For the 12 months ending 30 June 2020, PwC firms around the world had gross revenues of US$43 billion – up 3% in local currency and 1.4% in US dollars.
During the first nine months of FY20 to the end of March, revenues grew by nearly 7% over the same period last year with increases across all lines of business and in every major market. From April to June, revenues were significantly impacted by the lockdown and subsequent slowing economies as countries around the world fought the COVID-19 pandemic. Compared to the same three months in 2019, revenues were down from April to June 2020 by 6%.
“First and foremost the COVID-19 pandemic has been a human tragedy that has deeply affected the lives of many people around the world including members of our PwC family, their relatives and friends and our heartfelt condolences go out to all those who have lost loved ones,” said Bob Moritz, Chairman of the PwC Network.
“Since the pandemic struck, our priorities have been the safety and wellbeing of our people, protecting and preserving jobs, and helping our clients and the communities in which we live and work deal with the impact of COVID-19. I am proud of what we have done over the last year and the way our people have adapted quickly to a huge amount of change while at the same time continuing to connect, collaborate and innovate for the benefit of our stakeholders across the world.”
“While the last few months have been very challenging for everyone, we have re-focused our business to help our clients manage the immediate impacts of the pandemic and reinvent their businesses for future success. It has never been more important to provide our stakeholders with high quality services. We have also continued our significant investments in technology and upskilling our people to help build a sustainable PwC for the future. Our investment in technology was borne out at the height of the lockdown when 95% of our 284,000 strong workforce were operating out of the office with no interruption to the service we were able to provide”, added Bob Moritz.
Revenues across the world
In the Americas, revenues rose by 3% with a particularly good performance from businesses in the United States and Canada. Revenues in Western Europe were up by 2%, while in Central and Eastern Europe, revenues grew by 4%.
Revenues from the Middle East and Africa rose by 10% with a strong result from the Middle East where revenues were up 14%. Across Asia, revenues grew by 5% while in Australasia and the Pacific, revenues were down 1% reflecting difficult trading conditions throughout FY20.
Regional growth numbers for the full year FY20 mask the impact of COVID-19, with all regions performing as anticipated up to the end of March 2020 and then feeling the full impact of the economic restrictions caused by lockdowns in the months of April, May and June. For the last three months of FY20, in most markets around the world we experienced declines in revenues compared with the same period in FY19 with falls in revenues of up to 30% in certain countries.
Revenues by line of business
Around the world, our businesses are focused on providing high quality services that help our clients respond to an ever more complex and challenging environment and address current and future opportunities. While all our lines of business continued to grow in FY20, each was impacted by the economic effects of COVID-19 and we expect market conditions to be challenging for all our operations as we go into our new financial year.
Assurance: Assurance remains PwC’s largest operation across the world and our brand defining business, serving key stakeholders and helping to build trust in the world’s capital markets. In FY20, revenues from our assurance operations grew by 3% to US$17.6 billion, driven by continued strong demand for our core audit. As management and other stakeholders seek insight into operations, risks and performance, and to increase confidence and resilience in business, we have seen continued strong growth in our broader assurance services, such as internal audit and governance, risk and controls. Demand for our digital risk solutions has also remained strong as companies look for support as they accelerate their transition to the Cloud. With almost 119,000 professionals, PwC is the world’s largest provider of assurance services.
Advisory: PwC Advisory operations grew by 4% to US$14.7 billion. This growth was driven by high demand across the world for advice on strategy, business transformation and value creation in the first nine months of the financial year. Our advisory business differentiates by bringing together consulting, deals and cybersecurity professionals, and our operations benefited from increased teaming with our tax and risk assurance colleagues to provide a more integrated service for our clients that gives the advice and support they need from strategy right through to execution. PwC Advisory now employs over 71,000 people.
Tax & Legal Services: PwC Tax & Legal revenues grew by 2% to US$10.7 billion, with demand for tax reporting and strategy, people and organisation and legal services in the first nine months of the year offset by the impact of the pandemic in the final three months. Guided by our PwC Global Tax Code of Conduct, the over 55,000 professionals in our Tax & Legal Services teams use their knowledge and expertise to help clients – ranging from individuals to the largest global corporations – to navigate complex and challenging environments, address people and legal issues, and comply with their tax and reporting responsibilities.
