Clifford Chance (CC) has become the third Magic Circle firm to announce its 2017 results, with revenues up 11% to £1.54bn while profits per equity partner (PEP) has leapt to £1.37m.
The City giant boosted its income by £154m, from £1.39bn in 2015/16 to £1.54bn. PEP, meanwhile, jumped from £1.23m in 2015/16 to £1.37m, while total profits rose by 12%, from £494m in 2015/16 to £554m.
As with most leading London firms, dramatic swings in currencies against Brexit-laden sterling has had material impact on its growth figures this year, though CC will be cheered by a 4% real terms increase in its core City market and an emphatic increase in profitability. Stripping out the currency impact the firm said that its revenue grew 2% on a like-for-like basis, while its net profit was up 8.5% in real terms.
Both the UK and Continental Europe represented 33% of the firm’s revenues with both regions bringing in just over £505m. Asia Pacific brought in £276m for the firm, up by 23% year-on-year in sterling reporting. The Americas generated £202m, with £49m coming from the Middle East.
In like-for-like terms, revenues in the US were flat, while its mainland European practice saw a 2% decline in income, which was attributed primarily to restructuring of its practice in Germany. Asia was a bright spot for the London-bred firm for the second year running, with the practice hiking its revenues by 7% in real terms.
CC managing partner Matthew Layton said that the firm expected to see a more robust performance in its US practice in 2017/18 after a period of substantial investments.
Layton (pictured) told Legal Business: ‘We are pleased with the results this year. The highlight is focusing on the profit and PEP number, revenue is obviously good but was boosted by the exchange rates impact.
‘There was no region that was down or that was impacted particularly, and London put in a resilient performance with a strong profit performance. That was after the impact of the referendum where we did see activity levels slowdown in the lead up to the referendum, then we had a more prolonged summer impact on the cycle. But September came back very strongly and we saw a very strong second half to the year.’
Key transactional matters for the firm last year included acting for the winning consortium on National Grid’s £13.8bn sale of its gas pipe network; advising on the second largest European real estate transaction on record, the €12.25bn acquisition of pan-European logistics outfit Logicor from Blackstone to China Investment Corporation; and advising the underwriters on 2016’s largest initial public offering of $8bn for Postal Savings Bank of China.
Key contentious instructions include winning the high-profile instruction to defend Rupert Murdoch’s News Group Newspapers in its hacking litigation; and representing 15-company consortium FairSearch in the European Commission probe into Google, which since resulted in a record €2.4bn fine for the search engine for abusing its dominance.
The key result for CC will be regarded as the increase in profitability, a core target under Layton’s leadership, as the firm has moved to keep its ‘share price’ competitive to retain key partners from predatory US rivals.
As Legal Business revealed last month, the firm has just agreed a shake-up of its lockstep partnership that will allow a select band of top performers the equivalent of 150 points, against a current ‘core ladder’ of 40-60 points. A growing number of partners in less profitable markets are now capped at 70 points.
Earlier this week, Freshfields Bruckhaus Deringer posted flat turnover for 2016/17 with a top line of £1.33bn. Net income also dipped by 1% to £612m but PEP increased by 5% to £1.547m.
Linklaters was the first of the Magic Circle to deliver its results this year, with global revenue up 9.8% to £1.44bn. Linklaters’ pre-tax profit stood at £664.4m, while PEP also increased 8% to £1.51m. CC’s old finance rival Allen & Overy is set to unveil its results on Friday (7 July).
While partners will welcome a credible performance on the bottom line, the ominous trend for CC and its City peers is that the 2016/17 period has seen key US rivals continue to widen the profitability gap with UK leaders.