Investor Day 2012

Oct 11, 2012

Slides

Let me welcome everybody who has joined us on the webcast as well as those of you back from our brief break. I'm Casey McClure, Managing Director of Investor Relations. For those of you who have joined us today via the webcast, you will be able to find the remarks from the earlier part of the session posted to the Investor Relations section of our website. We expect to have those posted over the next couple of days. I would like to remind you that some of the materials we will discuss in today's conference constitute forward looking statements relating to Accenture's operations and results. We wish to caution investors not to place undue reliance on such forward looking statements. Any statements other than statements of historical fact may be forward looking. In particular, information about our financial goals and our capital allocation strategy, including share buybacks and dividends are forward looking statements. These forward looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the presentations and are not a guarantee of our future performance. Such risks and uncertainties include, but are not limited to, general economic conditions and those risk factors set forth under the Risk Factors section of our Annual Report on Form 10 ks and quarterly reports on Form 10 Q and other documents filed with or furnished to the Securities and Exchange Commission. As always, Accenture assumes no obligation to update any statements made in these presentations or to conform such statements to actual results or changes in Accenture's assumptions and expectations. I would also like to remind you that we will not be providing you with an update for or making comments related to our Q1 of fiscal 2013. With that, let me turn it over to our CFO, Pam Craig. Okay. It's great to be here with my colleagues, some of our very top leaders bringing alive as well as around the world what we do for a living, not only today, but also how we are positioned to drive our business in the future across our broad and deep base of clients, industries and markets. 2 weeks ago, I provided our fiscal 2013 business outlook. My intent today is to connect it to our consistent and enduring financial goals. So to set the stage for that, let's start with how we finished our fiscal 2012. The year was strong across the key dimensions of our business. We met or beat all of the elements in our original annual business outlook, including the 3 financial goals you see here. Net revenue growth of 11% local currency, above the market growth and above the 7% to 10% range in our original business outlook double digit earnings growth per share of 13% and finally, the return of $3,050,000,000 of substantial cash to shareholders through $2,100,000,000 in share repurchases and $951,000,000 in dividends. So to summarize, we focused on sustainable profitable growth. We delivered and our results reflect performance that differentiates us in the marketplace. Our financial goals have been consistent and they endure. Our track record against these goals has been one of continued and sustained performance and we are focused on growth over the long term and on delivering it in a high performance manner that is with rigorous execution along the way. This is fundamental to our success. How we see fiscal 2013 fits right into this philosophy. Our current position of strength evidenced in our Q4 bookings is a great foundation to build further upon. So a reminder of our 3 financial goals. First, revenue growth to grow faster than the market. 2nd, earnings per share to continue growing in double digits. And third, our balance sheet to maintain its strength and to return a substantial portion of our cash to shareholders. So let's turn now first to the market growth. As we look forward in the context of these goals, let me share with you how we look at the market. That is the addressable market for the kinds of services that we provide. We rely on external analyst data from IDC and Gartner for market growth estimates and then we analyze and consolidate their data into a view that aligns as close as we can to our addressable market and fiscal years. Now, on the left side, you can see go back one, please. On the left side, you can see that our addressable market in fiscal 2013 currently is expected to grow at 4.8%, which is 80 basis points lower than the estimates we had 18 months ago when we shared them with you at our 2011 Investor and Analyst Conference. Our net revenue range outlook of 5% to 8% for fiscal 2013 is above the point estimate derived from the external analysts. And the lower end of our outlook does assume that the market could end up growing at a still slower rate than that 4.8%. On the right side are some details of the changes from the underlying growth numbers shared 18 months ago. Our estimated fiscal 2013 growth in both management consulting and technology actually came down about a point to 5.8% and 4.3% respectively with no significant change in BPO. BPO's stronger market growth of 6.1% echoes the trends that we've seen in our business. By geographic region, since 2011, growth estimates for fiscal 2013 are up 0.5 point in the Americas, but down substantially by 2.6% for EMEA and down 60 basis points for Asia Pacific. So net net for fiscal 2013, both the Americas and Asia Pacific are now estimated to have market growth of about 6% with lower growth in EMEA of about 2.7%. Now let's turn to us Accenture. So if we look back over the last decade, we've grown at a compounded annual growth rate of 8% in local currency since the end of fiscal year 20 3. This growth rate in the context of the addressable market analysis I just mentioned has averaged 4.5% above the market's growth. The last times that we met in this forum, I talked about different parts of our work transitioning to our global delivery network and that we had considered that trend. During the downturn of fiscal 2009 2010, key positioning that we did allowed us to accelerate the shift of work to the GDN driven at that time as you remember by largely by client demand. As a result, while revenue growth was declining in those years, we were gaining in the volume of ours. And this increase in volume then created a platform for our growth in fiscal 2011 and 2012. And while we continue our multi year transition to the GDN, we now have a more scale base to keep building upon. We are focused on the long term as we always have been with the objective of steadily taking share along the way. Now, uncertainty as Pierre mentioned and as Sean mentioned in the macro environment continues and our intent is to continue