TIDMMMC
RNS Number : 6135G
Management Consulting Group PLC
05 March 2015
5 March 2015
MCG Announces Preliminary Results for 2014
Group performance in line with expectations, reflects weaker
Alexander Proudfoot and strong currency headwinds, offset by
good progress in Kurt Salmon
Management Consulting Group PLC ("MCG" or "the Group"), the
global professional services group, today announces its results for
the year ended 31 December 2014.
Key points
-- Reported revenues down 6% at GBP242.8m (2013: GBP257.3m) due
to strong currency headwinds. Revenues flat at constant exchange
rates.
-- Underlying* operating profit of GBP11.8m (2013: GBP21.2m),
with underlying operating profit margin lower at 4.9% (2013: 8.2%),
reflecting revenue weakness and the impact of investment in
Alexander Proudfoot
-- Profit from operations of GBP8.1m (2013: GBP17.5m) with
margin on profit from operations down at 3.3% (2013: 6.8%).
-- Retained loss for the year of GBP1.0m (2013: profit of
GBP9.1m) reflecting an unusually high tax charge in 2014
-- Strong cash generation in the second half of the year
resulting in a reduction in net debt to GBP33.6m (2013: GBP39.8m),
representing approximately 2x adjusted EBITDA** and comfortably
within the Group's revised banking covenants
-- Underlying* EPS of 0.2p (2013: EPS 2.4p); basic loss per share of 0.2p (2013: EPS 1.9p)
-- Proposed final dividend of 0.595p per share. Total dividend
unchanged at 0.825p per share (2013: 0.825p per share)
* Throughout this statement the term 'underlying' is defined as
'before non-recurring items and amortisation of acquired
intangibles'.
**Adjusted EBITDA is adjusted operating profit, after adding
back depreciation and amortisation and certain other non-cash items
including the cost of share awards.
Nick Stagg, Chief Executive, commented:
"The Group's reported results in 2014 reflect the impact of
strong currency headwinds and a year of planned change and weak
revenues in Alexander Proudfoot. Kurt Salmon delivered an
encouraging performance overall, despite continued weakness in its
key French market, delivering underlying revenue growth and
maintaining its margin. We have had a good start to 2015 in Kurt
Salmon and we expect the trends seen in that business in 2014 to
continue this year. We will continue to invest in the Alexander
Proudfoot business and develop the operating model to improve its
longer term performance".
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 0203 727 1000
An analyst briefing will be held at the offices of FTI
Consulting at 200 Aldersgate, EC1A on 5 March at 8.30am.
Notes to Editors
Management Consulting Group PLC (MMC.L) provides professional
services across a wide range of industries and sectors. It
comprises two independently managed practices: Alexander Proudfoot
and Kurt Salmon, which both operate worldwide. Alexander Proudfoot
helps clients to embed disciplined execution in their operations to
achieve growth targets, revenue and profit goals. Kurt Salmon
provides services to a wide range of industries. For further
information, visit www.mcgplc.com.
Forward looking statements
This preliminary announcement contains certain forward-looking
statements with respect to the financial condition, results of
operations and businesses of Management Consulting Group PLC. These
statements and forecasts involve risk and uncertainty because they
relate to events and depend upon circumstances that will occur in
the future. There are a number of factors that could cause actual
results or developments to differ materially from those expressed
or implied by these forward-looking statements and forecasts. The
forward-looking statements are based on the directors' current
views and information known to them at 4 March 2015. The directors
do not make any undertakings to update or revise any
forward-looking statements, whether as a result of new information,
future events, or otherwise. Nothing in this statement should be
construed as a profit forecast.
Chairman's Statement
The Group's performance in 2014 was badly affected by the impact
of strong currency headwinds accounting for the six per cent
decline in reported revenues. On a local currency basis, weaker
revenues in Alexander Proudfoot were offset by a stronger
performance in Kurt Salmon. We have invested in and taken action to
restore growth and profitability in Alexander Proudfoot and I am
confident that we will begin to see the benefits in 2015. Kurt
Salmon has performed well in North America and other geographies
and despite continued macroeconomic weakness in France it is now
well placed to prosper in its core markets.
