RNS Number:0802S
CMG PLC
27 February 2002
27 February 2002
CMG plc: Audited results for the year to 31 December 2001
Summary
2001 2001 2000
Turnover €1,481.8m £920.4m £810.4m
Operating profit* €88.6m £55.0m £125.5m
Profit before tax* €65.0m £40.4m £117.0m
(Loss)/profit after tax and minority interests (€959.7)m (£596.1)m £45.0m
Basic earnings per share* €0.072 4.5p 14.5p
Full year dividend €0.048 3.0p 2.8p
Final dividend €0.031 1.9p 1.8p
(Payable on 17 May 2002 to all shareholders on the register on
12 April 2002. Ex-dividend date is 10 April 2002, on which
date the Euro dividend conversion rate will be set.)
* before goodwill amortisation of £56.3m (2000: £33.9m); exceptional restructuring charges of £8.9m (2000:£nil) and
exceptional goodwill impairment provisions of £564.0m. (2000: £nil)
The effect of exchange rates on CMG's reported results is shown on page 12
Key points of 2001
• Creditable performance in a very challenging market for both ICT services and Telecom products.
• 14% growth in Group turnover (12% growth at constant exchange rates) including the effect of acquisitions.
• 7% organic growth in ICT services turnover (at constant exchange rates) especially strong in Benelux at 11%.
• WDS profitable in second half of 2001: R&D investment maintained for future positioning.
• £40m annualised savings achieved in H2 2001 through reorganisations and overhead cost reductions.
• Significant improvement in operating cash flow conversion.
• Exceptional £564.0 million FRS11 write-off of goodwill acquired principally with Admiral and Computer Answers.
• Security and quality of earnings underpinned by Outsourcing/Managed Services (which grew organically by 31%),
Government business (which grew by some 19%) and focused customer relationships.
Commenting on the 2001 results, CMG Chairman Cor Stutterheim said:
"2001 was a tough year for the ICT services industry, but we have delivered strong revenue growth and taken market
share. Our profitability levels have come under pressure due to lower utilisation rates, but we are well placed to take
advantage of an upturn in the marketplace when it comes."
On the outlook for 2002, he commented:
"CMG has an experienced management team, supported by strong underlying disciplines that ensure tight control of costs
and cash flow. Over the last year, we have brought additional focus to our sales, business development and account
management functions, recognising that our industry was moving into a phase where demand no longer always outstrips
supply. In countries and market niches where we have both scale and track record, we are taking a larger share of the
available business as customers rationalise the number of suppliers they use and recognise CMG's status as a trusted
partner. However, we are not immune to economic cycles and performance in 2002 will be determined to a considerable
extent by the arrival of an economic upturn.
"For the first half of 2002 in ICT Services, we currently do not see scope for revenue growth over the second half of
2001, which had revenues of £383 million. In the early part of 2002, there has been a rise in the number of customer
proposals being worked on, but competition for these opportunities is inevitably fiercer than in more demand-driven
market conditions. In the UK, the actions already taken will allow us to return to higher profitability than the second
half of 2001 in the first half of 2002, although not at the level of the corresponding period last year. Our position in
the Benelux gives us confidence that we can contain reduced utilisation levels and pricing pressure, although the margin
in the first half of 2002 will be well below the full year margin in 2001 (which was 16.3%). Germany is likely to remain
under pressure in the first half given the current economic environment, but we expect some progress in France. Revenue
and profit growth in ICT services for the full year will require the upward trend in customer activity and conversion to
sales to continue along with an upturn in the European economies.
"In Wireless Data Solutions (WDS), we expect to grow overall revenues significantly in 2002 by continuing to build
market share in developing geographies and by securing further customers for our new products. There remains
considerable scope for developing SMS applications in both the entertainment and commercial arenas; but the European
operator market for SMS capacity upgrades will continue to slow as the interpersonal messaging market matures and, in
the years ahead, migrates to multimedia. The contract from Hutchison 3G announced after the year end is a clear
endorsement of our WDS product strategy and the investment we have made and continue to make in it. We have demonstrated
that we are a leader in new mobile data technologies and, because of this and other successes, we expect significant
revenues in 2002 to be derived from new 2.5/3G related products. We also expect that research & development investment
will remain at around £55 million for 2002, including the accelerated investment needed to support our Hutchison 3G
contract. However, we recognise the necessity to balance R&D investment with the need to deliver a profit for the full
year 2002.
"In the challenging year ahead, CMG people will employ all their skill and commitment to deliver solid results from
tightly managed operations, while strengthening our platform for future growth."
A copy of the full Chairman's Statement and key financial data is included below.
