Legal Business Blogs

‘There’s a flat legal market’: Hogan Lovells blames low revenue and profit growth on currency fluctuations

Nearly six years on from its transatlantic union Hogan Lovells continues to post modest financial growth as its results today (16 February) showed revenue for the calendar year increased by 2.3% to $1.82bn in 2015 from $1.779bn in 2014 while profit per equity partner (PEP) increased by 2.7% to $1.250m from $1.217m.

Meanwhile revenue per lawyer (RPL), decreased by 4% to $723,698 in 2015 from $753,974 in 2014. Notably last year chief executive Steve Immelt (pictured) said he aimed to increase the firm’s RPL figure ‘so that it’s tracking more closely our increase in revenue.’

The firm said in a statement that with more than 40% of billings in London and continental Europe, the stronger dollar and weaker euro and sterling adversely impact results when reported in dollars. Factoring out the impact of currency on the results, revenue increased by 8.2%.

Immelt said: ‘We’re pleased to have revenues up but you really have to take into account the currency effect that underlines that – only half of our billings are in dollars so when other currencies go down it dampens our dollar reporting. Our PEP is also affected by the number of markets we operate in. We succeeded our targets.’

‘We continue to work on the profitability of the firm – that’s like saying the sun is coming up tomorrow. It’s important we continue to be focused on levels of profitability and focus on RPL. Globally the sense is there’s a flat legal market – it’s very different to how it was ten years ago.’

Another senior management figure at the firm told Legal Business: ‘One of the issues when you’re full service, and in most places, doing most things, you get the advantages of that, but not the complete highs it brings to people in certain economic conditions. You can’t fully utilise opportunities compared to those firms who specialise.’

It is the second consecutive year of disappointing financials after last year the firm posted a modest revenue increase by 3.6% to $1.779bn from $1.718bn in 2013, while PEP was flat with a 0.8% uptick to $1.217m.

Geographically, a revenue breakdown showed the Americas represent approximately 50% of total billings, while London and Continental Europe together made up 43%, and Asia and the Middle East totalled 7%. Immelt added that the firm has no plans to open any offices this year.

By practice, corporate represented approximately 32% of total billings, while the litigation, arbitration and employment group made up 28%, followed by government regulatory at 16%, finance with 14% and IP, media and technology generating 10%.

Internally the firm promoted 24 last January and another 24 this year, as well as an additional 35 lateral partner hires globally in 2015 – of which a third were recruited in Asia. The firm intends to make ‘further significant investments there in 2016.’