RNS Number:3830J
Management Consulting Group PLC
07 March 2005
FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004
Management Consulting Group PLC ("MCG" or "the Group"), the international
management consultancy group, today announces its results for the year ended 31
December 2004.
Key points
* Turnover up 35% to #119.2 million (2003: #88.6 million)
* Underlying turnover growth of 44% at constant exchange rates
* Operating profit before goodwill amortisation of #12.3 million (2003:
#0.2 million)
* Operating profit after goodwill amortisation of #8.5 million (2003: loss
of #3.8 million)
* Proudfoot Consulting performing well - turnover up 19% to #81.4 million
(2003: #68.2 million); underlying revenue increase was 26% at constant
exchange rates
* Parson Consulting showed significant growth with turnover up 85% at
#37.8 million (2003: #20.4 million); underlying revenue increase was over
100% at constant exchange rates
* Headline earnings per share of 5.0 pence (2003: loss of 0.5 pence)
* Basic earnings per share of 3.0 pence (2003: loss of 2.7 pence)
* Dividend up 34% to 0.67 pence per share (2003: 0.5 pence per share)
* Turnover since the year end in line with last year. Year to date order
book up 10%
Rolf Stomberg, Chairman:
"2004 has delivered the best results for our shareholders in a decade and I am
delighted that we are recommending a 34% increase in the dividend."
Kevin Parry, Chief Executive:
"During 2004 our trading improved significantly, with Parson Consulting doubling
in size and Proudfoot Consulting performing strongly. In 2005, our existing
orders and prospects, together with the expanded service offering, will position
us well to deliver further growth."
For further information please contact:
Management Consulting Group PLC
Kevin Parry Chief Executive 020 7710 5000
Mark Currie Finance Director 020 7710 5000
The Maitland Consultancy
Suzanne Bartch 020 7379 5151 (mobile) 07769 710335
Michelle Jeffery 020 7379 5151 (mobile) 07989 977837
An analyst briefing will be held at the offices of Management Consulting Group
PLC on the 6th floor of Fleet Place House, 2 Fleet Place, Holborn Viaduct,
London, EC4M 7RF on Monday 7 March 2005 at 9.30am.
Notes to Editors
Management Consulting Group PLC comprises two consulting businesses: Proudfoot
Consulting and Parson Consulting.
Proudfoot Consulting helps clients to achieve significantly increased
profitability through the implementation of operational improvements leading to
increased sales, lower operating and overhead costs, greater output and lower
capital expenditure. Its clients include BP, National Australia Bank, Newmont
Mining, Nissan, PSA Peugeot-Citroen and Societe Generale.
Parson Consulting specialises in financial management consultancy. It is free of
auditing conflicts and provides Sarbanes-Oxley compliant services. It has four
service lines: governance and risk management, operational financial management,
strategic financial management and transaction support. Its clients include
Avis, Citigroup, Ford, General Mills, Kingfisher, Shell and Warner Bros.
MANAGEMENT STATEMENT
Overview
2004 2003 2002 2001 2000
#m #m #m #m #m
Turnover
- Continuing operations 119.2 88.6 107.3 72.1 31.7
- Discontinued operations - - - - 6.2
------- ------- ------- ------- -------
119.2 88.6 107.3 72.1 37.9
------- ------- ------- ------- -------
Operating profit/(loss) from continuing
operations before goodwill
amortisation 12.3 0.2 7.6 1.7 (9.5)
------- ------- ------- ------- -------
Headline earnings/(loss)
per share* (pence) 5.0 (0.5) 4.7 1.4 (7.3)
------- ------- ------- ------- -------
Dividend 0.67p 0.50p 0.50p - -
------- ------- ------- ------- -------
* adjusted for effect of capital issue in May 2002
Trading in 2004 improved markedly over the prior year with both businesses
performing well. In particular, the performance of Parson Consulting improved
significantly as a result of continuing investment, the completion of its
restructuring, a broadening of its client base, new service offerings and
increased client spending resulting from US regulatory changes.
Turnover was up 35% in Sterling terms. Underlying growth was even stronger
because the US dollar, in which the majority of our revenues are billed,
weakened relative to Sterling. At 2004 constant exchange rates, the underlying
growth was 44%.
The operating profit before goodwill amortisation increased by #12.1 million to
#12.3 million (2003: #0.2 million), demonstrating the significant operational
gearing in both the Proudfoot Consulting and Parson Consulting businesses.
Exchange rate movements had only a small impact on operating profit because we
largely match the currency of our costs with the currency of our sales.
Headline earnings per share were 5.0 pence (2003: loss of 0.5 pence), the
highest level for 10 years.
In the light of the profitability of the Group and the trading prospects, the
directors are recommending a 34% increase in the final dividend to 0.67 pence
per share.
GROUP CONSULTANCIES
The Group comprises two consultancies: Proudfoot Consulting and Parson
Consulting.
Proudfoot Consulting helps clients to achieve significantly increased
profitability through the implementation of operational improvements leading to
increased sales, lower operating and overhead costs, greater output and lower
capital expenditure. Proudfoot Consulting's appeal is to operationally focused
senior managers intent on executing strategy and achieving stretching goals.
