TIDMMMC
RNS Number : 4418L
Management Consulting Group PLC
01 August 2011
1 August 2011
Management Consulting Group PLC Interim Results
24% increase in underlying operating profit
Management Consulting Group PLC ("MCG" or "the Group"), the
global professional services group, today announces its results for
the half year ended 30 June 2011.
Key points
-- Revenue up 19% at GBP155.6m (2010: GBP131.3m)
-- Operating profit up 22% to GBP13.7m (2010: GBP11.2m)
-- Underlying* operating profit up 24% to GBP15.3m (2010:
GBP12.4m)
-- Underlying* operating profit margin higher at 9.9% (2010:
9.4%)
-- Profit for the half year increased to GBP9.1m (2010:
GBP6.5m)
-- Net debt reduced by 31% to GBP51.7m (June 2010: GBP74.8m)
-- Basic earnings per share increased to 2.1p (2010: 2.0p)
-- Underlying basic earnings per share increased to 2.4p (2010:
2.2p)
-- Interim dividend increased to 0.2p per share (2010:
0.15p)
* Throughout this statement the term 'underlying' is defined as
'before non-recurring items and amortisation of acquired intangible
assets'.
Nick Stagg, Chief Executive commented:
"The Group has continued to build successfully on the changes
made in 2010 and has delivered a robust top and bottom line
performance in the period. Alexander Proudfoot has delivered a good
first half result, benefiting in particular from a growing workload
for clients in the natural resources sector. Kurt Salmon has also
grown revenues in its key markets and we are investing in the
business to drive future revenue and profit growth.
"MCG enters the second half of 2011 with a strong order book and
a healthy project pipeline and the Group is trading in line with
management expectations. We continue to focus on improving
operational efficiency and profitability, whilst investing for
growth. Although the global economic outlook remains uncertain, the
indicators are promising at this stage and the Board looks forward
to continuing progress over the remainder of the year."
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 Monday 1 August 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.
Chairman's Statement
We delivered a 24% increase in underlying operating profit on a
19% increase in revenue compared with the same period in 2010. The
stronger trading that we saw in the second half of last year has
been sustained into the first half of 2011. I am hopeful that we
can maintain momentum in our businesses over the remainder of the
year.
From 1 January 2011 the Group has been trading as two divisions:
Alexander Proudfoot and Kurt Salmon. Alexander Proudfoot's
performance has continued to improve, after the strong recovery in
the second half of last year. The merger of Ineum Consulting and
Kurt Salmon Associates to form Kurt Salmon was implemented
successfully, and we have already seen benefits in terms of
recruitment and client opportunities as a result of the improved
scale and capabilities of the merged business. We will continue to
work to develop both businesses, with selective investment and
recruitment in sectors and geographies where there are good
prospects for profitable growth.
Last year we made significant changes to the operations,
management and funding of the Group, in order to implement a
strategy that will create value for all our stakeholders. About one
hundred and fifty of our employees are now shareholders in MCG and
in aggregate employees and directors now hold about 18% of our
equity. We have continued to work to better align the interests of
our employees with the creation of value for our shareholders, both
in setting the performance criteria for variable remuneration and
by ensuring that share awards to our staff incorporate retention
and performance conditions that are designed to promote long term
value creation.
When I stepped down as Executive Chairman at the end of last
year I believe we had put in place the building blocks for the next
phase in the development of MCG. I am pleased with the progress we
have made in the first half of 2011, under the strong leadership of
Nick Stagg as Chief Executive. The Board will continue to promote
an organic growth strategy and focus on financial and operational
discipline across the Group. We are investing to drive growth and
we are managing our costs and operating margins to generate value
for our shareholders.
Alan Barber
Chairman
Operating and financial review
We are satisfied with the performance of both divisions in the
first half of the year. The changes made last year have helped
contribute to a much improved performance compared with the first
half of last year.
Alexander Proudfoot
Alexander Proudfoot develops and implements operational
improvements to increase productivity or reduce costs for its
clients. Working with its clients, Alexander Proudfoot improves
their top line performance through increased throughput and
revenue, and their bottom line through reduced operational costs
and improved efficiency. A critical element of its focus is
improving the effectiveness of management and implementing
sustainable change. Alexander Proudfoot's projects deliver
significantly increased profitability with benefits to clients
often running into millions of pounds and a typical return on
investment within twelve months.
Alexander Proudfoot's revenue for the first half of 2011 was 85%
higher at GBP44.4m (H1 2010: GBP23.9m). Alexander Proudfoot had not
performed well in the first half of 2010, but first half revenue
for 2011 was also 16% or GBP6.1m higher than the second half of
2010. Operating profit for the first half of 2011 was GBP5.8m
compared with an operating loss in the first half of 2010 of
GBP0.2m. The operating profit margin was 13.2% compared with -0.9%
in the first half of 2010.
