TIDMMMC
RNS Number : 0348N
Management Consulting Group PLC
20 September 2019
20 September 2019
Management Consulting Group PLC
Interim Results
Management Consulting Group PLC ("MCG" or the "Group"), the
global professional services group, today announces its results for
the half-year ended 30 June 2019.
Key points
-- Encouraging progress on the transformation strategy to return
the business to growth and profitability over the medium term.
-- Reported revenues of GBP17.3m - up 25% year-on-year (H1 2018 : GBP13.8m).
-- Underlying** operating loss of GBP2.1m - an improvement on H1
2018. (H1 2018 : loss GBP2.8m).
-- Retained loss for the half-year of GBP2.6m (H1 2018 restated*: GBP10.8).
-- Loss from continuing operations for the half-year of GBP2.6m (H1 2018 restated*: GBP4.6m).
-- Strategic investments in partnerships and private equity have
delivered some first contract wins in the period.
Nick Stagg, Chief Executive, commented:
"Revenues for the first half of 2019 are well ahead of the same
period in 2018 and also the second half of 2018. This, and a
significantly increased level of contract wins in the period, are
encouraging and demonstrate the strategic investments to be
delivering the anticipated upsides. We have substantially cut costs
in the last 18 months and have re-invested part of the savings in
new resources at Proudfoot. Although the business is still trading
at a loss, we are confident that the strength of the Proudfoot
brand as a transformation leader across attractive verticals will
deliver further operational and financial improvements".
For further information please contact:
Nick Stagg Chairman and Chief Executive 020 7710 5000
* refer to note 2
** refer to note 2 for definition
Notes to Editors
Management Consulting Group PLC (MMC.L) provides professional
services across a wide range of industries and sectors. For further
information, visit www.mcgplc.com.
Market Abuse Regulations
The information contained within this announcement is deemed by
the Group to constitute inside information as stipulated under the
Market Abuse Regulation. Upon the publication of this announcement
via a regulatory information service this inside information is now
considered to be in the public domain.
The person responsible for arranging the release of this
announcement on behalf of the Group is Nick Stagg, Chairman and
Chief Executive.
Forward Looking Statements
Certain information contained in this announcement constitutes
forward looking information. This information relates to future
events or occurrences or the Company's future performance. All
information other than information of historical fact is forward
looking information. The use of any of the words "anticipate,"
"plan, " "continue," "estimate," "expect," "may," "will,"
"project," "should," "believe," "predict," and "potential" and
similar expressions are intended to identify forward looking
information. This information involves known and unknown risks,
uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in such forward
looking information. No assurance can be given that this
information will prove to be correct and such forward looking
information included in this announcement should not be relied
upon. Forward looking information speaks only as at the date of
this announcement.
The forward looking information included in the announcement is
expressly qualified by this cautionary statement and is made as of
the date of this announcement. The Group does not undertake any
obligation to publicly update or revise any forward looking
information except as required by applicable securities laws.
Chairman and Chief Executive's Statement
The continued investment in Proudfoot's transformation strategy
remained the focus for the first six months of 2019. The leadership
team completed the recruitment of the United States business
development and sales teams, and good progress has been made on the
transformation in the first six months of the year, resulting in
growing revenues year-on-year. In particular, our strategic
investments in technology partnerships; our private equity
practice; and building the Proudfoot brand within our target
sectors are delivering the anticipated upsides and demonstrate the
potential of our offering. The significant cost savings made over
the last 18 months have been partially re-invested in the
transformation plan.
The Group cash position of GBP14.4m as at 30 June 2019 compares
to GBP17.3m as at FY2018, which includes GBP4.1m of cash retained
to support certain contingent creditors of the Group (FY2018:
GBP4.2m).
Overall, the results of the first half of the year show
encouraging progress on the transformation strategy to return the
business to growth and profitability over the medium term.
Proudfoot
In the first half of 2019 the Group reported revenues of
GBP17.3m - up 25% year-on-year. Additionally, the Group won signed
orders and contracts during the period of GBP17.0m, compared to
GBP11.4m in the corresponding period last year, an increase of 49%.
Natural Resources, particularly in the EMEA regions, along with
European Industrials, continue to provide the foundation for
revenues in Proudfoot. The introduction of Maintenance & Repair
Operations ("MRO") in the US, as per the firm's 2018-2020 strategy,
has developed from start-up to now generating revenues in the
period, demonstrating the Proudfoot brand's ability to extend into
new verticals and providing revenue diversification.
There has been a continuing focus on investment in talent during
the period and the transformation of the Proudfoot team globally,
across leadership, sales and marketing, delivery and support
functions.