to proactively manage through it. Sean often shows us these economist covers, which so creatively highlight some of the key risks in the macroeconomic environment. The hard landing of the Chinese economy, significant worsening of the European sovereign debt crisis, stalemate on resolving the U. S. Fiscal cliff and higher commodity prices creating inflation and growth risks. As you would have expected us, we consider these and other external influences in the scenario planning that we update and discuss regularly with our management team and with our Board. So with that in mind, let's turn to our first financial goal. For fiscal 2013, we are targeting 5% to 8% net revenue growth in local currency. And I should note that this range includes a normal level of acquisition activity and that is we do not see our revenue growth overall materially impacted by acquisition activity. Our core business across management consulting, technology and BPO continues to be extremely important and large. The core represents the major portion of our revenue in fiscal 2013 and in the years beyond. Our clients are dealing with the business trends that Pierre references globalization, regulation, rationalization and technology innovation. Our ability to uniquely combine our core capabilities to provide industry based end to end services clearly differentiates us in how we are able to deliver value to clients. We see clear opportunity across the industries and markets we serve and we see evidence that business services are taking hold. For the 33 clients where we had new bookings greater than $100,000,000 in fiscal 2012, over half of them included a substantial blend of both consulting and outsourcing services. Our core offerings and capabilities are very often the centerpiece of these services. Our management consulting business, and by the way, our leader is on vacation in Africa, so that's why you didn't hear from him today. But our management consulting business is a key source of differentiation. We have over 17,000 industry dedicated professionals globally. Our ability to take our capability to the market as part of an integrated end to end business solution sets us apart in the marketplace. Marty Cole and Paul Doherty shared today the technology is the backbone of our business. Our differentiated delivery capability powered by 162,000 professionals in our global delivery network and an unmatched blend of technology and industry skills equip us to take on some of the hardest and most critical challenges that our clients face, including anticipating new technology ways, which Paul so aptly got into for us and integrating them in their businesses to drive the most value. Our BPO business has significant growth potential. And as Mike Salvino brought to life for us has evolved to be an industry leader. It is approaching a $3,000,000,000 part of Accenture with significant market presence and top three market share. So our core business is healthy. It's diverse, durable and evolving, which continues to differentiate us as a leader in the marketplace. Let's turn now to our strategic growth initiatives, same ones we've been showing you the last couple of years. So building on our core, we have these and we've been telling you about them and the opportunity for them to grow to be $1,000,000,000 parts of Accenture. We've measured significant growth in these initiatives since we first shared them with you 2.5 years ago. So here are some milestones. Analytics was our first $1,000,000,000 strategic growth initiative, actually crossed that level in fiscal 2011 and was almost $2,000,000,000 in fiscal 2012. Steve gave you some great color on our business in health, which also surpassed $1,000,000,000 in both fiscal 2011 and fiscal 2012. Paul talked about mobility and cloud. They both crossed the $1,000,000,000 threshold in fiscal 2012 as did Accenture Software and Related Services. Accenture Interactive, we formally called it digital marketing and Smart Grid, each had very significant growth in fiscal 2012 and are on track to join the others. So now our focus is to continue their growth and we are raising the bar and have added multi to our aspiration. Turning now to the priority emerging markets and this third area of growth. In fiscal 2012, they grew 16% in local currency coming off 30% growth in fiscal 2011. We project that the group's local currency growth will continue at a rate well above the Accenture average into the foreseeable future. We heard today from 4 of the PEM leaders and they're each expecting to grow double digits in local currency in fiscal 2013. As Pierre said, we are still very focused on making our priority emerging markets a more significant part of Accenture over the medium term. One other note, Australia crossed the $1,000,000,000 threshold in fiscal 2012. So let's turn now to our second goal, profitability. We remain focused on driving growth at the bottom line and our target for fiscal 2013 is EPS growth of 10% to 12%. Now when it comes to profitability, we've been focused on modest margin expansion with an average of 20 basis point per year improvement over the last 5 years. And as always, we will balance between investing in our business, as Sean so well described earlier, and delivering sustainable margin expansion as we continue to scale. As you know, our investments primarily flow through our margins, including gross margins. Our history tells the story of strong earnings per share growth coming from all aspects of managing our P and L, but with the outsized contributor being revenue growth in purple there. These are high quality earnings. Our leaders are focused on profitable revenue growth. It is in our DNA. In fiscal 2013, we expect the key driver of earnings per share growth to continue to be revenue growth of 5% to 8%, but also critical to EPS is how we deliver that revenue profitably through operating margin. Now we remain confident in our ability to continue to modestly expand in a sustainable way. We will work the levers. 1st, by rigorously managing the quality of the contracts in our portfolio and driving pricing through differentiation. 2nd, by focusing on our labor costs, our biggest operating expense. This means constant management and balancing of market relevant compensation, supply and demand, utilization and payroll efficiency. 