TIDMMMC
RNS Number : 4030C
Management Consulting Group PLC
07 March 2011
7 March 2011
MCG Announces Resilient Results for 2010
Resilient results on stronger second half revenue
performance
Management Consulting Group PLC ("MCG" or "the Group"), the
global professional services group, today announces its results for
the year ended 31 December 2010.
Key points
-- Revenue broadly unchanged from previous year at GBP270.4m
(2009: GBP276.5m)
-- Operating profit up 88% to GBP18.0m (2009: GBP9.6m)
-- Underlying operating profit down 17% to GBP23.3m (2009:
GBP28.0m)
-- Underlying operating margin lower at 8.6% (2009: 10.1%)
-- Net debt at year end down 35% to GBP54.4m (2009:
GBP83.5m)
-- Underlying EPS down 30% to 3.5p (2009: 5.0p). Basic EPS 2.4p
(2009: 0.4p)
-- Total dividend 0.45p per share (2009: 0.4p per share)
-- Raised GBP25m in June 2010 to recapitalise balance sheet
-- Merger of Ineum and KSA completed on 1 January 2011
-- Encouraging levels of business in early 2011
* Throughout this statement the term 'underlying' is defined as
'before non-recurring items and amortisation and impairment of
acquired intangibles for continuing businesses'.
Nick Stagg, Chief Executive, commented:
"In 2010 we took decisive action to make the Group a more robust
business with improved prospects for growth in 2011 and beyond.
During the period, we strengthened our balance sheet, reduced
costs, and successfully completed the formation of Kurt Salmon,
alongside Alexander Proudfoot. We will continue to concentrate our
efforts on investing in organic growth in our key markets, and
improving operational efficiency, in order to progressively benefit
our bottom line performance over the next two years. Whilst the
risks of instability in the global economy remain, activity levels
so far in 2011 are encouraging."
For further information please contact:
Management Consulting Group PLC
Nick Stagg Chief Executive 020 7710 5000
Chris Povey Finance Director 020 7710 5000
Financial Dynamics
Ben Atwell 020 7831 3113
An analyst briefing will be held at the offices of Financial
Dynamics at Holborn Gate, 26 Southampton Buildings, London WC2A 1PB
on 7 March at 9.30am.
Notes to Editors
Management Consulting Group PLC (MMC.L) provides professional
services across a wide range of industries and sectors.
It comprises two independently managed practices: Alexander
Proudfoot and Kurt Salmon. Alexander Proudfoot develops and
implements operational improvements to its clients to increase
productivity and reduce costs. Kurt Salmon provides consultancy
services to a wide range of industries in both the private and
public sectors. The Group operates worldwide. For further
information, visit www.mcgplc.com.
Forward looking statements
This preliminary announcement contains certain forward-looking
statements with respect to the financial condition, results of
operations and businesses of Management Consulting Group PLC. These
statements and forecasts involve risk and uncertainty because they
relate to events and depend upon circumstances that will occur in
the future. There are a number of factors that could cause actual
results or developments to differ materially from those expressed
or implied by these forward-looking statements and forecasts. The
forward-looking statements are based on the directors' current
views and information known to them at 7 March 2011. The directors
do not make any undertakings to update or revise any
forward-looking statements, whether as a result of new information,
future events, or otherwise. Nothing in this statement should be
construed as a profit forecast.
Chairman's Statement
Overview
2010 was another demanding year for Management Consulting Group
PLC ("MCG" or "the Group"), but one in which we took decisive
action to make MCG a more robust business with improved prospects,
by strengthening our balance sheet and establishing a solid
platform for profitable organic growth.
After the challenging economic conditions experienced in 2009,
the global economic environment in 2010 again provided a difficult
backdrop for our clients and our businesses. In many of the sectors
and geographies in which we operate the recovery was slower and
more fragile than had previously been expected. Each of our
businesses performed creditably in these circumstances, and our
overall revenues for 2010 were sustained at a level close to those
of the previous year. In 2009 we made significant efforts to manage
costs to mitigate the influence of lower revenues on bottom line
profits. In 2010 it proved more difficult to maintain margins in
parts of our business that experienced declining revenues during
some periods of the year, and this affected our profitability.
We looked again at our strategy during the first half of 2010
and concluded on the need to recapitalise our balance sheet. With
the difficult post-financial crash trading conditions experienced
in 2009, it had become clear to us that the level of indebtedness
of the Group was too high to allow us the financial flexibility
needed to deliver future organic growth, which is our key
objective. We raised GBP25m (before expenses) in a Firm Placing,
Placing and Open Offer at 22 pence in June 2010. Some GBP17m of the
equity funds were subscribed by BlueGem Capital Partners LLP, as a
new cornerstone investor with a 17% stake in MCG following
completion of the capital raising. Our existing shareholders were
supportive, and the Open Offer element of the capital raising was
oversubscribed, applications being scaled back by 35%. Forty-six
employees who were not shareholders were able to participate in the
Placing and to take up shares in MCG, demonstrating their support
and commitment to our equity story. We remain focused on promoting
broader ownership of shares amongst the senior management and staff
of MCG to further align their interests with those of our other
investors.
