RNS Number:1073Q
CMG PLC
30 August 2000
CMG plc: Group interim results for six months to 30 June 2000
Summary
6 months to 30 June
2000 Euros 2000 GBP 1999 GBP Increase
Turnover Euros 573.1m #349.4m #290.5m 20% (30%)
Operating profit* Euros 84.5m #51.5m #36.4m 41% (54%)
Profit before tax* Euros 83.5m #50.9m #36.8m 38% (51%)
Profit after tax Euros 46.8m #28.5m #23.9m 19% (30%)
Earnings per share** Euros 0.112 6.8p 5.1p 33% (45%)
Interim dividend
Payable on
17 November 2000 to
all shareholders on
the register on
20 October 2000. 1.0p 0.725p 38%
Ex dividend date
is 16 October 2000
* Before goodwill amortisation of #5.8 million (1999: #1.0 million)
** Basic eps before goodwill amortisation (1999 comparative restated to
reflect share sub-division and bonus issue in May 2000)
( ) constant exchange rates. The effect of exchange rates on CMG's
reported results is shown on page 6.
Highlights
The Group's turnover, profit and operating margin all made good advances
in the first half, as an excellent performance in the global telecom
products business more than offset the slower growth in Information &
Communications Technology (ICT) services resulting from the slow rebound
following the millennium. The Group figures include a one month
contribution from Admiral plc whose acquisition was the most significant
corporate event of the period.
* 20% growth in Group turnover (30% growth at constant exchange rates)
* Group pre-tax profits* up 38% to #50.9 million (51% growth at
constant exchange rates)
* Triple digit turnover and profit growth in mobile telecom products
* Headcount up 36% to over 11,800 including the Admiral acquisition:
enhanced scale in UK, France and Belgium
* Operating margin* improvement, up from 12.5% to 14.7%
* Business focusing around front and back office integration and e &
mCommerce
On the outlook for the remainder of the year, CMG Chairman Cor
Stutterheim said:
"The improving business climate should feed through to enhanced turnover
growth for the second half for our ICT services operations and we will
have the benefit of the Admiral business for the full period. We also
expect strong top line growth in our telecom products business with very
healthy margins despite investing further in our existing and recently
acquired business to accelerate product development and the integration
of the respective product offerings. We look forward to a good set of
results for the full year."
For further information please contact:
Cor Stutterheim, Chairman, CMG plc
Tel: +31 (0)20 6720444
Clay Brendish, Deputy Chairman, CMG plc
Tel: +44 (0)1276 459302
David Robbie, Finance Director, CMG plc
Tel: +44 (0)20 7592 4442
Tony Richards, Group Communications (London)
Tel: +44 (0)20 7592 4442
Jan Massier, Group Communications (Amsterdam)
Tel: +31 (0)20 6720444
Toby Mountford, Citigate Dewe Rogerson
Tel: +44 (0)20 7638 9571
Chairman's Statement
Results
I am pleased to report good Group results for the first half of the year
in line with my previous statements. Turnover in the six months to 30
June 2000 increased by 20% to #349.4 million and operating profit* rose
41% to #51.5 million, an operating profit margin* of 14.7%, up from
12.5% in the same period last year. Profit before tax* increased by 38%
to #50.9 million. Profit after tax, goodwill amortisation, minority
interests and interest charges was #28.4 million, while diluted earnings
per share* were 6.4p compared to 4.8p (restated to reflect the share sub-
division and bonus issue) in the first half of 1999. The figures
include a one month contribution from Admiral plc which became part of
the Group with effect from the beginning of June, together with a number
of smaller acquisitions in the first half. Including acquisitions, our
employee numbers increased to over 11,800 by the end of June.
*before goodwill amortisation
Overview
An excellent performance in our telecom products business, which
achieved triple digit growth, more than offset a slow rebound in our
traditional business of Information & Communications Technology (ICT)
services following the millennium lock-down.
We had already indicated, along with external independent commentators,
that market growth rates for ICT services across Europe would slow
significantly in 2000 in comparison to the exceptional two years running
up to the century change. Some degree of millennium hangover was also
inevitable in the early part of the year, but it is fair to say that we,
like most IT services companies, initially underestimated how long it
would take for activity and utilisation levels to recover.
