Irwin Mitchell‘s first LLP accounts since the acquisition of Thomas Eggar in December last year show the firm’s profit on ordinary activities has dropped by 59% to £8.4m from £20.6m.
Irwin Mitchell claims the sharp drop in profits is down to a deliberate decision by the board to ‘fast-track the integration of Thomas Eggar which has led to a short-term impact on profitability in FY16 but which we view as being the right decision longer term to enable us to maximise the return on synergies between Irwin Mitchell and Thomas Eggar as soon as possible.’
The decrease in profits is despite the fact that LLP revenues have increased by 7% to £199m from £186m, largely as a result of the Thomas Eggar acquisition – the largest in the firm’s history. According to the report, the firm also borrowed £29m, which is due within two years.
According to the firm’s business review: ‘The merger advanced a number of strategic objectives for the LLP, including adding new offices and experts in the core London and south east market; adding significant strength and depth to the business legal services division; and adding the specialisms of a number of Thomas Eggar teams to the existing private client and private wealth experience at Irwin Mitchell and Berkeley Law, acquired by the firm in November 2014.’
The LLPs also state that members are: ‘required to contribute capital amounting to 30% of notional salary plus any guaranteed profit share within two months of becoming a partner as and when required by HMRC legislation.’
In addition to turnover, the accounts reveal the firm’s operating costs at 30 April 2016 rose – from £60m to £70m, while other operating income rose from £72m to £86m.
On the other hand, operating profit fell from £53m to £45m, while profit for the financial year before members’ remuneration and profit shares fell from £53m to £44m. Goodwill since the Thomas Eggar merger was valued at £24m, up £19m from the year before.
According to the accounts, the amount paid out to the member with the largest entitlement to profits was £4.2m, down from £14.6m. The accounts said that this related to a corporate member.