PwC stabilises revenue and limits Covid-19 job cuts to 250
Big Four firm PwC has stabilised its income in its latest financial year, despite seeing several months of its reporting period impacted by the Covid-19 crisis. Partners have had to take a ten percent hit to their income.
Since 2015, professional services giant PwC managed to book consecutive years of double digit growth, lifting its total fee income to $2.6 billion and crowning the firm as the largest of the Big Four in Australia. But as expected, the Covid-19-induced downturn has brought PwC’s steep growth to an abrupt halt, however, the damage is not as bad as previously anticipated.
In June, CEO Tom Seymour said that the firm would have to shed around 400 jobs to offset the fallout of demand, in a move to keep the firm competitive and healthy. Fast forward two months, and on the back of better than expected financial results, Seymour told Australian Financial Review (AFR) that the firm has in fact managed to limit the job cuts to 250, in part due to internal redeployment of staff to in-demand areas.
In FY2020, PwC generated a total income of $2.6 billion, flat on last year’s revenue. The results per division were however mixed. The Assurance and Audit division saw its revenue grow by 6%. Such type of work is relatively Covid-19-proof as the majority of work stems from regulatory requirements (external audit). Meanwhile, a rapidly changing landscape meant that companies needed to re-examine their assets and financials, driving up demand for some offerings.
The Financial Advisory division, which helps clients with mergers & acquisitions, corporate finance, legal and tax, saw its revenue slide by two percent. A sharp decline in the number of deals meant that PwC’s dealmakers took the largest hit, meanwhile, the firm’s restructuring practice is facing a growing pipeline of work amid growing distress in the business environment.
The Consulting division led by David McKeering, which includes strategy consultancy firm Strategy&, saw its turnover drop by four percent. Long the firm’s growth engine, the unit is facing clients pressured to cut discretionary costs and delay large, costly transformations as part of belt tightening measures.
Seymour told AFR: “Some elements of our consulting business have been highly impacted by Covid-19. Large businesses [have put] transformations on hold or at least scaled them back. But other elements of that business around the health sector, for example, are growing quite well. So it’s a bit of a mix.”
Big Four
In June Deloitte announced that it increased its revenues by ten percent to $2.5 billion for the 2020 financial year, meaning that if PwC would have seen its income drop significantly it would have lost its pole position to its arch rival. But at $2.6 billion, PwC still leads the quartet by around $100 million, while the gap with EY and KPMG remains larger – over $500 million.
EY and KPMG will release their domestic results later this year, but are expected to show a similar mixed bag of fortunes.
In comparison with Deloitte, PwC appears to have protected its partner profitability relatively well. Their incomes for the year were down ten percent on average, with senior partners taking a larger hit (up to fifteen percent). At Deloitte, annual partner profit fell by more than 20 percent.
Looking ahead, CEO Seymour, who took the reins from Luke Sayers in July, said that the current business environment remains unpredictable, but that he is confident PwC is well positioned and resilient enough to emerge successfully out of the crisis.