This has not been an issue of IT budgets which have been and remain in
place at levels similar to or above those of 1999 for most major
organisations. However, new projects relate increasingly to eBusiness
models rather than the automation of existing processes. It therefore
takes longer for the business analyses and detailed project definitions
to be completed before suppliers are selected and full-scale projects
commence. On the other hand, these projects bring with them significant
integration issues which require a broad mix of skills. That
requirement plays to CMG's strengths, particularly with the added
resources and expertise acquired with Admiral.
In this period we have begun to see the knock-on benefit in our ICT
services businesses of the very visible success of the early entry into
the WAP (Wireless Application Protocol) and mobile Internet arena by our
telecom products business. We are providing application development
services to organisations in a number of vertical sectors who are
seeking to add the mobile channel to their marketing mix. We are also
assisting operators in the definition, development and testing of new
services that will come on stream with the advent of third generation
mobile networks.
For some time now, we have been focusing our ICT business skills on
enterprise application integration - that is, providing an effective
infrastructure for more client-focused business models. This includes
e & mCommerce applications, the Customer Relationship Management and
logistical systems that underpin them, and other enabling techniques
such as knowledge management, data warehousing and business intelligence
systems. A growing number of our people are attending master classes
and gaining customer experience in these areas. We are also
concentrating our recruitment on attracting more people with these
skills, although competition for them is particularly strong and success
will require all of our customary creativity.
Admiral Integration on target and management team in place
The acquisition of Admiral was clearly the most significant corporate
event of the period. The opportunity to combine forces with a
substantial organisation of like-minded individuals with a long-standing
reputation for quality delivery and performance does not often present
itself. The need for greater presence in the UK market in particular
was clear to both managements, as well as employees throughout the two
organisations. That understanding provides us with a substantial fund
of goodwill internally as we proceed with the integration process,
taking the best elements from both operations.
Joining forces nearly doubles our size in the UK, France and Belgium and
brings to the Group ICT operations in Australia, Denmark, Ireland,
Malaysia and Singapore with a corresponding expansion of our
international customer base. Equally important, it broadens and deepens
our skills base in systems development and integration, including
established expertise in important emerging areas such as Internet
security and Public Key Infrastructures.
From a financial perspective, the rationale for joining forces was based
on the potential revenue synergies between the two organisations derived
from cross-selling skills and products to each other's customers, and
the ability to adopt proven management approaches to improve margins.
The increase in resources also brings projects within our scope for
which we could not have been considered previously.
While the performance of Admiral was disappointing in the early months
of the year due to the difficult market conditions, there was a marked
improvement in June and July and a better platform has been built for
the second half. One month's trading results of Admiral are included in
our Interim results: turnover of #14.8 million and an operating profit
of #2.4 million.
Operations
BeneluxGood profitability in a period of slower growth
In order to provide greater transparency, we have for the first time
separated out completely the results of our telecom products business
which were previously reported as part of The Benelux operation: they
are detailed below.
On this basis, our Benelux business delivered turnover growth of 9% and
operating profit growth of 5% in local currency. In Sterling reported
terms, turnover was flat at #163.5 million and the operating profit fell
by 4% to #29 million. The operating margin remained good at 17.7%
despite the significantly slower growth, indicating the strength of our
management disciplines. These figures exclude the one month
contribution from Admiral in Belgium.
While we added a net 463 people during the period through recruitment
and the acquisitions of Tell:IT in The Netherlands and Admiral in
Belgium, the very difficult recruitment environment is an additional
constraint on growth as demand comes back into the market. Our
performance relative to our peers is still good, nonetheless, and
explains why we were once again rated as the ICT company of choice for
new employees by the independent Blauw Report.
There are exciting opportunities to grow ahead of the market by placing
particular emphasis on web-enabled front office applications, including
e & mCommerce, and their integration with back office systems, both
legacy and ERP. In the banking sector, where we are already a leading
player, we will seek to exploit our pioneering work in wireless banking,
for instance. Managed services is another strong growth area with the
addition of application and web hosting alongside traditional strengths
such as payroll and applications management. Our development of an
Internet-based payroll hosting service will bear fruit in the second
half and enable us to address a wider market of small-to-medium size
enterprises (SMEs). We have also seen good results from cross-selling
of skills in both directions following the acquisition of Thijssen last
October.