Proudfoot's other 2019 strategic investments included:
-- Identifying partnership opportunities with technology firms
-- Developing the Private Equity practice; and
-- Building the Proudfoot brand within target sectors
The recent client win of a major Digital Transformation
programme in partnership with one of the world's largest technology
providers, provides strong support for the partnership approach and
this is being replicated via various other technology partnerships
now in place globally. Similarly, there have been some first wins
with private equity backed firms providing evidence of the success
of this strategy. Proudfoot's positioning with The Future of Mining
brand and focus on delivery of 'hard results through soft power'
through our 'The Future of Business is (still) People' campaign,
has also opened up new revenue sources.
Whilst these strategic initiatives have negatively impacted
profit in H1 2019, the investment underpins Proudfoot's medium term
strategy to be the transformation leader achieving measurable
results through people. The increased revenue and booked business
in the period reinforces the Board's positive outlook for the
Proudfoot business and the infrastructure now in place is expected
to deliver further growth and an improved financial
performance.
Group Financial Review
The commentary below on the results to 30 June 2019 reflects the
Proudfoot business, with the 2018 comparative numbers being
restated for the change in treatment of cash following adoption of
IFRS 9 in 2018.
Proudfoot's reported revenue for the first half of 2019 was
GBP17.3m, 25% higher than the same period in 2018 (H1 2018:
GBP13.8m) and 19% higher than the preceding six months (H2 2018:
GBP14.5m). The Group reported an underlying operating loss of
GBP2.1m in the first half of 2019 compared with restated losses of
GBP2.8 for the first half of 2018 and GBP1.4m for the second half
of 2018.
Proudfoot operates as a single business and it generates
revenues and deploys resources globally. Revenues in North America
reflected the ongoing turnaround strategy with new management
changes implemented. First half revenues grew to GBP6.2m (H1 2018:
GBP4.2m). Europe also grew its revenue to GBP10.3m for the period
compared with GBP8.0m in the corresponding period in 2018. Asia and
Africa revenues decreased from GBP1.7m in H1 2018 to GBP0.8m in H1
2019 reflecting a lack of Natural Resource work in Africa and
uneven workflows in our relatively small Asia business.
Global headcount was 164 at 30 June 2019, up from 154 at 31
December 2018, reflecting the recruitment of additional business
development staff.
Underlying operating loss from continuing operations
The underlying operating loss of GBP2.1m for the period was
GBP0.7m lower than H1 2018 (H1 2018: GBP2.8m) and GBP0.7m higher
compared to the previous 6 months (H2 2018: GBP1.4m). This reflects
the cost saving initiatives that were completed in 2018, reflected
in the reducing half on half losses in 2018. This is offset
partially by investment in the first half of the current year in
expanding the business development and sales teams in
Proudfoot.
The GBP0.1m credit (H1 2018 restated: charge GBP1.7m) of
non-underlying expense relates to a release of severance accruals
offset with a small severance charge for restructuring in the
period.
There were no discontinued operations in H1 2019.
Interest
The net interest expense was GBP0.4m (H1 2018: GBP0.3m). In
accordance with IAS 19, the reported net interest charge for H1
2019 includes an imputed charge in relation to defined benefit
pensions of GBP0.4m (H1 2018: GBP0.3m).
Taxation
The tax charge on operations was GBP0.2m (H1 2018: tax credit
GBP0.1m). The tax charge for the half year reflects project
specific withholding taxes and the tax charges in taxable non-UK
jurisdictions where there are no losses available to mitigate the
charges (GBP0.2m) offset by adjustments to prior year balances
(GBP0.0m).
Loss for the period
The loss for the period from continuing operations including the
underlying loss from operations, non-underlying expenses, taxation
and interest was GBP2.6m (H1 2018 restated: GBP4.6m).
Losses per share
The basic loss per share for continuing operations was 0.2p (H1
2018 restated: 0.9p per share) and the underlying basic loss per
share was 0.2p (H1 2018 restated: 0.5p per share).
Exchange rates
A significant portion of Group revenue and costs are derived in
foreign currencies. As a result of limited foreign exchange
movements in the period, the impact of this on the Group operating
results for the period is not significant.
The closing exchange rates to Sterling used in balance sheet
translation at 30 June 2019 were GBP1 = $1.27 (H1 2018: $1.32) and
GBP1 = EUR1.12 (H1 2018: EUR1.13).
Going Concern
The Board's assessment in relation to going concern is included
in Note 2 of the financial information. Principal risks and
uncertainties are also set out in Note 2 of the financial
information.
Balance Sheet
The net assets of the Group decreased from GBP0.8m at 31
December 2018 to a net liability of GBP1.8m at 30 June 2019 due to
the loss for the period.
The Group is a people business and therefore operates an asset
light model. Working capital has been broadly stable during the
period and we have a strong net cash position. The gross pension
deficit as at 30 June 2019 was GBP9.8m and we do not carry any
goodwill in respect of Proudfoot on the balance sheet.
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.
