Covington profits drop 8 per cent in London as revenue stays flat

Covington & Burling’s net profit in London dropped 8 per cent over 2015, while revenue remained virtually flat.

The US firm’s London office saw net profit dip from $30.7m to $28.1m (£19.7m) in the last financial year – worlds away from its 18 per cent increase in net profit over 2014.

Despite a revenue increase of 6 per cent in 2014, the firm’s City base also saw a slight dip in turnover last year from $64m to $63.6m (£44.6m).

“We don’t get too hung up on year-by-year figures, as it costs money to invest in the firm,” said London partner and management committee member Louise Nash. “We’re where we want to be in London at the moment and we’ve seen a real step in assignments in the past year.”

The results in the City fall short of the firm’s efforts globally, with worldwide revenue growing nearly 5 per cent from $709m to $742.5m. However, global net profit also fell, from $330.5m to $327m. Average profit per equity partner (PEP) dipped across the firm’s 10 international offices from $1.3m to $1.28m over 2015, after a 13 per cent rise the year before.

“The profits are down [in London] as part of a multi-year building process,” explained Tim Hester, chair of the firm’s management committee. “We’ve taken a number of building steps, as we think it’s been more important to position ourselves as more competitive in Europe.”

In terms of headcount, Covington’s London figures contrasted with its overall metrics worldwide. There were slightly fewer Covington partners in London over 2015, falling from 23.02 to 22.03, but partner headcount grew globally from 247.6 to 256.5. Fee-earner numbers also rose worldwide from 962.3 to 978.96, with London headcount dropping from 88.57 to 85.3.

There was a growth in female partner numbers over 2015 worldwide from 57.33 to 58.64, with women representing 22.6 per cent of the London partnership. The figure is in line with the firm’s global female percentage of 22.8 per cent.

The area in which Covington expects to see growth in the coming year is in its commercial litigation team, with the firm hiring King & Wood Mallesons litigation head Alex Leitch in 2015.

Significant mandates for Covington in London last year include working on multiple transactions for AstraZeneca, such as its acquisition of Takeda, and Illumina’s partnership with Genomics England. On the litigation side, Leitch is working for “The Voice” creator Talpa Global on Hong Kong arbitration proceedings against former Chinese licensees.

The firm has also announced the hire of Carlo Kostka in its London financial institutions practice. Kostka joins the firm from UniCredit, where he was co-head of the legal department.