KPMG pre-tax profits dip 9% as tax regulation bites
KPMG has reported a 5% growth in revenues but pre-tax profits fell as the firm made a series of investments in new business lines, while its tax practice felt the impact of an increased regulatory burden
Revenues for the financial year ended 30 September 2014 are £1,909m, up from £1,814m the previous year. Overall profits totalled £414m, a 9% drop.
The employee bonus pool increased by nearly 10% from £73m to £80m, but average partner pay was broadly flat, increasing marginally by 0.3% from £713,000 to £715,000.
Advisory services saw a 5% annual increase in contribution to profits from £308m to £324m, while audit saw a 2% increase from £178m to £181m and tax saw a reduction of 8% from £140m to £129m.
Profits, before tax, were down 9% as the firm invested in its people, new business lines and new offices.
Average partner pay was broadly flat, increasing marginally by 0.3% from £713,000 to £715,000.
The Big Four firm’s advisory services saw a 5% annual increase in contribution to profits, increasing from £308m to £324m, while audit was up 2% from £178m to £181m.
In contrast, tax fell 8% from £140m to £129m.
Simon Collins, UK chairman of KPMG, said: ‘Our tax practice, which has one of the largest indirect tax teams, was disproportionately affected by changes in the indirect tax market and forthcoming EU reforms on supplying non-audit services.
‘However, the tax practice is on a firm footing for the future by diversifying and innovating with good growth in our corporate tax business, the development of new technology such as KPMG Fusion, a pension modelling tool, and with the launch of our multi-disciplinary legal services business.’
Collins said the firm had made ‘substantial’ investments in the business over the year, including spending on people training and development, and the introduction of an improved staff reward package. It has also made investments in new technology, including an alliance with Mclaren Group, as well as new offices in Manchester and London.
KPMG’s investment programme is focused on five ‘strategic growth investments’: cyber security, technology, enterprise (SMEs), digital and analytics, and ‘P3’ (a people management offering), Collins said.
KPMG in the UK has 588 partners and employs 11,300 staff (an increase of 5%).
New audit wins during the year included Compass, the Royal Mail and Smith & Nephew and retained audits include Standard Chartered and Old Mutual.
However, it also lost audit business including drinks giant Diageo valued at £570m and security firm G4S. The biggest audit loss was HSBC, valued at £26.3m which is set to move to Big Four rival PwC. The firm secured a third of audits retendered in the FTSE 350.
Source: accountancylive – KPMG pre-tax profits dip 9% as tax regulation bites
