Management Consulting Group PLC Final Results (6135G)

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.