The capital raising in the first half of 2010 delivered a
substantial reduction in our indebtedness and this will decrease
further as our businesses generate operating cash flows as they
benefit from improving economic conditions. Indebtedness was
reduced by a further GBP20m in the second half through strong
positive operating cashflow and we reported net debt at the end of
the year of GBP54.4m. We will continue to focus on cash generation
in 2011.
As part of the capital raising, the Company issued warrants
which are convertible into ordinary shares during 2011 at an
exercise price of 22p. If all the warrants were converted, the cash
raised as a result in 2011 would be GBP11.4m.
Alexander Proudfoot
Alexander Proudfoot experienced a significant decline in
revenues in the first half of the year, as the business felt the
effects of slowing activity in the second half of 2009 and a low
order book at the end of that year. First half revenues in 2010
were slightly more than half those of the same period in 2009 and
the business recorded a small trading loss. Results in the second
half, however, improved significantly with revenues 54% higher than
the same period in 2009, restoring the business to profitability
for the year as a whole albeit still well below historic levels.
The performance in Europe in the second half of 2010 and into 2011
has been particularly encouraging, and the business worldwide has
benefited from increased demand from clients in the natural
resources sector. Alexander Proudfoot has delivered outstanding
results and strong margins in the recent past. It entered 2011 with
a strong order book and we are confident that its performance will
continue to improve.
Ineum Consulting/Kurt Salmon Associates
Ineum Consulting was more robust than our other businesses
during the difficult trading conditions experienced in 2009,
reflecting the strength of its large French business. In broad
terms these strengths were again evident in 2010, although its
performance was mixed, with some areas performing very well, and
others experiencing reduced demand and pressure on margins. Overall
Ineum Consulting revenue decreased by 9% in 2010. In France Ineum
Consulting's offering in financial services showed excellent
progress, and the public sector practice remained strong. However
revenues from mainstream French corporate clients in the
manufacturing and services sectors suffered, particularly over the
summer and autumn periods. Outside France, the business performed
well in the Benelux markets, and increased the profile of its
financial sector led practice in the United States. Overall
profitability was adversely affected by the poorer performing
business sectors in France, and by a weak second half performance
in the UK. Towards the end of the year, there were encouraging
signs of increased activity in most parts of the business.
Kurt Salmon Associates had suffered badly in 2009 but was
showing positive signs of recovery towards the end of that year,
and this continued throughout 2010. The business benefited from a
slow but steady improvement in demand for its core consulting
offerings in the global retail and consumer products sector, as
some confidence returned to these markets in the United States and
Europe. There was also improvement in the US healthcare consulting
practice, as large private hospital groups who are our clients were
able to operate in a more secure environment. In overall terms,
Kurt Salmon Associates' revenues in 2010 increased by more than 25%
from 2009, and its profit margin more than doubled. The improved
performance provides an excellent basis for success in 2011.
Much effort during the year was devoted to bringing together the
Ineum Consulting and Kurt Salmon Associates businesses in a merged
operation which, since 1 January 2011, has been trading as Kurt
Salmon. We implemented the merger in the knowledge that the two
businesses already shared a similar business culture and an
operating model. Their complementary industry and geographic focus
provides an opportunity to develop a unified practice that is a
stronger competitor in the world market, attracting new talent and
delivering enhanced results to all stakeholders. The larger and
more integrated global practice that has resulted will increase our
scope of services across many geographies. We are already seeing
the benefits in terms of increasing business opportunities.
The merger provided an opportunity for us to further review
costs in these businesses and, in addition, we have looked again at
costs in our head office. We have been able to implement a number
of savings, including property rationalisation and some
restructuring of back office operations. There are some
non-recurring costs in 2010 related to achieving this ongoing
reduced cost base. We will continue to look at opportunities to run
our operations more efficiently and to improve financial discipline
across the Group. The initiatives undertaken in 2010 are expected
to deliver annual savings from 2011 of approximately GBP5m, but
will be offset by investment for organic growth in the merged Kurt
Salmon business which is designed to drive revenue growth and
profitability in 2011 and beyond. In particular we are looking at
selective recruitment, following a period in which investment for
growth has necessarily been constrained.
Summary of trading performance
Total revenue for the year ended 31 December 2010 was GBP270.4m,
2% down on the previous year (2009: GBP276.5m). MCG is a global
business and around 92% of our revenue in 2010 came from outside
the UK.
Underlying operating profit in 2010 was down 17%, or GBP4.7m, to
GBP23.3m (2009: GBP28.0m). This reflects the impact of the first
half loss in Alexander Proudfoot and weaker overall profit
performance in Ineum Consulting in the second half, mitigated by
the second half recovery in Alexander Proudfoot and a strong
performance throughout the year by Kurt Salmon Associates.
The Group is reporting net non-recurring costs of GBP2.6m (2009:
GBP15.7m), associated with the implementation of the Kurt Salmon
merger, further property rationalisation and some personnel
restructuring. These initiatives should give rise to benefits to
the business in 2011 and beyond.
