RNS No 3378m
CMG PLC
2nd September 1997
Group interim results for six months to 30 June 1997
Summary
6 months to 30 June
1997 1996 Increase
Turnover #140.7m #116.6m 21%
Operating profit #14.6m #11.2m 30%
Profit before tax #15.1m #11.3m 33%
Profit after tax #9.5m #7.1m 34%
Earnings per share 14.9p 11.4p 31%
Interim dividend 2.6p 2.0p 30%
(Payable on 20 November 1997
to all shareholders on the register on
17 October 1997. Ex-dividend date is 13 October 1997.)
Highlights
* Pre-tax profits up 33% (56%*) to #15.1 million
* 21% (39%*) growth in Group turnover virtually all organic
* Operating margin up from 9.6% to 10.4%
* Germany returns to profit even before Orga-Team contribution
* Further substantial turnover and profit growth in The Netherlands
* Continuing growth in market share in the UK
* Staff numbers up 20% from year end to 4202 at end of June
On the outlook for the remainder of the year, CMG Chairman Cor
Stutterheim said, "The Group's performance since the end of
June continues to be very satisfactory and our main markets
remain buoyant. Notwithstanding the tight recruitment market,
we anticipate that the second half year, traditionally CMG's
better half, will enable us to produce a further strong set of
results for the full year".
For further information, contact:
Cor Stutterheim, Chairman CMG plc
Chris Banks, Finance Director, CMG plc
Michael Harrington, Group Communications Manager Tel: 0171-
233 0288
**At constant exchange rates. The effect of exchange rates on
CMG's reported results is shown on page 4.
Chairman's statement
Results
I am pleased to report that we have had a very good first half
year. Turnover in the six months to 30 June 1997 increased by
21% (39%*) to #140.7 million, while operating profit rose by
30% (54%*) to #14.6 million. Once again, our strong organic
growth during the period is more accurately reflected by our
results at constant exchange rates. Our operating margin rose
from 9.6% to 10.4%. Profit after tax has increased 34% (56%*)
to #9.5 million, while earnings per share have grown to 14.9p,
an increase of 31% (54%*) on the same period last year. This
substantial growth in our turnover and profits has been
reflected in the increase in staff numbers, which reached 4202
at the end of June, compared with 3075 at the same time last
year and 3512 at the end of 1996.
Overview
I am pleased that we are delivering on the expectations
outlined in our Annual Report. In The Netherlands, we have
continued to gain market share and have improved margins
compared to the same period last year. In the UK, we have
increased both turnover and profit and expanded staff numbers
considerably. However, one of the most encouraging
developments for CMG in the first half year has been the
return to profit in Germany, even before taking account of the
earnings from our recent acquisition, Orga-Team.
In such buoyant markets, the great challenge for CMG has been
to recruit sufficient staff of the right calibre. Though the
serious shortage of IT skills throughout Europe has been well
documented, we have continued to be successful in recruiting
quality staff. We have evolved our recruitment strategy and
skills over many years and constantly enhance them to ensure
we stay ahead of the market. This has enabled us to pass the
3000 employee mark in The Netherlands during June and we have
just recently reached 1000 employees in the UK.
Our cash performance, which is seasonally weaker in the first
half, has improved on 1996 and we expect cash generation to be
strong in the second half of the year.
Operations
The strong growth in The Netherlands has occurred across all
sectors, particularly Trade, Transport & Industry, where CMG
has a rapidly increasing market share. The trend in this
sector towards ERP (Enterprise Resource Planning) packages
such as Baan and SAP is providing great opportunities for CMG.
In Finance, our largest sector, a noteworthy new gain was a 4
year outsourcing contract for Nationale Nederlanden, part of
the ING Group. CMG's CAST ("Computer Aided Software Testing')
methodology, which reduces the IT development time for our
clients' products, has continued its success of last year.
In Telecoms, we continue to benefit from the liberalisation of
markets. Our participation in Varitel, the number portability
project for PTT Telecom, started on 1 January 1997 and will
continue until 1999. Our Value Added Service Platform for
mobile telephone operators continues to gain new customers,
among them Telia AB of Sweden.
The telecoms revolution is now impacting all our market
sectors. Our Information Systems business, for example, has
recently been commissioned to develop a study planning and
registration system for all secondary schools in The
Netherlands using intranet technology.
Many of our largest projects in the Netherlands continue to be
in the public sector. Our most recent gain there was an
agreement with the Ministry of Finance to work with their tax
department automation centre to rebuild their system for the
collection of corporation tax.
In the UK, CMG also had a good first half, due mainly to good
account development and greater concentration on specific
market sectors and niches. Again, this growth has been evenly
spread across our markets.
The number of new orders under long-term and framework
agreements in the commercial and public sectors continues to
rise, from clients ranging from DHL and Esso to Customs &
Excise and the DTI.
