Grant Thornton 'strong' as revenues drop 0.7%

GRANT THORNTON revenues slipped 0.7% in the 2010/11 financial year, a decrease of £2.7m to £377m, while profits fell from £77.6m to £75.2m.

Chief executive officer Scott Barnes said the contraction is a "good, strong result" given the economic climate and the fact that the fifth-largest UK firm enjoyed a "huge revenue bounce" of more than 40% in 2009/10.

"We held on to last year's strong gains and I'm very pleased with the results, given the current context," he continued.

Revenue in the firm's corporate finance arm was weakest, plummeting 16% to £35.2m, while tax-related income slipped 1.4% to £91.7m.

Barnes (pictured) said the falls were largely due to government spending cuts which brought public sector advisory work to an abrupt end, sending revenues around £3m lower.

Tax revenues suffered as transactional work fell amid "ongoing economic challenges", but Barnes said he was "pretty pleased, given the fairly depressed market", claiming ongoing tax advisory work is as strong as ever.

The top-six firm enjoyed swift revenue growth in forensic and investigation services, up 17.7% to £17.7m. "This is primarily due to international work," Barnes revealed. "We have lots of business in the Cayman Islands and British Virgin Islands. We have established ourselves as specialists in the field."

Grant Thornton is aiming to grow annual revenue to £500m by 2015, primarily due to gains in the corporate finance and forensic markets.

Corporate finance revenue contraction accounts for much of this year's fall but nevertheless, Barnes is confident an improving economic climate and the firm's "resilient client base" will translate to gains in the medium term.

"Our clients have come through the economic crisis in good shape, for the most part. They have money to spend. Once confidence beings to rebuild, we expect transactions to take off," he said.

Even the public sector could provide a potential source of work, Barnes claimed: "We have recently won a three year contract from BIS to deliver the new Manufacturing Advisory Service and we are well positioned to pick up more public sector audit work."

Grant Thornton, PwC and KPMG are the three largest providers of public sector audit outside the Audit Commission, and Barnes hopes to win a significant chunk of work being contracted out by the soon-to-close public body.

An Audit Commission decision to limit the proportion of contracts available to any one firm has hurt Grant Thornton's potential to expand in the sector, but Barnes noted winning the maximum work allowable would increase the firm's public sector audit activity by around 50%.

"Given the continuing difficult economic conditions, Grant Thornton's performance has been very strong. We knew it was going to be a tough period and it is testament to our core strategy and the strength of the partnership that we have come in ahead of expectations," Barnes concluded.