Accenture’s Q4FY12 revenue, at USD6.7bn, though within the company’s guidance, surpassed Street estimate. Operating margin, at 13.8%, dipped 100bps QoQ and was flat YoY. New order booking, at USD9.2bn, surged 9% YoY and 26.2% QoQ. For FY13 it has guided for revenue growth of 5-8% in local currency (versus 11% in FY12) and expects outsourcing revenue to drive growth during the year. Management reiterated that higher demand for transformational projects across operating groups and structural cost take-out related services drove bookings during the quarter. We believe the continued traction in outsourcing and financial services (FS) does not bode well for Indian IT players and could pose tough competition ahead.
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Traction in outsourcing continues
Outsourcing revenue, at USD3.1bn, rose 10.4% YoY. The company stated that clients’ focus on improving operational efficiencies has raised demand for cost take-out related projects. This, coupled with initiatives to transform businesses from capex to opex model, is driving bookings in outsourcing. Management reiterated that momentum in offshoring from Europe continues. Outsourcing order book at USD4.9bn grew 14.5% YoY and the company has booked orders over USD100mn each from 11 clients. For Q1FY13, Accenture has guided for revenue of USD7.10-7.35bn (0.4-3.9% growth YoY); this range assumes negative foreign exchange impact of 3% YoY.
Financial services continues to drive growth
The FS vertical posted revenue of USD1.5bn, a robust 7.8% YoY growth. Within the vertical, while the surge was driven by outsourcing, consulting revenue was flat, especially in banking and capital market. Over the past four quarters, FS has grown at a CQGR of 2%, which is higher than the large Indian lT players except TCS.
Outlook: Outsourcing spurt could queer the pitch for Indian peers
Accenture’s strong growth in the outsourcing segment (up 10.4% YoY) and FS vertical during the quarter coupled with strong order pipeline in outsourcing signifies that the company has been able to hold on to its market share. We re-iterate our view that retention of renewals have gone up significantly for atleast Accenture and IBM, which is also evident from their high outsourcing order book growth. This will directly impact the revenue growth of Indian IT players who have been posting robust growth on back of market share gains driven by extremely high churns for MNCs (Accenture, IBM and others).
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