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Financial Model and Valuation

Accenture plc
Authored by

Shashi Bhushan

About the Author

Shashi Bhushan did his schooling from Delhi Public School at Bokaro Steel City, a small town in the state of Jharkhand. With special interest in
Mathematics, Physics and Finance, he completed his B. Tech. Degree in Mechanical Engineering from Indian Institute of Technology (IIT), Hauz Khas,
New Delhi and MBA (PGDM) from Indian Institute of Management (IIM), Ahmedabad where he specialized in Finance. He has over 16 years of
experience spread across large Project Management, Management Consulting, Investment Banking, Mergers & Acquisitions, Corporate Finance,
Strategy Formulation and Fund Raising.

About the Financial Model

This model has been prepared solely to serve as a basis for demonstration of various techniques and steps involved in Financial Modeling leading to Valuation. It
doesn’t depict efficient or inefficient handling of a situation by an individual or corporate. All the historical information has been taken from publicly available
sources and forward looking projections are based on judgments of the author. This is not an investment thesis and not intended to form a basis for any investment
decisions.

Copyright © 2017, Pristine

All rights reserved. No part of this document may be produced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical,
photocopying, recording or otherwise without the prior permission of the author or Pristine.
ASSUMPTION SHEET
Year ends 31st Aug
Year Count 1 2 3 4 5
Parameter Unit / Linkage FY15A FY16A FY17A FY18P FY19P FY20P FY21P FY22P
Method 1 - Top down approach (Bill to booking ratio)
Revenue Drivers - Consulting
Annual growth rate in new booking % 14.7% 3.3% 3.0% 2.8% 2.5% 2.3% 2.3%
Bill to Booking Ratio % 97.0% 93.3% 94.8% 94.8% 94.8% 95.0% 95.0% 95.0%
Revenue Drivers - Outsourcing
Annual growth rate in new booking % -8.1% 8.4% 8.0% 7.5% 7.0% 6.5% 6.5%
Bill to Booking Ratio % 84.1% 92.5% 91.5% 91.5% 91.5% 92.0% 92.0% 92.0%
Method 2 - Bottom up approach
Revenue Drivers
Billable Consultant Headcount Annual Growth Rate % 7.0% 10.9% 9% 8.0% 7.0% 6.0% 6.0%
Consultant Utilization % 90.0% 91.0% 91.3% 91.3% 91.3% 91.3% 91.3% 91.3%
Consultant Bill Rate annual Growth Rate % -2.1% -4.7% -4.0% -3.0% -2.0% -1.0% 0.0%
Annual Billable Hours / Consultant 000 hrs 2.09 2.09 2.09 2.09 2.09 2.09 2.09 2.09

% of revenue before
Reimbursements 6.0% 5.8% 5.5% 5.5% 5.5% 5.5% 5.5% 5.5%
reimbursement

Cost Drivers

% of revenue before
Cost of services before reimbursable expenses 68.4% 68.7% 68.3% 68.0% 68.0% 67.8% 67.8% 67.5%
reimbursement

% of revenue before
Sales and marketing Cost 11.3% 10.9% 10.8% 10.8% 10.4% 10.3% 10.0% 10.0%
reimbursement

% of revenue before
General and administrative costs 5.8% 5.7% 6.1% 6.0% 5.8% 5.7% 5.6% 5.5%
reimbursement

Financing Assumptions

% of revenue before
LC Amount #REF! #REF! #REF! 0.7% 0.7% 0.7% 0.7% 0.7%
reimbursement

% of borowing
Commitment Fees 0.7% 0.7% 0.7% 0.7% 0.7% 0.7% 0.7% 0.7%
facilities
LC Charges % of LC Amount 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Interest Charges on oustanding debt % 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Interest Income as %age of opening cash & cash
% 0.7% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8%
equivalent and short term investments
Assumptions Leading to Net Income
Effective Tax Rate % of PBT 25.8% 22.4% 21.3% 21.0% 21.0% 21.0% 21.0% 21.0%
Net income attributable to noncontrolling interests in
% of PAT 5.5% 4.5% 4.1% 4.1% 4.1% 4.1% 4.1% 4.1%
Accenture SCA and Accenture Canada Holdings Inc.

