During 2022/2023, we realized growth in revenue, which increased 8.5% from the previous year, thanks to an increase in volumes and a continued demand in both Assurance and Advisory. We continued to win strong mandates in the current Mandatory Firm Rotation (MFR). Our operational results were strong. Total profit before income tax was lower, due to the PCAOB penalty and the costs of the investigation into answer sharing.
In Assurance, we achieved double-digit growth. This is the result of FTE increase (+7%), larger volumes and higher rates.
In Advisory, strong demand for our services came from clients in growth sectors such as Infrastructure, Government and Healthcare (IG&H), Energy & Natural Resources and the Financial Services industry as a result of increased regulation and transformation needs. New opportunities related to ESG, energy transition, housing developments and infrastructure projects.
Growth in Technology, Media & Telecommunications was slowed by economic unpredictability in the second half of the year. Revenues from our Deals Advisory business recovered from a slow start to the year, while revenues from our Risk and Regulation advisory service remained strong the entire year.
Our operating expenditure increased by 17% year-on-year. Rising inflation put pressure on costs and we continued to invest on strategic projects. Non operationally, costs were impacted by the PCAOB penalty and costs related to the investigation into answer sharing. As a result, profit before income tax declined by 34%.
Strategic investments
We continued to invest in our business in 2022/2023, with strategic investments totaling EUR 40.6 million, up from EUR 39.4 million the year before and in line with our budget for the year. As part of our strategic investment program, which constitutes of both capital and operating expenditures, we implemented KPMG Clara (new window), developed and rolled out the firm’s data strategy and our cybersecurity enhancement project. Along with these, in Advisory, we invested in Alliances with key partners such as Microsoft, SalesForce, SAP and ServiceNow. These Alliances will help increase our use of data, digital technologies and AI – vital for scaling our digital advisory business. See Digital & innovation section (new window) for specific details on investments in new audit tools and technologies.
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 2022/2023, our total funding was 18.8% lower compared with 2021/2022, as a result of lower short-term funding, including profits that are not distributed until the end of the calendar year.
Note on tax
Our total profit before income 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.