Alexander Proudfoot delivered very strong revenue growth in the
second half of 2010 and revenues have continued to grow strongly
into the first half of 2011. Alexander Proudfoot's business units
are based in Europe, the United States, South Africa and Brazil,
from which it serves clients globally. All its business units have
reported increased revenues in the first half of 2011 although the
rate of growth in the North American operations has been lower than
in other geographies. The business has seen good ongoing demand
from clients in the natural resources sector and growth in revenues
from projects delivered in emerging markets, in particular in
Southern Africa and Latin America. In the first half of 2011 there
has been an increasing trend for work sold in Europe and North
America to be delivered elsewhere, for example, in Botswana, Russia
and Peru. Projects won during 2011 in the natural resources sector
and in emerging markets have typically been larger than average,
although the sometimes remote and challenging project locations
have had higher delivery costs and this has had some impact on
profit margins.
Alexander Proudfoot has demonstrated over many years that it has
an offering that produces very attractive returns for its clients.
It is performing well in the current market, taking advantage of
the opportunities provided by the pressure on producers in the
natural resources sector to improve productivity and efficiency in
extraction and processing. As global demand for commodities remains
strong there are opportunities for further growth in this sector.
Alexander Proudfoot's clients are generally large international
organisations and, whilst the business does not necessarily produce
a regular cycle of recurring work with the same client, many
clients do commission further work at some stage, and most act as
references for sales to other customers. Management is continuing
to work to enhance sales processes across the business, increasing
the focus on building long term relationships with existing and
prospective clients as well as driving individual project
sales.
The current order book for Alexander Proudfoot is at a higher
level than at any time during 2009 and 2010, providing some
visibility on the revenues into the beginning of the fourth quarter
of 2011. The pipeline of prospects is also encouraging at this
stage of the year, although as is usual in our business the
conversion of these into revenue remains a key factor in the
performance of the business over the remainder of the year.
Kurt Salmon
Kurt Salmon was established on 1 January 2011 from the merger of
Ineum Consulting and Kurt Salmon Associates. Prior to that date
both divisions reported and were managed as separate business
segments and references to 2010 numbers below represent a pro forma
aggregation of Ineum Consulting and Kurt Salmon Associates.
Kurt Salmon is a global management consultancy business which
partners with its clients to drive strategies and solutions that
make a lasting and meaningful impact on their businesses. The
business operates internationally in certain key industry verticals
and has a particular focus in retail and consumer products and in
financial services. It also provides functional expertise around,
for example, offerings to CIOs and CFOs. Kurt Salmon now operates
in fifteen countries around the world, the largest operations being
in North America and Continental Europe, together with a presence
in some markets in Asia.
Kurt Salmon's revenue for the first half of 2011 was GBP111.2m.
This was GBP3.8m or 4% higher than the corresponding first half
revenue in 2010 of GBP107.4m, and GBP10.4m or 10% higher than the
second half revenue in 2010 of GBP100.8m. Underlying operating
profit for the first half of 2011 was GBP9.5m representing a margin
on revenue of 8.5%. In 2010 the underlying operating profit for the
first half was GBP12.6m and the margin was 11.7%. In the second
half of 2010 margins weakened, and the first half operating profit
margin for 2011 reflects a significant improvement on the previous
six months.
Kurt Salmon has made good progress in the first half of 2011 in
all of its key markets. The retail and consumer products consulting
practice recovered strongly in 2010 and delivered further revenue
growth in the first half of 2011, despite consumer spending in
Western markets remaining fragile in the face of continued economic
uncertainty. Kurt Salmon's financial services consulting practice
has performed strongly in Continental Europe and is developing well
in North America, following the appointment in April this year of
Allen K Merrill as global head of the practice, based in New York.
The creation of Kurt Salmon is allowing the business to combine its
capabilities in key industry sectors and its functional expertise
to exploit opportunities to broaden the offering provided to
clients. For example, it has recently won a significant project
with a major retail European bank to develop a programme to
transform its customer relationship experience with its retail
customers. This project is an example of Kurt Salmon applying its
expertise in the retail experience for consumers to operations in
the financial services sector.
The Continental European operations of Kurt Salmon have
performed well in the first half of 2011. In France, which is the
largest of the European operations, the business has increased
revenues and profitability compared with the second half of 2010.
