BLP bank debt rises by 223% as latest LLP accounts reveal varying fortunes for UK firms

The latest crop of LLP accounts show drops in profitability and increases in bank borrowings for many of the UK 200 firms.

Net debt at Berwin Leighton Paisner (BLP) grew from £14.78m to £34.59m, its LLP accounts have revealed, an increase of 134 per cent.

The increase in net debt was largely the result of the more than tripling of BLP’s bank borrowings, with loans due within a year rising by 223 per cent from £13.94m to £45m.

Net profit at BLP last year was £52.3m on a total fee income of £231.87m. This represents a drop of 33.4 per cent on the previous year’s net profit of £78.58m and gives the firm a margin of 22.5 per cent.

A BLP spokesperson commented: “We restructured our financing arrangements in early 2013 in order to generate cost efficiencies and to provide greater capacity for future investment in the firm.  We expect borrowings to steadily reduce throughout 2014.”

BLP also saw a succession of partners leave the firm last year including employment head Fraser Younson (13 December 2013), banking and finance Matthew Kellett (30 October 2013) and high-profile private equity partner Raymond McKeeve (20 August 2013).

Despite this the average number of members grew from 190 to 212, although the profit share for the highest paid member fell by 25 per cent from £1.6m to £1.2m.

Profit was also down at Clifford Chance. The magic circle firm reported a 16 per cent fall in net profit from £382m in 2011/12 to £322m in 2012/13, the firm’s LLP accounts showed. The accounts also confirmed a 2.5 per cent drop in revenue to £1.27bn (8 July 2013).

The firm previously reported a net profit figure of £404m, down from £431m in 2011/12, with average profit per equity partner of £1m. A firm spokesperson said the difference between the LLP profit figure and the previously-announced figure was due to the fact that the LLP accounts are produced according to International Financial Reporting Standards (IFRS) and treat issues such as annuities, pension schemes and property leases in a different way from the firm’s partnership agreement.

The 16 members of the firm’s management committee collectively took home £18m last year, an average of £1.13m each. That was a slight drop on 2011/12 (4 October 2012), when remuneration to the management committee totalled £19m.

Staff costs dropped by 1.5 per cent from £566m in 2011/12 to £558m last year. Although lawyer and fee-earner headcount remained roughly stable, administrative and support staff numbers fell by 86 to 2,709 people.

Clifford Chance has 577 partners in total, of whom 475 were members of the LLP last year.

The firm’s defined-benefit pension scheme deficit continued to rise last year, with the net liability at the end of the 2012/13 financial year hitting £168m – up from £112m at the end of the previous year. Its pensions obligations were £476m, up from £379m in 2011/12.

Profit was also a key part of the LLP accounts produced by national personal injury firm Thompsons. Its LLPs reveal that just £2m of the firm’s £10.8m total profit was distributed among its 35 members last year at an average of £57,000 each. The remainder was retained in the business.

Thompsons’s turnover rose by 2.3 per cent from £82.3m in 2011/12 to £84.2m last year. The £10.8m profit gives Thompsons a margin of 12.8 per cent.

In the members’ report Thompsons highlighted the impact on its business of recent legislative changes relating to personal injury. These, it said, would “affect the level of income the firm is likely to generate in future years for its principal personal injury business”.

However the firm added that any changes were “likely to have a delayed impact due to the nature of the long case life of this type of work”.

Stephenson Harwood published its first financial statement since becoming an LLP in March 2013. The consolidated results show that firm revenue increased by 3.5 per cent over the 2012/13 financial year, rather than the 2 per cent initially stated by the firm (15 July 2013). Turnover rose from £109.3m to £113.3m during the last financial year while profit was flat at £36.8m.

The firm has bank loans of £6.2m, repayable in 32 quarterly installments of £200,000 until February 2021.

The average number of members at the firm increased from 105 to 112, with the number of fee-earners and support staff also rising – from 506 to 522 and 173 to 180 respectively. The highest-paid partner took home £895,000, a 1.6 per cent decrease from £910,000 in 2011/12.

Macfarlanes’ LLP accounts confirmed its double-digit increase in turnover from £102.3m to £114.2m (4 July 2013). Net profit rose from £29.5m to £34.6m and the firm’s highest-paid partner took home £1.4m last year, an increase of 14.3 per cent on £1.2m in 2011/12.

While staff and lawyer numbers increased by 33 to 442, an 8 per cent rise in headcount, staff costs rose by 13 per cent to £33.7m. Wages and salaries accounted for £27.9m of that figure, with Macfarlanes’ wage bill going up by just under 12 per cent between 2011/12 and 2012/13.

Lawrence Graham (LG) and Wragge & Co, which before Christmas confirmed their imminent merger (11 December 2013) also submitted their LLP accounts to Companies House in December.

Wragges’ accounts show a firm in robust financial health, with a £11.5m increase in cash during the course of 2012/13 and no bank loans. The accounts also confirm average profit per partner of £339,000, up from £330,000 in 2011/12, although the profit share of the highest-paid LLP member dropped from £648,000 to £560,000 last year. Wragges’ net profit rose slightly from £37.3m in 2011/12 to £39.5m last year.

Meanwhile LG’s net profit dropped slightly from £14.25m in 2011/12 to £14.1m last year. The firm said profitability continued to be impacted by excess space in its London office, but had managed to sublet 26,000 sq ft since the year end.

The highest-paid partner at LG received £355,000 in 2012/13, down from £420,000 the previous year.

Revenue dropped by 9 per cent to £50.6m – slightly lower than the £51.8m which the firm originally reported in July (26 July 2013). LG said 42 per cent of revenue came from clients outside the UK and its overseas offices were performing well with Monaco returning to profitability after a restructuring. Revenue from overseas offices rose by 67 per cent during 2012/13.

LG’s borrowings decreased year-on-year, from £9.4m in 2011/12 to £8.2m last year.

Other firms to have filed LLP accounts include Lewis Silkin. The firm’s accounts reveal that the firm increased its revenue by 5 per cent in the 2012/13 financial year from £39.2m to £41.3m. Net profit rose by 6 per cent, from £13.5m to £14.3m. The highest earning partner in 2012/13 took home £539,377, up by 3 per cent from £524,254 in the previous year.

The LLP accounts also showed the firm’s net debt grew significantly, from £11,809 in 2011/12 to £1.25m last year. The increase was largely due to new overdrafts of £700,000 and additional bank loans of £360,000.

MacRoberts’ LLP accounts show a largely positive year for the Scottish firm. Turnover for the 2012/13 financial year stood at £17.5m, a slight increase from last year’s £17.3m. Net profit also grew, from £5.4m to £5.9m.

Average profit per partner was stable at £128,000, but there was a 20 per cent increase in the share for the highest-paid partner – from £154,432 in 2011/12 to £193,025 last year.

The firm reduced its bank overdraft from the previous year by 45 per cent, down from £1.178m to £656,681.

LLPs have nine months after the end of the financial year to file their accounts with Companies House.