Herbert Smith Freehills (HSF) has put in its strongest financial performance since its creation in 2012 through the merger of the UK’s Herbert Smith and Australia’s Freehills, with revenue up 7% in 2015/16 to £870m.
Revenue increased by £55m from £815m in 2014/15 to £870m in 2015/16. While still lagging behind HSF’s record profit per equity partner (PEP) of £1.03m, achieved ahead of the financial crisis, PEP rose 5% last year to reach £840,000. This equates to an extra £39,000 in take home pay per partner, and equals the £840,000 PEP Herbert Smith achieved in its final year before the Australian merger.
Net profit increased 7% last year to £278.2m, which helped to fund the firm’s globalisation efforts, with openings in Dusseldorf and Riyadh in November coming just a month after the launch of its first African office in Johannesburg. However, HSF is the only major UK firm to report in a constant currency basis, meaning its performance may be less impressive in real currency rates given the strengthening of the pound against the Australian dollar in 2015. For example, last year the firm reported £815m on a constant currency basis, but its LLP filing for the year showed revenue at £793.4m.
Co-chief executive Sonya Leydecker told Legal Business: ‘These results show the merger has been a success. Our strategy is about ensuring we have capability where we need it. It’s not about adding capability in all offices. We may not have everything we want in some of our offices but like everybody else, we’re prudent about how we spend our money. It’s a growth strategy.’
HSF increased the number of panels it was appointed to this year, by 21 to 161, after being named as a go-to adviser for Weir Group, National Grid, Bank of Queensland, British Land, and Royal Bank of Scotland.
Leydecker (pictured) said that the firm’s ‘disputes group had another exceptional year’, while the finance and real estate groups ‘saw strong growth’ and projects experienced ‘a real resurgence’. Highlights include guiding ICBC Standard Bank, until recently the investment banking unit of South Africa’s Standard Bank, to the UK’s first-ever deferred prosecution agreement; defeating a judicial review against Big Four accountancy KPMG over its handling of compensation from banks that mis-sold interest rate hedging products; and getting an international arbitration claim against Spain over renewable energy subsidy changes thrown out. The firm also continues to act for RBS in a landmark claim by 40,000 shareholders over its 2008 rights issue.
Leydecker added: ‘We are seeing an increase in cross-border mandates, which we’ve been working hard on. Our top-30 clients now instruct us in more than nine offices. The strapline for our strategy is to become a world-class professional services business and that means becoming more efficient and effective in the way we run our own business,’ she adds. ‘That hasn’t at the moment meant there’s been any cost-cutting but we’re looking at processes and how we do it better. Clients want better pricing and more efficiency and that’s not going to change.’
Read more on the firm in: ‘Consumed – Can burning ambition from Down Under recast Herbert Smith for the global stage?’