Reporting season has opened in earnest in the City as Freshfields Bruckhaus Deringer today (5 July) reveals it has bucked the trend towards flat revenue growth among its Magic Circle rivals while Linklaters, Ashurst and Norton Rose Fulbright disclose a varying set of 2012/13 numbers.
In a year that has already seen a number of managing partners blame challenging market conditions for flat revenue streams, Freshfields reported a 7.2% revenue increase from £1.139bn to £1.22bn, while its profit per equity partner (PEP) rose by 7.6% to £1.398m.
Global managing partner Ted Burke said: ‘Over the past six years we have worked hard at making our offering across our practices, sectors and geographies as nimble and flexible as possible to ensure we can adapt to changing client demand. We feel that we are now very well-placed to provide the transactional, regulatory, contentious and risk management help our clients need, wherever in the world they want it. These strong results demonstrate how this approach is working’.
Headline deals for the 2332-lawyer firm have included its role advising the government on the long-running IPO of Royal Mail, and advising Betfair on CVC Capital Partners’ £910m takeover bid. For Q1 of 2013, Freshfields was ranked by mergermarket in third place for global M&A behind US firms Davis Polk & Wardwell and Wachtell, Lipton, Rosen & Katz, and second for global buyouts behind Kirkland & Ellis.
In contrast, Magic Circle rival Linklaters‘ turnover dropped by 1% to £1.195bn, although its PEP saw the second-largest increase among the Magic Circle, up 6% to £1.260m. Linklaters global managing partner Simon Davies said: ‘I’m cautiously optimistic. Our longer term growth will continue at a lower pace. There’s plenty of cash in the market, although not much optimism on where to deploy it. We’re very comfortable with our model. There’s not a market that we should be in and are not.’
Flat revenues amid challenging conditions are also a feature of Ashurst’s past year, which in line with many City firms reported a slow start to the year and a strong final quarter. The top 20 firm saw its turnover increase only marginally from £322m in 2012 to £323m (0.3%) over the past financial year. PEP is down by 8.6% from £744,000 to £680,000. The partner profit range has also dropped to £375,000 to £975,000 (down from £405,000 to £1,052,000 in 2012) and the firm’s net profit was down from £112m to £105m.
Ashurst managing partner James Collis said: ‘Market conditions remain challenging and this has inevitably impacted activity levels…The year was characterised by a difficult first half, a better second half and a strong last quarter.
‘In the last year, our non-UK revenue accounted for 41% of the total. We have seen a notable improvement in performance in the last year in Asia, Middle East and the US. In the UK, activity in energy, transport and infrastructure and finance has been particularly robust. That said, market conditions in Continental Europe have continued to be challenging and the weakening in the Euro has had a marked impact.’
Elsewhere, Norton Rose Fulbright disclosed a 1% increase in revenue to $1.334bn. That figure does not include Fulbright Jaworski’s revenues after the firms’ merger went live on 3 June. In Sterling terms that figure is £845.3m (converting at average exchange rates during the year), up 3% from £822.3m last year. However, the firm has declared an overall increase of 4% owing to depreciation against Sterling of the SA Rand.
Global chief executive Peter Martyr said: ‘We are happy with a 4% growth across the world, particularly given the economic climate and the huge strategic steps we have made.’
Yesterday, Allen & Overy reported a 0.6% increase in revenues for its year to April 2013, with income hitting £1.19bn and flat profit per equity partner of £1.1m.
Outside of the Magic Circle, many of the top 50 UK firms have revealed spikes in turnover off the back of recent mergers and international expansion. Top-20 firm Pinsent Masons posted a 40% increase in revenue from £221m to £309m following its merger with McGrigors last June. The firms, which would have had a combined turnover last year of around £294m, have in real terms seen a growth in revenue of 5%.
Clyde & Co, meanwhile, saw a hike in turnover of 17% as it continues to see the effects of its 2011 merger with Barlow Lyde & Gilbert. The insurance-focused firm’s revenues are up to £336.6m from £287m last financial year, having shot up by 38% the year before in the more immediate aftermath of its merger with Barlows. PEP is also up 4% this year from £558,000 to £580,000.
However, it has also been a good year for boutique and specialist firms, including litigation outfit Stewarts Law, which on 3 July announced an increase in turnover of 29.5% to £45.2m for 2012/13 and average profits per equity partner of £1.1m.
Macfarlanes, on the other hand, stands out for being one of the few firms to have announced significant increases in turnover and profit without having expanded from its single site office or made changes to its predominantly transactional practice.
The high-performing City firm posted a 12% increase in revenues for 2012/2013 from £102.2m to £114.16m. The firm, which recorded an 8% rise in revenues in 2011/2012, continues to be one of the most profitable firms in the City, with net income up 16% from £42.44m to £49.25m, equating to a PEP of £985,000 – an increase of 9% on 2011/2012. Profit per lawyer at the firm stands at £158,000 – a rise of 7%.
