Local Currency Appreciation Contracts Accenture Net Profit By 11% in Q2FY14

Accenture delivered a record order booking worth of USD 10 billion for Q2FY14, which includes USD 4.6 billion booking for its consulting business and its outsourcing bookings of USD 5.5 billion. On revenue front, the company recorded net revenue of USD 7.1 billion in Q2FY14. Though the revenue of company has declined by 3% in dollar terms on QoQ basis, it registered a marginal growth of 1% in dollar terms and 3% growth in local currency, on yearly basis. Its net revenue dropped due to a decline in its earnings from resources and health & public services segments by 2.4% and 0.84% to USD 1.22 billion and USD 1.18 billion respectively. In its other sectors, the company reported 4.2% growth (USD 1.75 billion) in products segment and showed a growth of 3.3% (USD 1.56 billion) from its financial services segment on quarterly basis. While its revenue from communication & media remains the same as in previous quarter at USD 1.41 billion.

On geographical front, the company registered a growth of 2% in its revenue from  Americas and EMEA (Europe, Middle East, Africa) in USD terms to USD 3.36 billion and USD 2.86 billion respectively. Contrary Asia Pacific business of the company remained subdued in Q2FY14 and revenue from the region dropped by 7% to USD 908 million.

Operating income of Accenture stands at USD 951 million posting a decline of 13% in dollar terms compared with the last quarter in FY14 and a decline of 18% on yearly basis. Net profit of the company stood at USD 722 million, a drop by 11% on sequential basis and on yearly basis also, it dropped by 39%, mainly due to the appreciation in local currency against dollar. The company’s operating margin contracted by 149 basis points on QoQ basis standing at 13.34% in Q2FY14.

As the management of Accenture reported, the company has shown a good growth in local currency terms on revenue front, whereas the growth remains negative in dollar terms. Considering the outlook for Q3FY14 and FY14, the company remains optimistic on its performance on both revenue front and robust order book, however, it expects the margins to shrink from 15.2% in FY13 to remain in range of 14.3% – 14.5% for FY14E. Looking to Accenture’s performance, we may expect the performance of Indian IT players will also follow the same trend. However, the companies having more Asia-Pacific exposure may show marginal growth in their performance.