3rd, by staying committed to industrialization, as Sean laid out, our methods, processes, tools and of course leveraging our global delivery network, which Marty elaborated on. And 4th, by continuing our efforts to drive down our selling costs as well as managing the growth of G and A. As I've said in the past, I will never give up on modest operating margin expansion. Moving to our tax rate, the fiscal 2013 range is between 26% 27%, slightly lower than fiscal 2012. We're always looking for tax efficiencies. A number of factors can impact the tax rate year to year, including evolving statutory tax rates in the countries where we do business. This of course makes it a challenge to predict the rate over the long term. Finally, in terms of share count, we continue to expect about a 2% reduction in our average diluted shares outstanding as we continue plan to continue to buy back more shares than we issue in fiscal 2013. So on to the last goal here. Our third goal is to maintain a strong balance sheet and cash flow and to return a substantial portion of our cash to shareholders through buybacks and dividends. For fiscal 2013, we expect to return cash to shareholders of at least 3,300,000,000 dollars We've returned about 90% of our free cash flow since our IPO. Our strong cash balance provides us with even more flexibility to deploy capital dollars Our industry leading DSOs have been and will continue to be a hallmark of our company wide focus on cash generation. 1 of the ways we return cash to shareholders is through our dividend. We have a demonstrated history of growing our dividend each year since we introduced it in fiscal 2006. And as you can see there in fiscal 'ten, we transitioned to a semiannual dividend. Of the various payout metrics that we use to measure growth, dividend as a percentage of prior year net income is one that we continually evaluate. In fiscal 2012, the dividend is approximately 40% of our prior year net income, up from roughly 20%, doubled in fact when we first introduced the dividend 7 years ago. Fiscal 2013 shows the 1st semi annual cash dividend of $0.81 per share as declared by our board last month and payable in November. In addition to dividends, share buybacks have been a consistent way for us to return cash to our shareholders. We believe that repurchasing shares in the market on a consistent basis is in the best interest of our shareholders and we will continue to recommend this strategy to our Board. Now let me spend a couple of minutes on capital allocation. We believe a responsible capital allocation strategy has to be flexible and sustainable. It should support growth in our business and then return surplus capital to shareholders. So very simply on this slide, left side shows cash in and the right side depicts how we look to allocate it. While we reexamine our strategy annually with our Board of Directors, we thought it important to also share with you our current thinking about capital allocation. The core driver of the flexibility in our capital allocation model is that we are cap light. As shown on the right side, we see capital expenditures running at about 10% of operating cash flow and we earmarked about 15% of operating cash flow to fuel our strategic and targeted acquisition strategy. So that leaves a significant level of generated capital that is available to be returned cash to our shareholders through a combination of share buybacks and dividends. We are now running at roughly a 2:one ratio of repurchases to dividends. And at this 2:one ratio, we have significant flexibility to sustain our dividend paying capability. In addition, it provides us the flexibility to redirect capital spend should an attractive or compelling opportunity arise. Now there's another 2:one ratio that we think is important here And that is the continuing relationship of the impact of share repurchases to share issuances on weighted average diluted shares outstanding. So just bear with me here. We expect that the impact of both together will be about a 2% reduction in our share count per year. The key point here is that we do not see a scenario when these lines will cross. That is we do not foresee a time when share issuances would exceed share repurchases. Now let me tell you a little bit more about why. Our employee share purchase plans are purchase programs, which have caps on participation levels. When it comes to our Performance Award grants, the vast majority go to our senior executives, a population that by design has grown much slower than overall headcount. Senior executive growth has been about 3% versus 9% for the whole population since fiscal 2007 and we do expect that trend to continue. Funding performance equity grants is discretionary and aligned with achievement of our financial goals. All awards are dollar value denominated. They're not driven by the number of shares. The number of shares issued therefore varies by share price. This is a natural hedge to repurchases. And lastly, we proactively manage the overall affordability and dilution of our equity programs, which we know are key to instilling owner operator behavior in our leaders and to retaining our high performing people. We believe this approach to capital allocation combined with our Cap Light investment model is the right strategy to deliver industry leading shareholder value. So to summarize, we have financial goals to grow revenue faster than the market with 5% to 8% growth for fiscal 2013, to achieve double digit earnings per share growth with 10% to 12% in fiscal 2013 and to continue to maintain a strong balance sheet and cash flow and to return at least $3,300,000,000 of our cash to shareholders through buybacks and dividends in fiscal 20 13. Our capital light strategy supports our culture. We embrace change and then we nimbly move on it. Of course, the most important elements of all this are our clients and our people. Our relationships with our clients are sustained by the value we deliver to them day in and day out. Our shared drive for high performance means that we're focused on developing the best talent, on building relevant market leading offerings and on delivering outcomes that help our clients move their businesses forward. Operational and financial excellence underpins everything we do this with superior leadership from the team you saw today. As we start fiscal 2013, we feel good about our ability to continue to lead by driving growth, balancing priorities and managing our business as you and we expect of us. Now I'd like to ask our CEO, Pierre Nonterre to join me on stage for some more Q and A. Got my glasses on, so we can see everybody. Thank you, Pam. And again, excellent presentation. I think you can you would certainly recognize that our finance operations are in extremely good hands that we have a clear strategy in terms of our finance. We have a clear trajectory. You can see that we are consistent in the way we allocate and we've