Evan Vitale Consulting: Deloitte UK boosted by strong consulting growth

Sunday, August 23, 2015

Deloitte UK boosted by strong consulting growth – Financial Times

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Professional services firm Deloitte UK increased revenues by 6.4 per cent in its latest financial year, as double-digit gains at its consulting division helped offset a stagnant performance from audit.

The contrasting rates of growth illustrate the changing nature of the big four accounting firms, which are trying to expand areas such as consulting and advisory as their core audit markets mature.

Deloitte reported revenue of £2.7bn for the year ending May 31. Across its four main business lines, audit rose 0.3 per cent to £708m, while consulting revenue grew 10.5 per cent to £687m. Revenues from its financial advisory and tax service divisions also outpaced audit, with 9 per cent and 5 per cent growth respectively.

David Sproul, senior partner and chief executive of Deloitte, said: “Audit is a harder market to grow in, mainly because of continued fee pressure and less special work. The audit business won’t grow at the same rate as our consulting and advisory divisions.”

Gains in consulting came as clients sought to improve productivity, better engage with customers, and protect themselves from risks such as cyber attacks. Financial advisory was boosted by an increase in mergers and acquisitions activity during the 12 months. Deloitte is beefing up its corporate finance coverage and in June it hired Paul Staples from BNP Paribas as part of an expansion push.

Mr Sproul says that Deloitte continues to look at medium-sized “bolt-on” acquisitions, particularly in areas such as technology, analytics and digital.

Competition for deals is tough, however. He noted that some acquisitions by Deloitte’s rivals “are being done at very silly prices” and that there was a “war for talent” going on in digital and cyber security.

Like its rivals, Deloitte is trying to harness the power of data analytics in its audit and consulting divisions.

Profit distributable to partners for 2015 was £593m, up slightly from £554m in 2014. The average profit earned by each partner in the year, after providing for pensions and annuities payable to retired partners, was £822,000, an increase from £750,000 last year.

Deloitte UK’s results include the Swiss practice, which increased revenue by 13 per cent to £267m.

Mr Sproul said the balance sheets of UK companies were more resilient than a couple of years ago and in better shape to withstand an economic shock “if Europe went back into recession or there was a hard landing from China.”

He believed “the right economic answer” was for Britain to stay in the EU. “Given the amount of exports our clients do, the better answer is to be part of a single market that gives access to 500m people across 28 European member states.”

Deloitte is trying to improve the retention of women as it tries to address the lack of gender diversity in senior positions. It has an ambition that 25 per cent of its partners will be women by 2020. Deloitte’s gender pay gap is 17.8 per cent, about 1.3 per cent below the national figure.

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