The year ahead
“While we adapted quickly to many of the new challenges that the COVID-19 pandemic brought, there is no doubt that the next 12 months and beyond are going to be difficult. Our economists are predicting that the global economy will contract by 5.5 % by the end of 2021 and while different countries will recover at different rates it is clear that the economic downturn will impact us and our clients across the world,” said Bob Moritz.
We are now very clearly focused on a number of priorities.
- Jobs: Doing the right things to preserve jobs for our people, continue to invest in building the workforce PwC needs for the future, while maintaining the sustainability of our operations. Unfortunately we have seen some job losses in a few markets around the world, particularly in the advisory business, but we are working hard to limit these by containing non-essential costs and investments.
- Safety and Wellbeing: Where we are returning to office based work, ensuring that our people are safe and comfortable and that we have processes and technologies in place to protect our people in line with relevant safety protocols. And where our people remain working from home, we continue to provide the support that they need to meet the challenges this can bring.
- Quality: The uncertainty created by the pandemic and its economic impact has placed an even greater focus on the importance of trust in institutions, information and increased transparency. Investing in the enhancement of the quality of all of the services we provide to our stakeholders remains our number one priority, including continuing to invest the US$1 billion we announced last year to drive quality and innovation by making us the most cloud-enabled organisation in the world.
- Clients: Supporting our clients across the world as they deal with the impact of the pandemic and look to restart operations, repair their balance sheets and rethink their business models.
- Innovation: Driving and scaling up innovation right across our network and the development of new products and services. As our stakeholders grapple with the challenges of the current economic environment, it is vital that we are able to advise and support them on the best ways to construct sustainable businesses for the future.
- Upskilling: Upskilling our own people and collaborating with UNICEF in support of Generation Unlimited to help upskill young people across the world has become even more important as the pandemic has accelerated the use of technology and remote working. Despite the economic uncertainty, we continue to invest heavily to help our own people and others better prepare for the new world of work.
- Diversity and Inclusion: Redoubling our efforts to create a PwC culture where everyone feels valued, listened to and has the opportunity to grow and succeed and taking a leading role in the global dialogue on diversity. We have created our first global diversity and inclusion leadership council.
“The pandemic brought many challenges but it also brought the opportunity to reflect and to some degree rethink the future. How we work together, how we use technology, what real estate we need, whether we need to travel so much, how to innovate, how to connect with our stakeholders and how to prioritise our health and wellbeing. These are all issues that we are actively working on as we think about the PwC of tomorrow,” said Bob Moritz.
The PwC Global Annual Review will be published in October 2020 and will cover in more detail how PwC responded to the COVID-19 pandemic, the work that we do with our clients, stakeholders and the communities where we operate, how we supported our people, the results of our quality inspections and how we are embedding a high-quality culture across PwC, and the actions we are taking relating to important issues such as diversity and inclusion.
Renewable Energy Jobs Reach 12 Million Globally
Renewable energy employment worldwide reached 12 million last year, up from 11.5 million in 2019, according to the eighth edition of Renewable Energy and Jobs: Annual Review 2021. The report was released by the International Renewable Energy Agency (IRENA) in collaboration with the International Labour Organization (ILO) at a high-level opening of IRENA’s Collaborative Framework on Just and Inclusive Transitions, co-facilitated by the United States and South Africa.
The report confirms that COVID-19 caused delays and supply chain disruptions, with impacts on jobs varying by country and end use, and among segments of the value chain. While solar and wind jobs continued leading global employment growth in the renewable energies sector, accounting for a total of 4 million and 1.25 million jobs respectively, liquid biofuels employment decreased as demand for transport fuels fell. Off-grid solar lighting sales suffered, but companies were able to limit job losses.
China commanded a 39% share of renewable energy jobs worldwide in 2020, followed by Brazil, India, the United States, and members of the European Union. Many other countries are also creating jobs in renewables. Among them are Viet Nam and Malaysia, key solar PV exporters; Indonesia and Colombia, with large agricultural supply chains for biofuels; and Mexico and the Russian Federation, where wind power is growing. In Sub-Saharan Africa, solar jobs are expanding in diverse countries like Nigeria, Togo, and South Africa.
