CommBank Accounting Market Pulse. Conducted by Beaton Research + Consulting November 2014

Transcription

1 CommBank Accounting Market Pulse. Conducted by Beaton Research + Consulting November 2014

2 Contents Increasing confidence underpinned by strong economic outlook 2 Australian economic outlook 3 November 2014 results summary 5 Overall business conditions Perception of business conditions in specific areas (segmented by firm type) from now to 2 years time 7 Perceived performance of Australian economy 7 Perception of business conditions in specific areas 8 Perception of business conditions in specific areas (segmented by firm type) 8 FY15 Business priorities Market entry and exit for all 9 Revenue predictions Changes in revenue over the next 6 months by location 10 Changes in revenue over the next 6 months by location (segmented by firm type) 10 Changes in revenue over the next 6 months by service line (segmented by firm type) 11 Expense and profitability predictions Changes in expenses over the next 6 months (segmented by firm type) 13 Changes in staffing over the next 6 months (segmented by firm type) 13 Changes in core workforce turnover in FY2015 (segmented by firm type) 14 Changes in average remuneration in FY Changes in average remuneration in FY2015 (segmented by firm type) 15 Change in operating margins for the next 6 months 15 Adoption of technologies Pace of adoption of new technologies in Australia compared to other countries 16 Adoption and implementation of new technologies (segmented by firm type) 16 Adoption and implementation of new technologies (segmented by firm type) continued 17 Business areas with two or more suppliers 17 Changes in revenue over the next 6 months by service line (segmented by firm type) continued 11 Realised rates Expected changes in realised rates over the next 6 and 12 months 12 1

3 Increasing confidence underpinned by strong economic outlook. An important indicator of confidence is investment in people, and the report reveals a strong expectation in hiring for fee earning roles such as fixed share and equity partner numbers and also for junior to mid-level accountants. An important indicator of confidence is investment in people, and the report reveals a strong expectation in hiring for fee earning roles Marc Totaro National Manager, Professional Services Commonwealth Bank It is with pleasure that I welcome you to the inaugural CommBank Accounting Market Pulse conducted by Beaton Research + Consulting. The first report in our biannual series summarises key industry forecasts, business confidence and other lead indicators amongst the top Australian accounting and insolvency. We are grateful for the breadth of survey respondents, which includes most of the leading accounting and insolvency in Australia. This report produced some interesting and positive results for the broader accounting industry, with an increasingly strong outlook for the sector in the short and medium term. Underpinning the positive sentiment was the expectation amongst one in two that broader economic conditions will improve, and in all locations except South Australia are expecting revenue growth. In addition, flagged increasing operating margins over the next six months, particularly amongst the larger. Underpinning the positive sentiment was the expectation amongst one in two that broader economic conditions will improve Despite a positive outlook, challenges still remained with citing price negotiation with clients, winning new business and competing with other as key concerns. As a likely reaction to the competitive environment, the survey also reveals an expected increase in marketing and business development expenses. When looking at service lines, are expecting the largest revenue growth to come from corporate finance (including M&A), wealth management and financial planning. Conversely, business recovery and insolvency recorded the lowest revenue growth expectations at just seven per cent. This report also focused on technology and return on investment, with 81 per cent of indicating that the pace of adoption of new technologies in Australia was either on par or faster than their international counterparts. Amongst those who have adopted new technologies, the majority have seen a moderate to high return on investment, with one responding Chief Executive Officer remarking, For the most part the technologies adopted have shown most return in the satisfaction and retention of our people who enjoy having high quality adaptable work tools. We hope this report provides unique insights into the broader sector and enables your business to benchmark its performance and assists with planning for the future. We look forward to keeping you updated as these trends develop in future reports. We saw mixed results when looking at the variation between large, those specialising in insolvency/ restructuring, and mid-sized. While the large have the most positive view of business conditions in the next 12 months, the mid-sized and restructuring displayed increasing optimism over the long term (ie beyond 12 months). Marc Totaro marc.totaro@cba.com.au Phone:

