Eversheds Sutherland has revealed a 17% increase in its net profit from £150.3m to £175.2m in this year’s financial results. The rate of growth is six percentage points lower than last year’s bumper 23% spike, reflecting the challenges which law firms currently face. Revenue also grew from £678.4m to £730.9m, matching last year’s 8% rise.
In contrast to the significant 26% jump in profit per equity partner (PEP) in 2022, this year’s performance shows a far more modest 4% increase from £1.2m to £1.29m, despite the significantly higher rate of net profit growth.
Asked why the rate of PEP growth slowed down this year, chief executive Lee Ranson (pictured) told Legal Business: ‘We have had two record years of promotions of equity partners into the business, so the number of partners has risen. PEP is a basic equation; we are investing in people and the future of the business, so the last two years reflect lots of lateral hires and promotion rounds.’
He added: ‘If you look at one year in isolation, there are always factors such as retirements and people coming in, but if you look at the overall pattern of the last five years, everything has gone up. It is not always a straight line, but the general direction of travel remains the same.’
Ranson explained which practice areas brought in the most income for the firm: ‘It has been one of those years where the breadth of the business has been a major positive for us. In the previous financial year, we saw the big transactional side of the business generate income, which this year was not as busy. However, pensions, labour and real estate all performed extremely well this year.’
He elaborated further: ‘The UK is still performing very well as it always does. The Middle Eastern practice was a standout this year, which has involved international offices rather than just a regional play. We are seeing that part of the business mature now.’
Referring to the previous year’s transactional success, he noted: ‘We did experience a decrease from the heights of last year. How quickly it recovers remains to be seen against the backdrop of rising interest rates. Our transactional team remains busy, but the industry isn’t immune to wider political and economic situations.’
Ranson also spoke about the firm’s recruitment strategy: ‘We have hired 15 lateral partners over the last year – M&A, funds and finance are key areas of our recruitment strategy, but not exclusively so. The key hire of Patrick Gerry from Ashurst as senior real estate partner in Paris has helped to connect the international offering we have, and continue our growth in Europe. Almost immediately, Patrick was involved in a multijurisdictional deal which he introduced through his own client base that he brought with him.’
Regarding the firm’s investment plans, Ranson commented: ‘We have previously announced that we put aside a £50m fund for investment, which we don’t see the need to increase while we are working on existing projects. We are looking at technological investment in things like artificial intelligence, which we are debating on as a team. We are confident that these will be dealt with by our existing cash flow.’
Asked whether the timing of the Frankfurt office launch in January was unfortunate, given the current deals market, he responded: ‘You make your decisions about where you want to be. We decided we wanted to be in Frankfurt. It isn’t a one-year investment, and we remain very excited about the practice.’
As for the next financial year, Ranson was positive: ‘We have set our budgets as all firms have done, which we want to make sure we hit, while continuing the improvement of our profit and revenue. We expect a year of continued uncertainty, but we think we will meet our targets after a good start to the year. There are many twists and turns in any financial year; this year more than most, and we expect to be thrown the unexpected in the future. Overall, we have made investments that we said we were going to make as part of our strategy, and we continue to review our year-on-year performance.’
