TIDMMMC
RNS Number : 8051N
Management Consulting Group PLC
31 July 2014
31 July 2014
Management Consulting Group PLC Interim Results
Revenues and profit ahead of last year on a constant currency
basis
Management Consulting Group PLC ("MCG" or "the Group"), the
global professional services group, today announces its results for
the half-year ended 30 June 2014. As indicated in our pre close
statement on 4 July, good revenue and profit growth in the first
half of 2014 have been masked by the translation impact of the
strengthening of Sterling.
Key points
-- Reported revenue 1% higher at GBP125.0m (H1 2013: GBP123.4m),
8% higher on a constant currency basis
-- Underlying* operating profit 3% higher at GBP7.2m (H1 2013: GBP7.0m)
-- Underlying* operating profit margin steady at 5.8% (H1 2013: 5.7%)
-- Profit for the half-year of GBP1.4m (H1 2013: GBP1.9m)
-- As expected Alexander Proudfoot underlying* operating profit
margin lower at 0.4% (H1 2013: 3.1%) reflecting planned change
initiatives
-- Kurt Salmon underlying* operating profit margin higher at 7.5% (H1 2013 6.4%)
-- Net debt decreased to GBP48.0m (H1 2013: GBP51.7m)
-- Underlying* basic earnings per share decreased to 0.4p (H1 2013: 0.7p)
-- Interim dividend unchanged at 0.23p per share (H1 2013: 0.23p)
*Throughout this statement the term 'underlying' is defined as
'before non-recurring items and amortisation of acquired intangible
assets'.
Nick Stagg, Chief Executive commented:
"We have delivered an improved performance on both the top and
bottom line on an underlying basis. Kurt Salmon has performed well,
both in revenue and margin terms, reflecting improved market
conditions and a lower cost base. As expected our first half
results reflect a slow start in Alexander Proudfoot and the margin
impact of the changes we have been making to build a more flexible
business model focused on profitable growth. Our reported results
have been significantly impacted by currency translation, with
underlying revenue and profit growth in Euros and US Dollars in
particular masked by the considerable strengthening of Sterling, a
currency which represents only 7% of our revenue. Both businesses
are well placed at this stage of the year for an improved second
half in terms of underlying performance in line with our
expectations, although we remain exposed to the risk that currency
headwinds will affect year on year comparisons."
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
Victoria Foster-Mitchell 020 3727 1000
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 2014 has
been generally encouraging. On a constant currency basis both
Alexander Proudfoot and Kurt Salmon have increased revenues, by 22%
and 4% respectively, although our reported results have been
affected by the significant strengthening of Sterling as a result
of which reported Group revenues in Sterling have increased by 1%
to GBP125.0m.
Kurt Salmon had a good start to 2014 and this continued into the
second quarter. In our French business, revenue levels have
stabilised and margins have benefited from the management action
taken last year to adjust resources to lower activity levels in
that year. We have seen positive underlying trends in revenue
elsewhere in Europe and in North America. Kurt Salmon is benefiting
from increasing work in digital transformation, as clients across
all sectors require help in adapting their business models and
operations to an increasingly digital environment.
As previously reported Alexander Proudfoot had a slow start to
the year and has been most affected by the material translation
impact of currency movements. Reported revenues in Sterling for the
first half of 2014 slightly exceed those in the same period last
year but do not match those reported in the second half of 2013. We
have made good progress with the change initiatives in the
Alexander Proudfoot business announced earlier this year which will
deliver a stronger platform for growth in the medium term, but, as
expected, these have adversely affected profitability in the first
half of 2014.
We have entered the second half of the year with some positive
momentum in Kurt Salmon, although we are not yet seeing significant
signs of growth in France, our largest market. We believe that
Alexander Proudfoot will emerge as a stronger business by the end
of 2014, although we will need to continue to build our order input
strongly in the rest of the third quarter in order to maintain
reported year on year revenue growth for 2014 as a whole,
particularly if further currency headwinds persist in the second
half. I look forward to an improving underlying performance for the
Group in the second half, albeit with a suitable measure of caution
at this stage of the year.
