Full-Year Report 2014

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Full-Year Report 2014 Management Consulting Group PLC Annual report and accounts 2014 Innovating iru#jurzwk Building a Ľup#sodwirup Nxuw#Vdoprq#lv#d#joredo#pdqdjhphqw#frqvxowdqf|/# Kurt zlwk#ghhs#lqgxvwu|#h{shuwlvh#dqg#d#eurdg#shuvshfwlyh/# ghglfdwhg#wr#exloglqj#wkh#pdunhw#ohdghuv#ri# Vdoprq wrpruurzĞzkdwhyhu#wrpruurz#pljkw#orrn#olnh1 Read more about Kurt Salmon on p14 Progressing Pdqdjhphqw#Frqvxowlqj#Jurxs#SOF#surylghv#h{shuwlvh/# jxlgdqfh#dqg#surihvvlrqdo#vhuylfhv#wr#pdq|#ri#wkh#zruogġv# ohdglqj#frpsdqlhv1# Together MCG operates through two independently managed practices: Doh{dqghu#Surxgirrw#dqg#Nxuw#Vdoprq1#Zh#xwlolvh#rxu#h{shuwlvh#wr# enable both practices to progress to their fullest potential – distinctly, exw#lq#wdqghp#Ğ#fuhdwlqj#pd{lpxp#vkduhkroghu#ydoxh1 Alexander Proudfoot helps clients to better Alexander execute their plans and strategies by improving pdqdjhphqw#hļhfwlyhqhvv#dqg#hpehgglqj# Proudfoot sustainable change, delivering substantial improvements in operational performance dqg#lqfuhdvhg#surĽwdelolw|1 Read more about Alexander Proudfoot on p18 p14 Kurt Salmon Segmental review p18 Segmental review Alexander Proudfoot Overview Strategic report Governance Financials Contents Overview Financials 04 Highlights 69 Group income statement 06 At a glance 69 Group statement of comprehensive income 08 Chairman’s statement 70 Group statement of changes in equity 71 Group balance sheet Strategic report 72 Group cash flow statement 73 Company balance sheet 10 Chief Executive’s review 74 Company statement of changes in equity 14 Segmental review: Kurt Salmon 75 Company cash flow statement 18 Segmental review: Alexander Proudfoot 76 Notes to the financial statements 22 Corporate social responsibility: Our people 115 Contacts for investors and clients 24 Corporate social responsibility: Our impact 116 Company advisers 26 Financial review 32 Principal risks and uncertainties Governance Chairman’s statement 35 Chairman’s introduction with Alan Barber 36 Board of Directors 38 Corporate governance report p08 41 Other disclosures 42 Report of the Audit and Risk Committee 45 The Nominations Committee 46 Report of the Remuneration Committee 63 Directors’ responsibility statement Chief Executive’s revieww 64 Independent auditor’s report with Nick Stagg p10 Financial review with Chris Povey p26 KS 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 AP one of the two businesses is being discussed. Management Consulting Group PLC Annual report and accounts 2014 03 Highlights A year of evolution 2014 was a year of evolution for MCG in which we zrunhg#wr#ghyhors#dqg#hqkdqfh#rxu#rļhulqjv#lq# uhvsrqvh#wr#pdunhw#fkdqjh1 Our progression Innovating for growth Kurt Salmon has benefited from its increasing expertise in digital transformation, helping clients across a range of industries to adapt their strategy and operations to the digital world. Read about Kurt Salmon on p14 Building a Ľup#sodwirup Alexander Proudfoot’s powerful core offering is being expanded and developed in new directions to increase its flexibility and focus in response to client demand. Read about Alexander Proudfoot on p18 Management Consulting Group PLC 04 Annual report and accounts 2014 Overview Strategic report Governance Financials Our year in brief / financial highlights Revenue (£m) 242.8 14 242.8 Wkh#Jurxsġv#uhsruwhg#uhvxowv#lq#5347#uhľhfw#wkh#lpsdfw#ri#vwurqj# 