Deloitte grows with a focus on Trust, Resilience and Transformation has been saved
Deloitte grows with a focus on Trust, Resilience and Transformation
30 September 2020
- Revenues1 for the year increased 9.1%, with the majority of growth in first ten months of FY20. Growth in final two months fell to around 2%; distributable profit for the year down 16%
- Recently announced acquisition of Keytree underlines firm’s confidence in Britain’s technology economy
- Focus on societal impact with commitment to help 5 million people overcome barriers to education and employment by 2030
Deloitte today launches its Annual Report, focusing on Trust, Resilience and Transformation. The report brings together the firm’s financial performance for the year to 31 May 2020 alongside its Transparency Report, and the story of the firm’s Purpose – highlighting its wider impact across clients, people and society.
Deloitte UK CEO Richard Houston said:
“The last financial year finished in the shadow of COVID-19, which has first and foremost been a human tragedy, but also brought with it a level of global disruption we’ve never seen before.
“Our immediate focus was ensuring the health and safety of our people, working with clients and suppliers to minimise disruption and supporting our communities to address challenges they faced.
“I’m proud of what we have achieved. We safely transitioned 20,000 people and partners to remote working and played a key role supporting clients in their response to COVID-19, including the national response from government. We ensured our society partners could help those most in need, while also protecting jobs and the long-term resilience of our own firm.
“The pandemic has also prompted a period of reflection, particularly around the role of business within wider society and how it supports the UK economy. It is clear to me that business needs to build trust, strengthen resilience and drive transformation, with each of these also critical in delivering Deloitte’s own ambition for the months and years ahead.
“COVID-19 has placed a greater focus on what being a responsible business means. We are helping clients consider their impact on a range of areas, including climate change, ethical supply chains, the safe storage of data, and responsible investment and lending strategies. We want them to emerge stronger from the pandemic while recognising the fundamental changes in the economy and how businesses must operate”, continued Richard Houston.
As part of the journey to rebuild trust in business, Deloitte this month announced accelerated enhancements to the firm’s own governance.
Stephen Griggs, UK managing partner and former managing partner Audit & Assurance, said:
“We have committed to reforms that we believe will improve audit quality, increase choice and restore public confidence and trust in audit. Accelerating enhancements to our own governance through the formation of the new Audit Governance Board is an important step for us. The Audit Governance Board will have responsibility for providing independent oversight of our UK audit practice, with a focus on the policies and procedures for improving audit quality and ensuring the Financial Reporting Council’s objectives for operational separation are met.”
The new Audit Governance Board, with independent chair Margaret, Baroness Ford of Cunninghame OBE, alongside Jim Coyle, Almira Delibegovic-Broome QC and Shirley Garrood as independent non-executives, will come into effect in January 2021.
Deloitte also announced earlier this month the launch of its WorldClimate strategy to look at how the firm can be more responsible through its own operations and achieve net-zero emissions by 2030.
COVID-19 has shone a spotlight on organisational weaknesses and challenges. Deloitte has supported clients to embed financial, operational and reputational resilience into areas such as the supply chain, workforce, digital and cyber security, as shown through the stories in the Annual Report. There has been high demand to access insight and support on the implications of COVID-19, with Deloitte’s COVID-19 weekly webinar attracting more than 30,000 attendees since it started.
Richard Houston added:
“Our own resilience has also been high on the agenda. We took a number of actions early in the crisis to help create certainty and ensure our firm’s long-term stability, such as deferring capital expenditure, suspending equity partner profit distributions and reducing and deferring promotions, salary increases and bonuses. I’m grateful and proud of how our partners and people have responded to these difficult decisions, and for supporting each other and the firm throughout the pandemic.
“The acceleration of change brought about by COVID-19 has been huge, provoking us and our clients to think about the business we want to be and what needs to change in order to thrive. For our clients this is about supporting their transformation - whether that’s helping them access finance or stay cyber secure, digitally engage with their customers or even change their business entirely through an acquisition or sale”, said Richard Houston.