We have secured important projects during the period from, amongst
others, ABN-AMRO Bank, ING Bank, Philips, The Ministry of VROM and Kappa
Packaging.
UK Tough market conditions - new management and disciplines now in
place
Turnover in the UK business rose by just 4% to #65.5 million, excluding
the one month contribution from Admiral. The operating profit declined
by #1.9 million to #2.7 million as a result of poor utilisation rates.
These were partly the result of the difficult market conditions but were
also compounded by the need to allocate more resources than originally
planned to a number of development projects. The climate is now
improving with a strengthened management team which lays the foundation
for a marked improvement in the second half.
It was a specific objective of the merger with Admiral to strengthen our
management control, project disciplines and processes in the CMG UK
business. As a result, Geoff Neville, previously a director of Admiral
plc, was appointed to head up the newly combined operations effective
from the completion date. He has put together a senior management team
which draws on the skills of both companies and is focused on maximising
the opportunities created by the combination of resources. The
development of a new business model and organisation - with a strong
basis in Admiral's style of management combined with the proven CMG
approach to people management, involvement and care - is well underway
and will be fully implemented by January 2001.
There is no doubt that the UK was more affected by the millennium lock-
down than other countries which impacted both Admiral's and CMG's short
term results. The public sector was notably slow to rebound in terms of
new projects although performance of our long term outsourcing remained
solid. The finance sector had a poor first quarter. In the second
quarter, strong demand began to return for both new and more traditional
applications and that is also reflected in the better Admiral
performance for June and July.
There are now joint project teams working for customers in every sector:
early successes include projects for NatWest, BUPA and Shell. Of
particular note is the significant increase in the number of large,
often public sector, opportunities for long term managed service
contracts now emerging from our combined existing customer base. A
major recruitment campaign was launched in July to attract further
skills that are required to meet current and future demand.
GermanyBuilding on established strengths to address new sectors and
applications
CMG Germany was affected both by the millennium hangover and short-term
disruption to revenue streams resulting from consolidation moves amongst
a number of our major finance sector customers. We have also been
managing a reduction in demand for ERP work, particularly related to
Baan. Nevertheless, our German operations generated reasonable top line
growth with some assistance from acquisitions: turnover was up 15% in
local currency. In reported Sterling terms, turnover grew 4% to #29.7
million, but operating profit declined #0.3 million to #1.3 million.
The acquisition of SDC Software Development & Consulting in May
strengthened our presence in Berlin which is additionally important now
that we are seeing good early results from our move into the Government
sector.
In common with our other operations, we have been gradually re-aligning
our German business to focus more overtly on new application areas,
reducing our exposure to traditional ERP business and concentrating more
effort on e and mCommerce, Customer Relationship Management and Supply
Chain Management. An example is our work with update.com's CRM product
where we have not only implemented systems for customers, but are also
targeting to work with the software vendor to add our mobile commerce
channel expertise and to establish a pilot application hosting (ASP)
facility for smaller users.
During the period, we secured seven new customers for our regulatory
reporting product, SAMBA, including one in New York.
France Good demand in the market but 35 hour week delays profitability
until second half
The French economy has entered a period of sustained investment which
has helped demand levels to recover quickly after the millennium. At
the same time, however, the impact on operating margins of employee
legislation has been felt. In local currency, turnover increased by
47%. In reported Sterling terms, turnover increased 34% to #15.8
million, but we did not achieve our goal of profitability in the first
half, posting a small operating loss of #0.4 million. These figures
exclude the one month contribution from Admiral. We are now leveraging
our increasing reputation and scale to raise utilisation rates and
counteract the impact of the 35 hour week.
During the period, we won a number of major contracts, particularly in
the SAP/Oracle ERP arena with Cofiroute (part of the Vivendi Group);
with the French Atomic Authority IPSN; with Scarm, a large agricultural
co-operative; and with the insurance company Eurovia. We also extended
our consultancy relationships with Societe Generale, Banque de France,
Credit Agricole, Caisse d'Epargne, KBC, Cegetel and Bouygues Telecom.
