Collins makes a good start at KPMG but the hard part’s to come
This probably hasn’t been the easiest year to be the top dog at one of the country’s big four accountancy groups.
The industry is still wracked with self doubt as to whether it should or could have spotted the problems that led to the financial crash earlier, and, to make matters worse, the Big Four firms have been forced to confront pressure for reform on auditing rotation.
Gone are the days when shareholders will put up with audits being carried out by the same firm for 20-odd years without being submitted to tender.
At KPMG UK the ever thoughtful Simon Collins has just finished his first full year in charge. He beat off fierce competition to become senior partner and chairman in the spring of 2012 and his early period was dominated by overseeing job cuts at the firm as the group made three per cent of its employees redundant.
Then earlier this year the group lost the audit of HSBC, one of its largest clients, to PwC, a major blow to morale, but an inevitability perhaps of the shake-up in audit practice.
There are signs that Collins has things moving in a positive direction. Results for the UK, reported on the next page, show profits are up 27 per cent, as the firm benefits from cost cuts at the beginning of Collins’ reign.
Audit wins at Unilever and Berkeley Group have also softened the blow of the HSBC loss and restored confidence in that area.
The task going forward is to grow revenues faster. The disappointment in yesterday’s figures, if there is one, is that revenues, at a touch over £1.8bn, grew by only 0.4 per cent.
Collins is determined to take the firm, in common with other groups in the same space, into areas where the prospect of growth is great.
He wants KPMG to be the most trusted, relevant, financial services firm of choice for a host of services, from equity advisory to cyber security.
Earlier this year the firm announced the creation of a technology investment fund as well as the acquisition of Makinson Cowell, an equity adviser. It has contemplated an even larger technology acquisition but has so far been denied its favourite target.
KPMG seems a more dynamic place under Collins than it was during the tail-end of the John Griffith-Jones era. Time will tell whether Collins can make the right moves to grow the firm, while coping sufficiently with the growing competition that threatens it core business.
ANGRY ASHLEY
Sports Direct’s majority shareholder Mike Ashley is not known for his zen-like calm. So when the German sportswear group Adidas decided last week to withdraw the sale of replica Chelsea kit from Sports Direct stores from next season it must have banked on provoking a stormy reaction.
It’s not quite clear how Ashley will respond. During a call with analysts last week there were hints he might even buy a stake in Adidas of up to five per cent to put pressure on the group to revoke its decision.
Chelsea’s kit is one of the biggest sellers in Sports Direct’s stores and so its withdrawal would certainly be a significant blow, both financially and in terms of prestige. Analysts reckon sales are worth between £8m and £10m a year to the company.
If he doesn’t buy a stake in Adidas, Ashley could always refuse to stock certain other Adidas lines in his 400 or so stores throughout the UK. That is maybe the likelier option.
It’s still not clear why Adidas has made the move. Sources yesterday suggested that Sports Direct is one of 17 stockists that will lose selected lines under a restructuring of the group’s distribution outlets, with some items being stocked only in what are considered to be the more upmarket stores.
Allister Heath is away
Follow him on Twitter: @allisterheath