Herbert Smith Freehills’ (HSF) bank overdraft rose from £26m to £62.7m last year as total bank borrowings grew by more than £30m, the firm’s latest LLP accounts have revealed.
In the first set of accounts to be filed since the 2012 merger of Herbert Smith and Australia’s Freehills (21 June 2012), the firm’s LLP recorded £29.2m of cash and £110.7m of bank borrowings – up from £80.1m – in the year ending 30 April 2013. The figures do not include the Australian side of the firm.
The accounts also show that the highest paid partner at the firm pulled in £2m during the year, compared to £1.6m the year before.
In comparison, legacy Freehills is understood to have paid its top partner AUS$2m (£1.13m) before bonuses the year before the firms merged (3 December 2013).
HSF also published its global LLP accounts this week, recording total revenues of £469.4m – slightly less than the £471.2m forecast in July (17 July 2013) – in the six months from October 2012.
The firm has also published LLP accounts for its international LLPs in the Middle East, New York, Paris and Spain.
Last year was the first full financial year for HSF’s Qatar operations and also the first year that it produced revenue. The Qatar office brought in £2.4m, but costs outweighed turnover and the offices made a £677,000 loss last year.
New York also made a loss in its first year, after opening in September 2012 (3 July 2012). The New York LLP was incorporated in May 2012, and in its first 12 months of trading produced income of £6.2m. Staff costs were £5.3m and other costs amounted to another £1.4m, resulting in a £442,000 loss.
Both the French and Spanish offices saw a slight decrease in turnover between 2011/12 and 2012/3. Paris produced revenues of £38.6m last year, down from £39m the previous year, while Spain’s turnover dropped from £11.1m to £10.98m.
However profits in Paris rose from £10.7m in 2011/12 to £12.98m last year, largely due to a reduction in staff and other costs. Although staff numbers remained static, salary costs in Paris fell from £10.7m to £9.4m.
The Spanish operation in Madrid also turned a profit last year, although at £1.2m this was slightly down on the £1.4m produced in 2011/12.
Notes in the accounts reveal that Paris owes the parent LLP £23.6m, Spain owes £6.9m, Qatar £4.1m and New York £5.3m.
However none of these intercompany debts will need to be repaid in the current financial year. The accounts also note that “the current economic conditions create uncertainty particularly over the level of demand for the firm’s services”, but nevertheless the offices had adequate resources for the foreseeable future.
When asked about the firm’s borrowings a spokesperson said: “Our debt levels are in line with the operations of a firm which following our October 2012 merger is nearly twice the size of legacy Herbert Smith and in a period of significant investment including a range of integration projects, and expansion focused on our new offices in New York, Seoul, Frankfurt and Berlin.
”They are structured to meet our requirements over a number of years and are consistent with what we would expect at this point in our trading and investment cycle.”