Coming together with Admiral in France is a significant opportunity
because it takes us to over 1,000 people, broadens our expertise in the
networking, systems management and embedded software arenas and brings
access to a different set of customers. The combined entity will be
profitable in the second half and will allow us to improve margins more
rapidly going forward.
CMG Telecommunications Outstanding growth driven by demand for text
messaging
Our global telecom products business, headquartered in Utrecht, once
again had an excellent first half, achieving growth of 166% on turnover
that reached #60.1 million, and operating profit growth of 786% to #18.6
million in Sterling reported terms. In local currency, turnover grew
193% and operating profit was up 875%. Despite increased investment in
R&D, this performance took margins significantly above those in the rest
of our Benelux business for the first time. Today, CMG
Telecommunications has over 600 people based in The Netherlands,
Ireland, USA, Singapore, Brazil and China and the lowest attrition rate
in the Group (5%). The subsequent acquisition of Computer Answers
International in July added a further 230 people in the UK and South
Africa, and this business will be grown significantly by the year-end.
The powerhouse of the figures remains demand for SMS (Short Messaging
Service) where volumes are currently doubling every six months. This
phenomenon plays very much to CMG's strength since we have the fastest,
highest capacity, and most resilient SMS systems on the market anywhere
in the world. We are securing upgrade business as traffic volumes rise
and we are replacing other suppliers' systems. A notable success in the
first half was the securing of six South American SMSC customers, as
well as WAP Service Broker and Mobile e-mail trials, all of which are
now supported from our recently opened Sao Paulo office in Brazil.
We have also continued to build profile and a global customer base of
early adopters in the emerging WAP (Wireless Access Protocol)
marketplace with our WAP Service Broker product. In this, we were
helped significantly by the visibility generated by our contract to
supply Vodafone in the UK and follow-on orders from other Vodafone
affiliates around the world. During the period, we announced a
strategic alliance with Mirapoint Inc. to strengthen our positioning in
mobile e-mail and future multimedia messaging. Successful trials were
carried out with France Telecom in relation to GPRS (General Packet
Radio Services) and we are now testing our GPRS and UMTS (Universal
Mobile Telecommunications System) interfaces at Mannesmann. We are well
positioned for the arrival of networks and services based on these
protocols.
In July, we acquired Computer Answers International, a successful
developer and supplier of Customer Care and Billing (CC&B) solutions for
the telecommunications sector based in the UK with additional staff in
South Africa. This is an important strategic move because telecom
operators and Internet Service Providers require new real-time billing
systems to cope with the data and content-based charging tariffs which
will increasingly predominate in future wireless networks. In that
environment, there will also be a close relationship between CC&B
systems and the messaging and gateway products that have been CMG
Telecommunication's traditional focus.
Exchange rate impact
In this half year, CMG's Sterling reported figures have been materially
impacted by the strengthening of the Pound against the Euro, given that
the majority of our earnings come from continental Europe. We believe
that the figures at constant exchange rates give a more accurate picture
of the growth rates achieved in our operations. At constant exchange
rates, the Group's turnover grew by 30% and operating profit before
goodwill amortisation by 54%.
Share sub-division and bonus issue
Following approval at the Annual General Meeting, the proposed share sub-
division and bonus issue took effect in May. Each old share of 5 pence
was replaced by four new shares of 2.5 pence and the prices on the
exchanges were adjusted accordingly.
Financing
In order to finance the cash element of the offer for Admiral plc and
further expansion through acquisition, we put in place a syndicated bank
facility of #300 million during the period, which was #170 million drawn
at 30 June 2000. Net debt at 30 June 2000 was #148 million,
representing gearing of 14%.
Cash
The Group cash performance is seasonally weaker in the first half, and
has been somewhat impacted by longer payment terms inherent in the
telecoms market. We expect that operating cash flow will improve in the
second half.
Dividend
The Board has declared an interim dividend of 1.0p net per share. This
represents an increase of 38% over the 1999 interim dividend. The
dividend will be paid on 17 November 2000 to shareholders on the
register on 20 October 2000.
Outlook
Market conditions continue to improve as the competitive pressures on
organisations dictate that they respond to the challenges and
opportunities of the networked economy. The biggest challenge our
business faces is attracting and retaining sufficient people with the
skills to meet these demands from our customers. We have a good track-
record on this front and a working culture that is dynamic and
attractive to talented and ambitious individuals: this issue receives
the highest priority of our management alongside customer relations, as
always.