Alan Barber
Chairman
Operating and financial review
Alexander Proudfoot
Alexander Proudfoot's reported revenue for the first half of
2014 was 9% higher than the same period in 2013 at GBP31.3m (H1
2013: GBP28.6m) but 22% lower than the preceding six month period
(H2 2013: GBP40.2m). At H1 2013 exchange rates, H1 2014 revenues
would have been GBP34.8m, an increase of 22% on the same period in
2013. The business reported a broadly break even position for the
first half of 2014 with underlying operating profit of GBP0.1m,
compared with GBP0.9m and a margin of 3.1% in the first half of
2013, reflecting the expected impact of the costs associated with
the change initiatives announced earlier this year.
Alexander Proudfoot had a slow start to 2014 as previously
disclosed. The opening order book at the beginning of the year was
stronger than at the same time in 2013, but levels of order input
in the first quarter were lower than those in the second half of
2013 and revenues were consequently weaker. In the most recent two
months, input has picked up quite strongly and the order book is
now better than at the beginning of the year and at a similar level
to the same stage last year.
In March 2014 the then CEO of Alexander Proudfoot stepped down
from this role and as a director of MCG. At the same time the MCG
Board announced that it intended to invest in and develop the
Alexander Proudfoot offering in order to help build a more stable
and predictable revenue base and drive top-line growth. Good
progress has been made in the last five months in taking forward a
series of initiatives to enhance sales and operations, introduce
innovations relating to the offering and to explore new contracting
models with clients. As expected these initiatives have required
investment in the form of recruitment and lower utilisation, which
have had an adverse effect on margins in the first half of 2014,
and we expect that this impact will continue in the second
half.
Alexander Proudfoot has unique capabilities in the natural
resources sector which has continued to represent a significant
component of the total revenues in the first half of 2014, higher
than in 2013 at approximately 50% of the total (H1 2013: 30%).
Manufacturing and financial services have continued to be the other
key sectors in which the business is consistently successful. In
terms of geographies, the business units in Europe, South America
and Asia have reported increased revenues compared with the same
period last year, whilst those in North America and Africa have
slightly lower revenues. Much of the focus of the change
initiatives has been on the North American operations, and the
adverse margin impact in 2014 has been most apparent here.
Alexander Proudfoot continues to operate very effectively in
emerging market locations and in the first half of 2014 nearly 60%
of total revenues related to work delivered outside North America
and Western Europe (H1 2013: nearly 50%).
Kurt Salmon
Kurt Salmon's reported revenue for the first half of 2014 was
GBP93.7m. This was GBP1.1m or 1% lower than the corresponding first
half revenue in 2013 of GBP94.8m, but equal to second half revenue
in 2013. H1 2013 included revenues of GBP3.5m from the Cleversys
business which was sold in October of that year. On a constant
currency basis at H1 2013 exchange rates, H1 2014 revenues would
have been GBP98.9m, an increase of 4.3% on the same period, or 8.3%
if the Cleversys revenues in H1 2013 are excluded. Underlying
operating profit for the first half of 2014 was GBP7.0m (H1 2013:
GBP6.1m) representing a margin of 7.5%, higher than the 6.4% margin
reported in the first half of 2013.
Kurt Salmon's operations in North America represent nearly 40%
of the division as a whole. The North American retail and consumer
goods practice has delivered a good performance in the first half
of 2014, growing revenues by more than 20% on a constant currency
basis. We continue to see increasing demand from US retail sector
clients facing the challenges of adapting business models and
operations to a new digital world. Our North American healthcare
consulting practice continues to make good progress, although the
US financial sector practice had a weaker first half in 2014 than
last year.
More than half Kurt Salmon's revenues are generated in Europe,
with the largest operation being in France which delivers around
70% of the total European revenues for the division. In 2012 and
2013 we saw a significant contraction in revenues in France driven
by macro economic weakness and reduced demand for our services.
