Record profitability in H1 2021/22; annual objectives strengthened - Impact , Wavestone's new strategic plan

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At its meeting of December 6, 2021, Wavestone’s Supervisory Board approved the consolidated half-yearly accounts as at September 30, 2021, which are summarized below. These accounts have been subject to a limited review by the statutory auditors, who are in the process of issuing their report.

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07/12/2021 |
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Revenue from organic growth up by +15% in H1 2021/22 In H1 2021/22, Wavestone generated revenue of €217.8m, up 17% year-on-year – and 12% compared with H1 2019/20, prior to the health crisis. At constant scope and exchange rates, excluding Everest Group consulting , half-year organic growth stood at 15% – driven by sustained demand, especially from major transformation projects. 

Acceleration of recruitment plan in 2021/22  At September 30, 2021, Wavestone had 3,476 employees, compared with 3,453 six months earlier. At the same date, the staff turnover rate stood at 15% on a rolling 12-month basis. Over the whole of the fiscal year, Wavestone expects a turnover rate of between 15% and 20% – higher than its initial target of 15%.  To offset this higher-than-expected rate, and with excellent visibility on future projects, the company has accelerated recruitment activity in H2 2021/22; Wavestone is now targeting about 900 new starters over the year, compared with the 800 envisaged initially. 
 
High consultant utilization rate and strongly positioned sales prices  The operating indicators were well positioned during the first half of the year. The consultant utilization rate stood at 78% over the whole six-month period – a figure significantly higher than the firm’s established norm (75%). The average daily rate was €847 over the period: a modest increase compared with the end of last fiscal year (€842 in 2020/21). The integration of Everest Group consulting for five months of the six-month period made a positive contribution to sales prices: increasing the average by €5. In line with H1, Wavestone is now targeting an average daily rate for the entire fiscal year that is slightly higher than the previous year. 

Six-monthly EBIT margin of 14.6%  At the end of H1 2021/22, EBIT stood at €31.8m – up 122% compared with H1 2020/21. The EBIT margin was 14.6% in H1 2021/22, compared with 7.7% in H1 of the previous year, which suffered as a result of the health crisis.  This record operating profit for H1 reflects the good orientation of the activity but also tightly controlled operating expenses, despite higher spending on recruitment and human resources. The company has benefited, in particular, from the decision to reduce its office size – an output of the Smartworking@Wavestone project. After accounting for the amortization of customer relationships and other non-current charges, in particular those related to the acquisition of Everest Group’s consulting practice, in the US, in May 2021, operating income stood at €30.1m. This is an increase of 123%, compared with H1 2020/21. 

Net margin of 9.5%   The cost of net financial debt and other financial charges are reducing sharply. The income tax charge saw a limited increase due to a reduction in corporate tax rates and the rate of CVAE (a French business tax based on corporate added value).  Group share of net income for the six-month period stood at €20.7m. This represents an increase of +198%, compared with €7.0m in H1 2020/21. Net margin stood at 9.5% in H1 2021/22, compared with 3.7% a year earlier. 

Solid increase in self-financing capacity, but a rise in working capital requirements   In H1 2021/22, self-financing capacity rose by 71% to €34.3m.  The change in WCR consumed €22.8m of cash, due to an increase in trade receivables linked to growth and the usual reduction seen in social security charges in the first half of the year. The latter was further amplified by the repayment of €2.2m of monies received under furlough arrangements during the 2020/21 fiscal year.  After payment of taxes, operating cash flow amounted to €3.5m. Investment operations consumed €7.1m in H1, mostly applied to the acquisition of Everest Group consulting . Financing flows consumed €15.4m; of this, €2.0m was from share buybacks, €4.6m from the resumption of dividend payments from the 2020/21 fiscal year, €4.2m for loan repayments, and €4.1m for lease-liability repayments (under IFRS 16). 

Available cash and cash equivalents of €16.9m at September 30, 2021  At September 30, 2021, Wavestone's equity had increased to €221.8m. Net cash and cash equivalents2 amounted to €16.9m at the end of H1, compared with €31.8m at March 31, 2021. Available cash stood at €69.0m at September 30, 2021. 

Annual profitability objective strengthened: EBIT margin of close to 15%  

Throughout H1 2021/22, Wavestone benefited from a buoyant consulting market, which saw the launch of numerous major transformation projects and increasing demand for its services.  At September 30, 2021, the firm's order book stood at 3.9 months of work, a sign of excellent visibility on future projects.

This strong momentum has continued in Q3, with a consultant utilization rate that continues to be above the 75% norm, and sales prices that remain robust.

As a result, Wavestone has decided to target an EBIT margin of close to 15% for the whole of the fiscal year, compared with 13% previously. This new objective reflects robust operating indicators and operating cost control, while taking account of additional investment needs in recruitment and human resources over H2.