The charge for amortisation of acquired intangibles was
unchanged from the prior year at GBP2.7m. Consequently the overall
profit from operations increased by 88% to GBP18.0m (2009:
GBP9.6m). The net interest expense, net of investment income,
increased to GBP3.7m (2009: GBP3.3m). The profit before tax was up
129% to GBP14.3m (2009: GBP6.3m).
With an underlying effective tax rate of 36% (2009: 34%)
underlying earnings per share were 3.5p (2009: 5.0p), reflecting
the dilutive effect of the capital raising and the lower underlying
earnings for the year. Basic earnings per share were 2.4p (2009:
0.4p).
The Board has resumed dividend payments starting with the 2010
interim dividend of 0.15p per share paid in January 2011. The Board
is recommending, subject to shareholder approval, a total dividend
for the year of 0.45p per share (2009: 0.4p per share). The
Directors therefore recommend, subject to shareholder approval, a
final dividend of 0.3p per share to be paid on 6 July 2011 to
shareholders on the register at 10 June 2011. Subject to the
Group's financial position, the Board intends to pursue a
progressive dividend policy.
The Group raised net proceeds of GBP23.6m from the equity
raising in June 2010 which significantly reduced net indebtedness.
Cash generated by operations was GBP17.1m, very substantially
higher than in the previous year (2009: -GBP13.5m). As a result net
debt at the end of 2010 reduced significantly to GBP54.4m (2009:
GBP83.5m).
Group structure and strategy
The business is now organised as two trading divisions:
Alexander Proudfoot and Kurt Salmon, each of which reports directly
to the Group Chief Executive. Kurt Salmon comprises the former
businesses of Ineum Consulting and Kurt Salmon Associates, which
merged with effect from 1 January 2011. Going forward, MCG will
report its segmental results on these two divisional lines.
MCG has a balance of businesses in terms of geographies,
industries and sectors. The strategy of MCG is to exploit the
platform provided by our existing businesses, which are leaders in
their fields, in order to drive organic revenue and margin growth.
We have no current intention to make further significant
acquisitions. The geographical spread of our businesses and our
global office infrastructure will support an increase in
operational activity. The merger of Ineum Consulting and Kurt
Salmon Associates to form Kurt Salmon enhances our ability to
execute this strategy.
We are committed to continuing to deliver efficiencies in the
Group's operations at both the divisional and head office levels,
and to enhancing financial discipline across the Group. We seek to
align the performance of employees in each of our businesses with
objectives that are consistent with value creation for our
shareholders. We will communicate clearly, regularly and fairly
with our shareholders and with other stakeholders in our
business.
People
I announced two years ago that I intended to stand down as
Executive Chairman of MCG in 2010. I am pleased that the Board was
able to put in place a process that enabled a smooth transition to
a new Chief Executive during the year.
Nick Stagg joined the Board as an Executive Director in October
2009 and we announced in April 2010 that he would be appointed
Chief Executive of the Group with effect from 1 July 2010. Nick has
a long and successful history in managing and developing businesses
which rely heavily on the motivation and talent of their employees,
demonstrating in his previous roles an ability to create
significant value for shareholders.
I continued to act as Executive Chairman until the end of 2010,
and from that date I have held the role of Non-Executive
Chairman.
On 18 June 2010 we welcomed two new non-executive directors to
our Board from our new cornerstone equity investor, BlueGem Capital
Partners LLP. Marco Capello and Emilio Di Spiezio Sardo have
already made a valuable contribution to the Board and I look
forward to their continued support.
Craig Smith left the Board on 31 October 2010. I would like to
take this opportunity to thank Craig, who had been Group Finance
Director since April 2007, for his contribution to the Group during
this period.
Chris Povey joined the Board as Group Finance Director on 31
October 2010. Chris joined MCG in 2005 and knows the Group and its
operations well, as our former Head of Corporate Finance.
Janet Cohen will step down from the Board at the AGM on 19 April
2011. Janet is our Senior Independent Director and has served on
our Board since 2003. I would like to thank her, on behalf of all
of the Directors, for her contribution to the Company during this
period.
Marco Lopinto will also step down from the Board at the AGM on
19 April 2011, following the completion of his term under the Ineum
purchase agreement. I would like to thank him, on behalf of all of
the Directors, for his contribution to the Company during his
period as a director. Marco will continue in his role as head of
the Kurt Salmon strategy practice.
Stephen Ferriss will be our Senior Independent Director from 19
April 2011. Julian Waldron will take over as Chairman of the Audit
Committee on the same day.
During the year the Financial Reporting Council published the
new UK Corporate Governance Code which recommends the annual
re-election of directors for FTSE350 companies. I support this
approach and, as shareholders may be aware, have voluntarily
offered myself for annual re-election at the AGM over the past few
years. The board has now agreed that all directors should seek
re-election each year and accordingly resolutions to this effect
will be put at the forthcoming AGM.
The success of MCG is built upon our people, many of whom have
now experienced a further difficult year for their businesses, with
the consequent pressure to perform and deliver results to our
clients. I would like to take this opportunity to thank everyone
who worked for MCG during 2010 for their support and commitment to
the Group during the year.
