At the end of May, consulting firm Wavestone unveiled the results for its 2022/23 financial year, ended March 31, which enabled it to reaffirm its growth targets. Pascal Imbert, Wavestone's founder and Chairman of the Board, took the opportunity to discuss the current health of the market, as well as the hot topic of the moment, the emergence of artificial intelligence.

Cercle Finance: Your annual results were well received on the stock market. To what do you attribute this favorable reaction?

Pascal Imbert: From the various feedbacks I've been able to get from investors and financial analysts, it's above all our outlook for the 2023/24 financial year - i.e. the continuation of a good level of organic growth at least equal to 7% coupled with an operating margin on ordinary activities of around 15% - that has pleasantly surprised the market. As our sector enters a more challenging period, many of our competitors are tending to be more cautious. On the contrary, our outlook is one of confidence.

CF: Don't you think you've also benefited from the recent craze surrounding technology stocks, particularly those most exposed to artificial intelligence (AI)?

PI: Undoubtedly, even if it's still too early to know whether AI represents a real long-term opportunity or, on the contrary, a threat. In any case, over the next two or three years, this technological breakthrough will undoubtedly represent a tremendous opportunity for a company like Wavestone. It's clear that generative AI can enable our customers to optimize their operational processes or offer a better experience to their own customers. What's more, with the rise of this technology, a new ecosystem will also emerge that will raise a whole range of issues in terms of cybersecurity, personal data protection and ethics: this is fortunate, as these are areas in which we enjoy strong skills and an excellent reputation.

CF: And what are the risk factors?

PI: In the medium term, we're going to have to remain vigilant to ensure that our offer doesn't remain focused on subjects which, in the long term, could find themselves reduced to the status of commodities, even if, in my view, this only concerns a very small part of our business. What is clear is that AI is going to change the landscape of consulting services. So we're going to have to add the right tools to our consultants' toolkits to ensure that their value contribution and effectiveness remain unquestionable.

CF: Some technology groups are no longer hesitating to integrate AI into their business model. Does this make sense?

PI: The essence of the consulting business is to add value for our customers. The important thing is not so much to change our business model, but rather to redesign our tools and approaches so that we can continue to deliver the same level of value. For example, over the past few years, consulting firms have frequently been called upon by financial institutions to carry out remediation work in response to cases of non-compliance with regulatory requirements. This work involved handling large quantities of information and documents, a time-consuming and repetitive process. We already use machine learning or analytical solutions to help us with this type of task, but the emergence of AI means that the need to commission a consultancy firm has all but disappeared. From now on, our role will be limited to helping customers equip themselves with products that enable them to become totally autonomous in these matters, which will necessarily impact our business.

CF: By the very nature of your business, you're constantly keeping your finger on the pulse of your customers' activities. With the spectre of recession looming, have you noticed a downturn in their spending plans?

PI: We don't feel that we're in a crisis situation, even if we are seeing a slowdown in certain sectors and, more generally, more caution when it comes to spending. We are seeing an upsurge in so-called "defensive" investments, which enable companies to maintain their margins, to the detriment of more offensive development projects that may involve, among other things, the development of new businesses. This change in the nature of projects is accompanied by a greater wait-and-see attitude. At sector level, energy and luxury goods are in sparkling form, and demand in insurance remains strong. On the other hand, other sectors such as industry are undeniably going through a more complicated phase, with clouds continuing to gather on the horizon. This is also the case for banking, where the environment is becoming less buoyant.

CF: You also have explicit objectives in terms of mergers and acquisitions (M&A)....

PI: Our strategic ambition for the coming years is to acquire international stature. Today, only 20% of our sales are generated outside France. We're still very much focused on the French market, which is an obstacle to our development: our clients are often large multinationals with a strong presence abroad, and the fact that we appear to be a very French-oriented firm can be a handicap. To expand our international footprint, we have two priority targets: the UK, a market in which we have grown a lot recently and where we are enjoying success, and the USA, where we fully intend to take off in the next few years.

CF: What about a more transforming operation?

PI: We know that well-executed mergers between equals can change the dimension of a company. The acquisition of Kurt Salmon in 2016 enabled us to create a lot of value. We're keeping this type of deal on the radar, although we're well aware that the number of potential candidates remains limited. What's more, not everyone is open to mergers of this kind. But conversations are underway, and I hope they will materialize by 2025. If a similar opportunity were to arise, we wouldn't hesitate to seize it!

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