Field Fisher Waterhouse has posted a 20% drop in profits per equity partner (PEP) for 2011-12, alongside a 4% increase in revenues.

The top 50 firm's PEP has significantly dropped from the 2010-11 figure of £510,000 to £410,000 for the most recent financial year, while revenues rose 4% from last year's figure of £94m to £97.5m.

The firm's recently elected managing partner Matthew Lohn cited public sector spending cuts as the main reason for the drop in profitability, with a large chunk of the firm's revenues traditionally coming from government work.

Lohn also said that the firm's efforts to restructure the business in the wake of the public sector cuts had increased costs and therefore negatively impacted on profitability.

Field Fisher's investment in its German offices also contributed to costs, according to Lohn, with the firm taking a four-partner team from defunct firm Howrey to launch in Munich and Duesseldorf in April 2011. Twenty percent of the firm's revenues now come from offices outside the UK.

Lohn (pictured) said: "I am encouraged by the rise in turnover and in particular the increase in revenue from our offices outside the UK, which we are continuing to build further with a focus on our key sectors."

He added: "Across the board we are bringing in quality instructions from private sector clients with practice areas such as intellectual property, technology, funds and banking & finance in particular seeing encouraging growth. The firm has a sound platform for future expansion and increasing profitability."

The news comes not long after it emerged that Field Fisher is in merger talks with City firm LG. If the deal goes ahead, Field Fisher is expected to move out of its Vine Street office into LG's premises at More London Riverside.