BDO’s annual report shows overall growth thanks to mid-market focus

BDO's annual report shows overall growth thanks to mid-market focus

BDO's annual report shows growth across several sectors within the company, following its February 2019 merger with Moore Stephens.

BDO’s annual report shows overall growth thanks to mid-market focus

BDO has grown for the seventh year in a row, posting revenues of £578m with a 25% total increase on the previous year, according to its annual report.

These increases follow the firm’s February 2019 merger with Moore Stephens LLP, which gave BDO a 10% growth boost. The additional 15% of growth came organically.

Including five months of post-merger growth, BDO’s profits increased by 26% to £134m, making it the largest UK accountancy firm focused on mid-sized entrepreneurial businesses.

According to Eagland, part of BDO’s success can be tracked not only to its focus on the middle market, but its flexibility in also serving the micro and top markets.

Eagland said: “Post-financial crisis of 2008, we’ve got evidence that the mid-market were able to react and respond and re-engineer their business, and reposition their strategies more effectively than either the big businesses or the micro businesses.

“As such, they have grown more quickly, employed more people and have become more profitable in the post-financial crisis world than the other parts of the market.

“So, 2018, for us, is a kind of culmination of our byproducts of having focused on that market for so long—and having worked with those businesses, we have benefitted by working and delivering to those clients.”

Expanding expertise

That success also helped spur BDO’s staff growth. Internally, 13 partners were promoted into their positions, with an additional 14 partners being brought in from outside sources.

Additionally, nearly 1/3 of BDO’s UK workforce received a promotion and 390 trainees, including a record number of school leavers, were recruited into the firm.

“Accountancy isn’t a profession solely about numbers,” Eagland said. “Our clients buy our people, which is why we continue to prioritise investment in them.”

According to the report, the average distributable profit per partner increased 8.7% up to £602,000, based on pre-tax profits.

Positive business trends

Additionally, BDO’s audit, tax and advisory sectors each saw high levels of growth this year. In particular, audit grew 25% from the previous year, posting revenues of £200m.

Following the Moore Stephens merger, BDO became the third largest auditor of listed entities in the UK, bringing in several auditing opportunities.

Additionally, Eagland said that the action around audit reform throughout 2018 generated “amazing opportunities” for BDO as a mid-market firm.

For the second consecutive year, the FRC Audit Quality Review gave BDO the highest score of the major accountancy firms.

Capitalising on that, and similar to PwC’s audit investment plan, BDO will be investing £20m into its UK auditing practice throughout the next year. This is set to include £4m for professional training and an additional £4m for data analytics and audit processing software.

The firm’s tax business reported 20% growth over the prior year, with in-demand risk advisory and tax compliance services contributing to its £168m revenue. Private tax advice also helped this growth, moving BDO up in the list of leading personal tax practices.

Meanwhile, advisory revenue grew by 30% up to £210m, which BDO attributes to a flourishing private equity community.

Looking past Brexit

Admist a turbulent economy, Eagland said that he’s optimistic that BDO’s international experience will help carry the company through Brexit—and that the industry will be okay.

“I’m an optimist,” Eagland said. “I really am. My experience of working with our client base is that if you take Brexit—or you take world politics and economics—there is always anxiety in society, in economies, and in governments around the world that recession is always around the corner.

“I think what we particularly enjoy at BDO is that we work with clients who are super agile, super ambitious, they are resilient—and they are just very skilled at navigating change.

“So yes, we debate and discuss Brexit with our clients, but that’s not going to stop them continue investing and building their businesses. There are so many confident people out there that I’m an optimist, whatever the outcome of Brexit is, the UK economy—I can see it continue to do well.”

Looking ahead, Eagland anticipates internationally-compliant audit reform to continue growing, with the price of these services increasing with demand.

Additionally, he expects businesses to have a renewed focus on tax compliance, thanks to the changing legislation regarding Brexit. Particularly, advisory may see a demand for accountants with IT skills, particularly in financial systems and assorted tech platforms.

In addition to those technological skills, BDO’s report indicates that accountants may want to specialise in forensic tax, evaluations and pensions.

 

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