This reflects some improvement in confidence in the market, and
management focus on improving operational efficiency. In the UK,
where Kurt Salmon has a relatively small operation and where the
overall supply of consulting services is high relative to current
demand, results overall have been somewhat disappointing in the
first half.
In North America, the largest element of Kurt Salmon's
activities relates to the retail and consumer goods practice, which
had a good start to the year. Some recent indicators have suggested
that growth in the retail offering may be slowing somewhat,
reflecting client concerns about the pace of economic recovery in
the United States. Revenue and profit in the US healthcare
consulting practice has increased, and this practice is well placed
to benefit from longer term trends in healthcare spending.
In Asia, the Japanese business unit suffered in the aftermath of
the natural disasters earlier this year but has continued to work
with its retail clients in difficult circumstances, and business
confidence in Japan now appears to be improving. Kurt Salmon has a
developing relationship with a small retail consulting business in
China, which trades under the Kurt Salmon name under a license
agreement, and is seeing an increase in its activity in the region
as Asian consumer markets expand.
Kurt Salmon is an established global consulting brand with a
long heritage. It is well placed to develop as a significant player
in the consulting market in the industry and functional areas where
its expertise is focused. The business has scope for organic growth
in markets where it is already established and will look to build
its presence in markets where it currently lacks scale. Alongside
investment for growth, the management of Kurt Salmon will continue
to work to improve operational efficiencies in the business to
enhance the underlying profit margin.
The current order book for Kurt Salmon is at a higher level than
at any time during 2009 and 2010. The pipeline of prospects is also
promising, although visibility into the fourth quarter is limited
at this stage of the year.
Outlook
Trading in the first six months of 2011 has been encouraging.
The recovery in Alexander Proudfoot has continued, and Kurt Salmon
has made good progress in key areas. Conditions in most of the
markets in which the Group operates have been improving slowly
during the first half of 2011, although many clients remain
cautious, and the lead time to convert sales opportunities into
revenue continues to be more extended than has been experienced in
prior years.
Healthy underlying cash generation has helped to further reduce
the Group's net debt to GBP51.7m at 30 June 2011. The normal
phasing of cash flows means that historically the second half of
the year tends to see stronger cash generation and the Board
continues to expect this to be the case in 2011.
MCG enters the second half of 2011 with a strong order book and
healthy project pipeline and the Group is trading in line with
management expectations. We continue to focus on improving
operational efficiency and profitability whilst investing for
growth. Although the global economic outlook remains uncertain, the
indicators are promising at this stage, and the Board looks forward
to continuing progress over the remainder of the year.
Exchange rates
The Group derives the majority of its revenue and operating
profit and holds the majority of its assets and liabilities in
Euros and US Dollars. The average exchange rates to Sterling used
in the first half of 2011 were GBP1 = EUR1.15 (2010: GBP1 =
EUR1.15) and GBP1 = $1.61 (2010: GBP1 = $1.53). The closing
exchange rates to Sterling used in balance sheet translation were
GBP1 = EUR1.11 (2010: GBP1 = EUR1.22) and GBP1 = $1.60 (2010: GBP1
= $1.50).
Revenue
Revenue for the first half of 2011 was GBP155.6m, 19% ahead of
the corresponding figure for the previous year (2010: GBP131.3m).
The major contributor to this increase was Alexander Proudfoot,
which recorded revenue of GBP44.4m (2010: GBP23.9m), an increase of
GBP20.5m. Revenue from Kurt Salmon was GBP111.2m (2010: GBP107.4m),
an increase of GBP3.8m. Changes in exchange rates compared with the
first half of 2010 have had a small negative impact on reported
revenues, principally as a result of a somewhat weaker US Dollar
depressing the Sterling value of revenues in that currency.
Geographically all areas recorded revenue growth compared with
the corresponding period of 2010. The revenue from Europe was
GBP93.9m (2010: GBP82.2m), the Americas GBP47.2m (2010: GBP44.9m)
and the Rest of World GBP14.5m (2010: GBP4.2m). This analysis
reflects the geographies in which the business units generating the
revenues are located, and, particularly in the case of Alexander
Proudfoot, does not correspond exactly either to the locations in
which work is delivered or the currency in which revenue is
billed.
Underlying operating profit
Operating profit for the first half of 2011 was GBP13.7m (2010:
GBP11.2m). Underlying operating profit for the period increased by
24% to GBP15.3m (2010: GBP12.4m), principally relating to the
profit improvement made by Alexander Proudfoot. Kurt Salmon's
underlying operating profit for the first half of 2011 showed an
improvement on the second half of 2010.
