6 Oct 2014 07:00
6th October 2014
Management Consulting Group PLC ("MCG")
Trading Update
Management Consulting Group PLC ('MCG' or 'the Group'), the international professional services group, today announces a trading update.
The outlook for the business for the year as a whole has deteriorated from the position set out in our Interim Results statement on 31 July 2014, principally as a result of weakness in Alexander Proudfoot, and as a result the Board has materially reduced its profit expectations for 2014.
In our Interim Statement at the end of July we noted that whilst the order book position in Alexander Proudfoot at that stage was healthy, the improved rate of order input that we had recently seen needed to be maintained in order to achieve our performance objectives for the year as a whole. Subsequent order input in the last two months has been very weak and the Board considers that the likely conversion of current pipeline opportunities in the remaining months of the year will not compensate for this weakness in terms of the impact on the results for 2014. The postponement of certain significant client projects from 2014 to 2015 affecting the North American business unit in particular has contributed to the current position. As a result, the Board currently expects that Alexander Proudfoot will deliver second half revenues in 2014 close to those in the first half of the year, and is likely to report a small operating loss for the year as a whole. As previously reported, the year on year comparison for Alexander Proudfoot for 2013 and 2014 will be affected by significant negative currency translation effects.
We continue to make good progress with the change initiatives in the Alexander Proudfoot business that were announced earlier this year, but as previously reported these have had an adverse effect on profitability in 2014, compounding the impact of weaker than expected revenues. In particular, we have seen a successful start to the dedicated natural resources business unit that we established in the second quarter of this year, generating higher order input from mining projects in the last two quarters than the whole of 2013.
Kurt Salmon delivered an improved performance in the first half of 2014. Order input and activity levels in France in the last two months were slightly weaker than expected, and the North American business has been affected by some recent project delays. These factors will have some impact on reported second half revenues and margins and consequently the Board has reduced its revenue and profit estimates for Kurt Salmon for 2014. Recent order input and pipeline activity are encouraging and the Board expects that the broadly positive underlying trends in the Kurt Salmon business that were reported in the Interim Statement on 31 July will continue to apply over the remainder of the financial year and into 2015.
Reported net debt at the half year stage was £48.0m. Whilst levels of indebtedness are currently higher than the half year position as a result of the slower summer trading period and weakness in Alexander Proudfoot, the Group continues to focus on operational cash generation to further reduce net indebtedness over the course of the current financial year.
Nick Stagg, Chief Executive, commented:
"Recent order input in Alexander Proudfoot has been disappointing and as a result we have significantly reduced our performance expectations for the Group for the year as a whole. This is a transition year for Alexander Proudfoot and the changes we are making will build a more flexible business model focused on profitable growth but in the short term, as expected, will adversely affect our margins and have exacerbated the impact of weaker revenues this year. We have had some early successes in expanding the range of revenue opportunities in the Alexander Proudfoot business by introducing new service lines and offerings. Kurt Salmon performed well in the first half, and although some project deferrals and a slow summer period in France will have a negative impact in the short term, the underlying trends in the business remain encouraging. The medium term outlook for the Group remains positive."
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 | 020 3727 1000 | |
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.