DAC Beachcroft senior partner Simon Hodson has hailed the firm’s “profitable year-on-year growth” despite the fact that the newly merged firm’s debt has tripled.
In the first set of accounts to be filed since the 2011 merger of Beachcroft and Davies Arnold Cooper (DAC) (31 October 2011), the firm posted a revenue rise of 22 per cent to £163.5m for 2011/12, according to its LLP accounts. However, the comparison is with Beachcroft’s 2010/11 turnover of £134m and does not take account of DAC’s standalone turnover figure.
The firm said the addition of DAC’s turnover to Beachcroft’s added approximately £21m to the top line, with the remaining £8.5m representing organic growth.
However, in a statement the firm admitted that the cash position of the business has worsened over the course of the year, with net debt increasing from £10m in 2010/11 to £34m in 2011/12 - £29m of which is bank loans payable within a year.
The firm said the majority of the increase was down to client debtors and pledged to tackle work in progress.
Client debtors rose from £38.9m to £71.2m and bank overdrafts increased from £5.1m to £29.5m.
The accounts also showed that following the merger process, members put in £7.8m of capital and a further £8m of net assets was acquired. But DAC members were also repaid £8m in capital.
The combined firm now has a £1.8m property bill – up from £6.7m in 2010/11.
In a statement the firm said: “The firm continues to drive a more stringent revenue management process, including the proposed implementation of new IT systems to enable better debt collection.”
At a group level, operating profits before exceptional items were £30.8m – compared to pre-merger Beachcroft profits of £27.4m and DAC profits of £8.3m (28 June 2012).
The firm said the profit figure to be shared out to partners had fallen from £25.4m to £21.9m because of one-off costs associated with the merger.
Hodson said: “The overall picture painted by these accounts is of a strong business with profitable year-on-year growth. They represent a very solid performance during a period not only of major strategy implementation and structural change but also continued investment and growth in the business.
“In the prevailing atmosphere of financial unease, DAC Beachcroft continues to invest for the future and these accounts are testament to the firm’s long-term ambition.”
The Lawyer has reported the merged firm’s average profit per equity partner as £321,000 for 2011/12.
The accounts show that the figure excludes the impact of a corporation tax charge and a £6.5m onerous lease charge. The taxation charge is due to the fact that the business now owns or controls a number of profit-making subsidiaries.
The firm added that it had a solid balance sheet with “acceptable ratios” and that its goodwill and fixed asset increases showed an “acquisitive” business investing in the future.
Staff costs have risen from £72.2m to £85.9m because the number of fee-earners has risen form 906 to 1,301, although support staff numbers have remained flat at 541 for 2011/12 compared to 535 in 2010/11.