been reasonably predictable. So we feel good and that's our style. Probably Pam and I now back people would call us R and D, rigor and discipline. But I think this is what you've seen here. When you're managing an organization of that size, you need rigor and discipline, clear trajectory and then to deliver and see what the management team is doing. So thanks Pam for all of this. That being said, we have time for questions. We do. Let's go. Hi. Joe Ferrese from Janney Montgomery. Pam, you had talked prior before about there being a slowdown on the consulting projects and some of the decision making. Can you help us reconcile that with the bookings last quarter? And as you look maybe not so much into 2013, but are we going to see a separation on the decision making in different verticals and geographies? Do you think some will be doing better than others? Yes. I mean there are always geographic complexion of the kinds of projects that we're booking in consulting. We see less of the smaller kind of quick turn projects that maybe don't have as much impact and more of the larger ones that I think do end up delivering more value. So it's not so much decision making, it's maybe different kinds of decisions. And then how these then bleed through into revenue is taking longer. So does that have any implications for discretionary spending? I mean, is it more discretionary what you're seeing a slowdown in? I'm just trying to get a full picture of it. I mean, I'm not sure I would characterize that, because I think in this world, I'm not sure there is a lot of discretionary anything in this economy. So I think what we're seeing is that clients are very focused on value, on outcomes and on driving those kinds of projects today. Yes. Thanks. Katie Huberty, Morgan Stanley. Pam, the operating margin expansion guidance is in line with your long term goal, but it is at the lower end of historical ranges. So can you just talk about is that entirely a function of a little bit lower revenue growth? Or is there a message on pricing or investment strategy? Thanks. Well, it's 10 to 20 basis points is what we guided to. And the average as we showed you was 20. So we'll be shooting for the 20, guiding for the 10 to 20, which though I don't really think it's below that. Now that said, we are investing in our business. You heard about that from Sean and we're going to continue to do that. And most of those investments do flow through P and L. So our objective is to actually manage this really tightly by design. Yes. No change in our overall philosophy with this. We believe that's exactly the right objective and the right balance with the necessity to invest with continuing with our modest margin expansion to paraphrase that. He doesn't let me paraphrase him on rigor and discipline though. I had it in my script in Q4 and he made me take it out. He said those are my words. Here? Hi. It's Brian Keane, Deutsche Bank. Where are you, Brian? I'm right here. Brian. Okay, Brian. Yes. One of the slides you had up showed a lot of market share gains specifically in the last 2 years. I think fiscal year 2011 showed 12% gain above market, 8% in fiscal year 2012. This year it looks like you don't expect at least given the guidance you don't expect a lot of more of that market share expansion. The question is, is it easier to gain market share for Accenture in an expanding accelerating economy versus maybe a declining or slowing economy? Because if you look back fiscal year 2020, 2019 actually didn't have a lot of gains. The last 2 years did. Yes. On this, again, we believe that first we're going to see what the market would do. So you know the results of the game after the game on this. So regarding the IDC and the other analysts. When you look at the 528, I mean definitely we're shooting for guidance which is above the market. And if you look at the top end of the range that would mean a good market share expansion. So I feel this is consistent with what we are what we've been doing so far. And I think one of the other things to just point out is that in 2009 and 2010 where it really looked like versus the market we hadn't done so well, what was so interesting about that was the volumes and how they had really, really grown in the GDN. And so then when you did the compare into those years into those next years, right? I mean, I think there was a lot of that in those numbers weren't necessarily reflected in the top line in those years. Just a follow-up. The deflationary pressure from the GDN, is that just about over now that it's been several years? It looks like you're finally hitting scale there. Thanks so much. Yes. I mean, we are hitting scale there. And I mean, we're going to consistently look to have it in the mix that we can deliver value to our clients through the GDN, which for maybe for those specific pieces are less revenue for us, but then what more can we do with value? And I think what we've demonstrated over the last couple of years is we've been able to do a lot with that. Of course, the other point you've seen on the chart is if you look at 11% and 10%, it was on back of 0 and minus 2% growth in Accenture. If you're looking at where we are in 12% 13%, it's on the back of 2015 or 2014 and 2011. So it's not exactly the same analysis and the same math. Yes. Keith Boggan from Bank of Montreal. 2 if I could. Could you talk about the mix implications of margins? If BPO consistently grows faster than the weighted average and say consulting grows slower, What are the margin implications there? Casey, as you know, we manage the business to operating margins. That's what I was referring to. So while there are differences at the gross margin level sometimes, I mean, what we do is we often find, I mean, Mike runs a very tight ship in terms of delivering profitable operating margin in BPO. So we do look at this mix. We are expecting that the mix change that we saw will be about what we saw last year will carry through to this year and are very intent on managing that. The follow-up if I could is on Europe. And I think appropriately so you've cast Europe as a slower growth area. Some of your competitors are talking about Europe starting to at least open up more directionally in terms of the outsourcing model and things along those lines. How do you see that unfolding if you kept the economy neutral so to speak? How does that potentially impact your growth? Thank you. That one's yours. That's for me. I'm the European expert on everything. So very good question. I mean first, we're already doing a significant level of outsourcing in Europe. So for us that's not something new. I know for