US – Hewitt Associates says its consultancy revenues rose 34% to 172.1 million dollars in the first quarter - boosted by the acquisition of UK-based Bacon & Woodrow, though the revenues were slightly lower than expectations due to a “very challenging” market.

Chairman and chief executive Dale Gifford said in a statement that the rise in consulting revenues was “driven primarily by our acquisition of Bacon & Woodrow”. The rise to 172.1 million dollars compares to a 128.0 million dollar revenue a year ago.

"While organic consulting revenue growth continued in the first quarter, we did see reduced demand for discretionary consulting services. However, we expect demand to increase - as it historically has - once the economy begins to improve," Gifford added.

Income in the consulting arm fell to 26.2 million dollars from 38.2 million dollars, though margin rose to 15.2% from 13.2% - boosted by bacon & Woodrow and lower travel costs.

Total net revenues increased 19% to 480.3 million dollars, up from 404.1 million dollars in the comparable period a year before.

Earnings for the quarter came in at 29.5 million dollars, up 25% from 23.6 million dollars a year earlier. Earnings per share were in line with expectations at 0.30 dollars.

"While revenue growth in the quarter was strong, particularly in light of the difficult economic environment for consulting services, it was slightly lower than our initial expectations for our consulting business in the first quarter,” Gifford said, citing a “very challenging market environment which continued to reduce the discretionary spending on the part of our clients”.

But he was upbeat on the company’s prospects. “However, we expect activity to pick up when the economy rebounds. Importantly, even on slightly lower revenue growth, we produced strong earnings growth in the quarter, coming in at the high end of our forecasted range." It sees revenue growth for 2003 in the low range of 15%-18%.

Attention will now focus on Watson Wyatt Co., which releases earnings on Friday.