Legal Business Blogs

Cash levels drop at Hogan Lovells as PEP dips below £700,000

The international arm of Hogan Lovells, which covers all offices outside the Americas, suffered an 11% fall in profits per equity partner (PEP) in 2014/15 as revenue and profits suffered.

Revenue generated by Hogan Lovells International dipped 2% from £604m to £591m in the 12 months to 30 April 2015, with operating profit down 8% to £184m as a result.

While the firm maintained its debt free position, cash flow was heavily impacted by the drop in income, with cash at the end of the year 84% below the £57m balance at the end of 2013/14. On 30 April 2015 it was just £9m. Nonetheless, the group’s £60m bank facility remained untouched.

Costs also rose, with staff expenditure up £3m to £254m last year despite a drop in the number of employees. With profits dented, PEP across the group fell by 11% to £698,000. Key management took an even bigger hit, with take-home pay across the firm’s biggest earners down 12% to £7.9m.

The filing also shows that partners injected £7.2m over the period to take members’ capital to £48.8m. This is largely due to the tax changes imposed on non-equity partners at LLPs, introduced by UK HM Revenue & Customs which impacted the majority of UK law firms.

The international arm is off the pace compared to its US unit, which carried the firm towards global growth in 2014. The firm said in its filing that ‘there remains an on-going risk of the economic environment having an adverse impact on some of our clients’.

The accounts state: ‘Our underlying business performance over the year has been satisfactory, exhibiting the benefits of our global capability, the continued demonstration of the strength of our client work across our practice areas, industry sectors, regions and the positive effects of tight cost control in the current economic conditions.’