- ENDS -
For further information, contact:
Cor Stutterheim, Chairman, CMG plc Tel: +31 (0) 20 67 20 444
David Robbie, Finance Director, CMG plc Tel: +44 (020) 7592 4646
Tony Richards, Head of Investor Relations, CMG plc Tel: +44 (020) 7592 4442
Toby Mountford, Citigate Dewe Rogerson Tel: +44 (020) 7638 9571
Chairman's Statement
Results
2001 was a tough year for the ICT services industry, but we have delivered strong revenue growth and taken market share.
Our profitability levels have come under pressure due to lower utilisation rates, but we are well placed to take
advantage of an upturn in the marketplace when it comes.
Turnover for the full year increased by 13.6% to £920.4 million; but operating profits* fell to £55.0 million with a
consequent drop in operating profit margin* from 15.5% to 6.0%. Profit before tax* decreased to £40.4 million. After tax
and minority interests, a loss of £596.1 million was posted (after a £564.0 million write down of goodwill and £8.9
million of exceptional restructuring costs). Earnings per share* decreased to 4.5p. The Board has recommended a final
net dividend of 1.9p (2000: 1.8p), making a total of 3.0p for the year (2000: 2.8p) to be paid to shareholders on the
register on 12 April 2002 - a total increase of 7%.
2001 2000 Reported Organic**
£m £m Change Change
Turnover:
ICT Services 781.9 655.1 19% 7%
WDS 138.5 155.3 (11)% (17)%
920.4 810.4 14% 2%
Operating profit/(loss)*:
ICT Services 77.7 86.5 (10)% (12)%
WDS (19.7) 42.3 (147)% (146)%
Common costs/other (3.0) (3.3)
55.0 125.5 (56)% (57)%
*Before goodwill amortisation and exceptional items.
**Organic change stated at constant currency exchange rates.
Overview
In 2001, 85% of our business was derived from the provision of Information and Communications Technology (ICT) services
where, primarily as a result of a strong first half, we achieved organic revenue growth of 7%**. Benelux remained our
largest territory, contributing 42% of Group revenues - an organic growth of 11%** for the year. Margins there declined
in the second half due to lower utilisation resulting in a full year margin of 16.3%, still a very good performance. UK
revenues grew organically in the first half at 11%**, but the flat performance in the second half led to full year
organic growth of 5%**. The first half margin of 10% was followed by break even trading in the second half (before
exceptional restructuring costs), giving a full year margin of 5.3%. France continued its progress in the second half,
achieving a full year margin of 3.5% on revenue which grew organically by 5%**. Revenues at our German operations
remained flat throughout the year, trading close to break even prior to the cost of the restructuring programme carried
out in the second half. The territories grouped under Rest of World, primarily in Asia Pacific, contributed a small loss
for the year on revenues of £15.2 million.
CMG Wireless Data Solutions, which represented 15% of Group revenues in 2001, reported a full year loss of £19.7
million. We maintained our Research & Development investment at £55 million and, following the actions taken to reduce
costs and refocus sales, WDS returned to profitable trading for the second half.
Tightening services market as economies slow down
As reported at the Interim stage, our ICT services business entered the year strengthened by the integration of the
former Admiral business. This, coupled with continued strong account management, enabled us to make good progress in our
key operations until the autumn. The deteriorating economic environment was reflected through the summer by a
progressive slowing down of decision-making on new projects in many of our markets. We were able to compensate for this
by progressively tightening our control of discretionary expenditure to take some £20 million of annualised cost out of
the business, through overhead savings and Group purchasing initiatives. In addition, we leveraged our increased scale
in the UK and the strength of our customer relationships in the Benelux. As a result, we were able to report a strong
performance at the half year. It is notable for instance that our UK company secured its largest ever contract during
the first half of 2001, while our top ten customers in Benelux spent 15% more with us in 2001 than they did in 2000.
However, since late September we have experienced a series of customer decisions to defer or cancel projects before we
entered contract discussions, resulting in a marked decline in utilisation levels. The impact was most severe in the UK
market, notably in sectors such as personal finance, insurance and transport. As a result, we took action to reduce our
UK staffing by around 10% to ensure that we entered 2002 with an appropriate level of resource for the expected business
opportunities. As part of this action, we have streamlined the UK management structure, bringing greater clarity and
focus to our activities. This reorganisation, together with redundancies in WDS in the UK will deliver annualised
savings of some £20 million.
