MMC.L Regulatory News (MMC)

6 March 2013

Management Consulting Group PLC Preliminary Results

Resilient performance in difficult market conditions

Management Consulting Group PLC ("MCG" or "the Group"), the global professional services group, today announces its results for the year ended 31 December 2012.

 Key points

·; Revenues of £285.8m (2011: £302.6m); approximately 2% lower on a constant currency basis

·; Underlying* operating profit of £25.7m (2011: £28.3m). Underlying operating profit margin broadly flat at 9% (2011: 9%)

·; Operating profit of £18.2m, down 29% (2011: £25.5m)

·; Good performance from Alexander Proudfoot, delivering improved profitability

·; Mixed performance from Kurt Salmon, with further progress in the US and Asia offset by weaker activity in European markets

·; Strong financial position maintained with net debt broadly unchanged at £30.3m (2011: £28.2m), below 1x adjusted EBITDA**

·; Underlying* EPS of 3.5p (2011: 3.8p). Basic EPS 2.4p (2011: 3.7p)

·; Total dividend increased 10% to 0.825p per share (2011: 0.75p per share)

* Throughout this statement the term 'underlying' is defined as 'before non-recurring items and amortisation of acquired intangibles.

**Adjusted EBITDA is underlying operating profit, after adding back depreciation (£1.1m) and amortisation (£1.3m) and the cost of share awards (£3.1m).

Nick Stagg, Chief Executive, commented:

"The Group delivered a resilient performance for 2012 in difficult market conditions. Alexander Proudfoot reported a good result, with revenue growth in markets outside Europe and an improvement in margin. Kurt Salmon increased revenues in North America and Asia, but the business was affected by weakness in Europe, and the weaker Euro in 2012 reduced reported revenues in Sterling. Whilst we expect some of the Group's more established markets to remain challenging during 2013, MCG is well placed to take advantage of opportunities in markets and sectors which continue to grow. The Group's strong financial position, its geographic balance, sector focus and strong client relationships provide a solid foundation for success. The Board will continue to focus on promoting profitable growth and improving returns to shareholders."

For further information please contact:

An analyst briefing will be held at the offices of FTI Consulting at Holborn Gate, 26 Southampton Buildings, London WC2A 1PB on 6 March at 9.30am.

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. Alexander Proudfoot helps clients to embed disciplined execution in their operations to achieve growth targets, revenue and profit goals. 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.

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 6th March 2013. 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 performance of the Group's businesses in 2012 was mixed. We saw an improved performance in North America and good progress in emerging markets, offset by lower business activity in some core European markets driven by macro-economic concerns, compounded by the negative impact on our reported revenues in Sterling as a result of a weaker Euro. We have broadly maintained our overall underlying operating profit margin at 9% despite lower reported revenues.

Alexander Proudfoot continued to perform well in 2012, sustaining previous levels of activity in the natural resources sector and in emerging markets, and improving its margin. It remains well placed to find further success in those sectors and markets where economic growth remains robust. Kurt Salmon's operations in North America and Asia, mainly focused on the retail and consumer goods sector, also performed well. Kurt Salmon's European business delivered a weaker performance than the previous year as existing clients lowered spending on consulting services in response to continuing macro-economic weakness and uncertainty in the Eurozone.

Signs of a sustained global recovery in 2013 remain elusive and we expect the economic backdrop in Europe to remain challenging. We have already taken steps to adjust our strategy and operational footprint to these conditions, but we will continue to work to develop our businesses through investment and recruitment in sectors and geographies where there are good prospects for profitable growth. 

The Group is in a strong financial position and our net indebtedness at the end of 2012 was less than one-times adjusted EBITDA at £30.3m. MCG's operations are profitable and cash generative and we will continue to focus on promoting profitable growth in the business and improving returns to shareholders. Recognising this, the Board is proposing to increase the dividend for the full year by 10% to 0.825 pence per share, and will continue to maintain a progressive dividend policy.

