BDO LLP Announces financial results for 2019/20

• Overall revenue rises by 14% due to strong first nine months of year pre-COVID-19
• The majority of revenue increase (9%) comes from first full year of merger with Moore Stephens LLP. Organic growth accounts for 5%
• Reported profits before tax remain flat but underlying business profits1 fell by over £25m entirely due to the impact of COVID-19 in the final quarter  
• Fall in profits has been absorbed by the partners resulting in a decline in partner ‘pay’ (average profit per partner before tax) of 14% to £518,000
• The protracted impact from COVID-19 is set to continue well into 2020/21
• Ambition to preserve UK jobs and to continue recruiting apprentices

Accountancy and business advisory firm BDO LLP has posted revenues of £660m for the financial year 2019/20, a 14% increase on the previous year, the firm announced today.

Around 9% of the revenue increase reflects the first full year of BDO’s merger with Moore Stephens LLP back in 2019, with 5% coming from organic growth. Accounting profit before tax was flat at £137m with underlying business profits falling by £25m.

The first nine months of the financial year (July 2019 – March 2020) showed strong growth for the firm where BDO’s focus on quality and its successful merger paid off in increased revenue and profit pre-COVID-19.

The impact of COVID-19 and the subsequent lockdown, however, saw a reversal in BDO’s profitability. In the final three months of the year (April 2020 to June 2020), revenues and profits fell substantially by 13% and 50% versus prior year respectively. The fall in revenue in the last quarter equated to a drop of £25m and a £25m corresponding reduction in underlying business profits.

The £25m reduction in profits was absorbed by BDO’s partners with average distributable profit per partner (PEP), before taxation, for the year decreasing by 14% to £518,000 compared to £602,000 last year – all associated with the impact of COVID-19.

With additional economic volatility caused by the prospect of a winter spike in infections, lower levels of profitability look set to continue.

Despite that, as the first nine months of the financial year shows, BDO is a business which has the fundamentals right. The firm’s focus on quality, servicing clients and its clear strategy means that BDO is in a strong position to weather the economic storm.

Paul Eagland, Managing Partner at BDO LLP, said:

“It’s been a year completely unique to any other. A year when we have all worried about the health of friends and family but also one where economic uncertainty has led to increased anxiety for everyone.

“To fully understand our annual results, they should be broken down into two very different periods: pre-lockdown and lockdown. The strength of our overall financial results derives entirely from the first nine months before the crisis hit us. The last three months tell a completely different story with revenues and profits falling as lockdown took hold.

“To brace ourselves for the COVID-19 impact, our first step was to ask partners to reduce their monthly ‘pay’ and forego their quarterly distributions. Subsequently – and in order to protect the jobs and pay packets of our 5,500 UK people - we applied to use the Coronavirus Job Retention Scheme. We ensured our furloughed employees were paid in full by topping up their wages to 100% during their time on furlough, and we brought all our employees back into full time employment with no redundancies made across our workforce.

“COVID-19 has already had a huge impact on our business and we don’t know what lies around the corner. This means we have had to take a number of tough but prudent decisions to ensure the sustainability of the firm and to protect our people’s jobs – not just for the initial lockdown period but also looking ahead to the slow, challenging recovery.”

BDO also continues to provide much-needed skilled opportunities to young people across the country. It recruited 470 apprentices (graduates and school leavers) this financial year and has opened a new wave of apprentice recruitment for another 400 in Autumn 2021.

Business Performance

Performance across the business was mixed with a clear split between the first nine months of the year prior to lockdown and the subsequent three months to the end of BDO’s financial year in June 2020.

The audit business posted revenues of £247m, up 24% on the previous year. BDO’s focus on quality, its expertise in the AIM market and a desire from main market businesses to get ahead of forthcoming audit reforms - which saw the firm increase its share of listed audits - all contributed to the rise in revenue.

The tax business reported growth of 11%, generating revenues of £187m, with tax compliance and risk advisory services in increasingly high demand. Private client tax advice was another key part of this growth, enhancing BDO’s position as one of the UK’s leading personal tax practices.

BDO’s advisory revenues grew by 8% to £226m, fuelled and driven by the firm’s strong sector credentials. Across the advisory practice, international institutions and donor assurance, technology risk assurance and global outsourcing all performed well.

Tackling skills and climate change

Behind the financial numbers, BDO made progress in other significant areas. For the financial year 2019/20, BDO recruited over 470 apprentices and, prior to COVID-19, promoted 1,500 individuals in the firm. Looking ahead, BDO will be investing around £25m next year in new apprenticeships, technology and on improving quality.

In addition to advising many clients on their environment, social and governance (ESG) accountancy requirements, BDO committed itself to being a carbon neutral organisation. In January, working with an independent sustainability consultant, BDO offset its identified carbon footprint for the two years to June 2019 through the purchase of carbon credits and is aiming for its complete suite of UK offices to be carbon neutral by the end of 2020.

Supporting the UK Economic Engine

BDO’s client heartland remains the UK’s mid-sized, ambitious and entrepreneurially-spirited businesses.  The firm continues to be one of the most trusted advisers to mid-sized, private equity-backed and AIM-listed companies.

Responsible for a third of UK turnover and a third of private sector jobs but only making up less than 1% of businesses by number, BDO describes this segment of the economy as the “UK economic engine”.

Through its global “Rethink” model, BDO is providing economic engine businesses with a road map of support throughout the COVID-19 pandemic and beyond as well highlighting the concerns and issues being faced by mid-sized businesses during this uncertain time.

Paul Eagland added:

“Our client heartland remains the UK’s entrepreneurially-spirited mid-sized businesses, which is the economic engine driving our economy. Like the rest of the economy, COVID-19 has had a devastating impact on mid-sized businesses. 

“The Government took bold action with its emergency funding measures which undoubtedly saved many jobs and businesses across the UK. We would ask the Government to ensure future policies also support mid-sized businesses which are vital to the UK but can be overlooked and undervalued despite providing around one in three UK private sector jobs.”

ENDS

Note to the editors

(1) Underlying business profits were calculated by stripping out the impact of the merger with Moore Stephens LLP

(2) All revenue numbers presented herein have been prepared in accordance with International Financial Reporting Standards and IFRS Interpretation Committee interpretations, as issued by the International Accounting Standards Board.

(3) PEP is based on profit before tax.

Accountancy and business advisory firm BDO LLP provides integrated advice and solutions to help businesses navigate a changing world.

Our clients are Britain’s economic engine – ambitious, entrepreneurially-spirited and high-growth businesses that fuel the economy. 

We share our clients’ ambitions and their entrepreneurial mind-set. We have the right combination of global reach, integrity and expertise to help them succeed. 

BDO LLP

BDO LLP operates in 18 offices across the UK, employing 6,000 people offering tax, audit and assurance, and a range of advisory services. BDO LLP is the UK member firm of the BDO international network.

BDO’s global network

The BDO global network provides business advisory services in 167 countries, with 91,000 people working out of 1,658 offices worldwide. It has revenues of $10.3bn.

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