Non-recurring items for the first half of 2011 netted to an
expense of GBP0.3m (2010: GBP0.2m income). These comprise costs of
GBP1.8m predominantly arising from the integration of Ineum
Consulting and Kurt Salmon Associates, and income of GBP1.5m which
is the release of part of a legal provision created on the
acquisition of Kurt Salmon Associates that is no longer required by
the Group. Amortisation of acquired intangibles was GBP1.3m (2010:
GBP1.4m).
Interest
The total net finance costs for the period were GBP1.2m (2010:
GBP1.9m). The decrease reflects the effects of lower net debt for
the period following the refinancing in June 2010 and the strong
cash generation from the second half of 2010. The Group has paid
margins of 1.5% over LIBOR rates on its bank borrowings during the
period.
Taxation
Profit before tax for the first half of 2011 was GBP12.5m (2010:
GBP9.3m). Underlying profit before tax for the period was GBP14.1m
(2010: GBP10.5m). The tax rate on the underlying profit before tax
was 26% (2010: 35%) and includes the benefit of certain prior year
items. The Group has tax losses in various jurisdictions and the
underlying tax rate has benefited in recent years from the
utilisation of these, particularly in France. However these have
diminished and the ability to utilise those remaining is dependent
on trading profitability.
Earnings per share
Basic earnings per share were 2.1 pence (2010: 2.0 pence per
share). Underlying basic earnings per share increased to 2.4 pence
(2010: 2.2 pence per share). Earnings per share for the first half
of 2011 reflect the full year dilutive impact of new shares issued
in the capital raising in June 2010.
Dividend
The final dividend for 2010 of 0.3 pence per ordinary share was
paid on 6 July 2011 to shareholders on the register at 10 June
2011. The Board is declaring an interim dividend for 2011 of 0.2
pence per ordinary share (2010: 0.15 pence per share). The increase
in the interim dividend in part reflects a rebalancing between the
interim and final dividends. The interim dividend will be paid on 6
January 2012 to shareholders on the register on 2 December
2011.
Share Capital
On 17 June 2010 a General Meeting of MCG approved the firm
placing, placing and open offer of 113.7m new ordinary shares at 22
pence per share and up to 53.1 million warrants at the same price.
As at 30 June 2011 6.5 million warrants had been exercised and 46.6
million warrants remained outstanding. In the event that all these
outstanding warrants are converted before they lapse on 31 December
2011, the further cash proceeds payable to MCG will be GBP10.2
million.
Balance Sheet
The Group's net debt at 30 June 2011 was GBP51.7m (30 June 2010:
GBP74.8m), which is GBP2.7 million lower than the GBP54.4m reported
at the end of 2010. In previous years the Group's operations have
not typically been cash generative in the first half of the year,
primarily as a result of the timing of the payment of annual cash
bonuses. As a result the Group has generated the majority of its
cash in the second half of the calendar year and this trend is
expected to continue in 2011.
Since 31 December 2010 GBP1.2 million has been received as a
result of the exercise of warrants issued in the capital raising in
June 2010. In March 2011 the trustees of the MCG employee benefit
trust purchased 4.2 million of the Company's shares for
consideration of GBP1.5 million for use in satisfying future awards
under the Company's employee share incentive plans.
The Group is financed by a multi-currency debt facility
negotiated during 2007 and expiring in September 2012. At 30 June
2011 the gross debt drawn under this facility reflected in the
Group balance sheet was GBP72.4m. The leverage covenant measure
used in the debt facility agreement is a measure of the ratio of
net debt to adjusted EBITDA, and was 1.7 at 30 June 2011. As a
result the interest rate margin paid on the Group's debt in the
remainder of 2011 will be 1.15% above US Dollar Libor and Euribor,
lower than the 1.5% margin paid in the first half.
The net post-retirement obligations liability principally
relates to a closed US defined benefit scheme in Alexander
Proudfoot and to a Kurt Salmon pension obligation in Germany and
has decreased from GBP25.7m at 31 December 2010 to GBP24.9m at 30
June 2011.The reduction reflects improved asset performance and an
increase in the discount rates used to calculate the liabilities of
the US scheme.
The Board's assessment in relation to going concern is included
in Note 2 of the financial information.
There have been no transactions with or material changes to
related partiesthat have materially affected the financial position
or performance of the Group during the period.