In the key Benelux market, we achieved excellent results in a challenging market: organic growth of 11% at a profit
margin of 16.3% is outstanding. Nonetheless, the slowing in demand in the last quarter was significant. The Benelux
management applied cost reduction measures and employed maximum flexibility in moving people to areas where demand
remained strongest. We have avoided enforced headcount reductions as CMG values highly its reputation as the best
recruiter and employer in the business. It remains vital on a longer view to achieving our organic growth objectives. At
the current time, therefore, Benelux is concentrating on its long-term customer relationships and increased account
management focus to minimise the impact on margins resulting from the reduced level of utilisation. It is also using
that capacity wherever possible to accelerate internal projects that will aid operational efficiency going forward.
In Germany, we carried through our planned restructuring in the second half, closing one office, rescaling our BaaN
practice to more realistically reflect future business levels, and refocusing the remaining operation on key accounts
and technology areas with better demand potential.
France has made good progress in 2001, concentrating on improving profitability and taking advantage of its substantial
SAP skills to counteract tightening in some other market areas. This process will continue through 2002, although we
recognise the need for greater scale here, as in Germany, in order to achieve our longer-term targets for profitability.
Our relatively small Asia Pacific operations delivered somewhat mixed results, but we are making good progress with
developing our managed services capability across the region, capitalising on our European credentials wherever possible
and key reference sites such as Hewlett Packard (in 14 countries). We have also made the first successful moves in
exploiting the potential of Malaysia as an offshore software development facility.
Throughout the Group, we have focused on cash flow, and our position has improved since H1 2001. We converted 113% of
operating profit (before goodwill amortisation and exceptional items) into operating cash flow, compared to 76% in 2000.
There has been some commentary about pricing pressure in the market and clearly this is a stronger factor when demand
weakens. We are not immune to that pricing pressure in competitive markets and have entered into contracts for 2002 with
some major customers at a discount to 2001 daily rates. CMG has for a long time positioned its services business with
sufficient business consultants with high level industry knowledge to provide added value to differentiate us from
simple staff provision, without carrying the overhead of a freestanding management consultancy.
Recurring revenues and strong public sector
The 2001 performance demonstrates the importance of a strong and growing track record in both long term managed services
contracts and Government applications. 33% of Group ICT services turnover is in these areas. The former offer stable
recurring revenues as well as excellent opportunities to cross sell other systems development and integration services.
It is a business we have been in for more than 30 years in both the UK and the Netherlands, notably in payroll and human
resources applications. Over the last decade, we have increased our capability beyond IT processing and application
management, into genuine Business Process Outsourcing. During 2001, for instance, we added a major new customer in the
energy distribution business, TXU, to our UK facility where we are managing a significant proportion of their back
office operations, taking on some of the customer staff as part of the process.
Outsourcing is one of the fastest growing sectors in the IT business, fuelled by the attraction of greater cost
certainty, particularly in times of tight internal budgets. Less often publicised is the equally buoyant market for
in-sourced, ongoing services which is another CMG strength, encompassing application and infrastructure management and
help desk support.
In the UK, the current Government administration has actively stimulated investment in IT systems by ministries and
agencies and the combined strength of CMG and Admiral has enabled us to benefit from these moves, most notably with the
ten year, £120 million contract for the Health & Safety Executive. In the Netherlands, where we work for all 13
ministries, public sector business has also remained very solid.
Focusing our competencies
In both public and private sectors, we group our propositions to prospective customers under three key themes: business
innovation; business optimisation; and IT optimisation. This enables us to retain focus across a diverse range of
applications and to present ourselves effectively to business leaders as well as IT management. Clarity of approach
commands an even greater premium in times of lower growth when differentiation from competitors is especially critical.
Business innovation
Business innovation is where we help our customers to adopt technologies that can transform aspects of their operations.
These would include our ability to open up the mobile channel to customers and citizens; our leadership position in
mobility telematics (traffic, transport and logistics management); and our expertise in security systems, notably in the
year under review, our pioneering work for Schiphol airport's Privium service for quick and secure border passage, based
on iris scanning technology.
Business optimisation
Business optimisation is about process, both human and data. It is about improving operational efficiency and thereby
margins. An obvious example is the marketplace for Enterprise Application Integration, including Enterprise Resource
Planning (ERP), Supply Chain Management (SCM), Manufacturing Execution Systems (MES) and Customer Relationship
Management (CRM).
The market for ERP systems, and those employing SAP software in particular, was strong throughout 2001. This has the
most impact in our Benelux and French businesses where we have large, experienced teams and good relations with the
local SAP companies. In the UK, we have historically focused primarily on SAP HR applications, reflecting our
traditional strength in personnel departments. During the year, we secured our first customers for a hosted SAP Payroll
offering. In Germany, we are growing our SAP competency and broader Enterprise Integration and CRM capability, at the
same time as reducing our BaaN exposure. The majority of our ERP work relates to existing implementations which require
optimisation and extensions. We therefore address the cumulative installed base of customers and are not reliant solely
on new licence sales. Today we have nearly 1,000 consultants actively working on SAP-related projects in Europe, making
us a significant partner for this important software vendor.
