RNS No 7507e
CMG PLC
1 September 1999
CMG plc
Group interim results for six months to 30 June 1999
Summary
6 months to 30 June
1999 Euros 1999 GBP 1998 GBP Increase
----------------------------------------------
Turnover
Euros #290.5m #194.2m 50%
432.8m (47%**)
Operating profit* Euros #36.4m #23.6m 54%
54.3m (51%**)
Profit before tax* Euros #36.8m #24.3m 51%
54.8m (48%**)
Profit after tax Euros #23.9m #15.5m 54%
35.6m (51%**)
Earnings per share* Euros 20.3p 12.9p 57%
0.30 (54%**)
Interim dividend
Payable on 19 November
1999 to all shareholders
on the register on
22 October 1999 2.9p 2.0p 45%
* Before goodwill amortisation
** At constant exchange rates. The effect of exchange rates
on CMG's reported results is shown on page 4.
The 1998 comparatives have been restated to comply with FRS14,
see page 5 for more detail.
Highlights
Turnover, profit, operating margin and headcount have all made
good advances in the first half with CMG continuing to take
market share in its chosen territories and markets.
* 50% growth in Group turnover, primarily organic
* Group pre-tax profits up 51% to #36.8 million
* Headcount passes the 8,000 level
* Continued operating margin improvement, up from 12.2% to 12.5%
On the outlook for the remainder of the year, CMG Chairman Cor
Stutterheim said: "We expect turnover growth for the full
year to stay well ahead of industry averages, but do not
expect growth to be as exceptionally high as last year. In
the unique situation of the approaching millennium, it would
be unwise to ignore the potential for isolated incidents
distorting planned activities in the last quarter of the year.
However, our forward planning discussions with customers do
not indicate any general slowdown or freezing of developments
and we therefore continue to look forward to a very good set
of results for the full year. Looking forward into 2000, we
are seeing increasing evidence of strong demand from our
customers to address new applications and projects, giving us
considerable confidence in our ability to continue to grow
ahead of our chosen markets next year and beyond."
For further information please contact:
Cor Stutterheim, Chairman, CMG plc Tel: 00 31 20 672 0444
Chris Banks, Finance Director, CMG plc Tel: 00 44 171 592 4000
Tony Richards, Group Communications (London) Tel: 00 44 171 592 4000
Jan Massier, Group Communications (Amsterdam) Tel: 00 31 20 672 0444
Toby Mountford, Citigate Dewe Rogerson Tel: 00 44 171 638 9571
Chairman's Statement
Results
I am pleased to report that we had an excellent first half of
the year producing a very good result. Turnover in the six
months to 30 June 1999 increased by 50% to #290 million and,
with the operating profit margin* improving from 12.2% to
12.5%, operating profit* rose 54% to #36.4 million. Profit
after tax has risen 54% to #23.9 million, while diluted
earnings per share* have grown to 19.3p, an increase of 57% on
the same period last year. While three acquisitions were
completed during the period, growth was again predominantly
organic and our employee numbers had reached 8,004 by the end
of June, compared to 5,725 a year earlier and 7,122 at the end
of 1998.
* before goodwill amortisation
Overview
We continued to experience strong demand for our services
across all territories. This confirmed our view that the
drivers for growth are related to the ongoing need to deploy
information and communications technology (ICT) for
competitive advantage rather than short-term preoccupations
with the millennium. While organisations are unlikely to move
new applications from their development platforms to "live"
working in the months either side of 1 January 2000, we do not
see any significant sign of budgets being reduced or diverted
from new projects. Indeed, since our customers are typically
larger organisations who have addressed their millennium
issues in good time, we are already seeing greater attention
being focused on applications that have the potential to
increase customer loyalty or give access to new revenue
streams.
In such an environment, human resource management remains a
critical skill. Our well-established computerised planning
methodology enables us to maintain good utilisation rates by
ensuring that we have the right expertise in the right place
at the right time. It does so by allowing us to adjust our
recruitment and development programmes according to the future
needs of our customers. The long-term relationships we foster
with customers are crucial to securing that intelligence early
and regularly.
However, the demand for experienced people who understand the
interrelationship between business processes and ICT systems,
and for those with the latest technical skills, significantly
outstrips supply. We have an excellent track record as both a
recruiter and an employer, but our greatest challenge is
always to attract enough good people and we continue to
innovate and invest heavily in that process. With some
mobility taken out of the employment market in the run-up to
the millennium, recruitment has been more demanding recently
and we do not expect the exceptionally strong increase in
staff numbers in the second half of 1998 to be repeated this
year.