Condensed group income statement
for the six months ended 30 June 2011
Unaudited Unaudited
six months six months
ended ended
30 June 30 June
2011 2010
Note GBP'000 GBP'000
--------------------------------------------- ----- ----------- -----------
Continuing operations
Revenue 3 155,595 131,278
Cost of sales (100,470) (87,286)
--------------------------------------------- ----- ----------- -----------
Gross profit 55,125 43,992
--------------------------------------------- ----- ----------- -----------
Administrative expenses - underlying (39,784) (31,604)
Operating profit - underlying 15,341 12,388
Administrative (expenses)/income -
non-recurring (269) 217
--------------------------------------------- ----- ----------- -----------
Operating profit before amortisation of
acquired intangibles 15,072 12,605
Administrative expenses - amortisation of
acquired intangibles (1,332) (1,372)
--------------------------------------------- ----- ----------- -----------
Total administrative expenses (41,385) (32,759)
--------------------------------------------- ----- ----------- -----------
Operating profit 3 13,740 11,233
Investment income 77 62
Finance costs (1,313) (2,005)
--------------------------------------------- ----- ----------- -----------
Profit before tax 12,504 9,290
Tax 5 (3,381) (2,807)
--------------------------------------------- ----- ----------- -----------
Profit for the period from continuing
operations 9,123 6,483
--------------------------------------------- ----- ----------- -----------
Profit for the period attributable to owners
of the company 9,123 6,483
--------------------------------------------- ----- ----------- -----------
Earnings per share - pence
From continuing operations
Basic 6 2.1 2.0
Diluted 6 2.0 1.9
Basic - underlying 6 2.4 2.2
Diluted - underlying 6 2.3 2.1
--------------------------------------------- ----- ----------- -----------
Condensed group statement of comprehensive income
for the six months ended 30 June 2011
Unaudited Unaudited
six months six months
ended ended
30 June 30 June
2011 2010
GBP'000 GBP'000
---------------------------------------------------- ----------- -----------
Exchange gains/(losses) on translation of foreign
operations 6,181 (8,350)
Actuarial gains / (losses) on defined benefit
obligations 263 (5,626)
Profit on available-for-sale investments 118 81
Tax on items taken directly to equity 24 651
---------------------------------------------------- ----------- -----------
Net income/(expense) recognised directly in equity 6,586 (13,244)
Profit for the period 9,123 6,483
---------------------------------------------------- ----------- -----------
Total comprehensive income/(expense) for the period
attributable to owners of the company 15,709 (6,761)
---------------------------------------------------- ----------- -----------
Condensed group statement of changes in equity
for the six months ended 30 June 2011
Shares
Share held
by
Share Share Merger compensation employee Translation Other Retained
benefits
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
--------------- -------- -------- -------- ------------- --------- ------------ --------- --------- --------
Unaudited six
months ended
30 June 2011
Shareholders'
equity 1
January 2011 83,997 71,390 32,513 2,386 (2,354) 32,829 6,412 (51,398) 175,775
--------------- -------- -------- -------- ------------- --------- ------------ --------- --------- --------
Profit for the
period 9,123 9,123
Dividends (1,317) (1,317)
Exchange
differences 6,181 6,181
Actuarial
movements 263 263
Profit on AFS
investments 118 118
Tax on equity
items 24 24
Share based
payments 366 366
Shares issued 53 1,101 1,154
Shares
acquired by
ESOP (1,485) (1,485)
Shares
transferred
from ESOP 116 116
--------------- -------- -------- -------- ------------- --------- ------------ --------- --------- --------
Shareholders'
equity 30
June 2011 84,050 72,491 32,513 2,752 (3,723) 39,010 6,530 (43,305) 190,318
--------------- -------- -------- -------- ------------- --------- ------------ --------- --------- --------
Unaudited six
months ended
30 June 2010
Shareholders'
equity 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 6,483 6,483
Exchange
differences (8,350) (8,350)
Actuarial
movements (5,626) (5,626)
Profit on AFS
investments 81 81
Tax on equity
items 651 651
Share based
payments (1,282) (1,282)
Shares issued 1,137 23,882 25,019
Share issue
costs (1,605) (1,605)
Shareholders'
equity 30
June 2010 83,985 71,258 32,513 934 (1,153) 28,575 6,184 (55,413) 166,883
--------------- -------- -------- -------- ------------- --------- ------------ --------- --------- --------
Condensed group balance sheet
As at 30 June 2011
Unaudited Audited
30 June 31 Dec
2011 2010
GBP'000 GBP'000
---------------------------------------------------- ---------- ----------
Non-current assets
Intangible assets 280,401 276,923
Property, plant and equipment 3,191 2,846
Financial assets 3,318 3,183
Deferred income tax assets 18,712 19,078
---------------------------------------------------- ---------- ----------
Total non-current assets 305,622 302,030
---------------------------------------------------- ---------- ----------
Current assets
Trade and other receivables 95,460 76,589
Cash and cash equivalents 20,710 25,710
---------------------------------------------------- ---------- ----------
Total current assets 116,170 102,299
---------------------------------------------------- ---------- ----------
Total assets 421,792 404,329
