Profits and partner pay plunge at KPMG
Saltire Court: Edinburgh home of KPMG (photo by Terry Murden)
Profits crashed 19.5% at big four accountant KPMG and partner remuneration was slashed after a number of poor investments had to be written off.
Chairman Bill Michael admitted the practice had been forced to make some “tough decisions” as investments had failed to reach expectations.
He also admitted that the firm needed to do more to close the gender and ethnic pay gap.
He remained confident of a return to profit next year and was positive about the UK economy’s prospects.
Revenue for the year to the end of September grew 5% from £2.07 billion to £2.17bn but profits plunged from £374 million to £301m and average partner remuneration was slashed from £582,000 to £519,000.
Mr Michael said: “This year our core business grew strongly to reach record revenues following some fantastic client wins. Our audit and consulting practices achieved double digit growth, while regulatory changes stimulated strong demand for tax advice.
“However, we also took some tough decisions, writing down our stake in a selection of historic investments where performance has not met expectations. While this meant taking a one off hit in our profits this year, it has left us well placed to achieve profitable growth next year and our sales pipeline is strong.
“We are confident about the strength of the UK economy and have plans to recruit an additional 2,500 colleagues in the forthcoming months.
“In order to achieve our ambitions for the year ahead, we must continue to attract the brightest and best to our firm from all walks of life. This is both a social imperative and a bottom-line issue – teams with diverse perspectives deliver better outcomes to clients.
“We are making progress but the pay gap data that we have also published today shows that, like many businesses, we need to go further to improve the gender and ethnicity balance, particularly among our senior people. Achieving this is a top priority for me and my leadership team.”
KPMG’s audit practice performed strongly in the wake of further rounds of audit re-tendering, posting growth of 10% and securing the audits of BT, Legal and General and Micro Focus amongst others, to become the number one auditor of the FTSE250 and FTSE350.
KPMG’s management consulting practice grew 11%, driven by clients seeking new and cost-effective operating models for areas such as IT services, finance, people and learning.
Activity in the European M&A market reached its most intense levels since the financial crisis, said the firm, boosting its corporate finance and transaction services sales. KPMG advised on major deals during the year, including the merger of Booker and Tesco.
Meanwhile the implementation of international regulatory initiatives, such as the OECD’s Base Erosion and Profit Shifting project, stimulated demand for tax compliance services and advice, driving an increase of 4%.
Mr Michael added: “We are operating in a period of unprecedented change and this creates great opportunity for our firm. Our clients are navigating complex regulatory and geopolitical change, while technology continually reshapes and disrupts their markets. I believe KPMG has a pivotal role to play to help businesses through this period, helping them to adapt, evolve and grow.”
KPMG did not provide figures for its Scottish practice.
Key points from the 2017 annual results:
- KPMG generated 5% overall revenue growth, with a 19.5% reduction in profits;
- The firm has around 600 partners, a similar level to the previous year;
- KPMG UK continued to make significant contributions to a multi-year global investment program; this year KPMG International invested more than £744m in new services, technology, alliances and acquisitions, focused particularly on digital and analytics, strategy, cyber security, digital labour and audit;
- Total tax payable of £824m to HMRC;
- Average partner remuneration reduced from £582k to £519k;
- The Chairman’s pay was £1.4m, which reflects nine months remuneration for the former Chairman Simon Collins and three months remuneration for the current Chairman, Bill Michael;
- KPMG’s gender pay gap was 22.1% (median) and 22.3% (mean);
- The firm’s ethnicity pay gap was 11.7% (median) and 13.9% (mean).
- KPMG ranked 10th in the 2017 Stonewall Workplace Equality Index
RSM unveils positive return on investment
RSM announced a 9%increase in UK annual revenues to £319m for its financial year ending 31 March 2017.
Partner and staff numbers rose by 4% to almost 3,500 while total partner and staff remuneration increased by 11% to £202m.
Consolidated UK company profits grew by 16% to £5m, while profits of RSM UK Group rose by 15% to £49m.
Meanwhile dividends paid to staff, partners, and retired staff and partners rose by over 4% to £3m.
- Tax and advisory grew by 8.6 per cent to £138m
- Audit and assurance grew by 4.8 per cent to £77m
- Restructuring advisory grew by 9.6 per cent to £39m
- Risk assurance grew by 14.6 per cent to £25m
- Corporate finance grew by 1 per cent to £24m
Laurence Longe, chief executive,said “This year’s excellent financial results very clearly show the commercial benefit of the major investment that has been made in first reshaping and then rebranding the firm following the absorption of the former Tenon business in 2013.”