MMC Management Consulting Group Plc

 

TIDMMMC 
 
RNS Number : 3046C 
Management Consulting Group PLC 
10 November 2009 
 

10 November 2009 
 
 
Management Consulting Group PLC 
 
 
Interim Management Statement and Directorate Changes 
 
 
Interim management statement 
Management Consulting Group PLC ('MCG' or 'the Group'), the international 
professional services group, today announces an update on progress in the 
business since 3 August 2009. The financial results for the full year to 31 
December 2009 will be reported on 8 March 2010. It also announces changes to its 
Board. 
 
 
Group trading 
MCG expects to report underlying* operating profit for the 2009 financial year 
in line with consensus between GBP28m and GBP30m. The achievement of this profit 
figure reflects active cost management across the Group in the face of the 
difficult trading conditions experienced by the professional services industry 
which have continued since the half-year results announcement. In particular MCG 
has mitigated the effects of these conditions by reducing employee numbers and 
discretionary bonus payments accrued in relation to the 2009 financial year. 
 
 
Trading during the summer period has been slower than expected and each of the 
three divisions has reduced their revenue forecasts for the full year as a 
result. The reductions at Kurt Salmon Associates and Ineum Consulting are small 
and trading for the September to December 2009 period is expected to be in line 
with expectations. However the influx of new business at Alexander Proudfoot, 
usually seen following the summer slowdown, has not materialised this year and, 
as a result, Proudfoot's second half revenue will be lower than expected. 
Alexander Proudfoot is a business that generally performs well when the world 
economy is experiencing either an upswing or a downturn, as companies require 
throughput and revenue maximisation or cost reduction projects, respectively. 
Recently potential clients have tended towards a 'wait and see' approach and a 
deferral of prospective business. As a result, 2009 revenue for MCG as a whole 
is now expected to be in the range of GBP280m to GBP290m. Despite this, as noted 
above, underlying operating profit is expected to be in line with consensus. 
 
 
Non-recurring costs are expected to reach between GBP9m and GBP10m for the full 
year, reflecting the continued requirement to reduce employee numbers across the 
Group. Currently MCG employs around 1,700 people, down from a peak of 2,350 in 
June 2008. 
 
 
* 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". 
 
 
Cash flow and balance sheet 
Whilst cost savings generally result in immediate cash improvements, the 
majority of bonus payments are made in the year following the year of accrual 
and those relating to the 2009 financial year would normally be made during the 
first half of 2010. Thus the positive cash effect of these cost savings will be 
seen in 2010, not 2009 and hence the shortfall in revenue will adversely impact 
the year end net debt figure, which is now expected to be around GBP90m. The 
Group is in compliance with the covenants under its existing banking facilities 
and will manage its affairs to ensure that this continues to be the case. The 
EBITDA used to calculate leverage covenant compliance is expected to be around 
GBP5m higher than underlying operating profit. The Group cash flow will benefit 
in 2010 from the lower bonus payment. 
 
 
Ineum Consulting 
During 2009 the Group received indicative offers from three French private 
equity houses interested in purchasing some part or all of Ineum Consulting. The 
Board has reviewed these offers in detail, given the desire to maximise value 
for its shareholders. Two of these approaches foundered quite early in the 
process but significant time and expense was incurred on the third, which valued 
Ineum Consulting at around GBP85m. The cost of this project was approximately 
GBP1.6m and this is included in the non-recurring cost total above. The Board 
has concluded that this proposal materially undervalued the Ineum Consulting 
business and was significantly dilutive to MCG shareholders and accordingly it 
too was rejected. 
 
 
Executive Chairman Alan Barber commented, "2009 has been a challenging year for 
all of us at MCG following the record results reported in 2008. We are not 
immune to the global difficulties in consulting and professional services and we 
believe that we are weathering the storm better than many of our competitors. We 
have taken strong and concerted action to manage the business and control costs, 
giving us confidence that consensus profit figures can be achieved despite the 
current adverse environment. We are dedicated to ensuring the business is well 
positioned to benefit from the eventual recovery in the global economy and to 
create long-term value for shareholders. We are delighted that Ineum Consulting 
is remaining within MCG. Ineum has been a very successful acquisition for the 
Group and is an important element of our current offering to the market." 
 
 
Directorate Changes 
The Group also today announces that Mr. Chiheb Mahjoub has been appointed to the 
Board as an executive director, with immediate effect. 
 
 
Mr. Mahjoub (45), who has dual French and Tunisian nationality, is a graduate of 
the École Nationale des Ponts et Chaussées and Ensimag in Paris where he 
obtained a Master of Engineering degree and an MBA. Following a short period 
working in the derivatives market he helped to establish and develop Summit 
Systems, a global leader in derivatives trading software packages. In 1995 Mr. 
Mahjoub joined Deloitte Consulting to develop its investment banking practice in 
France before becoming lead partner in charge of its Continental Europe 
Investment Banking Skills Centre. During this period he was involved in major 
strategic and transformational assignments for leading financial institutions in 
Europe, the US and Asia Pacific. In 2003 Mr. Mahjoub was one of the founding 
partners of Ineum Consulting, responsible for the Global Financial Services 
Team. In 2008 he became Managing Partner and Global Executive of Ineum 
Consulting, heading the development of its international business. 
 
 
Mr. Miguel de Fontenay, an executive director of MCG, has stepped down from the 
Board with immediate effect. 
 
 
Mr. Barber commented, "I am delighted that Chiheb is joining the Board. He has 
been instrumental in building Ineum to its current position in the French market 
and will be able to use his strong international background to drive its future 
development. Ineum has been extremely successful since its acquisition and we 
look forward to working with Chiheb and the rest of Ineum management in this new 
phase of its history. I would like to thank Miguel for his contribution as a 
director of MCG." 
 
 
Mr Mahjoub is beneficially interested in 3,740,322 Ordinary Shares representing 
1.13 per cent of the issued share capital of the Company. An announcement will 
be made in due course of any further disclosures required under Rule 9.6.13 of 
the Listing Rules. 
 
 
On 23 October 2009 it was announced that Mr. Nicholas Stagg has been appointed 
to the Board as an executive director and that Mr. JP Bolduc had resigned as a 
non-executive director. 
 
 
As previously reported the Executive Chairman, Alan Barber, will relinquish his 
executive duties towards the middle of 2010. A succession planning process is 
now underway, with input from an external executive search consultant to 
identify both internal and external candidates for the role, and the Group would 
expect to announce Mr. Barber's successor at the same time as the 2009 
preliminary results in early March 2010. 
 
 
For further information, please contact: 
 
 
+-----------------------+-------------------------------+---------------------------+ 
| Management Consulting Group PLC                       | Tel: +44 20 7710 5000     | 
+-------------------------------------------------------+---------------------------+ 
| Alan Barber           | Executive Chairman            |                           | 
+-----------------------+-------------------------------+---------------------------+ 
| 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: Alexander Proudfoot, Ineum Consulting and Kurt Salmon 
Associates. Alexander Proudfoot provides operational improvement services. Ineum 
Consulting provides consulting services with industry expertise. Kurt Salmon 
Associates provides retail and health care 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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