MMC Management Consulting Group Plc

 

TIDMMMC 
 
RNS Number : 7121U 
Management Consulting Group PLC 
30 June 2009 
 

30 June 2009 
 
 
 
 
Management Consulting Group PLC 
 
 
Pre-Close Trading Update 
 
 
 
 
Pre-Close Trading Update 
 
 
Management Consulting Group PLC ('MCG' or 'the Group') issues the following 
pre-close period trading update ahead of the announcement of the Group's 2009 
interim results which are due to be announced on 3 August 2009. 
 
 
Trading by Division 
 
 
Alexander Proudfoot (formerly Proudfoot Consulting) has remained robust in the 
first half of 2009, particularly in the United States. The vast majority of its 
business remained the provision of 'cost base improvement' projects, emphasising 
the counter-cyclical nature of its offering. Revenue to June 2009 is expected to 
be broadly in line with 2008 but underlying* operating profit is expected to be 
higher than last year due to a combination of favourable exchange rates and 
benefits from the restructuring projects. 
 
 
Ineum Consulting (combining Ineum Consulting, Parson Consulting and Viaduct 
Consulting as reported in 2008) has been resilient with the French business 
performing particularly well. As previously reported, trading in the 'legacy' 
Parson US business was very slow at the beginning of the year and this business 
has now been closed. Losses in the first half of 2009 for this legacy business 
are expected to be around GBP1.6m and the underlying operating profit of Ineum 
Consulting as a whole is expected to be broadly in line with last year. 
 
 
As disclosed in both the preliminary results in March and the Interim Management 
Statement in April, trading in Kurt Salmon Associates has been adversely 
affected by the current economic downturn in both its consumer products and 
health care markets. This trend has continued throughout the first half of 2009. 
Although there has been a slight improvement in the order book of the consumer 
products division in the second quarter, the health care business, which relies 
on capital expenditure in the US health care sector, continues to find its 
market challenging as clients conserve cash pending conclusion of the important 
national health reform debate later in the year. As a result of these factors, 
revenue for the first half of 2009 is expected to be between 20% and 25% below 
the corresponding figure for 2008 (and between 35% and 40% down in constant 
exchange rate terms) and the division is anticipated to be loss making for this 
period. However, Kurt Salmon Associates expects to return to profitability in 
the second half of the year and, although statistics for the period are not yet 
available, management does not believe it has lost market share. 
 
 
Restructuring Programmes 
 
 
The management of MCG has continued to be proactive in its restructuring of the 
business to mitigate the effects of the economic downturn on the short and 
longer term results of the business. Several programmes have been undertaken in 
the first half of 2009 with the result that the numbers employed worldwide in 
the Group are expected to be around 1,850 at the end of June, down around 300 or 
14% from the number employed at the end of 2008 and around 500 or 21% from 
twelve months ago. The majority of this reduction has occurred in the US. 
 
 
As previously reported the 'legacy' Parson US business has now been closed and 
it is only the CBH Consulting business, acquired in 2007, that remains active in 
this space. This has also involved a restructuring of the IT infrastructure in 
the US that used to be run in tandem with the Alexander Proudfoot systems. 
 
 
Also as previously reported Kurt Salmon Associates has undertaken a substantial 
redundancy programme. In view of the continued soft trading this programme has 
been extended to cover both the US and European businesses. 
 
 
In addition Alexander Proudfoot has taken the decision to close its Australian 
office due to the completion of its ongoing projects. The Australian business 
will now largely be run out of the global Natural Resource Centre of Excellence. 
As a result Ineum Consulting will be relocating its Sydney office to smaller 
premises. Alexander Proudfoot has also undertaken redundancy programmes, 
particularly in Europe where demand has been weak. 
 
 
As a result of the above measures, non-recurring costs for the first half of 
2009 are expected to be in the region of GBP6m to GBP7m (2008: GBP11.0m). 
 
 
Amortisation of intangibles is estimated to be approximately GBP1.4m (2008: 
GBP1.1m). No charge is expected relating to the impairment of acquired goodwill 
(2008: GBP26.7m). Underlying earnings per share for the first half of 2009 is 
expected to be between 1.8p and 2.2p per share (2008: 2.8p) 
 
 
Net Debt 
 
 
Net debt is expected to be around GBP80m at 30 June 2009 (2008: GBP78.9m). At 
constant exchange rates this represents a reduction of about GBP15m in the past 
twelve months, demonstrating the continued cash generative nature of the 
business despite the difficult trading conditions. The Group expects to be 
comfortably within its covenant and facility limits. The seasonal nature of the 
Group's working capital cycle means that net debt generally increases in the 
first half of the year and decreases in the second half. 
 
 
Outlook 
 
 
While the Group has benefited in the first half of 2009 from the 
counter-cyclical nature of some of its businesses, the savings from previous 
restructuring programmes and the weakness in Sterling, this has been offset by 
the tough market conditions in the Kurt Salmon Associates business in 
particular. As a result revenue and underlying operating profit for the six 
months to 30 June 2009 are expected to be below those for the first half of 
2008. The Group's revenue from continuing operations for the six-month period 
ended 30 June 2009 is estimated to be in the range of GBP150m to GBP160m (2008: 
GBP166.7m). Underlying operating profit is expected to be in the range of 
GBP11.5m to GBP12.5m (2008: GBP15.1m). 
 
 
The recent strengthening of Sterling will, if it continues, adversely affect the 
reported revenue and profit of the Group for the full year but will reduce the 
net debt, which is held predominantly in US Dollars and Euros. The second half 
of 2009 also faces the challenge of being compared to a very strong second half 
performance in 2008, and the Group will start the period with an order book 
about ten percent lower than twelve months ago. As usual for MCG, visibility of 
this order book remains limited to three to four months and so forecasting 
results for the full year remains difficult although, given the above factors, 
the Board recognises that the Group may come in below market consensus for 
2009. 
 
 
Management continues to take decisions appropriate to balance its short term 
profitability with its longer term prospects. Shareholder returns remain 
uppermost in the minds of the Directors and the Board continues to review and 
consider its options regularly as it looks to maximise these returns. 
 
 
*The term 'underlying' is defined as '"before non-recurring items, the 
amortisation of acquired intangible assets and the impairment of acquired 
goodwill from continuing operations." 
 
 
For further information please contact: 
 
 
+-----------------------------------------+-----------------------------------------+ 
| Management Consulting Group PLC         | Tel: +44 20 7710 5000                   | 
+-----------------------------------------+-----------------------------------------+ 
| Craig Smith, Finance Director           |                                         | 
+-----------------------------------------+-----------------------------------------+ 
|                                         |                                         | 
+-----------------------------------------+-----------------------------------------+ 
| Financial Dynamics                      | Tel: +44 20 7269 7242                   | 
+-----------------------------------------+-----------------------------------------+ 
| Ben Atwell                              |                                         | 
+-----------------------------------------+-----------------------------------------+ 
 
 
Notes to editors: 
 
 
Management Consulting Group PLC (MMC.L) is an umbrella organisation for a 
diverse range of consulting and professional services offerings. 
 
 
MCG operates through three divisions: Ineum Consulting, Kurt Salmon 
Associates, 
 and Alexander Proudfoot. Ineum Consulting provides consulting 
services with industry expertise. Kurt Salmon Associates provides retail and 
healthcare consulting. Alexander Proudfoot provides operational improvement 
consulting. The Group operates worldwide. For further information, visit 
www.mcgplc.com. 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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