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  WAVESTONE company press release from 05/12/2022

  05/12/2022 - 18:00

EBIT margin in H1 2022/23: 12.5% 2022/23 revenue guidance updated to more than EUR 525m


During its meeting on December 5, 2022, the Board of Directors of Wavestone approved the consolidated annual financial statements at September 30, 2022, a summary of which is presented below. These financial statements have been the subject of a limited review by the statutory auditors and their report is in the process of being issued.

Consolidated data (€m)
Limited review of data at 09/30
Audited data at 03/31
H1
2022/23
(6 months)
H1
2021/22
(6 months)
Change   2021/22
(12 months)
Revenue 237.1 217.8 +9%   470.1
EBIT
EBIT margin
29.7
12.5%
31.8
14.6%
-7%   74.8
15.9%
Customer relations depreciation
Other operating income and expenses
Operating income
(0.7)
(3.3)
25.7
(0.7)
(0.9)
30.1
 

-15%
  (1.5)
(0.5)
72.8
Cost of net financial debt
Other financial income and expense
Income tax expenses
(0.4)
(0.4)
(6.9)
(0.5)
(0.3)
(8.7)
    (0.9)
-
(20.9)
Group share of net income
Net margin
17.9
7.6%
20.7
9.5%
-14%   51.0
10.9%

First-half revenue up 9%, of which 4% on an organic basis

At September 30, 2022, at the end of H1 2022/23, Wavestone generated consolidated revenue of €237.1m, up 9% year-on-year. At constant scope and on a constant forex basis, organic growth came out at 4% for the year.

Note that, apart from the impact of acquisitions from the previous fiscal year, H1 2022/23 benefited from the contribution from Nomadéis, consolidated since April 1, 2022 and from PEN Partnership consolidated since August 1, 2022. Coeus Consulting will be consolidated from October 1, 2022.

Staff turnover still high but dynamic pace of recruitment

At September 30, 2022, the staff turnover rate stood at 19% on a rolling 12-month basis, at an identical pace to end-June, versus 18% for the whole of 2021/22.

The pace of recruitment remained steady over the six-month period in line with the full-year roadmap targeting the recruitment of more than 1,000 employees over the year.

Wavestone had 3,864 employees at September 30, 2022, versus 3,732 six months earlier.

Sales prices holding up well and consultant utilization rate at 75% mid-year

For the first half overall, the utilization rate came to 75%, in line with the normative level for the firm, versus 77% for the whole fiscal year 2021/22.

The average daily rate over the six-month period came to €880, up 3% compared with FY 2021/22 (€854). At constant exchange rates, it came to €872 and is up 2% compared with a year earlier.

Order intake remained steady over the summer and since the start of September. The order book stood at 3.7 months at end-September 2022. The decline in the order book compared with September 30, 2022
(4.2 months) reflects the expected growth in the headcount for the 3rd quarter of the fiscal year.

First-half EBIT margin at 12.5% and net margin at 7.6%

As announced, the EBIT margin suffered a decline over the first half. It came to 12.5% versus 14.6% in the first half of the previous year. As a result, EBIT came to €29.7 million, down 7% compared with H1 2021/22.

Note that profitability in H1 2021/22 was exceptionally high owing to the post-Covid-19 context, with a recovery in business and still moderate growth in operating charges.

During H1 2022/23, the firm, however, stepped up spending, notably on recruitment and human resources. Wavestone also decided to adjust its salary policy to maintain its appeal for increasingly sought-after talent, but this will not weigh on the ratio of sales prices to salaries thanks to growth in average daily rate.

After taking account of depreciation of customer relations and other non-operating charges, mainly made up of the costs linked to the acquisitions of PEN Partnership and Coeus Consulting, operating income came to €25.7m, down 15%.

The cost of net financial debt and other financial charges remained practically flat compared with a year earlier. The tax charge was reduced to €6.9 million, compared with €8.7 million a year earlier.

Group share of net income for the first half came to €17.9 million, down 14% compared with H1 2021/22. As a result, the net margin came out at 7.6% in H1 2022/23, versus 9.5% a year earlier.

Financing of three external growth transactions in the first six months of the financial year

In H1 2022/23, cash flow from operations came to €30.1m, down 12% compared with the same period of the previous year.

Changes in WCR consumed €25.4 million in cash (versus €22.8 million a year earlier), owing to business growth and the traditional decline in tax and social security charges during the first half of the fiscal year.

After taking account of taxes paid (€12.2 million) operating cash flow came to a negative €7.5 million versus positive operating cash flow of €3.5 million a year earlier.

Investment transactions cost €52.1 million in H1 2022/23 and consisted mainly of the acquisitions of Nomadéis, PEN Partnership and Coeus Consulting.

Financing flows consumed €21.1 million, including €7.6 million in dividend payments with respect of 2021/22, €6.5 million allocated to share buybacks enabling the full coverage of the employee free share allocation plans, and €4.1 million to repay financial borrowings.

Net financial debt at €16.2 million at September 30, 2022

At September 30, 2022, Wavestone's shareholders' equity came to €267.7 million.

