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LLP accounts: Linklaters posts fall in profits as top earner doubles income at Macfarlanes

Operating profits at Linklaters dipped 1% to £472.3m, while Macfarlanes’ highest-earning partner brought home almost £4m in 2017/18, the two firms’ LLP accounts showed this week.

In a mixed bag of financial results, the fall in profits at Linklaters came despite a 6% rise in turnover to £1.51bn. The operating profit figure reported is more than £200m lower than the £676.2m pre-tax profit the firm posted in July .

Linklaters said the discrepancy was because the published accounts consider as salaried employees the firm’s 150 partners that are not LLP members. The number of equity partners was down by two on last year to 310, according to the filing. Last year’s accounts had shown a 9% rise in operating profits to £476.2m in 2016/17.

The firm saw a 5% increase in its staff cots to £739m this year, up from £705m last year, as the number of lawyers rose by 30 to 2,487 and business support staff by 41 to 2,190. The share of profit available to the firm’s 13 executive committee members rose slightly however to £21.6m from £20.8m.

Linklaters has the lowest profit per equity partner (PEP) of the Magic Circle at £1.54m. Discussing the financial results in July, managing partner Gideon Moore said he was happy with the firm’s financial performance: ‘The increase in revenue was good and it’s an indication that the clients are supporting what we are trying to do’.

On the weakened profitability, he pointed to significant investments made by the firm in a number of areas, including the joint operations agreement with Shanghai firm Zhao Sheng.

Meanwhile, Macfarlanes’ highest earner took home £3.86m in 2017/18, a 90% increase on £2m the previous year. According to the accounts, the figure includes payments on retirement to a partner who is not a member of the senior management team.

Operating profits rose 24% to £106.27m amid a 20% turnover growth to £201.5m in a standout year for one of the most profitable operators in the City. The strong increase in profits came despite staff cost rising 12% to £59.3m with the firm growing its headcount by 25 to 585. The remuneration available for key management group members was £4.55m, up 10% from £4.11m in 2016/17.

In July Macfarlanes posted a PEP of £1.74m , up 26% and higher than most of the Magic Circle.