On May 30, 2017, Wavestone's Supervisory Board met to approve the Group's 2016/17 consolidated financial statements for the twelve-month period ended March 31, 2017, the details of which are summarized below. The consolidated financial statements have been audited and the certification report duly published by the Company's statutory auditors.
| Audited consolidated data (a) at 03/31 (€m) |
2016/17 | 2015/16 | % change | 2015/16 pro forma (b) |
|
| Revenue | 338.7 | 233.0 | +45% | 326.2 | |
| Operating income on ordinary activities EBIT margin |
38.7 11.4% |
29.8 12.8% |
+30% |
34.5 10.6% |
|
| Amortization of customer-relationship intangible assets Other operating income and expenses Operating profit |
(2.5) (0.6) 35.6 |
0 (6.7) 23.1 |
+54% |
24.1 |
|
| Cost of net financial debt Other financial income and expenses Income tax expenses |
(2.1) (0.4) (13.1) |
(0.7) (0.6) (8.4) |
|||
| Group share of net income Net margin |
20.1 5.9% |
13.4 5.7% |
+50% |
12.6 3.9% |
(a) Arthus Tech (consolidated since 07/01/15) and the European activities of Kurt Salmon* (since 01/01/16).
(b) Pro-forma financial information for the 2015/16 fiscal year based on the 12-month consolidation of the European activities of Kurt Salmon* as though the acquisition had taken place on 04/01/15.
At end-March 2017, Wavestone reported 45% growth in consolidated 2016/17 revenue to €338.7m, of which €118.6m from the European activities of Kurt Salmon*. For the record, on April 22, 2017, before the audit, management forecast pre-audit consolidated revenue of €339.0m.
On a like-for-like and constant forex basis, consolidated growth came out at 16% over the twelve-month period.
Growth was driven by the Group's strong recruitment drive sustained throughout the year with more than 600 new staff members (young graduates and experienced consultants) hired over the period. On the other hand, the staff turnover rate for Kurt Salmon's European activities* was particularly high at 33% over the year. For the rest of Group, this remained at a low level of 12% over the year.
At end-March 2017, Wavestone's headcount had increased to 2,628 employees from the year-earlier level of 2,511. This includes employees at Kurt Salmon's European activities* where staff levels fell from 777 to 723 over the same period.
Mixed trends in operating indicators
The utilization rate of Kurt Salmon's European activities* remained under pressure throughout 2016/17 coming out at 68%. For the rest of the Group, the utilization rate remained stable at the solid level of 83%, in line with 2015/16.
The average daily rate of Kurt Salmon's European activities* narrowed to €1,051 in fiscal 2016/17 from €1,062 in Q4 2015/16 (the first quarter of consolidation). Prices for the rest of Wavestone continued to advance over the period reaching €774 at end-March 2017, up 4% year-on-year.
Excluding Kurt Salmon's European activities*, the order book stood at 3.3 months at end-March 2017, compared with 3.4 at end-March 2017
The implementation of the new ERP system and a uniform set of management rules will enable the Group to provide unified indicators as of Q1 2017/18. The following table lists what the operating indicators would have been in fiscal 2016/17, had these new management rules been applied.
| Wavestone excluding Kurt Salmon |
Kurt Salmon's European activities* | Wavestone consolidated |
|||
| Utilization rate | 79% | 68% | 76% | ||
| Average daily rate | €774 | €1,045 | €845 |
2016/17 Ebit margin of 11.4%
2016/17 income on ordinary activities advanced 30% to €38.7m, exceeding the initial target of €34m. Underpinned by favorable pricing trends throughout the year, EBIT margin came out at 11.4%.
During the fiscal year, the firm established the Purchase Price Allocation (PPA) for Kurt Salmon's European activities*. This led to the identification of customer-relationship intangible asset depreciation to the tune of €16.5m, representing a pre-tax charge of €2.5m in 2016/17.
Other operating costs totaled €0.6m, of which €0.2m in skills-sponsorship costs and the remainder in residual costs related to the acquisition of Kurt Salmon's European activities*.
Factoring in these elements, operating income rose 54% to €35.6m
Cost of financial debt came out at €2.1m, the bulk of which related to interest and financing costs associated to the acquisition of Kurt Salmon's European activities*.
