The second Magic Circle firm to post its financial results, Allen & Overy (A&O) has moved ahead of peer firm Linklaters with an annual revenue of £1.28bn for the financial year ending June 2014/15, up £47m, or 4%, from £1.23bn.
The firm’s profits per equity partner (PEP) moved up 8% to £1.21m from £1.12m, while its profit before tax was up by £38m to £570m, an increase of 7%.
This was despite the firm being ‘slightly slowed down because of currency moves’, according to global managing partner Wim Dejonghe (pictured). Using ‘constant currency figures’, the firm said revenues were up 8% to £1.327bn, while PEP was up 13% to £1.26m.
The strong results are the latest in a series of year-on-year increases in revenue and profits since 2009/10 when the firm suffered a slight dip in revenues to £1.05bn. Since then, the firm has managed to grow firmwide turnover by 22%.
The results puts A&O ahead of Linklaters, which posted largely flat financials yesterday (July 1), with a 1% rise in revenue to £1.27bn, while PEP rose just 2% from £1.34m to £1.37m in the 12 months to 30 April.
Dejonghe told Legal Business that the last financial year particularly saw strong performances in its London, UAE and Luxembourg offices, with standout growth for dispute resolution globally. ‘Five years ago, disputes was looked at as a domestic practice but this has gone international because of the increase in regulatory work and investigations.’
Around 71% of the firm’s work is cross-border, involving two countries or more, while 25% of all matters involve five or more countries. Nevertheless, Dejonghe pointed out that Russia remains particularly difficult.
‘Russia is slower and a bit of a challenge. I also have a bit of worry about the oil prices in the Middle East, which will be a challenge going forward, but the rest of Continental Europe is still going strong,’ he said. A&O offered redundancy packages to four associates, including two senior associates, in its Moscow office as it consolidated its capital markets practice within its broader finance offering in late October last year.
However, A&O continued to grow its international footprint in the past year with office launches in Barcelona, Johannesburg and Toronto, and the firm also recently confirmed its intention to set up shop in South Korea.
Dejonghe said the firm also plans to ‘grow steadily’ in the US and increase its US high yield capability internationally to support its capability in the states, particularly in London, Hong Kong, Singapore, Germany and Paris. Clearly this is a key area of focus for all the magic circle, with US elite firms making strong inroads in their London home turf, which is contributing to their impressive revenue and profit growth globally. However, the firm saw New York-based Robert Kartheiser, who served as co-head of A&O’s Latin America practice, and capital markets specialist Cathleen McLaughlin, who was head of the New York office’s international capital markets group, exit the firm to join Paul Hastings in March.
On the efficiency front, A&O Belfast – its legal and support services centre in Northern Ireland – has also grown in line with the firm’s targets and now boasts a 400-staff team that contains between 80-90 trained legal advisers.
‘Forty per cent of our partners globally have worked with the Belfast office and around 80% of our London partners also regularly use Belfast,’ said Dejonghe.
Adding to the bottom line success has been the development of Peerpoint, the firm’s contract lawyer business, in 2013. In September last year the firm appointed Richard Punt, formerly managing partner of growth and markets for Deloitte, to spearhead the initiative.