For 2021/2022, we reported a significant growth in both revenues and pre-tax profit. During the year, we also stepped up our strategic investments and committed to additional increases in both fixed salaries and incentive payments for employees.
In Assurance, profits were helped by continued client demand – we also had fewer non-chargeable hours spent on KPMG Clara (new window) than initially expected and continued our Accelerate for Audit program to further strengthen the overall financial performance of our engagement portfolio.
In Advisory, we saw strong demand from clients, particularly from the financial services and IG&H sectors, and a further increase in utilization rates. Our ESG (new window) and digitalization services were also in demand, underpinned by Connected (new window), Powered (new window), Trusted (new window).
Strategic investments and our target operating model
We continued with our high level of strategic investment. In 2021/2022, these investments totaled EUR 39 million, up from EUR 27 million the year before. Significant investments were made in digitization, IT and innovation, in workforce management, the introduction of KPMG Clara (new window), and Sofy – software that helps clients manage and analyze data in areas like governance, risk, compliance and tax management.
In 2022/2023, we expect strategic investments to exceed EUR 40 million. As part of our investment program, we will be putting in place a new target operating model, starting in 2023. Blueprints will be developed for both our Assurance and Advisory businesses. The aim is to ‘future-proof’ KPMG N.V., enable it to respond rapidly to changes in its market and operating environment, supporting long-term growth in the business. Many of the building blocks are already, or will soon be, in place, including KPMG Clara and Workforce Shaping. We are also setting up new Centers of Excellence in Assurance to help standardize good practice – and we will be working on embedding innovation throughout the organization.
*According to current projections
Capital position and funding from equity partners
Our policy is to maintain a strong capital position, so that we retain the confidence of the firm’s clients and creditors and can continue to invest in business growth. Most financing comes from mandatory contributions from our equity partners (in the form of equity and mandatory loans). Partners may also provide additional financing through voluntary loans. In 2021/2022, our total funding rose by 13% – a result of both an increase in long-term and short-term funding, including profits that are not distributed until the end of the calendar year.
Note on tax
Our total profit before tax is subject to standard corporate income tax at the same rate as Coöperatie KPMG U.A., KPMG N.V. and the individual equity partners’ practice companies. Only a limited part of our total income tax expense is included in KPMG’s profit & loss account as the majority of our tax is paid via the equity partners’ practice companies. Our income tax expense includes temporary differences for which a deferred tax asset or liability has been accounted. KPMG N.V., Coöperatie KPMG U.A. and the individual equity partners pay their taxes in the Netherlands.
- 1Many of these non-chargeable hours are expected to be spent in 2022/2023.