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Watson Wyatt earnings slip on acquisition costs

GLOBAL – Consulting firm Watson Wyatt & Co. has reported lower quarterly earnings – hit in part by a loss related to its acquisition of its European affiliate.

Fiscal year 2006 first-quarter earnings per share from continuing operations came in at $0.36 per diluted share – down from $0.42 in the prior year period and $0.37 in the fourth quarter of 2005.

The numbers included a $3.6m (€3m) “non-operating charge” due to a loss on a foreign currency forward contract that was related to its recent acquisition of Watson Wyatt LLP.

In August the firm reported a $4.8m charge relating to the same matter in fiscal 2005– taking its total loss in the area to $8.4m.

The contract was worth £88.3m with a commercial bank, investor relations director Lisa Mayr told IPE. She said: “The rates moved against us.”

The first-quarter loss was partially offset, the company said, by a $1.7m gain from the sale of its New Zealand operations.

“The net impact of these non-operating items was a loss of $1.9m or $0.03 per after-tax diluted share,” its earnings statement said today.

Revenues rose to $265.9m from $175.4m a year before – driven by the Watson Wyatt LLP acquisition and “strong performance across all practices of the combined entity”.

“We continued to see positive momentum on the revenue front, with virtually all of our businesses posting strong growth on a comparable basis,” said president and chief executive John Haley.

“We are seeing more demand for retirement plan design work, a strong market interest in our technology solutions and robust growth in our insurance and financial services consulting business.”

Client work related to pension investment strategy in the US and Europe was behind a 17% rise in investment consulting group revenues in the period. Investment consulting accounts for 5% of the firm’s revenue.

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