Directors' responsibility statement
The Directors are responsible for the maintenance and integrity
of corporate and financial information. Legislation in the United
Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
We confirm that, to the best of our knowledge:
(a) the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting;
(b) the Chairman and Chief Executive's Statement and the Group
Financial Review include a fair review of the information required
by DTR 4.2.7R (indication of important events during the first six
months and description of principal risks and uncertainties for the
remaining six months of the year); and
(c) the Chairman and Chief Executive's Statement and the Group
Financial Review include a fair review of the information required
by DTR 4.2.8R (disclosure of related parties' transactions and
changes therein).
By order of the Board.
At the date of this statement, the Directors are those listed in
the Group's 2018 annual report and accounts.
Nick Stagg
Chairman and Chief Executive
20 September 2019
Cautionary statement
The Chairman and Chief Executive's Statement and the Group
Financial Review have been prepared solely to provide additional
information to shareholders to assess the Group's strategies and
the potential for those strategies to succeed. They should not be
relied on by any other party or for any other purpose.
They contain certain forward-looking statements. These
statements are made by the directors in good faith based on the
information available to them up to the time of their approval of
this report but such statements should be treated with caution due
to the inherent uncertainties, including both economic and business
risk factors, underlying any such forward-looking information.
Condensed Group Income statement
for the six months ended 30 June 2019
Unaudited Unaudited
six months six months
ended ended
30 June 2019 30 June 2018
GBP'000 GBP'000
Notes (restated)*
Continuing operations
Revenue 3 17,251 13,778
Cost of sales (9,215) (6,716)
------------------------------------------------ ----- ------------ ------------
Gross profit 8,036 7,062
------------------------------------------------ ----- ------------ ------------
Total administrative expenses (10,042) (11,542)
------------------------------------------------ ----- ------------ ------------
Administrative expenses - non-underlying 4 101 (1,712)
Loss from operations - underlying 3 (2,107) (2,768)
------------------------------------------------ ----- ------------ ------------
Loss from operations 3 (2,006) (4,480)
Finance income 45 52
Finance costs (444) (338)
------------------------------------------------ ----- ------------ ------------
Loss before tax 3 (2,405) (4,766)
Tax (expense)/credit 6 (151) 136
------------------------------------------------ ----- ------------ ------------
Loss for the period from continuing operations (2,556) (4,630)
Loss from discontinued operations 9 - (6,215)
------------------------------------------------ ----- ------------ ------------
Loss for the period (2,556) (10,845)
------------------------------------------------ ----- ------------ ------------
*Refer note 2
Loss per share - pence
From loss from continuing operations for
the period
Basic and diluted 7 (0.2) (0.9)
Basic and diluted - underlying 7 (0.2) (0.5)
------------------------------------------------ ----- ------------ ------------
From the loss for the period
Basic and diluted 7 (0.2) (2.1)
Basic and diluted - underlying 7 (0.2) (0.8)
------------------------------------------------ ----- ------------ ------------
Condensed Group statement of comprehensive income
for the six months ended 30 June 2019
Unaudited Unaudited
six months six months
ended ended
30 June 30 June
2019 2018
GBP'000 GBP'000
(restated)*
Loss for the period (2,556) (10,845)
Items that will not subsequently be reclassified
to profit and loss
Remeasurement of defined benefit pension schemes 2 1,132
Tax on items taken directly to comprehensive income - -
Items that may subsequently be reclassified to profit
and loss
Exchange differences on translation of foreign operations (62) (231)
Total comprehensive expense for the period attributable
to owners of the Company (2,616) (9,944)
---------------------------------------------------------- ---------- -----------
*Refer note 2
Condensed Group statement of changes in equity
for the six months ended 30 June 2019
Shares
held
Share by employee
Share Share compensation benefit Translation Other Retained
capital premium reserve trust reserve reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- --------- --------- ------------- ------------ ------------ ---------- ---------- -------------
Audited
balance as
at 31
December 2017
as previously
stated 5,111 8,023 158 (103) (2,733) 7,064 (15,376) 2,144
-------------- --------- --------- ------------- ------------ ------------ ---------- ---------- -------------
Impact of
transition
to IFRS 9 - - - - - - (153) (153)
-------------- --------- --------- ------------- ------------ ------------ ---------- ---------- -------------
Balance at 1
January
2018 restated 5,111 8,023 158 (103) (2,733) 7,064 (15,529) 1,991
-------------- --------- --------- ------------- ------------ ------------ ---------- ---------- -------------
Comprehensive
expense
for the period
Loss for the
period - - - - - - (10,845) (10,845)
Other
comprehensive
expense - - - - (231) - 1,132 901
-------------- --------- --------- ------------- ------------ ------------ ---------- ---------- -------------