Parson Consulting specialises in financial management consultancy. It is free of
auditing conflicts and provides Sarbanes-Oxley compliant services. It has four
service lines: governance and risk management, operational financial management,
strategic financial management and transaction support. Parson Consulting's
appeal is to Chief Financial Officers intent on achieving the highest standards
of financial management.
Year ended Year ended
31 Dec 2004 31 Dec 2003
--------- ---------
#'000 #'000
--------- ---------
Revenue
Proudfoot Consulting 81,437 68,238
Parson Consulting 37,811 20,411
--------- ---------
119,248 88,649
---------- ---------
Operating profit/(loss) before goodwill
amortisation
Proudfoot Consulting 10,063 4,519
Parson Consulting 2,278 (4,310)
--------- ---------
12,341 209
---------- ----------
The operating profit before goodwill amortisation of Proudfoot Consulting was
#10.1 million, an increase of #5.5 million relative to the prior year and that
of Parson Consulting was #2.3 million, an increase of #6.6 million.
PROUDFOOT CONSULTING
Proudfoot Consulting's turnover was #81.4 million, an increase of 19% over 2003
and 26% in constant currency terms. This represents 68% (2003: 77%) of Group
turnover.
Turnover in the dominant markets of North America and Europe grew strongly;
North America by 26% and Europe by 24%.
The North American business rebounded strongly in 2004 after a difficult 2003.
Significant engagements were undertaken to increase output for natural resource
clients which are benefiting from high commodity prices. In the
telecommunication and financial sectors there was a particular emphasis on
engagements to improve customer service and productivity. These latter two
sectors increased their spending on consulting after several years of cut backs.
The European business was influenced more by the improving general economic
conditions than by particular industry sectors. Earlier in the year the demand
for services increased in the UK, Spain and Portugal and latterly this extended
to France and Germany. Whilst this is encouraging, it may be premature to
conclude that there will be a sustained increase in demand for consulting
services in Europe.
South African businesses are very aware of their need to favour black empowered
suppliers. Accordingly we concluded transactions with two groups of previously
disadvantaged individuals (PDIs) which resulted in the formation of Proudfoot
Consulting Africa (Proprietary) Limited, a company with 51% ownership by PDIs.
This business model takes account of the specific circumstances in South Africa
and will significantly increase our credentials for winning work in that
economy. We are delighted to be the first international consultancy to be
majority black owned.
In Asia Pacific we have established an office in China which will allow us to
serve more readily that growing market place.
The operating profit before goodwill amortisation for the Proudfoot Consulting
business was #10.1 million (2003: #4.5 million). After adding back depreciation,
the EBITDA margin was 13% (2003: 8%) compared with our unchanged target of a
sustainable 15% margin.
PARSON CONSULTING
At the end of the year, we had owned Parson Consulting for some two and a half
years. During 2004 we made significant progress not only by selling the
Sarbanes-Oxley related services that we had developed in 2003 but also from the
introduction of other service offerings.
Parson Consulting's turnover increased by 85% compared with 2003 to #37.8
million. In constant currency the growth was over 100%. The operating profit
before goodwill amortisation was #2.3 million compared with a loss of #4.3
million in 2003. After adding back depreciation, the EBITDA margin was 7%. We
are aiming to achieve a sustainable 15% EBITDA margin, the same as our aim for
Proudfoot Consulting.
We have significantly expanded our US client base on the back of the regulatory
requirements. To ensure that we are not over-reliant on Sarbanes-Oxley related
work, we have developed a range of new services that we started to offer in the
autumn and which have been well received. This is part of a continuing programme
of service developments to meet the increasing demands that are being placed on
finance functions and back offices in large businesses.
As expected, Sarbanes-Oxley work peaked in the fourth quarter of 2004. This work
was mainly assisting larger US clients to comply for the first time with the
requirements of Section 404 of the Sarbanes-Oxley Act. Corporate governance and
risk related work will continue to be an important service in the future. Work
on initial compliance with Sarbanes-Oxley is continuing in 2005 because smaller
US companies and foreign registrants have a later deadline for compliance.
Further, clients will need assistance with the continuing compliance obligations
and will wish to use dedicated software for this purpose. Accordingly, we have
entered into a partnership agreement with Certus, a company that has developed
specialised compliance software. This allows us to be at the leading edge of
future work in this area.
The turn-around of Parson Consulting has now been completed in line with our
original timetable after lagging by some months in the earlier part of 2003. Key
elements of the turn-around have been investment in senior people, investment in
service offerings, process improvements installed by Proudfoot Consulting, fully
valuing our services and developing the capability to undertake larger and more
complex engagements. We are continuing to invest further in people, service
lines, training and geographies.
Following the success of the London office which was opened at the tail end of
2003, we are opening two additional offices in the United States as well as
offices in Paris and Sydney. The latter two will be based in our existing
Proudfoot Consulting offices in those cities which will reduce the additional
real estate and other infrastructure costs of the start-ups.
Earnings
The net finance expense was less than #0.1 million, little changed from 2003.
Interest income was offset by the discount unwind associated with the closed US
retirement benefit plans.
