Legal Business Blogs

DLA LLPs reveal costs up by £11m due to inflation and ‘key investments’ including Warsaw

DLA Piper International’s operating costs have increased by £10.6m to £502.7m according to the firm’s latest LLP accounts, which DLA said is ‘largely attributable to inflationary salaries and key investments into delivering effective and efficient client service’ including project management capabilities and the transfer of 200 business support jobs in the UK to Warsaw last year.

Paul Edwards, DLA’s chief financial officer told Legal Business that this wouldn’t be more than half of the £10.6m figure.

Edwards said: ‘The message back from the partners, particularly against the current backdrop is that they are pleased with the way the firm has progressed over the last three or four years and it shows some of the strength of the firm and we are pleased by that as well.’

DLA also claims that the huge increase is due to ‘significant investment into the Africa region during the year’ which has also contributed, along with other investments, to a drop in the operating margin of 1.1% to 34.5%.

Despite a drop in operating profit of 3%, from £272m to £264.8m and profit available for allocation among members dropping 2% from £265.5m to £260.8m, key management personnel which includes the senior partner, managing partner, members of the executive committee, international practice group heads, country managing partners and service directors pocketed a total of £34.3m, up from £32m in 2015. However Edwards said that due to LLP reporting standards not recognising some partners as members these figures do not represent real underlying profit amongst members and members’ equivalent which is actually up 7.6% year on year.

There was a marginal increase in DLA’s revenue for 2015/16, with turnover increasing by 0.4% from £764.1m to £767.5m which the firm said ‘was a pleasing result in current market conditions’ particularly as the drop in sterling value reduced revenue by £15.5m. According to Edwards, this was not a direct comparison because in the year 2015 the numbers were boosted by the Turkish practice and the Norwegian practice, both which were later demerged from the consolidated accounts in that year. The actual underlying fee increase in income is 3.1%. Edwards claims that the fee income growth largely came from the firm’s French and German practices which saw increases of 25% and 18% respectively.

Additionally there was a significant increase in the firm’s net assets of £23.9m to £260.4m while the Group’s cash and cash equivalents less borrowings have also increased during the year by £15.1m to £17.3m for the fourth successive year. Borrowings decreased from £33.9m in 2015 to £17.9m and the firm slashed its overdraft by £26.5m to £13.9m.

Total staff numbers at the firm have reduced, from 4,926 in 2015 to 4,916 in 2016. Despite this, the overall number of fee earners has increased, from 2,036 to 2,044.