MCG is built on our people, our relationships with our clients, and our ability to produce results for the clients who engage us. We have maintained and grown our client base in challenging times by sustaining and improving the quality of our offering, and continuing to nurture strong relationships. This is a direct consequence of the quality of the peopIe who work in our own businesses, and I would like to take this opportunity to thank everyone who worked for MCG during 2012 for their support and commitment to the Group during the year.

Alan Barber

Chairman

6th March 2013

Chief Executive's review

MCG has delivered a resilient performance for 2012, broadly maintaining our underlying operating profit margin in spite of lower levels of activity in some core markets. The continued difficult conditions in our European markets weakened demand for our services in some markets and sectors, although we have not only retained all our key existing client relationships but have gained new clients in a difficult market. The performance of both Alexander Proudfoot and Kurt Salmon demonstrates the strengths of the two businesses in this uncertain economic environment.

MCG is organised as two operating divisions: Alexander Proudfoot and Kurt Salmon. Through its two operating divisions MCG has a broad balance of businesses in terms of industries and geographies. MCG's strategy is to exploit the platform provided by our existing businesses, which are leaders in their fields, in order 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 bolt-on acquisitions and team hires. We will focus on opportunities for growth in 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.

We are committed to continuing to deliver efficiencies in the Group's operations and to enhancing financial discipline across the Group. We responded in 2012 to lower activity levels in our European markets by reducing headcount and rationalising some non-core activities which have not consistently delivered acceptable margins, which has had some negative impact on reported revenue compared with 2011.

Total revenue for the year ended 31 December 2012 was £285.8m, 6% lower than the previous year (2011: £302.6m). Most of this reduction relates to changes in average exchange rates and on a constant currency basis 2012 revenue was down only 2%. MCG is a global business and approximately 97% of revenue in 2012 came from projects delivered outside the UK.

Underlying operating profit in 2012 was £2.6m lower, at £25.7m (2011: £28.3m). This reflects the impact of lower reported revenues and a weaker margin in Kurt Salmon, adverse movements on the Euro exchange rate and an increase in the cost of employee share awards. The underlying operating profit margin was broadly flat at 9.0% (2011: 9.4%).

We continue to seek to align the performance of employees in each of our businesses with objectives that are consistent with value creation for our shareholders. Underlying operating profit for 2012 reflects a charge of £3.1m relating to share awards made to employees (2011: £1.7m). During the year 98 senior employees received awards over approximately 25 million shares in total, generally vesting over three years and conditional upon continued employment and in some cases subject to financial or share price performance. At the year end there were total awards in place over 43.4 million shares relating to 112 employees. 19.8 million of these share awards, should they vest, are required to be satisfied from existing MCG shares, and the other awards may be satisfied from existing or new shares. The Employee Benefit Trust held 11.3 million shares at the year-end for this purpose, and a further 1.3 million Treasury shares were held which may be used to satisfy share awards. Some 160 of our employees now either hold shares in MCG or have received conditional awards over MCG shares.

For 2012 the Group is reporting net non-recurring expenses of £5.3m (2011: £0.2m), comprising the cost of restructuring certain practices and eliminating some non-core lower margin activities including making adjustments to headcount (£2.9m), provisions for surplus property (£2.4m), the write-down of certain assets which are earmarked for disposal (£0.4m), offset by the impact of income from the disposal of non-core assets (£0.4m).

The charge for amortisation of acquired intangibles was £2.3m (2011: £2.6m). The overall profit from operations decreased by 29% to £18.2m (2011: £25.5m). The net interest expense decreased to £2.2m (2011: £2.3m). The profit before tax was down 31% to £16.0m (2011: £23.2m).

The underlying effective tax rate was 28% (2011: 36%), reflecting a lower proportion of Group profit in some higher tax geographies. Underlying earnings per share were 3.5p (2011: 3.8p), lower as a result of the full year dilutive effect of shares issued in late 2011 in relation to the conversion of warrants. Basic earnings per share were 2.4p (2011: 3.7p).

