Winning in the market
We will continue to invest in developing our relationships and expertise so that we remain the first choice for clients. Our key objective is to deliver the best client experience possible.
Our performance
The firm primarily operates in the UK but our services are heavily influenced by international markets. Almost all markets across the world have been hit by the credit crisis and the following economic downturn. Over the years, UK and global GDP growth and transaction volumes have been strong leading indicators of demand for our services. In the year to the second quarter of 2009, UK GDP fell by 5.6%. The volume of M&A transactions has fallen dramatically over the period.
Despite the turbulence in our markets, over the past year we have been able to deliver financial performance consistent with 2008. Overall turnover was slightly ahead of last year, at £2,248m, with profit available for division among members also slightly ahead of last year at £667m. We have 3% more partners than in 2008, so our profits per partner are down by 3% on average at £777,000. In the current market conditions we consider this to be a strong performance. We have achieved this through a focus on delivering excellent client service and by carefully managing our cost base.
Our goal is to manage our cost base tightly and to continue to invest in our business during the downturn in order to come out of the recession stronger than when we went in. Overhead and discretionary cost savings during the year in our core UK business were approximately £50m and we expect this to be an enduring benefit. Major investments during the year have included a strategic alliance with PwC in the Middle East and the acquisition of Halliwell Consulting and Sustainable Finance. However, our major investment is in our people – we continued to invest heavily in our existing people, spending over £33m on learning and education, and we invested in 53 new partners and over 1,700 new staff.
We have maintained and indeed enhanced the investment we have made in our people by moving work around different units in the firm and retraining significant numbers of people. It has been impressive to see how everyone has responded as ‘one firm’ to meet rapidly changing client needs and as we have sought to support the people in our more vulnerable businesses.
Our contribution
Our firm makes a significant contribution to the UK public purse through the taxes paid by our business and employees. In the past year this amounted to £623m of business, property and employment taxes. This figure excludes tax paid by our partners on their individual share of the profits of the firm. Further details of our Total Tax Contribution can be found in the finance section, and more information on our model, which is increasingly used by companies to assess the level of their contribution to Government finances, can be found at pwc.co.uk/ttc
Structuring our business
Over the past year we have improved our client focus by assessing the firm’s performance in two dimensions: our markets and our businesses. We look at the market by segment, industry and region. Our businesses are organised in three Lines of Service (LoS): Assurance, Tax and Advisory.
The markets dimension is designed to combine a strategic view of the needs of clients with the focus, support and challenge at an individual client team level. The segment leaders focus on our largest national clients which account for about 45% of our revenues, working with our industry leaders to bring insight and knowledge to our clients and the teams that serve them.
The LoS are responsible for businesses which are largely organised around competencies. Each business is responsible for a full profit and loss account considering all issues from innovation and business revenue growth through to efficient delivery.
Next generation BBC
As with all broadcasters, the arrival of the digital age is having a profound effect on the BBC. Everyone, from TV producers to live broadcast teams, must transform the way they operate to secure their competitive position in the market in the future.
Looking ahead
Market trends
We have done extensive work to understand the context in which we are likely to operate over the next three years.
We consider that we will still be operating in very challenging market conditions for most of our businesses. The external markets are still credit constrained and this, together with concerns around consumer confidence, makes it difficult for our clients to invest in their businesses. Our assumption is, therefore, that there will not be a significant upturn in the volume of transactions in the next year.
Given the limited prospect of economic recovery in FY10, we believe growth will mostly come from market share as opposed to the size of the market increasing. Agility and entrepreneurship will be required to make the most of the significant opportunities that a rapidly changing environment brings.
The rate of change in our clients’ industries is now faster than ever. Weak demand is making the gap bigger between winners and losers; some traditional market leaders are failing or losing ground to nimbler competitors, and the economic balance of power is shifting more rapidly eastwards. This provides us with opportunities to help our existing clients adjust, and to assist tomorrow’s emerging winners.
The composition of our own client base is also changing. This year 56% of our turnover came from services provided to our non-audit clients, continuing the trend we have witnessed in recent years.
Our strategy
Our strategy for FY10 and beyond is designed to achieve transformational growth of our consulting market share and extend our lead in our core businesses of audit, tax, business recovery services and transactions. We are also looking to expand a number of our other businesses where we see there being excellent long-term growth prospects, such as human resource services, risk assurance and forensics.
Looking at the markets we serve, we believe we are well placed to increase our market share in financial services, public sector and with entrepreneurs and private companies. Our assurance practice is well placed to increase its market share in all sectors of the audit market. Finally, we are increasingly embedding a sustainability dimension in many of our service offerings.
