Cyclical departments increasing contribution to bottom line
As an analytical tool half-year figures may be superficial but as a litmus test of performance they show, on the basis of the figures released by LB100 firms so far, that 2013/14 will be a much improved and more benign year.
Firms including Allen & Overy (A&O), Clyde & Co and Simmons & Simmons have disclosed increases in revenue, with signs that cyclical departments such as finance and real estate are beginning to increase their contribution to the bottom line again.
A&O was the first Magic Circle firm to disclose its figures, revealing a 7.5% rise in H1 revenues to £608m. Speaking to Legal Business, managing partner Wim Dejonghe attributed the results in part to an improvement in trading conditions in most markets and the success of the firm’s litigation practice, but of more surprise was the performance of its flagship finance department.
Dejonghe said: ‘We expected a strong performance in litigation, but the one that really outperformed my expectations was capital markets.’
Dejonghe also singled out London and Asia-Pacific for praise: ‘South-East Asia has always been a strong market for the firm, but I was pleasantly surprised by our results in China and Hong Kong, considering the growth in those markets has slowed down and many players have now entered the market: there are now 254 law firms in China.’
Elsewhere, insurance giant Clyde & Co set the bar high for the top 20 when it became one of the first to release results with an H1 turnover increase of 16.5% to £169m, which it said ‘has been achieved through a combination of underlying growth and improvements in our working capital management’.
Senior partner James Burns added: ‘It’s pleasing to see that we’ve maintained the rate of growth that we achieved in the second half of the last financial year, particularly after a tough first half of 2012/13.’
Simmons, which in November 2012 blamed problems in the eurozone for a 3% dip in its H1 revenues, last month reported an 8% revenue increase, up from £121m to £130.7m.
Managing partner Jeremy Hoyland said: ‘We’ve seen more growth in northern Europe, the UK, Germany and Netherlands, where market conditions have definitely improved. For us, the Middle East has done better.’
Outside London, DWF, currently in 22nd position in the LB100, has had an 18-month period of rapid expansion, including its February acquisition of the lion’s share of Cobbetts and merger with City insurance practice Fishburns. Unsurprisingly, the firm last month posted a 57.5% increase in H1 revenues from £59.4m to £93.6m.
Wragge & Co posted a more modest increase in revenues, amid news that the firm is in merger talks with City outfit Lawrence Graham.
Turnover increased by 4% to £63m, which includes the firm’s international offices, both owned and affiliated, while the UK offices saw a revenue increase of 6% during the same period to £58m.
Wragges is so far unusual in disclosing its mid-term profits, which it has indicated are up 15% on this time last year.
‘What economists have been saying about growth seems to have been borne out by law firm results.’
Peter Jackson, Hill Dickinson
Managing partner Ian Metcalfe attributes much of the firm’s financial success so far to strong performances from real estate and dispute resolution, and said October 2013 was the highest billing month since the same month in 2008.
Just outside of the top 30, Hill Dickinson posted a 6% H1 rise in revenues from £51.9m to £54.9m, after issuing a £2.8m cash call to partners in August following a year of heavy investment, including opening offices in Monte Carlo and Hong Kong.
Managing partner Peter Jackson said: ‘There would appear to be a turn in the economy. There has been growth across the board. What economists have been saying about growth seems to have been borne out by law firm results.’
With the scars of the recession so raw, it is unsurprising that senior figures are nervous about appearing too confident and Peter Crossley, European managing partner at Squire Sanders – which doesn’t release half-year figures – said: ‘Trading’s been a challenge, but we have found that there has been more than enough evidence of a pick-up in Europe in transactional work. I’m not trying to suggest there will be any significant increase any time soon, but it is definitely better than a year ago. On the contentious side, litigation and international arbitration continues to be very active.’
However, Jackson added: ‘[H1] figures can hide a multitude of sins. What you can’t tell is profitability, or how many of those firms that are reporting are relying on the overseas rather than UK economy.’
| Firm | Revenue |
|---|---|
| DWF | £93.6m (57.5%) |
| Clyde & Co | £169m (16.5%) |
| Osborne Clarke (group) | €71.6m (12%) |
| Stephenson Harwood | £57m (10%) |
| Simmons & Simmons | £121m (8%) |
| Allen & Overy | £608m (7.5%) |
| Field Fisher Waterhouse | £49.9m (7%) |
| Weightmans | £41m (7%) |
| Hill Dickinson | £54.9m (6%) |
| Gateley | £21m (4%) |
| Wragge & Co | £63m (4%) |