Professional services firm KPMG bounces back from Covid-19 doldrums

The results are the latest from the big four firms to show impressive bounce back from the negative impact of the initial Covid-19 years.

Professional services firm KPMG has claimed record growth of 16 per cent in total revenue in the past financial year, with the $2.34bn figure representing a 31 per cent increase on the 2019 financial year – the last pre-Covid-19 year.

The results released on Monday are the latest from the big four firms to show impressive bounce back from the negative impact of the initial Covid-19 years.

After excluding recoverable expenses, KPMG’s annual revenue was $2.179bn – a 15 per cent lift which however leaves it below Deloitte with a 19 per cent increase to $2.5bn and EY’s 18 per cent lift to $2.39bn.

PwC, which until now has been the biggest of the big four firms in Australia, will report later this month.

KPMG chief executive Andrew Yates said the growth showed the firm, which has also increased its staff numbers by one third since pre-Covid-19 levels, had put the difficult years of the pandemic behind it.

“We are certainly looking at this being the close of a three-year-Covid financial period,” he said.

“Like most businesses, we’re still seeing quite a high degree of sick leave at the moment more than would be the norm. But from a business perspective, we feel we’re moving on from Covid-19.

“There’s a lot of sentiment around things being a little bit uncertain moving forward, and that’s probably true, but we still see really strong momentum in our own business.”

KPMG boss Andrew Yates at the accounting and advisory firm’s Barangaroo office in Sydney.Picture: Monique Harmer/NewsWire

KPMG reported a profit increase of 8 per cent, with equity partners enjoying a 1 per cent lift to take them to a 14 per cent increase on pre-Covid-19 levels.

Mr Yates said while he was “obviously pleased” with the top-line performance, he was also delighted with “the level of investment we’ve put into the business this year; what we’ve done for our people in terms of reviewing reward; the breadth of work for our clients; and the issues that we continue to advocate on which make a really positive impact on society”.

KPMG has increased staff numbers by 25 per cent year on year for a headcount of 12,238. This is a 34 per cent lift on the 9100 who were employed pre-Covid-19.

While some have come from the acquisition of three businesses, Rubicon Red, Certus and Navire, most have been hired to meet increased demand across the business. After a period of redundancies across the sector in response to the pandemic, KPMG took in a record number of graduates – 749 or an increase of 26 per cent.

KPMG, along with the other big four firms, for the first time this year released pay scales of employees, a move designed to increase transparency work in a tight labour market. Mr Yates said attraction and retention of high quality talent continued to be a challenge.

“That’s why it’s very pleasing to have seen the increased headcount we’ve been able to achieve,” he said. “The churn (of staff) is above the long-run averages, but it’s definitely lower than it was at the start of this year. It’s on a downward trend, but it still is above the long-term average.”

KPMG had put “about $165m incremental investment into the reward and value proposition for our people” this year and had cut the gender pay gap among staff by 2.3 per cent; with a 4.1 per cent reduction in the gap for partners.

The results revealed the lowest growth year-on-year, after excluding recoverable expenses, was in audit, assurance and risk consulting (12.5 per cent); deals, tax and legals (7 per cent); and management consulting (15.6 per cent). The enterprise and infrastructure divisions each recorded more than 20 per cent growth. Management consulting was the biggest earner ($666m) followed by audit at $644m; followed by Deals, Tax and Legals ($412m); Enterprise ($293m); and infrastructure ($164m).

After months of conjecture about the possibility of rival firm EY splitting its audit and consulting businesses globally, Mr Yates said: “At the moment we’re very comfortable with the model we have in place and we’re committed to continuing that. We feel it’s the best way to serve our client base and the broader community. Like every business, we’ve always and will continue to always think about and look at our business model.”

He said among the biggest challenges for the nation were access to skilled labour, high interest rates and inflation. While last week’s vote in the House of Representatives to lock in emissions targets was welcome, more was needed.

“I don’t think the debate is behind us,” he said. “Australia needs certainty and we need the climate wars to end. We need a lasting framework and we’re looking forward to working with government and our clients to help develop a lasting framework. I think we’re heading down a path of certainty, but it’s not there yet.”

The big demand from clients was for assistance in transforming their businesses with technology.

“One thing we found in the pandemic was that business realised we could do things more quickly than once thought,” he said. “We’re seeing demand for our transformation specialists, helping the public sector and the private sector transform digitally.”