Reduced commercial activity has slowed growth at Simmons & Simmons after a record-breaking 2014/15, with the firm reporting a modest 1% rise in revenue for the first half of the current financial year.
The UK top 20 firm posted a £2m increase in turnover to £142m for the first half of 2015/16, which represents a 9% increase on half-year revenue over two years, with income for the first half of 2015/16 up £12m on the £130m logged for the first six months of 2013/14.
Simmons managing partner Jeremy Hoyland told Legal Business: ‘I use the word solid – that’s how I see it – it’s not spectacular. Last year we had a big bounce and we’ve matched that and improved on it.’
With its fortunes tied to its large financial services client base, Simmons brought an end to a period of slow growth with record revenues during 2014/15. Income was up 8% to £290.1m, while profits per equity partner soared by nearly £100,000 to hit a new high of £649,000.
But with expansion across its network, particularly in continental Europe where the firm has recently launched in Luxemburg and moved into larger premises in Milan and Düsseldorf, Hoyland admits stronger revenue growth is needed to meet costs and ensure greater profitability. ‘We’ve got quite a lot of infrastructure costs coming through and obviously we need income growth to grow profits – but 1% isn’t going to do that.’
In a mixed set of results, Simmons saw improvements in transactional activity across France, Germany, the Netherlands and Spain but was negatively impacted by trading conditions in the Middle East, with instability in the region and tumbling oil prices hitting workloads in the region. Hoyland said that ‘the continent will continue to come back so that should offset some of the negative impacts we’re seeing elsewhere’.
As last year’s growth was fuelled by a barrage of financial regulatory mandates, in particular the work generated by the implementation of the Alternative Investment Fund Managers Directive in the UK in late 2013 to limit the leverage of funds and a boom in transactional work, Hoyland expects the firm’s shift towards contentious work to pay dividends.
With the firm having captured a string of high profile mandates recently, including defending RBS against a £800m claim from a property tycoon over alleged damages caused by interest rate rigging, Hoyland says Simmons is ‘starting to see some shifts in the balance of the firm’.
Because the firm’s transactional finance work is ‘quieter’ than in the past, Hoyland says Simmons is moving resource into faster-growing areas such as investigations, regulatory, IP, fintech and real estate fund work.
Hoyland concluded: ‘We’re looking to bring partners in and shift the balance of the firm towards those strong areas. I’m less and less keen on the generalists and non-sector focused activities. We need to get as much of our resources focused on sectors. Being all things to all people is not what the clients want.’