Having been the stand-out City player in its weight class since the 2008 banking crisis re-shaped the global legal market, Allen & Overy (A&O) has this year seen a relative slow-down in growth as the firm becomes the first Magic Circle practice to unveil its 2012/13 results.
The 525-partner law firm saw a 0.6% increase in revenues for its year to April 2013, with income hitting £1.19bn. Profit per equity partner was also flat at £1.1m while total profits before tax were up 2% to £496.7m.
A&O managing partner Wim Dejonghe cited a noticeable improvement in the fourth quarter of the financial year with strong performances in the City firm’s emerging markets and Asian practices.
Dejonghe told Legal Business: ‘Europe’s outlook is not great so we chose to expand in the US and the emerging markets and we still want to grow further in the US. In terms of Asia, it’s all about investment such as infrastructure; there is a growing middle class so you see increased M&A activity there rather than in the established markets and this leads to arbitration work.’
He added that the firm had invested in operational and financial efficiencies. A&O’s staff costs were down from £446.8m in 2011/12 to £438.6m while its operating expenses rose to £244.3m from £238.4m in the previous financial year.
The fall in staff costs were primarily due to A&O’s Belfast support hub becoming fully operational after an initial launch in late 2011. At the beginning of 2013, the firm moved a number of support roles out of Europe and the US into Belfast, with further moves expected later this year.
In the last 12 months, the firm launched in Istanbul, Ho Chi Minh City and Hanoi, totalling 14 new offices in 11 countries since 2008. During this five-year period, turnover has grown by 7%, profit by 15% and its partnership has increased by 7%. The profit distribution will range from £627,000 for a partner with 20 profit sharing points to £1,566,000 for a partner with 50 profit sharing points. In 2012 that range was £640,000 to £1,601,000.
Dejonghe said the firm had seen a growing volume of inter-Asian investment flows. ‘There are a number of matters that have a cross border element and links to the number of offices we have opened. ‘Nevertheless, the European market is still of great importance in terms of generating the firm’s total revenues.’
The firm reported a 2.7% drop in half-year revenues at the end of October 2012, but has seen activity pick up since the start of 2013. On the current outlook, Dejonghe commented: ‘The last couple of weeks, the global markets have gotten a little nervous again on the back of stock markets dropping and quantitative easing stopping, so the early signs of recovery have been shaken. But based on the initial months, we are confident we will have an encouraging year in terms of performance.’
A&O’s results set the scene for its City peers, though it is clear that elite London firms have generally faced challenging trading conditions through 2012/13 after a painfully slow period during the summer of 2012. A&O has been the best relative performer in London’s big four international Magic Circle firms over the last five years, maintaining a heavy investment programme while its peers have generally retrenched.
See Legal Business’ Global 100 special on Friday (5 July) to find out how A&O matches up to the world’s largest law firms.
Jaishree.kalia@legalease.co.uk.