IT optimisation
IT optimisation is where we apply our deep IT skills and project control disciplines to cut the cost of IT delivery and
to get complex systems up and working. This includes exploring options for outsourcing as well as the application of our
renowned TestFrame software testing methodology. The range of applications addressed by CMG is very diverse and by
actively sharing knowledge across the Group as a whole, we are able to treat major customers as marketplaces in their
own right. As an example, for one major electronics conglomerate we are providing skills as diverse as embedded
software, software testing, production control and ERP systems, and eCommerce applications. We work with a similarly
large range of software vendors to ensure that we always deliver "best of breed" solutions, and for a number of them, we
now represent a substantial implementation and integration resource - for example, Oracle (where we now have over 1,000
consultants working on related projects), Microsoft, IBM, Compaq and BEA Systems.
Wireless Data Solutions (WDS)
The decline in our revenues from telecom products was the result of a marked slowing in traffic growth for Short Message
Services (SMS) in Europe combined with significant capacity sales to the operators in the previous year. Most of our
current revenues are generated by SMS systems, with Europe - where we are the dominant player - being the major
contributor. Many European operators incurred large debt burdens through the purchase of third generation mobile
licences and other infrastructure investments. As a result, they slowed their purchasing in 2001 to an extent that could
not be compensated for by business from other parts of the world. In fact, we achieved triple digit growth in both Asia
Pacific and the Americas, but from too small a base to achieve profitability in the first half of the year given our
decision to make a large investment in R&D through 2001 to position CMG strongly for next generation messaging systems.
We took action to reduce the cost base and refocus the business; as a result, we traded profitably in the second half.
The disappointing financial performance in WDS should not obscure the important milestones achieved in developing this
business into one with a portfolio of products aimed at global marketplaces in current, intermediate and future
transmission technologies. These include:
• the launch, successful trials and production shipments of our new Multimedia Messaging Service Centre (MMSC);
• development of a unified communications capability including the acquisition of Cisco's uOne voice-over-IP product
set and development team;
• customer base in Asia Pacific doubled during the year, including seven more SMSCs sold into China, taking the number
of Chinese regions partnering with CMG up to 15;
• testing of our new pre-paid billing (mCharger) and customer management products, subsequently launched to the market;
• a joint venture with TDC which secured its first contract
to integrate Microsoft's Hotmail and MSN services and mobile messaging; and
• our first hosted/revenue-sharing SMS customer, providing inter-network messaging across Canada.
We were also able, in Thomas Ivarson, to attract a leader for this business with extensive international experience in
the mobile arena who both understands the opportunities and challenges we face and is committed to driving our WDS teams
forward to further success.
In the second half of the year, we were able to support very high levels of sales development and tendering related to
future systems, while maintaining focus on shorter term performance. We were the first company to ship production
versions of our MMSC - to Telenor in Norway and four countries addressed by Telia - giving us a significant share of the
Nordic marketplace, always an early mover in new mobile technology. Early in the new year, we were able to announce that
we had secured a global framework agreement with Hutchison 3G covering five countries initially and many elements of our
new product portfolio. As a new 3G entrant, this company has to offer leading edge services that can attract customers
from traditional operators and their choice of CMG as a leading edge supplier is therefore especially significant. We
are not complacent about the competitive environment we face in making the transition to new product platforms and
services over the next 3-5 years, but we have started strongly and have a clear strategy going forward.
The mBusiness opportunity
The current economic environment and focus on short-term deliverables to some extent masks the huge opportunity
represented by mobile data in the years ahead. With 500 million people accessing the Internet and 250 million people
already connected to CMG's mobile infrastructure, we are well placed to benefit from the trillion euro business that e&
mCommerce presents. While today WDS's business is primarily an operator one, with a relatively small number of early
movers in mobile banking and telematics, the future opportunity for CMG as a whole will span virtually all of our
current marketplace. The need for 24 hour, 365 day mobile application service provision will become a necessity for many
corporate enterprises whose employees need to be connected from anywhere at anytime. Commercial organisations are now
beginning to take up the mobile channel seriously as a promotional vehicle through SMS, laying the foundation for full
transactional services and even mobile payment as network infrastructures and handsets evolve. Governments see mobile
communications as the ideal medium to develop an electronic relationship with citizens at the places and times that
public and social services actually impact them.
