Partner profit falls at scandal-hit Grant Thornton

12 November 2019 3 min. read
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A scandal-stricken 2019 seems to have hit Grant Thornton’s UK operations hard, with Partner profit poised to drop by almost 6%. The firm’s leadership will now face pressure from not only the Financial Reporting Council to improve its auditing standards, but from its own Partners to improve profitability in the coming months.

Last year was a difficult 12 months for Grant Thornton UK. Having overhauled the firm’s partnership structure to make it a John Lewis-style profit-sharing scheme for all staff rather than just Partners, CEO Sacha Romanovitch was ousted from her role at the head of the company by a group of anonymous Partners and Directors at the firm, infuriated by what they saw as her of pursuit of a “socialist agenda.”

Following that, the tenure of new CEO David Dunckley got off to a rocky start, as it coincided with the emergence of a multi-million black hole at the heart of a client’s accounts. Patisserie Valerie has since collapsed, while months later, Grant Thornton forfeited its position as the UK’s fifth largest professional services firm, with the news that BDO and Moore Stephens were poised to clinch a merger deal in the near future. The deal between the duo has since created an entity with a gross annual revenue of approximately £600 million.

Partner profit falls at scandal-hit Grant Thornton

One year later, it appears the situation has hit the firm’s UK Partners in the place they feared most; their pockets. Having dumped their previous CEO in order to preserve their portion of profits at the firm, Grant Thornton’s UK Partner team look set to endure a near-6% drop in distributable profit on last year’s figures. They will now enjoy pay-outs of £323,000, down from £343,000 in 2019 – despite notable lay-offs at the firm since. Partially, this is due to the number of Partners at the firm growing from 188 to 200 over the last year; however, revenue only increased modestly from £490.8 million to £501.8 million this year.

At the same time, dwindling growth at the firm will not have been helped by the Financial Reporting Council (FRC) launching an on-going investigation into the firm’s audit of Patisserie Valerie, or the FRC’s other probe of the firm’s audits of outsourcer Interserve for 2015, 2016 and 2017. Since then, Grant Thornton has also become entangled in another investigation for its 2016 audit of Sports Direct, which it belatedly dropped as a client in 2019.

Incumbent CEO Dunkley will now be under significant pressure to improve the firm’s performance, then, not only from the UK’s auditing watchdog observing the firm’s accounting standards, but also from Partners looking to see their profit share increase. Meanwhile, Grant Thornton has also announced it is delaying its accounts this year.

A spokesperson for Grant Thornton told the press, “The firm has decided to adjust its financial year end from 30th June to 31st December, as a later year-end better matches the seasonality of our business and aligns with our global reporting commitments. This will not have any adverse impact on our people or clients.”