Operating profits at CMS Cameron McKenna Nabarro Olswang rose 20% to £192.8m after the firm restructured its Hong Kong and Turkish offices, the LLP accounts have revealed.
Norton Rose Fulbright (NRF) also filed its LLP books this week (31 January), showing a £2m decrease in revenue in its EMEA business to £480.7m following a move to the US calendar year-end in 2018.
The profit increase in the year to April 2019 at the 11 UK and 18 overseas offices under CMS’ UK LLP came despite a 13% rise in the firm’s pension contributions to just over £6m. The strong growth in the firm’s profits came amid a 5% turnover growth to £545.4m.
The accounts also revealed changes to the set-up of the Hong Kong and Istanbul offices, with CMS’ UK partnership ending its joint venture agreements in those two jurisdictions in February and January last year respectively.
CMS had opened its Hong Kong branch in 2016 as a joint venture between the UK and German partnerships, and in May 2018 it had formed an alliance with Hong Kong firm Shirley Lau & Co with a view to practising local law.
The LLP books showed the office has since February 2019 been operated only by the German member firm of CMS’ international alliance, CMS Hasche Sigle.
In Turkey meanwhile the firm put an end to its joint venture with local firm YBBK in January last year, and has since been operating through an association with the same firm.
As a result of the reshuffling, the Hong Kong and Turkish offices contributed just £13k and £69k respectively to the UK LLP’s billings in 2018/19, compared to £552k and £661k the year before.
A spokesperson for the firm told Legal Business that the changes were ‘a technical point of entity structure that in no way reflects our growth strategy’.
The LLP books also showed the firm has continued paying off the pension debt it inherited from legacy Nabarro, which stood at £17.2m when the firms merged in 2017.
As part of the recovery plan the firm has agreed to pay £1.25m in the current financial year and aims to eliminate the debt by May 2022.
After the three-way union with Nabarro and Olswang the firm also set up a £85m rolling credit facility with Lloyds Bank and RBS to finance merger costs, which this year’s accounts show was reduced to £65m in July 2018.
‘The costs of the merger have now been paid for and we ended the year in a strong positive cash position of £45m,’ the spokesperson said. ‘Given the strength of our business we have a reduced credit need.’
Staff costs rose 7% to £197,300 amid a 12% increase in fee-earner headcount to 1,738 and a 17% rise in support staff to 957. The average number of equity partners decreased by three to 373.
The total remuneration for firm’s management personnel in the year was up 8% to £4.3m, although the firm’s highest paid partner took home roughly the same as the previous year – £1.083m compared to £1.001m.
Meanwhile, the LLP books for NRF’s EMEA business showed a 5% fall in operating profits to £124.7m amid a slight decrease in turnover.
Speaking to Legal Business, the firm’s chief operating officer Rod Harrington connected the fall to the firm’s decision in 2018 to shift from the April year-end to the US calendar-year end reporting in a move to a more integrated global verein.
‘2018 was the first time we had a December year-end,’ Harrington said. ‘When we got to April, which is our statutory year-end [for the EMEA LLP], anything billed we can record as revenue; whereas any unbilled work can only be partially recognised as accrued income.’
The firm estimated that, like most firms, about 20-25% of its billing tended to be done towards the end of the calendar year and were therefore not fully accounted for in last year’s LLP books.
He also pointed to a 1.8% increase in cost, largely due to a rise in lawyers’ salaries. In October last year, the firm announced a further 9% increase to its NQ basic salary to £87,500 effective in January 2020, with bonuses of up to 30% on top of that.
Overall staff costs at NRF rose 2% to £213.7m in 2018/19 despite the average number of employees growing by just one to 2,232.
