Under-fire accountants and consultants are to net almost £40m in fees as troubled outsourcer Interserve pulls itself back from the brink.
Big Four bean counters such as PwC and EY as well as management consultants FTI Consulting and Oliver Wyman were paid £13.9m during 2017 with a further £25m to be paid in 2018, it was announced today.
Shares in the London-listed firm dived around 17 per cent this morning.
The bumper fees come on top of £16.5m in termination costs and £16.7m following an aborted property consolidation exercise.
The professional advisers were hired, in part, to conduct a review of Interserve’s contracts – one which identified £86.1m of contract write-downs.
The total bill for professional fees, restructuring costs and write-downs was, therefore, £158.2m, most of which led to Interserve suffering annual pre-tax losses of £244.4m. Operating losses leapt threefold to £224.8m while net debt doubled to £502.6m.
The Big Four – Deloitte, PwC, EY and KPMG – have been subject to criticism for audit sign-offs provided to firms which subsequently encountered financial difficulty.
A parliamentary inquiry into January’s failure of contracting giant Carillion has accused accountants of “feasting” on the carcass of the firm shortly before it collapsed. Consultancy FTI was unable to complete a report in time for lenders to doomed contractor.
Interserve’s losses were in-part offset by a decision to cash in a foreign currency swap at the end of last year. The firm had a contract to hedge against adverse exchange rate movements mitigating the impact on its $350m (£254m) of private placement bonds.
Disposing of the swap led to a £2.9m profit and a £44.1m cash windfall; though this will mean Interserve will be exposed to fluctuations against the US dollar in years to come.
PwC, EY, FTI and Oliver Wyman declined to comment.