| Fee income of top 20 firms passes €1 billion |
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It was another year of strong growth as the top 20 accountancy firms in the Annual Finance Accountancy Survey surpassed fee income of €1 billion for the first time.
The top firms returned an annual growth rate of 19.6 per cent while none of the firms reported a drop in fee income. Deloitte, once again, is the most ‘efficient’ top accountancy firm, returning the most income per employee. |
Ireland’s top accountancy firms have enjoyed another successful year, with many firms posting growth figures in excess of 15 per cent. However, the overall growth rate of the top 20 firms is 19.6 per cent for the year, making a small gain on last year’s growth of 17.9 per cent, and remaining behind the growth rates seen in 2005, when fee income grew by over 20 per cent.
Profitability
All of the accountancy firms polled recorded strong growth figures for the year, with overall fee income for the firms growing by 19.6 per cent, from E976.3 million in last year’s poll to almost E1.2 billion in this year’s survey. Once again this year, the Big 4 accounted for the lion’s share of fee income, and they maintained their market share from last year. In 2006, they claimed 73.5 per cent of the market share, and this year, that rose marginally to 75.2 per cent.
The average growth in fee income of the Big 4 this year stood at almost 18 per cent, which was an increase on last year, and this recovery put them right in line with the average of the top 20 firms.
Once again, Deloitte is the third placed firm with E143.6 million in fee income earned, and again finished ahead of Ernst & Young (E138 million in fee income) to round of the placings for the Big 4.
The Big 4 firm that recorded the fastest growth this year was once again KPMG, with fee income growth of 27.4 per cent. It far outpaced its closest rival of the Big 4, E&Y, who recorded growth of almost 18 per cent. Deloitte also enjoyed robust growth of 15 per cent, while PwC had an all-Ireland growth rate of 11 per cent in the last year.
BDO Simpson Xavier once again was ‘best of the rest’, retaining its fifth place ranking. The firm recorded a solid rate of growth this year, with an all-Ireland fee income of E72 million.
Once again, a series of mergers caused the most movement among the mid-tier companies, although most firms experienced growth in fee income in the last year. Grant Thornton saw its fee income leap from E30 million last year to E50 million this year, thanks in no small way to its acquisition of RSM Robson Rhodes, who was itself a feature on the list of top 20 firms before its deal with Grant Thornton. The firm remains in sixth position on the poll, but as a result of its acquisition has closed the gap significantly on fifth placed BDO Simpson Xavier.
Similarly, the newly formed firm, Baker Tilly Ryan Glennon posted fee income figures of E12 million. The firm is the product of a merger this year between Baker Tilly O’Hare and PKF Ryan Glennon & Co. As was the case with RSM Robson Rhodes and Grant Thornton, both of these firms featured on the top 20 fee income earners in the 2006 edition of the Finance Accountancy Survey.
The eighth placed firm, Mazars, also enjoyed solid growth this year, posting an impressive 23.8 per cent increase in fee income. Outside of firms involved in mergers and the Big 4, Mazars enjoyed the biggest growth for the year. However, it still experienced a slight drop on last year’s growth of 31.3 per cent.
The static Moore Stephens has been overtaken by a couple of firms this year, falling from 14th place in 2006 to 16th position this year. It was overtaken by the merged Baker Tilly Ryan Glennon and PKF O’Connor Leddy Holmes, which enjoyed solid growth of 17.6 per cent.
Ormsby Rhodes was the only firm to record a fee income increase of less than 5 per cent.
With the largest fee income this year, PwC also controls the largest markets share of the top 20 firms, with 20 per cent share of the market. KPMG is the only other firm to have more than an 20 per cent share of the market. The Big 4 once again dominate the majority of the market, with 75.2 per cent of the total fee income of the top 20.
As a result of the numerous mergers in the past year, DCA Accountants are a new entry to this year’s survey, filling the final position on the list.
Efficiency
Once again, the survey also compared the firms in terms of efficiency. This was done by examining the income earned per staff member. For the third year running, Deloitte was the most efficient firm, with its 944 members of staff generating an average income of E152, 119, a slight increase on last year’s figure of E151,701.
KPMG jumped ahead of Mazars and PKF O’Connor Leddy Holmes to reach second place in terms of efficiency, thanks to a 6.4 per cent increase in its efficiency from last year. Mazars also in creased its efficiency, but the gain of 4.8 per cent was not enough for it to hold off the challenge of KPMG.
The other mid-tier firms all performed well in this respect, with Russell Brennan Keane increasing its efficiency by 11.4 per cent, while BDO Simpson Xavier increased its efficiency by 6.5 per cent, putting it in sixth position.
PKF O’Connor Leddy Holmes fell back two places in this year’s ranking as its efficiency fell from E140,625 in 2006 to E126,984 this year. This can mainly be attributed to the firm’s 31 per cent increase in its staff numbers, and sees the firm return to its efficiency level recorded in 2005. This drop sees PKF fall back to fifth spot in the efficiency ranking.