4 Australian economic outlook. short to medium-term horizon. The larger are more optimistic than the rest of the market in terms of short-term confidence. Accounting generally see the outlook for the Australian economy as positive, except for restructuring who hold a neutral position. Diana Mousina Associate Director Economics Commonwealth Bank The Australian economy expanded by 2.9 per cent in financial year 2013/14 as a whole. This outcome is a touch above that recorded in financial year 2012/13 and is close to trend. This should be seen as a decent outcome for an economy in transition. The economic package remains very attractive. Australian public finances and the financial system remain in good shape, the AAA credit rating looks secure and policy makers still have some firepower if needed. The main uncertainty that is clouding the economic outlook is ensuring that the transition from mining to non-mining led growth is successful. Solid growth in residential construction and resource exports is on track. But non-mining business capex growth needs to be stronger. In our view, the anticipated positive turn in the economy will be evidenced more clearly as growth picks up over The boom in residential construction has positive flowon effects to other sectors, such as retail. The labour-intensive nature of residential construction is also positive for jobs growth. A lower unemployment rate will support consumer spending. The depreciation in the Australian dollar is very positive for exportexposed industries. And a surge in resourcerelated exports will lift incomes. Commonwealth Bank is also forecasting inflation to edge higher, towards the top end of the Reserve Bank of Australia s (RBA) target band over These factors form our view that the RBA will need to start lifting interest rates sooner than financial markets are expecting. We expect the first 0.25 per cent increase in the RBA cash rate to occur in August 2015, taking the cash rate to 2.75 per cent. The uncertainty of this growth transition has impacted business and consumer confidence. Consumer confidence remains quite fragile but business confidence has picked up. The latest CommBank Accounting Market Pulse (conducted by Beaton Research + Consulting) indicates that business confidence across the surveyed accounting was positive for the 3

5 GDP growth is running close to trend. This is a decent outcome for an economy that is in transition. REAL GDP (annual % change) % % Trend Sep-98 Sep-01 Sep-04 Sep-07 Sep-10 Sep-13 0 Sentiment outcomes across the business and household sector are still fragile because of uncertainty surrounding the growth transition. High job security concerns across the household sector is putting pressure on consumer confidence. Index SENTIMENT INDICATORS Index 160 Job security concerns Business confidence Consumer 80 Source: Melbourne Institute/WBC/NAB confidence Jul-10 Jul-11 Jul-12 Jul-13 Jul

6 November Summary 2014 of Q1 FY2015 findings results summary. Perception of business conditions Geographic and practice areas with highest revenue growth expectations 15% 5 At the moment In 12 months Net % (positive-negative) 55% In 2 years Net % (increasing decreasing) Asia Northern Territory UK / Europe % Top 3 most challenging business elements for accounting. Large Corporate finance Management consulting services % Negotiating price with clients 6 Winning new business 6 Competing with other Restructuring Corporate finance Business advisory services Management consulting services Net % (challenging - easy) Increased competition from Big 4 pushing into the traditional middle market space Mid-sized Property advisory Wealth management & financial planning 71% 10 Perceived performance of Australian economy Net % (positive negative) All Realised rates expected to increase +0.4% +1.7% Staff numbers over next 6 months Junior to mid-level accountants Fixed share / salary partners Equity partners Directors / Managers 5 In the next 6 months In the next 12 months Shared service staff Secretarial and admin staff

7 November 2014 results summary cont. Operating margins forecast to increase Net % (increasing decreasing) 42% 6 Marketing and $ Business Development have the highest expected expense growth for the next 6 months. Pace of adoption of new technologies in Australia vs. other countries 19% Slower 56% At the same pace 25% Faster Implementation of new technologies implemented implemented 6 and use 8 cloud-based 9 mobility solutions have not fully computing / storage looking to or have implemented document automation Return on investment from new technologies Level of investment in new technologies 29% High return 35% Moderate return 12% Low return 45% 4 In the next 6 months % In the next 12 months 24% Don t know (too early to tell) All Net % (increasing - decreasing) 6