The tax charge was #3.0 million (2003: #1.1 million) giving an effective tax
rate on pre-tax profits before goodwill amortisation of 24%. The tax charge
benefits from the utilisation of brought forward tax losses, particularly in the
United States, but the Group suffers from minimum tax charges in certain
jurisdictions and has taxable income in others.
The basic earnings per share were 3.0 pence (2003: loss of 2.7 pence). The
headline earnings per share, which adds back goodwill amortisation to the basic
earnings per share, were 5.0 pence (2003: loss of 0.5 pence).
Balance sheet
Goodwill amounts to #62.3 million (2003: #69.2 million). Goodwill has reduced
due to the annual amortisation, the weakness of the US dollar relative to
Sterling and the write-back of deferred consideration that did not become
payable in connection with acquisitions.
The cash balance increased by #4.8 million to #14.5 million at 31 December 2004
(31 December 2003: #9.7 million). The increase in cash is attributable to
trading profits, offset by the payment of deferred consideration, contributions
to the closed US defined benefit pension plan, tax and dividends.
The balance sheet liability in respect of the closed US retirement benefit plans
reduced by #1.8 million to #11.4 million as a result of funding during the year,
foreign exchange movements and an improvement in the value of assets, offset in
part by the effect of the actuary adopting more conservative actuarial
assumptions.
Dividend
The board is delighted to recommend a final dividend of 0.67 pence per share
(2003: 0.5 pence per share) which will be payable on 25 May 2005 to shareholders
on the register on 29 April 2005.
International Financial Reporting Standards
The Group will be reporting its results in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union from 1
January 2005.
Note 12 presents and explains the expected consolidated results of the Group
converted from UK Generally Accepted Accounting Principles (UK GAAP) to an IFRS
basis for the year ended 31 December 2004, and includes the restated opening
balance sheet at 1 January 2004, which is the transition date for the Group's
adoption of IFRS.
The transition to IFRS results in an increase in both operating profit and
profit before tax for the year ended 31 December 2004 of #3.9 million compared
to UK GAAP. This is due to the removal of goodwill amortisation (#3.8 million)
and deferral of long-term employee benefits (#0.5 million), offset in part by a
new charge for employee share options in 2004 of #0.4 million.
Equity shareholders' funds at 31 December 2004 increase by #5.5 million under
IFRS compared to UK GAAP. This reflects the adjustments noted above which, after
tax, increase the retained profit for the year by #4.3 million, and the reversal
of the proposed year end dividend of #1.2 million which is recorded when
declared under IFRS.
Basic earnings per share are 2.1 pence higher under IFRS at 5.1 pence per share.
People
During the course of the year we have recruited many employees to the Group. We
are grateful for the contribution that all employees have made and we are
pleased by the part that they have all played in the continued development of
Proudfoot Consulting and Parson Consulting.
As previously announced, Stephen Purse has resigned as a director with effect
from 7 March 2005 to become the finance director of Clifford Chance LLP. Gareth
Jones, who has completed his three year term as a non-executive director, will
not be standing for re-election at the forthcoming Annual General Meeting. We
are grateful for their important contributions to the development of the Group
and wish them well for the future. Also as previously announced, Mark Currie
joined the board on 1 March 2005 and succeeds Stephen Purse as the finance
director. He will offer himself for re-election at the forthcoming Annual
General Meeting.
In addition, Alan Barber is offering himself for election as a non-executive
director at the forthcoming Annual General Meeting. He was a partner in KPMG LLP
for 25 years until he retired last year. He provided audit and other services to
many of KPMG's largest clients. He has not previously been involved in providing
services to Management Consulting Group PLC. He is currently a non-executive
director of Teather and Greenwood Holdings plc, lastminute.com plc and the
Animal Health Institute. It is intended that he will succeed Gareth Jones as
Chairman of the Audit Committee.
Prospects
Group revenue in the first two months of 2005 has matched the level of the first
two months of last year. We are continuing to invest in both Proudfoot
Consulting and Parson Consulting to deliver growth in 2005 and the effect of
this is already visible in the cumulative order book of both Proudfoot
Consulting and Parson Consulting, which is some 10% up since the beginning of
the year.
The board expects that in 2005, Parson Consulting will contribute an increased
proportion of the Group's turnover, resulting in a broader mix of revenue than
previously. Parson Consulting's revenue in the first two months of 2005 is in
line with the run rate for the second half of 2004, even though the second half
of last year represented the peak of the work associated with our clients'
Sarbanes-Oxley initial compliance. This has been achieved as a result of steps
taken last year to broaden the service offerings provided by Parson Consulting,
which have been well received due to clients' continuing investment in finance
functions.
The board is pleased with the 2004 results of both Proudfoot Consulting and
Parson Consulting and we anticipate further progress in the current calendar
year.
