TIDMMMC
RNS Number : 6651K
Management Consulting Group PLC
01 August 2013
1 August 2013
Management Consulting Group PLC Interim Results
Lower half-year results set to be followed by stronger second
half
Management Consulting Group PLC ("MCG" or "the Group"), the
global professional services group, today announces its results for
the half-year ended 30 June 2013. As indicated in March and July
trading in the first half of 2013 has been softer than the prior
year, but the second half revenue and profit performance is
expected to be materially stronger.
Key points
-- Revenue 16% lower at GBP123.4m (H1 2012: GBP146.8m)
-- Underlying* operating profit 41% lower at GBP7.0m (H1 2012: GBP11.8m)
-- Underlying* operating profit margin lower at 5.7% (H1 2012: 8.0%)
-- Profit for the half-year of GBP1.9m (H1 2012: GBP4.1m restated)
-- Alexander Proudfoot underlying operating profit margin lower
at 3.1% (H1 2012: 11.8%) reflecting revenues which are 35% lower
than the same period in 2012
-- Kurt Salmon underlying operating profit margin maintained at
6.4% in spite of 7.5% reduction in revenue versus the same period
in 2012
-- Net debt increased to GBP51.7m, as previously guided (30 June 2012: GBP35.7m)
-- Underlying basic earnings per share decreased to 0.7p (H1 2012: 1.1p restated)
-- Interim dividend unchanged at 0.23p per share (2012: 0.23p)
-- Current Alexander Proudfoot order book is at twice the level
at the 2012 year end, and in both businesses is higher than at the
same time last year
* Throughout this statement the term 'underlying' is defined as
'before non-recurring items and amortisation of acquired intangible
assets'.
Nick Stagg, Chief Executive commented:
"As previously guided, our first half results reflect a reduced
level of activity in Alexander Proudfoot, which started the year
with a weak order book. Proudfoot's order input has however
improved significantly in the last few months and the business is
well placed to deliver a much better second half. Whilst Kurt
Salmon's revenue performance in the first half was affected by
continuing weakness in the French market, elsewhere the performance
of the business has been encouraging and it is well positioned for
the second half. The Group remains in a strong financial position
and we have a healthy order book and a good pipeline going into the
second half 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
FTI Consulting
Ben Atwell/Susan
Stuart/ Victoria
Foster-Mitchell 020 7831 3113
An analyst briefing will be held at the offices of FTI
Consulting at Holborn Gate, 26 Southampton Buildings, London WC2A
1PB on 1 August at 9.30 am.
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
The performance of the Group in the first six months of 2013 has
been affected by a reduced level of activity in the first half of
the year in Alexander Proudfoot, which largely accounts for the 16%
fall in Group revenues compared with the same period last year. The
results also reflect the continuing impact of macroeconomic
weakness on demand for Kurt Salmon's services in the French market,
although in other markets, in North America and Asia in particular,
Kurt Salmon has made good progress. The second half has started
well and is expected to be materially stronger than the first six
months.
Alexander Proudfoot's individual client engagements are usually
on a substantial scale, and as a result there can be an inherent
lumpiness in the revenues of the business from half-year to
half-year. This year we have suffered from the low level of order
input that was seen in the latter part of 2012 and in the early
part of 2013, which has reduced first half revenues. I am pleased
to report that the rate of order intake has increased significantly
in the last few months and that the current order book level is
more than twice that at the start of the 2013, providing a
promising start to the second half of the year.
Kurt Salmon continues to face difficult conditions in France,
and we will continue to manage our resource levels in the French
business to match expected market demand. Elsewhere in Europe Kurt
Salmon has made good progress so far this year, and in North
America and Asia, where the businesses is mainly focused on the
retail and consumer goods sector, it has performed well.
Much of the increase in net indebtedness at the half-year is
attributable to the first half weakness in Alexander Proudfoot
revenues, and we expect to reduce net debt significantly by the end
of the year. The Group remains in a strong financial position and
we have started the second half of the year with a healthy order
book and pipeline of prospects.