In addition, given the acquisition of the consulting firm why innovation!, which has been consolidated into Wavestone’s accounts since November 1, 2021, the annual revenue target has been increased to €462m, compared with €460m previously.

These objectives are calculated on a constant forex basis and include Everest Group consulting (since  May 1, 2021)
and why innovation! (since November 1, 2021). 

Exclusive negotiations for the acquisition of NewVantage Partners in the United States

Wavestone announces that it is in exclusive negotiations for the acquisition of NewVantage Partners,  a consulting firm based in Boston, USA.

Founded in 2001, NewVantage Partners is a niche player, specialized in data strategy, working with blue-chip clients, including several Fortune-200 companies. NewVantage Partners is expected to realize about  $2.6m (?€2.3m) in revenue, in 2021.  

The acquisition price will be between $2.7m and $3.9m (?€2.4m and €3.5m), depending on the company’s results over the next 12 months. 

A new economic cycle, marked by profound changes

The year 2021 has marked the beginning of a new economic cycle.  

Businesses are pursuing major transformations against a backdrop of profound change: increasingly strong competition, an accelerating digital revolution, and urgent climate and environmental challenges.  

After successfully navigating the crisis in 2020, and building on a solid track record of transformation work and a value proposition that combines business and technology, Wavestone's objective is to become the preferred partner of large companies in addressing these challenges. 
 
Impact : Wavestone's strategic plan for 2025

The Impact strategic plan, which Wavestone has published today, is turned towards this objective. It is built on three major pillars.

  • International & growth - Wavestone will make positioning itself to partner major international clients its development priority in the years to come.  This priority will see a concrete outworking in business-development activity, the application of its skills, all geographies included, and in growth-related investment (marketing, recruitment, human resources). The firm also intends to accelerate external growth, particularly in its target geographies: the US, the UK, and in the medium term, Asia. Beyond the targeted acquisitions that the company typically pursues, Wavestone may consider more fundamental purchases, if the right opportunities arise.
  • Expertise & value - Wavestone intends to invest more heavily in developing the skills and expertise of its teams: its ambition is to become one of the best training grounds for consultants at all career stages.  The firm also plans to extend this investment into actions that deepens its expertise and value; this will take the form of more innovation, future-focused thinking, and thought leadership.  These investments will encompass the entirety of the company's expertise, with a particular focus on the key challenges of future years – such as cybersecurity, data, artificial intelligence, new digital business models. Wavestone also intends to develop a leading expertise in decarbonization and sustainable development. The aim is to deepen and enrich the firm's value proposition, through a 360° view of the challenges – business, technological, and sustainable-development challenges. The effort required may lead to a decrease in utilization rates, offset by an increase in sales prices that reflects the additional value to clients.  
  • “The Positive Way” - The signature approach of “The Positive Way” will remain central to Wavestone's development plans.  Over the course of the plan, the firm will cultivate its values: customer satisfaction and support for sustainable performance, employee development and commitment, responsibility and ethics, as well as the collective, its most distinctive quality. Wavestone intends to benefit from its roots to strengthen its identity and unity, to better meet the challenges of growth. 

An ambitious new stage for Wavestone

Wavestone's ambition through Impact : Replicating Wavestone’s success in France on an international scale

In this context, the company has set the following objectives, to be achieved by 2025.

  • Reach a new growth horizon and target an annual revenue of €750m
  • Include five non-French major accounts within its TOP 20 clients
  • Position the firm within the top 5% of companies in CSR terms

Maintaining profitability comparable to that targeted for the current fiscal year will provide Wavestone with the financial flexibility necessary to realize Impact . 

Preparing the future

As part of Impact , Wavestone also wants to lay the foundations for its future development, in terms of governance structure.

As a first step, when his current mandate ends in July 2022, Michel Dancoisne will not seek a new mandate as Chairman of the Supervisory Board.  

At the next General Meeting, Shareholders will be asked to vote on a proposal to change the governance structure: from one of a Management Board and Supervisory Board, to one of a Board of Directors. It will also 
be proposed that Pascal Imbert becomes CEO of the company; Patrick Hirigoyen becomes the Deputy CEO; and Michel Dancoisne continues to serve on the Board.

As it executes this strategic plan, the ongoing development of Wavestone’s management structure will be key, in order to be ready to begin the transition to a new management team from 2025.

Regardless of these changes, Michel Dancoisne and Pascal Imbert intend to maintain their positions as the company’s major shareholders, in the interests of Wavestone’s long-term development.  

Next event: Publication of Q3 2021/22 revenue – Thursday, January 27, 2022, after Euronext market closing. 

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