We increased our geographic coverage in the first half through
acquisitions that established CMG in Antwerp and Hannover. In
addition we decided to open an office in Berlin to capitalise
on new market opportunities there, while a specific long term
contract led us to establish a facility in Prestatyn, North
Wales. We have also taken the first steps to establish an
additional software development centre for our telecoms
business in Cork, Republic of Ireland.
Operations
Benelux
Continued strong organic growth with increased Belgian contribution
Turnover in the Benelux grew by 47% to #187 million and the
operating profit by 53% to #32.5 million. We have continued
to achieve high utilisation rates thanks to strong demand for
our services in a market where we are a preferred supplier for
many of our key customers.
Turnover from Belgium grew through both continued development
of our Brussels-based business and the acquisition of
Softguide, based in Antwerp. The latter, which specialises in
Enterprise Resource Planning (ERP) implementations, doubled
the size of our Belgian operation and brought a blue-chip
customer portfolio with it.
In both the finance and trade, transport and industry sectors
in the Benelux we have extended our activities in the area of
customer relationship management, including further web-based
applications aimed at enhancing customer loyalty and,
ultimately, internet-based banking or trading. Demand for
ongoing applications management has also been strong across
all sectors, including Government. The global telecoms
business managed from Utrecht had a strong period with
important new contracts secured, including one to increase the
short messaging capacity of the D2 network of Mannesmann to a
record-breaking level.
UK
Organic growth through vertical sector focus and large contract wins
Our UK business achieved a 27% uplift in turnover to #63.0
million, which was virtually all organic. The operating
profit grew by 14% to #4.6 million. Profits would have grown
slightly ahead of turnover except for a provision on a fixed
price project which is now on track.
1998 saw a number of notable successes with UK government
departments and this trend has continued in the first half of
1999. The contract signed with the Export Credits Guarantee
Department will exploit both our government and finance
expertise and generate revenues of #40 million over a ten year
period.
We have built on our successful re-entry into the privatised
energy utilities sector in 1998 with orders from several
electricity companies for the Archipel "middleware" product
line, which enables the management of multi-service offerings
and multi-channel marketing and distribution.
Germany
Enhanced geographic coverage and broadening application set
The strong performance in 1998 has continued for our German
operations with turnover growth of 87% and operating profit up
by 72% to #1.6 million. We acquired Partner Consult, which
substantially strengthened our presence in Northern Germany.
In addition to an excellent and well established customer-
base, this company has expertise in social security systems,
which can now be exploited through our network of offices to
which we have added Berlin.
In the finance arena, we are consolidating our position as a
market leader by extending our regulatory reporting product
into wider risk management applications within the framework
of tracsFRAME (topics for reporting, management and
controlling risks).
France
Integrated operation with improving market profile
In the first half we completed the integration of the three
acquired businesses with our organically developed activities.
We now have a single company operating from a single location
under one management team and with the standard CMG systems
and methodologies in place. Turnover rose from #2.3 million
to #11.8 million for the first six months with an operating
loss of #0.4 million, in line with our objective of being
closer to break even for the year.
We now have more than 400 people focussed on ICT solutions
across the finance, retail, automotive, telecoms and public
sectors. In the French ERP market, we are now amongst the top
ten players.
Cash
The Group cash performance is seasonally weaker in the first
half, but we have had better cash flow than in the comparable
period last year and again expect operating cash flow to be
good for the year as a whole.
Dividend
Recognising the excellent first half-year results, the Board
has declared an interim dividend of 2.9p net per share. This
represents an increase of 45% over the 1998 interim dividend.
The dividend will be paid on 19 November 1999 to shareholders
on the register on 22 October 1999.
Auditors
During the period we invited tenders from three major
international firms for our external audit with the objective
of achieving greater co-ordination across our various country
operations. As a result of this review process, we selected
Arthur Andersen (of which our previous auditors Binder Hamlyn
are a member). The appointment of Arthur Andersen as our
auditors will be put to shareholders at the next Annual
General Meeting.
Year 2000/EMU
A review has been carried out of the services and products
sold to customers in the past as well as those currently being
offered in order to assess exposure to potential liabilities
associated with the year 2000. Internal systems have also been
reviewed. In the limited instances where millennium non-
compliance has been identified, remedial work has either been
carried out or is in progress. The review process will be
maintained to ensure prompt identification and resolution of
any future issues. Similar review procedures are in place in
respect of the introduction of the Euro. It is not anticipated
that the cost of any remedial work will be material.
Prospects
Market conditions remain generally good with demand still
outstripping the supply of skilled resource. There is
increasing commentary from industry analysts that this skills
gap may widen rather than reduce as we enter the next century.