Summary and outlook
Following a very difficult year for the professional services
industry in 2009, parts of our business experienced considerably
improved trading conditions in 2010, particularly in the second
half, whilst other areas saw the continuing effects of uncertainty
in the markets in which we and our clients operate. I am pleased
that in these testing conditions we maintained our overall revenues
at broadly the same level as the previous year, whilst delivering
an increased profit before tax.
We ended the year with some very considerable achievements.
Having refinanced the Group we now have the flexibility to invest
in our businesses as market conditions improve. We also have a
strong and supportive new cornerstone investor and a new Chief
Executive who is determined to deliver improved results. The merger
of our two complementary consulting businesses to form Kurt Salmon
allows us to develop a powerful global business to serve our
clients, and we are already seeing benefits in terms of business
and recruitment opportunities.
With a more robust balance sheet, a focused team, and an
encouraging pipeline, we entered 2011 in a much stronger position
than a year previously. Whilst the risks of instability in the
global economy remain, our businesses will benefit as economic
conditions improve. We have a sound platform for improving our
performance and delivering value to our shareholders.
Alan Barber
Non-Executive Chairman
7 March 2011
Management Consulting Group 7 March 2011
PLC
Group income statement
2010 2009
Note GBP'000 GBP'000
----------------------------------------------- ---- --------- ---------
Continuing operations
Revenue 4 270,426 276,456
Cost of sales (179,784) (173,500)
----------------------------------------------- ---- --------- ---------
Gross profit 90,642 102,956
----------------------------------------------- ---- --------- ---------
Administrative expenses - underlying (67,374) (74,931)
----------------------------------------------- ---- --------- ---------
Profit from operations - underlying 23,268 28,025
Administrative expenses - non--recurring (2,569) (15,739)
----------------------------------------------- ---- --------- ---------
Profit from operations before amortisation
of acquired intangibles 20,699 12,286
Administrative expenses - amortisation
of acquired intangibles (2,701) (2,739)
----------------------------------------------- ---- --------- ---------
Total administrative expenses (72,644) (93,409)
----------------------------------------------- ---- --------- ---------
Profit from operations 4 17,998 9,547
Investment revenues 8 132 805
Finance costs 8 (3,802) (4,064)
----------------------------------------------- ---- --------- ---------
Profit before tax 14,328 6,288
Tax 9 (5,097) (4,932)
----------------------------------------------- ---- --------- ---------
Profit for the year from continuing operations 9,231 1,356
Profit for the year attributable to owners
of the company 9,231 1,356
----------------------------------------------- ---- --------- ---------
Earnings per share - pence
From profit for the year attributable to
owners of the company
Basic and diluted 10 2.4 0.4
Basic - underlying 10 3.5 5.0
----------------------------------------------- ---- --------- ---------
Group statement of comprehensive income
2010 2009
Note GBP'000 GBP'000
---------------------------------------------------- ----- ------- --------
Exchange differences on translation of
foreign operations (4,096) (18,166)
Actuarial losses on defined benefit post-retirement
obligations (3,362) (3,802)
Gain on available for sale investments 309 717
Current tax - (96)
Deferred tax 1,627 203
----------------------------------------------------------- ------- --------
Other comprehensive expense for the period (5,522) (21,144)
Profit for the period 9,231 1,356
----------------------------------------------------------- ------- --------
Total comprehensive income/(expense) the
period attributable to owners of the company 3,709 (19,788)
----------------------------------------------------------- ------- --------
Group statement in changes in equity
Shares
held by
Share employee
Share Share Merger compensation benefits Translation Other Retained
capital premium reserve reserve trust reserve reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ------- -------- ------- ------------ -------- ----------- -------- --------- ---------
Balance at
1 January
2010 82,848 48,981 32,513 2,216 (1,153) 36,925 6,103 (56,921) 151,512
------------------ ------- -------- ------- ------------ -------- ----------- -------- --------- ---------
Profit for
the period - - - - - - - 9,231 9,231
Exchange
differences - - - - - (4,096) - - (4,096)
Actuarial
movements - - - - - - - (3,362) (3,362)
Profit on
AFS investments - - - - - - 309 - 309
Tax on equity
items 114 114
Tax on items
recognised
in Group SOCIE - - - - - - - 1,627 1,627
Share option
charge - - - (1,260) - - - - (1,260)
Transfer on
nil vesting - - - 1,430 - - - (1,430) -
Shares issued 1,149 24,144 - - - - - - 25,293
Share issue
expenses - (1,735) - - - - - - (1,735)
Shares acquired
by employee
benefits trust - - - - (1,475) - - - (1,475)
Shares
transferred from
employee
benefits trust - - - - 274 - - - 274
Dividends - - - - - - - (657) (657)
------------------ ------- -------- ------- ------------ -------- ----------- -------- --------- ---------
Balance at
31 December
2010 83,997 71,390 32,513 2,386 (2,354) 32,829 6,412 (51,398) 175,775