It should be noted that financial assets include €25.5 million in equity investments following the acquisition of Coeus Consulting, completed mid-September but consolidated in Wavestone's financial statements from October 1, 2022. By March 31, 2023, the assets, liabilities and goodwill stemming from the Coeus Consulting acquisition will replace these equity investments on Wavestone's balance sheet.

Owing to acquisitions, net financial debt[1] came to €16.2 million at September 30, 2022, versus a net cash position of €60.3 million six months earlier.

At the end of FY 2022/23, the firm targets a positive net cash position between €30 million and €35 million, excluding new acquisitions, thanks to traditionally higher cash generation during the second half of the year.

Consolidated data (€m)
Limited review at 09/30
Audited data at 03/31
09/30
2022
03/31
2022
  Consolidated data (€m)
Limited review at 09/30
Audited data at 03/31
09/30
2022
03/31
2022
Non-current assets 279.0 214.9   Shareholders' equity 267.7 257.0
o/w goodwill 217.4 178.5  
o/w financial assets 26.9 1.3   Financial liabilities
< 1 year
44.2
8.4
47.9
8.1
o/w right-of-use 14.8 14.5   Lease liabilities 18.0 18.1
Current assets 188.1 171.1   Non-financial liabilities 165.1 171.3
o/w trade receivables 154.8 147.8  
Cash and cash equivalents 27.9 108.3        
Total 495.0 494.2   Total 495.0 494.2

Towards a market slowdown in 2023, but resilience expected in certain sectors

The deterioration in the economic backdrop raises the increasingly probable risk of a slowdown in consulting demand, which could materialize from the start of 2023.

These anticipated trends prompt the firm to adopt a cautious approach to Q4 2022/23, with the start of the calendar year traditionally slow for order givers committing to spending.

Nevertheless, Wavestone remains confident regarding certain areas of activity, notably banking, energy and luxury.

In the UK, the acquisitions of PEN Partnership and Coeus Consulting are progressing nicely. Business is holding up well and operating synergies are already starting to be unlocked. Thanks to these acquisitions, Wavestone triples its size in this key geography of the Impact plan, and the targeted profitability for fiscal year 2022/23 is equal to or higher than that of the firm.

Regarding the public sector in France, controversies over the place of consulting firms and the uncertainties they generate do not appear to be abating. As a result, Wavestone has decided to significantly reduce its commercial investments allocated to this sector.

More broadly, over the coming months, despite the more demanding market environment, the firm has decided to maintain a dynamic pace of recruitment, while continuing its intense commercial activity, particularly in resilient sectors.

Revenue of €525 million, and 15% EBIT margin now targeted for 2022/23

For FY 2022/23, to factor in the consolidation of PEN Partnership and Coeus Consulting, Wavestone has updated its annual targets. 

The firm is now guiding for consolidated revenue of more than €525m, compared with more than €505m initially.

Wavestone reiterated its EBIT margin target of around 15% for the full year.

In terms of external growth, the firm plans to continue its targeted acquisitions policy. After the acquisitions in H1 2022/23, Wavestone does not plan any further deals in the UK over the coming months. Therefore, the firm aims to give priority to the US, without ruling out the possibility of tactical deals in other geographies.

Next event: Q3 2022/23 revenue, Monday, January 30, 2023, after the Euronext market closing.


About Wavestone

In a world where knowing how to drive transformation is the key to success, Wavestone's mission is to inform and guide large organizations in their most critical transformations, with the ambition of a positive outcome for all stakeholders. This ambition is anchored in the firm's DNA and summarized in its signature approach –"The Positive Way."

Wavestone brings together nearly 4,000 employees in Europe – where it is one of the leading independent consultants – in the United States and in Asia.

Wavestone is listed on Euronext Paris and recognized as a Great Place to Work®.


Wavestone
Pascal Imbert
CEO
Tel.: +33 (0)1 49 03 20 00
Justine Brosset
Financial Communication
Tel.: +33 (0)1 49 03 20 00
  Actus
Mathieu Omnes
Investor and Analyst Relations
Tel.: +33 (0)1 53 67 36 92
Deborah Schwartz
Press relations
Tel.: +33 (0)1 53 67 36 35

 

Appendix 1: Consolidated income statement at 09/30/22

 

Euro thousands - Limited review ongoing - IFRS standards 09/30/22 03/31/22 09/30/21
Revenue 237,113 470,057 217,843
Purchases consumed -8,037 -11,190 -5,164
Personnel expenses -170,901 -336,016 -160,925
External expenses -22,705 -34,432 -14,461
Taxes -3,137 -7,748 -3,084
Depreciation and provisions for the year -2,435 -6,023 -2,814
Other operating income and expenses 209 157 403
EBIT 29,689 74,805 31,796
Customer relations depreciation -747 -1,493 -747
Other operating income and expenses -3,289 -501 -926
Operating income 25,653 72,811 30,124
Financial income 9 15 4
Cost of gross financial debt -419 -899 -463
Cost of net financial debt -410 -884 -459
Other financial income and expense -423 -16 -282
Pre-tax profit 24,820 71,912 29,383
Income tax expenses -6,914 -20,880 -8,691
Net profit 17,906 51,032 20,692
Minority interests 0 0 0
Consolidated net profit - Group share 17,906 51,032 20,692
       
Consolidated net profit - Group share per share (euros) (1) 0.90 2.55 1.03
Diluted net profit - Group share per share (euros) 0.90 2.55 1.03
 
(1) Weighted number of shares over the period.
     