If this proves true, it will clearly be to the benefit of
companies like CMG that invest heavily in acquiring,
developing and retaining the appropriate people skills. We
expect turnover growth for the full year to stay well ahead of
industry averages, but do not expect growth to be as
exceptionally high as last year. In the unique situation of
the approaching millennium, it would be unwise to ignore the
potential for isolated incidents distorting planned activities
in the last quarter of the year. However, our forward
planning discussions with customers do not indicate any
general slowdown or freezing of developments and we therefore
continue to look forward to a very good set of results for the
full year.
Looking forward into 2000, we are seeing increasing evidence
of strong demand from our customers to address new
applications and projects, giving us considerable confidence
in our ability to continue to grow ahead of our chosen markets
next year and beyond.
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 1999 exchange rates
("constant exchange rates") and at the exchange rates used for
1998 ("actual exchange rates").
Six months to 30 June
% %
1999 1998 1998 growth growth
at at at at
constant actual constant actual
exchange exchange exchange exchange
rates rates rates rates
#'m #'m #'m
Turnover 290.5 197.7 194.2 47% 50%
EBITDA 39.4 26.5 25.9 49% 52%
Operating profit
before goodwill
amortisation 36.4 24.1 23.6 51% 54%
Profit before tax
and goodwill
amortisation 36.8 24.8 24.3 48% 51%
Profit after tax 23.9 15.8 15.5 51% 54%
Earnings per share (basic)
- before goodwill
amortisation 20.3p 13.2p 12.9p 54% 57%
- after goodwill
amortisation 19.5p 12.9p 12.6p 51% 55%
Key exchange rates used above: #1 =
Netherlands Guilder 3.28 3.28 3.36
Deutsche Mark 2.91 2.91 2.98
French Franc 9.76 9.76 9.99
Consolidated Profit and Loss Account
Unaudited Unaudited Unaudited Audited
6 months 6 months 6 months Year
ended ended ended ended
30 June 30 June 30 June 31 Dec
Notes 1999 1999 1998 1998
Euros '000 #'000 #'000 #'000
Turnover 3 432,839 290,496 194,151 443,832
Net operating costs (380,083) (255,089) (170,847 (387,155)
--------- --------- --------- ---------
Operating profit
Before goodwill
amortisation 54,250 36,410 23,628 58,371
Goodwill amortisation (1,494) (1,003) (324) (1,694)
---------------------------------------
52,756 35,407 23,304 56,677
Net interest receivable 523 351 656 805
---------------------------------------
Profit on ordinary
activities before tax 53,279 35,758 23,960 57,482
Tax on profit on
ordinary activities 5 (17,724) (11,895) (8,490) (20,065)
--------------------------------------
Profit on ordinary
activities after tax 35,555 23,863 15,470 37,417
Dividends
- ordinary shares 6 (5,298) (3,556) (2,450) (7,351)
-------------------------------------------------------------
Retained profit for
the period 30,257 20,307 13,020 30,066
=============================================================
Earnings per share
- headline and basic 7
- before goodwill
amortisation Euros 20.3p 12.9p 31.9p
0.30
- after goodwill
amortisation Euros 19.5p 12.6p 30.5p
0.29
- diluted
- before goodwill
amortisation Euros 19.3p 12.3p 30.4p
0.29
- after goodwill
amortisation Euros 18.5p 12.1p 29.0p
0.28
==============================================================
The 1998 half year comparatives have been restated to comply
with FRS14 in relation to dividends payable to the Employee
Trust and to remove the shares held by the Employee Trust from
the earnings per share calculation.