8 Overall business conditions. Perception of business conditions for Australian accounting* from now to 2 years time Business confidence is positive for the short to medium-term horizon. are more optimistic than the rest of the market in terms of short-term conditions Net % % % Total Restructuring Total Restructuring Total Restructuring At the moment In 12 months time In 2 years time Perceived performance of Australian economy Perceptions of the Australian economy are generally positive except for restructuring who hold a neutral position % % % -2-4 Total -4 Negative Neutral Positive Net % 7 * The comparative data presented in the Accounting Market Pulse is based on the following categorisation; large are defined as the top and largest second-tier diversified accounting and advisory, restructuring are defined as top tier specialist insolvency and restructuring, and mid-sized are defined as mid-tier accounting and insolvency ranging from large state-based practices to federations of smaller in Australia.

9 Perception of business conditions in specific areas Price negotiations, revenue generation and competitive activity are considered to be the primary challenges in the current market conditions % Net % % -15% -25% -35% -35% Accessing capital Keeping staff fully utilised Keeping quality staff Keeping Finding quality expenses staff under control Collecting invoices Competing with other Winning new business -85% Negotiating price with clients Perception of business conditions in specific areas (segmented by firm type) are experiencing the greatest pressure on several fronts % % % Net % Accessing capital Keeping staff fully utilised Keeping quality staff Keeping expenses under control Finding quality staff Collecting invoices Competing with other s Winning new business Negotiating price with clients 8

10 FY15 Business priorities. Market entry and exit for all Business advisory and management consulting services are considered to be the primary areas of market growth over the next 12 to 18 months. % % 25% % 15% Planning to enter / actively grow Planning to exit / actively reduce 1 5% 5% 5% 5% % -7% -6% -6% -6% 9

11 Revenue predictions. Changes in revenue over the next 6 months by location Overseas and targeted domestic activity in the Northern Territory are forecast to be the primary locations for revenue growth over the next 6 months Net % (increasing- decreasing) % 6 53% 47% 43% 38% 38% 25% 11% -2 Asia Northern Territory UK/ Europe New South Wales Victoria Australian Capital Territory Queensland New Zealand Tasmania Western Australia -11% South Australia Changes in revenue over the next 6 months by location (segmented by firm type) expect a decrease in revenue in Victoria and South Australia % 8 71% Net % (increasing- decreasing) Asia Northern Territory UK/ Europe New South Wales Victoria Australian Capital Territory Queensland New Zealand Tasmania Western Australia South Australia 10

12 Changes in revenue over the next 6 months by service line (segmented by firm type) forecast stronger growth across most practice areas compared to other, particularly for private equity, economic & social policy advice and sustainability/climate change % 6 64% 75% 6 57% Net % (increasing- decreasing) 5 25% 25% 2 Corporate finance (including M&A) Wealth Business advisory management & services financial planning Economic and social policy advice Private equity Sustainability / climate change Forensic & fraud accounting Internal audit Changes in revenue over the next 6 months by service line (segmented by firm type) continued forecast a decrease in revenue in superannuation, whilst restructuring forecast a decrease in business recovery & insolvency. Net % (increasing- decreasing) % 4 14% % - Management consulting services Tax consulting Property advisory Risk management Superannuation External / statutory audit Tax compliance Business recovery & insolvency 11

13 Realised rates. Expected changes in realised rates over the next 6 and 12 months and restructuring are not as optimistic when forecasting changes in realised rates over the next 6 months Mean % Total Restructuring Average realised rates in the next 6 months Total Restructuring Average realised rates in the next 12 months 12

14 Expense and profitability predictions. Changes in expenses over the next 6 months (segmented by firm type) are controlling expenses across staff training and development, knowledge management and telecommunications. On the other hand, expenses will increase for other across all areas measured. Net % (increasing- decreasing) % 2 25% -2 25% Marketing and business development Staff training and development Professional indemnity insurance Knowledge management Occupancy IT hardware and software Telecommunications Changes in staffing over the next 6 months (segmented by firm type) expect staff numbers to decrease across all levels except fixed share/salary partner numbers Net % (increasing- decreasing) % 4 8% 4-8% % -4-8% Junior to mid-level accountant numbers Fixed share / salary partner numbers Equity partner numbers Director / manager numbers Shared service staff numbers Secretarial and admin staff numbers 13