Total
comprehensive
expense for
the period - - - - (231) - (9,713) (9,944)
-------------- --------- --------- ------------- ------------ ------------ ---------- ---------- -------------
Contributions
by
and
distributions
to owners
Recycling of
historic
foreign
exchange
reserve
arising on
disposal of
Brazil - - - - 4,479 - - 4,479
Share based
payments - - 37 - - - - 37
-------------- --------- --------- ------------- ------------ ------------ ---------- ---------- -------------
Total
transactions
with owners - - 37 - 4,479 - - 4,516
Restated
unaudited
balance
at 30 June
2018 5,111 8,023 195 (103) 1,515 7,064 (25,242) (3,437)
-------------- --------- --------- ------------- ------------ ------------ ---------- ---------- -------------
Comprehensive
expense
for the period
Loss for the
period - - - - - - (4,017) (4,017)
Other
comprehensive
expense - - - - 341 - (783) (442)
-------------- --------- --------- ------------- ------------ ------------ ---------- ---------- -------------
Total
comprehensive
expense for
the period - - - - 341 - (4,800) (4,459)
-------------- --------- --------- ------------- ------------ ------------ ---------- ---------- -------------
Contributions
by
and
distributions
to owners
Share based
payments - - 37 - - - - 37
Issue of new
shares 10,054 - - - - - (1,409) 8,645
-------------- --------- --------- ------------- ------------ ------------ ---------- ---------- -------------
Total
transactions
with owners 10,054 - 37 - - - (1,409) 8,682
-------------- --------- --------- ------------- ------------ ------------ ---------- ---------- -------------
Restated*
balance
as at 31
December
2018 15,165 8,023 232 (103) 1,856 7,064 (31,451) 786
-------------- --------- --------- ------------- ------------ ------------ ---------- ---------- -------------
Impact of
transition
to IFRS 16 - - - - - - 53 53
Balance at 1
January
2019 restated 15,165 8,023 232 (103) 1,856 7,064 (31,398) 839
-------------- --------- --------- ------------- ------------ ------------ ---------- ---------- -------------
Comprehensive
expense
for the period
Loss for the
period - - - - - - (2,556) (2,556)
Other
comprehensive
expense - - - - (62) - 2 (60)
-------------- --------- --------- ------------- ------------ ------------ ---------- ---------- -------------
Total
comprehensive
expense for
the period - - - - (62) - (2,554) (2,616)
-------------- --------- --------- ------------- ------------ ------------ ---------- ---------- -------------
Contributions
by
and
distributions
to owners
Shares
transferred
to ESOP - - - (26) - - - (26)
-------------- --------- --------- ------------- ------------ ------------ ---------- ---------- -------------
Total
transactions
with owners - - - (26) - - - (26)
Unaudited
balance
at
30 June 2019 15,165 8,023 232 (129) 1,794 7,064 (33,952) (1,803)
-------------- --------- --------- ------------- ------------ ------------ ---------- ---------- -------------
*Refer note 2
Condensed Group statement of financial position
as at 30 June 2019
Unaudited Audited
30 June 31 Dec
2019 2018
Note GBP'000 GBP'000
(restated)*
--------------------------------------------- ----- --------- -----------
Non-current assets
Intangible assets and goodwill 25 40
Property, plant and equipment 134 108
Right-of-use assets 1,915 -
Financial assets 420 420
Deferred tax assets 103 86
---------------------------------------------------- --------- -----------
Total non-current assets 2,597 654
---------------------------------------------------- --------- -----------
Current assets
Trade and other receivables 6,551 6,400
Current tax receivables 29 164
Cash and cash equivalents 14,423 17,263
Total current assets 21,003 23,827
---------------------------------------------------- --------- -----------
Total assets 23,600 24,481
---------------------------------------------------- --------- -----------
Current liabilities
Trade and other payables (9,096) (9,548)
Lease liabilities (806) -
Current tax liabilities (1,118) (1,153)
Total current liabilities (11,020) (10,701)
---------------------------------------------------- --------- -----------
Net current assets 9,983 13,126
---------------------------------------------------- --------- -----------
Non-current liabilities
Retirement benefit obligations (9,751) (9,286)
Deferred tax liabilities (4) (4)
Lease liabilities (1,209) -
Long-term provisions (3,419) (3,704)
---------------------------------------------------- --------- -----------
Total non-current liabilities (14,383) (12,994)
---------------------------------------------------- --------- -----------
Total liabilities (25,403) (23,695)
---------------------------------------------------- --------- -----------
Net (liabilities)/assets (1,803) 786
---------------------------------------------------- --------- -----------
Equity
Share capital 15,165 15,165
Share premium 8,023 8,023
Share compensation reserve 232 232
Shares held by employee benefit trust (129) (103)
Translation reserve 1,794 1,856
Other reserves 7,064 7,064
Accumulated deficit (33,952) (31,451)
---------------------------------------------------- --------- -----------
Equity attributable to owners of the Company (1,803) 786
---------------------------------------------------- --------- -----------
*Refer note 2
Condensed Group statement of cash flows
for the six months ended 30 June 2019
Unaudited Unaudited
six months six months
ended Ended
30 June 2019 30 June 2018
Note GBP'000 GBP'000