Dr Rolf Stomberg
Chairman
Kevin Parry
Chief Executive
GROUP PROFIT AND LOSS ACCOUNT
year ended 31 December 2004 2003
note #'000 #'000
--------- ---------
Turnover 2 119,248 88,649
Cost of sales (60,270) (45,137)
--------- ---------
Gross profit 58,978 43,512
Selling costs (30,362) (28,303)
--------- ---------
Administrative expenses
Excluding goodwill amortisation (16,275) (15,000)
Goodwill amortisation (3,792) (4,029)
--------- ---------
Total administrative expenses (20,067) (19,029)
Operating profit/(loss):
--------- ---------
Before goodwill amortisation 12,341 209
After goodwill amortisation 8,549 (3,820)
--------- ---------
Total operating profit/(loss) 2,8 8,549 (3,820)
Finance costs 3 (34) (46)
--------- ---------
Profit/(Loss) on ordinary activities before taxation 2 8,515 (3,866)
Tax on profit/(loss) on ordinary activities (2,995) (1,062)
--------- ---------
Profit/(Loss) on ordinary activities after taxation 5,520 (4,928)
Equity dividends 4 (1,221) (944)
--------- ---------
Retained profit/(loss) for the financial year 4,299 (5,872)
--------- ---------
Earnings/(Loss) per share - pence 7
Basic 2.98 (2.68)
Diluted 2.96 (2.68)
Headline 5.03 (0.49)
--------- ---------
There is no material difference between the results reported on the historical
cost basis and those disclosed in the profit and loss account.
Turnover and operating results in both the current and prior years relate to
continuing operations.
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
year ended 31 December 2004 2003
note #'000 #'000
-------- --------
Profit/(Loss) for the financial year 5,520 (4,928)
Actuarial (loss)/gain relating to retirement benefit
schemes 10 (1,696) 285
Currency translation differences on foreign currency
net investments (1,745) 250
-------- --------
Total recognised gains and losses relating to the year 2,079 (4,393)
-------- --------
GROUP RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
year ended 31 December 2004 2003
#'000 #'000
--------- --------
Profit/(Loss) for the financial year 5,520 (4,928)
Other recognised gains and losses during the year (3,441) 535
--------- --------
2,079 (4,393)
Equity dividends (1,221) (944)
Issue of share capital
Deferred consideration for acquisitions 27 1,281
Share option schemes 48 -
Movement in reserve for shares to be issued (1,981) (7,261)
--------- --------
Net decrease in shareholders' funds (1,048) (11,317)
Opening shareholders' funds 44,708 56,025
--------- --------
Closing shareholders' funds 43,660 44,708
--------- --------
GROUP BALANCE SHEET
as at 31 December 2004 2003
note #'000 #'000 #'000 #'000
------- ------- ------- -------
Fixed assets
Intangible assets 62,317 69,206
Tangible assets 1,789 1,649
------- -------
Total fixed assets 64,106 70,855
Current assets
Debtors 12,575 7,910
Cash at bank and in hand and
deposits 14,510 9,738
------- -------
27,085 17,648
Creditors: amounts falling due
within one year (30,718) (24,015)
------- -------
Net current liabilities (3,633) (6,367)
------- -------
Total assets less current
liabilities 60,473 64,488
Creditors: amounts falling due
after more than one year (2,545) (3,387)
Provisions for liabilities and
charges (2,885) (3,180)
------- -------
Net assets excluding retirement
benefits liability 55,043 57,921
Retirement benefits liability 10 (11,383) (13,213)
------- --------
Net assets including retirement
benefits liability 43,660 44,708
------- -------
Capital and reserves
Called up share capital 47,256 47,198
Share premium account 38,026 38,009
Shares to be issued 185 2,166
Own shares held by employee share trust (970) (970)
Other reserves (1,336) 409
Profit and loss account (39,501) (42,104)
------- -------
Shareholders' funds - equity 43,660 44,708
------- -------
GROUP CASH FLOW STATEMENT
as at 31 December 2004 2003
note #'000 #'000 #'000 #'000
------- ------- ------- -------
Net cash inflow/(outflow) from
operating activities 8 12,048 (4,957)
Returns on investments and
servicing of finance
Interest received 206 247
------- -------
Net cash inflow from returns on
investments and servicing of finance 206 247
Taxation (3,806) (553)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (1,438) (594)
Proceeds from sale of tangible
fixed assets 117 205
------- -------
Net cash outflow from capital
expenditure and financial
investment (1,321) (389)
Acquisitions and disposals
Payments to acquire subsidiary
undertakings (1,074) (5,189)
------- -------
Net cash outflow from acquisitions
and disposals (1,074) (5,189)
Equity dividends paid (925) (911)
------- -------
Cash inflow / (outflow)
before use of liquid resources
and financing
5,128 (11,752)
Financing
Net proceeds from issue of
ordinary shares 48 -
------- -------
Net cash inflow from financing 48 -
------- -------
Increase/(Decrease) in cash in the
year 9 5,176 (11,752)
------- -------
NOTES
1.Accounting policies
The financial information, with the exception of note 12, has been prepared on
the basis of the accounting policies set out in the Annual Report and Accounts
for the year ended 31 December 2003. Note 12 shows the impact of International
Financial Reporting Standards (IFRS) on the results for the year and restates
the balance sheets under IFRS at the transition date of 1 January 2004 and at 31
December 2004.
2. Segmental information
(a) Turnover
The analysis of turnover by geographical origin is as follows:
2004 2003
Continuing operations #'000 #'000
--------- ---------
North America 77,656 54,457
Europe 33,670 24,650
Africa 3,791 4,698
Asia Pacific 4,131 4,844
--------- ---------
119,248 88,649
--------- ---------
There is no material difference between turnover by geographical origin and
turnover by geographical destination.
