Dusseldorf The corona pandemic has left its mark on the auditing and consulting company Deloitte’s operational business. In the fiscal year that ended at the end of May, the company’s sales in Germany fell by eight percent to 1.56 billion euros. For the fourth-largest German auditor, the phase of uninterrupted and, in some years, stormy growth has thus come to an end for the time being.
Deloitte Germany boss Volker Krug is not surprised or nervous. “We experienced two completely different half-years. By the end of 2020, we too felt the reluctance of customers, and since the beginning of the year we have been making strong gains again. I am therefore satisfied under the given conditions, ”he says in an interview with Handelsblatt.
Deloitte attributes the dent mainly to special factors. For example, a major order in the Financial Advisory segment expired according to plan, while other projects were delayed or postponed by clients due to the pandemic. In addition, in the corona year, the company charged customers significantly less travel expenses, which led to a drop in sales.
Reason: The consultants and auditors did not travel all the time during the pandemic as usual, but worked with the customers via video conference. Expensive face-to-face meetings were also canceled internally and were converted to virtual formats. This in turn supported Deloitte’s profit: The profitability – i.e. the return – increased in the 2020/21 financial year, explained Krug, but did not give a specific figure.
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The loss in sales in consulting (minus 7.5 percent) and financial advisory (minus 30 percent) was also due to the fact that foreign Deloitte companies contributed less to international projects with German customers due to the pandemic. As a precaution, many companies initially limited the implementation to Germany. The volumes fell as a result.
Travel costs are to be reduced by 30 percent
For the current fiscal year, Deloitte is again planning higher single-digit sales growth, but is hoping for more. Because this value has been clearly exceeded in the months since the end of May. “But there is one thing we do not want to win back: the travel expenses included in sales and the associated emissions,” said Krug.
In other words, there will be no return to the previously accustomed way of working with constant presence with customers and flights to internal meetings around the world at Deloitte. The company wants to save up to 30 percent on travel costs over the long term. The employees also do not want to give up the flexibility they have gained.
However, the auditing and consulting company will not make a complete switch to mobile working, for example from the home office. “The office is an anchor point for a company and its culture,” says Krug. The company currently has a 25 percent attendance rate in the office, but the value is increasing noticeably.
“The office is an anchor point for a company and its culture.”
(Photo: Deloitte)
In view of the increasing number of infections, customers can still feel a certain reluctance. Some want the advisory teams to be on site again, others continue to advocate extensive remote exchange. According to Deloitte, this is handled differently even within group units.
An industry comparison shows that Deloitte has been hit harder by the pandemic than the competition. All four large audit firms have odd fiscal years that end in early summer, at KPMG only in autumn. Market leader PwC achieved total output of 2.3 billion euros in the 2020/21 financial year, around two percent less than in the previous year.
At EY, sales shrank by three percent to just under two billion euros. However, this decrease shown in the transparency report is based solely on special effects of the corona pandemic, said EY. The number two in the industry also refers to lower travel expenses that were billed to customers and depressed sales. In purely operational terms, EY has grown slightly.
At all major auditing and consulting firms, sales and the order situation have been picking up again, especially in the consulting units, since spring 2021. According to Krug, Deloitte has several drivers for this.
On the one hand, more and more companies are relocating their IT applications to the cloud and at the same time investing in systems to defend against cybercrime. Deloitte no longer positions itself solely as a consultant, but also wants to operate the cloud and security systems for the clients.
In addition, there is the new megatopic sustainability. Auditors not only benefit from this because they sign the corresponding reports from their auditing clients. At other companies, Deloitte is also engaged as a consultant for the measurement, analysis and controlling of sustainability indicators.
Deloitte becomes the new auditor of Software AG
Deloitte plans to invest around 340 million euros in Germany by 2025. The money is to be invested in new technologies and in promoting talent. This also includes the further digital upgrade of the final exam, including cloud applications.
At Deloitte, this core business of auditing and tax consulting grew slightly in 2020/21. In the competition for new auditor mandates, Krug wants to proceed “selectively” – so it looks at the individual case.
There is also the question of whether Deloitte wants to continue to work as a consultant for the companies concerned or whether this should remain at the client’s request. Group auditors are hardly allowed to advise them at the same time. In industry circles it is said that Deloitte did not even apply for the auditor mandate at SAP for this reason. The order went to BDO in the spring.
Deloitte recently won several new DAX mandates. In addition to Bayer, the company will also examine Deutsche Post and Merck KGaA in the future. The company is currently vying for a mandate from Deutsche Telekom. The MDax group Software AG is fresh on the client list. Its supervisory board has voted in favor of Deloitte as the new auditor, but this has yet to be approved by the general meeting.
More: PwC catches up with KPMG: How the balance of power of the “Big Four” in the Dax 40 is shifting