(restated)*
------------------------------------------ ---- ------------ ------------
Net cash outflow from operating
activities 8 (2,861) (7,166)
------------------------------------------ ---- ------------ ------------
Investing activities
Interest received 45 52
Purchases of property, plant and
equipment (60) 8
Movement in restricted cash 158 2,045
Expenses from disposals of subsidiaries - (773)
------------------------------------------ ---- ------------ ------------
Net cash generated by investing
activities 143 1,332
------------------------------------------ ---- ------------ ------------
Financing activities
Lease payments (377) -
Net cash outflow from financing
activities (377) -
------------------------------------------ ---- ------------ ------------
Net decrease in cash and cash equivalents (3,095) (5,834)
Cash and cash equivalents at beginning
of period 12,970 12,412
Effect of foreign exchange rate
changes 413 128
------------------------------------------ ---- ------------ ------------
Cash and cash equivalents at end
of period 10,288 6,706
------------------------------------------ ---- ------------ ------------
*Refer note 2
Included within the 30 June 2019 cash balance of GBP14.4m is
GBP4.1m (H1 2018 restated: GBP6.5m) of cash which is not available
for use by the Group. This represents cash held in restricted bank
accounts which is required to be retained to support indemnity
obligations to Wavestone, the acquirer of the French and related
operations of Kurt Salmon and in support of the Kurt Salmon UK
pension scheme, which remained a Group obligation following the
sale of the Kurt Salmon retail and consumer goods operations.
Notes
1. General information
The results for the six months ended 30 June 2019 and 30 June
2018 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 2018 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.
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. 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
The accounting policies, significant judgements and key sources
of estimation adopted in the preparation of the Condensed set of
Consolidated Financial Statements are consistent with those applied
by the Group in its Consolidated Financial Statements for the year
ended 31 December 2018 except for the adoption of new standards and
interpretations effective as of 1 January 2019 listed below:
-- IFRS 16: Leases
-- IFRIC 23: Uncertainty over Income tax Treatments
-- Amendments to IFRS 9: Financial Instruments: Prepayment
Features with Negative Compensation and Modification of Financial
Liabilities
-- Amendments to IAS 28: Investments in Associates and Joint
Ventures: Long-Term Interests in Associates and Joint Ventures
-- Amendments to IAS 19: Employee Benefits. Plan Amendment, Curtailment or Settlement
-- Annual improvements to IFRS Standards 2015-2017 Cycle
Only the application of IFRS 16 results in the accounting
applied by the Group changing. Details of the impact of this
standard are given below. Other new and amended standards and
Interpretation issued by the IASB that will apply for the first
time in the next annual financial statements are not expected to
impact the Group as they are either not relevant to the Group's
activities or require accounting which is consistent with the
Group's current accounting policies.
Full details of the Group's accounting policies can be found in
note 2 to the 2018 Annual Report which is available on our website:
www.mcgplc.com.
IFRS 16: Leases
Effective 1 January 2019, IFRS 16 has replaced IAS 17 Leases and
IFRIC 4 Determining whether an Arrangement Contains a Lease.
IFRS 16 provides a single lessee accounting model, requiring the
recognition of assets and liabilities for all leases together with
exemptions to exclude leases where the lease term is 12 months or
less, or where the underlying asset is of low value. IFRS 16
substantially carries forward the lessor accounting in IAS 17, with
the distinction between operating lease and finance lease being
retained. The Group does not have significant leasing activities as
a lessor.
Transition method and practical expedients utilised
The Group adopted IFRS 16 using the modified retrospective
approach, with recognition of transitional adjustments on the date
of initial application at 1 January 2019 without restatement of
comparative figures. The Group elected to apply the practical
expedient to not reassess whether a contract is, or contains a
lease at the date of initial application. Contracts entered into
before the transition date that were not identified as leases under
IAS 17 and IFRIC 4 were not reassessed. The definition of a lease
under IFRS 16 was applied only to contracts entered into or changed
on or after 1 January 2019.
The Group has elected to adopt the following practical
expedients when applying IFRS 16 to leases previously classified as
operating leases under IAS 17:
-- Exclude initial direct costs from the measurement of
right-of-use assets at the date of initial application for leases
where the right-of-use asset was determined as if IFRS 16 had been
applied since the commencement date;
-- Reliance on previous assessments on whether leases are
onerous as opposed to preparing an impairment review under IAS 36
as at the date of initial application; and
-- Applied the exemption not to recognise right-of-use assets
and liabilities for leases with less than 12 months of lease term
remaining as of the date of initial application.