(b) Profit/(Loss) on ordinary activities before taxation
The analysis of the profit/(loss) by geographical region is as follows:
2004 2003
Continuing operations #'000 #'000
--------- ---------
North America 11,558 2,736
Europe (2,161) (6,899)
Africa (728) 25
Asia Pacific (120) 318
--------- ---------
Total operating profit/(loss) 8,549 (3,820)
Finance costs (34) (46)
--------- ---------
Group profit/(loss) on ordinary activities before
taxation 8,515 (3,866)
--------- ---------
Management consultancy is the Group's sole business segment.
3.Finance costs
2004 2003
#'000 #'000
-------- --------
Interest receivable and similar income 421 859
Interest payable and similar charges (183) (180)
Other finance charges (272) (725)
-------- --------
(34) (46)
-------- --------
4. Equity dividends proposed
2004 2003
Equity shares #'000 #'000
-------- --------
Proposed final dividend of 0.67p (2003: 0.5p) 1,221 944
-------- --------
The directors recommend the payment of a final dividend of 0.67 pence to be paid
on 25 May 2005 to ordinary shareholders on the register on 29 April 2005. The
dividend is not payable on shares held in the employee share trust, which has
waived its entitlement to dividends. The amount of the 2004 dividend waived was
#0.03 million (2003: #0.02 million).
5. Earnings before interest, tax, depreciation and amortisation
2004 2003
#'000 #'000
-------- --------
Operating profit/(loss) 8,549 (3,820)
Depreciation 1,164 1,223
Amortisation of goodwill 3,792 4,029
-------- --------
EBITDA 13,505 1,432
-------- --------
6. Staff numbers and costs
The average number of persons employed by the Group (including directors) during
the year, analysed by category, was as follows:
2004 2003
-------- --------
Sales and marketing 181 178
Consultants 454 420
Support staff 122 121
-------- --------
757 719
-------- --------
The aggregate payroll costs of these persons were as follows:
2004 2003
#'000 #'000
-------- --------
Wages and salaries 58,231 50,332
Social security costs 6,346 5,752
Other pension costs 800 828
-------- --------
65,377 56,912
-------- --------
7. Earnings per share
The basic earnings per share are calculated by dividing the profit after tax by
the weighted average number of Ordinary Shares in issue during the year after
deducting 3,879,584 shares held by the Group in an employee share trust.
For diluted earnings per share, the weighted average number of Ordinary Shares
in issue is adjusted to assume conversion of all potentially dilutive Ordinary
Shares. The Group's dilutive instruments are share options granted to employees
where the exercise price is less than the average market price during the year.
Dilution is not recognised where continuing operations are loss making.
The average market price of Ordinary Shares for the year ended 31 December 2004
was 41.3 pence (31 December 2003: 36.9 pence).
Headline earnings per share has been calculated in accordance with the
definition in the Institute of Investment Management Research ('IIMR') Statement
of Practice No. 1, 'The Definition of IIMR Headline Earnings'.
Reconciliations of the earnings and weighted average number of shares used in
the calculations are set out below:
2004 2003
Weighted Weighted Earnings
average Earnings average per share
number of per share number of amount
Earnings shares amount Earnings shares
(#'000) (million) (pence) (#'000) (million) (pence)
-------- -------- -------- -------- -------- --------
Basic EPS
Profit/(Loss)
attributable to
shareholders 5,520 185.0 2.98 (4,928) 183.7 (2.68)
Effect of
dilutive
securities
Options - 1.8 (0.02) - - -
-------- -------- -------- -------- -------- --------
Fully diluted
EPS 5,520 186.8 2.96 (4,928) 183.7 (2.68)
-------- -------- -------- -------- -------- --------
Basic EPS 5,520 185.0 2.98 (4,928) 183.7 (2.68)
Goodwill
amortisation 3,792 - 2.05 4,029 - 2.19
-------- -------- -------- -------- -------- --------
Headline EPS 9,312 185.0 5.03 (899) 183.7 (0.49)
-------- -------- -------- -------- -------- --------
8. Reconciliation of operating profit/(loss) to net cash flow from operating
activities
2004 2003
#'000 #'000
-------- --------
Operating profit/(loss) 8,549 (3,820)
Depreciation 1,164 1,223
Amortisation of goodwill 3,792 4,029
Management long-term incentive plan (757) (1,919)
Adjustment for pension funding (2,911) (3,029)
(Increase)/Decrease in debtors (4,053) 534
Increase/(Decrease) in creditors 6,374 (2,043)
(Decrease)/Increase in provisions (110) 68
-------- --------
Net cash inflow/(outflow) from operating activities 12,048 (4,957)
-------- --------
9. Analysis of net funds
Net funds at Cash flow Exchange Net funds at
1 Jan 2004 movement 31 Dec 2004
#'000 #'000 #'000 #'000
--------- --------- --------- ---------
Cash at bank 9,738 5,176 (404) 14,510
--------- --------- --------- ---------
10. Retirement benefits
The retirement benefits liability relates to the closed US defined benefits
pensions scheme and to the closed US post-retirement medical benefits plan.
