Clifford Chance revenue drops 2.5 per cent as PEP slips to £1m
8 July 2013 | By Joshua Freedman
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Clifford Chance has posted a 2.5 per cent drop in revenue for the 2012/13 financial year against a 9 per cent drop in average profit per equity partner (PEP).
The firm has become the last of the magic circle to announce its headline figures for the year ending 30 April after Allen & Overy, Freshfields Bruckhaus Deringer and Linklaters posted mixed revenue increases last week (5 July 2013).
Clifford Chance’s revenue was down from £1.303bn to £1.271bn, but taking into account the effect of exchange rate movements the turnover growth was flat. The firm remains the largest of the magic circle in turnover terms.
Revenue for the Asia-Pacific region was down 3 per cent from £185m to £179m, forcing the firm to push back its target articulated in 2011 of doubling fee income in the region to £250m by 2014. Global managing partner David Childs said the firm had changed the aim to 2015 or 2016, with this year’s drop standing in contrast to last year’s 28 per cent increase (3 July 2012).
The region now contributes 14 per cent of overall revenue.
Global PEP fell for the first time since 2008/09 (1 July 2009), dropping 9 per cent from £1.1m to £1m after last year’s 7 per cent rise.
The figures mark the firm’s weakest revenue result since 2009/10, when fee income fell 5 per cent (7 July 2010), with revenue on an upward spiral every year since then.
2012/13 also saw partnership profit fall 6 per cent from £431m to £404m.
Childs blamed the results on tough market conditions, especially in the Eurozone area, where German revenue dropped 4.5 per cent (3 July 2013), as well as political uncertainty in China and the impact of presidential elections in the US.
However, UK revenue was flat at £443m, representing 35 per cent of the overall business, and turnover in Spain grew year-on-year. Overall revenue on Continental Europe was down 5 per cent from £492m to £467m, or 37 per cent of overall fees.
The Middle East, down 2.5 per cent from £39m to £38m, contributes 3 per cent of firmwide revenue. The Americas were flat on £144m, or 11 per cent of global revenue.
Childs, who will be standing down as global chief next year, said disputes and restructuring had been strong but warned that this was not enough to make up for a quiet M&A year and the volatile capital markets, but he added that finance had seen a good year. The firm is now looking to serve alternative credit providers as much as traditional lenders, following in a trend set by Linklaters and Freshfields for magic circle firms to move into this area.
He also highlighted the firm’s preservation of its real estate practice in contrast to some competitors’ sidelining of it.
Childs said the firm had £103m in cash and no borrowings. 18 per cent of its non-secretarial business services staff are now based in its offshoring base in India, which has significantly increased in size (22 October 2012).
The efficiency measure comes alongside the firm’s continuous improvement programme, which has seen 40 projects to improve lawyers’ efficiency trialled and another 40 underway, with costs coming down as a result. The projects cover areas including enhancing due diligence processes.
Childs said he “can’t imagine” the firm opening a low-cost base in the UK or Ireland.
Meanwhile, the firm has increased its average number of full-time equivalent equity partners from 379 in 2010/11 and 400 in 2011/12 to 411 in 2012/13, representing a 3 per cent increase over the past year and and 8 per cent jump over two years.
Separately, the magic circle firm has still not filled the empty space in its Canary Wharf offices left vacant when the London Organising Committee of the Olympic and Paralympic Games exited it last year but said there had been interest on and off (14 May 2012).
The results follow a year in which the firm has struck an alliance with Singapore litigation boutique Cavenagh Law (11 December 2012), launched in Seoul (16 July 2012) and become the first international firm to set up a mixed local and foreign partnership in Saudi Arabia (6 March 2013).
Childs said in a statement: “This year has started well, with noticeable signs of an upturn in transactional volumes. While we may not yet be seeing a large number of high-value deals, there is a sense of increased market confidence. Our targeted investment in the right expertise and resources means that we continue to be well placed to provide our clients with the guidance and support they need to navigate a fast changing global economic and regulatory environment.”