The interim dividend for 2012 of 0.23p per share was paid in January 2013. The Board is recommending, subject to shareholder approval, a total dividend for the year of 0.825p per share, up 10% from 0.75p per share in 2011. The Directors therefore recommend, subject to shareholder approval, a final dividend for 2012 of 0.595p per share to be paid on 2 July 2013 to shareholders on the register on 17 May 2013.  Subject to the Group's financial position, the Board intends to pursue a progressive dividend policy. 

On 30 October 2012 MCG announced that it intended to commence a share buyback programme to make market purchases of its ordinary shares of up to £5m over the succeeding twelve months. Up to 31 December 2012 the Company had purchased 1,261,772 of its ordinary shares of 1 pence each at an average price of 22.49 pence per share.

Net debt at the end of 2012 was broadly unchanged at £30.3m (2011: £28.2m), which is less than adjusted EBITDA for 2012 as measured for the purpose of the Group's borrowing facility. Cash generated by operations was £14.9m, lower than in the previous year (2011: £32.5m) partly as a result of lower operating profits and the cash impact of non-recurring costs in 2012.

Alexander Proudfoot

Alexander Proudfoot made good progress in 2012 maintaining revenues and improving profit margins on the previous year, and continuing to exploit its strengths in the natural resources sector and in emerging markets. Revenues for 2012 were broadly in line with those for the previous year at £86.7m (2011: £87.0m). In 2011 reported revenues benefited from one large client project that represented approximately 18% of the divisional total for the year. In 2012, Alexander Proudfoot revenues did not benefit from such a large single project, with the largest client representing approximately 10% of total reported revenue.

Alexander Proudfoot reported underlying operating profit for the year as a whole of £12.2m (2011: £11.6m). The profit margin of 14.1% for the year was ahead of the 2011 margin of 13.3%.

The number of staff employed by Alexander Proudfoot increased marginally from 302 at the end of 2011 to 323 at the end of 2012. The business operates a flexible global staffing model and employee numbers were significantly higher at times during 2012 to meet the requirements of client projects.

During 2012 Alexander Proudfoot was organised on the basis of five business units, based in Europe, the United States, South Africa, Brazil and Chile. The business is headquartered in Atlanta in the United States and during 2012 operated from further office locations in London, Paris, Frankfurt, Johannesburg, New York, Toronto, São Paulo and Santiago. In January 2013 a new office was established in Hong Kong, to serve as a base for promoting the business in Asia. Alexander Proudfoot serves clients globally from these locations.

Most of the Alexander Proudfoot business units reported increased revenues in 2012. The North American business unit reported revenue growth and an improved margin, benefiting in 2012 from some large projects delivered in Canada alongside a satisfactory performance in the US market. In Europe overall revenues were weaker than in 2011, reflecting more difficult market conditions, and this reduced margins somewhat. The African business unit reported revenues broadly in line with the previous year and continued to benefit from work for natural resources clients delivered in a number of locations in sub-Saharan Africa, alongside work outside the natural resources sector in South Africa. The Brazilian business unit reported increased revenues and an improved margin, most of its workload comprising projects for domestic industrial businesses in the Brazilian market. In the first half of 2012 Alexander Proudfoot established a new business unit based in Santiago in Chile mainly in order to serve natural resources clients in Spanish-speaking Latin America. In its first year of operation this business reported revenues of nearly £3m and it is well positioned to progress in 2013.

In 2012 Alexander Proudfoot continued to see good ongoing demand from clients in the natural resources sector and for projects delivered in emerging markets, in particular in Africa and Latin America. Work in the natural resources sector represented just under half the total Alexander Proudfoot revenues in 2012, slightly lower than the previous year. Alexander Proudfoot's experience and capabilities in the natural resources sector have continued to prove attractive to clients looking to improve productivity and efficiency in their extraction and processing operations, and softer commodity markets in 2012 did not adversely impact revenues from the sector. Other industry sectors where Alexander Proudfoot reported strong revenues in 2012 were financial services and manufacturing.

Alexander Proudfoot has demonstrated over many years that it has an offering that produces attractive returns for its clients. Its clients are generally large international organisations and, whilst the business does not necessarily produce a regular cycle of recurring work with the same client, many clients do commission further work at some stage and most act as references for sales to other customers. Management continues to focus on building long term relationships with existing and prospective clients as well as driving individual project sales. Approximately 60% of 2012 revenues related to work for clients with whom the business had an existing relationship.

