CMG Croma Grp

RNS Number:7830L
CMG PLC
18 October 2001


18 October 2001


                     CMG plc: Statement of Current Trading


Having considered the September results together with the order and prospect
situation for the final quarter of 2001, the Board of CMG today issued the
following statement:

In our Interim results announcement in August, we confirmed our target to
achieve organic turnover growth in excess of 10% in our key ICT services
territories, Benelux and the UK. Whilst this expectation remains for the
Benelux, trading conditions in the UK have worsened markedly since late
September.

The full effects of the tragic events on September 11th are as yet unclear, but
a number of our customers in key markets have been severely affected. Over
recent weeks, we have seen a significant downturn in our business derived from
the insurance, financial services and transport sectors, together with a
further softening in telecom consultancy and some evidence of deferrals from Q4
2001 into next year. We are in consequence actively addressing our cost base.

Our UK business has been particularly impacted by the rapid deterioration in
the insurance, personal finance, transport and logistics sectors where some
projects have been cancelled and others deferred. We continue to see strong
performance elsewhere; notably in retail banking, government, managed services
and payroll. Nevertheless, CMG now expects that total UK ICT services revenues
in the second half of 2001 will be lower than the same period last year (2000:
#129.5 million). The worsening trading environment has led to a reduction in
utilisation rates and expected insurance product licence revenues such that the
UK is expected to trade close to break-even in the second half (before the
reorganisation and redundancy costs referred to below). As a result of the
foregoing, the Board is taking prompt action to reduce our ICT services staff
numbers in the UK and Ireland by some 350 people.

Our mobile telecom products business, CMG Wireless Data Solutions, has
continued to trade profitably through the third quarter with prospects for the
fourth quarter consistent with our previously stated expectations, although the
full year performance remains heavily dependent on software upgrades late in
the year. Our investments in next generation products are now showing signs of
success as acceptance trials and current tender opportunities are progressing
well. In our Interim statement, we committed to balancing the ongoing research
and development costs necessary to fuel long-term growth with the need to
deliver short and medium term profitability. The Board has therefore decided to
reduce the number of people working in our UK and Ireland based research and
development centres by 120, predominantly involved with our Customer Care and
Billing activities.

The cost of these total 470 redundancies and associated reorganisations will be
some #6.5 million and they will have taken effect by the year end. Annualised
savings in 2002 will be in the order of #20 million, principally benefiting the
UK services business.

Our Benelux business is holding up well and the impact of worsening market
conditions continues to be largely mitigated by the strength of our customer
relationships and further market share improvements. Managed services,
government and ERP applications remain strong business areas. Revenue growth is
expected to meet our double digit expectations, although growth for the full
year will be lower than the 14% organic growth delivered in the first half. In
addition, Benelux operating margins for the full year will now be at the bottom
end of our 16-18% target range.

Trading in our Germany and France operations is not immune to the general
slowdown, but currently continues broadly in line with the expectations
outlined at our Interim results announcement. In all countries, recruitment has
been reduced significantly to specific skills only.

Commenting on the action, CMG Chairman Cor Stutterheim said:

"Our sector focus and customer relationships have enabled us to minimise the
impact on CMG of the current economic uncertainty. There remain strong drivers
for IT investment and a large number of opportunities in the market, despite
lengthening decision-making processes. However, we are not immune to market
forces and expect this challenging environment to persist through the first
half of next year. While at the personal level we greatly regret having to make
redundancies in the UK and Ireland, we recognise that these relatively small
adjustments to our staffing are necessary to ensure that the cost base matches
projected customer demand. This decision has been balanced by our equally
critical determination to maintain the quality and flexibility of the service
that we provide to our customers. This restructuring of our ICT services
operations will enable us to take full advantage of our strong position in our
key markets as soon as the trading environment improves."


Conference call for buy and sell-side analysts
There will be a teleconference, this morning at 10.00am (UK Time), 11.00am
(CET) and 5.00am (EST), followed by a question and answer session.

The teleconference will be hosted by Cor Stutterheim, Executive Chairman of
CMG.

To participate in the teleconference, please dial the following number:

Tel: +44 (0)20 8240 8242 or +44 (0)20 8240 8240

for UK/Continental European participants

Tel: +1 800 491 3127 for US participants

If you are unable to participate, a taped recording of the conference will be
available approximately one hour after the call ends until close of business on
Thursday, 8th November 2001. Please note that you will also be able to access
the replay via the following web address: http://investor.cmg.com/Ir as from
Friday, 19th October 2001.

Replay

To access the replay, please dial the following number:

Tel: +44 (0)20 8288 4459 for UK/Continental Europe

The Access Code is: 630 132

Tel: +1 800 625 5288 for US

The Access Code is: 127 9578


For further information please contact:

CMG plc Tel: +44 (0) 20 7592 4442
Cor Stutterheim, Chairman
David Robbie, Finance Director
Tony Richards, Investor Relations

Citigate Dewe Rogerson Tel: +44 (0) 20 7638 9571
Toby Mountford
Seb Hoyle

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