KPMG Australia grow revenues by 7% to $1.9 billion
The Australian arm of KPMG has seen its revenues grow by 7% to $1.9 billion in its latest financial year, which includes four Covid-19-impacted impacted months.
Up until February, the accounting and consulting firm was on track to achieve 13% revenue growth domestically, which would have marked its best financial performance in years. In the three years previous, KPMG had booked 9% growth. However, the fallout of demand caused by the Covid-19 outbreak put pressure on the firm’s performance, bogging the overall growth rate down to 7%.
Considering the hardship and challenges KPMG has faced in the past months, CEO Gary Wingrove said that “all things considered, we’ve had a good financial year” adding “I’m proud of what we’ve achieved working closely together as a firm, and continuously supporting our clients.”
Like its peers, KPMG saw much of its work in mergers & acquisitions, management consulting and business transformation paused or cancelled, amid tightening belts at clients. This put pressure on KPMG’s chargeability and margins. But, “by acting swiftly and decisively early in the pandemic, we have protected the underlying health of the firm,” said Wingrove.
KPMG was the first of the Big Four to announce job cuts in response to Covid-19 (200 redundancies), and among other measures, the firm cut discretionary spending, paused recruitment, and asked its workforce to voluntarily accept a 20% reduction in pay between May and August, the equivalent of a 7 per cent annual pay reduction. At the end of May, Wingrove unveiled that 99% of all KPMG’ers in Australia had accepted the temporary change of terms.
These measures helped KPMG mitigate the loss of income during the last four months of the financial year, which according to Wingrove was around 15% down on the original plan.
For the full year, all divisions made positive contributions to the firm’s results. The Management Consulting business grew by 4.6%, while KPMG Strategy – the firm’s strategy consulting arm – saw fee income spike by 13.5%. The Advisory division overall did see some inorganic growth accelerate its performance following the acquisition of Action Sustainability in Australia.
KPMG’s Audit, Assurance & Risk Consulting (AARC) division was up 9%, driven by ongoing audit work and strong growth in the financial services and infrastructure sectors. Deals, Tax & Legal (DTL) was up 8.1%, although this unit has faced a relatively hard hit from Covid-19, due to nosedived demand for mergers & acquisitions and significant uncertainty in the IPO market. KPMG’s mid-market and family business division grew by 5.8%.
According to Alison Kitchen, KPMG’s Chairman, “Gary and his team has done an excellent job in deeply challenging circumstances. They have kept us in good financial stead, while delivering balanced and thoughtful outcomes for our people, clients and partners.”
The better than expected overall performance has enabled KPMG’s partner team to repay employees some of their salary reductions for May and June (one third of base income). However, Wingrove said that it is too early to comment on the July repayment and if the firm would make any others repayments. He has though confirmed that all employees will return to 100% of their base pay from 1 September.
Looking ahead, the chief executive said he expects flat growth for FY21, but added that amid a still pretty volatile environment, “it's too hard to predict an exact number or budget.”
The Big Four compared
With revenues of $2.6 billion, flat on the year previous, PwC is Australia’s largest Big Four firm. Number two player Deloitte grew its revenues by 10% to $2.5 billion, while EY grew by 13% to $2.1 billion.