As a lessee, the Group previously classified leases as operating
or finance lease based on its assessment of whether the lease
transferred substantially all of the risks and rewards of
ownership. Under IFRS 16, the Group recognises right-of-use assets
and lease liabilities for most leases. However, the Group has
elected not to recognise right-of-use assets and lease liabilities
for some leases of low value assets based on the value of the
underlying asset when new or for short-term leases with a lease
term of 12 months or less.
On adoption of IFRS 16, the Group recognised right-of-use assets
and lease liabilities in relation to leases of office space and IT
equipment, which had previously been classified as operating
leases.
The lease liabilities were measured at the present value of the
remaining lease payments, discounted using an incremental borrowing
rate as at 1 January 2019. The right-of-use assets were measured as
follows:
a) Office space: Right-of-use assets are measured at an amount
equal to the lease liability, adjusted by the amount of any prepaid
or accrued lease payments.
b) All other leases: the carrying value that would have resulted
from IFRS 16 being applied from the commencement date of the
leases, subject to the practical expedients noted above.
The following table presents the impact of adopting IFRS 16 in
the statement of financial position as at 1 January 2019:
1 January
2019
GBP'000
Right-of-use assets 2,231
Lease liabilities (2,284)
Net reduction in retained earnings (53)
-------------------------------------- ---------
Included in profit or loss for the period are GBP0.4m of
amortisation of the right-of-use assets and GBP0.1m of finance
expense on lease liabilities.
Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the incremental
borrowing rate on commencement of the lease. There are no variable
lease payments to consider in any leases recognised under IFRS
16.
Right-of-use assets are initially measured at the amount of the
lease liability, reduced for any lease incentives received, and
increased for
-- Lease payments made at or before commencement of the lease;
-- Initial direct costs incurred; and
-- The amount of any provision recognised where the group is
contractually required to dismantle, remove or restore the leased
assets.
Subsequent to initial measurement, lease liabilities increase as
a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use
assets are amortised on a straight-line basis over the remaining
term of the lease or over the remaining economic life of the asset
if, rarely, this is judged to be shorter than the lease term. Lease
liabilities are remeasured when there is a change in future lease
payments arising from a change in an index or rate or when there is
a change in the assessment of the term of any lease.
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.
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 mitigating 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.
Restatements
The 2018 comparative numbers have been restated for the
following corrections:
-- Change of the treatment of restricted cash. At June 2018
certain cash assets relating to the Kurt Salmon escrow funds were
incorrectly carried in the statement of financial position net of
an expected credit loss. This restatement increases cash by
GBP2.2m, increases provisions by GBP1.3m and increases reserves by
GBP0.9m as at 30 June 2018;
-- Reclassification of expenses incurred in connection with the
issue of shares in July 2018, which were previously deducted from
the share premium account have now been reclassified against
retained earnings.
Going concern
The Group prepares regular business forecasts and monitors its
projected cash flows, which are reviewed by the Board. Forecasts
are adjusted for reasonable sensitivities that address the
principal risks and uncertainties to which the Group is exposed.
Consideration is given to the potential actions available to
management to mitigate the impact of one or more of these
sensitivities, in particular the discretionary nature of costs
incurred by the Group.
The Board has concluded that the Group should have adequate
resources to continue in operational existence 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 half-yearly report.
Non-GAAP performance measures
The Group has adopted a number of alternative performance
measures to provide additional information to understand underlying
trends and the performance of the Group. These alternative
performance measures are not defined by IFRS and therefore may not
be directly comparable to other companies' alternative performance
measures.
Underlying profit/loss from operations
This is defined as operating profit or loss before
non-underlying items.
Non-underlying
Non-underlying items are those charges or credits which, in the
opinion of the directors, should be disclosed separately by virtue
of their size or incidence to enable a full understanding of the
Group's financial performance. Transactions that may give rise to
non-underlying items include charges for impairment, restructuring
costs, acquisition costs and profits/losses on disposals of
subsidiaries. The Group exercises judgement in assessing whether
items should be classified as non-underlying. This assessment
covers the nature of the item and the material impact of that item
on reported performance. Reversals of previous items are assessed
based on the same criteria.
3. Segmental information
The Group's continuing operating segment is one professional
services practice, Proudfoot. 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. All revenues are derived from the
provision of professional services.