------------------ ------- -------- ------- ------------ -------- ----------- -------- --------- ---------
Balance at
1 January
2009 82,817 48,981 32,513 2,720 (1,296) 55,091 5,386 (51,817) 174,395
------------------ ------- -------- ------- ------------ -------- ----------- -------- --------- ---------
Profit for
the period - - - - - - - 1,356 1,356
Exchange
differences - - - - - (18,166) - - (18,166)
Actuarial
movements - - - - - - - (3,802) (3,802)
Profit on
AFS investments - - - - - - 717 - 717
Tax on equity
items - - - - - - - (155) (155)
Tax on items
recognised
in Group SOCIE - - - - - - - 107 107
Reclassification - - - (1,624) - - - 1,624 -
Share option
charge - - - 1,120 - - - - 1,120
Shares issued 31 - - - - - - - 31
Shares acquired
by the EBT - - - - (114) - - - (114)
Shares
transferred from
the EBT - - - - 257 - - - 257
Dividends - - - - - - - (4,234) (4,234)
------------------ ------- -------- ------- ------------ -------- ----------- -------- --------- ---------
Balance at
31 December
2009 82,848 48,981 32,513 2,216 (1,153) 36,925 6,103 (56,921) 151,512
------------------ ------- -------- ------- ------------ -------- ----------- -------- --------- ---------
Group balance sheet
2010 2009
Note GBP'000 GBP'000
--------------------------------------- ----- --------- ---------
Non--current assets
Intangible assets 276,923 283,748
Property, plant and equipment 2,846 4,505
Investments 3,183 2,977
Deferred tax assets 19,078 17,856
---------------------------------------------- --------- ---------
Total non--current assets 302,030 309,086
---------------------------------------------- --------- ---------
Current assets
Trade and other receivables 76,589 76,331
Cash and cash equivalents 25,710 23,965
---------------------------------------------- --------- ---------
Total current assets 102,299 100,296
---------------------------------------------- --------- ---------
Total assets 404,329 409,382
---------------------------------------------- --------- ---------
Current liabilities
Financial liabilities (39,059) (53,151)
Trade and other payables (94,772) (100,079)
Current tax liabilities (12,630) (13,293)
---------------------------------------------- --------- ---------
Total current liabilities (146,461) (166,523)
---------------------------------------------- --------- ---------
Net current liabilities (44,162) (66,227)
---------------------------------------------- --------- ---------
Non--current liabilities
Financial liabilities (41,050) (54,362)
Retirement benefit obligations (25,705) (23,248)
Non--current tax liabilities (7,040) (7,959)
Long-term provisions (8,298) (5,778)
---------------------------------------------- --------- ---------
Total non--current liabilities (82,093) (91,347)
---------------------------------------------- --------- ---------
Total liabilities (228,554) (257,870)
---------------------------------------------- --------- ---------
Net assets 175,775 151,512
---------------------------------------------- --------- ---------
Equity
Share capital 83,997 82,848
Share premium account 71,390 48,981
Merger reserve 32,513 32,513
Share compensation reserve 2,386 2,216
Shares held by employee benefits trust (2,354) (1,153)
Translation reserve 32,829 36,925
Other reserves 6,412 6,103
Retained earnings (51,398) (56,921)
---------------------------------------------- --------- ---------
Total equity attributable to owners of
the company 175,775 151,512
---------------------------------------------- --------- ---------
Group cash flow statement
2010 2009
Note GBP'000 GBP'000
------------------------------------------- ---- -------- --------
Net cash inflow/(outflow) from operating
activities 11 10,426 (18,490)
------------------------------------------- ---- -------- --------
Investing activities
Interest received 132 805
Purchases of property, plant and equipment (471) (1,419)
Purchases of intangible assets (1,592) (1,093)
Proceeds on disposal of fixed assets 68 -
Purchase of financial assets (21) (363)
Proceeds on disposal of investments 214 738
------------------------------------------- ---- -------- --------
Net cash used in investing activities (1,670) (1,332)
------------------------------------------- ---- -------- --------
Financing activities
Reclassification from investments - 3,848
Interest paid (2,554) (4,264)
Dividends paid 6 - (4,234)
Proceeds from borrowings 18,966 31,237
Repayment of borrowings (48,545) (18,343)
Proceeds on issue of shares 23,559 143
Net cash (used in)/raised by financing
activities (8,574) 8,387
------------------------------------------- ---- -------- --------
Net increase/ (decrease) in cash and cash
equivalents 182 (11,435)
Cash and cash equivalents at beginning
of year 23,965 35,761
Effect of foreign exchange rate changes 1,563 (361)
------------------------------------------- ---- -------- --------
Cash and cash equivalents at end of year 25,710 23,965
------------------------------------------- ---- -------- --------
Notes
1. Basis of preparation
The financial information included in this statement does not
constitute the company's statutory accounts for the years ended 31
December 2010 or 2009, but is derived from those accounts.
Statutory accounts for 2009 have been delivered to the Registrar of
Companies and those for 2010 will be delivered following the
company's annual general meeting. The auditors have reported on
those accounts; their reports were unqualified, did not draw
attention to any matters by way of emphasis without qualifying
their reports and did not contain statements under Section 498
Companies Act 2006.
