PwC Australia nets $3.4bn in revenue; partners face 30pc pay cut as scandal weighs on outlook

The firm’s annual revenue hit $3.4bn, but it warns ‘ongoing reputational challenges’ will hit earnings further in the coming year.

PwC Australia partners will face an income reduction of up to 30 per cent in the coming year as the firm warns “ongoing reputational challenges” created by its tax scandal will continue to weigh on revenue.

The warning of a difficult period ahead came after PwC reported underlying annual revenue growth of 11 per cent to $3.4bn.

Profit in the 12 months to June 30 remained flat against the backdrop of fallout in the fourth quarter from the firm’s sharing of confidential Treasury information — and past failures in professional, ethical or leadership responsibilities.

The top-line growth undershot big four rival Deloitte’s 14 per cent bounce in revenue to $3.19bn and EY Australia’s 13 per cent jump to $2.97bn, but beat KPMG’s 9.5 per cent growth to $2.55bn.

New PwC Australia chief executive Kevin Burrowes said that while the revenue result was pleasing, challenges experienced in the final quarter had an impact on profit.

“We completely accept that past leadership failed to meet the standards our people, our clients, the community and the Australian government rightly expect, and for that I apologise,” he said.

“We didn’t get it right, but our focus has, and always will be, on our clients, as we take the necessary steps to re-earn trust with our stakeholders.”

“I want to thank our people for their resilience, their continued focus on our clients and the high quality of their work in the face of what has been a difficult time for them at the firm.”

PwC Australia also said it would release its annual transparency report after the independent review of the firm’s governance, accountability and culture by Dr Ziggy Switkowski is published in late September. This was so it could capture the full picture of the firm and its response.

PwC chief executive Kevin Burrowes says that partners will take a pay cut to ensure strong pay for staff.

In the 12 months to June 30, annualised partner pay ranged from $374,000 to the former chief executive Tom Seymour’s salary of $4,043,000. The average partner income though declined by 12 per cent.

PwC said that the results did not reflect the divestment of its government advisory business, which accounted for $680m or about 20 per cent of the firm’s revenue. That division was acquired by Allegro Funds for $1 and has been rebadged at Scyne with more than 1200 staff from PwC due to join.

The accounting firm said that the divestment, along with the ongoing reputational challenges the firm faces, will hit results in the current financial year. Mr Burrowes said that the target income reduction by partners of up to 30 per cent had been decided to ensure its other staff continued to be “well compensated”.

“As a firm focused on the corporate and private business sector of Australia, we will continue to deliver an exceptional quality of work and our commitment to helping our clients and growing the careers of our people will not change,” Mr Burrowes said.

Revenue growth on an adjusted basis was achieved across PwC Australia’s three businesses: Assurance (15 per cent), Financial Advisory (9 per cent) and Consulting (12 per cent).

Growth in PwC Australia’s Consulting business was driven by demand in corporate and health sectors and an increase in demand for our cloud and digital capabilities, while Assurance generated record growth from advice and audit related to cyber, risk and regulation and sustainability.

The firm paid $47m in incentive payments to staff in the financial year and increased pay across the business by an average of 4.5 per cent from July 1.

In the full year, PwC promoted 1,513 people from its workforce of close to 10,000 people.

A total of 97 people were made partner over the financial year and 79 partners retired, meaning overall the partnership grew to 882 partners by June 30. It however decided to defer its July partner intake as it looked to rebuild from scandals facing the firm.

PwC has faced months of criticism after it was revealed confidential tax briefings were shared with many members of the firm by its former head of international tax, Peter Collins. PwC used these briefings to sell strategies to clients to attempt to minimise their tax.

A Senate inquiry found PwC engaged in “a calculated breach of trust” and “deliberate strategy over many years to cover up the breach of confidentiality and the plan by PwC personnel to monetise it”.