London: Management Consulting Group PLC, the holding company of consulting firms Alexander Proudfoot and Kurt Salmon, this week reported a significant rebound in its financial results for the year to December 31 2011.
- Revenue up 12% to £302.6m
- Operating profit up 42% to £25.5m
- Pre-tax profit up 61% to £23.15m
- 95% of 2011 revenue from outside UK
- Encouraging levels of business in early 2012
Nick Stagg, Chief Executive, commented, "The Group delivered a strong performance for 2011 with double digit revenue growth, an increased margin and strong cash generation. Alexander Proudfoot benefited from an increased workload for clients in the natural resources sector and Kurt Salmon has grown revenues in its key markets. We have seen a resilient performance in our established geographic markets and growth from emerging markets. Economic uncertainty is unavoidable in 2012 and we are not immune to its effects on our clients, but MCG is a global business with a balanced geographic and sector focus and we are well placed to take advantage of opportunities in markets and sectors which continue to grow."
In his statement, Chairman Alan Barber commented, "2011 was a successful year for Management Consulting Group despite the economic uncertainty in many of the markets in which we operate. During 2011 we realised some of the benefits of the changes that were made in 2010. Both Alexander Proudfoot and Kurt Salmon performed well, resulting in a 12% increase in revenue and a 22% increase in underlying operating profit.
"MCG operates globally in diverse markets, both in terms of geographies and industry sectors. A growing proportion of the Group's revenues are derived from emerging markets, and we are well placed to take advantage of further opportunities in those markets that continue to perform strongly, despite uncertainty over the growth prospects of some developed economies in 2012."
MCG's Executive Review of its performance is revealing and below we carry it at length:
"MCG has delivered significant growth in both revenue and profit in 2011, as well as strong operational cash generation. Hopes for sustained global economic recovery in 2011 receded sharply in the second half of the year, as it became clear that growth had stalled in most developed economies. In these testing circumstances both Alexander Proudfoot and Kurt Salmon made good progress and the results for the year as a whole are encouraging and demonstrate the resilience of the two businesses in an uncertain economic environment.
"MCG is now organised as two operating divisions: Alexander Proudfoot and Kurt Salmon, and from 2011 MCG has reported its segmental results on these two divisional lines. Kurt Salmon comprises the former businesses of Ineum Consulting and Kurt Salmon Associates, which merged with effect from 1 January 2011.
"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 further large scale acquisitions, but will look to add capabilities where appropriate through smaller 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 global office infrastructure will support an increase in operational activity.
"Total revenue for the year ended 31 December 2011 was £302.6m, 12% up on the previous year (2010: £270.4m). MCG is a global business and more than 95% of revenue in 2011 came from projects delivered outside the UK.
"Underlying operating profit in 2011 was up 22%, or £5.0m, to £28.3m. This reflects the impact of an impressive overall performance by Alexander Proudfoot after its strong recovery in the second half of 2010, and a solid performance throughout the year by Kurt Salmon."
"Alexander Proudfoot delivered very strong revenue growth in the second half of 2010 and these increased revenue levels were sustained throughout 2011. The business has recovered well from the weakness experienced from mid-2009 into the first half of 2010.
"Overall revenues for the year were up 40% to £87.0m. Underlying operating profit for the year was £11.6m (2010: £4.9m).
"During 2011 Alexander Proudfoot was organised on the basis of four business units, based in Europe, the United States, South Africa and Brazil. The business is headquartered in Atlanta in the United States and during 2011 had further office locations in London, Paris, Frankfurt, Johannesburg, Toronto and São Paulo. Alexander Proudfoot serves clients globally from these locations.
"Most of the Alexander Proudfoot business units reported increased revenues in 2011. The strongest year-on-year revenue growth was delivered in the European and African business units. The Brazilian business unit showed strong growth in the first half and delivered a satisfactory performance for the year as a whole. The recovery in the North American business developed more slowly during 2011 and this unit reported revenue broadly in line with the previous year. The management team in the North American business unit was strengthened in the second half of the year and recent indicators suggest that the changes made are now delivering results."
"Kurt Salmon was established on 1 January 2011 from the merger of Ineum Consulting and Kurt Salmon Associates. Prior to that date both were managed and reported as separate business segments.
"In October 2011 MCG acquired Vertical Retail Consulting, a successful retail consulting business operating in mainland China, Hong Kong and elsewhere in Asia, for an initial consideration of US$2.25m. The acquisition brings an established team of partners and consultants serving both well known international brands already active in or in the process of entering the Chinese market, and local retailers which are expanding rapidly in terms of store and brand development. The acquired business generated revenues of approximately £3.2m in the 12 months to 31 December 2011, of which £0.8m is reflected in MCG's reported results for the year. It is performing well and has a strong order book and sales pipeline which extends into the second half of 2012. Kurt Salmon has a successful existing business operating in Japan and as a result of the acquisition it has significantly enhanced its capabilities in fast growing retail markets in Asia.
"Overall revenues for the year were £215.6m, 4% higher than the previous year (2010: £208.2m) butd underlying operating profit for the year fell to £16.8m (2010: £18.4m)
"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, with offices across Continental Europe, in London and in the United States. In Asia, Kurt Salmon has offices in Tokyo, Shanghai and Hong Kong.
"Kurt Salmon's continental European operations, centred on France, together with Germany and the Benelux countries, had a successful year and all reported revenue growth. The Kurt Salmon retail consulting business in the UK performed well, but the results of some of the other smaller elements of the UK operations were unsatisfactory, in a consulting market which remains difficult and competitive. In North America the core retail and consumer goods practice delivered revenue and profit growth. The US financial services practice continued to show good progress. The US healthcare practice had a more difficult year than had been anticipated, although management have now taken steps to improve growth prospects and profitability in 2012. The Kurt Salmon operation in Japan suffered badly in the aftermath of the natural disasters of March 2011, but recovered very strongly in the second half of the year."