PwC’s business in Asia shrank over the past year after scandals caused the Big Four accounting firm to lose clients in China and forced it to sell its government consulting arm in Australia.
The firm on Monday reported a 12.7 per cent decline in Asia-Pacific profits for the year ended June 30th, reflecting its loss of market share in the region and offsetting growth in the Middle East and Europe.
Overall, PwC’s global profits rose 1 per cent for the year, compared with 3.1 per cent in the prior 12 months. The firm does not report a dollar figure for profits but does report revenues, which were a record $55.4 billion in the year to June, up 3.7 per cent, stripping out currency fluctuations.
By comparison, revenue growth in 2023 was 9.9 per cent.
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Twin scandals in Asia-Pacific compounded a slowdown in the consulting market that has also crimped growth at rivals including Deloitte and EY in their most recent fiscal years.
Chinese regulators ruled PwC had helped conceal a fraud at the collapsed property developer Evergrande, one of its largest audit clients in the country. State-owned enterprises have ditched PwC as their auditor as a result of the scandal, and PwC China last month had its licence to operate suspended for six months.
In Australia, the firm has been in the middle of a political furore after a partner in its tax practice was found to have used confidential information from his work with the government to help colleagues woo multinational technology companies. The firm sold its government consulting business in the country to avoid losing federal contracts.
In both countries, PwC’s global bosses replaced the heads of the local businesses, and PwC China was stripped of its representation within the firm’s top leadership team.
“We know that in order to earn and maintain the trust of our stakeholders we need to take a hard look at ourselves and be transparent when we don’t get it right,” PwC global chair Mohamed Kande wrote in the firm’s annual report.
The Evergrande audit was not representative of the work of PwC’s staff, he said. “We hope that our actions relating to the matter, including leadership accountability, conveyed the seriousness of our commitment to quality and integrity.”
Revenue in Asia-Pacific, the smallest of PwC’s regions, fell from $10 billion in the 2023 fiscal year to $9.3bn, down 5.6 per cent in local currencies. In the Americas, its largest, revenue was rose from $23.5 billion to $24.3bn, a 3.4 per cent increase, with profits up 3.8 per cent.
The firm singled out strong growth in the Middle East, Sweden and France for an 8.6 per cent increase in revenue from the Europe, Middle East and Africa region. Emea profit growth was 3.4 per cent.
Despite the challenges in Asia, PwC achieved global revenue growth a little higher than Deloitte’s 3.1 per cent and a little behind EY’s 3.9 per cent. Its two rivals reported their weakest growth in 14 years, with flat revenues in Asia-Pacific and a slowdown in consulting.
Mr Kande, who became the first consultant appointed as PwC global chair in July, said it had been “a year full of successes and challenges”.
The firm’s consulting business suffered from “a continuing slow market for mergers and acquisitions, sluggish economic growth in a number of key markets and political uncertainty holding back investment in some key projects”, PwC said. It grew 2.6 per cent, versus revenue increases of 3.4 per cent in the audit business and 6.3 per cent in tax and legal services. - Copyright The Financial Times Limited 2024
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