In review 2020: Resilient performance highlights long-term strategic progress
25 August 2020
We achieved strong financial performance in the year to 30 April 2020, as a buoyant year was disrupted latterly by the Covid-19 pandemic. Our resilience results from years of strategic investing to deliver our clients the best service – whether through our global network of offices and innovative ways of delivering legal services, or in nurturing talented people and fostering a diverse culture.
While economies go through booms and busts, our long-term priority remains to reinforce our position as a leading global law firm and a trusted partner to our clients. During the year to 30 April 2020, we made strategic hires around the world, notably in US Litigation, pursuing our objective of expanding our US presence. We continued to invest in Asia, which will be the world’s fastest growing region in the next 15 years, with developments such as our strategic Joint Operation with Chinese firm Shanghai Lang Yue Law Firm. And, from a sector perspective, we focused on building our capabilities in private equity, including infrastructure and debt funds, recognising its growing role in financing the global economy.
In addition, we further sharpened our focus on diversity and inclusion. As a talent business, we are committed to hiring from the whole population, not only to access the best lawyers but also because it strengthens and enriches our values, our culture and the creativity of our people, and enables us to do the best work for our clients. We are making good progress in increasing diversity but recognise that we have more to do.
Highlights from the past year
The results of our strategy were evident in A&O’s financial results for the year ended 30 April 2020, which saw a strong performance in the year before the global markets were impacted by the pandemic.
Client revenue grew by GBP65 million (4%) to GBP1.69 billion (USD2.14bn; EUR1.93bn). However, the combination of declining revenues in the last two months of the year and impact of the Covid-19 pandemic on our global markets caused profit before tax to decline by 2.5% to at GBP690 million (USD 875m; EUR788m).
There were strong performances across all practices, with litigation and real estate having a particularly good year. Similarly, all regions, delivered a strong performance, especially the US and Europe.
It was another year of growth for Advanced Delivery & Solutions (AD&S), building on notable advances in 2019, with a revenue increase of 15%. Among the highlights were the introduction of a fourth cohort of legaltech companies into Fuse, A&O’s collaborative tech innovation space, and the launch of a number of solutions to help clients solve complex challenges. These included IBORmatrix, an end-to-end solution to help with transitioning from LIBOR, and Rulefinder e-signature, a subscription service that provides a law and practice analysis of e-signing across 48 jurisdictions. AD&S also launched a tech-based contract review service to help clients understand which, if any, of their contracts allow relief for non-performance under force majeure provisions during the Covid-19 pandemic. In addition, A&O Consulting continued to grow in revenue and number of consultants, notably launching in Asia Pacific.
In our view, AD&S is well placed to continue its strong growth. We believe its suite of offerings will be in demand over the next few years, as clients seek to introduce ever greater operational efficiencies in how legal services are delivered.
Moving quickly to adapt to the uncertain environment, we reduced outgoings at the start of April. This included managing profit distribution to partners, increasing partner capital levels and deferring certain investments. As a result, A&O ended the year in a strong position to navigate the volatile market conditions that lie ahead.
Throughout the Covid-19 crisis, the welfare of A&O’s people has been our main concern. Most of our people around the world worked from home during the lockdowns and we encourage them to continue taking every necessary precaution in the future, putting the emphasis on individual choice.
We are managing a cautious, phased reopening of our global offices, depending on the state of the pandemic locally, although we intend to offer staff greater flexibility in how they use the office even after the pandemic crisis passes. Our lawyers concluded transformational, complex deals during lockdown, showing that our people can work and collaborate seamlessly, whether they are located physically together, or have to work remotely and separately.
Looking to the future, we expect tough trading conditions in the year ahead. The prospects for the global economy remain uncertain for the foreseeable future. Even during these testing times, the intrinsic strengths of our business – our diversification and depth across both geography and practice area, our expertise in complex, cross-border work, and our balanced approach to strategic investment and financial prudence – give us confidence in our resilience.
What we have delivered for our clients
Many of the transactions we advised on during the year show how our investments and record of innovation have enabled us to help our clients achieve their goals through transactions that are often highly complex and involve multiple jurisdictions. Below are a few of the notable public transactions.
One of the largest deals we worked on was the acquisition by LVMH, one of the world’s leading luxury groups, of Tiffany & Co, the global luxury jeweller, where we advised the banking syndicate. Our lawyers in Paris, New York and London worked together on this EUR15 billion equivalent loan facility, one of the year’s flagship deals in the European loan market.
In the United States, we advised WillScot Corporation on its merger with Mobile Mini, Inc to become a leading provider of modular space and portable solutions. This illustrated our US capabilities across a range of fields. The New York team advised on all areas of the transaction, including financing, SEC and antitrust matters.
Even during lockdown, A&O continued to deliver transformational transactions for clients. For instance, we advised Liberty Global on its GBP31 billion deal with Telefónica to merge Virgin Media and O2 to create a business serving 46 million video, broadband and mobile subscribers. More than 50 of our lawyers worked remotely to conclude this massively complex deal, which was announced in May 2020, shortly after our year end.
And, in the closing weeks of our financial year, we advised the Republic of Indonesia on its USD4.3 billion global bond offering to partially fund its Covid-19 relief and recovery efforts.
In addition, we acted for Eni SpA, and three of its Nigerian subsidiaries, in a highly complex and high-value case in the English High Court in which the Federal Republic of Nigeria is claiming over USD3 billion from our clients and others in relation to allegations that they secured licensing agreements for a Nigerian oil block by bribing officials. We advised our clients to challenge the jurisdiction of the English court. Following a three-day virtual hearing, the judge granted our application, agreeing that the court should decline jurisdiction.
