Accenture repositions guidance on consulting slowdown

The continuing slowdown in converting its consulting backlog into revenues has prompted Accenture management to reposition its FY13 revenue guidance to the ‘lower half’ of its previously forecast 5-8% range. However, management retained margin and earnings expectations.

Consulting revenues dipped by 1% yoy to $3.75bn in Q2 (to 28^th Feb.), but this was more than compensated by a 10% rise in outsourcing revenues to $3.31bn (all rates in local currency). Net net, Accenture’s revenues for the quarter rose by 4% to $7.06bn. Americas region led growth (+9%); EMEA was down 1%. Operating margins expanded by 20bps yoy 13.3%.

Retiring CFO Pamela Craig alluded to “fewer … smaller (consulting) deals … that convert faster (to revenues)”, a trend that continued “even beyond where we thought it would.” Accenture is trying to pump up the consulting backlog to compensate. The problem appears to be more evident in Europe and in particular Financial Services where small consulting projects have seemingly dried up.

The growth in outsourcing really says it all, though. Market demand is still all about cost cutting. OK, suppliers can cloak this work in the guise of ‘transformation’ and with some justification in terms of the technologies employed. But the objective is very clear – customers still want to do more for less.