With fee income for the year ended 30 June 2003 down 7% to £1.5bn on continuing operations, the firm is now £227m ahead of second-largest firm, Deloitte, which has earnings of £1.2bn. It also compares poorly with Ernst & Young’s recent results, which showed turnover up 8% to £811.6m.
The results will boost Deloitte’s ambition of becoming the top UK accountancy firm in terms of revenue, as it has retained its consulting arm. Senior partner and chief executive John Connolly claimed in July this was possible in ‘two to three years’.
Operating profit, not including figures from PwC Consulting, took a tumble of more than 15% to £382m from a comparable figure of £451m for the previous year. It is the only Big Four firm so far to register a reduction in turnover in its latest accounting period.
However, the figures are not causing too much concern. Kieran Poynter, UK chairman of PwC, said the firm was pleased with the results in what had been the toughest trading environment he could remember.
He reiterated the importance to PwC of its position as top dog in the profession, highlighting the potential damage that could be caused by losing it. ‘We want to be seen as leaders and as a great place to work,’ said Poynter. ‘It gives us a virtuous circle, where the best people want to work for us and give us the best results.’
External issues have impacted heavily in many areas of the firm’s work.
‘We have been working in a very uncertain regulatory environment where mergers and acquisition work is down massively on normal levels,’ said John Berriman, PwC’s director of finance and operations.
‘Assurance and business advisory services income is down 5% and our tax services have also suffered. The bright spot has been corporate finance and recovery where turnover has risen 2%.’
According to Poynter, the firm has undergone some significant changes during the year. As well as the sale of PwC Consulting, the business has undergone large-scale headcount reduction, with staffing levels and partner numbers reduced by 9%.
Poynter said the firm had now completed this process and was once again recruiting.
He added that PwC was the only Big Four firm not to acquire UK offices or partners from the collapse of Andersen and that this was likely to impact on its rivals’ results.
PwC has also undergone the process of weeding out unprofitable and undesirable companies from its client base and it has also reduced costs by £90m.
PwC’s chief said the firm was now in a good position to grow once again.
‘We have been spending on technology and knowledge management. There is lots more opportunity to grow, especially in the middle market and outside London,’ said Poynter.
The sale of PwC Consulting earned the firm £223m. Some £58m of this was distributed in the form of shares to PwC partners who moved to IBM, while £85m was retained by the firm to meet former partners’ obligations to pay pension annuities.
None was distributed to current PwC partners, meaning Poynter’s potential share from the sale was not included in his annual pay package, which totalled £1.485m.
HMRC breaches client confidentiality; and partner profits fall at EY. These stories and more discussed in Friday Afternoon Live
Two new audit partners have been appointed at the firm BDO in its audit practice following continued growth and investment
Changes to the tax system is urged to support the growth of entrepreneurs, found a report from the Grant Thornton UK, the Institute of Directors, and the Prelude Group
Six new partners have been revealed by top ten firm Mazars