---------------------------------------------------- ---------- ----------
Current liabilities
Financial liabilities (31,069) (39,059)
Trade and other payables (104,102) (94,772)
Current tax liabilities (12,984) (12,630)
---------------------------------------------------- ---------- ----------
Total current liabilities (148,155) (146,461)
---------------------------------------------------- ---------- ----------
Net current liabilities (31,985) (44,162)
---------------------------------------------------- ---------- ----------
Non-current liabilities
Financial liabilities (41,328) (41,050)
Retirement benefit obligations (24,872) (25,705)
Deferred tax liabilities (7,254) (7,040)
Long-term provisions (9,865) (8,298)
---------------------------------------------------- ---------- ----------
Total non-current liabilities (83,319) (82,093)
---------------------------------------------------- ---------- ----------
Total liabilities (231,474) (228,554)
---------------------------------------------------- ---------- ----------
Net assets 190,318 175,775
---------------------------------------------------- ---------- ----------
Equity
Share capital 84,050 83,997
Share premium account 72,491 71,390
Merger reserve 32,513 32,513
Share compensation reserve 2,752 2,386
Own shares held by employee benefit trust (3,723) (2,354)
Translation reserve 39,010 32,829
Other reserves 6,530 6,412
Retained earnings (43,305) (51,398)
---------------------------------------------------- ---------- ----------
Total equity attributable to owners of the company 190,318 175,775
---------------------------------------------------- ---------- ----------
Condensed group cash flow statement
For the six months ended 30 June 2011
Unaudited Unaudited
six months six months
ended ended
30 June 30 June
2011 2010
Note GBP'000 GBP'000
--------------------------------------------- ----- ----------- -----------
Net cash inflow / (outflow) from operating
activities 7 6,735 (13,717)
--------------------------------------------- ----- ----------- -----------
Investing activities
Interest received 78 62
Purchases of property, plant and equipment (844) (190)
Purchases of intangible assets (199) (371)
Proceeds on disposal of tangible fixed
assets - 45
Proceeds on disposal of investments 147 213
--------------------------------------------- ----- ----------- -----------
Net cash used in investing activities (818) (241)
--------------------------------------------- ----- ----------- -----------
Financing activities
Dividends paid (733) (26)
Interest paid (1,423) (2,005)
Proceeds from borrowings 8,990 13,388
Repayment of borrowings (17,893) (26,045)
Proceeds from issue of shares 1,153 25,019
Purchase of shares (1,485) -
--------------------------------------------- ----- ----------- -----------
Net cash (used) / raised by financing
activities (11,391) 10,331
--------------------------------------------- ----- ----------- -----------
Net decrease in cash and cash equivalents (5,474) (3,627)
Cash and cash equivalents at beginning of
period 25,710 23,965
Effect of foreign exchange rate changes 474 (1,295)
--------------------------------------------- ----- ----------- -----------
Cash and cash equivalents at end of period 20,710 19,043
--------------------------------------------- ----- ----------- -----------
Notes
1. General information
The information for the year ended 31 December 2010 does not
constitute statutory accounts as defined in Section 434 of the
Companies Act 2006. A copy of the statutory accounts for that year
has been delivered to the Registrar of Companies. The auditor's
report on those accounts was not qualified, did not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying the report and did not contain
statements under Section 498 (2) or (3) of the Companies Act
2006.
2. Significant accounting policies
(a) Basis of preparation
The set of condensed financial statements included in this
half-yearly report has been prepared in accordance with
International Accounting Standard 34, Interim Financial Reporting,
as adopted in the EU.
(b) Accounting policies
The accounting policies and methods of computation applied by
the Group in the half-year report are consistent with those
followed in the preparation of the Group's annual financial
statements for the year ended 31 December 2010. The condensed set
of financial statements included in this half-yearly financial
report has been prepared in accordance with International
Accounting Standard 34 "Interim Financial Reporting", as adopted by
the European Union. The Group's annual financial statements for the
year ended 31 December 2010 were prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union, and are available on our website:
www.mcgplc.com.
The Group has implemented IFRS 3 Business Combinations (revised
2008) and IAS 27 Consolidated and Separate Financial Statements
(revised 2008). These revisions have not impacted the Group.
Principal risks and uncertainties
The Group has operating and financial policies and procedures
designed to maximise shareholder value within a defined risk
management framework.
The key risks to which the business is exposed are reviewed
regularly by senior management and the Board as a whole.
The major risks the business faces are related to the demand for
consultancy services in each of the markets and sectors in which
the Group operates; maintaining and extending our client base:
attracting and retaining talented employees; and not using our
intellectual capital to full advantage.
