In a live update to KPMG’s 9000-strong Australian workforce, Chief Executive Officer Gary Wingrove today reported on the measures introduced earlier this year to safeguard the business against COVID-19 and ensure continuity of service for clients.
“The one thing I can say with certainty at the moment is that nothing is certain, and we must continue to be agile so we can act swiftly as circumstances change,” he told employees and partners.
“In our initial COVID-19 response communicated in early April, we announced pre-emptive actions geared at preventing more drastic measures at a later time.” These encompassed strident discretionary spending cuts, a recruitment pause, redirecting resources to where they were most needed, targeted redundancies, asking employees to temporarily take a 20 percent cut in monthly salary (from May until August), and partners taking an effective pay reduction of up to 36 percent for the same period.
“Today, we continue to prioritise the health, safety and wellbeing of our people whilst doing everything we can to protect jobs and ensure continued service for clients. Our financial priorities remain maintaining the financial stability of the firm, returning employees to normal salaries and paying back some of the remuneration reductions if we can,” he said.
“The financial and economic effects of COVID-19 are still impacting our clients and our business. However we have performed slightly better during these COVID months than expected, and within the thresholds we set in our plans to protect our firm during the pandemic. This is in no small part due to the efforts of our people, whom I sincerely thank.
“Over coming weeks, we will be preparing our financial results for FY20. While it’s too early to be definitive, I can say we do expect to generate some year-on-year revenue growth for FY20. However, it is inevitable we will fall well short of the growth projections laid out in our plan at the start of the year, even though we built up the resources to deliver that growth and more, which of course has a flow-through impact on profit.”
“We have said all along that our approach in regard to temporary salary reductions is that we hope we don’t need to use it all, and if this proves true, that we would pay back what we can, as soon as we can.
“Given the health crisis has not been as bad as first thought by government, lockdown policy is generally now easing at a greater rate and breadth than we had countered on, and our clients are continuing to ask us for support and advice – albeit in different ways to our original plan – we have experienced a trading result these past few months that is slightly better than we thought.
“This performance in the last three months of FY20 means we are pleased to be able to repay one-third of employee salary reductions in May and June 2020. For the majority of people, this repayment will represent 1 percent of their annual salary.
“While times remain uncertain, our people’s efforts to date have enabled us to perform slightly above our expectations and we want to recognise this. I also believe that a payment now still strikes the balance of recognising everyone’s contribution while being prudent, but not too cautious.”
Mr Wingrove reiterated that the repayment will not be applied to partners or executive directors. “We will continue to prioritise repayments to staff above returns to partners. That was our commitment at the start of this process and it hasn’t changed.”
“There is continued uncertainty of how this pandemic will play out – we still don’t know whether there will be a significant second wave in Australia; or how long before a vaccine is developed; how and when the world will open up; and what this all means for our clients, their businesses and our interaction with them. However, it is clear that the economic impacts of COVID-19 will be with us for many months yet and therefore we must maintain our operational plan for July and August – and cannot promise any further paybacks at this time.”
“Australia – so far – has been relatively fortunate in being able to reduce the spread of the virus to significantly lower levels than other countries, and what was initially expected. This has allowed the government to move more quickly and with more flexibility in tackling the economic crisis. We are fortunate that restrictions are now easing at a greater rate and breadth than we had expected.
“Economic perspectives are mixed, and while there is some optimism, there is also significant concern around ‘the cliff’ we may face in coming months if the government ends its support as planned in September.
“We still expect the coming months to be the period when the impact of COVID-19 on the business will peak. So I still believe it’s going to be a tough period ahead for our clients, and our firm.
“We will continue to monitor our business on a regular basis so that we can adjust as we need to,” he concluded.
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