 

Appendix 2: Consolidated statement of financial position at 09/30/22

 

Euro thousands - Limited review ongoing - IFRS standards 09/30/22 03/31/22
Goodwill 217,410 178,512
Intangible assets 3,481 4,320
Property, plant and equipment 7,115 6,879
Right-of-use of properties leased 14,784 14,468
Financial assets - share over one year(1) 26,910 1,296
Other non-current assets 9,278 9,397
Non-current assets 278,978 214,872
Trade and other receivables 154,823 147,761
Other receivables 33,285 23,351
Cash and cash equivalents 27,942 108,251
Current assets 216,051 279,363
Total assets 495,029 494,235
     
Share capital 505 505
Issue, merger, contribution premiums 11,218 11,218
Reserves and consolidated income 251,306 243,139
Group translation reserves 4,689 2,122
Share capital - Group share 267,719 256,984
Minority interests 0 0
Total share capital 267,719 256,984
Long-term provisions 11,787 14,287
Financial liabilities - share over one year 35,761 39,811
Lease liabilities - share over one year 13,142 13,097
Other non-current liabilities 12,188 332
Non current liabilities 72,879 67,528
Short-term provisions 4,805 5,253
Financial liabilities - share less than one year 8,395 8,109
Lease liabilities - share less than one year 4,899 4,959
Trade and other payables 15,166 12,590
Tax and payroll liabilities 93,227 109,770
Other current liabilities 27,940 29,042
Current liabilities 154,431 169,723
Total liabilities 495,029 494,235
 
(1) This item includes the equity investments in Coeus Consulting acquired on 09/14/22 for €25,453 K, which will be consolidated from 10/01/22.

 

Appendix 3: Consolidated cash flow statement at 09/30/22

 

Euro thousands - Limited review ongoing - IFRS standards 09/30/22 03/31/22 09/30/21  
Net profit from consolidated entities 17,906 51,032 20,692  
Elimination of non-monetary items:        
Net allocations to depreciation and provisions(1) 4,104 3,051 2,929  
Expense/(income) related to share-based payments 1,541 2,044 1,043  
Capital gains/losses net of tax -82 1,463 320  
Other calculated income and expenses -771 -652 22  
Cost of net financial debt (incl. interest on lease liabilities) 503 1,139 600  
Tax expense/(income) 6,914 20,880 8,691  
Cash flow from operations before net cost of financial debt and tax 30,115 78,956 34,297  
Tax paid -12,242 -15,768 -7,992  
Change in working capital requirement -25,420 -6,853 -22,838  
Net cash flow generated by operating activities -7 548 56,335 3,467  
Acquisitions of tangible and intangible assets -891 -455 -166  
Disposals of tangible and intangible assets 109 146 134  
Change in financial fixed assets(3) -22,072 277 15  
Impact of changes in the scope of consolidation -29,266 -12,452 -7,093  
Net cash flow from investments -52,120 -12,485 -7,109  
Disposal (acquisition) of treasury stock by the Company(2) -6,456 -2,361 -2,032  
Dividends paid to parent company shareholders -7,612 -4,612 -4,645  
Dividends paid to minority interests in consolidated companies 0 0 0  
Loan subscriptions 0 0 0  
Loan reimbursements -4,147 -8,472 -4,185  
Reimbursement of lease liabilities -2,451 -7,583 -4,093  
Net financial interest paid -300 -655 -341  
Net interest paid on lease liabilities -98 -282 -148  
Other financial transaction flows -30 0 0  
Net cash flow from financing operations -21,095 -23,965 -15,444  
Change in cash and cash equivalents -80,762 19,885 -19,087  
Effect of foreign exchange rate fluctuations 453 360 93  
Cash at start of period 108,249 88,003 88,003  
Cash at end of period 27,939 108,249 69,010  
 
(1) Including €2,694 K in respect of the amortization of right-of-use property assets (IFRS 16) at 09/30/22 (€3,393 K at 09/30/21).
 
(2) For information purposes, the company delivered treasury stock of an amount of €1,802k.  
(3) Coeus Consulting, acquired on 09/14/22, will be consolidated from 10/01/22. At 09/30/22, shares acquired are presented on the balance sheet as non-operating financial assets and the initial price paid is presented in the “changes in financial assets” line for an amount of
 €(22,184)K. For information, Coeus Consulting's cash position at the same date stood at €2,066K.
 
   
   

[1]Excluding lease liabilities


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  Original Source: WAVESTONE