RPC accounts show firm borrowed more than £5m to fund loss-making consulting arm
Pay for firm's top earner rises 20% despite dip in operating profit and PEP
February 07, 2018 at 05:43 AM
3 minute read
RPC took out bank loans worth more than £5m during the last financial year to help fund its loss-making consulting business, the firm's limited liability partnership (LLP) accounts have revealed.
The 2016-17 accounts, filed with Companies House last week, state that the firm, which posted a 12% dip in profit per equity partner (PEP) last year to £317,000, took out three bank loans during the year, totalling more than £5.5m.
Two of the loans, worth a combined £5.3m at year end and fully repayable by 2021, were used "for the purpose of funding the investment in and development of RPC Consulting". These included costs relating to its 2015 acquisition of UK software business Marriott Sinclair, according to the accounts.
RPC also took out a third loan, repayable in 2018, worth £237,500 "to fund costs of reorganising the London space".
The filings also show a sharp increase in the firm's overdraft, with £6.8m of the firm's £10m overdraft facility in use at 30 April 2017, compared with just over £81,000 the previous year. The accounts state that the bank loans and overdraft are secured on members' interests.
RPC Consulting – which launched in February 2015 – generated turnover of £4m in 2017, up from £1m the previous year, but made an operating loss of £2.3m, according to separately filed accounts. In 2015-16, the business generated a loss of £2.6m.
The accounts show two resignations among the business's appointed partners – most notably former managing partner Jonathan Watmough, who resigned in December 2016, as well as Rory O'Brien, formerly global head of risk consulting and software at Towers Watson, who headed up the launch of the business but resigned in October 2017.
RPC said in a statement: "It's been a positive year for RPC Consulting, with revenue growing significantly. That story looks set to continue in FY18. As with any startup, it takes time for profit to catch up with upfront investment, but the P&L is around where we expected it to be at this stage."
Accounts for RPC itself also show that the profit share attributed to the highest-paid member rose 20% from last year's figure of £840,802 to £1.01m, despite the fall in average PEP.
The total number of fee earners at RPC rose to 360 during the year, up from 317, while the total number of support staff fell from 233 to 229, with staff costs increasing by 6% to £50.4m as a result.
The average number of partners rose to 84 from 80, including 12 non-member partners with equivalent status. The total paid to key management personnel increased 8%, from £6.1m to just under £6.6m.
Overall, the firm posted revenue of £99.2m, down 0.3% from £99.5m, while operating profit fell 11% from £25m to £22.2m.
James Miller took over as managing partner in January last year, following the surprise exit of Watmough in 2016. Watmough was a partner at RPC for 25 years and had been managing partner since 2008. He went on sabbatical in July 2016 – 10 months before his third term was officially due to end on 30 April 2017.
Former insurance head Miller was appointed by the board in July 2016, alongside corporate chief Tim Anderson as interim co-managing partner, before he formally took up the role on 30 January last year.
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