Management Consulting Group PLC Annual Report and Accounts 2015 M a N a G E M E N T C O N Su Ltin G G Ro U P PL C a N N U a L Re
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PLC Annual 2015 report and accounts Management Consulting Group Management Consulting Group PLC Annual report and accounts 2015 Management Consulting Group PLC provides expertise, guidance and professional services to many of the world’s leading companies. Kurt KS Alexander Salmon AP Proudfoot MCG is made up of two businesses: Alexander Proudfoot (“AP”) and Kurt Salmon (“KS”). Throughout the report the use of this symbol signifies whether the whole of MCG or one of the two businesses is being discussed. Strategic report Governance Financials 01 Highlights 33 Chairman’s introduction 67 Group income statement 02 At a glance 34 Board of Directors 68 Group statement of comprehensive income 04 Our global reach 36 Corporate governance report 69 Group statement of changes in equity 06 Chairman’s statement 40 Other disclosures 70 Group balance sheet 08 Chief Executive’s review 41 Report of the Audit and Risk Committee 71 Group cash flow statement 12 Segmental review: Kurt Salmon 45 The Nominations Committee 72 Company balance sheet 16 Segmental review: Alexander Proudfoot 46 Report of the Remuneration Committee 73 Company statement of changes in equity 20 Corporate social responsibility: Our people 62 Directors’ responsibility statement 74 Company cash flow statement 22 Corporate social responsibility: Our impact 63 Independent auditor’s report 75 Notes to the financial statements 24 Financial review 119 Contacts for investors and clients 30 Principal risks and uncertainties 120 Company advisers 32 Viability statement Management Consulting Group PLC Annual report and accounts 2015 Strategic report Governance Financials Highlights A year of change “MCG has completed the sale of the French and related operations of Kurt Salmon and we have repaid the Group’s bank debt. The Group is in a strong financial position, debt free, and well placed to promote profitable growth in its continuing operations. Alexander Proudfoot had a very disappointing 2015 and continues to be significantly affected by weaker demand from natural resources clients. Kurt Salmon is now primarily focused on the global retail and consumer goods practice, together with a US healthcare practice. The Board of MCG will remain alert to all opportunities to generate value from the Group’s portfolio of businesses.” Nick Stagg Chief Executive Reported revenues from continuing Revenue from continuing operations (£m) (Loss)/profit from continuing operations (£m) operations of £138.9m (2014*: £145.9m), approximately 4.8% lower as a result of £138.9m £(0.1)m weakness in Alexander Proudfoot 15 138.9 15 (0.1) Underlying** operating profit from continuing operations of £0.8m 14 145.9 14 4.3 (2014: £7.7m), with profit of £6.1m for the retained Kurt Salmon business offset by loss of £5.3m for Alexander Proudfoot Underlying operating profit from Net debt (£m) continuing operations (£m) Sale of Kurt Salmon business in France £52.8m and related geographies was completed £0.8m on 7 January 2016, the Group receiving 15 0.8 15 52.8 gross proceeds at completion of 14 7.7 14 33.6 approximately £65.9m Loss from discontinued operations of £57.8m (2014: £1.1m profit) Retained loss for the year of £65.5m (2014: £1.0m) Net debt at 31 December of £52.8m (31 December 2014: £33.6m) repaid in full * 2014 comparatives have been restated to reflect continuing operations only. in January 2016 from disposal proceeds ** Throughout this statement the term “underlying” is defined as “before non-recurring items and amortisation of acquired intangibles”. Management Consulting Group PLC Annual report and accounts 2015 01 Strategic report At a glance MCG operates through two independently managed practices: Alexander Proudfoot and Kurt Salmon. We seek to enable both practices to progress to their fullest potential – distinctly, but in tandem – creating maximum shareholder value. Kurt Salmon Innovating for growth Alexander Proudfoot Building a firm platform Management Consulting Group PLC 02 Annual report and accounts 2015 Strategic report Governance Financials Kurt Salmon has benefited from its increasing Alexander Proudfoot’s powerful core offering expertise in digital transformation, helping clients is being expanded and developed in new across a range of industries to adapt their strategy directions to increase its flexibility and focus and operations to the digital world. in response to client demand. Our expertise Our expertise Through our deep expertise and innovative solutions, We work in the field, deploying teams quickly to our clients’ Kurt Salmon can deliver the building blocks of success operational sites, wherever in the world they may be. in the 21st century. We understand that tomorrow’s We have