Alan Barber
Chairman
Operating and financial review
Alexander Proudfoot
Alexander Proudfoot delivers measurable financial benefits to
its clients by developing and installing processes and programmes
to improve operations, helping companies rapidly to improve their
operating performance by increasing revenues and productivity,
reducing costs and generating incremental cash flow. Alexander
Proudfoot differentiates itself from its competitors by working
side-by-side with client management and front-line workers to
implement sustainable changes. The annualised return on investment
that clients obtain from working with Alexander Proudfoot is
typically several times the cost of the project. It helps clients
across a broad range of sectors and has a particularly strong
expertise in the natural resources, financial services and
manufacturing industries.
As anticipated, Alexander Proudfoot delivered a weak revenue
performance in the first half of 2013, mainly reflecting the impact
of a depressed order book position at the start of the year. Given
the typically large scale of most of its individual client
projects, with an average size of around GBP2m, there can be an
inherent lumpiness in the revenues of the business over a shorter
reporting cycle (from half-year to half-year), which may not be
driven primarily by underlying market or business trends. So far in
2013 the rate of order intake has been significantly higher than in
the second half of 2012 and as a result the current order book
level is more than twice that at the start of the 2013, and higher
than the same time in 2012. The weakness in the opening order book
position and the subsequent improvement in order input have not
been focused on a particular geography or sector. The order book
position and the pipeline of prospects at this stage of the year
across all key geographies provide a promising start to the second
half of 2013, and point to a significantly stronger revenue
performance over the rest of the year.
Projects in the natural resources sector have continued to
represent a significant component of the total workload, although
the proportion of revenues from this sector in the first half of
2013 was lower than in 2012 at approximately 30% of the total. The
nature of the work in this sector has shifted somewhat as commodity
prices have softened, from throughput/revenue related work to
production efficiency/cost reduction. The business continues to
find success across a range of other industries, with the financial
services and manufacturing sectors being the most significant
sources of revenue alongside natural resources clients. Alexander
Proudfoot continues to operate very effectively in emerging
markets, with business units now established in South Africa,
Brazil, Chile and Hong Kong. In the first half of 2013, nearly 50%
of total revenues related to work delivered outside North America
and Western Europe, including projects in Peru, Brazil, South
Africa, Gabon, Uganda, and Russia.
Alexander Proudfoot's revenue for the first half of 2013 was 35%
lower than the same period in 2012 at GBP28.6m (H1 2012: GBP44.3m),
and 33% lower than the preceding six month period (H2 2012:
GBP42.5m). Underlying operating profit for the first half of 2013
was GBP0.9m compared with underlying operating profit in the first
half of 2012 of GBP5.2m. The underlying operating profit margin was
3.1% compared with 11.8% in the first half of 2012.
Kurt Salmon
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. Kurt
Salmon operates internationally in certain key industry verticals
and has a particular focus on retail and consumer products and in
financial services. In addition it has a number of strong regional
practices, for example in healthcare in the United States and in
the public sector in France. Kurt Salmon also provides functional
expertise to its clients, for example, through offerings focused on
Chief Financial Officers and Chief Information Officers.
Kurt Salmon's operations in North America, mainly focused on the
retail and consumer goods sector, represent approximately one-third
of the division as a whole, and have performed well in the first
half of 2013. The US retail sector is showing more confidence this
year and we have seen improved demand for our services, in
particular in relation to the interaction of bricks and mortar and
digital retail platforms. Our North American healthcare consulting
practice continues to make good progress and has recently won a
significant new project outside its core market, to advise on a
hospital development in the Middle East. The US financial sector
practice has also performed well in the first half.
In Asia the Kurt Salmon retail consulting operation in China,
acquired in 2011, continues to make excellent progress, and our
retail practice in Japan has seen improved demand as confidence has
improved in the wake of a more expansionary fiscal policy adopted
by the Japanese authorities.
Approximately 60% of Kurt Salmon's revenues are generated in
Europe, with the largest operation being in France, which delivers
around three quarters of the total European revenues for the
division. Kurt Salmon in France is a leading player in the
consulting market with a stable blue chip client base. A high
proportion of its annual revenues are derived from clients who have
been commissioning work from Kurt Salmon for many years. Growth in
the French economy has stalled and business confidence has been
damaged by the failure so far to implement long term restructuring
initiatives. Clients are cautious and we have seen a trend towards
commissioning smaller, multiple consulting projects over time,
rather than single larger projects. This trading environment may
persist for some time, and we will continue to adjust our resources
to match expected demand, in what will remain an important and
profitable market for Kurt Salmon, albeit one where growth remains
very challenging.