Net income attributable to noncontrolling interests other % of PAT 1.3% 1.0% 1.1% 1.1% 1.1% 1.1% 1.1% 1.1%

Working Capital Assumptions

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ASSUMPTION SHEET
Year ends 31st Aug
Year Count 1 2 3 4 5
Parameter Unit / Linkage FY15A FY16A FY17A FY18P FY19P FY20P FY21P FY22P
days of revenue
Receivables from clients, net before 47 48 45 44 43 42 40
reimbursement
days of revenue
Current Portion of Unbilled services, net before 24 25 25 25 25 25 25
reimbursement
days of operating
Accounts Payable 15 16 15 15 15 15 15
expenses
Accrued payroll and related benefits
Client Facing Workforce Nos. 334,074 357,516 396,446 #VALUE! - - - -
Total Headcount Nos. 358,498 383,735 424,869
Back End Workforce Nos. 24,424 26,219 28,423 #VALUE! - - - -
% of client facing
Back End Workforce 7.3% 7.3% 7.2% 7.2% 7.2% 7.2% 7.2% 7.2%
workforce
Accrued payroll and related benefits / employee US $ 10,286 10,530 9,557 9,557 9,557 9,557 9,557 9,557
% of provisions for
Income Tax payable 45.5% 28.9% 72.2% 72.2% 72.2% 72.2% 72.2% 72.2%
income tax
Non Current Assets & Liabilities Assumptions
days of revenue
Non Current Portion of Unbilled services, net before 0.5 0.6 0.6 0.6 0.6 0.6 0.6
reimbursement
Retirement Obligation / employee US $ 3,092 3,895 3,316 3,316 3,316 3,316 3,316 3,316
ASSET MODELING ASSUMPTIONS

% of revenue before
Capex #REF! #REF! #REF! #REF! #REF! #REF! 1.4% 1.4%
reimbursement

Depreciation method SLM

Link Depreciation to Gross Block
% of Closing Gross
Depreciation #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!
Block

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PROFIT & LOSS STATEMENT

Year ends 31st Aug

Year Count
Parameter (US $ bn) FY15A FY16A FY17A
REVENUES:
Revenues before reimbursements - Consulting 16.20 17.87 18.75

[+] Revenues before reimbursements - O 14.84 15.02 16.10

Revenues before reimbursements 31.05 32.88 34.85

[+] Reimbursements 1.87 1.91 1.92
Total Revenues 32.91 34.80 36.77
OPERATING EXPENSES:
Cost of services:
Cost of services before reimbursable exp 21.24 22.61 23.82
[+] Reimbursable expenses 1.87 1.91 1.92
Cost of services 23.11 24.52 25.73
[+] Sales and marketing 3.51 3.58 3.75
[+] General and administrative costs 1.80 1.89 2.13
[+] Pension settlement charges 0.06 - 0.51
[-] Total operating expenses 28.48 29.99 32.13
OPERATING INCOME 4.44 4.81 4.63
[+] Interest income 0.03 0.03 0.04
[-] Interest expense 0.01 0.02 0.02
[-] Other expense (income), net 0.04 0.07 0.04
[+] Gain / (Loss) on sale of businesses - 0.85 (0.00)
INCOME BEFORE INCOME TAXES 4.41 5.60 4.62
[-] Provision for income taxes 1.14 1.25 0.98
NET INCOME 3.27 4.35 3.63

[-] Net income attributable to noncontro 0.18 0.20 0.15

[-] Net income attributable to noncontroll 0.04 0.04 0.04

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PROFIT & LOSS STATEMENT

Year ends 31st Aug

Year Count
Parameter (US $ bn) FY15A FY16A FY17A
NET INCOME ATTRIBUTABLE TO ACCENTURE P 3.05 4.11 3.45
GROSS MARGIN 9.81 10.28 11.03
Depreciation, Amortization & Asset Impa 0.65 0.73 0.80
EBITDA 5.08 5.54 5.43

