Profits drop at Grant Thornton as restructure takes its toll

Grant Thornton house

Grant Thornton has taken the bold move of accounting for restructuring costs
in one hit after its merger with Robson Rhodes, so that it can draw a line under
the costly tie-up and start to rebuild without any further damage to its

The costs of the restructure were booked in the UK’s fifth biggest firm’s
2008/2009 results, leading to a drop in profit per partner of 19% to £201,000,

However revenues only fell 4.1% to £378.2m, in line with many accountancy

The GT results come after a rollercoaster year which saw accountancy
practices across the UK look at ways to reduce costs as the credit crunch
battered the economy.

To 30 June 2009, its audit practice grew by 3.4% to £121.2m, with recovery
and reorganisation growing by 11.0% to £75.4m.

Activity in the forensic arm rose by 13.1% to £16.7m. However, corporate
finance revenues dropped by 33.0% to £44.0m, which had a knock-on effect in
transactional tax services, leading to a 4.9% drop in tax revenues to £97.7m.

Scott Barnes, the firm’s most senior figure, spearheaded the decision against
smoothing out the costs from its merger with Robson Rhodes, an expensive move
that put the firm under serious pressure when the UK’s economy buckled.

“To be totally transparent about the issue, we’d just done the merger with
Robson Rhodes back in the middle of 2007 and it meant we went into the recession
with too high a cost base. Clearly what we did in the second half of our
financial year had a major effect on revenues.

“We had too many partners and slightly too many staff and we needed to
rationalise the outfit.

“[The new board appointed in] January has tried to take out the costs and
rightsize the business relative to what was going on in the economy,” said

“What you are going to see from 1 July 2009 to 30 June 2010, is the benefit
of that. We are forecasting a significant increase in our profits per partner
for this year even if the revenues stay flat or go down.”

GT is also forecasting growth in forensic and recovery of around 10% each
this year.

As part of the restructure, Grant Thornton partner numbers were cut from 286
to 235 and around 200 staff left the firm.

Barnes, who has endured a baptism of fire after taking over on 1 January
2009, stood by the decision to merge with Robson Rhodes ­ a move which some
commentators have claimed was too ambitious.

“I wouldn’t say it was too ambitious. Hindsight is a wonderful thing, but I
absolutely do believe, strategically, it was the right thing to do. The timing
[of the credit crunch] just couldn’t be forecasted.”

After bringing in 177 new trainees, Barnes added that the firm would be
committed to bringing in new talent to take full advantage when the practice was
working flat out.

“If you cut back on trainee numbers, it gives you a massive problem further
down the track. We couldn’t afford not to have people there when the upturn

Further reading:
use of internet – practice: Grant Thornton

Related reading