We will continue at the same time to look for opportunities to acquire
businesses that provide additional skills, products, customers or
geographic coverage. CMG has a tremendous opportunity to build a
leadership position in mobile commerce applications, based on the
success of our telecom products business combined with our vertical
sector expertise in areas such as banking. This in turn will enhance
our growing focus on the wider eCommerce arena. We are investing to
achieve this goal through organisational initiatives, marketing,
recruitment, training and alliances with relevant partners.
The improving business climate should feed through to enhanced turnover
growth for the second half for our ICT services operations and we will
have the benefit of the Admiral business for the full period. We also
expect strong top line growth in our telecom products business with very
healthy margins despite investing further in our existing and recently
acquired business to accelerate product development and the integration
of the respective product offerings. We look forward therefore to a good
set of results for the full year.
Cor Stutterheim
Chairman
Exchange Rates
CMG's reported results can be significantly influenced by movements in
exchange rates, which can hinder understanding of the underlying
financial performance. To provide a more meaningful basis of
comparison, the table below provides key financial information expressed
both at 2000 exchange rates ("constant exchange rates") and at the
exchange rates used for 1999 ("actual exchange rates").
Six months to 30 June 2000 1999 1999 % growth % growth
at constant at actual at constant at actual
exchange exchange exchange exchange
rates rates rates rates
#'m #'m #'m
Turnover
- Benelux
- ICT Services 164.5 149.6 164.6
- Telecom Products 60.1 20.5 22.6
- United Kingdom 76.6 63.0 63.0
- Germany 29.7 26.0 28.5
- France 17.5 10.7 11.8
- Rest of World 1.0 - -
-------------------------------
349.4 269.8 290.5 30% 20%
-------------------------------
EBITDA 54.9 36.2 39.4 52% 39%
Operating profit *
- Benelux
- ICT Services 29.2 27.6 30.3
- Telecom Products 18.6 1.9 2.1
- United Kingdom 4.9 4.6 4.6
- Germany 1.3 1.4 1.6
- France (0.4) (0.4) (0.4)
- Rest of World - - -
-------------------------------
53.6 35.1 38.2
Common costs (2.1) (1.7) (1.8)
-------------------------------
51.5 33.4 36.4 54% 41%
-------------------------------
Profit before tax * 50.9 33.8 36.8 51% 38%
Profit after tax 28.5 21.9 23.9 30% 19%
Earnings per share
(basic)
- before goodwill
amortisation 6.8p 4.7p 5.1p 45% 33%
- after goodwill
amortisation 5.6p 4.5p 4.9p 24% 14%
*before goodwill amortisation
Note: The 1999 earnings per share comparatives have been restated to
reflect the bonus issue and share split which took place in May 2000.
Key exchange rates used above: #1 =
Netherlands Guilder 3.61 3.61 3.28
Deutsche Mark 3.20 3.20 2.91
French Franc 10.74 10.74 9.76
Consolidated Profit & Loss Account
Unaudited Unaudited Unaudited Unaudited Audited
Acquisitions Continuing Total
Operations
6 months 6 months 6 months 6 months Year
ended ended ended ended ended
30 June 30 June 30 June 30 June31 December
2000 2000 2000 1999 2000
Notes #'m #'m #'m #'m #'m
Turnover 3 22.6 326.8 349.4 290.5 608.6
Net operating
costs (18.9) (284.8) (303.7) (255.1) (525.5)
---------------------------------------------------
Operating Profit
Before -------------------------------------------------
goodwill amortisation 3.7 47.8 51.5 36.4 85.3
Goodwill amortisation - (5.8) (5.8) (1.0) (2.2)
---------------------------------------------------
3.7 42.0 45.7 35.4 83.1
----------------------
Net interest
(payable)/receivable (0.6) 0.4 0.5
--------------------------
Profit on ordinary
activities before tax 45.1 35.8 83.6
Tax on profit
on ordinary
activities 5 (16.6) (11.9) (27.6)
---------------------------
Profit on ordinary
activities after tax 28.5 23.9 56.0
Minority interests
(equity) (0.1) - (0.3)
---------------------------
Profit for the period 28.4 23.9 55.7
Dividends
- ordinary
shares 6 (5.8) (3.6) (10.7)
------------------------------------------------------------------------
Retained profit for the period 22.6 20.34 5.0
========================================================================
Earnings per
share 7
- headline and basic
- before goodwill
amortisation 6.8p 5.1p 11.8p
- after goodwill
amortisation 5.6p 4.9p 11.4p
- diluted
- before goodwill
amortisation 6.4p 4.8p 11.1p
- after goodwill
amortisation 5.3p 4.6p 10.7p
========================================================================
The 1999 earnings per share comparatives have been restated to reflect
the bonus issue and share split which took place in May 2000.