While the financial information included in this preliminary
announcement has been computed in accordance with International
Financial Reporting Standards (IFRS), this announcement does not
itself contain sufficient information to comply with IFRSs.
The Group's Annual Report and Accounts and notice of Annual
General Meeting will be sent to shareholders on 18 March 2011 and
will be available at the Company's registered office at 10 Fleet
Place, London, EC4M 7RB, United Kingdom and on our website:
www.mcgplc.com.
The Annual General Meeting will be held at 1.30pm on 19 April
2011 at the offices of Baker & McKenzie LLP, 100 New Bridge
Street, London, EC4V 6JA.
2. Accounting policies
The financial information has been prepared in accordance with
IFRSs. These financial statements have been prepared in accordance
with those IFRS standards and IFRIC interpretations issued and
effective or issued and early adopted as at the time of preparing
these statements (as at 31 December 2010). The policies have been
consistently applied to all the periods presented.
Full details of the Group's accounting policies can be found in
the 2009 Annual Report in note 2 which is available on our website:
www.mcgplc.com.
3. Going concern
In June 2010 the Group raised additional capital of GBP25.0
million (GBP23.6 million net of expenses) which significantly
strengthened the balance sheet. The Group has committed borrowing
facilities until September 2012, together with a balanced and
broad-based business which is not reliant on any one industrial
sector or geography. The Group prepares regular business forecasts
and monitors its projected compliance with its financial covenants
for the committed facilities. These are reviewed by the Board.
Forecasts are adjusted for sensitivities, which address the
principal risks to which the Group is exposed, and consideration
given to actions open to management to mitigate the impact of these
sensitivities. There is sufficient working capital headroom and the
Group has met all covenant tests. As a consequence, the directors
believe that that Group is well placed to manage its business risks
successfully and as such the Group's financial statements have been
prepared on a going concern basis.
4. Segmental information
In 2010 the Group's operating segments are defined as the three
professional services practices, Alexander Proudfoot, Ineum
Consulting and Kurt Salmon Associates. The three operating segments
are combined into one reportable segment owing to similar
underlying economic characteristics across all three practices.
This is the basis on which information was provided to the Board of
Directors for the purposes of allocating certain resources within
the Group and assessing the performance of the business. The Board
of Directors also receives information based on geography; the
segments for this purpose are Americas, Europe and Rest of World.
All revenues are derived from the provision of professional
services.
(a) Geographical analysis
The Group operates in three geographical areas; the Americas,
Europe and the Rest of World. The following is an analysis of
financial information by geographic segment:
(i) Revenue and underlying operating profit by geography
Rest of
Americas Europe World Group
----------------------------------------- -------- ------- ------- -------
Year ended 31 December 2010 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- -------- ------- ------- -------
Revenue - continuing operations 96,480 158,819 15,127 270,426
Profit from operations before
non-recurring expenses and amortisation
of acquired intangibles 8,596 12,820 1,852 23,268
Non-recurring expenses and amortisation
of acquired intangibles (1,619) (3,553) (98) (5,270)
----------------------------------------- -------- ------- ------- -------
Profit from operations 6,977 9,267 1,754 17,998
----------------------------------------- -------- ------- ------- -------
Investment income 132
Finance costs (3,802)
----------------------------------------- -------- ------- ------- -------
Profit before tax 14,328
----------------------------------------- -------- ------- ------- -------
Rest of
Americas Europe World Group
Year ended 31 December 2009 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- -------- ------- ------- --------
Revenue - continuing operations 93,346 167,943 15,167 276,456
Profit from operations before
non-recurring expenses and amortisation
of acquired intangibles 8,663 15,653 3,709 28,025
Non-recurring expenses and amortisation
of acquired intangibles (6,329) (9,942) (2,207) (18,478)
---------------------------------------- -------- ------- ------- --------
Profit from operations 2,334 5,711 1,502 9,547
---------------------------------------- -------- ------- ------- --------
Investment income 805
Finance costs (4,064)
---------------------------------------- -------- ------- ------- --------
Profit before tax 6,288
---------------------------------------- -------- ------- ------- --------
The revenue and underlying profit for Europe includes the
Group's operations in the UK, which represented 8% of total Group
revenue in 2010 (2009: 5%).