Some of the significant reduction in our profitability has been
caused by our decision to develop and invest in Alexander Proudfoot
to establish a firm platform for future profitable growth. After a
long period during which it has been successful and profitable we
are investing in the business to establish Alexander Proudfoot on a
clear growth path. In the short term the action we have taken has
adversely affected our 2014 results but we believe that the changes
we are making will lead to a better performing and less volatile
business in the future. As previously announced in 2015 I will
continue to support our Group Chief Executive, Nick Stagg, in his
additional role as Chief Executive of Alexander Proudfoot.
Proudfoot has a distinctive and valuable offering in a crowded
consulting market and we need to preserve and enhance what makes it
different and compelling to clients.
Kurt Salmon had a good start to 2014 and despite some signs of
weakness in the third quarter, it delivered a strong performance
towards the end of the year which bodes well for 2015. In its
French business revenues are stable and margins in 2014 benefited
from the management action taken in 2013 to adjust resources to
lower activity levels. We saw positive underlying trends in revenue
elsewhere in Europe. In North America Kurt Salmon delivered an
excellent performance and our challenge now is to respond to
improving demand by growing our capacity to deliver, which may
affect margins in 2015 as we recruit. Kurt Salmon continues to
benefit from increasing work in digital transformation for clients
across all sectors, and it has developed a real expertise here
which is proving to be a competitive advantage.
The Group remains in a good financial position. Despite weaker
profits in 2014 we have produced strong operating cash flows and
have reduced our net indebtedness further in the year to GBP33.6m
at the year end. The Board is proposing to maintain the dividend
for the full year at 0.825 pence per share.
Kurt Salmon and Alexander Proudfoot are long established and
successful consulting businesses with a superb portfolio of clients
and highly capable employees. The Board of MCG will continue to
focus on promoting profitable growth in these businesses to benefit
our shareholders.
Alan Barber
Chairman
5 March 2015
Chief Executive's review
Overview
The Group's profit performance in 2014 was affected by currency
headwinds, weaker revenues in Alexander Proudfoot and the adverse
impact on profit of the change initiatives being implemented in
that business to build a more flexible model focused on profitable
growth. As a consequence, Alexander Proudfoot reported a small loss
in 2014, but the Board believes that the current strategy for the
business will deliver an improved performance in 2015 and
beyond.
In Kurt Salmon revenues on a constant currency basis increased
in 2014 from the previous year, and the underlying operating profit
margin also increased slightly. Continued weakness in its key
French market has contrasted with impressive revenue growth in the
North American operations, and the business is well placed to
benefit from further growth opportunities in 2015.
MCG operates globally with 96% of revenues in 2014 coming from
projects delivered outside the UK. The same proportion of the
Group's revenues in the year were billed in currencies other than
Sterling and most of these currencies weakened significantly (in
terms of average exchange rates) between 2013 and 2014. All of the
6% reported reduction in Group revenues in 2014 is attributable to
currency translation.
MCG's strategy is to exploit the platform provided by its
existing businesses to drive organic revenue and margin growth. We
have no current intention to make large scale acquisitions, but
will look to add capabilities where appropriate through smaller
acquisitions and team hires. We will focus on opportunities in
growth markets and industry sectors where we can readily exploit
our strengths. The geographical spread of our businesses and our
existing global office infrastructure will support an increase in
operational activity.
Results for the year
Total revenue for the year ended 31 December 2014 was GBP242.8m,
6% lower than the previous year (2013: GBP257.3m). As noted,
currency headwinds had a significant effect on reported revenues in
both MCG's businesses, accounting for all of the year on year
reduction. Alexander Proudfoot's revenues in 2014 on a constant
currency basis were 4% lower than those in the previous year, with
both first and second half reported revenues in the order of
GBP30m, in contrast to 2013 which benefited from a much stronger
second half. On the same constant currency basis, and excluding the
Cleversys business sold in 2013, Kurt Salmon's revenues increased
by more than 4% from the previous year.
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