Consolidated Statement of Total Recognised Gains and Losses
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June31 December
2000 1999 1999
#'m #'m #'m
Profit for the period 28.4 23.9 55.7
Currency translation differences on
foreign currency net investments 3.6 (3.8) (7.9)
------------------------------------------------------------------------
Total recognised gains 32.0 20.1 47.8
========================================================================
Consolidated Balance Sheet
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
30 June 30 June 31 December
2000 1999 1999
Notes
#'m #'m #'m
Fixed assets
Goodwill 1,070.4 44.8 45.6
Tangible assets 27.3 17.9 16.9
Investments
- own shares 2.8 2.8 2.8
---------------------------------------------
1,100.5 65.5 65.3
---------------------------------------------
Current assets
Debtors 240.1 155.4 146.1
Cash at bank
and in hand 9 31.4 26.2 31.2
---------------------------------------------
271.5 181.6 177.3
Creditors - amounts falling due within one year
Overdrafts 9 (5.9) - -
Other creditors (193.6) (141.4) (116.3)
---------------------------------------------
(199.5) (141.4) (116.3)
Net current assets 72.0 40.2 61.0
--------------------------------------------
Total assets
less current liabilities 1,172.5 105.7 126.3
Creditors
- amounts falling
due after more
than one year 9 (172.4) - -
Provisions for
liabilities and charges (3.5) (4.7) (4.7)
------------------------------------------------------------------------
Net assets 996.6 101.0 121.6
========================================================================
Capital and reserves
Called up equity
share capital 10 15.0 6.4 6.4
Share premium
account 10 3.7 10.5 10.5
Shares to be
issued 10 40.8 - -
Reserves of
Employee Trust 10 2.8 2.3 2.6
Profit and loss
account 10 128.1 81.8 102.1
Merger reserve 10 806.2 - -
------------------------------------------------------------------------
========================================================================
Equity shareholders' funds 996.6 101.0 121.6
========================================================================
Consolidated Cash Flow Statement
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
Notes 2000 1999 1999
#'m #'m #'m
Net cash inflow
from operating 8
activities 20.9 26.0 70.9
Returns on
investments and
servicing of finance
Dividends paid to
minority
interests (0.2) - -
Interest received 0.7 1.0 1.9
Interest paid (1.3) (0.2) (1.3)
------------------------------------------
Net cash (outflow)/inflow
from returns on
investments and
servicing of finance (0.8) 0.8 0.6
Taxation (13.5) (8.3) (35.7)
Capital expenditure (4.2) (3.3) (6.5)
Acquisitions
- Acquisitions
of subsidiaries (201.6) (27.7) (32.5)
- Net cash acquired
with subsidiaries 31.2 4.9 5.0
---------------------------------------------
(170.4) (22.8) (27.5)
Equity dividends paid (7.1) (4.9) (8.5)
--------------------------------------------
Net cash outflow
before
use of liquid
resources
and financing 9 (175.1) (12.5) (6.7)
Management of liquid
resources 5.0 (0.2) (0.2)
Financing activities
Proceeds from exercise
of share options 0.1 0.1 0.1
New loans 170.0 - -
Capital element of
finance lease
rental payments (0.1) - -
------------------------------------------------------------------------
Decrease in cash (0.1) (12.6) (6.8)
========================================================================
Notes to the interim report
1. Basis of preparation
The unaudited results have been prepared in accordance with the
accounting policies set out in the Annual Report for the year ended
31 December 1999.
The financial information in this interim report does not constitute
statutory accounts within the meaning of section 240 of the Companies
Act 1985. Statutory accounts for the year ended 31 December 1999
upon which the auditors gave an unqualified opinion, have been
delivered to the Registrar of Companies.