Consolidated Statement of Total Recognised Gains and Losses
Unaudited Unaudited Unaudited Audited
6 months 6 months 6 months Year
30 June 30 June 30 June 31 Dec
1999 1999 1998 1998
Euros '000 #'000 #'000 #'000
Profit for the period 35,555 23,863 15,470 37,417
Currency translation
differences on foreign
currency net investments (5,596) (3,756) (564) 4,280
--------------------------------------------------------------
Total recognised gains 29,959 20,107 14,906 41,697
==============================================================
Consolidated Balance Sheet
Unaudited Unaudited Unaudited Audited
30 June 30 June 30 June 31 Dec
Notes 1999 1999 1998 1998
Euros '000 #'000 #'000 #'000
Fixed assets
Goodwill 68,552 44,806 18,608 28,463
Tangible assets 27,317 17,854 15,426 17,794
Investments -
own shares 4,269 2,790 2,798 2,790
---------------------------------------
100,138 65,450 36,832 49,047
=======================================
Current assets
Debtors 237,802 155,426 92,913 115,930
Cash at bank
and in hand 40,091 26,203 30,214 39,467
--------------------------------------
277,893 181,629 123,127 155,397
======================================
Creditors
Amounts falling due
within one year (216,296) (141,370) (94,633) (114,592)
-----------------------------------------
Net current assets 61,597 40,259 28,494 40,805
-----------------------------------------
Total assets less
current liabilities 161,735 105,709 65,326 89,852
Provisions for
liabilities and charges (7,134) (4,663) (2,813) (5,449)
--------------------------------------------------------------
Net assets 154,601 101,046 62,513 84,403
==============================================================
Capital and reserves
Called up equity 9
share capital 9,809 6,411 6,406 ,406
Share premium account 9 16,018 10,469 10,382 10,382
Reserves of Employee
Trust 93,565 2,330 2,001 2,197
Profit and loss
account 9 125,209 81,836 43,724 65,418
--------------------------------------------------------------
Capital employed 154,601 101,046 62,513 84,403
==============================================================
Consolidated Cash Flow Statement
Unaudited Unaudited Unaudited Audited
6 months 6 months 6 months year
ended ended ended ended
30 June 30 June 30 June 31 Dec
Notes 1999 1999 1998 1998
Euros'000 #'000 #'000 #'000
Net cash inflow from
operating activities 8 38,727 25,991 12,180 51,762
Returns on investments
and servicing of finance
Interest received 1,484 996 787 1,843
Interest paid (311) (209) (217) (898)
---------------------------------------------
Net cash inflow from
returns on investments
and servicing of
finance 1,173 787 570 945
Taxation (12,385) (8,312) (4,927) (15,286)
Capital expenditure (4,899) (3,288) (4,642) (9,814)
Acquisitions (33,906) (22,756) (8,085) (22,456)
Equity dividends paid (7,302) (4,901) (3,331) (5,635)
---------------------------------------
Net cash (outflow)
before use of liquid
resources and
financing (18,592) (12,479) (8,235) (484)
Management of liquid
resources (341) (229) (244) 498
Financing activities
Proceeds from exercise
of share options 137 92 - -
--------------------------------------------------------------
(Decrease) / increase
in cash (18,796) (12,616) (8,479) 14
==============================================================
Notes to the interim report
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 1998.
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 1998, 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 1999 30 June 1998 31 December 1998
Period end Average Period end Average Year end Average
Netherlands Guilder 3.37 3.28 3.39 3.36 3.12 3.28
Deutsche Mark 2.99 2.91 3.01 2.98 2.77 2.91
French Franc 10.03 9.76 10.09 9.99 9.29 9.76
Euro 1.53 1.49 - - 1.42 -
The primary reporting currency of the Group is UK Pounds
Sterling. For illustrative purposes, a translation into Euros
has been provided. The profit and loss account and cash flow
statement have been translated at the average exchange rate
for the period and the balance sheet has been translated at
the closing rate for the period.
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 Dec 30 June 30 June 31 Dec
1999 1998 1998 1999 1998 1998
#'000 #'000 #'000 #'000 #'000 #'000
Benelux 187,123 127,093 290,270 32,477 21,185 53,317
United
Kingdom 63,013 49,505 108,230 4,594 4,035 9,161
Germany 28,540 15,240 36,182 1,572 914 2,215
France 11,820 2,313 9,150 (442) (768) (2,748)
--------------------------------------------------------------
290,496 194,151 443,832 38,201 25,366 61,945
Common costs - - - (1,791) (1,738) (3,574)
Goodwill
amortisation - - - (1,003) (324) (1,694)
Net interest
Receivable - - - 351 656 805
--------------------------------------------------------------
290,496 194,151 443,832 35,758 23,960 57,482
==============================================================
#442,000 of the goodwill amortisation is attributable to
the UK (1998: #279,000); #179,000 is attributable to Germany
(1998: #nil); #160,000 is attributable to Benelux (1998: #nil)
and the remaining #222,000 to France (1998: #45,000).
4. Employees
30 June 30 June 31 December
1999 1998 1998
The average number of employees
during the period was:
Benelux 5,039 3,815 4,157
United Kingdom 1,576 1,206 1,294
Germany 655 331 394
France 404 59 160
--------------------------------------------------------------
7,674 5,411 6,005
==============================================================
30 June 30 June 31 December
1999 1998 1998
The number of employees
at the end of the
period was:
Benelux 5,230 3,997 4,752
United Kingdom 1,632 1,285 1,500
Germany 721 362 513
France 421 81 357
--------------------------------------------------------------
8,004 5,725 7,122
==============================================================
5. Taxation
The tax charge for the half year has been based on the
estimated effective tax rate for the full year of 33.3%. The
charge includes overseas tax of #10.0 million (1998: #7.3
million).