15 Changes in core workforce turnover in FY2015 (segmented by firm type) Expected increases in turnover among fixed share / salary partner numbers are primarily driven by large and restructuring. 10 Net % (increasing- decreasing) % -2 8% -8% -2 Fixed share / salary partner numbers Junior to mid-level accountant numbers Director / manager numbers Shared service staff numbers Equity partner numbers Secretarial and admin staff numbers Changes in average remuneration in FY2015 Increase in remuneration is forecast to be highest for junior to mid-level accountants. Net % (increasing- decreasing) % % 35% % 25% 55% % Mean % -2 Fixed share / salary partner Director / manager Junior to mid-level accountant Shared service staff Secretarial and admin staff -2.0 Decrease by 5-15% Decrease by 1-4% Stay about the same Increase by 1-4% Increase by 5-15% Net % 14

16 Changes in average remuneration in FY2015 (segmented by firm type) Average remuneration across all staff levels will rise with the exception of fixed share/salary partners in restructuring Mean % Fixed share / salary partner Director / manager Junior to mid-level accountant Shared service staff Secretarial and admin staff Change in operating margins for the next 6 months Overall, forecast operating margins to increase for the next 6 months, especially for large Net % (increasing- decreasing) % 6 42% 1 Total 15

17 Adoption of technologies. Pace of adoption of new technologies in Australia compared to other countries The majority of accounting believe that the pace of adoption of new technologies in Australia will outpace overseas markets. This view is primarily driven by large % % % % 56% % 22% Total Slower At the same pace Faster Adoption and implementation of new technologies (segmented by firm type) are lagging behind the rest of the market in adopting cloud-based computing and storage % % 25% 8% % % 2 25% 8% 8% 42% % Document automation Cloud-based computing / storage Collaboration software Data analytics software Not implemented Looking to implement Currently implementing Implemented but seldom use Implemented and frequently use 16

18 Adoption and implementation of new technologies (segmented by firm type) continued do not currently have web based CRM software available, whilst restructuring do not find enterprise social media platforms useful % Restructuring mid-sized 10 Restructuring 5 mid-sized 10 Restructuring Enterprise social media platforms Mobility solutions Web based CRM software 5 mid-sized Not implemented Looking to implement Currently implementing Implemented but seldom use Implemented and frequently use Business areas with two or more suppliers are more likely to use multiple suppliers across all business areas measured except telecommunications % 5 83% 75% % 2 Recruitment IT Software Training and development IT Hardware Banking Staff contracting agencies Leasing Telecommunications mid-sized 17

19 Further information For further insights or information, please contact: Marc Totaro, National Manager Professional Services Mobile: Phone: marc.totaro@cba.com.au Web: commbank.com.au/accountingmarketpulse For media inquiries, please contact: Sarah Gibbons, Public Relations Advisor Phone: Sarah.Gibbons@cba.com.au About Beaton Research + Consulting Beaton Research + Consulting is a full-service research firm which offers a full range of solutions for professional services, financial services and associations. Their expertise includes benchmarking, thought leadership, brand solutions, customised solutions and client satisfaction. Things to know before you Can: This report is published solely for information purposes. As this report has been prepared without considering your objectives, financial situation or needs, you should before acting on the information in this report, consider its appropriateness to your circumstances and if necessary seek the appropriate professional advice. This biannual report has been prepared independently by Beaton Research + Consulting and commissioned by Commonwealth Bank. The confidential on-line survey used to prepare this report was undertaken by Beaton Research + Consulting in September to October The report is based on the views of 20 accounting across Australia and any opinions, conclusions or recommendations are reasonably held or made, based on the information available at the time of its compilation, but no representation or warranty, either expressed or implied, is made or provided as to the accuracy, reliability or completeness of any statement made in this report. The project was undertaken in compliance with the requirements of ISO Commonwealth Bank of Australia ABN