Whilst we have not yet seen clear signs of growth in the French
market and business sentiment remains fragile, underlying revenue
levels in local currency in our French business stabilised in the
first half of 2014 and our margins have improved significantly as a
result of the management action taken during 2013 to manage
resources to match demand.
Elsewhere in Europe the first half results have been
encouraging, with revenue and profit growth in the retail-led
consulting practices in Germany and the UK offset a little by
weaker revenues in Belgium and Luxembourg which are more focused on
the financial sector. In Asia the Kurt Salmon retail consulting
operations in China and Japan have continued to make good progress
but these are a relatively small component of the division as a
whole.
Summary and outlook
On a constant currency basis, the Group's revenues increased by
8% in the first half of 2014 and underlying operating profit by an
estimated 10% compared with the same period last year. However,
material currency headwinds have impacted the Group's reported
results for the first half and so show a more modest improvement in
revenue and profitability.
Alexander Proudfoot has increased revenues year on year, in
spite of a slow start to 2014. As expected, the changes being made
to develop the offering and operations have had some adverse impact
on margins, but we expect these initiatives to deliver a more
stable and better business. Recent order input has helped us build
a healthy order book to a similar level as at the same stage in
2013, but we need to maintain the improved order intake rate that
we have seen recently in order to achieve our objectives for the
year as a whole, and we remain suitably cautious on the outlook at
this stage of the year.
Kurt Salmon has delivered a much improved underlying
performance, with margins benefiting from the action taken last
year to address resourcing levels in France, and impressive growth
in revenues in North America. The business is well placed for the
second half, both in terms of its order book and its positioning in
a market where clients increasingly need to devise and implement
operational changes in response to the challenge of digital, an
area where Kurt Salmon has continued to develop real expertise.
Net debt has decreased year on year to GBP48.0m (H1 2013:
GBP51.7m) and remains at a comfortable level in relation to the
Group's 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 2014.
Stability in our French business and improving market conditions
in some of the other geographies in which we operate provide an
encouraging backdrop for Kurt Salmon as we enter the second half of
the year, and we are making good progress in developing a firmer
growth platform in Alexander Proudfoot. At this stage both
businesses are showing positive signs of an improving underlying
performance in the second half, but our reported results in terms
of year on year comparisons may continue to be affected by the
translation impact of exchange rate movements.
Group Financial Summary
Exchange rates
In the first half of 2014, only approximately 7% of the Group's
total revenues were billed in Sterling. Nearly half of the Group's
revenues are typically denominated in Euros and more than one third
in US Dollars. Given the global nature of its project delivery
capabilities, Alexander Proudfoot also operates in a range of other
currencies, notably in South African Rand and Brazilian Real, which
together comprised approximately 14% of divisional revenues in H1
2014.
The average exchange rates to Sterling used in the first half of
2014 were GBP1 = EUR1.22 (H1 2013: GBP1 = EUR1.18) and GBP1 = $1.67
(H1 2013: GBP1 = $1.55). Comparing the first half periods in 2014
and 2013, Sterling therefore strengthened by 3% against the Euro
and by 8% against the US Dollar. Over the same period Sterling also
strengthened by 26% against the South African Rand and by 22%
against the Brazilian Real.
Whilst the translation impact on reported revenues of changes in
exchange rates has been significant, the profit impact of exchange
rate shifts is mitigated by the large degree of natural hedging in
the Group's operations in that its expenses are broadly denominated
in a similar mix of currencies to its revenues. However, the
proportion of the Group's expenses that are denominated in Sterling
tends to be somewhat higher than revenues in that currency, and
therefore does have some negative impact on reported Group profit
margins when Sterling is strengthening.
The closing exchange rates to Sterling used in balance sheet
translation at 30 June 2014 were GBP1 = EUR1.25 (H1 2013: GBP1 =
EUR1.17) and GBP1 = $1.73 (H1 2013: GBP1 = $1.52).
Revenue
Reported revenue for the first half of 2014 was GBP125.0m, 1%
ahead of the corresponding figure for the previous year (H1 2013:
GBP123.4m). Alexander Proudfoot recorded revenue of GBP31.3m, 9%
higher than the same period in the previous year (H1 2013:
GBP28.6m). Reported revenues from Kurt Salmon were GBP93.7m (H1
2013: GBP94.8m), a decrease of 1%.