Exceptional items and goodwill
During 2001, CMG implemented restructuring programmes in our German and UK operations (ICT and WDS business), including
some 500 redundancies. The total cost of these reorganisations was £8.9 million.
The goodwill amortisation charge for 2001 was £56.3 million (2000: £33.9 million). In accordance with FRS 11 (Impairment
of fixed assets and goodwill), the carrying values of the group's goodwill balances have been compared to their
recoverable amounts, represented by their value in use to the group.
The value in use has been derived from discounted cash flow projections which cover the ten years from 1 January 2002.
The projections cover a ten year period as the directors consider that the growth in these businesses will exceed the
average GDP growth rates of the countries concerned over ten years. After the ten year period, the projections use a
long-term growth rate compatible with projections for the countries concerned. The discount rate used to arrive at this
calculation was 14% on a pre-tax basis (equivalent to 10% on a post-tax basis).
The review has resulted in an exceptional charge to operating costs of £564.0 million in respect of Admiral, Computer
Answers and sundry smaller acquisitions. The bulk of this write down relates to the acquisition of Admiral in May 2000,
which was principally financed by shares (at a share price of £9.33). Admiral continues to be an important contributor
to the group, giving critical mass in the UK and creating significant cross-selling opportunities. The remaining
goodwill of £468.0 million will be amortised in accordance with the group's accounting policies.
People and recruitment
In most areas, recruitment has been scaled back to essential staff only - primarily those with in demand skills that can
be billed to customers immediately. Wage levels have been generally frozen as well. We have, though, maintained our
relationships with colleges and business schools and continue to invest in the development of our staff. In the UK and
Ireland, we implemented redundancy programmes following consultation in both our services business and two R&D
facilities related to aspects of customer care and billing for Wireless Data Solutions. We also reduced staff numbers in
our German operation as part of our restructuring there. While enforced redundancies are not something CMG has prior
experience of or takes lightly, we believe our action was appropriate to the future health of the business. Our culture
remains strong and has helped us through these actions. CMG people are committed to the long-term success of the
business. Indeed, following revisions to our share ownership plans, virtually 100% of CMG people now have shares or
options in the company and our managers have a significant holding at their own expense as part of their conditions of
employment. This ensures that people throughout the business remain focused on delivering success for customers and
thereby shareholder value.
The Board
The Board was strengthened in July 2001 by the arrival of Alistair Crawford as Chief Operating Officer. He has been
working alongside our Chief Executive, Tom Rusting, concentrating particularly on developing the Group's capability to
deliver consistent services and applications across our various enterprises and geographical territories, reusing
solutions wherever feasible and getting maximum leverage from global partners.
Tom Rusting has decided to stand down from his position as Chief Executive, handing over the reins to Alistair Crawford.
Tom has some difficult personal circumstances that need his full attention and we wish him and his family all possible
success in that endeavour. I know Tom will remain both very interested in CMG's progress and a staunch supporter of our
future strategy, even though he can no longer participate directly in it. This is a particularly sad moment for me,
since I have worked with Tom since he joined the company back in 1973. It is impossible to do justice here to the
immense contribution he has made to the Group's development. His calm, logical and wise counsel has been valued by so
many people, not least his fellow Board colleagues.
Of course, I am extremely pleased we were able to recruit Alistair Crawford last year and have him work closely with Tom
while getting up to speed. Alistair is already a very visible presence around our Group and the impact he is already
achieving gives confidence that he will make a seamless transition into his new role.
Outlook
CMG has an experienced management team, supported by strong underlying disciplines that ensure tight control of costs
and cash flow. Over the last year, we have brought additional focus to our sales, business development and account
management functions, recognising that our industry was moving into a phase where demand no longer always outstrips
supply. In countries and market niches where we have both scale and track record, we are taking a larger share of the
available business as customers rationalise the number of suppliers they use and recognise CMG's status as a trusted
partner. However, we are not immune to economic cycles and performance in 2002 will be determined to a considerable
extent by the arrival of an economic upturn.
For the first half of 2002 in ICT Services, we currently do not see scope for revenue growth over the second half of
2001, which had revenues of £383 million. In the early part of 2002, there has been a rise in the number of customer
proposals being worked on, but competition for these opportunities is inevitably fiercer than in more demand-driven
market conditions. In the UK, the actions already taken will allow us to return to higher profitability than the second
half of 2001 in the first half of 2002, although not at the level of the corresponding period last year. Our position in
the Benelux gives us confidence that we can contain reduced utilisation levels and pricing pressure, although the margin
in the first half of 2002 will be well below the full year margin in 2001 (which was 16.3%). Germany is likely to remain
under pressure in the first half given the current economic environment, but we expect some progress in France. Revenue
and profit growth in ICT services for the full year will require the upward trend in customer activity and conversion to
sales to continue along with an upturn in the European economies.
