October 29, 2020

Accenture outlook on consulting and strategy revenue in 2021

  • The consulting industry has been hard-hit by the coronavirus pandemic, as embattled companies in the retail, hospitality and energy sector cut costs. 
  • But Accenture expects its consulting and strategy business to make a full recovery by the second half of its upcoming fiscal year, the CEO said in Thursday’s earnings call.
  • The firm’s shares dropped more than 6% on Thursday.
  • Do you know more about layoffs at Accenture? Contact the reporter at sstokes@businessinsider.com.
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The consulting industry has been hard-hit by the coronavirus pandemic, as struggling companies pull back on spending and focus on survival rather than growth.

Accenture, one of the world’s largest consulting firms, is forecasting for that to change and for its consulting and strategy service to recover by the second half of the next 12 months. 

Accenture CEO Julie Sweet told analysts on Thursday that clients were focusing less on smaller matters and instead investing their consulting dollars into bigger projects.

“What’s playing out in the market isn’t a sort of weakness in strategy and consulting,” she said. “It’s a reflection of how our clients are thinking about their businesses and what they need.”

Accenture has been working to manage its headcount as fewer low-performing employees are leaving the company voluntarily. The firm announced this spring that it would cut as many as 25,000 jobs — or 5% of its 500,000-person workforce — globally, Business Insider previously reported. This includes up to 10% of the firm’s 55,000 US employees.

Read more: Accenture is cutting more low performers across the 500,000-plus person firm as fewer employees are jumping ship on their own

The firm’s consulting revenues in the quarter ended Aug. 31 were $5.68 billion, an 8% decrease compared with the same period a year earlier. Last quarter, consulting revenues decreased 4% from the previous year to $6 billion. For its 2020 fiscal year, Accenture’s strategy and consulting arm, which makes up 30% of its business, brought in $13 billion in revenue. 

Accenture CFO Kathleen McClure said on Thursday’s earnings call that the firm’s quarterly and fiscal year-end results were in line with its own expectations and that she expected to see “recovery and reconnection with growth” in the second half of the next fiscal year.

The firm’s shares dropped more than 6% on Thursday. 

MoffatNathanson analyst Lisa Ellis said in an email that Accenture was “faring far better in the COVID-19 pandemic than it did during the last major recession,” referring to the Great Recession.

She said the firm’s “resilient” financial performance was due to IT spending in retail, banking, and healthcare sectors  — which Accenture focuses on — outperforming GDP. Additionally, she said Accenture has diversified its business and that a large portion of its revenues comes from 5-10 year outsourcing contracts that aren’t as affected by the coronavirus economy. 

In Accenture’s fourth quarter, outsourcing revenues rose 6% to $5.15 billion compared to a year earlier. 

Even as strategy and consulting performance was down in the fourth quarter, Accenture’s results give hope that the professional-services industry may be making a comeback.

The firm ended its fourth quarter with $10.84 billion in overall revenue, down 2% from $11.06 billion in 2019. Revenue for clients in communications, media and technology and financial services held steady, at $2.2 billion and $2.1 billion, respectively, while health and public service industry revenue increased 12% to $12.3 billion. 

Revenue in the products and resources industries both declined by 6% to 2.9 billion and 10% to $6.6 billion, respectively. Accenture saw $14 billion in new bookings and ended the quarter with an $8.4 billion cash balance.

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