Revenue from Europe in the first half of 2014 was lower than the
corresponding period in 2013 at GBP64.6m (H1 2013: GBP66.7m).
Revenue from the Americas increased to GBP50.6m (H1 2013: GBP47.8m)
and in the Rest of World revenue increased to GBP9.8m (H1 2013:
GBP8.9m). 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 18% of
revenues in the first half of 2014 (H1 2013: 15%) 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 2014 was GBP5.3m (H1
2013: GBP4.4m). Underlying operating profit for the period
increased compared with the corresponding period in 2013 by 3% to
GBP7.2m (H1 2013: GBP7.0m). We estimate that reported underlying
operating profit for H1 2014 measured at H1 2013 average exchange
rates would have been approximately GBP0.5m higher than reported,
or 10% higher than the corresponding period in 2013.
Non-recurring items for the first half of 2014 were an expense
of GBP1.4m (H1 2013: GBP1.4m). These largely comprise the costs
associated with the departure of the former Chief Executive of
Alexander Proudfoot in March 2014 of GBP0.7m and restructuring
costs related to some other planned employee departures in that
business resulting from the change initiatives referred to above.
Amortisation of acquired intangibles was GBP0.5m (H1 2013:
GBP1.3m).
Interest
The total net finance costs for the period were GBP1.6m (H1
2013: GBP1.9m). The Group has paid margins of 2.63% over Libor
rates on its bank borrowings during the period, 0.13% higher than
the same period during 2013.
Taxation
Profit before tax for the first half of 2014 was GBP3.8m (H1
2013: GBP2.5m). Underlying profit before tax for the period was
GBP5.6m (H1 2013: GBP5.1m). The tax rate on the underlying profit
before tax was 63% (H1 2013: 30%). The higher than usual underlying
tax rate in the period part reflects a mix of profits in the first
half of 2014 weighted towards higher tax jurisdictions and
project-specific withholding taxes in Alexander Proudfoot and is
not expected to recur.
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 losses are now largely
recognised and the tax charge in future will not therefore be
reduced as a result.
Earnings per share
Basic earnings per share were 0.3 pence (H1 2013: 0.4 pence per
share) and underlying basic earnings per share were 0.4 pence (H1
2013: 0.7 pence per share).
Dividend
The final dividend for 2013 of 0.595 pence per ordinary share
was paid on 2 July 2014 to shareholders on the register at 16 May
2014. The Board is declaring an interim dividend for 2014 of 0.23
pence per ordinary share (2013: 0.23 pence per share). The interim
dividend will be paid on 6 January 2015 to shareholders on the
register on 5 December 2014.
Balance Sheet
The Group's net debt at 30 June 2014 was GBP48.0m, which is
GBP3.7m lower than the GBP51.7m reported at 30 June 2013 and
GBP8.2m higher than the GBP39.8m reported at the end of 2013. 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
2014.
The Group is financed by an GBP85m debt facility negotiated
during 2011 and expiring in July 2016. At 30 June 2014 the gross
debt drawn under this facility reflected in the Group balance sheet
was GBP54.5m (H1 2013: GBP62.6m), held in Euros and US Dollars. The
leverage covenant measure used in the debt facility agreement is a
measure of the ratio of net debt to adjusted EBITDA and was 1.79 at
30 June 2014 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 2014 will marginally increase to
2.75% above Libor and Euribor.
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 GBP19.6m at 31 December 2013 to
GBP18.0m at 30 June 2014. The decrease is principally due to
currency movements, offset to some extent by a decrease in the
discount rates used to measure the pension obligations.
