Grant Thornton UK LLP has reported a drop in fee income to £500m, down from £534m in 2016 due to a one-off cancellation of a major government funded contract, but profitability has improved as the number five accounting firm has strengthened various services lines, including forensic services
The accounting firm, ranked fifth in the UK, reported annual fee income of £499.9m for year end 2017, down £33.9m from £533.8m in 2016.
It has seen post-tax profit up 10.3% to £75m (2016: £72.2m), although this figure is still down on 2015, when Grant Thornton reported £82m in profits
There was relief for partners as the firm-wide restructuring has improved partner profitability levels, with average distributable profit per partner up almost 7% to £407,000, recovered from 2016 when partner profit was down at £344,000. The latest performance marks a return to 2015/16 partner payouts.
Against the backdrop of market volatility and uncertainty, Grant Thornton said it had taken ‘bold steps to reshape its client portfolio, replacing 20% of profits through exiting certain streams of business and investing in others aligned to its purpose-led business strategy. As a result the firm saw growth in all three of its stated impact areas’.
The firm’s audit and tax lines of service turned in improved performances from the previous year with tax in particular showing a strong spike in growth. Tax revenue was up marginally year on year by 2.6% to £107.2m (2016: £104m). The audit service line increased by 4.7% to £155m (2016: £148m).
Advisory, including consulting, insolvency, restructuring and corporate finance, was down significantly on the previous year to £237m (2016: £282m) due to firm restructuring.
The firm also faced a number of Financial Reporting Council investigations and was forced to pay a fine of £2.3m over the AssetCo audit.
Through the year the firm continued to invest in key areas to support current and future growth. This included investments in its strategic account programme - resulting in income growth of 24% during the year. In 2016/17 the firm also invested in its financial services and forensics expertise with 30% of all partner appointments in this area. This investment resulted in financial services and forensics contributing a combined 24% increase in profits year-on-year.
Grant Thornton is now an adviser to over 51% of the FTSE100 and is the leading auditor to the public sector. 2016/17 also included game-changing work with a major UK clearing bank on the ring-fencing of its retail bank.
‘Over 50% of our revenue is now derived from clients trading internationally. Investments in international advisory and leveraging the huge experience of the global Grant Thornton member network is key to this,’ Romanovich said.
Shared Enterprise culture
In terms of employees and new recruits, applications to the firm were at a record high at over 32,000 in 2016/17 and Glassdoor’s annual Employees’ Choice Awards rated Grant Thornton the 12th best place to work, describing it as ‘a firm with a real sense of purpose’.
Grant Thornton was also voted number one in the UK’s first ever Social Mobility Employer Index. The index ranks employers on the actions they are taking to ensure they are open to accessing and progressing talent from all backgrounds.
In the firm’s first gender pay gap equality survey, however, BAME staff were found to be paid substantially less on bonuses, although across basic pay the firm reported reasonable levels of equanimity. The results showed a sharp difference in male and female bonus rates and an average pay gap of 26.56%.
Improvements in 2016/17 performance mean that the firm has increased the shared reward pool. The pool is on track to pay out to employees in the 2018/19 financial year.
Sacha Romanovitch, CEO of Grant Thornton UK LLP said: ‘We passionately believe that a diverse team of nearly 5,000 people sharing ideas, sharing responsibility and ultimately sharing rewards will unleash the potential of our people and will be critical to the success of our business. We know we have more work to do in this area.’
Report by Sara White