Elsewhere in Europe the first half results have been
encouraging, with a good performance in the retail consulting
practices in Germany and the UK, and progress in the business units
in Belgium, Luxemburg and Switzerland, which are more focused on
the financial sector. Kurt Salmon is not exposed to weaker markets
in Southern Europe.
Kurt Salmon's revenue for the first half of 2013 was GBP94.8m.
This was GBP7.7m or 7.5% lower than the corresponding first half
revenue in 2012 of GBP102.5m, and GBP1.7m or 1.8% lower than the
second half revenue in 2012 of GBP96.5m. This reduction reflects
the impact of the geographic and sector trends discussed above, but
also the actions taken in the second half of 2012 to rationalise
certain non-core underperforming practices. Underlying operating
profit for the first half of 2013 was GBP6.1m representing a margin
of 6.4%, in line with the margin reported in the first half of
2012.
Summary and outlook
Trading in the first six months of 2013 has been affected by the
expected impact ofa slow start to the year in Alexander Proudfoot
and some continuing weakness in the Kurt Salmon business in France,
which have contributed to a softer first half revenue and profit
performance.
The momentum of order input in Proudfoot however has improved
significantly in the last four months and the business appears well
placed at this stage for a much better performance in the second
half, with a current order book that is more than twice the level
seen at the start of the year, and an encouraging pipeline of
prospects.
The level of the Kurt Salmon order book and its pipeline of
prospects are also encouraging at this stage of the year. We are
taking further action to address the impact of the continuing weak
economy in France, and elsewhere the Kurt Salmon business continues
to perform well, both in the European operations outside France,
and particularly in North America and Asia.
Our business continues to prosper in emerging markets and 15% of
first half revenues came from work delivered outside North America
and Western Europe. This is slightly lower than last year (2012:
18%) as a whole as a result of the lower proportion of Alexander
Proudfoot revenues in the Group total.
As expected, the Group's net debt has increased at the half-year
as a result of weaker revenue and cash generation, to GBP51.7m, but
it remains at a comfortable level in relation to our overall bank
facility and covenant requirements. 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 2013.
Clients remain cautious, and we have yet to see signs of
sustained growth in significant parts of the global economy. Some
markets, France in particular, continue to be difficult. However,
the Group has a well balanced and diverse business which is now
showing positive signs for the second half trading performance in
most of its markets. We will continue to focus on growth
opportunities where they arise, including smaller bolt-on
acquisitions where appropriate.
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. Approximately half of the Group's revenues
are typically denominated in Euros. The average exchange rates to
Sterling used in the first half of 2013 were GBP1 = EUR1.18 (H1
2012: GBP1 = EUR1.21) and GBP1 = $1.55 (H1 2012: GBP1 = $1.58). The
closing exchange rates to Sterling used in balance sheet
translation at 30 June 2013 were GBP1 = EUR1.17 (H1 2012: GBP1 =
EUR1.23) and GBP1 = $1.52 (H1 2012: GBP1 = $1.56).
Revenue
Revenue for the first half of 2013 was GBP123.4m, 16% below the
corresponding figure for the previous year (H1 2012: GBP146.8m) and
11% below the revenue reported for the preceding 6 month period (H2
2012: GBP139.0m). Alexander Proudfoot recorded revenue of GBP28.6m,
35% lower than the same period in the previous year (H1 2012:
GBP44.3m). Revenue from Kurt Salmon was GBP94.8m (H1 2012:
GBP102.5m), a decrease of 7.5%.
Changes in exchange rates compared with 2012 have had a small
net positive impact on reported revenues, principally as a result
of a stronger Euro and US dollar increasing the Sterling value of
revenue in these currencies, offset by some weakening in the South
African Rand, Brazilian Real and Japanese Yen.
Revenue from Europe in the first half of 2013 was lower than the
corresponding period in 2012 at GBP66.7m (H1 2012: GBP81.7m).