These risks are managed by anticipating consultancy trends;
identifying new markets and sectors in which the Group might
operate; maximising staff utilisation; having remuneration policies
which reward performance and promote continued employment with the
Group; and maintaining a comprehensive knowledge management
system.
Potential contractual liabilities arising from client
engagements are managed through careful control of contractual
conditions and appropriate insurance arrangements. There is no
material outstanding litigation against the Group, of which the
Directors are aware, which is not covered by insurance, or provided
for in the financial statements.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position,
and the financial position of the Group, its cash flows, liquidity
position and borrowing facilities are set out in the Chairman's
statement. Principal risks and uncertainties are described
above.
The Group prepares regular business forecasts and monitors its
projected compliance with its banking covenants, which are reviewed
by the Board. Forecasts are then adjusted for sensitivities which
address the principal risks to which the Group is exposed.
Consideration is then given to the potential actions available to
management to mitigate the impact of one or more of these
sensitivities if required.
The Board has concluded that the Group should be able to operate
within the level of its current facility and remain covenant
compliant for the foreseeable future, being a period of at least
twelve months from the date of approval of this half-yearly report.
Accordingly, they continue to adopt the going concern basis in
preparing the annual report and financial statements.
3. Segmental information
The Group's operating segments are defined as the two
professional services practices, Alexander Proudfoot and Kurt
Salmon. Kurt Salmon was formed following the merger of Ineum
Consulting and Kurt Salmon Associates with effect from 1 January
2011. The two merged consultancies have been combined in the 2010
comparatives to be stated on the same basis as the 2011 segmental
presentation. This is the basis on which information is 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 the Americas, Europe
and the Rest of World. All revenues are derived from the provision
of professional services.
Inter-segmental sales are not significant.
Income statement
(a) Revenue and underlying operating profit by geography
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:
Six months ended 30 June 2011
(unaudited)
--------------------------------------------
Rest
of
Americas Europe World Consolidated
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- --------- -------- -------- -------------
Revenue - continuing operations 47,208 93,931 14,456 155,595
-------------------------------- --------- -------- -------- -------------
Operating profit - underlying 4,776 8,261 2,304 15,341
Non-recurring expenses and
amortisation of acquired
intangibles (777) (824) - (1,601)
-------------------------------- --------- -------- -------- -------------
Operating profit 3,999 7,437 2,304 13,740
Investment income 77
-------------------------------- --------- -------- -------- -------------
Finance costs (1,313)
-------------------------------- --------- -------- -------- -------------
Profit before tax 12,504
-------------------------------- --------- -------- -------- -------------
Six months ended 30 June 2010 (unaudited)
------------------------------------------------
Rest of
Americas Europe World Consolidated
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------- --------- --------- --------------
Revenue - continuing
operations 44,856 82,253 4,169 131,278
---------------------------- ---------- --------- --------- --------------
Operating profit/(loss) -
underlying 2,604 9,988 (204) 12,388
Non-recurring expenses and
amortisation of acquired
intangibles (589) (376) (190) (1,155)
---------------------------- ---------- --------- --------- --------------
Operating profit/(loss) 2,015 9,205 (204) 11,233
Investment income 62
Finance costs (2,005)
---------------------------- ---------- --------- --------- --------------
Profit before tax 9,290
---------------------------- ---------- --------- --------- --------------
(b) Revenue and underlying operating profit by operating
segment
The two (2010: three) operating segments are combined into one
reportable segment owing to similar underlying economic
characteristics across both 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.
Six months ended 30 June 2011
(unaudited)
------------------------------------
Alexander Kurt
Proudfoot Salmon Consolidated
GBP'000 GBP'000 GBP'000
-------------------------------------- ---------- -------- -------------
Revenue - continuing operations 44,351 111,244 155,595
--------------------------------------- ---------- -------- -------------
Operating profit - underlying 5,855 9,486 15,341
--------------------------------------- ---------- -------- -------------
Non-recurring expenses and
amortisation of acquired intangibles (1,601)
Operating profit 13,740
Investment income 77
Finance costs (1,313)
--------------------------------------- ---------- -------- -------------
Profit before tax 12,504
--------------------------------------- ---------- -------- -------------
Six months ended 30 June
2010 (unaudited)
-------------------------------------------------
Kurt
Alexander Ineum Salmon Kurt
Proudfoot Consulting Associates Salmon Consolidated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ---------- ----------- ----------- -------- -------------
Revenue -
continuing
operations 23,912 68,312 39,054 107,366 131,278
--------------- ---------- ----------- ----------- -------- -------------
Operating
(loss)/profit
- underlying (218) 7,718 4,888 12,606 12,388
--------------- ---------- ----------- ----------- -------- -------------
Non-recurring
expenses and
amortisation
of acquired
intangibles (1,155)
Operating
profit 11,233
Investment
income 62
Finance costs (2,005)
--------------- ---------- ----------- ----------- -------- -------------
Profit before
tax 9,290
--------------- ---------- ----------- ----------- -------- -------------
4. Dividends
Unaudited Unaudited
six months six months
ended ended
30 June 30 June
2011 2010
GBP'000 GBP'000
---------------------------------------------------- ----------- -----------
Amounts recognised as distributions to equity
holders in the period:
Final dividend in respect of the year ended 31 1,317 -
December 2010 of 0.15p (2009: nil) per share
---------------------------------------------------- ----------- -----------
Dividends are not payable on shares held in the employee share
trusts which have waived their entitlement to dividends.
