Accenture 4Q16 Earnings Call Notes

Accenture plc (ACN) CEO Pierre Nanterme on Q4 2016 Results

Example of digital project

“. In digital, we are working with many hotels, the European hospitality company to implement a digital transformation strategy to increase sales across all channels through data driven customer segmentation. In just one-year, direct sales were up of 27% and more than one million people have joined Meliá’s Rewards program.”

Example of cloud and security projects

“In cloud, we are helping Rio Tinto, a global mining company, transition its enterprise systems to the public cloud, including the world’s largest SAP production system migration to Microsoft Azure, delivering increased agility with an as-a-Service model.

And in security, our cyber experts are working with large U.S. based utility to define, develop and run a next-generation security operations center. We are developing a comprehensive strategy to assess risk, managed identity and enable alerts for cyber threats in real-time. ”

See strong demand for mission critical transformation programs

“We continued to see strong demand from our clients for large scale mission-critical transformation programs. The broad range of services we provide across our five businesses, together with our deep industry expertise, continues to differentiate Accenture and we remain the partner of choice for the world’s leading companies.”

Double digit growth in the US

“In North America, we delivered 11% growth in local currency, driven by the United States where we have now delivered double-digit growth of five of the last six years. In Europe, we grew even 11% in local currency, with double-digit growth in the UK, Italy, Switzerland, Spain and Germany, as well as high single-digit growth in France. And in growth markets, we grew revenue 8% in local currency, driven primarily by double-digit growth in Japan, as well as strong double-digit growth in China, India, South Africa and Mexico.”

David Rowland

Macro environment volatile but guidance assumes market growth

“Great, thank you. So, let me just take a minute and just frame how we see the environment and then how that relates to our guidance. I think, first of all, and I don’t think it’s a surprise to anyone on this call, in balance, we see the overall macro environment being more volatile, let’s say, at this time than where it was a year-ago entering fiscal 2016. So we’d see a higher level of volatility overall in the macro environment for the reasons that this group understands very well. Having said that, in that context, our guidance assumes that the market growth, and when I reference market growth, I’m talking about the basket of publicly traded companies. We expect for purposes of managing our business and the outlook that the market growth is going to be very similar in 2017 to what we saw in 2016. And in 2016, to be clear, we saw organic growth in the basket of publicly traded companies of about 2.5%.”

Financial services is a tech intensive sector

” I think, as we know, Financial Services is a very technology-intensive sector, especially if you’re thinking about banking and capital markets, specifically. Within that, I would say the three demand drivers continue to be significant investment in digitizing the customer channels, so what we refer to, the sector refers to as distribution and marketing. There are significant investments to digitize the channel as a way to drive growth in the bank.”

We don’t see anything that’s going to fundamentally change a 2.5% growth environment

“What’s driving that assumption is that we don’t see anything as we sit here today that would fundamentally change the dynamics that we see in the market, let’s say, as we look out over the next four quarters. We see more of the same. And what we see is an organic market that would continue to grow in that 2.5% range, which means that we are making our own market through our differentiation, the uniqueness of our strategy, leveraging the power of our investments to drive a level of organic growth that is meaningfully higher than that to take share. But we don’t see anything that would meaningfully change that underlying organic growth of about 2.5%. So in other words, we’re not speculating on – you pick your black swan of the day, we’re not speculating on some black swan event that would materially change the market. If that were to happen, all companies will be revisiting the impact of something like that, should it occur.”

Do see some decelerations in 2017

“In terms of the – again, I almost hate to use the word deceleration because in almost all cases, our growth ambitions for the vast majority of our verticals continue to be quite strong and well above the market, albeit at lower levels than, in many cases, the very, very strong double-digit growth we’ve had the last year, if not two years. And so deceleration, what I would say for many of our verticals, we’ve assumed lower but still strong growth is the way I would characterize it. Energy and chemicals and natural resources, we don’t see a catalyst for change. We think those industries are going to continue to be tougher, let’s say, continue to be tough as we go through the fiscal year. As I mentioned, we have seen some pressure in communications in Europe in particular. And although we are very pleased with our growth in Financial Services, in banking and capital markets specifically, I would say that is an industry that we are watching, through Richard Lumb’s leadership, we are watching very, very carefully and very closely.”