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BALANCE SHEET

Year ends 31st Aug

Year Count
Parameter (US $ bn) FY15A FY16A FY17A
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 4.36 4.91 4.13
[+] Short-term investments 0.00 0.00 0.00
[+] Receivables from clients, net 3.84 4.07 4.57
[+] Unbilled services, net 1.88 2.15 2.32
[+] Other current assets 0.61 0.85 1.08
Total current assets 10.70 11.98 12.10
NON-CURRENT ASSETS:
Unbilled services, net 0.02 0.07 0.04
[+] Investments 0.05 0.20 0.21
[+] Property and equipment, net 0.80 0.96 1.14
[+] Goodwill 2.93 3.61 5.00
[+] Deferred contract costs 0.66 0.73 0.76
[+] Deferred income taxes, net 2.09 2.08 2.21
[+] Other non-current assets 0.96 0.99 1.23
Total non-current assets 7.50 8.63 10.59
TOTAL ASSETS 18.20 20.61 22.69

Authored by
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BALANCE SHEET

Year ends 31st Aug

Year Count
Parameter (US $ bn) FY15A FY16A FY17A
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and bank 0.00 0.00 0.00
[+] Accounts payable 1.15 1.28 1.53
[+] Deferred revenues 2.25 2.36 2.67
[+] Accrued payroll and related benefits 3.69 4.04 4.06
[+] Accrued consumption taxes 0.32 0.36 0.38
[+] Income taxes payable 0.52 0.36 0.71
[+] Other accrued liabilities 0.56 0.47 0.47
Total current liabilities 8.49 8.88 9.82
NON-CURRENT LIABILITIES:
Long-term debt 0.03 0.02 0.02
[+] Deferred revenues 0.52 0.75 0.66
[+] Retirement obligation 1.11 1.49 1.41
[+] Deferred income taxes, net 0.09 0.11 0.14
[+] Income taxes payable 1.00 0.85 0.57
[+] Other non-current liabilities 0.32 0.30 0.35
Total non-current liabilities 3.06 3.54 3.16
SHAREHOLDERS EQUITY:
Total Accenture plc shareholders equity 6.13 7.56 8.95
[+] Non controlling interests 0.51 0.63 0.76
Total shareholders equity 6.65 8.19 9.71
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY 18.20 20.61 22.69

Authored by
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BALANCE SHEET

Year ends 31st Aug

Year Count
Parameter (US $ bn) FY15A FY16A FY17A
CHECK 1.00 1.00 1.00
WORKING CAPITAL
Current Assets excluding Cash 6.34 7.07 7.97
[-] Current Liabilities excluding borrowings 8.49 8.88 9.82
Working Capital (2.15) (1.81) (1.85)
Net Change in Working Capital (2.15) 0.34 (0.05)

Authored by
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REVENUE BUILD UP SHEET

Year ends 31st Aug

Year Count
Parameter Unit FY15A FY16A FY17A
Method 1 - Top down approach (Bill to booking ratio)
Consulting
New Booking $ bn 16.70 19.16 19.79
[x] Bill to booking ratio % 97.0% 93.3% 94.8%
Consulting Revenue $ bn 16.20 17.87 18.75
Outsourcing
New Booking thousands 17.66 16.23 17.59
[x] Bill to booking ratio % 84.1% 92.5% 91.5%
Outsourcing Revenue $ bn 14.84 15.02 16.10

Method 2 - Bottom up approach

Year end billable consultant headcount thousands 334.07 357.52 396.45
[x] Consultant Utilization % 90.0% 91.0% 91.3%
[x] Consultant Bill Rate $ / hr 49.46 48.41 46.14
[x] Annual Billable Hours / Consultant 000 hrs 2.09 2.09 2.09
Total Revenue $ bn 31.05 32.88 34.85
%age difference
Check & balance using Market Size & Share
Global Consulting
Market Size 236.67 247.33 257.23
y-o-y growth 4.5% 4.0%
Implied Market Share 6.8% 7.2% 7.3%
Global Outsourcing
Market Size 94.13 80.90 72.81
y-o-y growth -14.1% -10.0%
Implied Market Share 15.8% 18.6% 22.1%

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