Highlights included the strength and access to the firm’s global capabilities for Australian clients, outperformance by Risk Consulting, continued health in the Management Consulting and Audit practices, as well as the smooth leadership transition to new CEO, Gary Wingrove.
“The role of professional services firms within a global business environment has never been more critical. We are reorienting our firm for a return to growth through a focus on entrepreneurship and quality. We are striving to further increase our agility and innovation to meet the changing needs and behaviours of our clients, and pursue our growth ambitions,” said Mr Wingrove.
To invest in the firm’s growth potential, KPMG hired talent from over 30 countries and 40 business lines during the year – with staff and partner numbers totalling 5103 people at 30 June 2013, including 35 new partners and 369 graduates.
“The capability of our audit, tax and advisory services brings objectivity and integrity to our clients’ businesses – key factors in building confidence in the financial markets,“ said KPMG Australia Chairman, Peter Nash. “I genuinely view our role as important in enhancing confidence in capital markets and enhancing standards of governance and transparency.”
Whilst economic conditions were subdued, KPMG continued to invest in its corporate citizenship programs. “In particular, I am personally proud of our work with Indigenous Australians. This year we published Australia’s first Reconciliation Action Plan (RAP) App, were presented with a prestigious award for socially responsible procurement and sent our 143rd person on secondment to work with Indigenous communities through the Jawun program,” he added.
Key drivers of KPMG’s result included:
- Global capability – Bringing global capability to the table played a key role in KPMG winning significant client work in Australia. For example, Australian Payments Clearing Association’s (APCA) appointment of KPMG as programme manager for its market-first New Payments Platform was largely attributable to the firm’s demonstrated global expertise as well as its local payments capability.
- Innovation – KPMG’s internal social media platform, tibbr, enabled ‘Brave Banana’ crowd sourcing to connect client service teams with whole of firm ideas, generating more creative solutions to business problems. A new executive role was announced in May to focus on firm innovation, with Martin Sheppard appointed National Managing Partner, Brand & Innovation, effective from 1 July 2013. KPMG achieved some significant results in creating a more collaborative and innovative culture through initiatives such as its ‘Workplace of the Future’ project. This saw more than 200 staff participate in an ‘agile working’ pilot program during the year, designed to create a stimulating work environment focused on flexibility, productivity and collaboration.
- Growth businesses and investment – KPMG has long understood the importance of Asia to Australia’s economic prosperity and in FY13 China-related revenues achieved double digit growth. During the year, KPMG Australia commenced integrating its four country practices – Japan, China, South Korea and India – to form one Asia Business Group for the benefit of clients who strategically view Asia as a region.
Other previously identified priority sectors such as Financial Services and Oil & Gas also outperformed, delivering strong growth for the year. From a geographic perspective, Western Australia delivered standout growth. James Hunter was announced as National Managing Partner, Markets & Growth in May. Effective from 1 July 2013, this new role will drive the firm’s growth ambitions.
- Building a high performance culture – Significant new leadership and performance management programs, as well as a new reward and recognition framework were launched during the year in support of the firm’s strategy to deepen its high performance culture.
- Leadership and diversity – The change of CEO from Geoff Wilson to Gary Wingrove, announced in April, was successfully transitioned by 1 July 2013. Effective leadership succession planning saw internal candidates assume the roles of Head of Advisory (John Somerville), Head of Management Consulting (Ian Hancock), and Head of Risk Consulting (Sally Freeman).
During the year KPMG launched its 5-year Diversity & Inclusion strategy to build diversity of thought and a more inclusive culture within the firm. More than 400 leaders attended unconscious bias workshops. KPMG committed to launch targets for women in leadership in 2014, including the percentage of women admitted to the partnership and senior leadership roles.
In a market environment where Australian listed company profits fell 4.4% and improved company earnings performance was being driven by cost-cutting , KPMG’s small revenue decline (-0.6%) was a sturdy result, reflecting the firm’s adeptness in responding to clients’ changing needs.
Particular outperformance was achieved in Financial Services through the Banking practice; in Energy & Natural Resources through the Oil & Gas practice; as well as through KPMG’s domestically-based China Business Practice.
Geographically, Western Australia was the key growth contributor – achieving double digit revenue growth from the previous year, despite challenges in the mining sector. Western Australia was supported with the largest increase of new partners (20% of national intake).
Advisory remained the firm’s largest business, contributing $518 million (46.5%) of firm revenues. Audit contributed 35% of revenues ($389 million), holding steady on last year; while Tax experienced a small decline, contributing 18.5% of revenue ($206 million).
The firm’s Advisory practice maintained its leadership position, achieving modest revenue growth despite discernible caution in the consulting market.
- Management Consulting consolidated its position, stabilising revenues of $264 million after a number of years of significant growth. Greatest demand came from Financial Services, Technology, Media & Telecommunications together with traditional strongholds in State and Federal Government. Investment in key talent continued, broadening capability in growth areas including Justice, Health, Shared Services & Outsourcing, Financial Management and Technology Enablement.
- Risk Consulting revenues increased (9.8%) to $142 million. Clients continued to seek broad advice to drive changes that build resilience in their strategies and optimise risk for competitive advantage. Investment was also made in evolving Risk Consulting service capabilities in Data Analytics. Demand continued for financial risk management, strategic risk analysis, internal audit risk and consulting, compliance, forensic accounting, actuaries and advice on climate change - most notably in the Financial Services, Consumer Markets and Federal Government sectors.
- Transactions and Restructuring revenues were slightly down (-3%) on last year’s performance, at $112 million. Focused investment on the institutional, government and middle markets helped to balance the reduction in larger corporate transaction volumes. The practice continued to build its reputation in Corporate Finance, bolstered by the April acquisition of leading global firm, Makinson Cowell.
Audit revenues are consistent with the prior year at $389 million. Tender activity increased slightly through the year and audit pricing pressure continues both here and overseas. The CFO Advisory business saw double digit growth in both the Corporate and Government sectors. The practice continues to invest in evolving the audit through data analytics, insightful reporting and audit process improvements. The Audit practice published its third voluntary Transparency Report during the year, was named Capital CFO Audit Firm of the Year and played an active role in audit transparency and financial reporting reform.
Revenues were down (-4%) to $206 million as a result of muted demand in corporate tax, and reduced transaction volumes. Specialist Tax experienced good growth with transfer pricing now the fastest growing group in Tax. Strong demand came from the ENR sector. KPMG will continue to invest across the practice, with focus on Specialist Tax, Corporate specialist areas, Asian inbound investment and assisting clients manage their tax risk.
KPMG’s Private Enterprise business experienced strong growth during the year, on the back of demand for Migration services and Family Business Advisory services. Tax services for Private Client also strengthened during the year. KPMG is committed to further investing in, and growing its middle market business.
“KPMG has a robust business, with good foundations and exceptional people. We need to do more to realise our potential as a vibrant, responsive, full service firm,” said Mr Wingrove.
“The recent appointments I have made to our executive are an important step in bringing together leadership with the right blend of experience, knowledge and skill to successfully drive the next phase of our firm’s growth. We are sharpening our strategic agenda to focus on three priority areas – being more market facing, investing for growth, and increasing our speed and effectiveness of execution.”
“This year, you will see more of KPMG’s innovative side – fresh and creative growth strategies and solutions for our firm and our clients. You’ll see us investing across all areas of the business, aligning capability for an improving market, and continuing to attract high quality talent,” concluded Mr Wingrove.