Performance targets
We have set ourselves ambitious targets for revenue growth and profitability so that we can continue to invest in developing our business. These will be impossible to achieve unless we have a single-minded focus on improving the way we service our clients and motivate our people. We constantly receive feedback from our clients and our people to ensure we listen to how we can best make improvements.
PwC: United for England’s World Cup Bid
England’s bid to host the 2018 or 2022 FIFA World Cup Finals was launched in May at Wembley by David Beckham, Wayne Rooney and members of the successful 1966 World Cup winning team. Members of the PwC team, including project leader and sports and leisure leader Julie Clark and Executive Board member Paul Rawlinson, were also at Wembley on the day and Paul explained why PwC is supporting the bid.
Leading around the country
Our regional network is fundamental to our strategy. We have offices in 32 locations outside London and in the Middle East employing 6,622 partners and staff, and of the 53 partners promoted this year 20 came from outside London. Each of these regional offices is able to combine local business knowledge and expertise with the full scale and breadth of PwC's capabilities.
Agenda for change
Our agenda for change will continue in FY10. We believe there are benefits to our clients and our business of looking at how we deliver our services and we will be reviewing some of our core business models in FY10.
We have around 2,800 people dedicated to servicing other professionals in the firm. Many of these people were subject to a reorganisation that took place on a rolling basis during FY09. FY10 will see these people better placed to provide improved service quality at reduced costs with enhanced career prospects.
In conclusion, we are well placed to stand by our clients and our people. We look forward to another year of exciting opportunities.
Business performance highlights
Assurance
£861mFY09 turnover
£866m FY08 turnover
- We have maintained our leading audit market share for both the FTSE 100 at 40% (2008: 39%) and FTSE 250 at 27% (2008: 29%)
- We made significant progress growing our audit market share of large private companies
- We have seen a significant increase in non-statutory audit work for government and public services
- We were voted by UK finance directors as the Large Audit Firm of the Year for 2009
- We won Best Treasury Consultant at the Treasury Management International Awards
- Our Actuarial practice, one of the largest in the UK, achieved good growth with net revenue increasing by 6% (2008: 4%)
- Demand for our Risk Assurance Services has remained strong throughout the year, generating double digit growth
- For the second year in a row we won three out of every five significant audit proposals we took part in.
Tax
£650mFY09 turnover
£675m FY08 turnover
- The Global Tax Monitor recognises us, by reputation, as the leading firm in the UK for tax advice and as the leading firm in the UK for advising on difficult and complex tax issues1
- We have the leading reputation in the following areas of the HR consultancy market: employment tax, international mobility and HR function effectiveness2
- As a result of the slowdown in transactions and related corporate tax services we saw an overall decline of 4% in tax revenues this year
- Despite tough market conditions our Human Resource Services and indirect tax practices continued to perform strongly with positive growth this year
- We won Employee Benefits Consultant of the Year and Actuarial Consultant of the Year at the FT Pensions and Investment Provider Awards
- In May we were awarded UK Transfer Pricing Firm of the Year at the International Tax Review European Tax Awards
- During the year we acquired Halliwell Consulting, a leading executive remuneration and share scheme advisory firm to complement our existing strength in this area.
- These results are based on the year-ending Q1 2009 figures, with a sample size of 313 primary buyers of tax advice in the UK. Launched in 2000, the Global Tax Monitor (GTM) is a multi-client independent survey conducted by research agency TNS, that examines the competitive position of the top firms in the tax advisory market – globally, regionally, nationally and on an industry basis. It provides a comprehensive measure of firm reputation, client service and brand health, gained currently from just over 3,000 telephone interviews annually with key decision makers (CFOs and Tax Directors) in 31 key markets.
- Lighthouse UK HR monitor survey 2009.
Advisory
£737mFY09 turnover
£703m FY08 turnover
- Our consulting business grew by 10% and the Kennedy Report ranks the firm at No.1 overall in the business consulting market
- For the fourth successive year we topped the ThomsonReuters' Project Finance International (PFI) table for number of deals closed globally. We also came top by volume of deals closed in EMEA in 2008
- We were Top UK Advisers by deal values $50m to $1bn (by volume) over a ten-year period
- For the third year we were awarded Commercial and Market Due Diligence Team of the Year and for the first time the Financial Due Diligence Team of the Year at the Private Equity News Awards
- We won the largest market share of all insolvencies by value, including the largest ever, Lehman Brothers. Our insolvency appointments this year cover assets worth £483bn. We have restructured debt in excess of £600bn and acted on many high-profile turnarounds, together with members of our Turnaround Panel, resulting in Turnaround of the Year awards for our clients.
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