In the Finance sector, we have successfully expanded our
client base, winning projects with the Woolwich plc, NatWest
Bank and Moscow Narodny Bank, among others. COBRA, our bank
regulatory software package, was sold to a number of de-
mutualising building societies and several international
banks.
The two new divisions established at the end of last year have
started well. Some #3 million worth of orders have been won by
our Managed Services business and our Central Government
Payroll business has gained contracts with a number of bodies,
including the National Physical Laboratory. Our Payroll and
Personnel business continues to thrive, recently winning a
major 5 year outsourcing contract with National Australia
Group.
More generally, we have been particularly successful in
developing expertise and experience that we can transfer
across industry sectors. Examples include our intranet
developments for Halifax plc and a large power utility
company.
In Germany, CMG's recovery is well underway, with our Industry
Frankfurt business now trading profitably following
reorganisation. The highlight of the first half there was a
DM2.5 million contract with SOKA, a Social Security
organisation in the house building sector.
Following the acquisition of Orga-Team, our Finance sector
business now represents over 70 per cent of German turnover
and is performing well, with an excellent order book. The
highlight in this sector was a DM4 million millennium project
with R+V Insurance, one of many recent new clients. Orga-Team
itself is performing in line with expectations, as well as
providing us with spin-off consultancy work around its market-
leading software product, SAMBA, for bank regulatory
reporting.
Opportunities for our telecoms products and skills are also
increasing, and we have now opened an office in Cologne to
develop this business jointly with CMG telecoms specialists
from The Netherlands.
Dividend
In the light of these results, the Board has declared an
interim dividend of 2.6p per share, 30% higher than 1996. The
dividend will be paid on 20 November 1997 to shareholders on
the register on 17 October 1997.
Prospects
The Group's performance since the end of June continues to be
very satisfactory and our main markets remain buoyant.
Notwithstanding the tight recruitment market, we anticipate
that the second half year, traditionally CMG's better half,
will enable us to produce a further strong set of results for
the full year.
* At constant exchange rates. The effect of exchange rates on
CMG's reported results is shown in the table below.
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 1997 exchange rates
("constant exchange rates") and at the exchange rates used for
1996 ("actual exchange rates")
To 30 June: 1997 1996 1996 % Growth % Growth
At constant At actual At constant At actual
exchange exchange exchange exchange
rates rates rates rates
#'000 #'000 #'000
Turnover 140,704 101,124 116,616 39 21
Operating
profit 14,578 9,475 11,177 54 30
Profit before
tax 15,117 9,711 11,340 56 33
Profit after
tax 9,526 6,101 7,128 56 34
Earnings per
share 14.9p 9.7p 11.4p 54 31
Key exchange rates
used above: #1=
Netherlands Guilder 3.09 3.09 2.56
Deutsche Mark 2.75 2.75 2.28
CMG plc
Consolidated profit and loss account
Unaudited Unaudited Audited
6 months ended 6 months ended year ended
30 June 30 June 31 December
1997 1996 1996
Notes #'000 #'000 #'000
Turnover 3 140,704 116,616 245,159
Net operating costs (126,126) (105,439) (218,243)
Operating profit 14,578 11,177 26,916
Net income of Employee Trust 36 25 71
Net interest receivable 503 138 535
Profit on ordinary
activities before tax 3 15,117 11,340 27,522
Tax on profit on
ordinary activities 5 (5,591) (4,212) (10,382)
Profit on ordinary
activities after tax 9,526 7,128 17,140
Dividends - ordinary
shares 6 (1,665) (1,252) (3,771)
Retained profit for
the period 7,861 5,876 13,369
====== ====== ======
Earnings per share
- headline and basic 7 14.9p 11.4p 27.4p
======= ======= =======
Statement of total recognised gains and losses
Unaudited Unaudited Audited
6 months ended 6 months ended year ended
30 June 30 June 31 December
1997 1996 1996
#'000 #'000 #'000
Profit for the period 9,526 7,128 17,140
Currency translation differences on
foreign currency net
investments (2,388) (787) (3,151)
Total recognised gains 7,138 6,341 13,989
======= ======= =======
CMG plc
Consolidated balance sheet
Unaudited Unaudited Audited
30 June 30 June 31 December
1997 1996 1996
#'000 #'000 #'000
Fixed assets
Tangible assets 11,665 9,026 11,348
Investments - own shares 2,839 2,839 2,839
------------------ ---------
14,504 11,865 14,187
Current assets
Debtors 64,485 63,531 50,143
Cash at bank and in hand 23,374 16,289 27,059
------------------ ---------