In Wireless Data Solutions (WDS), we expect to grow overall revenues significantly in 2002 by continuing to build market
share in developing geographies and by securing further customers for our new products. There remains considerable scope
for developing SMS applications in both the entertainment and commercial arenas; but the European operator market for
SMS capacity upgrades will continue to slow as the interpersonal messaging market matures and, in the years ahead,
migrates to multimedia. The contract from Hutchison 3G announced after the year end is a clear endorsement of our WDS
product strategy and the investment we have made and continue to make in it. We have demonstrated that we are a leader
in new mobile data technologies and, because of this and other successes, we expect significant revenues in 2002 to be
derived from 2.5/3G related products. We also expect that research & development investment will remain at around £55
million for 2002, including the accelerated investment needed to support our Hutchison 3G contract. However, we
recognise the necessity to balance R&D investment with the need to deliver a profit for the full year 2002.
In the challenging year ahead, CMG people will employ all their skill and commitment to deliver solid results from
tightly managed operations, while strengthening our platform for future growth
Cor Stutterheim
Chairman
Consolidated Profit and Loss Account
For the year ended 31 December 2001
2001 2001 2001 2000
Before Exceptional Total Total
exceptional items
items (Note 4)
Notes £'m £'m £'m £'m
Turnover 3 920.4 - 920.4 810.4
Net operating costs (921.7) (572.9) (1,494.6) (718.8)
Operating (loss)/profit
Before goodwill amortisation and impairment 55.0 (8.9) 46.1 125.5
Goodwill amortisation and impairment (56.3) (564.0) (620.3) (33.9)
(1.3) (572.9) (574.2) 91.6
Net interest payable (14.6) - (14.6) (8.5)
(Loss)/profit on ordinary activities before tax 3 (15.9) (572.9) (588.8) 83.1
Tax on profit on ordinary activities (13.1) 6.1 (7.0) (37.9)
(Loss)/profit on ordinary activities after tax (29.0) (566.8) (595.8) 45.2
Minority interests (0.3) - (0.3) (0.2)
(Loss)/profit for the year (29.3) (566.8) (596.1) 45.0
Dividends - ordinary shares 6 (18.1) - (18.1) (16.5)
Retained (loss)/profit for the year (47.4) (566.8) (614.2) 28.5
All results are derived from continuing activities
2001 2000
Earnings per share 7
- headline and basic
- before goodwill amortisation and exceptional items 4.5p 14.5p
- after goodwill amortisation and exceptional items (99.6p) 8.3p
- diluted
- before goodwill amortisation and exceptional items 4.4p 13.7p
- after goodwill amortisation and exceptional items (99.6p) 7.8p
Consolidated Statement of Total Recognised Gains and Losses
2001 2000
£'m £'m
(Loss)/profit for the year (596.1) 45.0
Currency translation differences on foreign currency net investments (5.3) 3.6
Total recognised (losses)/gains for the period (601.4) 48.6
Consolidated Balance Sheet
At 31 December 2001
2001 2001 2000 2000
Notes £'m £'m £'m £'m
Fixed assets
Goodwill 468.0 1,086.9
Tangible assets 36.9 28.9
Share of gross assets of joint venture 1.5 -
Investments - own shares 3.2 2.8
509.6 1,118.6
Current assets
Stock 4.8 3.9
Debtors 263.7 236.2
Cash at bank and in hand 59.4 52.2
327.9 292.3
Creditors - Amounts falling due within one
year
Borrowings (6.8) (9.6)
Other creditors (199.9) (170.5)
(206.7) (180.1)
Net current assets 121.2 112.2
Total assets less current liabilities 630.8 1,230.8
Creditors - Amounts falling due after more
than one year
Borrowings (244.3) (230.9)
Provisions for liabilities and charges (4.3) (4.3)
Net assets 382.2 995.6
Capital and reserves
Called up equity share capital 10 15.5 15.3
Share premium account 10 13.1 7.2
Reserves of employee trusts 10 4.1 3.1
Profit and loss account 10 90.9 133.7
Merger reserve 10 258.6 836.3
Equity shareholders' funds 10 382.2 995.6
Consolidated Cash Flow Statement
For the year ended 31 December 2001
Notes 2001 2001 2000 2000
£'m £'m £'m £'m
Net cash inflow from operating activities 8 56.6 95.9
Returns on investments and servicing of finance
Dividends paid to minority interests (0.2) (0.2)
Interest received 1.5 1.7
Interest paid (16.4) (9.4)
Interest element of finance lease rental payments (0.3) (0.3)
Net cash outflow from returns on investments
and servicing of finance (15.4) (8.2)
Taxation (18.6) (42.4)
Capital expenditure
Purchase of tangible fixed assets (15.3) (11.2)
Sale of own shares by employee share trusts 3.0 -
Purchase of own shares by employee share trusts (1.3) -
(13.6) (11.2)
Acquisitions (0.9) (239.7)
Equity dividends paid (17.3) (12.9)
Net cash outflow before use of liquid resources
and financing 9 (9.2) (218.5)
Management of liquid resources - 5.0
Financing activities
Proceeds from issues of shares 6.1 3.7
Increase in loans 14.8 228.4
Capital element of finance lease rental payments (1.0) (0.6)
Cost of bonus issue and share split - (0.4)
19.9 231.1
Increase in cash in the year 10.7 17.6
Notes
1. Source of financial information
The financial information set out above does not comprise the Group's financial statements. Financial statements for the
previous financial year ended 31 December 2000 have been delivered to the Registrar of Companies. The auditors' report
on those accounts was unqualified and did not contain any statement under section 237(2) or (3) of the Companies Act
1985. The 2001 financial statements, including an unqualified audit report, will be posted to shareholders and will be
filed with the Registrar of Companies.
