London: Management Consulting Group said today that it has made some progress in difficult trading conditions in its half year ended 30 June — but profit and revenue both fell.
- Revenue 6% lower at £146.8m (H1 2011: £155.6m)
- Underlying operating profit 23% lower at £11.8m (H1 2011: £15.3m)
- Profit for the half year of £4.7m (H1 2011: £9.1m)
- Net debt reduced by 31% to £35.7m (June 2011: £51.7m)
- Good performances in US and emerging markets offset by continuing weakness in Europe
Nick Stagg, chief executive, said, "MCG has made progress in parts of the business in the first half of 2012 against a backdrop of challenging trading conditions and market uncertainty, and enters the second half of 2012 with a healthy order book and project pipeline.
"We have seen a good performance overall in North America, and in emerging markets, with work delivered outside North America and Western Europe representing 15% of first half revenues. This has been offset by the negative impact of Eurozone weakness which has affected overall activity levels and margins.
"Economic uncertainty looks set to continue in the second half of 2012, but MCG is a global business with a balanced geographic and sector focus. We remain committed to improving operational efficiency and profitability, whilst investing for growth, and we are well placed to take advantage of opportunities in markets and sectors which continue to grow."
Group chairman Alan Barber commented, "The performance of the Group's businesses in the first half of 2012 has been mixed. We have held our overall revenues broadly at the same level achieved in the second half of 2011. We have seen a good performance in North America and emerging markets, offset by the negative impact of Eurozone weakness on business activity, and some negative impact on our reported results in Sterling as a result of a weaker Euro.
"Alexander Proudfoot has continued to perform well, with encouraging levels of activity in the natural resources sector and in emerging markets. It is well placed to be successful in markets where economic growth remains robust in spite of weak prospects for growth in developed economies, and enters the second half of the year in a promising position.
"Kurt Salmon's operations in North America and Asia, mainly focused on the retail and consumer goods sector, have performed well. Kurt Salmon's European business had a slow start to the year and continuing uncertainty over the future of the Eurozone has adversely affected the French and Benelux operations in the first half, in particular in relation to work for financial services and public sector clients.
"There are no signs that the current weakness and uncertainty in European markets will ease in the next few months, and we must adapt to these conditions, whilst continuing to work to develop our businesses with selective investment and recruitment in sectors and geographies where there are good prospects for profitable growth."
The Group says Alexander Proudfoot has performed well in the first half of 2012. It continues to benefit from strong demand for its services from the natural resources sector and growing opportunities in emerging markets.
The Brazilian and South African business units have had a successful first half, with a particularly encouraging level of work outside the natural resources sector. A new Latin American business unit has been established in Santiago in Chile to serve as a base for work in Spanish-speaking Latin America and is making good progress In North America the performance of the business has been better than the same period in 2011, but nevertheless a little slower than expected.
In Europe, the Group says Alexander Proudfoot has been affected by macro economic uncertainty but has continued to benefit from opportunities to sell projects to European headquartered businesses which are delivered in other geographies.
Alexander Proudfoot's revenue for the first half of 2012 was in line with the same period in 2011 at £44.3m (H1 2011: £44.4m), and 4% higher than the preceding six month period (H2 2011: £42.6m). Operating profit for the first half of 2012 was £5.2m compared with an operating profit in the first half of 2011 of £5.8m.
The Group says Kurt Salmon's retail and consumer goods operations in North America have performed well in the first half of 2012. The Healthcare consulting practice in the US is making good progress and has been enhanced by the acquisition of New Albany Healthcare.
Howver the firm's smaller US financial sector practice has been adversely affected by wider uncertainty in the banking sector driven by issues in the Eurozone.
The new Kurt Salmon retail consulting operation in China, acquired in October last year, is making excellent progress, alongside the existing business in Japan.
Kurt Salmon's European operations had a slow start to the year and is below management expectations. Continuing uncertainty over the stabilisation of the Eurozone, and the national elections in France, adversely affected the French and Benelux businesses in the first half, in particular in relation to work for financial services and public sector clients. Some client projects have been deferred and prospective clients have been cautious in procuring new consulting projects, providing more challenging conditions for the efficient deployment of staff resources. In response, Kurt Salmon, management is looking to "adjust" headcount.
Kurt Salmon's revenue for the first half of 2012 was £102.5m. This was £8.7m or 8% lower than the corresponding first half revenue in 2011 of £111.2m, and £1.9m or 2% lower than the second half revenue in 2011 of £104.4m. The reported reduction in revenues compared with the second half of 2011 is the result of the translation impact of changes in exchange rates, in particular the weaker Euro. When measured at the average exchange rates which prevailed in the second half of 2011, Kurt Salmon's revenues for the first half of 2012 would have been £1.3m higher than the preceding six months. Underlying operating profit for the first half of 2012 was £6.6m representing a margin of 6.5%, slightly below the 6.9% operating profit margin reported in the second half of 2011. In the stronger trading conditions in the first half of 2011 the underlying operating profit was £9.5m and the margin was 8.6%.