Cash and carry-on

The argument that currency fluctuations affect revenue figures is pretty thin

A graph of the euro-sterling exchange rate over the past year shows how the strength of the pound against the European currency has plummeted, from around 86p per euro in December 2011 to some 81p, with a trough of around 78p in mid-summer.

This goes some way towards justifying the argument of the firms that have claimed in recent weeks that half-year revenue drops are skewed by conversion rates.

Allen & Overy was first this reporting season, saying its 3 per cent turnover drop, from £566m to £582m, was actually a 6 per cent rise in euros, from €664m to €703m – and a 1 per cent rise on a constant currency basis.

Ashurst, meanwhile, argued that its 6 per cent revenue drop was only a 3 per cent fall, given currency fluctuation. And Simmons & Simmons, in announcing its 3 per cent revenue slump, claimed billings were flat on a constant exchange rate.

It begs the question of whether firms would not be better off chasing exchange rates by announcing results in the optimal currency each year. Salans switched from dollars to euros in 2007, while Hogan Lovells’ billings are roughly a third each in dollars, sterling and euros, meaning it could probably choose what to report in if it wanted.

The bottom line, in more senses than one, is what partners take home. If this is in sterling, that’s the figure that matters. Everyone is working in the same economic environment; the ‘we’re so global our figures suffer’ argument does not quite wash.