2. Exchange rates
The most important exchange rate for the Group is the Euro. The relevant rates for translation are:
2001 2001 2000 2000
Year end Average Year end Average
£1 = Euro 1.63 1.61 1.59 1.64
Exchange rate impact table
2001 2000 2000
at constant at actual
exchange rates exchange
rates
£m £m £m
Turnover 920.4 821.7 810.4
Operating Profit* 55.0 127.5 125.5
Profit before tax* 40.4 119.0 117.0
Profit after tax and minority interests (596.1) 46.3 45.0
Earnings per share* 4.5p 14.7p 14.5p
Key exchange rates used above: £1 = Euro 1.61 1.61 1.64
* before goodwill amortisation and exceptional items
3. Segmental information
An analysis of turnover and profit before tax is given below:
Turnover Profit/(loss) before tax
2001 2000 2001 2000
£'m £'m £'m £'m
- Benelux 386.4 335.6 62.9 62.9
- United Kingdom 264.2 206.1 13.9 21.1
- Germany 58.8 58.8 (0.1) 1.8
- France 57.3 44.5 2.0 (0.2)
- Rest of World 15.2 10.1 (1.0) 0.9
ICT Services 781.9 655.1 77.7 86.5
- Wireless Data Solutions 138.5 155.3 (19.7) 42.3
Total Operations 920.4 810.4 58.0 128.8
Profit in employee trusts - - 1.5 -
Common costs - - (4.5) (3.3)
920.4 810.4 55.0 125.5
Goodwill amortisation - (56.3) (33.9)
Exceptional restructuring costs - - (8.9) -
Exceptional goodwill impairment provision - - (564.0) -
920.4 810.4 (574.2) 91.6
Net interest payable - - (14.6) (8.5)
920.4 810.4 (588.8) 83.1
£0.9 million of the goodwill amortisation is attributable to the Benelux (2000: £0.9m), £50.3m to the UK which
includes all goodwill amortisation relating to Admiral Ltd (2000: £29.7m), £1.2m to Germany (2000: £1.1m), £0.8m
to France (2000: £0.7m) and £3.1m to Wireless Data Solutions (2000: £1.5m) .
An analysis of turnover by country of destination is given below:
Turnover
2001 2000
£'m £'m
Benelux 398.3 348.3
United Kingdom 263.0 215.3
Germany 71.0 77.8
France 65.5 53.0
Rest of World 122.6 116.0
920.4 810.4
4. Exceptional items
During 2001, CMG implemented restructuring programmes in our German and UK operations (ICT and WDS business), including
some 500 redundancies. The total cost of these reorganisations was £8.9 million.
The goodwill amortisation charge for 2001 was £56.3 million (2000: £33.9 million). In accordance with FRS 11 (Impairment
of fixed assets and goodwill), the carrying values of the group's goodwill balances have been compared to their
recoverable amounts, represented by their value in use to the group.
The value in use has been derived from discounted cash flow projections which cover the ten years from 1 January 2002.
The projections cover a ten year period as the directors consider that the growth in these businesses will exceed the
average GDP growth rate of the countries concerned over ten years. After the ten year period, the projections use a
long-term growth rate compatible with projections for the countries concerned. The discount rate used to arrive at this
calculation was 14% on a pre-tax basis (equivalent to 10% on a post-tax basis).
