Grant Thornton has faced yet more disappointment after the mid-tier firm’s 2017/18 financial results fell below expectations, underpinning what has been a tumultuous year with partner unrest, a CEO change, and audit scrutiny.
The firm reported on Friday a 1.8% fall in its year-on-year revenues to £491m, and its post-tax profits nosedived from £75m last year to £70m.
Grant Thornton’s newly-appointed CEO David Dunckley blamed “significant changes in our leadership, our structure and how we face the market” on the firm’s disappointing year-end performance.
The firm’s weaker revenues further destabilised its top five position in the accountancy league table. News of BDO and Moore Stephens LLP’s merger, with their now combined £590m fee income clout, would surely oust Grant Thornton from that stature.
In what will surely be a contentious sting to many, the year-end report confirmed news that partners will see the average distributable profit per partner as £373,000, a fall from the £407,000 partners took home the year before.
This should come as no surprise to a disgruntled contingent of Grant Thornton partners who made a public stance on the prospect of low pay packages earlier this year. In protest, a group comprising of 15 GT partners leaked former CEO Sacha Romanovitch performance review.
The group accused Romanovitch as being “out of control” and having a “socialist agenda”. Romanovitch hit back at the criticism of her decisions to cap her own pay and move the firm to a bonus system that gave all employees a share of its profits. “We are making decisions that will depress profits in the short term but will help profits in the long term,” she said.
The internal partner battle eventually set in motion her eventual departure. In October this year, Romanovitch stepped down after four years as the firm CEO a week after telling The Times that she wasn’t going anywhere.
Adding salt to the partners’ wounds, the BDO partners enjoyed a 17% increase where they took home £531,000 on average.
The disarray surrounding Grant Thornton was contained to internal fighting, the firm was also embroiled in Patisserie Valerie near-collapse. While the embattled bakery’s FD was arrested on suspicion of fraud following a £20m hole in Patisserie Valerie’s accounts, Grant Thornton faced questions over its role as the company’s auditor since 2010.
That was not the firm’s only audit blunder this year. Joining the ever-occurring audit scandals involving big firms, Grant Thornton suffered a £3m fine by the FRC in September after its audit of drinks maker Nichols and the University of Salford.
Grant Thornton’s CEO put a brave face on the results: “These 2017/18 results are below our expectations and, whilst there were many positives, we know we can drive improvement moving forward.”
Dunckley also trumpeted a 55% increase in brand strength in 2017/18, but the strongest growth was a 30% increase in the firm’s advisory arm. The actuarial, and risk, business consulting and business risk services saw a growth of 45%, 23% and 7%.
He later added: “We are confident that with our newly aligned market focus, our fantastic people and our powerful propositions we will accelerate key growth areas of the business, driving sustainable and profitable growth in the future.”
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