currency exchange

Happy 10th Birthday Clyde & Co Australia!

According to a post in Lawyers Weekly today, Clyde & Co is celebrating its 10th birthday here in Australia – “Happy Birthday!” .

How time flies; and there is no doubt that Clydes has done well here in Australia. As the LW article points out, the firm has enjoyed:

“a growth rate of 115 per cent in the country since 2018.”

Which, to be fair, is not a one-off year as the financial figures show:

“The firm has maintained yearly growth rates of over 20 per cent for the past five years.”

As sustainable growth, which over 5 years you have to assume it is, and an underlying culture that must be driving this growth, everyone would say have to say – “wow, can we have some of that!”.

As impressive as these accolades are – and I’m a huge fan* of how this one time shipping insurance firm has been able to pivot into one of the world’s leading cyber/privacy/technology firms which has resulted in Australia currently ranking its global operations as:

“Clyde & Co’s third-largest country by fees generated”

I have a concern.

And that is this:

“Clyde & Co exceeds $100m in annual revenue in Australia”

Followed by this:

As I first pointed out way back in 2013 and several times since, Australian-based law firms primarily earning/reporting revenue in Australian Dollars, but with accounting systems and tax years based on British Pounds (or US$s), face the dragon known as ‘exchange rates’.

So what does that mean?

The answer is in that chart, it is also in the Lawyers Weekly headline, but I suspect – most importantly – it is in the individual Australian partners’ direct contribution, because that chart tells me there is every chance they could be the third biggest revenue earning geographic zone for the firm globally, and a hell of a long way down the pecking order when it comes to partner distribution.

Anyhow, “Happy Birthday Clydes!”

As usual, comments are my own (*although in this case I will add that while I don’t, now ever have, worked at Clydes I do know a lot of people who do and I greatly admire the work they do).

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Photo credit: Morgan Lane on Unsplash

Currency woes strike again!

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It’s that time of the year again when law firms in the UK (at least those with LLP status) publish their annual accounts and, once again, it would appear that currency exchange fluctuations have played a significant part in the profit and loss (P&L) sheets of most with international operations (‘Currency woes hit growth‘ – subscription required).

As I pointed out back in March 2013, and then again in August 2014, the Australian operations of international law firms were not going to be sitting pretty when it came to reporting full year earnings in GBP or US$. At the time the experts were predicting mid 80 cents on the US$, and things can only be said to have taken a turn for the worse since then.

Failing a dramatic turnaround in commodity prices, it doesn’t take a genius to work out this will remain the same unless – or until – the Australian arm of international firms can muscle in on the [hopefully much more attractive US$] rates their offshore partners set up for them on advisory or transactional matters (see my post ‘Can a falling A$ make selling Australian legal services easier overseas?‘).

Alternatively, if you are an international firm with operations in Australia you could do what I have seen a number of firms doing during this reporting season and talk up you Australian earnings in “local currency contributions“. Because all things being equal, these firms have worked hard over the past 12 – 18 months to get their strategy on track and have most likely seen real growth in local currency contribution terms.