Revenue hits £1.359bn at Clifford Chance, PEP up 16 per cent to £1.14m

Revenue soared to its highest-ever level at Clifford Chance in the 2013/14 financial year to reach £1.359bn, 7 per cent boost on the £1.271bn turnover posted at the end of the previous financial year. 


Layton
Managing partner Matthew Layton

Average profit per equity partner is up 16 per cent from £1m in 2012/13 to £1.14m (8 July 2013). It is a return to double digit growth at the magic circle firm, the first since 2009/10 when PEP climbed 27 per cent from £733,000 to £933,000 (see table below)  (7 July 2010). 

Net profit is also up 14 per cent, from £404m to £459m after a 6 per cent drop for the previous financial year. It is the highest jump in profit in six years.

Clifford Chance is the first of the magic circle to unveil year-end figures in an about-turn from the previous financial year. It was the last magic circle firm to announce its underwhelming results for 2012/13, when profit, PEP and revenue were all down. 

At the end of 2012/13, turnover had declined by 2.5 per cent to £1.271bn. Taking into account the effect of exchange rate movements the turnover growth was flat but profit had decreased by 6 per cent, from £431m to £404m. Global PEP also fell for the first time since 2008/09, dropping 9 per cent from £1.1m to £1m (1 July 2009),

The most recent financial year marks a significant return to growth. The firm experienced growth across all jurisdictions and practice areas, with Asia Pacific the strongest performer. The region expanded revenue by 9 per cent from £179m to £195m following a 3 per cent downturn in 2012/13. When currency adjustments are taken into account growth was 14 per cent, bringing the figure to £204m.

Asia Pacific now contributes 14 per cent of the firm’s global revenue – short of targeted growth for the region, which was set at £250m by 2014 by former managing partner David Childs. The goal was shifted to 2015 by Childs last year.

Managing partner Matthew Layton, who took over the top job in May, said it was unlikely that the firm would achieve the aim within the next 12 months. “Will we get to £250m by next year? I don’t think so but targets are always going to be aspirational,” he said.

Layton said the firm had aimed to produce 15 per cent of firmwide revenue from Asia Pacific by the end of 2013/14, the equivalent of £203.85m. He said the firm was “almost there”. It produced £195m during 2013/14 and Layton said he expected corporate growth to continue in the region on the back of a market uptick.

The firm has already taken on eight IPOs this year in Asia Pacific and Layton said the firm’s new Jakarta alliance was a part of that success. The firm formed a strategic alliance with Indonesian firm Linda Widyati & Partners (LWP) in a bid to cement its presence in the region (10 January 2014).

Layton said transactional volume had also picked up in the region, though the US had been the first market to see a return to health following a year of difficult conditions. Major corporate wins in the last 12 months include a high-profile €750m (£600m) deal for media group AMC Networks as well as winning Pernod Ricard as a client.

The Americas now contributes £152m, 11 per cent of total revenue, and saw a 6 per cent boost for the 2013/14 financial year. The firm has been adding to its US practice in recent months.

Continental Europe contributed £503m to total revenue in 2013/14, jumping 8 per cent from the previous year. The region now stands at 37 per cent total global revenue, the biggest after the UK.

The firm has been focused on growth opportunities coming out of Europe as part of a three-year study with the Economist Intelligence Unit. Layton said Clifford Chance had spotted high demand for assets in Italy and Spain in particular, which experienced high demand from Asian and Middle Eastern investors.

That contrasts to the 2012/13 financial year, when tough conditions in the Eurozone led to a German revenue drop of 4.5 per cent and Continental Europe was down by 5 per cent.

The firm has a strong foothold  in the Middle East, with four offices and consistent year-on-year growth. Last year the region generated £40m, holding fast at three per cent of the firm’s global revenue, but boosted revenue by 6 per cent.

UK revenue was also up by 6 per cent and continues to represent 35 per cent of the firm’s total income.

On top of that, cash in the bank increased from £103m at the end of 2012/13 to £110m at the end of the last financial year, and the firm had no borrowings.

Layton said growth had been strong across practice areas with 25 of the firm’s largest clients working with the firm across more than 20 offices and all practice areas.

Increased confidence across M&A and capital markets helped Clifford Chance turn its results around but the new leader said a continued focus on alternative credit providers and the shadow banking industry was helping too.

The firm has moved with key insurers and clients like GE as they diversify away from traditional lending, along with other magic circle firms.

Layton said Clifford Chance had boosted results by adapting to new ways of working and continuing to plough ahead with efficiency programmes. The firm’s offshore base in India now boasts 390 staff (22 October 2012). 

That chimes with the firm’s continuous improvement programme. Last year it launched 40 projects as part of the efficiency scheme, introduced in 2012. Today it has completed almost 100 individual projects.

“One of my aspirations is to continue investing and changing the way we operate,” said Layton. The schemes include analysis of the duplication of work and altering team structures to bring down the cost base of mandates.

Clifford Chance’s partnership structure has remained stable, with an average 401 equity partners, down from 411 at the end of the last financial year. Layton said he felt strongly about the firm’s lockstep structure as “a fundamental pillar of the firm” but expected equity partner numbers to increase slightly over the upcoming year.

Clifford Chance – a decade in figures
  Turnover (£m) % change  Profit (£m)  % change  PEP (£k) % change 
2013/14 1,359 7 459 14 1,140 16
2012/13 1271 -2.5 404 -6 1,000 -9
2011/12 1303 7 431 13 1,078 7
2010/11 1219 2 381 10 1,005 8
2009/10 1197 -5 347 13 933 27
2008/09 1,262 -5 307 -33.4 733 -37.4
2007/08 1329 11.3 461 15.9 1,170 15.3
2006/07 1194 15.9 397.9 28.6 1,015 25.3
2005/06 1030 12.7 309.4 24.8 810 24.4
2004/05 914 -3.79 248 5.53 651 15.8