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KPMG profits take a dive

KPMG International, the global accountancy firm, yesterday blamed a wave of accounting scandals sweeping the profession for a 22 per cent dive in full-year profits at its UK business to £212 million.
Turnover at KPMG’s UK-based partnership edged slightly lower to £1.02 billion, but a steep fall in margins led to average earnings by the firm’s 600 partners falling from £462,000 to £353,000.

Mike Rake, the chairman, said the 12 months to September 30 had been “a difficult year for everyone”. The year was punctuated by the Chapter 11 bankruptcies of Enron, WorldCom and Global Crossing in the wake of accounting scandals linked to Andersen, a rival of KPMG. He said: “It’s been a very difficult year for the accountancy profession, and no one is certain about the short-term economic outlook for business.”

The headcount was reduced during the year by about 1,000 partners and staff, or 10 per cent of the workforce, because of the economic downturn and fallout from the September 11 terrorist attacks in America.The company said that restructuring, redundancies and higher salaries had cut into its operating margins.

Last week KPMG International reported that global turnover rose by 3.9 per cent during the year to $10.7 billion (£6.7 billion).

Mr Rake said: “KPMG’s financial year, because it ends in September, represents a period that has borne the full brunt of the economic downturn.”

He added that KPMG had “performed well in what has been a bad period for everyone associated with corporate transactions”. KPMG’s corporate recovery service, which deals with insolvencies and restructuring, was one of the few divisions to see gains as turnover rose by 12.8 per cent.

Assurance, which generates the largest portion of turnover, grew by 3.1 per cent to £421.1 million, while tax, the next largest unit, fell by 4.5 per cent to £265.2 million.

The group recorded a one-off gain from the sale of KPMG’s consulting business to Atos Origin, the Franco-Dutch group, for £274 million, which lifted total pre-tax profits to £406 million from £304 million the previous year.

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