some of our competitors, they're looking at Europe at the kind of next horizon. Not for us. We've been doing outsourcing. And I'm talking more about I think Continental Europe. When you're mentioning Europe, you probably would put a little bit the UK a part of that trend. So we are doing outsourcing. Indeed, what you've seen last year, it was a great year for outsourcing in Europe because it's a response to the needs of our clients. Now the way of doing outsourcing requires some savoir faire. I think we developed that savoir faire in Europe because we have a better knowledge of the labor market environment. We have, I would say, a network of our 50 delivery centers and a significant number of our delivery centers, I think something like 20, are in Europe. So we are already equipped because it's not that easy as what we used to call what you're doing in some parts of the world or what some of our competitors are doing with the lift and drop. That is not the mechanic to win in not Continental Europe. So yes, outsourcing is there. Yes, we are doing a lot. Yes, we expect to do more. And we are better equipped than many of our competitors to do the European outsourcing type of work. Thanks, Keith. Yes. Hey, thanks. Moshe Katri from Cowen. A couple of questions here. First of all, talk a bit about your training and R and D expenses for fiscal year 2013. I think that level has been coming down pretty gradually every year. And how should we think about the next few years for that specific budget? I think you mentioned something on that Sean, did you? 600,000,000 dollars I don't think it's been coming down dramatically. But one thing that we are doing is this technology you saw this morning, we're continuing to push that at all we can with training. Now not all training can be done that way, but it's amazing how much more effective it can be. And we're really pioneering even some new things in terms of how we're able to bring kind of live training to people in a classroom, but it might but they might be joined up with other classrooms around the world. So I think what we're doing is really continuing to push technology so that we keep the effectiveness of training, but we are able to drive more efficiencies through that. So that's part of what you see in the numbers. R and D is not going down. It's going up. Yes. And on this, I mean, no different if you look at Accenture compared to any other large organization. We need to do more with less. And that's all what Accenture Web productivity efficiency is all about. We are leveraging technology. We are leveraging lower cost countries, organization and we're just more productive and more efficient. And this is all the role when it comes to training of Jill Smart, the team, Ellen Shu, Larry Solomon there. Their job is to train more people with less every year. It's not easy, Jill, I know, but you're doing that very well. And then kind of focusing on pricing, you're talking about kind of trying to move up maybe the blended pricing levels given some of the value that you're providing your customers with. I'm assuming the environment is probably getting a bit more aggressive, especially in terms of pricing more challenging. The Tier 1 offshore companies, some of them are kind of struggling trying to go back into the market. How do you kind of maintain those blended pricing levels that you have for the next, I don't know, 6 to 12 months assuming that the environment continues to be challenging? Well, I mean, as we mentioned on the Q4 earnings call, we actually have seen the environment to be pretty stable for our services. And then the push where we can get the differentiation is where you get that killer value proposition for the client, right, in terms of significantly more revenue gained or cost savings for them. That gives us some pricing power when we get those really, really differentiated propositions. I mean the name of the game is to get out of the commodity market. And I think to come back to what Mike mentioned regarding BPO, I mean you have 2 markets in BPO. The one we don't want to be, the one we want to be. The one we don't want to be and the same with application outsourcing that we do the same with many business is the commoditized market. That's a disease. That's a problem. Now not to be in the commodity market and to be more in the added value market, you need to work hard on all what has been presented this morning, Differentiation, differentiation, differentiation through industry, technology, business process, nuggets acquisition, things going to make you different, more relevant, IP proprietary. So indeed you can keep a kind of pricing power in the sense that what we've seen the pricing be stable, which I think is a very good achievement you would recognize in the current market environment even just to have stabilized the price. Thanks. Number 2? Yes. Rob Bourgeois here from Bernstein. First question about competition. You have a lot of competitors that are aspiring to be more like Accenture at least that's how I interpret the strategies that are being articulated. And you might say easier said than done. But you are seeing companies with pretty deep pockets doing acquisitions for instance in Europe and articulating strategies to become more transformational or more innovative. Are you worried about increasing competition as it's very clear the profit pool is at the higher end of the market over time and a lot of players are making those investments. So let's just take Europe as an example as Indian firms try to do acquisitions there. Presumably you've looked at the same companies and haven't chosen to do those acquisitions, I guess, because you already have people there. But how are you thinking about the competitive threat? Is that something that weighs on your mind over the next couple of years as deep pocketed competitors really try to make some investments? Yes. Thanks Rod, for that question. 1st, we are watching that extremely carefully, as you might imagine. And Sean and the team are monitoring every minute of every day what's happening in the competitive environment. 