Accenture plc — FY2012 Form 10-K
Reporting period: Fiscal year ended August 31, 2012. The filing also reports fourth-quarter results. Accenture provides management consulting, technology and outsourcing services; it had approximately 257,000 employees and operations in 54 countries.
Financial performance and liquidity
| Metric | FY2012 | FY2011 |
|---|---|---|
| Net revenues, before reimbursements | $27.86 billion | $25.51 billion |
| Revenue growth | 9% in U.S. dollars; 11% in local currency | 18% in U.S. dollars; 15% in local currency |
| Operating income | $3.87 billion | $3.47 billion |
| Operating margin | 13.9% | 13.6% |
| Net income attributable to Accenture plc | $2.55 billion | $2.28 billion |
| Diluted EPS | $3.84 | $3.39 |
| Operating cash flow | $4.26 billion | $3.44 billion |
| Cash and cash equivalents at year-end | $6.64 billion | $5.70 billion |
- Gross margin declined to 32.3% from 32.9%, mainly because payroll costs were higher as a share of net revenues, including acquisition and offering-investment costs; improved contract profitability partly offset the decline.
- Consulting generated $15.56 billion, up 4% in U.S. dollars and 6% in local currency. Outsourcing generated $12.30 billion, up 16% and 19%, respectively; outsourcing rose to 44% of net revenues from 41%.
- Net cash used in investing was $535 million, including $372 million of property and equipment purchases and $174 million for acquisitions. Financing used $2.56 billion, including $2.10 billion for share purchases and $951 million of dividends.
- Debt was negligible: $33,000 outstanding at year-end. Accenture had $1.64 billion of borrowing facilities with no borrowings under them. Current assets were $12.59 billion and current liabilities were $8.11 billion.
Fourth-quarter results and changes versus prior period
- Q4 net revenues were $6.84 billion, up 2% in U.S. dollars and 9% in local currency year over year. Operating income was $940 million; net income attributable to Accenture plc was $578 million; diluted EPS was $0.88.
- Q4 consulting net revenues fell 4% in U.S. dollars but rose 2% in local currency. Outsourcing net revenues grew 10% in U.S. dollars and 18% in local currency.
- FY2012 revenue growth slowed from FY2011’s 18% U.S.-dollar growth. All operating groups grew in local currency during FY2012, but consulting growth moderated sharply in the second half. Asia Pacific led regional growth at 18% local currency; EMEA grew 8%.
- FY operating income increased 12%; diluted EPS increased 13%. Lower selling, general and administrative costs as a share of net revenues supported operating margin, while the gross margin declined.
Outlook, management commentary and risks
- Management expected year-over-year growth to moderate in the near term and vary by operating group and geography, with lower growth or declines possible, particularly in consulting and Europe. Accenture expected Communications, Media & Technology net revenues to decline year over year in the near term.
- Management cited client caution on small consulting projects and slower revenue conversion on longer projects. Outsourcing demand remained strong, driven by cost savings, operational transformation, expanded scope and new work.
- FY2012 bookings were $32.23 billion ($16.61 billion consulting; $15.62 billion outsourcing); Q4 bookings were $9.21 billion. The company cautions that bookings can fluctuate and are not comparable to revenue or a measure of backlog; many contracts can be terminated on short notice.
- Principal risks include economic uncertainty and reduced client spending, public-sector budget cuts, competitive pricing, talent retention and compensation costs, foreign-exchange movements, delivery or contract-profitability shortfalls, cyber and data-security incidents, and tax and regulatory exposures.
- Accenture reported a $1.35 billion retirement obligation. It expected to fund a discretionary $500 million contribution to U.S. defined-benefit pension plans in the first half of FY2013; estimated FY2013 contributions and related benefit funding totaled approximately $572 million.
- Unrecognized tax benefits were $1.60 billion at year-end, and tax audits remained ongoing. A legacy reorganization liability was $269 million; management noted that ultimate settlement payments could exceed recorded amounts. The company said ordinary-course litigation and investigations were not expected to have a material effect.
- Management believed cash and expected operating cash flows would cover working-capital and investment needs for the next 12 months. It intended to continue using a significant portion of operating cash for share repurchases in FY2013. A $0.81-per-share semiannual dividend was declared after year-end.
Investor verification priorities
- Check whether near-term revenue moderation, especially in consulting, Europe and Communications, Media & Technology, materialized and how bookings converted to revenue.
- Track gross-margin recovery, payroll and compensation costs, utilization, and the profitability of outsourcing and large contracts.
- Review pension-plan funding, the expected $500 million U.S. contribution, and the effect of pension assumptions on reported obligations.
- Follow tax-audit outcomes, the $1.60 billion unrecognized-tax-benefit balance, and resolution of the legacy reorganization liability.
- Assess cash allocation among repurchases, dividends, acquisitions and investment, alongside foreign-exchange exposure and operating cash flow.