Deloitte UK’s partners have to be paid 17 per cent of their paychecks despite rising revenues by nearly a tenth because the accounting and consulting group has not been able to cut costs fast enough in response to the coronavirus disruption.
In the first set of results to be published by one of the Big Four professional services firms, Deloitte reported strong growth across all divisions of its business in the 10 months to the end of March, before the pandemic caused a major slowdown.
She said revenue in April and May were “severely affected by the Covid-19 virus”, with growth dropping to around 2 percent, after hitting nearly 11 percent in the first part of the year.
As a result, total revenue came to 4.31 billion pounds for the full year through May 31, up 9.1 percent from 3.95 billion pounds in 2019.
However, the distributable profit for this period was only £ 518m, down 16 per cent from the £ 617m Deloitte earned the previous year, because investment levels were determined assuming continued growth in the business.
The average earnings per partner fell slightly more, from a 10-year high of 882,000 pounds announced last year to 731,000 pounds – due to a slight increase in the number of eligible partners during the year.
Donna Ward, Deloitte UK Chief Financial Officer, said: “As a result of this pandemic, the company’s growth has been less than planned … We have carefully managed our resources throughout this period, implementing cost containment and liquidity enhancement measures to ensure our company’s long-term resilience.
One person familiar with the numbers said profits have fallen sharply because revenues have fallen immediately since March, but that the cost cuts “take time to develop and implement them thoughtfully.”
Consulting provided the strongest performance for divisions, with revenue up 12 percent as Deloitte won new business advising on the pandemic. In addition to helping corporate clients redesign business practices and strengthen their supply chains, the company has been appointed by the UK government to help coordinate emergency response actions.
Of the £ 109 million contracts awarded by Whitehall administrations to consultants in the first weeks of the crisis, Deloitte included managing the purchase of personal protective equipment for hospitals, and support for test sites – though the company did. Cash For a series of administrative errors and delays in providing the group.
Audit work has also increased, with revenues rising by nearly 9 percent, despite continued blame for the Big Four for the quality of corporate audit. in September, Deloitte was ordered to pay £ 21m in fines and costs For serious misconduct in its audit of Autonomy, the former FTSE 100 technology group is at the center of one of the UK’s biggest accounting scandals.
Alongside its findings, the company provided more details about the new audit board it has created since in an effort to “rebuild confidence in the business”. Under an independent chairmanship, the Board of Directors will aim to provide more stringent oversight of the audit practice in the UK, ensuring that the regulatory separation of auditing from other departments is achieved, as required by the Financial Reporting Board.