Strong corporate confidence boosts KPMG profits

Accounting firm KPMG is looking to step up its hiring after profit rose by 19 per cent for the financial year.

The new CEO of KPMG Andrew Yates at is home in Sydney. John Feder/The Australian.

Accounting firm KPMG is looking to step up its hiring on the back of a stronger than expected economic recovery, which has boosted profits by 19 per cent for the financial year, according to its new chief executive Andrew Yates.

“As the year went on, the confidence of our clients increased in terms of their willingness to invest and their willingness to commit to longer term projects,” Yates said on Wednesday as its annual results were released.

“As our clients became more confident, it has flowed through to our business.”

Mr Yates said KPMG was “seeing much more confidence from clients than a year ago,” despite recent lockdowns in Sydney and Brisbane, as a result of outbreaks of the Delta variant of Covid-19.

“I share that optimism,” said Mr Yates who took over as chief executive of the firm from July 1 from former chief executive Gary Wingrove who had been in the role for eight years.

While the firm does not reveal its profits, it reported a stronger than expected increase of 9.4 per cent in total revenue for the financial year to June 30 to more than $1.9bn.

The firm, which has hired almost 600 new graduates during the year, boosting its staff to almost 10,000 people, has announced plans to double the bonus pool of profits paid to staff this year from what was originally budgeted a year ago when the economic outlook was much more subdued.

Mr Yates said this represented an increase of 20 per cent in the staff bonus pool in a normal year.

This a sharp contrast to the picture more than a year ago when the firm asked its staff to take a 20 per cent pay cut for the months of May, June, July and August.

He said the firm had since repaid staff their full wages for this period plus an additional “thank you bonus.”

The year saw equity partner profits increase by 17 per cent compared to the previous year, a period when profits were down by 12 per cent on the back of a Covid driven slowdown in economic activity.

Mr Yates said KPMG’s clients were “now starting to look forward”.

“They are looking to do longer term transformational projects.”

He said the firm had also benefited from a strong performance from its mergers and acquisition business during the year.

Mr Yates said there was also increasing confidence among clients in its enterprise business which covers mid market companies and private clients.

He said his clients were reporting more confidence about the outlook because of the rollout of the vaccines.

He said companies were also becoming more used to dealing with the constant changes as a result of the pandemic.

“I do think we are in a more certain period of uncertainty compared with a year ago.”

“We how have a vaccine, which we didn’t have a year ago.

“And business has shown that people can work from home and still deliver quality work.”

“People have more confidence now.”

He said there was a feeling of “some optimism and hope that there is some light at the end of the tunnel”.

Mr Yates, who lives in Sydney, said he had not been in the KMPG office since taking over as chief executive on July 1 because of the Sydney lockdown.

The firm’s strongest business arm continues to be its management consulting business which saw a 12.5 per cent growth in revenue to $629m.

It said its management consulting division had “increasingly won larger engagements and enjoyed significant revenue growth”.

Its infrastructure, government and health care sectors showed “significant growth”.

The firm’s traditional audit, assurance and risk consulting business saw revenue up by 6.5 per cent to $590m.

Revenue from its enterprise division was up by 0.8 per cent to $243m while revenue from deals, tax and legal was down marginally by 0.9 per cent to $449m.

Mr Yates said the firm had set itself a new goal of having at least 40 per cent women partners by 2025.

Women currently make up some 31 per cent of its partners.

Mr Yates said the firm was setting up a new people advisory board to allow more direct feedback from staff “and to provide a sounding board around initiatives business leaders are considering.”

The firm’s changes also reflect the growing labour shortage hitting some white collar professional firms in Australia as a result of an upturn in activity at a time of closed international borders.

Mr Yates announced a firm wide review of pay “to ensure greater flexibility, adaptive to individual’s needs and career stages and the agility to respond to market forces.”

The firm has just announced plans to extend its parental leave to 26 weeks and introduce “cultural leave” and “floating” public holidays.

Mr Yates said he found talent shortages one of the top issues of concern among businesses today.

He said the firm’s staff had worked well during prolonged periods of lockdowns but he was particularly keen to get younger staff back in the office when lockdowns ended to allow them to learn from older staffers.

“We need people back in the office to make sure we regain the collaboration and learn from working in teams,” he said.

He said the next year would see an investment by the firm in more staff and more technology.

“We need to embed more technology in the business as well as increase the head count.”