2001 results 18 march 2002. © 2002 management consulting group plc all rights reserved 2 agenda...

2001 results

18 March 2002

© 2002 Management Consulting Group PLC All rights reserved

2

Agenda

• Introduction

• 2001 highlights

• Profit and loss account

• Balance sheet

• Issues

• Outlook


3

Project management

Peoplesolutions

Process improvement

The enhancement and design of processes to improve sales and productivity and / or eliminate cost and waste

Behavioural analysis, training and products to enhance skills and embrace change

Tight, structured approach with

measurable payback in predetermined

timescales

‘We are obsessed by measuring our successesand your earnings enhancement’

Core business

Installation


4

Representative clients


5

Acquisitions structure

• Horizontal acquisitions: different consulting offerings• Vertical acquisitions: fill in acquisitions, with all party buy-in• MCG will become an umbrella for a range of complementary,

non-regulated consultancy / professional service operations

A Consulting

Central services

C Consulting

D Consulting(complementary to B)

B Consulting


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Agenda

• Introduction

• 2001 highlights


• Balance sheet

• Issues

• Outlook


7

2001 highlights

• Trading continues to be strong• Turnover from continuing operations up 128% to £72.1 million (2000: £31.7

million) • Like-for-like turnover +34% (2001 first half +25%; 2001 second half +42%)

(2000 year: +25%): compared with market growth of 10% (2000 year: 17.5%)

• EBITDA of £2.3 million (2000: loss: £8.2 million)• Operating profit of £0.1 million, including exceptional credit of £2.0 million

(2000: loss £9.6 million on continuing operations) • Incremental investment spend in first half of £2.5 million (2000: £7.9 million for

year), completing the planned programme at £10.4 million• Acquisition of Czipin & Partners on 31 May 2001 for £11.0 million • Employees: 562 (2000: 409)• Cash of £18.9 million (2000: £19.5 million)• Board optimistic regarding future prospects


8

Agenda

• Introduction

• 2001 highlights


• Balance sheet

• Issues

• Outlook


9

Profit and loss account2001 2000

£m Change £mTurnover - continuing 72.1 128% 31.7 - discontinued - 6.2

72.1 37.9 Cost of sales (35.9) (19.1)Gross profit 36.2 18.8 Selling costs (20.9) 101% (10.4) Administrative expenses (17.2) 4% (16.6) Exceptional credit 2.0 - Operating result - continuing 0.1 (9.6) - discontinued - 1.4

0.1 (8.2) Profit on sale of Japan - 26.0 Interest (net) 0.5 1.1 Profit before tax 0.6 18.9 Tax (0.5) (1.6)Profit after tax 0.1 17.3

Gross profit margin 50% 50%Selling costs of turnover 29% 27%

Adjusted headline EPS 0.9 p (6.6) p


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Geographic analysis: turnover

2001 2000£m Change £m

North America 37.3 75% 21.3 Europe 30.0 292% 7.7 Africa 3.3 77% 1.9 Asia Pacific 1.5 75% 0.8 Continuing operations 72.1 128% 31.7 IMR prior period (11.5 months) - 17.5 Czipin prior period (5 months) - 4.6 Like-for-like 72.1 34% 53.8

Continuing operations 72.1 31.7 Discontinued: Japan - 6.2 Statutory 72.1 37.9


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Geographical analysis: operating profit

2001 2000Pension Depn

Operating credit/ and share Operatingprofit/(loss) goodwill schemes EBITDA (loss) EBITDA

£m £m £m £m £m £m

North America 4.8 (2.0) 1.3 4.1 (4.2) (3.6) Europe (3.5) 1.6 1.1 (0.8) (3.1) (2.5) Africa (0.1) - 0.1 - (1.0) (0.9) Asia Pacific (1.1) - 0.1 (1.0) (1.3) (1.2)Continuing operations 0.1 (0.4) 2.6 2.3 (9.6) (8.2)


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Incremental investment in business2000 2001 Total

£m £m £m

Advertising and marketing 0.5 0.2 0.7 Advisory boards 0.2 0.6 0.8 Sales staff 2.5 0.9 3.4 Business reviews 0.4 - 0.4 Recruitment, HR and training 2.0 0.5 2.5 Executive compensation 0.8 - 0.8 Knowledge management 0.5 0.2 0.7 Product development 0.1 0.1 0.2 Cost savings (0.5) - (0.5)Performance bonuses 1.4 - 1.4

7.9 2.5 10.4


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US pension fund

• Defined benefit scheme totally closed from 31 December 2001 and replaced by defined contribution scheme

• Exceptional credit of £2.0 million arises as a result of closure

• FRS 17 implemented in full and pension liability brought on balance sheet

• Prior year restated on consistent basis

• Exceptional credit is as a result of action taken to close fund and a credit would also have arisen under former accounting policy


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Results commentary

• Continued growth faster than the market

• More than doubled size in the year

• Both North America and Europe now above critical size

• All units grew substantially, Europe organic growth slower at 5%

• Continued focus on Europe to produce further organic growth

• EBITDA £2.3 million (2000: loss £8.2 million)

• New clients include: Airbus, AMP, BP, Thomas & Betts, Washington Gas

• Average size of projects increased by 75% to £1.2 million


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Agenda

• Introduction

• 2001 highlights


• Balance sheet

• Issues

• Outlook


16

Balance sheet2001 2000

Fixed assets £m £m Intangible assets 35.7 25.7 Tangible assets 2.6 1.2 Investments 1.0 -

39.3 26.9 Current assets Debtors 10.2 6.9 Cash and cash equivalents 18.9 19.5

29.1 26.4 Creditors due within one year (28.7) (19.8)Net current assets 0.4 6.6

Creditors due after one year (4.4) (2.6)Provisions for liabilities & charges (3.0) (4.0)Retirement benefits liability (12.2) (8.3)Net assets 20.1 18.6


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Commentary on balance sheet

• Goodwill on acquisition of Czipin & Partners - £11.6 million

• Long term investments comprise share scheme associated with acquisition of IMR

• Cash of £18.9 million remains partly available for acquisitions

• Pension liability reflected on balance sheet (£7.3 million) together with post-retirement health care liability (£4.9 million)


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Agenda

• Introduction

• 2001 highlights


• Balance sheet

• Issues

• Outlook


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Issues addressed in second half of 2001

• Integration of Czipin & Partners into Proudfoot Europe

• Updating of three year strategy

• Further training of account executives, analysts and consultants to maintain growth and quality of delivery

• Further expansion of client base

• First direct sales to VC/PE community

• Return to monthly profitability

• Continued assessment of acquisition opportunities


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Issues to be addressed in 2002

• Continue to grow revenues

• Accelerate the growth in Europe

• Infrastructure now in place for planned growth - minimal net increases in non-operational headcount

• Continue training and development of people

• Ensure we have the best available sales executives

• Development of middle management in line with the growth in the business

• Continue to seek suitable acquisitions at the right price


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Agenda

• Introduction

• 2001 highlights


• Balance sheet

• Issues

• Outlook


22

2002 outlook

• Cost reduction continues to be a priority for clients in difficult economic conditions

• Some signs of increased focus on sales and procurement

• Order book currently higher than at year end

• Directors expect turnover growth to continue to out-perform consulting market

• Directors remain optimistic about future prospects

2001 results 18 march 2002. © 2002 management consulting group plc all rights reserved 2 agenda...

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