The review has resulted in an exceptional charge to operating costs of £564.0 million in respect of Admiral, Computer
Answers and sundry smaller acquisitions. The bulk of this write down relates to the acquisition of Admiral in May 2000,
which was principally financed by shares (at a share price of £9.33). Admiral continues to be an important contributor
to the group, giving critical mass in the UK and creating significant cross-selling opportunities. The remaining
goodwill of £468.0 million will be amortised in accordance with the group's accounting policies.
5. Employees
2001 2000 2001 2000
Year end Year end Average Average
The number of employees by
geographical location was:
Benelux 7,403 6,796 7,271 6,233
United Kingdom 3,398 3,608 3,719 2,752
Germany 811 899 889 853
France 1,032 1,095 1,072 844
Rest of World 840 672 799 377
13,484 13,070 13,750 11,059
6. Ordinary dividends paid and proposed
2001 2001 2000 2000
£'m £'m £'m £'m
Interim dividend of 1.1 pence on 614.0 million ordinary shares
(2000: 1.0 pence on 602.6 million ordinary shares) 6.0 6.0
Less dividends payable to the employee trusts (0.2) (0.2)
6.6 5.8
Proposed final dividend of 1.9 pence on 620.5 million ordinary
shares (2000: 1.8 pence on 613.3 million ordinary shares) 11.8 11.1
Less dividends payable to the employee trusts (0.3) (0.4)
11.5 10.7
18.1 16.5
7. Earnings per share
2001 2000
Earnings (£'m)
- standard basis (596.1) 45.0
- add back exceptional items net of tax 566.8 -
- add back goodwill amortisation 56.3 33.9
- before goodwill amortisation and exceptional items 27.0 78.9
Number of shares ('m)
Weighted average number of shares in issue 615.0 566.6
Shares held by the employee trusts (16.7) (22.3)
Shares used to calculate earnings per share 598.3 544.3
Effect of dilutive potential ordinary shares
- share options 15.0 29.9
Shares used to calculate diluted earnings per share 613.3 574.2
In calculating earnings per share after goodwill amortisation and exceptional items, options over 15.0 million shares
were excluded from the calculation of total diluted number of shares in the year ended 31 December 2001 as their
inclusion would have been anti- dilutive.
8. Reconciliation of operating (loss)/profit to net cash inflow from operating activities
2001 2001 2001 2000
Before Exceptional Total
exceptional items
items
£'m £'m £'m £'m
Operating (loss)/profit (1.3) (572.9) (574.2) 91.6
Goodwill amortisation and impairment 56.3 564.0 620.3 33.9
Depreciation of tangible fixed assets 12.3 - 12.3 8.9
Increase in debtors (24.7) - (24.7) (37.0)
Increase/(decrease) in creditors and provisions 19.7 3.2 22.9 (1.5)
Net cash inflow/(outflow) from operating activities 62.3 (5.7) 56.6 95.9
9. Reconciliation of cash flow to change in net (debt)/funds
2001 2001 2000 2000
£'m £'m £'m £'m
Net (debt)/funds as at 1 January
Cash 52.2 26.2
Liquid resources - 5.0
Overdrafts (7.5) -
Finance lease obligations (3.7) -
Loans and borrowings due after more than one year (229.3) -
(188.3) 31.2
Net cash outflow before use of liquid resources and financing (9.2) (218.5)
Shares issued 6.1 3.7
Other movements (1.3) (1.7)
Debt and financing acquired with subsidiary - (3.8)
Exchange differences 1.0 0.8
(3.4) (219.5)
Net (debt)/funds as at 31 December
Cash 59.4 52.2
Overdrafts (5.7) (7.5)
Finance lease obligations (3.5) (3.7)
Loans and borrowings due after more than one year (241.9) (229.3)
(191.7) (188.3)
10. Reconciliation of group reserves
Share Share Reserves of Profit and Merger Total
capital premium Employee
account Trust loss account Reserve
£'m £'m £'m £'m £'m £'m
Balance at 1 January 2001 15.3 7.2 3.1 133.7 836.3 995.6
Change in value due to currency - - - (5.3) - (5.3)
fluctuations
Retained loss for the year - - - (614.2) - (614.2)
Shares issued during the year 0.2 5.9 - - - 6.1
Transfer in respect of the employee trusts - - 1.0 (1.0) - -
Transfer between reserves - - - 577.7 (577.7) -
Balance at 31 December 2001 15.5 13.1 4.1 90.9 258.6 382.2
11. Acquisitions
On 27 July 2001, CMG acquired Cisco's uOne Unified Communications software platform business for the service
provider market and the research and development team supporting this technology for nil consideration.
This information is provided by RNS
The company news service from the London Stock Exchange
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