A&O posts record results to £1.23bn but revenue rise lags half year performance

Total revenue at Allen & Overy (A&O) rose by just 2 per cent last year from £1.21bn to £1.23bn in 2013/14, despite the firm having posted a 7.5 per cent rise at the half-year stage.

Managing partner Wim Dejonghe

Average profit per equity partner (PEP) stood at £1.12m, a 7 per cent increase on the previous year’s figure of £1.05m, while total profit before tax also rose by 7 per cent to £532.1m from £496.7m in 2012/13.

Last November data from A&O hinted at a stronger year when it announced a 7.5 per cent increase in revenue for the first half of 2013/14, with the firm turning over £608m in the six months from 1 May (20 November 2013).

At the time managing partner Wim Dejonghe told The Lawyer that while the recovery had been slow in Continental Europe, A&O had enjoyed strong performances in the Asia Pacific region, particularly in Hong Kong and China, as well as in London.

Commenting yesterday, Dejonghe said the first three quarters of the full year had been “very strong”, but that there had been “some softening” during the final quarter of 2013/14.

“The global economy has begun to recover, but that recovery has not been uniform across all markets,” added Dejonghe, who also said that A&O’s “natural hedge” from its “broad geographic and practice spread” had delivered “another consistent result”.

Dejonghe pointed to “particularly strong performances” in the firm’s Germany, London, Luxembourg, Singapore and UAE offices, driven by increasing activity in banking and litigation.

A&O’s financials, which are a record for the firm in terms of both revenue and total profit, represent consistency in that for the past five years these metrics have both risen. However, its most recent results are likely to leave it trailing behind other members of the UK’s big four firms in terms of PEP.

Yesterday Clifford Chance became the first magic circle firm to post results for the 2013/14 financial year, posting a 7 per cent rise in revenue to £1.359bn and a 16 per cent increase in PEP from £1m in 2012/13 to £1.14m (1 July 2014). Both Linklaters and Freshfields Bruckhaus Deringer are expected to release their annual financial results next Tuesday (8 July).

Dejonghe highlighted the firm’s Belfast support services and legal services centre as having played an instrumental part in delivering A&O’s record financials.

“Belfast helps us bring down costs and the number of matters worked on there has doubled over the past year,” added Dejonghe. “The fact that we’re able to offer that sort of work means we retain more work within A&O – in effect we reaggregate it within one firm. Clients really appreciate that.”

This week The Lawyer Management Guide to Delivering Legal Services Differently (27 June 2014) found that many clients preferred working with a single firm to deliver disaggregated legal work, a finding that was also borne out by research from CSO contained in the feature Alternative Workstyles (16 June 2014).

“What has really delivered in terms of performance this year is our focus on ensuring our business model is flexible enough to deliver legal services in the way our clients want,” said Dejonghe. “This has resulted in an increasing return on our investment from our legal services centre in Belfast. Over the past year the number of matters it has worked on has doubled – and we expect to see that growth continuing in the years ahead. During the year we also launched a new contract lawyer business, Peerpoint (25 November 2013), which will provide even greater flexibility in dealing with the variable nature of peaks in client demand.”

A&O said that demand for multijurisdictional work continued to grow last year, with nearly 70 per cent of the firm’s work now involving two offices or more, up from 67 per cent in 2012/13. Matters involving five or more countries now constitute more than a quarter (25.6 per cent) of all work, up from 23 per cent the year before.

“We’ve been tracking that statistic for 10 years and it keeps growing steadily,” added Dejonghe.

A&O’s equity partnership over the last 12 months rose by two from 442 to 444 while the total number of partners rose by one to 526. Revenue per lawyer rose by 6.1 per cent from £429,705 to £455,929 while the firm’s top of equity rose from £1.56m to £1.67m. The bottom of equity also rose from £627,000 to £669,000.

During the year A&O became the first magic circle firm to enter into Myanmar, with the launch of an office in Yangon (6 May 2014). It also recently announced it is planning to open new offices in Barcelona (4 February 2014) and Toronto (9 June 2014) this financial year.

Allen & Overy, a decade in numbers
  Turnover (£bn) % change Profit (£m)  % change PEP (£m) % change
2013/14 1230 2 532.1 7 1120 7
2012/13 1210 0.5 497 2.26 1050 -0.9
2011/12 1183 0.8 486 6.63 1060 -3.6
2010/11 1182 12.6 455.8 17.5 1100 0
2009/10 1050 -3.76 388 -0.5 1100 5
2008/09 1091 7.38 390 -12.8 1047 -6.7
2007/08 1016 14.5 447 23.1 1122 9.46
2006/07 887 20.5 363.2 34.5 1025 30.1
2005/06 736 10.5 270 22.8 788 20.1
2004/05 666 2.15 219.8 12.1 656 7.72