Magic circle outfit Allen & Overy today revealed a small dip in its reported profits, as EU referendum uncertainty caused work to tail off in the second half of its financial year.
Profit before tax for the year to April slid by 1.4 per cent to £562m, although the figure was also affected by changes to the way pensions and property costs are put through the accounts. Without these changes, profits would have been flat.
Despite the drop in profits, revenue for the firm increased to £1.3bn, up 2.3 per cent. Average profits per equity partner remained stable at £1.2m.
Why it's important
The firm's London office had been performing particularly strongly, but found its workflow weaken during the second half of the financial year, after referendum woes gave clients cold feet. This most recent set of results also puts an end of the firm's winning streak for profit growth, having managed to increase profits consistently for the last six years.
However, it hasn't been all doom and gloom for Allen & Overy this year. It advised on over 1,500 deals globally across its M&A, debt and equity capital markets, loans and projects offerings, outpacing its closest rival by at least 25 per cent.
What Allen & Overy said
"The year has seen mixed markets around the world," said Andrew Ballheimer, global managing partner. "On the one hand we had an M&A boom in developed markets during calendar 2015, while on the other hand clients also had to contend with a slowdown in China, the collapse of oil and commodity prices and rising uncertainty over the UK's referendum on whether to leave the European Union.
"In that context these are another set of solid results which highlight our people’s ability to contend with fluctuating market conditions and spot opportunities for growth. It also underlines the natural hedge provided by our geographic spread and the breadth of our expertise, which has enabled us to deliver an unbroken record of revenue growth since the financial crisis."
Not all bad news by a long shot, but a sign of what effect referendum uncertainty has had on large firms.