London: KPMG Europe LLP saw revenues up 13 percent to €4,589 million last year, with management and risk consulting fuelling the growth. But profits fell 3% to €903 million in a difficult market.
- Risk Consulting is star performer; up 16% percent
- Management Consulting up 11%
- Combined firm grows to 18 countries
- 8,500 partners, experienced hires and graduates recruited
The audit to consulting services firm has reported combined turnover up 13 percent to reach €4,589 million in the year to 30 September, 2011.
On a like-for-like, pro-forma basis and at constant exchange rates, revenues were up 5 percent to €4,718 million.
This performance was driven by revenue growth in Russia (CIS) and Turkey, with Spain also performing well. In the two largest practices in ELLP, revenue grew by 7 percent in the UK to €1,965 million , while in Germany revenue was flat at €1,179 million (2010: €1,187 million).
During the financial year, KPMG firms in Norway, Saudi Arabia and Kuwait joined the ELLP group, and Jordan voted to join. This takes the number of countries represented in ELLP to 18, with 32,800 partners and staff.
John Griffith-Jones and Rolf Nonnenmacher, ELLP joint chairmen, said, "This was a robust performance by ELLP firms in a challenging economy. ELLP has continued to expand and has demonstrated the resilience of our business model, which has enabled us to deliver continued growth.
"At the same time, the financial crisis has sparked a fierce debate about the future of auditing. Proposed reforms have huge implications for our profession, the high standards of audit quality we have always worked so hard to maintain and the continued development of relevant multi-disciplinary services for our clients. We have approached this debate from a very clear standpoint. We are not interested in special pleading. This is not an argument about our profitability or about protecting the status quo. Instead it is an argument about the functioning of the capital markets and about building better defences against future financial shocks in the modern world."
Group financial highlights
The strongest performing function in the firm was Risk Consulting (below), reflecting the need of clients for strategic advice in a challenging business environment. Within Risk Consulting, Financial Risk Management and IT Advisory were the key drivers of growth.
KPMG said Management Consulting also grew strongly, although its performance was patchy with exceptional growth in CIS offset by a 22 percent fall in Germany.
Aidan Brennan, Head of Management Consulting, said, "In a challenging market we performed well overall, with net sales up by 11 percent, although results were mixed across the region. The UK saw growth of 17 percent on the back of a surge in FS work despite a 40 percent slump in Public Sector net sales. We adapted well to the changing market, redeploying people from Public Sector to FS and embedding them in mixed teams to speed learning and development.
"In Germany our business shrank by 22 percent as corporate clients switched their attention from cost reduction, where we are strong, to areas where our capabilities are still growing. We are addressing the balance of our offerings by recruiting market-leading, experienced talent in the areas most relevant to our clients' needs. Elsewhere we have continued to grow significantly in the Netherlands (17 percent), Belgium (22 percent) and Spain (21 percent). The expansion of our delivery capability resulted in significant growth also in the CIS, where net sales increased by 57 percent, Norway 46 percent and Switzerland 32 percent."
Group net sales by function, as reported internally
- Audit: €1,889 million — down two percent
- Tax: €1,003 million — up nine percent
- Risk Consulting: €479 million — up 16 percent
- Management Consulting: €443 million — up 11 percent
- Transactions & Restructuring: €654 million — down two percent
Group net sales by market sector, as reported internally
- Financial Services: €1,357 million — up seven percent
- Corporates: €2,613 million — up four percent
- Public Sector: €351 million — down 14 percent
- Private Equity: €147 million — up 18 percent
Richard Bennison, ELLP Chief Operating Officer, said, "This year has seen a very creditable performance in difficult economic conditions. Our focus throughout the year has been on striving to understand our clients' needs, to exceed those needs and consistently add value while doing so. Looking ahead, we remain committed to investing in our growth areas and priority sectors. No imminent recovery is expected in the M&A and IPO markets and our plans are built around an expectation of continuing volatility in the financial markets. However we expect our Risk Consulting and Management Consulting businesses to continue to capitalise on the market opportunities that are likely to exist across all sectors."
KPMG ELLP made some significant acquisitions during the year, mainly in Its Management Consulting business. These included EquaTerra, a market-leading advisory business in sourcing with a strong US-presence; Plexus, a specialist healthcare consultancy business based predominantly in the Netherlands; Xantus, an IT consulting firm based mainly in the UK (this completed just after year end); and the integration of the personnel of several legal boutique practices in Spain.