Accenture blames tax hikes on profit decline for Q1 2016

18 Dec 2015

Missing market analysts’ expectations, Accenture says that its Q1 2016 earnings showed a decline in profits due to increased tax rates and the resurgent strength of the dollar.

Accenture, the Dublin-based digital consulting company, has for the last number of years seen an increase in its earnings year-on-year, now it seems that its earnings are not quite reaching the targets required to push itself towards the higher-end of the profit margin.

Releasing its earnings report to investors, the company says that for this quarter it made a profit of $858.5m ($1.28 per share), which is lower than the last quarter, which saw profits of $882.2m ($1.29 per share).

Market analysts, however, had earlier predicted that Accenture would perform slightly better than this at $1.32 per share, according to the Wall Street Journal.

In total, its revenues topped $8bn, which marks a percentage increase in revenue of 1pc, or in Ireland a 10pc increase.

This, Accenture says, along with the addition of a higher tax rate of 29.1pc in this quarter, has led to its profits taking a hit, with the tax rate rising from 25.1pc the previous year.

By the time the upcoming quarter concludes in March, Accenture says that it expects its revenues to decrease to between $7.5bn and $7.75bn.

Following the news, the company’s shares took a hit, falling by 4.4pc, with the company saying that the full year of 2016 is likely to see a currency exchange impact of negative 5pc compared with the previous year, which was 4pc.

In the report, Pierre Nanterme, Accenture’s chairman and CEO, said: “We are very pleased with our financial results for the first quarter. We delivered 10pc revenue growth in local currency, which was again broad-based across the dimensions of our business, including double-digit growth in three of our five operating groups and in North America and Europe — our two largest geographic regions.”

Accenture building image via Michael Gray/Flickr

Colm Gorey was a senior journalist with Silicon Republic