2. Exchange rates
The most important exchange rates for the Group were:
30 June 2000 30 June 1999 31 December 1999
Period end Average Period end Average Year end Average
Netherlands
Guilder 3.48 3.61 3.37 3.28 3.54 3.35
Deutsche Mark 3.09 3.20 2.99 2.91 3.14 2.97
French Franc 10.36 10.74 10.03 9.76 10.55 9.97
Euro 1.60 1.64 1.53 1.49 1.61 1.52
The primary reporting currency of the Group is UK Pounds Sterling.
3. Segmental information
Analyses of turnover and profit before tax by country of origin and
geographic area are given below :
Turnover Profit before tax
30 June 30 June 31 December 30 June 30 June31 December
2000 1999 1999 2000 1999 1999
#'m #'m #'m #'m #'m #'m
Benelux
- ICT
Services 164.5 164.6 325.4 29.2 30.3 63.0
- Telecom
Products 60.1 22.6 73.2 18.6 2.1 11.6
United Kingdom 76.6 63.0 125.9 4.9 4.6 10.3
Germany 29.7 28.5 59.8 1.3 1.6 4.0
France 17.5 11.8 24.3 (0.4) (0.4) (0.1)
Rest of world 1.0 - - - - -
------------------------------------------------------------------------
349.4 290.5 608.6 53.6 38.2 88.8
Common costs - - (2.1) (1.8) (3.5)
Goodwill
amortisation - - (5.8) (1.0) (2.2)
Net interest
(payable)/
receivable - - (0.6) 0.4 0.5
------------------------------------------------------------------------
349.4 290.5 608.6 45.1 35.8 83.6
========================================================================
#4.7 million of the goodwill amortisation is attributable to the UK
(1999: #0.4 million); #0.4 million is attributable to Germany (1999:
#0.2 million); #0.4 million is attributable to Benelux (1999: #0.2
million) and the remaining #0.3 million to France (1999: #0.2 million).
Turnover analysed by country of destination shows #169.8 million arising
in the Benelux (#165.5 million for the half year 1999; #330.8 million
for the full year 1999) and #41.0 million in the Rest of the World
(#18.3 million for the half year 1999; #49.3 million for the full year
1999). In the other geographic areas, turnover by destination is not
materially different from turnover by country of origin.
4. Employees 30 June 30 June 31 December
2000 1999 1999
The average number of employees during
the period was:
Benelux 5,899 5,016 5,237
United Kingdom 1,962 1,576 1,645
Germany 821 655 705
France 625 404 436
Rest of World 152 23 40
--------------------------------------------------------------------
9,459 7,674 8,063
========================================================================
Average employee numbers include employees in subsidiaries acquired
for the period during which they are members of the Group.
30 June 30 June 31 December
2000 1999 1999
The number of employees at the
end of the period was:
Benelux 6,205 5,204 5,607
United Kingdom 3,247 1,632 1,713
Germany 876 721 776
France 1,021 421 501
Rest of World 465 26 59
--------------------------------------------------------------------
11,814 8,004 8,656
========================================================================
5. Taxation
The tax charge for the half year is based on the estimated effective
tax rate for the full year of 32.6% before goodwill amortisation.
The charge includes overseas tax of #15.6 million (1999 #10.0
million).