Entitlement to additional benefit accruals under the US defined benefits pension
scheme ceased on 31 December 2001.
The US post-retirement medical benefits plan relates to certain former employees
who retired prior to 30 June 1995 and to a small number of current and former
employees who were employed at that date.
2004 2003
#'000 #'000
-------- --------
Retirement benefits liability at start of year (13,213) (17,290)
Pension contributions 2,790 1,315
Payment of medical benefits 122 140
Service costs (1) 1,574
Net finance expense (272) (725)
Actuarial (loss)/gain (1,696) 285
Foreign exchange translation 887 1,488
-------- --------
Retirement benefits liability at end of year (11,383) (13,213)
-------- --------
11. Statutory accounts
The above financial information does not constitute statutory accounts as
defined in Section 240 of the Companies Act 1985. The financial information has
been extracted without material adjustment from the consolidated financial
statements of Management Consulting Group PLC, which have been audited. The
auditors have made a report under Section 235 of the Companies Act 1985 in
respect of the statutory consolidated accounts for the years ended 31 December
2004 and 31 December 2003. Their reports were unqualified within the meaning of
Section 262(1) of the Companies Act 1985 and did not contain a statement under
Section 237(2) or (3) of that Act.
Statutory accounts for the financial year ended 31 December 2003 have been
delivered to the Registrar of Companies pursuant to Section 242 of the Act
whereas those for 2004 will be delivered following the Annual General Meeting.
12. Restatement of financial information under IFRS
IFRS will apply for the first time in the Group's Annual Report for the year
ending 31 December 2005. Consequently, the Group's financial results for the six
months ending 30 June 2005 will be prepared under IFRS.
This note presents and explains the consolidated results of the Group converted
from UK Generally Accepted Accounting Principles (UK GAAP) to an IFRS basis for
the year ended 31 December 2004. It summarises on an IFRS basis:
* the consolidated income statement for the year ended 31 December 2004;
* the consolidated opening balance sheet at 1 January 2004, which is the
transition date for the Group's adoption of IFRS;
* the consolidated balance sheet at 31 December 2004; and
* the consolidated cash flow statement for the year ended 31 December
2004.
The standards giving rise to changes to the Group's consolidated results on
transition from UK GAAP to IFRS, and their financial impact, are as follows:
IFRS 2 Share-based Payment
Under IFRS 2, the Group recognises a charge for the fair value of outstanding
share options granted to employees after 7 November 2002. The charge has been
calculated using the stochastic option pricing model and the resulting cost has
been charged to the income statement over the relevant option vesting periods,
adjusted to reflect actual and expected levels of vesting. There was no charge
to the profit and loss account in 2004 under UK GAAP in relation to share
options granted to employees. The impact of IFRS 2 is a reduction in retained
earnings as at 1 January 2004 of #0.2 million and a charge of #0.4 million for
the year ended 31 December 2004. A deferred tax asset of #0.2 million is
recognised in relation to the share option scheme.
IFRS 3 Business Combinations
Under IFRS, goodwill is no longer amortised but held at carrying value in the
balance sheet and tested annually for impairment (with a specific requirement to
be tested at the date of transition) and when there are indications of
impairment. The goodwill amortisation under UK GAAP of #3.8 million charged
during the year has been reversed under IFRS. All goodwill has been tested for
impairment for the year ended 31 December 2004 and at the transition date in
accordance with IFRS, and no adjustment was deemed necessary.
Under the transitional rules of IFRS 1, the Group has taken advantage of the
option not to apply IFRS 3 retrospectively to business combinations that took
place before the date of transition. As a result, goodwill arising from past
business combinations is recorded initially in the opening balance sheet at the
amortised carrying value under UK GAAP on that date.
IAS 10 Events after the Balance Sheet Date
IAS 10 requires that dividends are recognised in the period in which they are
declared. This is different to UK GAAP where the proposed dividend is recognised
in the profit and loss account. The proposed final dividend for 2003 of #0.9
million has been reversed out of the opening balance sheet and recorded as the
amount paid in the year ended 31 December 2004. Similarly, the proposed final
dividend for 2004 of #1.2 million has been reversed from the income statement.
IAS 19 Other Long-term Benefits
Deferred employee bonuses awarded in respect of the year ended 31 December 2004
but not payable in cash and shares until 31 December 2007, are accounted for
under IAS 19 as deferred long-term benefits, and will be expensed to the income
statement over the subsequent three year deferral period under IFRS. Under UK
GAAP they are charged in full to the profit and loss account in 2004. This
results in a credit to the 2004 income statement of #0.5 million, included in
"Other adjustments", and a corresponding reduction in liabilities at 31 December
2004. Deferred tax of #0.2 million is provided under IFRS in respect of the
deferred employee bonuses.
IAS 38 Intangible Assets
IAS 38 requires computer software costs, including development costs, to be
classified as intangible assets. Capitalised software of #0.4 million is
reclassified at 31 December 2004 as intangible assets, which continues to be
amortised over three years or the life of the software contract if shorter. The
opening balance sheet under IFRS includes a similar reclassification of #0.4
million.