“Renewable energy’s ability to create jobs and meet climate goals is beyond doubt. With COP26 in front of us, governments must raise their ambition to reach net zero,” says Francesco la Camera, IRENA Director-General. “The only path forward is to increase investments in a just and inclusive transition, reaping the full socioeconomic benefits along the way.”
“The potential for renewable energies to generate decent work is a clear indication that we do not have to choose between environmental sustainability on the one hand, and employment creation on the other. The two can go hand-in-hand,” said ILO Director-General, Guy Ryder.
Recognising that women suffered more from the pandemic because they tend to work in sectors more vulnerable to economic shocks, the report highlights the importance of a just transition and decent jobs for all, ensuring that jobs pay a living wage, workplaces are safe, and rights at work are respected. A just transition requires a workforce that is diverse – with equal chances for women and men, and with career paths open to youth, minorities, and marginalised groups. International Labour Standards and collective bargaining arrangements are crucial in this context.
Fulfilling the renewable energy jobs potential will depend on ambitious policies to drive the energy transition in coming decades. In addition to deployment, enabling, and integrating policies for the sector itself, there is a need to overcome structural barriers in the wider economy and minimise potential misalignments between job losses and gains during the transition.
Indeed, IRENA and ILO’s work finds that more jobs will be gained by the energy transition than lost. An ILO global sustainability scenario to 2030 estimates that the 24-25 million new jobs will far surpass losses of between six and seven million jobs. Some five million of the workers who lose their jobs will be able to find new jobs in the same occupation in another industry. IRENA’sWorld Energy Transition Outlook forecasts that the renewable energy sector could employ 43 million by 2050.
The disruption to cross-border supplies caused by COVID-19 restrictions has highlighted the important role of domestic value chains. Strengthening them will facilitate local job creation and income generation, by leveraging existing and new economic activities. IRENA’s work on leveraging local supply chains offers insights into the types of jobs needed to support the transition by technology, segment of the value chain, educational and occupational requirements.
This will require industrial policies to form viable supply chains; education and training strategies to create a skilled workforce; active labour market measures to provide adequate employment services; retraining and recertification together with social protection to assist workers and communities dependent on fossil fuels; and public investment strategies to support regional economic development and diversification.
Read full report
In highly uneven recovery, global investment flows rebound
After a big drop last year caused by the COVID-19 pandemic, global foreign direct investment (FDI) reached an estimated $852 billion in the first half of 2021, showing a stronger than expected rebound.
It shows the increase in the first two quarters in FDI, recovered more than 70 per cent of the losses stemming from the COVID-19 crisis in 2020.
For the UNCTAD‘s director of investment and enterprise, James Zhan, the good news “masks the growing divergence in FDI flows between developed and developing economies, as well as the lag in a broad-based recovery of the greenfield investment in productive capacity.”
Mr. Zhan also warns that “uncertainties remain abundant”.
The duration of the health crisis, the pace of vaccinations, especially in developing countries, and the speed of implementation of infrastructure stimulus, remain important factors of uncertainty.
Other important risk factors are labour and supply chain bottlenecks, rising energy prices and inflationary pressures.
Despite these challenges, the global outlook for the full year has improved from earlier projections.
The growth in the next few months should be more muted than the in the first half of the year, but it should still take FDI flows to beyond pre-pandemic levels.
Between January and June, developed economies saw the biggest rise, with FDI reaching an estimated $424 billion, more than three times the exceptionally low level in 2020.
In Europe, several large economies saw sizeable increases, on average remaining only 5 per cent below pre-pandemic quarterly levels.
Inflows in the United States were up by 90 per cent, driven by a surge in cross-border mergers and acquisitions.
FDI flows in developing economies also increased significantly, totalling $427 billion in the first half of the year.
There was a growth acceleration in east and southeast Asia (25 per cent), a recovery to near pre-pandemic levels in Central and South America, and upticks in several other regional economies across Africa and West and Central Asia.
Of the total recovery increase, 75 per cent was recorded in developed economies.
High-income countries more than doubled quarterly FDI inflows from rock bottom 2020 levels, middle-income economies saw a 30 per cent increase, and low-income economies a further nine per cent decline.
