The past 12 months saw a sharp turnaround in Stephenson Harwood's fortunes. Turnover rose for the first time in three years, up by 9 per cent to £61.1m. But it was the increase in average PEP, up by 45 per cent to £407,000 from £280,000, that catches the eye.

Stephensons distributes its profit on a merit-based system. This year partners at the bottom of the equity pulled in £242,000 - £2,000 more than the top equity partners received three years ago. In the same period the firm has more than doubled its equity plateau to £575,000.

Stephensons is looking to crack down on costs, in particular its property overheads. When the firm moved into its main office at One St Paul's Churchyard, it took out long leases on two properties adjacent to the building to cope with the overspill of lawyers. Now the firm has slimmed down and taken over the whole of the St Paul's Churchyard building, leaving the two extra offices empty.

The firm is subletting one and keeping the other empty. With around five years left on the leases, the premises could prove to be a drag on profit in the future.

London still dominates Stephensons' revenue. The office houses 88 per cent of the firm's partnership, accounting for 82 per cent of turnover. At the head office, aviation and real estate have performed well, with the latter picking up ABN Amro and Deutsche Bank as new clients.

On the flip side, in January 2006 the firm lost its head of M&A Kevin Dean, who quit for Kirkpatrick & Lockhart Nicholson Graham.

The improved profitability and turnaround in revenue can be attributed to reforms proposed by managing partner Sunil Gadhia, who has helped focus the firm's lawyers on fewer deals of higher value than before. For example, this year the firm's four largest commercial litigation disputes were worth more than £2bn.