2017/18 annual results show strong growth - EBIT margin of 14.1%

At its meeting of May 28, 2018, Wavestone's Supervisory Board approved the consolidated annual accounts at March 31, 2018, which are summarized below. Auditing of the accounts is complete, and the auditors are in the process of issuing their report.

Consolidated data at 03/31 (in €m)	2017/18	2016/17	Change
Revenue	359.9	338.7	+6%
EBIT EBIT margin	50.6 14.1%	38.7 11.4%	+31%
Amortization of client relationships Other operating income and expenses Operating income	(2.5) (1.3) 46.8	(2.5) (0.6) 35.6	+31%
Cost of financial debt Other financial income and expenses Income tax expenses	(1.9) (1.0) (17.3)	(2.1) (0.4) (13.1)
Group share of net income Net margin	26.6 7.4%	20.1 5.9%	+33%

 

Over the full year, 2017/18, Wavestone generated revenue of €359.9m, significantly exceeding its target of €350m. Growth was 6% over the full year (7% on a constant forex basis). There was no change in the scope of consolidation between this and the previous year.

This solid growth in activity was supported by an annual growth of 6% in the firm's workforce. In the 2017/18 fiscal year, Wavestone took on nearly 700 new employees, outperforming its annual recruitment plan (which envisaged 600 new hires)—despite a highly competitive labor market.

Annual staff turnover stood at 16%, with a slight decline over the second half of the year (having stood at a full-year equivalent of 17% in H1). Wavestone confirms its medium-term aim of a staff turnover rate of less than 15%, while remaining cautious in the short-term given the current pressures on human resources.

At March 31, 2018, Wavestone had 2,793 employees, compared with 2,628 at March 31, 2017.

 

Improving operating indicators in 2017/18

Despite a slight decline at the end of the year, consultant utilization rate rose to 77% in 2017/18, compared with 76% for the whole of the previous year.

Sales prices saw a positive shift in Q4, reaching an average daily rate of €848 over the whole year, a slight increase compared with the previous year (€845).

The order book improved over the year, reaching 3.7 months of work at the end of March 2018.

 

Group share of net income up 33%

Thanks to strong levels of activity, compounded with a favorable progression in operating indicators, EBIT increased by 31% to €50.6m.

As a result, the 2017/18 EBIT margin was 14.1%, well above its target, which was raised to 11% in December 2017.

After accounting for €2.5m in amortization of customer relationships, and €1.3m in other operating expenses, operating income came to €46.8m, also up by 31% year-on-year.

As a result of the firm's deleveraging, the cost of financial debt was reduced, over the year, to €1.9m, compared with €2.1m in 2016/17. Other financial charges have increased due to foreign exchange fluctuations.

After taking into account the impact on deferred tax of changes to fiscal regimes announced in Belgium, France, and the US, income tax expenses amounted to €17.3m.

Group share of net income in 2017/18 was €26.6m, up 33%. As a result, net margin stands at 7.4%, compared with 5.9% last year.

 

A reduction of more than €20m in net debt

Over the 2017/18 fiscal year, Wavestone generated a cash flow from operations of €30.1m, up 22% year-on-year. Changes in working capital requirements (WCR) remained stable, year-on-year, with the unusual deterioration in the payment collections position that occurred in H1 fully absorbed during Q3.

Investments represented €3.0m during the year. Flows related to financing accounted for €13.3m, including €9.5m in loan repayments and €3.0m in dividend payments from the 2016/17 financial year.

Consolidated data (€m)	03/31/2018	03/31/2017		Consolidated data (€m)	03/31/2018	03/31/2017
Non-current assets of which goodwill	157.1 118.9	164.0 119.8		Shareholders' equity	130.2	104.1
Current assets of which trade receivables	152.2 123.9	130.8 111.2		Non-financial liabilities	144.4	134.2
Cash and cash equivalents	52.1	38.7		Financial liabilities of which less than one year	86.7 16.7	95.2 9.4
Total	361.3	333.5		Total	361.3	333.5

 

At March 31, 2018, the firm's consolidated equity amounted to €130.2m, and net financial debt had been reduced to €34.6m, compared with €56.5m at March 31, 2017.

At its next shareholders' annual general meeting, on July 26, 2018, Wavestone will propose a dividend payment of €0.81 per share for the 2017/18 fiscal year—an increase of 33%.

To increase share liquidity, and make Wavestone's shares more accessible, the firm will also be proposing that the par/nominal value of its shares is divided by four.

 

Wavestone's construction is a success—Direction: Wavestone 2021

The strong growth shown in the 2017/18 annual results—which has delivered an unprecedented EBIT margin of over 14%—clearly underscores that Wavestone's construction is a success.

The firm is now in a position to pursue its further development—in line with the ambitions set out in the Wavestone 2021 strategic plan.

1. Scale: generate €500m in revenue with an EBIT margin of 15%;
2. Reputation: make Wavestone the number-one consulting brand in France for transformation;
3. Commitment: be in the top three in its category for CSR;
4. International: generate €100m in revenue outside France.

The last objective is now key for Wavestone: more impetus is needed in terms of development and performance internationally.

The acquisition, in early April, of the UK consultancy—Xceed—is a first step in this direction. We intend to follow this with other acquisitions, as well as accelerating organic growth outside France.

 

2018/19 objectives: growth of at least 8%; EBIT margin of over 13%

Beyond the international topic, Wavestone's priorities in 2018/19 will be to consolidate the progress made in operational performance and human resources and to launch new initiatives to strengthen Wavestone's brand in the market.

Wavestone will also continue its aggressive focus on key market transformations: the bank of the future, energy transition, autonomous vehicles and new forms of mobility, and the modernization of the public sector.

Over the 2018/19 fiscal year, Wavestone's objective is to achieve consolidated revenue growth of at least 8%, including Xceed, with an EBIT margin of over 13%. These objectives are calculated on a constant forex basis and exclude new acquisitions.

 

Next events: Q1 2018/19 revenue, Wednesday, July 25, 2018, after Euronext market closing; and the combined ordinary and extraordinary shareholders' general meeting, Thursday, July 26, 2018, at 9:00am.

 

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About Wavestone
In a world where understanding transformation is the key to success, Wavestone's ambition is to provide its clients with advice that is unique in the market, enlightening and guiding them in their most strategic decisions.
Wavestone draws on some 2,800 employees in eight countries. It is a leading independent player in European consulting, and the number one in France.
Wavestone is listed on Euronext, Paris, and is eligible for the PEA-PME (a French investment instrument that encourages individuals to invest in smaller and intermediate-sized firms). Wavestone is recognized as a Great Place to Work^®.

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