Mixed picture for investors
Growing investor confidence is most apparent in infrastructure, boosted by favourable long-term financing conditions, recovery stimulus packages and overseas investment programmes.
International project finance deals were up 32 per cent in number, and 74 per cent in value terms. Sizeable increases happened in most high-income regions and in Asia and South America.
In contrast, UNCTAD says investor confidence in industry and value chains remains shaky. Greenfield investment project announcements continued their downward path, decreasing 13 per cent in number and 11 per cent in value until the end of September.
The combined value of announced greenfield investments and project finance deals rose by 60 per cent, but mostly because of a small number of very large deals in the power sector.
International project finance in renewable energy and utilities continues to be the strongest growth sector.
The investment in projects relevant to the SDGs in least developed countries continued to decline precipitously. New greenfield project announcements fell by 51 per cent, and infrastructure project finance deals by 47 per cent. Both had already fallen 28 per cent last year.
Capabilities fit is a winning formula for M&A: PwC’s “Doing the right deals” study
Ensuring there is a capabilities fit between buyer and target is key to delivering a high-performing deal, according to a new PwC study of 800 corporate acquisitions. . The study finds that capabilities-driven deals generated a significant annual total shareholder return (TSR) premium (equal to 14.2% points) over deals lacking a capabilities fit.
The “Doing the right deals” study looks at the 50 largest deals with publicly-listed buyers in each of 16 industries and evaluates the characteristics that delivered superior financial outcomes for the buyers, as measured by annual TSR.
A capability is defined as the specific combination of processes, tools, technologies, skills, and behaviours that allows the company to deliver unique value to its customers.
Two types of deals were found to outperform the market: capabilities enhancement deals – in which the buyer acquires a target for a capability it needs — and capabilities leverage deals – in which the buyer uses its capabilities to generate value from the target. These represent a true engine of value creation, delivering average annual TSR that was 3.3% points above local market indices. Deals without these characteristics – limited-fit deals – had an average annual TSR of -10.9% points compared to the local market indices.
While 73% of the largest 800 deals analysed sought to combine businesses that did fit from a capabilities perspective, 27% were limited-fit deals. The analysis shows that for every dollar spent on M&A, roughly 25 cents were spent on such limited-fit deals that in many cases destroyed shareholder value.
Alastair Rimmer, Global Deals Strategy Leader, PwC UK said: “Our analysis confirms that deals where the buyer is focused on enhancing its own capabilities or leveraging its capabilities to improve the target can result in a substantial TSR premium. Whether a deal creates value depends less on whether it is aimed at consolidation, diversification or entering new markets. What matters is whether there is a solid capabilities rationale between the buyer and the target.”
Capabilities fit delivers shareholder value across industries
The capabilities premium was found to be positive across all of the 16 industries studied. The share of capabilities-driven deals was highest in pharma & life sciences (92%), an industry where deals often combine one company’s innovation capabilities with another’s strength in distribution. Other leading industries in capabilities fit deals were health services and telecommunications (both with 90% capabilities-driven deals) and automotive (86%). Limited fit deals were found to be most prevalent in the oil & gas industry (62%), where asset acquisition can play an important role in addition to capabilities fit.
The analysis shows that the stated strategic intent of a deal, as defined in corporate announcements and regulatory filings, has little to no impact on value creation. Whether a deal fits or not depends less on stated goals of consolidation, diversification or entering new markets. What matters is whether there is a capabilities fit between the buyer and the target. Deals aiming for geographic expansion notably stood out as performing less well than others, largely because many of them (34%) were limited-fit deals.
The M&A playing field has shifted due to COVID-19
More than ever, companies must be clear in defining which capabilities they can leverage to succeed, and which capabilities gaps they need to fill.
Hein Marais, Global Value Creation Leader, PwC UK added: “Deal rationales have shifted in a COVID context, reflecting the heightened need for new and different capabilities if an enterprise is to generate value and create sustained outcomes. The need to move quickly increases the pressure to do deals at pace – and thereby the risk of failing to evaluate capabilities fit with enough care. Ensuring such capabilities fit, however, dramatically increases the chances of your deal creating value.”
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