Revenue from the Americas decreased to GBP47.8m (H1 2012: GBP53.9m)
and in the Rest of World revenue decreased to GBP8.9m (H1 2012:
GBP11.3m). This analysis reflects the geographies in which the
business units generating the revenues are located, and,
particularly in the case of Alexander Proudfoot, this does not
wholly reflect either the locations in which work is delivered or
the currency in which revenue is billed. Approximately 15% of
revenues in the first half of 2013 were derived from projects
delivered outside the developed economies of North America and
Western Europe.
Underlying operating profit
Operating profit for the first half of 2013 was GBP4.4m (H1
2012: GBP9.5m). Underlying operating profit for the period
decreased compared with the corresponding period in 2012 by 41% to
GBP7.0m (H1 2012: GBP11.8m), principally as a result of a
significantly weaker performance in Alexander Proudfoot.
Non-recurring items for the first half of 2013 were an expense
of GBP1.4m (H1 2012: GBP1.0m). These predominantly comprise
redundancy and related costs from headcount reductions made in Kurt
Salmon in France. Amortisation of acquiredintangibles was GBP1.3m
(H1 2012: GBP1.2m).
Interest
The total net finance costs for the period were GBP1.9m (H1
2012: GBP2.0m restated). The Group has paid margins of 2.5% over
LIBOR rates on its bank borrowings during the period, consistent
with the same period during 2012. Revisions to IAS 19 that apply in
2013 mean that the reported net finance charge now includes an
imputed charge in relation to the defined benefit pension deficit
of GBP0.5m (H1 2012: GBP0.5m restated).
Taxation
Profit before tax for the first half of 2013 was GBP2.5m (H1
2012: GBP7.6m restated). Underlying profit before tax for the
period was GBP5.1m (H1 2012: GBP9.9m restated). The tax rate on the
underlying profit before tax was 30% (H1 2012: 44% restated). The
Group has tax losses in various jurisdictions and the underlying
tax rate has benefited in recent years from the utilisation of
these. However these have diminished and the ability to utilise
those remaining is dependent on trading profitability and other
factors.
Earnings per share
Basic earnings per share were 0.4 pence (H1 2012: 0.8 pence per
share restated). Underlying basic earnings per share decreased to
0.7 pence (H1 2012: 1.1 pence per share restated).
Dividend
The final dividend for 2012 of 0.595 pence per ordinary share
was paid on 2 July 2013 to shareholders on the register at 17 May
2012. The Board is declaring an interim dividend for 2013 of 0.23
pence per ordinary share (2012: 0.23 pence per share). The interim
dividend will be paid on 7 January 2014 to shareholders on the
register on 6 December 2013.
Balance Sheet
The Group's net debt at 30 June 2013 was GBP51.7m which is
GBP16.3m higher than the GBP35.7m reported at 30 June 2012, and
GBP21.7m higher than the GBP30.3m reported at the end of 2012. The
Group's operations are not typically 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
historically generated the majority of its cash in the second half
of the calendar year and this trend is expected to continue in
2013. The level of cash receipts in the first half of 2013 has also
been affected by the relative weakness of Alexander Proudfoot
revenues in this period, and by the impact of exchange rates. At
2012 year end exchange rates the reported net debt position at 30
June would have been GBP49.2m.
The Group is financed by an GBP85m debt facility negotiated
during 2011 and expiring in July 2016. At 30 June 2013 the gross
debt drawn under this facility reflected in the Group balance sheet
was GBP62.6m (30 June 2012: GBP48.1m). The leverage covenant
measure used in the debt facility agreement is a measure of the
ratio of net debt to adjusted EBITDA, and was 1.9 at 30 June 2013
compared with the maximum leverage permitted under the facility of
2.75. As a result the interest rate margin paid on the Group's debt
in the remainder of 2013 will increase to 2.75% above Libor and
Euribor (from 2.25%).
The net post-retirement obligations liability principally
relates to a closed US defined benefit scheme in Alexander
Proudfoot and to an unfunded Kurt Salmon pension obligation in
Germany, and has decreased from GBP24.6m at 31 December 2012 to
GBP21.5m at 30 June 2013. The decrease is principally due to an
increase in the discount rates used to measure the pension
obligations.
