Jessica Fino 7 Dec 2018 03:54pm

Profits and revenues down at Grant Thornton

A “tough year” at Grant Thornton has led to disappointing financial results at the mid-tier firm, with contract terminations and rebellion inside its business

The mid-tier firm said this year’s performance was hurt by portfolio disposals and contracts terminations, including the investment and subsequent withdrawal of Geniac, a platform to support back office functions for small businesses.

Grant Thornton said that, after realising the platform had not attracted sufficient new clients, it took the “difficult decision” to cease its investment, with a £2.1m loss.

As a result, profits before tax at the firm declined 8% to £71.6m in 2017/18, and revenue fell 1.8% from £500m to £491m.

When Sacha Romanovitch joined the firm as CEO in 2015, the firm reported profits of £82m and revenues of £521m.

The firm said on Friday its average profit per partner fell 8% from £403,000 to £373,000 in 2017/18.

With revenues now below the £500m mark, the mid-tier firm looks set to lose its position as the fifth largest accountancy firm, following the news that BDO and Moore Stephens are merging. The new firm will have combined revenues of approximately £560m.

Dave Dunckley, who was elected CEO at the firm this month after Romanovitch’s unexpected departure, apologised to her for an individual’s decision to leak her performance review to the press. He said this was “unprofessional and disappointing”.

He added, “I want to make it clear that Grant Thornton UK condemns such actions and take the opportunity to apologise to Sacha and thank her for her leadership.”

The firm explained in its annual results that the “disappointing” performance was led by one-off portfolio disposals which had delivered revenue in the previous year, as well as a number of contracts that had come to an end and had not been replaced with similar work.

These included the end of three large public service contracts, with a combined revenue of £20m, six small portfolio disposals and decisions taken about clients the firm no longer wished to work with.

Its audit arm saw revenues grow from £155m to £157m, and its advisory corporate finance division grew from £57m to £69m.

However, its recovery and reorganisation recovery division saw revenues fall from £62m to £59m, while other advisory dropped from £98m to £75m.

Grant Thornton has taken the decision this year to withdraw from auditing FTSE 350 companies due to the “competitive landscape”, adding it would continue this policy until it saw a “shift in the competitive landscape that would level the playing field for competing in this market”.

In its submission to the Competition Market Authority (CMA) audit market review, Grant Thornton argued against an audit market cap, but instead called for an independent auditor appointment body and shared audits.