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  1. Demand environment is robust for Indian IT firms

Demand environment is robust for Indian IT firms

Accenture reported an exceptional August 2018 quarter (Q4FY18) with 11% revenue growth in constant currency (c/c).

By: | Published: October 4, 2018 12:49 AM
Indian IT firms, Accenture, financial services, Organic revenue, security services Accenture reported strong Q4FY18 with c/c revenue growth of 11%, 1% higher than the upper end of the 7-10% guidance band. (PTI)

Accenture reported an exceptional August 2018 quarter (Q4FY18) with 11% revenue growth in constant currency (c/c). After growing at 10.5% in c/c in FY18 (8% on organic basis), Accenture has guided for 5-8% revenue growth in FY19. The moderation bakes in a more volatile global environment. Read-through for Indian IT – the demand environment is robust. Companies with strong digital competencies and portfolio aligned to growth areas will likely report strong growth.

Accenture reported strong Q4FY18 with c/c revenue growth of 11%, 1% higher than the upper end of the 7-10% guidance band. Organic revenue growth was an impressive 10%. Revenue was strong across geos and most verticals with the exception of financial services. Consulting grew 12% and outsourcing 9%.

New bookings grew at 7% to $10.8 bn. New services (digital, cloud and security services) contributed more than 60% to revenues in Q4FY18. Strategy & consulting growth accelerated to high single digits, while application services and operations grew in double digit. Accenture grew 10.5% in FY18 and 8% on organic basis.

Accenture added $3.65 bn of absolute revenues in c/c and $2.8 bn on organic basis. Accenture has guided for 5-8% revenue growth in FY19, a surprisingly modest guidance after a strong exit and 7-10% c/c revenue growth guidance in Q1FY19. The guidance implies acquisition contribution of 1.5%, which is 1% lower than the previous year.

Accenture has an outlay of $1.5 bn for inorganic initiatives. The company has guided for 10-30 bps expansion in FY19 EBIT margin. Accenture management indicated that the macro environment is a lot more volatile compared to FY18. Risks of a hard Brexit and volatile global trade do have implications for guidance. Similar to the earlier years, the company will strive to achieve the upper end of the guidance. The guidance should not be construed as conservative, per management. Financial services grew at modest 3% with the growth likely to stay in low single digit in H1FY19.

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