KPMG profits in decline after surge in spending
KPMG’s profits have fallen for the second year in a row after the professional services giant spent more money building up its consulting arm and upgrading offices.
The accountancy group said revenues increased but profits fell 7pc to £383m in the year to September, prompting a 13pc pay cut for its partners, who were awarded an average of £623,000 each.
Earnings from advisory work, KPMG’s biggest business line, fell 5pc to £308m as the organisation spent time and money on restructuring its teams, IT upgrades and the acquisition of the management consultancy groups Nunwood and Boxwood.
“Overall, if I’ve got one disappointment this year it would be the advisory growth rate,” said Simon Collins, UK chairman. “It was perhaps a bit optimistic to think that we could make this type of change in operations and still power through with the same level of growth.”
In keeping with the fall in profits, Mr Collins’ pay was cut from £2.5m to £2.2m for the year.
There were some bright spots in the advisory business, including an upswing in work, with companies hoping to protect themselves against cybercrime. The firm now has almost 200 specialists in this area, which has in the past year gone from a vague threat to a major worry among company boards, Mr Collins said.
Overall revenues rose 2.6pc to £1.96bn, helped by strong growth in KPMG’s audit division, which picked up lucrative work with Barclays, Experian and British American Tobacco during the year.
Dozens of large companies have switched auditors as they adjust to new British and EU rules on retendering audits at least once every decade. In some cases, such as Barclays, this has meant dismantling partnerships that stretched back more than 100 years.
KPMG’s tax earnings rose 17pc to £151m, with the firm reporting growing demand for advice in the wake of the OECD’s decision to tighten up global tax avoidance rules.
The group’s bottom line was affected by £120m spending on property and equipment during the year. KPMG opened a new clubhouse in Mayfair two months ago to cater for clients and partners away from its Canary Wharf headquarters.
“There have been some days when it’s been completely full, and clients have been using it to host their own events. The feedback has been sensational,” said Mr Collins. While some partners outside London were unconvinced by the investment, “that’s melted away like snow when they see the place”, he added.
The organisation has hired about 1,000 new staff in the past year, and also revealed that the pay gap between men and women across its 11,652 employees stood at 21.4pc, reflecting a lack of women in the most senior roles. When comparing workers at the same grade, the gender gap narrows to 5.8pc.
Other accountancy firms have also reported their gender pay gaps, pre-empting a Government plan to force all companies to disclose pay disparities. Deloitte said earlier this year that it paid women 17.8pc less than men, while PwC said the difference was 15.1pc.