Our financial contributionOur third strategic pillar – strengthen global, empower local – balances the global and local aspects of our business. At EY, globalization means using our global footprint wisely to serve global clients better, while creating operational efficiencies within our network to generate incremental earnings and investment capacity. But we are clear that globalization must not mean sapping the energy and entrepreneurialism from what happens on the ground every day in every one of our local market segments around the world. That’s why we operate through regions and approach the market through local market segments. Strength at local level is essential for superior results — the revenues we need to invest in building a leading global professional services organization and to deliver competitive earnings and pay to our people to attract and retain world-class talent.
We present the combined income statement of Ernst & Young Nederland LLP and Holland Van Gijzen Advocaten en Notarissen LLP for the year ended June 30, 2016.
|Combined income statement
|Transaction Advisory Services||39||7%||37|
|Rendering of services||695||2%||684|
|Corporate Business Services||32||24%||26|
|Depreciation and amortization||5||-17%||6|
|Other operating expenses||171||5%||163|
|Finance income and expenses||-6||-13%||-7|
|Profit before tax||135||-8%||147|
|Income tax expenses||-||-||-|
|Profit for the fiscal year||135||-8%||147|
|Exceptional and undistributable items and interest on capital||-20||-16%||-24|
|Income available for distribution||115||-6%||123|
Revenue from our core operating activities - Assurance, Tax, Advisory and TAS - increased by €11 million (2%) to €695 million. Our Corporate Business Services reported €6 million (23%) revenue growth to €32 million. As a result, overall revenue grew by €17 million (2%) to
Our revenue growth of 2% did not keep pace with the substantial increase in client serving professionals of 9%. Weaker trading and productivity conditions compared to the previous year were the main causes of the decline.
The former reflects the impact of mandatory audit rotation (e.g., transition of audit and non-audit engagements in addition to first year audits), investments in new tools, the continued rise in nonbillable quality engagement hours, particularly in our audit business, and persistent fierce competition and pressure on prices.
Lower productivity was due mainly to the fact that the year had one production week less than in the previous year (which counted 53 production weeks). As a consequence, overall production revenue per client-serving professional was lower and so was our margin. This was manifest in Assurance, to a lesser extent in Advisory and only marginally in Tax. However, TAS reported a higher number and margin.
The average work force, partners included, increased from 3,731 FTEs to 4,029 in FY 2015/2016.
Higher expenses on the back of investments in new and experienced hires
Operating expenses were 5% higher, as purchased services, employee expenses and other operating expenses all rose. The substantial investment in new and experienced hires was a main driver in this respect. The rise is reflected in the 10% increase in the average number of client-serving staff to 3,263 FTEs. The average number of support staff, however, fell slightly by 1% to 521 in line with our policy to grow our business with basically the same number of support staff. Higher staff numbers increased employee expenses and other operating expenses, including education and training, accommodation and IT costs.
In weaker trading and productivity conditions, revenue increased by only 2%, compared with a 5% increase in operating expenses. On balance, operating profit decreased by €13 million (-8%) to €141 million. Finance income and expenses improved by €1 million to €6 million negative. As a result, profit for the year fell by €12 million (-8%) to €135 million.
Income available for distribution
The profit for the year is distributed to the partners’ B.V.s after settling exceptional and undistributable items, such as pension obligations for retired partners, onerous contracts and interest on capital. These items amounted to €20 million in 2015/2016 (2014/2015: €24 million). As a consequence, income available for distribution to partners amounted to €115 million (2014/2015: €123 million).