In the fast-developing area of environmental, social and governance (ESG) issues, we advised clients about risk management and strategy, due diligence, reporting, dispute resolution and sustainable finance. For example, we worked for the lead banks managing Export-Import Bank of India’s USD500 million green bond issue, provided advice to one of the world’s largest mining companies about human rights-related risks in Africa and Australasia, and to numerous banks and fintechs on implementing anti-money laundering policies and procedures.
Turning to technology and new ways of working, our long-term investments in this area have put us in a strong position to continue supporting our clients and to set the innovation agenda for the wider legal market. AD&S is transforming the way legal services are delivered through new solutions, technology and resourcing.
Demonstrating the difference these services make, we advised Santander on the first end-to-end blockchain bond. Santander was supported by Nivaura, a fintech company that digitises and automates key capital markets processes. Nivaura was also one of the first companies invited to work in Fuse. The USD20 million pilot transaction is settled on the public Ethereum blockchain.
What we have done for our people
As a market-leading global law firm, we are proud to lead conversations on diversity, inclusion, mental health and wellbeing – both in our profession and with clients. Diversity and inclusion is a strategic priority for A&O, and we firmly believe that leadership from the top makes a difference. Our diversity and inclusion programme has three long-term goals: a better gender balance, greater racial and ethnic representation, and greater LGBT+ inclusion.
In terms of gender, we made substantial progress over the past year. Forty five percent of our partner promotions were women, which is a significant improvement on just a few years ago. We also embedded accountability for achieving our gender diversity goals during the year, refining our processes and supporting women from the earliest stages of their careers. Over time, we hope that half of all partner promotions will be women. Moreover, we are delighted to be named a top employer for women in the UK for the second year running by The Times Top 50 Employers for Women, produced in partnership with Business in the Community.
Turning to race and ethnicity, the tragic death of George Floyd in the United States led to an increased focus on the Black Lives Matter movement. This shone a real spotlight on the experiences of black people not only in the US but in communities across the world and gave even greater impetus to our efforts to make real and tangible changes within our own business.
While about 30% of our graduate recruits in the UK are from ethnically diverse backgrounds, the black community is still under-represented in this group. We plan to increase this to about 35%, including 10% black but our main challenge lies in a relatively low rate of retention. We need to change this by making ethnically diverse people feel more at home here, so that they can have long-lasting and fulfilling careers.
We have stepped up our work on race and ethnicity, using data, focus groups and external research to help us better understand how we can create a more inclusive environment. We intend to make sure minorities are more equally represented, particularly at senior levels. In the UK, we are reviewing various processes to reduce bias and we have implemented a successful mentoring scheme, as well as developing our networks and early career support for young colleagues from ethnic minorities.
We are proud to say that the third strand of our diversity and inclusion programme – creating an inclusive working environment for our LGBT+ community – has been recognised for its impact. We were named a 2019 Stonewall Top Global Employer for the second year. Additionally, in the US, Yale Law Women recognised A&O in its annual Top Firms Report for excellence in both hiring practices and LGBTQ+ representation.
Finally, as a partnership we have a responsibility to make sure that our employees are fit and healthy – mentally and physically. Having limited social interaction because of working from home is challenging for some, and our HR team is striving to make sure that our people continue to have opportunities to do interesting work and maintain their training.
Through our Minds Matter programme, we aim to promote a culture where our people can flourish and deliver sustainable high performance. We launched Mindful Leader training for partners in the year, and appointed more than 40 mental health advocates, who are partners and senior support professionals.
What we have done for our communities
Our lawyers delivered 120 hours of pro bono and community investment work every day last year, amounting to 43,938 hours worldwide.
Responding to the Covid-19 pandemic, we extended our partnership with Hope & Homes for Children to July 2021, beyond the planned two-year time frame of September 2020, to support the charity at this challenging time.
Our impact on the environment
One outcome from the pandemic was that working from home without business travel helped to cut the firm’s CO2 footprint. Beyond this, we continued to demonstrate our commitment to environmental sustainability by seeking to reduce our most material sources of CO2 emissions and supporting UN Sustainable Development Goal 13 – Climate Action.
We purchased Gold Standard Voluntary Emissions Reductions credits to offset the CO2 emissions from our global air travel emissions. Our reported global carbon footprint decreased by 5%, during the calendar year 2019. And just over 75% of our global electricity consumption was supplied from renewable sources in 2019. Going forward, we plan to offset all our global residual CO2 emissions, including aviation emissions.
The final months of the last financial year tested A&O’s adaptability and we would like to thank all of our employees for their versatility in moving from a bricks-and-mortar firm to a virtual firm in just a few days. In particular, our non-legal staff’s outstanding effort ensured that we continued to help our clients to conclude highly complex cross-border transactions.
We would also like to thank Andrew Ballheimer, who stepped down as global managing partner on 30 April 2020, for his achievements and wise counsel over the four years he held the role. Andrew was an exemplary custodian of the firm. His astute judgement, his unrelenting commitment to client care and focus on progressing our long-term strategic goals provide a solid foundation and a well-balanced platform for future growth.
The next 12 months will undoubtedly bring challenges and opportunities. We stand shoulder to shoulder with our clients, as we have done throughout our 90-year history. We will continue to help them to navigate any volatility that may lie ahead. Our strong financial performance coupled with our robust and swift response to the pandemic demonstrate the strength and resilience of our people, and our flexible and prudent approach to managing our firm.
Wim Dejonghe, Senior Partner
Gareth Price, Managing Partner