Big Four accountancy firm KPMG has reported revenues rising at their fastest rate for a decade in the UK, despite the blow to its reputation from the collapse of a major audit client Carillion in January.
The firm, which has faced fierce criticism from politicians and regulators for the quality of its audit work, managed an 8 per cent rise in revenues to £2.3 billion (€2.58 billion) in the year to September 30th.
Profits before tax and partner bonuses rose 53 per cent. Excluding the proceeds of the sale of a building in Canary Wharf, profits were up 18 per cent. This helped boost average pay per partner, which rose 15 per cent to £601,000.
Despite the pay increase, bonuses for partners still lagged those at the other Big Four firms. Deloitte's partners remained the best paid in the UK this year, although average pay fell slightly to £832,000. PwC partners received £712,000 on average, while those at EY received £693,000.
KPMG's revenues are also smaller - PwC posted £3.8 billion of revenues this year, while Deloitte reported £3.6 billion and EY reported £2.4 billion.
Bill Michael, KPMG’s UK chairman, said he was pleased with the latest results but “did not want to get complacent about the challenges we’ve got”.
Relief
The firm’s financial performance will come as a relief following a series of reputational setbacks in the UK and overseas over the past 18 months.
In South Africa, it has lost audit clients and faced serious criticism over its work for the billionaire Gupta family over the past two decades. It has also become embroiled in a scandal in the US after it emerged the firm was tipped off about forthcoming regulatory inspections by staff it had hired from the US accounting watchdog.
Meanwhile the UK accounting regulator has launched two investigations of KPMG's work this year, including its audit of outsourcer Carillion and of Conviviality, the drinks supplier.
The Financial Reporting Council is also investigating KPMG's work for car manufacturer Rolls-Royce; mattress firm Silent Night; US financial services group BNY Mellon; the Co-operative Bank; and insurer Equity Syndicate Management.
KPMG’s financial report showed its provisions for fines and professional claims have increased from £56 million to £73 million over the past 12 months.
Mr Michael said that the next few weeks - when two separate reports are expected on competition in the audit market and the future of the FRC respectively - will be “illuminating for everyone”.
He added: “I generally believe our trajectory is right but it’s a very difficult ecosystem we are operating in and a very sensitive moment in UK history.”
KPMG’s UK audit business posted an 8 per cent rise in revenues, in line with the growth rate of the overall business.
The firm said of this division: “This year has presented significant challenges, both for our firm and our profession. While we have a great deal to be proud of, we know there are things that we must do better.
“We’re disappointed that the FRC [the regulator] found our overall audit quality score decreased - and that the steps we took in previous years haven’t resulted in the necessary improvements to audit quality at the pace we’d hoped.” – Copyright The Financial Times Limited 2018