Deloitte is also transforming itself – including opening a number of regional technology hubs across the UK, as well as recently acquiring Keytree, the international award-winning technology consultancy, strengthening its capabilities in areas including SAP S/4HANA, data analytics, cloud services and robotic technologies.
“Our acquisition of Keytree demonstrates our confidence in the UK and our willingness to invest in growth for the future. The COVID-19 pandemic has clearly shown that investment in technology will be a critical catalyst for the recovery of UK businesses,” said Richard Houston.
Deloitte’s role in society
The COVID-19 crisis has also demonstrated the difference business can make to some of the biggest challenges the country faces. In addition to helping clients respond to the pandemic, including supporting government scale COVID-19 testing across the country, the firm worked alongside The Trussell Trust and FutureDotNow to support in providing food and technology to those in the greatest need. Deloitte also helped charity partners such as Tax Aid and Tax Help for Older People adapt to the needs of a more digital future.
Dimple Agarwal, Deputy CEO and Managing Partner People & Purpose, said:
“The role of business in our society has never been more important. In the last six months we’ve not only focused on driving a positive impact on society through the work we do with our clients, we’ve also reached our target of helping one million people overcome barriers to education and employment through our One Million Futures programme. In just four years, the programme contributed over £22 million and 120,000 hours to UK charities, schools and social enterprises.
“Now we’re looking to do even more to build skills and create brighter futures. Our Worldclass commitment means we aim to help another 5 million people across North and South Europe by 2030.
Diversity and inclusion
“While we’ve made progress on our wider inclusion agenda over recent years, it is absolutely clear that we need to do more. We believe that having more diversity is not only the right thing to do, it is good for our business. We are 100% committed to continue to focus on inclusion and are taking concrete actions that will make a sustained difference to our people, our clients and society”, added Dimple Agarwal.
Deloitte continues to track and monitor its pay gap. This year’s headline figures on gender pay gap improved slightly between FY19 and FY20 – with the total earnings gender gap, reducing by 4.5 percentage points from 39.3% to 34.8%. Deloitte also voluntarily reported on its Ethnicity pay gap in FY20, with the total Earnings Ethnicity Pay Gap reducing by 3.4 percentage points to 40.1% compared with FY19.
Dimple Agarwal said:
“Both our gender and ethnicity pay gaps are a result of us having low female and ethnic minority (including Black) representation at senior grades, so we are working towards addressing this imbalance with a focus on recruitment, promotion and culture change.”
Deloitte’s action plans mean that the firm’s leadership is accountable for gender and ethnicity targets, including Black targets, at all levels. The firm has also put in place various interventions and policies – such as doubling paternity leave, changing promotion processes so they are more inclusive, mandatory training on inclusion including race and ethnicity, as well as active mentoring and sponsorship.
In addition to its gender and ethnicity action plans Deloitte launched a dedicated Black Action Plan in response to the Black Lives Matter movement. The plan is based on five key commitments, such as developing people to succeed and thrive and evolving the firm’s culture and behaviour, which come with meaningful and measurable objectives. It was developed together with the firm’s newly formed Black Steering Group and the Ethnicity Council.
Dimple Agarwal added:
“We continue to drive our culture of inclusion through training and listening to our people. In addition to gender and ethnicity, in the UK we have and will continue to work hard with our networks, allies and partners to achieve all dimensions of inclusion. This includes supporting social mobility, neurodiversity and the LGBTQ+ community. I look forward to sharing more detailed information as part of our Inclusion Report, which will be published early next year.”
Financial performance in 2019/20
Deloitte today reported revenue of £4.31bn1 for the year ended 31 May 2020, up 9.1% from £3.95bn in 2019. In the first ten months of the financial year, prior to the effects of the pandemic, revenue growth was close to 11%, with all businesses growing. Revenues in April and May 2020 were significantly impacted by COVID-19, with growth dropping to around 2%.
Distributable profit2 for the year ended 31 May 2020 was £518m, down 16% from £617m in the prior year.