87,859 79,820 77,202
Creditors
Amounts falling due within
one year (58,660) (54,322) (48,182)
------------------ ---------
Net current assets 29,199 25,498 29,020
Total assets less current
liabilities 43,703 37,363 43,207
Provisions for liabilities
and charges (2,560) (2,563) (2,923)
------------------- ----------
Net assets 41,143 34,800 40,284
======= ======= =======
Capital and reserves
Called up equity share
capital 3,203 3,189 3,203
Share premium account 13,585 13,214 13,585
Goodwill elimination
reserve (27,260) (26,523) (24,371)
Reserves of Employee Trust 1,806 1,724 1,770
Profit and loss account 49,809 43,196 46,097
------------------ ---------
Capital employed 41,143 34,800 40,284
======= ======= =======
CMG plc
Consolidated cash flow statement
Unaudited Unaudited Audited
6 months ended 6 months ended year ended
30 June 30 June 31 December
1997 1996 1996
Notes #'000 #'000 #'000
Net cash inflow from
operating activities 8 9,282 1,328 26,607
Returns on investments and servicing
of finance
Interest received 682 610 1,228
Interest paid (591) (256) (383)
------------------ ---------
Net cash inflow from returns on investments
and servicing of finance 91 354 845
Taxation paid (3,366) (1,581) (9,537)
Capital expenditure (3,199) (3,439) (8,482)
Acquisitions (4,151) (3,463) (3,463)
Equity dividends paid (2,514) (2,002) (3,259)
------------------ ---------
Net cash (outflow)/inflow
before financing (3,857) (8,803) 2,711
Financing activities
Proceeds from exercise
of share options - - 385
------------------ ---------
(Decrease)/increase in cash (3,857) (8,803) 3,096
======= ======= =======
CMG plc
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 1996.
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 1996, 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 1997 30 June 1996 31 December 1996
Period end Average Period end Average Period end Average
Netherlands Guilder 3.26 3.09 2.65 2.56 2.96 2.63
Deutsche Mark 2.90 2.75 2.37 2.28 2.64 2.35
3. Segmental information
Analyses of turnover and profit before tax by geographic area
are given below:
Turnover Profit before tax
30 June 30 June 31 December 30 June 30 June 31 December
1997 1996 1996 1997 1996 1996
#'000 #'000 #'000 #'000 #'000 #'000
The Netherlands 96,597 79,753 172,202 13,176 10,704 27,107
United Kingdom 33,369 26,258 53,714 2,018 1,660 3,117
Germany 10,738 10,605 19,243 500 (391) (1,244)
140,704 116,616 245,159 15,694 11,973 28,980
Common costs - - - (1,116) (796) (2,064)
Net income of
Employee Trust - - - 36 25 71
Net interest
receivable - - - 503 138 535
140,704 116,616 245,159 15,117 11,340 27,522
4. Employees
30 June 30 June 31 December
1997 1996 1996
The average number of
employees during the period was:
The Netherlands 2,866 2,006 2,210
United Kingdom 843 687 722
Germany 217 187 179
------------------------
3,926 2,880 3,111
====== ====== ======
30 June 30 June31 December
1997 1996 1996
The number of employees at
the end of the period was:
The Netherlands 3,063 2,184 2,560
United Kingdom 910 704 774
Germany 229 187 178
------- --------------
4,202 3,075 3,512
====== ====== ======
5. Taxation
The tax charge for the half year has been based on the
estimated effective tax rate for the full year. The charge
includes overseas tax of #4.8 million (1996: #3.5 million).
6. Dividends on ordinary shares
An interim dividend of 2.6 pence (1996: 2.0 pence), net of the
associated tax credit, will be paid on 20 November 1997 to
shareholders on the register on 17 October 1997. In 1996 the
Employee Trust waived its entitlement to dividends on
1,200,000 ordinary shares. No dividends have been waived in
1997.
7. Earnings per share - headline and basic
Headline and basic earnings per share, calculated on a
standard basis, of 14.9 pence (1996: 11.4 pence) are based on
profits after tax of #9.5 million (1996: #7.1 million) and on
the weighted average number of shares in issue during the
period, less in 1996 shares on which dividends have been
waived by the Employee Trust, of 64.1 million (1996: 62.6
million).
8. Reconciliation of operating profit to net cash inflow
from operating activities
30 June 30 June 31 December
1997 1996 1996
#'000 #'000 #'000
Operating profit 14,578 11,177 26,916
Depreciation of tangible
fixed assets 2,385 1,394 3,120
(Profit) on disposal
of fixed assets - - (16)
Increase in debtors (18,824)(21,000)(10,825)
Increase in creditors
and provisions 10,817 9,481 7,371
Exchange rate adjustments on
debtors and creditors 326 276 41
-------- ----------------
Net cash inflow from
operating activities 9,282 1,328 26,607
===== ====== ======
9. Interim report
Copies of the interim report are available from CMG plc,
Telford House, Tothill Street, London SW1H 9NB.
END
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