The dramatic impact of currency markets during the 2016/17 period has significantly bolstered another law firm’s LLP accounts, with the latest beneficiary, DLA Piper International, adding £75.5m to its top line on the back of exchange rate movements last year.
This currency boost accounted for 69% of the international (non-US) revenue improvement for the year ending 30 April 2017, which was up £109.3m to £876.8m. Helped in no small part by this, profit rose to £304.4m from £260.8m, even as operating costs soared 13% to £568.6m – of which £45.9m of the £65.8m increase was again attributed to currency changes.
Chief financial officer Paul Edwards said it had been a good year for the firm, but cautioned against reading too much into any firm’s accounts from that period: ‘Currency played an enormous, enormous part in bolstering results.’
The firm’s director of finance, Claire Chellam, added: ‘In previous years our results have not benefited from exchange and it’s appeared that we’ve had a decrease, this year they are very much flattered by the weakening of the sterling and the currency movements.’
Both maintained the firm had recorded a good financial performance despite this, however: sterling accounts for 33% of the business, meaning exchange rate fluctuations can have a big impact on the headline numbers which are quoted in sterling. Stripping out the currency movements, DLA Piper’s revenue rose £33.8m, an increase of 4%. In real terms, average profit per partner increased 2%.
Edwards said the firm paid its partners in their local currency, and the finance team had introduced a hedging system 10 years ago to try and manage for exchange rate movements: ‘We have to look at what our mismatch is at the start of the year, between where profits are being generated and being remunerated, and if we’ve got a mismatch in the currency, then we’ll take a hedge on that.’
Salaries and other investments were said to have led to the increase in operating costs not attributed to currency movements. Salaries in 2016/17 rose 15% to £275.6m. Edwards said pay pressures were becoming more acute in the legal sector because of the relative strength of the dollar and improved activity levels generating demand for talent.
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 took home a total of £36.1m, up from £34.2m. Total staff numbers at the firm rose slightly to 4,955 from 4,916, of which 2,026 were fee earners – down from 2,044 last year.
The firm said most of its regions experienced growth, most notably in Europe where revenue increased £24.4m, or 7%. The UK lagged with growth below 2%, Chellam said.
‘The UK has been very busy and all the Brexit doom-and-gloom, which people talk about, has not cut in and I don’t think it will cut in through the early part of 2018,’ Edwards said.
‘Maybe we’ll get a bit more uncertainty as the end-of-year comes but I’m looking to deliver another good set of results this year.’