On 30 October 2012 MCG announced that it intended to commence a
share buy-back programme to make market purchases of its ordinary
shares of up to GBP5m over the succeeding twelve months. Up to 31
July 2013 the Company had purchased 2.2m of its ordinary shares for
a total consideration of GBP0.6m.
The Board's assessment in relation to going concern is included
in Note 2 of the financial information. Principal risks and
uncertainties are set out in Note 2 of the financial
information.
There have been no transactions with or material changes to
related parties that have materially affected the financial
position or performance of the Group during the period.
.
Condensed Group statement of profit and loss
for the six months ended 30 June 2013
Unaudited
Unaudited six months
six months ended
ended 30 June 2012
30 June 2013 (restated)
Note GBP'000 GBP'000
------------------------------------------- ---- ------------ ------------
Continuing operations
Revenue 3 123,421 146,831
Cost of sales (81,511) (93,706)
------------------------------------------- ---- ------------ ------------
Gross profit 41,910 53,125
------------------------------------------- ---- ------------ ------------
Administrative expenses - underlying (34,905) (41,290)
Profit from operations - underlying 7,005 11,835
Administrative expenses - non-recurring (1,356) (1,044)
------------------------------------------- ---- ------------ ------------
Profit from operations before amortisation
of acquired intangibles 5,649 10,791
Administrative expenses - amortisation
of acquired intangibles (1,278) (1,244)
------------------------------------------- ---- ------------ ------------
Total administrative expenses (37,539) (43,578)
------------------------------------------- ---- ------------ ------------
Profit from operations 3 4,371 9,547
Investment income 8 9
Finance costs (1,894) (1,977)
------------------------------------------- ---- ------------ ------------
Profit before tax 2,485 7,579
Tax 5 (607) (3,527)
------------------------------------------- ---- ------------ ------------
Profit for the period attributable to
owners of the Company 1,878 4,052
------------------------------------------- ---- ------------ ------------
Earnings per share - pence
From profit for the period attributable
to owners of the Company
Basic 6 0.4 0.8
Diluted 6 0.4 0.8
Basic - underlying 6 0.7 1.1
Diluted - underlying 6 0.7 1.1
------------------------------------------- ---- ------------ ------------
Condensed Group statement of comprehensive income
for the six months ended 30 June 2013
Unaudited
Unaudited six months
six months ended
30 June
ended 2012
30 June 2013 (restated)
GBP'000 GBP'000
------------------------------------------------------- ------------ ----------
Exchange gains/(losses) on translation of foreign
operations 10,757 (4,512)
Remeasurement of defined benefit pension schemes 4,367 (2,433)
(Loss)/gain on available-for-sale investments (364) 186
Other comprehensive income/(expense) for the
period 14,760 (6,759)
Profit for the period 1,878 4,052
------------------------------------------------------- ------------ ----------
Total comprehensive income for the period attributable
to owners of the Company 16,638 (2,707)
------------------------------------------------------- ------------ ----------
Condensed Group statement of changes in equity
for the six months ended 30 June 2013
Shares
Share held
Share Share Merger compensation by 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 2013
Shareholders' equity
1 January 2013 84,504 82,040 32,513 5,732 (3,627) 23,214 6,383 (36,193) 194,566
--------------------- ------- ------- ------- ------------ ----------- ----------- -------- -------- -------
Total comprehensive
income
for the period 10,757 (364) 6,245 16,638
Dividends (2,878) (2,878)
Share-based payments 1,097 140 75 1,312
Shares acquired by ESOP (282) (282)
Shares transferred from
ESOP 92 92
------------------------------ ------- ------- ------------ ----------- ----------- -------- -------- -------
Shareholders' equity
30 June 2013 84,504 82,040 32,513 6,829 (3,677) 33,971 6,019 (32,751) 209,448
--------------------- ------- ------- ------- ------------ ----------- ----------- -------- -------- -------
Unaudited six months
ended 30 June 2012
Shareholders' equity
1 January 2012 84,504 82,040 32,513 3,388 (3,739) 29,040 6,229 (39,237) 194,738
--------------------- ------- ------- ------- ------------ ----------- ----------- -------- -------- -------
Total comprehensive
income
for the period (4,512) 186 1,619 (2,707)
Dividends (2,670) (2,670)
Share-based payments 980 980
Shares transferred from
ESOP 388 388
------------------------------ ------- ------- ------------ ----------- ----------- -------- -------- -------
Shareholders' equity
30 June 2012 84,504 82,040 32,513 4,368 (3,351) 24,528 6,415 (40,288) 190,729
