KPMG has posted revenue growth of 8.5 per cent to a record $1.78 billion thanks to a surge in demand for risk specialists and as financial services companies sought help with compensating customers in the wake of the banking royal commission.
The firm's audit, assurance and risk consulting business posted 15 per cent revenue growth in the year to June, a result that boosted the firm's sales in a volatile trading year disrupted by the federal election, said KPMG CEO Gary Wingrove in an annual trading update.
"The first half of the year, so from July through till December, was strong for us, really strong. The second half was a bit more volatile...[the federal] election did create, it's common knowledge, some uncertainty in the minds of business leaders and that uncertainty in turn flowed through into the results of a professional services firm like ours," Mr Wingrove said.
"So, a little bit more choppy are the words I've been using internally in the second half, but post the election I think confidence is returning and our trajectory is strong."
He said the firm had "invested strongly" in risk advisory services, an offering which assists clients in complying with regulations and managing their operating risks.
"In the era that we're living in, there's increased demands for risk-related services and there's also an increased demand in the financial services space for some of the remediation services that are being asked of our clients coming out of the back of the royal commission," Mr Wingrove said.
In July, KPMG poached Deloitte partner Vivienne Hardy for its risk advisory business.
The firm, like its peers Deloitte, EY and PwC, is a partnership and does not break out figures beyond revenue. Asked about profit, Mr Wingrove would only say the firm "had good bottom line growth."
KPMG made two big acquisitions during the year, insolvency firm Ferrier Hodgson and digital consultancy Love Agency with both operations "now embedded into our firm," Mr Wingrove said.
Audit wins and losses
The firm's audit division won three new clients but lost two clients during the year.
KPMG won the tender to become the global auditor for insurance company Swiss Re following a selection process in the first half of 2019 triggered by the European Union's mandatory auditor rotation rules. The firm is set to take over from current auditor PwC from 2021 pending the approval of shareholders.
KPMG chairman Alison Kitchen said that the audit role at Swiss Re was a "very significant win" for the firm. The value of the Australia audit is not broken out in the company's local filings.
KPMG also became auditor of bathroom supplier Reece and will sign off on the FY19 accounts for the company and for Heritage Bank with the firm taking over as auditor from this financial year.
Reece spent $1.1 million on its previous auditor Pitcher Partners in 2018, while Heritage Bank spent $604,000 with auditor EY last year.
"They're both Australian companies and just based on good governance, the companies decided to test the market and to select the best auditor for their requirements," Ms Kitchen said.
The wins offset the loss of the BUPA audit to PwC, put to tender due to EU mandatory rotation rules, and Origin Energy which was won by EY. KPMG's Australian work for BUPA was worth $1.5 million in 2018, while the Origin Energy work was worth $4 million last year.
Pro bono
Ms Kitchen also highlighted the firm's donation of a record 30,000 hours through its Corporate Citizenship initiatives during the year.
"We've had a citizenship group very active around four platforms for a number of years now, on Indigenous [issues], climate change, mental health and lifelong learning," she said.
"We've identified [these] few areas where we think we either have particular expertise to offer to the community or they're particular passions for our staff."
Sourced from Financial Review - written by Edmund Tadros