When reports from across the pond started surfacing in September about the cost-cutting frenzy (you know, Project Zebra) going on at KPMG, accounting blabbermouths (like us) were salivating at the thought of how bad the firm’s 2019 revenue would be when the numbers were released in December. Well, that day has finally come, and believe it or not, KPMG U.K.’s revenue wasn’t all that bad.
Profits? Yikes! Reeeeal bad.
But first the good news: KPMG’s revenue for the year ended Sept. 30 increased 3%, from £2.34 billion in 2018 to £2.40 billion in 2019. That’s actually a higher percentage of revenue growth than the Queen’s Ernst & Young had this year (1.5%). Still, KPMG will remain fourth in revenue among the Big 4 firms in the U.K. and will assuredly remain in fourth place globally when KPMG releases its 2019 global revenue results within the next week.
Revenue generated by KPMG’s audit practice grew 10% over last year, the most growth of any of the firm’s businesses, followed by deal advisory at 3% and tax, pensions, and legal, also at 3%. The consulting practice’s revenue dropped 2% over last year.
Now the bad news: Profits for 2019 took a nosedive, from £356 million in 2018 to £307 million in 2019—a 14% drop. The Financial Times noted that the decline in profits puts KPMG at 2017 levels, when current chairman Bill Michael took over and wrote off a number of investments to reverse a five-year financial decline.
The sharp drop in KPMG’s bottom line [in 2019] was in part due to a £45m investment to revamp its audit practice, which included hiring 700 qualified auditors, recruiting a record 1,900 graduates and spending £23m on training at its new “KPMG audit university”.
In addition, KPMG partners saw their average pay drop from £690,000 in 2018 to £640,000 in 2019, which is far below their Big 4 rivals. And let’s all shed a tear for Bill Michael who saw his pay drop from £2.1 million last year to £1.9 million this year.
And let’s not forget that KPMG was fined more than any other U.K. accounting firm over the past year.
Now that KPMG has released its U.K. revenue for 2019, all the Big 4 firms plus BDO (No. 5 in revenue) have published their results this year. The holdout is Grant Thornton, which said in late October that it was extending its year end from June 30 to Dec. 31, thus pushing back its 2019 revenue and profits announcement until next year.
An omen that GT’s 2019 results are craptastic? Eh, probably not. FT reported that as of the end of October, revenue grew by £11 million to £502 million, and profits went up about £72 million.