Group share of net income at end-March 2017 rose 50% year-on-year to €20.1m, making for a net margin of 5.9%, versus the year-earlier level of 5.7%. Restated for the amortization of customer-relationship intangible assets (an accounting entry with no cash impact), Group share of net income came out at €21.7m.
Cash flow from operations up 60% to €24.7m
Wavestone strengthened its balance sheet position in 2016/17 with consolidated shareholders' equity at €104.1m.
Cash flow from operations rose 60% year-on-year to €24.7m.
Investments totaled €18.5m in 2016/17, of which €2.0m in scope of consolidation changes, €12.1m in office remodeling and extension to accommodate Kurt Salmon* teams, and the remainder, €4.4m, in short-term investments.
Financial flows accounted for €7.1m, including a dividend payout of €2.0m for fiscal 2015/16, net loan repayments of €3.4m and net interest of €1.7m.
Free cash totaled €38.7m at end-March 2017 for financial debt of €95.2m, making for net debt of €56.5m, versus the year-earlier level of €58.8m.
| Audited consolidated data at 03/31 (€m) | 03/31/2017 | 03/31/2016 | Audited consolidated data at 03/31 (€m) | 03/31/2017 | 03/31/2016 | |
| Non-current assets o/w goodwill |
164.0 119.8 |
147.0 130.4 |
Shareholders' equity | 104.1 | 85.0 | |
| Current assets o/w trade receivables |
130.8 111.2 |
124.9 101.0 |
Long-term liabilities | 134.2 | 128.2 | |
| Cash | 38.7 | 39.8 | Financial liabilities o/w less than 1 year |
95.2 9.4 |
98.6 5.3 |
|
| Total | 333.5 | 311.8 | Total | 333.5 | 311.8 |
At the General Shareholders Meeting on July 27, 2017, management will propose the distribution of a €0.61 per-share dividend relative to the 2016/17 fiscal year, up 49% on 2015/16.
Construction of Wavestone now complete
The two key events that dominated 2016/17 were clearly the construction of Wavestone and the launch of the firm's new consultancy brand.
The final stages of the construction process were completed today with the implementation of the Group's new ERP system and roll out of the new Human Resources model and processes.
Nevertheless, as we begin the new 2017/18 fiscal year, two points still require attention: the persistent staff turnover rate within several teams and sharp under-performance of certain activities. The impact of measures taken to rectify these points is taking time to feed through. As such, Wavestone remains cautious in the short term as to when the situation will return to normal.
2017/18: unlocking Wavestone's potential
These major issues aside, the firm will pursue investments in 2017/18 with a view to boosting brand reputation.
Furthermore, Wavestone will strive to unlock its potential by targeting key market transformations, such as the bank of the future, new energy models and services, the autonomous vehicle and state modernization.
In addition, once sufficient progress has been made to bring performances back under control, the firm plans to resume its external growth strategy, notably abroad.
2017/18 objectives
Excluding any new acquisitions, Wavestone is targeting revenue of over €350m and a double-digit EBIT margin in fiscal 2017/18.
The firm has also confirmed its 2021 objectives to: (i) make Wavestone the N°1 transformation consulting brand in France, (ii) generate revenue of €500m for an EBIT margin of 15%, (iii) mark up revenue of €100m abroad, (iv) achieve a top-3 CSR ranking every year over the period.
Upcoming events: Publication of Q1 2017/18 revenue: Wednesday, July 26 2017, after Euronext market close.
About Wavestone
In a world where permanent evolution is the key to success, Wavestone's mission is to enlighten and partner business leaders in their most critical decisions.
Wavestone draws on some 2,500 employees across four continents. It is a leading player in European independent consulting, and the number one in France.
Created from the merger, at the beginning of 2016, of Solucom and Kurt Salmon's European activities (excluding Retail & Consumer Goods consulting), Wavestone is a company listed on Euronext Paris and eligible for the PEA-PME – a French investment instrument that encourages individuals to invest in smaller and intermediate firms. In 2017, Wavestone has been labeled Great Place To Work®.
| Wavestone Pascal IMBERT Chief Executive Officer Tel. : +33 (0)1 49 03 20 00 Sarah LAMIGEON Communications Director Tel. : +33 (0)1 49 03 20 00 |
Actus Financial news Mathieu OMNES Analyst & investor relations Tel. : +33 (0)1 53 67 36 92 Nicolas BOUCHEZ Press relations Tel. : +33 (0)1 53 67 36 74 |
* excluding Retail & Consumer goods consulting