(ii) Net assets by geography
Rest of
Americas Europe World Group
At 31 December 2010 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- --------- ------- ---------
Assets
Intangibles, including goodwill 117,016 159,906 - 276,923
Other segment assets 41,290 72,760 9,463 123,513
---------------------------------- -------- --------- ------- ---------
158,306 232,666 9,463 400,436
Unallocated corporate assets 3,894
---------------------------------- -------- --------- ------- ---------
Consolidated total assets 404,329
---------------------------------- -------- --------- ------- ---------
Liabilities
Segment liabilities (99,139) (108,489) (6,636) (214,264)
Unallocated corporate liabilities (14,290)
---------------------------------- -------- --------- ------- ---------
Consolidated total liabilities (228,554)
---------------------------------- -------- --------- ------- ---------
Net assets 175,775
---------------------------------- -------- --------- ------- ---------
Rest of
Americas Europe World Group
At 31 December 2009 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- --------- ------- ---------
Assets
Intangibles, including goodwill 107,589 176,159 - 283,748
Other segment assets 25,689 61,762 3,108 90,559
---------------------------------- -------- --------- ------- ---------
133,278 237,921 3,108 374,307
Unallocated corporate assets 35,075
---------------------------------- -------- --------- ------- ---------
Consolidated total assets 409,382
---------------------------------- -------- --------- ------- ---------
Liabilities
Segment liabilities (43,290) (64,069) (5,512) (112,871)
Unallocated corporate liabilities (144,999)
---------------------------------- -------- --------- ------- ---------
Consolidated total liabilities (257,870)
---------------------------------- -------- --------- ------- ---------
Net assets 151,512
---------------------------------- -------- --------- ------- ---------
(iii) Capital additions, depreciation and amortisation by
geography
Rest of
Americas Europe World Group
Year ended 31 December 2010 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- ------- ------- -------
Capital additions 808 1,208 7,692 2,024
Unallocated corporate additions 23
-------------------------------- -------- ------- ------- -------
Total capital additions 2,047
-------------------------------- -------- ------- ------- -------
Depreciation and amortisation 2,314 3,346 60 5,720
-------------------------------- -------- ------- ------- -------
Rest of
Americas Europe World Group
Year ended 31 December 2009 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- ------- ------- -------
Capital additions 410 469 174 1,053
Unallocated corporate additions 689
-------------------------------- -------- ------- ------- -------
Total capital additions 410 469 174 1,742
-------------------------------- -------- ------- ------- -------
Depreciation and amortisation 1,778 3,244 101 5,123
-------------------------------- -------- ------- ------- -------
(b) Revenue and underlying operating profit by operating
segment
The three operating segments are combined into one reportable
segment owing to similar underlying economic characteristics across
all three practices. Not all significant non-recurring items and
financial items can be allocated to the practices and are therefore
disclosed for the reportable segment as a whole. Assets and
liabilities by practice are not reviewed by the Board and are
therefore not disclosed.
Alexander Ineum Kurt Salmon
Proudfoot Consulting Associates Total
Year ended 31 December 2010 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------- ----------- ----------- -------
Revenue - continuing operations 62,252 128,884 79,290 270,426
------------------------------- ---------- ----------- ----------- -------
Underlying operating profit 4,898 9,188 9,182 23,268
Non-recurring expenses and
amortisation of acquired
intangibles (5,270)
------------------------------- ---------- ----------- ----------- -------
Profit from operations 17,998
Investment income 132
Finance costs (3,802)
------------------------------- ---------- ----------- ----------- -------
Profit before tax 14,328
------------------------------- ---------- ----------- ----------- -------
Alexander Ineum Kurt Salmon
Proudfoot Consulting Associates Total
Year ended 31 December 2009 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ---------- ----------- ----------- --------
Revenue - continuing
operations 71,171 142,239 63,046 276,456
------------------------------ ---------- ----------- ----------- --------
Underlying operating profit 11,996 12,497 3,532 28,025
Non-recurring expenses and
amortisation of acquired
intangibles (18,478)
------------------------------ ---------- ----------- ----------- --------
Profit from operations 9,547
Investment income 805
Finance costs (4,064)
------------------------------ ---------- ----------- ----------- --------
Profit before tax 6,288
------------------------------ ---------- ----------- ----------- --------
Inter-segmental sales were not significant.
5. Profit/(loss) before tax
Profit/(loss) before tax has been arrived at after
(crediting)/charging the following:
2010 2009
Note GBP'000 GBP'000
---------------------------------------------- ---- ------- -------
Foreign exchange gains / (losses) 112 (32)
Amortisation of intangible assets 4,198 3,597
Depreciation of property, plant and equipment 1,521 1,526
Loss on disposal of fixed assets 19 299
Non--recurring items 2,569 15,739
Staff costs 7 166,552 161,613
---------------------------------------------- ---- ------- -------
Non-recurring items in 2010 comprise GBP2.3m in relation to the
merger and integration of Ineum Consulting and Kurt Salmon
Associates, GBP2.2m in relation to property restructuring, GBP1.1m
in relation to restructuring costs and a GBP3.0m income which is
the release of part of a legal provision.
6. Dividends
2010 2009
GBP'000 GBP'000
------------------------------------------------ ------- -------
Amounts recognised as distributions to equity
holders in the year
Final dividend for the year ended 31 December
2008 0.9p per share - 2,931
Interim dividend for the year ended 31 December
2010 of 0.15p (2009:0.40p) per share 657 1,303
------------------------------------------------ ------- -------
657 4,234
------------------------------------------------ ------- -------
Dividends are not payable on shares held in the employee share
trust which has waived its entitlement to dividends. The amount of
the dividend waived in 2010 (in respect of the interim dividend for
the year ended 31 December 2010) was GBP12,729 (2009:
GBP73,806).
