National firm DLA Piper today reported partner profits down 18%, and blamed the fall on losses incurred by its hard-hit Middle East practice.

For the year ending 31 December 2009, revenues at the firm fell to £581m from £585m in 2008, while average profits per equity partner (PEP) fell to £527,000 from £645,000 over the same period. Turnover in the Middle East fell by nearly 40% to £12.4m from £20.5m, and turnover also fell in the UK, by 7.8% to £284m from £308m.

The firm reported stronger performance in Asia, with revenues up by 21% to £56.5m from £46.8m, and in continental Europe, with revenues up 9.7% to £229m from £208.8m.

The firm undertook massive expansion in the Middle East in 2007 and 2008 (see news story). DLA said that ‘excluding the losses incurred in the Middle East, PEP would have been down by 3% to £625,000’.

‘Having seen strong growth during 2007 and 2008, 2009 was a very difficult year for our Middle East offices,’ the firm said. ‘Over 50% of our practice in the region was projects [or] project finance, and the majority of projects we were instructed on were cancelled or postponed.

‘As a result of our business profile we were vulnerable to the downturn during 2009 and took steps to adjust our resource levels. We were able to redeploy some of our lawyers to other offices, including to our group member, DLA Phillips Fox. Our overall headcount was reduced by 40% and we missed our revenue budget for the region by over 50%, leading to a substantial loss for the year, notwithstanding the cost savings we made.’

Joint chief executive Sir Nigel Knowles said: ‘[The year] 2010 marks the end of a three-year strategic planning cycle and, on balance, we are satisfied that we have performed well overall and have delivered the objectives we set, with the exception of profitability, which is not a surprise given the impact of the global financial crisis. We are now very much focused on preparing our strategic plan for 2011-13, and our primary objectives will be to develop our client base, build our capabilities in key markets and take advantage of the opportunities which the changed market conditions offer.’