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 2014
Unaudited Unaudited
six months six months
ended ended
30 June 2014 30 June 2013
Note GBP'000 GBP'000
------------------------------------------- ---- ------------ ------------
Continuing operations
Revenue 3 125,018 123,421
Cost of sales (81,433) (81,511)
------------------------------------------- ---- ------------ ------------
Gross profit 43,585 41,910
------------------------------------------- ---- ------------ ------------
Administrative expenses - underlying (36,427) (34,905)
Profit from operations - underlying 7,158 7,005
Administrative expenses - non-recurring (1,361) (1,356)
------------------------------------------- ---- ------------ ------------
Profit from operations before amortisation
of acquired intangibles 5,797 5,649
Administrative expenses - amortisation
of acquired intangibles (480) (1,278)
------------------------------------------- ---- ------------ ------------
Total administrative expenses (38,268) (37,539)
------------------------------------------- ---- ------------ ------------
Profit from operations 3 5,317 4,371
Investment income 16 8
Finance costs (1,578) (1,894)
------------------------------------------- ---- ------------ ------------
Profit before tax 3,755 2,485
Tax 5 (2,309) (607)
------------------------------------------- ---- ------------ ------------
Profit for the period attributable to
owners of the Company 1,446 1,878
------------------------------------------- ---- ------------ ------------
Earnings per share - pence
From profit for the period attributable
to owners of the Company
Basic 6 0.3 0.4
Diluted 6 0.3 0.4
Basic - underlying 6 0.4 0.7
Diluted - underlying 6 0.4 0.7
------------------------------------------- ---- ------------ ------------
Condensed Group statement of comprehensive income
for the six months ended 30 June 2014
Unaudited Unaudited
six months six months
ended ended
30 June
30 June 2014 2013
GBP'000 GBP'000
------------------------------------------------- ------------ ----------
Profit for the period 1,446 1,878
Items that will not subsequently be reclassified
to profit and loss
Remeasurement of defined benefit pension schemes 48 4,367
Items that may subsequently be reclassified to
profit and loss
Loss on available-for-sale investments (205) (364)
Exchange differences on translation of foreign
operations (12,337) 10,757
------------------------------------------------- ------------ ----------
(12,542) 10,393
------------------------------------------------- ------------ ----------
Total comprehensive (expense)/ income for the
period attributable to owners of the Company (11,048) 16,638
------------------------------------------------- ------------ ----------
Condensed Group statement of changes in equity
for the six months ended 30 June 2014
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 2014
Shareholders' equity
1 January 2014 84,504 82,040 32,513 6,239 (4,111) 25,126 6,300 (21,745) 210,866
--------------------- ------- ------- ------- ------------ ----------- ----------- -------- -------- --------
Total comprehensive
income
for the period (12,337) (205) 1,494 (11,048)
Dividends (3,984) (3,984)
Shares issued 14 322 336
Share-based payments 1,353 1,353
Vesting of share awards (1,604) 1,333 263 (8)
Shares acquired by ESOP (1,015) (1,015)
Shares transferred from
ESOP 58 58
------------------------------ ------- ------- ------------ ----------- ----------- -------- -------- --------
Shareholders' equity
30 June 2014 84,518 82,362 32,513 5,988 (3,735) 12,789 6,095 (23,972) 196,558
--------------------- ------- ------- ------- ------------ ----------- ----------- -------- -------- --------
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
--------------------- ------- ------- ------- ------------ ----------- ----------- -------- -------- --------
Condensed Group statement of financial position
as at 30 June 2014
Unaudited Audited
30 June
2014 31 Dec 2013
GBP'000 GBP'000
--------------------------------------------- --------- -----------
Non-current assets
Intangible assets 251,682 266,806
Property, plant and equipment 2,672 2,724
Investments 1,991 2,444
Deferred income tax assets 15,726 16,486
