Expanded BDO to hit revenue parity next year
Merged BDO and PKF to push past their previous separate fee incomes in the next financial year, as the new firm looks to grow
THE MERGED BDO and PKF business will ‘make par’ in the next financial year in terms of overall revenues, as the firm looks to build on the skillsets and mass of bringing the two together.
Revenues grew 10% for BDO in 2012/13 to £312m, although this incorporated three months’ trading with PKF on board. Simon Michaels, managing partner of BDO, told Accountancy Age that organic growth was more modest, between 1% and 2%.
The last recorded separate revenue figures for the two firms (2011/12) saw a combined income of £384m – although PKF’s financial planning division was subsequently not integrated into BDO. Michaels (pictured), who said the combined firm had a run-rate of £375m, expects to hit the £384m figure next year, with a combination of inorganic and organic growth.
Rather than move forward cautiously, as PKF beds in, BDO is looking to continue to recruit as it aims for improving markets, said Michaels.
“Both firms had strong balance sheets, which gives us a strong base to invest,” he said.
Underlying profit increased by 6% to £55m, with distributable profits before exceptional items up 4% over the period to £50m. With 100 new partners on board post-merger, average profit per equity partner was static, at £240,000.
The merger had seen some job losses, “in the tens”, through the combined back office functions, Michaels added.
“The biggest opportunity is to exploit the benefits of the merged firm – the economy is picking up and there’s more deal flow.”
Audit fees increased by 16% to £111m, with the merger and some organic growth coming from a flat market. The firm hopes to increase its FTSE 350 audit share to 5%, from 3%, over the next five years.
Tax revenues climbed 8% to £86m, with private client and ex-patriot work for domestic and internal clients picking up. “We’ll see more of that in the year ahead,” Michaels added.
Advisory climbed 8% to £115m, with outsourcing, rick and forensic services expected to continue to grow. “We currently act for one-third of the FTSE 350 in an advisory capacity, which we want to boost to nearer 50% in the next five years,” said Michaels.
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The BDO international network saw revenues up 7.3% to $6.45bn (£3.95bn) for the year ended 30 September 2013. The network expects a strong year driven by mergers among several of its major firms, including the US and Australia.