Grant Thornton reported a more than 90% drop in profits from business audits, the sixth UK accounting firm having invested heavily to recover from several difficult years.
The group said audit profit was £ 1 million in the 18-month period ending in January, up from £ 13 million for the previous 12 months.
David Dunckley, who took office as general manager in late 2018 after the sudden departure of Sacha Romanovitch, said he had “cleaned up the company’s bottom line enormously.”
Grant Thornton delayed his results for a week as he struggled to assess the impact of the coronavirus outbreak on his business. Dunckley said about 150 of its 4,500 UK employees have agreed to 40% cut in wages and hours for two months so the company can save money before an expected drop in customer fees. He added that the partners had also agreed to reduce their share of monthly profit “when we need it.”
The firm said that “even in the worst case scenario, it believed it would honor its bank commitments, including a £ 111 million credit facility which runs until the end of 2023.
He invested £ 7 million last year to improve the quality of his audits after careful scrutiny by regulatory authorities over his work for the collapsed coffee chain Patisserie Valerie and a £ 21 million trial over his audits. Assetco, a fire vehicle rental company. It is also the subject of an investigation by the Financial Reporting Council for its audits of Interserve and Sports Direct.
“We have to defend the problems in the past, but we have started the new year with a much stronger foundation than we have in a while,” Dunckley told The Financial Times. He said Grant Thornton’s audit division was “resilient” despite the drop in profits.
The firm released its latest annual results on Tuesday after changing its fiscal year from June to December. He earned £ 201 million in audit fees over the 18-month period, up from £ 140 million the previous year.
Revenues were £ 728 million and profit before tax £ 72.4 million. In the previous 12 months, the company posted sales of £ 479 million and profit of £ 67.6 million.
On an annual basis, he said revenues for the 12 months to January 2020 were £ 514 million, up from £ 502 million in the same period the year before, while profits had gone from £ 61 million to £ 68 million.
Dunckley said the year-over-year increase did not include £ 35.5 million resulting from the sale of his wealth consultancy business to Standard Life Aberdeen in November. Part of this money was used to finance an additional £ 12 million in provisions for legal and regulatory claims, bringing the total amount set aside to £ 27 million.
The 190 Grant Thornton partners received an average share of profits of £ 513,000 each over the 18 month period. An interim report filed by the accounting firm last October showed that the partners were paid £ 323,000 in 2019, 13% less than the average profit of £ 373,000 per partner for 2018.
The drop in partner compensation was one of the grievances highlighted in a 2018 anonymous memo that attacked the performance of Ms. Romanovitch, who has led Grant Thornton for three years.
Dunckley has made a number of changes to reverse performance, including restructuring the partnership and removing 60 administrative workers. He said the 18-month period had been “transient, resulting in a more targeted business.”