Revenue and underlying operating profit by geography
Unaudited six months ended
30 June 2019
------------------------------------------------------------------------
Rest of
Americas Europe World Consolidated
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------------------------- ------------- ------------- --------------
Revenue 6,158 10,321 772 17,251
------------------------------- -------------------------- ------------- ------------- --------------
(Loss)/profit from operations -
underlying (1,963) 347 (491) (2,107)
------------------------------- -------------------------- ------------- ------------- --------------
Non-underlying expenses - 80 21 101
(Loss)/profit from operations (1,963) 427 (470) (2,006)
------------------------------- -------------------------- ------------- ------------- --------------
Finance income 45
Finance costs (444)
------------------------------- -------------------------- ------------- ------------- --------------
Loss before tax (2,405)
------------------------------- -------------------------- ------------- ------------- --------------
Unaudited six months ended
30 June 2018
----------------
Rest of
Americas Europe World Consolidated
GBP'000 GBP'000 GBP'000 GBP'000
(restated) (restated) (restated) (restated)*
------------------------------- -------------------------- ------------- ------------- ----------------
Revenue - continuing operations 4,154 7,960 1,664 13,778
------------------------------- -------------------------- ------------- ------------- ----------------
Loss from operations -
underlying (1,617) (638) (513) (2,768)
------------------------------- -------------------------- ------------- ------------- ----------------
Non-underlying expenses (613) (907) (193) (1,713)
Loss from operations (2,230) (1,545) (706) (4,480)
------------------------------- -------------------------- ------------- ------------- ----------------
Finance income 52
Finance costs (338)
------------------------------- -------------------------- ------------- ------------- ----------------
Loss before tax (4,766)
------------------------------- -------------------------- ------------- ------------- ----------------
*Refer note 2
3. Segmental information
Net assets by geography
Unaudited six months ended
30 June 2019
-----------------------------------------------
Rest of
Americas Europe World Consolidated
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ---------- --------- -------- --------------
Assets
Segment assets 3,555 6,506 - 10,061
Unallocated corporate assets 13,539
---------------------------------- ---------- --------- -------- --------------
Consolidated total assets 23,600
---------------------------------- ---------- --------- -------- --------------
Liabilities
Segment liabilities (12,778) (6,647) (1,111) (20,536)
Unallocated corporate liabilities (4,867)
---------------------------------- ---------- --------- -------- --------------
Consolidated total liabilities (25,403)
---------------------------------- ---------- --------- -------- --------------
Net liabilities (1,803)
---------------------------------- ---------- --------- -------- --------------
Unaudited six months ended
30 June 2018
-----------------------------------------------
Rest of
Americas Europe World Consolidated
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ---------- --------- -------- --------------
Assets
Segment assets 873 4,654 181 5,708
Unallocated corporate assets 13,956
---------------------------------- ---------- --------- -------- --------------
Consolidated total assets 19,664
---------------------------------- ---------- --------- -------- --------------
Liabilities
Segment liabilities (7,651) (5,898) (1,885) (15,434)
Unallocated corporate liabilities (7,667)
---------------------------------- ---------- --------- -------- --------------
Consolidated total liabilities (23,101)
---------------------------------- ---------- --------- -------- --------------
Net liabilities (3,437)
---------------------------------- ---------- --------- -------- --------------
4. Non-underlying items
Unaudited Unaudited
six months six months
ended ended
30 June 30 June
2019 2018
GBP'000 GBP'000
(restated)*
Restructuring (101) 274
Fundraising costs - 1,388
Legacy Kurt Salmon expenses - 50
(101) 1,712
---------------------------- ----------- -----------
*Refer note 2
The GBP0.1m credit (H1 2018 restated: GBP1.7m) of non-underlying
expense comprises GBP0.1m release of surplus severance accruals
offset with a small severance charge for current year
restructuring.
5. Dividends
The Company did not pay an interim or final dividend for 2018
and no interim dividend for 2019 will be payable.
6. Taxation
The tax charge on operations was GBP0.2m (H1 2018: tax credit
GBP0.1m). The tax charge for the half year reflects project
specific withholding taxes and the tax charges in taxable non-UK
jurisdictions where there are no losses available to shelter the
income (GBP0.17m) offset by adjustments to prior year balances
(GBP0.02m).