Alexander Proudfoot's global reach and flexible capability means it is well placed to take advantage of opportunities in markets and industry sectors where economic growth remains strong. As a result of the typical scale of individual client projects, there is some inherent lumpiness in the Alexander Proudfoot revenues from quarter to quarter, and from half year to half year. The order intake in the latter part of the 2012 financial year slowed somewhat compared with the first half, and the order book at the end of the year was lower than that at the end of 2011. Whilst this is likely to have some impact on first half revenues for the year relative to the same period in 2012, the current order book and the pipeline of prospects in the business provides an encouraging foundation for the year as a whole. 

Kurt Salmon

Kurt Salmon delivered a mixed result for the year as a whole, with an improved performance in the United States and Asia and a weaker result in its European operations. It reported an overall decrease in revenues, reflecting weaker activity in France and other European markets and the translation impact of the weaker Euro on revenues reported in Sterling. Overall revenues for the year were £199.0m, 8% lower than the previous year (2011: £215.6m), but only 4% lower at constant exchange rates. Kurt Salmon reported underlying operating profit for the year of £13.5m (2011: £16.8m) and an underlying operating margin of 6.8% (2011: 7.8%).

The number of staff employed by Kurt Salmon decreased during the year from 1,420 at the end of 2011 to 1,349 at the end of 2012. The overall headcount reduction reflects the decisions taken by management to adapt to lower levels of activity in some European operations, both in terms of natural attrition and restructuring initiatives implemented during 2012. Kurt Salmon continues to recruit in higher growth sectors and geographies within the business.

Kurt Salmon is organised on the basis of geographic locations and global industry verticals. Kurt Salmon has its headquarters operations in Paris and New York. In Continental Europe Kurt Salmon operates from offices in France, Germany, Belgium Luxemburg, and Switzerland. It operates in the UK from MCG's head office location in London, and in the United States from New York, Atlanta and San Francisco. In Asia, Kurt Salmon has offices in Tokyo, Shanghai and Hong Kong.

Kurt Salmon's largest single business in terms of geography is in France, comprising about half of total divisional revenue. The Kurt Salmon business is a market leader in the French management consulting industry and has been resilient through the economic cycle in recent years. In 2012 Kurt Salmon's French operations had a slow start for the year, and it became clear during the first half that economic uncertainty, in part related to the Eurozone crisis, and exacerbated by the impact of the French elections, was adversely affecting spending by our existing clients on consulting services. The unresolved Eurozone issues and the underlying weakness in the French economy that emerged more clearly in the second half of the year continued to affect the level of revenues in France for the year as a whole, which were some 14% lower than the previous year on a constant currency basis. The Kurt Salmon business in France is broadly based in terms of industry coverage, but the most significant are financial services, the public sector, and the industrial sector. Consulting spend by some financial sector clients was particularly subdued in 2012, and revenue from public sector work was also impacted. Revenue from French industrial clients was less affected. Overall, client activity levels appear to have now stabilised at this lower level, but in the absence of a stronger economic growth outlook, subdued business confidence may limit the prospects for revenue growth in France in 2013. Action was taken in 2012 to adjust staff resources to lower activity levels. Kurt Salmon's longstanding relationships with its existing French clients provided a robust platform for the business, and it was also successful in expanding its client base during the year.

Elsewhere in Continental Europe, Kurt Salmon has operations in Germany, Luxemburg, Belgium and Switzerland. These have been less affected by Eurozone uncertainty than the business in France, and mostly reported broadly stable or improving revenues in 2012.  Kurt Salmon has no exposure to the weaker peripheral Eurozone countries in Southern Europe. Kurt Salmon's relatively small UK operation, focused largely on the retail sector, performed well in 2012. Some other lower-margin non-core operations in the UK have been closed down.

