Deloitte’s and KPMG’s annual revenue fell amid lower private and public sector demand for advisory services, but leaders at the big four firms predict a return to growth after two years of contraction.
Deloitte Australia’s revenue was down 8 per cent to $2.55 billion, while revenue at KPMG Australia was 4 per cent lower at $2.13 billion. Both have cut staff numbers to offset the effect of the lower income on partner profits.
The value of Deloitte’s partner profit units, which is how equity partners are paid, fell 7 per cent in the year to May. Average pay for the firm’s more than 900 partners, who are split almost evenly between equity and non-equity partners, is more than $500,000 each. In contrast, KPMG’s leaders managed to trim enough costs to increase average pay for the firm’s 684 partners by 10 per cent to more than $715,000 each.
Deloitte Australia chief executive Joanne Gorton said her firm was expecting a return to growth this financial year across all of its businesses. Gorton, an auditor, has only been in the top job since February.
“Evolving client needs, heightened global volatility, and the accelerating pace of technological advancement have all contributed to a complex operating environment throughout [the last financial year],” she said.
Shrinkage in staff and partners
Deloitte, the largest consulting firm by revenue in the country, cut more than 900 staff during the past financial year, bringing its workforce to about 11,150. The firm also shrank its partnership by about 100 partners.
Revenue at three of Deloitte’s four businesses was down for the year. Its technology and transformation business suffered a 14 per cent decrease in demand to about $1 billion; audit and assurance was down 9 per cent to $511 million; strategy, risk and transformation was down 3 per cent to $652 million; and tax and legal was slightly up at $346 million.
Gorton said the increased use of generative AI technology and its fast-growing managed service business were bright spots for the firm.
KPMG Australia chief executive Andrew Yates said the firm’s consulting business had been hit by slower economic growth and “the reduced use of consultants by the government sector”, but noted that cost-cutting within the advisory business was mostly finished.
“We’ve had to not only put a new strategy in place [in the consulting business], we’ve had to resize the business, had to resize [the part] that serves the government sector ... we’re largely done with that,” Yates said.
He said that by managing the firm’s cost base, “looking for productivity gains, and reshaping our business, we’ve been able to improve the profitability of the firm”.
While KPMG’s standalone advisory business suffered an almost 20 per cent fall in revenue to $749 million, the total consulting work done across the firm’s businesses, including its enterprise division, was only down by about 12 per cent to about $1 billion in revenue.
Revenue at the firm’s audit and assurance division was up by more than 7 per cent to $365 million, while its tax and legal division also grew by more than 7per cent to $240 million. The number of staff at the firm has been cut by more than 600, or 7 per cent, to almost 9000.
Yates said the firm expected “modest” single-digit percentage growth this financial year, helped by the firm’s investment in AI tools and training.
“We feel the portfolio [of businesses] will continue to grow ... we want to give consulting the opportunity to grow again,” he said. “So, as we set up a budget for next year, we’re trying to make sure we’ve aligned the size the business with the prevailing market.”
Sourced from Financial Review