The amount of the dividend waived in 2011 (in respect of the
year ended 31 December 2010) was GBP17,952 (2010: nil).
An interim dividend of 0.2p per share (2010: 0.15p per share)
will be paid on 6 January 2012 to shareholders on the register on 2
December 2011.
5. Taxation
The effective tax rate on the reported profit before tax for the
half year is 27% (30 June 2010: 30%, due predominately to the
impact of non-recurring items in the prior year). The effective tax
rate on the reported profit before tax as adjusted for the impact
of non recurring items and the accounting for amortisation of
acquisition intangibles charge for the half year is 26% (2010:
35%). Of the total tax charge, none (2010: GBP0.2m credit) arises
in respect of the UK with the remainder of the charge arising
outside the UK. In the prior year the total tax charge arises
outside the UK.
6. Earnings per share
The calculation of the earnings per share is based on the
following data:
Unaudited Unaudited
six months six months
ended ended
30 June 30 June
2011 2010
GBP'000 GBP'000
---------------------------------------------------- ----------- -----------
Earnings
Earnings for the purposes of basic earnings per
share and diluted earnings per share being net
profit attributable to owners of the company 9,123 6,483
Amortisation of acquired intangibles 1,332 1,372
Non-recurring items 269 (217)
Tax on exceptional items (335) (376)
---------------------------------------------------- ----------- -----------
Earnings for purpose of basic earnings per share
excluding amortisation of acquired intangibles and
non-recurring items 10,389 7,262
---------------------------------------------------- ----------- -----------
Number Number
(million) (million)
------------------------------------------------------ ---------- ----------
Number of shares
Weighted average number of ordinary shares for the
purposes of basic earnings per share and basic
excluding amortisation of acquired intangibles and
non-recurring items 436.3 332.9
Effect of dilutive potential ordinary shares:
- share options, performance share plan and warrants 23.3 8.5
------------------------------------------------------ ---------- ----------
Weighted average number of ordinary shares for the
purposes of diluted earnings per share 459.6 341.4
------------------------------------------------------ ---------- ----------
Pence Pence
-------------------------------------------------------------- ------ ------
Basic earnings per share - continuing operations 2.1 2.0
Diluted earnings per share - continuing operations 2.0 1.9
Basic earnings per share - excluding amortisation of acquired
intangibles and non-recurring items 2.4 2.2
Diluted earnings per share - excluding amortisation of
acquired intangibles and non-recurring items 2.3 2.1
-------------------------------------------------------------- ------ ------
The average share price for the six months ended 30 June 2011
was 34.1p (30 June 2010: 22.1p).
7. Notes to the cash flow statement
Unaudited Unaudited
six months six months
ended ended
30 June 30 June
2011 2010
GBP'000 GBP'000
---------------------------------------------------- ----------- -----------
Profit from continuing operations 13,740 11,233
Adjustments for:
Depreciation of property, plant and equipment 440 788
Amortisation of intangible assets 1,990 2,078
Profit on disposal of plant and equipment (35) (45)
Adjustment for pension funding - (140)
Adjustment for cost of share based payments 801 (1,283)
Increase in provisions 1,826 407
---------------------------------------------------- ----------- -----------
Operating cash flows before movements in working
capital 18,762 13,038
Increase in receivables (17,118) (18,084)
Increase / (decrease) in payables 7,273 (4,204)
---------------------------------------------------- ----------- -----------
Cash generated / (used) by operations 8,917 (9,250)
Income taxes paid (2,182) (4,467)
---------------------------------------------------- ----------- -----------
Net cash inflow / (outflow) from operating
activities 6,735 (13,717)
---------------------------------------------------- ----------- -----------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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