--------------------- ------- ------- ------- ------------ ----------- ----------- -------- -------- -------
Condensed Group statement of financial position
as at 30 June 2013
Unaudited Audited
30 June
2013 31 Dec 2012
GBP'000 GBP'000
--------------------------------------------- --------- -----------
Non-current assets
Intangible assets 277,728 266,397
Property, plant and equipment 3,063 2,646
Investments 2,223 2,025
Deferred income tax assets 20,979 19,985
--------------------------------------------- --------- -----------
Total non-current assets 303,993 291,053
--------------------------------------------- --------- -----------
Current assets
Trade and other receivables 73,061 66,634
Cash and cash equivalents 10,943 14,863
--------------------------------------------- --------- -----------
Total current assets 84,004 81,227
--------------------------------------------- --------- -----------
Total assets 387,997 372,280
--------------------------------------------- --------- -----------
Current liabilities
Trade and other payables (72,346) (82,374)
Current tax liabilities (10,635) (12,147)
--------------------------------------------- --------- -----------
Total current liabilities (82,981) (94,521)
--------------------------------------------- --------- -----------
Net current assets/ (liabilities) 1,023 (13,294)
--------------------------------------------- --------- -----------
Non-current liabilities
Financial liabilities (62,597) (45,150)
Retirement benefit obligations (21,472) (24,761)
Deferred tax liabilities (3,989) (4,516)
Long-term provisions (7,510) (8,766)
--------------------------------------------- --------- -----------
Total non-current liabilities (95,568) (83,193)
--------------------------------------------- --------- -----------
Total liabilities (178,549) (177,714)
--------------------------------------------- --------- -----------
Net assets 209,448 194,566
--------------------------------------------- --------- -----------
Equity
Share capital 84,504 84,504
Share premium account 82,040 82,040
Merger reserve 32,513 32,513
Share compensation reserve 6,829 5,732
Shares held by employee benefit trust (3,677) (3,627)
Translation reserve 33,971 23,214
Other reserves 6,019 6,383
Retained earnings (32,751) (36,193)
--------------------------------------------- --------- -----------
Equity attributable to owners of the Company 209,448 194,566
--------------------------------------------- --------- -----------
Condensed Group statement of cash flows
for the six months ended 30 June 2013
Unaudited Unaudited
six months six months
ended ended
30 June
2013 30 June 2012
Note GBP'000 GBP'000
------------------------------------------- ---- ---------- ------------
Net cash outflow from operating activities 7 (12,412) (5,887)
------------------------------------------- ---- ---------- ------------
Investing activities
Interest received 8 9
Purchases of property, plant and equipment (845) (327)
Purchases of intangible assets (931) (1,848)
Purchase of financial assets (664) (25)
Proceeds on disposal of investments - 240
Acquisition of subsidiaries (319) (248)
------------------------------------------- ---- ---------- ------------
Net cash used in investing activities (2,751) (2,199)
------------------------------------------- ---- ---------- ------------
Financing activities
Dividends paid (1,099) (916)
Interest paid (1,177) (1,011)
Proceeds from borrowings 22,496 63,042
Repayment of borrowings (7,689) (60,331)
Proceeds from issue of shares - 585
Purchase of shares (282) -
------------------------------------------- ---- ---------- ------------
Net cash raised by financing activities 12,249 1,369
------------------------------------------- ---- ---------- ------------
Net decrease in cash and cash equivalents (2,914) (6,717)
Cash and cash equivalents at beginning
of period 14,862 19,762
Effect of foreign exchange rate changes (1,005) (668)
------------------------------------------- ---- ---------- ------------
Cash and cash equivalents at end of period 10,943 12,377
------------------------------------------- ---- ---------- ------------
Notes
1. General information
The results for the six months ended 30 June 2013 and 30 June
2012 are unaudited but have been reviewed by the Group's auditor,
whose report on the current period forms part of this document. The
information for the year ended 31 December 2012 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 or modified, did not include a
reference to any matters to which the auditor 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 annual financial statements of the Group are prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union, and are available on our website:
www.mcgplc.com. 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 by the European Union.