Kurt Salmon's operations in North America, focused on the retail and consumer goods sector, continued to perform well, reporting an increase in revenues in the year. The US financial services practice, based in New York, made good progress in difficult conditions, as did the CIO-Advisory practice providing services to Chief Information Officers. The US healthcare practice reported increased revenues and is looking to invest for further growth. In March 2012 Kurt Salmon acquired New Albany Healthcare, a small US healthcare practice focusing on operational consulting in surgical functions within medical facilities.

In Asia, Kurt Salmon's businesses in Japan and China are focused on the retail sector. The Japanese business continued the good progress seen in the second half of 2011 after suffering badly in the aftermath of the natural disasters earlier in that year. The China business, acquired in the fourth quarter of 2011, produced a good performance in 2012 and is well placed for further growth in 2013.

Kurt Salmon is an established global consulting brand with a long heritage, and deep, longstanding client relationships. 75% of the top twenty clients in 2012 were clients of the business in each of the last five years. Kurt Salmon was recognised as a leader by Gartner in its "Magic Quadrant for Business Operations Consulting Services, Worldwide" published in September 2012. The report evaluated the capabilities of ten firms that provide business operations consulting services on a global basis, including Deloitte, PWC, KPMG and Bearing Point, based principally on feedback from their clients. Gartner positioned Kurt Salmon in the "leaders" section in the Magic Quadrant, which measures firms in terms of their "ability to execute" and "completeness of vision". Kurt Salmon received the highest score of all the firms covered for client centricity, reflecting close attention to client needs and strong senior leadership relationships. Gartner reported that clients praised Kurt Salmon for its deep industry expertise, and noted its ability to move seamlessly from strategy to execution in multiple engagement scenarios, recording high scores in both these areas. 

The order intake in Kurt Salmon during the latter part of 2012 provided a good start to 2013 and the current order book and pipeline of prospects is encouraging. We expect that the outlook in Europe will continue to be affected by weak economic growth and uncertainty, but elsewhere there are better prospects in 2013.

Summary and outlook

The Group made satisfactory progress in 2012 with a mixed performance across different geographies and sectors. We did not see the sustained global economic recovery many had hoped for and expected in the year, and in the second quarter of 2012 it became clear that the Eurozone uncertainty and weak growth were affecting the appetite of some clients for our services. The lower activity levels in Europe that we saw at that time persisted during the rest of the year, and whilst conditions have not deteriorated further since then, they have not yet improved significantly. In other markets, in particular in North America and emerging economies in Asia, Latin America and Africa, we have made good progress. Much of the reduction in the Group's revenue and profit in 2012 relates to the negative impact on our reported results in Sterling as a result of a weaker Euro, rather than an underlying decrease in activity or profitability.

We have adapted to these conditions, and have taken action to underpin the performance of the Kurt Salmon business, including restructuring certain practices and making adjustments to headcount. We continue to work to develop our businesses with selective investment and recruitment in sectors and geographies where there are good prospects for profitable growth.

MCG retains a strong position in its key European markets, and we have an established position and brands in North America where economic growth has been a little more robust. Emerging markets continue to provide opportunities for growth which may not be so readily available elsewhere, and approximately 18% of MCG's 2012 revenues were derived from projects delivered outside the developed economies of North America and Western Europe.

We entered 2013 with a solid order book in Kurt Salmon, and, despite a slow start to the year, an encouraging pipeline of prospects in Alexander Proudfoot. MCG is in a strong financial position and has long term client relationships that have delivered revenues over many years. We have a stable platform to allow the Group's businesses to benefit in due course as economic conditions improve and we will continue to drive our strategy, investing for growth in our businesses to deliver value to our shareholders.

Group income statement

Group statement of comprehensive income

Group statement in changes of equity  

Group balance sheet  

Group cash flow statement

Notes

1. Responsibility statement of the directors on the annual report

The responsibility statement below has been prepared in connection with the Company's full annual report for the year ended 31 December 2012. Certain parts thereof are not included within this announcement.

We confirm to the best of our knowledge:

·; The financial statements, prepared in accordance with IFRSs, as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

·; The Management Report, which is incorporated into the Directors' Report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.