At the other end of the scale, new entrant DCA Accountants footed the table this year with a fee income per employee of E60,870. The arrival of DCA lifted Moore Stephens off the foot of the table. This year Moore Stephens improved its efficiency by almost 7 per cent, from E73,148 last year to E78,218 in 2007.
Midlands accountant Russell Brennan Keane was the only firm to see a double digit increase in its fee income per employee, increasing its earning by almost E10,000 per member of staff.
Baker Tilly Ryan Glennon saw its efficiency rating drop from E121,100 last year to E107,143 this year. Although this drop is mostly explained by the upheaval caused through the merger of Baker Tilly O’Hare and PKF Ryan Glennon, and the surrounding loss of capabilities that go along with integrating two separate operations.
OSK Accountants this year joined the group of firms that earn more than E100,000 per employee, its increase of 3.85 per cent pushing it into this category.
Examining chargeable staff alone, KPMG overtakes Deloitte. Its chargeable staff have an average income of E170,000. This year KPMG improved its chargeable staff efficiency by almost 9 per cent.
Looking at the average fee income earned per partner, the big firms again take the lead. PwC, Deloitte and KPMG are the only firms to record a fee income per partner of E3 million.
Staff numbers
The number of employees in the top 20 firms grew again this year. Compared to the figures of 2006, the total number of employees grew by 11.6 per cent, or an increase of 875 people. PwC once again leads the way in terms of total staff numbers, with 2620 employees, followed closely in second place by KPMG, which has 1800 employees. KPMG is closing the gap on PwC in this respect, with employee figures swelling by almost 20 per cent this year, compared to PwC’s growth of 11.2 per cent.
Ernst & Young has retained its lead over Deloitte, with both firms growing their staff by almost 15 per cent.
Outside of the Big 4, Baker Tilly Ryan Glennon posted an impressive increase in staff of 62 per cent, thanks to the merger that formed it this year. Outside of merger and acquisition growth, PKF O’Connor Leddy Holmes was the firm to most grow its staff figures from last year, hiring 15 new members of staff, giving it growth of 31 per cent. HLB Nathans also showed strong growth in staff number, increasing its employee figures by over 25 per cent compared to 2006.
Moore Stephens was the only firm to see its staff numbers drop from last year, losing seven members of staff, accounting for a drop of 6.5 per cent of its total workforce.
Deloitte was the only other firm to have 20 or more members of staff for every partner. The Big 4 all have a much higher staff to partner ratio than the other firms, with Russell Brennan Keane coming closest with almost 16 staff members per partner.
Although, recruitment is still seen as the major issue in the accountancy sector, staff numbers have grown impressively in the last year. This year’s growth of 11.6 per cent in the top 20 firms’ workforce is a significant increase on last year’s figure of 7.1 per cent. However, the growth in employee numbers is still behind the growth in fee income being recorded by the top accountancy firms.
Growth areas
Tax was the strongest area of revenue growth for the top firms with 35 per cent of the votes, followed closely by audit/accounting with 29 per cent. This is a similar finding to last year, where both categories amassed 35 per cent of the votes.
Management consulting made a strong impression this year, accounting for 24 per cent of votes. No-one chose this category in last year’s poll. Corporate finance finished bottom of the poll, with 12 per cent of firms choosing this option. This reflects a small drop on last year’s figure of 15 per cent.
Partners
According to the survey, the majority of partners are between 30 and 50 years old (72.5 per cent), with a slightly larger proportion in the second half of that age group (39.1 per cent). As was the case last year, there are no partners under 30 in the survey, while only five partners surveyed were over th age of 60 (1.6 per cent). Mazars is the firm with the youngest partners, with nine of its 17 partners under 40.
The number of female partners has seen a small rise compared to last years figures. There are now 52 female partners with the top 20 accountancy firms, accounting for 13.6 per cent of the total 382. This represents an increase on the figures of the last two years, when the figures for female partners stood at 12 per cent.
Of the Big 4 firms, PwC is one of the most progressive of the firms surveyed in this regard, with 20 female partners in the Republic of Ireland. Elsewhere Baker Tilly O’Hare has an impressive 25 per cent of female partners. However, BDO Simpson Xavier has only two female partners out of a total of 48, while at Farrell Grant Sparks, there is only one female among its 21 partners.
With staffing problems being cited as a major issue in the industry, many would expect retirement ages to be getting pushed back. For partners however, it was found that the average expected retirement age foe a partner in one of the top 20 firms is under 60, at 59.75 years old.
Only two of the 16 firms that responded to this question expected their partners to work to the official retirement age of 65. The majority of firms expect their partners to retire at 60, while one quarter of firms see their partners retiring at the age of 55.
The average working week of a partner in a top 20 firm was found to be almost 47 hours. The responses to this question ranged from a working week of 37.5 hours to a high of 55 hours per week. The majority of responses fell in between 45 and 50 hours per week.
A majority of 46 per cent of firms said that they would expect between 61-80 per cent of their partners’ working hours to be charged to a client. The lower bracket of 41-60 per cent chargeable hours was what 36 per cent of firms expected from their partners, while 18 per cent expected that 81-100 per cent of their partners working hours would be chargeable. |
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| Article appeared in the September 2007 issue.
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