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
In the current financial year, the Group has adopted the
amendments to IAS 19 (revised 2011) "Employee Benefits" in the
half-yearly report. Otherwise, the same accounting policies,
presentation and methods of computation are followed in the
condensed set of financial statements as applied in the Group's
latest annual audited financial statements.
IAS 19 (revised 2011) and the related consequential amendments
have impacted the accounting for the Group's defined benefit
scheme, by replacing the interest cost and expected return on plan
assets with a net interest charge on the net defined benefit
liability. For the current period, the profit is GBP0.5 million
lower than it would have been prior to the adoption of IAS 19
(revised 2011). For the comparative period, the restated profit is
GBP0.5 million lower than previously reported. As the Group has
always recognised actuarial gains and losses immediately there has
been no effect on the prior year defined benefit obligation.
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 consistent with those set
out in the Company's Annual Report for the year ended 31 December
2012. They are related to the demand for consultancy services in
each of the markets and sectors in which the Group operates;
retention and development of key client relationships, recruitment
and retention of talented employees; optimisation of the Group's
intellectual capital; and fluctuations in foreign exchange currency
rates.
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; maintaining a comprehensive knowledge management system; and
undertake hedging to mitigate currency risk where appropriate.
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. 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:
Unaudited six months ended 30 June 2013
---------------------------------------------
Rest of
Americas Europe World Consolidated
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ---------- -------- -------- -------------
Revenue - continuing operations 47,802 66,686 8,933 123,421
---------------------------------------- ---------- -------- -------- -------------
Profit from operations - underlying 2,820 3,395 790 7,005
---------------------------------------- ---------- -------- -------- -------------
Non-recurring expenses and amortisation
of acquired intangibles (475) (2,154) (5) (2,634)
Profit from operations 2,345 1,241 785 4,371
Investment income 8
Finance costs (1,894)
---------------------------------------- ---------- -------- -------- -------------
Profit before tax 2,485
---------------------------------------- ---------- -------- -------- -------------
Unaudited six months ended 30 June 2012
(restated)
---------------------------------------------
Rest of
Americas Europe World Consolidated
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ---------- -------- -------- -------------
Revenue - continuing operations 53,878 81,685 11,268 146,831
---------------------------------------- ---------- -------- -------- -------------
Profit from operations - underlying 3,645 6,370 1,820 11,835
---------------------------------------- ---------- -------- -------- -------------
Non-recurring expenses and amortisation
of acquired intangibles (508) (1,780) - (2,288)
Profit from operations 3,137 4,590 1,820 9,547
Investment income 9
Finance costs (1,977)
---------------------------------------- ---------- -------- -------- -------------
Profit before tax 7,579
---------------------------------------- ---------- -------- -------- -------------
(b) Revenue and underlying operating profit by operating
segment
The two 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.
Unaudited six months ended
30 June 2013
------------------------------------
Alexander
Proudfoot Kurt Salmon Consolidated
GBP'000 GBP'000 GBP'000
---------------------------------------- --------- ----------- ------------
Revenue - continuing operation 28,620 94,801 123,421
---------------------------------------- --------- ----------- ------------
Profit from operations - underlying 866 6,139 7,005
---------------------------------------- --------- ----------- ------------
Non-recurring expenses and amortisation
of acquired intangibles (2,634)
Profit from operations 4,371
Investment income 8
Finance costs (1,894)
---------------------------------------- --------- ----------- ------------
Profit before tax 2,485
---------------------------------------- --------- ----------- ------------
Unaudited six months ended
30 June 2012 (restated)
Alexander
Proudfoot Kurt Salmon Consolidated
GBP'000 GBP'000 GBP'000
---------------------------------------- --------- ----------- ------------
Revenue - continuing operations 44,267 102,564 146,831
---------------------------------------- --------- ----------- ------------
Profit from operations - underlying 5,211 6,624 11,835
---------------------------------------- --------- ----------- ------------
Non-recurring expenses and amortisation
of acquired intangibles (2,288)
Profit from operations 9,547
Investment income 9
Finance costs (1,977)
---------------------------------------- --------- ----------- ------------
Profit before tax 7,579
---------------------------------------- --------- ----------- ------------
4. Dividends
Unaudited Unaudited
six months six months
ended ended
30 June
30 June 2013 2012
GBP'000 GBP'000
---------------------------------------------- ------------ ----------
Amounts recognised as distributions to equity
holders in the period:
Final dividend in respect of the year ended
31 December 2012 of 0.595p
(2011: 0.55p) per share 2,878 2,670
---------------------------------------------- ------------ ----------
Dividends are not payable on treasury shares or shares held in
the employee share trusts which have waived their entitlement to
dividends.
