Magic circle firm Allen & Overy has blamed ‘property costs’ arising from difficulties in letting out surplus office space as part of the reason for a dip in profits.

In full results for the year ending 30 April 2018 published today, the firm reported profit before tax of £653m, down 8% on 2017’s £716m. Overall revenue increased 4% to £1.57bn (£1.51bn). Last year, the firm disclosed that profit per equity partner was £1.64m.

In a note to its report the firm said a one-off charge of £21m had been added to its consolidated statement to account for leasehold payments.

The firm said a tenant taking surplus office space in its City headquarters had vacated and a replacement had been found on terms incurring a loss for the remaining period of the lease.

‘Management have reviewed the other upcoming lease termination events and assessed probability of renewal. As result an onerous lease provision has been recongised for the expected cash shortfall arising from the rent payable while the office space is marketed and remains empty,’ the firm said, adding: ‘this has crystalised in a one-off charge to income statement of £21m.’

Without this charge and currency losses the firm would have reported a 3% rise in profit, the accounts stated.

A&O’s ‘key management group’ which comprises the senior partner, managing partner and heads of practice, shared £14.8m, down 6% from the previous year's £15.8m.

A&O is the first magic circle firm to report a fall in profits for 2017/18. Clifford Chance last week reported profits up 37% on the previous year.