This responsibility statement was approved by the Board of Directors on 6 March 2013 and is signed on its behalf by:

2. Basis of preparation

The financial information included in this statement does not constitute the Group's statutory accounts for the years ended 31 December 2012 or 2011 within the meaning of section 435 of the Companies Act 2006, but is derived from those accounts. Statutory accounts for 2011 have been delivered to the Registrar of Companies and those for 2012 will be delivered following the Company's annual general meeting. The auditor has reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their reports and did not contain statements under Section 498 (2) or (3) Companies Act 2006.

While the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRS), this announcement does not itself contain sufficient information to comply with IFRS.

The Group's Annual Report and Accounts and notice of Annual General Meeting will be sent to shareholders on 15 March 2013 and will be available at the Company's registered office at 10 Fleet Place, London, EC4M 7RB, United Kingdom and on our website: www.mcgplc.com.

The Annual General Meeting will be held at 11.30am on 18 April 2013 at the offices of Baker & McKenzie LLP, 100 New Bridge Street, London, EC4V 6JA.

3. Accounting policies

Whilst he financial information has been prepared in accordance with IFRS these financial statements have been prepared in accordance with those IFRS standards and IFRIC interpretations issued and effective or issued and early adopted as at the time of preparing these statements (as at 31 December 2012). The policies have been consistently applied to all the periods presented.

Full details of the Group's accounting policies can be found in note 2 to the 2011 Annual Report which is available on our website: www.mcgplc.com.

4. Going concern

The Group can draw up to £85 million under its fully revolving credit facility which runs until July 2016. The Group prepares regular business forecasts and monitors its projected compliance with its banking covenants, which are reviewed by the Board. Forecasts are adjusted for reasonable sensitivities which address the principal risks 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 a significant amount of cost incurred by the Group. On this basis the Board has concluded that it is appropriate to continue to adopt the going concern basis in the Group's financial statements.

5. 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. All revenues are derived from the provision of professional services.

Inter-segmental sales are not significant.

(a) Geographical analysis

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:

(i) Revenue and underlying operating profit by geography

The revenue and underlying profit for Europe includes the Group's operations in the UK, which represented 5% of total Group revenue in 2012 (2011: 5%).

(ii) Net assets by geography

(iii) Capital additions, depreciation and amortisation by geography

(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 the 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. Assets and liabilities by practice are not reviewed by the Board and are therefore not disclosed.

6. Profit before tax

Profit before tax has been arrived at after charging/ (crediting) the following:

Non-recurring items in 2012 comprise £2.9m in relation to restructuring within Kurt Salmon, which includes £2.9m for redundancy and related expenses and a write-down of £0.4m in respect of assets held for disposal offset by £0.4m income from asset disposals, and £2.4m in respect of property costs. Non-recurring items in 2011 comprised of £4.4m in relation to Kurt Salmon merger expenses, £1.1m in relation to property costs, £0.2m of acquisition-related costs and a £5.5m release of a legal claim.

7. Dividends

Dividends are not payable on shares held in the employee share trust which has waived its entitlement to dividends. The amount of the dividend waived in 2012 (in respect of the interim dividend for the year ended 31 December 2012) was £27,943 (2011: £25,046).

The 2011 final dividend of 0.55p per share was paid on 7 July 2012.

The 2012 interim dividend of 0.23p per share was paid on 8 January 2013. The directors propose a final dividend of [0.595p] per share for the year ended 31 December 2012.

8. Staff numbers and costs

The average number of persons employed by the Group (including executive directors) during the year, analysed by category, was as follows:

The number of Group employees at the year end was 1,697 (2011: 1,741).

The aggregate payroll costs of these persons were as follows:

9. Investment revenues and finance costs

10. Tax

UK corporation tax is calculated at 24.5% (2011: 26.5%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

11. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

The average share price for the year ended 31 December 2012 was 28.5p (2011: 35.5p).

12. Notes to the cash flow statement

\* The adjustment for pension funding represents additional cash contributions made to the Group's closed US defined benefit pension scheme to maintain the funding position at the required level.