13 257.3 currency headwinds and a year of planned change and weak revenues 285.8 lq#Doh{dqghu#Surxgirrw1#Nxuw#Vdoprq#gholyhuhg#dq#hqfrxudjlqj# 12 performance overall, despite continued weakness in its key French 11 302.6 market, delivering underlying revenue growth and maintaining its 10 270.4 pdujlq1#Zh#kdyh#kdg#d#jrrg#vwduw#wr#5348#lq#Nxuw#Vdoprq#dqg#zh# h{shfw#wkh#wuhqgv#vhhq#lq#wkdw#exvlqhvv#lq#5347#wr#frqwlqxh#wklv#|hdu1# Profit from operations (£m) Zh#zloo#frqwlqxh#wr#lqyhvw#lq#wkh#Doh{dqghu#Surxgirrw#exvlqhvv#dqg# ghyhors#wkh#rshudwlqj#prgho#wr#lpsuryh#lwv#orqjhu#whup#shuirupdqfh1# 8.1 Nick Stagg Chief Executive 14 8.1 13 17.5 12 18.2 Uhsruwhg#uhyhqxhv#grzq#9(#dw#5751;p#+5346=#58:16p,#gxh#wr# 11 25.5 vwurqj#fxuuhqf|#khdgzlqgv1#Uhyhqxhv#ľdw#dw#frqvwdqw#h{fkdqjh#udwhv 10 18.0 Xqghuo|lqj-#rshudwlqj#surĽw#ri#441;p#+5346=#5415p,/#zlwk#xqghuo|lqj# Underlying operating profit (£m) rshudwlqj#surĽw#pdujlq#orzhu#dw#71<(#+5346=#;15(,/#uhľhfwlqj#uhyhqxh# weakness and the impact of investment in Alexander Proudfoot 11.8 SurĽw#iurp#rshudwlrqv#ri#;14p#+5346=#4:18p,/#zlwk#pdujlq#rq# 14 11.8 surĽw#iurp#rshudwlrqv#grzq#dw#616(#+5346=#91;(,# 13 21.2 Uhwdlqhg#orvv#iru#wkh#|hdu#ri#413p#+5346=#surĽw#ri#<14p,# 12 25.7 uhľhfwlqj#dq#xqxvxdoo|#kljk#wd{#fkdujh#lq#5347 11 28.3 10 23.3 Strong cash generation in the second half of the year resulting in a reduction lq#qhw#ghew#wr#6619p#+5346=#6<1;p,/#uhsuhvhqwlqj#dssur{lpdwho|#5{#dgmxvwhg# EBITDA** and comfortably within the Group’s revised banking covenants Net debt (£m) Xqghuo|lqj-#HSV#ri#315s#+5346=#517s,>#edvlf#orvv#shu#vkduh#ri#315s#+5346=#HSV#41<s, 33.6 Sursrvhg#Ľqdo#glylghqg#ri#318<8s#shu#vkduh1#Wrwdo#glylghqg# 14 33.6 xqfkdqjhg#dw#31;58s#shu#vkduh#+5346=#31;58s#shu#vkduh, 13 39.8 12 30.3 * Throughout this statement the term “underlying” is defined as 11 28.2 “before non-recurring items and amortisation of acquired intangibles”. 10 54.4 ** Adjusted EBITDA is adjusted operating profit, after adding back depreciation and amortisation and certain other non-cash items including the cost of share awards. Management Consulting Group PLC Annual report and accounts 2014 05 At a glance Our global reach Zh#zrun#iru#pdq|#ohdglqj#joredo#frpsdqlhv/#khoslqj# them to succeed in a rapidly changing world and dsso|lqj#ghhs#lqgxvwu|#nqrzohgjh#lq#nh|#vhfwruv1 Diversified by geography North America (Revenue by project delivery location) Revenue by Kurt Salmon’s North American practices business (%) serve leading US and international retailers, major hospital groups and global financial institutions. 82 Alexander Proudfoot’s clients in 2014 18 included a Canadian nuclear power company, one of the largest producers of natural gas in the US and a major national healthcare provider with several hundred 5 medical centres. continents Read more in our Segmental Review on pages 14 to 21 Europe 45% North America 35% Africa 7% South and Central America 6% Asia 7% The Group is present in the important markets across the globe <9(#ri#PFJġv#uhyhqxhv#zhuh#ghulyhg# from outside the UK 20% of 2014 revenues related to client South and Central America surmhfwv#rxwvlgh#Qruwk#Dphulfd#dqg# Alexander Latin America is an important market for Proudfoot Zhvwhuq#Hxursh Alexander Proudfoot, with about one-third of revenues here being derived from natural resources clients. Client projects in 2014 included locations in Brazil, Chile, Mexico, Peru, 100% Argentina