The amount of the dividend waived in 2013 (in respect of the
year ended 31 December 2012) was GBP79,135 (2012: GBP64,053).
An interim dividend of 0.23p per share (2012: 0.23p per share)
will be paid on 7 January 2014 to shareholders on the register on 6
December 2013.
5. Taxation
The effective tax rate on the reported profit before tax for the
half year is 24% (H1 2012: 47% restated). 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 30% (H1 2012:
44% restated). Of the total tax charge, GBPnil (H1 2012: GBPnil)
arises in respect of the UK with the remainder of the charge
arising 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 2012
30 June
2013 (restated)
GBP'000 GBP'000
------------------------------------------------- ---------- ------------
Earnings
Earnings for the purposes of basic earnings per
share and diluted earnings per share being net
profit for the period attributable to owners
of the Company 1,878 4,052
Amortisation of acquired intangibles 1,278 1,244
Non-recurring items 1,356 1,044
Tax on exceptional items (936) (813)
------------------------------------------------- ---------- ------------
Earnings for purpose of basic earnings per share
excluding amortisation of acquired intangibles
and non-recurring items 3,576 5,527
------------------------------------------------- ---------- ------------
Number Number
(m) (m)
---------------------------------------------------------- ------ ------
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 484.2 485.8
Effect of dilutive potential ordinary shares:
- share options, performance share plan and warrants 11.1 -
---------------------------------------------------------- ------ ------
Weighted average number of ordinary shares for the
purposes of diluted earnings per share 495.3 485.8
---------------------------------------------------------- ------ ------
Pence Pence
---------------------------------------------------- ----- -----
Basic earnings per share - continuing operations 0.4 0.8
Diluted earnings per share - continuing operations 0.4 0.8
Basic earnings per share - excluding amortisation
of acquired intangibles and non-recurring items 0.7 1.1
Diluted earnings per share - excluding amortisation
of acquired intangibles and non-recurring items 0.7 1.1
---------------------------------------------------- ----- -----
The average share price for the six months ended 30 June 2013
was 28.6p (30 June 2012: 33.4p).
7. Notes to the cash flow statement
Unaudited Unaudited
six months six months
ended ended
30 June 2013 30 June 2012
GBP'000 GBP'000
---------------------------------------------- ------------ ------------
Profit from continuing operations 4,371 9,547
Adjustments for:
Depreciation of property, plant and equipment 483 518
Amortisation of intangible assets 2,298 1,929
Profit on disposal of plant and equipment (98) -
Adjustment for cost of share-based payments 1,839 1,429
(Decrease)/Increase in provisions (1,477) 451
---------------------------------------------- ------------ ------------
Operating cash flows before movements in
working capital 7,416 13,874
Increase in receivables (5,269) (11,145)
Decrease in payables (12,989) (4,108)
---------------------------------------------- ------------ ------------
Cash absorbed by operations (10,842) (1,379)
Income taxes paid (1,570) (4,508)
---------------------------------------------- ------------ ------------
Net cash outflow from operating activities (12,412) (5,887)
---------------------------------------------- ------------ ------------
8. Financial instruments fair value disclosure
The directors consider that the carrying value amounts of
financial assets and financial liabilities recorded at amortised
cost in the condensed financial statements included in this
half-yearly report are approximately equal to their fair
values.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DMGFNLMVGFZM
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