2nd, we have a lot of respect for our competitors. They want to win, we want to win and we're watching that extremely carefully. So we are definitely certainly not arrogant or complacent. We strongly believe that indeed as we speak we have a position of strength because of our positioning with the combination of working with the world's leading company, the company which are investing to transform plus our scale, our geographic footprint and our unique industry differentiation. And if this morning we put such a focus and emphasis on industry differentiation, it is the most difficult thing to achieve. And it's not by buying a consulting company in Spain or in Switzerland, as you've been referring to, that you can create the 150,000 people in Accenture certified and aligned to an industry. And we've been doing that not over 2 years, not with 1 or 2 acquisitions. We've been doing that over 40 years, 40 years. It's much more difficult in my opinion to build deep industry skills than to create to some extent the technology delivery network. We're creating the GDN and it was a massive achievement in less than 10 years. Industry specialization requires decades. I mean, listen to what William Zimbah mentioned this morning. We've been in South Africa for 40. 40 years. Brazil decades. China decades. So I don't think especially in an environment where clients are eager to get highly specialized skills. They want the best bankers. They want the best people knowing health. I mean to have the amounts of wisdom of a Steve role leader, it requires few decades. All right. Great. On that note, a quick question for Pam. Just one of the things that seemingly has happened in your business recently is contract duration has gone up. And it would seem that one of the benefits of that is you have better revenue visibility for the outer periods. Is there any trade offs attached to contract duration going up? Trade offs in the area of capital requirements or the effect on margins in the early stages of these new deals. If one of your competitors were to say contract duration is going up, I would worry about capital intensity getting higher and cash flow being affected. So can you talk to how that's playing out in your business? And is that at all an effect on your ROIC and free cash flow outlook? Generally not. I mean this whole capital light thing flows through our contracts and we generally, I mean you could see the industry leading DSOs that's where you'd see it. And we do think they'll come up a little bit to a more normal level, but we maintain a lot of strictness around that. And in terms of early year economics, we always have a few places where we're investing and that's in the mix. Thanks. Yes. Thanks. It's Darrin Peller from Barclays. Last year you guys outperformed the top line in spite of slower consulting than I think you might have expected mainly due to very strong outsourcing trends especially within your business. And I think the question really is first of all how do you think about how Pam, how easy is it to guide or how different is it guiding under an environment with a greater outsourcing mix? And then second follow-up to that is, if 5% to 8% top line is what you see in an environment with very strong outsourcing, but a little bit slower on the consulting side, should we expect longer term something above that since outsourcing generally is so sticky? So you got this long sticky business with growth 5% to 8% in consulting yet to really even come back in a strong way. Yes. I mean, I think outsourcing is a little bit more predictable in the sense that these are generally longer term contracts and we know what we're going to be doing over a period of years. And it's that shorter term consulting, actually that quickest turn consulting, which is the hardest to predict in our business. And that's what we're seeing a little less of right now. So I mean, I think what we're how we're seeing this come back as you saw consulting taper down through the year. And then as we see these bookings really starting to take hold, our expectation is that it will gradually move up through fiscal 2013. But indeed, we please I mean the environment is uncertain, probably less volatile, but reasonably uncertain. Difficult to predict what's going to happen in 13. We can probably understand what's going to happen at the back end of 12, but 13. So where I feel good about where we are is indeed we see a little bit more durability through the outsourcing, through the backlog. I'm pleased with the $32,000,000,000 bookings we had in fiscal year 2012. I'm pleased indeed with this outsourcing backbone we have in it and the BPO performance. I'm pleased to some extent as well within the consulting when we had good bookings, we see deals or projects of longer duration. So less the smaller things, but with longer duration. Longer duration is making all the things more predictable and giving you a little bit more visibility, especially at times where it's difficult, as you mentioned, to really forecast what you don't know. So I think we are in good place to start with our mix of work, with our bookings and with our backlog. Number 1? Hi. Thanks very much. George Price from BB and T. Pam, I wanted to ask you just real quick about the tax rate. I know it's a more minor part of your outlook, but as you also indicated, it's a little bit lower than you It's made your money though, so yes. Absolutely. Absolutely. But it is a help. Is the if I think about what you talked about in terms of the U. S. Versus EMEA, the growth outlook, right? Presumably Europe is going to be growing slower through the near term, all right? U. S. Faster that would suggest a higher all else being equal higher relative tax rate, right? Is the offset faster growth in emerging markets? Is the offset the ramp up you've seen in volume and profit through GDN? You mentioned some of the resolutions that you kind of expect. But I just wondered if maybe you could just give a little bit more color as to that planning and maybe if there's a bias within that range? Thanks. You just gave the color. I mean that's the stuff, right? And there's some final determinations factored in there as well. But yes, I mean it's the geographic mix, it's all of that. You can imagine the tax guy is actually sitting right behind you. You can quiz him after if you want, but he's not allowed to say anything. Anyway, you got it, right? And as you can imagine, it's a pretty complex process for us, right? All the countries we're in and all the things we do, but we do see it going down about a point the range this year. Here and then we will move left. Thanks. It's Tien Tsin Huang from JPMorgan again. Just I guess capital allocation question. It's been very thoughtful and obviously I think it's been a help to the multiple as well to see the income and the consistent share repurchase. But how do you benchmark the share repurchase versus the dividend? You've been very consistent there, but how price sensitive are you on stock price? Is there a 10b5 in place? How do you weigh the international versus the domestic cash? And lastly just on dividend, I mean, do you see an upward limit