Problems at former PwC unit Scyne reflect dire business for consultants

The consulting firm born from PwC’s tax scandal has lost $137m and a third of staff, but its chief sees light ahead. For owner Allegro Funds, the turnaround can’t come soon enough.

Spare a thought for John Ball, the man tasked with divining the rivers of gold that used to flow from Canberra to PwC’s consulting unit.

Ball is in charge of Scyne, the former piece of PwC that was sold to private equity and renamed in the wake of revelations the big four consulting firm deliberately breached the confidentiality of the Commonwealth government. It passed state tax secrets on to clients.

The tax leaks scandal shone a harsh spotlight on the once secretive world of the big four, being PwC, KPMG, EY, and Deloitte. The public backlash was swift. Taxpayers were furious that billions of their dollars were being spent on consultants and Canberra reacted by cutting them out of deals.

Unfortunately for Scyne, despite no longer being associated with PwC, the deals stopped too.

“The market is tight,” admits Ball, who hails from Google where he was in a customer service executive role and walked into the professional services bloodbath just a year ago. “It’s challenging across Australia for consulting.”

This week, the firm posted its second consecutive loss. It’s in the red by $137m after tax since starting in November 2023, according to its statutory financial report filed with the securities regulator.

It’s losing people too. Ball told The Australian its headcount is now down to 800, which he later upgraded to 870, including contractors. That means 16 per cent of its staff have chosen to walk in the past three months. That count is down by one-third on the 1200 who started at inception, including redundancies.

Scyne is not alone in feeling this pain.

Whole teams are being cut by the big four because they are now losing much of their bread-and-butter government work to mid-tier rivals which are perceived as cleanskins.

EY, KPMG, Accenture and Deloitte have all made significant redundancies too.

Then there are the teams that are choosing to jump ship to the likes of insolvency expert KordaMentha, which has spied a gap in the market.

Ball, who often reverts to management speak like being “purpose-driven”, observed positive momentum for Scyne, and points out the company now has 100 open roles.

“Our pipeline is continuing to grow, and it’s as big as it ever has been right now. And so there is positivity, certainly for our business,” Ball says.

Scyne’s underlying earnings before interest, tax, depreciation and amortisation for the last quarter of 2024-25 was $4.1m and for the first quarter of the current financial year it managed a smaller underlying EBITDA of $3.1m.

“The better results we see, that will continue. Our absolute plan and forecast is to be conservative, but to also see that continue through the course of this financial year.”

Ball forecasts the company will be in the black on an after-tax basis.

“Yes that is correct,” he says.

In the 2024-25 financial year, revenue at Scyne almost doubled to $209m, but this was offset by one-off costs such as redundancy payments and its reporting and payroll system. The company posted a net loss of $74.5m.

Ball said the decision to focus Scyne on six key areas was starting to pay off.

“We have a couple of focus areas,” Ball says. “Health is certainly one of those, and we’re very excited about the progress we’re making there. We’re also doing work in energy, in the energy sector, utilities, social insurance, defence and transport are the areas that we’re really taking some time to make sure that we have the right sort of capabilities and delivering great outcomes for our clients.”

For private equity owner Allegro Funds, the turnaround can’t come soon enough. The firm paid $14.3m for what’s now called Scyne and has had to tip in more than $100m since to keep it afloat.

When asked if more funds would be necessary this current year, Ball answers a different question. “The reality now is that we’re positive EBITDA and generating positive cash flow. And so as we work with Allegro, it’s about how do we accelerate the business, as opposed to, how do we need cash to keep the lights on?”

These are “very different conversations” from what’s been had in the past. Now, it’s about “how do we build for tomorrow?”