a flexible approach tailoring our core methodology organisation needs a different approach to formulating to the requirements of each project. strategy. Kurt Salmon helps its clients to deliver: We work alongside client staff, engaging with them, to install – operations that are lean and efficient yet agile and performance programmes that deliver rapid and sustainable capable of adjusting quickly to changing circumstances; operational and financial improvements. – information technology that facilitates the future and is not constrained by the present; and – people who are engaged, inspired and innovative. Revenue by sector (continuing operations) Revenue by sector Retail / 82% Natural resources / 45% Healthcare / 18% Industrials and utilities / 40% Financial / 7% Healthcare / 2% Retail / 6% Read more about Read more about Kurt Salmon p12 Alexander Proudfoot p16 Management Consulting Group PLC Annual report and accounts 2015 03 Strategic report Our global reach North America Diversified by geography (Revenue from Kurt Salmon’s North American continuing operations) practices serve leading retail and consumer goods companies as well as major hospitals and healthcare organisations. United States 5 Digital commerce Kurt Salmon designed, continents developed, and implemented a new mobile application for a leading pre-portioned meal delivery provider. The app was one of Apple’s top 25 apps of 2015, and is featured on all iPhones in Apple Retail Stores Europe 19% in North America. North America 63% Africa 4% Chile Mining South and Central America 6% Alexander Proudfoot helped Asia 8% a global leader in the natural resources sector to boost productivity and cut costs at its The Group is present in the copper mining operations in important markets across the globe order to supplement the achievement of its five-year plan. 93% of MCG’s revenues were derived from outside the UK South and Central America Latin America is an important market for Alexander Proudfoot, with about one-third of revenues here being derived from natural resources clients. Management Consulting Group PLC 04 Annual report and accounts 2015 Strategic report Governance Financials Germany Europe Japan eCommerce Omnichannel Kurt Salmon has unparalleled operationalisation Kurt Salmon supported one of industry expertise, serving Europe’s leading eCommerce One of the largest retailers in Europe’s most renowned companies with merchandise Asia sought to transform its retailers, specialty and global planning and management fulfilment network to improve brands, grocers, fashion, process definition, speed of product delivery for apparel and consumer organisation design and the growing direct-to-consumer goods companies. system selection. business. Kurt Salmon Alexander Proudfoot serves analysed consumer behaviours clients across the continent and and inventory management has a global delivery capability strategy to design an optimised for European clients with supply chain network that operations in other geographies. included ship-from-store, dark-store and dark-floor capabilities and a rationalised network of distribution centres. India South Africa Manufacturing Insurance This global manufacturer of Alexander Proudfoot improved electrical components needed the sales effectiveness of this to restore profitability. The global insurance company’s Alexander Proudfoot project field- and branch-based teams. eliminated unnecessary costs The project delivered higher and established best-in-class productivity and an increase operations to put the company in policy conversion rates. on a firmer footing. Asia Kurt Salmon serves the senior Africa executives of and private equity investors in retail and Alexander Proudfoot serves consumer goods throughout clients in South Africa and Asia from its base offices in across sub-Saharan Africa in Tokyo and Shanghai. the natural resources, Alexander Proudfoot operates financial services and from a base in Hong Kong manufacturing sectors. serving clients throughout Asia. Management Consulting Group PLC Annual report and accounts 2015 05 Strategic report Chairman’s statement Alan Barber 2015 was an important year for MCG which delivered significant changes to the structure and financial position of the Group. In November we announced the sale of a substantial part of the Kurt Salmon operations, principally those in France. The Kurt Salmon business which the Group has retained is focused on serving global clients in the retail and consumer goods sectors where it is a recognised market leader. With this enhanced focus and without the burden of indebtedness at the Group level we are now well placed to drive an improving performance. Highlights 2015 was an important year for MCG which With this enhanced focus in the Kurt Salmon delivered significant changes both to the business and without the burden of indebtedness Sale