rossotto.
Readers' comments (3)
The Prophet | 2-Jul-2008 10:52 am
Just like the good ol' days
I always thought their 'recovery' was built on shifting sands. It just shows that you can do all the tricksy management stuff you like but if there's millions of lawyers leaving, then eventually the proverbial is gonna hit the fan.
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Anonymous | 2-Jul-2008 4:35 pm
Masking the numbers...
What's the impact of the 4m refurbishment costs and new management systems on this year's PEP? Probably not a lot, since most of those costs are amortised/depreciated in the accounts over many years...
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Another Prophet | 3-Jul-2008 10:28 am
Still some way to go?
“Lock ins” have unhappy consequences – (1) the good and the bad are locked in together, (2) the people who have suffered the pain consider themselves entitled to a bigger slice in the future and new equity becomes restricted (how many equity partners have been made up in the last three years?) and (3) the firm takes years (if ever) to shake off the “firm in distress” image (as other comments demonstrate).
They have pulled out an unlikely success in recovering from the “black hole” and Crossley and the other partners deserve credit. We can expect the credit crunch to affect corporate and banking departments (in the mid tier firms) adversely in next year’s results. What might be worrying for Hammonds is that corporate and banking were, according to Crossley, the performing teams last year.
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