Latest LLP filings show increased borrowing

Jaishree Kalia

10 years ago

BLP bank debt up sharply as 2012/13 annual reports filter through

Growing debt was a recurring theme in the limited liability partnership (LLP) accounts filed in January, led by Legal Business 100 top-20 UK firm Berwin Leighton Paisner, which, after a year of partner departures and a significant drop in profit per equity partner, revealed a 223.7% increase in bank borrowing in the 2012/13 financial year.

The 790-lawyer firm’s borrowing ballooned to £45m from £13.9m in the previous year, on the back of new bank loans totalling £31.1m.

In a re-financing of debt, the firm also reduced its overdraft facility to £371,000, down from £4.5m, while overall the firm owes £76m to creditors compared with £51m in the previous year.

A spokesperson for the firm said: ‘We restructured our financing arrangements in early 2013 in order to generate cost efficiencies and to provide greater capacity for future investment in the firm.’

Filings also show profits at the firm fell 33% to £52.3m, compared to £78.6m in the previous year, while the highest-paid partner earned £1.2m, down from £1.6m, with overall fee income down from £245.9m to £231.9m.

Elsewhere, Morgan Cole’s accounts showed the Legal Business 100 top-80 UK firm’s highest-paid equity member received £162,000 in 2012/13 compared to £278,000 in 2011/12, a decrease of £116,000 or almost 42%. The lowest-paid equity partner was also hit, taking home 34.5% less at £135,000 compared to £206,000 the year before.

This came as revenue at the Cardiff-based firm dipped 8% from £36.6m to £33.7m, while operating profit fell by 32% from £10.2m to £6.9m, which Morgan Cole attributed to a one-off exceptional property charge that has now been resolved.

‘We restructured our financing arrangements in early 2013 in order to generate cost efficiencies.’
BLP spokesperson

The picture could not be more different at top-50 UK firm Charles Russell, which – despite seeing turnover and profit increase only slightly in the last financial year – saw its highest-paid partner take home £600,000, a 64% leap from the £366,000 it paid in 2011/12 – this increase was attributed by the firm to a one-off retirement payment.

The 310-lawyer firm continues to pay off £11m borrowed in 2009 to refurbish its City offices, reducing its outstanding term loan to £6.6m last year.

Also increasing its partner pay was top-30 firm Nabarro, which unveiled a 31% earnings boost for its top fee-earner and a 13% drop in partner numbers, following a seven-month period in which its year-end profitability rose significantly, but its half-year revenue was flat.

2012/13 LLP filings: selected highlights

Clifford Chance’s 16-strong management committee took a 5% cut in remuneration to £18m from £19m. Net assets attributable to members totalled £219m – down by £79m – while net cash at the year-end was £103m, marking a drop of £17m from the net cash figure as at 30 April 2012.

Dentons UKMEA saw its bank loans increase by around £3m in the 2012/13 year, while profit was down 10% to £28.3m, which the firm attributed to increased marketing and administration costs stemming from its tripartite merger with Salans and Fraser Milner Casgrain. Revenue at the top 10 firm dropped 1.4% from £144.8m to £142.8m.

Olswang’s filings reveal its overdraft grew by £3m to £18m in 2013, with net debt up to £13.7m from £8.4m. The UK top-40 firm, which saw its turnover increase from £108.5m to £110m but operating profit drop from £39.3m to £38m, paid its highest earning equity member a significantly heavier pay packet this year at £716,000, up from £576,000.

Trowers & Hamlins’ net income fell from £26.2m to £16.1m, while operating profit was down from £28.4m to £18.8m. The firm said the sharp fall was largely due to the cost of moving to its new London headquarters. Its turnover also decreased by 3.7% to £78.2m from £81.2m.

Holman Fenwick Willan’s revenue grew to £141.4m, up from £124.2m, while profits also rose to £47m from £39.7m. The firm has been one of the most financially successful practices in the UK top 50 over the last five years, with revenues rising 82% since 2008.

According to its filing, the highest-paid LLP member took home £635,000 up from £486,000. The accounts also showed the firm’s profits substantially grew in 2012/13, with operating profit rising 22% to £42.5m from £34.7m in the previous year. Fee income grew by a more modest 4% to £117.2m from £112.4m.

Meanwhile, Shoosmiths’ annual accounts revealed it paid £1.5m to acquire Scottish firm Archibald Campbell & Harley in October 2012. The top-45 firm acquired £1.77m of net assets, £1.47m of which was paid as a cash consideration, while the remaining £300,000 was collected by the end of the financial year.

The 418-lawyer firm, which transferred to an LLP in August 2012, saw its bank loans and overdraft increase by 18% from £6.5m in 2011/12 to £7.7m last year, while other loans also increased from £1.7m to £2.6m.

However, its highest-paid partner saw earnings drop from £375,000 to £281,000, as audited accounts showed a decline in profit of 12% during that period from £12.5m to £11m, although turnover increased 3.5% from £84m to £86.9m.

Penningtons also revealed remuneration cuts with its highest-paid member taking home £52,117 less, totalling £286,642 compared with £338,759 in 2012. Long-term loans at Penningtons, which acquired Manches from administrators PwC in October 2013, increased from £3.7m to £7.7m. The legacy firm posted a turnover figure of £32.1m, down very slightly from £32.3m in 2012, with the firm’s profits for members more or less flat at £11.5m compared to £11.53m.

CMS Cameron McKenna posted a 6.6% revenue drop for its UK LLP alongside a 12.5% decrease in operating profit. Turnover fell to £212.6m from £227.6m in 2011/12, while group operating profit slid to £47.8m from £54.6m.