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RNS Number : 8077J
Management Consulting Group PLC
16 April 2020
This announcement contains inside information for the purposes
of article 7 of Regulation 596/2014 (the "Market Abuse
Regulation").
16 April 2020
Management Consulting Group PLC
Update on current trading and impact of COVID-19
The Group has been carefully monitoring the developments with
respect to the COVID-19 outbreak and the impact, both actual and
expected, on its business activities. The Group's priority is to
support and protect the safety and welfare of the Group's employees
during this difficult time, and also to continue to support its
clients and customers, while preserving shareholder value to the
maximum extent possible.
Current trading
The market and general economic turmoil that has been unleashed
in recent weeks by the COVID-19 epidemic has presented, and is
expected to bring still further, significant challenges for the
Company.
The start of 2020 was positive, and the Group was well placed to
reap the benefits of the investment in people that was undertaken
in 2019.
During February the Group began to suffer from the implications
of the COVID-19 pandemic with a number of projects in its Asian
business deferred or temporarily put on hold, although Asia only
represents a modest proportion of Group revenues. During March the
pandemic spread to a significant number of other countries and this
has resulted in the majority of its projects being suspended or put
on hold. In order for Proudfoot to carry out its services, its
consulting workforce needs to travel to client premises. This often
requires international travel which is severely restricted at
present. Very little of Proudfoot's client work can be performed
off site.
The Group has implemented a series of actions to protect the
health and safety of its employees in line with advice from local
authorities and governments in all the jurisdictions in which the
group operates. These are monitored and reviewed on a regular basis
and communicated to our employees and clients.
The duration of the current restrictions in the majority of
geographies in which the Group operates is currently undefined and
therefore the length of this period of interruption cannot be
estimated with any reasonable certainty. During this business
interruption the business is using all available governmental
grants and assistance in all its geographies to maximise liquidity
and minimise net cash outflow.
The Group is therefore managing its liquidity and its cost base
very tightly including the deferral of any non-essential
expenditure and where appropriate temporary salary reductions with
the deferral of variable pay and bonus payments.
The Group has, unconnected to COVID-19, further reviewed it's
cost base with the assistance of an international advisory firm and
has identified cost savings amounting to approximately GBP4m on an
annualised basis. These are in the process of being
implemented.
Notwithstanding this period of business interruption, caused by
COVID-19, the Group is still in contact with clients and
prospective clients and further projects have been won, however the
start dates are deferred until the current crisis abates. Our
focus, in this time of crisis, is to continue to support our
clients as they navigate through this uncertainty, while ensuring
our business is well-prepared for the "new normal" of what will
emerge post COVID-19, a time where every organisation will need to
transform itself. Clients will continue to look for the outside
support we provide: the implementation of transformational change
and delivery of measurable results. With the current book of
projects, Proudfoot's strong positioning in the operational
transformation market, the Group should be well placed to take
advantage of the expected upturn in activity with a significantly
more efficient cost base once the economic and operational backdrop
improves.
Financial position and liquidity
The global COVID-19 pandemic has resulted in the Board revising
its initial forecasts for the period ending 31 December 2020.
Management has built a detailed 26 week cash forecast, based on its
current revenue, as adjusted for the COVID-19 impact, and overlaid
where available governmental grants and assistance to maximise
liquidity and minimise net cash outflows. In addition, a number of
cash conserving initiatives have been implemented including the
furlough of certain staff and a global temporary pay reduction by
25%. This 26 week forecast has been extended to a period to April
2021 in order to review the next 12 months liquidity.
At 31 December 2019, the Group had cash and cash equivalents of
GBP11.7m (2018: GBP17.3m). Cash balances at 31 December 2019
include GBP4.0m (2018: GBP4.2m) of cash required to be retained to
support certain contingent creditors of the Group. In particular,
EUR1.5m was held in an escrow account and in addition a further
EUR1.6m was held at HSBC to secure further indemnity obligations to
Wavestone, the acquirer of the French and related operations of
Kurt Salmon. The HSBC security has been extended to 17th September
2020. The total held in respect of potential Wavestone claims
amounts to EUR3.1m. Although a substantial proportion of this cash
is expected to become available to the Group for general corporate
purposes as the contingent obligations fall away over time, the
exact amount and timing is still subject to uncertainty.
The Board had therefore concluded that, even on a worst-case
basis, the Group has adequate resources to be able to operate for
the foreseeable future. However, the impact of COVID 19 has led to
a material uncertainty in the Group's ability to generate revenue
in the normal course of business whilst the current pandemic
restricts international travel and almost complete remote working
persists.
Management Consulting Group PLC
Tel: +44 20 7710 5000
Nick Stagg, Chairman and Chief Executive
Market Abuse Regulation
The information contained within this announcement is deemed by
the Group to constitute inside information as stipulated under the
Market Abuse Regulation. Upon the publication of this announcement
via a regulatory information service, this inside information is
now considered to be in the public domain.
The person responsible for arranging for the release of this
announcement on behalf of the Group is Nick Stagg, Chairman and
Chief Executive.
Forward-looking statements
Certain information contained in this announcement constitutes
forward looking information. This information relates to future
events or occurrences or the Company's future performance. All
information other than information of historical fact is forward
looking information. The use of any of the words "anticipate",
"plan", "continue", "estimate", "expect", "may", "will", "project",
"should", "believe", "predict" and "potential" and similar
expressions are intended to identify forward looking information.
This information involves known and unknown risks, uncertainties
and other factors that may cause actual results or events to differ
materially from those anticipated in such forward looking
information. No assurance can be given that this information will
prove to be correct and such forward looking information included
in this announcement should not be relied upon. Forward-looking
information speaks only as of the date of this announcement.
The forward looking information included in this announcement is
expressly qualified by this cautionary statement and is made as of
the date of this announcement. The Group does not undertake any
obligation to publicly update or revise any forward looking
information except as required by applicable securities laws.
END
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END
UPDKZGMDGKGGGZZ
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