Herbert Smith sees PEP return to 2006-07 levels as turnover nudges up
Herbert Smith has posted a 3 per cent increase in turnover and a 7 per cent drop in average profit per equity partner (PEP) for the 2011-12 financial year.
Revenue for the year rose to £480m, up from £465.1m last year, with equity partners enduring a fall in PEP from £900,000 in 2010-11 to £840,000.
The City firm’s net also profit decreased by 7 per cent, from £117.9m to £109.7m - its lowest level in five years, although turnover has reached a five-year peak.
PEP is also at a five-year trough, with the figure now 19 per cent down on the PEP of £1.036m in 2007-08, standing at its lowest level since its £820,000 figure in 2006-07.
The firm’s revenue grew by 3 per cent in 2010-11, with PEP up 4 per cent on the previous year.
The news comes amid a reshaping at the silver circle outfit, with the firm cutting 43.5 jobs in London (12 June 2012) as it enters advanced negotiations over a merger with Australia’s Freehills (21 June 2012).
It has also announced five support-staff redundancies in Dubai (22 May 2012).
Readers' comments (24)
Anonymous | 26-Jun-2012 12:27 pm
That's pretty lame given over half of their partnership is now non-equity. Guess that means their real profit per partner is £420,000, which is faaaaaarrrrrrrr behind their peer firms. Or what used to be their peer firms!
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A closer look at the numbers | 26-Jun-2012 1:01 pm
Revenues up 3%.
Profits down 6%.
Internet surfing by London corporate partners up 50%.
Partner satisfaction with Jonathon Scott and David Willis down 75%.
Number of litigation partners who will be demanding more corporate heads on the chopping block up 100%!
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D Willis | 26-Jun-2012 1:26 pm
Now now. Let's not get all snarky. This decline in profitability is all a part of the master plan. We're going to address the issue by bringing more partners into the ranks of management, writing numerous papers, hiring an outside consultant, opening more offices in far flung regions and socialising the issue so as to not damage our collegial culture. We're calling it Project Wishful Thinking.
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Scotty | 26-Jun-2012 1:33 pm
Bloody good idea Willis! Let's make sure to raise it at the next GPM.
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Herbies Partner | 26-Jun-2012 1:51 pm
Right now I wish I was a partner at Linklaters. Sigh.
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Scotty | 26-Jun-2012 2:22 pm
Oh sure. Report on our profits being down 6%. You missed the real story, which is that our collegiliality is up 6%!
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Herbies Partner | 26-Jun-2012 2:39 pm
I should have voted for Tim Parkes for senior partner. What was I thinking?!?
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Who writes this stuff? | 26-Jun-2012 2:53 pm
Partnership at Herbert Smith £840,000. Reading these comments, priceless!
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Anonymous | 26-Jun-2012 3:00 pm
I hope Freehills got a due diligence out in the merger agreement!
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FPC | 26-Jun-2012 3:09 pm
I suppose this means the minimum track from non-equity to equity will now be extended again from four years to five years.
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Anonymous | 26-Jun-2012 3:22 pm
Wow. PEP down almost 20% from when David Gold was at the helm. Bring back the Gold Standard!
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read it and weep | 26-Jun-2012 3:25 pm
Scotty did you even read the article? profits are down 7% not 6%
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Anonymous | 26-Jun-2012 3:55 pm
Kudos to the partners of Herbert Smith! This shows a real sense of social responsibility with the Herbert Smith partners taking a 7% pay cut and sharing some of the pain with all of the associates and support staff who have been made redundent. Partners at lesser firms would never be so willing to take this kind of pay cut. Good for you noble Herbies!
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Magic Man | 26-Jun-2012 4:01 pm
How long before they drop out of the silver circle?
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Chippy | 26-Jun-2012 5:30 pm
This ridiculous castigation of a firm at the top of the Bronze Medallion group is pathetic.
Grow up. All of you.
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Anonymous | 26-Jun-2012 9:48 pm
To the first comment at 12:27 pm. I think is rather the other way around. Same profit divided into less equity partners gives a higher PEP.
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Anonymous | 27-Jun-2012 0:04 am
Some of the commentary here is a bit hysterical. Herbert Smith is still one of the finest litigation shops in the world, with an excellent corporate and finance practice. The fact that its got the results it has, with such a poor deal environment (which effects everyone) shows the strength of its disputes group. Everyone needs to settle down and stop making irresponsible comments.
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MW | 28-Jun-2012 12:36 pm
Hysterical. But true nonetheless.
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first post is correct | 28-Jun-2012 4:54 pm
The first post at 12:27 am is correct. If half of the firm partnership is non-equity then the real "profit per partner" is roughly half of their reported PEP - which is "profit per equity partner". One half of their reported profit per equity partner of £840,000 equals a profit per partner of £420,000. Firms use non-equity partners to hide the real profitability of the partnership as a whole.
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Corporate sloth | 3-Jul-2012 0:16 am
For goodness sake you are all obsessed with profit and PEP levels. Are you capitalist robots? What happened to your real interests before you sacrificed them for the tedium of commercial law?
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Mind the Gap | 3-Jul-2012 3:16 pm
Not surprised to see profits at the Magic Circle firms increasing by 13% Clifford Chance and 7% Allen & Overy when Herbies is declining. Indeed the gap is widening.
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Herbies Insider | 3-Jul-2012 3:24 pm
Anyone who wasn't obessed with profit and PEP levels was made redundent by David Willis.
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anon | 3-Jul-2012 3:36 pm
Have they announced how many redundencies will be made after the merger with Freehills? Or will the next round of redundencies be "performance related" ETLs.
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curious | 3-Jul-2012 3:40 pm
What is ETLs?
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