--------------------------------------------- --------- -----------
Total non-current assets 272,071 288,460
--------------------------------------------- --------- -----------
Current assets
Trade and other receivables 72,363 68,709
Current tax receivables 1,893 1,941
Cash and cash equivalents 6,528 14,669
--------------------------------------------- --------- -----------
Total current assets 80,784 85,319
--------------------------------------------- --------- -----------
Total assets 352,855 373,779
--------------------------------------------- --------- -----------
Current liabilities
Trade and other payables (67,831) (70,787)
Current tax liabilities (7,756) (9,014)
--------------------------------------------- --------- -----------
Total current liabilities (75,587) (79,801)
--------------------------------------------- --------- -----------
Net current assets 5,197 5,518
--------------------------------------------- --------- -----------
Non-current liabilities
Financial liabilities (54,500) (54,481)
Retirement benefit obligations (17,997) (19,582)
Deferred tax liabilities (3,842) (3,764)
Long-term provisions (4,371) (5,285)
--------------------------------------------- --------- -----------
Total non-current liabilities (80,710) (83,112)
--------------------------------------------- --------- -----------
Total liabilities (156,297) (162,913)
--------------------------------------------- --------- -----------
Net assets 196,558 210,866
--------------------------------------------- --------- -----------
Equity
Share capital 84,518 84,504
Share premium account 82,362 82,040
Merger reserve 32,513 32,513
Share compensation reserve 5,988 6,239
Shares held by employee benefit trust (3,735) (4,111)
Translation reserve 12,789 25,126
Other reserves 6,095 6,300
Retained earnings (23,972) (21,745)
--------------------------------------------- --------- -----------
Equity attributable to owners of the Company 196,558 210,866
--------------------------------------------- --------- -----------
Condensed Group statement of cash flows
for the six months ended 30 June 2014
Unaudited Unaudited
six months six months
ended ended
30 June
2014 30 June 2013
Note GBP'000 GBP'000
---------------------------------------------- ---- ---------- ------------
Net cash outflow from operating activities 7 (5,520) (12,412)
---------------------------------------------- ---- ---------- ------------
Investing activities
Interest received 16 8
Purchases of property, plant and equipment (464) (845)
Purchases of intangible assets (137) (931)
Purchase of financial assets - (664)
Proceeds on disposal of financial instruments 25 -
Acquisition of subsidiaries (600) (319)
---------------------------------------------- ---- ---------- ------------
Net cash used in investing activities (1,160) (2,751)
---------------------------------------------- ---- ---------- ------------
Financing activities
Dividends paid (1,110) (1,099)
Interest paid (1,478) (1,177)
Proceeds from borrowings 12,715 22,496
Repayment of borrowings (10,320) (7,689)
Purchase of shares (1,014) (282)
---------------------------------------------- ---- ---------- ------------
Net cash (outflow)/ raised by financing
activities (1,207) 12,249
---------------------------------------------- ---- ---------- ------------
Net decrease in cash and cash equivalents (7,887) (2,914)
Cash and cash equivalents at beginning
of period 14,669 14,862
Effect of foreign exchange rate changes (254) (1,005)
---------------------------------------------- ---- ---------- ------------
Cash and cash equivalents at end of period 6,528 10,943
---------------------------------------------- ---- ---------- ------------
Notes
1. General information
The results for the six months ended 30 June 2014 and 30 June
2013 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 2013 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.
(b) Accounting policies
In the current year the following new standards are effective
which do not have any impact on the Group at present but may impact
acquisitions in the future: IFRS 10 Consolidated Financial
Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of
Interests in Other Entities and IAS 28 (2011) Investments in
Associates and Joint Ventures.