IAS 21 The Effects of Changes in Foreign Exchange
Under IFRS, translation differences arising from the date of transition to IFRS
that are permitted to be taken to reserves must be tracked in a separate foreign
exchange reserve. Foreign exchange taken to reserves relating to translation of
foreign equity investments must be recycled to the income statement on disposal
of the investment.
The Group has elected to take the exemption, permitted under the transitional
rules, of not applying IAS 21 retrospectively; this has allowed the Group to
reset to zero its historic foreign exchange reserve at 1 January 2004 of #12.3
million by means of a reclassification to retained earnings. The gain or loss on
any subsequent disposal of a foreign subsidiary will be adjusted only by those
accumulated translation adjustments arising after 1 January 2004.
(a) Income statement for the year ended 31 December 2004
Previously IFRS 2 IFRS 3 IAS 10 Other Restated
reported share Business Dividends under IFRS
under based combin-
UK GAAP payments ations
#'000 #'000 #'000 #'000 #'000 #'000
------- ------- ------- ------- ------- -------
Revenue 119,248 - - - - 119,248
Cost of sales (60,270) (144) - - - (60,414)
------- ------- ------- ------- ------- -------
Gross profit 58,978 (144) - - - 58,834
- - -
Distribution
costs (30,362) (86) - - - (30,448)
Goodwill
amortisation (3,792) - 3,792 - - -
Administrative
expenses
excluding
goodwill
amortisation (16,275) (209) - - 534 (15,950)
------- ------- ------- ------- ------- -------
Operating
profit 8,549 (439) 3,792 - 534 12,436
Finance (34) - - - - (34)
costs ------- ------ ------- ------- ------- -------
Profit before
tax 8,515 (439) 3,792 - 534 12,402
Tax (2,995) 160 - - (190) (3,025)
------- ------- ------- ------- ------- -------
Profit after
tax 5,520 (279) 3,792 - 344 9,377
Dividends (1,221) - - 296 - (925)
------- ------- ------- ------- ------- -------
Profit for the
year 4,299 (279) 3,792 296 344 8,452
------- ------- ------- ------- ------- -------
Earnings per
share - basic 2.98p 5.07p
Earnings per
share - diluted 2.96p 5.02p
------- -------
(b) Balance sheet as at 1 January 2004 (date of transition)
Previously IFRS2 IAS 10 IAS 38 IAS 21 Restated
reported share Dividends Intangible Foreign under
under based assets exchange IFRS
UK GAAP payments reserve
#'000 #'000 #'000 #'000 #'000 #'000
------- ------- -------- ------- ------- -------
Non-current
assets
Goodwill 69,206 - - - - 69,206
Other
intangible
assets - - - 390 - 390
Property,
plant and
equipment 1,649 - - (390) - 1,259
------- ------- -------- ------- ------- -------
Total
non-current
assets 70,855 - - - - 70,855
------- ------- -------- ------- ------- -------
Current
assets
Trade and
other
receivables 7,910 - - - - 7,910
Cash and cash
equivalents 9,738 - - - - 9,738
------- ------- -------- ------- ------- -------
Total current
assets 17,648 - - - - 17,648
------- ------- -------- ------- ------- -------
Total
assets 88,503 - - - - 88,503
------- ------- -------- ------- ------- -------
Current
liabilities
Trade and
other (19,084) - - - - (19,084)
payables
Dividend to
shareholders (944) - 944 - - -
Current tax
liability (3,987) - - - - (3,987)
------- ------- -------- ------- ------- -------
Total current
liabilities (24,015) - 944 - - (23,071)
------- ------- -------- ------- ------- -------
Total assets
less current
liabilities 64,488 - 944 - - 65,432
------- ------- -------- ------- ------- -------
Non-current
liabilities
Retirement
benefits
obligation (13,213) - - - - (13,213)
Non-current
tax
liabilities (2,359) - - - - (2,359)
Deferred tax
liabilities (1,296) - - - - (1,296)
Long-term
provisions (1,884) - - - - (1,884)
Other
non-current
payables (1,028) - - - - (1,028)
------- ------- -------- ------- ------- -------
Total
non-current
liabilities (19,780) - - - - (19,780)
------- ------- -------- ------- ------- -------
Total assets
less total
liabilities 44,708 - 944 - - 45,652
------- ------- -------- ------- ------- -------
Equity
Share
capital 47,198 - - - - 47,198
Share premium
account 38,009 - - - - 38,009
Shares to be
issued 2,166 - - - - 2,166
Share
compensation
reserve - 177 - - - 177
Own shares (970) - - - - (970)
Hedging and
translation
reserves (12,338) - - - 12,338 -
Other
reserves 12,747 - - - - 12,747
Retained
earnings (42,104) (177) 944 - (12,338) (53,675)
------- ------- -------- ------- ------- -------
Total 44,708 - 944 - - 45,652
equity ------- ------- -------- ------- ------- -------
(c) Balance sheet as at 31 December 2004
Previously IFRS 2 IFRS 3 IAS 10
reported Share Business Dividends
under based Combinations
UK GAAP payments
#'000 #'000 #'000 #'000
---------- -------- -------- --------
Non-current assets
Goodwill 62,317 - 3,792 -
Other intangible assets - - - -
Property, plant
and equipment 1,789 - - -
---------- -------- -------- --------
Total
non-current
assets 64,106 - 3,792 -
