Hammonds partners are bracing themselves for a crash in profitability, which has forced management to cut partner drawings by 12 per cent.
As first revealed on www.thelawyer.com (3 February), a stunned partnership was informed of the situation at a meeting last Wednesday (2 February).
It is understood that profit could drop by as much as 25 per cent to around £200,000, and that as a result the management has instituted a review to cut costs, which will include a redundancy programme among fee-earners and support staff in the UK.
It is believed the firm will also ask its equity partners, including those who have left the firm in the last financial year, to repay some of their drawings.
Support services will also be centralised and Hammonds is continuing to examine other ways of saving money.
Hammonds managing partner Peter Crossley cited a significant upturn in the performance of the corporate department and a “stellar” performance by its Leeds construction team as evidence of the firm’s ability to improve its fortunes.
“We’ve recently met with our partners to announce that, due to an exceptional charge, which is going to hit the current financial year, our level of profitability is going to be lower this year than anticipated,” said Crossley.
The ‘exceptional charge’ refers to reorganisation costs and will be incurred entirely within the 2004-05 financial year. Turnover at the year-end is expected to be flat. Last year Hammonds’ income was £136m, with an average profit per equity partner of £272,000.