7. Loss per share
The calculation of the loss per share is based on the following
data:
Unaudited
six months
ended
30 June
2019
GBP'000
---------------------------------------------- ------------
Loss
Loss for the purposes of basic and diluted
loss per share being net loss for the period
attributable to owners of the Company (2,556)
Non-underlying items 101
Loss for purpose of basic loss per share
- underlying 2,657
------------------------------------------------ ------------
Unaudited Unaudited Unaudited
six months six months six months
ended ended ended
30 June 30 June 30 June
2018 2018 2018
Total Continuing Discontinued
GBP'000 GBP'000 GBP'000
(restated)* (restated)*
---------------------------------------------- ------------ ------------- --------------
Loss
Loss for the purposes of basic and diluted
loss per share being net loss for the period
attributable to owners of the Company (10,845) (4,630) (6,215)
Non-underlying items 1,713 1,713 -
Adjustment for loss on disposal 4,806 - 4,806
Loss for purpose of basic loss per share
- underlying (4,326) (2,917) (1,409)
---------------------------------------------- ------------ ------------- --------------
2019 2018
Number Number
million Million
--------------------------------------------------- -------- --------
Number of shares
Weighted average number of ordinary shares for the
purposes of basic loss per share 1,513 511.1
Effect of dilutive potential ordinary shares:
- share options and performance share plan 0.3 0.3
--------------------------------------------------- -------- --------
Weighted average number of ordinary shares for the
purposes of diluted loss per share 1,516 511.4
--------------------------------------------------- -------- --------
7. Loss per share (continued)
2019
Pence
---------------------------------------------- ------
Basic and diluted loss per share (0.2)
Basic and diluted loss per share - underlying (0.2)
------------------------------------------------- ------
2018 2018
All Continuing 2018
Pence Pence Discontinued
(restated) (restated) Pence
---------------------------------------------- ----------- ----------- -------------
Basic and diluted loss per share (2.1) (0.9) (1.2)
Basic and diluted loss per share - underlying (0.8) (0.5) (0.3)
----------------------------------------------- ----------- ----------- -------------
*Refer note 2
The average share price for the six months ended 30 June 2019
was 1.9p (30 June 2018: 5.0p).
8. Notes to the cash flow statement
Unaudited Unaudited
six months six months
ended Ended
30 June 2019 30 June 2018
Note GBP'000 GBP'000
(restated)*
-------------------------------------------- ----- ------------ ------------
Loss from continuing operations (2,006) (4,480)
Loss from discontinued operations 10 - (614)
-------------------------------------------- ----- ------------ ------------
Loss from operations (2,006) (5,094)
-------------------------------------------- ----- ------------ ------------
Adjustments for:
Depreciation of property, plant
and equipment 211 78
Amortisation of intangible assets 15 67
Loss/(gain) on disposal of plant
and equipment 3 (4)
Adjustment for cost of share-based
payments - 39
Decrease in provisions (282) (898)
Other non-underlying items 74 57
-------------------------------------------- ----- ------------ ------------
Operating cash flows before movements in working
capital (1,985) (5,755)
--------------------------------------------------- ------------ ------------
Increase in receivables (172) (1,390)
(Decrease)/increase in payables (399) 100
Cash absorbed by operations (2,556) (7,045)
-------------------------------------------- ----- ------------ ------------
Income taxes paid (300) (88)
Interest paid (5) (33)
Net cash outflow from operating
activities (2,861) (7,166)
-------------------------------------------- ----- ------------ ------------
*Refer note 2
9. Discontinued operations
The loss for discontinued operations in 2018 of GBP6.2m relating
to the sale of Proudfoot Brazil:
30 June
2018
GBP'000
-------------------------------------------------- --------
Revenue 460
Cost of sales (344)
--------------------------------------------------- --------
Gross profit 116
--------------------------------------------------- --------
Total administrative expenses (730)
--------------------------------------------------- --------
Loss from operations (614)
Loss before tax (614)
Tax (795)
--------------------------------------------------- --------
Loss for the period attributable to owners of
the Company (1,409)
Loss on disposal from discontinued operations (327)
Foreign exchange arising on disposal of Brazilian
subsidiary (4,479)
--------------------------------------------------- --------
Net loss attributable to discontinued operations (6,215)
--------------------------------------------------- --------
10. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation. Except as
disclosed below, no Group company entered into a transaction with a
related party that is not a member of the Group. Goods and services
purchased from related parties are on normal commercial terms and
conditions.
During the year, the Group entered into the following
transactions with related parties:
Nicholas Stagg, a director of the Company, is an adviser to the
Board of Wedlake Bell LLP. iGlobal, a subsidiary of Wedlake Bell
LLP provided services at fair market rates to Alexander Proudfoot
(Europe) Limited valued at GBP22,670 (2018: GBP20,330) and at year
end there was a liability due to iGlobal of GBP7,290 (2018:
GBP700).
11. 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.
12. Events after the reporting period
The Directors confirm that there were no subsequent events to be
noted.
INDEPENDENT REVIEW REPORT TO MANAGEMENT CONSULTING GROUP PLC
Introduction
We have been engaged by the Group to review the condensed set of
financial statements in the half-yearly financial report for the
six months ended 30 June 2019 which comprises the Condensed Group
Income Statement, Condensed Group Statement of Comprehensive
Income, Condensed Group Statement of Changes in Equity, Condensed
Group Statement of Financial Position, Condensed Group Statement of
Cash Flows and related notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and
has been approved by the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. 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.
Our responsibility
Our responsibility is to express to the Group a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2019 is not prepared, in all material respects, in accordance
with International Accounting Standard 34, as adopted by the
European Union, and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Group in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
55 Baker Street
London
W1U 7EU
Date
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LLFFDAAIALIA
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