Baker Tilly says 'severe pricing pressures' across a number of service lines are responsible for the firm's pre-tax profits halving, dropping from £15.9m the previous year to £7.2m for the year ended 31 March 2013.
According to the firm's Companies House filing, profit after tax fell to £6.9m compared to £14.6m in 2012 in the period up to March 2013.
The directors' report describes a 'tough overall market' but says core professional services of taxation, accounting and general business advice had a 'comparatively good year' with some growth in all areas and describes the financial results as 'broadly in line with expectations'.
Baker Tilly's audit and assurance business is described as delivering a 'relatively good overall performance. However, the report states that 'while there were a significant number of important new client wins in the year this was offset by not only normal attrition due to client sales but also lost retenders against low-ball pricing'.
The firm says, though, that it will not be cutting its fees and states that 'sensible and sustainable commercial rates' are the only policy which is in the 'best long term interests of the firm and of our clients'.
The directors' report indicates Baker Tilly's specialist sale mandate operations and company advisory services performed well. The restructuring and recovery operations, which were themselves restructured during the year, faced reduced demand in a 'benign' market for businesses in financial difficulty.
Although the financial report is for the year ended 31 March 2013, the firm includes some details of its pre-pack acquisition of RSM Tenon which took place on 2 September 2013. Baker Tilly acquired the entire share capital of RSM Tenon for £1m and the entire share capital of RSM Audit Limited for £7. In addition, a further £21.5m was paid to settle the remaining bank debt of RSM Tenon Group.
The total cost of the acquisition including legal and other costs, is put at £23.2m. The directors' report also states that if the wealth management businesses are disposed of within five years, then a further consideration of 25% of the net proceeds will become payable.
The report says the financial impact of the acquisition cannot yet be accurately determined, but also states that the integration process is going well and is ahead of schedule in terms of rebranding, property and IT matters. It says that '2014 will be a challenging year for the group' but that the outlook 'looks promising' on the basis of results to date.
