David Jones  |  October 5, 2018

Accenture plc reported fourth-quarter and full-year fiscal 2018 results (ended August 31) on 27 September and held a conference call with investors and interested security analysts.  Participating on the conference call for ACN included Chairman and CEO Pierre Nanterme and David Rowland CFO.  

Important Metrics

Revenues were up by 11% in the quarter.

EPS increased by 7%.

The dividend was increased by 10% to $1.46 semi-annually.

A $5 billion share re-purchase of common stock was authorized.

Operating margins reached 14.8% at fiscal year-end.

They ended the year with $5.1 billion in cash; they have no discernible debt.

ACN is a fairly young company as public companies go, having their IPO just 17 years ago at $14/share and incorporated into the S&P 500 just seven years ago.  Hamilton, Bermuda was their first HQ and nothing more than a mail drop  but, nine years ago they moved their worldwide HQ to Dublin, Ireland.  ACN first started paying cash dividends in 2005 beginning with a thirty cent annual dividend;  today it is $2.92 annually.  They have raised their dividend every year.

Fiscal 2019 Guidance

Accenture expects revenue growth of 5 to 8% for their next fiscal year with the mid-point of of EPS at $7.11/share or a  5.5% increase.  Issues with Brexit were mentioned as having a dampening effect on growth especially in the first half.  They expected to begin a quarterly dividend a year from now scrapping the semi-annual payout.  

Attrition

ACN lost 18% of workforce up from 15% the previous year which caused a number of questions centering on the competition for talent in a tight job market, to which Pierre Nanterme said “we have zero issues hiring talent….no problem”.  ACN’s web pages advertise visits to college campuses where they prefer graduates with digital technology majors;  undergrad visits to MIT and Columbia were advertised while Wharton (University of Pennsylvania) for MBAs.  These graduates provide an important pool of new professionals.

Valuation

ACN’s p/e is close to a 50% premium to that of the S&P 500.  Price/earnings multiples are a function of leverage (debt) and there is none at the company.  Visibility of earnings is another factor and at ACN visibility is high in my view.  Profitability is also a consideration and here this company is one of the most profitable in its industry and lastly among others, growth is a consideration.

The common shares are held by certain clients of MDX Wealth Management.

Robert J Voccola,  CFA
Chief Investment Officer
Certain clients of MDX wealth Management are holders of the common shares of both companies as is the writer of this blog.