The firm’s total UK tax contribution was £1.2bn in FY20. This comprised £760m of taxes collected on behalf of HMRC (VAT, PAYE and employee national insurance) and £439m of taxes borne by the firm (partner income taxes, national insurance, corporation tax and employer’s national insurance).
Donna Ward, Chief Financial Officer, said:
“As a consequence of the pandemic, the firm’s growth has been less than planned. We have carefully managed our resources throughout this period, implementing cost containment and liquidity enhancement measures so as to ensure the long term resilience of our firm. We continue our focus on operational and financial resilience whilst also making considered, but strategic investment choices.”
UK Business Performance
- Audit & Assurance continued its focus on audit quality throughout the year. The start of the pandemic in the busiest trading period alongside the economic impact and increased operational risk of working remotely, have placed a greater need for companies to make sure their controls and processes are robust. The business has been working hard to ensure audit processes, technologies and controls continue to adapt so that it can continue to meet its public interest responsibilities to inform markets through the pandemic and beyond. Assurance services continued to support businesses in meeting their financial, regulatory and operational responsibilities. Audit & Assurance grew 8.7%.
- Consulting played a vital role over the latter part of FY20 in supporting clients’ response to COVID-19. The business delivered targeted solutions such as redesigning working practises, strengthening supply chains, driving cost reduction and responding to dramatically shifting customer needs to help clients respond and recover quickly from challenges brought about by COVID-19. Consulting also supported the Government in responding to the national emergency and accelerating and scaling COVID-19 testing across the UK as well as helping with their urgent business support schemes. Moreover, Consulting expanded its capability in digital transformation, cloud, AI, machine learning, and intelligent automation. The practice continues to evolve, developing new capabilities and making targeted acquisitions to empower clients across all sectors to recover and thrive post-COVID-19. Consulting grew 11.9%.
- Financial Advisory supported clients in their response to the immediate financial and operational pressures arising from COVID-19. The Restructuring Services and Debt Advisory practices worked with clients on a range of solutions to survive, recover and protect jobs - from complex restructurings to shorter term liquidity solutions. The Value Creation Services team advised on operational cost reduction, working capital management and cash flow forecasting. The Economic Consulting business worked with public and private sector organisations to support on policy, while the Government and Public Sector practice supported cross service line teams working on the response to the pandemic and also helped Government identify potential additional areas of support. The M&A teams worked with clients where the strategic imperative for M&A shifted, as they looked to consolidate their market position. Financial Advisory grew 5.0%.
- Risk Advisory provided operational support on businesses’ crisis management activities when the pandemic started. More recently teams have been working to manage the risks associated with businesses digitising their operations, and to build greater operational and financial resilience. Cyber threats have increased exponentially during the pandemic and Risk Advisory has been working with businesses to strengthen their cyber defences, enable remote working employees to safely collaborate online and ensure businesses can confidently transact with customers.. Risk Advisory grew 5.9%.
- Tax & Legal shifted its focus to helping clients manage their immediate liquidity challenges, particularly in those sectors hardest hit at the start of the pandemic. This included providing assistance with claims for government support and working closely with HMRC to provide feedback on the effectiveness of their new Job Retention and ‘time to pay’ schemes, suggesting practical improvements. Tax & Legal grew 7.1%.
Note to editors
1 All revenue numbers presented herein, unless other noted, represent UK and Switzerland consolidated, and have been prepared in accordance with International Financial Reporting Standards and IFRS Interpretation Committee interpretations, as issued by the International Accounting Standards Board, and are audited.
2 Distributable profit differs from profit as reported in the Firm’s Statutory Financial Statements as a consequence of, among other things, the treatment of equity partner annuities. Average profit per equity partner is based on distributable profit and was £731,000 in the year ended 31 May 2020 (down from £882,000 in the prior year).
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Deloitte LLP is a subsidiary of Deloitte NSE LLP, which is a member firm of DTTL, and is among the UK's leading professional services firms.
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