23 Apr 2018 15:02
This announcement contains inside information for the purposes of article 7 of Regulation 596/2014 (the "Market Abuse Regulation").
23 April 2018
Management Consulting Group PLC
Trading statement and update on the Kurt Salmon escrow funds
Management Consulting Group PLC (the "Group") gives the following update on trading and the Kurt Salmon escrow funds.
Outturn for the year ended 31 December 2017
Underlying operating results for the year ended 31 December 2017 ("FY2017") are expected to be in line with management expectations at the time of the trading statement on 3 November 2017. Reported revenues for FY2017 are expected to be £35.1m (2016: £45.2m) resulting in an expected underlying operating loss of £8.3m (2016 loss: £8.8m).
After non-recurring items, including impairments against intangible assets (notably goodwill and deferred tax), the Group expects to report a retained net loss of £31.0m for FY2017 (2016 retained net loss: £0.1m).
The performance in 2017 reflects the investment in and progress made at Proudfoot implementing our new offering and strategy in Europe, Asia and key sectors such as Natural Resources but also, as indicated in November, a continued slower pace of change across some areas of the business, notably in the Americas. At the same time, the Group has pursued its cost reduction programmes and the Board estimates that operating costs were reduced by around 20% during the year.
Cash balances at 31 December 2017 were £21m (30 June 2017: £28.4m) including £8.5m of cash reserved for contingent creditors of the Group. Cash balances at 31 March 2018 were £16.1m including £6 million in respect of the Kurt Salmon escrow funds.
Current trading and outlook
Proudfoot grew revenues in Q1 2018 compared with a particularly low Q4 in 2017 and early indications are for a continuation of this trend into Q2. The customer reaction to our offering continues to be strong where we win work. We are building up the necessary sales and marketing teams and infrastructure to push our offering more effectively and the Board remains confident in the power of the Proudfoot model to deliver sustainable improvement and change for our customers. Nonetheless, revenues for the year ending 31 December 2018 are likely to be lower than revenue reported in FY2017. In addition, Management is continuing its work to reduce costs across the Group as a whole.
Update on the Kurt Salmon escrow funds
Several of the Group's businesses, including Kurt Salmon in Europe, were disposed of through a series of transactions in 2015 and 2016. At present the Board is in ongoing negotiations over the release of funds held under the escrow arrangements which guarantee certain contingent liabilities relating to the disposal of parts of the Kurt Salmon business in 2016.
While the Board remains confident as to the Group's overall position in terms of the release of the outstanding Kurt Salmon escrow funds, it considers that the ongoing negotiations create undue risk to the Group's short term funding position and therefore it is actively considering options to manage this including raising new funds for the Company.
BlueGem Capital Partners LLP, which currently holds 24.38% of the Group's issued share capital and has two representatives on the Board, has confirmed in writing its support for a fundraising and its intention, in principle and subject to certain conditions, to commit new funds of up to €4 million (approximately £3.5 million) to the Company as part of such a fundraising in a form and amount to be agreed. The Board is now working to finalise its plans for the fundraising on an expedited basis.
The Board will provide further updates on these matters as appropriate.
Management Consulting Group PLC
Tel: +44 20 7710 5000
Nick Stagg, Chairman and Chief Executive
Market Abuse Regulation
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 for 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 of the date of this announcement.
The forward looking information included in this 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.
END