No final dividend was paid in relation to 2009. The 2010 interim
dividend of 0.15p per share was paid on 6 January 2011. The
directors propose a final dividend for the year ended 31 December
2010 of 0.30p per share.
7. Staff numbers and costs
The average number of persons employed by the Group (including
executive directors) during the year, analysed by category, was as
follows:
2010 2009
Number Number
-------------------- ------- -------
Sales and marketing 96 91
Consultants 1,335 1,386
Support staff 253 291
-------------------- ------- -------
1,684 1,768
-------------------- ------- -------
The number of Group employees at the year end was 1,678 (2009:
1,641).
The aggregate payroll costs of these persons were as
follows:
2010 2009
GBP'000 GBP'000
---------------------- ------- -------
Wages and salaries 132,348 126,654
Social security costs 30,746 32,138
Other pension costs 3,458 2,821
---------------------- ------- -------
166,552 161,613
---------------------- ------- -------
8. Investment revenues and finance costs
Investment revenues 2010 2009
GBP'000 GBP'000
Interest receivable on bank deposits
and similar income 132 805
-------------------------------------- --------- -------
Finance costs 2010 2009
GBP'000 GBP'000
------------------------------------------ ------- -------
Interest payable on bank overdrafts and
loans and similar charges (3,468) (3,310)
Finance costs on retirement benefit plans (334) (754)
------------------------------------------ ------- -------
(3,802) (4,064)
------------------------------------------ ------- -------
9. Tax
2010 2009
GBP'000 GBP'000
----------------------------------------------- ------- -------
Tax in respect of current year
Foreign tax 7,323 8,896
----------------------------------------------- ------- -------
Deferred tax - acquired intangible assets 122 (110)
Deferred tax - temporary differences and other (1,800) 7,300
Deferred tax - tax losses 1,593 (6,535)
Deferred tax - US goodwill 270 2,434
----------------------------------------------- ------- -------
Total deferred tax 185 3,089
----------------------------------------------- ------- -------
Total current year tax 7,508 11,985
Prior year current taxation (1,308) (3,622)
----------------------------------------------- ------- -------
Total tax expense on underlying profit 6,200 8,363
Tax in respect of non--recurring items
Foreign tax (763) (3,877)
Deferred tax - temporary differences and other (340) 446
----------------------------------------------- ------- -------
Total tax expense 5,097 4,932
----------------------------------------------- ------- -------
UK corporation tax is calculated at 28% (2009: 28%) of the
estimated assessable profit for the year. Taxation for other
jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
10. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
2010 2009
Earnings GBP'000 GBP'000
------------------------------------------------------- --------- ---------
Earnings for the purposes of basic earnings per
share and diluted earnings per share being net
profit attributable to equity holders of the parent 9,231 1,356
Non--recurring items 2,569 15,739
Non--recurring items - tax (1,103) (3,431)
Amortisation of acquired intangibles 2,701 2,739
------------------------------------------------------- --------- ---------
Earnings for the purpose of basic earnings per
share excluding non--recurring items
and amortisation of acquired intangibles 13,398 16,403
------------------------------------------------------- --------- ---------
Number Number
Number of shares (million) (million)
------------------------------------------------------- --------- ---------
Weighted average number of ordinary shares for
the purposes of basic earnings per share, and
basic excluding non--recurring items and amortisation
of acquired intangibles 384.4 326.1
Effect of dilutive potential ordinary shares:
- warrants and performance share plan 5.0 9.4
------------------------------------------------------- --------- ---------
Weighted average number of ordinary shares for
the purposes of diluted earnings per share 389.4 335.5
------------------------------------------------------- --------- ---------
Pence Pence
----------------------------------------------------- ----- -----
Basic and diluted earnings per share attributable
to owners of the company 2.4 0.4
Basic earnings per share - excluding non--recurring
items and amortisation of acquired intangibles 3.5 5.0
----------------------------------------------------- ----- -----
The average share price for the year ended 31 December 2010 was
23.4p (2009: 26.0p).
11. Notes to the cash flow statement
2010 2009
GBP'000 GBP'000
----------------------------------------------------- ------- --------
Profit from operations 17,998 9,547
Adjustments for:
Depreciation of property, plant and equipment 1,521 1,526
Amortisation of intangible assets 4,198 3,597
Loss on disposal of plant and equipment 19 633
Adjustment for pension funding - 303
Adjustment for share options charge (1,260) 1,120
Other non cash movements (1,389) -
Increase/(decrease) in provisions 2,250 (2,313)
----------------------------------------------------- ------- --------
Operating cash flows before movements in working
capital 23,337 14,413
Decrease in receivables 1,530 8,509
Decrease in payables (7,761) (36,400)
----------------------------------------------------- ------- --------
Cash generated/(absorbed) by operations 17,106 (13,478)
Income taxes paid (6,680) (5,012)
----------------------------------------------------- ------- --------
Net cash inflow/ (outflow) from operating activities 10,426 (18,490)
----------------------------------------------------- ------- --------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR DKQDNOBKDBNK
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