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
2013. 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 2014
----------------------------------------
Rest of
Americas Europe World Consolidated
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- -------- ------- ------- ------------
Revenue - continuing operations 50,580 64,597 9,841 125,018
---------------------------------------- -------- ------- ------- ------------
Profit from operations - underlying 3,003 3,536 619 7,158
---------------------------------------- -------- ------- ------- ------------
Non-recurring expenses and amortisation
of acquired intangibles (1,437) (1,042) 638 (1,841)
Profit from operations 1,566 2,494 1,257 5,317
Investment income 16
Finance costs (1,578)
---------------------------------------- -------- ------- ------- ------------
Profit before tax 3,755
---------------------------------------- -------- ------- ------- ------------
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
---------------------------------------- -------- ------- ------- ------------
(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 2014
------------------------------------
Alexander
Proudfoot Kurt Salmon Consolidated
GBP'000 GBP'000 GBP'000
---------------------------------------- --------- ----------- ------------
Revenue - continuing operations 31,288 93,730 125,018
---------------------------------------- --------- ----------- ------------
Profit from operations - underlying 132 7,026 7,158
---------------------------------------- --------- ----------- ------------
Non-recurring expenses and amortisation
of acquired intangibles (1,841)
Profit from operations 5,317
Investment income 16
Finance costs (1,578)
---------------------------------------- --------- ----------- ------------
Profit before tax 3,755
---------------------------------------- --------- ----------- ------------
Unaudited six months ended
30 June 2013
------------------------------------
Alexander
Proudfoot Kurt Salmon Consolidated
GBP'000 GBP'000 GBP'000
---------------------------------------- --------- ----------- ------------
Revenue - continuing operations 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
---------------------------------------- --------- ----------- ------------
4. Dividends
Unaudited Unaudited
six months six months
ended ended
30 June
30 June 2014 2013
GBP'000 GBP'000
----------------------------------------------- ------------ ----------
Amounts recognised as distributions to equity
holders in the period:
Final dividend in respect of the year ended 31
December 2013 of 0.595p
(2012: 0.595p) per share 2,873 2,878
Interim dividend in respect of the year ended
31 December 2013 of 0.23p 1,110 -
3,983 2,878
----------------------------------------------- ------------ ----------
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 2014 (in respect of the
year ended 31 December 2013) was GBP77,660 (2013: GBP79,135).
An interim dividend of 0.23p per share (2013: 0.23p per share)
will be paid on 6 January 2015 to shareholders on the register on 5
December 2014.
5. Taxation
The effective tax rate on the reported profit before tax for the
half year is 61% (H1 2013: 24%). 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 63% (H1 2013:
30%). Of the total tax charge, GBPnil (H1 2013: 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
30 June 2014 2013
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 1,446 1,878
Amortisation of acquired intangibles 480 1,278
Non-recurring items 1,361 1,356
Tax on exceptional items (1,209) (936)
------------------------------------------------- ------------ ----------
Earnings for purpose of basic earnings per share
excluding amortisation of acquired intangibles
and non-recurring items 2,078 3,576
------------------------------------------------- ------------ ----------
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 483.4 484.2
Effect of dilutive potential ordinary shares:
- share options and performance share plan 13.3 11.1
---------------------------------------------------------- ------ ------
Weighted average number of ordinary shares for the
purposes of diluted earnings per share 496.7 495.3
---------------------------------------------------------- ------ ------
Pence Pence
---------------------------------------------------- ----- -----
Basic earnings per share - continuing operations 0.3 0.4
Diluted earnings per share - continuing operations 0.3 0.4
Basic earnings per share - excluding amortisation
of acquired intangibles and non-recurring items 0.4 0.7
Diluted earnings per share - excluding amortisation
of acquired intangibles and non-recurring items 0.4 0.7
---------------------------------------------------- ----- -----
The average share price for the six months ended 30 June 2014
was 25.0p (30 June 2013: 28.6p).
7. Notes to the cash flow statement
Unaudited Unaudited
six months six months
ended ended
30 June
30 June 2014 2013
GBP'000 GBP'000
------------------------------------------------- ------------ ----------
Profit from continuing operations 5,317 4,371
Adjustments for:
Depreciation of property, plant and equipment 422 483
Amortisation of intangible assets 1,160 2,298
Profit on disposal of plant and equipment (41) (98)
Adjustment for cost of share-based payments 1,684 1,839
Decrease in provisions (1,590) (1,477)
------------------------------------------------- ------------ ----------
Operating cash flows before movements in working
capital 6,952 7,416
Increase in receivables (6,960) (5,269)
Decrease in payables (2,927) (12,989)
------------------------------------------------- ------------ ----------
Cash absorbed by operations (2,935) (10,842)
Income taxes paid (2,585) (1,570)
------------------------------------------------- ------------ ----------
Net cash outflow from operating activities (5,520) (12,412)
------------------------------------------------- ------------ ----------
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 DMGFNRGLGDZM
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