6. Dividends on ordinary shares
An interim dividend of 2.9 pence (1998: 2.0 pence) will be
paid on 19 November 1999 to shareholders on the register on 22
October 1999.
7. Earnings per share
30 June 30 June 31 December
1999 1998 1998
Earnings
- standard basis (#'000) 23,863 24,866 15,470
- before goodwill
amortisation (#'000) 15,794 37,417 39,111
--------------------------------------------------------------
Number of shares ('000)
- weighted average number
of shares in issue 128,163 (5,592) 128,113
- shares held by the
Employee Trust
--------------------------------------------------------------
(5,603) 128,113 (5,599)
Shares used to calculate
earnings per share 122,571 122,510 122,514
--------------------------------------------------------------
Effect of dilutive potential
ordinary shares
- share options 6,531 5,717 6,331
--------------------------------------------------------------
Shares used to calculate
diluted earnings
per share 129,102 128,227 128,845
--------------------------------------------------------------
The 1998 half year comparatives have been restated to comply
with FRS14 in relation to dividends payable to the Employee
Trust and to remove the shares held by the Employee Trust from
the earnings per share calculation. Earnings per share
excluding goodwill amortisation have also been included as the
directors consider that this figure is helpful for a better
understanding of the underlying business.
8. Reconciliation of operating profit to net cash inflow from
operating activities
30 June 30 June 31 December
1999 1998 1998
#'000 #'000 #'000
Operating profit 35,407 23,304 56,677
Goodwill amortisation 1,003 324 1,694
Depreciation of
tangible fixed assets 3,013 2,306 4,890
(Profit) / loss on
disposal of fixed assets (24) 220 524
Net result of Employee
Trust (1) 2 (11)
Increase in debtors (38,717) (25,413) (42,021)
Increase in creditors
and provisions 24,903 12,058 30,710
Exchange rate adjustments
on debtors and creditors 407 (621) (701)
---------------------------------------
Net cash inflow from
operating activities 25,991 12,180 51,762
========================================
9. Reconciliation of group reserves
Share Share Reserves of Profit Total
capital premium Employee and loss
account Trust account
#'000 #'000 #'000 #'000 #'000
Balance at
1 January 1999 6,406 10,382 2,197 65,418 84,403
Change in value
due to currency
fluctuations - - - (3,756) (3,756)
Retained profit for
the period - - - 20,307 20,307
Transfer in respect
of Employee Trust
result - - 1 (1) -
Transfer in respect
of Employee Trust
dividends after tax - - 132 (132) -
Shares issued during
the period 5 87 - - 92
---------------------------------------------
Balance at
30 June 1999 6,411 10,469 2,330 81,836 101,046
==============================================
10. Acquisitions
The Group completed three acquisitions during the period.
Partner Consult GmbH, a German company, was acquired on 19
February 1999 for a cash consideration of DM23.9 million (#8.2
million). Softguide Group, a Belgian company, was acquired on
30 March 1999 for a cash consideration of BFr 991.5 million
(#16.5 million) and Softguide France was acquired on 23 June
1999 for a cash consideration of FFr 0.7 million (#0.1
million).
These acquisitions contributed a total of #5.9 million to
group turnover during the period and #0.5 million to group
operating profit before goodwill amortisation.
11. Interim report
Copies of the interim report are available from CMG plc,
Parnell House, 25 Wilton Road, London SW1V 1EJ and CMG BV,
Johannes Vermeerstraat 29, 1071 DL Amsterdam, The Netherlands.
Independent review report to CMG plc
Introduction
We have been instructed by the company to review the financial
information set out on pages 6 to 11 and we have read the
other information contained in the interim report and
considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information
contained therein, is the responsibility of, and has been
approved by, the directors. The Listing Rules of the London
Stock Exchange require that the accounting policies and
presentation applied to the interim figures should be
consistent with those applied in preparing the preceding
annual accounts except where any changes, and the reasonsfor
them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained
in Bulletin 1999/4 issued by the Auditing Practices Board. A
review consists principally of making enquiries of Group
management and applying analytical procedures to the financial
information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A
review excludes audit procedures such as tests of controls and
verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in
accordance with Auditing Standards and therefore provides a
lower level of assurance than an audit. Accordingly we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material
modifications that should be made to the financial information
as presented for the six months ended 30 June 1999.
Arthur Andersen London
Chartered Accountants 31 August 1999
END
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