KPMG UK announces 2.6% growth in revenues to £1.96bn 

• The firm invested almost £200m in acquisitions, property and staff training
• Tax and audit were the firm’s highest earning services
• The firm, its partners and employees paid £786m in taxes

KPMG, the professional services firm providing audit, tax and advisory services, has announced today an increase in revenues from £1,909m to £1,958m (2.6 per cent) for the financial year ended 30th September 2015.

In a year where the firm positioned itself strongly for future growth, KPMG invested a total of £196m in acquisitions, property and staff training and development.  It also sharpened its focus on serving clients on their most pressing issues by changing its operating model.  As a result, audit saw a 9 per cent increase in contribution to profits from £181m to £197m and tax saw a 17 per cent increase from £129m to £151m.  However, advisory saw a decrease of 5 per cent in contribution to profits from £324m to £308m. Reflecting the strong investment throughout the year, overall profits, before tax and members’ profit shares, were down 7 per cent from £414m to £383m as the firm continued to invest in a three-year ‘grip, build and grow’ strategy to reposition the business in its markets.

Simon Collins, UK Chairman of KPMG, said: “Our industry is in the midst of historical change: the statutory audit is being overhauled at home and internationally; the tax debate is hotly contested and the demand from business for independent consulting services in transformation, risk, technology and corporate finance is huge.  We have introduced audit opinions which go beyond regulatory requirements to meet investor needs better; engaged in international regulatory change on tax and invested heavily – to the tune of £49m – in acquisitions which bolster our consulting business.  Overall, we have invested £196m in our business to set it on the path to sustainable long-term profitable growth. Though growth is not yet where we want it to be, we have held our nerve on our investments and I am pleased that we are now seeing returns come through.

“The tax advice industry is divided on the role tax advisers should play in the debate on international corporate tax.  We have taken an active and supportive role in the debate, notably on the OECD’s Base Erosion and Profit Shifting (BEPS) project – and our clients have responded favourably, contributing to a 12.5 per cent growth in revenues.  Our audit practice has also received positive reactions from investors and other stakeholders for taking a strong position and providing audit opinions which go beyond the regulatory requirements.  Our audit business performed well in the highly competitive audit tender market, triggered by the changing regulatory environment.  Barclays and Experian were just two big names we were pleased to secure in 2015 and we now audit more listed businesses than any other firm.

“Key areas of our deal advisory business performed strongly in 2015, reflecting a more buoyant M&A market, but our advisory business overall saw a marginal decrease in revenues of 1 per cent.  We made substantial investments in our management consulting business to ensure it has the right technology and skills to work with our clients to solve the problems they are grappling with: whether this is leadership skills in the NHS or harnessing technology for consumer focussed businesses such as banks.  With recent client wins such as the Civil Service Learning programme, I feel positive that this year’s investments underscore our future success.

”Investment has been a key theme for KPMG in 2015.  The firm invested:

• £49m in acquisitions – such as Nunwood and Boxwood, the consulting businesses;
• £120m in property, plant and equipment, including fit-out of new offices, hubs and a client meeting space in London’s West End;
• £27m in staff training and development.

Collins went on to say:

“As an employer of almost 12,000 people, we take our role seriously and have worked hard to give our staff opportunities to work on interesting and challenging client work and put together a market-leading benefits scheme to reward their efforts.  Reward and opportunity also extend to diversity and inclusion.  I feel passionately about creating a working culture which includes a diverse group of people.  We set ambitious diversity targets in 2014 and, while we have made improvements in some sections of our working population, I remain disappointed by the pace of change in some areas.

“For example, approximately a third of our internal partner promotions were female but our external hires reduced the increase in our overall female representation at our most senior levels.  Having more male employees in senior roles than female employees has also affected our gender pay gap figures which showed a 5.8% average difference across the grades and 21.4% overall.  We will continue to support work such as that led by the Davies Commission and ensure we are applying best practice comprehensively in our hiring and promoting process.”

Highlights from the annual report for 2015:

New audit appointments included Barclays, Experian and British American Tobacco – KPMG is now the leading auditor of listed businesses in the UK;

KPMG UK has 617 partners and employs 11,652 staff (an increase of 2.7 per cent on 2014); • Average partner remuneration has decreased by 13 per cent from £715,000 to £623,000, reflecting investment in the business and a decrease in the advisory business’ performance;

The Chairman’s pay for the year, recommended by the Remuneration Committee and approved by a vote of the partners, was £2.2m (2014 £2.5m);

Total tax collected as agent or paid by KPMG, its partners and employees was £786m (an increase of 10.5 per cent);

KPMG bolstered its executive leadership team with the appointment of Philip Davidson, former KPMG International Chief Operating Officer, to the new role of Managing Partner;

The firm regrouped its capabilities into four functions to sharpen focus on client issues:

Tax and Advisory will now work more closely together under a new Solutions umbrella; o National Markets will serve those clients based primarily in the UK;

International Markets & Government will service the world’s largest companies and our central Government clients;

Audit will continue to focus on the busy retendering market.

KPMG’s offices around the country performed well, with the North and Midlands supporting the devolution agenda.  The London region saw substantial revenue growth of 20%;

KPMG received 28,000 graduate applications in 2015 for 1,000 places;

Approximately a third of partners and a third of directors promoted internally in the year were female. Despite a lower percentage of female external hires, the overall percentage of women in the firm’s most senior positions rose to 21.5% (19.8% last year)

Source: KPMG – KPMG UK announces 2.6% growth in revenues to £1.96bn

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