BDO profits rise on post-PKF merger results

BDO has posted the first set of results since the merger with mid-tier firm PKF earlier this year, highlighting substantial organic and post-merger growth as fee income grew 10% year on year.

The number six firm in the UK saw fee income increase 9.3% to £312m in 2012-13, up £29m on the previous year, on the back of strong growth in international work, complex advisory projects for multinational brands and specialist tax areas, such as expatriate and private clients.

The figures for 2012-13 include nine months of BDO LLP's financials and three months of the combined firms post-merger based on a 5 July year end.

Reflecting an upturn in business confidence, BDO also reported underlying operating profit increased by 6% to £55m, up from £53.1m. Average profit per equity partner remained flat in line with last year at £240,000. The firm currently has 300 partners, up by 100 since the PKF merger.

Simon Michaels, senior managing partner at BDO said: 'Client stickiness has been very good post-merger. The majority of growth in the UK has been due to the merger and increased organic growth. Financial services and advisory have been strong growth areas, as are specialist tax and international work.'

The strongest growth area in the UK was advisory services, up 8% to £115m, while the audit income was up 16% to £111m due to a number of cross-border, international audit wins and client acquisition attributable to the merger.

The growth has been down to a number of factors, says Michaels. 'There is definitely a combination of the economy and changes in the mid-tier firms which means that some organisations are thinking of changing providers. Our Scottish office, for example, has had 60 new business opportunities in the last five months.'

The changes to the audit market from the UK and Europe are also having an impact. 'The Competition Commission will continue to open up the audit market. Competition is going to be as fierce as it has been over recent years. We don't see that changing - the Big Four will still be very active.

'But we have a growing market share in AIM audits and will continue raising our profile in this sector supported by investment at the firm. What is important is the quality of audit and, although there is going to be an increased cost of going through the audit tendering process, the increased cost is something that we are ready for. '

Total headcount at the firm is 3,500, including 350 partners, up from 2,300 total staff at the time of the merger, which did not result in significant staff losses, particularly of client facing staff.

Michaels said: 'A lot of the increase in headcount is because of the merger - we are seeing more opportunities and more organic growth.

'Both organisations had similar values and a sense of partnership - there has been a great deal of change for people and we have spent a lot of time engaging with staff. In the last two months I have been going around the country visiting our offices and have held 35 sessions for 2,000 people to give them a clear understanding of our strategy.

'Staff attrition rates have been low and we are planning to hire more staff in the next year. The trick is to grow the firm and hire the right people. But there is a lot of competition for talent as business recovers and we have a really high quality threshold.'

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