on the payout ratio? So, I mean, we don't have sort of this international domestic thing, just because we're based in Ireland. But just on the repurchases and the dividend, I mean, I think our philosophy is that we can consistently continue to do what we've done. And I sort of tried to lay out that ratio. We're also, as I mentioned, very confident about our ability to significantly exceed repurchases versus issuances, which we're very judicious about as we go forward to our top leaders. So I mean, I think with the dividend, we've been growing it slowly, steadily and there's still some room there. And all those discussions with our Board of Directors was supporting us and helping us in setting our capital education strategy. Yes. Very big job that we do with the Finance Committee. Yes. Thank you. It's David Grossman from Stifel Nicolaus. You guys have done a remarkable job of growing a very, very large professional services business over the last several years. And can you maybe share with us how you think about the challenge of sustaining that growth? And particularly in the context of some of the earlier comments that you made about this fine line of competing and cooperating or partnering with the software vendors? Yes. Good question. I mean from a growth standpoint, yes, we are raising a big organization. Yes, we can grab more market share. I mean what you see how the world is developing, We can grow in China. We can grow in our 10 priority emerging market. So we're not short of opportunity to grow. So I'm not concerned with this. What I'm more concerned with is for us to make the right bets, to focus on the right opportunity. It's to select health. It's to invest in the right BPO and not in the wrong BPO. So we have multiple opportunities to grow. We decided on 10 priority emerging markets, not some others. And on those 10 priority markets, we're putting more emphasis on China. And you've seen the result on South Africa, on India, on Brazil and on ASEAN. So the point is there is a world of opportunities. Where do we want to compete because we believe we have a differentiated value proposition? We can find the clients the G2000 for whom we are good at in terms of delivering our service. So I'm not advent at console as long as we remain extraordinarily focused so we can scale and leverage our investments. So now from a competition standpoint, yes, it's a world of competition as you're saying. But we have reasonably few, let's say 6, 7 key strategic technology partnership. We've been working with Microsoft, Oracle, SAP and now Salesforce for years. We developed unique and trusted relationship with them. They are developing their software. We're part of their success by successful implementation. We're building on top of their solution unique industry wrappers. This is what we are doing in health as Steve mentioned earlier on. So I think we find the right way of cooperating with our partners, which I believe is truly win win. So I see more moving forward cooperation and less competition with those partners we have because we have defined very clearly the space where we want to cooperate to lead and to win in the marketplace. Yes, on the left and then we'll move back on the right. Jason? Thanks, guys. Jason Kupferberg from Jefferies. Financial Services question for you. Q4 fantastic growth, obviously, 16% constant currency. I think probably surprised everybody to the upside just given all the macro uncertainty in that vertical. And I know there were some one time helpers in there, but still very strong growth. So when you think about fiscal 2013, I'm assuming that mid teens is probably too much to expect, but would you expect financial services to grow faster than the corporate average in fiscal 2013? And if so what are the drivers there? I don't think we're going to give any forecast by vertical at this stage. But I think the only thing we can say is we see great opportunities. But we feel good. We're not surprised. You're maybe surprised because you don't know Richard Lund, who's leading financial services. He's here and he's just a great leader and he's leading that vertical. And I know Richard and he's been leading that vertical in 2,007, 2008, 2009 when the market had been tough. And interestingly, we got out of the crisis probably stronger than any of our competitors under the leadership of Richard. We see opportunities because if there is an industry probably together with Com of my friend Bob here where you see massive transformation because of the Basel III of what I mean you know that market segment there is an unlimited need to some extent for transformation. With the blend outsourcing, Accenture Credit Services, mortgage, mortgage BPO in the U. S, we capture that opportunity. Outsourcing, transformation, risk and regulatory management, Basel III, all of this is creating an environment of change and transformation in that industry. And I think Richard and the team doing an excellent job in converting those opportunities. I'm from EFI, so I'm passionate about that vertical. And I must recognize that Richard is doing better than me. I'm nice today. Okay. Great. I think we have one over here, number 2. It's Ashwin Shirvaikar from Citi. I guess my first question is as Accenture's global depth increases as you get more revenues, more percentage of revenues from emerging markets, How does that affect your view on longer term revenue growth and margins? I mean does that bring your revenue growth up because these markets get more mature users of IT? What about the margin profile? At least what we've seen is in those markets our margins are reasonably consistent with the rest of Accenture. So maybe to On average. On average, if you look at your stand markets, because you might make the hypothesis, okay, you're expanding in new territories. You have to invest at the expense of the margin. And to some extent that would make sense. This is not what we see, probably because we continue to work with leading company G2000. I mean you heard Roger, William, Laelim, Gong. Our focus is around the G2000. And those clients have some consistent pattern in terms of buying. We know how to serve them. So it's not that dilutive, if you will, from a margin standpoint. And what we see on average is their margin is consistent with the margin of Accenture and we do not see any reason for this to change. And what about the growth part of the question? We do expect them to grow faster than the rest of Accenture. And last year they grew 16%. And how sustainable is it over time? I mean and does that then bring up your overall corporate growth rate as that becomes a bigger