It would only be a slight overstatement to say that observers were baffled when SJ Berwin announced a 40 per cent increase in average profit per equity partner to go with its 5 per cent turnover hike, from £171m to £179m.
Turnover (£m): 179
Average PEP: 626
Equity spread (£k):300-1,000
Profit margin (%):29
RPL (£k): 346
For a firm that had suffered a decline in previously strong areas such as funds, and went through damagingly protracted merger talks with US firm Proskauer Rose, the 2010-11 figures pointed to a surprising recovery – or ‘rebound’, as SJ Berwin likes to call it.
Sources both internally and externally were quick to give the obvious explanation: partner losses – not least the defection of real estate head Jon Vivian and three other property partners to Irwin Mitchell last autumn, which resulted in a smaller equity partnership and therefore a bigger profit share per partner. But in truth the global equity partnership actually increased from 79 in 2009-10 to 82 in 2010-11.
Rather, the firm’s upturn has been thanks to a programme of efficiency measures that has resulted in the profit margin rising from 23 per cent in 2009-10 to 29 per cent in the past year.
Managing partner Rob Day, widely hailed as a successful chief who has steadied the ship since his election last autumn, admits openly that the firm has had to show prudence across the board, renting out office space to Goodwin Procter and cutting the trainee intake. The result has been a 49 per cent increase in net profit, from £39m in the previous financial year to £51.7m in 2010-11.
Day’s ability to manage people as well as finances will be critical. The future for SJ Berwin is surely in a US merger, but at a firm with a reputation for disparity and internal strife, especially post-Proskauer, the pressure is on Day to keep partners together if anything is to materialise.