Sector Update Accenture
Sector Update | 19|March 2020
Accenture’s outlook should calm the nerves!
Commentary and outlook are encouraging
The company witnessed a robust increase of ~22% YoY in new bookings, driven
by high demand for digital, cloud and security related services.
This is impressive given the nearly two months of COVID-19 disruption in
APAC/growth markets and almost a month of restricted global travel.
Strong increase in bookings was led by Outsourcing (~40% YoY, CC) which is a
key positive read through for Indian IT companies.
For FY20, the company now expects revenue growth to be in the range of 3-6%
YoY (CC), compared to the earlier guidance of 6-8% YoY (CC). This guidance
downgrade was attributed to the COVID-19 impact - a significant part of which is
expected to come in the May'20 quarter.
It should be noted that the downgrade was driven more by the Consulting
segment rather than Outsourcing (which is more relevant to Indian IT).
The company now expects margin expansion of 10-20bp YoY in FY20 v/s earlier
expectation of 10-30bp, indicating limited expected disruption to operations.
Overall revenue grew ~8% YoY in local currency at the top end of the guidance,
despite nearly two months of COVID-19 disruption in some growth markets.
Growth was broad based across the Consulting and Outsourcing segments.
Across geographies, growth was driven by North America (11% YoY, CC). Despite
slight deceleration (from 13% YoY in 1QFY20 to 11% YoY CC), growth markets
delivered a good performance, especially in the context of COVID-19 impact for
almost two months in some key APAC countries.
Europe (2% YoY, CC) remained a drag on overall growth.
Growth in Financial services (3% YoY, CC) was weak. Within this segment, while
Insurance reported strong growth, Banking and Capital markets remained
modest. Growth in FSI was largely driven by growth markets, followed by the
Americas, while business in Europe witnessed a contraction.
Notably, the key operational parameters like utilization remained stable (at
91%), despite the lockdowns in some geographies.
The company indicated that, till date, it has not experienced any material
disruption to its service delivery.
Travel was restricted and employees were asked to work from home wherever
possible. Significant portion of the workforce (60% in India/Philippines and
~85%-90% in geographies like Italy/Spain) is already using this option.
Accenture has a good expertise in virtual work using collaborative technologies.
Note that the company is the largest user of Microsoft Teams globally.
In cases where services cannot be delivered from home due to the nature of the
business or other constraints, measures are taken to reduce the density of e
mployees across centers, initiate extra hygiene and social distancing protocols.
Impressive performance despite COVID-19 impact on growth markets
Adapting to a new way of work due to COVID-19
Research analyst – Sudheer Guntupalli –
(Sudheer.Guntupalli@MotilalOswal.com); +91225036 2749
Research analyst: Mohit Sharma
(Mohit.Sharma@MotilalOswal.com); +9122 6129 1531 /
(Heenal.Gada@MotilalOswal.com); +9122 2368 1805
19 March 2020
Investors are advised to refer through important disclosures made at the last page of the Research Report.
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