portion of your revenues? Well, I mean, it's a portfolio, right? And so we're always going to be looking at what can the portfolio do. I think that as Pierre has said, we're really focused on these markets, right, in terms of investing to drive higher than average growth. And they indeed are delivering. And again, I think 18 months ago, you remember, Pam, we mentioned that those markets in aggregate represent something like $3,000,000,000 I think we mentioned the number at that time 18 months ago. So when you look at this, you can see that we have some room left for growth given the starting point. So we're pleased with where we are, but we are comfortable we can grow because there is still a high potential to get market share in those 10 priority emerging markets given the relative size at the beginning. Okay. Time for one more. Yes. Thank you. Sarah Gubins from B. A. Merrill Lynch. On your last earnings call you mentioned that 60% of projects were sole sourced and that was up from 50% previously. Can you talk about what's driving that? What it means if anything for pricing and if it's happening in particular areas of your business? Thank you. It's happening across all of our business, because it's really a thrust of how we're going to market. And the more that we can proactively bring great propositions to our clients that combine our various capabilities, technology, BPO, consulting, we feel the better that is. And so I was pleased to see the wins in terms of how we've been sort of steadily increasing that percentage over the last couple of years to indeed be sole source. And it's very much part of our strategy to drive that. And thanks in closing to find that nugget, because I think that number is probably really telling about all what we discussed this morning. The 60% is the result of the execution of the strategy and is the result of the recognition of accentual differentiation from our clients. They could put us in competition. Nothing forcing them to buy sole source. If they are doing that, it's because they believe that we are more differentiated than the competition that we're bringing more value from the competition in terms of business outcome. We are more predictable and we can deliver with more predictability and with less risk. So that it's all of this and we have on top of this, I think Sean you mentioned that on your section, long and enduring relationship over 10 years for how many? 91%. 90 percent? 91% of our diamonds of our diamonds with more than 10 years relationship. So it's all of this. That's why to come back to the question of world around us and the competition to build that, it has required years of effort, focus around industry, technology, geographic expansion, scale, industry leading GDM, but on top of this to maintain absolutely unique trusted relationships with those giants. And that's really at the heart of what we're calling now ambition 2020 is to continue to serve that very specific segment of the GT2000 clients. And those giants they want to work with partners, suppliers, providers they trust to embark in some large transformation. 60, I think, is probably the best illustration of this. So thank you, Sarah. Thanks a lot. Time to wrap up. So I'm not going to make any profound ending. We I think we covered a lot. I hope that you find this morning valuable and you understand what's making Accenture differentiated in the marketplace, competitive in the marketplace. I hope you're comfortable with the strategy we are executing in the marketplace and why we believe that growth strategy is resonating with our clients and going to make us successful not only today, but going to make us successful moving forward. Again, we hear from all of us that we feel good, we feel confident, but we don't feel arrogant or complacent. Never. That kind of thing will never happen to Accenture. It's a company where we're working hard. We understand our strengths And every day, we want to make that company better. That's what that is. And if you will, the 5 key words maybe to summarize the whole thing is we're going to relentlessly focus on creating a diversified portfolio of businesses, because we believe that the right response to the volatility and the uncertainty in the marketplace. We will continue to invest in differentiation, differentiation, differentiation, whatever it's around technology, innovation or whatever it's around industry. Innovate, create new business model as we are doing with BPO. We're going to do that relentlessly. Scale. Scale is the name of the game for us. Avoid fragmentation. Pick your spot, your country, your industry. Scale rapidly to realize economy of scale, economy of scope. So with all of these 5, you are competitive in the marketplace and so you win. I mean those kind of five things are extraordinarily important and we are executing you've seen probably our lexicon and some smile on our faces around rigor and discipline, at speed at scale, shake and shape and passion and energy. And as I'm closing now, I would like first to thank the management team of Accenture. I mean not only because they are great professionals. Of course they are great professionals. And I'm sure with our competitors you have great professionals. But I think what's making this, I think, management team unique and important for you is we are extremely aligned. We all share the same view on what it is we want to execute in terms of strategy, maximum alignment. 2nd, maximum cohesiveness. We're an international team as you've seen, very international if you add all our geographic leaders. We are extraordinarily cohesive working with each other. And probably you've seen, I hope, a sense of camaraderie. And that's important. You can have the best professional on the planet. If they're not working as a team with alignment, cohesiveness and camaraderie, you can't achieve high goals. I think we have this. I would like as well to thank our Board. Our Board and we have some members of the Board here with us today. Thanks a lot for being with us. Permanently challenging us, challenging our hypothesis, but supporting us in the way we execute our strategy. And of course thanking the 257,000 people because they are making the difference every day. We're a professional services organization. It's not so much about definitely not about me, maybe not about us, but it's all about them, what they do every day at clients in 120 countries delivering the magic of Accenture. So again, thanks a lot for participating to the IEA Day. I hope you find the communication interesting and you feel good about Accenture about in closing. I feel good. Thanks a lot.