---------- -------- -------- --------
Current assets
Trade and other
receivables 12,575 160 - -
Cash and cash
equivalents 14,510 - - -
---------- -------- -------- --------
Total current
assets 27,085 160 - -
---------- -------- -------- --------
Total assets 91,191 160 3,792 -
---------- -------- -------- --------
Current liabilities
Trade and other
payables (24,756) - - -
Dividend to
shareholders (1,240) - - 1,240
Current tax
liability (4,722) - - -
---------- -------- -------- --------
Total current
liabilities (30,718) - - 1,240
---------- -------- -------- --------
Total assets
less current
liabilities 60,473 160 3,792 1,240
---------- -------- -------- --------
Non-current liabilities
Retirement
benefits
obligation (11,383) - - -
Non-current tax
liabilities (1,859) - - -
Deferred tax
liabilities (1,111) - - -
Long-term
provisions (1,774) - - -
Other
non-current
payables (686) - - -
---------- -------- -------- --------
Total
non-current
liabilities (16,813) - - -
---------- -------- -------- --------
Total assets
less total
liabilities 43,660 160 3,792 1,240
---------- -------- -------- --------
Equity
Share capital 47,256 - - -
Share premium
account 38,026 - - -
Shares to be
issued 185 - - -
Share
compensation
reserve - 616 - -
Own shares (970) - - -
Hedging and
translation
reserves (14,083) - - -
Other reserves 12,747 - - -
Retained
earnings (39,501) (456) 3,792 1,240
---------- -------- -------- --------
Total equity 43,660 160 3,792 1,240
---------- -------- -------- --------
IAS 38 IAS 21 Other Restated
Intangible Foreign Under
Assets Exchange IFRS
Reserve
#'000 #'000 #'000 #'000
---------- -------- -------- --------
Non-current assets
Goodwill - - - 66,109
Other intangible
assets 392 - - 392
Property, plant and
equipment (392) - - 1,397
---------- -------- -------- --------
Total non-current
assets - - - 67,898
---------- -------- -------- --------
Current assets
Trade and other
receivables - - - 12,735
Cash and cash
equivalents - - - 14,510
---------- -------- -------- --------
Total current assets - - - 27,245
---------- -------- -------- --------
Total assets - - - 95,143
---------- -------- -------- --------
Current liabilities
Trade and other
payables - - 534 (24,222)
Dividend to shareholders - - - -
Current tax
liability - - - (4,722)
---------- -------- -------- --------
Total current
liabilities - - 534 (28,944)
---------- -------- -------- --------
Total assets less
current liabilities - - 534 66,199
---------- -------- -------- --------
Non-current liabilities
Retirement benefits
obligation - - - (11,383)
Non-current tax
liabilities - - - (1,859)
Deferred tax
liabilities - - (190) (1,301)
Long-term provisions - - - (1,774)
Other non-current
payables - - - (686)
---------- -------- -------- --------
Total non-current
liabilities - - (190) (17,003)
---------- -------- -------- --------
Total assets less
total liabilities - - 344 49,196
---------- -------- -------- --------
Equity
Share capital - - - 47,256
Share premium
account - - - 38,026
Shares to be issued - - - 185
Share compensation
reserve - - - 616
Own shares - - (970)
Hedging and
translation reserves - 12,338 - (1,745)
Other reserves - - - 12,747
Retained earnings - (12,338) 344 (46,919)
---------- -------- -------- --------
Total equity - - 344 49,196
---------- -------- -------- --------
(d) Cash flow statement for the year ended 31 December 2004
Previously Effect of Restated
Reported transition to under
under IFRS IFRS
UK GAAP for the year
ended
31 December
2004
#'000 #'000 #'000
-------- ----------- --------
Cash flow from operating activities 12,048 (3,806) 8,242
Cash flow from investing activities 206 (2,395) (2,189)
Taxation (3,806) 3,806 -
Capital expenditure and financial
investment (1,321) 1,321 -
Acquisitions and disposals (1,074) 1,074 -
-------- ----------- --------
6,053 - 6,053
Cash flow from financing activities 48 (925) (877)
Equity dividends paid (925) 925 -
-------- ----------- --------
Net increase in cash and cash 5,176 - 5,176
equivalents
Cash and cash equivalents at beginning
of year 9,738 - 9,738
Effect of foreign exchange rates (404) - (404)
-------- ----------- --------
Cash and cash equivalents at end of
year 14,510 - 14,510
-------- ----------- --------
13. Annual Report
The Group's Annual Report and Accounts will be sent to shareholders on 22 March
2005 and will be available at the Company's registered office at Fleet Place
House, 2 Fleet Place, London, EC4M 7RF, United Kingdom and on our website:
www.mcgplc.com.
14. Annual General Meeting
The Annual General Meeting will be held at the Institute of Directors, 116 Pall
Mall, London, SW1Y 5ED on Tuesday 26 April 2005 at 10am.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR PKQKPDBKBDNK
Management Consulting (LSE:MMC)
Historical Stock Chart
From Jun 2024 to Jul 2024
Management Consulting (LSE:MMC)
Historical Stock Chart
From Jul 2023 to Jul 2024
