For months lawyers have been talking of unexpectedly robust trading conditions but the first clear indication from the City elite come today (3 July), as Clifford Chance (CC) announces a 5% income hike for 2017/18, while partner profits surged to £1.6m.
The first set of results from a Magic Circle outfit show revenue up from £1.54bn to £1.623bn, while the firm’s overall profits pool was up just over 13% to £626m. The number of equity partners over the year dipped from 403 to 392, driving profits per equity partner up nearly 16% from £1.375m to £1.596m. The number of lawyers at the firm also dipped to 2,905 from 2,999 last year.
Managing partner Matthew Layton told Legal Business CC had seen a strong performance ‘right across all regions and practice areas’. Last year the firm hiked revenue 11% but headline growth was largely due to Brexit-induced weakness in sterling, indicating an underlying increase in growth for 2017/18.
Layton pointed to a long list of high-value mandates around the world last year, including acting for Goldman Sachs on the $708m financing for the construction of the 4G Antioquia-Bolívar highway in Colombia, advising Spanish bank BBVA on the €5bn disposal of its real estate business to Cerberus and assisting the sponsors and underwriters on China Literature’s $1.1bn IPO. CC also advised Unilever on the $2.7bn acquisition of Seoul-based cosmetics maker Carver Korea.
For Layton, who started his second managing partner term on 1 May after being re-elected last year, it was also time to look back at his first four years leading the London law firm and the three years since the launch of its new strategy.
Since 2015, CC has hiked revenues 20% and PEP 43%, with Layton highlighting the firm’s 37% growth in the Americas. The firm now generates 13% of its revenue, or £214m, out of the Americas. ‘Everything was about how we build the culture of the firm to ensure we are delivering a very compelling proposition to the clients,’ said Layton, who argued that its ‘key pillars’ – bringing the firm together around key clients relationship, creating an inclusive culture, focusing on tech and best delivery strategies – were now clearly embedded into the firm’s culture.
More concretely, since taking over Layton also stripped back the firm’s sprawling governance structure, with the practice heads now appointed rather than elected, and overhauled (twice) its remuneration system.
Layton said continued growth in its 300-lawyer Americas operations was among the top priorities for his second term, alongside the firm’s Asia Pacific business, which generated £280m, a 2% rise in sterling terms. The strongest geographic growth for 2017/18 was, however, in the Middle East, which increased income 12% in sterling terms to £54m. The UK practice was up 5% during the year to £540m, while CC’s Continental European practice generated £535m, 6% up on 2016/17, though only 2% in local currency terms.
The current financial year will usher in change in CC’s senior leadership, with the firm electing a new senior partner in October as incumbent Malcolm Sweeting comes to the end of his second term. Veteran litigator Jeremy Sandelson and former London chief David Bickerton have been cited as likely contenders, though there are expectations that a senior figure from its continental Europe practice will enter the running.
Adding £83m to the top line in 2017/18, it is fair to say that CC could have done a lot worse. Yet with interest rates near historic lows, booming transactional activity both sides of the pond and US giants such as Latham & Watkins and Kirkland & Ellis once against sustaining strong growth in 2017, it is debatable if London leaders are doing enough to hold their market position on the global stage. Nevertheless, against what has been a poor run of relative financial performance from London leaders over the last decade, these kind of numbers will feel like a result to many in the Square Mile.