and the Caribbean. One of the larger ongoing projects is for an important Canadian headquartered client of our global natural resources practice, at one of its major asset locations in South America. Management Consulting Group PLC 06 Annual report and accounts 2014 Overview Strategic report Governance Financials Sectors we operate in Kurt Salmon is a global leader in consulting to clients in the retail and consumer goods sector. Alexander Proudfoot works for natural resources clients across the globe in remote and difficult locations. Both businesses also have strong capabilities in the financial sector and in industrials and utilities. Alexander Proudfoot Kurt Salmon Natural resources / 52% Retail / 41% Industrials and utilities / 31% Financial / 24% Financial / 8% Industrials and utilities / 18% Healthcare / 6% Healthcare / 11% Retail / 3% Public sector / 6% Europe Kurt Salmon has a leading market position in France serving large CAC40 and other multinational clients, Revenue by across a wide range of industry sectors. In Germany business (%) and the UK Kurt Salmon serves major retail and consumer goods clients. In 2014 Alexander Proudfoot worked for one of the 92 world’s leading cement and aggregates businesses, 8 on a multi-project basis in a number of European locations and elsewhere around the world. Read more in our Segmental Review on pages 14 to 21 Africa Alexander Proudfoot’s African business unit Asia Kurt Salmon serves leading national and global retail is based in Johannesburg and serves clients and consumer goods clients in Asia from its offices Revenue by in South Africa and across sub-Saharan Africa Revenue by in Shanghai, Hong Kong and Tokyo, working closely business (%) in the natural resources, financial services and business (%) with other parts of the global retail and consumer manufacturing sectors. Africa based projects goods practice. In 2014 Kurt Salmon’s US healthcare are also sold to clients headquartered in practice worked on some major hospital Europe and elsewhere. developments in the Middle East. 17 61 83 Kurt Salmon serves clients in French- 39 Alexander Proudfoot serves clients in Asia from speaking North Africa from its office in a base in Hong Kong. Casablanca and its base in France. Read more in our Segmental Review on pages 14 to 21 Management Consulting Group PLC Annual report and accounts 2014 07 Chairman’s statement Wkh#Jurxsġv#shuirupdqfh#lq#5347#zdv#edgo|#dļhfwhg#e|#wkh# lpsdfw#ri#vwurqj#fxuuhqf|#khdgzlqgv1#Rq#d#orfdo#fxuuhqf|# edvlv/#zhdnhu#uhyhqxhv#lq#Doh{dqghu#Surxgirrw#zhuh#rļvhw# e|#d#vwurqjhu#shuirupdqfh#lq#Nxuw#Vdoprq1# Highlights We have invested in and taken action We have reduced our net indebtedness Kurt Salmon and Alexander to restore growth and profitability in further in the year to £33.6m at the Proudfoot are long established Alexander Proudfoot year end and successful consulting businesses with a superb Kurt Salmon has performed well in The Board is proposing to maintain portfolio of clients and highly North America and other geographies, the dividend for the full year at 0.825p despite continued weakness in France per share fdsdeoh#hpsor|hhv1#Wkh#Erdug# of MCG will continue to focus The Group’s performance in 2014 was badly towards the end of the year, which bodes rq#surprwlqj#surĽwdeoh#jurzwk# affected hit by the impact of strong currency well for 2015.
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