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We talk a lot about ‘diversity of performance’ among the IT suppliers in times of economic strife, but the same applies within each supplier’s business. How much better can this be illustrated than with Accenture’s Q3 results (to 31 May), which saw outsourcing revenues grow by 19% yoy in local currency vs 3% growth in Consultancy.
And the performance diversity is as stark on a geographic basis. Accenture’s EMEA revenues grew by 4% yoy in local currency (actually a 1% headline revenue decline), compared with 12% growth for Americas region and 18% growth in Asia Pacific. EMEA Consulting revenues declined.
But as ever, Accenture management proved that it has its hands firmly on the company’s operational and financial levers, delivering headline 6% yoy growth (9% in local currency) at $7.2b, near the top of last quarter’s guidance. Additional payroll and contract costs pushed gross margins down 130bps to 33.1% but this was more than reclaimed through lower SG&A costs, albeit most of this was because of litigation provision in the prior year’s numbers. As a result, operating margins expanded yet again, by 70bps to 14.8%. Outstanding!
While management is holding to its 10-12% headline revenue growth for the FY, they have eased back earnings guidance a tad to account for unfavourable FX (read Europe). The Europe story is interesting in itself as, ironically, the country giving Accenture most concern at the moment is CEO Pierre Nanterme’s homeland, France, the only country to go backwards in Q3. And therefore we really do hope that ‘French’ Canadian SI, CGI (well, they are based in Montreal) really does ‘get it’ about the sad picture in the European SITS market as it steamrolls ahead with its acquisition of Logica. If Accenture is struggling in Europe (relatively speaking), what hope is there for the rest?