6. Dividends on ordinary shares
An interim dividend of 1.0 pence (1999: 0.725 pence) will be paid on
17 November 2000 to shareholders on the register on 20 October 2000.
7. Earnings per share
30 June 30 June 31 December
2000 1999 1999
Earnings (#'m)
- standard basis 28.4 23.9 55.7
- add back goodwill
amortisation 5.8 1.0 2.2
- before goodwill --------------------------------------
amortisation 34.2 24.9 57.9
--------------------------------------------------------------------
Number of shares (million)
- weighted average
number of shares in issue527.9 512.7 512.8
- shares held by the
Employee Trust (22.2) (22.4) (22.4)
--------------------------------------------------------------------
Shares used to calculate
earnings per share 505.7 490.3 490.4
---------------------------------------------------------------------
Effect of dilutive potential ordinary
- share options 31.6 26.1 29.6
---------------------------------------------------------------------
Shares used to calculate
diluted earnings per
share 537.3 516.4 520.0
------------------------------------------------------------------
8. Reconciliation of operating profit to net cash inflow from operating
activities
30 June 30 June 31 December
2000 1999 1999
#'m #'m #'m
Operating profit 45.7 35.4 83.1
Goodwill amortisation 5.8 1.0 2.2
Depreciation of
tangible fixed assets 3.4 3.0 6.5
Increase in debtors (44.3) (38.7) (32.5)
Increase in creditors
and provisions 10.3 25.3 11.6
-------------------------------------
Net cash inflow from
operating activities 20.9 26.0 70.9
=======================================
9. Reconciliation of cash flow to change in net debt
30 June 30 June 31 December
2000 1999 1999
#'m #'m #'m
Net funds as at 1 January
Cash 26.2 34.7 34.7
Liquid resources 5.0 4.8 4.8
-------------------------------------
31.2 39.5 39.5
Net cash outflow before
use of liquid resources
and financing (175.1) (12.5) (6.7)
Net cash flow from
other financing activities - 0.1 0.1
Debt and financing acquired
with subsidiary (3.8) - -
Other movements 0.4 - -
Exchange differences (0.6) (0.9) (1.7)
-------------------------------------
(179.1) (13.3) (8.3)
Net debt/funds as at period end
Cash 31.4 21.2 26.2
Liquid resources - 5.0 5.0
Overdrafts (5.9) - -
Current finance lease obligations (1.0) - -
Loans and borrowings due
after more than one year (172.4) - -
-------------------------------------
(147.9) 26.2 31.2
======================================
10. Reconciliation of group reserves
Share Share Shares toReserves of Profit and MergerTotal
capital premium be issued Employeesloss accountReserve
#'m #'m #'m #'m #'m #'m #'m
Balance at 1
January
2000 6.4 10.5 - 2.6 102.1 - 121.6
Change in
value due to
currency
fluctuations - - - - 3.6 - 3.6
Bonus issue 6.4 (6.4) - - - - -
Retained profit
for the period - - - - 22.6 - 22.6
Transfer in
respect of
Employee Trust - - - 0.2 (0.2) - -
Shares issued
during the
period
and to be
issued 2.2 - 40.8 - - 806.2 849.2
Share issue
expenses - (0.4) - - - - (0.4)
---------------------------------------------------------
Balance at
30 June
2000 15.0 3.7 40.8 2.8 128.1 806.2 996.6
====================================================================
11. Acquisitions
The group completed seven acquisitions during the period:
adit GmbH and banksys Software GmbH, two companies incorporated in
Germany, were acquired on 1 January 2000 for cash consideration of DM
13.0 million (#4.3 million) and DM 5.5 million (#1.8 million)
respectively.
Tell.IT International BV, a company incorporated in The Netherlands was
acquired on 8 February 2000 for cash consideration of NLG 25.2 million
(#7.0 million).
EPL Group, a company incorporated in France, was acquired on 1 March
2000 for cash consideration of FFr 53.0 million (#4.9 million).
Software Resource Ltd, a company incorporated in the UK, was acquired on
21 March 2000 for cash consideration of #7.0 million.
Software Development & Consulting GmbH, a company incorporated in
Germany, was acquired on 23 May 2000 for a cash consideration of DM 30.3
million (#9.5 million). DM 30 million of this is deferred.
Admiral plc, a UK listed company, was acquired on 31 May 2000 for a
consideration expected to be #191.2 million cash; #849.2 million new
equity issued and #1.2 million loan notes. At 30 June 2000, not all of
the consideration was paid.
12.Post balance sheet event
On 20 July 2000, the Group acquired Computer Answers Group Ltd., a
company incorporated in the UK, for cash consideration of #60 million.
13. Interim report
This Interim Report was approved by the Board of Directors on 29 August
2000 and copies are available from CMG plc, Parnell House, 25 Wilton
Road, London SW1V 1LW and CMG BV, Antareslaan 11, 2132 JE Hoofddorp, The
Netherlands.
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